VEREIT (VER) 6 Nov 182018 Q3 Earnings call transcript

Good day and welcome to the VEREIT 2018 Third Quarter 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, Head of Investor Relations. ahead. go Please

joining quarter for for VEREIT the Thank call. us third earnings XXXX you today

confirmation Joining X-(XXX)-XXX-XXXX, Glenn Today's AM approximately today in a Bartolotta, for webcast me replay are Dial-in our Eastern the our with and Executive on replay code call There the Chief Time Mike Investor Officer of Relations of today. Financial will at the XXXXXXXX. XX:XX Officer. website call the section. being Rufrano, is is vereit.com, our be Chief at beginning

the I detailed factors would may are results forward Before could that our earnings statements to like be to call differences actual and including filings, SEC which turn over in differ Report cause these Glenn, materially remind the not call, in certain will Quarterly VEREIT's I historical from facts, everyone are filed these that looking. statements this today. forward-looking

In forward-looking required addition, any fully obligation disclaims more or to our except VEREIT reports, statements, in SEC as law. stated update as these intent by expressly

Let call. me of today's format review the quickly

will begin by presenting operational Mike by results. closing Glenn quarterly the business a financial with followed will our update, Glenn and remarks. then providing wrap First,

turn the you. conclude by will call let over for call opening today's Glenn, questions. me We the to line

Bonni everybody Thanks and joining for thanks us today.

with $XXX totaled million was times acquisitions down X.X we quarter. We AFFO times Net EBITDA normalized quarter. dispositions. per and the To-date, of the pleased results for completed $X.XX. from are to diluted share debt was million last $XXX X.X

Occupancy to X.X%. rent progress on $X.XX up guidance for We’re litigation. narrowing made $X.XX $X.XX to guidance, and range to from civil increased was we’ve XX.X%. quarter the to AFFO our Same-store our our $X.XX

would X.X%. lease the renewal early same-store an Excluding have of been rents effects

for and early square feet branches, During store have early the rents renewals of approximately rents. renewals, properties, in were an to which included leasing and of XXX,XXX an XXX% lower. property. Notable we of six for prior much transactions six bank XX% comparison we we feet In closings dining all expense expansion square of a had casual renewals. been recaptured activity bankruptcies Including quarter, recaptured and prior office retail XXXX XXX,XXX

have there Sears, representing which on which no we Mattress Stores also news more Brookstone we’ve of of of that the X.X% stores. been of in income. and October have do However, a and stores, was some occurred Kmart, exposure. There one all have had notable David’s recently; was few XX no Firm announced National we Bridal negative

are We at with in time. ongoing discussions this them

two hurricanes had also this major season. We

major financials. that no Fortunately our there impacted damage was

totaled our the Turning third XX categories to fitness. acquisitions retail transactions, quarter million acquired merchandising XX properties included These home furnishings, in convenience to and as million such and quarter. subsequent

the industrial. acquisitions year of totaled which XX% and For retail XX% XXX were million

we and million notes, the an million for opportunistic our revolver. with majority and million range In had XXXX down to of principal $XX outstanding we the same are due acquisitions approximately we convertible dispositions related paid property keep were tenant debt XXX sold line credit to totaled repaid Lobster uncertainty XXX riskier the sale now Subsequent million we focused as at to Third interest X.X% credit. balances; end at million and the the targeted on million; year X%, leased on Red the date industrial rate a of our Lobster total to acquisitions now XXX unsecured the we of cautious the to cap in million to lower with quarter; year. the a intend profile; XXX million with we XX quarter of targeted using XXX XXX came environment, to continue that our be rate, office. million of for important and to is flat bond of a we August issued XX Red below dispositions quarter dispositions now to subsequent which a leases,

a no million our the have loan to end We mark. coming at in have million next With year until maturity February maturities year $XXX in debt us seven term due due fit available XXXX to and XXXX. $XXX major pay of in schedule of debt this off no coming we nicely the

