National Retail Properties Downgraded To Market Perform

Wells Fargo has downgraded National Retail Properties NNN from Outperform to Market perform based on valuation, and has reduced estimates on the company as well. In the report, Wells Fargo writes "Year-to-date the shares have outperformed the Dow Jones equity REIT benchmarks by ~600bp and NNN's high cash yield is appealing in this environment but we are unwilling to raise our valuation range further. The shares are trading at a premium to historic levels (absolute and vs. peers) as well as private market values (7.5-8.5% cap rates). Our valuation range remains $24-26/share. We are reducing our 2010-2011 FFO/sh from $1.40/$1.56 to $1.38/$1.50. NNN acquired 25 properties for $88.8MM in Q3 and sold 2 properties for net proceeds of $1.4MM. We still believe sequential growth in NNN's FFO/sh is dependent on net acquisition activity. As with other net lease REITs, the pace of acquisitions has taken longer and proven more sluggish than originally anticipated ($127MM year-to-date). We expect volume to accelerate in 2011 but pricing is becoming more competitive." National Retail Properties closed yesterday at $27.02.