Q2 2025 Global Net Lease Inc Earnings Call
Good day and welcome to global net lease in second quarter 2025 earnings conference call.
All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
After today's presentation, there will be an opportunity to ask questions to ask a question. You may press star then 1 on a touchtone phone,
To redo your questions. Please press star then 2, please note this event is being recorded.
I would now like to turn the conference over to Jordan shanfeld assistant vice president at Global Nepalese. Please go ahead.
Thank you. Good morning, everyone, and thank you for joining us for G&L's second quarter 2025 earnings call.
Joining me today on the call is Michael wild. Gnl chief executive officer and Chris Masterson jnl's Chief Financial Officer.
The following information contains forward-looking statements within the meaning of the private Securities litigation and Reform Act of 1995.
Please review the forward-looking and cautionary statements section at the end of our second quarter, 2025 earnings release. For various factors that could cause actual results to differ materially from forward-looking statements made during our call today.
As stated in our SEC filings, G&L disclaims, any intent or obligation to update, or revise these forward-looking statements except as required by law.
Also during today's call, we will discuss our non-gaap financial measures which we believe can be useful in evaluating the company's financial performance.
Descriptions of those non-gaap financial measures that we use such as afo and adjusted ibida and reconciliations of these measures to our results as reported in accordance with gaap, our detailed and our earnings release and supplemental materials. I'll now turn the call over to our chief executive officer. Michael while Mike
Thanks Jordan. Good morning, and thank you all for joining us today.
As you know, we've been steadfast in our commitment to drive durable, sustainable, long-term growth, and value creation by optimizing our portfolio, reducing leverage and lowering our cost of capital.
In the second quarter of 2025. We once again, delivered tangible progress towards these commitments demonstrating the strength of our strategy and the discipline of our execution.
During the second quarter of 2025, we completed, the 1.8 billion sale of our multi-tenant, retail portfolio to rcg Ventures.
Further positioning us, as a Pure Play Single tenant and at least company with streamlined operations and a higher quality portfolio.
The sale of these assets is expected to reduce annual recurring GNA by approximately 6 and a half million dollars and generate $30 million in annual capital expenditure savings.
The sale also eliminates the added complexity of managing multi-tenant retail assets.
In addition, it delivered, measurable improvements across key metrics increasing occupancy to 98% from 97% as of year, end 2024.
Expanding annualized, noi margin by 800 basis points.
Raising the percentage of leases with rent escalators to 88% from 81%.
And enhancing liquidity to 1 billion dollars from 492 million. Reflecting the terms of the recently refinanced revolving credit facility.
In line with our long-term debt reduction strategy. We use the net proceeds from the sale to materially reduce leverage, including a 1.1 billion. Pay down on gel's revolving, credit facility. In addition to the disposition of 466 million in secured, Mortgage Debt. That was assumed by rcg Ventures.
The sale of our multi-tenant retail portfolio has already benefited G&L in multiple ways.
These upgrades reflect the meaningful progress we've made in reducing leverage, enhancing liquidity and strengthening our overall credit profile.
The upgrades have also had an immediate impact on our cost of capital, lowering borrowing costs and expanding opportunities to access the unsecured bond market.
Building on that momentum. Subsequent to the second quarter. 20125, we refinanced our revolving credit facility.
securing improved pricing, enhanced liquidity and extension of our weighted average debt maturity to 3.7 years from 2.9 years as of June 30th 2025 and increased balance sheet flexibility
The facility was met with strong demand, including heightened interest, from both existing, and new institutional lenders relationships. We look forward to growing over the long term.
Since the third quarter of 2024, we've meaningfully lower G&L cost of borrowing on our revolving credit Facility by 70 basis points. A direct result of the strategy we put in place to lower our cost of capital through discipline deleveraging and favorable re refinancing activity.
We continue to make meaningful progress on a robust pipeline of non-core asset, dispositions beyond the multi-tenant retail portfolio sale.
