Right now doesn't seem like a particularly propitious moment for investing in brick-and-mortar businesses, but a new member of the retail REIT vertical does seem to hold some promise. That would be NETSTREIT (NYSE: NTST), a Dallas-based real estate investment trust (REIT) that just went public in August.
Here's how it describes itself: "By seeking out quality single-tenant net lease retail properties in diverse industries nationwide, we deliver opportunities for growth for all parties."
So, is NETSTREIT a buy?
First of all, what is a net lease retail property?
Let's look at the idea of net lease retail properties of the single-tenant variety. My Millionacres colleague Matt Frankel goes into depth on that topic, but basically it means one tenant per building, and that tenant is responsible for property taxes, building insurance, and most maintenance costs.
Thus, the rent you take in is net of all those expenses, rather than a gross-income lease, in which you as the property owner are responsible for all those expenses.
There are pros and cons to each, but what we're looking at here is exactly who these tenants are in buildings in which NETSTREIT is invested.
A murderer's row of "defensive retail tenants"
Check out page six of its August investor presentation and you'll see how NETSTREIT has focused on what it calls "a national diversified portfolio comprised primarily of defensive retail tenants."
By "defensive," the company means resistant to the pressures of e-commerce that have forced a fast-growing list of brick-and-mortar retailers, and even some REITs, onto the endangered list or into extinction.
NETSTREIT breaks its portfolio into four buckets. Here they are, with a few examples of its high-profile tenants:
- Necessity: Walgreens (NASDAQ: WBA), Walmart (NYSE: WMT), CVS (NYSE: CVS), Kroger (NYSE: KR), and Lowe's (NYSE: LOW)
- Discount: Family Dollar (NASDAQ: DLTR), Dollar General (NYSE: DG), Dollar Tree (NASDAQ: DLTR), and Kohl's (NYSE: KSS)
- Service: Starbucks (NASDAQ: SBUX), Taco Bell (NYSE: YUM), Firestone (OTCM: BRDCY), and 7-Eleven (OTCM: SVNDY)
- Other: Ashley HomeStore, Hobby Lobby, Verizon (NYSE: VZ), and Camping World (NYSE: CWH)
This looks like a murderers' row of tenants that can hold up well to tough competition from each other, an outside world full of e-commerce titans, and even a deadly virus.
Not a month old and already a yield
NETSTREIT says its initial public offering on Aug. 13 brought in $207.2 million for 12.5 million shares of common stock at $18 apiece. As of Sept. 3, it's been as high as $18.31 and as low as $17.15. That's pretty steady. And it's very early in this player's game, but the stock has already yielded a dividend.
The $0.10 a share declared for the third quarter was prorated to the Aug. 13 IPO to quarter's end to represent an annualized dividend rate of $0.80 a share, which gives this brand-new entity a trailing 12-month (TTM) yield of 4.37%.
The company also says it repaid $50 million of its line of credit, "bringing the outstanding balance to zero," and that it collected 95% of its July rent payments and 99% of August's rents by Aug. 24.
These are tenants with (usually) long-term leases and business models that have worked for them on a national and international basis for decades. So even though the bloom is not yet off the rose of this new retail REIT, it appears to be worth sniffing around for a long-term investment.