NTST - Earnings call transcript Q2 2021

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Operator

Greetings, and welcome to the NETSTREIT Corp.

Second Quarter 2021 Earnings Call. [Operator instructions] As a reminder, this conference is being recorded. It is now pleasure to introduce your host, Amy An. Thank you, Amy.

begin. may You

Amy An

for earnings you for second NETSTREIT's We call. joining XXXX conference quarter thank us

Litigation In the press an your answers to Investor www.NETSTREIT.com. posted statements Both addition On the forward-looking be questions Relations a Private close, after can XXXX. defined Reform management's company's as supplemental may we section market today's of Act contain package website in call, of to and found updated Securities the presentation. release investor in the distributed at yesterday and remarks

statements matters uncertainties today. results from Forward-looking address to that risks discussed that to are and those subject actual may cause differ

All For more as of statements date review year future. to for forward-looking are hereof, information you the the no the assumes in and any these filings. about ended update December we and obligation forward-looking encourage Form statements XXXX, to XX-K factors, made our XX, NETSTREIT risk SEC other

Financial certain refer non-GAAP and non-GAAP of on to are make Andy call useful conference hosted financial Chief GAAP reconciliation, is we this NETSTREIT's an In earnings Blocher. presented package definition, Executive measures includes supplemental such believe our and questions. to why call information will for your Today's addition, for Please Officer, and and financial explanation Manheimer; measures. financial They call Chief will then remarks, some Mark the prepared by we investors. Officer, release open

Mark. will I Now, the to over call turn

Mark Manheimer

quality core again, strategic with for you we growth And is and provide for investment the opportunities a adjusted conference detail our And then the on will us review pursuing and thank earnings on with results metrics returns. second call. second Andy risk quarter best and morning, focus Good tenants see where balance But begin XXXX sheet. our our high portfolio quarter. activity for will everyone. joining today NETSTREIT I quarter of

competitive generation, to them continue whose to more their to flow critical ecommerce physical pressures. tenants, are cash making We target resistant locations

More proven with strong balance tenants and importantly, we sheets capital. to access focus on

volume to quarter, inclusive totaling closing since Both the rated During and two completed X.X%, which $X term development with of it grade making quarter provided funding, million, initial our tenants with grade of profiles. second in that development and with X.X million begin to second tenants grade investment of our projects Also largest XXXX. all new developments at of or approximately a volume of included from August. weighted $XXX acquisitions tenants $XXX the are collect our investment will were acquisitions these million. we quarter quarter, approximately rate capitalization last of cash these We IPO costs, average remaining be of acquisition we achieved million $X Over we cost of an the expected with years. projects rent quarterly by XX% lease investment total anticipate we profiles, with

in Finally, five assets $XX sold rate average X.X%. weighted a capitalization for cash million at the of quarter, we

X.X%. these exposure With decreased our X.X% dining we've casual from to dispositions,

long at more decrease as to portfolio opportunities behavior. technological industries management a consumer to or are advances disruptions into exposure will shifting look We we will to tool to from risk to capital continue that for dispositions at opportunities. continue retail recycle look our from better Moreover, term

expiring classified XXXX with term of million, before to a roster X% XX% earnings tenancy million weighted portfolio lease XX ABR, X.X as $XX.X XX.X% XXX states contains is a Moving our grade an tenant investment diversified XX At of square end, on on no quarter years. tenants occupied XX Based until in with than increased Total grade ABR, profile. and ABR June XXXX, additional average in we XXXX. lease metrics our comprised of driver XXX% to with our with were feet less as portfolio XX, expirations investment our X.X leases, Industries. of primary of

tenant and of and collections a months to through credit defensive for the quality proud our XXX% our XX result July. portfolio, nature defensive straight report run As we of are our

Our grow excited our execute strategy. are in about we on to and our pipeline continues to size, growth ability external

We of review an projects. opportunities a continue and opportunities, assets, extend including stabilized wide sale investments to range in when development transactions leaseback

strategic stay We we the will to grade our our enhance continue quality portfolio. and other diversification investment tenants, true to focus while of on overall high

the balance opportunity of are we at excited As beyond, we and us. truly ahead by year of the looked the

