NETSTREIT (NTST) 30 Apr 242024 Q1 Earnings call transcript

Ladies and gentlemen, good morning, and welcome to the NETSTREIT Corp.

First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Amy An, Investor Relations. Please go ahead.

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

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

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

morning our Quarter XXXX First Thank you, Amy, join and thank you all on to us Earnings for taking the this time Call.

the NETSTREIT want to I my team. thanks First, to extend

in to also We REITs one active start two January, the not of been work. as equity program. our kicked raise ATM remaining strong Our year fantastic would while follow-on on to without the have possible year off their only

in their our dry transact physical million gives investment that competition, focused make year-to-date $XXX we which tenants locations through decrease strongest investing continuing to the equity at team pace on powder at retail ample heavily properties We in sectors defensive prices. diligently The remains investment Due drastic profit. year-end. on pursue team have with are a rely to attractive raised nearly to opportunities in current the of to

opportunities We and of also our see tenants investment-grade tenants. tenants which sub-investment-grade low-risk a great but continue only with to with now investment-grade and sector-leading unrated up make profile XX.X% portfolio, not

while buyer execute to has on also And and/or dispositions investments concentration leases tenants we lower and spend, the our better certain pool escalations. the capital in continue rent with to strategic recycle longer into

General the investments From as which strong includes In and in Firestone point to Tractor XX.X% XX cash Supply, Dollar quarter, the blended name XX first [ completed a million nationally gross of perspective, completed X.X%, yield increase. tenant activity new our with the were investment-grade we sequential few. quarter Brickstone of the tenants $XXX at basis over recognized ], such with of quarter of developments. tenants, were closed in quarter-over-quarter completion investment a a Acquisitions a

portfolio Moving sold million retail drugstore to in cash leased with industries. ABR of of our at quarter an $XXX.X At to were in store, XX properties for our $XX.X and XXX the pharmacy, quarter. disposition store consisted activity. properties We X.X% dollar convenience discount tenants end, These the yield million. a investments

Our investment-grade tenants to tenants. or leased investment-grade across in our of XX portfolio XX states with XX XX.X% operate profile industries

tenants Our with has lease leases schedule. on expiration favorable long-term high-quality focus and provided us a

in we rent. end, For XXXX lease in increase a the quarter renewed expiring to subsequent example, one XX.X% for that was

to XXXX. out Looking

minimal and term cash flows. the lease in currently cash average high our expirations expiring, X.X% risk which We impact lease credit on of term. our have stability expiration believe We our quality actively team flow to have of a We near weighted portfolio these positive provides our addressing. ABR is expect and our

our bulk several stores within asset March our to to to Dollar relates to recent intend XXXX the lease have past close commentary I their in which be they headlines. as who Dollar that across Dollar to sales provide stores. some been it concentration year, as Dollar of announced This the In not us tenant Tree portfolio. via Family was Family acquired few this Tree, country, will we wanted Turning and locations over branded of addressing Family proactive years. extensions a the surprise Dollar and

X that our we nature. of remaining which in stores, XX With X Dollar XX our the long those currently last basis of Two stores points that branded a initial stores in having we Family terms years. that We or with lease expires that ABR. already X.X% note leases within were would stores lease the of also months, extended of mind, in own the ABR comprise have term XX XX

As closure productivity our such, none among stores our pleased the and we see in are the initial list. confident to locations of stores, Family were XXX we on the of Dollar

risk relationship Our our investors. with with strong, flows we cash to Dollar them minimize and working maximize plan is and to Tree for continue

the turn points I pertains portfolio to reiterate over couple of call I and Before it sheet Dan, balance tenancy. to a as our to wanted

crosscurrents the growth provide robust believe opportunity to economic and set portfolio tenant our spending, reported the consumer, the to the focus are stable. U.S. negative impact from in which a multiple consumer as as weather should well of it prolonged positioned grow we are pertains there a well health While remain as economy to and

volatile, well-capitalized current externally balance low allowing us highly grow and remain the should and sheet investment competitive on remain opportunistic markets our to should provides Similarly, front, spread us improve for with sufficient while to the also environment the from capital leverage levels. capacity investing

Dan call the for turn quarter. key highlights to to discuss going I'm over the our financial to that, With

Thanks, Mark.

