Global Net Lease, Inc.

Greetings. Welcome to the Global Net Lease second quarter 2024 earnings call. At this time, I'll dispenser in listen-only mode. The question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. At this time, I'll turn the conference over to Jordan Schoenfeld. Jordan, you may now begin.

Thank you. Good morning, everyone, and thank you for joining us for GNL's second quarter 2024 earnings call. Joining me today on the call is Michael Weil, GNL's chief executive officer, and Chris Masterson, GNL's chief financial officer. The following information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please review the forward-looking and cautionary statements section at the end of our second quarter 2024 earnings release for various factors that could cause actual results to differ materially from forward-looking statements made during our call today. As stated in our SEC filings, G&L 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 certain non-GAAP financial measures which we believe can be useful in evaluating the company's financial performance. Description of those non-GAAP financial measures that we use, such as AFFO and net debt to adjusted EBITDA and reconciliation of these measures to our results as reported in accordance with GAAP are detailed in our earnings release and in our quarterly report on Form 10-Q for the second quarter 2024. I'll now turn the call over to our CEO, Michael Weil. Mike?

Thanks, Jordan. Good morning, and thank you all for joining us today. At the beginning of 2024, GNL initiated a comprehensive business plan with clear financial objectives. We're currently on track to achieve or exceed these objectives following another successful quarter marked by increased guidance of our strategic disposition initiative, further leverage reduction, efficient balance sheet execution, AFFO per share growth, strong leasing momentum, and continued synergies and internalization related savings. At the start of 2024, GNL implemented an asset disposition program and provided guidance of $400 million to $600 million in total sale proceeds from dispositions to be used for debt pay down, with a cash cap rate between 7% and 8% on occupied assets. The primary objectives are to reduce our net debt to adjusted EBITDA, lower our cost of capital, and align our leverage with industry peers. We're excited about the significant progress we have achieved to date. As of August 1st, total transactions, including our closed dispositions plus pipeline, total $728 million at a cash cap rate of 7.3% on occupied assets, with a weighted average remaining lease term of 5.3 years. This includes $371 million from successfully closed dispositions at a cash cap rate of 7.4% on occupied assets, $227 million in dispositions currently under PSA at a cash cap rate of 6.7% on occupied assets, and $130 million in dispositions with executed LOIs at a cash cap rate of 7.7% on occupied assets. As a result of the robust pipeline we have built in the early stages of our strategic disposition effort, We have raised our guidance for the disposition initiative to $650 million to $800 million of closed transactions in 2024 within our state at 7% to 8% cash cap rate. We believe the 7.3% cash cap rate achieved on the occupied dispositions demonstrates the value of our primarily investment-grade portfolio, representing a significant premium compared to GNL's current implied cap rate. We remain committed to reducing leverage into 2025, and we plan to disclose additional information on incremental dispositions as part of our 2025 business plan. These dispositions are focused on non-core assets with shorter weighted average remaining lease term compared to our portfolio average, as well as opportunistic sales. As part of this strategy, we anticipate further reducing our office portfolio through non-core dispositions targeting an exposure below 20% of total portfolio straight line rent by the end of 2024. Notable sales in the quarter include 20 single-tenant retail properties leased to Truist, totaling over $50 million at a 6.4% cash cap rate, and a portfolio of nine properties leased to AmeriCold for $170 million. The AmeriCold portfolio, with its 3.3 years of weighted average remaining lease term, and renewal uncertainties generated $170 million of gross proceeds, which we used to pay on our 2025 maturing debt balance during the quarter, with the remaining proceeds used to further pay down our revolving credit facility. This strategy exemplifies G&L's commitment to enhancing asset value and delivering long-term shareholder returns. Additionally, we have nearly $180 million in vacant property dispositions that are closed or under agreement, which are expected to eliminate over $3 million of annualized operating expenses, assuming closing of the transactions contemplated by such agreements. We're pleased to report that our progress in the 2024 Strategic Disposition Plan has enabled us to achieve a net debt to adjusted EBITDA ratio of 8.1 times at the end of the second quarter, down from 8.4 times last quarter. While we have more work ahead of us, we're optimistic about the progress we've made this far and are confident in our ability to further reduce leverage in the second half of the year without negatively impacting our AFFO per share. I want to emphasize that