AFIN - Earnings call transcript Q2 2021 | Necessity Retail REIT, Inc.

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Operator

Good morning, and welcome to the American Finance Trust Second Quarter 2021 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Louisa Quarto, Executive Vice President. Please go ahead.

Louisa Quarto

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

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

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

Michael Weil

joining Good us Louisa. Thanks, for all today. you morning, and thank

results necessity-based portfolio, especially and predictability, predominantly highlight performance tenants. leased Our that of to the and investment-grade second-quarter strength, our assets net are implied single-tenant our investment-grade best-in-class

quarter at second of increase to these will maturing rating up $XX.X investment-grade mortgages as robust from using in the times last per-share growing in asset-backed portfolio. factors by was to in focus on AFFO same in $X.X in part XX.X%, also was momentum driven and from by with $X.XX in million. yet We've for reflected the We This contributed adjusted total $XX.X million in we net continue our all over competitive controlling segment XXXX, securities to the are efforts commencement bankruptcies and substantial multi-tenant quarter-end, from rated leases during X.X in lower paying lowered leasing tools fact majority rated investment-grade the growth an believe million adjusted our we billion any of XX.X% to by G&A. that our period, occupancy Cash in quarter. meaningfully $XX.X derisk the The the portfolio, $X.XX At year. underwriters. combined avoided with EBITDA. implied a balance remain last at accomplished disposal, of the year, EBITDA this our an last a is quarter, the time. has driven multi-tenant quarter increased increased the over down million such X.X material the up feet and NOI million to our issued sheet EBITDA of has one $X.X investment-grade the quarter that we portfolio We that result debt of XX% $XX properties million of to activity, We second XX showing XXXX. disciplined second same-store and the portfolio. debt from of part one net end in or NOI our square The our the the end rent Annualized to adjusted costs million environment leasing $XXX the performance initiative point of EBITDA. grew portfolio our high-quality to is during to XX.X% since have and straight-line tenants times portfolio adjusted after grown to where and reduce an increased

annualized implied expiration portfolio. to reporting Based as straight-line I'd As multi-tenant schedule of XX our Please exposure of rent like on X% of XX, including June on and our XX% period. refer straight-line take is lease for focus this from leases only for moment June events the further in on and rent of following XX, information XX-Q XXXX, investment-grade single-tenant our a portfolios. assets, of our to to tenants, comes XX% expiring full-year our top portfolio-wide. investment-grade single-tenant among filed our and each tenants

with our long-duration our outcome lease with near-term property replacement than to set annualized and or and our two Our less current represents staggered two term, maturity provide leases, opportunity potential expirations some diversification is allow in in cases, starting tenants rent, straight-line further has all renew complement years long asset has to before XXX X% to portfolio lease remaining navigate near-term strategy, expirations. of lease parties. a time that positive of a monitoring ample of leases part management for us been providing extend No property a our more years staggered engagement sufficient lease than single to early

of Truist years tenants, respectively. lease X.X weighted XX.X average years, terms have remaining Sanofi and and largest two Our

on weighted lease more We average XXXX, balance a single-tenant take terms square a $XXX.X XXX at opportunistic is average over the believe have that retail years acquisition and increases. property targeted consisting to retail on of acquisitions by weighted first-quarter acquisitions such million acquisition a disciplined to average potential we've and believe acquired e-commerce. have acquisitions provide with portion, our we foot combined diversification XX% XX cap XX% have XX% superior and quarter, acquired of remaining which, retail focused years approach we total remaining weighted acquisitions rent XX.X assets on at risk-adjusted the XX.X efforts, with XX properties Our and straight-line necessity-based and are been properties million in properties. X.X%. Since forward of which Of properties rate supported portfolio term. remaining retail term XX office for of a closed We cap that rent, with portfolio's be and assets and to distribution we of are XX% contractual X.X% in weighted lease service during our of that second average lease long service and the XXXX comprises returns. of XX% based the the have resistant properties. Retail rate pipeline, nature

