FALSE000179810000017981002024-02-142024-02-14
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): February 14, 2024
NETSTREIT Corp.
(Exact Name of Registrant as Specified in its Charter)
| | | | | | | | | | | |
| Maryland | 001-39443 | 84-3356606 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
2021 McKinney Avenue Suite 1150 Dallas, Texas | 75201 |
| (Address of Principal Executive Offices) | (Zip Code) |
972-200-7100
(Registrant’s telephone number, including area code)
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| | | | | |
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $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 February 14, 2024, NETSTREIT Corp. (the “Company”) issued a press release announcing its financial results for the fourth quarter and full year ended December 31, 2023. 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 February 14, 2024, the Company furnished supplemental financial information for the fourth quarter and full year ended December 31, 2023. Also on February 14, 2024, 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 | | | |
| 99.2 | | | |
| 99.3 | | | |
| 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.
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| | | | NETSTREIT Corp. | |
| | | | | |
| February 14, 2024 | | /s/ DANIEL DONLAN | |
| Date | | Daniel Donlan | |
| | | | Chief Financial Officer and Treasurer | |
| | | | (Principal Financial Officer) | |
NETSTREIT REPORTS FOURTH QUARTER AND FULL YEAR 2023 FINANCIAL AND OPERATING RESULTS
– Net income of $0.03 and Adjusted Funds from Operations ("AFFO") of $0.31 Per Diluted Share for Fourth Quarter –
– Completed $119.1 Million of Gross Investment Activity at 7.2% Blended Cash Yield for Fourth Quarter –
– Reaffirms 2024 AFFO Per Share Guidance of $1.24 to $1.28 –
– Completed Forward Equity Offering in January 2024, Raising $190.8 Million of Net Proceeds –
Dallas, TX – February 14, 2024 – NETSTREIT Corp. (NYSE: NTST) (the “Company”) today announced financial and operating results for the fourth quarter and year ended December 31, 2023.
“We're proud of our strong execution and performance in 2023, completing $481 million of gross investment activity and growing our 2023 AFFO per diluted share by 5% from prior year. With the completion of our January forward equity offering, NETSTREIT is well capitalized to take advantage of attractive investment opportunities to deliver solid growth in 2024,” said Mark Manheimer, Chief Executive Officer of NETSTREIT.
FOURTH QUARTER AND FULL YEAR 2023 HIGHLIGHTS
The following table summarizes the Company's select financial results1 for the three months and year ended December 31, 2023.
| | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, |
| 2023 | | 2022 | | % Change |
| (Unaudited) |
Net Income per Diluted Share | $ | 0.03 | | | $ | 0.05 | | | (40) | % |
| Funds from Operations per Diluted Share | $ | 0.30 | | | $ | 0.26 | | | 15 | % |
| Core Funds from Operations per Diluted Share | $ | 0.30 | | | $ | 0.28 | | | 7 | % |
| Adjusted Funds from Operations per Diluted Share | $ | 0.31 | | | $ | 0.29 | | | 7 | % |
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 | | % Change |
| (Unaudited) |
| Net Income per Diluted Share | $ | 0.11 | | | $ | 0.16 | | | (31) | % |
| Funds from Operations per Diluted Share | $ | 1.18 | | | $ | 1.08 | | | 9 | % |
| Core Funds from Operations per Diluted Share | $ | 1.19 | | | $ | 1.10 | | | 8 | % |
| Adjusted Funds from Operations per Diluted Share | $ | 1.22 | | | $ | 1.16 | | | 5 | % |
1.Funds from operations ("FFO"), core funds from operations ("Core FFO"), and adjusted funds from operations ("AFFO") are non-GAAP financial measures. See "Non-GAAP Financial Measures."
INVESTMENT ACTIVITY
The following tables summarize the Company's investment and disposition activities (dollars in thousands) for the three months and year ended December 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, 2023 | | Year Ended December 31, 2023 |
| Number of Investments | | Amount | | Number of Investments | | Amount |
| Investments | 57 | | $ | 119,128 | | | 196 | | $ | 480,519 |
Dispositions1 | 6 | | 15,995 | | | 22 | | 49,506 |
| Net Investment Activity | | | $ | 103,133 | | | | | $ | 431,013 | |
| | | | | | | |
| Investment Activity | | | | | | | |
| Cash Yield | | | 7.2 | % | | | | 7.2 | % |
| % of ABR derived from Investment Grade Tenants | | | 94.3 | % | | | | 81.4 | % |
| % of ABR derived from Investment Grade Profile Tenants | | | 4.4 | % | | | | 11.8 | % |
| Weighted Average Lease Term (years) | | | 10.9 | | | | | 10.7 | |
| | | | | | | |
| Disposition Activity | | | | | | | |
Cash Yield1 | | | 7.2 | % | | | | 6.9 | % |
| Weighted Average Lease Term (years) | | | 11.2 | | | | | 7.8 | |
1.Includes mortgage loan payoffs.
The following table summarizes the Company's on-going development projects and estimated development costs (dollars in thousands) as of December 31, 2023.
| | | | | |
| Developments | Three Months Ended December 31, 2023 |
Amount Funded During the Quarter | $ | 25,499 | |
| |
| As of December 31, 2023 |
| Number of Developments | 24 | |
Amount Funded to Date | $ | 41,118 | |
Estimated Funding Remaining on Developments | 26,642 | |
| Total Estimated Development Cost | $ | 67,760 | |
PORTFOLIO UPDATE
The following table summarizes the Company's real estate portfolio (weighted by ABR, dollars in thousands) as of December 31, 2023.
| | | | | |
| As of December 31, 2023 |
| Number of Investments | 598 |
| ABR | $ | 131,859 |
| States | 45 |
| Square Feet | 10,624,183 |
| Tenants | 85 |
| Industries | 26 |
| Occupancy | 100.0 | % |
| Weighted Average Lease Term (years) | 9.5 |
| Investment Grade % | 70.5 | % |
| Investment Grade Profile % | 14.1 | % |
SUBSEQUENT ACTIVITY
In January 2024, the Company entered into forward sale agreements related to 11,040,000 shares of its common stock at a public offering price of $18.00 per share. The Company will have until January 9, 2025 to settle the forward sale agreements. The following table summarizes the Company's forward equity offering (dollars in thousands, except per share data).
| | | | | |
January 2024 Forward Equity Offering | As of February 14, 2024 |
Shares Unsettled | 11,040,000 | |
Price Per Share (Gross) | $ | 18.00 | |
Net Value of Unsettled Forward Equity | $ | 190,771 | |
CAPITAL MARKETS AND BALANCE SHEET
The following tables summarize the Company's leverage, balance sheet, liquidity, ATM issuances, and settlement of our forward equity offerings (dollars in thousands, except per share data) as of and for December 31, 2023.
| | | | | |
| Leverage | As of December 31, 2023 |
Net Debt / Annualized Adjusted EBITDAre | 5.0x |
Adjusted Net Debt / Annualized Adjusted EBITDAre | 4.1x |
Proforma Adjusted Net Debt / Annualized Adjusted EBITAre1 | 2.5x |
| |
| Liquidity | |
| Unused Unsecured Revolver Capacity | $ | 319,850 | |
| Cash, Cash Equivalents and Restricted Cash | 29,929 | |
Net Value of Unsettled Forward Equity from 2023 ATM Issuance2 | 98,594 | |
Remaining Available Principal of 2029 Term Loan3 | 100,000 | |
| Total Liquidity | $ | 548,373 | |
Net Value of Unsettled Forward Equity from January 2024 Follow-On | 190,771 |
Total Proforma Liquidity | $ | 739,144 | |
| |
| ATM Program | |
Shares Issued During Quarter | 4,478,539 | |
Weighted Average Price Per Share (Gross) | $ | 17.27 | |
| Net Proceeds | $ | 76,667 | |
| |
2023 ATM Program Initial Capacity | $ | 300,000 | |
ATM Capacity Remaining as of December 31, 2023 | $ | 222,677 | |
| |
Unsettled Forward Equity | |
Shares Unsettled as of December 31, 2023 | 5,983,711 | |
Weighted Average Price Per Share (Net) | $ | 16.48 | |
Net Value of Unsettled Forward Equity from 2023 ATM Issuance2 | $ | 98,594 | |
1.Adjusted to include the net value of unsettled shares from the January 2024 follow-on offering.
2.Reflects 5,983,711 of unsettled forward equity shares under the ATM program at the December 31, 2023 available net settlement price of $16.48.
3.All-in fixed rate of 4.99% consists of the fixed rate SOFR swap of 3.74% on $250.0 million of notional value, plus a credit spread adjustment of 0.10% and a borrowing spread of 1.15%.
DIVIDEND
On February 13, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $0.205 per share for the first quarter of 2024. On an annualized basis, the dividend of $0.82 per share of common stock represents an increase of $0.02 per share over the prior year annualized dividend. The dividend will be paid on March 28, 2024 to shareholders of record on March 15, 2024.
2024 GUIDANCE
The Company is reaffirming its initial full year 2024 AFFO per share guidance in the range of $1.24 to $1.28. The Company also expects cash G&A to be in the range of $13.5 million to $14.5 million (exclusive of transaction costs and severance payments).
The Company's 2024 guidance is based on a number of assumptions that are subject to change and many of which are outside the Company's control. If actual results vary from these assumptions, the Company's expectations may change. There can be no assurance that the Company will achieve these results.
AFFO is a non-GAAP financial measure. The Company does not provide a reconciliation of such forward-looking non-GAAP measure to the most directly comparable financial measures calculated and presented in accordance with GAAP because to do so would be potentially misleading and not practical given the difficulty of projecting event driven transactional and other non-core operating items in any future period. The magnitude of these items, however, may be significant.
EARNINGS CONFERENCE CALL
A conference call will be held on Thursday, February 15, 2024 at 12:00 PM ET. During the conference call the Company’s officers will review fourth quarter and full year 2023 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 15 minutes prior to the scheduled start time to register, as well as download and install any necessary audio software.
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 February 22, 2024, 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 13743515.
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 Corp.
