8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: July 28, 2004 COMMERCIAL NET LEASE REALTY, INC. (exact name of registrant as specified in its charter)
Maryland (State or other jurisdiction of incorporation or organization)	001-11290 (Commission File Number)	56-1431377 (I.R.S. Employment Identification No.)
450 South Orange Avenue, Orlando, FL 32801 (Address of principal executive offices, including zip code) (407) 265-7348 (Registrant’s telephone number, including area code)

Item 7. Financial Statements and Exhibits.

Exhibit 99.1: Press Release dated Juy 28, 2004.

Item 12. Results of Operations and Financial Condition.

On July 28, 2004, Commercial Net Lease Realty, Inc. issued a press release announcing its results of operations and financial condition for the quarter and six months ended June 30, 2004. The press release is attached hereto as Exhibit 99.1.

The information in this Form 8-K is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: July 28, 2004 By: /s/ Kevin B. Habicht
        Kevin B. Habicht
        Executive Vice President and
        Chief Financial Officer

EX-99

NEWS RELEASE

For information contact:
Kevin B. Habicht
Chief Financial Officer
(407) 265-7348

For Immediate Release
July 28, 2004

SECOND QUARTER OPERATING RESULTS ANNOUNCED BY
COMMERCIAL NET LEASE REALTY, INC.

Orlando, Florida, July 28, 2004 — Commercial Net Lease Realty, Inc. (NYSE:NNN), an equity real estate investment trust, reported funds from operations (“FFO”) for the second quarter ended June 30, 2004 were $14,809,000 or 29 cents per share compared to $14,491,000 or 36 cents per share for the same period last year. Excluding the $3,200,000 charge in connection with the management transition costs, FFO per share for the second quarter ended June 30, 2004 would have been 35 cents per share. For the six months ended June 30, 2004, FFO was $33,203,000 or 65 cents per share compared to $26,315,000 or 65 cents for the same period last year.

Net earnings available to common shareholders for the quarter ended June 30, 2004 was $11,314,000 or 22 cents per share compared to $11,342,000 or 28 cents per share for the same period last year. Revenues for the second quarter increased to $33,260,000 compared to $24,438,000 for last year’s second quarter. Net earnings available to common shareholders for the six months ended June 30, 2004 was $26,161,000 or 51 cents per share from $20,495,000 or 50 cents per share for the same period last year. Revenues for the six months increased to $63,769,000 compared to $47,006,000 for the same period last year.

During the second quarter of 2004, the Company and its affiliated subsidiaries invested $56,519,000 in additional properties and construction in progress. The Company also announced that it disposed of 11 properties during the second quarter of 2004 generating net proceeds of $15,976,000 resulting in a net gain of $2,203,000 for financial reporting purposes.

Craig Macnab, Chief Executive Officer and President, commented, “We are making significant progress toward our goal of reducing overall expenses. We were also gratified with the strong response to our $150 million ten-year unsecured notes offering, which we successfully completed in June. This lowered our cost of capital and reduced our exposure to floating interest rates. We continue to be cautious and disciplined on the acquisition front; however, we are encouraged about the outlook for the second half of the year as we focus on a broader variety of retail opportunities.”

Commercial Net Lease Realty invests in high quality, single-tenant retail and office properties subject generally to long-term, net leases with established tenants, such as Barnes & Noble, Best Buy, Eckerd, OfficeMax, Wal-Mart and the United States of America. The Company currently owns 344 properties held for investment in 38 states with a gross leasable area of approximately 8.0 million square feet. These properties are leased to 137 corporations in 52 industrial classifications.

Commercial Net Lease Realty Services, Inc. (“Services”) is included in the consolidated financial statements due to the implementation of Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities.” The prior period comparable condensed consolidated financial statements have been restated to show Services consolidated in all periods. The adoption of this interpretation did not have a significant impact on the financial position or results of operations of the Company.

Management will hold a conference call on July 28, 2004 at 11:00 am EDT to review the Company’s results. The call can be accessed on the Company’s web site live at http://www.cnlreit.com. For those unable to listen to the live broadcast, a replay will be available on the Company’s web site. In addition, the Company will post a summary of any earnings guidance given on the call to the Company’s website.

Statements in this press release, which are not strictly historical, are “forward-looking” statements. Forward-looking statements involve known and unknown risks, which may cause the Company’s actual future results to differ materially from expected results. These risks include, among others, general economic conditions, local real estate conditions, changes in interest rates, increases in operating costs, the availability of capital, and the profitability of the Company’s taxable subsidiary. Additional information concerning these and other factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the Company’s SEC filings, including, but not limited to, the Company’s report on Form 10-K. Copies of each filing may be obtained from the Company or the SEC. Consequently, such forward-looking statements should be regarded solely as reflections of the Company’s current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.

