Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries NETSTREIT Reports Third Quarter 2023 Financial and Operating Results By: NETSTREIT Corp. via Business Wire October 25, 2023 at 16:05 PM EDT – Net income of $0.06 and Adjusted Funds from Operations ("AFFO") of $0.31 Per Diluted Share – – Completed $117.5 Million of Investment Activity at 7.0% Blended Cash Yield– – Increases 2023 AFFO per Share Guidance Range to $1.21 to $1.23 – NETSTREIT Corp. (NYSE: NTST) (the “Company”) today announced financial and operating results for the third quarter ended September 30, 2023. “We are pleased to announce another solid quarter of results, completing $103.9 million in net investment activity in the quarter. We are also increasing our 2023 AFFO per share guidance midpoint, which implies 5% growth over last year. While the higher for longer narrative has placed upward pressure on the cost of capital for most companies, we remain well positioned from both a balance sheet, portfolio, and earnings standpoint. More specifically, we have no debt maturities until 2027, no net exposure to floating rate debt, low leverage, and ample liquidity. Coupled with our highly secure in-place rental stream, we are confident that our portfolio and investment discipline will result in earnings growth and increased value for our shareholders.” said Mark Manheimer, Chief Executive Officer of NETSTREIT. THIRD QUARTER 2023 HIGHLIGHTS The following table summarizes the Company's select financial results1 for the three and nine months ended September 30, 2023. Three Months Ended September 30, 2023 2022 % Change (Unaudited) Net Income per Diluted Share $ 0.06 $ 0.03 100 % Funds from Operations per Diluted Share $ 0.31 $ 0.28 11 % Core Funds from Operations per Diluted Share $ 0.31 $ 0.28 11 % Adjusted Funds from Operations per Diluted Share $ 0.31 $ 0.30 3 % Nine Months Ended September 30, 2023 2022 % Change (Unaudited) Net Income per Diluted Share $ 0.08 $ 0.11 (27 )% Funds from Operations per Diluted Share $ 0.87 $ 0.82 6 % Core Funds from Operations per Diluted Share $ 0.88 $ 0.82 7 % Adjusted Funds from Operations per Diluted Share $ 0.91 $ 0.87 5 % 1. Funds from operations ("FFO"), core funds from operations ("Core FFO"), and adjusted funds from operations ("AFFO") are non-GAAP financial measures. See "Non-GAAP Financial Measures." INVESTMENT ACTIVITY The following tables summarize the Company's investment and disposition activities (dollars in thousands) for the three and nine months ended September 30, 2023. Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Number of Investments Amount Number of Investments Amount Investments 29 $ 117,455 139 $ 361,391 Dispositions1 6 13,543 16 33,511 Net Investment Activity $ 103,912 $ 327,880 Investment Activity Cash Yield 7.0 % 7.2 % % of ABR derived from Investment Grade Tenants 75.1 % 77.2 % % of ABR derived from Investment Grade Profile Tenants 22.1 % 14.2 % Weighted Average Lease Term (years) 10.0 10.6 Disposition Activity Cash Yield1 6.9 % 6.8 % Weighted Average Lease Term (years) 7.1 6.0 1. Includes mortgage loan payoffs. The following table summarizes the Company's on-going development projects and estimated development costs (dollars in thousands) as of September 30, 2023. Developments Three Months Ended September 30, 2023 Amount Funded During the Quarter $ 33,017 As of September 30, 2023 Number of Developments 32 Amount Funded to Date $ 42,108 Estimated Funding Remaining on Developments 26,189 Total Estimated Development Cost $ 68,297 PORTFOLIO UPDATE The following table summarizes the Company's real estate portfolio (weighted by ABR, dollars in thousands) as of September 30, 2023. As of September 30, 2023 Number of Investments 547 ABR $ 124,341 States 45 Square Feet 9,971,909 Tenants 85 Industries 26 Occupancy 100.0 % Weighted Average Lease Term (years) 9.3 Investment Grade % 68.6 % Investment Grade Profile % 14.6 % CAPITAL MARKETS AND BALANCE SHEET The following tables summarize the Company's leverage, balance sheet, liquidity, ATM issuances, and settlement of our forward equity offerings (dollars in thousands, except per share data) as of and for September 30, 2023. Leverage As of September 30, 2023 Net Debt Adjusted for Outstanding Forward Equity/ Annualized Adjusted EBITDAre 4.2x Liquidity Unused Unsecured Revolver Capacity $ 358,000 Cash, Cash Equivalents and Restricted Cash 7,934 Value of Outstanding Forward Equity1 98,671 Total Liquidity $ 464,605 Plus: Remaining Available Principal of 2029 Term Loan 100,000 Total Proforma Liquidity $ 564,605 ATM Program Shares Issued During Quarter2 1,672,242 Weighted Average Price Per Share $ 16.55 Net Proceeds $ 27,418 Forward Equity Shares Outstanding as of September 30, 2023 5,983,711 Weighted Average Price Per Share $ 16.49 Value of Outstanding Forward Equity1 $ 98,671 1. Reflects 5,983,711 of unsettled forward equity shares under the ATM program at the September 30, 2023 available net settlement price of $16.49. 2. Includes 1,516,289 of settled forward equity shares. DEBT ACTIVITY On July 3, 2023, the Company closed a new three-year $250.0 million sustainability-linked senior unsecured term loan facility with a delayed draw option (the "Term Loan"). The Term Loan initially matures in July 2026 and includes two one-year options and one six-month option to extend the maturity to January 2029 (5.5-year term) at the Company's discretion, and an accordion feature that allow the Company to increase the aggregate availability under the Term Loan to $400.0 million. At close, the initial amount drawn on the Term Loan was $150.0 million. The following table summarizes the terms of the Term Loan (dollars in thousands). 2029 Term Loan Fully Extended Maturity Date January 2029 Principal Drawn as of September 30, 2023 $ 150,000 Remaining Available Principal as of September 30, 2023 $ 100,000 Total Principal $ 250,000 Full Capacity if Accordion Exercised $ 400,000 All-In Fixed Interest Rate1 4.99 % 1. All-in fixed rate consists of the fixed rate SOFR swap of 3.74% on $250.0 million of notional value, plus a credit spread adjustment of 0.10% and a borrowing spread of 1.15%. DIVIDEND On October 24, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.205 per share for the fourth quarter of 2023. On an annualized basis, the dividend of $0.82 per share of common stock represents an increase of $0.02 per share over the prior year annualized dividend. The dividend will be paid on December 15, 2023 to shareholders of record on December 1, 2023. 2023 GUIDANCE The Company is increasing its full year 2023 AFFO per share guidance range to $1.21 to $1.23 from $1.20 to $1.23, resulting in an increase to the midpoint of the range. The Company now expects 2023 net investment activity to be around $450.0 million. AFFO is a non-GAAP financial measure. The Company does not provide a reconciliation of such forward-looking non-GAAP measure to the most directly comparable financial measures calculated and presented in accordance with GAAP because to do so would be potentially misleading and not practical given the difficulty of projecting event driven transactional and other non-core operating items in any future period. The magnitude of these items, however, may be significant. EARNINGS CONFERENCE CALL A conference call will be held on Thursday, October 26, 2023 at 11:00 AM ET. During the conference call the Company’s officers will review third 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 November 2, 2023, 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 13741443. 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 Corp. NETSTREIT Corp. 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. NON-GAAP FINANCIAL MEASURES This press release contains non-GAAP financial measures, including FFO, Core FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, Annualized Adjusted EBITDAre, Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI Estimated Run Rate, Total Property-Level Cash NOI Estimated Run Rate and Net Debt. A reconciliation of each non-GAAP financial measure to the most comparable GAAP 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, including estimated development costs, 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 for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2023 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 macroeconomic conditions, including inflation, interest rates and instability in the banking system. 