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Section 1: 8-K (8-K)

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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 6, 2020
 
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.)
 
650 Fifth Avenue, 30th Floor
New York, New York 10019
______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
(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))
 
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
6.875% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value
 
GNL PR B
 
New York Stock Exchange
Preferred Stock Purchase Rights
 
 
 
New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  





Item 2.02. Results of Operations and Financial Condition.
 
On May 6, 2020, Global Net Lease, Inc. (the “Company”) issued a press release announcing its results of operations for the quarter ended March 31, 2020, and supplemental financial information for the quarter ended March 31, 2020, 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 May 6, 2020, the Company issued a press release announcing its results of operations for the quarter ended March 31, 2020, and supplemental financial information for the quarter ended March 31, 2020, 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 that are not historical facts may be forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause the outcome to be materially different. In addition, words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions indicate a forward-looking statement, although not all forward-looking statements include these words. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company’s control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include the potential adverse effects of the ongoing global COVID-19 pandemic, including actions taken to contain or treat COVID-19, on the Company, the Company’s tenants and the global economy and financial markets, as well as those set forth in the Risk Factors section of the Company's most recent Annual Report on Form 10-K for the year ended December 31, 2019 filed February 28, 2020 and all other filings filed with the Securities and Exchange Commission after that date. Further, 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, unless required by law.
 
Item 9.01. Financial Statements and Exhibits.
 
(d) Exhibits
 
Exhibit No.
 
Description
 
Press release dated May 6, 2020
 
 
 
 
Quarterly supplemental information for the quarter ended March 31, 2020
 
 
 
104
 
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL Document.



























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 6, 2020
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 3.31.20)

Exhibit


EXHIBIT 99.1

403886656_image3a29.gif    

FOR IMMEDIATE RELEASE
 

GLOBAL NET LEASE REPORTS FIRST QUARTER 2020 RESULTS
Company to Host Investor Conference Call Today at 11 AM Eastern


New York, May 6, 2020 - 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, Europe and Canada, announced today its financial and operating results for the quarter ended March 31, 2020.

First Quarter 2020 Highlights

Revenue increased 5.0% to $79.2 million from $75.5 million in first quarter 2019
Net income attributable to common stockholders was $5.0 million or $0.05 per share as compared to $5.8 million or $0.07 per share in first quarter 2019
Net operating income ("NOI") grew 5.5% to $71.9 million from $68.1 million in first quarter 2019
Core Funds from Operations (“Core FFO”) was $38.9 million or $0.43 per share as compared to $36.5 million or $0.44 per share in first quarter 2019
Adjusted Funds from Operations (“AFFO”) was $39.8 million as compared to $39.5 million in the prior year first quarter
AFFO per share was $0.44 as compared to $0.48 in first quarter 2019
Announced a dividend change to be paid beginning in the second quarter to $0.40 per quarter, or $1.60 per share on an annualized basis, expected to strengthen cash flow by $12.0 million per quarter
Ample Liquidity1 of $367 million after borrowing an additional $205.0 million under the Company's credit facility in March to enhance financial flexibility in response to COVID-19
Acquired ten industrial and office properties for an aggregate contract purchase price2 of $113.9 million at an 8.5% weighted-average capitalization rate3 and 18.9 years of weighted-average remaining lease term4  
Portfolio 99.6% leased with an 9.0 year weighted average remaining lease term5, up from 8.1 years in prior year quarter
Portfolio is allocated 48% office, 47% industrial/distribution and 5% retail at the end of the quarter compared to 53% office, 39% industrial/distribution and 8% retail based on annualized straight-line rent as of March 31, 2019
Collected 98% of April cash rents as of April 30, 2020
Collected 100% of cash rent due during April in the U.K., 99% in Europe and 96% in the U.S.


James Nelson, Chief Executive Officer of GNL commented, "We continue to execute on our strategy of focusing on industrial, distribution and office properties that are leased to high quality tenants primarily in the United States and Western Europe. GNL recorded a great first quarter and I am very proud of how our excellent team of professionals responded to the outbreak of the COVID-19 pandemic, collecting 98% of the rent due in April. Our team's dedication, combined with our balance of mission critical industrial and distribution assets and high concentration of investment grade tenants will continue to serve us well as we navigate this global economic uncertainty. Our ample liquidity of $367 million will provide further flexibility as we look to eventually capitalize on opportunities that may arise from this crisis.”






 
 
Three Months Ended March 31,
(In thousands, except per share data)
 
2020
 
2019
Revenue from tenants
 
$
79,242

 
$
75,468

 
 
 
 
 
Net income attributable to common stockholders
 
$
5,038

 
$
5,791

Net income per diluted common share
 
$
0.05

 
$
0.07

 
 
 
 
 
NAREIT defined FFO attributable to common stockholders
 
$
38,571

 
$
36,202

NAREIT defined FFO per diluted common share
 
$
0.43

 
$
0.44

 
 
 
 
 
Core FFO attributable to common stockholders
 
$
38,851

 
$
36,464

Core FFO per diluted common share
 
$
0.43

 
$
0.44

 
 
 
 
 
AFFO attributable to common stockholders
 
$
39,822

 
$
39,504

AFFO per diluted common share
 
$
0.44

 
$
0.48


Property Portfolio
 
The Company’s portfolio of 288 net lease properties is located in nine countries and comprised of 34.2 million rentable square feet leased to 126 tenants across 46 industries at March 31, 2020. The real estate portfolio metrics include:

99.6% leased with a remaining weighted-average lease term of 9.0 years, up from 8.1 years in 2019
93.7% of the portfolio contains contractual rent increases based on square footage
66.7% of portfolio annualized straight-line rent derived from investment grade and implied investment grade rated tenants6 
64% U.S. and 36% Europe (based on annualized straight-line rent)
48% Office, 47% Industrial / Distribution and 5% Retail (based on an annualized straight-line rent)

Acquisition and Disposition Activity

During the first quarter 2020, the Company acquired ten net leased assets for an aggregate contract purchase price of approximately $113.9. These assets were purchased at a weighted average going-in capitalization rate of 7.12%7, and an overall weighted average capitalization rate of 8.5%, with a weighted average remaining lease term of 18.9 years.

