Greetings, and welcome to the NetSTREIT Corp Third Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Randy Haugh, Senior Vice President of Finance. Please proceed.

Thank you for joining us for NetSTREIT's third quarter 2020 earnings conference call. In addition to the press release distributed yesterday after market close, we posted a supplemental package and an updated investor presentation in the investors, events and presentations section of the company's website at www.netstreit.com. On today's call, management's remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. For more information about these risk factors, we encourage you to review our prospectus dated August 13, 2020, and our other SEC filings. All forward-looking statements are made as of the date here, and NetSTREIT assumes no obligation to update any forward-looking statements in the future. In addition, certain financial information presented on this call includes non-GAAP financial measures. Please refer to our earnings release and supplemental package for definitions, GAAP reconciliations and an explanation of why we believe such non-GAAP financial measures are useful to investors. Today's conference call is hosted by NetSTREIT’s Chief Executive Officer, Mark Manheimer; and Chief Financial Officer, Andy Blocher. They will make some prepared remarks and then we will open the call for your questions. Now, I will turn the call over to Mark.

Good morning everyone, and thank you for joining us today for NetSTREIT's inaugural quarterly earnings call. We hope this finds you and your families well, and we are pleased to be here with you today. While we have met with many investors during our IPO marketing efforts over the past several months, let me begin with a brief overview of NetSTREIT. Then I will discuss our acquisition and external growth activity and close with a word on our commitment to you, our shareholders. Andy will provide more detail on our quarterly results, balance sheet, and fourth quarter outlook. We will then open the call for questions. Leading up to our formation transactions in December 2019 and every day since then, we have been focused on creating a high-quality, diversified, and defensive net lease retail portfolio with a conservatively capitalized balance sheet and scalable platform to support accretive and consistent long-term cash flow growth. While this is NetSTREIT's first conference call as a publicly traded company, Andy and I have lengthy track records within the net lease business and a publicly traded REIT and have surrounded ourselves with a seasoned leadership team to support our future growth and our commitment to success as a public company. I couldn't be more proud of the success of our 19 team members that got us to where we are today. Let me take a moment to briefly discuss our history. Our predecessor was a private real estate fund that owned a net lease portfolio valued at approximately $350 million in asset value, consisting of approximately 50% investment-grade rated tenants. Prior to our formation transactions, that portfolio was then pulled down to reduce exposure to certain tenants and sectors that we did not feel were desirable long-term. In December 2019 and into January 2020, we raised $220 million of capital from institutional investors via a private Rule 144A offering and internalized our management team and other formation transactions forming NetSTREIT. We also concurrently closed on a new term loan and revolver to refinance our outstanding debt and fund future growth. We then completed our IPO, raising an additional $227 million in August and September of 2020. Today, our portfolio contains 189 single-tenant properties comprising 3.4 million square feet in 37 states, with a diversified tenant roster of 53 tenants in 24 industries. Our weighted average lease term is 11.1 years, and we are 100% occupied with no lease expirations until 2022, and only 1.4% of leases expiring before 2025. Based on our ADR, our tenancy is 68% investment grade, with an additional 6.4% classified as high-quality, underrated, and 90% of our industry exposure is what we refer to as defensive. These tenants operate in industries where their physical location is critical to the generation of sales and profits, with a focus on necessary goods and essential services, including discount stores, grocers, drugstores, pharmacies, home improvement, automotive service, and quick service restaurants. This high-quality tenancy creates bond-like leases with high-quality rent collections in times of disruption, including what we have most recently seen in 2020. While we certainly cannot take credit for having predicted the COVID-19 pandemic, we designed our portfolio and balance sheet strategy for long-term stability and strength before the pandemic was even contemplated. We have long believed that retail will continue to evolve, both