Our portfolio proven. continues acquisition perform to well and and processes proactive are our

year in $XXX net with million continue bolstered full by to last was that at target sheet million our our following and the $XXX.X equity supported transformational liquidity for acquisitions XXXX We offerings. least balance strong quarter

the XX%. to I to perspective from turn to a of Andy, base you grew XX% include that some our over we just XX%. want I investment from grade to investment XX% our call accomplishments grew NETSTREIT's since properties grade And to went Before year assets grew XXX; over portfolio profile XXX We asset on provide under when tenants, ago. from metric public

now has ABR these and And increased Andy while I integral team on significant of believe sheet for NETSTREIT's platform strong have in and already of million markets will Andy? portfolio. result, focused value prouder balance quality been call key accomplishments. discuss the our $XX.X the create a our our we to from has couldn't same the I I'll improving shareholders. As capital our million achieving in place to be $XX.X which over activities. the remain further turn these we drivers, advance to that

Andy Blocher

this time you thank And all morning. Mark. your Thanks once us for with again,

Let was were in and end. to outstanding an as quarter in quarter. the cash I balance credit only In balance $X.XX believe a stock XX.X including quarter, being shares on our days second quarter in option FFO the Proceeds step and $X.XX reflect were reported million common results exercise of loss completed Yesterday of our a of one a $XXX.X additional for net $XX the me the equity as this per on pay XXXX. offering fall offering, acquisitions in AFFO for that raising second $X.XX; of these of quarter, fund we key results release, held sheet for issued for And April. share NETSTREIT we facility million the business in million note of we the to demonstrate core for from want the first the begin those underwriter's set as record the the for the to per investments with share press post we of diluted our to with in purchase offering XX used bytes strategy. while impact the April, our balance IPO of investment second quarter. off and remainder shares. continue proceeds We offering full million $XX our a our average

had cash. Moving fully XX, credit And revolving million our million on to undrawn. was in of as $XXX line our we $XX June balance sheet; of

December is one million of debt extension have to We maturities would year option, no loan. the a revolver match December which until XXXX, the $XXX our our which maturity of term subject in maturity XXXX

our term was EBITDA target. to end Our X.Xx below well adjusted quarter annualized to long X.Xx at ratio X.Xx net debt

September, we rising. With among payable future September shelf respect with in and universal will things of $X.XX a to to record of be X, which file of week, board dividends, efficiency regular provide on declared $X.XX other to respect the sheet, annualized a balance cash capital quarterly this XX dividend reflecting shareholders dividend would September per share. early an rate be options Finally, as new to early eligible to greater the for

per previously share. As XXXX full guidance disclosed, range we're to the maintaining in $X.XX year $X.XX AFFO of

to up $XXX We million. complete from guidance million in expect at net acquisitions of this least original $XXX year,

rates our a activity. recent see to quarter as with continue in this each consistent end We weighted back and cap

For in million. the cash be to to expect continue we of million $XX range G&A, to $XX

require While market the NETSTREIT, XXXX. a accelerator to as was largest large in offering a will filer for positive beginning us report our significant XXX capitalization

Our our incremental is team change internal The environment which our to control prepared the compliance impact to when is for from be them with Dallas expense, of coupled of end expenses well travel strong ensure that and working SOX to is G&A a pull result control diligence, to number enhance range. perspective. forward with to some associated rather XXXX and of development already on are the lower higher likely handle out makes our as of employees greater guidance than additional more us a business venturing

range And we of line additional fee interest of amortization. $X million. non addition, recurring cash of statement our item. the G&A financial expect And million million million. $X transaction will $X expense, in to In fees of includes $XXX,XXX cash financing costs, an are our to line then which $X.X as unused credit including in deferred our compensation be expense separate listed Non a cash cash

wrap in And average momentum to XX be we're To we year. up and positioned fully a strong for weighted expect pipeline outstanding million the shares strong very first for building the opportunities $XXX,XXX activity, ample with of to lastly, the We accretive up, expect XX We're to of incur with second pleased capital quarter. well range the quarter in taxes for $XXX,XXX. shares to our investments. diluted range of the

work open far this your acknowledge our Operator? to prepared This our the their for year. we for will team we performance always, line and to As now our hard entire remarks; want so strong concludes questions. contributions

Operator

with question first Our Crossett Instructions] [Operator comes from Nate Berenberg.

