• Revenue: $206 million in Q1 2024, compared to $207 million in Q4 2023.

• Net Loss: $35 million in Q1 2024, improved from $60 million in Q4 2023.

• Core FFO: Increased to $57 million or $0.25 per share in Q1 2024 from $48 million or $0.21 per share in Q4 2023.

• AFFO: Rose to $75 million or $0.33 per share in Q1 2024, up from $72 million or $0.31 per share in Q4 2023.

• Net Debt to Adjusted EBITDA: Ratio stood at 8.4 times, with net debt totaling $5.2 billion.

• Interest Expense Reduction: Annualized savings of $3.5 million from CMBS refinancing and $5.8 million from corporate credit facility swaps.

• Leasing Activity: 1.4 million square feet with new leases averaging a term of 10.2 years and renewals at 5.8 years.

• Portfolio Occupancy: 93% with a weighted average remaining lease term of 6.5 years.

• Disposition Program: $554 million in closed and pipeline dispositions at a 7.2% cash cap rate.

• Interest Rate: Weighted average of 4.8%, with 84% of debt at fixed rates.

• Liquidity: Approximately $175 million with $190 million of capacity on the credit facility.

• AFFO Guidance for 2024: Reaffirmed at $1.30 to $1.40 per share.

• Warning! GuruFocus has detected 9 Warning Signs with GNL.

Release Date: May 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Global Net Lease Inc reported a 6% growth in AFFO per share this quarter compared to the previous quarter.

• The company has made significant progress in its strategic disposition plan, with $554 million closed or in the pipeline, achieving a 7.2% cash cap rate on occupied assets.

• Global Net Lease Inc successfully completed a $237 million CMBS refinancing, reducing annualized interest expense by over $3.5 million and extending debt maturity.

• Robust leasing activity was reported, with nearly 1.4 million square feet leased, demonstrating strong demand for the company's properties.

• The company has a diversified portfolio with 93% occupancy and a weighted average remaining lease term of 6.5 years, positioning it well to navigate external macro challenges.

Negative Points

• Global Net Lease Inc recorded a net loss attributable to common stockholders of $35 million for the first quarter of 2024.

• The company's net debt to adjusted EBITDA ratio stands at 8.4 times, indicating a relatively high level of debt compared to earnings before interest, taxes, depreciation, and amortization.

• Despite the strategic dispositions, there is a short-term impact on portfolio occupancy due to the vacancy of Klausner, a furniture manufacturing tenant.

• Exposure to potential retail tenant instability remains, although minimal, with Family Dollar's intention to close some stores in 2024.

• The company is not focusing on acquisitions in the near term as it works to reduce leverage, which could limit growth opportunities from new properties.

Q & A Highlights

Q: Are you sticking with the retail landscape for a minute is there any timing that you can share on the closing of those two properties? And do you guys have any exposure to the rue 21 situation? A: Michael Weil, CEO, President of Global Net Lease Inc, responded that the closing of the two properties is expected at the beginning of the third quarter. Regarding rue 21, it represents a very small portion of their portfolio, specifically 0.12% of straight-line rent, and they anticipate no significant impact from this exposure.

Q: How long do you think it takes until you complete the disposition pipeline in its entirety? And are there any industrial or office assets in the sales mix? A: Michael Weil explained that the disposition pipeline includes non-core assets, particularly some office properties they aim to reduce exposure to, and a few industrial properties with short remaining lease terms. He highlighted the robust value received for these assets and the strategic focus on closing the value gap between the companys real estate and its stock price.

Q: Is it safe to say that given where you're trying to get to on the leverage front, that acquisitions really aren't top of mind anytime soon? A: Michael Weil affirmed that acquisitions are not a priority as the company is focused on executing its 2024 guidance metrics, which include significant disposition activities aimed at reducing leverage and enhancing shareholder value.

Q: Can you talk about your plans to continue recycling capital in 2025? A: Michael Weil indicated its too early to provide specific figures for 2025 but suggested that the successful execution of the 2024 disposition plan might lead to continued asset sales into 2025 to further reduce leverage and enhance value.

Q: Has there been any change in cap rates as you continue having conversations with potential buyers and work through additional disposals given the recent increase in interest rates? A: Michael Weil noted that despite fluctuations in the 10-year rate, the company has been able to execute dispositions at attractive cap rates. He remains optimistic about the companys positioning and its ability to continue achieving favorable disposition outcomes.

Q: Is there any other Klausner or other situations in the portfolio that we need to be aware of? A: Michael Weil reassured that there are no significant concerns similar to the Klausner situation within the portfolio. He emphasized the companys proactive asset management and its ability to manage and anticipate potential issues effectively.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.