Good afternoon, and welcome to the VEREIT Fourth Quarter and Year-End Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Bonni Rosen, Director of Investor Relations. Please go ahead.

Thank you for joining us today for the VEREIT 2017 fourth quarter and year-end earnings call. Joining me today are Glenn Rufrano, our Chief Executive Officer; and Mike Bartolotta, our Chief Financial Officer. Today’s call is being webcast on our website at vereit.com in the Investor Relations section. There will be a replay of the call beginning at approximately 2:00 PM Eastern Time today. Dial-in for the replay is 1-877-344-7529 with the confirmation code of 10116308. Before I turn the call over to Glenn, I would like to remind everyone that certain statements in this earnings call, which are not historical facts, will be forward-looking. VEREIT’s actual results may differ materially from these forward-looking statements and factors that could cause these differences are detailed in our SEC filings, including the yearly report filed today. In addition, as stated more fully in our SEC reports, VEREIT disclaims any intent or obligation to update these forward-looking statements, except as expressly required by law. Let me quickly review the format of today’s call. First, Glenn will begin by providing a business and operational update, followed by Mike presenting our quarterly and year-end financial results. Glenn will then discuss 2018 guidance and we will conclude today’s call by opening the line for questions. Glenn, let me turn the call over to you.

Thanks, Bonni, and thanks for joining our call. For the year, we met or exceeded the core components of our 2017 targets. We hit the high-end of our AFFO guidance range, with the real estate components at $0.70. Acquisitions totaled $746 million and we completed $575 million of dispositions. Our balance sheet is strong. We improved our maturity schedule and our net debt to normalized EBITDA is 5.7 times providing capacity. We received an investment grade rating for the company from S&P and Moody’s and along with Fitch, all three rating agencies have us had investment grade. And after reestablishing the brand of Cole Capital, we announced the sale simplifying our business model. We’re pleased with the operations for the year with occupancy ending at 98.8%. Same-store rent was flat, which includes 0.3% due to the impact of our early lease renewal efforts. In 2017, we had 2.5 million square feet of leasing activity, of which 1.5 million square feet were early renewals. Notable transactions included 1.1 million square feet of office and industrial leases and 92,000 square feet of bank branches. Of the early renewals, we recaptured 91% of the prior rents. These leases have built in increases and we have extended the weighted average lease maturity to 11.6 years. For the 2017 renewals, we recaptured 99% of prior rent, with additional rent increases over the lease term. Our portfolio diversification was further enhanced, as we implemented our calling process. At year-end, property tax diversification was 41% retail, 22% restaurants, 17% industrial, and office just under 20%. As you can see, we are within our target range of 15% to 20% for office, and Red Lobster was reduced to 6.5%, which is down from 12% when we first initiated our business plan. Our top 10 tenants represent 28.3%, which…

Thanks, Glenn, and thank you all for joining us today. Now with the sale of Cole has been accomplished, we will have more simplified financial reporting, and you will see our main real estate operations as continuing operations and Cole as discontinued operations. We finished the year on plan achieving AFFO of $0.74 per diluted share with $0.70 coming from continuing operations. As we outlined in our earnings release, we will focus on continuing operations for this call. In the fourth quarter, revenue increased $10.1 million to $316.6 million as we moved to being a net acquirer. The net loss was $2.5 million versus net income of $12.5 million last quarter. The $15 million decrease was mostly the result of higher impairment charges, G&A and appreciation along with our Q4 loss on the extinguishment of debt versus a gain in Q3. These were partially offset by higher revenue and a gain on the disposition of real estate in Q4. FFO and AFFO per diluted share were roughly flat for the quarter at $0.17 and $0.18, respectively, in each period. G&A was up $5.1 million to $18.3 million versus $13.2 million for the third quarter, mostly due to year-end compensation-related items. Full-year G&A was $58.6 million and we expect G&A for 2018 to be between $65 million and $68 million. The increase is predominantly due to cost previously included in the Cole Capital segment of which approximately 50% represents equity compensation. Recurring CapEx was $21.7 million for the year, which was lower than our anticipated range of $30 million to $35 million. Some of the capital spend will spill over into 2018. Given the spillover, our 2018 estimate for recurring CapEx is $30 million to $35 million. The average of the 2016 to 2018 CapEx is about $20 million to $25…

