Good morning everyone, thank you for joining us. This call is being webcast on the investor relations sections of GNL and RTL's websites at www.necessityretailreit.com and www.globalnetlease.com. Joining me today on the call to discuss the exciting transaction are Michael Weil, President and Chief Executive Officer at Necessity Retail REIT, and Jim Nelson, CEO at Global Net Lease. At this time, all participants are in a listen-only mode. A 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. The following information contains forward-looking statements which are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements.
We refer you all to each company's respective SEC filings, including in the annual report on Form 10-K for the year ended December 31st, 2022, filed in February 2023, and all other filings with the SEC after that date and contained in the presentation regarding the transaction posted to the investors relations section of GNL's website for additional risks and for a more detailed discussion of the risk factors that could cause these differences or otherwise impact our business. Any forward-looking statements provided during this conference call are only made as of the date of this call. As stated in SEC filings, GNL and RTL disclaims any intent or obligation to update or revise these forward-looking statements except required by law. Also, during today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating the company's financial performance.
These measures should not be considered in isolation or as a substitute to our financial results prepared in accordance with GAAP. Reconciliations of these measures to the most directly comparable GAAP measures are available in the transaction presentation posted to the investor relations section of GNL's website. Please refer to the recent earnings releases for more information about what we consider to be implied investment-grade tenants, a term we may reference throughout today's call. GNL and RTL also intend to file with the SEC a joint prospectus and proxy statement regarding the proposed transaction, and investors are urged to read this document when it becomes available because it will contain important information about the proposed transaction. I'll now turn the call over to Michael Weil.
Great. Thank you, operator, and good morning, everybody. I'm happy to be joined today by Jim Nelson, the Co-CEO of what will be the merged GNL and also the CFO, Chris Masterson. Many of you know us in our current roles, and frankly, we're very excited about the announcement of this merger and coming together. The merged GNL will be the third largest publicly traded net lease REIT with a global presence. One of the things that we're very excited about is just the overall scale of the company, the diversification, and frankly, a number of things that I plan on talking about on today's call and probably get into with the Q&A.
I hope you have all had a chance to read the press release that was filed last night, as well as the investor deck, excuse me. There's a lot of pertinent details in both, if you haven't had a chance, I do hope you will look through the decks as well. Let me get started. First of all, we announced a transaction, a stock for stock merger. GNL will be acquiring RTL. The RTL shareholders will receive 0.67 shares of GNL. As I mentioned earlier, this is going to be a very significant publicly traded net lease REIT, with exposure, of course, not only in North America, but in Europe as well. The increase in size, scale, and overall prominence, this will be a $9.6 billion asset portfolio.
The company will have over 1,350 individual properties, and we'll talk a little bit about some of the diversification that comes from that. We think about it in terms of geography, asset type, tenant, and industry. We have mitigated concentration risks. The top 10 tenants in the portfolio represent less than 20% of the overall straight-line rent. Our largest tenant in the portfolio, who is FedEx, represents 2.7% of overall straight-line rent. As we think also of the overall portfolio, 55% of the overall portfolio is investment-grade or implied investment-grade rated. Again, from a credit standpoint, we think that the two companies coming together really adds a lot.
For the shareholders, which of course, are at the forefront of our thoughts, we anticipate this to be 9% accretive compared to GNL's Q1 2023 AFFO per share. That accretion comes from a number of things. It comes from the scale, and it also comes from the internalization of management, which I'll discuss in just a few minutes. Net debt to EBITDA of the pro forma company is reduced to 7.6x, which I think is a very important starting point for both companies, as the overall balance sheet is stronger of the merged company and really gives us a great foundation to continue to operate and grow the company.
For dividend coverage, we expect an 85% payout ratio of the dividend that the board anticipates to be setting at $1.42 per share at time of closing. That's been reviewed and based on the implied earnings of the overall portfolio. One of the things that is exciting about that is for the existing RTL shareholders that will become GNL shareholders, that's going to represent a 12% increase in overall dividend for those shareholders that become GNL shareholders. Just overall for the GNL shareholders, a transaction that has alignment across the board. 9% accretion I think is very meaningful and shows the value of these two companies coming together.
