Global Net Lease, Inc.

Ladies and gentlemen, good morning and welcome to the Global NetLease Inc. Third Quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jordan Schoenfeld. Please go ahead, sir.

Thank you. Good morning, everyone, and thank you for joining us for GNL's Third Quarter 2024 earnings call. Joining me today on the call is Michael Weill, 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 statement section at the end of our Third 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, GNL disclaims any intent or obligation to update or revise these forward-looking statements except as required by law. Also on today's call, we will discuss certain non-GAAP financial measures which we believe can be useful in evaluating the company's financial performance. Descriptions of those non-GAAP financial measures that we use, such as AFFO and net debt to adjusted EBITDA, and reconciliations 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 10Q for the Third Quarter 2024. I'll now turn the all over to our CEO, Michael Weill. Mike?

Thanks, Jordan. Good morning and thank you all for joining us today. It's been over one year since we've successfully completed the merger and internalization of GNL, and throughout this time, we've remained committed to executing the strategy we originally communicated to you, capturing synergies, reducing leverage, and executing strategic dispositions while increasing occupancy and de-risking our balance sheet. Our progress has been clearly reflected through this year, with significant achievements highlighted once again in this quarter's results. The first pillar of our 2024 strategy was to capture the full $75 million in projected cost synergies by Q3 2024. I'm pleased to report that we've significantly exceeded our $75 million cost synergy target by reaching a total of $85 million in annual recurring savings. This accomplishment not only has a continuing positive impact on our GNA, but also underscores the effectiveness of our integration efforts and our ability to execute on synergy projections. The second pillar of our strategy is reducing leverage and improving our net debt to adjusted EBITDA. In 2024, we have successfully reduced outstanding net debt by $445 million, including $162 million of net debt reduction in Q3, primarily through completed asset dispositions. We anticipate closing an additional $371 million in dispositions with net proceeds earmarked for further debt reduction. At the end of Q3 2024, our net debt to adjusted EBITDA ratio stands at 8.0 times, down from 8.4 times at the start of 2024. We're encouraged with our progress and remain committed to further reducing our leverage. The third pillar of our strategy is our asset disposition initiative, with an increased target of $650 million to $800 million in 2024 closed dispositions, up from the initial range of $400 million to $600 million. As of November 1st, we believe we're in excellent position to reach the high end of our target, as the value of closed dispositions plus our pipeline total $950 million at a cash cap rate of .1% on occupied assets. With an average weighted remaining lease term of 5.1 years. This includes $579 million from successfully closed dispositions at a cash cap rate of .1% on occupied assets. $241 million in dispositions currently under PSA at a cash cap rate of .1% on occupied assets. And $131 million in dispositions with executed LOIs at a cash cap rate of .2% on occupied assets. I'd like to highlight our strong execution of the disposition initiative, having sold $579 million in assets through November 1st. And our AFFO per share has remained relatively consistent over the past three quarters, with an increase compared to the end of 2023 when we implemented this strategy. We achieved this mainly through interest expense savings from debt reduction tied to closed dispositions, incremental NOI generated by lease up initiatives, and GNA savings realized from the merger and internalization. We believe the .1% cash cap rate achieved in occupied dispositions demonstrates the value of our primarily investment grade and diversified portfolio, representing a significant premium compared to GNL's current implied cap rate. As discussed on last quarter's earnings call, a key component of our disposition strategy is prioritizing selling assets held on our corporate credit facility, which incur the highest interest costs and no prepayment penalties. Another financing tool that provides GNL with a significant advantage is our ABS Master Trust. To provide some context for those who aren't 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 .6% interest rate ABS, we replace them with assets from our revolving credit facility, which currently carries a .1% floating interest rate on the U.S. dollar portion. This generates over 300 basis points of potential interest rate savings and allows us the flexibility to continue focusing on reducing our cost of capital as we continue to dispose of assets. Our strategic dispositions are focused on non-core assets and those with shorter weighted average remaining lease term compared to our portfolio average, as well as opportunistic sales. These dispositions enhance the overall quality of our portfolio, as evidenced by a 200 basis point increase in investment grades or implied investment grade tenants since last quarter, rising from 59% to 61%, while also contributing to a reduction in leverage. This reinforces the benefit of investment grade tenants in our portfolio, further strengthening the quality and predictability of GNL earnings. Notable sales include 21 single tenant retail properties that were leased to Truist, totaling over $51 million at a .4% cash cap rate, and the sale of the Plant Shopping Center in San Jose, California for $95 million. We enhance the value of the Plant Shopping Center by strategically subdividing the property into two separate parcels, which broadened the buyer pool and allowed us to secure premium pricing for the multi-tenant shopping center portion of the property. We retained ownership of the newly created parcel, which is an attractive single tenant net lease asset with approximately nine years remaining on the lease, featuring a .5% rental increase every five years. It's leased to Home Depot, an investment grade tenant with an A2 credit rating. Our disposition initiative has also focused on reducing our office sector exposure. Last quarter, we projected our office exposure to fall below 20% of total portfolio straight line rent. This quarter, through several notable office sales, we successfully reduced our office exposure to 18%, while also mitigating portfolio vacancy risk and increasing overall occupancy sale of the 366,000 square foot vacant Foster Wheeler office property in the UK for over $27 million. We owned this property for nearly eight years and sold it vacant just as the tenant's lease expired after collecting 100% of the rent throughout the lease term. Additionally, we sold three fully occupied office properties, the Accredia office property in Michigan for over $13 million, Kedrian Plasma in Texas for over $5 million, and Johnson Controls in Spain for over $4 million. We successfully sold these three office