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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission file number: 001-37390
GNL-20210331_G1.GIF
Global Net Lease, Inc.
(Exact name of registrant as specified in its charter)
Maryland 45-2771978
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
650 Fifth Ave., 30th Floor, New York, NY                 10019
______________________________________________________________________________ ___________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (212) 415-6500
Securities registered pursuant to section 12(b) of the Act:
Title of each class Trading Symbols Name of each exchange on which registered
Common Stock, $0.01 par value per share GNL New York Stock Exchange
7.25% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share GNL PR A New York Stock Exchange
6.875% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share GNL PR B New York Stock Exchange
Preferred Stock Purchase Rights per share New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒   Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of April 30, 2021, the registrant had 95,393,290 shares of common stock outstanding.

GLOBAL NET LEASE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Page
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1
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
GLOBAL NET LEASE, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)

March 31,
2021 		December 31,
2020
ASSETS  
Real estate investments, at cost (Note 3):
Land
$ 474,538  $ 476,599 
Buildings, fixtures and improvements
3,106,860  3,124,884 
Construction in progress
5,876  5,486 
Acquired intangible lease assets
707,964  711,985 
Total real estate investments, at cost
4,295,238  4,318,954 
Less accumulated depreciation and amortization
(710,902) (675,200)
Total real estate investments, net
3,584,336  3,643,754 
Cash and cash equivalents 262,868  124,245 
Restricted cash 1,352  1,448 
Derivative assets, at fair value (Note 8)
934  525 
Unbilled straight-line rent 61,840  61,007 
Operating lease right-of-use asset (Note 10)
55,782  58,395 
Prepaid expenses and other assets 43,674  43,929 
Due from related parties 346  377 
Deferred tax assets 2,367  2,367 
Goodwill and other intangible assets, net 23,089  23,089 
Deferred financing costs, net 7,269  7,878 
     Total Assets $ 4,043,857  $ 3,967,014 
LIABILITIES AND EQUITY    
Mortgage notes payable, net (Note 4)
$ 1,347,484  $ 1,363,698 
Revolving credit facility (Note 5)
125,864  111,132 
Term loan, net (Note 5)
287,172  300,154 
Senior notes, net (Note 6)
490,692  490,345 
Acquired intangible lease liabilities, net 31,503  32,970 
Derivative liabilities, at fair value (Note 8)
14,835  19,984 
Due to related parties 845  2,002 
Accounts payable and accrued expenses 30,025  28,310 
Operating lease liability (Note 10)
24,085  25,350 
Prepaid rent
26,580  21,481 
Deferred tax liability
12,157  12,157 
Dividends payable
5,386  5,152 
Total Liabilities 2,396,628  2,412,735 
Commitments and contingencies (Note 10)
—  — 
Stockholders’ Equity (Note 9):
7.25% Series A cumulative redeemable preferred stock, $0.01 par value, liquidation preference $25.00 per share, 9,959,650 shares authorized, 6,799,467 shares issued and outstanding as of March 31, 2021 and December 31, 2020
68  68 
6.875% Series B cumulative redeemable perpetual preferred stock, $0.01 par value, liquidation preference $25.00 per share, 11,450,000 shares authorized, 4,503,893 and 3,861,953 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
45  39 
Common Stock, $0.01 par value, 250,000,000 shares authorized, 95,512,062 and 89,614,601 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
2,286  2,227 
Additional paid-in capital 2,540,522  2,418,659 
Accumulated other comprehensive income 13,885  8,073 
Accumulated deficit (933,695) (896,547)
Total Stockholders’ Equity 1,623,111  1,532,519 
Non-controlling interest 24,118  21,760 
 Total Equity
1,647,229  1,554,279 
     Total Liabilities and Equity $ 4,043,857  $ 3,967,014 
The accompanying notes are an integral part of these consolidated financial statements.
2
GLOBAL NET LEASE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
  Three Months Ended March 31,
2021 2020
Revenue from tenants $ 89,390  $ 79,242 
 Expenses:
Property operating 7,570  7,377 
Operating fees to related parties 9,639  8,794 
Acquisition, transaction and other costs 17  280 
General and administrative
4,128  2,961 
Equity-based compensation 2,577  2,488 
Depreciation and amortization 39,684  33,533 
Total expenses
63,615  55,433 
Operating income before gain (loss) on dispositions of real estate investments
25,775  23,809 
Operating income
25,775  23,809 
Other income (expense):
Interest expense (21,368) (16,440)
Loss on extinguishment of debt
— —
Gain on derivative instruments 1,842 3,143
Other income 15 48
Total other expense, net
(19,511) (13,249)
Net income before income tax 6,264  10,560 
Income tax expense (2,080) (959)
Net income 4,184  9,601 
Preferred stock dividends (5,016) (4,563)
Net income attributable to common stockholders $ (832) $ 5,038
Basic and Diluted Earnings Per Share:
Net income per share attributable to common stockholders — Basic and Diluted $ (0.01) $ 0.05 
Weighted average common shares outstanding:
Weighted average shares outstanding — Basic 91,479,497  89,458,753 
Weighted average shares outstanding — Diluted 91,479,497  89,499,294 
The accompanying notes are an integral part of these consolidated financial statements.
3
GLOBAL NET LEASE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)


  Three Months Ended March 31,
2021 2020
Net income $ 4,184  $ 9,601 
Other comprehensive income (loss)
Cumulative translation adjustment 2,017  (12,550)
Designated derivatives, fair value adjustments 3,795  (7,152)
Other comprehensive income (loss) 5,812  (19,702)
Comprehensive income (loss) 9,996  (10,101)
Preferred Stock dividends (5,016) (4,563)
Comprehensive income (loss) attributable to common stockholders $ 4,980  $ (14,664)
The accompanying notes are an integral part of these consolidated financial statements.
4
GLOBAL NET LEASE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share data)
(Unaudited)

Three Months Ended March 31, 2021
Series A Preferred Stock Series B Preferred Stock Common Stock
  Number of
Shares 		Par Value Number of
Shares 		Par Value Number of
Shares 		Par Value Additional Paid-in
Capital 		Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Non-controlling interest Total Equity
Balance, December 31, 2020 6,799,467  $ 68  3,861,953  $ 39  89,614,601  $ 2,227  $ 2,418,659  $ 8,073  $ (896,547) $ 1,532,519  $ 21,760  $ 1,554,279 
Issuance of Common Stock, net —  —  —  —  5,895,802  59  105,691  —  —  105,750  —  105,750 
Issuance of Preferred Stock, net —  —  641,940  6  —  —  15,953  —  —  15,959  —  15,959 
Dividends declared:
—  — 
Common Stock, $0.40 per share
—  —  —  —  —  —  —  —  (36,213) (36,213) —  (36,213)
Series A Preferred Stock, $0.45 per share
—  —  —  —  —  —  —  —  (3,081) (3,081) —  (3,081)
Series B Preferred Stock,$0.43 per share
—  —  —  —  —  —  —  —  (1,935) (1,935) —  (1,935)
Equity-based compensation, net of forfeitures —  —  —  —  1,659  —  219  —  —  219  2,358  2,577 
Distributions to non-controlling interest holders
—  —  —  —  —  —  —  —  (103) (103) —  (103)
Net Income —  —  —  —  —  —  —  —  4,184  4,184  —  4,184 
Cumulative translation adjustment
—  —  —  —  —  —  —  2,017  —  2,017  —  2,017 
Designated derivatives, fair value adjustments
—  —  —  —  —  —  —  3,795  —  3,795  —  3,795 
Balance, March 31, 2021 6,799,467  $ 68  4,503,893  $ 45  95,512,062  $ 2,286  $ 2,540,522  $ 13,885  $ (933,695) $ 1,623,111  $ 24,118  $ 1,647,229 

Three Months Ended March 30, 2020
Series A Preferred Stock Series B Preferred Stock Common Stock
  Number of
Shares 		Par Value Number of
Shares 		Par Value Number of
Shares 		Par Value Additional Paid-in
Capital 		Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Non-controlling interest Total Equity
Balance, December 31, 2019 6,799,497  $ 68  3,450,000  $ 35  89,458,752  $ 2,225  $ 2,408,353  $ 20,195  $ (733,245) $ 1,697,631  $ 12,327  $ 1,709,958 
Issuance of Common Stock, net
—  —  —  —  —  —  (106) —  —  (106) —  (106)
Issuance of Series A Preferred Stock, net
—  —  —  —  —  —  76  —  —  76  —  76 
Dividends declared:
   Common Stock, $0.53 per share
—  —  —  —  —  —  —  —  (47,638) (47,638) —  (47,638)
  Series A Preferred Stock, $0.45 per share
—  —  —  —  —  —  —  —  (3,081) (3,081) —  (3,081)
  Series B Preferred Stock, $0.43 per share
—  —  —  —  —  —  —  —  (1,482) (1,482) —  (1,482)
Equity-based compensation
—  —  —  —  —  —  129  —  —  129  2,359  2,488 
Distributions to non-controlling interest holders
—  —  —  —  —  —  —  —  (157) (157) —  (157)
Net Income —  —  —  —  —  —  —  —  9,601  9,601  —  9,601 
Cumulative translation adjustment
—  —  —  —  —  —  —  (12,550) —  (12,550) —  (12,550)
Designated derivatives, fair value adjustments
—  —  —  —  —  —  —  (7,152) —  (7,152) —  (7,152)
Balance, March 31, 2020 6,799,497  $ 68  3,450,000  $ 35  89,458,752  $ 2,225  $ 2,408,452  $ 493  $ (776,002) $ 1,635,271  $ 14,686  $ 1,649,957 
The accompanying notes are an integral part of these consolidated financial statements.
5
GLOBAL NET LEASE, INC.
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Three Months Ended March 31,
2021 2020
Cash flows from operating activities:  
Net income $ 4,184  $ 9,601 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation 22,461  19,263 
Amortization of intangibles 17,223  14,270 
Amortization of deferred financing costs 2,279  1,810 
Amortization of mortgage discounts and premiums, net —  10 
Amortization of below-market lease liabilities (1,088) (815)
Amortization of above-market lease assets 907  840 
Amortization related to right-of-use assets 240  207 
Amortization of lease incentive 119  — 
Unbilled straight-line rent (944) (1,487)
Equity-based compensation 2,577  2,488 
Unrealized losses (gains) on foreign currency transactions, derivatives, and other (1,762) (2,082)
Lease incentive payment —  (4,676)
Changes in operating assets and liabilities, net:  
Prepaid expenses and other assets 1,367  4,873 
Deferred tax assets —  22 
Accounts payable and accrued expenses 558  (909)
Prepaid rent 5,099  212 
Deferred tax liability —  (686)
Taxes payable —  (1,046)
Net cash provided by operating activities 53,220  41,895 
Cash flows from investing activities:
Investment in real estate and real estate related assets —  (113,117)
Deposits for real estate investments (1,200) (1,434)
Capital expenditures (3,247) (1,396)
Net cash used in investing activities (4,447) (115,947)
Cash flows from financing activities:  
Borrowings under revolving credit facilities 15,000  205,000 
Principal payments on mortgage notes payable (2,709) — 
Common Stock issuance (costs) proceeds, net 105,750  (106)
Series A Preferred Stock issuance (costs) proceeds, net —  76 
Series B Preferred Stock issuance (costs) proceeds, net 15,959  — 
Payments of financing costs (150) — 
Dividends paid on Common Stock (36,213) (47,638)
Dividends paid on Series A Preferred Stock (3,081) (3,081)
Dividends paid on Series B Preferred Stock (1,701) (577)
Distributions to non-controlling interest holders (103) (135)
Net cash provided by financing activities 92,752  153,539 
Net change in cash, cash equivalents and restricted cash 141,525  79,487 
Effect of exchange rate changes on cash (2,998) (5,972)
Cash, cash equivalents and restricted cash, beginning of period 125,693  274,287 
Cash, cash equivalents and restricted cash, end of period $ 264,220  $ 347,802 
Three Months Ended March 31,
2021 2020
Cash and cash equivalents, end of period $ 262,868  $ 343,447 
Restricted cash, end of period 1,352  4,355 
Cash, cash equivalents and restricted cash, end of period $ 264,220  $ 347,802 

The accompanying notes are an integral part of these consolidated financial statements.
6
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)

Note 1 — Organization
Global Net Lease, Inc. (the “Company”) is an externally managed real estate investment trust for United States (“U.S.”) federal income tax purposes (“REIT”) that focuses on acquiring and managing a globally diversified portfolio of strategically-located commercial real estate properties, which consist primarily of “Investment Grade” tenants (defined below). The Company invests in commercial properties, with an emphasis on sale-leaseback transactions and mission-critical, single tenant net-lease assets.
As of March 31, 2021, the Company owned 306 properties consisting of 37.2 million rentable square feet, which were 99.7% leased, with a weighted-average remaining lease term of 8.3 years. Based on the percentage of annualized rental income on a straight-line basis as of March 31, 2021, 65% of the Company’s properties are located in the U.S. and Canada and 35% in Europe. In addition, the Company’s portfolio was comprised of 49% industrial/distribution properties, 46% office properties and 5% retail properties. These percentages are calculated using annualized straight-line rent converted from local currency into the U.S. Dollar (“USD”) as of March 31, 2021. The straight-line rent includes amounts for tenant concessions.
Substantially all of the Company’s business is conducted through the Global Net Lease Operating Partnership, L.P. (the “OP”), a Delaware limited partnership. The Company has retained Global Net Lease Advisors, LLC (the “Advisor”) to manage the Company’s affairs on a day-to-day basis. The Company’s properties are managed and leased to third parties by Global Net Lease Properties, LLC (the “Property Manager”). The Advisor and the Property Manager are under common control with AR Global Investments, LLC (“AR Global”), and these related parties receive compensation and fees for various services provided to the Company.
“Investment Grade” includes both actual investment grade ratings of the tenant or guarantor, if available, or implied investment grade. Implied investment grade may include actual ratings of the tenant parent, guarantor parent (regardless of whether or not the parent has guaranteed the tenant’s obligation under the lease) or tenants that are identified as investment grade by using a proprietary Moody’s analytical tool, which generates an implied rating by measuring an entity’s probability of default.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company included herein were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to this Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair statement of results for the interim periods. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results for the entire year or any subsequent interim period.
These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2020, which are included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 26, 2021. Except for those required by new accounting pronouncements discussed below, there have been no significant changes to the Company’s significant accounting policies during the three months ended March 31, 2021, other than those relating to new accounting pronouncements (see “Recently Issued Accounting Pronouncements” section below).
Principles of Consolidation
The accompanying unaudited consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members as well as whether the entity is a variable interest entity (“VIE”) for which the Company is the primary beneficiary. Substantially all of the Company’s assets and liabilities are held by the OP.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
7
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue recognition, purchase price allocations to record investments in real estate, income taxes, derivative financial instruments, hedging activities, equity-based compensation expenses related to a multi-year outperformance agreement entered into with the Advisor in 2018 (the “2018 OPP”) and fair value measurements, as applicable.
Revenue Recognition
The Company’s revenues, which are derived primarily from lease contracts, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. As of March 31, 2021, these leases had a weighted-average remaining lease term of 8.3 years. Because many of the Company’s leases provide for rental increases at specified intervals, straight-line basis accounting requires the Company to record a receivable for, and include in revenue from tenants, unbilled rent receivables that the Company will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease.
For new leases after acquisition of a property, the commencement date is considered to be the date the lease is executed and the tenant has access to the space. The Company defers the revenue related to lease payments received from tenants in advance of their due dates. When the Company acquires a property, the acquisition date is considered to be the commencement date for purposes of this calculation for all leases in place at the time of acquisition. In addition to base rent, the Company’s lease agreements generally require tenants to pay or reimburse the Company for all property operating expenses, which primarily reflect insurance costs and real estate taxes incurred by the Company and subsequently reimbursed by the tenant. However, some limited property operating expenses that are not the responsibility of the tenant are absorbed by the Company. Under ASC 842, the Company has elected to report combined lease and non-lease components in a single line “Revenue from tenants.” For expenses paid directly by the tenant, under both ASC 842 and 840, the Company has reflected them on a net basis.
The Company continually reviews receivables related to rent and unbilled rent receivables and determines collectability by taking into consideration the tenant’s payment history, the credit worthiness and financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. Under lease accounting rules, the Company is required to assess, based on credit risk only, if it is probable that it will collect virtually all of the lease payments at the lease commencement date and it must continue to reassess collectability periodically thereafter based on new facts and circumstances affecting the credit risk of the tenant. Partial reserves, or the ability to assume partial recovery are no longer permitted. If the Company determines that it is probable it will collect virtually all of the lease payments (rent and common area maintenance), the lease will continue to be accounted for on an accrual basis (i.e. straight-line). However, if the Company determines it is not probable that it will collect virtually all of the lease payments, the lease will be accounted for on a cash basis and the straight line rent receivable would be written off where it was subsequently concluded that collection was not probable. Cost recoveries from tenants are included in revenue from tenants on the accompanying consolidated statements of operations in the period the related costs are incurred, as applicable.
Accounting for Leases
Lessor Accounting
As a lessor of real estate, the Company has elected, by class of underlying assets, to account for lease and non-lease components (such as tenant reimbursements of property operating expenses) as a single lease component as an operating lease because (a) the non-lease components have the same timing and pattern of transfer as the associated lease component; and (b) the lease component, if accounted for separately, would be classified as an operating lease. Additionally, only incremental direct leasing costs may be capitalized under the accounting guidance. Indirect leasing costs in connection with new or extended tenant leases, if any, are being expensed as incurred.
Update on the Impacts of the COVID-19 Pandemic
The financial stability and overall health of the Company’s tenants is critical to its business. The negative effects that the global COVID-19 pandemic has had on the economy has impacted the ability of some of the Company’s tenants to pay their monthly rent. The Company has taken a proactive approach to seek mutually agreeable solutions with its tenants where necessary, and, in some cases, the Company executed rent deferral agreements on leases with several tenants. For accounting purposes, in accordance with ASC 842, normally a company would be required to assess the modification to determine if the modification should be treated as a separate lease and if not, modification accounting would be applied which would require a company to reassess the classification of the lease (i.e. operating, direct financing or sales-type). However, in light of the COVID-19 pandemic due to which many leases are being modified, the FASB and SEC have provided relief that allows companies to make a policy election as to whether they treat COVID-19 related lease amendments as a provision included in the preconcession arrangement, and therefore, not a lease modification, or to treat a lease amendment as a modification. In order to qualify for the relief, the modifications must be COVID-19 related and cash flows must be substantially the same or less than
8
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
those prior to the concession. The Company elected to use this relief where applicable. In those circumstances, the Company has accounted for these arrangements as if no changes to the lease contract were made. For those leases that do not qualify for the relief, the Company performs a lease modification analysis and if required, uses lease modification accounting.
Lessee Accounting
For lessees, the accounting standard requires the application of a dual lease classification approach, classifying leases as either operating or finance leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. Lease expense for operating leases is recognized on a straight-line basis over the term of the lease, while lease expense for finance leases is recognized based on an effective interest method over the term of the lease. Also, lessees must recognize a right-of-use asset (“ROU”) and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Further, certain transactions where at inception of the lease the buyer-lessor accounted for the transaction as a purchase of real estate and a new lease, may now be required to have symmetrical accounting to the seller-lessee if the transaction was not a qualified sale-leaseback and accounted for as a financing transaction. For additional information and disclosures related to the Company’s operating leases, see Note 10 — Commitments and Contingencies.
Impairment of Long Lived Assets
When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net earnings.
Goodwill
The Company evaluates goodwill for impairment at least annually or upon the occurrence of a triggering event. A triggering event is an event or circumstance that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company performed a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. The Company determined that the potential impact of the COVID-19 pandemic represented a triggering event, and, as such, performed an updated goodwill assessment during the first quarter of 2020. Based on the Company’s assessment, it determined that the goodwill was not impaired at the time of the triggering event evaluation. The Company also performed its annual goodwill impairment evaluation in the fourth quarter of 2020 and determined that goodwill was not impaired as of December 31, 2020. There were no material changes to this assessment as of March 31, 2021.
Derivative Instruments
The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts to hedge all or a portion of the interest rate risk associated with its borrowings. In addition, all foreign currency denominated borrowings under the Company’s Credit Facility (as defined in Note 5 - Revolving Credit Facility and Term Loan, Net) are designated as net investment hedges. Certain of the Company’s foreign operations expose the Company to fluctuations of foreign interest rates and exchange rates. These fluctuations may impact the value of the Company’s cash receipts and payments in the Company’s functional currency, the USD. The Company enters into derivative financial instruments in an effort to protect the value or fix the amount of certain obligations in terms of its functional currency.
The Company records all derivatives on the consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in foreign operations. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions
9
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.
The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designed and qualifies for hedge accounting treatment. If the Company elects not to apply hedge accounting treatment (or for derivatives that do not qualify as hedges), any changes in the fair value of these derivative instruments is recognized immediately in gains (losses) on derivative instruments in the consolidated statements of operations. If a derivative is designated and qualifies for cash flow hedge accounting treatment, the change in the estimated fair value of the derivative is recorded in other comprehensive income (loss) in the consolidated statements of comprehensive income (loss) to the extent that it is effective. Any ineffective portion of a change in derivative fair value is immediately recorded in earnings.
Equity-Based Compensation
The Company has a stock-based incentive plan under which its directors, officers and other employees of the Advisor,or its affiliates who are involved in providing services to the Company are eligible to receive awards. Awards granted thereunder are accounted for under the guidance for employee share based payments. The cost of services received in exchange for a stock award is measured at the grant date fair value of the award and the expense for such awards is included in equity-based compensation on consolidated statements of operations and is recognized over the vesting period or when the requirements for exercise of the award have been met (see Note 13 — Equity-Based Compensation for additional information).
Multi-Year Outperformance Agreements
Concurrent with the listing of the Company’s common stock, $0.01 par value per share (“Common Stock”) on the New York Stock Exchange (“NYSE”) on June 2, 2015 and modifications to the Fourth Amended and Restated Advisory Agreement (the “Advisory Agreement”) by and among the Company, the OP and the Advisor, the Company entered into a multi-year outperformance agreement with the Advisor in June 2015 (the “2015 OPP”). Following the end of the performance period under the 2015 OPP on June 2, 2018, the Company entered into the 2018 OPP with the Advisor (see Note 13 — Equity-Based Compensation). Under the 2018 OPP, effective June 2, 2018, the Company records equity-based compensation evenly over the requisite service period of approximately 2.8 years from the grant date. Under accounting guidance adopted by the Company on January 1, 2019, total equity-based compensation expense calculated as of the adoption of the new guidance is fixed as of that date and reflected as a charge to earnings over the remaining service period. Further, in the event of a modification, any incremental increase in the value of the instrument measured on the date of the modification both before and after the modification, will result in an incremental amount to be reflected prospectively as a charge to earnings over the remaining service period. The expense for these non-employee awards is included in the equity-based compensation line item of the consolidated statements of operations. For additional information on the original terms, a February 2019 modification of the 2018 OPP, and accounting for these awards, see Note 13 — Equity-Based Compensation.
Income Taxes
The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), beginning with the taxable year ended December 31, 2013. Commencing with such taxable year, the Company was organized to operate in such a manner as to qualify for taxation as a REIT under the Code and believes it has so qualified. The Company intends to continue to operate in such a manner to continue to qualify for taxation as a REIT, but no assurance can be given that it will operate in a manner to remain qualified as a REIT. As a REIT, the Company generally will not be subject to federal corporate income tax to the extent it distributes annually all of its REIT taxable income. REITs are subject to a number of other organizational and operational requirements.
The Company conducts business in various states and municipalities within the U.S., Canada, Puerto Rico, the United Kingdom and Western Europe and, as a result, the Company or one of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and certain foreign jurisdictions. As a result, the Company may be subject to certain federal, state, local and foreign taxes on its income and assets, including alternative minimum taxes, taxes on any undistributed income and state, local or foreign income, franchise, property and transfer taxes. Any of these taxes decrease the Company’s earnings and available cash. In addition, the Company’s international assets and operations, including those owned through direct or indirect subsidiaries that are disregarded entities for U.S. federal income tax purposes, continue to be subject to taxation in the foreign jurisdictions where those assets are held or those operations are conducted.
Significant judgment is required in determining the Company’s tax provision and in evaluating its tax positions. The Company establishes tax reserves based on a benefit recognition model, which the Company believes could result in a greater amount of benefit (and a lower amount of reserve) being initially recognized in certain circumstances. Provided that the tax position is deemed more likely than not of being sustained, the Company recognizes the largest amount of tax benefit that is
10
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
greater than 50 percent likely of being ultimately realized upon settlement. The Company derecognizes the tax position when the likelihood of the tax position being sustained is no longer more likely than not.
The Company recognizes deferred income taxes in certain of its subsidiaries taxable in the U.S. or in foreign jurisdictions. Deferred income taxes are generally the result of temporary differences (items that are treated differently for tax purposes than for GAAP purposes). In addition, deferred tax assets arise from unutilized tax net operating losses, generated in prior years. The Company provides a valuation allowance against its deferred income tax assets when it believes that it is more likely than not that all or some portion of the deferred income tax asset may not be realized. Whenever a change in circumstances causes a change in the estimated realizability of the related deferred income tax asset, the resulting increase or decrease in the valuation allowance is included in deferred income tax expense (benefit).
The Company derives most of its REIT taxable income from its real estate operations in the U.S. and has historically distributed all of its REIT taxable income to its shareholders. As such, the Company’s real estate operations are generally not subject to U.S. federal tax, and accordingly, no provision has been made for U.S. federal income taxes in the consolidated financial statements for these operations. These operations may be subject to certain state, local, and foreign taxes, as applicable.
The Company’s deferred tax assets and liabilities are primarily the result of temporary differences related to the following:
•Basis differences between tax and GAAP for certain international real estate investments. For income tax purposes, in certain acquisitions, the Company assumes the seller’s basis, or the carry-over basis, in the acquired assets. The carry-over basis is typically lower than the purchase price, or the GAAP basis, resulting in a deferred tax liability with an offsetting increase to goodwill or the acquired tangible or intangible assets;
•Timing differences generated by differences in the GAAP basis and the tax basis of assets such as those related to capitalized acquisition costs and depreciation expense; and
•Tax net operating losses in certain subsidiaries, including those domiciled in foreign jurisdictions that may be realized in future periods if the respective subsidiary generates sufficient taxable income.
The Company recognizes current income tax expense for state and local income taxes and taxes incurred in its foreign jurisdictions. The Company’s current income tax expense fluctuates from period to period based primarily on the timing of its taxable income.
Recently Issued Accounting Pronouncements
Pending Adoption as of March 31, 2021
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Topic 470) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Topic 815). The new standard reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and amends the guidance for the derivatives scope exception for contracts in an entity's own equity. The standard also amends and makes targeted improvements to the related earnings per share guidance. The ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The standard allows for either modified or full retrospective transition methods. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in Topic 848 is optional and may be elected over the period March 12, 2020 through December 31, 2022 as reference rate reform activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to (i) the assertion that the Company’s hedged forecasted transactions remain probable and (ii) the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of the Company’s derivatives, which will be consistent with the Company’s past presentation. The Company will continue to evaluate the impact of the guidance and may apply other elections, as applicable, as additional changes in the market occur.
11
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Note 3 — Real Estate Investments, Net
Property Acquisitions
The following table presents the allocation of the assets acquired and liabilities assumed during the three months ended March 31, 2020, and, in the case of assets located outside of the United States, based on the applicable exchange rate at the time of purchase. All acquisitions were considered asset acquisitions for accounting purposes. There were no acquisitions during the three months ended March 31, 2021.
Three Months Ended March 31,
(Dollar amounts in thousands) 2020
Real estate investments, at cost:
Land $ 21,153 
Buildings, fixtures and improvements 84,767 
Total tangible assets 105,920 
Acquired intangible lease assets:
In-place leases 7,245 
Above-market lease assets 21 
Below-market lease liabilities (69)
               Total intangible assets 7,197 
ROU asset — 
Cash paid for acquired real estate investments $ 113,117 
Number of properties purchased 10 

