UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Item 7.01. Regulation FD Disclosure.
Investor Presentation
On November 2, 2022, The Necessity Retail REIT, Inc. (the “Company”) prepared an investor presentation that officers and other representatives of the Company intend to present at conferences and meetings. A copy of the investor presentation is furnished as Exhibit 99.1 of this Current Report on Form 8-K. The information set forth in Item 7.01 of this Current Report on Form 8-K and in the attached Exhibit 99.1 is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information set forth in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933, as amended, regardless of any general incorporation language in such filing.
The statements in this Current Report on Form 8-K that are not historical facts may be forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to be materially different. The words “may,” “will,” “seeks,” “anticipates,” “believes,” “expects,” “estimates,” “projects,” “plans,” “intends,” “should” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside of the Company’s control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include (a) the potential adverse effects of (i) the global COVID-19 pandemic, including actions taken to contain or treat COVID-19, and (ii) the geopolitical instability due to the ongoing military conflict between Russia and Ukraine, including related sanctions and other penalties imposed by the U.S. and European Union, and the related impact on the Company, the Company’s tenants and the global economy and financial markets, and (b) that any potential future acquisition is subject to market conditions and capital availability and may not be completed on favorable terms, or at all, as well as those risks and uncertainties set forth in the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed on February 24, 2022 and all other filings with the Securities and Exchange Commission after that date, as such risks, uncertainties and other important factors may be updated from time to time in the Company's subsequent reports. Further, forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise any forward-looking statement to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required to do so by law.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description | |
| 99.1 | Investor Presentation | |
| 104 | Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL Document. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| THE NECESSITY RETAIL REIT, INC. | ||
| By: | /s/ Edward M. Weil, Jr. | |
| Edward M. Weil, Jr. | ||
|
Chief Executive Officer and President (Principal Executive Officer) | ||
Dated: November 2, 2022
Exhibit 99.1
The Necessity Retail REIT Third Quarter 2022 Investor Presentation November 2022
1 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Third Quarter 2022 Overview Necessity - Based Retail Focus 55% of portfolio Annualized Straight - Line Rent is derived from Necessity - Based retail tenants that RTL believes to be more resilient to e - commerce and economic cycles than Traditional Retail Robust Leasing Platform Year over year, multi - tenant Occupancy increased to 90.6% from 87.9% and is expected to grow to 92.8% as leases commence and signed LOIs lead to definitive leases, which is not assured Best - in - Class Portfolio 61.9% of top 20 tenants are actual or implied Investment Grade Rated and are 54.2% Necessity - Based Diligent Balance Sheet Liquidity of $81 million, weighted average interest rate of 4.2%, weighted average debt maturity of 4.3 years Demonstrated Acquisition Program 2022 acquisitions of $1.4 billion at a Cash Cap Rate (2) of 7.2% and a weighted average Cap Rate of 8.6% Substantial Earnings Growth As compared to Q4’21, the last full quarter prior to the CIM Transaction, AFFO per share grew from $0.22 to $0.26, in large part due to the accretive CIM Transaction Portfolio Information: (1) Real Estate Investments, at cost $5.2 billion # of Properties 1,050 States (including District of Columbia) 48 Portfolio Occupancy (2) 92.6% Portfolio Annualized Straight - line Rent (2) $392.3 million Weighted Average Remaining Lease Term (2) 7.0 Years Top 20 Tenant Investment Grade % (2)(3) 61.9% 2022 Real Estate Acquisitions (4) $1.4 billion Note: Metrics shown as of and for the period ending September 30, 2022. 1. See appendix for a full description of capitalized terms and a reconciliation of non - GAAP metrics. 2. Based on Annualized Straight - line Rent as of September 30, 2022. 3. Based on Annualized Straight - line Rent and based on ratings information as of September 30, 2022. RTL’s top 20 tenants were 52.4 % actual and 9.5% implied Investment Grade rated. 4. Represents the contract purchase price and excludes acquisition costs which are capitalized per GAAP. The acquisition costs f or acquisitions completed during the nine months ended September 30, 2022, were $93.1 million.
2 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Summary of Third Quarter 2022 Performance For the periods ended September 30, 2022 and 2021 unless otherwise indicated. 1. See appendix for a full description of capitalized terms and a reconciliation of non - GAAP metrics. 2. Refer to slide 3 for additional information. 3. Refer to slide 10 for additional information. 4. Leasing Pipeline data as of October 31, 2022. Assumes that signed letters of intent lead to definitive agreements, which is n ot assured. 5. Includes pipeline as of October 31, 2022. PSAs are subject to conditions. There can be no assurance the pipeline dispositions wi ll be completed on their current terms, or at all. Improved Financial Performance (1) Significant Leasing Activity (3) Year over year, multi - tenant Occupancy improved to 90.6% from 87.9%. Multi - tenant Executed Occupancy and Leasing Pipeline is expected to increase Occupancy to 92.8% and add $5.0 million of SLR (4) . Year - to - date, RTL completed 98 multi - tenant lease renewals that total nearly 1.2 million square feet and completed 18 single - tenant lease renewals that total over 156,000 square feet. Q3’22 and year - to - date multi - tenant lease renewal spreads of 7.7% and 7.1%, respectively. RTL’s financial performance continues to increase year - over - year: x Revenues from Tenants up 26% to $116.2 million from $91.9 million. x Adjusted EBITDA up 14% to $71.7 million from $63.1 million. x Cash NOI up 12% to $85.0 million from $75.7 million. As compared to Q4’21, the last full quarter prior to the CIM Transaction, AFFO per share grew from $0.22 to $0.26, in large part due to the accretive CIM Transaction. Weighted average interest rate of 4.2% with 83.1% of debt at fixed interest rates. Only 12% of RTL’s debt matures through 2024 as a result of RTL’s focus to lock in long - term low interest rate bearing debt in 2020 and 2021. Assumed $353 million of property - level debt in the CIM Transaction that has a weighted average interest rate of 4.0%. Year - to - date, RTL completed $331 million of dispositions and built a forward disposition pipeline (5) of $261 million, by contract sales price, proceeds of which we expect to use to opportunistically reduce leverage. Diligent Capital Structure CIM Transaction Highlights (2) Accretive $1.3 billion (7.19% Cash Cap Rate) acquisition of an 81 - property open - air shopping center portfolio. Highly complementary and pandemic - tested assets with an emphasis on Necessity - Based retail tenants. Increased the number of grocery centers in RTL’s portfolio to 22 from 8, a segment that management believes enhances its ability to command strong rental rates. Enhanced portfolio fundamentals with an increase to tenant diversification and Necessity - Based retail tenants and a reduction in office exposure. In Q3’22, RTL completed the previously announced accretive $1.3 billion open - air shopping center portfolio and generated over 1. 1 million square feet of leasing activity across the portfolio. Q3’22 AFFO per share of $0.26 grew by 18% when compared to Q4’21, the last full quarter prior to the CIM Transaction, AFFO per share of $0.22.
