STIFEL: Triple-Net - Triple-Net REIT Comp Sheets

Triple-Net REIT Comp Sheets 9/18/2016

REITs Pull Back, Sector Outperforms. The overall REIT sector pulled back 70 bps this past week and is +9.6% YTD. The triple-net sector outperformed gaining 10 bps for the week and is +28.7% YTD.

Dividend Yield. Triple-net REITs are trading at 16.3x 2017E FFO as compared to equity REITs trading at 17.2x. The current dividend yield for the sector is 4.78% vs. the REIT sector dividend yield of 3.82%. The 96 bps spread is 67 bps below the long-term average spread of 163 bps.

ADC Management Takeaways. We recently hosted meetings with Agree Realty Corporation's (ADC, $46.41 Buy) management. Management's main message is that the company has created value and continues to create value across its three platforms: acquisitions, development, and Partner Capital Solutions (PCS). Management believes it differentiates itself from the other net-lease peers in that it focuses strictly on retail, is a real estate focused company as opposed to being more of a finance company, and management believes its development capabilities also stand out. Acquisitions yields are in the mid-7.0% range, development yields are in the 9.0% range, and PCS yields are somewhere in between. Some recent and current value creation opportunities include a Starbucks turn-key lease at the strip center in Lakeland, FL, a ground-lease Chick-fil-A in Frankfort, KY, a ground-lease Texas Roadhouse in Mount Pleasant, MI, and the Family Fare Quick Stop in Marshall, MI. Another opportunity is the 20,745 sf Off Broadway lease in Boynton Beach, FL that expires next year. The lease was an original Borders location and accounts for half of the rent roll.in 2017. The property could be expanded by 15,500 sf and re-leased at higher rates.

GPT Establishes Strategic Office Partners With TPG. Gramercy Property Trust (GPT, $9.26, Buy) announced that the company has formed Strategic Office Partners with TPG Real Estate. The platform will invest in up to $1.0 billion of single-tenant office assets in high-growth MSAs. The entity will have $400 million of equity and has obtained $200 million of non-course financing. GPT will own a 25.0% interest in the venture. At close, GPT has sold six office assets ($187.5 million) at a 9.5% cap rate with a weighted average lease term of 3.6 years. The assets are located in the Los Angeles MSA, San Francisco Bay Area, the San Diego MSA, Nashville, and Minneapolis.

Also Receives Investment Grade Rating From Fitch. Fitch provided GPT with an initial BBB rating with a stable outlook. The company also has a BBB- with a stable outlook from S&P and Baa3 with a stable outlook from Moody’s. GPT now has investment grade ratings from all three major rating agencies.

FCPT Purchases More Restaurants. Four Corners Property Trust (FCPT, $20.01, Not Covered) acquired four KFC restaurants in the Detroit, Michigan MSA for $3.9 million with a weighted average lease terms of 20 years.