- Earnings call transcript Q3 2022

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Operator

Good morning, and welcome to The Necessity Retail REIT Third Quarter 2022 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Curtis Parker, Senior Vice President. Please go ahead.

Curtis Parker

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

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

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

Michael Weil

our of the which U.S. you We a The our that CIM Good and has since joining million morning lease the portfolio leasing grew would year, to notably, leasing, is strong we the Journal Portfolio Retail years.” well all, when quarter compared excellent reflects the compared our press XX shopping revival U.S. biggest Curtis. lowest economic financial portfolio new today. preeminent short-term over appreciation capital The in level we vacancy for positioned to with perceived to XXXX. believe that the centers, shareholders resilience provides for ago. a peers, XX% quarter In of retail all at sector. than our a fell current was touted terms third uncertainty. the to and listing AFFO us this in ongoing enjoying years including dividend its portfolio of “is in very completing were compelling per meaningful asking Wall the tremendous broadly Thank Most upside and higher in any last featured second believe while article feet, Furthermore, the prior CIM provides an and offset retail shopping rents expect that yield. sector, that its centers Street you, was successful leases retail square thank strength we share the transaction. necessity-based by Acquisition. full renewals which quarters open-air we've quarter highlighted in most our retail of fourth among occupancy the increased in had U.S. five We U.S. that one in of October quarter including to declared early years by the had quarter XX% at

possible first the to stores in U.S. continue face since and XXXX, in last trend of that time headwinds. even more expected the in opened year closed XXXX, economic with the For

a this economy that underlying offers investing surprise sector course, is believed comes estate. of strong Of real as no for reliably that to have compelling we reasons as the in Retail Necessity us its long

We since continue over results third recording last building to pleased commitment the team. in feet by world-class prior year from more see than team results square significant to measured with we've the achieved, activity XXXX. the a very management any leasing asset quarter quarter made I'm this

the of raise of Our in of leasing pipeline October at XX, quarter. from the plus our occupancy XX.X% quarter-end as segment XX.X%, as up executed would multi-tenant second end leases to

and rent. XX definitive square renewals to new XXX,XXX totaled leases annualized million million feet. our multi-tenant our letters As XXX,XXX annualized with feet over over XX line lease the in portfolio $X.X portfolio, and assuming commence on executed line in through includes of signed straight leases. of square in Executed the representing leases in $X.X rent over straight one feet This million lead multi-tenant all leases quarter square of intent third

As of the rent positive under and terms lease a renewals the had payable of previous the between of X.X% the rent the the quarter-end, spread renewal.

straight of Our weighted term of lease of XX, the rent including leasing executed leases the after third XX.X square over over and quarter, a million in of end $X years. pipeline October feet line XXX,XXX average annualized consisted as

of portfolio, seven a spread million properties and the rent portfolio the new increased square rent plus Portfolio. $XXX.X and square we first million $XX.X months grew approximately X.X our quarter-end, X.X lease of in At positive nine XX.X% for The and lease occupancy almost in rent. XX straight consists over due XX% and comprised annualized $X.X term over million $X.X This of CIM feet, our with annualized lease of executed year-over-year renewals totaling part renewals signed and the XX% of acquisition almost X.X%. pipeline line leasing feet year, square straight remaining totaling leases, to XX.X of million square was to large square over years. our portfolio feet footage million line X,XXX line weighted lease had feet. straight a XXX,XXX over average of leases billion the Annualized multi-tenant of million During in in the XX to

long-term environment ability with the under quarter-end, or implied after or during portfolio our investment portfolio assets At remains leases debt significant line efforts which that over in last acquired believe are the same in past delever our of we'll is the rated leasing XX.X% investment years Columbia and or from portfolio more our XX.X% than through proactively per recently grade maturity rent. rate tenants implied our XX today's us of average that investment through percentage single than intend increases, to low and the We properties grade anchor of properties we experienced high necessity-based portfolio that X% rental X.X grade deleveraging no across long-term in average. and tenant rent, in XX% potential of cash tenant rates As to our our successfully resume quarter-end, of industry and multi-tenant XX% to our CIM cash weighted our lease-up implied now rent tenants at single continued own XX continued XX% Based flows actual we tenants straight expect year, locked for fixed actual increase District the representing rate that demonstrated assets historically and had Acquisition line rising is or interest The actual by sale upside the growth these of time multiple on are strategic on different dependable in single over the rated. due rate insulates across contractual and of approximately and representing leases X% a based include potential. which of provide we on of tenants available straight the the do year with no an of of exposure nature the We've closed. interest state initiative and operate Portfolio have environment. We the space. portfolio and states more industries

pipeline $XXX assuming the of on dispositions of months properties During terms. the we and nine disposition million, $XXX year, over of their mostly disposed all a were first have non-core of over All a contemplated million close to is to net us it be in our Doyle from take greater proceeds portion used lower and of Jason debt these detail. ratio. to numbers over the turn the dispositions through I'll repay debt-to-EBITDA expected Jason? to