The Company did not dispose of any properties during the three months ended March 31, 2020.






Capital Structure and Liquidity Resources

As of March 31, 2020, the Company had $343.4 million of cash and cash equivalents. The Company’s net debt to enterprise value was 55.0% with an enterprise value of $3.1 billion based on the quarter end closing share price of $13.37 for common stock, $20.27 for the Series A preferred stock and $19.89 for the Series B preferred stock, with net debt of $1.7 billion8, including $1.3 billion of mortgage debt.

As of March 31, 2020, the percentage of fixed rate debt (including variable rate debt fixed with swaps) increased to 89.6% from 83.7% as of March 31, 2019. The Company’s total combined debt had a weighted average interest rate of 3.1% resulting in an interest coverage ratio of 4.1 times9. Weighted-average debt maturity based on outstanding principal balance of the debt on the last day of the applicable quarter increased to 5.4 years as of March 31, 2020 from 4.2 years at March 31, 2019.

Dividend

On March 30, 2020, the Company announced that its Board of Directors approved a quarterly dividend of $0.40 per share, equating to an annualized dividend of $1.60 per share. The Company pays dividends quarterly, and the change went into effect for the dividend which the Company declared in April 2020.

Subsequent Events

Acquisitions

The Company has signed two definitive purchase and sale agreements ("PSAs") to acquire two net lease properties in the United States, for a contract purchase price of approximately $11.2 million at a weighted average capitalization rate of 8.6%. The Company has signed two letters of intent ("LOIs") to acquire a total of 11 net lease properties, for an aggregate purchase price of $45.6 million at a weighted average capitalization rate of 8.8%. The PSAs are subject to conditions and the LOIs may not lead to a definitive agreement. There can be no assurance that the Company will complete any of these acquisitions on a timely basis or on acceptable terms and conditions, if at all.

April Rent10    

The Company collected 98% of cash rents that were payable in April as of April 30, 2020, including 100% of the cash rent payable from the top 20 tenants in the portfolio (measured based on annualized straight-line rent as of March 31, 2020), which represent 48% of GNL's April cash rent11. On a geographic basis, GNL collected 100% of the cash rent payable from U.K.based assets, 99% from European tenants and 96% of tenants located in the U.S.
Short-term Stockholder Rights Plan

On April 9, 2020 the Company announced that its Board of Directors had approved a short-term stockholder rights plan to protect the interests of the Company due to the substantial volatility in the trading of the Company’s common stock that has resulted from the ongoing COVID-19 pandemic.







Footnotes/Definitions

1  Liquidity includes $23.2 million of availability under the credit facility and $343.4 million of cash and cash equivalents.
2 Represents the contract purchase price and excludes acquisition costs which are capitalized per GAAP.
3 Capitalization rate is a rate of return on a real estate investment property based on the expected, annualized straight-line 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.
4 
The weighted average remaining lease term in years is based upon square feet as of the date of acquisition.
5 
Weighted-average remaining lease term in years is based on square feet as of March 31, 2020.    
6  
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, 2020. Comprised of 35.9% leased to tenants with an actual investment grade rating and 30.8% leased to tenants with an Implied Investment Grade rating as of March 31, 2020.
7 
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.
8 Comprised of the principal amount of GNL's debt totaling $2.1 billion less cash and cash equivalents totaling $343.4 million, as of March 31, 2020.
9 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, 2020. Adjusted EBITDA and cash paid for interest are Non-GAAP metrics and are reconciled below.
10 This information may not be indicative of any future period. The impact of the COVID-19 pandemic on the Company’s rental revenue for the second quarter of 2020 and thereafter cannot be determined at present. The ultimate impact on our future results of operations and liquidity will depend on the overall length and severity of the COVID-19 pandemic, which management is unable to predict.
11 Of the remaining rent not yet collected, rent deferral amendments have been approved for 1% of the unpaid cash rent, while another 1% of rent deferrals are currently in negotiation. The typical deferral defers payment of approximately 30% of the rent due for April, June and July of 2020, with payment due during the first half of 2021. There can be no assurance that these negotiations will be successful and will lead to formal rent deferral agreements on favorable terms, or at all. The remaining 1% generally represents tenants that have paid partial April cash rent but where the Company has not agreed to, or commenced negotiations regarding, any formal deferral arrangements. There can be no assurance the Company will be successful in its efforts to collect or defer these amounts on a timely basis, or at all.





