Global Net Lease, Inc. (NYSE: GNL) (“GNL” or the “Company”), an
internally managed real estate investment trust that focuses on
acquiring and managing a globally diversified portfolio of
strategically-located commercial real estate properties, announced
today its financial and operating results for the quarter and year
ended December 31, 2023.
Fourth Quarter 2023
Highlights
- As a direct result of the merger
with The Necessity Retail REIT, Inc. (the “Merger”) and
internalization of advisory and property management functions (the
“Internalization”), GNL recognized $68 million of annualized
synergies and is currently on track to recognize the full $75
million balance by third quarter 20242
- Revenue was $206.7 million in
fourth quarter 2023
- Net loss was $59.5 million, or
$0.26 per diluted share in fourth quarter 2023
- NOI was $169.7 million in fourth
quarter 2023
- Core FFO was $48.3 million, or
$0.21 per diluted share in fourth quarter 2023
- AFFO was $71.7 million, or $0.313
per diluted share in fourth quarter 2023. In fourth quarter 2023,
post-merger, GNL incurred an elevated $5.5 million European income
tax expense in the quarter and $2.3 million one-time write offs
primarily related to reimbursements. The Company has completed a
European tax restructure that is expected to reduce income tax
expense immediately beginning in first quarter 2024
- Completed 70 lease renewals and new
leases combining for over 2.1 million square feet across the
portfolio, resulting in over $19 million of net new straight-line
rent
- Portfolio maintained occupancy of
96% leased with minimal near-term lease maturities and a weighted
average remaining lease term of 6.8 years4
- Renewal leasing spread of 6% across
the entire portfolio, including an 8% renewal spread for the
single-tenant portfolio and 2% renewal spread for the multi-tenant
suburban portfolio
- New leases that were completed in
fourth quarter 2023 have a weighted average lease term of 9.2
years, while the renewals that were completed in fourth quarter
2023 have a weighted average lease term of 6.1 years
- Weighted average annual cash rent
increase of 1.3% provides organic rental growth
- Sector-leading 58% of annualized
straight-line rent comes from Investment Grade or implied
Investment Grade tenants5
- Portfolio is comprised of
diversified and high-quality tenants with the top 10 tenants
totaling 21% of the overall portfolio’s straight-line rent and the
largest tenant contributing only 3.1% of total straight-line
rent
- Weighted-average debt maturity at
the end of 2023 was 3.2 years with minimal debt maturity in 2024,
and 80% fixed debt across the portfolio
- In fourth quarter 2023, GNL closed
on $76.1 million of vacant and near-term expiration dispositions,
with the proceeds used to begin the Company’s debt paydown strategy
and currently have a $148 million6 disposition pipeline that is
expected to close by second quarter 2024
- GNL’s near-term strategic priority
will focus on reducing leverage through select dispositions,
prioritizing non-core assets and opportunistic sales
“We take great pride in our achievements at GNL
throughout 2023, especially the seamless integration of our
transformative merger. With the Merger and Internalization behind
us, we remain focused on positioning ourselves as an industry
leader with a global, diversified and primarily investment-grade
portfolio. We maintain that the best path forward for GNL is
reducing leverage through non-core and strategic dispositions to
enhance our balance sheet as we aim to lower our cost of capital
and position the Company for future growth. Disposing of assets at
a significant premium to our assumed implied cap rate will provide
investors with proof of value of our leading investment-grade
worthy portfolio,” stated Michael Weil, Co-CEO of GNL. “As we’ve
taken a conservative approach, our strategy for deleveraging is
designed to be earnings neutral, with the expectation that our net
debt to adjusted EBITDA will decrease by almost one full turn. By
applying a reasonable and achievable 10x AFFO multiple to our per
share guidance, the implied stock price exceeds $13 per share; $20
per share range if we trade to the high-end of the sector at a 15x
AFFO multiple. This outlook aligns with our goal of narrowing the
trading discount and we believe these strategic initiatives will
position GNL for future success that maximizes shareholder
value.”
