Form 8-K NETSTREIT Corp. For: Jul 29
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NETSTREIT REPORTS SECOND QUARTER 2021 FINANCIAL AND OPERATING RESULTS
– Completed $107.7 Million of Net Investment Activity –
– Reaffirms Full Year 2021 AFFO Guidance in Range of $0.95 - $0.99 Per Share –
–During the Quarter, Raised Gross Proceeds of $203.6 Million through Follow On Offering –
Dallas TX – July 29, 2021 – NETSTREIT (NYSE: NTST) (the “Company”), today announced financial and operating results for the second quarter ended June 30, 2021.
“During the second quarter, we again generated strong results while benefiting from our strategic focus. Our portfolio remains 100% occupied, and through July, we have collected 100% of rents for eleven straight months. Importantly, we accomplished a significant milestone during the second quarter, completing a $200-plus million follow-on common equity offering and demonstrating our access to well-priced capital. With more than $200 million of high quality acquisitions completed in the first half of the year, and significant capacity on our balance sheet, we will continue to take advantage of attractive opportunities to deploy capital. As we look to the balance of the year, we believe NETSTREIT’s unique focus on the highest quality net lease assets and our demonstrated sourcing methodologies, positions us well to continue to grow in 2021, and beyond,” said Mark Manheimer, Chief Executive Officer of NETSTREIT.
SECOND QUARTER 2021 HIGHLIGHTS
•Reported net loss per share of $(0.07), Core Funds from Operations (“Core FFO”) per share of $0.181 and AFFO per share of $0.201 (see non-GAAP reconciliation attached)
•The Company collected 100% of the second quarter rent payments and for the month of July 2021, resulting in eleven consecutive months of 100% rent collections
PORTFOLIO UPDATE
As of June 30, 2021, the NETSTREIT portfolio was comprised of 267 leases2, contributing $55.3 million of annualized base rent3, with a weighted-average remaining lease term of 9.9 years, of which 69.9% were investment grade rated tenants and 13.5% were tenants with investment grade profiles (unrated tenants with more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x). The portfolio was 100.0% occupied as of June 30, 2021.
INVESTMENT ACTIVITY
During the quarter ended June 30, 2021, the Company had total net investment activity of $107.7 million. The Company acquired 35 properties for approximately $116.7 million at an initial cash capitalization rate of 6.5%, inclusive of closing costs. A majority of the acquisitions closed late in the last month of the quarter resulting in the Company owning the assets for an average of approximately 19 days. Acquisitions completed during the quarter had a weighted-average remaining lease term of 9.7 years, and 72.8% of the properties are occupied by investment grade rated tenants and 20.5% occupied by tenants with investment grade profiles. The Company also provided $4.0 million of development funding in the second quarter, including funding to support two new developments for tenants with investment grade profiles.
The Company completed five dispositions for $13.0 million in total contractual sales proceeds, which equated to a 6.7% cash capitalization rate.
The transaction activity decreased total tenant count from 60 to 59 tenants, and decreased the portfolio’s exposure to casual dining. The geographic and industry exposure remained unchanged at 39 states and 23 industries.
BALANCE SHEET AND LIQUIDITY
In April, the Company completed a follow on offering of 10,915,688 shares of common stock, which includes the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $18.65 per share. Gross proceeds to the Company from the offering, before deducting underwriting discounts and commissions and other offering expenses, were approximately $203.6 million. Proceeds from the offering were used to repay certain borrowings under the revolving credit facility, fund acquisitions of properties, and for general corporate purposes.
At quarter end, total debt outstanding was $175 million, with a weighted average term of 3.5 years and a quarter end contractual interest rate, including the impact of the fixed rate swap, of 1.36% (excluding the impact of deferred fee amortization). All of the Company’s debt was at a fixed rate and the Company’s net debt to annualized adjusted EBITDA ratio was 2.1x. Additionally, the ending cash balance was $88 million, and the Company had an unused revolving line of credit with $250 million of capacity.
DIVIDEND
On July 27, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share for the third quarter of 2021, which will be paid on September 15, 2021 to shareholders of record on September 1, 2021.
2021 OUTLOOK
The Company is maintaining its full year 2021 AFFO per share guidance in the range of $0.95 to $0.99 per share. This AFFO guidance is based on the following assumptions:
•For full year 2021, the Company expects net acquisition activity, inclusive of dispositions, to be at least $360 million
•The Company expects cash G&A to be in the range of $11.0 to $12.0 million, which includes recurring transaction costs, as well as additional non-cash compensation expense of $3.0 to $4.0 million
•The Company expects cash interest expense, including unused line of credit facility fees, of $3.0 to $3.5 million, and an additional $0.6 million of non-cash deferred financing fee amortization
•The Company expects to incur taxes in the range of $0.2 to $0.3 million which will be reported as “income taxes” in the Company’s financial statements for 2021
•Full year 2021 diluted weighted average shares outstanding, which includes the impact of OP units, are expected to be in the range of 38 to 39 million shares
EARNINGS WEBCAST AND CONFERENCE CALL
A conference call will be held on Friday, July 30, 2021 at 10:00 AM ET. During the conference call the Company’s officers will review second quarter performance, discuss recent events, and conduct a question and answer period.
The webcast will be accessible on the “Investor Relations” section of the Company’s website at www.NETSTREIT.com. To listen to the live webcast, please go to the site at least fifteen minutes prior to the scheduled start time to register, as well as download and install any necessary audio software. A replay of the webcast will be available for 90 days on the Company’s website shortly after the call.
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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 August 6, 2021, which can be accessed by dialing 1-844-512-2921 for domestic callers or 1-412-317-6671 for international callers. The passcode for this dial-in replay is 13721126.
SUPPLEMENTAL PACKAGE
The Company’s supplemental package will be available prior to the conference call in the Investor Relations section of the Company’s website at www.investors.netstreit.com.
About NETSTREIT
NETSTREIT is an internally managed Real Estate Investment Trust (REIT) based in Dallas, Texas that specializes in acquiring single-tenant net lease retail properties nationwide. The growing portfolio consists of high-quality properties leased to e-commerce resistant tenants with healthy balance sheets. Led by a management team of seasoned commercial real estate executives, NETSTREIT’s strategy is to create the highest quality net lease retail portfolio in the country with the goal of generating consistent cash flows and dividends for its investors.
Investor Relations
ir@netstreit.com
972-597-4825
(1) Per share amounts include weighted average common shares of 38,018,588, weighted average operating partnership units of 1,438,969 and weighted average effect of dilutive unvested restricted stock units of 332,781 for the three-months ended June 30, 2021.
(2) Leases are individual properties with a distinct lease agreement in place, development activities where a lease is expected at a future date, or in the case of master lease arrangements each property under the master lease is counted as a separate lease.
(3) Annualized base rent, or ABR, is calculated by multiplying (i) cash rental payments (a) for the month ended June 30, 2021 (or, if applicable, the next full month's cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of June 30, 2021, plus (b) for properties under development, the first full month's permanent cash rent contractually due after the development period by (ii) 12.
NON-GAAP FINANCIAL MEASURES
This press release contains non-GAAP financial measures, including FFO, Core FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, NOI, and Cash NOI. A reconciliation from net loss available to common shareholders to each non-GAAP financial measure, and definitions of each non-GAAP measure, are included below.
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FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements concerning our business and growth strategies, investment, financing and leasing activities and trends in our business, including trends in the market for single-tenant, retail commercial real estate. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this press release may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see the information under the heading “Risk Factors” in our Form 10-K filed with the Securities and Exchange Commission (the “SEC”) and other reports filed with the SEC from time to time. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this press release. New risks and uncertainties may arise over time and it is not possible for us to predict those events or how they may affect us. Many of the risks identified herein and in our periodic reports have been and will continue to be heightened as a result of the ongoing and numerous adverse effects arising from the novel coronavirus (COVID-19). We expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.
