Good afternoon, and welcome to the Global Net Lease Second Quarter 2023 Earnings Call. Please note, this event is being recorded. I would now like to turn the conference over to Curtis Parker, Senior Vice President. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us for GNL's second quarter 2023 earnings call. This call is being webcast in the Investor Relations section of GNL's website at www.globalnetlease.com. Joining me today on the call to discuss this quarter's results are Jim Nelson, GNL's Chief Executive Officer; and Chris Masterson, GNL's Chief Financial Officer. Mike Weil, CEO of The Necessity Retail REIT, Inc., will also be joining us for the question-and-answer session. The following information contains forward-looking statements, which are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements. We refer all of you to our SEC filings, including the Form 10-K for the year ended December 31, 2022, filed on February 23, 2023, and all other filings with the SEC after that date for a more detailed discussion of the risk factors that could cause these differences. Any forward-looking statements provided during this conference call are only made as of the date of this call. As stated in our SEC filings, GNL 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 non-GAAP financial measures, which we believe can be useful in evaluating the company's financial performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our earnings release and supplement, which are posted to our website. Please also refer to our earnings release for more information about what we consider to be implied investment-grade tenants, a term we will use throughout today's call. I'll now turn the call over to our CEO, Jim Nelson. Jim?

Thanks, Curtis, and thank you to everyone for joining us on today's call. Before we get into our results, I will provide a brief update on the proposed merger with The Necessity Retail REIT, which was announced in May and is expected to close this September. We believe that the merger with RTL and the simultaneous internalization of GNL's management and operations, paired with numerous governance enhancements, will establish GNL as a sector-leading net lease REIT with a global presence uniquely positioned for long-term growth. We expect that the first full quarter after closing the transaction will be 9% accretive to annualized AFFO per share relative to the quarter ended March 31, 2023, and will reduce leverage for the combined company, driving net debt to adjusted EBITDA to 7.6x in the fourth quarter. Annual cost savings are expected to be approximately $75 million. The SEC declared the registration statement for the merger effective in July, and we have set a record date of August 8, 2023, for the special meeting of stockholders to vote on the proposed merger, which will be on September 8, 2023. Beyond the merger, the GNL team continued to make great progress on our key strategic objectives during the second quarter. We completed 11 lease renewals and 1 tenant expansion project, resulting in nearly $20.2 million of net new straight-line rent over a weighted average lease term of 6 years. Occupancy was 98% across the portfolio. Subsequent to quarter-end, we signed 3 additional lease renewals, bringing us to 14 lease renewals since the end of the first quarter. Nearly 60% of our long-term leases are with investment-grade tenants, and industrial and distribution assets comprised 55% of our portfolio at the end of the second quarter, both based on annualized straight-line rent. Among our office properties, 68% are mission-critical facilities, which are defined as headquarters, lab or R&D facilities, and 71% are leased to investment-grade or implied investment-grade tenants. We believe GNL is well-positioned for meaningful capital appreciation with our strong portfolio and upcoming corporate enhancements. We continue to be substantially insulated from the rising interest rate environment as we benefit from our predominantly fixed-rate debt, which minimizes the impact of rate increases, as well as a sophisticated hedging program designed to minimize the negative impact to our cash flow from foreign exchange volatility and a stronger U.S. dollar. In the second quarter, our AFFO was $41.4 million or $0.40 per share compared to $0.43 in the second quarter of 2022, but an increase from $0.38 per share in the first quarter of 2023. Revenue increased over $1.5 million compared to the first quarter of 2023, which also helped drive adjusted EBITDA and NOI higher quarter-over-quarter. Our performance was driven by ongoing strong leasing activity, which totaled 1.7 million square feet of lease renewals and extensions through July 20, 2023. These leases added $64.1 million of net new straight-line rent over the new lease terms at a positive 0.7% spread compared to the prior leases. Leases signed during the second quarter included six leases with XPO Logistics in the US for over 77,000 square feet, a lease with ID Logistics in France for approximately 566,000 square feet, and an 86,000 square foot lease with PFP Canada in Alberta. Thanks to our leasing efforts, our portfolio only has 1% of leases expiring during the balance of this year, with 73% of our leases not expiring until 2028 or later. At quarter-end, our $4.6 billion, 317 property portfolio had a weighted average remaining lease term of 7.6 years. Geographically, 236 of our properties are located in the U.S. and Canada, representing 60% of annualized straight-line rent revenue. We own 81 properties in the UK and Western Europe, which generate 40% of annualized straight-line rent. Our portfolio is well-diversified with 139 tenants and 51 industries, with no single industry representing more than 12% of the entire portfolio and no tenant exceeding 5% of the portfolio based on annual straight-line rent. Approximately 95% of our leases feature annual rent increases, which increase the cash rent that is due over time from these leases. Based on straight-line rent, approximately 60.1% of our leases feature fixed-rate escalations, 27.5% have escalations that are based on the consumer price index, and 7.1% have escalations based on other measures. Subsequent to the end of the second quarter, we announced that we had entered into a definitive agreement to sell a vacant property in San Jose, California, for $50 million. We bought this property for $52.5 million in 2014 with a long-term lease in place. Negotiating the sale of this vacant property for nearly the same price we paid for it showcases the value of our diligent underwriting standards that favor properties with high reuse potential. Our differentiated investment strategy continues to deliver value, and we remain focused on growing our portfolio. Our successful lease renewals speak to the mission-critical nature of the properties that we own, where the weighted average remaining lease term is nearly eight years. We are well-positioned for the future, and I look forward to building on our progress through the merger and the many strategic objectives we are pursuing. I'll turn the call over to Chris to walk through the financial results in more detail before I follow up with some closing remarks. Chris?

