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The Mergers | 3 Months Ended
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Mar. 31, 2024
Business Combination and Asset Acquisition [Abstract] |
The Mergers | The Mergers On September 12, 2023 (the “Acquisition Date”), the REIT Merger (as defined below) and the Internalization Merger (as defined below) were both consummated (collectively, the “Mergers”). The REIT Merger and Internalization Merger were conditioned upon each other and accordingly are considered “related” and treated as a single transaction for accounting and reporting purposes. The REIT Merger Pursuant to the terms and conditions of the Agreement and Plan of Merger dated May 23, 2023 (the “REIT Merger Agreement”), on the Acquisition Date, RTL merged with and into Osmosis Sub I, LLC, a wholly-owned subsidiary of GNL (“REIT Merger Sub”), with REIT Merger Sub continuing as the surviving entity (the “REIT Merger”) and a wholly-owned subsidiary of GNL, followed by Osmosis Sub II, LLC, a wholly-owned subsidiary of the OP, merging with and into the RTL OP, with RTL OP continuing as the surviving entity (the “OP Merger” and collectively with the REIT Merger, the “REIT Mergers”). On the Acquisition Date, pursuant to the REIT Merger Agreement, each issued and outstanding share of RTL’s (i) Class A Common Stock, par value $0.01 per share (the “RTL Class A Common Stock”), was converted into 0.670 shares (the “Exchange Ratio”) of GNL’s Common Stock, par value $0.01 per share (“Common Stock”), (ii) 7.50% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share (“RTL Series A Preferred Stock”), was automatically converted into one share of newly created 7.50% Series D Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share (the “Series D Preferred Stock”), and (iii) 7.375% Series C Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share (“RTL Series C Preferred Stock”), was automatically converted into one share of newly created 7.375% Series E Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share (the “Series E Preferred Stock”). Also, pursuant to the REIT Merger Agreement: •The Company issued Common Stock (adjusted for the Exchange Ratio) for certain shares of restricted RTL Class A Common Stock (“RTL Restricted Shares”) (see table below for details). •The Company issued Class A Units (adjusted for the Exchange Ratio) to the previous holder of RTL Class A Units (see table below for details). The Internalization Merger Pursuant to the terms and conditions of the Agreement and Plan of Merger dated May 23, 2023 (the “Internalization Merger Agreement”) to internalize the advisory and property management functions of the combined companies, on the Acquisition Date, (i) GNL Advisor Merger Sub LLC, a wholly-owned subsidiary of the OP merged with and into the former Advisor, with the former Advisor continuing in existence; (ii) GNL PM Merger Sub LLC, a wholly-owned subsidiary of the OP merged with and into the Property Manager, with the Property Manager continuing in existence; (iii) RTL Advisor Merger Sub LLC merged with and into Necessity Retail Advisors, LLC (“RTL Advisor”), with RTL Advisor continuing in existence; and (iv) RTL PM Merger Sub LLC, a wholly-owned subsidiary of the OP merged with and into Necessity Retail Properties, LLC (“RTL Property Manager”), with RTL Property Manager continuing in existence (collectively, the “Internalization Merger”). As a result of the consummation of the Internalization Merger, the advisory agreements were terminated for both the Company and RTL and the Company assumed both of the Company’s and RTL’s property management agreements and the Company was no longer externally managed. The Company internalized these functions with its own dedicated workforce (see Note 12 — Related Party Transactions and Arrangements for additional information on the Internalization Merger). As consideration for the Internalization Merger, the Company issued 29,614,825 shares of its Common Stock valued in the aggregate at $325.0 million to AR Global and paid cash in an amount equal to $50.0 million to AR Global. The number of shares issued in respect of the Internalization Merger was valued based on the Company’s 5-day volume-weighted average price as of market close on May 11, 2023 of $10.97 per share of Common Stock. The Company registered these shares for resale under the Securities Act, pursuant to the terms and conditions (including limitations) thereof. Fair Value of Consideration Transferred The following table presents the fair value of the consideration transferred to affect the acquisition:
|  | Fair Value Calculation |  |
|  | Shares or Units |  | Price Used to Calculate Fair Value |  | Fair Value of Consideration Transferred (In thousands) |  | Consideration Type
Fair value of Common Stock issued to holders of RTL Class A Common Stock (1) |  | 93,432,946 |  |  | $ | 11.11 |  | (2) | $ | 1,038,040 |  |  | Common Stock
Fair value of Common Stock issued upon vesting of certain RTL Restricted Shares |  | 209,906 |  |  | $ | 11.11 |  | (2) | 2,332 |  |  | Common Stock
Fair value of Common Stock issued to AR Global for the Internalization Merger |  | 29,614,825 |  | (3) | $ | 11.11 |  | (2) | 329,021 |  |  | Common Stock
Fair value of Class A Units issued by the OP to holder of RTL Class A Units |  | 115,857 |  |  | $ | 11.11 |  | (2) | 1,287 |  |  | Class A Units
Fair value of GNL Series D Preferred Stock issued to holders of RTL Series A Preferred Stock (6) |  | 7,933,711 |  | (4) | $ | 19.61 |  | (4) | 155,580 |  |  | Series D Preferred Stock
Fair value of GNL Series E Preferred Stock to be issued to holders of RTL Series C Preferred Stock (6) |  | 4,595,175 |  | (5) | $ | 19.75 |  | (5) | 90,755 |  |  | Series E Preferred Stock
Total equity consideration |  |  |  |  |  | 1,617,015 |  |  |
Cash consideration paid to AR Global |  |  |  |  |  | 50,000 |  |  | Cash
Cash used to repay RTL’s credit facility at closing of the REIT Merger |  |  |  |  |  | 466,000 |  |  | Cash
Total consideration transferred |  |  |  |  |  | $ | 2,133,015 |  |  |
___________ (1)Includes RTL LTIP Units earned and converted to RTL Class A Common Stock and certain vested shares of RTL Restricted Shares, both of which occurred prior to the Acquisition Date (see Note 13 — Equity-Based Compensation). (2) Represents the closing price of GNL’s Common Stock on the Acquisition Date. (3)The considered value of Common Stock to be issued to AR Global was $325.0 million for the Internalization Merger, and the number of shares issued was valued based on the Company’s 5-day volume-weighted average price as of market close on May 11, 2023. The price used to calculate fair value represents the closing price of GNL’s Common Stock on the Acquisition Date. (4)Each share of the RTL Series A Preferred Stock was exchanged for one new share of Series D Preferred Stock respectively. The price used to calculate fair value represents the closing price of the RTL Series A Preferred Stock on the Acquisition Date. (5) Each share of the RTL Series C Preferred Stock was exchanged for one new share of Series E Preferred Stock respectively. The price used to calculate fair value represents the closing price of the RTL Series C Preferred Stock on the Acquisition Date. Purchase Price Allocation The Mergers were all conditioned upon each other and accordingly are considered “related” and treated as a single transaction for accounting and reporting purposes. The Mergers are accounted for under the acquisition method for business combinations pursuant to GAAP, with the Company as the accounting acquirer of RTL. The consideration transferred by the Company in the Mergers establishes a new accounting basis for the assets acquired, liabilities assumed and any non-controlling interests, measured at their respective fair value as of the Acquisition Date. To the extent fair value of the consideration paid exceeds fair value of net assets acquired, any such excess represents goodwill. The Company provided a provisional allocation of the fair value of the assets acquired and liabilities assumed in the Mergers in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023. During the three months ended March 31, 2024 and December 31, 2023, measurement period adjustments were determined and recorded as if they had been completed at the Acquisition Date. Future adjustments to the provisional allocation of the fair value of the assets and liabilities acquired in the Mergers, as well as adjustments to the consideration paid may change the determination and amount of goodwill and may impact depreciation, amortization and accretion based on revised fair value of assets acquired and liabilities assumed. The finalization of the Company’s fair value assessments could result in changes in the valuation of assets acquired and liabilities assumed up to a year after the Acquisition Date. The following table summarizes the provisional amounts recognized for the assets acquired and liabilities assumed as of Acquisition Date, as well as adjustments made in the three months ended March 31, 2024 and December 31, 2023 (measurement period adjustments) to the amounts previously reported in the three months ended September 30, 2023.
