Global Net Lease: A Compelling Case for Undervaluation in a Low-Rate Environment

The Federal Reserve's recent 0.25 percentage point rate cut, bringing the federal funds rate to 4.00%-4.25%, has reignited interest in net lease real estate investment trusts (REITs), which thrive in low-rate environments, according to Global Net Lease's Q1 results. These entities, which fund long-term, fixed-rate leases on commercial properties, benefit from cheaper debt and higher relative yields. Among them, Global Net Lease, Inc. (GNL) stands out as a compelling candidate for undervaluation, despite its recent operational and financial improvements.

Financial Health and Strategic Restructuring

GNL's first-quarter 2025 results underscored its disciplined capital management. The company reduced net debt by $833.2 million, trimming its Net Debt to Adjusted EBITDA ratio to 6.7x—a significant improvement from 8.1x in late 2024. This progress was accelerated by the $1.8 billion sale of its multi-tenant retail portfolio in Q2 2025, which slashed annual recurring G&A costs by $6.5 million and capital expenditures by $30 million, according to GNL's Q2 earnings report. The proceeds were used to pay down $1.1 billion on its revolving credit facility and $466 million of secured mortgage debt, further reducing leverage to 6.6x. Such actions have extended the weighted average debt maturity to 3.7 years, enhancing balance-sheet flexibility.

GNL's occupancy rate now stands at 98%, with a weighted average lease term of 6.3 years, ensuring stable cash flows. Its AFFO per share guidance of $0.90–$0.96 for 2025, combined with a 9.33% dividend yield (annualized $0.76 per share), positions it as a high-yield alternative to bonds in a low-rate world, according to StockAnalysis data.

Valuation Disparity and Peer Comparison

GNL's valuation metrics starkly contrast with those of its peers. As of August 2025, its P/AFFO ratio was 5.37, far below Welltower's 35.95, Prologis's 18.42, and American Tower's 20.37. This discrepancy suggests the market may be undervaluing GNL's stable cash flows and improved leverage profile. However, GNL's P/E ratio of -6.68 as of September 2025, according to Public.com P/E data, complicates direct comparisons, reflecting temporary earnings pressures. Yet, in a low-rate environment where investors prioritize income over earnings growth, this metric becomes less critical.

Risks and the Fed's Role

While GNL's strategy is sound, risks persist. Its 4.3% weighted average interest rate on debt exposes it to rate hikes, though the Fed's projected two additional 2025 rate cuts mitigate this risk, as shown in the FOMC projections. Moreover, GNL's negative P/E ratio highlights near-term profitability challenges, though its 9.33% yield and share repurchases (10.2 million shares at $7.52) demonstrate management's commitment to shareholder value.

Conclusion: A Mispriced Opportunity

In a low-rate environment, GNL's combination of high yield, improving leverage, and strategic portfolio optimization makes it a compelling case of undervaluation. While its negative P/E ratio and interest rate sensitivity warrant caution, the Fed's easing cycle and GNL's operational discipline position it to outperform peers. For income-focused investors, GNL represents a rare blend of risk management and value creation—a hallmark of resilient net lease REITs in today's market.