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Section 1: 8-K (8-K GNL EARNINGS RELEASE 3.31.19)

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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):  May 9, 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.   ¨

Securities registered pursuant to section 12(b) of the Act:
Title of each class
 
Trading Symbols
 
Name of each exchange on which registered
Common Stock, $0.01 par value
 
GNL
 
New York Stock Exchange
7.25% Series A Cumulative Redeemable Preferred Stock, $0.01 par value
 
GNL PR A
 
New York Stock Exchange





Item 2.02. Results of Operations and Financial Condition.
 
On May 9, 2019, Global Net Lease, Inc. (the “Company”) issued a press release announcing its results of operations for the quarter ended March 31, 2019, and supplemental financial information for the quarter ended March 31, 2019, 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 March 31, 2019, the Company issued a press release announcing its results of operations for the quarter ended March 31, 2019, and supplemental financial information for the quarter ended March 31, 2019, 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, 2018 filed on February 28, 2019 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 May 9, 2019
 
Quarterly supplemental information for the quarter ended March 31, 2019


























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.

Global Net Lease, Inc.
 
Date: May 9, 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 3.31.19)

Exhibit


EXHIBIT 99.1

397867962_image3a24.gif    

FOR IMMEDIATE RELEASE
 

GLOBAL NET LEASE REPORTS FIRST QUARTER 2019 RESULTS
Company to Host Investor Conference Call Today at 11 AM Eastern

New York, May 9, 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 ended March 31, 2019.

First Quarter 2019 Highlights

Revenue increased 10.8% to $75.5 million from $68.1 million in first quarter 2018
Net income attributable to common stockholders was $5.8 million or $0.07 per share as compared to $2.4 million or $0.03 per share in first quarter 2018
Core Funds from Operations (“Core FFO”) increased 10.2% on a year-over-year basis to $36.5 million or $0.44 per share
Adjusted Funds from Operations (“AFFO”) improved 12.6% to $39.5 million as compared to $35.1 million in the prior year first quarter
Adjusted Funds from Operations per share was $0.48 as compared to $0.52 in first quarter 2018
Raised gross equity proceeds of $154.5 million which will all be used to fund current acquisitions pipeline
$185.3 million of closed and pipeline acquisitions6 for a going-in capitalization rate of 7.52% and a weighted average capitalization rate of 8.17%, funded in part from equity raised in first quarter 2019
Portfolio 99.5% leased with an 8.1 year weighted average remaining lease term4 
Significantly increased debt maturity to 4.2 years compared to 3.6 years at the end of the first quarter 2018


James Nelson, Chief Executive Officer of GNL commented, “We are pleased with our programmatic ability to execute on all fronts this quarter. We successfully raised gross equity proceeds of $154.5 million in the quarter and continue to grow our $185 million pipeline, which includes year-to-date completed acquisitions and pending acquisitions6. Although AFFO decreased to $0.48 per share year-over-year from $0.52 per share, the real estate acquisitions we have closed so far in the second quarter of 2019 and those in our current acquisition pipeline will be primarily funded from the equity proceeds we raised and will resolve the natural timing difference we saw this quarter. We remain proactive and disciplined in our acquisition strategy and continue to leverage direct relationships with landlords and developers to identity off-market transactions, allowing us to achieve what we believe are better-than-market capitalization rates. We have also completed refinancings of European properties at attractive rates, providing meaningful contributions to our bottom line. We will continue our efforts to deliver steady growth and enhance long-term value for our shareholders."





 
 
Three Months Ended March 31,
(In thousands, except per share data)
 
2019
 
2018
Revenue from tenants
 
$
75,468

 
$
68,086

 
 
 
 
 
Net income attributable to common stockholders
 
$
5,791

 
$
2,361

Net income per diluted common share
 
$
0.07

 
$
0.03

 
 
 
 
 
NAREIT defined FFO attributable to common stockholders
 
$
36,202

 
$
31,857

NAREIT defined FFO per diluted common share
 
$
0.44

 
$
0.47

 
 
 
 
 
Core FFO attributable to common stockholders
 
$
36,464

 
$
33,103

Core FFO per diluted common share
 
$
0.44

 
$
0.49

 
 
 
 
 
AFFO attributable to common stockholders
 
$
39,504

 
$
35,081

AFFO per diluted common share
 
$
0.48

 
$
0.52


Property Portfolio
 
At March 31, 2019 the Company’s portfolio consisted of 343 net lease properties located in seven countries and is comprised of 27.4 million rentable square feet leased to 112 tenants across 45 industries. The real estate portfolio metrics include:

99.5% leased with a remaining weighted-average lease term of 8.1 years4 
91.9% of the portfolio contains contractual rent increases based on square footage
75.7% of portfolio annualized straight-line rent derived from investment grade and implied investment grade rated tenants1 
55.8% U.S. and 44.2% Europe (based on annualized straight-line rent)
53% Office, 39% Industrial / Distribution and 8% Retail (based on an annualized straight-line rent)

Acquisition and Disposition Activity

During the quarter ended March 31, 2019, the Company acquired two net leased assets totaling approximately 116,720 square feet for a contract sales price of approximately $23.5 million. Additionally, the Company funded $11.4 million of capital expenditures to expand and remodel four properties that are leased to a single tenant, in exchange for increased annual rent at the respective properties. These assets are leased at a weighted average going-in capitalization rate of 7.47%2, and an overall weighted average capitalization rate of 7.67%3, with a weighted average remaining lease term of 9.3 years4.

