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Global Net Lease(GNL) - 2022 Q3 - Earnings Call Transcript
GNLGlobal Net Lease(GNL)2022-11-03 19:41
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Financial Data and Key Metrics Changes - In Q3 2022, core FFO grew by 9.6% year-over-year to 48.3millionor48.3 million or 0.47 per share, while AFFO was 41.3millionor41.3 million or 0.40 per share [8][19] - Revenue for Q3 2022 was recorded at 92.6million,withanetincomeattributabletocommonstockholdersof92.6 million, with a net income attributable to common stockholders of 9.7 million [18][19] - On a constant currency basis, revenues would have increased by 1.2millionto1.2 million to 93.8 million, and year-over-year, revenues would have been up by 4.9millionto4.9 million to 97.5 million [8][18] Business Line Data and Key Metrics Changes - The company completed two lease renewals and one tenant expansion project totaling nearly 850,000 square feet, bringing year-to-date activity to 3.6 million square feet [10] - Year-to-date renewal and expansion leasing added 117millionofnetnewstraight−linerentoveranewweightedaverageremainingleasetermof9.3years[11]−TheportfoliocompositionattheendofQ32022was56117 million of net new straight-line rent over a new weighted average remaining lease term of 9.3 years [11] - The portfolio composition at the end of Q3 2022 was 56% industrial and distribution, 41% office, and 3% retail, compared to 52%, 43%, and 5% respectively at the end of Q3 2021 [14] Market Data and Key Metrics Changes - The portfolio consists of 310 properties with a weighted average remaining lease term of 8.1 years, with 66% located in the U.S. and Canada and 34% in the UK and Western Europe [12] - Over 94% of leases feature annual rental increases, with approximately 64% having fixed rate escalations [13] Company Strategy and Development Direction - The company is focusing on increasing portfolio concentration in industrial and distribution assets, which now represent 56% of the portfolio [7][14] - The strategy includes divesting non-core retail assets and acquiring highly dependable single-tenant industrial and distribution properties in North America and Europe [16] - The company aims to reduce net debt to the low to mid-6s range, currently at 8 times net debt to trailing 12-month adjusted EBITDA [33][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's performance, highlighting strong tenant credit and successful leasing activity [24] - The company is cautious about capital deployment due to economic uncertainties, including inflation and potential recession [34] - Management believes the portfolio is well-positioned for future growth and capital appreciation [7][24] Other Important Information - The company recorded 33.3 million in acquisitions year-to-date and has a pipeline of 32millioninpotentialacquisitions[15]−Thecompanyhasawell−cushionedinterestcoverageratioof3.3timesandendedthequarterwithnetdebtof32 million in potential acquisitions [15] - The company has a well-cushioned interest coverage ratio of 3.3 times and ended the quarter with net debt of 2.2 billion at a weighted average interest rate of 3.5% [20][21] Q&A Session Summary Question: Impact of foreign currency on AFFO per share - The impact on AFFO was a decrease of about 2.6millionprimarilyduetoforeignexchange[28]Question:Considerationofmorehedges−Thecompanyhasaconsistenthedgingstrategyfocusedonnetcashflowsandisevaluatingthepotentialtoincreasehedging[29]Question:Goalsforassetdivestiture−Thecompanyaimstodivestnon−coreassets,primarilyretail,andmayalsoconsidersellingpropertiesiftenantsaremovingout[31]Question:Futureleveragegoals−Thecompanyaimstoreduceleveragetothelowtomid−6srangebutiscautiousaboutcapitaldeploymentinthecurrenteconomicclimate[33][34]Question:Leaserenewalsandrentescalators−Newleasesareincorporatinglargerescalatorsof22.6 million primarily due to foreign exchange [28] Question: Consideration of more hedges - The company has a consistent hedging strategy focused on net cash flows and is evaluating the potential to increase hedging [29] Question: Goals for asset divestiture - The company aims to divest non-core assets, primarily retail, and may also consider selling properties if tenants are moving out [31] Question: Future leverage goals - The company aims to reduce leverage to the low to mid-6s range but is cautious about capital deployment in the current economic climate [33][34] Question: Lease renewals and rent escalators - New leases are incorporating larger escalators of 2% to 4%, with no pushback from tenants on these increases [36] Question: Tenant credit health in Europe - The company has no concerns regarding tenant credit health, as most tenants are investment grade and paying rents on time [38] Question: Future acquisitions in Europe - The company is being cautious but is seeing attractive opportunities at decent prices [39] Question: Breakdown of asset sales - A small property was sold for approximately 3 million, with two additional properties under agreement totaling over $110 million [42] Question: Plan for upcoming debt maturity - The company is evaluating options for refinancing upcoming debt and will make decisions closer to the due date [50][51]