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. NETSTREIT CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) (Unaudited) September 30, December 31, 2023 2022 Assets Real estate, at cost: Land $ 449,718 $ 401,146 Buildings and improvements 1,081,427 907,084 Total real estate, at cost 1,531,145 1,308,230 Less accumulated depreciation (90,890 ) (62,526 ) Property under development 33,497 16,796 Real estate held for investment, net 1,473,752 1,262,500 Assets held for sale 38,839 23,208 Mortgage loans receivable, net 109,091 46,378 Cash, cash equivalents and restricted cash 7,934 70,543 Lease intangible assets, net 163,824 151,006 Other assets, net 69,403 52,057 Total assets $ 1,862,843 $ 1,605,692 Liabilities and equity Liabilities: Term loans, net $ 521,613 $ 373,296 Revolving credit facility 42,000 113,000 Mortgage note payable, net 7,890 7,896 Lease intangible liabilities, net 26,699 30,131 Liabilities related to assets held for sale 1,024 406 Accounts payable, accrued expenses and other liabilities 33,727 22,540 Total liabilities 632,953 547,269 Commitments and contingencies Equity: Stockholders’ equity Common stock, $0.01 par value, 400,000,000 shares authorized; 68,701,223 and 58,031,879 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively 687 580 Additional paid-in capital 1,289,810 1,091,514 Distributions in excess of retained earnings (100,006 ) (66,937 ) Accumulated other comprehensive income 30,494 23,673 Total stockholders’ equity 1,220,985 1,048,830 Noncontrolling interests 8,905 9,593 Total equity 1,229,890 1,058,423 Total liabilities and equity $ 1,862,843 $ 1,605,692 NETSTREIT CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenues Rental revenue (including reimbursable) $ 31,167 $ 24,339 $ 89,347 $ 67,309 Interest income on loans receivable 2,244 674 5,145 1,671 Other revenue 550 — 550 — Total revenues 33,961 25,013 95,042 68,980 Operating expenses Property 3,883 2,539 11,350 8,156 General and administrative 5,133 4,552 15,299 13,608 Depreciation and amortization 15,804 13,407 46,599 36,137 Provisions for impairment 1,538 — 4,374 1,114 Transaction costs 143 51 267 704 Total operating expenses 26,501 20,549 77,889 59,719 Other income (expense) Interest expense, net (3,946 ) (3,017 ) (13,412 ) (5,708 ) Gain on sales of real estate, net 373 143 669 2,162 Loss on debt extinguishment — — (128 ) — Other income, net 367 — 586 36 Total other income (expense), net (3,206 ) (2,874 ) (12,285 ) (3,510 ) Net income before income taxes 4,254 1,590 4,868 5,751 Income tax (expense) benefit (15 ) (171 ) 60 (356 ) Net income 4,239 1,419 4,928 5,395 Net income attributable to noncontrolling interests 24 16 32 63 Net income attributable to common stockholders $ 4,215 $ 1,403 $ 4,896 $ 5,332 Amounts available to common stockholders per common share: Basic $ 0.06 $ 0.03 $ 0.08 $ 0.11 Diluted $ 0.06 $ 0.03 $ 0.08 $ 0.11 Weighted average common shares: Basic 67,112,587 50,449,735 62,123,334 47,679,870 Diluted 68,048,369 51,384,758 62,897,957 48,657,049 NETSTREIT CORP. AND SUBSIDIARIES RECONCILIATION OF NET INCOME TO FFO, CORE FFO AND ADJUSTED FFO (In thousands, except share and per share data) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (Unaudited) (Unaudited) Net income $ 4,239 $ 1,419 $ 4,928 $ 5,395 Depreciation and amortization of real estate 15,726 13,241 46,379 35,701 Provisions for impairment 1,538 — 4,374 1,114 Gain on sales of real estate, net (373 ) (143 ) (669 ) (2,162 ) FFO $ 21,130 $ 14,517 $ 55,012 $ 40,048 Adjustments: Non-recurring executive transition costs, severance and related charges 62 — 276 — Loss on debt extinguishment and other related costs — — 223 — Gain on insurance proceeds (1 ) — (47 ) (36 ) Core FFO $ 21,191 $ 14,517 $ 55,464 $ 40,012 Adjustments: Straight-line rent adjustments (245 ) (272 ) (707 ) (1,144 ) Amortization of deferred financing costs 578 239 1,165 553 Amortization of above/below-market assumed debt 29 — 86 — Amortization of loan origination costs 26 28 83 59 Amortization of lease-related intangibles (121 ) (313 ) (517 ) (644 ) Earned development interest 189 — 189 — Capitalized interest expense (404 ) (115 ) (688 ) (218 ) Non-cash interest expense (1,134 ) — (1,134 ) — Non-cash compensation expense 1,280 1,302 3,559 3,645 AFFO $ 21,389 $ 15,386 $ 57,500 $ 42,263 Weighted average common shares outstanding, basic 67,112,587 50,449,735 62,123,334 47,679,870 Operating partnership units outstanding 501,987 514,890 507,014 530,940 Unvested restricted stock units 173,001 255,613 167,215 261,727 Unsettled shares under open forward equity contracts 260,794 164,520 100,394 184,512 Weighted average common shares outstanding, diluted 68,048,369 51,384,758 62,897,957 48,657,049 FFO per common share, diluted $ 0.31 $ 0.28 $ 0.87 $ 0.82 Core FFO per common share, diluted $ 0.31 $ 0.28 $ 0.88 $ 0.82 AFFO per common share, diluted $ 0.31 $ 0.30 $ 0.91 $ 0.87 RECONCILIATION OF NET INCOME TO EBITDA, EBITDAre AND ADJUSTED EBITDAre (In thousands) (Unaudited) Three Months Ended September 30, 2023 2022 (Unaudited) Net income $ 4,239 $ 1,419 Depreciation and amortization of real estate 15,726 13,241 Amortization of lease-related intangibles (121 ) (313 ) Non-real estate depreciation and amortization 78 166 Interest expense, net 3,946 3,017 Income tax expense (benefit) 15 171 Amortization of loan origination costs 26 28 EBITDA 23,909 17,729 Adjustments: Provision for impairments 1,538 — Gain on sales of real estate, net (373 ) (143 ) EBITDAre 25,074 17,586 Adjustments: Straight-line rent adjustments (245 ) (272 ) Non-recurring executive transition costs, severance and related charges 62 — Gain on insurance proceeds (1 ) — Non-cash compensation expense 1,280 1,302 Lease termination fees (550 ) — Adjustment for construction in process (1) 720 263 Adjustment for intraquarter investment activities (2) 1,341 1,182 Adjusted EBITDAre $ 27,681 $ 20,061 Annualized Adjusted EBITDAre (3) $ 110,724 Net Debt Adjusted for Outstanding Forward Equity / Annualized Adjusted EBITDAre 4.2 x As of September 30, 2023 Principal amount of total debt $ 575,399 Less: Cash, cash equivalents and restricted cash (7,934 ) Net Debt 567,465 Value of outstanding forward equity (4) (98,671 ) Net Debt Adjusted for Outstanding Forward Equity $ 468,794 (1) Adjustment reflects the estimated cash yield on developments in process balances as of period end. (2) 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 September 30, 2023 and 2022 had occurred on July 1, 2023 and July 1, 2022, respectively. (3) We calculate Annualized Adjusted EBITDAre by multiplying Adjusted EBITDAre by four. (4) There were 5,983,711 of unsettled forward equity shares under the ATM program at the September 30, 2023 available net settlement price of $16.49. RECONCILIATION OF NET INCOME TO NOI AND CASH NOI (In thousands) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (Unaudited) (Unaudited) Net income $ 4,239 $ 1,419 $ 4,928 $ 5,395 General and administrative 5,133 4,552 15,299 13,608 Depreciation and amortization 15,804 13,407 46,599 36,137 Provisions for impairment 1,538 — 4,374 1,114 Transaction costs 143 51 267 704 Interest expense, net 3,946 3,017 13,412 5,708 Gain on sales of real estate, net (373 ) (143 ) (669 ) (2,162 ) Income tax expense (benefit) 15 171 (60 ) 356 Loss on debt extinguishment — — 128 — Interest income on mortgage loans receivable (2,244 ) (674 ) (5,145 ) (1,671 ) Lease termination fees (550 ) — (550 ) — Other income, net (367 ) — (586 ) (36 ) Property-Level NOI 27,284 21,800 77,997 59,153 Straight-line rent adjustments (245 ) (272 ) (707 ) (1,144 ) Amortization of lease-related intangibles (121 ) (313 ) (517 ) (644 ) Property-Level Cash NOI $ 26,918 $ 21,215 $ 76,773 $ 57,365 Adjustment for intraquarter acquisitions, dispositions and completed development (1) 1,320 Property-Level Cash NOI Estimated Run Rate 28,238 Interest income on mortgage loans receivable 2,244 Adjustments for intraquarter mortgage loan activity (2) 21 Total Cash NOI - Estimated Run Rate $ 30,503 (1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended September 30, 2023, had occurred on July 1, 2023. (2) Adjustment assumes all loan activity completed during the three months ended September 30, 2023, had occurred on July 1, 2023. NON-GAAP FINANCIAL MEASURES FFO, Core FFO and AFFO The National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a widely accepted non-GAAP financial measure of operating performance known as FFO. Our FFO is net income in accordance with GAAP, excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortization and impairment charges on depreciable real property. Core FFO is a non-GAAP financial measure defined as FFO adjusted to remove the effect of unusual and non-recurring items that are not expected to impact our operating performance or operations on an ongoing basis. These include non-recurring executive transition costs, severance and related charges, gain on insurance proceeds, and loss on debt extinguishments and other related costs. 