REAL ESTATE NEWS

One year after its merger with Necessity Retail REIT, Global Net Lease (GNL) has successfully executed its disposition strategy, surpassing initial targets and strengthening its position as one of the largest net lease REITs in the industry. The company's ability to close the buyer-seller expectation gap has been crucial to its success, resulting in full-price asset sales and significant debt reduction.

Disposition Strategy Exceeds Expectations

In an interview with GlobeSt.com, GNL's CEO Michael Weil reported that after the REIT achieved its initial disposition target of $400-$600 million, it prompted an increase in the goal to $650-$800 million for the calendar year 2024. "At the end of the second quarter, we had just about achieved that already, so we increased our targets," Weil said.

The success of GNL's disposition strategy is particularly noteworthy given the current environment for investment sales. The company has managed to sell non-core assets at an average cap rate of 7.3%, well within their projected range of 7-8%. Specifically, as of August 31, 2024, GNL has closed or secured agreements for dispositions totaling $854 million at a cash cap rate of 7.2%.

Closing the Buyer-Seller Gap

GNL's ability to close the gap between buyer and seller expectations has been pivotal to its success. Weil explained their strategy: "The way that we approached our disposition initiative was to go to the local potential buyer pool. Our asset management team identified commercial brokers in the markets where we were looking to dispose of assets, and they went to that buyer pool and actively engaged."

This localized approach has allowed GNL to maximize sale proceeds while ensuring buyers acquire assets that align with their investment strategies. "There's been a lot of hand-to-hand engagement between our company and the buyers. We've been able to maximize the sale proceeds, and the buyers are getting assets that they should be very happy to own," Weil said.

Post-Merger Synergies and Performance

The company has also nearly achieved its post-merger target of $75 million in operating synergies, having reached $74 million by the end of the second quarter. This accomplishment has positioned GNL to operate more effectively in the competitive net lease sector.

"Anytime there's a merger, people are very interested to see how integration goes. And achieving a number like $75 million of synergies in the first year allows this company to operate in a very efficient manner," Weil said.

Portfolio Strength and Market Resilience

Meanwhile, GNL's portfolio, which includes a mix of retail, industrial, and office properties, has demonstrated strong performance across all sectors. "We continue to have great leasing as this economy is very strong for retailers and occupancy within our portfolio continues to grow. All three sectors continue to have strong renewals as well as increased occupancy. Rents are going up in the portfolio," Weil said.

This robust performance is particularly impressive given the current economic climate. "We're seeing that again in these last couple of years. We were in a terrific period of low interest rates. We knew that that would change at some point. Where we are today shows that real estate can continue to perform," Weil said.

As GNL moves forward, the company remains focused on executing its disposition strategy and reducing corporate leverage.  "In the near term, we're more focused on our disposition strategy that we communicated to the market," Weil said. "And again, it's looking to achieve that $650 million to $800 million of closed disposition in calendar year 2024 coming out of the merger."

While acquisitions are not currently a priority, the company is well-positioned for future growth opportunities, he added. "GNL is poised for continued success, because we've gotten the first building block accomplished, which is the year one work."

Source: GlobeSt/ALM