WPC - Net Lease REITs: Rising Rates Not A Concern Yet

• Following a punishing sell-off early in the pandemic, net lease REITs have displayed notable resilience in the face of stiff macroeconomic headwinds and entered 2021 with momentum at their backs.
• Despite their heavy retail and restaurant exposure, net lease REITs - with some exceptions - fared far better than their retail REIT peers with rent collection "normalizing" by late 2020.
• Recent earnings reports confirmed that acquisition-fueled growth kicked back into gear in late 2020 and is expected to power a rebound in AFFO growth after the 7% average decline in 2020.
• Before the pandemic, net lease REITs' performance was largely determined by movements in long-term interest rates due to their bond-like nature and reliance on low-cost capital to fuel external growth.
• For now, macroeconomic conditions remain in the "Goldilocks zone", and net lease REITs should be beneficiaries of the reopening trade so long as rates are rising for the "right" reasons: economic growth expectations rather than inflation.

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