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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported):  November 5, 2020

 

Global Net Lease, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Maryland   001-37390   45-2771978

(State or other jurisdiction

of incorporation)

   (Commission File Number)  

(I.R.S. Employer

Identification No.)

 

650 Fifth Avenue, 30th Floor

New York, New York 10019

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

 

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

 

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

 

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

  

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

 

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

true

   New York Stock Exchange

 

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

 

Emerging growth company ¨

 

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

  

 

 

 

 

Item 7.01. Regulation FD Disclosure.

 

Earnings Call Script

 

On November 5, 2020, Global Net Lease, Inc. (the “Company”) hosted a conference call to discuss its financial and operating results for the third quarter ended September 30, 2020. A transcript of the pre-recorded portion of the conference call is furnished as Exhibit 99.1 to this Current Report on Form 8-K. As previously disclosed, a replay of the entire conference call is available through February 5, 2021 by telephone as follows:

 

Domestic Dial-In (Toll Free): 1-877-344-7529

International Dial-In: 1-412-317-0088

Canada Dial-In (Toll Free): 1-855-669-9658

Conference Number: 10148229

 

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

 

The statements in this Current Report on Form 8-K that are not historical facts may be forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause the outcome to be materially different. In addition, words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions indicate a forward-looking statement, although not all forward-looking statements include these words. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company’s control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include the potential adverse effects of the ongoing global COVID-19 pandemic, including actions taken to contain or treat COVID-19, on the Company, the Company’s tenants and the global economy and financial markets and that the information about rent collections may not be indicative of any future period, as well as those set forth in the Risk Factors section of the Company's most recent Annual Report on Form 10-K for the year ended December 31, 2019 filed on February 28, 2020, the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed on May 7, 2020, the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 filed on August 6, 2020 and all other filings filed with the Securities and Exchange Commission after that date. Further, forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

 

Item 9.01. Financial Statements and Exhibits.

 

(d)Exhibits

 

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

  

 

 

 

SIGNATURES

 

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

 

  GLOBAL NET LEASE, INC.
     
Date: November 5, 2020 By: /s/ James L. Nelson
    Name:  James L. Nelson
    Title:  Chief Executive Officer and President

 

 

 

Exhibit 99.1

 

Global Net Lease, Inc. (NYSE:GNL) Q3 Earnings Conference Call

 

Executives

 

James Nelson – CEO & President

Chris Masterson – CFO

Louisa Quarto – Executive Vice President

 

Operator

 

Good afternoon and welcome to the Global Net Lease Third Quarter 2020 Earnings Call. [Operator Instructions]. I would now like to turn the conference over to Louisa Quarto, Executive Vice President. Please go ahead.

 

Louisa Quarto

 

Thank you, operator. Good afternoon everyone and thank you for joining us for GNL's Third 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 uncertainties. Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements. We refer all of you to our SEC filings including the Form 10-K for the year ended December 31, 2019 filed on February 28, 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, GNL disclaims any intent or obligation to update or revise these forward-looking statements except as required by law. Also, during today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating the company's financial performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our earnings release and supplement which are posted to our website at www.globalnetlease.com. Please also refer to our earnings release for more information about what we consider to be implied investment grade tenants, a term we will use throughout today's call.

 

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

 

James Nelson

 

Thank you, Louisa, and thanks again to everyone for joining us on today’s call. In the third quarter, our high-quality, global portfolio of industrial and office net leased properties continued to demonstrate its strength, remaining largely unaffected by the ongoing pandemic. For the quarter, we collected over 97% of the original cash rent that was payable, including 99% of the cash rent payable from our top 20 tenants which represents almost half of our total annual cash rent. Our historic emphasis on credit quality, underwriting, asset selection and due diligence have all helped shape a portfolio that continues to perform well. On a geographic basis, GNL collected 99% of the cash rent payable from our U.K. based assets, 99% from our other European tenants and 96% from our U.S. based assets.

 

To be clear, when we give rent collection statistics we are comparing to the total rent payable and not reducing the expected rent in the denominator by any negotiated deferrals or making any other adjustments.

 

As our portfolio continues to perform well, I am also excited about the progress we made on other fronts this quarter. We closed on $88.0 million of loans at an interest rate of 3.45% collateralized by our Whirlpool Corporation assets located in the US. We also completed a three-property sale-leaseback with Johnson Controls, an investment-grade diversified technology and multi-industrial leader that specializes in products, technologies, software and services for buildings. Johnson Controls was ranked #399 on Fortune's Global 500 list in 2019. The office and industrial properties are located in the United Kingdom and Spain and were acquired for $23.4 million at a 7.98% weighted-average cap rate. At closing, Johnson Controls signed new 12 year leases that include annual rent escalators of 1.5%.

 

 

 

 

Our total year to date acquisitions now exceed $168 million at a weighted-average going-in cap rate of 7.1%, a weighted-average cap rate of 8.5% and a weighted average remaining lease term of 18.5 years. Thanks to the direct relationships we have built with developers, landlords and tenants, we have amassed a forward acquisitions pipeline of over $158 million. The pipeline consists of primarily industrial acquisitions that we expect to close before the end of the year. At a weighted-average going-in cap rate of 6.5%, a weighted-average cap rate of 7.0% and a weighted-average remaining lease term of more than nine years, these potential acquisitions are emblematic of the future growth and focus of the GNL portfolio. Our closed and pipeline acquisitions currently total over $325 million for 2020 at a weighted-average going-in cap rate of 6.9%, a weighted-average cap rate of 8.1% and with a weighted-average lease term of 15.8 years. Eighty-nine percent of these acquisitions by purchase price fall under industrial and distribution property categories.

