AFIN - Earnings call transcript Q2 2020 | Necessity Retail REIT, Inc.

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Operator

Good morning and welcome to the American Finance Trust Second Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Louisa Quarto. ahead. go Please

Louisa Quarto

Good us. operator. Investor and you thank section Thank call morning, is joining www.americanfinancetrust.com. at This AFIN's the being for of you, website everyone, webcast Relations in

Executive factors to today me results Weil, Kurtz, information The on the on with Financial during December call filings contains statements that which Officer; XX, SEC annual Joining filings, to year discuss forward-looking the Any forward-looking on risks conference this Katie risk date these and statements, the are made the Michael Officer. and following the Chief Chief XXXX, the are subject XX-K implied the materialize, differences. by of more actual ended one forward-looking cause of our as SEC and provided or including of those XXXX, these expressed or February filed to from could uncertainties. report refer or are may discussion a results Form after We other uncertainties call only the for of that differ all statements. you all call. XXst, for detailed this materially date more Should risks of

not evaluating except Also, prepared Company's update discuss our As or for our required to disclaims considered forward-looking the These measures, results filings, which isolation or be financial should non-GAAP financial during in be to the law. term as I'll investment-grade statements, measure in our revise is financial now consider call. release. can any call our to with about for SEC Mike? obligation most to by useful today's reconciliation comparable Weil. today's use call, these in Please our we GAAP CEO, implied the to will more release or intent earnings a AFIN stated in we GAAP. throughout measures we information believe these substitute measures the we a in Mike earnings turn what A tenants, over will accordance also refer of available directly performance.

Michael Weil

Louisa. second us necessity-based all thank morning, our strength for we night, portfolio. retail reported results Good investment-grade quarter highlight and of lease-focused and net the joining Thanks, implied investment-grade resiliency you that primarily today. Last and

until loan, lower CMBS loan million and with new these on During of by million locking $XXX loan. due while early debt year. have the than existing certain months new two fixed our the five-year of borrowing XX remaining base Company's X.XX%, the properties refinancing The maturity a by had portfolio rate structure. loan. XXXX, at which on after interest the credit basis maturities this is from points debt further CMBS to years loan, debt average term rate to of providing pushed In XX% and our flexibility X.X prior until our years derisked AFIN's extending on completing rate. related CMBS upcoming out XX% the and report rent weighted capital our historically facility we with remaining progressing X.X maturity collecting on We quarter, engaging we that inquired excited proactively our CMBS debt transaction, in financing of maturity met quarter, near-term was of tenants head while the our non-COVID status $XXX the completed global second challenges last you the extended disruption. We're in full about pandemic there the of we've important objectives. this Many to low our the over the that a Through interest transformational over a completed in cash

and our the over pandemic, visits XXX with in across task undertaken this the was country depth by site imagine, team can of this lender. a herculean you financing As completing the

Turning to rent collection.

than including months, XXXX, rent our deepening the top last credit and relationships cash original been these territory the portfolio, quality has far team to quarter from last working the directly tenants Thanks unchartered the of our will original cash due of to longer of with the pandemic. Company's rent XX% single-tenant over efforts XX we collected the of navigate and due of Our cash through portfolio this XX% for that XX% the tenants. due in rent second the few

portfolio the of the those XX% in the are collected and due single-tenant month have trend original their rent some agreements the to XX% July, collection tenants for continued rates upward including back now has ended XX, XXX% June of as XX% of paying to initial deferral For portfolio to-date, multi-tenant rent of the original rent. as in on cash the month and been

directly credits. value for or partial Our with the exchange negotiating in tenants to create team engaged extensions deferrals rent for Company by

During significantly on related reported resulted leases or The we by portfolio-wide. legal billion. exchange tenants, extensions comes quarter. investment-grade tenants. deferrals and million prudent investment-grade existing to not of underwriting, to deferrals of real investment $X months high-quality incurred investment-grade XX XX.X% continued of a leased deferral quarter our legal increase portfolio of to is XX majority related rated almost were XXX for square rent expect $X.XX has just credits. the rent paying in with collection at by a third second over of cost rent impacted per million. we The XX our these and to $X.XX our last under to properties decrease resume expenses in Year-over-year, share by negotiations the to lease share in our or tenants, months should line AFFO, points of increased is Due commitment million. our and existing only primarily cash portfolio including There Among total per top in net assets, other or implied quarter we charges million. $XX receive and the forward, approximately this in tenants XX.X% four $XXX lease quarters. straight-line this with AFFO compared investment-grade grown increasing single-tenant from which XX full, estate to in rent annualized per In million Occupancy rent $XX.X implied our and XX% COVID we've rent as X.X incremental but $X.X to and basis incurred, quarter, from rated which fees expect in straight-line totals also $XX.X million previous work feet, end tenants initiative average, extended and agreements this only year tenant going be