a key priority of our disposition strategy is selling assets held on our revolving credit facility, as these assets incur the highest interest costs and allow us to deleverage on an earnings neutral basis. If a sale involves assets not on our revolving credit facility, our intent is to allocate the remaining proceeds to reduce our revolving credit facility balance, as we did with our AmeriCold disposition. Another financing tool that provides G&L with a significant advantage is our ABS Master Trust. To provide some context for those who are not familiar, the Master Trust allows for a flexible collateral pool with the ability to substitute or release assets, which gives GNL more flexibility than what is traditionally found in other types of financings. As we dispose of assets that currently sit on our ABS at an approximately 3.6% interest rate, we replace them with assets from our revolving credit facility, which currently carries a 7.3% floating interest rate on the US dollar portion. This generates over 300 basis points of interest rate savings and allows us the flexibility to continue focusing on reducing our cost of capital as we continue to dispose of assets. As mentioned, GNL continues to place a strong emphasis on de-risking our balance sheet, focusing on managing near-term debt maturities and increasing the proportion of fixed-rate debt in our portfolio. We have been proactive in addressing near-term debt maturities And as of August 1st, we have successfully addressed 100% of the debt that was scheduled to mature in 2024 through dispositions or refinancing onto a revolving credit facility. As a result, GNL currently has no debt maturities through July of 2025. Additionally, we previously announced we expect to achieve $75 million in savings resulting from the merger and internalization of our management functions by the end of Q3 2024. We're excited to announce that through Q2 2024, we've already recognized over $74 million of cost synergies with the remaining balance to be realized next quarter. During the second quarter of 2024, we also showcased our strong asset management capabilities through robust leasing activity. We achieved positive leasing spreads encompassing nearly 1.5 million square feet with attractive renewal spreads that were 4.3% higher than expiring rents. New leases that were completed in the second quarter of 2024 have a weighted average lease term of 8.3 years, while the renewals that were completed during this period have a weighted average lease term of 8.5 years. Notably, the single tenant segment completed 16 new leases and renewals, highlighted by an 8.5% renewal spread. The multi-tenant segment completed 81 new leases and renewals, resulting in a 2% renewal spread, consistent with the high demand we're experiencing at our suburban shopping centers. Turning to our portfolio, as of the end of the second quarter, we own 1,242 properties spanning over 64 million square feet and a weighted average remaining lease term of 6.5 years. Our weighted average remaining lease term remains steady quarter over quarter, which is directly attributable to our strategic focus on disposing of assets with short remaining lease terms and successful leasing efforts. We believe GNL is well positioned to continue to navigate external macro challenges given the diverse composition of our net lease portfolio, which is unmatched across geography, asset type, tenant, and industry. Regarding other tenant exposure, GNL maintains limited exposure to family dollar, of only seven basis points of straight-line rent, and cons and big lots each represent just eight basis points of straight-line rent. We had minimal exposure to Route 21, accounting for only five basis points of straight-line rent, and no exposure to Red Lobster, which both recently filed for bankruptcy. This is a testament to our portfolio's impressive diversification and credit underwriting. No single tenant accounts for more than 3.2% of total straight line rent, and the top 10 tenants collectively contribute only 21% of total straight line rent. We continue to monitor all tenants in our portfolio and their business operations on a regular basis. Geographically, 80% of our straight line rent is earned in North America and 20% from Europe. The portfolio features a stable tenant base and a high quality of earnings, with an industry-leading 59% of tenants receiving an investment grade or implied investment grade rating. The portfolio features an average annual contractual rental increase of 1.3%, which excludes the impact of 14% of the portfolio with CPI-linked leases that have historically experienced significantly higher rental increases. I encourage everyone to look at our Q2 2024 investor presentation on our website for more details on each segment of our portfolio. We remain committed to executing on our systematic and prudent approach to achieving our financial objectives, focusing on reducing net debt to adjusted EBITDA without negatively impacting earnings, while organically enhancing NOI through lease up initiatives and contractual rent growth. We're pleased with our first half achievements and look forward to sustaining this momentum in the second half of 2024. I'll turn the call over to Chris to walk through the financial results and balance sheet matters in more detail. Chris?

