How Fundamental Income Provides Investors Income Through The Net Lease Sector

Benzinga held its inaugural Benzinga Global Small Cap Conference, a day of dealmaking, networking, and learning, on Dec. 8-9.

In recognition of those disruptive innovators creating positive and diverse change, Benzinga presents Fundamental Income.

About: Fundamental Income is a multi-faceted investment firm specializing in the identification and creation of investment strategies rooted in sustainable income and predictable growth. 

The company is led by seven partners with a combined 50 years of experience and $15-billion of cumulative transaction history.

In the simplest way possible: Fundamental Income is an industry specialist, focused on the net lease real estate sector via two strategies, one public and one private.

Core Offer Unpacked: Alongside its provision of transformational capital, the firm seeks to offer exposure to the net lease industry that generates income from undervalued market segments.

“Our first strategy was creating an index that Nasdaq create and disseminate,” partner and CIO Alexi Panagiotakopoulos said in reference to the firm’s flagship product, the NETLease Corporate Real Estate ETF NETL launched by Exchange Traded Concepts.

“The index is based on 24 publicly traded net lease REITs, and provides investors the opportunity to generate income, protect against inflation, and take advantage of a segment of the market that we think is undervalued and misunderstood.”

Fundamental Income also offers a private institutional platform.

“We raised $500-million of equity from Brookfield Asset Management out of New York, to run a private net lease investment platform as well,” the CIO said. “Both strategies focus on creating sustainable income and identifiable growth by investing in the net lease sector, and owning long-term corporate leases.”

Through Fundamental Income’s strategy, investors can get e-commerce resilient exposure to single tenant, freestanding buildings -- the usual sites of Starbucks Corporation SBUX, CVS Health Corporation CVS, Walgreens Boots Alliance Inc WBA, Kroger Corporation KR, Home Depot Inc HD, Amazon.com Inc AMZN, and FedEx Corporation FDX facilities.

Recent Developments: In light of the pandemic, financial markets experienced a sharp liquidation.

“The product was hurt badly at the beginning of COVID-19 in March, but now that the economy has reopened, and rent collections are over 96%, it has come back strong and is in a position to continue the trend.”

According to Panagiotakopoulos, Fundamental Income’s core strategy was produced on the basis of deep knowledge and experience. Specifically, partner and CEO Chris Burbach was an executive for two public REITs included in the ETF, including STORE Capital STOR who's largest investors include Berkshire Hathaway Inc (NYSE: BRK-A). 

“This is really unique because we’ve built these businesses inside out,” Panagiotakopoulos said in reference to providing investors safety and stability in the pending economic recovery. “We understand the fundamentals behind this, and that’s why we started this focused product -- because the market was missing it.”

Benzinga was told that a major differentiator is the focused investment strategy, excluding malls, multi-tenant offices, and multi-family units. During the pandemic, many REITs struggled under pressure of lockdowns.

“Net lease REITs are actually thriving because properties like drive-through restaurants, distribution centers, grocery stores and gas stations are all places in the economy people still need to go and use on a daily basis,” the CIO noted.

Prospects For Growth: Fundamental Income has grown exponentially.

In a few short years, the firm has added two full-time wholesales and grown to 18 team members. Going forward, the firm is looking to expand the depth and breadth of its product portfolio, further delivering to investors yield and stability.

“Everybody was flocking to the growth stocks that were pushing multiples to crazy numbers. Now that there’s a vaccine on the horizon, people are starting to look at rebalancing and thinking about how they can invest and create value for the long-term.”

“The net lease sector has historically yielded roughly 4.5% to 5%. When you look at it on a relative value basis next to other industry sectors, it looks cheap compared to equities, but it’s still an equity, yet it has potentially more attractive yields than some other asset classes, even though it has better risk-adjusted returns.”

To learn more about Fundamental Income, click here.