assets at a .7% cash cap rate, highlighting the quality of our mission critical office portfolio and demonstrating the significant value we can create. We also have reached an agreement on a forward sale of the KPN office property in the Netherlands, which is set to close in December 2026 upon the tenant's lease expiration. We've structured this sale to collect all rent throughout the lease term and had limited visibility on the tenant's renewal intentions. This strategy exemplifies GNL commitment to reducing our office exposure further and enhancing portfolio value while extracting long-term returns. Beyond these office sales, we have over $187 million in vacant property dispositions that are closed or under agreement, expected to eliminate over $3 million of annualized operating expenses, assuming the pending transactions close. The fourth pillar of our strategy is centered on increasing portfolio occupancy with a strong focus on new leasing and attractive renewals. Throughout the first three quarters of 2024, we consistently raised occupancy rates from 93% as of Q1 to 96% in Q3, reflecting the strength and efficiency of our in-house asset management team. This achievement not only enhances our revenue base, but also solidifies the resilience of our portfolio, positioning us for sustained growth as we continue to meet tenant demand. On the leasing front, we achieved positive leasing spreads, encompassing over 1.2 million square feet with an attractive renewal spread that were .2% higher than expiring rents. New leases that were completed in the third quarter of 2024 have a weighted average lease term of 6.5 years, while renewals that were completed during this period have a weighted average lease term of 5.2 years. Notably, the single tenant segment completed six new leases and renewals, highlighted by a 10% renewal spread. The multi-tenant segment completed 73 new leases and renewals, resulting in a .6% renewal spread. We find that demand for retail space remains in high demand, resulting in rising rental rates as businesses compete for prime locations. I'd like to highlight that in Q3, we executed five short-term Spirit Halloween leases, totaling approximately 100,000 square feet, which does not have a material impact on our overall portfolio occupancy. The fifth and final pillar of our 2024 strategy emphasizes de-risking our balance sheet by proactively managing near-term debt maturities. We're pleased to have successfully addressed 100% of the debt that was scheduled to mature in 2024 through dispositions or refinancing onto our revolving credit facility, and we have no debt maturities through July of 2025. This year, we've proactively reduced the 2025 maturity balance from $699 million to $521 million and anticipate further reductions by year end as we complete dispositions currently in our pipeline. Turning to our portfolio, at the end of the third quarter, we owned over 1,200 properties spanning over 61 million square feet and a weighted average remaining lease term of 6.3 years. We believe GNL is well positioned to continue to navigate external macro challenges given the diverse composition of our net lease portfolio, which we believe is unmatched across geography, asset type, tenant, and industry. As you're all aware, hurricanes Helene and Milton recently caused devastation that severely impacted several cities across the U.S. Our thoughts are with those affected by the storms. Thanks to our storm drains, maintaining retention ponds, inspecting roofs, and palm tree maintenance, we're fortunate that only one of our properties located in Asheville, North Carolina sustained any notable damage. Repair costs are expected to be covered by insurance, resulting in minimal -of-pocket expenses. With over 1,200 properties in our portfolio located across the United States and Europe, we're fortunate that our portfolio experienced no material impact. Our ability to limit exposure to high-risk geography, asset types, tenants, and industries is a testament to our portfolio's impressive diversification and credit underwriting. No single tenant accounts for more than 3% of total straight line rent, and our top 10 tenants collectively contribute only 22% of total straight line rent. We carefully 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% in Europe. The portfolio features a stable tenant base and a high quality of earnings, with an industry-leading 61% 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 15% of the portfolio with CPI-linked leases that have historically experienced significantly higher rental increases. I encourage everyone to look at the details of each segment of which can be found in our Q3 2024 Investor presentation on our website. We remain committed to executing on our disciplined and strategic approach to achieve our financial objectives, particularly by reducing leverage without negatively impacting AFFO per share and organically increasing NOI through lease-up initiatives and contractual rent growth. We're proud of the achievements in Q3 2024 and look forward to building on this momentum to close out 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 GapNet income to non-GAP measures can be found in our earnings release, which is posted on our website. For the third quarter of 2024, we recorded revenue of 197 million and a net loss attributable to common stockholders of 77 million, compared to 203 million and 47 million respectively in Q2 2024. AFFO was 74 million, or 32 cents per share, in the third quarter of 2024, compared to 77 million, or 33 cents per share, in Q2 2024. Looking at our balance sheet, the outstanding debt balance was 5 billion at the end of Q3, down by 157 million from the end of Q2. Our debt is comprised of 1 billion in senior notes, 1.6 billion on the multi-currency revolving credit facility, and 2.4 billion for outstanding gross mortgage debt, with no maturities remained over the year. As of Q3 2024, 91 percent of our debt is fixed, up from 90 percent in Q2 2024, reflecting floating rate debt with in-place interest rate swaps. Our weighted average interest rate stood at 4.8 percent, and our interest coverage ratio was 2.5 times. We intend to further reduce our outstanding debt balance as we close on the dispositions currently in our pipeline. At the end of the third quarter, our net debt to adjusted EBITDA ratio was 8 times based on net debt of 4.8 billion, a decrease of 162 million from the prior quarter. At quarter end, FX movements led to a temporary $49 million increase in total debt due to the sharp strengthening of the pound in euro. Following quarter close, both currencies have weakened rapidly, reversing part of the negative FX impact on our Q3 debt levels. As of September 30th, we have liquidity of approximately 253 million and 366 million of capacity on a revolving credit facility. Additionally, we had approximately 230.8 million common shares outstanding, and approximately 230.5 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 ASSO 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 are also reaffirming our disposition initiative range of 650 million to 800 million in total proceeds. I'll now turn the call back to Mike for some closing remarks.