In particular, we continue to strategically and opportunistically reduce our exposure to office assets that while high-quality and Mission critical. We Believe have not been fully valued by the market.
It's important to note that our office. Portfolio continues to perform well with 100% rent collection from all tenants and the highest percentage of investment grade Tenney across our portfolio at 77%.
Lease rollover remains minimal with expirations, representing 2 and a half percent or less of total portfolio square footage annually through 2029.
We remain focused on active tenant retention, particularly within the office portfolio.
Since the start of 2024, we've addressed 14 near-term. Expirations of these 9 were renewed 3 were sold and 1 is in the final stages of renewal negotiations. And the last 1 is being finalized for sale.
In total these office renewals since the first quarter of 2024 were completed with an average lease renewal spread of approximately 7%.
In addition, as discussed on last quarter's earnings call, we began proactively scaling back, our exposure to the gas and convenience store sector an industry facing structural shifts in consumer Behavior, fuel demand, evolving Transportation Trends, and inconsistent operations.
as of August 1st 2025, we've sold approximately 108 million dollars of Assets in this category, reducing our portfolio, exposure to 2.1% from 5.3%
Taking into account, our disposition pipeline. We expect our exposure to. This sector will be reduced to 1.4%.
These actions, reflect our discipline, portfolio management strategy, and our continued focus on concentrating on higher growth sectors. That are more closely aligned with our long-term vision.
They also contribute to our deleveraging efforts and help reduce net debt to adjusted AVA.
Year to date are closed Sales, Plus active, disposition pipeline totals. 2.2 billion.
And since launching our disposition initiative in 2024, total closed sales plus our disposition pipeline has exceeded $3 billion.
Importantly, we continue to take deliberate steps to further strengthen our capital structure and mitigate risk.
During the second quarter of 2025 we fully paid off the remaining 4509 million of secured debt. That was maturing in 2025 and Warehouse the amount on our revolving credit facility.
This facility now offers enhanced pricing and significantly greater availability as well as flexibility. Following the substantial pay down and refinancing completed after the multi-tenant retail. Portfolio sale
Looking ahead, we have no remaining 2025 debt maturities and 95 million of debt, tied to retail assets expiring in 2026.
Alongside our balance sheet initiatives, we've continued to repurchase our stock.
Capitalizing on the compelling, opportunity to buy back shares at an afo yield of approximately 12%.
We've remained disciplined in balancing share repurchases with leverage reduction.
However, the lack of improvement in our share price despite meaningful progress in improving our balance sheet and extending our debt maturities has been to say the least disappointing and leads us to continue to evaluate multiple corporate initiatives.
Turning to our portfolio. At the end of the second quarter of 2025, we owned over 900 properties, spanning over 44, million, rentable, square feet.
The portfolio's occupancy grew to 98% with a weighted average remaining lease term of 6.2 years.
Geographically. 70% of our straight line. Rent is earned in North America and 30% in Europe.
Unlike many net. Lease fees. We believe our exposure to Europe differentiates Us by providing diversification across economic cycles, and the ability to capitalize on unique Market opportunities, not typically available in the US,
The portfolio features a stable tenant base and a high-quality of earnings with an industry-leading, 60% of tenants receiving an investment grade or implied, investment grade rating.
It has an annual contractual rental increase of 1.5%, which excludes the impact of 22.6% of the portfolio with CPI-linked leases that have historically experienced significantly higher rental increases.
On the leasing front, we achieved positive spreads encompassing over, 200,000 square feet with attractive, renewal spreads that were 6% higher than expiring rents.
New leases that were completed in the second quarter of 2025 have a weighted average lease term of 10 years. While renewals that were completed during this period have a weighted average lease term of 5.6 years,
Our continued efforts to limit exposure to high risk geography, asset types, tenants, and industries are a testament to our intentional diversification strategy and credit underwriting.