in ways that we can predict and in ways that we cannot. With that backdrop, we have been, and continue to be focused on retailers in industries that are well protected from e-commerce pressures, but also have balance sheet strength and access to capital to reinvest in their businesses and adapt to the changing retail landscape. We're also focused on acquiring real estate that is fundable and attractive to other retail uses, and other bases that we can continue to replicate cash flows in a downside scenario. Additionally, given our portfolio was recently constructed, NetSTREIT has not had to work through legacy tenants in the worst struggling categories that may have felt an outsized impact from the pandemic. Proof of this is in our cash rent collections, which have been strong and consistent, with 100% cash rent collections in both September and October. Andy will provide further details momentarily. With respect to external growth, we're committed to disciplined acquisitions and focused on underlying tenant credit locations with fundable real estate, strong market fundamentals, and locations that provide strong cash flows to the parent tenant. The single-tenant retail net lease sector is large and highly liquid. And we believe we can bring our deep industry relationships to bear as we seek to execute on our pipeline of acquisition opportunities. We're able to continue to execute through market disruption during COVID, with $327 million of acquisitions completed in 2020 through the end of the third quarter. For the third quarter, we completed $103 million of acquisitions at an initial cash capitalization rate of 6.5%. These acquisitions had a weighted average remaining lease term of 10.9 years, and 100% of the properties are occupied by investment-grade rated tenants. We would note that $15 million of this activity was originally targeted to close in the fourth quarter, but we were able to accelerate these closings to September 30. In July, we acquired a Walmart Supercenter and a Sam's Club in Tupelo, Mississippi at an initial cap rate of 6.6% and a remaining lease term of 12 years. There we provided a solution to the seller by partnering with a shopping center buyer who could currently purchase the remainder of the center, and as a result, we were able to increase our exposure to what we believe is a blue chip defensive tenant. In August, we acquired a portfolio of seven well-located and strong-performing O'Reilly's auto parts New England locations with more than 11 years of remaining lease term at a 6.9% initial cash cap rate. From a transparency perspective, note that when we discuss cap rates on acquisitions, NetSTREIT will provide cash cap rates on total acquisition costs. We completed one disposition in the third quarter at a sales price of $1.9 million to casual dining restaurants that we felt could have trouble competing in the future and wanted to eliminate that exposure from our portfolio. Casual dining is not a sector that we plan on adding to in the portfolio, and we continue to reduce that small exposure in the portfolio through dispositions over time. As we look ahead, we're targeting an average of $80 million or more of acquisitions per quarter, or $160 million for the last two quarters of 2020. Well, 100% of our third quarter acquisitions were investment grade, over time, we intend to target an appropriate balance for our risk tolerance and growth objectives. We expect that approximately 70% of our investment activity will be with investment-grade tenants. The balance will be with non-investment grade tenants at a slightly higher yield, including high-quality underrated tenants and selectively targeted seven different grade tenants where we have a high level of confidence in the tenant industry, the retailers management team, the trajectory of the retailer's business, as well as the quality of the real estate we are acquiring. Before I turn the call over to Andy, I'd like to make a few comments regarding the philosophy with which we approach our business. When we embarked on our IPO, we met with many of you through our marketing process, and we were humbled by the strong institutional support we received when we finalized our order book. We recognize that you are entrusting us with your capital, and we want you to know that you can count on us. We are committed to providing clear and straightforward disclosures, remaining accessible to investors and analysts, and finally to fulfill our obligations as corporate citizens by establishing a strong ESG program. Regarding ESG, we are committed to creating a strong internal culture that promotes inclusion and employee well-being and are pleased with the initial steps we have taken to date. Finally, we are proud of our shareholder-friendly corporate governance structure, including our diverse majority independent board. I'll now turn the call over to Andy.

