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

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported):  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 7.01. Regulation FD Disclosure.

 

Investor Presentation

 

On May 9, 2019, Global Net Lease, Inc. (the “Company”) prepared an investor presentation that officers and other representatives of the Company intend to present at conferences and meetings. A copy of the investor presentation is furnished as Exhibit 99.1 this Current Report on Form 8-K. The information set forth in Item 7.01 of this Current Report on Form 8-K and in the attached Exhibit 99.1 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 Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, 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 Securities and Exchange Commission 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
99.1   Investor Presentation

 

 

 

 

  

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  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)

 

Exhibit 99.1

 

Global Net Lease First Quarter Investor Presentation

 

 

2 OVERVIEW Differentiated Strategy with International Exposure 1. As used herein, investment grade includes both actual investment grade ratings of the tenant or guarantor, if available, or i mpl ied 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 proprie tar y 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. Proactive Asset Management Program to Drive Long Term Portfolio Value Experienced Management Team Ability to Capitalize on Imbalance Between U.S. and European Markets Deliver Superior Risk Adjusted Returns High - Quality, Mission Critical, Net Lease Focused Portfolio Long Duration Leases to Primarily Investment Grade Rated Tenants (1)

 

 

3 PORTFOLIO HIGHLIGHTS Properties 343 Square Feet (millions) 27.4 Tenants 112 Industries 45 Countries 7 Leased 99.5% Weighted - Average Remaining Lease Term (1) 8.1 years % of SLR derived from Investment Grade Tenants (2)(3) 75.7% % of leases with contractual rent increases (4) 92% Portfolio Overview As of March 31, 2019 unless otherwise noted. 1. Weighted - average remaining lease term in years is based on square feet as of March 31, 2019. 2. Refer to Investment Grade Rating definition included in the footnotes to page 2. 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. 3. Calculated as of March 31, 2019 using annualized straight - line rent (“SLR”) converted from local currency into USD as of the respective period presented for the in - place lease on the property on a straight - line basis, which includes tenant concessions such as free rent, as applicable. 4. Contractual rent increases include fixed percent or actual increases, or country CPI - indexed increases. Percentage of leases wit h rent increases is based on square feet as of March 31, 2019.

 

 

4 Non Investment Grade 21.9% Investment Grade 75.7% Not Rated 2.4% Industrial/Distribution 39% Retail 8% Office 53% WELL BALANCED PORTFOLIO As of March 31, 2019 1. Metric based on SLR. Refer to SLR definition included in the footnotes to page 3. 2. Refer to Investment Grade Rating definition included in the footnotes to page 2. Credit Rating (1) Tenant Industry (1) Geography (1) Asset Type (1) (2) United States 56% United Kingdom 19% Germany 7% The Netherlands 6% Finland 5% France 5% Luxembourg 2% Financial Services 12% Technology 7% Discount Retail 6% Aerospace 5% Telecommunications 5% Government Services 5% Healthcare 5% Freight 5% Metal Processing 5% Utilities 4% Energy 4% All Other 37%

 

 

5 Tenant Rating Country Property Type % of SLR (1) Baa2** U.S. Distribution 5% Aaa** U.S. Office 4% Baa2* U.K. Office 4% Baa3* GER Office 4% Aa3 NETH Office 3% Aa1** FIN Industrial 3% Baa3 U.S. Retail 3% Baa2 U.S. Distribution 3% Baa3* U.S. Industrial 2% A3 U.K. Distribution 2% WELL DIVERSIFIED TENANT BASE Top Ten Tenants As of March 31, 2019. *Represents Moody’s Implied Rating. ** Represents Tenant Parent Rating even if not a guarantor on the lease. 1. Metric based on SLR. Refer to SLR definition included in the footnotes to page 3. Top Ten Tenants Represent Only 33 % of SLR (1)

 

 

6 Office Distribution Industrial FOCUS ON HIGH - QUALITY TENANTS Only Focused on Markets with Quality Sovereign Debt Ratings (S&P) U.S. Luxembourg Germany The Netherlands Finland U.K. France AA+ AAA AAA AAA AA+ AA AA Best - in - class portfolio leased to largely Investment Grade Rated Tenants (1) in well established markets in the U.S. and Europe 1. Refer to Investment Grade Rating definition included in the footnotes to page 2.

