REIT Access to Equity Markets Could Accelerate Acquisitions in the Coming Year
REITs are working to find a seat at the table as active buyers for commercial real estate property as the transaction market regains momentum.
One sign that REITs are positioning to take advantage of buying opportunities is a recent flurry of equity raising. Five REITs went to the market with secondary offerings in February, raising a combined $1.3 billion.
- W. P. Carey Inc. (NYSE: WPC) raised $496.8 million
- Essential Properties Realty Trust, Inc. (NYSE: EPRT) raised $350 million
- NETSTREIT Corp. (NYSE: NTST) raised $208 million
- Curbline Properties Corp. (NYSE: CURB) raised $204 million
- Getty Realty Corp. (NYSE: GTY) raised $131 million
W. P. Carey is coming off a record $2.1 billion in new acquisitions in 2025. “It's a really good market right now for us. The stability in interest rates has brought bid-ask spreads in, and sellers who have been on the sidelines for the last few years are now back into the market. So, we took advantage of that in 2025,” says CEO Jason Fox. The company is targeting primarily manufacturing and logistics facilities, as well as select retail, both in the United States and Europe.
The REIT is poised for more growth in 2026 thanks to a strong balance sheet that includes roughly over $850 million in equity forwards, a credit facility of more than $2 billion that is largely undrawn, and annual free cash flow of about $300 million per year. The company has issued conservative guidance for acquisitions of between $1.25 billion and $1.75 billion, with the expectation that those numbers will be adjusted depending on how the year progresses.
“Our cost of capital is as strong as it's been for quite some time. That supports accretive investment activity, and it allows us to be competitive on pricing when needed,” Fox says. “I think a lot of REITs find themselves in a similar position.” For all those reasons, REITs are likely to be more active acquirers this year. That's reflected in deal volume to date, as well as many of the guidance numbers for 2026, he adds.
Across the board, it’s safe to say that REITs have been preparing for an acquisition spree. “Operationally, REITs are very much ready to handle a significant increase in number of properties, and some of that's being helped by the technology investments that companies have been making to be efficient and manage more with less,” says Matthew Werner, managing director, REIT strategies, at Chilton Capital Management.
REITs also have worked to strengthen balance sheets. Many are under-levered with some of the lowest debt ratios they’ve ever had and very low levels of floating-rate debt specifically. “They have tons of capital capacity, but except for a few sectors, their cost of equity doesn’t make sense for them to go and do transactions,” Werner says.
Cost of Capital Hurdles
After multiple years of low transactions volume, commercial real estate transaction volume started to recover and rose 23% last year to $545.3 billion, according to MSCI. Certainly, REITs were among the group of buyers. In fact, four REITs—Welltower Inc. (NYSE: WELL), Agree Realty Corp. (NYSE: ADC), W. P. Carey, and Starwood Property Trust, Inc. (NYSE: STWD)—ranked in the top 12 for most active buyers last year based on the total number of properties acquired, according to MSCI.
However, REITs as a group were noticeably less active last year. REITs accounted for 5.5% of the total transaction volume compared to 9.6% of transaction volume the prior year, and more than 10% of transaction volume in 2020 and 2021, according to JLL. The key reason for that decline is that most REITs have been trading at discounts to NAV since mid-2022, when the Federal Reserve first began its rate-hiking cycle.
“A lot of REITs, through no fault of their own, have been trading at perpetual discounts to NAV,” says Steve Hentschel, senior managing director and leader of the M&A and corporate advisory platform at JLL. “It's very hard to raise new equity when it's dilutive, and without raising new equity, it's hard to be an active acquirer,” he says.
Over the last few years, many publicly traded REITs have been trading at discounts to both their underlying asset values and the broader equity markets. That dynamic constrained opportunities to make new investments, and instead resulted in some take-private activity, adds Bryan Connolly, chair of DLA Piper’s U.S. real estate practice.
“Looking ahead, as the underlying real estate fundamentals improve, interest rates stabilize and potentially decrease, and values in the private market continue to adjust, there should be more opportunities for growth by public REITs,” he says.