Thanks, Mark. And thank you everyone for joining us on our call today. I'm incredibly happy to be joining you as CFO of NetSTREIT. As Mark noted earlier, and we discuss frequently during our IPO process, we're committed to building and maintaining a conservative capital structure and providing transparency with respect to our business. We believe that these initiatives, coupled with successfully executing our business strategy, will build shareholder confidence and over time support a competitive cost of capital. Let me begin with our results for the quarter. Yesterday in our press release, we recorded a net loss of $0.11, core FFO of $0.15, and AFFO of $0.21 per share. As of September 30, 2020, the NetSTREIT portfolio contributed $38.9 million in annualized base rent or ADR after giving effect to acquisitions and dispositions completed in the quarter. From a cash perspective, we're pleased to report that prior to giving any consideration to deferral or abatement arrangements granted as a result of COVID-19, we collected 100% of September rent payments, bringing total third quarter rent collections to 98.1%. This is a slight increase from our previous disclosures, as our only tenant being recognized on a cash basis paid their September rent shortly following our publish update, bringing them current through the third quarter. On a related note, based on the payment history of our tenants, we currently have zero bad debt reserves and recognize zero bad debt in the quarter or year-to-date. Finally, as Mark mentioned, for the month of October, we also received 100% in cash funds. With respect to deferrals and abatements, there was $108,000 of abatements granted in the third quarter under general conditions on these extensions, which averaged approximately one to one and a half years of additional terms for each month of abated rent. Year-to-date, we granted just under $750,000 of renovations, generally conditioned on lease extensions, which averaged approximately 1.4 years of additional term for each month of abated rent. With respect to deferrals, we deferred $261,000 of rent year-to-date, of which $75,000 has been repaid, leaving a net rent deferral balance of $186,000 at quarter-end. The remaining deferred balance will be repaid over the lifetime of the leases, and therefore we expect the quarterly impact on our business as we collect deferrals to be very small, it was $4,000 in the third quarter. As demonstrated by our 100% rent collections in September and October, we provided no deferrals or abatements after August. We currently have eight assets classified as held for sale and took $363,000 in impairments in the third quarter to bring our GAAP net book value from two of those eight assets, including our single asset being recognized on a cash basis, in line with the anticipated net proceeds from those sales. A couple of items resulting from our successful IPO impacted our financial statements in the third quarter. We had $0.9 million of expenses in the third quarter and $2.2 million year-to-date related to 144A and IPO related transaction costs. These costs largely reflect consulting services as we staffed up pre-IPO to put appropriate public company processes and reporting in place. In addition, we recognize $1.8 million of noncash compensation expense from two sources in the quarter. The first is $1.7 million resulting from a cash out related to $4.8 million of performance-based equity awards at the time of the 144A, with a shelf registration performance criteria. The nature of that performance criteria didn't allow us to recognize any expense until the product performance criteria was met, and as a result, significant catch-up was recognized in the quarter. An additional $74,000 was recognized from the $3.1 million time-based awards granted to employees and board members at the time of the IPO. These awards will be recognized on a straight-line basis over their three to five year life. The transaction expenses and the noncash equity compensation catch-up resulted in the largest non-recurring adjustments or key financial measures in the third quarter. Turning to our capital markets activity. On August 13, 2020, we completed our IPO, and including the overallotment option in September, issued just under 14 million common shares at $18 per share, generating net proceeds of approximately $227.3 million after deducting the underwriting discount and offering expenses. In connection with the IPO, we repaid the $50 million outstanding balance under the company's revolving line of credit, and retired the outstanding Series A Preferred shares with remaining proceeds utilized for acquisition and general corporate purposes. In September, the company completed a $175 million LIBOR swap to hedge floating rate exposure on the entire balance of the company's term loan at an effective rate of 21 basis points to the maturity of the term loan in December 2024. As of September 30, we had $137 million of cash remaining fully undrawn on our $250 million revolving line of credit. We have no debt maturities until the maturity of our revolver in December 2023, which is subject to a one-year extension option. In addition, our net debt to adjusted EBITDA ratio is 1.4 times, well below our 4.5 to 5.5 times long-term target. With respect to dividends, in August, we declared an inaugural cash dividend on our common stock of $0.10 per share for the IPO sub-period in the third quarter of 2020. The dividend amount was prorated to reflect the period of time from the IPO at quarter-end. Yesterday, with our earnings release, the Board declared a $0.20 quarterly cash dividend payable in December, reflecting an annualized dividend rate of $0.80 per share. Before I turn it back over to Mark, let me just take a few minutes to discuss our outlook on a couple of fourth quarter items and provide some forward-looking perspective. First, as Mark mentioned, consistent with our average expected post-IPO acquisition volumes of $80 million per quarter, and after accounting for the $15 million in fourth quarter acquisitions that we accelerated to September 30, we expect to complete at least an additional $65 million of acquisitions in the fourth quarter, bringing our total 2020 acquisition volumes to approximately $400 million. With the LIBOR hedge in place and with current cash balances exceeding our fourth quarter acquisition expectations, we expect no incremental borrowings under our revolver, and resultant fourth-quarter interest expense, including $300,000 of quarterly deferred financing fee amortization and undrawn fees to be approximately a million dollars. We expect our fourth quarter cash G&A to better approximate our forward-looking run rate of $11 million to $12 million annually, combined with an additional $3 million of non-cash compensation expenses annually. As discussed during our IPO process, we believe this amount reflects the appropriate staffing to execute our business strategy and effectively run as a public company. As a result, we would expect increases to G&A over time to be marginal as we grow approximately 10 basis points on incremental acquisition volumes should be a pretty good estimate. Finally, consistent with the Board's dividend declaration, we're targeting an 80% annualized dividend rate for the near-term, with dividend growth expected once we stabilize at 65% to 75% AFFO payout. Now, I'll turn the call back over to Mark.