Funds from Operations, commonly referred to as FFO, is a relative non-GAAP financial measure of operating performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. For purposes of the Company, FFO is net earnings excluding depreciation, gains and losses on the disposition of real estate, and the Company’s share of these items from the Company’s unconsolidated partnerships.

FFO is generally considered by industry analysts to be the most appropriate measure of performance. FFO does not necessarily represent cash provided by operating activities in accordance with accounting principles generally accepted in the United States of America and should not be considered an alternative to net income as an indication of the Company’s performance or to cash flow as a measure of liquidity or ability to make distributions. Management considers FFO an appropriate measure of performance of an equity REIT because it primarily excludes the assumption that the value of the real estate assets diminishes predictably over time, and because industry analysts have accepted it as a performance measure. The Company’s computation of FFO may differ from the methodology for calculating FFO used by other equity REITs, and therefore, may not be comparable to such other REITs

The Company has determined that there are earnings from discontinued operations in each of its segments, real estate held for investment and real estate held for sale. All property dispositions from the Company’s held for investment segment are classified as discontinued operations. In addition, certain properties in the Company’s held for sale segment that have generated revenues before disposition are to be classified as discontinued operations. These held for sale properties have not historically been classified as discontinued operations, prior period comparable condensed consolidated financial statements have been restated to include these properties in its earnings from discontinued operations. These adjustments resulted in a decrease in the Company’s reported total revenues and total and per share income from continuing operations and an increase in the Company’s income from discontinued operations.  However, the Company’s total and per share FFO and net income available to common stockholders is not affected.

Commercial Net Lease Realty, Inc. (in thousands, except per share data)
Income Statement Summary	Quarter Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
Revenues:
Rental and earned income	$	28,309		$	21,110		$	54,997		$	42,472
Real estate expense reimbursement from tenants		1,329			281			3,031			960
Contingent rental income		90			100			420			402
Gain on disposition of real estate held for sale		1,744			2,778			1,823			2,829
Interest income from real estate transactions		1,788			169			3,498			343
		33,260			24,438			63,769			47,006
Operating expenses:
General and administrative		5,399			5,328			11,307			9,831
Real estate		3,280			551			6,256			1,532
Depreciation and amortization		4,238			3,072			8,444			5,938
		12,917			8,951			26,007			17,301
Other expenses (revenues):
Interest and other income		(789	)		(1,338	)		(1,869	)		(2,208	)
Interest expense		7,746			6,836			15,208			13,228
Dissenting shareholders' settlement		-			-			-			2,413
Transition costs		3,200			-			3,200			-
		10,157			5,498			16,539			13,433
Provision for income tax benefit		371			298			1,257			1,064
Minority interest		11			(17	)		61			1
Equity in earnings of unconsolidated affiliates		1,286			862			2,539			1,882
Earnings from continuing operations		11,854			11,132			25,080			19,219
Earnings from discontinued operations:
Real estate, held for investment		676			477			1,467			1,651
Real estate, held for sale		205			735			2,456			1,628
		881			1,212			3,923			3,279
Net earnings		12,735			12,344			29,003			22,498
Series A preferred dividends		(1,002	)		(1,002	)		(2,004	)		(2,003	)
Series B convertible preferred dividends		(419	)		-			(838	)		-
Net earnings available to common shareholders	$	11,314		$	11,342		$	26,161		$	20,495
Weighted average common shares outstanding:
Basic		51,479			40,445			51,107			40,428
Diluted		51,768			40,751			51,414			40,661
Net earnings per share available to common stockholders:
Basic:
Continuing operations	$	0.20		$	0.25		$	0.43		$	0.43
Discontinued operations		0.02			0.03			0.08			0.08
Net earnings	$	0.22		$	0.28		$	0.51		$	0.51
Diluted:
Continuing operations	$	0.20		$	0.25		$	0.43		$	0.42
Discontinued operations		0.02			0.03			0.08			0.08
Net earnings	$	0.22		$	0.28		$	0.51		$	0.50

Commercial Net Lease Realty, Inc. (in thousands, except per share data)
	Quarter Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
Reconciliation of funds from operations:
Net earnings available to common shareholders	$	11,314		$	11,342		$	26,161		$	20,495
Real estate depreciation and amortization:
Continuing operations		3,774			2,520			7,528			4,978
Discontinued operations		26			105			86			223
Partnership real estate depreciation		154			171			313			335
Loss (gain) on disposition of real estate held for
investment from discontinued operations		(459	)		353			(885	)		284
Funds from operations	$	14,809		$	14,491		$	33,203		$	26,315
Funds from operations per share:
Basic	$	0.29		$	0.36		$	0.65		$	0.65
Diluted	$	0.29		$	0.36		$	0.65		$	0.65
In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (“SFAS No. 144”) the Company has classified its ten and nine investment assets sold during 2004 and 2003, respectively, as discontinued operations. All real estate held for investment sold subsequent to December 31, 2001, the effective date of SFAS No. 144, have been classified to discontinued operations. The following is a summary of earnings from discontinued operations from real estate held for investment.
	Quarter Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
Revenues:
Rental and earned income	$	206		$	909		$	536		$	2,058
Other income		46			36			143			127
		252			945			679			2,185
Expenses:
General and administrative		1			7			3			11
Real estate		8			3			8			16
Depreciation and amortization		26			105			86			223
		35			115			97			250
Gain (loss) on disposition of real estate		459			(353	)		885			(284	)
Earnings from discontinued operations from real estate
held for investment	$	676		$	477		$	1,467		$	1,651

