Two Triple Net REITs That Score From Half Court
For the average investor, it's easy to get close to the value creation of a triple net REIT since all of us have visited a Walgreen
In fact, Walgreen recently completed the sale of six office buildings in its Deerfield headquarters to Realty Income
Owning investment grade triple net real estate is comparable to investing in a bond; however, there are notable differences since real estate is a tangible asset that does appreciate and bondholders are creditors and they have no ownership in the companies. Notably, bond investors enjoy the interest income as well as the return of principle. Conversely, REIT investors like dividends and having an equity stake.
Triple net REITs offer a hybrid of sorts. Due to lower bond yields, many investors have substituted REITs for bonds to replace interest income with dividend income. It's important to recognize the difference between being a creditor (a bond holder) and an owner (a REIT owner), especially when dividends are cut or eliminated.
Two Net Lease REITs That Shoot More Than Layups
The landscape of triple net REITs is getting much larger as many companies look for ways to monetize the premium pricing in REIT-dom. Of course, driving the demand for income seems to be the biggest attraction as REITs pay no corporate taxes and instead are forced to pay out at least 90% of taxable income in the form of dividends.
Since triple net REITs lease buildings to corporations on a net-net-net basis (meaning the tenant pays for taxes, insurance and maintenance costs), the income stream is less volatile and the costs to operate (i.e. G&A costs) are minimal. That translates into higher and more predictable dividends. According to Nareit, the triple net REITs pay out some of the highest dividends in the equity REIT sector -- around 4.66% for triple net REITs compared to 3.68% for the entire equity sector.