When we take into effect, the benefit of internalizing management, in this transaction, we will eliminate all management fees at closing. The employees that have currently been running both RTL and GNL will be internalized. They will come over and become employees of GNL. There will be no contracts between the former advisor and GNL. It will be a completely self-sufficient, internalized management structure that we're very excited about because of the familiarity and the skills of the employees that will be running GNL on a day-to-day basis. It will reduce operating expenses significantly. It will increase cash flow, which will be used for a number of things, everything from debt repayment, acquisitions, further potential increase in dividend coverage.
We looked frankly at the industry, we have seen that internally managed peers traded about 14.3x AFFO compared to about 7.1x for externally managed net lease REITs. Again, I think that's just another reason that we really look to the benefits of this transaction. We anticipate annual savings of $75 million through the internalization and merger synergies. From a corporate governance standpoint, the Board has taken the steps to enhance corporate governance. The decisions have been made to opt out of MUTA, something that I think from a governance standpoint, the market has inquired about. We will declassify the Board at closing. The company stockholder rights plan, many of you refer to that as a poison pill, will also be repealed.
Very much an alignment, further alignment between shareholders and the company. Before I stop for Q&A or to see if Jim has anything that he'd like to add, as stated in the press release, there is a go-shop. RTL has a 30-day go-shop, and that is being handled by their financial advisor, Truist, who represented RTL in this transaction, and on the GNL side, Bank of Montreal was the financial advisor. Jim, Chris, before we go to Q&A, anything that you guys would like to add?
Yeah. Let me just say a couple things. Thank you, Mike. First of all, I'm really looking forward to working with Mike and Chris. I mean, we've got six and a half years already running this company. It's gonna be a seamless transition, which is beautiful. The scale will be something that's very, very exciting and important for GNL. The reduced expenses, internalization of management is really terrific. You know, Mike covered a lot of the net takeaways, the value add here, and I just wanna emphasize that we at the company are really excited about this. Thank you, Mike.
Thanks, Jim. Chris, anything that you'd like to add, or should we open up for Q&A?
We can open up for Q&A.
All right.
Thank you. 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'd 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. Our first question comes from the line of Bryan Maher with B. Riley Securities. Please proceed with your question.
Thank you.
Good morning, Bryan.
Good morning, Michael and Jim and Chris. Just a few from me this morning. You know, very interesting transaction. Can you share with us what prompted the merger at this particular time?
You know, there were a couple of things that were really in our thoughts here. One, we just thought the combination made such great sense from an overall scale. When the special committees were formed and they started to evaluate this, the information that they were provided by their financial advisors with the accretion, the dividend increase for the RTL shareholders, the overall value creation for the GNL shareholders.
It just came to be very clear that this was going to be at almost $10 billion, a very meaningful transaction, in creating a powerful net lease REIT that would benefit from scale. The conversations around internalization, you know, just as an example, when we talked about internally managed peers trading at 14 x AFFO and externally advised companies at 7 x, we saw it as a good opportunity to really let the company find its true value with this scale. Timing just kind of happened naturally.
Thanks. Then other than the internalization cost, the fee cost, what other costs are you expecting to merge the two companies together? Like, how meaningful would that be?
The overall cost to merge the two companies will be very, very low. There will be details provided in the proxy when that is filed. Obviously, that's something that the work is already starting on. Because the two companies are familiar with one another coming from the common platform, internalization will be the driver. In that internalization, GNL is going to be moving into fully furnished offices that already exist. You know, there's not a need for employees to be hired, so the G&A that's been calculated and published in the press release and the decks takes that all into account. When we talk about the 9% accretion in the overall deal, that factors in all costs. It is a very positive overall transaction for the merged GNL.
