Global Net Lease, Inc.

Good morning and welcome to the Global Net Lease first quarter 2020 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, Please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Luisa Corto, Executive Vice President, Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone, and thank you for joining us for GNL's first quarter 2020 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 the quarter's results are Jim Nelson, GNL's Chief Executive Officer, and Chris Masterson, GNL's Chief Financial Officer. The following information contains forward-looking statements, which are subject to risks and uncertainty. 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 31st, 2019, filed on February 28th, 2020, 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, G-NEL 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 a 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. The reconciliation of these measures to the most directly comparable GAAP measure is available in our earnings release Supplement, and Form 10-K, all of which are posted to our website at www.globalnetleads.com. Please also refer to our earnings release for more information about what we consider to be implied investment grade tenants, a term newly used throughout today's call. I'll now turn the call over to Jim Nelson, our CEO.

Thank you, Louisa, and thanks again to everyone for joining us on today's call. Before we start our discussion on GNL's quarterly results, I would like to express our hope that you, your families, and colleagues remain healthy and safe during these unprecedented times and offer our heartfelt appreciation for the heroic efforts of the healthcare and frontline workers who are leading the efforts to address the effects of the COVID-19 pandemic. We are encouraged by the improving situation and see many signs of strength and resiliency across our portfolio. While our priority is the health and safety of our tenants, teams, and business partners, our focus remains on preserving and driving long-term value for our stockholders. Although this call will discuss our first quarter 2020 results, I think the best place to begin is where everyone is currently focused, which is on COVID-19 and any potential impacts the pandemic has had in our portfolio. We are pleased to report that as of April 30th, 2020, We've collected over 98% of cash rents that were payable during the month, including 100% of the cash rent payable from the top 20 tenants in our portfolio. Our historic emphasis on credit quality, underwriting, and due diligence is making a tremendous difference in our portfolio's performance. Further, we are in contact with the tenants that constitute the remaining 2% of rent, and we continue to look to collect this outstanding balance. On a geographic basis, GNL collected 100% of the cash rent payable from our UK-based assets, 99% from our other European tenants, and 96% from our US-based assets. While there is still much unknown, and we cannot predict the full economic impact of this pandemic, we believe our balance of mission-critical industrial and distribution assets, limited retail exposure, and high investment grade rated concentration will continue to perform as underwritten. We believe we will emerge from this crisis well positioned to capitalize on the opportunities that inevitably arise from such a widespread disruptive event. As previously disclosed, GNL has taken steps to enhance our financial flexibility and manage risk during this uncertain time. As a result of these steps, liquidity or cash on our balance sheet and availability for future borrowings under our credit facility totaled $366.6 million at the end of the first quarter, which we believe favorably positions the company for the months ahead. In March, we drew on our credit facility to enhance our cash position as the scope of the crisis became apparent. Additionally, the Board approved a change in the common stock dividend to an annualized rate of $1.60 per share or quarterly 40 cents per share beginning in the second quarter 2020. Our first quarter AFFO was 44 cents per share. We believe that this action was prudent in the current environment and will strengthen G&L's cash flow by over 12 million per quarter as we prioritize preservation of capital. In April, the board adopted a short-term stockholder rights plan to discourage the accumulation of our stock through open market trading. The board believes that the plan, along with our other recently announced actions, are in the best interest of the company. We believe that GNL's solid foundation continues to position us well for the long run. We remain committed to executing on our global investment strategy of acquiring and owning a portfolio of well-diversified properties lease long-term to high-quality tenants who consider these properties to be critical to their business operations. Given our platform that spans from North America to Europe, our capital resources, and the evolving real estate markets and macroeconomic conditions, we believe we will be well-positioned to capitalize on select opportunities as they arise. While we may still be in the middle innings of a global health crisis, We believe our portfolio has shown impressive resiliency thus far and will continue to demonstrate its strength as we move ahead. Turning now to the first quarter, we acquired 10 properties for an aggregate contract purchase price of $114 million, including the completion of the Whirlpool sale leaseback we discussed on our last call. The acquisitions, located in the U.S., Canada, and Italy, have an average remaining lease term of 18.9 years and were acquired at a weighted average cap rate of 8.5%. We also signed lease extensions for four properties leased to Finnair, the flag carrier and largest airline in Finland, and majority owned by the Finnish government. We were able to extend the weighted average remaining lease term on the properties from 4.7 years to 11 years, providing further stability and increased cash flow to GNL. Including these closings, our $3.8 billion, 288 property portfolio is nearly fully occupied at 99.6% leased and has a weighted average remaining lease term of nine years, up from 8.1 years a year ago. We have no 2020 lease expirations and contractual rent growth is embedded at 94% of leases. 223 of our properties are in the US and Canada, and 65 are in the UK and Western Europe, representing 65 and 35% of annualized rent revenue, respectively. Our property mix is currently 48% office, 47% industrial and distribution, and 5% retail, compared to 53% office, 39% industrial and distribution and 8% retail a year ago, a reflection of our focus on industrial acquisitions and retail dispositions over the last year. We believe that this emphasis on industrial acquisitions and the reduction of our exposure to retail has aided our success in the current environment, as has our focus on tenant credit. Across the portfolio, 66.7% of straight-line rent comes from investment grade or implied investment grade tenants, including 90% of our top 10 tenants. Going forward, we are adopting a prudent stance with potential acquisition opportunities as we reevaluate historical cap rates during this uncertain time. We are carefully determining the appropriate risk-adjusted cap rate targets for potential new acquisitions going forward, and we'll ensure that all assets meet our revised criteria. Taking a look at financial highlights, we are pleased to report year-over-year increases in adjusted EBITDA, revenue from tenants, and NOI. Adjusted EBITDA increased to $60.1 million in the first quarter 2020, and total revenue was up 5% to $79.2 million. Net operating income also increased 5.5% to $71.9 million from $68.1 million in the first quarter 2019. and 1.2% from 71 million in the previous quarter. On a per share basis, AFFO decreased year over year to 44 cents per share, but this was primarily due to preferred dividends on our series B preferred shares, which were issued in the fourth quarter. The proceeds of which were largely used to help fund acquisitions during the first quarter of this year. AFFO per share was flat over the fourth quarter of 2019. With that, I'll turn the call over to Chris to walk through the operating results in more detail before I follow up with some closing remarks.