GNL-B Global Net Lease Inc

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported):  August 3, 2023

 

Global Net Lease, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Maryland		001-37390		45-2771978
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

650 Fifth Avenue, 30th Floor

New York, New York 10019

(Address, including zip code, of Principal Executive Offices)

 

Registrant’s telephone number, including area code: (212) 415-6500

  

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

  

Securities registered pursuant to section 12(b) of the Act:

 

Title of each class		Trading Symbols		Name of each exchange on which registered
Common Stock, $0.01 par value per share		GNL		New York Stock Exchange
7.25% Series A Cumulative Redeemable Preferred Stock, $0.01 par value share		GNL PR A		New York Stock Exchange
6.875% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share		GNL PR B		New York Stock Exchange
Preferred Stock Purchase Rights				New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

  

 

Item 7.01.

Regulation FD Disclosure.

 

Earnings Call Script

 

On August 3, 2023, Global Net Lease, Inc. (the “Company”) hosted a conference call to discuss its financial and operating results for the quarter ended June 30, 2023. A transcript of the pre-recorded portion of the conference call is furnished as Exhibit 99.1 to this Current Report on Form 8-K. As previously disclosed, a replay of the entire conference call is available through November 3, 2023 by telephone as follows:

 

Domestic Dial-In (Toll Free): 1-844-512-2921

International Dial-In: 1-412-317-6671

Conference Number: 10176723

 

The information set forth in Item 7.01 of this Current Report on Form 8-K and in the attached Exhibit 99.1 is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information set forth in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933, as amended, regardless of any general incorporation language in such filing.

 

The statements in this Current Report on Form 8-K 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. In addition, words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” expects,” “plans,” “intends,” “would,” or similar expressions indicate a forward-looking statement, although not all forward-looking statements contain these identifying words. Any statements referring to the future value of an investment in the Company, including the adjustments giving effect to RTL merging with and into Osmosis Sub I, LLC, with Osmosis Sub I continuing as the surviving entity and wholly-owned subsidiary of GNL (the “REIT Merger”) and GNL and RTL becoming internally managed (the “Internalization Merger”) as described in this communication, as well as the potential success that the Company may have in executing the REIT Merger and Internalization Merger, are also forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause the Company’s actual results, or the Company’s actual results after making adjustments to give effect to the REIT Merger and the Internalization Merger, to differ materially from those contemplated by such forward-looking statements, including but not limited to: (i) the Company’s ability to complete the proposed REIT Merger and Internalization Merger on the proposed terms or on the anticipated timeline, or at all, including risks and uncertainties related to securing the necessary stockholder approvals and satisfaction of other closing conditions to consummate the proposed transaction, (ii) the occurrence of any event, change or other circumstance that could give rise to the termination of the Internalization Merger Agreement and REIT Merger Agreement, each dated as of May 23, 2023 relating to the proposed transactions, (iii) ability of the Company to obtain lender consent to amend its Second Amended and Restated Credit Facility or any other loan agreement of the Company, if at all, or on terms favorable to the Company, (iv) risks related to the potential repeal of the Company’s Shareholder’s Rights Plan; (v) risks related to the decrease in the beneficial ownership requirements of the Company’s applicable classes and series of stock; (vi) risks related to diverting the attention of the Company’s management from ongoing business operations, (vii) failure to realize the expected benefits of the proposed transactions, (viii) significant transaction costs or unknown or inestimable liabilities, (ix) the risk of shareholder litigation in connection with the proposed transaction, including resulting expense or delay, (x) the risk that RTL’s business will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected, (xi) risks related to future opportunities and plans for the Company post-closing, including the uncertainty of expected future financial performance and results of the Company post-closing following completion of the proposed transactions, (xii) the effect of the announcement of the proposed transaction on the ability of the Company and RTL to operate their respective businesses and retain and hire key personnel and to maintain favorable business relationships, (xiii) the effect of any downgrade of the Company’s or RTL’s corporate rating or to any of their respective debt or equity securities including the outstanding notes under the RTL Indenture; (xiv) risks related to the market value of the GNL Common Stock to be issued in the proposed transactions; (xv) other risks related to the completion of the proposed transactions, (xvi) the risk that one or more parties to the Internalization Merger Agreement and REIT Merger Agreement may not fulfil its obligations under the respective agreement, as well as the additional risks, uncertainties and other important factors set forth in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 23, 2023, 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 Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, except as required by law.

 

 

Item 9.01.

Financial Statements and Exhibits.

