Monday, BTIG reiterated its Neutral rating on shares of Global Net Lease (NYSE:GNL), following the company's update on its asset disposition program aimed at improving leverage levels. The real estate investment trust has increased its 'dispositions to date' pipeline to $854 million, up from the previously reported $728 million. This includes both closed deals and potential transactions.
Global Net Lease recently completed the sale of The Plant Shopping Center in San Jose for $95 million and disposed of a single-tenant office property in the UK for $27 million. The company is on track to surpass its annual guidance of $600 million to $800 million in asset sales if it manages to close the remaining deals by the end of the year.
Despite the progress in asset disposals, BTIG notes that the challenges for Global Net Lease persist in the current market environment, particularly in reducing its leverage.
The firm points out that the sale of the office asset in the UK coincided with the expiration of the lease in the building, which resulted in more than $11 million in rental income being removed from GNL's portfolio. This transaction was categorized as a 'vacant' sale instead of being evaluated based on a capitalization rate due to the lease expiration.
Management's reported 100 basis points reduction in Office exposure primarily stems from this lease expiration, which accounted for 1.6% of straight-line rent, rather than from the sales of occupied office assets. BTIG suggests that while the strategy being pursued by Global Net Lease may be the only feasible option, achieving the leverage targets set by management by the end of the year will likely be challenging.
The firm anticipates that Global Net Lease will continue selling assets into 2025 as it works towards reducing leverage and improving its cost of equity. The Neutral rating stands as BTIG awaits further developments.
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