Jordyn Schoenfeld; Associate; Global Net Lease Inc
Michael Weil; Chief Executive Officer & President; Global Net Lease Inc
Christopher Masterson; Chief Financial Officer, Treasurer, Secretary; Global Net Lease Inc
Opel Rana; Analyst; KeyBanc Capital Markets
Eric Borden; Analyst; BMO Capital Markets
Mitch Germain; Analyst; JMP Securities
Operator
Greetings, and welcome to the Global Net Lease fourth-quarter and full-year 2024 earnings call.
(Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the call over to Jordyn Schoenfeld, Associate at Global Net Lease. Please go ahead.
Jordyn Schoenfeld
Thank you. Good morning, everyone, and thank you for joining us for GNL's Fourth Quarter and Full Year 2024 Earnings Call. Joining me today on the call is Michael Weil, GNL's Chief Executive Officer; and Chris Masterson, GNL's Chief Financial Officer.
The following information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please review the forward-looking and cautionary statement section at the end of our fourth quarter 2024 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, 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 certain 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 AFFO and adjusted EBITDA, and reconciliations of these measures to our results as reported in accordance with GAAP are detailed in our earnings release and in our annual report on Form 10-K for the year ended December 31, 2024, which was filed on February 27, 2025.
I'll now turn the call over to our Chief Executive Officer, Michael Weil. Mike?
Michael Weil
Thanks, Jordyn. Good morning and thank you all for joining us today. 2024 was a remarkable year for GNL, marked by the achievement of all of the financial objectives we outlined at the time of the merger and internalization and at the start of the year.
One of the most exciting highlights was meeting and exceeding full year guidance, completing $835 million in dispositions during the year at a cash cap rate of 7.1% on occupied assets with a weighted average remaining lease term of 4.9 years. This total surpassed the high end of our revised guidance range of $650 million to $800 million and exceeded the original high-end projection by $235 million.
The proceeds from these transactions were used to reduce outstanding net debt by $734 million, lowering our net debt to adjusted EBITDA ratio from 8.4 times at the start of the year to 7.6 times at the end of the year. We believe these strategic sales enhance the overall quality of our portfolio and position GNL for long-term growth, reinforcing our commitment to delivering value to our shareholders.
Despite the significant volume of dispositions, including selling $63 million in annual base rent, our 2024 AFFO per share totaled $1.32, remaining within our original guidance range of $1.30 to $1.40, highlighting the strength of our strategy and disciplined execution. An additional highlight was delivering $85 million in annual recurring savings as of third quarter of 2024 as a result of the merger and internalization with the necessity retail REIT, exceeding our initial target of $75 million of cost synergies.
This accomplishment underscores the strength of our integration efforts and our ability to unlock value from strategic initiatives. Another area of focus in 2024 was increasing portfolio occupancy, particularly through new leasing activity and attractive renewals. We raised occupancy rates from 93% as of the end of the first quarter of 2024 to 97% as of the end of the fourth quarter 2024, reflecting the strength and efficiency of our in-house asset management team.
This achievement not only enhances our revenue base, but also solidifies the resilience of our portfolio, positioning us for sustained growth as we continue to meet tenant demand. On the leasing front, we achieved positive leasing spreads encompassing nearly 1.2 million square feet with attractive renewal spreads that were 6.8% higher than the expiring rents.
New leases that were completed in the fourth quarter of 2024 have a weighted average lease term of 9.7 years, while renewals that were completed during this period have a weighted average lease term of 6.5 years. Notably, the single-tenant segment completed 14 new leases and renewals, highlighted by a 6.5% renewal spread, and the multi-tenant segment completed 58 new leases and renewals, resulting in a 7.1% renewal spread.
Last, our 2024 financial strategy emphasizes derisking our balance sheet by proactively managing near-term debt maturities. We successfully paid off all of the debt that was scheduled to mature in 2024 through dispositions or refinancing on to our revolving credit facility. We have no debt maturities until August 2025 and have proactively reduced our 2025 debt maturity balance from the $715 million at original issuance to $465 million.