3 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Completion and Highlights of the Accretive CIM Transaction Accretion Enhanced Diversification Amplified Scale Sunbelt Exposure 39% 57% RTL Q4'21 RTL Q3'22 AFFO per Share $0.22 $0.26 RTL Q4'21 RTL Q3'22 The CIM Transaction was accretive, in large part contributing to an 18% AFFO per share increase, and resulted in numerous por tfo lio enhancements, including increased multi - tenant Occupancy, reduced top 10 tenant SLR concentration, reduced SLR derived from office assets, and increased emphasis on Necessity - Based retail tenants when compared to Q4’21, the last full quarter prior to the CIM Transaction. Note: Metrics shown for the Q3’22 RTL portfolio as of and for the period ending September 30, 2022 and as of December 31, 202 1 f or the Q4’21 RTL portfolio. 38% 28% RTL Q4'21 RTL Q3'22 % of Portfolio SLR Top 10 Tenant Concentration % of Portfolio SLR 8 22 RTL Q4'21 RTL Q3'22 Number of Grocery Centers Annualized Straight - line Rent Office Property Exposure 7% 1% RTL Q4'21 RTL Q3'22 % of Portfolio SLR $288.2 $392.3 RTL Q4'21 RTL Q3'22
4 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Third Quarter 2022 Portfolio Summary Portfolio Metrics ($ and SF in mm) Multi - Tenant Single - Tenant Total Portfolio Real Estate Investments, at cost $2,784 $2,398 $5.2 billion Number of Properties 111 939 1,050 States (including District of Columbia) 30 48 48 Square Feet 16.9 11.9 28.8 Annualized Straight - Line Rent $207.7 $184.6 $392.3 Occupancy (%) 90.6% 95.5% 92.6% Executed Occupancy Plus Leasing Pipeline (%) 92.8% 95.5% 93.9% Investment Grade Tenancy (1) (%) 40.4% 54.3% 48.3% (2) Weighted Average Remaining Lease Term 4.6 Years 9.8 Years 7.0 Years RTL’s preeminent Necessity - Based retail portfolio features a unique investment mix of stable, long - term single - tenant net lease assets and open - air shopping centers that RTL believes are highly complementary, pandemic - tested and resistant to economic cycles. Note: Metrics shown as of and for the period ending September 30, 2022. 1. Based on Annualized Straight - line Rent and based on ratings information as of September 30, 2022. RTL’s single - tenant portfolio tenants were 39.9% actual and 14.4% implied investment grade rated. RTL’s multi - tenant portfolio includes credit ratings for ten ants who occupy 10,000 square feet or more. RTL’s multi - tenant portfolio tenants were 30.9% actual and 9.5% implied investment grade rated. On a total portfolio basis, RTL’s tenants were 3 6.0 % actual and 12.3% implied Investment Grade rated. 2. Includes anchor tenants, tenants that occupy 10,000 square feet or more, only from the multi - tenant portfolio. 56% 23% 21% Power Center Grocery Center Anchored Center 82% 16% 2% Retail Distribution Office $185 million $208 million 29% 13% 11% 47% Power Center Grocery Center Anchored Center Single-Tenant Total Portfolio Annualized SLR by Segment $392 million Multi - Tenant 53% Single - Tenant Multi - Tenant
5 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com 2022 Acquisition Activity ($ in millions, square feet in thousands, lease term remaining in years) Closed Transactions Property Type Number of Properties Square Feet Purchase Price (2) Wgt. Avg. Cap Rate (3) Lease Term Remaining (4) Closed McCain Plaza Multi - Tenant Retail 1 308 $31.3 4.1 Q1’22 BJ's Wholesale Club Traditional Retail 1 68 $8.4 7.3 Q1’22 Heritage Service Retail 1 7 $1.2 20.0 Q1’22 CIM Shopping Center Portfolio Multi - Tenant Retail 56 6,419 $801.1 4.6 Q1’22 CIM Shopping Center Portfolio Multi - Tenant Retail (22) / Service Retail (2) 24 3,033 $452.8 5.8 Q2’22 Imperial Service Retail 8 28 $17.5 20.0 Q2’22 CIM Shopping Center Portfolio Multi - Tenant Retail 1 375 $71.1 3.7 Q3’22 Fidelity Memorial Service Retail 1 25 $5.0 20.0 Q3’22 2022: Total Closed 93 10,263 $1,388.4 8.6% 5.0 1. Includes pipeline as of October 31, 2022. PSAs are subject to conditions. There can be no assurance the pipeline dispositions wi ll be completed on their current terms, or at all. 2. Represents the contract purchase price and excludes acquisition costs which are capitalized per GAAP. The acquisition costs f or acquisitions completed during the nine months ended September 30, 2022, were $93.1 million. 3. Weighted average based on square feet. See Definitions in the appendix for a full description. 4. Weighted average remaining lease term is based on square feet as of the respective acquisition date for closed transactions a nd estimated acquisition date for pipeline. In Q3’22, RTL completed the previously announced CIM Transaction and continued to diligently evaluate accretive acquisition a nd opportunistic dispositions. Year - to - date, RTL completed $331 million of dispositions and built a forward disposition pipeline (1) of $261 million, by contract sales price, proceeds of which we expect to use to proactively reduce leverage.
