Global Net Lease Continues Momentum of Strategic Disposition Initiative With Sales of the Plant Shopping Center and Foster Wheeler Office

Rhea-AI Summary

Global Net Lease (NYSE: GNL) has made significant progress in its 2024 strategic disposition plan, announcing sales of The Plant Shopping Center in San Jose for $95 million and the Foster Wheeler office property in the UK for over $27 million. As of August 31, 2024, GNL has closed or secured agreements for dispositions totaling $854 million at a cash cap rate of 7.2%. The company used proceeds from The Plant sale to pay down its Revolving Credit Facility and strategically subdivided the asset to maximize value. The Foster Wheeler office sale reduces GNL's office exposure to 19% of the portfolio's straight-line rent. CEO Michael Weil emphasized the execution of their strategic plan and the focus on reducing outstanding debt and lowering Net Debt to Adjusted EBITDA.

Positive

• Successful sales of The Plant Shopping Center ($95 million) and Foster Wheeler office ($27 million)
• Total dispositions of $854 million at a 7.2% cash cap rate
• Strategic subdivision of The Plant Shopping Center to maximize value
• Retention of a core single-tenant property leased to Home Depot (A2 credit rating) with 10 years remaining
• Reduction of office exposure to 19% of portfolio's straight-line rent
• Use of proceeds to pay down Revolving Credit Facility

Negative

• Potential reduction in rental income due to property dispositions
• Exposure to office sector still at 19% despite efforts to reduce

Insights

Financial Analyst

Global Net Lease's strategic disposition initiative shows promising progress, with $854 million in closed or agreed sales at a 7.2% cash cap rate. The sale of The Plant Shopping Center for $95 million and the Foster Wheeler office for over $27 million are significant moves. The company's approach to subdividing The Plant property demonstrates savvy asset management, potentially maximizing returns.

The retention of the Home Depot parcel with its investment-grade tenant and built-in rent escalations provides a stable income stream. The Foster Wheeler office sale aligns with the trend of reducing office exposure, now down to 19% of the portfolio's straight-line rent. This strategic reshuffling could enhance GNL's overall portfolio quality and risk profile.

Using proceeds to pay down the Revolving Credit Facility is a prudent move, potentially improving the company's debt metrics and financial flexibility. Investors should monitor the impact on Net Debt to Adjusted EBITDA, a key metric for REITs.

Real Estate Market Analyst

GNL's disposition strategy reflects broader market trends and investor preferences. The decision to divest from multi-tenant retail and office properties while retaining single-tenant, investment-grade assets aligns with current market dynamics. The 7.2% cash cap rate is attractive in the current environment, suggesting strong demand for these assets.

The subdivision of The Plant Shopping Center is particularly noteworthy. By separating the multi-tenant retail from the single-tenant Home Depot property, GNL has effectively created two distinct asset classes. This move likely expanded the buyer pool and optimized pricing, a strategy that could be replicated with other properties in their portfolio.

The reduction in office exposure is timely, given the ongoing uncertainties in the office market post-pandemic. By bringing office exposure down to 19%, GNL is positioning itself more defensively. However, investors should consider how this shift might affect the overall portfolio yield and growth prospects.

Dispositions Closed or Under Agreement Now Total $854 Million at a Cash Cap Rate of 7.2%

NEW YORK, Sept. 04, 2024 (GLOBE NEWSWIRE) -- Global Net Lease, Inc. (NYSE: GNL) (“GNL” or the “Company”) today announced continued progress in its 2024 strategic disposition plan with the sales of The Plant Shopping Center in San Jose, California for $95 million and the Foster Wheeler office property in Shinfield Park, Reading, United Kingdom for over $27 million. As of August 31, 2024, GNL has closed or secured agreements for dispositions totaling $854 million at a cash cap rate of 7.2%¹.

