Dividends are payments approved by a company’s Board of Directors to its shareholders from its earnings. Knowing how a company generates and sustains its dividend payments is essential when making an investment decision. The diagram shown below illustrates how we generate reliable dividends that grow over time.
Identify Acquisition Opportunities
In general, we seek to acquire freestanding, single tenant properties leased to commercial businesses. We also focus on acquiring properties leased to tenants with strong credit and/or favorable property level cash flows located in significant markets or strategic locations critical to generating revenue for the business.
Our acquisitions team maintains relationships with tenants, real estate developers, owners, brokers, private equity firms and investment banks to source these opportunities.
Analyze the Merits of a Potential Acquisition
Once a viable opportunity has been identified, our due diligence or underwriting process begins. At this point, we are trying to determine:
- If the tenant represents a reliable source of lease revenue
- If the property is in a strategic location critical to generating revenue
- If the acquisition is appropriate relative to the diversification of our portfolio
- If the industry is favored relative to macroeconomic trends
- If the property is priced near replacement cost and leased at rents that approximate market rents
There are many acquisition opportunities we identify that don’t make it past an initial analysis. Opportunities that do pass this initial screen experience a rigorous review process by our in-house research team, culminating in a final evaluation by our Investment Committee, comprised of select senior-level executives.
Buy and Fund Property Acquisitions
Once our Investment Committee approves a property for acquisition, we move quickly to purchase the property. Having ample access to well-priced capital gives the seller confidence that we will close as promised—differentiating us from other “contingent” buyers.
To immediately fund acquisitions, we maintain an acquisition credit facility of $2 billion, which also has a
$1 billion accordion expansion feature. Ultimately, we seek to permanently fund our acquisition activity by issuing additional common and preferred stock or issuing long-term, investment-grade-rated bonds.
Manage our Portfolio to Maintain Consistent Lease Revenue
Because we have long-term leases with creditworthy tenants, our real estate portfolio has generally performed well, and occupancy has remained high. Here’s how we’ve kept our lease revenue stable and consistent:
- Manage lease expirations in advance of their expiration date.
We enter into discussions with a tenant well in advance of the lease expiration date to determine our options. We closely monitor the economic and real estate environment in a particular market to gauge whether or not it would be better to re-lease the property to the same tenant, to a new tenant, or to sell the property before the lease expires.
- Monitor and manage any tenant operating difficulties to minimize vacancies.
One of the most important responsibilities of owning a portfolio of commercial real estate is monitoring the operations of our individual tenants and the various economic factors that might impact their industries. Our in-house research team is specifically trained to monitor news and economic trends for the different industries in which our tenants operate, as well as the performance of the individual companies with which we maintain long-term leases.
- Determine which properties represent potential sales opportunities.
Determining whether or not to sell a particular property is both an operational and a financial decision. Property sales materialize when we believe that:
- Sales proceeds can be reinvested at higher returns
- Sale proceeds can be redeployed into assets that better meet our investment strategy
- The sale of a property will reduce re-leasing risk in the future
Cash – Monthly Cash Dividends to Shareholders
The objective of all the processes mentioned above is to generate dependable monthly cash dividends for our shareholders that grow over time. As with any investment, though, there is no guarantee that we will always be successful in executing every step of the dividend generating process.
Despite paying consecutive monthly dividends since our founding in 1969, we always recommend that investors rely on us for only a portion of their income needs.
Past performance is not a reliable indicator of future performance. There is risk that dividends will not always increase, that dividends will not be declared according to past history, or that dividends will be declared at all.