Thanks, Mike. Please note that, as always, a reconciliation of gap net income to non-gap measures can be found in our earnings release, which is posted on our website. For the second quarter of 2024, we recorded revenue of $203 million and a net loss attributable to common stockholders of $47 million, compared to $206 million and $35 million in Q1 2024, respectively. ASFO grew 2% to $77 million, or $0.33 per share, in the second quarter of 2024, compared to $75 million, or $0.33 per share, in Q1 2024, representing a 2% ASFO per share increase from last quarter. We achieved a significant reduction in income tax expense in Q2 2024, driven by the continued benefits from the successful European tax restructure and a 3.8 million tax benefit recognized in the quarter. Looking at our balance sheet, our debt comprises $1 billion in senior notes, $1.7 billion on the multi-currency revolving credit facility, and $2.4 billion of outstanding gross mortgage debt, with zero debt maturing for the remainder of the year. Our debt includes 90% fixed rate debt which incorporates floating rate debt with in-place interest rate swaps, and our interest coverage ratio was 2.4 times. It's important to note that even though 90% of our debt is subject to fixed rates, the current sustained high interest rate environment has a temporary effect on the portion of our debt that isn't fixed or swapped. To mitigate this, in April, we reduced variable rate debt exposure through a $237 million TMBS refinancing, and swapped $300 million of the U.S. dollar portion of our revolving credit facility to an interest rate that is 120 basis points lower than the current floating interest rate, effective April 1, 2024. Additionally, in March, we entered into $200 million of GBP swaps that are approximately 90 basis points lower than the one-month soviet. These proactive cost-cutting actions have reduced our weighted average interest rate to 4.7%, down from 4.8% in Q1 2024, and increased the portion of our debt that is fixed rate to 90% up from 84% in Q1 2024. At the end of the second quarter, our net debt to adjusted EBITDA ratio was 8.1 times based on net debt of $5 billion, a decrease of 0.3 times from the prior quarter, largely due to the $277 million of dispositions closed in Q2. We have successfully managed to reduce our outstanding debt balance by $251 million from Q1 2024, and we intend to further reduce our outstanding debt balance as we close on the disposition currently in our pipeline. We have liquidity of approximately $220 million and $214 million of capacity on our revolving credit facility. As of June 30th, 2024, we had approximately 230.8 million common shares outstanding, and approximately 230.4 million shares outstanding on a weighted average basis. Turning to our outlook for the remainder of 2024, based on progress to date, we are reaffirming our AFFO per share guidance range of $1.30 to $1.40 and a net debt to adjusted EBITDA range of 7.4 times to 7.8 times. As Mike mentioned, we have increased guidance related to our disposition initiative to $650 million to 800 million from 400 million to 600 million. I'll now turn the call back to Mike for some closing remarks.

Thanks, Chris. GNL made significant progress in the first half of 2024, effectively executing the business plan we set forth at the beginning of the year and demonstrating strong performance across multiple strategic initiatives. We're pleased with the velocity of our 2024 strategic disposition plan with closed and pipeline dispositions totaling $728 million at favorable cash cap rates, underscoring the strength of our investment-grade portfolio. This initiative has been crucial in our efforts to align our leverage with industry peers by reducing net debt to adjusted EBITDA. During the successful second quarter, we saw a 0.3 times decrease in net debt to adjusted EBITDA to 8.1 times, with further reductions anticipated in the second half of the year. Our disposition initiative is being executed on an earnings neutral basis, as demonstrated by our AFFO per share growth quarter over quarter. And importantly, it's worth reiterating that our proactive approach to managing near-term debt maturities has resulted in zero debt maturities through July 2025, further solidifying our financial stability. We've raised disposition guidance to a new range of $650 million to $800 million of closed dispositions in 2024 from an initial range of $400 million to $600 million, reflecting the rapid progress and effectiveness of our initiative. We've recognized 99% of the anticipated cost synergies from the merger and internalization and expect to realize the full balance by next quarter as originally projected. Additionally, continued strong leasing activities have increased portfolio occupancy and generated positive renewal spreads. As we look ahead, we believe the net lease industry continues to offer stable and predictable income, as demonstrated by GNL's successful second quarter results. We remain committed to executing our 2024 business plan and are optimistic about maintaining positive momentum, especially with tailwinds from potential rate cuts. As always, we're available to answer any questions you may have on this quarter after the call. Operator, please open the line for questions.

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue. For participants using speaker equipment, It may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Thank you, and our first question comes from the line of John Kim with BMO Capital Markets. Please proceed with your question.

Good morning, John.

Good morning, and thank you. I wanted to ask about the dispositions that you've added to the poll this year. and the additional disclosure on the assets that are in letter of intent at a 7-7 cap rate. Michael, I think from your commentary that this is mostly office assets, but I just wanted to confirm that's the case. And also, if you could just comment on the overall transaction market and how investor appetite has changed with the change in rates.