Haves and Have Nots
The spike in interest rates and pricing volatility that sent both buyers and sellers to the sidelines in 2023 and 2024 appears to be reversing course. The availability of debt, cost of debt, and comfort level with valuations are all improving, which is good news for commercial real estate sales activity in general.
For REITs, the ability to transact is still divided into those “haves” and “have nots” in terms of NAV. The “haves” are those sectors that are trading at large premiums to NAV, notably health care, net lease retail, and data centers. Health care REITs in particular are trading at historically large premiums that are 50%, 100%, or even close to 150% above NAV in some cases. As a result, companies such as Welltower, Ventas, Inc. (NYSE: VTR), American Healthcare REIT, Inc. (NYSE: ATR) and CareTrust REIT, Inc. (NYSE: CTR) have been very acquisitive.
Welltower, for example, completed $13.9 billion in new investments in the fourth quarter alone, which is larger than the total asset size of some public REITs. CareTrust invested $1.8 billion in 2025, including $562 million in fourth quarter. At REITworld last December, CareTrust President and CEO Dave Sedgwick said that with a larger team and broader platform, the “table is set” for another strong year. The REIT kicked off 2026 with the January announcement of a $142 million acquisition of six skilled nursing facilities in the Mid-Atlantic region.
“We've always said, if you’ve got it, flaunt it, and we’re seeing that now from a lot of these health care REITs where they are appropriately using that cheaper cost of equity to be acquisitive in the markets they operate in,” says Daniel Ismail, co-head of strategic research, managing director, at Green Street. Health care REITs have the added benefit of finding good buying opportunities within sub-sectors, particularly in senior housing, he adds.
Net lease is another sector that has been leveraging its cost of capital advantage to make accretive acquisitions. And many of the same players that were active last year expect to keep their foot on the gas. For example, Agree Realty acquired $1.45 billion in retail net lease properties last year, and the company recently increased guidance for 2026 to $1.6 billion to be deployed across its three external growth platforms.
“Our pipeline to start the year is very healthy, filled with typical assets and pricing that investors would anticipate from Agree Realty,” says CEO Joey Agree. However, the REIT is watching to see how the expectation of lower interest rates this year will play out in terms of pricing, sellers, and the competitive landscape.
“One important misconception is that publicly listed and private capital are chasing the same assets,” he adds. “It’s important for investors to understand the size and scope of the net lease market and appreciate the divergent strategies and execution of the many players.”
Positioning for Acquisitions
On the opposite side of the spectrum, a number of sectors are trading at discounts to NAV of between roughly 10% and 20%, including office, apartments, industrial, self-storage, and lodging. REITs in those sectors are still buying assets, but they are less active. “It will be hard to see them ramp up acquisition activity throughout 2026, and they likely will be highly selective in the type of deals they do,” Ismail says.
Digging into individual property sectors, there are multiple examples of companies that have done a lot of hard work to put themselves in better positions for the acquisitions to “turn back on,” Werner adds. “The market is paying attention to that and rewarding these companies,” he says.
FrontView REIT, Inc. (NYSE: FVR), for example, was able to source a convertible preferred investment and now has the opportunity to prove their acquisition strategy. As a result, their share price is on a path toward being able to issue common equity again, and the company will be able to continue acquisitions after they use the cash from the convertible preferred issuance, Werner notes.
REITs also have another lever to pull that could give them an edge in acquisitions—the ability to utilize the tax advantages of the REIT structure to allow private operators to sell their assets to REITs. Instead of a cash sale, an owner could consider an UPREIT, which would allow them to transfer their basis into operating partnership (OP) units. There have been one or two examples of that in strip centers, which has been experiencing good fundamentals. “So, we could see a few more of those as the year goes on,” Ismail says.
Outlook for M&A Activity
In addition to property sales, the environment could be more conducive for M&A deals this year, both in public-to-public and take-private deals. One recent announcement was the acquisition of Veris Residential, Inc. (NYSE: VRE) by a group led by Affinius Capital for $3.4 billion in cash.
“If the math doesn't work for a REIT to go buy something on the private market, why not buy a public peer with an exchange,” Werner says. “I think the sector is ripe for that, but I do think that it's also ripe for take-privates because the debt markets are very open.”
