Earnings call transcript Q1 2023

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Operator

Good day, and welcome to the NETSTREIT Corp.

First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, that today’s is being recorded.

At this time, I would like to the conference to Amy An, Director of Investor Relations. Please go ahead.

Amy An

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

the distributed updated press close, to company's the addition In release of section a can found the package Investor both Relations we at yesterday supplemental and presentation, an www.netstreit.com. investor website be in posted market after

as of remarks Private Securities the management's call, your XXXX. today's in answers to questions Reform defined Act may On and contain forward-looking statements Litigation

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

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

certain financial non-GAAP we measure, and our non-GAAP In measures comparable to call presented earnings measures. financial believe package most Please information non-GAAP for investors. addition, useful this release of to are why definitions an of explanation our reconciliations supplemental on includes to such financial measures, and refer GAAP

will the call some then NETSTREIT's is hosted They Officer, remarks Executive Manheimer; prepared Chief call open for conference Financial your Dan we Donlan. Chief will and and Officer, Today's Mark by make questions.

turn Mark. will Mark? the to I call over Now,

Mark Manheimer

morning, everyone, Good and welcome quarter XXXX to conference call. first earnings our

Dan. generate to value new experience Dan the and shareholders. and CFO REIT sustainable to pleased our is platform, Treasurer, to welcome and am aboard, corporate strong for to brings team. he I finance, the our long-term helping Welcome Donlan begin, NETSTREIT we capital company Before to committed operational Dan markets

markets to backdrop. had We Turning despite volatile to uncertain macroeconomic start quarter an the and active our the environment first year an results. capital

inflation, Our best-in-class exceptionally and higher of portfolio volatility. to in concerns, persistent well perform rate face interest recession increases the continues

any and profitability collections our has occupancy, maintained disruption rent and have We minimal. been XXX% to XXX% tenant sales

our to dry of and capital accessing XXXX conditions meet portions we ample quality locking that capital structure investments when supportive, good in of were powder prudently the make significant thresholds. with a spent portion return Having our by XXXX started

a we weighted two $XXX.X million, XX a weighted a X for secured $X.X and yield two investments quarter, projects including million completed support $XX.X additional to average yield billion of average at properties the cash cash $XX.X funding were of the X.X%, weighted loan of cash X.X%. for $XX.X million by of and for completed development investments, development which million $XX.X X.X%, During of at at acquisition ongoing yield properties senior average [ph] XX million are projects dispositions of net

Notably, industry lease ABR, and with levered today were better this terms these based and total transaction Overall, grade investment-grade investments remain investment tenants. seeing sidelined. we opportunities year, financing attractive a healthy last time first buyers as are less while on pace of profile than market with quarter the contingent remains of XX% at active net prices

to net our our have the pace take a investments slightly we investment activity will of taken approach continue us pursue. quarter has first XXXX versus judicious ahead While we and to target,

We pricing the are standards to of we when assets. takes disciplined when capital staying - comes and underwriting our extremely are it credit and in it mindful deployment,

maintain stress on has our a variety the banking created As environments, strategy be opportunities over in opportunities net years capitalize to in the we regional past market, have has dislocations X provided can they sector us nimble the as growth demonstrated momentum. transaction through and we lease of with Currently, which macroeconomic arise.

with of the remain a This our helped communication where counterparties We number expand NETSTREIT. increasing industry tenants, solutions-based and of solutions developers existing provide number see while returns. relationships best approach the constant other growing with has in to financing landlords risk-adjusted opportunities we for

seen XX alternative have $XX stores our mortgage we investment purchase million mind, loans In leased X-Eleven. structures, of funded first in for increase loans. borrowers quarter, convenience of subsidiary With including that we to the an in a of Speedway,

The position us. and The are XX%, weighted with is in we ahead loan-to-value a and first of average lien rate capital of of approximately no loans term collateral X-year interest X.X%. the underlying a have

larger While this addition is creativity outsized for risk-adjusted provides demonstrating a deploying NETSTREIT loan us, exposure to capital. our to in it value in