No, single tenant accounts from more than 5% of total straight line rent and our top 10, tenants, collectively, contribute, only 28% of total straight line rent.
We carefully monitor all tenants in our portfolio and their business operations on a regular basis.
I encourage everyone to look at the details of each segment of our portfolio which can be found in our Q2 2025 investor presentation on our website.
With that I'll turn the call over to Chris to walk through the financial results and balance sheet matters in more detail. Chris.
Thanks. Mike. Please note that, as always a Reconciliation of gaap, net income to non-gaap measures can be found in our earnings release, which is posted on our website.
We also want to emphasize that second quarter 2025 earnings and leverage metrics. Reflect the full benefit of noi from the encumbered assets sold as part of the multi-tenant retail portfolio sale
Consistent with what we anticipated. When establishing full year guidance
For the second quarter of 2025, we recorded revenue of 124.9 million and the net loss attributable to Common stockholders of 35.1 million.
Afo was 53.1 million or 24 cents per share.
Looking at our balance sheet, the growth outstanding debt balance was 3.1 billion. At the end of the second quarter of 2025, our reduction of 2 billion from the end of the second quarter of 2024.
Our debt is comprised of 1 billion in senior notes.
741 million on the multicurrency revolving credit facility.
And $1.4 billion of outstanding gross mortgage debt.
As of the end of the second quarter of 2025 85% of our debt, is fixed reflecting debt tied to fixed rates or debt. That is swapped to fix rates.
Our weighted average interest rates stood at 4.3% down from 4.7% in second quarter of 2024. And our interest coverage ratio was 2.7 times
at the end of the second quarter of 2025 our net debt, to adjust to debt ratio was 6.6 times, based on net debt of 3 billion significantly down from 8.1 times at the end of the second quarter of 2024,
Additionally, we had approximately 221 million shares of common stock outstanding and approximately 223 million shares outstanding on a weighted average basis for the second quarter of 2025.
As of August 1st 2025, we have repurchased 10.2 million shares at a weighted average price of 752 cents per share under our share repurchase program.
As Mike mentioned, subsequent quarter end on August 5th, 2025. We refinanced our revolving credit facility to 1.8 billion and extended the maturity date from October 2026 into 2030, inclusive of 2, 6-month extension options.
The refinance revolving credit facility provides enhanced benefits.
most notably in immediate 35 basis point reduction in interest rates spread due to improved pricing
While also increasing liquidity and extending our weighted average debt maturity to 3.7 years from 2.9 years.
Turning to our outlook for the remainder of 2025, we are confident in our performance and our raising, the lower end of our afo per share guidance to a new range of 92 cents to 96 cents.
We also reaffirm our stated net debt to adjusted ebit out range of 6.5 times to 7.1 times.
I'll now turn the call back to Mike for some closing remarks.
Thanks Chris.
over the past year, we've made meaningful progress on our strategic priorities to streamline operations, Elevate portfolio, quality, reduce leverage and enhance balance sheet flexibility
We've sold approximately 1.8 billion dollars of multi-tenant. Retail assets, transforming gnl into a Pure Play Single tenant. Net lease rate and drove total asset sales to over 3 billion dollars.
We also continue to executing our share repurchase program capitalizing on the opportunity to buy back shares at an afo yield of approximately 12%.
Since the second quarter of 2024, we've reduced leveraged by 1 and a half turns contributing to a credit rating. Upgrade from S&P and reflecting the tangible progress. We've made in reducing our debt.
This momentum supported the 1.8 billion refinancing of our revolving credit facility which immediately lowers our interest rate spread by 35 basis points extended. Our weighted average debt maturity by nearly a year and increased our liquidity to over 1 billion dollars.
Quarter over quarter. Beginning at the start of 2024 we've cons, consistently executed major strategic initiatives that we believe should help narrow, the valuation gap between G&L and our net lease fears.
We're proud of the significant progress. G&L has made and as we move forward, everything is on the table.
