RTL - Earnings call transcript Q1 2022 | Necessity Retail REIT, Inc.

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Operator

Greetings. And welcome to the Necessity Retail REIT First Quarter 2022 Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. the President. to turn Quarto, host, to Vice Executive like conference your over Louisa I'd go please Ma’am, ahead.

Louisa Quarto

webcast relations operator. thank www.necessityretailreit.com. us. being you you, for the Thank Good joining This morning, call website of RTLs section everyone. And in at investor is

me to the Michael the results Jason Doyle, call Officer Chief Executive and on Chief today are Joining discuss Weil, Financial Officer.

other more more differ materialize SEC that the Any statement, which or the and during cause SEC from our one you ended call report year on or XX-K XXXX forward-looking discussion annual risks December actual expressed are detailed these uncertainties. of uncertainties on to XX, the impact provided filed of or the factors may with to all differences, forward-looking for date after filings the that of for subject contains February business. date statement implied call. the risks and are as information forward-looking materially refer of Following those statement. risk our XXXX, results these otherwise could all Form only including made Should conference by or filings, We the of this XX,

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

Michael Weil

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

The quarter. of over grocery Sanofi power effectiveness an the to anchored, the sale growth Both anchored of closed series announced the part million centers $XXX of but illustrated in to transformational subsequent two first all close office these strategy of acquired property and were we month. to shopping closing the transactions on open-air and we Jersey. the December. expect transactions and We've as of the in quarter completed this end our Including of now of New lease centers

acquisitions transactions our These per different first dates quarter throughout XX.X% were partially accretive in XXXX. anticipated. We've grew the share, of AFFO quarter. retail X% fourth to REIT quarter as to diversification XX occurred first as derived XX% this quarter tenants exposure the the to quarter. the per immediately of straight-line added $X.XX play of XXXX less to fourth portfolio. rent from results to from quarter per reducing AFFO by We share compared share Our assets X% reducing we than benefited closings to office over only created concentration our top a of pure at

our straight-line Sunbelt than XX%. the almost from to grown we've XX% less by XX.X% of Finally, percentage rent from states

of a careful our activity quarter few well results acquisition and Jason acquisitions, reflect In also as impact want the addition only quarter I sheet. additional to per completed last balance AFFO to management first of not will but but share, mention the the year, highlights. first provide our our we as leasing detail,

million, grew million. $XX.X nearly year-over-year to by by and over XX% $XX.X increased to cash revenue XX% NOI quarter First

the of billion last completed include quarter of only about first by quarter, results the benefit acquisitions XX% acquisitions, the as portfolio $X.X our which total price. purchase of measured partially Importantly, represents

notably February for acquisitions dates, The the at closed previously therefore multitenant different first multitenant completed March As our contributed quarter property the $X.X acquisitions the NOI. actual will and in completed only CIM last million the add million results. proportionally quarter in to noted, assets Upon of rent. we straight-line the portfolio in acquisition, that the of portfolio over CIM annualized closing of and contributed first the $XXX anticipate XX

XX% quarter billion the our thus Annualized of properties, occupancy square years. end, to was portfolio grew of at occurred a comprised first portfolio meaningfully the term of NOI. and and rent Sanofi feet. $XXX our to disposition and of buildings increased quarter, the year-over-year quarter contribute million, XX.X% million XX% average straight-line beginning portfolio $X.X weighted of the to X.X very with X,XXX remaining Finally, lease At XX.X

of per also that index. single operate rent. includes tenant increases states wide representing tenants grade XX industries, different portfolio state tenants which across own and XX.X% investment to single in XX.X% that portfolio District on average consumer anchor an no rated, straight-line the or properties or assets We on and are on include X% XX.X% is translate straight-line Our industry multi-tenant increases, and our portfolio, across price contractual single have rent the our with year, XX investment than investment grade and rent the portfolio annual leases Based rent. in our or of leases more based implied of increase based rated. of XX% Columbia grade

X.X open-air million and of acquisition As centers of million, average price, April that term forward cap and $XXX.X closed XX, years an our and on April remaining. contractual $XXX.X weighted at of end totaled for we purchase including X.X% pipeline based rate lease the shopping with the average

nine remaining service million. the are $XX of an contract primarily the properties pipeline that under almost additional centers, a for includes total shopping open-air retail to addition In