Okay, one more for me, and then I'll hop back into the queue and let the others go. The $1.42 dividend, I think you said it was an 85% payout ratio on AFFO. I think the peers are at, I don't know, I think in the deck I saw 75%. What gives you comfort with that 85% payout ratio, and how comfortable should be the shareholders that there won't be a subsequent dividend cut in the next couple of years?
Well, I always caveat it, Bryan, by saying dividend policy is set by the board. Management is very comfortable with where the board came out at $1.42 and the 85% coverage ratio. The pro forma company has taken into account a steady state merger between GNL and RTL. The $1.42 to us feels that it is the right sized dividend and 85% ratio will generate retained earnings that will be valuable to the company overall. When we think about the potential growth in the portfolio, everything from acquisitions, lease up, some strategic dispositions that occur, the board will certainly have the ability over time to evaluate further improving the coverage ratio.
At 85%, we feel that it is a very solid starting coverage ratio, and $1.42 is a justified dividend. We were completely comfortable with the board's decision on that reset.
Okay. Thank you, Michael.
Thanks, Bryan.
Thank you. Our next question comes from the line of Mitch Germain with JMP Securities. Please proceed with your question.
Good morning.
Hi, Mitch.
Hi. Michael, in conjunction with the closing, is it the understanding that you and Chris are going to resign from any other roles that you hold for any other REITs that are in the AR Global organization?
Yes.
Okay.
That is absolute, and it's been determined already.
How should I think about the growth prospects going forward? Obviously RTL facing, you know, some challenges on the tenant side, with some bankruptcies. It does have a pretty good leasing pipeline, though. On the GNL side, obviously you've got some office exposure. How do I think about, you know, kinda your ability to grow earnings, on a fairly steady, consistent basis?
Well, I think on the RTL side, I think your concerns are a little bit overstated. The portfolio has continued to show the ability to internally grow through lease up, et cetera. The other thing I would just point out is with the merged company, the further diversification of the portfolio adds a great level of additional safety. You know, no tenant over 3%. Foundationally, we're very stable. Growth is an important aspect of running this company, and that's something that we anticipate coming with more details in the future as we get closer to a closing. What we wanted to do today was give the market a very clear picture of what day one merge GNL look like.
We're talking about, you know, I know I've said it several times, and I guess I am intentionally trying to repeat it, but the proposed transaction is 9% accretive day one, just from the combination of the portfolio, the known synergies from internalization, the removal of duplicative professional services like audit, et cetera. The company is really well-positioned, I think, for continued growth, and we will be very eager to evaluate different opportunities to further grow through accretive acquisitions. There's a lot to come in this announcement. Obviously, this is day one, but we're starting from such an exciting point. As you mentioned, RTL continues to perform at a very high level with lease-up.
As Jim and Chris can talk to, GNL continues to be very stable, and they've had terrific performance with renewals and growth from that aspect. You know, there are a number of levers that we're excited to really develop and operate this company so that it will have growth not just in portfolio but in earnings and AFFO.
Got you. You talked about some of the cost synergies, right? $54 million seems to be pretty straightforward on the external advisement and property management side. How should we think about the additional $21 million? That does seem a lot to think about when you consider audit, maybe some legal, some public filing fees. What comprises that, and how should that $21 million play out in terms of the realization of how quickly you can realize those synergies?
That additional roughly $20 million, we project will be realized within the first year of the merger. It will be detailed in the proxy. The $75 million of annual savings that we've highlighted, have been reviewed and vetted. Jim, Chris, and I are very confident. As you said, the majority of that comes from the internalization. Again, high level of confidence. There are not... It's not a complicated synergies map to achieve these goals. The $75 million is where we are comfortable and highly confident in achieving.
Last one from me. I know that you mentioned the go-shop, right? I think it's 30 days or so that Truist is handling. I mean, was RTL for sale, or was this just the situation that you've considered strategically today and you'll see if the market has, you know, kinda any potential bid going forward? I mean, how should I consider how this process played out?
