8-K
NETSTREIT Corp. (NTST)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 27, 2022
NETSTREIT Corp.
(Exact Name of Registrant as Specified in its Charter)
| Maryland | 001-39443 | 84-3356606 | |
|---|---|---|---|
| (State or Other Jurisdiction<br><br>of Incorporation) | (Commission<br><br>File Number) | (IRS Employer<br><br>Identification No.) | |
| 2021 McKinney Avenue<br><br>Suite 1150<br><br>Dallas, Texas | 75201 | ||
| (Address of Principal Executive Offices) | (Zip Code) |
972-200-7100
(Registrant’s telephone number, including area code)
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock,<br><br>$0.01 par value per share | NTST | The New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On October 27, 2022, NETSTREIT Corp. (the “Company”) issued a press release announcing its financial results for the third quarter ended September 30, 2022. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.
The information contained in Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (“Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 7.01. Regulation FD Disclosure.
On October 27, 2022, the Company furnished supplemental financial information for the third quarter ended September 30, 2022. Also on October 27, 2022, the Company furnished an updated investor presentation. The supplemental financial information and investor presentation are attached hereto as Exhibits 99.2 and 99.3, respectively, and incorporated by reference herein. The supplemental information and investor presentation also are available on the “Investors / Events & Presentations” page of the Company’s website at www.netstreit.com. The information found on, or otherwise accessible through, the Company’s website is not incorporated by reference herein.
The information contained in Exhibits 99.2 and 99.3 shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
| (d) | Exhibits. | |
|---|---|---|
| Exhibit No. | Description | |
| 99.1 | Press release dated October 27, 2022 | |
| 99.2 | Third quarter 2022 supplemental financial information | |
| 99.3 | Third quarter 2022 investor presentation | |
| 104 | Cover page interactive data file (embedded within the inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| NETSTREIT Corp. | |
|---|---|
| October 27, 2022 | /s/ ANDREW BLOCHER |
| Date | Andrew Blocher |
| Chief Financial Officer, Treasurer and Secretary | |
| (Principal Executive Officer) |
Document
NETSTREIT REPORTS THIRD QUARTER 2022 FINANCIAL AND OPERATING RESULTS
– Net Income of $0.03 and Adjusted Funds from Operations ("AFFO")1 of $0.30 per diluted share –
– Completed $129.6 Million of Net Investment Activity –
– Completed 10.35 Million Shares Forward Equity Offering and Closed $600 Million Sustainability-Linked Credit Facility –
– $200 Million Term Loan Swapped to Maturity, 93% of Debt now Fixed –
– Narrows Full Year 2022 AFFO Guidance to $1.15 to $1.17 Per Share, Increasing Mid-Point of the Range –
Dallas TX – October 27, 2022 – NETSTREIT Corp. (NYSE: NTST) (the “Company”), today announced financial and operating results for the third quarter ended September 30, 2022.
“We are pleased to announce another strong quarter of portfolio performance and investment activity as NETSTREIT continues to execute its strategy of prudent growth while maintaining one of the net lease industry's highest credit quality portfolios. During the quarter, we completed $131.3 million of acquisition activity at a cash capitalization rate of 6.6%. Further, we continued to strengthen our balance sheet with the completion of an oversubscribed forward equity offering of 10.35 million shares and closed on our inaugural $600 million sustainability-linked credit facility, locking in very attractive capital and putting us in a strong liquidity position,” said Mark Manheimer, Chief Executive Officer of NETSTREIT.
Mr. Manheimer continued, "we built this company to weather all phases of any economic cycle, with unmatched credit and real estate quality, and a fortified balance sheet with significant liquidity. Despite witnessing historic shifts in interest rates and rising economic uncertainty so far in 2022, our strategy remains unchanged as we continue to seek to acquire well located assets leased to tenants with strong credit at attractive cap rates. Consistent with that strategy, as pricing for net lease assets continues to adjust to a new normal, we may limit the amount of acquisitions we complete in the fourth quarter and beyond to focus on opportunities that meet our investment criteria and at appropriate pricing. Therefore, we are moving from a quantitative acquisition target for the year to an opportunistic approach to capital deployment, but narrowing and increasing the midpoint of our AFFO per share guidance. We are confident that our discipline and execution will position NETSTREIT effectively to continue growing shareholder value into the future."
THIRD QUARTER 2022 HIGHLIGHTS
•Net income per share2 decreased to $0.03, compared to $0.07 from prior year period
•Core Funds from Operations (“Core FFO”)1 per share increased to $0.28, compared to $0.22 from prior year period
•AFFO per share increased to $0.30, compared to $0.24 from prior year period
PORTFOLIO UPDATE
As of September 30, 2022, the NETSTREIT portfolio was comprised of 406 leases, contributing $92.7 million of annualized base rent3, with a weighted-average remaining lease term of 9.6 years4, of which 64.6% were with investment grade rated tenants and 14.0% were tenants with investment grade profiles5. The portfolio was 100.0% occupied as of September 30, 2022.
INVESTMENT ACTIVITY
During the quarter ended September 30, 2022, the Company had total net investment activity of $129.6 million, which includes dispositions.
The Company invested approximately $131.3 million in the acquisition of 26 properties at an initial cash capitalization rate of 6.6%. Acquisitions completed during the quarter had a weighted-average remaining lease term of 11.8 years.
The Company had no developments where rent commenced and provided $4.7 million to support ongoing development projects during the quarter. At quarter end, the Company has six projects under development, where the Company has invested $17.5 million to date.
The Company completed one disposition for $1.7 million in total contractual sales proceeds, which equated to a 5.5% cash capitalization rate.
The investment grade and investment grade profile totals for acquisitions completed in the quarter were 65.0% and 18.3%, respectively, based on total annualized base rent. The quarter's transaction activity increased the total tenant count from 75 to 77 tenants.
Year-to-date, the Company has completed net investment activity of $388.2 million.
BALANCE SHEET AND LIQUIDITY
At quarter end, total debt outstanding was $413.5 million, with a weighted average term of 3.9 years and a quarter end contractual interest rate, including the impact of fixed rate swaps, of 2.8% (excluding the impact of deferred fee amortization). 93% of the Company's debt was at a fixed rate and the Company's net debt to annualized adjusted EBITDA ratio was 5.0x. After giving consideration to the settlement of shares pursuant to the August forward sales agreements, the Company's net debt to annualized adjusted EBITDA ratio was 2.5x.
In August, the Company entered into its forward sale agreements related to 10,350,000 shares of its common stock at a public offering price of $20.20 per share. The Company will have until August 3, 2023 to settle the forward sale agreements and no settlements have yet occurred. On September 29, 2022, the Company settled all remaining shares from the January forward sales agreements and issued 4.5 million shares of common stock, receiving net proceeds of approximately $93.5 million.
The Company closed on a $600 million sustainability-linked senior unsecured credit facility, which consisted of a $400 million senior unsecured revolving credit facility and a new $200 million senior unsecured term loan, with an additional $400 million accordion feature. The revolver will mature in August 2026, with the option available to extend the maturity for an additional year, while the term loan will mature in February 2028. The term loan is fully hedged at an all-in rate of 3.88%. The Company's existing $175 million term loan that is fully hedged at an all-in rate of 1.36% will remain outstanding through the maturity in December 2024.
The September 30, 2022 cash balance was $16.2 million and the Company had $30.0 million outstanding on its revolving line of credit. Currently, the Company has total liquidity available, which includes unsettled equity forward contracts and undrawn line of credit capacity, of $585.3 million.
DIVIDEND
On October 25, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share for the fourth quarter of 2022, which will be paid on December 15, 2022 to shareholders of record on December 1, 2022.
2022 OUTLOOK
The Company is narrowing its AFFO per share guidance range to $1.15 to $1.17 per share, resulting in an increase to the midpoint of the range. The guidance reflects the Company's opportunistic and disciplined approach to acquisitions for the remainder of 2022 based on the current economic environment, replacing the previous expectation of at least $500 million of acquisitions, and the following additional assumptions:
•The Company expects cash G&A to remain in the range of $14.5 million to $15.0 million (inclusive of transaction costs), and expects non-cash compensation expense to be in the range of $5.0 million to $5.5 million
•The Company is narrowing cash interest expense, from a range of $7.0 million to $9.0 million, to a range of $8.0 million to $9.0 million, with additional non-cash deferred financing fee amortization remaining at a range of $0.8 million to $0.9 million
•Full year 2022 diluted weighted average shares outstanding, which includes the impact of OP units, is being narrowed, from a range of 50.0 million to 52.0 million shares, to a range of 50.0 million to 51.0 million shares
Certain of the forward-looking financial measures above are provided on a non-GAAP basis. The Company does not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with GAAP because to do so would be potentially misleading and not practical given the difficulty of projecting event driven transactional and other non-core operating items in any future period. The magnitude of these items, however, may be significant.
EARNINGS WEBCAST AND CONFERENCE CALL
A conference call will be held on Friday, October 28, 2022 at 10:00 AM ET. During the conference call the Company’s officers will review third quarter performance, discuss recent events, and conduct a question and answer period.
The webcast will be accessible on the “Investor Relations” section of the Company’s website at www.NETSTREIT.com. To listen to the live webcast, please go to the site at least fifteen minutes prior to the scheduled start time to register, as well as download and install any necessary audio software. A replay of the webcast will be available for 90 days on the Company’s website shortly after the call.
The conference call can also be accessed by dialing 1-877-451-6152 for domestic callers or 1-201-389-0879 for international callers. A dial-in replay will be available starting shortly after the call until November 4, 2022, which can be accessed by dialing 1-844-512-2921 for domestic callers or 1-412-317-6671 for international callers. The passcode for this dial-in replay is 13730420.
SUPPLEMENTAL PACKAGE
The Company’s supplemental package will be available prior to the conference call in the Investor Relations section of the Company’s website at www.investors.netstreit.com.
About NETSTREIT
NETSTREIT is an internally managed real estate investment trust (REIT) based in Dallas, Texas that specializes in acquiring single-tenant net lease retail properties nationwide. The growing portfolio consists of high-quality properties leased to e-commerce resistant tenants with healthy balance sheets. Led by a management team of seasoned commercial real estate executives, NETSTREIT’s strategy is to create the highest quality net lease retail portfolio in the country with the goal of generating consistent cash flows and dividends for its investors.
Investor Relations
ir@netstreit.com
972-597-4825
(1) Non-GAAP financial measure. See "Non-GAAP Financial Measures".
(2) All per share amounts herein include weighted average common shares of 50,449,735, weighted average operating partnership units of 514,890, weighted average unvested restricted stock units of 255,613, and weighted average unsettled shares under open forward equity contracts of 164,520 for the three-months ended September 30, 2022.
(3) Annualized base rent, or ABR, is calculated by multiplying (i) cash rental payments (a) for the month ended September 30, 2022 (or, if applicable, the next full month's cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of September 30, 2022, plus (b) for properties under development, the first full month's permanent cash rent contractually due after the development period by (ii) 12.
(4) Weighted by ABR, excluding lease extension options and mortgage loan receivables.
(5) Unrated tenants with more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x.
NON-GAAP FINANCIAL MEASURES
This press release contains non-GAAP financial measures, including FFO, Core FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, NOI, and Cash NOI. A reconciliation from net loss available to common shareholders to each non-GAAP financial measure, and definitions of each non-GAAP measure, are included below.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements concerning our business and growth strategies, investment, financing and leasing activities and trends in our business, including trends in the market for single-tenant, retail commercial real estate. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this press release may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see the information under the heading “Risk Factors” in our Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2022 and other reports filed with the SEC from time to time. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this press release. New risks and uncertainties may arise over time and it is not possible for us to predict those events or how they may affect us. Many of the risks identified herein and in our periodic reports have been and will continue to be heightened as a result of the ongoing and numerous adverse effects arising from the novel coronavirus (COVID-19), rising interest rates and instability in macroeconomic conditions. We expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.
