High-Yield REITs to Avoid: Global Net Lease (GNL)
Global Net Lease Inc (NYSE:GNL) owns, manages and operates commercial buildings in the U.S. and Europe. Most of its operations are single-company buildings.
For example, its top tenant is FedEx Corporation (NYSE:FDX). GNL owns and operates buildings FDX uses for its distribution network. In this way, FDX doesn’t have to be in the commercial real estate business and can work with a partner who can buy or build the properties it needs in the right locations.
GNL makes it up to the tenants to pay for the taxes, insurance and maintenance on their buildings, which means less revenue for GNL but a lot less headache as well.
The problem is, this is a fairly leveraged approach in the REIT business and according to its Q2 numbers, while revenue was up, net income and FFO are falling significantly.
Off almost 11% year to date, GNL’s 10% dividend may be at risk of a cut if things don’t turn around soon.