NTST - Earnings call transcript Q4 2021

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Operator

Greetings, and welcome to NETSTREIT Corp. Fourth Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. pleasure your my Investor Amy now Relations. is to host, introduce An, It you. Thank

You may begin.

Amy An

for for joining and you thank We us XXXX conference full NETSTREIT’s earnings call. year quarter fourth

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

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

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

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

over Now to Mark? I’ll Mark. turn the call

Mark Manheimer

year-end Good conference call. morning, earnings XXXX NETSTREIT’s everyone. welcome to And

have spent first with we like public year, if year to not the our of a past dealing for would company. exceptionally the we achieved your hard their seamlessly first and you. fulltime. I’m we with a all And share fourth full COVID-XX, work in of is of I Today, all together these performed most, have contributions. XXXX, Uptown, team and thank We thank and have our I’m performance our activity our without year, for aspects disruption well. finally to moment quarter Before I entire new business significant take our while not in that pleased pleased discuss and employees across I’d into during full the headquarters accomplished all that, Dallas to as results moved NETSTREIT’s for that employees our

better Our collaborate, goals. position to grow, to best new us allows space achieve and us our

we together, our Now, to in addition, promoting are looking enthusiastic achieve I’m an where proud to forward goals. work and to environment all common

was our to high grow One of to end of quality The further activity $XXX with million over portfolio up The the investment $XX and million, team $XX ABR million and grew closed objectives at to from of our XXXX over portfolio gross for XXXX. assets diversify our XXXX. portfolio in holdings. underwrote

tenants XX During the roster our to portfolio. states and new added year, three our new we to

those stated or than of have towards have targets. our no to portfolio that total be diversification our goals for X%. ABR no want be We made significant XX% than industry tenant and more we to And more we progress state

year-end, concentration state XX%. approximately of As in our largest at Texas is

home is our is and X%. Our largest improvement industry slightly at at top over tenant Walgreens XX%

our X.X%. and for a proceeds and million from removed rate portfolio of we capitalization casual decreasing cash de-risked total exposure properties sold holdings. XXXX, dining $XX.X RV our of the banking sales During nine at dispositions by The and

had portfolio XX properties operating square XX comprised feet. states XX, was of industries. We X.X in As in an of XXXX, December XX of tenants aggregate with our different million XXX

lease year-end portfolio The no all was term at Our had XXXX. vacancies years. XXX% X.X average experienced and of collections during rent weighted remaining

combined investment XX.X%. profile a has grade grade and of portfolio Our investment tendency

of and million, of ongoing which a quarter, lease XX.XX% capitalization remaining investment million. rate $XXX Acquisitions tenants. Acquisitions X.X% of weighted grade acquisitions investment activity completed XX.X profile a the with and fourth cash initial had $XXX average of development and record quarterly quarter, of over completed the an completed years. investment we tenants in funding were had net in XX.X% the high term $X grade million During includes quarter

strong grade the typical. in nothing part While quarter that lease property, than were we driven TRS. well and floor ground the in a largely lower Fitness of performing This investment located Lincoln specifically Garden very three all included by a decor, currently Park This or percentages acquisition mix, and Chicago. LA in our a acquisition was larger Olive a the hold

likely the of fitness rent portfolio are to not to a beginning exceptional and the escrowed we our real not estate, long-term were comfortable rents months is and the be at with investment. this While of to XX looking add replaceable We hold.

