GNL - NYSE

Good morning, everyone, and welcome to the Global Net Lease, Inc. Q4 2023 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation there will be opportunity to ask questions. [Operator Instruction] Please also note today's event is being recorded. And at this time, I'd like to turn the floor over to Jordyn Schoenfeld of Global Net Lease. Please go ahead, sir.

Thank you. Good afternoon, everyone, and thank you for joining us for GNL's fourth quarter 2023 earnings call. Joining me today on the call are Mike Weil and Jim Nelson, GNL's Co-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 and our periodic and current reports filed 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. Heading guidance or statements referring to our pipeline or the future value of an investment in G&L including any adjustments giving effect to the recent completed merger with Necessity Retail REIT, Inc., also known as RTL and the internalization of both GNLs and RTL's advisory and property management functions as well as any projections about future success following the merger and internalization are also forward-looking statements. 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. Please note that we do not provide guidance on net income. We only provide guidance on AFFO per share and our net debt to adjusted EBITDA ratio and do not provide reconciliations of this forward-looking non-GAAP guidance to net income per share or our debt to net income due to the inherent difficulty in quantifying certain items necessary to provide such reconciliations as a result of their unknown effect, timing and potential significance. Examples of such items include impairments of assets, gains and losses from sale of assets and depreciation and amortization from new acquisitions and other nonrecurring expenses. 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'll now turn the call over to our Co-CEO, Mike. Mike?