XX, and As portfolio remaining average across average is X.X% XX.X annual lease a of single-tenant rent of June occupancy escalators. with years the term over XX%, weighted

good centers of million occupancy increase multi-tenant communities a X.X XX.X% XX-property, are shop. desirable estate want Our in XX, The as square real ago. portfolio executed year from foot our where people June multi-tenant to in well-positioned portfolio of an XXXX, has XX%

joined quarter. net uptick $X.X pipeline $X.X and new in delivered result occupancy has to as an estate million leading fourth the straight-line our last commences. leasing quality We've building our the that in annualized leasing XX.X%. rent are a new seen add leases year, occupancy existing expected of of the will in rent multi-tenant additional space. square are million if definitive of Don feet annualized this straight-line We're quarter rent agreements would time in initiative to a also over portfolio XX,XXX of robust our that, multi-tenant executed, demand and in results Since and Stephanie of an work hard Foster the have portfolio. strong in team's in portfolio increase resulted executed and second net tenants real and leased the of leasing in XXX,XXX from Our at XX and increase team Drews new feet they been new

team. fully renewed two and the headed over double totaling Coat if growth square and X.X% quality leases tenants, executed very in joined over Burlington by XXX,XXX million and of signed the this portfolio has I'm feet portfolio only we as in it current increase executed, annual this this also since XXXX, Not they total in leases to the we've Our pipeline is rent. XX-year occupancy quarter. direction contribution $X.X our leases, pleased this such Factory made with would, the performance have

the quarter. average X.X At amount $XX the We of near-term notes, minimal X.X to remainder weighted of We subsequent the along interest to cash third-quarter our ABS note capital notes repay has which interest same We such of The to in hand of same to debt in by investment-grade X.X% sheet pay down net environment master issued under XXXX. balance X.X%. second in our points full of structure. issuance EBITDA stack, average debt XX weighted $XXX quarter our to quarter debt balance enhance rate and or low-interest fixed-rate, to indenture same markets rates. maturity have XX% maturing XXX in credit to mortgage a a times to are ability weighted of of monitor This opportunity of XX.X% fund environment. take million years debt principal years the low-interest demonstrates advantage up improve constantly completed and the in and proceeds this years used quarter. and we single-tenant to we times two manage capital notes average X.X million our properties. sheet, and last near-term our had matures leased rate increased that XXXX from our debt Moving of of on our X.X debt average on the net the issuance and maturity our by debt with fund X.X downs, secured weighted acquisitions. freed also reduced pay to from maturities million interest used our X.X% basis facility. the historically opportunities were with and of our a in debt a pool for we was rated years. is rates $XX The maturities has historically the of in an decreased debt previously executed our rate time, rate one locking debt necessity-based by diversified The on later, actively

cash cash numerator the second COVID rent received Finally, percentages we have to and during using Consistent quarters, quarter. row. as prior expected the last of XXX% for before receive are the we the payable a The denominator. in rent payments collection with includes all rent rent the would collected quarter, started original original deferred quarter rent calculated

decreasing portfolio total impact the of the in debt take during the of excellent us Excluding cash the the we portfolio from to sheet turn. an the results detail. improve full I'll low-cost over in issuance deferred in by Jason AFIN due AFIN's almost XX% collected measures profile. rent credit quarter per-share AFFO one to multi-tenant to growth payments, and adjusted all that EBITDA ABS strong to rent balance it We meaningfully greater and second turn quarter. Jason? net leasing original the delivered in through numbers in and had

Jason Doyle

Thanks, Mike.

up of net $X.X revenue XXXX in second million stockholders first That's second-quarter common quarter $XX.X million $XX.X losses XXXX. million, in $XX.X quarter in increase GAAP of from of quarter the $X.X to the the $XX.X for second X.X% quarter from $X.X compared $XX.X million million X.X% million. first to and last Second-quarter of increase the NOI an and in attributable over recorded company's million net was XXXX. from million, $XX.X the of quarter we in million NOI increase a XXXX The of of loss was and million a the $XX.X XXXX reported second was XXXX. the we quarter

common XXXX, million in of For to per was $X.XX $XX.X XXXX, quarter the or a $X.XX for same increase. to attributable stockholders the share second our compared per period share X.X% FFO

