Investors are growing more concerned about the viability of Global Net Lease (NYSE: GNL). Apparently, GNL, which is a Triple Net Lease real estate investment trust, may not be able to continue paying its present $2.13 dividend given its substantial capital expenditures associated with a large office exposure. The REIT also faces pressure from a lawsuit brought by Moor Park Capital Partners LLP – a European private real estate firm with an estimated $2.8 billion in real estate assets under management – in regards to GNL’s improper termination of a Service Provider Agreement.
Specifically, GNL has approximately 330 properties in its portfolio. Apparently, more than half of the portfolio has office exposure. Because of re-leasing expenditures, leasing commissions and tenant improvement work, the REIT’s properties command substantial capital. Normally, when a REIT maintains a high percentage of office exposure, it decreases dividend payouts. Mainly, REITs lower payouts in these cases so it can have a safety margin if there are early vacancies or defaulting tenants. It remains to be seen whether GNL will lowers its payout for this reason.
Moreover, on January 16, 2018, GNL announced the termination of a Service Provider Agreement that Moor Park had with Global Net Lease Advisors LLC . Moor Park reportedly sued Global Net Lease Inc. (Moor Park Capital Partners LLP v. Global Net Lease Inc. et al. #650391/2018), seeking an injunction to the termination. Allegedly, Moors Park claims that the termination was improper.
Ultimately, there is not much of a safety margin for GNL’s dividend. Current forecasts show that GNL’s dividend will be less than $2.00 per share in 2019. With more than a 100% payout ratio, there’s a real chance that future volatility in the real estate sector could lead to GNL having insufficient funds to pay dividends.
Sometimes, brokers induce investors to purchase REITs including GNL by playing up the historical high yields. However, REITs are equities containing a substantial increase in risk compared with traditional mutual fund investments. Additionally, REITs have systemic risk; volatility in the real estate markets could produce drastic consequences for REITs. Unfortunately, some brokers ignore suitability concerns for investors because selling them REITs generates high commissions. Brokers can be liable for selling unsuitable GNL investments or omitting information about risks and costs.
Suffered losses from a GNL investment you purchased from your broker or financial advisor? If so, contact Soreide Law Group at (888) 760-6552. You’ll be able to speak with experienced counsel about a possible recovery of your investment losses. Notably, Soreide Law Group has recovered millions of dollars for investors who have suffered losses due to broker and brokerage firm misconduct. We represent clients on a contingency fee basis and advance all costs.
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