Thanks, Mike. I’ll now turn to guidance for 2018. AFFO per share between $0.70 and $0.72; net debt to EBITDA of approximately 6 times; real estate operations with average occupancy about 98%; the same-store rental growth ranging from 0.3% to 1%; dispositions totaling $300 million to $500 million; and cap rate ranging from 6.5 to 7.5, targeting our continued diversification categories, restaurant, office as well as non-core. Acquisition guidance is $200 million to $300 million in excess of dispositions funded through a combination of internal equity, debt capacity and proceeds from the sale of Cole. Properties are expected to be in the cap rate range of 6.5 to 7.5 and will be considered based upon their portfolio enhancing qualities. Our acquisition program within the balance sheet guidelines and the $200 million authorized share repurchase plan could be interchangeable with respect to real estate assets or the company stock. We’re in a period where capital market conditions are causing volatility in REITsharesin the face of generally good economic and market fundamentals. Over the past three years, the market has been more stable and we have taken advantage of that stability to reinforce our portfolio, strengthen and make more liquid our balance sheet and with the sale of Cole simplify the business. Our talented management team has experienced through various market cycles and we’ll continue to focus on our business objectives. I’ve now been here three years, and I’m committed to continue the progress we’ve made and as such, have renewed my contract for an additional three years. With that, we’ll open the phone to Q&A.

[Operator Instructions] And our first question will come from Sheila McGrath of Evercore.

Yes, good afternoon. Glenn, your share still traded at meaningful discount to the net lease sector. Cole Capital was a major move to help simplify VEREIT. What is – what other levers do you think VEREIT has to pull to close the discount?

Well, Sheila, we – as you certainly understood following us, we had a number of impediments as we started building the company back to where it is today. And we have one left litigation and we understand and know that causes some discount. We’ve operated well in the last three years. As a company, you can only manage litigation and we are managing the litigation. Our goal is to continue to operate well, continue to prove that we have improved the portfolio. We have acquisition capabilities and run the portfolio well. If we do that, we will be rewarded. What we will not do is something stupid that I will guarantee you.

Okay, great. And then I know you’re very limited on what you can say on litigation, but you mentioned the date June 11. I was wondering, if you could tell – remind us or give us a little more detail what that is? And also how we should think about insurance covering litigation costs in 2018?

The – it’s just a reference point for the folks to get back together. As we mentioned, we initiated depositions and it would be a Status Conference primarily dedicated to that. That’s what the June date is all about, Sheila. In terms of insurance, we continue to work with insurance. We have – had a lawsuit, which is preventing insurance to be paid right now. We do expect that to be settled at a reasonable – in a reasonable timeframe.

Okay, great. Thank you.

Thank you.

[Operator Instructions] And our next question will come from Joshua Dennerlein of Bank of America Merrill Lynch.

Hey, good evening, everyone.

Hi.

I’m curious about your plans for the 2018 convertible notes and also that notes coming due in 2019 and where you think you could issue 10-year debt today?

Sure, Josh, it’s Mike. I mean, we – if you take a look at what we have over the next two years, we now have $185 million outside on the line, and that line technically comes due 6/30 of 2018 with a one-year extension capability. We’ve got $597 million of those 3% converts that come due in August 1st of 2018 and then we have the $750 million of the 3% unsecured notes that mature on – in February of 2019. What we’re currently doing is working with our banking group. And obviously, one of the things we can do is renew our line and have the $2.3 billion revolver there available to help absorb some of this. And obviously, we have no problem going back out to the debt markets to issue notes. I think today if we were to issue notes, we would be somewhere in the neighborhood of roughly 4.6% to 4.7% on the 10-year and something less on the less – on something less as far as that goes. I think, we will probably be working with our banks potentially to do our recap. And as we were to do a recap, that would allow us in our likelihood to do a deferred draw that would allow us to take care of the first convertible note coming due in 2018. And we would then work with our banks, as well as the market to see what we wanted to do with the February 19 that towards the end of this year.

Okay.

And as you know, you could see in the summer, Mike and his team recapped $600 million. I think piteously, we beat some of this increase to free up this line that makes this next financing much easier.

Got it. Thanks, guys. That’s it for me.

Thank you.

And next, we have a follow-up question from Sheila McGrath.

Yes. Just in terms of stock buyback and capital allocation towards acquisitions, if you could just give us a little bit of insight on how you’re thinking about acquisitions versus buyback?