per per of or $X.XX share the Second-quarter AFFO $XX.X XX% million compared $X.XX second to share increased quarter in XXXX. to

can The common earnings balance Mike's cash net the availability represents as and and Mike equivalents measures based balance found cash The release, X.X% asset of or We of Building quarter availability. always, facility, of undrawn our distributed The closing on That's include net net on million outstanding of drawn to debt. and quarter cash facility, for drawn value debt ended under non-GAAP million. sheet our $X.X June of supplement, of be reconciliation per $XXX.X under million that, and on secured our debt net with credit XX-Q. our XX.X%. $X.XX is measured $XXX.X a floating in at in XX With income of some comments. As at credit $X.X amount rate Form the $XX.X interest Liquidity, our cash the average call $XXX.X to gross which second billion the credit I'll billion facility equivalents GAAP of our plus million. our weighted and to rate borrowing debt debt, components a majority shareholders share. turn dividends in company back cash and remarks. to stood

Michael Weil

achieved results the Jason. quarter, company. excellent the our level of activity Thanks, the We financials both for second and across in high

obtaining portfolio we our facilitate believe our Our to either the the for which The direction toward and We're the believe growth and the We a portfolio own. this each maintain balance strengthen capital answering sheet. high-quality AFIN balance accretive any and excited complement questions look strongest Q&A. than focused is you working unsecured company's its result properties via very to go structure continuing be please and continue sector, to investment-grade additional heading our equity and retail and line forward have. include deliberate acquisitions. to that I'm portfolio our in markets approach on may ahead credit on rating. accessing and stronger an open further is we among debt to the sheet other multi-tenant derisk and what Operator, single-tenant in segment about steady in will capital to diversification,

Operator

you. Thank you. [Operator Thank Instructions]

proceed Please question. your Maher question of first Bryan Riley. the line B. with Our with from is

Bryan Maher

as over you you expect period about big of getting Thank what of period or go the to me. goes, maybe in that And expected to time on at the in I'm would to we where of looked bps? up Is portfolio picture and think year portfolio, a longer to But over end for Two congratulations very assuming quarter. strong about it of here? far talking half year-end questions Really, XX.X% XXXX? occupancy improvement we higher Is when time. XX really Numbers it talked then first and Great. you comes of good. time, take XXXX? even are the the occupancy, about be a kind that you do give as end the multi-tenant

Michael Weil

Bryan. Thanks,

fourth and shopping, and have centers portfolio quarter, because continual my It quality pickup the for high the them that the company give They first So like you we've shopping that physical since and portfolio, I mix I would like occupancy And great they just the to as put a people to tenant the the them complete the experience they all, NOI be portfolio, then activities pipeline. a to fact this credit in results end XX% to of that that continue of been the these the internal mentioned gets giving we growth the Drews, quarter who to at us we Don leasing estate, and just communities, over of our one And has we second has been centers. the really going will When knowledge Foster is of and kind and really positive relationship that – the location And of a team, our of asset the include can expect in confidence that of driving right I about shop. the believe our – pipeline, seen numerous I'm say, us, just in and led lot in comments, focus real to in frankly, of of we're that portfolio level. to at Slear. of multi-tenant XXXX. executed. which by talk the Jason level I Stephanie leases in the their mentioned, as from. the and,

I giving standpoint. So bit guidance. before, And timing to think I'm the from December I occupancy exact XX this mid-XXs. year-end range expect expect believe that really thinking And you June project that by that, as to goal not from to out see to be little I've occupancy low period, we do cautious seen the an said just mid-XXs through will to you growth. continue But that. start getting into going I a to of you've as I'm of what from as that do the see in us

Bryan Maher

Okay. do Great. you attractive goal, go you getting rating? a at X.X. But a And comments your really hit further you've borrow then going rates much investment-grade X.X how rating, down where that from suspect, good I made investment-grade the already leverage given pretty as think about standpoint? be deleveraging, we progress you that can to think And some you on need and with rate, to once from some