6 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Robust Top 10 Tenants RTL’s top 10 tenants represent only 28% of portfolio SLR, which represents an 10% reduction when compared to the pre - CIM Transac tion RTL portfolio (Q4’21) and features everyday brands that are representative of Where America Shops. Tenant Credit Market Cap (1) Tenant Industry Remaining Lease Term (in years) % SLR Fresenius Actual: Baa3 $8 Billion Healthcare 6.3 3.7% Mountain Express Oil Co. Implied: Ba3 N/A Gas & Convenience 15.9 3.4% Home Depot Actual: A2 $282 Billion Home Improvement 6.6 3.3% AmeriCold Actual: Baa3 $7 Billion Refrigerated Warehousing 5.0 3.2% Truist Bank Actual: A2 $58 Billion Retail Banking 6.8 3.1% PetSmart Actual: B1 N/A Pet Supplies 3.2 2.6% Stop & Shop Implied: Baa1 N/A Grocery 4.1 2.4% Dick's Sporting Goods Actual: Baa3 $8 Billion Sporting Goods 3.1 2.4% Bob Evans Implied: Ba1 N/A Fast Casual Restaurants 14.6 2.1% Best Buy Actual: A3 $14 Billion Electronics 2.7 2.1% Top 10 Tenants 72% IG Rated (2) $377 Billion 7.0 28.4% Remaining Portfolio 7.1 71.6% Note: Metrics shown for the Q3’22 RTL portfolio as of and for the period ending September 30, 2022. 1. Market capitalization as of September 30, 2022. Source: Bloomberg. 2. Based on Annualized Straight - Line Rent. Ratings information as of September 30, 2022. 63% of the rated tenants were actual Inves tment Grade rated and 9% of the rated tenants were implied Investment Grade rated, which includes ratings of the tenant’s par ent (regardless of whether or not the parent has guaranteed the tenant’s obligation under the lease) or lease guarantor.
7 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Primarily Necessity - Based Tenant Base (% of SLR) RTL’s portfolio features significant tenant industry diversity with no individual tenant - industry totaling more than 8% of portf olio SLR and a tenant base that is 55% Necessity - Based retail. Tenant Industry Type % of SLR Discount Retail Traditional Retail (1) 8% Gas/Convenience Necessity - Based 7% Specialty Retail Traditional Retail 7% Healthcare Necessity - Based 6% Quick Service Restaurant Necessity - Based 5% Apparel Retail Traditional Retail 5% Home Improvement Traditional Retail 5% Grocery Necessity - Based 5% Retail Banking Necessity - Based 4% Full - Service Restaurant Necessity - Based 4% Fast Casual Necessity - Based 4% Sporting Goods Traditional Retail 4% Refrigerated Warehousing Distribution 3% Pet Supplies Traditional Retail 3% Auto Services Necessity - Based 3% Salon / Beauty Necessity - Based 3% Furniture Traditional Retail 2% Electronics Traditional Retail 2% 22 Others Various 20% Discount Retail 8% Gas/Convenience 7% Specialty Retail 7% Healthcare 6% Quick Service Restaurant 5% Apparel Retail 5% Home Improvement 5% Grocery 5% Retail Banking 4% Full - Service Restaurant 4% Fast Casual 4% Sporting Goods 4% Refrigerated Warehousing 3% Pet Supplies 3% Auto Services 3% Salon / Beauty 3% Furniture 2% Electronics 2% All Others 18% 40 Tenant Industries 55% of portfolio SLR was derived from Necessity - Based tenants Note: Metrics shown for the Q3’22 RTL portfolio as of and for the period ending September 30, 2022. 1. See appendix for a full description of capitalized terms.
8 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Significant Sunbelt Exposure Coupled With Geographic Diversification 57% of RTL’s SLR was derived from sunbelt markets, which continue to grow and have favorable demographic tailwinds, with the bala nce derived from dense suburban markets with strong MSA’s and community centric lifestyles. Sunbelt Markets RTL Single - Tenant RTL Multi - Tenant State % of SLR GA 10% NC 7% OH 7% FL 6% AL 6% TX 5% IL 5% SC 5% KY 4% CA 4% 38 Others 41% Legend Note: Metrics shown for the Q3’22 RTL portfolio as of and for the period ending September 30, 2022.
9 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com 2% 5% 8% 7% 6% 6% 6% 3% 2% 8% <1% 1% 1% 2% 4% 8% 3% 4% 3% 22% 2022 2023 2024 2025 2026 2027 2028 2029 2030 Thereafter Lease Maturity Schedule (% of total portfolio SLR) RTL MT RTL ST Well Balanced Lease Maturity Schedule RTL’s unique investment mix of stable long - term single - tenant net lease assets and open - air shopping centers results in a well - b alanced lease maturity schedule with a weighted average Remaining Lease Term of 7.0 years, offering market - rate leasing opportunities for RTL’s asset m anagers. 4.6 Years 9.8 Years 7.0 Years WALT Note: Metrics shown for the Q3’22 RTL portfolio as of and for the period ending September 30, 2022.