The first of the properties, acquired on March 29th is a 36,720 square foot industrial facility located in Gillette, Wyoming which is leased to Cummins, Inc., a Fortune 500 company that specializes in the design and manufacture of automotive engines and related equipment and has an investment grade credit rating of "A+" and "A2" form S&P and Moody's respectively. The remaining lease term as of acquisition date is 9.7 years.

The second property, also acquired on March 29th is an 80,000 square foot headquarters office property located in Fishers, Indiana which is leased to Stanley Convergent Security Solutions, a division and wholly owned subsidiary of Stanley Black & Decker, which designs, supplies and installs commercial electronic security systems and provides electronic security services. Stanley Black & Decker, which is the parent of the tenant but not a guarantor, has an investment grade credit rating of “A” and “Baa1” from S&P and Moody’s, respectively. The remaining lease term as of acquisition date is 9.3 years.






GNL sold one property for gross proceeds of $9.5 million, which resulted in net proceeds of $9.3 million after closing costs.

Capital Structure and Liquidity Resources

As of March 31, 2019, the Company had $95.3 million of cash and cash equivalents. The Company’s net debt to enterprise value was 47.8% with an enterprise value of $3.3 billion based on the March 29, 2019 closing share price of $18.90 for common stock and $25.67 for the Series A preferred stock, with net debt of $1.6 billion, including $1.1 billion of mortgage debt.

As of March 31, 2019, the percentage of fixed rate debt (including variable rate debt fixed with swaps) increased to 83.7%5 from 79.9% as of December 31, 2018. The Company’s total combined debt had a weighted average interest rate of 3.0% resulting in an interest coverage ratio of 4.3 times7. Debt maturity remained unchanged at 4.2 years as of March 31, 2019 and December 31, 2018.
 
The Company raised gross proceeds of approximately $152.8 million at a weighted average price of $19.69 per share through its common stock ATM Program and $1.7 million at a weighted average price of $24.90 through its Series A preferred stock ATM Program.

Subsequent Events

Acquisitions

GNL closed on the acquisition of three properties during April 2019 for an aggregate purchase price of $41.9 million at a weighted average going-in capitalization rate of 6.9%2,a weighted average capitalization rate of 7.5%3 and a weighted average lease term of 9.9 years4.

On April 12, 2019, the Company acquired a 60,100 square foot newly built industrial property located in Colorado Springs, Colorado for $18.4 million and leased the property to Sierra Nevada Corporation, a privately held systems integrator specializing in space exploration and satellites, aircraft integrations, navigation and guidance systems, threat detection and security, scientific research, and infrastructure protection.

On April 25, 2019, the Company acquired a 275,500 square foot distribution facility located in Calhoun, Georgia for $10.1 million and leased the property to Hanes Companies, Inc. Hanes is a subsidiary of parent company and lease guarantor, Leggett & Platt, Inc., a NYSE listed, S&P 500 publicly traded company. LEG has an investment grade credit rating of “Baa1” and “BBB” from Moody’s and S&P, respectively.

On April 25, 2019, the Company acquired a 127,100 square foot industrial, manufacturing and warehouse facility located in Waynesburg, Pennsylvania for $13.4 million and leased the property to EQT Gathering, LLC, a division of EQT Corporation, a NYSE listed integrated energy company with an emphasis on Appalachian-area natural gas production, gathering, and transmission. EQT is the largest producer of natural gas in the United States.

GNL currently has an acquisition pipeline of $96.1 million consisting of eight net lease industrial and distribution properties under agreement at a weighted-average capitalization rate of 8.4% and a weighted-average remaining lease term of 11.5 years. These properties also contain embedded contractual rent growth with average annual rent increases of 1.8% per year.

GNL is also scheduled to fund capital expenditures of $12.5 million during the second quarter to expand an industrial property located in Houston, Texas in exchange for increased rent.








Dividend Frequency

On April 5, 2019, the board of directors of GNL approved a change in the Company’s common stock dividend policy. Accordingly, consistent with its peers, the Company anticipates paying future dividends authorized by its board of directors on its shares of common stock on a quarterly basis in arrears on the 15th day of the first month following the end of each fiscal quarter (unless otherwise specified) to common stock holders of record on the record date for such payment.
 