Thanks,

Chris. The

third quarter was a successful period for GNL as we continued to effectively execute our five key objectives. Achieving the high end of our disposition initiative with $950 million of closed disposition plus pipeline. Further reducing net debt by $162 million and surpassing our $75 million cost energy target by $10 million, totaling $85 million. Underscoring the strength of our portfolio, we also maintained strong leasing momentum reflected in increased occupancy from 94% in Q2 2024 to 96% this quarter, along with a positive renewal spread of .2% across the portfolio. Additionally, we continue to proactively manage our near term debt maturities, resulting in no maturities until July 2025, while successfully reducing the 2025 debt maturity balance by $178 million. The primary focus of our disposition efforts is to lower our cost of capital and improve net debt to adjusted EBITDA, enabling GNL to pursue a sustainable growth oriented strategy in the future. We're executing this disposition strategy on an earnings neutral basis, resulting in minimal to no impact on AFFO per share, as reflected in its consistent performance quarter over quarter. We're proud of our accomplishments during the third quarter of 2024, all of which helped meet our commitment to generate long term shareholder value. We look forward to closing out the year strong and continuing our positive momentum. I'd also like to highlight a subsequent development. CYVN Holdings, owned by the government of Abu Dhabi, recently announced it has entered into a non-binding agreement to acquire 100% of McLaren's automotive business from Metallicat. With the government of Abu Dhabi holding a AA investment grade rating from S&P Global and managing approximately $1.7 trillion in assets, this transaction would potentially bring significant credit enhancement to McLaren, one of GNL's largest tenants. McLaren's lease, which has 16 years remaining, includes annual rental escalations tied to CPI with a collar of .25% and a cap of 4%. 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.

Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from the line of John Kim from BMO Capital Markets. Please go ahead. Thank you.

Good morning, John. Hey, Michael. I wanted to ask about the letter of intent you have on office assets in the Netherlands with the tenants vacating. Can you just comment or provide some additional color on the buyer and how they value the assets and maybe what they do with empty office buildings?

Yeah, so, and your line is a little bit garbled, but I think I got everything. If I miss anything, I apologize. So, the property is currently occupied as an office use lease expires in 2026 as we described. The buyer is a developer and the opportunity that they see is repositioning the asset. As we stated, we have a lease that runs through 2026. They, of course, have work that they can be doing with approvals, permitting, et cetera. So, the arrangement that we have entered into with them is we continue to collect the tenants' full rent through the end of the lease, at which time we will complete the sale and they will begin the work that they are going to do to reposition the asset. And John, I don't remember if it's being repositioned into multifamily or mixed use, but it is being changed from an office use.

So, as future lease expirations occur in office and in some cases the tenant doesn't renew, how reputable is this strategy with those assets in your portfolio?

It's a -by-case basis. We've done it before, if you remember a couple of quarters ago, we had an office asset in San Jose. We did something similar. We did something this quarter where the tenant, when they expired at Foster Wheeler. So, it's something that we look at strategically. We engage early with the tenant with the potential buyer pool and we just kind of make that a condition. It doesn't always work. If we have a great buyer and they won't agree to that, we will take it on a -by-case basis.

Okay. On your occupancy that you're continuing to pick up on the multi-tenants and the overall portfolio side, it seems like the last few years the renewals have been higher on the skill-tent versus the multi-tenant detail portfolio. Is that because of the link to the lease? John,

I'm sorry to interrupt you, John. Your audio is not coming in clear. Okay.

Do you want to dial back in,

John? Yes, sure. All right, thank you. We'll get your questions as soon as you're back in.

Thanks. Thank you. We move on to our next question which is from the line of Upal Rana from KeyBank Capital Markets. Please go ahead.

Hi, Upal.

How are you?

Great, great. Thanks for taking my question. My question is really around the wall. Do you have a strategic plan to get your wall to a little higher here? Are there enough non-core vacant assets to move the needle or are there any large concentration of properties with lower wall that you can dispose of?

I think the ongoing strategy will be to continue to focus on lease up and renewals which extend our wall organically each quarter. It is something that we look at very closely. There are some more vacant assets that are part of the disposition strategy. Ultimately, we're looking forward after we complete the deleveraging in extending wall through acquisitions. What we've been very focused on, if you go back to Q1, our wall has not been getting reduced because of the strategic nature of our dispositions and the fact that what we're selling has shorter wall than what we're keeping. We're in what I would think of as a pretty secure hold pattern in the meantime allowing us to focus on the successful reduction of debt.

Okay, got it. On the full year AFO guidance, it remains somewhat wide with less than two months to go. Anything driving your decision there to not narrow and what gets us to the low end or the high end of the range?

I think if you take into account our initial disposition guidance and the fact that last quarter we raised it, the momentum and the success that we've had in dispositions, the cap rates that we've achieved last quarter, the average cap rate of the disposition initiative was 7.3%. We were able to lower that to 7.1. We've increased the velocity. That did, as you would

expect, increase the...I'm

just thinking how to explain it. We're more focused on reduction of debt. Of course, AFO is very important to us. Our ability to expedite dispositions and increase the speed at which we can delever, we wanted that window, and that's why we maintain the AFO range that we did. I think as you look at your consensus, we will continue to push dispositions, maintaining the AFO range, and we will provide 2025 guidance so that everybody has a clear view for next year as well.

Okay, good. That was helpful. Then just the last one from me. When looking at your 25 debt maturities, that's associated to about 320 encumbered properties. How much of the current disposition pipeline that hasn't closed yet is associated to those properties, which would help reduce your debt maturities next year?

That's not a detail that we disclose ahead of time. It's not helpful as we approach dispositions and the general market, so we've never addressed it before a disposition has closed. What I will tell you is these are assets that are performing. They are primarily retail, and as we continue to talk about the importance of our ABS Master Trust, we believe that in 2025, we will have a number of very attractive refinancing opportunities with that portfolio, and we will continue to update you and other investors as it comes closer, but we are very confident in our ability to execute on that. And as you pointed out, we've already lowered it by nearly $200 million from the beginning of the year, and we anticipate that the pipeline will further lower that, getting us an even better position, I would say, early summer

of 2025. Okay, great. That was helpful. Thank you. Yeah.