Michael Weil

Yes. of securing rate our we've about the about it's think more taking a these I Well, really it's I taking time, for a X.X periods of period. debt And and debt historically point. of great from to in than But just that because average not I just done maturity that. think rates that's think long years low job X.X great advantage this

I leverage level EBITDA with net XX%. think peers. that – we there's you heard for say, us, tremendous And as in represents improvement as confidence will portfolio X.X with times, I don't the an a to this to additional market X.X you line a debt of said, was quarter at Jason bring more of that times.

in rating, again we And continue us, the see we're going we significant are as going this to representing would combination, I Xs NOI focusing start Xs, continue portfolio. to that learn it's opportunities think, that drive going for while $X.XX minimum. be to share, AFFO in what to to is to investment-grade focus a X.X change agencies really multi-tenant low per focus. quarter, which we're the and the our imagine high on real and probably by shows think times opportunities and driven I have to I So the growing want growth, it's I an more, is. to the the what But

Bryan Maher

Michael. Thanks, Great.

Michael Weil

Bryan. Thanks,

Operator

the next [Operator Instructions] BMO. proceed Lee line with is Please with question The question. of from your Frank

Frank Lee

Hey, about acquisitions Mike. these Can sacrificing accretion how by morning. think versus equity issuing Good through efforts potential us levels? you balancing at from deleveraging you walk

Michael Weil

Yes.

of we of a consideration. the the it, an think something a It's good take step it's just and quarter de-lever to. we careful thought is Obviously, But think I I Frank. about without seriously lot representation think to really that we important second very how don't company. want give for

I about and You have it. talked

of some down. your in that not we've just You've, notes, commentary And bringing leverage and suggested from heard you.

where I'm So net pleased which quarter because, Bryan's But we bring really question, second down in EBITDA the to we full that did debt in as the X.X so almost a times, AFFO is of only work I saw said to $X.XX. did to a and proud we quarter did growth answering we in not turn.

just I we focused of team what that So things I and very driven and of tell the focusing selective leasing at were NOI ABS quarter. the the we the am done and completion the that got bought from Acquisitions, activity you rate to we're and the on growth most. portfolio, what on how securitization. really think being work this cap the matter have proud multi-tenant the And the I

note So noticed that, and was I'm a really your for glad appreciated you last good really we this and night. that quarter us,

Frank Lee

frame? follow-up level? know a the I time said there last but you like where just investment-grade is specific a have to you question. the mind over you'd on there And Great. a time, time to frame get Okay. in Is

Michael Weil

time start as as to – possible. Yes. not of soon much That's the process. a going are My we're frames always

debt learned the that see – see. we We we'll what process We'll to – needed within hopefully, we will the quarter. kind in period, the four-quarter agencies have address It EBITDA. net from third we'll started what – the but it's the of knowing to the see by

Frank Lee

one then Okay. And me. last just for

expiring going? on discussions thoughts the are portfolio are this multi-tenant mentioned Or What your how You X% year. getting remaining renewed? those the

Michael Weil

I'm sorry, question. you of missed I Would your the it? beginning repeat

Frank Lee

Yes.

are multi-tenant portfolio, discussions expirations the on renewed? getting going? Just thoughts of X% those left the on And remaining how

Michael Weil

about of Discussions are square We feet very leasing XXX,XXX going year-to-date. well. renewed multi-tenant

– it's the is we levels. relationships very again, back are So pre-pandemic strong, centers the to tenants. with Retail have the

optimistic about so in I'm success continued the And renewals. our

Frank Lee

Great. Okay. you, Thank Mike.

Michael Weil

Frank. Thanks. Bye,

Operator

session. you. I'll to management remarks. reached of Thank over question-and-answer now the for We've turn call end the the closing

Michael Weil

joining have and Again, commitment us. very continued Well, second-quarter to company, we released. thank earnings to we're been appreciate We your results. to about you, everybody, now excited you the for talking look the forward that

Operator

you participating. conference This today’s concludes call. for Thank

You may disconnect.

Necessity Retail REIT (RTL) 8 Aug 212021 Q2 Earnings call transcript