This change will affect the frequency of dividend payments only, and will have no impact on the Company’s annualized dividend rate on its common stock of $2.13 per share.






Footnotes/Definitions

1   As used herein, “Investment Grade Rating” includes both actual investment grade ratings of the tenant or guarantor, if available, or implied investment grade. Implied Investment Grade may include actual ratings of tenant parent, guarantor parent (regardless of whether or not the parent has guaranteed the tenant’s obligation under the lease) or by using a proprietary Moody's analytical tool, which generates an implied rating by measuring a company's probability of default. Ratings information is as of March 31, 2019. Comprised of 38.2% leased to tenants with an actual investment grade rating and 37.5% leased to tenants with an Implied Investment Grade rating as of March 31, 2019.
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.
6 Closed and pipeline acquisitions of $185.3 million include: (i) two acquisitions for $23.4 million in purchase price completed in the first quarter of 2019; (ii) three acquisitions for $41.9 million in purchase price completed in the second quarter of 2019; (iii) amendments to four leases whereby annual rent was increased at closing in exchange for the Company funding an aggregate amount of approximately $11.4 million in capital expenditures to expand and remodel four properties of a single tenant; (iv) five definitive purchase and sale agreements (“PSAs”) to acquire a total of eight net lease properties, all of which are located in the United States, for an aggregate purchase price of approximately $96.1 million; and (v) one LOI to amend a lease whereby annual rent would be increased in exchange for the Company funding $12.5 million in capital expenditures to expand and remodel the leased property. The PSAs are subject to conditions and the LOI may not lead to a definitive agreement. There can be no assurance the Company will complete any of these pending transactions on their contemplated terms, or at all.
7 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 March 31, 2019. Adjusted EBITDA and cash paid for interest are Non-GAAP metrics and are reconciled below.

Conference Call
 
GNL will host a conference call on May 9, 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 August 9, 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, 2018 filed on February 28, 2019 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)


 
 
March 31,
2019
 
December 31,
2018
ASSETS
 
(Unaudited)
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
400,559

 
$
398,911

Buildings, fixtures and improvements
 
2,353,473

 
2,345,202

Construction in progress
 
12,495

 
1,235

Acquired intangible lease assets
 
647,678

 
675,551

Total real estate investments, at cost
 
3,414,205

 
3,420,899

Less accumulated depreciation and amortization
 
(467,657
)
 
(437,974
)
Total real estate investments, net
 
2,946,548

 
2,982,925

Assets held for sale
 
110,679

 
112,902

Cash and cash equivalents
 
95,267

 
100,324

Restricted cash
 
3,368

 
3,369

Derivative assets, at fair value
 
6,854

 
8,730

Unbilled straight-line rent
 
49,089

 
47,183

Prepaid expenses and other assets
 
81,026

 
22,245

Due from related parties
 
20

 
16

Deferred tax assets
 
3,281

 
3,293

Goodwill and other intangible assets, net
 
21,925

 
22,180

Deferred financing costs, net
 
5,704

 
6,311

Total Assets
 
$
3,323,761

 
$
3,309,478

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net
 
$
1,131,072

 
$
1,129,807

Revolving credit facility
 
260,409

 
363,894

Term loan, net
 
273,414

 
278,727

Acquired intangible lease liabilities, net
 
32,885

 
35,757

Derivative liabilities, at fair value
 
5,908

 
3,886

Due to related parties
 
472

 
790

Accounts payable and accrued expenses
 
43,494

 
31,529

Prepaid rent
 
20,816

 
16,223

Deferred tax liability
 
14,960

 
15,227

Taxes payable
 
48

 
2,228

Dividends payable
 
2,721

 
2,664

Total Liabilities
 
1,786,199

 
1,880,732

Commitments and contingencies
 
 
 
 
Stockholders' Equity:
 
 
 
 
7.25% Series A cumulative redeemable preferred shares
 
55

 
54

Common stock
 
2,169

 
2,091

Additional paid-in capital
 
2,183,829

 
2,031,981

Accumulated other comprehensive income
 
214

 
6,810

Accumulated deficit
 
(653,956
)
 
(615,448
)
Total Stockholders' Equity
 
1,532,311

 
1,425,488

Non-controlling interest
 
5,251

 
3,258

Total Equity
 
1,537,562

 
1,428,746

Total Liabilities and Equity
 
$
3,323,761

 
$
3,309,478







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

 
 
Three Months Ended March 31,
 
 
2019
 
2018
Revenue from tenants
 
$
75,468

 
$
68,086

 
 
 
 
 
 Expenses:
 
 
 
