• Net Lease REITs entered 2022 firing on all cylinders, taking full advantage of cheap capital to fuel a "buying spree" of property acquisitions, fueling double-digit FFO and dividend growth.
• One of the more "bond-like" and rate-sensitive REIT sectors, however, net lease REITs have underperformed the REIT average for three straight years despite their impressive post-pandemic rebound.
• Over most longer-term periods, net lease REITs have historically delivered above-average earnings growth as accretive external growth has more than offset the drag from muted property-level growth.
• Interestingly, net lease REITs actually outperformed the REIT sector during the prior Fed rate hike cycle from 2015-2019 after significantly underperforming in the 18-months prior- a similar backdrop to the current dynamic.
• Critically, the "rates" that matter for all REITs are long-term rates, not the Fed Funds rate, and the tightening cycle is beginning with the 10-Year Yield already closer to its post-GFC peak than its lows. We see the recent underperformance as a buying opportunity for net lease REITs.

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