NetSTREIT Corp. Q1 FY2025 earnings call

• Progressed in reducing top five tenant concentrations, with Dollar General's concentration reduced to 8.1% of ABR. - Completed $90.7M gross investments at 7.7% cash yield, 9.2-year weighted average lease term, 66% ABR from investment grade tenants. - Realized $40.3M in dispositions from 16 properties at 7.3% cash yield. - Portfolio consists of 695 properties in 26 industries across 45 states, 9.7-year weighted average lease term remaining, 1.3% ABR expiring 2026. - Added high-quality low-risk tenants like Gerber Collision. - Credit underwriting strong with no credit losses during COVID, Big Lots exposure had 20 basis points loss with locations assumed. - Deliberate investment pace due to balance sheet and cost of capital considerations, ready to accelerate investment if cost of equity improves.

During the first quarter, NETSTREIT completed $90.7 million of gross investments at a blended cash yield of 7.7%. The weighted average lease term for these investments was 9.2 years, with investment grade and investment grade profile tenants representing 66% of ABR. Additionally, $40.3 million of disposition proceeds were realized across 16 properties at a 7.3% blended cash yield. The portfolio ended the quarter with 695 properties leased to 101 tenants in 26 industries across 45 states. 71% of total ABR was leased to investment grade or investment grade profile tenants, with a weighted average lease term remaining of 9.7 years and just 1.3% of ABR expiring through 2026. The top five tenant concentration declined to 28.2% of ABR, including a 50 basis point reduction in Dollar General to 8.1% of ABR.

• Increased AFFO per share guidance to $1.28 to $1.30, assuming net investment activity of $75 million to $125 million and recurring cash G&A of $14.5 million to $15.5 million. - Guidance assumes roughly 75 basis points of unknown rent loss. - Declared a quarterly cash dividend of $0.21 per share, payable on June 16.

• Economic uncertainties that could impact tenant performance and real estate values. - Dependence on key tenants, potential effects of store closures or changes in tenant credit. - Fluctuations in capital markets affecting cost of capital and investment opportunities.

Q: Talk about the appetite for pharmacy and Dollar Stores and timeline to reduce exposures A: Mark mentions the timeline to get below 5% by 12/31, with Walgreens aiming for below 3%, and robust interest from institutions and 1031 buyers on Dollar Store side Q: Debt side, ratings upgrade, potential savings A: Dan says preparing for ratings upgrade, targeting latter half of year, expecting about 30 basis points savings on debt costs Q: Net investment activity and transaction market since April 2 A: Mark states if stock price improves, can accelerate investments, and transaction market remains good Q: 75 bps bad debt expense, specific tenants A: Mark says it's for unknown events, not specific to any tenants Q: Update on Big Lots asset in Maryland A: Mark says there's interest from retailers, competing center, actively negotiating, not included in 2025 guidance Q: Walgreens take private and impact on risk profile A: Mark says it doesn't change risk profile, Sycamore has good track record, stores will continue operating Q: Dispositions in second quarter, mix, cap rate A: Mark says mix includes autos, Dollar Generals, Family Dollars, pharmacies, with mid to high 6% cap rate Q: Grocery exposure and where leaning A: Mark says adding large ESOP grocers in strong retail corridors Q: Dollar Store combo stores and forward equity A: Mark says combo stores going to Family Dollar, forward equity likely settled by year end Q: What drives deal selection and risk adjusted returns A: Mark says diversifying portfolio, looking for best risk adjusted returns, 7.7% blended cap rate Q: Cost of capital and forward equity extension A: Dan says can extend forward equity, light green on cost of capital outlook Q: Disposition pipeline, opportunistic sales, seller financing A: Mark says no recent seller financing, one opportunistic sale, mostly to reduce exposure Q: New store opening appetite and tariffs A: Mark says tenants still growing, tariffs causing confusion, portfolio resilient during economic slowdowns Q: Acquisitions, new tenants A: Mark says 3 new tenants added in the quarter Q: Stock performance and capital allocation A: Mark says continuing to work on diversification, leverage within comfort range Q: Private buyers bank financing for non-investment grade tenants A: Mark says some banks willing to lend, helping buyers source financing Q: Underwriting criteria and box size A: Mark says underwriting unchanged, cautious on large boxes, prefer smaller fungible boxes Q: Tariffs impact and tenant credit watch A: Mark says tariffs causing confusion, portfolio resilient and prepared for economic changes Q: Acquisitions, new relationships A: Mark says 3 new tenants added in the quarter Q: Competition for investment grade assets A: Mark says not seeing more competition yet, may see more in uncertain economy