In a recent ION Influencers Fireside Chat, Teddy Kaplan, Managing Director, President & CEO of Net Lease, at New Mountain Capital joined the host Giovanni Amodeo to discuss the trends in the new lease space. Net lease investing is emerging as a powerful alternative for yield-seeking investors, combining credit-like stability with real estate tax benefits. The discussion also covers New Mountain’s unique PE-driven underwriting and focus on defensive sectors position it well in this growing market.

Topics Discussed

1. Introduction to New Mountain Capital & Net Lease Strategy

• New Mountain Capital is a $55B AUM private equity firm with a strong track record in defensive, acyclical investments.
• The firm’s Net Lease business focuses on industrial real estate, with ~40M sq. ft. across North America.
• Net Lease provides long-duration, tax-efficient income, making it attractive for private wealth and institutional investors.

2. Evolution of the Net Lease Industry

• Originally used for tax planning, Net Lease evolved into a sponsor finance tool for private equity-backed companies.
• Shift from non-traded REITs (historically investor-unfriendly) to perpetual private placement REITs in the wealth channel.
• Today, Net Lease is seen as a hybrid credit/real estate strategy, offering inflation protection and stable cash flow.

3. Why Net Lease is Gaining Traction

• Non-correlated to public equities – Performs well in volatile markets.
• Inflation-resistant – Fixed escalators protect against rising costs (taxes, insurance, maintenance).
• Tax-efficient income – Ideal for high-net-worth investors.
• Durable tenants – Focus on mission-critical industrial assets (e.g., CPG, pharma, food & beverage).

4. How New Mountain Sources & Underwrites Deals

• Synergies with PE team – Leverages deep industry expertise to assess tenant creditworthiness.
• Proprietary sourcing – 75% of deals won without being the highest bidder due to better alignment with sponsors.
• Senior advisors – Former C-suite executives provide unique insights on tenant durability.

5. Future Growth: Private Wealth & European Expansion

• Wealth channel is the fastest-growing due to demand for permanent capital vehicles.
• Closed-end funds still relevant for investors seeking vintage-based returns.
• European expansion – New Mountain is launching a dedicated European Net Lease fund.

6. Common Misconceptions About Net Lease

• Myth: Real estate always hedges inflation through rent increases.
• Reality: Net Lease avoids cost inflation (passed to tenants) while providing fixed rent escalations.

Key timestamps:

00:06 Introduction to ION Influencers Fireside Chats
01:48 Overview of New Mountain Capital
02:44 New Mountain’s Investment Track Record
03:22 Defensive Investment Strategies
04:17 Evolution of the Net Lease Business
05:54 Competition and Market Changes in Net Lease
08:38 Current Trends in Net Lease Investments
10:16 Investor Understanding of Net Lease
15:20 Assessing Fit for Net Lease Investments
19:26 Aligning Interests with Private Equity
21:14 The Unique Approach of New Mountain
22:45 Job Descriptions and Advancement in Private Equity
25:04 Future Growth Channels in Private Wealth
25:50 The Permanency of Investment Vehicles
26:52 Comparing Wealth Channels and Public REITs
27:54 Future Directions for New Mountain’s Investment Strategy