Tenants XX XXX% our investment-grade represented ratings or investments XX, contributing comprised annualized ABR. with March base At was million tenants, of XXX profiles portfolio XX% rent. of with of $XXX.X occupied investment-grade

our quarter, is our A $XX.X return And recycling accretively of part first longer million. in X risk meets criteria. the or for sold value no we key execution is the capital where properties

investments X.X years receivable, of expiring total average only in weighted expirations with term XXXX. loans X.X% portfolio mortgage the with a of lease ABR and associated Excluding lease through XXXX no has

Furthermore, As potential look continue of profile and we our flow despite continue return uncertainty, portfolio durable economic our scaling investors. while balance total high-quality managing our to we focus on to attractive of position. balance sheet XXXX, the compelling ongoing for will cash stream believe growth and to we offer prudently liquidity tenants

the over first guidance. and results to With XXXX turn Dan financial I'll to call quarter that, our go over

Daniel Donlan

months. NETSTREIT. Thank thank I'm spending more the the I with broader look over the lie opportunities and us everyone community that Mark, excited and ahead weeks you you, today. to time forward coming incredibly joining about investment for to

of Turning core reported net quarter of $X.XX share. $X.XX, earnings. diluted AFO to income our We $X.XX, of first per FFO an

our should and G&A G&A As senior we fully the team, relative a asset management with to to built-out our expense as to executive rationalize our base continue portfolio. pertains it grow

all million debt interest debt including rate swaps of of consideration targeted impact remains leverage below fixed of sheet balance of our our the rate, net of giving X.X weighted to with annualized X.X X.X times. After to range outstanding times, well the X.X%. a settlement was XX, contractual average March adjusted total shares, our $XXX which EBITDAre approximately At forward had to

which net issue to a shares generated used million average Moving ATM on $X.X proceeds. the at of net [ph] in activities XXX,XXX our weighted to capital XX.XX of markets We quarter. price

million pursuant addition, our net of equity August the million XXXX, forward approximately which we offering proceeds. X.X in settled to $XX generated shares in quarter, In

XXXX, X.X remained million XXXX As the million forward of March or sale approximately August shares $XX unsettled agreement. under XX,

Regarding our the be the April $X.XX XX quarterly Board on dividend our as for declared XX%. of dividend shareholders AFO June regular XX, to record X. of was on to dividend, payable amount, payout a cash ratio this on first quarter June Based

guidance. XXXX to Turning

investment range of XXXX. acquisitions, million per We are receivable of including in dispositions $X.XX. range least activity, share developments maintaining This and $XXX completed assumes mortgage our net loans to at $X.XX of AFO

open for we that, line will the With now Operator? questions.

Operator

Eric Today's proceed. comes question-and-answer Citi. from session. Please first question Wolff Instructions] with We will now begin the [Operator

Nick Joseph

loans on It's could here you morning. balance new deals? how walk Good Nick look acquisitions about and kind appetite preference those Wondering sheet versus Thanks. to of Eric. actually with underwriting differently you Joseph if or through think between the as you your

Mark Manheimer

maybe rate. return what and and felt for LTV Speedway the that loan X.X% was there a little really as the where an we're think like Yes. we outsized to equity I position XX% in all of Look, was we taking the risk one-off saw the yes, relates a it only return bit stepping of risk a kind not at ahead interest getting of a

the appear future. think in I probably not that's again likely to

bit about I a outsized in doing would as the I in be little the a think maybe So to of piece future, smaller first being what certainly, going quarter. it think we're

doing volume probably the basis. of we'll on somewhere go-forward in think be a X%, I neighborhood XX% of

buying Of quarter-by-quarter. closer properties. little a kind to of down expect can we're bit would move course, and yields where that those up I And to be

properties is market transaction have be to the with sell needs the their sellers that this certainly seeing were to now, Right year time typically or okay that pricing influx sell properties we're reason be them now a to there last eager their for today. to from to to

kind as a lot those avenue relationships of risk-adjusted of us was bit little this strong really with in building returns. well So of sellers, as an future of a sprinkling

But down eventually start I to risk we're replacement huge little and we think think loans road. what to off about paid going we any to a those minimize that bit are part hesitant to the make just a want do, as get of

Nick Joseph

helpful. average versus on to really how with comfortable And to current, you investment expand cost thinking but Or there of guess, And current deals? capital, are acquisition That's weighted to you cap rates? do Thanks. do the about even who need do accretive equity want spread? you are then caprice a basis more just I if you