Thanks, Andy. And thank you all for joining us today. As we prepared for the IPO in August, we made sure that we not only had high-quality assets and the right portfolio in place to successfully enter the public markets, but also the best people and platform as well. To that end, I'm very proud of our portfolio's performance amid a pandemic, no less, as well as our team. Andy and I are very grateful to them for their hard work and dedication. We would also like to thank our Board for their valuable advice and counsel. We look forward to growing this business and speaking with you all each quarter to update you on our progress. This concludes our prepared remarks. We will now open the line for questions.

Thank you. At this time, we'll be conducting a question-and-answer session. Your first question comes from the line of Nate Crossett with Berenberg. Please proceed with your question.

I wanted to get your commentary just on the activity so far in October, and what it looks like for the next two months? It sounds like 65 million is at least baked in. Is that a conservative estimate? And just curious, if you're seeing any more deal activity because of the upcoming election and potential for tax code changes?

Thanks, Nate. Yes, so far this quarter, we've been targeting $80 million per quarter since the third and fourth quarter. And we did pull forward in the neighborhood of $15 million of transactions to September 30, that we had initially targeted for the fourth quarter. That being said, we still have a pretty robust pipeline. And it really will come down to the timing on some of the transactions. We continue to see similar deal flow that we saw coming into the IPO that we discussed on the roadshow with investors, and I'm actually very happy about what the pipeline looks like for the fourth quarter. We should get a couple of new names in the portfolio that I think people will certainly like the tenant lineup that we think should close. If you could slip into January, we're hopeful that we can kind of get in a similar number here in the fourth quarter. And I guess, another thing of note is our 100% investment-grade acquisition for the third quarter. So, probably the first and only time that you'll see 100%, after this and beyond, that's great. The mix of what we're looking at buying is probably more in the 70% range of investment-grade. Of course, that can shift around depending on what closes in December or January. But certainly, we're adding a little bit more to that high-quality, non-rated budget which is as we redefine more than a billion dollars of revenue from less than 2 times debt-to-EBITDA, so kind of a tendency that would have an investment grade rating if they were to go out and get a rating. And so I'm really feeling pretty good about the pipeline today.

Maybe you guys can just also touch on compensation and pricing. Have there been any changes that you've seen since the IPO? Obviously, you guys are targeting concepts that are highly sought after, so I'm just curious kind of what you're seeing on the ground?

Yes, not really. When we think about the other institutional investors, most of them have a different credit profile that they're really chasing. Most of our competition continues to be really kind of your mom-and-pop, 1031-type investors. We haven't really seen too much of a change, maybe we'll make up your mind as the results come in, and that changes people's strategies, but even with the 1031, I would anticipate there's certainly a lot of strong lobbyists out there. Regardless of how the election turns out, I would imagine that's going to take some time, so I wouldn't be surprised if there's just a massive rush for people to get some 1031s in, but we'll certainly be monitoring that.

