Global Net Lease, Inc. (GNL) Q2 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to the Global Net Lease Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Jordyn Schoenfeld, Vice President at Global Net Lease. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us for GNL's Second Quarter 2026 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 second quarter 2026 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 supplemental materials. I'll now turn the call over to our Chief Executive Officer, Michael Weil. Mike?

Thanks, Jordyn. Good morning, and thank you all for joining us today. Over the past several years, we've been clear about the strategy we're executing, and, more importantly, our commitment to delivering on it. Our second quarter results reflect another period of disciplined execution with meaningful progress across the initiatives to continue to strengthen GNL and position the company for its next stage of evolution. Perhaps the best example of that progress is the proposed acquisition of Modiv. Modiv shareholder voting is currently underway, and we anticipate closing the Modiv transaction in mid-August 2026, shortly after their special meeting and shareholder vote on August 10, 2026. We believe the strategic rationale for the transaction remains as compelling today as when it was first announced. Modiv's high-quality industrial portfolio features a weighted average remaining lease term of 15 years and benefits from 2.4% annual contractual rent escalations, supported by a diversified credit-worthy tenant base that aligns well with GNL's investment strategy. Upon closing, the transaction is expected to extend our portfolio weighted average lease term to 6.6 years and increase our industrial exposure to account for approximately 50% of total straight-line rent, further improving the overall quality and resilience of our real estate portfolio. We also expect the transaction to be approximately 4% accretive to AFFO per share, while remaining leverage-neutral, allowing us to improve earnings, strengthen the durability of our cash flows, and maintain the strength and flexibility of our balance sheet. While the proposed acquisition of Modiv has been an important focus, it has been by no means our only priority. During the second quarter of 2026, our disciplined capital recycling strategy gained further momentum as we selectively monetized non-core assets, demonstrating the value of our office assets while continuing to reduce office exposure and strengthen the overall composition of our portfolio. Through July 31, 2026, we have closed and pending disposition pipelines totaling $263 million, including $145 million of credit for closed dispositions at a weighted average cash cap rate of 7.6% on occupied assets, with approximately 78% of the total disposition volume consisting of office assets. One transaction illustrates the thoughtful approach we're taking to reduce our office exposure. As previously disclosed, we remain under contract to sell our 133,000-square-foot KPN office property in the Netherlands for approximately $18 million. The property is under a signed purchase and, sale agreement with closing scheduled to coincide with the lease expiration in December of 2026. We've received a non-refundable deposit from the proposed buyer and expect to continue collecting the full contractual rental income until closing. We also have additional office assets under advanced negotiations to sell with transactions following a similar strategy and closing expected to occur upon lease expirations, allowing us to realize the remaining contractual rental cash flows while avoiding the leasing cost, capital expenditures, and occupancy risk associated with taking back vacant office assets. We look forward to providing updates as those transactions advance. In addition to these transactions, we've completed the sale of our 33,000-square-foot office property leased to the U.S. General Services Administration for $13 million, and our 369,000-square-foot office property leased to GE Aviation for $48 million, both at a 7.2% cash cap rate following 20-year and 10-year lease extensions, respectively. Collectively, these transactions reflect our ability to proactively monetize office assets at attractive valuations while continuing to reduce our office exposure and improve the overall quality of our portfolio. We remain encouraged by the level of demand we're seeing and believe we're well positioned to execute on our remaining planned office dispositions. Upon completion of these planned dispositions, we expect office to represent approximately 21% of straight-line rent, marking another meaningful step in repositioning the portfolio. Equally important, these dispositions support our long-term objective of continuing to reduce leverage while creating additional capacity to reinvest in high-quality single-tenant industrial and retail assets. While reducing our office exposure remains a key priority, our capital recycling strategy extends beyond that. We plan to continue to opportunistically monetize non-core assets where pricing is attractive and thoughtfully allocate that capital between reducing leverage and investing in opportunities that further enhance the quality of our portfolio and the long-term durability of our earnings. Consistent with that approach, we completed the acquisition of an approximately 100,000-square-foot single-tenant industrial