We believe we'll have several strategic options to address that balance, including refinancing through the revolving credit facility and ABS transaction or an unsecured bond offering. We're excited about our recently announced transaction that we believe is in the best long-term interest of GNL shareholders and continues the momentum we achieved in 2024.
We have entered into a binding agreement to sell 100 noncore multi-tenant properties to RCG Ventures Holdings for approximately $1.8 billion at a cash cap rate of 8.4%. This cap rate is based on the trailing 12 months of cash NOI as of Q3 '24. The RCG transaction would represent the most significant step in our strategic disposition initiative and is expected to deliver a wide range of benefits from a clear focus on long-term value.
We believe the transaction is a disciplined and prudent approach to accelerating our debt reduction efforts and would result in a substantial decrease in net debt to adjusted EBITDA, which post-transaction, we expect to be in the range of 6.5 times to 7.1 times. This meaningful improvement would enhance our ability to secure an investment-grade credit rating, which we expect will lower our cost of capital and provide financial flexibility to fuel long-term growth.
The buyer agreed to assume the two multi-tenant mortgage loans, and we expect to use the net proceeds to repay most of the outstanding balance on our revolving credit facility, leaving it largely undrawn and enhancing financial flexibility. The resulting lower leverage is expected to increase the potential multiple expansion, close the valuation gap with our net lease peers and generate additional interest from institutional investors.
The RCG transaction would transform GNL into a pure-play, single-tenant net lease company without the operational complexities, G&A expenses and capital expenditures associated with multi-tenant retail properties. We expect that it will enhance key portfolio and financial metrics by reducing G&A by $6.5 million annually, boosting occupancy to 98% and extending WALT to 6.4 years. Please refer to our investor presentation we recently filed for additional information.
As mentioned, we're taking this important step because we believe its long-term benefits far exceeds some of the near-term effects. Given that the transaction would impact earnings, the Board plans to reduce our quarterly dividend per share of common stock from $0.275 to $0.19 per share, beginning with the dividend expected to be declared in April of 2025. We believe the dividend reset aligns well with our long-term strategy of reducing leverage and increasing liquidity, as it will generate $78 million in incremental cash flow.
We're also pleased to announce that in addition to the RCG transaction, the Board has also approved a share repurchase program authorizing the company to opportunistically repurchase up to $300 million of its outstanding common stock. As I mentioned, this transaction has enabled us to deleverage at an accelerated pace, creating the flexibility to consider share repurchases, an option that while possible without a sale, would be impractical given our previous leverage levels.
Our Board of Directors believes the stock buyback presents a more compelling and accretive opportunity for GNL compared to the real estate assets currently available in the market. In addition to the RCG transaction, during 2025, we expect to sell several noncore properties in our single-tenant portfolio.
Through February 25, 2025, this pipeline, which includes transactions that are closed under PSA and under LOI, totals $2.1 billion at a cash cap rate of 8.5% on occupied assets and a weighted average remaining lease term of 5.6 years. Including both 2024 dispositions and the 2025 pipeline, we anticipate completing nearly $3 billion in dispositions by the end of year while still retaining appropriate scale to operate efficiently with approximately $6 billion of real estate assets.
Turning to our portfolio. At the end of the fourth quarter, we owned over 1,100 properties spanning over 60 million rentable square feet and a weighted average remaining lease term of 6.2 years. Our continued ability to limit exposure to high-risk geography, asset types, tenants and industries is a testament to our portfolio's impressive diversification and credit underwriting.
No single tenant accounts for more than 3.5% of total straight-line rent, and our top 10 tenants collectively contribute only 21% of total straight-line rent. We carefully monitor all tenants in our portfolio and their business operations on a regular basis.