Whereby. No means finished, taking the steps needed small and large to strengthen our overall business and maximize the value of your investment.
We're available to answer any questions. You may have after the call operator, please open the line for questions.
Thank you. We will now begin the question and answer session to ask a question. You may press star then 1 on your touchtone phone, if you are using a speaker-phone please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question please press star then 2
At this time, we will pause momentarily to assemble our roster.
The first question comes from the line of John Kim with BMO Capital markets. Please go ahead.
Good morning John. Thanks. Hey, good morning. Um on the office sales. Uh right now it's 27% of your portfolio. Where do you want this to go to and over what time frame and um how do you think about the dilution impact that that may bring?
So, we're going to be very strategic in how we approach the, um, office portfolio. Um, as we said in the comments, it it's a strong performer contributing to the overall, uh, earnings of the company. Um, we have been very active with renewals, which positions the, uh, properties, for a more valuable potential disposition. So I'm not going to give you an answer of um, you know, the
Exact percentage and timing, but it's going to be something that...
Sector of our portfolio, has the highest percentage of investment grade or implied investment grade tenants. So, it kind of goes opposite of some of the, the general feelings about office in the United States. Um, but we're going to harvest value here. And then look to, to use those proceeds to further de-lever. Um, and when the time is right, we will start looking at Acquisitions in the retail and Industrial and distribution Arena.
so,
you know, that's that's about a specific as I'd like to be right now.
Okay.
Um and so it sounds like, well, you're going to have further dispositions on the positive side. In terms of earnings growth, you have GNA savings improved cost of debt. You're buying back shares.
Um, looking at a crystal ball, when do you think earnings are going to trough? And and uh, we could start to project to earnings growth going forward.
Well right now having just completed the second quarter, we were able to to raise the lower end of our guidance um to 92 to 96 cents and that's where we see the year playing out from an earnings standpoint. Um, as we get later into the year, of course, we'll we'll provide guidance for for 2026 and um, you know, as of yet, we have not done that. Right now, we're we're focused on completing the initiatives that are underway, which include uh,
Disposition.
Some further lease up and and most importantly, uh, renewals. So we we've got um, just organic
Opportunities in the portfolio that will um really keep us in that.
State at guidance range of 92 to 96 cents per share.
Okay.
And then I I have to ask this because it seems to have impacted your share price. Uh but uh Michael last month you sold 100. 150 shares, which I think is about 20% of your Holdings in the company.
Can you just comment on the timing of that sale and the mixed messaging? It, it may have uh, just given you're selling that, uh, in light of G&L buying back shares,
Yeah, I think you can look at my history of never having sold shares before, and you know, there are some points in a person's life where they, you know, have some obligation. I needed, um, you know, to sell a bit of stock to take care of something that...
you know, I
I don't want to stammer or say any it just was necessary and I don't think it's anything to read into and I've never sold stock before. And I am very opportunity or optimistic about where the, the company will go. And, and the reason we're working as hard as we are to to drive it. So, you know, don't forget, uh, you know, the the company does have a, a published, um, long
Long-term incentive plan and an annual incentive plan. Uh, that does have a, a significant amount of stock. So, as far as my personal alignment, um, it's unchanged. And, you know, I'm I'm as on board as, as you can be. And, you know, that's
That's all I care to say.
Okay, thank you.
Thanks.
Thank you. Next question, comes from the line of opal Runner with keybanc capital markets, please go ahead.
Good morning, thank you. How are you?
Good morning. Uh, you know, I appreciate your comments on the company reducing exposure to gas and convenience, you know. But the top industry within the portfolio is auto manufacturing at 10% of straight-line rent. You know, given all the tariff announcements, I want to get your understanding of how you're looking at the industry within your portfolio and if you plan to reduce exposure there or not.
um, the, the assets that we have, um, are critical assets. They are in primarily, um, the Detroit market and they are, um, us manufacturers doing, um, final assembly and some some warehousing, so, it's something that that we are watching. But, you know, I don't like to be
Reactionary. Um, and I, I believe that these, um,
Primarily um, US manufactured products, um, will continue to, um, do fine. Um, you know, all Industries have ups and downs, but I don't see this as anything too problematic, so we're very comfortable with what we own.
