We thank you for joining us for NETSTREIT's Fourth Quarter 2023 Earnings Conference Call. In addition to the press release distributed yesterday after market close, we posted a supplemental package and an updated investor presentation. Both can be found in the Investor Relations 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 Form 10-K for the year ended December 31, 2022, and our other SEC filings. All forward-looking statements are made as of the date hereof, 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 of our non-GAAP measures, reconciliations to the most comparable GAAP measure 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, Dan Donlan. We will make some prepared remarks, and then we will open the call for your questions. Now I'll turn the call over to Mark.

Good afternoon, everyone, and welcome to our fourth quarter and year-end 2023 earnings conference call. First, I want to highlight our recently completed forward equity offering, which raised $191 million of net proceeds. Given how volatile the capital markets have been since the Fed began their rate hike campaign in early 2022, we thought it was best to take advantage of a supportive issuance window this January. As it stands today, we have all of the equity capital that we need to execute our 2024 growth plans while still ending the year around the low end of our targeted leverage range of 4.5x to 5.5x. Additionally, this well-timed capital raise, which was done on a 100% forward basis, allows us to remain opportunistic and thoughtful in today's increasingly attractive investment environment. Next, I want to thank the NETSTREIT team for their efforts in executing our investment strategy in 2023, which required our investment professionals to be nimble and creative in the face of volatility, inflation, and rising interest rates. Despite the transaction market experiencing a roughly 70% decline in volumes versus previous years, we managed to acquire high-quality net lease assets at favorable pricing throughout the year. With that in mind, cap rates moved sequentially higher again in the fourth quarter as evidenced by the 7.2% initial cash yield on $119.1 million of investments, which brought our 2023 investment activity to $480.5 million. With nearly all of our fourth-quarter investments being leased to investment-grade tenants, our investment-grade tenancy has now reached 70.5%, which is a record high for the company. Since our last call, we have seen no shortage of investment opportunities, specifically within the dollar store and grocery sectors. Our relationships with tenants and developers, which includes a focus on solving problems for all parties, including us, has allowed us to negotiate many win-win outcomes that were not previously available to us due to the prior strength of the transaction market. As such, we have deliberately pushed our investment volume with certain tenants to higher levels in order to achieve longer lease terms and better rent escalations with said tenants. At the same time, we have and will continue to proactively sell assets leased to these same tenants where the leases are flatter and shorter in duration. Due to the credit of these tenants and the fungible nature of the real estate, we have recycled these assets at a positive spread to our recent purchase prices, which we expect to continue. Furthermore, given our various investment sourcing channels and the opportunities we see with other tenants, we do not expect to see these concentrations to rise much higher than they are today. As a testament to our disciplined underwriting and focus on high-quality real estate, we have identified and acquired multiple Winn-Dixie locations over the past few years that we believe were high-performing locations with underappreciated intrinsic real estate value. Last year, it was announced that ALDI will acquire the brand, which is a substantial credit upgrade for us. We have already been in contact with ALDI, who has expressed interest in converting stores to the ALDI brand. Since inception, we have actively culled the portfolio to avoid potential risk. This is evidenced by our declining Big Lots exposure, which is now down to 8 properties or 1.5% of ABR. Our initial focus has been to sell assets that generated the lowest foot traffic within our portfolio. These assets garnered interest from real estate investors due to their below-market rents and strong real estate fundamentals, which bode well for our remaining exposure. While we are comfortable with the assets we still own, we will still continue to look for opportunities to decrease our exposure. Turning to the portfolio. We have 598 investments leased to 85 tenants that operate within 26 retail industries across 45 states. Our ABR grew 33% to $131.9 million at 2023 year-end from $99.2 million the previous year. 84.6% of our portfolio ABR is leased to tenants with an investment-grade rating or investment-grade profile, and nearly 88% of our ABR is derived from tenants in defensive retail sectors. Our occupancy remains at 100%, and our weighted average remaining lease term is 9.5 years. Our proactive approach to lease expirations leaves us with an enviable lease expiration schedule with only $84,000 of rent expiring in 2024 and 2% of total ABR expiring through 2025. We believe our high credit quality and minimal lease expiration risk adds stability to our underlying cash flow, which we see providing a consistent and growing earnings stream to investors. With that, I'll turn the call over to Dan to discuss our fourth-quarter financial results and subsequent capital-raising activities.