 

(d)

Exhibits

 

Exhibit No		Description
99.1		Transcript
104		Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	GLOBAL NET LEASE, INC.
Date: August 3, 2023	By:	/s/ James L. Nelson
	Name:	James L. Nelson
	Title:	Chief Executive Officer and President

 

 

 

 

 

 

Exhibit 99.1

Operator

 

Good afternoon and welcome to the Global Net Lease Second Quarter 2023 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. Good afternoon, everyone and thank you for joining us for GNL's second quarter 2023 Earnings Call. This call is being webcast in the Investor Relations section of GNL's website at www.globalnetlease.com. Joining me today on the call to discuss this quarter’s results are Jim Nelson, GNL’s Chief Executive Officer and Chris Masterson, GNL’s Chief Financial Officer. Mike Weil, CEO of The Necessity Retail REIT, Inc. will also be joining us for the question and answer session.

 

The following information contains forward-looking statements, which are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements. We refer all of you to our SEC filings including the Form 10-K for the year ended December 31, 2022 filed on February 23, 2023 and all other filings with the SEC after that date for a more detailed discussion of the risk factors that could cause these differences.

 

Any forward-looking statements provided during this conference call are only made as of the date of this call. As stated in our SEC filings, GNL disclaims any intent or obligation to update or revise these forward-looking statements except as required by law. Also, during today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating the company's financial performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our earnings release and supplement which are posted to our website. Please also refer to our earnings release for more information about what we consider to be implied investment grade tenants, a term we will use throughout today's call.

 

I'll now turn the call over to our CEO, Jim Nelson. Jim?

 

 

James Nelson

 

Thanks, Curtis, and thank you to everyone for joining us on today’s call.

 

Before we get into our results I will provide a brief update on the proposed merger with the Necessity Retail REIT which was announced in May and is expected to close this September. We believe that the merger with RTL - and the simultaneous internalization of GNL's management and operations, paired with numerous governance enhancements - will establish GNL as a sector-leading net-lease REIT with a global presence, uniquely positioned for long-term growth.

 

We expect that in the first full quarter after closing, the transactions will be 9% accretive to annualized AFFO per share, relative to the quarter ended March 31, 2023, and will reduce leverage for the combined company, driving net debt to adjusted EBITDA to 7.6x in the fourth quarter. Annual cost savings are expected to be approximately $75 million. The SEC declared the registration statement for the merger effective in July, and we have set a record date of August 8, 2023, for the special meeting of stockholders to vote on the proposed mergers, which will be on September 8, 2023.

 

Beyond the merger, the GNL team continued to make great progress on our key strategic objectives during the second quarter. We completed eleven lease renewals and one tenant expansion project, resulting in nearly $20.2 million of net new straight-line rent over a weighted-average lease term of 6.0 years. Occupancy was 98% across the portfolio. Subsequent to quarter end, we signed three additional lease renewals, bringing us to fourteen lease renewals since the end of the first quarter. Nearly 60% of our long-term leases are with Investment Grade Tenants, and industrial or distribution assets comprised 55% of our portfolio as of the end of the second quarter, both based on annualized straight-line rent. Among our office properties, 68% are mission critical facilities, which is defined as a headquarters, lab or R&D facility, and 71% are leased to investment grade or implied investment grade tenants. We believe GNL is well positioned for meaningful capital appreciation with our strong portfolio and the upcoming corporate enhancements.

 

 

We continue to be substantially insulated from the rising interest rate environment, as we benefit from our predominately fixed rate debt which minimizes the impact of rate increases, as well as a sophisticated hedging program designed to minimize negative impact to our cash flow from foreign exchange volatility and a stronger US dollar.

 

In the second quarter, our AFFO was $41.4 million or $0.40 per share, compared to $0.43 in the second quarter of 2022 but an increase from $0.38 per share in the first quarter of 2023. Revenue increased over $1.5 million compared to the first quarter of 2023, which also helped drive Adjusted EBITDA and NOI higher quarter over quarter.

 

Our performance was driven by ongoing strong leasing activity which totaled 1.7 million square feet of lease renewals and expansions through July 20, 2023. These leases added $64.1 million of net new straight-line rent over the new lease terms at a positive 0.7% spread compared to the prior leases.

 

Leases signed during the second quarter included six leases with XPO Logistics in the US for over 77,000 square feet, a lease with ID Logistics in France for approximately 566,000 square feet, and an 86,000 square foot lease with PFB Canada in Alberta. Thanks to our leasing efforts, our portfolio only has 1% of leases expiring during the balance of this year, with 73% of our leases not expiring until 2028 or later.

 

 

At quarter end, our $4.6 billion, 317 property portfolio had a weighted average remaining lease term of 7.6 years. Geographically, 236 of our properties are located in the U.S. and Canada, representing 60% of annualized straight-line rent revenue. We own 81 properties in the U.K. and Western Europe, which generate 40% of annualized straight-line rent. Our portfolio is well-diversified with 139 tenants in 51 industries, with no single industry representing more than 12% of the entire portfolio and no tenant exceeding 5% of the portfolio, based on annual straight-line rent.