Okay, all right. I agree. That was helpful. And then, you know, on the office assets, Opal, if I can just go back. Also, because I was thinking about,
The second largest tenant in the portfolio is McLaren, so that does make up a significant amount of that 10% that you referenced. Um, and as you've probably seen in the news, uh, McLaren is financially as strong as it's been in uh, an incredibly long time decades, um, with the um investment.
From the UAE, uh, they paid off all of their outstanding debt, um, their their race team, um, which generates a a lot of Revenue and positive marketing is, um, doing phenomenally well. And the, um, retail sales are also very solid. So, um,
the, the US market from McLaren, um, is not a huge Market, you know, they are a global brand, they they are
A big Europe and and UK as well as um, the Middle East. Um, so
You know, I I, I think that they will also continue to to perform very well and we're very comfortable to see them as well, capitalised as they are.
Okay, great, thanks for the added color. Uh, just my second question on on office assets. It seems like they're starting to be a little more interesting from private Capital there, you know, have have you seen any increased interest, uh, on your office assets and where you may want to begin transacting at?
Uh, yes. And as I I I said in the earlier question, you know, we've got some very interesting renewals underway as well, so I think that that, you know, all markets, um, ebb and flow, and
2 to 4 quarters ago, I would have to guess that office was probably as low as it could be. And yes, we are starting to see the, the opportunity. Um, good real estate always has value and with single tenant office, um, a big part of the definition of good real estate, is the tenant and the term. Uh, so yeah, I I think we can drive value here and, and that is the goal. Um, and you know, I we don't as, as you've seen from our actions over the last year, and a half,
We don't want to be an outlier. We were a bit of an outlier with the shopping center portfolio so we disposed of it. Um, you know, the, the, the market is is,
Letting us know how they feel about office. And and I think continuing to lower exposure in a strategic way is valuable, and we will continue to do that. Um, but yeah, the market is getting stronger. Our tenants are, uh, back in office and their real estate is a valuable part of their operation.
Okay, got it. And then the last one for me, you know, I obviously got the multi-tenant portfolio done. I guess I'm wondering what's the pace of dispositions going forward, you know, how much is sort of left to do?
Um, I'm looking at Ory right now because he, I would say that it's um,
About 300 million in in the pipeline right now and I'll confirm that in just a minute if I'm, if, if that's not accurate. Um, but again, we're now looking at things very strategically. Um, I I think the potential disposition of non-core assets at good cap rates. Um, is a is a great. Um,
Funding source for us to continue our stock buyback.
Um, which is very valuable to the company. You know, you heard us talk about the the 12% affo on on shares bought back and I think we're at about a little under eighty million dollars so far that that we have bought back. So um, you know, our 3 billion dollars of sales since we announced the disposition initiative is been at a, a 7677 cap rate. Um, so using those proceeds, um, you know, if if even, if we did something in the 5050 range of
50% Debt, Pay down, 50% stock buyback on future dispositions. Uh, that's a pretty leveraged neutral or, or even deleveraging way to really. Take advantage of this opportunity to buy back stock um when we see it at this price level and frankly, um, you know, I I hope that we don't see the stock buyback as such a great value over the the near term. But while it is, we intend to take advantage of it.
And just to add to that, I will call the existing pipeline as of August 1st for 2025 is about hundred million dollars.
Okay, great. Thank you so much.
Thanks, super.
Thank you. Next question, comes from the line of Michael Gorman with btig. Please go ahead.
Hey, Michael.