NETSTREIT Corp. 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
NON-GAAP FINANCIAL MEASURES
This press release contains non-GAAP financial measures, including FFO, Core FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, Annualized Adjusted EBITDAre, Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI Estimated Run Rate, Total Property-Level Cash NOI Estimated Run Rate, Net Debt and Adjusted Net Debt. A reconciliation of each non-GAAP financial measure to the most comparable GAAP 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, including estimated development costs, trends in our business, including trends in the market for single-tenant, retail commercial real estate and our 2024 guidance. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this press release may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see the information under the heading “Risk Factors” in our Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2023 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 macroeconomic conditions, including inflation, interest rates and instability in the banking system. 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, |
| 2023 | | 2022 |
| Assets | | | |
| Real estate, at cost: | | | |
| Land | $ | 460,896 | | | $ | 401,146 | |
| Buildings and improvements | 1,149,809 | | | 907,084 | |
| Total real estate, at cost | 1,610,705 | | | 1,308,230 | |
| Less accumulated depreciation | (101,210) | | | (62,526) | |
| Property under development | 29,198 | | | 16,796 | |
| Real estate held for investment, net | 1,538,693 | | | 1,262,500 | |
| Assets held for sale | 52,451 | | | 23,208 | |
| Mortgage loans receivable, net | 114,472 | | | 46,378 | |
| Cash, cash equivalents and restricted cash | 29,929 | | | 70,543 | |
| Lease intangible assets, net | 161,354 | | | 151,006 | |
| Other assets, net | 49,337 | | | 52,057 | |
| Total assets | $ | 1,946,236 | | | $ | 1,605,692 | |
| Liabilities and equity | | | |
| Liabilities: | | | |
| Term loans, net | $ | 521,912 | | | $ | 373,296 | |
| Revolving credit facility | 80,000 | | | 113,000 | |
| Mortgage note payable, net | 7,883 | | | 7,896 | |
| Lease intangible liabilities, net | 25,353 | | | 30,131 | |
| Liabilities related to assets held for sale | 1,158 | | | 406 | |
| Accounts payable, accrued expenses and other liabilities | 36,498 | | | 22,540 | |
| Total liabilities | 672,804 | | | 547,269 | |
| Commitments and contingencies | | | |
| Equity: | | | |
| Stockholders’ equity | | | |
Common stock, $0.01 par value, 400,000,000 shares authorized; 73,207,080 and 58,031,879 shares issued and outstanding as of December 31, 2023 and 2022, respectively | 732 | | | 580 | |
| Additional paid-in capital | 1,367,505 | | | 1,091,514 | |
| Distributions in excess of retained earnings | (112,276) | | | (66,937) | |
| Accumulated other comprehensive income | 8,943 | | | 23,673 | |
| Total stockholders’ equity | 1,264,904 | | | 1,048,830 | |
| Noncontrolling interests | 8,528 | | | 9,593 | |
| Total equity | 1,273,432 | | | 1,058,423 | |
| Total liabilities and equity | $ | 1,946,236 | | | $ | 1,605,692 | |
NETSTREIT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(Unaudited)
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | | 2022 | | | 2021 |
| Revenues | | | | | | | |
| Rental revenue (including reimbursable) | $ | 123,967 | | | | $ | 93,934 | | | | $ | 59,140 | |
| Interest income on loans receivable | 7,388 | | | | 2,345 | | | | — | |
| Other revenue | 550 | | | | — | | | | — | |
| Total revenues | 131,905 | | | | 96,279 | | | | 59,140 | |
| Operating expenses | | | | | | | |
| Property | 16,413 | | | | 11,695 | | | | 5,803 | |
| General and administrative | 20,176 | | | | 19,053 | | | | 14,810 | |
| Depreciation and amortization | 63,677 | | | | 50,075 | | | | 30,807 | |
| Provisions for impairment | 7,083 | | | | 1,114 | | | | 3,539 | |
| Transaction costs | 456 | | | | 839 | | | | 700 | |
| Total operating expenses | 107,805 | | | | 82,776 | | | | 55,659 | |
| Other income (expense) | | | | | | | |
| Interest expense, net | (19,058) | | | | (9,181) | | | | (3,700) | |
| Gain on sales of real estate, net | 1,175 | | | | 4,148 | | | | 2,997 | |
| Loss on debt extinguishment | (128) | | | | — | | | | — | |
| Other income, net | 752 | | | | 131 | | | | 431 | |
| Total other income (expense), net | (17,259) | | | | (4,902) | | | | (272) | |
| Net income before income taxes | 6,841 | | | | 8,601 | | | | 3,209 | |
| Income tax benefit (expense) | 49 | | | | (396) | | | | (59) | |
| Net income | 6,890 | | | | 8,205 | | | | 3,150 | |
| Net income attributable to noncontrolling interests | 53 | | | | 88 | | | | 104 | |
| Net income attributable to common stockholders | $ | 6,837 | | | | $ | 8,117 | | | | $ | 3,046 | |
| Amounts available to common stockholders per common share: | | | | | | | |
| Basic | $ | 0.11 | | | | $ | 0.16 | | | | $ | 0.08 | |
| Diluted | $ | 0.11 | | | | $ | 0.16 | | | | $ | 0.08 | |
| Weighted average common shares: | | | | | | | |
| Basic | 63,922,973 | | | | 49,517,977 | | | | 36,999,459 | |
| Diluted | 64,665,439 | | | | 50,431,822 | | | | 38,672,565 | |
NETSTREIT CORP. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO FFO, CORE FFO AND ADJUSTED FFO
(in thousands, except share and per share data)
(Unaudited)
| | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 |
| Net income | $ | 6,890 | | | $ | 8,205 | |
| Depreciation and amortization of real estate | 63,379 | | | 49,498 | |
| Provisions for impairment | 7,083 | | | 1,114 | |
| Gain on sales of real estate, net | (1,175) | | | (4,148) | |
| FFO | 76,177 | | | 54,669 | |
| Adjustments: | | | |
| Non-recurring executive transition costs, severance and related charges | 362 | | | 848 | |
| Loss on debt extinguishment and other related costs | 223 | | | — | |
| Gain on insurance proceeds | (78) | | | (126) | |
| Core FFO | 76,684 | | | 55,391 | |
| Adjustments: | | | |
| Straight-line rent adjustments | (1,163) | | | (1,286) | |
| Amortization of deferred financing costs | 1,730 | | | 862 | |
| Amortization of above/below-market assumed debt | 114 | | | 29 | |
| Amortization of loan origination costs | 163 | | | 88 | |
| Amortization of lease-related intangibles | (611) | | | (889) | |
| Earned development interest | 515 | | | — | |
| Capitalized interest expense | (1,060) | | | (452) | |
| Non-cash interest expense | (2,124) | | | — | |
| Non-cash compensation expense | 4,822 | | | 4,774 | |
| AFFO | $ | 79,070 | | | $ | 58,517 | |
| | | |
| Weighted average common shares outstanding, basic | 63,922,973 | | | 49,517,977 | |
| Weighted average operating partnership units outstanding | 501,751 | | | 526,859 | |
| Weighted average dilutive securities | 165,420 | | | 248,602 | |
| Weighted average unsettled shares under forwards | 75,295 | | | 138,384 | |
| Weighted average common shares outstanding, diluted | 64,665,439 | | | 50,431,822 | |
| | | |
| FFO per common share, diluted | $ | 1.18 | | | $ | 1.08 | |
| Core FFO per common share, diluted | $ | 1.19 | | | $ | 1.10 | |
| AFFO per common share, diluted | $ | 1.22 | | | $ | 1.16 | |
NETSTREIT CORP. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO EBITDA, EBITDAre AND ADJUSTED EBITDAre
(in thousands, except share and per share data)
(Unaudited)
| | | | | | | | | | | |
| Three Months Ended December 31, |
| 2023 | | 2022 |
| Net income | $ | 1,962 | | | $ | 2,810 | |
| Depreciation and amortization of real estate | 17,000 | | | 13,797 | |
| Amortization of lease-related intangibles | (93) | | | (246) | |
| Non-real estate depreciation and amortization | 78 | | | 141 | |
| Interest expense, net | 5,646 | | | 3,473 | |
| Income tax expense | 10 | | | 41 | |
| Amortization of loan origination costs | 80 | | | 28 | |
| EBITDA | 24,683 | | | 20,044 | |
| Adjustments: | | | |
| Provisions for impairment | 2,709 | | | — | |
| Gain on sales of real estate, net | (506) | | | (1,986) | |
| EBITDAre | 26,886 | | | 18,058 | |
| Adjustments: | | | |
| Straight-line rent adjustments | (456) | | | (142) | |
| Non-recurring executive transition costs, severance and related charges | 86 | | | 848 | |
| Gain on insurance proceeds | (31) | | | (90) | |
| Non-cash compensation expense | 1,264 | | | 1,128 | |
Adjustment for construction in process (1) | 719 | | | 315 | |
Adjustment for intraquarter investment activities (2) | 820 | | | 1,334 | |
| Adjusted EBITDAre | $ | 29,288 | | | $ | 21,451 | |
Annualized Adjusted EBITDAre (3) | $ | 117,152 | | | |
| | | |
Net Debt | As of December 31, 2023 | | |
| Principal amount of total debt | $ | 613,361 | | | |
| Less: Cash, cash equivalents and restricted cash | (29,929) | | | |
| Net Debt | 583,432 | | | |
Less: Net value of unsettled forward equity from 2023 ATM issuance (4) | (98,594) | | | |
| Adjusted Net Debt | $ | 484,838 | | | |
Less: Net value of unsettled forward equity from January 2024 offering (5) | (190,771) | | | |
Proforma Adjusted Net Debt | $ | 294,067 | | | |
| | | |
Leverage | | | |
| Net debt / Annualized Adjusted EBITDAre | 5.0 | x | | |
| Adjusted Net Debt / Annualized Adjusted EBITDAre | 4.1 | x | | |
| Proforma Adjusted Net Debt / Annualized Adjusted EBITDAre | 2.5 | x | | |
(1) Adjustment reflects the estimated cash yield on developments in process as of December 31, 2023.
(2) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments and interest earning loan activity
completed during the three months ended December 31, 2023 and 2022 had occurred on October 1, 2023 and 2022, respectively.
(3) We calculate Annualized Adjusted EBITDAre by multiplying Adjusted EBITDAre by four.
(4) There were 5,983,711 of unsettled forward equity shares under the ATM program at the December 31, 2023 available net settlement price of $16.48.
(5) Reflects 11,040,000 of unsettled shares from the January 2024 offering.
NETSTREIT CORP. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO NOI AND CASH NOI
(in thousands, except share and per share data)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Year Ended December 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
| Net income | $ | 1,962 | | | $ | 2,810 | | | $ | 6,890 | | | $ | 8,205 | |
| General and administrative | 4,876 | | | 5,444 | | | 20,176 | | | 19,053 | |
| Depreciation and amortization | 17,078 | | | 13,938 | | | 63,677 | | | 50,075 | |
| Provisions for impairment | 2,709 | | | — | | | 7,083 | | | 1,114 | |
| Transaction costs | 189 | | | 135 | | | 456 | | | 839 | |
| Interest expense, net | 5,646 | | | 3,473 | | | 19,058 | | | 9,181 | |
| Gain on sales of real estate, net | (506) | | | (1,986) | | | (1,175) | | | (4,148) | |
| Income tax expense | 10 | | | 41 | | | (49) | | | 396 | |
| Loss on debt extinguishment | — | | | — | | | 128 | | | — | |
| Interest income on mortgage loans receivable | (2,243) | | | (674) | | | (7,388) | | | (2,345) | |
| Lease termination fees | — | | | — | | | (550) | | | — | |
| Other income, net | (166) | | | (95) | | | (752) | | | (131) | |
| Property-Level NOI | 29,555 | | | 23,086 | | | 107,554 | | | 82,239 | |
| Straight-line rent adjustments | (456) | | | (142) | | | (1,163) | | | (1,286) | |
| Amortization of lease-related intangibles | (93) | | | (246) | | | (611) | | | (889) | |
| Property-Level Cash NOI | $ | 29,006 | | | $ | 22,698 | | | $ | 105,780 | | | $ | 80,064 | |
Adjustment for intraquarter acquisitions, dispositions and completed development (1) | 705 | | | | | | | |
| Property-Level Cash NOI Estimated Run Rate | 29,711 | | | | | | | |
| Interest income on mortgage loans receivable | 2,243 | | | | | | | |
Adjustments for intraquarter mortgage loan activity (2) | 115 | | | | | | | |
| Total Cash NOI - Estimated Run Rate | $ | 32,069 | | | | | | | |
(1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended December 31, 2023, had occurred on October 1, 2023.
(2) Adjustment assumes all loan activity completed during the three months ended December 31, 2023, had occurred on October 1, 2023.
NON-GAAP FINANCIAL MEASURES
FFO, Core FFO and AFFO
The National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a widely accepted non-GAAP financial measure of operating performance known as FFO. Our FFO is net income in accordance with GAAP, excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortization and impairment charges on depreciable real property.
Core FFO is a non-GAAP financial measure defined as FFO adjusted to remove the effect of unusual and non-recurring items that are not expected to impact our operating performance or operations on an ongoing basis. These include non-recurring executive transition costs, severance and related charges, gain on insurance proceeds, and loss on debt extinguishments and other related costs.
AFFO is a non-GAAP financial measure defined as Core FFO adjusted for GAAP net income related to non-cash revenues and expenses, such as straight-line rent, amortization of above- and below-market lease-related intangibles, amortization of lease incentives, capitalized interest expense, earned development interest, non-cash interest expense, non-cash compensation expense, amortization of deferred financing costs, amortization of above/below-market assumed debt, and amortization of loan origination costs.
Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values historically have risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO to be useful in evaluating potential property acquisitions and measuring operating performance.
We further consider FFO, Core FFO and AFFO to be useful in determining funds available for payment of distributions. FFO, Core FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP. You should not consider FFO, Core FFO and AFFO to be alternatives to net income as a reliable measure of our operating performance nor should you consider FFO, Core FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity.
FFO, Core FFO and AFFO do not measure whether cash flow is sufficient to fund our cash needs, including principal amortization, capital improvements and distributions to stockholders. FFO, Core FFO and AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP. Further, FFO, Core FFO and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO, Core FFO and AFFO.
EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre
We compute EBITDA as earnings before interest expense, income tax expense, and depreciation and amortization. In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDAre. We compute EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and impairment charges on depreciable real property.
Adjusted EBITDAre is a non-GAAP financial measure defined as EBITDAre further adjusted to exclude straight-line rent, non-cash compensation expense, non-recurring executive transition costs, severance and related charges, loss on debt extinguishment and other related costs, gain on insurance proceeds, other non-recurring expenses (income), lease termination fees, adjustment for construction in process, and adjustment for intraquarter activities. Beginning in the quarter ended June 30, 2023, we modified our definition of Adjusted EBITDAre to include adjustments for construction in process and intraquarter investment activities. Prior periods have been recast to reflect this new definition.
Annualized Adjusted EBITDAre is Adjusted EBITDAre multiplied by four.
We present EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized 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, Adjusted EBITDAre, and Annualized Adjusted EBITDAre as measures of our operating performance and not as measures of liquidity.
EBITDA, EBITDAre, Adjusted EBITDAre and Annualized 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, Adjusted EBITDAre and Annualized 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.
Net Debt and Adjusted Net Debt
We calculate our Net Debt as our principal amount of total debt outstanding excluding deferred financing costs, net discounts and debt issuance costs less cash, cash equivalents and restricted cash available for future investment. We believe excluding cash, cash equivalents and restricted cash available for future investment from our principal amount, all of which could be used to repay debt, provides an estimate on the net contractual amount of borrowed capital to be repaid. We believe these adjustments are additional beneficial disclosures to investors and analysis.
We further adjust Net Debt by the net value of unsettled forward equity as of period end to derive Adjusted Net Debt.
Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate
Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate are non-GAAP financial measures which we use to assess our operating results. We compute Property-Level NOI as net income (computed in accordance with GAAP), excluding general and administrative expenses, interest expense (or income), income tax expense, transaction costs, depreciation and amortization, gains (or losses) on sales of depreciable property, real estate impairment losses, interest income on mortgage loans receivable, loss on debt extinguishment, lease termination fees, and other income (or expense). We further adjust Property-Level NOI for non-cash revenue components of straight-line rent and amortization of lease-intangibles to derive Property-Level Cash NOI. We further adjust Property-Level Cash NOI for intraquarter acquisitions, dispositions and completed developments to derive Property-Level Cash NOI - Estimated Run Rate. We further adjust Property-Level Cash NOI - Estimated Run Rate for interest income on mortgage loans receivable and intraquarter mortgage loan activity to derive Total Cash NOI - Estimated Run Rate. We believe Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate 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.
Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate are not measurements of financial performance under GAAP, and 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.
OTHER DEFINITIONS
ABR is annualized base rent as of December 31, 2023, for all leases that commenced and annualized cash interest on mortgage loans receivable in place as of that date.
Cash Yield is the annualized base rent contractually due from acquired properties, interest income from mortgage loans receivable, and completed developments, divided by the gross investment amount, or gross proceeds in the case of dispositions.
Investments are lease agreements in place at owned properties, properties that have leases associated with mortgage loans receivable, developments where rent commenced, or in the case of master lease arrangements each property under the master lease is counted as a separate lease.
Investment Grade are investments, or investments that are subsidiaries of a parent entity, with a credit rating of BBB- (S&P/Fitch), Baa3 (Moody's) or NAIC2 (National Association or Insurance Commissioners) or higher.
Investment Grade Profile are investments 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, Fitch, Moody's, or NAIC.
Occupancy is expressed as a percentage, and is the number of economically occupied properties divided by the total number of properties owned, excluding mortgage loans receivable and properties under development.
Weighted Average Lease Term is weighted by the annualized base rent, excluding lease extension options and investments associated with mortgage loans receivable.
Fourth Quarter and Full Year 2023 Supplemental Financial Information
Table of Contents 2 03 Corporate Overview 04 Quarterly Highlights 05 Consolidated Statements of Operations 06 Funds from Operations and Adjusted Funds from Operations 07 EBITDAre and Adjusted EBITDAre 08 Net Operating Income 09 Consolidated Balance Sheets 10 Debt, Capitalization and Financial Ratios 12 Investment Activity 13 Portfolio Information 17 Lease Expiration Schedule 18 Non-GAAP Measures and Definitions 22 Forward Looking and Cautionary Statements
3 Corporate Overview 2021 McKinney Avenue Suite 1150 Dallas, Texas, 75201 Phone: (972) 597 – 4825 Website: www.netstreit.com Corporate Headquarters Transfer Agent Computershare PO Box 43007 Providence, RI 02940-3007 Phone: (800) 736-3001 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 and President Daniel Donlan, Chief Financial Officer and Treasurer Jeff Fuge, Senior Vice President of Acquisitions Randy Haugh, Senior Vice President of Finance Trish McBratney-Gibbs, SVP, Chief Accounting Officer Chad Shafer, Senior Vice President of Underwriting Management Team Todd Minnis – Chair Matthew Troxell Michael Christodolou Heidi Everett Mark Manheimer Lori Wittman Robin Zeigler Board of Directors
Quarterly Highlights (unaudited, dollars in thousands, except per share data) 4 Three Months Ended Financial Results December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 Net income $ 1,962 $ 4,239 $ (792) $ 1,481 $ 2,810 Net income per common share outstanding - diluted $ 0.03 $ 0.06 $ (0.01) $ 0.03 $ 0.05 Funds from Operations (FFO) $ 21,165 $ 21,130 $ 17,198 $ 16,684 $ 14,621 FFO per common share outstanding - diluted $ 0.30 $ 0.31 $ 0.28 $ 0.28 $ 0.26 Core Funds from Operations (Core FFO) $ 21,220 $ 21,191 $ 17,587 $ 16,685 $ 15,379 Core FFO per common share outstanding - diluted $ 0.30 $ 0.31 $ 0.29 $ 0.28 $ 0.28 Adjusted Funds from Operations (AFFO) $ 21,573 $ 21,389 $ 18,747 $ 17,419 $ 16,251 AFFO per common share outstanding - diluted $ 0.31 $ 0.31 $ 0.30 $ 0.30 $ 0.29 Dividends per share $ 0.205 $ 0.205 $ 0.200 $ 0.200 $ 0.200 Weighted average common shares outstanding - diluted 69,922,646 68,048,369 61,043,531 58,883,386 55,715,025 Portfolio Metrics(1) Number of leases 598 547 525 488 430 Square feet 10,624,183 9,971,909 9,440,349 8,769,431 8,644,376 Occupancy(2) 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Weighted average lease term remaining (years)(3) 9.5 9.3 9.4 9.4 9.5 Investment grade (rated) - % of ABR(4) 70.5 % 68.6 % 67.8 % 67.1 % 64.4 % Investment grade profile (unrated) - % of ABR(5) 14.1 % 14.6 % 14.0 % 14.9 % 15.8 % Combined Investment grade (rated) & Investment grade profile (unrated) - % of ABR 84.6 % 83.3 % 81.8 % 82.0 % 80.2 % 1. Includes acquisitions, mortgage loans receivable, and completed developments. 2. Excludes investment that secure mortgage loans receivable. 3. Weighted by ABR; excludes lease extension options and investments that secure mortgage loans receivable. 4. Investments, or investments that are subsidiaries of a parent entity, with a credit rating of BBB- (S&P/Fitch), Baa3 (Moody's) or NAIC2 (National Association of Insurance Commissioners) or higher. 5. Investments 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, Fitch, Moody's, or NAIC.
5 Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 REVENUES Rental revenue (including reimbursable) $ 34,619 $ 26,625 $ 123,967 $ 93,934 Interest income on loans receivable 2,243 674 7,388 2,345 Other revenue — — 550 — Total revenues 36,862 27,299 131,905 96,279 OPERATING EXPENSES Property 5,064 3,539 16,413 11,695 General and administrative 4,876 5,444 20,176 19,053 Depreciation and amortization 17,078 13,938 63,677 50,075 Provisions for impairment 2,709 — 7,083 1,114 Transaction costs 189 135 456 839 Total operating expenses 29,916 23,056 107,805 82,776 OTHER INCOME (EXPENSE) Interest expense, net (5,646) (3,473) (19,058) (9,181) Gain on sales of real estate, net 506 1,986 1,175 4,148 Loss on debt extinguishment — — (128) — Other income, net 166 95 752 131 Total other income (expense), net (4,974) (1,392) (17,259) (4,902) Net income before income taxes 1,972 2,851 6,841 8,601 Income tax benefit (expense) (10) (41) 49 (396) Net income 1,962 2,810 6,890 8,205 Net income attributable to noncontrolling interests 21 25 53 88 Net income attributable to common stockholders $ 1,941 $ 2,785 $ 6,837 $ 8,117 Amounts available to common stockholders per common share: Basic $ 0.03 $ 0.05 $ 0.11 $ 0.16 Diluted $ 0.03 $ 0.05 $ 0.11 $ 0.16 Weighted average common shares: Basic 69,276,514 54,991,093 63,922,973 49,517,977 Diluted 69,922,646 55,715,025 64,665,439 50,431,822 Consolidated Statements of Operations (unaudited, dollars in thousands, except per share data)
Funds From Operations and Adjusted Funds From Operations (unaudited, dollars in thousands, except per share data) 6 Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 GAAP Reconciliation: Net income $ 1,962 $ 2,810 $ 6,890 $ 8,205 Depreciation and amortization of real estate 17,000 13,797 63,379 49,498 Provisions for impairment 2,709 — 7,083 1,114 Gain on sales of real estate, net (506) (1,986) (1,175) (4,148) Funds from Operations (FFO) $ 21,165 $ 14,621 $ 76,177 $ 54,669 Non-recurring executive transition costs, severance and related charges 86 848 362 848 Loss on debt extinguishment and other related costs — — 223 — Gain on insurance proceeds (31) (90) (78) (126) Core Funds from Operations (Core FFO) $ 21,220 $ 15,379 $ 76,684 $ 55,391 Straight-line rent adjustments (456) (142) (1,163) (1,286) Amortization of deferred financing costs 565 309 1,730 862 Amortization of above/below-market assumed debt 29 29 114 29 Amortization of loan origination costs 80 28 163 88 Amortization of lease-related intangibles (93) (246) (611) (889) Earned development interest 326 — 515 — Capitalized interest expense (372) (234) (1,060) (452) Non-cash interest expense (990) — (2,124) — Non-cash compensation expense 1,264 1,128 4,822 4,774 Adjusted Funds from Operations (AFFO) $ 21,573 $ 16,251 $ 79,070 $ 58,517 FFO per common share, diluted $ 0.30 $ 0.26 $ 1.18 $ 1.08 Core FFO per common share, diluted $ 0.30 $ 0.28 $ 1.19 $ 1.10 AFFO per common share, diluted $ 0.31 $ 0.29 $ 1.22 $ 1.16 Dividends per share $ 0.205 $ 0.200 $ 0.810 $ 0.800 Dividends per share as a percent of AFFO 66 % 69 % 66 % 69 % Weighted average common shares outstanding, basic 69,276,514 54,991,093 63,922,973 49,517,977 Operating partnership units outstanding 486,096 514,706 501,751 526,859 Unvested restricted stock units 160,036 209,226 165,420 248,602 Unsettled shares under open forward equity contracts — — 75,295 138,384 Weighted average common shares outstanding, diluted 69,922,646 55,715,025 64,665,439 50,431,822
EBITDAre and Adjusted EBITDAre (unaudited, dollars in thousands) 7 Three Months Ended December 31, 2023 2022 GAAP Reconciliation: Net income $ 1,962 $ 2,810 Depreciation and amortization of real estate 17,000 13,797 Amortization of lease-related intangibles (93) (246) Non-real estate depreciation and amortization 78 141 Interest expense, net 5,646 3,473 Income tax expense 10 41 Amortization of loan origination costs 80 28 EBITDA 24,683 20,044 Adjustments: Provisions for impairment 2,709 — Gain on sales of real estate, net (506) (1,986) EBITDAre 26,886 18,058 Adjustments: Straight-line rent adjustments (456) (142) Non-recurring executive transition costs, severance and related charges 86 848 Gain on insurance proceeds (31) (90) Non-cash compensation expense 1,264 1,128 Adjustment for construction in process (1) 719 315 Adjustment for intraquarter investment activities (2) 820 1,334 Adjusted EBITDAre $ 29,288 $ 21,451 Annualized Adjusted EBITDAre (3) $ 117,152 Net Debt As of December 31, 2023 Principal amount of total debt $ 613,361 Less: Cash, cash equivalents and restricted cash (29,929) Net Debt $ 583,432 Less: Net value of unsettled forward equity from 2023 ATM issuance (4) (98,594) Adjusted Net Debt $ 484,838 Less: Net value of unsettled forward equity from January 2024 offering(5) (190,771) Proforma Adjusted Net Debt $ 294,067 Leverage Net debt / Annualized Adjusted EBITDAre 5.0 x Adjusted Net Debt / Annualized Adjusted EBITDAre 4.1 x Proforma Adjusted Net Debt / Annualized Adjusted EBITDAre 2.5 x 1. Adjustment reflects the estimated cash yield on developments in process as of December 31, 2023. 2. Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments and interest earning loan activity completed during the three months ended December 31, 2023 and 2022, had occurred on October 1, 2023 and 2022, respectively. 3. We calculate Annualized Adjusted EBITDAre by multiplying Adjusted EBITDAre by four. 4. Reflects 5,983,711 of unsettled forward equity shares under the ATM program at the December 31, 2023 available net settlement price of $16.48. 5. Reflects 11,040,000 of unsettled forward equity shares from the January 2024 offering.
Net Operating Income (unaudited, dollars in thousands) 8 Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 GAAP Reconciliation: Net income $ 1,962 $ 2,810 $ 6,890 $ 8,205 General and administrative 4,876 5,444 20,176 19,053 Depreciation and amortization 17,078 13,938 63,677 50,075 Provisions for impairment 2,709 — 7,083 1,114 Transaction costs 189 135 456 839 Interest expense, net 5,646 3,473 19,058 9,181 Gain on sales of real estate, net (506) (1,986) (1,175) (4,148) Income tax expense 10 41 (49) 396 Loss on debt extinguishment — — 128 — Interest income on mortgage loans receivable (2,243) (674) (7,388) (2,345) Lease termination fees — — (550) — Other income, net (166) (95) (752) (131) Property-Level NOI 29,555 23,086 107,554 82,239 Straight-line rent adjustments (456) (142) (1,163) (1,286) Amortization of lease-related intangibles (93) (246) (611) (889) Property-Level Cash NOI $ 29,006 $ 22,698 $ 105,780 $ 80,064 Adjustment for intraquarter acquisitions, dispositions and completed development (1) 705 Property-Level Cash NOI Estimated Run Rate 29,711 Interest income on mortgage loans receivable 2,243 Adjustments for intraquarter mortgage loan activity (2) 115 Total Cash NOI - Estimated Run Rate $ 32,069 Property Operating Expense Coverage Property operating expense reimbursement $ 4,415 $ 3,151 $ 14,648 $ 10,214 Property operating expenses (5,064) (3,539) (16,413) (11,695) Property operating expenses, net $ (648) $ (389) $ (1,765) $ (1,481) 1. Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended December 31, 2023, had occurred on October 1, 2023. 2. Adjustment assumes all loan activity completed during the three months ended December 31, 2023, had occurred on October 1, 2023.
