On Friday, BTIG downgraded shares of Global Net Lease (NYSE:GNL) from Buy to Neutral, following the company's disappointing fourth-quarter results and its outlook for 2024. The firm also removed its price target for the stock.
The downgrade was prompted by the company's second dividend cut in the past six months and a downward revision in the 2024 adjusted funds from operations (AFFO) per share estimate to $1.25, which represents a 13% decline from the previous year.
Global Net Lease's guidance for 2024 has raised concerns for BTIG, particularly as the firm believes it is unlikely that the company will achieve its net debt to adjusted EBITDA target range of 7.4x-7.8x based on the asset sales planned for the year.
The analyst pointed out that while the valuation of Global Net Lease may appear attractive on certain metrics, the risks to the 2024 guidance pose a challenge, and they do not foresee any potential catalysts that could drive the valuation higher.
The report also highlighted the nature of net lease assets, which typically trade in a deep and liquid market. However, realizing full value for public portfolios often requires significant events such as spin-offs, larger portfolio sales, or other structural changes.
With respect to Global Net Lease's strategy, the firm has indicated its intention to focus on retail and office dispositions, targeting a capitalization rate range of 7%-8%. BTIG expressed concern that this could mean sales are likely to come from the core portfolio, or that there may be execution risks associated with achieving these cap rates.
Additionally, BTIG expressed caution regarding the company's multi-tenant portfolio outlook. The loss of more than 200 basis points of occupancy in the fourth quarter has led to uncertainty about the portfolio's future performance.
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