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Edited Transcript of AFIN.OQ earnings conference call or presentation 7-Nov-19 4:00pm GMT

Q3 2019 American Finance Trust Inc Earnings Call

Nov 15, 2019 (Thomson StreetEvents) -- Edited Transcript of American Finance Trust Inc earnings conference call or presentation Thursday, November 7, 2019 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Edward Michael Weil

American Finance Trust, Inc. - Chairman, President & CEO

* Katie P. Kurtz

American Finance Trust, Inc. - CFO, Secretary & Treasurer

* Zachary Pomerantz

American Finance Trust, Inc. - Senior VP of Asset Management

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Conference Call Participants

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* Barry Paul Oxford

D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst

* Bryan Anthony Maher

B. Riley FBR, Inc., Research Division - Analyst

* Frank Lee

BMO Capital Markets Equity Research - Senior Associate

* Robert Jeremy Metz

BMO Capital Markets Equity Research - Director & Analyst

* Louisa Hall Quarto

Healthcare Trust, Inc. - EVP

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Presentation

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Operator [1]

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Good morning, and welcome to the American Finance Trust third quarter earnings conference call. (Operator Instructions) Please note, today's event is being recorded.

I would now like to turn the conference over to Louisa Quarto, Executive Vice President. Please go ahead.

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Louisa Hall Quarto, Healthcare Trust, Inc. - EVP [2]

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Thank you, operator. Good morning, everyone, and thank you for joining us for AFIN's Third Quarter 2019 Earnings Call. The call is being webcast in the Investor Relations section of AFIN's website at www.americanfinancetrust.com.

The following information contains forward-looking statements, which are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements. We refer all of you to our SEC filings, including the annual report on Form 10-K for the year ended December 31, 2018, filed on March 7, 2019, and all other filings with the SEC after that date for a more detailed discussion of the risk factors that could cause these differences. Any forward-looking statements or portfolio information provided during this conference call are only made as of the date of this call. As stated in our SEC filings, AFIN disclaims any intent or obligation to update or revise these forward-looking statements or portfolio information, except as required by law.

During today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating the company's financial performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of GAAP net income to the non-GAAP measures can be found in our earnings release supplement and Form 10-Q, all of which is posted on our website at www.americanfinancetrust.com.

I'll now turn the call over to our CEO, Mike Weil.

Mike?

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [3]

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Thanks, Louisa. Good morning to our shareholders and other participants, and thank you for joining us. With me today on the call are Katie Kurtz, our Chief Financial Officer; and Zach Pomerantz, Senior Vice President of Asset Management.

I'll start with an overview of our third quarter results and highlight some of our recent accomplishments; Katie will provide additional financial details; and Zach will discuss our portfolio and pipeline, and then we'll take questions.

Before we get started, I'd like to welcome to the call the 2 analysts who picked up coverage of AFIN in the third quarter, Bryan Maher from B. Riley FBR; and Barry Oxford from D.A. Davidson. We're pleased to have your coverage join Jeremy Metz and Frank Lee from Bank of Montreal.

We're pleased to report another strong quarter for the company. From a real estate perspective, we had an extremely active quarter, closing on $179 million in primarily service retail acquisitions, including a $143 million dialysis portfolio. These acquisitions increased annualized straight-line rent by approximately $14 million, which will start to be fully realized in the fourth quarter. Through lease-up of the multi-tenant portfolio, we increased portfolio occupancy this quarter by 180 basis points to 95.2%. In capital markets, we completed an $87 million preferred offering at a lower effective yield than the initial offering. Finally, for our shareholders, our common stock continues to trade near 52-week highs. Broadly, we continue to believe in the U.S. retail industry, and economic indicators such as the University of Michigan Consumer Sentiment Index remain near 19-year highs.

As of September 30, our portfolio consisted of 771 properties, now located in 46 states and the District of Columbia. Portfolio occupancy grew to 95.2% on 18.2 million square feet of rentable space. Our leases include average annual escalators of 1.3% and have a weighted average remaining lease term of 8.9 years.