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NETSTREIT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(Unaudited)
| June 30, | December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| Assets | |||||||||||
| Real estate, at cost: | |||||||||||
| Land | $ | 233,068 | $ | 189,373 | |||||||
| Buildings and improvements | 479,858 | 358,360 | |||||||||
| Total real estate, at cost | 712,926 | 547,733 | |||||||||
| Less accumulated depreciation | (18,652) | (10,111) | |||||||||
| Property under development | 5,316 | — | |||||||||
| Real estate held for investment, net | 699,590 | 537,622 | |||||||||
| Assets held for sale | 16,700 | 14,802 | |||||||||
| Cash, cash equivalents and restricted cash | 88,140 | 92,643 | |||||||||
| Lease intangible assets, net | 99,620 | 75,024 | |||||||||
| Other assets, net | 8,964 | 5,724 | |||||||||
| Total assets | $ | 913,014 | $ | 725,815 | |||||||
| Liabilities and equity | |||||||||||
| Liabilities: | |||||||||||
| Term loan, net | $ | 174,217 | $ | 174,105 | |||||||
| Lease intangible liabilities, net | 22,186 | 16,930 | |||||||||
| Liabilities related to assets held for sale | 402 | 399 | |||||||||
| Accounts payable, accrued expenses and other liabilities | 6,733 | 6,308 | |||||||||
| Total liabilities | 203,538 | 197,742 | |||||||||
| Commitments and contingencies | |||||||||||
| Equity: | |||||||||||
| Stockholders’ equity | |||||||||||
| Common stock, $0.01 par value, 400,000,000 shares authorized; 39,525,978 and 28,203,545 shares issued and outstanding, respectively | 395 | 282 | |||||||||
| Additional paid-in capital | 704,269 | 501,045 | |||||||||
| Distributions in excess of retained earnings | (23,140) | (7,464) | |||||||||
| Accumulated other comprehensive income | 2,181 | 235 | |||||||||
| Total stockholders’ equity | 683,705 | 494,098 | |||||||||
| Noncontrolling interests | 25,771 | 33,975 | |||||||||
| Total equity | 709,476 | 528,073 | |||||||||
| Total liabilities and equity | $ | 913,014 | $ | 725,815 | |||||||
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NETSTREIT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(in thousands, except share and per share data)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Rental revenue (including reimbursable) | $ | 13,798 | $ | 7,117 | $ | 25,730 | $ | 12,625 | |||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Property | 1,315 | 434 | 2,265 | 719 | |||||||||||||||||||
| General and administrative | 3,991 | 1,846 | 7,127 | 3,732 | |||||||||||||||||||
| Depreciation and amortization | 7,075 | 3,116 | 13,004 | 5,462 | |||||||||||||||||||
| Provisions for impairment | 3,469 | 1,410 | 3,539 | 1,410 | |||||||||||||||||||
| Transaction costs | 181 | 634 | 332 | 1,728 | |||||||||||||||||||
| Total operating expenses | 16,031 | 7,440 | 26,267 | 13,051 | |||||||||||||||||||
| Other (expense) income | |||||||||||||||||||||||
| Interest expense, net | (894) | (1,098) | (1,799) | (2,797) | |||||||||||||||||||
| Gain on sales of real estate, net | 497 | 1,016 | 497 | 1,016 | |||||||||||||||||||
| Gain on forfeited earnest money deposit | — | — | — | 250 | |||||||||||||||||||
| Total other (expense) income, net | (397) | (82) | (1,302) | (1,531) | |||||||||||||||||||
| Net loss before income tax expense | (2,630) | (405) | (1,839) | (1,957) | |||||||||||||||||||
| Income tax expense | — | — | (50) | — | |||||||||||||||||||
| Net loss | (2,630) | (405) | (1,889) | (1,957) | |||||||||||||||||||
| Net loss attributable to noncontrolling interests | (94) | (111) | (54) | (536) | |||||||||||||||||||
| Preferred stock dividends | — | 6 | — | 6 | |||||||||||||||||||
| Net loss attributable to common shareholders | $ | (2,536) | $ | (300) | $ | (1,835) | $ | (1,427) | |||||||||||||||
| Amounts available to common shareholders per common share: | |||||||||||||||||||||||
| Basic | $ | (0.07) | $ | (0.03) | $ | (0.06) | $ | (0.13) | |||||||||||||||
| Diluted | $ | (0.07) | $ | (0.03) | $ | (0.06) | $ | (0.13) | |||||||||||||||
| Weighted average common shares: | |||||||||||||||||||||||
| Basic | 38,018,588 | 11,797,645 | 33,236,262 | 11,105,709 | |||||||||||||||||||
| Diluted | 38,018,588 | 11,797,645 | 33,236,262 | 11,105,709 | |||||||||||||||||||
| Other comprehensive (loss) income: | |||||||||||||||||||||||
| Net loss | $ | (2,630) | $ | (405) | $ | (1,889) | $ | (1,957) | |||||||||||||||
| Change in value on derivatives, net | (265) | — | 2,058 | — | |||||||||||||||||||
| Total comprehensive (loss) income | $ | (2,895) | $ | (405) | $ | 169 | $ | (1,957) | |||||||||||||||
| Comprehensive (loss) income attributable to noncontrolling interests | (106) | (111) | 58 | (536) | |||||||||||||||||||
| Comprehensive (loss) income attributable to common shareholders | $ | (2,789) | $ | (294) | $ | 111 | $ | (1,421) | |||||||||||||||
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NETSTREIT CORP. AND SUBSIDIARIES
RECONCILIATION OF NET LOSS TO FFO, CORE FFO AND ADJUSTED FFO
(in thousands, except share and per share data)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||
| Net loss | $ | (2,630) | $ | (405) | $ | (1,889) | $ | (1,957) | |||||||||||||||
| Depreciation and amortization of real estate | 6,997 | 3,040 | 12,849 | 5,311 | |||||||||||||||||||
| Provision for impairment | 3,469 | 1,410 | 3,539 | 1,410 | |||||||||||||||||||
| Gain on sale of real estate, net | (497) | (1,016) | (497) | (1,016) | |||||||||||||||||||
| FFO | 7,339 | 3,029 | 14,002 | 3,748 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Gain on forfeited earnest money deposit | — | — | — | (250) | |||||||||||||||||||
| 144A and IPO transaction costs(1) | — | 570 | — | 1,279 | |||||||||||||||||||
| Core FFO | 7,339 | 3,599 | 14,002 | 4,777 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Straight-line rental revenue | (222) | (877) | (463) | (1,030) | |||||||||||||||||||
| Amortization of deferred financing costs | 157 | 155 | 314 | 307 | |||||||||||||||||||
| Amortization of above/below market lease intangibles | (237) | (130) | (427) | (122) | |||||||||||||||||||
| Amortization of lease incentives | 3 | — | 3 | — | |||||||||||||||||||
| Capitalized interest expense | (15) | — | (15) | — | |||||||||||||||||||
| Non-cash compensation expense | 1,041 | — | 1,598 | — | |||||||||||||||||||
| AFFO | $ | 8,066 | $ | 2,747 | $ | 15,012 | $ | 3,932 | |||||||||||||||
| Weighted average common shares outstanding, basic | 38,018,588 | 11,797,645 | 33,236,262 | 11,105,709 | |||||||||||||||||||
| Weighted average operating partnership units outstanding | 1,438,969 | 4,449,019 | 1,527,160 | 4,449,019 | |||||||||||||||||||
| Weighted average dilutive securities | 332,781 | — | 210,370 | — | |||||||||||||||||||
| Weighted average common shares outstanding, diluted | 39,790,338 | 16,246,664 | 34,973,792 | 15,554,728 | |||||||||||||||||||
| FFO per common share, diluted | $ | 0.18 | $ | 0.19 | $ | 0.40 | $ | 0.24 | |||||||||||||||
| Core FFO per common share, diluted | $ | 0.18 | $ | 0.22 | $ | 0.40 | $ | 0.31 | |||||||||||||||
| AFFO per common share, diluted | $ | 0.20 | $ | 0.17 | $ | 0.43 | $ | 0.25 | |||||||||||||||
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RECONCILIATION OF NET LOSS TO EBITDA, EBITDAre AND ADJUSTED EBITDAre
(in thousands)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||
| Net loss | $ | (2,630) | $ | (405) | $ | (1,889) | $ | (1,957) | |||||||||||||||
| Depreciation and amortization of real estate | 6,997 | 3,040 | 12,849 | 5,311 | |||||||||||||||||||
| Amortization of above/below market lease intangibles | (237) | (130) | (427) | (122) | |||||||||||||||||||
| Amortization of lease incentives | 3 | — | 3 | — | |||||||||||||||||||
| Non-real estate depreciation and amortization | 78 | 76 | 155 | 151 | |||||||||||||||||||
| Interest expense, net | 894 | 1,098 | 1,799 | 2,797 | |||||||||||||||||||
| Income tax expense | — | — | 50 | — | |||||||||||||||||||
| EBITDA | 5,105 | 3,679 | 12,540 | 6,180 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Provision for impairments | 3,469 | 1,410 | 3,539 | 1,410 | |||||||||||||||||||
| Gain on sale of real estate, net | (497) | (1,016) | (497) | (1,016) | |||||||||||||||||||
| EBITDAre | 8,077 | 4,073 | 15,582 | 6,574 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Straight-line rental revenue | (222) | (877) | (463) | (1,030) | |||||||||||||||||||
| Gain on forfeited earnest money deposit | — | — | — | (250) | |||||||||||||||||||
| 144A and IPO transaction costs(1) | — | 570 | — | 1,279 | |||||||||||||||||||
| Non-cash compensation expense | 1,041 | — | 1,598 | — | |||||||||||||||||||
| Adjusted EBITDAre | $ | 8,896 | $ | 3,766 | $ | 16,717 | $ | 6,573 | |||||||||||||||
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RECONCILIATION OF NET LOSS TO NOI AND CASH NOI
(in thousands)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||
| Net loss | $ | (2,630) | $ | (405) | $ | (1,889) | $ | (1,957) | |||||||||||||||
| General and administrative | 3,991 | 1,846 | 7,127 | 3,732 | |||||||||||||||||||
| Depreciation and amortization | 7,075 | 3,116 | 13,004 | 5,462 | |||||||||||||||||||
| Provisions for impairment | 3,469 | 1,410 | 3,539 | 1,410 | |||||||||||||||||||
| Transaction costs | 181 | 634 | 332 | 1,728 | |||||||||||||||||||
| Interest expense, net | 894 | 1,098 | 1,799 | 2,797 | |||||||||||||||||||
| Gain on sales of real estate, net | (497) | (1,016) | (497) | (1,016) | |||||||||||||||||||
| Income tax expense | — | — | 50 | — | |||||||||||||||||||
| Gain on forfeited earnest money deposit | — | — | — | (250) | |||||||||||||||||||
| NOI | 12,483 | 6,683 | 23,465 | 11,906 | |||||||||||||||||||
| Straight-line rental revenue | (222) | (877) | (463) | (1,030) | |||||||||||||||||||
| Amortization of above/below market lease intangibles | (237) | (130) | (427) | (122) | |||||||||||||||||||
| Amortization of lease incentives | 3 | — | 3 | — | |||||||||||||||||||
| Cash NOI | $ | 12,027 | $ | 5,676 | $ | 22,578 | $ | 10,754 | |||||||||||||||
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NON-GAAP FINANCIAL MEASURES
FFO, Core FFO and AFFO
FFO is a non-GAAP financial measure defined by NAREIT as net income (computed in accordance with GAAP), excluding real estate-related expenses including, but not limited to, gains (losses) from sales, impairment adjustments, and depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO is consistent with FFO as defined by NAREIT.
Core FFO is a non-GAAP financial measure defined as FFO adjusted for gains from forfeited earnest money deposits and non-recurring public company costs. We believe the presentation of Core FFO provides investors with a metric to assist in their evaluation of our operating performance across multiple periods because it removes the effect of unusual and non-recurring items that are not expected to impact our operating performance on an ongoing basis.
AFFO is a non-GAAP financial measure defined as Core FFO adjusted for GAAP net income related to non-cash revenues and expenses, such as straight-line rent, amortization of above- and below-market lease-related intangibles, amortization of lease incentives, capitalized interest expense, non-cash compensation expense, and amortization of deferred financing costs.
Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values historically have risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO to be useful in evaluating potential property acquisitions and measuring operating performance. We further consider Core FFO and AFFO to be useful in determining funds available for payment of distributions. FFO, Core FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP. You should not consider FFO, Core FFO and AFFO to be alternatives to net income as a reliable measure of our operating performance; nor should you consider FFO, Core FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity.
FFO, Core FFO and AFFO do not measure whether cash flow is sufficient to fund all of our cash needs, including principal amortization, capital improvements and distributions to stockholders. FFO, Core FFO and AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP. Further, FFO, Core FFO and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO, Core FFO and AFFO.
EBITDA, EBITDAre and Adjusted EBITDAre
We compute EBITDA as earnings before interest, income taxes and depreciation and amortization. In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDAre. We compute EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and real estate impairment losses.
Adjusted EBITDAre is a non-GAAP financial measure defined as EBITDAre further adjusted to exclude straight-line rent, gains from forfeited earnest money deposits, non-recurring public company costs, representing consulting fees that we have incurred in preparing to become a public company and non-cash compensation expense.
We present EBITDA, EBITDAre and Adjusted EBITDAre as they are measures commonly used in our industry. We believe that these measures are useful to investors and analysts because they provide supplemental information concerning our operating performance, exclusive of certain non-cash items and other costs. We use EBITDA, EBITDAre and Adjusted EBITDAre as measures of our operating performance and not as measures of liquidity.
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EBITDA, EBITDAre and Adjusted EBITDAre do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. Additionally, our computation of EBITDA, EBITDAre and Adjusted EBITDAre may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.
