net lease REITs

Net Lease REITs

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) REIT 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.


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Types of Net Lease Properties

Four types of net lease REITs exist.

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

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

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

Absolute Net Lease REIT – 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. But a negative is REITs do not pay qualified dividends.

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

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

TickerCompany NameNo. YearsDividend Yield (%)10-yr Dividend Growth Rate (%)Payout Ratio (%)TTM P/E RatioMarket Cap (millions)
ADCAgree Realty44.55.7715836.1$6,037
BNLBroadstone Net Lease06.9n/a141.621.2$3,050
EPREPR Props27.40.4147.319.9$3,359
EPRTEssential Props Realty54.6n/a94.821.4$3,829
FCPTFour Corners Prop75.2n/a11322.1$2,288
GNLGlobal Net Lease015n/an/an/a$1,121
GOODGladstone Commercial09-2.2n/an/a$531
GTYGetty Realty115.38121.423.1$1,632
NNNNNN REIT345.33.411322.1$7,770
ORealty Income3453.5210.443.1$41,045
OLPOne Liberty Props18.82.599.511.4$435
PINEAlpine Income Prop Trust46.5n/a76.413.4$237
PSTLPostal Realty Trust46.3n/a707.4114.2$300
RTLNecessity Retail REIT012n/an/an/a$954
SRCSpirit Realty Cap36.6-1.7115.217.7$5,698
WPCW.P. Carey266.32.4119.118.9$14,444

Dividend Calendar for the Net Lease REITs

Stock Rover* was used for creating this table.

TickerCompanyEx-Dividend DateDiv. Record DateDividend Payment DateDividend FrequencyNext Div. Payment Per ShareDividend Per Share
ADCAgree Realty7/28/237/31/238/14/2312$0.24 $2.92
BNLBroadstone Net Lease6/29/236/30/237/14/234$0.28 $1.12
EPREPR Props7/28/237/31/238/15/2312$0.28 $3.30
EPRTEssential Props Realty6/29/236/30/237/14/234$0.28 $1.12
FCPTFour Corners Prop6/29/236/30/237/14/234$0.34 $1.36
GNLGlobal Net Lease7/12/237/13/237/17/234$0.40 $1.60
GOODGladstone Commercial8/22/238/23/238/31/2312$0.10 $1.20
GTYGetty Realty9/27/239/28/2310/12/234$0.43 $1.72
NNNNNN REIT7/28/237/31/238/15/234$0.56 $2.26
NTSTNetstreit8/31/239/1/239/15/234$0.20 $0.82
ORealty Income7/31/238/1/238/15/2312$0.26 $3.07
OLPOne Liberty Props6/23/236/26/237/6/234$0.45 $1.80
PINEAlpine Income Prop Trust6/7/236/8/236/30/234$0.28 $1.10
PSTLPostal Realty Trust8/4/238/7/238/31/234$0.24 $0.95
RTLNecessity Retail REIT7/12/237/13/237/17/234$0.21 $0.85
SRCSpirit Realty Cap6/29/236/30/237/14/234$0.66 $2.65
WPCW.P. Carey6/29/236/30/237/14/234$1.07 $4.28

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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