We continue to focus on what we define as service retail properties, which we believe are more resistant to competition from e-commerce. At the same time, we believe the market is recognizing that certain brick-and-mortar retail is perhaps more resilient than the earlier narrative would like to have us believe. As data from the U.S. Census Bureau illustrates, over the last 10 years, overall retail volume by sales has increased nearly 46% to over $5.3 trillion per year from $3.9 trillion. During this period, retail sales excluding e-commerce have increased by 30%, meaning e-commerce has helped grow the overall retail pie. The growth of e-commerce has not come exclusively at the expense of traditional retail but has opened up a new market to reach far more customers.

In our view, Amazon is the 21st century equivalent of Sears, Roebuck and Company. We're pioneering a novel method of connecting with customers, not only results in growth for your company but indeed reforms and revitalizes a gigantic sector of the economy. Further, it's no longer accurate to isolate retail into e-commerce sales and sales from physical locations. The retail landscape today is not limited to binary online and offline sales. We believe that the real revolution is the rise of omni-channel retail, which seeks to leverage technology and the connectivity of today's consumer to provide a retail experience that seemingly bridges the gap from website or app to fulfillment, local stores and customer service centers.

One of our core strengths is sourcing and diligently closing acquisitions that are accretive to our portfolio by a multitude of measures. During the quarter, we closed on 69 acquisitions for a total of $179 million, led by a portfolio of 50 dialysis properties. The dialysis portfolio was acquired for $143 million at a 7.7% weighted average cap rate, immediately adding $10 million of annualized cash rent and over $11 million of annualized straight-line rent, including 1.3% average annual rent escalators. 42 of the dialysis properties, representing 88% of the annualized straight-line rent, are guaranteed by DaVita or Fresenius, both of which are industry-leading publicly traded companies with a combined market cap of over $30 billion.

Our relationships within the marketplace as well as our ability to close swiftly and with certainty, allowed us to achieve a 100-plus basis point discount to recent comparable deals in the market for Jones Lang LaSalle Research. We have a forward pipeline of approximately $58 million that we anticipate closing before year-end. Altogether, this brings our total closed plus pipeline acquisitions for the year to $419 million at a cash cap rate of 7.2% and a weighted average cap rate of 7.9%.

An important element in AFIN's strategy is an ongoing program of strategic dispositions. As we've discussed on prior calls, we've continually been able to sell SunTrust properties at cap rates that are roughly 200 basis points lower than the cap rates we're paying for assets with similar credit and lease durations. Identifying opportunities to capture a spread, like with the aforementioned SunTrust properties, is a valuable component of our portfolio management strategy.

We're pleased that in the third quarter, we completed the sale of 2 SunTrust properties for $7 million, resulting in net proceeds of $3 million. Subsequent to quarter end and through October 15, 2019, we have sold 3 properties for $10.8 million. And we're also under contract or LOI to sell 4 more occupied SunTrust properties by the end of the year for approximately $10.9 million at a 5.7% weighted average cash cap rate.

Our 738 property single-tenant portfolio, which makes up about 2/3 of our annualized straight-line rent, has no lease expirations for the remainder of this year or next, with approximately 4% expiring through 2022 and less than 10% expiring through 2025.

Occupancy across the single-tenant portfolio increased to 99.3%, with 1.3% average annual rent escalators. Further, we're confident in the credit quality of our leases. 82% of our top 10 tenants portfolio-wide, and 75% of our single-tenant portfolio are leased to investment-grade or implied investment-grade tenants. Please refer to our earnings release for more information about what we consider to be implied investment-grade tenants.

The 69 properties acquired during the quarter added approximately $14 million to AFIN's annualized straight-line rent, but the full effect wasn't realized as the dialysis properties closed on the last day of the quarter. We expect to receive the full cash NOI benefit in Q4.

Our multi-tenant portfolio continues to meaningfully contribute to our service retail focus as we lease space to experiential and e-commerce defensive tenants. This was a particularly great quarter for leasing as occupancy rose from 85.1% to 89.1%. Approximately 1.6% of the increase was through new long-term leases while the other 2.4% came through seasonal leasing activity that we expect to be in place for parts of the third and fourth quarter.

