United States securities and exchange commission logo
June 9, 2020
Mark Manheimer
President and Chief Executive Officer
NetSTREIT Corp.
5910 N. Central Expressway
Suite 1600
Dallas, TX 75206
Re: NetSTREIT Corp.
Confidential Draft
Registration Statement on Form S-11
Submitted May 13,
2020
CIK No. 0001798100
Dear Mr. Manheimer:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-11 filed May 13, 2020
General
1. We note from your
disclosure that as part of your formation transactions, you conducted
private offerings in
December 2019 and February 2020 involving the sale of common
stock and the issuance
of OP Units and that some of these securities are subject to various
registration rights
agreements. Please explain to us in more detail the timing of your
formation transactions,
identifying when the OP units were issued and to whom. In this
respect, we note that
your use of the defined term "private offering" in the context of your
formation transactions
does not clearly indicate if the OP Units were issued in December
2019 or February 2020,
or both. To the extent the OP Units were issued upon multiple
Mark Manheimer
NetSTREIT Corp.
June 9, 2020
Page 2
dates, please clarify if the potential earliest conversion date of
December 23, 2020 that is
currently disclosed in your prospectus applies to all OP Units.
Finally, please address
whether the conversion will be done privately.
Prospectus Summary, page 1
2. We note disclosure throughout the prospectus regarding management's
experience with
Spirit Realty Capital and Cole Credit Property Trust II and the
specific performance
information that you have provided for these entities. If you choose
to retain this
performance information, please expand the disclosure to provide a
more complete
discussion of the performance of these entities. For example, please
balance this
disclosure with a discussion of any major adverse business
developments. In addition,
please remove performance information from the summary section.
Performance
information for companies other than the issuer is not appropriate for
the prospectus
summary.
Our Competitive Strengths
Tenant Credit Underwriting, page 3
3. We note your risk factor on page 31 discusses your potential use of a
"shadow rating" and
explains some of the limitations of its use and how it is calculated.
When discussing your
tenant underwriting criteria elsewhere in your prospectus, please
expand your disclosure
to provide similar information and highlight how it differs from the
ratings provided by
credit rating agencies.
Our Real Estate Portfolio
Diversity by Industry, Tenant and Geography, page 7
4. Please disclose the types of properties that are encompassed by your
category "other."
Overview of Our Leases, page 9
5. Please provide the disclosure in accordance with Item 15(a) and (e) of
Form S-11 or tell
us why you cannot provide this information. Please clarify how your
rental disclosures
take into account tenant concessions and abatements. Additionally,
please expand your
lease expiration table to provide all of the information required by
Item 15(f) of Form S-
11
6. We note that your disclosure on page 76 appears to indicate that your
leases are
"primarily" triple net leases based on your description of the expenses
for which your
FirstName LastNameMark Manheimer
tenants are responsible. Please revise your disclosure throughout to
clarify. In addition,
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please disclose
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2020 Page clarify the difference between the types if applicable.
FirstName LastName
Mark Manheimer
FirstName LastNameMark Manheimer
NetSTREIT Corp.
Comapany NameNetSTREIT Corp.
June 9, 2020
Page 3
June 9, 2020 Page 3
FirstName LastName
Risk Factors
The current pandemic of Covid-19 ..., page 30
7. We note your disclosure on page 80 regarding you only receiving rent
for 68% of your
portfolio and that 24% have asked for rent relief. Please disclose
this in your risk factor
and address the impact that this has on your operations. Additionally,
please revise to
address your anticipation regarding the remaining 8% and whether the
32% of non-
payments are focused in a particular industry to which you rent.
Use of Proceeds, page 62
8. Please disclose the amount of proceeds that will be allocated to
repurchasing the preferred
shares, the amount that will be allocated towards the acquisition of
properties and the
amount to be allocated to general corporate purposes. Please advise if
any of the proceeds
are to be used for the repayment of debt. Please see Item 504 of
Regulation S-K.
Distribution Policy, page 63
9. We note from your disclosure on page 80 that you have received payment
of
approximately 78% and 68% of contractual base rent billed for the
months of April and
May and rent relief requests from approximately 24% of tenants in your
portfolio as a
result of the impact of the COVID-19 pandemic. To the extent there
have been significant
rent concessions provided, please explain to us your consideration for
including such
amounts in your calculation of cash available for distribution for the
12 month period.
Capitalization, page 66
10. Please revise your calculation for total capitalization to exclude the
amount
for cash, cash equivalents and restricted cash as it is not a
component of capitalization.
Unaudited Pro Forma Consolidated Financial Statements
Private Offering and Formation Transactions, page 69
11. We note from your disclosure that as part of the formation
transactions you entered into a
contribution agreement with EBA EverSTAR to internalize your
management
infrastructure, in addition to acquiring your initial portfolio of 93
single-tenant
commercial retail properties from your predecessor, which was
accounted for as an asset
acquisition. Please explain to us in detail how you accounted for your
acquisition of EBA
EverSTAR Management, LLC and your basis for accounting for the
acquisition of your
initial portfolio as an asset acquisition. Cite the applicable
accounting guidance in your
response.
Notes to Unaudited Pro Forma Consolidated Financial Statements
Adjustments to the Unaudited Pro Forma Consolidated Statement of Operations,
page 73
12. We note from your disclosure in footnote (I) that you eliminate
predecessor impairment
Mark Manheimer
NetSTREIT Corp.
June 9, 2020
Page 4
losses of $4.2 million related to the initial portfolio acquired in the
formation transactions.
Please explain to us in detail how this adjustment complies with Article
11 of Regulation
S-X and provide your basis for such elimination.
Our Business and Properties
Employees, page 111
13. We note that you currently have 13 employees. Please disclose whether you
outsource
any operations to third parties, and if so, please identify third parties
and disclose the
services provided and costs incurred. If material, please file the
agreements with the third
parties in accordance with Item 601(b)(10) of Regulation S-K.
You may contact Isaac Esquivel at 202-551-3395 or Shannon Menjivar at
202-551-3856
if you have questions regarding comments on the financial statements and
related
matters. Please contact Stacie Gorman at 202-551-3585 or Erin E. Martin at
202-551-3391 with
any other questions.
Sincerely,
FirstName LastNameMark Manheimer
Division of
Corporation Finance
Comapany NameNetSTREIT Corp.
Office of Real
Estate & Construction
June 9, 2020 Page 4
cc: Christina T. Roupas, Esq.
FirstName LastName