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What changed in NETSTREIT Corp.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of NETSTREIT Corp.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+279 added−272 removedSource: 10-K (2024-02-14) vs 10-K (2023-02-23)

Top changes in NETSTREIT Corp.'s 2023 10-K

279 paragraphs added · 272 removed · 186 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

41 edited+15 added−18 removed60 unchanged
Biggest changeBeginning with our short taxable year ended December 31, 2019, we elected to be treated and qualify as a REIT for U.S. federal income tax purposes. 2022 Financing Activities Debt Refinancing Transaction On August 11, 2022, we entered into a credit agreement (the “New Credit Agreement”) related to our sustainability-linked senior unsecured credit facility consisting of (i) a $200.0 million senior unsecured term loan (the “2028 Term Loan”) and (ii) a $400.0 million senior unsecured revolving credit facility (the “New Revolver”, and together with the 2028 Term Loan, the “New Credit Facility”).
Biggest changeBeginning with our short taxable year ended December 31, 2019, we elected to be treated and qualify as a REIT for U.S. federal income tax purposes. 2023 Financing Activities Debt Transactions 2029 Term Loan On July 3, 2023, we entered into an agreement (the “2029 Term Loan Agreement”) related to a $250.0 million sustainability-linked senior unsecured term loan (the “2029 Term Loan”) which may, subject to the terms of the 2029 Term Loan Agreement, be increased to an amount of up to $400.0 million at our request.
We believe these characteristics make our tenants' businesses e-commerce resistant and resilient through all economic cycles.
We believe these characteristics make our tenants' businesses e-commerce resistant and resilient through all economic cycles.
Tax Status We believe that we are organized and have operated in a manner that has enabled us to qualify to be taxed as a REIT commencing with our short taxable year ended December 31, 2019, and we intend to continue to operate so as to satisfy the requirements for qualification as a REIT for U.S. federal income tax purposes.
Tax Status We are organized and have operated in a manner that has enabled us to qualify to be taxed as a REIT commencing with our short taxable year ended December 31, 2019, and we intend to continue to operate so as to satisfy the requirements for qualification as a REIT for U.S. federal income tax purposes.
Item 1. Business Business Overview We are an internally managed real estate company that acquires, owns and manages a diversified portfolio of single-tenant, retail commercial real estate subject to long-term net leases with high credit quality tenants across the United States.
Item 1. Business Business Overview We are an internally managed real estate company that acquires, owns, invests in and manages a diversified portfolio of single-tenant, retail commercial real estate subject to long-term net leases with high credit quality tenants across the United States.
Our Target Properties We seek to acquire, own and manage a diversified portfolio of single-tenant, retail commercial real estate subject to long-term net leases with high credit quality tenants across the United States.
Our Target Properties We seek to acquire, own, invest in and manage a diversified portfolio of single-tenant, retail commercial real estate subject to long-term net leases with high credit quality tenants across the United States.
Our ability to efficiently deploy capital is a direct result of our management team's extensive network of industry relationships with retailers, brokers, intermediaries, private equity firms and others in the net lease industry, which we utilize to source a robust pipeline of attractive marketed and off-market investment opportunities through which we have deployed capital, acquiring 354 single-tenant retail net leased properties with an aggregate purchase price of $1.3 billion since our formation in December 2019 (excluding our property development acquisitions).
Our ability to efficiently deploy capital is a direct result of our management team's extensive network of industry relationships with retailers, brokers, intermediaries, private equity firms and others in the net lease industry, which we utilize to source a robust pipeline of attractive marketed and off-market investment opportunities through which we have deployed capital, acquiring 457 single-tenant retail net leased properties with an aggregate purchase price of $1.6 billion since our formation in December 2019 (excluding our property development acquisitions).
Investment Strategy In addition to acquiring single-tenant net leased retail properties subject to an existing stabilized long term lease, we will continue to grow our portfolio through a multi-faceted investment strategy, which includes “blend and extend” acquisitions, build-to-suit and reverse build-to-suit transactions, sale-leaseback transactions and investments in fully collateralized mortgage loans receivable.
Investment Strategy In addition to acquiring single-tenant net leased retail properties subject to an existing stabilized long-term lease, we will continue to grow our portfolio through a multi-faceted investment strategy, which includes “blend and extend” acquisitions, investments in fully collateralized mortgage loans receivable, property developments which include build-to-suit and reverse build-to-suit transactions and sale-leaseback transactions.
Additionally, our WALT of 9.5 years as of December 31, 2022 and superior underwriting and portfolio monitoring capabilities, which reduce default losses, are intended to make our cash flows highly stable.