NOI and Cash NOI
NOI and Cash NOI are non-GAAP financial measures which we use to assess our operating results. We compute NOI as net income (loss) (computed in accordance with GAAP), excluding general and administrative expenses, interest expense (or income), income tax expense, depreciation and amortization, gains (or losses) on sales of depreciable property, gain from forfeited earnest money deposits and real estate impairment losses. We further adjust NOI for non-cash revenue components of straight-line rent and amortization of lease intangibles and lease incentives to derive Cash NOI. We believe NOI and Cash NOI provide useful and relevant information because they reflect only those income and expense items that are incurred at the property level and present such items on an unlevered basis.
NOI and Cash NOI are not measurements of financial performance under GAAP, and our NOI and Cash NOI may not be comparable to similarly titled measures of other companies. You should not consider our NOI and Cash NOI as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.
(1) These expenses represent a subset of transaction costs as presented on the condensed consolidated statements of operations and comprehensive (loss) income.
11
Quarterly Supplemental Information Second Quarter 2021
Table of Contents 2 03 Corporate Overview 04 Earnings Release 08 Quarterly Highlights 09 Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income 10 Funds from Operations and Adjusted Funds from Operations 11 EBITDAre, Adjusted EBITDAre, NOI and Cash NOI 12 Consolidated Balance Sheets 13 Debt, Capitalization and Financial Ratios 14 Investment Activity 15 Portfolio Information 19 Lease Expiration Schedule 20 Non-GAAP Measures and Definitions 23 Forward Looking and Cautionary Statements
Corporate Overview 3 5910 North Central Expressway Suite 1600 Dallas, Texas, 75075 Phone: (972) 579 – 4825 Website: www.netstreit.com Corporate Headquarters Transfer Agent Computershare PO Box 505000 Louisville, Kentucky 40233 Phone: (866) 637 – 9460 Website: www.computershare.com Corporate Profile NETSTREIT Corp. (NYSE: NTST) is an internally managed Real Estate Investment Trust (REIT) based in Dallas, Texas that specializes in acquiring single-tenant net lease retail properties nationwide. The growing portfolio consists of high-quality properties leased to e-commerce resistant tenants with healthy balance sheets. Led by a management team of seasoned commercial real estate executives, NETSTREIT’s strategy is to create the highest quality net lease retail portfolio in the country in order to generate consistent cash flows and dividends for its investors. Mark Manheimer, Chief Executive Officer Andy Blocher, Chief Financial Officer Jeff Fuge, Senior Vice President of Acquisitions Randy Haugh, Senior Vice President of Finance Kirk Klatt, Senior Vice President of Real Estate Trish McBratney, SVP, Chief Accounting Officer Chad Shafer, Senior Vice President of Underwriting Management Team Todd Minnis – Chair Matthew Troxell – Lead Independent Michael Christodolou Heidi Everett Mark Manheimer Lori Wittman Robin Zeigler Board of Directors
Earnings Release 4 NETSTREIT REPORTS SECOND QUARTER 2021 FINANCIAL AND OPERATING RESULTS – Completed $107.7 Million of Net Investment Activity – – Reaffirms Full Year 2021 AFFO Guidance in Range of $0.95 - $0.99 Per Share – – During the Quarter, Raised Gross Proceeds of $203.6 Million through Follow On Offering – Dallas TX – July 29, 2021 – NETSTREIT (NYSE: NTST) (the “Company”), today announced financial and operating results for the second quarter ended June 30, 2021. “During the second quarter, we again generated strong results while benefiting from our strategic focus. Our portfolio remains 100% occupied, and through July, we have collected 100% of rents for eleven straight months. Importantly, we accomplished a significant milestone during the second quarter, completing a $200-plus million follow-on common equity offering and demonstrating our access to well-priced capital. With more than $200 million of high quality acquisitions completed in the first half of the year, and significant capacity on our balance sheet, we will continue to take advantage of attractive opportunities to deploy capital. As we look to the balance of the year, we believe NETSTREIT’s unique focus on the highest quality net lease assets and our demonstrated sourcing methodologies, positions us well to continue to grow in 2021, and beyond,” said Mark Manheimer, Chief Executive Officer of NETSTREIT. SECOND QUARTER 2021 HIGHLIGHTS • Reported net loss per share of $(0.07), Core Funds from Operations (“Core FFO”) per share of $0.181 and AFFO per share of $0.201 (see non-GAAP reconciliation attached) • The Company collected 100% of the second quarter rent payments and for the month of July 2021, resulting in eleven consecutive months of 100% rent collections PORTFOLIO UPDATE As of June 30, 2021, the NETSTREIT portfolio was comprised of 267 leases2, contributing $55.3 million of annualized base rent3, with a weighted-average remaining lease term of 9.9 years, of which 69.9% were investment grade rated tenants and 13.5% were tenants with investment grade profiles (unrated tenants with more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x). The portfolio was 100.0% occupied as of June 30, 2021. INVESTMENT ACTIVITY During the quarter ended June 30, 2021, the Company had total net investment activity of $107.7 million. The Company acquired 35 properties for approximately $116.7 million at an initial cash capitalization rate of 6.5%, inclusive of closing costs. A majority of the acquisitions closed late in the last month of the quarter resulting in the Company owning the assets for an average of approximately 19
Earnings Release 5 days. Acquisitions completed during the quarter had a weighted-average remaining lease term of 9.7 years, and 72.8% of the properties are occupied by investment grade rated tenants and 20.5% occupied by tenants with investment grade profiles. The Company also provided $4.0 million of development funding in the second quarter, including funding to support two new developments for tenants with investment grade profiles. The Company completed five dispositions for $13.0 million in total contractual sales proceeds, which equated to a 6.7% cash capitalization rate. The transaction activity decreased total tenant count from 60 to 59 tenants, and decreased the portfolio’s exposure to casual dining. The geographic and industry exposure remained unchanged at 39 states and 23 industries. BALANCE SHEET AND LIQUIDITY In April, the Company completed a follow on offering of 10,915,688 shares of common stock, which includes the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $18.65 per share. Gross proceeds to the Company from the offering, before deducting underwriting discounts and commissions and other offering expenses, were approximately $203.6 million. Proceeds from the offering were used to repay certain borrowings under the revolving credit facility, fund acquisitions of properties, and for general corporate purposes. At quarter end, total debt outstanding was $175 million, with a weighted average term of 3.5 years and a quarter end contractual interest rate, including the impact of the fixed rate swap, of 1.36% (excluding the impact of deferred fee amortization). All of the Company’s debt was at a fixed rate and the Company’s net debt to annualized adjusted EBITDA ratio was 2.1x. Additionally, the ending cash balance was $88 million, and the Company had an unused revolving line of credit with $250 million of capacity. DIVIDEND On July 27, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share for the third quarter of 2021, which will be paid on September 15, 2021 to shareholders of record on September 1, 2021. 2021 OUTLOOK The Company is maintaining its full year 2021 AFFO per share guidance in the range of $0.95 to $0.99 per share. This AFFO guidance is based on the following assumptions: • For full year 2021, the Company expects net acquisition activity, inclusive of dispositions, to be at least $360 million • The Company expects cash G&A to be in the range of $11.0 to $12.0 million, which includes recurring transaction costs, as well as additional non-cash compensation expense of $3.0 to $4.0 million • The Company expects cash interest expense, including unused line of credit facility fees, of $3.0 to $3.5 million, and an additional $0.6 million of non-cash deferred financing fee amortization
Earnings Release 6 • The Company expects to incur taxes in the range of $0.2 to $0.3 million which will be reported as “income taxes” in the Company’s financial statements for 2021 • Full year 2021 diluted weighted average shares outstanding, which includes the impact of OP units, are expected to be in the range of 38 to 39 million shares EARNINGS WEBCAST AND CONFERENCE CALL A conference call will be held on Friday, July 30, 2021 at 10:00 AM ET. During the conference call the Company’s officers will review second quarter performance, discuss recent events, and conduct a question and answer period. The webcast will be accessible on the “Investor Relations” section of the Company’s website at www.NETSTREIT.com. To listen to the live webcast, please go to the site at least fifteen minutes prior to the scheduled start time to register, as well as download and install any necessary audio software. A replay of the webcast will be available for 90 days on the Company’s website shortly after the call. The conference call can also be accessed by dialing 1-877-451-6152 for domestic callers or 1-201-389- 0879 for international callers. A dial-in replay will be available starting shortly after the call until August 6, 2021, which can be accessed by dialing 1-844-512-2921 for domestic callers or 1-412-317- 6671 for international callers. The passcode for this dial-in replay is 13721126. SUPPLEMENTAL PACKAGE The Company’s supplemental package will be available prior to the conference call in the Investor Relations section of the Company’s website at www.investors.netstreit.com. About NETSTREIT NETSTREIT is an internally managed Real Estate Investment Trust (REIT) based in Dallas, Texas that specializes in acquiring single-tenant net lease retail properties nationwide. The growing portfolio consists of high-quality properties leased to e-commerce resistant tenants with healthy balance sheets. Led by a management team of seasoned commercial real estate executives, NETSTREIT’s strategy is to create the highest quality net lease retail portfolio in the country with the goal of generating consistent cash flows and dividends for its investors. Investor Relations [email protected] 972-597-4825 (1) Per share amounts include weighted average common shares of 38,018,588, weighted average operating partnership units of 1,438,969 and weighted average effect of dilutive unvested restricted stock units of 332,781 for the three-months ended June 30, 2021. (2) Leases are individual properties with a distinct lease agreement in place, development activities where a lease is expected at a future date, or in the case of master lease arrangements each property under the master lease is counted as a separate lease.
Earnings Release 7 (3) Annualized base rent, or ABR, is calculated by multiplying (i) cash rental payments (a) for the month ended June 30, 2021 (or, if applicable, the next full month's cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of June 30, 2021, plus (b) for properties under development, the first full month's permanent cash rent contractually due after the development period by (ii) 12. NON-GAAP FINANCIAL MEASURES This press release contains non-GAAP financial measures, including FFO, Core FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, NOI, and Cash NOI. A reconciliation from net loss available to common shareholders to each non-GAAP financial measure, and definitions of each non-GAAP measure, are included below. FORWARD LOOKING STATEMENTS This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements concerning our business and growth strategies, investment, financing and leasing activities and trends in our business, including trends in the market for single-tenant, retail commercial real estate. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this press release may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see the information under the heading “Risk Factors” in our Form 10-K filed with the Securities and Exchange Commission (the “SEC”) and other reports filed with the SEC from time to time. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this press release. New risks and uncertainties may arise over time and it is not possible for us to predict those events or how they may affect us. Many of the risks identified herein and in our periodic reports have been and will continue to be heightened as a result of the ongoing and numerous adverse effects arising from the novel coronavirus (COVID-19). We expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.