Our 33-property, 7.2 million square foot multi-tenant portfolio currently has an executed occupancy of 90.2%, with a 1.3% average annual rent escalator and a weighted average remaining lease term of 4.9 years. Across the multi-tenant portfolio with almost $89 million in annual straight-line rent, approximately 7% of leases expire within the next 2 years and only 4% of leases expire in 2022. Our asset management team remains focused on renewing our minimal upcoming lease maturities and has found sustained success in their efforts, as Zach will further discuss.

From an execution standpoint, in addition to acquisitions and dispositions, the third quarter was also successful in the capital markets and financing departments. We completed an add-on offering of our Series A preferred stock, raising $87 million at a lower effective yield than the initial offering. Demand for this offering exceeded our expectations with the book being oversubscribed. Total liquidity at the end of the quarter was $255 million, which is available to fund our current pipeline and future acquisitions.

With that, Katie, will you take us through the financial results?

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Katie P. Kurtz, American Finance Trust, Inc. - CFO, Secretary & Treasurer [4]

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Thanks, Mike. We ended the third quarter with net debt of $1.6 billion at a weighted average interest rate of 4.5%. The components of our net debt include $318 million drawn on the credit facility, $1.3 billion of secured mortgage debt, and cash and cash equivalents of $76.8 million. Liquidity, which we measure as undrawn availability under our credit facility plus cash and cash equivalents, stood at $255.4 million at September 30, 2019.

As Mike touched on, we raised gross proceeds of $87 million in our add-on offering of our Series A preferred stock in September, and another $23.8 million of gross proceeds in our Series A preferred ATM programs throughout the quarter. This results in a cumulative gross raise of $31.6 million through the Series A preferred ATM program since its inception earlier this year. In addition, we activated our common ATM program in the third quarter, raising gross proceeds of $6.1 million. The company's net debt to gross asset value or total assets plus accumulated depreciation and amortization was 39.5% compared to 39.4% at June 30, 2019. And our net debt to annualized adjusted EBITDA was 7.8x at September 30, 2019, down from 7.9x at June 30. We reported our third quarter revenue of $72.9 million as compared to $74.9 million for the third quarter 2018.

Our FFO attributable to common stockholders was $25 million for the third quarter 2019 as compared to $7.9 million in the third quarter of 2018. Keep in mind that certain onetime items from our listing on the NASDAQ in July 2018 affected the third quarter of 2018 FFO. Please see our September 30, 2018 10-Q for more details.

AFFO attributable to common stockholders was $23.4 million or $0.22 per share for the third quarter 2019 as compared to $24.9 million or $0.24 per share in the third quarter 2018. Year-to-date, AFFO is higher in 2019 than at the same point in 2018. And as Mike mentioned, we expect the fourth quarter to benefit from the full impact of the real estate acquisitions that occurred at the end of the third quarter. As always, a reconciliation of GAAP net income to non-GAAP measures can be found in our earnings release, supplement and Form 10-Q, all of which are posted on our website at www.americanfinancetrust.com.

We declared common dividends of $29.2 million during the third quarter of 2019. I'll pass it over to Zach to discuss our real estate acquisitions, dispositions and leasing activity in greater detail.

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Zachary Pomerantz, American Finance Trust, Inc. - Senior VP of Asset Management [5]

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Thanks, Katie. As mentioned earlier, we acquired $179 million of primarily service retail properties during the quarter. The 69 properties we acquired have a weighted average remaining lease term of 9.8 years and total about 587,000 rentable square feet. These properties were acquired at an attractive weighted average cash cap rate of 7.2% and a weighted average cap rate of 7.7%.

In addition to the dialysis portfolio Mike discussed earlier, we also acquired 3 car washes that are leased to Mister Car Wash and implied Ba1 credit with 20-year lease terms as well as 13 properties leased to Dollar General and 2 one-off properties leased to Caliber Collision and Checkers.