Our robust supplemented acquisitions are leasing activity. significant by

leases, $XXX,XXX we base In lease of been tenant our multi-tenant multi-tenant also XX,XXX Executed the signed, of for portfolio, a totaled possession annual in exceeded square quarter, yet and of renewals, tenants of rent quarter, and anchor in and first first including is renewals term includes weighted leases XXX,XXX with portfolio. segment completed straight-line the hasn't XX,XXX taken the have new of which In For quarter, million rent. comprised XX leases total executed that the our total $X.X where but feet first space activity feet square and leases six space, years. that annualized over new rent our of that we of XXX,XXX straight-line pipeline. square of $X feet, the signed occupancy, including over feet leasing nine leases seven square lease average million annualized the

a straight new square XX Our XX,XXX average that leasing leases dollars line-rent $X.X term and of weighted lease totaled over feet includes million years. XX of pipeline annualized

In of to fixed of completed balance through of the last Before our in debt rate the interest while to I light turning revisit notes unsecured wanted rate rates end issuance debt sheet, favorable environment. as transactions current year were was the the XX.X% our the part we quarter. of of

net average strategic end a XX%. value We a was our rates first decision. debt our on of for maturity and also U.S. At interest With the a years of prudent gross asset to portion the extended X.X period rise, to years quarter weighted our debt, rates such longer was at for of locking favorable quarter-end, XXXX. debt substantial the from X.X in

opportunity which balance utilized open-air a has discussed we critical the believe growth the been previously, is for of sheet As our firmly accommodate temporarily to we company. portfolio, acquisition the

levels. complete, hold our pre-closed to to of we back initiative million previous that acquisition to leverage to proceeds we've portfolio intend the With resume begin through substantially sale, potentially deleveraging of $XXX reduce providing sale assets the identified for to

leasing In immediately identified to past and develop the pipeline demonstrated same which addition, the we've XX an upon through to that We've be closing. do in strong have expect future. we'll successfully ability in to a leasing assets potential that deliver we began able the

the of space. acquired tenant connection $X.XX With also retailers and restaurants, during and centers estate, in We the through $XX.X million long-term are and confident grocery recently, between work CME issued a prospects demographics combination single million ATM whole portfolio service the shopping for these home shopping issuance Well positioned are in is average located issued share, intentionally to per Group, completed of experienced remain levels. strong suburban million price the located $XX.X as the America have retail last in a where a renaissance at and counts. over common well approaching with quick pandemic our quarter. open-air with we've and Retail We and of shops Necessity-based approximately affiliates and of especially $XX.X program as located every the stores day. an real in-store pre through shopping years, center in conveniently two CIM like markets acquisitions The stock are tenants traffic Necessity centers in

momentum by retailers recent for years to eightfold calls leased Stores year, two look total to growth been A disclosed Target will and and that vacated to highlighted, feet coming and message open to to between Walmart, continued accounts continue their increase retailers’ digital stores, and long-term overtime. major XX% than report Net these where importance need stores will is Burlington omnichannel evidence million in this significant continued XXXX physical grow the come store this meet more each to sales From we quarter. than that in earning the space TJ in carried over no stores of first brands’ stores the into XXX continues have into in consumers. further to of absorption matched by own through almost that growth research new to have Maxx increased where strategies. U.S. orders has accounts in CBRE growth year to XXX has plans operations, and from demand grow improve. The You they square XX% store physical

creative of growth. can a create well of platform, one acquirers thus our Jason? greater it quality take to positioned detail. With opportunities the We've the look for already premier to be multi-tenant the remainder growth We're experienced national I'll relationships of XXXX. forward fully retail we year. numbers the of properties. significant year-over-year portfolio Jason centers, to the our with turn far and be the retailers to addition of through high shopping Doyle service harnessed remaining in power to over us the And in

Jason Doyle

Thanks, Mike.

GAAP million the million reported million first first of NOI of revenue the income million $XX.X million, XXXX up $X.X in quarter the quarter quarter we quarter and $XX.X NOI XXXX of XX% and XX.X% from of $XX.X for the the was fourth of fourth $XX.X net quarter XXXX compared The $XX.X a was million, up first in million the $XX.X of XXXX. in $XX.X XXXX. company's fourth in XXXX an increase the the million recorded $XX.X from and to from quarter $X.X in million quarter first of of losses quarter First increase was million, XXXX. over XX.X% we

of common quarter first XXXX, per million, or that's the share, $X.XX our the to to AFFO was For per in for same attributable period compared $XX $X.XX stockholders share XXXX.

per AFFO reported $XX.X of quarter then over quarter million to First the to fourth the XX.X% quarter XXXX. first $X.XX share the compared X.X% of unchanged or $X.XX increase XXXX increased and in

