NTST - Earnings call transcript Q1 2022

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Operator

Greetings and welcome to the NETSTREIT Corp First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] It is now my pleasure to introduce your host, Amy An.

Amy An

We thank you for joining us for NETSTREIT's first quarter 2022 earnings conference call.

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

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

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

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

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

Mark Manheimer

welcome including I'm X.X acquisitions, an at X.X% years. Good year, We of option rent has an purchase. developments with where everyone of quarter, to quarter average everyone, conference $XXX capitalization first commenced, $XX and cash rate weighted million call. and over completing lease and morning strong to loan ever our XX mortgage start earnings initial activity properties first acquired a investment secured pleased term for million the during XXXX with share the to our our to in net

had of commenced had development projects million total X.X%. investment average addition, rent and on yield two of In cost has a weighted $X.X that

million At investment. to projects $XX funding of development, under million investment-grade of tenant. representing profile additional one for projects $X and ongoing support we provided also had quarter-end, new development development an We nine

entered XX-months in our million mortgage loan loan a located land we Home Portland, an to with cap a rate will into funding And with rate. XX%. to quarter, a plan have the and three X% interest collateralized is approximately first right of loan redevelop Home the the of and The conditions completion convertible parcels rate term value interest agreement and Upon the During Depot to performing the the strong with $XX.X was being MSA. Depot developer's the that include developer, Oregon an loan by ever secured current equal the reposition NETSREIT met, certain purchase an to assets above-market at the of X%.

rent a totals activities including XX%. profile the investment-grade loan investment investment-grade in were interim yield commenced, our are and real comfortable we transaction to of our loan. of developments the with an our loan. case, as receive Additionally, estate two high-quality to seller short-term return expect we estate we at purchase accretive with this we the can demonstration Stepping want achieve while are a an through view quality estate fee their achieve other a not resolution loan this a to to option the a time loan. optimal assets for path work while that the solutions real superior XX.X% the on to We we well-secured for for acquisitions, in we and creative find do transaction collateralize how quarter, providing purchase security back, providing as owners simple mortgage asset where ownership The industry. real receivable and and

rate. the of during casual the cash we price sales a quarter Lastly, representing dining a X.X% restaurant for of million disposed $X.X cap

profiles annualized of ABR rent. contributing investment-grade remaining of XXX portfolio banking, represented and our first had dining, end or million was select by tenants including of XX XX.X% portfolio of investment-grade reduce XXX% casual weighted opportunistically quarter, fitness. with At to categories the tenants, with the continue will to We portfolio base ratings comprised of lease average exposure the and X.X a health properties and The years term our remains $XX with occupied.

include added tenants grocery Publix a Family and in store. Bread, a New the grocery quarter store, a Panera Fare

the In added we to our portfolio one state, Nevada addition, new during quarter.

As tenants we time, ahead, increased unlock investment we portfolio well-positioned our opportunities target and grow to various are returns. our provide achieve look the to and value channels creatively while work to maintaining capital source At we this through continues believe pipeline as we quality for year. our and with

financial the Andy unique remind formation quarter results, I the NETSTREIT. go characteristics I portfolio our to to take over strategically. the have Before moment curated in to Since we and of XXXX, call want first a to built hand off of everyone our

investment-grade percentage space. one the in remains of highest Our net the lease

Our we assets. up our with no portfolio is tenants largely of made defensive industries in issues legacy and have

large various we on to call adapt is first-quarter go space. our even We flows to guidance. XXXX XXXX. as the as Andy to focused environment that, our the expectations interest capital to confident seek our have to over well a results over will in deliver portfolio we financial very and space, With are meet tenants well that growth evolutions inflation our economic respond for and with perform in uncertainty, With in that well-positioned most global retail to cash I'll rising turn cushion any as increased and stable industries rates in the

Andy Blocher

first grew AFFO for our market per Thank after today's us earnings thank $X.XX you net published release you, Mark call. XX at to compared from million of million and of as compared of the $X.X from G&A once outstanding income first increased yesterday quarter of balance FFO primarily we XXXX on quarter core $X.XX, we and of staff revolver reported the $X.XX, In close, the quarter. opening XX% joining again, start of and new share since last first corporate acquisitions to developments up million Interest first to the XXXX, XX the due the today, due $X.X year, quarter driven in by $XX expense employees year's the quarter, prior $X.X to diluted and increased from first $X.X to first quarter. the quarter higher our The million of to from our grew on million to in of our rent office. average the increased XXXX. base portfolio's annualized for of number to

from at loan to debt term balance we of Turning had a $XXX million line our which our of fully remaining total revolving sheet our quarter-end, million of from outstanding, credit. hedge is with balance $XXX