Our multi-tenant occupancy stands at 89.1% at the end of the quarter. This is a significant improvement over last quarter where occupancy was 85.1%, and over the same quarter in 2018 where occupancy in the multi-tenant portfolio was 86.7%. This 390 basis point increase in the multi-tenant occupancy increased AFIN's overall occupancy of 95.2% from 93.4% last quarter. Approximately 1.6% of the increased multi-tenant occupancy came from new leases signed with long-term tenants at 7 different multi-tenant properties. The other 2.4% increase came from short-term seasonal tenants that are expected to be in place during parts of the third and fourth quarters.

In addition to these, we have another approximately 82,000 square feet of leases that have been executed but not delivered as of the end of the third quarter. During the quarter, we were able to bring in and sign up 2 new anchor tenants on executed LOIs at San Pedro Crossing in San Antonio. The 2 tenants are well-respected brands and are expected to bring in over $900,000 of annual base rent for the property and occupy over 70,000 square feet for at least 10 years.

At San Pedro Crossing, like we discussed in prior quarters when we signed significant anchor tenant leases at other properties such as Prairie Town Center, the negotiation of long duration leases with quality tenants frequently includes the payment by AFIN of certain costs related to building out space to meet our new tenants needs. These tenant improvements have an impact on our total capital expenditure but are made in the pursuit of enhancing revenue.

As many of you have requested, we wanted to provide you with some detail on the operation of our portfolio capital expenses. Year-to-date of $9.2 million in total CapEx, we consider $5.3 million or 57% of expenditures to be revenue-enhancing. Non-revenue enhancing CapEx or maintenance is $3.9 million year-to-date. As a percentage of cash NOI, maintenance is 2% of AFIN's total portfolio cash NOI. Additional details can be found in the MD&A section of our 10-Q for this quarter.

Our forward-looking acquisition pipeline as of October 15 consists primarily of service retail properties, including locations leased to IMTAA, an operator of gas and convenience stores, DaVita and Mister Car Wash as well as traditional retail lease to Dollar General. We also have 26 Advance Auto properties in our pipeline for about $28 million. The total purchase price for the pipeline, assuming we complete all of them, is approximately $58 million with a weighted average cash cap rate of 7.2%, a weighted average cap rate of 7.4% and a weighted average remaining lease term of 12 years.

For the year, we have 213 properties either closed or in the pipeline at a cash cap rate of 7.2%, a weighted average cap rate of 7.9% and a weighted average remaining lease term of 12.7 years. We're excited about the opportunities we are currently seeing in the market and look forward to expanding our portfolio.

Mike, I'll turn it back to you.

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [6]

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Thanks, Zach. Before we take questions, I want to take a minute to discuss what we think of as quality of earnings, which we think is a real differentiator between us and some of our peers. We believe that the strength of our leases, which are overwhelmingly triple net, long in duration and inclusive of contractual rent increases, combined with the strong credit quality of the tenants, is unique in the net lease REIT space. For example, our top 10 tenants make up 41% of our annualized straight-line rent and occupy almost 6.6 million square feet of our portfolio. Of the top 10 tenants, 82% are either actual or implied investment-grade credits. 66% of these tenants are service retail businesses, and the leases have an average remaining lease term of 11.5 years and include 1.5% average annual rent increases. We believe that these facts differentiate AFIN from our peer group.

We continued the execution of our unique strategy with our activity in the third quarter. Our successful $87 million preferred add-on provided us with an opportunity to swiftly close on the $143 million dialysis transaction on the last day of the quarter, which will reflect in our performance going forward. We've increased our annualized straight-line rent and occupancy without meaningfully increasing our debt. We look forward to continuing to execute on our strategy in the final quarter of 2019.

With that, let's open up the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Today's first question comes from Jeremy Metz of BMO.

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Robert Jeremy Metz, BMO Capital Markets Equity Research - Director & Analyst [2]

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I'm on with Frank Lee here. First question, I just wanted to touch on the capital expenditures. Obviously, definitely appreciate the added disclosure around that, in the queue today, and you talked about it here earlier in your opening remarks. In terms of the shopping center space, a big portion of that is TIs and tenant allowances. You did mention the bucket for revenue-enhancing CapEx, so I wonder if maybe you could just touch on that a little bit. And what exactly is the criteria there to put it in that bucket? And are tenant allowances a part of that or separate from that?

