Global Net Lease - Q4 2025

Transcript

Operator (participant)

Good afternoon, and welcome to the Global Net Lease's fourth quarter and full year 2025 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Jordan Schonfeld, Vice President at Global Net Lease. Please go ahead.

Jordan Schonfeld (VP, Investor Relations)

Thank you. Good morning, everyone, and thank you for joining us for G&L's fourth quarter and full year 2025 earnings call. Joining me today on the call is Michael Weil, G&L's Chief Executive Officer, and Chris Masterson, G&L'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 fourth quarter 2025 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, G&L 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?

Michael Weil (CEO and President)

Thanks, Jordan. Good morning, and thank you all for joining us today. 2025 was a transformational year for G&L as we executed a series of deliberate and highly impactful actions that materially reshaped our financial and operational profile, strengthened the quality and focus of our portfolio, and established a more durable foundation for our company's long-term growth. The centerpiece of our transformation in 2025 was the successful execution of our $1.8 billion multi-tenant retail portfolio sale, which accelerated our deleveraging strategy, materially strengthened our balance sheet, and completed our evolution into a pure-play, single-tenant net lease REIT. This portfolio simplification improved the overall efficiency of the company by driving meaningful reductions in operational complexity, which allowed us to lower both G&A and capital expenditures.

The multi-tenant retail portfolio sale was a significant milestone in our disposition program, launched in 2024, through which we have completed approximately $3.4 billion of asset sales to date. The disposition program included $995 million of occupied single-tenant, non-core assets at a 7.6% cash cap rate, and $2 billion of occupied multi-tenant assets at an 8.2% cash cap rate, and concluded in December 2025 with the sale of the McLaren Campus for GBP 250 million, or approximately $336 million at a 7.4% cash cap rate.

The McLaren sale generated approximately GBP 80 million, or $108 million, of value above its original acquisition price and further enhanced the quality and focus of our portfolio as it increased the proportion of investment-grade tenants among our top 10 tenants to 80% in the fourth quarter of 2025 from 73% in the third quarter of 2025, while also reducing our exposure to the automotive industry. The net proceeds from these non-core asset sales under our disposition program were deployed with clear priorities. We applied capital directly to deleverage our balance sheet, reducing outstanding debt by more than $2.8 billion since the fourth quarter of 2023, and improving Net Debt to Adjusted EBITDA from 8.4x to 6.7x over the same period.

This improvement meaningfully enhanced our financial flexibility and positioned us to act from a position of strength in the debt capital markets. This enabled us to further de-risk our balance sheet by executing a $1.8 billion refinancing of our revolving credit facility, which secured improved pricing, enhanced liquidity, and extended the maturity from October of 2026 to August of 2030, including 2 additional 6-month extension options. Our decisive actions were recognized by the credit rating agencies, with Fitch upgrading G&L's corporate credit rating to investment-grade BBB- from BB+, and S&P Global lifting our corporate rating to BB+ while upgrading our bonds to investment grade. These upgrades marked a major milestone for the company and validate the progress we've made in reducing leverage, improving portfolio quality, and strengthening our overall credit profile.

Finally, as our disposition program continued to generate incremental proceeds, it provided additional flexibility to pursue other value-enhancing initiatives. Beginning in 2025, this included the opportunistic repurchase of 17.2 million shares through February 20th, 2026, at a weighted average price of $7.88, representing total repurchases of $135.9 million and an implied AFFO yield of approximately 12%. We've been disciplined in deploying capital in a manner we believe supports long-term shareholder value, balancing accretive share repurchases with continued deleveraging. Our performance in 2025 was driven by disciplined execution of our corporate strategy, which translated into meaningful shareholder value creation, reflected by G&L's total return, delivering 32% in 2025, compared to a 6% return for the net lease sector.

We've begun to close the valuation gap with our peers through disciplined execution in 2025. While we're pleased with the results achieved so far, we also believe there is a clear path to continued growth by the execution of our 2026 corporate objectives. We're evolving from a strategy centered primarily on deleveraging and dispositions to one focused on the accretive recycling of capital. This includes remaining selective and opportunistic with asset sales, particularly those that materially reduce our office exposure, and redeploying proceeds accretively into single tenant, industrial, and retail acquisitions on a leverage neutral basis. Importantly, we continue to actively evaluate our office portfolio and are currently marketing the sale of several assets, and we'll provide additional details as the transactions progress.