Well, again, Mitch, I'm gonna rely on the details that'll be published in the proxy for that because this was handled, both sides of this transaction were handled by special committees of the board of the independent directors that I was not a part of. The proxy will detail how this came about. You know, but I do think that, you know, a go-shop is a, you know, something that many deals have. It's a 30-day opportunity to see if there's a topper out there. Truist is certainly capable of handling that process, and we look forward to the outcome.
Is there a term fee if there is a higher bid? I didn't see that in the documents.
I didn't hear the beginning of your question. I apologize.
Is there some sort of fee that we need to consider if there's another bid?
I will have to confirm if that's been released yet. The details are all gonna be provided, Mitch. I just don't wanna get ahead of public disclosure.
Yep. Understood. Thank you so much for your time.
All right. Thanks, Mitch.
Thanks, Mitch.
Thank you. Our next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.
Yeah. Hi, good morning. A couple of questions. I guess first, I just wanted to follow up on the growth and the 9% accretion that you outlined at closing. Is that just related to the internalization transaction and corporate G&A synergies, or does that also include assumptions around, you know, operations, leasing? You know, you've detailed and discussed the Mountain Express bankruptcy a little bit and things of that nature.
Todd, that 9% accretion takes into account, obviously the synergies, the $75 million of synergies. It also takes into account the Known status of both the RTL and the GNL portfolios come together. There's no, at this point in what's been publicly disclosed, there are no assumptions about growth other than what's in the company's existing pipelines.
Okay. Can you discuss the internalization fee, the $325 million and $50 million amounts, a little bit of color on how that valuation was arrived at? Maybe for Chris, you know, within the context around the pro forma 4Q estimate, you know, how many shares are you assuming are outstanding at closing for that calculation?
Chris, do you wanna respond or do you want me to start?
You could start. I'm just pulling the share information to make sure we've put that out there.
Okay. Todd, I'm sorry. Would you just restart your question for me and Chris will jump in in a minute?
Yeah. I just wanted to see if you could provide a little bit of color on, y ou know, how those amounts were arrived at in terms of, you know, the valuation for the internalization transaction.
I will. First of all, Todd, the internalization amounts were negotiated. They will be detailed in the proxy, so I'm not privy to releasing the details of that at the moment. Each company, GNL and RTL, had an advisory contract between AR Global and the REIT itself, and that was negotiated as part of the transaction, as was property management, which was another existing contractual arrangement. What the ultimate goal of the company GNL was we wanted full internalization and separation, not for any other reason other than we want it to be a clearly independent company operating our own portfolio, making our own contractual arrangements for anything that might be needed.
Part of the employee group that will be coming over includes a full European asset management team, a U.S. asset management team, so the company will be able to run its own property management and asset management platforms. They were fully and heavily negotiated. I think the acceptance of stock by AR Global as the majority currency in the internalization shows great alignment and belief in the announced transaction. You know, we were excited to see that structured the way it was. We think AR Global did a great job as the external advisor.
We're excited to be fully internalized and operating the portfolio, you know, in the same way that a lot of our internally managed peers are currently doing as well.
Just to jump in about the shares. We have not disclosed the number of shares as part of the internalization component. For the RTL stockholders, it's 0.67 shares of GNL that they receive, and there was about $134 million of shares outstanding as of the quarter end. That's roughly about $90 million related to RTL.
Okay. Okay. That's helpful. Just back to the $21 million of merger synergy. Just so I understand, you're expecting that to be fully realized within the first year of closing? You know, I just wanted to make sure 'cause you know, it sounds like there could be some leases or, you know, technology or vendor contracts, things of that nature. You're anticipating the full $21 million to be realized in the run rate within 12 months of closing?
That is correct.
Okay. Then just one more, as we kinda think about the combined company, you know, going forward, do you plan to begin providing guidance, you know, as we think about 2024, you know, whether, you know, full year 2024 AFFO guidance, same-store growth, and just more detail around, you know, the portfolio and assumptions going forward?
