Deutsche Bank Markets Research North America United States Financial REITs industry US REIT 3Q16 Earnings Preview REIT pullback & low bar could spark 3Q rallies, but don't get too excited House vie': remains constructr,e for RiliTc at: fundamentals moderate Following a strong start to 2016 the REITs have traded off 10% since 8/1. The decline coincides with a 30bps rise in the 10-year yield and increasing probabilities of a Dec rate hike. While painful, the move has reset valuations, which now appear much healthier. As we have stated in the past, we think the REITs remain in macro limbo, with expectations regarding yields and overall risk appetites trumping bottom up trends. Given the DB house view, which calls for muted GDP growth, a stable 10-year environment, and no recession through 2017, combined with less aggressive REIT valuations, we think the stocks have a little room to run if 3Q can exceed low expectations. Data Centers remain car focus. despite a...nested leasing :olurne decline Following several Q's of record leasing we think the Data Centers could be poised to see some moderation in 3Q as activity naturally ebbs and flows. There are some concerns that public cloud players may take a pause in leasing activity following a rapid period of expansion, but with penetration of cloud workloads still low, we think any such pause would be temporary. Also, with the 10% and 14% drops in DLR and CONE, respectively since 8/1, we think expectations are low, making for an interesting setup for 2 names with secular demand drivers and above average growth prospects over the next few years. Strip valuations looking hotter. but Sports Authority optics could be a challenge Last Q we got less positive on the Strips as valuations had gotten ahead of fundamentals. With the markets seemingly feeling less risk averse, the Strips have pulled back by 11%, easing valuation concerns. 30 could be optically challenging, however, as the impact from th