 
Property operating
 
7,359

 
7,470

Fire recovery
 

 
(79
)
Operating fees to related parties
 
8,043

 
6,831

Acquisition, transaction and other costs
 
262

 
1,325

General and administrative
 
3,206

 
2,051

Equity-based compensation
 
2,109

 
(832
)
Depreciation and amortization
 
31,303

 
29,496

       Total expenses
 
52,282

 
46,262

Operating income before gain on dispositions of real estate investments
 
23,186

 
21,824

Gain on dispositions of real estate investments
 
892

 

              Operating income
 
24,078

 
21,824

Other income (expense):
 
 
 
 
Interest expense
 
(15,162
)
 
(12,975
)
Gain (loss) on derivative instruments
 
240

 
(2,935
)
Unrealized gain (loss) on undesignated foreign currency advances and other hedge ineffectiveness
 
76

 
(43
)
Other income
 
4

 
11

       Total other expense, net
 
(14,842
)
 
(15,942
)
Net income before income taxes
 
9,236

 
5,882

Income tax expense
 
(960
)
 
(1,070
)
Net income
 
8,276

 
4,812

Net income attributable to non-controlling interest
 

 

Preferred stock dividends
 
(2,485
)
 
(2,451
)
Net income attributable to common stockholders
 
$
5,791

 
$
2,361

 
 
 
 
 
Basic and Diluted Earnings Per Share:
 
 
 
 
Basic and diluted net income per share attributable to common stockholders
 
$
0.07

 
$
0.03

 
 
 
 
 
Basic weighted average shares outstanding
 
81,475

 
67,287

Diluted weighted average shares outstanding
 
82,798

 
67,287










Global Net Lease, Inc.
Quarterly Reconciliation of Non-GAAP Measures (Unaudited)
(In thousands)
 
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Adjusted EBITDA
 
 
 
 
Net income
 
$
8,276

 
$
4,812

Depreciation and amortization
 
31,303

 
29,496

Interest expense
 
15,162

 
12,975

Income tax expense
 
960

 
1,070

Equity-based compensation
 
2,109

 
(832
)
Acquisition and transaction related
 
262

 
1,325

Gain on dispositions of real estate investments
 
(892
)
 

Fire recovery
 

 
(79
)
(Gain) loss on derivative instruments
 
(240
)
 
2,935

Unrealized (gain) loss on undesignated foreign currency advances and other hedge ineffectiveness
 
(76
)
 
43

Other income
 
(4
)
 
(11
)
Adjusted EBITDA
 
56,860

 
51,734

 
 
 
 
 
Net operating income (NOI)
 
 
 
 
Operating fees to related parties
 
8,043

 
6,831

General and administrative
 
3,206

 
2,051

NOI
 
68,109

 
60,616

Amortization of above- and below- market leases and ground lease assets and liabilities, net
 
337

 
552

Straight-line rent
 
(1,626
)
 
(1,503
)
  Cash NOI
 
$
66,820

 
$
59,665

 
 
 
 
 
Cash Paid for Interest:
 
 
 
 
   Interest Expense
 
$
15,162

 
$
12,975

   Non-cash portion of interest expense
 
(1,742
)
 
(901
)
   Amortization of mortgage (discount) premium, net
 
(102
)
 
(267
)
   Total cash paid for interest
 
$
13,318

 
$
11,807

 
 
 
 
 
 
 
 
 
 







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

 
 
Three Months Ended March 31,
 
 
2019
 
2018
Net income attributable to stockholders (in accordance with GAAP)
 
$
5,791

 
$
2,361

   Depreciation and amortization
 
31,303

 
29,496

   Gain on dispositions of real estate investments
 
(892
)
 

FFO (defined by NAREIT)
 
36,202

 
31,857

   Acquisition and transaction fees [1]
 
262

 
1,325

   Fire recovery [2]
 

 
(79
)
Core FFO attributable to common stockholders
 
36,464

 
33,103

   Non-cash equity-based compensation
 
2,109

 
(832
)
   Non-cash portion of interest expense
 
1,742

 
901

   Amortization of above- and below-market leases and ground lease assets and liabilities, net
 
337

 
552

   Straight-line rent
 
(1,626
)
 
(1,503
)
   Unrealized (gain) loss on undesignated foreign currency advances and other hedge ineffectiveness
 
(76
)
 
43

   Eliminate unrealized losses on foreign currency transactions [3]
 
452

 
2,550

   Amortization of mortgage discounts and premiums, net and mezzanine discount
 
102

 
267

Adjusted funds from operations (AFFO) attributable to common stockholders
 
$
39,504

 
$
35,081

Footnotes:
[1] For the three months ended March 31, 2018, 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] Recovery arising from clean-up costs related to a fire sustained at one of our office properties. 
[3] For AFFO purposes, we add back unrealized (gain) loss. For the three months ended March 31, 2019, gains on derivative instruments were $0.2 million which consisted of unrealized losses of $0.5 million and realized gains of $0.7 million. 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.