Thanks, Jordan. Good morning, and thank you all for joining us today. GNL is now the third largest publicly traded net lease REIT with a global presence and features a diversified portfolio of high-quality, primarily investment-grade tenants. GNL's focus on investment-grade tenants as compared to our peers highlights the stability and high quality of our rental income. The largest tenant in the portfolio only accounts for 3.1% of the total straight-line rent with the top 10 tenants totaling just 21% of the portfolio, effectively mitigating concentration risk within the portfolio. We believe our diverse portfolio provides us with the flexibility and capacity to capitalize on numerous market opportunities, maximizing shareholder value over the long term. 2023 was a transformative year for GNL that included the internalization of management and enhanced corporate governance, further aligning P&L with its net lease peers. In addition to the merger and internalization, 2023 also highlighted GNL's strong asset management platform capabilities with continued leasing momentum. As a direct result of the merger, GNL has also recognized significant synergies, as outlined in our investor deck, and we're currently on track to achieve our stated $75 million of annualized cost savings by the third quarter of 2024. GNL is implementing a 2024 business plan focused on deleveraging its balance sheet, reducing its exposure to variable rate debt and driving down its net debt to adjusted EBITDA. Our near-term strategic priority will focus on reducing leverage through select dispositions, prioritizing noncore assets and opportunistic sales. We've strategically reviewed our portfolio and identified assets where we believe there is beneficial opportunity to divest. This includes assets that are noncore or have near-term debt maturities or near-term lease expirations. We expect a total of $400 million to $600 million of strategic dispositions in 2024. This disposition program will drive long-term shareholder value by generating cash to enhance and derisk our balance sheet and create a clear path forward for us to potentially narrow the trading discount compared to our net lease peers. Selling assets at attractive cap rates will also provide proof of value to investors and demonstrate a significant premium compared to where the company is currently trading on an implied cap rate basis. Driving down leverage through measured opportunistic dispositions is the proper approach to maximize long-term shareholder value with proceeds used to lower our net debt to adjusted EBITDA. Our near-term strategic approach also involves a planned reduction of GNL's annual dividend from $1.42 to $1.10 per share, increasing the amount of annualized cash by $74 million to further reduce leverage. This reflects the company's continued commitment to strengthening its balance sheet while maintaining a disciplined dividend policy. Turning to our portfolio. At year-end 2023, we had approximately 1,300 properties, spanning nearly 67 million square feet with a gross asset value of $9.2 billion. The diverse composition of our net lease portfolio is unmatched, whether measured by geography, asset type, tenant or industry and positions GNL to effectively navigate external macro challenges as we move ahead. The portfolio maintained occupancy of 96% with a weighted average remaining lease term of 6.8 years. Geographically, 80% of our straight-line rent is earned in North America, while 20% comes from Europe. The portfolio also features a stable tenant base and a high quality of earnings with an industry-leading 58% of tenants receiving an investment-grade or implied investment-grade credit rating. From a growth perspective, the portfolio includes an average annual contractual rental increase of 1.3%. I'm again highlighting the strong asset management capabilities we demonstrated as we continue our leasing and renewal efforts. In particular, our fourth quarter leasing and renewal activities included over 2.1 million square feet across the entire portfolio with attractive leasing spreads on renewals that were 6% higher than the expiring rents. New leases that were completed in the fourth quarter of 2023 have a weighted average lease term of 9.2 years. While the renewals that were completed in the fourth quarter of 2023 have a weighted average lease term of 6.1 years. The largest segment of our portfolio is industrial and distribution with 219 properties that span over 33.9 million square feet that contributed $235 million to annualized straight-line rent. 92% of the leases in this portfolio include rent escalations with an average annual rental increase of 1.5%, positioning the portfolio to benefit from annual rental income while having a 7.7-year weighted average lease term. Our single-tenant retail segment is the largest by property count, with 878 properties that span over 7.9 million square feet and contributed $154 million to annualized straight-line rent. The single-tenant retail segment comprises 66% investment-grade or implied investment-grade rated tenants and features an 8.3-year weighted average lease term. The multi-tenant suburban retail segment consists of 109 properties that span over 16.4 million square feet that contributed $200 million in annualized straight-line rent. The portfolio has a weighted average remaining lease term of 5.2 years and includes 21% of grocery-anchored centers, which are 90% leased. This segment is predominantly comprised of triple net leases with incremental lease-up potential and attractive leasing spreads. Additionally, 61% of the straight line rent in this portfolio comes from Sunbelt markets, which continue to grow and have favorable demographic tailwinds. Our smallest segment by straight-line rent, single-tenant office includes 90 properties that span 8.6 million square feet and contributed $143 million to annualized straight-line rent and has a 5-year weighted average lease term. One of the metrics that differentiates GNL's single-tenant office portfolio is that it's comprised of 70% mission-critical facilities, which we define as headquarters, lab or R&D facilities and feature 68% investment-grade or implied investment-grade tenants, which we believe provides our portfolio with rent stability and low level of default risk. Given GNL's successful track record of lease renewals, the single-tenant office segment also includes limited near-term lease maturities, minimizing the risk of vacancy. A fundamental aspect of our comprehensive portfolio strategy involves limiting concentration risk. The combined annual straight-line rent from our top tenants amounts to only 21% of our overall portfolio, with our largest tenant contributing just 3.1%. Our approach to mitigating concentration risk also extends to every segment of our portfolio, ensuring diversity among the top 5 tenants within each segment, which we have highlighted in the investor deck. This diversified and investment-grade tenant base not only ensure stability but also offers predictability in rental income, laying a solid foundation for our future growth. The quality and reliability of our tenants underscore the resilience and longevity of our business model. Our leasing results continue to illustrate the quality of our assets, driving leasing rates higher even in the current environment. The single-tenant segment completed 16 new leases and renewals, and showcased the positive 8% renewal leasing spread, demonstrating the strong renewal demand for our mission-critical assets while adding nearly $9 million to net straight-line rent. The multi-tenant segment completed 54 new leases and renewals, resulting in a 2% renewal spread, consistent with the high demand we're experiencing at our suburban shopping centers which increased net straight-line rent by over $10.5 million. New leases that were completed in the fourth quarter of 2023 have a weighted average lease term of 9.2 years. While the renewals that were completed in the fourth quarter of 2023 have a weighted average lease term of 6.1 years. Our executed leases at the end of the fourth quarter '23 combined with our leasing pipeline as of February 15, 2024, will bring occupancy in our multi-tenant portfolio from 88% to 91%. To put that in perspective, the multi-tenant portfolio represents only 27% of total straight-line rent in our portfolio, and GNL's overall portfolio occupancy stands at 96%. The fourth quarter 2023 highlighted our commitment to expanding relationships with existing tenants, including new leases and renewals with Burlington, HEB Grocery and Dick’s Sporting Goods. Looking ahead, we remain committed to executing on our systematic and prudent approach to achieving our financial objectives, which revolve around reducing net debt to adjusted EBITDA while organically enhancing NOI through lease-up initiatives and contractual rent growth. A pivotal component of this strategy involves noncore dispositions and opportunistic sales which should provide us with capital to deleverage our balance sheet. We believe this strategy will pave the way to reducing the valuation gap with our net lease peers. I'll turn the call over to Chris to walk through the financial results in more detail. Chris?