NateCrossett

close color and would could and XQ, you just maybe on could It right yield in you pricing. quarter. on And be helpful. strong but congrats you to guys could Hey, maybe then the what you if comment quarter, you're touch this good now? the activity on of a like what's far did hoping sounds give I any size expecting was the pipeline be so competition the to morning,

MarkManheimer

having Yes, repeat past, sellers had are been business, more assets more And repeat the to a now, really more experience business we or blended the where assets. more off and that. bit and better inefficiently I with, for I business really Yes, bit to so discussed of see is that kind advantage, the really more do about mean, other use some extends, than and lay helping the a pricing, Thanks think is seeing development the pipeline. year priced good which whether a we an and where we sure. pretty on getting, and size, in little opportunity starting our little again it I we've side pick And a set the be think we're out on repeat just like as Nate. public side, think we've as of market our we the

So I just able a continue this rate the cap think quarter, public achieve quarter to first same as the to the was as been our cap rates, same we've company.

we of competition returns continue with investment So generate certainly types is out. in the But finance. to get able a same think quarter we're out building the they're the really similar cap we've side, there here the lot pipeline quality, to we similar of our has continue for out That in way to and quarter been and allowed pleased the I said being high that for, us have, pretty to in of rates of looking using easier types to types a being that larger assets and expect quarter relationships, quarter future. grade

NateCrossett

concentration that up. Okay, before. one I think you down XXX the that's helpful. Thanks. that that was I were noticed selling And went

I'm give be great color as a helpful if on might that So curious. it's little you credit. a Obviously, just well. But that, could

MarkManheimer

we attractive away maybe lease term sale turn to And new more to and we to leases concentrations of a don't below acquisitions. the pretty And with all new I brand absolute gets goal. base think as net also that we tenant year than opportunity we scale at more do the Yes, larger be back billion, little business, pricing that's a great we want asset sure. with of attractive we X%. XXX, long the should kind $X that's where got with had in able get XX right; And bit think California But bumps. Yes.

so And quality that at the we kind of portfolio. the as additive to of looked

we're opportunities think decrease at mostly exposure, more increasing of with the the we it's size look to that time. XXX don't So pricing many have going that over likely we to portfolio But the through we also achieve. will

Operator

comes Todd question with next KeyBanc Our Thomas Capital from Markets.

ToddThomas

Hey, thanks. Good morning.

company's broadly wondering, investment investments. is First down, of And about how company as strategy we curious we of question, external giving bases but by think year base activity the increasing. the the not whether I the percent installed on sort forward, expect you're going the more for guidance, to and follow you just each realize grow to certain winding I'm base would year, if keep comment broadly, And acquire just on you is move up think constant? we about growth a could the Just should forward? more wanted as XXXX, to

MarkManheimer

general, I I Yes, think, in drastically expect to acquisitions. mean see I ramp sure. wouldn't us

And adding understanding as to asset the a the to allow appetite grow but or our as base, come dispositions is grow net I think opportunities think I peers. acquisitions, over acquisitions. assets, million really I our going our to AFFO size with from where $X mentioned we'd compared $XX will to priced of like we're like and that quarter top continue opportunities pricing of so increasing is call time at favorable that increase, to the But a we really, outside those our business seeing us steadily at most increase that path. of going with kind similar of assets to it need inefficiently clip, per pretty billion repeat does at

ToddThomas

for at least just that guidance pace, tax you million, running some curious balance ahead year or and with in little then year, the of you're changes otherwise. bit Okay, maintain late the it of potential $XXX a the so of seems policy

in larger the pace improvement there is capital, sort potential sort a acquisitions and into in of company's a cost a light of 'XX. see of of in of investments much And the to late year heading the

MarkManheimer

stick I knitting we're mean, just for to and been I going to think, our Yes, to, really what's working us. stick

able we have assets Again, ramping the thing on over The at to been margin can our this we of the necessarily time don't just is over we think as our pricing growth put set. we sake because is I to will we But the increase more acquisitions just the really of for into quality really I too that getting the important think continue to doesn't that we've because growth get and to opportunity portfolio. far point mean the we important. us want start that increase we skis should. only can,

the approach been we're taking the think over I with last pretty So several quarters. comfortable that we've

