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Section 1: 8-K (8-K GNL EARNINGS RELEASE 12.31.18)

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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):  February 27, 2019
 
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 February 27, 2019, Global Net Lease, Inc. (the “Company”) issued a press release announcing its results of operations for the quarter and year ended December 31, 2018, and supplemental financial information for the quarter and year ended December 31, 2018, attached hereto as Exhibits 99.1 and 99.2, respectively.
 
Item 7.01. Regulation FD Disclosure.
 
Press Release and Supplemental Information
 
As disclosed in Item 2.02 above, on February 27, 2019, the Company issued a press release announcing its results of operations for the quarter and year ended December 31, 2018, and supplemental financial information for the quarter and year ended December 31, 2018, attached hereto as Exhibits 99.1 and 99.2, respectively. The information set forth in Item 7.01 of this Current Report on Form 8-K and in the attached Exhibits 99.1 and 99.2 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 and 99.2, 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 Annual Report on Form 10-K for the year ended December 31, 2017 filed on February 28, 2018 and all other filings with the SEC after that date. 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
 
Press release dated February 27, 2019
 
Quarterly supplemental information for the quarter and year ended December 31, 2018


























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: February 27, 2019
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 GNL EARNINGS RELEASE 12.31.18)

Exhibit


EXHIBIT 99.1
396895353_image3a20.gif

FOR IMMEDIATE RELEASE
 
         GLOBAL NET LEASE REPORTS FOURTH QUARTER AND FULL YEAR 2018 RESULTS
                  Company to Host Investor Conference Call Today at 11 AM Eastern

New York, February 27, 2019 - 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 quarter and year ended December 31, 2018.

Fourth Quarter 2018 Highlights

Revenue increased 6.9% to $71.2 million from $66.6 million in fourth quarter 2017
Net loss attributable to common stockholders was $6.7 million and net loss attributable to common stockholders per share was $0.09
Core Funds from Operations (“Core FFO”) increased 8.3% on a year-over-year basis to $36.9 million or $0.50 per share
Adjusted EBITDA increased 5.1% year-over-year to $53.4 million
Adjusted Funds from Operations (“AFFO”) improved 5.6% to $37.1 million, as compared to $35.2 million in the prior year fourth quarter
The Company believes it has an agreement in principal with our former European service provider regarding an anticipated resolution of our outstanding litigation for $7.4 million, resulting in a one-time, non-recurring reserve that affects net income and FFO but has no impact to the Company's AFFO
Closed on the acquisition of six properties for approximately $212 million
The acquired properties provided nominal rental income for the period as the closings occurred on or after November 14th, with four of the six properties closed in the second half of December
Closed on a 10-year $98.5 million multi-property mortgage loan, with a fixed interest rate of 4.9% and a 2028 maturity
Raised gross equity proceeds of $80.8 million
Paid common stock dividends for the quarter of $39.1 million
Weighted average shares outstanding for the respective periods were 74,001,263 and 67,286,822


Full Year 2018 Highlights

Revenue increased 8.8% year-over-year to $282.2 million
Net income attributable to common stockholders was $1.1 million, which includes a one-time $7.4 million reserve for an anticipated resolution with our former European service provider, representing a decrease of $0.29 cents per share
Core FFO increased 10.8%, or $0.13 per share on a year-over-year basis
Adjusted EBITDA increased 8.9% or $17.5 million to $214.8 million on a year-over-year basis
AFFO improved 4.7% to $147.3 million, inclusive of a $3.0 million lease termination fee as compared to $140.7 million in the prior year
Portfolio 99.2% leased with an 8.3 year weighted average remaining lease term at year end
78.3% of tenants rated as investment grade or implied investment grade1 
Closed on the acquisition of 23 properties totaling 5.0 million square feet for a contract sales price of approximately $478.0 million
Closed on an eight-property $33.0 million CMBS loan with a 10-year term
Closed an upsizing of its unsecured credit facility of $132.0 million for the multi-currency revolving credit facility portion of the facility and €51.8 million for the senior unsecured term loan facility portion
Secured new UK five year £230.0 million multi-property financing
Raised gross equity proceeds of $179.3 million
Debt maturity is 4.2 years as compared to 3.7 years at the end of the fourth quarter 2017
Weighted average shares outstanding for the respective periods were 69,663,208 and 66,877,620


James Nelson, Chief Executive Officer of GNL, commented, “In 2018 we advanced our long term strategy significantly. Our operating results were strong, setting the foundation for continued growth. We acquired close to half a billion dollars in net leased real estate including $212 million acquired during the fourth quarter. We funded much of that growth through our ability to opportunistically access the capital markets throughout the year. These steps further solidified our balance sheet and position us well to fund future growth and build shareholder value."