 

The work we have done to grow the portfolio and collect rent during the pandemic contributed to recording a quarter-over-quarter increase in total and per share AFFO. For the third quarter, AFFO per share was up 4.5% to $0.46 per share from $0.44 per share last quarter. The Company distributed $35.8 million in common dividends to shareholders in the quarter, or $0.40 per share.Our $4.0 billion, 299 property portfolio is nearly fully occupied at 99.6% leased with a weighted average remaining lease term of 8.7 years, up from 8.0 years a year ago thanks to our recent acquisitions where we have acquired attractive, long-dated industrial and distribution assets. We have no 2020 lease expirations, and contractual rent growth is embedded in over 93% of our leases. 231 of our properties are in the U.S. and Canada and 68 are in the U.K. and Western Europe, representing 63% and 37% of annualized rent revenue, respectively. Our portfolio is well-diversified with 127 tenants in 47 industries, with no single industry representing more than 10% of the whole portfolio, based on straight-line rent.

 

Our property mix continues to evolve and is currently 48% office, 47% industrial and distribution and 5% retail, compared to 52% office, 43% industrial and distribution and 5% retail a year ago. Contributing to our success is our focus on tenant credit, industrial acquisitions and retail dispositions over the last several years. Across the portfolio, over 65% of straight-line rent comes from Investment Grade or implied Investment Grade tenants.

 

Industrial and distribution assets have been an increasingly significant segment of our portfolio, growing to 47% of our current assets when measured by straight-line rent. Our industrial acquisitions have included the sale-leaseback transactions we completed with Whirlpool Corporation in the US and Italy, as well as other industrial acquisitions totaling over $100 million year to date. These properties are leased to tenants such as CSTK, Metal Technologies, Klaussner Industrial and NSA. Other significant tenants in this segment include Finnair, Auchan and Grupo Antolin. We are always seeking accretive acquisitions that meet our investment criteria. While our primary focus has been and will continue to be on industrial and distribution assets, we will continue to evaluate adding single-tenant, mission-critical office properties leased to investment grade tenants similar to those that currently populate our portfolio.

 

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. Chris?

 

Chris Masterson

 

Thanks, Jim.

 

For the third quarter 2020 we recorded adjusted EBITDA of $63.6 million up from $58.3 million in the third quarter of 2019. We also reported a 6.1% increase in revenue to $82.7 million from $77.9 million, with net loss attributable to common stockholders of $0.5 million. FFO and AFFO for the third quarter were $34.5 million and $40.9 million, respectively, or $0.39 and $0.46 per share, compared to $0.44 and $0.47 per share in the third quarter of 2019. The company paid common stock dividends of $35.8 million or $0.40 per share for the quarter. As always, a reconciliation of GAAP net income to the non-GAAP measures can be found in our earnings release.

 

On the balance sheet, we ended the third quarter with net debt of $1.8 billion at a weighted-average interest rate of 3.1%. Our net debt to adjusted EBITDA ratio was 7.2x at the end of the quarter. The weighted-average debt maturity at the end of the third quarter 2020 was 5.1 years. The components of our debt include $264.0 million on the multi-currency revolving credit facility, $421.6 million on the term loan and $1.4 billion of outstanding gross mortgage debt. This debt was approximately 91% fixed rate, which is inclusive of floating rate debt with in-place interest rate swaps. The company has a well-cushioned interest coverage ratio of 3.8x. As of September 30, 2020, liquidity was approximately $392.0 million.

 

Our net debt to enterprise value was 51.8% with an enterprise value of $3.5 billion based on the September 30, 2020 closing share price of $15.90 for common shares, $25.70 for Series A preferred shares and $25.19 for Series B preferred shares. This ratio continues to be impacted by the market disruption that took place across the industry starting in the last half of February. With that, I'll turn the call back to Jim for some closing remarks.

 

 

 

 

James Nelson

 

Thank you, Chris.

 

I am very encouraged by all that we have accomplished in the third quarter. We believe that our portfolio has been intentionally constructed to continue to perform brilliantly through his short-term economic disruption, as evidenced by collecting 97% of the cash rent payable in the third quarter. We believe that we are specifically positioned for long-term growth and future success building upon our strong foundation of nearly 100% occupancy, long weighted-average remaining lease terms, high percentage of investment-grade tenancy and focus on resilient property types. We resumed our accretive acquisitions program and are thoughtfully rebuilding a large acquisitions pipeline, currently totaling over $325 million of high-quality closed and pipeline acquisitions. We have ample liquidity to act on accretive opportunities and no near-term debt maturities. We remain committed to executing on our business plan and on the activities that are critical to our ongoing success. We look forward to continuing these efforts in the fourth quarter and delivering a strong finish to the year.

 

With that, Operator, we can open the line for questions.

 

 

Question-and-Answer Session

 

Operator

 

[Operator Instructions].

 

 

 

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