Global Net Lease Reports Third Quarter 2020 Results

11/5/20

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

Third Quarter 2020 and Subsequent Events Highlights

  • Revenue increased 6.1% to $82.7 million from $77.9 million in third quarter 2019
  • Net loss was $0.5 million as compared to net income of $6.9 million in third quarter 2019 and $1.0 million in the second quarter
  • Net operating income ("NOI") grew 7.8% to $75.2 million from $69.7 million in third quarter 2019
  • Core Funds from Operations ("Core FFO") was $34.6 million as compared to $38.6 million in third quarter 2019
  • Adjusted Funds from Operations ("AFFO") was $40.9 million as compared to $40.2 million in the prior year quarter
  • AFFO per share was $0.46 as compared to $0.47 in third quarter 2019 and up from $0.44 last quarter
  • Distributed $35.8 million, or $0.40 per share, in common dividends to shareholders
  • Ample Liquidity with cash and cash equivalents of $392 million1
  • Collected 97% of third quarter cash rents, including 99% from Top 20 tenants, as of October 31, 20202
  • Acquired three industrial and office properties for $23.4 million3 at a weighted-average going-in capitalization4 rate of 7.26% and a weighted-average capitalization rate5 of 7.98% with 12 years of weighted-average remaining lease term6
  • Closed over $168 million of acquisitions year-to-date through the end of September 2020 at a weighted average going-in capitalization rate of 7.12% and a weighted average capitalization rate of 8.49%
  • Acquisitions pipeline of $153 million in industrial assets and $5 million of office assets7
  • Portfolio 99.6% leased with 8.7 years of weighted average remaining lease term8, up from 8.0 years in prior year quarter
  • High quality tenants are 65% investment grade or implied investment grade, including nine out of the top ten tenants, based on straight-line rent
  • Increased industrial/distribution assets by 4% year over year based on annualized straight-line rent

"We are very encouraged by all that we have accomplished this year, despite many challenges, and our portfolio has continued to perform brilliantly, driving growth in revenue and AFFO per share," said James Nelson, CEO of GNL. "We collected 97% of cash rent in the quarter and resumed our accretive acquisitions program which, combined with a thoughtfully constructed pipeline, will result in over $330 million of high-quality acquisitions. We have ample liquidity to act on this acquisitions plan and have no near-term debt maturities. We remain committed to intentionally building a resilient, best-in-class portfolio of industrial, distribution and office properties as we move forward."

Property Portfolio

The Company's portfolio of 299 net lease properties is located in 10 countries and comprised of 34.7 million rentable square feet leased to 127 tenants across 47 industries at September 30, 2020. The real estate portfolio metrics include:

  • 99.6% leased with a remaining weighted-average lease term of 8.7 years, up from 8.0 years in 2019
  • 93.4% of the portfolio contains contractual rent increases based on square footage
  • 65% of portfolio annualized straight-line rent derived from investment grade and implied investment grade rated tenants9
  • 63% U.S. and 37% Europe (based on annualized straight-line rent)
  • 48% Office, 47% Industrial / Distribution and 5% Retail (based on an annualized straight-line rent)

Rent Collection

The Company collected 97% of cash rents that were payable in the third quarter of 2020 as of October 31, 2020, including 99% of the cash rent payable from the top 20 tenants in the portfolio (measured based on annualized cash rent as of September 30, 2020), which represent 49% of GNL's third quarter cash rent. On a geographic basis, GNL collected 99% of the cash rent payable from U.K. based assets, 99% from European tenants and 96% of tenants located in the U.S.

Acquisition Activity

During the third quarter 2020, the Company acquired three net leased assets for an aggregate contract purchase price of approximately $23.4 million. These assets were purchased at a weighted average going-in capitalization rate of 7.26% and an overall weighted average capitalization rate of 7.98%, with a weighted average remaining lease term of 12 years.

Capital Structure and Liquidity Resources

As of September 30, 2020, the Company had $300.0 million of cash and cash equivalents. The Company's net debt to enterprise value was 51.8% with an enterprise value of $3.5 billion based on the quarter end closing share price of $15.90 for common stock, $25.70 for the Series A preferred stock and $25.19 for the Series B preferred stock, with net debt of $1.8 billion10, including $1.4 billion of mortgage debt.

As of September 30, 2020, the percentage of debt that is fixed rate (including variable rate debt fixed with swaps) decreased to 90.5% from 93.0% as of September 30, 2019. The Company's total combined debt had a weighted average interest rate of 3.1% resulting in an interest coverage ratio of 3.8 times11. Weighted-average debt maturity based on outstanding principal balance of the debt on the last day of the applicable quarter decreased to 5.1 years as of September 30, 2020 from 5.7 years at September 30, 2019.

Footnotes/Definitions

1Liquidity includes $92.0 million of availability under the credit facility and $300.0 million of cash and cash equivalents.
2This information may not be indicative of any future period. The impact of the COVID-19 pandemic on the Company's rental revenue for the third quarter of 2020 and thereafter cannot be determined at present. The ultimate impact on our future results of operations and liquidity will depend on the overall length and severity of the COVID-19 pandemic, which management is unable to predict.
3Represents the contract purchase price and excludes acquisition costs which are capitalized per GAAP.
4Going-in capitalization rate is a rate of return on a real estate investment property based on the expected, cash rental income that the property will generate under its existing lease during the first year of the lease. Going-in capitalization rate is calculated by dividing the cash rental income the property will generate during the first year of the lease (before debt service and depreciation and after fixed costs and variable costs) and the purchase price of the property. The weighted average going-in capitalization rate is based upon square feet of the date of acquisition.
5Capitalization rate is a rate of return on a real estate investment property based on the expected, annualized straight-line rental income that the property will generate under its existing lease. Capitalization rate is calculated by dividing the average annualized straight-line rental income the property will generate (before debt service and depreciation and after fixed costs and variable costs) and the purchase price of the property. The weighted average capitalization rate is based upon square feet.
6 The weighted average remaining lease term in years is based upon square feet as of the date of acquisition.
7Represents non-binding letters of intent that may not lead to definitive agreements. There can be no assurance we will complete these acquisitions, on the contemplated terms and conditions, if at all
8Weighted-average remaining lease term in years is based on square feet as of September 30, 2020.
9As used herein, "Investment Grade Rating" includes both actual investment grade ratings of the tenant or guarantor, if available, or implied investment grade. Implied Investment Grade may include actual ratings of tenant parent, guarantor parent (regardless of whether or not the parent has guaranteed the tenant's obligation under the lease) or by using a proprietary Moody's analytical tool, which generates an implied rating by measuring a company's probability of default. Ratings information is as of September 30, 2020. Comprised of 36.1% leased to tenants with an actual investment grade rating and 29% leased to tenants with an Implied Investment Grade rating as of September 30, 2020.
10Comprised of the principal amount of GNL's debt totaling $2.1 billion less cash and cash equivalents totaling $300.0 million, as of September 30, 2020.
11The interest coverage ratio is calculated by dividing adjusted EBITDA by cash paid for interest (interest expense less non-cash portion of interest expense and amortization of mortgage (discount) premium, net) for the quarter ended September 30, 2020. Adjusted EBITDA and cash paid for interest are Non-GAAP metrics and are reconciled below.


About Global Net Lease, Inc.

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