Netstreit Corp. · NYSE:NTST
Netstreit — Investor Presentation (September 2023)
43 slides from Netstreit's investor presentation, Sep 20, 2023
Slide 1: Investor Presentation September 2023
1 Investor Presentation September 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 Source: Company data and balance sheet as of June 30, 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 a
Slide 4: Portfolio Overview
8.8% 8.1% 8.0% 4.7% 3.9% 3.8% 3.7% 3.7% 3.3% 3.2% Portfolio Overview High-Quality, Diversified Portfolio Consisting of 68% Investment Grade Tenants Across 45 States 4 Source: Company data as of June 30, 2023. 1. 62 properties that secure mortgage loans receivable are denoted as individual investment
Slide 5: Portfolio Diversification In Defensive Retail Sectors
Convenience Stores: Dollar Stores: Home Improvement: Grocery: Drug Stores & Pharmacies: Portfolio Diversification In Defensive Retail Sectors Nationally Diversified Portfolio Primarily Comprised of Recession Resilient Retail Tenants Source: Company data as of June 30, 2023. All figures represent per
Slide 6: Resilient, Cycle-Tested Investment Grade Credit Tenants
Resilient, Cycle-Tested Investment Grade Credit Tenants with Durable Cash Flows1 >60% 81.8% (67.7% Investment Grade Credit and 14.1% Investment Grade Profile) Granular Assets in Highly Fragmented, Undercapitalized Market Segment $3.2 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 (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: Unit-Level Profitability Analysis
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 quarter-to-date as of September 13, 2023. Peer filings are as of June 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 p
Slide 13: Investment Activity Summary Details
13 Investment Activity Summary Details $71,293 $150,538 $135,848 $122,459 $129,616 $91,349 $112,708 $114,957 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 3Q'21 4Q'21 1Q'22 2Q'22 3Q'22 4Q'22 1Q'23 2Q'23 In v e s tm e n t A c ti v it y ($ 0 0 0 s ) Investments1 3Q'21 4Q'21 1Q
Slide 14: Disposition Activity Summary Details
$18,835 $- $2,364 $10,328 $1,685 $12,294 $15,907 $4,060 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 3Q'21 4Q'21 1Q'22 2Q'22 3Q'22 4Q'22 1Q'23 2Q'23 D is p o s it io n A c ti v it y ($ 0 0 0 s ) 14 Disposition Activity Summary Details Source: Company data as of June
Slide 15: Active Asset Management
15 Source: Company data as of June 30, 2023. Since inception, the Company has disposed of 74 properties totaling $218 million, which has materially improved portfolio performance metrics such as tenant quality, WALT, and geographic diversity Identify properties not meeting strategy and/or risk manag
Slide 16: Conservative Balance Sheet with Improved Liquidity
3.4x 4.0x 4.1x 4.2x 5.1x 5.4x 5.5x 5.5x 5.8x Conservative Balance Sheet with Improved Liquidity Balance Sheet Positioned for Growth Given Strong Liquidity Profile and Low Leverage Position Debt Maturity Schedule – Pro Forma2,3 Abundant Liquidity to Support Growth: $683 million in total PF liquidity1
Slide 17: Portfolio Highlights Relative to Peers
14.0 9.4 8.1 8.6 10.3 10.2 9.6 3.3% 5.1% 7.5% 11.1% 12.8% 13.8% 15.4% $2.4 $2.8 $2.9 $3.2 $4.0 $4.1 $4.6 100% 15% 79% 21% 38% 55% 25% 19% 16% 7% 3% 53% 4% 25% 17% 5% 2% 100% 87% 83% 62% 62% 60% 31% Service Discount Necessity 68% 68% 59% 40% 19% 18% NA Portfolio Highlights Relative to Peers NTST’s St
Slide 18: Multiple and Earnings Growth Comparison
7.4% 4.4% 3.1% 3.0% 2.2% 2.2% 2.0% 1.5% 1.0% 6.7% 4.0% 3.8% 3.8% 3.2% 2.8% 2.5% 2.4% 2.2% 14.3x 13.9x 13.5x 13.4x 13.2x 13.0x 11.5x 11.4x 9.9x 14.9x 14.4x 14.3x 14.0x 13.5x 13.5x 11.8x 11.7x 10.1x 2023E AFFO per Share Multiple22023E AFFO per Share Growth1 2024E AFFO per Share Growth3 2024E AFFO per
Slide 19: Applied Cap Rate and NAV Analysis