 
 
Quarter Ended December 31,
 
Year Ended December 31,
(In thousands, except per share data)
 
2018
 
2017
 
2018
 
2017
Revenue
 
$
71,226

 
$
66,602

 
$
282,207

 
$
259,295

 
 
 
 
 
 
 
 
 
Net (loss) income attributable to common stockholders
 
$
(6,744
)
 
$
5,998

 
$
1,082

 
$
20,731

Net (loss) income per common share
 
$
(0.09
)
 
$
0.09

 
$
0.01

 
$
0.30

 
 
 
 
 
 
 
 
 
NAREIT defined FFO attributable to common stockholders
 
$
28,334

 
$
34,553

 
$
131,415

 
$
132,612

FFO per common share
 
$
0.38

 
$
0.51

 
$
1.89

 
$
1.98

 
 
 
 
 
 
 
 
 
Core FFO attributable to common stockholders
 
$
36,940

 
$
34,103

 
$
149,112

 
$
134,635

Core FFO per common share
 
$
0.50

 
$
0.51

 
$
2.14

 
$
2.01

 
 
 
 
 
 
 
 
 
AFFO attributable to common stockholders
 
$
37,137

 
$
35,165

 
$
147,330

 
$
140,652


Property Portfolio
 
At December 31, 2018 the Company’s portfolio consisted of 342 net lease properties located in seven countries and comprises of 27.5 million rentable square feet leased to 111 tenants across 44 industries. The real estate portfolio metrics include:

99.2% leased with a remaining weighted-average lease term of 8.3 years
92.0% of the portfolio contains contractual rent increases based on square footage
78.3% of portfolio annualized straight-line rent derived from investment grade and implied investment grade rated tenants
55.7% U.S. and 44.3% Europe (based on annualized straight-line rent)
53% Office, 39% Industrial / Distribution and 8% Retail (based on an annualized straight-line rent)

Acquisition Highlights

During the fourth quarter, the Company closed on the acquisition of six net leased assets totaling approximately 1.3 million square feet for a contract sales price of approximately $212 million. The facilities are all located within the U.S., specifically, Michigan, Massachusetts, Alabama, Pennsylvania and Kansas. The assets were purchased at a weighted average going-in capitalization rate of 6.67%2, equating to a weighted average capitalization rate of 7.23%3, with a weighted average remaining lease term of 12.3 years4.


Full Year Acquisition Highlights

During the year, the Company closed on acquisitions of 23 net leased assets totaling approximately 5.0 million square feet, for a contract sales price of approximately $478.0 million. All of the acquired properties are located within the continental U.S. The properties were purchased at a weighted average going-in capitalization rate of 7.21%2, equating to a weighted average capitalization rate of 7.703, with a weighted average remaining lease term of 11.6 years4.






396895353_chart.jpg

Capital Structure and Liquidity Resources

As of December 31, 2018, the Company had $100.3 million of cash and cash equivalents. The Company’s net debt to enterprise value was 53.3% with an enterprise value of $3.2 billion based on the December 31, 2018 closing share price of $17.62 for common shares and $24.68 for the Series A preferred stock, with net debt of $1.7 billion, including $1.1 billion of mortgage debt. The net debt to enterprise value would improve to 50.8% if the calculation was based on closing share prices from February 22nd of $19.67 for common stock and $25.17 for Series A preferred stock.

On November 28, 2018 the Company completed an underwritten public offering of four million shares of common stock at a public offering price of $20.20 per share. The net proceeds from this offering of approximately $77.5 million were used to fund acquisitions, as well as for general corporate purposes.

Year-over-year the percentage of fixed rate debt (including variable rate debt fixed with swaps) decreased to 79.9%5 from 86.9% as of December 31, 2017. The Company’s total combined debt had a weighted average interest rate cost of 3.1% resulting in an interest coverage ratio of 3.8 times. Debt maturity is 4.2 years as compared to 3.7 years at the end of the fourth quarter 2017.
 
Subsequent to the quarter end, the Company raised gross proceeds of approximately $152.8 million at $19.69 per share through its ATM in Q1 2019.

Footnotes/Definitions

1  As 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 December 31, 2018. Comprised of 39.0% leased to tenants with an actual investment grade rating and 39.3% leased to tenants with an Implied Investment Grade rating as of December 31, 2018.
2 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 feet of the date of acquisition.
3 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. 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 capitalization rate is based upon square feet as of the date of acquisition.
4 The weighted average remaining lease term in years is based upon square feet as of the date of acquisition.
5 Inclusive 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 February 27, 2019 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: 5568103
 
 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: 10128753
 
*Available one hour after the end of the conference call through May 27, 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 Annual Report on Form 10-K for the year ended December 31, 2017 filed on February 28, 2018 and all other filings with the SEC after that date, 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
(In thousands)


 
 
December 31,
 
 
2018
 
2017
ASSETS
 
(Unaudited)
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
398,911

 
$
402,318

Buildings, fixtures and improvements
 
2,345,202

 
2,138,405

Construction in progress
 
1,235

 
2,328

Acquired intangible lease assets
 
675,551

 
629,626

Total real estate investments, at cost
 
3,420,899

 
3,172,677

Less: accumulated depreciation and amortization
 
(437,974
)
 