At the same time, we're evaluating multiple redeployment opportunities that can be funded within our existing capital framework, executed on a leverage neutral basis and meaningfully contribute to earnings growth, preserving the balance sheet quality we've worked to establish. Turning to our portfolio, at the end of the fourth quarter of 2025, we owned 820 properties, spanning nearly 41 million rentable sq ft. Our portfolio's occupancy stand at 97%, with a weighted average remaining lease term of 6.1 years. G&L's portfolio features a stable tenant base and a high quality of earnings, with an industry leading 66% of tenants with an investment grade or implied investment grade rating.

It is an average annual contractual rental increase of 1.4%, which excludes the impact of 19.6% of the portfolio, with CPI-linked leases that have historically experienced significantly higher rental increases. On the leasing front, we delivered strong results across the portfolio, reflecting the depth of our asset management capabilities and the quality of our tenant relationships, as we executed leases on more than 3.7 million sq ft during 2025, and achieved renewal spreads of approximately 12% above expiring rents. During the year, we completed multiple lease extensions with high quality tenants, including Home Depot, GXO and FedEx. Notably, we executed a GE Aviation extension at an office asset, releasing the space at a 37% renewal spread, demonstrating our ability to drive incremental value within our office portfolio and position assets for potential sale.

New leases executed in 2025 carried a weighted average lease term of approximately 5.2 years. Renewals completed during the period had a weighted average lease term of approximately 6.5 years, further supporting cash flow visibility and the durability of earnings. We remain focused on engaging with tenants well in advance of lease expirations to drive occupancy, retention, and rental growth, while maintaining a long-term perspective on portfolio stability. Our continued efforts and results in limiting exposure to high-risk geography, asset types, tenants, and industries are a testament to our intentional diversification strategy and credit underwriting. No single tenant accounts for more than 6% of total straight-line rent, and our top 10 tenants collectively contribute 29% of total straight-line rent, with 80% being investment grade.

We carefully monitor all tenants in our portfolio and their business operations on a regular basis. I encourage everyone to look at the details of each segment of our portfolio, which can be found in our Q4 2025 investor presentation on our website. I'll turn the call over to Chris to walk through the financial results and balance sheet matters in more detail. Chris?

Chris Masterson (CFO)

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 fourth quarter 2025, we recorded revenue of $117 million, and net income attributable to common stockholders of $37.2 million. AFFO was $48.5 million, or $0.22 per share for the fourth quarter of 2025, and then $0.99 per share for the full year, exceeding our revised 2025 AFFO per share guidance range of $0.95-$0.97, reflecting a strong finish to the year, driven by disciplined execution.

Looking at our balance sheet, the growth outstanding debt balance was $2.6 billion at the end of 2025, a $2.1 billion reduction from the end of 2024, and our Net Debt to Adjusted EBITDA ratio was 6.7x, based on net debt of $2.5 billion, down significantly from 7.6x at the end of 2024. Our debt is comprised of $1 billion in senior notes, $324.2 million on the multicurrency revolving credit facility, and $1.3 billion of outstanding gross mortgage debt. As of the end of 2025, 98% of our debt was effectively fixed through either contractual fixed rates or interest rate swaps, providing strong visibility into future interest expense.

As a result of significant debt reductions and asset sales, refinancing activity, and improved borrowing costs, our weighted average interest rate stood at 4.2%, down from 4.8% in the fourth quarter of 2024, driving a 45% reduction in quarterly interest expense to $42.6 million from $77.2 million a year ago. Interest coverage ratio was 2.9 times, reflecting the combined benefits of lower leverage and reduced interest costs. From a debt maturity perspective, we have limited expirations, with only $95 million of debt maturing in 2026. Given our strong liquidity position, we expect to address this maturity through refinancing onto our multicurrency revolving credit facility.

