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

Thank you, operator. Good morning, everyone. And thank you for joining us for GNL third quarter 2019 earnings call. This call is being webcast in the investor relations section of GNS website at www.globalnetlease.com.

Joining me today on the call to discuss the quarter's results are James Nelson, Chief Executive Officer; and Chris Masterson, Chief Financial Officer. The following information contains forward-looking statements, which are subject to risks and uncertainties.

If one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements.

To refer all of you to our SEC filings including the annual report on form 10-K for the year ended December 31, 2018 filed on February 28 2019, 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 or portfolio information provided during these conference calls are only made as of the date of the call. As stated in our SEC filings GNL disclaims any intent or obligation to update or revise the forward looking statements or portfolio information except as required.

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 financial results prepared in accordance with GAAP.

Our reconciliation of GAAP net income to the non-GAAP measures can be found in our earnings release, supplement and Form 10-Q, all of which are posted to our website at www.globalnetlease.com. I'll now turn the call over to our CEO, Jim Nelson..

Thanks, Louisa and good morning, everyone. Thank you all for joining us on today's call and a special welcome to D.A Davidson and Aegis Capital who initiated coverage of GNL last month increasing our coverage to five analysts. We are pleased to report another quarter of year over year increases in rental revenue, cash NOI, adjusted EBITDA and AFFO.

We had an extremely active quarter, including 102 million of primarily industrial and office acquisitions, which, combined with another significant retail disposition, progressed our strategic goals to increase our portfolio allocation to industrial properties and decrease our retail exposure.

We saw a year-over-year decrease in our net debt to EBITDA ratio. And we also signed an agreement with a fortune top 150 tenant to buy domestic and international portfolio properties for a total of approximately $182 million before the end of the year.

In total, we have $373 million of acquisitions in our pipeline, which brings our total pipeline plus year to date acquisitions to $697 million.

Finally, we improved our financial flexibility and ability to execute on acquisition opportunities as we expanded our credit facility to $1.2 billion and entered into a new loan at favorable interest rates that helped extend our weighted average debt maturity and will help fuel our continued growth.

Total revenue for the third quarter was $77.9 million of 8.4% from $71.9 million in the prior year quarter. AFL also increased a $40.2 million from $39.6 million in third quarter of 2018, on the strength of our recent acquisitions.

On a per share basis AFFO was $0.47 per share, compared to $0.57 per share during the same quarter last year, due to a large termination fee received in the third quarter of last year, and also the increase shares outstanding compared to last year, which were offered in order to fund our acquisition pipeline.

Cash NOI for the quarter was $68.6 million compared to $65.8 million in the same quarter 2018. EBITDA was $58.7 million in this quarter compared to $48.5 million in third quarter 2018. Overall, our 264 property portfolio is nearly fully occupied at 99.6% leased.

196 properties are located in the US and 68 are in the UK and Western Europe, representing 59% and 41% of annualized rental revenue respectively, roughly in line with our target to reach a geographic distribution of 60% US, 40% Europe. Our investment grade or implied investment grade tenants now makeup over 71% of the portfolio.

Please refer to our earnings release for more information about what we consider to the implied investment grade tenants. Our property mix is currently 52% office, 43% industrial and distribution and 5% retail. The portfolio has a weighted average remaining least term of eight years with no near term explorations.

During the quarter, we acquired nine net lease assets comprising of about 921,000 square feet for a contract sales price of approximately $102 million. These assets are least at an attractive going in cap rate of 6.64%, and a weighted average cap rate of 7.68% with a weighted average remaining least term of 17.1 years.

These acquisitions included seven industrial properties, an office building and a lab which are all located in the United States. We are very pleased to be acquiring long term leases at favorable cap rates while improving the mix of assets in our portfolio. I'd like to take a minute to review some of the highlights from these acquisitions.

The office and lab properties we acquired during the quarter are part of a three pack of property least to be obvious Yavi [ph] Solutions in California. The tenant has an implied Baa2 credit rating and the least continues for 13 years.

These assets total approximately 137,000 square feet and were acquired for a total contract sales price of $25.7 million. The industrial properties we acquired our lease to C. F. Sauer and SWECO and are located in Kentucky, South Carolina, California and Florida. C. F. Sauer is a cooking products business makes extracts and other food products.

