Global Net Lease's Crossroads: Schorsch's Share Sales and the Path to Recovery

The real estate investment trust (REIT) sector has long been a barometer of economic health, but few companies are navigating today's environment with as much turbulence as Global Net Lease, Inc. (NYSE: GNL). Amid a mix of strategic progress and financial headwinds, the company's recent moves—including significant debt reduction and insider share sales by CEO Nicholas Schorsch—have sparked debate about whether GNL is positioned for a turnaround or heading toward deeper challenges. Let's dissect the implications.

The Financial Backdrop: Debt Reduction vs. Earnings Miss

Global Net Lease has made undeniable strides in deleveraging its balance sheet. In Q1 2025, net debt fell by $833 million to $3.7 billion, with the net debt-to-EBITDA ratio improving to 6.7x from 8.4x a year earlier. The first phase of its multi-tenant portfolio sale, generating $1.1 billion in proceeds, was a key driver. By reducing reliance on non-core assets, GNL aims to streamline its focus on single-tenant net lease properties—a strategy that has long been its revenue engine.

However, the company's Q1 results were marred by an EPS loss of -$0.87, a stark miss versus estimates of -$0.085, and revenue of $132.4 million, below the $190 million forecast. These figures underscore the near-term pain of restructuring: asset sales compress revenue while upfront costs (like impairment charges) pressure earnings. Yet management reaffirmed its 2025 AFFO guidance of $0.90–$0.96 per share, suggesting confidence in the long-term plan.

Schorsch's Share Sales: Cause for Concern or Prudent Strategy?

The elephant in the room is Schorsch's June 2025 sale of 7.4 million shares—26% of his holdings—at prices between $7.33 and $7.43. This move reduced his stake to ~19.6 million shares, valued at $148 million as of June 13. Such a large sale could signal insider skepticism about GNL's prospects, but context matters.

First, Schorsch's holdings remain substantial, and the sale may reflect tax planning or diversification. The company's stock trades at a steep discount to peers like Welltower (WELL) or Realty Income (O), trading at just 6.8x 2025 AFFO guidance versus peers averaging 12–15x. A CEO might logically take profits when the market undervalues their equity stake.

Second, Schorsch's moves are part of a broader ownership structure. His entities control ~20% of GNL through a complex web of LLCs, and the sales were executed under Rule 10b5-1 plans—pre-arranged trading arrangements that insulate against allegations of insider timing. While the sale's scale is notable, it doesn't definitively signal distress.

The Strategic Shift: Can the Single-Tenant Model Deliver?

GNL's pivot to a single-tenant net lease focus hinges on execution. The remaining phases of its multi-tenant portfolio sale—expected to close by Q2 2025—will further reduce debt, potentially pushing the net debt-to-EBITDA ratio below 6.5x. This would align with the company's stated goal of achieving investment-grade metrics, which could unlock cheaper financing and reduce refinancing risk (the current weighted average debt maturity is just 2.7 years).

The single-tenant portfolio has merits: 60% of rental income comes from investment-grade tenants, and 86% of leases have contractual rent increases. Q1 leasing activity showed spreads of 8.2% on renewals, signaling pricing power. Yet occupancy (95% pro forma) and tenant retention will be critical as the company exits non-core assets.

Valuation and Risks: Is the Discount Justified?

GNL's valuation is deeply discounted. At a recent price of $7.37, it trades at 6.8x its $1.08 AFFO per share (midpoint of guidance). Even assuming a conservative 8x multiple—a fraction of peers—the stock could rise to $8.64, implying 17% upside. However, risks are significant:

• Debt Maturity Wall: $3.7 billion in debt with a short maturity profile requires refinancing in a higher-rate environment.
• Asset Sale Execution: Delays in closing the remaining $1 billion+ multi-tenant sales could strain liquidity.
• Earnings Volatility: One-time costs (impairments, transaction fees) will continue to pressure EPS until restructuring is complete.

Investment Thesis: A Speculative Buy with Strings Attached

The case for GNL is this: the company is aggressively de-risking its balance sheet, focusing on a higher-quality asset class, and trading at a valuation that already discounts much of the pessimism. If the multi-tenant sales proceed as planned and AFFO meets guidance, the stock could rebound.

However, the risks are too great for conservative investors. The near-term earnings volatility, debt pressures, and execution dependency on external sales make this a high-risk/high-reward play. The ideal scenario is a patient investor who can wait for catalysts like completed sales, improved leverage metrics, and a narrowing valuation gap with peers.

Final Verdict: Proceed with Caution

For now, GNL is a hold with a speculative tilt. The stock's cheapness is compelling, but the path to recovery is fraught with execution risks. Investors should wait for confirmation of the multi-tenant sale completion and positive AFFO results before considering a position. Until then, the jury remains out on whether Schorsch's share sales signal confidence in GNL's turnaround—or a quiet acknowledgment that the road ahead is long and uncertain.