Well, I think that we're going to see –

Increase in activity in the market, the expectation of lowering rates is only going to be a positive. So considering where we've been in the first half of the year when it was not certain of timing on potential rate cuts, I think it will only help us and really be winded our back. As far as the executed LOI portion of what We're anticipating closing in the remainder of 2024. That's going to continue to change. It's just at the moment. The average cap rate is a 7.7. As you've seen, in the first quarter, we were 7.3 on closed assets. In the second quarter, we're 7.4. And we've got an upcoming... allocation that's under PSA that's at a 6.7. So I don't think, you know, this is just a moment in time type of analysis. And some assets are going to be at a higher cap rate. It is a disposition mix that does include office as well. And as we move from LOI to close, we will continue to provide property level details on those dispositions. But I don't think the 7-7 is any indication of where we're trending in our continued disposition strategy. And when we increased the guidance to 650 to 800, we still think that we're going to be in this operating range. I don't know that we'll be exactly at 7.3%, but it's going to be valuable and it's going to help us continue to pay down debt. I'd like to just reiterate again how happy we are with the results of being able to pay down the debt in the quarter, but not seeing any erosion of earnings. That's something that we've been very focused on. And when we identify as disposition of non-core assets, that's part of really what we focus on because reducing leverage is certainly the top goal, but so are earnings.

I understand the 7-7 cap rate is likely due to mix, but just wanted to know if it contains a higher proportion of office or non-U.S. assets, and that's What's driving that higher yield?

No, it is primarily U.S. dispositions. Again, it is a blend that includes office. And as we said on the earnings call itself, this is going to drive our office portfolio percentage under 20% overall because we do see value in continuing to lower that.

This quarter, you had a nice pickup in occupancy on your multi-tenant retail portfolio. How do you see that progressing over the next year, year and a half? And specifically, you have a target of 91.8% based on the near-term pipeline. And I'm just wondering what the headwinds are to that 91.8% as you look at expirations and known move-outs in the portfolio. Yeah.

Well, the asset management team has remained very busy and fully engaged. I believe that what you've seen in 2020 for the first two quarters is what you should expect to continue to see through the 24 and into 25. It's all been factored into our earnings guidance of $1.30 to $1.40. It does include continued uptake of occupancy. And besides the obvious value of leasing and increasing revenue, there's also the benefit of improving further the OpEx reimbursement rate. So it's just, again, positive momentum on the revenue side of the balance sheet, as we're also equally focused on lowering the debt side. So positive feedback on the shopping centers. As I've said in earnings calls prior, bringing in significant anchors makes the shopping centers more valuable in general. It creates revenue. business opportunities for the regional and local retailers that want to be in those centers. And I think you've seen from our release, we've avoided a lot of the retailers that are headline bankruptcies. And I don't ever want to say that we're infallible, but it is an intentional part of our underwriting. It didn't come as a surprise to us. We've made some strategic decisions you know, four or five years ago regarding certain retailers and not wanting to have significant exposure to them. That, you know, we never knew when, but we did believe in a tight credit market they could potentially have problems. And I'm sorry to see that they did, but I'm happy to see that it doesn't have an impact on our portfolio.

Okay, great. Thank you.

Thanks, John.

Our next question is from the line of Brian Maher with B. Reilly Securities. Please proceed with your questions.

Good morning, Brian. Thank you. Good morning. Good morning, Michael. Good morning, Chris. A couple for me this morning. So 8-4 to 8-1 without any earnings degradation. Pretty impressive for the second quarter. I think you're headed to the mid-7s. The peers are trading kind of high fives. Where's the end game? Can you share with us? Are you happy getting to the 6s eventually and maybe how long that takes?

Yeah, so the end game is to look essentially like our peers because that's what shareholders want to see. And as we said last quarter, you know, we have to start somewhere and we want to do it in a rational way because obviously earnings really do matter. We will continue to use strategic dispositions as the driver and There are other certain things you heard a little bit about. Our ability to move assets from the credit facility onto our ABS Master Trust. That is at a pretty significant lower cost of debt. That'll increase earnings. So as we think about net debt to adjusted EBITDA, obviously debt is half of that equation. But with lease up, with balance sheet management, with doing things like we've done, restructuring our European assets, et cetera, we can lower leverage and we can grow EBITDA. And this is going to be a multi-pronged approach. I think we've been very clear with people that we're not going to be able to get from 8-4 first quarter to where we want to ultimately be within the calendar year. But as we start to prove to the market our ability to execute, other doors are going to open that are going to let us take some steps strategically that could accelerate that next step from the mid-7s closer to where our peers are.