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 calculate 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 impact of transactions or other items that are not related to the ongoing performance 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.



(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2 GNL SUPPLEMENTAL 3.31.19)

Exhibit
EXHIBIT 99.2






Global Net Lease, Inc.
Supplemental Information

Quarter ended March 31, 2019 (unaudited)





Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2019 (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”. 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, 2018 filed on February 28, 2019 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. 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 March 31, 2019 (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 March 31, 2019 (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 March 31, 2019 (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 March 31, 2019 (Unaudited)

Key Metrics
As of and for the three months ended March 31, 2019
Amounts in thousands, except per share data, ratios and percentages
Financial Results
 
 
Revenue from tenants
 
$
75,468

Net income attributable to common stockholders
 
$
5,791

Basic and diluted net income per share attributable to common stockholders [1]
 
$
0.07

Cash NOI [2]
 
$
66,820

Adjusted EBITDA [2]
 
$
56,860

AFFO attributable to common stockholders [2]
 
$
39,504

Dividends paid per share - first quarter
 
$
0.53

Dividend yield - annualized, based on quarter end share price
 
11.2
%
 
 
 
Balance Sheet and Capitalization
 
 
Equity market capitalization - based on quarter end share price of $18.90 for common shares and $25.67 for preferred shares
 
$
1,725,375

Net debt [3] [4]
 
1,579,894

Enterprise value
 
3,305,269

 
 
 
Total capitalization
 
3,400,536

 
 
 
Total consolidated debt [4]
 
1,678,264

Total assets
 
3,323,761

Liquidity [5]
 
244,429

 
 
 
Common shares outstanding as of March 31, 2019 (thousands)
 
83,840

Share price, end of quarter
 
$
18.9

 
 
 
Net debt to enterprise value
 
47.8
%
Net debt to adjusted EBITDA (annualized)
 
6.9
x
 
 
 
Weighted-average interest rate cost [6]
 
3.0
%
Weighted-average debt maturity (years) [7]
 
4.2

Interest Coverage Ratio [8]
 
4.3
x
 
 
 
Real Estate Portfolio
 
 
Number of properties
 
343

Number of tenants
 
112

 
 
 
Square footage (millions)
 
27.4

Leased
 
99.5
%
Weighted-average remaining lease term (years) [9]
 
8.1

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 $149.2 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 March 31, 2019.  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 March 31, 2019


Consolidated Balance Sheets
Amounts in thousands
 
 
March 31,
2019
 
December 31,
2018
 
 
(Unaudited)
 
 
ASSETS
 
 
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
400,559

 
$
398,911

Buildings, fixtures and improvements
 
2,353,473

 
2,345,202

Construction in progress
 
12,495

 
1,235

Acquired intangible lease assets
 
647,678

 
675,551

Total real estate investments, at cost
 
3,414,205

 
3,420,899

Less accumulated depreciation and amortization
 
(467,657
)
 
(437,974
)
Total real estate investments, net
 
2,946,548

 
2,982,925

Assets held for sale
 
110,679

 
112,902

Cash and cash equivalents
 
95,267

 
100,324

Restricted cash
 
3,368

 
3,369

Derivative assets, at fair value
 
6,854

 
8,730

Unbilled straight-line rent
 
49,089

 
47,183

Prepaid expenses and other assets
 
81,026

 
22,245

Due from related parties
 
20

 
16

Deferred tax assets
 
3,281

 
3,293

Goodwill and other intangible assets, net
 
21,925

 
22,180

Deferred financing costs, net
 
5,704

 
6,311

Total Assets
 
$
3,323,761

 
$
3,309,478

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net
 
$
1,131,072

 
$
1,129,807

Revolving credit facility
 
260,409

 
363,894

Term loan, net
 
273,414

 
278,727

Acquired intangible lease liabilities, net
 
32,885

 
35,757

Derivative liabilities, at fair value
 
5,908

 
3,886

Due to related parties
 
472

 
790

Accounts payable and accrued expenses
 
43,494

 
31,529

Prepaid rent
 
20,816

 
16,223

Deferred tax liability
 
14,960

 
15,227

Taxes payable
 
48

 
2,228

Dividends payable
 
2,721

 
2,664

Total Liabilities
 
1,786,199

 
1,880,732

Commitments and contingencies
 

 

Stockholders' Equity:
 
 
 
 
7.25% Series A cumulative redeemable preferred shares
 
55

 
54

Common stock
 
2,169

 
2,091

Additional paid-in capital
 
2,183,829

 
2,031,981

Accumulated other comprehensive income
 
214

 
6,810

Accumulated deficit
 
(653,956
)
 
(615,448
)
Total Stockholders' Equity
 
1,532,311

 
1,425,488

Non-controlling interest
 
5,251

 
3,258

Total Equity
 
1,537,562

 
1,428,746

Total Liabilities and Equity
 
$
3,323,761

 
$
3,309,478



7


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2019 (Unaudited)

