Exchange Traded Concepts has launched the NETLease Corporate Real Estate ETF.
“This fund tracks the net lease real estate sector, which exemplifies consistent and predictable cash flows that net lease REITs derive from a diverse portfolio of corporate-leased properties,” said J. Garrett Stevens, CEO of Exchange Traded Concepts. “Great colleagues and great ideas are the true drivers of ETF success,” continued Stevens.
The NETL ETF is uniquely focused solely on net lease REITs, which is one of the fastest growing sectors within the REIT space. This pure-play net lease REIT ETF encompasses a variety of REITs that provide sustainable cash flows by leasing their properties through long-term contractual leases on a triple-net lease basis. The leases have terms that are generally 10 years or longer, predetermined rental rate increases, and minimal landlord responsibilities.
Net lease real estate has long been a misunderstood sector, primarily because net lease REITs act more as capital providers to operating businesses and generate their returns from contractual, tenant lease payments, rather than property appreciation. In addition, the management teams of net lease REITs may have strong underwriting and due diligence methodologies that target creditworthy tenants and properties that are integral to the tenants’ businesses. Net lease tenants are also responsible for property expenses such as taxes and insurance, other operating expenses and most of the capital improvements, which further support reliable cash flows produced by the underlying real estate for the building owner.
This newly created net lease ETF is based on the Fundamental Income Net Lease Real Estate Index (NNNLSCTR), which is calculated by Nasdaq and aims to allow investors to benefit from these unique net lease REIT fundamentals. The NETLease ETF does not have exposure to multi-tenant malls, traditional multi-tenant office buildings and multifamily owners, all of whom have significant capital expenditures and operating expense obligations.
Chris Burbach, co-founder and partner of Fundamental Income stated, “We started Fundamental Income with a simple view that investments with cash flows built upon identifiable underlying fundamentals, that are stable and predictable, should be worth more than those without a clear foundation or less certainty.
“Net lease REITs have the potential to provide investment income and capital preservation, in a market searching for both, which is why we are excited to partner with ETC. We believe this ETF offers investors broad exposure to the tangible U.S. economy through the underlying predictable rents of NETL. The time has come for investors to shift their focus from property appearances to results and for net lease real estate to stand on its own — we created the Index to do just that.”