Full Year 2024 Guidance and Dividend
Update7
It is GNL’s objective to provide investors with
enhanced transparency regarding our financial goals and
projections, and therefore we would like to introduce initial 2024
guidance:
- AFFO per share range of $1.30 to
$1.40
- Net Debt to Adjusted EBITDA range8
of 7.4x to 7.8x
- Projected 2024 dispositions in the
range of $400 million to $600 million6,9, with the majority of the
dispositions coming from occupied opportunistic sales, where GNL
anticipates achieving a cash cap rate between 7% and 8%
- Reduced annual
dividend to $1.10 per share of common stock starting with the
dividend expected to be declared in April 2024 which increases the
amount of cash that can be used to lower leverage
Summary Fourth Quarter 2023
Results
|
|
Quarter Ended |
(In
thousands, except per share data) |
|
December 31, 2023 |
Revenue from tenants |
|
$ |
206,726 |
|
|
|
|
Net loss attributable to
common stockholders |
|
$ |
(59,514 |
) |
Net loss per diluted common
share |
|
$ |
(0.26 |
) |
|
|
|
NAREIT defined FFO
attributable to common stockholders |
|
$ |
43,165 |
|
NAREIT defined FFO per diluted
common share |
|
$ |
0.19 |
|
|
|
|
Core FFO attributable to
common stockholders |
|
$ |
48,331 |
|
Core FFO per diluted common
share |
|
$ |
0.21 |
|
|
|
|
AFFO attributable to common
stockholders |
|
$ |
71,656 |
|
AFFO per diluted common
share |
|
$ |
0.31 |
|
|
|
|
|
|
Property Portfolio
At December 31, 2023, the Company’s
portfolio consisted of 1,296 net leased properties located in
eleven countries and territories and comprised of 66.8 million
rentable square feet. The Company operates in four reportable
segments: (1) Industrial & Distribution, (2) Multi-Tenant
Retail, (3) Single-Tenant Retail and (4) Office. The real estate
portfolio metrics include:
- 96% leased with a
remaining weighted-average lease term of 6.8 years
- 78% of the portfolio
contains contractual rent increases based on annualized
straight-line rent
- 58% of portfolio
annualized straight-line rent derived from investment grade and
implied investment grade rated tenants
- 80% U.S. and Canada,
20% Europe (based on annualized straight-line rent)
- 32% Industrial &
Distribution, 27% Multi-Tenant Retail, 21% Single-Tenant Retail and
20% Office (based on an annualized straight-line rent)
Capital Structure and Liquidity
Resources10
As of December 31, 2023, the Company had
liquidity of $135.7 million and $206 million of capacity under the
Company's revolving credit facility. The Company had net debt of
$5.3 billion11, including $2.7 billion of mortgage debt.
As of December 31, 2023, the percentage of
debt that is fixed rate (including variable rate debt fixed with
swaps) was approximately 80%, compared to approximately 70% as of
December 31, 2022. The Company’s total combined debt had a weighted
average interest rate of 4.8% resulting in an interest coverage
ratio of 2.4 times12. Weighted average debt maturity was 3.2 years
as of December 31, 2023 as compared to 3.9 years as of
December 31, 2022.
Footnotes/Definitions
1 Based on GNL’s fourth quarter 2023 general
& administrative expenses annualized for a full fiscal
year.
2 Captured synergies based on GNL’s general
& administrative expenses for the fourth quarter of 2023
following the completion of the Merger and Internalization, as
compared to the general & administrative expenses of RTL and
GNL for the full year 2022 (inclusive of RTL’s general &
administrative expenses and GNL and RTL advisory and management
fees previously paid to the external manager during such
period).
3 While we consider AFFO a useful indicator of
our performance, we do not consider AFFO as an alternative to net
income (loss) or as a measure of liquidity. Furthermore, other
REITs define AFFO differently than we do. Projected AFFO per share
data included in this release is for informational purposes only
and should not be relied upon as indicative of future performance
or our ability to pay dividends. AFFO for the fourth quarter also
contains a number of adjustments for items that the Company
believes were non-recurring, one time items including adjustments
for items that were settled in cash such as merger and proxy
related expenses.
4 Weighted-average remaining lease term in years is based on
square feet as of December 31, 2023.
5 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. The term
"parent" for these purposes includes any entity, including any
governmental entity, owning more than 50% of the voting stock in a
tenant. Ratings information is as of December 31, 2023.
Comprised of 33.4% leased to tenants with an actual investment
grade rating and 24.2% leased to tenants with an Implied Investment
Grade rating based on annualized cash rent as of December 31,
2023.
6 Inclusive of $148 million in signed PSAs and
LOIs ($117 million of signed PSAs and $31 million under LOIs) as of
February 19, 2024. There is no assurance that signed PSAs/LOIs lead
to definitive sales on their contemplated terms, or at all.
7 We do not provide guidance on net income. We
only provide guidance on AFFO per share and our Net Debt to
Adjusted EBITDA ratio and do not provide reconciliations of this
forward-looking non-GAAP guidance to net income per share or our
debt to net income due to the inherent difficulty in quantifying
certain items necessary to provide such reconciliations as a result
of their unknown effect, timing and potential significance.
Examples of such items include impairment of assets, gains and
losses from sales of assets, and depreciation and amortization from
new acquisitions and other non-recurring expenses.
8 Projected Adjusted EBITDA annualized based on
estimated Adjusted EBITDA for the quarter ended December 31, 2024
multiplied by four.
9 Disposition Pipeline also includes $252
million to $452 million of opportunistic dispositions
10 During the year ended December 31, 2023,
the Company did not sell any shares of Common Stock or Series B
Preferred Stock through its Common Stock or Series B Preferred
Stock "at-the-market" programs. However, the Company did issue
7,933,711 shares of newly created Series D Preferred Stock,
4,595,175 shares of newly created Series E Preferred Stock and
123,257,677 shares of common stock in connection with the Merger
and Internalization.
11 Comprised of the principal amount of GNL's
outstanding debt totaling $5.4 billion less cash and cash
equivalents totaling $121.6 million, as of December 31,
2023.