Geographically, 80% of our straight-line rent is earned in North America, and 20% in Europe, which we expect to shift to 72% and 28%, respectively, upon completing the multi-tenant portfolio sale. The portfolio features a stable tenant base and a high quality of earnings, with an industry-leading 61% of tenants receiving an investment-grade or implied investment-grade rating.
The portfolio features an average annual contractual rental increase of 1.3%, which excludes the impact of 14.8% of the portfolio with CPI-linked leases that have historically experienced significantly higher rental increases. I encourage everyone to look at the details of each segment of our portfolio, which can be found in our Q4 2024 investor presentation on our website.
We're pleased to have delivered on all the financial objectives we set for 2024, reflecting a year of strong performance and disciplined execution. Looking ahead, we're excited about GNL's future and the opportunities that lie ahead. In particular, the sale of our multi-tenant portfolio would represent a pivotal step forward unlocking key levers to drive long-term growth while enabling us to sharpen our focus as a pure-play net lease company.
I'll turn the call over to Chris to walk through the financial results and balance sheet matters in more detail. Chris?
Christopher Masterson
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. For the fourth quarter 2024, we recorded revenue of $199.1 million and a net loss attributable to common stockholders of $17.5 million compared to $206.7 million and $59.5 million, respectively, in the fourth quarter of 2023.
AFFO was $78.3 million or $0.34 per share in the fourth quarter of 2024 compared to $71.7 million or $0.31 per share in the fourth quarter of 2023. AFFO in the fourth quarter of 2024 includes funds collected from Children of America, a tenant that had not paid rent for the past two years, leading to a switch to cash basis accounting in 2023.
Through persistent negotiations and the unwavering dedication of our team, we successfully collected $4.5 million in past due rent, positively impacting AFFO and adjusted EBITDA in the quarter. Shortly after the start of the new year, we completed the disposition of Children of America office asset as part of our strategy to reduce exposure to office properties.
Looking at our balance sheet. The gross outstanding debt balance was $4.7 billion at the end of the fourth quarter of 2024, down by $256.4 million from the end of the third quarter. Our debt is comprised of $1 billion in senior notes, $1.4 billion on the multicurrency revolving credit facility and $2.3 billion of outstanding gross mortgage debt. As of the end of the fourth quarter of 2024, 91% of our debt is fixed, up from 80% as of December 31, 2023, reflecting debt tied to fixed rates or debt that is swapped to fixed rates.
Our weighted average interest rate stood at 4.8%, and our interest coverage ratio was 2.5 times. At the end of the fourth quarter 2024, our net debt to adjusted EBITDA ratio was 7.6 times based on net debt of $4.6 billion. As a reminder, our net debt to adjusted EBITDA was 8.4 times at the start of 2024.
As of December 31, 2024, we have liquidity of approximately $492.2 million and $460 million of capacity on our revolving credit facility. Additionally, we had approximately 231.1 million shares of common stock outstanding and approximately 230.6 million shares outstanding on a weighted average basis for the fourth quarter of 2024.
We are pleased to introduce initial 2025 guidance, which is contingent on the sale of our multi-tenant portfolio. We project an AFFO per share guidance range of $0.90 to $0.96 and a net debt to adjusted EBITDA range of 6.5 times to 7.1 times. Additionally, as Mike mentioned, we expect the Board will reduce our quarterly dividend per share of common stock from $0.275 per share to $0.19, beginning with the dividend expected to be declared in April 2025.
I'll now turn the call back to Mike for some closing remarks.
Michael Weil
Thanks, Chris. Fiscal year 2024 was a highly productive period for GNL, as we successfully executed our key financial objectives we laid out at the start of the year. We exceeded the high end of our disposition target with $835 million in closed sales, further reduced net debt by $734 million and surpassed our $75 million cost synergy goal by achieving $85 million, $10 million above our original estimate.
Demonstrating the resilience and quality of our portfolio, we maintained strong leasing momentum throughout the year, increasing occupancy from 93% as of the end of the first quarter of 2024 to 97% by year-end, complemented by a positive renewal spread of 6.8% across the portfolio.