Thank you. The next question is from the line of Brian from B Riley securities. Please go ahead.

Hi, Brian. Thank you. Good morning. Just a few for me today. The synergies went from 75 million, I think, to 85 million. Can you maybe give us a little color on how that happened and what, to any extent, do you think there's more to do?

I'll answer the beginning, and then I'm going to ask Chris if you'll jump in and give Brian some detail, but we felt that the opportunity to achieve and exceed the synergy number was something that was very important to us. We've been focused on the execution of the plan from the first quarter post merger, which was in late 2023 through 2024. So the fact that there's an annual recurring $85 million savings in the operation, I think, is just another testament to the benefit and value of what we did last year. So as far as the details, Chris, do you want to jump in and help Brian with that?

Sure. So I guess what I would say is there's probably two parts to this answer. The first part is this quarter we did have most of what we call transition services expenses rolling off. And those were whether some of the previous contracts we had in place or some of the duplicative costs, those are effectively gone by 3Q and obviously will not be recurring going forward. And then the second part is over the past year, we put extensive work into really reviewing all of our G&A expenses and identifying areas that we can reduce costs. And as we got to 3Q, we've become much more effective with that and towards the question about going forward. I mean, that's a process that we're always going to be doing and constantly evaluating. So we're going to keep trying to push that as much as we can.

And then as it relates to the asset sales, I think, you know, we're kind of at $900 millionish or so closed or in the pipeline. At what point, Michael, do you stop, pause, reassess? How are you thinking about that? Or is this going to be another on current thing, higher number for the next couple of few quarters?

I think it's the latter, Brian, because the most important thing that we believe we need to achieve is the continued lowering of net debt to EBITDA. And the ability to sell these assets that we still categorize as non-core, we have insisted on keeping the assets that we want to own long term. It creates a better portfolio, a stronger portfolio. I do think it's worth talking about. We were able to lower the disposition cap rate between the second quarter and the third quarter, despite some of the noise that was in the market and kind of the uncertainty around interest rates, et cetera. And, you know, I'm always cautious to sound like I'm patting ourselves on the back. But this disposition team, the asset management team, the way the properties are maintained, our relationships with the brokerage community, it creates a lot of value because our trading value is mismatched to the value of the portfolio. And we're going to continue to do that and show that until we see the value, the trading value of the company in line with the portfolio. So, yeah, we will continue. I think that, you know, I don't want to get ahead of 2025 guidance, but I would anticipate similar for 2025. With the benefit of in 2024, we were starting from zero. We'll have a pipeline that will carry over into 2025. So, you know, we're pleased with the direction of where we're taking leverage in the portfolio while we're still maintaining the earnings, because those two things are obviously very important.

Right. So you kind of read my mind, you know, segueing into my next question on, you know, where do you start to get credit, right? So you delivered a great quarter. You're doing everything that you told the market that you would do a year ago, leverages down to eight times. I think the groups that kind of high-fives, 5.7, 5.8. And yet, your FFO multiple is half the peers, and your EBITDA multiple is 11.8, and the groups at 16.2. At what point do you think that the market starts to give you credit for what you've been delivering for the past year?

So I'm very confident that we're doing the right things, and I'm very pleased at the pace that we're achieving the goals. I am not ever going to be in a position to determine when we hit that tipping point and the stock starts to move directionally where I think it should be. You know, if it were up to me, we'd already be there, because I would look at the quality of the portfolio, the investment grade, the occupancy, et cetera, And I would say, okay, they're not where they need to be, but directionally they're going. They've proven to us that they can get there. I'm willing to buy now when the stock is such a value, get the benefit of the dividend, and ride up with these guys because they look like they're executing. It's not my...I don't control that, unfortunately, but I do control, and Chris and Ori and I and the team are focused, are execution, and I was really pleased with the third quarter results and year to date, and you and I have talked about it quite a bit. It's about executing every quarter, and we've done that, but if we need to continue to do that, we will. I do believe that this company will be fairly valued because it's an exciting portfolio, and I do say it humbly, it's a good management team, and we're going to continue to just put our heads down and grind and execute and put these numbers up, and we'll

get us there. I'm confident.

Thank you.

Thanks, Brian.