Conference Call 
GNL will host a conference call on May 6, 2020 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: 2032186 
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: 10141887 
*Available one hour after the end of the conference call through August 6, 2020.
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. The words “anticipates,” “believes,” "expects," “estimates,” “projects,” “plans,” “intends,” “may," "will," "would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside of the Company's control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include the potential adverse effects of the ongoing global COVID-19 pandemic, including actions taken to contain or treat COVID-19, on the Company, the Company's tenants and the global economy and financial markets and that any potential future acquisition is subject to market conditions and capital availability and may not be identified or completed on favorable terms, or at all, as well as those risk and uncertainties set forth in the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended December 31, 2019 filed on February 28, 2020 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 the Company's subsequent reports. Further, forward looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise any forward-looking statement to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results, unless required to do so by law.
Accounting Treatment of Rent Deferrals
The Company currently anticipates that the majority of the concessions granted to its tenants as a result of the COVID-19 pandemic will be rent deferrals with the original lease term unchanged and collection of deferred rent deemed probable. The Company’s revenue recognition policy requires that it must be probable that the Company will collect virtually all of the lease payments due and does not provide for partial reserves, or the ability to assume partial recovery. In light of the COVID-19 pandemic, the FASB and SEC agreed that for leases where the total lease cash flows will remain substantially the same or less than those after the COVID-19 related effects, companies may choose to forgo the evaluation of the enforceable rights and obligations of the original





lease contract as a practical expedient and account for rent concessions as if they were part of the enforceable rights and obligations of the parties under the existing lease contract. As a result, we do not expect rental revenue used to calculate Net Income and NAREIT FFO to be significantly impacted by deferrals. In addition, since we currently believe that these amounts are collectible, we would not plan to adjust from AFFO the amounts recognized under GAAP relating to rent deferrals.

Contacts: 
Investors and Media:
Email: [email protected]
Phone: (212) 415-6510





Global Net Lease, Inc.
Consolidated Balance Sheets
(In thousands)

 
 
March 31,
2020
 
December 31,
2019
ASSETS
 
(Unaudited)
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
429,160

 
$
414,446

Buildings, fixtures and improvements
 
2,736,228

 
2,685,325

Construction in progress
 
12,912

 
11,725

Acquired intangible lease assets
 
649,562

 
651,768

Total real estate investments, at cost
 
3,827,862

 
3,763,264

Less accumulated depreciation and amortization
 
(543,062
)
 
(517,123
)
Total real estate investments, net
 
3,284,800

 
3,246,141

Assets held for sale
 

 

Cash and cash equivalents
 
343,447

 
270,302

Restricted cash
 
4,355

 
3,985

Derivative assets, at fair value
 
5,373

 
4,151

Unbilled straight-line rent
 
51,925

 
51,795

Operating lease right-of-use asset
 
48,868

 
50,211

Prepaid expenses and other assets
 
39,956

 
37,370

Due from related parties
 
345

 
351

Deferred tax assets
 
4,419

 
4,441

Goodwill and other intangible assets, net
 
21,688

 
21,920

Deferred financing costs, net
 
10,177

 
10,938

Total Assets
 
$
3,815,353

 
$
3,701,605

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net
 
$
1,249,308

 
$
1,272,154

Revolving credit facility
 
399,213

 
199,071

Term loan, net
 
390,450

 
397,893

Acquired intangible lease liabilities, net
 
29,398

 
30,529

Derivative liabilities, at fair value
 
14,035

 
7,507

Due to related parties
 
196

 
342

Accounts payable and accrued expenses
 
22,762

 
22,903

Operating lease liability
 
23,363

 
23,985

Prepaid rent
 
17,448

 
17,236

Deferred tax liability
 
14,289

 
14,975

Taxes payable
 

 
1,046

Dividends payable
 
4,934

 
4,006

Total Liabilities
 
2,165,396

 
1,991,647

Commitments and contingencies
 

 

Stockholders' Equity:
 
 
 
 
7.25% Series A cumulative redeemable preferred stock
 
68

 
68

6.875% Series B cumulative redeemable perpetual preferred stock
 
35

 
35

Common stock
 
2,225

 
2,225

Additional paid-in capital
 
2,408,452

 
2,408,353

Accumulated other comprehensive income
 
493

 
20,195

Accumulated deficit
 
(776,002
)
 
(733,245
)
Total Stockholders' Equity
 
1,635,271

 
1,697,631

Non-controlling interest
 
14,686

 
12,327

Total Equity
 
1,649,957

 
1,709,958

Total Liabilities and Equity
 
$
3,815,353

 
$
3,701,605






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

 
 
Three Months Ended March 31,
 
 
2020
 
2019
Revenue from tenants
 
$
79,242

 
$
75,468

 
 
 
 
 
 Expenses:
 
 
 
 
Property operating
 
7,377

 
7,359

Operating fees to related parties
 
8,794

 
8,043

Acquisition, transaction and other costs
 
280

 
262

General and administrative
 
2,961

 
3,206

Equity-based compensation
 
2,488

 
2,109

Depreciation and amortization
 
33,533

 
31,303

       Total expenses
 
55,433

 
52,282

Operating income before gain on dispositions of real estate investments
 
23,809

 
23,186

Gain on dispositions of real estate investments
 

 
892

              Operating income
 
23,809

 
24,078

Other income (expense):
 
 
 
 
Interest expense
 
(16,440
)
 
(15,162
)
Gain on derivative instruments
 
3,143

 
240

Unrealized income on undesignated foreign currency advances and other hedge ineffectiveness
 

 
76

Other income
 
48

 
4

       Total other expense, net
 
(13,249
)
 
(14,842
)
Net income before income taxes
 
10,560

 
9,236

Income tax expense
 
(959
)
 