Additionally, our WALT of 9.5 years as of December 31, 2023 and superior underwriting and portfolio monitoring capabilities, which reduce default losses, are intended to make our cash flows highly stable.
Our past and continued success relies on our ability to attract, develop, engage, and retain a team of highly motivated and talented employees. In order to meet this objective, we are committed to the following: ◦ Talent acquisition and development. To ensure we attract and retain top talent, we provide competitive compensation and benefits, including stock awards for all employees.
Our past and continued success relies on our ability to attract, develop, engage, and retain a team of highly motivated and talented employees. In order to meet this objective, we are committed to the following: ◦ Talent acquisition and development. To ensure we attract and retain top talent, we provide competitive compensation and benefits, including equity compensation for all employees.
Both build-to-suit and reverse build-to-suit transactions allow us to acquire the property at lower cost in exchange for long lease terms and higher entry capitalization rates. 7 Table of Contents • Sale-leaseback: Sale-leaseback transactions allow us to acquire a single-tenant commercial property used by the seller with a simultaneous long-term lease of the property back to the seller.
Both build-to-suit and reverse build-to-suit transactions allow us to acquire the property at lower cost in exchange for long lease terms and higher entry capitalization rates. • Sale-leaseback: Sale-leaseback transactions allow us to acquire a single-tenant commercial property used by the seller with a simultaneous long-term lease of the property back to the seller.
We believe these characteristics make our tenants' businesses e-commerce resistant and resilient through all economic cycles. Our management team focuses primarily on securing long-term leases with investment grade credit rated tenants and creditworthy tenants without an investment grade rating. The current market for retail net leased properties is fragmented and decentralized.
We believe these characteristics make our tenants' businesses e-commerce resistant and resilient through all economic cycles. Our management team focuses primarily on securing long-term leases with investment grade credit rated tenants and creditworthy tenants without an investment grade rating. 6 Table of Contents The current market for retail net leased properties is fragmented and decentralized.
The average purchase price of a property in our portfolio as of December 31, 2022 was $3.5 million, our ABR per property is approximately $232 thousand, and our leases typically have initial lease terms of approximately 10 years and contain two or more options for the tenant to extend the lease term, most often for additional five-year periods.
The average purchase price of a property in our portfolio as of December 31, 2023 was $3.4 million, our ABR per property is approximately $232 thousand, and our leases typically have initial lease terms of approximately 10 years and contain two or more options for the tenant to extend the lease term, most often for additional five-year periods.
We intend to target a conservative net debt to EBITDA re leverage ratio of 4.5x to 5.5x, excluding the impact of any forward undrawn equity, to best position the Company for growth, and we intend to capitalize on our leading origination, underwriting, financing, documentation and property processes to improve our efficiency.
We intend to target a conservative net debt to EBITDA re leverage ratio of 4.5x to 5.5x, including the impact of any forward unsettled equity, to best position the Company for growth, and we intend to capitalize on our leading origination, underwriting, financing, documentation and property processes to improve our efficiency.
In addition, losses of a catastrophic nature, such as those caused by wind, hail, hurricanes, terrorism or acts of war, may be uninsurable or 10 Table of Contents not economically insurable.
In addition, losses of a catastrophic nature, such as those caused by wind, hail, hurricanes, terrorism or acts of war, may be uninsurable or not economically insurable.
Human Capital Management As of December 31, 2022, we have 30 full-time employees. Our staff is mostly comprised of professional employees engaged in origination, underwriting, closing, financial reporting, portfolio management and capital markets activities essential to our business. We are committed to creating a strong internal culture that promotes inclusion and employee well-being.
Human Capital Management As of December 31, 2023, we had 28 full-time employees. Our staff is mostly comprised of professional employees engaged in origination, underwriting, closing, accounting and financial reporting, portfolio management and capital markets activities essential to our business. We are committed to creating a strong internal culture that promotes inclusion and employee well-being.
As of December 31, 2022, we owned 99.1% of the limited partnership interests in our operating partnership.
As of December 31, 2023, we owned 99.3% of the limited partnership interests in our operating partnership.
We may physically settle the forward sale agreements (by the delivery of shares of common stock) and receive proceeds from the sale of those shares upon one or more forward settlement dates, which shall occur no later than August 3, 2023.
We expect to physically settle the forward sale agreements (by the delivery of shares of common stock) and receive proceeds from the sale of those shares upon one or more forward settlement dates, which shall occur no later than January 9, 2025.
In connection with the offering, we entered into forward sale agreements for 10,350,000 shares of common stock. We did not initially receive any proceeds from the sales of shares of common stock by the forward purchasers upon registration of the offering.
In connection with the offering, we entered into forward sale agreements for 11,040,000 shares of our common stock. We did not initially receive any proceeds from the sale of shares of common stock by the forward purchasers.