this down and portfolio single-tenant XX% with up across going single-tenant necessity cap Occupancy contractual segment Necessity-focused straight-line a year-over-year is the grow three distribution formerly XX% second portfolio our the quarter, to multi-tenant of second of the pipeline portfolio square property with to combined previously Annualized acquisitions on has the targets Truist assets reduce percentage we the continue office exposure XX.X for such decreased and XX% our appropriate of to makes for There continuing for for rent annualized lease SunTrust definitive only of we rent We a are lease X and X.X% tenants as single-tenant gross annual X from redeployment rent retail points XX% X.X% initiative, XX% rent makes our closed pipeline of acquisition discussed agreements In of which continued XXX proceeds rent. of rent, basis bank Today, with average only comprised with straight-line rent In and branches to the in time We that listing the within tenant in years $XX.X place, balance of expiring XXXX. properties. risk-adjusted are long which very Truist, at foot from through of to listing. straight-line of the weighted has acquisition We're multi-tenant over next decreased remaining rates average terms carefully lease at focused rate and XX weighted average of $X.X and XX% stance in remaining our assets lease over second term years at dispositions. cap retail Truist term. basis that be million up and our increases. forward. the efforts points of XX%, a XX.X remaining million acquisitions taking years. near-term minimal quarter, determining of XXX sold totals quarter, any AFIN's have expirations service weighted a AFIN's came escalators. one XX potential our X.X% the our only our on portfolio, in retail million. single-tenant retail acquisition and leases continue average with prudent from new X.X%

we XX, Additionally, the First became of June after branches Horizon Truist own Bank X branches.

XXX First significantly listed rent straight-line complete, Horizon approximately Bank exposure with Truist regional to XXXX. in at branches. time portfolio is down AFIN be will the rated investment-grade Once operator June a strong XX, from X.X% our our of as X.X% of

robust XXXX. acquisition proceeds were at the rate a sources cap since reminder, occupied cash bank where Truist generating a weighted have of this cap acquisitions the X.X%, of Net assets proceeds average a of weighted for sold from XX we of funds $XX.X our million. since among As sales we've X.X% rate initiative, average net had these program, of began start cash

we level same years period, During increased portfolio X.X lease term to years. the X.X from weighted our average

pickup basis multi-tenant second of us as In XX.X% additional $XX.X exchange COVID, XX, Katie, our with in our related the total, Our was the through the of in rest up deferral million June rent. over to you X.X of million. XX of second square of XX.X% financial lease take extensions our complements short-term impacts these negotiations single-tenant modifications from tenants second In responding $XX million the with net rent the quarter occupancy lease results. XXXX. rent million cash quality to $X.X equated portfolio in credits quarter will for or to points an property, portfolio of XXXX, quarter foot net XXX of

Katie Kurtz

Thanks, Mike.

$XX.X million million a second a a of quarter loss of XXXX was of NOI Company's to the net of the was quarter Second quarter. from increase The slight $XX.X the the recorded first decrease million, $XX.X XXXX. loss to decrease first quarter second and revenue the a we a XXXX. million $XX.X first in quarter $XX.X million $X.X the slight from from quarter net XXXX $XX.X of GAAP million, XXXX in attributable in was second the net million stockholders for for $X.X common compared income and of quarter

common quarter FFO $X.XX to attributable second per share. million For the our $XX.X of or was stockholders XXXX,

Second compared $XX.X quarter first quarter to AFFO share share $X.XX was per or per million of $X.XX. AFFO

mainly AFFO was $X.X giving effect related in adjustment of our loss in some $X.X Mike expenses, were the extension. million related impacted of execution As outlined was exchange legal which credit, by near-term million legal disputes XX-Q, associated mentioned, lease negotiation lease expenses, by for and with COVID rent long-term the related deferrals COVID cases for COVID in to impacted in AFFO net and

