Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
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36 S C T / A U G U S T 2 0 1 7 Net-lease REIT tenants are largely immune to recession and to Internet competition — but not to Wall Street jitters BY STEVE BERGSMAN net-lease update and the stock plunged by about 20 percent. As Stephen Horn, chief acquisition officer of Orlando, Fla.–based National Retail Properties observed: "One of our competitors didn't have a great first quarter with their earnings release. Spirit Realty got hammered, and the net-lease REIT sector got crushed. The tide went out, and we all went out with it." By midyear, net-lease REITs managed to recover, but only a little, says Horn. By mid-June, retail REITs had fallen by 16 percent, versus a gain of 8.9 percent for the S&P; 500, according to The Wall Street Journal. The problem is that investors are so nervous about retail REITs, the net-lease REITs have had to suffer equally, their comparatively good performance notwithstanding. But the fact is, freestanding-retail REITs such as Spirit, National Retail et-lease REITs, which invest mostly in single-tenant retail properties such as corner drugstores and fast-food restaurants, normally trade with less volatility than other REITs. But this year things have been different. The general REIT sector has been weak, dragged down by retail REIT investors jittery about apparel chain bankruptcies and department store closures. Over the first four months of this year, REITs in general posted an aggregate return of 3.5 percent. The equity REIT side did worse: a total return of 2.9 percent, versus 7.2 percent for the S&P; 500. Things grew worse still for net-lease REITs. In May Dallas- based Spirit Realty Capital missed its earnings projections, N