Good afternoon and welcome to the Global Net Lease Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] I would now like to turn the conference over to, Curtis Parker, [ph] Senior Vice President. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us for GNL's third quarter 2022 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. 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, 2021, filed on February 24, 2022 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 measures 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. Our high-quality, mission-critical net lease office and industrial portfolio continues to perform well. We are advancing our differentiated international and domestic strategy by increasing portfolio concentration in industrial and distribution assets, successfully extending and expanding leases, maintaining 99% occupancy and building a pipeline of attractive acquisitions. Since the beginning of 2020, over 82% of GNL's acquisitions have been industrial and distribution assets, increasing GNL's ownership of this asset class to 56% of the portfolio. We believe our best-in-class portfolio is well-positioned for meaningful capital appreciation and that our dividend provides shareholders a very compelling current yield. In the third quarter, core FFO grew by 9.6% year-over-year to $48.3 million or $0.47 per share and AFFO was $41.3 million or $0.40 per share. On a constant currency basis, when we applied the average monthly currency rates from the second 2022, revenues would have been up by $1.2 million to $93.8 million. Using the same constant currency concept year-over-year, revenues would have been up by $4.9 million to $97.5 million. Our AFFO was impacted by the strengthening of the U.S. dollar relative to the euro and pound. However, our comprehensive hedging program helped reduce the impact of the strengthening and we realized $2.4 million of gains this quarter. We think our unique global capabilities, strong balance sheet and best-in-class real estate assets continue to support GNL's positive performance. One of our areas of focus for 2022 is asset management, and we continue to build leasing momentum. In the third quarter, we completed two lease renewals and one tenant expansion project, totaling nearly 850,000 square feet, bringing our year-to-date activity to 3.6 million square feet. We also signed one small new lease for a convenience store in the UK. The…

Thanks, Jim. For the third quarter 2022, we recorded revenue of $92.6 million with a net income attributable to common stockholders of $9.7 million. FFO and AFFO for the third quarter were $48.2 million and $41.3 million, respectively, or $0.46 and $0.40 per share. On a constant currency basis, applying the average monthly currency rates from the second quarter 2022, revenues would have been up by $1.2 million to $93.8 million. Using the same constant currency concept year-over-year, revenues would've been up by $4.9 million to $97.5 million. Core FFO grew by 9.6% year-over-year to $48.3 million or $0.47 per share, and AFFO was $41.3 million or $0.40 per share. Our AFFO is impacted by the strengthening of the U.S. dollar relative to the euro and pound. However, our comprehensive hedging program helped reduce the impact of the ongoing turbulence in these currencies. As always, a reconciliation of GAAP net income to non-GAAP measures can be found in our earnings release. On the balance sheet, we ended the quarter with net debt of $2.2 billion at a weighted average interest rate of 3.5% and $128 million of cash and cash equivalent. Our net debt to trailing 12-month adjusted EBITDA ratio was 8 times at the end of the quarter. The weighted average debt maturity at the end of the third quarter 2022 was 4.2 years. The components of our debt include $500 million in senior notes, $605.1 million on the multicurrency revolving credit facility, and $1.3 billion of outstanding gross mortgage debt. This debt was approximately 75% fixed rate, which is inclusive of floating rate debt with in place interest rate swaps. The Company has a well-cushioned interest coverage ratio of 3.3 times. As of September 30, 2022, liquidity was approximately $206.9 million. Company distributed $41.7 million in dividends to common shareholders in the quarter or $0.40 per share. Our net debt to enterprise value is 62.3% with an enterprise value of $3.6 billion based on the September 30, 2022 closing share price of $10.65 for common shares, $21.58 for Series A preferred shares and $22.20 for Series B preferred shares. With that, I'll turn the call back to Jim for some closing remarks.

Thanks, Chris. I'm very pleased with our progress and accomplishments during the third quarter, including our ongoing successful leasing activity and the forward pipeline of accretive acquisitions we have built in the current market of expanding cap rates. Our best in class portfolio features long-term leases with investment grade and other high quality tenants, balanced asset classes and strong geographic and industry diversity. Our primarily fixed rate debt and comprehensive hedging strategies have helped to minimize the impact of recent interest rate and foreign exchange turbulence, allowing us to focus on creating value for shareholders. We believe we are well positioned to continue to enhance our portfolio and grow earnings for shareholders throughout the balance of 2022 and into next year. With that, operator, we can open the line for questions.

