NetLease Corporate Real Estate ETF
ETF Trends Chairman Tom Lydon talks about NetLease Corporate Real Estate ETF ((NETL) in this week’s ETF of the Week podcast with Chuck Jaffe on the MoneyLife Show.
NETL seeks to measure the performance before fees and expenses of the Fundamental Income Net Lease Real Estate Index (NETLXT). NETL seeks to provide investors with access to sustainable income with noticeable growth by investing in Net Lease REITs. Net lease REITs are a segment of the real estate sector that focuses on leasing properties to individual tenants under net leases, with tenants responsible for paying most, if not all, of operating costs including property taxes, insurance and maintenance.
This is a high yield idea that focuses on the real estate sector renting corporate real estate to individual tenants. NETL can help investors access a total return strategy aimed at sustainable income and predictable growth.
Real estate investment funds are an excellent source of long-term returns. Listed equity REITs have had some of the best average annual net returns over a two-decade period.
There are also improved diversification benefits. The sector provided an excellent source of diversification for a traditional equity and bond mix. REITs showed a -0.03 correlation to US long bonds and a 0.53 correlation to US large caps.
In terms of improved risk-adjusted returns outside of fixed income, REITs had the highest Sharpe ratio at 0.44. This reflects historically high returns and slightly above average volatility.
Net rental property refers to a contractual arrangement where the person renting the property pays part or all of the taxes, insurance fees and maintenance costs for a property along with the rent. Most commercial properties follow a net rental model. Basically, the tenant is expected to pay all real estate costs as if the tenant were the owner.
Rent escalation provisions in rental agreements can help income grow and keep pace with inflation. The most common net lease is a “triple net lease,” where the tenant pays property taxes, insurance, and maintenance – the three networks in one lease.
These properties include convenience stores, drug stores, restaurants, grocery stores, distribution centers, corporate headquarters, health clubs, and movie theaters. These are all long-term rental properties that are rented out net to individual tenants. Compared to multi-tenant REITs, they require minimal management and fewer risks to consider.
Traditional landlords from a REIT If there are several tenants, operating costs, property management, rental prices, rental periods, alternative areas and local supply / demand are taken into account. In the case of a net lease with a tenant, the tenant’s credit quality, the importance of the property to the tenant and the available alternative space must be taken into account. As a result, minimal landlord responsibilities translate into higher margins and more consistent cash flows for net leases with a tenant.