Okay. And then as we look at dispositions, I guess you're at 730 or so now for 2024. You raised your outlook to 650 to 800. Are you pretty firm about that 730, give or take 20, or do you think you could go even higher? I suspect you wouldn't put it on paper if you thought it would be lower. Yeah.

Well, the 730 that we talk about, we do know that some of those assets are going to be closing in the first quarter of 2024. So when we raised our guidance to 650 to 800 million, that is of closed dispositions in calendar year 2024, which was originally the 400 to 600. We have a pretty clear sight line on how we're going to achieve that. And as you and I have spoken about, the company is ultimately focused on achieving our net debt to EBITDA goals. I think it's the most important thing that we can continue to execute on, and we will. And if there's a way to accelerate it, we'll do that as well. But this is part of the plan. I did say in the first quarter, we're trading these assets in the low 7% cap rate range on an implied cap rate range. We're not trading anywhere near that. So we're going to continue to prove value in this portfolio. We were really excited to see the positive momentum of the stock as we came into earnings. And we think that that's what's driving it, and we will continue to communicate our successes and execute on this plan.

So we were surprised by the veracity of the dispositions. Can you give us a little bit of color on on who the buyers are. Are they private equity? Are they regional, smaller players? And what process are you using? Are you marketing these by brokers? Are these in-house, outbound calls? Can you give us a little color on how you're achieving this?

Yeah, you know, it's just coming to work every day and pounding the phones.

Our brokerage team, which I'm really proud of, They work with local brokers in each market where we have target dispositions. They identify who they think is the best set of boots on the ground and who knows the market the best. We have not really had a lot of institutional buyers because... Frankly, they tend to be more value motivated, and we're looking for what we think is full value for the assets. A lot of the buyers are local. We continue to access the 1031 market. We've actually had relationships with a number of developers that see redevelopment opportunities in some of these assets. We don't want to be in that business. We don't think that's a good use of our time or capital. So we would rather see those assets trade into someone else's hands and use the proceeds for our near-term goals, which is pay down of outstanding debt.

Thanks. And just last for me, maybe a little two-part question. Who are the types of retailers who are driving your multi-tenant occupancy higher? Like who's out there growing their footprint? And then kind of the, you know, opposite of that, is there anybody in your tenant base, you know, with the consumer softening and you touched upon some of the retailers who've had issues who are currently making you a little bit nervous? And that's all for me.

Thank you, Brian. So the shopping center occupancy pickup has really been in expanding some great relationships that we've already had. We've spent some great time working with Dick's Sporting Goods, who I really frankly think is one of the best retailers in the country. They've been executing on their plan, dominating their sector, and really providing a lot of value in the communities where their stores are located. So it's fun to see companies like that that have a great model and continue to look to expand it, and we're proud to be a partner with them. You know, the national retailers, we continue to see great stuff from the discount apparel operators. Ross is always a top tenant in our multi-tenant portfolio. But then there are also a lot of local or regional retailers. They could be independent pet supply. They can be hair and nail. They can be dry cleaners. But they, as I said in my earlier comments, they benefit from the strong foot traffic that the retailers, the national retailers, bring into the center. So they're willing to pay a higher rent because they're their revenues benefit from that. And we can negotiate better renewal terms. And it's really kind of one of those things that good tenants drive better results.

And that's what we're focused on. Thank you. Thanks, Ben.

Our next questions are from Lana Vupal Rana with KeyBank Capital Markets. Pleased to see you with your questions. Hey, how are you?

Hey, good morning, guys. Just a few from me. You know, you highlighted a few of your tenant credit exposures to some troubled tenants in your prepared remarks that add up to about 20 basis points. How much was embedded into your guidance? And of that 20 basis points, how much do you think is actually at risk here?

First of all, I take every tenant's health seriously. but I'm very comfortable with where we are in this credit cycle, and it is not impacting our guidance. We have not been negatively surprised. And again, having a very strong asset management platform, a very tight control on rent collection and timing of rent collection, we're not seeing anything that gives us great concern. As a matter of fact, I think you'll notice the overall investment grade rating of the portfolio actually went up a percentage point this quarter from 58% to 59%. And that focus on credit from the beginning has been incredibly valuable for us and something that gives me comfort as I think about credit and guidance for the rest of 2024.

Okay, great. That was helpful. And what percentage of your core portfolio would you say that you plan on keeping is currently vacant? And how is that potential lease up of those properties trending?