Consolidated Balance Sheets (unaudited, dollars in thousands, except per share data) 9 December 31, 2023 2022 ASSETS Real estate, at cost: Land $ 460,896 $ 401,146 Buildings and improvements 1,149,809 907,084 Total real estate, at cost 1,610,705 1,308,230 Less accumulated depreciation (101,210) (62,526) Property under development 29,198 16,796 Real estate held for investment, net 1,538,693 1,262,500 Assets held for sale 52,451 23,208 Mortgage loans receivable, net 114,472 46,378 Cash, cash equivalents and restricted cash 29,929 70,543 Lease intangible assets, net 161,354 151,006 Other assets, net 49,337 52,057 Total assets $ 1,946,236 $ 1,605,692 LIABILITIES AND EQUITY Liabilities: Term loans, net 521,912 373,296 Revolving credit facility 80,000 113,000 Mortgage note payable, net 7,883 7,896 Lease intangible liabilities, net 25,353 30,131 Liabilities related to assets held for sale 1,158 406 Accounts payable, accrued expenses and other liabilities 36,498 22,540 Total liabilities $ 672,804 $ 547,269 Equity: Stockholders’ equity Common stock, $0.01 par value, 400,000,000 shares authorized; 73,207,080 and 58,031,879 shares issued and outstanding as of December 31, 2023 and 2022, respectively $ 732 $ 580 Additional paid-in capital 1,367,505 1,091,514 Distributions in excess of retained earnings (112,276) (66,937) Accumulated other comprehensive income 8,943 23,673 Total stockholders’ equity 1,264,904 1,048,830 Noncontrolling interests 8,528 9,593 Total equity 1,273,432 1,058,423 Total liabilities and equity $ 1,946,236 $ 1,605,692
1. Rates presented exclude the impact of capitalized loan fee amortization. 2. Interest rate reflects the all-in borrowing rate as of December 31, 2023. Facility fees are charged at an annual rate of 0.15% of the total facility size of $400 million, and are not included in the interest rate presented. The facility has a one year extension option. Remaining capacity reduced by $0.15 million for outstanding letters of credit. 3. Interest rate consists of the fixed rate SOFR swap of 1.87%, plus a credit spread adjustment of 0.10% and a borrowing spread of 1.15%. See the $175 million Term Loan - Interest Rate Schedule table for additional detail on the fixed interest rate changes through the fully extended maturity. 4. Interest rate consists of the fixed rate SOFR swap of 2.63%, plus a credit spread adjustment of 0.10% and a borrowing spread of 1.15%. The swap terminates of February 11, 2028. 5. Interest rate consists of the fixed rate SOFR swap of 3.64%, plus a credit spread adjustment of 0.10% and a borrowing spread of 1.15%. The term loan matures on July 3, 2026 and includes two one-year extension options and one six-month extension option. 6. The mortgage note was assumed as part of an asset acquisition during the third quarter of 2022. Debt, Capitalization, and Financial Ratios (unaudited, dollars in thousands) 10 As of December 31, 2023 Debt Summary Fully Extended Maturity Principal Balance Interest Rate(1) Remaining Capacity Available Term (years) Unsecured revolver(2) August 11, 2027 $ 80,000 6.49% $ 319,850 3.6 Unsecured term loan(3) January 15, 2027 175,000 3.12% — 3.0 Unsecured term loan(4) February 11, 2028 200,000 3.88% — 4.1 Unsecured term loan(5) January 3, 2029 150,000 4.89% 100,000 5.0 Mortgage note(6) November 1, 2027 8,361 4.53% — 3.8 Total / Weighted Average $ 613,361 4.26% $ 419,850 4.0 $175 million Term Loan - Interest Rate Schedule Start Date End Date Applicable Balance Fixed Rate(1) November 27, 2023 December 23, 2024 $ 175,000 3.12 % December 23, 2024 January 15, 2027 $ 175,000 3.65 % $175 $200 $250 $8 $400 $0 $100 $200 $300 $400 $500 $600 2023 2024 2025 2026 2027 2028 2029 2024 Unsecured Term Loan 2028 Unsecured Term Loan 2029 Unsecured Term Loan Mortgage Note Revolving Credit Facility Capacity Debt Maturity Schedule Floating, 13% Fixed, 87% Fixed vs. Floating Debt
1. Reflects 5,983,711 of unsettled forward equity shares under the ATM program at the December 31, 2023 available net settlement price of $16.48. 2. Reflects 11,040,000 of unsettled forward equity shares from the January 2024 offering. 3. Value is based on the December 29, 2023 closing share price of $17.85 per share. Debt, Capitalization, and Financial Ratios (unaudited, dollars in thousands, except per share data) 11 Net Debt December 31, 2023 Principal amount of total debt $ 613,361 Less: Cash, cash equivalents and restricted cash (29,929) Net debt $ 583,432 Less: Net value of unsettled forward equity from 2023 ATM issuance(1) (98,594) Adjusted net debt $ 484,838 Less: Net value of unsettled forward equity from January 2024 offering(2) (190,771) Proforma adjusted net debt $ 294,067 Net debt / Annualized Adjusted EBITDAre 5.0x Adjusted Net Debt / Annualized Adjusted EBITDAre 4.1x Proforma Adjusted Net Debt / Annualized Adjusted EBITDAre 2.5x Key Debt Covenant Information Required Actual Consolidated total leverage ratio ≤ 60.0% 30.5% Fixed charge coverage ratio ≥ 1.50x 4.8x Maximum secured indebtedness ≤ 40.0% 0.4% Maximum recourse indebtedness ≤ 10.0% —% Unencumbered leverage ratio ≤ 60.0% 33.3% Unencumbered interest coverage ratio ≥ 1.75x 5.3x Liquidity As of December 31, 2023 Unused unsecured revolver capacity $ 319,850 Cash, cash equivalents and restricted cash 29,929 Net value of unsettled forward equity from 2023 ATM issuance(1) 98,594 Undrawn term loan balance 100,000 Total Liquidity $ 548,373 Net value of unsettled forward equity from January 2024 offering(2) 190,771 Total Proforma Liquidity $ 739,144 Equity Ending Shares/ Units as of December 31, 2023 Equity Market Capitalization % of Total Common shares(3) 73,207,080 $ 1,306,746 99.3 % OP units(3) 479,298 8,555 0.7 % Total 73,686,378 $ 1,315,302 100.0 % Enterprise Value As of December 31, 2023 % of Total Principal amount of total debt $ 613,361 31.8 % Equity market capitalization(3) 1,315,302 68.2 % Total enterprise value $ 1,928,662 100.0 %
1. Includes acquisitions, mortgage loans receivable, and completed developments. 2. ABR divided by the Gross Investment. 3. Weighted by ABR; excludes lease extension options and investments that secure mortgage loans receivable. 4. Includes investments associated with mortgage loans receivable. 5. Excludes transaction costs. 6. ABR divided by Gross Proceeds; excludes vacant properties. Investment Activity (unaudited, dollars in thousands) 12 Three Months Ended December 31, September 30, June 30, March 31, December 31, 2023 2023 2023 2023 2022 Investments Number of Investments(1) 57 29 39 71 24 Gross Investment $ 119,128 $ 117,455 $ 115,321 $ 128,615 $ 104,069 Cash Yield(2) 7.2 % 7.0 % 6.8 % 7.7 % 6.9 % Weighted Average Lease Term (years)(3) 10.9 10.0 11.5 10.3 11.1 Investment Grade and Investment Grade Profile % 98.7 % 97.2 % 80.7 % 94.9 % 97.7 % Dispositions Number of Investments(4) 6 6 2 8 3 Number of Vacant Properties — — — — — Gross Proceeds(5) $ 15,995 $ 13,543 $ 4,060 $ 15,907 $ 12,294 Cash Yield(6) 7.2 % 6.9 % 6.7 % 6.8 % 6.7 % Weighted Average Lease Term (years)(3) 11.2 7.1 4.2 5.6 10.8 Developments Industry Location Lease Term (years) Amount Funded to Date Actual/ Anticipated Rent Commencement Arts & Craft D'Iberville, MS 15 $ 7,405 Commenced 1Q'23 Arts & Craft Winder, GA 15 $ 7,422 Commenced 1Q'23 Arts & Craft Sheboygan, WI 10 $ 3,599 Commenced 2Q'23 Home Improvement Bossier City, LA 12 $ 6,306 Commenced 3Q'23 Discount Retail Alpena, MI 10 $ 4,588 Commenced 3Q'23 Dollar Stores (multiple programs) Various (3 completed) 10 $ 4,628 Commenced 3Q'23 Dollar Stores (multiple programs) Various (13 completed) 10 to 15 $ 22,613 Commenced 4Q'23 Automotive Service (multiple locations) Various (1 completed) 15 $ 3,195 Commenced 4Q'23 Dollar Stores (multiple programs) Various (15 in progress) 10 to 15 $ 22,813 1Q'24 to 3Q'24 Automotive Service (multiple locations) Various (6 in progress) 15 $ 9,416 2Q'24 to 3Q'24 Farm Supplies Malakoff, TX 20 $ 5,616 1Q'24 Home Improvement Butte, MT 15 $ 2,098 3Q'24 Pet Supplies Sumter, SC 10 $ 1,175 4Q'24
Portfolio Information (unaudited, dollars in thousands) 13 1. Includes acquisitions, mortgage loans receivable, and completed developments. 2. Excludes 70 investments that secure mortgage loans receivable. 3. Weighted by ABR; excludes lease extension options and 70 investments that secure mortgage loans receivable. 4. Investments, or investments 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. 5. Investments 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. 6. Investments, or investments 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 December 31, 2023 Number of Investments(1) 598 Number of states 45 Square feet 10,624,183 Tenants 85 Industries 26 Occupancy(2) 100.0 % Weighted average lease term remaining (years)(3) 9.5 Tenant Quality Number of Investments ABR % of ABR Investment grade (rated)(4) 472 $ 92,927 70.5% Investment grade profile (unrated)(5) 49 18,641 14.1% Sub-investment grade (rated)(6) 28 11,542 8.8% Sub-investment grade profile (unrated) 49 8,750 6.6% Total 598 $ 131,859 100.0% 87.6% of ABR Necessity Discount Service Other 12.3% 84.6% of ABR Inv. Grade Inv. Grade Profile Sub-Investment Grade 8.8% Investment Grade Profile 14.1% Investment Grade 70.5% Sub-Investment Grade Profile 6.6% Tenant Quality Discount 22.0% Necessity 52.3% Service 13.3% Defensive Category
Portfolio Information (cont’d) (unaudited, dollars in thousands) 14 1. If rated by a credit rating agency, reflects highest rating from S&P, Fitch, Moody's or National Association of Insurance Commissioners. Top 20 Tenants Number of Leases ABR % of ABR Credit rating(1) 134 $ 14,350 10.9% BBB 33 10,246 7.8% BBB 28 9,047 6.9% BBB- 59 6,540 5.0% BBB 4 6,197 4.7% A 7 5,808 4.4% BBB+ 15 5,531 4.2% IG Profile 20 4,611 3.5% A 49 4,288 3.3% A 3 3,955 3.0% IG Profile 40 3,900 3.0% Baa2 6 3,770 2.9% AA 4 3,578 2.7% BBB+ 7 3,407 2.6% Baa1 6 3,188 2.4% A3 2 2,615 2.0% BB 10 2,435 1.8% IG Profile 4 2,356 1.8% Ba3 2 2,186 1.7% BBB 8 2,011 1.5% SIG (unrated) Total 441 $ 100,020 75.9%
Portfolio Information (cont’d) (unaudited, dollars in thousands) 15 State Number of Investments ABR % of ABR Illinois 26 $ 11,391 8.6% Texas 43 10,063 7.6% Wisconsin 24 9,507 7.2% New York 25 8,609 6.5% North Carolina 70 7,721 5.9% Georgia 36 7,054 5.3% Alabama 45 6,698 5.1% Ohio 42 6,685 5.1% Virginia 11 5,892 4.5% Pennsylvania 28 5,697 4.3% Other 248 52,542 39.8% Total 598 $ 131,859 100.0%
Portfolio Information (cont’d) (unaudited, dollars in thousands) 16 Industry Defensive Category Number of Investments ABR % of ABR Dollar Stores Discount 193 $ 20,890 15.8% Grocery Necessity 31 20,261 15.4% Drug Stores & Pharmacies Necessity 61 19,294 14.6% Home Improvement Necessity 29 15,269 11.6% Convenience Stores Service 73 9,641 7.3% Discount Retail Discount 32 8,134 6.2% Auto Parts Necessity 61 5,526 4.2% Arts & Crafts Other 14 5,475 4.2% Sporting Goods Other 4 3,841 2.9% General Retail Necessity 6 3,753 2.8% Consumer Electronics Other 6 3,188 2.4% Quick Service Restaurants Service 22 3,170 2.4% Healthcare Necessity 12 2,366 1.8% Automotive Service Service 18 2,036 1.5% Specialty Other 2 1,719 1.3% Farm Supplies Necessity 7 1,615 1.2% Casual Dining Service 7 1,066 0.8% Health and Fitness Service 1 985 0.7% Furniture Stores Other 2 932 0.7% Equipment Rental and Leasing Service 5 687 0.5% Apparel Other 4 481 0.4% Banking Necessity 3 467 0.4% Wholesale Warehouse Club Necessity 1 417 0.3% Telecommunications Other 2 314 0.2% Gift, Novelty, and Souvenir Shops Other 1 200 0.2% Home Furnishings Other 1 134 0.1% Total 598 $ 131,859 100.0% Defensive Category Number of Investments ABR % of ABR Necessity 211 68,967 52.3% Discount 225 29,024 22.0% Service 126 17,585 13.3% Other 36 16,284 12.3% Total 598 $ 131,859 100.0%
Lease Expiration Schedule(1) (unaudited, dollars in thousands) 17 ABR Expiring Year of Number of ABR as a % of Expiration Investments Expiring Expiring Total Portfolio 2024 1 $ 84 0.1% 2025 7 2,300 1.9% 2026 10 2,563 2.1% 2027 17 4,602 3.8% 2028 26 10,128 8.3% 2029 43 9,759 8.0% 2030 39 9,896 8.1% 2031 64 12,187 9.9% 2032 34 9,085 7.4% 2033 61 12,590 10.3% 2034 39 11,095 9.1% 2035 28 8,861 7.2% 2036 21 4,977 4.1% 2037 23 6,666 5.4% 2038 91 11,439 9.3% 2039 7 1,110 0.9% 2040 2 425 0.3% 2041 4 1,246 1.0% 2042 1 985 0.8% 2043 2 1,500 1.2% 2044 8 1,038 0.8% TOTAL 528 $ 122,535 100.0% 1. Excludes 70 investments that secure mortgage loans receivable.