property in Mississippi, leased to Federal Express for approximately $14 million and an 8.2% going-in cash cap rate. The property is leased through 2031 and we're already engaged in discussions with FedEx regarding a long-term lease extension. The attractive spread between the cap rates we're achieving on dispositions and those available on acquisitions, such as FedEx, highlights the value creation potential of our capital recycling strategy. Going forward, we intend to remain focused on selectively investing in high-quality single-tenant industrial and retail assets that further strengthen our portfolio. We also believe the investment backdrop for publicly traded REITs continues to improve. Recent research and commentary from firms including Morgan Stanley, UBS, JPMorgan, BlackRock, PIMCO, and Heitman point to a common set of themes: improving capital markets liquidity, recovering transaction activity, attractive relative valuations, and growing opportunities for well-capitalized REITs with disciplined capital allocation. We believe the progress we've made strengthening our portfolio, improving our credit profile, establishing an investment-grade balance sheet, and actively recycling capital into higher-quality assets positions GNL well to take advantage of this environment. In addition to our capital recycling strategy, we continue to evaluate the most effective uses of our disposition proceeds, including opportunistic share repurchases. Since the beginning of our share repurchase program through July 31, 2026, we've repurchased 20.9 million shares at a weighted average price of $8.11, totaling $169.7 million. While the pending Modiv transaction has limited our ability to repurchase shares this quarter, our view on the value of opportunistic buybacks has not changed and we remain disciplined in balancing share repurchases with our priorities of reducing leverage and reinvesting in higher-quality assets. Turning to our portfolio, at the end of the second quarter of 2026, we own 798 properties totaling 40 million rentable square feet. Our portfolio occupancy remains steady at 97% with a weighted average remaining lease term of 5.7 years. Specifically, our office occupancy increased to 99% from 95% in the second quarter of '25, primarily driven by the disposition of a $45 million vacant office property during the first quarter of 2026, which also eliminated over $1 million of annualized negative NOI drag. Our office portfolio continues to perform well, supported by 100% rent collection and the highest proportion of investment-grade tenants within our portfolio. GNL's portfolio features a stable tenant base and high quality of earnings, with an industry-leading 63% of tenants carrying an investment-grade or implied investment-grade rating, up from 60% in the second quarter of 2025. Our average annual contractual rental increase is 1.4%, excluding the impact of 20.3% of the portfolio with CPI-linked leases that have historically experienced significantly higher rental increases. On the leasing front, we once again delivered strong leasing results across the portfolio, reflecting the quality of our asset management capabilities and tenant relationships. We achieved renewal spreads of approximately 5.6% above expiring rents on more than 357,000 square feet, with a weighted average lease term of 8.4 years. Highlights from this quarter included nearly 76,000 square feet of renewals with Dollar General at a 7.4% renewal spread, over 147,000 square feet with FedEx Freight at a 4.6% renewal spread, and over 100,000 square feet with FedEx at a 9.1% renewal spread. These results reflect our disciplined, proactive approach to lease management. By engaging with tenants well in advance of lease expirations, we continue to drive strong retention, preserve high occupancy levels, and capture rental growth, all while maintaining our long-term focus on portfolio stability and cash flow durability. Our continued efforts to limit exposure to high-risk geographies, asset types, tenants, and industries reflect our intentional diversification strategy and disciplined credit underwriting. No single tenant accounts for more than 6% of total straight-line rent, and our top ten tenants collectively contribute only 29% of total straight-line rent, with 80% being investment grade. 48% of our portfolio straight-line rent is derived from publicly traded tenants or is backed by a publicly traded guarantor, providing greater transparency into the financial profile of a substantial portion of our portfolio. We carefully monitor all tenants in our portfolio and their business operations on a regular basis. I encourage everyone to review the details of each segment of our portfolio in our second quarter 2026 investor presentation on our website. Before concluding, I'd like to briefly address my separation from Bellevue Capital Partnership, which was publicly disclosed last month. As part of that separation, I'll receive 2.2 million GNL shares from Bellevue, increasing my ownership to approximately 2.9 million shares. This significant ownership position underscores my confidence in GNL's future, the quality of the platform we've built, and the strategy we're executing. I remain fully committed to building on that momentum and creating long-term value for our shareholders. I'll turn the call over to Chris to walk through the financial results and balance sheet matters in more detail. Chris?

