SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))

[X] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

Captec Net Lease Realty, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:

- --------------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials:

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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.

(1) Amount previously paid:

Not Applicable
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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

Not Applicable
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(4) Date Filed:

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2

CAPTEC NET LEASE REALTY, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

---------------------

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Captec
Net Lease Realty, Inc. will be held at The Ritz-Carlton Dearborn, Fairlane
Plaza, 300 Town Center Drive, Dearborn, Michigan, on Friday, May 8, 1998, at
10:00 a.m., Eastern time, for the following purposes:

1. To elect seven directors, each to serve until the next annual
meeting of the stockholders and until his successor has been duly elected
and qualified;

2. To receive reports at the meeting. No action constituting approval
or disapproval of the matters referred to in said reports is contemplated;
and

3. To transact such other business as may properly come before the
meeting.

Only stockholders of record at the close of business on March 20, 1998,
will be entitled to notice of and to vote at the meeting or any adjournment
thereof. Stockholders are urged to complete, date and sign the enclosed proxy
and return it in the enclosed envelope. The principal address of Captec Net
Lease Realty, Inc. is 24 Frank Lloyd Wright Drive, P.O. Box 544, Ann Arbor, MI
48106-0544.

By order of the Board of Directors,

/s/ W. Ross Martin
W. ROSS MARTIN
Executive Vice President and
Chief Financial Officer

Dated: April 7, 1998

YOUR VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND RETURN YOUR PROXY.
3

CAPTEC NET LEASE REALTY, INC.

PROXY STATEMENT

---------------------

This proxy statement is furnished in connection with the solicitation of
proxies to be used at the Annual Meeting of Stockholders (the "Annual Meeting")
of Captec Net Lease Realty, Inc., a Delaware corporation (the "Company"), to be
held at The Ritz-Carlton Dearborn, Fairlane Plaza, 300 Town Center Drive,
Dearborn, Michigan, on Friday, May 8, 1998, at 10:00 a.m., Eastern time, and at
any adjournment thereof. This proxy statement and the accompanying notice and
proxy will first be sent to stockholders by mail on or about April 7, 1998.

Annual Report. A copy of the Company's Annual Report to Stockholders for
the fiscal year ended December 31, 1997, which incorporates the Company's Form
10-K as filed with the United States Securities and Exchange Commission (the
"Commission"), is enclosed.

Solicitation and Revocation of Proxies. This solicitation of proxies is
made by and on behalf of the Board of Directors. The cost of solicitation of
proxies will be borne by the Company. In addition to solicitation of proxies by
mail, employees of the Company or its affiliates may solicit proxies by
telephone or facsimile.

If the enclosed proxy is signed and returned, the shares represented
thereby will be voted in accordance with any specification made therein by the
stockholder. In the absence of any such specification, the shares will be voted
to elect the director nominees set forth under "Election of Directors" below. A
stockholder's presence at the meeting, without more, will not operate to revoke
the proxy. The proxy is revocable by the stockholder at any time to the extent
not yet exercised by giving notice to the Company in writing at its address
indicated on the attached Notice of Annual Meeting of Stockholders or at the
Annual Meeting.

Outstanding Shares. The close of business on March 20, 1998, has been
fixed as the record date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting. On that date, the Company's issued
and outstanding voting securities consisted of 9,508,108 shares of common stock,
par value $.01 per share (the "Common Stock"), each of which is entitled to one
vote at the Annual Meeting.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 1, 1998, by: (a) the Company's
directors (all of whom are also nominees for director); (b) each other person
who is known by the Company to own beneficially more than 5.0% of the
outstanding shares of the Common Stock; (c) each of the Company's executive
officers; and (d) the Company's executive officers and directors as a group.
Unless otherwise stated, the following beneficial owners have sole voting power
and sole investment power of all shares of Common Stock set forth opposite their
names.

