Keepin' It Real  

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  • Alex Pettee, CFA

Net Lease REITs: Reopening Revival

  • Net Lease REITs were punished by the coronavirus-related economic shutdowns, but have rebounded over the last several months as key shutdown-sensitive tenants reopen their doors and as rent collection improves.

  • Rent collection has improved sequentially from a low of 65% in April to 90% in July as the majority of tenants have now reopened. Theaters and gyms remain the soft spots.

  • Net Lease REITs had previously defied the 'retail apocalypse' headwinds over the past half-decade by investing in these experience-based retail categories, which have become liabilities in the coronavirus era.

  • Lackluster rent collection in the second quarter led to record-declines in operating metrics and forced four of the fifteen net lease REITs to reduce or eliminate their dividend since the start of the pandemic.

  • While several "experience-heavy" REITs continue to have their backs against the walls, the sector as a whole remains on a relatively firm footing as four net lease REITs have actually increased their dividend in 2020.

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