Not All Real Estate Is Created Equal

Many investors allocate capital to public REITs as if it is a single asset class, or solely based on a property type, such as office, industrial or retail. We believe both approaches fall short. We focus instead on how these companies generate cash flow, rather than on behavioral biases that have little to do with investment results.

Publicly traded net lease REITs share a common business model, which is centered around a specific lease type, not just a property type. This business model creates four layers of diversification: (1) property type; (2) tenant; (3) industry; and (4) geography.

Net lease REITs use this business model to generate predictable cash flow derived from long-term lease contracts with built-in rent increases and minimal to no landlord responsibilities. As a result, net lease REITs have the highest gross profit margins (approximately 90%) and highest EBITDA margins (approximately 79%), relative to any other public REIT sector.

NET Lease Index
Symbol NETLXT
Calculator NASDAQ
Number of Holdings 25
Reconstitution Annual
Rebalance Quarterly
Weighing Modified Market Cap
Methodology GUIDE

Methodology

Fundamental Income, through its proprietary public index, the Fundamental Income Net Lease Real Estate Index (NETLXT), calculated by NASDAQ, serves as the index provider to the NETLease Corporate Real Estate ETF (NYSE Arca: NETL). We partner with best-in-class firms to democratize the public net lease sector in a diversified, transparent, and tradable manner.

Broad Based Exposure to the US Economy

Net lease REITs own single-tenant, free-standing commercial properties that serve as the backbone of American business. Including many household names, tenants of publicly traded net lease REITs benefit from the everyday activities of US consumers. Across nearly every sector, industry, and geography, this broad mix of tenants offers investors highly diversified exposure to US corporate real estate and the economy as a whole.

FedexFed Ex logoAmazonAmazon logoThe Home DepotThe Home Depot logoWalmartWalmart logo7-Eleven7 eleven logoWalgreensWalgreens logoDollar GeneralDollar General logoCircle KCircle K logoSherwin WilliamsSherwin-Williams logoBass Pro ShopsBass Pro Shops logoTaco BellTaco Bell logoAdvance Auto PartsAdvance Auto Parts logoPenskePenske Automotive logoDardenDarden logoTSCTractor Supply Company logoAlbertson’sAlbertsons logo

Net Lease Sector Index Highlights

As of December 31, 2020

25Companies
$195BEnterprise Value
$127BMarket Capitalization
$12.2BAnnualized Revenue
34.5%Debt/Enterprise Value
25,885Properties
98.9%Occupancy
13.0 yrsWtd. Avg.
Remaining Lease Term
50States
3.1%Largest Weighted
Tenant Concentration
4.8%Dividend Yield
15.9xEquity Cash Flow Multiple
6.8 yrsWtd. Avg. Debt / Debt Term Remaining
3.7%Avg. Borrowing Rate
12.6%Avg. Annual Return
Year Public Net Lease REITs Gross Assets (billions)
December 2008 11 $19B
December 2020 25 $173B
Growth Statistics
CAGR (Growth Assets) 20.4%
LTM Sept 2020 Asset Growth $18.6B

Sector Gross Assets

Historical Back Tested Performance

Ticker Index Name
NETLX Fundamental Income Net Lease Real Estate Index
RMZ MSCI US REIT Index
IBOXHY IBOX USD Liquiid High Yield Index
SPBDLL S&P/LSTA U.S. Leveraged Loan 100
AMZDX Alerian MLP Infrastructure Index

DISCLAIMER: Back-tested performance is not actual performance, but hypethetical. The back-test calculations are based on the index's current constituents. Prior to 2017 the back-test used an equal weighted methodology. The index inception date was 12/21/2018. All data prior to the inception date is back-tested. Index returns are quoted before fees and expenses.

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