NETSTREIT Provides Fourth Quarter and Full Year 2023 Business Update
- Completed $480.5 million of gross investment activity at a 7.2% blended cash yield for 2023
- Reaffirms 2023 AFFO per share guidance of $1.21 to $1.23
- Provides 2024 AFFO per share guidance of $1.24 to $1.28
- Completed $431.0 million of net investment activity in 2023
- Raised $76.7 million of equity during the fourth quarter
- None.
Insights
NETSTREIT Corp.'s announcement of completing $480.5 million in gross investment activity with a 7.2% blended cash yield is a strong indicator of the company's aggressive capital deployment strategy in the net lease real estate sector. This level of investment is significant as it demonstrates the company's ability to source and close deals in a competitive market, which is crucial for sustaining revenue growth and maintaining investor confidence. The reaffirmation of the 2023 AFFO guidance suggests stability and predictability in the company's operations, which is a positive signal for investors looking for consistent returns.
The introduction of the 2024 AFFO guidance further indicates management's confidence in the company's strategic direction and the sustainability of its earnings. However, the lack of reconciliation with GAAP measures could raise questions about the transparency and comparability of the reported financial metrics. Investors would benefit from understanding the adjustments made to reach AFFO figures, as these adjustments can significantly impact the perceived performance of the company.
NETSTREIT's focus on acquiring high-quality net lease properties with tenants holding exceptional credit profiles is a conservative strategy that mitigates risk and provides a stable cash flow. The high percentage of Annualized Base Rent (ABR) derived from investment-grade tenants (81.4%) and investment-grade profile tenants (11.8%) is indicative of a robust tenant base, which is particularly important for REITs as it directly affects the predictability of income streams. The weighted average lease term of approximately 10.7 years offers long-term visibility into the company's revenue potential, which is a critical factor for REIT investors.
On the capital markets front, the company's liquidity position, with over $548 million in proforma liquidity, reflects a strong balance sheet that can support continued growth and potential acquisitions. However, the reliance on equity issuances through the ATM program and forward equity offerings could dilute existing shareholders' interests. The weighted average price per share of these issuances should be monitored, as it will affect the cost of capital and ultimately the returns to shareholders.
The commercial real estate market has been subject to volatility due to economic uncertainty and NETSTREIT's performance must be evaluated in this context. The company's ability to maintain a cash yield of 7.2% on both investment and disposition activities is competitive within the industry, suggesting effective asset management and a strong grasp of market dynamics. Moreover, the company's proactive capital raising efforts and net investment activity reflect a strategic approach to positioning itself for future growth despite the challenging environment.
Investors should consider the potential impact of broader economic factors such as interest rate changes, which could affect the cost of capital and property valuations in the REIT sector. Additionally, the company's guidance for cash G&A expenses provides insight into the expected efficiency of operations. As operational costs can erode net income, effective cost management is essential for maintaining profitability and ensuring that the company can meet its AFFO targets.
– Completed
– Reaffirms 2023 Adjusted Funds from Operations ("AFFO") Per Share Guidance of
– Provides 2024 AFFO Per Share Guidance of
“With the Company completing
INVESTMENT ACTIVITY
The following tables summarize the Company's investment and disposition activities (dollars in thousands) for the three months and year ended December 31, 2023.