Such laws may impose fines or penalties for violations, and may require permits or other governmental approvals to be obtained for the operation of a business involving such activities.
Such laws may impose fines or penalties for violations, and may require permits or other governmental approvals to be obtained for the operation of a business involving such activities. As a result of the foregoing, we could be materially and adversely affected.
ATM Program On September 1, 2021, we entered into a $250.0 million at-the-market equity program (the “ATM Program”) through which, from time to time, we may sell shares of our common stock in registered transactions.
ATM Program On October 25, 2023, we entered into a $300.0 million at-the-market equity program (the “2023 ATM Program”) through which, from time to time, we may sell shares of our common stock in registered transactions.
As a result of the foregoing, we could be materially and adversely affected. 9 Table of Contents Environmental laws also govern the presence, maintenance and removal of asbestos-containing materials (“ACM”) and impose various requirements, including operation and maintenance plans for the presence of any suspect ACM. Significant fines can be assessed for violation of these regulations.
Environmental laws also govern the presence, maintenance and removal of asbestos-containing materials (“ACM”) and impose various requirements, including operation and maintenance plans for the presence of any suspect ACM. Significant fines can be assessed for violation of these regulations.
Our current strategy targets a portfolio that, over time, will: • derive no more than (i) 5% of its ABR from any single tenant or property, (ii) 15% of its ABR from any single retail sector, (iii) 15% of its ABR from any single state and (iv) 50% of its ABR from its top 10 tenants; • be primarily leased to tenants operating in businesses we believe to be e-commerce resistant and resilient through all economic cycles; • have at least 60% of its tenants with an investment grade rating; and • have a WALT that approximates 10 years. 6 Table of Contents While we consider the foregoing when making investments, we will be opportunistic in managing our business and make investments that do not meet one or more of these criteria if we believe the opportunity presents an attractive risk-adjusted return.
Our current strategy targets a portfolio that, over time, will: • derive no more than (i) 5% of its ABR from any single tenant or property, (ii) 15% of its ABR from any single retail sector, (iii) 15% of its ABR from any single state and (iv) 50% of its ABR from its top 10 tenants; • be primarily leased to tenants operating in businesses we believe to be e-commerce resistant and resilient through all economic cycles; • have at least 60% of its tenants with an investment grade rating; and • have a WALT that approximates 10 years.
We offer competitive healthcare insurance and generous paid time off, as well as paid medical and parental leave. We also provide employees with standing desks, ergonomic desk chairs and fitness center memberships. Available Information Our principal executive office is located at 2021 McKinney Avenue, Suite 1150, Dallas, Texas, 75201 and our telephone number is 972-200-7100. Our website address is www.NETSTREIT.com.
We also provide employees with standing desks, ergonomic desk chairs and fitness center memberships. 11 Table of Contents Available Information Our principal executive office is located at 2021 McKinney Avenue, Suite 1150, Dallas, Texas, 75201 and our telephone number is 972-200-7100. Our website address is www.NETSTREIT.com.
In addition, we seek to make investments that generate strong current income as a result of the difference, or spread, between the rate we earn on our assets and the rate we pay on our liabilities (primarily our long-term debt).
As we grow, we anticipate having access to the investment grade debt and equity capital markets to maintain a prudent balance between debt and equity financing. 8 Table of Contents In addition, we seek to make investments that generate strong current income as a result of the difference, or spread, between the rate we earn on our assets and the rate we pay on our liabilities (primarily our long-term debt).
In 2021, we established an Employee Experience Committee (EEC) with a mission to ensure that employees have a clear voice in sharing and upholding our cultural values and expectations. The EEC allows the leadership team to engage with, and obtain feedback from, our employees on their workplace experiences.
We ensure that employees have a clear voice in sharing and upholding our cultural value and expectations through the Employee Experience Committee (EEC). The EEC allows the leadership team to engage with, and obtain feedback from, our employees on their workplace experiences. The EEC is comprised of non-management members of the organization and rotate annually.
As of December 31, 2022, our portfolio was 100% occupied and generated ABR 1 of $99.2 million with a weighted average remaining lease term (“WALT”) of 9.5 years, which we believe provides us with a strong, stable source of recurring cash flow from our portfolio.
Exclusive of mortgage loans receivable, our portfolio was 100% occupied with a weighted average remaining lease term (“WALT”) of 9.5 years, which we believe provides us with a strong, stable source of recurring cash flow from our portfolio.
Competition We face competition for acquisitions of real property from investors, including traded and non-traded public REITs, private equity investors and institutional investment funds, some of which have greater financial resources than we do, a greater ability to borrow funds to acquire properties and the ability to accept more risk.