ToddThomas

your wondering All ATM then, ATM but in change talked leverage what mentioned shelf was was, I'm sheet, eligibility? right, prepared share removed anything in Andy, guidance, the just you in there remarks. company around from the count usage about nears no the the curious And you language as the the balance just view

AndyBlocher

million shares. I to Yes, well, yes, mean, good. XX We said XX

file gives the be additional gives early will would I so that weeks mean, program the to forth. on indicate is benefit shares. the respect and next capital the the some so in shelf opportunity to potential So September. an ATM The several Yes, we potentially us with for put there sources; look, shelf, us eligible to it it greater optionality in

of the available So about that sources on right balance practice to same as sheet, going all the utilizing the talked sheet asset of us. on side side Mark diligence balance the have we diligence we're that the to

Operator

Citi. with Katy Our comes from next McConnell question

ParkerDecraene

the you that what was a $X you the did during how relative is you do just Hey, guys, the are Parker that my this I acquiring today? for gave of is I perspective, million quarter. quarter out question from with during on just to that wondering, first guess actually guys has yield Katy. to development

MarkManheimer

little going taking the any move with go we just in tenants, risk we're typically more with cost we're particular open not bit lease risk. cap think are And what a And lease are to hand, a opportunity on to pick assets. it's we side. is with just little even bit if tenants, taking are profile sometimes two little development cap new going the and versus to we're and of transactions sure. investment forward leases well. in up overrun more I on in get Yes, so on rate the than cash not transactions a We're have rates credit to getting only, remember side, source out seven yield grade development a up kind the low as the any in which really development that range bit us mid great acquiring those do the difficult Those and we to brand existing a for side And market.

ParkerDecraene

Got it.

Buy, willing this thanks. Okay, quarter. of then on the just of them? acquired a where just Best push now? questions you think re sort out are you grow How about I stores you my with you and that guys Are needle second guys continue And to few guys sort comfortable to sitting

MarkManheimer

how Yes, making some no, they their I to as mean, Buy's Best we about their it certainly store. been thinking are business. footprint relates I think But within they've like changes,

terms the willing Best to So extraordinarily add Buy portfolio. our ones we're which of with exposure in to we're cautious

to cell the Best Buy best we to in three with our we to to to data was in get committed we more. our at data, locations opportunities any I that while with quarter three add, pipeline, Best And just rare. get portfolio. see add looking locations. those Quite the to current frankly, have so and that think conversations we're we are wouldn't trying have traffic locations phone in did we they I how more believe the But quarter foot and can did say the Best happen not that really somewhat We and are don't get Buy Buy, have it add

wouldn't Best see more add expect Buy to us much of to I our So our portfolio.

ParkerDecraene

cap assets quarter? at what you those can just rate able to get I if the And during it. Got were guys three

MarkManheimer

was Yes, for give than rate individual cap average don't quarter. the and higher specific cap usually slightly on rates but it we deals, the

Operator

comes question from next Our Greg Scotiabank. with McGinniss

GregMcGinniss

morning. good Hey,

that potential with investment meet net today? differently, you with maybe passing opportunities versus bit those how great a any sourcing your fit But tenants said deals many your criteria business do there's and issue who lease curious investment if with criteria, companies some out I mentioned Mark, not top just So, tenants. investment new know

MarkManheimer

It sure. because on the estate a quite a Yes, limited we real that quality, to are to investable. frankly, of portfolio add the very of of types we're stringent credits and is bit retail, most the universe is willing not which

two. is constantly maybe we see and a tenants would that over universe, couple into more like looking So the added next more expect time, or somewhat are we not over grade it of tenants a those few we've pop are for finite grade, that investment profile, - to new portfolio a quarter I maybe of that the investment

for portfolio, exceptional you real but So opportunity got is growth. with estate in add us the plenty helpful in that are we've of thinking their the certainly the about relationships most tenants the which they're of we are seeing portfolio, tenants with to to us their continue see grow that getting and into how insight to

we're to quality So we're the well pretty that tenants, able going to assets. add be very as comfortable very to as with to high similar continue portfolio

GregMcGinniss

And in XXXX. thanks. I you. on And another of believe remarks Okay, you I comment missed it. made opening one apologize development kind I regarding a as for QX, But

how Just forward longer-term $X whatever it investment curious the traction million and about might the potential gaining side to development looking next you're much into size today future? the years from how few on you're the the thinking be in