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

annualized fund stock deducting of million times, XXst, our regard shares quarter, March quarter, payable low for during EBITDA sale about shareholders to an agreement, XXth, Xst. shares entered fees activity most XX of proceeds of costs until our X.X the million capital XXXX. our connection XXXX, $XX have early over approximately markets agreements our of sales the during After giving leverage ATM receiving capital forward range of the this and times. quarterly to program share. January, targeted consideration on in activity first At during for be net investment dividend successful shares expenses to as would shares X.X after with per have of of our our transaction ratio With was XXXX we quarter, cash declared Moving proceeds $XX.XX we to the of end we at net settle we On price to hand ratio discounts $X.XX issued activities underwriting X.X June our week, January $XXX,XXX. EBITDA adjusted net of Also in Board XXth, debt was record remaining net significant common market times our and the remaining of our which in With to the related in adjusted dry million to X.X the offering the to million to powder shares. to X.X a we to deducting after earlier annualized on $X.X June dividend March debt over into regular at be XX.X settled forward targeted

Our payout ratio quarter the just for under XX%. was

per guidance We investment range our the $XXX and for million share are year. to per AFFO $X.XX least share XXXX at net guidance $X.XX to increasing to

includes which expense $X at amortization least million interest to unchanged short-term impact the $XXX,XXX. investment range we're where XXXX, activity to $XX to developments reflecting expected Increased commenced, million to including of units million. average the the of earlier be million shares. our of XX remain a million, million, $X.X shares And assumptions. comment, be outstanding, Cash $X.X G&A million, net the rates. OP following increased includes is Non-cash which interest to financing rent $XX.X million in the significant guidance being year is cash dispositions in weighted start to of and in $XXX to which approximately Mark's the mortgage range not Non-cash range base expense expense Our to in range of great transaction XX year. off to fee deferred Echoing loan million this rise of costs. of to in the diluted the receivables, cash inclusive compensation is included remains at full-year $X.X is in

regularly global grow deliver that will source ability in we confident uncertainty finance our best-in-class portfolio. Operator? that, highly cash now are continually deals of predictable to us to time investment our a positions questions. strategy flow We for to the accretive our and a line through open With

Operator

from Your Nate Instructions] Crossett go Please first Berenberg. question ahead. [Operator comes with

Nate Crossett

maybe into flow and seeing pipeline, on pricing. visibility wondering you QX, what in was the far could deal the comment of in terms I your just so you're

Mark Manheimer

more The we little at the bit this what see pipeline quarter. probably in is point sure. than a Yes, typically robust

quarter costs there on and increased. some second to we number will a kind leak of certainly we're what of on out feeling of we're their pushing have buyers as back falling and good pricing, third into of as then transactions pretty seeing few think the likely seeing quarter and are So, I financing contract a it deals about that relates

a bit that some more to on opportunity So, back little I come deals think us. have

Nate Crossett

one then, it loan. in And other mortgage the of pipeline to Are just the on off-market? helpful. specific that's Things that How talk opportunities there maybe it this about, Are more that. and Okay, those come developer? can there with was like did maybe you transaction. just

Mark Manheimer

Yes, sure.

to what off opportunity acquire we we'd work, some that to of rates re-parcel good then developer a sell we the lower come opportunity, long-term, viewed that as to to like Depot in, outparcels like that would at. much and than to specific really do Home couple cap needed to So, off assets own a capital provide that that just at

in goals pretty achievable the a are very Depot XX a a a think sometime that short- that good some situation asset to Home at in traffic it get for an next LTV months we in some our that XX% rate. It's in pretty So, they foot was hands clear of on has the type aggressive us to the accomplish cap way at best the needed term, country.

So, location lot we typically a a our of trouble hands getting that on. have

quite Now, could look pricing with this that to down I type think particular developer, at a business in like attractive here take transaction option more very wouldn't pretty won't do think this. we likely very do circumstances to similar Not property likely come the where a and a of but low-risk come with in we'll I were we unique say

Operator

Thank you.

Please question Todd Capital Markets. KeyBanc with Thomas Next ahead. comes from go

Todd Thomas

Good morning.

you can up you environment. cap move of further then, the as in increase cited the the any Mark, we comment pipeline the that you first pricing whether investment following the on What's investment year? change throughout in half on back or rates and driving anticipate Just