We also maintain full property coverage on all untenanted properties and other property coverage as may be required by our lenders, which are not required to be carried by our tenants under our leases. 10 Table of Contents Competition We face competition for acquisitions of real property from investors, including traded and non-traded public REITs, private equity investors and institutional investment funds, some of which have greater financial resources than we do, a greater ability to borrow funds to acquire properties and the ability to accept more risk.
In sale-leaseback transactions, we strive to set rents at sustainable levels and get long-term site commitments from tenants. • Mortgage loans receivable: Investments are made by issuing fully collateralized mortgage loans to the owner of a property, with the property serving as collateral for the loans.
Blend-and-extend acquisitions allow us to acquire properties at a lower basis and get long-term site commitments from tenants. • Mortgage loans receivable: Investments are made by issuing fully collateralized mortgage loans to the owner of a property, with the property serving as collateral for the loans.
The EEC is comprised of non-management members of the organization and rotate annually. Members meet periodically to discuss recommendations to present to the leadership team, which may include additional substantive training, personal growth and professional development programs, company social and team-building events, employee benefits, and health and wellness programs.
Members meet periodically to discuss recommendations to present to the leadership team, which may include additional substantive training, personal growth and professional development programs, company social and team-building events, employee benefits, and health and wellness programs. In addition, we established an Employee Recognition Program designed to recognize exemplary performance.
We have $154.2 million remaining gross proceeds available for future issuances of shares of our common stock under the ATM Program. General Investment Criteria Our objective is to maximize stockholder value by generating attractive risk-adjusted returns through owning, managing and growing a diversified portfolio of commercially desirable properties.
General Investment Criteria Our objective is to maximize stockholder value by generating attractive risk-adjusted returns through owning, managing and growing a diversified portfolio of commercially desirable properties.
Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions.
Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions.
As of December 31, 2022, our portfolio consisted of 427 single-tenant retail net leased properties that were diversified by tenant, industry and geography, including 80 different tenants, across 25 retail sectors in 43 states.
As of December 31, 2023, we owned or had investments in 598 single-tenant retail net leased properties that were diversified by tenant, industry and geography, including 85 different tenants, across 26 retail sectors in 45 states.
In addition, we established an Employee Recognition Program designed to recognize exemplary performance. Employees have an opportunity to nominate their teammates who have made significant contributions and two nominees per quarter are chosen to win an award. 11 Table of Contents ◦ Employee wellness. We are committed to providing a safe and healthy working environment for our employees.
Employees have an opportunity to nominate their teammates who have made significant contributions and two nominees per quarter are chosen to win an award. ◦ Employee wellness. We are committed to providing a safe and healthy working environment for our employees. We offer competitive healthcare insurance and generous paid time off, as well as paid medical and parental leave.
These laws may impose liability for improper handling or a release into the environment of ACM and may provide for fines to, and for third parties to seek recovery from, owners or operators of real properties for personal injury or improper work exposure associated with ACM.
These laws may impose liability for improper handling or a release into the environment of ACM and may provide for fines to, and for third parties to seek recovery from, owners or operators of real properties for personal injury or improper work exposure associated with ACM. 9 Table of Contents When excessive moisture accumulates in buildings or on building materials or moisture is otherwise present, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time.
Approximately 63% of our ABR is from investment grade credit rated tenants and an additional 17% of our ABR is derived from tenants with an investment grade profile.
As of December 31, 2023, our investments generated ABR 1 of $131.9 million. Approximately 71% of our ABR is from investment grade 2 credit rated tenants and an additional 14% of our ABR is derived from tenants with an investment grade profile 3 .
As of December 31, 2022, we had $113.0 million of borrowings outstanding under our $400.0 million New Revolver as well as $175.0 million outstanding under the 2024 Term Loan and $200.0 million outstanding under the 2028 Term Loan.
As of December 31, 2023, we had $80.0 million of borrowings outstanding under our $400.0 million senior unsecured revolving credit facility (the “Revolver”) as well as $175.0 million outstanding under the 2027 Term Loan, $200.0 million outstanding under the $200 million senior unsecured term loan (the “2028 Term Loan”), and $150.0 million outstanding under the 2029 Term Loan.
Since June 2018, we have disposed of 64 properties totaling $194.2 million in aggregate sales price and improved portfolio performance by diversifying tenant concentration and improving key metrics such as tenant credit quality, WALT and geographic diversity. 8 Table of Contents Capital Allocation Strategy We seek to maintain a capital structure that provides us with flexibility to manage our business and scale our platform through targeted acquisitions, while allowing us to service our debt requirements and generate appropriate risk-adjusted returns.
