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. Another negative is REITs do not pay qualified dividends, instead, they pay ordinary or non-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.

TickerCompanyDividend YieldEPS 5-Year Avg (%)Dividend 5-Year Avg (%)Dividend 10-Year Avg (%)Payout RatioPrice / EarningsCap ($M USD)
ADCAgree Realty5.10%-3%n/a 6.10%170.50%34.5$5,871
BNLBroadstone Net Lease7.20%n/an/a n/a 111.00%15.9$2,966
EPREPR Props7.40%-10.50%-5.20%0.40%171.00%23.2$3,374
EPRTEssential Props Realty4.80%14.90%n/a n/a 93.30%19.8$3,666
FCPTFour Corners Prop6.00%-3.20%4.30%n/a 125.90%21.4$2,090
GNLGlobal Net Lease16.20%n/an/a n/a n/a n/a $2,015
GOODGladstone Commercial9.40%n/a-4.40%-2.20%n/a n/a $508
GTYGetty Realty6.20%3.60%6.10%8.00%120.30%20.5$1,536
NNNNNN REIT5.60%8.30%2.50%3.40%104.00%18.9$7,337
NTSTNetstreit5.30%n/a n/a n/a 619.20%119.1$1,066
ORealty Income5.70%2.30%3.00%3.50%229.90%40.8$38,954
OLPOne Liberty Props9.00%-3.20%0.00%2.50%165.10%18.5$419
PINEAlpine Income Prop Trust6.80%n/a n/a n/a 200.00%33.1$222
PSTLPostal Realty Trust6.80%n/a n/a n/a 728.90%107.5$305
SRCSpirit Realty Cap6.50%10.80%1.40%-1.60%151.10%23.3$5,804
WPCW.P. Carey7.00%5.80%0.90%2.20%116.70%16.9$13,472

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 Realty11/29/2311/30/2312/14/2312$0.25 $2.96
BNLBroadstone Net Lease12/28/2312/29/231/12/244$0.28 $1.14
EPREPR Props11/29/2311/30/2312/15/2312$0.28 $3.30
EPRTEssential Props Realty9/28/239/29/2310/13/234$0.28 $1.12
FCPTFour Corners Prop12/28/2312/29/231/12/244$0.34 $1.38
GNLGlobal Net Lease10/11/2310/12/2310/16/234$0.35 $1.42
GOODGladstone Commercial12/15/2312/18/2312/29/2312$0.10 $1.20
GTYGetty Realty12/27/2312/28/231/11/244$0.45 $1.80
NNNNNN REIT10/30/2310/31/2311/15/234$0.56 $2.26
NTSTNetstreit11/30/2312/1/2312/15/234$0.20 $0.82
ORealty Income11/30/2312/1/2312/15/2312$0.26 $3.07
OLPOne Liberty Props10/2/2310/3/2310/11/234$0.45 $1.80
PINEAlpine Income Prop Trust12/13/2312/14/2312/29/234$0.28 $1.10
PSTLPostal Realty Trust10/31/2311/1/2311/30/234$0.24 $0.95
SRCSpirit Realty Cap9/28/239/29/2310/13/234$0.67 $2.68
WPCW.P. Carey11/2/23n/an/a4$1.07 $4.28

Other REIT Lists

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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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