The following table summarizes the acquisition by property type during the three months ended March 31, 2020:
Property Type
Number of Properties
Square Feet (unaudited)
Properties Acquired in 2020:
Office 2  196 
Industrial 6  1,796 
Distribution 2  562 
Retail —  — 
10  2,554 
Acquired Intangible Lease Assets
The Company allocates a portion of the fair value of real estate acquired to identified intangible assets and liabilities, consisting of the value of origination costs (tenant improvements, leasing commissions, and legal and marketing costs), the value of above-market and below-market leases, and the value of tenant relationships, if applicable, based in each case on their relative fair values. The Company periodically assesses whether there are any indicators that the value of the intangible assets may be impaired by performing a net present value analysis of future cash flows, discounted for the inherent risk associated with each investment. The Company did not record any impairment charges to its intangible assets associated with its real estate investments during the three months ended March 31, 2021 and 2020.
Dispositions
During the three months ended March 31, 2021 and 2020, the Company did not sell any properties.
Assets Held for Sale
As of March 31, 2021 and December 31, 2020, the Company did not have any assets that were classified as held for sale.
12
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Significant Tenants
There were no tenants whose annualized rental income on a straight-line basis represented 10.0% or greater of consolidated annualized rental income on a straight-line basis for all properties as of March 31, 2021 and December 31, 2020. The termination, delinquency or non-renewal of leases by any major tenant may have a material adverse effect on revenues.
Geographic Concentration
The following table lists the countries and states where the Company has concentrations of properties where annualized rental income on a straight-line basis represented greater than 10.0% of consolidated annualized rental income on a straight-line basis as of March 31, 2021 and December 31, 2020.
Country / U.S. State March 31,
2021 		December 31,
2020
United States 63.5% 63.2%
Michigan 15.4% 15.3%
United Kingdom 17.3% 16.8%
13
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Note 4 —Mortgage Notes Payable, Net
Mortgage notes payable, net as of March 31, 2021 and December 31, 2020 consisted of the following:
Encumbered Properties
Outstanding Loan Amount (1)
Effective Interest Rate
Interest Rate
Country Portfolio March 31,
2021 		December 31,
2020
Maturity
(In thousands) (In thousands)
Finland: Finland Properties 5 $ 86,786  $ 90,760  1.7% (2) Fixed/Variable Feb. 2024
France: French Properties 7 82,095  85,854  2.5% (3) Fixed/Variable May 2025
Germany: Germany Properties 5 60,399  63,165  1.8% (4) Fixed/Variable Jun. 2023
Luxembourg/ The Netherlands: Benelux Properties 3 140,734  147,178  1.4% Fixed Jun. 2024
Total EUR denominated 20 370,014  386,957 
United Kingdom: United Kingdom Properties 42 301,828  301,979  3.0% (5) Fixed/Variable Aug. 2023
Total GBP denominated 42 301,828  301,979 
United States: Penske Logistics 1 70,000  70,000  4.7% (6) Fixed Nov. 2028
Multi-Tenant Mortgage Loan I 12 187,000  187,000  4.4% (6) Fixed Nov. 2027
Multi-Tenant Mortgage Loan II 8 32,750  32,750  4.4% (6) Fixed Feb. 2028
Multi-Tenant Mortgage Loan III 7 98,500  98,500  4.9% (6) Fixed Dec. 2028
Multi-Tenant Mortgage Loan IV 16 97,500  97,500  4.6% (6) Fixed May 2029
Multi-Tenant Mortgage Loan V 12 204,000  204,000  3.7% (6) Fixed Oct. 2029
Total USD denominated 56 689,750  689,750 
Gross mortgage notes payable
118 1,361,592  1,378,686  3.4%
Mortgage discount
—  — 
Deferred financing costs, net of accumulated amortization (7)
(14,108) (14,988)
Mortgage notes payable, net
118 $ 1,347,484  $ 1,363,698  3.4%

______________
(1)Amounts borrowed in local currency and translated at the spot rate in effect at the applicable reporting date.
(2)80% fixed as a result of a “pay-fixed” interest rate swap agreement and 20% variable. Variable portion is approximately 1.4% plus 3-month Euribor rate in effect as of March 31, 2021.
(3)90% fixed as a result of a “pay-fixed” interest rate swap agreement and 10% variable. Variable portion is approximately 2.3% plus 3-month Euribor. Euribor rate in effect as of March 31, 2021.
(4)80% fixed as a result of a “pay-fixed” interest rate swap agreement and 20% variable. Variable portion is approximately 1.55% plus 3 month Euribor. Euribor rate in effect as of March 31, 2021.
(5)80% fixed as a result of a “pay-fixed” interest rate swap agreement and 20% variable. Variable portion is approximately 2.0% plus 3-month GBP LIBOR. LIBOR rate in effect as of March 31, 2021. This loan requires principal repayments that began in 2020 based on amounts specified under the loan.
(6)The borrower’s (wholly owned subsidiaries of the Company) financial statements are included within the Company’s consolidated financial statements, however, the borrowers’ assets and credit are only available to pay the debts of the borrowers and their liabilities constitute obligations of the borrowers.
(7)Deferred financing costs represent commitment fees, legal fees, and other costs associated with obtaining commitments for financing. These costs are amortized over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or paid down before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close.
14
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The following table presents future scheduled aggregate principal payments on the Company’s gross mortgage notes payable over the next five calendar years and thereafter as of March 31, 2021:
(In thousands)
Future Principal Payments (1)
2021 (remainder) $ 10,611 
2022 20,650 
2023 330,967 
2024 227,519 
2025 82,095 
2026 — 
Thereafter 689,750 
Total $ 1,361,592 
________
(1)Assumes exchange rates of £1.00 to $1.38 for GBP and €1.00 to $1.17 for EUR as of March 31, 2021 for illustrative purposes, as applicable.
The Company’s mortgage notes payable agreements require compliance with certain property-level financial covenants including debt service coverage ratios. As of March 31, 2021, the Company was in compliance with all financial covenants under its mortgage notes payable agreements, except as described below.
During the three months ended September 30, 2020, the borrower entities under the mortgage loan secured by all the Company’s properties located in the United Kingdom did not maintain the required loan-to-value ratios with respect to the mortgaged properties, and, as a result, a cash trap event under the loan occurred which was immediately cured when the Company executed, as required by the terms of the loan, a limited unsecured corporate guaranty of the borrower entities’ obligations under the loan of £20.0 million (approximately $27.6 million as of March 31, 2021). The guaranty remains in effect as of March 31, 2021 and contains a covenant that requires the Company to maintain unrestricted cash and cash equivalents (or amounts available for future borrowings under credit facility, such as the Credit Facility) in an amount sufficient to meet its actual and contingent liabilities under the guaranty.
During the three months ended December 31, 2020, the borrower entities under the same mortgage loan did not maintain the same loan-to-value ratio and another cash trap event under the loan occurred. This does not constitute a breach of the covenant and is not an event of default under the loan. The Company is currently in active negotiations with its lenders to cure the cash trap event. The Company anticipates reaching a resolution on the cure to the cash trap event in the second quarter of 2021 but there can be no assurance it will be able to do so on favorable terms, or at all. If the value of the underlying portfolio continues to decline, the loan to value ratio may exceed the financial covenant required under the loan of 55%, which would result in a breach, which could, if not cured, give rise to the lenders’ right to accelerate the principal amount due under the loan and other remedies. In that event, the Company’s intent would be to cure the breach through various remedies available to them per the loan agreement within the specified time frame under the loan. If the Company is unable to maintain this loan-to-value after the next annual lender valuation in the fourth quarter of 2021, it may experience future cash trap events that could adversely impact its liquidity.
In addition, during the three months ended December 31, 2020, the Company also triggered a cash sweep event under one of its mortgage loans with a balance of $98.5 million as of March 31, 2021, because a major tenant failed to renew its lease. This is not an event of default and instead triggers a cash sweep event. During the first quarter of 2021, the Company cured this event through one of the available options under the loan by putting a $3.2 million letter of credit in place. The Company may be required to put additional letters of credit in place up to an aggregate of $7.4 million if the Company is not able to find a suitable replacement tenant prior to the fourth quarter of 2021, and the letters of credit reduce the availability for future borrowings under the Revolving Credit Facility.
As of March 31, 2021, the Company was in compliance with the covenants pursuant to the Indenture under the Company’s 3.75% Senior Notes due 2027 (the “Senior Notes”) (as described in Note 6 — Senior Notes, Net) Credit Facility and mortgage notes payable agreements.
The total gross carrying value of unencumbered assets as of March 31, 2021 was $1.8 billion, of which approximately $1.8 billion was included in the unencumbered asset pool comprising the borrowing base under the Revolving Credit Facility (as defined in Note 5 — Revolving Credit Facility and Term Loan, Net) and therefore is not available to serve as collateral for future borrowings.
15
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Note 5 — Revolving Credit Facility and Term Loan, Net
The table below details the outstanding balances as of March 31, 2021 and December 31, 2020 under the credit agreement with KeyBank National Association (“KeyBank”), as agent, and the other lender parties thereto, which provides for an $835.0 million senior unsecured multi-currency revolving credit facility (the “Revolving Credit Facility”) and a €247.1 million ($289.8 million based on the prevailing exchange rate as of March 31, 2021) senior unsecured term loan facility (the “Term Loan” and, together with the Revolving Credit Facility, the “Credit Facility”). The Credit Facility was originally entered into on July 24, 2017 and it has been amended from time to time. On August 1, 2019, the Company, through the OP, entered into an amendment and restatement of the credit agreement related to the Credit Facility to, among other things, increase the aggregate total commitments, lower the interest rate and revise certain covenants, and the terms of the Credit Facility described below generally reflect this amendment and restatement.
March 31, 2021 December 31, 2020
(In thousands)
TOTAL USD (1)
USD GBP EUR
TOTAL USD (2)
USD GBP EUR
Revolving Credit Facility
$ 125,864  $ 120,000  £ —  € 5,000  $ 111,132  $ 105,000  £ —  € 5,000 
Term Loan 289,765  —  —  247,075  303,036  —  —  247,075 
Deferred financing costs (2,593) —  —  —  (2,882) —  —  — 
Term Loan, Net 287,172  —  —  247,075  300,154  —  —  247,075 
Total Credit Facility $ 413,036  $ 120,000  £ —  € 252,075  $ 411,286  $ 105,000  £ —  € 252,075 
(1)Assumes exchange rates of £1.00 to $1.38 for GBP and €1.00 to $1.17 for EUR as of March 31, 2021 for illustrative purposes, as applicable.
(2)Assumes exchange rates of £1.00 to $1.37 for GBP and €1.00 to $1.23 for EUR as of December 31, 2020 for illustrative purposes, as applicable.

Credit Facility - Terms
As of December 31, 2020, the aggregate total commitments under the Credit Facility were $1.1 billion, based on the USD equivalent on March 31, 2021. On February 24, 2021, following a request by the Company, lender commitments under the Credit Facility were increased by $50.0 million with all of the increase allocated to the Revolving Credit Facility, and the total commitments were approximately $1.2 billion based on prevailing exchange rates on that date. This increase was made pursuant to the Credit Facility’s uncommitted “accordion feature” whereby, upon the request of the Company, but at the sole discretion of the lenders participating in such increase, total commitments under the Credit Facility may be increased, with the aggregate of such commitments not to exceed $1.75 billion. Following the effectiveness of the commitment increase completed on February 24, 2021, the Company may request future additional increases to total commitments of approximately $565.0 million, allocable to either or both components of the Credit Facility. The increase in lender commitments did not impact the amount available for future borrowings under the Credit Facility, which is based on the value of a pool of eligible unencumbered real estate assets owned by us and compliance with various ratios related to those assets.
The Credit Facility consists of two components, a Revolving Credit Facility and a Term Loan, both of which are interest-only. The Revolving Credit Facility matures on August 1, 2023, subject to two six-month extensions at the Company’s option, and the Term Loan matures on August 1, 2024. Borrowings under the Credit Facility bear interest at a variable rate per annum based on an applicable margin that varies based on the ratio of consolidated total indebtedness and the consolidated total asset value of the Company and its subsidiaries plus either (i) LIBOR, as applicable to the currency being borrowed, or (ii) a “base rate” equal to the greatest of (a) KeyBank’s “prime rate,” (b) 0.5% above the Federal Funds Effective Rate, or (c) 1.0% above one-month LIBOR. The applicable interest rate margin is based on a range from 0.45% to 1.05% per annum with respect to base rate borrowings under the Revolving Credit Facility, 1.45% to 2.05% per annum with respect to LIBOR borrowings under the Revolving Credit Facility, 0.40% to 1.00% per annum with respect to base rate borrowings under the Term Loan and 1.40% to 2.00% per annum with respect to LIBOR borrowings under the Term Loan. As of March 31, 2021, the Credit Facility had a weighted-average effective interest rate of 2.5% after giving effect to interest rate swaps in place.
In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee, which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to LIBOR in derivatives and other financial contracts. On March 5, 2021, the Financial Conduct Authority confirmed a partial extension of this deadline, announcing that it will cease the
16
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
publication of the one-week and two-month USD LIBOR settings immediately following December 31, 2021. The remaining USD LIBOR settings will continue to be published through June 30, 2023. The Company is not able to predict when there will be sufficient liquidity in the SOFR market. The Company is monitoring and evaluating the risks related to changes in LIBOR availability, which include potential changes in interest paid on debt and amounts received and paid on interest rate swaps. In addition, the value of debt or derivative instruments tied to LIBOR will also be impacted as LIBOR is limited and discontinued and contracts must be transitioned to a new alternative rate. While the Company expects LIBOR to be available in substantially its current form until at least the end of 2021, it is possible that LIBOR will become unavailable prior to that time. This could occur, for example, if a sufficient number of banks decline to make submissions to the LIBOR administrator. The Credit Facility contains terms governing the establishment of a replacement index to serve as an alternative to LIBOR, if necessary. To transition from LIBOR under the Credit Facility, the Company anticipates that it will either utilize the Base Rate or negotiate a replacement reference rate for LIBOR with the lenders.
The Credit Facility requires the Company through the OP to pay an unused fee per annum of 0.25% of the unused balance of the Revolving Credit Facility if the unused balance exceeds or is equal to 50% of the total commitment or a fee per annum of 0.15% of the unused balance of the Revolving Credit Facility if the unused balance is less than 50% of the total commitment. From and after the time the Company obtains an investment grade credit rating, the unused fee will be replaced with a facility fee based on the total commitment under the Revolving Credit Facility multiplied by 0.30%, decreasing as the Company’s credit rating increases.
The availability of borrowings under the Revolving Credit Facility is based on the value of a pool of eligible unencumbered real estate assets owned by the Company and compliance with various ratios related to those assets. As of March 31, 2021, approximately $88.6 million was available for future borrowings under the Revolving Credit Facility. Any future borrowings may, at the option of the Company, be denominated in USD, Euros (“EUR”), Canadian Dollars, British Pounds Sterling (“GBP”) or Swiss Francs. Amounts borrowed may not, however, be converted to, or repaid in, another currency once borrowed. The Term Loan is denominated in EUR.
The Company, through the OP, may reduce the amount committed under the Revolving Credit Facility and repay outstanding borrowings under the Credit Facility, in whole or in part, at any time without premium or penalty, other than customary “breakage” costs payable on LIBOR borrowings. In the event of a default, lenders have the right to terminate their obligations under the Credit Facility agreement and to accelerate the payment on any unpaid principal amount of all outstanding loans. The Credit Facility also imposes certain affirmative and negative covenants on the OP, the Company and certain of its subsidiaries including restrictive covenants with respect to, among other things, liens, indebtedness, investments, distributions (see additional information below), mergers and asset sales, as well as financial covenants requiring the OP to maintain, among other things, ratios related to leverage, secured leverage, fixed charge coverage and unencumbered debt services, as well as a minimum consolidated tangible net worth. As of March 31, 2021, the Company was in compliance with all covenants under the Credit Facility.
Under the terms of the Credit Facility, the Company may not pay distributions, including cash dividends payable with respect to Common Stock, the Company’s 7.25% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”), its 6.875% Series B Cumulative Redeemable Perpetual Preferred Stock $0.01 par value per share (“Series B Preferred Stock”) or any other class or series of stock the Company may issue in the future, or redeem or otherwise repurchase shares of Common Stock, Series A Preferred Stock, Series B Preferred Stock, or any other class or series of stock the Company may issue in the future that exceed 100% of the Company’s Adjusted FFO, as defined in the Credit Facility (which is different from AFFO disclosed in this Quarterly Report on Form 10-Q) for any period of four consecutive fiscal quarters, except in limited circumstances, including that for one fiscal quarter in each calendar year, the Company may pay cash dividends and other distributions, and make redemptions and other repurchases in an aggregate amount equal to no more than 105% of its Adjusted FFO. From and after the time the Company obtains and continues to maintain an investment grade rating, the limitation on distributions discussed above will not be applicable. The Company used the exception to pay dividends that were between 100% of Adjusted FFO to 105% of Adjusted FFO during the quarter ended on June 30, 2020.
The Company’s ability to comply with the restrictions on the payment of distributions in the Credit Facility depends on its ability to generate sufficient cash flows that in the applicable periods exceed the level of Adjusted FFO required by these restrictions. If the Company is not able to generate the necessary level of Adjusted FFO, the Company will have to reduce the amount of dividends paid on the common and the preferred stock or consider other actions. Alternatively, the Company could elect to pay a portion of its dividends on the Common Stock in additional shares of Common Stock if approved by the Company’s board of directors.
17
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The Company and certain of its subsidiaries have guaranteed the OP’s obligations under the Credit Facility pursuant to a guarantee and a related contribution agreement which governs contribution rights of the guarantors in the event any amounts become payable under the guaranty.
Note 6 — Senior Notes, Net
On December 16, 2020, the Company and the OP issued $500.0 million aggregate principal amount of 3.75% Senior Notes due 2027. In connection with the closing of the offering of the Senior Notes, the Company, the OP and their subsidiaries that guarantee the Notes entered into an indenture with U.S. Bank National Association, as trustee. As of March 31, 2021 and December 31, 2020 the amount of the Senior Notes on the Company’s consolidated balance sheet totaled $490.7 million and $490.3 million, respectively, which is net of $9.3 million and $9.7 million of deferred financing costs, respectively. The Senior Notes, which were issued at par, will mature on December 15, 2027 and accrue interest at a rate of 3.750% per year. Interest on the Senior Notes, which began to accrue on December 16, 2020, is payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2021.
Additional information on the terms of the Senior Notes can be found in the Company’s 2020 Annual Report on Form 10-K filed with the SEC on February 26, 2021.
Note 7 — Fair Value of Financial Instruments
The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. This alternative approach also reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The guidance defines three levels of inputs that may be used to measure fair value:
Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability and those inputs are significant.
Level 3 — Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. As of March 31, 2021 and December 31, 2020, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.
18
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Financial Instruments Measured at Fair Value on a Recurring Basis
The following table presents information about the Company’s assets and liabilities (including derivatives that are presented net) measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020, aggregated by the level in the fair value hierarchy within which those instruments fall.
(In thousands) Quoted Prices in Active Markets
Level 1 		Significant Other Observable Inputs
Level 2 		Significant Unobservable Inputs
Level 3 		Total
March 31, 2021
Foreign currency forwards, net (GBP & EUR) $ —  $ (2,262) $ —  $ (2,262)
Interest rate swaps, net (USD,GBP & EUR) $ —  $ (11,639) $ —  $ (11,639)
December 31, 2020
Foreign currency forwards, net (GBP & EUR) $ —  $ (4,025) $ —  $ (4,025)
Interest rate swaps, net (USD,GBP & EUR) $ —  $ (15,434) $ —  $ (15,434)
A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, 2021.
Financial Instruments not Measured at Fair Value
The carrying value of short-term financial instruments such as cash and cash equivalents, restricted cash, due to/from related parties, prepaid expenses and other assets, accounts payable, accrued expenses and dividends payable approximates their fair value due to their short-term nature.
•The gross carrying value of the Company’s mortgage notes payable as of March 31, 2021 and December 31, 2020 were $1.4 billion and $1.4 billion, respectively, which approximated their fair value. The fair value of gross mortgage notes payable is based on estimates of market interest rates. This approach relies on unobservable inputs and therefore is classified as Level 3 in the fair value hierarchy.
•As of March 31, 2021 the advances to the Company under the Revolving Credit Facility had a carrying value of $125.9 million and a fair value of $125.5 million. As of December 31, 2020 the advances to the Company under the Revolving Credit Facility had a carrying value of $111.1 million and a fair value of $111.2 million.
•As of March 31, 2021 the Company’s Term Loan had a gross carrying value of $289.8 million and a fair value of $290.7 million. As of December 31, 2020 the Company’s Term Loan had a gross carrying value of $303.0 million and a fair value of $304.6 million.
•As of March 31, 2021, the Company’s Senior Notes had a gross carrying value of $500.0 million and a fair value of $495.0 million. As of December 31, 2020, the Company’s Senior Notes had a gross carrying value of $500.0 million and a fair value of $512.4 million.
Note 8 — Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts to hedge all or a portion of the interest rate risk associated with its borrowings. Certain of the Company’s foreign operations expose the Company to fluctuations of foreign interest rates and exchange rates. These fluctuations may impact the value of the Company’s cash receipts and payments in terms of the Company’s functional currency. The Company enters into derivative financial instruments to protect the value or fix the amount of certain obligations in terms of its functional currency, the USD.
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GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative or other purposes other than interest rate and currency risk management. The use of derivative financial instruments carries certain risks, including the risk that any counterparty to a contractual arrangement may not be able to perform under the agreement. To mitigate this risk, the Company only enters into a derivative financial instrument with a counterparty with a high credit rating with a major financial institution which the Company and its affiliates may also have other financial relationships with. The Company does not anticipate that any such counterparty will fail to meet its obligations, but there is no assurance that any counterparty will meet these obligations.
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2021 and December 31, 2020:
(In thousands) Balance Sheet Location March 31,
2021 		December 31,
2020
Derivatives designated as hedging instruments:
Interest rate “pay-fixed” swaps (USD) Derivative liabilities, at fair value $ (3,200) $ (3,829)
Interest rate “pay-fixed” swaps (GBP) Derivative liabilities, at fair value (6,584) (9,000)
Interest rate “pay-fixed” swaps (EUR) Derivative liabilities, at fair value (1,855) (2,605)
Total $ (11,639) $ (15,434)
Derivatives not designated as hedging instruments:
Foreign currency forwards (GBP-USD) Derivative assets, at fair value $ 376  $ 198 
Foreign currency forwards (GBP-USD) Derivative liabilities, at fair value (2,740) (2,714)
Foreign currency forwards (EUR-USD) Derivative assets, at fair value 558  327 
Foreign currency forwards (EUR-USD) Derivative liabilities, at fair value (456) (1,836)
Total $ (2,262) $ (4,025)
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
All of the changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income (“AOCI”) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction impacts earnings. During the three months ended March 31, 2021, such derivatives were used to hedge the variable cash flows associated with variable-rate debt.
Amounts reported in AOCI related to derivatives are reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months ending March 31, 2022, the Company estimates that an additional $6.7 million will be reclassified from other comprehensive income as an increase to interest expense.