Thanks, Mike. Typically, we would provide year-over-year financial comparisons. However, that would not be meaningful at this time given the recent merger and internalization. Going forward, we'll begin comparing to prior quarters until Q4 2024 when we have a full year of a merged and internalized G&L. For the fourth quarter 2023, we recorded revenue of $206.7 million and a net loss attributable to common stockholders of $59.5 million. Core FFO was $48.3 million or $0.21 per share and AFFO was $71.7 million or $0.31 per share. In Q4 2023, we incurred an elevated $5.5 million European income tax expense in the quarter and $2.3 million onetime write-offs primarily related to reimbursement. We have completed a European tax restructure that we expect will reduce the company's income tax expense beginning in Q1 2021. As always, a reconciliation of GAAP net income to the non-GAAP measures can be found in our earnings release, which is posted on our website. Looking at our balance sheet, it's worth noting that while only 20% of our debt is subject to variable rates. The current sustained high interest rate environment does have a temporary effect on the portion of our debt that isn't fixed or swapped. To mitigate this, we seek to reduce our exposure to variable rate debt as we move through the year. As part of our strategy to address 2024 debt maturities and subsequent to the fourth quarter, we completed an $80 million refinancing agreement with Nordea Bank secured by multiple properties in Finland that extended that maturities of these assets to 2029 at a 4.6% interest rate. GNL has a plan to address the remaining 2024 debt maturities through dispositions, refinancing and availability on the credit facility. We will continue to address the 2025 maturities and anticipate that the second half of 2024 will present a more favorable environment for debt maturities beyond 2024, but we remain confident in our ability to refinance these assets. Our net debt to adjusted EBITDA ratio was 8.4 times. We ended the quarter with net debt of $5.3 billion at a weighted average interest rate of 4.8% and have liquidity of approximately $135.7 million and $206 million of capacity on the credit facility. The weighted average maturity at the end of the fourth quarter 2023 was 3.2 years with minimal debt maturity due in 2024. Our debt comprises $1 billion in senior notes, $1.7 billion on the multicurrency revolving credit facility and $2.7 billion of outstanding gross mortgage debt. Our debt was 80% fixed rate, which includes floating rate in-place interest rate swaps and our interest coverage ratio was 2.4 times. As of December 31, 2023, we had approximately 230.9 million common shares outstanding. On a weighted average basis, there are approximately 230.3 million shares outstanding during the fourth quarter of 2023. Lastly, here's our objective to provide investors with enhanced transparency regarding our financial goals and projections. And therefore, we would like to introduce initial 2024 guidance today with an 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. The initial guidance reflects our assumption mentioned earlier that our projected 2024 dispositions will be in the range of $400 million to $600 million. The majority of these dispositions will come from occupied opportunistic sales where we anticipate achieving a cash cap rate between 7% and 8%. I'll now turn the call back to Mike for some closing remarks.

Thanks, Chris. Before I conclude, I'd like to express my gratitude to Jim Nelson, the President and Co-CEO of GNL for all of his hard work and contributions during his time at the company. He's a great friend and partner. And on behalf of the entire company, we extend our best wishes for a well-deserved and enjoyable retirement. We take great pride in our achievements at GNL throughout 2023. With the merger and internalization behind us, we remain focused on positioning ourselves as an industry leader with a global diversified and investment-grade portfolio. We want to reiterate that we strongly believe that the best path forward for GNL is reducing leverage through noncore and strategic dispositions to enhance our balance sheet as we aim to lower our cost of capital to position the company for future growth. Our planned dividend reduction is expected to increase the amount of annualized cash by $74 million to further reduce leverage. Additionally, disposing of assets at a premium to our current assumed implied cap rate will provide investors with proof of value of our leading investment grade-worthy portfolio. As we've taken a conservative approach, our strategy for deleveraging is designed to be earnings neutral with the expectation that our net debt to adjusted EBITDA will decrease by approximately 1 full turn. By applying a reasonable and achievable 10 times AFFO multiple to our per share guidance, the implied stock price exceeds $13 per share, $20 per share range if we trade to the high end of the sector at a 15 times AFFO multiple. This outlook aligns with our goal of narrowing the trading discount and we believe these strategic initiatives will position GNL for future success that maximizes shareholder value. 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.