(960
)
Net income
 
9,601

 
8,276

Preferred stock dividends
 
(4,563
)
 
(2,485
)
Net income attributable to common stockholders
 
$
5,038

 
$
5,791

 
 
 
 
 
Basic and Diluted Earnings Per Share:
 
 
 
 
Basic and diluted net income per share attributable to common stockholders
 
$
0.05

 
$
0.07

 
 
 
 
 
Basic weighted average shares outstanding
 
89,459

 
81,475

Diluted weighted average shares outstanding
 
89,499

 
82,798










Global Net Lease, Inc.
Quarterly Reconciliation of Non-GAAP Measures (Unaudited)
(In thousands)
 
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Adjusted EBITDA
 
 
 
 
Net income
 
$
9,601

 
$
8,276

Depreciation and amortization
 
33,533

 
31,303

Interest expense
 
16,440

 
15,162

Income tax expense
 
959

 
960

Equity-based compensation
 
2,488

 
2,109

Acquisition and transaction related
 
280

 
262

Gain on dispositions of real estate investments
 

 
(892
)
Gain on derivative instruments
 
(3,143
)
 
(240
)
Unrealized income on undesignated foreign currency advances and other hedge ineffectiveness
 

 
(76
)
Other income
 
(48
)
 
(4
)
Adjusted EBITDA
 
60,110

 
56,860

 
 
 
 
 
Net operating income (NOI)
 
 
 
 
Operating fees to related parties
 
8,794

 
8,043

General and administrative
 
2,961

 
3,206

NOI
 
71,865

 
68,109

Amortization of above- and below- market leases and ground lease assets and liabilities, net
 
232

 
337

Straight-line rent
 
(1,487
)
 
(1,626
)
  Cash NOI
 
$
70,610

 
$
66,820

 
 
 
 
 
Cash Paid for Interest:
 
 
 
 
   Interest Expense
 
$
16,440

 
$
15,162

   Non-cash portion of interest expense
 
(1,810
)
 
(1,742
)
   Amortization of mortgage (discount) premium, net
 
(10
)
 
(102
)
   Total cash paid for interest
 
$
14,620

 
$
13,318








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

 
 
Three Months Ended March 31,
 
 
2020
 
2019
Net income attributable to stockholders (in accordance with GAAP)
 
$
5,038

 
$
5,791

   Depreciation and amortization
 
33,533

 
31,303

   Gain on dispositions of real estate investments
 

 
(892
)
FFO (defined by NAREIT)
 
38,571

 
36,202

   Acquisition, transaction and other costs
 
280

 
262

Core FFO attributable to common stockholders
 
38,851

 
36,464

   Non-cash equity-based compensation
 
2,488

 
2,109

   Non-cash portion of interest expense
 
1,810

 
1,742

   Amortization of above- and below-market leases and ground lease assets and liabilities, net
 
232

 
337

   Straight-line rent
 
(1,487
)
 
(1,626
)
   Unrealized income on undesignated foreign currency advances and other hedge ineffectiveness
 

 
(76
)
   Eliminate unrealized (gain) losses on foreign currency transactions [1]
 
(2,082
)
 
452

   Amortization of mortgage discounts and premiums, net
 
10

 
102

Adjusted funds from operations (AFFO) attributable to common stockholders
 
$
39,822

 
$
39,504

Footnotes:
[1] For AFFO purposes, we add back unrealized (gain) loss. For the three months ended March 31, 2020, gains on derivative instruments were $3.1 million, which consisted of unrealized gains of $2.1 million and realized gains of $1.0 million. 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.





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 gain or loss 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. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect the proportionate share of adjustments for non-controlling interest to arrive at FFO, Core FFO and AFFO, as applicable.

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, gain and loss from the sale of certain real estate assets, gain and loss 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. 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. 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 subsequent operations of 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 and other items excluded in Core FFO as well as 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. 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 gain and loss 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 gain or loss, we believe AFFO provides useful supplemental information. 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. Furthermore, 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 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-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 3.31.20)

Exhibit
EXHIBIT 99.2






Global Net Lease, Inc.
Supplemental Information

Quarter ended March 31, 2020 (unaudited)





Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2020 (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 of Global Net Lease, Inc. (the “Company”) includes “forward looking statements.” These forward-looking statements involve risks and uncertainties that could cause actual results or events to be materially different. The words “anticipates,” “believes,” "expects," “estimates,” “projects,” “plans,” “intends,” “may," "will," "would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside of the Company's control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include the potential adverse effects of the ongoing global COVID-19 pandemic, including actions taken to contain or treat COVID-19, on the Company, the Company's tenants and the global economy and financial markets and that any potential future acquisition is subject to market conditions and capital availability and may not be identified or completed on favorable terms, or at all, as well as those risk and uncertainties set forth in the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended December 31, 2019 filed on February 28, 2020 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 the Company's subsequent reports. Further, forward looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise any forward-looking statement to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results, unless required to do so by law.
Accounting Treatment of Rent Deferrals
The Company currently anticipates that the majority of the concessions granted to its tenants as a result of the COVID-19 pandemic will be rent deferrals with the original lease term unchanged and collection of deferred rent deemed probable. The Company’s revenue recognition policy requires that it must be probable that the Company will collect virtually all of the lease payments due and does not provide for partial reserves, or the ability to assume partial recovery. In light of the COVID-19 pandemic, the FASB and SEC agreed that for leases where the total lease cash flows will remain substantially the same or less than those after the COVID-19 related effects, companies may choose to forgo the evaluation of the enforceable rights and obligations of the original lease contract as a practical expedient and account for rent concessions as if they were part of the enforceable rights and obligations of the parties under the existing lease contract. As a result, we do not expect rental revenue used to calculate Net Income and NAREIT FFO to be significantly impacted by deferrals. In addition, since we currently believe that these amounts are collectible, we would not plan to adjust from AFFO the amounts recognized under GAAP relating to rent deferrals.