20
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
As of March 31, 2021 and December 31, 2020, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:
March 31, 2021 December 31, 2020
Derivatives Number of
Instruments 		Notional Amount Number of
Instruments 		Notional Amount
(In thousands) (In thousands)
Interest rate “pay-fixed” swaps (GBP) 49 $ 303,780  49 $ 301,210 
Interest rate “pay-fixed” swaps (EUR) 22 613,306  22 641,394 
Interest rate “pay-fixed” swaps (USD) 3 150,000  3 150,000 
Total 74 $ 1,067,086  74 $ 1,092,604 

In connection with a multi-property loan which refinanced all of the Company’s mortgage notes payable secured by the Company’s properties located in Finland during the first quarter of 2019, the Company terminated five interest rate swaps with an aggregate notional amount of €57.4 million for a payment of approximately $0.8 million. Following these terminations, $0.7 million was recorded in AOCI and is being recorded as an adjustment to interest expense over the term of the original EUR hedges and respective borrowings. Of the amount recorded in AOCI following these terminations, $0.1 million was recorded as an increase to interest expense for the three months ended March 31, 2020 and there was no balance remaining in AOCI related to this transaction as of December 31, 2020.
In connection with a multi-property loan which refinanced all of the Company’s mortgage notes payable denominated in GBP during the third quarter of 2018, the Company terminated 15 interest rate swaps with an aggregate notional amount of £208.8 million and one floor with a notional amount of £28.1 million. Following these terminations, the amount relating to GBP borrowings still outstanding of approximately $1.2 million was recorded in AOCI and is being recorded as an adjustment to interest expense over the term of the original GBP hedges and respective borrowings. Of the amount recorded in AOCI following these terminations, approximately $0.1 million was recorded as an increase to interest expense for the three months ended March 31, 2020. As of December 31, 2020, there was no balance remaining in AOCI related to these terminations.
The table below details the location in the consolidated financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the three months ended March 31, 2021 and 2020.
Three Months Ended March 31,
(In thousands) 2021 2020
Amount of gain (loss) recognized in AOCI from derivatives
$ 2,037  $ (8,391)
Amount of loss reclassified from AOCI into income as interest expense
$ (1,743) $ (824)
Total interest expense recorded in the consolidated statements of operations
$ 21,368  $ 16,440 
Net Investment Hedges
The Company is exposed to fluctuations in foreign currency exchange rates on property investments in foreign countries which pay rental income, incur property related expenses and borrow in currencies other than its functional currency, the USD. For derivatives designated as net investment hedges, all of the changes in the fair value of the derivatives, including the ineffective portion of the change in fair value of the derivatives, if any, are reported in AOCI (outside of earnings) as part of the cumulative translation adjustment. Amounts are reclassified out of AOCI into earnings when the hedged net investment is either sold or substantially liquidated. As of March 31, 2021 and December 31, 2020 the Company did not have foreign currency derivatives that were designated as net investment hedges used to hedge its net investments in foreign operations and during the three months ended March 31, 2021 and the year ended December 31, 2020, the Company did not use foreign currency derivatives that were designated as net investment hedges.
Foreign Denominated Debt Designated as Net Investment Hedges
All foreign currency denominated borrowings under the Credit Facility are designated as net investment hedges. As such, the designated portion of changes in value due to currency fluctuations are reported in AOCI (outside of earnings) as part of the cumulative translation adjustment. The remeasurement gains and losses attributable to the undesignated portion of the foreign currency denominated debt are recognized directly in earnings. Amounts are reclassified out of AOCI into earnings when the
21
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
hedged net investment is either sold or substantially liquidated, or if the Company should no longer possess a controlling interest. The Company records adjustments to earnings for currency impacts related to undesignated excess positions, if any. During the three months ended March 31, 2021 and 2020, the Company did not have any undesignated excess positions.
Non-designated Derivatives
The Company is exposed to fluctuations in the exchange rates of its functional currency, the USD, against the GBP and the EUR. The Company has used and may continue to use foreign currency derivatives, including options, currency forward and cross currency swap agreements, to manage its exposure to fluctuations in GBP-USD and EUR-USD exchange rates. While these derivatives are economically hedging the fluctuations in foreign currencies, they do not meet the strict hedge accounting requirements to be classified as hedging instruments. Changes in the fair value of derivatives not designated as hedges under qualifying hedging relationships are recorded directly in net income (loss). The Company recorded a gain of $1.8 million for the three months ended March 31, 2021. The Company recorded a gain of $0.1 million for the three months ended March 31, 2020.
As of March 31, 2021 and December 31, 2020, the Company had the following outstanding derivatives that were not designated as hedges under qualifying hedging relationships.
March 31, 2021 December 31, 2020
Derivatives Number of
Instruments 		Notional Amount Number of
Instruments 		Notional Amount
(In thousands) (In thousands)
Foreign currency forwards (GBP-USD) 45 $ 50,936  41 $ 41,633 
Foreign currency forwards (EUR-USD) 40 39,875  40 38,634 
Interest rate swaps (EUR) — —  — — 
Total 85 $ 90,811  81 $ 80,267 
Offsetting Derivatives
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of March 31, 2021 and December 31, 2020. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the accompanying consolidated balance sheets.
Gross Amounts Not Offset on the Balance Sheet

(In thousands)
Gross Amounts of Recognized Assets Gross Amounts of Recognized (Liabilities) Gross Amounts Offset on the Balance Sheet Net Amounts of (Liabilities) Assets presented on the Balance Sheet Financial Instruments Cash Collateral Received (Posted) Net Amount
March 31, 2021 $ 934  $ (14,835) $ —  $ (13,901) $ —  $ —  $ (13,901)
December 31, 2020 $ 525  $ (19,984) $ —  $ (19,459) $ —  $ —  $ (19,459)
In addition to the above derivative arrangements, the Company also uses non-derivative financial instruments to hedge its exposure to foreign currency exchange rate fluctuations as part of its risk management program, including foreign denominated debt issued and outstanding with third parties to protect the value of its net investments in foreign subsidiaries against exchange rate fluctuations. The Company has drawn, and expects to continue to draw, foreign currency advances under the Credit Facility to fund certain investments in the respective local currency which creates a natural hedge against the original equity invested in the real estate investments, removing the need for the final cross currency swaps. 
22
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Credit-risk-related Contingent Features
The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.
As of March 31, 2021, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $15.6 million. As of March 31, 2021, the Company had not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value.
Note 9 — Stockholders' Equity
Common Stock
As of March 31, 2021 and December 31, 2020, the Company had 95,512,062 and 89,614,601, respectively, shares of Common Stock issued and outstanding including Restricted Shares of Common Stock (“Restricted Shares”) and excluding unvested restricted stock units in respect of shares of Common Stock (“RSUs”) and long-term incentive plan units of limited partner interest in the OP (“LTIP Units”). LTIP Units may be convertible into shares of Common Stock in the future.
ATM Program — Common Stock
The Company has an “at the market” equity offering program (the “Common Stock ATM Program”) pursuant to which the Company may sell shares of Common Stock, from time to time, through its sales agents, having an aggregate offering price of up to $250 million which was increased to $500 million in March 2021.
•During the three months ended March 31, 2021, the Company sold 5,904,470 shares of Common Stock through the Common Stock ATM Program for gross proceeds of $107.6 million, before commissions paid of $1.6 million and additional issuance costs of $0.3 million.
•The Company did not sell any shares of Common Stock through the Common Stock ATM Program during the year ended December 31, 2020.
During the first quarter of 2021, the cancellation of 8,668 shares of Common Stock that had been forfeited in a prior period was effectuated, which reduced the Common Stock outstanding as of March 31, 2021. The cancellation of these shares is presented in the consolidated statement of stockholders' equity in the common stock issuances, net line item.
Preferred Stock
The Company is authorized to issue up to 30,000,000 shares of Preferred Stock.
•The Company has classified and designated 9,959,650 shares of its authorized Preferred Stock as authorized shares of Series A Preferred Stock, as of March 31, 2021 and December 31, 2020. The Company had 6,799,467 and 6,799,467 shares of Series A Preferred Stock issued and outstanding as of March 31, 2021 and December 31, 2020.
•The Company has classified and designated 11,450,000 shares of its authorized Preferred Stock as authorized shares of Series B Preferred Stock, as of March 31, 2021 and December 31, 2020. The Company had 4,503,893 and 3,861,953 shares of Series B Preferred Stock issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.
•The Company has classified and designated 100,000 shares of its authorized Preferred Stock as authorized shares of its Series C preferred stock, $0.01 par value (“Series C Preferred Stock”), as of March 31, 2021 and December 31, 2020. No shares of Series C Preferred Stock were issued and outstanding as of March 31, 2021 and December 31, 2020.
ATM Program — Series B Preferred Stock
In December 2019, the Company established an “at the market” equity offering program for its Series B Preferred Stock (the “Series B Preferred Stock ATM Program”) pursuant to which the Company may raise aggregate sales proceeds of $200 million through sales of shares of Series B Preferred Stock from time to time through its sales agents.
•During the three months ended March 31, 2021, the Company sold 641,940 shares of Series B Preferred Stock through the Series B Preferred Stock ATM Program for gross proceeds of $16.2 million, before commissions paid of approximately $0.2 million and nominal additional issuance costs.
•The Company did not sell any shares of Series B Preferred Stock through the Series B Preferred Stock ATM Program during the first quarter of 2020.
23
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Dividends
Common Stock Dividends
Historically, and through March 31, 2020, the Company paid dividends at an annualized rate of $2.13 per share or $0.5325 per share on a quarterly basis. In March 2020, the Company’s board of directors approved a change in the dividend to an annual rate of $1.60 per share or $0.40 per share on a quarterly basis, which became effective in the second quarter of 2020 with the Company’s April 1, 2020 dividend declaration and was also in effect in the first quarter of 2021.
Dividends authorized by the Company’s board of directors are paid on a quarterly basis in arrears on the 15th day of the first month following the end of each fiscal quarter (unless otherwise specified) to common stockholders of record on the record date for such payment. The Company’s board of directors may alter the amounts of dividends paid or suspend dividend payments at any time prior to declaration and therefore dividend payments are not assured. For purposes of the presentation of information herein, the Company may refer to distributions by the OP on ordinary units of limited partner interest in the OP (“OP Units”) and LTIP Units as dividends. In addition, see Note 5 — Revolving Credit Facility and Term Loan, Net for additional information on the restrictions on the payment of dividends and other distributions imposed by the Credit Facility.
Series A Preferred Stock Dividends
Dividends on Series A Preferred Stock accrue in an amount equal to $0.453125 per share per quarter to Series A Preferred Stock holders, which is equivalent to 7.25% of the $25.00 liquidation preference per share of Series A Preferred Stock per annum. Dividends on the Series A Preferred Stock are payable quarterly in arrears on the 15th day of January, April, July and October of each year (or, if not on a business day, on the next succeeding business day) to holders of record at the close of business on the record date set by the Company’s board of directors.
Series B Preferred Stock Dividends
Dividends on Series B Preferred Stock accrue in an amount equal to $0.429688 per share per quarter to Series B Preferred Stock holders, which is equivalent to 6.875% of the $25.00 liquidation preference per share of Series B Preferred Stock per annum. Dividends on the Series B Preferred Stock are payable quarterly in arrears on the 15th day of January, April, July and October of each year (or, if not on a business day, on the next succeeding business day) to holders of record at the close of business on the record date set by the Company’s board of directors.
Stockholder Rights Plan
In April 2020, the Company announced that its board of directors approved a stockholder rights plan (the “Plan”). The Plan is intended to allow the Company to realize the long-term value of the Company’s assets by protecting the Company from the actions of third parties that the Company’s board determines are not in the best interest of the Company. In connection with the adoption of the Plan, the Company’s board of directors authorized a dividend of one preferred share purchase right for each outstanding share of Common Stock to stockholders of record on April 20, 2020 to purchase from the Company one one-thousandth of a share of Series C Preferred Stock for an exercise price of $50.00, once the rights become exercisable, subject to adjustment as provided in the related rights agreement. By the terms of the Plan, the rights will initially trade with Common Stock and will generally only become exercisable on the 10th business day after the Company’s board of directors become aware that a person or entity has become the owner of 4.9% or more of the shares of Common Stock or the commencement of a tender or exchange offer which would result in the offeror becoming an owner of 4.9% or more of the Common Stock. The Plan was set to expire on April 8, 2021, however in February 2021, the Company amended the rights agreement related to its stockholder rights plan to extend the expiration date of the rights under the Plan from April 8, 2021 to April 8, 2024, unless earlier exercised, exchanged, amended redeemed or terminated. The adoption of the Plan did not have a material impact on the Company's financial statements and its earnings per share.
Note 10 — Commitments and Contingencies
Lessee Arrangements — Ground Leases
The Company leases land under nine ground leases for associated with certain properties, with lease durations ranging from 15 to 97 years as of March 31, 2021. The Company did not enter into any additional ground leases during the quarter ended March 31, 2021.
As of March 31, 2021 and December 31, 2020, the Company’s balance sheet includes ROU assets of $55.8 million and $58.4 million, respectively, and operating lease liabilities of $24.1 million and $25.4 million, respectively. In determining the operating ROU assets and lease liabilities for the Company’s existing operating leases upon the adoption of the new lease guidance on January 1, 2019 as well as for new operating leases entered into after the adoption of the new standard, the
24
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Company was required to estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases. Since the terms of the Company’s ground leases are significantly longer than the terms of borrowings available to the Company on a fully-collateralized basis, the Company’s estimate of this rate required significant judgment.
The Company’s ground operating leases have a weighted-average remaining lease term of approximately 31.8 years and a weighted-average discount rate of 4.33% as of March 31, 2021. For the three months ended March 31, 2021, the Company paid cash of approximately $0.4 million for amounts included in the measurement of lease liabilities and recorded expense of $0.4 million on a straight-line basis in accordance with the standard. For the three months ended March 31, 2020, the Company paid cash of approximately $0.3 million for amounts included in the measurement of lease liabilities and recorded expense of $0.3 million on a straight-line basis in accordance with the standard.
The following table reflects the base cash rental payments due from the Company as of March 31, 2021:
(In thousands)
Future Base Rent Payments (1)
2021 (remainder) $ 1,084 
2022 1,446 
2023 1,446 
2024 1,450 
2025 1,455 
Thereafter 39,005 
Total minimum lease payments (2)
45,886 
Less: Effects of discounting (21,801)
Total present value of lease payments $ 24,085 
________
(1)Assumes exchange rates of £1.00 to $1.38 for GBP and €1.00 to $1.17 for EUR as of March 31, 2021 for illustrative purposes, as applicable.
(2)Ground lease rental payments due for the Company’s ING Amsterdam lease are not included in the table above as the Company’s ground rent for this property is prepaid through 2050.
Litigation and Regulatory Matters
In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. There are no material legal or regulatory proceedings pending or known to be contemplated by or against the Company.
Environmental Matters
In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. As of March 31, 2021, the Company had not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations.
Note 11 — Related Party Transactions
As of March 31, 2021 and December 31, 2020, AR Global and certain affiliates owned, in the aggregate, 35,900 shares of outstanding Common Stock. The Advisor, which is an affiliate of AR Global, and its affiliates incur, directly or indirectly, costs and fees in performing services for the Company. As of March 31, 2021 and December 31, 2020, the Company had $0.3 million and $0.4 million, respectively, of receivables from the Advisor or its affiliates and $0.8 million and $2.0 million of payables to the Advisor or its affiliates, respectively.
As of March 31, 2021, AR Global indirectly owned 95% of the membership interests in the Advisor and Scott J. Bowman, the Company’s former chief executive officer and president, directly owned the other 5% of the membership interests in the Advisor. James L. Nelson, the Company’s chief executive officer and president, holds a non-controlling profit interest in the Advisor and Property Manager.
The Company is the sole general partner of the OP. There were no OP Units held by anyone other than the Company outstanding as of March 31, 2021 and December 31, 2020.
25
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The Company paid $0.1 million in distributions to the Advisor as the sole holder of LTIP Units during the three months ended March 31, 2021, and the Company paid $0.2 million in distributions related to LTIP units during the three months ended March 31, 2020, which are included in accumulated deficit in the audited consolidated statements of equity. As of March 31, 2021 and December 31, 2020, the Company had no unpaid distributions on the LTIP Units.
During the third quarter of 2020, the Company granted 132,025 Restricted Shares to employees of the Advisor or its affiliates who are involved in providing services to the Company, including the Company’s Chief Executive Officer and Chief Financial Officer. For additional information, see Note 13 — Equity-Based Compensation.
Fees Paid in Connection with the Operations of the Company
Under the Advisory Agreement, the Company pays the Advisor the following fees in cash:
(a)    a base fee of $18.0 million per annum payable in cash monthly in advance (“Minimum Base Management Fee”); and
(b)    a variable fee amount equal to 1.25% per annum of the sum, since the effective date of the Advisory Agreement in June 2015, of: (i) the cumulative net proceeds of all common equity issued by the Company (ii) any equity of the Company issued in exchange for or conversion of preferred stock or exchangeable notes, based on the stock price at the date of issuance; and (iii) any other issuances of common, preferred, or other forms of equity of the Company, including units in an operating partnership (excluding equity based compensation but including issuances related to an acquisition, investment, joint-venture or partnership) (the “Variable Base Management Fee”).
The Company will pay the Advisor any Incentive Compensation (as defined in the Advisory Agreement), generally payable in quarterly installments 50% in cash and 50% in shares of Common Stock (subject to certain lock up restrictions). The Advisor did not earn any Incentive Compensation during the three months ended March 31, 2021 and 2020. The Advisory Agreement was amended on May 6, 2021 as described below and in Subsequent Events — Note 15 (the “2021 Amendment”), but prior thereto, the Incentive Compensation was generally calculated on an annual basis for the 12-month period from July 1 to June 30 of each year. Pursuant to the 2021 Amendment, the 12-month period is now measured from January 1 to December 31 of each year, commencing with the 12-month period ending December 31, 2021. After the end of each performance period, the Incentive Compensation is subject to a final adjustment in accordance with the terms of the Advisory Agreement based on the difference, if any, between the amount of Incentive Compensation paid to the Advisor during the year and the amount actually earned by the Advisor at the end of the year. In connection with any adjustments, shares of Common Stock that were issued as a portion of any quarterly installment payment are retained and, for purposes of any repayment required to be made by the Advisor, have the value they had at the time of issuance and are adjusted in respect of any dividend or other distribution received with respect to those shares to allow recoupment of the same.
The Incentive Compensation can be earned by the Advisor based on the Company’s achievement relative to two threshold levels of Core AFFO Per Share(1): the Incentive Fee Lower Hurdle (as defined in the Advisory Agreement) and the Incentive Fee Upper Hurdle (as defined in the Advisory Agreement).
Under the Advisory Agreement, prior to an amendment thereto in May 2020 (the “2020 Amendment”), the Incentive Fee Lower Hurdle was (a) $2.15 for the 12 months ended June 30, 2019, and (b) $2.25 for the 12 months ending June 30, 2020. Following the 2020 Amendment, the Incentive Fee Lower Hurdle was equal to (i) $1.6875 per share in the aggregate and $0.5625 per share per quarter for the period beginning July 1, 2019 and ending March 31, 2020, (ii) $1.35 per share in the aggregate and $0.45 per share per quarter for the period beginning April 1, 2020 and ending December 31, 2020, (iii) $1.125 per share in the aggregate and $0.5625 per share per quarter for the period beginning January 1, 2021 and ending June 30, 2021, and (iv) $2.25 per share in the aggregate and $0.5625 per share per quarter for the annual period beginning July 1, 2021. Following the 2021 Amendment, the Incentive Fee Lower Hurdle is equal to (x) $1.95 per share in the aggregate and $0.4875 per share per quarter for the annual period beginning January 1, 2021, and (y) $2.25 per share in the aggregate and $0.5625 per share per quarter for the annual period beginning January 1, 2022 and each annual period thereafter, subject to potential annual increases by the Company’s independent directors as described below.
26
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
In addition, prior to the 2020 Amendment, the Incentive Fee Upper Hurdle was (a) $2.79 for the 12 months ended June 30, 2019, and (b) $2.92 for the 12 months ending June 30, 2020. Following the 2020 Amendment, the Incentive Fee Upper Hurdle was equal to (i) $2.19 per share in the aggregate and $0.73 per share per quarter for the period beginning July 1, 2019 and ending March 31, 2020, (ii) $1.75 per share in the aggregate and $0.583 per share per quarter for the period beginning April 1, 2020 and ending December 31, 2020, (iii) $1.46 per share in the aggregate and $0.73 per share per quarter for the period beginning January 1, 2021 and ending June 30, 2021, and (iv) $2.92 per share in the aggregate and $0.73 per share per quarter for the annual period beginning July 1, 2021. Following the 2021 Amendment, the Incentive Fee Upper Hurdle is equal to (x) $2.62 per share in the aggregate and $0.655 per share per quarter for the annual period beginning January 1, 2021, and (y) $2.92 per share in the aggregate and $0.73 per share per quarter for the annual period beginning January 1, 2022 and each annual period thereafter, subject to potential annual increases by the Company’s independent directors as described below.
The 2020 Amendment also extended from July 1, 2020 to July 1, 2021 the first date that the annual thresholds are subject to annual increases by a majority of the Company’s independent directors (in their good faith reasonable judgment, after consultation with the Advisor). The 2021 Amendment further extended this date to January 1, 2023. The percentage at which independent directors may so increase the thresholds remains a percentage equal to between 0% and 3%. In addition, the 2021 Amendment extended from August 2023 to May 2026, the first date on which the Advisor has a right to request that the Company’s independent directors reduce the then current Incentive Fee Lower Hurdle and Incentive Fee Upper Hurdle and make a determination whether any reduction in the annual thresholds is warranted. The Advisor will again have this right in May 2031 and then every five years thereafter.
The annual aggregate amount of the Minimum Base Management Fee and Variable Base Management Fee (collectively, the “Base Management Fee”) that may be paid under the Advisory Agreement are subject to varying caps based on assets under management (“AUM”)(2), as defined in the Advisory Agreement. The amount of the Base Management Fee to be paid under the Advisory Agreement is capped at the AUM for the preceding year multiplied by (a) 0.75% if equal to or less than $3.0 billion; (b) 0.75% less (i) a fraction, (x) the numerator of which is the AUM for such specified period less $3.0 billion and (y) the denominator of which is $11.7 billion multiplied by 0.35% if AUM is greater than $3.0 billion but less than $14.6 billion; or (c) 0.4% if equal to or greater than $14.7 billion.
_________
(1)For purposes of the Advisory Agreement, Core AFFO Per Share means for the applicable period (i) net income adjusted for the following items (to the extent they are included in net income): (a) real estate related depreciation and amortization; (b) net income from unconsolidated partnerships and joint ventures; (c) one-time costs that the Advisor deems to be non-recurring; (d) non-cash equity compensation (other than any Restricted Share Payments (as defined in the Advisory Agreement)); (e) other non-cash income and expense items; (f) certain non-cash interest expenses related to securities that are convertible to Common Stock; (g) gain (or loss) from the sale of investments; (h) impairment loss on real estate; (i) acquisition and transaction related costs (known as acquisition, transaction and other costs on the face of the Company’s income statement); (j) straight-line rent; (k) amortization of above and below market leases assets and liabilities; (l) amortization of deferred financing costs; (m) accretion of discounts and amortization of premiums on debt investments; (n) marked-to-market adjustments included in net income; (o) unrealized gain (loss) resulting from consolidation from, or deconsolidation to, equity accounting, (p) consolidated and unconsolidated partnerships and joint ventures and (q) Incentive Compensation, (ii) divided by the weighted-average outstanding shares of Common Stock on a fully-diluted basis for such period.
(2)For purposes of the Advisory Agreement, AUM means, for a specified period, an amount equal to (A) (i) the aggregate costs of the Company’s investments (including acquisition fees and expenses) at the beginning of such period (before reserves for depreciation of bad debts, or similar non-cash reserves) plus (ii) the aggregate cost of the Company’s investment at the end of such period (before reserves from depreciation or bad debts, or similar non-cash reserves) divided by (B) two (2).
In addition, the per annum aggregate amount of the Base Management Fee and the Incentive Compensation to be paid under the Advisory Agreement is capped at (a) 1.25% of the AUM for the previous year if AUM is less than or equal to $5.0 billion; (b) 0.95% if the AUM is equal to or exceeds $15.0 billion; or (c) a percentage equal to: (A) 1.25% less (B) (i) a fraction, (x) the numerator of which is the AUM for such specified period less $5.0 billion and (y) the denominator of which is $10.0 billion multiplied by (ii) 0.30% if AUM is greater than $5.0 billion but less than $15.0 billion. The Variable Base Management Fee is also subject to reduction if there is a sale or sales of one or more Investments in a single or series of related transactions exceeding $200.0 million and a special dividend(s) related thereto is paid to stockholders.
Under the Advisory Agreement, the Company has also agreed under the Advisory Agreement to reimburse, indemnify and hold harmless each of the Advisor and its affiliates, and the directors, officers, employees, partners, members, stockholders, other equity holders, agents and representatives of the Advisor and its affiliates (each, a “Advisor Indemnified Party”), of and from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever (including reasonable attorneys’ fees) in respect of or arising from any acts or omissions of the Advisor Indemnified Party performed in good faith under the Advisory Agreement and not constituting bad faith, willful misconduct, gross negligence, or reckless disregard of duties on the part of the Advisor Indemnified Party. In addition, the Company has agreed to advance funds to an Advisor Indemnified Party for reasonable legal fees and other reasonable costs and expenses incurred as a result of any claim,
27
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
suit, action or proceeding for which indemnification is being sought, subject to repayment if the Advisor Indemnified Party is later found pursuant to a final and non-appealable order or judgment to not be entitled to indemnification.
Property Management Fees
The Property Manager provides property management and leasing services for properties owned by the Company, for which the Company pays fees to the Property Manager equal to: (i) with respect to stand-alone, single-tenant net leased properties which are not part of a shopping center, 2.0% of gross revenues from the properties managed and (ii) with respect to all other types of properties, 4.0% of gross revenues from the properties managed in each case plus market-based leasing commissions applicable to the geographic location of the applicable property.
For services related to overseeing property management and leasing services provided by any person or entity that is not an affiliate of the Property Manager, the Company pays the Property Manager an oversight fee equal to 1.0% of gross revenues of the property managed. This oversight fee is no longer applicable to 39 of the Company’s properties which became subject to separate property management agreements with the Property Manager in connection with certain mortgage loans entered into by the Company in October 2017, April 2019 and September 2019 (the “ Loan Property PMLAs”) on otherwise nearly identical terms to the primary property and management leasing agreement (the “Primary PMLA”), which remains applicable to all other properties.
In February 2019, the Company entered into an amendment to the Primary PMLA with the Property Manager, providing for automatic extensions for an unlimited number of successive one-year terms unless terminated by either party upon notice. Following this amendment, either the Company or the Property Manager may terminate the Primary PMLA at any time upon at least 12 months’ written notice prior to the applicable termination date. This termination notice period does not apply to the Loan Property PMLAs, which may be terminated by either the Company or the Property Manager upon 60 days’ written notice prior to end of the applicable term.
If cash flow generated by any of the Company’s properties is not sufficient to fund the costs and expenses incurred by the Property Manager in fulfilling its duties under the property management and leasing agreements, the Company is required to fund additional amounts. Costs and expenses that are the responsibility of the Company under the property management and leasing agreements include, without limitation, reasonable wages and salaries and other employee-related expenses of all on-site and off-site employees of the Property Manager who are engaged in the operation, management, maintenance and leasing of the properties and other out-of-pocket expenses which are directly related to the operation, management, maintenance and leasing of specific properties, but may not include the Property Manager’s general overhead and administrative expenses.
During the year ended December 31, 2020, the Company incurred leasing commissions to the Property Manager of $1.5 million, and, during the three months ended March 31, 2021, the Company incurred an additional $0.5 million of leasing commissions to the Property Manager. These amounts are being recorded over the terms of the related leases. During the three months ended March 31, 2021, $42,000 was recorded as an expense in property management fees (see table below).
Professional Fees and Other Reimbursements
The Company reimburses the Advisor or its affiliates for expenses paid or incurred by the Advisor or its affiliates in providing services to the Company under the Advisory Agreement, except for those expenses that are specifically the responsibility of the Advisor under the Advisory Agreement, such as salaries, bonus and other wages, payroll taxes and the cost of employee benefit plans of personnel of the Advisor and its affiliates (including the Company’s executive officers) who provide services to the Company under the Advisory Agreement, the Advisor’s rent and general overhead expenses, the Advisor’s travel expenses (subject to certain exceptions), professional services fees incurred with respect to the Advisor for the operation of its business, insurance expenses (other than with respect to the Company’s directors and officers) and information technology expenses. In addition, these reimbursements are subject to the limitation that the Company will not reimburse the Advisor for any amount by which the Company’s operating expenses (including the asset management fee) at the end of the four preceding fiscal quarters exceeds the greater of (a) 2.0% of average invested assets and (b) 25.0% of net income, unless the excess amount is otherwise approved by the Company’s board of directors. The amount of expenses reimbursable for the three months ended March 31, 2021 and 2020 did not exceed these limits.
28
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Fees Paid in Connection with the Liquidation of the Company’s Real Estate Assets
Under the Advisory Agreement, the Company is required to pay to the Advisor a fee in connection with net gain recognized by the Company in connection with the sale or similar transaction of any investment equal to 15% of the amount by which the gains from the sale of investments in the applicable month exceed the losses from the sale of investments in that month unless the proceeds from such transaction or series of transactions are reinvested in one or more investments within 180 days thereafter (the “Gain Fee”). The Gain Fee is calculated at the end of each month and paid, to the extent due, with the next installment of the Base Management Fee. The Gain Fee is calculated by aggregating all of the gains and losses from the preceding month. There was no Gain Fee paid during the three months ended March 31, 2021 or 2020.