Many of the M&A deals that have occurred in the last year were take-privates that involved deals below $3 billion.
Some of those transactions are getting done in “chunks” with perhaps one buyer acquiring a large portion of the portfolio, with other assets or smaller portions being sold off separately, Hentschel notes. For example, Aimco is reportedly sold seven of its Chicago-area properties to an investment group for $455 million as part of its liquidation.
Buying Opportunities Ahead
REITs could find more buying opportunities ahead in a market where transaction volume is rising and the bid-ask pricing gap between buyers and sellers is narrowing. Although transaction markets have not been entirely frozen, the inventory of for-sale properties has been thin, with more sellers that have opted to hold onto properties and wait out market volatility. “There was plenty of liquidity, but there was a bid-ask gap between buyers and sellers, and now that gap is closing, and more product is coming to market,” Hentschel says.
In its 2025 Year-End Real Estate Trends Report, DLA Piper is predicting that U.S. commercial real estate transaction volume will increase by another 15% to 20% this year. “We expect REITs will be most active in sectors perceived to benefit from multi-year tailwinds such as health care and housing-related assets, including senior housing and multifamily properties,” Connolly says. Data centers are likely to continue to command interest, as well as manufacturing and logistics due to supply chain challenges, continued expansion of e-commerce, and on-shoring.
“Public REITs have been challenged by the gap between how the public market values their stock and how the private market values the underlying real estate,” Connolly points out. “However, as private market values continue to adjust to the new reality, this headwind should diminish.”
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Net Lease REITs Poised for Continued Growth
In a commercial real estate market where transaction activity remains subdued, net lease REITs have been busy deploying billions in capital and steadily growing their portfolios. Many companies in the sector have good liquidity and a desire to grow and are expected to actively pursue deals they view as attractive—despite ongoing market volatility. Net lease REITs are by nature an acquisitive group. They need to make accretive investments to grow their FFO per share, and the sector is coming off a robust year of deal-making with an especially active fourth quarter. Notable highlights include: Realty Income Corp. (NYSE: O) invested $3.9 billion last year, with $1.7 billion occurring in the fourth quarter. Essential Properties Realty Trust, Inc. (NYSE: EPRT) invested $1.2 billion last year, which included $333.4 million in the fourth quarter W. P. Carey Inc. (NYSE: WPC) closed on $1.6 billion in acquisitions in 2024, including a record high of $840 million in the fourth quarter. Agree Realty Corp. (NYSE: ADC) invested $951 million in 2024, with $371 million in the fourth quarter. “One can make the argument, isn't the fourth quarter usually the biggest acquisition quarter in the year?” says Scott Merkle, managing director at SLB Capital Advisors, a real estate advisory firm specializing in sale-leasebacks. “That's usually accurate, and that probably played a role here. But more importantly, the net lease REITs coming into 2025 were trading at very attractive levels, so they had good currency with which to acquire properties.” Fourth quarter investment activity also accelerated along with signals that the Federal Reserve was moving into a rate-easing cycle, adds Jason Fox, president and CEO of W. P. Carey. “That flowed through to the 10-year Treasury and helped propel sellers who had largely been on the sidelines for much of 2024 into action, with bid-ask spreads between buyers and sellers coming in meaningfully,” he says. Appetite for Growth Despite market volatility fueled by President Trump’s proposed tariff policy, net lease REITs are maintaining cautious optimism for more growth ahead with guidance, thus far, that is similar to 2024. “The appetite to do deals and deploy capital is still there. We're seeing it every day in the transactions that we're working on with REITs that are actively offering on sale-leasebacks,” Merkle says. Net lease REITs are buying existing net lease properties and also investing in sale-leasebacks, both on a one-off and portfolio basis. However, all buyers are being a bit more cautious right now given uncertainty surrounding the impact from tariffs on consumer spending, supply chains, and the global economy. “The biggest headwind to the sector is volatility,” says Spenser Glimcher, managing director, self-storage & net lease, at Green Street. “It's one thing if the economy is slowing, but it's the uncertainty of the swings in markets week-to-week or day-to-day,” she adds. Companies are navigating in a market where there is less certainty around the ability to deploy capital and execute on acquisition opportunities. Will deals take longer to get done? And will buyers and sellers try to renegotiate different pricing or cap rates? “The volatility in the market, if anything, has made it even more important in terms of having balance sheets and liquidity because there is a certain amount of acquisition expectation that's built into this sector every year,” says