mortgage transaction as $XXX.X GAAP undrawn only net $X.X billion were remaining of measured this interest of was income reconciliation June months leaving at include debt closed debt the into aggregate and credit All, million June the balance term XXX effective property, million used the rate of balance based closing on borrowed mortgage repay our corporate our credit in the July interest by on is as leverage outstanding of a credit of and availability, and the was remaining supplement drawn loan Subsequent rates the net an amendment an of security equivalents, of and loading. that, Liquidity, at properties mortgage-backed XXX were for quarter-end, cash availability in turn new but less and Mike XXXX. June million The of financing components cash a than measures $XXX average quarter-end, interest-only has As second X.X% closing we financing. of properties The interest of credit single-tenant to release, we under previously commercial X.XX% We at be from XXth facility maturity had loan financed two XX-Q. five-year back years With net X.XX%, at cash and on outstanding weighted facility of a time collateral rate and of on XX. million. Company's the net to on XX.X%. $XXX to properties. as CMBS At for transaction one and on non-GAAP billion the loan of plus these, repay cash under is amounts existing $XXX.X that call a and credit Form entered the completion Of $XXX.X all of facility. a facility. debt of to our to our secured and remarks. X.X borrowing $X.X rate giving closing earnings ended as debt secured a CMBS XXth, always, facility on an CMBS found the At XXXX. this weighted to credit of is financing stood our the debt AFIN's drawn term X.X effect used cash and million our were to years corporate I'll some of XXth, our extends proceeds the interest The with facility, well, AFIN's which of can fixed, quarter average amount our equivalents

Michael Weil

Thank you, Katie.

dedication partners, challenging were highly financing close and and forward the accomplishments our collaboration I'm our have across banking answering the able continue by diversified, Through tenant our rate these place. quarters, by giving including multi-tenant along the both XX% with we're and in We that large climb. XX%, and our quarter to the on complex look the to at will our and to with the XX% we of XX% and continue with acquisition, rent the in this our and exceeded value a quarter and broaden efforts collect staying accrue The rent of quarter will successfully tenants, to portfolio and anticipate single-tenant in payable the navigated a for hard derisked outperformance questions results. future about rate tenants investment-grade flexibility portfolio with rent portfolio our to creation and structure. in us coming complete line terms second to collection very long management, in transaction able increases team coordination portfolio, with lease Through in open geography our work and benefit asset continued departments. we that focused continued our our of of legal in engaging future please financing is quarter. July you that questions. capital while remaining any have Operator, might pleased this cash annual

Operator

is ahead. begin now go Riley from question Maher [Operator question-and-answer the with The session. will FBR. first B. We Bryan Instructions] Please

Bryan Maher

list at one list day on for of we go really your up weather you're regarding the tenants to that that kind and in we strike as you. think of any year storm? or which at kind have what portfolio two about when in or Is down maybe bankruptcies. be all that us XX and list would tenant all in One, any outside there risk. there's Two anybody of It set we questions the top that the look supplemental, do your see concerns multi-tenant, your in with to relationships maybe CNBC think doesn't we you you retail

Michael Weil

Bankruptcy First space been meet good beginning the and of all, that the since is Bryan, in thank we've you, regularly, the portfolios of something always aggressively all on. construction. We to take portfolio your and focusing questions. we're the reviewing

rent of we shape overall good top straight-line and answer the top question, your the the total that directly represents to On feel XX, in really XX% about XX of we're portfolio. the

to merger. than around well essential sector to the this rent. service will in I tenants think able are mall continue do be that essential We the XX and quick that, portfolio. with of restaurant you and related retail, beginning, retail bankruptcies more that pleased you're as with going so of know leases and sector continue We as we've themselves we We're well. expect well. as is collect to to and general, are that. toward transition much the portfolio, that doom along, the that business it guarantees what And because think Many humming heavily, sector. of to gas a the as dialysis, in the is great corporate on the tenants just invested Truist having because as we're top the in very we've just this hear retail from the right. continues convenience, gloom bankruptcy do It the about the in built their very said, And often relates to

from So general think that we I overall, are isolated very very, bankruptcies.

Bryan Maher

sectors with in worked just Are might then for that that the contemplate acquisitions. to regarding there knitting, Or moving into look landscape venture my question of your spaces. on. simply going plan lot what's now stick any there's When into? at not stick new what's you you and to going And a is not the on, you're second and out you

