– Reports Net Income of $0.05 and Adjusted
Funds from Operations (“AFFO”) of $0.29 per diluted share for the
Fourth Quarter –
– Net Income of $0.16 and AFFO of $1.16 per
diluted share for the Full Year 2022 –
– Completed $480.2 Million of Net
Investments in 2022 –
– Issued 21.0 Million Shares of Common Stock
and Closed $600 Million Sustainability-Linked Credit
Facility–
– Provides Full Year 2023 AFFO Guidance of
$1.17 to $1.23 AFFO per diluted share –
NETSTREIT Corp. (NYSE: NTST) (the “Company”), today
announced financial and operating results for the fourth quarter
and full year ended December 31, 2022.
“We are pleased to announce another strong year of portfolio
performance and prudent investment growth even as economic
uncertainty and Fed policy created both challenges and
opportunities. We are extremely proud of our accomplishments in
2022 as we continued to execute on our strategic goals. Our focus
on credit underwriting, real estate fundamentals, and strong store
performance coupled with being disciplined on pricing and capital
has enabled us to accretively build one of the net lease industry's
highest quality portfolios,” said Mark Manheimer, Chief Executive
Officer of NETSTREIT.
Mr. Manheimer continued, “We have and will continue to be
opportunistic in raising and investing capital. Our team has
continued to find acquisitions from a variety of sources at cap
rates above those found in the broader market without comprising on
asset quality. Given the strength of our team and the groundwork we
have laid, we are optimistic about our ability to continue to
deliver shareholder value regardless of the economic backdrop.”
FOURTH QUARTER AND FULL YEAR 2022 HIGHLIGHTS
- Net income per share2 of $0.05 for the fourth quarter of 2022,
flat versus the prior year period
- Core Funds from Operations (“Core FFO”)1 per diluted share2 of
$0.28 compared to $0.25 from prior year period
- AFFO per diluted share2 of $0.29 compared to $0.27 from prior
year period
- Reported net income per diluted share3 of $0.16, Core FFO per
diluted share3 of $1.10 and AFFO per diluted share3 of $1.16 for
the full year 2022
PORTFOLIO UPDATE
As of December 31, 2022, the NETSTREIT portfolio was comprised
of 427 leases, contributing $99.2 million of annualized base rent4,
with a weighted-average remaining lease term of 9.5 years4, of
which 62.9% were with investment grade rated tenants and 17.2% were
with tenants with investment grade profiles6. The portfolio was
100.0% occupied as of December 31, 2022.
INVESTMENT ACTIVITY
During the quarter ended December 31, 2022, the Company had
total net investment activity of $91.8 million.
In the fourth quarter, the Company invested approximately $99.9
million in the acquisition of 23 properties at an initial cash
capitalization rate of 7.0%. Acquisitions completed during the
quarter had a weighted-average remaining lease term of 11.2
years.
The Company commenced rent on one development project that had
total costs of $4.2 million and a weighted average investment yield
of 6.1% during the quarter. The Company also provided $7.8 million
of funding to support on-going development projects.
The Company completed three dispositions for $12.3 million in
total contractual sales proceeds during the quarter, which equated
to a 6.7% cash capitalization rate.
The investment grade and investment grade profile totals for
acquisitions completed in the quarter were 53.6% and 44.0%,
respectively, based on total annualized base rent. The quarter’s
transaction activity increased the total tenant count from 77 to 80
tenants.
During the year ended December 31, 2022, the Company completed
$438.5 million of acquisitions in 105 properties at an initial cash
capitalization rate, including acquisitions costs, of 6.6%.
Acquisitions completed during the year had a weighted-average
remaining lease term of 10.7 years. The Company provided $22.0
million of total development funding in 2022 including the
acquisition of two new build-to-suit projects with an initial
purchase price of $1.8 million. In addition, the Company commenced
rent on six development projects with a total investment amount of
$22.0 million During the same period, the Company sold seven
properties for total proceeds of $26.7 million, recognizing total
net gains of $4.1 million.