XX estimated During with grade we Two tenants. provided million and $XX.X quarter, million. the development projects. which over with investment tenants for $X development fourth the in were are projects costs funded new funding in year of with investment profile five We of grade three

have be part during this partnership acquisitions. had growing We we no property the quarter, any fourth of pleasantly and the future amount replaced be with additional can a development believe surprised growth to of our been and and dispositions disposition for activity interest we by We expect opportunities strategy.

to our the and portion opportunities credit & long-term in will to a want sell quality own see acquisition the acquisition the we portion risk larger to Olive be similar Chicago. view occur the a historic to we adjusted future in we of Garden the diversification a order better return, of to Or we at Floor opportunity arise sales Decor an portfolio. see largely of improve complete, accretively While if extent to the and the curating asset portfolio of

financial in teams grow with performance the grade corporate largest excellent and example and include an relationship is arts Lobby balance investment is and sheets category. leader has within and Hobby our the our that that want business top our our falls third great portfolio. an management is industry crafts tenant Lobby, companies excellent profile Our strong in this tenants of with A XX which to Hobby tenants we with.

In addition, dense generally in retail locations they and operate corridors. prime

we that focus our deals as tenants. to quality our sourcing on high portfolio Before our to want the beyond, of want approach business call stakeholders. the best-in-class partners with growing affirm to and look I to I hand right and execution We building and continue grow valued innovative to continue in with to XXXX off we’ll our Andy, all for relationships trusted

ESG. the I’ll over over As call around provide to financial forward. fourth guidance. going our continue however, and additional we providing our important to to each our we our is enhanced and performance, Andy growth of as XXXX ESG will year, go disclosure principles the to disclosures detail significantly commitment And Last element. turn quarter With that, financial results

Andy Blocher

call. and and $X.XX Mark close, diluted In for earnings share yesterday of you, AFFO joining quarter. after market per for on our $X.XX, us you thank reported Thank today’s release of the we FFO net fourth $X.XX income published once again, core of

full loan of share. net and sheet year of balance For total hedge $XXX XXXX, from is revolving $X.XX, from per At income fully a outstanding end, with our AFFO million FFO $X.XX million our remaining of reported the year which core line balance diluted we of of credit. term $XXX $X.XX, of had our debt

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

adjusted was range at targeted X.Xx. our end net of Our to to X.Xx ratio X.Xx debt year annualized below EBITDA leverage

In XX, XX On Moving fortified and April last filed activities time shelf-registration with of stock capital into early markets common per our and our through price proceeds follow-on shares our our a year. $XX.XX the year sheet shares share. an activity. We on strengthen million series the this program, to nearly million sell allows completed stock offering September, equity simultaneously we SEC first a us XXXX, a from and of universal received from issuing time We to efficient of balance at approximately common our $XXX manner. of offering $XXX.X in financing we ATM gross to which of million. entered

January, $XX.XX price million. per this common XX, in came the of a of $XX.XX from a a a high quarter, XX.X nearly proceeds for under agreements offering reverse In vast physically REIT share from public these to quality will forward million XXXX connection sale gross of of stock dedicated fourth the common $XX result The until proceeds we proceeds. million forward program receive our January agreement. a share inquiry volume price of per have completed at shares We of settle the with issued sale investor. approximately as shares a of During receive a our any shares and at and weighted we ATM of the we sale stock majority not did of average X.X

investment fund expectations reasonable for dry and these year. activity through leverage, equity this have to usage With targeted sufficient powder we deals recent ATM and our

update, addition, of benefit With the our our a forward regard declared XXXX a leverage financing for earlier effectively share as In projections. one In rather commitment the lump risks flexibility of of January share. guidance quarterly AFFO shareholders March in of per our we to as regular cash Board on XX. record range to business payable than needed the can from to better be positions $X.XX and the to sum forward week, our March $X.XX per to we remove draw $X.XX NETSTREIT dividend XX key dividend established as this the XXXX down

range units year, the be deferred completed $X.X amortization. the of million to with to Our be and in assumptions; million, Cash XX approximately range of to be including diluted XX range fee be dispositions million the least net $X acquisition which year costs. million. of million million transaction of is in the to be developments to expense, million, OP to $XXX,XXX is in to XXXX to activity $XX the at which full additional weighted expected also shares. $X average in of outstanding, guidance shares range non-cash following of $X.X includes the inclusive million XXX compensation Non-cash impact of interest cash of million G&A the And to includes net financing $XX.X in

