Wedbush Securities’ Ratings Breakdown
Wedbush Securities made a bold move by initiating coverage of four significant net lease Real Estate Investment Trusts (REITs). Among these, Essential Properties Realty Trust (EPRT) and Broadstone Net Lease (BNL) earned an “Outperform” rating, while NETSTREIT (NTST) and Realty Income (O) garnered a more cautious “Neutral” rating.
Market Insights and Outlook
Despite the sluggish nature of the overall transaction market over the past 18-24 months, the net lease REITs managed to persevere by fostering strong tenant relationships to sustain external growth.
Wedbush analysts highlighted the potential favorable impact of lower interest rates on the sector. They also raised a flag regarding the potential resurgence of competition from private investors, which could influence deal volume and cap rates.
By maintaining a bullish stance on the sector, Wedbush emphasized their positive outlook for the future.
Key Highlights of Individual REITs
Essential Properties Realty Trust (EPRT) stands out with its equity cost of capital advantage and higher average acquisition cap rates, positioning itself for continued earnings growth in the foreseeable future.
Broadstone Net Lease (BNL) is executing a portfolio simplification strategy aimed at reducing its exposure to healthcare assets. This strategic move, from 17.6% to 7.1% healthcare exposure, is anticipated to fetch the company a premium multiple and pave the way for earnings growth by 2025.
NETSTREIT (NTST) faces pressure on its stock due to recent tenant issues, which may impede the expected pace of acquisition volume, according to Wedbush analysts.
On the other hand, Realty Income (O) has expanded its average acquisition cap rates through investments in Europe, a move reflecting its ~$80B enterprise value. However, challenges in maintaining earnings growth are anticipated due to a slowing rate of acquisitions compared to the previous year.
Market Performance Snapshot
During Monday’s midday trading, Broadstone Net Lease (BNL) saw a positive movement of +0.51% to reach $17.64, while Essential Properties Realty Trust (EPRT) surged by +1.55% to $30.18. NETSTREIT (NTST) experienced a rise of +1.19% to hit $16.20, and Realty Income (O) climbed by +0.90% to reach $60.59.