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, earned development interest, non-cash interest expense, non-cash compensation expense, amortization of deferred financing costs, amortization of above/below-market assumed debt, and amortization of loan origination 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. EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre We compute EBITDA as earnings before interest expense, income tax expense, 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 impairment charges on depreciable real property. Adjusted EBITDAre is a non-GAAP financial measure defined as EBITDAre further adjusted to exclude straight-line rent, non-cash compensation expense, non-recurring executive transition costs, severance and related charges, loss on debt extinguishment and other related costs, gain on insurance proceeds, other non-recurring expenses (income), lease termination fees, adjustment for construction in process, and adjustment for intraquarter activities. Beginning in the quarter ended June 30, 2023, we modified our definition of Adjusted EBITDAre to include adjustments for construction in process and intraquarter investment activities. Prior periods have been recast to reflect this new definition. Annualized Adjusted EBITDAre is Adjusted EBITDAre multiplied by four. We present EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized 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, Adjusted EBITDAre, and Annualized Adjusted EBITDAre as measures of our operating performance and not as measures of liquidity. EBITDA, EBITDAre, Adjusted EBITDAre and Annualized 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, Adjusted EBITDAre and Annualized 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. Net Debt We calculate our Net Debt as our principal amount of total debt outstanding excluding deferred financing costs, net discounts and debt issuance costs less cash, cash equivalents and restricted cash available for future investment. We further adjust Net Debt by the value of outstanding forward equity as period end to derive Net Debt Adjusted for Outstanding Forward Equity. We believe excluding cash, cash equivalents and restricted cash available for future investment from our principal amount, all of which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid. We believe these adjustments are additional beneficial disclosures to investors and analysis. 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 we use to assess our operating results. We compute Property-Level NOI as net income (computed in accordance with GAAP), excluding general and administrative expenses, interest expense (or income), income tax expense, transaction costs, depreciation and amortization, gains (or losses) on sales of depreciable property, real estate impairment losses, interest income on mortgage loans receivable, loss on debt extinguishment, lease termination fees, and other income (or expense). We further adjust Property-Level NOI for non-cash revenue components of straight-line rent and amortization of lease-intangibles to derive Property-Level Cash NOI. We further adjust Property-Level Cash NOI for intraquarter acquisitions, dispositions and completed developments to derive Property-Level Cash NOI - Estimated Run Rate. We further adjust Property-Level Cash NOI - Estimated Run Rate for interest income on mortgage loans receivable and intraquarter mortgage loan activity to derive Total Cash NOI - Estimated Run Rate. We believe Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate 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. Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate are not measurements of financial performance under GAAP, and may not be comparable to similarly titled measures of other companies. You should not consider our measures as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. OTHER DEFINITIONS ABR is annualized base rent as of September 30, 2023, for all leases that commenced and annualized cash interest on mortgage loans receivable in place as of that date. Cash Yield is the annualized base rent contractually due from acquired properties, interest income from mortgage loans receivable, and completed developments, divided by the gross investment amount, or gross proceeds in the case of dispositions. 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. Investment Grade are investments, or investments that are subsidiaries of a parent entity, with a credit rating of BBB- (S&P/Fitch), Baa3 (Moody's) or NAIC2 (National Association or Insurance Commissioners) or higher. Investment Grade Profile are 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. Occupancy is expressed as a percentage, and is the number of economically occupied properties divided by the total number of properties owned, excluding mortgage loans receivable and properties under development. Weighted Average Lease Term is weighted by the annualized base rent, excluding lease extension options and investments associated with mortgage loans receivable. View source version on businesswire.com: https://www.businesswire.com/news/home/20231025159042/en/Contacts Investor Relations ir@netstreit.com 972-597-4825 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
NETSTREIT Reports Third Quarter 2023 Financial and Operating Results By: NETSTREIT Corp. via Business Wire October 25, 2023 at 16:05 PM EDT – Net income of $0.06 and Adjusted Funds from Operations ("AFFO") of $0.31 Per Diluted Share – – Completed $117.5 Million of Investment Activity at 7.0% Blended Cash Yield– – Increases 2023 AFFO per Share Guidance Range to $1.21 to $1.23 – NETSTREIT Corp. (NYSE: NTST) (the “Company”) today announced financial and operating results for the third quarter ended September 30, 2023. “We are pleased to announce another solid quarter of results, completing $103.9 million in net investment activity in the quarter. We are also increasing our 2023 AFFO per share guidance midpoint, which implies 5% growth over last year. While the higher for longer narrative has placed upward pressure on the cost of capital for most companies, we remain well positioned from both a balance sheet, portfolio, and earnings standpoint. More specifically, we have no debt maturities until 2027, no net exposure to floating rate debt, low leverage, and ample liquidity. Coupled with our highly secure in-place rental stream, we are confident that our portfolio and investment discipline will result in earnings growth and increased value for our shareholders.” said Mark Manheimer, Chief Executive Officer of NETSTREIT. THIRD QUARTER 2023 HIGHLIGHTS The following table summarizes the Company's select financial results1 for the three and nine months ended September 30, 2023. Three Months Ended September 30, 2023 2022 % Change (Unaudited) Net Income per Diluted Share $ 0.06 $ 0.03 100 % Funds from Operations per Diluted Share $ 0.31 $ 0.28 11 % Core Funds from Operations per Diluted Share $ 0.31 $ 0.28 11 % Adjusted Funds from Operations per Diluted Share $ 0.31 $ 0.30 3 % Nine Months Ended September 30, 2023 2022 % Change (Unaudited) Net Income per Diluted Share $ 0.08 $ 0.11 (27 )% Funds from Operations per Diluted Share $ 0.87 $ 0.82 6 % Core Funds from Operations per Diluted Share $ 0.88 $ 0.82 7 % Adjusted Funds from Operations per Diluted Share $ 0.91 $ 0.87 5 % 1. Funds from operations ("FFO"), core funds from operations ("Core FFO"), and adjusted funds from operations ("AFFO") are non-GAAP financial measures. See "Non-GAAP Financial Measures." INVESTMENT ACTIVITY The following tables summarize the Company's investment and disposition activities (dollars in thousands) for the three and nine months ended September 30, 2023. Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Number of Investments Amount Number of Investments Amount Investments 29 $ 117,455 139 $ 361,391 Dispositions1 6 13,543 16 33,511 Net Investment Activity $ 103,912 $ 327,880 Investment Activity Cash Yield 7.0 % 7.2 % % of ABR derived from Investment Grade Tenants 75.1 % 77.2 % % of ABR derived from Investment Grade Profile Tenants 22.1 % 14.2 % Weighted Average Lease Term (years) 10.0 10.6 Disposition Activity Cash Yield1 6.9 % 6.8 % Weighted Average Lease Term (years) 7.1 6.0 1. Includes mortgage loan payoffs. The following table summarizes the Company's on-going development projects and estimated development costs (dollars in thousands) as of September 30, 2023. Developments Three Months Ended September 30, 2023 Amount Funded During the Quarter $ 33,017 As of September 30, 2023 Number of Developments 32 Amount Funded to Date $ 42,108 Estimated Funding Remaining on Developments 26,189 Total Estimated Development Cost $ 68,297 PORTFOLIO UPDATE The following table summarizes the Company's real estate portfolio (weighted by ABR, dollars in thousands) as of September 30, 2023. As of September 30, 2023 Number of Investments 547 ABR $ 124,341 States 45 Square Feet 9,971,909 Tenants 85 Industries 26 Occupancy 100.0 % Weighted Average Lease Term (years) 9.3 Investment Grade % 68.6 % Investment Grade Profile % 14.6 % CAPITAL MARKETS AND BALANCE SHEET The following tables summarize the Company's leverage, balance sheet, liquidity, ATM issuances, and settlement of our forward equity offerings (dollars in thousands, except per share data) as of and for September 30, 2023. Leverage As of September 30, 2023 Net Debt Adjusted for Outstanding Forward Equity/ Annualized Adjusted EBITDAre 4.2x Liquidity Unused Unsecured Revolver Capacity $ 358,000 Cash, Cash Equivalents and Restricted Cash 7,934 Value of Outstanding Forward Equity1 98,671 Total Liquidity $ 464,605 Plus: Remaining Available Principal of 2029 Term Loan 100,000 Total Proforma Liquidity $ 564,605 ATM Program Shares Issued During Quarter2 1,672,242 Weighted Average Price Per Share $ 16.55 Net Proceeds $ 27,418 Forward Equity Shares Outstanding as of September 30, 2023 5,983,711 Weighted Average Price Per Share $ 16.49 Value of Outstanding Forward Equity1 $ 98,671 1. Reflects 5,983,711 of unsettled forward equity shares under the ATM program at the September 30, 2023 available net settlement price of $16.49. 2. Includes 1,516,289 of settled forward equity shares. DEBT ACTIVITY On July 3, 2023, the Company closed a new three-year $250.0 million sustainability-linked senior unsecured term loan facility with a delayed draw option (the "Term Loan"). The Term Loan initially matures in July 2026 and includes two one-year options and one six-month option to extend the maturity to January 2029 (5.5-year term) at the Company's discretion, and an accordion feature that allow the Company to increase the aggregate availability under the Term Loan to $400.0 million. At close, the initial amount drawn on the Term Loan was $150.0 million. The following table summarizes the terms of the Term Loan (dollars in thousands). 2029 Term Loan Fully Extended Maturity Date January 2029 Principal Drawn as of September 30, 2023 $ 150,000 Remaining Available Principal as of September 30, 2023 $ 100,000 Total Principal $ 250,000 Full Capacity if Accordion Exercised $ 400,000 All-In Fixed Interest Rate1 4.99 % 1. All-in fixed rate consists of the fixed rate SOFR swap of 3.74% on $250.0 million of notional value, plus a credit spread adjustment of 0.10% and a borrowing spread of 1.15%. DIVIDEND On October 24, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.205 per share for the fourth quarter of 2023. On an annualized basis, the dividend of $0.82 per share of common stock represents an increase of $0.02 per share over the prior year annualized dividend. The dividend will be paid on December 15, 2023 to shareholders of record on December 1, 2023. 2023 GUIDANCE The Company is increasing its full year 2023 AFFO per share guidance range to $1.21 to $1.23 from $1.20 to $1.23, resulting in an increase to the midpoint of the range. The Company now expects 2023 net investment activity to be around $450.0 million. AFFO is a non-GAAP financial measure. The Company does not provide a reconciliation of such forward-looking non-GAAP measure to the most directly comparable financial measures calculated and presented in accordance with GAAP because to do so would be potentially misleading and not practical given the difficulty of projecting event driven transactional and other non-core operating items in any future period. The magnitude of these items, however, may be significant. EARNINGS CONFERENCE CALL A conference call will be held on Thursday, October 26, 2023 at 11:00 AM ET. During the conference call the Company’s officers will review third 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 November 2, 2023, 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 13741443. 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 Corp. NETSTREIT Corp. 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. NON-GAAP FINANCIAL MEASURES This press release contains non-GAAP financial measures, including FFO, Core FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, Annualized Adjusted EBITDAre, Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI Estimated Run Rate, Total Property-Level Cash NOI Estimated Run Rate and Net Debt. A reconciliation of each non-GAAP financial measure to the most comparable GAAP 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, including estimated development costs, 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 for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2023 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 macroeconomic conditions, including inflation, interest rates and instability in the banking system. 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. NETSTREIT CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) (Unaudited) September 30, December 31, 2023 2022 Assets Real estate, at cost: Land $ 449,718 $ 401,146 Buildings and improvements 1,081,427 907,084 Total real estate, at cost 1,531,145 1,308,230 Less accumulated depreciation (90,890 ) (62,526 ) Property under development 33,497 16,796 Real estate held for investment, net 1,473,752 1,262,500 Assets held for sale 38,839 23,208 Mortgage loans receivable, net 109,091 46,378 Cash, cash equivalents and restricted cash 7,934 70,543 Lease intangible assets, net 163,824 151,006 Other assets, net 69,403 52,057 Total assets $ 1,862,843 $ 1,605,692 Liabilities and equity Liabilities: Term loans, net $ 521,613 $ 373,296 Revolving credit facility 42,000 113,000 Mortgage note payable, net 7,890 7,896 Lease intangible liabilities, net 26,699 30,131 Liabilities related to assets held for sale 1,024 406 Accounts payable, accrued expenses and other liabilities 33,727 22,540 Total liabilities 632,953 547,269 Commitments and contingencies Equity: Stockholders’ equity Common stock, $0.01 par value, 400,000,000 shares authorized; 68,701,223 and 58,031,879 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively 687 580 Additional paid-in capital 1,289,810 1,091,514 Distributions in excess of retained earnings (100,006 ) (66,937 ) Accumulated other comprehensive income 30,494 23,673 Total stockholders’ equity 1,220,985 1,048,830 Noncontrolling interests 8,905 9,593 Total equity 1,229,890 1,058,423 Total liabilities and equity $ 1,862,843 $ 1,605,692 NETSTREIT CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenues Rental revenue (including reimbursable) $ 31,167 $ 24,339 $ 89,347 $ 67,309 Interest income on loans receivable 2,244 674 5,145 1,671 Other revenue 550 — 550 — Total revenues 33,961 25,013 95,042 68,980 Operating expenses Property 3,883 2,539 11,350 8,156 General and administrative 5,133 4,552 15,299 13,608 Depreciation and amortization 15,804 13,407 46,599 36,137 Provisions for impairment 1,538 — 4,374 1,114 Transaction costs 143 51 267 704 Total operating expenses 26,501 20,549 77,889 59,719 Other income (expense) Interest expense, net (3,946 ) (3,017 ) (13,412 ) (5,708 ) Gain on sales of real estate, net 373 143 669 2,162 Loss on debt extinguishment — — (128 ) — Other income, net 367 — 586 36 Total other income (expense), net (3,206 ) (2,874 ) (12,285 ) (3,510 ) Net income before income taxes 4,254 1,590 4,868 5,751 Income tax (expense) benefit (15 ) (171 ) 60 (356 ) Net income 4,239 1,419 4,928 5,395 Net income attributable to noncontrolling interests 24 16 32 63 Net income attributable to common stockholders $ 4,215 $ 1,403 $ 4,896 $ 5,332 Amounts available to common