The Road to Nareit (Part 3)

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The Road to Nareit (Part 3)

May 29, 2026 The Road to Nareit (Part 3)REAL

The Encore Nobody Wants; Rates, Balance Sheets and What if Inflation

Isn't Over? Michael Gorman

(212) 738-6138 mgorman@btig.comESTATE WHAT YOU SHOULD KNOW: In our 2023 Outlook (Link) we asked what could be in store Thomas Catherwood

for REITs if the past 15 years were the outlier. After four years of underperformance (212) 738-6140 tcatherwood@btig.com

(including 2022), interest headwinds and multiple compression, the start of a Fed John Nickodemus, CFA easing cycle brought some hope to the sector along with initial outperformance in (212) 738-6050 jnickodemus@btig.com

2026. However, renewed inflation concerns has led the 10-year Treasury to re-anchor

Michael Tompkins around 4.5% (Exhibit 1), CPI has re-accelerated to 3.8% as of April 2026 (Exhibit 2), and

(212) 527-3566 mtompkins@btig.comINDUSTRY structural conditions for elevated inflation have not been resolved but deferred. REITs

are in some ways better positioned with lower starting multiples, and interest expense Zachary Light

as a percentage of NOI remains below the historical average (Exhibit 10). But average (332) 400-5016 zlight@btig.com

debt maturities are down more than 1.5 years from peak (Exhibit 11) and variable-

rate debt balances are higher than 2022, suggesting any move higher could createREPORT more of a fundamental headwind than before. Finally, the fiscal and monetary policy

backdrop carries a pattern that rhymes uncomfortably with the mid-1970s inflation

interlude (even though not our base case), a scenario that would be challenging for the

REIT market. REIT management teams are not rate strategists (and neither are we) but

heading into REITWeek we think questions around near-term capital raising, potential