(339,931
)
Total real estate investments, net
 
2,982,925

 
2,832,746

Assets held for sale
 
112,902

 

Cash and cash equivalents
 
100,324

 
102,425

Restricted cash
 
3,369

 
5,302

Derivative assets, at fair value
 
8,730

 
2,176

Unbilled straight-line rent
 
47,183

 
42,739

Prepaid expenses and other assets
 
22,245

 
22,617

Due from related parties
 
16

 
16

Deferred tax assets
 
3,293

 
1,029

Goodwill and other intangible assets, net
 
22,180

 
22,771

Deferred financing costs, net
 
6,311

 
6,774

Total Assets
 
$
3,309,478

 
$
3,038,595

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net
 
$
1,129,807

 
$
984,876

Revolving credit facility
 
363,894

 
298,909

Term loan, net
 
278,727

 
229,905

Acquired intangible lease liabilities, net
 
35,757

 
31,388

Derivative liabilities, at fair value
 
3,886

 
15,791

Due to related parties
 
790

 
829

Accounts payable and accrued expenses
 
31,529

 
23,227

Prepaid rent
 
16,223

 
18,535

Deferred tax liability
 
15,227

 
15,861

Taxes payable
 
2,228

 
2,475

Dividends payable
 
2,664

 
2,556

Total Liabilities
 
1,880,732

 
1,624,352

Commitments and contingencies
 
 
 
 
Stockholders' Equity:
 
 
 
 
7.25% Series A cumulative redeemable preferred shares
 
54

 
54

Common stock
 
2,091

 
2,003

Additional paid-in capital
 
2,031,981

 
1,860,058

Accumulated other comprehensive income
 
6,810

 
19,447

Accumulated deficit
 
(615,448
)
 
(468,396
)
Total Stockholders' Equity
 
1,425,488

 
1,413,166

Non-controlling interest
 
3,258

 
1,077

Total Equity
 
1,428,746

 
1,414,243

Total Liabilities and Equity
 
$
3,309,478

 
$
3,038,595







Global Net Lease, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)

 
 
Three Months Ended
 
Year Ended
 
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
 
 
(Unaudited) 
 
(Unaudited) 
 
(Unaudited) 
 
 
Revenues:
 
 
 
 
 
 
 
 
Rental income
 
$
67,283

 
$
62,556

 
$
265,298

 
$
242,532

Operating expense reimbursements
 
3,943

 
4,046

 
16,909

 
16,763

Total revenues
 
71,226

 
66,602

 
282,207

 
259,295

 
 
 
 
 
 
 
 
 
 Expenses:
 
 
 
 
 
 
 
 
Property operating
 
7,750

 
6,849

 
28,732

 
28,857

Fire (recovery) loss
 
(1
)
 
(150
)
 
(50
)
 
45

Operating fees to related parties
 
7,309

 
6,624

 
28,234

 
24,457

Impairment charges and related lease intangible write-offs
 
5,000

 

 
5,000

 

Acquisition, transaction and other costs
 
8,607

 
(301
)
 
13,850

 
1,979

General and administrative
 
2,617

 
2,357

 
10,439

 
8,648

Equity based compensation
 
1,451

 
(1,177
)
 
2,649

 
(3,787
)
Depreciation and amortization
 
30,078

 
28,558

 
119,582

 
113,048

       Total expenses
 
62,811

 
42,760

 
208,436

 
173,247

Operating income before loss gain on dispositions of real estate investments
 
8,415

 
23,842

 
73,771

 
86,048

Loss on dispositions of real estate investments
 

 

 
(5,751
)
 
1,089

Operating income
 
8,415

 
23,842

 
68,020

 
87,137

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(15,479
)
 
(12,806
)
 
(57,973
)
 
(48,450
)
Loss on extinguishment of debt
 

 

 
(3,897
)
 

Gain (loss) on derivative instruments
 
2,950

 
(1,719
)
 
7,638

 
(8,304
)
Unrealized (loss) gain on undesignated foreign currency advances and other hedge ineffectiveness
 
(452
)
 
86

 
(434
)
 
(3,679
)
Other (expense) income
 
(90
)
 
10

 
(23
)
 
22

       Total other expense, net
 
(13,071
)
 
(14,429
)
 
(54,689
)
 
(60,411
)
Net (loss) income before income tax
 
(4,656
)
 
9,413

 
13,331

 
26,726

Income tax (benefit) expense
 
366

 
(964
)
 
(2,434
)
 
(3,140
)
Net (loss) income
 
(4,290
)
 
8,449

 
10,897

 
23,586

Net income attributable to non-controlling interest
 

 

 

 
(21
)
Preferred stock dividends
 
(2,454
)
 
