Global Net Lease reported funds from operations (FFO) of $0.38 per share for the third quarter, beating consensus estimates by $0.05 and marking a 4.5% sequential increase. Net rental income rose 2.8% quarter-over-quarter to $85.2 million, driven by full contributions from recently acquired logistics properties in Northern Europe. Management reiterated full-year FFO guidance in the range of $1.43 to $1.47 per share, citing stabilized occupancy at 95.3% and contractual rent escalations averaging 2.2% annually across the portfolio.

During the quarter, Global Net Lease recorded non-cash impairment charges totaling $62 million, primarily related to three underperforming office properties in New York and Atlanta. These writedowns reflect as much as 28% reductions in carrying value for those assets and highlight persistent demand weakness in the office segment. Industrial and retail assets, which comprise 68% of net operating income, offset but did not fully counterbalance the office shortfall, underscoring concentrated exposure to regions with office vacancy rates above 15%.

Despite an attractive 8.0% dividend yield, Global Net Lease has trimmed its payout twice in the past 18 months and generated a 12% decline in operating cash flow since 2022. Free cash flow remained negative $14 million in Q3 as rental collections on office leases slipped to 89% of invoiced amounts. Given mounting capital expenditure requirements for property upgrades and a conservative leverage ratio at 6.2x net debt to EBITDA, management’s unwillingness to cut the distribution further suggests potential dividend coverage risks. With fundamentals deteriorating, we view the current share levels as a sell for income-oriented portfolios seeking more stable REIT exposure.