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Zachary Pomerantz, American Finance Trust, Inc. - Senior VP of Asset Management [3]

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Jeremy, this is Zach. And yes, to your point, we've met a bunch of times, and you have brought this up so we wanted to provide that type of additional transparency. And we'd look, obviously, to provide as much information as we can. Yes, with regards to the capital monies. When it comes to revenue-enhancing, that is money spent for new leases to bring rent in the door and to improve the NOI of our properties. And that could be for -- related to their tenant improvement allowance, or it's a certain base building work we have to do to put that tenant in place.

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Robert Jeremy Metz, BMO Capital Markets Equity Research - Director & Analyst [4]

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So any sort of larger -- sorry, go ahead.

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Zachary Pomerantz, American Finance Trust, Inc. - Senior VP of Asset Management [5]

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No. Go ahead.

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Robert Jeremy Metz, BMO Capital Markets Equity Research - Director & Analyst [6]

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Just making sure, so any sort of -- if you were to do any sort of redevelopment or adding space, anything like that would be additional to that. This is -- it sounds like a lot more of, you have some space, you need to lease-up, this is -- you might need to do a little bit of facade work or other work to help bring a tenant in, but this is sort of in a way another form of tenant allowance as well to drive NOI. Is that the right...

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Zachary Pomerantz, American Finance Trust, Inc. - Senior VP of Asset Management [7]

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Yes, yes. We don't really do the building extra buildings on the site. This is really related to -- directly to the lease-up. And as far as the maintenance goes, that will be more directly related to something standard like a roof replacement thing, something of that nature.

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Robert Jeremy Metz, BMO Capital Markets Equity Research - Director & Analyst [8]

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Perfect. That's helpful. And then I just want to make sure I was thinking about this straight-line correctly, the $13.6 million increase from the acquisitions that was identified in the press release. I assume that's in addition to what you've already been booking. And the increase to the $2.7 million in 3Q from, call it, $1.5 million last quarter, I'm guessing that's related to the increase in the multi-occupancy. Is that the right way to think about it?

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [9]

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So Jeremy, it's Mike. Katie and I are looking at each other as you asked the question just because we want to make sure we're -- you're talking about as far as the pipeline leasing versus the executed leasing in the quarter, correct?

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Robert Jeremy Metz, BMO Capital Markets Equity Research - Director & Analyst [10]

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Well, I'm looking -- there was a $13 million increase identified from acquisitions for straight line that we need to be thinking about. And then there was multi-tenant leasing, which is from covering shopping centers. You obviously -- you got a 400 basis point increase in physical occupancy. I'm assuming that comes with added straight line as well.

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [11]

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That is correct.

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Robert Jeremy Metz, BMO Capital Markets Equity Research - Director & Analyst [12]

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Got it. And in terms of the funding of the acquisitions going forward, you had good execution on the preferred, you did a little bit on the ATM. The line of credit, it's got a decent amount drawn at this point. But should we think -- should we be thinking about common equity becoming a bigger part of the funding story, assuming the stock stays somewhere around these levels or higher?

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [13]

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No. I don't think that we should draw any conclusions right now on future equity, preferred or common. We ended the quarter with Katie, $200 million? What was the availability, cash and...

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Katie P. Kurtz, American Finance Trust, Inc. - CFO, Secretary & Treasurer [14]

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We had liquidity of $255 million between cash and availability on our line, Jeremy, at the end of the quarter. So like we've said in the past, we'll be looking to use the credit facility as well as other forms of financing where we see appropriate. And we'll also keep our eye on the capital markets, and our stock as well.

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [15]

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So let me just round that one out a little bit. I think we've shown that we are disciplined as it relates to issuance of equity. The Board and management share the view. I think that we've been able to continue to make important acquisitions quarter-over-quarter. And with the pipeline where we are as well as cash on hand and availability, we're in a really good, conservative place. I'm very pleased to see the stock trading where it is trading. I hope to see that continue. And we're going to -- sorry to keep saying continue, but we're going to continue to make good decisions with a real long-term view of adding critical properties to the portfolio that are accretive.