Thanks, Jim. For the second quarter of 2023, we recorded revenue of $95.8 million with a net loss attributable to common stockholders of $31.4 million. FFO was $5.9 million or $0.06 per share and AFFO was $41.4 million, respectively or $0.40 per share. FFO was impacted by $15.1 million of settlement costs, $7.4 million of proxy-related expenses, and $6.3 million of merger and transaction costs that are added back to AFFO. On a constant currency basis, applying the average monthly currency rates from the second quarter of 2022, revenues in the second quarter of 2023 would have been up by $0.2 million year-over-year to $96 million. As always, a reconciliation of GAAP net income to the non-GAAP measures can be found in our earnings release, which is posted on our website. On the balance sheet, we ended the quarter with net debt of $2.4 billion at a weighted average interest rate of 4.8% and a liquidity of $374.1 million, including $100.9 million of cash and cash equivalents and $273.2 million of availability under the company's revolving credit facility. Our net debt to trailing 12-month adjusted EBITDA ratio was 8.3 times at the end of the quarter. The weighted average debt maturity at the end of the second quarter of 2023 was 3.7 years. Our debt includes $500 million in senior notes, $1 billion on the multi-currency revolving credit facility, and $1 billion of outstanding gross mortgage debt. This debt was approximately 72% fixed rate, which includes floating rate debt with in-place interest rate swaps, and our interest coverage ratio was 2.9x. The company distributed $41.7 million in dividends to common shareholders in the quarter at a rate of $0.40 per share. Our net debt to enterprise value was 65.2% with an enterprise value of $3.7 billion. I'll now turn the call back to Jim for some closing remarks.

Thanks, Chris. We are continuing to execute lease renewals and tenant expansions across our portfolio, locking in creditworthy tenants with long-term leases. Our success is the natural outcome of the deliberate underwriting process we have applied over many years. In a similar way, as we continue to move toward the proposed transformative merger with The Necessity Retail REIT, we believe that its similarly constructed portfolio of primarily retail net leases and open-air shopping centers will complement our current assets. We expect that the diversification, scale, and savings that we anticipate realizing through the merger, the internalization of management, and governance enhancements will unlock value for GNL's shareholders and create a strong foundation for GNL to continue growing in the future. We are pleased that Mike Weil, CEO of RTL, who will join me as Co-CEO of GNL pending completion of the merger, will participate in the Q&A session. We look forward to answering any questions you may have. Operator, please open the line for questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Bryan Maher with B. Riley FBR. Please go ahead.

Thank you, and good afternoon, Jim and Chris, and Michael.

Hi, Bryan.

Just a couple of questions for me this afternoon. You had very little lease expirations for the rest of this year, I think it's less than 1% and then maybe 9.5% or so next year. How much can you get in front of that now? And are there any known vacates that are material that we should be thinking about?

