Net Lease REITs Upbeat About Expansion Opportunities

Net lease REITs see continued opportunities to expand their operations going forward in both foreign and domestic markets, according to executives speaking at REITWeek 2015: NAREIT’s Investor Forum.

Christopher Volk, president and CEO of STORE Capital Corp. (NYSE: STOR), said he expects acquisition volumes to be higher in the net lease sector in 2016. STORE Capital invested $1.1 billion in 2014.

“The (net lease) space itself is embryonic,” he said.

National Retail Properties, Inc. (NYSE: NNN) Chairman and CEO Craig Macnab, pointed to estimates that the net lease retail sector is valued at more than $1 trillion. “In a trillion dollar market, there’s plenty of opportunity,” he said.

Macnab noted that occupancy rates across the company’s portfolio are close to 99 percent, with the convenience retail sector representing the largest component of the portfolio.

Broadstone Net Lease, Inc. Chairman and CEO Amy Tait said 2015 has been better than expected for the company. She explained that at the start of the year, the company anticipated raising $200 million of equity capital. Now, however, Broadstone is “on pace to well exceed capital raising targets.” She added that Broadstone expects to book about $575 million of acquisitions this year.

“The acquisition market is very competitive, but we still think it’s very rational. We’re still very bullish and aggressive on acquisitions,” she said.

Broadstone’s largest brand exposure is fast-food chain Wendy’s. Tait said Broadstone sees continued opportunities in the fast-food restaurant net lease business, stressing that it is both recession- and Internet-resistant.

Meanwhile, newly listed REIT Global Net Lease (NYSE: GNL) sees significant opportunities ahead, most notably in the European market. GNL CEO Scott Bowman said the European net lease sector presents a “once-in-a-lifetime buying opportunity.” The company estimates there is about $9 trillion in available net lease inventory in Europe.

Gary Winer, chairman of GNL’s European service provider Moor Park Capital Partners, said the macroeconomic environment in Europe is “extremely positive.” He noted that property valuations are about 25 percent below levels seen before the financial crisis. “The opportunity is huge,” he stressed.

Meanwhile, net lease executives said the prospect of higher interest rates doesn’t pose a major concern. GNL’s Bowman noted that with 87 percent of its leases having embedded rent growth, higher interest rates will result in higher earnings.

National Retail CFO Kevin Habicht observed that the company has operated successfully in environments with much higher interest rates.

“Our balance sheet is well-positioned for higher rates,” he said.