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My Single Biggest Investment In August 2021

Aug. 03, 2021 8:25 AM ETLXILF, O, STOR, UBA, UBP, UBP.PR.H, UBP.PR.K34 Comments


  • To earn extraordinary returns, you need to invest in extraordinary investments.
  • Triple net leases offer extraordinary investment characteristics that remain underappreciated by the market.
  • Most net lease REITs remain deeply undervalued, and we expect 30-50% upside, in addition to the double-digit annual returns from dividend payments and cash flow growth.
  • Looking for a portfolio of ideas like this one? Members of High Yield Landlord get exclusive access to our model portfolio. Learn More »

asset allocation concept graph on blackboard
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Today, only a handful of investments are getting most of the attention. This includes tech stocks (QQQ) Bitcoin (BTC-USD), and SPACs (SPCX) perhaps.

But as you have heard before, you can't expect to earn extraordinary results by

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This article was written by

Jussi Askola, CFA profile picture

Jussi Askola is the President of Leonberg Capital, a value-oriented investment boutique that consults hedge funds, family offices, and private equity firms on REIT investing. He has authored award-winning academic papers on REIT investing, has passed all three CFA exams, and has built relationships with many top REIT executives.

He is the leader of the investing group High Yield Landlord, where he shares his real-money REIT portfolio and transactions in real-time. Features of the group include: three portfolios (core, retirement, international), buy/sell alerts, and a chat room with direct access to Jussi and his team of analysts to ask questions. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of O, STOR either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (34)

Anthony Webster profile picture
Unless the leases have built in CPI escalators, isn't there a big inflation risk with these properties (and therefore the REITs)? Don't you have an implicit macro view built in here about long-term low inflation?
@Anthony Webster most master leases have a 2-3% annual rent escalator built-in.
Anthony Webster profile picture
That's part of my point. If inflation goes-to/stays at say 3%, you are guaranteed to lose. This in contrast to other sectors of the REIT industry, which can reprice quickly to stay ahead of inflation.
Jussi Askola, CFA profile picture
@Anthony Webster Net lease REITs are well protected because they pay no property expenses, get steadier rent growth, and faster growth via external acquisitions than most other REITs. Some net lease REITs have CPI-based rent increases. As always, it is important to be selective.
Zucks profile picture
Don’t kid yourself about the maintenance item. You are generally on point, even a bit conservative on the lease rent escalation clauses. The 2% you cited is today’s level for the most desirable tenants such as banks and highly rated chains. Others have clauses based on a floor but also account for inflation using a local CPI in the formula. That said, as we tend to say, a tenant approaching the end of a lease will use bubble gum to keep the HVAC going rather than fixing it. Many systems may need upgrading anyway. However, in the scheme of things, it’s worth the owner’s offer of upgrading systems anyway to attract a new tenant who will pay top secured rent.
Jussi Askola, CFA profile picture
@Zucks Sure, it does not mean that never pay any maintenance. If your property is empty, you need to reinvest in it to release. But if you have a good tenant that's profile, it won't want to move out, and it will need to take care of the maintenance. Net lease REITs have strong bargaining power with tenants because they own a lot of properties and can plenty of relationships. It is different if you own one or two properties.
right there with you Jussi
long o, wpc, nnn, adc
Jussi Askola, CFA profile picture
@Overfished Thank you for sharing your net lease picks. We own some of those, but most of our net lease capital is going elsewhere at the moment. Feel free to join us for a 2-week free trial to access all our Top Picks: seekingalpha.com/...
seIII profile picture
New ceo at STOR. Something we need to watch closely. Leadership matters. She has skin in the game like we do.

Jussi Askola, CFA profile picture
@seIII She has been with Chris from day 1 and he remains the Executive Chair. I am not too worried about it.
Jussie Askola, can you or one of your readers tell me how I can determine what a REIT'S payout percentage is? Thanks.
“you can expect to earn extraordinary results”

Surely that should be “can’t“…
Jussi Askola, CFA profile picture
@Fruit Fever Thanks! Requesting an edit now.
Nice work, Mr. Askola.

I like triple nets as well. Have been holding both O and WPC for a long time. Added more WPC over the past few months.

Retired income investor
Jussi Askola, CFA profile picture
@usiah Thank you for sharing your picks. We own both, O and WPC, in our Retirement Portfolio. Feel free to join us for a 2-week free trial to access all our Top Picks: seekingalpha.com/...
BullsDividends profile picture
I can buy STOR and O all day long!
Jussi Askola, CFA profile picture
@rschelling Yes, at these prices, we are buyers too, but there are even better net lease opportunities out there.
Retired Investor profile picture
Interesting choice of Aldi for your photo as they just announced they are leaving the US market, which raises questions. Do stores have leases with back-out clauses or are they on the hook for remaining lease payments? Aldi stores are small compared to other grocery stores so how hard is to lease out the abandoned stores?
Jussi Askola, CFA profile picture
@Retired Investor Where did you see that Aldi is leaving the US? They opened their 2000th location last year and made a bold prediction earlier this year to open 100 new locations this year alone. Their German competition Lidl is also aggressively moving to the US.
Agree. There is a new Aldi opening up in my smaller city (<75k population) this year.
Retired Investor profile picture
@Jussi Askola I checked and apparently it was fake internet story. That said, how are leases handled when a store closes?
Hi Jussi...Recently joined HYL to learn more about REIT's and your info has been great. What percentage of a portfolio do most dedicate to REIT's?
Jussi Askola, CFA profile picture
@Mike_InvestSmart That's great to hear :) I invest about 50% my net worth into the REITs recommended at High Yield Landlord: seekingalpha.com/...

If I can help with anything else, I am here for you.
BullsDividends profile picture
@Jussi Askola you need to have a Hulk stomach for that... high volatility is among these turbulent times...
High Yield FIREVestor profile picture
That's a great one, Jussi. Do you see any scenario that would force you to unload STOR, besides it becoming overvalued? Would you unload if WB no longer believes in it?
Investing for Freedom profile picture
@Investing4FIRE I would unload $STOR if the millionaire @Investing4FIRE no longer believes in it. (Disclaimer: I have no position of $STOR.)
Jussi Askola, CFA profile picture
@Investing4FIRE I wouldn't invest based on WB's decision. I owned it before he first invested in the company, sold it when it became overpriced, and got back last year.
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