Netstreit Corp. · NYSE:NTST
Netstreit — Investor Presentation (June 2023)
41 slides from Netstreit's investor presentation, Jun 5, 2023
Slide 1: Investor Presentation June 2023
1 Investor Presentation June 2023
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 Note: Portfolio data and balance sheet as of March 31, 2023, unless otherwise noted. Figures represent percentage of ABR unless otherwise noted. 1. Represents tenants with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to
Slide 4: Portfolio Overview
9.2% 7.9% 5.8% 4.8% 4.2% 4.0% 3.9% 3.6% 3.6% 3.5% Portfolio Overview High-Quality, Diversified Portfolio Consisting of 67% Investment Grade Tenants Across 45 States 4 Note: Portfolio data as of March 31, 2023. 1. 52 properties that secure mortgage loans receivable are denoted as individual investmen
Slide 5: Portfolio Diversification In Defensive Retail Sectors
Convenience Stores: Home Improvement: Dollar Stores: Grocery: Drug Stores & Pharmacies: Portfolio Diversification In Defensive Retail Sectors Nationally Diversified Portfolio Primarily Comprised of Recession Resilient Retail Tenants Note: Portfolio data as of March 31, 2023. All figures represent pe
Slide 6: Resilient, Cycle-Tested Investment Grade Credit Tenants
Resilient, Cycle-Tested Investment Grade Credit Tenants with Durable Cash Flows1 >60% 82.0% (67.1% Investment Grade Credit and 14.9% Investment Grade Profile) Granular Assets in Highly Fragmented, Undercapitalized Market Segment $3.3 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: Investment Grade vs Investment Grade Profile Tenants
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 com
Slide 10: Real Estate Valuation Framework
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 March 31, 2023. 1. Investments with investment grade credit metrics (more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x), but do not carry a published rating from S&P, Fitch, Moody’s, or NAIC. 2. Excludes l
Slide 13: Strong External Growth Profile
$74 $150 $103 $81 $88 $117 $90 $151 $138 $133 $131 $104 $129 1Q'20 2Q'20 3Q'20 4Q'20 1Q'21 2Q'21 3Q'21 4Q'21 1Q'22 2Q'22 3Q'22 4Q'22 1Q'23 Completed Investments New Quarterly Investments Strong External Growth Profile Dependable Track Record of Procuring New Investments 433 Completed Investments 13
Slide 14: Active Asset Management
14 Note: Portfolio data as of March 31, 2023. Since inception, the Company has disposed of 72 properties totaling approximately $214 million, which has materially improved portfolio performance metrics such as tenant quality, WALT, and geographic diversity Identify properties not meeting strategy an
Slide 15: Conservative Balance Sheet with Improved Liquidity
15 Conservative Balance Sheet with Improved Liquidity Balance Sheet Positioned for Growth Given Strong Liquidity Profile and Low Leverage Position Debt Maturity Schedule – March 31, 2023 Debt Maturity Schedule – Pro Forma2,3 Abundant Liquidity to Support Growth: $652 million in total PF liquidity1 A
Slide 16: Portfolio Highlights Relative to Peers
100% 54% 79% 21% 36% 55% 26% 17% 16% 7% 3% 16% 3% 25% 17% 5% 2% FCPT NTST EPRT ADC O NNN SRC Service Discount Necessity Portfolio Highlights Relative to Peers NTST’s Stable & Predictable Cash Flow Profile Drives Superior Risk-Adjusted Returns 68% 67% 61% 41% 20% 18% NA Source: Public filings as of M
Slide 17: Peer Benchmarking and Implied Cap Rate
Implied Cap Rate 5.9% 6.0% 6.0% 6.1% 6.8% 6.9% 7.0% 7.3% Average 6.5% Applied Nominal Cap Rate – Sensitivity Analysis Source: Public filings, FactSet and S&P Capital IQ. Note: Market data as of June 2, 2023. Companies may define adjusted cash NOI differently. Accordingly, such data for these compani
Slide 18: Case Studies
18 Case Studies
Slide 19: Case Study: Loan Strategy
19 • Loan provided the borrower funding to acquire a 49 property Speedway portfolio • Loan-to-value of ~60%, with first lien senior secured priority with no capital ahead of NETSTREIT’s loan • Yield maintenance provides protection from refinancing • Valuation excludes pending uncapped CPI rent escal
Slide 20: Case Study: Breakup Strategy
20 • 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 21: Case Study: Blend & Extend
21 • 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 22: Case Study: Sale Leaseback Master Lease
22 • Created a master lease to encompass an existing Festival Foods store and a newly acquired Festival Foods location • Master lease has 15 years of initial term for both properties, which included extending the WALT of the existing site • Excellent retail area with population of 330,000 in a 5-mil
Slide 23: Commitment to ESG
23 Commitment to ESG
Slide 24: Areas of ESG Focus