Okay. And just last question quickly, if I can. Any assets that are held for sale? I'm just curious, what's in that mix? Is there any common theme in that?

Yes, I mean, I'll stop short of getting exactly what they are. This is where we're relying on the third-party sites to close on those. So it's a little bit out of our control. But I think what you're seeing is the big focus for us is going to be on monitoring risk in the portfolio. In most cases, it's going to be kind of getting out ahead of some potential credit risk. We are looking at decreasing our exposure, specifically to casual dining, and maybe to a lesser extent, our bank exposure over time. So there are expected to be a little bit of that, and then we do have a number one tenant, so there's a little bit of an outside exposure in the portfolio, so there could be a little bit of that mixed in there.

Your next question comes from the line of Todd Thomas with KeyBanc. Please proceed with your question.

Just first question following up on the investments in terms of pricing. Are you seeing any compression in cap rates? Or do you feel comfortable that you'll be able to continue to buy in that sort of 6.5% to 7% range? And then Mark, you talked about striking a balance between investment-grade rated tenants and sub-IG or non-rated tenants with higher yields? What's the difference in yield like there? And is that added risk being compensated for the higher yield in this environment?

So as it relates to the mix outside of investment grade, and keep in mind, we're really targeting very high-quality tenants. So certainly not a barbell approach or buying a bunch of really high-yield assets and then trying to get some quality to kind of blend in cap rates. It's really more, there's a limited universe of tenants that we're very comfortable with that don't happen to carry an investment grade rating. Quarter-to-quarter that can certainly shift, but I would expect to see maybe at least through the first nine months of this year, in the $27 million that we've closed on in the first nine months of the year, there's been about a 40 basis point difference between that high-quality bucket versus our investment-grade bucket.

Todd, it's Andy, if I can just add to that. Just from our perspective, since it's really the first time we're disclosing it as a public company. When we talked about cap rate on acquisitions, just to make sure we're all on the same page, that cash cap rate is on total acquisition costs.

And in terms of the pipeline, and what you're seeing out there and sort of the various channels that you use for sourcing deals—existing assets, I guess, build-to-suit sale leasebacks. Where's the biggest opportunity today? And you mentioned the Walmart acquisition. Is that an area where you continue to see an increase in offerings, either from more REITs or other retail property owners? Is that area of focus for the company?

Yes, absolutely. Our acquisition targets, I think, are fairly modest in terms of volume. And so it allows us to be very selective. We've got about $500 million to $550 million of acquisitions in our pipeline, most of which we will not get there on pricing. But we pride ourselves on being extremely creative, really trying to find a situation where our surety of closure or whatever we bring to the table is valued, could be speed of close, could be having the cash already raised, could be a relationship that we have—certainly, as you mentioned, on the Walmart transaction, where we partnered with a Dallas-based shopping center buyer that focuses more on gearboxes and shelf space. Things that we've deemed a little bit riskier, but being able to bring that type of transaction to the seller, that solve their entire problem, rather than us kind of pulling out the credit out of the deal and leaving them in a worse spot to sell the rest of the center. Certainly, we're seeing more and more of those types of opportunities working more and more with developers and seeing some more opportunity there as well.

Todd, it's Andy. I mean, just when you think about either the idea of whether it's shopping center owners, getting off some of those triple net tenants, certainly from Mark and my experience, you really need to dig into the details there, whether that's co-tenancy provisions or restricted uses, so on and so forth. So, the devil is in the details on those deals.

And we're starting early derivatives with that way underneath us. So we're not taking on any co-tenancy risk or restricted use if that's going to create a problem for us in the future.

And then just one last question, Andy. In terms of collections, just a little less than 2% not collecting the quarter. I realize you're at 100% in September and October. But is that all resolved in your view? Do you feel that those tenants, and your tenant base in general, is on better footing going forward here or is there some risk that tenants could come back looking for relief or deferrals of some sort? Do you see any risk of that heading into further into the fourth quarter?