Thank you. The next question comes from the line of Mitch German from CitizensJMP. Please go ahead.

Hi, Mitch. Thank you. Hey, what's up? So, Michael, I'm curious as you're growing the investment sales or the disposition pipeline, has the pool of assets that you originally identified for sale, has that evolved as you've gone through the iteration of seeing where there is demand in the market?

Well, dispositions, Mitch, are a great opportunity for us to trim the portfolio in ways that we think are long-term beneficial. So, as you've seen, we lowered our office exposure down to 18% of straight-line rent of the entire portfolio. Very intentional. In the quarter, we were pleased to see the assets, those three assets that I mentioned in the earlier portion, and we sold those at a 7-8 cap rate. So, we have over 1,200 properties. We know them all very well. We will continue to find what we deem to be non-core because, as I said earlier, we don't want to sell the things that we want because we're going to be operating this portfolio for a long time, we hope, and we want good assets, good tenants, good markets. So, we do look at the portfolio on a regular basis. We do engage with tenants on a regular basis. The asset that we talked about earlier, where we're selling it at the end of the lease, that takes engagement. We're talking to those tenants well in advance of lease maturities. We're not being surprised at the last minute and having to scramble to make tough or hard or bad decisions. So, as I think about it, I see a pretty significant delta between the implied value of where we're trading versus the value that we're selling assets. And frankly, until that gap closes, I will continue to look at the entire company, the entire portfolio, and we will find value one way or the other.

Great. Last one for me. You mentioned office, obviously exposure going down, and I'm curious about kind of the bid for assets, your US office versus your European office. Or is it less location and more credit, tenant, lease term? Like what are the decisions that are – or where is the demand for those assets?

A lot of it is primarily being driven by market and opportunity in that market. If we have an office tenant that has a long lease and is an investment-grade tenant, I'm frankly not in a real rush to dispose of that asset because it's a great part of the revenue stream. If it's an asset with a shorter lease term, with a tenant that has expressed uncertainty about likelihood of renewal, if it's a market where multifamily or mixed use is in more demand, we will opportunistically sell the office. And being able to sell it in that high seven cap range is attractive. Our guidance for dispositions is 7 to 8% overall, and third quarter we executed at 7.1%. So it's really kind of a little bit of an art and a little bit of a science, and I'm fortunate to have a great team around me that are tuned in to the corporate goals and can identify opportunities in the portfolio, and then we can discuss how we want to proceed.

Thank you. Thanks, Mitch.

Thank you. The next question is from the line of Michael Gorman from BTG Pactroll. Please go ahead.

Hi, Michael. Hi, good morning. Michael, just wanted to go back just one more time on the guidance. Just wanted to understand, totally get that there's a lot of moving pieces and you've done a good job of accelerating the pipeline over the course of the year. I'm just curious that we sit here less than 60 days from the end of 24. I guess what would get you kind of to the high end of the AFFO range of 130 to 140 versus put you down towards the lower end of the range? I guess what moving pieces remain over these next two months?

You know, Michael, I'm going to take a little bit of an unusual approach maybe to answering that. I don't know that we're going to be at the high end of the range. And I don't think you think we're going to be at the high end of the range because I think you understand selling almost a billion dollars of assets at a 7-1 cap rate, there is going to be some lowering of earnings in the portfolio, which will lead to some reduction in AFFO. We're very comfortable that we will be in the range that we stated, the $1.30 to $1.40. It's the first year as an internalized company. We had a lot of moving pieces that included everything from synergies, which we exceeded to dispositions to focus on lowering leverage. And, you know, this company has a very significant dividend that's being covered. And I think that's very important. So we're in a good range to continue to operate, to continue to meet our investors' expectations of us. So I'm not, I'm very comfortable saying that we anticipate being in the range of guidance that we provided at the beginning of the year. We'll take another look as we prepare 2025 guidance to see if we want to be in a tighter range for next year or however we want to think about it. But I think right now the most important things that we're successfully accomplishing is the aggressive or fast-paced dispositions at a very attractive cap rate that's allowed us to pay down a significant amount of debt in a relatively short amount of time without, excuse the expression, bastardizing earnings.

