Netstreit Corp. · NYSE:NTST
Netstreit — Investor Presentation (September 2024)
39 slides from Netstreit's investor presentation, Sep 9, 2024
Slide 1: Investor Presentation September 2024
1 Investor Presentation September 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 June 30, 2024, unless otherwise noted. Figures represent percentage of ABR unless otherwise noted. 1. Reflects the impact of Walgreens’ downgrade to sub-investment grade in July 2024. 2. Represents tenants with in
Slide 4: Portfolio Overview
11.8% 6.9% 5.9% 5.6% 4.3% 3.9% 3.8% 3.0% 2.9% 2.8% Portfolio Overview High-Quality, Diversified Portfolio Consisting of 63.0%1 Investment Grade Tenants Across 45 States 4 Source: Company data as of June 30, 2024, unless otherwise noted. 1. Reflects the impact of Walgreens’ downgrade to sub-investmen
Slide 5: Portfolio Diversification In Defensive Retail Sectors
Dollar Stores: 17.4% 1 Portfolio Diversification In Defensive Retail Sectors Nationally Diversified Portfolio Primarily Comprised of Recession Resilient Retail Tenants Source: Company data as of June 30, 2024. All figures represent percentage of ABR. Due to rounding, respective defensive retail sect
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% 76.6% (63.0% Investment Grade Credit and 13.7% Investment Grade Profile)2 Granular Assets in Highly Fragmented, Undercapitalized Market Segment $3.3 million Avg. Asset Size $1 to $10 million Avg. Asset Size Net Lea
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 June 30, 2024. 1. Investments with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Fitch, Moody’s, or NAIC. 2. Excludes le
Slide 13: Investment Activity Summary Details
$131,301 $104,069 $128,615 $115,321 $117,455 $119,128 $129,207 $115,795 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 3Q'22 4Q'22 1Q'23 2Q'23 3Q'23 4Q'23 1Q'24 2Q'24 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: Compan
Slide 14: Disposition Activity Summary Details
$1,685 $12,294 $15,907 $4,060 $13,543 $15,995 $21,600 $12,707 $0 $3,000 $6,000 $9,000 $12,000 $15,000 $18,000 $21,000 $24,000 3Q'22 4Q'22 1Q'23 2Q'23 3Q'23 4Q'23 1Q'24 2Q'24 D is p o s it io n s A c ti v it y ($ 0 0 0 s ) 14 Disposition Activity Summary Details Source: Company data as of June 30, 20
Slide 15: Active Asset Management
15 Source: Company data as of June 30, 2024. Since inception, the Company has disposed of 101 properties totaling $274 million, which has materially improved portfolio performance metrics such as tenant quality, WALT, and geographic diversity Identify properties not meeting strategy and/or risk mana
Slide 16: Conservative Balance Sheet with Improved Liquidity
Source: Company data as June 30, 2024, unless otherwise noted. 1. Reflects 14,766,811 of unsettled forward equity shares at the June 30, 2024, weighted average net settlement price of $17.17 per share. 2. The three-year $250.0 million senior unsecured delayed draw term loan includes two one-year ext
Slide 17: Portfolio Highlights Relative to Peers
59% 68% 63%1 29% 17% NA ADC NTST FCPT O NNN EPRT 3.0% 6.8% 13.5% 16.6% 17.0% 18.0% EPRT NTST ADC O NNN FCPT 97% 16% 80% 26% 47% 56%23% 16% 7% 49% 3% 40% 10% 5% FCPT NTST EPRT ADC O NNN Service Discount Necessity Source: Public filings as of June 30, 2024, unless otherwise noted. 1. Reflects the impa
Slide 18: Multiple and Earnings Growth Comparison
7.9% 3.9% 3.9% 3.5% 3.4% 3.2% 3.0% 2.9% 3.4x 3.8x 4.4x 4.9x 5.2x 5.5x 5.5x 5.7x 18.4x 18.1x 16.7x 14.8x 14.3x 13.7x 13.2x 13.0x 17.4x 17.1x 16.2x 14.3x 13.9x 13.2x 12.7x 12.6x Net Debt + Pref. / EBITDA3 Multiple and Earnings Growth Comparison Relative Valuation and Growth Remains Stable 18 Source: P
Slide 19: Applied Cap Rate and NAV Analysis