We will continue to manage borrowings effectively on our Revolving Credit Facility to take advantage of its lower interest rate spreads across currencies, generating approximately 170 basis points of interest savings based on rates as of January 30, 2026. As of December 31, 2025, we have liquidity of approximately $961.9 million, and capacity on our Revolving Credit Facility was $1.5 billion, compared to $492.2 million and $460 million, respectively, as of the end of 2024. Additionally, we had approximately 216 million shares of common stock outstanding and approximately 219.1 million shares outstanding on a weighted average base for Q4 2025.

Beginning in 2025 and through February 20, 2026, we have repurchased 17.2 million shares, totaling $135.9 million under our share repurchase program. We repurchased shares at a weighted average price of $7.88, well below recent trading levels, which has since increased approximately 20%. These repurchases were executed in a deliberate and highly accretive manner, which we believe created meaningful value for shareholders. We are pleased to establish initial 2026 guidance of AFFO in the range of $0.80-0.84 per share and Net Debt to Adjusted EBITDA in the range of 6.5x-6.9x. The 2026 guidance assumes a gross transaction volume of $250 million-$350 million, inclusive of both acquisitions and dispositions.

This initial guidance also reflects our focus on reducing office exposure, along with the optionality to redeploy net sale proceeds in a disciplined, leverage-neutral manner, which we anticipate will drive earnings growth. I'll now turn the call back to Mike for some closing remarks.

Michael Weil (CEO and President)

Thanks, Chris. The actions we executed throughout 2025 represent a decisive and comprehensive repositioning of G&L as we enhance the overall quality of the company by simplifying the portfolio, materially reducing leverage, strengthening liquidity, and improving our credit profile. There were not incremental changes, but deliberate and coordinated actions taken by G&L to reset the company's trajectory, deliver measurable results across the balance sheet and portfolio, and meaningfully expand our strategic flexibility as we enter the next phase of growth. We look ahead to 2026 from a position of strength, with what we believe is a clear path to earnings growth, driven by disciplined capital recycling alongside a continued emphasis on further deleveraging over the long term. Our strategy prioritizes monetizing select office assets and redeploying capital into accretive acquisitions of single-tenant industrial and retail assets that enhance earnings durability and portfolio strength.

We're currently reviewing a number of accretive acquisition opportunities that align with this approach and support our long-term objectives. With a streamlined operating platform and enhanced financial flexibility, we intend to execute this plan with discipline. On behalf of the entire management team and board, I want to sincerely thank all of our shareholders and analysts who have put their trust in G&L as we've accomplished all of these corporate goals. We intend to remain on this path with a continued focus on thoughtful execution and long-term value creation. We're available to answer any questions you may have after the call. Operator, please open the line for questions.

Operator (participant)

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from the line of Mitch Germain with Citizens JMP. Please proceed with your question.

Michael Weil (CEO and President)

Hey, good morning, Mitch.

Mitch Germain (Managing Director)

Good morning, or good afternoon, maybe, and congrats on the year.

Michael Weil (CEO and President)

Thank you.

Mitch Germain (Managing Director)

Michael, I'd love to get some perspective on the McLaren office sale. Was that a reverse inquiry, or was that an asset that you were marketing?

Michael Weil (CEO and President)

We had an inquiry from a third party. As I have kind of talked about in the past, having a relationship with McLaren that I did, I wanted to make sure that they had an opportunity to see the asset before we took any action. Through kind of their ownership structure, it proceeded that way. No, it was not a highly marketed transaction, but as many people know, it is a very well-known campus. McLaren being the successful organization that they are, coming off of the two F1 championships, et cetera, there was just natural interest in that asset.

Mitch Germain (Managing Director)

That's helpful. Do you think that you could replicate that kind of pricing, for additional office sales? Do you think that that's not representative, given the quality of the property and brand that is, tenanting the asset?

Michael Weil (CEO and President)

We actually believe, Mitch, that the net lease office portfolio within G&L is, in many cases, equivalent value to what we sold McLaren for. One of the reasons that we've identified that as a 2026 goal is because we can say that, but I think the best way to prove value is to execute on it. We are not at a point where we wanna disclose specifics, but we have a number of office assets that have significant interest, and I'm very comfortable that this is the area of pricing that you'll see. We'll probably have announcements, maybe end of first quarter, but definitely second quarter on several office assets.