29
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The following table reflects related party fees incurred, forgiven and contractually due as of and for the periods presented:
Three Months Ended March 31,
  2021 2020
(In thousands) Incurred Incurred
Ongoing fees (1):
  Asset management fees (2)
7,678  7,376 
  Property management fees
1,961  1,418 
  Incentive compensation —  — 
Total related party operational fees and reimbursements $ 9,639  $ 8,794 
______________
(1)The Company incurred general and administrative costs and other expense reimbursements of approximately $0.2 million and $0.3 million for the three months ended March 31, 2021 and 2020, respectively, which are recorded within general and administrative expenses in the consolidated statements of operations and are not reflected in the table above.
(2)The Advisor, in accordance with the Advisory Agreement, received asset management fees in cash each quarter equal to one quarter of the annual Minimum Base Management Fee of $18.0 million and the Variable Base Management Fee. The Variable Base Management Fee was $3.0 million and $2.9 million for the three months ended March 31, 2021 and 2020, respectively.
Note 12 — Economic Dependency
Under various agreements, the Company has engaged or will engage the Advisor, its affiliates and entities under common control with the Advisor, to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, accounting services, investor relations, transfer agency services, as well as other administrative responsibilities for the Company.
As a result of these relationships, the Company is dependent upon the Advisor and its affiliates. In the event that these companies are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.
30
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Note 13 — Equity-Based Compensation
2021 Equity Plan
At the Company’s 2021 annual meeting of stockholders held on April 12, 2021, the Company’s stockholders approved the 2021 Omnibus Incentive Compensation Plan of Global Net Lease, Inc. (the “Individual Plan”) and the 2021 Omnibus Advisor Incentive Compensation Plan of Global Net Lease, Inc. (the “Advisor Plan” and together with the Advisor Plan, the “2021 Equity Plan”). Both the Individual Plan and the Advisor Plan became effective upon stockholder approval. See Note 15 — Subsequent Events for further details.
The terms of the Advisor Plan are substantially similar to the terms of the Individual Plan, except with respect to the eligible participants. Generally, directors of the Company, employees of the Company and employees of the Advisor or its affiliates who are involved in providing services to the Company (including the Company’s executive officers) are eligible to participate in the Individual Plan. Only the Advisor and any of its affiliates that are involved in providing services to the Company or any of its subsidiaries are eligible to receive awards under the Advisor Plan. The total number of shares of Common Stock that can be issued or subject to awards under the Advisor Plan and the Individual Plan, in the aggregate, is 6,300,000 shares. Shares issued or subject to awards under the Individual Plan reduce the number of shares available for awards under the Advisor Plan on a one-for-one basis and vice versa. The Individual Plan and the Advisor Plan will expire on April 12, 2031.
The 2021 Equity Plan permit awards of Restricted Shares, RSUs, stock options, stock appreciation rights, stock awards, LTIP Units and other equity awards.
Option Plan
Because the Individual Plan and Advisor Plan were approved by the Company’s stockholders, no awards will be granted under the Global Net Lease, Inc. 2012 Stock Option Plan (the “Option Plan”) in the future. While effective, the Option Plan authorized the grant of nonqualified Common Stock options to the Company’s directors, officers, advisors, consultants and other personnel of the Company, the Advisor and the Property Manager and their affiliates, subject to the absolute discretion of the Company’s board of directors and the applicable limitations of the Plan. The exercise price for any stock options granted under the Option Plan was to be equal to the closing price of a share of Common Stock on the last trading day preceding the date of grant. A total of 0.5 million shares had been authorized and reserved for issuance under the Plan. As of March 31, 2021 and December 31, 2020, no stock options were issued under the Option Plan.
Restricted Share Plan
The Company’s employee and director incentive restricted share plan (“RSP”) provides the Company with the ability to grant awards of Restricted Shares and RSUs to directors, officers and full-time employees (if any), of the Company, the Advisor and its affiliates, and certain persons that provide services to the Company, the Advisor or its affiliates.
Under the RSP, prior to stockholder approval of the 2021 Equity Plan, the number of shares of Common Stock available for awards was equal to 10.0% of the Company’s outstanding shares of Common Stock on a fully diluted basis at any time, and, if any awards granted under the RSP are forfeited for any reason, the number of forfeited shares was again available for purposes of granting awards under the RSP. Because the 2021 Equity Plan was approved by the Company’s stockholders, only 2,772,905 shares of Common Stock remain available for the grant of new awards under RSP through the expiration of the RSP on April 20, 2022, and shares of Common Stock underlying awards that expire, terminate, are cancelled or are forfeited under the RSP will not again be available for issuance under the RSP. Awards previously granted under the RSP will remain outstanding (and eligible to vest and settle) in accordance with their terms under the RSP.

31
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
RSUs
RSUs may be awarded under terms that provide for vesting on a straight-line basis over a specified period of time for each award. RSUs represent a contingent right to receive shares of Common Stock at a future settlement date, subject to satisfaction of applicable vesting conditions or other restrictions, as set forth in the RSP and an award agreement evidencing the grant of RSUs. RSUs may not, in general, be sold or otherwise transferred until restrictions are removed and the rights to the shares of Common Stock have vested. Holders of RSUs do not have or receive any voting rights with respect to the RSUs or any shares underlying any award of RSUs, but such holders are generally credited with dividend or other distribution equivalents which are subject to the same vesting conditions or other restrictions as the underlying RSUs and only paid at the time such RSUs are settled in shares of Common Stock. RSU award agreements generally provide for accelerated vesting of all unvested RSUs in connection with a termination without cause from the Company’s board of directors or a change of control and accelerated vesting of the portion of the unvested RSUs scheduled to vest in the year of the recipient’s voluntary resignation from or failure to be re-elected to the Company’s board of directors.
The following table reflects the amount of RSUs outstanding as of March 31, 2021 and 2020:
 
Number of RSUs Weighted-Average Issue Price
Unvested, December 31, 2020 44,949  $ 15.35 
Vested
(9,409) 13.37 
Granted
—  — 
Unvested, March 31, 2021 35,540  15.88 
 
Number of RSUs Weighted-Average Issue Price
Unvested, December 31, 2019 40,541  $ 20.47 
Vested
—  — 
Granted
—  — 
Unvested, March 31, 2020 40,541  20.47 

The fair value of the equity awards in the form of Restricted Shares granted prior to the listing of the Common Stock on the NYSE on June 2, 2015 was based on the per share price in the Company’s initial public offering of Common Stock completed prior to the listing, and the fair value of the RSUs granted on or after the listing is based on the market price of Common Stock as of the grant date. The fair value of the equity awards is expensed over the vesting period.
Restricted Shares
Restricted Shares are shares of Common Stock awarded under terms that provide for vesting over a specified period of time. Holders of Restricted Shares receive nonforfeitable cash dividends prior to the time that the restrictions on the Restricted Shares have lapsed. Any dividends to holders of Restricted Shares payable in shares of Common Stock are subject to the same restrictions as the underlying Restricted Shares. Restricted Shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested.
In September 2020, the Company granted 132,025 Restricted Shares to employees of the Advisor or its affiliates who are involved in providing services to the Company, and including its Chief Executive Officer and Chief Financial Officer. In accordance with accounting rules, the fair value of the Restricted Shares granted is being recorded on a straight-line basis over the vesting period of four years.
The Restricted Shares granted to employees of the Advisor or its affiliates vest in 25% increments on each of the first four anniversaries of the grant date. Except in connection with a change in control (as defined in the award agreement) of the Company, any unvested Restricted Shares will be forfeited if the holder’s employment with the Advisor terminates for any reason. During the three months ended March 31, 2021, 7,750 Restricted Shares were forfeited.
Upon a change in control of the Company, 50% of the unvested Restricted Shares will immediately vest and the remaining unvested Restricted Shares will be forfeited.

32
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Compensation Expense — RSP
Compensation expense for awards granted pursuant to the RSP was $0.2 million and $0.1 million for the three months ended March 31, 2021 and 2020, respectively. Compensation expense is recorded as equity-based compensation in the accompanying consolidated statements of operations.
As of March 31, 2021, the Company had $0.4 million unrecognized compensation cost related to RSUs granted under the RSP, which is expected to be recognized over a weighted-average period of 1.7 years. As of March 31, 2021, the Company had $1.9 million unrecognized compensation cost related to Restricted Share awards granted under the RSP, which is expected to be recognized over a period of 3.5 years.
Director Compensation
The Company pays independent director compensation as follows: (i) the annual retainer payable to all independent directors is $100,000 per year, (ii) the annual retainer for the non-executive chair is $105,000, (iii) the annual retainer for independent directors serving on the audit committee, compensation committee or nominating and corporate governance committee is $30,000. All annual retainers are payable 50% in the form of cash and 50% in the form of RSUs which vest over a three-year period. In addition, the directors have the option to elect to receive the cash component in the form of RSUs which would vest over a three-year period.
Multi-Year Outperformance Agreement
On July 16, 2018, the Company’s compensation committee approved the 2018 OPP, which was subsequently entered into by the Company and the OP with the Advisor on July 19, 2018. The 2018 OPP was entered into in connection with the conclusion of the performance period under the 2015 OPP on June 2, 2018. None of the LTIP Units granted under the 2015 OPP were earned and all of those LTIP Units were automatically forfeited without the payment of any consideration by the Company or the OP effective as of June 2, 2018.
Under accounting rules adopted by the Company on January 1, 2019, the total fair value of the LTIP Units granted under the 2018 OPP of $18.8 million is fixed as of that date and will not be remeasured in subsequent periods unless the 2018 OPP is amended (see Note 2 — Summary of Significant Accounting Policies for a description of accounting rules related to non-employee equity awards). The fair value of the LTIP Units that have been granted is being recorded evenly over the requisite service period which is approximately 2.8 years from the grant date in 2018. In February 2019, the Company entered into an amendment to the 2018 OPP with the Advisor to reflect a change in the peer group resulting from the merger of two members of the peer group. Under the accounting rules, the Company was required to calculate any excess of the new value of LTIP Units awarded pursuant to the 2018 OPP at the time of the amendment ($29.9 million) over the fair value immediately prior to the amendment ($23.3 million). This excess of approximately $6.6 million is being expensed over the period from February 21, 2019, the date the Company’s compensation committee approved the amendment, through June 2, 2021, the end of the service period.
During the three months ended March 31, 2021, the Company recorded compensation expense related to the 2018 OPP of $2.4 million. During the three months ended March 31, 2020, the Company recorded compensation expense of $2.4 million related to the 2018 OPP.
LTIP Units/Distributions/Redemption
The rights of the Advisor as the holder of the LTIP Units are governed by the terms of the LTIP Units contained in the agreement of limited partnership of the OP.
The Advisor, as the holder of the LTIP Units is entitled to distributions on the LTIP Units equal to 10% of the distributions made per OP Unit (other than distributions of sale proceeds) until the LTIP Units are earned. The Company paid $0.1 million and $0.2 million in distributions related to LTIP Units during the three months ended March 31, 2021 and 2020, respectively, which is included in accumulated deficit in the consolidated statements of changes in equity. These distributions are not subject to forfeiture, even if the LTIP Units are ultimately forfeited. If any LTIP Units are earned, the Advisor will be entitled to a priority catch-up distribution on each earned LTIP Unit equal to the aggregate distributions paid on OP Units during the applicable performance period, less the aggregate distributions paid on the LTIP Unit during the performance period. As of the valuation date on the final day of the applicable performance period, any LTIP Units that are earned will become entitled to receive the same distributions paid on the OP Units. Further, at the time the Advisor’s capital account with respect to an LTIP Unit that is earned and vested is economically equivalent to the average capital account balance of an OP Unit, the Advisor, as the holder of the earned LTIP Unit, in its sole discretion, will in accordance with the limited partnership agreement of the OP, be entitled to convert the LTIP Unit into an OP Unit, which may, in turn, be redeemed on a one-for-one basis for, at the Company’s election, a share of Common Stock or the cash equivalent thereof.
33
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
2018 OPP
Based on a maximum award value of $50.0 million and $19.57 (the “Initial Share Price”), the closing price of Common Stock on June 1, 2018, the trading day prior to the effective date of the 2018 OPP, the Advisor was issued a total of 2,554,930 LTIP Units pursuant to the 2018 OPP. These LTIP Units represent the maximum number of LTIP Units that may be earned by the Advisor based on the Company’s total shareholder return (“TSR”), including both share price appreciation and Common Stock dividends, against the Initial Share Price over a performance period, commencing on June 2, 2018 and ending on the earliest of (i) June 2, 2021, (ii) the effective date of any Change of Control (as defined in the 2018 OPP) and (iii) the effective date of any termination of the Advisor’s service as advisor of the Company (the “Performance Period”).
Half of the LTIP Units (the “Absolute TSR LTIP Units”) are eligible to be earned as of the last day of the Performance Period (the “Valuation Date”) if the Company achieves an absolute TSR with respect to threshold, target and maximum performance goals for the Performance Period as follows:
Performance Level (% of Absolute TSR LTIP Units Earned)    Absolute TSR   Number of Absolute TSR LTIP Units Earned
Below Threshold 0  %  Less than 24  % 0 
Threshold 25  % 24  % 319,366 
Target 50  % 30  % 638,733 
Maximum 100  % 36  % or higher 1,277,465 
If the Company’s absolute TSR is more than 24% but less than 30%, or more than 30% but less than 36%, the percentage of the Absolute TSR LTIP Units earned is determined using linear interpolation as between those tiers, respectively.
Half of the LTIP Units (the “Relative TSR LTIP Units”) are eligible to be earned as of the Valuation Date if the amount, expressed in terms of basis points, whether positive or negative, by which the Company’s absolute TSR for the Performance Period exceeds the average TSR of a peer group for the Performance Period consisting of Lexington Realty Trust, W.P. Carey Inc. and Office Properties Income Trust as follows:
Performance Level (% of Relative TSR LTIP Units Earned)    Relative TSR Excess   Number of Absolute TSR LTIP Units Earned
Below Threshold 0  %  Less than -600  basis points 0 
Threshold 25  % -600  basis points 319,366 
Target 50  % —  basis points 638,733 
Maximum 100  % 600  basis points 1,277,465 
If the relative TSR excess is more than -600 basis points but less than 0 basis points, or more than 0 basis points but less than +600 bps, the percentage of the Relative TSR LTIP Units earned will be determined using linear interpolation as between those tiers, respectively.
If the Valuation Date is the effective date of a Change of Control or a termination of the Advisor for any reason (i.e., with or without cause), the number of LTIP Units earned will be calculated based on actual performance through the last trading day prior to the effective date of the Change of Control or termination (as applicable), with the hurdles for calculating absolute TSR pro-rated to reflect that the Performance Period lasted less than three years but without pro-rating the number of Absolute TSR LTIP Units or Relative TSR LTIP Units the Advisor would be eligible to earn to reflect the shortened period.
The award of LTIP Units under the 2018 OPP is administered by the compensation committee of the Company’s board of directors, provided that any of the compensation committee’s powers can be exercised instead by the board of directors if it so elects. Following the Valuation Date, the compensation committee is responsible for determining the number of Absolute TSR LTIP Units and Relative TSR LTIP Units earned, as calculated by an independent consultant engaged by the compensation committee and as approved by the compensation committee in its reasonable and good faith discretion. The compensation committee also must approve the transfer of any Absolute TSR LTIP Units and Relative TSR LTIP Units (or OP Units into which they may be converted in accordance with the terms of the agreement of limited partnership of the OP).
LTIP Units earned as of the Valuation Date will also become vested as of the Valuation Date. Any LTIP Units that are not earned and vested after the compensation committee makes the required determination will automatically and without notice be forfeited without the payment of any consideration by the Company or the OP, effective as of the Valuation Date.
Other Equity-Based Compensation
34
GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The Company may issue Common Stock in lieu of cash to pay fees earned by the Company’s directors at each director’s election. If the Company did so, there would be no restrictions on the shares issued since these payments in lieu of cash relate to fees earned for services performed. There were no such shares of Common Stock issued in lieu of cash during the three months ended March 31, 2021 and 2020.
Note 14 — Earnings Per Share
The following is a summary of the basic and diluted net income per share computation for the periods presented:
Three Months Ended March 31,
(In thousands, except share and per share data) 2021 2020
Net income attributable to common stockholders $ (832) $ 5,038 
Adjustments to net income attributable to common stockholders for common share equivalents (153) (135)
Adjusted net income attributable to common stockholders $ (985) $ 4,903 
Weighted average common shares outstanding — Basic 91,479,497  89,458,753 
Weighted average common shares outstanding — Diluted 91,479,497  89,499,294 
Net income per share attributable to common stockholders — Basic and Diluted $ (0.01) $ 0.05 