Thanks, Mike. Please note that, as always, a reconciliation of GAAP net income to non-GAAP measures can be found in our earnings release, which is posted on our website. For the second quarter of 2026, we recorded revenue of $112.5 million and a net loss attributable to common stockholders of $7.5 million. AFFO was $45.7 million, or $0.22 per share. It increased from $0.21 in the first quarter of 2026. Looking at our balance sheet, the gross outstanding debt balance was $2.5 billion at the end of the second quarter of 2026, a reduction of $621 million from the end of the second quarter of 2025. Our debt is comprised of $1 billion in senior notes, $473 million on the multi-currency revolving credit facility, and $1 billion of outstanding gross mortgage debt. As of the end of the second quarter of 2026, 92% of our debt is tied to fixed rates or debt that is swapped to fixed rates. Our weighted average interest rate stood at 4.1%, down from 4.3% in the second quarter of 2025, and our interest coverage ratio was 3.2 times. At the end of the second quarter of 2026, our net debt to adjusted EBITDA ratio improved to 6.6x based on net debt of $2.3 billion compared to 7.2x at the end of the first quarter of 2026. We also continue to realize the benefits of our streamlined operating platform, with recurring capital expenditures declining significantly to $3.4 million in the first half of 2026 from $19.6 million in the first half of 2025. This meaningful reduction in capital requirements further strengthens our cash flow profile and financial flexibility. As of June 30, 2026, we have liquidity of approximately $919 million and $1.3 billion capacity on our revolving credit facility, compared to $790 million and $1.2 billion, respectively, as of the end of the second quarter of 2025. We had approximately 211 million shares of common stock outstanding and approximately 211 million shares outstanding on a weighted average basis for the second quarter of 2026. Since launching our share repurchase program in 2025 and through July 31, 2026, we have repurchased 20.9 million shares for a total of $169.7 million. This includes approximately 1.2 million shares repurchased in the second quarter of 2026 for $11.1 million at a weighted average price of $9.10. Since inception, total repurchases under this program have been executed at a weighted average price of $8.11, a meaningful discount to the current share price. We believe this program has been a highly accretive use of capital and has generated tangible value for our shareholders. Turning to our outlook for 2026, we are raising our full-year AFFO per share guidance from $0.80 to $0.84 to a new range of $0.82 to $0.85, and increasing our gross transaction volume guidance from $250 million to $350 million to a new range of $700 million to $800 million. We also reaffirm our stated net debt to adjusted EBITDA range of 6.5x to 6.9x. Our updated guidance reflects the anticipated acquisition of Modiv based on our high degree of confidence that the transaction will close in mid-August 2026. It is important to note that this revised guidance includes only approximately one and a half quarters of expected contribution from the accretive Modiv acquisition during 2026. Our reaffirmed leverage guidance reflects the transaction's expected leverage-neutral structure, which remains fully consistent with our disciplined balance sheet strategy. I'll now turn the call back to Mike for some closing remarks.

Thanks, Chris. As we approach the third anniversary of our internalization, it's clear how much GNL has evolved. Our objective has been to build a stronger, more resilient company capable of delivering reliable, durable returns for shareholders. And I believe the progress we've made speaks for itself. Over that time, we've simplified our portfolio, materially reduced leverage, strengthened liquidity, improved our credit profile, and established an investment-grade balance sheet. The expected acquisition of Modiv is a natural extension of that strategy, further strengthening our portfolio and enhancing the durability of our earnings. Today, we're proud to offer shareholders an attractive dividend supported by high-quality earnings from a predominantly investment-grade tenant roster. We believe the repositioning of our portfolio over the past two years has created a meaningfully stronger GNL. As we enter this next chapter, we remain committed to building on that foundation and delivering long-term value for our shareholders. We're available to answer any questions you may have after the call. Operator, please open the line for questions.