Before that team I’m your we accomplished echo of in we and want Mark’s move proud the NETSTREIT to onto all at XXXX. sentiment. questions, I very

Our and while impossible a to back office. working There in degree team is now is remotely. emulate, collaboration the that comradery fully of is

our building few we’ve of impressed successful what seamlessly over nine succeed, us just to With become for I’ve executing working potential. now IPO accelerated that, establishing including but communication from position $XXX we XX to accomplished all not increased years, us will the line an over team and Operator? acquiring follow-on started will have I two been office environment million that see control and assets, out two past and with allows offerings, that apart our roughly While to been a the in we’ve the weeks, full to back our filer. in the we know to the reach and open questions. collaboration

Operator

Thank McGinniss Our you. comes your [Operator question question. Greg Instructions] with with Scotiabank. first proceed of the line from Please

Jason Wayne

Hi. with This is Greg. on Wayne Jason

So strong date, the of a update $XXX of and was strong if acquisitions this just in acquisition you’ve for the quarter and on activity your to guidance year million. QX cap you investment quarter seeing been I was provide an rate pipeline quarter? kind could wondering size the over trends

Mark Manheimer

[Audio weighted. end Gap] and it’s a little bit back more

excited closed growth likely visibility so But so half days be REIT into we’ve comfortable about think pretty pipeline the so tenants we closing. maybe feel said, really a the good of including far, and development. the that new that, some about few I this – some to than and a So pretty we add bit that about maybe will in only XXX little of in have being But quarter. first what we’re with pretty portfolio, we’re pipeline more with about XX

Jason Wayne

forward of just funding. debt so has offering $XXX the for Great. you any remaining. year equity wondering is million if are year. million this looking And then I’m this you have ATM about $XXX issued your

Mark Manheimer

less the a the it something that’s the put associated we would’ve same we’ve markets the There’s the funding had relative potentially the feel good of guidance, towards hitting that is, we – that risk year. see when got than difference the the today is the why from notable the to like. we about today mean, balance talking with facility – week look in numbers end forward. been significantly in turning the are about We’ll those out I we Yes. just January, to execution on otherwise. really first numbers out, Obviously, of what some credit have

that feel we’re to fully like ability the capacity So, as I million in to $XXX said, undrawn with I in year. remarks, and our undrawn my on talking line, the fund the leverage the ATM expectations and feel forward reasonable with with about usage confident very the respect for

Jason Wayne

Okay. Thank you.

Operator

Please from comes question with next Thomas Our Todd question. KeyBanc. your of the proceed with line

Todd Thomas

little if year, could tenant we portfolio Mark, like morning. categories during to talk the should we the Just Hi. exposures at think today bit if diversification? are be Thanks. retail anticipate the Good about you XXXX you’d what a for about – goals what curious curious the end. or year where

Mark Manheimer

sure. Yes,

out set kind longer-term our we’ve So, goals. of

we think until assets, being north we that the year. of probably already happen following kind about end which more $X So, to expect as of billion those of hit some of of targets. wouldn’t we’ve But the

don’t then we we’ve is don’t And concentration really all met. have made of more it lot more we tenant we’re concentration want with with states industries like X% of XX% to the We down about there. want which XXXX progress So, end a thinking than by below have our any any tenants, both that. And of how XX% to have relates we’d concentration. to than as of

got You’ve Walgreens at the X.X%.

of you’ve us seen which base, very it really increasing really down is that some that kind we’re ratcheting So mindful of. of the but quarter-after-quarter diversification, is something just of asset

Todd Thomas

look but as to Okay. growing there, other make little really? that some acquisitions you well? mostly is standout net guidance terms $XXX Or are you any tenants? of selective will I dispositions? can accomplished the through the by And bit And of with investments, guess, being – exposure, there are dispositions million about I in Walgreens be a talk you dispositions know would

