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Section 1: 8-K (FORM 8-K)

 

 

 

 

 

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 7, 2018

 

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.)

 

405 Park Avenue, 3rd Floor
New York, New York 10022

(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))

  

 

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 2.02. Results of Operations and Financial Condition.

 

On November 7, 2018, Global Net Lease, Inc. (the “Company”) issued a press release announcing its results of operations for the quarter ended September 30, 2018, and supplemental financial information for the quarter ended September 30, 2018, attached hereto as Exhibits 99.1 and 99.2, respectively.

 

Item 7.01. Regulation FD Disclosure.

 

Press Release, Supplemental Information and Investor Presentation

 

As disclosed in Item 2.02 above, on November 7, 2018, the Company issued a press release announcing its results of operations for the quarter ended September 30, 2018, and supplemental financial information for the quarter ended September 30, 2018, attached hereto as Exhibits 99.1 and 99.2, respectively. In addition, the Company has prepared an investor presentation that officers and other representatives of the Company intend to present at conferences and meetings. A copy of the investor presentation is furnished as Exhibit 99.3 this Current Report on Form 8-K. The information set forth in Item 7.01 of this Current Report on Form 8-K and in the attached Exhibits 99.1, 99.2 and 99.3 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 Items 2.02 and 7.01 of this Current Report on Form 8-K, including Exhibits 99.1, 99.2 and 99.3, 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 include statements regarding the intent, belief or current expectations of the Company and members of its management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “strives,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements, including as a result of those factors set forth in the Risk Factors section of the Company’s most recent annual report on Form 10-K and the Company’s most recent quarterly report on Form 10-Q. 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, or revise forward-looking unless required by law.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit No    Description
99.1   Press release dated November 7, 2018
99.2   Quarterly supplemental information for the quarter ended September 30, 2018
99.3   Investor Presentation

 

 

 

  

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.

 

Date: November 7, 2018 By:   /s/ James L. Nelson   
    Name:   James L. Nelson  
    Title: Chief Executive Officer and President  

 

 

 

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

 

GLOBAL NET LEASE ANNOUNCES OPERATING RESULTS FOR THIRD QUARTER 2018

  

 

New York, November 7, 2018 – Global Net Lease, Inc. (NYSE: GNL) (“GNL” or the “Company”), a real estate investment trust focused on the acquisition and management of industrial and office properties leased long-term to high quality corporate tenants in select markets in the United States and Europe, announced today its financial and operating results for the third quarter ended September 30, 2018.

 

 

Third Quarter 2018 Highlights

·Revenue increased 11% year over year to $72 million
·Net income attributable to common stockholders was $177,000
·Core Funds from Operations (“FFO”) increased 16% or $0.06 per share on a year over year basis
·Adjusted EBITDA increased 16% or $7.8 million to $56.6 million on a year over year basis
·Adjusted Funds from (Operations (“AFFO”) increased 14% to $39.6 million, inclusive of a $3 million lease termination fee, as compared to $34.8 million in the prior year third quarter, weighted average shares outstanding for the respective periods were 69,441,639 and 67,286,615
·Portfolio 99.5% leased with an 8.6 year weighted average remaining lease term
·77.1% of tenants rated as investment grade or implied investment grade1
·Closed on the acquisition of four industrial, distribution or office assets totaling 1.3 million square feet for $105.4 million. Year to date $266.4 million of the previously announced $401 million in acquisitions have closed.
·Secured new UK five year £230 million multi-property financing
·Debt maturity is 3.8 years as compared to 3.1 years at the end of the third quarter 2017
·Raised gross proceeds of $95 million through a public offering
·Paid common stock dividends for the quarter of $36.7 million

 

James Nelson, Chief Executive Officer of GNL commented, “Our third quarter results reflect continued execution of our long range strategic plan to build a diversified global net lease portfolio and deliver an attractive return to our investors.  As we grow our portfolio we will remain focused on acquiring high quality properties which are leased long-term to tenants with strong and stable credit. The commitment to steady execution, combined with rent growth in our current leases, resulted in record quarterly revenue and AFFO.  Key to delivering these great results is the continued evolution of our balance sheet.  During the quarter, we refinanced almost $300 million of our UK debt at very attractive terms.  We believe our capital structure allows us to continue to identify and close transactions at attractive cap rates.”

 

  

Three Months Ended 

September 30, 

 
(In thousands, except per share data)  2018   2017 
Revenue  $71,924   $64,870 
           
Net income attributable to common stockholders  $177   $2,104 
Net income per diluted common share  $   $0.03 
           
NAREIT defined FFO attributable to common stockholders  $32,305   $31,708 
NAREIT defined FFO per diluted common share  $0.47   $0.47 
           
Core FFO attributable to common stockholders  $37,752   $32,544 
Core FFO per diluted common share  $0.54   $0.48 
           
AFFO attributable to common stockholders  $39,598   $34,848 

 

_____________________________________

 

1As used herein, “Investment Grade Rating” includes both actual investment grade ratings of the tenant or Implied Investment Grade. Implied Investment Grade includes ratings of tenant parent (regardless of whether or not the parent has guaranteed the tenant’s obligation under the lease) or lease guarantor. Implied Investment Grade ratings are determined using a proprietary Moody’s analytical tool, which compares the risk metrics of the non-rated company to those of a company with an actual rating. Ratings information is as of September 30, 2018. Comprised of 38% leased to tenants with an actual investment grade rating and 39% leased to tenants with an Implied Investment Grade rating as of September 30, 2018.

 

 

 

 

 

 

Property Portfolio

 

At September 30, 2018 the Company’s portfolio consisted of 336 net lease properties located in seven countries and comprises 26.2 million rentable square feet leased to 106 tenants across 42 industries. The real estate portfolio metrics include:

 

·         99.5% leased with a remaining weighted-average lease term of 8.6 years
·         92% of portfolio rent with contractual rent increases based on square footage
·         77.1% of portfolio annualized straight-line rent derived from investment grade and implied investment grade rated tenants
·         Retail portfolio accounts for 9% of annualized straight-line rent, with no retail tenants in bankruptcy, and all paying rent
·         53% U.S. and 47% Europe (based on annualized straight-line rent)
·         55% Office, 36% Industrial / Distribution and 9% Retail (based on an annualized straight-line rent)

 

Acquisition Highlights

 

During the third quarter the Company closed on the previously announced acquisition of four net leased assets totaling approximately 1.3 million square feet for $105.4 million. The leases for these facilities, located in New York, Texas, Ohio and North Carolina, are with (or are guaranteed by) FedEx Freight, NetScout, Rubbermaid Incorporated and a furniture manufacturer. The four assets were purchased at a weighted average going-in capitalization rate of 7.16%2, equating to a weighted average GAAP capitalization rate of 7.68%3, with a weighted average remaining lease term of 13.8 years4.

 

 

Tenant Buildings Square 
Feet
Asset Type Lease 
Term 
(yrs)(1)
Purchase 
Price 
(mm)
Location
Furniture Manufacturer 1    456,094 Industrial 20.0 $  19.0 New York State
NetScout 1    145,000 Office 12.0 $  54.0 Allen, Texas

Rubbermaid

1    668,592 Industrial 10.0 $  21.4 Akron, Ohio
FedEx Freight 1      28,911 Distribution 15.0 $  11.0 Greenville, North Carolina
Total 4 1,298,597     $105.4  

 

(1)As of the end of the acquisition date

 

Capital Structure and Liquidity Resources

 

As of September 30, 2018, the Company had $155 million of cash and cash equivalents. The Company’s net debt to enterprise value was 48.9% with an enterprise value of $3.2 billion based on the September 30, 2018 closing share price of $20.85 for common shares and $25.07 for the preferred shares, with net debt of $1.6 billion, including $975 million of mortgage debt.

 

GNL announced it closed on a new 5-year £230 million ($293 million equivalent based on exchange rates on the date of closing) multi-property financing which encumbers GNL's 43 assets located in the United Kingdom. The UK multi-property financing, a syndicated balance sheet loan lead by Lloyds Bank, closed on August 16, 2018 and replaced the individual property loans on 38 of those properties.

 

The Company closed on an upsizing of its unsecured credit facility of $132.0 million for the multi-currency revolving credit facility portion and €51.8 million for the senior unsecured term loan facility portion. GNL used all the proceeds from the increased borrowings under the term loan facility to repay amounts outstanding under the revolving credit facility.

 

On August 20, 2018, GNL completed the issuance and sale of 4,600,000 shares of common stock (including 600,000 shares issued and sold pursuant to the underwriters’ exercise of their option to purchase additional shares in full) in an underwritten public offering at a price per share of $20.65. The gross proceeds from the offering were $95 million.

 

Year over year the percentage of fixed rate debt (including variable rate debt fixed with swaps) decreased to 73.8%5 from 77.9% as of September 30, 2017. The Company’s total combined debt had a weighted average interest rate cost of 3.0% resulting in an interest coverage ratio of 4.3x times. Debt maturity is 3.8 years as compared to 3.1 years at the end of the third quarter 2017.

 ______________

2Going-in capitalization rate is a rate of return on a real estate investment property based on the expected, cash rental income that the property will generate under its existing lease during the first year of the lease. Going-in capitalization rate is calculated by dividing the cash rental income the property will generate during the first year of the lease (before debt service and depreciation and after fixed costs and variable costs) and the purchase price of the property. The weighted average going-in capitalization rate is based upon square feet of the date of acquisition.
3GAAP capitalization rate is a rate of return on a real estate investment property based on the expected, annualized straight-lined rental income that the property will generate under its existing lease. GAAP capitalization rate is calculated by dividing the average annualized straight-line rental income the property will generate (before debt service and depreciation and after fixed costs and variable costs) and the purchase price of the property. The weighted average GAAP capitalization rate is based upon square feet as of the date of acquisition.
4The weighted average remaining lease term in years is based upon square feet as of the date of acquisition.
5Inclusive of floating rate debt with in place interest rate swaps allowing debt to effectively act as fixed.

 

 

 

  

Conference Call

 

GNL will host a conference call on November 7, 2018 at 11:00 a.m. ET to discuss its financial and operating results.

 

Dial-in instructions for the conference call and the replay are outlined below. This conference call will also be broadcast live over the Internet and can be accessed by all interested parties through the GNL website, www.globalnetlease.com, in the “Investor Relations” section.

 

To listen to the live call, please go to GNL’s “Investor Relations” section of the website at least 15 minutes prior to the start of the call to register and download any necessary audio software. For those who are not able to listen to the live broadcast, a replay will be available shortly after the call on the GNL website at www.globalnetlease.com.

 

Conference Call Details

 

Live Call

Dial-In (Toll Free): 1-888-317-6003

International Dial-In: 1-412-317-6061

Canada Dial-In (Toll Free): 1-866-284-3684

Participant Elite Entry Number: 1191916

  

Conference Replay*

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: 10125608

 

*Available one hour after the end of the conference call through February 7, 2019.

  

 

 

  

Supplemental Schedules

 

The Company will file supplemental information packages with the Securities and Exchange Commission (the “SEC”) to provide additional disclosure and financial information. Once posted, the supplemental package can be found under the “Presentations” tab in the Investor Relations section of GNL’s website at www.globalnetlease.com and on the SEC website at www.sec.gov.

 

About Global Net Lease, Inc.

 

Global Net Lease, Inc. (NYSE: GNL) is a publicly traded real estate investment trust listed on the NYSE focused on acquiring a diversified global portfolio of commercial properties, with an emphasis on sale-leaseback transactions involving single tenant, mission critical income producing net-leased assets across the United States, Western and Northern Europe. Additional information about GNL can be found on its website at www.globalnetlease.com.

 

Important Notice

 

The statements in this press release that are not historical facts may be forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to be materially different.

 

In addition, words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “would,” or similar expressions indicate a forward-looking statement, although not all forward-looking statements contain these identifying words. Any statements referring to the future value of an investment in GNL, as well as the success that GNL may have in executing its business plan, are also forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause GNL’s actual results to differ materially from those contemplated by such forward-looking statements, including those risks, uncertainties and other important factors set forth in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of GNL’s most recent Annual Report on Form 10-K and GNL’s most recent Quarterly Report on Form 10-Q, as such risks, uncertainties and other important factors may be updated from time to time in GNL’s subsequent reports. Further, forward looking statements speak only as of the date they are made, and GNL 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, except as required by law.

 

Contacts:

 

Investors and Media:

Email: investorrelations@globalnetlease.com
Phone: (212) 415-6510

  

 

 

 

  

Global Net Lease, Inc. 