Mitch Germain (Managing Director)

Great. Last one for me. Just talking about capital allocation, excuse me, given the attractiveness or the discount that you could buy your stock back at, I mean, how does that weigh in? Because it definitely seems like there might be a shift in deployment toward asset rather than stock here. Just curious in terms of how the buyback fits in your overall strategy on a go-forward basis, please. Thank you.

Michael Weil (CEO and President)

Sure. Yeah. Thank you, Mitch. The buyback remains a very important tool that we have at our disposal. We're gonna continue to evaluate opportunities. As I said, you know, we have some interesting potential acquisitions, we're certainly not going to just put money out for the sake of saying we bought certain assets. There's still benefit to opportunistically retiring more shares of G&L. As you said, and I completely agree, you know, 2, 3 months ago, it was a no-brainer that stock buyback was much more accretive than anything that we could see in the market. There will still be a reasonable expectation that this stock is worth buying back, we will be more active in evaluating acquisitions.

Again, I think we've been extremely deliberate and very disciplined in how we've approached, this last 18 months of G&L's, performance, and there's nothing that we're more focused on than continuing that.

Mitch Germain (Managing Director)

Thank you.

Michael Weil (CEO and President)

Thanks.

Operator (participant)

Our next question comes from the line of Upal Rana with KeyBanc. Please proceed with your question.

Michael Weil (CEO and President)

Hi, Upal.

Upal Rana (Director, Equity Research)

Hey, how's it going? Good morning out there.

Michael Weil (CEO and President)

Good morning.

Upal Rana (Director, Equity Research)

You know, just on the office, asset dispositions, is there a particular strategy you're trying to accomplish there that either improves your portfolio the most or showcases the embedded value, in your office portfolio?

Michael Weil (CEO and President)

It definitely we wanna highlight the implied value of the office because I think there's, you know, a bit of a disconnect in the market. You know, single-tenant, net lease, investment-grade with duration is still a valuable asset class. The other thing, Uppal, that we're really focused on is, you know, we've heard from a lot of shareholders, and frankly, the feedback is they believe that G&L will be a better portfolio, more heavily weighted to industrial, primarily, and also retail. We certainly don't want to dismiss that, but we don't want to value either. We're going to intentionally market the properties. Our asset management team is working very hard on identifying the right brokers, talking to potential buyers and really unlocking value here.

You know, as Mitch asked, and as you bring up, you know, when we can do this in kind of the same, let's just call it mid-7 range, you know, maybe a little lower, maybe right there. That's real value. And then we'll redeploy into the asset classes of net lease industrial, some retail, but right now I'm really focused on industrial. I think that's the way to proceed into 2026.

Upal Rana (Director, Equity Research)

Okay, great. That was helpful. You know, can you talk about the decision to provide transaction guidance and maybe you could break down how much are dispositions and how much are acquisitions?

Michael Weil (CEO and President)

I think that it was important that we made it very clear. You know, we spent the last, call it 18 months, aggressively pursuing a disposition strategy because it was really the important part of what we could do. You know, we lowered our leverage, we lowered our cost of capital. It was very important that we continued that. Having sold about $3.4 billion, frankly, we're ready now, as I talked about last quarter, you know, kind of just alluding to, but we're really ready to get back on what I think of as the offensive. We will evaluate opportunities.

We will take our time, and, you know, as we've done in the past, we'll disclose when we believe that the deal is at a point that it has real assurity. We're also going to, as I said, continue with a few more opportunistic dispositions. No, we're not at a point right now where we want to break out the transaction volume. We did want people to know that there will be growth in this portfolio starting this year. You know, we've got still more focus on continued deleveraging, and we really also are focused on earnings growth, and we're gonna do that through the combination of opportunistic share repurchase and beneficial acquisitions for the long term.

Upal Rana (Director, Equity Research)

Okay, great. That was helpful. Last one from me on acquisitions. You know, what cap rates are you eyeing, and what investment spreads are you targeting there? Are these acquisitions likely to be in the U.S. or abroad?

Michael Weil (CEO and President)

Well, we haven't provided that level of detail in our disclosure, Uppal. What we are committed to is accretion and AFFO growth. You know, as we take a look at cost of debt and cap rates, you know, the market is one where you really have to selectively pick and choose your acquisition targets. As I've said in the past, the relationships that we have with developers, with certain brokers in the market, it'll give us an opportunity to make sure that we're able to maintain buying cap rates that allow for that type of growth. You know, without giving more detail than I can, that is how we will underwrite.