(2,451
)
 
(9,815
)
 
(2,834
)
Net (loss) income attributable to common stockholders
 
$
(6,744
)
 
$
5,998

 
$
1,082

 
$
20,731

 
 
 
 
 
 
 
 
 
Basic and Diluted (Loss) Earnings Per Share:
 
 
 
 
 
 
 
 
Basic and diluted net (loss) income per share attributable to common stockholders
 
$
(0.09
)
 
$
0.09

 
$
0.01

 
$
0.30

Weighted Average Shares Outstanding:
 
 
 
 
 
 
 
 
Basic
 
73,554

 
67,287

 
69,411

 
66,878

Diluted
 
74,001

 
67,287

 
69,663

 
66,878










Global Net Lease, Inc.
Quarterly Reconciliation of Non-GAAP Measures (Unaudited)
(In thousands)
 
 
 
Three Months Ended
 
Year Ended
 
 
March 31, 2018
 
June 30,
2018
 
September 30, 2018
 
December 31, 2018
 
December 31, 2018
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
4,812

 
$
7,743

 
$
2,632

 
$
(4,290
)
 
$
10,897

Depreciation and amortization
 
29,496

 
29,813

 
30,195

 
30,078

 
119,582

Interest expense
 
12,975

 
14,415

 
15,104

 
15,479

 
57,973

Income tax expense (benefit)
 
1,070

 
1,200

 
530

 
(366
)
 
2,434

Impairment charges and related lease intangible write-offs
 

 

 

 
5,000

 
5,000

Equity-based compensation
 
(832
)
 
(23
)
 
2,053

 
1,451

 
2,649

Non-cash portion of incentive fee
 

 

 
180

 
(180
)
 

Acquisition, transaction and other costs
 
1,325

 
1,114

 
2,804

 
8,607

 
13,850

Loss on dispositions of real estate investments
 

 
3,818

 
1,933

 

 
5,751

Fire (recovery) loss
 
(79
)
 
(1
)
 
31

 
(1
)
 
(50
)
Loss (gain) on derivative instruments
 
2,935

 
(6,333
)
 
(1,290
)
 
(2,950
)
 
(7,638
)
Unrealized loss (gain) on undesignated foreign currency advances and other hedge ineffectiveness
 
43

 
47

 
(108
)
 
452

 
434

Loss on extinguishment of debt
 

 
1,285

 
2,612

 

 
3,897

Other (income) expense
 
(11
)
 
(12
)
 
(44
)
 
90

 
23

Adjusted EBITDA
 
51,734

 
53,066

 
56,632

 
53,370

 
214,802

Operating fees to related parties
 
6,831

 
7,138

 
6,956

 
7,309

 
28,234

General and administrative
 
2,051

 
2,556

 
3,215

 
2,617

 
10,439

NOI
 
$
60,616

 
$
62,760

 
$
66,803

 
$
63,296

 
$
253,475








Global Net Lease, Inc.
Quarterly Reconciliation of Non-GAAP Measures (Unaudited)
(In thousands)

 
 
Three Months Ended
 
Year Ended
 
 
March 31, 2018
 
June 30,
2018
 
September 30, 2018
 
December 31, 2018
 
December 31, 2018
Funds from operations (FFO):
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders (in accordance with GAAP)
 
$
2,361

 
$
5,288

 
$
177

 
$
(6,744
)
 
$
1,082

  Impairment charges and related lease intangible write-offs
 

 

 

 
5,000

 
5,000

   Depreciation and amortization
 
29,496

 
29,813

 
30,195

 
30,078

 
119,582

   Loss on dispositions of real estate investments
 

 
3,818

 
1,933

 

 
5,751

FFO (defined by NAREIT)
 
31,857

 
38,919

 
32,305

 
28,334

 
131,415

   Acquisition, transaction and other costs [1]
 
1,325

 
1,114

 
2,804

 
8,607

 
13,850

   Loss on extinguishment of debt [2]
 

 
1,285

 
2,612

 

 
3,897

   Fire (recovery) loss [3]
 
(79
)
 
(1
)
 
31

 
(1
)
 
(50
)
Core FFO attributable to common stockholders
 
33,103

 
41,317

 
37,752

 
36,940

 
149,112

   Non-cash equity-based compensation
 
(832
)
 
(23
)
 
2,053

 
1,451

 
2,649

   Non-cash portion of incentive fee
 

 

 
180

 
(180
)
 

   Non-cash portion of interest expense
 
901

 
1,499

 
1,339

 
1,454

 
5,193

   Amortization of above- and below-market leases and ground lease assets and liabilities, net
 
552

 
500

 
488

 
590

 
2,130

   Straight-line rent
 
(1,503
)
 
(1,833
)
 
(1,492
)
 
(1,482
)
 
(6,310
)
   Unrealized loss (gain) on undesignated foreign currency advances and other hedge ineffectiveness
 