Thank you. [Operator Instructions] Our first question comes from the line of Mitch Germain with Citizens JMP.

Congrats on the quarter. I really like the progress you're making in reducing office. I think you said it will be around 20% by year-end. I'm curious, can you continue to sell assets there, or are future sales really going to be more aligned with some of the lease expirations?

It's going to continue to be both, Mitch. We see some great opportunities. A lot of the assets that we have on the longer-term sale structure, where we're going to receive 100% of the rent that is due to us, those assets are typically going to be acquired by developers for redevelopment opportunity. So it makes sense for them and it makes great sense for us. It maximizes our revenue, as you clearly understand. So we have a group like that, that we'll continue to focus on in that same structure. And then we also have some office -- look, we've been hearing for the last couple of years from people like you and others that it would be beneficial to GNL to continue to reduce office exposure. So I don't want to look for the, we'll call it the perfect exit -- we want to look for the most efficient and beneficial exit. And I think moving down to 20% this quickly is clear proof of concept that we're committed to it, that we're going to do it. So you'll see both structures come into play.

Great. Last one for me. What's the long-term plan for some of the non-industrial assets that you're acquiring from Modiv? Could there be some potential sale candidates? And can you -- is there any restrictions on your ability to sell those properties?

There are no restrictions in our ability to sell assets. The industrial portfolio that we're acquiring from Modiv is the majority of their asset pool, so we're very excited to bring that into GNL on a long-term basis. There are a few assets that we feel are opportunistic sale candidates that I don't want to get into too much detail on right now, but like we've done in the past, we are going to continue to sharpen this portfolio so that it is predominantly industrial assets, net lease single-tenant. And the pieces that don't fit the puzzle, although they may be great assets, to us that's just an opportunity, like we did with McLaren to achieve a tremendous disposition price and then have the opportunity to evaluate whether we want to pay down debt, whether we want to redeploy into industrial assets. But it is an opportunity that we will continue to work forward on.

Our next question comes from the line of Upal Rana with KeyBanc Capital Markets.

Congrats on the quarter, guys. Michael, you completed one acquisition subsequent to quarter-end. Maybe could you comment on what you're seeing out there in the transaction market, including pricing, size, quality, industries, maybe how many deals you've gone through or underwritten? Any color would be helpful. I guess I'm trying to understand if the company is interested in doing smaller acquisitions? Or would you be more focused on being patient for larger type deals like a Modiv?

Yes, so I've always believed that one-off acquisitions are an important aspect of building a great portfolio. They are in the market, you have to evaluate them. There are a number of deals that we see that any number of reasons we are not interested in it. We may not like the guarantee structure, we may not like the asking cap rate, we may not like the geographic market, or we may not like the industry. But there are a lot of deals that we see that we do like. We were very active in the second quarter bidding. But we're bidding where we want to own, not necessarily where the seller or the broker wants to see the property transact. And that's okay. We felt that we had a great portfolio of Modiv assets coming into the company in the next, I would say, estimate about a week or so. So we didn't have to chase. We're buying those Modiv assets at about an 8% cap. We bought the FedEx in that same kind of range. So no benefit in chasing price. And what makes a great portfolio, besides the fact that we're 64% investment grade, we really focus on a lot of things other than just starting cap rate. We want to know that we've got a high-quality portfolio with the quality of earnings being top of mind for us. If it's a 15-year lease, we want that tenant in there for 15 years. We want them doing well and being happy to renew. It's one of the things that we're excited about. If you look back over the last couple of years, our renewal spreads have been consistently in the 5% and higher range. Because we've got great tenants, they value the properties, it's where they run their business from, and they don't want to have to relocate, and we certainly don't want them to relocate. So, you know, it all goes into how we look at the day one acquisition. And the most important thing I can tell you is there are a lot of properties out there that are available. We run what we think of as a funnel. You know, if we put 100 properties through the funnel, we may come out after underwriting and due diligence with three to 10 that we want to move forward on. And if we do that on a consistent basis, this portfolio is just going to continue to get stronger and bigger, and you're going to see the weighted average lease term extend. And that's the kind of company that everyone here at GNL is proud to be building.