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

Michael Weil

our favorable anchored have on making assets. for a and the helped leasing grocery transformational and quarter look acquisitions seen transactions we our and for acquisition Thanks, share The well first REIT grow over open-air completed Thank AFFO way office morning. minimized RTL. we exposure on a center this of anchored, to XXXX We're successful accretive will year being and per power quarter and to operator, Jason. last And XX.X% impact only increase pure $X.XX, We've a line rates to rates. Weighted owning shops years, assets the positive for We're the retail increased locking the years maturity focused rate activity the forward debt you to quarter to from X.X our partial and average fixed the despite interest already this the eagerly remaining quarter. the of in throughout to at debt America X.X completed play our in where the please for joining rest lasting acquisitions have year. impact questions. us open through to

Operator

much. question with the time, our conducting we Riley you Please this Thank Instructions] of have At Maher B. question-and-answer a ahead. Bryan first be very We [Operator will Securities. session. go from line

Bryan Maher

Pretty really execution Congratulations quarter. Jason. on impressive. Yes. the in Good Good morning, morning, first some Mike. solid

you which a we you're down some acquisitions is deleveraging, to. that ones to some the and that you But on that other I'm addition what CIM. have thought road? the pipeline So that We little when going may to saw digest in you it sure actually planning might take CIM those outside though, that in made release were acquired focusing you we CIM of surprised, other assets time about

Michael Weil

those of a most normal operation CIM prior pipeline the in Bryan, part So, our acquisitions transaction. the were to as of

going ahead the just really were we contractual So obligations. with

have, starting the market, the it on It we're buy look the a as and maybe we are rising, in this. quarters see general pause At surprising time up deals, to But compressing. divergence, are is guess we've at the that before beginning takes I that new I catching taken again. it's we of As of one looking the part Necessity most to are rates deals seen. Retail interest rates widen same cap market, period that rates REIT. we not monitoring, two cap we the at at like like just the to a types for

not in something market. on do and and at to because with certainly we're the of the us look come have we we're to a as certainly relationship take they're you So very continue of it. leasing been aggressively continued the transaction. out, If going to a on tenant, pursuing assets we the hard a CIM correctly response an have tenants. We've had relationship, lease prior But the have And deals growth portfolio. looking back that's to we be and We've in the really through integrating that NOI great acquired focused pointed focused part with to to new renewals. important going

quarter. we really from it And indication everything worked what the come. in a as management was asset together hard, all really can it really teams, sure see team So good came place. accounting was of that was successful The a expect and made to results, the you

Bryan Maher

to a get And just X.X down for moment. still X plan with sticking the to times? to deleveraging the about Is

Michael Weil

for the will quarter, we resume And absolute goals place that REIT is see Yeah, retail, the the warranted to the we to investment an I've reasonable really longer tenant before, a Ultimately action last portfolio bringing term and said of to both multi-tenant. in would we think creating our lower rating. that Retail Necessity changed impact in we be But that We things us portfolio on plan. nothing us do that to and did, said necessary CIM positive to. efforts the that thought single portfolio as that achieve actions has steps focus this are as taking grade track the leverage.

Bryan Maher

Thanks. And last me. just for

bit Are strong properties a those you said for occupancy there did you with portfolio, identified within and CIM get uptick? much little how the timing We you leasing. downtick the what's quarter. occupancy XX a that do of you've the the in notice that I think properties could think

Michael Weil

CIM It’s recall. portfolio, in of in you our We management both transaction. the existing the CIM platform asset portfolio and will anticipation this as increased

assets. the national expand working reaction their physical We've really So ground, to people we've on more looking have able the seen tremendous also been retailers to footprint. from

look included at Brian, you. our overall than it pipeline did we pipeline, has And including we high be, where we have close, very been through for this when surety includes to occupancy. strong. it pipeline. Part was the level of occupancy in slightly absorption. a of can our we to as portfolio. year, we that the And existing will lower slight that activity we calendar CIM portfolio we we're out the have dip So And come XX% have break that that to the that If look continue acquired, you positive leasing pretty mentioned,

occupancy, and for deals, we're what opportunity factored So lose we tenants, driving at existing didn't is purchase, on. looking and focus really that I how was didn't which the lose new We that us. is into

Bryan Maher

you. Thank

Michael Weil

Bryan. Thanks,

Operator

Thank you.

Please We have ahead. from of a line with next Colliers. the Barry Oxford question go

Barry Oxford

know to where but Thanks, on so year-end vacant space. how be idea from of could far opportunity we build for Great. guys. by to Michael, can I tell, think model it's build the NOI that have to the as kind do an leasing. the that contributing out occupancy you as hard

Michael Weil

Barry, to Thanks joining. you. nice talk for to

Barry Oxford

Yeah, no worries.