|
Three Months Ended
|
|
Year Ended December 31, 2023 |
||||||||
|
Number of
|
|
Amount |
|
Number of
|
|
Amount |
||||
Investments |
57 |
|
$ |
119,128 |
|
|
196 |
|
$ |
480,519 |
|
Dispositions1 |
6 |
|
|
15,995 |
|
|
22 |
|
|
49,506 |
|
Net Investment Activity |
|
|
$ |
103,133 |
|
|
|
|
$ |
431,013 |
|
|
|
|
|
|
|
|
|
||||
Investment Activity |
|
|
|
|
|
|
|
||||
Cash Yield |
|
|
|
7.2 |
% |
|
|
|
|
7.2 |
% |
% of ABR derived from Investment Grade Tenants |
|
|
|
94.3 |
% |
|
|
|
|
81.4 |
% |
% of ABR derived from Investment Grade Profile Tenants |
|
|
|
4.4 |
% |
|
|
|
|
11.8 |
% |
Weighted Average Lease Term (years) |
|
|
|
10.9 |
|
|
|
|
|
10.7 |
|
|
|
|
|
|
|
|
|
||||
Disposition Activity |
|
|
|
|
|
|
|
||||
Cash Yield1 |
|
|
|
7.2 |
% |
|
|
|
|
6.9 |
% |
Weighted Average Lease Term (years) |
|
|
|
11.2 |
|
|
|
|
|
7.8 |
|
1. Includes mortgage loan payoffs. |
|||||||||||
CAPITAL MARKETS AND BALANCE SHEET
The following tables summarize the Company's balance sheet, liquidity, ATM issuances, and settlement of our forward equity offerings (dollars in thousands, except per share data) as of and for December 31, 2023.
Liquidity |
As of December 31, 2023 |
||
Unused Unsecured Revolver Capacity |
$ |
319,850 |
|
Cash, Cash Equivalents and Restricted Cash |
|
29,929 |
|
Value of Outstanding Forward Equity1 |
|
98,612 |
|
Total Liquidity |
$ |
448,391 |
|
Plus: Remaining Available Principal of 2029 Term Loan |
|
100,000 |
|
Total Proforma Liquidity |
$ |
548,391 |
|
|
|
||
ATM Program |
|
||
Shares Issued During Quarter |
|
4,478,539 |
|
Weighted Average Price Per Share |
$ |
17.27 |
|
Net Proceeds |
$ |
76,667 |
|
|
|
||
Forward Equity |
|
||
Shares Outstanding as of December 31, 2023 |
|
5,983,711 |
|
Weighted Average Price Per Share |
$ |
16.48 |
|
Value of Outstanding Forward Equity1 |
$ |
98,612 |
|
1. Reflects 5,983,711 of unsettled forward equity shares under the ATM program at the December 31, 2023 available net settlement price of |
|||
2023 GUIDANCE
The Company is reaffirming its full year 2023 AFFO per share guidance range of
2024 GUIDANCE
The Company is providing its initial full year 2024 AFFO per share guidance in the range of
AFFO is a non-GAAP financial measure. The Company does not provide a reconciliation of such forward-looking non-GAAP measure 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.
About NETSTREIT Corp.
NETSTREIT Corp. is an internally managed real estate investment trust (REIT) based in
NON-GAAP FINANCIAL MEASURES
This press release contains guidance about our 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 funds from operations (“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 executive transition costs, severance and related charges, gain on insurance proceeds, and loss on debt extinguishments and other related costs.
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, earned development interest, non-cash interest expense, non-cash compensation expense, amortization of deferred financing costs, amortization of above/below-market assumed debt, and amortization of loan origination costs.
We further consider AFFO to be useful in determining funds available for payment of distributions. AFFO does not represent net income or cash flows from operations as defined by GAAP. You should not consider AFFO to be an alternative to net income as a reliable measure of our operating performance nor should you consider AFFO to be an alternative to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity.
AFFO does not measure whether cash flow is sufficient to fund our cash needs, including principal amortization, capital improvements and distributions to stockholders. AFFO does not represent cash flows from operating, investing or financing activities as defined by GAAP. Further, AFFO as disclosed by other REITs might not be comparable to our calculations of AFFO.
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 opportunities and our fourth quarter of 2023 and 2024 guidance. 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, 2022 filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2023 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 macroeconomic conditions, including inflation, interest rates and instability in the banking system. 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240108136776/en/
Investor Relations
ir@netstreit.com
972-597-4825
Source: NETSTREIT Corp.
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