24 ▪ Dedication to reducing the Company’s ecological footprint ▪ Endorsement of renewable resources and encouragement of tenants to practice leading sustainability initiatives ▪ New corporate headquarters is LEED v4 O+M: EB Gold Certified ▪ Implementation of energy conservation practices in the offi
Slide 25: Alignment with UN Sustainable Development Goals
25 Promote health and well-being in our offices. Company provides insurance benefits to our employees and family. Company provides employees with fitness memberships. Ensure inclusive and equitable quality education and promote lifelong learnings opportunities for all. Company provides continuing ed
Slide 26: Tenant Sustainability Programs
26 Source: Company data. Portfolio data represents portfolio as of 3/31/2023. Corporate sustainability programs for each tenant is published on their or their parent entity’s website. ENVIRONMENTAL SOCIAL GHG/CO2 Emission Plastic Usage/ Sustainable Packaging Renewable Energy/Energy Conservation Wate
Slide 27: Environmental Responsibility: Sustainability-Linked Pricing
27 We can achieve up to 2.5 bps pricing adjustment if we meet certain annual key performance indicators set by our sustainability agent. The KPI is based on the percentages of our portfolio ABR that is derived by tenants who have set targets of reducing GHG with SBTi or have made commitments to set
Slide 28: Social Responsibility
28 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 29: Corporate Governance
29 Source: Company data. Annual Director Elections Majority Voting Standard For Election of Directors Director Resignation Policy Annual Director and Committee Assessments No poison pill or differential voting stock structure to chill shareholder participation Shareholders’ right to amend the charte
Slide 30: Financial Information and Non-GAAP Reconciliations
30 Financial Information and Non-GAAP Reconciliations
Slide 31: Consolidated Statements of Operations
Three Months Ended March 31, 2023 2022 REVENUES Rental revenue (including reimbursable) $ 28,474 $ 20,921 Interest income on loans receivable 978 411 Total revenues 29,452 21,332 OPERATING EXPENSES Property 3,936 2,932 General and administrative 4,909 4,190 Depreciation and amortization 14,949 10,98
Slide 32: FFO, Core FFO and AFFO Reconciliation
Three Months Ended March 31, 2023 2022 GAAP Reconciliation: Net income $ 1,481 $ 1,966 Depreciation and amortization of real estate 14,884 10,862 Loss (gain) on sales of real estate, net 319 (161) Funds from Operations (FFO) $ 16,684 $ 12,667 Non-recurring severance and related charges 13 — Other no
Slide 33: EBITDA and EBITDAre Reconciliation
1. The adjustment removes base rent and interest income for new investments completed during the period shown and replaces the removed amount with an estimated equivalent amount for the for the full period shown. The adjustment also removes base rent for properties disposed of during the period show
Slide 34: NOI and Cash NOI Reconciliation
1. Interest income from mortgage loans receivable is excluded from the NOI, Cash NOI and Normalized Cash NOI amounts. 2. The adjustment removes recognized base rent from acquisitions and developments that were completed during the period shown, and replaces the removed amount with an estimated equiv
Slide 35: Consolidated Balance Sheets
March 31, 2023 December 31, 2022 ASSETS Real estate, at cost: Land $ 417,704 $ 401,146 Buildings and improvements 966,743 907,084 Total real estate, at cost 1,384,447 1,308,230 Less accumulated depreciation (72,682) (62,526) Property under development 6,501 16,796 Real estate held for investment, ne
Slide 36: Debt Summary
As of March 31, 2023 Debt Summary Maturity Date Principal Balance Interest Rate(1) Rate Type Weighted Average Years to Maturity Unsecured revolver(2)(3) August 11, 2026 $ 96,000 5.94% Floating 3.4 years Unsecured term loan(4) December 23, 2024 175,000 1.37% Fixed 1.7 years Unsecured term loan(5) Feb
Slide 37: Liquidity and Capitalization
As of March 31, 2023 Liquidity Balance Unused unsecured revolver capacity $ 304,000 Cash, cash equivalents and restricted cash 6,596 Cash value of outstanding forward equity(1) 91,166 Total Liquidity $ 401,762 Ending Equity Market Equity Shares/Units Capitalization % of Total Common shares(2) 60,862
Slide 38: Non-GAAP Measures and Definitions
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 39: Non-GAAP Measures and Definitions (cont'd)
Annualized Adjusted EBITDAre is Adjusted EBITDAre, plus adjustments for intraquarter investment activity, 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 beca
Slide 40: Defensive Category Definitions
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 re
Slide 41: Investor Relations
41 Investor Relations ir@netstreit.com 972-597-4825