We are very proactive in managing lease renewals. For instance, we renewed the Finnair lease, which had four years remaining, with a seven-year extension a few years back. We are actively working on lease renewals with our tenants, and I don't foresee any issues within our portfolio at this time. As we approach the end of the year and head into the next, I believe you will be pleased with the outcomes we have achieved.

Okay. And then next for me, we've not really seen any acquisition activity since the Boots deal back in 1Q, I think that was maybe $75 million. Has this focus been at the company simply getting the RTL deal over the finish line or are you not seeing anything terribly compelling out in the market?

Well, we still have a very robust pipeline and we look at a lot of deals. But this RTL deal is overwhelmingly positive for us, and we do have a certain amount of focus on that. But that doesn't mean we're not looking at other potential acquisitions, but we just haven't found something that we found really exciting to go out and buy. So as we wrap up this merger, I think it's a very exciting time for both companies.

And Jim, if you don't mind, it's Mike Weil. As mentioned, the focus has been on advancing the merger while Jim and Chris handle the daily operations. However, it's important to note that neither RTL nor GNL has encountered any acquisitions comparable in scale to this merger that would enhance the AFFO per share by 9% and create a transformative impact, resulting in the third largest net lease REIT with a global presence. The market conditions for sellers haven't shifted enough to motivate us to pursue a property acquisition just for the sake of it. What will occur in September significantly surpasses anything either of us could find in the broader real estate market.

Thanks for that. Assuming the transaction closes in September, and I have no reason to believe otherwise, the market seems to be pricing in that expectation. What does the acquisition capacity look like for the combined company? Given that it's an all-stock deal, apart from the $50 million paid to the external manager, should we assume that the liquidity each company currently has combined, minus $50 million, represents your available funds when we reach the fourth quarter? Or is there something else that could positively or negatively affect that figure?

I would say, that's a fair way to look at it without diving into too much detail in terms of looking at the availability. And as you could see, we have a significant amount of liquidity at this point at GNL at the end of the quarter. It was about $273 million.

And Bryan, we also should point out that the payout ratio is expected to be 85% post-merger. So the company's ability from a retained earnings standpoint and a cash availability will get stronger and stronger just from the scale and the result of the merger.

Since you brought that up, is that the target of the new Board, 85% or is that just the starting point and you would expect that to gravitate lower as the company grows organically?

Go ahead, Jim.

It's a good starting point, Bryan. It's a very good starting point. And as we progress and things get better, certainly, it will change for the positive.

Okay. Thanks. That’s all for me.

Thanks, Bryan.

Thanks. Take care.

Our next question comes from Barry Oxford with Colliers. Please go ahead.

Hi, guys. Thanks for taking the call. Just to build on the acquisitions after the merger, you guys seem to indicate that there's a wide bid-ask spread, nothing really that exciting out there. But is there a particular property type or a particular country that's looking more attractive right now that you guys might like to execute in or look kind of across the board, this bid-ask spreads are wide and right now it just isn't desirable?

Well, Barry, one of the beauties of this merger is at the RTL side, the opportunity to buy really good properties in Europe as GNL does. So it opens up a whole new area of opportunity for that side of our new business. So we're very excited about that.

Okay. So you think there might be some opportunities from a retail standpoint?

Absolutely. You saw the Boots acquisition we did.

You took the words out of my mouth, Jim.

And hopefully, we'll find a lot more like that, especially with the RTL component, that type of asset component.

Right. That’s what I was striving at. Thanks for the color. Perfect.

Is there anything else, Barry – Okay, go ahead, operator.

Our next question comes from Mitch Germain with JMP Securities. Please go ahead.

Thank you and good afternoon. Chris, help me through the liquidity change, because I know you redeemed some of that debt on the credit facility. So I'm curious about how the liquidity change quarter-over-quarter?

Sure. The difference is mainly due to the UK loan, which has now transitioned to the credit facility. Previously, based on the loan-to-value ratio and our debt repayments on that line, we had a significantly different borrowing capacity in relation to the credit facility.

Okay. That makes sense. And what was the timing of that debt redemption? Was it like early quarter, late quarter?

It was about mid-quarter.

Mid-quarter. And for my last question, it appeared that leasing during the quarter was more focused on industrial properties, as highlighted by Jim. I'm interested in what you're observing from your office tenants regarding their decision-making and their readiness to engage in lease discussions.