43

 
47

 
(108
)
 
452

 
434

   Eliminate unrealized losses (gains) on foreign currency transactions [4]
 
2,550

 
(6,256
)
 
(1,215
)
 
(2,206
)
 
(7,127
)
   Amortization of mortgage discounts and premiums, net
 
267

 
263

 
601

 
118

 
1,249

Adjusted funds from operations (AFFO) attributable to common stockholders [5]
 
$
35,081

 
$
35,514

 
$
39,598

 
$
37,137

 
$
147,330


Footnotes:
[1] For the year ended December 31, 2018, acquisition, transaction and other costs are comprised of expenses incurred in connection with litigation related to the termination of the Former Service Provider totaling $10.3 million, of which $7.4 million relates to a reserve recorded for the anticipated settlement of this litigation and $2.9 million relates to legal costs. In addition, acquisition, transaction and other costs include $1.6 million in fees associated with the exploration of a potential foreign equity offering, $1.3 million in various legal and professional fees related to financing activities and $0.7 million of other costs.
[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, transaction and other costs 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 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 June 30, 2018, gains on derivative instruments were $6.3 million which primarily comprised of unrealized gains. 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 December 31, 2018, gains on derivative instruments were $3.0 million, which were comprised of unrealized gains of $2.2 million and realized gains of $0.8 million. For the year ended December 31, 2018, gains on derivative instruments were $7.6 million, which were comprised of unrealized gains of $7.1 million and realized gains of $0.5 million.
[5] AFFO for the three months ended September 30, 2018 and year ended December 31, 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.

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 operating 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 over time by the Board of Governors of NAREIT, as restated in a White Paper approved by the Board of Governors of NAREIT effective in December 2018 (the "White Paper"). The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. 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, transaction and other 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, transaction and other 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 our current operating performance. 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, transaction and other costs (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 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 our operating performance. 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, transaction and other costs, 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, transaction and other costs, 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.



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Section 3: EX-99.2 (EXHIBIT 99.2 GNL SUPPLEMENTAL 12.31.18)

Exhibit
EXHIBIT 99.2






Global Net Lease, Inc.
Supplemental Information

Quarter ended December 31, 2018 (unaudited)





Global Net Lease, Inc.
Supplemental Information
Quarter ended December 31, 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 all other filings with the Securities and Exchange Commission after that date. 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 December 31, 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.
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 operating 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 over time by the Board of Governors of NAREIT, as restated in a White Paper approved by the Board of Governors of NAREIT effective in December 2018 (the "White Paper"). The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. 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 December 31, 2018 (Unaudited)

Core Funds From Operations
In calculating Core FFO, we start with FFO, then we exclude certain non-core items such as acquisition, transaction and other 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, transaction and other 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 our current operating performance. 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, transaction and other costs (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 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 our operating performance. 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, 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, transaction and other costs, 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, transaction and other costs, depreciation and amortization, other non-

4


Global Net Lease, Inc.
Supplemental Information
Quarter ended December 31, 2018 (Unaudited)

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 December 31, 2018 (Unaudited)

Key Metrics
As of and for the three months ended December 31, 2018
Amounts in thousands, except per share data, ratios and percentages
Financial Results
 
 
Rental Income
 
$
67,283

Net (loss) attributable to common stockholders
 
$
(6,744
)
Basic and diluted net (loss) per share attributable to common stockholders [1]
 
$
(0.09
)
Cash NOI [2]
 
$
62,404

Adjusted EBITDA [2]
 
$
53,370

AFFO attributable to common stockholders [2]
 
$
37,137

Dividends paid per share - fourth quarter
 
$
0.53

Dividend yield - annualized, based on quarter end share price
 
12.1
%
 
 
 
Balance Sheet and Capitalization
 
 
Equity market capitalization - based on quarter end share price of $17.62 for common shares and $24.68 for preferred shares
 
$
1,474,230

Net debt [3] [4]
 
1,685,752

Enterprise value
 
3,159,982

 
 
 
Total capitalization
 
3,260,306

 
 
 
Total consolidated debt [4]
 
1,786,076

Total assets
 
3,309,478

Liquidity [5]
 
142,567

 
 
 
Common shares outstanding as of December 31, 2018 (thousands)
 
76,081

Share price, end of quarter
 
$
17.62

 
 
 
Net debt to enterprise value
 
53.3
%
Net debt to adjusted EBITDA (annualized based on current quarter results)
 
7.9
x
 
 
 
Weighted-average interest rate cost [6]
 
3.1
%
Weighted-average debt maturity (years) [7]
 
4.2

Interest Coverage Ratio [8]
 
3.8
x
 
 
 
Real Estate Portfolio
 
 
Number of properties
 
342

Number of tenants
 
111

 
 
 
Square footage (millions)
 
27.5

Leased
 
99.2
%
Weighted-average remaining lease term (years) [9]
 
