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: February 2, 2005 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 February 2, 2005.

Item 12. Results of Operations and Financial Condition.

On February 2, 2005, Commercial Net Lease Realty, Inc. issued a press release announcing its results of operations and financial condition for the quarter and year ended December 31, 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: February 2, 2005 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
February 2, 2005

INCREASED YEAR-END OPERATING RESULTS ANNOUNCED BY
COMMERCIAL NET LEASE REALTY, INC.

Orlando, Florida, February 2, 2005 — Commercial Net Lease Realty, Inc. (NYSE:NNN), a real estate investment trust, reported net earnings available to common shareholders for the quarter ended December 31, 2004 were $17,924,000 or 34 cents per share compared to $14,588,000 or 30 cents per share for the same period last year. Revenues for the fourth quarter increased nine percent to $33,067,000 compared to $30,389,000 for last year’s fourth quarter. Net earnings available to common shareholders for the year ended December 31, 2004 were $59,251,000 or $1.15 per share from $49,465,000 or $1.13 per share for the same period last year. Excluding the charge in connection with the management transition costs of $489,000 and $3,741,000 for the quarter and year ended December 31, 2004, respectively, net earnings available to common shareholders per share would have been $0.34 and $1.22, respectively. Revenues for the year ended December 31, 2004 increased 27 percent to $129,309,000 compared to $103,614,000 for the same period last year.

Funds from operations (“FFO”) available to common shareholders for the quarter ended December 31, 2004 were $20,760,000 or 39 cents per share compared to $18,432,000 or 38 cents per share for the same period last year. Funds from operations available to common shareholders for the year ended December 31, 2004 were $73,065,000 or $1.41 per share compared to $61,749,000 or $1.41 per share for the same period last year. Excluding the charge in connection with the management transition costs of $489,000 and $3,741,000 for the quarter and year ended December 31, 2004, respectively, FFO per share would have been $0.40 and $1.48, respectively.

2004 Highlights:

• Dividends increased to $1.29 per share marking 15 consecutive years of increases
• Invested $216 million in properties owned by the Company and its affiliates, of which $139 million is included in the Company's investment property portfolio
• Increased occupancy to 97.4%
• Sold 45 properties generating $115 million of net proceeds and a gain of $19 million, net of minority interest; of which 20 properties generating $32 million of net proceeds and a gain of $2.5 million was from the Company’s investment property portfolio
• Issued $150 million 10-year unsecured notes at 5.91%
• Increased interest and fixed charge coverage ratios to 3.6x and 2.8x, respectively
• Generated total return to common stockholders of 23.8%
• Inclusion in S&P 600 Index

Craig Macnab, Chief Executive Officer and President, commented, “In 2004 we refocused our strategy on retail properties, which is consistent with NNN’s core competencies. We had a strong fourth quarter acquiring high quality accretive retail properties for our portfolio, purchasing and selling properties in our 1031 exchange program and harvesting gains in our development subsidiary. Also, our team completed a great deal of work on the previously announced pending acquisition of National Properties Corporation, which will be accretive to our shareholders when it is completed later this year. This acquisition allows us to further diversify our retail portfolio into the Midwest, add two new states, including Iowa, and acquire a portfolio of high-quality convenience stores, which is a category that we are targeting for increased investment in 2005.”

The Company invested $72,432,000 during the fourth quarter of 2004 and $215,951,000 during the year 2004 in additional properties and construction in progress. The Company also invested $5,090,000 during the fourth quarter of 2004 and $6,587,000 during the year 2004 in structured finance investments.

For the year ended December 31, 2004, the Company generated total net proceeds of $115,667,000 from the disposition of 45 properties resulting in a net gain of $19,432,000, net of minority interest. For the quarter ended December 31, 2004, the Company disposed of 16 properties generating net proceeds of $39,909,000 resulting in a net gain of $8,026,000, net of minority interest. Also, the Company received $20,900,000 in principal repayments from its structured finance investments during the fourth quarter of 2004.

Based on the annual base rent of the Company’s investment property portfolio in place as of December 31, 2004, 83.4% of the Company’s annualized base rent was derived from retail properties and 16.6% from office properties. As of December 31, 2004, two tenants in the Company’s investment property portfolio each accounted for more than 5% of annualized base rent: the United States of America at 15.4% and CVS at 6.4%. The weighted average lease maturity of the investment property portfolio was approximately 10 years as of December 31, 2004 and gross leasable area was approximately 8.5 million square feet.

Commercial Net Lease Realty invests primarily in high quality, single-tenant retail 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 362 investment properties in 38 states with a gross leasable area of approximately 8.3 million square feet. These properties are leased to 152 corporations in 56 industry classifications.