Consolidated Balance Sheets (Unaudited) 

(In thousands)

 

    September 30,
 2018
  December 31,
 2017
ASSETS   (Unaudited)    
Real estate investments, at cost:        
Land   $ 411,339     $ 402,318  
Buildings, fixtures and improvements     2,289,697       2,138,405  
Construction in progress     527       2,328  
Acquired intangible lease assets     656,361       629,626  
Total real estate investments, at cost     3,357,924       3,172,677  
Less accumulated depreciation and amortization     (420,913 )     (339,931 )
Total real estate investments, net     2,937,011       2,832,746  
Cash and cash equivalents     155,188       102,425  
Restricted cash     3,491       5,302  
Derivative assets, at fair value     10,442       2,176  
Unbilled straight-line rent     46,227       42,739  
Prepaid expenses and other assets     34,395       22,617  
Due from related parties     16       16  
Deferred tax assets     999       1,029  
Goodwill and other intangible assets, net     22,357       22,771  
Deferred financing costs, net     6,932       6,774  
Total Assets   $ 3,217,058     $ 3,038,595  
                 
LIABILITIES AND EQUITY                
Mortgage notes payable, net   $ 974,515     $ 984,876  
Revolving credit facility     455,556       298,909  
Term loan, net     282,463       229,905  
Acquired intangible lease liabilities, net     32,118       31,388  
Derivative liabilities, at fair value     3,071       15,791  
Due to related parties     782       829  
Accounts payable and accrued expenses     26,369       23,227  
Prepaid rent     17,258       18,535  
Deferred tax liability     15,417       15,861  
Taxes payable     925       2,475  
Dividends payable     2,638       2,556  
Total Liabilities     1,811,112       1,624,352  
Commitments and contingencies                
Stockholders' Equity:                
7.25% Series A cumulative redeemable preferred shares     54       54  
Common stock     2,051       2,003  
Additional paid-in capital     1,954,264       1,860,058  
Accumulated other comprehensive income     17,102       19,447  
Accumulated deficit     (569,448 )     (468,396 )
Total Stockholders' Equity     1,404,023       1,413,166  
Non-controlling interest     1,923       1,077  
Total Equity     1,405,946       1,414,243  
Total Liabilities and Equity   $ 3,217,058     $ 3,038,595  

  

 

 

 

Global Net Lease, Inc. 

Consolidated Statements of Operations (Unaudited) 

(In thousands, except share and per share data)

 

   Three Months Ended September 30, 
   2018   2017 
         
Revenues:          
Rental income  $68,661   $61,270 
Operating expense reimbursements   3,263    3,600 
Total revenues   71,924    64,870 
           
 Expenses:          
Property operating   5,301    7,202 
Fire recovery   31    (305)
Operating fees to related parties   6,956    6,390 
Acquisition and transaction related   2,804    1,141 
General and administrative   3,215    2,468 
Equity-based compensation   2,053    (391)
Depreciation and amortization   30,195    29,879 
       Total expenses   50,555    46,384 
           Operating income   21,369    18,486 
           
Other income (expense):          
Interest expense   (15,104)   (12,479)
Loss on extinguishment of debt   (2,612)    
(Loss) gain on dispositions of real estate investments   (1,933)   275 
Gain (loss) on derivative instruments   1,290    (3,125)
Unrealized gain on undesignated foreign currency advances and other hedge ineffectiveness   108    88 
Other income   44    2 
       Total other expense, net   (18,207)   (15,239)
Net income before income taxes   3,162    3,247 
Income tax expense   (530)   (760)
Net income   2,632    2,487 
Preferred stock dividends   (2,455)   (383)
Net income attributable to common stockholders  $177   $2,104 
           
Basic and Diluted Earnings Per Share:          
Basic and diluted net income per share attributable to common stockholders  $   $0.03 
           
Basic weighted average shares outstanding   69,442    67,287 
Diluted weighted average shares outstanding   69,442    67,287 

 

 

 

 

Global Net Lease, Inc. 

Quarterly Reconciliation of Non-GAAP Measures (Unaudited) 

(In thousands) 

 

   Three Months Ended September 30, 
   2018   2017 
Adjusted EBITDA          
Net income  $2,632   $2,487 
Depreciation and amortization   30,195    29,879 
Interest expense   15,104    12,479 
Income tax expense   530    760 
Equity-based compensation   2,053    (391)
Non-cash portion of incentive fee   180     
Acquisition and transaction related   2,804    1,141 
Loss on dispositions of real estate investments   1,933    (275)
Fire loss (recovery)   31    (305)
(Gain) loss on derivative instruments   (1,290)   3,125 
Unrealized gain on undesignated foreign currency advances and other hedge ineffectiveness   (108)   (88)
Loss on extinguishment of debt   2,612     
Other income   (44)   (2)
Adjusted EBITDA   56,632    48,810 
           
Net operating income (NOI)          
Operating fees to related parties   6,956    6,390 
General and administrative   3,215    2,468 
NOI  $66,803   $57,668 

 

 

 

 

 

Global Net Lease, Inc. 

Quarterly Reconciliation of Non-GAAP Measures (Unaudited) 

(In thousands) 

 

   Three Months Ended September 30, 
   2018   2017 
Net income attributable to stockholders (in accordance with GAAP)  $177   $2,104 
   Depreciation and amortization   30,195    29,879 
   Loss on dispositions of real estate investments   1,933    (275)
FFO (defined by NAREIT)   32,305    31,708 
   Acquisition and transaction fees [1]   2,804    1,141 
   Loss on extinguishment of debt [2]   2,612     
   Fire loss (recovery) [3]   31    (305)
Core FFO attributable to common stockholders   37,752    32,544 
   Non-cash equity-based compensation   2,053    (391)
   Non-cash portion of incentive fee   180     
   Non-cash portion of interest expense   1,339    1,198 
   Amortization of above- and below-market leases and ground lease assets and liabilities, net   488    489 
   Straight-line rent   (1,492)   (2,070)
   Unrealized gain on undesignated foreign currency advances and other hedge ineffectiveness   (108)   (88)
   Eliminate unrealized (gains) losses on foreign currency transactions [4]   (1,215)   3,598 
   Amortization of mortgage discounts and premiums, net and mezzanine discount   601    261 
   Deferred tax benefit       (693)
Adjusted funds from operations (AFFO) attributable to common stockholders [5]  $39,598   $34,848 

  

Footnotes:

 

[1]Primarily includes litigation costs resulting from the termination of the Former Service Provider, costs to refinance foreign debt and fees associated with the exploration of a potential equity offering.

 

[2]For the three months ended September 30, 2018, includes non-cash write-off of deferred financing costs of $1.5 million and prepayment penalties paid on early extinguishment of debt of $1.1 million.

 

[3]Loss (recovery) arising from clean-up costs related to a fire sustained at one of our office properties.

 

[4]For AFFO purposes, we add back unrealized (gain) loss. For the three months ended September 30, 2018, gains on derivative instruments were $1.3 million which consisted of unrealized gains of $1.2 million and realized gains of $0.1 million. For the three months ended September 30, 2017, losses on derivative instruments were $3.1 million, which were comprised of unrealized losses of $3.6 million partially offset by net realized gains of $0.5 million.

 

[5]AFFO for the three months ended September 30, 2018 includes income from a lease termination fee of $3.0 million, which is recorded in rental income in the unaudited consolidated statements of operations, related to a real estate asset sold during the three months ended September 30, 2018.

  

 

 

  

Caution on Use of Non-GAAP Measures

 

Funds from Operations (“FFO”), Core Funds from Operations (“Core FFO”), Adjusted Funds from Operations (“AFFO”), Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), and Net Operating Income (“NOI”) should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP measures.

 

Other REITs may not define FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition (as we do), or may interpret the current NAREIT definition differently than we do, or may calculate Core FFO or AFFO differently than we do. Consequently, our presentation of FFO, Core FFO and AFFO may not be comparable to other similarly-titled measures presented by other REITs.

 

We consider FFO, Core FFO and AFFO useful indicators of our performance. Because FFO, Core FFO and AFFO calculations exclude such factors as depreciation and amortization of real estate assets and gains or losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), FFO, Core FFO and AFFO presentations facilitate comparisons of operating performance between periods and between other REITs in our peer group.

  

As a result, we believe that the use of FFO, Core FFO and AFFO, together with the required GAAP presentations, provide a more complete understanding of our performance including relative to our peers and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. However, FFO, Core FFO and AFFO are not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. Investors are cautioned that FFO, Core FFO and AFFO should only be used to assess the sustainability of our operating performance excluding these activities, as they exclude certain costs that have a negative effect on our operating performance during the periods in which these costs are incurred.

 

Funds from Operations, Core Funds from Operations and Adjusted Funds from Operations

 

Funds from Operations

 

Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated a measure known as FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. FFO is not equivalent to net income or loss as determined under GAAP.

 

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (the "White Paper"). The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property but including asset impairment write-downs, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO. Our FFO calculation complies with NAREIT's definition.

 

 

 

 

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, and straight-line amortization of intangibles, which implies that the value of a real estate asset diminishes predictably over time, especially if not adequately maintained or repaired and renovated as required by relevant circumstances or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that, because real estate values historically rise and fall with market conditions, including inflation, interest rates, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation and certain other items may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, among other things, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.

  

Core Funds from Operations

 

In calculating Core FFO, we start with FFO, then we exclude certain non-core items such as acquisition- and transaction-related costs, as well as certain other costs that are considered to be non-core, such as debt extinguishment costs, fire loss and other costs related to damages at our properties. The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our core business plan to generate operational income and cash flows in order to make dividend payments to stockholders. In evaluating investments in real estate, we differentiate the costs to acquire the investment from the operations derived from the investment. We also add back non-cash write-offs of deferred financing costs and prepayment penalties incurred with the early extinguishment of debt which are included in net income but are considered financing cash flows when paid in the statement of cash flow. We consider these write-offs and prepayment penalties to be capital transactions and not indicative of operations. By excluding expensed acquisition- and transaction-related costs as well as non-core costs, we believe Core FFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management's analysis of the investing and operating performance of our properties.

 

Adjusted Funds from Operations

 

In calculating AFFO, we start with Core FFO, then we exclude certain income or expense items from AFFO that we consider more reflective of investing activities, other non-cash income and expense items and the income and expense effects of other activities that are not a fundamental attribute of our business plan. These items include early extinguishment of debt (adjustment included in Core FFO) and unrealized gain and loss, which may not ultimately be realized, such as gain or loss on derivative instruments, gain or loss on foreign currency transactions, and gain or loss on investments. In addition, by excluding non-cash income and expense items such as amortization of above-market and below-market leases intangibles, amortization of deferred financing costs, straight-line rent and equity-based compensation from AFFO, we believe we provide useful information regarding income and expense items which have a direct impact on our ongoing operating performance. We also include the realized gain or loss on foreign currency exchange contracts for AFFO as such items are part of our ongoing operations and affect the current operating performance of the Company. By providing AFFO, we believe we are presenting useful information that can be used to better assess the sustainability of our ongoing operating performance without the impacts of transactions that are not related to the ongoing profitability of our portfolio of properties. AFFO presented by us may not be comparable to AFFO reported by other REITs that define AFFO differently.

 

 

 

  

In calculating AFFO, we exclude certain expenses which under GAAP are characterized as operating expenses in determining operating net income. All paid and accrued merger, acquisition and transaction related fees (including prepayment penalties for debt extinguishments) and certain other expenses negatively impact our operating performance during the period in which expenses are incurred or properties are acquired will also have negative effects on returns to investors, but are not reflective of our on-going performance. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income. In addition, as discussed above, we view gains and losses from fair value adjustments as items which are unrealized and may not ultimately be realized and not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. Excluding income and expense items detailed above from our calculation of AFFO provides information consistent with management's analysis of the operating performance of the Company. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe AFFO provides useful supplemental information. We believe that in order to facilitate a clear understanding of our operating results, AFFO should be examined in conjunction with net income (loss) as presented in our consolidated financial statements. AFFO should not be considered as an alternative to net income (loss) as an indication of our performance or to cash flows as a measure of our liquidity or ability to make distributions.

 

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization, and Net Operating Income

 

We believe that Adjusted EBITDA, which is earnings before interest, taxes, depreciation and amortization adjusted for acquisition and transaction-related expenses, other non- cash items and including our pro-rata share from unconsolidated joint, is an appropriate measure of our ability to incur and service debt. Adjusted EBITDA should not be considered as an alternative to cash flows from operating activities, as a measure of our liquidity or as an alternative to net income as an indicator of our operating activities. Other REITs may calculate Adjusted EBITDA differently and our calculation should not be compared to that of other REITs. NOI is a non-GAAP financial measure equal to net income (loss), the most directly comparable GAAP financial measure, less discontinued operations, interest, other income and income from preferred equity investments and investment securities, plus corporate general and administrative expense, acquisition and transaction-related expenses, depreciation and amortization, other non-cash expenses and interest expense. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. Therefore, we believe NOI is a useful measure for evaluating the operating performance of our real estate assets and to make decisions about resource allocations. Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition activity on an unlevered basis, providing perspective not immediately apparent from net income. NOI excludes certain components from net income in order to provide results that are more closely related to a property's results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) as presented in our consolidated financial statements. NOI should not be considered as an alternative to net income (loss) as an indication of our performance or to cash flows as a measure of our liquidity.

 

 

(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

 

Exhibit 99.2

 

 

 

 

 

 

Global Net Lease, Inc.

 

Supplemental Information

 


Quarter ended September 30, 2018 (unaudited)

 

 

 

 

  

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

 

 

 

Table of Contents    
     
Item   Page
Non-GAAP Definitions   3
Key Metrics   6
Consolidated Balance Sheets   7
Consolidated Statements of Operations   8
Non-GAAP Measures   9
Debt Overview   11
Future Minimum Lease Rents   12
Top Ten Tenants   13
Diversification by Property Type   14
Diversification by Tenant Industry   15
Diversification by Geography   16
Lease Expirations   17
     
Please note that totals may not add due to rounding.    