8.3

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 $42.2 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 December  31, 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 December 31, 2018


Consolidated Balance Sheets
Amounts in thousands
 
 
December 31,
 
 
2018
 
2017
 
 
(Unaudited)
 
 
ASSETS
 
 
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
398,911

 
$
402,318

Buildings, fixtures and improvements
 
2,345,202

 
2,138,405

Construction in progress
 
1,235

 
2,328

Acquired intangible lease assets
 
675,551

 
629,626

Total real estate investments, at cost
 
3,420,899

 
3,172,677

Less accumulated depreciation and amortization
 
(437,974
)
 
(339,931
)
Total real estate investments, net
 
2,982,925

 
2,832,746

Assets held for sale
 
112,902

 

Cash and cash equivalents
 
100,324

 
102,425

Restricted cash
 
3,369

 
5,302

Derivative assets, at fair value
 
8,730

 
2,176

Unbilled straight-line rent
 
47,183

 
42,739

Prepaid expenses and other assets
 
22,245

 
22,617

Due from related parties
 
16

 
16

Deferred tax assets
 
3,293

 
1,029

Goodwill and other intangible assets, net
 
22,180

 
22,771

Deferred financing costs, net
 
6,311

 
6,774

Total Assets
 
$
3,309,478

 
$
3,038,595

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net
 
$
1,129,807

 
$
984,876

Revolving credit facility
 
363,894

 
298,909

Term loan, net
 
278,727

 
229,905

Acquired intangible lease liabilities, net
 
35,757

 
31,388

Derivative liabilities, at fair value
 
3,886

 
15,791

Due to related parties
 
790

 
829

Accounts payable and accrued expenses
 
31,529

 
23,227

Prepaid rent
 
16,223

 
18,535

Deferred tax liability
 
15,227

 
15,861

Taxes payable
 
2,228

 
2,475

Dividends payable
 
2,664

 
2,556

Total Liabilities
 
1,880,732

 
1,624,352

Commitments and contingencies
 

 

Stockholders' Equity:
 
 
 
 
7.25% Series A cumulative redeemable preferred shares
 
54

 
54

Common stock
 
2,091

 
2,003

Additional paid-in capital
 
2,031,981

 
1,860,058

Accumulated other comprehensive income
 
6,810

 
19,447

Accumulated deficit
 
(615,448
)
 
(468,396
)
Total Stockholders' Equity
 
1,425,488

 
1,413,166

Non-controlling interest
 
3,258

 
1,077

Total Equity
 
1,428,746

 
1,414,243

Total Liabilities and Equity
 
$
3,309,478

 
$
3,038,595



7


Global Net Lease, Inc.
Supplemental Information
Quarter ended December 31, 2018 (Unaudited)

Consolidated Statements of Operations
Amounts in thousands, except per share data

 
 
Three Months Ended
 
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
Revenues:
 
 
 
 
 
 
 
 
Rental income
 
$
67,283

 
$
68,661

 
$
65,562

 
$
63,792

Operating expense reimbursements
 
3,943

 
3,263

 
5,409

 
4,294

Total revenues
 
71,226

 
71,924

 
70,971

 
68,086

 
 
 
 
 
 
 
 
 
 Expenses:
 
 
 
 
 
 
 
 
Property operating
 
7,750

 
5,301

 
8,211

 
7,470

Fire (recovery) loss
 
(1
)
 
31

 
(1
)
 
(79
)
Operating fees to related parties
 
7,309

 
6,956

 
7,138

 
6,831

Impairment charges and related lease intangible write-offs
 
5,000

 

 

 

Acquisition, transaction and other costs
 
8,607

 
2,804

 
1,114

 
1,325

General and administrative
 
2,617

 
3,215

 
2,556

 
2,051

Equity-based compensation
 
1,451

 
2,053

 
(23
)
 
(832
)
Depreciation and amortization
 
30,078

 
30,195

 
29,813

 
29,496

Total expenses
 
62,811

 
50,555

 
48,808

 
46,262

Operating income before loss on dispositions of real estate investments
 
8,415

 
21,369

 
22,163

 
21,824

Loss on dispositions of real estate investments
 

 
(1,933
)
 
(3,818
)
 

Operating income
 
8,415

 
19,436

 
18,345

 
21,824

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(15,479
)
 
(15,104
)
 
(14,415
)
 
(12,975
)
Loss on extinguishment of debt
 

 
(2,612
)
 
(1,285
)
 

Gain on derivative instruments
 
2,950

 
1,290

 
6,333

 
(2,935
)
Unrealized (loss) gain on undesignated foreign currency advances and other hedge ineffectiveness
 
(452
)
 
108

 
(47
)
 
(43
)
Other (expense) income
 
(90
)
 
44

 
12

 
11

Total other expense, net
 
(13,071
)
 
(16,274
)
 
(9,402
)
 
(15,942
)
Net (loss) income before income tax
 
(4,656
)
 