Great, that was helpful. This kind of goes hand in hand, but just on your transaction guidance, you increase it to $700 to $800 million. When you combine the closed plus dispositions and your acquisitions, that kind of gets you to the midpoint, I think you've identified $64 million is going to be closing in '27. So just maybe you can comment on the transaction guidance and how we should be thinking about that.

Upal, I really think that Modiv was an unexpected opportunity for us in 2026 that we're really excited about. So I think the revised range is really how you should be thinking about it. We're going to continue to grind through some upcoming opportunities. But again, we want to be really selective. We want to be buying at the right price. We're starting to see our cost of capital coming in to a much better place. But we don't want to get ahead of that. And I think one of our themes over the last three years has been discipline of execution, and we're going to continue with that.

[Operator Instructions] Our next question comes from the line of Jay Kornreich with Cantor Fitzgerald.

I wanted to follow up about the asset recycling, with dispositions year to date coming in at that 7.6% cap rate number while the acquisition has been at 8.2%. So I guess, do you anticipate that accretive asset recycling to continue? And then just as you think about how to recycle capital from dispositions, what is your preference in terms of new acquisitions versus reducing leverage or share repurchases at this point?

First part of your question, yes, I think we can continue to operate in that range. We fight very hard for achieving greatest possible sale price and we fight very hard to show that we're a qualified buyer and we negotiate the best possible price. So no sense in buying a lot of things that don't move the needle. So we'll continue with that as an underlying principle moving forward. The second part of your question is one of my favorite questions because it really comes back to strategy of how are we going to operate this company. Obviously, we continue to believe that one of the most important things we can do is execute on the continued deleveraging of the company. So that will be top of mind as we move forward. We also want to be in a position to grow earnings and to grow earnings and extend WALT, we need that disciplined underwriting on the acquisition front. And Modiv really kind of filled that gap for 2026. The stock buyback program, I'm very proud of our team as we've executed our stock buyback through 2026. I think that we have really been on point in how we've approached the strategy of the buyback. It's a great tool. We still have capacity under the buyback. We will, where we see necessary, continue to execute on the buyback. But I will tell you that I'd be even happier if the stock continues to move up on its own as new investors find this an interesting opportunity and move into the stock. We may not have to be active in the buyback, which is great. But it is a very valuable tool. It's one of the three levers, as you pointed out. We will continue to reduce leverage. We will be very focused in how we look at potential acquisitions. And when we need to, we have the ability to be active in a stock buyback.

Appreciate all that color, that's helpful. And then just one follow-up for me, just going back to the office exposure, reducing it to, I think you said 21% in the near term. Is it too early to put, kind of, goalposts around a timeline as to what you'd like to get that exposure down to? Or just how you're thinking about reducing that going forward?

I hate to put those types of dates on things because it just sends the wrong message to the market as far as the real estate market. By no means do I want to fire-sale the office assets, but we are very active in taking properties to market, working with very qualified brokers in regional markets and we will continue to do that. You know, I don't see this as an initiative that necessarily is over in calendar year '26. But by no means do we want it to drag on for extended periods of time.

We have reached the end of the question-and-answer session. Mr. Weil, I'd like to turn the floor back over to you for closing comments.

Great, thank you. Yes, I just would like to close with a thank you to everybody that's on the call. We appreciate the time that you dedicate to GNL and, you know, we've had a lot of shareholders that have been with us since the internalization. We've had new shareholders join, and that really excites us, and thank you for that. We continue to be available and look forward to answering any questions you may have. Please reach out to our IR team, and we'll get time scheduled to talk. But I also want to thank the analysts that cover us and spend time and really dig in. It's very helpful, and it's really brought us to the point where we are. I think that this is an exciting point for us. We're looking forward, as we said, the Modiv shareholder vote is next Monday, and we believe that we'll be in a position to close shortly after. And we'll just keep doing the things that you've identified and pointed out to us that are part of our go-forward strategy. So thank you all for the time, the commitment, and we look forward to talking to you soon.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.