Triple-net REITs: BofA’s Net Lease REIT 1Q26 Quarterly: Large deal pipelines & stable rent coverage

Research evidence excerpt

Triple-net REITs: BofA’s Net Lease REIT 1Q26 Quarterly: Large deal pipelines & stable rent coverage

concerns

Across the sector, credit quality continues to improve, with management teams broadly Key terms:

lowering bad debt assumptions and highlighting limited near-term concerns. At the same ABR: Annualized base rents

time, companies are actively managing concentration risk through targeted dispositions Bn: Billion

and more diversified acquisition strategies. During the quarter REITs reduced exposure Bp: Basis points

to dollar stores and drug stores, supported by recent cap rate trends. FVR reduced its C: Cents

Dollar Tree exposure by 40bp and lowered restaurant exposure to below 23%. NTST Sh: Share

trimmed its Dollar General exposure by 40bp and CVS by 50bp, while WPC reduced its WALT: Weighted average lease term

Hellweg exposure by 10bp to 1%. We expect dispositions to pick up as REITs get ahead Y/Y: Year over year

of potential margin compression and rent coverage deterioration. See Exhibit 6 to ADC: Agree Realty Corp

Exhibit 15 for 2026 bad debt assumptions and top 10 tenant lists. EPR: EPR Properties

EPRT: Essential Properties Realty

Risk to sector if Fed changes course to hikes FVR: FrontView REIT Inc

We started the year positive on net lease given our research pointed to historical net GTY: Getty Realty Corp

lease outperformance in prior Fed cutting cycles. We remain positive despite Fed NNN: NNN REIT Inc

interest rate cuts being pushed back to later 2027 given the favorable tailwinds of 1) NTST: NetSTREIT Corp

wide investment spreads on largely prefunded capital, 2) large deal volume and 3) good O: Realty Income Corp

tenant health/stable rent coverage ratios. However, multiples could be at risk if the WPC: WP Carey Inc