Michael Weil

As you given know, never we've guidance.

So about the how need give think through way I think really you that. to to to

to the in we're year. positive whether get to seeing what saw We course to mid-XX the the six would XX-XX. quarters. And we continue I we the we're with still during be have the be next, should the four And in-line last of to will I at seeing trends -- think portfolio this that in there absorption able occupancy, that's be quarters, say

Barry Oxford

I can up? out. kind you mean, seven clip. gave that do think mean, caller. said to like that keep you I he clip getting you good occupancy of ready good The pretty that's pretty us take Mike, you XX Right. are you had leases said a

Michael Weil

do. I I do.

Barry Oxford

That helps. helps. That

Michael Weil

this come located really indicated suburban large a and a our markets. really strong properties national tenants. being existing have with to these the Retail market with platform, where well relationship in very significant are the Yeah, shops, as America Sunbelt markets asset exposure Necessity to We've a active We've management got we have REIT year. expanded ICSC we've at will presence the we've

So positive this. can on yes, with where very we go we're

Barry Oxford

Switching see towards could Is year? indicated the million more be timing theme, for sticking that? more of about year? Is a there timing middle in $XXX on gears, sale. great. we the you the and of to that back going it Great, the out with Or the

Michael Weil

looks to the that's half second year. it going be of now, think As the in I

Barry Oxford

Okay.

then, And the portfolio that the Okay. like there -- front, also and see fit, that be feel disposition properties on Or CIM at could opportunity, XX you're properties, about don't Barry, the and of them. when look you just are look, just in of another dispositions. source all you we

Michael Weil

I've feel quarter the it Barry, portfolio quality, And shopping The talked same also. So, way. high very we about CIM was open-air center. last

the that significant There like have standpoint. we that acquired. And from a think, view assets really So, that couple changed. hasn't that we we portfolio value are disposition of a

them piece San a with in the plant shopping great just real is on of very called estate it. out center Jose, a of One valuable

but few we'll continue these So to properties. these NOI, portfolio see at real and intend look we the operate addition we will to to look we or there for strategically are part, upside sure. a and that for most Because own

Barry Oxford

Okay, the Thanks, great. color. guys. Appreciate

Michael Weil

Barry. Thanks,

Barry Oxford

Yes, yes.

Operator

you. Thank

Please of go ahead. JMP We Germain have the with next Securities. question Mitch from line

Michael Weil

Hi, Mitch.

Mitch Germain

the Seems point portfolio? so different remainder you're significantly about versus, that characteristics acquiring going they're there on? CIM size any properties two value? can bigger Is you of the What's to? what's remaining Hey, the

Michael Weil

process. just they specific have it's assets, very for these loan two assumption No,

agency rating One review. of them requires

period the a with. the do nothing their servicers just part was the LifeCo. the a has little the different been a slightly other of slower see that But it it of process time. of than we deal we've by And had it's don't that And It's held timing. buyer just And some seller. -- original problematic. taking just other is as doc, loan been has to loan or Just longer the to with

Mitch Germain

review, but And --- I I'm majority Got be at wrong, expectation or thought original some purchase assumption that assuming think me the -- how appear about were debt. it to that if is debt you. And didn't you then of should was remaining going correct I last the my prices the on

Michael Weil

Yes?

Mitch Germain

Got you. Okay.

me. for it That's you. Thank Okay.

Michael Weil

Nothing Yeah, characteristics. changed, yeah. acquisition pieces And different different constructed. was how Mitch, in had the

Mitch Germain

Appreciated.

Michael Weil

All Thanks, right. Mitch.

Operator

I'd Michael reached Ladies you. Thank end you, have Over CEO the to back turn of sir. question-and-answer to for to the like closing gentlemen, and we And call Weil, the remarks. session.

Michael Weil

We out Necessity at of Right. Well, appreciate see year post update. again, hear Thank was you with we look you. completion quarter, the anticipate the forward to NAREIT we your time you thanks, We continuing the results either of day productive. ICSC. to REIT, everybody. always you. talking these acquisition. to hopefully or And the Retail taking the started very We'll the to

So for your this thank you time morning.

Operator

gentlemen, and Ladies conference. concludes you. today's this Thank

your disconnect this you at may You your Thank time. for lines participation.

Necessity Retail REIT (RTL) 5 May 222022 Q1 Earnings call transcript