[Operator Instructions] And our first question today comes from John Kim from BMO Capital Markets. Please proceed with your question.

I wanted to ask about AFFO guidance for this year. I realize there's a lot of moving parts and dispositions as well as some onetime items. But I thought it would have been higher if you included some of the G&A synergies that you expect to realize this year, high occupancy from your multi-tenant retail portfolio and potentially lower interest rates. So I just wanted to see what other parts are offsetting that potential growth?

Yes. Well, thanks, John. The $1.30 to $1.40 is the guidance range that based on what we know today, based on the dispositions that we talked about, the occupancy, et cetera, all the things that you've talked about. We've taken a -- what I believe is now in a kind of common view, but a conservative view regarding interest rate reduction. I think in the end of year '23, there was a lot more anticipation of many deeper cuts. And I'm not sure when they will be coming, what the size and frequency of them will be. And we didn't want to build an expectation around the unknown. This guidance is what we are very clear on being able to execute on. And if environmental or economic environment does change to the positive with interest rates, later in the year if it requires us to revise our guidance, we can. But we're a first-time issuer of guidance, and we think that it's important we're not overly conservative, but we believe we're very accurate, and this is where we will execute in '24.

And then maybe specifically on the dispositions, how much mortgage debt is associated with those assets? And if you could provide like a blended cap rate on this position, including the non-income-producing assets?

Well, the nonincome-producing assets, this portfolio has always had a small portion of assets that we look to dispose of, whether it's because of a nonrenewal or whatever the case may be. Hard to put a cap rate on those as they don't generate NOI. Again, that's a small part of what we're looking at on dispositions. The $400 million to $600 million, our typical leverage in the portfolio on these assets is kind of in the 50% to 60% range. So that will be the leverage pay down as we achieve these dispositions.

And my final question is on your use of proceeds, I realize you want to most likely reduce debt near term, get your leverage down. But you do have a share repurchase program. Your stock is trading north of 10% implied cap rate. Where does buying back shares sit as far as potential use of proceeds?

Yes. As we've released 2024 initial guidance, we have not included a stock buyback announcement in that guidance. It is something that is available to us and something that the Board can take into consideration. But our 2024 initial guidance, as we've talked about, we think based on dispositions and cap rates is a great opportunity for the company to bring down net debt to EBITDA and hit these AFFO per share guidance range.

Our next question comes from Bryan Maher from B. Riley. Please proceed with your question.

Just a couple for me this morning. On the guidance for leverage, getting down to 7.4 times to 7.8 times, is that just kind of the year-end 2024 initial goal? Or is that where you're going to be comfortable staying longer term? And if not, where do you ultimately want to get to?

Thanks, Bryan. Yes, that is a year-end target, 7.4 times to 7.8 times in the 2024 guidance as you point out. That is not ultimately where -- we intend to drive net debt to adjusted EBITDA. As I've said before, it's a little bit of a longer process. But we wanted to make it very clear that the initial path of doing that through dispositions. And I've spoken in the past about thinking that ultimate net debt-to-EBITDA should be in the 6 times, 6.5 times range.

And then when we look at the payout ratio on the new dividend, I think you're at $1.10 let's take the midpoint of your guidance, 135. So it's about an 81% payout ratio. Is that where the Board wants to kind of hang out? Or is that just an initial salvo and you want to go a little bit lower than that? Or should we just think about it 80%, give or take 5%?

I don't think there is any reason to expect another announcement in 2024. Today's announcement of the $1.10 is where we believe this portfolio will trade at this level. And that 80% to 85% payout ratio is -- especially if you remember, this portfolio is 58% investment grade. So our quality of earnings is quite high and higher than others in the sector. So we are very comfortable. We are at nearly 100% rent collection the portfolio is really performing well. So the 80% to 85% range does feel like where we intend to be.