Daniel Donlan

our should targeted to Dan you range Nick, where of capital. Yes. balance using within spreads to X.X I it's and highly continue at the leverage our impact Donlan. be Look, deploy mindful our and expect relative X.X equity can the sheet us of first And with investment prudently we is average judicious we our leverage weighted maintain cost manage [ph] given Ford times. X.X to today foremost, of capital think we're as to how of today

said, look relative you can to at points cash where flow XXX from can about getting anywhere investment of the XXX source That believe and years, debt to you to we we when of think basis equity, current excess of deploy in our impact X our cost we're of where spread free capital we today.

Nick Joseph

to with does that XXX history? And you're How that to compare XXX. comfortable

Daniel Donlan

Yes.

higher that that's that little we're to environment. norm, much And deploying with but a I to a in course, closer capital certainly we we interest bit of be historically, we lower spread. want when were been of are rate type think the - comfortable

Nick Joseph

Thank you.

Operator

Todd Thomas with KeyBanc Markets. Please from The Capital next comes question proceed.

Todd Thomas

thanks. Good morning. Hi,

circle wanted back to to the investments. Just loan

to be forward think other for To the to relative So is overall said I large extent might X% loan right be portfolio there going the opportunities the book a sheet to a that that might XX% that think how as but as sort you govern way additional well. on book would in balance of of or investments maybe volume threshold? threshold have about future? is loans there the the it, you arise,

Mark Manheimer

going future. a right a case in tightened think now, I loan which to And we're the side, situation don't I opportunities is the there's be the Yes. where long on in think into necessarily position

term, book probably let they're created equally. I not don't want barometer. although So to all get of north loan a that's good think XX%, We in the short our

us at those loans So going the that assets. think the of convert looking those ownership into done are up either I we've fee having in past, end those where will back to

think, pretty to that be there to for off wouldn't get So capital easy redeploy us are, the take paid that accretively. I and income at any rates or disruption we

are of mind those in the about so of of a a kind risk. as think reinvestment kind we less little risk my bit And

counterparties. you've yes, LTVs at of higher, all But to group think harder developers types for banks. regional of I going likely harder in get that It's on loan typical of be a a kind debt relied and types these other got lot historically of get is had to the type to the future of

opportunity step an XXX% there's we now, of transactions. for us right capital or own property, of the so provide and XXX% flow time, a to the and or collect of XX% of the - [ph] XX% And of of capital and all cash each where kind of in provide ROFRs on the capital get those for period of

new is that XX% of some trying we're redeploy and to off we So accretively. and each to on loans get then the we of the don't loans our to \-- capital want of can't there have to and are balance going take paid these, really book, our

it. So just it that's to don't get I threshold XX%. really a But the about north of purposes, thinking way we're going for modeling looking let if of we're you're think for kind that

Todd Thomas

loan I the of some detail you guess as terms underwriting other some the to sort general, in of reinvestment provide be risk disclosure might order then in And just of important some around and additional for rates to in the there do that modeling portfolio loan it. grows plan Got purposes? and dates, purposes that terms maturity Okay. for

Mark Manheimer

helpful we've we'll as mean give like we would picture we the it adding risk. certainly quarter, feel something kind the should that our to consider. disclosure a I I into of relates investors But that portfolio, already into added to which story, I evaluate think think credit clearer this is some in to if have understand to start Yes. loans we as of that

which of of want bit if like off little to at reassess different we'd a than the the negotiating if loan, be to extension loans, and and sooner maybe we X-year more that, having approach, And we maturities, some loans, latter kind to at to some as others time. we've of then get take be whether as about able like fees we've it a be XX-year taken peers kind kind seen loans relates that's X-year the back loan versus we of paid prudent table tact extend the things think XX, or to like maybe

the So capital disclosure that you within provide understand and we'll think sure how But deploying I investors are to on what make exactly evaluate. we're rely to certainly, portfolio. can us the risks

Todd Thomas

curious, contemplated two in then the call your a that acquisition terms at, was And loans, XXX, Was to it is guidance, or of the which anything Okay. it, in yields. point I'm guide $XX as pertains then the impacting almost basis that just just XXX the offsetting loan maintained, you there some sort of yield guidance, on million investment of are premium premium to guidance? those And that the is other side? yield that

Daniel Donlan

thought out it yes, two the given guidance. before wait months the and ago, in contemplated in - that now, range. of It's to our a was months this set revisiting Dan there guidance And loan right guidance a Look, only few prudent look, world lot there's just volatility Dolan. we we

Todd Thomas

All great. you. right, thank Okay,

Operator

question Please from next with Our McGinniss Greg proceed. comes Scotiabank.

