American Finance Trust, Inc. a real estate investment trust focused on acquiring and managing a diversified portfolio of primarily service-oriented1 and traditional retail and distribution related commercial real estate properties in the U.S., announced today its financial and operating results for the first quarter ended March 31, 2020.
First Quarter 2020 Highlights
CEO Comments
Michael Weil, Chief Executive Officer, commented, “Our first quarter results highlight the strong momentum we had coming into this year. Going forward, we continue to have a high degree of confidence in our long-term outlook, reflecting the resilience and capabilities of our team and the financial strength of our portfolio. I am proud of the focused effort and proactive communications we took in early March to create direct dialog with our tenants in response to the unprecedented COVID-19 pandemic. This led to tremendous success, as we collected over 79% of the rents due in April during the month, including 97% of the rent payable from the top 20 tenants in our portfolio.”
Financial Results
Three Months Ended March 31, |
||||||||
(In thousands, except per share data) |
2020 |
2019 |
||||||
Revenue from tenants |
$ |
74,564 |
$ |
71,541 |
||||
Net loss attributable to common stockholders |
$ |
(9,153) |
$ |
(3,227) |
||||
Net loss per common share (a) |
$ |
(0.08) |
$ |
(0.03) |
||||
FFO attributable to common stockholders |
$ |
23,690 |
$ |
26,760 |
||||
FFO per common share (a) |
$ |
0.22 |
$ |
0.25 |
||||
AFFO attributable to common stockholders |
$ |
25,237 |
$ |
26,303 |
||||
AFFO per common share (a) |
$ |
0.23 |
$ |
0.25 |
(a) |
All per share data based on 108,364,082 and 106,076,588 diluted weighted-average shares outstanding for the three months ended March 31, 2020 and 2019, respectively. |
Real Estate Portfolio
The Company’s portfolio consisted of 848 net lease properties located in 46 states and the District of Columbia and comprised 18.9 million rentable square feet as of March 31, 2020. Portfolio metrics include:
Property Acquisitions
During the three months ended March 31, 2020, the Company acquired 31 properties for an aggregate contract purchase price of $90.0 million at a weighted average capitalization rate of 8.4%. Since 2017, 78% of all acquisitions have been properties leased to service retail tenants12.
Subsequent to March 31, 2020, the Company completed one property acquisition for a contract purchase price of $6.9 million. The Company’s acquisition pipeline as of April 15, 2020 includes 34 properties for an aggregate contract purchase price of $37.8 million. There can be no assurance that these acquisitions will be completed on current terms, or at all.
Property Dispositions
The Company sold two properties during the first quarter of 2020 for $3.8 million, of which approximately $1.3 million was used to repay related mortgage debt.
Capital Structure and Liquidity Resources
As of March 31, 2020, the Company had a total borrowing capacity under its credit facility of $522.4 million. Of this amount, $483.1 million was outstanding under this facility as of March 31, 2020 and $39.3 million remained available for future borrowing13. As of March 31, 2020, the Company had $175.7 million of cash and cash equivalents. The Company’s net debt14 to gross asset value15 was 38.8%, with net debt of $1.6 billion.
The Company’s percentage of fixed rate debt was 73.2% as of March 31, 2020. The Company’s total combined debt had a weighted-average interest rate cost of 4.2%16, resulting in an interest coverage ratio of 2.8 times17.
Dividend
On March 30, 2020, the Company announced that its Board of Directors approved an annualized dividend of $0.85 per share. The Company pays dividends monthly, and the change went into effect for the dividend which the Company declared in April 2020.
Subsequent Events
Short-term Stockholder Rights Plan
On April 13, 2020 the Company announced that its Board of Directors had approved a short-term stockholder rights plan to protect the long-term interests of the Company due to the substantial volatility in the trading of the Company’s Class A common stock that has resulted from the ongoing COVID-19 pandemic.
April Rents18
For the month of April, AFIN collected over 79% of the cash rents that were due across the portfolio, including 97% of the cash rent payable from the top 20 tenants19 in the portfolio and 92% of the cash rent payable in the single tenant portfolio.
Of the April cash rent remaining, rent deferral amendments have been approved for 4% of the unpaid cash rent, while another 16% of rent deferrals are currently in negotiation. The remaining 1% generally represents tenants that have paid partial April cash rent but where the Company has not agreed to, or commenced negotiations regarding, any formal deferral arrangements.
The typical deferral amendment defers payment of approximately 30% of the rent due for 3 months and is repaid within the first half of 2021.
Footnotes/Definitions
1 Service retail is defined as single-tenant retail properties leased to tenants in the retail banking, restaurant, grocery, pharmacy, gas/convenience, healthcare, and auto services sectors
2 Represents the contract purchase price and excludes acquisition costs which are capitalized per GAAP.
3 Cash capitalization rate is a rate of return on a real estate investment property based on the expected, annualized cash rental income during the first year of ownership that the property will generate under its existing lease. Cash capitalization rate is calculated by dividing the annualized cash rental income the property will generate (before debt service and depreciation and after fixed costs and variable costs) and the purchase price of the property. The weighted-average cash capitalization rate is based upon square feet.