Under current authoritative guidance for determining earnings per share, all unvested share-based payment awards that contain non-forfeitable rights to distributions are considered to be participating securities and therefore are included in the computation of earnings per share under the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common shares and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. The Company’s unvested Restricted Shares, unvested RSUs and unearned LTIP Units contain rights to receive distributions considered to be non-forfeitable, except in certain limited circumstances, and therefore the Company applies the two-class method of computing earnings per share. The calculation of earnings per share above excludes the distributions to the unvested Restricted Shares, unvested RSUs and unearned LTIP Units from the numerator.
Diluted net income per share assumes the conversion of all Common Stock share equivalents into an equivalent number of shares of Common Stock, unless the effect is anti-dilutive. The Company considers unvested Restricted Shares, unvested RSUs and unvested LTIP Units to be common share equivalents. The following table shows common share equivalents on a weighted average basis that were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2021 and 2020:
Three Months Ended March 31,
2021 2020
Unvested RSUs 44,322  40,541 
Unvested Restricted Shares (1)
129,356  — 
LTIP Units (2)
2,554,930  2,554,930 
Total common share equivalents excluded from EPS calculation 2,728,608  2,595,471 
(1) There were 124,275 Restricted Shares issued and outstanding as of March 31, 2021. See Note 13 — Equity-Based Compensation for additional information on the Restricted Shares, including their issuance during September 30, 2020.
(2) There were 2,554,930 LTIP Units issued and outstanding under the 2018 OPP as of March 31, 2021 and 2020. See Note 13 — Equity-Based Compensation for additional information on the 2018 OPP.
Conditionally issuable shares relating to the 2018 OPP award (see Note 13 — Equity-Based Compensation) would be included in the computation of fully diluted EPS (if dilutive) based on shares that would be issued as if the balance sheet date were the end of the measurement period. No LTIP Unit share equivalents were included in the computation for the three months ended March 31, 2021 and 2020.
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GLOBAL NET LEASE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Note 15 — Subsequent Events
The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have not been any events that have occurred that would require adjustments to, or disclosures in the consolidated financial statements, except for as disclosed below.
Acquisitions Subsequent to March 31, 2021
Subsequent to March 31, 2021, we acquired five properties, located in the United States and United Kingdom, for an aggregate contract purchase price of approximately $249.9 million, excluding closing costs. This included one acquisition from the McLaren Group of three triple-net lease properties located in the United Kingdom for a purchase price of £170.0 million ($236.3 million on the date of acquisition). The acquisition closing costs of $5.6 million were funded with a £101.0 million ($140.6 million on the date of incurrence) loan secured by the McLaren Group properties, £52.0 million ($72.2 million on the date of acquisition) in additional borrowings under the Revolving Credit Facility and cash on hand.
Advisory Agreement Amendment
On May 6, 2021, the Advisory Agreement was amended pursuant to the 2021 Amendment. See Note 11 — Related Party Transactions for further details.
2021 Equity Plan
At the Company’s 2021 annual meeting of stockholders held on April 12, 2021, the Company’s stockholders approved the
2021 Equity Plan, which became effective upon stockholder approval. Because the Equity Plan was approved by the Company’s stockholders, (i) no awards will be granted under the Option Plan in the future, (ii) only 2,772,905 shares of Common Stock will remain available for the grant of new awards under the RSP through the expiration of the RSP on April 20, 2022, and (iii) shares of Common Stock underlying awards that expire, terminate, are cancelled or are forfeited under the RSP will not again be available for issuance under the RSP. No awards have ever been granted under the Option Plan, and awards previously granted under the RSP will remain outstanding (and eligible to vest and settle) in accordance with their terms under the RSP. See Note 13 — Equity-Based Compensation for further details.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Global Net Lease, Inc. and the notes thereto. As used herein, the terms “Company,” “we,” “our” and “us” refer to Global Net Lease, Inc., a Maryland corporation, including, as required by context, Global Net Lease Operating Partnership, L.P. (the “OP”), a Delaware limited partnership, and its subsidiaries. We are externally managed by Global Net Lease Advisors, LLC (the “Advisor”), a Delaware limited liability company.
Forward-Looking Statements
Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements, including statements regarding the intent, belief or current expectations of us, our Advisor and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.
These forward-looking statements are subject to risks, uncertainties, and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. Some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward looking statements are set forth under “Risk Factors” and “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2020.
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Overview
We are an externally managed real estate investment trust for U.S. federal income tax purposes (“REIT”) that focuses on acquiring and managing a globally diversified portfolio of strategically-located commercial real estate properties, which are crucial to the success of our roster of primarily “Investment Grade” tenants (defined below). We invest in commercial properties, with an emphasis on sale-leaseback transactions and mission-critical, single tenant net-lease assets.
As of March 31, 2021, we owned 306 properties consisting of 37.2 million rentable square feet, which were 99.7% leased, with a weighted-average remaining lease term of 8.3 years. Based on the percentage of annualized rental income on a straight-line basis, as of March 31, 2021, 65% of our properties were located in the United States (“U.S.”) and Canada and 35% of our properties were located in Europe, and our portfolio was comprised of 49% industrial/distribution properties, 46% office properties and 5% retail properties. These percentages as of March 31, 2021 are calculated using annualized straight-line rent converted from local currency into the U.S. Dollar (“USD”) as of March 31, 2021 for the in-place lease on the property on a straight-line basis, which includes tenant concessions such as free rent, as applicable. We may also originate or acquire first mortgage loans, mezzanine loans, preferred equity or securitized loans (secured by real estate). As of March 31, 2021, we did not own any first mortgage loans, mezzanine loans, preferred equity or securitized loans.
Substantially all of our business is conducted through the OP, a Delaware limited partnership, and its wholly-owned subsidiaries. Our Advisor manages our day-to-day business with the assistance of Global Net Lease Properties, LLC (the “Property Manager”). Our Advisor and Property Manager are under common control with AR Global Investments, LLC (“AR Global”) and these related parties receive compensation and fees for providing services to us. We also reimburse these entities for certain expenses they incur in providing these services to us.
Our portfolio is leased to primarily “Investment Grade” rated tenants in well established markets in the U.S. and Europe. A total of 66.3% of our rental income on a straight-line basis for the quarter ended March 31, 2021 was derived from Investment Grade rated tenants, comprised of 36.4% leased to tenants with an actual investment grade rating and 29.9% leased to tenants with an implied investment grade rating. “Investment Grade” includes both actual investment grade ratings of the tenant or guarantor, if available, or implied investment grade. Implied investment grade may include actual ratings of the tenant parent, guarantor parent (regardless of whether or not the parent has guaranteed the tenant’s obligation under the lease) or tenants that are identified as investment grade by using a proprietary Moody’s analytical tool, which generates an implied rating by measuring an entity’s probability of default. Ratings information is as of March 31, 2021.
Management Update on the Impacts of the COVID-19 Pandemic
The COVID-19 global pandemic has impacted and may continue to impact our business, including our future results of operations and our liquidity. The ultimate impact on our results of operations, our liquidity and the ability of our tenants to continue to pay us rent will depend on numerous factors including the overall length and severity of the COVID-19 pandemic. For a further discussion of the risks and uncertainties associated with the impact of the COVID-19 pandemic on us, see Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020.
We have taken several steps to mitigate the impact of the pandemic on our business. We have been in direct contact with our tenants since the crisis began, cultivating open dialogue and deepening the fundamental relationships that we have carefully developed through prior transactions and historic operations. Based on this approach and the overall financial strength and creditworthiness of our tenants, we believe that we have had positive results in our rent collections during this pandemic. As of April 30, 2021, we have collected approximately 100% of the original cash rent due for the first quarter of 2021 across our entire portfolio, including approximately 100% of the original cash rent due from our assets in the United States, 100% of the original cash rent due from our assets in the United Kingdom and approximately 100% of the original cash rent due from our assets in the rest of Europe. This level of collection was consistent with the our level of collections in the fourth quarter of 2021,which was a slight improvement from the level of collections in the second and third quarters of 2020.
“Original cash rent” refers to contractual rents on a cash basis due from tenants as stipulated in their originally executed lease agreement at inception or as amended, prior to any rent deferral agreement. We calculate “original cash rent collections” by comparing the total amount of rent collected during the period to the original cash rent due. During 2020 in light of COVID-19 pandemic, we agreed with certain tenants to defer a certain portion of cash rent due in 2020 to instead be due during 2021. Total rent collected during the period includes both original cash rent due and payments made by tenants pursuant to rent deferral agreements. Eliminating the impact of deferred rent paid, we collected 99% of original cash rent due in the first quarter of 2021 across our entire portfolio, including approximately 99% of the original cash rent due from our assets in the United States, 100% of the original cash rent due from our assets in the United Kingdom and approximately 100% of the original cash rent due form our assets in the rest of Europe.
This information about rent collections may not be indicative of any future period. There is no assurance that we will be able to collect the cash rent that is due in future months including the deferred 2020 rent amounts due during 2021. The impact of the COVID-19 pandemic on our tenants and thus our ability to collect rents in future periods cannot be determined at present.
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Significant Accounting Estimates and Critical Accounting Policies
For a discussion about our significant accounting estimates and critical accounting policies, see the “Significant Accounting Estimates and Critical Accounting Policies” section of our 2020 Annual Report on Form 10-K. Except for those required by new accounting pronouncements discussed in the section referenced below, there have been no material changes from these significant accounting estimates and critical accounting policies.
Recently Issued Accounting Pronouncements
See Note 2 — Summary of Significant Accounting Policies — Recently Issued Accounting Pronouncements to our consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion.
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Properties
We acquire and operate a diversified portfolio of commercial properties. All such properties may be acquired and operated by us alone or jointly with another party. The following table represents our portfolio of real estate properties as of March 31, 2021:
Portfolio
Acquisition Date
Country
Number of Properties
Square Feet (in thousands) (1)
Average Remaining Lease Term (2)
McDonald's Oct. 2012 UK 1 9 3.0
Wickes Building Supplies I May 2013 UK 1 30 3.5
Everything Everywhere Jun. 2013 UK 1 65 6.3
Thames Water Jul. 2013 UK 1 79 1.4
Wickes Building Supplies II Jul. 2013 UK 1 29 5.7
PPD Global Labs Aug. 2013 US 1 77 3.7
Northern Rock Sep. 2013 UK 2 86 2.4
Wickes Building Supplies III Nov. 2013 UK 1 28 7.7
XPO Logistics Nov. 2013 US 7 105 2.7
Wolverine Dec. 2013 US 1 469 1.8
Encanto Dec. 2013 PR 18 65 4.3
Rheinmetall Jan. 2014 GER 1 320 2.8
GE Aviation Jan. 2014 US 1 369 4.8
Provident Financial Feb. 2014 UK 1 117 14.6
Crown Crest Feb. 2014 UK 1 806 17.9
Trane Feb. 2014 US 1 25 2.7
Aviva Mar. 2014 UK 1 132 8.2
DFS Trading I Mar. 2014 UK 5 240 9.0
GSA I Mar. 2014 US 1 135 1.4
National Oilwell Varco I Mar. 2014 US 1 24 2.3
GSA II Apr. 2014 US 2 25 1.9
OBI DIY Apr. 2014 GER 1 144 2.8
DFS Trading II Apr. 2014 UK 2 39 9.0
GSA III Apr. 2014 US 2 28 1.7
GSA IV May 2014 US 1 33 4.3
Indiana Department of Revenue May 2014 US 1 99 1.8
National Oilwell Varco II May 2014 US 1 23 8.9
Nissan May 2014 US 1 462 7.5
GSA V Jun. 2014 US 1 27 2.0
Lippert Components Jun. 2014 US 1 539 5.4
Select Energy Services I Jun. 2014 US 3 136 5.6
Bell Supply Co I Jun. 2014 US 6 80 7.8
Axon Energy Products (3)
Jun. 2014 US 3 214 3.8
Lhoist Jun. 2014 US 1 23 11.8
GE Oil & Gas Jun. 2014 US 2 70 4.3
Select Energy Services II Jun. 2014 US 4 143 5.6
Bell Supply Co II Jun. 2014 US 2 19 7.8
Superior Energy Services Jun. 2014 US 2 42 3.0
Amcor Packaging Jun. 2014 UK 7 295 3.7
GSA VI Jun. 2014 US 1 7 3.0
Nimble Storage Jun. 2014 US 1 165 0.6
FedEx -3-Pack Jul. 2014 US 3 339 1.8
Sandoz, Inc. Jul. 2014 US 1 154 5.3
Wyndham Jul. 2014 US 1 32 4.1
Valassis Jul. 2014 US 1 101 2.1
GSA VII Jul. 2014 US 1 26 3.6
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Portfolio
Acquisition Date
Country
Number of Properties
Square Feet (in thousands) (1)
Average Remaining Lease Term (2)
AT&T Services Jul. 2014 US 1 402 5.3
PNC - 2-Pack Jul. 2014 US 2 210 8.3
Fujitsu Jul. 2014 UK 3 163 9.0
Continental Tire Jul. 2014 US 1 91 1.3
BP Oil Aug. 2014 UK 1 3 4.6
Malthurst Aug. 2014 UK 2 4 4.6
HBOS Aug. 2014 UK 3 36 4.3
Thermo Fisher Aug. 2014 US 1 115 3.4
Black & Decker Aug. 2014 US 1 71 0.8
Capgemini Aug. 2014 UK 1 90 2.0
Merck & Co. Aug. 2014 US 1 146 4.4
GSA VIII Aug. 2014 US 1 24 3.4
Waste Management Sep. 2014 US 1 84 1.8
Intier Automotive Interiors Sep. 2014 UK 1 153 3.1
HP Enterprise Services Sep. 2014 UK 1 99 5.0
FedEx II Sep. 2014 US 1 12 3.0
Shaw Aero Devices, Inc. Sep. 2014 US 1 131 11.8
Dollar General - 39-Pack Sep. 2014 US 21 200 7.0
FedEx III Sep. 2014 US 2 221 3.3
Mallinkrodt Pharmaceuticals Sep. 2014 US 1 90 3.4
Kuka Sep. 2014 US 1 200 3.3
CHE Trinity Sep. 2014 US 2 374 1.7
FedEx IV Sep. 2014 US 2 255 1.8
GE Aviation Sep. 2014 US 1 102 1.8
DNV GL Oct. 2014 US 1 82 3.9
Bradford & Bingley Oct. 2014 UK 1 121 8.5
Rexam Oct. 2014 GER 1 176 3.9
FedEx V Oct. 2014 US 1 76 3.3
C&J Energy Oct. 2014 US 1 96 0.8
Onguard Oct. 2014 US 1 120 9.8
Metro Tonic Oct. 2014 GER 1 636 4.5
Axon Energy Products Oct. 2014 US 1 26 3.6
Tokmanni Nov. 2014 FIN 1 801 12.4
Fife Council Nov. 2014 UK 1 37 2.9
GSA IX Nov. 2014 US 1 28 1.1
KPN BV Nov. 2014 NETH 1 133 5.8
Follett School Dec. 2014 US 1 487 3.8
Quest Diagnostics Dec. 2014 US 1 224 3.4
Diebold Dec. 2014 US 1 158 0.8
Weatherford Intl Dec. 2014 US 1 20 4.6
AM Castle Dec. 2014 US 1 128 8.6
FedEx VI Dec. 2014 US 1 28 3.4
Constellium Auto Dec. 2014 US 1 321 8.7
C&J Energy II Mar. 2015 US 1 125 9.6
Fedex VII Mar. 2015 US 1 12 3.5
Fedex VIII Apr. 2015 US 1 26 3.5
Crown Group I Aug. 2015 US 2 204 2.8
Crown Group II Aug. 2015 US 2 411 14.4
Mapes & Sprowl Steel, Ltd. Sep. 2015 US 1 61 8.8
JIT Steel Services Sep. 2015 US 2 127 8.8
Beacon Health System, Inc. Sep. 2015 US 1 50 5.0
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Portfolio
Acquisition Date
Country
Number of Properties
Square Feet (in thousands) (1)
Average Remaining Lease Term (2)
Hannibal/Lex JV LLC Sep. 2015 US 1 109 8.5
FedEx Ground Sep. 2015 US 1 91 4.3
Office Depot Sep. 2015 NETH 1 206 7.9
Finnair Sep. 2015 FIN 4 656 10.0
Auchan Dec. 2016 FR 1 152 2.4
Pole Emploi Dec. 2016 FR 1 41 2.3
Sagemcom Dec. 2016 FR 1 265 2.8
NCR Dundee Dec. 2016 UK 1 132 5.6
FedEx Freight I Dec. 2016 US 1 69 2.4
DB Luxembourg Dec. 2016 LUX 1 156 2.7
ING Amsterdam Dec. 2016 NETH 1 509 4.2
Worldline Dec. 2016 FR 1 111 2.8
Foster Wheeler Dec. 2016 UK 1 366 3.3
ID Logistics I Dec. 2016 GER 1 309 3.6
ID Logistics II Dec. 2016 FR 2 964 3.7
Harper Collins Dec. 2016 UK 1 873 4.4
DCNS Dec. 2016 FR 1 97 3.6
Cott Beverages Inc Feb. 2017 US 1 170 5.8
FedEx Ground - 2 Pack Mar. 2017 US 2 162 5.5
Bridgestone Tire Sep. 2017 US 1 48 6.3
GKN Aerospace Oct. 2017 US 1 98 5.8
NSA-St. Johnsbury I Oct. 2017 US 1 87 11.6
NSA-St. Johnsbury II Oct. 2017 US 1 85 11.6
NSA-St. Johnsbury III Oct. 2017 US 1 41 11.6
Tremec North America Nov. 2017 US 1 127 6.5
Cummins Dec. 2017 US 1 59 4.2
GSA X Dec. 2017 US 1 26 8.8
NSA Industries Dec. 2017 US 1 83 11.8
Chemours Feb. 2018 US 1 300 6.8
FCA USA Mar. 2018 US 1 128 6.9
Lee Steel Mar. 2018 US 1 114 7.5
LSI Steel - 3 Pack Mar. 2018 US 3 218 6.6
Contractors Steel Company May 2018 US 5 1,392 7.2
FedEx Freight II Jun. 2018 US 1 22 11.4
DuPont Pioneer Jun. 2018 US 1 200 11.3
Rubbermaid - Akron OH Jul. 2018 US 1 669 7.8
NetScout - Allen TX Aug. 2018 US 1 145 9.4
Bush Industries - Jamestown NY Sep. 2018 US 1 456 17.5
FedEx - Greenville NC Sep. 2018 US 1 29 11.8
Penske Nov. 2018 US 1 606 7.6
NSA Industries Nov. 2018 US 1 65 17.7
LKQ Corp. Dec. 2018 US 1 58 9.8
Walgreens Dec. 2018 US 1 86 4.7
Grupo Antolin Dec. 2018 US 1 360 11.6
VersaFlex Dec. 2018 US 1 113 17.8
Cummins Mar. 2019 US 1 37 7.7
Stanley Security Mar. 2019 US 1 80 7.3
Sierra Nevada Apr. 2019 US 1 60 8.0
EQT Apr. 2019 US 1 127 9.3
Hanes Apr. 2019 US 1 276 7.5
Union Partners May 2019 US 2 390 8.0
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Portfolio
Acquisition Date
Country
Number of Properties
Square Feet (in thousands) (1)
Average Remaining Lease Term (2)
ComDoc Jun. 2019 US 1 108 8.2
Metal Technologies Jun. 2019 US 1 228 13.2
Encompass Health Jun. 2019 US 1 199 12.0
Heatcraft Jun. 2019 US 1 216 7.3
C.F. Sauer SLB Aug. 2019 US 6 598 18.3
SWECO Sep. 2019 US 1 191 14.2
Viavi Solutions Sep. 2019 US 2 132 11.4
Faurecia Dec. 2019 US 1 278 8.0
Plasma Dec. 2019 US 9 125 9.3
Whirlpool Dec. 2019 US 6 2,924 10.8
FedEx Dec. 2019 CN 2 20 8.2
NSA Industries Dec. 2019 US 1 116 18.8
Viavi Solutions Jan. 2020 US 1 46 11.4
CSTK Feb. 2020 US 1 56 9.0
Metal Technologies Feb. 2020 US 1 31 13.9
Whirlpool Feb. 2020 IT 2 196 5.2
Fedex Mar. 2020 CN 1 29 19.0
Klaussner Mar. 2020 US 4 2,195 10.9
Plasma May 2020 US 6 79 10.4
Klaussner Jun. 2020 US 1 261 19.0
NSA Industries Jun. 2020 US 1 48 19.3
Johnson Controls Sep. & Dec. 2020 UK, SP & FR 4 156 11.5
Broadridge Financial Solutions Nov. 2020 US 4 1,248 8.7
ZF Active Safety Dec. 2020 US 1 216 12.6
FCA USA Dec. 2020 US 1 997 9.3
Total 306 37,175 8.3
________
(1)Total may not foot due to rounding.
(2)If the portfolio has multiple properties with varying lease expirations, average remaining lease term is calculated on a weighted-average basis. Weighted- average remaining lease term in years is calculated based on square feet as of March 31, 2021.
(3)Of the three properties, one location is vacant while the other two properties remain in use.
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Results of Operations
In addition to the comparative period-over-period discussions below, please see the “Overview - Management Update on the Impacts of the COVID-19 Pandemic” section above for additional information on the risks and uncertainties associated with the COVID-19 pandemic and management’s actions taken to mitigate those risks and uncertainties.
Comparison of the Three Months Ended March 31, 2021 and 2020
Net Income Attributable to Common Stockholders
Net income attributable to common stockholders was $(0.8) million for the three months ended March 31, 2021, as compared to net income attributable to common stockholders of $5.0 million for the three months ended March 31, 2020. The change in net (loss) income attributable to common stockholders is discussed in detail for each line item of the consolidated statements of operations in the sections that follow.
Revenue from Tenants
In addition to base rent, our lease agreements generally require tenants to pay or reimburse us for all property operating expenses, which primarily reflect insurance costs and real estate taxes incurred by us and subsequently reimbursed by the tenant. However, some limited property operating expenses that are not the responsibility of the tenant are absorbed by us.
Revenue from tenants was $89.4 million and $79.2 million for the three months ended March 31, 2021 and 2020, respectively. The increase was primarily driven by the impact of our property acquisitions since March 31, 2020 and the impact of foreign exchange rates. During the three months ended March 31, 2021 there were increases of 7.6% in the average exchange rate for British Pounds Sterling (“GBP”) to USD and 9.3% in the Euro (“EUR”) to USD, when compared to the same period last year. These increases were partially offset by the impact of our dispositions since March 31, 2020.
Property Operating Expenses
Property operating expenses were $7.6 million and $7.4 million for the three months ended March 31, 2021 and 2020, respectively. These costs primarily relate to insurance costs and real estate taxes on our properties, which are generally reimbursable by our tenants. The main exceptions are Government Services Administration properties for which certain expenses are not reimbursable by tenants. The increase was primarily due to the impact of our acquisitions since March 31, 2020 and increases during the three months ended March 31, 2021 of 7.6% in the average exchange rate for GBP to USD and 9.3% in the EUR to USD, when compared to the same period last year.
Operating Fees to Related Parties
Operating fees paid to related parties were $9.6 million and $8.8 million for the three months ended March 31, 2021 and 2020, respectively. Operating fees to related parties consist of compensation to the Advisor for asset management services, as well as property management fees paid to the Property Manager. Our advisory agreement with the Advisor (our “Advisory Agreement”) requires us to pay the Advisor a Minimum Base Management Fee of $18.0 million per annum ($4.5 million per quarter) and a Variable Base Management Fee, both payable in cash, and Incentive Compensation (as defined in our Advisory Agreement), generally payable in cash and shares, if the applicable hurdles are met. In light of the unprecedented market disruption resulting from the COVID-19 pandemic, in May 2020, we amended our Advisory Agreement to temporarily lower the effective thresholds of these applicable hurdles, and we further amended these hurdles and certain related provisions in May 2021. The Advisor did not earn any Incentive Compensation during the quarters ended March 31, 2021 or 2020. The increase in operating fees between the periods in part results from an increase of $0.3 million in the Variable Base Management Fee resulting from the incremental additional net proceeds generated from offerings of equity securities. The Variable Base Management Fee would increase in connection with any offerings or issuances of equity securities (see Note 11 — Related Party Transactions to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional details).
Our Property Manager is paid fees to manage our properties, which may include market-based leasing commissions. Property management fees are calculated as a percentage of our gross revenues generated by the applicable properties. For additional information on our property management agreement with the Property Manager, see Note 11 — Related Party Transactions to our consolidated financial statements included in this Quarterly Report on Form 10-Q. During the three months ended March 31, 2021 and 2020, property management fees were $2.0 million and $1.4 million, respectively. During the year ended December 31, 2020 and the three months ended March 31, 2021, we incurred leasing commissions to the Property Manager of $1.5 million and $0.5 million, respectively, of which $42,000 was recorded as a property management fee in operating fees to related parties in our consolidated statement of operations for the quarter ended March 31, 2021. The balance is being recorded over the terms of the related leases.
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Acquisition, Transaction and Other Costs
We recognized $17,000 and $0.3 million of acquisition, transaction and other costs during the three months ended March 31, 2021 and 2020, respectively. Acquisition, transaction and other costs during the three months ended March 31, 2021 and 2020 were due to costs for terminated acquisitions.
General and Administrative Expenses
General and administrative expenses were $4.1 million and $3.0 million for the three months ended March 31, 2021 and 2020, respectively, primarily consisting of professional fees including audit and taxation services, board member compensation and directors’ and officers’ liability insurance and including expense reimbursements of approximately $0.2 million to the Advisor under the Advisory Agreement for the three months ended March 31, 2021. The increase for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily due to an increase in professional fees.
Equity-Based Compensation
During the three months ended March 31, 2021 and 2020, we recognized equity-based compensation expense of $2.6 million and $2.5 million, respectively, which primarily related to our multi-year outperformance agreement entered into with the Advisor in July 2018 (the “2018 OPP”). Equity-based compensation expense also includes amortization of restricted shares of Common Stock (“Restricted Shares”) granted to employees of the Advisor or its affiliates who are involved in providing services to us and restricted stock units in respect of shares of Common Stock (“RSUs”) granted to our independent directors.
Equity-based compensation expense related to the 2018 OPP is fixed as of January 1, 2019 and is only remeasured in subsequent periods if the 2018 OPP is amended. In February 2019, the 2018 OPP was amended in light of the effectiveness of a merger of one member of the peer group. Under the accounting rules, we were required to calculate any excess of the new value of LTIP Units in accordance with the provisions of the amendment ($29.9 million) over the fair value immediately prior to the amendment ($23.3 million). This excess of approximately $6.6 million is being expensed over the period from February 21, 2019, the date our compensation committee approved the amendment, through June 2, 2021.
Depreciation and Amortization
Depreciation and amortization expense was $39.7 million and $33.5 million for the three months ended March 31, 2021 and 2020, respectively. The increase in the first quarter of 2021 as compared to the first quarter of 2020 was due to additional depreciation and amortization expense recorded as a result of the impact of our property acquisitions since March 30, 2020 and increases during the three months ended March 31, 2021 of 7.6% in the average exchange rate for GBP to USD and 9.3% in the EUR to USD, when compared to the same period last year, partially offset by the impact of our dispositions since March 31, 2020.
Interest Expense
Interest expense was $21.4 million and $16.4 million for the three months ended March 31, 2021 and 2020, respectively. The increase was primarily related to interest accrued for the $500 million senior notes issued in December 2020, which accrue interest at 3.750% per year (see Note 6 - Senior Notes, Net for additional details). The net amount of our total gross debt outstanding also increased from $2.0 billion as of March 31, 2020 to $2.3 billion as of March 31, 2021 and the weighted-average effective interest rate of our total debt was 3.1% as of March 31, 2020 and 3.3% as of March 31, 2021. The increase in interest expense was also impacted by increases during the three months ended March 31, 2021 of 7.6% in the average exchange rate for GBP to USD and 9.3% in the average exchange rate for EUR to USD, when compared to the same period last year. As of the quarter ended March 31, 2021, approximately 30.0% of our total debt outstanding was denominated in EUR and 10.0% of our total debt outstanding was denominated in GBP, and as of the quarter ended March 31, 2020, approximately 38% of our total debt outstanding was denominated in EUR and 16% of our total debt outstanding was denominated in GBP.
We view a combination of secured and unsecured financing sources as an efficient and accretive means to acquire properties and manage working capital. As of March 31, 2021, approximately 60% of our total debt outstanding was secured and 40% was unsecured. Our interest expense in future periods will vary based on interest rates as well as our level of future borrowings, which will depend on refinancing needs and acquisition activity.
Foreign Currency and Interest Rate Impact on Operations
The gains of $1.8 million and $3.1 million on derivative instruments for the three months ended March 31, 2021 and 2020, respectively, reflect the marked-to-market impact from foreign currency and interest rate derivative instruments used to hedge the investment portfolio from currency and interest rate movements, and was mainly driven by rate changes in the GBP and EUR compared to the USD. The quarterly average GBP to USD exchange rate increased 7.6% and the quarterly average EUR to USD exchange rate increased 9.3% during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.
We had no gains or losses on undesignated foreign currency advances and other hedge ineffectiveness for the three months ended March 31, 2021 and three months ended March 31, 2020.
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As a result of our foreign investments in Europe, and, to a lesser extent, our investments in Canada, we are subject to risk from the effects of exchange rate movements in the EUR, GBP and, to a lesser extent, CAD, which may affect costs and cash flows in our functional currency, the USD. We generally manage foreign currency exchange rate movements by matching our debt service obligation to the lender and the tenant’s rental obligation to us in the same currency. This reduces our overall exposure to currency fluctuations. In addition, we may use currency hedging to further reduce the exposure to our net cash flow. We are generally a net receiver of these currencies (we receive more cash than we pay out), and therefore our results of operations of our foreign properties benefit from a weaker USD, and are adversely affected by a stronger USD, relative to the foreign currency. During the three months ended March 31, 2021, the average exchange rate for GBP to USD increased by 7.6%, and the average exchange rate for EUR to USD increased by 9.3%, when compared to the same period last year.
Income Tax Expense
Although as a REIT we generally do not pay U.S. federal income taxes, we recognize income tax (expense) benefit domestically for state taxes and local income taxes incurred, if any, and also in foreign jurisdictions in which we own properties. In addition, we perform an analysis of potential deferred tax or future tax benefit and expense as a result of book and tax differences and timing differences in taxes across jurisdictions. Our current income tax expense fluctuates from period to period based primarily on the timing of those taxes. Income tax expense was $2.1 million and $1.0 million for the three months ended March 31, 2021 and 2020, respectively.
Cash Flows from Operating Activities
During the three months ended March 31, 2021, net cash provided by operating activities was $53.2 million. The level of cash flows provided by operating activities is driven by, among other things, rental income received, operating fees paid to related parties for asset and property management services and interest payments on outstanding borrowings. Cash flows provided by operating activities during the three months ended March 31, 2021 reflect net income of $4.2 million, adjusted for non-cash items of $42.0 million (primarily depreciation, amortization of intangibles, amortization of deferred financing costs, amortization of mortgage premium/discount, amortization of above- and below-market lease and ground lease assets and liabilities, bad debt expense, unbilled straight-line rent (including the effect of adjustments due to rent deferrals), and equity-based compensation). In addition, operating cash flow increased by $7.0 million, due to working capital items.
During the three months ended March 31, 2020, net cash provided by operating activities was $41.9 million. The level of cash flows provided by operating activities is driven by, among other things, rental income received, operating fees paid to related parties for asset and property management services and interest payments on outstanding borrowings. Cash flows provided by operating activities during the three months ended March 31, 2020 reflect net income of $9.6 million, adjusted for non-cash items of $34.5 million (primarily depreciation, amortization of intangibles, amortization of deferred financing costs, amortization of mortgage premium/discount, amortization of above- and below-market lease and ground lease assets and liabilities, bad debt expense, unbilled straight-line rent, and equity-based compensation). In addition, working capital items increased operating cash flow by $2.5 million. These increases were partially offset by a lease incentive payment of $4.7 million related to the signing of lease extensions for four properties leased to Finnair, which incentive was negotiated in exchange for extending the weighted-average remaining lease term on the properties from 4.7 years to 11.0 years.
Cash Flows from Investing Activities
Net cash used in investing activities during the three months ended March 31, 2021 of $4.4 million was driven by deposits for real estate investments of $1.2 million and capital expenditures of $3.2 million.
Net cash used in investing activities during the three months ended March 31, 2020 of $115.9 million was driven by property acquisitions of $113.1 million, property acquisition deposits of $1.4 million and capital expenditures of $1.4 million.
Cash Flows from Financing Activities
Net cash provided by financing activities of $92.8 million during the three months ended March 31, 2021 was a result of net proceeds from borrowings under our Revolving Credit Facility of $15.0 million, net proceeds from the issuance of common stock of $105.8 million and net proceeds from the issuance of Series B Preferred Stock of $16.0 million. These cash inflows were partially offset by dividends paid to common stockholders of $36.2 million, dividends paid to holders of our 7.25% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”), of $3.1 million, dividends paid to holders of our 6.875% Series B Cumulative Redeemable Perpetual Preferred Stock $0.01 par value per share (“Series B Preferred Stock”), of $1.7 million and payments on mortgage notes payable of $2.7 million.
Net cash provided by financing activities of $153.5 million during the three months ended March 31, 2020 was a result of net proceeds from borrowings under our Revolving Credit Facility of $205.0 million, partially offset by dividends paid to common stockholders of $47.6 million, dividends paid to holders of Series A Preferred Stock of $3.1 million, dividends paid to holders of Series B Preferred Stock $0.6 million.
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Liquidity and Capital Resources
The negative impacts of the COVID-19 pandemic has caused and may continue to cause certain of our tenants to be unable to make rent payments to us timely, or at all, which impacts the amount of cash we generate from our operations. During the year ended December 31, 2020, we took proactive steps to collect rent and to otherwise mitigate the impact on our business and liquidity. The future impact of the pandemic on our results of operations, our liquidity and the ability of our tenants to continue to pay us rent will depend on numerous factors including the overall length and severity of the COVID-19 pandemic. Management is unable to predict the nature and scope of any of these factors. Because substantially all of our income is derived from rentals of commercial real property, our business, income, cash flow, results of operations, financial condition, liquidity, prospects our ability to service our debt obligations, our ability to consummate future property acquisitions and our ability to pay dividends, and other distributions to our stockholders would be adversely affected if a significant number of tenants are unable to meet their obligations to us.
In addition to the discussion below, please see the “Overview — Management Update on the Impacts of the COVID-19 Pandemic” section above for additional information on the risks and uncertainties associated with the COVID-19 pandemic and management’s actions taken to mitigate those risks and uncertainties.
As of March 31, 2021 and December 31, 2020, we had cash and cash equivalents of $262.9 million and $124.2 million, respectively. See discussion above for how our cash flows from various sources impacted our cash. Principal future needs for use of our cash and cash equivalents will include the purchase of additional properties or other investments in accordance with our investment strategy, payment of related acquisition costs, improvement costs, operating and administrative expenses, continuing debt service obligations and dividends to holders of our Common Stock, Series A Preferred Stock and Series B Preferred Stock, as well as to any future class or series of preferred stock we may issue. Management expects that operating income from our existing properties supplemented by our existing cash will be sufficient to fund operating expenses, and the payment of quarterly dividends to our common stockholders and holders of our Series A Preferred Stock and Series B Preferred Stock. Our other sources of capital, which we have used and may use in the future, include proceeds received from our Revolving Credit Facility, proceeds from secured or unsecured financings (which may include note issuances), proceeds from our offerings of equity securities (including Common Stock and preferred stock), proceeds from any future sales of properties and undistributed funds from operations, if any.
During the three months ended March 31, 2021, cash used to pay our dividends was generated mainly from cash flows provided by operations.
Acquisitions and Dispositions
We are in the business of acquiring real estate properties and leasing the properties to tenants. Generally, we fund our acquisitions through a combination of cash and cash equivalents, proceeds from offerings of equity securities (including Common Stock and preferred stock), borrowings under our Revolving Credit Facility and proceeds from mortgage or other debt secured by the acquired or other assets at the time of acquisition or at some later point (see Note 4 - Mortgage Notes Payable, Net and Note 5 — Revolving Credit Facility and Term Loan, Net to our consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion). In addition, to the extent we dispose of properties, we have used and may continue to use the net proceeds from the dispositions (after repayment of any mortgage debt, if any) for future acquisitions or other general corporate purposes.
Acquisitions and Dispositions — Three Months Ended March 31, 2021
During the three months ended March 31, 2021, we did not acquire or dispose of any properties.
Acquisitions and Dispositions Subsequent to March 31, 2021 and Pending Transactions
Subsequent to March 31, 2021, we acquired five properties, located in the United States and United Kingdom, for an aggregate base purchase price of approximately $249.9 million, excluding closing costs. The largest of these acquisitions was the global headquarters of the McLaren Group located in close proximity to central London, England and Heathrow Airport. McLaren Group is a group of automotive, motorsport and technology companies. This 840,849 square foot campus consists of three different buildings: a technology center, production center and thought leadership center. These state-of-the-art buildings were designed by renowned architect Norman Foster, have won numerous awards and obtained Carbon Standard recognition from the Carbon Trust for their environmentally conscious features. We acquired these properties for £170.0 million ($236.3 million on the date of acquisition) in a sale-leaseback transaction with the McLaren Group. We believe the price paid for this property is significantly below replacement cost. The leases have a term of 20 years with annual rent escalators linked to the consumer price index subject to a cap of 4% and a collar of 1.25%. The annual base rent is subject to a one-time contingent adjustment which only occurs upon a McLaren Holdings Limited corporate credit rating enhancement to B- (or equivalent) from one of S&P, Moody’s or Fitch by May 2023 and if we refinance the debt incurred to acquire the property secured by thereby (the “McLaren Loan”) by December 2024. If these conditions are not met, the adjustment will not occur. We are under no obligation to complete a refinancing of this loan, and we do not expect to do so during the first year of the lease. If
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these conditions are not met, the adjustment will not occur and the initial rent will not decrease. We are under no obligation to complete refinancing of the McLaren Loan, and we do not expect to do so during the first year of the lease. We funded this acquisition with the £101.0 million ($140.6 million on the date of incurrence) McLaren Loan, £52.0 million ($72.2 million on the date of acquisition) in additional borrowings under the Revolving Credit Facility and cash on hand consisting primarily of proceeds from our ATM programs. The maturity date of the McLaren Loan is April 23, 2024 and it bears interest at 6% per annum. The McLaren Loan is interest-only with the principal due at maturity.
We have signed one definitive purchase and sale agreement (“PSA”) to acquire one net lease property for a base purchase price of $6.9 million. The PSA is subject to conditions and there can be no assurance we will complete the acquisition, or any future acquisitions, on a timely basis or on acceptable terms and conditions, if at all. Since the onset of the COVID-19 pandemic, the overall amount of available acquisitions has been reduced, and although we have adjusted our historical capitalization rate target, in many cases current sellers have not yet made similar changes to their pricing expectations. We believe that over time, bidding and asking prices will converge to establish a long-term trend of lower prices.
Equity Offerings
Common Stock
We have an “at the market” equity offering program (the “Common Stock ATM Program”), pursuant to which we may raise aggregate sales proceeds of $500.0 million (increased from $250.0 million in March 2021) through sales of Common Stock from time to time through our sales agents. During the three months ended March 31, 2021, we sold 5,904,470 shares of Common Stock through the Common Stock ATM Program for gross proceeds of $107.6 million, before commissions paid of $1.6 million and additional issuance costs of $0.3 million.
Preferred Stock
We have established an “at the market” equity offering program for our Series B Preferred Stock (the “Series B Preferred Stock ATM Program”) pursuant to which we may raise aggregate sales proceeds of $200.0 million through sales of shares of Series B Preferred Stock from time to time through our sales agents. During the three months ended March 31, 2021, we sold 641,940 shares of Series B Preferred Stock through the Series B Preferred Stock ATM Program for gross proceeds of $16.2 million, before commissions paid of approximately $0.2 million and nominal additional issuance costs.
The timing differences between when we raise equity proceeds or receive proceeds from dispositions and when we invest those proceeds in acquisitions or other investments that increase our operating cash flows have affected, and may continue to affect, our results of operations.
Borrowings
As of March 31, 2021 and December 31, 2020, we had total debt outstanding of $2.3 billion, bearing interest at a weighted-average interest rate per annum equal to 3.3%.
As of March 31, 2021, 95.8% of our total debt outstanding either bore interest at fixed rates, or was swapped to a fixed rate, which bore interest at a weighted average interest rate of 3.3% per annum. As of March 31, 2021, 4.2% of our total debt outstanding was variable-rate debt, which bore interest at a weighted average interest rate of 2.6% per annum. The total gross carrying value of unencumbered assets as of March 31, 2021 was $1.8 billion, of which approximately $1.8 billion was included in the unencumbered asset pool comprising the borrowing base under the Revolving Credit Facility and therefore is not available to serve as collateral for future borrowings. We intend to add certain of these unencumbered assets to the borrowing base under the Revolving Credit Facility to increase the amount available for future borrowings thereunder.
Our debt leverage ratio was 57.0% (total debt as a percentage of total purchase price of real estate investments, based on the exchange rate at the time of purchase) as of March 31, 2021. See Note 7 — Fair Value of Financial Instruments to our consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of fair value of such debt as of March 31, 2021. As of March 31, 2021, the weighted-average maturity of our indebtedness was 5.1 years. We believe we have the ability to service our debt obligations as they come due.
Senior Notes
On December 16, 2020, we and the OP issued $500.0 million aggregate principal amount of 3.750% Senior Notes due 2027. As of March 31, 2021 and December 31, 2020, the amount of the Senior Notes outstanding totaled $490.7 million and $490.3 million, respectively. These amounts are net of $9.3 million and $9.7 million of deferred financing costs, respectively. The Senior Notes were issued in transactions exempt from registration under the Securities Act of 1933, as amended. See Note 6 — Senior Notes, Net for further discussion on the Senior Notes and related covenants.
Mortgage Notes Payable
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As of March 31, 2021, we had secured mortgage notes payable of $1.3 billion, net of mortgage discounts and deferred financing costs. Repayments of principal under the mortgage loan secured by all our properties located in the United Kingdom began in October 2020 based on amounts specified under the loan. In January 2021, approximately $2.7 million in principal was repaid in accordance with the terms of this mortgage note payable. Approximately $10.6 million (approximately £7.7 million) in principal is due during the remainder of 2021, which is the only debt we have coming due during 2021.
Credit Facility
As of March 31, 2021, outstanding borrowings under our Revolving Credit Facility were $125.9 million and the total outstanding balance on our term loan was $287.2 million, net of deferred financing costs. During the three months ended March 31, 2021, we borrowed an additional $15.0 million under the Revolving Credit Facility.
As of March 31, 2021, the aggregate total commitments under the Credit Facility were approximately $1.1 billion, based on the USD equivalent on March 31, 2021. On February 24, 2021, following a request by us, lender commitments under the Credit Facility were increased by $50.0 million with all of the increase allocated to the Revolving Credit Facility, and the total commitments were approximately $1.2 billion based on prevailing exchange rates on that date. This increase was made pursuant to the Credit Facility’s uncommitted “accordion feature” whereby, upon our request, but at the sole discretion of the lenders participating in such increase, total commitments under the Credit Facility may be increased, with the aggregate of such commitments not to exceed $1.75 billion. Following the effectiveness of the commitment increase completed on February 24, 2021, we may request future additional increases to total commitments of approximately $565.0 million, based on prevailing exchange rates on that date, allocable to either or both components of the Credit Facility. The increase in lender commitments did not impact the amount available for future borrowings under the Credit Facility, which is based on the value of a pool of eligible unencumbered real estate assets owned by us and compliance with various ratios related to those assets.
The Credit Facility consists of two components, a Revolving Credit Facility and a Term Loan, both of which are interest-only. The Revolving Credit Facility matures on August 1, 2023, subject to two six-month extensions at our option subject to certain conditions, and the Term Loan matures on August 1, 2024. Borrowings under the Credit Facility bear interest at a variable rate per annum based on an applicable margin that varies based on the ratio of consolidated total indebtedness and our consolidated total asset value including our subsidiaries plus either (i) LIBOR, as applicable to the currency being borrowed, or (ii) a “base rate” equal to the greatest of (a) KeyBank’s “prime rate,” (b) 0.5% above the Federal Funds Effective Rate, or (c) 1.0% above one-month LIBOR. The applicable interest rate margin is based on a range from 0.45% to 1.05% per annum with respect to base rate borrowings under the Revolving Credit Facility, 1.45% to 2.05% per annum with respect to LIBOR borrowings under the Revolving Credit Facility, 0.40% to 1.00% per annum with respect to base rate borrowings under the Term Loan and 1.40% to 2.00% per annum with respect to LIBOR borrowings under the Term Loan. As of March 31, 2021, the Credit Facility had a weighted-average effective interest rate of 2.5% after giving effect to interest rate swaps in place.
While we expect LIBOR to be available in substantially its current form until at least the end of 2021, it is possible that LIBOR will become unavailable prior to that time. The Credit Facility contains terms governing the establishment of a replacement index to serve as an alternative to LIBOR, if necessary. To transition from LIBOR under the Credit Facility, we anticipate that we will either utilize the Base Rate or negotiate a replacement reference rate for LIBOR with the lenders.
Our Credit Facility requires us, through the OP, to pay an unused fee per annum of 0.25% of the unused balance of the Revolving Credit Facility if the unused balance exceeds or is equal to 50% of the total commitment or a fee per annum of 0.15% of the unused balance of the Revolving Credit Facility if the unused balance is less than 50% of the total commitment. From and after the time we obtain an investment grade credit rating, the unused fee will be replaced with a facility fee based on the total commitment under the Revolving Credit Facility multiplied by 0.30%, decreasing if our credit rating increases.
The availability of borrowings under the Revolving Credit Facility is based on the value of a pool of eligible unencumbered real estate assets owned by us and compliance with various ratios related to those assets. As of March 31, 2021, approximately $88.6 million was available for future borrowings under the Revolving Credit Facility. Any future borrowings may, at our option be denominated in USD, EUR, Canadian Dollars, GBP or Swiss Francs. Amounts borrowed may not, however, be converted to, or repaid in, another currency once borrowed. The Term Loan is denominated in EUR.
Loan Obligations
Our loan obligations generally require us to pay principal and interest on a monthly or quarterly basis with all unpaid principal and interest due at maturity. Our loan agreements (including the Credit Facility) stipulate compliance with specific reporting covenants. Our mortgage notes payable agreements require compliance with certain property-level financial covenants including debt service coverage ratios.
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During the three months ended September 30, 2020, the borrower entities under the mortgage loan secured by all of our properties located in the United Kingdom did not maintain the required loan-to-value ratios with respect to the mortgaged properties, and, as a result, a cash trap event under the loan occurred which was immediately cured when we executed, as required by the terms of the loan, a limited unsecured corporate guaranty of the borrower entities’ obligations under the loan of £20.0 million (approximately $27.6 million as of March 31, 2021). The guaranty remains in effect and contains a covenant that requires us to maintain unrestricted cash and cash equivalents (or amounts available for future borrowings under credit facility, such as the Credit Facility) in an amount sufficient to meet its actual and contingent liabilities under the guaranty.
During the three months ended December 31, 2020, the borrower entities under the same mortgage loan did not maintain the same loan-to-value ratio and another cash trap event under the loan occurred. This does not constitute a breach of the covenant and is not an event of default under the loan. We are currently in active negotiations with out lenders to cure the cash trap event. We anticipate reaching a resolution on the cure to the cash trap event in the second quarter of 2021 but there can be no assurance we will be able to do so on favorable terms, or at all. If the value of the underlying portfolio continues to decline, the loan to value ratio may exceed the financial covenant required under the loan of 55%, which would result in a breach, which could, if not cured, give rise to the lenders’ right to accelerate the principal amount due under the loan and other remedies. In that event, our intent would be to cure the breach through various remedies available to them per the loan agreement within the specified time frame under the loan. We do not anticipate that any arrangement required to cure the cash trap that occurred during the fourth quarter of 2020 and still remains in place during the first quarter of 2021 and subsequent thereto will have a material impact on our liquidity. However, if we are unable to maintain this loan-to-value after the next annual lender valuation in the fourth quarter of 2021, we may experience future cash trap events that could adversely impact our liquidity.
In addition, during the three months ended December 31, 2020, we also triggered a cash sweep event under one of our mortgage loans with a balance of $98.5 million as of March 31, 2021, because a major tenant failed to renew its lease. This is not an event of default and instead triggers a cash sweep event. Subsequent to December 31, 2020, we cured this event through one of the available options under the loan by putting a $3.2 million letter of credit in place. We may be required to put additional letters of credit in place up to an aggregate of $7.4 million if we are not able to find a suitable replacement tenant prior to the fourth quarter of 2021, and the letters of credit reduce the availability for future borrowings under the Revolving Credit Facility.
2021 LTIP Unit Award
On May 3, 2021, our independent directors, acting as a group, authorized the issuance of a new award of LTIP Units to the Advisor after the performance period under the 2018 OPP expires on June 2, 2021. The number of LTIP Units to be issued to the Advisor pursuant to this award will be equal to the quotient of $50.0 million divided by the closing price of Common Stock on June 2, 2021. See Item 5 — Other information for additional information.
Non-GAAP Financial Measures
This section discusses the non-GAAP financial measures we use to evaluate our performance including Funds from Operations (“FFO”), Core Funds from Operations (“Core FFO”) and Adjusted Funds from Operations (“AFFO”). A description of these non-GAAP measures and reconciliations to the most directly comparable GAAP measure, which is net income, is provided below.
Use of Non-GAAP Measures
FFO, Core FFO, and AFFO should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO, Core FFO and AFFO measures. Other REITs may not define FFO in accordance with the current NAREIT definition (as we do), or may interpret the current NAREIT definition differently than we do, or may calculate Core FFO or AFFO differently than we do. Consequently, our presentation of FFO, Core FFO and AFFO may not be comparable to other similarly-titled measures presented by other REITs.
We consider FFO, Core FFO and AFFO useful indicators of our performance. Because FFO, Core FFO and AFFO calculations exclude such factors as depreciation and amortization of real estate assets and gain or loss from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), FFO, Core FFO and AFFO presentations facilitate comparisons of operating performance between periods and between other REITs.
As a result, we believe that the use of FFO, Core FFO and AFFO, together with the required GAAP presentations, provide a more complete understanding of our operating performance including relative to our peers and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. However, FFO, Core FFO and AFFO are not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. Investors are cautioned that FFO, Core FFO and AFFO should only be used to assess the sustainability of our operating performance
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excluding these activities, as they exclude certain costs that have a negative effect on our operating performance during the periods in which these costs are incurred.
Funds from Operations, Core Funds from Operations and Adjusted Funds from Operations
Funds from Operations
Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts (“NAREIT”), an industry trade group, has promulgated a measure known as FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. FFO is not equivalent to net income or loss as determined under GAAP.
We calculate FFO, a non-GAAP measure, consistent with the standards established over time by the Board of Governors of NAREIT, as restated in a White Paper approved by the Board of Governors of NAREIT effective in December 2018 (the “White Paper”). The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding depreciation and amortization related to real estate, gain and loss from the sale of certain real estate assets, gain and loss from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Our FFO calculation complies with NAREIT’s definition.
The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, and straight-line amortization of intangibles, which implies that the value of a real estate asset diminishes predictably over time. We believe that, because real estate values historically rise and fall with market conditions, including inflation, interest rates, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation and certain other items may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, among other things, provides a more complete understanding of our performance to investors and to management, and, when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.
Core Funds from Operations
In calculating Core FFO, we start with FFO, then we exclude certain non-core items such as acquisition, transaction and other costs, as well as certain other costs that are considered to be non-core, such as debt extinguishment costs, fire loss and other costs related to damages at our properties. The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our core business plan to generate operational income and cash flows in order to make dividend payments to stockholders. In evaluating investments in real estate, we differentiate the costs to acquire the investment from the subsequent operations of the investment. We also add back non-cash write-offs of deferred financing costs and prepayment penalties incurred with the early extinguishment of debt which are included in net income but are considered financing cash flows when paid in the statement of cash flows. We consider these write-offs and prepayment penalties to be capital transactions and not indicative of operations. By excluding expensed acquisition, transaction and other costs as well as non-core costs, we believe Core FFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties.
Adjusted Funds from Operations
In calculating AFFO, we start with Core FFO, then we exclude certain income or expense items from AFFO that we consider more reflective of investing activities, other non-cash income and expense items and the income and expense effects of other activities that are not a fundamental attribute of our business plan. These items include early extinguishment of debt and other items excluded in Core FFO as well as unrealized gain and loss, which may not ultimately be realized, such as gain or loss on derivative instruments, gain or loss on foreign currency transactions, and gain or loss on investments. In addition, by excluding non-cash income and expense items such as amortization of above-market and below-market leases intangibles, amortization of deferred financing costs, straight-line rent and equity-based compensation from AFFO, we believe we provide useful information regarding income and expense items which have a direct impact on our ongoing operating performance. We also include the realized gain or loss on foreign currency exchange contracts for AFFO as such items are part of our ongoing operations and affect our current operating performance.
In calculating AFFO, we exclude certain expenses which under GAAP are characterized as operating expenses in determining operating net income. All paid and accrued merger, acquisition, transaction and other costs (including prepayment penalties for debt extinguishments) and certain other expenses negatively impact our operating performance during the period in which expenses are incurred or properties are acquired will also have negative effects on returns to investors, but are not reflective of on-going performance. Further, under GAAP, certain contemplated non-cash fair value and other non-cash
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adjustments are considered operating non-cash adjustments to net income. In addition, as discussed above, we view gain and loss from fair value adjustments as items which are unrealized and may not ultimately be realized and not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. Excluding income and expense items detailed above from our calculation of AFFO provides information consistent with management’s analysis of our operating performance. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gain or loss, we believe AFFO provides useful supplemental information. By providing AFFO, we believe we are presenting useful information that can be used to better assess the sustainability of our ongoing operating performance without the impact of transactions or other items that are not related to the ongoing performance of our portfolio of properties. AFFO presented by us may not be comparable to AFFO reported by other REITs that define AFFO differently. Furthermore, we believe that in order to facilitate a clear understanding of our operating results, AFFO should be examined in conjunction with net income (loss) as presented in our consolidated financial statements. AFFO should not be considered as an alternative to net income (loss) as an indication of our performance or to cash flows as a measure of our liquidity or ability to make distributions.