12 The interest coverage ratio is calculated by
dividing adjusted EBITDA for the applicable quarter by cash paid
for interest (calculated based on the interest expense less
non-cash portion of interest expense and amortization of mortgage
(discount) premium, net). Management believes that Interest
Coverage Ratio is a useful supplemental measure of our ability to
service our debt obligations. Adjusted EBITDA and cash paid for
interest are Non-GAAP metrics and are reconciled below.
Conference Call
GNL will host a webcast and conference call on
February 28, 2024 at 11:00 a.m. ET to discuss its financial
and operating results.
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.
Dial-in instructions for the conference call and the replay are
outlined below.
Conference Call Details
Live Call
Dial-In (Toll Free): 1-833-816-1441International
Dial-In: 1-412-317-0533
Conference Replay
For those who are not able to listen to the live
broadcast, a replay will be available from 2:00 p.m. ET on
February 28, 2024 through May 28, 2024 on the GNL website
at www.globalnetlease.com.
Or dial-in below:
Domestic Dial-In (Toll Free):
1-844-512-2921International Dial-In: 1-412-317-6671Conference
Number: 10185095
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 internally managed real estate investment trust that focuses
on acquiring and managing a global portfolio of income producing
net lease assets across the U.S., and Western and Northern Europe.
Additional information about GNL can be found on its website at
www.globalnetlease.com.
Forward-Looking Statements
This press release contains statements that are
not historical facts and may be forward-looking statements,
including statements regarding the intent, belief or current
expectations of us, our operating partnership and members of our
management team, as well as the assumptions on which such
statements are based, and generally are identified by the use of
words such as “may,” “will,” “seeks,” “anticipates,” “believes,”
“estimates,” “projects,” “potential,” “predicts,” “expects,”
“plans,” “intends,” “would,” “could,” “should” or similar
expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain these
identifying words. Actual results may differ materially from those
contemplated by such forward-looking statements.
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 risks associated with the merger with RTL and the
internalization of the Company’s property management and advisory
functions; the geopolitical instability due to the ongoing military
conflicts between Russia and Ukraine and Israel and Hamas,
including related sanctions and other penalties imposed by the U.S.
and European Union, and the related impact on the Company, the
Company’s tenants and the global economy and financial markets;
that any potential future acquisition by the Company is subject to
market conditions and capital availability and may not be
identified or completed on favorable terms, or at all. Some of the
risks and uncertainties, although not all risks and uncertainties,
that could cause our actual results to differ materially from those
presented in our forward-looking statements are set forth under
“Risk Factors” and “Quantitative and Qualitative Disclosures about
Market Risk” in its Annual Report on Form 10-K, its Quarterly
Reports on Form 10-Q, and its 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 over time, unless required by law.
Contacts:
Investors and Media:Email:
investorrelations@globalnetlease.comPhone: (332) 265-2020
Global Net Lease, Inc. |
Consolidated Balance Sheets |
(In thousands) |
|
|
|
December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
ASSETS |
|
(Unaudited) |
|
|
Real estate investments, at
cost: |
|
|
|
|
Land |
|
$ |
1,430,607 |
|
|
$ |
494,101 |
|
Buildings, fixtures and improvements |
|
|
5,842,314 |
|
|
|
3,276,656 |
|
Construction in progress |
|
|
23,242 |
|
|
|
26,717 |
|
Acquired intangible lease assets |
|
|
1,359,981 |
|
|
|
689,275 |
|
Total real estate investments, at cost |
|
|
8,656,144 |
|
|
|
4,486,749 |
|
Less: accumulated depreciation and amortization |
|
|
(1,083,824 |
) |
|
|
(891,479 |
) |