4 Capitalization rate is a rate of return on a real estate investment property based on the expected, annualized straight-line rental income that the property will generate under its existing lease. Capitalization rate is calculated by dividing the annualized straight-lined rental income the property will generate (before debt service and depreciation and after fixed costs and variable costs) and the purchase price of the property. The weighted-average capitalization rate is based upon square feet.
5 Percentage of single-tenant portfolio tenants and top 10 tenants based on annualized straight-line rent as of March 31, 2020.
6 As used herein, investment grade includes both actual investment grade ratings of the tenant or guarantor, if available, or implied investment grade. Implied investment grade may include actual ratings of tenant parent, guarantor parent (regardless of whether or not the parent has guaranteed the tenant’s obligation under the lease) or by using a proprietary Moody’s analytical tool, which generates an implied rating by measuring a company’s probability of default. Ratings information is as of March 31, 2020. Single-tenant portfolio tenants are 44.3% actual investment grade rated and 21.5% implied investment grade rate. Anchor tenants in the multi-tenant portfolio are 19.7% actual investment grade rated and 10.6% implied investment grade rated.
7 Based on annualized straight-line rent as of March 31, 2020. Contractual rent increases include fixed percent or actual increases, or CPI-indexed increases.
8 Liquidity includes the amount available for future borrowings under the Company’s credit facility of $39.3 million and cash and cash equivalents. In accordance with the Company’s credit facility, the Company is permitted to pay distributions in an aggregate amount not exceeding 105% of MFFO (as defined in the Company’s credit facility) for any applicable period (commencing with the period of two consecutive fiscal quarters ended on September 30, 2019) if, as of the last day of the period, the Company is able to satisfy a maximum leverage ratio after giving effect to the payments and also has a combination of cash, cash equivalents and amounts available for future borrowings under the credit facility of not less than $60.0 million. The Company satisfied these requirements and relied on this exception for all applicable periods (including the period ended March 31, 2020). The Company also expects it will rely on this exception in future periods.
9 The weighted-average remaining lease term (years) is based on annualized straight-line rent as of March 31, 2020.
10 Annualized straight-line rent is calculated using the most recent available lease terms as of March 31, 2020.
11 Experiential retail is defined as multi-tenant properties leased to tenants in the restaurant, discount retail, entertainment, salon/beauty, and grocery sectors, among others.
12 Based on acquisitions during the period from January 1, 2017 through March 31, 2020 excluding the multi-tenant properties acquired in the American Realty Capital Retail Centers of America, Inc. (“RCA”) merger in February 2017. Weighted by annualized straight-line rent as of March 31, 2020.
13 The borrowing capacity and availability for future borrowings under the Company’s credit facility is based on the borrowing base thereunder, which is the pool of eligible otherwise unencumbered real estate assets as March 31, 2020.
14 Total debt of $1.8 billion less cash and cash equivalents of $175.7 million as of March 31, 2020. Excludes the effect of deferred financing costs, net, mortgage premiums, net and includes the effect of cash and cash equivalents.
15 Defined as the carrying value of total assets plus accumulated depreciation and amortization as of March 31, 2020.
16 Weighted based on the outstanding principal balance of the debt.
17 The interest coverage ratio is calculated by dividing adjusted EBITDA by cash paid for interest (interest expense less amortization of deferred financing costs, net, and change in accrued interest and amortization of mortgage premiums on borrowings) for the quarter ended March 31, 2020.
18 This information may not be indicative of any future period. The impact of the COVID-19 pandemic on the Company’s rental revenue for the second quarter of 2020 and thereafter cannot be determined at present. The ultimate impact on our future results of operations and liquidity will depend on the overall length and severity of the COVID-19 pandemic, which management is unable to predict. With respect to ongoing negotiations of rent deferrals, there can be no assurance that these negotiations will be successful and will lead to formal rent deferral agreements on favorable terms, or at all. With respect to the other remaining unpaid amounts, there can be no assurance the Company will be successful in its efforts to collect or defer these amounts on a timely basis, or at all.
19 Top 20 tenants based on April cash rents
Webcast and Conference Call
AFIN will host a webcast and call on May 7, 2020 at 11:00 a.m. ET to discuss its financial and operating results. This webcast will be broadcast live over the Internet and can be accessed by all interested parties through the AFIN website, www.americanfinancetrust.com, in the “Investor Relations” section.
Dial-in instructions for the conference call and the replay are outlined below.
To listen to the live call, please go to AFIN’s “Investor Relations” section of the website at least 15 minutes prior to the start of the call to register and download any necessary audio software. For those who are not able to listen to the live broadcast, a replay will be available shortly after the call on the AFIN website at www.americanfinancetrust.com.
Live Call
Dial-In (Toll Free): 1-888-317-6003
International Dial-In: 1-412-317-6061
Canada Dial-In (Toll Free): 1-866-605-3851
Participant Elite Entry Number: 4922290
Conference Replay*
Domestic Dial-In (Toll Free): 1-877-344-7529
International Dial-In: 1-412-317-0088
Canada Dial-In (Toll Free): 1-855-669-9658
Conference Number: 10141883