stockholders per common share: Basic $ 0.06 $ 0.03 $ 0.08 $ 0.11 Diluted $ 0.06 $ 0.03 $ 0.08 $ 0.11 Weighted average common shares: Basic 67,112,587 50,449,735 62,123,334 47,679,870 Diluted 68,048,369 51,384,758 62,897,957 48,657,049 NETSTREIT CORP. AND SUBSIDIARIES RECONCILIATION OF NET INCOME TO FFO, CORE FFO AND ADJUSTED FFO (In thousands, except share and per share data) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (Unaudited) (Unaudited) Net income $ 4,239 $ 1,419 $ 4,928 $ 5,395 Depreciation and amortization of real estate 15,726 13,241 46,379 35,701 Provisions for impairment 1,538 — 4,374 1,114 Gain on sales of real estate, net (373 ) (143 ) (669 ) (2,162 ) FFO $ 21,130 $ 14,517 $ 55,012 $ 40,048 Adjustments: Non-recurring executive transition costs, severance and related charges 62 — 276 — Loss on debt extinguishment and other related costs — — 223 — Gain on insurance proceeds (1 ) — (47 ) (36 ) Core FFO $ 21,191 $ 14,517 $ 55,464 $ 40,012 Adjustments: Straight-line rent adjustments (245 ) (272 ) (707 ) (1,144 ) Amortization of deferred financing costs 578 239 1,165 553 Amortization of above/below-market assumed debt 29 — 86 — Amortization of loan origination costs 26 28 83 59 Amortization of lease-related intangibles (121 ) (313 ) (517 ) (644 ) Earned development interest 189 — 189 — Capitalized interest expense (404 ) (115 ) (688 ) (218 ) Non-cash interest expense (1,134 ) — (1,134 ) — Non-cash compensation expense 1,280 1,302 3,559 3,645 AFFO $ 21,389 $ 15,386 $ 57,500 $ 42,263 Weighted average common shares outstanding, basic 67,112,587 50,449,735 62,123,334 47,679,870 Operating partnership units outstanding 501,987 514,890 507,014 530,940 Unvested restricted stock units 173,001 255,613 167,215 261,727 Unsettled shares under open forward equity contracts 260,794 164,520 100,394 184,512 Weighted average common shares outstanding, diluted 68,048,369 51,384,758 62,897,957 48,657,049 FFO per common share, diluted $ 0.31 $ 0.28 $ 0.87 $ 0.82 Core FFO per common share, diluted $ 0.31 $ 0.28 $ 0.88 $ 0.82 AFFO per common share, diluted $ 0.31 $ 0.30 $ 0.91 $ 0.87 RECONCILIATION OF NET INCOME TO EBITDA, EBITDAre AND ADJUSTED EBITDAre (In thousands) (Unaudited) Three Months Ended September 30, 2023 2022 (Unaudited) Net income $ 4,239 $ 1,419 Depreciation and amortization of real estate 15,726 13,241 Amortization of lease-related intangibles (121 ) (313 ) Non-real estate depreciation and amortization 78 166 Interest expense, net 3,946 3,017 Income tax expense (benefit) 15 171 Amortization of loan origination costs 26 28 EBITDA 23,909 17,729 Adjustments: Provision for impairments 1,538 — Gain on sales of real estate, net (373 ) (143 ) EBITDAre 25,074 17,586 Adjustments: Straight-line rent adjustments (245 ) (272 ) Non-recurring executive transition costs, severance and related charges 62 — Gain on insurance proceeds (1 ) — Non-cash compensation expense 1,280 1,302 Lease termination fees (550 ) — Adjustment for construction in process (1) 720 263 Adjustment for intraquarter investment activities (2) 1,341 1,182 Adjusted EBITDAre $ 27,681 $ 20,061 Annualized Adjusted EBITDAre (3) $ 110,724 Net Debt Adjusted for Outstanding Forward Equity / Annualized Adjusted EBITDAre 4.2 x As of September 30, 2023 Principal amount of total debt $ 575,399 Less: Cash, cash equivalents and restricted cash (7,934 ) Net Debt 567,465 Value of outstanding forward equity (4) (98,671 ) Net Debt Adjusted for Outstanding Forward Equity $ 468,794 (1) Adjustment reflects the estimated cash yield on developments in process balances as of period end. (2) 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 September 30, 2023 and 2022 had occurred on July 1, 2023 and July 1, 2022, respectively. (3) We calculate Annualized Adjusted EBITDAre by multiplying Adjusted EBITDAre by four. (4) There were 5,983,711 of unsettled forward equity shares under the ATM program at the September 30, 2023 available net settlement price of $16.49. RECONCILIATION OF NET INCOME TO NOI AND CASH NOI (In thousands) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (Unaudited) (Unaudited) Net income $ 4,239 $ 1,419 $ 4,928 $ 5,395 General and administrative 5,133 4,552 15,299 13,608 Depreciation and amortization 15,804 13,407 46,599 36,137 Provisions for impairment 1,538 — 4,374 1,114 Transaction costs 143 51 267 704 Interest expense, net 3,946 3,017 13,412 5,708 Gain on sales of real estate, net (373 ) (143 ) (669 ) (2,162 ) Income tax expense (benefit) 15 171 (60 ) 356 Loss on debt extinguishment — — 128 — Interest income on mortgage loans receivable (2,244 ) (674 ) (5,145 ) (1,671 ) Lease termination fees (550 ) — (550 ) — Other income, net (367 ) — (586 ) (36 ) Property-Level NOI 27,284 21,800 77,997 59,153 Straight-line rent adjustments (245 ) (272 ) (707 ) (1,144 ) Amortization of lease-related intangibles (121 ) (313 ) (517 ) (644 ) Property-Level Cash NOI $ 26,918 $ 21,215 $ 76,773 $ 57,365 Adjustment for intraquarter acquisitions, dispositions and completed development (1) 1,320 Property-Level Cash NOI Estimated Run Rate 28,238 Interest income on mortgage loans receivable 2,244 Adjustments for intraquarter mortgage loan activity (2) 21 Total Cash NOI - Estimated Run Rate $ 30,503 (1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended September 30, 2023, had occurred on July 1, 2023. (2) Adjustment assumes all loan activity completed during the three months ended September 30, 2023, had occurred on July 1, 2023. NON-GAAP FINANCIAL MEASURES FFO, Core FFO and AFFO The National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a widely accepted non-GAAP financial measure of operating performance known as FFO. Our FFO is net income in accordance with GAAP, excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortization and impairment charges on depreciable real property. Core FFO is a non-GAAP financial measure defined as FFO adjusted to remove the effect of unusual and non-recurring items that are not expected to impact our operating performance or operations on an ongoing basis. These include non-recurring executive transition costs, severance and related charges, gain on insurance proceeds, and loss on debt extinguishments and other related costs. 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, earned development interest, non-cash interest expense, non-cash compensation expense, amortization of deferred financing costs, amortization of above/below-market assumed debt, and amortization of loan origination 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. EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre We compute EBITDA as earnings before interest expense, income tax expense, 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 impairment charges on depreciable real property. Adjusted EBITDAre is a non-GAAP financial measure defined as EBITDAre further adjusted to exclude straight-line rent, non-cash compensation expense, non-recurring executive transition costs, severance and related charges, loss on debt extinguishment and other related costs, gain on insurance proceeds, other non-recurring expenses (income), lease termination fees, adjustment for construction in process, and adjustment for intraquarter activities. Beginning in the quarter ended June 30, 2023, we modified our definition of Adjusted EBITDAre to include adjustments for construction in process and intraquarter investment activities. Prior periods have been recast to reflect this new definition. Annualized Adjusted EBITDAre is Adjusted EBITDAre multiplied by four. We present EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized 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, Adjusted EBITDAre, and Annualized Adjusted EBITDAre as measures of our operating performance and not as measures of liquidity. EBITDA, EBITDAre, Adjusted EBITDAre and Annualized 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, Adjusted EBITDAre and Annualized 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. Net Debt We calculate our Net Debt as our principal amount of total debt outstanding excluding deferred financing costs, net discounts and debt issuance costs less cash, cash equivalents and restricted cash available for future investment. We further adjust Net Debt by the value of outstanding forward equity as period end to derive Net Debt Adjusted for Outstanding Forward Equity. We believe excluding cash, cash equivalents and restricted cash available for future investment from our principal amount, all of which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid. We believe these adjustments are additional beneficial disclosures to investors and analysis. 