Global Net Lease(GNL) - 2022 Q4 - Annual Report

Portfolio Overview - As of December 31, 2022, the company owned 309 properties with a total of 39.2 million rentable square feet, achieving a leasing rate of 98.0%[19] - The portfolio consisted of 56% industrial/distribution properties, 41% office properties, and 3% retail properties as of December 31, 2022[19] - As of December 31, 2022, 35% of the company's properties were located in Europe, with 65% in the U.S. and Canada[54] - The company operates in eleven different countries and leases space to 138 tenants across 51 industries[22] - The United States accounts for 71.4% of the total square footage, with 229 properties and 28,000 thousand square feet, generating an annualized straight-line rent of $217,665 thousand, representing 63.9$40,889 thousand[209] - The United Kingdom holds 17.4% of the total portfolio with 47 properties and 59,000 thousand square feet[213] - The average remaining lease term for properties in Canada is 17.1 years, with 7 properties totaling 372 thousand square feet[207] - The average remaining lease term for properties in the Netherlands is 6.3 years, with 4 properties totaling 1,007 thousand square feet[207] - The company has a significant presence in Michigan, with 29 properties and an annualized straight-line rent of $52,938 thousand, accounting for 15.5$340,757 thousand[209] - Future minimum base rent payments total $2,647,674,000 over the next ten years and thereafter[214] - In 2023, 20 leases are expiring with an annualized straight-line rent of$9,438,000, representing 2.8% of the total portfolio[215] - The total annualized straight-line rent for all expiring leases over the next ten years is $263,482,000, accounting for 77.4$181.8 million for the year ended December 31, 2022, while total dividends paid amounted to $187.5 million[50] - The company collected approximately 100$1.2 billion in gross mortgage notes payable as of December 31, 2022[59] - Outstanding debt under the Revolving Credit Facility was $670.0 million as of December 31, 2022[60] - As of December 31, 2022, the company had total indebtedness of$2.4 billion, including $1.2 billion of secured debt and$670 million under the Revolving Credit Facility[125] - Approximately $249.5 million of the company's debt is set to mature in 2023, with a weighted average interest rate of 2.8% per annum[128] - The interest rate on borrowings under the Credit Facility increased from 2.7% as of December 31, 2021, to 4.6% as of December 31, 2022[128] - 30% of the company's total indebtedness bore interest at variable rates averaging 4.4% as of December 31, 2022[131] - The company may face increased borrowing costs due to rising interest rates from the U.S. Federal Reserve and other central banks, impacting future acquisitions[132] - The company may need to restructure or refinance its debt if unable to meet obligations, which could lead to asset sales or unfavorable terms[127] - The company faces restrictions from covenants in its debt agreements, which limit operational flexibility and could hinder growth opportunities[135] - A breach of covenants could lead to an event of default, potentially causing debt to become immediately due and payable[137] - A lowering of debt ratings by agencies could increase future borrowing costs and reduce access to capital[139] Tenant and Lease Information - 60.5% of the rental income was derived from "Investment Grade" rated tenants, with 34.9% from actual investment grade tenants and 25.6% from implied investment grade tenants[23] - The weighted-average remaining lease term was 8.0 years as of December 31, 2022, down from 8.3 years in the previous year[24] - Approximately 94.5% of leases included rent escalation provisions, averaging a cumulative increase of 1.2% per year[24] - 40% of the company's tenants were either not evaluated or ranked below "investment grade" as of December 31, 2022, indicating a higher risk of lease defaults[84] - The company generated 18% of its annualized rental income from net leases with a remaining lease term of more than ten years as of December 31, 2022[85] - The concentration of properties in Michigan (16%), Texas (7%), and Ohio (6%) accounted for a total of 29% of the company's consolidated annualized rental income from the United States and Canada[72] - The auto manufacturing and financial services industries each accounted for 12% of the company's consolidated annualized rental income as of December 31, 2022, indicating significant exposure to these sectors[74] Market and Economic Conditions - The commercial real estate market is highly competitive, impacting occupancy levels and rental rates[32] - Market and economic challenges may adversely impact the company's operating results and financial condition, affecting tenant businesses and rental payments[52] - The ongoing military conflict between Russia and Ukraine may exacerbate inflation and lead to volatility in commodity prices, impacting the company's financial condition[55] - The COVID-19 pandemic has caused disruptions that may continue to impact tenants' ability to pay rent, affecting the company's cash flow[69] - Rising expenses could reduce cash flow, with potential increases in property taxes, utility costs, and insurance impacting overall profitability[93] - The real estate market is influenced by economic conditions, financing availability, and interest rates, affecting the ability to sell properties at desired prices[91] - Prolonged vacancies could lead to reduced revenues and lower cash available for dividends[87] Regulatory and Tax Considerations - The company’s REIT qualification is crucial for tax purposes, and failure to maintain it could lead to significant tax liabilities and reduced earnings available for distribution[170][171][172] - To maintain REIT status, the company must distribute at least 90% of its REIT taxable income annually, which may limit investment opportunities and require borrowing under unfavorable conditions[174] - The company may incur tax liabilities that could reduce cash available for distribution to stockholders, including a potential 100% tax on net income from prohibited transactions[173] - The company is subject to a 4% nondeductible excise tax on any distributions that fall short of certain income thresholds, which could impact overall returns to stockholders[174] - The company may face a 100% penalty tax on net income from property sales deemed as inventory or held primarily for sale, which could restrict property disposal activities[176] - The company must ensure that at least 75% of its assets consist of qualified REIT real estate assets to maintain REIT qualification, which may force liquidation of attractive investments[186] - The board of directors has the authority to revoke the company's REIT qualification without stockholder approval, which could lead to corporate-level taxes and reduced distributions[187] - The company may face adverse legislative or regulatory tax changes that could increase tax liability and reduce operating flexibility[188] - Future legislation could potentially reduce the tax advantages currently enjoyed by REITs, impacting the company's market position[189] Management and Operational Risks - The company relies on its Advisor and real estate professionals to identify investments, with no assurance of success in achieving financial objectives[44] - The company relies heavily on single tenants, making it vulnerable to their financial stability, as any default could materially reduce revenues[76] - The ongoing litigation with Blackwells Onshore could be costly and time-consuming, potentially distracting management from operations[65] - The company has limited rights to terminate agreements with the Advisor and Property Manager, with termination fees potentially reaching up to 2.5 times the previous year's compensation[114] - The company relies on the Advisor and Property Manager for essential services, and any adverse changes in their financial health could impact operations[113] - The company does not maintain key person life insurance for its executive officers, which could pose risks if key personnel leave[112] - The company may acquire or originate commercial real estate debt, exposing it to additional risks and uncertainties[121]