And just last for me. GNL is a bit unique with its exposure to Europe. And I know that, that's dropped meaningfully with the merger down to about or so. But given its uniqueness and given that most of us on this call don't really track European real estate day in, day out. Can you give us any type of broad strokes, what's going on over there? Have cap rates increased over the past 2 to 3 quarters, outlook for dispositions in that market? Just a little bit more color on what's going on in Europe.

Yes. So obviously, Europe can't be painted in a single brush. So there the part of Europe that we have always focused on has been a stable European market, typically Western Europe and tends to have similar traits to the U.S. market, especially when you think about the tenant names that consist of the 20% European exposure. So some of our disposition targets are in Europe, and we are very active in getting strong indications. It's a little bit early to discuss in detail. But the buying market in Europe remains strong. Cost of debt in parts of Europe is actually a little bit more attractive still than in the U.S. And -- our focus for '24, I just want to reiterate, is on the dispositions, not on the acquisitions. So we have engaged local brokers that we have long relationships with on a few assets that we think meet the disclosed criteria as noncore dispositions. And our $400 million to $600 million really does focus on the retail and office. And any maybe near-term nonstrategic assets and some of them are in Europe and the market is active.

Our next question comes from Todd Thomas from KeyBanc Capital Markets. Please go ahead with your question.

I wanted to circle back to the AFFO guidance of $1.30 to $1.40. It's about $0.05 to $0.06 per quarter lower than it seemed like you were anticipating when the merger was initially announced. Can you provide a bridge and just help us understand some of the moving pieces to help us understand that the current quarterly AFFO run rate just relative to what was loosely discussed a couple quarters ago.

Yes. Thank you, Todd. The biggest change from when the merger was announced to now is interest expense, and it's up about $6 million per quarter. We have calculated that in, figured it in. One of the goals of the guidance and disposition strategy is that we will be able to pay down some of that debt and drive those -- drive that benefit into earnings. As we have talked about also, there was some movement in the European tax structure as far as the year-end charge and Chris and team, and Chris can talk about this in a little bit more detail, but Chris and team have addressed that with a European tax restructuring that was completed in the fourth quarter, and we'll have immediate benefit in the first quarter. So those are 2 of the biggest items. It was also in -- as far as in the fourth quarter, just the completion of some merger activity and what I'll call, cleanup. But the 2024 full year guidance, I think the -- the way we're viewing interest expense is probably the biggest change.

I guess maybe for Chris, just to further discuss the guidance a little bit. I mean you seem to be on track for the G&A with the synergies that you've previously discussed, but it sounds like interest expense is up. I mean, are you able to provide any additional ranges around either straight-line rent or sort of cash NOI at year-end or the cash interest expense that's embedded in the guidance?

I'm sure, I guess just first to start in terms of the synergies. As you mentioned, we're fully on target to reach the $75 million in even exceed that in terms of the overall synergies. For cash NOI, I do want to mention in the fourth quarter, as Mike said, there was about $2 million sort of cleanup type of items coming in, which were negatively impacted in the fourth quarter and will not be in the first quarter. And then just in terms of the overall go-forward, we obviously expect to be leasing up the multi-tenant properties and not to help push the NOI.

And then just curious with the, obviously, the focus here is on dispositions, but I'm curious if investments are at all a consideration. In the past, you've you found deals at high single-digit, low double-digit going in yield. Is there any consideration to either recycling proceeds from dispositions at all or some of the additional retained earnings from the dividend reduction in the new investments at all in 2024?

Todd, I think the most important thing that we will do in 2024 is lower net debt to EBITDA, and that is the focus of the company. And I think the as we drive our cost of capital to a more reasonable place, then we could look at potential acquisitions, but 2024 is really focused on dispositions and lowering net debt to EBITDA, cost of capital and improving our trading multiple so that we have that -- the ability to really take advantage of those types of acquisitions that we've always been able to generate. And we look forward to the future where we can do that. But right now, we understand and are committed to this plan and the results of it.

And just lastly, if I could, on the dividend reduction. Can you just talk a little bit about the Board's decision to reset the payout to that sort of 80% range and talk about the decision to reset at $1.10. I'm just curious whether there was any consideration to reduce it further, retain even more capital, which could help further reduce leverage and improve your cost of capital? Was that at all a consideration?