Total real estate investments, net |
|
|
7,572,320 |
|
|
|
3,595,270 |
|
Assets held for sale |
|
|
3,188 |
|
|
|
— |
|
Cash and cash equivalents |
|
|
121,566 |
|
|
|
103,335 |
|
Restricted cash |
|
|
40,833 |
|
|
|
1,110 |
|
Derivative assets, at fair
value |
|
|
10,615 |
|
|
|
37,279 |
|
Unbilled straight-line
rent |
|
|
84,254 |
|
|
|
73,037 |
|
Operating lease right-of-use
asset |
|
|
77,008 |
|
|
|
49,166 |
|
Prepaid expenses and other
assets |
|
|
121,997 |
|
|
|
64,348 |
|
Due from related parties |
|
|
— |
|
|
|
464 |
|
Deferred tax assets |
|
|
4,808 |
|
|
|
3,647 |
|
Goodwill |
|
|
46,976 |
|
|
|
21,362 |
|
Deferred financing costs,
net |
|
|
15,412 |
|
|
|
12,808 |
|
Total Assets |
|
$ |
8,098,977 |
|
|
$ |
3,961,826 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Mortgage notes payable,
net |
|
$ |
2,517,868 |
|
|
$ |
1,233,081 |
|
Revolving credit facility |
|
|
1,744,182 |
|
|
|
669,968 |
|
Senior notes, net |
|
|
886,045 |
|
|
|
493,122 |
|
Acquired intangible lease
liabilities, net |
|
|
95,810 |
|
|
|
24,550 |
|
Derivative liabilities, at
fair value |
|
|
5,145 |
|
|
|
328 |
|
Due to related parties |
|
|
— |
|
|
|
1,183 |
|
Accounts payable and accrued
expenses |
|
|
99,014 |
|
|
|
22,889 |
|
Operating lease liability |
|
|
48,369 |
|
|
|
21,877 |
|
Prepaid rent |
|
|
46,213 |
|
|
|
28,456 |
|
Deferred tax liability |
|
|
6,009 |
|
|
|
7,264 |
|
Dividends payable |
|
|
11,173 |
|
|
|
5,189 |
|
Total Liabilities |
|
|
5,459,828 |
|
|
|
2,507,907 |
|
Commitments and
contingencies |
|
|
— |
|
|
|
— |
|
Stockholders'
Equity: |
|
|
|
|
7.25% Series A cumulative
redeemable preferred stock |
|
|
68 |
|
|
|
68 |
|
6.875% Series B cumulative
redeemable perpetual preferred stock |
|
|
47 |
|
|
|
47 |
|
7.50% Series D cumulative
redeemable perpetual preferred stock |
|
|
79 |
|
|
|
— |
|
7.375% Series E cumulative
redeemable perpetual preferred stock |
|
|
46 |
|
|
|
— |
|
Common stock |
|
|
3,639 |
|
|
|
2,371 |
|
Additional paid-in
capital |
|
|
4,350,112 |
|
|
|
2,683,169 |
|
Accumulated other
comprehensive (loss) income |
|
|
(14,096 |
) |
|
|
1,147 |
|
Accumulated deficit |
|
|
(1,702,143 |
) |
|
|
(1,247,781 |
) |
Total Stockholders' Equity |
|
|
2,637,752 |
|
|
|
1,439,021 |
|
Non-controlling interest |
|
|
1,397 |
|
|
|
14,898 |
|
Total Equity |
|
|
2,639,149 |
|
|
|
1,453,919 |
|
Total Liabilities and Equity |
|
$ |
8,098,977 |
|
|
$ |
3,961,826 |
|
Global Net Lease, Inc. |
Consolidated Statements of Operations |
(In thousands, except per share data) |
|
|
|
Three Months Ended |
|
Year Ended |
|
|
December 31,2023 |
|
December 31,2022 |
|
December 31,2023 |
|
December 31,2022 |
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|
Revenue from tenants |
|
$ |
206,726 |
|
|
$ |
93,948 |
|
|
$ |
515,070 |
|
|
$ |
378,857 |
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
Property operating |
|
|
37,037 |
|
|
|
9,854 |
|
|
|
67,839 |
|
|
|
32,877 |
|
Operating fees to related parties |
|
|
(580 |
) |
|
|
9,877 |
|
|
|
28,283 |
|
|
|
40,122 |
|
Impairment charges |
|
|
2,978 |
|
|
|
4,504 |
|
|
|
68,684 |
|
|
|
21,561 |
|
Merger, transaction and other costs |
|
|
4,349 |
|
|
|
— |
|
|
|
54,492 |
|
|
|
244 |
|
Settlement costs |
|
|
— |
|
|
|
— |
|
|
|
29,727 |
|
|
|
— |
|
General and administrative |
|
|
16,867 |
|
|
|
6,108 |
|
|
|
40,187 |
|
|
|
17,737 |
|
Equity-based compensation |
|
|
1,058 |
|
|
|
2,855 |
|
|
|
17,297 |
|
|
|
12,072 |
|
Depreciation and amortization |
|
|
98,713 |
|
|
|
36,987 |
|
|
|
222,271 |
|
|
|
154,026 |
|
Total expenses |
|
|
160,422 |
|
|
|
70,185 |
|
|
|
528,780 |
|
|
|
278,639 |
|
Operating income (loss) before gain on dispositions of real estate
investments |
|
|
46,304 |
|
|
|
23,763 |
|
|
|
(13,710 |
) |
|
|
100,218 |
|
(Loss) gain on dispositions of real estate investments |
|
|
(988 |
) |
|
|
120 |
|
|
|
(1,672 |
) |
|
|
325 |
|
Operating income (loss) |
|
|
45,316 |
|
|
|
23,883 |
|
|
|
(15,382 |
) |
|
|
100,543 |
|
Other income
(expense): |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(83,575 |
) |
|
|
(25,731 |
) |
|
|
(179,411 |
) |
|
|
(97,510 |
) |
Loss on extinguishment of debt |
|
|
(817 |
) |
|
|
(1,657 |