$X.XX $X.XX $XX.X X.X% we of was quarter per million share. which first net and our per year. diluted for quarter FFO or diluted AFFO $X.XX share reported the income increase results, Core $X over earnings share, was or $XX.X at a diluted million was million Looking first last or per

declined $XX.X X% million. G&A year-over-year payments $X.XX XX% while to to Turning severance cash our declined payments saw to the onetime total front. onetime G&A year-over-year severance expense We million, ex ex

In total prior the G&A addition, rationalize quarterly revenue onetime year representing versus G&A to in XX% quarter, ex our of our steadily in revenues severance payments, revenues relative total total continues XX% base. our to the quarter with of

to Turning balance the sheet.

Our which forward end, of the equity includes $XXX.X of all million. impact net quarter total was debt, as adjusted

X.X have average which years our debt X.XX%, exercised maturity interest weighted at January until options, XXXX. debt Our average be weighted is can we maturing extension and rate our is discretion, including no

XXXX that drew term note remaining please quarter, we the $XXX loan. on million During our the

$XX on mentioned, follow-on and front Forward a share million quarter. As were we sold offering. Mark we macro in January, per at the early $XXX constructive capital this the existed Utilizing backdrop over that markets active Equity

opportunistic forward ATM of $XX March. of through year-to-date our with remain million with April, million $X program we in Additionally, including sold sales end the

million, unsettled of Including of $XX.X $XX.X $XXX.X million hand, cash was million liquidity Forward from which available million. activity, At quarter the quarter our end, $XXX.X forma $XXX.X $XXX.X million on million our at unsettled revolving Equity. on ATM and liquidity of consisted of April pro our credit was end equity facility our

Turning to leverage.

our adjusted activity, leverage debt X.Xx. remains well adjusted for was X.Xx quarter declines to ATM pro annualized range Our adjusting Furthermore, targeted million. to to EBITDAre forma below leverage at net X.X our $X.X April of our end, which

no cushion, and year. low end investment we our Equity equity activity modestly below the year still XXXX the additional range can level of required Given targeted this exceed this end with Forward our net leverage

increasing per XXXX guidance to We're low on to range a of our to share the $X.XX. new guidance. end AFFO Moving $X.XX of

million we payments. and to addition, severance In million, $XX.X exclusive onetime G&A of cash range costs to which continue expect between and is $XX.X transaction

XX for XX%. quarterly now quarter cash With declared a Lastly, as amount, XX, ratio AFFO operator, will on we shareholders our Based the to dividend the first of The share. dividend X. that, on Board June the was payable June payout April on questions. $X.XXX record line per for the will open of of dividend be

[Operator Instructions] of is question St. first line the Haendel from Our

Securities. Mizuho with Juste

on is So the we what and my first -- first over what for from interpret deployment means or we extrapolate term. your should question, capital how near activity should I quarter the it guess,

I'm a in be you cost grades curious cap about of buy times allows above You've spreads mentioned the continue your high you few But market? should we can how to of pace rates current capital without to indicative thinking they Are a leverage where getting that at buy here? metrics? and sustainable the your

mean to continue us our opportunity current the with that and of can similar Yes, a deploy you think set sure. capital at expect cost think to pretty I we're I seeing, I pace.

over As it certainly what they gotten we've I attractive far lot as what acquired several grade we've lot past out quarters. have like of the so what spreads interpreted were. and than what Investment-grade noninvestment year, we've acquired looks this more far a spreads a think

estate real profile. in rents think investment-grade noninvestment-grade headwinds facing that the on fungible non-investment whether focused is noninvestment healthy a lot think industries or replaceable, side, grade we've tenants very that on they aren't more with just of Historically, the grade be we we are and that really

kind more you we pricing. lease may side. do think that of up side there on healthy a second attractive year. the as quarter opportunities lot think could seeing we really call are remainder sale grade the fit I we of what some as for we the on half I second bucket, of and attractive. -- get in of back in pretty side a but see see quarter, few Certainly, But of those the the the kind you see to the the noninvestment-grade see investment some much We'll if more opportunities I on that what of think