FFO, Core FFO, and AFFO FFO means funds from operations. It is a non-GAAP measure defined by NAREIT as net income (computed in accordance with GAAP). Our FFO is net income in accordance with GAAP, excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortization and impairment charges on depreciable real property. Core FFO means core funds from operations. Core FFO is a non-GAAP financial measure defined as FFO adjusted to remove the effect of unusual and non-recurring items that are not expected to impact our operating performance or operations on an ongoing basis. These include non-recurring executive transition costs, severance and related charges, gain on insurance proceeds, and loss on debt extinguishments and other related costs. AFFO means adjusted funds from operations. AFFO is a non-GAAP financial measure defined as Core FFO adjusted for GAAP net income related to non-cash revenues and expenses, such as straight-line rent, amortization of above- and below-market lease-related intangibles, amortization of lease incentives, capitalized interest expense, earned development interest, non-cash interest expense, non-cash compensation expense, amortization of deferred financing costs, amortization of above/below-market assumed debt, and amortization of loan origination costs. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values historically have risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO to be useful in evaluating potential property acquisitions and measuring operating performance. We further consider FFO, Core FFO and AFFO to be useful in determining funds available for payment of distributions. FFO, Core FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP. You should not consider FFO, Core FFO and AFFO to be alternatives to net income as a reliable measure of our operating performance nor should you consider FFO, Core FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity. FFO, Core FFO and AFFO do not measure whether cash flow is sufficient to fund our cash needs, including principal amortization, capital improvements and distributions to stockholders. FFO, Core FFO and AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP. Further, FFO, Core FFO and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO, Core FFO and AFFO. Non-GAAP Measures and Definitions 18
EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre EBITDA is defined as earnings before interest expense, income tax expense, and depreciation and amortization. EBITDAre is the NAREIT definition of EBITDA (as defined above), but it is further adjusted to follow the definition included in a white paper issued in 2017 by NAREIT, which recommended that companies that report EBITDA also report EBITDAre. We compute EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from sales of depreciable property and impairment charges on depreciable real property. Adjusted EBITDAre is a non-GAAP financial measure defined as EBITDAre further adjusted to exclude straight-line rent, non-cash compensation expense, non-recurring executive transition costs, severance and related charges, loss on debt extinguishment and other related costs, gain on insurance proceeds, other non- recurring expenses (income), lease termination fees, adjustment for construction in process, and adjustment for intraquarter activities. Beginning in the quarter ended June 30, 2023, we modified our definition of Adjusted EBITDAre to include adjustments for construction in process and intraquarter investment activities. Prior periods have been recast to reflect this new definition. Annualized Adjusted EBITDAre is a non-GAAP financial measure defined as Adjusted EBITDAre multiplied by four. We present EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized 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, Adjusted EBITDAre and Annualized Adjusted EBITDAre as measures of our operating performance and not as measures of liquidity. EBITDA, EBITDAre, Adjusted EBITDAre and Annualized 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, Adjusted EBITDAre and Annualized 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. Net Debt and Adjusted Net Debt Net Debt is calculated as our principal amount of total debt outstanding excluding deferred financing costs, net discounts and debt issuance costs less cash, cash equivalents and restricted cash available for future investment. We believe excluding cash, cash equivalents and restricted cash available for future investment from our principal amount, all of which could be used to repay deb, provides an estimate of the net contractual amount of borrowed capital to be repaid. We believe these adjustments are additional beneficial disclosures to investors and analysis. Adjusted Net Debt is Net Debt adjusted by the net value of unsettled forward equity as of period end. Non-GAAP Measures and Definitions (cont’d) 19
Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate are non-GAAP financial measures which we use to assess our operating results. We compute Property-Level NOI as net income (computed in accordance with GAAP), excluding general and administrative expenses, interest expense (or income), income tax expense, transaction costs, depreciation and amortization, gains (or losses) on sales of depreciable property, real estate impairment losses, interest income on mortgage loans receivable, loss on debt extinguishment, lease termination fees, and other income (or expense). We further adjust Property-Level NOI for non-cash revenue components of straight-line rent and amortization of lease-intangibles to derive Property-Level Cash NOI. We further adjust Property-Level Cash NOI for intraquarter acquisitions, dispositions and completed developments to derive Property-Level Cash NOI - Estimated Run Rate. We further adjust Property-Level Cash NOI - Estimated Run Rate for interest income on mortgage loans receivable and intraquarter mortgage loan activity to derive Total Cash NOI - Estimated Run Rate. We believe Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate 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. Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate are not measurements of financial performance under GAAP, and may not be comparable to similarly titled measures of other companies. You should not consider our measures as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. Other Definitions ABR is annualized base rent as of December 31, 2023, for all leases that commenced and annualized cash interest on mortgage loans receivable in place as of that date. Cash Yield is the annualized base rent contractually due from acquired properties, interest income from mortgage loans receivable, and completed developments, divided by the gross investment amount, or gross proceeds in the case of dispositions. 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. Non-GAAP Measures and Definitions (cont’d) 20
Non-GAAP Measures and Definitions (cont’d) 21 Investments are lease agreements in place at owned properties, properties that have leases associated with mortgage loans receivable, developments where rent commenced, or in the case of master lease arrangements each property under the master lease is counted as a separate lease. Occupancy is expressed as a percentage, and it is the number of economically occupied properties divided by the total number of properties owned, excluding mortgage loans receivable and properties under development. OP Units means operating partnership units not held by NETSTREIT. Weighted Average Lease Term is weighted by the annualized base rent, excluding lease extension options and investments associated with mortgage loans receivable.
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, including estimated development costs, and trends in our business, including trends in the market for single-tenant, retail commercial real estate. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this supplemental report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 23, 2023 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 macroeconomic conditions, including inflation, interest rates and instability in the banking system. 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.
1 Investor Presentation February 2024
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, including estimated development costs, 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 Form 10-K for the year ended December 31, 2022, filed with the SEC on February 23, 2023, 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 macroeconomic conditions, including inflation, interest rates and instability in the banking system. 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. This presentation also includes certain financial measures not presented in accordance with generally accepted accounting principles (“GAAP”) including, but not limited to, FFO, Core FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, Annualized Adjusted EBITDAre, NOI, Cash NOI, Normalized Cash NOI, Net Debt, Adjusted Net Debt, and Pro forma Adjusted Net Debt. These non-GAAP financial measures are not measures of financial performance in accordance with GAAP and may exclude items that are significant in understanding and assessing the Company’s financial results. Therefore, these measures should not be considered in isolation or as an alternative to net income, cash flows from operations or other measures of profitability, liquidity or performance under GAAP. You should be aware that the presentation of these measures may not be comparable to similarly-titled measures used by other companies. The Company believes these non-GAAP measures provide useful information to management and investors regarding certain financial and business trends relating to the Company’s financial condition and results of operations. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends in and in comparing its financial results with other similar companies, many of which present similar non-GAAP financial measures to investors. These non-GAAP financial measures are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these non-GAAP financial measures. Certain monetary amounts, percentages and other figures included in this presentation have been subject to rounding adjustments. Certain other amounts that appear in this presentation may not sum due to rounding.