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

 
 
Three Months Ended
 
 
March 31, 2019
 
December 31,
2018
 
September 30, 2018
 
June 30,
2018
Revenue from tenants
 
$
75,468

 
$
71,226

 
$
71,924

 
$
70,971

 
 
 
 
 
 
 
 
 
 Expenses:
 
 
 
 
 
 
 
 
Property operating
 
7,359

 
7,750

 
5,301

 
8,211

Fire (recovery) loss
 

 
(1
)
 
31

 
(1
)
Operating fees to related parties
 
8,043

 
7,309

 
6,956

 
7,138

Impairment charges and related lease intangible write-offs
 

 
5,000

 

 

Acquisition, transaction and other costs
 
262

 
8,607

 
2,804

 
1,114

General and administrative
 
3,206

 
2,617

 
3,215

 
2,556

Equity-based compensation
 
2,109

 
1,451

 
2,053

 
(23
)
Depreciation and amortization
 
31,303

 
30,078

 
30,195

 
29,813

Total expenses
 
52,282

 
62,811

 
50,555

 
48,808

Operating income before loss on dispositions of real estate investments
 
23,186

 
8,415

 
21,369

 
22,163

Gain (loss) on dispositions of real estate investments
 
892

 

 
(1,933
)
 
(3,818
)
Operating income
 
24,078

 
8,415

 
19,436

 
18,345

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(15,162
)
 
(15,479
)
 
(15,104
)
 
(14,415
)
Loss on extinguishment of debt
 

 

 
(2,612
)
 
(1,285
)
Gain on derivative instruments
 
240

 
2,950

 
1,290

 
6,333

Unrealized gain (loss) on undesignated foreign currency advances and other hedge ineffectiveness
 
76

 
(452
)
 
108

 
(47
)
Other income
 
4

 
(90
)
 
44

 
12

Total other expense, net
 
(14,842
)
 
(13,071
)
 
(16,274
)
 
(9,402
)
Net income (loss) before income taxes
 
9,236

 
(4,656
)
 
3,162

 
8,943

Income tax (expense) benefit
 
(960
)
 
366

 
(530
)
 
(1,200
)
Net income (loss)
 
8,276

 
(4,290
)
 
2,632

 
7,743

Net income attributable to non-controlling interest
 

 

 

 

Preferred stock dividends
 
(2,485
)
 
(2,454
)
 
(2,455
)
 
(2,455
)
Net income (loss) attributable to common stockholders
 
$
5,791

 
$
(6,744
)
 
$
177

 
$
5,288

 
 
 
 
 
 
 
 
 
Basic and Diluted Earnings Per Share:
 
 
 
 
 
 
 
 
Basic and diluted net income (loss) per share attributable to common stockholders
 
$
0.07

 
$
(0.09
)
 
$

 
$
0.08

Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
81,475

 
73,554

 
69,442

 
67,292

Diluted
 
82,798

 
74,001

 
69,442

 
67,292



8


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2019 (Unaudited)

Non-GAAP Measures
Amounts in thousands, except per share data
 
 
Three Months Ended
 
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
June 30,
2018
EBITDA:
 
 
 
 
 
 
 
 
Net income (loss)
 
$
8,276

 
$
(4,290
)
 
$
2,632

 
$
7,743

Depreciation and amortization
 
31,303

 
30,078

 
30,195

 
29,813

Interest expense
 
15,162

 
15,479

 
15,104

 
14,415

Income tax expense (benefit)
 
960

 
(366
)
 
530

 
1,200

   EBITDA
 
55,701

 
40,901

 
48,461

 
53,171

Impairment related charges and related lease intangible write-offs
 

 
5,000

 

 

Equity-based compensation
 
2,109

 
1,451

 
2,053

 
(23
)
Non-cash portion of incentive fee
 

 
(180
)
 
180

 

Acquisition, transaction and other costs
 
262

 
8,607

 
2,804

 
1,114

(Gain) loss on dispositions of real estate investments
 
(892
)
 

 
1,933

 
3,818

Fire (recovery) loss
 

 
(1
)
 
31

 
(1
)
Loss (gain) on derivative instruments
 
(240
)
 
(2,950
)
 
(1,290
)
 
(6,333
)
Unrealized (gain) loss on undesignated foreign currency advances and other hedge ineffectiveness
 
(76
)
 
452

 
(108
)
 
47

Loss on extinguishment of debt
 

 

 
2,612

 
1,285

Other (income) expense
 
(4
)
 
90

 
(44
)
 