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Accounting Treatment of Rent Deferrals
All of the concessions granted to our tenants as a result of the COVID-19 pandemic are rent deferrals with the original lease term unchanged and collection of deferred rent deemed probable (see the Overview - Management Update on the Impacts of the COVID-19 Pandemic section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information on second quarter rent deferrals). As a result of relief granted by the FASB and SEC related to lease modification accounting, rental revenue used to calculate net income and NAREIT FFO has not, and we do not expect we will be, significantly impacted by the deferrals we have entered into. In addition, since we currently believe that these deferral amounts are collectable, we have excluded from the increase in straight-line rent for AFFO purposes the amounts recognized under GAAP relating to rent deferrals. For a detailed discussion of our revenue recognition policy, including details related to the relief granted by the FASB and SEC, see Note 2 — Summary of Significant Accounting Policies to the consolidated financial statements included in this Quarterly Report on Form 10-Q.
Three Months Ended March 31,
(In thousands) 2021 2020
Net (loss) income attributable to common stockholders (in accordance with GAAP) $ (832) $ 5,038 
Depreciation and amortization 39,684  33,533 
FFO (as defined by NAREIT) attributable to common stockholders 38,852  38,571 
Acquisition, transaction and other costs 17  280 
Loss on extinguishment of debt
—  — 
Core FFO attributable to common stockholders
38,869  38,851 
Non-cash equity-based compensation
2,577  2,488 
Non-cash portion of interest expense
2,279  1,810 
Amortization related to above- and below- market lease intangibles and right-of-use assets, net 59  232 
Straight-line rent (944) (1,487)
Straight-line rent (rent deferral agreements) (1)
(649) — 
Unrealized income on undesignated foreign currency advances and other hedge ineffectiveness
—  — 
Eliminate unrealized losses (gains) on foreign currency transactions (2)
(1,762) (2,082)
Amortization of mortgage discounts and premiums, net and mezzanine discount
—  10 
AFFO attributable to common stockholders $ 40,429  $ 39,822 
Summary
FFO (as defined by NAREIT) attributable to common stockholders $ 38,852  $ 38,571 
Core FFO attributable to common stockholders $ 38,869  $ 38,851 
AFFO attributable to common stockholders $ 40,429  $ 39,822 
_________
(1)Represents the amount of deferred rent pursuant to lease negotiations which qualify for FASB relief for which rent was deferred but not reduced. These amounts are included in the straight-line rent receivable on our balance sheet but are considered to be earned revenue attributed to the current period, for purposes of AFFO, as they are expected to be collected.
(2)For AFFO purposes, we adjust for unrealized gains and losses. For the three months ended March 31, 2021, gains on derivative instruments were $1.8 million, which consisted of primarily unrealized gains of $1.8 million. For the three months ended March 31, 2020, gains on derivative instruments were $3.1 million, which consisted of unrealized gains of $2.1 million and realized gains of $1.0 million.

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Dividends
The amount of dividends payable to our common stockholders is determined by our board of directors and is dependent on a number of factors, including funds available for dividends, our financial condition, provisions in our Credit Facility or other agreements that may restrict our ability to pay dividends, capital expenditure requirements, as applicable, requirements of Maryland law and annual distribution requirements needed to maintain our status as a REIT.
Through March 31, 2020, we paid dividends on Common Stock at an annualized rate of $2.13 per share or $0.5325 per share on a quarterly basis. In March 2020, our board of directors approved a change in the dividend to an annual rate of $1.60 per share or $0.40 per share on a quarterly basis, which was effective beginning in the second quarter of 2020 with our April 1, 2020 dividend declaration. Dividends authorized by our board of directors and declared by us are paid on a quarterly basis in arrears on the 15th day of the first month following the end of each fiscal quarter (unless otherwise specified) to common stockholders of record on the record date for such payment.
Dividends on our Series A Preferred Stock accrue in an amount equal to $0.453125 per share per quarter to Series A Preferred Stock holders, which is equivalent to 7.25% of the $25.00 liquidation preference per share of Series A Preferred Stock per annum. Dividends on our Series B Preferred Stock accrue in an amount equal to $0.429688 per share per quarter to Series B Preferred Stock holders, which is equivalent to 6.875% of the $25.00 liquidation preference per share of Series B Preferred Stock per annum. Dividends on the Series A Preferred Stock and Series B Preferred Stock are payable quarterly in arrears on the 15th day of January, April, July and October of each year (or, if not on a business day, on the next succeeding business day) to holders of record on the close of business on the record date set by our board of directors. Any accrued and unpaid dividends payable with respect to the Series A Preferred Stock and Series B Preferred Stock become part of the liquidation preference thereof.
Pursuant to the Credit Facility, we may not pay distributions, including cash dividends payable with respect to Common Stock, Series A Preferred Stock, Series B Preferred Stock, or any other class or series of stock we may issue in the future, or redeem or otherwise repurchase shares of Common Stock, Series A Preferred Stock, Series B Preferred Stock, or any other class or series of stock we may issue in the future that exceed 100% of our Adjusted FFO as defined in the Credit Facility (which is different from AFFO disclosed in this Annual Report on Form 10-K) for any period of four consecutive fiscal quarters, except in limited circumstances, including that for one fiscal quarter in each calendar year, we may pay cash dividends and other distributions and make redemptions and other repurchases in an aggregate amount equal to no more than 105% of our Adjusted FFO. We used the exception to pay dividends that were between 100% of Adjusted FFO to 105% of Adjusted FFO during the quarter ended on June 30, 2020.
Our ability to pay dividends in the future and maintain compliance with the restrictions on the payment of dividends in our Credit Facility depends on our ability to operate profitably and to generate sufficient cash flows from the operations of our existing properties and any properties we may acquire. There can be no assurance that we will complete acquisitions on a timely basis or on acceptable terms and conditions, if at all. If we fail to do so (and we are not otherwise able to increase the amount of cash we have available to pay dividends and other distributions), our ability to comply with the restrictions on the payment of dividends in our Credit Facility may be adversely affected, and we might be required to further reduce the amount of dividends we pay. In the past, the lenders under our Credit Facility have consented to increase the maximum amount of our Adjusted FFO we may use to pay cash dividends and other distributions and make redemptions and other repurchases in certain periods, most recently in connection with the amendment and restatement of our Credit Facility in August 2019. There can be no assurance that they will do so again in the future.

