U.S. Net Lease REITs "NNN-credible" Goldsmith

Research evidence excerpt

U.S. Net Lease REITs "NNN-credible" Goldsmith

the macro environment, and upward pressure on the

10-yr. We prefer ADC, FCPT and EPRT as names driving consistent, reliable acquisition

volumes and maintaining fortified portfolios. Plus, they have underperformed peers

which provide more room for upside, in our view. We also like O and NTST, as those

with underappreciated upside and favorable risk/rewards from here.

Expectations for 2026 continue to climb higher

We think the REIT outlooks were increasingly constructive in 1Q'26, as demonstrated by

the majority taking guidance higher. In our view, this largely reflects increasing visibility

into an ability to transact at elevated volumes and muted tenant bankruptcy impacts in

1Q.

Most raised guidance. Specifically, 8 out of 10 Net Lease companies under our

coverage raised AFFO guidance this quarter, at an average increase of $0.02. Only

ADC and BNL opted not to raise AFFO guidance (and ADC had taken guidance

higher earlier in they year and faced headwinds from treasury stock dilution).

Overall, the Triple Nets raised the full-year investment guidance in 1Q'26 by 16%.

In our view, this should offset some of the concerns around a compression in cap

rates by demonstrating confidence to continue to transact accretively.

Further clarity around bad debt. Most of the Triple Net REITs reported a lower

impact from credit loss in 1Q'26 than initial guidance. Notably, FCPT and GTY

reported another quarter of no bad debt impact. In particular, WPC started its

2026 credit loss assumptions at $10-$15 mm, but took it down in 1Q'26 to $8-

$12 mm. O indicated that the biggest source of upside to their 2026 results is in its

conservative credit loss assumptions which was brought down to 40 bps.

Potential compression in cap rates through 2026.