Final decisions haven't been made, but I think you can tell by what we've published regarding the merger and the accretion and things like that. I believe that yes, we will be providing some guidance.
Okay. All right. Thank you.
Thanks, Todd.
Thank you. Our next question comes from the line of John Massocca with Ladenburg Thalmann. Please proceed with your question.
Good morning.
Hi, John.
Hey, good morning, John.
Maybe going back to the internalization fee, can you just walk us through the math for the $325 million equity component? I mean, is that based on shares as of yesterday's close or heading into the merger? Just kind of any kind of detail as to how we should think about the share count number that's gonna come out of that portion of the internalization fee.
I'm gonna have to ask that we wait until the proxy is filed. That will all be part of the disclosure. It's just not out yet.
Okay. Maybe kind of bigger picture, you know, you're gonna have kind of these three property type buckets, the retail side of things, the office and the industrial. Are you gonna focus as you look to grow on any one particular, you know, property type or dispose of any one particular property type, or is it gonna continue to kind of have these three verticals as you go forward?
As we think about the three verticals, we think that they all have very valuable qualities. With our office, you know, the office is single tenant, mission-critical corporate headquarters. Unlike a lot of the conversations we hear about the struggles of different cities and their multi-tenant office portfolios, these corporate office complexes continue to be typically at a 100% occupancy with activity throughout every day, every business day. The portfolio complements itself. We look at some of the peer set. You know, we talked about being one of the three largest net lease REITs with global exposure and fourth largest overall net lease.
When you look at that whole range of companies, they have very similar exposure retail, office, industrial. You know, we will continue to see different markets and different buying opportunities, different cycles, et cetera. That's what Jim and I, and the acquisition teams will continue to evaluate as we look at the portfolio and where we have different opportunities to grow.
Okay. It was kind of implied a little bit in your answer to Mitch's question, but I just wanna make sure I'm thinking about this right. The $54 million of synergies that comes from the internalization, that should be relatively instant upon closing of the merger. Correct?
Correct.
Okay. One last one, and I know this may come with the SEC filings, but any thoughts on timing for the shareholder votes for both RTL and GNL shareholders?
That will all be announced. It's, you know, being worked on. We were really glad to get this out into the market last night, host today's initial call. You'll be seeing, as is customary in a transaction like this, further updates and dates, et cetera. That, that will be announced shortly.
That's it for me. Thank you very much.
All right. Thanks, John. Thanks, John.
Thanks, John.
Thank you. Our next question comes from line of Michael Gorman with BTIG. Please proceed with your question.
Yeah, thanks. Good morning. just wanted to start on the accretion side, if we could, and just kind of checking my math here. First quarter, GNL did about $0.38 a share in AFFO. 9% accretion would be a little over $0.03 a share. Annualize that's $0.13-$0.14 a share. With a few assumptions, and I know you're not disclosing how you're getting to the $325 million in stock, but just kind of a few basic assumptions there. You can get to, like, 225 million shares. If I average that out, that's like $30 million-$31 million of total accretion, which is less than 50% of the cost savings that you've actually laid out for the deal. I'm just trying to figure out where the gap is between...
either what's going wrong with my math there, or where the gap is between the $75 million in cost savings and the $30 million-$31 million of accretion that's implied by the transaction?
I think you're making some assumptions or not making some assumptions because of what has to still be released, which will be in the proxy. If I can, what I'd like to do is after the call, Chris and I will catch up, and Jim of course, and let us see what we can get back to you with that is publicly released now versus what's going to come in the further releases of the proxy.
Okay. Right. 'Cause the only unknown in there is the share count associated with the break fee, right? That's the only unknown piece.
Yeah. What I can tell you is the 9% accretion that has been announced as part of the pro forma company is based on the first quarter 2023 GNL results, as you said. It's been fully analyzed, and that is what we're expecting upon closure of the transaction. There are just probably some things that will come in the further release that you aren't able to take into account right now.