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 we use to assess our operating results. We compute Property-Level NOI as net income (computed in accordance with GAAP), excluding general and administrative expenses, interest expense (or income), income tax expense, transaction costs, depreciation and amortization, gains (or losses) on sales of depreciable property, real estate impairment losses, interest income on mortgage loans receivable, loss on debt extinguishment, lease termination fees, and other income (or expense). We further adjust Property-Level NOI for non-cash revenue components of straight-line rent and amortization of lease-intangibles to derive Property-Level Cash NOI. We further adjust Property-Level Cash NOI for intraquarter acquisitions, dispositions and completed developments to derive Property-Level Cash NOI - Estimated Run Rate. We further adjust Property-Level Cash NOI - Estimated Run Rate for interest income on mortgage loans receivable and intraquarter mortgage loan activity to derive Total Cash NOI - Estimated Run Rate. We believe Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate 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. Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate are not measurements of financial performance under GAAP, and may not be comparable to similarly titled measures of other companies. You should not consider our measures as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. OTHER DEFINITIONS ABR is annualized base rent as of September 30, 2023, for all leases that commenced and annualized cash interest on mortgage loans receivable in place as of that date. Cash Yield is the annualized base rent contractually due from acquired properties, interest income from mortgage loans receivable, and completed developments, divided by the gross investment amount, or gross proceeds in the case of dispositions. 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. Investment Grade are investments, or investments that are subsidiaries of a parent entity, with a credit rating of BBB- (S&P/Fitch), Baa3 (Moody's) or NAIC2 (National Association or Insurance Commissioners) or higher. Investment Grade Profile are 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. Occupancy is expressed as a percentage, and is the number of economically occupied properties divided by the total number of properties owned, excluding mortgage loans receivable and properties under development. Weighted Average Lease Term is weighted by the annualized base rent, excluding lease extension options and investments associated with mortgage loans receivable. View source version on businesswire.com: https://www.businesswire.com/news/home/20231025159042/en/Contacts Investor Relations ir@netstreit.com 972-597-4825
– Net income of $0.06 and Adjusted Funds from Operations ("AFFO") of $0.31 Per Diluted Share – – Completed $117.5 Million of Investment Activity at 7.0% Blended Cash Yield– – Increases 2023 AFFO per Share Guidance Range to $1.21 to $1.23 –
NETSTREIT Corp. (NYSE: NTST) (the “Company”) today announced financial and operating results for the third quarter ended September 30, 2023. “We are pleased to announce another solid quarter of results, completing $103.9 million in net investment activity in the quarter. We are also increasing our 2023 AFFO per share guidance midpoint, which implies 5% growth over last year. While the higher for longer narrative has placed upward pressure on the cost of capital for most companies, we remain well positioned from both a balance sheet, portfolio, and earnings standpoint. More specifically, we have no debt maturities until 2027, no net exposure to floating rate debt, low leverage, and ample liquidity. Coupled with our highly secure in-place rental stream, we are confident that our portfolio and investment discipline will result in earnings growth and increased value for our shareholders.” said Mark Manheimer, Chief Executive Officer of NETSTREIT. THIRD QUARTER 2023 HIGHLIGHTS The following table summarizes the Company's select financial results1 for the three and nine months ended September 30, 2023. Three Months Ended September 30, 2023 2022 % Change (Unaudited) Net Income per Diluted Share $ 0.06 $ 0.03 100 % Funds from Operations per Diluted Share $ 0.31 $ 0.28 11 % Core Funds from Operations per Diluted Share $ 0.31 $ 0.28 11 % Adjusted Funds from Operations per Diluted Share $ 0.31 $ 0.30 3 % Nine Months Ended September 30, 2023 2022 % Change (Unaudited) Net Income per Diluted Share $ 0.08 $ 0.11 (27 )% Funds from Operations per Diluted Share $ 0.87 $ 0.82 6 % Core Funds from Operations per Diluted Share $ 0.88 $ 0.82 7 % Adjusted Funds from Operations per Diluted Share $ 0.91 $ 0.87 5 % 1. Funds from operations ("FFO"), core funds from operations ("Core FFO"), and adjusted funds from operations ("AFFO") are non-GAAP financial measures. See "Non-GAAP Financial Measures." INVESTMENT ACTIVITY The following tables summarize the Company's investment and disposition activities (dollars in thousands) for the three and nine months ended September 30, 2023. Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Number of Investments Amount Number of Investments Amount Investments 29 $ 117,455 139 $ 361,391 Dispositions1 6 13,543 16 33,511 Net Investment Activity $ 103,912 $ 327,880 Investment Activity Cash Yield 7.0 % 7.2 % % of ABR derived from Investment Grade Tenants 75.1 % 77.2 % % of ABR derived from Investment Grade Profile Tenants 22.1 % 14.2 % Weighted Average Lease Term (years) 10.0 10.6 Disposition Activity Cash Yield1 6.9 % 6.8 % Weighted Average Lease Term (years) 7.1 6.0 1. Includes mortgage loan payoffs. The following table summarizes the Company's on-going development projects and estimated development costs (dollars in thousands) as of September 30, 2023. Developments Three Months Ended September 30, 2023 Amount Funded During the Quarter $ 33,017 As of September 30, 2023 Number of Developments 32 Amount Funded to Date $ 42,108 Estimated Funding Remaining on Developments 26,189 Total Estimated Development Cost $ 68,297 PORTFOLIO UPDATE The following table summarizes the Company's real estate portfolio (weighted by ABR, dollars in thousands) as of September 30, 2023. As of September 30, 2023 Number of Investments 547 ABR $ 124,341 States 45 Square Feet 9,971,909 Tenants 85 Industries 26 Occupancy 100.0 % Weighted Average Lease Term (years) 9.3 Investment Grade % 68.6 % Investment Grade Profile % 14.6 % CAPITAL MARKETS AND BALANCE SHEET The following tables summarize the Company's leverage, balance sheet, liquidity, ATM issuances, and settlement of our forward equity offerings (dollars in thousands, except per share data) as of and for September 30, 2023. Leverage As of September 30, 2023 Net Debt Adjusted for Outstanding Forward Equity/ Annualized Adjusted EBITDAre 4.2x Liquidity Unused Unsecured Revolver Capacity $ 358,000 Cash, Cash Equivalents and Restricted Cash 7,934 Value of Outstanding Forward Equity1 98,671 Total Liquidity $ 464,605 Plus: Remaining Available Principal of 2029 Term Loan 100,000 Total Proforma Liquidity $ 564,605 ATM Program Shares Issued During Quarter2 1,672,242 Weighted Average Price Per Share $ 16.55 Net Proceeds $ 27,418 Forward Equity Shares Outstanding as of September 30, 2023 5,983,711 Weighted Average Price Per Share $ 16.49 Value of Outstanding Forward Equity1 $ 98,671 1. Reflects 5,983,711 of unsettled forward equity shares under the ATM program at the September 30, 2023 available net settlement price of $16.49. 2. Includes 1,516,289 of settled forward equity shares. DEBT ACTIVITY On July 3, 2023, the Company closed a new three-year $250.0 million sustainability-linked senior unsecured term loan facility with a delayed draw option (the "Term Loan"). The Term Loan initially matures in July 2026 and includes two one-year options and one six-month option to extend the maturity to January 2029 (5.5-year term) at the Company's discretion, and an accordion feature that allow the Company to increase the aggregate availability under the Term Loan to $400.0 million. At close, the initial amount drawn on the Term Loan was $150.0 million. The following table summarizes the terms of the Term Loan (dollars in thousands). 