NETSTREIT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
| September 30, | December 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Assets | ||||
| Real estate, at cost: | ||||
| Land | $ | 380,092 | $ | 299,935 |
| Buildings and improvements | 839,305 | 626,457 | ||
| Total real estate, at cost | 1,219,397 | 926,392 | ||
| Less accumulated depreciation | (53,255) | (30,669) | ||
| Property under development | 17,475 | 17,896 | ||
| Real estate held for investment, net | 1,183,617 | 913,619 | ||
| Assets held for sale | 23,985 | 2,096 | ||
| Mortgage loans receivable, net | 46,406 | — | ||
| Cash, cash equivalents and restricted cash | 16,190 | 7,603 | ||
| Lease intangible assets, net | 149,357 | 124,772 | ||
| Other assets, net | 54,087 | 20,351 | ||
| Total assets | $ | 1,473,642 | $ | 1,068,441 |
| Liabilities and equity | ||||
| Liabilities: | ||||
| Term loans, net | $ | 373,202 | $ | 174,330 |
| Revolving credit facility | 30,000 | 64,000 | ||
| Mortgage note payable, net | 7,901 | — | ||
| Lease intangible liabilities, net | 31,438 | 23,316 | ||
| Liabilities related to assets held for sale | 416 | — | ||
| Accounts payable, accrued expenses and other liabilities | 21,200 | 16,980 | ||
| Total liabilities | 464,157 | 278,626 | ||
| Commitments and contingencies | ||||
| Equity: | ||||
| Stockholders’ equity | ||||
| Common stock, $0.01 par value, 400,000,000 shares authorized; 54,876,295 and 44,223,050 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | 549 | 442 | ||
| Additional paid-in capital | 1,032,634 | 809,724 | ||
| Distributions in excess of retained earnings | (58,747) | (35,119) | ||
| Accumulated other comprehensive income | 25,335 | 4,123 | ||
| Total stockholders’ equity | 999,771 | 779,170 | ||
| Noncontrolling interests | 9,714 | 10,645 | ||
| Total equity | 1,009,485 | 789,815 | ||
| Total liabilities and equity | $ | 1,473,642 | $ | 1,068,441 |
NETSTREIT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except share and per share data)
(Unaudited)
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Revenues | ||||||||
| Rental revenue (including reimbursable) | $ | 24,339 | $ | 15,603 | $ | 67,309 | $ | 41,333 |
| Interest income on mortgage loans receivable | 674 | — | 1,671 | — | ||||
| Total revenues | 25,013 | 15,603 | 68,980 | 41,333 | ||||
| Operating expenses | ||||||||
| Property | 2,539 | 1,737 | 8,156 | 4,002 | ||||
| General and administrative | 4,552 | 3,776 | 13,608 | 10,904 | ||||
| Depreciation and amortization | 13,407 | 8,074 | 36,137 | 21,078 | ||||
| Provisions for impairment | — | — | 1,114 | 3,539 | ||||
| Transaction costs | 51 | 132 | 704 | 464 | ||||
| Total operating expenses | 20,549 | 13,719 | 59,719 | 39,987 | ||||
| Other income (expense) | ||||||||
| Interest expense, net | (3,017) | (895) | (5,708) | (2,693) | ||||
| Gain on sales of real estate, net | 143 | 1,955 | 2,162 | 2,452 | ||||
| Other income | — | — | 36 | — | ||||
| Total other income (expense), net | (2,874) | 1,060 | (3,510) | (241) | ||||
| Net income before income taxes | 1,590 | 2,944 | 5,751 | 1,105 | ||||
| Income tax expense | (171) | — | (356) | (50) | ||||
| Net income | 1,419 | 2,944 | 5,395 | 1,055 | ||||
| Net income attributable to noncontrolling interests | 16 | 96 | 63 | 42 | ||||
| Net income attributable to common stockholders | $ | 1,403 | $ | 2,848 | $ | 5,332 | $ | 1,013 |
| Amounts available to common stockholders per common share: | ||||||||
| Basic | $ | 0.03 | $ | 0.07 | $ | 0.11 | $ | 0.03 |
| Diluted | $ | 0.03 | $ | 0.07 | $ | 0.11 | $ | 0.03 |
| Weighted average common shares: | ||||||||
| Basic | 50,449,735 | 39,559,605 | 47,679,870 | 35,359,551 | ||||
| Diluted | 51,384,758 | 41,333,579 | 48,657,049 | 37,108,425 | ||||
| Other comprehensive income: | ||||||||
| Net income | $ | 1,419 | $ | 2,944 | $ | 5,395 | $ | 1,055 |
| Change in value on derivatives, net | 13,887 | 5 | 21,436 | 2,063 | ||||
| Total comprehensive income | $ | 15,306 | $ | 2,949 | $ | 26,831 | $ | 3,118 |
| Comprehensive income attributable to noncontrolling interests | 149 | 95 | 287 | 153 | ||||
| Comprehensive income attributable to common stockholders | $ | 15,157 | $ | 2,854 | $ | 26,544 | $ | 2,965 |
NETSTREIT CORP. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO FFO, CORE FFO AND ADJUSTED FFO
(In thousands, except share and per share data)
(Unaudited)
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| (Unaudited) | (Unaudited) | |||||||
| Net income | $ | 1,419 | $ | 2,944 | $ | 5,395 | $ | 1,055 |
| Depreciation and amortization of real estate | 13,241 | 7,994 | 35,701 | 20,843 | ||||
| Provisions for impairment | — | — | 1,114 | 3,539 | ||||
| Gain on sale of real estate, net | (143) | (1,955) | (2,162) | (2,452) | ||||
| FFO | 14,517 | 8,983 | 40,048 | 22,985 | ||||
| Adjustments: | ||||||||
| Gain on insurance proceeds | — | — | (36) | — | ||||
| Core FFO | 14,517 | 8,983 | 40,012 | 22,985 | ||||
| Adjustments: | ||||||||
| Straight-line rent adjustments | (272) | (244) | (1,144) | (707) | ||||
| Amortization of deferred financing costs | 239 | 157 | 553 | 471 | ||||
| Amortization of loan origination costs | 28 | — | 59 | — | ||||
| Amortization of above/below market lease intangibles | (444) | (182) | (1,021) | (609) | ||||
| Amortization of lease incentives | 131 | 23 | 377 | 26 | ||||
| Capitalized interest expense | (115) | (24) | (218) | (38) | ||||
| Non-cash compensation expense | 1,302 | 1,025 | 3,645 | 2,623 | ||||
| AFFO | $ | 15,386 | $ | 9,738 | $ | 42,263 | $ | 24,751 |
| Weighted average common shares outstanding, basic | 50,449,735 | 39,559,605 | 47,679,870 | 35,359,551 | ||||
| Operating partnership units outstanding | 514,890 | 1,334,571 | 530,940 | 1,462,419 | ||||
| Unvested restricted stock units | 255,613 | 439,403 | 261,727 | 286,455 | ||||
| Unsettled shares under open forward equity contracts | 164,520 | — | 184,512 | — | ||||
| Weighted average common shares outstanding, diluted | 51,384,758 | 41,333,579 | 48,657,049 | 37,108,425 | ||||
| FFO per common share, diluted | $ | 0.28 | $ | 0.22 | $ | 0.82 | $ | 0.62 |
| Core FFO per common share, diluted | $ | 0.28 | $ | 0.22 | $ | 0.82 | $ | 0.62 |
| AFFO per common share, diluted | $ | 0.30 | $ | 0.24 | $ | 0.87 | $ | 0.67 |
RECONCILIATION OF NET INCOME TO EBITDA, EBITDAre AND ADJUSTED EBITDAre
(In thousands)
(Unaudited)
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| (Unaudited) | (Unaudited) | |||||||
| Net income | $ | 1,419 | $ | 2,944 | $ | 5,395 | $ | 1,055 |
| Depreciation and amortization of real estate | 13,241 | 7,994 | 35,701 | 20,843 | ||||
| Amortization of above/below market lease intangibles | (444) | (182) | (1,021) | (609) | ||||
| Amortization of lease incentives | 131 | 23 | 377 | 26 | ||||
| Non-real estate depreciation and amortization | 166 | 79 | 436 | 234 | ||||
| Interest expense, net | 3,017 | 895 | 5,708 | 2,693 | ||||
| Income tax expense | 171 | — | 356 | 50 | ||||
| Amortization of loan origination costs | 28 | — | 59 | — | ||||
| EBITDA | 17,729 | 11,753 | 47,011 | 24,292 | ||||
| Adjustments: | ||||||||
| Provision for impairments | — | — | 1,114 | 3,539 | ||||
| Gain on sale of real estate, net | (143) | (1,955) | (2,162) | (2,452) | ||||
| EBITDAre | 17,586 | 9,798 | 45,963 | 25,379 | ||||
| Adjustments: | ||||||||
| Straight-line rent adjustments | (272) | (244) | (1,144) | (707) | ||||
| Gain on insurance proceeds | — | — | (36) | — | ||||
| Non-cash compensation expense | 1,302 | 1,025 | 3,645 | 2,623 | ||||
| Adjusted EBITDAre | $ | 18,616 | $ | 10,579 | $ | 48,428 | $ | 27,295 |
RECONCILIATION OF NET INCOME TO NOI AND CASH NOI
(In thousands)
(Unaudited)
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| (Unaudited) | (Unaudited) | |||||||
| Net income | $ | 1,419 | $ | 2,944 | $ | 5,395 | $ | 1,055 |
| General and administrative | 4,552 | 3,776 | 13,608 | 10,904 | ||||
| Depreciation and amortization | 13,407 | 8,074 | 36,137 | 21,078 | ||||
| Provisions for impairment | — | — | 1,114 | 3,539 | ||||
| Transaction costs | 51 | 132 | 704 | 464 | ||||
| Interest expense, net | 3,017 | 895 | 5,708 | 2,693 | ||||
| Gain on sales of real estate, net | (143) | (1,955) | (2,162) | (2,452) | ||||
| Income tax expense | 171 | — | 356 | 50 | ||||
| Interest income on mortgage loans receivable | (674) | — | (1,671) | — | ||||
| Other income | — | — | (36) | — | ||||
| NOI | 21,800 | 13,866 | 59,153 | 37,331 | ||||
| Straight-line rent adjustments | (272) | (244) | (1,144) | (707) | ||||
| Amortization of above/below market lease intangibles | (444) | (182) | (1,021) | (609) | ||||
| Amortization of lease incentives | 131 | 23 | 377 | 26 | ||||
| Cash NOI | $ | 21,215 | $ | 13,463 | $ | 57,365 | $ | 36,041 |
NON-GAAP FINANCIAL MEASURES
FFO, Core FFO and AFFO
The National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a widely accepted non-GAAP financial measure of operating performance known as FFO. Our FFO is net income in accordance with GAAP, excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortization and impairment charges on depreciable real property.
Core FFO is a non-GAAP financial measure defined as FFO adjusted to remove the effect of unusual and non-recurring items that are not expected to impact our operating performance or operations on an ongoing basis. Historically, these have included gains from forfeited earnest money deposits, non-recurring public company costs, and gains from insurance proceeds.
AFFO is a non-GAAP financial measure defined as Core FFO adjusted for GAAP net income related to non-cash revenues and expenses, such as straight-line rent, amortization of above- and below-market lease-related intangibles, amortization of lease incentives, capitalized interest expense, non-cash compensation expense, and amortization of deferred financing and amortization of loan origination costs.
Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values historically have risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO to be useful in evaluating potential property acquisitions and measuring operating performance.
We further consider FFO, Core FFO and AFFO to be useful in determining funds available for payment of distributions. FFO, Core FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP. You should not consider FFO, Core FFO and AFFO to be alternatives to net income as a reliable measure of our operating performance nor should you consider FFO, Core FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity.
FFO, Core FFO and AFFO do not measure whether cash flow is sufficient to fund our cash needs, including principal amortization, capital improvements and distributions to stockholders. FFO, Core FFO and AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP. Further, FFO, Core FFO and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO, Core FFO and AFFO.
EBITDA, EBITDAre and Adjusted EBITDAre
We compute EBITDA as earnings before interest expense, income tax expense, and depreciation and amortization. In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDAre. We compute EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and impairment charges on depreciable real property.
Adjusted EBITDAre is a non-GAAP financial measure defined as EBITDAre further adjusted to exclude straight-line rent, non-cash compensation expense, and gain on insurance proceeds.
We present EBITDA, EBITDAre and Adjusted EBITDAre as they are measures commonly used in our industry. We believe that these measures are useful to investors and analysts because they provide supplemental information concerning our operating performance, exclusive of certain non-cash items and other costs. We use EBITDA, EBITDAre and Adjusted EBITDAre as measures of our operating performance and not as measures of liquidity.
