Global Net Lease Reports Second Quarter 2020 Results – Wire Real Estate

Global Net Lease Reports Second Quarter 2020 Results




Aug 8, 2020

Wire.RealEstate powered by Google



Global Net Lease, Inc., a real estate investment trust focused on the acquisition and management of primarily single-tenant industrial and office properties leased long-term to high quality corporate tenants in select markets in the United StatesEurope and Canada, announced today its financial and operating results for the quarter ended June 30, 2020.

Second Quarter 2020 and Subsequent Events Highlights

  • Revenue increased 6.6% to $81.1 million from $76.1 million in second quarter 2019
  • Net income attributable to common stockholders was $1.0 million as compared to $12.6 million in second quarter 2019 due to a $7 million decrease in gains from real estate dispositions in 2019
  • Net operating income (“NOI”) grew 6.1% to $73.3 million from $69.1 million in second quarter 2019
  • Core Funds from Operations (“Core FFO”) was $35.4 million as compared to $38.4 million in second quarter 2019
  • Adjusted Funds from Operations (“AFFO”) was $39.8 million as compared to $40.1 million in the prior year quarter
  • AFFO per share was $0.44 as compared to $0.47 in second quarter 2019 due to increased interest expense and share count
  • Distributed $35.8 million in common dividends to shareholders
  • Ample Liquidity with cash and cash equivalents of $331 million1
  • Collected 98% of second quarter cash rents as of July 31, 20202
  • Acquired eight industrial and office properties for $31 million3 at an 8.45% weighted-average capitalization rate4 with 18.1 years of weighted-average remaining lease term5
  • Total acquisitions for the six months ended June 30, 2020 approach $145 million
  • Portfolio 99.6% leased with 8.9 years of weighted average remaining lease term6, up from 8.0 years in prior year quarter
  • Increased industrial/distribution exposure by 6% year over year based on annualized straight-line rent
  • Total portfolio allocation is 48% office, 47% industrial/distribution and 5% retail at the end of the quarter compared to 53% office, 41% industrial/distribution and 6% retail based on annualized straight-line rent as of June 30, 2019
  • Closed refinancing with €70 million loan at an effective interest rate of 2.3% against seven properties in France, which, combined with previously completed refinancing of properties in FinlandGermanythe NetherlandsLuxembourg, and the U.K, constitute a complete refinancing of the Company’s European assets
  • Subsequent to quarter end, closed on six loans for an aggregate of $88 million at a 3.45% interest rate, secured by six properties leased to the Whirlpool Corporation in the United States

“In the face of the unprecedented challenges presented by COVID, the GNL portfolio has continued to perform at the highest levels. Due to the strength of the underlying assets making up the portfolio, which features primarily investment grade tenants that are diversified across the United States and Europe, we collected 98% of the cash rent due in one of the toughest quarters in my career,” commented James Nelson, Chief Executive Officer of GNL. He continued, “At the same time, we have remained disciplined around our long-range objectives. We completed several important financing transactions at historically low interest rates while closing on eight industrial and office acquisitions, further enhancing our balance sheet and portfolio.”

   

Three Months Ended June 30,

(In thousands, except per share data)

 

2020

 

2019

Revenue from tenants

 

$

81,109

   

$

76,119

 
         

Net income attributable to common stockholders

 

$

966

   

$

12,621

 

Net income per diluted common share

 

$

0.01

   

$

0.15

 
         

NAREIT defined FFO attributable to common stockholders

 

$

35,103

   

$

36,782

 

NAREIT defined FFO per diluted common share

 

$

0.39

   

$

0.43

 
         

Core FFO attributable to common stockholders

 

$

35,445

   

$

38,394

 

Core FFO per diluted common share

 

$

0.39

   

$

0.45

 
         

AFFO attributable to common stockholders

 

$

39,777

   

$

40,058

 

AFFO per diluted common share

 

$

0.44

   

$

0.47

 

Property Portfolio

The Company’s portfolio of 296 net lease properties is located in nine countries and comprised of 34.6 million rentable square feet leased to 126 tenants across 46 industries at June 30, 2020. The real estate portfolio metrics include:

  • 99.6% leased with a remaining weighted-average lease term of 8.9 years, up from 8.0 years in 2019
  • 93.4% of the portfolio contains contractual rent increases based on square footage
  • 65% of portfolio annualized straight-line rent derived from investment grade and implied investment grade rated tenants7
  • 65% U.S. and 35% Europe (based on annualized straight-line rent)
  • 48% Office, 47% Industrial / Distribution and 5% Retail (based on an annualized straight-line rent)

Rent Collection

The Company collected 98% of cash rents that were payable in the second quarter of 2020 as of July 31, 2020, including 99% of the cash rent payable from the top 20 tenants in the portfolio (measured based on annualized straight-line rent as of June 30, 2020), which represent 49% of GNL’s second quarter cash rent. On a geographic basis, GNL collected 99% of the cash rent payable from U.K. based assets, 100% from European tenants and 96% of tenants located in the U.S.