 

Forward-looking Statements:

 

This supplemental package includes “forward looking statements”. Forward-looking statements may be identified by the use of words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates,” “contemplates,” “aims,” “continues,” “would” or “anticipates” or the negative of these words and phrases or similar words or phrases. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: the factors included in (i) the Annual Report on Form 10-K for the year ended December 31, 2017 of Global Net Lease, Inc. (the “Company”) filed on February 28, 2018, including those set forth under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” and (ii) in future periodic reports filed by the Company under the Securities Exchange Act of 1934, as amended. While forward-looking statements reflect the Company’s good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to publicly update or revise any forward- looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this press release, except as required by applicable law. For a further discussion of these and other factors that could impact the Company’s future results, performance or transactions, see the section entitled “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2017 filed on February 28, 2018, and other risks described in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. Prospective investors should not place undue reliance on any forward-looking statements, which are based only on information currently available to the Company (or to third parties making the forward-looking statements).

  

2 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

 

Non-GAAP Financial Measures

 

This section includes non-GAAP financial measures, including Funds from Operations ("FFO"), Core Funds from Operations ("Core FFO") and Adjusted Funds from Operations ("AFFO"), Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA"), Net Operating Income ("NOI"), and Cash Net Operating Income ("Cash NOI"). A description of these non-GAAP measures and reconciliations to the most directly comparable GAAP measure, which is net income, is provided below.

 

Caution on Use of Non-GAAP Measures

 

FFO, Core FFO, AFFO, Adjusted EBITDA, NOI, and Cash NOI should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP measures.

 

Other REITs may not define FFO in accordance with the current National Association of Real Estate Investment Trusts ("NAREIT") definition (as we do), or may interpret the current NAREIT definition differently than we do, or may calculate Core FFO or AFFO differently than we do. Consequently, our presentation of FFO, Core FFO and AFFO may not be comparable to other similarly-titled measures presented by other REITs.

 

We consider FFO, Core FFO and AFFO useful indicators of our performance. Because FFO, Core FFO and AFFO calculations exclude such factors as depreciation and amortization of real estate assets and gains or losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), FFO, Core FFO and AFFO presentations facilitate comparisons of operating performance between periods and between other REITs in our peer group.

 

As a result, we believe that the use of FFO, Core FFO and AFFO, together with the required GAAP presentations, provide a more complete understanding of our performance including relative to our peers and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. However, FFO, Core FFO and AFFO are not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. Investors are cautioned that FFO, Core FFO and AFFO should only be used to assess the sustainability of our operating performance excluding these activities, as they exclude certain costs that have a negative effect on our operating performance during the periods in which these costs are incurred.

 

Funds from Operations, Core Funds from Operations and Adjusted Funds from Operations

 

Funds From Operations

 

Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated a measure known as FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. FFO is not equivalent to net income or loss as determined under GAAP.

 

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (the "White Paper"). The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property but including asset impairment write-downs, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO. Our FFO calculation complies with NAREIT's definition.

 

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, and straight-line amortization of intangibles, which implies that the value of a real estate asset diminishes predictably over time, especially if not adequately maintained or repaired and renovated as required by relevant circumstances or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that, because real estate values historically rise and fall with market conditions, including inflation, interest rates, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation and certain other items may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, among other things, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.

 

3 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

  

Core Funds From Operations

 

In calculating Core FFO, we start with FFO, then we exclude certain non-core items such as acquisition- and transaction-related costs, as well as certain other costs that are considered to be non-core, such as debt extinguishment costs, fire loss and other costs related to damages at our properties. The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our core business plan to generate operational income and cash flows in order to make dividend payments to stockholders. In evaluating investments in real estate, we differentiate the costs to acquire the investment from the operations derived from the investment. We also add back non-cash write-offs of deferred financing costs and prepayment penalties incurred with the early extinguishment of debt which are included in net income but are considered financing cash flows when paid in the statement of cash flows. We consider these write-offs and prepayment penalties to be capital transactions and not indicative of operations. By excluding expensed acquisition- and transaction-related costs as well as non-core costs, we believe Core FFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management's analysis of the investing and operating performance of our properties.

 

Adjusted Funds From Operations

 

In calculating AFFO, we start with Core FFO, then we exclude certain income or expense items from AFFO that we consider more reflective of investing activities, other non-cash income and expense items and the income and expense effects of other activities that are not a fundamental attribute of our business plan. These items include early extinguishment of debt (adjustment included in Core FFO) and unrealized gains and losses, which may not ultimately be realized, such as gains or losses on derivative instruments, gains and losses on foreign currency transactions, and gains and losses on investments. In addition, by excluding non-cash income and expense items such as amortization of above-market and below-market leases intangibles, amortization of deferred financing costs, straight-line rent and equity-based compensation from AFFO, we believe we provide useful information regarding income and expense items which have a direct impact on our ongoing operating performance. We also include the realized gains or losses on foreign currency exchange contracts for AFFO as such items are part of our ongoing operations and affect the current operating performance of the Company. By providing AFFO, we believe we are presenting useful information that can be used to better assess the sustainability of our ongoing operating performance without the impacts of transactions that are not related to the ongoing profitability of our portfolio of properties. AFFO presented by us may not be comparable to AFFO reported by other REITs that define AFFO differently.

 

In calculating AFFO, we exclude certain expenses which under GAAP are characterized as operating expenses in determining operating net income. All paid and accrued merger, acquisition and transaction related fees (including prepayment penalties for debt extinguishments) and certain other expenses negatively impact our operating performance during the period in which expenses are incurred or properties are acquired will also have negative effects on returns to investors, but are not reflective of our on-going performance. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income. In addition, as discussed above, we view gains and losses from fair value adjustments as items which are unrealized and may not ultimately be realized and not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. Excluding income and expense items detailed above from our calculation of AFFO provides information consistent with management's analysis of the operating performance of the Company. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe AFFO provides useful supplemental information. We believe that in order to facilitate a clear understanding of our operating results, AFFO should be examined in conjunction with net income (loss) as presented in our consolidated financial statements. AFFO should not be considered as an alternative to net income (loss) as an indication of our performance or to cash flows as a measure of our liquidity or ability to make distributions.

 

4 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

  

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization, Net Operating Income, and Cash Net Operating Income.

 

We believe that Adjusted EBITDA, which is defined as earnings before interest, taxes, depreciation and amortization adjusted for acquisition and transaction-related expenses, other non-cash items and including our pro-rata share from unconsolidated joint ventures, is an appropriate measure of our ability to incur and service debt. Adjusted EBITDA should not be considered as an alternative to cash flows from operating activities, as a measure of our liquidity or as an alternative to net income as an indicator of our operating activities. Other REITs may calculate Adjusted EBITDA differently and our calculation should not be compared to that of other REITs.

 

NOI is a non-GAAP financial measure equal to net income (loss), the most directly comparable GAAP financial measure, less discontinued operations, interest, other income and income from preferred equity investments and investment securities, plus corporate general and administrative expense, acquisition and transaction-related expenses, depreciation and amortization, other non-cash expenses and interest expense. NOI is adjusted to include our pro rata share of NOI from unconsolidated joint ventures. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. Therefore, we believe NOI is a useful measure for evaluating the operating performance of our real estate assets and to make decisions about resource allocations. Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition activity on an unlevered basis, providing perspective not immediately apparent from net income. NOI excludes certain components from net income in order to provide results that are more closely related to a property's results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) as presented in our consolidated financial statements. NOI should not be considered as an alternative to net income (loss) as an indication of our performance or to cash flows as a measure of our liquidity.

 

Cash NOI, is a non-GAAP financial measure that is intended to reflect the performance of our properties. We define Cash NOI as net operating income (which is separately defined herein) excluding amortization of above/below market lease intangibles and straight-line adjustments that are included in GAAP lease revenues. We believe that Cash NOI is a helpful measure that both investors and management can use to evaluate the current financial performance of our properties and it allows for comparison of our operating performance between periods and to other REITs. Cash NOI should not be considered as an alternative to net income, as an indication of our financial performance, or to cash flows as a measure of liquidity or our ability to fund all needs. The method by which we calculate and present Cash NOI may not be directly comparable to the way other REITs present Cash NOI.

  

5 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

 

Key Metrics

As of and for the three months ended September 30, 2018

Amounts in thousands, except per share data, ratios and percentages

 

Financial Results    
Rental Income   $ 68,661  
Net income attributable to common stockholders   $ 177  
Basic and diluted net income per share attributable to common stockholders [1]   $  
Cash NOI [2]   $ 65,799  
Adjusted EBITDA [2]   $ 56,632  
AFFO attributable to common stockholders [2]   $ 39,598  
Dividends paid per share - third quarter   $ 0.53  
Dividend yield - annualized, based on quarter end share price   10.2 %
Dividend payout ratio - third quarter   93.4 %
     
Balance Sheet and Capitalization    
Equity market capitalization - based on quarter end share price of $20.85 for common shares and $25.07 for preferred shares   $ 1,638,493  
Net debt [3] [4]   1,570,035  
Enterprise value   3,208,528  
     
Total capitalization   3,363,716  
     
Total consolidated debt [4]   1,725,223  
Total assets   3,217,058  
Liquidity [5]   162,172  
     
Common shares outstanding as of September 30, 2018 (thousands)   72,072  
Share price, end of quarter   $ 20.85  
     
Net debt to enterprise value   48.9 %
Net debt to adjusted EBITDA (annualized)   6.9 x
     
Weighted-average interest rate cost [6]   3.0 %
Weighted-average debt maturity (years) [7]   3.8  
Interest Coverage Ratio [8]   4.3 x
     
Real Estate Portfolio    
Number of properties   336  
Number of tenants   106  
     
Square footage (millions)   26.2  
Leased   99.5 %
Weighted-average remaining lease term (years) [9]   8.6

Footnotes:

 

[1]  Adjusted for net income (loss) attributable to common stockholders for common share equivalents.

 

[2]  This Non-GAAP metric is reconciled below.

 

[3]  Includes the effect of cash and cash equivalents.

 

[4]  Excludes the effect of deferred financing costs, net and mortgage (discount) premium, net.

 

[5]  Liquidity includes $7.0 million of availability under the credit facility and cash and cash equivalents.

 

[6]  The weighted average interest rate cost is based on the outstanding principal balance of the debt.

 

[7]  The weighted average debt maturity is based on the outstanding principal balance of the debt.

 

[8] The interest coverage ratio is calculated by dividing adjusted EBITDA by cash paid for interest (interest expense less non-cash portion of interest expense and amortization of mortgage (discount) premium, net) for the quarter ended September 30, 2018.  Adjusted EBITDA and cash paid for interest are Non-GAAP metrics and are reconciled below.

 

[9] The weighted-average remaining lease term (years) is based on square feet.

 

 

6 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

 

Consolidated Balance Sheets

Amounts in thousands

 

    September 30,
 2018
  December 31,
 2017
    (Unaudited)    
ASSETS        
Real estate investments, at cost:        
Land   $ 411,339     $ 402,318  
Buildings, fixtures and improvements   2,289,697     2,138,405  
Construction in progress   527     2,328  
Acquired intangible lease assets   656,361     629,626  
Total real estate investments, at cost   3,357,924     3,172,677  
Less accumulated depreciation and amortization   (420,913 )   (339,931 )
Total real estate investments, net   2,937,011     2,832,746  
Cash and cash equivalents   155,188     102,425  
Restricted cash   3,491     5,302  
Derivative assets, at fair value   10,442     2,176  
Unbilled straight-line rent   46,227     42,739  
Prepaid expenses and other assets   34,395     22,617  
Due from related parties   16     16  
Deferred tax assets   999     1,029  
Goodwill and other intangible assets, net   22,357     22,771  
Deferred financing costs, net   6,932     6,774  
Total Assets   $ 3,217,058     $ 3,038,595  
         
LIABILITIES AND EQUITY        
Mortgage notes payable, net   $ 974,515     $ 984,876  
Revolving credit facility   455,556     298,909  
Term loan, net   282,463     229,905  
Acquired intangible lease liabilities, net   32,118     31,388  
Derivative liabilities, at fair value   3,071     15,791  
Due to related parties   782     829  
Accounts payable and accrued expenses   26,369     23,227  
Prepaid rent   17,258     18,535  
Deferred tax liability   15,417     15,861  
Taxes payable   925     2,475  
Dividends payable   2,638     2,556  
Total Liabilities   1,811,112     1,624,352  
Commitments and contingencies        
Stockholders' Equity:        
7.25% Series A cumulative redeemable preferred shares

  54     54  
Common stock   2,051     2,003  
Additional paid-in capital   1,954,264     1,860,058  
Accumulated other comprehensive income   17,102     19,447  
Accumulated deficit   (569,448 )   (468,396 )
Total Stockholders' Equity   1,404,023     1,413,166  
Non-controlling interest   1,923     1,077  
Total Equity   1,405,946     1,414,243  
Total Liabilities and Equity   $ 3,217,058     $ 3,038,595  

 

7 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

 

Consolidated Statements of Operations

Amounts in thousands, except per share data

  