NUMBER OF SHARES
BENEFICIALLY
OWNED(1)
BENEFICIAL OWNER OF CLASS PERCENT
---------------- ---------------- -------

Patrick L. Beach............................................ 461,516 4.9%
W. Ross Martin.............................................. 210,036 2.2
H. Reid Sherard............................................. 33,586 *
Ronald Max.................................................. -- --
Richard J. Peters........................................... 5,000 *
Creed L. Ford, III.......................................... 1,000 *
William H. Krul, II......................................... 1,000 *
Lee C. Howley............................................... 5,000 *
The Public Institution For Social Security.................. 527,778 5.6
Boston Partners Asset Management L.P.(2).................... 480,000 5.0
Mutual Management Corp.(3).................................. 480,000 5.0
Marsh & McLennan Companies, Inc.(4)......................... 500,000 5.3
------- ---
All Executive Officers and Directors as a Group............. 717,138 7.5%

- ---------------
* Less than 1.0%.
(1) Excludes shares of the Common Stock subject to options which are not
exercisable within 60 days.
(2) According to a Schedule 13G dated February 9, 1998, filed with the
Commission, Boston Partners Asset Management, L.P. ("BPAM"), an investment
advisory firm, beneficially owns 480,000 shares of the Common Stock. BPAM
disclosed in its Schedule 13G that (i) it has shared dispositive and voting
power for all 480,000 shares of the Common Stock with Boston Partners, Inc.
("Boston Partners"), the sole general partner of BPAM, and Desmond John
Heathwood, the principal stockholder of Boston Partners; and (ii) each of
BPAM, Boston Partners and Mr. Heathwood may be deemed to own beneficially
all 480,000 shares of the Common Stock. BPAM also disclosed in its Schedule
13G that it holds all 480,000 shares of the Common Stock under management
for its clients, none of whom owns more than 5.0% of the Common Stock.
(3) According to a Schedule 13G dated February 6, 1998, filed with the
Commission, Mutual Management Corp. ("MMC"), an investment advisory firm,
beneficially owns 480,000 shares of the Common Stock. MMC disclosed in its
Schedule 13G that (i) it has shared dispositive and voting power for all
480,000 shares of the Common Stock with Salomon Smith Barney Holdings Inc.
("SSB"), the sole stockholder of MMC, and Travelers Group Inc. ("TRV"), the
sole stockholder of SSB; and (ii) each of MMC, SSB and TRV may be deemed to
own beneficially all 480,000 shares of the Common Stock.
(4) According to a Schedule 13G dated February 6, 1998, filed with the
Commission by Marsh & McLennan Companies, Inc. a holding company, its wholly
owned subsidiary Putnam Investments, Inc. ("PII") and PII's wholly owned
subsidiaries The Putnam Advisory Company, Inc. ("PAC") and Putnam Investment
Management, Inc. ("PIMI") and the Putnam Capital Appreciation Fund ("PCAF")
in the aggregate beneficially own shares of the Common Stock as follows: (i)
PII -- 500,000 shares (shared voting power -- 14,300 shares, shared
dispositive power -- 500,000 shares); (ii) PIMI -- 485,700 shares (for which
it shares dispositive power); (iii) PAC -- 14,300 shares (for which it
shares voting and dispositive power); and (iv) PCAF -- 485,700 shares (for
which it shares voting and dispositive power).

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ELECTION OF DIRECTORS

The Company's Bylaws establish the number of directors at seven. At the
Annual Meeting, the shares represented by proxies, unless otherwise specified,
will be voted for the election of the seven nominees named herein, each to serve
until the next annual meeting and until his successor is duly elected and
qualified.

The director nominees are identified in the following table. Messrs. Beach,
Martin and Sherard each were elected as directors on August 29, 1997. Messrs.
Peters, Ford, Krul and Howley each were elected as directors on November 10,
1997.

If for any reason any of the nominees is not a candidate when the election
occurs (which is not expected), the Board of Directors expects that proxies will
be voted for the election of a substitute nominee designated by management. The
following information is furnished concerning each nominee for election as a
director.