Greg McGinniss

the In range going when acquisition morning. and are normal on helped in investment mortgage you in that acquisitions we guidance about about to investment the opportunity good to market thinking net What X% the course had QX. that set the maintain Speedway volumes XX% confidence that's for volume offset thinking giving secured Hey, you transaction loan where forward? lower seeing loan

Mark Manheimer

Yes, sure.

So that moved coming enough think due now though, reasons where mean, continued comps of various seen have cap trouble sell. did to even sellers I want year the got or rates they're debt believing why that obviously, they've rates coming from much migration we've late yes, a they've other last not had some as moved. We're to I as having they table. there out interest seen And had

that foresee that like or cap call, okay, either sell rock that line anytime to say, hold seeing I that trying the transact. much the soon. And we're to they to as about then of really rates bucket sellers people And the dropping last second don't bucket the What we talked can. need need on ones as I a

had us, And to second lot there in continues opportunities year. because so but - side as increase, opportunities bucket than be selective that it And certainly the we to had the the extraordinarily for to is I fee a just we're relates more opportunity loans simple we've that think seen we've grow. as on it the certainly and earlier seeing

Greg McGinniss

a opportunity added I there, viewing some pipeline, like Thanks. us you it Can merchant are - looking couple you with at of look to builders Then other quarters. development like of Great. sense capital? the of give looks developments partnering haven't how as what projects any think, compared might in uses that you today or

Mark Manheimer

Yes.

saw We've sense. relied selling been the to coming on developing more lot has them quite when cap into had historically much we some to the rate out, kind going willing from the made some we stress of a thought rates the time. ones XXXX historically grow about that are some than merchant to certainly a you willing we're developers on basis come banks properties institutions of were some that acquired regional But properties think the are So when that and go. for to stores with which to tenants market, for aggressive trying cap of and they

That ways decision just funding partner that pressure made other the has to with the development. build, to there and continued developers than we are

some of we'll the number those of been transactions, think their be some transactions pretty but by yield come working I takeouts loans favorably likely more couple or A should either we the And results. like at on pretty will a And so, fruition, of to that equity I the disclosure positive next end the do. have likely creative as I we've quarter, of we got buying some providing in the be providing we think of should viewed pretty they bit they a be market after think in past those on little and properties.

Greg McGinniss

development expect see to just Thanks, And that we use? pipeline that, so as should capital down to probably other come investments the Mark. clarify offset on

Mark Manheimer

necessarily. Not

whether funding typical to are ownership, right There's already, of loans into and developers, they we a some on up the that of it's convert that are have takeouts, counterparties negotiated. So could some we're just equity construction. end fee those the lot be or which of of now, regular loans which types just structuring just investments, our potentially at end right a but development, transactions still being in now some the of takeouts working how equity of of number going closed are pipeline

Greg McGinniss

you very the Appreciate time. Thank All right. much.

Mark Manheimer

you. Thank

Operator

The next from proceed. Dennerlein Please question comes with Bank Josh America. of

Unidentified Analyst

Grant Hi. for Barel This is Dennerlein.

the been investment-grade ask base, wanted so about, is competition you've your as tenant been like? assets to for just And what I these looking increasing

Mark Manheimer

Yes, sure.

I'd what on is firms mean the past. family competition stack. the or is we've capital So private I some offices even a have using be equity leverage seen the part buyer, that overall, versus mean, muted of capital that say their very I larger much relied whether debt big in

They're that largely the achieve and go of for and go transactions to debt. XXXX some when they community It's and become source out out the try some difficult get yields need to to then to buyers their very market. of they these bank try

environment up volume the quarter, really set seen but I fourth versus think with first So operating the transaction pick we're we've in up the quarter not competition. and pick only quarter second opportunity industry-wide significantly in and less an

Unidentified Analyst

Great. Thank you.