10 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com 15,283 104 264 14,500 14,700 14,900 15,100 15,300 15,500 15,700 Q3'22 Occupancy Q3'22 Executed Occupancy Q3'22 Leasing Pipeline 87.9% 90.6% 92.8% RTL Q3'21 Occupancy RTL Q3'22 Occupancy Successful Leasing and Asset Management Platform RTL’s Multi - Tenant Leasing Platform Is Expected To Increase SLR By $5.0 Million Note: Leasing Pipeline data as of October 31, 2022. Metrics shown for the Q3’22 RTL portfolio as of and for the period ending September 30, 2022. RTL continues to generate substantial new and renewal leasing activity for its portfolio and in Q3’22, completed 41 new multi - te nant leases, 42 multi - tenant renewals, and three single - tenant renewals. As of Q3’22, RTL also had an Executed Occupancy plus forward Leasing Pipeline of 368,400 square feet, which is expected to increase multi - tenant Occupancy to 92.8% from 90.6%. Tenants RTL’s Partnered With in 2022 RTL Q3’22 + Executed Occupancy & Leasing Pipeline ($ in 000’s) Q1'22 Q2'22 Q3'22 Multi - Tenant New Leases Number of Transactions 7 22 41 Square Feet 59,631 197,495 512,130 Annualized SLR $1,034 $2,025 $3,531 Multi - Tenant Renewal Leases Number of Transactions 18 38 42 Square Feet 178,920 420,402 571,739 Annualized SLR $2,756 $5,410 $8,377 Lease Spread (%) 5.4% 6.8% 7.7% Single - Tenant Renewal Leases Number of Transactions 2 13 3 Square Feet 18,269 116,269 22,032 Annualized SLR $158 $2,824 $453 Lease Spread (%) - 0.4% 0.4% 2.8%
11 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com The Importance of Brick and Mortar Brick and Mortar and e - commerce retailers continue to realize the importance of having a physical store footprint as a majority of consumers still prefer physical store shopping to online shopping as retailers continue to increase the utilization on omnichannel retail tou chp oints to provide customers with a seamless and personalized shopping experience. (1) % of SLR % of SLR More than 50% of online orders are fulfilled through physical stores 3% Physical store sales represented 90% of net sales 2% 79% of 2021 sales were completed through the brick & mortar channel 2% Initiative to open over 1,000 new stores in 2022 2% The company stated that omni - channel customers are 6x more productive than digital - only 2% 2022 comparable - store sales projected to increase by 10% and plans to open 50 new stores by year - end 1% More stores opened than closed in the U.S. last year for the first time since 1995 (Morgan Stanley (2) ) U.S. retail vacancy fell to 6.1% in Q2’22, the lowest level in at least 15 years, and shopping center asking rents were 16% h igh er than five years ago (C&W (2) ) 14% of retail sales in Q1’22 occurred online as compared to 16% in Q2’20, indicating people still want to shop in person (U.S. Census Bureau (2) ) Source : Each respective company’s most recent Annual Report on Form 10 - K or Quarterly Report on Form 10 - Q. 1. Source: Salesforce “How an Omnichannel Strategy Benefits Businesses and Customers” . 2. Source: Wall Street Journal “Retail Real Estate Is Enjoying Its Biggest Revival in Years” property report.
12 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com RTL Total Return vs. Peers Year - to - date (1) , RTL has outperformed the Company’s peers on average by 9% on a total return basis. *Denotes externally advised REIT. 1) Source: S&P Capital IQ. Data as of October 31, 2022. - 33% - 32% - 28% - 28% - 27% - 26% - 25% - 18% - 17% - 16% -40% -35% -30% -25% -20% -15% -10% -5% 0% MAC OPI* RPT BNL GOOD* Peer Avg. RMZ S&P 500 RTL* SRC RTL and Peers Year - To - Date Total Return Percentages (1)
13 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Third Quarter 2022 Financial Highlights Note: Metrics as of and for the three months ended September 30, 2022 . See Definitions in the appendix for a full description of capitalized terms and for a reconciliation of non - GAAP metrics. 1) Weighted average interest rate based on balance outstanding as of September 30 , 2022 . 2) See Definitions in the appendix for a full description. 3) Excludes the effect of deferred financing costs, net and mortgage premiums, net. Earnings Summary ($ mm) Q3’22 Q3’21 Net Loss Attributable to Common Stockholders ($56.5) ($6.4) NOI (2) $88.1 $78.5 Cash NOI (2) $ 85.0 $75.7 Funds from Operations (FFO) (2) $ 29.4 $ 30.3 Adjusted Funds from Operations (AFFO) (2) $34.2 $36.4 Funds from Operations (FFO) per Share $0 .22 $ 0.25 Adjusted Funds from Operations (AFFO) per Share $ 0.26 $ 0.31 Weighted Average Basic and Diluted Shares Outstanding 133.1 118.9 Debt Capitalization (as of December 31, 2021) RTL continues to benefit from the accretive $1.3 billion CIM Transaction, in large part contributing to an 18% increase to pr e - C IM Transaction (Q4’21) AFFO per share and features a diligently constructed capital structure that can support a near - term increase in leverage from the CIM Tra nsaction. Key Capitalization Metrics ($ in mm) Q3’22 Net Debt (2)(3) $2,781 Gross Asset Value (2) $5,395 Net Debt / Adjusted EBITDA 9.7x _ Net Debt / Gross Asset Value 51.5% _ Debt Capitalization (as of September 30, 2022) ($mm) Single - Tenant Mortgages $ 1,282 Multi - Tenant Mortgages $562 Total Secured Debt $ 1,844 2028 4.5% Senior Unsecured Notes $500 Revolving Credit Facility $478 Total Unsecured Debt $978 Total Debt $ 2,822 Weighted Average Interest Rate (1) 4.2 % $28.3 $34.2 Common Stock Dividends AFFO
14 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com 10% 2% 25% 4% 59% 2022 2023 2024 2025 2026 Thereafter Key Capitalization Metrics 5.0 Years 5.6 Years 5.3 Years 4.6 Years 4.3 Years 3.6% 4.0% 3.7% 3.8% 4.2% 2 2.5 3 3.5 4 4.5 5 5.5 6 1.50% 2.50% 3.50% 4.50% 5.50% 6.50% Q3'2021 Q4'2021 Q1'2022 Q2'2022 Q3'2022 x Weighted average interest rate of 4.2% with 83.1% of debt at fixed interest rates. x Only 12% of RTL’s debt matures through 2024 as a result of RTL’s focus to lock in long - term low interest rate bearing debt in 2020 and 2021. x $500 million of senior unsecured notes with credit rating of BB+ from S&P and BB+ from Fitch . Note: Metrics as of and for the three months ended September 30 , 2022 unless otherwise indicated . 1) Based on total debt outstanding as of September 30, 2022. For purposes of the revolving credit facility, the chart uses debt out standing under the facility at such date and not the total commitment. 2) Weighted based on the outstanding principal balance of debt for Q3’22 as of September 30, 2022 and for Q3’21 as of September 30, 2021. 3) The interest coverage ratio is calculated by dividing adjusted EBITDA by cash paid for interest (interest expense less amortizat ion of deferred financing costs, net, and amortization of mortgage premiums on borrowings) for the quarter ended September 30, 2 022 and for the quarter ended September 30, 2021. Adjusted EBITDA and cash paid for interest are Non - GAAP metrics. See appendix for Non - GAAP reconciliations. 4) Includes floating rate debt fixed by swaps. Metric Q3’2022 Q3’2021 Interest Coverage Ratio (3) 2.5x 3.6x Fixed Rate Debt (4) 83.1% 89.7% Weighted - Average Interest Rate 4.2% 3.6% Weighted - Average Debt Maturity 4.3 Years 5.0 Years Balance Sheet Highlights Weighted Average Interest Rate and Debt Maturity (2) Key Debt Metrics 63% of RTL’s Debt Is Scheduled to Mature After 2026 (1) RTL’s debt capitalization features long - term and primarily fixed rate and low interest rate bearing debt with only 12% of debt m aturing in the next nine quarters, limiting refinancing risks in the current high interest rate environment.