EBITDA, EBITDAre and Adjusted EBITDAre do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. Additionally, our computation of EBITDA, EBITDAre and Adjusted EBITDAre may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.
NOI and Cash NOI
NOI and Cash NOI are non-GAAP financial measures which we use to assess our operating results. We compute NOI as net income (computed in accordance with GAAP), excluding general and administrative expenses, interest expense (or income), income tax expense, depreciation and amortization, gains (or losses) from the sales of depreciable property, impairment charges on depreciable real property, transaction costs, and other income (or expense). We further adjust NOI for non-cash components of straight-line rent and amortization of lease intangibles and lease incentives to derive Cash NOI. We believe NOI and Cash NOI provide useful and relevant information because they reflect only those income and expense items that are incurred at the property level and present such items on an unlevered basis.
NOI and Cash NOI are not measurements of financial performance under GAAP, and our NOI and Cash NOI may not be comparable to similarly titled measures of other companies. You should not consider our NOI and Cash NOI as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.
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a3q22formattedsupplement
Third Quarter 2022 Supplemental Financial Information
Table of Contents 2 03 Corporate Overview 04 Earnings Release 08 Quarterly Highlights 09 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) 10 Funds from Operations and Adjusted Funds from Operations 11 EBITDAre, Adjusted EBITDAre, NOI and Cash NOI 12 Consolidated Balance Sheets 13 Debt, Capitalization and Financial Ratios 14 Investment Activity 15 Portfolio Information 19 Lease Expiration Schedule 20 Non-GAAP Measures and Definitions 23 Forward Looking and Cautionary Statements
Corporate Overview 3 2021 McKinney Avenue Suite 1150 Dallas, Texas, 75201 Phone: (972) 579 – 4825 Website: www.netstreit.com Corporate Headquarters Transfer Agent Computershare PO Box 505000 Louisville, Kentucky 40233 Phone: (866) 637 – 9460 Website: www.computershare.com Corporate Profile NETSTREIT Corp. (NYSE: NTST) is an internally managed real estate investment trust (REIT) based in Dallas, Texas that specializes in acquiring single-tenant net lease retail properties nationwide. The growing portfolio consists of high-quality properties leased to e- commerce resistant tenants with healthy balance sheets. Led by a management team of seasoned commercial real estate executives, NETSTREIT’s strategy is to create the highest quality net lease retail portfolio in the country in order to generate consistent cash flows and dividends for its investors. Mark Manheimer, Chief Executive Officer Andy Blocher, Chief Financial Officer Jeff Fuge, Senior Vice President of Acquisitions Randy Haugh, Senior Vice President of Finance Kirk Klatt, Senior Vice President of Real Estate Trish McBratney-Gibbs, SVP, Chief Accounting Officer Chad Shafer, Senior Vice President of Underwriting Management Team Todd Minnis – Chair Michael Christodolou Heidi Everett Mark Manheimer Matthew Troxell Lori Wittman Robin Zeigler Board of Directors
Earnings Release 4 NETSTREIT REPORTS THIRD QUARTER 2022 FINANCIAL AND OPERATING RESULTS – Net Income of $0.03 and Adjusted Funds from Operations ("AFFO")1 of $0.30 per diluted share – – Completed $129.6 Million of Net Investment Activity – – Completed 10.35 Million Shares Forward Equity Offering and Closed $600 Million Sustainability- Linked Credit Facility – – $200 Million Term Loan Swapped to Maturity, 93% of Debt now Fixed – – Narrows Full Year 2022 AFFO Guidance to $1.15 to $1.17 Per Share, Increasing Mid-Point of the Range – Dallas TX – October 27, 2022 – NETSTREIT Corp. (NYSE: NTST) (the “Company”), today announced financial and operating results for the third quarter ended September 30, 2022. “We are pleased to announce another strong quarter of portfolio performance and investment activity as NETSTREIT continues to execute its strategy of prudent growth while maintaining one of the net lease industry's highest credit quality portfolios. During the quarter, we completed $131.3 million of acquisition activity at a cash capitalization rate of 6.6%. Further, we continued to strengthen our balance sheet with the completion of an oversubscribed forward equity offering of 10.35 million shares and closed on our inaugural $600 million sustainability-linked credit facility, locking in very attractive capital and putting us in a strong liquidity position,” said Mark Manheimer, Chief Executive Officer of NETSTREIT. Mr. Manheimer continued, "we built this company to weather all phases of any economic cycle, with unmatched credit and real estate quality, and a fortified balance sheet with significant liquidity. Despite witnessing historic shifts in interest rates and rising economic uncertainty so far in 2022, our strategy remains unchanged as we continue to seek to acquire well located assets leased to tenants with strong credit at attractive cap rates. Consistent with that strategy, as pricing for net lease assets continues to adjust to a new normal, we may limit the amount of acquisitions we complete in the fourth quarter and beyond to focus on opportunities that meet our investment criteria and at appropriate pricing. Therefore, we are moving from a quantitative acquisition target for the year to an opportunistic approach to capital deployment, but narrowing and increasing the midpoint of our AFFO per share guidance. We are confident that our discipline and execution will position NETSTREIT effectively to continue growing shareholder value into the future." THIRD QUARTER 2022 HIGHLIGHTS • Net income per share2 decreased to $0.03, compared to $0.07 from prior year period • Core Funds from Operations (“Core FFO”)1 per share increased to $0.28, compared to $0.22 from prior year period • AFFO per share increased to $0.30, compared to $0.24 from prior year period PORTFOLIO UPDATE As of September 30, 2022, the NETSTREIT portfolio was comprised of 406 leases, contributing $92.7 million of annualized base rent3, with a weighted-average remaining lease term of 9.6 years4, of which 64.6% were with investment grade rated tenants and 14.0% were tenants with investment grade profiles5. The portfolio was 100.0% occupied as of September 30, 2022.
Earnings Release 5 INVESTMENT ACTIVITY During the quarter ended September 30, 2022, the Company had total net investment activity of $129.6 million, which includes dispositions. The Company invested approximately $131.3 million in the acquisition of 26 properties at an initial cash capitalization rate of 6.6%. Acquisitions completed during the quarter had a weighted-average remaining lease term of 11.8 years. The Company had no developments where rent commenced and provided $4.7 million to support ongoing development projects during the quarter. At quarter end, the Company has six projects under development, where the Company has invested $17.5 million to date. The Company completed one disposition for $1.7 million in total contractual sales proceeds, which equated to a 5.5% cash capitalization rate. The investment grade and investment grade profile totals for acquisitions completed in the quarter were 65.0% and 18.3%, respectively, based on total annualized base rent. The quarter's transaction activity increased the total tenant count from 75 to 77 tenants. Year-to-date, the Company has completed net investment activity of $388.2 million. BALANCE SHEET AND LIQUIDITY At quarter end, total debt outstanding was $413.5 million, with a weighted average term of 3.9 years and a quarter end contractual interest rate, including the impact of fixed rate swaps, of 2.8% (excluding the impact of deferred fee amortization). 93% of the Company's debt was at a fixed rate and the Company's net debt to annualized adjusted EBITDA ratio was 5.0x. After giving consideration to the settlement of shares pursuant to the August forward sales agreements, the Company's net debt to annualized adjusted EBITDA ratio was 2.5x. In August, the Company entered into its forward sale agreements related to 10,350,000 shares of its common stock at a public offering price of $20.20 per share. The Company will have until August 3, 2023 to settle the forward sale agreements and no settlements have yet occurred. On September 29, 2022, the Company settled all remaining shares from the January forward sales agreements and issued 4.5 million shares of common stock, receiving net proceeds of approximately $93.5 million. The Company closed on a $600 million sustainability-linked senior unsecured credit facility, which consisted of a $400 million senior unsecured revolving credit facility and a new $200 million senior unsecured term loan, with an additional $400 million accordion feature. The revolver will mature in August 2026, with the option available to extend the maturity for an additional year, while the term loan will mature in February 2028. The term loan is fully hedged at an all-in rate of 3.88%. The Company's existing $175 million term loan that is fully hedged at an all-in rate of 1.36% will remain outstanding through the maturity in December 2024. The September 30, 2022 cash balance was $16.2 million and the Company had $30.0 million outstanding on its revolving line of credit. Currently, the Company has total liquidity available, which includes unsettled equity forward contracts and undrawn line of credit capacity, of $585.3 million. DIVIDEND On October 25, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share for the fourth quarter of 2022, which will be paid on December 15, 2022 to shareholders of record on December 1, 2022.
Earnings Release 6 2022 OUTLOOK The Company is narrowing its AFFO per share guidance range to $1.15 to $1.17 per share, resulting in an increase to the midpoint of the range. The guidance reflects the Company's opportunistic and disciplined approach to acquisitions for the remainder of 2022 based on the current economic environment, replacing the previous expectation of at least $500 million of acquisitions, and the following additional assumptions: • The Company expects cash G&A to remain in the range of $14.5 million to $15.0 million (inclusive of transaction costs), and expects non-cash compensation expense to be in the range of $5.0 million to $5.5 million • The Company is narrowing cash interest expense, from a range of $7.0 million to $9.0 million, to a range of $8.0 million to $9.0 million, with additional non-cash deferred financing fee amortization remaining at a range of $0.8 million to $0.9 million • Full year 2022 diluted weighted average shares outstanding, which includes the impact of OP units, is being narrowed, from a range of 50.0 million to 52.0 million shares, to a range of 50.0 million to 51.0 million shares Certain of the forward-looking financial measures above are provided on a non-GAAP basis. The Company does not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with GAAP because to do so would be potentially misleading and not practical given the difficulty of projecting event driven transactional and other non-core operating items in any future period. The magnitude of these items, however, may be significant. EARNINGS WEBCAST AND CONFERENCE CALL A conference call will be held on Friday, October 28, 2022 at 10:00 AM ET. During the conference call the Company’s officers will review third quarter performance, discuss recent events, and conduct a question and answer period. The webcast will be accessible on the “Investor Relations” section of the Company’s website at www.NETSTREIT.com. To listen to the live webcast, please go to the site at least fifteen minutes prior to the scheduled start time to register, as well as download and install any necessary audio software. A replay of the webcast will be available for 90 days on the Company’s website shortly after the call. The conference call can also be accessed by dialing 1-877-451-6152 for domestic callers or 1-201-389-0879 for international callers. A dial-in replay will be available starting shortly after the call until November 4, 2022, which can be accessed by dialing 1-844-512-2921 for domestic callers or 1-412-317-6671 for international callers. The passcode for this dial-in replay is 13730420. SUPPLEMENTAL PACKAGE The Company’s supplemental package will be available prior to the conference call in the Investor Relations section of the Company’s website at www.investors.netstreit.com. About NETSTREIT NETSTREIT is an internally managed real estate investment trust (REIT) based in Dallas, Texas that specializes in acquiring single-tenant net lease retail properties nationwide. The growing portfolio consists of high-quality properties leased to e-commerce resistant tenants with healthy balance sheets. Led by a management team of seasoned commercial real estate executives, NETSTREIT’s strategy is to create the highest quality net lease retail portfolio in the country with the goal of generating consistent cash flows and dividends for its investors.
Earnings Release 7 Investor Relations ir@netstreit.com 972-597-4825 (1) Non-GAAP financial measure. See "Non-GAAP Financial Measures". (2) All per share amounts herein include weighted average common shares of 50,449,735, weighted average operating partnership units of 514,890, weighted average unvested restricted stock units of 255,613, and weighted average unsettled shares under open forward equity contracts of 164,520 for the three-months ended September 30, 2022. (3) Annualized base rent, or ABR, is calculated by multiplying (i) cash rental payments (a) for the month ended September 30, 2022 (or, if applicable, the next full month's cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of September 30, 2022, plus (b) for properties under development, the first full month's permanent cash rent contractually due after the development period by (ii) 12. (4) Weighted by ABR, excluding lease extension options and mortgage loan receivables. (5) Unrated tenants with more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x. NON-GAAP FINANCIAL MEASURES This press release contains non-GAAP financial measures, including FFO, Core FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, NOI, and Cash NOI. A reconciliation from net loss available to common shareholders to each non-GAAP financial measure, and definitions of each non-GAAP measure, are included below. FORWARD LOOKING STATEMENTS This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements concerning our business and growth strategies, investment, financing and leasing activities and trends in our business, including trends in the market for single-tenant, retail commercial real estate. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this press release may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see the information under the heading “Risk Factors” in our Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2022 and other reports filed with the SEC from time to time. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this press release. New risks and uncertainties may arise over time and it is not possible for us to predict those events or how they may affect us. Many of the risks identified herein and in our periodic reports have been and will continue to be heightened as a result of the ongoing and numerous adverse effects arising from the novel coronavirus (COVID-19), rising interest rates and instability in macroeconomic conditions. We expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.