MarkManheimer

and going to of to type Yes, get when like private, are even we with the that of more. and there. trying for to back and a bit more those And we're really starting that's traction no, focus we lot going transactions of ways we We've were programmatic up more get to relationships little acquire pick got building tenants kind different that us, properties, a we sure. a starting been

And lease, getting it'll committed to, just quarter quarter is, So better new we tenant that on the what fact typically we're the getting we're the grow with location year on they're and who think depending at liked that a I XX-XX margin in really out. a pricing. acquiring and do albeit

kind of we the without that And to adding taking way beta view is so kind a of alpha of great more more beta. portfolio

do chunk on So the that what to future. I the be a to gain for in we would expect margin of bigger

GregMcGinniss

decision appreciate just, guidance a use just to million the Okay, $XXX the color. is And number. as that at for me final on then question least acquisition

instead of why you net at maybe traditional use least more investment curious range. a Just

MarkManheimer

we, obviously Yes, and to want I promise I throughout the organization, deliver. if and under over think mean,

to wanted be to we $XXX going that sure So at we least to make were million. able do

depending we're set we're expect north what of be comfort going a confident million. us calls opportunity pretty on be do obviously, that that to felt of only So, we can in able that have that But what to days hit on number comes closing. to number, us not to we're we going underachieving XX-XX like in the actually is you gave would we $XXX be that really sight into and

little to difficult million. really a is bit number, firm give it at a So beyond least really $XXX

AndyBlocher

think as prioritize just prepared as And, and to Yes. as that, and Greg, add really continue talked about executing, of in I Mark his the as I right. acquisitions, start we if we components the we've could remarks, been to

really quality consecutive I then triple to you're what out retail can we're as as And XX a As of think is, we of those relative third, trying months really XXX% rent is always close build second. coming portfolios net either seeing that the first, comes of is bulletproof there. to quality timing and collections, economics

so So to from traditional, of quality, the right. least deals, that ABR, we're increasing we're those kind perspective, in we're And on we're very XX%. our focused quarter focused less things confident us $XXX our those our confident million as somewhat on on says of very types impact because at of almost opposed drive something guidance and by that inter to the ability, very,

Operator

question from Our Kim comes Bin with Truist Securities. next Ki

KiKim

good morning. and Thanks

despite the competitive So Are finding are of that the you Or just would types move finding are grade all you philosophical assets eye eye that, even pressures? having own? deals investment you same, what the despite typically right, still bull's for at to you to the arranged of acquisition all your the are because bull's not want within going back to your questions. and that

MarkManheimer

question, great Yes, a it's no, Bin. Ki

do to types that opportunities, do very your of easy difficult, with is laying higher than yes, bit do of do which but some attractive a out same We the extent think of most a of quarter that channels, to yields the of and drop the figure in are a the I quarter sourcing types can value, areas and repeat ones doing but are and blended we to it's then we're them seeing out to since to start maybe type some because providing where But And developer, I or little we're competition, become bit to whether to those are that they by peers capital on curve competition there, that I public, you've bell more a don't think that I we there that might continue I we opportunity, getting offset as deals, point, did our expectations own and continue of feel the very more little to first I acquisitions then think want lot margin, quarter. think of quarter. are sellers. get have, If that's we've business sourcing finance. grow, like really from out, type very each or cap you've have over we more seen think But deal out little a bit inefficiently. a really the I quarter some same But trying and allowed and a time, gone more kind priced then keep rates think rates we're us seen the our see want to if acquisitions, you acquisitions. think cap creating a a do that becomes to yet. is challenge, our ramp of focused lot a there might really little the more doing and we we drop bit on we

KiKim

two question; that take And is simple million me it as acquisitions second run does as to look expand three? million? $XXX are of addressable you hiring of What like people? rate trying a you're own? as Just that So to about to the hitting about want my actually universe to you go or you more mentioned, what of $XXX brings really you quarter. year Or a thinking to how it

MarkManheimer

million, which about something increase different lot to quality, think I $XXX a don't do. a there's to willing sacrifice couple of ways it's Yes, and that talked we've we could can internally, we we're