15 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Experienced Management Team Jason Slear Executive Vice President of Real Estate Acquisitions and Dispositions ▪ Responsible for sourcing, negotiating, and closing AR Global's real estate acquisitions and dispositions ▪ Oversaw the acquisition of over $3.5 billion of real estate assets and the lease - up of over 10 million square feet during professional career Michael Weil Chief Executive Officer, President and Chairman of the Board of Directors ▪ Founding partner of AR Global ▪ Previously served as Senior VP of sales and leasing for American Financial Realty Trust ▪ Served as president of the Board of Directors of the Real Estate Investment Securities Association (n/k/a ADISA) Boris Korotkin Senior Vice President of Capital Markets and Corporate Strategy ▪ Responsible for leading all debt capital market transactions ▪ Former Executive Vice President of Transaction Structuring for American Financial Realty Trust Ori Kravel Senior Vice President of Corporate Development ▪ Responsible for corporate development and business strategy ▪ Executed over $12 billion of capital market transactions and over $25 billion of M&A transactions Jason Doyle Chief Financial Officer, Treasurer and Secretary ▪ Mr. Doyle previously served as chief accounting officer of Global Net Lease, Inc. (“GNL”) and Chief Financial Officer, Secret ary , and Treasurer of Healthcare Trust, Inc. (“HTI”). Prior to joining AR Global and GNL, Mr. Doyle held various financial and practice leadership roles, including Acting VP Finance at Markforged , Inc. Associate Controller, Head of Global Accounting Operations at Charles River Associates and VP Finance and Practice Director, Transportation at AST Corporation, a privately - held software and management consulting firm
16 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Legal Notices
17 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Disclaimers Disclaimers This presentation includes estimated projections of future operating results or activities such as leasing activity, among other things . These projections were not prepared in accordance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial projections . This information is not fact and should not be relied upon as being necessarily indicative of future results ; the projections were prepared in good faith by management and are based on numerous assumptions that may prove to be wrong . Important factors that may affect actual results and cause the projections to not be achieved include, but are not limited to, risks and uncertainties relating to the Company and other factors described in the “Risk Factors” section of the Company's Annual Report on Form 10 - K for the year ended December 31 , 2021 , the Company's subsequent Quarterly Reports on Form 10 - Q and in future filings with the SEC . The projections also reflect assumptions as to certain business decisions that are subject to change . As a result, actual results may differ materially from those contained in the estimates . Accordingly, there can be no assurance that the estimates will be realized . The industry in which we operate is subject to a high degree of uncertainty and risk due to variety of factors, including those described in the “Risk Factors” and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's Annual Report on Form 10 - K for the year ended December 31 , 2021 , filed with the SEC on February 24 , 2022 and the Company's subsequent Quarterly Reports on Form 10 - Q, Current Reports on Form 8 - K and Annual Reports on Form 10 - K filed with the SEC . These and other factors could cause results to differ materially from those expressed in these publications and reports . This presentation contains estimates and information concerning the Company’s industry that is based on industry publications . The Company has not independently verified the accuracy of the data contained in these industry publications . These estimates and information involve a number of assumptions and limitations, and you are cautioned not to rely on or give undue weight to this information . The majority of the concessions granted to the Company's tenants as a result of the COVID - 19 pandemic are rent deferrals or temporary rent abatements with the original lease term unchanged and collection of deferred rent deemed probable . The Company's revenue recognition policy requires that it must be probable that the Company will collect virtually all of the lease payments due and does not provide for partial reserves, or the ability to assume partial recovery . In light of the COVID - 19 pandemic, the FASB and SEC agreed that for leases where the total lease cash flows will remain substantially the same or less than those after the COVID - 19 related effects, companies may choose to forgo the evaluation of the enforceable rights and obligations of the original lease contract as a practical expedient and account for rent concessions as if they were part of the enforceable rights and obligations of the parties under the existing lease contract . As a result, rental revenue used to calculate Net Income and NAREIT FFO has not been, and the Company does not expect it to be, significantly impacted by these types of deferrals .. In addition, since the Company currently believes that these deferral amounts are collectable, the Company has excluded from the increase in straight - line rent for AFFO purposes the amounts recognized under GAAP relating to these types of rent deferrals . Conversely, for abatements where contractual rent has been reduced, the reduction is reflected over the remaining lease term for accounting purposes but represents a permanent reduction and the Company has, accordingly, reduced its AFFO . Credit Ratings A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time . Each rating agency has its own methodology for assigning ratings and, accordingly, each rating should be evaluated independently of any other rating .