Quarterly Highlights (unaudited, in thousands, except share, per share data and square feet) 8 (1) Weighted by ABR; excludes lease extension options. (2) Tenants, or tenants that are subsidiaries of a parent entity (with such subsidiary making up at least 50% of the parent company total revenue), with a credit rating of BBB- (S&P), Baa3 (Moody's) or NAIC2 (National Association of Insurance Commissioners) or higher. (3) Tenants with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Moody's, or NAIC. (4) Percentage calculations do not include any deferral or abatement arrangements granted as a result of the COVID-19 pandemic. (5) Tenants, or tenants that are subsidiaries of a parent entity (with such subsidiary making up at least 50% of the parent company total revenue), with a credit rating of BB+ (S&P), Ba1 (Moody's) or NAIC3 (National Association of Insurance Commissioners) or lower. Three Months Ended Financial Results June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 Net income (loss) $ (2,630) $ 741 $ 4,510 $ (2,341) Net income (loss) per common share outstanding - diluted $ (0.07) $ 0.02 $ 0.15 $ (0.11) Funds from Operations (FFO) $ 7,339 $ 6,662 $ 5,513 $ 2,582 FFO per common share outstanding - diluted $ 0.18 $ 0.22 $ 0.18 $ 0.11 Core Funds from Operations (Core FFO) $ 7,339 $ 6,662 $ 5,513 $ 3,473 Core FFO per common share outstanding - diluted $ 0.18 $ 0.22 $ 0.18 $ 0.15 Adjusted Funds from Operations (AFFO) $ 8,066 $ 6,946 $ 5,934 $ 4,777 AFFO per common share outstanding - diluted $ 0.20 $ 0.23 $ 0.20 $ 0.21 Dividends per share $ 0.20 $ 0.20 $ 0.20 $ 0.10 Weighted average common shares outstanding - diluted 39,790,338 30,052,940 30,021,750 23,135,675 Portfolio Metrics Number of leases 267 235 203 189 Square feet 5,154,701 4,438,591 3,733,062 3,376,371 Occupancy 100.0% 100.0 % 100.0 % 100.0 % Weighted average lease term remaining (years)(1) 9.9 10.1 10.5 11.1 Investment grade (rated) - % of ABR(2) 69.9% 69.6 % 70.0 % 68.0 % Investment grade profile (unrated) - % of ABR(3) 13.5% 11.2 % 8.0 % 6.4 % Three Months Ended June 30, 2021 March 31, 2021 Rent Collection Update - Percentage of Contractual Rent(4) Collection % % of Total Due Collection % % of Total Due Investment grade (rated)(2) 100.0% 70.5% 100.0% 70.7% Investment grade profile (unrated)(3) 100.0% 11.3% 100.0% 7.8% Sub-investment grade (rated)(5) 100.0% 6.5% 100.0% 7.4% Sub-investment grade profile (unrated) 100.0% 11.7% 100.0% 14.1% Total 100.0% 100% 100.0% 100.0%
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (unaudited, in thousands, except share and per share data) 9 Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 REVENUES Rental revenue (including reimbursable) $ 13,798 $ 7,117 $ 25,730 $ 12,625 OPERATING EXPENSES Property 1,315 434 2,265 719 General and administrative 3,991 1,846 7,127 3,732 Depreciation and amortization 7,075 3,116 13,004 5,462 Provisions for impairment 3,469 1,410 3,539 1,410 Transaction costs(1) 181 634 332 1,728 Total operating expenses 16,031 7,440 26,267 13,051 OTHER INCOME (EXPENSE) Interest expense, net(2) (894) (1,098) (1,799) (2,797) Gain on sales of real estate, net 497 1,016 497 1,016 Gain on forfeited earnest money deposit — — — 250 Total other (expense) income, net (397) (82) (1,302) (1,531) Net loss before income tax expense (2,630) (405) (1,839) (1,957) Income tax expense — — (50) — Net loss (2,630) (405) (1,889) (1,957) Net loss attributable to noncontrolling interests (94) (111) (54) (536) Preferred stock dividends — 6 — 6 Net loss attributable to common shareholders $ (2,536) $ (300) $ (1,835) $ (1,427) Amounts available to common shareholders per common share: Basic $ (0.07) $ (0.03) $ (0.06) $ (0.13) Diluted $ (0.07) $ (0.03) $ (0.06) $ (0.13) Weighted average common shares: Basic 38,018,588 11,797,645 33,236,262 11,105,709 Diluted 38,018,588 11,797,645 33,236,262 11,105,709 OTHER COMPREHENSIVE INCOME ( LOSS) Net loss $ (2,630) $ (405) $ (1,889) $ (1,957) Change in value on derivatives, net (265) — 2,058 — Total comprehensive (loss) income $ (2,895) $ (405) $ 169 $ (1,957) Comprehensive (loss) income attributable to noncontrolling interests (106) (111) 58 (536) Comprehensive (loss) income attributable to common shareholders $ (2,789) $ (294) $ 111 $ (1,421) (1) Represents the costs incurred by the Company to facilitate the private offering and formation transactions and the initial public offering, as well as costs associated with abandoned acquisitions and other acquisition related expenses. (2) Interest expense is net of interest income from interest bearing accounts.
Funds From Operations and Adjusted Funds From Operations (unaudited, in thousands, except share and per share data) 10 Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 GAAP Reconciliation: Net loss $ (2,630) $ (405) $ (1,889) $ (1,957) Depreciation and amortization of real estate 6,997 3,040 12,849 5,311 Provision for impairment 3,469 1,410 3,539 1,410 Gain on sale of real estate, net (497) (1,016) (497) (1,016) Funds from Operations (FFO) $ 7,339 $ 3,029 $ 14,002 $ 3,748 Gain on forfeited earnest money deposit — — — (250) 144A and IPO transaction costs(1) — 570 — 1,279 Core Funds from Operations (Core FFO) $ 7,339 $ 3,599 $ 14,002 $ 4,777 Straight-line rental revenue (222) (877) (463) (1,030) Amortization of deferred financing costs 157 155 314 307 Amortization of above/below market lease intangibles (237) (130) (427) (122) Amortization of lease incentives 3 — 3 — Capitalized interest expense (15) — (15) — Non-cash compensation expense 1,041 — 1,598 — Adjusted Funds from Operations (AFFO) $ 8,066 $ 2,747 $ 15,012 $ 3,932 FFO per common share outstanding - diluted $ 0.18 $ 0.19 $ 0.40 $ 0.24 Core FFO per common share outstanding - diluted $ 0.18 $ 0.22 $ 0.40 $ 0.31 AFFO per common share outstanding - diluted $ 0.20 $ 0.17 $ 0.43 $ 0.25 Dividends per share $ 0.20 $ — $ 0.40 $ — Dividends per share as a percent of AFFO 100 % — % 93 % — % Weighted average common shares outstanding, basic 38,018,588 11,797,645 33,236,262 11,105,709 Weighted average operating partnership units outstanding 1,438,969 4,449,019 1,527,160 4,449,019 Weighted average dilutive securities 332,781 — 210,370 — Weighted average common shares outstanding, diluted 39,790,338 16,246,664 34,973,792 15,554,728 Series A preferred stock balance(2) $ — $ 125 $ — $ 125 Series A preferred stock dividends and redemption premium $ — $ 6 $ — $ 6 Supplemental Information Deferred rent, net(3) $ 6 $ (205) $ 23 $ (205) Recurring capital expenditures $ 331 $ — $ — $ — (1) These expenses represent a subset of Transaction Costs as presented on the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. (2) The 125 shares of 12% Series A Preferred Stock were fully redeemed on August 18, 2020. (3) Reflects the net amount of base rent that was deferred (negative amount) or collected (positive amount) as a result of COVID related rent relief provided by NETSTREIT.
EBITDAre, Adjusted EBITDAre, NOI and Cash NOI (unaudited, in thousands) 11 (1) These expenses represent a subset of Transaction Costs as presented on the Consolidated Statements of Operations and Comprehensive (Loss) Income. (2) The adjustment removes base rent for properties acquired during the period shown and replaces the removed amount with an estimated equivalent ABR for the full period. The adjustment also removes base rent for properties disposed of during the period shown. Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 GAAP Reconciliation: Net loss $ (2,630) $ (405) $ (1,889) $ (1,957) Depreciation and amortization of real estate 6,997 3,040 12,849 5,311 Amortization of above/below market lease intangibles (237) (130) (427) (122) Amortization of lease incentives 3 — 3 — Non-real estate depreciation and amortization 78 76 155 151 Interest expense, net 894 1,098 1,799 2,797 Income tax expense — — 50 — EBITDA 5,105 3,679 12,540 6,180 Provision for impairments 3,469 1,410 3,539 1,410 Gain on sale of real estate, net (497) (1,016) (497) (1,016) EBITDAre 8,077 4,073 15,582 6,574 Straight-line rental revenue (222) (877) (463) (1,030) Gain on forfeited earnest money deposit — — — (250) 144A and IPO transaction costs(1) — 570 — 1,279 Non-cash compensation expense 1,041 — 1,598 — Adjusted EBITDAre $ 8,896 $ 3,766 $ 16,717 $ 6,573 Adjusted EBITDAre 8,896 Adjustments for intraquarter acquisitions and dispositions(2) 1,590 Annualized Adjusted EBITDAre $ 41,944 86,860 Net debt / Annualized Adjusted EBITDAre 2.1x 0.00207 GAAP Reconciliation: Net loss $ (2,630) $ (405) $ (1,889) $ (1,957) General and administrative 3,991 1,846 7,127 3,732 Depreciation and amortization 7,075 3,116 13,004 5,462 Provisions for impairment 3,469 1,410 3,539 1,410 Transaction costs 181 634 332 1,728 Interest expense, net 894 1,098 1,799 2,797 Gain on sales of real estate, net (497) (1,016) (497) (1,016) Gain on forfeited earnest money deposit — — — (250) Income tax expense — — 50 — NOI 12,483 6,683 23,465 11,906 Straight-line rental revenue (222) (877) (463) (1,030) Amortization of above/below market lease intangibles (237) (130) (427) (122) Amortization of lease incentives 3 — 3 — Cash NOI $ 12,027 $ 5,676 $ 22,578 $ 10,754 Adjustments for intraquarter acquisitions and dispositions(2) 1,590 Normalized Cash NOI $ 13,617 Property Operating Expense Coverage Property operating expense reimbursement $ 1,141 $ 379 2,011 $ 610 Property operating expenses (1,315) (434) (2,265) (719) Property operating expenses, net $ (174) $ (55) (254) (109)
Consolidated Balance Sheets (unaudited, in thousands, except share data) 12 June 30, December 31, 2021 2020 ASSETS Real estate, at cost: Land $ 233,068 $ 189,373 Buildings and improvements 479,858 358,360 Total real estate, at cost 712,926 547,733 Less accumulated depreciation (18,652) (10,111) Property under development 5,316 — Real estate held for investment, net 699,590 537,622 Assets held for sale 16,700 14,802 Cash, cash equivalents and restricted cash 88,140 92,643 Lease intangible assets, net 99,620 75,024 Other assets, net 8,964 5,724 Total assets $ 913,014 $ 725,815 LIABILITIES AND EQUITY Liabilities: Term loan, net $ 174,217 $ 174,105 Revolving credit facility — — Lease intangible liabilities, net 22,186 16,930 Liabilities related to assets held for sale 402 399 Accounts payable, accrued expenses and other liabilities 6,733 6,308 Total liabilities 203,538 197,742 Equity: Stockholders’ equity Common stock, $0.01 par value, 400,000,000 shares authorized; 39,525,978 and 28,203,545 shares issued and outstanding, respectively $ 395 $ 282 Additional paid-in capital 704,269 501,045 Distributions in excess of retained earnings (23,140) (7,464) Accumulated other comprehensive income 2,181 235 Total stockholders’ equity 683,705 494,098 Noncontrolling interests 25,771 33,975 Total equity 709,476 528,073 Total liabilities and equity $ 913,014 $ 725,815