 

Approximately 95% of our leases feature annual rent increases which increase the cash rent that is due over time from these leases. Based on straight-line rent, approximately 60.1% of our leases feature fixed-rate escalations, 27.5% have escalations that are based on the Consumer Price Index, and 7.1% have escalations based on other measures.

 

Subsequent to the end of the second quarter we announced that we had entered into a definitive agreement to sell a vacant office property in San Jose, California for $50 million. We bought this property for $52.5 million in 2014 with a long-term lease in place. Negotiating the sale of this vacant property for nearly the same price we paid for it showcases the value of our diligent underwriting standards that favors properties with high reuse potential.

 

Our differentiated investment strategy continues to deliver value and we remain focused on growing our portfolio. Our successful lease renewals speak to the mission-critical nature of the properties that we own, where the weighted-average remaining lease term is nearly eight years. We are well-positioned for the future, and I look forward to building on our progress through the merger and the many strategic objectives we are pursuing.

 

I'll turn the call over to Chris to walk through the financial results in more detail before I follow up with some closing remarks. Chris?

 

 

Chris Masterson

 

Thanks, Jim.

 

For the second quarter 2023 we recorded revenue of $95.8 million, with a net loss attributable to common stockholders of $31.4 million. FFO was $5.9 million, or $0.06 per share, and AFFO was $41.4 million, respectively, or $0.40 per share. FFO was impacted by $15.1 million of settlement costs, $7.4 million of proxy related expenses, and $6.3 million of merger and transaction costs that are added back to AFFO. On a constant currency basis, (applying the average monthly currency rates from the second quarter 2022), revenues in the second quarter of 2023 would have been up by $0.2 million year-over-year to $96.0 million. As always, a reconciliation of GAAP net income to the non-GAAP measures can be found in our earnings release, which is posted on our website.

 

On the balance sheet, we ended the quarter with net debt of $2.4 billion at a weighted-average interest rate of 4.8% and had liquidity of $374.1 million, including $100.9 million of cash and cash equivalents and $273.2 million of availability under the Company's revolving credit facility. Our net debt to trailing twelve month adjusted EBITDA ratio was 8.3x at the end of the quarter. The weighted-average debt maturity at the end of the second quarter 2023 was 3.7 years.

 

Our debt includes $500.0 million in senior notes, $1.0 billion on the multi-currency revolving credit facility and $1.0 billion of outstanding gross mortgage debt. This debt was approximately 72% fixed rate, which includes floating rate debt with in-place interest rate swaps, and our interest coverage ratio was 2.9x. The Company distributed $41.7 million in dividends to common shareholders in the quarter, at a rate of $0.40 per share.

 

Our net debt to enterprise value was 65.2% with an enterprise value of $3.7 billion. I'll now turn the call back to Jim for some closing remarks.

 

 

James Nelson

 

Thanks, Chris.

 

We are continuing to execute lease renewals and tenant expansions across our portfolio, locking in credit-worthy tenants with long-term leases. Our success is the natural outcome of the deliberate underwriting process we have applied over many years. In a similar way, as we continue to move toward the proposed transformative merger with the Necessity Retail REIT, we believe that it's similarly constructed portfolio of primarily retail net-lease and open-air shopping centers will complement our current assets. We expect that the diversification, scale, and savings that we anticipate realizing through the merger, internalization of management, and governance enhancements will unlock value for GNL shareholders and create a strong foundation for GNL to continue growing in the future.

 

We are pleased that Mike Weil, CEO of RTL who will join me as co-CEO of GNL pending completion of the merger, will participate in the Q&A session. We look forward to answering any questions you may have. Operator, please open the line for questions.

 

Question-and-Answer Session

 

Operator

 

[Operator Instructions]

 

v3.23.2

Cover	Aug. 03, 2023
Document Information [Line Items]
Document Type	8-K
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Entity File Number	001-37390
Entity Registrant Name	Global Net Lease, Inc.
Entity Central Index Key	0001526113
Entity Tax Identification Number	45-2771978
Entity Incorporation, State or Country Code	MD
Entity Address, Address Line One	650 Fifth Avenue
Entity Address, Address Line Two	30th Floor
Entity Address, City or Town	New York
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Preferred Stock Purchase Rights [Member]
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Security Exchange Name	NYSE
Common Stock [Member]
Document Information [Line Items]
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Document Information [Line Items]
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Trading Symbol	GNL PR A
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Series B Preferred Stock [Member]
Document Information [Line Items]
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