Netstreit Corp. · NYSE:NTST
Netstreit — Investor Presentation (February 2024)
40 slides from Netstreit's investor presentation, Feb 14, 2024
Slide 1: Investor Presentation February 2024
1 Investor Presentation February 2024
Slide 2: Disclaimer
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 b
Slide 3: Investment Highlights & Business Update
Investment Highlights & Business Update 3 Source: Company data and balance sheet as of December 31, 2023, unless otherwise noted. Figures represent percentage of ABR unless otherwise noted. 1. Represents tenants with investment grade credit metrics (more than $1.0 billion in annual sales and a debt
Slide 4: Portfolio Overview
10.9% 7.8% 6.9% 5.0% 4.7% 4.4% 4.2% 3.5% 3.3% 3.0% Portfolio Overview High-Quality, Diversified Portfolio Consisting of 70.5% Investment Grade Tenants Across 45 States 4 Source: Company data as of December 31, 2023. 1. 70 properties that secure mortgage loans receivable are denoted as individual inv
Slide 5: Portfolio Diversification In Defensive Retail Sectors
Dollar Stores: 15.8% 1 Portfolio Diversification In Defensive Retail Sectors Nationally Diversified Portfolio Primarily Comprised of Recession Resilient Retail Tenants Source: Company data as of December 31, 2023. All figures represent percentage of ABR. Due to rounding, respective defensive retail
Slide 6: Resilient, Cycle-Tested Investment Grade Credit Tenants with Durable Cash Flows
Resilient, Cycle-Tested Investment Grade Credit Tenants with Durable Cash Flows1 >60% 84.6% (70.5% Investment Grade Credit and 14.1% Investment Grade Profile) Granular Assets in Highly Fragmented, Undercapitalized Market Segment $3.4 million Avg. Asset Size $1 to $10 million Avg. Asset Size Net Leas
Slide 7: Acquisition Strategy – Bell Curve Investing
“Market-Taker Assets” 7 Inefficiently Priced Assets TYPICAL TRANSACTION - Well marketed transaction - Straight-forward transaction - Ability to finance transaction - Highly competitive, well capitalized investors TYPICAL TRANSACTION - Not highly marketed - May involve transaction structuring that li
Slide 8: Stringent Three-Part Underwriting Process
8 Real Estate Valuation Unit-Level Profitability • Review underlying key real estate metrics to maximize re- leasing potential • Location analysis • Alternative use analysis • Determine rent coverage (min. 2.0x) and cost variability • Assess volatility and likelihood of cash flow weakness C B Tenant
Slide 9: Tenant Credit Underwriting: Investment Grade and Investment Grade Profile
Investment Grade (rated) Investment Grade Profile (unrated) Sub-IG (rated) & Sub-IG Profile (unrated) Description • Validated financial strength and stability • Professional management with standardized operational practices • Focus on corporate guarantee credit • Lower relative yields • Higher comp
Slide 10: Real Estate Valuation
10 Market-Level Considerations Property-Level Considerations • Fungibility of building for alternative uses • Replacement cost • Location analysis • Traffic counts • Nearby uses and traffic drivers, complementary nature thereof • Accessibility and parking capacity • Ingress and egress • Visibility /
Slide 11: Key Unit-Level Investment Criteria
11 Obtain Financial Info Perform Financial Analysis 2 Assess Investment Merits 1 3 • Provides clarity into location-specific performance • Analyze store demand dynamics, cost structure and liquidity profile • Determine whether property meets investment criteria • Obtain unit-level financial informat
Slide 12: History of Sourcing Investments at Attractive Yields
12 Source: Company filings from August 2020 through December 31, 2023. FCPT and EPRT are as of September 30, 2023 1. Investments with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating fr
Slide 13: Investment Activity Summary Details
$138,212 $132,787 $131,301 $104,069 $128,615 $115,321 $117,455 $119,128 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 1Q'22 2Q'22 3Q'22 4Q'22 1Q'23 2Q'23 3Q'23 4Q'23 G ro s s I n v e s tm e n t A c ti v it y ($ 0 0 0 s ) 13 Investment Activity Summary Details Source: Company