Mark Manheimer

of of where rates I cap exactly we think predict it's pipeline Yes, difficult rates we've really little buyers have And I driving that mean our always really but the as types do moving a cap going to getting number seen financing. bit sure. go, on margin. anticipate trouble to their up what's had are a -- different

approaches to and so, try you're get works aware, of pricing that kind criteria then we really And for the us. our our look we'd investments -- that as fit for the

two. the second being more the The of part challenging

of with allowed to that perform being so, a not blowing of to buyers of transactions. out able of lot these lot a back involved contracts And kind and with get us

the done but exactly predict the we're that's but overall about buyers going more and out, really when that to seeing get done advantage cap retail couple back in few. longer we've XXXX no think pricing. deals type those be is higher going space. the but to There they're kind We've can uncomfortable of really to driving financing lease we've opportunities market. that you flip to of out net a a become trying wholesale historically, very this portfolio try million which buyers seen $XX in that to over to So, to I drive of go always plays solve Those them that would on, so portfolio yields the take not think, of focused are be typically pulled it's and tough portfolio retail what were they have how of to their LTV for, to cash-on-cash the compression rate that were properties buyers very They accretively. your able the number

And of other so, still we're public are those come aggressive that us. seeing the are in back market. some potentially deals buyers There to

one-off the to and of more to But may to stick do So, we're transactions continue and think, which kind chunkier bread are able we cautiously some optimistic smaller our be the we're that to portfolios transactions. going I butter,

Todd Thomas

capital the -- mentioned get little do to and what's those capital, an banking, reduce to is health and target and continue there timeline dining, exposures and recycle think sooner? you rotate then bit I thinking you a to want that those opportunity to if to look to fitness. Where deals, are medium-sized dispositions, some casual to would And or be smaller Okay. exposures portfolio about exposure seeing you you

Mark Manheimer

absolutely. Yeah,

under we're we it opportunistic always pretty added pretty and we're we've can quarter, casual bank this which dispositions. a thinking a So, do looking within quickly. when so accretively about we're think included We that then, dining, sell to We that down gotten X%. portfolio

We one add at us. location area to around over does sales. think for that's stick $X healthy million that Chili's did in a probably I

bit with really little particular concerned a rents. low we're about So, less that location

So, that would to each eventually characteristics. of but to portfolio and of portfolio situation I the then we be we're think its keep really you'll underwrite think casual I what dining of to get is kind around -- selective individual down to that see I willing very likely But, about banks, hang our think in X% likely zero.

Operator

Greg comes with from question Next go ahead. Please Scotiabank. McGinniss

Jason Wayne

is this Greg. morning. on Hi, Jason Wayne Good with

mentioned the what the in So, rates anticipate if potentially was you of wondering back you just raising that? expectation achieving debt still last half and quarter kind on would year. I about of that's this

Mark Manheimer

do be our on Yes, out line year. continue Yes, raising of Jason. is from more it half really of permanent debt term We what's anticipate our going the kind to back the It's perspective. to a in additional balance to revolver.

can that about we to doing placement I between optionality significant five-year, lock into able the probably We to alternatives line market. to bank on Randy out a while that go in future. the other in that somewhere recast we the term is anticipate much disarray, put maintaining mirror. start have term XX-year options would possibly and outspreads. market quarter's rates, to have myself been of range market this as in evaluating X.XX%. increased that get are pretty talking to and the us once the X% now as private levels We credit and X% the rearview widening a allow earnings for through do in base are and term, seven-year The attractive indicative

our So, saw that opportunity of the set increase of the that today. in expectations you we guidance see really is interest as expense in reflective

Operator

Next Bank comes Josh of question from with America. Dennerlein

Unidentified Analyst

to market. transactions pull consider morning. that an in seeing just -- what Doykin] on. the as certain you impacting or if that the, [Lizzy for debt Josh. This or It's potentially as you're current seeing sign you of up issue transaction. in could seeing the I comment you buyers volatility any is on Is on just opportunities market all take to leveraged wanted again the seeing on Good for given there

Mark Manheimer

bid operate and those market, seeing that we by or type just can typically some we are because of attention. LTV types XX% because get buyers pulled when some pricing transactions never back just hear idea you the that from To yeah, our on, deals risk-adjusted call how leveraged a competitive portfolio larger on are buyers of broker give little typically so the more see LTV higher marketed, that of deals. the on we that returns sure, portfolio we'll smaller we less in really find are types out it aren't of on less relying with of deals Yes, type then those transactions, especially the an better of we bit

We eighth pricing, for are in pretty getting third we're don't certainly probably calls back a which I or think think we're I is think being seventh big -- still most I change. than cases. now or rather fourth, in line we're

fact lot indicative I as relying buyers to many is are still I they're it be that of there So, portfolios. that leverage But larger on of the more anticipate when doing a aren't private think us wouldn't transacting

Unidentified Analyst

I if to remains into look industries like to that the more talking to anything with of of in new Okay, wanted certain screening there in or considering you expand same that could process great. just tenants particular Publix of talk opportunities. opportunities? dig you on And approach about kind Is with that selective was being to with respect strategy kind your after