[Operator Instructions] And our first questions from the line of Bryan Maher with B. Reilly Securities. Please proceed with your question.

Good afternoon, Jim and Chris. And thanks for all those prepared comments. Couple of quick questions on the foreign currency front. I know that you guys gave the impact on revenues, but maybe a two-part question. I don't know, Chris, if you have it. But, what was the impact on AFFO per share? And I realize that you guys had some gains from the hedging activity. So, that's kind of part one. Part two is, have you considered or would you consider doing more hedges, and how costly is that?

Sure. So, I guess, the first part to start with in terms of the impact on AFFO, we did quarter-over-quarter have about $2.6 million or $2.7 million of decrease related to primarily FX. There was about $0.5 million related to some OpEx on a vacant tenant, but that was mostly driven by the FX. And then, in terms of the actual hedges, the realized gains that we recorded for the quarter were $2.4 million. Last quarter, we actually had $1.5 million in realized gains. So, we were up almost $1 million quarter-over-quarter in the realized gains. In terms of the increasing in the hedging going forward, we have had a pretty consistent strategy for hedging. And what we do is, we focus on hedging the net cash flows because that is actual foreign currency that we will be bringing in the door and need to convert. So, we won't necessarily go beyond our cash flows, because that's moving us out of our strategy of trying to minimize risk. But we have been consistently evaluating, if we did want to increase some of the percentage that we do hedge compared to the exposure. And in terms of cost, there is really very little cost to these hedges. We don't have to put any cash out the door day one effectively in terms of the forward contracts. We are locking in spot rates in the future that will be converting the cash back into USD, and like I said, no additional cash going out the door for us.

Okay. Thanks. And then on the disposition front, I know you gave us the metrics on that. But maybe a little bit more color against kind of two parts. Is the goal to kind of divest of non-core assets and recycle that into better performing assets and/or is it to deleverage or maybe both? And I think you said you’re 8 times net debt-to-EBITDA. What is the goal?

Good afternoon, Bryan. Good to hear your voice. First of all, we will divest ourselves of properties when we deem it's appropriate. As you know, we divested a big property in Germany a few years ago where we knew the tenant was moving out. And we had three unsolicited offers on the property and we made a good profit on it. We are divesting ourselves of a few other things. We will continue to divest non-core assets, which are primarily the retail assets, which over time we are definitely sellers of retail. As far as the rest of the portfolio goes -- and in general, all the portfolio is performing extremely well. So, we don't sell properties because they are not performing. We may sell a property, if there are other reasons behind it. For example, if a tenant is moving out and we think it's better to sell the property and repurpose the funds into buying new assets. But there are a lot of different factors for us to decide what to divest. And we will continue to follow that sort of program as we move ahead. What was the other part of your question, Bryan? Say it again.

The leverage level. I think you are at 8 times now. Is there a goal to be meaningfully lower than that or are you fine at 8 times?

Ultimately -- no, ultimately we would like to be down into the low to the mid-6s. But with the stock price where it is, I mean, the easiest way to delever would be, if the stock price was at a decent level, would be to sell some stock on the ATM and use that to delever. So, we always have a goal of getting down into the low 6s. Right now with where the economy is, with inflation, potential recession, we are just sticking to our guns here and being very cautious about how we deploy capital and where we are going forward. We do have a strong balance sheet. We do have some attractive acquisition -- potential acquisitions in the pipeline, but we are being very cautious.

Great. And just last for me, on the lease renewals, renewals or new leases, how is that dialogue progressing these days? I mean, has the tone changed at all? Is there any pushback from the rate increases that you're looking to get? And is there any thought to increasing rent escalators, given the current state of inflation? And that's all for me. Thank you.

Thanks Bryan. In our new leases, we're looking at anywhere from -- 2% to 4% and a much higher upside. So, on all new leases, we're building in much larger escalators. When we renew leases, we're doing the same thing, and if we have not had any pushback from our tenants on any of this so far. I think, we're very fortunate because of the high quality of our portfolio and the locations of our properties that really give us an advantage in dealing with our tenants on renewals and looking forward as far as getting them to stay for long periods of time. But thank you, Bryan. I appreciate the call.