Lastly, we proactively manage near-term debt maturities, successfully reducing the 2025 maturity balance by $250 million since the original issuance, strengthening our flexibility with multiple refinancing options. The sale of the multi-tenant portfolio would mark a transformative step for GNL, allowing us to accelerate our deleveraging plan and clear a path for sustained growth.
By reducing leverage and strengthening our financial foundation, we believe will position ourselves to potentially secure an investment-grade credit rating, a milestone that would significantly lower our cost of capital and borrowing costs while enhancing financial flexibility. Beyond the financial benefits, this proposed transaction would simplify and refine our portfolio, aligning it with our strategic vision of becoming a pure-play net lease owner and operator.
The transaction is not merely a tactical move, but a strategic one, and we expect would reset the company to thrive over the long term. It would strengthen portfolio metrics, bolster our balance sheet and increased GNL's overall financial stability and flexibility.
We view this transaction as a deliberate forward-looking decision that prioritizes what is best for GNL over the long term. This comprehensive perspective is integral to our strategy and underscores our commitment to delivering sustainable growth and value for shareholders.
We're available to answer any questions you may have after the call. Operator, please open the line for questions.
Operator
(Operator instructions)
Opel Rana, KeyBank Capital Markets.
Opel Rana
Right, thank you for taking my question. Good morning. Congrats on the deal. I'm just curious on the pricing of the portfolio. Is this where you expected to shake out? Or any other color, it would be helpful.
Thank you.
Christopher Masterson
Sure. I think that the way we thought about it was this is 100 property portfolio. There's a great portfolio of shopping centers. We engaged with Bank of America and really looked for the best buyer, and RCG brought to the table a lot of different things that price is one important factor, but not the only important factor. We felt that their ability to execute, the way they approached the asset underwriting and what it accomplished for us remember, we really had talked about a multiyear deleveraging strategy.
And I'm not saying we're finished deleveraging. But I am saying this accelerates the deleveraging in a way that has so many benefits, not only from the G&A side of things, but just importantly, this singular focus on single-tenant assets. So we feel that it's a good price. There aren't a lot of, we'll call it, a $1.8 billion transaction in the market to evaluate against. So we were very satisfied. We appreciated their timing, their speed, their ability to underwrite, and this is going to be a great transaction long term for our shareholders. So we made the decision to go ahead.
Opel Rana
Okay. Great. That was helpful. And then just on RCG, you talked about a little bit about them already, but you have no reservations on them potentially making it to the finish line and closing the deal, correct?
Christopher Masterson
No, we don't. We've known RCG for a number of years in a much smaller relationship than this. But we certainly know them as professionals very capable of performing. And frankly, they may be a little bit on the unknown side of things, but very sophisticated backing. And we have no reservations, coupled with the fact that we have a $25 million nonrefundable deposit. And I know how motivated they are, and we're making great progress for the first closing.
Opel Rana
Okay. Great. And then just last one for me would be, you rightsized the dividend again, which certainly makes sense, but you are adding further dispositions, especially the office portfolio. Should we assume there could be more rightsizing the dividend again in the future once the office portfolio is addressed?
Christopher Masterson
Yes. We never want to speculate far into the future, but I have to say, we took a very fulsome approach to how we were going to issue guidance for '25. We looked at everything. We looked at where we were. We looked at the pipeline, and we looked at our goals for further leverage reduction. And we feel that this is an appropriate and prudent reduction in dividend, one that gives us the safety of a strong payout ratio. So we're very comfortable and confident where we are today.
And I just would add on to that without kind of over answering. If you can all just think about between 2024 and when we close this deal with RCG, the company will have sold about $3 billion of assets in that period. And that is over $200 million of NOI. So I think it's reasonable to understand. Nobody likes a dividend cut, and we certainly didn't discuss it and approach it with the Board in any kind of casual way and the Board certainly didn't approach it casually.