Implied Cap Rate2 G&A Adjusted Implied Cap Rate3 2024E AFFO Multiple 6.2% 5.2% 13.9x 6.3% 6.0% 14.3x 6.4% 5.8% 13.4x 6.7% 6.4% 13.0x 7.2% 5.9% 13.5x 7.2% 6.8% 11.5x 7.9% 7.6% 9.9x Average 6.8% 6.2% 12.8x Applied Cap Rate and NAV Analysis Strong Upside Potential Given Relative Valuation Applied Nomin
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: Areas of ESG Focus
25 ▪ 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 26: UN Sustainable Development Goals Alignment
26 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 27: Environmental Responsibility: Tenant Sustainability Programs
27 Source: Company data. Portfolio data represents portfolio as of June 30, 2023. Corporate sustainability programs for each tenant is published on their or their parent entity’s website. Environmental Responsibility Our top tenants have corporate sustainability programs that govern their business o
Slide 28: Sustainability-Linked Loan Feature
28 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 29: Social Responsibility
29 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 30: Corporate Governance
30 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 31: Financial Information and Non-GAAP Reconciliations
31 Financial Information and Non-GAAP Reconciliations
Slide 32: Consolidated Statements of Operations
Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 REVENUES Rental revenue (including reimbursable) $ 29,707 $ 22,048 $ 58,180 $ 42,970 Interest income on loans receivable 1,923 586 2,901 997 Total revenues 31,630 22,634 61,081 43,967 OPERATING EXPENSES Property 3,530 2,685 7,
Slide 33: FFO, Core FFO and AFFO Reconciliation
Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 GAAP Reconciliation: Net (loss) income $ (792) $ 2,010 $ 689 $ 3,976 Depreciation and amortization of real estate 15,769 11,598 30,653 22,460 Provisions for impairment 2,836 1,114 2,836 1,114 Gain on sales of real estate, net
Slide 34: Adjusted EBITDAre Reconciliation
1. Adjustment reflects the estimated cash yield at completion on non-interest earning construction in process balances as of period end. 2. The adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including interest earning developments and interest earning loa
Slide 35: NOI Reconciliation
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, 2023, had occurred on April 1, 2023. 2. Adjustment assumes all loan activity completed during the three months end
Slide 36: Consolidated Balance Sheets
June 30, 2023 June 30, 2022 ASSETS Real estate, at cost: Land $ 424,821 $ 401,146 Buildings and improvements 1,005,884 907,084 Total real estate, at cost 1,430,705 1,308,230 Less accumulated depreciation (80,527) (62,526) Property under development 24,192 16,796 Real estate held for investment, net
Slide 37: Debt Summary
As of June 30, 2023 Debt Summary Fully Extended Maturity Principal Balance Interest Rate(1) Remaining Capacity Available Term (years) Unsecured revolver(2) August 11, 2027 $ 106,000 6.15% $ 294,000 4.1 Unsecured term loan(3) January 15, 2027 175,000 1.37% — 3.5 Unsecured term loan(4) February 11, 20
Slide 38: Net Debt, Covenants, Liquidity and Equity
Net Debt June 30, 2023 Principal amount of total debt $ 489,472 Less: Cash, cash equivalents and restricted cash (13,140) Net debt $ 476,332 Net debt / Annualized Adjusted EBITDAre 4.6x Key Debt Covenant Information Required Actual Consolidated total leverage ratio ≤ 60.0% 28.0% Fixed charge coverag
Slide 39: 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 income (computed in accordance with GAAP). Our FFO is net income in accordance with GAAP, excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortizati
Slide 40: EBITDAre Definitions
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 adop
Slide 41: 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 42: 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 43: Investor Relations
43 Investor Relations ir@netstreit.com 972-597-4825