Yes, Todd. A lot of that is going to depend on what the future brings with respect to COVID and so forth. I think that we demonstrated that our portfolio was extremely defensive during the second quarter, right? Based on discussions, and going into the third quarter. Certainly feel like, if we're kind of in the current environment, I feel very, very good about collections, not just on the legacy assets, but the assets we've acquired and what it is that we see in the pipeline. So yes, as good as you can feel in this current environment, we feel good.

Yes, and the only thing I would add there is, we cut all of our deals as it relates to COVID back in April and May. And then everyone has gone along with those agreements, and has paid 100%, starting in June. So we just haven't had conversations with tenants as it relates to COVID, or not paying rent, or rent relief, or any of those types of situations. But I think if there's a reemergence of COVID, second wave, whatever you want to call it, I think there is a possibility that we have those types of conversations. But in reality, the deals that we cut, we ended up getting a lot of lease extensions, and a lot more value came back to us than what we gave up. It really showed the commitment to the locations that our tenants have in the areas that were impacted by COVID. So I'm pretty optimistic that we'll continue to collect 100%, but we're certainly open to working with our tenants in the event that their government systems down or things outside of their control impact their ability to generate profits.

Yes. So Todd, just to kind of quantify on what Mark said, for the year-to-date, we've given just under three quarters of a million dollars of rent abatement to our tenants. In exchange for that, if you were to quantify what we got with extended terms, that equates to about $14.5 million of additional rent payments at the end of the term.

Your next question comes from line of Linda Tsia with Jefferies. Please proceed with your question.

The disposition you made this quarter was that in casual dining, and then what do you think cap rates might trend for derisking these one-off assets going forward?

Yes, sure, Linda. Yes, that was a casual dining restaurant. That was probably the one property most impacted by COVID in Hutchinson, Kansas, a location without a drive-through, without much of a network to really drive and research in any of those types of platforms. So they closed in and we're unlikely to reopen. And so we thought the fair amount is now the time where we get some value. We felt like if we waited longer, it would be a much uglier situation. So it was a way for us to derisk the portfolio. Certainly, it was something that we did prior to the IPO that we had agreed to that sale, just to really try to clean that up to have a cleaner portfolio on a go-forward basis. Never say never. But keep in mind, we did start out with a $350 million portfolio, really clawed out things that we thought were going to be potential problems down the road of about $90 million that we pulled out of the portfolio. And then it really built up most of the portfolio since the initial capital raise back in December and January and so really feeling very good about the portfolio. There may be a one-off situation here or there. We do have one casual dining restaurant that has been there typically pays about three weeks late, which is what the difference was between our business update on October 1, where we had 99.5% of rent collected, and September now that's up to 100%, because they paid. So that's one where we may want to move at some point. We just want to make sure that we're maximizing value and getting the best economic outcome that we've had to look at in each of those situations.

And then, given the increased market interest in investment grade tenants, what's the best strategy to navigate potentially increased competition and still achieve their cap rates in your targeted range?

Sure, absolutely. I mean, obviously, it's the strategy that we think makes the most sense. So, as we start to head into maybe a period of uncertainty, there may be more interest there. But it's a very, very fragmented business, very much a relationship business. You take a Walmart example that we talked about earlier, that's very difficult for a private buyer to step in and do if they're not in the business each and every day like we are. And we've got $507 million in our pipeline. But we just have to pull down the ones that work for us, and it's just such a large fragmented market that we really feel strongly that we'll continue to be able to execute our business plan in the future.

The next question comes from line of Katy McConnell with Citi. Please proceed with your question.

Can you give us some more color around the debt deals that you walked away from this quarter to get a sense for how you're underwriting rescue acquisitions differently today? And then on the disposition front, would you expect to see similar pricing on the held for sale assets versus the retail?