But this is an appropriate reset of the dividend based on the fact that we're now a single focused, single-tenant portfolio where we will be upon closing. That's about $6 billion of assets, down from roughly $9 billion. So, I do think that the logic of the reduction is there. And frankly, something that a number of analysts and investors have asked us about. And I'll just end it by saying I do think it's appropriate, and I think we're well positioned for go forward.
Opel Rana
Okay. Great. That was helpful. That's it for me. Thank you.
Christopher Masterson
And Opel, I'm also going to just ask you to remember the fact that this is about $80 million of recurring free cash flow, which is just again, another important and strong thing for the company.
Operator
(Operator instructions)
Eric Borden, BMO Capital Markets.
Eric Borden
Hey, good morning. I just had a question on the portfolio sale. Was there a write-down associated with that sale? Just correct me if I'm wrong, I'm, I remember it was valued at around $2.7 billion versus the $1.7 billion of proceeds expected today. So just curious if you could provide any color there on what the delta is? I know there was some asset sales last year that may contribute to it, but if there's anything else that you could provide, that would be helpful.
Michael Weil
Chris, do you want to take that?
Christopher Masterson
Mike, would you like, yes. I'd like to take it. So just first, the $2.7 billion, that goes back to gross asset values that were previously on the RTL books as opposed to what came over on GNL and where they stood on our books. And at this point, we did not take a write-down. We actually do expect when the transaction fully closes, that we'll be in a position where we have a realized gain.
Eric Borden
Okay. That's helpful. And then on the annual CapEx side, the reduction from 44 to 10 is definitely helpful in terms to the bottom line. But would have thought it would have been just a little bit lower given your net lease business model. So just anything incremental there would be helpful.
Michael Weil
Yes. Like just about every net lease REIT, there's a mix of triple net and double net. And as a proactive landlord, there's just certain works that need to be done that we budget for.
Eric Borden
Okay. And then how should we think about the use of proceeds in terms of a pecking order? What is most what is your number one priority today in terms of a potential share repurchase, continuing to delever, and acquisitions?
Michael Weil
I will, without hesitation, tell you, acquisitions is number 3, least important. I can't prioritize definitively, leverage reduction with stock buyback because stock buyback, the Board approved a $300 million stock buyback and we will use it opportunistically and strategically. But in the overall scheme of things, of course, the majority of the proceeds will be used for leverage reduction.
Chris and Ori and I are very excited about seeing our balance on our credit facility essentially taken to zero. The RCG transaction, they're assuming a little over $400 million of CMBS. So it's just going to change our leverage profile of the company. And just as important, it's also going to change our liquidity profile. So I would look very much forward to the time that acquisitions are interesting to us. But frankly, I'm a little underwhelmed with what's in the market from an acquisition standpoint.
I see cap rates and cost of debt. And I don't see the same opportunities that I would have said existed probably five years ago, three years ago. So this is very interesting and fortunate timing for us because we're able to reshape the company at a time where being out of the acquisition market for the near term is actually a benefit. And we're really going to take advantage of that and be positioned when markets present opportunities that are worth acquiring and seeing the accretion, we'll be in a good position to participate in that. But I don't think that's near term.
Eric Borden
Thank you very much. I will leave it there.
Operator
Mitch Germain, Citizens JMP.
Mitch Germain
Good morning. Thank you. Michael. Michael, please don't say the word acquisitions again. I'm just kidding. Can you did so much, right, $3 billion-Ish, give or take. And while you probably want to at least rest a little, you have to get to ask the question, what's next, right? So obviously, you've mentioned an office exit is certainly something that you are potentially going to pursue. Are there any barriers because of you've got some debt outside the US Are there any barriers or covenants that prevent you from doing something similar transaction in the office sector?
