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: November 1, 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 November 1, 2004.

Item 12. Results of Operations and Financial Condition.

On November 1, 2004, Commercial Net Lease Realty, Inc. issued a press release announcing its results of operations and financial condition for the quarter and nine months ended September 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: November 1, 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
November 1, 2004

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

Orlando, Florida, November 1, 2004 — Commercial Net Lease Realty, Inc. (NYSE:NNN), an equity real estate investment trust, reported net earnings available to common shareholders for the quarter ended September 30, 2004 was $15,585,000 or 30 cents per share compared to $14,382,000 or 32 cents per share for the same period last year. Revenues for the third quarter increased to $33,491,000 compared to $27,780,000 for last year’s third quarter. Net earnings available to common shareholders for the nine months ended September 30, 2004 was $41,746,000 or 81 cents per share from $34,877,000 or 83 cents per share for the same period last year. Excluding the $3,252,000 charge in connection with the management transition costs, net earnings available to common shareholders for the nine months ended September 30, 2004 would have been 87 cents per share. Revenues for the nine months increased to $96,998,000 compared to $73,868,000 for the same period last year.

Funds from operations (“FFO”) available to common shareholders for the third quarter ended September 30, 2004 were $19,520,000 or 38 cents per share compared to $17,002,000 or 37 cents per share for the same period last year. For the nine months ended September 30, 2004, FFO available to common shareholders was $52,723,000 or $1.02 per share compared to $43,317,000 or $1.03 for the same period last year. Excluding the $3,252,000 charge in connection with the management transition costs, FFO per share for the nine months ended September 30, 2004 would have been $1.08 per share.

During the third quarter of 2004, the Company and its affiliated subsidiaries invested $45,991,000 in additional properties and construction in progress. The Company also announced that it disposed of 11 properties during the third quarter of 2004 generating net proceeds of $43,224,000 resulting in a net gain of $4,910,000, net of minority interest.

Craig Macnab, Chief Executive Officer and President, commented, “We were very pleased with these improved operating results.  Our balance sheet and tenant profile remain very strong and we continue to see solid gains from property dispositions in our taxable subsidiary.”

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, CVS, OfficeMax and the United States of America. The Company currently owns 352 investment properties in 38 states with a gross leasable area of approximately 8.2 million square feet. These properties are leased to 144 corporations in 52 industry 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. 46R, “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 November 1, 2004 at 10:30 am EST 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 Annual 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. FFO is defined by NAREIT and is used by the Company as follows: net earnings (computed in accordance with GAAP) plus depreciation and amortization of assets unique to the real estate industry, excluding gains (or including losses) on the disposition of real estate held for investment, 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 of real estate companies. FFO does not necessarily represent cash provided by operating activities in accordance with GAAP 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 shareholders are not affected.

Commercial Net Lease Realty, Inc. (in thousands, except per share data)
Income Statement Summary	Quarter Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
Revenues:
Rental and earned income	$	28,234		$	25,483		$	83,380		$	68,089
Real estate expense reimbursement from tenants		899			1,562			3,927			2,519
Gain on disposition of real estate held for sale		2,413			-			4,162			2,066
Interest and other income from real estate transactions		1,893			735			5,441			1,194
		33,439			27,780			96,910			73,868
Operating expenses:
General and administrative		5,848			5,552			17,151			15,382
Real estate		2,854			2,473			9,098			3,995
Depreciation and amortization		4,403			3,440			12,807			9,337
Dissenting shareholders’ settlement		-			-			-			2,413
Transition costs		52			-			3,252			-
		13,157			11,465			42,308			31,127
Other expenses (revenues):
Interest and other income		(1,238	)		(573	)		(3,057	)		(2,665	)
Interest expense		8,594			6,763			23,802			19,992
		7,356			6,190			20,745			17,327
Provision for income tax benefit		642			922			1,824			2,275
Minority interest		(1,342	)		27			(1,009	)		27
Equity in earnings of unconsolidated affiliates		1,155			1,580			3,694			3,462
Earnings from continuing operations		13,381			12,654			38,366			31,178
Earnings from discontinued operations:
Real estate, held for investment		862			1,489			2,546			3,361
Real estate, held for sale		2,762			1,241			5,096			3,343
		3,624			2,730			7,642			6,704
Net earnings		17,005			15,384			46,008			37,882
Series A preferred dividends		(1,002	)		(1,002	)		(3,006	)		(3,005	)
Series B convertible preferred dividends		(418	)		(84	)		(1,256	)		(84	)
Net earnings available to common shareholders — basic		15,585			14,298			41,746			34,793
Series B convertible preferred stock dividends		-			84			-			84
Net earnings available to common stockholders — diluted	$	15,585		$	14,382		$	41,746		$	34,877
Weighted average common shares outstanding:
Basic		51,672,012			44,368,735			51,288,732			41,755,975
Diluted		51,969,340			45,403,830			51,590,336			42,259,338
Net earnings per share available to common shareholders:
Basic:
Continuing operations	$	0.23		$	0.26		$	0.66		$	0.68
Discontinued operations		0.07			0.06			0.15			0.16
Net earnings	$	0.30		$	0.32		$	0.81		$	0.84
Diluted:
Continuing operations	$	0.23		$	0.26		$	0.66		$	0.67
Discontinued operations		0.07			0.06			0.15			0.16
Net earnings	$	0.30		$	0.32		$	0.81		$	0.83