NOMINEES FOR ELECTION AT THE ANNUAL MEETING

EXPIRATION
OF TERM
DIRECTOR FOR WHICH
NAME AGE PRINCIPAL OCCUPATION SINCE PROPOSED
---- --- -------------------- -------- ----------

Patrick L. Beach............ 41 Chairman of the Board of Directors, 1997 1999
President and Chief Executive Officer
W. Ross Martin.............. 37 Executive Vice President, Chief Financial 1997 1999
Officer and Treasurer
H. Reid Sherard............. 46 Senior Vice President -- Sales and 1997 1999
Marketing, Captec Financial Group, Inc.
Richard J. Peters........... 50 President, R.J. Peters & Company, L.L.C. 1997 1999
Creed L. Ford, III.......... 46 Chief Executive Officer, Kona Restaurant 1997 1999
Group
William H. Krul, II......... 48 President, Miller-Valentine Construction, 1997 1999
Inc.
Lee C. Howley............... 50 President, Howley & Company 1997 1999

Each of the nominees has engaged in the principal occupation or activity
indicated for at least five years, except as follows. Since 1981, Mr. Beach has
served as the Chairman of the Board of Directors, President and Chief Executive
Officer of Captec Financial Group, Inc. ("Captec Financial"), an affiliate of
the Company. Mr. Martin served as Vice President -- Finance of Captec Financial
from 1986 to 1994 and has served as its Senior Vice President and Chief
Financial Officer since 1994. From 1986 to 1994, Mr. Sherard was employed by
Franchise Finance Corporation of America in several positions including Vice
President, Acquisitions. From 1986 through June 1997, Mr. Peters was a senior
executive of Penske Corporation, serving most recently as Executive Vice
President and Chief Financial Officer, and as President and Chief Executive
Officer of Penske Motor Sports, Inc. From 1976 until 1997 Mr. Ford served in
numerous capacities with Brinker International, most recently as Chief Operating
Officer and a Director.

Mr. Peters is a Director of Penske Corporation, Penske Motor Sports, Inc.
and Aon Funds. Mr. Howley is a Director of Boykin Lodging Company, International
Total Services, Inc. and LESCO, Inc., and currently serves as Co-Chairman of the
Rock and Roll Hall of Fame and Museum in Cleveland, Ohio.

Kona Restaurant Group, of which Mr. Ford is the Chief Executive Officer, is
a lessee of three properties from the Company on which it operates Johnny
Carino's Italian Kitchen restaurants. Total rent to the Company from these
properties was $146,670 in 1997 and is anticipated to be approximately $467,272
in 1998.

As of December 31, 1997, the Company held a demand loan of $421,920
collateralized by a first mortgage on a Blockbuster Video Unit owned by Mr.
Martin's father-in-law. The note bears interest at a rate of 9.0% per annum.

As of December 31, 1997, the Company held various collateralized loans to
affiliates under a master revolving note and a promissory note with Captec
Financial in the aggregate principal amount of approximately $13.1 million. The
master revolving note bears interest at 8.0% per annum and the promissory note
bears interest at 15.74% per annum. Both notes are payable on demand.

As of December 31, 1997, the Company also held approximately $7.5 million
in short-term demand loans, substantially all of which are from Captec
Financial. These loans bear interest at the rate of 8.0% per annum.
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In January 1997, the Company acquired two net leased real properties and
three equipment leases from an affiliated limited partnership for an aggregate
purchase price of approximately $2.4 million.