    Three Months Ended
    September 30, 2018   June 30,
 2018
  March 31, 2018   December 31, 2017
Revenues:                
Rental income   $ 68,661     $ 65,562     $ 63,792     $ 62,556  
Operating expense reimbursements   3,263     5,409     4,294     4,046  
Total revenues   71,924     70,971     68,086     66,602  
                 
 Expenses:                
Property operating   5,301     8,211     7,470     6,849  
Fire recovery   31     (1 )   (79 )   (150 )
Operating fees to related parties   6,956     7,138     6,831     6,624  
Acquisition and transaction related   2,804     2,399     1,325     (301 )
General and administrative   3,215     2,556     2,051     2,357  
Equity-based compensation   2,053     (23 )   (832 )   (1,177 )
Depreciation and amortization   30,195     29,813     29,496     28,558  
Total expenses   50,555     50,093     46,262     42,760  
Operating income   21,369     20,878     21,824     23,842  
Other income (expense):                
Interest expense   (15,104 )   (14,415 )   (12,975 )   (12,806 )
Loss on extinguishment of debt   (2,612 )            
Loss on dispositions of real estate investments   (1,933 )   (3,818 )        
Gain (loss) on derivative instruments   1,290     6,333     (2,935 )   (1,719 )
Unrealized gain (loss) on undesignated foreign currency advances and other hedge ineffectiveness   108     (47 )   (43 )   86  
Other income   44     12     11     10  
Total other expense, net   (18,207 )   (11,935 )   (15,942 )   (14,429 )
Net income before income taxes   3,162     8,943     5,882     9,413  
Income tax expense   (530 )   (1,200 )   (1,070 )   (964 )
Net income   2,632     7,743     4,812     8,449  
Net income attributable to non-controlling interest                
Preferred stock dividends   (2,455 )   (2,455 )   (2,451 )   (2,451 )
Net income attributable to common stockholders   $ 177     $ 5,288     $ 2,361     $ 5,998  
                 
Basic and Diluted Earnings Per Share:                
Basic and diluted net income per share attributable to common stockholders   $     $ 0.08     $ 0.03     $ 0.09  
Weighted average shares outstanding:                
Basic   69,442     67,292     67,287     67,287  
Diluted   69,442     67,292     67,287     67,287  

 

8 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

 

Non-GAAP Measures

Amounts in thousands, except per share data

 

    Three Months Ended
    September 30, 2018   June 30, 2018   March 31, 2018   December 31, 2017
EBITDA:                
Net income   $ 2,632     $ 7,743     $ 4,812     $ 8,449  
Depreciation and amortization   30,195     29,813     29,496     28,558  
Interest expense   15,104     14,415     12,975     12,806  
Income tax expense   530     1,200     1,070     964  
   EBITDA   48,461     53,171     48,353     50,777  
Equity-based compensation   2,053     (23 )   (832 )   (1,177 )
Non-cash portion of incentive fee   180              
Acquisition and transaction related   2,804     1,114     1,325     (301 )
Loss on dispositions of real estate investments   1,933     3,818          
Fire loss (recovery)   31     (1 )   (79 )   (150 )
(Gain) loss on derivative instruments   (1,290 )   (6,333 )   2,935     1,719  
Unrealized (gain) loss on undesignated foreign currency advances and other hedge ineffectiveness   (108 )   47     43     (86 )
Loss on extinguishment of debt   2,612     1,285        
Other income   (44 )   (12 )   (11 )   (10 )
   Adjusted EBITDA   56,632     53,066     51,734     50,772  
Operating fees to related parties   6,956     7,138     6,831     6,624  
General and administrative   3,215     2,556     2,051     2,357  
   NOI   66,803     62,760     60,616     59,753  
Amortization of above- and below- market leases and ground lease assets and liabilities, net   488     500     552     533  
Straight-line rent   (1,492 )   (1,833 )   (1,503 )   (1,550 )
  Cash NOI   $ 65,799     $ 61,427     $ 59,665     $ 58,736  
                 
Cash Paid for Interest:                
   Interest Expense   $ 15,104     $ 14,415     $ 12,975     $ 12,806  
   Non-cash portion of interest expense   (1,339 )   (1,499 )   (901 )   (1,399 )
   Amortization of mortgage (discount) premium, net   (601 )   (263 )   (267 )   (262 )
   Total cash paid for interest   $ 13,164     $ 12,653     $ 11,807     $ 11,145  

 

 

9 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

 

Non-GAAP Measures

Amounts in thousands, except per share data

 

    Three Months Ended
    September 30,
 2018
  June 30,
 2018
  March 31,
 2018
  December 31, 2017
Funds from operations (FFO):                
Net income attributable to common stockholders (in accordance with GAAP)   $ 177     $ 5,288     $ 2,361     $ 5,998  
Depreciation and amortization   30,195     29,813     29,496     28,558  
Loss on dispositions of real estate investments   1,933     3,818          
Proportionate share of adjustments for non-controlling interest to arrive at FFO               (3 )
FFO (as defined by NAREIT) attributable to common stockholders   32,305     38,919     31,857     34,553  
Acquisition and transaction fees [1]   2,804     1,114     1,325     (301 )
Loss on extinguishment of debt [2]   2,612     1,285          
Fire loss (recovery) [3]   31     (1 )   (79 )   (150 )
Proportionate share of adjustments for non-controlling interest to arrive at Core FFO               1  
Core FFO attributable to common stockholders   37,752     41,317     33,103     34,103  
Non-cash equity-based compensation   2,053     (23 )   (832 )   (1,177 )
Non-cash portion of incentive fee   180              
Non-cash portion of interest expense   1,339     1,499     901     1,399  
Amortization of above and below-market leases and ground lease assets and liabilities, net   488     500     552     533  
Straight-line rent   (1,492 )   (1,833 )   (1,503 )   (1,550 )
Unrealized (gains) losses  on undesignated foreign currency advances and other hedge ineffectiveness   (108 )   47     43     (86 )
Eliminate unrealized (gains) losses on foreign currency transactions [4]   (1,215 )   (6,256 )   2,550     1,681  
Amortization of mortgage discounts and premiums, net   601     263     267     262  
Adjusted funds from operations (AFFO) attributable to common stockholders [5]   $ 39,598     $ 35,514     $ 35,081     $ 35,165  
                 
Weighted average common shares outstanding - basic   69,442     67,292     67,287     67,287  
Weighted average common shares outstanding - Diluted   69,442     67,292     67,287     67,287  
FFO per diluted common share   $ 0.47     $ 0.58     $ 0.47     $ 0.51  
Core FFO per diluted common share   $ 0.52     $ 0.61     $ 0.49     $ 0.51  
Dividends declared [6]   $ 36,769     $ 35,828     $ 35,833     $ 35,955  

Footnotes:

 

[1] Primarily includes litigation costs resulting from the termination of the Former Service Provider, costs to refinance foreign debt and fees associated with the exploration of a potential equity offering.

[2] For the three months ended September 30, 2018 includes non-cash write-off of deferred financing costs of $1.5 million and prepayment penalties paid on early extinguishment of debt of $1.1 million. Prepayment penalties paid on early extinguishment of debt of $1.3 million that occurred during the three months ended June 30, 2018, were previously classified as acquisition and transaction fees and have been reclassified as loss on extinguishment of debt in the table above.

[3] Loss (recovery) arising from clean-up costs related to a fire sustained at one of our office properties.

[4] For AFFO purposes, we add back unrealized (gain) loss. For the three months ended September 30, 2018, gains on derivative instruments were $1.3 million which consisted of unrealized gains of $1.2 million and realized gains of $0.1 million. For the three months ended June 30, 2018, gains on derivative instruments were $6.3 million which were primarily comprised of unrealized gains. For the three months ended March 31, 2018, losses on derivative instruments were $2.9 million, which were comprised of unrealized losses of $2.6 million and realized losses of $0.3 million. For the three months ended December 31, 2017, losses on derivative instruments were $1.7 million, which were comprised of unrealized losses of $1.7 million and realized losses of $38,000.

[5] AFFO for the three months ended September 30, 2018 includes income from a lease termination fee of $3.0 million, which is recorded in rental income in the unaudited consolidated statements of operations, related to a real estate asset sold during the three months ended September 30, 2018.

[6] Dividends declared to common stockholders only, and do not include distributions to non-controlling interest holders or holders of Series

A Preferred Stock.

 

 

10 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

 

Debt Overview

As of September 30, 2018

Amounts in thousands, except ratios and percentages

  

Year of Maturity  Number of Encumbered Properties   Weighted-Average Debt Maturity (Years)   Weighted-Average Interest Rate [1]   Total Outstanding Balance [2]   Percent 
Non-Recourse Debt                         
2018 (remainder)           %  $      
2019   11    1.1    2.3%   237,587      
2020   10    1.9    1.9%   209,796      
2021   3    2.8    1.2%   16,827      
2022           %         
2023   43    4.9    3.2%   299,674      
Thereafter   20    9.2    4.4%   219,750      
Total Non-Recourse Debt   87    4.2    2.9%   983,634    57%
                          
Recourse Debt                         
   Revolving Credit Facility        2.8    3.6%   455,556      
   Term Loan Facility        3.8    1.9%   286,033      
Total Recourse Debt        3.2    3.0%   741,589    43%
                          
Total Debt        3.8    3.0%  $1,725,223    100%
                          

 

Total Debt by Currency  Percent 
USD   39%
EUR   41%
GBP   20%
Total   100%

 

 

Footnotes:

 

[1] As of September 30, 2018, the Company’s total combined debt was 73.8% fixed rate or swapped to a fixed rate and 26.2% floating rate.

 

[2] Excludes the effect of deferred financing costs, net and mortgage (discount) premium, net. Current balances as of September 30, 2018 are shown in the year the loan matures.

 

11 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

 

 

 

Future Minimum Lease Rents

As of September 30, 2018

Amounts in thousands

 

 

    Future Minimum
Base Rent Payments [1]
2018 (remainder)   $ 65,414  
2019     264,029  
2020     267,518  
2021     268,287  
2022     258,975  
2023     234,943  
Thereafter     777,237  
Total   $ 2,136,403  
Footnotes:

 

[1] Base rent assumes exchange rates of £1.00 to $1.30 for GBP and €1.00 to $1.16 for EUR as of September 30, 2018 for illustrative purposes, as applicable.

 

 

12 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

 

Top Ten Tenants

As of September 30, 2018

Amounts in thousands, except percentages

 

Tenant / Lease Guarantor  Property Type  Tenant Industry  Annualized SL Rent [1]   SL Rent Percent 
FedEx  Distribution  Freight  $13,495    5%
Government Services Administration (GSA)  Office  Government   12,048    5%
Foster Wheeler  Office  Engineering   11,069    4%
RWE AG  Office  Utilities   11,061    4%
ING Bank  Office  Financial Services   9,232    3%
Finnair  Industrial  Aerospace   9,155    3%
Family Dollar  Retail  Discount Retail   8,125    3%
Steel Service Supplier  Industrial  Metal Processing   6,815    3%
Harper Collins  Distribution  Publishing   6,687    3%
Trinity Health  Office  Healthcare   6,584    2%
Subtotal         94,271    35%
                 
Remaining portfolio         173,477    65%
                 
Total Portfolio        $267,748    100%

 

Footnotes:

 

[1] SL Rent (Straight-line rent) is on an annualized basis and assumes exchange rates of £1.00 to $1.30 for GBP and €1.00 to $1.16 for EUR as of September 30, 2018 for illustrative purposes, as applicable.

  

13 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

 

Diversification by Property Type

As of September 30, 2018

Amounts in thousands, except percentages

 

 

    Total Portfolio     Unencumbered Portfolio [2]
Property Type   Annualized SL Rent [1]   SL Rent Percent   Square Feet   Sq. ft. Percent     Annualized SL Rent [1]   SL Rent Percent   Square Feet   Sq. ft. Percent
Office   $ 148,522     55 %   8,567     33 %     $ 46,135     42 %   2,569     21 %
Industrial     60,853     23 %   10,142     38 %       36,004     32 %   6,430     52 %
Distribution     34,383     13 %   5,395     21 %       15,755     14 %   2,277     18 %
Retail     23,990     9 %   2,109     8 %       13,188     12 %   1,050     9 %
Total   $ 267,748     100 %   26,213     100 %     $ 111,082     100 %   12,326     100 %

 

Footnotes:

 

[1] SL Rent (Straight-line rent) is on an annualized basis and assumes exchange rates of £1.00 to $1.30 for GBP and €1.00 to $1.16 for EUR as of September 30, 2018 for illustrative purposes, as applicable.

 

[2] Includes properties on the credit facility borrowing base.