 

 

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

 

 

8 $154.5 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 Robust pipeline of acquisitions funded from equity proceeds raised in the first quarter CURRENT DEPLOYMENT TIMING 1. See page 9 for further details 2. Refer to Average Cap Rate definition included in the footnotes to page 9. Q1’19 $185.3 million Closed and Pipeline Acquisitions (1) Purchase Price (in millions) Average Cap Rate (2) Gross Capital Raised Total Acquisitions • Attractive capitalization rates • Acquisition program provides accretive opportunities Current Pipeline $108.6 Q1’19 Closed $34.8 Q2’19 Closed $41.9 8.17% (Average Cap Rate)

 

 

9 CURRENT ACQUISITIONS (1) & CAPITAL DEPLOYMENT TIMING *Represents Moody’s Implied Rating. ** Represents Tenant Parent Rating. 1. The Company has signed five definitive purchase and sale agreements (“PSAs”) to acquire a total of eight net lease properties , a ll of which are located in the United States, for an aggregate purchase price of approximately $96.1 million. The Company has also entered into an LOI for a lease amendment contemplating increased annual rent at the property in exchang e f or the Company funding a $12.5 million expansion and remodeling of the 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 the se transactions on their contemplated terms, or at all. 2. Average capitalization rate is a rate of return on a real estate investment property based on the expected, annualized SLR th at the property will generate under its existing lease. Average capitalization rate is calculated by dividing the annualized SLR the property will generate (before debt service and depreciation and after fixed costs and variable costs) and th e purchase price of the property. The weighted - average capitalization rate is based upon square footage as of the date of acquisition. Going - in capitalization rate is a rate of return on a real estate investment property based on the expe cted, 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 o f the lease (before debt service and depreciation and after fixed costs and variable costs) and the purchase price of the property. The weighted - average going - in capitalization rate is based upon square footage as of the date of acquisition. 3. Represents remaining lease term as of expected closing date and is weighted based on square feet. 4. These transactions represent the expansion and remodeling of current properties which were, or are scheduled to be, funded by th e Company in exchange for increased annual rent. Current acquisitions represent management’s ability to leverage direct relationships with landlords and developers into primarily off - market transactions, allowing the Company to achieve what it believes to be better than market cap rates. (1) A cquisition Name A cquisition Status Credit Rating Property Type Purchase Price (in millions) Average Cap Rate (2) Lease Term Remaining (3) Contractors Expansion/Remodel 4 - Pack (4 ) Closed: Q1’19 Ba2* Industrial $11.4 8.9 Cummins Closed: Q1’19 A2 Industrial $7.1 9.7 Stanley Security Closed: Q1’19 Baa1** Office $16.3 9.3 Total Closed Q1 2019 $34.8 7.67% 9.3 Sierra Nevada Corporation Closed: Q2’19 B3* Industrial $18.4 9.9 Hanes/Leggett & Platt Closed: Q2’19 Baa1 Distribution $10.1 9.4 EQT Corp Closed: Q2’19 Baa3 Industrial $13.4 11.2 Total Closed Q2 2019 $41.9 7.50% 9.9 Total Closed YTD 2019 $76.7 7.54% 9.8 Hannibal Industries 2 - Pack PSA Executed – Expected: Q2’19 Ba1* Industrial $24.0 15.0 Hannibal Industries Expansion (4 ) LOI Executed – Expected: Q2’19 Ba1* Industrial $12.5 15.0 Union Partners 2 - Pack PSA Executed – Expected: Q2’19 Ba1* Industrial $30.9 9.6 Metal Technologies 2 - Pack PSA Executed – Expected: Q2’19 B2* Industrial $12.1 15.0 ComDoc PSA Executed – Expected: Q2’19 Ba3* Distribution $17.6 10.0 Heatcraft PSA Executed – Expected: Q2’19 Baa3 Industrial $11.5 9.0 Total Under Agreement 2019 $108.6 8.49% 11.7 Total Closed + Pipeline YTD 2019 $185.3 8.17% 11.0