Okay. Yeah, that would be helpful because like I said, that's over, like, 50% leakage on the synergies side. Another question from the presentation and maybe for Chris. It mentioned that obviously the line of credit wouldn't be assumed, which I think makes sense, that you'd be having a conversation with your lenders about, I guess, extending and reworking your line of credit as a result. I guess two questions. One is, have you started those conversations already just kind of given the overall credit environment? Two, I think it mentions drawing $818 million.
I'm just curious where that figure comes from, 'cause as of 1Q, I think RTL had about $450 million outstanding on its line of credit. Even if you add in the cash portion of the internalization fee, that's still about $320 million higher than would be implied. I'm just kind of curious where that $800 million+ draw comes from?
There's also been draws post Q1 related to refinancing from the U.K. and Germany included in that balance.
I'm sorry. The $800 million in additional accordion draw would not all be associated with the transaction?
That is, that is correct. Additional about $800 million. Sorry, just pulling up the number. Give me one second. Sorry. Yes, it has to do with some refinancings also. That's it.
Okay.
Remember, Michael, we've talked to you about the U.K. facility and refinancing that potentially on the credit line. There are some refinancings in that number.
Right. Right. Got it. I was just curious because the footnote mentioned just the repayment of the RTL credit facility and the internalization. That's why I was a little bit confused on that part.
Part of it is because the European piece has already been done. That leaves room under the credit facility with the accordion for the RTL payoff of their credit facility. As Jim and Chris and I have talked about, you know, we will look at the credit facility. We think that there's a great opportunity over time, whether it's a bond issuance. You know, there are a number of different things that we'll be able to do. In the short interim period, the credit facility is going to be available through the accordion, and we'll be in good shape. We don't need a bridge for this transaction. It's very straightforward for what the company is capable of transacting on.
Got it. Okay. One was what's the genesis or the reasoning behind the changing of the charter to the 8.9% threshold? Can you just remind us what the shareholder vote threshold is for approval of the transaction on both the RTL and the GNL sides?
I'm gonna get that for you in just a second. I'm asking our general counsel.
Okay. I guess, sorry, just one more as we're doing that. Just to confirm, I assume it is, but between now and the estimated close, there aren't any additional kind of internalization fees that are being paid on the RTL side, right? The $325 + $50 is the fully loaded internalization costs across the two organizations.
Correct. To your earlier question, RTL needs majority of shares outstanding, and GNL needs a majority of shares, cast at the meeting.
Cast at the meeting. Okay. Oh, just one last one. Sorry. I know you're looking to pursue more strategically, looking to pursue kind of an unsecured balance sheet once with the combined entity. What is the percentage of assets or percentage of ABR or whatever that is, that is currently unencumbered that you could like, where does that sit today as you get started?
That's something that hasn't been disclosed as part of the merger. We'll take a look at that as we get further into it.
Okay. Thanks for the time.
All right. Thank you.
Thanks, Michael.
Thank you. Our next question comes from the line of Nate Crossett with BNP Paribas. Please proceed with your question.
Hey. Hey, good morning. Thanks for taking the questions.
Hi, Nate.
It has been a lot asked already, just one. For the go-shop, would the buyer have to buy out the advisor fee? And then two, if a buyer were to come in, should we be operating under the assumption that GNL would still be internalized?
Those are questions that the board is going to have to answer. As we are thinking about it, we've announced a merger that we've gone through the details of that we're very excited about. The go-shop will be detailed by Truist, the terms of it, et cetera. I don't. It's not something that I can comment on right now.
Okay. How about are there any hurdles outside of the shareholder vote that you see in closing the deal that we should be aware of or?
No, no, I don't. I think that's one of the, you know, again, the two companies have operated on a shared platform for quite a while, and the removal from that shared platform to the internalization brings those key dedicated employees to GNL. So it is really something that we think of as a very smooth transition. Jim and Chris and I have really worked very closely together on what this looks like. When we clear this shareholder vote, we're excited to start operating.