Thank you, Mark, and thank you, everyone, for joining our call today. Turning to our fourth-quarter earnings. We reported net income of $2 million or $0.03 per diluted share. Core FFO was $21.2 million or $0.30 per diluted share, and AFFO was $21.6 million or $0.31 per diluted share, which represented 7% year-over-year growth. For the full year, we reported net income of $0.11 per diluted share, core FFO of $1.19 per diluted share, and AFFO of $1.22 per diluted share, which represented 5% growth year-over-year in 2023. Total G&A expense, excluding one-time items, was $4.8 million for the quarter, which was down 5.5% sequentially. In addition, total G&A for the quarter represented 13% of total revenues, which has improved compared to last quarter and the prior year quarter when total G&A was 14.9% and 16.8%, respectively, of total revenues. We continue to expect our G&A to rationalize relative to our asset base and total revenues as the company has reached proper scale to effectively operate our business on a go-forward basis. Moving on to the balance sheet. Total net debt was $583.4 million at quarter end, and our weighted average interest rate was 4.3%. In addition, when including the impact of extension options, which are solely at our discretion, we have no debt maturing until January of 2027. In terms of future debt issuance, please note that in early March, we plan to draw the remaining $100 million of our 2029 term loan, which has been swapped to a fixed 5.13% interest rate. We do not anticipate raising any additional debt capital this year as our $400 million revolving credit facility provides us with ample capacity to fulfill our 2024 debt needs. With regards to fourth-quarter capital markets activities, we raised $76.7 million of equity through our ATM program. In terms of forward agreements, we had $98.6 million of unsettled forward equity at 2023 year-end. As Mark mentioned earlier, subsequent to year-end, we raised just over 11 million shares of common stock in January of this year, which resulted in $190.8 million of net proceeds to the company. The offering was completed on a 100% forward basis, and we have until January 9, 2025, to settle all shares under the forward sale agreement. With that in mind, we now have the necessary equity capital to fund our 2024 external growth objectives without the need for any additional equity issuance. At quarter end, our liquidity was $548.4 million, which was comprised of $29.9 million of cash on hand, $319.9 million available on our revolving credit facility, $98.6 million of available forward equity, and $100 million of remaining available principal on our 2029 term loan. Including the net proceeds from our January follow-on offering, our pro forma liquidity at year-end was $739.1 million. From a leverage perspective, our adjusted net debt to annualized adjusted EBITDAre was 4.1x at quarter end, which compares favorably to our targeted range of 4.5x to 5.5x. Furthermore, when including the net proceeds from our foreign offering this January, our quarter end pro forma leverage declines to 2.5x. Moving on to guidance. We are reaffirming our 2024 AFFO per share guidance range of $1.24 to $1.28. And we continue to expect cash G&A to range between $13.5 million and $14.5 million, which is exclusive of transaction costs and one-time severance payments. Lastly, on February 13, the Board declared a quarterly cash dividend of $0.205 per share. The dividend will be payable on March 28 to shareholders of record as of March 15. Based on the dividend amount, our AFFO payout ratio for the fourth quarter was 66%. With that, operator, we will now open the line for questions.

I guess I'm curious about what's the messaging here on acquisitions and capital deployment. On the one hand, as you pointed out, you have lots of liquidity following your recent equity raise. But on the other hand, the cost of debt has been choppy. A number of your peers seem to be taking a more reserved approach to capital deployment. So I'm curious what's your messaging or perhaps what sort of pace of capital deployment could be expected over the near term?

