In a recent ION Influencers Fireside Chat, Giovanni Amodeo sat down with Teddy Kaplan, Head of Net Lease at New Mountain Capital, to unpack the evolving landscape of the Net Lease real estate sector. With over two decades of experience, Kaplan shared expert insights into trends, deal sourcing, and the strategic advantages of integrating net lease investments into diversified portfolios.

Key Topics Discussed in the Fireside Chat

1. Teddy Kaplan’s Career Journey in Net Lease

• Started at WP Carey, a pioneer in net lease structures.

• Built out net lease platforms at Angelo Gordon before launching the strategy at New Mountain Capital in 2016.

• Currently manages a portfolio nearing 40 million square feet of primarily industrial net lease real estate across North America.

2. New Mountain Capital’s Platform and Philosophy

• $55B AUM across private equity and adjacent strategies.

• Emphasis on defensive growth sectors and downside protection.

• Has never experienced a bankruptcy or interest default in 25 years—a rare feat in the leveraged buyout space.

3. Evolution of the Net Lease Market

• Transition from tax-centric deals to mainstream institutional interest.

• Rise of sale-leasebacks as a value-accretive tool for private equity portfolio companies.

• Maturation of net lease into a hybrid asset class—part credit, part real estate—with long-duration income and inflation resilience.

4. Why Net Lease Is Gaining Traction

• Non-correlation to public equities.

• Naturally tax-efficient and provides fixed annual rent escalations.

• Immune to rising costs in taxes, insurance, and maintenance due to tenant responsibility.

• Increasing popularity within wealth management channels and core-plus institutional portfolios.

5. Common Misconceptions & Pushbacks

• Critics argue traditional real estate provides more inflation-linked upside.

• Kaplan counters that net lease structures shift inflation risk away from landlords and create predictable, durable cash flows.

6. Deal Sourcing & Proprietary Edge

• New Mountain leverages its private equity insights to identify and underwrite creditworthy tenants.

• Approximately 75% of net lease deals are won without needing to be the highest bidder.

• Integration with PE allows the firm to engage early with buyers during M&A and position themselves as value-adding real estate partners.

7. Structuring Alignment with Private Equity Teams

• Net lease strategy at New Mountain operates in true joint venture with the PE team.

• Cultural and economic incentives are designed to encourage cross-platform collaboration.

• PE professionals are evaluated partly on their contribution to adjacent strategies like net lease, ensuring deep knowledge sharing and deal alignment.

Why Net Lease Should (or Shouldn’t) Be in Every Portfolio

Why It Belongs:

• Inflation-resistant income

• Credit-like stability with real estate upside

• Ideal for wealth managers seeking tax efficiency

Why Some Hesitate:

• Misunderstood inflation dynamics

• Unfamiliarity with the hybrid asset profile

• Belief that value creation only comes through re-tenanting or rent resets

Final Takeaway

Net lease real estate has quietly evolved into a core holding for sophisticated investors. With players like New Mountain Capital applying private equity discipline to real estate underwriting, the asset class now offers a compelling mix of stability, tax efficiency, and scalability—especially for those focused on long-duration, non-correlated returns.

🗣️ “We’ve turned the traditional real estate paradigm on its head,” Kaplan said. “If we do our job right, our tenants never leave—and our investors keep getting paid.”

Key timestamps:

00:06 Introduction to the Fireside Chat
01:26 Overview of New Mountain Capital
03:39 Evolution of the Net Lease Business
09:47 Investor Perspectives on Net Lease
13:44 Assessing Company Fit in Net Lease
17:50 Creating Alignment with Private Equity
19:38 New Mountain’s Unique Approach to Private Equity
20:22 Expanding Financial Solutions in Private Equity
21:01 Mechanisms for Collaboration and Economics
21:45 Role of Senior Advisors in Underwriting
22:32 Insights from Senior Advisors on Industry Knowledge
23:28 Closing Thoughts and Acknowledgments