SWECO is the world leader in particle separation and size reduction solutions. These industrial assets total approximately 790,000 square feet and were acquired for a total contract sales price of $76.3 million. We continue to take advantage of available opportunities to recycle capital and optimize our mix of asset types and credits.

During the third quarter, we continue to act on this type of opportunity selling a total of 33 properties, including a portfolio of 32 Family Dollar Retail Stores, which were sold for gain at 7.25% cap rate, reducing GLG retail concentration. Last quarter we sold 62 Family Dollar Stores.

As a part of the company's active tenant evaluation and discipline asset management strategy, we determined that eliminating our current exposure to Family Dollar would be the best for the portfolio. Upon evaluation, we were no longer comfortable with Family Dollars underperforming financials.

More broadly, retail assets are not our focus, and we felt this disposition was appropriate and increases the quality of our portfolio. The balance of the retail assets in our portfolio are performing and we do not expect to dispose of these assets in the near-term.

We will continue to evaluate this position going forward as we do for all of our assets and tenants. As we continue to grow and refine our asset mix, we are focused on acquiring primarily industrial distribution and some select office properties.

At the end of the quarter, we agreed to terms on a significant US and European sale leaseback transaction with a fortune top 150 investment grade tenant. This $182 million portfolio is a great fit for us and demonstrates the strength and expertise of our global capabilities to source execute on transactions such as this. Inclusive of this portfolio.

We have a total of $373 million of attractive assets, which we anticipate closing in the fourth quarter, which will bring our total 2019 acquisitions to approximately 697 million at a 6.88% going in cap rate, a 7.76 average cap rate and 14 years of average lease duration.

Recently, I along with several other members of our management team were able to attend Expo Real conference in Munich. This is the largest real estate conference in Europe and brings together over 24,000 real estate professionals including owners, brokers and lenders and service providers.

This was a great opportunity to efficiently build on our existing relationships and make new connections with vendors from all over Europe. So with that, I'll turn the call over to Chris to walk through the operating results and our balance sheet in more detail, and then I will follow up with some closing remarks.

Chris?.

Thanks, Jim. Third quarter revenue was $77.9 million up 2.4% over the second quarter 2019 figure and FFO was $37.9 million up 3% over the second quarter. Moving on core, FFO grew point 7% over the second quarter to $38.6 million and a FFO was $40.2 million up 0.4% over the prior quarter.

AFFO per share was flat quarter over quarter due to an increase in the weighted average number of shares outstanding. During the quarter we paid common stock dividends of $45 million.

On our balance sheet, we ended the third quarter with net debt, which is debt less cash and cash equivalent of $1.6 billion at a weighted average interest rate of 3% per annum. Our weighted average that maturity has lengthen to 5.7 years at the end of the third quarter an improvement from 3.8 years at the close of 2018 third quarter.

This includes $122.8 million of debt that matures in 2019. The components of our debt include $101.4 million on the multi-currency revolving credit facility, $392.5 million on the term loans, and $1.4 billion of outstanding gross mortgage debt.

This that was approximately 93% fixed rates, which is inclusive of floating rate debt with in place interest rate swaps, and improvement over the quarter ended June 30, 2019 were at 84.6% and was fixed.

Our net data analyze adjusted EBITDA improved to 6.7 times from 6.9 times in the third quarter 2018 with a strong interest coverage ratio of 4.1 times. As of September 30, 2019, liquidity was approximately 407 million, which is comprised of $306 million of cash on hand and $101 million of availability under revolving credit facility.

GNL's net debt enterprise value is 45%, with an enterprise value of $3.5 billion based on September 30, 2019, closing share price of $19.50 per common shares and $25 and $0.60 for series A preferred shares.

During the third quarter we entered into a CMBS loan to finance 12 properties located in the United States, the 10 year $204 million loan carriers at fixed interest rate of 3.65%. We also utilize our ATM programs during the third quarter, raising gross total of $128 million.

Approximately $110 million of this was common equity, remaining $18 million within our series a preferred stock. Finally with respected dividend, we paid dividends equating to $0.5125 per common share for the quarter. With that, I'll turn the call back to Jim for some closing remarks. .

Thanks, Chris. We had an excellent quarter from a real estate perspective and we believe we have put the pieces in place to finish the year very strong. The portfolio and the rental income generated by the portfolio continue to grow.

We have a strong balance sheet that allows us flexibility to close on our $373 million of pipeline acquisitions of long term lease primarily industrial assets. Selling the Family Dollar portfolio illustrates our disciplined asset management strategy and provides the opportunity to use the net proceeds to improve our asset mix.