So I'll take the first one first. The debt deal that we really had to do with a deal that we had cut pre-COVID and then we were able to continue to hit we can on the contract until the seller eventually isn't allowed to keep picking again on that. That had to do with a specific tenant, where we were buying a couple of properties and had a hard deposit back during COVID. And the credit really had deteriorated a bit due to COVID. And then they also were undertaking a pretty large capital market transaction that we thought was going to add leverage to the balance sheet and potentially add additional risks to that particular acquisition. So we elected to walk from that particular transaction. I think that's going to be very abnormal—was really a COVID-type related type deal—but we felt like it was more important for us to not take in assets that could potentially lead to problems down the road than it would be to walk away from a couple hundred thousand dollars. Obviously, something we don't want to do in the future. But I think COVID definitely had a lot to do with that. And then as it relates to dispositions, I would think of the 10.4% cap rate on the one dark casual dining location to be very much an anomaly. As we look at our dispositions in the future, we think the cap rates should be significantly inside of that, depending on what that mix looks like. How many of those are getting out ahead of risk? How many of those are diversification? Sounds like a 711. But I would imagine this would be significantly less than the 10.4% cap rate.

Yes, just to kind of follow up on that. I mean, for everybody else, we had $1.2 million of transaction costs in the quarter. We add back 144A and IPO related expenses, as I discussed in my prepared remarks, to $900. So to quantify that, that's $300,000 of head deal costs in the quarter, as Mark said, we'd anticipate that to be less going forward.

Your next question comes from line of Todd Stender with Wells Fargo. Please proceed with your question.

Just to go back to cap rates. We've been focusing on the cap rate compression direction, really at the peer group. But when you look at this stuff, you guys have been buying some fairly steady with good investment-grade-rated tenants. But with the 10-year Treasury being fairly range-bound below 1%, would you say there's a natural floor in cap rates? You've just got to account for some level of risk on top of that risk-free rate. Maybe that accounts for some of the reasons why cap rates seem to be pretty steady for you guys?

Yes, I think that's right. I think there's generally going to be a floor. When you look at cap rates over time over the past 20 years. People tend to think that there's a massive correlation to interest rates, but there really isn't. I think it's certainly had some gravity to bring those down over time due to a prolonged low interest rate environment that we've been in. But I think the only situations where it really has an impact is sometimes you'll see a very large scale effect that could be a structured financing type execution where some of that secured debt can come into play where someone could get pretty aggressive. But really in kind of the 1031 mom-and-pop smaller transaction market, there's really just not—we don't expect to see massive moves in cap rates, which we really haven't seen over the past 20 years. It's been extraordinarily stable. So I think that's a fair assessment.

Thanks, Mark. Maybe this is for Andy. Obviously, with your proceeds from the IPO still sitting there, you're plenty liquid. Debt-to-EBITDA sub two times. What will probably see you there cap to the capital markets? With debt, come next certainly is a little premature. Probably have until the second quarter of next year to deploy the IPO proceeds? So maybe how you're thinking about the capital structure?

Yes, sure, Todd. Thank you. Yes, plenty liquid, I like that expression. I mean, where we stand right now, we're sitting on $137 million of cash. We've got roughly $30 million worth of assets that are currently held for sale. $250 million undrawn on the credit facilities. So, as you said, plenty liquid for the near-term, our beliefs was through the 144A and into the IPO until today is that continued execution of the business plan is going to result in improvements to our overall cost-of-capital over time. Mark and I are constantly talking about just keep executing, just keep executing, kind of like Dory in Finding Nemo—right, just keep swimming. We're in no rush to raise additional equity at this point. But obviously, we're constantly evaluating funding alternatives on a go-forward basis. Just from where we sit right now, I don't think it's in anybody's best interest to start speculating on what type of capital size, timing, or price. But we're really focused on executing the business, got our eyes wide open, and hopefully the markets trust us to make the appropriate decisions at the appropriate time.

Your next question comes from Alexander Pernokas with Bank of America. Please proceed with your question.

Just one question, what are your thoughts on providing official guidance with 4Q results for 2021?

Alex, look, I mean something that we're regularly thinking about. What we tried to do this quarter was really to give you guys, whether it's on the ADR line, some guidance with respect to acquisitions, interest expense pretty often with our now fixed-rate debt on our term loan. With respect to the dividends from G&A, which are really the biggest drivers there? We will continue to evaluate and try to adhere to best practices as best as we can, as we continue to gain greater clarity around the business. So, if you're asking for, are we going to commit to providing AFFO per share guidance for 2021? At this point, I think it's too soon to tell. To the extent that people feel like we're not giving you the basic building blocks, which I think that we went to great lengths to do this quarter, please feel free to reach out on a one-off basis, and we're happy to discuss.