Jason Doyle

up of Thanks, million, Mike. company's $XXX.X quarter XX.X% million The the $XX.X in million $XX.X of revenue loss the third from in net quarter. was quarter third with a incurred XXXX,

to transaction. quarter share, XX% the fourth the to or $X.XX Third up quarter CIM last XXXX, compared prior quarter of full the $XX.X was AFFO million per

last of million not in of and revenue which million, impact and nearly reflect results this of both and had any Portfolio quarter's CIM $X.X This by increased the include from $XX.X the AFFO the second the and did third respectively. year lease the termination quarter fees, acquisition previously quarter full year

per or in third third Our was the we of quarter $X.XX NOI quarter $XX.X million, reported share, million over million a XXXX. XX.X% FFO of $XX.X increase the and XXXX was $XX.X NOI

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

Michael Weil

Jason. Thanks,

America third stores in are Shops portfolio. the reflect restaurants, and as suburban necessity-based are retail CIM quick Where of open-air real and Our centers. located and our day. grocery With of transaction and every our conveniently service results performance our single-tenant affirm home the quarter properties belief And estate, and the properties between benefits tenants especially work continued such shopping

We line expected of pace We’re delivering positioned the across our acquirers accelerated transactions pipeline. XX%, high-quality to of the and premier grow Necessity successful compelling very for leasing the to a questions. this activity almost of dividend. lasting including impact our the multi-tenant for CIM morning. well and from occupancy one look us our Properties operator, portfolio leasing Retail have to you we acquisitions we’re to accretion to Thank expect be and will joining pay continuing believe successfully the leasing please shareholders, we forward the And while open for

Operator

is with Thank you. Bryan first the from B. with question questions. Securities. Our [Operator proceed Riley Maher your of Please coming Instructions] line

Michael Weil

morning. good Bryan,

Bryan Maher

those all from so far. for A comments Thanks me. couple

On assuming a perfect is that there in delevering some pool what the disposition being or of want deep selling, driven that by activity, is could the capital to things would be for how you And expect recycling? you mainly world, you get you’re assets?

Michael Weil

beginning a the continues to about market to that for utilize great some good net properties recycling the Well, the to but debt we buyers. from really to net debt standpoint, going CIM opportunities the of EBITDA lowering be quality again, felt committed acquisition, that of strategy we will as there’s estate The and EBITDA leg to be were drive from talked active. find real course, there Obviously, we’ve dispositions been regarding we’ve some announcement pullback, strategic one down. to were of

the thought from how it than So different it’s we beginning, no about Bryan.

We’re strategically the at portfolio. just looking

disposing cap where X.XX% Northern an that You’ve talk in plant we rate we execute at acquired heard of Again, at plant value we CIM transaction lower. of this me believe and the disposing rate California. of significantly we intrinsic will portfolio cap the about the see a on average a

very net to continue to even and tenants. wondered. The asset new creation the I effort the of have is against just real team thought positive led management execution I’ve there. regarding And X% strong. up is. think heard stated this And driving about So performance The by again, greater what things that our quality or existing to The the people plan think EBITDA, debt renewal only we’ll real we significant that’s net activity make spreads talked on attractive the of so and tenants, again, already portfolio to really estate the of professionalism just absorption. leasing and in the continued of leasing been importance goes have occupancy not but portfolio some it than I you is value today.

So we talking are quarter an really these for to just in It’s hand all pleased. hand and be exciting about. go us

Bryan Maher

leasing angle a And Thanks. on maybe moment. for the sticking

lot a a are the there anybody you tenant multi-tenant had occupancy little gains? And push that’s You’ve type up some of particular Are on economy properties. asset the squirrly? starting as back occupancy success gotten driving rate see increases to has at or bringing the those

Michael Weil

No, just alone all. as we’re And evidence leases in basis X% where square foot we renewal haven’t seen were. on at a where that the leasing per the over from expiring

to So, good very real retailers. valuable estate is

We Necessity Shops, Retail and the discount to is see so we – our apparel. whole America continue theme continue Where

not generated by – is our in Where is which multi-tenant Kroger, to we XXXX positive. the it for be statements and portfolio, very all the and anchored. or But the that we America line have. see the publicly And our is our they’re how a And know And remain all reason just is on that way opening us effect in Albertsons proposed our we’ve in of any grocery about us. excited to plans positioned, Shops. been not what as has straight again, their portfolio in suburban reading note, rent just more about portfolio I Kroger might more look. have stores gives and continue the side and We home merger improvement, stores portfolio, we’re and no Albertsons XX% repair. making it America don’t core tenants XXXX or All Bryan, is These it auto grocery to it’s – about that