Haendel, it's Dan. Yes. And

and of or debt want to year the we've think first raised, frankly, equity do As about kind quarter. for through the we we raising look, future raising,

-- fairly can set attractive side the us, yields. market what whether have on if we terms or capital the to So we -- and be be afford the comes more see gets we in it's opportunity can higher to of patient

why we if out may comes be of opportunistic available. X be capital be plenty are are time write over we to we've to quarters. something position this we capital that's environment where able markets is with want next X got whatever the to And the So to

as a achieve a XX-year basis loan cost spread here. given the to debt Got points kind your here? we, maybe on follow-up, guess, continue XXX spot you're bit more your unsecured of XX of think target expect where I more using just how versus it. Should Appreciate or that. term you about ability to Maybe

Yes. now, I in just at mean, billion north gross look, $X assets. of right

our as Forward we nearly bank as the be have, doing the that the think efficient Equity near-term covered XX-year loan where be pace said, not Equity $XXX on, will easily Looking with as is all -- facility. Forward the well about that needs credit our market being by capital are term today to looking market. you we as That to we're million, able to the

XXXX. the mid now. not to And concern we'll -- anything until to it out term to have really looking kind We with early for loans look we're private get do market nature longer we now XX-year really X-year term placements, to have have to where just private don't see of placements, the ourselves thankfully, that capital to right for we is be, not whatever may right in

to on that wanted it. your not second Curious Got Lots. it. list check My and you're question XX generally to? just the in. like get Big tenant is anymore. They're Got market if you'd selling exposure I to is top just what where in

end to cost-cutting the be increase none now Yes, starting hopefully in they of rightsized their need turnaround. Big XX. the in see out I continue confidence helping. are like Lots. last full mean, finally looks day, inventories It of sales But ours, what's year, and XX we another with opened Yes, also to bottom They sure. finally see appears of the versus at improvement Thanks, to start Haendel. kind have closed going monitor really their look, to to we they've stores margins, on which

on So left estate locations. handful that of the we're a really selling relying strong got we've real off those after

infill got retail rents we've locations with Now attractive and below-market corridors.

ultimate really backstop. is price a just There to we're selling potentially to with. for takers the assets. And estate we're those be so more. But we that to some don't have our with We feel like attractive market continues left be real open that's how

see to trigger, to we've a like cap pull feelers I in little bit to more market. the be think really the out us aggressive couple a for rates the we'd of got but

move us I see couple So would shocked more. not be to a

the Appreciate color, guys. Great.

Rose Our is from next Citibank. question Smedes with

terms just landscape pricing? about at Do the just I I higher rates? of more was you longer, point, narrative what you're your call this in taken there's seeing? of people And this about has upward think just I bias think bit kind little is given could with investors, since for assume hold. if what you're you talk has wondering last just seller talk a of what in an Or retreating cap maybe seeing

year, the from it's cuts We we of the feel started on macro certainly X the which But market, during see lot interesting X with didn't or market of least point the rate No, those the like that an equity a kind have expectations cuts year at does it, same muted why call was see, cuts expectation, the sure. banking been Yes, some because coming. at raised way. of coming. time the seller is largely on market really quite kind we that still the in we'd

in is I obviously, December consensus that one Now or nothing all. think might at the we get

And in that lot I little bit a competition think could more there's so And We've would opportunities acceptance keeps the I we our higher-for-longer more on a an actually than that lot be of really a been seen sidelines. expected. of a have market.

be us against selective, to see we're not we allows allows very assets buy where way us negotiate are. the we trying to people that that to really really competing we it to like that the them So are terms other think