Debt, Capitalization, and Financial Ratios (unaudited, in thousands, except share data) 13 As of June 30, 2021 Debt Summary Maturity Date Principal Balance Interest Rate(1) Rate Type Weighted Average Years to Maturity Unsecured revolver(2)(3) December 23, 2023 $ — 1.29% Floating 2.5 years Unsecured term loan(4) December 23, 2024 175,000 1.36% Fixed 3.5 years Principal amount of total debt 175,000 Deferred financing costs, net(5) (1,780) Carrying value of total debt $ 173,220 Net Debt Balance Principal amount of total debt $ 175,000 Less: Cash, cash equivalents and restricted cash (6) (88,140) Net Debt $ 86,860 Series A preferred stock balance (7) — Net Debt + Preferred Stock $ 86,860 Key Debt Covenant Information Required Actual Consolidated total leverage ratio ≤ 60.0% 20.1% Fixed charge coverage ratio ≥ 1.25x 9.97x Maximum secured indebtedness ≤ 40.0% 0.0% Maximum recourse indebtedness ≤ 10.0% 0.0% Unencumbered leverage ratio ≤ 60.0% 20.2% Unencumbered debt yield ≥ 10.0% 24.1% Unencumbered interest coverage ratio ≥ 2.00x 13.39x Liquidity Balance Unused unsecured revolver capacity $ 250,000 Cash, cash equivalents and restricted cash(6) 88,140 Total Liquidity $ 338,140 Ending Equity Market Equity Shares/Units Capitalization % of Total Common shares(8) 39,525,978 $ 911,469 96.7 % OP units(8) 1,355,365 31,255 3.3 % Preferred stock — — — % Total 40,881,343 $ 942,724 100.0 % Enterprise Value Balance % of Total Principal amount of total debt $ 175,000 15.7 % Equity market capitalization(8) 942,724 84.3 % Total enterprise value $ 1,117,724 100.0 % (1) Interest rate for floating rate debt, if applicable, is based on the last day of the quarter presented. Rates presented exclude the impact of capitalized loan fee amortization. (2) Unused facility fees are charged at an annual rate of 0.15% of the unused capacity if usage exceeds 50% of the total available facility, or 0.25% of the unused facility if usage does not exceed 50%. (3) The revolver has a one-year extension option. (4) Effective September 28, 2020 the floating rate underlying the term loan was swapped to an effective fixed rate of 0.21%. The swap terminates on December 23, 2024. (5) Amount reflects a net asset balance of $1.0 million related to the revolver, and a net liability balance of $0.8 million related to the term loan. (6) Balances includes $2.3 million of restricted cash held in 1031 exchange accounts. (7) The 125 shares of 12% Series A Preferred Stock were fully redeemed on August 18, 2020. (8) Value is based on the June 30, 2021 closing price of $23.06 per share.
Investment Activity (unaudited, dollars in thousands) 14 (1) Excludes development related transactions. (2) Reflects all expenditures that were capitalized as part of the transaction, including acquisition costs. (3) Calculated by dividing in-place ABR at the time of acquisition by the Gross Investment. (4) Represents all capitalized costs associated with the property, less impairment charges and net of accumulated depreciation. (5) Reflects contractual sales price. (6) The rate only applies to properties that were occupied at the time of the disposition. It is calculated by dividing the in-place ABR at the time of disposition by the contractual sales price. Three Months Ended June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 Acquisitions(1): Number of Transactions 18 25 19 9 Number of Properties 35 31 26 30 Gross Investment(2) $ 116,725 $ 88,225 $ 81,246 $ 102,638 Cash Capitalization Rate(3) 6.5% 6.7% 6.8% 6.5 % Dispositions: Number of Occupied Properties 5 — 12 1 Number of Vacant Properties — — — — Net Book Value(4) $ 11,821 $ — $ 31,144 $ 1,806 Proceeds(5) $ 13,060 $ — $ 37,362 $ 1,868 Cash Capitalization Rate(6) 6.7% 0.0% 6.6% 10.4 % Developments: Industry Location Lease Term Amount Funded to Date Anticipated Rent Commencement Discount Retail Yuma, AZ 10 Years $ 1,870 2Q'2022 Arts & Craft Fond Du Lac, WI 10 Years $ 1,836 2Q'2022 Discount Retail Fond Du Lac, WI 10 Years $ 1,562 2Q'2022
Portfolio Information (unaudited, dollars in thousands) 15 (1) Weighted by ABR; excludes lease extension options. (2) Tenants, or tenants that are subsidiaries of a parent entity (with such subsidiary making up at least 50% of the parent company total revenue), with a credit rating of BBB- (S&P), Baa3 (Moody's) or NAIC2 (National Association of Insurance Commissioners) or higher. (3) Tenants with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Moody's, or NAIC. (4) Tenants, or tenants that are subsidiaries of a parent entity (with such subsidiary making up at least 50% of the parent company total revenue), with a credit rating of BB+ (S&P), Ba1 (Moody's) or NAIC3 (National Association of Insurance Commissioners) or lower. Portfolio Metrics June 30, 2021 Number of leases 267 Number of states 39 Square feet 5,154,701 Tenants 59 Industries 23 Occupancy 100.0% Weighted average lease term remaining (years)(1) 9.9 Tenant Quality Number of Leases ABR % of ABR Investment grade (rated)(2) 197 $ 38,623 69.9% Investment grade profile (unrated)(3) 26 7,442 13.5% Sub-investment grade (rated)(4) 9 3,299 6.0% Sub-investment grade profile (unrated) 35 5,905 10.7% Total 267 $ 55,269 100.0%
Portfolio Information (cont’d) (unaudited, dollars in thousands) 16 Top 20 Tenants Number of Leases ABR % of ABR Credit rating 22 $ 5,149 9.3% A / Baa2 4 3,578 6.5% BBB+ / Baa1 36 3,562 6.4% BBB- / Baa2 35 3,481 6.3% BBB / Baa2 5 3,288 5.9% AA / Aa2 15 2,758 5.0% BBB / Baa2 7 2,568 4.6% IG Profile 5 2,525 4.6% BBB+ / A3 8 2,018 3.7% IG Profile 7 1,918 3.5% IG Profile 6 1,426 2.6% BBB / Baa1 4 1,404 2.5% BBB / Baa2 12 1,296 2.3% BBB / Baa2 2 1,268 2.3% BBB / Baa1 1 1,202 2.2% A / A2 3 1,198 2.2% BBB / Baa1 2 1,147 2.1% BBB- / Baa2 4 1,022 1.8% BBB / Baa3 2 917 1.7% BB+ / Ba2 1 815 1.5% BB- / Ba3 Total 181 $ 42,541 77.0%
Portfolio Information (cont’d) (unaudited, dollars in thousands) 17 State Number of Leases ABR % of ABR Texas 32 $ 7,501 13.6% Ohio 19 3,645 6.6% Georgia 14 3,428 6.2% New York 12 3,012 5.4% Illinois 8 2,998 5.4% Virginia 5 2,655 4.8% Pennsylvania 15 2,417 4.4% Mississippi 12 2,326 4.2% Florida 15 2,275 4.1% Indiana 11 2,273 4.1% California 8 2,235 4.0% Wisconsin 11 1,950 3.5% Michigan 6 1,749 3.2% Alabama 11 1,595 2.9% Washington 3 1,399 2.5% Arkansas 7 1,182 2.1% Minnesota 4 1,162 2.1% Tennessee 5 1,161 2.1% Kentucky 3 1,138 2.1% Missouri 5 960 1.7% New Mexico 3 916 1.7% Oklahoma 6 784 1.4% Massachusetts 4 751 1.4% New Jersey 5 680 1.2% Arizona 2 672 1.2% North Carolina 3 669 1.2% South Carolina 6 631 1.1% Iowa 6 623 1.1% Vermont 9 548 1.0% Maryland 2 297 0.5% Colorado 2 267 0.5% Utah 1 253 0.5% Louisiana 2 232 0.4% West Virginia 2 223 0.4% Kansas 2 220 0.4% New Hampshire 3 157 0.3% Idaho 1 99 0.2% Connecticut 1 95 0.2% North Dakota 1 92 0.2% Total 267 $ 55,269 100.0%
Portfolio Information (cont’d) (unaudited, dollars in thousands) 18 Industry Defensive Category Number of Leases ABR % of ABR Home Improvement Necessity 18 $ 7,165 13.0% Discount Retail Discount 21 6,372 11.5% Convenience Stores Service 26 5,891 10.7% Dollar Stores Discount 47 4,777 8.6% Auto Parts Necessity 54 4,705 8.5% Drug Stores & Pharmacies Necessity 19 4,162 7.5% Grocery Necessity 8 3,428 6.2% General Retail Necessity 5 3,226 5.8% Quick Service Restaurants Service 16 2,646 4.8% Arts & Crafts Other 7 2,568 4.6% Consumer Electronics Other 5 2,525 4.6% Farm Supplies Necessity 6 1,426 2.6% Healthcare Necessity 4 1,022 1.8% Automotive Service Service 10 947 1.7% Furniture Stores Other 2 878 1.6% RV Sales Other 1 705 1.3% Casual Dining Service 4 638 1.2% Banking Necessity 4 560 1.0% Apparel Other 4 506 0.9% Wholesale Warehouse Club Necessity 1 417 0.8% Equipment Rental and Leasing Other 3 369 0.7% Gift, Novelty, and Souvenir Shops Other 1 200 0.4% Home Furnishings Other 1 134 0.2% Total 267 $ 55,269 100.0% Defensive Category Number of Leases ABR % of ABR Necessity 119 26,112 47.2% Service 56 10,122 18.3% Discount 68 11,149 20.2% Other 24 7,886 14.3% Total 267 $ 55,269 100.0%
Lease Expiration Schedule (unaudited, dollars in thousands) 19 ABR Expiring Year of Number of ABR as a % of Expiration Leases Expiring Expiring Total Portfolio 2021 — $ — 0.0% 2022 — — 0.0% 2023 4 333 0.6% 2024 1 84 0.2% 2025 7 2,379 4.3% 2026 11 3,476 6.3% 2027 13 3,963 7.2% 2028 26 3,918 7.1% 2029 29 4,334 7.8% 2030 37 8,492 15.4% 2031 44 7,709 13.9% 2032 15 3,852 7.0% 2033 21 2,831 5.1% 2034 11 1,644 3.0% 2035 23 7,762 14.0% 2036 11 1,962 3.5% 2037 3 549 1.0% 2038 — — 0.0% 2039 7 1,110 2.0% 2040 2 425 0.8% 2041 1 192 0.3% 2042 — — 0.0% 2043 1 254 0.5% TOTAL 267 $ 55,269 100%
Non-GAAP Measures and Definitions 20 FFO, Core FFO, and AFFO FFO means funds from operations. It is a non-GAAP measure defined by NAREIT as net income (computed in accordance with GAAP), excluding real estate-related expenses including, but not limited to, gains (losses) from sales, impairment adjustments, and depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO is consistent with FFO as defined by NAREIT. Core FFO means core funds from operations. It is a non-GAAP financial measure defined as FFO adjusted for gains from forfeited earnest money deposits and non-recurring 144A and IPO transaction costs. We believe the presentation of Core FFO provides investors with a metric to assist in their evaluation of our operating performance across multiple periods because it removes the effect of unusual and non-recurring items that are not expected to impact our operating performance on an ongoing basis. AFFO means adjusted funds from operations. It is a non-GAAP financial measure defined as Core FFO adjusted for GAAP net income related to non-cash revenues and expenses, such as straight-line rental revenue, amortization of above and below-market lease-related intangibles, amortization of lease incentives, capitalized interest expense, non-cash compensation expense, and amortization of deferred financing costs. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values historically have risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO to be useful in evaluating potential property acquisitions and measuring operating performance. We further consider FFO, Core FFO and AFFO to be useful in determining funds available for payment of distributions. FFO, Core FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP. You should not consider FFO, Core FFO and AFFO to be alternatives to net income as a reliable measure of our operating performance; nor should you consider FFO, Core FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity. FFO, Core FFO and AFFO do not measure whether cash flow is sufficient to fund our cash needs, including principal amortization, capital improvements and distributions to stockholders. FFO, Core FFO and AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP. Further, FFO, Core FFO and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO, Core FFO and AFFO.