Capital Allocation Strategy We seek to maintain a capital structure that provides us with flexibility to manage our business and scale our platform through targeted acquisitions, while allowing us to service our debt requirements and generate appropriate risk-adjusted returns.
Investment Origination Process Our current investment pipeline has been, and our investments going forward will be, identified by our senior management team, led by our Chief Executive Officer, Mark Manheimer, supplemented by our entire acquisitions team. Our acquisition team has developed a broad network of long-standing relationships.
We believe this multi-faceted investment strategy will provide us with greater flexibility to opportunistically build our portfolio and differentiate us from other public REITs pursuing a more limited investment strategy. 7 Table of Contents Investment Origination Process Our current investment pipeline has been, and our investments going forward will be, identified by our senior management team, led by our Chief Executive Officer, Mark Manheimer, supplemented by our entire acquisitions team.
Borrowings under the New Credit Facility are repayable at our option in whole or in part without premium or penalty.
The 2027 Term Loan is repayable at our option in whole or in part without premium or penalty. The Company has fully hedged the 2027 Term Loan.
Blend-and-extend acquisitions allow us to acquire properties at a lower basis and get long-term site commitments from tenants. • Build-to-suit: In build-to-suit transactions, we secure development financing for a single-tenant commercial property pursuant to executing a long-term lease.
These mortgage loans allow us to receive a fixed rate of return and may provide us an option to acquire the property under certain circumstances. • Build-to-suit: In build-to-suit transactions, we secure development financing for a single-tenant commercial property pursuant to executing a long-term lease.
As of December 31, 2022, our workforce was approximately 53% male and 47% female, and women represented approximately 25% of our senior management team. The ethnicity of our workforce at the end of 2022 was approximately 77% white, 10% Asian, 10% Black, and 3% Hispanic.
As of December 31, 2023, our workforce was approximately 64% male and 36% female; females represented approximately 14% of our senior management team; and 29% of our workforce was ethnically diverse.
Removed
We define “investment grade” tenants as tenants, or tenants that are subsidiaries of a parent entity (with such subsidiary making up at least 50% of the parent company total revenue), with a credit rating of BBB- (S&P), Baa3 (Moody’s) or NAIC2 (National Association of Insurance Commissioners (“NAIC”)) or higher.
Added
The 2029 Term Loan contains a 12-month delayed draw feature and $150.0 million was drawn on July 3, 2023. The 2029 Term Loan is prepayable at our option in whole or in part without premium or penalty.
Removed
Tenants with investment grade profile metrics have more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x but do not carry a published rating from S&P, Moody’s or NAIC.
Added
The 2029 Term Loan matures on July 3, 2026, subject to extension options at our election on two occasions, by one year and, on one occasion, by six months (subject to certain conditions).
Removed
Investment grade and investment grade profile tenants historically have exhibited a strong track record of making scheduled rental payments and demonstrating defensive, consistent performance through multiple cycles. See “Item 2 – Properties” for additional information about the properties in our portfolio.
Added
We have hedged the entire $250.0 million of the 2029 Term Loan at an all-in fixed interest rate of 4.99%, through January 2029, which consists of the fixed rate SOFR swap of 3.74%, plus a credit spread adjustment of 0.10% and, at current leverage levels, a borrowing spread of 1.15%.
Removed
The New Credit Facility may be increased by $400.0 million in the aggregate. The New Revolver refinanced and upsized our existing $250.0 million senior unsecured revolving credit facility (“Prior Revolver”) pursuant to the credit agreement, dated as of December 23, 2019, governing such facility (the “Prior Credit Agreement”).
Added
Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings. 2027 Term Loan In December 2019, we entered into an agreement governing a $175.0 million senior unsecured term loan that was scheduled to mature in December 2024 (the “2024 Term Loan”).
Removed
We used the proceeds from the borrowings made under the New Revolver on the closing date to repay in full our Prior Revolver. The remaining and future proceeds of the loans under the New Credit Facility will be used for general corporate purposes, including acquisitions.
Added
On June 15, 2023, we amended and restated the agreement governing the 2024 Term Loan to provide for a $175.0 million senior unsecured term loan with a maturity date of January 15, 2026 that is subject to a one year extension option at our election (subject to certain conditions) (the “2027 Term Loan”).
Removed
Our $175.0 million senior unsecured term loan (“2024 Term Loan”) under the Prior Credit Agreement, which matures in December 2024, remained outstanding upon the closing of the New Credit Facility. The 2028 Term Loan matures on February 11, 2028 and the New Revolver matures on August 11, 2026, subject to extension of up to one year.