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Robert Jeremy Metz, BMO Capital Markets Equity Research - Director & Analyst [16]

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That's all helpful. And I think Frank had one quick one for you as well.

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Frank Lee, BMO Capital Markets Equity Research - Senior Associate [17]

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Yes. Just one on acquisitions. Seems like the portfolio deal came together fairly quickly. Can you talk about the process in acquiring the dialysis portfolio? Was it relation-driven or off-market? And what's the buyer pool like for these types of assets?

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [18]

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This acquisition was relationship-driven. We have and continue to feel that dialysis is a very strong subset of what we like to buy. And when the -- and we can't disclose cap rate on this deal. We have disclosed average cap rate, which is all we're able to do under the terms of the PSA. So I just want to be conscious of that. I think that for the amount of the portfolio that is investment-grade at 67% and having the 2 leading dialysis providers in the portfolio, when we came to terms that the seller could live with and that we could live with, we wanted to get it done. And the fact that we got it done in the quarter was a bonus for us. But of course, we did extensive due diligence on all the properties. And we were, still, because of our platform, able to diligence these 50 properties and close and look to receive the full benefit of ownership in the fourth quarter. So it's pretty exciting for us, Frank.

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Operator [19]

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Our next question today comes from Barry Oxford of D.A. Davidson.

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Barry Paul Oxford, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [20]

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Real quick here. When you look at your -- I know you're not giving guidance, but when you look at your 2020 plan and your acquisitions, I imagine you want to kind of keep somewhat the same pace. If you could talk a little bit if the equity capital markets kind of were not to be quite as accessible as they are right today, can you execute on what you want to execute on 2020? Or would that throw a slight kind of wrench in the acquisitions that you have planned for 2020?

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [21]

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I always hesitate to answer Doomsday-scenario questions because -- yes, it's certainly...

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Barry Paul Oxford, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [22]

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I was trying to use the word, slight.

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [23]

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Yes. I know. So let's just talk about kind of practical operation of the portfolio. We have strategically recycled capital when we have needed to. If you remember second quarter, we sold 2 office properties that we didn't think long-term were strategic to the portfolio, giving us an opportunity to reinvest that capital in more service retail. For the last 3 or 4 quarters, we have strategically disposed of some of the SunTrust branches at very attractive cap rates, redeploying that capital at roughly a 200 basis point spread. So I think that we continue to have multiple levers. And we, as a management team, and with a very engaged and strong Board, will be able to continue to operate the company, right? The -- one of the most important things that we can do is make sure we have multiple levers available to us. So we're sensitive to where we are on a net debt-to-EBITDA basis. We were able to -- very slightly, but we were able to reduce it a little bit this quarter over last quarter. So by no means do we want to just see net debt-to-EBITDA increasing. We will continue to operate in a conservative manner. I think it's important for REITs to identify the appropriate acquisitions and make them. And I do see in the near future that we can continue to operate that way. There may be a quarter here or there, where we are like every REIT responding to market conditions but at the same time, we have enough capacity within the company, either through cash on hand or strategic disposition to continue to do what we've done since we listed in July of 2019.

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Operator [24]

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And our next question today comes from Bryan Maher of B. Riley FBR.

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Bryan Anthony Maher, B. Riley FBR, Inc., Research Division - Analyst [25]

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So look, just to ask another way. It just seems like with your liquidity and basically, your run rate of acquisitions, you're kind of good to go through 2Q '20 without tapping kind of any markets. Is that correct?

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [26]

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I think that, that's a reasonable conclusion that can be drawn.

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Bryan Anthony Maher, B. Riley FBR, Inc., Research Division - Analyst [27]

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Okay. And then when we look at the multi-tenant kind of occupancy ramping up there. Can you give us some samples of the type of tenants going into those spaces?