18 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Forward - Looking Statements Certain statements made in this presentation are “forward - looking statements” (as defined in Section 21E of the Exchange Act), i ncluding estimated projections of future operating results, and the impact and success of the proposed and recently completed acquisitions, and which reflect the expectations of the Company regarding future events. The forward - looking statement s involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those contained in the forward - looking statements. Such forward - looking statements include, but are not limited to, market and other e xpectations, objectives, and intentions, as well as any other statements that are not historical facts. Our potential risks and uncertainties are presented in the section titled “Item 1A - Risk Factors” disclosed in our Annual Report on Form 10 - K for the year ended December 31, 2021 filed with the SEC on February 24, 2022, and the Company's subsequent Quarterly Reports on Form 10 - Q filed with the SEC. Forward - looking statements speak as of the date they are made and, we disclaim any obligation to update and revise statements contained in these materials to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law. Th e following are some of the risks and uncertainties relating to us, although not all risks and uncertainties, that could caus e our actual results to differ materially from those presented in our forward - looking statements: ▪ We may be unable to acquire properties on advantageous terms or our property acquisitions may not perform as we expect. ▪ We are subject to risks associated with a pandemic, epidemic or outbreak of a contagious disease, such as the ongoing global COV ID - 19 pandemic, including negative impacts on our tenants and their respective businesses. ▪ Certain of the agreements governing our indebtedness may limit our ability to pay dividends on our Class A common stock, our Ser ies A Preferred Stock and our Series C Preferred Stock, and our ability to repurchase shares. ▪ If we are not able to generate sufficient cash from operations, we may have to reduce the amount of dividends we pay or ident ify other financing sources. ▪ Funding dividends from other sources such as borrowings, asset sales or equity issuances limits the amount we can use for pro per ty acquisitions, investments and other corporate purposes. ▪ Our operating results are affected by economic and regulatory changes that have an adverse impact on the real estate market i n g eneral. ▪ Inflation and continuing increases in the inflation rate may have an adverse effect on our investments and results from opera tio ns. ▪ In owning properties we may experience, among other things, unforeseen costs associated with complying with laws and regulati ons and other costs, potential difficulties selling properties and potential damages or losses resulting from climate change. ▪ We depend on tenants for our rental revenue and, accordingly, our rental revenue is dependent upon the success and economic v iab ility of our tenants. If a tenant or lease guarantor declares bankruptcy or becomes insolvent, we may be unable to collect balances due under relevant leases. ▪ Our tenants may not be diversified including by industry type or geographic location. ▪ The performance of our retail portfolio is linked to the market for retail space generally and factors that may impact our re tai l tenants, such as the increasing use of the Internet by retailers and consumers. ▪ Certain of our tenants are facing increased competition with other non - traditional and online grocery retailers and higher costs due to inflation and supply chain issues, which may negatively impact their businesses. ▪ We depend on our Advisor and Property Manager to provide us with executive officers, key personnel and all services required for us to conduct our operations. ▪ All of our executive officers face conflicts of interest, such as conflicts created by the terms of our agreements with our A dvi sor and compensation payable thereunder, conflicts allocating investment opportunities to us, and conflicts in allocating their time and attention to our matters. Conflicts that arise may not be resolved in our favor and could result in actions th at are adverse to us. ▪ We have long - term agreements with our Advisor and its affiliates that may be terminated only in limited circumstances. ▪ We have substantial indebtedness and may be unable to repay, refinance, restructure or extend our indebtedness as it becomes due . Increases in interest rates could increase the amount of our debt payments. We may incur additional indebtedness in the future. ▪ The stockholder rights plan adopted by our board of directors, our classified board and other aspects of our corporate struct ure and Maryland law may discourage a third party from acquiring us in a manner that might result in a premium price to our stockholders. ▪ Restrictions on share ownership contained in our charter may inhibit market activity in shares of our stock and restrict our bus iness combination opportunities. ▪ Actual or threatened terrorist attacks and other acts of violence, civilian unrest or war may affect the markets in which we ope rate our business and our profitability. ▪ Certain provisions in our bylaws and agreements may deter, delay or prevent a change in our control. ▪ We may fail to continue to qualify as a REIT.
