Global Net Lease Hits Sales Goal One Year After Merger

A year after its merger with Necessity Retail REIT, Global Net Lease (GNL) has successfully executed its divestment strategy, exceeding initial goals and solidifying its position as one of the largest net lease REITs in the industry. The company’s ability to close the gap between buyer and seller expectations has been critical to its success, resulting in the sale of assets at full value and significant debt reduction.

In an interview with GlobeSt.com, GNL CEO Michael Weil said that after the REIT hit its initial sales target of $400 million to $600 million, that prompted an increase to a target of $650 million to $800 million for calendar year 2024. “We were almost there at the end of the second quarter, so we increased our targets,” Weil said.

The success of GNL’s divestment strategy is particularly noteworthy given the current investment divestment environment. The Company has been able to sell non-core assets at an average cap rate of 7.3%, which is within the guidance range of 7-8%. Specifically, as of August 31, 2024, GNL has closed or secured divestments totaling $854 million at a cash cap rate of 7.2%.

Closing the gap between buyer and seller

GNL’s ability to close the gap between buyer and seller expectations was key to its success. Weil explained their strategy: “The way we approached our divestment initiative was to go to a local pool of potential buyers. Our asset management team identified commercial brokers in the markets where we wanted to divest, and they went to that pool of buyers and actively engaged.”

This local approach allowed GNL to maximize the proceeds of the sale while ensuring that buyers acquired assets that aligned with their investment strategies. “Our firm and the buyers had a lot of direct contact. We were able to maximize the proceeds of the sale, and the buyers are getting assets that they should be very happy to own,” Weil said.

Synergies and Results after Merger

The company also nearly achieved its post-merger goal of $75 million in operating synergies, reaching $74 million by the end of the second quarter. This achievement enabled GNL to operate more effectively in the competitive net leasing sector.

“Whenever there’s a merger, people are very interested in how the integration goes. And achieving $75 million in synergies in the first year allows this company to operate very efficiently,” Weil said.

Portfolio Strength and Market Resilience

Meanwhile, GNL’s portfolio, which includes a mix of retail, industrial and office properties, showed strong performance across all sectors. “We continue to have great leasing performance as the economy is very strong for retailers, and occupancy across our portfolio continues to improve. All three sectors continue to have strong renewals as well as increased occupancy. Rents across the portfolio are increasing,” Weil said.

That solid performance is especially impressive given the current economic climate. “We’ve seen that again over the last few years. We were in a great period of low interest rates. We knew that would change at some point. Where we are today shows that real estate can continue to thrive,” Weil said.

As GNL moves forward, the company remains focused on executing on its sales strategy and reducing corporate leverage. “In the near term, we are more focused on our sales strategy that we have communicated to the market,” Weil said. “And again, the company is looking to achieve $650 million to $800 million in closed sales in calendar year 2024 post-merger.”

While acquisitions are not a current priority, the company is well positioned for future growth opportunities, he added. “GNL is poised for continued success, having delivered the first building block, which is our first-year work.”