Three national retailer tenants have filed for Chapter 11 protection under the U.S. Bankruptcy Code, leaving 18 properties shuttered with no lease revenue coming in, the company tells the SEC.

The REIT is currently trying to lease the closed properties.

The tenants are Waccamaw/HomePlace which has stopped paying rent on six stores. Heilig-Meyers, the furniture retailer, isn't paying on 12 out of 17 store leases. HomeLife is asking the bankruptcy court to allow it to stop making rent payments on five locations. The five stores are leased to Sears Roebuck which will continue to make rent payments, Commercial Net Lease Realty officials tell GlobeSt.com.

Combined rental income from the three tenants' total 27 leases accounted for 9.6% of the REIT's first-half aggregate rental income.

The REIT told the SEC in its 10-Q filing, "The lost revenues and increased property expenses resulting from the rejection by any bankrupt tenant of any of their respective leases with the company could have a material adverse effect on the liquidity and results of operations of the company, if the company is unable to re-lease the properties at comparable rental rates and in a timely manner."

Rental income from operating leases; earned income from direct financing leases; and contingent rental income totaled $35.96 million in the first half versus $37.35 million in the same period last year. The company attributes the decrease to the sale of 28 properties.

The REIT is reporting first-half net earnings ended June 30 of $22 million or basic and diluted earnings of 72 cents per share versus $17.2 million or basic and diluted earnings of 57 cents per share in the same 2000 period.

For the second quarter, net earnings were $10.38 million or basic and diluted earnings per share of 34 cents compared to $8.57 million or basic and diluted earnings per share of 28 cents in second quarter 2000.

Six-month revenue of $40.98 million barely topped the $40.17 million in the same period last year. Second-quarter revenue of $20.1 million compared to $19.58 million a year ago.

But the company is far from hurting in the net cash column. Commercial Net Lease is sitting on a cash pile that totaled $8 million on June 30, up from cash and cash equivalents of $2.1 million in second half 2000.

For the six-month period, CNLR generated $26.37 million in net cash provided by operating activities compared to $26.6 million in the comparable period last year. The decrease was due to changes in revenue and expenses.

From mortgages and other receivables generated by CNLR's unconsolidated subsidiary, Commercial Net Lease Realty Services Inc., the REIT received $4.19 million in interest and fees in the first six months versus $2 million a year ago.

The company is paying total dividends of $9.62 million or 31 ½ cents per common share to shareholders this month.

On property dispositions, the REIT sold 28 properties valued at $35.72 million in the first half and received net proceeds of $35.28 million. The net gain was $4.45 million.

The company is using the money from the sale of seven properties to pay down outstanding debt. The proceeds from the sale of the 21 properties will be used to buy additional properties and to structure the acquisitions as tax-free exchange transactions for federal income tax purposes.

The sales reduced the total properties owned by the REIT to 232. A year ago, CNLR owned 267 stores.

The company's common stock closed yesterday at $13.75 per share, up five cents (.36%) on volume of 58,800. The 52-week high-low is $14.25 per share and $9.81 per share.The REIT's market capitalization is $419.4 million with a price/earnings ratio of 10.04. There are 30.5 million shares outstanding.