Well, I can't really disclose too much about Board discussion, as I know you can understand. But nobody -- let me restart that. Dividend policy is a top priority. And we understand the importance and the tough decision around making an announcement of a dividend cut. I think this low 80% payout ratio as I said, based on the quality of the portfolio, the investment-grade percentage, et cetera, is justified. And it's an important aspect, as you know, of running a REIT. And we appreciate the really deep conversation and analysis that we undertook with the Board, and we think that this is a good place to come out. And for 2024, this gives us the ability to pay down debt. It's about $75 million of additional retained earnings, which is meaningful. And we think that it is something that existing shareholders can appreciate. Again, nobody looks for a dividend cut, I understand that. But it's also a great entry point for new shareholders as they look at this 2024 plan.

Our next question comes from Michael Gorman from BTIG. Please go ahead with your question.

If I could go back to kind of Todd's initial question, can you just talk a little bit more about the expectations for some of the baseline portfolio in the 2024 guidance and the NOI run rate? Just looking through the presentations, it looks like there was about a 240 basis point tick down in occupancy in the multi-tenant portfolio quarter-over-quarter. Maybe kind of what drove that? And then how do you see that NOI trending over the course of 2024 -- like what's baked into that number?

Yes. So first of all, Michael, thanks for the question. The biggest driver of that multi-tenant was just timing. And what I mean by that, in the third quarter, we had an uptick of short term as we do every year and as most retail operators do from seasonal short-term leasing. Some of the backfill leasing that we are involved in is just a little bit of a timing, whether it's fourth quarter or first quarter. So I don't see it as any indication of any trend. The pipeline activity has been strong. Our relationships with our national anchor tenants is expanding. The occupancy at the centers is very stable and increasing, which drives the more regional backfill or in-line tenants in the portfolio. So things are very positive on the multi-tenant front, and you'll continue to see that fill and grow. And what I'd like to just keep in mind is multi-tenant is only about 22% of the overall portfolio. The overall portfolio at 96%, very stable. You saw the renewal spreads averaged 6%. So again, the real estate is desirable and tenants are paying to stay, paying to renew, which is always a very positive sign, and we will continue to expect to see those results as well.

So you're seeing positive momentum above and beyond kind of that lease plus pipeline number that's in the presentation for the multi-tenant?

Yes. As the multi-tenant portfolio is structured, we have 4 regional asset managers that are engaged completely. There's about 110 properties in the multi-tenant portfolio. So they all have roughly 30 properties that they're responsible for. They're talking about renewals, typically 18 to 24 months early. They're in the market. They're expanding their national relationships with great companies like Burlington, T.J. Maxx, Dick’s Sporting Goods, et cetera. Now what we've published in our pipeline is are deals that are pretty far along, but not yet executed. So there's a pretty much a fully negotiated term sheet and it's moved to NOI. So we're very comfortable putting it in our pipeline numbers. But yes, there are more leases behind that, and we will continue to drive that 22% slice of the portfolio and the overall 96% up higher.

And then obviously, a lot of focus on the asset sales. Can you give a little bit more color on maybe kind of the noncore that you went through the analysis and kind of how that breaks down among the different property types and maybe how the management team thought about it? Obviously, the shorter lease term makes sense or maybe some debt maturities make sense. Was there any consideration for certain asset types in the portfolio where you think there's a meaningful disconnect between how the public is valuing it and where you think you could sell those assets? And then that $400 million to $600 million, is that all of the noncore? Or would there be potential additional proceeds above and beyond?

Well, first, Michael, I want to respect the fact that this is the first time that we've given full year guidance. And in that full year guidance, we've identified $400 million to $600 million of dispositions. So I don't want to day 1, start talking about, oh, and there's more. Because we're going to execute on this plan. We're going to achieve what we said we're going to achieve. We're going to drive the AFFO full year, et cetera. But this is a big company and there's life beyond 2024, and we will always continue to evaluate the portfolio and take advantage of buy-sell arbitrage that's in our benefit. One thing that I'll point out, it's relatively small, but it's meaningful. So far in this 2024 disposition strategy, we sold $35 million of Truist bank branches from the portfolio. And we sold them at an average 6.5% cash cap rate. Those are the types of things that the buyers are typically individuals, local buyers. We've got local brokers working these assets for us. We are taking advantage of that desire that individuals have to own that type of real estate in their local market. And that's how we're going to really take advantage of those spreads. I think 6.5% cap rates on an average remaining lease term that's about 6 years really speaks to the value of those bank branches. There are other things that we're not quite ready to talk about yet, but we're very excited about what we're anticipating to be disposition cap rates on certain assets. And we will continue to disclose. But we don't want to over disclose now because of it just makes it harder to dispose of in the market if we put out too much public information. My last point is we've been very focused on disposing from the retail and primarily office part of the portfolio. The industrial continues to really be a bellwether, but we did also look at some assets that we may have had early conversations with the tenant about their long-term plans for the asset and made decisions that this is a good time to dispose of such assets.