Applied Cap Rate and NAV Analysis Strong Upside Potential Given Relative Valuation Applied Nominal Cap Rate – Sensitivity Analysis Source: Public filings, FactSet and S&P Capital IQ. Note: Capitalization data as of June 30, 2024. Market data as of September 5, 2024; closing price per share of $16.78
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 at the time • Exceptional real estate that tenant is committed to long term INVESTMENT ST
Slide 24: Corporate Responsibility
24 Corporate Responsibility
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 June 30, 2024. 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 rev
Slide 28: Financial Information and Non-GAAP Reconciliations
28 Financial Information and Non-GAAP Reconciliations
Slide 29: Consolidated Statements of Operations
Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 REVENUES Rental revenue (including reimbursable) $ 36,864 $ 29,707 $ 72,053 $ 58,180 Interest income on loans receivable 2,703 1,923 5,187 2,901 Total revenues 39,567 31,630 77,240 61,081.00 OPERATING EXPENSES Property 3,982 3
Slide 30: FFO, Core FFO and AFFO Reconciliation
Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 GAAP Reconciliation: Net (loss) income $ (2,306) $ (792) $ (1,254) $ 689 Depreciation and amortization of real estate 18,465 15,769 35,926 30,653 Provisions for impairment 3,836 2,836 7,498 2,836 Gain on sales of real estate,
Slide 31: EBITDAre and Adjusted EBITDAre Reconciliation
1. Adjustment reflects the estimated cash yield on developments in process as of June 30, 2024. 2. The adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments and loan activity completed during the three months ended June 30, 2024 and 2023,
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 interest earning developments completed during the three months ended June 30, 2024, had occurred on April 1, 2024. 2. Adjustment assumes a
Slide 33: Consolidated Balance Sheets
June 30, 2024 December 31, 2023 ASSETS Real estate, at cost: Land $ 494,654 $ 460,896 Buildings and improvements 1,270,572 1,149,809 Total real estate, at cost 1,765,226 1,610,705 Less accumulated depreciation (122,236) (101,210) Property under development 16,896 29,198 Real estate held for investme
Slide 34: Debt Summary
As of June 30, 2024 Debt Summary Fully Extended Maturity Principal Balance Interest Rate(1) Remaining Capacity Available Term (years) Unsecured revolver(2) August 11, 2027 $ 98,000 6.43% $ 301,850 3.1 Unsecured term loan(3) January 15, 2027 175,000 3.12% — 2.5 Unsecured term loan(4) February 11, 202
Slide 35: Net Debt, Covenants and Liquidity
Net Debt As of June 30, 2024 Principal amount of total debt $ 731,284 Less: Cash, cash equivalents and restricted cash (13,726) Net Debt $ 717,558 Less: Net value of unsettled forward equity(1) (253,579) Adjusted Net Debt $ 463,979 Net Debt / Annualized Adjusted EBITDAre 5.3 x Adjusted Net Debt / An
Slide 36: FFO, Core FFO, and AFFO Definitions
FFO, Core FFO, and AFFO FFO means funds from operations. It is a non-GAAP measure defined by NAREIT as net (loss) income (computed in accordance with GAAP), excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortization and impairment charges on depreciable
Slide 37: EBITDA, EBITDAre, Adjusted EBITDAre Definitions
EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre EBITDA is defined as earnings before interest expense, income tax expense, and depreciation and amortization. EBITDAre is the NAREIT definition of EBITDA (as defined above), but it is further adjusted to follow the definition incl
Slide 38: Property-Level NOI and Cash NOI Definitions
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, interest earning developments, or in the case of master lease arrangements each property under the master lease is counted as a sep