) |
|
|
(1,221 |
) |
|
|
(2,040 |
) |
(Loss) gain on derivative instruments |
|
|
(4,478 |
) |
|
|
(6,892 |
) |
|
|
(3,691 |
) |
|
|
18,642 |
|
Unrealized income on undesignated foreign currency advances and
other hedge ineffectiveness |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,439 |
|
Other income |
|
|
435 |
|
|
|
127 |
|
|
|
2,270 |
|
|
|
981 |
|
Total other expense, net |
|
|
(88,435 |
) |
|
|
(34,153 |
) |
|
|
(182,053 |
) |
|
|
(77,488 |
) |
Net (loss) income before
income tax |
|
|
(43,119 |
) |
|
|
(10,270 |
) |
|
|
(197,435 |
) |
|
|
23,055 |
|
Income tax expense |
|
|
(5,459 |
) |
|
|
(2,370 |
) |
|
|
(14,475 |
) |
|
|
(11,032 |
) |
Net (loss)
income |
|
|
(48,578 |
) |
|
|
(12,640 |
) |
|
|
(211,910 |
) |
|
|
12,023 |
|
Preferred stock dividends |
|
|
(10,936 |
) |
|
|
(5,098 |
) |
|
|
(27,438 |
) |
|
|
(20,386 |
) |
Net loss attributable
to common stockholders |
|
$ |
(59,514 |
) |
|
$ |
(17,738 |
) |
|
$ |
(239,348 |
) |
|
$ |
(8,363 |
) |
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss
Per Share: |
|
|
|
|
|
|
|
|
Net loss per share attributable to common stockholders — Basic and
Diluted |
|
$ |
(0.26 |
) |
|
$ |
(0.17 |
) |
|
$ |
(1.71 |
) |
|
$ |
(0.09 |
) |
Weighted Average
Shares Outstanding: |
|
|
|
|
|
|
|
|
Basic and Diluted |
|
|
230,320 |
|
|
|
103,782 |
|
|
|
142,584 |
|
|
|
103,686 |
|
Global Net Lease, Inc. |
Quarterly Reconciliation of Non-GAAP Measures
(Unaudited) |
(In thousands) |
|
|
|
Three Months Ended |
|
Year Ended |
|
|
March 31,2023 |
|
June 30,2023 |
|
September 30,2023 |
|
December 31,2023 |
|
December 31,2023 |
Adjusted
EBITDA |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(890 |
) |
|
$ |
(26,258 |
) |
|
$ |
(136,184 |
) |
|
$ |
(48,578 |
) |
|
$ |
(211,910 |
) |
Depreciation and amortization |
|
|
37,029 |
|
|
|
37,297 |
|
|
|
49,232 |
|
|
|
98,713 |
|
|
|
222,271 |
|
Interest expense |
|
|
26,965 |
|
|
|
27,710 |
|
|
|
41,161 |
|
|
|
83,575 |
|
|
|
179,411 |
|
Income tax expense |
|
|
2,707 |
|
|
|
3,508 |
|
|
|
2,801 |
|
|
|
5,459 |
|
|
|
14,475 |
|
Impairment charges |
|
|
— |
|
|
|
— |
|
|
|
65,706 |
|
|
|
2,978 |
|
|
|
68,684 |
|
Equity-based compensation |
|
|
2,925 |
|
|
|
2,870 |
|
|
|
10,444 |
|
|
|
1,058 |
|
|
|
17,297 |
|
Merger, transaction and other costs |
|
|
99 |
|
|
|
6,279 |
|
|
|
43,765 |
|
|
|
4,349 |
|
|
|
54,492 |
|
Settlement costs |
|
|
— |
|
|
|
15,084 |
|
|
|
14,643 |
|
|
|
— |
|
|
|
29,727 |
|
Loss on dispositions of real estate investments |
|
|
— |
|
|
|
— |
|
|
|
684 |
|
|
|
988 |
|
|
|
1,672 |
|
Loss (gain) on derivative instruments |
|
|
1,656 |
|
|
|
774 |
|
|
|
(3,217 |
) |
|
|
4,478 |
|
|
|
3,691 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
404 |
|
|
|
— |
|
|
|
817 |
|
|
|
1,221 |
|
Other income |
|
|
(66 |
) |
|
|
(1,650 |
) |
|
|
(119 |
) |
|
|
(435 |
) |
|
|
(2,270 |
) |
Expenses attributable to 2023 proxy contest and related
litigation[1] |
|
|
1,716 |
|
|
|
7,371 |
|
|
|
14 |
|
|
|
— |
|
|
|
9,101 |
|
Expenses attributable to European tax restructuring[2] |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,169 |
|
|
|
2,169 |
|
Transition costs related to the Merger and Internalization[3] |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,484 |
|
|
|
2,484 |
|
Adjusted EBITDA |
|
|
72,141 |
|
|
|
73,389 |
|
|
|
88,930 |
|
|
|
158,055 |
|
|
|
392,515 |
|
Operating fees to related parties |
|
|
10,101 |
|
|
|
10,110 |
|
|
|
8,652 |
|
|
|
(580 |
) |
|
|
28,283 |
|
General and administrative |
|
|
5,660 |
|
|
|
10,683 |
|
|
|
6,977 |
|
|
|
16,867 |
|
|
|
40,187 |
|
Expenses attributable to 2023 proxy contest and related
litigation[1] |
|
|
(1,716 |
) |
|
|
(7,371 |
) |
|
|
(14 |
) |
|
|
— |
|
|
|
(9,101 |
) |
Expenses attributable to European tax restructuring[2] |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,169 |
) |
|
|
(2,169 |
) |
Transition costs related to the Merger and Internalization[3] |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,484 |
) |
|
|
(2,484 |
) |
NOI |
|
|
86,186 |
|
|
|
86,811 |
|
|
|
104,545 |
|
|
|
169,689 |
|
|
|
447,231 |
|
Amortization related to above- and below-market lease intangibles
and right-of-use assets, net |
