Global Net Lease is looking to cut ties with a suburban Nashville property after the office was involved in the widespread Department of Government Efficiency cuts.
The New York-based real estate investment trust is hunting for buyers to take on its roughly 135,375-square-foot property at 127 International Drive, according to marketing materials viewed by CoStar News, a property developed as a build-to-suit project for the Internal Revenue Service nearly a decade and a half ago.
The entirety of the Franklin, Tennessee, building has long been leased to the federal government to house the IRS's National Office. However, the long-term lease for the property was one of the largest in the Elon Musk-led effort to terminate and restructure large swaths of the federal real estate portfolio across the United States.
The early cancellation of the Franklin lease is estimated to save the government about $4.6 million annually, according to DOGE's website, but left a hole for a property Global Net Lease was expecting to remain filled until the deal's natural expiration in August 2032.
Properties leased to federal agencies used to provide landlords with an enviable sense of stability that helped prop up valuations and buyer demand if they were put up for sale. Yet the approach from the new presidential administration has led some property owners to try to stay ahead of DOGE's real estate cuts.
The cost-cutting watchdog earlier this year, for example, said it had canceled or restructured nearly 100 federal leases covering more than 2 million square feet of space across the country, a move that was collectively estimated to save taxpayers about $80 million. By late February, DOGE estimates showed about $100 million in lease reductions, a figure expected to climb even further as the government has another $385 million of office leases that are eligible to be cut through the remainder of this year.
The agency then scaled back some of its lease termination decisions a few weeks later, removing about 2.2 million square feet of leases that collectively reduced the amount DOGE had claimed to save by $57.83 million. The true value of DOGE's sweeping cost-cutting efforts has yet to be seen, but the efforts have already shaken the national office market.
The U.S. General Services Administration, the agency responsible for the leasing and management of government buildings, pays roughly $5 billion a year to rent 144 million square feet of offices nationwide, according to the agency’s latest data.
Filling the gap
Similar to the IRS's former Franklin office, government agencies are often the sole tenant for many federally leased buildings, meaning any loss deals a severe blow when they leave.
About $12 billion of loans tied to commercial mortgage-backed securities are at risk from DOGE's cuts, according to a recent Barclays report. That has resulted in sellers being forced to close deals at significant discounts given the unlikely scenario that they'll be able to quickly backfill any federal vacancy.
Global Net Lease acquired the International Drive building for more than $43 million in 2014, a price-per-square-foot record at the time of the deal for the Nashville area, according to CoStar data. That record price was largely due to the property being fully leased to the GSA at that point, a status it is no longer able to claim.
Listing price details were not publicly disclosed for the property, and the REIT did not immediately respond to CoStar News' requests for comment. Global Net Lease has a handful of single-tenant office properties leased to the federal government, according to information filed with the Securities and Exchange Commission.
Any deal for the anchor-less Franklin building would add to the more than $835 million in dispositions Global Net Lease closed throughout 2024, an effort the landlord will extend throughout this year as it aims to reposition its national portfolio. All told, the REIT is planning to sell a total of $3 billion of properties before the end of 2025.
"We have certain office properties that are long-term leases with great tenants that we feel very good about, and we have others that we feel might be categorized or are categorized as non-core," Global CEO Michael Weil recently told analysts. "We will look to continue doing what I think we've shown the market we do really well, which is strategic disposition of non-core assets."