Haendel St. Juste, managing director and senior REIT analyst at Mizuho Americas. Net lease REITs rely on acquisitions because it is not an internal high-growth sub-sector. Historically, more than two-thirds of growth in the sector has come from acquisitions, he notes. Tapping Equity Markets Historically, net lease REITs have funded acquisitions with roughly 50-50 equity and debt, and they’re often tapping equity via ATMs as well as traditional equity issuance. For example, EPRT has pre-funded its growth for the coming year thanks to an upsized stock offering in March that raised $254.2 million. “Because these companies are serial acquirers, the sub-sector requires lots more fresh equity every year,” St. Juste says. “Their stock price and cost of capital matters because they’re spread investing, and that’s why you see their balance sheets a little bit more liquid.” Investors often gravitate to net lease REIT stocks during cyclical downturns and volatility because of the bond-like characteristics of the sector. And the defensive nature of the sector has garnered attention this year as investors have looked for a safe spot to place capital. Net lease REITs have diversified tenancy with long-term leases that also have embedded rent bumps. Balance sheets are typically liquid and low-levered, and investors also like the steady dividend yield they deliver. “From a positioning perspective, we've seen a number of investors that have built their portfolios a bit more towards long-duration sectors in the last couple of months. If you look at what's worked year to date, it's been health care, towers, gaming, and triple net,” St. Juste says. Varied Approach to Acquisitions Although the desire to grow is there, the capacity for growth within the sector is a mixed bag. Most net lease REITs like to invest on a leverage-neutral basis and tend to be conservative allocators of capital. “If you're not trading in a premium–5% or greater to your NAV–you're kind of in the cost of capital penalty box because you're not able to go out and issue equity to grow,” Glimcher says. Triple net REITs without the need to raise any additional capital to reach, and potentially exceed, acquisition targets should be net winners, according to St. Juste. W. P. Carey is among the net lease REITs sitting in a strong capital position. “We've talked this year about having a clear path to fund our investments in 2025 without the need to raise any equity,” Fox says. The REIT plans to fund acquisitions with the sale of non-core operating assets, primarily dispositions of its legacy self-storage properties. The REIT also has a $2 billion credit facility that’s largely undrawn. W. P. Carey started 2025 with guidance for acquisitions in a range between $1 billion and $1.5 billion. “I've characterized that as appropriately conservative given the market uncertainty,” Fox says. The REIT has completed about $449 million in investments through April, primarily involving single-tenant industrial assets. The biggest and obvious headwind is the uncertainty in the world right now, where interest rates are going, where tariffs are going to land, and how that’s all going to flow through to inflation. “This uncertainty tends to chill transaction markets, and we'll probably see some of that, especially from portfolio sellers who may not be as motivated to be in the market right now,” Fox notes. However, some of those same challenges also could provide tailwinds by creating buying opportunities and perhaps motivate sellers to pursue a sale-leaseback to raise capital for their business. “We've done some of our best deals over the years during times of significant uncertainty or when there's capital markets dislocation,” he adds. Searching for Buying Opportunities Finding buying opportunities could be a near-term challenge with uncertainty that may keep sellers on the sidelines. The M&A market is typically a big source of investment opportunities for REITs as sale-leasebacks are often used as a financing tool. However, the pipeline for M&A deals has been relatively quiet this year, given the uncertainty and volatility in capital markets that make pricing more challenging. REITs also are seeing increased competition from private equity groups. According to SLB Capital Advisors, there were three large sale-leaseback deals announced in first quarter by SouthState Bank, AT&T and REI totaling more than $1.5 billion, and all three of those deals went to private equity buyers. “We hear from all the buyers we talk to that there is a shortage of quality sale-leasebacks out there, so there’s probably not as much acquisition volume as they would like, but REITs are actively pursuing those deals that they view as being attractive,” Merkle says. REITs also are well-positioned to win deals when they choose to do so, he says. “They're not stretching; they're not overpaying; but when they like an acquisition they're going after it and putting forth attractive, compelling offers,” he adds. Despite an appetite for growth, net lease REITs are keeping a close eye on their capital costs, potential credit risk and slowing economic growth. “I think the sub-sector is a net winner here, and acquisitions will be part of the story,” St. Juste says. “But we'll probably hear of deals taking a little bit longer, and in some cases, maybe a bit more competition from new private equity sources in the space.”