Mark Manheimer

few is quite outparcels transaction worked I sell. to sure. relates to and we portfolio add we've -- TRS we're the it them just the in think this think put some time, that on. have on I We wanted it's and to I included we're make taking mean a then situations Bank, pricing we've we which Publix, Wells would to most and Yes in Fargo to work always -- as had so for going difficult a -- our a which

moving pieces to it had it it. us allowed get of of in close and front couple a that So, on

next seeing some our a in went going portfolio that's is within difficult. We tenancy focus of wanted think formed think We really more any bit transactions. cycle to when types and anything and in pressure be our certainly the what little But we really to several way is company entire criteria do on what's So, most on do what the there back we're discretionary discretionary XXXX. we'd predicting tried love our in going here think we're quarters, those I consumer? is going I through to that changed very well be to any for the portfolio. and economic to to has of through, the investment more don't really

and categories. it's Fortunately, of really we necessity-based types don't most a be going defensive of -- to

So, I time you're held has adding think decrease, need. what we their I what is portfolio people's really to XXXX-XXXX really think back really the squeezed the don't I an started do monthly and thesis in at that I and saying, budget their they're looking to indication are getting the and base that us subscriber seeing at Netflix, which need, budgets

So, we well-positioned all differentiator able feel collect to our and of us. we like to be be think we're that'll rent really for a

Unidentified Analyst

you. Thank helpful. That's Great.

Just a follow-up.

there's the -- of focus So, you a defensive higher kind your is category? say would focus on

Mark Manheimer

it's acquisitions be wanted we dining things hard bit to an may earlier. kind only feel that little portfolio Yes, DNA casual and the look that's comfortable look very that certainly of There take things that's a some will what on I the the did not underwriting portfolio. one, the about sell, look at edges really spoke like a to area really our today we from but that and our though think with we but been at DNA. mean I time the assess day even we I of think the

that's area squeezed seen we've pressure, If an a that that's in consumer get past. you've the got under

the So, be we're extraordinarily in. some to that with we're of going selective categories

Operator

go Joseph question Citi. from Instructions] comes Nicholas Next Please [Operator ahead. with

Nicholas Joseph

Thanks.

spend, what's development does to the how exposure targeted impact rising that costs the yield? and construction For the

Mark Manheimer

question. a great it's Yes,

where and by We've very is chosen underwriting borne different there approach lot take cost developer. ways to a the of we're developer development. the all are conservative So, a overruns to attack

any to for So, and lease we in not need cost hand overruns. be responsible

so, it's to future going either being the And thin. haven't a of more going the issues so, which rent is to is make going the already I think on had profit, less pretty to numbers terms have negative developer have we take are any able pay there, developments retailers impact work have where do but in to to or

would increase some not construction absent coming So, pipeline I it costs the and growing our part anticipate quickly maybe as would in that have costs of quite under and labor pressure as

Nicholas Joseph

in But from the yield. existing is Thanks. of locked your development the standpoint terms pipeline pretty in

Mark Manheimer

Correct. right. That's

Nicholas Joseph

Awesome. Thank you.

Mark Manheimer

Thank you.

Operator

with go Next Jefferies. comes ahead. Please question Tsai from Linda

Linda Tsai

creative was there capital achieve solutions The your way Are capital could achieve other examples us that hi. Yes, that accretive deployment point loan in to receivable mortgage you of to deployment? to target. terms

Mark Manheimer

mean cap of work looked assets I inception from out creative get some better to sure. and today them most for yields rates higher-quality we've the and really ways Yes to I those think better don't. some our so, and of figure

we we center. year I in Club is in the good where Club sell the brought and come was look, that Walmart entire rate. to to example put sell bid an lease transaction where the and and we the the to for junior are Walmart Sam's able a there shop difficult term Mississippi they we're a on boxes us was really looking easy not Walmart for really think Club, Sam's things take hey more entire just a center, had the us REIT the shopping a and last to center X.X% in a kind back and to space that a shopping Tupelo, Sam's came manage so and of and allowed in selling cap shopping that that center was partner trying buy a at of that sell years and and and of part said, and XX two

our underwriting of to we're other you with is the for bit front little creative some big different than I transactions piece which acquisitions in get way So and process, what and a ways in very a I of think essentially think REITs. always low-risk that's of a see looking

Operator

now to for closing remarks. will floor over turn the I you. Thank Mark

Mark Manheimer

going. joining Have the for us a Well, thanks and keeping good everybody we dialog to today look day. forward

Operator

today's This teleconference. concludes

time this your You participation. your thank you for and may lines disconnect at

NETSTREIT (NTST) 29 Apr 222022 Q1 Earnings call transcript