Thank you. Our next question is from the line of James Allen Villard with Ladenburg Thalmann. Please proceed with your question.

I guess just kind of big picture. Are you seeing any impact in terms of tenant credit health in your European portfolio from kind of the energy cost inflation? And how are you all thinking about that moving forward?

Well, you have to remember that a large majority of our tenants are investment grade, and we have a committee that watches our tenants’ credit and we have no one on the watch list right now. Our European tenants, Whirlpool, Johnson Controls, ING, they're all in good shape and they pay their rents on time. So, we really don't have a concern as far as collecting rents. I mean, energy basically hurts everyone, as we see this inflation. But I think, we're very fortunate with the high quality of the tenants in our portfolio and we will probably be affected less than a lot of other people, so.

Yes. And I guess, how is that affecting I guess future acquisitions in Europe?

We're being very cautious. As I said earlier, we're looking for higher cap rates, which we're starting to see and we are seeing a bunch of stuff that are in the pipeline right now. We've been very cautious, as I said for the whole year, as far as deploying capital, because there's a lot of unknowns out there in the economy today. But we're seeing stuff that we like at decent prices.

Our next question is from the line of Mitch Germain with JMP Securities. Please proceed with your questions.

Can I get a little more detail on the asset sales? I guess, one completed, right? And then two additional. And I think you gave the amount was 110. Do you have like a breakdown of -- and I might have missed it in what you provided earlier today, but do you have a breakdown of what was sold versus what's for sale?

Chris, can you handle that?

Sure. Absolutely. So, the property that was sold during the quarter was actually a small property that was roughly about $3 million. The property that we expect to close on the sale in the fourth quarter, that property is approximately $48 million, that's a property in France. And then, there is one additional property which is vacant. That sale price is a little over $60 million, and that we expect to close next year.

And Mitch, just to give you a little color. The building in France is a large office building. So that will reduce our office exposure.

That was my next question.

That'll reduce our office exposure.

Great. But you're buying office.

We're buying one small office building, a government office building in Belgium, I think.

Government lease. Okay, good.

Government lease, long-term lease, great credit. Yes.

Okay. Makes sense. You've got some debt coming due next year. What is the plan -- $231 million? What's the plan for that?

So that debt is our UK debt. We are currently evaluating our options, but we do have the ability to refinance that using our credit facility and pull those properties onto the credit line as an option.

So, Mitch, that's a decision we don't have to make today because it's not coming due till the middle of next year. But, we watch the markets pretty closely, and obviously we will try to find the best pricing on the debt to benefit our shareholders as best we can. So, it’s a decision we will make a little closer to the due date, but we are watching it very, very carefully.

And I know you have a multicurrency credit facility, and I noticed there wasn't much of a change in the average price quarter-over-quarter, but I suspect because of your European exposure there, the likelihood is that rate is jumped pretty dramatically at this point. Is that a good way to think about it, or is there some hedging there that I am not aware of?

There is hedging there. And that's part of the reason why you're seeing some of the rates stay pretty consistent because we do have hedge.

Understood, okay.

And we have extended some of the hedging out further.

I'm sure you have it somewhere and I probably just read it, but how much of your debt is pure variable, no hedge?

I'm just pulling that up. I believe it's about 25% is the number.

That's consistent with what I saw then. Okay, makes sense. And Chris, help me out here. Just one more question. I guess, I'm just not understanding some of your language around FX. Was it a headwind to the bottom line or was it a tailwind?

It is a headwind. So, I pulled down the actual say revenue numbers because obviously as the euro and the pound weekend, their conversion to USD was lower than it previously would have been.

Got you. Okay, great. Thanks guys. I appreciate it.

All right. Thanks, Mitch.

At this time, I'll turn the floor back to Mr. Nelson for your closing remarks.

Well, I want to thank everybody for joining us on today's call. This company is operating very solidly. We're very pleased with the gains we've made on leasing and in maintaining a strong balance sheet. The Company, we have a great portfolio, we have great tenants and we're actually very proud of the portfolio we've built over the last number of years. So, thank you very much for calling in today and listening in, and we will talk to you next quarter. Thanks everybody. Bye, bye.

This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time.