Bryan Maher

Thanks. escalators your And you just of last have in that leases. from me, I bulk know rent – your the

or I think they’re so. X% around

you what’s inflation, annual Given received? those have rent do given would be with Thanks. think And on you how escalators? that bumping any guys to up going thought

Michael Weil

the high of the the will construction remember contractual they retailers with rent Well, grade, on are insist again, to at such most you investment time of national negotiated portfolio grade for have implied investment a the percentage lease. or that escalators part,

off. holding we a it’s clear So I the or strong of but am as in rent will in periods inflation continue the don’t do we ranks, about XX year inflation lease high growth renewals, periods AFFO gives think year know very months. But don’t a the into value again, to we the at exceed compounding historical XX I and escalator a the up. they’re XX six, of result portfolio for market whether great what taper confident look we of that believe XX, earnings lease lease And a as growth. as point, will it’s quarter. think likelihood, We with visibility to And contractual had a see annual I overall, that this the

one-time We fees. the lift per from $X.XX share. have in earned or didn’t like things We per have paid dividend any about of talked $X.XX as comments share. $X.XX per share we that benefit And termination

forward organic that seeing growth more something portfolio. from exciting the standpoint continued think even looking the we that we’re and an to that’s in So

Bryan Maher

Okay. Thank you, Michael.

Michael Weil

Thanks, Bryan.

Operator

is with the next questions. Barry Oxford from Our with Colliers. your proceed line of question Please

Barry Oxford

Great guys.

Or on build on acquisitions of of acquisitions. paying the that Just in dispositions debt to it thinking to you’ll exception more down wrong? kind fair disposition opportunities? more on be pausing net of and Michael, about side opportunistic and I and say a the the Is the – of things that be you’ll XXXX with am

Michael Weil

good to Well, to first talk of It’s Barry. all, morning, you. good

Barry Oxford

Yep. Yep.

Michael Weil

and guidance Without foremost… at or all, any giving too guidance first much

Barry Oxford

looking this for. I’m is But what

Michael Weil

Yes, that. I appreciate

Barry Oxford

I got mean, to numbers, fill I Yes. in. boxes I got

Michael Weil

maximize same strategic opportunities seller, the you, through at EBITDA, job items portfolio. I let that I tell be to in dispositions. further time focus address the the to the to and a our believe grow, never off some this still continue debt the would see have portfolio important goal net but we and lowering is a to addressing while foremost improving start with to strategic forward very look to committed opportunities year on to I will portfolio earnings and First my being net

presents. what see economy going the we’re So

of CIM. a every many we’re We in things right typically I really are there or periods think we’re happening and going But know have to that didn’t the be clear just right items focused and macro debt-to-EBITDA places. watch XXXX inflation headlines, going opportunity a being to this prior. – an the of on. but we’ve period the that a a period before at our such on in spoken shorter of going with that belief we the driving now. I hard what could XXXX wouldn’t because it’s earnings, so see are the was net like dynamic, think calls I be pick there told boxes us XXXX, had caused end there closely unique some that inflation. economy, on picture you But the as inflation, now, continues lot well, have but not point of issues gives exciting going a are I know in like than never most that’s caused portfolio of me is personally supply only by that chain by we’ve at about the really checked box I’m be many something it unique which typically that of gives different which

Barry Oxford

Great. Thanks. Thanks helpful. That’s for color. that

things obviously upward, are you probably tougher. few nudging the seen a quarters. just that driven speed rate keep Another [ph] very kind that you’ve but from be strong this not that the this occupancy, but quite have question that quarter, at you occupancy little probably going We’ll few past Can occupancy get over past of not lot over or really me. The quarters. driving

Michael Weil

always on occupancy thinking of how I’ve the team because that and feel effort about we that and the strongly XX% get your able it be logic we just think, range. to the real talked of I’ve I approach retailers. we always this the quality The XX% to portfolio and felt – the estate about the right should higher relationships based gets. And I the have Well, is into the with it

before, be can. that and landlords value opportunity. As shown I’ve with And that we to said retailers they want we’ve create

the continue centers at a – to level. very operate We a high in

talk how of We have We goals them retailers. part the that. with strategic and about be their relationships we can to a

occupancy we’re every natural the earnings out I hit every foot of that’s increase absorption XX, continue but know comes point but look So a I if or forward to just saturation. you’ve we see numbers in to in portfolio, kind have last upcoming that’s where going portfolio, the seasons. squeeze there will job. because the our don’t this of large positive portfolio to And continuing XX

Barry Oxford

Perfect. Great. I’ve today. Appreciate guys. Thanks, that. got for That’s all

Michael Weil

Barry. Thanks,

Operator

next Jyoti Yadav Our from JMP Please Securities. your line with the questions. of is with question proceed

Jyoti Yadav

Thank Jyoti you. is Good This morning. Yadav.