 

 

10 GEOGRAPHIC BALANCE (AS OF MARCH 31, 2019) 1. Refer to basis for metric calculation included in the footnotes to page 3. 2. Metric based on SLR. Refer to SLR definition included in the footnotes to page 3. U.S. Number of Assets: 274 Weighted - Average Remaining Lease Term: 8.2 years (1) % of GNL SLR: 55.8% (2) Europe Number of Assets: 69 Weighted - Average Remaining Lease Term: 8 .0 years (1) % of GNL SLR: 44.2% (2)

 

 

11 Office 53% Industrial/Distribution 39% Retail 8% PORTFOLIO COMPARISON: Q1 2019 VS Q1 2018 Continued Focus towards United States Industrial and Distribution Properties Office 58% Industrial/Distribution 33% Retail 9% United States 49% Europe 51% Property Type Concentration (1) Geographic Concentration (1) As of March 31, 2018 As of March 31, 2018 As of March 31, 2019 2019 vs 2018: Industrial / Distribution increased by 6% up to 39% United States 56% Europe 44% As of March 31, 2019 2019 vs 2018: United States increased by 7% up to 56% as spreads in Europe tightened. GNL took advantage of attractive opportunities in the U.S. and will continue to monitor and explore potential European Acquisitions. 1. Metric based on SLR. Refer to SLR definition included in the footnotes to page 3.

 

 

12 FIRST QUARTER ACQUISITION: CUMMINS, INC. Property and Tenant Overview Tenant Cummins, Inc. Property Type Industrial Credit Rating (1) S&P: A+ Moody's: A2 Location Gillette, WY Square Feet 36,720 Lease Term (years) 9.7 Tenant • The Tenant is a Fortune 500 company that specializes in the design and manufacture of automotive engines and related equipment. • The Tenant has grown to a world leader in the automotive engine industry, expanding their operations to more than 190 countries and employing over 58,000 people. Property • The Property is an industrial facility built in 2008, situated on a 7 - acre parcel. • Major customers of Cummins engines include Ford Motor Company, Chrysler, and Nissan. • The lease contains annual rent escalations of 1.0% beginning in December 2023. Transaction Overview 1. Tenant’s actual credit grade rating. Refer to Investment Grade Rating definition included in the footnotes to page 2 and page 3.

 

 

13 • Stanley Black & Decker, the Parent, has an investment grade credit rating of “A” and “Baa1” from S&P and Moody’s respectively. (1) • The lease contains annual rent escalators of 0.5%. Transaction Overview Tenant Stanley Convergent Security Solutions, Inc. Property Type Office Credit Rating (1) S&P: Parent: A Moody’s: Parent: Baa1 Location Fishers, IN Square Feet 80,000 Lease Term (years) 9.3 Tenant • The Tenant designs, supplies and installs commercial electronic security systems and provides electronic security services. Property • The subject Property is a Class A, state - of - the - art 3 - story office building, built for the Tenant in 2017. • The Property serves as the corporate headquarters for the Tenant, housing approximately 400 employees, and it is located in one of the most affluent trade areas in Indiana. 1. Parent's actual credit rating. Tenant's investment grade rating is implied, although parent is not a guarantor under the lea se. Refer to Investment Grade Rating definition included in the footnotes to page 2 and page 3. FIRST QUARTER ACQUISITION: STANLEY CONVERGENT SECURITY SOLUTIONS, INC. Property and Tenant Overview

 

 