19 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Appendix
20 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Definitions AFFO : In calculating AFFO, we start with FFO, then we exclude certain income or expense items from AFFO that we consider to be more reflective of investing activities, such as non - cash income and expense items and the income and expense effects of other activities that are not a fundamental attribute of our day to day operating business plan, such as amounts related to litigation arising out of the merger with American Realty Capital - Retail Centers of America, Inc . in February 2017 (the “Merger”) . These amounts include legal costs incurred as a result of the litigation, portions of which have been and may in the future be reimbursed under insurance policies maintained by us . Insurance reimbursements are deducted from AFFO in the period of reimbursement . We believe that excluding the litigation costs and subsequent insurance reimbursements related to litigation arising out of the Merger helps to provide a better understanding of the operating performance of our business . Other income and expense items also include early extinguishment of debt and unrealized gains and losses, which may not ultimately be realized, such as gains or losses on derivative instruments and gains and losses on investments . In addition, by excluding non - cash income and expense items such as amortization of above - market and below - market lease intangibles, amortization of deferred financing costs, straight - line rent, and share - based compensation related to restricted shares, the 2018 OPP and the 2021 OPP from AFFO, we believe we provide useful information regarding those income and expense items which have a direct impact on our ongoing operating performance . By providing AFFO, we believe we are presenting useful information that can be used to, among other things, assess our performance without the impact of transactions or other items that are not related to of our portfolio of properties . AFFO presented by us may not be comparable to AFFO reported by other REITs that define AFFO differently . Annualized Straight - Line Rent (“SLR”) : Straight - line rent which is annualized and calculated using the most recent available lease terms as of the period end indicated . Cash Cap Rate : For acquisitions, cash cap 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 or leases . For dispositions, cash cap rate is a rate of return based on the annualized cash rental income of the property to be sold . For acquisitions, cash cap rate is calculated by dividing this annualized cash rental income the property will generate (before debt service and depreciation and after fixed costs and variable costs) by the purchase price of the property, excluding acquisition costs . For dispositions, cash cap rate is calculated by dividing the annualized cash rental income by the contract sales price for the property, excluding disposition costs . Weighted average cash cap rates are based on square feet unless otherwise indicated . Cash NOI : We define Cash NOI as NOI excluding amortization of above/below market lease intangibles and straight - line adjustments that are included in GAAP lease revenues . Executed Occupancy : Includes Occupancy as defined below as of a particular date as well as all leases fully executed by both parties as of the same date where the tenant has yet to take possession as of such date . For Q 3 ’ 22 and as of September 30 , 2022 , there are six additional leases executed where rent commences over time in Q 4 ’ 22 and 2023 totaling approximately 104 , 100 square feet . FFO: We define FFO, a non - GAAP measure, consistent with the standards established over time by the Board of Governors of NAREIT, as r estated in a White Paper and approved by the Board of Governors of NAREIT effective in December 2018 (the "White Paper"). The Wh ite Paper defines FFO as net income or loss computed in accordance with GAAP excluding depreciation and amortization related to real estate, gains and losses fro m s ales of certain real estate assets, gains and losses from change in control and impairment write - downs of certain real estate as sets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Adjustments for consolidated p art ially - owned entities (including our OP) and equity in earnings of unconsolidated affiliates are made to arrive at our proportion ate share of FFO attributable to our stockholders. Our FFO calculation complies with NAREIT's definition. Gross Asset Value: Total gross asset value of $5.4 billion, comprised of total assets of $4.7 billion plus accumulated depreciation and amortiza tio n of $0.7 billion as of September 30, 2022. Investment Grade: As used herein, Investment Grade includes both actual investment grade ratings of the tenant or guarantor, if available, or i mpl ied investment grade. Implied investment grade may include actual ratings of tenant parent, guarantor parent (regardless of w het her 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. The term “parent" for these purposes includes any entity, including any governm en tal entity, owning more than 50% of the voting stock in a tenant. Ratings information is as of September 30, 2022 and based on Annualized Straight - Line Rent. Leasing Pipeline : Leasing Pipeline includes ( i ) all leases fully executed by both parties as of October 31, 2022, but after September 30, 2022 and (ii) all leases under ne got iation with an executed LOI by both parties as of October 31, 2022. This represents one executed lease totaling approximately 2, 300 square feet and 21 LOIs totaling approximately 262,000 square feet. No lease terminations occurred during this period. Leasing pipeline should n ot be considered an indication of future performance. Liquidity: As of September 30, 2022, the Company had $ 41.1 million in cash and cash equivalents, and $39.9 million available for future borrowings under the Company's credit facility. LOI: Means a non - binding letter of intent. Necessity - Based : We define Necessity - Based as properties that are leased to tenants that operate in what we believe to be service - based or essential industries such as auto services, distribution, financial services, gas/convenience, grocery, healthcare, and quick service restaurants, among others . Net Debt : For Q 3 ’ 2022 , represents total debt of $ 2 . 8 billion less cash and cash equivalents of $ 41 . 1 million as of September 30 , 2022 . NOI : Defined as a non - GAAP financial measure used by us to evaluate the operating performance of our real estate . NOI is equal to total revenues, excluding contingent purchase price consideration, less property operating and maintenance expense . NOI excludes all other items of expense and income included in the financial statements in calculating net (loss) . Occupancy : Represents percentage of square footage of which the tenant has taken possession of divided by the respective total rentable square feet as of the date or period end indicated . PSA : Means a definitive purchase and sale agreement .. Remaining Lease Term : Represents the outstanding tenant lease term . Weighted based on Annualized Straight - Line Rent as of the date or period end indicated . Traditional Retail : RTL’s definition of Traditional Retail includes retail properties leased to tenants in the auto retail, department store, discount retail, electronics, furniture, home improvement, home furnishing , specialty retail, and sporting good sectors .