Michael Weil
Well, first of all, we've known each other a long time, Mitch, so there's no time for rest. We're ready to go. We work very hard to get the RCG deal to a point where we felt that it should be announced and had the deposit nonrefundable. And then we turned right obviously, to today.
I want to point out that the RCG transaction is closing in three tranches. The first at the end of the first quarter, the end of March, the next two towards the end of June. So we're going to be very busy making sure that everything is moving along, loan assumptions, transfers, et cetera.
I would like to point out, post-closing of the RCG transaction, GNL, 75% of our straight-line rent is going to come from single-tenant net lease retail, industrial and distribution. Prior, that was only 55%. So we will be predominantly retail, industrial and distribution, which I think is a very valuable mix. We will and have already spoken about opportunistic dispositions that we'll continue to look at.
We have certain office properties that our long-term leases with great tenants that we feel very good about. And we have others that we feel might be categorized or are categorized as noncore that we will look to continue doing what I think we've shown the market we do really well, which is strategic disposition of noncore assets.
So we've put out full year guidance for 2025. And we've taken into account some additional non-core asset dispositions. So I think 2025 is pretty clearly designated. We're looking forward to the execution, again, something that I think we've shown in the market, we can do well. We do execute just like we exceeded our $75 million of deal synergies.
We achieved $85 million. We're going to just the pins are set up; we're going to knock them down. We're going to enjoy the deleveraging, getting in that sub 7 times this quickly. You and I have talked about it. If we hadn't announced the RCG deal, I think we were probably 1.5 to 2 years to achieve what we announced for 2025 guidance. So great team. We worked really hard, but there's still a lot that we're excited to see '25.
Mitch Germain
So is there any other sales over the $2.1 billion, give or take, that you have on the slide deck, in your investor presentation, is there anything else assumed on top of that? Or is that what's in your guidance today?
Michael Weil
If I have a slide in the deck that I want to reference that talks about our pipeline. And it's successfully executing disposition plan is the slide, Mitch. We can talk about it later today.
Mitch Germain
Yes. No, it's $2 billion and almost $2.1 billion. It's got stuff that's under PSA, LOI. I guess and I recognize some of it's closed also, I recognize all that is what right now is under contemplation. I'm curious, does guidance assume anything on top of that, right? Because I would assume the bulk of this will be done by the end of the second quarter. So we still have six months, after that, less than a year. So should we be thinking about other dispositions on top of the what's referenced on the slide right now?
Michael Weil
I think that you should rely on the guidance that we put out for 2025. The AFFO per share and the net debt to EBITDA takes into account what we're looking at for full year '25 as far as additional opportunistic dispositions.
Mitch Germain
Okay. That's helpful. Can you just talk a little bit about the bidding process? I mean, I recognize I think you mentioned Bank of America helping out, some relationship with RCG. But I mean, was this how many parties? I know that you may want to be careful what you share, but I'm just curious, more or less kind of what, how the process played out.
Michael Weil
So I am going to be careful because I'll only talk to what we've disclosed publicly. But we did engage Bank of America to run the process. It was a multiparty process. There were several bidders that were full portfolio bidders. There were a number of bidders that were looking at breaking up the portfolio.
But when we took into account RCG's interest in the full portfolio, their timing and ability to execute, there were a lot of factors that went into the evaluation. They were clearly the best buyer for this portfolio, and that's how the decisioning came to be.
Mitch Germain
Great. Last one for me. Just circling back to that $4.5 million. So that's just a one-timer, right, Chris? We should remove that from the run rate, and it's sitting in operating rents right now?
Christopher Masterson
Correct.
Operator
There are no further questions at this time. I'd like to hand the floor back over to management for any closing remarks.
Michael Weil
Great. Well, thanks, everybody. As always, we appreciate you giving us some time to discuss what we think is really important news for Global Net Lease. We continue to be available. We look forward to talking to anybody that has questions. And we will continue to update you on the progress and success. And this is a great way for us to finish up 2024 and kick off 2025. So thanks again.
Operator
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