Sail Through Inflationary Headwinds with Net Lease REITs
Experts are sounding the alarm bells regarding an impending recession due to sustained inflation, rising interest rates and conflict in Europe. As a result, some investors are questioning whether their portfolios are resilient enough to weather an economic downturn. For investors seeking a reliable dividend stock to add to their portfolio, one worth considering is a net lease real estate investment trust (REIT). REITs are companies that own or finance different types of properties and net lease specifically refers to the triple-net lease structure, whereby tenants are responsible for paying expenses related to property taxes, insurance and maintenance. Net lease REITs generally own single-tenant properties leased to creditworthy tenants and operate like corporate bonds due to their long-term leases. However, unlike bonds, net lease REITs can grow substantially through a combination of rent increases and external acquisitions, offering both stability and the potential for long-term growth. In today’s volatile market, here are three reasons why investors should consider adding net lease REITs to their portfolio. Stable dividend yields provide long-term income REITs have high and reliable dividend payouts compared to other stocks due to the REIT structure which requires at least 90 percent of taxable income to be distributed to shareholders as dividends. Several REITs have also increased their dividend over time, which has historically outpaced the rate of inflation and provided investors with steadily growing income. Furthermore, REITs can offer long-term capital appreciation through stock price increases, providing investors with total returns comparable, and often higher, than those of other stocks and fixed income investments. This demonstrates that REITs can be an attractive investment option for both income- and growth- focused investors. Contractual rent increases offer hedge against inflation Some net lease REITs provide natural protection against inflation due to contractual rent increases imbedded in their leases. These can be fixed or linked to an inflationary index such as the consumer price index (CPI). CPI-linked rental increases enable REITs, in particular net lease REITs that are not responsible for property management expenses, to directly offset inflation and pass on rising costs to the tenant. Inflation also tends to increase property prices which increases the overall value of a REIT’s portfolio; however, this growth is tempered by a REIT’s increased cost of debt due to rising interest rates. Regardless, these characteristics help protect investor returns against inflationary pressures, adding resiliency to a portfolio. Diversification protects against certain market risks Some net lease REITs offer diversified portfolios of real estate, meaning they invest across a range of property types, geographies and tenant industries. This ensures that no individual tenant, asset type or industry will have an outsized impact on overall performance, insulating investors from individual market risks and offering stability in economic downturns. Net lease REITs also offer diversification compared to other stocks and bonds an investor may own in their portfolio, as real estate is a distinct asset class that has demonstrated low correlation with other sectors of the stock market. In other words, net lease REITs tend to outperform when other assets in a portfolio are struggling, offsetting market volatility. Conclusion When investors are choosing a net lease REIT for their portfolio, it’s important to consider that not all are created equal. Selecting a REIT with an established history and experience performing in all market cycles will ensure investors are protected from adverse impacts, while reaping the benefits of stability and growth over the long term.
Why Net Lease Continues to Draw Investors
The net lease retail sector continues to outperform despite changing interest rates, with a growing number of retailers expanding their footprints or developing new properties against a “compelling” cap rate environment. That’s according to Michael Fitzgerald, executive director, head of US Retail, W. P. Carey, who told GlobeSt at ICSC Las Vegas that many retailers are “aggressively expanding” in their markets. “We’ve seen a lot of activity in sale-leaseback and we are bullish on net lease retail,” Fitzgerald says. “The retail sector is enormous – and we’re chasing deals.” Fitzgerald also discusses: The state of retail fundamentals How investors are responding to changing interest rates and economic uncertainty What makes W. P. Carey stand out from its competitors in terms of investment opportunities Watch now An interview with Michael Fitzgerald, W. P. Carey, and Holly Amaya, GlobeSt.com.