|
|
955 |
|
|
|
1,297 |
|
|
|
1,444 |
|
|
|
1,907 |
|
|
|
5,603 |
|
Straight-line rent |
|
|
(1,888 |
) |
|
|
(1,786 |
) |
|
|
(2 |
) |
|
|
(6,720 |
) |
|
|
(10,396 |
) |
Cash NOI |
|
$ |
85,253 |
|
|
$ |
86,322 |
|
|
$ |
105,987 |
|
|
$ |
164,876 |
|
|
$ |
442,438 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Paid for
Interest: |
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
$ |
26,965 |
|
|
$ |
27,710 |
|
|
$ |
41,161 |
|
|
$ |
83,575 |
|
|
$ |
179,411 |
|
Non-cash portion of interest expense |
|
|
(2,085 |
) |
|
|
(2,083 |
) |
|
|
(2,046 |
) |
|
|
(2,408 |
) |
|
|
(8,622 |
) |
Amortization of mortgage discounts |
|
|
(227 |
) |
|
|
(237 |
) |
|
|
(3,374 |
) |
|
|
(15,078 |
) |
|
|
(18,916 |
) |
Total cash paid for interest |
|
$ |
24,653 |
|
|
$ |
25,390 |
|
|
$ |
35,741 |
|
|
$ |
66,089 |
|
|
$ |
151,873 |
|
___________
[1] Amounts relate to general and administrative
expenses incurred for the 2023 proxy contest and related Blackwells
Capital LLC, an affiliate of Blackwells Onshore, and certain others
involved with the proxy solicitation (collectively, the
“Blackwells/Related Parties”) litigation. The Company does not
consider these expenses to be part of its normal operating
performance. Due to the increase in these expenses as a portion of
its general and administrative expenses in the quarter ended March
31, 2023, the Company began including this adjustment to arrive at
Adjusted EBITDA in order to better reflect its operating
performance. [2] Amount relates to costs incurred related to the
tax restructuring of our European entities. We do not consider
these expenses to be part of our normal operating performance and
have, accordingly, increased Adjusted EBITDA for this amount.[3]
Amount includes costs related to (i) compensation incurred for our
retiring Co-Chief Executive Officer; (ii) a transition service
agreement with the former Advisor and; (iii) insurance premiums
related to expiring directors and officers insurance of former RTL
directors. We do not consider these expenses to be part of our
normal operating performance and have, accordingly, increased
Adjusted EBITDA for this amount.
Global Net Lease, Inc. |
Quarterly Reconciliation of Non-GAAP Measures
(Unaudited) |
(In thousands, except per share data) |
|
|
|
Three Months Ended |
|
Year Ended |
|
|
March 31,2023 |
|
June 30,2023 |
|
September 30,2023 |
|
December 31,2023 |
|
December 31,2023 |
Funds from operations
(FFO): |
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders (in accordance with
GAAP) |
|
$ |
(5,989 |
) |
|
$ |
(31,357 |
) |
|
$ |
(142,488 |
) |
|
$ |
(59,514 |
) |
|
$ |
(239,348 |
) |
Impairment charges |
|
|
— |
|
|
|
— |
|
|
|
65,706 |
|
|
|
2,978 |
|
|
|
68,684 |
|
Depreciation and amortization |
|
|
37,029 |
|
|
|
37,297 |
|
|
|
49,232 |
|
|
|
98,713 |
|
|
|
222,271 |
|
Loss on dispositions of real estate investments |
|
|
— |
|
|
|
— |
|
|
|
684 |
|
|
|
988 |
|
|
|
1,672 |
|
FFO (defined by
NAREIT) |
|
|
31,040 |
|
|
|
5,940 |
|
|
|
(26,866 |
) |
|
|
43,165 |
|
|
|
53,279 |
|
Merger, transaction and other costs[1] |
|
|
99 |
|
|
|
6,279 |
|
|
|
43,765 |
|
|
|
4,349 |
|
|
|
54,492 |
|
Settlement costs[2] |
|
|
— |
|
|
|
15,084 |
|
|
|
14,643 |
|
|
|
— |
|
|
|
29,727 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
404 |
|
|
|
— |
|
|
|
817 |
|
|
|
1,221 |
|
Core FFO attributable
to common stockholders |
|
|
31,139 |
|
|
|
27,707 |
|
|
|
31,542 |
|
|
|
48,331 |
|
|
|
138,719 |
|
Equity-based compensation |
|
|
2,925 |
|
|
|
2,870 |
|
|
|
10,444 |
|
|
|
1,058 |
|
|
|
17,297 |
|
Non-cash portion of interest expense |
|
|
2,085 |
|
|
|
2,083 |
|
|
|
2,046 |
|
|
|
2,408 |
|
|
|
8,622 |
|
Amortization related to above- and below-market lease intangibles
and right-of-use assets, net |
|
|
955 |
|
|
|
1,297 |
|
|
|
1,444 |
|
|
|
1,907 |
|
|
|
5,603 |
|
Straight-line rent |
|
|
(1,888 |
) |
|
|
(1,786 |
) |
|
|
(2 |
) |
|
|
(6,720 |
) |
|
|
(10,396 |
) |
Eliminate unrealized losses (gains) on foreign currency
transactions[3] |
|
|
2,647 |
|
|
|
1,631 |
|
|
|
(1,933 |
) |
|
|
4,941 |
|
|
|
7,286 |
|
Amortization of mortgage discounts |
|
|
227 |
|
|
|
237 |
|
|
|