Well, interestingly enough, Mitch, it's really across the whole portfolio, the success we're having with re-leasing or renewing leases. I wouldn't say it's more favorable in one sector or another. We've been having very positive results all across the portfolio in Europe and in the US. So there's nothing specific that I would point out. But it's a good question and the answer is pretty obvious that we're having great success with our lease renewals.

Great. That’s helpful. Thanks.

Sure. Thank you.

Our next question comes from Todd Thomas with KeyBanc. Please go ahead.

Hi, thanks. Good afternoon. I guess, I just wanted to follow up on the line of questioning around the lease expirations and maybe touch on office a little bit. You have done a nice job with the lease extensions and renewals to date. Jim, it sounds like you're not eying any major non-renewals in 2024, but it is about 10% of straight-line rent that expires. How much of that is comprised of office assets?

Chris, do you have that percentage off hand?

No, I don't want to take a look at that. I don't have the exact percentage.

We haven't broken that out, but we can get back to you with that.

Okay. Yes, that would be helpful. And then if we, I guess, think about the office exposure in the portfolio, I understand a high percentage is mission-critical, headquarters office space. But have you had conversations with tenants that inbound looking to downsize or sub-lease their space? And is any of the office space today being sub-leased?

I think there are very few tenants with small sublet space, but it's not significant. We are very proactive with our tenants, maintaining regular communication with them. As of today, I am not aware of anyone requesting to reduce their space. Additionally, we have several expansion projects in progress for many of our tenants. Overall, we feel positive about our office portfolio. Considering the increasing number of people returning to work and the strategic locations of our office properties, we believe we are in a strong position.

Okay. And just last question, maybe for Chris. In terms of near-term balance sheet initiatives, and I realize the balance sheet changes post-merger, but on the GNL side, the roughly $340 million of mortgage debt that matures in 2024. What's the timing of that in 2024? And what's the current thought process there in terms of refinancing or paying that down?

Right. So what I would say now is we're obviously going to be exercising the accordion on the credit facility. So we're going to have a lot more capacity there to use. That being said, most of the debt maturing next year is about mid-year. So we have a lot of time to look into the options. Obviously, we'll be looking to potential unsecured markets and sort of evaluating really what's the most efficient and best option for us in the short-term. So it's still in process.

And Todd, it's Mike. If I can just add to what Chris was saying. One of the things that we're really focused on and looking forward to with the merger is net debt to adjusted EBITDA is reduced down into the mid-7s as a result of the merger. That's ultimately not where we want to end up, but it's obviously an improvement. The portfolio will be much larger. Diversification will be further because GNL is already really nicely diversified. So we do think that if the unsecured market comes back a little bit in the next couple of quarters, which we have reason to believe is very possible, we would like to certainly explore that option. And I think we can explore it as a larger company and really be able to take advantage of this opportunity to refinance out that mortgage debt at the appropriate time and price.

Okay. That's helpful. And I guess, while we're talking about leverage, so pro forma mid-7s, what is the sort of longer term leverage target for the combined company? And what's the timeframe to reduce leverage towards that level?

Chris, do you want to take that?

Sure. So, over time, we definitely want to push the leverage into the 6s. I mean, we want to move towards investment-grade, but we do want to move it over time. In terms of the actual timeframe, I don't have an exact number. Part of that's going to have to do with obviously the equity markets and our ability to raise capital. But we think especially with the combined company, that's going to be a favorable change for us. So it's something that we're definitely going to push towards.

And again, Todd, not to just keep jumping in, but again, we're thinking about this as a much larger entity post-merger with what we think are going to be great opportunities. The internalization and the changes to corporate governance, the savings of $75 million to $54 million, which occurs at the closing, is really going to change our position in the market. We think that many of the institutional owner type firms, they're going to see this as an opportunity. We're looking to expand our ownership, and we'd like to see the company start trading much more in line with our peers. In doing that, it's obviously going to open up some strategic doors for us, as it relates to equity and debt at the right time. So, this merger is really key for GNL and our long-term thoughts around driving net debt to EBITDA further down and ultimately be looking for an investment-grade rating.

All right. Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Jim Nelson for any closing remarks.

Thank you, operator. I want to thank Chris and Mike for joining me on today's call. I appreciate all their great input. And I want to thank everybody who joined us on the call for joining us today. So at this point, operator, thank you. We can close the call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.