Your next question comes from line of Ki Bin Kim with Trust Securities. Please proceed with your question.

Could you discuss your investment philosophy? I'm sure there's a host of variables that you consider when you're buying assets. What's your pecking order, and if you could provide some details on that?

Absolutely. Yes, I mean, our first primary focus is going to be on the corporate credit and making sure that we're going to get rent during the lease term. We think in a world where retail continues to evolve, we think it's extraordinarily important to have a strong management team that has access to capital and access to cash, that will allow them to continue to reinvest in their business, and allow them to adapt to the change that will continue to come. I mean, I think that's the one thing that we're sure of is that there will be change. And so being prepared for that, and not having tenants that are continually taking cash out of the business, but rather reinvesting in the business, we think is very important, which happened to be a lot of investment-grade credits and tenants that we focus on that have strong access to capital with lower leverage. The next piece that is very important to us is making sure that we're buying the real estate right. And so, there will be disruption. We got to get everything right. But probably pull us to think we'll get everything right. And so really our backstop is effectively what are we actually buying, and of course the real estate. What can we do with that real estate? How attractive is that going to be to other uses? Looking at the demographics and traffic counts and signage, and what the other traffic drivers are in the area. We think that's very important and really trying to analyze what happens if we do get it back. What can we do with it? How much money is that going to? Are we going to have to put into building if any, and what type of rent should we be able to get replacing the rent that we're getting at the time that we initially do an acquisition. And so we also think it's important to focus on locations that generate positive cash flow for their tenants. Certainly, we've seen that be important as it relates to renewals. But that's probably third in the pecking order behind corporate credit and real estate.

Okay. And Mark you and both Andy have had a lot of experience and looked at public companies in the past. Just curious, as NetSTREIT, what kind of corporate culture you're trying to create?

Yes, absolutely. We think corporate culture is often overlooked, and it's something that we focus on every day, making sure that we've got people that are excited to come to work, like what they're doing, are valued. And we think that will continue to drive them to do the best that they can do. We've got a lot of momentum behind the culture where people are really excited about what we've accomplished. I think it's going to get harder and harder as we continue to scale the business to make sure that we've got the right people in the right seats that kind of have that team mentality that aren't looking to point fingers but are trying to find solutions to issues as they come up. So far, so good. We feel obviously what's been accomplished by our 19 team members to date. I think about we were a smaller private entity less than a year ago, and really what we've been able to accomplish on the acquisitions front, asset management front, a very heavy lift on the accounting side, and what we've been able to accomplish, I don't think that would have been done in a bad culture. And you throw COVID in the mix, really would have been difficult. But people have held themselves accountable through this whole process from a lot of working from home. We think that is certainly a testament to the culture that we've built today.

I would also say, look to the board, right. I mean, as Mark and I were looking to build out the board, we kind of broke it down to its simplest forms. There's three things that we believe can make a REIT successful or not—in this order—but the real estate, the balance sheet, and the people. What happens is a lot of time, you get a lot of folks on boards who are super focused on the first two, not a lot on the last. We have, I keep calling it our secret weapon, who is Heidi Everett, one of our new board members as part of the IPO, who is really engaged in culture, morale, employee maximization. Mark and I very much look forward to working with her to ensure that we are getting everything that we can out of our people, and that we are being as responsive as we can to our employees' needs. We're 19 employees at this point. The idea that Mark and I had our first conversation just over a year ago—we've raised two rounds of capital. We got our books and records in place; we were able to report pretty early in the cycle and feel like we're setting ourselves up for success. You can't do that without the best quality people. We just couldn't be prouder of the team that we have. So hopefully that answers your question.

Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to Mr. Mark Manheimer for closing remarks.

Well, thank you, everybody for joining today. Certainly an exciting day for us with our first call as a public company. Also, we do plan on another call in a few weeks and hope we can find some time to discuss our progress. Thanks again and have a great day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.