So the majority of the vacancy in the portfolio, as you know, is in the multi-tenant portfolio, where we continue to have gains on a net absorption basis and coupled with strong renewal activity. I believe that throughout the course of the year. We didn't give specific occupancy guidance, but it will be a benefit to earnings as we continue through the quarter. I believe the multi-tenant portfolio, I've said this before, I believe that a good shopping center portfolio should really be in the mid 90s on an occupancy basis. So we do have some additional earnings pickup potential from the work that we'll continue to focus on and do. but it is a stable portfolio with a little bit of upside that I think is valuable.

Okay, great. Thanks. And then last one from me. Is there any update on the status of the three vacant Klausner locations? I believe two were expected to close during 2Q, and then the last property was still being shopped around. So any color that would be helpful?

Yes. So one of the assets that was under contract closed in the quarter, in the second quarter. The other asset is closing in the third quarter. It's through due diligence and it's just now a matter of days until we see that. And the final and fifth asset is still being marketed, as we had said. It's being marketed for sale or lease, but having addressed four of the five Klausner properties in a very quick amount of time, the impact on the portfolio will be very small.

Okay, great. That's all for me. Thanks. All right. Thanks.

Thank you. As a reminder, remember to star one to ask a question. The next questions are from the line of Mitch Germain with Citizens JMP. Please proceed with your questions.

Hi, Mitch. Hey, how are you? Good. A quick question. You mentioned, Michael, you mentioned obviously office sales. And I'm curious, you know, it seems like fundamentals across Europe or at least the view toward office across Europe is a bit more normalized to like pre-pandemic levels. So are you going to be looking to trim exposure to properties outside the U.S.? Just maybe some insight on your office sales strategy, please.

So we think that there are opportunities in the office portfolio, both in the US and Europe. And we are exploring those opportunities. And as we have information to publish, we certainly will. So short answer is yes.

It is absolutely part of the targeted strategy.

The renewal spreads within the shopping center portfolio, been some volatility there. I think they were like, if I'm not mistaken, around 2% this quarter. Was there anything that influenced that, that was like one time in nature, or is that a pretty clean number?

Well, every quarter it's a little bit different depending on who the primary renewals occur with. If it's a tenant that has an annual escalator on an initial term of 10 or 15 years, their renewal rate is not going to be significantly higher than their expiring rate because they're very at market already. If you have a tenant that maybe has an escalator every five years, when that renewal comes, you're going to see a catch-up with market. It could be 8%, like we've seen in prior quarters. So I think it's important that you have the renewal spreads, but in the multi-tenant, it's something that we've always seen quarter over quarter, some variability, but that's really the reason.

Gotcha. And then a couple of model questions, Chris. The tax benefit, that's one time in nature. Is that the way to think about that? Obviously, the savings on the Euro tax restructure is going to flow through, but that 3.8 million benefit, that's just for the quarter, correct?

Yes, that's not a run rate item. That's something our team identified as we were looking to file the prior year return. So that is not a run rate. I would say the run rate going forward is that roughly about $2.5 to $3 million.

Okay. And then obviously it doesn't really affect your bottom line, but I'm just more curious about looking at your financials. It looks like your non-cash answers expense increased pretty dramatically. Was there anything behind that? I mean, obviously you've been pretty active. You have the CMBS deal. You paid down debt. Anything that kind of – Is it the motivating factor behind that?

Yes. So what you'll see is as we sell properties and we pay down some of the debt that has large discounts, we have to accelerate the discounts as we pay down that debt. So that's what we saw this quarter as we paid down some of the legacy RTL debt, which had the discounts.

Got you. So that just flows off next quarter. Is that the way to think about it?

It's going to be choppy depending on our sales and the debt that we're paying down.

Understood.

Thank you.

Thank you, Mitch. Thank you. At this time, we've reached the end of our question and answer session, and I'll hand the floor back to management for closing remarks.

Great. Well, first, thanks, everybody, for taking some time to catch up with G&L. We continue to be very active and successful in achieving our goals. One thing I did want to just point out again that I think is important is we have no further debt maturities in 2024, as you saw in our deck and prepared comments. But in addition to that, the upcoming debt maturity doesn't occur until third quarter of 2025. We've already lowered that by $200 million through the disposition strategy. We think that we're in really great shape on a balance sheet basis, and we're excited to continue to do this work and really see the value opportunity come to be with G&L. So thank you all, and we look forward to talk to you through the quarter.

This will conclude today's conference. We disconnect your lines at this time. Thank you for your participation, and have a wonderful day.