the XX, results place on update a Mike XXXX. have since with Before be taken January held completed let brief this reviews financial the and will be year; next been the tax scheduled for Status depositions by our November provide end litigation; of must Conference me court

set including in right all The third stock the the settle for common an a discussions opt-out claims were company actions; actions, XX.X defendants X% with settled million. and were the approximately XX approximately has settlements. XX, eight into of settled and/or the for X, settled October company claims of representing continue now settled XX% remaining dated judge total SEC; representing and has Vanguard of in actions, common the aggregate for September XXXX of plaintiffs against of As settled the for swaps agreements, outstanding the pursue a other is an and XXXX mentioned stock VEREIT’s pending stock company of common retains opt-out we we’ve through opt-out series the million; the aggregate settlement including representing the of XX a trial to September to amounts the the date million, of have claims of paid approximately with parties, the previously XX% litigations XXth contribution to payment outstanding and shares and of four for swaps and previously swaps brought announced any XX payment of entered XXX.X by

litigations today. be found in XX-Q pending filed regarding details can our Additional

now turn me Let Mike. the call over to

of achieving earnings compared and million higher you quarter. primarily operations to Glenn had AFFO on In today. quarter all focus thank gain per due Net third diluted revenue loss in million XX the was estate of XX.X to FFO flat by to essentially from this disposition quarter settled higher better with impairment along call. continuing lower by $X.XX revenue to decreased Thanks, due us share in $X.XX offset last of lower mentioned XXX,XXX net higher $X.XX. Mostly and the debt X.X diluted lower extinguishment for was that We a of QX, the million acute we’ll million with interest costs. versus from million, of partially expenses accrual deferred $X.XX QX good offset higher financing for real XXX.X with on accrued other slightly million of expenses. settlement higher per compensation per X.X million litigation joining settlements the interest quarter; on and X.X $X.XX the share along million to was million income and litigation from equity X.X expense; X.X of gain slight X and increase the to XX.X debt decreased income by expense due with premiums second by was -- partially versus G&A lower in G&A lower quarter. lower last AFFO amortization equivalent share driven second mostly by the certain rental recorded by million XX.X for the previously quarter in slightly cash that offset to at million is cash a

company’s agreement Cole Capital CIM XXX with transition we non-traded over March certain know transition whereby who sale, services hired XX, we discussed a contracted part provide to as XXXX of August the the entered REIT Cole part As were services XX prior of and CIM and business, our through of employees of in the services. purchaser closing approximately staff moved as CIM at you the providing into

G&A anticipate disengaged CIM fully be from VEREIT’s We our changes be as and expect able absorbed our the that that to that support; increase may ultimately can of could first that become necessary. we other run transition agreement due any agreement to between would the until by now will at and the transition agreement the down, we implement rate were overhead end expenses operating being winds

the XX the related of about gross for there During to year bringing were XX. quarter amount total litigation million expenses,

you XX of can see our are could million As for and XX and year. target of million end trending this estimated towards the higher above we be our range

no quarter not There the as can and future this be time. lawsuit. we the at potential recently it to believes the any million range any pending For affect accrued the announced. opt-out any SEC also settlements whether or additional because how may resolution opt-out probable reasonably XX has reasonably loss the for company opt-out XXX.X or The assurance settlements litigation for that possible class estimable remaining amounts not action ongoing investigation, the of is reserved of loss

net weighted-average Turning cap cash purchased we five for during XX company of weighted-average on X.X% quarter XXX properties XX calculation activity a sales for and the properties The in approximately to amount Lobster. used quarter rate the of the X.X%, Red cash was estate million. million the third Of quarter disposed of quarter, total was the subsequent XX at XX the XXX to XX rate million including purchased XX million the million. of million; third company real for sales gain cap properties this

company XX related borrowings Xst notes, our million. mortgage which XXXX the price disposed to sales company related disposed facility. properties of sales addition, and the of certain legacy using sales an million the legacy of and nine securities was an million. quarter revolving an the of August under X CMBS sold repaid million price In aggregate quarter price during investments for the outstanding temporarily aggregate to investments Subsequent company of On the principal funded of for convertible XXX billion for aggregate XX XX certain

of quarter drawn million end the on As we revolver. XXX our have

used million. borrowings quarter XXX be on XXth issuance forma During and completed the the secured XXth pro debt quarter proceeds September by under to as a the on revolver a of to repay we basis. the the million which million Subsequent net will bond company also XXX reduced X.XXX%, October XX