Added
For additional information regarding our debt facilities, see “Note 6 – Debt” in “Item 8 – Financial Statements and Supplementary Data.” 1 Annualized base rent (“ABR”) is annualized base rent as of December 31, 2023, for all leases that commenced, and annualized cash interest on mortgage loans receivable in place as of that date. 2 We define “investment grade” tenants as tenants, or tenants that are subsidiaries of a parent entity, with a credit rating of BBB- (S&P/Fitch), Baa3 (Moody's) or NAIC2 (National Association of Insurance Commissioners) or higher. 3 We define “investment grade profile” tenants as tenants with metrics of more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x but do not carry a published rating from S&P, Moody’s or NAIC. 5 Table of Contents January Follow-On Offering In January 2024, we completed a registered public offering of 11,040,000 shares of our common stock at a public offering price of $18.00 per share.
Removed
Borrowings under the New Revolver may be repaid and reborrowed from time to time prior to the maturity date. 1 Annualized base rent (“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 Table of Contents January Follow-On Offering In January 2022, we completed a registered public offering of 10,350,000 shares of our common stock at a public offering price of $22.25 per share.
Added
From October 25, 2023 through December 31, 2023, we sold 4,478,539 shares of our common stock at a weighted average price of $17.27 per share, from which we received net proceeds of approximately $76.5 million.
Removed
In connection with the offering, we entered into forward sale agreements for 10,350,000 shares of our common stock. As of September 29, 2022, we had fully physically settled the forward sale agreements (by the delivery of shares of common stock) at a price of $22.25 per share in accordance with the forward sale agreements.
Added
As of December 31, 2023, we had $222.7 million in remaining gross proceeds available for future issuances of shares of our common stock under the 2023 ATM Program. Effective October 24, 2023, in connection with the establishment of the 2023 ATM Program, we terminated our prior $250.0 million at-the-market equity program (the “2021 ATM Program”).
Removed
We received net proceeds from the settlement of the forward sale agreements of $215.5 million, net of underwriting discounts and offering costs of $14.8 million. August Follow-On Offering In August 2022, we completed a registered public offering of 10,350,000 shares of common stock at a public offering price of $20.20 per share.
Added
As a result of such termination, we will not offer or sell any additional shares of common stock under the 2021 ATM Program. We have entered into a forward confirmation with respect to 5,983,711 shares of common stock under the 2021 ATM Program that remains unsettled.
Removed
We may, at our election, cash settle or net share settle all or a portion of our obligations under a forward sale agreement if we conclude it is in our best interest to do so over the prescribed offering period.
Added
We may physically settle this forward confirmation (by the delivery of shares of common stock) and receive proceeds from the sale of those shares on one or more forward settlement dates, which shall occur no later than September 13, 2024.
Removed
If we elect to cash settle a forward sale agreement, we may not receive any proceeds and may owe cash to the relevant forward counterparty in certain circumstances. On December 30, 2022, we settled 2,973,944 shares of common stock at a price of $20.20 per share in connection with the forward sale agreements.
Added
While we consider the foregoing when making investments, we will be opportunistic in managing our business and make investments that do not meet one or more of these criteria if we believe the opportunity presents an attractive risk-adjusted return.
Removed
We received net proceeds from the settlement of $56.7 million, net of underwriting discounts and offering costs of $3.4 million. As of December 31, 2022, 7,376,056 shares remained unsettled under the forward sale agreements.
Added
In sale-leaseback transactions, we strive to set rents at sustainable levels and get long-term site commitments from tenants.
Removed
During 2022, we issued 276,060 shares of common stock at a weighted average price of $21.02 per share in connection with the ATM Program for net proceeds of approximately $5.5 million, net of sales commissions and offering costs of $0.3 million.
Added
Our acquisition team has developed a broad network of long-standing relationships.
Removed
In aggregate, we have issued 4,128,496 shares of common stock at a weighted average price of $23.21 per share in connection with the ATM Program for net proceeds of approximately $94.5 million, net of sales commissions and offering costs of $1.3 million.
Added
During 2023, we disposed of 19 properties totaling $40.3 million in aggregate sales price and improved portfolio performance by diversifying tenant concentration and improving key metrics such as tenant credit quality, WALT and geographic diversity.
Removed
These mortgage loans allow us to receive a fixed rate of return and generally provide us an option to acquire the property at predetermined pricing and dates. We believe this multi-faceted investment strategy will provide us with greater flexibility to opportunistically build our portfolio and differentiate us from other public REITs pursuing a more limited investment strategy.
Added
Some molds may be toxic and produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria.
Removed
As we grow, we anticipate having access to the investment grade debt and equity capital markets to maintain a prudent balance between debt and equity financing.
Removed
When excessive moisture accumulates in buildings or on building materials or moisture is otherwise present, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may be toxic and produce airborne toxins or irritants.