Investment Highlights & Business Update 3 Source: Company data and balance sheet as of December 31, 2023, unless otherwise noted. Figures represent percentage of ABR unless otherwise noted. 1. 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, Fitch, Moody's, or NAIC. 2. Reflects 5,983,711 of unsettled forward equity shares under the ATM program at the December 31, 2023 available net settlement price of $16.48. 3. Pro forma (PF) adjustments reflect 11,040,000 of unsettled shares from the January 2024 forward equity offering, and includes the $100.0 million available to draw from the $250.0 million senior unsecured term loan that closed on July 3, 2023. 4. Assumes Company exercises its one-year extension option to further extend maturity to January 2027. 88% Necessity, Discount, and Service-Oriented Tenants 100% Occupancy 100% Rent Collections 26 Retail Industries 85 Tenants $739.1 million Total PF Liquidity2,3 4.1x Adj. Net Debt2 / Annualized Adj. EBITDAre ✓Focused on growing portfolio with high quality tenants that offer strong credit profiles and provide consistent performance through various economic cycles ✓Proactive asset management with successful track record of maintaining full occupancy and strong rent collections since inception ✓Well diversified by tenant and retail industry across 45 states ✓Low leverage with no immediate-term debt maturities ✓Strong liquidity supported by active ATM program; issued $76.7 million of common stock in 4Q’23 ✓Raised $190.8 million of net equity proceeds from follow-on offering in January 2024 High Credit Quality & Diverse Net Lease Portfolio Well Capitalized Balance Sheet 85% Investment Grade (IG) and Investment Grade Profile (IGP)1 6.7% Cash Yield on New Investments Since 3Q’20 ✓Strong investment pace since 2020 with a strong pipeline of investment opportunities at attractive cash yields ✓$119.1 million of gross investments completed in 4Q’23, which are 98.7% leased to IG and IGP tenants Proven Ability to Source Attractive Investment Opportunities 2027 First Debt Maturity4 $116 million Avg. Quarterly Investments Since 3Q’20 23% Adj. Net Debt2 / Undepreciated Gross Assets $431.0 million YTD Net Investments 7.2% YTD Cash Yield
10.9% 7.8% 6.9% 5.0% 4.7% 4.4% 4.2% 3.5% 3.3% 3.0% Portfolio Overview High-Quality, Diversified Portfolio Consisting of 70.5% Investment Grade Tenants Across 45 States 4 Source: Company data as of December 31, 2023. 1. 70 properties that secure mortgage loans receivable are denoted as individual investments. 2. Excludes 70 investments that secure mortgage loans receivable. 3. Investments, or investments that are subsidiaries of a parent entity, with a credit rating of BBB- (S&P/Fitch), Baa3 (Moody’s) or NAIC2 (National Association of Insurance Commissioners) or higher. 4. Weighted by ABR; excludes lease extension options and 70 investments that secure mortgage loans receivable. 5. Represent investments 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, Fitch or NAIC. Key Portfolio Stats Investments1 598 States 45 Portfolio Square Feet (in millions) 10.6 Tenants 85 Retail Sectors 26 % Occupancy2 100% % Investment Grade Tenants (by ABR)3 70.5% Weighted Average Lease Term Remaining (Years)4 9.5 Lease Turnover Through 2026 (by ABR) 4.1% National Footprint in Attractive Markets Top 10 Tenants by % of ABR Investment Grade Rated BBB Investment Grade Profile5 ≥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 A BBB+ BBB IG Profile BBB A A BBB- IG Profile
Dollar Stores: 15.8% 1 Portfolio Diversification In Defensive Retail Sectors Nationally Diversified Portfolio Primarily Comprised of Recession Resilient Retail Tenants Source: Company data as of December 31, 2023. All figures represent percentage of ABR. Due to rounding, respective defensive retail sector exposure may not precisely reflect the absolute figures. Top Industries52.3% Necessity 22.0% Discount 12.3% Other Drug Stores & Pharmacies: 14.6% 3 Grocery: 15.4% 2 Home Improvement: 11.6% 4 Convenience Stores: 7.3% 5 13.3% Service 87.6% of ABR Necessity Discount Service 5
Resilient, Cycle-Tested Investment Grade Credit Tenants with Durable Cash Flows1 >60% 84.6% (70.5% Investment Grade Credit and 14.1% Investment Grade Profile) Granular Assets in Highly Fragmented, Undercapitalized Market Segment $3.4 million Avg. Asset Size $1 to $10 million Avg. Asset Size Net Lease Retail Assets with Long Lease Term Benefiting From Contractual Rent Growth ~10 Year WALT 9.5 Year2 WALT Diversification by Industry, Tenant, State1 <15% Industry <50% Top 10 Tenants <15% State 15.8% Industry 53.5% Top 10 Tenants 8.6% 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 6 Source: Company data as of December 31, 2023. 1. Portfolio statistics as a percentage of ABR. 2. Weighted by ABR; excludes lease extension options and 70 investments that secure mortgage loans receivable. Current MetricsInvestment Philosophy Portfolio Strategy Defensive Tenancy in Necessity-Based and E-commerce-Resistant Retail Industries1 87.6%Primarily Consistent Investment Approach Disciplined and Deliberate Portfolio Construction
“Market-Taker Assets” 7 Inefficiently Priced Assets TYPICAL TRANSACTION - Well marketed transaction - Straight-forward transaction - Ability to finance transaction - Highly competitive, well capitalized investors TYPICAL TRANSACTION - Not highly marketed - May involve transaction structuring that limits buyer pool - Limited financing options - Less competitive Efficiently Priced Assets Acquisition Strategy – Bell Curve Investing Acquisition Strategy is Focused on Inefficiently Priced Assets Where Risk Adjusted Returns are Higher
8 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 volatility and likelihood of cash flow weakness C B Tenant Credit Underwriting • Evaluate corporate level financials • Assess business risks • Determine ownership/sponsorship • Rigorous credit underwriting A L e v e l o f U n d e rw ri ti n g E m p h a s is Stringent Three-Part Underwriting Process Our Three-Pronged Approach Results in Superior Downside Protection
Investment Grade (rated) Investment Grade Profile (unrated) Sub-IG (rated) & Sub-IG Profile (unrated) 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: • At least $1B in sales • Debt / adjusted EBITDA of less than 2.0x • Well-capitalized retailers • National footprint with strong brand equity • Focus on real estate quality / unit- level profitability • Higher relative yields • Lower competition for deals Durability • Coverage and credit enhancements required given more susceptible to market disruptions % Of ABR 70.5% 14.1% 15.4% Lease Terms (WALT, Rent Bumps, etc.) Less negotiating leverage More negotiating leverage Most negotiating leverage Representative Tenants 9 Source: Company data as of December 31, 2023. 84.6% IG and IG Profile Defensive, consistent performance through economic cycles Strong Tenant Credit Underwriting Credit-Focused Underwriting Approach Drives Stable Revenue and Long-Term Return on Investment
10 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 • Market rent versus in-place rent • Demographic analysis • Current demographics plus trends and forecasts • Competitive analysis • Market position versus competing retail corridors Real Estate Valuation Real Estate Closely Follows Credit as a Top Priority: We Utilize a Ground-Up Framework Rooted in Real Estate Fundamentals to Underpin Valuation and Further Quantify the Upside Potential of an Investment
11 Obtain Financial Info 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 • Foot traffic • Sales • EBITDAR margin • Rent • 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✓ Unit-Level Profitability Assess Unit-Level Financial Performance to Focus on Properties with Strong Rent Coverage and Higher Variability in Operating Costs
12 Source: Company filings from August 2020 through December 31, 2023. FCPT and EPRT are as of September 30, 2023 1. Investments 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, Fitch, Moody’s, or NAIC. 2. Excludes lease extension options and investments that secure mortgage loans receivable. 3. Assumes cash cap rate is 30bps lower than reported GAAP cap rate. Volume $(000)s $1,618 $4,987 $2,329 $1,014 $3,002 Investment Grade % 67.5% 67.9% NA 54.2% NA Investment Grade Profile1 % 13.8% NA NA NA NA IG + IG Profile % 81.2% NA NA NA NA WALT2 9.8 9.6 10.4 10.2 13.0 Weighted Average Cash Yield 6.7% 6.1%3 6.8% 6.5% 7.2% History of Sourcing Investments at Attractive Yields Consistently Invested at Above-Market Yields Despite Focus on High-Quality Tenants Sourcing Volume Since 3Q’20
$138,212 $132,787 $131,301 $104,069 $128,615 $115,321 $117,455 $119,128 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 1Q'22 2Q'22 3Q'22 4Q'22 1Q'23 2Q'23 3Q'23 4Q'23 G ro s s I n v e s tm e n t A c ti v it y ($ 0 0 0 s ) 13 Investment Activity Summary Details Source: Company data as of December 31, 2023. 1. Includes acquisitions, mortgage loans receivable, and completed developments. 2. Excludes lease extension options and investments that secure mortgage loans receivable. Investments1 1 ' 2 ' 3 3 ' 3 '23 '23 Number of Investments 37 27 26 24 71 39 29 57 Average Investment $3,735 $4,918 $5,050 $4,318 $1,811 $2,957 $4,050 $2,090 Cash Cap Rates 6.4% 6.6% 6.6% 6.9% 7.7% 6.8% 7.0% 7.2% IG + IGP % 77.5% 88.1% 83.3% 97.7% 94.9% 80.7% 97.2% 98.7% Weighted Average Lease Term2 8.4 11.0 11.8 11.1 10.3 11.5 10.0 10.9
$2,364 $10,328 $1,685 $12,294 $15,907 $4,060 $13,543 $15,995 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 1Q'22 2Q'22 3Q'22 4Q'22 1Q'23 2Q'23 3Q'23 4Q'23 D is p o s it io n A c ti v it y ($ 0 0 0 s ) 14 Disposition Activity Summary Details Source: Company data as of December 31, 2023. 1. Excludes vacant properties. Dispositions '22 '22 '22 ' 2 ' 3 3 3 3 Cash Cap Rates1 5.5% 6.0% 5.5% 6.7% 6.8% 6.7% 6.9% 7.2% Number of Investments 1 2 1 3 8 2 6 6 Weighted Average Lease Term1 8.0 9.8 0.4 10.8 5.6 4.2 7.1 11.2
15 Source: Company data as of December 31, 2023. Since inception, the Company has disposed of 86 properties totaling $240 million, which has materially improved portfolio performance metrics such as tenant quality, WALT, and geographic diversity Identify properties not meeting strategy and/or risk management criteria (i.e. rent coverage) Periodically review all properties for changes in performance, credit, and local conditions Leverage 1031 exchange transfers where possible to access deep, non- institutional market for portfolio optimization Strategic Recycling Perpetual Stratification Active Monitoring Identify Active Asset Management Continuously Track Property Performance to Stratify Portfolio and Ensure a Secure Rental Stream
Source: Company data as December 31, 2023, unless otherwise noted. 1. Pro forma (PF) adjustments reflect 5,983,711 of unsettled shares issued through the ATM from the third quarter 2023, 11,040,000 of unsettled shares from the January 2024 forward equity offering, and includes the $100.0 million available to draw from the $250.0 million senior unsecured term loan that closed on July 3, 2023. 2. The three-year $250.0 million senior unsecured delayed draw term loan includes two one-year extension options and one six-month to extend maturity to January 2029, at Company’s discretion, totaling 5.5 year of available term. 3. Company extended the existing $175 million term loan maturity to January 2026 from December 2024, with a one-year extension option to further extend maturity to January 2027. 4. Pro forma (PF) adjustments reflect 5,983,711 of unsettled shares issued through the ATM from the third quarter 2023 and 11,040,000 of unsettled shares from the January 2024 forward equity offering. Conservative Balance Sheet with Improved Liquidity Balance Sheet Positioned for Growth Given Strong Liquidity Profile and Low Leverage Position Debt Maturity Schedule – Pro Forma2,3 Abundant Liquidity to Support Growth: $739.1 million in total PF liquidity1 Access to Debt: $100 million remaining to draw from 5.5-year $250 million term loan2 Well-Staggered Debt Maturity Profile: No term loan maturities expected until 20272,3 Unsecured Balance Sheet: Asset base is over 99% unencumbered Low Leverage: PF Adjusted Net Debt4 / Annualized Adjusted EBITDAre of 2.5x $175 $200 $250 $8 $400 $0 $100 $200 $300 $400 $500 $600 2023 2024 2025 2026 2027 2028 2029 2024 Unsecured Term Loan 2028 Unsecured Term Loan 2029 Unsecured Term Loan Mortgage Note Revolving Credit Facility Capacity 3 2 16
100% 13% 79% 27% 37% 55%22% 17% 7% 52% 3% 40% 18% 5% FCPT NTST EPRT ADC O NNN Service Discount Necessity59% 71% 69% 32% 0% 0% NTST ADC FCPT O NNN EPRT Source: Public filings as of December 31, 2023. FCPT, EPRT, and O as of September 30, 2023. 1. EPRT and NNN investment grade concentration assumed to be 0%, although it is not disclosed by either company. 2. Examples of service includes convenience stores, quick service restaurants, automotive service, and health and fitness. Examples of discount include dollar store and discount retail. Examples of necessity include, drug stores & pharmacy, home improvement, auto parts, and banking. 4.9% 7.9% 15.1% 19.7% 19.8% 20.9% EPRT NTST ADC FCPT NNN O Portfolio Highlights Relative to Peers NTST’s Stable & Predictable Cash Flow Profile Drives Superior Risk-Adjusted Returns Lease Rollover Through 2027 Average Investment Size per Property Investment Grade %1 Portfolio Composition2 Weighted-Average Lease Term 17 13.9 9.5 8.4 8.0 10.1 9.7 $3.9 $3.7 $3.4 $3.0 $2.8 $2.6
Multiple and Earnings Growth Comparison Relative Valuation and Growth Remains Stable 18 2.5x 3.7x 4.7x 4.8x 5.0x 5.4x 5.4x 5.6x 5.6% 4.6% 3.3% 3.1% 2.9% 2.4% 2.3% NA 13.5x 13.1x 12.9x 12.8x 11.9x 11.6x 11.5x 11.4x 14.0x 13.9x 13.4x 13.4x 12.3x 11.9x 11.9x 11.9x Source: Public filings, FactSet and S&P Capital IQ. Note: Market data as of February 13, 2024. Peer capitalization data as of September 30, 2023. NTST capitalization data as of December 31, 2023, as adjusted for forward equity offering in 1Q24. 1. 2024E AFFO per share growth is calculated using FactSet mean 2024E AFFO per share estimates and 2023E AFFO per share estimates. 2. During 2023, WPC spun-off NLOP. Year-over-year growth not comparable. Consensus WPC RemainCo 2023E AFFO estimate not available. 3. 2024E AFFO per share multiple calculated using current price per share and FactSet mean 2024E AFFO per share estimates. 4. Net Debt plus Preferred is adjusted for forward equity. 5. Leverage uses capitalization as of December 31, 2023, and is adjusted for subsequent forward equity offering during 1Q24. 6. 2025E AFFO per share multiple calculated using current price per share and FactSet mean 2025E AFFO per share estimates. 2024E AFFO per Share Growth1 2024E AFFO per Share Multiple3 Net Debt + Pref. / EBITDA4 2025E AFFO per Share Multiple6 2 5
(unaudited, in thousands) Three Months Ended, December 31, 2023 NOI $29.6 Straight-line Rental Adjustments (0.5) Amort. of Lease-Related Intangibles (0.1) Cash NOI 29.0 Intraquarter Net Investment Activity 0.7 Normalized Cash NOI 29.7 Annualized Normalized Cash NOI $118.8 Applied Cap Rate 7.50% 7.00% 6.50% 6.00% 5.50% Implied Real Estate Value $1,585 $1,698 $1,828 $1,981 $2,161 Mortgage Loan Receivable 114.5 Property Under Development 29.2 Other Tangible Assets 49.3 Net Debt (484.8) Other Tangible Liabilities (36.5) Implied Equity Value $1,256 $1,369 $1,500 $1,652 $1,832 Fully Diluted Shares Outstanding 73.7 Unsettled Forward Shares1 6.0 Implied Equity Value per Share $15.77 $17.19 $18.83 $20.74 $23.00 Applied Cap Rate and NAV Analysis Strong Upside Potential Given Relative Valuation Applied Nominal Cap Rate – Sensitivity Analysis Source: Public filings, FactSet and S&P Capital IQ. Note: Peer capitalization data as of September 30, 2023. NTST capitalization data as of December 31, 2023, as adjusted for forward equity offering in 1Q24. Market data as of February 13, 2024; closing price per share of $16.92. Companies may define adjusted cash NOI differently. Accordingly, such data for these companies and NTST may not be comparable. 1. Assumes 6.0 million shares issued through the ATM during the third quarter were settled for cash on December 31, 2023. 2. Implied cap rate as of February 13, 2024. 3. (NOI – TTM G&A) / Implied Real Estate Value. 19 Implied Cap Rate2 G&A Adjusted Implied Cap Rate3 2024E AFFO Multiple 6.3% 5.7% 13.9x 6.5% 6.1% 14.0x 6.7% 6.0% 13.4x 6.9% 6.7% 12.3x 7.1% 6.3% 13.4x 7.3% 6.9% 11.9x Average 6.8% 6.3% 13.1x Peer Benchmarking
20 Case Studies
Close Date: March 2023 Loan Amount: $46.1 million Interest Rate: 9.3% Location: Multiple – Southeast Term at Close: 3 years Parent Credit Rating: A / Baa2 21 • Loan provided the borrower funding to acquire a 49 property Speedway portfolio • Loan-to-value of ~60%, with first lien senior secured priority with no capital ahead of NETSTREIT’s loan • Yield maintenance provides protection from refinancing • Valuation excludes pending uncapped CPI rent escalations Investment Stats: Investment Highlights Case Study: Loan Strategy
22 • Acquisition of one Walmart Supercenter and one Sam’s Club by partnering and concurrently closing with a shopping center acquirer who purchased the remainder of the center • Significantly higher cap rate achieved through creative structuring • Strong retail corridor in Tupelo, MS INVESTMENT STATS:INVETMENT STATS: Close Date: July 2020 Purchase Price: $17.0 million Cash Cap Rate: 6.6% Location: Tupelo, MS Term at Close: 12 years Credit Rating: AA / Aa2 Investment Stats: Investment Highlights Case Study: Breakup Strategy
23 • NTST negotiated a new 10-year lease with only a 7.4% rent reduction to increase lease term by six years • Cash cap rate of 6.9% compares favorably to other 10-year Tractor Supply transactions in the market • Exceptional real estate that tenant is committed to long term INVESTMENT STATS: Close Date: March 2021 Purchase Price: $6.2 million Post-B&E Cash Cap Rate: 6.9% Location: Olympia, WA Term at Close of B&E: 10.5 Years Credit Rating: BBB / Baa1 Investment Stats: Investment Highlights Case Study: Blend & Extend
24 Commitment to ESG
25 Source: Company data. 1. Reflects gender and racial / ethnic diversity. Annual Director Elections Majority Voting Standard For Election of Directors Director Resignation Policy Annual Director and Committee Assessments No poison pill or differential voting stock structure to chill shareholder participation Shareholders’ right to amend the charter and bylaws by simple majority vote Separate non-executive Chair and CEO roles and Lead Independent Director with strong role and significant governance duties Governance Highlights Board Independence and Diversity 86% Independent Directors 50% Diverse Independent Directors1 43% Female Directors 3 Fully Independent Committees Governance We are committed to acting with honesty and integrity and conducting all corporate opportunities in an ethical manner.