Commercial Net Lease Realty, Inc. (in thousands)
Earnings from Discontinued Operations - Real Estate Held for Investment: 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 15 and 14 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 September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
Revenues:
Rental and earned income	$	573		$	1,006		$	1,378		$	3,345
Other income		48			29			194			147
		621			1,035			1,572			3,492
Expenses:
General and administrative		(9	)		3			(6	)		15
Real estate		6			6			29			33
Depreciation and amortization		15			107			141			370
		12			116			164			418
Gain on disposition of real estate		253			570			1,138			287
Earnings from discontinued operations from real estate
held for investment	$	862		$	1,489		$	2,546		$	3,361
Earnings from Discontinued Operations - Real Estate Held for Sale: The Company has classified its eight and 15 held for sale assets sold during 2004 and 2003, respectively, as discontinued operations. In addition, the Company has classified its 12 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 September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
Revenues:
Rental and earned income	$	682		$	779		$	1,921		$	2,248
Gain on disposition of real estate held for sale		7,394			1,070			10,768			3,408
Other income		-			-			81			15
		8,076			1,849			12,770			5,671
Expenses:
General and administrative		17			-			23			1
Real estate		84			14			242			25
Interest		149			51			645			256
Depreciation and amortization		1			(216	)		1			-
		251			(151	)		911			282
Provision for income taxes		(1,690	)		(759	)		(3,118	)		(2,046	)
Minority interest		(3,373	)		-			(3,645	)		-
Earnings from discontinued operations from real estate
held for sale	$	2,762		$	1,241		$	5,096		$	3,343

Commercial Net Lease Realty, Inc. (in thousands, except per share data)
Reconciliation of net earnings to FFO and FFO available to
common shareholders:
Net earnings	$	17,005		$	15,384		$	46,008		$	37,882
Real estate depreciation and amortization:
Continuing operations		4,020			2,912			11,508			7,851
Discontinued operations		15			107			141			370
Partnership real estate depreciation		153			171			466			506
Gain on disposition of real estate held for
investment from discontinued operations		(253	)		(570	)		(1,138	)		(287	)
FFO		20,940			18,004			56,985			46,322
Series A preferred dividends		(1,002	)		(1,002	)		(3,006	)		(3,005	)
Series B convertible preferred dividends		(418	)		(84	)		(1,256	)		(84	)
FFO available to common stockholders — basic		19,520			16,918			52,723			43,233
Series B convertible preferred stock dividends		-			84			-			84
FFO available to common stockholders — diluted	$	19,520		$	17,002		$	52,723		$	43,317
Funds from operations per share:
Basic	$	0.38		$	0.38		$	1.03		$	1.04
Diluted	$	0.38		$	0.37		$	1.02		$	1.03

Commercial Net Lease Realty, Inc. (in thousands)
Balance Sheet Summary	September 30,		December 31,
	2004		2003
Assets:
Cash and cash equivalents	$	16,921	$	5,335
Receivables, net of allowance		6,730		4,740
Mortgages, notes and accrued interest receivable, net of allowance		62,287		68,423
Line of credit and accrued interest receivable from related party		26,983		16,530
Investments in and other receivables from unconsolidated
affiliates		31,997		39,606
Real estate held for investment:
Accounted for using the operating method, net of
accumulated depreciation and amortization		966,775		887,124
Accounted for using the direct financing method		105,597		102,970
Real estate held for sale, net of accumulated depreciation		63,521		45,822
Accrued rental income, net of allowance		28,478		25,322
Other assets		18,543		17,906
Total assets	$	1,327,832	$	1,213,778
Liabilities and stockholders’ equity:
Current liabilities	$	15,127	$	15,328
Line of credit payable		28,000		27,800
Mortgages payable		160,745		149,861
Notes payable		343,186		289,758
Obligation under capital lease		26,041		-
Minority interest		1,937		277
Stockholders’ equity		752,796		730,754
Total liabilities and equity	$	1,327,832	$	1,213,778
Common shares outstanding		51,884		50,002
Gross Leaseable Area		8,250		7,907

Commercial Net Lease Realty, Inc. Properties Held for Investment (Based on current annual base rent of $114,372,000 as of September 30, 2004)
Top 20 Tenants
	Tenant	% of Total		Tenant	% of Total
1.	United States of America	16.0%	11.	Target	1.6%
2.	CVS	6.7%	12.	Bed Bath & Beyond	1.5%
3.	Best Buy	5.2%	13.	Food 4 Less	1.4%
4.	OfficeMax	4.4%	14.	The Good Guys	1.4%
5.	Barnes & Noble	4.2%	15.	Havertys Furniture	1.3%
6.	Eckerd	4.0%	16.	Dick's Sporting Goods	1.2%
7.	The Sports Authority	3.2%	17.	Reliable	1.2%
8.	Academy	3.1%	18.	Rite Aid	1.1%
9.	Borders Books	2.7%	19.	Winn-Dixie	1.1%
10.	Jared Jewelers	1.6%	20.	Lowe's	1.1%
Top 10 States
	State	% of Total		State	% of Total
1.	Virginia	20.7%	6.	Missouri	3.1%
2.	Florida	14.8%	7.	New Jersey	3.0%
3.	Texas	13.1%	8.	Maryland	2.8%
4.	California	8.0%	9.	Ohio	2.8%
5.	Georgia	5.9%	10.	Tennessee	2.7%

Lease Expirations
	# of Properties	% of Total		# of Properties	% of Total
2004	1	0.1%	2010	16	4.2%
2005	6	0.5%	2011	14	3.0%
2006	6	1.4%	2012	18	4.8%
2007	16	2.0%	2013	27	7.0%
2008	23	3.6%	2014	34	24.7%
2009	22	4.0%	Thereafter	154	44.7%