Last week we told you markets were pricing one rate cut for the remainder of 2026. That lasted about a week.

As of this writing, the 10-Year Treasury sits near 4.48% — up from the 4.30–4.40% range it held through most of June — and futures markets are now pricing better than even odds of a rate hike in September. Not a cut. A hike. The Fed is expected to hold at its late-July meeting, but persistent inflation has flipped the conversation. Five years above target, and the recent prints are moving the wrong direction.

Here is what matters for net lease investors: the last time the Treasury moved like this, NNN cap rates barely blinked. Overall net lease cap rates compressed one basis point in Q1 to 6.80% while supply fell nearly 10% quarter-over-quarter and retail bid-ask spreads narrowed to 23 basis points. The market that decoupled from macro noise remains decoupled — because the marginal buyer is still cash, 1031 capital, and family offices, not levered institutions.

But decoupled is not immune. If September brings a hike rather than a cut, the levered buyer stays sidelined longer, supply stays scarce, and the premium for quality gets wider still. Position accordingly.

Two companies control roughly 60% of a $120 billion industry, and they are running in opposite directions. That divergence is now the single most important thing to understand before buying dollar store paper.

Dollar General is doubling down on the core value proposition — its CEO announced in June that more than 2,000 products now sell for a dollar or less. Rural trade areas, needs-based consumables, the customer who counts change. It is the same machine it has always been, and its investment-grade guarantee still backs the standard 10–15 year absolute NNN lease.

Dollar Tree is becoming something else entirely. The banner is opening 400 stores in 2026 while closing 75, and pushing hard into multi-price assortment — more items at $3 to $5 than at $1. It worked last year: fiscal 2025 sales rose 10.4% with comps up 5.3%. Dollar Tree is quietly turning into a small-format variety retailer with a discount brand name.

And then there is Family Dollar — the reason to read lease documents more carefully than ever. Dollar Tree sold the chain to Brigade Capital and Macellum Capital in mid-2025 for roughly $1 billion, a $7.5 billion haircut from what it paid a decade earlier. Around 1,000 stores have closed or are slated to close. Most important for our readers: new Family Dollar leases no longer carry a Dollar Tree corporate guarantee, and the new ownership carries no public credit rating.

The market has already voted. Dollar General trades around 6.75–7.25%, Dollar Tree 6.50–7.00%, Family Dollar 7.50–8.50% — and the Family Dollar range is the one we would treat with the most caution, because the label on the building no longer tells you who stands behind the lease. An older Family Dollar lease with a surviving Dollar Tree guarantee and a new lease signed under private equity ownership are two entirely different investments wearing the same sign.

Last issue we showed you trophy QSR trading at 4.40–5.00% cap rates. This week, the other end of that spectrum: Yum! Brands is closing roughly 250 underperforming Pizza Hut locations — about 3% of the U.S. footprint — with the closures targeted for completion by July 1. A Texas franchisee has already filed Chapter 11. Yum has said openly that its strategic review could end in a sale of the brand.

Industry-wide, Black Box Intelligence flags 9% of full-service restaurant units and 4% of limited-service units as at risk of closure in 2026. The restaurant correction is real — it is just landing very unevenly.

The lesson is the one we keep returning to: in QSR, brand tier is the primary driver of everything. McDonald's ground leases and legacy dine-in pizza boxes are both "restaurant real estate" the way a Treasury bond and a distressed junk bond are both "fixed income." If you own restaurant NNN, know three things cold: whether your guarantee is corporate or franchisee, the unit-level sales of your specific location if your lease gives you reporting rights, and what the building becomes if the tenant goes dark. Drive-thru boxes on hard corners have answers to that last question. 6,000-square-foot dine-in pizza restaurants often do not.

That is the credit loss Agree Realty — one of the most disciplined public net lease REITs — actually realized across its portfolio in 2025. Guidance for 2026: 25 to 50 basis points. Portfolio-wide recapture on re-leased space ran above 100%.

Hold that against the headlines. Francesca's, Eddie Bauer, West Marine, 250 Pizza Huts — the bankruptcy tracker gets longer every month, and yet a curated net lease portfolio lost about a quarter of one percent to credit events. The difference is not luck. It is underwriting: investment-grade concentration, avoiding the watch list before it becomes the bankruptcy list, and owning fungible real estate where a failed tenant becomes a re-leasing event instead of a catastrophe.

The REITs publish this intelligence for free, four times a year, under securities law. Their acquisition cap rates, their watch lists, their credit commentary — it is the closest thing private NNN investors have to an institutional research department. We read the filings so you don't have to, but if you only borrow one habit from the institutions, borrow this one.

Charlie Munger: "Show me the incentive and I will show you the outcome."

Look at who now sits across the table from net lease landlords. Family Dollar is owned by private equity. Walgreens is owned by private equity. Pizza Hut's parent is publicly exploring a sale. In each case the operator's incentives changed the moment ownership changed — and the lease you own did not.

A corporate parent building a hundred-year brand treats its lease obligations as sacred, because default costs it cheap capital everywhere else. A private equity owner underwriting a five-to-seven-year hold treats every store, every guarantee, and every renewal option as a line item in an IRR model. Neither is evil. They are simply responding to their incentives — and the rational response to a marginal store is very different in those two models.

So when you underwrite a net lease today, underwrite the ownership, not just the tenant. Who controls the entity on the guarantee line? What do they need to happen in the next five years? Is your building a store they need, or a store they can live without? The rent check looks identical either way. The risk does not.

The sign on the building tells you who the customer sees. The signature on the lease tells you who you should be watching.

The Latticework Letter is published weekly on Friday mornings. It is independent analysis — we have no brokerage relationships, no listings to push, and no financial products to sell. Our only interest is giving you a clearer picture of the market.

Forward this to someone who owns NNN assets and is tired of getting their intelligence from people with something to sell.