26 401K Plan 100% company match of up to a 3% contribution, and 50% of up to the next 2% Insurance Health, dental, and vision insurance costs covered at 90% for employees and 60% for dependents Leave Ten weeks of paid maternity leave at 100% salary as well as four weeks of paid family bonding; Company also provides jury duty, witness leave, and military leave Paid Time Off A minimum of twenty-three PTO days Paid Holidays Twelve days of paid holidays Employee Assistance 24/7 toll-free hotline to access confidential counseling on various physical and mental health needs Continuing Education Reimbursement for certifications, tuition, courses, and seminars for continuing professional education BenefitsWorkforce Diversity Source: Company data. Social Responsibility Human capital management is the cornerstone of our ESG and corporate strategy. We believe in the value of a diverse workforce and inclusive culture. Female, 40% Male, 60% White, 70% Ethnically Diverse, 30% Female, 36% Male, 64% White, 71% Ethnically Diverse, 29%
27 Source: Tenants within our portfolio that have public environmental, social, or governance initiatives as of December 31, 2023. 1. Includes the $200 million unsecured term loan which matures in February 2028, the $250 million unsecured term loan which matures in January 2029, and the $400 million revolver which matures in August 2027. Environmental Responsibility We are committed to fulfilling our responsibility as an outstanding corporate citizen. ✓ 18 of our top 20 tenants have corporate sustainability initiatives in place ✓ 70% of ABR represents tenants with ESG initiatives ✓ We incorporated green lease clauses in our standard lease form and as part of our corporate guidelines ✓ We received Silver Level recognition from Green Lease Leaders for our efforts ✓ We incorporated sustainability-linked loan feature, based on SBTi, to our unsecured term loans and credit facility1 ✓ We completed scope 1 and 2 greenhouse gas emissions inventory for our corporate headquarters ✓ We participated in our first GRESB Public Disclosure ✓ Corporate headquarters is LEED v4 O+M: EB Gold Certified, meeting strict guidelines set forth by the Environmental Protection Agency ✓ Implementation of conservation practices in office Corporate Sustainability Initiatives from Tenants Greenhouse Gas Emissions Green Lease Clauses Sustainable Practices Science Based Target initiatives (“SBTi”) GRESB Public Disclosure
28 Financial Information and Non-GAAP Reconciliations
Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 REVENUES Rental revenue (including reimbursable) $ 34,619 $ 26,625 $ 123,967 $ 93,934 Interest income on loans receivable 2,243 674 7,388 2,345 Other revenue — — 550 — Total revenues 36,862 27,299 131,905 96,279 OPERATING EXPENSES Property 5,064 3,539 16,413 11,695 General and administrative 4,876 5,444 20,176 19,053 Depreciation and amortization 17,078 13,938 63,677 50,075 Provisions for impairment 2,709 — 7,083 1,114 Transaction costs 189 135 456 839 Total operating expenses 29,916 23,056 107,805 82,776 OTHER INCOME (EXPENSE) Interest expense, net (5,646) (3,473) (19,058) (9,181) Gain on sales of real estate, net 506 1,986 1,175 4,148 Loss on debt extinguishment — — (128) — Other income, net 166 95 752 131 Total other income (expense), net (4,974) (1,392) (17,259) (4,902) Net income before income taxes 1,972 2,851 6,841 8,601 Income tax benefit (expense) (10) (41) 49 (396) Net income 1,962 2,810 6,890 8,205 Net income attributable to noncontrolling interests 21 25 53 88 Net income attributable to common stockholders $ 1,941 $ 2,785 $ 6,837 $ 8,117 Amounts available to common stockholders per common share: Basic $ 0.03 $ 0.05 $ 0.11 $ 0.16 Diluted $ 0.03 $ 0.05 $ 0.11 $ 0.16 Weighted average common shares: Basic 69,276,514 54,991,093 63,922,973 49,517,977 Diluted 69,922,646 55,715,025 64,665,439 50,431,822 Consolidated Statements of Operations (unaudited, dollars in thousands, except per share data) 29
Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 GAAP Reconciliation: Net income $ 1,962 $ 2,810 $ 6,890 $ 8,205 Depreciation and amortization of real estate 17,000 13,797 63,379 49,498 Provisions for impairment 2,709 — 7,083 1,114 Gain on sales of real estate, net (506) (1,986) (1,175) (4,148) Funds from Operations (FFO) $ 21,165 $ 14,621 $ 76,177 $ 54,669 Non-recurring executive transition costs, severance and related charges 86 848 362 848 Loss on debt extinguishment and other related costs — — 223 — Gain on insurance proceeds (31) (90) (78) (126) Core Funds from Operations (Core FFO) $ 21,220 $ 15,379 $ 76,684 $ 55,391 Straight-line rent adjustments (456) (142) (1,163) (1,286) Amortization of deferred financing costs 565 309 1,730 862 Amortization of above/below-market assumed debt 29 29 114 29 Amortization of loan origination costs 80 28 163 88 Amortization of lease-related intangibles (93) (246) (611) (889) Earned development interest 326 — 515 — Capitalized interest expense (372) (234) (1,060) (452) Non-cash interest expense (990) — (2,124) — Non-cash compensation expense 1,264 1,128 4,822 4,774 Adjusted Funds from Operations (AFFO) $ 21,573 $ 16,251 $ 79,070 $ 58,517 FFO per common share, diluted $ 0.30 $ 0.26 $ 1.18 $ 1.08 Core FFO per common share, diluted $ 0.30 $ 0.28 $ 1.19 $ 1.10 AFFO per common share, diluted $ 0.31 $ 0.29 $ 1.22 $ 1.16 Dividends per share $ 0.205 $ 0.200 $ 0.810 $ 0.800 Dividends per share as a percent of AFFO 66 % 69 % 66 % 69 % Weighted average common shares outstanding, basic 69,276,514 54,991,093 63,922,973 49,517,977 Operating partnership units outstanding 486,096 514,706 501,751 526,859 Unvested restricted stock units 160,036 209,226 165,420 248,602 Unsettled shares under open forward equity contracts — — 75,295 138,384 Weighted average common shares outstanding, diluted 69,922,646 55,715,025 64,665,439 50,431,822 Funds From Operations and Adjusted Funds From Operations (unaudited, dollars in thousands, except per share data) 30
1. Adjustment reflects the estimated cash yield on developments in process as of December 31, 2023. 2. The adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments and interest earning loan activity completed during the three months ended December 31, 2023 and 2022 had occurred on October 1, 2023 and 2022, respectively. 3. We calculate Annualized Adjusted EBITDAre by multiplying Adjusted EBITDAre by four. 4. Reflects 5,983,711 of unsettled forward equity shares under the ATM program at the December 31, 2023 available net settlement price of $16.48. 5. Reflects 11,040,000 of unsettled forward equity shares from the January 2024 offering. Three Months Ended December 31, 2023 2022 GAAP Reconciliation: Net income $ 1,962 $ 2,810 Depreciation and amortization of real estate 17,000 13,797 Amortization of lease-related intangibles (93) (246) Non-real estate depreciation and amortization 78 141 Interest expense, net 5,646 3,473 Income tax expense 10 41 Amortization of loan origination costs 80 28 EBITDA 24,683 20,044 Adjustments: Provisions for impairment 2,709 — Gain on sales of real estate, net (506) (1,986) EBITDAre 26,886 18,058 Adjustments: Straight-line rent adjustments (456) (142) Non-recurring executive transition costs, severance and related charges 86 848 Gain on insurance proceeds (31) (90) Non-cash compensation expense 1,264 1,128 Adjustment for construction in process (1) 719 315 Adjustment for intraquarter investment activities (2) 820 1,334 Adjusted EBITDAre $ 29,288 $ 21,451 Annualized Adjusted EBITDAre (3) $ 117,152 Net Debt As of December 31, 2023 Principal amount of total debt $ 613,361 Less: Cash, cash equivalents and restricted cash (29,929) Net Debt $ 583,432 Less: Net value of unsettled forward equity from 2023 ATM issuance (4) (98,594) Adjusted Net Debt $ 484,838 Less: Net value of unsettled forward equity from January 2024 offering (5) (190,771) Proforma Adjusted Net Debt $ 294,067 Leverage Net debt / Annualized Adjusted EBITDAre 5.0 x Adjusted Net Debt / Annualized Adjusted EBITDAre 4.1 x Proforma Adjusted Net Debt / Annualized Adjusted EBITDAre 2.5 x EBITDAre and Adjusted EBITDAre (unaudited, dollars in thousands) 31
Net Operating Income (unaudited, dollars in thousands) 1. Adjustments assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended December 31, 2023, had occurred on October 1, 2023. 2. Adjustment assumes all loan activity completed during the three months ended December 31, 2023, had occurred on October 1, 2023. Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 GAAP Reconciliation: Net income $ 1,962 $ 2,810 $ 6,890 $ 8,205 General and administrative 4,876 5,444 20,176 19,053 Depreciation and amortization 17,078 13,938 63,677 50,075 Provisions for impairment 2,709 — 7,083 1,114 Transaction costs 189 135 456 839 Interest expense, net 5,646 3,473 19,058 9,181 Gain on sales of real estate, net (506) (1,986) (1,175) (4,148) Income tax expense 10 41 (49) 396 Loss on debt extinguishment — — 128 — Interest income on mortgage loans receivable (2,243) (674) (7,388) (2,345) Lease termination fees — — (550) — Other income, net (166) (95) (752) (131) Property-Level NOI 29,555 23,086 107,554 82,239 Straight-line rent adjustments (456) (142) (1,163) (1,286) Amortization of lease-related intangibles (93) (246) (611) (889) Property-Level Cash NOI $ 29,006 $ 22,698 $ 105,780 $ 80,064 Adjustment for intraquarter acquisitions, dispositions and completed development (1) 705 Property-Level Cash NOI Estimated Run Rate $ 29,711 Interest income on mortgage loans receivable 2,243 Adjustments for intraquarter mortgage loan activity (2) 115 Total Cash NOI - Estimated Run Rate $ 32,069 Property Operating Expense Coverage Property operating expense reimbursement $ 4,415 $ 3,151 $ 14,648 $ 10,214 Property operating expenses (5,064) (3,539) (16,413) (11,695) Property operating expenses, net $ (648) $ (389) $ (1,765) $ (1,481) 32
December 31, 2023 December 31, 2022 ASSETS Real estate, at cost: Land $ 460,896 $ 401,146 Buildings and improvements 1,149,809 907,084 Total real estate, at cost 1,610,705 1,308,230 Less accumulated depreciation (101,210) (62,526) Property under development 29,198 16,796 Real estate held for investment, net 1,538,693 1,262,500 Assets held for sale 52,451 23,208 Mortgage loans receivable, net 114,472 46,378 Cash, cash equivalents and restricted cash 29,929 70,543 Lease intangible assets, net 161,354 151,006 Other assets, net 49,337 52,057 Total assets $ 1,946,236 $ 1,605,692 LIABILITIES AND EQUITY Liabilities: Term loans, net $ 521,912 $ 373,296 Revolving credit facility 80,000 113,000 Mortgage note payable, net 7,883 7,896 Lease intangible liabilities, net 25,353 30,131 Liabilities related to assets held for sale 1,158 406 Accounts payable, accrued expenses and other liabilities 36,498 22,540 Total liabilities $ 672,804 $ 547,269 Equity: Stockholders’ equity Common stock, $0.01 par value, 400,000,000 shares authorized; 73,207,080 and 58,031,879 shares issued and outstanding as of December 31, 2023 and 2022, respectively $ 732 $ 580 Additional paid-in capital 1,367,505 1,091,514 Distributions in excess of retained earnings (112,276) (66,937) Accumulated other comprehensive income 8,943 23,673 Total stockholders’ equity 1,264,904 1,048,830 Noncontrolling interests 8,528 9,593 Total equity 1,273,432 1,058,423 Total liabilities and equity $ 1,946,236 $ 1,605,692 Consolidated Balance Sheets (unaudited, dollars in thousands, except per share data) 33