BALANCE SHEET AND LIQUIDITY
At quarter end, total debt outstanding was $496.5 million, with
a weighted average term of 3.7 years and a quarter end contractual
interest rate, including the impact of fixed rate swaps, of 3.4%
(excluding the impact of deferred fee amortization). 77% of the
Company’s debt was at a fixed rate and the Company’s net debt to
annualized adjusted EBITDA ratio was 3.4x, after giving
consideration to the settlement of shares pursuant to the August
forward sales agreements. Excluding the settlement of the forward
shares, the Company’s net debt to annualized adjusted EBITDA ratio
was 5.0x.
During the year ended 2022, the Company completed the following
equity issuances:
- In January, the Company entered into forward sale agreements
related to 10,350,000 shares of its common stock at a public
offering price of $22.25 per share. The Company has fully settled
the forward sale agreements receiving total net proceeds of $216.0
million.
- In August, the Company entered into forward sale agreements
related to 10,350,000 shares of its common stock at a public
offering price of $20.20 per share. On December 30, 2022, the
Company settled 2,973,944 shares of common stock, receiving net
proceeds from the offering of $57.0 million. As of December 31,
2022, 7,376,056 shares remained unsettled under the August forward
sale agreements. The Company will have until August 3, 2023 to
settle the forward sale agreements.
- During 2022 the Company issued 276,060 shares of common stock
at a weighted average net price of $20.75 per share in connection
with the ATM Program for net proceeds of approximately $5.7
million.
The Company closed on a $600 million sustainability-linked
senior unsecured credit facility, which consisted of a $400 million
senior unsecured revolving credit facility and a new $200 million
senior unsecured term loan, with an additional $400 million
accordion feature. The revolver will mature in August 2026, with
the option available to extend the maturity for an additional year,
while the term loan will mature in February 2028. The term loan is
fully hedged at an all-in rate of 3.88%. The Company’s existing
$175 million term loan was fully hedged at year end at an all-in
LIBOR based rate of 1.36%, and subsequent to year end was moved to
an all-in SOFR based rate of 1.37%, will remain outstanding through
the maturity in December 2024.
The December 31, 2022 cash and restricted cash balance was $70.5
million and the Company had $287.0 million outstanding on its
revolving line of credit. Currently, the Company has total
liquidity available, which includes cash and restricted cash,
unsettled equity forward contracts and undrawn line of credit
capacity, of $499.0 million.
DIVIDEND
On February 21, 2023, the Company’s Board of Directors declared
a quarterly cash dividend of $0.20 per share for the first quarter
of 2023, which will be paid on March 30, 2023 to shareholders of
record on March 15, 2023.
2023 OUTLOOK
The Company is providing full year 2023 AFFO per share guidance
in the range of $1.17 to $1.23 per share. The Company expects net
investment activity, including acquisitions, developments where
rent commenced, and mortgage loan receivables, net of dispositions,
to be at least $400.0 million in 2023.
Certain of the forward-looking financial measures above are
provided on a non-GAAP basis. The Company does not provide a
reconciliation of such forward-looking measures to the most
directly comparable financial measures calculated and presented in
accordance with GAAP because to do so would be potentially
misleading and not practical given the difficulty of projecting
event driven transactional and other non-core operating items in
any future period. The magnitude of these items, however, may be
significant.
EARNINGS WEBCAST AND CONFERENCE CALL
A conference call will be held on Friday, February 24, 2023 at
10:00 AM ET. During the conference call the Company’s officers will
review fourth quarter performance, discuss recent events, and
conduct a question and answer period.
The webcast will be accessible on the “Investor Relations”
section of the Company’s website at www.NETSTREIT.com. To listen to
the live webcast, please go to the site at least fifteen minutes
prior to the scheduled start time to register, as well as download
and install any necessary audio software. A replay of the webcast
will be available for 90 days on the Company’s website shortly
after the call.
The conference call can also be accessed by dialing
1-877-451-6152 for domestic callers or 1-201-389-0879 for
international callers. A dial-in replay will be available starting
shortly after the call until March 3, 2023, which can be accessed
by dialing 1-844-512-2921 for domestic callers or 1-412-317-6671
for international callers. The passcode for this dial-in replay is
13734721.