Messrs. Beach, Martin and Sherard are the Chief Executive Officer,
President and Chairman, the Senior Vice President and Chief Financial Officer,
and the Senior Vice President -- Sales and Marketing, respectively, of Captec
Financial. Messrs. Beach and Martin also serve as the Chief Executive Officer,
President and Chairman and the Executive Vice President and Chief Financial
Officer, respectively, of Captec Net Lease Realty Advisors, Inc. ("Captec
Advisors"). Messrs. Beach, Martin and Sherard and Captec Financial are each
stockholders of Captec Advisors. Together with Captec Financial, Captec Advisors
provides the Company with certain investment and financial advisory services
pertaining primarily to the acquisition, development and leasing of properties
pursuant to an August 29, 1997 Advisory Agreement (the "Advisory Agreement").
Pursuant to the Advisory Agreement, as compensation for its services Captec
Advisors receives a Management Fee of the lesser of (i) 0.6% of the aggregate
capitalized cost (excluding accumulated depreciation) of all assets in the
Company's portfolio, or (ii) 5.0% of the Company's revenues, in either case
determined in accordance with generally accepted accounting principles. Captec
Advisors also receives an Incentive Fee equal to 15.0% of the amount by which
any increase in annual Funds From Operations ("FFO") per share exceeds a 7.0%
annual increase in FFO per share multiplied by the weighted average number of
shares of the Common Stock outstanding. The Company also will pay to Captec
Advisors an amount equal to all costs incurred in the acquisition of properties
identified by Captec Advisors, Captec Financial or any other person or entity
with which Captec Advisors subcontracts and acquired during the term of the
Advisory Agreement (the "Cost Reimbursement"). In no event will the Incentive
Fee and Cost Reimbursement exceed 3.0% of the acquisition cost of properties
identified and acquired. The Company also reimburses Captec Advisors, Captec
Financial or its subcontractors for any third party expenses incurred directly
in connection with the services they provide to the Company. The Company paid
$474,904 (inclusive of the Cost Reimbursement) as compensation pursuant to the
Advisory Agreement in 1997. Based upon the Company's existing portfolio of
properties and its anticipated acquisition activity in 1998, the Company
estimates it will pay approximately $3.1 million (inclusive of the Cost
Reimbursement) as compensation pursuant to the Advisory Agreement in 1998. The
amount to be paid under the Advisory Agreement in 1998 will vary based upon
numerous circumstances, some of which are beyond the Company's control, and the
actual amount paid pursuant to the Advisory Agreement may vary materially.

The Company consummated its initial public offering of the Common Stock in
November 1997. During the fiscal year ended December 31, 1997, the Board of
Directors held one meeting which all directors attended. The Board of Directors
has appointed an Audit Committee and a Compensation Committee, and does not have
a Finance or Nominating Committee. No committee meetings were held during 1997.

The Audit Committee consists of Messrs. Peters, Ford and Howley. The Audit
Committee recommends annually to the Board of Directors the engagement of the
independent public accountants for the Company, reviews the plans for, and
results of, audit engagements, approves professional services provided by the
independent public accountants, considers the range of audit and nonaudit fees,
and reviews the independent public accountants' letter of comments and
management's responses thereto, the adequacy of the Company's internal
accounting controls and major accounting or financial reporting matters.

The Compensation Committee consists of Messrs. Peters, Howley and Krul. The
Compensation Committee determines compensation for senior management, advises
the Board of Directors on the adoption and administration of employee benefit
and compensation plans and administers the Captec Net Lease Realty, Inc.
Long-Term Incentive Plan (the "Long-Term Incentive Plan").

Directors' Compensation. Each independent director is compensated at the
rate of $16,000 per year (prorated to $2,000 for 1997). Each director also
receives $1,000 for attendance at each meeting of the Board of Directors and of
any committee or $250 for participation in any meeting by telephone. No other
director fees are paid. Upon completion of the Company's initial public
offering, each independent director (Messrs. Peters, Ford, Krul and Howley)
received a 10-year option for 5,000 shares of Common Stock, exercisable at
$18.00 per share and subject to vesting within two years of issuance. Directors
who are not employees of the Company are eligible to participate in the
Company's Directors' Deferred Compensation

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Plan (the "Deferred Plan"). The Deferred Plan, which is administered by officers
appointed by the Board of Directors who are not eligible to participate in it,
allows directors to defer receipt of fees payable to them by the Company for
their service as directors. The value of the amounts credited to a director in
the Deferred Plan increases or decreases based on the market value of the Common
Stock.

COMPENSATION COMMITTEE REPORT

Introduction. The Compensation Committee is responsible for determining
the compensation to be paid to the Company's executive officers. The
Compensation Committee also is responsible for making major policy decisions
with respect to health care and other benefit plans and administers the
Long-Term Incentive Plan.

