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Blackwells Issues Letter to Stockholders Urging End to AR Global’s Management of Two REITs

Blackwells Capital LLC, an affiliate of Blackwells Onshore, issued a letter to fellow shareholders regarding the “urgent need” for boardroom changes at The Necessity Retail REIT Inc. (NASDAQ: RTL) and Global Net Lease Inc. (NYSE: GNL), two formerly non-traded REITs externally managed by AR Global (the successor company to American Realty Capital).

As The DI Wire previously reported, Blackwells filed a lawsuit against AR Global in December 2022 which was followed by a countersuit. In October 2022, Blackwells originally charged AR Global with “corporate piracy of the highest order” in regards to their management of the formerly non-traded REITs after GNL rejected “a purported notice” from the stockholder that stated its intention to nominate two individuals to the company’s board of directors and to have six proposals considered at the company’s 2023 annual meeting of stockholders. Blackwells most recently launched a website, StopARGlobal.com.

The letters provide a list of reasons from Jason Aintabi, founder and chief investment officer, as to why the change is encouraged. The letter was sent prior to the upcoming annual meeting of shareholders on May 18, 2023. Aintabi’s points from the letters are listed below.

  • RTL trades at a 66% discount to its net asset value and 62% discount to peers. This is due to the chokehold of its significantly off-market management agreement with AR Global. Since 2015, RTL has paid AR Global $498 million in fees and expenses, while RTL shareholders have suffered a 62% stock price decline representing $1.3 billion in total value destruction.
  • GNL trades at a 35% discount to its net asset value and 51% discount to peers. This is due to the chokehold of its significantly off-market management agreement with AR Global. Since 2015, GNL has paid AR Global $383 million in fees and expenses while GNL shareholders have suffered a 64% stock price decline representing $2.1 billion in total value destruction.
  • Since RTL’s initial public offering in 2018, there have been eight dilutive stock issuances at the behest of AR Global. While shareholders have had to suffer through each of these dilutive issuances, AR Global’s unchecked parade against RTL’s coffers has led to annual fees and expenses increasing three times during the same period.
  • Since GNL’s initial public offering in 2015, there have been 11 dilutive stock issuances at the behest of AR Global. While shareholders have had to suffer through each of these dilutive issuances, AR Global’s unchecked parade against GNL’s coffers has led to annual fees and expenses increased more than two times during the same period.

Aintabi also believes RTL and GNL’s board of directors and management is “profoundly conflicted.” This includes RTL’s chief executive officer, president and chairman, Michael Weil, who is the founding partner of AR Global; chief financial officer Jason Doyle who is the former chief administrative officer of another AR Global advised entity; Lisa Kabnick, the RTL board’s lead independent director; GNL’s chief executive officer and board member James L. Nelson, GNL’s chief financial officer, Chris Masterson, who is also CFO of another AR Global-managed REIT; Sue Perrotty, the GNL board’s lead independent director, and; Michael Weil, a GNL board member who also sits as chief executive officer of AR Global, the parent of GNL’s external advisor.

“Blackwells has nominated two independent and highly qualified individuals for the RTL Board, Jim Lozier and Richard O’Toole,” writes Aintabi. “Both individuals bring a wealth of real estate and fiduciary experience, along with a track record of creating value.”

Blackwells Capital was founded in 2016 by Jason Aintabi and invests in public securities, ranging property development and management to REITs and adjacent real estate activities, including financing, origination, and managing real estate backed securities, including direct mezzanine and equity investments.

As of Dec. 31, 2022, Global Net Lease Inc. owned 309 properties consisting of 39.2 million rentable square feet, which were 98.0% leased, with a weighted-average remaining lease term of 8.1 years.

As of Dec. 31, 2022, Necessity Retail REIT Inc. owned 1,044 properties, comprised of 27.9 million rentable square feet, which were 93.7% leased, including 935 single-tenant net leased commercial properties, 897 of which are retail properties, and 109 multi-tenant retail properties.

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