Global Net Lease (GNL) PT Lowered to $19 at BTIG

BTIG analyst Michael Gorman lowered the price target on Global Net Lease (NYSE: GNL) to $19.00 (from $23.00) while maintaining a Buy rating.

The analyst commented, "We are updating our numbers for GNL, raising our 2022 FFO/sh estimate to $1.86 from $1.95 previously and introducing a $1.93 estimate for 2023. We maintain our Buy rating on GNL given its record-low relative discount to Diversified, Net Lease, and Equity REITs, as well as its own NAV (see Exhibits 2-5). GNL's historical discount can be largely attributed to the external management structure, Diversified strategy, and potentially the added complexity of its portfolio's 40% European exposure. Despite these hurdles, GNL has consistently sourced accretive deals for durable, net lease Industrial and Office real estate leased to high-credit tenants. However, looking ahead to the coming year, we think the company's leverage levels could challenge its ability to fund growth accretively. The balance sheet is levered with 7.3x net debt / EBITDA, suggesting management will likely need to source equity to drive new acquisitions. Moreover, significant competition from private buyers for properties and the wider market sell-off this year have pressured the spread of GNL's cost of capital to cap rates. While the shares have outperformed REITs by 610 bps YTD, GNL's absolute cost of capital has not improved with (2.8%) price returns in 2022. However, we think steeply discounted value names could be attractive in a higher interest-rate environment, and the company ended 2021 with strong operational results and investment execution. We continue to like GNL's exposure to Industrial assets, as the total portfolio, which is 54% Industrial, trades at an 11% implied cap rate versus our 4.2% Industrial REIT coverage average. We believe the stock is too discounted at the current valuation given the high-quality, 63% Investment Grade portfolio which performs with the stability traditionally expected of a net lease REIT. We maintain our Buy rating, but we are revising our Price Target down to $19 from $23 previously."

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