Slide 14: Disposition Activity Summary Details
$2,364 $10,328 $1,685 $12,294 $15,907 $4,060 $13,543 $15,995 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 1Q'22 2Q'22 3Q'22 4Q'22 1Q'23 2Q'23 3Q'23 4Q'23 D is p o s it io n A c ti v it y ($ 0 0 0 s ) 14 Disposition Activity Summary Details Source: Company data as of Decembe
Slide 15: Active Asset Management
15 Source: Company data as of December 31, 2023. Since inception, the Company has disposed of 86 properties totaling $240 million, which has materially improved portfolio performance metrics such as tenant quality, WALT, and geographic diversity Identify properties not meeting strategy and/or risk m
Slide 16: Capitalization and Liquidity
Source: Company data as December 31, 2023, unless otherwise noted. 1. Pro forma (PF) adjustments reflect 5,983,711 of unsettled shares issued through the ATM from the third quarter 2023, 11,040,000 of unsettled shares from the January 2024 forward equity offering, and includes the $100.0 million ava
Slide 17: Portfolio Highlights Relative to Peers
100% 13% 79% 27% 37% 55%22% 17% 7% 52% 3% 40% 18% 5% FCPT NTST EPRT ADC O NNN Service Discount Necessity59% 71% 69% 32% 0% 0% NTST ADC FCPT O NNN EPRT Source: Public filings as of December 31, 2023. FCPT, EPRT, and O as of September 30, 2023. 1. EPRT and NNN investment grade concentration assumed to
Slide 18: Multiple and Earnings Growth Comparison
Multiple and Earnings Growth Comparison Relative Valuation and Growth Remains Stable 18 2.5x 3.7x 4.7x 4.8x 5.0x 5.4x 5.4x 5.6x 5.6% 4.6% 3.3% 3.1% 2.9% 2.4% 2.3% NA 13.5x 13.1x 12.9x 12.8x 11.9x 11.6x 11.5x 11.4x 14.0x 13.9x 13.4x 13.4x 12.3x 11.9x 11.9x 11.9x Source: Public filings, FactSet and S&
Slide 19: Applied Cap Rate and NAV Analysis
(unaudited, in thousands) Three Months Ended, December 31, 2023 NOI $29.6 Straight-line Rental Adjustments (0.5) Amort. of Lease-Related Intangibles (0.1) Cash NOI 29.0 Intraquarter Net Investment Activity 0.7 Normalized Cash NOI 29.7 Annualized Normalized Cash NOI $118.8 Applied Cap Rate 7.50% 7.00
Slide 20: Case Studies
20 Case Studies
Slide 21: Case Study: Loan Strategy
Close Date: March 2023 Loan Amount: $46.1 million Interest Rate: 9.3% Location: Multiple – Southeast Term at Close: 3 years Parent Credit Rating: A / Baa2 21 • Loan provided the borrower funding to acquire a 49 property Speedway portfolio • Loan-to-value of ~60%, with first lien senior secured prior
Slide 22: Case Study: Breakup Strategy
22 • Acquisition of one Walmart Supercenter and one Sam’s Club by partnering and concurrently closing with a shopping center acquirer who purchased the remainder of the center • Significantly higher cap rate achieved through creative structuring • Strong retail corridor in Tupelo, MS INVESTMENT STAT
Slide 23: Case Study: Blend & Extend
23 • NTST negotiated a new 10-year lease with only a 7.4% rent reduction to increase lease term by six years • Cash cap rate of 6.9% compares favorably to other 10-year Tractor Supply transactions in the market • Exceptional real estate that tenant is committed to long term INVESTMENT STATS: Close D
Slide 24: Commitment to ESG
24 Commitment to ESG
Slide 25: Governance Highlights
25 Source: Company data. 1. Reflects gender and racial / ethnic diversity. Annual Director Elections Majority Voting Standard For Election of Directors Director Resignation Policy Annual Director and Committee Assessments No poison pill or differential voting stock structure to chill shareholder par
Slide 26: Social Responsibility
26 401K Plan 100% company match of up to a 3% contribution, and 50% of up to the next 2% Insurance Health, dental, and vision insurance costs covered at 90% for employees and 60% for dependents Leave Ten weeks of paid maternity leave at 100% salary as well as four weeks of paid family bonding; Compa
