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 29, 2020
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.) | |
| 5910 N. Central Expressway<br><br>Suite 1600<br><br>Dallas, Texas | 75206 | ||
| (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 29, 2020, NETSTREIT Corp. (the “Company”) issued a press release announcing its financial results for the third quarter ended September 30, 2020. 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, 29, 2020, the Company furnished supplemental financial information for the third quarter ended September 30, 2020. Also on October 29, 2020, 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 29, 2020 | |
| 99.2 | Third quarter 2020 supplemental financial information | |
| 99.3 | October 2020 Investor Presentation |
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 29, 2020 | /s/ ANDREW BLOCHER |
| Date | Andrew Blocher |
| Chief Financial Officer, Treasurer and Secretary | |
| (Principal Executive Officer) |
Document
NETSTREIT REPORTS THIRD QUARTER 2020 FINANCIAL AND OPERATING RESULTS
– Reports Net Loss of $0.11 and Adjusted Funds from Operations (“AFFO”) of $0.21 per share –
– Collected 100.0% of October Rents as Contemplated in Original Leases –
– Collected 98.1% of Third Quarter Rents as Contemplated in Original Leases –
– Completed Approximately $103 Million of Acquisitions –
– Raised Net Proceeds of $227.3 million through Initial Public Offering –
Dallas TX – October 29, 2020 – NETSTREIT (NYSE: NTST) (the “Company”), today announced financial and operating results for the third quarter ended September 30, 2020.
“Having accessed the public equity markets through our initial public offering in August, we are very pleased with our initial financial and operating results as a public company. We believe our high quality, diversified investment grade rated and defensive retail oriented portfolio provides strong performance through various economic conditions, including today’s COVID-impacted environment, as proven by our rent collections, which are among the highest in the net lease peer group,” said Mark Manheimer, Chief Executive Officer of NETSTREIT. “With a highly capable team, a scalable platform and a low-leverage balance sheet, we believe NETSTREIT is well positioned to offer an attractive combination of yield and cash flow growth to shareholders as we look ahead to 2021 and beyond.”
THIRD QUARTER 2020 HIGHLIGHTS
•Reported net loss per share of $0.11, Core Funds from Operations (“Core FFO”) per share of $0.151 and AFFO per share of $0.211 per share (see non-GAAP reconciliation attached)
•Prior to giving any consideration to deferral or abatement arrangements granted as a result of COVID, the Company collected 100.0% of September rent payments, bringing total third quarter rent collections to 98.1%
•The Company has collected 100.0% of October rent payments
PORTFOLIO UPDATE
As of September 30, 2020, the NETSTREIT portfolio was comprised of 189 properties, contributing $38.9 million of annualized base rent2, with a weighted-average remaining lease term of 11.1 years, of which 68.0% were investment grade rated tenants and 6.4% were tenants with investment grade profiles (unrated tenants with more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x). The portfolio was 100.0% occupied as of September 30, 2020.
INVESTMENT ACTIVITY
During the quarter ended September 30, 2020, the Company invested approximately $103 million in 30 properties at an initial cash capitalization rate of 6.5%. Acquisitions completed during the quarter had a weighted-average remaining lease term of 10.9 years, and 100.0% are occupied by investment grade rated tenants.
Over the same period, the Company sold one property for total proceeds of $1.9 million. The cash capitalization rate on the property was 10.4%.
This transaction activity enhanced tenant diversification, including reducing ABR exposure from the Company’s largest tenant (7-Eleven) from 13.6% to 11.3%. Additionally, this transaction activity enhanced the Company’s geographic diversity by adding properties in three new states to the portfolio.
CAPITAL MARKETS ACTIVITY
On August 13, 2020, the Company completed its IPO and issued 13,936,829 common shares at $18.00 per share, including the partial exercise of the underwriters’ option to purchase additional shares, raising aggregate net proceeds to the Company of approximately $227.3 million after deducting the underwriting discount and offering expenses. In connection with the IPO, the Company repaid $50 million outstanding under the Company’s line of credit.
In September, the Company completed a $175 million LIBOR swap to hedge floating rate exposure on the entire balance of the Company’s term loan at an effective rate of 21 bps.
BALANCE SHEET AND LIQUIDITY
At quarter end, total debt outstanding was $175 million, with a weighted average term of 4.2 years and a quarter end contractual interest rate, including the impact of the fixed rate swap, of 1.46%. 100% of the Company’s debt was at a fixed rate and the Company’s net debt to annualized adjusted EBITDA ratio was 1.4x. Additionally, the cash balance was $137 million, and the $250 million revolving line of credit was fully undrawn.
DIVIDEND
On October 27, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share for the fourth quarter of 2020, which will be paid on December 15, 2020 to shareholders of record on December 1, 2020.
EARNINGS WEBCAST AND CONFERENCE CALL
A conference call will be held on Friday, October 30, 2020 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 6, 2020, 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 13711343.
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) Per share amounts include weighted average common shares of 18,825,389 and weighted average operating partnership units of 4,310,286 for the three-months ended September 30, 2020.
(2) Annualized base rent, or ABR, is calculated by multiplying (i) cash rental payments (a) for the month following the period shown plus (b) for properties under development, the first full month's permanent cash rent contractually due after the development period by (ii) 12.
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 prospectus dated August 13, 2020, relating to our initial public offering, filed with the Securities and Exchange Commission (the “SEC”) on August 14, 2020 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). 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, 2020 | December 31, 2019 | |||
|---|---|---|---|---|
| Assets | ||||
| Real estate, at cost: | ||||
| Land | $ | 168,214 | $ | 83,996 |
| Buildings and improvements | 320,684 | 140,057 | ||
| Total real estate, at cost | 488,898 | 224,053 | ||
| Less accumulated depreciation | (6,703) | (132) | ||
| Real estate held for investment, net | 482,195 | 223,921 | ||
| Assets held for sale | 32,599 | 8,532 | ||
| Cash, cash equivalents and restricted cash | 137,010 | 169,319 | ||
| Acquired lease intangible assets, net | 67,459 | 28,846 | ||
| Other assets, net | 6,006 | 3,304 | ||
| Total assets | $ | 725,269 | $ | 433,922 |
| Liabilities and equity | ||||
| Liabilities: | ||||
| Term loan, net | $ | 174,048 | $ | 173,913 |
| Lease intangible liabilities, net | 16,645 | 4,672 | ||
| Liabilities related to assets held for sale | 919 | 189 | ||
| Accounts payable, accrued expenses and other liabilities | 4,950 | 2,716 | ||
| Total liabilities | 196,562 | 181,490 | ||
| Commitments and contingencies | ||||
| Equity: | ||||
| Shareholders’ equity | ||||
| Common stock, $0.01 par value, 400,000,000 shares authorized; 25,734,474 and 8,860,760 shares issued and outstanding; as of September 30, 2020 and December 31, 2019, respectively | 257 | 89 | ||
| Additional paid-in capital | 452,911 | 164,416 | ||
| (Deficit)/Retained earnings | (5,984) | 28 | ||
| Accumulated other comprehensive loss | (110) | — | ||
| Total shareholders’ equity | 447,074 | 164,533 | ||
| Noncontrolling interests | 81,633 | 87,899 | ||
| Total equity | 528,707 | 252,432 | ||
| Total liabilities and equity | $ | 725,269 | $ | 433,922 |
NETSTREIT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share data)
(Unaudited)
| Successor | Predecessor | Successor | Predecessor | |||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||
| Revenues | ||||||||
| Rental revenue (including reimbursable) | $ | 9,652 | $ | 4,786 | $ | 22,277 | $ | 16,203 |
| Operating expenses | ||||||||
| Property | 624 | 293 | 1,344 | 853 | ||||
| General and administrative | 4,109 | 956 | 7,841 | 2,915 | ||||
| Depreciation and amortization | 4,692 | 2,660 | 10,153 | 8,065 | ||||
| Provisions for impairment | 363 | 2,839 | 1,773 | 6,268 | ||||
| Transaction costs | 1,241 | 3 | 2,969 | 76 | ||||
| Total operating expenses | 11,029 | 6,751 | 24,080 | 18,177 | ||||
| Other income (expense) | ||||||||
| Interest expense, net | (1,018) | (2,449) | (3,815) | (8,349) | ||||
| Gain on sales of real estate | 54 | 1,674 | 1,070 | 5,773 | ||||
| Gain on forfeited earnest money deposit | — | — | 250 | — | ||||
| Total other expense | (964) | (775) | (2,495) | (2,576) | ||||
| Net loss | (2,341) | (2,740) | (4,298) | (4,550) | ||||
| Net loss attributable to noncontrolling interests | (263) | — | (799) | — | ||||
| Net loss attributable to common shareholders | (2,078) | (2,740) | (3,499) | (4,550) | ||||
| Cumulative preferred stock dividends and redemption premium | 36 | — | 42 | — | ||||
| Net loss attributable to common shareholders | $ | (2,114) | $ | (2,740) | $ | (3,541) | $ | (4,550) |
| Amounts available to common shareholders per common share: | ||||||||
| Basic | $ | (0.11) | N/A | $ | (0.26) | N/A | ||
| Diluted | $ | (0.11) | N/A | $ | (0.26) | N/A | ||
| Weighted average common shares: | ||||||||
| Basic | 18,825,389 | N/A | 13,771,457 | N/A | ||||
| Diluted | 18,825,389 | N/A | 13,771,457 | N/A | ||||
| Other comprehensive loss: | ||||||||
| Net loss | $ | (2,341) | $ | (2,740) | $ | (4,298) | $ | (4,550) |
| Unrealized (loss) gain on derivatives, net | (128) | — | (128) | 55 | ||||
| Total comprehensive loss | (2,469) | (2,740) | (4,426) | (4,495) | ||||
| Comprehensive loss attributable to noncontrolling interests | (281) | — | (817) | — | ||||
| Comprehensive loss attributable to common shareholders | $ | (2,188) | $ | (2,740) | $ | (3,609) | $ | (4,495) |
NETSTREIT CORP. AND SUBSIDIARIES
RECONCILIATION OF NET LOSS TO FFO, CORE FFO AND ADJUSTED FFO
(in thousands, except share and per share data)
(Unaudited)
| Successor | Predecessor | Successor | Predecessor | |||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||
| (Unaudited) | ||||||||
| Net loss | $ | (2,341) | $ | (2,740) | $ | (4,298) | $ | (4,550) |
| Depreciation and amortization of real estate | 4,614 | 2,660 | 9,926 | 8,065 | ||||
| Provision for impairment | 363 | 2,839 | 1,773 | 6,268 | ||||
| Gain on sale of real estate | (54) | (1,674) | (1,070) | (5,773) | ||||
| FFO | $ | 2,582 | $ | 1,085 | $ | 6,331 | $ | 4,010 |
| Adjustments: | ||||||||
| Gain on forfeited earnest money deposit | — | — | (250) | — | ||||
| 144A and IPO transaction costs (1) | 891 | — | 2,170 | — | ||||
| Core FFO | $ | 3,473 | $ | 1,085 | $ | 8,251 | $ | 4,010 |
| Adjustments: | ||||||||
| Straight-line rental revenue | (387) | 296 | (1,417) | 688 | ||||
| Amortization of deferred financing costs | 157 | 276 | 464 | 775 | ||||
| Amortization of above/below market lease intangibles | (219) | 105 | (340) | 486 | ||||
| Non-cash compensation expense | 1,753 | — | 1,753 | — | ||||
| AFFO | $ | 4,777 | $ | 1,762 | $ | 8,711 | $ | 5,958 |
| Three Months Ended<br>September 30, 2020 | ||||||||
| --- | --- | --- | ||||||
| Weighted average common shares, basic and diluted | 18,825,389 | |||||||
| Weighted average operating partnership units | 4,310,286 | |||||||
| 23,135,675 | ||||||||
| Core FFO per share | $ | 0.15 | ||||||
| AFFO per share | $ | 0.21 |
RECONCILIATION OF NET LOSS TO EBITDA, EBITDAre AND ADJUSTED EBITDAre
(in thousands, except share and per share data)
(Unaudited)
| Successor | Predecessor | Successor | Predecessor | |||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||
| (Unaudited) | ||||||||
| Net loss | $ | (2,341) | $ | (2,740) | $ | (4,298) | $ | (4,550) |
| Depreciation and amortization of real estate | 4,614 | 2,660 | 9,926 | 8,065 | ||||
| Amortization of above/below market lease intangibles | (219) | 105 | (340) | 486 | ||||
| Non-real estate depreciation and amortization | 77 | — | 228 | — | ||||
| Interest expense, net | 1,018 | 2,449 | 3,815 | 8,349 | ||||
| EBITDA | $ | 3,149 | $ | 2,474 | $ | 9,331 | $ | 12,350 |
| Adjustments: | ||||||||
| Provision for impairments | 363 | 2,839 | 1,773 | 6,268 | ||||
| Gain on sale of real estate | (54) | (1,674) | (1,070) | (5,773) | ||||
| EBITDAre | $ | 3,458 | $ | 3,639 | $ | 10,034 | $ | 12,845 |
| Adjustments: | ||||||||
| Straight-line rental revenue | (387) | 296 | (1,417) | 688 | ||||
| Gain on forfeited earnest money deposit | — | — | (250) | — | ||||
| 144A and IPO transaction costs (1) | 891 | — | 2,170 | — | ||||
| Non-cash compensation expense | 1,753 | — | 1,753 | — | ||||
| Adjusted EBITDAre | $ | 5,715 | $ | 3,935 | $ | 12,290 | $ | 13,533 |
RECONCILIATION OF NET LOSS TO NOI AND CASH NOI
(in thousands, except share and per share data)
(Unaudited)
| Successor | Predecessor | Successor | Predecessor | |||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||
| (Unaudited) | ||||||||
| Net loss | $ | (2,341) | $ | (2,740) | $ | (4,298) | $ | (4,550) |
| General and administrative | 4,109 | 956 | 7,841 | 2,915 | ||||
| Depreciation and amortization | 4,692 | 2,660 | 10,153 | 8,065 | ||||
| Provisions for impairment | 363 | 2,839 | 1,773 | 6,268 | ||||
| Transaction costs | 1,241 | 3 | 2,969 | 76 | ||||
| Interest expense, net | 1,018 | 2,449 | 3,815 | 8,349 | ||||
| Gain on sales of real estate | (54) | (1,674) | (1,070) | (5,773) | ||||
| Gain on forfeited earnest money deposit | — | — | (250) | — | ||||
| NOI | $ | 9,028 | $ | 4,493 | $ | 20,933 | $ | 15,350 |
| Straight-line rental revenue | (387) | 296 | (1,417) | 688 | ||||
| Amortization of above/below market lease intangibles | (219) | 105 | (340) | 486 | ||||
| Cash NOI | $ | 8,422 | $ | 4,894 | $ | 19,176 | $ | 16,524 |
NON-GAAP FINANCIAL MEASURES
FFO, Core FFO and AFFO
FFO is a non-GAAP financial measure defined by NAREIT as net income (computed in accordance with GAAP), excluding real estate-related expenses including, but not limited to, gains (losses) from sales, impairment adjustments, and depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO is consistent with FFO as defined by NAREIT.
Core FFO is a non-GAAP financial measure defined as FFO adjusted for gains from forfeited earnest money deposits and non-recurring public company costs. We believe the presentation of Core FFO provides investors with a metric to assist in their evaluation of our operating performance across multiple periods because it removes the effect of unusual and non-recurring items that are not expected to impact our operating performance on an ongoing basis.
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, non-cash compensation expense, and amortization of deferred financing 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 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 all of 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, income taxes 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 real estate impairment losses.
Adjusted EBITDAre is a non-GAAP financial measure defined as EBITDAre further adjusted to exclude straight-line rent, gains from forfeited earnest money deposits, non-recurring public company costs, representing consulting fees that we have incurred in preparing to become a public company and non-cash compensation expense.
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 (loss) (computed in accordance with GAAP), excluding general and administrative expenses, interest expense (or income), depreciation and amortization, gains (or losses) on sales of depreciable property, gain from forfeited earnest money deposits and real estate impairment losses. We further adjust NOI for non-cash revenue components of straight-line rent and amortization of lease intangibles 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.
(1) These expenses represent a subset of Transaction Costs as presented on the Condensed Consolidated Statement of Operations and Comprehensive Loss.
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Quarterly Supplemental Information Third Quarter 2020
Table of Contents 03 Corporate Overview 04 Earnings Release 08 Quarterly Highlights 09 Condensed Consolidated Statement of Operations and Comprehensive Loss 10 Fund from Operations and Adjusted Funds from Operations 11 EBITDAre, Adjusted EBITDA, NOI and Cash NOI 12 Condensed Consolidated Balance Sheets 13 Debt, Capitalization and Financial Ratios 14 Investment Activity 15 Portfolio Information 18 Lease Expiration Schedule 19 Non-GAAP Measures and Definitions 22 Forward Looking and Cautionary Statements 2
Corporate Overview 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. Management Team Board of Directors Mark Manheimer, Chief Executive Officer Todd Minnis – Chair Andy Blocher, Chief Financial Officer Matthew Troxell – Lead Independent Jeff Fuge, Senior Vice President of Acquisitions Michael Christodolou Randy Haugh, Senior Vice President of Finance Heidi Everett Kirk Klatt, Senior Vice President of Real Estate Mark Manheimer Trish McBratney, SVP, Chief Accounting Officer Lori Wittman Chad Shafer, Senior Vice President of Underwriting Robin Zeigler Corporate Headquarters Transfer Agent 5910 North Central Expressway Computershare Suite 1600 PO Box 505000 Dallas, Texas, 75075 Louisville, Kentucky 40233 Phone: (972) 579 – 4825 Phone: (866) 637 – 9460 Website: www.netstreit.com Website: www.computershare.com 3
Earnings Release NETSTREIT REPORTS THIRD QUARTER 2020 FINANCIAL AND OPERATING RESULTS – Reports Net Loss of $0.11 and Adjusted Funds from Operations (“AFFO”) of $0.21 Per Share – – Collected 100.0% of October Rents as Contemplated in Original Leases – – Collected 98.1% of Third Quarter Rents as Contemplated in Original Leases – – Completed Approximately $103 Million of Acquisitions – – Raised Net Proceeds of $227.3 million through Initial Public Offering – Dallas TX – October 29, 2020 – NETSTREIT (NYSE: NTST) (the “Company”), today announced financial and operating results for the third quarter ended September 30, 2020. “Having accessed the public equity markets through our initial public offering in August, we are very pleased with our initial financial and operating results as a public company. We believe our high quality, diversified investment grade rated and defensive retail oriented portfolio provides strong performance through various economic conditions, including today’s COVID-impacted environment, as proven by our rent collections, which are among the highest in the net lease peer group,” said Mark Manheimer, Chief Executive Officer of NETSTREIT. “With a highly capable team, a scalable platform and a low-leverage balance sheet, we believe NETSTREIT is well positioned to offer an attractive combination of yield and cash flow growth to shareholders as we look ahead to 2021 and beyond.” THIRD QUARTER 2020 HIGHLIGHTS • Reported net loss per share of $0.11, Core Funds from Operations (“Core FFO ”) per share of $0.15(1) and AFFO per share of $0.21(1) per share • Prior to giving any consideration to deferral or abatement arrangements granted as a result of COVID, the Company collected 100.0% of September rent payments, bringing total third quarter rent collections to 98.1% • The Company has collected 100.0% of October rent payments PORTFOLIO UPDATE As of September 30, 2020, the NETSTREIT portfolio was comprised of 189 properties, contributing $38.9 million of annualized base rent(2), with a weighted-average remaining lease term of 11.1 years, of which 68.0% were investment grade rated tenants and 6.4% were tenants with investment grade profiles (unrated tenants with more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x). The portfolio was 100.0% occupied as of September 30, 2020. 4
Earnings Release (cont’d) INVESTMENT ACTIVITY During the quarter ended September 30, 2020, the Company invested approximately $103 million in 30 properties at an initial cash capitalization rate of 6.5%. Acquisitions completed during the quarter had a weighted-average remaining lease term of 10.9 years, and 100.0% are occupied by investment grade rated tenants. Over the same period, the Company sold one property for total proceeds of $1.9 million. The cash capitalization rate on the property was 10.4%. This transaction activity enhanced tenant diversification, including reducing ABR exposure from the Company’s largest tenant (7-Eleven) from 13.6% to 11.3%. Additionally, this transaction activity enhanced the Company’s geographic diversity by adding properties in three new states to the portfolio. CAPITAL MARKETS ACTIVITY On August 13, 2020, the Company completed its IPO and issued 13,936,829 common shares at $18.00 per share, including the partial exercise of the underwriters’ option to purchase additional shares, raising aggregate net proceeds to the Company of approximately $227.3 million after deducting the underwriting discount and offering expenses. In connection with the IPO, the Company repaid $50 million outstanding under the Company’s line of credit. In September, the Company completed a $175 million LIBOR swap to hedge floating rate exposure on the entire balance of the Company’s term loan at an effective rate of 21 bps. BALANCE SHEET AND LIQUIDITY At quarter end, total debt outstanding was $175 million, with a weighted average term of 4.2 years and a quarter end contractual interest rate, including the impact of the fixed rate swap, of 1.46%. 100% of the Company’s debt was at a fixed rate and the Company’s net debt to annualized adjusted EBITDA ratio was 1.4x. Additionally, the cash balance was $137 million, and the $250 million revolving line of credit was fully undrawn. DIVIDEND On October 27, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share for the fourth quarter of 2020, which will be paid on December 15, 2020 to shareholders of record on December 1, 2020. 5
Earnings Release (cont’d) EARNINGS WEBCAST AND CONFERENCE CALL A conference call will be held on Friday, October 30, 2020 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 6, 2020, 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 13711343. 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) Per share amounts include weighted average common shares of 18,825,389 and weighted average operating partnership units of 4,310,286 for the three-months ended September 30, 2020. (2) Annualized base rent, or ABR, is calculated by multiplying (i) cash rental payments (a) for the month following the period shown plus (b) for properties under development, the first full month's permanent cash rent contractually due after the development period by (ii) 12. 6
Earnings Release (cont’d) 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 prospectus dated August 13, 2020, relating to our initial public offering, filed with the Securities and Exchange Commission (the “SEC”) on August 14, 2020 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). 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. 7
Quarterly Highlights (unaudited, in thousands, except share and per share data) Three Months Ended Financial Results September 30, 2020 Net income (loss) attributable to common shareholders $ (2,114) Net income (loss) per share of common stock outstanding $ (0.11) Net income (loss) attributable to common shareholders and noncontrolling interests $ (2,341) FFO attributable to common shareholders and noncontrolling interests $ 2,582 FFO per share of common stock and OP units outstanding $ 0.11 Core FFO attributable to common shareholders and noncontrolling interests $ 3,473 Core FFO per share of common stock and OP units outstanding $ 0.15 AFFO attributable to common shareholders and noncontrolling interests $ 4,777 AFFO per share of common stock and OP units outstanding $ 0.21 Dividends declared per share of common stock and OP units $ 0.10 Weighted average shares of common stock and OP units outstanding 23,135,675 Ending shares of common stock and OP units outstanding 29,928,225 As of Portfolio Metrics September 30, 2020 Number of leases 189 Square feet 3,376,371 Occupancy 100.0% Weighted average lease term remaining (years)(1) 11.1 Investment grade (rated) - % of ABR(2) 68.0% Investment grade profile (unrated) - % of ABR(3) 6.4% Three Months Ended September 30, 2020 Rent Collection Update - Percentage of Contractual Rent(4) Collection % % of Total Due Investment grade (rated)(2) 99.4% 63.9% Investment grade profile (unrated)(3) 100.0% 7.3% Sub-investment grade (rated)(5) 91.4% 8.0% Sub-investment grade profile (unrated) 96.4% 20.8% Total 98.1% 100.0% (1) Weighted by ABR; excludes lease extension options. (2) 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. (3) 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. (4) Percentage calculations do not include any deferral or abatement arrangements granted as a result of the COVID-19 pandemic. (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. 8
Condensed Consolidated Statement of Operations and Comprehensive Loss (unaudited, in thousands, except share and per share data) Three Months Ended Nine Months Ended Successor Predecessor Successor Predecessor September September September September 30, 2020 30, 2019 30, 2020 30, 2019 REVENUES Rental revenue (including reimbursable) $ 9,652 $ 4,786 $ 22,277 $ 16,203 OPERATING EXPENSES Property 624 293 1,344 853 General and administrative 4,109 956 7,841 2,915 Depreciation and amortization 4,692 2,660 10,153 8,065 Provisions for impairment 363 2,839 1,773 6,268 Transaction costs(1) 1,241 3 2,969 76 Total operating expenses 11,029 6,751 24,080 18,177 OTHER INCOME (EXPENSE) Interest expense, net(2) (1,018) (2,449) (3,815) (8,349) Gain (loss) on sales of real estate 54 1,674 1,070 5,773 Gain on forfeited earnest money deposit - - 250 - Total other income (expense) (964) (775) (2,495) (2,576) Net income (loss) $ (2,341) (2,740) (4,298) (4,550) Less: Net income (loss) attributable to noncontrolling interests (263) - (799) - Net income (loss) attributable to common shareholders (2,078) (2,740) (3,499) (4,550) Less: Preferred stock dividends and redemption premium 36 - 42 - Net income (loss) attributable to common shareholders $ (2,114) $ (2,740) $ (3,541) $ (4,550) Amounts available to common shareholders per common share: Basic $ (0.11) N/A $ (0.26) N/A Diluted $ (0.11) N/A $ (0.26) N/A Weighted average common shares outstanding:(3) Basic 18,825,389 N/A 13,771,457 N/A Diluted 18,825,389 N/A 13,771,457 N/A OTHER COMPREHENSIVE INCOME (LOSS) Net income (loss) $ (2,341) $ (2,740) $ (4,298) $ (4,550) Unrealized gain (loss) on derivatives, net (128) - (128) 55 Total comprehensive gain (loss) (2,469) (2,740) (4,426) (4,495) Less: Comprehensive gain (loss) attributable to noncontrolling interests (281) - (817) - Comprehensive gain (loss) attributable to NETSTREIT Corp. $ (2,188) $ (2,740) $ (3,609) $ (4,495) (1) Represents the costs incurred by the Company to facilitate the private offering and formation transactions and the initial public offering in addition to costs associated with abandoned acquisitions and other acquisition related expenses. (2) Interest expense is net of interest income from interest bearing accounts. The calculation is based on a percentage of ABR. Percentage calculations do not include any deferral or abatement arrangements granted as a result of the COVID-19 pandemic. (3) Amounts exclude the weighted average OP Units attributable to the noncontrolling interests. 9
Funds From Operations and Adjusted Funds From Operations (unaudited, in thousands, except share and per share data) Three Months Ended Nine Months Ended Successor Predecessor Successor Predecessor September September September September 30, 2020 30, 2019 30, 2020 30, 2019 GAAP Reconciliation: Net income (loss) $ (2,341) $ (2,740) $ (4,298) $ (4,550) Depreciation and amortization of real estate 4,614 2,660 9,926 8,065 Provisions for impairment 363 2,839 1,773 6,268 Loss (gain) on sale of real estate (54) (1,674) (1,070) (5,773) Funds from Operations (FFO) 2,582 1,085 6,331 4,010 Loss (gain) on forfeited earnest money deposit - - (250) - 144A and IPO Transaction Costs(1) 891 - 2,170 - Core Funds from Operations (Core FFO) 3,473 1,085 8,251 4,010 Straight-line rental revenue (387) 296 (1,417) 688 Amortization of deferred financing costs 157 276 464 775 Amortization of above/below-market leases (219) 105 (340) 486 Non-cash compensation expense 1,753 - 1,753 - Adjusted Funds from Operations (AFFO) $ 4,777 $ 1,762 $ 8,711 $ 5,958 FFO per share of common stock and OP units $ 0.11 N/A $ 0.35 N/A Core FFO per share of common stock and OP units $ 0.15 N/A $ 0.45 N/A AFFO per share of common stock and OP units $ 0.21 N/A $ 0.48 N/A Dividends per share declared to common stockholders and noncontrolling interests $ 0.10 N/A $ 0.10 N/A Dividends declared as a percent of AFFO 48.4% N/A 20.9% N/A Weighted average shares of common stock outstanding 18,825,389 N/A 13,771,457 N/A Effect of weighted average OP Units 4,310,286 N/A 4,402,437 N/A Weighted average shares of common stock and units outstanding 23,135,675 N/A 18,173,895 N/A Series A preferred stock balance(2) $ - N/A $ - N/A Series A preferred stock dividends and redemption premium $ 36 N/A $ 42 N/A Supplemental Information Deferred rent, net(3) $ 4 $ - $ (186) $ - Recurring capital expenditures $ - $ - $ - $ - (1) These expenses represent a subset of Transaction Costs as presented on the Condensed Consolidated Statement of Operations and Comprehensive Loss. (2) The 125 shares of 12% Series A Preferred Stock were fully redeemed on August 18, 2020. (3) Reflects the net amount of base rent that was deferred (negative amount) or collected (positive amount) in the period shown. 10
EBITDAre, Adjusted EBITDA, NOI and Cash NOI (unaudited, in thousands) Three Months Ended Nine Months Ended Successor Predecessor Successor Predecessor September September September September 30, 2020 30, 2019 30, 2020 30, 2019 GAAP Reconciliation: Net income (loss) $ (2,341) $ (2,740) $ (4,298) $ (4,550) Depreciation and amortization of real estate 4,614 2,660 9,926 8,065 Amortization of above/below-market leases (219) 105 (340) 486 Non-real estate depreciation and amortization 77 - 228 - Interest expense, net 1,018 2,449 3,815 8,349 EBITDA 3,149 2,474 9,331 12,350 Provision for impairment 363 2,839 1,773 6,268 Loss (gain) on sale of real estate (54) (1,674) (1,070) (5,773) EBITDAre 3,458 3,639 10,034 12,845 Straight-line rental revenue (387) 296 (1,417) 688 Gain on forfeited earnest money deposit - - (250) - 144A and IPO Transaction Costs(1) 891 - 2,170 - Non-cash compensation expense 1,753 - 1,753 - Adjusted EBITDA $ 5,715 $ 3,935 $ 12,290 $ 13,533 Adjusted EBITDA $ 5,715 Adjustments for intraquarter acquisitions and dispositions(2) 893 Annualized Adjusted EBITDA $ 26,433 Net debt / Annualized Adjusted EBITDA 1.4x GAAP Reconciliation: Net income (loss) $ (2,341) $ (2,740) $ (4,298) $ (4,550) General and administrative 4,109 956 7,841 2,915 Depreciation and amortization 4,692 2,660 10,153 8,065 Provisions for impairment 363 2,839 1,773 6,268 Transaction costs 1,241 3 2,969 76 Interest expense, net 1,018 2,449 3,815 8,349 Gain (loss) on sales of real estate (54) (1,674) (1,070) (5,773) Gain on forfeited earnest money deposit - - (250) - NOI 9,028 4,493 20,933 15,350 Straight-line rental revenue (387) 296 (1,417) 688 Amortization of above/below-market leases (219) 105 (340) 486 Cash NOI 8,422 4,894 19,176 16,524 Adjustments for intraquarter acquisitions and dispositions(2) 893 Normalized Cash NOI $ 9,316 Property Operating Expense Coverage Property operating expense reimbursement $ 452 $ 222 $ 1,063 $ 610 Property operating expenses (624) (293) (1,344) (853) Property operating expenses, net $ (172) $ (71) $ (281) $ (243) (1) These expenses represent a subset of Transaction Costs as presented on the Condensed Consolidated Statement of Operations and Comprehensive Loss. (2) The adjustment removes base rent for properties acquired during the period shown and replaces the removed amount with an estimated equivalent ABR for the full period. The adjustment also removes base rent for properties disposed of during the period shown. 11
Condensed Consolidated Balance Sheets (in thousands, except share data) As of As of September 30, 2020 December 31, 2019 (unaudited) (unaudited) ASSETS Real estate, at cost: Land $ 168,214 $ 83,996 Buildings and improvements 320,684 140,057 Total real estate, at cost 488,898 224,053 Less accumulated depreciation (6,703) (132) Real estate held for investment, net 482,195 223,921 Assets held for sale 32,599 8,532 Cash, cash equivalents and restricted cash 137,010 169,319 Acquired lease intangible assets, net 67,459 28,846 Other assets, net 6,006 3,304 Total assets $ 725,269 $ 433,922 LIABILITIES AND EQUITY Liabilities: Term loan, net $ 174,048 $ 173,913 Lease intangible liabilities, net 16,645 4,672 Liabilities related to assets held for sale 919 189 Accounts payable, accured expenses and other liabilities 4,950 2,716 Total liabilities 196,562 181,490 Equity: Shareholders' equity Common stock, $0.01 par value, 400,000,000 shares authorized; 25,734,474 and 8,860,760 shares issued and outstanding; as of September 30, 2020 and December 31, 2019 respectively $ 257 $ 89 Additional paid-in capital 452,911 164,416 (Deficit)/Retained earnings (5,984) 28 Accumulated other comprehensive loss (110) - Total shareholders' equity 447,074 164,533 Noncontrolling interests 81,633 87,899 Total equity 528,707 252,432 Total liabilities and equity $ 725,269 $ 433,922 12
Debt, Capitalization, and Financial Ratios (unaudited, in thousands, except share and per share data) As of September 30, 2020 Weighted Average Debt Summary Maturity Date Principal Balance Interest Rate(1) Rate Type Years to Maturity Senior secured revolver(2)(3)(4) December 23, 2023 $ - n/a Floating 3.2 years Senior secured term loan(2)(5) December 23, 2024 175,000 1.46% Fixed 4.2 years Principal amount of total debt 175,000 Deferred financing costs, net(6) (2,250) Carrying value of total debt $ 172,750 Net Debt Balance Principal amount of total debt $ 175,000 Less: cash and cash equivalents (137,010) Net Debt $ 37,990 Series A preferred stock balance(7) - Net Debt + Preferred Stock $ 37,990 Key Debt Covenant Information Required Actual Consolidated total leverage ratio(8) ≤ 65.0% 25.2% Fixed charge coverage ratio(9) ≥ 1.25x 5.57x Maximum secured indebtedness ≤ 40.0% 0.0% Maximum recourse indebtedness ≤ 10.0% 0.0% Unencumbered leverage ratio(8) ≤ 65.0% 25.2% Unencumbered debt yield(10) ≥ 10.0% 20.4% Unencumbered interest coverage ratio ≥ 2.00x 8.60x Liquidity Balance Unused senior secured revolver capacity $ 250,000 Unrestricted cash and cash equivalents 137,010 Total Liquidity $ 387,010 Ending Equity Market Equity Shares/Units Capitalization % of Total Preferred stock - $ - 0.0% Common shares(11) 25,734,474 469,911 86.0% OP units(11) 4,193,751 76,578 14.0% Total 29,928,225 $ 546,489 100.0% Enterprise Value Balance % of Total Principal amount of total debt $ 175,000 24.3% Equity market capitalization 546,489 75.7% Total enterprise value $ 721,489 100.0% (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) The collateral release requirements were met as of September 30, 2020, therefore during the fourth quarter of 2020 the associated debt will become unsecured once all lender reporting requirements are completed. (3) Unused facility fees are charged at an annual rate of 0.15% of the unused capacity if usage exceeds 50% of the total available facility, or 0.25% of the unused facility if usage does not exceed 50%. (4) The revolver has a one-year extension option. (5) 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. (6) Amount reflects a net asset balance of $1.3 million associated with the revolver, and a net liability balance of $1.0 million related to the term loan. (7) The 125 shares of 12% Series A Preferred Stock were fully redeemed on August 18, 2020. (8) The required threshold decreases to 60.0% after September 30, 2020. (9) The required threshold increases to 1.50x after December 31, 2020. (10) The required threshold increases to 12.0% after December 31, 2020. (11) Value is based on the September 30, 2020 closing price of $18.26 per common share and OP unit. 13
Investment Activity (unaudited, dollars in thousands) Three Months Ended September 30, 2020 Acquisitions: Number of Transactions 9 Number of Properties 30 Gross Investment(1) $ 102,638 Cash Capitalization Rate(2) 6.5% Dispositions: Number of Occupied Properties 1 Number of Vacant Properties - Net Book Value(3) $ 1,806 Proceeds(4) $ 1,868 Cash Capitalization Rate (on occupied properties only)(5) 10.4% (1) Reflects all expenditures that were capitalized as part of the transaction, including acquisition costs. (2) Calculated by dividing in-place ABR at the time of acquisition by the Gross Investment. (3) Represents all capitalized costs associated with the property, less impairment charges and net of accumulated depreciation. (4) Reflects contractual sales price. (5) 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. 14
Portfolio Information (unaudited, dollars and square feet in thousands) Portfolio Metrics Number of leases 189 Number of states 37 Square feet 3,376,371 Tenants 53 Industries 24 Occupancy 100.0% Weighted average lease term remaining (years)(1) 11.1 Number of Tenant Quality Leases ABR % of ABR Investment grade (rated)(2) 133 $ 26,462 68.0% Investment grade profile (unrated)(3) 8 2,498 6.4% Sub-investment grade (rated)(4) 8 3,431 8.8% Sub-investment grade profile (unrated) 40 6,539 16.8% Total 189 $ 38,930 100.0% Number of Credit Top 20 Tenants Leases ABR % of ABR rating 7-Eleven 18 $ 4,385 11.3% AA- / Baa1 Lowe's 4 3,578 9.2% BBB+ / Baa1 Advance Auto Parts 33 3,194 8.2% BBB- / Baa2 Sam's / Walmart 4 2,720 7.0% AA / Aa2 CVS 11 2,117 5.4% BBB / Baa2 Ollie's 7 2,047 5.3% IG Profile Dollar General 19 1,774 4.6% BBB / Baa2 Walgreens 4 1,329 3.4% BBB / Baa2 Home Depot 1 1,202 3.1% A / A2 Kohl's 2 1,147 2.9% BBB- / Baa2 Floor & Décor 1 815 2.1% BB- / Ba3 Tractor Supply 4 778 2.0% BBB / Baa1 Academy 1 735 1.9% B / B1 Dollar Tree / Family Dollar 7 724 1.9% BBB- / Baa2 Camping World 1 705 1.8% B- / B2 BB&T (Truist) 5 647 1.7% A- / A3 Jack's 4 646 1.7% Not Rated Fresenius 2 643 1.7% BBB / Baa3 Ashley Furniture 1 536 1.4% Not Rated Sherwin Williams 6 520 1.3% BBB- / Baa2 Total 135 $ 30,244 77.7% (1) Weighted by ABR; excludes lease extension options. (2) 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. (3) 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. (4) 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. 15
Portfolio Information (cont’d) (unaudited, dollars and square feet in thousands) Number of State Leases ABR % of ABR Texas 32 $ 7,182 18.4% Georgia 10 3,040 7.8% Virginia 4 2,551 6.6% Mississippi 12 2,352 6.0% Illinois 5 1,761 4.5% Florida 11 1,666 4.3% Ohio 9 1,416 3.6% Michigan 4 1,383 3.6% Pennsylvania 10 1,381 3.5% Tennessee 6 1,374 3.5% Alabama 9 1,296 3.3% Indiana 6 1,254 3.2% Minnesota 4 1,151 3.0% Arkansas 6 1,082 2.8% Missouri 5 960 2.5% Louisiana 2 819 2.1% California 1 815 2.1% New York 3 811 2.1% New Jersey 6 771 2.0% New Mexico 3 716 1.8% Wisconsin 8 714 1.8% North Carolina 1 522 1.3% South Carolina 4 465 1.2% Kentucky 1 445 1.1% Colorado 3 399 1.0% Arizona 1 384 1.0% Iowa 4 320 0.8% Maryland 2 297 0.8% Utah 1 253 0.6% Kansas 2 247 0.6% West Virginia 2 223 0.6% Vermont 4 223 0.6% Oklahoma 2 186 0.5% New Hampshire 3 157 0.4% Massachusetts 1 124 0.3% North Dakota 1 97 0.2% Idaho 1 90 0.2% Total 189 $ 38,930 100.0% 16
Portfolio Information (cont’d) (unaudited, dollars and square feet in thousands) Defensive Number of Industry Category Leases ABR % of ABR Home Improvement Necessity 15 $ 6,742 17.3% Convenience Stores Service 20 4,794 12.3% Discount Retail Discount 11 4,040 10.4% Auto Parts Necessity 40 3,574 9.2% Drug Stores & Pharmacies Necessity 15 3,447 8.9% General Retail Necessity 3 2,303 5.9% Dollar Stores Discount 26 2,498 6.4% Quick Service Restaurants Service 15 2,378 6.1% Casual Dining Service 6 1,081 2.8% Furniture Stores Other 2 872 2.2% Automotive Service Service 9 807 2.1% Farm Supplies Necessity 4 778 2.0% Grocery Necessity 2 748 1.9% Sporting Goods Other 1 735 1.9% RV Sales Other 1 705 1.8% Banking Necessity 5 647 1.7% Healthcare Necessity 2 643 1.7% Apparel Other 4 506 1.3% Arts & Crafts Other 1 451 1.2% Wholesale Warehouse Club Necessity 1 417 1.1% Telecommunications Other 3 341 0.9% Gift, Novelty, and Souvenir Shops Other 1 200 0.5% Home Furnishings Other 1 134 0.3% Equipment Rental and Leasing Other 1 90 0.2% Total 189 $ 38,930 100.0% Number of Defensive Category Leases ABR % of ABR Necessity 87 $ 19,298 49.6% Service 50 9,060 23.3% Discount 37 6,538 16.8% Other 15 4,034 10.4% Total 189 $ 38,930 100.0% 17
Lease Expiration Schedule (unaudited, dollars and square feet in thousands) ABR Expiring Year of Number of ABR as a % of Expiration Leases Expiring Expiring Total Portfolio 2020 - $ - 0.0% 2021 - - 0.0% 2022 1 112 0.3% 2023 4 355 0.9% 2024 1 97 0.2% 2025 6 1,526 3.9% 2026 8 1,912 4.9% 2027 8 2,176 5.6% 2028 19 2,746 7.1% 2029 20 2,763 7.1% 2030 21 5,636 14.5% 2031 25 4,103 10.5% 2032 8 2,879 7.4% 2033 19 2,401 6.2% 2034 9 1,165 3.0% 2035 25 8,553 22.0% 2036 3 550 1.4% 2037 3 453 1.2% 2038 - - 0.0% 2039 6 845 2.2% 2040 2 409 1.0% 2041 - - 0.0% 2042 - - 0.0% 2043 1 250 0.6% TOTAL 189 $ 38,930 100% 18
Non-GAAP Measures and Definitions 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), excluding real estate-related expenses including, but not limited to, gains (losses) from sales, impairment adjustments, and depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO is consistent with FFO as defined by NAREIT. Core FFO means core funds from operations. It is a non-GAAP financial measure defined as FFO adjusted for gains from forfeited earnest money deposits and non-recurring 144A and IPO transaction costs. We believe the presentation of Core FFO provides investors with a metric to assist in their evaluation of our operating performance across multiple periods because it removes the effect of unusual and non-recurring items that are not expected to impact our operating performance on an ongoing basis. AFFO means adjusted funds from operations. It 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 rental revenue, amortization of above and below-market lease-related intangibles, stock-based compensation expense, and amortization of deferred financing 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. 19
Non-GAAP Measures and Definitions (cont’d) EBITDA, EBITDAre and Adjusted EBITDAre EBITDA is computed by us as earnings before interest, income taxes 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 real estate impairment losses. Adjusted EBITDAre, as computed by us, is EBITDAre adjusted to exclude straight-line rental revenue, gains from forfeited earnest money deposits, non-recurring 144A and IPO transaction costs, and stock-based compensation expense. Annualized Adjusted EBITDAre is Adjusted EBITDAre 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. It is calculated by subtracting property operating expenses from rental revenue including reimbursements (as presented on the Statement of Operations). Cash NOI is computed by us as GAAP NOI excluding straight-line rental revenue and amortization of above/below-market leases adjustments. 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. 20
Non-GAAP Measures and Definitions (cont’d) Other Definitions ABR means annualized base rent. ABR is calculated by multiplying (i) cash rental payments (a) for the month following the period shown 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. Net Debt is computed by us as the principal amount of total debt outstanding less cash and cash equivalents. Occupancy is expressed as a percentage, and it is the sum of leased square feet divided by rentable square feet. OP units means operating partnership units not held by NETSTREIT. 21
Forward Looking and Cautionary Statements 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 prospectus dated August 13, 2020, relating to our initial public offering, filed with the Securities and Exchange Commission (the “SEC”) on August 14, 2020 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). 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. 22
ntstinvestorpresentation
Investor Presentation October 2020
Disclaimer 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. 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 prospectus dated August 13, 2020, relating to our initial public offering, filed with the Securities and Exchange Commission (the “SEC”) on August 14, 2020 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). 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. 2
Company & Investment Highlights NETSTREIT Is Built on a Foundation of Strength on Both Sides of the Balance Sheet, Led by Seasoned Leadership Team with Exceptional Track Record 1 Strategy Overview and Performance During COVID 2 Active Asset Management to Achieve Optimal Portfolio Performance 3 Disciplined Underwriters with Dual Focus on Credit AND Real Estate 4 Multifaceted Investment Strategy Leveraging Deep Industry Relationships 5 Platform Positioned for Scale High-Quality, Diversified, and Conservative Capitalization to Defensive Net Lease Retail Support Accretive Growth Portfolio 3
1 Strategy Overview and Performance During COVID Investment grade tenancy provides defensive, consistent performance through economic cycles NETSTREIT STRATEGY BY THE NUMBERS1 ▪ High-quality tenancy creates bond-like leases with high rent collections during times of disruption ▪ 99.4% of Investment Grade tenants paid pre-COVID contractual rent in 3Q 2020 Investment Grade Tenancy 68.0% Defensive nature of NETSTREIT portfolio strategy Defensive Retail Tenancy2 89.6% ▪ Focused on benefits of restructuring leases (i.e. extending lease terms) rather than pushing rent collections during COVID-19 Rent Collections3: ▪ No exposure to experiential retail Q3 2020 98.1% September 2020 High level of rent collections during COVID 100.0% ▪ Collected 100% of cash rents in September and October October 2020 100.0% Unresolved Requests for COVID Related Rent Relief4 0% NETSTREIT’s focus on defensive, credit tenancy in essential industries is a deliberate and longstanding Experiential Retail Exposure strategy, rather than a reactionary shift to a post- (Cinemas, Fitness, Childcare, 0% COVID-19 world Family Entertainment) Source: Company data. Portfolio data represents portfolio as of 9/30/2020 unless otherwise noted. 1. Figures represent percentage of ABR unless otherwise noted. 2. Defensive retail tenancy based on rent from tenants in necessity, discount or service- oriented industries. 3. NETSTREIT rent collection percentages are based on actual cash rent collected divided by contractual rent prior to any COVID-19 related lease modifications. 4. NETSTREIT has collected 100% of rent in accordance with in- place lease agreements from June 2020 to October 2020. 4
2 Portfolio Overview High-quality, diversified portfolio consisting of 68% investment grade tenants across 37 states Key Portfolio Stats Top 10 Tenants by % of ABR Properties 189 States 37 Baa1 / AA- Portfolio Square Feet (in millions) 3.4 Tenants 53 Baa1 / BBB+ Industries 24 % Occupancy 100.0% Baa2 / BBB- % Investment Grade Tenants (by ABR) 68% % Defensive Industry Exposure (by ABR) 90% Aa2 / AA Weighted Average Lease Term Remaining (Years) 11.1 Weighted Average Annual Rent Increases 0.8% Baa2 / BBB Lease Turnover Through 2024 (by ABR) 1.4% National Footprint Across Attractive Markets WA ME VT MT ND NH Baa2 / BBB MN MA OR NY WI CT RI ID SD MI WY PA NJ IA OH MD DE NE Baa2 / BBB NV IN IL WV VA UT CA CO MO KY KS NC TN OK AR SC AZ A2 / A NM GA MS AL LA AK TX FL HI Baa2 / BBB- >10% and <25% ABR >5% and <10% ABR >3% and <5% ABR Investment Grade Rated High-Quality Unrated >1% and <3% ABR <1% ABR 0% ABR Sources: Company data. Portfolio data represents portfolio as of 9/30/2020. 5
2 Portfolio Diversification In Defensive Retail Sectors NETSTREIT offers a national diversified portfolio comprised primarily of defensive retail tenants Necessity Discount Top Industries (% of ABR) 1 Home 17% Improvement: 2 Convenience 12% Stores: 50% 90% 17% of ABR Necessity 3 Discount Discount Retail: 10% Service Service 10% Other 23% 4 Auto Parts: 9% 5 Drug Stores & 9% Pharmacies: Source: Company data. Portfolio data represents portfolio as of 9/30/2020. Note: Due to rounding, respective defensive retail sector exposure may not precisely reflect the absolute figures. 6
2 Active Asset Management NETSTREIT continuously tracks property performance and stratifies the portfolio to achieve consistent cash flows and balanced growth for its investors Disciplined Acquisitions Active Monitoring Pursue opportunities that Periodically review all align with objectives properties for changes in Practice disciplined performance, credit, and underwriting strategy local conditions Existing portfolio has been carefully curated Strategic Recycling Perpetual Stratification Leverage 1031 exchange Identify properties not transfers where possible to access deep, non- meeting strategy and/or institutional market for risk management criteria (i.e. rent coverage) portfolio optimization Since inception, the Company has disposed of 36 properties totaling approximately $100 million, while also acquiring high-quality assets that have enhanced scale and materially improved portfolio performance metrics Source: Company data. 7
3 Three-Part Underwriting Philosophy NETSTREIT leverages a disciplined, three-pronged approach to underwriting potential acquisitions which positions the Company to benefit from superior downside protection on its investments A B C TENANT CREDIT UNDERWRITING • Evaluate corporate level REAL ESTATE financials VALUATION • Assess business risks • Review underlying key real estate Level ofUnderwriting Level Emphasis • Determine ownership/sponsorship UNIT-LEVEL • For Non-IG tenants, establish metrics to maximize re-leasing PROFITABILITY NETSTREIT implied credit rating potential • Location analysis • Determine rent coverage (min. • Alternative use analysis 2.0x) and cost variability • Assess relative to corporate stability / real estate merits 8
3 A Tenant Credit Underwriting 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 Investment Grade Profile Sub-IG (rated) & Investment Grade (rated) (unrated) Sub-IG Profile (unrated)(1) • Well-capitalized retailers • Validated financial strength and stability • IG-caliber balance sheets without explicit • National footprint with strong brand • Professional management with rating equity standardized operational practices • Threshold metrics: • Focus on real estate quality / unit-level Description • Focus on corporate guarantee credit • >$1B in Sales profitability • Lower relative yields • Max Debt / Unadjusted • Higher relative yields • Higher competition for deals EBITDA of 2.0x • Lower competition for deals • Coverage and credit enhancements Durability Defensive, consistent performance through economic cycles required given more susceptible to market disruptions % Of ABR1 68% 74% Total 6% 26% Lease Terms (WALT, Less negotiating leverage More negotiating leverage Most negotiating leverage Rent Bumps, etc.) Representative Tenants Source: Company data. Portfolio data represents portfolio as of 9/30/2020. 1. IG stands for investment grade. 9
3 A Focus on Investment Grade Tenants Investment grade tenants have outperformed during economic downturns and largely avoided bankruptcy Price Performance vs. S&P 500 During GFC and COVID-191 Major Net Lease Retail Tenant Bankruptcies (2009 – 2020) 2008 Financial Crisis COVID-19 Outbreak Best Credit Rating 27% Bankruptcy Prior to Filing Investment 6% Retail Tenant Filing Date (S&P / Moody’s)5 Grade? (0%) (10%) Mar-20 NR / NR (34%) BB- (May-01) / Jan-19 (57%) B2 (Apr-01) Public IG-Rated Tenants Other Public Tenants Wtd. S&P 500 BB+ (Mar-05) / Wtd. Avg. by ABR2 Avg. by ABR 3 Oct-18 Ba1 (Mar-05) 4 B+ (Sep-15) / IG/Defensive Peers vs. Other Peers YTD Price Performance Oct-18 B1 (July-15) IG/Defensive Peers Other Peers 20% BB (Mar-04) / Sep-17 B1 (Aug-10) 0% Mar-17 NR / NR (13%) B (Mar-06) / Mar-16 (20%) B2 (Mar-06) (28%) B (Nov-04) / Jan-12 (40%) NR Feb-11 NR / NR (60%) Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Mar-09 NR / NR Sources: Capital IQ, Company data, The Deal Pipeline, Bloomberg, SNL Financial. 1. Time intervals based on market peaks to market troughs for 2008 Financial Crisis and COVID-19 Outbreak (10/9/2007 to 3/9/2009 and 2/19/2020 to 3/23/2020, respectively). Tenant ABR calculated based on NETSTREIT portfolio data as of 9/30/2020. 2. IG Wtd. Avg. calculated on all NETSTREIT’s public IG tenants. 3. Other Public Tenants calculated on all NETSTREIT’s public non-IG tenants (10 total tenants). 4. Sourced from SNL Financial; market data as of 9/30/2020. IG/ Defensive peers include ADC and O. Other peers include NNN, EPRT, FCPT, SRC, and STOR. 5. Indicates best credit rating held after 1/1/2005 and date when the respective credit rating was assigned. Some credit ratings are pre-2005. 10
3 B Real Estate Valuation 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 • Vacancy analysis • Fungibility of building for alternative uses • Marketability of the real estate without current • Replacement cost tenant • Location analysis • List of likely replacement tenants • Traffic counts • Rent analysis • Nearby uses and traffic drivers, • Replacement rent versus current rent complementary nature thereof • Demographic analysis • Accessibility and parking capacity • Current demographics plus trends and • Ingress and egress forecasts • Visibility / signage • Competitive analysis • Market position versus competing retail corridors 11
3 C Unit-Level Profitability In assessing unit-level financial performance, NETSTREIT focuses on mission-critical properties with strong rent coverage and higher variability in operating costs 1 2 3 Obtain Financial Information Perform Financial Analysis Assess Investment Merits • Provides clarity into • Analyze store demand • Determine whether property location-specific dynamics, cost structure and meets investment criteria performance liquidity profile • Obtain unit-level financial • Triangulate P&L based on available Key Unit-Level Investment Criteria information from parent information company if possible • Sales (per data vendors) Minimum 2.0x Rent • EBITDAR margin (per financials) • If financials are not provided, ✓ Coverage utilize data provided by third • Rent (known quantity) party vendors to estimate • Account for variability in business sales by location model cost structure ✓ Higher Cost Variability • Third party data includes: • Higher proportion of fixed costs = • Cell phone traffic more variability in rent coverage Ranks in Top Half of • Point of sales (POS) data • Determine store ranking within ✓ Tenant’s Store tenant’s broader operating portfolio Portfolio based on estimated sales 12
4 Portfolio Strategy / Investment Philosophy Investment Philosophy Portfolio Strategy Current Metrics Defensive Tenancy in Necessity-Based and Primarily 90% E-commerce-Resistant Industries1 Resilient, Cycle-Tested Investment Grade Credit >60% 68% Tenants with Durable Cash Flows1 Granular Assets in Highly Fragmented, $1 to $10M Avg. Asset $3.1M Avg. Asset Size Undercapitalized Market Segment Size Net Lease Retail Assets with Long Lease Term >10 Year WALT 11.1 Year WALT Benefiting From Contractual Rent Growth <15% Industry 17% Industry Diversification by Industry, Tenant, State1 <50% Top 10 Tenants 60% Top 10 Tenants <15% State 18% State Significant Focus on Fundamental Real Estate Attractive cost basis with durable valuation supported by market rents and demos, physical structure and Underwriting location, and alternative use analyses Source: Company data. Portfolio data represents portfolio as of 9/30/2020. 1. Portfolio statistics by percentage of ABR. 13
4 Growth Strategy: Generating Both Quality & Quantity The Company utilizes a multi-faceted growth strategy to deploy capital in a variety of investment structures in the Net Lease Retail sector, allowing it greater flexibility to build its portfolio from a larger opportunity set Investment Description Investment Source Type Current Brokerage Development Tenant Private Commentary Owners Network Partners Relationships Equity Acquire operating properties on the open Existing market Stabilized • Deepest and most liquid opportunity set • Actively monitored Acquire single-tenant property with short-term Blend & lease Extend • Blend existing rent rate with new rate to extend lease term to at least 12 years Fund construction for single-tenant property Build-to-Suit with long-term lease ("BTS") • Key driver of higher risk-adjusted returns • Collaborate in design and construction of property Acquire a BTS property upon completion Reverse • Strong tenant relationship upon acquisition Build-to-Suit • Long lease terms, higher cap rates, comparable risk Acquire single-tenant property with a Sale- simultaneous long-term lease back to the seller Leaseback • Capitalize on likelihood of increased corporate real estate monetization in light of current disruption 14
4 2020 Quarterly Investment Activity Cumulative Acquisitions in 2020 ($ in millions) 98 Total Acquisitions Properties Acquired: 24 44 30 Quarterly Portfolio Expansion1: 27% 43% 21% Average Acquisition Activity per Quarter = $109 million Source: Company data. Portfolio data represents portfolio as of 9/30/2020. 1. Measured quarterly acquisition at purchase price divided by portfolio at the beginning of the quarter shown. 15
4 Acquisition Case Study: Invested Grade (rated) Walmart Supercenter and Sam’s Club – Tupelo, MS Acquisition Completed: July 2020 $17.0M 2 Purchase Price Properties 6.6% $538.1B Acquisition Cap Rate Tenant Sales (2020)1 12 Years 0.0% Avg. Annual Rent New Lease Terms Increases $396.5B AA / Aa2 S&P/Moody’s Credit Market Capitalization Rating Recession Proof Tenant with Long Lease Term • Acquisition of one Walmart Supercenter and one Sam’s Club by partnering with and concurrently closing with a shopping center acquirer who purchased the remainder of the center $41.0B Essential Debt on Balance Designation During • Both brands owned by Walmart Inc. (NYSE: WMT) Sheet2 COVID-19 • Blue-chip investment grade tenant • Proven history of performing through economic downturns • Increases NETSTREIT’s defensive retail exposure • 12 years of new lease terms Sources: SNL Financial, Company data. Market data as of 9/30/2020. 1. Represents the twelve months ended 7/31/2020. 2. Reflects long-term debt outstanding as of 7/31/2020. 16
4 Acquisition Case Study: Investment Grade Profile (unrated) Ollie’s Bargain Outlet Portfolio Acquisition – Various Locations Acquisition Completed: March 2020 $26.1M 7 Purchase Price Properties1 6.9% $1.6B Acquisition Cap Rate Tenant Sales (2020)2 10 Years 0.8% Avg. Annual Rent New Lease Terms Increases $5.7B NR / NR S&P/Moody’s Credit Market Capitalization Rating Defensive Portfolio at Premium Yield • Establishes meaningful exposure to Ollie’s Bargain Outlet (NASDAQ: OLLI) $592M Essential • Previously part of the Toys R Us estate Debt on Balance Designation During • High-quality properties in strong retail locations Sheet3 COVID-19 • Exemplifies NETSTREIT’s “High-Quality Unrated” category • Premium yield for a creditworthy tenant operating in a defensive market position • Supports counter-cyclical portion of NTST’s strategy and philosophy Sources: SNL Financial, Company data. Market data as of 9/30/2020. 1. Originally 9 properties with weakest two locations eliminated following site checks. 2. Represents the twelve months ended 8/1/2020 3. Reflects long-term debt outstanding as of 8/1/2020. 17
4 Acquisition Case Study: Sub-Investment Grade (rated) Floor & Decor – La Quinta, CA Acquisition Completed: June 2020 $9.6M 1 Purchase Price Property 8.5% $2.1B Acquisition Cap Rate Tenant Sales (2020)1 10 Years 2.0% Avg. Annual Rent New Lease Term Increases $7.8B BB- / Ba3 S&P/Moody’s Credit Market Capitalization Rating E-Commerce Resistant Tenant at Attractive Price • First exposure to Floor & Decor (NYSE: FND) • Exemplifies NETSTREIT’s ability to partner with developers and buyers to acquire undervalued assets $207.0M Essential • Purchase of the property from a mixed-use buyer who Debt on Balance Designation During 2 did not want the retail exposure Sheet COVID-19 • Replacement tenant with 2nd generation rents next to a thriving Walmart Supercenter • Mitigates the downside related to Floor & Decor’s sub-investment grade rating • Enhances the e-commerce resistance of current portfolio Sources: SNL Financial, Company data. Market data as of 9/30/2020. 1. Represents the twelve months ended 6/25/2020 2. Reflects long-term debt as of 6/25/2020 18
4 Acquisition Case Study: Invested Grade (rated) O’Reilly Auto Parts – Various Locations Acquisition Completed: August 2020 $5.7M 7 Purchase Price Properties 6.9% $10.7B Acquisition Cap Rate Tenant Sales (2020)1 11 Years 0.0% Avg. Annual Rent Remaining Lease Term Increases $34.2B BBB / Baa1 S&P/Moody’s Credit Market Capitalization Rating E-Commerce Resistant Tenant at Attractive Price • First exposure to O’Reilly (NASDAQ: ORLY) • Portfolio provides an above-market yield for a long-term investment grade tenant $4.1B Essential Debt on Balance Designation During • Increased geographic diversity by adding exposure to Sheet2 COVID-19 Vermont and New Hampshire • Addition of e-commerce resistant tenant under a master lease at below-market rents Sources: SNL Financial, Company data. Market data as of 9/30/2020. 1. Represents the twelve months ended 6/30/2020 2. Reflects long-term debt as of 6/30/2020 19
5 Senior Leadership Seasoned leadership team with significant net lease retail and public company experience High-Quality Real Estate Portfolio Conservative Capitalization Mark Manheimer Andy Blocher President, CEO & Director CFO, Treasurer & Secretary Mr. Manheimer leads the overall Mr. Blocher manages liabilities, strategy, acquisitions, underwriting, capital raising, investor relations and and asset management for the financial reporting for the company company Prior experience includes: Prior experience includes: • EB Arrow; CIO of the Single-Tenant Net Lease Group • First Potomac Realty Trust (NYSE: FPO)1; EVP, CFO and • Spirit Realty Capital (NYSE: SRC); EVP, Head of Asset Treasurer from 2012 through 2017 Management from 2012 through 2016 • Leading role in FPO’s $1.4 billion sale to Government • Member of Investment Committee Properties Income Trust (now Office Properties Income Trust, NASDAQ: OPI) • Led restructuring and extension of the largest tenant’s master lease, as well as subsequent sales of the assets • Provided valuable public company expertise in leased to the tenant evaluating and recommending changes to corporate governance initiatives; active role in evaluating Board • Led due diligence in merger that doubled company size candidates • Cole Real Estate Investments; Head of Sale-Leaseback • Successfully remediated a pre-existing material Acquisitions from 2009 through 2012 weakness with respect to financial controls • Realty Income Corporation (NYSE: O); Director of • Federal Realty Investment Trust (NYSE: FRT); SVP, CFO Underwriting from 2005 through 2009 and Treasurer from 2008 through 2012 Source: Company data. 1. First Potomac Realty Trust was publicly traded on the NYSE until October 2017. 20
5 Key Personnel Experienced team of professionals drive NETSTREIT’s day to day operations High-Quality Real Estate Portfolio Conservative Capitalization Jeff Fuge Trish McBratney Senior Vice President, Acquisitions Senior Vice President and Chief Accounting Officer • Joined in December 2019 • Joined in May 2020 • Prior experience includes: • Prior experience includes: – Director of Capital Markets at EB Arrow – Chief Accounting Officer of American Bath Group – Senior Vice President at Compass Point Research & Trading – Chief Accounting and Administrative Officer of Mill Creek – Client Relations Director at Aegis Financial Residential Trust • B.A. in History and minor in Business Administration from the – Vice President and Controller of CyrusOne (NASDAQ: CONE) College of Charleston; M.B.A. from George Washington University • B.S. in Accounting from Oklahoma State University; Certified Public Accountant Chad Shafer Randy Haugh Senior Vice President, Credit and Underwriting Senior Vice President, Finance • Joined in May 2020 • Joined in February 2020 • Prior experience includes: • Prior experience includes: – Various roles at JPMorgan Chase & Co., most recently as – U.S. Real Estate fund management group at The Carlyle Group Executive Director – Wholesale Credit Risk (NASDAQ:CG) – Other roles include Head of Real Estate Banking Portfolio – Vice President of Finance and Director of Finance at First Management, Head of Key Relationship Group – Credit Risk, Potomac Realty Trust (NYSE: FPO)1 Commercial Term Lending, and Credit Manager, among others • B.S. in Economics and Certificate of Accounting from University of • B.S. in Finance from Butler University Virginia Kirk Klatt Amy An Senior Vice President, Real Estate Investor Relations Manager • Joined in December 2019 • Joined in December 2019 • Prior experience includes: • Prior experience includes: – Chief Acquisitions Officer, Single-Tenant Net-Lease at EB – Investor Relations Manager at EB Arrow Arrow – Investor Relations Associate and Real Estate Analyst at – Development Services Manager for Duke Realty Corporation CapView Partners (NYSE: DRE) • B.S. in Business Administration from the University of Texas at • B.S. in Civil Engineering from Texas Tech University; M.B.A. from Dallas – Naveen Jindal School of Management University of Texas at Dallas; licensed real estate salesperson in Texas Source: Company data. 1. First Potomac Realty Trust was publicly traded on the NYSE until October 2017. 21
5 Corporate Responsibility 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 Areas of Focus ▪ Dedication to reducing the Company’s ecological footprint ▪ Endorsement of renewable resources and encouragement of tenants to practice leading E sustainability initiatives ▪ Implementation of energy conservation practices in the office Environmental Responsibility ▪ Emphasis on creating a culture driven by diversity & inclusion S ▪ Commitment to employee well-being & satisfaction in the workplace ▪ Creation of leading employee training and development programs to promote growth Social Responsibility ▪ Diverse management team & board of directors ▪ Enactment of ideal board features to enhance the Company’s fiduciary responsibility to G shareholders ▪ Rigorous risk management procedures to protect shareholder interests Corporate Governance 22
5 Board of Directors In addition to Mr. Manheimer, the Company’s board is comprised of six additional directors, five of whom are independent, each possessing diverse backgrounds in industry, public company and investment experience Todd Minnis Matt Troxell, CFA Lori Wittman Robin Zeigler Heidi Everett Michael Christodolou Chairman of the Board Lead Independent Director Independent Director Independent Director Independent Director Independent Director ▪ Compensation Committee ▪ Audit Committee Chair ▪ Nominating & Corporate ▪ Compensation ▪ Audit Committee Member Chair ▪ Nominating & Corporate Governance Committee Committee Member ▪ Investment Committee ▪ Investment Committee Governance Committee Chair ▪ Nominating & Corporate Member Chair Member ▪ Compensation Committee Governance Committee ▪ Audit Committee Member Member Member ▪ Investment Committee Member Background Background Background Background Background Background ▪ EB Arrow, CEO: ▪ Formerly AEW Capital ▪ Big Rock Partners, CFO ▪ Cedar Realty Trust ▪ Star Cypress Partners, ▪ Inglewood Capital Commercial real estate Management, Head of ▪ Global Medical REIT (NYSE: CDR), EVP and President and CEO Management, Manager developer & owner with AEW Real Estate (NYSE: GMRE) COO ▪ Formerly The Wentworth ▪ Lindsay Corporation (NYSE: $1.6B of AUM Securities Independent Director and ▪ Formerly Federal Realty Group and Stafford Family LNN), Director, serves on ▪ Formerly Cypress ▪ Formerly Landmark Land Audit Committee Chair Investment Trust (NYSE: Foundation, Vice Audit Committee, Human Equities Real Estate Company, VP ▪ Formerly Care Capital FRT), COO, Mid-Atlantic President Resources and Investment Management, Properties, CFO ▪ Veteran of the United Compensation Committee CIO ▪ Formerly Ventas, SVP – States Air Force ▪ Formerly with Bass Brothers ▪ Formerly with The Capital Markets & / Taylor & Company Staubach Company Investor Relations 23
Company & Investment Highlights NETSTREIT Is A Growth Company With A Defensive Net Lease Retail Strategy Attractive Sector Fundamentals with Compelling Growth Opportunity Seasoned Leadership Team with Extensive Track Record 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 Platform Positioned for Scale High-Quality, Diversified, and Conservative Capitalization to Defensive Net Lease Retail Support Accretive Growth Portfolio 24
Definitions ABR means annualized base rent. ABR is calculated by multiplying (i) cash rental payments (a) for the month following the period shown 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. 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. Sub-investment grade (rated) 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. 25
Investor Relations ir@netstreit.com 972-597-4825 26