We anticipate growth in the portfolio as the proceeds from our second and third quarter dispositions are fully redeployed and will continue to be a net acquire of high quality, long term net lease office distribution and industrial assets.

Finally, as we have discussed our ability to negotiate favorable financings in local markets and at the corporate level had extended our average debt maturity. With that operator, we can open the line for questions..

Thank you. Before we go to the question and answer session, I'd like to turn the call to Chris Masterson for recent announcement. .

Thank you, operator and good morning everyone. This is Chris Masterson, Chief Financial Officer of Global Net Lease. You just listen to our scripted remarks that we recorded a few days ago. Before we begin Q&A, I want to let you know that Jim is taking care of a personal health issue and is unable to join us for today's Q&A.

Jim expects to return to the office soon, and we wish him a speedy recovery. Joining me today for the Q&A is Brian Mansouri, SVP of Acquisitions. Operator, we're ready for the first question. .

Thank you. [Operator Instructions] Today's first question comes from Ben Zucker of Aegis Capital. Please go ahead.

Thanks for taking my questions and congratulations on posting some solid improvements in your core operating fundamentals.

Real quickly that in that impairment charge of $6.4 million what asset or assets was that related to?.

So is it the property act Mia in the Netherlands, we actually sold it during the fourth quarter. And that was a property they were still paying rent, the lease extended for four years, but they were going to be moving out and we thought that the best option for us was to sell the property now and recycle the capital..

Okay, great.

And while we're talking about the Netherlands, could you just quickly give us kind of your view of the total market opportunity in the US versus abroad currently, I think that your acquisitions over the first six months of the year had a strong if not exclusive bias to the US but it looks like some of your 3Q and subsequent activity has picked up overseas a little bit.

So just kind of wondering how you're viewing the competitive landscape right now between the two?.

Sure. So I mean, obviously, we're still looking at both the US and Europe. And as you can see what we found so far, it's been primarily based in the US where we found the better deals. But there are some European acquisitions that are popping up on the radar. And it's something that we're going to keep on monitoring.

But as you can see, we have found some opportunities in Europe and outside the US..

Very helpful. And so Chris, you guys are really flush with capital at the moment and I'm trying to get a sense of what kind of full deployment looks like for you guys.

So how much cash as a percentage of total company equity do you guys generally look to hold for, you know, just kind of corporate liquidity purposes? Obviously, its value is pretty elevated at the end of the quarter, especially with the pace and volume of the ATM program you guys were utilizing, but I'm just trying to get a feel for how kind of how far we can stretch forth from growth with you guys..

Sure. So I mean, probably a simple way to look at is when we acquire properties, we typically look to leverage them at 50%.

So if you're doing modeling purposes, I would say to build that in from a cash perspective, like you mentioned, we obviously were elevated a quarter, and a lot of it had to do with the timing of capital raised, and then some sales. But I think probably the easiest way to look at a cash position will be maybe to go back to some previous quarters.

And in general, we have been pretty consistent in that ballpark about 100 million in cash on the balance sheet. So I think that historical is probably the best way to look at it right now..

That's helpful.

And then real quickly, lastly as a little bit of housekeeping with the preferred stock sales, do you have any idea kind of is the pace of sales that we saw in 3Q? Is that something that you would be extrapolating out as we're trying to think about how the preferred interest expense line item should be moving or is this something that's a little bit more intimate than that?.

Well, I said it's very hard to say I mean, when it comes to issuing equity, it's going to be difficult to necessarily project and we're going to evaluate it kind of as needed and as the market is there. .

Understood, well, that's it for me. So thanks for taking my questions..

Next question today comes from Mitchell Germain of JMP securities, please go ahead..

Thank you, Chris. Obviously been pretty opportunistic and using the European markets for some funding, you've got about a 60/40 mix.

Are you kind of tapped out or is that a market that is you have to add some additional assets to be able to use, you know, European debt going forward?.

Well, from a European debt perspective, we do have the ability to draw on credit facility in euros and pounds, but it's also something that we want to make sure that we don't go too far one direction in a currency if we don't have access to match up with it right now, I think we're, we're comfortable with where we stand.

But we do have opportunities there for we need to tap into them. .

You talked about, you know, the Family Dollar sales, reducing your exposure in retail, but you still got about 5% retail and can potentially opportunistically use that retail to buy industrial.