Quarterly Highlights (unaudited, in thousands, except share, per share data and square feet) 8 (1) Metrics exclude mortgage loans receivable. (2) Weighted by ABR; excludes lease extension options and mortgage loan receivables. (3) Tenants, or tenants that are subsidiaries of a parent entity (with such subsidiary making up at least 50% of the parent company total revenue), with a credit rating of BBB- (S&P), Baa3 (Moody's) or NAIC2 (National Association of Insurance Commissioners) or higher. (4) Tenants with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Moody's, or NAIC. Three Months Ended Financial Results September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 Net income $ 1,419 $ 2,010 $ 1,966 $ 2,095 $ 2,944 Net income per common share outstanding - diluted $ 0.03 $ 0.04 $ 0.04 $ 0.05 $ 0.07 Funds from Operations (FFO) $ 14,517 $ 12,864 $ 12,667 $ 11,197 $ 8,983 FFO per common share outstanding - diluted $ 0.28 $ 0.26 $ 0.28 $ 0.26 $ 0.22 Core Funds from Operations (Core FFO) $ 14,517 $ 12,828 $ 12,667 $ 10,759 $ 8,983 Core FFO per common share outstanding - diluted $ 0.28 $ 0.26 $ 0.28 $ 0.25 $ 0.22 Adjusted Funds from Operations (AFFO) $ 15,386 $ 13,738 $ 13,135 $ 11,477 $ 9,738 AFFO per common share outstanding - diluted $ 0.30 $ 0.28 $ 0.29 $ 0.27 $ 0.24 Dividends per share $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20 Weighted average common shares outstanding - diluted 51,384,758 48,951,833 45,600,810 43,308,598 41,333,579 Portfolio Metrics(1) Number of leases 406 381 361 327 290 Square feet 7,990,845 7,419,551 7,028,798 6,420,246 5,452,608 Occupancy 100.0% 100.0 % 100.0 % 100.0 % 100.0 % Weighted average lease term remaining (years)(2) 9.6 9.5 9.6 9.9 10.0 Investment grade (rated) - % of ABR(3) 64.6 % 64.7 % 63.9 % 65.2 % 70.5 % Investment grade profile (unrated) - % of ABR(4) 14.0 % 16.4 % 16.7 % 16.4 % 14.5 % Combined Investment grade (rated) & Investment grade profile (unrated) - % of ABR 78.6 % 81.1 % 80.6 % 81.6 % 85.0 %
9 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited, in thousands, except share and per share data) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 REVENUES Rental revenue (including reimbursable) $ 24,339 $ 15,603 $ 67,309 $ 41,333 Interest income on mortgage loans receivable 674 — 1,671 — Total revenues 25,013 15,603 68,980 41,333 OPERATING EXPENSES Property 2,539 1,737 8,156 4,002 General and administrative 4,552 3,776 13,608 10,904 Depreciation and amortization 13,407 8,074 36,137 21,078 Provisions for impairment — — 1,114 3,539 Transaction costs(1) 51 132 704 464 Total operating expenses 20,549 13,719 59,719 39,987 OTHER (EXPENSE) INCOME Interest expense, net (3,017) (895) (5,708) (2,693) Gain on sales of real estate, net 143 1,955 2,162 2,452 Other income — — 36 — Total other (expense) income, net (2,874) 1,060 (3,510) (241) Net income before income taxes 1,590 2,944 5,751 1,105 Income tax expense (171) — (356) (50) Net income 1,419 2,944 5,395 1,055 Net income attributable to noncontrolling interests 16 96 63 42 Net income attributable to common stockholders $ 1,403 $ 2,848 $ 5,332 $ 1,013 Amounts available to common stockholders per common share: Basic $ 0.03 $ 0.07 $ 0.11 $ 0.03 Diluted $ 0.03 $ 0.07 $ 0.11 $ 0.03 Weighted average common shares: Basic 50,449,735 39,559,605 47,679,870 35,359,551 Diluted 51,384,758 41,333,579 48,657,049 37,108,425 OTHER COMPREHENSIVE INCOME Net income $ 1,419 $ 2,944 $ 5,395 $ 1,055 Change in value on derivatives, net 13,887 5 21,436 2,063 Total comprehensive income $ 15,306 $ 2,949 $ 26,831 $ 3,118 Comprehensive income attributable to noncontrolling interests 149 95 287 153 Comprehensive income attributable to common stockholders $ 15,157 $ 2,854 $ 26,544 $ 2,965 (1) Represents the costs associated with abandoned acquisitions and other acquisition related expenses.
Funds From Operations and Adjusted Funds From Operations (unaudited, in thousands, except share and per share data) 10 Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 GAAP Reconciliation: Net income $ 1,419 $ 2,944 $ 5,395 $ 1,055 Depreciation and amortization of real estate 13,241 7,994 35,701 20,843 Provisions for impairment — — 1,114 3,539 Gain on sale of real estate, net (143) (1,955) (2,162) (2,452) Funds from Operations (FFO) $ 14,517 $ 8,983 $ 40,048 $ 22,985 Gain on insurance proceeds — — (36) — Core Funds from Operations (Core FFO) $ 14,517 $ 8,983 $ 40,012 $ 22,985 Straight-line rent adjustments (272) (244) (1,144) (707) Amortization of deferred financing costs 239 157 553 471 Amortization of loan origination costs 28 — 59 — Amortization of above/below market lease intangibles (444) (182) (1,021) (609) Amortization of lease incentives 131 23 377 26 Capitalized interest expense (115) (24) (218) (38) Non-cash compensation expense 1,302 1,025 3,645 2,623 Adjusted Funds from Operations (AFFO) $ 15,386 $ 9,738 $ 42,263 $ 24,751 FFO per common share outstanding - diluted $ 0.28 $ 0.22 $ 0.82 $ 0.62 Core FFO per common share outstanding - diluted $ 0.28 $ 0.22 $ 0.82 $ 0.62 AFFO per common share outstanding - diluted $ 0.30 $ 0.24 $ 0.87 $ 0.67 Dividends per share $ 0.20 $ 0.20 $ 0.40 $ 0.40 Dividends per share as a percent of AFFO 67 % 83 % 46 % 60 % Weighted average common shares outstanding, basic 50,449,735 39,559,605 47,679,870 35,359,551 Operating partnership units outstanding 514,890 1,334,571 530,940 1,462,419 Unvested restricted stock units 255,613 439,403 261,727 286,455 Unsettled shares under open forward equity contracts 164,520 — 184,512 — Weighted average common shares outstanding, diluted 51,384,758 41,333,579 48,657,049 37,108,425
(1) The adjustment removes base rent and interest income for new investments completed during the period shown and replaces the removed amount with an estimated equivalent amount for the full period shown. The adjustment also removes base rent for properties disposed of during the period shown. (2) The adjustment removes base rent from new acquisitions completed during the period shown and replaces the removed amount with an estimated equivalent amount for the full period shown. The adjustment also removes base rent for properties disposed of during the period shown. EBITDAre, Adjusted EBITDAre, NOI and Cash NOI (unaudited, in thousands) 11 Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 GAAP Reconciliation: Net income $ 1,419 $ 2,944 $ 5,395 $ 1,055 Depreciation and amortization of real estate 13,241 7,994 35,701 20,843 Amortization of above/below market lease intangibles (444) (182) (1,021) (609) Amortization of lease incentives 131 23 377 26 Non-real estate depreciation and amortization 166 79 436 234 Interest expense, net 3,017 895 5,708 2,693 Income tax expense 171 — 356 50 Amortization of loan origination costs 28 — 59 — EBITDA 17,729 11,753 47,011 24,292 Provision for impairments — — 1,114 3,539 Gain on sale of real estate, net (143) (1,955) (2,162) (2,452) EBITDAre 17,586 9,798 45,963 25,379 Straight-line rent adjustments (272) (244) (1,144) (707) Gain on insurance proceeds — — (36) — Non-cash compensation expense 1,302 1,025 3,645 2,623 Adjusted EBITDAre $ 18,616 $ 10,579 $ 48,428 $ 27,295 Adjusted EBITDAre $ 18,616 Adjustments for intraquarter acquisitions and dispositions(1) 1,182 Annualized Adjusted EBITDAre $ 79,192 Net debt / Annualized Adjusted EBITDAre 5.0x — Net debt adjusted for outstanding forward equity / Annualized Adjusted EBITDAre 2.5x GAAP Reconciliation: Net income $ 1,419 $ 2,944 $ 5,395 $ 1,055 General and administrative 4,552 3,776 13,608 10,904 Depreciation and amortization 13,407 8,074 36,137 21,078 Provisions for impairment — — 1,114 3,539 Transaction costs 51 132 704 464 Interest expense, net 3,017 895 5,708 2,693 Gain on sales of real estate, net (143) (1,955) (2,162) (2,452) Income tax expense 171 — 356 50 Interest income on mortgage loans receivable (674) — (1,671) — Other income — — (36) — NOI 21,800 13,866 59,153 37,331 Straight-line rent adjustments (272) (244) (1,144) (707) Amortization of above/below market lease intangibles (444) (182) (1,021) (609) Amortization of lease incentives 131 23 377 26 Cash NOI $ 21,215 $ 13,463 $ 57,365 $ 36,041 Adjustments for intraquarter investment activities(2) 1,182 Normalized Cash NOI $ 22,397 Property Operating Expense Coverage Property operating expense reimbursement $ 2,170 $ 1,505 $ 7,113 $ 3,516 Property operating expenses (2,539) (1,737) (8,156) (4,002) Property operating expenses, net $ (369) $ (232) $ (1,043) $ (486)
Consolidated Balance Sheets (unaudited, in thousands, except share data) 12 September 30, December 31, 2022 2021 ASSETS Real estate, at cost: Land $ 380,092 $ 299,935 Buildings and improvements 839,305 626,457 Total real estate, at cost 1,219,397 926,392 Less accumulated depreciation (53,255) (30,669) Property under development 17,475 17,896 Real estate held for investment, net 1,183,617 913,619 Assets held for sale 23,985 2,096 Mortgage loans receivable, net 46,406 — Cash, cash equivalents and restricted cash 16,190 7,603 Lease intangible assets, net 149,357 124,772 Other assets, net 54,087 20,351 Total assets $ 1,473,642 $ 1,068,441 LIABILITIES AND EQUITY Liabilities: Term loans, net $ 373,202 $ 174,330 Revolving credit facility 30,000 64,000 Mortgage note payable, net 7,901 — Lease intangible liabilities, net 31,438 23,316 Liabilities related to assets held for sale 416 — Accounts payable, accrued expenses and other liabilities 21,200 16,980 Total liabilities $ 464,157 $ 278,626 Equity: Stockholders’ equity Common stock, $0.01 par value, 400,000,000 shares authorized; 54,876,295 and 44,223,050 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively $ 549 $ 442 Additional paid-in capital 1,032,634 809,724 Distributions in excess of retained earnings (58,747) (35,119) Accumulated other comprehensive income 25,335 4,123 Total stockholders’ equity 999,771 779,170 Noncontrolling interests 9,714 10,645 Total equity 1,009,485 789,815 Total liabilities and equity $ 1,473,642 $ 1,068,441
Debt, Capitalization, and Financial Ratios (unaudited, in thousands, except share data) 13 As of September 30, 2022 Weighted Average Debt Summary Maturity Date Balance Interest Rate(1) Rate Type Maturity Unsecured revolver(2)(3) August 11, 2026 $ 30,000 3.85% Floating 3.9 years Unsecured term loan(4) December 23, 2024 175,000 1.36% Fixed 2.2 years Unsecured term loan(5) February 11, 2028 200,000 3.88% Fixed 5.4 years Secured mortgage loan(6) November 01, 2027 8,546 4.53% Fixed 5.1 years Principal amount of total debt $ 413,546 Net Debt Balance Principal amount of total debt $ 413,546 Less: Cash, cash equivalents and restricted cash(7) (16,190) Net debt 397,356 Value of outstanding forward equity(8) (199,086) Net debt adjusted for outstanding forward equity $ 198,270 Key Debt Covenant Information Required Actual Consolidated total leverage ratio ≤ 60.0% 28.0% Fixed charge coverage ratio ≥ 1.50x 9.01x Maximum secured indebtedness ≤ 40.0% 0.6% Maximum recourse indebtedness ≤ 10.0% 0.0% Unencumbered leverage ratio ≤ 60.0% 28.9% Unencumbered interest coverage ratio ≥ 1.75x 11.01x Liquidity Balance Unused unsecured revolver capacity $ 370,000 Cash, cash equivalents and restricted cash(7) 16,190 Cash value of outstanding forward equity(8) 199,086 Total Liquidity $ 585,276 Ending Equity Market Equity Shares/Units Capitalization % of Total Common shares(9) 54,876,295 $ 977,347 99.1 % OP units(9) 514,890 9,170 0.9 % Total 55,391,185 $ 986,517 100.0 % Enterprise Value Balance % of Total Principal amount of total debt $ 413,546 29.5 % Equity market capitalization(9) 986,517 70.5 % Total enterprise value $ 1,400,063 100.0 % (1) Interest rate for floating rate debt, if applicable, is based on the last day of the quarter presented. Rates presented exclude the impact of capitalized loan fee amortization. (2) Facility fees are charged at an annual rate of 0.15% of the total facility size of $400 million. (3) The revolver has a one-year extension option. (4) Effective September 28, 2020 the floating rate underlying the term loan was swapped to an effective fixed rate of 0.21%. The swap terminates on December 23, 2024. (5) Effective September 1, 2022 the floating rate underlying the term loan was swapped to an effective fixed rate of 2.63%. The swap terminates on February 11, 2028. (6) The secured mortgage loan was assumed as part of an asset acquisition during the third quarter 2022. (7) There was no restricted cash held as of September 30, 2022. (8) Reflects approximately 10.3 million of unsettled shares from August 2022 forward equity offering, at the September 30, 2022 available net settlement price of $19.24. (9) Value is based on the September 30, 2022 closing price of $17.81 per share.
Investment Activity (unaudited, dollars in thousands) 14 (1) Excludes development related transactions. (2) Includes loan receivables and book value of completed developments, as well as all expenditures that were capitalized as part of the transaction, including acquisition costs and any incentives provided to the seller and/or tenant at close.. (3) Calculated by dividing in-place ABR, or interest income, at the time of investment by the Gross Investment. (4) Represents all capitalized costs associated with the property, less impairment charges and net of accumulated depreciation. (5) Reflects contractual sales price. (6) The rate only applies to properties that were occupied at the time of the disposition. It is calculated by dividing the in-place ABR at the time of disposition by the contractual sales price. (7) Represents capitalized acquisition and development costs, including capitalized interest. Three Months Ended September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 Investments(1): Number of Investments 26 26 37 32 26 Gross Investment(2) $ 131,301 $ 133,065 $ 137,987 $ 150,538 $ 90,128 Cash Capitalization Rate(3) 6.6% 6.6% 6.3% 6.5% 6.2% Dispositions: Number of Occupied Properties 1 1 1 — 4 Number of Vacant Properties — 1 — — — Net Book Value(4) $ 1,517 $ 8,027 $ 2,096 $ — $ 16,160 Proceeds(5) $ 1,685 $ 10,328 $ 2,364 $ — $ 18,835 Cash Capitalization Rate (on occupied properties only)(6) 5.5% 6.0% 5.5% N/A 6.3% Developments: Industry Location Lease Term Amount Funded to Date(7) Anticipated Rent Commencement Discount Retail Fond Du Lac, WI 10 Years $2,909 Completed 1Q'22 Home Improvement Sioux Falls, SD 12 Years $4,918 Completed 1Q'22 Dollar Stores Woodland, AL 10 Years $1,587 Completed 2Q'22 Arts & Craft Fond Du Lac, WI 10 Years $3,625 Completed 2Q'22 Discount Retail Yuma, AZ 10 Years $4,543 Completed 2Q'22 Discount Retail Sheboygan, WI 10 Years $2,192 4Q'2022 Arts & Craft D'Iberville, MS 15 Years $4,855 1Q'2023 Arts & Craft Winder, GA 15 Years $2,509 1Q'2023 Arts & Craft Sheboygan, WI 10 Years $5,208 1Q'2023 Discount Retail Alpena, MI 10 Years $1,588 1Q'2023 TBD Sumter, SC TBD $1,123 TBD
Portfolio Information (unaudited, dollars in thousands) 15 (1) Metrics exclude mortgage loan receivables. (2) Weighted by ABR; excludes lease extension options and interest income from mortgage loan receivables. (3) Tenants, or tenants that are subsidiaries of a parent entity (with such subsidiary making up at least 50% of the parent company total revenue), with a credit rating of BBB- (S&P), Baa3 (Moody's) or NAIC2 (National Association of Insurance Commissioners) or higher. (4) Tenants with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Moody's, or NAIC. (5) Tenants, or tenants that are subsidiaries of a parent entity (with such subsidiary making up at least 50% of the parent company total revenue), with a credit rating of BB+ (S&P), Ba1 (Moody's) or NAIC3 (National Association of Insurance Commissioners) or lower. Portfolio Metrics(1) September 30, 2022 Number of leases 406 Number of states 42 Square feet 7,990,845 Tenants 77 Industries 24 Occupancy 100.0% Weighted average lease term remaining (years)(2) 9.6 Tenant Quality Number of Leases ABR % of ABR Investment grade (rated)(3) 286 $ 59,956 64.6% Investment grade profile (unrated)(4) 42 12,980 14.0% Sub-investment grade (rated)(5) 30 10,342 11.2% Sub-investment grade profile (unrated) 48 9,462 10.2% Total 406 $ 92,739 100.0% 0.0% 25.0% 50.0% 75.0% 100.0% Defensive Industries Tenant Credit 64.6% Investment Grade 14.0% Investment Grade Profile 11.2% Sub- Investment Grade 10.2% Sub- Investment Grade Profile 57.7% Necessity 17.5% Discount 13.4% Service 11.5% Other
Portfolio Information (cont’d) (unaudited, dollars in thousands) 16 Top 20 Tenants(1) Number of Leases ABR % of ABR Credit rating 33 $ 10,555 11.4% BBB / Baa2 22 6,428 6.9% BBB / Baa2 14 5,468 5.9% IG Profile 21 4,879 5.3% A / Baa2 46 4,531 4.9% BBB / Baa2 40 3,900 4.2% BBB- / Baa2 6 3,770 4.1% AA / Aa2 4 3,578 3.9% BBB+ / Baa1 33 3,294 3.6% BBB / Baa2 6 3,211 3.5% BBB+ / A3 5 3,000 3.2% BBB / Baa1 | IG Profile 2 2,615 2.8% BB / Ba3 10 2,543 2.7% SIG Profile 10 2,435 2.6% IG Profile 4 2,356 2.5% B+ / Ba3 2 1,944 2.1% A / A2 13 1,884 2.0% BB- / B1 7 1,578 1.7% BBB / Baa1 6 1,331 1.4% BBB / Baa3 3 1,205 1.3% BB+ / Ba2 Total 287 $ 70,504 76.0% (1) Metrics exclude mortgage loan receivables. (2) Ahold Delhaize does not provide a guaranty on one Food Lion lease, however the tenant qualifies for Investment Grade Profile designation. (2)
Portfolio Information (cont’d) (unaudited, dollars in thousands) 17 State(1) Number of Leases ABR % of ABR Illinois 23 $ 8,663 9.3% Texas 37 8,400 9.1% Georgia 24 5,480 5.9% Ohio 33 5,464 5.9% Wisconsin 19 5,163 5.6% New York 16 4,674 5.0% Virginia 8 4,231 4.6% California 13 4,174 4.5% Indiana 17 3,864 4.2% Louisiana 9 3,783 4.1% Pennsylvania 21 3,362 3.6% Mississippi 14 3,203 3.5% Alabama 18 3,119 3.4% Michigan 11 2,874 3.1% Florida 16 2,733 2.9% North Carolina 10 2,176 2.3% Arizona 5 1,837 2.0% New Mexico 7 1,516 1.6% Washington 3 1,399 1.5% South Carolina 9 1,373 1.5% Nevada 6 1,369 1.5% Kentucky 4 1,366 1.5% Arkansas 7 1,182 1.3% Tennessee 5 1,165 1.3% Iowa 7 952 1.0% Oklahoma 7 897 1.0% Kansas 4 892 1.0% Maryland 4 829 0.9% Massachusetts 4 751 0.8% Connecticut 3 680 0.7% Nebraska 2 662 0.7% Vermont 10 633 0.7% Minnesota 5 618 0.7% New Jersey 4 574 0.6% North Dakota 2 553 0.6% West Virginia 5 515 0.6% Colorado 4 449 0.5% South Dakota 1 331 0.4% Utah 2 317 0.3% Missouri 3 260 0.3% New Hampshire 3 157 0.2% Idaho 1 99 0.1% Total 406 $ 92,739 100.0% (1) Metrics exclude mortgage loan receivables.
Portfolio Information (cont’d) (unaudited, dollars in thousands) 18 Industry(1) Defensive Category Number of Leases ABR % of ABR Drug Stores & Pharmacies Necessity 55 $ 16,983 18.3% Home Improvement Necessity 32 11,561 12.5% Grocery Necessity 21 10,886 11.7% Discount Retail Discount 32 8,371 9.0% Dollar Stores Discount 79 7,825 8.4% Convenience Stores Service 25 5,621 6.1% Auto Parts Necessity 61 5,526 6.0% Arts & Crafts Other 14 5,468 5.9% General Retail Necessity 6 3,708 4.0% Consumer Electronics Other 6 3,211 3.5% Quick Service Restaurants Service 18 2,908 3.1% Healthcare Necessity 12 2,352 2.5% Farm Supplies Necessity 7 1,578 1.7% Automotive Service Service 14 1,463 1.6% Health and Fitness Service 1 985 1.1% Furniture Stores Other 2 885 1.0% Casual Dining Service 5 764 0.8% Equipment Rental and Leasing Service 5 679 0.7% Apparel Other 4 481 0.5% Banking Necessity 3 457 0.5% Wholesale Warehouse Club Necessity 1 417 0.4% Specialty Other 1 276 0.3% Gift, Novelty, and Souvenir Shops Other 1 200 0.2% Home Furnishings Other 1 134 0.1% Total 406 $ 92,739 100.0% Defensive Category Number of Leases ABR % of ABR Necessity 198 $ 53,468 57.7% Discount 111 16,196 17.5% Service 68 12,421 13.4% Other 29 10,655 11.5% Total 406 $ 92,739 100.0% (1) Metrics exclude mortgage loan receivables.
Lease Expiration Schedule (unaudited, dollars in thousands) 19 ABR Expiring Year of Number of ABR as a % of Expiration Leases Expiring Expiring(1) Total Portfolio 2022 — — 0.0% 2023 2 852 0.9% 2024 2 293 0.3% 2025 10 2,826 3.0% 2026 16 3,095 3.3% 2027 20 4,871 5.3% 2028 33 4,983 5.4% 2029 53 8,168 8.8% 2030 41 10,028 10.8% 2031 66 12,357 13.3% 2032 33 9,034 9.7% 2033 27 3,716 4.0% 2034 25 9,187 9.9% 2035 25 8,914 9.6% 2036 25 5,690 6.1% 2037 11 4,147 4.5% 2038 1 255 0.3% 2039 7 1,110 1.2% 2040 2 425 0.5% 2041 4 1,246 1.3% 2042 1 985 1.1% 2043 2 558 0.6% TOTAL 406 $ 92,739 100.0% (1) Weighted by ABR; excludes lease extension options and mortgage loan receivables.
FFO, Core FFO, and AFFO FFO means funds from operations. It is a non-GAAP measure defined by NAREIT as net income (computed in accordance with GAAP). Our FFO is net income in accordance with GAAP, excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortization and impairment charges on depreciable real property. Core FFO means core funds from operations. Core FFO is a non-GAAP financial measure defined as FFO adjusted to remove the effect of unusual and non-recurring items that are not expected to impact our operating performance or operations on an ongoing basis. Historically, these have included gains from forfeited earnest money deposits, non-recurring public company costs, and gains from insurance proceeds. AFFO means adjusted funds from operations. AFFO is a non-GAAP financial measure defined as Core FFO adjusted for GAAP net income related to non-cash revenues and expenses, such as straight-line rent, amortization of above- and below-market lease-related intangibles, amortization of lease incentives, capitalized interest expense, non-cash compensation expense, and amortization of deferred financing and amortization of loan origination costs. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values historically have risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO to be useful in evaluating potential property acquisitions and measuring operating performance. We further consider FFO, Core FFO and AFFO to be useful in determining funds available for payment of distributions. FFO, Core FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP. You should not consider FFO, Core FFO and AFFO to be alternatives to net income as a reliable measure of our operating performance; nor should you consider FFO, Core FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity. FFO, Core FFO and AFFO do not measure whether cash flow is sufficient to fund our cash needs, including principal amortization, capital improvements and distributions to stockholders. FFO, Core FFO and AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP. Further, FFO, Core FFO and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO, Core FFO and AFFO. Non-GAAP Measures and Definitions 20
Non-GAAP Measures and Definitions (cont’d) EBITDA, EBITDAre and Adjusted EBITDAre EBITDA is computed by us as earnings before interest expense, income tax expense and depreciation and amortization. EBITDAre is the NAREIT definition of EBITDA (as defined above), but it is further adjusted to follow the definition included in a white paper issued in 2017 by NAREIT, which recommended that companies that report EBITDA also report EBITDAre. We compute EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and impairment charges on depreciable real property. Adjusted EBITDAre, as computed by us, is EBITDAre adjusted to exclude straight-line rent, non-cash compensation expense, and gain on insurance proceeds. Annualized Adjusted EBITDAre is Adjusted EBITDAre, plus adjustments for intraquarter investment activity, multiplied by four. We present EBITDA, EBITDAre and Adjusted EBITDAre as they are measures commonly used in our industry. We believe that these measures are useful to investors and analysts because they provide supplemental information concerning our operating performance, exclusive of certain non-cash items and other costs. We use EBITDA and EBITDAre as measures of our operating performance and not as measures of liquidity. EBITDA, EBITDAre and Adjusted EBITDAre do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. Additionally, our computation of EBITDA and EBITDAre may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs. NOI, Cash NOI, and Normalized Cash NOI NOI means net operating income, and it is computed in accordance with GAAP. We compute NOI as net income (computed in accordance with GAAP), excluding general and administrative expenses, interest expenses (or income), income tax expense, depreciation and amortization, gains (or losses) from the sales of depreciable property, impairment charges on depreciable real property, transaction costs, and other income (or expense). Cash NOI is computed by us as NOI excluding straight-line rent and amortization of above/below-market leases adjustments and lease incentives. We believe NOI and Cash NOI provide useful and relevant information because they reflect only those income and expense items that are incurred at the property level and present such items on an unlevered basis. NOI and Cash NOI are not measurements of financial performance under GAAP, and our NOI and Cash NOI may not be comparable to similarly titled measures of other companies. You should not consider our NOI and Cash NOI as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. Normalized Cash NOI is computed by us as Cash NOI adjusted to remove Cash NOI for properties acquired during the period shown, and then replace the removed amount with an estimated equivalent ABR for the full period. It is further adjusted to remove Cash NOI for properties disposed of during the period shown. 21
Non-GAAP Measures and Definitions (cont’d) 22 Other Definitions ABR means annualized base rent. ABR is calculated by multiplying (i) cash rental payments (a) for the month ended September 30, 2022 (or, if applicable, the next full month’s cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of September 30, 2022, plus (b) for properties under development, the first full month’s permanent cash rent contractually due after the development period by (ii) 12. Defensive Category is considered by us to represent tenants that focus on necessity goods and essential services in the retail sector, including discount stores, grocers, drug stores and pharmacies, home improvement, automotive service and quick-service restaurants, which we refer to as defensive retail industries. The defensive sub-categories as we define them are as follows: (1) Necessity, which are retailers that are considered essential by consumers and include sectors such as drug stores, grocers and home improvement, (2) Discount, which are retailers that offer a low price point and consist of off-price and dollar stores, (3) Service, which consist of retailers that provide services rather than goods, including, tire and auto services and quick service restaurants, and (4) Other, which are retailers that are not considered defensive in terms of being considered necessity, discount or service, as defined by us. Leases are individual properties with a distinct lease agreement in place, development activities where a lease is expected at a future date, or in the case of master lease arrangements each property under the master lease is counted as a separate lease. Net Debt is computed by us as the principal amount of total debt outstanding less cash, cash equivalents, and restricted cash. Occupancy is expressed as a percentage, and it is the number of economically occupied properties divided by the total number of properties owned. Properties under development are excluded from the calculation. OP units means operating partnership units not held by NETSTREIT.
Forward Looking and Cautionary Statements 23 This supplemental report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements concerning our business and growth strategies, investment, financing and leasing activities and trends in our business, including trends in the market for single-tenant, retail commercial real estate. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this supplemental report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 24, 2022 and other reports filed with the SEC from time to time. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this supplemental report. New risks and uncertainties may arise over time and it is not possible for us to predict those events or how they may affect us. Many of the risks identified herein and in our periodic reports have been and will continue to be heightened as a result of the ongoing and numerous adverse effects arising from the novel coronavirus (COVID-19), rising interest rates and instability in macroeconomic conditions. We expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.
ntstinvestorpresentation
1 Investor Presentation October 2022
Disclaimer 2 This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements concerning our business and growth strategies, investment, financing and leasing activities and trends in our business, including trends in the market for single-tenant, retail commercial real estate, and our financial outlook. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this presentation may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements, or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see the information under the heading “Risk Factors” in our Form 10-K for the year ended December 31, 2021, filed with the SEC on February 24, 2022, and other reports filed with the SEC from time to time. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this presentation. New risks and uncertainties may arise over time, and it is not possible for us to predict those events or how they may affect us. Many of the risks identified herein and in our periodic reports have been and will continue to be heightened as a result of the ongoing and numerous adverse effects arising from the novel coronavirus (COVID-19), rising interest rates and instability in macroeconomic conditions. We expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.
Company & Investment Highlights 3 NETSTREIT Is Built on a Foundation of Strength on Both Sides of the Balance Sheet, Led by a Seasoned Leadership Team with an Exceptional Track Record High-Quality, Diversified, and Defensive Net Lease Retail Portfolio Conservative Capitalization to Support Accretive Growth Active Asset Management to Achieve Optimal Portfolio Performance2 Disciplined Underwriters with Dual Focus on Credit AND Real Estate3 Multifaceted Investment Strategy Leveraging Deep Industry Relationships4 1 Durable and Defensive Cash Flows with Demonstrated Resiliency Platform Positioned for Scale5
Durable and Defensive Cash Flows with Demonstrated Resiliency NETSTREIT STRATEGY BY THE NUMBERS1 4 Source: Company data. Data represents portfolio and balance sheet as of 9/30/2022 unless otherwise noted. 1. Figures represent percentage of ABR unless otherwise noted. 2. Represents tenants with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Moody's, or NAIC. Investment Grade Tenancy 64.6% Investment Grade Profile Tenancy2 14.0% Occupancy 100.0% 1 Investment grade tenancy provides defensive, consistent performance through economic cycles ▪ High-quality tenancy creates bond-like leases with high rent collections during times of disruption ▪ 78.6% of portfolio consisted of investment grade tenants, or tenants with an investment grade profile Defensive nature of NETSTREIT portfolio strategy ▪ Focused on defensive industries such as necessity, discount, and service-oriented retailers, with e-commerce resistant strategies Healthy portfolio with strong external growth opportunities ▪ Maintained 100% occupancy through all of 2020 and 2021 ▪ Average quarterly investment activity of $114.2 million since the beginning of 2020 ▪ Continued focus on acquiring high credit quality tenants located in well populated markets Well positioned balance sheet ▪ 93% fixed rate debt ▪ $585 million of total liquidity (revolver capacity + unsettled forward equity
2.9% 3.3% 4.2% 5.7% 9.1% 10.3% 11.6% 16.5% 13.2 13.8 9.6 8.8 9.0 10.3 10.6 8.8 STOR EPRT NTST FCPT ADC SRC NNN O Lease Rollover % ('22-'25) WALT 63% 68% 65% 43% 22% 18% 0% 0% ADC NTST FCPT O SRC NNN STOR EPRT 5 NTST's Stable, Defensive Cash Flow Profile Drives Superior Risk-Adjusted Returns Source: Company Filings as of 9/30/2022. 1. ADC, FCPT, O, and SRC as of 6/30/2022. NNN investment grade concentration as of 12/31/2021. EPRT and STOR investment grade concentration assumed to be 0%, although it is not disclosed by either company. Lease Rollover Investment Grade %1
Portfolio Overview 6 Sources: Company data. Portfolio data represents portfolio as of 9/30/2022. 1. Excludes mortgage loan receivables. 2. Represents tenants with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Moody's, or NAIC. High-quality, diversified portfolio consisting of 64.6% investment grade tenants across 42 states Key Portfolio Stats1 Leases 406 States 42 Portfolio Square Feet (in millions) 8.0 Tenants 77 Retail Sectors 24 % Occupancy 100% % Investment Grade Tenants (by ABR) 64.6% Weighted Average Lease Term Remaining (Years) 9.6 Lease Turnover Through 2025 (by ABR) 4.3% National Footprint Across Attractive Markets Top 10 Tenants by % of ABR Investment Grade Rated BBB / Baa2 BBB / Baa2 Investment Grade Profile2 2 ≥1% and <3% ABR <1% ABR ≥5% and <10% ABR ≥3% and <5% ABR 0% ABR AK HI WA OR MT CA AZ WY NV ID UT CO NM TX OK ND SD NE KS LA AR MO IA MN WI IL IN MI OH KY TN FL MS AL GA SC NC VAWV PA DE NJ NY ME VT NH MA MD CT RI ≥10% ABR BBB+ / Baa1 IG Profile A / Baa2 BBB / Baa2 BBB- / Baa2 BBB / Baa2 BBB+ / A3 AA / Aa2 11.4% 6.9% 5.9% 5.3% 4.9% 4.2% 4.1% 3.9% 3.6% 3.5% Baa2 / BBB Baa2 / BBB IG Profile A / Baa2 BBB / Baa2 BBB- / Baa2 AA / Aa2 / BBB / Baa2 BBB+ / A3
Dollar Stores: Grocery: Discount Retail: Home Improvement: Drug Stores & Pharmacies: Portfolio Diversification In Defensive Retail Sectors Source: Company data. Portfolio data represents portfolio as of 9/30/2022. All figures represent percentage of portfolio ABR. Note: Due to rounding, respective defensive retail sector exposure may not precisely reflect the absolute figures. NETSTREIT offers a national diversified portfolio comprised primarily of defensive retail tenants Top Industries 57.7% Necessity 17.5% Discount 11.5% Other 1 18.3% 2 12.5% 3 11.7% 4 9.0% 5 8.4% 13.4% Service 2 88.5% of ABR Necessity Discount Service 7
NTST Portfolio Transformation 8 NETSTREIT has prudently allocated offering proceeds and recycled capital to grow the scale of its asset base while also improving portfolio quality through further diversification and increased exposure to defensive credit tenancy 2 Source: Company Filings and Company-provided data. 1. Includes mortgage loan receivables. 2. Calculated as % of ABR; excludes mortgage loan receivables. Pre-144A (12/23/19) 144A to IPO IPO (8/13/20) Since IPO Current (9/30/22) Leases 93 70 163 243 406 States 28 6 34 8 42 Portfolio Size 1.4M SF 1.6M SF 3.0M SF 5.0M SF 8.0M SF ABR $17.8M $16.7M $34.5M $58.2M $92.7M Investment Volume1 – ~$264M – ~$1B – Cap Rate1 – 6.6% – 6.7% – Disposition Volume – ~$10M – ~$85M – Disposition Cap Rate – 5.8% – 6.5% – Gross Asset Value ~$247M ~$262M ~$509M ~$755M ~$1.4B IG Concentration2 64% 0% 64% +1% 65% IG & IG Profile Concentration2 64% +8% 72% +7% 79% Top 10 Tenant Concentration2 62% (5%) 57% (4%) 53% Top Five Tenants2 4.9% 5.3% 5.9% 6.9% 11.4% 6.4% 7.5% 7.9% 8.9% 11.9% 4.9% 5.2% 6.1% 7.9% 12.7%Baa2 / BBB Baa2 / BBB Baa1 / BBB+ Baa2 / BBB Baa2 / BBB- Baa1 / AA- Aa2 / AA Baa2 / BBB IG Profile Baa1 / BBB+ IG Profile BBB / Baa2 BBB / Baa2 BBB / Baa2 A / Baa2 BBB / Baa2
$74.2 $150.5 $102.6 $81.2 $88.2 $116.7 $90.1 $150.5 $138.0 $133.1 $131.3 1Q'20 2Q'20 3Q'20 4Q'20 1Q'21 2Q'21 3Q'21 4Q'21 1Q'22 2Q'22 3Q'22 Completed Investments New Quarterly Investments Strong External Growth Profile 337 Completed Investments 9 Source: Company data. 1. Includes completed developments and the mortgage loan receivables. ($ in millions) Avg. Acquisition Activity per Completed Quarter = $114.2 million Cumulative Investments Since 20191 Properties Acquired: 24 44 30 26 $224.7 $327.3 $613.5 2 $408.6 31 35 $496.8 26 $703.7 $854.2 32 $992.2 37 26 $1,125.3 $1,256.6 26
Active Asset Management 10 NETSTREIT continuously tracks property performance and stratifies the portfolio to achieve consistent cash flows and balanced growth for its investors Source: Company data. Portfolio data represents portfolio as of 9/30/2022. Since inception, the Company has disposed of 61 properties totaling approximately $186 million, while also acquiring high-quality assets that have enhanced scale and materially improved portfolio performance metrics such as tenant quality, WALT, and geographic diversity Identify properties not meeting strategy and/or risk management criteria (i.e. rent coverage) Periodically review all properties for changes in performance, credit, and local conditions Pursue opportunities that align with objectives Practice disciplined underwriting strategy Leverage 1031 exchange transfers where possible to access deep, non- institutional market for portfolio optimization Strategic Recycling Disciplined Acquisitions Perpetual Stratification Active Monitoring Existing portfolio has been carefully curated 2
Three-Part Underwriting Philosophy 11 NETSTREIT leverages a disciplined, three-pronged approach to underwriting potential acquisitions which positions the Company to benefit from superior downside protection on its investments 3 REAL ESTATE VALUATION UNIT-LEVEL PROFITABILITY• Review underlying key real estate metrics to maximize re-leasing potential • Location analysis • Alternative use analysis • Determine rent coverage (min. 2.0x) and cost variability • Assess relative to corporate stability / real estate merits C B TENANT CREDIT UNDERWRITING • Evaluate corporate level financials • Assess business risks • Determine ownership/sponsorship • For Non-IG tenants, establish NETSTREIT implied credit rating A L e v e l o f U n d e rw ri ti n g E m p h a s is
Tenant Credit Underwriting 12 NETSTREIT employs a credit-focused underwriting strategy for all tenants – the MOST IMPORTANT element of the Company’s underwriting process that drives stable revenue and long-term return on investment Source: Company data. Portfolio data represents portfolio as of 9/30/2022. 1. IG stands for investment grade. Investment Grade (rated) Investment Grade Profile (unrated) Sub-IG (rated) & Sub-IG Profile (unrated)1 Description • Validated financial strength and stability • Professional management with standardized operational practices • Focus on corporate guarantee credit • Lower relative yields • Higher competition for deals • IG-caliber balance sheets without explicit rating • Threshold metrics: • >$1B in Sales • Debt / adjusted EBITDA of 2.0x • Well-capitalized retailers • National footprint with strong brand equity • Focus on real estate quality / unit-level profitability • Higher relative yields • Lower competition for deals Durability • Coverage and credit enhancements required given more susceptible to market disruptions % Of ABR 64.6% 14.0% 21.4% Lease Terms (WALT, Rent Bumps, etc.) Less negotiating leverage More negotiating leverage Most negotiating leverage Representative Tenants 78.6% Total Defensive, consistent performance through economic cycles 3 A
Focus on Investment Grade Tenants 13 Investment grade tenants have outperformed during economic downturns and largely avoided bankruptcy Sources: Capital IQ, Company data, The Deal Pipeline, Bloomberg, SNL Financial 1. Indicates best credit rating held after 1/1/2005 and date when the respective credit rating was assigned. Some credit ratings are pre-2005. Major Retail Tenant Bankruptcies (2009 – 2020) Owned by Net Lease Peer Group Retail Tenant Bankruptcy Filing Date Best Credit Rating Prior to Filing (S&P / Moody’s)1 Investment Grade? Oct-20 B (Jul-12) / B2 (May-12) Mar-20 NR / NR Feb-20 NR / NR Jan-19 BB- (May-01) / B2 (Apr-01) Oct-18 BB+ (Mar-05) / Ba1 (Mar-05) Oct-18 B+ (Sep-15) / B1 (July-15) Sep-17 BB (Mar-04) / B1 (Aug-10) Mar-17 NR / NR Mar-16 B (Mar-06) / B2 (Mar-06) Jan-12 B (Nov-04) / NR Feb-11 NR / NR Mar-09 NR / NR A3
Real Estate Valuation 14 Real Estate closely follows Credit as a top priority: NETSTREIT utilizes a ground-up framework rooted in real estate fundamentals to underpin its valuation and further quantify the upside potential for a transaction Market-Level Considerations Property-Level Considerations • Fungibility of building for alternative uses • Replacement cost • Location analysis • Traffic counts • Nearby uses and traffic drivers, complementary nature thereof • Accessibility and parking capacity • Ingress and egress • Visibility / signage • Vacancy analysis • Marketability of the real estate without current tenant • List of likely replacement tenants • Rent analysis • Replacement rent versus current rent • Demographic analysis • Current demographics plus trends and forecasts • Competitive analysis • Market position versus competing retail corridors B3
Unit-Level Profitability 15 In assessing unit-level financial performance, NETSTREIT focuses on mission-critical properties with strong rent coverage and higher variability in operating costs Obtain Financial Information Perform Financial Analysis 2 Assess Investment Merits 1 3 • Provides clarity into location-specific performance • Analyze store demand dynamics, cost structure and liquidity profile • Determine whether property meets investment criteria • Obtain unit-level financial information from parent company if possible • If financials are not provided, utilize data provided by third party vendors to estimate sales by location • Third party data includes: • Cell phone traffic • Point of sales (POS) data • Triangulate P&L based on available information • Sales (per data vendors) • EBITDAR margin (per financials) • Rent (known quantity) • Account for variability in business model cost structure • Higher proportion of fixed costs = more variability in rent coverage • Determine store ranking within tenant’s broader operating portfolio based on estimated sales Key Unit-Level Investment Criteria Minimum 2.0x Rent Coverage✓ Higher Cost Variability✓ Ranks in Top Half of Tenant’s Store Portfolio ✓ C3
Portfolio Strategy / Investment Philosophy 16 Source: Company data. Portfolio data represents portfolio as of 9/30/2022. 1. Portfolio statistics by percentage of ABR. Current MetricsInvestment Philosophy Portfolio Strategy Defensive Tenancy in Necessity-Based and E-commerce-Resistant Retail Industries1 88.5%Primarily Resilient, Cycle-Tested Investment Grade Credit Tenants with Durable Cash Flows1 >60% 78.6% (64.6% Investment Grade Credit and 14.0% Investment Grade Profile) Granular Assets in Highly Fragmented, Undercapitalized Market Segment $3.5M Avg. Asset Size $1 to $10M Avg. Asset Size Net Lease Retail Assets with Long Lease Term Benefiting From Contractual Rent Growth ~10 Year WALT 9.6 Year WALT Diversification by Industry, Tenant, State1 <15% Industry <50% Top 10 Tenants <15% State 18.3% Industry 53.5% Top 10 Tenants 9.3% State Significant Focus on Fundamental Real Estate Underwriting Attractive cost basis with durable valuation supported by market rents and demos, physical structure and location, and alternative use analyses 4
Bell Curve Investing – Focusing on the Right Side 17 Inefficiently Priced Assets “Market-Taker” Assets TYPICAL TRANSACTION - Large portfolio ($0.2b to $1.0b+) or outsized buyer pool - Well marketed transaction - Straight-forward transaction - Ability to finance transaction with high loan-to- value debt - Highly competitive, with sophisticated and well capitalized investors TYPICAL TRANSACTION - Smaller deal size ($1m to $20m) or limited buyer pool - Not highly marketed - May involve transaction structuring that limits buyer pool - Limited financing options - Less competitive, 1031 exchangers, family offices, and unsophisticated investors Efficiently Priced Assets 4
Opportunistic Capital Markets Activity – Over $1 Billion Raised/Refinanced in 2022 NETSTREIT CAPITAL MARKETS ACTIVITY - 2022 18 January Forward Equity Raise $230 million August Forward Equity Raise $209 million August Credit Facility Recast $600 million January 2022 Forward Equity Raise: ▪ 10.4 million shares at $22.25 price to public ($230 million in gross proceeds) ▪ Fully settled as of September 30, 2022 August 2022 Forward Equity Raise: ▪ 10.4 million shares at $20.20 price to public ($209 million in gross proceeds) ▪ Full forward was available as of September 30, 2022 August 2022 Credit Facility Recast: ▪ Added a 5.5-year $200 million term loan, swapped to an all-in fixed rate of 3.88% ▪ Upsized the revolver from $250 million to $400 million ▪ Facility cap rate, used for valuing asset base, decreased from 7.25% to 6.50% ▪ Covenants adjusted to allow greater flexibility in our various approaches to acquisitions Source: Company data. Data as of 9/30/2022 unless otherwise noted. Total Over $1 Billion
Fortified Balance Sheet Positively Positions Us for Future Investment Opportunities NETSTREIT BALANCE SHEET 19 Total Liquidity $585 million Leverage (adjusted for unsettled forward equity) 2.5x Fixed Rate Debt % 93% Liquidity: ▪ $370 million of unused revolver capacity ▪ $199 million of unsettled forwards ▪ $16 million of unrestricted cash ▪ TOTAL LIQUIDITY: $585 million Leverage: ▪ 5.0x Net Debt to Adjusted EBITDAre ▪ 2.5x Net Debt to Adjusted EBITDAre after adjusted for unsettled forward equity ▪ 28% Debt to Total Assets Fixed vs Floating Rate Debt: ▪ 93% of debt is fixed rate Source: Company data. Data as of 9/30/2022 unless otherwise noted.
