STIFEL: Triple-Net - Triple-Net REIT Comp Sheets 10/16/2016

Triple-Net REIT Comp Sheets

REITs Rebound, Sector Slightly Outperforms. The overall REIT sector gained 120 bps this past week and is +7.2% YTD. The triple-net sector slightly outperformed, gaining 140 bps for the week, and is +25.5% YTD.

Dividend Yield. Triple-net REITs are trading at 15.8x 2017E FFO as compared to equity REITs trading at 16.6x. The current dividend yield for the sector is 4.92% vs. the REIT sector dividend yield of 3.93%. The 99 bps spread is 64 bps below the long-term average spread of 163 bps.

Short Interest -12.6% for Group. Short interest decreased 12.6% this quarter, or 0.9 million shares/company, to 2.8% of the float. Notable short interest decreasers this quarter were Global Net Lease (GNL, $7.65, Not Covered) -40.2%, Four Corners Property Trust (FCPT, $20.46, Not Covered) -37.8%, and Store Capital Corporation (STOR, $28.02, Buy) -32.5%. GNL has been the underperformer through 9/30 (+2.6% vs. the RMS +11.9%), has the highest dividend yield in the sector (9.3%), and had a 189% increase in short interest in 2Q, which, to some extent, was due to its very high exposure to NOI derived from Europe. FCPT is viewed as one of the defensive names in the group and is one of the top performing YTD. STOR had one of the largest short interest increases in 2Q (138.9%) and, more importantly, investors became less concerned about Gander Mountain. Notable increasers were National Retail Properties (NNN, $47.12, Buy) +6.2% and Gramercy Property Trust (GPT, $9.05, Buy) +3.3%. NNN trades at one of the highest multiples in the group and its well-respected CEO Craig Macnab announced his retirement at the end of the quarter. GPT was one of the better performing names in the group in 3Q. Days to cover for the group decreased to 4.5 days, down from 4.7 days last quarter.

Short Interest Leaders. Realty Income Corp. (O, $62.04, Buy) and NNN lead the group with the highest short interest at 6.2% and 5.3%, respectively. Both O and NNN are the quality names in the group that trade at the highest multiple and highest premium to NAV, among the lowest dividend yields (3.9%), and are therefore shorted against a handful of names in the sector. VEREIT (VER, $9.70, Hold) and W.P. Carey (WPC, $61.80, Not Covered) have the lowest short interests in the group at 1.5% or below. VER has a low short interest as it continues to execute on its business plan, raised equity in August, and has an above-average dividend yield (5.7%). WPC continues to underperform YTD after underperforming last year (-10.4% vs. the RMS +2.5%) and pays an above average dividend (6.4%).