Nate, you have to really look at this. It's such an easy transition. I mean, 'cause all these people have worked on. A lot of them worked on both, some worked on each. It's a very easy natural transition. They'll just continue doing what they're doing, and we'll have a much larger company with a lot of benefits.
Okay. That's helpful. Then just like the price that the advisor is getting GNL stock at, like, I know you said it will come out in the proxy or, but has it been decided yet or is it yet to be decided?
Again, as much as, you know, our instinct is to answer questions, we are bound by waiting for the proxy to be released. I'm sorry.
Okay. Okay.
That, that will all come out in the proxy in great detail.
Okay. I'll leave it there. Thank you.
All right. Thanks.
Thanks, Nate. Thanks, Nate.
Thank you. Our next question comes from the line of Mitch Germain with JMP Securities. Please proceed with your question.
Hey, what's going on? I guess maybe it was kind of what Nate just asked, but is the internalization, the fee, is that based on a VWAP from today, or is it based on a VWAP at the time of closing?
Mitch, I would love to give you a different answer than I gave Nate, but we're gonna have to just we're forced to wait for the proxy to be filed. It will all be detailed there. I just can't get ahead of that process.
No problem. You're saying, should we think G&A now going forward is 6% of combined rents? Is that the way to think about your G&A on a percentage basis? Is that kind of how you think about modeling this?
Yes. I think we're right in line with where we need to be at 6%. That's the exact right way to think about it.
Okay. Does that 6% include like some sort of long-term incentive plan? You know, like, is that contemplated or is that something that's additional to that?
I don't know. First of all, again, I'm gonna tell you that all has to come out in the proxy. I'm gonna get back to you on that and see if there's an answer I can give you before the proxy. I'm not sure.
Thank you.
I think that's a fully baked 6%.
Excellent. Appreciate it.
Yep. Thanks.
Thank you. Ladies and gentlemen, our final question comes from the line of Bryan Maher with B. Riley Securities. Please proceed with your question.
Thank you. Yeah, just two quick follow-ups. Hopefully, you can answer them, Michael. The first one is, you talk about in the deck about the improvement in the leverage, 7.5x . You have talked about in the past possibly seeking an investment-grade rating for RTL, and I think GNL is BB+ currently by S&P. Would the long-term goal to become investment-grade rated?
Absolutely, Bryan. I think 7.6x is a great place to start the merged GNL from. We will continue to focus on further lowering net debt to EBITDA. We were really encouraged. S&P this morning put out a research update, Necessity Retail REIT. The ratings are placed on CreditWatch positive based on the announced acquisition. GNL also received an update from S&P that indicated that, Chris, what was the language in the GNL note update from S&P?
I mean, effectively, it said that they're maintaining the same rating with a positive view.
From the credit side of the balance sheet, Bryan, this deal is really good for both companies and RTL merging into GNL, it will continue to be a positive.
Also remember, Bryan-
Sorry, Jim. Go ahead.
No, all I was gonna say was, you know, the rating agencies also look at the size of the company, and having greater scale works to our advantage.
Okay. That's helpful. Just lastly, and I don't know if you can answer this or not, Michael, but do you know if AR Global will be subject to a lock-up on the shares that they get, and how long would that be?
I can't. I don't know, and I can't answer.
All right. Fair enough. Thank you so much.
All right. Thank you all.
Thanks, Bryan. And thanks, everybody, for calling in.
All right. Thank you. This concludes our question and answer session. I'll turn the floor back to Mr. Weil for any final comments.
Thank you. I appreciate everybody's time this morning. Jim and Chris and I are very excited about this announcement and the future for Global Net Lease. As you know, there will be more information being provided. I'm sorry that I had to say that it had to wait until the proxy is filed, but I think everybody is understanding of that. We will make sure that we continue to answer your questions and look forward to a lot more information and ultimately a really great transaction for shareholders. There's obviously a lot of benefit to this event and what we're doing here. Thank you all again, and if there's any follow-up, please reach out.
Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.