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A REIT Opportunity in the Sale/Leaseback Space

Remember that a decrease in share price means that dividend yields go up. That's especially attractive to know since the triple-net REITs have a long history of steady dividend payments with a solid track record of steady earnings growth. My favorite triple-net REIT -- Realty Income , W.P. Carey and National Retail Properties -- all have extraordinary track records of not only paying dividends every year but also for raising them.

Why buy triple-net REITs Today? First off, I would rather invest in an environment with increasing fundamentals and rising rates, versus decreasing fundamentals and lowering rates. Secondly, over the long term, triple-net REITs have proven to be a good hedge against inflation because of an ability to raise rents in an inflationary environment. Third, triple-net REITs are paying high risk-adjusted dividends today.

As the triple-net REIT industry continues to blossom, many companies are continuing to exploit the sale-leaseback structure as a vehicle to monetize the balance sheet. Today that window of opportunity for sale/leaseback monetization is wide open; however, the threat of rising interest rates could increase the speed at which many corporations pursue REIT deals as a way to lock into attractively low-cost capital.

Last year, Bloomin' Brands (BLMN), closed a deal with National Retail Properties and Cole Real Estate Investments (COLE) on a 67-store package worth around $192.9 million.

Family Dollar (FDO) has also closed on several large portfolios of sale/leaseback deals as a way to monetize the new stores as a source of capital for the company's ongoing fee development program. Last year, the company created a fee development program whereby the dollar chain works with developers to build stores using the company's capital and then leases them back to institutional buyers and REITs.

As the wave of REIT consolidation continues, many listed REITs have tapped into the sale/leaseback model as a way to gain scale quickly. American Realty Capital Properties (APRP), American Realty Capital Trust IV (ARCTIV) and Spirit Realty Capital (SRC) have all exploited the growing asset unlock model. In addition, several private players like Store Capital, Angelo Gordon and United Trust Fund have been active owners in the $2 trillion triple-net sector.
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