Commercial Net Lease Realty, Inc. (in thousands, except per share data)
The Company has classified its three and eight held for sale assets sold during 2004 and 2003, respectively, as discontinued operations. In addition, the Company has classified its nine properties that are currently held for sale and generating rental revenues as discontinued operations. The Company has reclassified all held for sale properties that have generated rental revenue before disposition which were sold subsequent to December 31, 2001, the effective date of SFAS No. 144, to discontinued operations. The following is a summary of earnings from discontinued operations from real estate held for sale.
	Quarter Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
Revenues:
Rental and earned income	$	627		$	706		$	1,145		$	1,465
Gain on disposition or real estate held for sale		-			643			3,300			1,575
Other income		55			19			174			20
		682			1,368			4,619			3,060
Expenses:
General and administrative		-			-			3			2
Real estate		124			11			161			12
Interest		227			74			496			205
Depreciation and amortization		-			98			-			216
		351			183			660			435
Provision for income taxes		(126	)		(450	)		(1,503	)		(997	)
Earnings from discontinued operations from real estate held for sale	$	205		$	735		$	2,456		$	1,628

Commercial Net Lease Realty, Inc. (in thousands)
Balance Sheet Summary	June 30, 2004		December 31, 2003
Assets:
Cash and cash equivalents	$	10,105	$	5,335
Receivables, net of allowance		3,641		4,740
Mortgages, notes and accrued interest receivable,          net of allowance		63,226		68,423
Line of credit, note and accrued interest receivable          from related party		29,265		16,530
Investments in and other receivables from unconsolidated          affiliates		34,092		39,606
Real estate, held for investment:
Accounted for using the operating method, net of               accumulated depreciation and amortization		945,636		887,124
Accounted for using the direct financing method		106,309		102,970
Real estate, held for sale		75,344		45,822
Accrued rental income, net of allowance		28,234		25,322
Other assets		19,803		17,906
Total assets	$	1,315,655	$	1,213,778
Liabilities and stockholders’ equity:
Current liabilities	$	18,270	$	15,328
Line of credit payable		37,300		27,800
Mortgages payable		164,032		149,861
Notes payable		343,241		289,758
Minority interest		314		277
Stockholders’ equity		752,498		730,754
Total liabilities and equity	$	1,315,655	$	1,213,778
Common shares outstanding		51,803		50,002

Commercial Net Lease Realty, Inc. Properties Held for Investment
Top 20 Tenants (based on current annual base rent as of June 30, 2004)
	Tenant	% of Total		Tenant	% of Total
1.	United States of America	16.5%	11.	Food 4 Less	1.4%
2.	Eckerd	10.9%	12.	The Good Guys	1.4%
3.	Best Buy	5.3%	13.	Havertys Furniture	1.4%
4.	OfficeMax	4.5%	14.	Dick's Sporting Goods	1.2%
5.	Barnes & Noble	4.3%	15.	Reliable	1.2%
6.	The Sports Authority	3.2%	16.	Target	1.2%
7.	Academy	3.2%	17.	Kash N' Karry	1.1%
8.	Borders Books	2.8%	18.	Winn-Dixie	1.1%
9.	Jared Jewelers	1.7%	19.	Lowe's	1.1%
10.	Bed Bath & Beyond	1.6%	20.	Bennigan's	1.1%
Top 20 States (based on current annual base rent as of June 30, 2004)
	State	% of Total		State	% of Total
1.	Virginia	21.2%	6.	Missouri	3.2%
2.	Florida	15.2%	7.	New Jersey	3.0%
3.	Texas	13.4%	8.	Ohio	2.9%
4.	California	7.6%	9.	Maryland	2.9%
5.	Georgia	4.6%	10.	Tennessee	2.8%

Lease Expirations (based on current annual base rent as of June 30, 2004)
	# of Properties	% of Total		# of Properties	% of Total
2004	1	0.1%	2010	15	4.1%
2005	2	0.2%	2011	14	3.1%
2006	6	1.5%	2012	18	5.0%
2007	17	2.1%	2013	28	7.0%
2008	21	3.6%	2014	34	24.7%
2009	19	3.3%	Thereafter	159	45.3%