Net Lease REITs

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A net lease real estate investment trust (REIT) purchases, develops, and owns commercial real estate and rents it to tenants under a net lease agreement. The term usually refers to triple net lease (NNN) structures. But it can refer to other net lease structures too.

Not all REITs invest in net lease properties. Instead, REITs usually focus on a specific property type. For example, American Tower (AMT) and Crown Castle (CCI) are REITs specializing in cell phone towers. Also, Crown Castle is infamous as a holding in Bill Gates’s Portfolio. Some REITs, like Public Storage (PSA), focus on self-storage, yet others emphasize other market niches. Publicly traded REITs usually own hundreds to thousands of properties.

Types of Net Lease Properties

Four types of net lease REITs exist.

Single Net Lease – The tenant pays the monthly base rent and property taxes.

Double Net Lease – The tenant pays the base rent plus the property taxes and insurance.

Triple Net Lease – The tenant pays the base rent plus the property taxes, insurance, and building maintenance.

Absolute Net Lease – The tenant pays the monthly base rent and all other expenses.

The single-tenant triple net lease is popular. The real estate property tends to be a standalone structure, and the lessee is often a national retail chain, like Bass Pro Shops, AMC Theatres, U-Haul, Advance Auto Parts, Walgreens, 7-Eleven, LA Fitness, etc. The tenants are often market leaders with a sound financial position because of the long-term leases.

What is a REIT?

A real estate investment trust (REIT) is a corporation that develops, purchases, owns, and operates commercial real estate properties. A REIT is a company that owns, operates, or finances income-generating commercial real estate.

To qualify as a REIT, a corporation must own real estate that generates income distributed to shareholders. Specifically, according to Investopedia, a REIT must

  • Invest at least 75% of total assets in real estate, cash, or U.S. Treasuries
  • Derive at least 75% of gross income from rents, interest on mortgages that finance a real property, or real estate sales
  • Pay a minimum of 90% of taxable income in the form of shareholder dividends each year
  • Be an entity that’s taxable as a corporation
  • Be managed by a board of directors or trustees
  • Have at least 100 shareholders after its first year of existence 
  • Have no more than 50% of its shares held by five or fewer individuals

Some REITs are privately held, and others are publicly traded on a stock exchange. As a result, retail investors can easily invest in the commercial real estate market by buying and selling a REIT’s stock. The advantage is that investors require significantly less capital.

Investors like REITs because they can pay higher dividend yields and diversify portfolios. However, a risk the dividend may be cut during recessions. For instance, during the Great Recession and the COVID-19 pandemic, black swan event REITs suffered disproportionately, and many cut or suspended their dividend.

Pros of Net Lease REITs

Publicly traded net lease REITs have a few advantages for investors.

No Minimum Investment – The minimum is the cost of one share.

Liquidity – Publicly traded REITs can be traded whenever the stock market is open.

Dividends – REITs must pay dividends permitting investors to generate a passive income stream. Some REITs are dividend growth stocks too. For example, there are 3 Dividend Aristocrat REITs, and Realty Income (O) is a net lease REIT.

Diversification – Investing in publicly traded REITs provides diversification to a portfolio.

Final Thoughts

Real estate investment trusts that invest in net lease properties are known as net lease REITs. The most popular net lease structure is triple net lease REITs (NNN). The largest and most liquid net lease REITs may provide investors with a safe dividend income stream. Moreover, a few are dividend growth stocks.

List of Net Lease REITs – Updated 10/09/22

Stock Rover* and Portfolio Insight* were used to create this table.

Ticker Company Name No. Years Dividend Yield (%) 10-yr Dividend Growth Rate (%) Payout Ratio (%) TTM P/E Ratio Market Cap (millions)
ADC Agree Realty 10 4.3 5.8 142.9 34.4 $5,181 
BNL Broadstone Net Lease 0 7 n/a 144.5 21.2 $2,678 
EPR EPR Props 0 9.2 1 170.3 19.7 $2,685 
EPRT Essential Props Realty 0 5.6 n/a 108.3 20 $2,737 
FCPT Four Corners Property 6 5.8 n/a 108.7 19.1 $1,879 
GNL Global Net Lease 0 15.2 n/a n/a n/a $1,089 
GOOD Gladstone Commercial 0 9.8 0 7518.4 n/a $609 
GTY Getty Realty 10 6.2 12.6 94.2 15.5 $1,243 
NNN National Retail Props 33 5.7 3.4 124 22.6 $6,859 
NTST Netstreit 0 4.4 n/a 363.6 82 $910 
O Realty Income 29 5.1 5.1 294.7 58.5 $35,838 
OLP One Liberty Props 0 8.6 3.2 97.8 11.5 $440 
PINE Alpine Income Prop Trust 0 7 n/a 48.2 8.2 $188 
PSTL Postal Realty Trust 0 6.2 n/a 754.2 125 $281 
RTL Necessity Retail REIT 0 14.3 n/a n/a n/a $791 
SRC Spirit Realty Cap 0 7.5 11.7 152.8 21.2 $4,821 
STOR STORE Capital 8 5.2 n/a 129.4 26.3 $8,853 
WPC W.P. Carey 25 6 5 152.5 25.9 $14,742 
               
  Mean 6.72 7.39 5.31 650.28 34.07  $        5,101 
  Median 0.00 6.20 5.00 143.70 21.20  $        2,279 

Source: Portfolio Insight*, Stock Rover* (as of October 9, 2022)

Dividend Calendar for the Net Lease REITs

Ticker Company Ex-Dividend Date Div. Record Date Dividend Payment Date Dividend Frequency Next Div. Payment Per Share Dividend Per Share
ADC Agree Realty 9/29/22 9/30/22 10/14/22 12 $0.23  $2.81 
BNL Broadstone Net Lease 9/29/22 9/30/22 10/14/22 4 $0.27  $1.08 
EPR EPR Props 9/29/22 9/30/22 10/17/22 12 $0.28  $3.30 
EPRT Essential Props Realty 9/29/22 9/30/22 10/14/22 4 $0.27  $1.08 
FCPT Four Corners Property 9/29/22 9/30/22 10/14/22 4 $0.33  $1.33 
GNL Global Net Lease 10/12/22 10/13/22 10/17/22 4 $0.40  $1.60 
GOOD Gladstone Commercial 9/21/22 9/22/22 9/30/22 12 $0.13  $1.50 
GTY Getty Realty 9/21/22 9/22/22 10/6/22 4 $0.41  $1.64 
NNN National Retail Props 7/28/22 7/29/22 8/15/22 4 $0.55  $2.20 
NTST Netstreit 8/31/22 9/1/22 9/15/22 4 $0.20  $0.80 
O Realty Income 9/30/22 10/3/22 10/14/22 12 $0.25  $2.98 
OLP One Liberty Props 9/26/22 9/27/22 10/7/22 4 $0.45  $1.80 
PINE Alpine Income Prop Trust 9/9/22 9/12/22 9/30/22 4 $0.28  $1.10 
PSTL Postal Realty Trust 8/5/22 8/8/22 8/26/22 4 $0.23  $0.93 
RTL Necessity Retail REIT 10/12/22 10/13/22 10/17/22 4 $0.21  $0.85 
SRC Spirit Realty Cap 9/29/22 9/30/22 10/14/22 4 $0.66  $2.65 
STOR STORE Capital 9/29/22 9/30/22 10/17/22 4 $0.41  $1.64 
WPC W.P. Carey 9/29/22 9/30/22 10/14/22 4 $1.06  $4.24 

Source: Stock Rover* (as of October 9, 2022)


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