So I'm curious about your decision to conclude any sales in that segment for the time being?.

Well, at this point, all of the tenants that we have in the retail space are performing we're happy with them, we're going to obviously keep evaluating them and if anything changes, and then we may decide to make decisions, but right now we're happy with what we have in the retail space. .

Okay. And then just curious about the competitive landscape. Obviously, everybody wants to win industrial assets. I guess you have the ability to do a sale leaseback deal that's a little bit unique in both US and Europe.

But I'm curious about your ability to source transactions and how important are the local demographics in terms of your underwriting? Or you're really just talking about looking more at credit lease term and, and other factors like that?.

Well, I mean, honestly, we look at all of it, if any of the pieces are lacking or have problems, and typically, we probably wouldn't be able to close on it. So it's really we have to look at the full picture and make an acquisition. .

Got you. And then probably last question, it seems like from a funding perspective, with the cash on hand plus some debt, you're pretty good.

What was the-- I might have missed it in your remarks, but I know that you raised equity, what was the average price on the left equity raise?.

The quarter, I don't have the average price with me, but it's pretty consistent to where we raised it during the first quarter. .

Thank you. Bye. .

My next question today comes from Bryan Maher of B. Riley FBR. Please go ahead..

So kind of following up a little bit on the Europe, you know, nice to see you're dipping your toe back in the market there.

Are you seeing any movement in cap rates over there in any of the particular countries? And who are you sourcing acquisitions from? How are you being shown things to buy over there?.

So, I pass it back to Brian and give you a little bit more insight on that. .

Sure. So as Chris mentioned, where we're very active in evaluating opportunities overseas, I think the market generally speaking has been pretty consistent over the past few quarters, you know, obviously, capital is cheap, and that's driving cap rates, but you know, everything has been pretty consistent as far as we've seen..

Okay. Here in the US, and if you've looked at and made some successful acquisitions in industrial but I think probably everybody on this call knows that everybody seems to want industrial in the US.

When it comes to the asset individually or in the small portfolios you've acquired, who are you bumping up against in the bidding process? And kind of how much are you underwriting relative to how much you're actually getting a deal done on?.

A lot of what we're seeing in the market right now is coming from relationship driven opportunities. So we're not butting heads with a lot of the big institutional competitors, which we think is great. We're sourcing our deals from long standing brokers, as well as developer relationships and also private equity sponsors on the Sally stack side..

[Operator Instructions] Today's next question comes from John Massocca of Ladenburg Thalmann. Please go ahead..

So on the leverage side, you guys kind of trend down the last couple of quarters. I know some of that may be simply, you know, you raise an ATM in 3Q, probably the pre fund a pretty robust pipeline here for the rest of the year.

But should we expect that to kind of stay at this level and maybe trend back up as you deploy the capital or just any kind of guidance on where you think leverage is going to trend here for the next, you know, six to 12 months be helpful?.

Well, what I would say here is that we're looking to be consistent; we did raise capital at the end of the quarter.

Typically, from a net debt to EBITDA perspective, we were roughly about seven and we're looking to remain consistent for now, ultimately, in the long run, it's something we would like to bring down but in the short term, we will be consistent. .

Okay.

So consistent with the current level, though?.

Generally, with where we've been previously, this current level with the capital coming in at the end, pulled it down a little bit. .

Okay.

And then do you have any update potentially on the timing for closing of the Germany office sales is that it's a 2019 event or could that slip into 2020?.

That's a 2019 event. .

And then more generally speaking, there was some office in both the pipeline in that you closed this quarter.

How much of that is kind of headquarters? Or is any of it more kind of, I guess what people on the healthcare side would call MOB or medical office kind of properties?.

I will pass to Brian, helps with a lot more detail. .

Everything we're looking at in the office spaces is traditional office, either headquarter or administrative. So nothing that we're doing is medical office in any sense of the word. So yes, pretty, pretty consistent in terms of the types of office buildings that we're looking at. .

Okay, that's it for me past my best wishes on to a Jim. .

Thank you, ladies and gentlemen, that concludes our question and answer session. I would like to turn the conference back over to Chris Masterson for any closing remarks. .

Okay, well, thanks a lot for everyone for dialing in and hopefully we'll see some of you at meeting [ph] next week. Thanks. .

Thank you, sir. Today's conference has now concluded. We thank you all for attending today's presentation. You may now expect to have a wonderful day..