As of December 31, 2023 Debt Summary Fully Extended Maturity Principal Balance Interest Rate(1) Remaining Capacity Available Term (years) Unsecured revolver(2) August 11, 2027 $ 80,000 6.49% $ 319,850 3.6 Unsecured term loan(3) January 15, 2027 175,000 3.12% — 3.0 Unsecured term loan(4) February 11, 2028 200,000 3.88% — 4.1 Unsecured term loan(5) January 3, 2029 150,000 4.89% 100,000 5.0 Mortgage note(6) November 01, 2027 8,361 4.53% — 3.8 Total / Weighted Average $ 613,361 4.26% $ 419,850 4.0 1. Rates presented exclude the impact of capitalized loan fee amortization. 2. Interest rate reflects the all-in borrowing rate as of December 31, 2023. Facility fees are charged at an annual rate of 0.15% of the total facility size of $400 million, and are not included in the interest rate presented. The facility has a one year extension option. Remaining capacity reduced by $0.15 million for outstanding letters of credit. 3. Interest rate consists of the fixed rate SOFR swap of 1.87%, plus a credit spread adjustment of 0.10% and a borrowing spread of 1.15%. See the $175 million Term Loan - Interest Rate Schedule table for additional detail on the fixed interest rate changes through the fully extended maturity. 4. Interest rate consists of the fixed rate SOFR swap of 2.63%, plus a credit spread adjustment of 0.10% and a borrowing spread of 1.15%. The swap terminates of February 11, 2028. 5. Interest rate consists of the fixed rate SOFR swap of 3.64%, plus a credit spread adjustment of 0.10% and a borrowing spread of 1.15%. The term loan matures on July 3, 2026 and includes two one-year extension options and one six-month extension option. 6. The mortgage note was assumed as part of an asset acquisition during the third quarter of 2022. Debt, Capitalization, and Financial Ratios (unaudited, dollars in thousands) 34 $175 million Term Loan - Interest Rate Schedule Start Date End Date Applicable Balance Fixed Rate(1) November 27, 2023 December 23, 2024 $ 175,000 3.12 % December 23, 2024 January 15, 2027 $ 175,000 3.65 % $175 $200 $250 $8 $400 $0 $100 $200 $300 $400 $500 $600 2023 2024 2025 2026 2027 2028 2029 2024 Unsecured Term Loan 2028 Unsecured Term Loan 2029 Unsecured Term Loan Mortgage Note Revolving Credit Facility Capacity Debt Maturity Schedule Floating, 13% Fixed, 87% Fixed vs. Floating Debt
Net Debt December 31, 2023 Principal amount of total debt $ 613,361 Less: Cash, cash equivalents and restricted cash (29,929) Net Debt $ 583,432 Less: Net value of unsettled forward equity from 2023 ATM issuance(1) (98,594) Adjusted Net Debt $ 484,838 Less: Net value of unsettled forward equity from January 2024 offering(2) (190,771) Proforma Adjusted Net Debt $ 294,067 Net debt / Annualized Adjusted EBITDAre 5.0 x Adjusted Net Debt / Annualized Adjusted EBITDAre 4.1 x Proforma Adjusted Net Debt / Annualized Adjusted EBITDAre 2.5 x Key Debt Covenant Information Required Actual Consolidated total leverage ratio ≤ 60.0% 30.5 % Fixed charge coverage ratio ≥ 1.50x 4.8x Maximum secured indebtedness ≤ 40.0% 0.4 % Maximum recourse indebtedness ≤ 10.0% — % Unencumbered leverage ratio ≤ 60.0% 33.3 % Unencumbered interest coverage ratio ≥ 1.75x 5.3x Liquidity As of December 31, 2023 Unused unsecured revolver capacity $ 319,850 Cash, cash equivalents and restricted cash 29,929 Net value of unsettled forward equity from 2023 ATM issuance(1) 98,594 Undrawn term loan balance 100,000 Total Liquidity $ 548,373 Net value of unsettled forward equity from January 2024 offering(2) 190,771 Total Proforma Liquidity $ 739,144 Equity Ending Shares/ Units as of December 31, 2023 Equity Market Capitalization % of Total Common shares(3) 73,207,080 $ 1,306,746 99.3 % OP units(3) 479,298 8,555 0.7 % Total 73,686,378 $ 1,315,302 100.0 % Enterprise Value As of December 31, 2023 % of Total Principal amount of total debt $ 613,361 31.8 % Equity market capitalization(3) 1,315,302 68.2 % Total enterprise value $ 1,928,662 100.0 % 1. Reflects 5,983,711 of unsettled forward equity shares under the ATM program at the December 31, 2023 available net settlement price of $16.48. 2. Reflects 11,040,000 of unsettled forward equity shares from the January 2024 offering. 2. Value is based on the December 31, 2023 closing share price of $17.85 per share. Debt, Capitalization, and Financial Ratios (cont’d) (unaudited, dollars in thousands) 35
Non-GAAP Measures and Definitions FFO, Core FFO, and AFFO FFO means funds from operations. It is a non-GAAP measure defined by NAREIT as net income (computed in accordance with GAAP). Our FFO is net income in accordance with GAAP, excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortization and impairment charges on depreciable real property. Core FFO means core funds from operations. Core FFO is a non-GAAP financial measure defined as FFO adjusted to remove the effect of unusual and non-recurring items that are not expected to impact our operating performance or operations on an ongoing basis. These include non-recurring executive transition costs, severance and related charges, gain on insurance proceeds, and loss on debt extinguishments and other related costs. AFFO means adjusted funds from operations. AFFO is a non-GAAP financial measure defined as Core FFO adjusted for GAAP net income related to non-cash revenues and expenses, such as straight-line rent, amortization of above- and below-market lease-related intangibles, amortization of lease incentives, capitalized interest expense, earned development interest, non-cash interest expense, non-cash compensation expense, amortization of deferred financing costs, amortization of above/below-market assumed debt, and amortization of loan origination costs. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values historically have risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO to be useful in evaluating potential property acquisitions and measuring operating performance. We further consider FFO, Core FFO and AFFO to be useful in determining funds available for payment of distributions. FFO, Core FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP. You should not consider FFO, Core FFO and AFFO to be alternatives to net income as a reliable measure of our operating performance nor should you consider FFO, Core FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity. FFO, Core FFO and AFFO do not measure whether cash flow is sufficient to fund our cash needs, including principal amortization, capital improvements and distributions to stockholders. FFO, Core FFO and AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP. Further, FFO, Core FFO and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO, Core FFO and AFFO. 36
Non-GAAP Measures and Definitions EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre EBITDA is defined as earnings before interest expense, income tax expense, and depreciation and amortization. EBITDAre is the NAREIT definition of EBITDA (as defined above), but it is further adjusted to follow the definition included in a white paper issued in 2017 by NAREIT, which recommended that companies that report EBITDA also report EBITDAre. We compute EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from sales of depreciable property and impairment charges on depreciable real property. Adjusted EBITDAre is a non-GAAP financial measure defined as EBITDAre further adjusted to exclude straight-line rent, non-cash compensation expense, non-recurring executive transition costs, severance and related charges, loss on debt extinguishment and other related costs, gain on insurance proceeds, other non-recurring expenses (income), lease termination fees, adjustment for construction in process, and adjustment for intraquarter activities. Beginning in the quarter ended June 30, 2023, we modified our definition of Adjusted EBITDAre to include adjustments for construction in process and intraquarter investment activities. Prior periods have been recast to reflect this new definition. Annualized Adjusted EBITDAre is a non-GAAP financial measure defined as Adjusted EBITDAre multiplied by four. We present EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized 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, Adjusted EBITDAre and Annualized Adjusted EBITDAre as measures of our operating performance and not as measures of liquidity. EBITDA, EBITDAre, Adjusted EBITDAre and Annualized 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, Adjusted EBITDAre and Annualized 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. Net Debt and Adjusted Net Debt Net Debt is calculated as our principal amount of total debt outstanding excluding deferred financing costs, net discounts and debt issuance costs less cash, cash equivalents and restricted cash available for future investment. We believe excluding cash, cash equivalents and restricted cash available for future investment from our principal amount, all of which could be used to repay deb, provides an estimate of the net contractual amount of borrowed capital to be repaid. We believe these adjustments are additional beneficial disclosures to investors and analysis. Adjusted Net Debt is Net Debt adjusted by the net value of unsettled forward equity as of period end. Proforma Adjusted Net Debt is further adjusted by the net value of unsettled forward equity from the January 2024 offering. 37
Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate are non- GAAP financial measures which we use to assess our operating results. We compute Property-Level NOI as net income (computed in accordance with GAAP), excluding general and administrative expenses, interest expense (or income), income tax expense, transaction costs, depreciation and amortization, gains (or losses) on sales of depreciable property, real estate impairment losses, interest income on mortgage loans receivable, loss on debt extinguishment, lease termination fees, and other income (or expense). We further adjust Property-Level NOI for non-cash revenue components of straight-line rent and amortization of lease-intangibles to derive Property- Level Cash NOI. We further adjust Property-Level Cash NOI for intraquarter acquisitions, dispositions and completed developments to derive Property-Level Cash NOI - Estimated Run Rate. We further adjust Property-Level Cash NOI - Estimated Run Rate for interest income on mortgage loans receivable and intraquarter mortgage loan activity to derive Total Cash NOI - Estimated Run Rate. We believe Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate 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. Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate are not measurements of financial performance under GAAP, and may not be comparable to similarly titled measures of other companies. You should not consider our measures as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. Other Definitions ABR is annualized base rent as of December 31, 2023, for all leases that commenced and annualized cash interest on mortgage loans receivable in place as of that date. Cash Yield is the annualized base rent contractually due from acquired properties, interest income from mortgage loans receivable, and completed developments, divided by the gross investment amount, or gross proceeds in the case of dispositions. 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. Non-GAAP Measures and Definitions (cont’d) 38
Investments are lease agreements in place at owned properties, properties that have leases associated with mortgage loans receivable, developments where rent commenced, or in the case of master lease arrangements each property under the master lease is counted as a separate lease. Occupancy is expressed as a percentage, and it is the number of economically occupied properties divided by the total number of properties owned, excluding mortgage loans receivable and properties under development. OP Units means operating partnership units not held by NETSTREIT. Weighted Average Lease Term is weighted by the annualized base rent, excluding lease extension options and investments associated with mortgage loans receivable. Non-GAAP Measures and Definitions (cont’d) 39
40 Investor Relations ir@netstreit.com 972-597-4825
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-Section 14a
-Number 240
-Subsection 12
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-Publisher SEC
-Name Securities Act
-Number 230
-Section 425
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