Morgan Stanley Note On Playing The Triple Net REIT Space

Morgan Stanley suggested a way to play the triple net REIT space with analysis of three companies. The industry is up 23 percent in 2014 on low interest rates, long acquisition pipelines and strong institutional investor interest. However, the increase in valuation, among other factors, makes Morgan Stanley more cautious on the industry.

Spirit Realty Capital - Overweight, $13 Price Target

An increase in acquisition volume during the second half of 2014 is a key reason why Morgan Stanley likes Spirit Realty SRC. The estimate was boosted from $482 million to $582 million.

Shares of Spirit Realty were last up 0.35 percent on the upgrade to $11.42 (13.8 percent upside to price target).

National Retail Properties - Equalweight, $38.50 Price Target

Morgan Stanley sees growth in National Retail Properties NNN but gives the stock an equalweight rating on valuation. The note states, “Assuming interest rates increase this year, we believe NNN’s balance sheet strength and flexibility as well as tenant relationships should enable the company to achieve higher accretion versus peers.”

Regarding valuation, “Valuation now appears to more accurately reflect NNN’s portfolio quality and balance sheet.”

Shares of National Retail Properties were last trading at $37.70, 2.1 percent below the $38.50 price target.

Realty Income - Underweight, $38 Price Target

The research note lists several catalysts why Realty Income O is not an attractive buy. These include proprietary survey data showing negative outlook for large portfolio deals and higher leverage with lower pricing benefit than peers.

Shares of Realty Income are down 0.8 percent on the comments to $45.02. The $38 price target indicates 15.6 percent downside on the stock.