Non-GAAP Measures and Definitions (cont’d) 21 EBITDA, EBITDAre and Adjusted EBITDAre EBITDA is computed by us as earnings before interest, income taxes and depreciation and amortization. EBITDAre is the NAREIT definition of EBITDA (as defined above), but it is further adjusted to follow the definition included in a white paper issued in 2017 by NAREIT, which recommended that companies that report EBITDA also report EBITDAre. We compute EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and real estate impairment losses. Adjusted EBITDAre, as computed by us, is EBITDAre adjusted to exclude straight-line rental revenue, gains from forfeited earnest money deposits, non-recurring 144A and IPO transaction costs, and stock-based compensation expense. Annualized Adjusted EBITDAre is Adjusted EBITDAre multiplied by four. We present EBITDA, EBITDAre and Adjusted EBITDAre as they are measures commonly used in our industry. We believe that these measures are useful to investors and analysts because they provide supplemental information concerning our operating performance, exclusive of certain non-cash items and other costs. We use EBITDA and EBITDAre as measures of our operating performance and not as measures of liquidity. EBITDA, EBITDAre and Adjusted EBITDAre do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. Additionally, our computation of EBITDA and EBITDAre may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs. NOI, Cash NOI, and Normalized Cash NOI NOI means net operating income, and it is computed in accordance with GAAP. It is calculated by subtracting property operating expenses from rental revenue including reimbursements (as presented on the Statement of Operations). Cash NOI is computed by us as NOI excluding straight-line rental revenue, amortization of above/below- market leases intangibles and lease incentives. Normalized Cash NOI is computed by us as Cash NOI adjusted to remove Cash NOI for properties acquired during the period shown, and then replace the removed amount with an estimated equivalent ABR for the full period. It is further adjusted to remove Cash NOI for properties disposed of during the period shown.
Non-GAAP Measures and Definitions (cont’d) 22 Other Definitions ABR means annualized base rent. ABR is calculated by multiplying (i) cash rental payments (a) for the month ended June 30, 2021 (or, if applicable, the next full month’s cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of June 30, 2021, plus (b) for properties under development, the first full month’s permanent cash rent contractually due after the development period by (ii) 12. Defensive Category is considered by us to represent tenants that focus on necessity goods and essential services in the retail sector, including discount stores, grocers, drug stores and pharmacies, home improvement, automotive service and quick-service restaurants, which we refer to as defensive retail industries. The defensive sub-categories as we define them are as follows: (1) Necessity, which are retailers that are considered essential by consumers and include sectors such as drug stores, grocers and home improvement, (2) Discount, which are retailers that offer a low price point and consist of off-price and dollar stores, (3) Service, which consist of retailers that provide services rather than goods, including, tire and auto services and quick service restaurants, and (4) Other, which are retailers that are not considered defensive in terms of being considered necessity, discount or service, as defined by us. Leases are individual properties with a distinct lease agreement in place, development activities where a lease is expected at a future date, or in the case of master lease arrangements each property under the master lease is counted as a separate lease. Net Debt is computed by us as the principal amount of total debt outstanding less cash, cash equivalents and restricted cash. Occupancy is expressed as a percentage, and it is the number of economically occupied properties divided by the total number of properties owned. Properties under development are excluded from the calculation. OP units means operating partnership units not held by NETSTREIT.
Forward Looking and Cautionary Statements 23 This supplemental report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements concerning our business and growth strategies, investment, financing and leasing activities and trends in our business, including trends in the market for single-tenant, retail commercial real estate. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this supplemental report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and other reports filed with the SEC from time to time. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this supplemental report. New risks and uncertainties may arise over time and it is not possible for us to predict those events or how they may affect us. Many of the risks identified herein and in our periodic reports have been and will continue to be heightened as a result of the ongoing and numerous adverse effects arising from the novel coronavirus (COVID-19). We expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.
Investor Presentation July 2021
Disclaimer 2 This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements concerning our business and growth strategies, investment, financing and leasing activities and trends in our business, including trends in the market for single-tenant, retail commercial real estate. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward- looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this presentation may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and other reports filed with the SEC from time to time. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this presentation. New risks and uncertainties may arise over time and it is not possible for us to predict those events or how they may affect us. Many of the risks identified herein and in our periodic reports have been and will continue to be heightened as a result of the ongoing and numerous adverse effects arising from the novel coronavirus (COVID-19). We expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.
Company & Investment Highlights 3 NETSTREIT Is Built on a Foundation of Strength on Both Sides of the Balance Sheet, Led by a Seasoned Leadership Team with an Exceptional Track Record High-Quality, Diversified, and Defensive Net Lease Retail Portfolio Conservative Capitalization to Support Accretive Growth Active Asset Management to Achieve Optimal Portfolio Performance2 Disciplined Underwriters with Dual Focus on Credit AND Real Estate3 Multifaceted Investment Strategy Leveraging Deep Industry Relationships4 1 Durable and Defensive Cash Flows with Demonstrated Resiliency Platform Positioned for Scale5
NETSTREIT STRATEGY BY THE NUMBERS1 4 Investment grade tenancy provides defensive, consistent performance through economic cycles ▪ High-quality tenancy creates bond-like leases with high rent collections during times of disruption ▪ 83.4% of portfolio consisted of investment grade tenants, or tenants with an investment grade profile Defensive nature of NETSTREIT portfolio strategy ▪ Focused on defensive industries such as necessity, discount, or service-oriented retailers, with e-commerce resistant strategies ▪ No exposure to experiential retail Source: Company data. Portfolio data represents portfolio as of 6/30/2021 unless otherwise noted. 1. Figures represent percentage of ABR unless otherwise noted. 2. Represents tenants with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Moody's, or NAIC. 3. Defensive retail tenancy based on rent from tenants in necessity, discount, or service-oriented industries. 4.NETSTREIT rent collection percentages are based on actual cash rent collected divided by contractual rent prior to any COVID-19 related lease modifications. Investment Grade Tenancy 69.9% Investment Grade Profile Tenancy2 13.5% Defensive Retail Tenancy3 85.7% Rent Collections4: Q2 2021 100.0% Q1 2021 100.0% Q4 2020 100.0% Q3 2020 98.1% Q2 2020 87.2% Unresolved Requests for COVID Related Rent Relief 0% Experiential Retail Exposure (Cinemas, Fitness, Childcare, Family Entertainment) 0% 1 High level of rent collections ▪ NETSTREIT has collected 100% of rent payments for eleven consecutive months since the beginning of September 2020 NETSTREIT’s focus on defensive, credit tenancy in essential industries is a deliberate and longstanding strategy, rather than a reactionary shift to a post- COVID-19 world Durable and Defensive Cash Flows with Demonstrated Resiliency
99% 98% 97% 93% 90% 90% 90% 87% FCPT NTST ADC O NNN EPRT SRC STOR 100% 100% 99% 97% 96% 96% 94% 93% NTST FCPT ADC NNN SRC EPRT O STOR 65% 70% 67% 67% 50% 23% 19% 0% 0% NTST ADC FCPT O SRC NNN STOR EPRT 5 Rent Collections Source: Company Filings as of 6/30/2021, SNL Financial. 1. NNN as of 12/31/2020. EPRT and STOR investment grade concentration assumed to be 0%, although it is not disclosed by either company. Q1 2021 Q4 2020 Q2 2020 Investment Grade %1 Lease Rollover Darden Q3 2020 100% 100% 99% 96% 94% 94% 91% 90% NTST FCPT ADC NNN SRC O EPRT STOR 92% 90% 87% 87% 75% 73% 69% 69% FCPT ADC NTST O SRC STOR EPRT NNN NTST's Stable, Defensive Cash Flow Profile Drives Superior Risk-Adjusted Returns
9.3% 6.5% 6.4% 6.3% 5.9% 5.0% 4.6% 4.6% 3.7% 3.5% Portfolio Overview 6 Sources: Company data. Portfolio data represents portfolio as of 6/30/2021. 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, Moody's, or NAIC. High-quality, diversified portfolio consisting of 69.9% investment grade tenants across 39 states Key Portfolio Stats Properties 267 States 39 Portfolio Square Feet (in millions) 5.2 Tenants 59 Retail Sectors 23 % Occupancy 100% % Investment Grade Tenants (by ABR) 69.9% % Defensive Industry Exposure (by ABR) 85.7% Weighted Average Lease Term Remaining (Years) 9.9 Lease Turnover Through 2024 (by ABR) 0.8% National Footprint Across Attractive Markets Top 10 Tenants by % of ABR Investment Grade Rated A / Baa2 IG Profile Investment Grade Profile1 2 >1% and <3% ABR <1% ABR >5% and <10% ABR >3% and <5% ABR 0% ABR AK HI WA OR MT CA AZ WY NV ID UT CO NM TX OK ND SD NE KS LA AR MO IA MN WI IL IN MI OH KY TN FL MS AL GA SC NC VAWV PA DE NJ NY ME VT NH MA MD CT RI >10% ABR IG Profile BBB+ / Baa1 BBB- / Baa2 BBB / Baa2 AA / Aa2 BBB / Baa2 IG Profile BBB+ / A3
Convenience Stores: Dollar Stores: Discount Retail: Home Improvement: Auto Parts: Portfolio Diversification In Defensive Retail Sectors Source: Company data. Portfolio data represents portfolio as of 6/30/2021. Note: Due to rounding, respective defensive retail sector exposure may not precisely reflect the absolute figures. NETSTREIT offers a national diversified portfolio comprised primarily of defensive retail tenants Top Industries (% of ABR)Necessity Discount Other 1 13.0% 2 11.5% 3 10.7% 4 8.6% 5 8.5% Service 2 85.7% of ABR Necessity Discount Service 47.2% 20.2% 14.3% 18.3%