3,162

 
8,943

 
5,882

Income tax expense
 
366

 
(530
)
 
(1,200
)
 
(1,070
)
Net (loss) income
 
(4,290
)
 
2,632

 
7,743

 
4,812

Preferred stock dividends
 
(2,454
)
 
(2,455
)
 
(2,455
)
 
(2,451
)
Net (loss) income attributable to common stockholders
 
$
(6,744
)
 
$
177

 
$
5,288

 
$
2,361

 
 
 
 
 
 
 
 
 
Basic and Diluted (Loss) Earnings Per Share:
 
 
 
 
 
 
 
 
Basic and diluted net (loss) income per share attributable to common stockholders
 
$
(0.09
)
 
$

 
$
0.08

 
$
0.03

Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
73,554

 
69,442

 
67,292

 
67,287

Diluted
 
74,001

 
69,442

 
67,292

 
67,287



8


Global Net Lease, Inc.
Supplemental Information
Quarter ended December 31, 2018 (Unaudited)

Non-GAAP Measures
Amounts in thousands, except per share data
 
 
Three Months Ended
 
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
EBITDA:
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(4,290
)
 
$
2,632

 
$
7,743

 
$
4,812

Depreciation and amortization
 
30,078

 
30,195

 
29,813

 
29,496

Interest expense
 
15,479

 
15,104

 
14,415

 
12,975

Income tax (benefit) expense
 
(366
)
 
530

 
1,200

 
1,070

   EBITDA
 
40,901

 
48,461

 
53,171

 
48,353

Impairment charges and related lease intangible write-offs
 
5,000

 

 

 

Equity-based compensation
 
1,451

 
2,053

 
(23
)
 
(832
)
Non-cash portion of incentive fee
 
(180
)
 
180

 

 

Acquisition, transaction and other costs
 
8,607

 
2,804

 
1,114

 
1,325

Loss on dispositions of real estate investments
 

 
1,933

 
3,818

 

Fire (recovery) loss
 
(1
)
 
31

 
(1
)
 
(79
)
(Gain) loss on derivative instruments
 
(2,950
)
 
(1,290
)
 
(6,333
)
 
2,935

Unrealized loss (gain) on undesignated foreign currency advances and other hedge ineffectiveness
 
452

 
(108
)
 
47

 
43

Loss on extinguishment of debt
 

 
2,612

 
1,285

 

Other expense (income)
 
90

 
(44
)
 
(12
)
 
(11
)
   Adjusted EBITDA
 
53,370

 
56,632

 
53,066

 
51,734

Operating fees to related parties
 
7,309

 
6,956

 
7,138

 
6,831

General and administrative
 
2,617

 
3,215

 
2,556

 
2,051

   NOI
 
63,296

 
66,803

 
62,760

 
60,616

Amortization of above- and below- market leases and ground lease assets and liabilities, net
 
590

 
488

 
500

 
552

Straight-line rent
 
(1,482
)
 
(1,492
)
 
(1,833
)
 
(1,503
)
  Cash NOI
 
$
62,404

 
$
65,799

 
$
61,427

 
$
59,665

 
 
 
 
 
 
 
 
 
Cash Paid for Interest:
 
 
 
 
 
 
 
 
   Interest expense
 
$
15,479

 
$
15,104

 
$
14,415

 
$
12,975

   Non-cash portion of interest expense
 
(1,454
)
 
(1,339
)
 
(1,499
)
 
(901
)
   Amortization of mortgage discounts and premiums, net
 
(118
)
 
(601
)
 
(263
)
 
(267
)
   Total cash paid for interest
 
$
13,907

 
$
13,164

 
$
12,653

 
$
11,807




9


Global Net Lease, Inc.
Supplemental Information
Quarter ended December 31, 2018 (Unaudited)

Non-GAAP Measures
Amounts in thousands, except per share data
 
 
Three Months Ended
 
 
December 31, 2018
 
September 30, 2018
 
June 30,
2018
 
March 31,
2018
Funds from operations (FFO):
 
 
 
 
 
 
 
 
Net (loss) income attributable to common stockholders (in accordance with GAAP)
 
$
(6,744
)
 
$
177

 
$
5,288

 
$
2,361

Impairment charges and related lease intangible write-offs
 
5,000

 

 

 

Depreciation and amortization
 
30,078

 
30,195

 
29,813

 
29,496

Loss on dispositions of real estate investments
 

 
1,933

 
3,818

 

FFO (as defined by NAREIT) attributable to common stockholders
 
28,334

 
32,305

 
38,919

 
31,857

Acquisition, transaction and other costs [1]
 
8,607

 
2,804

 
1,114

 
1,325

Loss on extinguishment of debt [2]
 

 
2,612

 
1,285

 

Fire (recovery) loss [3]
 
(1
)
 
31

 
(1
)
 