GNL used the net proceeds from The Plant Shopping Center sale to pay down its Revolving Credit Facility. To maximize the property’s value for a sale, GNL strategically subdivided the asset into two separate parcels, bifurcating The Plant Shopping Center from an adjacent single-tenant property. GNL believes this broadened the potential buyer pool and enabled the Company to secure premium pricing for the parcel with the multi-tenant shopping center. The newly created parcel that GNL retained ownership of is now a core single-tenant property that is leased to Home Depot, an investment-grade tenant with an A2 credit rating. There are approximately 10 years remaining on the lease, with a 12.5% rental increase every five years.

GNL has owned the 366,000 square foot Foster Wheeler Office property for nearly eight years and sold the property as the tenant’s lease expired in mid-August, having collected 100% of the rent under the term of the lease. The sale of the property will further reduce GNL’s office exposure by approximately 100 bps, decreasing total office exposure to 19% of total portfolio’s straight-line rent².

“The $95 million sale of the multi-tenant Plant parcel in San Jose showcases our continued execution of our strategic disposition plan and we believe validates our strategic decision to subdivide the property to maximize its overall value,” said Michael Weil, CEO of GNL, “Additionally, the sale of the former Foster Wheeler building further aligns with our ongoing efforts to reduce office exposure while mitigating portfolio vacancy.”

“We are pleased with the rapid progress of our strategic disposition initiative, successfully building a pipeline of closed and pending dispositions of $854 million at a cash cap rate of 7.2%, within the stated cash cap guidance range of 7% to 8%. This reflects the strong execution of our 2024 business plan across multiple strategic initiatives. We intend to continue using the net proceeds from asset sales to reduce outstanding debt, with a key focus on lowering our Net Debt to Adjusted EBITDA,” Mr. Weil concluded.

GNL has furnished a slide detailing the progress of its 2024 strategic disposition plan with a Current Report on Form 8-K with the Securities and Exchange Commission on the date hereof.

About Global Net Lease, Inc.

Global Net Lease, Inc. is a publicly traded real estate investment trust listed on the NYSE, which focuses on acquiring and managing a global portfolio of income producing net lease assets across the United States, and Western and Northern Europe. Additional information about GNL can be found on its website at www.globalnetlease.com.

Important Notice

The statements in this press release that are not historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that could cause the outcome to be materially different. The words such as "may," "will," "seeks," "anticipates," "believes," "expects," "estimates," "projects," “potential,” “predicts,” "plans," "intends," “would,” “could,” "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 the risks associated with realization of the anticipated benefits of the merger with The Necessity Retail REIT, Inc. and the internalization of the Company’s property management and advisory functions; that any potential future acquisition or disposition by the Company is subject to market conditions and capital availability and may not be identified or completed on favorable terms, or at all. Some of the risks and uncertainties, although not all risks and uncertainties, that could cause the Company’s actual results to differ materially from those presented in its forward-looking statements are set forth in the Risk Factors and “Quantitative and Qualitative Disclosures about Market Risk” sections in the Company’s Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, and all of its other filings with the U.S. Securities and Exchange Commission, 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 by law.

Contacts:
Investor Relations
Email: investorrelations@globalnetlease.com
Phone: (332) 265-2020

Footnotes:

¹ Disposition data as of August 31, 2024, includes transactions that are either closed or under agreement or letter of intent, and assumes purchase agreements and letters of intent lead to closing based on their contemplated terms, which cannot be assured.
² Calculated based on Q2 2024 actuals.

FAQ

What is the total value of dispositions closed or under agreement for GNL as of August 31, 2024?

As of August 31, 2024, Global Net Lease (GNL) has closed or secured agreements for dispositions totaling $854 million at a cash cap rate of 7.2%.

How much did GNL sell The Plant Shopping Center in San Jose for?

Global Net Lease (GNL) sold The Plant Shopping Center in San Jose, California for $95 million.

What is GNL's current office exposure after the Foster Wheeler property sale?

After the sale of the Foster Wheeler office property, GNL's office exposure decreased to 19% of the total portfolio's straight-line rent.

How is GNL using the proceeds from its property sales?

GNL is using the net proceeds from asset sales, including The Plant Shopping Center, to reduce outstanding debt, with a focus on lowering its Net Debt to Adjusted EBITDA.