Acquisition Activity

During the second quarter 2020, the Company acquired eight net leased assets for an aggregate contract purchase price of approximately $31 million. These assets were purchased at a weighted average going-in capitalization rate of 7.11%8, and an overall weighted average capitalization rate of 8.45%, with a weighted average remaining lease term of 18.1 years.

Capital Structure and Liquidity Resources

As of June 30, 2020, the Company had $316.8 million of cash and cash equivalents. The Company’s net debt to enterprise value was 50.1% with an enterprise value of $3.5 billion based on the quarter end closing share price of $16.73 for common stock,  $24.31 for the Series A preferred stock and $22.95 for the Series B preferred stock, with net debt of $1.8 billion9, including $1.3 billion of mortgage debt.

As of June 30, 2020, the percentage of fixed rate debt (including variable rate debt fixed with swaps) increased to 86.6% from 84.6% as of June 30, 2019. The Company’s total combined debt had a weighted average interest rate of 3.2% resulting in an interest coverage ratio of 3.9 times10. Weighted-average debt maturity based on outstanding principal balance of the debt on the last day of the applicable quarter increased to 5.2 years as of June 30, 2020 from 4.6 years at June 30, 2019.

Subsequent Events

Financing Activity

The Company, through certain of its subsidiaries, entered into a financing transaction with a syndicate of regional banks led by BOK Financial and borrowed an aggregate of $88 million secured by six (6) properties that are leased to Whirlpool Corporation, a Fortune 200 company with a Moody’s credit rating of Baa1.  The transaction is structured as six (6) individual loans (the “Loans”), each secured by one of the properties in the collateral pool.  Per the terms of the applicable loan agreements, the Loans are cross-collateralized and cross-defaulted. The maturity date of the Loans is July 2027.  The Loans were swapped to fixed via six (6) interest rate swaps that carry an interest rate of 3.45%.  The Loans are interest-only with the principal due at maturity.  At the closing of the Loans, an aggregate of $84 million of proceeds was used to repay amounts outstanding under the Company’s revolving credit facility and the remaining proceeds after costs and fees are available for general corporate purposes.

Footnotes/Definitions  

   

1

Liquidity includes $14.2 million of availability under the credit facility and $316.8 million of cash and cash equivalents.

2 

This  information may not be indicative of any future period. The impact of the COVID-19 pandemic on the Company’s rental revenue for the third quarter of 2020 and thereafter cannot be determined at present. The ultimate impact on our future results of operations and liquidity will depend on the overall length and severity of the COVID-19 pandemic, which management is unable to predict.

3 

Represents the contract purchase price and excludes acquisition costs which are capitalized per GAAP.

4 

Capitalization rate is a rate of return on a real estate investment property based on the expected, annualized straight-line rental income that the property will generate under its existing lease. Capitalization rate is calculated by dividing the average annualized straight-line rental income the property will generate (before debt service and depreciation and after fixed costs and variable costs) and the purchase price of the property. The weighted average capitalization rate is based upon square feet.

5 

The weighted average remaining lease term in years is based upon square feet as of the date of acquisition.

6 

Weighted-average remaining lease term in years is based on square feet as of June 30, 2020.       

7 

As used herein, “Investment Grade Rating” includes both actual investment grade ratings of the tenant or guarantor, if available, or implied investment grade. Implied Investment Grade may include actual ratings of tenant parent, guarantor parent (regardless of whether or not the parent has guaranteed the tenant’s obligation under the lease) or by using a proprietary Moody’s analytical tool, which generates an implied rating by measuring a company’s probability of default. Ratings information is as of June 30, 2020. Comprised of 35.7% leased to tenants with an actual investment grade rating and 29.3% leased to tenants with an Implied Investment Grade rating as of June 30, 2020.

8 

Going-in capitalization rate is a rate of return on a real estate investment property based on the expected, cash rental income that the property will generate under its existing lease during the first year of the lease. Going-in capitalization rate is calculated by dividing the cash rental income the property will generate during the first year of the lease (before debt service and depreciation and after fixed costs and variable costs) and the purchase price of the property. The weighted average going-in capitalization rate is based upon square feet of the date of acquisition.