Mark Manheimer

sure. Yes,

dispositions that of aggressive X% the likely on the time cap that that acquisitions decrease. really acquisitions we slowly have like about given that a likely on we something, sold There an and of possibility shape. continue we’ll to thinking we which And sell to a always the really quarter, at than the rate, will both So, IPO, more than yes, those need Walgreens allow think the feel the in if to less our really post-IPO are and to as we you into around mentioned. we’re is portfolios I portfolio side, Walgreens, opportunity number pre-IPO replace what the is good acquire way very planned we sell that

run that ground the less of Floor XX in calling along bit are lease, the zero months Decor this came quarter being think some Olive fitness, good holds rate, of the get form, & way a we have I Garden kind then are those which sell quarters not sitting acquisition will that portfolio. first largely that think quarters, a long-term to is at and long-term, always a to inherited is and our long-term of escrow. months we XX good an the So is – said, really may Similar major LA a certain want to portfolio more, assets, that only assets you’ll portfolio like there’s keep other then take might of $XX maybe to million have hands But see some an the quarter done. look possibility and we to that little a in out with little bit comes where be we the probably the move on

just kind drawing we of So on have been that.

got we’ve Chicago. real It’s the some of So also there. time Lincoln of part estate exceptional in

But some yet. a get have that long-term acquired that’s pricing. good might more about not hands because of that thinking our selling, pretty it it holds we hadn’t something assets to So at us been good are example we attractive on allowed attractive

Todd Thomas

cap what embedded the And for that’s remind helpful. XXXX the the in investments? us can – is what’s Andy, you the expected That’s rate Okay. just guidance

Andy Blocher

similar looking saw we we’re I in mean, I rates at think to XXXX. what Yes. cap that

Mark Manheimer

Yes.

on are some quarters of some that have that on that, of high end are the So the end low that. we’ll

range think to of I that. X%, X.X% we kind between X%, something like – X%,

little probably blended compression, we seen X.X%. forward So kind cap maybe bit to a X.X%, maybe that’s to a on about of that think have good a hair think go as of about X.X%, I it a a basis, way so below

Todd Thomas

Thank Okay. Great. All right. you.

Operator

America. question the Dennerlein Joshua with of question. with next comes from Bank Please Our your line proceed of

Joshua Dennerlein

first you’re cut about about it when Mark, the Yes, the talking everyone. think pipeline. good morning, out I question

So I could what in maybe do pipeline see the re-ask, you just if outlook?

Mark Manheimer

to that I names absolutely. expect would similar continue you’ve yes, add seen. Yes, us to

We grade we’re I strong, first on we’re coming grocery that have should and quarter we the quick to either overall, of of tenant the in profile $XXX we’re of And set in or hit restaurant think like service year, the rest the target net over be million to going investment a grocery for a couple investment the just lot. type pretty us fairly year. in like is about come tenants side, new the a acquisitions excited that the the that grade another and operators print pipeline up good out quarter the feeling of able that for with

Joshua Dennerlein

And Okay, awesome. have about about different ATMs that in you versus the maybe about you and How to feel ask tools any how you. overnights forwards? then raise do Thank you I equity. using to think wanted preference? Do

Mark Manheimer

very we on Yes. in I a that in year, about the little to going fortunate thing really large at in million. to approached was were fourth of ATM, right respect time. be We raise, $XX we active felt financial of good little was interested equity ongoing to were mean, With on time. raise we we geopolitical really conditions by REIT a market a stock, overhang quarter the market. the good equity a I – the feel think of a taking that place, being I reported go-forward dedicated to quarter fourth drove that a potential don’t the the right investor, which very that large saw that that were lucky, we forward risks into able the basis results about and an very were block really as a not around, and we bit say that I the while were to bit based it’s pipeline of that yesterday, anticipate but look, all point to some want