(in thousands) |  | Amounts Recognized as of the Acquisition Date (as previously reported) |  | Measurement Period Adjustments |  | Amounts Recognized as of the Acquisition Date (as adjusted)
Assets Acquired: |  |  |  |  |  |
Land |  | $ | 954,967 |  |  | $ | 615 |  |  | $ | 955,582 |
Buildings, fixtures and improvements |  | 2,526,810 |  |  | 349 |  |  | 2,527,159 |
Total tangible assets |  | 3,481,777 |  |  | 964 |  | (1) |  | 3,482,741 |
Acquired intangible assets: |  |  |  |  |  |
In-place leases |  | 582,475 |  |  | (1,045) |  |  | 581,430 |
Above-market lease assets |  | 67,718 |  |  | 50 |  |  | 67,768 |
Total acquired intangible lease assets |  | 650,193 |  |  | (995) |  | (1) |  | 649,198 |
Cash |  | 65,223 |  |  | (607) |  | (2) |  | 64,616 |
Operating lease right-of-use assets |  | 26,407 |  |  | 10 |  |  | 26,417 |
Prepaid expenses and other assets |  | 60,862 |  |  | 1,910 |  | (3) |  | 62,772 |
Goodwill |  | 29,817 |  |  | (2,765) |  | (4) |  | 27,052 |
Total assets acquired |  | 4,314,279 |  |  | (1,483) |  |  | 4,312,796 |
Liabilities Assumed: |  |  |  |  |  |
Mortgage notes payable, net |  | 1,587,455 |  |  | — |  |  | 1,587,455 |
Senior notes, net |  | 386,250 |  |  | — |  |  | 386,250 |
Acquired intangible lease liabilities |  | 76,682 |  |  | 3 |  |  | 76,685 |
Accounts payable and accrued expenses |  | 86,031 |  |  | (1,456) |  | (5) |  | 84,575 |
Operating lease liabilities |  | 26,407 |  |  | (30) |  |  | 26,377 |
Prepaid rent |  | 18,439 |  |  | — |  |  | 18,439 |
Total liabilities assumed |  | 2,181,264 |  |  | (1,483) |  |  | 2,179,781 |
Total consideration transferred |  | $ | 2,133,015 |  |  | $ | — |  |  | $ | 2,133,015 |
_________ (1) These adjustments were recorded to reflect changes in the estimated fair value of tangible and intangible assets, from the initial provisional estimates, due to the receipt of new information. (2) The decrease in cash was due to the receipt of new information, subsequent to the initial provisional estimates, related to cash acquired as of the Acquisition Date. (3) The net increase in prepaid expenses and other assets was due to the receipt of new information, subsequent to the initial provisional estimates, primarily related to receivables that had previously been deemed uncollectible as of the Acquisition Date. (4) The net decrease in goodwill from the initial provisional valuation reflects the net impact of all measurement period adjustments to the assets acquired and liabilities assumed. (5) The net decrease in accounts payable and accrued expenses was due to the receipt of new information, subsequent to the initial provisional estimates, related to accrued expenses that were estimated as of the Acquisition Date. Goodwill Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the Mergers includes the expected synergies and other benefits that we believe will result from the Internalization Merger and any intangible assets that do not qualify for separate recognition. Goodwill is not amortized and the Company has allocated the goodwill to its segments.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent + Details
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