14 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

 

Diversification by Tenant Industry

As of September 30, 2018

Amounts in thousands, except percentages

 

 

    Total Portfolio     Unencumbered Portfolio [3]
Industry Type   Annualized SL
Rent [1]
  SL Rent Percent   Square Feet   Sq. ft. Percent     Annualized SL
Rent [1]
  SL Rent Percent   Square Feet   Sq. ft. Percent
Financial Services   $ 34,490     13 %   2,316     9 %     $ 4,671     4 %   446     4 %
Technology   18,046     7 %   906     3 %     8,145     7 %   309     3 %
Discount Retail   15,953     6 %   1,786     7 %     9,976     9 %   985     8 %
Aerospace   14,932     6 %   1,258     5 %     2,992     3 %   233     2 %
Telecommunications   14,576     5 %   913     3 %     2,336     2 %   133     1 %
Government   14,471     5 %   536     2 %     11,696     11 %   424     3 %
Freight   14,433     5 %   1,442     6 %     11,504     10 %   1,180     10 %
Healthcare   13,680     5 %   647     2 %     7,372     7 %   423     3 %
Metal Processing   13,162     5 %   2,472     9 %     11,034     10 %   2,152     17 %
Utilities   12,726     5 %   673     3 %         %       %
Energy   11,848     4 %   1,043     4 %     9,255     8 %   821     7 %
Engineering   11,069     4 %   366     1 %         %       %
Pharmaceuticals   9,789     4 %   390     1 %     1,970     2 %   90     1 %
Auto Manufacturing   7,982     3 %   2,068     8 %     5,225     5 %   1,067     9 %
Retail Food Distribution   7,426     3 %   1,128     4 %     825     1 %   170     1 %
Publishing   6,687     2 %   873     3 %         %       %
Metal Fabrication   5,421     2 %   720     3 %     2,120     2 %   297     2 %
Consumer Goods   3,706     1 %   940     4 %     2,634     2 %   765     6 %
Automotive Parts Supplier   3,512     1 %   411     2 %     1,311     1 %   91     1 %
Restaurant - Quick Service   3,394     1 %   74     %     3,212     3 %   65     1 %
Logistics   3,247     1 %   1,273     5 %         %       %
Specialty Retail   2,984     1 %   280     1 %         %       %
Other [2]   24,214     11 %   3,698     15 %     14,804     13 %   2,675     21 %
Total   $ 267,748     100 %   26,213     100 %     $ 111,082     100 %   12,326     100 %

 

Footnotes:

 

[1] SL Rent (Straight-line rent) is on an annualized basis and assumes exchange rates of £1.00 to $1.30 for GBP and €1.00 to $1.16 for EUR as of September 30, 2018 for illustrative purposes, as applicable.

 

[2] Other includes 20 industry types as of September 30, 2018.

 

[3] Includes properties on the credit facility borrowing base.

 

 

15 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

 

Diversification by Geography

As of September 30, 2018

Amounts in thousands, except percentages

 

    Total Portfolio     Unencumbered Portfolio [2]
Region   Annualized SL
Rent [1]
  SL Rent Percent   Square Feet   Sq. ft. Percent     Annualized SL
Rent [1]
  SL Rent Percent   Square Feet   Sq. ft. Percent
United States   $ 138,619     51.7 %   15,606     59.5 %     $ 100,001     90 %   11,731     95.2 %
   Michigan   26,563     9.9 %   3,537     13.3 %     19,916     17.7 %   2,720     21.9 %
   Texas   24,565     9.2 %   2,014     7.7 %     17,484     15.7 %   1,391     11.3 %
   California   10,478     3.9 %   389     1.5 %     4,170     3.8 %   165     1.3 %
   New Jersey   9,012     3.4 %   397     1.5 %     686     0.6 %   48     0.4 %
   Tennessee   7,122     2.7 %   789     3.0 %     5,389     4.9 %   327     2.7 %
   Ohio   6,433     2.4 %   1,437     5.5 %     6,056     5.5 %   1,339     10.9 %
   Indiana   5,684     2.1 %   1,414     5.4 %     4,660     4.2 %   874     7.1 %
   Illinois   4,095     1.5 %   789     3.0 %     4,095     3.7 %   789     6.4 %
   New York   3,959     1.5 %   677     2.6 %     2,010     1.8 %   519     4.2 %
   Missouri   3,427     1.3 %   309     1.2 %     3,427     3.1 %   309     2.5 %
   South Carolina   3,296     1.2 %   414     1.6 %     3,296     3.0 %   414     3.4 %
   Florida   3,014     1.1 %   206     0.8 %     3,014     2.7 %   206     1.7 %
   Kentucky   2,740     1.0 %   355     1.4 %     2,740     2.5 %   355     2.9 %
   North Carolina   2,290     0.9 %   221     0.8 %     2,290     2.1 %   221     1.8 %
   Minnesota   2,143     0.8 %   150     0.6 %     781     0.7 %   117     0.9 %
   Mississippi   2,105     0.8 %   381     1.5 %     2,105     1.9 %   381     3.1 %
   Pennsylvania   1,954     0.7 %   234     0.9 %     1,391     1.3 %   121     1.0 %
   Maine   1,882     0.7 %   50     0.2 %     1,882     1.7 %   50     0.4 %
   Massachusetts   1,757     0.7 %   127     0.5 %     1,757     1.6 %   127     1.0 %
   South Dakota   1,304     0.5 %   54     0.2 %     1,304     1.2 %   54     0.4 %
   Kansas   1,275     0.5 %   179     0.7 %     1,275     1.1 %   179     1.5 %
   Nebraska   1,267     0.5 %   116     0.4 %     564     0.5 %   58     0.5 %
   Louisiana   1,264     0.5 %   137     0.5 %     1,264     1.1 %   137     1.1 %
   Vermont   1,166     0.4 %   213     0.8 %         %       %
   Colorado   1,088     0.4 %   27     0.1 %     1,088     1.0 %   27     0.2 %
   West Virginia   980     0.4 %   104     0.4 %         %       %
   Iowa   886     0.3 %   232     0.9 %     886     0.8 %   232     1.9 %
   North Dakota   884     0.3 %   47     0.2 %     884     0.8 %   47     0.4 %
   Oklahoma   825     0.3 %   89     0.3 %     825     0.7 %   89     0.7 %
   Alabama   802     0.3 %   74     0.3 %     802     0.7 %   74     0.6 %
   Maryland   785     0.3 %   120     0.5 %     785     0.7 %   120     1.0 %
   Idaho   644     0.2 %   38     0.1 %     644     0.6 %   38     0.3 %
   New Mexico   556     0.2 %   46     0.2 %     556     0.5 %   46     0.4 %
   Georgia   452     0.2 %   41     0.2 %     452     0.4 %   41     0.3 %
   Montana   441     0.2 %   54     0.2 %     441     0.4 %   54     0.4 %
   New Hampshire   399     0.1 %   83     0.3 %         %       %
   Utah   397     0.1 %   20     0.1 %     397     0.4 %   20     0.2 %
   Delaware   362     0.1 %   10     %     362     0.3 %   10     0.1 %
   Arizona   156     0.1 %   16     0.1 %     156     0.1 %   16     0.1 %
   Arkansas   91     %   8     %     91     0.1 %   8     0.1 %
   Virginia   76     %   8     %     76     0.1 %   8     0.1 %
United Kingdom   54,277     20.3 %   4,080     15.6 %         %       %
Germany   20,938     7.8 %   2,178     8.3 %         %       %
The Netherlands   17,101     6.4 %   1,039     4.0 %     7,869     7.1 %   530     4.3 %
Finland   15,132     5.7 %   1,457     5.6 %         %       %
France   12,928     4.8 %   1,632     6.2 %         %       %
Luxembourg   5,541     2.1 %   156     0.6 %         %       %
US Province   3,212     1.2 %   65     0.2 %     3,212     2.9 %   65     0.5 %
Total   $ 267,748     100 %   26,213     100 %     $ 111,082     100 %   12,326     100 %

Footnotes:

[1] SL Rent (Straight-line rent) is on an annualized basis and assumes exchange rates of £1.00 to $1.30 for GBP and €1.00 to $1.16 for EUR as of September 30, 2018 for illustrative purposes, as applicable.

[2] Includes properties on the credit facility borrowing base.

 

16 

Global Net Lease, Inc.
Supplemental Information
Quarter ended September 30, 2018 (Unaudited)

 

Lease Expirations

As of September 30, 2018

Amounts in thousands, except ratios and percentages

 

Year of Expiration  Number of Leases Expiring   Annualized SL Rent [1]   Annualized SL Rent Percent   Leased Rentable Square Feet   Percent of Rentable Square Feet Expiring 
         (In thousands)                
2018 (Remaining)      $    %       %
2019           %       %
2020   1    1,055    0.4%   100    0.4%
2021   2    4,944    1.8%   323    1.2%
2022   16    23,856    8.9%   1,553    6.0%
2023   30    28,131    10.5%   2,411    9.2%
2024   45    68,534    25.6%   5,887    22.6%
2025   38    37,578    14.0%   3,199    12.3%
2026   16    21,039    7.9%   2,038    7.8%
2027   15    6,681    2.5%   717    2.7%
2028   38    17,888    6.7%   3,019    11.6%
2029   107    23,327    8.7%   2,773    10.6%
2030   11    11,799    4.4%   603    2.3%
2031           %       %
2032   5    2,006    0.7%   317    1.2%
2033   2    6,722    2.5%   830    3.2%
Thereafter (>2033)   9    14,188    5.4%   2,317    8.9%
Total   335   $267,748    100%   26,087    100%

 

[1] Annualized rental income converted from local currency into USD as of September 30, 2018 for the in-place lease in the property on a straight-line basis, which includes tenant concessions such as free rent, as applicable.

17 

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Section 4: EX-99.3 (EXHIBIT 99.3)

 

Exhibit 99.3

 

GLOBAL NET LEASE Third Quarter Investor Presentation NETSCOUT – ALLEN, TX

 

 

2 OVERVIEW Long Duration Leases to Investment Grade Rated Tenants (1) Proactive Asset Management to Drive Long Term Portfolio Value High - Quality, Mission Critical, Diversified Portfolio Differentiated Strategy with International Exposure Highly Experienced Management Team Ability to Capitalize on Imbalance Between U.S. and European Markets to Deliver Superior Risk Adjusted Returns 1. As used herein, “Investment Grade Rating” includes both actual investment grade ratings of the tenant or Implied Investment G rad e. Implied Investment Grade includes ratings of tenant parent (regardless of whether or not the parent has guaranteed the tenant’s obligation under the lease) or lease guarantor. Implied Investment Grade ratings are determined u sin g proprietary Moody’s analytical tool, which compares the risk metrics of the non - rated company to those of a company with an actual rating. Ratings information is as of September 30, 2018.

 

 

3 PORTFOLIO HIGHLIGHTS Properties 336 Square Feet (millions) 26.2 Tenants 106 Industries 42 Countries 7 Leased 99.5% Weighted Average Remaining Lease Term (1) 8.6 years % of SLR derived from Investment Grade Tenants (2)(3) 77.1% % of leases with contractual rent increases (4) 92% Portfolio Overview As of September 30 , 2018 unless otherwise noted. 1. Weighted average remaining lease term in years is based on square feet as of September 30, 2018. 2. Refer to Investment Grade Rating definition included in the footnotes to page 2. Comprised of 37.9% leased to tenants with an actual investment grade rating and 39.2% leased to tenants with an implied investment grade rating as of September 30, 2018. 3. Calculated using annualized straight - line rent (“SLR”) converted from local currency into USD as of the respective period presen ted for the in - place lease on the property on a straight - line basis, which includes tenant concessions such as free rent, as applicable. 4. Contractual rent increases include fixed percent or actual increases, or country CPI - indexed increases. Percentage of leases wit h rent increases is based on square feet as of September 30, 2018.

 

 

4 Industrial/Distribution 36% Retail 9% Office 55% Non Investment Grade 20.0% Investment Grade 77.1% Not Rated 2.9% WELL BALANCED PORTFOLIO As of September 30, 2018 1. Me tric based on SLR. Refer to SLR definition included in the footnotes to page 3. 2. Refer to Investment Grade Rating definition included in the footnotes to page 2. Credit Rating (1) Tenant Industry (1) Geography (1) Asset Type (1) (2) US: 69 % EUR: 31% US: 55% EUR: 45% US: 43% EUR: 57% United States 53% United Kingdom 20% Germany 8% The Netherlands 6% Finland 6% France 5% Luxembourg 2% Financial Services 13% Technology 7% Discount Retail 6% Aerospace 6% Telecommunications 5% Government Services 5% Healthcare 5% Freight 5% Utilities 5% Metal Processing 5% Energy 4% All Other 34%

 

 

5 WELL DIVERSIFIED TENANT BASE Top Ten Tenants As of September 30, 2018. *Represents Moody’s Implied Rating. ** Represents Tenant Parent Rating. 1. Metric based on SLR. Refer to SLR definition included in the footnotes to page 3. Top Ten Tenants Represent Only 35 % of SLR (1) Tenant Rating Country Property Type % of SLR (1) Baa2** U.S. Distribution 5% Aaa** U.S. Office 5% Baa3* U.K. Office 4% Baa3* GER Office 4% Aa3 NETH Office 3% Aa1** FIN Industrial 3% Baa3 U.S. Retail 3% Steel Service Supplier Baa3* U.S. Industrial 3% A3 U.K. Distribution 3% Aa3 U.S. Office 2%

 

 

6 Financial Service Providers Government Services Multinational Corporations FOCUS ON HIGH - QUALITY TENANTS Only Focused on Markets with Quality Sovereign Debt Ratings (S&P) U.S. Luxembourg Germany The Netherlands Finland U.K. France AA+ AAA AAA AAA AA+ AA AA Best - in - class portfolio leased to largely Investment G rade Rated T enants (1) in well established markets in the U.S. and Europe 1. Refer to Investment Grade Rating definition included in the footnotes to page 2.