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Cash used to pay dividends and distributions during the three months ended March 31, 2021, was generated from cash flows from operations and cash on hand, consisting of proceeds from borrowings. The following table shows the sources for the payment of dividends to holders of Common Stock, Series A Preferred Stock, Series B Preferred Stock and distributions to holders of LTIP Units for the periods indicated:
Three Months Ended March 31, 2021
(In thousands) Percentage of Dividends
Dividends and Distributions:
Dividends to holders of Common Stock
$ 36,213 
Dividends to holders of Series A Preferred Stock
3,081 
Dividends to holders of Series B Preferred Stock
1,701 
Distributions to holders of LTIP Units
103 
Total dividends and distributions
$ 41,098 
Source of dividend and distribution coverage:
Cash flows provided by operations
$ 41,098  100.0  %
Available cash on hand
—  —  %
Total sources of dividend and distribution coverage
$ 41,098  100.0  %
Cash flows provided by operations (GAAP basis)
$ 53,220 
Net income (loss) attributable to common stockholders (in accordance with GAAP) $ (832)

Foreign Currency Translation
Our reporting currency is the USD. The functional currency of our foreign investments is the applicable local currency for each foreign location in which we invest. Assets and liabilities in these foreign locations (including intercompany balances for which settlement is not anticipated in the foreseeable future) are translated at the spot rate in effect at the applicable reporting date. The amounts reported in the consolidated statements of operations are translated at the average exchange rates in effect during the applicable period. The resulting unrealized cumulative translation adjustment is recorded as a component of accumulated other comprehensive income in the consolidated statements of changes in equity. We are exposed to fluctuations in foreign currency exchange rates on property investments in foreign countries which pay rental income, incur property related expenses and borrow in currencies other than our functional currency, the USD. We have used and may continue to use foreign currency derivatives including options, currency forward and cross currency swap agreements to manage our exposure to fluctuations in foreign GBP-USD and EUR-USD exchange rates (see Note 8 — Derivatives and Hedging Activities to the consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion).
Contractual Obligations
Except as set forth in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” there were no material changes in our contractual obligations at March 31, 2021 as compared to those reported in our Annual Report on Form 10-K for the year ended December 31, 2020.
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Election as a REIT 
We elected to be taxed as a REIT under Sections 856 through 860 of the Code, effective for our taxable year ended December 31, 2013. We believe that, commencing with such taxable year, we have been organized and have operated in a manner so that we qualify for taxation as a REIT under the Code. We intend to continue to operate in such a manner to qualify for taxation as a REIT, but can provide no assurances that we will operate in a manner so as to remain qualified as a REIT. To continue to qualify for taxation as a REIT, we must distribute annually at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard for the deduction for dividends paid and excluding net capital gains, and must comply with a number of other organizational and operational requirements. If we continue to qualify for taxation as a REIT, we generally will not be subject to federal corporate income tax on the portion of our REIT taxable income that we distribute to our stockholders. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and properties, as well as federal income and excise taxes on our undistributed income.
In addition, our international assets and operations, including those owned through direct or indirect subsidiaries that are disregarded entities for U.S. federal income tax purposes, continue to be subject to taxation in the foreign jurisdictions where those assets are held or those operations are conducted.
Inflation
We may be adversely impacted by inflation on any leases that do not contain an indexed escalation provision. In addition, we may be required to pay costs for maintenance and operation of properties which may adversely impact our results of operations due to potential increases in costs and operating expenses resulting from inflation.
Related-Party Transactions and Agreements
See Note 11 — Related Party Transactions to our consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of the various related party transactions, agreements and fees.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that had or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There has been no material change in our exposure to market risk during the three months ended March 31, 2021. For a discussion of our exposure to market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that our disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
During the quarter ended March 31, 2021, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
There have been no material changes to the risk factors disclosed in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, and we direct your attention to those risk factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds of Registered Securities.
Recent Sale of Unregistered Securities
There were no recent sales of unregistered securities.
Purchases of Equity Securities by the Issuer and Related Purchasers
There were no recent repurchases of our equity securities.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Advisory Agreement Amendment
On May 6, 2021, we entered into an amendment to our Advisory Agreement with the Advisor primarily to align the time periods relevant for calculating the effective thresholds of Core AFFO Per Share (as defined in our Advisory Agreement) and for other matters with our fiscal year and to extend the dates when these thresholds may be adjusted in accordance with our our Advisory Agreement. Incentive Compensation (as defined in our Advisory Agreement) can be earned by the Advisor based on our achievement relative to these thresholds.
Prior to the amendment, the Incentive Fee Lower Hurdle (as defined in our Advisory Agreement) was equal to (a) $1.6875 per share in the aggregate and $0.5625 per share per quarter for the period beginning July 1, 2019 and ending March 31, 2020, (b) $1.35 per share in the aggregate and $0.45 per share per quarter for the period beginning April 1, 2020 and ending December 31, 2020, (c) $1.125 per share in the aggregate and $0.5625 per share per quarter for the period beginning January 1, 2021 and ending June 30, 2021, and (d) $2.25 per share in the aggregate and $0.5625 per share per quarter for the annual period beginning July 1, 2021. Following the amendment, the Incentive Fee Lower Hurdle is equal to (i) $1.95 per share in the aggregate and $0.4875 per share per quarter for the annual period beginning January 1, 2021, and (ii) $2.25 per share in the aggregate and $0.5625 per share per quarter for the annual period beginning January 1, 2022 and each annual period thereafter, subject to potential annual increases by our independent directors as described below.
In addition, prior to the amendment, the Incentive Fee Upper Hurdle (as defined in our our Advisory Agreement) was equal to (a) $2.19 per share in the aggregate and $0.73 per share per quarter for the period beginning July 1, 2019 and ending March 31, 2020, (b) $1.75 per share in the aggregate and $0.583 per share per quarter for the period beginning April 1, 2020 and ending December 31, 2020, (c) $1.46 per share in the aggregate and $0.73 per share per quarter for the period beginning January 1, 2021 and ending June 30, 2021, and (d) $2.92 per share in the aggregate and $0.73 per share per quarter for the annual period beginning July 1, 2021. Following the amendment, the Incentive Fee Upper Hurdle is equal to (i) $2.62 per share in the aggregate and $0.655 per share per quarter for the annual period beginning January 1, 2021, and (ii) $2.92 per share in the aggregate and $0.73 per share per quarter for the annual period beginning January 1, 2022 and each annual period thereafter, subject to potential annual increases by our independent directors as described below.
The amendment also extended from July 1, 2021 to January 1, 2023 the first date that the annual thresholds are subject to annual increases by a majority of our independent directors (in their good faith reasonable judgment, after consultation with the Advisor). The percentage at which independent directors may so increase the thresholds remains a percentage equal to between 0% and 3%. In addition, the amendment extended, from August 2023 to May 2026, the first date on which the Advisor has a right to request that our independent directors reduce the then current Incentive Fee Lower Hurdle and Incentive Fee Upper Hurdle and make a determination whether any reduction in the annual thresholds is warranted. The Advisor will again have this right in May 2031 and then every five years thereafter.
The foregoing summary of the material terms of the amendment does not purport to be complete and is subject to, and qualified in its entirety by reference to, the amendment, which is attached as an exhibit to this Quarterly Report on Form 10-Q and incorporated herein by reference.
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2021 LTIP Unit Award
On May 3, 2021, our independent directors, acting as a group, authorized the issuance of a new award of LTIP Units (the “2021 LTIP Unit Award”) to the Advisor after the performance period under the 2018 OPP expires on June 2, 2021. The number of LTIP Units to be issued to the Advisor pursuant to the 2021 LTIP Unit Award will be equal to the quotient of $50.0 million divided by the closing price of Common Stock on June 2, 2021. Holders of these LTIP Units will have the same distribution and redemption rights as holders of currently outstanding LTIP Units. See Note 13 — Equity-Based Compensation for further details. Once the new LTIP Units are issued, we will enter into a new award agreement and an amendment to the agreement of limited partnership of the OP reflecting the terms and conditions described below.
The number of LTIP Units issued will be equal to the maximum number of LTIP Units that may be earned based on our total shareholder return (“TSR”), including both share price appreciation and Common Stock dividends, compared to the closing price of Common Stock on June 2, 2021 over a performance period, commencing on June 3, 2021 and ending on the earliest of (i) June 3, 2024, (ii) the effective date of any change of control and (iii) the effective date of any termination of the Advisor’s service as our advisor.
Half of the LTIP Units will be eligible to be earned as of the last day of the performance period if we achieve an absolute TSR with respect to threshold, target and maximum performance goals for the performance period as follows:
Performance Level (% of Relative TSR LTIP Units Earned)  Absolute TSR
Below Threshold 0  %  Less than 24 %
Threshold 25  % 24 %
Target 50  % 30 %
Maximum 100  % 36 % or higher

If our absolute TSR is more than 24% but less than 30%, or more than 30% but less than 36%, the percentage of the LTIP Units earned is determined using linear interpolation as between those tiers, respectively.
Half of the LTIP Units will be eligible to be earned as of the last day of the performance period if the amount, expressed in terms of basis points, whether positive or negative, by which our absolute TSR for the performance period exceeds the average TSR of a peer group (consisting of Lexington Realty Trust, Office Properties Income Trust and W.P. Carey, Inc.) for the performance period as follows:
Performance Level (% of Relative TSR LTIP Units Earned)  Absolute TSR
Below Threshold 0  %  Less than -600 basis points
Threshold 25  % -600 basis points
Target 50  % 0 basis points
Maximum 100  % 600 or higher

If the relative TSR excess is more than -600 basis points but less than 0 basis points, or more than 0 basis points but less than +600 bps, the percentage of LTIP Units earned will be determined using linear interpolation as between those tiers, respectively.
If the last day of the performance period is the effective date of a change of control or a termination of the Advisor for any reason (i.e., with or without cause), the number of LTIP Units earned will be calculated based on actual performance through the last trading day prior to the effective date of the change of control or termination (as applicable), with the hurdles for calculating absolute TSR pro-rated to reflect that the performance period lasted less than three years but without pro-rating the number of LTIP Units the Advisor would be eligible to earn to reflect the shortened period.
The 2021 LTIP Unit Award will be administered by the compensation committee of our board of directors. Following the performance period, the compensation committee will be responsible for determining the number of LTIP Units earned, as calculated by an independent consultant engaged by the compensation committee and as approved by the compensation committee in its reasonable and good faith discretion. The compensation committee also must approve the transfer of any LTIP Units (or OP Units into which they may be converted in accordance with the terms of the agreement of limited partnership of the OP). Our board of directors, in its sole discretion, may choose to exercise any of the powers granted to the compensation committee under the 2021 LTIP Unit Award.
LTIP Units earned as of the end of the performance period will also become vested at that time. Any LTIP Units that are
not earned and vested after the required determination is made will automatically and without notice be forfeited without the
payment of any consideration by us or the OP, effective as of the end of the performance period.
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Item 6. Exhibits.
The exhibits listed on the Exhibit Index (following the signatures section of this report) are included, or incorporated by reference, in this Quarterly Report on Form 10-Q.
59
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  Global Net Lease, Inc.
  By: /s/ James L. Nelson
    James L. Nelson
    Chief Executive Officer and President
(Principal Executive Officer)
By: /s/ Christopher J. Masterson
  Christopher J. Masterson
  Chief Financial Officer, Treasurer, and Secretary
(Principal Financial Officer and Principal Accounting Officer)

Dated: May 7, 2021
60
EXHIBITS INDEX


The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 (and are numbered in accordance with Item 601 of Regulation S-K).
Exhibit No. Description
3.1 (1)
Articles of Restatement of Global Net Lease, Inc., effective February 24, 2021.
3.2 (2)
Amended and Restated Bylaws of Global Net Lease, Inc.
3.3 (3)
Amendment to Amended and Restated Bylaws of Global Net Lease, Inc.
4.1 (1)
Amendment to Rights Agreement, dated February 26, 2021, between Global Net Lease, Inc. and American Stock Transfer and Trust, LLC, as Rights Agent.
10.1 *
Form of Restricted Stock Unit Award Agreement
10.2 (4)
Amendment No. 4, dated as of March 19, 2021, to Equity Distribution Agreement, dated February 28, 2019, by and among Global Net Lease, Inc., Global Net Lease Operating Partnership, L.P., Capital One Securities, Inc., Mizuho Securities USA LLC, B. Riley Securities, Inc., KeyBanc Capital Markets Inc., BMO Capital Markets Corp., BBVA Securities Inc., SMBC Nikko Securities America, Inc. Stifel, Nicolaus & Company, Incorporated, Ladenburg Thalmann & Co. Inc. and Barclays Capital Inc.
10.3 (5)
2021 Omnibus Incentive Compensation Plan of Global Net Lease, Inc.
10.4 (6)
2021 Advisor Omnibus Incentive Compensation Plan of Global Net Lease, Inc.
10.5 *
Fourth Amendment, dated as of May 6, 2021, to the Fourth Amended And Restated Advisory Agreement, dated as of June 2, 2015, by and among Global Net Lease, Inc., Global Net Lease Operating Partnership, L.P., and Global Net Lease Advisors, LLC.
31.1 *
 
Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *
 
Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 *
 
Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH *
Inline XBRL Taxonomy Extension Schema Document.
101.CAL *
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF *
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB *
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE *
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 *
Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
_________
*Filed herewith
(1) Filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 26, 2021.
(2) Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on June 3, 2015.
(3) Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on April 9, 2020.
(4) Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on March 19, 2021.
(5) Filed as Annex A to the Company’s definitive proxy statement on Schedule 14A filed with the SEC on February 26, 2021.
(6) Filed as Annex B to the Company’s definitive proxy statement on Schedule 14A filed with the SEC on February 26, 2021.



61

EXHIBIT 10.1
RESTRICTED STOCK UNIT AWARD AGREEMENT
PURSUANT TO THE
2021 OMNIBUS INCENTIVE COMPENSATION PLAN
OF
GLOBAL NET LEASE, INC.
THIS RESTRICTED STOCK UNIT AGREEMENT (this “Agreement”) is made and entered into effective as of [______] (the “Grant Date”), by and between Global Net Lease, Inc., a Maryland corporation with its principal office at 650 Fifth Avenue, 30th Floor, New York, New York 10019 (the “Company”), and [_________] (the “Participant”).
Terms and Conditions
The Participant is hereby granted as of the Grant Date, pursuant to the 2021 Omnibus Incentive Compensation Plan of Global Net Lease, Inc. (as may be amended and/or restated from time to time, the “Plan”), the number of Restricted Stock Units in respect of the Company’s Shares set forth in Section 1 below. Except as otherwise indicated, any capitalized term used but not defined herein shall have the meaning ascribed to such term in the Plan. A copy of the Plan and the prospectus with regard to the Shares under an effective registration statement on Form S-8 have been delivered, or made available, to the Participant. By signing and returning this Agreement, the Participant acknowledges having received and read a copy of the Plan and the prospectus and agrees to comply with the Plan, this Agreement and all applicable laws and regulations.
Accordingly, the parties hereto agree as follows:
1.Grant of RSUs. Subject in all respects to the terms, conditions and restrictions set forth herein and in the Plan, effective as of the Grant Date, the Company hereby grants to the Participant an award consisting of [__] Restricted Stock Units (the “RSUs” and such grant, collectively, the “Award”). The RSUs are subject to certain vesting restrictions set forth in Section 2 hereof and, to the extent vested, shall be settled in Shares pursuant to Section 4 hereof.
2.Vesting. Subject to the terms of the Plan and this Agreement, the Award shall vest as follows:
(a)the RSUs subject to the Award shall vest in substantially equal installments of one-third (1/3) of the RSUs on each of (i) the first anniversary of [•]1 (the “Vesting Date”), (ii) the second anniversary of the Vesting Date and (iii) the third anniversary of the Vesting Date; provided, in each case, that the Participant has not incurred a termination of the Participant’s role as a Director prior to such date.
(b)One hundred percent (100%) of any unvested portion of the Award shall automatically vest upon the occurrence of an Acceleration Event (as defined below). For purposes of this Agreement, an “Acceleration Event” shall mean the first to occur of any of the
11 The date of the applicable annual meeting of stockholders



following: (i) a Change of Control (provided that the Participant has not incurred a termination of the Participant’s role as a Director prior to the occurrence of such Change of Control); or (ii) the Participant incurs an Acceleration Termination (as such term is defined in the following sentence). For purposes of this Agreement, (A) an “Acceleration Termination” shall mean a termination of the Participant’s role as a Director other than by the Company for Cause (as defined below) or as a result of the Participant’s death or Disability (as defined below); (B) “Cause” shall mean (x) the Participant’s willful misconduct or gross negligence in the performance of the Participant’s duties as a Director that is not cured by the Participant within thirty (30) days after the Participant’s receipt of written notice from the Company or (y) the Participant’s conviction of, or plea of guilty or nolo contendere to, a crime relating to the Company or any Affiliate thereof or any felony; and (C) “Disability” means that the Participant has experienced a “permanent and total disability” within the meaning of Section 22(e)(3) of the Code, without regard to the last sentence thereof.
(c)If the Participant incurs a termination of the Participant’s role as a Director (i) as a result of the Participant’s voluntary resignation or (ii) as a result of the Participant’s failure to be re-elected to the Board following the Participant’s nomination by the Board for re-election, in either case, other than at a time when circumstances constituting Cause exist, then any then-unvested portion of the Award that is due to vest in the calendar year in which the Participant voluntarily resigns or fails to be re-elected to the Board, as applicable, shall automatically vest on the date of the Participant’s voluntary termination as a Director or the date of such election in which the Participant is not re-elected, as applicable. Any unvested portion of the Award due to vest in calendar years subsequent to the year in which the Participant voluntarily resigns or fails to be re-elected to the Board, as applicable, shall be forfeited in accordance with Section 3 below.
(d)There shall be no proportionate or partial vesting in the periods prior to the applicable vesting dates.
3.Forfeiture. Except as otherwise provided above, if a Participant incurs a termination of the Participant’s role as a Director for any reason, the Participant shall automatically forfeit any unvested portion of the Award as of the date of such termination for no consideration.
4.Settlement. Subject to the terms of this Agreement and the Plan, the Participant shall receive one Share with respect to each vested RSU subject to the Award within thirty (30) days of the date on which such RSU becomes vested.
5.Dividend Equivalent Amounts. If the Company pays dividends on Shares after the Grant Date, but prior to settlement of the RSUs, the Company shall credit any such dividends to an RSU dividend book entry account for the benefit of the Participant with respect to each RSU held by the Participant, and the Participant’s right to receive any such dividend shall be subject to the same restrictions as the RSU to which the dividend relates and shall be paid to the Participant at the same time the Participant receives the settlement of the Shares under the RSU in accordance with Section 4. Unless otherwise determined by the Committee, cash dividends shall not be reinvested (or deemed reinvested) in Shares, and shall not bear interest. Dividend

122433450v6

equivalent rights and any amounts that may become distributable in respect thereof shall be treated separately from the RSUs and the rights arising in connection therewith for purposes of the designation of time and form of payments required by Code Section 409A.
6.No Rights as a Holder of Shares. The Participant shall have no rights as a stockholder with respect to any Shares relating to RSUs covered by the Award unless and until the Participant has become the holder of record of such Shares, and no adjustments shall be made for dividends (whether in cash, in kind or other property), distributions or other rights in respect of any such Shares, except as otherwise specifically provided for in the Plan or this Agreement.
7.Taxes. The Participant acknowledges that the Participant shall be solely responsible for all applicable federal, state, local or other taxes with respect to any Shares delivered or RSUs granted to the Participant under this Agreement. Notwithstanding the foregoing, if at any time the Company is required by law to withhold any such taxes, then (a) no later than the date on which such taxes become due in respect of the RSUs, the Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding payment of, any federal, state or local or other taxes of any kind required by law to be withheld with respect to any RSUs; and (b) the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Participant any federal, state or local or other taxes of any kind required by law to be withheld with respect to any RSUs, including that the Company may, but shall not be required to, sell a number of Shares otherwise issuable under this Agreement in respect of the RSUs sufficient to cover applicable withholding taxes.
8.No Obligation to Continue Directorship. Neither the execution of this Agreement nor the award of the RSUs hereunder constitute an agreement by the Company to continue to engage the Participant as a Director during the entire, or any portion of, the term of this Agreement, including but not limited to any period during which any RSUs are outstanding.
9.Section 409A. Subject to and without limitation on Section 18 of the Plan, it is intended that the RSUs comply with or be exempt from Code Section 409A, and this Agreement shall be construed and interpreted in accordance with such intent. In no event whatsoever will Company or any of its Affiliates, directors, officers, employees, consultants, agents or advisors be liable for any tax, interest or penalties that may be imposed on the Participant under Code Section 409A or any damages for failing to comply with Code Section 409A. A termination of the Participant’s role as a Director shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to Code Section 409A upon or following a termination of service unless such termination is also a "separation from service" within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of the Participant’s role as a Director” or like terms shall mean “separation from service.” If the Participant is a “specified employee” upon his or her “separation from service” (within the meaning of such terms in Code Section 409A under such definitions and procedures as established by the Company in accordance with Code Section 409A), any portion of a payment, settlement, or other distribution made upon such a “separation from service” that would cause the acceleration of, or an addition to, any taxes pursuant to Code Section 409A will not commence or be paid until a

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date that is six (6) months and one (1) day following the applicable “separation from service.” Any payments, settlements, or other distributions that are delayed pursuant to this Section 9 following the applicable “separation from service” shall be accumulated and paid to the Participant in a lump sum without interest on the first business day immediately following the required delay period. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of Company.
10.Miscellaneous.
(a)This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, personal legal representatives, successors, trustees, administrators, distributees, devisees and legatees. The Company may assign to, and require, any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree in writing to perform this Agreement.
(b)The Participant shall not sell, transfer, pledge, hypothecate, assign or otherwise dispose of the RSUs or any rights or interest therein, including without limitation any rights under this Agreement or any Shares issuable in respect of the RSUs prior to settlement under Section 4 (to the extent applicable), except as permitted in the Plan or this Agreement. Any attempted sale, transfer, pledge, hypothecation, assignment or other disposition of the RSUs or any Shares issuable in respect of any RSUs prior to settlement under Section 4 (to the extent applicable), in violation of the Plan or this Agreement shall be void and of no effect and the Company shall have the right to disregard the same on its books and records and to issue “stop transfer” instructions to its transfer agent.
(c)This award of RSUs shall not affect in any way the right or power of the Board or stockholders of the Company to make or authorize an adjustment, recapitalization or other change in the capital structure or the business of the Company, any merger or consolidation of the Company or its subsidiaries, any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the RSUs, the dissolution or liquidation of the Company, any sale or transfer of all or part of its assets or business or any other corporate act or proceeding.
(d)The Participant acknowledges and agrees that the RSUs and any Shares issued or amounts paid upon settlement thereof (as applicable) shall be subject to the terms and provisions of any “clawback” or recoupment policy that may be adopted by the Company from time to time or as may be required by any applicable law (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act and rules and regulations thereunder).
(e)The Participant agrees that the award of the RSUs hereunder is special incentive compensation and that it and any dividends paid thereon (even if treated as compensation for tax purposes) will not be taken into account as “salary” or “compensation” or “bonus” in determining the amount of any payment under any pension, retirement or profit-

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sharing plan of the Company or any life insurance, disability or other benefit plan of the Company.
(f)No modification or waiver of any of the provisions of this Agreement shall be effective unless in writing and signed by the party against whom it is sought to be enforced.
(g)This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one contract. Execution and delivery of this Agreement by facsimile or other electronic signature is legal, valid and binding for all purposes.
(h)The failure of any party hereto at any time to require performance by another party of any provision of this Agreement shall not affect the right of such party to require performance of that provision, and any waiver by any party of any breach of any provision of this Agreement shall not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right under this Agreement.
(i)The headings of the sections of this Agreement have been inserted for convenience of reference only and shall in no way restrict or modify any of the terms or provisions hereof.
(j)All notices, consents, requests, approvals, instructions and other communications provided for herein shall be in writing and validly given or made when delivered, or on the second succeeding business day after being mailed by registered or certified mail, whichever is earlier, to the persons entitled or required to receive the same. Notices to the Company shall be addressed to Global Net Lease, Inc. at 650 Fifth Avenue, 30th Floor, New York, New York 10019, Attn: Chief Financial Officer. Notice to the Participant shall be addressed to the address on file for the Participant with the Company.
(k)The Participant agrees, to the fullest extent permitted by applicable law, in lieu of receiving documents in paper format, to accept electronic delivery of any documents that the Company or any of its Affiliates may deliver in connection with this grant of RSUs and any other grants offered by the Company, including, without limitation, prospectuses, grant notifications, account statements, annual or quarterly reports, and other communications. The Participant further agrees that electronic delivery of a document may be made via the Company’s email system or by reference to a location on the Company’s intranet or website or the online brokerage account system.
(l)This Agreement shall be construed, interpreted and governed and the legal relationships of the parties determined in accordance with the internal laws of the State of Maryland without reference to rules relating to conflicts of law.
11.Provisions of Plan Control. This Agreement is subject to all the terms, conditions and provisions of the Plan, including, without limitation, the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted thereunder and as may be in effect from time to time. The Plan is incorporated herein by reference. A copy of the Plan has been delivered to the Participant. If and to the extent that this

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Agreement conflicts or is inconsistent with the terms, conditions and provisions of the Plan, the Plan shall control, and this Agreement shall be deemed to be modified accordingly. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof (other than any other documents expressly contemplated herein or in the Plan) and supersedes any prior agreements between the Company and the Participant.
[signature page(s) follow]



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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

GLOBAL NET LEASE, INC.