The opportunity to buy in the U.S. and UK and Europe, we will certainly consider opportunities in the UK and Europe, as well as, of course, the U.S. The team is busy. Everyone is very excited to be back at that part of the job that, you know, we had kind of put on hold for the last two years. It will be a very selective process. It will continue to have duration. It'll have credit tenants, primarily, investment grade or implied investment grade, and I think fair to say, predominantly in the industrial space.

Upal Rana (Director, Equity Research)

Okay, great. That was helpful. Good luck for the rest of the year.

Michael Weil (CEO and President)

Thanks, Upal. Talk to you soon.

Operator (participant)

Our next question comes from the line of John Kim with BMO Capital Markets. Please proceed with your question.

Michael Weil (CEO and President)

Hi, John. Hey, hey, Michael.

John Kim (Managing Director, Equity Research (REITs))

Hi, everyone. Just wanted to ask about your strategy change. Over the last few years, you've been prioritizing strengthening the balance sheet, and your stock got rewarded for it last year. Now seems like you're shifting the offense and focusing more on growth. I guess my question is: Why stop now with your leverage at 6.7?

Michael Weil (CEO and President)

We're not stopping, John. I think that's a great point to clarify. You know, we also have to really mind the earnings within the portfolio. You know, we sold, as you know, $3.4 billion of assets, which is quite a bit. We've been able to protect the dividend, which is something that I feel very confident about and something that was really a priority of ours.

By no means are we saying, "Hey, we're now gonna just a 180 degree turn and go 100 miles an hour and just be blind to acquisition so that we can line the sheet and say we bought this and we bought that." We will continue to look at different opportunities, including share repurchase, select acquisitions, et cetera, through the disposition targets that we have internally. That will give us an opportunity to continue to take leverage into consideration. I think for right now, it's important that we have that opportunity to selectively grow. We're gonna balance the things that we know are important to the market.

It will still continue to have a focus on leverage. We're gonna start putting our foot back in the water on some potential acquisitions.

John Kim (Managing Director, Equity Research (REITs))

You mentioned the office disposition cap rate since mid-7? Is there anything unique about these assets that you're selling that would lead to just attractive pricing? If there's any secured debt associated with these assets, or locationally, are they unique? If you can give us just a quantum on how much you're looking to sell or buy this year.

Michael Weil (CEO and President)

What's unique about these assets compared to office in general, is that the net lease characteristics of office are just stronger than the overall U.S. office market. We have a majority of our tenants are investment grade. We've got good duration on the portfolio. And these are tenants that people are comfortable with. They're typically, as I've said over the many quarters, mission critical to the companies themselves. They're predominantly office, but they may have a component of R&D or light assembly and storage. Just for the long-term operation of the tenant's business, these are important assets. Because of that, they have a successful return-to-office program that's been in place for probably longer than most office properties.

It's typically a local buyer who will acquire these properties. It could be a 1031 buyer, but we have sufficient evidence that we'll be able to trade at these types of levels and really prove value for these properties. We haven't specified dollar value of what we will sell, but we'll continue to update quarterly. I think people will be pleased with the results.

John Kim (Managing Director, Equity Research (REITs))

In terms of acquisitions, your shares are probably trading at approximately 8.5% AFFO yield. Is that the hurdle rate for acquisitions that you're looking at, or are there other factors that would lead to different cap rate on acquisitions?

Michael Weil (CEO and President)

I mean, as I say over and over, because it's the primary focus, it's driven by accretion, and so we have those targets. Now, we look at everything overall. You know, the proceeds from dispositions, the combination of stock buyback, and then acquisitions itself. You know, we know where we need to be, and that will drive our kind of go, no-go on those acquisitions.

John Kim (Managing Director, Equity Research (REITs))

Okay. Thank you.

Michael Weil (CEO and President)

Thanks, John.

Operator (participant)

Our next question comes from the line of Jay Kornreich with Cantor Fitzgerald. Please proceed with your question.

Michael Weil (CEO and President)

Hi, Jay.

Jay Kornreich (VP, REIT Equity Research)

Hi, good morning. Good morning.