3,374 |
|
|
|
15,078 |
|
|
|
18,916 |
|
Expenses attributable to 2023 proxy contest and related
litigation[4] |
|
|
1,716 |
|
|
|
7,371 |
|
|
|
14 |
|
|
|
— |
|
|
|
9,101 |
|
Expenses attributable to European tax restructuring[5] |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,169 |
|
|
|
2,169 |
|
Transition costs related to the Merger and Internalization[6] |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,484 |
|
|
|
2,484 |
|
Adjusted funds from
operations (AFFO) attributable to common stockholders |
|
$ |
39,806 |
|
|
$ |
41,410 |
|
|
$ |
46,929 |
|
|
$ |
71,656 |
|
|
$ |
199,801 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding - Basic |
|
|
103,783 |
|
|
|
104,149 |
|
|
|
130,825 |
|
|
|
230,320 |
|
|
|
142,584 |
|
Weighted average
common shares outstanding - Diluted |
|
|
103,783 |
|
|
|
104,149 |
|
|
|
130,825 |
|
|
|
230,320 |
|
|
|
142,584 |
|
Net loss per share
attributable to common shareholders — Basic and Diluted |
|
$ |
(0.06 |
) |
|
$ |
(0.30 |
) |
|
$ |
(1.11 |
) |
|
$ |
(0.26 |
) |
|
$ |
(1.71 |
) |
FFO per diluted common
share |
|
$ |
0.30 |
|
|
$ |
0.06 |
|
|
$ |
(0.21 |
) |
|
$ |
0.19 |
|
|
$ |
0.37 |
|
Core FFO per diluted common
share |
|
$ |
0.30 |
|
|
$ |
0.27 |
|
|
$ |
0.24 |
|
|
$ |
0.21 |
|
|
$ |
0.97 |
|
AFFO per diluted common
share |
|
$ |
0.38 |
|
|
$ |
0.40 |
|
|
$ |
0.36 |
|
|
$ |
0.31 |
|
|
$ |
1.40 |
|
Dividends declared to common
stockholders |
|
$ |
41,677 |
|
|
$ |
41,674 |
|
|
$ |
41,978 |
|
|
$ |
81,891 |
|
|
$ |
207,220 |
|
_______________
[1] For the three months ended June 30, 2023,
September 30, 2023 and December 31, 2023, these costs primarily
consist of advisory, legal and other professional costs that were
directly related to the Merger and Internalization. The quarter
ended March 31, 2023 did not have any of these costs.[2] In the
three months ended June 30, 2023 and September 30, 2023, we
recognized these settlement costs which include one-half of the
reasonable, documented, out-of-pocket expenses (including legal
fees) incurred by the Blackwells/Related Parties in connection with
the proxy contest and related litigation as well as expense for
Common Stock issued to the Blackwells/Related Parties, as required
under the cooperation agreement with the Blackwells/Related
Parties.[3] For the three months ended March 31, 2023, the loss on
derivative instruments was $1.7 million which consisted of
unrealized losses of $2.6 million and realized gains of $0.9
million. For the three months ended June 30, 2023, the loss on
derivative instruments was $0.8 million which consisted of
unrealized losses of $1.6 million and realized gains of $0.8
million. For the three months ended September 30, 2023, the gain on
derivative instruments was $3.2 million which consisted of
unrealized gains of $1.9 million and realized gains of $1.3
million. For the three months ended December 31, 2023, the
loss on derivative instruments was $4.5 million, which consisted of
unrealized losses of $4.9 million and realized gains of $0.4
million. For the year ended December 31, 2023, the loss
on derivative instruments was $3.7 million, which consisted of
unrealized losses of $7.3 million and realized gains of $3.6
million. [4] Amount relates to costs incurred for the 2023 proxy
that were specifically related to the Company’s 2023 proxy contest
and Blackwells litigation. The Company does not consider these
expenses to be part of its normal operating performance and has,
accordingly, increased its AFFO for these amounts.[5] Amount
relates to costs incurred related to the tax restructuring of our
European entities. We do not consider these expenses to be part of
our normal operating performance and have, accordingly, increased
AFFO for this amount.[6] Amount includes costs related to (i)
compensation incurred for our retiring Co-Chief Executive Officer;
(ii) a transition service agreement with the former Advisor and;
(iii) insurance premiums related to expiring directors and officers
insurance of former RTL directors. We do not consider these
expenses to be part of our normal operating performance and have,
accordingly, increased AFFO for this amount.