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [28]

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Yes. I just want to add one thing before Zach, who just knows this so well. I want to point out because I was really pleased with the results in the quarter, and what Zach and his team were able to do. We did intentionally break out long-term leases versus the seasonal Q3, Q4 leases. And I think that, that's -- the seasonal is opportunistic for us. We'd be foolish not to take advantage of it. It's without TI for the most part. And we collect the rent while they're in place. And then we continue to look for long-term occupancy to replace that. But what I want to point out, because there's a difference between the straight-line rent that's generated and the square feet. So on the long-term leases that Zach was able to get executed in the quarter, as compared to the seasonal, 56% of the total new rent generated by the leasing in this quarter is associated with long-term leases; only 44% of it is with the seasonal leasing. So we created some long-term value here while creating some short-term benefit that we'll be able to deploy in various manners. So not that I want to be the one to say we had a good leasing quarter, but I really was pleased. It's a lot of effort and activity. Zach and his team and the brokers that work so hard across the country to fill these buildings, this is the momentum that we've been looking for.

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Zachary Pomerantz, American Finance Trust, Inc. - Senior VP of Asset Management [29]

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Thanks for the lead-in. So a number of the names you'd recognize that we've done leases with recently, with Bank of America, Crunch Fitness. We did a deal with At Home that we talked about last quarter. We've done deals recently with 5 Below and ULTA at the properties as well as doing a number of smaller in-line leases with local operators that could be anything from a nail salon, hair, things that are services to the community that have to fill the rest of those centers. We talked about an LOI with a large national that's out. And that -- just to come back to Mike talking about the seasonal leasing, one of the box at San Pedro, we've had seasonally leased while we were negotiating the LOI for that space. And when that got signed, it gave us the runway to know that we'd have the box with someone in place until a lease got signed. So that's a nice little bump there for us as well. And those are the types of tenants we've been putting in place.

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Bryan Anthony Maher, B. Riley FBR, Inc., Research Division - Analyst [30]

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Great. That's super helpful. And then switching gears for a second to the bank branches. And we see that you disposed of a few more at seemingly decent prices. Should we assume that, that's not an avenue that you would go down to make acquisitions, simply because the cap rates are too low relative to your expectations going forward? I mean you wouldn't reverse arbitrage what you're already doing. So we should expect that to continue to decline as an asset class for you and not stay the same or get higher, correct?

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [31]

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That is correct.

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Bryan Anthony Maher, B. Riley FBR, Inc., Research Division - Analyst [32]

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And then just lastly for me, as we think about the dividend coverage, and we wrote about this in our initiation piece a couple of months ago. Should we just assume as we kind of sit here now, and I don't want you to speak for the Board per se, that the plan would be to continue to grow into that coverage over the next, let's say, 18 to 24 months?

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [33]

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Bryan, that is how I view it. I do talk, and Katie, of course, we talk to the Board about it regularly. Again, when we have things occur like the dialysis portfolio acquisition on the last day of the quarter where we don't get the recognition of the rental income until the fourth quarter, when we have a lease-up in the multi-tenant portfolio, I continue to be confident that we will cover the dividend. It's a high priority for all of us, including the Board. And I'm looking forward to that. And I think the things that we're doing, that we're reporting and talking about, are the drivers that we need to see to remain confident that we are going to be covering.

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Bryan Anthony Maher, B. Riley FBR, Inc., Research Division - Analyst [34]

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Look, for sure. And I think that anybody looking at it on a quarter-to-quarter basis is making a mistake. It really should be looked at on a year-to-year basis. And are you making forward progress, '19 to '20 to '21. That was just my point, that there's nothing else you're kind of planning on doing or doing other than the plan to grow into it with your NOI growth.

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [35]

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That is -- I agree with how you've stated that, yes.

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Operator [36]

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Ladies and gentlemen, this concludes the question-and-answer session. I'd like to turn the conference back over to Mike Weil for any closing remarks.

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Edward Michael Weil, American Finance Trust, Inc. - Chairman, President & CEO [37]

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All right, Rocco, thank you. Again, we want to just thank everybody for taking the time and joining us today. We continue to be excited about American Finance Trust and the progress that we're making. And we're, again, thankful for your support. Jeremy and Frank, Barry and Bryan, thank you for taking the time to join us today. And if you have any follow-up questions, don't hesitate to reach out.

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Operator [38]

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Thank you, sir. Today's conference has now concluded, and we thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.