21 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Non - GAAP Reconciliations (Adjusted EBITDA, NOI & Cash NOI) (Unaudited) Three Months Ended September 30, 2022 September 30, 2021 EBITDA: Net loss $ (50,689) $ (565) Depreciation and amortization 57,494 32,762 Interest expense 32,402 19,232 EBITDA (1) $ 39,207 $ 51,429 Impairment of real estate investments 30,046 4,554 Acquisition, transaction and other costs 210 3,426 Equity - based compensation 3,857 4,149 Gain on sale of real estate investments (1,608) (478) Other income (25) (18) Adjusted EBITDA (1) $ 71,687 $ 63,062 Asset management fees to related party 7,939 9,880 General and administrative 8,499 5,589 NOI (1) $ 88,125 $ 78,531 Accretion of market lease and other intangibles, net (574) (1,474) Straight - line rent (2,586) (1,392) Cash NOI (1) $ 84,965 $ 75,665 Cash Paid for Interest: Interest expense $ 32,402 $ 19,232 Amortization of deferred financing costs, net (3,474) (2,192) Amortization of mortgage discounts and premiums on borrowings (454) 328 Total cash paid for interest $ 28,474 $ 17,368 Non - GAAP Measures Amounts in thousands 1) For the three months ended September 30, 2022 and September 30, 2021, includes equity - based compensation expense related to the Company’s restricted common shares of $0.7 million and $0.3 million, respectively.
22 The Necessity Retail REIT ® Where America Shops | www.necessityretailreit.com Non - GAAP Reconciliations (FFO & AFFO) (Unaudited) Three Months Ended September 30, 2022 December 31, 2021 September 30, 2021 Funds from operations (FFO): Net loss attributable to common stockholders (in accordance with GAAP) $ (56,466) $ (40,219) $ (6,406) Impairment of real estate investments 30,046 28,616 4,554 Depreciation and amortization 57,494 32,955 32,762 Gain on sale of real estate investments (1,608) (3,982) (478) Proportionate share of adjustments for non - controlling interest to arrive at FFO (115) 53 (150) FFO attributable to common stockholders (1) $ 29,351 $ 17,423 $ 30,282 Acquisition, transaction and other costs (2) 210 774 3,426 Legal fees and expenses – COVID - 19 Lease Disputes (3) 7 200 44 Accretion of market lease and other intangibles, net (574) (1,175) (1,474) Straight - line rent (2,586) (1,897) (1,392) Straight - line rent (rent deferral agreements) (4) (27) (694) (876) Amortization of mortgage (premiums) and discounts on borrowings, net 454 4 (328) Loss on non - designated derivatives (5) ─ 3,950 ─ Equity - based compensation (6) 3,857 3,485 4,149 Amortization of deferred financing costs, net and change in accrued interest (7) 3,474 4,743 2,620 Proportionate share of adjustments for non - controlling interest to arrive at AFFO (6) 3 (18) AFFO attributable to common stockholders (1) $ 34,160 $ 26,816 $ 36,433 Weighted - average common shares outstanding 133,116 $ 123,221 $ 118,863 Net loss per share attributable to common stockholders — Basic and Diluted $ (0.43) $ (0.33) $ (0.06) FFO per common share $ 0.22 $ 0.14 $ 0.25 AFFO per common share $ 0.26 $ 0.22 $ 0.31 Dividends declared on common stock $ 28,331 $ 26,245 $ 25,190 Non - GAAP Measures Amounts in thousands, except per share data 1) FFO and AFFO for the three months ended September 30, 2021 includes income from lease termination fees of $10.4 million, whic h i s recorded in revenue from tenants in our consolidated statements of operations. 2) Primarily includes prepayment costs incurred in connection with early debt extinguishment as well as litigation costs related to the Merger. 3) Reflects legal costs incurred related to disputes with tenants due to store closures or other challenges resulting from COVID - 19 . The tenants involved in these disputes had not recently defaulted on their rent and, prior to the second and third quarters of 2020, had recently exhibited a pattern of regular payment. Based on the tenants involved in these matters, their history of rent payments, and the impact of the pandemic on current economic conditi ons , the Company views these costs as COVID - 19 - related and separable from its ordinary general and administrative expenses related to tenant defaults. The Company engaged counsel in connection with these issues separate and distinct from counsel the Company typically engages for tenant defaults. The amount reflects what t he Company believes to be only those incremental legal costs above what the Company typically incurs for tenant - related dispute iss ues. The Company may continue to incur these COVID - 19 related legal costs in the future. 4) Represents amounts related to deferred rent pursuant to lease negotiations which qualify for FASB relief for which rent was d efe rred but not reduced. These amounts are included in the straight - line rent receivable on the Company's consolidated balance shee ts but are considered to be earned revenue attributed to the current period for which rent was deferred for purposes of AFFO as they are expected to be collected. Accordingly, when the deferred amo unts are collected, the amounts reduce AFFO. For rent abatements (including those qualified for FASB relief), where contractu al rent has been reduced, the reduction is reflected over the remaining lease term for accounting purposes but represents a permanent reduction and the Company has, accordingly reduced its AFFO. 5) In the quarter ended December 31, 2021, the Company recognized a charge $4.0 million for the change in value of an embedded d eri vative (a 7.5% collar on the price of stock/units to be issued in connection with the CIM Portfolio Acquisition). Management doe s not consider this non - cash charge for an embedded derivative fair value adjustment in connection with this transaction to be capital in nature and it is not part of recurring operations. Acco rdi ngly, such charges are excluded for AFFO purposes. 6) Includes expense related to the amortization of the Company's restricted common shares and LTIP Units related to its multi - year outperformance agreements for all periods presented. 7) We issued $500.0 million in Senior Notes in October 2021. The Senior Notes pay semiannual interest which we accrue interest o ver time for GAAP purposes. Accordingly, to better reflect our operating performance, beginning with the year ended December 31, 20 21 and for all periods thereafter, we have elected to remove the impact of the change in accrued interest from the calculation of AFFO, which was previously included in this line item.