14 Chris Masterson Chief Financial Officer, Treasurer and Secretary FULLY ALIGNED MANAGEMENT STRUCTURE Fully integrated external management team creates highly scalable platform with an acquisition pipeline generated by a proven, country - focused origination network No transactional fees allows for low general and administrative costs, which allows AR Global to provide greater resources at a lower cost. (1) Lower Overhead Costs AR Global has sponsored or co - sponsored 15 REITs which have acquired more than $40 billion of real estate since 2007. Experience The audit, compensation, nominating and corporate governance committees are comprised of independent directors. Corporate Governance Performance Alignment Management structure aligned to compensate based on operational outperformance, in turn delivering increased value to shareholders. Company is supported by a financial accounting and reporting team, and maintains its own financial reporting processes, controls, and procedures. Operational Efficiencies James L. Nelson Chief Executive Officer and President • Joined GNL as an Independent Board Member on March 2017 • Mr. Nelson currently serves as a Board and Audit committee Member for Caesars Entertainment Corp. (since 2019) and Herbalife Ltd. (since 2014) and previously a Board and Audit committee Member of Icahn Enterprises from 2001 - 2019 • Previously served as CEO of Orbitex Management, a financial services company, and Eaglescliff Corporation, a specialty investment banking, consulting and wealth management company • Previously served as Chief Accounting Officer of Global Net Lease • Past experience includes accounting positions with Goldman Sachs and KPMG, LLP. • Certified Public Accountant in New York State 1. As compared to fees associated with the prior management contract

 

 

15 GNL CAPITAL STRUCTURE GNL continued to improve its capital structure during the first quarter of 2019 by extending debt maturities, maintaining a low cost of debt and optimizing the debt structure for continued future growth Debt Maturity and Interest Expense by Quarter (1) GNL Capital Structure by Quarter (1) (in millions) (years) (WAVG interest expense) 1. As of March 31, 2019. $1,136 $1,375 $1,503 $1,341 $1,585 $135 $139 $136 $134 $141 $1,047 $983 $984 $1,140 $1,141 $582 $686 $742 $646 $537 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Equity Preferred Equity Mortgage Debt Line of Credit 3.6 3.3 3.8 4.2 4.2 2.8% 3.1% 3.0% 3.1% 3.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Weighted-Average Maturity Weighted-Average Interest Rate

 

 

16 PERFORMANCE METRICS 1. See page 9 for further details 2. Adjusted Funds from Operations (“AFFO”). See “Non - GAAP measures” on pages 26 - 28 for a description of AFFO and pages 29 - 30 for a reconciliation of AFFO to net income, the most directly comparable GAAP Financial measure. Q1 2019 Q1 2018 Revenue from Tenants $75.5 million $68.1 million Net Income $8.3 million $4.8 million AFFO (2) $39.5 million $35.1 million Dividends Paid to Common Shareholders $43.3 million $35.8 million Weighted - Average Shares Outstanding 82.8 million 67.3 million Q1 2019 Financials: Key Takeaways • $185.3 million of closed and pipeline acquisitions at a weighted average cap rate of 8.17% (1) • The company sold 7.8 million shares of common equity pursuant to its “at the market program” at a weighted average price per sha re of $19.69 during Q1 2019 • GNL will continue to use its equity proceeds to fund new acquisitions • In February 2019, GNL entered into a syndicated investment facility loan agreement in the amount of €74.0 million that is sec ure d by all 5 Finnish properties • This refinancing significantly lowered the interest rate of the debt encumbering these properties from 2.3% to 1.7%

 

 