 

 

7 DIFFERENTIATED INVESTMENT STRATEGY Geography Asset Type Property Fundamentals Credit Quality Structure and Pricing Focused on single - tenant commercial properties to generate superior risk - adjusted returns • Focus on the U.S. and strong sovereign debt rated countries in Continental Europe • Critical company operational sites and headquarters • Strategically located industrial and distribution facilities • In - house financial and business model review using Moody’s analytics • Continuous monitoring of improving or deteriorating credit quality for asset management opportunities • Analysis of property condition as well as local market conditions • Review of replacement cost against current valuation • Concentration on long term leases with contractual rent increases • Deposits and covenants help to further protect deployment of capital

 

 

8 1. Refer to Average GAAP Cap Rate definition included in the footnotes to page 15. 2. Based upon square feet as of the date of acquisition 2018 INVESTMENT ACTIVITY Tenant Closing Date Properties Asset Type Purchase Price (millions) Average GAAP Cap Rate (1) Acquisitions Chemours Company, FC LLC 2/26/2018 1 Distribution $18.6 6.96% Lee Steel Holdings, LLC 3/21/2018 1 Industrial $8.8 8.31% LSI Steel Processing 3/29/2018 3 Industrial $17.8 8.21% FCA US, LLC (Fiat Chrysler) 3/29/2018 1 Industrial $18.2 8.56% Steel Service Supplier 5/16/2018 5 Industrial $83.0 8.19% FedEx Freight – Blackfoot, ID 6/1/2018 1 Distribution $6.5 6.76% DuPont Pioneer 6/13/2018 1 Industrial $8.1 7.27% Rubbermaid 7/27/2018 1 Industrial $21.4 7.43% NetScout 8/13/2018 1 Office $54.0 7.36% FedEx Freight 9/28/2018 1 Distribution $11.0 6.70% Furniture Manufacturer 9/28/2018 1 Industrial $19.0 8.21% T otal 17 $266.4 7.87% • Acquired 17 properties through September 30 th for $ 266 .4 million with a cash cap rate of 7.40% and a weighted average GAAP cap rate of 7.87 % (2) • 100% of assets acquired were industrial, distribution and office assets GNL continued to identify what it believes to be accretive acquisition opportunities to grow organically, adding an additional $266.4 million of properties in 2018 through September 30 th

 

 

9 ROBUST PIPELINE *Represents Moody’s Implied Rating. ** Represents Tenant Parent Rating. 1. The acquisitions of $126 .6 million in contract purchase price of properties are subject to customary closing conditions, and there can be no assurance t he y will be competed on their current terms, or at all. 2. Refer to Average GAAP Cap Rate definition included in the footnotes to page 15 . 3. Represents remaining lease term in years as of 9/30/18 for all properties that closed prior to the end of the quarter. Remain ing lease term for properties that are scheduled to close subsequent to quarter end are based on values as of closing date and are weighted based on square feet. 4. Refer to Investment Grade Rating definition included in the footnotes to page 2 and page 3. Approximately $63.4 million of assets closed in Q1 2018, $97.6 million of assets closed in Q2 2018 and an additional $105.4 million of assets closed in Q3 2018 through September 30 th . The pipeline represents management’s ability to leverage direct relationships with landlords and developers into primarily off - market transactions, allowing the Company to achieve what it believes to be better than market cap rates. (1) As of September 30, 2018 After Pipeline % Change No. of Properties 336 337 +0.3% Investment Grade and Implied Investment Grade (4 ) 77.1% 77.9% +1.0% Square Feet 26.2 million 26.8 million +2.3% Purchase Price $3.4 billion $3.5 billion +3.7% Lease Term Remaining 8.6 years 8.6 years +0.2% Deal Name Expected Closing Date Credit Rating Property Type Purchase Price (in millions) Average GAAP Cap Rate (2) Lease Term Remaining (3) Chemours Closed - 1Q 2018 Ba2** Distribution $18.6 6.96% 9.6 Lee Steel Holdings Closed - 1Q 2018 B3* Industrial $8.8 8.31% 10.2 LSI Steel Processing 3 - Pack Closed - 1Q 2018 Baa1* Industrial $17.8 8.21% 9.7 FCA US, LLC (Fiat Chrysler) Closed - 1Q 2018 Baa2 Industrial $18.2 8.56% 9.7 Steel Service Supplier 5 - Pack Closed - 2Q 2018 Baa3* Industrial $83.0 8.19% 10.0 FedEx Freight Closed - 2Q 2018 Baa2 Distribution $6.5 6.76% 14.3 DuPont Pioneer Closed - 2Q 2018 A3** Industrial $8.1 7.27% 10.5 Rubbermaid Closed - 3Q 2018 Baa3 Industrial $21.4 7.43% 10.0 NetScout Closed - 3Q 2018 Ba3* Office $54.0 7.36% 12.0 FedEx Freight Closed - 3Q 2018 Baa2 Distribution $11.0 6.70% 15.0 Furniture Manufacturer Closed - 3Q 2018 Ba1* Industrial $19.0 8.21% 20.0 Cold Storage Facility 4Q 2018 Baa2 Distribution $126.6 6.71% 10.0 Total 77.9% Inv. Grade $393.0 7.70% 11.0

 

 

10 GEOGRAPHIC BALANCE (INCLUDING PIPELINE) 1. Refer to basis for metric calculation included in the footnotes to page 3. 2. Metric based on SLR. Refer to SLR definition included in the footnotes to page 3. U.S. Number of Assets: 268 Remaining Lease Term: 8 .7 years (1) % of GNL SLR: 54.4% (2) Europe Number of Assets: 69 Remaining Lease Term: 8.5 years (1) % of GNL SLR: 45.6 % (2)

 

 

11 PRO FORMA PORTFOLIO COMPOSITION WITH PIPELINE Continued Focus towards United States Industrial and Distribution Properties Geographic concentration split changes from 53% and 47% to 54% and 46%, for the United States and Europe, respectively with the addition of the 2018 pipeline. Office 53% Industrial/Distribution 38% Retail 9% Office 55% Industrial/Distribution 36% Retail 9% United States 54% Europe 46% United States 53% Europe 47% Property Type Concentration (1) Geographic Concentration (1) As of 9/30/2018 As of 9/30/2018 Pro Forma with Pipeline Pro Forma with Pipeline 1. Metric based on SLR. Refer to SLR definition included in the footnotes to page 3. 2% increase for the portfolio’s Industrial/Distribution Property Type with the addition of the 2018 pipeline.

 

 

12 THIRD QUARTER ACQUISITION: RUBBERMAID Property and Tenant Overview Tenant Rubbermaid Incorporated Property Type Distribution Credit Rating (1) S&P: Guarantor: BBB - Moody's: Guarantor: Baa3 Location Akron, OH Square Feet 668,592 Lease Term (years) 10.0 Purchase Price $21.4 million Average GAAP Cap Rate (2) 7.43% Tenant/Guarantor • The tenant, Rubbermaid, is a subsidiary of the Guarantor Newell Brands. Rubbermaid, founded in 1968, is a manufacturer of innovative, solution - based products for commercial and institutional markers worldwide. • The parent company and Guarantor, Newell Brands, is an American worldwide marketer of consumer and commercial products with a portfolio of brands including Rubbermaid food storage, Coleman outdoor products, Sharpie and many more. • The parent and guarantor has an S&P rating of BBB - and a Moody’s rating of Baa3. Property • The Property is a 668,592 square foot industrial distribution building. • The lease has a going - in cap rate of 7.10% and an average GAAP cap rate of 7.43%. (2) • S&P: Parent: BBB - ; Moody's: Parent: Baa3 1. Investment Grade Credit Rating. 2. Refer to Average GAAP Cap Rate and going - in cap rate definition included in the footnotes to page 15. Transaction Overview

 

 

13 Transaction Overview Tenant NetScout Systems Texas, LLC Property Type Office Credit Rating (1)(3) S&P: N/A; Moody's: Implied: Ba3 Location Allen, TX Square Feet 145,000 Lease Term (years) 12.0 Purchase Price $54 million Average GAAP Cap Rate (2) 7.36% Tenant/Guarantor • NetScout Systems Texas, LLC, the Tenant, is a wholly owned subsidiary of NetScout Systems, Inc. (NASDAQ: NTCT), the Guarantor. With headquarters in Westford, MA, NetScout is a leading provider of application and network performance management products. NetScout has been in the network performance monitoring space for 30 years. Property • The newly constructed subject Property is located within a 17 - acre multi - phase, corporate office campus • Allen, TX is a city in Collin County, TX, a northern suburb of Dallas. The city is located 25 miles north of Dallas, TX and 55 miles northeast of Fort Worth, TX. • The lease has a going - in cap rate of 6.58% and an average GAAP cap rate of 7.36%. (2) • The double - net lease includes annual rent escalations of 2.00%. 1. Investment Grade Credit Rating. 2. Refer to Average GAAP Cap Rate and going - in cap rate definition included in the footnotes to page 15 . 3. Refer to Investment Grade Rating definition included in the footnotes to page 2 and page 3. Property and Tenant Overview THIRD QUARTER ACQUISITION: NETSCOUT

 

 

14 Chris Masterson Chief Financial Officer, Treasurer and Secretary FULLY ALIGNED MANAGEMENT STRUCTURE Fully integrated external management team creates highly scalable platform with an acquisition pipeline generated by a proven, country - focused origination network No transactional fees allows for low general and administrative costs, which allows AR Global to provide greater resources at a lower cost. (1) Lower Overhead Costs AR Global has sponsored or co - sponsored 15 REITs which have acquired more than $40 billion of real estate since 2007. Experience The audit, compensation, nominating and corporate governance committees are completely comprised of independent directors. Corporate Governance Performance Alignment Management structure aligned to compensate based on operational outperformance, in turn delivering increased value to shareholders. Company is supported by a financial accounting and reporting team, and maintains its own financial reporting processes, controls, and procedures. Operational Efficiencies James L. Nelson Chief Executive Officer and President • Joined GNL as an Independent Board Member on March 2017 • Mr. Nelson currently serves as a Board and Audit committee Member for Icahn Enterprises (since 2001) and Herbalife Ltd. (since 2014) • Previously served as CEO of Orbitex Management, a financial services company, and Eaglescliff Corporation, a specialty investment banking, consulting and wealth management company • Previously served as Chief Accounting Officer of Global Net Lease • Past experience includes accounting positions with Goldman Sachs and KPMG, LLP. • Certified Public Accountant in New York State 1. As compared to fees associated with the prior management contract

 

 

15 COMPANY INITIATIVES GNL continues to execute on corporate, financing and investment actions that enhance the Company’s value and capabilities Q4 2017 $187 Million CMBS Offering • Closed on $187 million of CMBS debt with Credit Suisse • Interest rate of approximately 4.37% with a 10 - year term; closed on October 27, 2017 Add - On Offering of Preferred Equity • GNL successfully closed its add - on offering of Series A preferred equity • $29 million of gross proceeds raised Q1 and Q2 2018 $33 Million CMBS Loan • Successfully closed on an 8 - property CMBS loan with Ladder Capital Finance • 10 - year term, interest only loan at 4.32% Q3 2018 Common Stock Offering • Closed on the previously announced underwritten public offering of 4,600,000 shares of common stock at an offering price of $ 20. 65 for gross proceeds of approximately $95 million Upsizing of Unsecured Credit Facility • Closed an upsizing of its unsecured credit facility of $132.0 million for the multi - currency revolving credit facility portion a nd €51.8 million for the senior unsecured term loan facility portion. (1) £230 Debt Refinancing • Successfully closed on a £230 million syndicated investment facility loan agreement • 5 - year term, bearing interest at a rate of 1.975% + 3 - month GBP LIBOR, with the interest rate for 80% of the loan amount fixed b y a swap agreement to 3.299% • Secured by all 43 of the Company's properties in the United Kingdom • Refinancing lowers the cost of borrowings secured by UK assets to approximately 3.20% at closing from 3.42% as of June 30, 20 18 and extends GNL’s overall weighted average debt duration from 3.3 years at June 30, 2018 to 3.9 years 2018 Pipeline (3) • GNL already has a robust pipeline of approximately $393 million of properties under contract or closed through Q3 2018 • The pipeline consists of 77.9% investment grade and implied investment grade tenants with a weighted average GAAP cap rate of 7.70% (2) 2018 Expanded European Operations • Our advisor has strengthened its dedicated team in Europe in order to manage our European portfolio, continue to develop relationships with tenants, evaluate overseas real estate markets and source potential acquisitions 1. GNL used all the proceeds from the increased borrowings under the term loan facility to repay amounts outstanding under the revolving credit facility . 2. Average GAAP capitalization rate is a rate of return on a real estate investment property based on the expected, annualized SLR that the property will generate under its existing lease . GAAP capitalization rate is calculated by dividing the annualized SLR the property will generate (before debt service and depreciation and after fixed costs and variable costs) and the purchase price of the property . The weighted - average GAAP capitalization rate is based upon square footage as of the date of acquisition . Going - in capitalization rate is a rate of return on a real estate investment property based on the expected, cash rental income that the property will generate under its existing lease during the first year of the lease . Going - in capitalization rate is calculated by dividing the cash rental income the property will generate during the first year of the lease (before debt service and depreciation and after fixed costs and variable costs) and the purchase price of the property . The weighted - average going - in capitalization rate is based upon square footage as of the date of acquisition . 3. The acquisitions of the $ 126 . 6 million in contract purchase price of properties are subject to customary closing conditions, and there can be no assurance they will be completed on their current terms, or at all .