2029 Term Loan Fully Extended Maturity Date January 2029 Principal Drawn as of September 30, 2023 $ 150,000 Remaining Available Principal as of September 30, 2023 $ 100,000 Total Principal $ 250,000 Full Capacity if Accordion Exercised $ 400,000 All-In Fixed Interest Rate1 4.99 % 1. All-in fixed rate consists of the fixed rate SOFR swap of 3.74% on $250.0 million of notional value, plus a credit spread adjustment of 0.10% and a borrowing spread of 1.15%. DIVIDEND On October 24, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.205 per share for the fourth quarter of 2023. On an annualized basis, the dividend of $0.82 per share of common stock represents an increase of $0.02 per share over the prior year annualized dividend. The dividend will be paid on December 15, 2023 to shareholders of record on December 1, 2023. 2023 GUIDANCE The Company is increasing its full year 2023 AFFO per share guidance range to $1.21 to $1.23 from $1.20 to $1.23, resulting in an increase to the midpoint of the range. The Company now expects 2023 net investment activity to be around $450.0 million. AFFO is a non-GAAP financial measure. The Company does not provide a reconciliation of such forward-looking non-GAAP measure to the most directly comparable financial measures calculated and presented in accordance with GAAP because to do so would be potentially misleading and not practical given the difficulty of projecting event driven transactional and other non-core operating items in any future period. The magnitude of these items, however, may be significant. EARNINGS CONFERENCE CALL A conference call will be held on Thursday, October 26, 2023 at 11:00 AM ET. During the conference call the Company’s officers will review third 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 November 2, 2023, 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 13741443. 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 Corp. NETSTREIT Corp. 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. NON-GAAP FINANCIAL MEASURES This press release contains non-GAAP financial measures, including FFO, Core FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, Annualized Adjusted EBITDAre, Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI Estimated Run Rate, Total Property-Level Cash NOI Estimated Run Rate and Net Debt. A reconciliation of each non-GAAP financial measure to the most comparable GAAP 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, including estimated development costs, 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 for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2023 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 macroeconomic conditions, including inflation, interest rates and instability in the banking system. 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. NETSTREIT CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) (Unaudited) September 30, December 31, 2023 2022 Assets Real estate, at cost: Land $ 449,718 $ 401,146 Buildings and improvements 1,081,427 907,084 Total real estate, at cost 1,531,145 1,308,230 Less accumulated depreciation (90,890 ) (62,526 ) Property under development 33,497 16,796 Real estate held for investment, net 1,473,752 1,262,500 Assets held for sale 38,839 23,208 Mortgage loans receivable, net 109,091 46,378 Cash, cash equivalents and restricted cash 7,934 70,543 Lease intangible assets, net 163,824 151,006 Other assets, net 69,403 52,057 Total assets $ 1,862,843 $ 1,605,692 Liabilities and equity Liabilities: Term loans, net $ 521,613 $ 373,296 Revolving credit facility 42,000 113,000 Mortgage note payable, net 7,890 7,896 Lease intangible liabilities, net 26,699 30,131 Liabilities related to assets held for sale 1,024 406 Accounts payable, accrued expenses and other liabilities 33,727 22,540 Total liabilities 632,953 547,269 Commitments and contingencies Equity: Stockholders’ equity Common stock, $0.01 par value, 400,000,000 shares authorized; 68,701,223 and 58,031,879 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively 687 580 Additional paid-in capital 1,289,810 1,091,514 Distributions in excess of retained earnings (100,006 ) (66,937 ) Accumulated other comprehensive income 30,494 23,673 Total stockholders’ equity 1,220,985 1,048,830 Noncontrolling interests 8,905 9,593 Total equity 1,229,890 1,058,423 Total liabilities and equity $ 1,862,843 $ 1,605,692 NETSTREIT CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenues Rental revenue (including reimbursable) $ 31,167 $ 24,339 $ 89,347 $ 67,309 Interest income on loans receivable 2,244 674 5,145 1,671 Other revenue 550 — 550 — Total revenues 33,961 25,013 95,042 68,980 Operating expenses Property 3,883 2,539 11,350 8,156 General and administrative 5,133 4,552 15,299 13,608 Depreciation and amortization 15,804 13,407 46,599 36,137 Provisions for impairment 1,538 — 4,374 1,114 Transaction costs 143 51 267 704 Total operating expenses 26,501 20,549 77,889 59,719 Other income (expense) Interest expense, net (3,946 ) (3,017 ) (13,412 ) (5,708 ) Gain on sales of real estate, net 373 143 669 2,162 Loss on debt extinguishment — — (128 ) — Other income, net 367 — 586 36 Total other income (expense), net (3,206 ) (2,874 ) (12,285 ) (3,510 ) Net income before income taxes 4,254 1,590 4,868 5,751 Income tax (expense) benefit (15 ) (171 ) 60 (356 ) Net income 4,239 1,419 4,928 5,395 Net income attributable to noncontrolling interests 24 16 32 63 Net income attributable to common stockholders $ 4,215 $ 1,403 $ 4,896 $ 5,332 Amounts available to common stockholders per common share: Basic $ 0.06 $ 0.03 $ 0.08 $ 0.11 Diluted $ 0.06 $ 0.03 $ 0.08 $ 0.11 Weighted average common shares: Basic 67,112,587 50,449,735 62,123,334 47,679,870 Diluted 68,048,369 51,384,758 62,897,957 48,657,049 NETSTREIT CORP. AND SUBSIDIARIES RECONCILIATION OF NET INCOME TO FFO, CORE FFO AND ADJUSTED FFO (In thousands, except share and per share data) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (Unaudited) (Unaudited) Net income $ 4,239 $ 1,419 $ 4,928 $ 5,395 Depreciation and amortization of real estate 15,726 13,241 46,379 35,701 Provisions for impairment 1,538 — 4,374 1,114 Gain on sales of real estate, net (373 ) (143 ) (669 ) (2,162 ) FFO $ 21,130 $ 14,517 $ 55,012 $ 40,048 Adjustments: Non-recurring executive transition costs, severance and related charges 62 — 276 — Loss on debt extinguishment and other related costs — — 223 — Gain on insurance proceeds (1 ) — (47 ) (36 ) Core FFO $ 21,191 $ 14,517 $ 55,464 $ 40,012 Adjustments: Straight-line rent adjustments (245 ) (272 ) (707 ) (1,144 ) Amortization of deferred financing costs 578 239 1,165 553 Amortization of above/below-market assumed debt 29 — 86 — Amortization of loan origination costs 26 28 83 59 Amortization of lease-related intangibles (121 ) (313 ) (517 ) (644 ) Earned development interest 189 — 189 — Capitalized interest expense (404 ) (115 ) (688 ) (218 ) Non-cash interest expense (1,134 ) — (1,134 ) — Non-cash compensation expense 1,280 1,302 3,559 3,645 AFFO $ 21,389 $ 15,386 $ 57,500 $ 42,263 Weighted average common shares outstanding, basic 67,112,587 50,449,735 62,123,334 47,679,870 Operating partnership units outstanding 501,987 514,890 507,014 530,940 Unvested restricted stock units 173,001 255,613 167,215 261,727 Unsettled shares under open forward equity contracts 260,794 164,520 100,394 184,512 Weighted average common shares outstanding, diluted 68,048,369 51,384,758 62,897,957 48,657,049 FFO per common share, diluted $ 0.31 $ 0.28 $ 0.87 $ 0.82 Core FFO per common share, diluted $ 0.31 $ 0.28 $ 0.88 $ 0.82 AFFO per common share, diluted $ 0.31 $ 0.30 $ 0.91 $ 0.87 RECONCILIATION OF NET INCOME TO EBITDA, EBITDAre AND ADJUSTED EBITDAre (In thousands) (Unaudited) Three Months Ended September 30, 2023 2022 (Unaudited) Net income $ 4,239 $ 1,419 Depreciation and amortization of real estate 15,726 13,241 Amortization of lease-related intangibles (121 ) (313 ) Non-real estate depreciation and amortization 78 166 Interest expense, net 3,946 3,017 Income tax expense (benefit) 15 171 Amortization of loan origination costs 26 28 EBITDA 23,909 17,729 Adjustments: Provision for impairments 1,538 — Gain on sales of real estate, net (373 ) (143 ) EBITDAre 25,074 17,586 Adjustments: Straight-line rent adjustments (245 ) (272 ) Non-recurring executive transition costs, severance and related charges 62 — Gain on insurance proceeds (1 ) — Non-cash compensation expense 1,280 1,302 Lease termination