And then maybe last one, Chris, and just a mechanical one, I guess, maybe I'm just curious. So you sold about $75 million in assets in the quarter -- in the fourth quarter. But when I look through the sub, it looks like net debt went up by about $80 million in aggregate. And I'm just kind of curious like what the puts and takes are there with the asset sales, but ultimately with the debt moving higher?

So in the fourth quarter with the sales, we did pay down a portion of outstanding CMBS debt. It was also draw early in the period for some funding purposes. And I think that really is probably the key of what increased the net debt during the quarter.

Yes. So maybe we can follow up with that off-line because I'm just still not quite there yet the puts and takes.

Ladies and gentlemen, our final question today comes from Mitch Germain from Citizens JMP.

Michael, it seems like some really good progress that you're planning to make on deleveraging this year. But you're still well off your goals. So do we consider this the start of what will be like a multiyear plan? Is that kind of the way we should think about this?

I think that's fair.

So as you go through the portfolio, identify assets to sell, is this going to be kind of something you'll consider to do next year? Or are there methods to do some more organic deleveraging that you're kind of going to consider as you approach 2025?

Well, Mitch, it's a great question, and I appreciate it. As -- at the end of February of 2024, I'm not quite ready to talk about obviously, our thoughts on 2025. We've got really good work ahead with what we've put out for guidance and dispositions and the lowering of net debt to EBITDA. As you know, there are several levers that can drive lowering net debt to EBITDA, and we hope and expect that more than dispositions is available to us before the end of 2024 based on our execution. Organic is great. Dispositions is great, and we will continue to watch the performance and execute on what we've disclosed for our guidance. And that -- one of our goals is to have a better cost of capital going into 2025, and that's what we're really excited about.

On the credit facility, is there any swaps or hedges that could prevent you from redeeming some of that debt? Chris, is there anything there that can't be touched right now or it's too expensive to redeem? Is that just a small portion of it? Is it a large portion of it? How should we think about that?

There is no portion of it that's restricted from us at this point.

And then I guess last question for me. I'm just curious in terms of your -- I appreciate the color that you guys have been giving on the sector by sector. And in multi-tenant, I'm curious about the conversion percentage that you've got on your leasing pipeline. I know you've got a good portion of that, that's still under consideration or in some sort of state of discussion. What have you guys been seeing in terms of, I guess, is 289,000 square feet today. What does you guys have been seeing in terms of the ability to convert that over the last couple of quarters?

And just so I make sure I understand your question. You're asking when it's in our pipeline, what is our conversion percentage of

Yes. So if I'm looking at your slide on the multi-tenant, obviously, some of that has already been completed. Some of that you're calling expected. And then some of that is your pipeline. So I guess between your expected and your pipeline, I'm just trying to understand kind of how have you been witnessing conversion of that over the last couple of quarters?

We have, for many quarters, been at or near 100% when we put it in public disclosure as pipeline. As I said earlier, those are lease negotiations that are very far along that maybe are not yet at a negotiated lease form, but there is an executed NOI. There is a tenant that is fully engaged and moving forward. So those numbers are very -- we're very confident in.

And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to management for any closing remarks.

Great. Jim, before I end with a couple of closing remarks. Is there anything that you'd like to add?

Yes. Yes, I just want to thank everybody for joining us on this call. I mean it's been my pleasure interfacing with you all for the last almost 7 years, and we want to thank you for your continued support of the company. And it's been a great 7 years. I'm very pleased to be leaving with the firm in very capable hands with Mike and Chris and the rest of the team. It's a great team, and I think there's a lot of great things to come. So thank you.