Sure. First, Sheila, we in May of this year announced $200 million of buyback as you remember, and we watched the markets very closely and we bought about 69,000 shares, not much. I think that was good. As we look at our stock today, we understand the discount. We see the cost of capital in the market versus the cost of capital in buying shares. We’re very analytical in that process. And we will use the appropriate risk return relationship to consider both acquisitions stock or assets. The difference though I would point out is, we are always looking to improve our portfolio. So an asset acquisition has to improve the portfolio, where a stock acquisition may be a better risk, but we are going to be looking towards debt. We are not going to move out of our debt guidance either – in either buying stock and/or assets.

Okay. That’s helpful. And then most of your acquisitions, I think, recently have been more retail and industrial-oriented. Just your thoughts on the office portfolio longer-term with this, do you think this would ever be considered non-core, and you would divest office, or just your long-term thoughts on office?

Sure. But to your point, you’re right, Sheila, for the year, we bought the $746 million, 57% was retail, 43% was industrial. So those were the two property types that we purchased. We are continuing to take down our office portfolio, we’re about 19.6, and we’ll take it down a bit more, because we want to be within guidelines, which we think makes sense. In terms of the total diversification of the company, we do believe in diversification. We do believe that having different property types can make sense. And it can make sense, because not only are you diversifying risk, you provide the opportunity at the appropriate time to buy the right property type. So as of now, we’re not considering exiting the office market. We’re considering bringing it down somewhat. But at some point, it may provide an opportunity for us. And we’ve continually said, we’re not smart enough to know at any given time, which property type is in or out. And in our business, our business model, which is to provide equity to corporate America, we have the infrastructure to manage and lease all four of these property types that infrastructure value is important to us and we will continue consider diversification.

Okay. And one last question. Just on the Cole disposition, I think, it was meaningful in terms of simplifying VEREIT. I’m just wondering if you could give us like longer-term after all the moving pieces are gone. Incrementally, will that sale have a positive impact on G&A for VEREIT before and after Cole if we kind of compare?

Sure. I’ll let Mike start that.

Sure. I mean, I think, we’ve indicated just now that our increase in G&A that we mentioned of about $8 million is due to the Cole transaction. We will – even now with that increase of – which puts us in a range of $66 million in G&A. We have about 4% of our assets in G&A and about 5.3% of our revenue. And that’s compared to a peer group of about 0.5% and about 6.7%. That being said, we were never going to be comfortable with having the large increase in G&A, and we will always work towards having the most efficient operation. It’s hard to tell today given that we just disclosed the transaction where we come out beyond 2019.

Okay. Thank you.

Thank you.

And next, we have a question from Chris Lucas of Capital One.

Good afternoon, everybody. Hey, Glenn, I think, initially, when you laid out your sort of plan for the company when you joined, one of the items that you were looking at was eliminating flat leases as part of the portfolio, or at least reducing that. You’re still at 21% of ABR and flat leases. what’s the thought on your exposure there? is that – I know that’s – a lot of that relates to sort of investment grade-rated tenants? But just curious as to how you think about that pool of assets relative to the overall portfolio?

We have tried hard for it. We were at 25%. We’re now down to 21%. And just to give you a sense, we had sold $715 million of flat leases since we started. But we’re working with denominator effects here. And that’s the reason it hasn’t come down as much as we’d like. We want to be in that range. But your other point is important, because a good question would be, why have any? Frankly, we’d like to have none, but we are always matching investment grade. So we’ll match the two. But for our balance sheet, as we said right in the beginning in our business plan, we’d rather take a flat lease, sell it at good price and put that money back into the balance sheet to work, and that’s still our position and we’re going to bring it down to that 15% to 20% range.

Okay, thanks. And then going back to the question that Sheila asked, as it relates to sort of the transition with Cole, I guess, the question I have is that, so the sale closes mid-quarter going forward the rest of the year for the quarterly results. Are there transition overhangs as it relates to G&A that we should be thinking about, or other sort of dual efforts that sort of inflate the current expectations for G&A relative to sort of what the clean run rate will look like going forward in 2019 and beyond?

I’ll start that one. Basically, Chris, it’s the $8 million. I think, if you want to think about overhang, it’s roughly that $8 million that I mentioned that is the increase over the existing run rate of G&A for the continuing operations. That that’s the overhang that we have right now that we’ll need to deal with as as we move forward.

And, Chris, the part of the transition agreement allows us as we’re moving to lower people count. It allows us to reduce any other slippage. That number is the primary number that we’ll be working towards to reduce.

Okay, great. Thank you.

Thank you.

And this concludes our question-and-answer session. I would like to turn the conference back over to Glenn Rufrano for any closing remarks.

We thank, everybody, for joining us today, and look forward to another good year. Thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.