So think, I likely will to to think I we're bring the more look have there is like a Fed move seeing going that What first just not and turn back acceptance up. rates start But to a cutting around mean XXXX. quarter, has quarter. in second bit been continued rates and an yes, of us the little I lot the cap

think similar? you it line rates first -- you saw kind sequential or be cap will you Or the said increase with be be quarter? quarter do Sorry, mean of second will the in should what you in

than more getting what rental in sourcing looks we're opportunities term, today I rates pipeline still will of increases. quarter, on second . lease quarter similar have the terms think better similar depending longer but closes, a we have in the still a the We the be -- although in kind the pretty second we're much first. few the what lease with

from is Scotiabank. Our next question Greg McGinniss with

that of acquisition side, capital, or in given the are Or of we the any Or targeting? there now kind out address of terms a of standpoint? and any should there more I'm of now and cost changed maybe industries rates that you're to cap of to your I address? industry able new you're kind changes looking what just concept you're terms to where in able have to just industries curious, you're guess On see from expect target concept same

Yes, sure. I mean specific And seen mostly Dollar to you've General.

You've that move seen a that quite developers concentration year. up last to funding we was bit. of committed A that lot

less maybe So I that, think funding what of in of little some it, call to bit past. that's months be we've X the going seen or X kind got but than you've a of another left

leasebacks just not it's You portfolio. will XX, that across broadly into to see sale collision we development new few are top a maybe the portfolio. close come a that There's the attractive seeing side think had us of into do the the XX, We that kind important our increase opportunities diversification tenants some in in are for other And but the few haven't active space. been with get we've we popped on and in there past. the top only the

lower, So portfolio I to cap rates that have call able not into to will a would I XX in months been portfolio. very think much we find been XX, be the we would new think that you tenants put few ago and the attractive see have pop it,

Have to side any some you've escalators in that on terms terms changed? that different deals been negotiate there to have Okay. build previously them. the other those side, of didn't able escalators being changes market then been I or that an previously the And leasing development of you as mentioned into believe on able development financing has

yes, I historically mean, I much been getting not a we're in I think better leases of But that rent Yes. quarter-over-quarter. escalators mean flat. have change

portfolio being tenants in some term So turn change a program, that big around some and bringing of and leases of with driven but leases quarter-over-quarter. we has those recycling do longer of that real that's focused been on, able bumps something less with then slightly now the better flat the and of capital accretively out our to with rent selling no lot

Okay. the debt you But talked bad Apologies this. for addressed for And into year? already have guys final you expectations me. about guidance if built

Yes, did we on last the call.

guidance at I here an think sit AFFO between the of still our on annualized range. to modeling as we today, basis still end we're points basis, -- XX we're somewhere XX high

is of Our the question next from Alec Baird. with line Feygin

sale? categories for First what one you about are held just can assets that for talk the me the in are is,

got around type. of We've of mix I Dollar Lots Yes, recycling the where it's Stores a but a we're and pretty property mentioned big it's broad mix. of the pretty lot of Big improve to through some a escalators, the there that kind

on may for the those XX stores it. them? And if is, the need one you at Got market for release you second the rents color where properties, Family is think provide in some the and did portfolio Dollar current to in-place

you're mean property, per annual I to $XX,XXX Yes. rent. so $XXX,XXX talking in about

think sites. inexpensive rents the very we've and their largely there to That tenant we commitment very profitability are So closely replaceable. being with and that said, the our worked understanding

about, would to of pretty do various at lot assets infill think are similar or that that tenants that So and list of is close could from list. of but locations, stores pleased a higher rents different But still a potentially on we going those lot have feel they rents. we take see interest if that being ours said, close . even were certainly couple a good they're ours of to we to as XXX -- as their always none there many they're that locations talking first

from Dennerlein question America. [Operator of is Bank with the line Instructions] next of Joshua Our

you what investment Josh. on touch to know of today? seeing behalf can wanted if you on Granath to where you're capital Farrell I could relative spreads is This in deploy