Hey, good morning, Mike. Uh, maybe just following up on some of your comments there. Can you just talk a little bit about you? You've had a lot of success moving down the the debt to Evita,
Ladder there and just how you think about the share repurchases and capital allocation. I know you talked about continuing to do it and kind of a leverage responsible way but does that does that math shift at all. As you get lower on the debt to ebit Da range and and if you get lower on The Leverage range, it doesn't necessarily have an impact on on the valuation. Could you just kind of talk about how you're thinking about that strategically?
Um,
I mean in simple terms and as as you know, Michael every every dollar that we buy back is a dollar less that that we can de-lever. Um
We are.
Point. Now, whereas I just mentioned it, it comes into play in the balance. This is something of importance if we continue to use dispositions to fund.
Let me say this: if we continue to use future dispositions to fund stock buybacks, we can achieve both of our goals. Um,
the um,
investment grade rating is still a, a top goal of ours. Um, but at the same time,
we want to see value in in the
Stock price and you know we're going to balance both of them. Um very smartly, very prudently. Um I'm not by any means saying 1 in lie of the other I'm saying,
Approach it responsibly and like I I see asset sales of, you know, if we if we can continue to sell in this call at 7 and a half cap rate range, or lower, frankly, for some assets. Um that's an incredibly valuable tool um both to delve and buy back stock.
And then, you know, recognizing that you just went through. The the large multi-tenant portfolio of sales, so I don't want to make it sound, like, asking what's next? But you mentioned future initiatives. How do we, how do we think about that in, In Cadence? Like are we talking about large scale on the order of magnitude of the multi-tenant sale? Like, whether it's a something with the European portfolio or is this more incremental? Um,
Initiatives from here, going forward.
Yeah, sometimes the most exciting thing is Mystery.
and I think that we, as a management team, have really shown a dedication to doing
Important things in a timely manner.
To reposition the company to drive value in the company and what we've done in the last 6 quarters, I'm extremely proud of the team. It's a lot of effort focused, you know, call it what you want or just call it doing our job because that's how I view it.
Um, I intentionally wanted to be vague in my comments.
But I also intentionally wanted to say, all things are on the table.
Um,
We will evaluate different ways to.
Close, what I think of, as a a, a gap to Value, this company should be trading in line with our peers.
Um, we have de-risked this company.
Uh, you know, nobody's asked. So I'll bring it up about, you know, how we think about, um,
The credit facility.
And the fact that we don't have any debt maturities, any material debt maturities until 2027 now
So, you know, we may not like where we are today on a equity basis.
but what really can cause, massive failure for companies is when they don't manage the debt side of their balance sheet and we have
We have pushed out our debt maturity um, to almost 4 years. Um,
And we respect that, too. Um, but as you know, they'll be incredible value for this company. Um, when we do achieve those investment grade goals and, um, in the meantime, we're positioned really well to drive value from our real estate and focus on the equity side because the debt side is very safe, very manageable and really frees us up to to do some important work.
That's that's helpful. Thank you Les 1 and I apologize if I missed it just a quick 1. How much is remaining on the share repurchase authorization?
About 220 million.
Okay, perfect.
Thank you very much. Thanks Michael.
Thank you.
A reminder to all the participants that you may press start at 1 to ask a question.
Next question comes from the line of Craig cosira with Lucid Capital markets. Please go ahead.
Hi Craig.
Yeah. Hey guys, uh, I actually didn't dial in with any questions. I apologize. I was on another call. So, uh, no questions here if you get the moment. Okay. All right, thanks. Talk to you later.
Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Michael wild for closing remarks.
Great. Well thank you. As always I want to thank everybody for making time in their schedule to join us. Um Chris ory and I look forward to the opportunity to answer any questions that you have any follow-up. Etc. Um we are as I said
proud of the work that we're done, but by no means, um,
Happy yet? We've got work to do. We're going to get it done, directionally. There's a lot of upside in this company, and we've positioned it in a way that we can start really taking advantage of that. So, thanks, everybody.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect