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): March 4, 2021
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 March 4, 2021, NETSTREIT Corp. (the “Company”) issued a press release announcing its financial results for the fourth quarter and full year ended December 31, 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 March 4, 2021, the Company furnished supplemental financial information for the fourth quarter and full year ended December 31, 2020. Also on March 4, 2021, 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 March 4, 2021 | |
| 99.2 | Fourth quarter 2020 supplemental financial information | |
| 99.3 | Fourth quarter 2020 investor presentation | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| NETSTREIT Corp. | |
|---|---|
| March 4, 2021 | /s/ ANDREW BLOCHER |
| Date | Andrew Blocher |
| Chief Financial Officer, Treasurer and Secretary | |
| (Principal Executive Officer) |
Document
NETSTREIT REPORTS FOURTH QUARTER AND FULL YEAR 2020 FINANCIAL AND OPERATING RESULTS
– Reports Net Income of $0.15 and $0.01 and Adjusted Funds from Operations (“AFFO”) of $0.20 and $0.69 per diluted share, for the Fourth Quarter and Full Year 2020, respectively –
– Collected 100.0% of Fourth Quarter 2020 Contractual Rents as Contemplated in Original Leases –
– Completed $409 Million of Acquisitions in 2020 –
Dallas TX – March 4, 2021 – NETSTREIT (NYSE: NTST) (the “Company”), today announced financial and operating results for the fourth quarter and full year ended December 31, 2020.
“2020 was a very important year for NETSTREIT, and we are extremely proud of all of our accomplishments. Our portfolio performed well throughout a period of elevated economic stress and we credit our sector-leading collections to our portfolio quality and the defensive characteristics that define our strategy. We also completed our Initial Public Offering, which enhances our access to capital as we look to continue to grow. Further, we continued to improve our already strong portfolio composition through thoughtful acquisitions and dispositions which resulted in a larger, more diversified and higher quality asset base, which is another example of our ability to execute our strategy to drive cash flow growth and generate a strong, safe yield over time,” said Mark Manheimer, Chief Executive Officer of NETSTREIT. “As we look ahead to 2021, we are focused on continuing to capitalize on our significant growth opportunity within the net lease sector, utilizing our dedicated platform and high-quality balance sheet.”
FOURTH QUARTER AND FULL YEAR 2020 HIGHLIGHTS
•Reported net income per diluted share of $0.15, Core Funds from Operations (“Core FFO”) per diluted share of $0.181 and AFFO per diluted share of $0.201 (see non-GAAP financial measures reconciliation) for the fourth quarter of 2020
•Reported net income per diluted share of $0.01, Core FFO per diluted share of $0.652 and AFFO per diluted share of $0.692 (see non-GAAP financial measures reconciliation) for the full year 2020
•Prior to giving any consideration to deferral or abatement arrangements granted as a result of COVID, the Company collected 100.0% of fourth quarter contractual rent. For the full year 2020, the Company collected 96.9% of contractual rent
PORTFOLIO UPDATE
As of December 31, 2020, the NETSTREIT portfolio was comprised of 203 properties, contributing $41.8 million of annualized base rent3, with a weighted-average remaining lease term of 10.5 years, of which 70.0% were leased to investment grade rated tenants and 8.0% were leased to 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 December 31, 2020.
INVESTMENT ACTIVITY
During the quarter ended December 31, 2020, the Company invested approximately $81.2 million in 26 properties at an initial cash capitalization rate of 6.8%. Acquisitions completed during the quarter had a weighted-average remaining lease term of 8.8 years, and 68.7% are occupied by investment grade rated tenants.
Over the same period, the Company sold 12 properties for total proceeds of $37.4 million. The cash capitalization rate on the 12 properties was 6.6%.
During the year ended December 31, 2020, the Company invested approximately $409 million in 124 properties at an initial cash capitalization rate of 6.7%. Acquisitions completed during the year had a weighted-average remaining lease term of 11.2 years, and 71.9% were occupied by investment grade rated tenants.
Over the same period, the Company sold 15 properties, including one vacant property, for total proceeds of $50 million. The cash capitalization rate on the 14 occupied properties was 6.6%.
Over the course of 2020, the Company’s portfolio increased from 94 properties to 203 properties. The portfolio’s weighted average lease term remaining improved from 10.1 years to 10.5 years, and the portfolio’s investment grade percentage increased from 63.7% to 70.0%. During the year, the Company added 23 new tenants, 4 new industries, and 10 new states to its portfolio.
BALANCE SHEET AND LIQUIDITY
At quarter end, total debt outstanding was $175 million, with a weighted average term of four years and a contractual interest rate, including the impact of the fixed rate swap, of 1.36% (excluding the impact of deferred fee amortization). Including the effect of the interest rate swap, 100% of the Company’s outstanding debt balances were at a fixed rate and the Company’s net debt to annualized adjusted EBITDA ratio was 2.8x. Additionally, the ending cash balance, which included $14.8 million of restricted cash held in 1031 exchange accounts, was $92.6 million, and the Company had an unused revolving line of credit with $250 million of capacity.
DIVIDEND
On March 3, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share for the first quarter of 2021, which will be paid on March 30, 2021 to shareholders of record on March 15, 2021.
2021 OUTLOOK
On January 5, 2021, the Company announced the following external growth targets for full year 2021:
•The Company expects acquisition activity, net of dispositions, to total $320 million
•The Company expects to continue to review its portfolio and complete opportunistic dispositions to further improve portfolio diversification and mitigate risk
In addition, the Company is introducing the following targets for full year 2021:
•The Company expects cash G&A to be in the range of $11.0 to $12.0 million, with additional non-cash compensation expense of $3.0 to $4.0 million
•The Company expects cash interest expense, including unused line of credit facility fees, of $3.0 to $3.5 million, and an additional $0.6 million of non-cash deferred financing fee amortization
•The Company expects to incur state and franchise taxes in the range of $0.2 to $0.3 million which will be reported as “income taxes” in the Company’s financial statements for 2021.
EARNINGS WEBCAST AND CONFERENCE CALL
A conference call will be held on Friday, March 5, 2021 at 10:00 AM ET. During the conference call the Company’s officers will review fourth 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 March 12, 2021, 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 13714402.
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 27,897,168 and weighted average operating partnership units of 2,033,718 for the three-months ended December 31, 2020.
(2) Per share amounts include weighted average common shares of 17,322,182 and weighted average operating partnership units of 3,807,022 for the twelve-months ended December 31, 2020.
(3) Annualized base rent, or ABR, is calculated by multiplying (i) cash rental payments (a) for the month ended December 31, 2020 (or, if applicable, the next full month's cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of December 31, 2020, 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
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(Unaudited)
| December 31, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| Assets | ||||
| Real estate, at cost: | ||||
| Land | $ | 189,373 | $ | 83,996 |
| Buildings and improvements | 358,360 | 140,057 | ||
| Total real estate, at cost | 547,733 | 224,053 | ||
| Less accumulated depreciation | (10,111) | (132) | ||
| Real estate held for investment, net | 537,622 | 223,921 | ||
| Assets held for sale | 14,802 | 8,532 | ||
| Cash, cash equivalents and restricted cash | 92,643 | 169,319 | ||
| Acquired lease intangible assets, net | 75,024 | 28,846 | ||
| Other assets, net | 5,724 | 3,304 | ||
| Total assets | $ | 725,815 | $ | 433,922 |
| Liabilities and equity | ||||
| Liabilities: | ||||
| Term loan, net | $ | 174,105 | $ | 173,913 |
| Lease intangible liabilities, net | 16,930 | 4,672 | ||
| Liabilities related to assets held for sale | 399 | 189 | ||
| Accounts payable, accrued expenses and other liabilities | 6,308 | 2,716 | ||
| Total liabilities | 197,742 | 181,490 | ||
| Commitments and contingencies | ||||
| Equity: | ||||
| Stockholders’ equity | ||||
| Common stock, $0.01 par value, 400,000,000 shares authorized; 28,203,545 and 8,860,760 shares issued and outstanding as of December 31, 2020 and 2019, respectively | 282 | 89 | ||
| Additional paid-in capital | 501,045 | 164,416 | ||
| Retained (loss) earnings | (7,464) | 28 | ||
| Accumulated other comprehensive income | 235 | — | ||
| Total stockholders’ equity | 494,098 | 164,533 | ||
| Noncontrolling interests | 33,975 | 87,899 | ||
| Total equity | 528,073 | 252,432 | ||
| Total liabilities and equity | $ | 725,815 | $ | 433,922 |
NETSTREIT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except share and per share data)
(Unaudited)
| Successor | Predecessor | |||||
|---|---|---|---|---|---|---|
| Year Ended December 31, | For the Period from <br>December 23 to December 31, | For the Period from <br>January 1 to December 22, | ||||
| 2020 | 2019 | |||||
| Revenues | ||||||
| Rental revenue (including reimbursable) | $ | 33,727 | $ | 513 | $ | 19,805 |
| Operating expenses | ||||||
| Property | 2,569 | 52 | 1,113 | |||
| General and administrative | 11,340 | 49 | 3,555 | |||
| Depreciation and amortization | 15,459 | 195 | 10,422 | |||
| Provisions for impairment | 2,690 | — | 7,186 | |||
| Transaction costs | 3,169 | 2 | 535 | |||
| Total operating expenses | 35,227 | 298 | 22,811 | |||
| Other income (expense) | ||||||
| Interest expense, net | (4,741) | (173) | (10,712) | |||
| Gain on sales of real estate, net | 6,213 | — | 5,646 | |||
| Gain on forfeited earnest money deposit | 250 | — | — | |||
| Other income (expense), net | (10) | — | — | |||
| Total other income (expense), net | 1,712 | (173) | (5,066) | |||
| Net income (loss) | 212 | 42 | (8,072) | |||
| Net (loss) income attributable to noncontrolling interests | (518) | 14 | — | |||
| Preferred stock dividends and redemption premium | 42 | — | — | |||
| Net income (loss) attributable to common stockholders | $ | 688 | $ | 28 | $ | (8,072) |
| Amounts available to common stockholders per common share: | ||||||
| Basic | $ | 0.04 | $ | — | N/A | |
| Diluted | $ | 0.01 | $ | — | N/A | |
| Weighted average common shares outstanding: | ||||||
| Basic | 17,322,182 | 8,860,760 | N/A | |||
| Diluted | 21,157,996 | 8,860,760 | N/A | |||
| Other comprehensive income (loss): | ||||||
| Net income (loss) | $ | 212 | $ | 42 | $ | (8,072) |
| Change in unrealized gain on derivatives, net | 253 | — | 55 | |||
| Total comprehensive income (loss) | 465 | 42 | (8,017) | |||
| Comprehensive (loss) income attributable to noncontrolling interests | (500) | 14 | — | |||
| Comprehensive income (loss) attributable to common stockholders | $ | 965 | $ | 28 | $ | (8,017) |
NETSTREIT CORP. AND SUBSIDIARIES
RECONCILIATION OF NET LOSS TO FFO, CORE FFO AND ADJUSTED FFO
(in thousands, except share and per share data)
(Unaudited)
| Three Months Ended | Twelve Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Successor | Predecessor | Successor | Predecessor | |||||||||
| December 31, | For the Period from <br>December 23 to December 31, | For the Period from <br>October 1 to December 22, | December 31, | For the Period from <br>December 23 to December 31, | For the Period from <br>January 1 to December 22, | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Net income (loss) | $ | 4,510 | $ | 42 | $ | (3,523) | $ | 212 | $ | 42 | $ | (8,072) |
| Depreciation and amortization of real estate | 5,229 | 188 | 2,357 | 15,154 | 188 | 10,422 | ||||||
| Provision for impairment | 917 | — | 919 | 2,690 | — | 7,186 | ||||||
| Gain on sale of real estate, net | (5,143) | — | 127 | (6,213) | — | (5,646) | ||||||
| FFO | 5,513 | 230 | (120) | 11,843 | 230 | 3,890 | ||||||
| Adjustments: | ||||||||||||
| Gain on forfeited earnest money deposit | — | — | — | (250) | — | — | ||||||
| 144A and IPO transaction costs (1) | — | — | 449 | 2,170 | — | 450 | ||||||
| Core FFO | 5,513 | 230 | 329 | 13,763 | 230 | 4,340 | ||||||
| Adjustments: | ||||||||||||
| Straight-line rental revenue | (271) | (15) | 349 | (1,688) | (15) | 1,037 | ||||||
| Amortization of deferred financing costs | 157 | 14 | 249 | 621 | 14 | 1,024 | ||||||
| Amortization of above/below market lease intangibles | (164) | 2 | 78 | (504) | 2 | 563 | ||||||
| Non-cash compensation expense | 699 | — | — | 2,452 | — | — | ||||||
| AFFO | $ | 5,934 | $ | 231 | $ | 1,005 | $ | 14,644 | $ | 231 | $ | 6,964 |
| Weighted average common shares outstanding, basic | 27,897,168 | 8,860,760 | N/A | 17,322,182 | 8,860,760 | N/A | ||||||
| Weighted average operating partnership units outstanding | 2,033,718 | 4,449,019 | N/A | 3,807,022 | 4,449,019 | N/A | ||||||
| Weighted average dilutive securities | 90,864 | — | N/A | 28,792 | — | N/A | ||||||
| Weighted average common shares outstanding, diluted | 30,021,750 | 13,309,779 | N/A | 21,157,996 | 13,309,779 | N/A | ||||||
| FFO per common share, diluted | $ | 0.18 | $ | 0.02 | N/A | $ | 0.56 | $ | 0.02 | N/A | ||
| Core FFO per common share, diluted | $ | 0.18 | $ | 0.02 | N/A | $ | 0.65 | $ | 0.02 | N/A | ||
| AFFO per common share, diluted | $ | 0.20 | $ | 0.02 | N/A | $ | 0.69 | $ | 0.02 | N/A |
RECONCILIATION OF NET LOSS TO EBITDA, EBITDAre AND ADJUSTED EBITDAre
(in thousands, except share and per share data)
(Unaudited)
| Three Months Ended | Twelve Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Successor | Predecessor | Successor | Predecessor | |||||||||
| December 31, | For the Period from <br>December 23 to December 31, | For the Period from <br>October 1 to December 22, | December 31, | For the Period from <br>December 23 to December 31, | For the Period from <br>January 1 to December 22, | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Net income (loss) | $ | 4,510 | $ | 42 | $ | (3,523) | $ | 212 | $ | 42 | $ | (8,072) |
| Depreciation and amortization of real estate | 5,229 | 188 | 2,357 | 15,154 | 188 | 10,422 | ||||||
| Amortization of above/below market lease intangibles | (164) | 2 | 78 | (504) | 2 | 563 | ||||||
| Non-real estate depreciation and amortization | 77 | 7 | — | 305 | 7 | — | ||||||
| Interest expense, net | 926 | 173 | 2,363 | 4,741 | 173 | 10,712 | ||||||
| EBITDA | 10,578 | 412 | 1,275 | 19,908 | 412 | 13,625 | ||||||
| Adjustments: | ||||||||||||
| Provision for impairments | 917 | — | 919 | 2,690 | — | 7,186 | ||||||
| Gain on sale of real estate, net | (5,143) | — | 127 | (6,213) | — | (5,646) | ||||||
| EBITDAre | 6,352 | 412 | 2,321 | 16,385 | 412 | 15,165 | ||||||
| Adjustments: | ||||||||||||
| Straight-line rental revenue | (271) | (15) | 349 | (1,688) | (15) | 1,037 | ||||||
| Gain on forfeited earnest money deposit | — | — | — | (250) | — | — | ||||||
| 144A and IPO transaction costs (1) | — | — | 449 | 2,170 | — | 450 | ||||||
| Non-cash compensation expense | 699 | — | — | 2,452 | — | — | ||||||
| Adjusted EBITDAre | $ | 6,780 | $ | 397 | $ | 3,119 | $ | 19,069 | $ | 397 | $ | 16,652 |
RECONCILIATION OF NET LOSS TO NOI AND CASH NOI
(in thousands, except share and per share data)
(Unaudited)
| Three Months Ended | Twelve Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Successor | Predecessor | Successor | Predecessor | |||||||||
| December 31, | For the Period from <br>December 23 to December 31, | For the Period from <br>October 1 to December 22, | December 31, | For the Period from <br>December 23 to December 31, | For the Period from <br>January 1 to December 22, | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Net income (loss) | $ | 4,510 | $ | 42 | $ | (3,523) | $ | 212 | $ | 42 | $ | (8,072) |
| General and administrative | 3,500 | 49 | 1,099 | 11,340 | 49 | 3,555 | ||||||
| Depreciation and amortization | 5,306 | 195 | 2,357 | 15,459 | 195 | 10,422 | ||||||
| Provisions for impairment | 917 | — | 919 | 2,690 | — | 7,186 | ||||||
| Transaction costs | 199 | 2 | — | 3,169 | 2 | 535 | ||||||
| Interest expense, net | 926 | 173 | 2,363 | 4,741 | 173 | 10,712 | ||||||
| Gain on sales of real estate, net | (5,143) | — | 127 | (6,213) | — | (5,646) | ||||||
| Gain on forfeited earnest money deposit | — | — | — | (250) | — | — | ||||||
| Other (income) expense, net | 10 | — | — | 10 | — | — | ||||||
| NOI | 10,225 | 461 | 3,342 | 31,158 | 461 | 18,692 | ||||||
| Straight-line rental revenue | (271) | (15) | 349 | (1,688) | (15) | 1,037 | ||||||
| Amortization of above/below market lease intangibles | (164) | 2 | 78 | (504) | 2 | 563 | ||||||
| Cash NOI | $ | 9,790 | $ | 448 | $ | 3,769 | $ | 28,966 | $ | 448 | $ | 20,292 |
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 Consolidated Statement of Operations and Comprehensive Income (Loss).
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Quarterly Supplemental Information Fourth Quarter 2020
Table of Contents 2 03 Corporate Overview 04 Earnings Release 08 Quarterly Highlights 09 Consolidated Statement of Operations and Comprehensive Income (Loss) 10 Funds from Operations and Adjusted Funds from Operations 11 EBITDAre, Adjusted EBITDAre, NOI and Cash NOI 12 Consolidated Balance Sheets 13 Debt, Capitalization and Financial Ratios 14 Investment Activity 15 Portfolio Information 18 Lease Expiration Schedule 19 Non-GAAP Measures and Definitions 22 Forward Looking and Cautionary Statements
Corporate Overview 3 5910 North Central Expressway Suite 1600 Dallas, Texas, 75075 Phone: (972) 579 – 4825 Website: www.netstreit.com Corporate Headquarters Transfer Agent Computershare PO Box 505000 Louisville, Kentucky 40233 Phone: (866) 637 – 9460 Website: www.computershare.com Corporate Profile NETSTREIT Corp. (NYSE: NTST) is an internally managed Real Estate Investment Trust (REIT) based in Dallas, Texas that specializes in acquiring single-tenant net lease retail properties nationwide. The growing portfolio consists of high-quality properties leased to e-commerce resistant tenants with healthy balance sheets. Led by a management team of seasoned commercial real estate executives, NETSTREIT’s strategy is to create the highest quality net lease retail portfolio in the country in order to generate consistent cash flows and dividends for its investors. Mark Manheimer, Chief Executive Officer Andy Blocher, Chief Financial Officer Jeff Fuge, Senior Vice President of Acquisitions Randy Haugh, Senior Vice President of Finance Kirk Klatt, Senior Vice President of Real Estate Trish McBratney, SVP, Chief Accounting Officer Chad Shafer, Senior Vice President of Underwriting Management Team Todd Minnis – Chair Matthew Troxell – Lead Independent Michael Christodolou Heidi Everett Mark Manheimer Lori Wittman Robin Zeigler Board of Directors
Earnings Release 4 NETSTREIT REPORTS FOURTH QUARTER AND FULL YEAR 2020 FINANCIAL AND OPERATING RESULTS – Reports Net Income of $0.15 and $0.01 and Adjusted Funds from Operations (“AFFO”) of $0.20 and $0.69 per diluted share, for the Fourth Quarter and Full Year 2020, respectively – – Collected 100.0% of Fourth Quarter 2020 Contractual Rents as Contemplated in Original Leases – – Completed $409 Million of Acquisitions in 2020 – Dallas TX – March 4, 2021 – NETSTREIT (NYSE: NTST) (the “Company”), today announced financial and operating results for the fourth quarter and full year ended December 31, 2020. “2020 was a very important year for NETSTREIT, and we are extremely proud of all of our accomplishments. Our portfolio performed well throughout a period of elevated economic stress and we credit our sector-leading collections to our portfolio quality and the defensive characteristics that define our strategy. We also completed our Initial Public Offering, which enhances our access to capital as we look to continue to grow. Further, we continued to improve our already strong portfolio composition through thoughtful acquisitions and dispositions which resulted in a larger, more diversified and higher quality asset base, which is another example of our ability to execute our strategy to drive cash flow growth and generate a strong, safe yield over time,” said Mark Manheimer, Chief Executive Officer of NETSTREIT. “As we look ahead to 2021, we are focused on continuing to capitalize on our significant growth opportunity within the net lease sector, utilizing our dedicated platform and high-quality balance sheet.” FOURTH QUARTER AND FULL YEAR 2020 HIGHLIGHTS • Reported net income per diluted share of $0.15, Core Funds from Operations (“Core FFO”) per diluted share of $0.181 and AFFO per diluted share of $0.201 (see non-GAAP financial measures reconciliation) for the fourth quarter of 2020 • Reported net income per diluted share of $0.01, Core FFO per diluted share of $0.652 and AFFO per diluted share of $0.692 (see non-GAAP financial measures reconciliation) for the full year 2020 • Prior to giving any consideration to deferral or abatement arrangements granted as a result of COVID, the Company collected 100.0% of fourth quarter contractual rent. For the full year 2020, the Company collected 96.9% of contractual rent PORTFOLIO UPDATE As of December 31, 2020, the NETSTREIT portfolio was comprised of 203 properties, contributing $41.8 million of annualized base rent3, with a weighted-average remaining lease term of 10.5 years, of which 70.0% were leased to investment grade rated tenants and 8.0% were leased to 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 December 31, 2020.
Earnings Release 5 INVESTMENT ACTIVITY During the quarter ended December 31, 2020, the Company invested approximately $81.2 million in 26 properties at an initial cash capitalization rate of 6.8%. Acquisitions completed during the quarter had a weighted-average remaining lease term of 8.8 years, and 68.7% are occupied by investment grade rated tenants. Over the same period, the Company sold 12 properties for total proceeds of $37.4 million. The cash capitalization rate on the 12 properties was 6.6%. During the year ended December 31, 2020, the Company invested approximately $409 million in 124 properties at an initial cash capitalization rate of 6.7%. Acquisitions completed during the year had a weighted-average remaining lease term of 11.2 years, and 71.9% were occupied by investment grade rated tenants. Over the same period, the Company sold 15 properties, including one vacant property, for total proceeds of $50 million. The cash capitalization rate on the 14 occupied properties was 6.6%. Over the course of 2020, the Company’s portfolio increased from 94 properties to 203 properties. The portfolio’s weighted average lease term remaining improved from 10.1 years to 10.5 years, and the portfolio’s investment grade percentage increased from 63.7% to 70.0%. During the year, the Company added 23 new tenants, 4 new industries, and 10 new states to its portfolio. BALANCE SHEET AND LIQUIDITY At quarter end, total debt outstanding was $175 million, with a weighted average term of four years and a contractual interest rate, including the impact of the fixed rate swap, of 1.36% (excluding the impact of deferred fee amortization). Including the effect of the interest rate swap, 100% of the Company’s outstanding debt balances were at a fixed rate and the Company’s net debt to annualized adjusted EBITDA ratio was 2.8x. Additionally, the ending cash balance, which included $14.8 million of restricted cash held in 1031 exchange accounts, was $92.6 million, and the Company had an unused revolving line of credit with $250 million of capacity. DIVIDEND On March 3, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share for the first quarter of 2021, which will be paid on March 30, 2021 to shareholders of record on March 15, 2021. 2021 OUTLOOK On January 5, 2021, the Company announced the following external growth targets for full year 2021: • The Company expects acquisition activity, net of dispositions, to total $320 million • The Company expects to continue to review its portfolio and complete opportunistic dispositions to further improve portfolio diversification and mitigate risk
Earnings Release 6 In addition, the Company is introducing the following targets for full year 2021: • The Company expects cash G&A to be in the range of $11.0 to $12.0 million, with additional non-cash compensation expense of $3.0 to $4.0 million • The Company expects cash interest expense, including unused line of credit facility fees, of $3.0 to $3.5 million, and an additional $0.6 million of non-cash deferred financing fee amortization • The Company expects to incur state and franchise taxes in the range of $0.2 to $0.3 million which will be reported as “income taxes” in the Company’s financial statements for 2021. EARNINGS WEBCAST AND CONFERENCE CALL A conference call will be held on Friday, March 5, 2021 at 10:00 AM ET. During the conference call the Company’s officers will review fourth 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 March 12, 2021, 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 13714402. 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 27,897,168 and weighted average operating partnership units of 2,033,718 for the three-months ended December 31, 2020.
Earnings Release 7 (2) Per share amounts include weighted average common shares of 17,322,182 and weighted average operating partnership units of 3,807,022 for the twelve-months ended December 31, 2020. (3) Annualized base rent, or ABR, is calculated by multiplying (i) cash rental payments (a) for the month ended December 31, 2020 (or, if applicable, the next full month's cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of December 31, 2020, 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.
Quarterly Highlights (unaudited, in thousands, except share, per share data and square feet) 8 (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 $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Moody's, or NAIC. (4) Percentage calculations do not include any deferral or abatement arrangements granted as a result of the COVID-19 pandemic. (5) Tenants, or tenants that are subsidiaries of a parent entity (with such subsidiary making up at least 50% of the parent company total revenue), with a credit rating of BB+ (S&P), Ba1 (Moody's) or NAIC3 (National Association of Insurance Commissioners) or lower. Financial Results December 31, 2020 September 30, 2020 Net income (loss) 4,510$ (2,341)$ Net income (loss) per common share outstanding - diluted $ 0.15 (0.11)$ Funds from Operations (FFO) $ 5,513 2,582$ FFO per common share outstanding - diluted $ 0.18 0.11$ Core Funds from Operations (Core FFO) $ 5,513 3,473$ Core FFO per common share outstanding - diluted $ 0.18 0.15$ Adjusted Funds from Operations (AFFO) $ 5,934 4,777$ AFFO per common share outstanding - diluted $ 0.20 0.21$ Dividends per share 0.20$ 0.10$ Weighted average common shares outstanding - diluted 30,021,750 23,135,675 Portfolio Metrics Number of leases 203 189 Square feet 3,733,062 3,376,371 Occupancy 100.0% 100.0% Weighted average lease term remaining (years) (1 ) 10.5 11.1 Investment grade (rated) - % of ABR (2) 70.0% 68.0% Investment grade profile (unrated) - % of ABR (3) 8.0% 6.4% Rent Collection Update - Percentage of Contractual Rent (4) Collection % % of Total Due Collection % % of Total Due Investment grade (rated) (2) 100.0% 68.9% 99.4% 63.9% Investment grade profile (unrated) (3) 100.0% 8.0% 100.0% 7.3% Sub-investment grade (rated) (5) 100.0% 8.7% 91.4% 8.0% Sub-investment grade profile (unrated) 100.0% 14.4% 96.4% 20.8% Total 100.0% 100.0% 98.1% 100.0% Sepetember 30, 2020 Three Months Ended Three Months Ended December 31, 2020
Consolidated Statement of Operations and Comprehensive Income (Loss) (unaudited, in thousands, except share and per share data) 9 (1) Represents the costs incurred by the Company to facilitate the private offering and formation transactions and the initial public offering, as well as costs associated with abandoned acquisitions and other acquisition related expenses. (2) Interest expense is net of interest income from interest bearing accounts. Three Months Ended Predecessor Predecessor December 31, 2020 For the Period from December 23 to December 31, 2019 For the Period from October 1 to December 22, 2019 December 31, 2020 For the Period from December 23 to December 31, 2019 For the Period from January 1 to December 22, 2019 REVENUES Rental revenue (including reimbursable) 11,450$ 513$ 3,602$ 33,727$ 513$ 19,805$ OPERATING EXPENSES Property 1,225 52 260 2,569 52 1,113 General and administrative 3,500 49 1,099 11,340 49 3,555 Depreciation and amortization 5,306 195 2,357 15,459 195 10,422 Provisions for impairment 917 - 919 2,690 - 7,186 Transaction costs (1 ) 199 2 - 3,169 2 535 Total operating expenses 11,147 298 4,635 35,227 298 22,811 OTHER INCOME (EXPENSE) Interest expense, net (2) (926) (173) (2,363) (4,741) (173) (10,712) Gain (loss) on sales of real estate, net 5,143 - (127) 6,213 - 5,646 Gain on forfeited earnest money deposit - - - 250 - - Other income (expense), net (10) - - (10) - - Total other income (expense), net 4,207 (173) (2,490) 1,712 (173) (5,066) Net income (loss) 4,510$ 42$ (3,523) 212 42 (8,072) Net income (loss) attributable to noncontrolling interests 281 14 - (518) 14 - Preferred stock dividends and redemption premium - - - 42 - - Net income (loss) attributable to common stockholders 4,229$ 28$ (3,523)$ 688$ 28$ (8,072)$ Amounts available to common stockholders per common share: Basic 0.15$ -$ N/A 0.04$ -$ N/A Diluted 0.15$ -$ N/A 0.01$ -$ N/A Weighted average common shares outstanding: Basic 27,897,168 8,860,760 N/A 17,322,182 8,860,760 N/A Diluted 30,021,750 8,860,760 N/A 21,157,996 8,860,760 N/A OTHER COMPREHENSIVE INCOME (LOSS) Net income (loss) 4,510$ 42$ (3,523)$ 212$ 42$ (8,072)$ Change in unrealized gain (loss) on derivatives, net 381 - - 253 - 55 Total comprehensive income (loss) 4,891 42 (3,523) 465 42 (8,017) Comprehensive income (loss) attributable to noncontrolling interests 316 14 - (500) 14 - Comprehensive income (loss) attributable to common stockholders 4,575$ 28$ (3,523)$ 965$ 28$ (8,017)$ Twelve Months Ended Successor Successor
Funds From Operations and Adjusted Funds From Operations (unaudited, in thousands, except share and per share data) 10 (1) These expenses represent a subset of Transaction Costs as presented on the Consolidated Statement of Operations and Comprehensive Income (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. Predecessor Predecessor December 31, 2020 For the Period from December 23 to December 31, 2019 For the Period from October 1 to December 22, 2019 December 31, 2020 For the Period from December 23 to December 31, 2019 For the Period from January 1 to December 22, 2019 GAAP Reconciliation: Net income (loss) 4,510$ 42$ (3,523)$ 212$ 42$ (8,072)$ Depreciation and amortization of real estate 5,229 188 2,357 15,154 188 10,422 Provisions for impairment 917 - 919 2,690 - 7,186 Loss (gain) on sale of real estate, net (5,143) - 127 (6,213) - (5,646) Funds from Operations (FFO) 5,513 230 (120) 11,843 230 3,890 Gain on forfeited earnest money deposit - - - (250) - - 144A and IPO Transaction Costs (1 ) - - 449 2,170 - 450 Core Funds from Operations (Core FFO) 5,513 230 329 13,763 230 4,340 Straight-line rental revenue (271) (15) 349 (1,688) (15) 1,037 Amortization of deferred financing costs 157 14 249 621 14 1,024 Amortization of above/below-market leases (164) 2 78 (504) 2 563 Non-cash compensation expense 699 - - 2,452 - - Adjusted Funds from Operations (AFFO) 5,934$ 231$ 1,005$ 14,644$ 231$ 6,964$ FFO per common share outstanding - diluted 0.18$ 0.02$ N/A 0.56$ 0.02$ N/A Core FFO per common share outstanding - diluted 0.18$ 0.02$ N/A 0.65$ 0.02$ N/A AFFO per common share outstanding - diluted 0.20$ 0.02$ N/A 0.69$ 0.02$ N/A Dividends per share 0.20$ -$ N/A 0.30$ -$ N/A Dividends per share as a percent of AFFO 101.2% -$ N/A 43.3% -$ N/A Weighted average common shares outstanding - basic 27,897,168 8,860,760 N/A 17,322,182 8,860,760 N/A Effect of weighted average OP Units outstanding 2,033,718 4,449,019 N/A 3,807,022 4,449,019 N/A Effect of weighted average dilutive securities 90,864 - N/A 28,792 - N/A Weighted average common shares outstanding - diluted 30,021,750 13,309,779 N/A 21,157,996 13,309,779 N/A Series A preferred stock balance (2) -$ -$ -$ -$ -$ -$ Series A preferred stock dividends and redemption premium -$ -$ -$ 42$ -$ -$ Supplemental Information Deferred rent, net (3) 3$ -$ -$ (183)$ -$ -$ Recurring capital expenditures -$ -$ -$ -$ -$ -$ Twelve Months EndedThree Months Ended Successor Successor
EBITDAre, Adjusted EBITDAre, NOI and Cash NOI (unaudited, in thousands) 11 (1) These expenses represent a subset of Transaction Costs as presented on the Consolidated Statement of Operations and Comprehensive Income (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. Predecessor Predecessor December 31, 2020 For the Period from December 23 to December 31, 2019 For the Period from October 1 to December 22, 2019 December 31, 2020 For the Period from December 23 to December 31, 2019 For the Period from January 1 to December 22, 2019 GAAP Reconciliation: Net income (loss) 4,510$ 42$ (3,523)$ 212$ 42$ (8,072)$ Depreciation and amortization of real estate 5,229 188 2,357 15,154 188 10,422 Amortization of above/below-market lease intangibles (164) 2 78 (504) 2 563 Non-real estate depreciation and amortization 77 7 - 305 7 - Interest expense, net 926 173 2,363 4,741 173 10,712 EBITDA 10,578 412 1,275 19,908 412 13,625 Provision for impairment 917 - 919 2,690 - 7,186 Loss (gain) on sale of real estate, net (5,143) - 127 (6,213) - (5,646) EBITDAre 6,352 412 2,321 16,385 412 15,165 Straight-line rental revenue (271) (15) 349 (1,688) (15) 1,037 Gain on forfeited earnest money deposit - - - (250) - - 144A and IPO Transaction Costs (1) - - 449 2,170 - 450 Non-cash compensation expense 699 - - 2,452 - - Adjusted EBITDAre 6,780$ 397$ 3,119$ 19,069$ 397$ 16,652$ Adjusted EBITDAre 6,780$ Adjustments for intraquarter acquisitions and dispositions (2) 467 Annualized Adjusted EBITDAre 28,988$ Net debt / Annualized Adjusted EBITDAre 2.8x GAAP Reconciliation: Net income (loss) 4,510$ 42$ (3,523)$ 212$ 42$ (8,072)$ General and administrative 3,500 49 1,099 11,340 49 3,555 Depreciation and amortization 5,306 195 2,357 15,459 195 10,422 Provisions for impairment 917 - 919 2,690 - 7,186 Transaction costs 199 2 - 3,169 2 535 Interest expense, net 926 173 2,363 4,741 173 10,712 Loss (gain) on sale of real estate, net (5,143) - 127 (6,213) - (5,646) Gain on forfeited earnest money deposit - - - (250) - - Other (income) expense, net 10 - - 10 - - NOI 10,225 461 3,342 31,158 461 18,692 Straight-line rental revenue (271) (15) 349 (1,688) (15) 1,037 Amortization of above/below-market lease intangibles (164) 2 78 (504) 2 563 Cash NOI 9,790 448 3,769 28,966 448 20,292 Adjustments for intraquarter acquisitions and dispositions (2) 467 Normalized Cash NOI 10,257$ Property Operating Expense Coverage Property operating expense reimbursement 1,157$ 69$ 117$ 2,219$ 69$ 727$ Property operating expenses (1,225) (52) (260) (2,569) (52) (1,113) Property operating expenses, net (68)$ 17$ (143)$ (349)$ 17$ (386)$ Twelve Months Ended SuccessorSuccessor Three Months Ended
Consolidated Balance Sheets (unaudited, in thousands, except share data) 12 As of As of December 31, 2020 December 31, 2019 ASSETS Real estate, at cost: Land 189,373$ 83,996$ Buildings and improvements 358,360 140,057 Total real estate, at cost 547,733 224,053 Less accumulated depreciation (10,111) (132) Real estate held for investment, net 537,622 223,921 Assets held for sale 14,802 8,532 Cash, cash equivalents and restricted cash 92,643 169,319 Acquired lease intangible assets, net 75,024 28,846 Other assets, net 5,724 3,304 Total assets 725,815$ 433,922$ LIABILITIES AND EQUITY Liabilities: Term loan, net 174,105$ 173,913$ Lease intangible liabilities, net 16,930 4,672 Liabilities related to assets held for sale 399 189 Accounts payable, accured expenses and other liabilities 6,308 2,716 Total liabilities 197,742 181,490 Equity: Stockholders' equity Common stock, $0.01 par value, 400,000,000 shares authorized; 28,203,545 and 8,860,760 shares issued and outstanding as of December 31, 2020 and 2019, respectively 282$ 89$ Additional paid-in capital 501,045 164,416 Retained (loss) earnings (7,464) 28 Accumulated other comprehensive income 235 - Total stockholders' equity 494,098 164,533 Noncontrolling interests 33,975 87,899 Total equity 528,073 252,432 Total liabilities and equity 725,815$ 433,922$
Debt, Capitalization, and Financial Ratios (unaudited, in thousands, except share data) 13 (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 became unsecured. (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 $1.2 million associated with the revolver, and a net liability balance of $0.9 million related to the term loan. (7) Balances includes $14.8 million of restricted cash held in 1031 exchange accounts. (8) The 125 shares of 12% Series A Preferred Stock were fully redeemed on August 18, 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 December 31, 2020 closing price of $19.49 per share. As of December 31, 2020 Weighted Average Debt Summary Maturity Date Principal Balance Interest Rate (1) Rate Type Years to Maturity Unsecured revolver (2)(3)(4) December 23, 2023 -$ n/a Floating 3.0 years Unsecured term loan (2)(5) December 23, 2024 175,000 1.36% Fixed 4.0 years Principal amount of total debt 175,000 Deferred financing costs, net (6) (2,094) Carrying value of total debt 172,906$ Net Debt Balance Principal amount of total debt 175,000$ Less: Cash, cash equivalents and restricted cash (7 ) (92,643) Net Debt 82,357$ Series A preferred stock balance (8) - Net Debt + Preferred Stock 82,357$ Key Debt Covenant Information Required Actual Consolidated total leverage ratio ≤ 60.0% 24.9% Fixed charge coverage ratio (9) ≥ 1.25x 7.33x Maximum secured indebtedness ≤ 40.0% 0.0% Maximum recourse indebtedness ≤ 10.0% 0.0% Unencumbered leverage ratio ≤ 60.0% 25.1% Unencumbered debt yield (1 0) ≥ 10.0% 23.0% Unencumbered interest coverage ratio ≥ 2.00x 10.68x Liquidity Balance Unused unsecured revolver capacity 250,000$ Cash, cash equivalents and restricted cash (7 ) 92,643 Total Liquidity 342,643$ Ending Equity Market Equity Shares/Units Capitalization % of Total Preferred stock - -$ 0.0% Common shares (1 1 ) 28,203,545 549,687 94.2% OP units (1 1 ) 1,751,882 34,144 5.8% Total 29,955,427 583,831$ 100.0% Enterprise Value Balance % of Total Principal amount of total debt 175,000$ 23.1% Equity market capitalization 583,831 76.9% Total enterprise value 758,831$ 100.0%
Investment Activity (unaudited, dollars in thousands) 14 (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. December 31, September 30, 2020 2020 Acquisitions: Number of Transactions 19 9 Number of Properties 26 30 Gross Investment (1) 81,246$ 102,638$ Cash Capitalization Rate (2) 6.8% 6.5% Dispositions: Number of Occupied Properties 12 1 Number of Vacant Properties - - Net Book Value (3) 31,144$ 1,806$ Proceeds (4) 37,362$ 1,868$ Cash Capitalization Rate (on occupied properties only) (5) 6.6% 10.4% Three Months Ended
Portfolio Information (unaudited, dollars in thousands) 15 (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 $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Moody's, or NAIC. (4) Tenants, or tenants that are subsidiaries of a parent entity (with such subsidiary making up at least 50% of the parent company total revenue), with a credit rating of BB+ (S&P), Ba1 (Moody's) or NAIC3 (National Association of Insurance Commissioners) or lower. Portfolio Metrics Number of leases 203 Number of states 38 Square feet 3,733,062 Tenants 56 Industries 23 Occupancy 100.0% Weighted average lease term remaining (years) (1 ) 10.5 Tenant Quality Number of Leases ABR % of ABR Investment grade (rated) (2) 147 29,264$ 70.0% Investment grade profile (unrated) (3) 12 3,358 8.0% Sub-investment grade (rated) (4) 8 3,139 7.5% Sub-investment grade profile (unrated) 36 6,042 14.5% Total 203 41,804$ 100.0% Top 20 Tenants Number of Leases ABR % of ABR Credit rating 7-Eleven 15 3,729$ 8.9% AA- / Baa2 Lowe's 4 3,578 8.6% BBB+ / Baa1 Advance Auto Parts 33 3,193 7.6% BBB- / Baa2 Sam's / Walmart 4 2,720 6.5% AA / Aa2 CVS 12 2,221 5.3% BBB / Baa2 Dollar General 21 1,991 4.8% BBB / Baa2 Ollie's 7 1,918 4.6% IG Profile Walgreens 4 1,329 3.2% BBB / Baa2 Ahold Delhaize (Food Lion / Stop & Shop) 2 1,268 3.0% BBB / Baa1 Home Depot 1 1,202 2.9% A / A2 Kohl's 2 1,147 2.7% BBB- / Baa2 Tractor Supply 5 1,016 2.4% BBB / Baa1 Burlington 2 903 2.2% BB / Ba2 Best Buy 2 854 2.0% BBB / Baa1 Floor & Décor 1 815 2.0% BB- / Ba3 Fresenius 3 787 1.9% BBB / Baa3 Dollar Tree / Family Dollar 7 783 1.9% BBB / Baa2 Camping World 1 705 1.7% B / B1 BB&T (Truist) 5 660 1.6% A- / A3 Jack's 4 656 1.6% Unrated Total 135 31,476$ 75.3%
Portfolio Information (cont’d) (unaudited, dollars in thousands) 16 State Number of Leases ABR % of ABR Texas 31 6,933$ 16.6% Georgia 13 3,365$ 8.0% Virginia 4 2,551$ 6.1% Mississippi 12 2,324$ 5.6% Ohio 11 2,271$ 5.4% Florida 12 1,803$ 4.3% Illinois 5 1,761$ 4.2% Pennsylvania 13 1,748$ 4.2% New York 4 1,681$ 4.0% Alabama 11 1,633$ 3.9% Indiana 7 1,508$ 3.6% Michigan 4 1,383$ 3.3% Tennessee 5 1,249$ 3.0% Arkansas 7 1,182$ 2.8% Minnesota 4 1,151$ 2.8% Missouri 5 960$ 2.3% California 1 815$ 2.0% New Jersey 6 780$ 1.9% New Mexico 2 583$ 1.4% Wisconsin 7 545$ 1.3% North Carolina 1 522$ 1.2% Massachusetts 2 479$ 1.1% Kentucky 1 445$ 1.1% Washington 1 441$ 1.1% Vermont 7 440$ 1.1% Oklahoma 3 416$ 1.0% South Carolina 4 411$ 1.0% Arizona 1 384$ 0.9% Iowa 4 320$ 0.8% Maryland 2 297$ 0.7% Colorado 2 265$ 0.6% Utah 1 253$ 0.6% Kansas 2 247$ 0.6% West Virginia 2 223$ 0.5% New Hampshire 3 157$ 0.4% North Dakota 1 92$ 0.2% Idaho 1 99$ 0.2% Louisiana 1 84$ 0.2% Total 203 41,804$ 100.0%
Portfolio Information (cont’d) (unaudited, dollars in thousands) 17 Industry Defensive Category Number of Leases ABR % of ABR Home Improvement Necessity 15 6,737$ 16.1% Discount Retail Discount 13 4,576 10.9% Auto Parts Necessity 48 4,169 10.0% Convenience Stores Service 17 4,161 10.0% Drug Stores & Pharmacies Necessity 16 3,551 8.5% Dollar Stores Discount 28 2,774 6.6% General Retail Necessity 4 2,658 6.4% Quick Service Restaurants Service 15 2,380 5.7% Grocery Necessity 5 2,248 5.4% Farm Supplies Necessity 5 1,016 2.4% Casual Dining Service 5 904 2.2% Furniture Stores Other 2 872 2.1% Consumer Electronics Other 2 854 2.0% Automotive Service Service 9 807 1.9% Healthcare Necessity 3 787 1.9% RV Sales Other 1 705 1.7% Banking Necessity 5 660 1.6% Apparel Other 4 506 1.2% Arts & Crafts Other 1 451 1.1% Wholesale Warehouse Club Necessity 1 417 1.0% Equipment Rental and Leasing Other 2 237 0.6% Gift, Novelty, and Souvenir Shops Other 1 200 0.5% Home Furnishings Other 1 134 0.3% Total 203 41,804$ 100.0% Defensive Category Number of Leases ABR % of ABR Necessity 102 22,243$ 53.2% Service 46 8,251 19.7% Discount 41 7,349 17.6% Other 14 3,960 9.5% Total 203 41,804$ 100.0%
Lease Expiration Schedule (unaudited, dollars in thousands) 18 ABR Expiring Year of Number of ABR as a % of Expiration Leases Expiring Expiring Total Portfolio 2021 - -$ 0.0% 2022 - - 0.0% 2023 3 267 0.6% 2024 1 92 0.2% 2025 6 2,280 5.5% 2026 7 1,816 4.3% 2027 8 2,740 6.6% 2028 20 3,114 7.4% 2029 22 3,335 8.0% 2030 26 6,074 14.5% 2031 30 4,868 11.6% 2032 13 3,329 8.0% 2033 20 2,687 6.4% 2034 9 1,165 2.8% 2035 23 7,570 18.1% 2036 4 667 1.6% 2037 2 273 0.7% 2038 - - 0.0% 2039 6 845 2.0% 2040 1 240 0.6% 2041 1 192 0.5% 2042 - - 0.0% 2043 1 250 0.6% TOTAL 203 41,804$ 100%
Non-GAAP Measures and Definitions 19 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.
Non-GAAP Measures and Definitions (cont’d) 20 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.
Non-GAAP Measures and Definitions (cont’d) 21 Other Definitions ABR means annualized base rent. ABR is calculated by multiplying (i) cash rental payments (a) for the month ended December 31, 2020 (or, if applicable, the next full month’s cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of December 31, 2020, plus (b) for properties under development, the first full month’s permanent cash rent contractually due after the development period by (ii) 12. Defensive Category is considered by us to represent tenants that focus on necessity goods and essential services in the retail sector, including discount stores, grocers, drug stores and pharmacies, home improvement, automotive service and quick-service restaurants, which we refer to as defensive retail industries. The defensive sub-categories as we define them are as follows: (1) Necessity, which are retailers that are considered essential by consumers and include sectors such as drug stores, grocers and home improvement, (2) Discount, which are retailers that offer a low price point and consist of off-price and dollar stores, (3) Service, which consist of retailers that provide services rather than goods, including, tire and auto services and quick service restaurants, and (4) Other, which are retailers that are not considered defensive in terms of being considered necessity, discount or service, as defined by us. Leases are individual properties with a distinct lease agreement in place, and in the case of master lease arrangements each property under the master lease is counted as a separate lease. Net Debt is computed by us as the principal amount of total debt outstanding less cash and cash equivalents. Occupancy is expressed as a percentage, and it is the number of economically occupied properties divided by the total number of properties owned. Properties under development are excluded from the calculation. OP units means operating partnership units not held by NETSTREIT.
Forward Looking and Cautionary Statements 22 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.
ntstinvestorpresentation
Investor Presentation March 2021
Disclaimer 2 This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements concerning our business and growth strategies, investment, financing and leasing activities and trends in our business, including trends in the market for single-tenant, retail commercial real estate. 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.
Company & Investment Highlights 3 NETSTREIT Is Built on a Foundation of Strength on Both Sides of the Balance Sheet, Led by Seasoned Leadership Team with Exceptional Track Record High-Quality, Diversified, and Defensive Net Lease Retail Portfolio Conservative Capitalization to Support Accretive Growth Active Asset Management to Achieve Optimal Portfolio Performance2 Disciplined Underwriters with Dual Focus on Credit AND Real Estate3 Multifaceted Investment Strategy Leveraging Deep Industry Relationships4 1 Strategy Overview and Performance Platform Positioned for Scale5
NETSTREIT STRATEGY BY THE NUMBERS1 Strategy Overview and Performance 4 Investment grade tenancy provides defensive, consistent performance through economic cycles ▪ High-quality tenancy creates bond-like leases with high rent collections during times of disruption ▪ 78% of portfolio consisted of investment grade tenants, or tenants with an investment grade profile Defensive nature of NETSTREIT portfolio strategy ▪ Focused on defensive industries such as necessity, discount, or service-oriented retailers, with e-commerce resistant strategies ▪ No exposure to experiential retail Source: Company data. Portfolio data represents portfolio as of 12/31/2020 unless otherwise noted. 1. Figures represent percentage of ABR unless otherwise noted. 2. Represents tenants with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Moody's, or NAIC. 3. Defensive retail tenancy based on rent from tenants in necessity, discount or service-oriented industries. 4.NETSTREIT rent collection percentages are based on actual cash rent collected divided by contractual rent prior to any COVID-19 related lease modifications. 5. NETSTREIT has collected 100% of rent in accordance with in-place lease agreements from June 2020 to December 2020. Investment Grade Tenancy 70.0% Investment Grade Profile Tenancy2 8.0% Defensive Retail Tenancy3 90.5% Rent Collections4: Q4 2020 100.0% Q3 2020 98.1% Q2 2020 87.2% Unresolved Requests for COVID Related Rent Relief5 0% Experiential Retail Exposure (Cinemas, Fitness, Childcare, Family Entertainment) 0% 1 High level of rent collections ▪ 100% of tenants paid pre-COIVD contractual rent in the fourth quarter NETSTREIT’s focus on defensive, credit tenancy in essential industries is a deliberate and longstanding strategy, rather than a reactionary shift to a post- COVID-19 world
NTST’s Stable, Defensive Cash Flow Profile Drives Superior Risk-Adjusted Returns 5 Rent Collections Source: Company Filings, SNL Financial. 1. SRC includes only October and November 2020 collections. 2. NNN and NTST investment grade concentrations are as of 4Q20 and FCPT is as of 2Q20, all others as of 3Q20. EPRT and STOR investment grade concentration assumed to be 0%, although it is not disclosed by either company. 3. Metrics as of 4Q20 for FCPT, NNN and NTST, all others as of 3Q20. 4Q20 Rent Collections1 3Q20 Rent Collections 2Q20 Rent Collections 100% 100% 99% 96% 94% 93% 91% 90% NTST FCPT ADC NNN O SRC EPRT STOR Investment Grade %2,3 Lease Rollover3 99% 98% 97% 93% 90% 90% 90% 87% FCPT NTST ADC O NNN EPRT SRC STOR 92% 90% 87% 87% 75% 73% 69% 69% FCPT ADC NTST O SRC STOR EPRT NNN 0.6% 0.7% 1.6% 2.1% 5.3% 11.2% 13.8% 15.6% 10.5 14.6 14.0 10.2 9.8 10.7 9.9 9.0 NTST EPRT STOR FCPT ADC NNN SRC O Lease Rollover % ('21-'23) WALT 66% 71% 70% 62% 49% 24% 19% 0% 0% FCPT NTST ADC O SRC NNN STOR EPRT Darden 1
8.9% 8.6% 7.6% 6.5% 5.3% 4.8% 4.6% 3.2% 3.0% 2.9% Portfolio Overview 6 Sources: Company data. Portfolio data represents portfolio as of 12/31/2020. High-quality, diversified portfolio consisting of 70% investment grade tenants across 38 states Key Portfolio Stats Properties 203 States 38 Portfolio Square Feet (in millions) 3.7 Tenants 56 Industries 23 % Occupancy 100.0% % Investment Grade Tenants (by ABR) 70% % Defensive Industry Exposure (by ABR) 91% Weighted Average Lease Term Remaining (Years) 10.5 Lease Turnover Through 2024 (by ABR) 0.9% National Footprint Across Attractive Markets Top 10 Tenants by % of ABR Investment Grade Rated Baa2 / AA- Baa2 / BBB Aa2 / AA Baa2 / BBB High-Quality Unrated 2 >1% and <3% ABR <1% ABR >5% and <10% ABR >3% and <5% ABR 0% ABR AK HI WA OR MT CA AZ WY NV ID UT CO NM TX OK ND SD NE KS LA AR MO IA MN WI IL IN MI OH KY TN FL MS AL GA SC NC VAWV PA DE NJ NY ME VT NH MA MD CT RI >10% ABR Baa2 / BBB A2 / A Baa1 / BBB+ Baa2 / BBB- Baa1 / BBB
Convenience Stores: Discount Retail: Home Improvement: Auto Parts: Drug Stores & Pharmacies: Portfolio Diversification In Defensive Retail Sectors 7 Source: Company data. Portfolio data represents portfolio as of 12/31/2020. Note: Due to rounding, respective defensive retai l sector exposure may not precisely reflect the absolute figures. NETSTREIT offers a national diversified portfolio comprised primarily of defensive retail tenants Top Industries (% of ABR)Necessity Discount Other 1 16% 2 11% 3 10% 4 10% 5 9% Service 2 90.5% of ABR Necessity Discount Service 9.5% 53.2% 17.6% 19.7%
Pre-144A (12/23/19) 144A to IPO IPO (8/13/20) Since IPO Current (12/31/20) Properties 93 70 163 40 203 States 28 6 34 4 38 Portfolio Size 1.4M SF 1.6M SF 3.0M SF 0.7M SF 3.7M SF ABR $17.8M $16.7M $34.5M $7.3M $41.8M Acquisition Volume – ~$264M – ~$146M – Acquisition Cap Rate – 6.6% – 6.8% – Value of Dispositions – ~$2M – ~$31M – Disposition Cap Rate – 5.8% – 6.8% – Gross Asset Value ~$247M ~$262M ~$509M ~$115M ~$624M IG & IG Profile Concentration 1,2 64% +8% 72% +6% 78% Top 10 Tenant Concentration 1 64% (7%) 57% (2%) 55% Per Randy H Top Five Tenants 1 6.4% 7.5% 7.9% 8.9% 11.9%Baa2 / BBB Baa2 / BBB Baa1 / BBB+ Baa2 / BBB Baa2 / BBB- 4.9% 5.2% 6.1% 7.9% 12.7%Baa1 / AA- Aa2 / AA Baa2 / BBB IG Profile Baa1 / BBB+ 5.3% 6.5% 7.6% 8.6% 8.9%Baa1 / AA- Baa1 / BBB+ Baa2 / BBB- Aa2 / AA Baa2 / BBB NTST Portfolio Transformation 8 Source: Company Filings and Company-provided data. 1. Calculated as % of ABR. 2. IPO and Current include high quality unrated tenants with investment grade credit metrics that have not received an investment rating. NETSTREIT has prudently allocated offering proceeds and recycled capital to grow the scale of its asset base while also improving portfolio quality through further diversification and increased exposure to defensive credit tenancy $115 ( 5~$262M 2
$74.2 $150.5 $102.6 $81.2 1Q'20 2Q'20 3Q'20 4Q'20 Completed Acquisitions New Quarterly Acquisitions 2020 Quarterly Investment Activity 9 Source: Company data. Portfolio data represents portfolio as of 12/31/2020. 1. Measured quarterly acquisition at purchase price divided by portfolio at the beginning of the quarter shown. ($ in millions) Average Acquisition Activity per Quarter = $102 million Cumulative Acquisitions in 2020 Properties Acquired: 4 124 Total Acquisitions 24 44 30 26 $224.7 $327.3 $408.5
Active Asset Management 10 NETSTREIT continuously tracks property performance and stratifies the portfolio to achieve consistent cash flows and balanced growth for its investors Source: Company data. Since inception, the Company has disposed of 47 properties totaling approximately $136.3 million, while also acquiring high-quality assets that have enhanced scale and materially improved portfolio performance metrics Identify properties not meeting strategy and/or risk management criteria (i.e. rent coverage) Periodically review all properties for changes in performance, credit, and local conditions Pursue opportunities that align with objectives Practice disciplined underwriting strategy Leverage 1031 exchange transfers where possible to access deep, non- institutional market for portfolio optimization Strategic Recycling Disciplined Acquisitions Perpetual Stratification Active Monitoring Existing portfolio has been carefully curated 2
Three-Part Underwriting Philosophy 11 NETSTREIT leverages a disciplined, three-pronged approach to underwriting potential acquisitions which positions the Company to benefit from superior downside protection on its investments REAL ESTATE VALUATION UNIT-LEVEL PROFITABILITY • Review underlying key real estate metrics to maximize re-leasing potential • Location analysis • Alternative use analysis • Determine rent coverage (min. 2.0x) and cost variability • Assess relative to corporate stability / real estate merits C B TENANT CREDIT UNDERWRITING • Evaluate corporate level financials • Assess business risks • Determine ownership/sponsorship • For Non-IG tenants, establish NETSTREIT implied credit rating A L e v e l o f U n d e rw ri ti n g E m p h a s is 3
Tenant Credit Underwriting 12 NETSTREIT employs a credit-focused underwriting strategy for all tenants – the MOST IMPORTANT element of the Company’s underwriting process that drives stable revenue and long-term return on investment Source: Company data. Portfolio data represents portfolio as of 12/31/2020. 1. IG stands for investment grade. Investment Grade (rated) Investment Grade Profile (unrated) Sub-IG (rated) & Sub-IG Profile (unrated)(1) Description • Validated financial strength and stability • Professional management with standardized operational practices • Focus on corporate guarantee credit • Lower relative yields • Higher competition for deals • IG-caliber balance sheets without explicit rating • Threshold metrics: • >$1B in Sales • Max Debt / Unadjusted EBITDA of 2.0x • Well-capitalized retailers • National footprint with strong brand equity • Focus on real estate quality / unit-level profitability • Higher relative yields • Lower competition for deals Durability • Coverage and credit enhancements required given more susceptible to market disruptions % Of ABR1 70% 8% 22% Lease Terms (WALT, Rent Bumps, etc.) Less negotiating leverage More negotiating leverage Most negotiating leverage Representative Tenants 78% Total Defensive, consistent performance through economic cycles 3 A
Focus on Investment Grade Tenants 13 Investment grade tenants have outperformed during economic downturns and largely avoided bankruptcy Sources: Capital IQ, Company data, The Deal Pipeline, Bloomberg, SNL Financial 1. Indicates best credit rating held after 1/1/2005 and date when the respective credit rating was assigned. Some credit ratings are pre-2005. Major Net Lease Retail Tenant Bankruptcies (2009 – 2020) Retail Tenant Bankruptcy Filing Date Best Credit Rating Prior to Filing (S&P / Moody’s)1 Investment Grade? Mar-20 NR / NR Jan-19 BB- (May-01) / B2 (Apr-01) Oct-18 BB+ (Mar-05) / Ba1 (Mar-05) Oct-18 B+ (Sep-15) / B1 (July-15) Sep-17 BB (Mar-04) / B1 (Aug-10) Mar-17 NR / NR Mar-16 B (Mar-06) / B2 (Mar-06) Jan-12 B (Nov-04) / NR Feb-11 NR / NR Mar-09 NR / NR A3
Real Estate Valuation 14 Real Estate closely follows Credit as a top priority: NETSTREIT utilizes a ground-up framework rooted in real estate fundamentals to underpin its valuation and further quantify the upside potential for a transaction Market-Level Considerations Property-Level Considerations • Fungibility of building for alternative uses • Replacement cost • Location analysis • Traffic counts • Nearby uses and traffic drivers, complementary nature thereof • Accessibility and parking capacity • Ingress and egress • Visibility / signage • Vacancy analysis • Marketability of the real estate without current tenant • List of likely replacement tenants • Rent analysis • Replacement rent versus current rent • Demographic analysis • Current demographics plus trends and forecasts • Competitive analysis • Market position versus competing retail corridors B3
Unit-Level Profitability 15 In assessing unit-level financial performance, NETSTREIT focuses on mission-critical properties with strong rent coverage and higher variability in operating costs Obtain Financial Information Perform Financial Analysis 2 Assess Investment Merits 1 3 • Provides clarity into location-specific performance • Analyze store demand dynamics, cost structure and liquidity profile • Determine whether property meets investment criteria • Obtain unit-level financial information from parent company if possible • If financials are not provided, utilize data provided by third party vendors to estimate sales by location • Third party data includes: • Cell phone traffic • Point of sales (POS) data • Triangulate P&L based on available information • Sales (per data vendors) • EBITDAR margin (per financials) • Rent (known quantity) • Account for variability in business model cost structure • Higher proportion of fixed costs = more variability in rent coverage • Determine store ranking within tenant’s broader operating portfolio based on estimated sales Key Unit-Level Investment Criteria Minimum 2.0x Rent Coverage✓ Higher Cost Variability✓ Ranks in Top Half of Tenant’s Store Portfolio ✓ C3
Portfolio Strategy / Investment Philosophy 16 Source: Company data. Portfolio data represents portfolio as of 12/31/2020. 1. Portfolio statistics by percentage of ABR. Current MetricsInvestment Philosophy Portfolio Strategy Defensive Tenancy in Necessity-Based and E-commerce-Resistant Industries1 91%Primarily Resilient, Cycle-Tested Investment Grade Credit Tenants with Durable Cash Flows1 >60% 78% (70% Investment Grade Credit and 8% Investment Grade Profile) Granular Assets in Highly Fragmented, Undercapitalized Market Segment $3.1M Avg. Asset Size $1 to $10M Avg. Asset Size Net Lease Retail Assets with Long Lease Term Benefiting From Contractual Rent Growth >10 Year WALT 10.5 Year WALT Diversification by Industry, Tenant, State1 <15% Industry <50% Top 10 Tenants <15% State 16% Industry 55% Top 10 Tenants 17% State Significant Focus on Fundamental Real Estate Underwriting Attractive cost basis with durable valuation supported by market rents and demos, physical structure and location, and alternative use analyses 4
Growth Strategy: Generating Both Quality & Quantity 17 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 Type Description Investment Source Commentary Current Owners Brokerage Network Development Partners Tenant Relationships Private Equity Existing Stabilized Acquire operating properties on the open market • Deepest and most liquid opportunity set • Actively monitored Blend & Extend Acquire single-tenant property with short-term lease • Blend existing rent rate with new rate to extend lease term to at least 12 years Build-to-Suit ("BTS") Fund construction for single-tenant property with long-term lease • Key driver of higher risk-adjusted returns • Collaborate in design and construction of property Reverse Build-to-Suit Acquire a BTS property upon completion • Strong tenant relationship upon acquisition • Long lease terms, higher cap rates, comparable risk Sale- Leaseback Acquire single-tenant property with a simultaneous long-term lease back to the seller • Capitalize on likelihood of increased corporate real estate monetization in light of current disruption 4
Acquisition Case Study: Investment Grade (rated) 18 Walmart Supercenter and Sam’s Club – Tupelo, MS Sources: S&P Global Market Intelligence, Company data. Market data as of 3/4/2021. 1. Represents the twelve months ended 1/31/2021. 2. Reflects long-term debt outstanding as of 1/31/2021. 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 • Both brands owned by Walmart Inc. (NYSE: WMT) • Blue-chip investment grade tenant • Proven history of performing through economic downturns • Increases NETSTREIT’s defensive retail exposure • 12 years of new lease terms 12 Years New Lease Terms 2 Properties $17.0M Purchase Price 6.6% Acquisition Cap Rate $559.2B Tenant Sales1 Essential Designation During COVID-19 $41.2B Debt on Balance Sheet2 0.0% Avg. Annual Rent Increases $361.8B Market Capitalization AA / Aa2 S&P/Moody’s Credit Rating Acquisition Completed: July 2020 4
Acquisition Case Study: Sub-Investment Grade (rated) 19 Floor & Decor – La Quinta, CA Sources: S&P Global Market Intelligence, Company data. Market data as of 3/4/2021. 1. Represents the twelve months ended 12/31/2020 2. Reflects long-term debt as of 12/312020 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 • Purchase of the property from a mixed-use buyer who did not want the retail exposure • 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 10 Years New Lease Term 1 Property $9.6M Purchase Price 8.5% Acquisition Cap Rate $2.4B Tenant Sales1 Essential Designation During COVID-19 $207.2M Debt on Balance Sheet2 2.0% Avg. Annual Rent Increases $9.2B Market Capitalization BB- / Ba3 S&P/Moody’s Credit Rating Acquisition Completed: June 2020 4
Acquisition Case Study: Investment Grade (rated) 20 Target – Kingston, MA Sources: S&P Global Market Intelligence, Company data. Market data as of 3/4/2021. 1. Represents the twelve months ended 01/30/2021 2. Reflects long-term debt as of 1/30/2021 3. Nielsen estimates Strong-Performing Location with High Likelihood of Renewal at Attractive Price • First exposure to Target (NYSE: TGT) • Ground lease with below market rents ($2.81/sf) provides strong downside protection • Current adjacent luxury multi-family redevelopment provides catalyst for future increase in foot traffic • Addition of omnichannel retail with strong demographics 7 Years Remaining Lease Term 1 Property $5.5M Purchase Price 6.5% Acquisition Cap Rate $92.4B Tenant Sales1 Essential Designation During COVID-19 $11.5B Debt on Balance Sheet2 2.54% Avg. Annual Rent Increases $86.2B Market Capitalization A / A2 S&P/Moody’s Credit Rating Acquisition Completed: December 2020 4
Acquisition/Disposition Case Study: Investment Grade (rated) 21 7-Eleven – Texas Sources: Company data. Portfolio Execution with Subsequent Accretive Dispositions to Reduce Exposure • Example of platform’s ability to acquire large, high quality portfolios, and selectively exit assets in the acquired portfolio at accretive pricing • Value creation through the strategic disposition of properties • Dispositions were executed at accretive cap rates (~15% lower than going in cash cap rate) • Exited assets were internally viewed as the weaker assets in the portfolio 17 Properties $71.5M Acquisition Price $9.8M Disposition Price 5.9% Acquisition Cap Rate Acquisition Completed: June 2020; Disposition Completed: October and November 2020 4 Acquisition Disposition 2 Properties 5.0% Disposition Cap Rate 15.0 Years Remaining Lease Term 14.7 Years Remaining Lease Term AA- / Baa2 S&P/Moody’s Credit Rating
Senior Leadership 22 Source: Company data. 1. First Potomac Realty Trust was publicly traded on the NYSE until October 2017. Seasoned leadership team with significant net lease retail and public company experience Mark Manheimer President, CEO & Director Mr. Manheimer leads the overall strategy, acquisitions, underwriting, and asset management for the company Prior experience includes: • EB Arrow; CIO of the Single-Tenant Net Lease Group • Spirit Realty Capital (NYSE: SRC); EVP, Head of Asset Management from 2012 through 2016 • Member of Investment Committee • Led restructuring and extension of the largest tenant’s master lease, as well as subsequent sales of the assets leased to the tenant • Led due diligence in merger that doubled company size • Cole Real Estate Investments; Head of Sale-Leaseback Acquisitions from 2009 through 2012 • Realty Income Corporation (NYSE: O); Director of Underwriting from 2005 through 2009 Prior experience includes: • First Potomac Realty Trust (NYSE: FPO)1; EVP, CFO and Treasurer from 2012 through 2017 • Leading role in FPO’s $1.4 billion sale to Government Properties Income Trust (now Office Properties Income Trust, NASDAQ: OPI) • Provided valuable public company expertise in evaluating and recommending changes to corporate governance initiatives; active role in evaluating Board candidates • Successfully remediated a pre-existing material weakness with respect to financial controls • Federal Realty Investment Trust (NYSE: FRT); SVP, CFO and Treasurer from 2008 through 2012 Andy Blocher CFO, Treasurer & Secretary Mr. Blocher manages liabilities, capital raising, investor relations and financial reporting for the company High-Quality Real Estate Portfolio Conservative Capitalization 5
Key Personnel 23 Source: Company data. 1. First Potomac Realty Trust was publicly traded on the NYSE until October 2017. Experienced team of professionals drive NETSTREIT’s day to day operations Jeff Fuge Senior Vice President, Acquisitions • Joined in December 2019 • Prior experience includes: – Director of Capital Markets at EB Arrow – Senior Vice President at Compass Point Research & Trading – Client Relations Director at Aegis Financial • B.A. in History and minor in Business Administration from the College of Charleston; M.B.A. from George Washington University Chad Shafer Senior Vice President, Credit and Underwriting • Joined in May 2020 • Prior experience includes: – Various roles at JPMorgan Chase & Co., most recently as Executive Director – Wholesale Credit Risk – Other roles include Head of Real Estate Banking Portfolio Management, Head of Key Relationship Group – Credit Risk, Commercial Term Lending, and Credit Manager • B.S. in Finance from Butler University Kirk Klatt Senior Vice President, Real Estate • Joined in December 2019 • Prior experience includes: – Chief Acquisitions Officer, Single-Tenant Net-Lease at EB Arrow – Development Services Manager for Duke Realty Corporation (NYSE: DRE) • B.S. in Civil Engineering from Texas Tech University; M.B.A. from University of Texas at Dallas; licensed real estate salesperson in Texas Trish McBratney Senior Vice President and Chief Accounting Officer • Joined in May 2020 • Prior experience includes: – Chief Accounting Officer of American Bath Group – Chief Accounting and Administrative Officer of Mill Creek Residential Trust – Vice President and Controller of CyrusOne (NASDAQ: CONE) • B.S. in Accounting from Oklahoma State University; Certified Public Accountant Randy Haugh Senior Vice President, Finance • Joined in February 2020 • Prior experience includes: – U.S. Real Estate fund management group at The Carlyle Group (NASDAQ:CG) – Vice President of Finance and Director of Finance at First Potomac Realty Trust (NYSE: FPO)1 • B.S. in Economics and Certificate of Accounting from University of Virginia Amy An Investor Relations Manager • Joined in December 2019 • Prior experience includes: – Investor Relations Manager at EB Arrow – Investor Relations Associate and Real Estate Analyst at Capview Partners • B.S. in Business Administration from the University of Texas at Dallas – Naveen Jindal School of Management High-Quality Real Estate Portfolio Conservative Capitalization 5
Corporate Responsibility 24 ▪ Dedication to reducing the Company’s ecological footprint ▪ Endorsement of renewable resources and encouragement of tenants to practice leading sustainability initiatives ▪ Implementation of energy conservation practices in the office E Environmental Responsibility ▪ Emphasis on creating a culture driven by diversity & inclusion ▪ Commitment to employee well-being & satisfaction in the workplace ▪ Creation of leading employee training and development programs to promote growth S Social Responsibility ▪ Diverse management team & board of directors ▪ Enactment of ideal board features to enhance the Company’s fiduciary responsibility to shareholders ▪ Rigorous risk management procedures to protect shareholder interests G Corporate Governance Areas of Focus NETSTREIT is committed to fulfilling its responsibility as an outstanding corporate citizen The Company’s mission is to be the leader in the net lease industry by practicing and implementing innovative, impactful Environmental, Social and Governance policies with the highest ethical standards 5
Board of Directors Lead Independent Director ▪ Compensation Committee Chair ▪ Investment Committee Chair ▪ Audit Committee Member Background ▪ Formerly AEW Capital Management, Head of AEW Real Estate Securities ▪ Formerly Landmark Land Company, VP Matt Troxell, CFA Independent Director ▪ Audit Committee Chair ▪ Nominating & Corporate Governance Committee Member Background ▪ Big Rock Partners, CFO ▪ Global Medical REIT (NYSE: GMRE) Independent Director and Audit Committee Chair ▪ Formerly Care Capital Properties (NYSE: CCP), CFO ▪ Formerly Ventas (NYSE: VTR), SVP – Capital Markets & Investor Relations Lori Wittman In addition to Mr. Manheimer, the Company’s board is comprised of six additional directors, five of whom are independent, each possessing diverse backgrounds in industry, public company and investment experience 25 Independent Director ▪ Nominating & Corporate Governance Committee Chair ▪ Compensation Committee Member ▪ Investment Committee Member Background ▪ Cedar Realty Trust (NYSE: CDR), EVP and COO ▪ Formerly Federal Realty Investment Trust (NYSE: FRT), COO, Mid-Atlantic Robin Zeigler Chairman of the Board Background ▪ EB Arrow, CEO: Commercial real estate developer & owner ▪ Formerly Cypress Equities Real Estate Investment Management, CIO ▪ Formerly with The Staubach Company Todd Minnis Independent Director ▪ Compensation Committee Member ▪ Nominating & Corporate Governance Committee Member Background ▪ Star Cypress Partners, President and CEO ▪ Formerly The Wentworth Group and Stafford Family Foundation, Vice President ▪ Veteran of the United States Air Force Heidi Everett Independent Director ▪ Audit Committee Member ▪ Investment Committee Member Background ▪ Inwood Capital Management, Manager ▪ Lindsay Corporation (NYSE: LNN), Director, serves on Audit Committee, and Corporate Governance and Nominating Committee ▪ Formerly with Bass Brothers / Taylor & Company Michael Christodolou 5
Company & Investment Highlights 26 NETSTREIT Is A Growth Company With A Defensive Net Lease Retail Strategy High-Quality, Diversified, and Defensive Net Lease Retail Portfolio Conservative Capitalization to Support Accretive Growth Active Asset Management to Achieve Optimal Portfolio Performance Disciplined Underwriters with Dual Focus on Credit AND Real Estate Multifaceted Investment Strategy Leveraging Deep Industry Relationships Attractive Sector Fundamentals with Compelling Growth Opportunity Seasoned Leadership Team with Extensive Track Record Platform Positioned for Scale
Definitions 27 ABR means annualized base rent. ABR is calculated by multiplying (i) cash rental payments (a) for the month ended December 31, 2020 (or, if applicable, the next full month's cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of December 31, 2020, 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.
28 Investor Relations ir@netstreit.com 972-597-4825