Removed
We also maintain full property coverage on all untenanted properties and other property coverage as may be required by our lenders, which are not required to be carried by our tenants under our leases.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

50 edited+35 added−16 removed197 unchanged
Biggest changeRisks Related to Government Regulation and Tax Matters Our failure to qualify or maintain our qualification as a REIT for U.S. federal income tax purposes would reduce the amount of funds we have available for distribution and limit our ability to make distributions to our stockholders. 19 Table of Contents We believe that our organization and current proposed method of operation has enabled us to meet the requirements for qualification and taxation as a REIT commencing with our short taxable year ended December 31, 2019, and we intend to continue to operate in such a manner.
Biggest changeWe believe that our organization and current proposed method of operation has enabled us to meet the requirements for qualification and taxation as a REIT commencing with our short taxable year ended December 31, 2019, and we intend to continue to operate in such a manner.
For example, the current and continued macro-economic conditions of high inflation and rising interest rates have increased the costs associated with acquiring new properties and decreased the availability of financing on terms that we find attractive, which has reduced our ability to acquire properties at our historical rate with attractive terms.
For example, the current and continued macro-economic conditions of high inflation and high interest rates have increased the costs associated with acquiring new properties and decreased the availability of financing on terms that we find attractive, which has reduced our ability to acquire properties at our historical rate with attractive terms.
We rely on information systems across our operations and corporate functions, including finance and accounting, and depend on such systems to ensure payment of obligations, collection of cash, data warehousing to support analytics, and other various processes and procedures. Our ability to efficiently manage our business depends significantly on the reliability and capacity of these systems.
We rely on information systems across our operations and corporate functions, including finance and accounting, and depend on such systems to ensure payment of obligations, collection of cash, data warehousing to support analytics, and other various processes and procedures. Our ability to manage our business depends significantly on the reliability and capacity of these systems.
If we cease to be a REIT, we will not be allowed a deduction for dividends paid to stockholders in computing our taxable income and will be subject to U.S. federal income tax at regular corporate rates and state and local taxes, which may have adverse consequences on our total return to our stockholders.
If we cease to be a REIT, we will not be allowed a deduction for dividends paid to stockholders in computing our taxable income and will be subject to U.S. federal income tax at corporate rates and state and local taxes, which may have adverse consequences on our total return to our stockholders.
In addition, inflation, changes in building codes and ordinances, environmental considerations, and other factors, including terrorism or acts of war, may make any insurance proceeds we receive insufficient to repair or replace a property if it is damaged or destroyed.
In addition, changes in building codes and ordinances, environmental considerations, and other factors, including terrorism or acts of war, may make any insurance proceeds we receive insufficient to repair or replace a property if it is damaged or destroyed.
Accordingly, our performance is subject to risks incident to the ownership of commercial real estate, which include the inability to collect rents from tenants due to financial hardship, including bankruptcy; changes in local real estate conditions in the markets in which we operate, including the availability and demand for single-tenant, retail commercial real estate space; changes in consumer trends and preferences that affect the demand for products and services offered by our tenants; inability to lease or sell properties upon expiration or termination of existing leases; environmental risks, including the presence of hazardous or toxic substances or materials on our properties; the subjectivity of real estate valuations and changes in such valuations over time; the illiquid nature of real estate compared to most other financial assets; changes in laws and governmental regulations, including those governing real estate usage and zoning; changes in interest rates and the availability of financing; and changes in the 12 Table of Contents general economic and business climate.
Accordingly, our performance is subject to risks incident to the ownership of commercial real estate, which include the inability to collect rents from tenants due to financial hardship, including bankruptcy; changes in local real estate conditions in the markets in which we operate, including the availability and demand for single-tenant, retail commercial real estate space; changes in consumer trends and preferences that affect the demand for products and services offered by our tenants; inability to lease or sell properties upon expiration or termination of existing leases; environmental risks, including the presence of hazardous or toxic substances or materials on our properties; the subjectivity of real estate valuations and changes in such valuations over time; the illiquid nature of real estate compared to most other financial assets; changes in laws and governmental regulations, including those governing real estate usage and zoning; changes in interest rates and the availability of financing; and changes in the general economic and business climate.
Mortgage loans receivables are investments made by issuing first-lien mortgage loans to the owner of a property, with the property serving as collateral for the loans. These mortgage loans allow us to receive a fixed rate of return and generally provide us an option to acquire the property at predetermined pricing and dates.
Mortgage loans receivable are investments made by issuing first-lien mortgage loans to the owner of a property, with the property serving as collateral for the loans. These mortgage loans allow us to receive a fixed rate of return and generally provide us an option to acquire the property at predetermined pricing and dates.