(12
)
   Adjusted EBITDA
 
56,860

 
53,370

 
56,632

 
53,066

Operating fees to related parties
 
8,043

 
7,309

 
6,956

 
7,138

General and administrative
 
3,206

 
2,617

 
3,215

 
2,556

   NOI
 
68,109

 
63,296

 
66,803

 
62,760

Amortization of above- and below- market leases and ground lease assets and liabilities, net
 
337

 
590

 
488

 
500

Straight-line rent
 
(1,626
)
 
(1,482
)
 
(1,492
)
 
(1,833
)
  Cash NOI
 
$
66,820

 
$
62,404

 
$
65,799

 
$
61,427

 
 
 
 
 
 
 
 
 
Cash Paid for Interest:
 
 
 
 
 
 
 
 
   Interest Expense
 
$
15,162

 
$
15,479

 
$
15,104

 
$
14,415

   Non-cash portion of interest expense
 
(1,742
)
 
(1,454
)
 
(1,339
)
 
(1,499
)
   Amortization of mortgage (discount) premium, net
 
(102
)
 
(118
)
 
(601
)
 
(263
)
   Total cash paid for interest
 
$
13,318

 
$
13,907

 
$
13,164

 
$
12,653




9


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2019 (Unaudited)

Non-GAAP Measures
Amounts in thousands, except per share data
 
 
Three Months Ended
 
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Funds from operations (FFO):
 
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders (in accordance with GAAP)
 
$
5,791

 
$
(6,744
)
 
$
177

 
$
5,288

Impairment related charges and related lease intangible write-offs
 

 
5,000

 

 

Depreciation and amortization
 
31,303

 
30,078

 
30,195

 
29,813

(Gain) loss on dispositions of real estate investments
 
(892
)
 

 
1,933

 
3,818

FFO (as defined by NAREIT) attributable to common stockholders
 
36,202

 
28,334

 
32,305

 
38,919

Acquisition, transaction and other costs [1]
 
262

 
8,607

 
2,804

 
1,114

Loss on extinguishment of debt [2]
 

 

 
2,612

 
1,285

Fire (recovery) loss [3]
 

 
(1
)
 
31

 
(1
)
Core FFO attributable to common stockholders
 
36,464

 
36,940

 
37,752

 
41,317

Non-cash equity-based compensation
 
2,109

 
1,451

 
2,053

 
(23
)
Non-cash portion of incentive fee
 

 
(180
)
 
180

 

Non-cash portion of interest expense
 
1,742

 
1,454

 
1,339

 
1,499

Amortization of above and below-market leases and ground lease assets and liabilities, net
 
337

 
590

 
488

 
500

Straight-line rent
 
(1,626
)
 
(1,482
)
 
(1,492
)
 
(1,833
)
Unrealized (gains) losses on undesignated foreign currency advances and other hedge ineffectiveness
 
(76
)
 
452

 
(108
)
 
47

Eliminate unrealized losses (gains) on foreign currency transactions [4]
 
452

 
(2,206
)
 
(1,215
)
 
(6,256
)
Amortization of mortgage discounts and premiums, net
 
102

 
118

 
601

 
263

Adjusted funds from operations (AFFO) attributable to common stockholders [5]
 
$
39,504

 
$
37,137

 
$
39,598

 
$
35,514

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
81,475

 
73,554

 
69,442

 
67,292

Weighted average common shares outstanding - Diluted
 
82,798

 
74,001

 
69,442

 
67,292

Net income per share attributable to common shareholders
 
$
0.07

 
$
(0.09
)
 
$

 
$
0.08

FFO per diluted common share
 
$
0.44

 
$
0.38

 
$
0.47

 
$
0.58

Core FFO per diluted common share
 
$
0.44

 
$
0.50

 
$
0.54

 
$
0.61

AFFO per diluted common share
 
$
0.48

 
$
0.50

 
$
0.57

 
$
0.53

Dividends declared [6]
 
$
43,297

 
$
39,119

 
$
36,769

 
$
35,828

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 March 31, 2019, gains on derivative instruments were $0.2 million which consisted of unrealized losses of $0.5 million and realized gains of $0.7 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 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.
[5] AFFO for the three months ended September 30, 2018 includes income from a lease termination fee of $3.0 million, which was 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 March 31, 2019 (Unaudited)

Debt Overview
As of March 31, 2019

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 (remainder)
 
9

 
0.6

 
2.4
%
 
$
214,499

 
 
2020
 
5

 
1.4

 
1.7
%
 
139,565

 
 
2021
 
3

 
2.3

 
1.2
%
 
16,267

 
 
2022
 

 

 
%
 

 
 
2023
 
43

 
4.4

 
3.2
%
 
299,740

 
 
2024
 
5

 
4.8

 
1.7
%
 
83,017

 
 
Thereafter
 
28

 
9.1

 
4.6
%
 
388,250

 
 
Total Non-Recourse Debt
 
93

 
4.9

 
3.2
%
 
1,141,338

 
68
%
 
 
 