The Compensation Committee seeks (i) to provide competitive compensation
that enables the Company to attract and retain qualified executives and align
their compensation with the Company's overall business strategies, and (ii) to
provide each executive officer with substantial incentive to work for the
success of the Company through stock options which provide for participation in
the Company's growth and success. To achieve this goal, the Compensation
Committee determines executive compensation with a focus on compensating
executive officers based on their responsibilities and the Company's
performance. The primary components of the Company's executive compensation
program are (i) base salaries and certain other annual compensation, (ii)
bonuses, and (iii) Common Stock options.

Base Salaries and Other Annual Compensation. The base salaries and certain
other compensation for the Company's executive officers in 1997 were determined
based upon the experience of the executives in the industry, together with
comparisons of compensation paid by companies of similar size in the real estate
investment trust industry. This compensation was determined after consulting
with the Company's financial advisors and the managing underwriters of the
Company's initial public offering.

Messrs. Beach and Martin each have employment agreements with the Company
pursuant to which they receive base salaries of $150,000 and $100,000,
respectively, health and life insurance and certain other benefits. The
employment agreements also entitle Messrs. Beach and Martin to options granted
pursuant to the Long-Term Incentive Plan to purchase 400,000 shares and 200,000
shares of the Common Stock respectively for a period of 10 years at a purchase
price of $18.00 per share. The Compensation Committee believes that these annual
compensation packages are commensurate with the experience and responsibility of
Messrs. Beach and Martin. Mr. Max's annualized base salary for the fiscal year
ended December 31, 1997 was $100,000.

Bonuses. The employment agreements each entitle Mr. Beach and Mr. Martin
to an annual bonus on a sliding scale of 10.0% to 100.0% of annual base salary
contingent, and based upon, the percentage increase of FFO per share in any
calendar year from the prior calendar year. No bonuses were awarded during 1997.

Stock Options. All of the Company's executive officers are eligible to
receive options to purchase shares of Common Stock under the Long-Term Incentive
Plan. The Company believes that stock options provide valuable motivation and
long-term incentive to management. Stock option grants reinforce long-term goals
by providing the proper nexus between the interests of management and the
interests of the Company's stockholders. Pursuant to their employment
agreements, Messrs. Beach and Martin have been granted 10-year options under the
Long-Term Incentive Plan to purchase 400,000 and 200,000 shares of Common Stock,
respectively, at $18.00 per share. Mr. Max has been granted a 10-year option
under the Long-Term Incentive Plan to purchase 50,000 shares of Common Stock at
$18.00 per share. The options granted to Messrs. Beach, Martin and Max will vest
and become exercisable in three equal annual installments on October 15, 1998,
1999 and 2000. The number of options granted initially to Messrs. Beach, Martin
and Max was determined through consultation with the managing underwriters of
the Company's initial public offering and based on the expected contribution of
each of them to the Company.

Richard J. Peters
Lee C. Howley
William H. Krul, II

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EXECUTIVE COMPENSATION

The following information is provided for each of the Company's executive
officers for the fiscal year ended December 31, 1997.

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------- ----------------------------------
OTHER RESTRICTED ALL
ANNUAL STOCK STOCK OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
PRINCIPAL POSITION ($) ($) ($)(2) ($) (#)(3) ($)
- --------------------------------------- ------- ----- ------------ ---------- ------- ------------

Patrick L. Beach....................... $11,538 -- -- -- 400,000 --
Chairman, President and
Chief Executive Officer
W. Ross Martin......................... $ 7,692 -- -- -- 200,000 --
Executive Vice President and Chief
Financial Officer
Ronald Max............................. $ 7,692 -- -- -- 50,000 $300
Vice President and
Chief Investment Officer

- ---------------
(1) Reflects compensation paid by the Company from November 18, 1997 (the date
of the initial public offering) through December 31, 1997. The Company did
not pay any compensation prior to November 18, 1997.
(2) Total perquisites and other personal benefits for each of the executive
officers do not exceed the threshold amounts specified in the regulations
promulgated by the Commission.
(3) Granted pursuant to the Long-Term Incentive Plan.