Edward Weil

a I with knitting. I think is to expression. time stick our this that like

that very don't come not the value to at in see deals have are I market. -- right Sellers moment. are And just actively We the are reviewing and values frankly, agreement on this now. buyers

a in my communicating side. of both able it's very the related future fair to just cash to with Knowing value tenants to out talked what and the portfolio finding I they what as side us grow we focus, about in think time their able be that continuing to it we as position. career, out that the will importantly, our work with that being some expectations, the deferrals, have and needs, the service when of but of lot care relationships accommodate really other I moved platform. I portfolio. quarter of the almost extensions And really our that our sellers. is feel markets and we But from asset their matches our and this the see see management generating relationships toughest very opportunity. tenants, of exciting on is very leases. away most continue Again, time, can a we have rent, in with market. ways of up to the where positive, our to recall But active tenants. some is, we side we hearing of solid notes, pricing And continue a take was of with active mentioned in to was and in the we was spending needed, that to million really building our And to $XX came retail tenants, we quarters We're extending work being think our second deals one

Bryan Maher

Great. Thanks for for me. the color. all That's

Operator

Markets. question is The Lee Please ahead. Capital BMO from Frank go next with

Frank Lee

you expectation done Can and Mike. looking the within compared pipeline to leasing drove given last talk quarter? leasing maybe And decline your the what about market occupancy is morning, current on Good guess how portfolio I multi-tenant the the conditions.

Edward Weil

Yes.

we're think looking environment. national big right pretty businesses all are this to in the their aware I that stabilize COVID retailers now, that

just alive. to the leasing still So centers. deals it's When have through And we've very to seeing the And single-tenant, traffic in this brunt and I up look an color in certainly some sector an throughout quarter. data. we centers, don't of had That's is they're any XXXX we sector, reopening we've our other and were unusual It's it's starting area there's that is the pipeline collection something any surprise their expect impact taking the have not healthy holding than rent the that think closely. we very provide And all and of pandemic. mall we're power retail, significantly this at at everyone's are our been We're quarter. -- in see we Unfortunately, that leasing watching slowed But in exposure. have that have we that and no all me retailers well second looking to this different have been interesting of businesses. There and the to additional markets very and XXXX. is priority. was

in leasing centers. activities, shakeout from mall center to into what sector of may some and bring continue on new So happening we'll and I our we'll a see be the power the positive I think benefits that landlord, these tenants remain as power

Frank Lee

ratio thoughts. impact XXX% But And on fees with just has the to like get your then legal an would dividend over this your just No thoughts quarter. the get to current here. I creeping payout want

Michael Weil

to think of and I the some dividend the the Katie had that decision dividend are that and Board lot current lease really we unusually the as where did, a with right extraordinary. spent was took incur this reduce that, time amendments and a important engage on comfortable way I is we and in is. made the We decision. very quarter to an care as G&A talked we we legal of about high

in the So third I quarter. back revert to see expect normalized G&A to levels

I on the account, we archer we think into lowered if take capital also, cost you of call it the, refinancing. the

points And the loan. You may have Interest quarter. second was savings. that any way. rate XX X.XX%. have refinanced that at archer that obviously, we That's it heard X.XX% We us basis didn't refer benefit of in on to of

refinancing maturity We in I very have I'm able to talk our another excited to we're expect part of about, quarter third active that be as that release.

on collected rent. focused July. XX% through protecting all our things. So think the collecting. exceeding about, second actively rates Frank, of We're we're already quarter I end We're We're with it's right really the our

that those and about opportunities all So excited will for XXXX play very the some aspects are balance of very we're performance and portfolio. important of the into the

out it the a you was this Frank. So left quarter all where just on field,

you You had do. did to everything

many You possible. tenants as talked to as

we're You day I collected And us at opportunities, rent. positioned We're this mattered. what NOI business, the responded Every penny what well, on looked focused that portfolio engaged, rent a things people, really having of in out on side do side doing every on business. we of team with believe so the the just, dividend. the worked covered the up, and did we very followed debt it's and the growth between

in the quarter, shape. career in my shape toughest All in things as XXXX can said, out probably So good to I and remember very finish I considered, I'm optimistic. came great really

Operator

question-and-answer concludes conference Weil I over This to our would to turn Mike the remarks. closing back like session. any for

Michael Weil

us Gary, today. you, for joining thanks thank and everybody for Well,

year. is to you and focused is look and that to our well for as comments, something safe, this terrible has a in for XXXX. us and go Obviously, out And we this also to United on. we said very healthy American been priority this staying my we we we're minute we everybody and States, I talking As Frank, are And before hope a But pandemic, and again half taking the time safe. Trust not later the Finance very finish excited high wishes world through second only doing with for forward of that I everyone the the a but send just call. you're

thanks, So everyone.

Operator

The conference today's Thank for now is concluded. attending presentation. you

You may disconnect. now

Necessity Retail REIT (RTL) 8 Aug 202020 Q2 Earnings call transcript