In one other instance of a neighborhood bank discovering a nationwide niche to develop its stability sheet, Cogent Bank in Orlando, Florida, has launched a enterprise to finance single-tenant internet lease properties from coast to coast.
Businesses that lease single-tenant properties are usually investment-grade operators, reminiscent of banks, eating places or retailers, so the credit score efficiency is seen as sturdy. In most single-tenant internet lease preparations, the enterprise pays not solely the lease, but additionally the working bills related to the property, together with taxes, insurance coverage and upkeep prices.
“Lenders like them, they’re straightforward to underwrite,” John Feeny, a senior vp at Boulder Group, a Wilmette, Illinois-based actual property service agency specializing in single-tenant internet lease properties, instructed American Banker.
Cogent is considered one of a rising variety of small banks which have sought to maneuver into niche companies with a view to overcome comfortable credit score demand. In February, the 26-year-old Cogent introduced plans to develop its owners affiliation banking division all through Florida and into Georgia and Alabama. In the long run, the bank envisions a nationwide rollout there, too.
Cogent, which operates 10 branches in Florida, reported internet earnings totaling $9.3 million for the quarter ending June 30, up 26% from the identical interval in 2024.
Other neighborhood banks which have launched nationwide niche companies embody the $3.4 billion-asset Capital Bancorp in Rockville, Maryland, which entered Small Business Administration lending and servicing in March 2024.
Cogent’s entry into the single-tenant internet lease market shall be led by Rich Dowdy, who labored at Little Rock, Arkansas-based Bank OZK and Synovus Financial Corp. in Columbus, Georgia, earlier than becoming a member of the $2.3 billion-asset Cogent.
Dowdy instructed American Banker that he has labored “virtually solely” in single-tenant internet lease lending for greater than a decade with “no loss publicity to talk of.”
Dowdy stated that when he was uncovered to this kind of mortgage, “I fell in love with them.”
Cogent did make some single-tenant loans previous to launching its National Net Lease Finance workforce, but it confined its lending largely to inside its Florida footprint. To function at scale, a broader, coast-to-coast strategy is simpler, given the nationwide scope of most tenant companies, Dowdy stated.
“If you are going to launch it, the one means it will work is if you happen to do it nationally,” Dowdy stated. “If you do it statewide or regionally, you are virtually taking your self out of the sport.”
Despite the enterprise line’s strong fundamentals, comparatively few neighborhood banks have opted to scale their single-tenant internet lease lending operations into vital traces of enterprise. Among the small variety of banks which can be energetic: the $1 billion-asset HCN Bank in Riverside, California, and the $2.9 billion-asset North American Savings Bank in Grandview, Missouri.
One motive that some banks could also be reticent is that the loans are classed as business actual property, an asset class that has been underneath the microscope in recent times. What’s extra, single-tenant loans usually carry decrease yields than commercial-and-industrial credit and even different CRE classes.
Dowdy linked the decrease yields to the truth that credit score efficiency within the enterprise is powerful. “You’re coping with high-quality nationwide tenants,” he stated, arguing that the enterprise is smart on a risk-adjusted foundation. “You’re being pretty compensated for the danger you’re taking.”
First Savings Financial Group in Jeffersonville, Indiana, is one other small bank that operates within the single-tenant internet lease enterprise.
In an April 2025 interview with American Banker, First Savings CEO Larry Myers likened the single-tenant internet lease loans that his firm books to bonds, attributable to their strong credit score profile. Indeed, not one of the single-tenant internet lease loans within the $757 million portfolio that the $2.4 billion-asset First Federal reported on June 30 have been designated as late and even criticized.
