Orange Capital Releases Detailed Presentation on Why It Intends to Vote Against the Merger of Global Net Lease, Inc. and the Necessity Retail REIT, Inc.
Highlights Lack of Financial or Strategic Value for GNL Stockholders
Identifies Key Questions for GNL Stockholders to Ask GNL Board
NEW YORK, Aug. 15, 2023 /PRNewswire/ -- Orange Capital Ventures, LP ("Orange Capital"), a New York-based investment firm, today released a detailed presentation outlining why it intends to vote AGAINST the proposed merger of Global Net Lease, Inc. (NYSE: GNL) ("GNL" or the "Company") and the Necessity Retail REIT, Inc. (Nasdaq: RTL) ("RTL") (the "Merger"). The Merger is subject to GNL and RTL stockholder approval at the Special Meeting of Stockholders scheduled for September 8, 2023.
Specifically, Orange Capital's rationale includes:
RTL's Retail Real Estate Assets Are Non-Core and Dilutive to GNL's High-Quality Portfolio of Mission Critical, Net Lease Real Estate Assets. Orange Capital believes RTL's mix of multi-tenant retail assets would dilute the quality of GNL's mission-critical, net lease asset portfolio. Retail REITs, such as RTL's real estate portfolio, trade at a discount to net lease and industrial REITs like GNL.
RTL is an Inferior Business Compared to GNL. Orange Capital believes RTL has a lower-quality portfolio of assets with higher vacancy, higher capital expenditure requirements, lower geographic diversification, higher leverage, and significant multi-tenant concentration in the retail industry. Furthermore, RTL has historically traded at a 1.5x FFO (Funds From Operations) discount to GNL.
Substantial Dilutive Stock Issuance. The Merger requires the issuance of substantial stock to AR Global at a valuation representing a 49% discount to GNL's NAV, a discount Orange Capital believes is largely due to AR Global's poor performance as GNL's external manager. The proposed Merger also accelerates unvested GNL and RTL stock awards.
Superior Alternatives. Orange Capital believes the Merger was in direct response to the Blackwells Capital proxy contest with GNL and RTL, and has pinpointed several actionable alternatives that it considers to be superior to the Merger, including: a stand-alone internalization of GNL, a potential sale of GNL to a third party, or the continuation of the current status quo. Orange Capital is confident that the implementation of the GNL Board's (the "GNL Board") proposed governance modifications, whether in conjunction with the Merger or independently, will generate immediate stockholder value.
Wastefully High Internalization Costs. GNL holds the option to terminate AR Global's external management contract by paying 2.5 times AR Global's current advisory fee, which termination payment Orange Capital estimates would be $83 million in the event of a change of control with an independent third-party. This is in stark comparison to the Merger's proposed windfall payment of $375 million to AR Global (equivalent to 5.8 times AR Global's current advisory fees), a difference of approximately $2.70 per GNL share (a +25% premium to the GNL unaffected stock price of $10.56). Orange Capital finds it deeply concerning that the GNL Board sanctioned this internalization fee without conducting a market assessment of GNL's assets.
Simplified and Focused REITs Trade at Higher Multiples than Diversified REITs. Orange Capital's research concludes that the market assigns an NAV discount to diversified REITs that own assets in multiple subsectors, like RTL's portfolio, in comparison to those with a focused asset base like GNL's portfolio.
The Merger Makes it Harder to Explore Eventual Strategic Alternatives, including a Sale of the Combined GNL-RTL. Orange Capital sees a limited pool of buyers for large diversified REITs like the post-Merger entity ("NewCo"), especially one that is diversified across multiple subsectors.
AR Global's Massive Influence Post Merger. AR Global would own approximately 14% of NewCo, which Orange Capital believes effectively serves as a self-imposed poison pill on future transactions, thereby diminishing the influence of the GNL Board's proposed governance reforms.
Orange Capital has pinpointed several strategic alternatives that, in its assessment, hold greater potential for enhancing value for GNL stockholders when compared to the Merger. These include:
Standalone GNL internalization
Sale of GNL following the execution of a comprehensive strategic alternatives process
Maintaining the status quo, particularly if GNL implements the governance reforms the GNL Board "enthusiastically supports."
Finally, Orange Capital identifies numerous important questions for GNL stockholders to ask the GNL Board before and at the stockholder vote on September 8, 2023.
The full presentation can be found here.
About Orange Capital
Orange Capital Ventures GP, LP is a New York based investment manager in private and public equity and debt. Orange Capital LLC was founded in 2004 by Mr. Daniel Lewis, who serves as Managing Partner.
Forward-Looking Statements
This release contains a number of forward-looking statements. Words such as "plan," "believe," "anticipate," "reflect," "invest," "see," "make," "expect," "deliver," "drive," "improve," "intend," "assess," "remain," "evaluate," "establish," "focus," "build," "turn," "expand," "leverage," "grow," "will," and variations of such words and similar future or conditional expressions are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding Orange Capital's, GNL's, RTL's or AR Global's plans, impacts of accounting standards and guidance, growth, legal matters, taxes, costs and cost savings, impairments, dividends, expectations, investments, innovations, opportunities, capabilities, execution, initiatives, and pipeline. These forward-looking statements reflect management's current expectations and are not guarantees of future performance and are subject to a number of risks and uncertainties, many of which are difficult to predict and beyond the Issuer's control. Orange Capital disclaims and does not undertake any obligation to update, revise, or withdraw any forward-looking statement in this press release, except as required by applicable law or regulation.
Investor Contacts:
Daniel Lewis, Orange Capital
Walied Soliman, Norton Rose Fulbright LLP
GNL.OrangeCap@gmail.com
Media Contacts
ASC Advisors
Taylor Ingraham / Steve Bruce
tingraham@ascadvisors.com / sbruce@ascadvisors.com
203 992 1230
SOURCE Orange Capital Ventures, LP