9 

Comprised of the principal amount of GNL’s debt totaling $2.1 billion less cash and cash equivalents totaling $316.8 million, as of June 30, 2020.

10 

The interest coverage ratio is calculated by dividing adjusted EBITDA by cash paid for interest (interest expense less non-cash portion of interest expense and amortization of mortgage (discount) premium, net) for the quarter ended June 30, 2020. Adjusted EBITDA and cash paid for interest are Non-GAAP metrics and are reconciled below.

Conference Call

GNL will host a conference call on August 5, 2020 at 11:00 a.m. ET to discuss its financial and operating results.

Dial-in instructions for the conference call and the replay are outlined below. This conference call will also be broadcast live over the Internet and can be accessed by all interested parties through the GNL website, www.globalnetlease.com, in the “Investor Relations” section.

To listen to the live call, please go to GNL’s “Investor Relations” section of the website at least 15 minutes prior to the start of the call to register and download any necessary audio software. For those who are not able to listen to the live broadcast, a replay will be available shortly after the call on the GNL website at www.globalnetlease.com.

Conference Call Details

Live Call
Dial-In (Toll Free): 1-888-317-6003
International Dial-In: 1-412-317-6061
Canada Dial-In (Toll Free): 1-866-284-3684
Participant Elite Entry Number: 3360622

Conference Replay*
Domestic Dial-In (Toll Free): 1-877-344-7529
International Dial-In: 1-412-317-0088
Canada Dial-In (Toll Free): 1-855-669-9658
Conference Number: 10145432
*Available one hour after the end of the conference call through November 5, 2020.

Supplemental Schedules

The Company will file supplemental information packages with the Securities and Exchange Commission (the “SEC”) to provide additional disclosure and financial information. Once posted, the supplemental package can be found under the “Presentations” tab in the Investor Relations section of GNL’s website at www.globalnetlease.com and on the SEC website at www.sec.gov.

About Global Net Lease, Inc.

Global Net Lease, Inc.  is a publicly traded real estate investment trust listed on the NYSE focused on acquiring a diversified global portfolio of commercial properties, with an emphasis on sale-leaseback transactions involving single tenant, mission critical income producing net-leased assets across the United States, Western and Northern Europe. Additional information about GNL can be found on its website at www.globalnetlease.com.

Important Notice

The statements in this press release that are not historical facts may be forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to be materially different. The words “anticipates,” “believes,” “expects,” “estimates,” “projects,” “plans,” “intends,” “may,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside of the Company’s control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include the potential adverse effects of the ongoing global COVID-19 pandemic, including actions taken to contain or treat COVID-19, on the Company, the Company’s tenants and the global economy and financial markets and that any potential future acquisition is subject to market conditions and capital availability and may not be identified or completed on favorable terms, or at all, as well as those risk and uncertainties set forth in the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed on February 28, 2020 and all other filings with the SEC after that date, as such risks, uncertainties and other important factors may be updated from time to time in the Company’s subsequent reports. Further, forward looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise any forward-looking statement to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results, unless required to do so by law.

Accounting Treatment of Rent Deferrals

The majority of the concessions granted to its tenants as a result of the COVID-19 pandemic are rent deferrals with the original lease term unchanged and collection of deferred rent deemed probable. The Company’s revenue recognition policy requires that it must be probable that the Company will collect virtually all of the lease payments due and does not provide for partial reserves, or the ability to assume partial recovery. In light of the COVID-19 pandemic, the FASB and SEC agreed that for leases where the total lease cash flows will remain substantially the same or less than those after the COVID-19 related effects, companies may choose to forgo the evaluation of the enforceable rights and obligations of the original lease contract as a practical expedient and account for rent concessions as if they were part of the enforceable rights and obligations of the parties under the existing lease contract. As a result, we do not expect rental revenue used to calculate Net Income and NAREIT FFO to be significantly impacted by these types of deferrals. In addition, since we currently believe that these amounts are collectible, we have excluded from the increase in straight-line rent for AFFO purposes the amounts recognized under GAAP relating to these types of rent deferrals.

Contacts:

Investors and Media:
Email: investorrelations@globalnetlease.com
Phone: (212) 415-6510

See Campaign: http://globalnetlease.com
Contact Information:
Email: investorrelations@globalnetlease.com Phone: (212) 415-6510

Tags:
, Wire Real Estate, Wire, United States, English