Messrs. Beach and Martin each entered into October 15, 1997 employment
agreements with the Company. Each agreement provides for an initial three-year
term that is automatically extended for an additional year at the end of each
year of the agreement, subject to the right of either party to terminate the
agreement at the end of the then applicable term by giving written notice of
termination on or before November 30 of any year. Each agreement provides for
the annual base salary, stock options and bonus described under "Election of
Directors -- Compensation Committee Report," and medical and dental benefits,
vacation and sick leave, life insurance and certain additional compensation. Mr.
Max does not have an employment agreement.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------- VALUE AT ASSUMED
PERCENTAGE OF ANNUAL RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE ------------------------
NAME GRANTED(1) FISCAL YEAR(2) ($/SHARE) 5% 10%
---- ---------- -------------- --------- ---------- -----------

Patrick L. Beach................... 400,000 61.5% $18.00 $4,528,000 $11,476,000
W. Ross Martin..................... 200,000 30.8% 18.00 2,264,000 5,738,000
Ronald Max......................... 50,000 7.7% 18.00 566,000 1,435,000

- ---------------
(1) Pursuant to each of their employment agreements, Messrs. Beach and Martin
have been granted, pursuant to the Long-Term Incentive Plan, 10-year options
to purchase 400,000 and 200,000 shares of Common Stock, respectively, at
$18.00 per share. Mr. Max has been granted, pursuant to the Long-Term
Incentive Plan, a 10-year option to purchase 50,000 shares of Common Stock
at $18.00 per share. The options granted to Messrs. Beach, Martin and Max
vest and become exercisable in three equal annual installments on October
15, 1998, 1999 and 2000.

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(2) Based on 650,000 options granted to all employees during the fiscal year.
(3) These amounts are based on hypothetical annual appreciation rates of 5.0%
and 10.0% and are not intended to forecast the actual future appreciation of
the Common Stock. No gain to optionees is possible without an actual
increase in the price of the Common Stock, which would benefit all of the
Company's stockholders. All calculations are based on a 10-year option
period.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FISCAL OPTIONS AT FISCAL
ACQUIRED ON VALUE YEAR-END(#) YEAR-END ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------------- -----------------

Patrick L. Beach............................ -- -- -0-/400,000 --
W. Ross Martin.............................. -- -- -0-/200,000 --
Ronald Max.................................. -- -- -0-/ 50,000 --

PERFORMANCE GRAPH

Set forth below is a line graph comparing the cumulative total return of a
hypothetical investment in the Common Stock with the cumulative total return of
a hypothetical investment in each of the National Association of Real Estate
Investment Trusts ("NAREIT") Equity Index and the S&P 500 Index based on the
respective market price of each such investment at October 31, 1997, November
30, 1997 and December 31, 1997, assuming in each case an initial investment of
$100 on October 31, 1997 and reinvestment of dividends.

[GRAPH]

OCTOBER 31, NOVEMBER 30, DECEMBER 31,
1997 1997 1997

The Company.................................... 100.00 94.44 95.49
S&P 500........................................ 100.00 104.63 106.43
NAREIT Equity.................................. 100.00 102.16 104.57

STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING

Any stockholder proposal intended to be presented at the Company's 1999
Annual Meeting of Stockholders must be received by the Company at 24 Frank Lloyd
Wright Drive, Lobby L, 4th Floor, Ann

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10

Arbor, MI 48106-0544, on or before December 1, 1998, for inclusion in the
Company's proxy statement and form of proxy relating to the 1999 Annual Meeting
of Stockholders.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended requires
the Company's directors, executive officers and owners of more than 10.0% of the
Company's Common Stock to file with the Commission initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Executive officers, directors and owners of more than 10.0% of
the Common Stock are required by Commission regulations to furnish the Company
with copies of all forms they file pursuant to Section 16(a).

To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 1997, its
executive officers, directors and greater than 10.0% beneficial owners complied
with all applicable Section 16(a) filing requirements except that each of
Messrs. Beach, Peters, Ford, Krul and Howley made a single late filing of a Form
4 with respect to the purchase of Common Stock.