(79
)
Core FFO attributable to common stockholders
 
36,940

 
37,752

 
41,317

 
33,103

Non-cash equity-based compensation
 
1,451

 
2,053

 
(23
)
 
(832
)
Non-cash portion of incentive fee
 
(180
)
 
180

 

 

Non-cash portion of interest expense
 
1,454

 
1,339

 
1,499

 
901

Amortization of above and below-market leases and ground lease assets and liabilities, net
 
590

 
488

 
500

 
552

Straight-line rent
 
(1,482
)
 
(1,492
)
 
(1,833
)
 
(1,503
)
Unrealized loss (gain) on undesignated foreign currency advances and other hedge ineffectiveness
 
452

 
(108
)
 
47

 
43

Eliminate unrealized (gains) losses on foreign currency transactions [4]
 
(2,206
)
 
(1,215
)
 
(6,256
)
 
2,550

Amortization of mortgage discounts and premiums, net
 
118

 
601

 
263

 
267

Adjusted funds from operations (AFFO) attributable to common stockholders [5]
 
$
37,137

 
$
39,598

 
$
35,514

 
$
35,081

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - Basic
 
73,554

 
69,442

 
67,292

 
67,287

Weighted average common shares outstanding - Diluted
 
74,001

 
69,442

 
67,292

 
67,287

Net (loss) income per share attributable to common stockholders
 
$
(0.09
)
 
$

 
$
0.08

 
$
0.03

FFO per common share
 
$
0.38

 
$
0.47

 
$
0.58

 
$
0.47

Core FFO per common share
 
$
0.50

 
$
0.54

 
$
0.61

 
$
0.49

Dividends declared [6]
 
$
39,119

 
$
36,769

 
$
35,828

 
$
35,833

Footnotes:
[1] Primarily consists of expenses incurred in connection with litigation related to the termination of the Former Service Provider, fees associated with the exploration of a potential foreign equity offering, various legal and professional fees related to financing activities and other costs.
[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] (Recovery) loss arising from clean-up costs related to a fire sustained at one of our office properties. 
[4] For the three months ended December 31, 2018, gains on derivative instruments were $3.0 million, which were comprised of unrealized gains of $2.2 million and realized gains of $0.8 million. 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 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.
[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 and related to a real estate asset sold during the three months ended September 30, 2018.
[6] Dividends declared to common stockholders only. Does not include distributions to non-controlling interest holders or holders of Series A Preferred Stock.
 

10


Global Net Lease, Inc.
Supplemental Information
Quarter ended December 31, 2018 (Unaudited)

Debt Overview
As of December 31, 2018

Year of Maturity
 
Number of Encumbered Properties
 
Weighted-Average Debt Maturity (Years)
 
Weighted-Average Interest Rate [1]
 
Total Outstanding Balance [2]
 (In thousands)
 
Percent
Non-Recourse Debt
 
 
 
 
 
 
 
 
 
 
2019
 
11

 
0.8

 
2.3
%
 
$
235,026

 
 
2020
 
10

 
1.7

 
1.9
%
 
207,353

 
 
2021
 
3

 
2.5

 
1.2
%
 
16,594

 
 
2022
 

 

 
%
 

 
 
2023
 
43

 
4.6

 
3.2
%
 
292,890

 
 
Thereafter
 
28

 
9.3

 
4.6
%
 
388,250

 
 
Total Non-Recourse Debt
 
95

 
4.9

 
3.2
%
 
1,140,113

 
64
%
 
 
 
 
 
 
 
 
 
 
 
Recourse Debt
 
 
 
 
 
 
 
 
 
 
   Revolving Credit Facility
 
 
 
2.6

 
3.6
%
 
363,894

 
 
   Term Loan
 
 
 
3.6

 
1.9
%
 
282,069

 
 
Total Recourse Debt
 
 
 
3.0

 
2.9
%
 
645,963

 
36
%
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
 
 
4.2

 
3.1
%
 
$
1,786,076

 
100
%
 
 
 
 
 
 
 
 
 
 
 
Total Debt by Currency
 
 
 
 
 
 
 
Percent
 
 
USD
 
 
 
 
 
 
 
42
%
 
 
EUR
 
 
 
 
 
 
 
39
%
 
 
GBP
 
 
 
 
 
 
 
19
%
 
 
Total
 
 
 
 
 
 
 
100
%
 
 

Footnotes:
 
[1] As of December 31, 2018, the Company’s total combined debt was 79.9% fixed rate or swapped to a fixed rate and 20.1% floating rate.
 
[2] Excludes the effect of deferred financing costs, net and mortgage (discount) premium, net. Current balances as of December 31, 2018 are shown in the year the loan matures.
 



11


Global Net Lease, Inc.
Supplemental Information
Quarter ended December 31, 2018 (Unaudited)

Future Minimum Lease Rents
As of December 31, 2018
Amounts in thousands

 
 
Future Minimum
Base Rent Payments