Michael Weil

Hi.

Jyoti Yadav

you. thank So

this can specific traction quarter. Firstly, that versus in? some the that leasing you you industry local like was on some just trends, saw congratulations or more And elaborate there progress on maybe if significant retailers point, national

Michael Weil

Yes.

to was so regional are seen puzzle national that which So, a is investment retailers. investment centers continue community opportunities grade or grade. always as expand. Many in or drive of the it center of anchor are the tenants, with neighborhood. make open portfolio tenants leasing positioned, to air higher pieces rents suburban majority But And the we’ve and well of the those just more implied activity many a of critical does local that shopping shopping of already the the of your really with one exciting are them and exist

of who’s to we names, centers in the analytical we don’t it do the levels and but benefit a bringing conversations them, the expect what choices we would is and we aspect at mix we versus long-term to in this the start And have want versus really success when more are, can type national center in the curate the does our tenant? very I better occupancy some of net and rent desirable your your had we are. So about, and national the retailer effective we’ve why, Y see bringing center. benefit And of X and leasing look that tenant where this – tenant when internal hey, the retailer There’s to following. value what creation, the name are

based pretty have us. and So years. industries industries place butter. XX much for of portfolio. more evaluate that that’s of be retail pleased aspect we and the in and we do brick of bankruptcies I with last the that We represented mix been portfolio, we retailer. underwrite retailer, of the fact what’s to bread exciting really the mortar follow resistance And to the Again, necessity the Those portfolio. those recession on this the the couldn’t are And in tenants, the XX few we our the don’t have have in strategy

rent lease this XXX% provide in These they’re the and to And a drives to their located. a where for willingness collect communities And are that spread here where goods relevant, tenant’s haul foot to traffic obviously drives continue long their the the and X% portfolio. previous tenants foot We sales and they businesses sales, positive because are renew services drives from was. traffic. at

and knowing is it markets understanding So all the relationships where and from the and tied it communities we’re having the located. starts really together

Jyoti Yadav

thank you. Well,

now there continued know price in discovery disposition the not I is ask right guidance, about Secondly, market. to but

disposition is of dispositions you that’s your for So it… timeline delaying seeing million are you have the worth $XXX or

Michael Weil

sorry. I’m Jyoti,

bit. out cut you could You question, re-ask the beginning your of it. hear I part little didn’t if a

Jyoti Yadav

course. Of

Sorry about that.

So I market know now. there’s continued the right discovery in price

you impacting, timeline or in are $XXX is delay considering seeing of any dispositions So in your portfolio? dispositions, of million those terms not of worth the it

Michael Weil

transacting. would been I’ve I timeline the real we estate we as you still same communicating that before, And on market. have tell to said quality the is as are

will put that we’ve timing comfortable that are forth. we meet we the So

Jyoti Yadav

lastly, to XXXX. you for coming there of $XXX is you And Thank about worth that. in million just Okay. debt

address there any year? on the you – elaborate to next is So plans could that

Michael Weil

coming due called assumed CIM. as we on that you there course, in the probably of of plant the the is. we that debt that XXXX from part And see Of property can the debt is majority

the a all is naturally. of in of the could looked that we be if we line of we disposition have our using or analysis other maturity that is if could But forward clear we have again, we very XXXX, something great path that unsecured our because the address our We is the it of way. disposition maturing a large will line the think the unsecured of favorable. intended market and is refinance for that that have at addressed debt we well it in But flexibility as to, as plant. So debt part of plans availability choose

Jyoti Yadav

Right. taking for you me. Yes. all That’s Thank for the questions.

Michael Weil

right. All you. Thank

Operator

At the you. floor right this I’ll comments. time, closing for Mr. to Thank turn Weil

Michael Weil

Well, again, And to The expectation All everybody have us positive very and operator. thanks right, joining thank are you, the we have every continue of exciting, company performance. for results to today.

think the traffic that I growth to and excited and understanding spends foot well that Q&A positioned to incredible a what’s we everybody company of year. and fact strongly for us questions finish appreciate in necessity time, retail the answers continue and this lot is next for future. important really out really industry ahead And see the the I the gets the year

everybody. you So thank

Operator

Thank conclude you. today’s conference. This will

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

Necessity Retail REIT (RTL) 3 Nov 222022 Q3 Earnings call transcript