Slide 27: Environmental Responsibility
27 Source: Tenants within our portfolio that have public environmental, social, or governance initiatives as of December 31, 2023. 1. Includes the $200 million unsecured term loan which matures in February 2028, the $250 million unsecured term loan which matures in January 2029, and the $400 million
Slide 28: Financial Information and Non-GAAP Reconciliations
28 Financial Information and Non-GAAP Reconciliations
Slide 29: Consolidated Statements of Operations
Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 REVENUES Rental revenue (including reimbursable) $ 34,619 $ 26,625 $ 123,967 $ 93,934 Interest income on loans receivable 2,243 674 7,388 2,345 Other revenue — — 550 — Total revenues 36,862 27,299 131,905 96,279 OPE
Slide 30: FFO, Core FFO and AFFO Reconciliation
Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 GAAP Reconciliation: Net income $ 1,962 $ 2,810 $ 6,890 $ 8,205 Depreciation and amortization of real estate 17,000 13,797 63,379 49,498 Provisions for impairment 2,709 — 7,083 1,114 Gain on sales of real estate, ne
Slide 31: EBITDAre and Adjusted EBITDAre Reconciliation
1. Adjustment reflects the estimated cash yield on developments in process as of December 31, 2023. 2. The adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments and interest earning loan activity completed during the three months ended Dec
Slide 32: Net Operating Income
Net Operating Income (unaudited, dollars in thousands) 1. Adjustments assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended December 31, 2023, had occurred on October 1, 2023. 2. Adjustment assumes all loan act
Slide 33: Consolidated Balance Sheets
December 31, 2023 December 31, 2022 ASSETS Real estate, at cost: Land $ 460,896 $ 401,146 Buildings and improvements 1,149,809 907,084 Total real estate, at cost 1,610,705 1,308,230 Less accumulated depreciation (101,210) (62,526) Property under development 29,198 16,796 Real estate held for investm
Slide 34: Debt Summary
As of December 31, 2023 Debt Summary Fully Extended Maturity Principal Balance Interest Rate(1) Remaining Capacity Available Term (years) Unsecured revolver(2) August 11, 2027 $ 80,000 6.49% $ 319,850 3.6 Unsecured term loan(3) January 15, 2027 175,000 3.12% — 3.0 Unsecured term loan(4) February 11,
Slide 35: Net Debt, Covenants and Liquidity
Net Debt December 31, 2023 Principal amount of total debt $ 613,361 Less: Cash, cash equivalents and restricted cash (29,929) Net Debt $ 583,432 Less: Net value of unsettled forward equity from 2023 ATM issuance(1) (98,594) Adjusted Net Debt $ 484,838 Less: Net value of unsettled forward equity from
Slide 36: Non-GAAP Measures and Definitions: FFO, Core FFO, and AFFO
Non-GAAP Measures and Definitions FFO, Core FFO, and AFFO FFO means funds from operations. It is a non-GAAP measure defined by NAREIT as net income (computed in accordance with GAAP). Our FFO is net income in accordance with GAAP, excluding gains (or losses) resulting from dispositions of properties
Slide 37: Non-GAAP Measures and Definitions: EBITDA and EBITDAre
Non-GAAP Measures and Definitions EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre EBITDA is defined as earnings before interest expense, income tax expense, and depreciation and amortization. EBITDAre is the NAREIT definition of EBITDA (as defined above), but it is further adju
Slide 38: Non-GAAP Measures and Definitions: Property-Level NOI
Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate are non- GAAP financial measures which
Slide 39: Non-GAAP Measures and Definitions (cont'd)
Investments are lease agreements in place at owned properties, properties that have leases associated with mortgage loans receivable, developments where rent commenced, or in the case of master lease arrangements each property under the master lease is counted as a separate lease. Occupancy is expre
Slide 40: Investor Relations
40 Investor Relations ir@netstreit.com 972-597-4825