Commercial Net Lease Realty Services, Inc. (“Services”) has been 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 February 2, 2005 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.nnnreit.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 that 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 the National Association of Real Estate Investment Trusts 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 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 December 31,						Year Ended December 31,
	2004			2003			2004			2003
Revenues:
Rental and earned income	$	28,385		$	25,483		$	110,724		$	92,524
Real estate expense reimbursement from tenants		1,830			2,529			5,756			5,048
Contingent rental income		-			1			411			405
Gain on disposition of real estate, held for sale(Note 1)		574			1,180			4,700			3,247
Interest and other income from real estate transactions		2,278			1,196			7,718			2,390
		33,067			30,389			129,309			103,614
Operating expenses:
General and administrative		5,846			6,322			22,996			21,696
Real estate		3,107			3,440			12,161			7,394
Depreciation and amortization		4,424			3,971			17,138			13,217
Dissenting shareholders' settlement		-			-			-			2,413
Transition costs		489			-			3,741			-
		13,866			13,733			56,036			44,720
Other expenses (revenues):
Interest and other income		(722	)		(681	)		(3,779	)		(3,346	)
Interest expense		8,348			7,106			32,463			26,754
		7,626			6,425			28,684			23,408
Provision for income tax benefit		509			768			2,542			2,902
Minority interest		(102	)		(36	)		(1,231	)		137
Equity in earnings of unconsolidated affiliates		1,030			878			4,724			4,341
Earnings from continuing operations		13,012			11,841			50,624			42,866
Earnings from discontinued operations:
Real estate, held for investment		1,809			586			4,766			4,330
Real estate, held for sale		4,105			3,164			9,544			6,277
		5,914			3,750			14,310			10,607
Net earnings		18,926			15,591			64,934			53,473
Series A preferred dividends		(1,002	)		(1,003	)		(4,008	)		(4,008	)
Series B convertible preferred dividends		(419	)		(418	)		(1,675	)		(502	)
Net earnings available to common shareholders - basic		17,505			14,170			59,251			48,963
Series B convertible preferred dividends		419			418			-			502
Net earnings available to common stockholders - diluted	$	17,924		$	14,588		$	59,251		$	49,465
Weighted average common shares outstanding:
Basic		51,725			47,121			51,312			43,108
Diluted		53,460			48,768			51,743			43,897
Net earnings per share available to common shareholders:
Basic:
Continuing operations	$	0.23		$	0.22		$	0.87		$	0.89
Discontinued operations		0.11			0.08			0.28			0.25
Net earnings	$	0.34		$	0.30		$	1.15		$	1.14
Diluted:
Continuing operations	$	0.23		$	0.22		$	0.87		$	0.89
Discontinued operations		0.11			0.08			0.28			0.24
Net earnings	$	0.34		$	0.30		$	1.15		$	1.13

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 21 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 December 31,						Year Ended December 31,
	2004			2003			2004			2003
Revenues:
Rental and earned income	$	420		$	714		$	2,444		$	4,681
Real estate expense reimbursements from tenants		(1	)		1			3			10
Contingent rental income		-			-			-			12
Interest and other income		103			47			292			185
		522			762			2,739			4,888
Expenses:
General and administrative		-			-			(5	)		24
Real estate		48			20			119			95
Interest		28			35			126			144
Depreciation and amortization		22			121			256			582
		98			176			496			845
Gain on disposition of real estate(Note 1)		1,385			-			2,523			287
Earnings from discontinued operations from real estate    held for investment	$	1,809		$	586		$	4,766		$	4,330
Earnings from Discontinued Operations - Real Estate Held for Sale: The Company has classified its 18 and 26 held for sale assets sold during 2004 and 2003, respectively, as discontinued operations. In addition, the Company has classified its 22 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.
Revenues:
Rental income	$	596		$	1,048		$	2,313		$	3,294
Real estate expense reimbursements from tenants		14			111			183			123
Contingent rental income		-			-			22			-
Gain on disposition of real estate, held for sale(Note 1)		7,898			5,521			18,702			8,928
Interest and other income		149			39			230			54
		8,657			6,719			21,450			12,399
Expenses:
General and administrative		10			1			33			3
Real estate		101			120			343			146
Interest		296			518			531			1,007
Depreciation and amortization		3			-			4			-
		410			639			911			1,156
Provision for income taxes		(2,512	)		(1,936	)		(5,839	)		(3,841	)
Minority interest		(1,630	)		(980	)		(5,156	)		(1,125	)
Earnings from discontinued operations from real estate     held for sale	$	4,105		$	3,164		$	9,544		$	6,277

