Canadian Net REIT has found a sweet spot by venturing where few private and institutional investors seek to go, says Kevin Henley, the REIT’s president and CEO.

The Montreal-based REIT focuses on acquiring single-tenant net leased retail properties in secondary and tertiary markets. It now owns 98 fully leased properties with 1.54 million square feet of gross leasable area in Quebec, Ontario, Nova Scotia and New Brunswick.

“The way we see it, we compete with less buyers,” Henley says. “Our usual transaction will be too large for private investors and too small for institutional investors.”

About 66 per cent of Canadian Net’s portfolio is composed of recession-resistant necessity retail. While a lot of private capital is seeking necessity retail in primary markets, the buyer pool diminishes in smaller markets “but the tenant quality stays the same,” Henley says.

Most of Canadian Net’s revenue (81 per cent) come from its top ten tenants. The tenant roster is anchored by major grocers Loblaw (18 per cent of NOI), Sobeys (16 per cent), Walmart (13 per cent) and Metro (13 per cent). Some of the secondary and tertiary markets in which Canadian Net has properties have only one major grocer, making them dominant in the market.

Necessity tenants secure a resilient portfolio

“As we keep growing, I expect you’ll see more Sobeys, Loblaw, Metro in the portfolio. At the end of the day, you’ll have a very solid portfolio that’s anchored by necessity tenants only on triple net leases,” he says. “The platform will be very resilient to all economic cycles.”

The Montreal-based REIT has $319 million in assets and a market capitalization of $133.3 million but only four full-time employees – Henley, the chief financial officer and two property accountants.

Henley joined the Canadian Net in 2017 as its chief investment officer after graduating from Concordia University. At the time, the REIT had only about 20 properties. He became president and CEO in 2023.

“We’ve built our reputation across Canada. In the early days it was cold calls that would get us deals. Now calls come from across Canada. “People know now that Canadian Net is a go to buyer for single-tenant assets.”

Based on gross leasable area, 60 per cent of Canadian Net’s portfolio is in Quebec, followed by Ontario (25 per cent) and Nova Scotia and New Brunswick (16 per cent).

Westward growth applying same strategy

Henley says Canadian Net is looking at opportunities across Canada but will not buy just for the sake of increasing its geographical distribution.

Canadian Net has no plans to change its strategy of buying single-tenant properties and having tenants manage them because “it allows us to remain extremely nimble in terms of operations and adds to the scalability of the business.”

The REIT runs the risk of creating a 100 per cent vacancy on a property if a tenant leaves when its lease expires. But Henley maintains that “because we’ve only been doing one thing, I like to think we’re becoming better at thinking like our tenants."

While the single tenant strategy creates more risk, “I believe this risk can be mitigated through understanding what you’re doing and maintaining good relations with your top tenants.”

Most of Canadian Net’s deals are off market purchases from local owners and developers and private funds. Occasionally, Canadian Net buys properties from larger REITs. “For them, a $14-million building in a secondary market is most often not their bread and butter.”

Formerly known as Fronsac, the REIT changed its name to Canadian Net in 2021. “In a public company it’s important that people understand what you’re doing, and so now it’s in the name – we do Canadian net real estate. We thought this was a better identification for us,” Henley says.

Disciplined approach to acquisitions

Canadian Net is currently in buying mode. The REIT raised a $4 million convertible debenture in Dec. 2025 to provide it with additional capital to deploy.

Last month, Canadian Net spent $4.43 million to acquire a single-tenant retail property leased to Bureau en Gros (Staples) at 250 de l’Hôtel-de-Ville Blvd. in Rivière-du-Loup, Que.

The acquisition was a textbook example of what the REIT looks for: a nationally tenanted, triple net property in a good secondary market.

Henley says Canadian Net puts its focus on funds from operations per unit and distribution per unit and not on the number of properties in the portfolio.

“We’re not going to grow for the sake of growing if it’s not increasing the per unit results. We want to remain disciplined,” he says. “If that means growing at a slower pace, but being more profitable, that’s what we’ll do.”