- Alex Pettee, CFA
Net Lease REITs: 'Power 3' O, NNN, STOR Lead The Surge
At this time last year, net lease REITs were going through an existential crisis. Analysts questioned the viability of the business model built on accretive acquisition-fueled growth.
Just as "rates up, REITs down" punished the sector in early 2018, net lease REITs have bounced back sharply as rates - and inflation expectations - have receded.
Since last February, the sector has surged roughly 50%, led by the upper echelon of the sector, the "Power 3" net lease REITs: Realty Income, National Retail, and Store Capital.
These three REITs acquired more than $4 billion of assets in 2018, a staggering figure considering the pressure from Wall Street analysts last year to scale back external growth targets.
The Power 3 weathered the storm in 2018 and now command the most favorable cost of capital in years, potentially reigniting AFFO growth if macroeconomic conditions can finally cooperate.
