$9.6B REIT Merger Hits Milestone

James Nelson, CEO, Global Net Lease Inc. Image courtesy of Global Net Lease

Global Net Lease Inc.‘s proposed merger with The Necessity Retail REIT Inc. has passed an important milestone as the U.S. Securities and Exchange Commission declared effective the firms’ Registration Statement on Form S-4. Special meetings of the stockholders of each company are scheduled for September 8.

The combined company, to operate as Global Net Lease post-closing, is expected to own and manage more than 1,350 properties and have an aggregate real estate asset value of approximately $9.6 billion. In addition, the new entity will become internally managed; up until now, the external asset and property management functions were performed by AR Global.

REITs have been struggling with capital markets upheaval and with wide value discrepancies between buyers and sellers across most property types and markets, according to Chris Wimmer, a senior director at Fitch Ratings.

Size plus focus

It was in late May that the two companies announced their intention to merge, with GNL acquiring RTL in an all-stock deal and thereby creating the third-largest publicly traded net lease REIT with a global presence.

GNL is an NYSE-listed REIT focused on acquiring a diversified global portfolio of commercial properties, with an emphasis on sale-leaseback transactions involving single tenant, mission-critical, income-producing net-leased assets across the U.S. as well as Western and Northern Europe.

NASDAQ-traded RTL focuses on “Where America Shops,” purchasing and managing a diversified portfolio of primarily necessity-based single-tenant retail and open-air shopping center properties in the U.S.

Following the announcement, Fitch placed RTL on Rating Watch Evolving, as the merger would presumably improve the REIT’s leverage. At the same time, GNL has been placed on Rating Watch Negative.