17 0% 0.4% 1.2% 5.7% 9.2% 21.9% 12.0% 7.5% 2.7% 39.4% DEBT OVERVIEW Net Debt to Enterprise Value (1) 47.8% Net Debt to Adjusted EBITDA (annualized) (2) 6.9x Interest Coverage Ratio (3) 4.3x Weighted - Average Interest Rate (4) 3.0% Weighted - Average Debt Maturity 4.2 Years Floating Rate / Fixed Rate (5) 16.3% / 83.7% Debt Metrics as of March 31, 2019 Debt by Currency Debt Maturity 1. Enterprise value is calculated based on the March 29 , 2019 closing price of $18.90 per common share and $25.67 per preferred share, and net debt of $1.6 billion, comprised of th e p rincipal amount of GNL’s debt totaling $1.7 billion less cash and cash equivalents totaling $ 95.3 million , as of March 31, 2019 . 2. Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA ”). Annualized based on first quarter 2019 Adjusted EBITDA multiplied by four. See “Non - GAAP Measures” on page 29 for a description of Adjusted EBITDA. 3. The interest coverage ratio is calculated by dividing Adjusted EBITDA by cash paid for interest (calculated based on the inte res t expense less non - cash portion of interest expense including amortization of mortgage (discount) premium, net and mezzanine discount for the quarter ended March 31, 2019). See “Non - GAAP Measures” page 28 for a reconciliation of cash paid for interest. 4. The weighted - average interest rate cost is based on the outstanding principal balance of the debt. 5. Fixed rate debt includes floating rate debt fixed by swaps. 6. Weighted - average remaining lease term in years is based on square feet as of March 31, 2019. (Millions) Weighted - Average Remaining Lease Term: 8.1 years (6) Lease Expiration Schedule (% of SF Per Year) USD 39% EUR 40% GBP 21% $215 $140 $16 $300 $471 $260 $277 $- $100 $200 $300 $400 $500 2019 2020 2021 2022 2023 Thereafter Mortgages Line of Credit

 

 

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

 

 

19 The statements in this presentation 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 with the SEC 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 . This presentation contains certain statements that are the Company’s and Management’s hopes, intentions, beliefs, expectations, or projections of the future and might be considered to be forward - looking statements under Federal Securities laws . Prospective investors are cautioned that any such forward - looking statements are not guarantees of future performance, and involve risks and uncertainties . The company’s actual future results may differ significantly from the matters discussed in these forward - looking statements, and we may not release revisions to these forward - looking statements to reflect changes after we’ve made the statements . FORWARD LOOKING STATEMENTS

 

 

20 RISK FACTORS The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward - looking statements . • All of our executive officers are also officers, managers, employees or holders of a direct or indirect controlling interest in the Advisor and other entities affiliated with AR Global Investments, LLC ("AR Global") . As a result, our executive officers, the Advisor and its affiliates face conflicts of interest, including significant conflicts created by the Advisor's compensation arrangements with us and other investment programs advised by AR Global affiliates and conflicts in allocating time among these investment programs and us . These conflicts could result in unanticipated actions . Because investment opportunities that are suitable for us may also be suitable for other investment programs advised by affiliates of AR Global, the Advisor and its affiliates face conflicts of interest relating to the purchase of properties and other investments and these conflicts may not be resolved in our favor . • We are obligated to pay fees which may be substantial to the Advisor and its affiliates . • We depend on tenants for our rental revenue and, accordingly, our rental revenue is dependent upon the success and economic viability of our tenants . • Increases in interest rates could increase the amount of our debt payments . • Adverse changes in exchange rates may reduce the net income and cash flow associated with our properties located outside of the United States ("U . S . ") . • The Advisor may not be able to identify a sufficient number of property acquisitions satisfying our investment objectives on a timely basis and on acceptable terms and prices, or at all . • We may be unable to continue to raise additional debt or equity financing on attractive terms, or at all, and there can be no assurance we will be able to fund future acquisitions . • We may be unable to repay, refinance, restructure or extend our indebtedness as it becomes due . • Adverse changes in exchange rates may reduce the value of our properties located outside of the United States ("U . S . ") .

 

 