Glenn. now term February XX%, our gross from our duration the has As years coming our net back real due next for delayed debt but forma X.X September remained million issuance. optionality our for was decreased ratio XXX times at nicely of ratio estate And EBITDA fit ratio times XXth, with X was seven X.X debt was the basis the bond that to XX%; our loan turn investment gives fixed weighted to year schedule million times bond that’s Glenn to net in as us XX a average pro unsecured to of draw and asset maturity percentage and bond unencumbered call healthy and normalized utilizing fixed our charge debt I’ll coverage our our X.X fixed on was of the XX% into year; $XXX then the of it mentioned

to sheet. We’ve balance maintain very Mike. flexible continued liquid Thanks, and a

us business Our X.X successful down pro allowed in times confidence reflected our bond offering, leaves out coming forma with which no loan have This due million plan. would us in our line to over-subscribed term is bond of the million year. available in is coming $XXX of to of XXXX. addition, billion; December a which pay This credit maturities February until our major four the pay due market’s capacity next $XXX

assets continue We’re closely and up cognizant our payments debt settlement our With making. questions. the to monitoring open that as to of are now we we've I’ll balances call been the unencumber

first begin Our of ahead. Mitch Securities. Thank Instructions] question-and-answer you. question [Operator We’ll comes the from go now session. Please Germain JMP

people, Glenn operating guess with understand, charges am financials Just that, what your the of potentially looking like burns of I'm the kind kind may remind then out? there so to trying potentially impacts until I find timing agreement, to transition some some seems additional I off me severance places regards after some that for or when leverage and you it how when people be that just some thinking

related I’ll of the XXX no people were over have transition work XXX did, me people VEREIT. to that been let Mitch, working XXX who let left, we Cole, at issues, roughly very by we they but are saying that where there people answer the about start are have people some the Cole went have just to and much Mike that

and -- forward there we infrastructure everybody moving need speak. an we here So we standpoint is have the from team as

Mike? of terms the transition In timing,

move the in end I another over and time of be would there’ll recently we’ll we when XX and working it of adjustments we will be that pieces, over mean went March with that in it end, of ends people envision to that need up there XXXX Mitch and time to well some and some CIM bits point, as where time point period by been we’ve to working your we’re will on be time. -- making that

your cost how And about coupon due debt term while just loan on the then I have you, coming think what a I be? the Mike versus do of would

potentially our we’re and the that’s it's this negative Well that and and the off what think today be coming planning right as going unfortunately some right due rolling revolver at is loan all debt to because debt new X.X%, that is same term the now rates today’s at about we now loan moment that's at usual is at I is it’s of is X% would coming so arbitrage on. be the

potential that, that fix swap the to potentially you. I be rate would But got a greater be or would so gap,

Okay?

we and if for between be years, and we did to year little mean could assume something either It bit seven you somewhat did just at seven Sure. swapped have XX our be similar. our X.X, I X.X, X.X. we would would over you can seven year

in Now hear than be that flat that year to would I the acquisitions dispositions was with fourth be to greater imply so regards acquisitions did on going would that it quarter? the

have in we have to how work, see for able our that be They we’re year. to reason the keep is that algebra dispositions may be The and Mitch key the guidance we this that are is as going of you can debt to excess still would our down. not slightly, acquisitions make would

So the guess be than dispositions. think And focusing property office, more moving dispositions or is flat. I you’ve at months? but the regards question low me less the you’re end then of your been assets said to be your to acquisitions on will to that not won't last you you target, necessarily kind that to amount, forward, more with to have Red for got the over similar it greater you going types or be still of have kind how going some you I okay. a last Lobster XX should dispositions be about to we a opportunistic could higher of is XX approach of what like industrial it meaning

