Net Lease REITs: Rates Up, REITs Down? Not So Fast

March 18, 2022 | Hoya Capital

Net Lease REITs: Rates Up, REITs Down? Not So Fast REIT Rankings Sector R... Mar 18 Written By Net Lease REITs entered 2022 firing on all cylinders, taking full advantage of cheap capital to fuel a "buying spree" of property acquisitions, fueling double-digit FFO and dividend growth. One of the more "bond-like" and rate-sensitive REIT sectors, however, net lease REITs have underperformed the REIT average for three straight years despite their impressive post-pandemic rebound.

Over most longer-term periods, net lease REITs have historically delivered above-average earnings growth as accretive external growth has more than offset the drag from muted property-level growth. Interestingly, net lease REITs actually outperformed the REIT sector during the prior Fed rate hike cycle from 2015-2019 after significantly underperforming in the 18-months prior- a similar backdrop to the current dynamic. Critically, the "rates" that matter for all REITs are long-term rates, not the Fed Funds rate, and the tightening cycle is beginning with the 10-Year Yield already closer to its post-GFC peak than its lows.

We see the recent underperformance as a buying opportunity for net lease REITs. Click Here To Read The Full Report on Seeking Alpha! Comments (0) Newest First Oldest First Newest First Most Liked Least Liked Add Comment --> Preview Edit --> Post Comment… Previous Previous Data Center M&A • Apartment Dividend Hikes • Housing Shortage Next Next Strong Housing Data • Oil Rebounds • REIT Dividends