I think were the avenue acquisitions in to lot we to a the likely more term. want do more near if

I think that more curve, are efficiently eat to bell as priced. priced assets a that efficiently buy bit more bell a we curve some that little of and assets, lay out little bit we'd have into

think in I you'd rate. you'd $XXX slight your using I million, margin, think difference cap it So probably on if the overall a see - the example was see

Operator

Our Tsai comes Linda with next Jefferies. question from

LindaTsai

your went Hi, additional like you a term acquisitions. going weighted forward? And you'd down it average this looks something Any little on expect color provide? could is

MarkManheimer

around Yes, term. of average we And weighted keeping no. are focused lease on years XX

shorter We started grade of include the in and that with been the some front. So tenants, portfolio than we've to blend out executions especially doing and extend do are externally some backs XX doing we within and potentially to on yes, if of typically, and current get bit where on lease think at investment our conversations tenants, acquisition sale But that locations terms lot own a assets early well. as the we're lease a the looking that a see were acquiring I more performing some very just challenge year we little high with lease are terms. quality you assets

bit is a a that on. is little I is we've lease something But you can added term guess some pipeline, longer area is an is thing give that bit a that challenge. So I fortunately, more the color focused little the on current it one

LindaTsai

of you about learned then maybe a year you've just the it has middle way along building And changed ago, been can you talk and in your was upon went executing the since about net the public acknowledging lease environment pandemic? you've And pipeline? how that what as a

MarkManheimer

I Yes, starting we to come started sure. the a the pandemic just of out I were think - get to beginning, bit. at very mean, starting little

that areas up think you we to they round lot so the we're the in focused of out the And impacted trying to people those of you buyers haven't still that had But the to COVID, number of had not really round. face on held by of do. about first hopefully, wanted figure kind second what sidelines, well. been I a a as very But

So there say, to is still the competition offices family like small little margin, But and buyers. But more be going always with those on individual bid seen our the a would pretty to strategy. bit feel strong we're we able assets. I a on execute we've still for

AndyBlocher

despite are risk despite giant the really right, only like, execute, our I the steadfast of direction the just to currently. feel risk together If continue and giant is been have and I kind we've of and changes that through to and could it's back on reality to important and we've a team produce note feel that of and for to call confident to cycle the from remained fact we're complete the been environment it We've off going strategy, to been where months our and I in ability Mark, risk add, results. able really, XXXA, we COVID just XX-XX that really our

LindaTsai

Thanks.

driving term yields in you're Just right what for in XX% IG the tenancy high is the like at rest being view yield more then have tenancy one and IG Do time? also at you but one, a driven? quality long last balances another the on same XX%,

MarkManheimer

sure. Yes,

the don't I we is and quarter-to-quarter set change opportunity on subject to to quarter-to-quarter. a going But are So think we're what basis.

than in like or mind a our investment as giant a profile versus plus an a at investment grade to versus see credit minus the of delineation don't BBB investment difference, credit other not BB grade, grade investment we least grade. So

double investment the the around think stated and XX%. profile in the percentages kind move BB a credits think do grade But credits, could some those you portfolio and margin. So of percentage likely I past, type or on see little we've XX% the stay bit some to I do grade see investment of between is

feel investment up right we But of more we're we profile a seeing the little the middle any pick of risk kind that are So right alpha side. like like more on really with grade we bit taking in that now. not can

bucket. to names and more like So we'd some like to find particular add more to that

Operator

at for to this over the questions Mark any closing would time. further no are There you. turn I floor Thank back comments. Manheimer to like

Mark Manheimer

progress We discussing look everyone. Alright, in thanks take forward hopefully the person. in future, care. to Yes, our

Operator

conference. This today's concludes

disconnect at for Have participation. weekend. a may Thank this you lines time. You your your wonderful

Amy An	Investor Relations
Mark Manheimer	President and Chief Executive Officer
Andy Blocher	Chief Financial Officer
Nate Crossett	Berenberg Capital Markets
Todd Thomas	KeyBanc Capital Markets
Parker Decraene	Citi
Greg McGinniss	Scotiabank
Ki Kim	Truist Securities
Linda Tsai	Jefferies

NETSTREIT (NTST) 30 Jul 212021 Q2 Earnings call transcript