SUPPLEMENTAL PACKAGE
The Company’s supplemental package will be available prior to
the conference call in the Investor Relations section of the
Company’s website at www.investors.netstreit.com.
About NETSTREIT
NETSTREIT is an internally managed real estate investment trust
(REIT) based in Dallas, Texas that specializes in acquiring
single-tenant net lease retail properties nationwide. The growing
portfolio consists of high-quality properties leased to e-commerce
resistant tenants with healthy balance sheets. Led by a management
team of seasoned commercial real estate executives, NETSTREIT’s
strategy is to create the highest quality net lease retail
portfolio in the country with the goal of generating consistent
cash flows and dividends for its investors.
(1)
Non-GAAP financial measure. See "Non-GAAP
Financial Measures".
(2)
All per share amounts herein include
weighted average common shares of 54,991,093, weighted average
operating partnership units of 514,706, weighted average unvested
restricted stock units of 209,226 for the three-months ended
December 31, 2022.
(3)
Per share amounts include weighted average
common shares of 49,517,977 and weighted average operating
partnership units of 526,859, weighted average unvested restricted
stock units of 248,602, and weighted average unsettled shares under
open forward equity contracts of 138,384 for the twelve-months
ended December 31, 2022.
(4)
Annualized base rent, or ABR, is
calculated by multiplying (i) cash rental payments (a) for the
month ended December 31, 2022 (or, if applicable, the next full
month's cash rent contractually due in the case of rent abatements,
recently acquired properties, and properties with contractual rent
increases, other than properties under development) for leases in
place as of December 31, 2022, plus (b) for properties under
development, the first full month's permanent cash rent
contractually due after the development period by (ii) 12.
(5)
Weighted by ABR, excluding lease extension
options and mortgage loan receivables.
(6)
Unrated tenants with more than $1.0
billion in annual sales and a debt to adjusted EBITDA ratio of less
than 2.0x.
NON-GAAP FINANCIAL MEASURES
This press release contains non-GAAP financial measures,
including FFO, Core FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre,
NOI, and Cash NOI. A reconciliation from net loss available to
common shareholders to each non-GAAP financial measure, and
definitions of each non-GAAP measure, are included below.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such forward-looking statements include, without
limitation, statements concerning our business and growth
strategies, investment, financing and leasing activities and trends
in our business, including trends in the market for single-tenant,
retail commercial real estate. Words such as “expects,”
“anticipates,” “intends,” “plans,” “likely,” “will,” “believes,”
“seeks,” “estimates,” and variations of such words and similar
expressions are intended to identify such forward-looking
statements. Such statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from the
results of operations or plans expressed or implied by such
forward-looking statements. Although we believe that the
assumptions underlying the forward-looking statements contained
herein are reasonable, any of the assumptions could be inaccurate,
and therefore such statements included in this press release may
not prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a
representation by us or any other person that the results or
conditions described in such statements or our objectives and plans
will be achieved. For a further discussion of these and other
factors that could impact future results, performance or
transactions, see the information under the heading “Risk Factors”
in our Form 10-K for the year ended December 31, 2021 filed with
the Securities and Exchange Commission (the “SEC”) on February 24,
2022 and other reports filed with the SEC from time to time.
Forward-looking statements and such risks, uncertainties and other
factors speak only as of the date of this press release. New risks
and uncertainties may arise over time and it is not possible for us
to predict those events or how they may affect us. Many of the
risks identified herein and in our periodic reports have been and
will continue to be heightened as a result of the ongoing and
numerous adverse effects arising from rising interest rates and
instability in macroeconomic conditions. We expressly disclaim any
obligation or undertaking to update or revise any forward-looking
statement contained herein, to reflect any change in our
expectations with regard thereto, or any other change in events,
conditions or circumstances on which any such statement is based,
except to the extent otherwise required by law.