 
 
 
 
 
 
 
 
Recourse Debt
 
 
 
 
 
 
 
 
 
 
   Revolving Credit Facility
 
 
 
2.3

 
3.4
%
 
260,409

 
 
   Term Loan
 
 
 
3.3

 
1.9
%
 
276,517

 
 
Total Recourse Debt
 
 
 
2.8

 
2.6
%
 
536,926

 
32
%
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
 
 
4.2

 
3.0
%
 
$
1,678,264

 
100
%
 
 
 
 
 
 
 
 
 
 
 
Total Debt by Currency
 
 
 
 
 
 
 
Percent
 
 
USD
 
 
 
 
 
 
 
39
%
 
 
EUR
 
 
 
 
 
 
 
40
%
 
 
GBP
 
 
 
 
 
 
 
21
%
 
 
Total
 
 
 
 
 
 
 
100
%
 
 

Footnotes:
 
[1] As of March 31, 2019, the Company’s total combined debt was 83.7% fixed rate or swapped to a fixed rate and 16.3% floating rate.
 
[2] Excludes the effect of deferred financing costs, net and mortgage (discount) premium, net. Current balances as of March 31, 2019 are shown in the year the debt matures.
 



11


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2019 (Unaudited)

Future Minimum Lease Rents
As of March 31, 2019
Amounts in thousands

 
 
Future Minimum
Base Rent Payments
[1]
2019 (remainder)
 
$
207,860

2020
 
280,334

2021
 
281,327

2022
 
272,251

2023
 
248,870

2024
 
204,921

Thereafter
 
663,302

Total
 
$
2,158,865

Footnotes:
[1] Base rent assumes exchange rates of £1.00 to $1.30 for GBP and €1.00 to $1.12 for EUR as of March 31, 2019 for illustrative purposes, as applicable.


12


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2019 (Unaudited)

Top Ten Tenants
As of March 31, 2019
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
 
12,041

 
4
%
Foster Wheeler
 
Office
 
Engineering
 
11,071

 
4
%
RWE AG
 
Office
 
Utilities
 
10,676

 
4
%
ING Bank
 
Office
 
Financial Services
 
9,000

 
3
%
Finnair
 
Industrial
 
Aerospace
 
8,898

 
3
%
Penske
 
Distribution
 
Logistics
 
8,500

 
3
%
Family Dollar
 
Retail
 
Discount Retail
 
8,126

 
3
%
Contractors Steel
 
Industrial
 
Metal Processing
 
6,815

 
2
%
Harper Collins
 
Distribution
 
Publishing
 
6,688

 
2
%
Subtotal
 
 
 
 
 
95,310

 
34
%
 
 
 
 
 
 
 
 
 
Remaining portfolio
 
 
 
 
 
186,709

 
67
%
 
 
 
 
 
 
 
 
 
Total Portfolio
 
 
 
 
 
$
282,019

 
101
%

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 $1.12 for EUR as of March 31, 2019 for illustrative purposes, as applicable.




13


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2019 (Unaudited)

Diversification by Property Type
As of March 31, 2019
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
 
$
148,841

 
53
%
 
8,647

 
32
%
 
 
$
37,575

 
35
%
 
2,396

 
19
%
Industrial
 
65,188

 
23
%
 
10,484

 
38
%
 
 
40,477

 
37
%
 
6,753

 
53
%
Distribution
 
44,184

 
16
%
 
6,148

 
22
%
 
 
16,660

 
15
%
 
2,366

 
19
%
Retail
 
23,806

 
8
%
 
2,110

 
8
%
 
 
14,138

 
13
%
 
1,194

 
9
%
Total
 
$
282,019

 
100
%
 
27,389

 
100
%
 
 
$
108,850

 
100
%
 
12,709

 
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 $1.12 for EUR as of March 31, 2019 for illustrative purposes, as applicable.

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

14


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2019 (Unaudited)

Diversification by Tenant Industry
As of March 31, 2019
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
 
$
33,824

 
12
%
 
2,316

 
8
%
 
 
$
3,889

 
4
%
 
349

 
3
%
Technology
 
18,590

 
7
%
 
906

 
3
%
 
 

 
%
 

 
%
Discount Retail
 
15,755

 
6
%
 
1,786

 
7
%
 
 
9,977

 
9
%
 
985

 
8
%
Aerospace
 
14,675

 
5
%
 
1,258

 
5
%
 
 
2,992

 
3
%
 
233

 
2
%
Freight
 
14,433

 
5
%
 
1,446

 
5
%
 
 
11,063

 
10
%
 
1,126

 
9
%
Telecommunications
 
14,416

 
5
%
 
913

 
3
%
 
 
2,291

 
2
%
 
133

 
1
%
Government
 
14,395

 
5
%
 
536

 
2
%
 
 
11,645