Understood. Yep, totally understand. Just wanted to make sure I wasn't missing something there. That's fair. And then as we think on the go-forward basis, obviously not looking for 25 guidance yet, too early on that. But as we think about the cadence of 24, you know, about somewhere between 900 million and a billion, if you hit the midpoint of your leverage target, that's kind of like a point, call it a .8 reduction on the debt to EBITDA. Is that kind of the ratio that we should think about as you continue to target leverage that kind of 900 million to a billion of sales will get you that .8 reduction in debt to EBITDA? Or is there something that could accelerate that? I'm just trying to think about how we should think about future leverage targets and how to get there.

So I always make sure I get a good night's sleep before the earnings call, Michael, because you guys always ask these tricky questions to try to get me to overshare a little bit. I don't think that there's a direct correlation. You know, each asset, depending on how it's financed, where it sits, if it's on the line, if it's, you know, there's just a lot of different -by-case scenarios. So I wish I could give you some kind of roadmap to figure that out, but it's just something that we have to take into account. You know, there's a numerator and a denominator, as you know, in net debt to EBITDA. So, you know, throughout the course of the quarter, a lot of moving pieces. Chris and his team do an awful lot of work, and, you know, we publish it as soon as we have it.

Okay, great. And then just one last clarifying one, and I'm sorry if I misunderstood it. For the KPN asset, is that counted in the disposition pipeline? Because I did notice the footnote in the presentation. Is that in the pipeline or not in the pipeline? No, it's not yet

in the pipeline.

Okay, perfect. Thank you so much.

Thanks,

Michael.

Thank

you. The next question is from the line of Barry Oxford from Coilers. Please go ahead.

Hi, Barry. Thanks, guys. Hey, Michael. Based on your last comment there, I don't know if you're going to like my question. But as I look out into the future, you made the comment that you have a lot of assets that you like. And I've got to imagine you've got to be getting closer to the end of non-core than – I've got to believe we're sort of past the halfway point, so to speak. When becomes the point, because you have driven leverage down, the stuff that you have getting ready to sell should put you kind of within your range. At what point do you kind of start to think about acquisitions?

I think about acquisitions every day, longingly,

wishing that we were active. But that's not what we need to be doing right now. So it is – we stay in touch with the markets, we stay in touch with the brokers, but that's not where we're going to create value for this company right now. So I'm not even going to give you a timeline. I'm going to drive it based on us continuing to lower leverage, improving the net debt to EBITDA multiple. And we'll know when it's time to look at acquisitions when we start to trade at a multiple where the equity makes sense.

Okay. Okay. That makes sense. Appreciate the time, guys.

All right, Barry. Thank you.

Yep.

Yep.

Thank you.

The next question comes

from the line of Michael Gorman from VDGP Actual. Please go ahead.

Hey, Michael. Just one more quick one, maybe taking a little bit of an approach from Barry's question there. As we think about the next stages, I'm sure you've had conversations, had approached them, not detail specific, but could we see like JV structures come into play here if you look to maybe monetize some assets that you still like that are on the balance sheet or like on a go-forward basis? Is that something that would be kind of in the quiver of strategic options for the company going into 25 and 26?

Yeah, I don't think it's a good practice for me to say definitively yes or no to something that's not on the table, not something that's being contemplated. I will tell you, I have my own feelings about JVs. I think they can complicate things unnecessarily. We have enough to do. We have work to do. We're executing on it and kind of combining your question and Barry's question. When we start trading more in line with where I believe we should be trading, it's time to get back to the acquisition work. In the meantime, I think our better path is to continue to look at the 1200 plus assets in the portfolio, see where we're selling them. Again, it's easy for us to say at this point with nearly a billion dollars of sold and under contract that this portfolio is easily worth a seven cap. Arguably because we haven't sold our best assets, it's clearly sub seven. We can certainly push our

own path. Again, I would

never say blanket no, I won't do a JV, but I can tell you that I see that as a great opportunity or something that I'm super focused on.

Great, that's very helpful. Thanks for the time.

Thanks. Thank you. Ladies and gentlemen, this concludes our question and answer session. I would now hand the conference over to Michael for his closing comments.

Well, thank you all very much. I always appreciate spending the time with you and the work that you all do following Global Net Lease. We will continue to execute. We will continue to update you. And we look forward to continuing the conversation, the question and answer and to the earlier question. We do look forward to seeing the stock trade at levels that we think it is justified to trade at and is appropriate to, but we're going to continue to do our work. So thank you all very much.

Thank you. The conference of Global Net Lease has now concluded. Thank you for your participation. You may now disconnect your line.