NETSTREIT CORP. AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(in thousands, except share and
per share data)
(Unaudited)
December 31,
2022
2021
Assets
Real estate, at cost:
Land
$
401,146
$
299,935
Buildings and improvements
907,084
626,457
Total real estate, at cost
1,308,230
926,392
Less accumulated depreciation
(62,526
)
(30,669
)
Property under development
16,796
17,896
Real estate held for investment, net
1,262,500
913,619
Assets held for sale
23,208
2,096
Mortgage loans receivable, net
46,378
—
Cash, cash equivalents and restricted
cash
70,543
7,603
Lease intangible assets, net
151,006
124,772
Other assets, net
52,057
20,351
Total assets
$
1,605,692
$
1,068,441
Liabilities and equity
Liabilities:
Term loans, net
$
373,296
$
174,330
Revolving credit facility
113,000
64,000
Mortgage note payable, net
7,896
—
Lease intangible liabilities, net
30,131
23,316
Liabilities related to assets held for
sale
406
—
Accounts payable, accrued expenses and
other liabilities
22,540
16,980
Total liabilities
547,269
278,626
Commitments and contingencies
Equity:
Stockholders’ equity
Common stock, $0.01 par value, 400,000,000
shares authorized; 58,031,879 and 44,223,050 shares issued and
outstanding as of December 31, 2022 and 2021, respectively
580
442
Additional paid-in capital
1,091,514
809,724
Distributions in excess of retained
earnings
(66,937
)
(35,119
)
Accumulated other comprehensive income
23,673
4,123
Total stockholders’ equity
1,048,830
779,170
Noncontrolling interests
9,593
10,645
Total equity
1,058,423
789,815
Total liabilities and equity
$
1,605,692
$
1,068,441
NETSTREIT CORP. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except share and
per share data)
(Unaudited)
Year Ended December
31,
2022
2021
2020
Revenues
Rental revenue (including
reimbursable)
$
93,934
$
59,140
$
33,727
Interest income on loans receivable
2,345
—
—
Total revenues
96,279
59,140
33,727
Operating expenses
Property
11,695
5,803
2,569
General and administrative
19,053
14,810
11,340
Depreciation and amortization
50,075
30,807
15,459
Provisions for impairment
1,114
3,539
2,690
Transaction costs
839
700
3,169
Total operating expenses
82,776
55,659
35,227
Other income (expense)
Interest expense, net
(9,181
)
(3,700
)
(4,741
)
Gain on sales of real estate, net
4,148
2,997
6,213
Gain on forfeited earnest money
deposit
—
—
250
Other income (expense), net
131
431
(10
)
Total other expense, net
(4,902
)
(272
)
1,712
Net income before income taxes
8,601
3,209
212
Income tax expense
(396
)
(59
)
—
Net income
8,205
3,150
212
Net income (loss) attributable to
noncontrolling interests
88
104
(518
)
Preferred stock dividends
—
—
42
Net income attributable to common
stockholders
$
8,117
$
3,046
$
688
Amounts available to common stockholders
per common share:
Basic
$
0.16
$
0.08
$
0.04
Diluted
$
0.16
$
0.08
$
0.01
Weighted average common shares:
Basic
49,517,977
36,999,459
17,322,182
Diluted
50,431,822
38,672,565
21,157,996
Other comprehensive income:
Net income
$
8,205
$
3,150
$
212
Change in value on derivatives, net
19,758
4,057
253
Total comprehensive income
$
27,963
$
7,207
$
465
Comprehensive income attributable to
noncontrolling interests
296
273
(500
)
Comprehensive income attributable to
common stockholders
$
27,667
$
6,934
$
965
NETSTREIT CORP. AND
SUBSIDIARIES
RECONCILIATION OF NET INCOME
TO FFO, CORE FFO AND ADJUSTED FFO
(in thousands, except share and
per share data)
(Unaudited)
Year Ended December
31,
2022
2021
Net income
$
8,205
$
3,150
Depreciation and amortization of real
estate
49,498
30,491
Provisions for impairment
1,114
3,539
Gain on sales of real estate, net
(4,148
)
(2,997
)
FFO
54,669
34,183
Adjustments:
Non-recurring severance and related
charges
848
—
Gain on insurance proceeds