2


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2020 (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 gain or loss 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. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect the proportionate share of adjustments for non-controlling interest to arrive at FFO, Core FFO and AFFO, as applicable.
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, gain and loss from the sale of certain real estate assets, gain and loss 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. 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, 2020 (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 subsequent operations of 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 and other items excluded in Core FFO as well as 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. 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 gain and loss 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 gain or loss, we believe AFFO provides useful supplemental information. 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. Furthermore, 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, 2020 (Unaudited)

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.
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, 2020 (Unaudited)

Key Metrics
As of and for the three months ended March 31, 2020
Amounts in thousands, except per share data, ratios and percentages
Financial Results
 
 
Revenue from tenants
 
$
79,242

Net income attributable to common stockholders
 
$
5,038

Basic and diluted net income per share attributable to common stockholders [1]
 
$
0.05

Cash NOI [2]
 
$
70,610

Adjusted EBITDA [2]
 
$
60,110

AFFO attributable to common stockholders [2]
 
$
39,822

Dividends per share - first quarter [3]
 
$
0.40

Dividend yield - annualized, based on quarter end share price
 
12.0
%
 
 
 
Balance Sheet and Capitalization
 
 
Equity market capitalization - based on quarter end share price of $13.37 for common shares, $20.27 for Series A preferred shares and $19.89 for Series B preferred shares
 
$
1,402,510

Net debt [4] [5]
 
1,714,815

Enterprise value
 
3,117,325

 
 
 
Total capitalization
 
3,460,772

 
 
 
Total consolidated debt [5]
 
2,058,262

Total assets
 
3,815,353

Liquidity [6]
 
366,647

 
 
 
Common shares outstanding as of March 31, 2020 (thousands)
 
89,459

Share price, end of quarter
 
$
13.37

 
 
 
Net debt to enterprise value
 
55.0
%
Net debt to annualized adjusted EBITDA [7]
 
7.1
x
 
 
 
Weighted-average interest rate cost [8]
 
3.1
%
Weighted-average debt maturity (years) [9]
 
5.4

Interest Coverage Ratio [10]
 
4.1
x
 
 
 
Real Estate Portfolio
 
 
Number of properties
 
288

Number of tenants
 
126

 
 
 
Square footage (millions)
 
34.2

Leased
 
99.6
%
Weighted-average remaining lease term (years) [11]
 
9.0

Footnotes:
[1]  Adjusted for net income (loss) attributable to common stockholders for common share equivalents.
[2]  This Non-GAAP metric is reconciled below.
[3]  Represents quarterly dividend per share rate based off the new annualized dividend rate of $1.60.
[4]  Represents total debt outstanding of $1.7 billion, less cash and cash equivalents of $343.4 million.
[5]  Excludes the effect of deferred financing costs, net and mortgage (discount) premium, net.
[6]  Liquidity includes $23.2 million of availability under the credit facility and $343.4 million of cash and cash equivalents.
[7]  Annualized adjusted EBITDA annualized based on Adjusted EBITDA for the quarter ended March 31, 2020 multiplied by four.
[8] The weighted average interest rate cost is based on the outstanding principal balance of the debt.
[9]  The weighted average debt maturity is based on the outstanding principal balance of the debt.
[10] 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, 2020.  Adjusted EBITDA and cash paid for interest are Non-GAAP metrics and are reconciled below.
[11] The weighted-average remaining lease term (years) is based on square feet.

6

Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2020


Consolidated Balance Sheets
Amounts in thousands
 
 
March 31,
2020
 
December 31,
2019
 
 
(Unaudited)
 
 
ASSETS
 
 
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
429,160

 
$
414,446

Buildings, fixtures and improvements
 
2,736,228

 
2,685,325

Construction in progress
 
12,912

 
11,725

Acquired intangible lease assets
 
649,562

 
651,768

Total real estate investments, at cost
 
3,827,862

 
3,763,264

Less accumulated depreciation and amortization
 
(543,062
)
 
(517,123
)
Total real estate investments, net
 
3,284,800

 
3,246,141

Cash and cash equivalents
 
343,447

 
270,302

Restricted cash
 
4,355

 
3,985

Derivative assets, at fair value
 
5,373

 
4,151

Unbilled straight-line rent
 
51,925

 
51,795

Operating lease right-of-use asset
 
48,868

 
50,211

Prepaid expenses and other assets
 
39,956

 
37,370

Due from related parties
 
345

 
351

Deferred tax assets
 
4,419

 
4,441

Goodwill and other intangible assets, net
 
21,688

 
21,920

Deferred financing costs, net
 
10,177

 
10,938

Total Assets
 
$
3,815,353

 
$
3,701,605

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net
 
$
1,249,308

 
$
1,272,154

Revolving credit facility
 
399,213

 
199,071

Term loan, net
 
390,450

 
397,893

Acquired intangible lease liabilities, net
 
29,398

 
30,529

Derivative liabilities, at fair value
 
14,035

 
7,507

Due to related parties
 
196

 
342

Accounts payable and accrued expenses
 
22,762

 
22,903

Operating lease liability
 
23,363

 
23,985

Prepaid rent
 
17,448

 
17,236

Deferred tax liability
 
14,289

 
14,975

Taxes payable
 

 
1,046

Dividends payable
 
4,934

 
4,006

Total Liabilities
 
2,165,396

 
1,991,647

Commitments and contingencies
 

 