The following table provides operating financial information for
the Company’s four reportable segments:
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
(In
thousands) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Industrial & Distribution: |
|
|
|
|
|
|
|
|
Revenue from tenants |
|
$ |
62,223 |
|
$ |
52,586 |
|
$ |
220,102 |
|
$ |
211,533 |
Property operating expense |
|
|
5,407 |
|
|
3,934 |
|
|
15,457 |
|
|
13,682 |
Segment income |
|
$ |
56,816 |
|
$ |
48,652 |
|
$ |
204,645 |
|
$ |
197,851 |
|
|
|
|
|
|
|
|
|
Multi-Tenant
Retail: |
|
|
|
|
|
|
|
|
Revenue from tenants |
|
$ |
66,412 |
|
$ |
— |
|
$ |
79,799 |
|
$ |
— |
Property operating expense |
|
|
22,494 |
|
|
— |
|
|
26,951 |
|
|
— |
Segment income |
|
$ |
43,918 |
|
$ |
— |
|
$ |
52,848 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
Single-Tenant
Retail: |
|
|
|
|
|
|
|
|
Revenue from tenants |
|
$ |
40,140 |
|
$ |
3,002 |
|
$ |
60,611 |
|
$ |
12,401 |
Property operating expense |
|
|
4,217 |
|
|
174 |
|
|
5,270 |
|
|
762 |
Segment income |
|
$ |
35,923 |
|
$ |
2,828 |
|
$ |
55,341 |
|
$ |
11,639 |
|
|
|
|
|
|
|
|
|
Office: |
|
|
|
|
|
|
|
|
Revenue from tenants |
|
$ |
37,951 |
|
$ |
38,360 |
|
$ |
154,558 |
|
$ |
154,923 |
Property operating expense |
|
|
4,919 |
|
|
5,746 |
|
|
20,161 |
|
|
18,433 |
Segment income |
|
$ |
33,032 |
|
$ |
32,614 |
|
$ |
134,397 |
|
$ |
136,490 |
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”), Net Operating Income (“NOI”) and
Cash Net Operating Income (“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 exclude the
proportionate share of the non-controlling interest to arrive at
FFO, Core FFO, AFFO and NOI attributable to stockholders, 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 exclude the proportionate share of the
non-controlling interest to arrive at FFO, Core FFO, AFFO and NOI
attributable to stockholders, as applicable. 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 merger, transaction and
other costs, settlement costs related to our Blackwells/Related
Parties litigation, as well as certain other costs that are
considered to be non-core, such as debt extinguishment costs. 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 or items, including items that were paid in cash
that are not a fundamental attribute of our business plan or were
one time or non-recurring items. These items include, for example,
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 exclude revenue attributable to the
reimbursement by third parties of financing costs that we
originally incurred because these revenues are not, in our view,
related to 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.
In calculating AFFO, we also exclude certain
expenses which under GAAP are treated as operating expenses in
determining operating net income. All paid and accrued acquisition,
transaction and other costs (including prepayment penalties for
debt extinguishments and merger related expenses) and certain other
expenses, including expenses incurred for our 2023 proxy contest
and related Blackwells/Related Parties litigation, expenses related
to our European tax restructuring and transition costs related to
the Merger and Internalization, negatively impact our operating
performance during the period in which expenses are incurred or
properties are acquired and will also have negative effects on
returns to investors, but are not reflective of our 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, among other
things, assess our performance without the impact of transactions
or other items that are not related to our portfolio of properties.
AFFO presented by us may not be comparable to AFFO reported by
other REITs that define AFFO differently. 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) calculated in accordance with GAAP and 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. We also exclude revenue
attributable to the reimbursement by third parties of financing
costs that we originally incurred because these revenues are not,
in our view, related to operating performance. All paid and accrued
acquisition, transaction and other costs (including prepayment
penalties for debt extinguishments) and certain other expenses,
including general and administrative expenses incurred for the 2023
proxy contest and related Blackwells/Related Parties litigation,
expenses related to our European tax restructuring and transition
costs related to the Merger and Internalization, negatively impact
our operating performance during the period in which expenses are
incurred or properties are acquired and will also have negative
effects on returns to investors, but are not reflective of on-going
performance. Due to the increase in general and administrative
expenses as a result of the 2023 proxy contest and related
litigation as a portion of our total general and administrative
expenses in the first quarter of 2023, we began including this
adjustment to arrive at Adjusted EBITDA in order to better reflect
our operating performance. 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.
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 rent 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 calculate and
present Cash NOI.
Cash Paid for Interest is calculated based on
the interest expense less non-cash portion of interest expense and
amortization of mortgage (discount) premium, net. Management
believes that Cash Paid for Interest provides useful information to
investors to assess our overall solvency and financial flexibility.
Cash Paid for Interest should not be considered as an alternative
to interest expense as determined in accordance with GAAP or any
other GAAP financial measures and should only be considered
together with and as a supplement to our financial information
prepared in accordance with GAAP.
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