I closer you target sure. continue to XXX will the million we’ve X.X, XX to year be Mitch X.X, to get in as X, sell so and at XX.X, about some out been to that like our mentioned with expect pretty it Xs, for so still am so far X.X far it XXX not we’re than the target is as we’re we’d start year and to of to Lobster down XX.X. in It’ll those be Red we’re at the this we strategic, lower, Office,

good leases. to bring sell so by accretion and wanting we selling down, we to continue strategically We that then well office will flat some as continue flat leases see

will then -- always We in portfolio see CBS of be we selling range, strategic three continue well. opportunistic programs good any we at have the to sale as X.XX% we an those continued with around price Walgreens a side the portfolio. it as think to asset our continue standpoint six the if there's opportunistic, if a will we fitting And wrap so from find we who very we’ll an business look for confines price be pay those that our wants we asset have to that someone we -- is

today maybe planned? construe here riskier there is of potential be credit And you that any sales to

have our not about we bad. program, internal is Yes, as talk or of but Mitch always we yes. an will we part absolutely but really good disposition think used you know who review that That’s as

from next of question [Operator One Please Capital Instructions] Lucas Securities. comes go ahead. Our Chris

net a we Glenn follow-up flat negative or about questions, of but as you’re should not year? I be think the net just next to know -- relates giving as on acquisitions it we thinking XXXX next couple year's guidance for

about to consideration, we’re and we're We dispositions a really reviewing will have dispositions little our little and and able so be and haven't our those element because we’re to now point plan here this will like between may a settlements acquisitions Chris, a all we a about acquisitions the in but key at be but for our bit next our to we thinking talk a balances holding game debt guidance yet, view a and be that determined call certainly it. we combination taking the be going of longer

will be sheet balance is let then a of you're how and questions there, loan down thinking your this year then to couple second at the is the managing -- swap sort to float guess looking the relates simply to there And I about or at it you or approach are as any on it the to on point term maybe one prepayment what is of time after it the is road does or the period a term relates loan how a repayable it just opportunities question it that work? three as

It’s in context, any yes. repayable

about… So it's

that and our have about now forma that as on we yes, pretty some year low. longer-term more capitalization right down guidance we yes, -- final $XXX floating-rate then with bond And give about then we’ve that we pro more think We’ll as yes. X.X% And so some million. pull floating-rate seven will we’re

does walk-through the conversations but year your as it you would if And internally the on -- relates nicely versus well, had I sort have schedule maturity X year guess XX? fit XX then seven maybe to at into debt as could of you

the Duration is same good we would've slope benefit. in in the the that big year. big last the spread that We years three over at on was time expect; seven a three this; little We a to fortunate and since years time slopes but the and both seven the and year felt were both the market as choice we that occurred don't at very issue, that you of at did a got was choice, looked there I return XX. on to advantage relative was on of risk spread a a turmoil our -- look seven would XX very have level had issue the weeks. we got in we we very the at a think we the

as agreement is me to on sure to transition of it thanks to And the process relates just completed? the the it’s with CIM I make I there agreement. kind from guess then wanted color last likelihood Mike any of question any for understand once earnout that just for

the and six Chris period we period We after that some we thought its time of but hope one there’s so it, tuning get but that’s sure is we we’ve why of can years. of of that make expect that CIM Cole at we six year and some I now and out, fine recognize earn a mean nowhere long just for booked we to a obviously booked it’s hope reasons there’d be none that hard

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

call; very was active exactly being a -- know Thank sure good will time of we I the days. Francisco Thank NAREIT on we over not trustee, in and now not going period getting the for you. all it’s are see you a of out on everybody NAREIT next we on. on for am I when timing plane of couple everybody us; heading of a San am the

The now you today’s attending is you conference disconnect. may for thank concluded; now presentation;