Stockholders’ Equity:
 
 
 
 
7.25% Series A cumulative redeemable preferred stock
 
68

 
68

6.875% Series B cumulative redeemable perpetual preferred stock
 
35

 
35

Common stock
 
2,225

 
2,225

Additional paid-in capital
 
2,408,452

 
2,408,353

Accumulated other comprehensive income
 
493

 
20,195

Accumulated deficit
 
(776,002
)
 
(733,245
)
Total Stockholders’ Equity
 
1,635,271

 
1,697,631

Non-controlling interest
 
14,686

 
12,327

Total Equity
 
1,649,957

 
1,709,958

Total Liabilities and Equity
 
$
3,815,353

 
$
3,701,605



7


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2020 (Unaudited)

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

 
 
Three Months Ended
 
 
March 31,
2020
 
December 31,
2019
 
September 30, 2019
 
June 30,
2019
Revenue from tenants
 
$
79,242

 
$
76,685

 
$
77,942

 
$
76,119

 
 
 
 
 
 
 
 
 
 Expenses:
 
 
 
 
 
 
 
 
Property operating
 
7,377

 
5,701

 
8,205

 
7,049

Operating fees to related parties
 
8,794

 
8,867

 
8,220

 
8,162

Impairment charges
 

 

 
6,375

 

Acquisition, transaction and other costs
 
280

 
19

 
192

 
847

General and administrative
 
2,961

 
1,334

 
3,250

 
2,318

Equity-based compensation
 
2,488

 
2,491

 
2,501

 
2,429

Depreciation and amortization
 
33,533

 
31,989

 
31,620

 
31,084

Total expenses
 
55,433

 
50,401

 
60,363

 
51,889

Operating income before loss on dispositions of real estate investments
 
23,809

 
26,284

 
17,579

 
24,230

Gain on dispositions of real estate investments
 

 
8,824

 
6,977

 
6,923

Operating income
 
23,809

 
35,108

 
24,556

 
31,153

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(16,440
)
 
(17,194
)
 
(16,154
)
 
(15,689
)
Loss on extinguishment of debt
 

 
379

 
(563
)
 
(765
)
Gain (loss) on derivative instruments
 
3,143

 
(3,905
)
 
3,044

 
1,390

Other income (expense)
 
48

 
195

 
(2
)
 
19

Total other expense, net
 
(13,249
)
 
(20,525
)
 
(13,675
)
 
(15,045
)
Net income before income taxes
 
10,560

 
14,583

 
10,881

 
16,108

Income tax expense
 
(959
)
 
(1,652
)
 
(940
)
 
(780
)
Net income
 
9,601

 
12,931

 
9,941

 
15,328

Preferred stock dividends
 
(4,563
)
 
(3,668
)
 
(3,081
)
 
(2,707
)
Net income attributable to common stockholders
 
$
5,038

 
$
9,263

 
$
6,860

 
$
12,621

 
 
 
 
 
 
 
 
 
Basic and Diluted Earnings Per Share:
 
 
 
 
 
 
 
 
Basic and diluted net income per share attributable to common stockholders
 
$
0.05

 
$
0.10

 
$
0.08

 
$
0.15

Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
89,459

 
89,458

 
85,255

 
83,847

Diluted
 
89,499

 
90,777

 
86,203

 
85,166



8


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2020 (Unaudited)

Non-GAAP Measures
Amounts in thousands, except per share data
 
 
Three Months Ended
 
 
March 31,
2020
 
December 31,
2019
 
September 30, 2019
 
June 30,
2019
EBITDA:
 
 
 
 
 
 
 
 
Net income
 
$
9,601

 
$
12,931

 
$
9,941

 
$
15,328

Depreciation and amortization
 
33,533

 
31,989

 
31,620

 
31,084

Interest expense
 
16,440

 
17,194

 
16,154

 
15,689

Income tax expense
 
959

 
1,652

 
940

 
780

   EBITDA
 
60,533

 
63,766

 
58,655

 
62,881

Impairment charges
 

 

 
6,375

 

Equity-based compensation
 
2,488

 
2,491

 
2,501

 
2,429

Acquisition, transaction and other costs
 
280

 
19

 
192

 
847

Gain on dispositions of real estate investments
 

 
(8,824
)
 
(6,977
)
 
(6,923
)
(Gain) loss on derivative instruments
 
(3,143
)
 
3,905

 
(3,044
)
 
(1,390
)
Loss on extinguishment of debt
 

 
(379
)
 
563

 
765

Other (income) loss
 
(48
)
 
(195
)
 
2

 
(19
)
   Adjusted EBITDA
 
60,110

 
60,783

 
58,267

 
58,590

Operating fees to related parties
 
8,794

 
8,867

 
8,220

 
8,162

General and administrative
 
2,961

 
1,334

 
3,250

 
2,318

   NOI
 
71,865

 
70,984

 
69,737

 
69,070

Amortization of above- and below- market leases and ground lease assets and liabilities, net
 