 

 

16 GNL CAPITAL STRUCTURE GNL continued to improve its capital structure throughout 2018 by extending debt maturities, maintaining a low cost of debt and optimizing the debt structure for continued future growth $1,385 $1,136 $1,375 $1,503 $139 $135 $139 $136 $992 $1,047 $983 $984 $532 $582 $686 $742 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Equity Preferred Equity Mortgage Debt Line of Credit Debt Maturity and Interest Expense by Quarter (1) GNL Capital Structure by Quarter (1) (in millions) (years) (WAVG interest expense) 3.7 3.6 3.3 3.8 2.9% 2.8% 3.1% 3.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Weighted Average Maturity Weighted Average Interest 1. As of September 30, 2018

 

 

17 $- $5 $10 $15 $20 $25 $30 $35 $40 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 PERFORMANCE METRICS Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Total Revenue $64.9 million $66.6 million $68.0 million $71.0 million $71.9 million Operating Income $18.5 million $23.8 million $21.8 million $20.9 million $20.3 million Dividends Paid to Common Shareholders $35.8 million $36.1 million $35.8 million $35.8 million $36.7 million AFFO (1) $34.8 million $35.2 million $35.1 million $35.5 million $39.6 million Weighted Average Shares Outstanding 67.3 million 67.3 million 67.3 million 67.3 million 69.4 million AFFO by Quarter (1) $40.0 $45.0 $50.0 $55.0 $60.0 $65.0 $70.0 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Revenue by Quarter 1. Adjusted Funds from Operations (“AFFO”). See “Non - GAAP measures” on pages 25 - 27 for a description of AFFO and pages 29 - 31 for a reconciliation of AFFO to net income, the most directly comparable GAAP Financial measure.

 

 

18 Fixed Rate 73.8% Floating Rate 26.2% USD 39% EUR 41% GBP 20% DEBT OVERVIEW Net Debt to Enterprise Value (1) 48.9% Net Debt to Adjusted EBITDA (annualized) (1)(2) 6.9x Interest Coverage Ratio (3) 4.3x Weighted Average Interest Rate (4) 3.0% Weighted Average Debt Maturity 3.8 Years Debt Metrics as of September 30, 2018 Debt by Currency Average Debt Maturity 1. Enterprise value is calculated based on the September 30, 2018 closing price of $20.85 per common share and $25.07 per prefer red share, and net debt of $1.6 billion, comprised of the principal amount of GNL’s debt less cash and cash equivalents, as of September 30, 2018. 2. Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”). See “Non - GAAP Measures” on page 27 for a description of EBITDA. 3. The interest coverage ratio is calculated by dividing adjusted EBITDA by cash paid for interest (calculated based on the inte res t expense less non - cash portion of interest expense including amortization of mortgage (discount) premium, net and mezzanine discount for the quarter ended September 30, 2018). See page 28 for a reconciliation of cash paid for inter est . 4. The weighted average interest rate cost is based on the outstanding principal balance of the debt. 5. Weighted average remaining lease term in years based on square feet as of September 30, 2018. ( Millions ) Weighted Average Remaining Lease Term: 8.6 years (5) Lease Expiration Schedule (% of SF Per Year) $ - $238 $210 $17 $519 $456 $227 $- $100 $200 $300 $400 $500 $600 2018 2019 2020 2021 2022 Thereafter Mortgages Line of Credit 0% 0% 0.4% 1.2% 6.0% 9.2% 22.6% 12.3% 7.8% 2.7% 37.7%

 

 

19 COMPREHENSIVE HEDGING PROGRAM Hedging Foreign Currency Exchange Risk (“Cash Flow Hedging Instruments”) • Provides protection against unfavorable movements in EUR and GBP versus the U.S. Dollar (“USD”) associated with the Company’s foreign property operations Interest Rate Swaps: Fixing Interest on Floating Rate Debt • Cost effective tools that mitigate against adverse fluctuations in interest rates; effectively acting to convert variable rate debt into fixed rate debt resulting in reduced exposure to variability in cash flows related to interest payments Net Investment Hedges: Asset – Liability Matching • Matches the value of assets with liabilities in the same currency (EUR or GBP), creating a “natural hedge” on the value of GNL assets against movement in FX rates vs USD GNL continues to employ a comprehensive hedging program, with a number of components designed to limit the impact of currency and interest rate movements to its European portfolio

 

 

INVESTOR INQUIRIES 1 - 866 - 902 - 0063 investorrelations@globalnetlease.com www.GlobalNetLease.com

 

 

21 FORWARD LOOKING STATEMENTS This presentation contains certain statements that are the Company’s and Management’s hopes, intentions, beliefs, expectations, or projections of the future and might be considered to be forward - looking statements under Federal Securities laws . Prospective investors are cautioned that any such forward - looking statements are not guarantees of future performance, and involve risks and uncertainties . The company’s actual future results may differ significantly from the matters discussed in these forward - looking statements, and we may not release revisions to these forward - looking statements to reflect changes after we’ve made the statements . Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company’s filings with the SEC including, but not limited to, the Company’s report on Form 10 - K, as well as company press releases .

 

 

22 RISK FACTORS The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward - looking statements . See the section entitled “Item 1 A . Risk Factors” in GNL’s Annual Report on Form 10 - K for the year ended December 31 , 2017 filed with the SEC on February 27 , 2018 for a discussion of the risks which should be considered in connection with your investment . • All of our executive officers are also officers, managers, employees or holders of a direct or indirect controlling interest in the Advisor and other entities affiliated with AR Global Investments, LLC ("AR Global") . As a result, our executive officers, the Advisor and its affiliates face conflicts of interest, including significant conflicts created by the Advisor's compensation arrangements with us and other investment programs advised by AR Global affiliates and conflicts in allocating time among these investment programs and us . These conflicts could result in unanticipated actions . • Because investment opportunities that are suitable for us may also be suitable for other investment programs advised by affiliates of AR Global, the Advisor and its affiliates face conflicts of interest relating to the purchase of properties and other investments and these conflicts may not be resolved in our favor . • We are obligated to pay fees which may be substantial to the Advisor and its affiliates . • We depend on tenants for our rental revenue and, accordingly, our rental revenue is dependent upon the success and economic viability of our tenants . • Increases in interest rates could increase the amount of our debt payments and limit our ability to pay dividends to our stockholders . • The Advisor may not be able to identify a sufficient number of property acquisitions satisfying our investment objectives on acceptable terms and prices, or at all . • We may be unable to continue to raise additional debt or equity financing on attractive terms, or at all, and there can be no assurance we will be able to fund the acquisitions contemplated by our investment objectives . • We may be unable to repay, refinance, restructure or extend our indebtedness as it becomes due . • Adverse changes in exchange rates may reduce the value of our properties located outside of the United States ("U . S . ") .

 

 

23 RISK FACTORS (CONTINUED) • Provisions in in our credit facility, may limit our ability to pay dividends on our common stock, $ 0 . 01 par value per share ("“Common Stock"”), our 7 . 25 % Series A Cumulative Redeemable Preferred Stock, $ 0 . 01 par value per share ("“Series A Preferred Stock"”) or any other stock we may issue . • We may be unable to pay or maintain cash dividends or increase dividends over time . • We may not generate cash flows sufficient to pay dividends to our stockholders or fund our operations, and, as such, we may be forced to borrow at unfavorable rates to pay dividends to our stockholders or fund our operations . • Any dividends that we pay on our Common Stock, Series A Preferred Stock or any other stock we may issue may exceed cash flow from operations, reducing the amount of capital available to invest in properties and other permitted investments . • We are subject to risks associated with our international investments, including risks associated with compliance with and changes in foreign laws, fluctuations in foreign currency exchange rates and inflation . Our ability to refinance or sell properties located in the United Kingdom and continental Europe may be impacted by the economic and political uncertainty caused by the Brexit Process . • We are subject to risks associated with any dislocations or liquidity disruptions that may exist or occur in the credit markets of the U . S . and Europe from time to time . • We may fail to continue to qualify, as a real estate investment trust for U . S . federal income tax purposes ("REIT"), which would result in higher taxes, may adversely affect operations and would reduce the trading price of our Common Stock and Series A Preferred Stock and our cash available for dividends . • We may be exposed to risks due to a lack of tenant diversity, investment types and geographic diversity . • The revenue derived from, and the market value of, properties located in the United Kingdom and continental Europe may decline as a result of the U . K . 's discussions with respect to exiting the European Union (the “Brexit Process”) . • We may be exposed to changes in general economic, business and political conditions, including the possibility of intensified international hostilities, acts of terrorism, and changes in conditions of U . S . or international lending, capital and financing markets, including as a result of the Brexit Process .

 

 

24 PROJECTIONS • This presentation includes estimated projections of future operating results . These projections were not prepared in accordance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial projections . This information is not fact and should not be relied upon as being necessarily indicative of future results ; the projections were prepared in good faith by management and are based on numerous assumptions that may prove to be wrong . Important factors that may affect actual results and cause the projections to not be achieved include, but are not limited to, risks and uncertainties relating to the company and other factors described in the “Risk Factors” section of GNL's Annual Report on Form 10 - K for the year ended December 31 , 2017 filed with the SEC on February 27 , 2018 , and in GNL's future filings with the SEC . The projections also reflect assumptions as to certain business decisions that are subject to change . As a result, actual results may differ materially from those contained in the estimates . Accordingly, there can be no assurance that the estimates will be realized . • This presentation also contains estimates and information concerning our industry, including market position, market size, an d g rowth rates of the markets in which we participate, that are based on industry publications and reports. This information involves a numb er of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently ver ifi ed the accuracy or completeness of the data contained in these industry publications and reports. The industry in which we operate i s s ubject to a high degree of uncertainty and risk due to variety of factors, including those described in the “Risk Factors” section of GNL ’s Annual Report on Form 10 - K for the year ended December 31, 2017 filed with the SEC on February 27, 2018, and in GNL's future filings with the SEC. These and other factors could cause results to differ materially from those expressed in these publications and repo rts .

 

 

25 DEFINITIONS • Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a measure known as funds from operations ("FFO"), which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT . FFO is not equivalent to net income or loss as determined under accounting principles generally accepted in the United States ("GAAP") . • We define FFO, a non - GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (the "White Paper") . The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property but including asset impairment write - downs, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures . Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO . Our FFO calculation complies with NAREIT's definition . • The historical accounting convention used for real estate assets requires straight - line depreciation of buildings and improvements, and straight - line amortization of intangibles, which implies that the value of a real estate asset diminishes predictably over time, especially if not adequately maintained or repaired and renovated as required by relevant circumstances or as requested or required by lessees for operational purposes in order to maintain the value disclosed . We believe that, because real estate values historically rise and fall with market conditions, including inflation, interest rates, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation and certain other items may be less informative . Historical accounting for real estate involves the use of GAAP . Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP . Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, among other things, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income . However, FFO, core funds from operations ("Core FFO") and adjusted funds from operations (“AFFO”), as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance . The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non - GAAP FFO, Core FFO and AFFO measures and the adjustments to GAAP in calculating FFO, Core FFO and AFFO . Other REITs may not define FFO in accordance with the current NAREIT definition (as we do) or may interpret the current NAREIT definition differently than we do or calculate Core FFO or AFFO differently than we do . Consequently, our presentation of FFO, Core FFO and AFFO may not be comparable to other similarly titled measures presented by other REITs . • We consider FFO, Core FFO and AFFO useful indicators of our performance . Because FFO calculations exclude such factors as depreciation and amortization of real estate assets and gains or losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful - life estimates), FFO facilitates comparisons of operating performance between periods and between other REITs in our peer group .