So wanted off the take to what that did. we that’s risk table,

offensive what But I we I to to on go position a trades think there far think better that us opposed is can’t count the be forward. mean, block ATM. look, defensive puts I difference the in through as

as of the of kind because either combination opposed a those what’s But some on of the of some out way if to the pieces point that cash hey, off do awesome. of debt. larger I it that’s a his or we putting go-forward just see paying low do it’s in us are us. And and we basis, issuance of cost around, draw ATM, of at of conditions it’ll see Mark opportunity we being are front dependent that and it, need team part set able puzzle. think in a as is market in trade be forward. sum But and there long It that comes all being the efficiency down portion regular for just forward the block just to sales time. on I what of all-in-one the

Joshua Dennerlein

Awesome. Thanks guys.

Operator

your the proceed with question Katy next comes Citi. of Our Instructions] with [Operator McConnell line from question. Please

Katy McConnell

Great. Thank you.

for lighter investment future that’s factoring pipeline? this up grade Just for what XQ and targeting rate year’s investment into grade in exposure are deals and wondering status if on on your you assumptions you the cap how can to wanted share follow

Mark Manheimer

Yes, absolutely.

then in quarter I think to into leaked a the close thought we that was going quarter, transaction particular chunkier this fourth had fourth. and really quarter, portfolio third the the So we

not that was investment grade. largely so And

something move think which I to of had around little So going bit. that mix is always a that do with to kind

to about good of between and I grade XX% is think a kind think thinking long-term our XX% what kind we’re investment will be. actual of way

times to more of we the billion less will profile is investment which bucket, Although, drive than continue $X is debt-to-EBITDA. to tenants revenues with grade two try and again than

even are tenants a where have credits better are be some don’t so in little than have investment rating cases pricing. can we to any mind bit reason have they typically in a those going to get our bucket that our So grade a debt, don’t better and

to So try bit. little that continue drive we’ll bucket to a

Katy McConnell

development seeing Great. development be forward growth underway Thanks. more And that could then just on could comments strategy? more part and your that the wondering of have projects some to external color if a about opening on maybe expand maybe partnership greater going you the provide opportunities you drive

Mark Manheimer

Yes, absolutely.

company. third, take with fortunate of able it to done So a a expected on do to be pretty little We developer, a very much fourth you public second, partners, good we’ve bit makes to pretty really been some deal. development longer. have it early find once as agreement then And kind a to had a easier that

at feed in commence expect So of us seeing those that think development to quarter. a really those expecting we when rent per come or of kind of I’d bit. on we’ll least on little we’re projects, three itself have terms And to, two for online

things little trying a pipeline. buying grow new our new with with to into So that we particular little bit better we is the to we negotiation we’re great can acquisitions and up really can buildings bucket, a yield, so about feeling clean leases pick compliment of of bit have a think we lease, up bit where kind fresh brand some a good more little tenant with also that

Katy McConnell

helpful. Thanks Great. everyone. Really

Mark Manheimer

Thank you.

Operator

next Kim your proceed Ki Truist. Bin Our with question the comes of with Please from question. line

Ki Bin Kim

morning, guys. good and Thanks

Mark Manheimer

Good morning.

Ki Bin Kim

in back for going How’s I all, all and raise balance the ago, mentioned to what’s with inflation debt about at you that you’re of changed Just that cost. future your couple raises think quarters last if X.X% happened kind sheet, overall? given expecting

Mark Manheimer

couple days, little clarify, X.X% haven’t be north that. placement we were to question, to Great go I may in the XX-year if I the probably, think of to be And Yes. I we’re private to to think a mean, bit said I able Bin. X% we a so fix, gotten last we market, Ki

significantly of later appears And private or out the our We we about to loan in that seen it are the be with I I’ve would previously. be as placement turning know that what end for a that could strategies well. range some term the vibrant that credit. market any indicators evaluating top year through to put market don’t of But talked the above that respect pretty

Ki Bin Kim

Got the And cost the make economic in base going it… some of and at think forward rates here or you sense that do about – forward, the of kind of it. that does how swap agreements to rate lock least does make