Senior Leadership 20 Source: Company data. 1. First Potomac Realty Trust was publicly traded on the NYSE until October 2017. Seasoned leadership team with significant net lease retail and public company experience Mark Manheimer President, CEO & Director Mr. Manheimer leads the overall strategy, acquisitions, underwriting, and asset management for the company Prior experience includes: • EB Arrow; CIO of the Single-Tenant Net Lease Group • Spirit Realty Capital (NYSE: SRC); EVP, Head of Asset Management from 2012 through 2016 • Member of Investment Committee • Led restructuring and extension of the largest tenant’s master lease, as well as subsequent sales of the assets leased to the tenant • Led due diligence in merger that doubled company size • Cole Real Estate Investments; Head of Sale-Leaseback Acquisitions from 2009 through 2012 • Realty Income Corporation (NYSE: O); Director of Underwriting from 2005 through 2009 Prior experience includes: • First Potomac Realty Trust (NYSE: FPO)1; EVP, CFO and Treasurer from 2012 through 2017 • Leading role in FPO’s $1.4 billion sale to Government Properties Income Trust (now Office Properties Income Trust, NASDAQ: OPI) • Provided valuable public company expertise in evaluating and recommending changes to corporate governance initiatives; active role in evaluating Board candidates • Successfully remediated a pre-existing material weakness with respect to financial controls • Federal Realty Investment Trust (NYSE: FRT); SVP, CFO and Treasurer from 2008 through 2012 Andy Blocher CFO, Treasurer & Secretary Mr. Blocher manages liabilities, capital raising, investor relations and financial reporting for the company High-Quality Real Estate Portfolio Conservative Capitalization 5
Key Personnel 21 Source: Company data. 1. First Potomac Realty Trust was publicly traded on the NYSE until October 2017. Experienced team of professionals drive NETSTREIT’s day to day operations Jeff Fuge Senior Vice President, Acquisitions • Joined in December 2019 • Prior experience includes: – Director of Capital Markets at EB Arrow – Senior Vice President at Compass Point Research & Trading – Client Relations Director at Aegis Financial • B.A. in History and minor in Business Administration from the College of Charleston; M.B.A. from George Washington University Chad Shafer Senior Vice President, Credit and Underwriting • Joined in May 2020 • Prior experience includes: – Various roles at JPMorgan Chase & Co., most recently as Executive Director – Wholesale Credit Risk – Other roles include Head of Real Estate Banking Portfolio Management, Head of Key Relationship Group – Credit Risk, Commercial Term Lending, and Credit Manager • B.S. in Finance from Butler University Kirk Klatt Senior Vice President, Real Estate • Joined in December 2019 • Prior experience includes: – Chief Acquisitions Officer, Single-Tenant Net-Lease at EB Arrow – Development Services Manager for Duke Realty Corporation (NYSE: DRE) • B.S. in Civil Engineering from Texas Tech University; M.B.A. from University of Texas at Dallas; licensed real estate salesperson in Texas Trish McBratney-Gibbs Senior Vice President and Chief Accounting Officer • Joined in May 2020 • Prior experience includes: – Chief Accounting Officer of American Bath Group – Chief Accounting and Administrative Officer of Mill Creek Residential Trust – Vice President and Controller of CyrusOne (NASDAQ: CONE) • B.S. in Accounting from Oklahoma State University; Certified Public Accountant Randy Haugh Senior Vice President, Finance • Joined in February 2020 • Prior experience includes: – U.S. Real Estate fund management group at The Carlyle Group (NASDAQ:CG) – Vice President of Finance and Director of Finance at First Potomac Realty Trust (NYSE: FPO)1 • B.S. in Economics from University of Virginia Amy An Investor Relations Manager • Joined in December 2019 • Prior experience includes: – Investor Relations Manager at EB Arrow – Investor Relations Associate and Real Estate Analyst at Capview Partners • B.S. in Business Administration from the University of Texas at Dallas – Naveen Jindal School of Management High-Quality Real Estate Portfolio Conservative Capitalization 5
Corporate Responsibility 22 ▪ Dedication to reducing the Company’s ecological footprint ▪ Endorsement of renewable resources and encouragement of tenants to practice leading sustainability initiatives ▪ Implementation of energy conservation practices in the office E Environmental Responsibility ▪ Emphasis on creating a culture driven by diversity & inclusion ▪ Commitment to employee well-being & satisfaction in the workplace ▪ Creation of leading employee training and development programs to promote growth S Social Responsibility ▪ Diverse management team & board of directors ▪ Enactment of ideal board features to enhance the Company’s fiduciary responsibility to shareholders ▪ Rigorous risk management procedures to protect shareholder interests G Corporate Governance Areas of Focus NETSTREIT is committed to fulfilling its responsibility as an outstanding corporate citizen The Company’s mission is to be the leader in the net lease industry by practicing and implementing innovative, impactful Environmental, Social and Governance policies with the highest ethical standards 5
Corporate Responsibility 23 NETSTREIT aligns its corporate responsibility efforts to support that of the United Nations Sustainable Development Goals (SDGs). 5 Promote health and well-being in our offices. Company provides insurance benefits to our employees and family. Company provides employees with fitness memberships. Ensure inclusive and equitable quality education and promote lifelong learnings opportunities for all. Company provides continuing education for employees and offers paid internship to college students. Ensure women’s full and effective participation and equal opportunities at all levels of decision-making. Over 40% of the board members and employee base are female. Promote sustained, inclusive, full and decent productive employment. Company culture promotes inclusivity and growth. Reduced inequality and empower and promote inclusion of all, irrespective of age, sex, race, religion, or economic status. Company culture promotes and empower inclusivity of all. Company has efforts to recruit in underserved communities.
Environmental Responsibility 24 5 We encourage sustainable practices among our employees and remain committed to make environmentally friendly decisions in our daily operations The new corporate headquarters is LEED v4 O+M: EB Gold Certified, meeting strict guidelines set forth by the Environmental Protection Agency The certification is the most rigorous of the green building program designations. The building achieved LEED certification for implementing practical and measurable strategies and solutions to achieve high performance in sustainable site development, water savings, and energy efficiency, materials selection, and indoor environmental quality The new headquarters also received the National Air Filtration Association Clean Air Award The building management partners with an urban beekeeping company to address declining bee populations and to create ecological awareness of bees
Environmental Responsibility 25 5 Our top tenants have corporate sustainability programs that govern their business operations. 18 of our top 20 tenants in our portfolio have ESG commitments Source: Company data. Portfolio data represents portfolio as of 9/30/2022. Corporate sustainability programs for each tenant is published on their website.
Environmental Responsibility 26 5 We can achieve up to 2.5 bps pricing adjustment if we meet certain annual key performance indicators set by our sustainability agent. The KPI is based on the percentages of our portfolio ABR that is derived by tenants who have set targets of reducing GHG with SBTi or have made commitments to set a target at a future date with SBTi. Source: Tenants within our portfolio with Science Base Target initiatives targets or commitments as of October 6, 2022. Tenants SBTi Targets SBTi Commitment Advance Auto Parts, Inc Burlington Best Buy Co., Inc. Bridgestone Corporation CVS Health DaVita Kohl's, Inc. Koninklijke Ahold Delhaize N.V. La-Z-Boy Incorporated Lowe's Companies, Inc. Panera Bread Seven & i Holdings Co., Ltd. Starbucks Coffee Company Target Corporation The Home Depot The Kroger Co. The Wendy's Company Ulta Beauty, Inc. Walmart Inc. Yum! Brands, Inc. To showcase our commitment to the reduction of greenhouse gas emissions, we incorporated to our $600 million credit facility, a sustainability-linked loan feature based on the Science Based Targets initiatives (“SBTi”).
Social Responsibility 27 5 Human Capital Management is the Cornerstone of our ESG and Corporate Strategy. We believe in the value of a diverse workforce and inclusive culture 401K Plan 100% company match of up to a 3% contribution, and 50% of up to the next 2% Insurance Health, dental, and vision insurance costs covered at 90% for employees and 60% for dependents Leave Ten weeks of paid maternity leave at 100% salary as well as four weeks of paid family bonding; Company also provides jury duty, witness leave, and military leave Paid Time Off A minimum of twenty-three PTO days Paid Holidays Twelve days of paid holidays Employee Assistance 24/7 toll-free hotline to access confidential counseling on various physical and mental health needs Continuing Education Reimbursement for certifications, tuition, courses, and seminars for continuing professional education BenefitsWorkforce Diversity Source: Company data. Female, 43% Male, 57% Asian, 13% Black, 9% Hispanic, 9% White, 70%
Corporate Governance 28 5 Source: Company data. We are committed to acting with honesty and integrity and conducting all corporate opportunities in an ethical manner Annual Director Elections Majority Voting Standard For Election of Directors Director Resignation Policy Annual Director and Committee Assessments No poison pill or differential voting stock structure to chill shareholder participation Shareholders’ right to amend the charter and bylaws by simple majority vote Separate non-executive Chair and CEO roles and Lead Independent Director with strong role and significant governance duties Governance Highlights Board Independence and Diversity 71% Independent Directors 50% Diverse Independent Directors 43% Female Directors 4 Fully Independent Committees
Board of Directors Lead Independent Director ▪ Compensation Committee Chair ▪ Investment Committee Chair ▪ Audit Committee Member Background ▪ Formerly AEW Capital Management, Head of AEW Real Estate Securities ▪ Formerly Landmark Land Company, VP Matt Troxell, CFA Independent Director ▪ Audit Committee Chair ▪ Nominating & Corporate Governance Committee Member Background ▪ Big Rock Partners, CFO ▪ Global Medical REIT (NYSE: GMRE) Independent Director and Audit Committee Chair ▪ Formerly Care Capital Properties (NYSE: CCP), CFO ▪ Formerly Ventas (NYSE: VTR), SVP – Capital Markets & Investor Relations Lori Wittman In addition to Mr. Manheimer, the Company’s board is comprised of six independent directors, each possessing diverse backgrounds in industry, public company and investment experience 29 Independent Director ▪ Nominating & Corporate Governance Committee Chair ▪ Compensation Committee Member ▪ Investment Committee Member Background ▪ Mural Real Estate, Founder and CEO ▪ Formerly Cedar Realty Trust (NYSE: CDR), EVP and COO ▪ Formerly Federal Realty Investment Trust (NYSE: FRT), COO, Mid-Atlantic Robin Zeigler Chairman of the Board Background ▪ EB Arrow, CEO: Commercial real estate developer & owner ▪ Formerly Cypress Equities Real Estate Investment Management, CIO ▪ Formerly with The Staubach Company Todd Minnis Independent Director ▪ Compensation Committee Member ▪ Nominating & Corporate Governance Committee Member Background ▪ Star Cypress Partners, President and CEO ▪ Formerly The Wentworth Group and Stafford Family Foundation, Vice President ▪ Veteran of the United States Air Force Heidi Everett Independent Director ▪ Audit Committee Member ▪ Investment Committee Member Background ▪ Inwood Capital Management, Manager ▪ Lindsay Corporation (NYSE: LNN), Director, serves on Audit Committee, and Corporate Governance and Nominating Committee ▪ Formerly with Bass Brothers / Taylor & Company Michael Christodolou 5
Company & Investment Highlights 30 NETSTREIT Is A Growth Company With A Defensive Net Lease Retail Strategy High-Quality, Diversified, and Defensive Net Lease Retail Portfolio Conservative Capitalization to Support Accretive Growth Active Asset Management to Achieve Optimal Portfolio Performance Disciplined Underwriters with Dual Focus on Credit AND Real Estate Multifaceted Investment Strategy Leveraging Deep Industry Relationships Durable and Defensive Cash Flows with Demonstrated Resiliency Seasoned Leadership Team with Extensive Track Record Platform Positioned for Scale
Definitions 31 ABR means annualized base rent. ABR is calculated by multiplying (i) cash rental payments (a) for the month ended September 30, 2022 (or, if applicable, the next full month's cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of September 30, 2022, plus (b) for properties under development, the first full month’s estimated permanent cash rent contractually due after the development period by (ii) 12. Defensive Category is considered by us to represent tenants that focus on necessity goods and essential services in the retail sector, including discount stores, grocers, drug stores and pharmacies, home improvement, automotive service and quick-service restaurants, which we refer to as defensive retail industries. The defensive sub-categories as we define them are as follows: (1) Necessity, which are retailers that are considered essential by consumers and include sectors such as drug stores, grocers and home improvement, (2) Discount, which are retailers that offer a low price point and consist of off-price and dollar stores, (3) Service, which consist of retailers that provide services rather than goods, including, tire and auto services and quick service restaurants, and (4) Other, which are retailers that are not considered defensive in terms of being considered necessity, discount or service, as defined by us. Investment Grade (rated) represents tenants, or tenants that are subsidiaries of a parent entity (with such subsidiary making up at least 50% of the parent company total revenue), with a credit rating of BBB- (S&P), Baa3 (Moody's) or NAIC2 (National Association of Insurance Commissioners) or higher. Investment Grade Profile (unrated) represents tenants with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Moody's, or NAIC. Occupancy is expressed as a percentage, and it is the number of economically occupied properties divided by the total number of properties owned. Properties under development are excluded from the calculation. Sub-investment grade (rated) represents tenants or tenants that are subsidiaries of a parent entity (with such subsidiary making up at least 50% of the parent company total revenue), with a credit rating of BB+ (S&P), Ba1 (Moody’s) or NAIC3 (National Association of Insurance Commissioners) or lower.
32 Investor Relations ir@netstreit.com 972-597-4825