Triple-net REITs: 2Q26 Net Lease Earnings Weekly Recap: ADC, EPR and WPC all beat

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Triple-net REITs

2Q26 Net Lease Earnings Weekly Recap:

ADC, EPR and WPC all beat

Price Objective Change

BofA raises POs on 2Q AFFO beats and upward revisions

Last week, 2Q Net Lease results largely beat AFFO guidance on stronger investment

volumes, wider spreads and better bad debt. As a result, we are increasing our Price

Objective for ADC to $93 from $92, for EPR to $62 from $61 and WPC to $84 from $83.

We reiterate our Buy rating on ADC given its leading AFFO growth and its high-quality

portfolio with the largest concentration of investment grade tenants. We reiterate our

Neutral rating on WPC as it trades near its historical AFFOx, and our relative

Underperform on EPR given its valuation.

Companies reiterate strong deal flow & stable cap rates

Transaction activity continues to accelerate, with all three REITs converting robust

pipelines into closings during the quarter: ADC invested a record $502mn, EPR deployed

$441mn, and WPC invested $707mn with all three raising the midpoint of prior guidance

(ADC +$200 million to $1.7 billion, WPC +$200million to $1.9 billion and EPR +$100

million to $650 million.) Cap rates remain stable, with ADC’s initial cash yield at 7.0% (10bp Q/Q) but the mix included more investment grade tenants and ground leases,

EPR’s blended cash yield at 8.5% (+50bp Q/Q) were somewhat elevated on a portfolio of

Six Flags attractions, and WPC’s initial cash yield at 7.4% reflected a higher mix of

industrial properties. This is consistent with how GTY, EPRT and NTST’s assessment of

an active transaction market, limited new direct competition, and stable cap rates

despite interest rate volatility.

REITs lower bad debt assumptions

Tenant credit remained stable for EPR with tenant coverage unchanged at 2.0x Q/Q and

management noted that bad debt is tracking well below current guidance. WPC lowered

its bad debt reserve to $7-10 million from previously guided $8-12 million with $3

million of bad debt incurred from tenant Hellwig. ADC experienced favorable bad debt in

2Q at only 6bp (10bp YTD) and lowered its full year guidance to 25bp from the prior 2550bp range.…