232

 
633

 
341

 
344

Straight-line rent
 
(1,487
)
 
(1,695
)
 
(1,506
)
 
(1,931
)
  Cash NOI
 
$
70,610

 
$
69,922

 
$
68,572

 
$
67,483

 
 
 
 
 
 
 
 
 
Cash Paid for Interest:
 
 
 
 
 
 
 
 
   Interest Expense
 
$
16,440

 
$
17,194

 
$
16,154

 
$
15,689

   Non-cash portion of interest expense
 
(1,810
)
 
(1,789
)
 
(1,906
)
 
(1,177
)
   Amortization of mortgage (discount) premium, net
 
(10
)
 
(28
)
 
(30
)
 
(100
)
   Total cash paid for interest
 
$
14,620

 
$
15,377

 
$
14,218

 
$
14,412




9


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2020 (Unaudited)

Non-GAAP Measures
Amounts in thousands, except per share data
 
 
Three Months Ended
 
 
March 31,
2020
 
December 31,
2019
 
September 30,
2019
 
June 30,
2019
Funds from operations (FFO):
 
 
 
 
 
 
 
 
Net income attributable to common stockholders (in accordance with GAAP)
 
$
5,038

 
$
9,263

 
$
6,860

 
$
12,621

Impairment charges
 

 

 
6,375

 

Depreciation and amortization
 
33,533

 
31,989

 
31,620

 
31,084

Gain on dispositions of real estate investments
 

 
(8,824
)
 
(6,977
)
 
(6,923
)
FFO (as defined by NAREIT) attributable to common stockholders
 
38,571

 
32,428

 
37,878

 
36,782

Acquisition, transaction and other costs [1]
 
280

 
19

 
192

 
847

Loss on extinguishment of debt [2]
 

 
(379
)
 
563

 
765

Core FFO attributable to common stockholders
 
38,851

 
32,068

 
38,633

 
38,394

Non-cash equity-based compensation
 
2,488

 
2,491

 
2,501

 
2,429

Non-cash portion of interest expense
 
1,810

 
1,789

 
1,906

 
1,177

Amortization of above and below-market leases and ground lease assets and liabilities, net
 
232

 
633

 
341

 
344

Straight-line rent
 
(1,487
)
 
(1,695
)
 
(1,506
)
 
(1,931
)
Eliminate unrealized (gains) losses on foreign currency transactions [3]
 
(2,082
)
 
4,592

 
(1,670
)
 
(455
)
Amortization of mortgage discounts and premiums, net
 
10

 
28

 
30

 
100

Adjusted funds from operations (AFFO) attributable to common stockholders
 
$
39,822

 
$
39,906

 
$
40,235

 
$
40,058

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - Basic
 
89,459

 
89,458

 
85,255

 
83,847

Weighted average common shares outstanding - Diluted
 
89,499

 
90,777

 
86,203

 
85,166

Net income per share attributable to common shareholders
 
$
0.05

 
$
0.10

 
$
0.08

 
$
0.15

FFO per diluted common share
 
$
0.43

 
$
0.36

 
$
0.44

 
$
0.43

Core FFO per diluted common share
 
$
0.43

 
$
0.35

 
$
0.45

 
$
0.45

AFFO per diluted common share
 
$
0.44

 
$
0.44

 
$
0.47

 
$
0.47

Dividends declared [4]
 
$
47,638

 
$
47,659

 
$
45,028

 
$
14,940

Footnotes:
[1] Primarily includes litigation costs resulting from the termination of the Former Service Provider and fees associated with the exploration of a potential equity offering.
[2] For the three months ended September 30, 2019 and June 30, 2019, primarily includes non-cash write-off of deferred financing costs.
[3] For AFFO purposes, we add back unrealized (gain) loss. For the three months ended March 31, 2020, gains on derivative instruments were $3.1 million which consisted of unrealized gains of $2.1 million and realized gains of $1.0 million. For the three months ended December 31, 2019, losses on derivative instruments were $3.9 million, which were comprised of unrealized losses of $4.6 million and realized gains of $0.7 million. For the three months ended September 30, 2019, gains on derivative instruments were $3.0 million which consisted of unrealized gains of $1.7 million and realized gains of $1.3 million. For the three months ended June 30, 2019, gains on derivative instruments were $1.4 million which consisted of unrealized gains of $0.5 million and realized gains of $0.9 million.
[4] Dividends declared to common stockholders only, and do not include distributions to non-controlling interest holders or holders of Series
A Preferred Stock or Series B Preferred Stock.

10


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2020 (Unaudited)

Debt Overview
As of March 31, 2020

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
 
 
 
 
 
 
 
 
 
 
2020 (remainder)
 
2

 
0.6

 
%
 
$
15,951

 
 
2021
 
2

 
1.2

 
1.3
%
 
11,551

 
 
2022
 

 

 
%
 


 
 
2023
 
47

 
3.3

 
2.9
%
 
332,863

 
 
2024
 
8

 
4.1

 
1.5
%
 
213,410

 
 
2025
 

 

 
%
 


 
 
Thereafter
 
56

 
8.6

 
4.3
%
 
689,750

 
 
Total Non-Recourse Debt
 
115

 
6.3

 
3.4
%
 
1,263,525

 
61
%
 
 
 
 
 
 
 
 
 
 
 
Recourse Debt
 
 
 
 
 
 
 
 
 
 
   Revolving Credit Facility
 
 
 