Operator

Our Baird. with Please comes next question Fagan from proceed. Alex

Unidentified Analyst

color team, stuff about any that and Hey, a external maybe the guys. can Dan. I detail the pipeline seeing? more question and you're Welcome if opportunities on you the have to more some growth provide in what's

Mark Manheimer

Yes. us I lot similar. tenants acquire the you'll see think of be mean a what I will

names our that get may some new we've of long period there in in will tried portfolios. a come a for time I smaller portfolio couple that think of be to

little quick see a about in buy dollar area of more what a little excited area bit the quality grocery in at and the restaurants you'll little but the we've the we that seen cap had that of really So service that do we're the is historically discounters past movement us, ones and another us to sector, some bit been credit store than business have opportunity with there. too seen Typically, some we've for for make cap the us. we rates bit aggressive have a that's sense tried certainly rates

other it names. the new think than see likely we've been few much from - you'll I past a won't So where deviate in

Operator

Our next with Please proceed. question comes from Linda Tsai Jefferies.

Linda Tsai

what to the From multiple Hi, the versus portfolio? kind assign loans valuation of would morning. good a you of perspective, rest your

Mark Manheimer

it's the of And smaller - Yes. it pretty certainly a be be portion certainly what similar I future think of in doing will And cap rates. portfolio. lot at the a we'll

So think of there. too needs to necessarily I there much don't be differentiation a

Linda Tsai

you. Thank

Operator

The Ki Bin comes Truist. proceed. Instructions] Please next from [Operator question with Kim

Ki Bin Kim

morning. loans go that want Good What coverage to like this I you Speedway? back Thanks. made interest the the just quarter. does look from to

Mark Manheimer

Yes.

all taking essentially of we're in rent the So X.X%. that

cap rate about rate buyer's the the So cash flow. X.X, all the we X.X% was perspective, from and of the it on a transaction then cap collect

what's have for they them for this reason CPI uncapped interesting is I X.X that the was borrower years. should opportunity interesting the an and in be hitting why think bumps, which about

lot with we that do associated opportunity on those And terms hit, those properties depending either for will this creation at in be out point or them when want could of to there we certainly, good the hit. so that CPI to But could bumps what value a increases time. refinance when a extend be

as they've they developer, strong opportunity large really a have X-Eleven And really the this to of the how got which location. good the relationship is introduced a tenant, to with and borrower performance the insight were directly so is

strong paying. but that certainly So them, rate the own the was at would to just portfolio. not borrower a really We like cap

Ki Bin Kim

payment. look entire asking about four-wall And the for that the just was clarify, I coverage like? What to does interest

Mark Manheimer

Yes.

So it's times. of they - north X

Ki Bin Kim

make can sub-investment incremental changes are tenants of of Okay. if like remind profile And your what any tenants from kind you banking And you up the portfolio? pressure we've that seen? those grade group us types of the seeing within any

Mark Manheimer

Yes.

and did going term. of getting of the big we that privately and portfolio locations to that's back and portfolio the we to mean raise to before what out we the restaurants, want both quick that tried was of So going and a own long be to capital, lot publicly, part tenants service to I not out did went is XXXX a all

those a high what left lot so a And you'd than some coverage’s, we're what the that locations maybe general, - best see hang of was what and in of on I extraordinarily sub-investment-grade with to the of to us we those properties. that the peers lot risk-adjusted we're from think is portfolio service with quick that with return in generate left in for rent like in feel higher locations restaurants

Ki Bin Kim

you. congrats, Thank And Dan.

Mark Manheimer

you. Thank

Daniel Donlan

Bin. Ki Thank you,

Operator

like queue, At for this further turn would in there time, Manheimer remarks. our does closing conference to Mark back questioners session. no the any the to are over question-and-answer and conclude this now I

Mark Manheimer

We all Thank you joining you for all today. very again soon. look forward to us speaking with

Operator

The has disconnect. conference for now attending today's presentation, concluded. Thank now may you and you

NETSTREIT (NTST) 27 Apr 232023 Q1 Earnings call transcript