 

 

26 DEFINITIONS (CONTINUED) • Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed - as - incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT's definition of FFO have prompted an increase in cash - settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP . • In calculating Core FFO, we start with FFO, then we exclude certain non - core items such as acquisition - and transaction - related costs, as well as certain other costs that are considered to be non - core, such as debt extinguishment costs, fire loss and other costs related to damages at our properties . The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our core business plan to generate operational income and cash flows in order to make dividend payments to stockholders . In evaluating investments in real estate, we differentiate the costs to acquire the investment from the operations derived from the investment . We also add back non - cash write - offs of deferred financing costs and prepayment penalties incurred with the early extinguishment of debt which are included in net income but are considered financing cash flows when paid in the statement of cash flows . We consider these write - offs and prepayment penalties to be capital transactions and not indicative of operations . By excluding expensed acquisition - and transaction - related costs as well as non - core costs, we believe Core FFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management's analysis of the investing and operating performance of our properties . • In calculating AFFO, we start with Core FFO, then we exclude certain income or expense items from AFFO that we consider more reflective of investing activities, other non - cash income and expense items and the income and expense effects of other activities that are not a fundamental attribute of our business plan . These items include early extinguishment of debt (adjustment included in Core FFO) and unrealized gain and loss, which may not ultimately be realized, such as gain or loss on derivative instruments, gain or loss on foreign currency transactions, and gain or loss on investments . In addition, by excluding non - cash income and expense items such as amortization of above - market and below - market leases intangibles, amortization of deferred financing costs, straight - line rent and equity - based compensation from AFFO, we believe we provide useful information regarding income and expense items which have a direct impact on our ongoing operating performance . We also include the realized gain or loss on foreign currency exchange contracts for AFFO as such items are part of our ongoing operations and affect the current operating performance of the Company . By providing AFFO, we believe we are presenting useful information that can be used to better assess the sustainability of our ongoing operating performance without the impacts of transactions that are not related to the ongoing profitability of our portfolio of properties . AFFO presented by us may not be comparable to AFFO reported by other REITs that define AFFO differently . • In calculating AFFO, we exclude certain expenses, which under GAAP are characterized as operating expenses in determining operating net income . All paid and accrued merger, acquisition and transaction related fees (including prepayment penalties for debt extinguishes) and certain other expenses negatively impact our operating performance during the period in which expenses are incurred or properties are acquired will also have negative effects on returns to investors, but are not reflective of our on - going performance . AFFO that excludes such costs and expenses would only be comparable to companies that did not have such activities . Further, under GAAP, certain contemplated non - cash fair value and other non - cash adjustments are considered operating non - cash adjustments to net income . In addition, as discussed above, we view gains and losses from fair value adjustments as items which are unrealized and may not ultimately be realized and not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance .

 

 

27 DEFINITIONS (CONTINUED) • Excluding income and expense items detailed above from our calculation of AFFO provides information consistent with management's analysis of the operating performance of the Company . Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance . By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe AFFO provides useful supplemental information . • As a result, we believe that the use of FFO, Core FFO and AFFO, together with the required GAAP presentations, provide a more complete understanding of our performance including relative to our peers and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities . • We believe that earnings before interest, taxes, depreciation and amortization (“EBITDA”) adjusted for acquisition and transaction - related expenses, other non - cash items and including our pro - rata share from unconsolidated joint ventures ("Adjusted EBITDA") is an appropriate measure of our ability to incur and service debt . Adjusted EBITDA should not be considered as an alternative to cash flows from operating activities, as a measure of our liquidity or as an alternative to net income as an indicator of our operating activities . Other REITs may calculate Adjusted EBITDA differently and our calculation should not be compared to that of other REITs . • NOI is a non - GAAP financial measure equal to net income (loss), the most directly comparable GAAP financial measure, less discontinued operations, interest, other income and income from preferred equity investments and investment securities, plus corporate general and administrative expense, acquisition and transaction - related expenses, depreciation and amortization, other non - cash expenses and interest expense . NOI is adjusted to include our pro rata share of NOI from unconsolidated joint ventures . We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level . Therefore, we believe NOI is a useful measure for evaluating the operating performance of our real estate assets and to make decisions about resource allocations . Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition activity on an unlevered basis, providing perspective not immediately apparent from net income . NOI excludes certain components from net income in order to provide results that are more closely related to a property's results of operations . For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level . In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level . NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently . We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) as presented in our consolidated financial statements . NOI should not be considered as an alternative to net income (loss) as an indication of our performance or to cash flows as a measure of our liquidity . • Cash NOI, is a non - GAAP financial measure that is intended to reflect the performance of our properties . We define Cash NOI as net operating income (which is separately defined herein) excluding amortization of above/below market lease intangibles and straight - line adjustments that are included in GAAP lease revenues . We believe that Cash NOI is a helpful measure that both investors and management can use to evaluate the current financial performance of our properties and it allows for comparison of our operating performance between periods and to other REITs . Cash NOI should not be considered as an alternative to net income, as an indication of our financial performance, or to cash flows as a measure of liquidity or our ability to fund all needs . The method by which we calculate and present Cash NOI may not be directly comparable to the way other REITs present Cash NOI .

 

 

28 NON – GAAP RECONCILIATIONS (in thousands) Three Months Ended September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2017 EBITDA: Net income $ 2,632 $ 7,743 $ 4,812 $ 8,449 Depreciation and amortization 30,195 29,813 29,496 28,558 Interest expense 15,104 14,415 12,975 12,806 Income tax expense 530 1,200 1,070 964 Equity - based compensation 2,053 (23) (832) (1,177) Non - cash portion of incentive fee 180 — — — Acquisition and transaction related 2,804 1,114 1,325 (301) Loss on disposition of real estate investments 1,933 3,818 — — Fire loss (recovery) 31 (1) (79) (150) (Gain) loss on derivative instruments (1,290) (6,333) 2,935 1,719 Unrealized (gains) losses on undesignated foreign currency advances and other hedge ineffectiveness (108) 47 43 (86) Loss on extinguishment of debt 2,612 1,285 — — Other income (44) (12) (11) (10) Adjusted EBITDA 56,632 53,066 51,734 50,772 Net Operating Income (NOI): Operating fees to related parties 6,956 7,138 6,831 6,624 General and administrative 3,215 2,556 2,051 2,357 NOI $ 66,803 $ 62,760 $ 60,616 $ 59,753 Cash Paid for Interest: Interest Expense $ 15,104 $ 14,415 $ 12,975 $ 12,806 Non - cash portion of interest expense (1,339) (1,499) (901) (1,399) Amortization of mortgage (discount) premium, net (601) (263) (267) (262) Total cash paid for interest $ 13,164 $ 12,653 $ 11,807 $ 11,145

 

 

29 NON – GAAP RECONCILIATIONS (in thousands) Three Months Ended September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2017 Funds from operations (FFO): Net income attributable to common stockholders (in accordance with GAAP) $ 177 $ 5,288 $ 2,361 $ 5,998 Depreciation and amortization 30,195 29,813 29,496 28,558 Loss on dispositions of real estate investments 1,933 3,818 — — Proportionate share of adjustments for non - controlling interest to arrive at FFO — — — (3) FFO (as defined by NAREIT) attributable to common stockholders 32,305 38,919 31,857 34,553 Acquisition and transaction fees 2,804 1,114 1,325 (301) Loss on extinguishment of debt 2,612 1,285 — — Fire loss (recovery) 31 (1) (79) (150) Proportionate share of adjustments for non - controlling interest to arrive at Core FFO — — — 1 Core FFO attributable to common stockholders 37,752 41,317 33,103 34,103 Non - cash equity - based compensation 2,053 (23) (832 ) (1,177 ) Non - cash portion of incentive fee 180 — — — Non - cash portion of interest expense 1,339 1,499 901 1,399 Amortization of above and below - market leases and ground lease assets and liabilities, net 488 500 552 533 Straight - line rent (1,492) (1,833 ) (1,503 ) (1,550) Unrealized (gains) losses on undesignated foreign currency advances and other hedge ineffectiveness (108) 47 43 (86) Eliminate unrealized (gains) losses on foreign currency transactions (1,215) (6,256) 2,550 1,681 Amortization of mortgage discounts and premiums, net 601 263 267 262 Adjusted funds from operations (AFFO) attributable to common stockholders $ 39,598 $ 35,514 $ 35,081 $ 35,165

 

 

30 AFFO RECONCILIATIONS Three Months Ended September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017 Funds from operations (FFO): Net income attributable to common stockholders (in accordance with GAAP) $ 177 $ 5,288 $ 2,361 $ 5,998 $ 2,104 $ 5,200 $ 7,429 Depreciation and amortization 30,195 29,813 29,496 28,558 29,879 27,497 27,114 Loss (gain) on dispositions of real estate investments 1,933 3,818 — — (275) 143 (957) Proportionate share of adjustments for non - controlling interest to arrive at FFO — — — (3) — (4) (71) FFO (as defined by NAREIT) attributable to stockholders 32,305 38,919 31,857 34,553 31,708 32,836 33,515 Acquisition and transaction fees 2,804 1,114 1,325 (301) 1,141 443 696 Loss on extinguishment of debt 2,612 1,285 — — — — — Fire loss (recovery) 31 (1) (79) (150) (305) 500 — Proportionate share of adjustments for non - controlling interest to arrive at Core FFO — — — 1 — — (2) Listing Fees — — — — — — — Change in fair value of Listing Note — — — — — — — Core FFO attributable to stockholders 37,752 41,317 33,103 34,103 32,544 33,779 34,209 Non - cash equity based compensation 2,053 (23) (832) (1,177) (391) (2,235) 16 Non - cash portion of incentive fee 180 — — — — — — Non - cash portion of interest expense 1,339 1,499 901 1,399 1,198 943 880 Realized losses on investment securities — — — — — — — Non - recurring general and administrative expenses — — — — — — — Amortization of above and below - market leases and ground lease assets and liabilities, net 488 500 552 533 489 504 404 Straight - line rent (1,492) (1,833) (1,503) (1,550) (2,070) (3,039) (3,878) Unrealized (gains) losses on undesignated foreign currency advances and other hedge ineffectiveness (108) 47 43 (86) (88) 2,971 882 Unrealized losses on non - functional foreign currency advances not designated as net investment hedges — — — — — — — Eliminate unrealized losses (gains) on foreign currency transactions (1,215) (6,256) 2,550 1,681 3,598 3,111 1,792 Amortization of mortgage discounts and premiums, net 601 263 267 262 261 151 153 Deferred tax benefit — — — — (693) — — Proportionate share of adjustments for non - controlling interest to arrive at AFFO — — — — — (3) (1) Adjusted funds from operations (AFFO) attributable to stockholders $ 39,598 $ 35,514 $ 35,081 $ 35,165 $ 34,848 $ 36,182 $ 34,457 Basic weighted average shares outstanding 69,442 67,292 67,287 67,287 67,287 66,652 66,271 Diluted weighted average shares outstanding 69,442 67,292 67,528 67,287 67,287 66,652 66,271 FFO per share $ 0.47 $ 0.58 $ 0.47 $ 0.51 $ 0.47 $ 0.49 $ 0.51 Core FFO per share $ 0.54 $ 0.61 $ 0.49 $ 0.51 $ 0.48 $ 0.51 $ 0.52 Dividends declared $ 36,769 $ 35,828 $ 35,833 $ 35,955 $ 35,857 $ 35,492 $ 35,288

 

 

31 AFFO RECONCILIATIONS Three Months Ended December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016 December 31, 2015 September 30, 2015 Funds from operations (FFO): Net income attributable to common stockholders (in accordance with GAAP) $ 15,946 $ 8,943 $ 15,763 $ 6,488 $ 12,312 $ 5,432 Depreciation and amortization 23,405 23,482 23,812 23,756 23,918 22,949 Loss (gain) on dispositions of real estate investments (10,521) (1,320) — — — — Proportionate share of adjustments for non - controlling interest to arrive at FFO 17 (182) (252) (252) (253) (243) FFO (as defined by NAREIT) attributable to stockholders 28,847 30,923 39,323 29,992 35,977 28,138 Acquisition and transaction fees 7,415 2,479 27 (129) 76 4,680 Loss on extinguishment of debt — — — — — — Fire loss (recovery) — — — — — — Proportionate share of adjustments for non - controlling interest to arrive at Core FFO (60) (20) — 1 33 (38) Listing Fees — — — — 150 — Change in fair value of Listing Note — — — — (3,380) (1,050) Core FFO attributable to stockholders 36,202 33,382 39,350 29,864 32,856 31,730 Non - cash equity based compensation 1,341 1,293 70 1,044 (90) 1,917 Non - cash portion of incentive fee — — — — — — Non - cash portion of interest expense 929 951 2,400 2,418 2,365 2,306 Realized losses on investment securities — — — — — 66 Non - recurring general and administrative expenses — — — — 302 — Amortization of above and below - market leases and ground lease assets and liabilities, net 28 (58) (27) 16 (52) 94 Straight - line rent (2,554) (2,536) (2,722) (2,801) (3,236) (3,697) Unrealized (gains) losses on undesignated foreign currency advances and other hedge ineffectiveness (4,496) (1,459) (4,252) 98 (2,679) (1,505) Unrealized losses on non - functional foreign currency advances not designated as net investment hedges — — — — 623 — Eliminate unrealized losses (gains) on foreign currency transactions (2,140) 1,606 (2,347) 1,809 (1,903) (2,255) Amortization of mortgage discounts and premiums, net (76) (121) (119) (121) (122) (123) Deferred tax benefit — — — — — — Proportionate share of adjustments for non - controlling interest to arrive at AFFO 38 3 74 (26) 51 35 Adjusted funds from operations (AFFO) attributable to stockholders $ 29,272 $ 33,061 $ 32,427 $ 32,301 $ 28,115 $ 28,568 Basic weighted average shares outstanding 57,781 56,463 56,316 56,312 56,312 56,316 Diluted weighted average shares outstanding 57,781 56,463 56,316 56,312 56,312 56,316 FFO per share $ 0.17 $ 0.18 $ 0.23 $ 0.18 $ 0.21 $ 0.17 Core FFO per share $ 0.21 $ 0.20 $ 0.23 $ 0.18 $ 0.19 $ 0.19 Dividends declared $ 30,250 $ 30,097 $ 30,019 $ 30,020 $ 29,985 $ 29,993

 

 

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