3.3

 
3.5
%
 
399,213

 
 
   Term Loan
 
 
 
4.3

 
1.9
%
 
395,524

 
 
Total Recourse Debt
 
 
 
3.8

 
2.7
%
 
794,737

 
39
%
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
 
 
5.4

 
3.1
%
 
$
2,058,262

 
100
%
 
 
 
 
 
 
 
 
 
 
 
Total Debt by Currency
 
 
 
 
 
 
 
Percent
 
 
USD
 
 
 
 
 
 
 
46
%
 
 
EUR
 
 
 
 
 
 
 
38
%
 
 
GBP
 
 
 
 
 
 
 
16
%
 
 
Total
 
 
 
 
 
 
 
100
%
 
 

Footnotes:
 
[1] As of March 31, 2020, the Company’s total combined debt was 89.6% fixed rate or swapped to a fixed rate and 10.4% floating rate.
 
[2] Excludes the effect of deferred financing costs, net and mortgage (discount) premium, net. Current balances as of March 31, 2020 are shown in the year the debt matures.
 



11


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2020 (Unaudited)

Future Minimum Lease Rents
As of March 31, 2020
Amounts in thousands

 
 
Future Minimum
Base Rent Payments
[1]
2020 (remainder)
 
$
223,138

2021
 
298,729

2022
 
290,089

2023
 
268,239

2024
 
232,791

2025
 
192,892

Thereafter
 
888,892

Total
 
$
2,394,770

Footnotes:
[1] Base rent assumes exchange rates of £1.00 to $1.24 for GBP, €1.00 to $1.10 for EUR and C$1.00 to $0.71 as of March 31, 2020 for illustrative purposes, as applicable.


12


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2020 (Unaudited)

Top Ten Tenants
As of March 31, 2020
Amounts in thousands, except percentages

Tenant / Lease Guarantor
 
Property Type
 
Tenant Industry
 
Annualized SL Rent [1]
 
SL Rent Percent
FedEx
 
Distribution
 
Freight
 
$
14,172

 
5
%
Whirlpool
 
Industrial/Distribution/Office
 
Consumer Goods
 
13,215

 
4
%
Government Services Administration (GSA)
 
Office
 
Government
 
12,041

 
4
%
Foster Wheeler
 
Office
 
Engineering
 
10,513

 
3
%
ING Bank
 
Office
 
Financial Services
 
9,005

 
3
%
Penske
 
Distribution
 
Logistics
 
8,500

 
3
%
Contractors Steel
 
Industrial
 
Metal Processing
 
7,958

 
3
%
Finnair
 
Industrial
 
Aerospace
 
7,915

 
3
%
Trinity Health
 
Office
 
Healthcare
 
6,430

 
2
%
Harper Collins
 
Distribution
 
Publishing
 
6,351

 
2
%
Subtotal
 
 
 
 
 
96,100

 
32
%
 
 
 
 
 
 
 
 
 
Remaining portfolio
 
 
 
 
 
208,455

 
68
%
 
 
 
 
 
 
 
 
 
Total Portfolio
 
 
 
 
 
$
304,555

 
100
%

Footnotes:
 
[1] SL Rent (Straight-line rent) is on an annualized basis and assumes exchange rates of £1.00 to $1.24 for GBP, €1.00 to $1.10 for EUR and C$1.00 to $0.71 as of March 31, 2020 for illustrative purposes, as applicable.




13


Global Net Lease, Inc.
Supplemental Information
Quarter ended March 31, 2020 (Unaudited)

Diversification by Property Type
As of March 31, 2020
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
 
$
145,089

 
48
%
 
8,563

 
25
%
 
 
$
42,928

 
34
%
 
2,529

 
16
%
Industrial
 
86,555

 
28
%
 
14,559

 
43
%
 
 
57,067

 
46
%
 
9,183

 
57
%
Distribution
 
57,599

 
19
%
 
9,724

 
28
%
 
 
19,849

 
16
%
 
4,016

 
25
%
Retail
 
15,312

 
5
%
 
1,325

 
4
%
 
 
5,063

 
4
%
 
265

 
2
%
Total
 
$
304,555

 
100
%
 
34,171

 
100
%
 
 
$
124,907

 
100
%
 
15,993

 
100
%
 
Footnotes:

[1] SL Rent (Straight-line rent) is on an annualized basis and assumes exchange rates of £1.00 to $1.24 for GBP, €1.00 to $1.10 for EUR and
C$1.00 to $0.71 as of March 31, 2020 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, 2020 (Unaudited)

Diversification by Tenant Industry
As of March 31, 2020
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
 
$
30,131

 
10
%
 
2,126

 
6
%
 
 
$

 
%
 

 
%
Healthcare
 
21,393

 
7
%
 
971

 
3
%
 
 
9,799

 
8
%
 
548

 
3
%
Technology
 
20,579

 
7
%
 
1,084

 
3
%
 
 
2,486

 
2
%
 
178

 
1
%
Consumer Goods
 
16,865

 
6
%
 
4,061

 
12
%
 
 
14,264

 
12
%
 
3,217

 
20
%
Aerospace
 
15,684

 
5
%
 
1,416

 
4
%
 
 
4,606

 
4
%
 
293

 
2
%
Freight
 
15,111

 
5
%
 
1,494

 
4
%
 
 
7,182

 
6
%
 
774

 
5
%
Government
 
14,368

 
5
%
 
536

 
2
%
 
 
12,567

 
10
%
 
466