OTHER MATTERS

The Company has selected Coopers & Lybrand L.L.P. as its independent
accountants for the current fiscal year. Representatives of Coopers & Lybrand
L.L.P., which served as the Company's independent public accountants for the
fiscal year ended December 31, 1997, are expected to be present at the Annual
Meeting, will have the opportunity to make a statement if they so desire and
will be available to respond to appropriate questions.

If the enclosed proxy is executed and returned to the Company, the persons
named in it will vote the shares represented by that proxy at the Annual
Meeting. The form of proxy permits specification of a vote for the election of
directors as set forth under "Election of Directors," the withholding of
authority to vote in the election of directors or the withholding of authority
to vote for one or more specified nominees.

When a choice has been specified in the proxy, the shares represented will
be voted in accordance with that specification. If no specification is made,
those shares will be voted at the Annual Meeting to elect directors as set forth
under "Election of Directors." Under Delaware law, broker non-votes and
abstaining votes will not be counted in favor of, or against, any nominee. The
seven director nominees receiving the greatest number of affirmative votes will
be elected directors. If any other matter properly comes before the Annual
Meeting, the persons named in the proxy will vote thereon in accordance with
their judgment. Management does not know of any other matter that will be
presented for action at the Annual Meeting.

By order of the Board of Directors,

/s/ W. Ross Martin
W. ROSS MARTIN
Executive Vice President and
Chief Financial Officer

Dated: April 7, 1998

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11
CAPTEC NET LEASE REALTY, INC.

[ARROW] Tear at Perforation [ARROW]

The Annual Meeting of Stockholders of Captec Net Lease Realty, Inc. will be held
Friday, May 8, 1998, at 10:00 a.m., at The Ritz-Carlton Dearborn, Fairlane
Plaza, 300 Town Center Drive, Dearborn, Michigan

1. ELECTION OF DIRECTORS

Nominees: Patrick L. Beach W. Ross Martin H. Reid Sherard
Richard J. Peters Creed L. Ford, III William H. Krul, II
Lee C. Howley

[ ] FOR all nominees [ ] WITHHELD as to all
nominees

FOR, except vote withheld from the following nominee(s):
[ ]
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2. ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING

The undersigned hereby acknowledges receipt of a Notice
of Annual Meeting of Stockholders of Captec Net Lease
Realty, Inc. called for May 8, 1998, and a Proxy Statement
for the Meeting prior to the signing of this proxy.

Dated:
-----------------------, 1998

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Please sign exactly as your
name(s) appear(s) on this
proxy. When signing in a
representative capacity,
please give title.

PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD
USING THE ENCLOSED ENVELOPE.

CAPTEC NET LEASE REALTY, INC.
24 Frank Lloyd Wright Drive
Ann Arbor, Michigan 48106 PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF CAPTEC NET LEASE REALTY, INC. FOR USE ONLY AT THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON MAY 8, 1998 AND ANY
ADJOURNMENT THEREOF.

The undersigned, being a stockholder of CAPTEC NET
LEASE REALTY, INC. ("Captec"), hereby authorizes Patrick L.
Beach and W. Ross Martin, and each of them, as proxies,
with the full power of substitution, to represent the
undersigned at the Annual Meeting of Stockholders of Captec
to be held at The Ritz-Carlton Dearborn, Fairlane Plaza,
300 Town Center Drive, Dearborn, Michigan on May 8, 1998 at
10:00 a.m., local time, and at any adjournment thereof, and
at the meeting to act with respect to all votes that the
undersigned would be entitled to cast, if then personally
present, as appears on the reverse side of this proxy.

In their discretion, the proxies are authorized to vote
with respect to matters incident to the conduct of the
meeting and upon such other matters as may properly come
before the meeting. This proxy may be revoked at any time
before it is exercised.

Shares of the Common Stock of Captec will be voted as
specified. If no specification is made, shares will be
voted FOR the nominees for director named on the reverse
side and IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES
as to any other matter which may properly come before the
Meeting.

CONTINUED ON OTHER SIDE