21 RISK FACTORS (CONTINUED) • Provisions in in our credit facility, may limit our ability to pay dividends on our common stock, $ 0 . 01 par value per share (“Common Stock ” ), our 7 . 25 % Series A Cumulative Redeemable Preferred Stock, $ 0 . 01 par value per share (“Series A Preferred Stock”) or any other stock we may issue, and, if we are not able to increase the amount of cash we have available to pay dividends, including through additional cash flows we expect to generate from completing acquisitions, or otherwise maintain compliance with our credit facility, we may have to reduce dividend payments or identify other sources to fund the payment of dividends at their current levels . • There can be no assurance we will complete acquisitions on a timely basis or on acceptable terms and conditions, if at all . • We may be unable to pay or maintain cash dividends or increase dividends over time . • We may not generate cash flows sufficient to pay dividends to our stockholders or fund our operations, and, as such, we may be forced to borrow at unfavorable rates to pay dividends to our stockholders or fund our operations . • Any dividends that we pay on our Common Stock, Series A Preferred Stock or any other stock we may issue may exceed cash flow from operations, reducing the amount of capital available to invest in properties and other permitted investments . • We are subject to risks associated with our international investments, including risks associated with compliance with and changes in foreign laws, fluctuations in foreign currency exchange rates and inflation . • We are subject to risks associated with any dislocations or liquidity disruptions that may exist or occur in the credit markets of the U . S . and Europe from time to time . • We may fail to continue to qualify, as a real estate investment trust for U . S . federal income tax purposes ("REIT"), which would result in higher taxes, may adversely affect operations and would reduce the trading price of our Common Stock and Series A Preferred Stock and our cash available for dividends . • We may be exposed to risks due to a lack of tenant diversity, investment types and geographic diversity . • We are exposed to changes in general economic, business and political conditions, including the possibility of intensified international hostilities, acts of terrorism, and changes in conditions of U . S . or international lending, capital and financing markets, including as a result of the U . K . 's potential or actual withdrawal from the European Union or any other events that create, or give the impression they could create, economic or political instability in Europe, which may cause the revenue derived from, and the market value of, properties located in the United Kingdom and continental Europe to decline .

 

 

22 PROJECTIONS • This presentation includes estimated projections of future operating results . These projections were not prepared in accordance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial projections . This information is not fact and should not be relied upon as being necessarily indicative of future results ; the projections were prepared in good faith by management and are based on numerous assumptions that may prove to be wrong . Important factors that may affect actual results and cause the projections to not be achieved include, but are not limited to, risks and uncertainties relating to the company and other factors described in the “Risk Factors” 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 with the SEC on February 28 , 2019 , and subsequent Quarterly Reports on Form 10 - Q filed with the SEC . The projections also reflect assumptions as to certain business decisions that are subject to change . As a result, actual results may differ materially from those contained in the estimates . Accordingly, there can be no assurance that the estimates will be realized . • This presentation also contains estimates and information concerning our industry, including market position, market size, and growth rates of the markets in which we participate, that are based on industry publications and reports . This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates . We have not independently verified the accuracy or completeness of the data contained in these industry publications and reports . The industry in which we operate is subject to a high degree of uncertainty and risk due to variety of factors, including those described 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 with the SEC on February 28 , 2019 , and subsequent Quarterly Reports on Form 10 - Q filed with the SEC . These and other factors could cause results to differ materially from those expressed in these publications and reports .

 

 

23 DEFINITIONS • Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a measure known as funds from operations ("FFO"), which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT . FFO is not equivalent to net income or loss as determined under accounting principles generally accepted in the United States ("GAAP") . • We 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 . However, FFO, core funds from operations ("Core FFO") and adjusted funds from operations (“AFFO”), as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance . The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non - GAAP FFO, Core FFO and AFFO measures and the adjustments to GAAP in calculating FFO, Core FFO and AFFO . Other REITs may not define FFO in accordance with the current NAREIT definition (as we do) or may interpret the current NAREIT definition differently than we do or calculate Core FFO or AFFO differently than we do . Consequently, our presentation of FFO, Core FFO and AFFO may not be comparable to other similarly titled measures presented by other REITs . • We consider FFO, Core FFO and AFFO useful indicators of our performance . Because FFO calculations exclude such factors as depreciation and amortization of real estate assets and gains or losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful - life estimates), FFO facilitates comparisons of operating performance between periods and between other REITs in our peer group .