Pre-144A (12/23/19) 144A to IPO IPO (8/13/20) Since IPO Current (6/30/21) Properties 93 70 163 104 267 States 28 6 34 5 39 Portfolio Size 1.4M SF 1.6M SF 3.0M SF 2.2M SF 5.2M SF ABR $17.8M $16.7M $34.5M $20.8M $55.3M Acquisition Volume1 – ~$264M – ~$352M – Acquisition Cap Rate1 – 6.6% – 6.6% – Disposition Volume – ~$10M – ~$52M – Disposition Cap Rate – 5.8% – 6.7% – Gross Asset Value ~$247M ~$262M ~$509M ~$310M ~$819M IG Concentration2 64% 0% 64% +6% 70% IG & IG Profile Concentration2,3 64% +8% 72% +11% 83% Top 10 Tenant Concentration2 62% (5%) 57% (1%) 56% Top Five Tenants2 NTST Portfolio Transformation 8 NETSTREIT has prudently allocated offering proceeds and recycled capital to grow the scale of its asset base while also improving portfolio quality through further diversification and increased exposure to defensive credit tenancy 2 Source: Company Filings and Company-provided data. 1. Excludes development projects. 2. Calculated as % of ABR. 3. Includes high quality unrated tenants with investment grade credit metrics that have not received an investment rating. 6.4% 7.5% 7.9% 8.9% 11.9% 4.9% 5.2% 6.1% 7.9% 12.7% 5.9% 6.3% 6.4% 6.5% 9.3%Baa2 / BBB Baa2 / BBB Baa1 / BBB+ Baa2 / BBB Baa2 / BBB- Baa1 / AA- Aa2 / AA Baa2 / BBB IG Profile Baa1 / BBB+ Baa2 / A Baa1 / BBB+ Baa2 / BBB- Baa2 / BBB Aa2 / AA
$74.2 $150.5 $102.6 $81.2 $89.5 $120.7 1Q'20 2Q'20 3Q'20 4Q'20 1Q'21 2Q'21 Completed Acquisitions New Quarterly Acquisitions 193 Completed Acquisitions Investment Activity Since 2019 9 Source: Company data. 1. Includes one development project funded in the first quarter. 2. Includes two development projects funded in the second quarter. ($ in millions) Avg. Acquisition Activity per Completed Quarter = $103.1 million Cumulative Acquisitions Since 2019 Properties Acquired: 24 44 30 26 $224.7 $327.3 $498.1 2 1 $408.6 32 37 $618.8 2
Active Asset Management 10 NETSTREIT continuously tracks property performance and stratifies the portfolio to achieve consistent cash flows and balanced growth for its investors Source: Company data. Portfolio data represents portfolio as of 6/30/2021. Since inception, the Company has disposed of 53 properties totaling approximately $152.3 million, while also acquiring high-quality assets that have enhanced scale and materially improved portfolio performance metrics such as tenant quality, WALT, and geographic diversity Identify properties not meeting strategy and/or risk management criteria (i.e. rent coverage) Periodically review all properties for changes in performance, credit, and local conditions Pursue opportunities that align with objectives Practice disciplined underwriting strategy Leverage 1031 exchange transfers where possible to access deep, non- institutional market for portfolio optimization Strategic Recycling Disciplined Acquisitions Perpetual Stratification Active Monitoring Existing portfolio has been carefully curated 2
Three-Part Underwriting Philosophy 11 NETSTREIT leverages a disciplined, three-pronged approach to underwriting potential acquisitions which positions the Company to benefit from superior downside protection on its investments REAL ESTATE VALUATION UNIT-LEVEL PROFITABILITY • Review underlying key real estate metrics to maximize re-leasing potential • Location analysis • Alternative use analysis • Determine rent coverage (min. 2.0x) and cost variability • Assess relative to corporate stability / real estate merits C B TENANT CREDIT UNDERWRITING • Evaluate corporate level financials • Assess business risks • Determine ownership/sponsorship • For Non-IG tenants, establish NETSTREIT implied credit rating A L e v e l o f U n d e rw ri ti n g E m p h a s is 3
Tenant Credit Underwriting 12 NETSTREIT employs a credit-focused underwriting strategy for all tenants – the MOST IMPORTANT element of the Company’s underwriting process that drives stable revenue and long-term return on investment Source: Company data. Portfolio data represents portfolio as of 6/30/2021. 1. IG stands for investment grade. Investment Grade (rated) Investment Grade Profile (unrated) Sub-IG (rated) & Sub-IG Profile (unrated)1 Description • Validated financial strength and stability • Professional management with standardized operational practices • Focus on corporate guarantee credit • Lower relative yields • Higher competition for deals • IG-caliber balance sheets without explicit rating • Threshold metrics: • >$1B in Sales • Max Debt / Unadjusted EBITDA of 2.0x • Well-capitalized retailers • National footprint with strong brand equity • Focus on real estate quality / unit-level profitability • Higher relative yields • Lower competition for deals Durability • Coverage and credit enhancements required given more susceptible to market disruptions % Of ABR 69.9% 13.5% 16.7% Lease Terms (WALT, Rent Bumps, etc.) Less negotiating leverage More negotiating leverage Most negotiating leverage Representative Tenants 83.4% Total Defensive, consistent performance through economic cycles 3 A
Focus on Investment Grade Tenants 13 Investment grade tenants have outperformed during economic downturns and largely avoided bankruptcy Sources: Capital IQ, Company data, The Deal Pipeline, Bloomberg, SNL Financial 1. Indicates best credit rating held after 1/1/2005 and date when the respective credit rating was assigned. Some credit ratings are pre-2005. Major Net Lease Retail Tenant Bankruptcies (2009 – 2020) Retail Tenant Bankruptcy Filing Date Best Credit Rating Prior to Filing (S&P / Moody’s)1 Investment Grade? Oct-20 B (Jul-12) / B2 (May-12) Mar-20 NR / NR Feb-20 NR / NR Jan-19 BB- (May-01) / B2 (Apr-01) Oct-18 BB+ (Mar-05) / Ba1 (Mar-05) Oct-18 B+ (Sep-15) / B1 (July-15) Sep-17 BB (Mar-04) / B1 (Aug-10) Mar-17 NR / NR Mar-16 B (Mar-06) / B2 (Mar-06) Jan-12 B (Nov-04) / NR Feb-11 NR / NR Mar-09 NR / NR A3
Real Estate Valuation 14 Real Estate closely follows Credit as a top priority: NETSTREIT utilizes a ground-up framework rooted in real estate fundamentals to underpin its valuation and further quantify the upside potential for a transaction Market-Level Considerations Property-Level Considerations • Fungibility of building for alternative uses • Replacement cost • Location analysis • Traffic counts • Nearby uses and traffic drivers, complementary nature thereof • Accessibility and parking capacity • Ingress and egress • Visibility / signage • Vacancy analysis • Marketability of the real estate without current tenant • List of likely replacement tenants • Rent analysis • Replacement rent versus current rent • Demographic analysis • Current demographics plus trends and forecasts • Competitive analysis • Market position versus competing retail corridors B3
Unit-Level Profitability 15 In assessing unit-level financial performance, NETSTREIT focuses on mission-critical properties with strong rent coverage and higher variability in operating costs Obtain Financial Information Perform Financial Analysis 2 Assess Investment Merits 1 3 • Provides clarity into location-specific performance • Analyze store demand dynamics, cost structure and liquidity profile • Determine whether property meets investment criteria • Obtain unit-level financial information from parent company if possible • If financials are not provided, utilize data provided by third party vendors to estimate sales by location • Third party data includes: • Cell phone traffic • Point of sales (POS) data • Triangulate P&L based on available information • Sales (per data vendors) • EBITDAR margin (per financials) • Rent (known quantity) • Account for variability in business model cost structure • Higher proportion of fixed costs = more variability in rent coverage • Determine store ranking within tenant’s broader operating portfolio based on estimated sales Key Unit-Level Investment Criteria Minimum 2.0x Rent Coverage✓ Higher Cost Variability✓ Ranks in Top Half of Tenant’s Store Portfolio ✓ C3
Portfolio Strategy / Investment Philosophy 16 Source: Company data. Portfolio data represents portfolio as of 6/30/2021. 1. Portfolio statistics by percentage of ABR. Current MetricsInvestment Philosophy Portfolio Strategy Defensive Tenancy in Necessity-Based and E-commerce-Resistant Retail Sectors1 85.7%Primarily Resilient, Cycle-Tested Investment Grade Credit Tenants with Durable Cash Flows1 >60% 83.4% (69.9% Investment Grade Credit and 13.5% Investment Grade Profile) Granular Assets in Highly Fragmented, Undercapitalized Market Segment $3.1M Avg. Asset Size $1 to $10M Avg. Asset Size Net Lease Retail Assets with Long Lease Term Benefiting From Contractual Rent Growth >10 Year WALT 9.9 Year WALT Diversification by Sector, Tenant, State1 <15% Sector <50% Top 10 Tenants <15% State 13.0% Sector 55.8% Top 10 Tenants 13.6% 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 4
Growth Strategy: Generating Both Quality & Quantity 17 The Company utilizes a multi-faceted growth strategy to deploy capital in a variety of investment structures in the Net Lease Retail sector, allowing it greater flexibility to build its portfolio from a larger opportunity set Investment Type Description Investment Source Commentary Current Owners Brokerage Network Development Partners Tenant Relationships Private Equity Existing Stabilized Acquire operating properties on the open market • Deepest and most liquid opportunity set • Actively monitored Blend & Extend Acquire single-tenant property with short-term lease • Blend existing rent rate with new rate to extend lease term to at least 10 years Build-to-Suit ("BTS") Fund construction for single-tenant property with long-term lease • Key driver of higher risk-adjusted returns • Collaborate in design and construction of property Reverse Build-to-Suit Acquire a BTS property upon completion • Strong tenant relationship upon acquisition • Long lease terms, higher cap rates, comparable risk Sale- Leaseback Acquire single-tenant property with a simultaneous long-term lease back to the seller • Capitalize on likelihood of increased corporate real estate monetization in light of current disruption 4
Acquisition Case Study: Investment Grade (rated) 18 Target – Kingston, MA Sources: S&P Global Market Intelligence, Company data. Market data as of 7/21/2021. 1. Represents the twelve months ended 1/30/2021. 2. Reflects long-term debt as of 1/30/2021. Strong-Performing Location with High Likelihood of Renewal at Attractive Price • First exposure to Target (NYSE: TGT) • Ground lease with below market rents ($2.81/sf) provides strong downside protection • Current adjacent luxury multi-family redevelopment provides catalyst for future increase in foot traffic • Addition of omnichannel retail with strong demographics 7 Years Remaining Lease Term 1 Property $5.5M Purchase Price 6.5% Acquisition Cap Rate $92.4B Tenant Sales1 Essential Designation During COVID-19 $11.5B Debt on Balance Sheet2 2.54% Avg. Annual Rent Increases $126.4B Market Capitalization A / A2 S&P/Moody’s Credit Rating Acquisition Completed: December 2020 4