Yes, sure. I mean, I would expect overall, at least for the first quarter, that's really all we've got visibility into. We closed $430 million or so net acquisitions last year. I would assume a somewhat similar pace for the first quarter. But we really want to keep some optionality. Things are pretty choppy out there. We're seeing some movement in pricing on cap rates, and we want to make sure that we're going to maximize the proceeds from our equity raise earlier this year.

Okay. Fair. And you also mentioned the focus on selling flatter lease assets reflecting a positive spread. I guess I'm curious how much opportunity is there, what type of spreads can you generate? And just to be clear, this is investment-grade neutral? Or are you selling investment grade and backfilling with non-investment grade?

Yes, sure. So I mean a lot of it is really with the same tenant. So we've seen some opportunities where some tenants have moved to longer lease terms with better escalations. And so where we've been able to take advantage of some 1031 buyers looking to acquire some investment-grade assets, we've been able to sell flatter leases with less lease term and then turn around and use that capital to buy longer lease term assets with better escalations. You've seen kind of a little bit of a move with our concentration with Dollar General. That particular tenant, we've really moved the escalations from what was essentially flat before to about 7x of 1%, so 70 basis points of escalations and went from about 8 years of lease term to over 12 years. So some pretty substantial moves there. And then as it relates to that particular tenant, obviously that concentration has moved up. We're going to try to get that portfolio of those assets in as good a shape as we can and then I think you can start to see that concentration migrate downward.

I was wondering how much credit loss is embedded in your guidance?

Yes. Ki Bin, it ranges obviously from the low to the high end, but you should expect a fairly de minimis amount at the high end of guidance and a fairly material amount at the low end. So certainly north of 100 basis points at the low end.

Okay. And I was wondering if you can remind us of how you're thinking about your Walgreens exposure and any kind of tail risk that might be within that tenant?

Yes. I mean, certainly, Walgreens and pharmacies in general have been topical. There's been some pressure on the consumer that's kind of hit their front-end sales a little bit. But that's really not new news that the front end has always kind of been an area that Walgreens and CVS have struggled in. But look, I mean, they're split rated right now. They still have a fixed charge coverage ratio of north of 2x. So we don't really see any near-term risk associated with their credit, and we don't have any leases with them coming due until August of 2028. So certainly nothing in the near term. And then just a little bit of color around how we select assets with Walgreens. Before we acquire any assets with them, we're talking to corporate and getting an understanding of how they think about the location, whether it's a good idea to try to own that location long term. And then consistently, we went out and met with them last year and went through a portfolio review, and they indicated there were one or two locations that were not performing as well, weren't on a closure list, but weren't performing well. And we elected to sell those assets in kind of in the mid-6% cap rate range. So there's still a market for those assets in the event that we start to see deterioration at the unit level, but we don't really see much risk as it relates to their ability to pay rent.

I just wanted to go back a little bit to kind of your thoughts around acquisition volumes this year. It sounds like you have a fairly good line of sight, I guess, in the near term. And just as you're thinking about spread to your cost of capital, I think you said on your last call, it's kind of around 100 basis points, which is below the longer-term 150 to 175 basis points. And is that kind of changing at all? And could you also just kind of speak to, is competition kind of heating up? Or are you more competitive, maybe, relative to other sources of capital? Or kind of what are you seeing on that front?

I’ll let Dan address the first part of your question and then discuss competition. The competition is minimal. In the 1031 market, historically, when we needed to sell assets, if we had an investment-grade property with a lease expiring, we would receive five or six bids in the first week. Now, that's taking longer. On the acquisition side, we aren’t competing as much with large family offices. The private equity bids have disappeared, and there’s not much activity in the 1031 market either. In a fragmented market, we encountered larger public REITs only when dealing with substantial portfolios, and that made it hard for us to compete. So, the competition has decreased significantly. Essentially, we are mostly up against the seller and their urgency to sell. If sellers don't have a strong reason to sell, they likely won't, which explains the more than 70% drop in transaction volumes over the past year. Thus, while there are fewer transactions, there's also less competition, leading to an increase in cap rates.