fees (550 ) — Adjustment for construction in process (1) 720 263 Adjustment for intraquarter investment activities (2) 1,341 1,182 Adjusted EBITDAre $ 27,681 $ 20,061 Annualized Adjusted EBITDAre (3) $ 110,724 Net Debt Adjusted for Outstanding Forward Equity / Annualized Adjusted EBITDAre 4.2 x As of September 30, 2023 Principal amount of total debt $ 575,399 Less: Cash, cash equivalents and restricted cash (7,934 ) Net Debt 567,465 Value of outstanding forward equity (4) (98,671 ) Net Debt Adjusted for Outstanding Forward Equity $ 468,794 (1) Adjustment reflects the estimated cash yield on developments in process balances as of period end. (2) 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 September 30, 2023 and 2022 had occurred on July 1, 2023 and July 1, 2022, respectively. (3) We calculate Annualized Adjusted EBITDAre by multiplying Adjusted EBITDAre by four. (4) There were 5,983,711 of unsettled forward equity shares under the ATM program at the September 30, 2023 available net settlement price of $16.49. RECONCILIATION OF NET INCOME TO NOI AND CASH NOI (In thousands) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (Unaudited) (Unaudited) Net income $ 4,239 $ 1,419 $ 4,928 $ 5,395 General and administrative 5,133 4,552 15,299 13,608 Depreciation and amortization 15,804 13,407 46,599 36,137 Provisions for impairment 1,538 — 4,374 1,114 Transaction costs 143 51 267 704 Interest expense, net 3,946 3,017 13,412 5,708 Gain on sales of real estate, net (373 ) (143 ) (669 ) (2,162 ) Income tax expense (benefit) 15 171 (60 ) 356 Loss on debt extinguishment — — 128 — Interest income on mortgage loans receivable (2,244 ) (674 ) (5,145 ) (1,671 ) Lease termination fees (550 ) — (550 ) — Other income, net (367 ) — (586 ) (36 ) Property-Level NOI 27,284 21,800 77,997 59,153 Straight-line rent adjustments (245 ) (272 ) (707 ) (1,144 ) Amortization of lease-related intangibles (121 ) (313 ) (517 ) (644 ) Property-Level Cash NOI $ 26,918 $ 21,215 $ 76,773 $ 57,365 Adjustment for intraquarter acquisitions, dispositions and completed development (1) 1,320 Property-Level Cash NOI Estimated Run Rate 28,238 Interest income on mortgage loans receivable 2,244 Adjustments for intraquarter mortgage loan activity (2) 21 Total Cash NOI - Estimated Run Rate $ 30,503 (1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the three months ended September 30, 2023, had occurred on July 1, 2023. (2) Adjustment assumes all loan activity completed during the three months ended September 30, 2023, had occurred on July 1, 2023. NON-GAAP FINANCIAL MEASURES FFO, Core FFO and AFFO The National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a widely accepted non-GAAP financial measure of operating performance known as FFO. Our FFO is net income in accordance with GAAP, excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortization and impairment charges on depreciable real property. Core FFO is a non-GAAP financial measure defined as FFO adjusted to remove the effect of unusual and non-recurring items that are not expected to impact our operating performance or operations on an ongoing basis. These include non-recurring executive transition costs, severance and related charges, gain on insurance proceeds, and loss on debt extinguishments and other related costs. 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, earned development interest, non-cash interest expense, non-cash compensation expense, amortization of deferred financing costs, amortization of above/below-market assumed debt, and amortization of loan origination 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. EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre We compute EBITDA as earnings before interest expense, income tax expense, 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 impairment charges on depreciable real property. Adjusted EBITDAre is a non-GAAP financial measure defined as EBITDAre further adjusted to exclude straight-line rent, non-cash compensation expense, non-recurring executive transition costs, severance and related charges, loss on debt extinguishment and other related costs, gain on insurance proceeds, other non-recurring expenses (income), lease termination fees, adjustment for construction in process, and adjustment for intraquarter activities. Beginning in the quarter ended June 30, 2023, we modified our definition of Adjusted EBITDAre to include adjustments for construction in process and intraquarter investment activities. Prior periods have been recast to reflect this new definition. Annualized Adjusted EBITDAre is Adjusted EBITDAre multiplied by four. We present EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized 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, Adjusted EBITDAre, and Annualized Adjusted EBITDAre as measures of our operating performance and not as measures of liquidity. EBITDA, EBITDAre, Adjusted EBITDAre and Annualized 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, Adjusted EBITDAre and Annualized 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. Net Debt We calculate our Net Debt as our principal amount of total debt outstanding excluding deferred financing costs, net discounts and debt issuance costs less cash, cash equivalents and restricted cash available for future investment. We further adjust Net Debt by the value of outstanding forward equity as period end to derive Net Debt Adjusted for Outstanding Forward Equity. We believe excluding cash, cash equivalents and restricted cash available for future investment from our principal amount, all of which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid. We believe these adjustments are additional beneficial disclosures to investors and analysis. 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 we use to assess our operating results. We compute Property-Level NOI as net income (computed in accordance with GAAP), excluding general and administrative expenses, interest expense (or income), income tax expense, transaction costs, depreciation and amortization, gains (or losses) on sales of depreciable property, real estate impairment losses, interest income on mortgage loans receivable, loss on debt extinguishment, lease termination fees, and other income (or expense). We further adjust Property-Level NOI for non-cash revenue components of straight-line rent and amortization of lease-intangibles to derive Property-Level Cash NOI. We further adjust Property-Level Cash NOI for intraquarter acquisitions, dispositions and completed developments to derive Property-Level Cash NOI - Estimated Run Rate. We further adjust Property-Level Cash NOI - Estimated Run Rate for interest income on mortgage loans receivable and intraquarter mortgage loan activity to derive Total Cash NOI - Estimated Run Rate. We believe Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate 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. Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate are not measurements of financial performance under GAAP, and may not be comparable to similarly titled measures of other companies. You should not consider our measures as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. OTHER DEFINITIONS ABR is annualized base rent as of September 30, 2023, for all leases that commenced and annualized cash interest on mortgage loans receivable in place as of that date. Cash Yield is the annualized base rent contractually due from acquired properties, interest income from mortgage loans receivable, and completed developments, divided by the gross investment amount, or gross proceeds in the case of dispositions. 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. Investment Grade are investments, or investments that are subsidiaries of a parent entity, with a credit rating of BBB- (S&P/Fitch), Baa3 (Moody's) or NAIC2 (National Association or Insurance Commissioners) or higher. Investment Grade Profile are 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. Occupancy is expressed as a percentage, and is the number of economically occupied properties divided by the total number of properties owned, excluding mortgage loans receivable and properties under development. Weighted Average Lease Term is weighted by the annualized base rent, excluding lease extension options and investments associated with mortgage loans receivable. View source version on businesswire.com: https://www.businesswire.com/news/home/20231025159042/en/