Acquisition/Disposition Case Study: Investment Grade (rated) 19 7-Eleven – Texas Sources: Company data. Portfolio Execution with Subsequent Accretive Dispositions to Reduce Exposure • Example of platform’s ability to acquire large, high quality portfolios, and selectively exit assets in the acquired portfolio at accretive pricing • Value creation through the strategic disposition of properties • Dispositions were executed at accretive cap rates (~15% lower than going in cash cap rate) • Exited assets were internally viewed as the weaker assets in the portfolio 17 Properties $71.5M Acquisition Price $9.8M Disposition Price 5.9% Acquisition Cap Rate Acquisition Completed: June 2020; Disposition Completed: October and November 2020 Acquisition Disposition 2 Properties 5.0% Disposition Cap Rate 15.0 Years Remaining Lease Term 14.7 Years Remaining Lease Term A / Baa2 S&P/Moody’s Credit Rating 4
Senior Leadership 20 Source: Company data. 1. First Potomac Realty Trust was publicly traded on the NYSE until October 2017. Seasoned leadership team with significant net lease retail and public company experience Mark Manheimer President, CEO & Director Mr. Manheimer leads the overall strategy, acquisitions, underwriting, and asset management for the company Prior experience includes: • EB Arrow; CIO of the Single-Tenant Net Lease Group • Spirit Realty Capital (NYSE: SRC); EVP, Head of Asset Management from 2012 through 2016 • Member of Investment Committee • Led restructuring and extension of the largest tenant’s master lease, as well as subsequent sales of the assets leased to the tenant • Led due diligence in merger that doubled company size • Cole Real Estate Investments; Head of Sale-Leaseback Acquisitions from 2009 through 2012 • Realty Income Corporation (NYSE: O); Director of Underwriting from 2005 through 2009 Prior experience includes: • First Potomac Realty Trust (NYSE: FPO)1; EVP, CFO and Treasurer from 2012 through 2017 • Leading role in FPO’s $1.4 billion sale to Government Properties Income Trust (now Office Properties Income Trust, NASDAQ: OPI) • Provided valuable public company expertise in evaluating and recommending changes to corporate governance initiatives; active role in evaluating Board candidates • Successfully remediated a pre-existing material weakness with respect to financial controls • Federal Realty Investment Trust (NYSE: FRT); SVP, CFO and Treasurer from 2008 through 2012 Andy Blocher CFO, Treasurer & Secretary Mr. Blocher manages liabilities, capital raising, investor relations and financial reporting for the company High-Quality Real Estate Portfolio Conservative Capitalization 5
Key Personnel 21 Source: Company data. 1. First Potomac Realty Trust was publicly traded on the NYSE until October 2017. Experienced team of professionals drive NETSTREIT’s day to day operations Jeff Fuge Senior Vice President, Acquisitions • Joined in December 2019 • Prior experience includes: – Director of Capital Markets at EB Arrow – Senior Vice President at Compass Point Research & Trading – Client Relations Director at Aegis Financial • B.A. in History and minor in Business Administration from the College of Charleston; M.B.A. from George Washington University Chad Shafer Senior Vice President, Credit and Underwriting • Joined in May 2020 • Prior experience includes: – Various roles at JPMorgan Chase & Co., most recently as Executive Director – Wholesale Credit Risk – Other roles include Head of Real Estate Banking Portfolio Management, Head of Key Relationship Group – Credit Risk, Commercial Term Lending, and Credit Manager • B.S. in Finance from Butler University Kirk Klatt Senior Vice President, Real Estate • Joined in December 2019 • Prior experience includes: – Chief Acquisitions Officer, Single-Tenant Net-Lease at EB Arrow – Development Services Manager for Duke Realty Corporation (NYSE: DRE) • B.S. in Civil Engineering from Texas Tech University; M.B.A. from University of Texas at Dallas; licensed real estate salesperson in Texas Trish McBratney Senior Vice President and Chief Accounting Officer • Joined in May 2020 • Prior experience includes: – Chief Accounting Officer of American Bath Group – Chief Accounting and Administrative Officer of Mill Creek Residential Trust – Vice President and Controller of CyrusOne (NASDAQ: CONE) • B.S. in Accounting from Oklahoma State University; Certified Public Accountant Randy Haugh Senior Vice President, Finance • Joined in February 2020 • Prior experience includes: – U.S. Real Estate fund management group at The Carlyle Group (NASDAQ:CG) – Vice President of Finance and Director of Finance at First Potomac Realty Trust (NYSE: FPO)1 • B.S. in Economics and Certificate of Accounting from University of Virginia Amy An Investor Relations Manager • Joined in December 2019 • Prior experience includes: – Investor Relations Manager at EB Arrow – Investor Relations Associate and Real Estate Analyst at Capview Partners • B.S. in Business Administration from the University of Texas at Dallas – Naveen Jindal School of Management High-Quality Real Estate Portfolio Conservative Capitalization 5
Corporate Responsibility 22 ▪ Dedication to reducing the Company’s ecological footprint ▪ Endorsement of renewable resources and encouragement of tenants to practice leading sustainability initiatives ▪ Implementation of energy conservation practices in the office E Environmental Responsibility ▪ Emphasis on creating a culture driven by diversity & inclusion ▪ Commitment to employee well-being & satisfaction in the workplace ▪ Creation of leading employee training and development programs to promote growth S Social Responsibility ▪ Diverse management team & board of directors ▪ Enactment of ideal board features to enhance the Company’s fiduciary responsibility to shareholders ▪ Rigorous risk management procedures to protect shareholder interests G Corporate Governance Areas of Focus NETSTREIT is committed to fulfilling its responsibility as an outstanding corporate citizen The Company’s mission is to be the leader in the net lease industry by practicing and implementing innovative, impactful Environmental, Social and Governance policies with the highest ethical standards 5
Board of Directors Lead Independent Director ▪ Compensation Committee Chair ▪ Investment Committee Chair ▪ Audit Committee Member Background ▪ Formerly AEW Capital Management, Head of AEW Real Estate Securities ▪ Formerly Landmark Land Company, VP Matt Troxell, CFA Independent Director ▪ Audit Committee Chair ▪ Nominating & Corporate Governance Committee Member Background ▪ Big Rock Partners, CFO ▪ Global Medical REIT (NYSE: GMRE) Independent Director and Audit Committee Chair ▪ Formerly Care Capital Properties (NYSE: CCP), CFO ▪ Formerly Ventas (NYSE: VTR), SVP – Capital Markets & Investor Relations Lori Wittman In addition to Mr. Manheimer, the Company’s board is comprised of six additional directors, five of whom are independent, each possessing diverse backgrounds in industry, public company and investment experience 23 Independent Director ▪ Nominating & Corporate Governance Committee Chair ▪ Compensation Committee Member ▪ Investment Committee Member Background ▪ Cedar Realty Trust (NYSE: CDR), EVP and COO ▪ Formerly Federal Realty Investment Trust (NYSE: FRT), COO, Mid-Atlantic Robin Zeigler Chairman of the Board Background ▪ EB Arrow, CEO: Commercial real estate developer & owner ▪ Formerly Cypress Equities Real Estate Investment Management, CIO ▪ Formerly with The Staubach Company Todd Minnis Independent Director ▪ Compensation Committee Member ▪ Nominating & Corporate Governance Committee Member Background ▪ Star Cypress Partners, President and CEO ▪ Formerly The Wentworth Group and Stafford Family Foundation, Vice President ▪ Veteran of the United States Air Force Heidi Everett Independent Director ▪ Audit Committee Member ▪ Investment Committee Member Background ▪ Inwood Capital Management, Manager ▪ Lindsay Corporation (NYSE: LNN), Director, serves on Audit Committee, and Corporate Governance and Nominating Committee ▪ Formerly with Bass Brothers / Taylor & Company Michael Christodolou 5
Company & Investment Highlights 24 NETSTREIT Is A Growth Company With A Defensive Net Lease Retail Strategy High-Quality, Diversified, and Defensive Net Lease Retail Portfolio Conservative Capitalization to Support Accretive Growth Active Asset Management to Achieve Optimal Portfolio Performance Disciplined Underwriters with Dual Focus on Credit AND Real Estate Multifaceted Investment Strategy Leveraging Deep Industry Relationships Durable and Defensive Cash Flows with Demonstrated Resiliency Seasoned Leadership Team with Extensive Track Record Platform Positioned for Scale
Definitions 25 ABR means annualized base rent. ABR is calculated by multiplying (i) cash rental payments (a) for the month ended June 30, 2021 (or, if applicable, the next full month's cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of June 30, 2021, plus (b) for properties under development, the first full month's permanent cash rent contractually due after the development period by (ii) 12. Defensive Category is considered by us to represent tenants that focus on necessity goods and essential services in the retail sector, including discount stores, grocers, drug stores and pharmacies, home improvement, automotive service and quick-service restaurants, which we refer to as defensive retail industries. The defensive sub-categories as we define them are as follows: (1) Necessity, which are retailers that are considered essential by consumers and include sectors such as drug stores, grocers and home improvement, (2) Discount, which are retailers that offer a low price point and consist of off-price and dollar stores, (3) Service, which consist of retailers that provide services rather than goods, including, tire and auto services and quick service restaurants, and (4) Other, which are retailers that are not considered defensive in terms of being considered necessity, discount or service, as defined by us. Investment Grade (rated) represents tenants, or tenants that are subsidiaries of a parent entity (with such subsidiary making up at least 50% of the parent company total revenue), with a credit rating of BBB- (S&P), Baa3 (Moody's) or NAIC2 (National Association of Insurance Commissioners) or higher. Investment Grade Profile (unrated) represents tenants with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Moody's, or NAIC. Sub-investment grade (rated) represents tenants with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Moody's, or NAIC.
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