(126
)
(438
)
Core FFO
55,391
33,745
Adjustments:
Straight-line rent adjustments
(1,286
)
(1,082
)
Amortization of deferred financing
costs
891
627
Amortization of loan origination costs
88
—
Amortization of above/below market lease
intangibles
(1,430
)
(808
)
Amortization of lease incentives
541
122
Capitalized interest expense
(452
)
(78
)
Non-cash compensation expense
4,774
3,703
AFFO
$
58,517
$
36,229
Weighted average common shares
outstanding, basic
49,517,977
36,999,459
Weighted average operating partnership
units outstanding
526,859
1,377,335
Weighted average dilutive securities
248,602
295,771
Weighted average unsettled shares under
forwards
138,384
—
Weighted average common shares
outstanding, diluted
50,431,822
38,672,565
FFO per common share, diluted
$
1.08
$
0.88
Core FFO per common share, diluted
$
1.10
$
0.87
AFFO per common share, diluted
$
1.16
$
0.94
NETSTREIT CORP. AND
SUBSIDIARIES
RECONCILIATION OF NET INCOME
TO EBITDA, EBITDAre AND ADJUSTED EBITDAre
(in thousands, except share and
per share data)
(Unaudited)
Year Ended December
31,
2022
2021
Net income
$
8,205
$
3,150
Depreciation and amortization of real
estate
49,498
30,491
Amortization of above/below market lease
intangibles
(1,430
)
(808
)
Amortization of lease incentives
541
122
Non-real estate depreciation and
amortization
577
316
Interest expense, net
9,181
3,700
Income tax expense
396
59
Amortization of loan origination costs
88
—
EBITDA
67,056
37,030
Adjustments:
Provisions for impairment
1,114
3,539
Gain on sales of real estate, net
(4,148
)
(2,997
)
EBITDAre
64,022
37,572
Adjustments:
Straight-line rent adjustments
(1,286
)
(1,082
)
Non-recurring severance and related
charges
848
—
Gain on insurance proceeds
(126
)
(438
)
Non-cash compensation expense
4,774
3,703
Adjusted EBITDAre
$
68,232
$
39,755
NETSTREIT CORP. AND
SUBSIDIARIES
RECONCILIATION OF NET INCOME
TO NOI AND CASH NOI
(in thousands, except share and
per share data)
(Unaudited)
Year Ended December
31,
2022
2021
Net income
$
8,205
$
3,150
General and administrative
19,053
14,810
Depreciation and amortization
50,075
30,807
Provisions for impairment
1,114
3,539
Transaction costs
839
700
Interest expense, net
9,181
3,700
Gain on sales of real estate, net
(4,148
)
(2,997
)
Income tax expense
396
59
Interest income on mortgage loans
receivable
(2,345
)
—
Other income
(131
)
(431
)
NOI
82,239
53,337
Straight-line rent adjustments
(1,286
)
(1,082
)
Amortization of above/below market lease
intangibles
(1,430
)
(808
)
Amortization of lease incentives
541
122
Cash NOI
$
80,064
$
51,569
NON-GAAP FINANCIAL MEASURES
FFO, Core FFO and AFFO
The National Association of Real Estate Investment Trusts
("NAREIT"), an industry trade group, has promulgated a widely
accepted non-GAAP financial measure of operating performance known
as FFO. Our FFO is net income in accordance with GAAP, excluding
gains (or losses) resulting from dispositions of properties, plus
depreciation and amortization and impairment charges on depreciable
real property.
Core FFO is a non-GAAP financial measure defined as FFO adjusted
to remove the effect of unusual and non-recurring items that are
not expected to impact our operating performance or operations on
an ongoing basis. These include non-recurring severance and related
charges and gain on insurance proceeds.
AFFO is a non-GAAP financial measure defined as Core FFO
adjusted for GAAP net income related to non-cash revenues and
expenses, such as straight-line rent, amortization of above- and
below-market lease-related intangibles, amortization of lease
incentives, capitalized interest expense, non-cash compensation
expense, and amortization of deferred financing and amortization of
loan origination costs.