By:     ______________________________

Name:     ______________________________

Title:     ______________________________



Participant


_______________________________
(Signature)








122433450v6
EXHIBIT 10.5
EXECUTION COPY

FOURTH AMENDMENT TO
FOURTH AMENDED AND RESTATED ADVISORY AGREEMENT

    This FOURTH AMENDMENT TO THE FOURTH AMENDED AND RESTATED ADVISORY AGREEMENT (this “Amendment”) is entered into as of this 6th day of May, 2021 and shall become effective as of January 1, 2021, by and among Global Net Lease, Inc., a Maryland corporation (the “Company”), Global Net Lease Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”) and Global Net Lease Advisors, LLC, a Delaware limited liability company (the “Advisor”).

RECITALS

    WHEREAS, the Company, the Operating Partnership and the Advisor previously entered into that certain Fourth Amended and Restated Advisory Agreement, dated as of June 2, 2015, as amended by (i) the First Amendment thereto dated as of August 14, 2018, (ii) the Second Amendment thereto dated as of November 6, 2018, and (iii) the Third Amendment thereto dated as of May 6, 2020 (collectively, the “Advisory Agreement”);

WHEREAS, the Company, the Operating Partnership, and the Advisor desire to make certain amendments to the Advisory Agreement to change (i) the timing of the calculation and reconciliation of the Base Management Fee Limit and Advisory Compensation Limit (each as defined in the Advisory Agreement), (ii) the timing of the Incentive Compensation Period (as defined in the Advisory Agreement), in order to align the periods with the Company’s fiscal year and the new Incentive Compensation Period, and (iii) the timing of the yearly Annual Performance Standards process;

WHEREAS, in light of the unprecedented market disruption resulting from the COVID-19 pandemic and the issuance of additional equity in the Company, the Company, the Operating Partnership and the Advisor acknowledge that the existing Incentive Compensation hurdles may not be attainable in the short term;

WHEREAS, in order to provide the Advisor an appropriate incentive as the Company works to continue to minimize the adverse impact on its business resulting from the COVID-19 pandemic and to account for the additional equity that has been issued by the Company, the Conflicts Committee of the Board of Directors of the Company desires to adopt adjusted Incentive Compensation hurdles for the annual period beginning on January 1, 2021 and ending December 31, 2021; and

WHEREAS, the Company, the Operating Partnership and the Advisor desire to amend and restate Section 6 of the Advisory Agreement so that the amendments effectuated by this Amendment and past amendments are more clearly organized and easier to follow.

AGREEMENT

        Page 1

    NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1.Resetting of the Annual “Incentive Compensation Period” from July 1-June 30 to January 1-December 31. Section 1 is amended by deleting the definition of Incentive Compensation Period in its entirety and replaced as follows:

““Incentive Compensation Period” means the annual period beginning on January 1 and ending on December 31.”

2.Resetting Calculation of “Base Management Fee Limit” on Calendar Year. Section 1 is amended by deleting the definition of Base Management Fee Limit in its entirety and replaced as follows:

    ““Base Management Fee Limit” means an amount, determined as of each December 31 for the preceding year, equal to (i) the AUM for the preceding year multiplied by (ii) (such multiplying factor, the “Factor”):

(A)    If such AUM is equal to or less than Three Billion Dollars ($3,000,000,000), 0.75%;
(B)    If such AUM is greater than Three Billion Dollars ($3,000,000,000) but is less than Fourteen Billion Six Hundred Sixty Million Dollars ($14,660,000,000), the Variable Base Management Fee Cap Percentage for such preceding year;
(C)    If such AUM is equal to or exceeds Fourteen Billion Six Hundred Sixty Million Dollars ($14,660,000,000), 0.40%;
provided, however, that, notwithstanding anything in Part (B) and Part (C) to the contrary, the Factor shall not be less than 0.50% unless a majority of the Independent Directors has then determined (based upon market fee comparables of advisory contracts and market comparables of total general and administrative expense ratios and advisory fee ratios then available to them and determined in accordance with Section 6(c)(vi) (such comparables, the “Market Comparables”)) that a Factor equal to 0.50% is not consistent in all material respects with the Market Comparables, in which case the Independent Directors shall set the Factor in accordance with Section 6(c)(vi), which shall be no less than the Factor determined in accordance with this definition but for this proviso and which shall be no greater than 0.50%.”

3.Resetting Calculation of “Advisory Compensation Limit” on Calendar Year. Section 1 is amended by deleting the definition of Advisory Compensation Limit in its entirety and replaced as follows:

    ““Advisory Compensation Limit” means an amount, determined as of each December 31 for the preceding year, equal to (i) the AUM for the preceding year multiplied by (ii):
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(A)    If such AUM is less than or equal to Five Billion Dollars ($5,000,000,000), 1.25%;
(B)    If such AUM is greater than Five Billion Dollars ($5,000,000,000) but less than Fifteen Billion Dollars ($15,000,000,000), the Variable Advisory Compensation Fee Cap Percentage for such preceding year; or
(C)    If such AUM is equal to or exceeds Fifteen Billion Dollars ($15,000,000,000), 0.95%.”

4.Incentive Compensation Periods. Notwithstanding anything to the contrary contained in the Advisory Agreement and herein:

i.The April 1, 2020-December 31, 2020 COVID-19 Response Incentive Compensation Period shall not be extended.

ii.Section 4(c) of the Third Amendment is deleted in its entirety and replaced with the following: “For the period beginning on January 1, 2021 and ending on December 31, 2021, there shall be a twelve-month incentive compensation period (the “2021 Incentive Compensation Period”).”

iii.Section 4(d) of the Third Amendment is deleted in its entirety and replaced with the following: “Following the 2021 Incentive Compensation Period, “Incentive Compensation Period” shall mean the annual period beginning on January 1 and ending on December 31 of the same year.”

5.Definition of Incentive Fee Lower Hurdle and Incentive Fee Upper Hurdle. The definitions of “Incentive Fee Lower Hurdle” and “Incentive Fee Upper Hurdle” are hereby deleted in their entirety and replaced as follows:

““Incentive Fee Lower Hurdle” means:


(i)for the 2021 Incentive Compensation Period beginning January 1, 2021 and ending December 31, 2021, $1.95 per share in the aggregate and $0.4875 per share per quarter;

(ii)for the Incentive Compensation Period beginning January 1, 2022 and ending December 31, 2022, $2.25 per share in the aggregate and $0.5625 per share per quarter; and

(iii)for each Incentive Compensation Period thereafter, the prior year’s Incentive Fee Lower Hurdle, as the same may be increased each year by the Incentive Fee Escalator in accordance with Section 6(e)(iii).
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“Incentive Fee Upper Hurdle” means:


(i)for the 2021 Incentive Compensation Period beginning January 1, 2021 and ending December 31, 2021, $2.62 per share in the aggregate and $0.655 per share per quarter;

(ii)for the Incentive Compensation Period beginning January 1, 2022 and ending December 31, 2022, $2.92 per share in the aggregate and $0.73 per share per quarter; and

(iii)for each Incentive Compensation Period thereafter, the prior year’s Incentive Fee Upper Hurdle, as the same may be increased each year by the Incentive Fee Escalator in accordance with Section 6(e)(iii).”

6.Amendment and Restatement of Section 6. Section 6 of the Advisory Agreement is hereby amended and restated in its entirety as follows:

“(a) For the services rendered under this Agreement, the Company shall pay the Base Management Fee and the Incentive Compensation to the Advisor.

(b) The Parties acknowledge that the Base Management Fee is intended to compensate the Advisor for certain expenses not otherwise reimbursable under Section 7(b) in order for the Advisor to provide the Company the services to be rendered under this Agreement.

(c) The Base Management Fee shall be calculated and paid as follows:

(i) The Company shall pay the Base Management Fee to the Advisor or its permitted assignees as compensation for services rendered in connection with this Agreement. The Base Management Fee shall be payable monthly, in advance in cash, in an amount equal to one-twelfth of the Base Management Fee. The Advisor shall calculate each monthly installment of the Base Management Fee, and deliver such calculation to the Company within ten (10) days following the last day of each calendar month for which a Base Management Fee is payable. The Company shall pay the Advisor each installment of the Base Management Fee within five (5) Business Days after the delivery to the Company of such computations.

(ii) Reduction in Base Management Fee. Upon a Portfolio Divestiture Event, the amount of the Variable Base Management Fee will be reduced by an amount equal to (A) the Divestiture Distributions multiplied by (B) 1.25%.

(iii) Minimum Base Management Fee. For the avoidance of doubt, during the Term, in no event shall the Base Management Fee paid to the Advisor in any calendar year be less than the Minimum Base Management Fee. For the avoidance of doubt, in the
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event this Agreement is terminated in accordance with Section 10 or Section 13, prior to December 31 of such year, the Advisor shall only be entitled to a portion of the Minimum Base Management Fee pro-rated for the portion of the year elapsed since January 1 of such year.

(iv) Limit on Base Management Fee. In no event shall the Base Management Fee paid to the Advisor over any calendar year exceed the Base Management Fee Limit.

(v) Reconciliation. No later than February 1 of each year, the Advisor shall calculate and provide to the Company a reconciliation showing the difference, if any, between the amount of the Base Management Fee actually paid to the Advisor in the preceding year and the amount which should have been paid pursuant to this Agreement (the “Annual BMF Calculation”). If the Annual BMF Calculation (as finally determined in accordance with Section 6(h)) shows that the Company has paid more than required under this Section 6(c) (a “Base Fee Excess”), the Advisor shall return and repay to the Company such Base Fee Excess in cash within fifteen (15) Business Days after the final determination of the Annual BMF Calculation. If the Annual BMF Calculation shows that the Company has not paid the amount required under this Section 6(c) (a “Base Fee Deficiency”) the Company shall pay the Advisor the portion of the Base Fee Deficiency that the Board does not dispute within five (5) Business Days after the receipt of the Annual BMF Calculation, and the balance of the Base Fee Deficiency shall be paid within five (5) Business Days after such amount has been finally determined in accordance with Section 6(h).

(vi) Base Management Fee Limit. No later than February 1 of each year (each, an “AUM Test Year”) in which AUM for the most recently completed AUM Test Year is equal to or exceeds Ten Billion Dollars ($10,000,000,000), a majority of the Independent Directors, in their good faith reasonable judgment, after consultation with the Advisor and the Company’s management, shall determine the comparables comprising the Market Comparables and the Factors (determined in accordance with the definition of “Base Management Fee Limit”) to be used for the following period. Notwithstanding anything contained herein to the contrary, in the event that then existing Market Comparables are insufficient, in themselves, to determine the Factors, the Independent Directors, in their good faith reasonable judgment, after consultation with the Advisor and the Company’s management shall make such determination based upon information then available.

(d) The Incentive Compensation shall be based on the Core AFFO for the entire applicable Incentive Compensation Period but shall be paid in quarterly installments based on the Core AFFO generated for the applicable quarter just ended, subject to a final year-end adjustment as set forth in Section 6(e)(vi), as the Board (including a majority of the Independent directors) shall reasonably determine. The Advisor shall compute each installment of the Incentive Compensation within forty-five (45) days after the end of the fiscal quarter with respect to which such installment is payable. A copy of the computations made by the Advisor to calculate such installment shall thereafter promptly be delivered to the Board and, upon such
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delivery, payment of such installment of the Incentive Compensation shown therein shall be due and payable no later than the date which is fifteen (15) Business Days after the date of delivery to the Board of such computations. Notwithstanding anything herein to the contrary, if the Company fails to pay dividends previously authorized by the Board (in good faith and in accordance with applicable law) and as has been announced to the public due to a legal prohibition or primarily as a result of an action or inaction of the Advisor, the Company shall have no obligation to pay the Incentive Compensation to the Advisor for so long as the Company remains unable to pay dividends; provided, however, that for the avoidance of doubt, the Incentive Compensation due to the Advisor during such period shall be paid to the Advisor promptly, and in any event within five (5) business days, following the date on which the Company is no longer prohibited from paying such dividends.

(e) Each installment of the Incentive Compensation shall be payable as follows:

(i) fifty percent (50%) of the Incentive Compensation will be payable in Restricted Shares (each a “Restricted Share Payment”); provided, however, the percentage of the Incentive Compensation payable in Restricted Shares is subject to the following: (1) the ownership of such shares by the Advisor does not violate the limit on ownership of Common Stock set forth in the Company’s Governing Instruments, after giving effect to any waiver from such limit that the Board may grant (in its sole absolute discretion) to the Advisor in the future, (2) the Company’s issuance of such shares to the Advisor complies with all applicable restrictions, registration requirements or exemptions therefrom under U.S. federal securities laws and the rules of The New York Stock Exchange and (3) although the Restricted Shares will be considered fully vested when issued, those Restricted Shares paid in each Restricted Share Payment shall be subject to a lockup on resale that will be released in equal one third installments on each anniversary of the applicable Restricted Share Payment, and, to the extent any Restricted Shares are required to be forfeited pursuant to Section 6(e)(vi), the forfeiture will occur automatically without any further action required by the Advisor or the Company and the number of Restricted Shares subject to the lockup on resale that will be released in equal one third installments on each anniversary of the applicable Restricted Share Payment will be reduced pro rata to reflect the forfeiture. On each issuance, the Advisor will enter into a lockup letter with the Company in substantially the form attached hereto as Exhibit A. The Advisor shall be entitled to receive all dividends and other distributions paid in respect of all such Restricted Shares whether or not such Restricted Shares are then subject to the restriction contained in the lockup letter evidencing all of the requirements of this Section 6(e)(i); and

(ii) the balance of the Incentive Compensation not paid in Restricted Shares will be payable in cash.

(iii) Commencing with the Incentive Compensation Period on January 1, 2023, and no later than December 31st immediately before that Incentive Compensation Period and each Incentive Compensation Period thereafter, a majority of the Independent Directors, in their good faith reasonable judgment, after consultation with the Advisor
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and the Company’s management, shall set the Incentive Fee Escalator for each of the Incentive Fee Hurdles and make the adjusted Incentive Fee Hurdles known to the Advisor by delivery of written notice of the same. The Incentive Fee Hurdles as so increased by an Incentive Fee Escalator shall take effect at the start of the next Incentive Compensation Period and shall remain in effect until again so increased. For the avoidance of doubt, the Incentive Fee Hurdles shall not be increased by the Incentive Fee Escalator until the start of the fiscal quarter of the Company beginning on January 1, 2023.

(iv) In the event that any of the Company’s financial statements are restated, which restated financial statement or statements indicate that the Incentive Compensation paid by the Company was an Overpayment, the Advisor shall pay to the Company an amount of cash equal to the Overpayment within ten (10) Business days after the Advisor and the Company reach an agreement on the amount of such Overpayment, which agreement must be reached within thirty (30) Business Days of such restatement.

(v) The Advisor, in respect to any Common Stock now or hereafter owned by it, shall not vote or consent in its capacity as a Stockholder on matters, resolutions, actions or proposals submitted to the Stockholders regarding (A) the removal of the Advisor or any of its Affiliates as the Advisor or (B) any transaction between the Company and the Advisor or any Affiliate of the Advisor.

(vi) Reconciliation. No later than March 31st of each calendar year during the term hereof (the “Outside Reconciliation Date”), the Advisor shall calculate and provide to the Company a reconciliation showing the difference, if any, between the amount of the Incentive Compensation paid to the Advisor on a quarterly basis in the immediately preceding Incentive Compensation Period and the amount of Incentive Compensation due, if any, based on the aggregate Core AFFO for the applicable period (the “Annual Incentive Calculation”). If, subject to dispute as set forth in Section 6(h), the Annual Incentive Calculation shows that the Company has paid more than required under this Section 6(e) (the “Excess Incentive Compensation”), the Advisor shall within five (5) Business Days after delivery of the Annual Incentive Calculation to the Company, repay the Company all Excess Incentive Compensation by forfeiting Restricted Shares having a value equal to 50% of the Excess Incentive Compensation (the “Forfeited Shares”) and by repaying the remaining 50% of Excess Incentive Compensation in cash. In addition, the Advisor shall repay the Company all dividends or other distributions paid before the date of forfeiture. For these purposes the Restricted Shares that are subject to forfeiture shall have the same value as the value accorded the Restricted Shares at the time of issuance. If, subject to dispute as set forth in Section 6(h), the Annual Incentive Calculation shows that the Company has not paid the full amount required under this Section 6(e) (an “Incentive Compensation Deficiency”) the Company shall pay the Advisor the Incentive Compensation Deficiency, if any, within fifteen (15) days of receipt of the Annual Incentive Calculation.

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(vii)    Notwithstanding anything contained herein to the contrary, on May [__], 2026 and on each five (5) year anniversary thereafter, the Board shall (A) consider any request by the Advisor (which request may be made solely by the Advisor in its discretion) to reduce the then current Incentive Fee Hurdles and (B) make a determination (based on all relevant facts and circumstances, including the best interests of the Company’s stockholders, the achievability of such Incentive Fee Hurdles, and any changes to the Investment Guidelines or the business plan of the Company) as to the amount by which such Incentive Fee Hurdles may be reduced.

(f) The number of Restricted Shares payable as the Incentive Compensation to be issued to the Advisor will be equal to the dollar amount of the portion of the then due Incentive Compensation payable in shares of Restricted Shares determined as follows:

(i) if the Common Stock is traded on a securities exchange, the value shall be deemed to be the average of the closing prices of the Common Stock on such exchange on the five (5) Business Days prior to the date on which the monthly installment of the Incentive Compensation is paid;

(ii) if the Common Stock is not traded on a securities exchange but is actively traded over-the-counter, the value shall be deemed to be the average of the closing bids or sales prices, as applicable, on the five (5) Business Days prior to the date on which the quarterly installment of the Incentive Compensation is paid; and

(iii) if the Common Stock is neither traded on a securities exchange nor actively traded over-the-counter, the value shall be the fair market value thereof, as reasonably determined in good faith by the Board (including a majority of the Independent Directors) of the Company.

(g) If at any time the Advisor shall, in connection with a determination of the value of the Common Stock made by the Board pursuant to Section 6(f)(iii), (i) dispute such determination in good faith by more than five percent (5%), and (ii) such dispute cannot be resolved between the Independent Directors and the Advisor within ten (10) Business Days after the Advisor provides written notice to the Company of such dispute (the “Valuation Notice”), then the matter shall be resolved by an independent appraiser of recognized standing selected jointly by the Independent Directors and the Advisor within not more than twenty (20) days after the Valuation Notice. In the event the Independent Directors and the Advisor cannot agree with respect to such selection within the aforesaid twenty (20) day time-frame, the Independent Directors shall select one such independent appraiser and the Advisor shall select one independent appraiser within five (5) Business Days after the expiration of the twenty (20) day period, with one additional such appraiser (the “Last Appraiser”) to be selected by the appraisers so designated within five (5) Business Days after their selection. Any valuation decision made by the Last Appraiser shall be deemed final and binding upon the Board and the Advisor and shall be delivered to the Advisor and the Board within not more than fifteen (15) days after the selection of the Last Appraiser. The expenses of the appraisal shall be paid by the Party with the
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estimate which deviated the furthest from the final valuation decision made by the independent appraisers.

(h) In the event the a majority of the Independent Directors makes a determination that disputes the Advisor’s calculation(s) as to (i) the Base Management Fee (including, for the avoidance of doubt, the Base Management Fee Limit and the Advisory Compensation Limit), (ii) the Incentive Compensation (including, for the avoidance of doubt, the Advisory Compensation Limit), or (iii) any expenses for which the Advisor claims reimbursement under the terms of this Agreement (including, for the avoidance of doubt, the Excess Amount), prior to payment or reimbursement of any disputed fees, costs or expenses, the Company will, within ten (10) days of such determination, provide written notice (a “Payment Dispute Notice”) to the Advisor disputing the amount set forth in the relevant computation or calculation submitted to it by the Advisor for payment (the “Payment Dispute”), in which case, the Company and the Advisor shall negotiate in good faith to reach an agreement on such Payment Dispute. If the Parties are unable to reach agreement on the Payment Dispute within thirty (30) calendar days of the date of delivery of the relevant payment Dispute Notice or such date as the Parties otherwise agree (the “Negotiation Period”) then such Payment Dispute shall be determined by agreement between the independent certified public accounting firms (the “Accountants”) of each of the Advisor and the Company who will have ten (10) days from the end of the Negotiation Period (the “Accountant Review Period”) to agree as to settlement of the Payment Dispute. If the Accountants cannot agree to settlement of the Payment Dispute, they shall agree to a third-party accounting firm (the “Neutral”) within two (2) days of the end of the Accountant Review Period, and the Neutral shall finally determine the payment no later than fifteen (15) after its selection by the Accountants. Each Party shall pay the cost and fees of its own Accountant and the parties will split the cost and fees of the Neutral.

(i) If an Overpayment is agreed to have occurred by any of (i) the Parties, (ii) the Accountants, or (iii), the Neutral, the Advisor shall pay the Overpayment to Company within thirty (30) days of such determination. The character of any payment made pursuant to this clause (i) shall be of the same form and composition as the Overpayment and, in the case of payments in the form of Restrictive Shares, shall be of the same value of such Restrictive Shares at the time of issuance and adjusted in respect of any dividends or other distributions received with respect to such Restrictive Shares to allow recoupment of the same.

(ii) If any of (i) the Parties, (ii) the Accountants, or (iii) the Neutral agree that the Company has failed to pay the Advisor the amounts required under this Agreement, the Company shall pay that amount to the Advisor within thirty (30) days of such determination.

(i) Fee on Gain from Sale of Investments. In connection with the Sale of any Investment, subject to the terms of this Section 6(i), the Company will pay to the Advisor a fee in connection with net Gain recognized by the Company in connection such sale (the “Gain Fee”). The Gain Fee shall be calculated at the end of each month and paid, to the extent due, with the
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next installment of the Base Management Fee. The Gain Fee will be calculated by aggregating all of the Gains and Losses for the applicable month.

(i) If, over the course of a month, the Gains exceed the Losses (a “Net Monthly Gain”), the Net Monthly Gain shall be multiplied by .15 and the resulting product shall be paid by the Company to the Advisor together with the next installment of the Base Management Fee.

(ii) If, over the course of a month, Losses exceed Gains (a “Net Monthly Loss”), the Net Monthly Loss shall be carried forward to the next month, and together with any Losses resulting in such immediately succeeding month, shall be applied against future Gains until exhausted.

(iii) In no event shall the Advisor have any responsibility to pay to the Advisor in the event that there are accumulated Net Monthly Losses.


(j) Limit on Advisory Compensation. In no event shall the Advisory Compensation paid to the Advisor over any calendar year exceed the Advisory Compensation Limit. For the avoidance of doubt, the amounts due to the Advisor under Section 6(i), if any, shall not be factored in for purposes of determining whether the Advisory Compensation Limit has been met.”

7.Resetting Timing of Annual Performance Standards Process. Section 12 of the Advisory Agreement is hereby amended by the addition of the following sentence at the end of the first paragraph of such Section 12:

“Notwithstanding anything in the foregoing to the contrary, in respect to the Annual Performance Standards to be set no later than April 30, 2021, such Standards shall be set for May 1-December 31, 2021 and, thereafter, such determinations shall be made on a calendar basis for the period commencing January 1 of each year and ending December 31 each year, with such determinations being made no later than January 31 of the following year.”

8.Effect of the Advisory Agreement. Except as modified by this Amendment, all of the terms of the Advisory Agreement are hereby ratified and confirmed and shall remain in full force and effect. This Amendment shall be construed as one with the Advisory Agreement, and the Advisory Agreement shall, where context requires, be read and construed so as to incorporate this Amendment.

9.General Provisions. Except as modified herein, the terms and provisions of Section 18 of the Advisory Agreement are hereby incorporated by reference as if set forth herein in their entirety and shall apply mutatis mutandis to this Amendment.



Page 10

[Signature Page Follows]
Page 11

    IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have duly executed and delivered this Fourth Amendment to Fourth Amended and Restated Advisory Agreement as of the date first set forth above.


                        GLOBAL NET LEASE, INC.

                        By: /s/ James L. Nelson
                         Name: James L. Nelson
                         Title: CEO

GLOBAL NET LEASE OPERATING PARTNERSHIP, L.P.
By: Global Net Lease, Inc., its General Partner

                        By: /s/ James L. Nelson
                         Name: James L. Nelson
                         Title: CEO

GLOBAL NET LEASE ADVISORS, LLC

                        By: /s/ Michael R. Anderson
                         Name: Michael R. Anderson
                         Title: Authorized Signatory


[Signature Page to the Fourth Amendment to the
Fourth Amended and Restated Advisory Agreement]

Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED


I, James L. Nelson, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Global Net Lease, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated the 7th day of May, 2021 /s/ James L. Nelson
James L. Nelson
Chief Executive Officer and President
(Principal Executive Officer)




Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Christopher J. Masterson, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Global Net Lease, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated the 7th day of May, 2021 /s/ Christoper J. Masterson
Christopher J. Masterson
Chief Financial Officer, Treasurer and Secretary
(Principal Financial Officer and Principal Accounting Officer)



Exhibit 32
SECTION 1350 CERTIFICATIONS
This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
The undersigned, who are the Chief Executive Officer and Chief Financial Officer of Global Net Lease, Inc. (the “Company”), each hereby certify as follows:
The quarterly report on Form 10-Q of the Company, which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in this quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated the 7th day of May, 2021
/s/ James L. Nelson
James L. Nelson
Chief Executive Officer and President
(Principal Executive Officer)
/s/ Christopher J. Masterson
Christopher J. Masterson
Chief Financial Officer, Treasurer and Secretary
(Principal Financial Officer and Principal Accounting Officer)