Michael Weil (CEO and President)

Good morning.

Jay Kornreich (VP, REIT Equity Research)

you know, I guess just sticking with the theme here of the office sales. I guess I just wanted to clarify, is there a goal range for a % of exposure you'd like to get the office segment down towards? Then additionally, are there any other, maybe non-office dispositions you'd be eyeing to reduce certain tenant exposures this year?

Michael Weil (CEO and President)

I think that it's important that we evaluate the contribution that the stabilized office portfolio makes to the overall earnings of G&L. I think that if we can take a subset of the office portfolio and prove value, my hope is that it gives people the confidence that, you know, this is a good performing asset class, and we will intentionally continue to lower our exposure to office. We don't want to get into any kind of rushed sale because then you lose the opportunity to really maximize value. Because of the performance of the office portfolio, there's no reason to sell at a price that we don't think represents the types of values that we're talking about.

We'll continue to update our activity as it relates to office, but we are committed to continuing to lower. You know, it's just part of the overall 2026 operating plan to do that. As far as other assets, you know, there are certain assets that, you know, for a number of reasons, it could be potential value from redevelopment or a tenant's plan at an asset, that, you know, yes, we will potentially dispose of certain other assets during the course of the year.

Jay Kornreich (VP, REIT Equity Research)

Okay, thanks for that perspective. Then just, you know, as you think about shifting more offensively, you know, you referenced having a priority for industrial and some retail. As you think about the markets between the U.S. and Europe, you know, does one of those two present, I guess, a more favorable, you know, investment outlook for you guys going forward?

Michael Weil (CEO and President)

You know, right now, I think that to be prudent, we probably are leaning a little bit more towards the U.S. markets just because, you know, there's some uncertainty as it relates to the U.K. and Europe. We're very comfortable there. We have a great team in place. We know the assets and the markets very well. You know, as I think as the U.S. is working through tariffs and trade relationships and things like that, for the time being, I think that the U.S. just is a little easier to understand. Again, by no means do I want to say that we don't value the UK and European assets that we own.

One of the great things about them is they're typically not export businesses in the UK and Europe. They're operating businesses that supply their local market. You know, they haven't been impacted by recent tariff and trade agreements. To come back to what I've already said, Jay, yeah, I think for right now, we're most focused on the U.S.

Jay Kornreich (VP, REIT Equity Research)

Understood. Thank you. All for me.

Michael Weil (CEO and President)

Thanks. Thank you.

Operator (participant)

Our next question comes from the line of Michael Gorman with BTIG. Please proceed with your question.

Michael Weil (CEO and President)

Hi, Michael.

Michael Gorman (Managing Director, REITs)

Hi, good morning. Thanks for the time. Just a quick one from me. Chris, I just want to maybe understand some puts and takes on the guidance side. Fourth quarter run rate would annualize to about $0.88 a share, understanding you got to make an adjustment for the McLaren sale, which was very late in the quarter. When I think about the even after that adjustment, you know, kind of 2-3% growth from the in-place portfolio, talk about accretion from capital recycling, it feels like maybe there's a couple of points that we're missing here that would maybe kind of push the guidance down to that $0.82 midpoint from where I would expect it to be.

Is there anything else kind of going into guidance in 2026 that might be a headwind against some of the growth metrics that you guys are talking about here?

Speaker 10

I think it's probably worth just pointing out, within the fourth quarter, we did have some tax benefits that we identified for our year-end process, which did give us a little over $0.01 in AFFO. That's something that kind of throws off the fourth quarter run rate.

Michael Gorman (Managing Director, REITs)

Yep, that's super helpful. Thank you. Mike, maybe just one quick one. We spent a lot of time talking about the portfolio and kind of asset transactions going into 2026. Are there any potential vacant asset sales that you're targeting for 2026 that maybe could provide funding for acquisitions and also benefit maybe from a debt-to-EBITDA perspective?

Michael Weil (CEO and President)

You know, the majority of the assets that had that vacant component had been addressed in 2025. There are a few important assets that we're looking at from that disposition standpoint that yes, we'll have free cash post-sale that we'll be able to deploy. You know, we've taken an approach with the guidance, $0.80-$0.84, because we're really at the beginning of the year. You know, those are definitely numbers that are backed up by what we know in the portfolio. There are certain things that we will pursue during the course of the year, you know, that are kind of macro-type events.