Mark Manheimer

mean, I on feel depends the specifics I to earlier, XX-year you. agreement, think on that we rating, where a unsecured that right the I based it we public available have right. Senior sit now, don’t what of said always you is like rating option where

for have loan, private versus option. don’t doing a if a So placement year a to deal advance effectiveness end five want us, and that up then we’re hedging settlement and or evaluating term in I with and to of XX seven lock

makes today, that we but for could sure it in not sense point future. right as sense for the here time I’m us absolutely us So make some sit at in

Ki Bin Kim

you leakage? a debt guidance, implicit XXXX in bad for expecting it. are what And your Got

Andy Blocher

of Yes, the so bad generic XX model, off debt our top just points we model basis line.

Our actual has to zero. been this point

So we’ll out a plays that see how basis. go forward on

Ki Bin Kim

at is XX Just you’re starting basis clarify those with, to for now? what points least

Andy Blocher

kind that’s That’s – our generic Yes. modeling assumption. our corporate of

Ki Bin Kim

that. it. that might look list anything watch today? feed see your What does you Got like don’t into And

Andy Blocher

feeling there. pop yes, confident But that the there’s about short-term we’re pretty feel We will good up the portfolio. in that pretty nothing

Ki Bin Kim

guys. Okay, great. Thank you,

Andy Blocher

Thanks Bin. Ki

Operator

your with question next Please question. from comes Berenberg. Nate the Crossett Our of proceed line with

Nate Crossett

morning guys. good Hey,

Mark Manheimer

Nate. morning, Good

Nate Crossett

I how in kind – I straightway the this the what of just guess then the guess volume than stuff, Hey, acquisitions the and yields much the year are development demodeling of higher terms development? from on for

Mark Manheimer

sure. Yes,

taking no as transactions. as of we’re close So to possible risk those on types

that by are a and signed have the over underwritten. by all runs born the developer cost already we tenant lease So, we’ve

to conservative points market those a of the assets. $XX we’re and approach going year. we those in to picking bit as And months terms trying right then out basis acquire warmer on million year in transactions development, million, XX of quantum, increasing of into the XX, So but open the a we’re get that see kind now it’s $XX over more up in kind range. could the I of the versus little

Nate Crossett

Okay. how That’s since just the should moves? it moves like and been we What it’s about thinking I think dividend thoughts that be initiated, the $X.XX on how helpful. when about so here? you

Andy Blocher

to to of the we’ve the increases feel acquisition see what the Don’t and of pipeline, pretty get us but lot AFFO lies risks I I out in a that our ultimate dividend a been in early two-thirds the to into target some a per place share, to development like yet, we’re mean, line timing specific make with three just our recommendation, decision of our obviously good quarters but the taken board, the kind like in that Yes, with future. sight dividend thinking a year to of the on Mark our want start portfolio, good tell, about still so feel and pretty path had we on puts get on of go-forward on basis.

Nate Crossett

do? on what the in sense? that Maybe be achieve ramped any kind of basically of need to Okay. to you at done the guys there fully point team, that this Are you just size hires is one just other want

Mark Manheimer

we ramped fully the hires as will asset management, There up. year, just through the few mean, on I pretty potentially a and scale underwriting, acquisitions, we’re be Yes. in accounting. business

expect you’d I as but it’ll So think in fully senior the team place. be is

Nate Crossett

Okay. me. for Thanks. That’s it

Mark Manheimer

Thanks Nate.

Operator

back to for no over to further queue. the are closing call hand in Mark There Manheimer the I’d questions remarks. like

Mark Manheimer

care. everyone look at Take conferences. We for you of upcoming joining many today. you soon forward the investor to us with speaking Thank

Operator

teleconference. for participation. Ladies conclude Thank today’s you does and your gentlemen, this

disconnect time, may day. a at wonderful lines this your and You have

NETSTREIT (NTST) 25 Feb 222021 Q4 Earnings call transcript