Historical cost accounting for real estate assets implicitly
assumes that the value of real estate assets diminishes predictably
over time. In fact, real estate values historically have risen or
fallen with market conditions. FFO is intended to be a standard
supplemental measure of operating performance that excludes
historical cost depreciation and valuation adjustments from net
income. We consider FFO to be useful in evaluating potential
property acquisitions and measuring operating performance.
We further consider FFO, Core FFO and AFFO to be useful in
determining funds available for payment of distributions. FFO, Core
FFO and AFFO do not represent net income or cash flows from
operations as defined by GAAP. You should not consider FFO, Core
FFO and AFFO to be alternatives to net income as a reliable measure
of our operating performance nor should you consider FFO, Core FFO
and AFFO to be alternatives to cash flows from operating, investing
or financing activities (as defined by GAAP) as measures of
liquidity.
FFO, Core FFO and AFFO do not measure whether cash flow is
sufficient to fund our cash needs, including principal
amortization, capital improvements and distributions to
stockholders. FFO, Core FFO and AFFO do not represent cash flows
from operating, investing or financing activities as defined by
GAAP. Further, FFO, Core FFO and AFFO as disclosed by other REITs
might not be comparable to our calculations of FFO, Core FFO and
AFFO.
EBITDA, EBITDAre and Adjusted
EBITDAre
We compute EBITDA as earnings before interest expense, income
tax expense, and depreciation and amortization. In 2017, NAREIT
issued a white paper recommending that companies that report EBITDA
also report EBITDAre. We compute EBITDAre in accordance with the
definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as
defined above) excluding gains (or losses) from the sales of
depreciable property and impairment charges on depreciable real
property.
Adjusted EBITDAre is a non-GAAP financial measure defined as
EBITDAre further adjusted to exclude straight-line rent, non-cash
compensation expense, non-recurring severance and related charges,
and gain on insurance proceeds.
We present EBITDA, EBITDAre and Adjusted EBITDAre as they are
measures commonly used in our industry. We believe that these
measures are useful to investors and analysts because they provide
supplemental information concerning our operating performance,
exclusive of certain non-cash items and other costs. We use EBITDA,
EBITDAre and Adjusted EBITDAre as measures of our operating
performance and not as measures of liquidity.
EBITDA, EBITDAre and Adjusted EBITDAre do not include all items
of revenue and expense included in net income, they do not
represent cash generated from operating activities and they are not
necessarily indicative of cash available to fund cash requirements;
accordingly, they should not be considered alternatives to net
income as a performance measure or cash flows from operations as a
liquidity measure and should be considered in addition to, and not
in lieu of, GAAP financial measures. Additionally, our computation
of EBITDA, EBITDAre and Adjusted EBITDAre may differ from the
methodology for calculating these metrics used by other equity
REITs and, therefore, may not be comparable to similarly titled
measures reported by other equity REITs.
NOI and Cash NOI
NOI and Cash NOI are non-GAAP financial measures which we use to
assess our operating results. We compute NOI as net income
(computed in accordance with GAAP), excluding general and
administrative expenses, interest expense (or income), income tax
expense, transaction costs, depreciation and amortization, gains
(or losses) on sales of depreciable property, real estate
impairment losses, and other income (or expense). We further adjust
NOI for non-cash revenue components of straight-line rent and
amortization of lease intangibles and lease incentives to derive
Cash NOI. We believe NOI and Cash NOI provide useful and relevant
information because they reflect only those income and expense
items that are incurred at the property level and present such
items on an unlevered basis.
NOI and Cash NOI are not measurements of financial performance
under GAAP, and our NOI and Cash NOI may not be comparable to
similarly titled measures of other companies. You should not
consider our NOI and Cash NOI as alternatives to net income or cash
flows from operating activities determined in accordance with
GAAP.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230223005774/en/
Investor Relations ir@netstreit.com 972-597-4825
NetSTREIT (NYSE:NTST)
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