Commercial Net Lease Realty, Inc. (in thousands, except per share data)
	Quarter Ended December 31,						Year Ended December 31,
	2004			2003			2004			2003
Reconciliation of net earnings to FFO and FFO     available to common shareholders:
Net earnings	$	18,926		$	15,591		$	64,934		$	53,473
Real estate depreciation and amortization:
Continuing operations		4,040			3,530			15,455			11,290
Discontinued operations		25			121			260			582
Partnership real estate depreciation		156			193			622			699
Gain on disposition of real estate held for               investment from discontinued operations		(1,385	)		-			(2,523	)		(287	)
FFO		21,762			19,435			78,748			65,757
Series A preferred dividends		(1,002	)		(1,003	)		(4,008	)		(4,008	)
Series B convertible preferred dividends		(419	)		(418	)		(1,675	)		(502	)
FFO available to common stockholders - basic		20,341			18,014			73,065			61,247
Series B convertible preferred dividends		419			418			-			502
FFO available to common stockholders - diluted	$	20,760		$	18,432		$	73,065		$	61,749
Funds from operations per share:
Basic	$	0.39		$	0.38		$	1.42		$	1.42
Diluted	$	0.39		$	0.38		$	1.41		$	1.41
Note 1: Reconciliation of the gain on disposition between     continuing and discontinued operations:
Continuing operations	$	574		$	1,180		$	4,700		$	3,247
Discontinued operations, held for investment		1,385			-			2,523			287
Discontinued operations, held for sale		7,898			5,521			18,702			8,928
Minority interest, held for sale		(1,760	)		(986	)		(6,422	)		(986	)
	$	8,097		$	5,715		$	19,503		$	11,476
Reconciliation of the gain on disposition by type:
Held for investment	$	1,385		$	-		$	2,523		$	287
Held for sale, Development		6,730			5,286			20,674			8,322
Held for sale, Exchange		1,505			1,194			1,911			2,816
Intercompany eliminations, held for sale		237			221			817			1,037
Minority interest on Development gain		(1,760	)		(986	)		(6,422	)		(986	)
	$	8,097		$	5,715		$	19,503		$	11,476

Commercial Net Lease Realty, Inc. (in thousands)
Balance Sheet Summary	December 31,
	2004		2003
Assets:
Cash and cash equivalents	$	1,947	$	5,335
Receivables, net of allowance		6,636		4,740
Mortgages, notes and accrued interest receivable, net of allowance		45,564		68,423
Line of credit and accrued interest receivable from related party		-		16,530
Investments in and other receivables from unconsolidated affiliates		29,307		39,606
Real estate held for investment:
Accounted for using the operating method, net of            accumulated depreciation and amortization		1,009,397		887,124
Accounted for using the direct financing method		102,311		102,970
Real estate held for sale, net of accumulated depreciation		58,049		45,822
Accrued rental income, net of allowance		28,619		25,322
Other assets		18,218		17,906
Total assets	$	1,300,048	$	1,213,778
Liabilities and stockholders' equity:
Line of credit payable	$	17,900	$	27,800
Mortgages payable		157,168		149,861
Notes payable		323,132		289,758
Financing lease obligation		26,041		-
Other liabilities		16,781		15,328
Minority interest		2,028		277
Stockholders' equity		756,998		730,754
Total liabilities and equity	$	1,300,048	$	1,213,778
Common shares outstanding		52,078		50,002
Gross leaseable area, real estate held for investment		8,542		7,907

Commercial Net Lease Realty, Inc. Properties Held for Investment (Based on annual base rent of $119,791,000 as of December 31, 2004)
Top 20 Tenants
	Tenant	% of Total		Tenant	% of Total
1.	United States of America	15.4%	11.	Jared Jewelers	1.6%
2.	CVS	6.4%	12.	Target	1.5%
3.	Best Buy	4.9%	13.	Bed Bath & Beyond	1.5%
4.	OfficeMax	4.2%	14.	CarMax	1.4%
5.	Barnes & Noble	4.1%	15.	Food 4 Less	1.3%
6.	Eckerd	3.9%	16.	Havertys Furniture	1.3%
7.	The Sports Authority	3.0%	17.	Dick's Sporting Goods	1.2%
8.	Academy	3.0%	18.	Reliable	1.2%
9.	Borders Books	2.6%	19.	Rite-Aid	1.1%
10.	United Rentals	1.8%	20.	Winn-Dixie	1.0%
Top 10 States
	State	% of Total		State	% of Total
1.	Virginia	19.6%	6.	Missouri	3.0%
2.	Florida	14.4%	7.	Ohio	3.0%
3.	Texas	13.9%	8.	New Jersey	2.8%
4.	California	7.5%	9.	Maryland	2.7%
5.	Georgia	5.6%	10.	Colorado	2.6%

Lease Expirations
	# of Properties	% of Total		# of Properties	% of Total
2005	7	0.4%	2011	14	2.9%
2006	6	1.4%	2012	18	4.6%
2007	16	1.9%	2013	27	6.7%
2008	23	3.5%	2014	37	24.1%
2009	21	3.6%	2015	18	5.4%
2010	16	4.0%	Thereafter	148	41.5%