According to the Zhichong Finance APP, with nearly 100% pricing by traders and investors, the well-known Wall Street investment institution, Wedbush Securities, has begun its first coverage of four net lease real estate investment trusts (REITs) focused on the US stock market, giving Essential Properties Realty Trust (EPRT.US) and Broadstone Net Lease (BNL.US) an 'outperform' rating and NETSTREIT (NTST.US) and Realty Income (O.US) a 'neutral' rating.

The Wedbush analyst team said in a recent report, "Although the overall pace of the real estate transaction market has been slow in the past 18-24 months, net lease real estate investment trusts (REITs) largely rely on tenant relationships to continue external growth, and are more stable than real estate stocks.

The trend of the Federal Reserve lowering benchmark interest rates may help improve the capital costs of the entire real estate industry. Wedbush Securities reported that private investors may rejoin the competition, which could affect market trading volumes and yield caps. "Therefore, we are in a positive industry growth trend," the firm's analysts said.

In the view of most Wall Street investment institutions, during the Federal Reserve's interest rate cuts, REITs that provide regular income to investors are usually more suitable for investment than pure real estate stocks. These institutions recommend that investors focusing on real estate choose REITs as their preferred investment category.

The price volatility of real estate stocks is usually much greater than that of REITs, as they directly reflect the supply and demand of the real estate market and company performance. On the other hand, due to their diversified investment and stable rental income streams, REITs have relatively smaller price fluctuations. This asset provides more stable dividend returns and is more attractive to investors pursuing stable cash flow. In the current period of uncertainty in US economic growth, REITs are more defensive and perform more steadily.

Historical statistical data shows that REITs usually perform well during the Federal Reserve's interest rate cuts, as they benefit from the reduction in financing costs and stable high dividend income.

REITs usually rely heavily on debt financing for their real estate investments and operations, and the Federal Reserve's interest rate cuts will significantly lower borrowing costs, enabling REITs to finance at lower interest rates, which directly improves their profitability. During the interest rate cut cycle, REITs with high yields and stable income from bonds and deposits begin to attract investors to invest some of their deposits in REITs, which may drive more investors to buy REITs and thereby push up their REITs trading prices.

Wedbush Securities noted in its report that Essential Properties Realty Trust has a significant equity capital cost advantage, and its higher level of purchase yield limit is expected to bring sustained profit growth trends, at least in the short term.

Broadstone Net Lease's investment portfolio simplification strategy aims to reduce healthcare-related risk exposure from 17.6% to 7.1%, and is expected to receive multiple premium valuations in 2025 and recover strong profitability growth trends.

Meanwhile, Wedbush noted that due to some tenant issues, NETSTREIT's trading price in the US stock market has been under pressure recently, which may result in a lower-than-expected purchase scale.

Wedbush also noted that given a corporate value of about $80 billion, Realty Income's recent expansion in Europe through the average purchase yield limit may make profit growth more difficult. In addition, the investment institution said that fixed asset purchases in 2024 showed a decline from the same period last year.

In terms of stock price trends, the above four REITs symbols covered by Wedbush have all seen gains this year except for NETSTREIT, which has been greatly boosted by expectations of a Fed rate cut. Essential Properties Realty Trust has seen the strongest increase this year, reaching 21%, outperforming the S&P 500 index.