most mean, the going Yes, I second X.X be quarter. into kind going think the to quarter you're not getting have into I'll the visibility only really sure. take kind I piece, of which is second as out in quarter expect third. the as We to similar first recent of and far

tough a earlier of but raised spread where year. gives this pretty certainly beyond healthy to us capital we project So that, off

watch Dollar. know on I And and any on Great. Big . Lots list. Family curious already if tenant other was you there's touched color I

nothing I a on income Yes, focused how mean really of type that we the than our give seeing customer sure. and watch color on lower tenants, I where mix the discretionary mean, are that. on we're bit who you more is, To little the is list. product that's product they're their and consumer, kind if mix pressure. of

overall healthy. consumer is The

consumer you struggling. been And consumers. those gross come of it's of in mean And XX%, that been margins look and of but so on to from kind consumer their I come the some passing upper doing pretty of trouble has of why healthy, the that a with XX-plus see certainly topical. is Walgreens out kind well, middle a XX% to lot tale the really seen inflationary you've cities see tenants is you kind costs lower end That's where but having X on percent. numbers government kind of

cash their impacting really that's So flow.

that out the ahead tenants. so we're And balance then of sheet making really our at types of those we're risks. of And getting looking sure

debt, going a years if it's that there's But be finance concern. Fortunately, it of to themselves refinance is to was their there lot lot of they more few a expensive in ago. much tenants these a not when have than really

been some challenged is these access even And for debt likely has ability the tenants. to more of be to just

popping list we're getting -- of nothing on. yes, to that that the this that's really on focused things is So rises watch up at But our are point. level those the

is what's that was also Okay. anything investment And hesitancy to there maybe in market net Or leading waiting to some providing you're I a the curious, guidance? see? on

cap of markets think over Yes. making in some obviously. of of I year, really Obviously, a sense see a the the potentially mean And up. to the wanted number made to rates lot change past out we're think Xx or we years, been it wanted couple over and I early in it progress didn't volatility there. we the to come -- really move really a We year. with X lot then there's

last overall, on to But that for a is I can you similar good haven't environment think a year. think deploy guidance similar to that, that which manner, we given but a us acquisitions, expect quantum in the if think capital persists just did way at I about we

with Our next is the Markets. Thomas Capital line Todd from question of KeyBanc

This current volumes? Nag-Chaudhuri this investment on your it Thomas. pipeline discuss Todd discussed for you you is XQ could XQ but if just already, and stands where Apologies about thinking and Antara

fairly similar. the conditions the volumes to sure. mean to be evenly spread probably will think market year Yes, continue I I over be if continue

deals don't change I a bit so you'll us see little little category And how but developing may in in development little much we leaseback yield a than or bit third to see -- have second much more for we that that deploy probably of couple a quarter, the or in too the are a out, or think funding for past. a we're and the more you some of chunky figure bit in out sale quarter, far

Or trending you higher? a on . sub-X are cap are rates achieve Got And able to rate? it. cap Okay. disposition disposition still pricing,

sell, going bit. what rates trending moved to drive But on higher I have that think bit. And They're cap a depending margin. we little little the a bit on a little it's up

the I the out and side disposition of want buyers. us kind dispositions issue there many really we aren't on as approach been just getting to figuring has is think how

And side not competing the want the with where so we acquiring that on really to acquisition us we're properties anybody acquire. for that helps

little takes it a side, little the in they've bit and on buyers a been been than then flakier But bit past. have longer disposition the the

at up sure likely be a we're think deal of something But bunch bit and selling potentially could debt looking very that of dispositions. top what have that this moved quarter incurring we're not So a X%. on making little staying we're below I costs in that's But on rates costs. just cap

the there closing conference I hand As Manheimer Mark? to now questions, further Mark over no for comments. are his

everyone, you, support, day. really appreciate joining. thank a the I Well, great for and have

of has you. NETSTREIT Thank now for Corp your The conference concluded. you participation. Thank

may disconnect lines. your now You