U.S. Net Lease REITs "Good Things Come In Threes" Goldsmith

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U.S. Net Lease REITs "Good Things Come In Threes" Goldsmith

arnings impact of individual tenant issues.

We believe this could reflect a broader shift in investor expectations. Following several

REITs reducing bad debt assumptions and reporting improving tenant health with 1Q'26

earnings, the market has increasingly embedded a benign credit environment into

forecasts for the balance of the year. As a result, even relatively small tenant issues may

generate an outsized stock reaction if they call into question the sustainability of current

credit assumptions. Moreover, minor tenant credit challenges may drive wider gaps in

earnings forecasts within the group, reflecting the outsized share reactions. Conversely,

we believe REITs that continue to demonstrate stable collections, limited watchlist

migration, and lower-than-expected credit losses should be well positioned to generate

positive estimate revisions. While we do not anticipate a material deterioration in tenant

health, credit outcomes remain one of the most important variables for relative stock

performance through year-end.

What are the key debates for 2Q'26 and beyond?

While acquisition activity and tenant credit trends remain the primary drivers of near-

term results, we believe investors are increasingly focused on how the Triple Nets

navigate a higher-for-longer rate environment and a potentially more inflationary

backdrop. Specifically, we see growing differentiation between REITs that can generate

meaningful internal growth through CPI-linked escalators, maintain attractive

investment spreads despite higher financing costs, and fund acquisition pipelines well

into 2027. At the same time, benign credit conditions continue to support upside to

conservative bad debt assumptions.