Yes. Smedes, in terms of investment spreads, I mean, look, our equity price as well as interest rates has been fairly stable just over the last 45 days. So if you kind of look at that and you think about the average, we're probably right now somewhere around 110 basis points in terms of investment spread, just on an average basis in the first 45 days of the year.

This is Antara Nag-Chaudhuri, on for Todd Thomas. Just a quick one for me. So I know that you have a lot of unsettled equity in the quarter. So at what point would you consider issuing forward capital through the ATM to keep funding intact?

Yes, we can execute our 2024 external growth plan with the existing equity we have, maintaining a leverage range of 4.5x to 5.5x. If opportunities become more appealing and we can achieve spreads that are in line or better than what we're currently experiencing, we could consider accessing the equity markets through the ATM.

Okay. Perfect. And one more. I saw that the Big Lots exposure decreased during the quarter. So was that an asset sale? Or did something else happen? And what are your plans to further reduce exposure?

Yes, that's a good question. We should have clarified that we sold an asset and there were no negative implications. We currently have 8 stores, which account for 1.5% of rent. There has been strong inbound interest for these locations, particularly from buyers who appreciate the real estate value at below market rents. Fortunately, we have good performing assets in terms of foot traffic, and we believe these locations would be appealing to other buyers. We are open to the possibility of selling more assets from our portfolio, provided the price is right.

I'm just trying to reconcile a few comments that have been made so far. So you mentioned an increasingly attractive market in the opening remarks and spoke about seeing some movement on cap rates. So does that mean that cap rates are moving higher? And if that's the case, how much and why the hesitance to provide some guidance on net investments? And I guess besides, with already under negotiation, is there just greater opacity than usual into the future potential pipeline? And if so, what's driving that?

Yes, sure. So yes, I mean, I think we are seeing cap rates move up, I would expect another 20 basis points or so with what we are planning on closing in the first quarter. Some of that may slip into the second quarter, so that could move things around a little bit on the margins. But I think we're hesitant to really give concrete guidance on what we plan to acquire because we are seeing cap rates move around a little bit, and we just want to make sure that the capital that we raised from investors that we're using that wisely and trying to maximize the returns that we can get from that capital. I think that's unlikely for us to completely pull back. If we couldn't find anything that was worth buying, then that would be on the table. But really, what we're seeing currently is a very attractive acquisitions market.

Just one quick one for me. What type of tenants are in the held-for-sale category? And do you have visibility to when those deals might close, if it's going to be in the first half?

Yes. I mean it's a pretty big mix. I mean, we mentioned some of the assets that we're potentially looking at recycling out of with the same tenants. And then there are handful in the convenience store and paint supplies industries.

Oh. Sorry, all my questions have been answered.

This is Farrell Granath on behalf of Josh Dennerlein. I was wondering with the implied growth for your current 2024 guidance, how much of that is being driven off of internal versus external drivers?

As most of these companies, most of the growth is coming from external growth as well as a reduction in cash G&A. But our internal growth is typically just a little bit less than 1% in any given year.

Great. And in terms of the investments going forward, how much of that would be of the mix of capital? Would you feel comfortable in terms of like cash, equity, debt, if there's like a baseline that you target?

Yes. I mean historically, we've kind of run the company around 65% equity and free cash flow and 35% debt. Thankfully for us right now, though we have over $450 million of prefunded equity before we would need to tap the revolver. That consists of $100 million of available principal in the 2029 term loan, that's $290 million of unsettled forward equity, that's $30 million or north of $30 million of free cash flow after dividends and then about another $30 million of cash on hand.

We recently identified a good opportunity with dollar stores, leading to an increase. Both of our tenants in that category are investment grade, which likely contributed to this rise. As we dispose of some of these assets, there may be a slight decrease. Historically, we have indicated a target of 60% to 70% investment grade tenants, though we are flexible regarding investment grade or strong-performing sub-investment-grade tenants. I anticipate a slight downward trend, but it should not stray far from our current position. Thank you, operator, and thanks, everybody, for joining today. We look forward to continuing the dialogue at the upcoming conference season. Have a good day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.