You know, we think that there could be some benefit in Fed pricing, you know, as we come into spring, that could open up opportunities in the market that we think that we're well positioned to take advantage of. You know, the overall idea is to continue to execute the business to be very smart and deliberate, and look for opportunities that we think are gonna be there primarily kind of in the summer and second half of the year.

Michael Gorman (Managing Director, REITs)

Great. Thank you for the time.

Michael Weil (CEO and President)

Thanks, Michael.

Operator (participant)

As a reminder, if you would like to ask a question, press star one on your telephone keypad. Our next question comes from the line of Craig Kucera with Lucid Capital Markets. Please proceed with your question.

Craig Kucera (Managing Director, Equity Research)

Yeah. Hey, good morning, guys.

Michael Weil (CEO and President)

Good morning, Craig.

Craig Kucera (Managing Director, Equity Research)

Michael Weil, you made mention in the past that you were looking to reduce your c-store exposure, and I think you've worked that down from maybe 5% or so of the portfolio last year to maybe a little bit more than 1% through the third quarter. Are you where you want to be on that front, or do you still think you might make some additional sales?

Michael Weil (CEO and President)

I'm just trying to get the final breakdown. Just one second on gas and convenience, because, yeah, you know, as you said, it was definitely an intentional strategy to reduce our exposure. Gas and convenience is an asset class that has resilience, but it's very operator-driven. You know, if we're at 1%, you know, we are definitely comfortable. We have taken the real risk out of what we saw from an operator standpoint. You know, I think the team did a great job of getting value for those assets. Letting us move into some things that just are a little bit easier to forecast.

Craig Kucera (Managing Director, Equity Research)

Okay, that's helpful. Changing gears, I want to talk about your 2026 office lease expirations, which I think are a decent amount of the total in 2026. Are those more concentrated in the US or Europe, and how are those discussions going so far?

Michael Weil (CEO and President)

They're more heavily weighted to Europe and the U.K The conversations are going well. Tenants are engaged. We're figuring out opportunities. We know that, for the most part, tenants are going to renew. There are a number of conversations that will be playing out over the next, you know, 1 to 2 quarters. I'll be with the team next week, in London, and we'll be really digging in on some of these conversations.

Craig Kucera (Managing Director, Equity Research)

Okay, great. Just one more for me, and you kind of alluded to it in the Q&A, but I guess, as you're thinking about selling office, you know, just given the McLaren sale, it would appear that there's, you know, stronger demand in Europe and the UK. Are you expecting to also be able to sell out of the US portfolio as well, or is it gonna be more heavily weighted towards over the sea?

Michael Weil (CEO and President)

No, we definitely see the U.S. market equivalently strong. It's just obviously, McLaren was based in the U.K. You know, we always felt that McLaren was a special credit in the portfolio. You know, the building was so specifically designed for them. It was a large single-tenant building, so when we had that opportunity, we were thrilled. We loved owning it, and we also loved selling it at that price. As we think about office opportunities in the U.S., very strong market as well. Craig, I'm sorry, I just want to go back to your last question, and just put a little clarification around it. I believe the 2026 lease maturity on office is about 3.1% of straight-line rent.

It is something we're focused on. We expect to have a lot of success with renewals, but it's by no means an overweight or disproportionate amount of potential in the coming year.

Craig Kucera (Managing Director, Equity Research)

Okay. That's it. Thanks for me.

Michael Weil (CEO and President)

Thank you.

Operator (participant)

We have no further questions at this time. Mr. Weil, I'd like to turn the floor back over to you for closing comments.

Michael Weil (CEO and President)

Great. Well, thank you, everyone. We always appreciate you taking time to join us. We are very excited about not only what we've accomplished in 2025, but the year ahead. This is a business where, you know, you come to work every day, and you just grind it out, and that's what we're already doing in 2026. I think that we will have some announcements that are very interesting and beneficial for the company and most importantly, for our shareholders. Look forward to speaking again soon, and if anyone does have specific questions, for Chris or Ori or myself, you know, please reach out. We, we're always available for conversation. Thanks, everybody.

Operator (participant)

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.