 

 

24 DEFINITIONS (CONTINUED) • Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed - as - incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT's definition of FFO have prompted an increase in cash - settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP . • In calculating Core FFO, we start with FFO, then we exclude certain non - core items such as acquisition, 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 . • In calculating AFFO, we start with Core FFO, then we exclude certain income or expense items from AFFO that we consider more reflective of investing activities, other non - cash income and expense items and the income and expense effects of other activities that are not a fundamental attribute of our business plan . These items include early extinguishment of debt (adjustment included in Core FFO) and unrealized gain and loss, which may not ultimately be realized, such as gain or loss on derivative instruments, gain or loss on foreign currency transactions, and gain or loss on investments . In addition, by excluding non - cash income and expense items such as amortization of above - market and below - market leases intangibles, amortization of deferred financing costs, straight - line rent and equity - based compensation from AFFO, we believe we provide useful information regarding income and expense items which have a direct impact on our ongoing operating performance . We also include the realized gain or loss on foreign currency exchange contracts for AFFO as such items are part of our ongoing operations and affect the current operating performance of the Company . By providing AFFO, we believe we are presenting useful information that can be used to better assess the sustainability of our ongoing operating performance without the 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 extinguishment) and certain other expenses negatively impact our operating performance during the period in which expenses are incurred or properties are acquired will also have negative effects on returns to investors, but are not reflective of our on - going performance . AFFO that excludes such costs and expenses would only be comparable to companies that did not have such activities . Further, under GAAP, certain contemplated non - cash fair value and other non - cash adjustments are considered operating non - cash adjustments to net income . In addition, as discussed above, we view gains and losses from fair value adjustments as items which are unrealized and may not ultimately be realized and not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance .

 

 

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

 

 

26 NON – GAAP RECONCILIATIONS 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 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) Gain on derivative instruments (240) (2,950) (1,290) (6,333) Unrealized (gains) losses 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) $ 13,318 $ 13,907 $ 13,164 $ 12,652

 

 

27 FFO AND AFFO RECONCILIATIONS Three Months Ended March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018 Funds from operations (FFO): Net income (loss) attributable to common stockholders (in accordance with GAAP) $ 5,791 $ (6,744) $ 177 $ 5,288 $ 2,361 Impairment charges — 5,000 — — — Depreciation and amortization 31,303 30,078 30,195 29,813 29,496 (Gain) loss on dispositions of real estate investments (892) — 1,933 3,818 — FFO (as defined by NAREIT) attributable to stockholders 36,202 28,334 32,305 38,919 31,857 Acquisition, transaction and other costs (1) 262 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 stockholders 36,464 36,940 37,752 41,317 33,103 Non - cash equity based compensation 2,109 1,451 2,053 (23) (832) Non - cash portion of incentive fee — (180) 180 — — Non - cash portion of interest expense 1,742 1,454 1,339 1,499 901 Amortization of above and below - market leases and ground lease assets and liabilities, net 337 590 488 500 552 Straight - line rent (1,626) (1,482) (1,492) (1,833) (1,503) Unrealized (gain) loss on undesignated foreign currency advances and other hedge ineffectiveness (76) 452 (108) 47 43 Eliminate unrealized losses (gains) on foreign currency transactions (4) 452 (2,206) (1,215) (6,256) 2,550 Amortization of mortgage discounts and premiums, net 102 118 601 263 267 Adjusted funds from operations (AFFO) attributable to stockholders (5) $ 39,504 $ 37,137 $ 39,598 $ 35,514 $ 35,081 Basic weighted - average shares outstanding 81,475 73,554 69,442 67,292 67,287 Diluted weighted - average shares outstanding 82,798 74,001 69,442 67,292 67,287 FFO per share $ 0.44 $ 0.38 $ 0.47 $ 0.58 $ 0.47 Core FFO per share $ 0.44 $ 0.50 $ 0.54 $ 0.61 $ 0.49 Dividends declared (6) $ 43,297 $ 39,119 $ 36,769 $ 35,828 $ 35,833 1. Primarily includes litigation costs resulting from the termination of the Former Service Provider, costs to refinance foreign de bt 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 prepa yment 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 classi fie d 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 AFFO purposes, we add back unrealized (gain) loss. For the three months ended March 31, 2019, gains on derivative instrum ent s 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 compris ed 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 re alized 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 derivat ive 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 was re cor ded 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.

 

 

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

 

 

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