Commercial Net Lease NNN
January 07, 2001 - 1:03pm EST by
cy132
2001 2002
Price: 10.50 EPS 1.5
Shares Out. (in M): 30 P/E
Market Cap (in $M): 0 P/FCF
Net Debt (in $M): 100 EBIT 0 0
TEV (in $M): 0 TEV/EBIT

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Description

Commercial Net Lease (NNN) is a REIT that focuses on freestanding net leased retail properties in the 7500 - 100,000 s.f. range. The company owns 293 stores leased to 53 major retailers. Tenants include Barnes & Noble, Eckerd Drug, Office Max & Best Buy.

The stock is currently priced at 10 and yields over 12%. Over 60% of the tenants are investment grade companies. No tenant is a significant percentage of the portfolio. The balance sheet is not highly leveraged. Management is dedicated to getting current debt levels even lower. It appears that none of the properties are junk.

During the period in 1999 through the first quarter of 2000 the price of NNN was in the tank. It was thought that with the coming of E - Commerce the need to bricks and mortar stores like the tenants of NNN would one day be passé. However, as we have all seen, though E Commerce will certainly be a force in the future it will not make bricks and mortar obsolete. With the rationalization of the tech sector the hunt for the other end of the spectrum has started. The first properties to have been bid up are trophy real estate.
At some point the mundane but consistent and rising underlying cash flow of NNN will be noticed.

It also wise to think of NNN in the reverse way that one would consider most value stocks. With most value stocks the value buyer looks for a longer term catalyst for price appreciation and some kind of dividend as a kicker and reward for patience. Here much of the return will be from the dividend and long term the appreciation will be the kicker.

Catalyst

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