The failure of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms, or a breach in security of these systems, such as in the event of cyber-attacks, malicious internet-based activity, online and offline fraud, and administrative or technical failures and other similar activities that threaten the confidentiality, integrity, 16 Table of Contents and availability of our information technology systems, including those of the third parties upon which we rely, could result in the theft of intellectual property, personal information or personal property, damage to our reputation and third-party claims, as well as reduced efficiency in our operations and in the accuracy of our internal and external financial reporting.
The failure of these systems to operate effectively, maintenance problems, failures or delays in upgrading or transitioning to new platforms, or a breach in security of these systems, such as in the event of cyber-attacks, malicious internet-based activity, online and offline fraud, and administrative or technical failures and other similar activities that threaten the confidentiality, integrity, and availability of our information technology systems, including those of the third parties upon which we rely, could result in the theft of intellectual property, personal information or personal property, damage to our reputation and third-party claims, as well as reduced efficiency in our operations and in the accuracy of our internal and external financial reporting.
The Credit Agreements and other debt agreements we may enter into in the future contain or may contain financial and other covenants with which we are or will be required to comply and that limit or will limit our ability to operate our business.
Our current debt agreements and other debt agreements we may enter into in the future contain or may contain financial and other covenants with which we are or will be required to comply and that limit or will limit our ability to operate our business.
In addition, our TRSs will be subject to U.S. federal income tax and applicable state and local taxes on their net income. Any of these taxes would reduce our cash available for distribution to stockholders. 20 Table of Contents Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends.
In addition, our TRSs will be subject to U.S. federal income tax and applicable state and local taxes on their net income. Any of these taxes would reduce our cash available for distribution to stockholders. Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends.
Furthermore, our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America 24 Table of Contents shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any claim arising under the Securities Act.
Furthermore, our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any claim arising under the Securities Act.
In addition, losses of a catastrophic nature, such as those caused by wind/hail, hurricanes, terrorism or acts of war, may be uninsurable or not economically insurable.
In addition, losses of a catastrophic nature, such as those caused by wind/hail, hurricanes, terrorism, acts of war or pandemics or endemics, may be uninsurable or not economically insurable.
Changes in global or national economic conditions, such as the global economic and financial market downturn and the conflict in Ukraine, may cause or continue to cause, among other things, tightening in the credit markets, lower levels of liquidity, higher interest rates, increased inflation, increases in the rate of default and bankruptcy and lower consumer and business spending, which could materially and adversely affect us.
Changes in global or national market and economic conditions, such as global economic and financial market volatility and global geopolitical conflict, may continue to cause, among other things, tightening in the credit markets, lower levels of liquidity, higher interest rates, increased inflation, increases in the rate of default and bankruptcy and lower consumer and business spending, which could materially and adversely affect us.
In addition, our charter requires us to indemnify and advance expenses to our directors and officers for actions taken by them in those and certain other capacities to the maximum extent permitted by Maryland law. We are a holding company with no direct operations and we rely on funds received from our operating partnership to pay liabilities.
In addition, our charter requires us to indemnify and advance expenses to our directors and officers for actions taken by them in those and certain other capacities to the maximum extent permitted by Maryland law. 26 Table of Contents We are a holding company with no direct operations and we rely on funds received from our operating partnership to pay liabilities.
The occurrence of any of these may cause the value of our real estate to decline, which could materially and adversely affect us. We may not be able to successfully execute our acquisition or development strategies.
The occurrence of any of these may cause the value of our real estate to decline, which could materially and adversely affect us. 12 Table of Contents We may not be able to successfully execute our acquisition or development strategies.
The remainder of our investment in 22 Table of Contents securities (other than government securities, securities of TRSs and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.
The remainder of our investment in securities (other than government securities, securities of TRSs and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.
Some of our tenants operate under franchise or license agreements, which, if terminated or not renewed prior to the expiration of their leases with us, would likely impair their ability to pay us rent. Of the ABR of our portfolio as of December 31, 2022, 6.1% is operated by tenants under franchise or license agreements.
Some of our tenants operate under franchise or license agreements, which, if terminated or not renewed prior to the expiration of their leases with us, would likely impair their ability to pay us rent. Of the ABR of our portfolio as of December 31, 2023, 4.6% is operated by tenants under franchise or license agreements.
A loss of key management personnel could adversely affect our performance. We are dependent on the efforts and performance of our key management, including Mark Manheimer, our Chief Executive Officer. We cannot guarantee we retain any of our executive leadership team and they could be difficult to replace.
A loss of key management personnel could adversely affect our performance. We are dependent on the efforts and performance of our key management, including Mark Manheimer, our Chief Executive Officer, and Daniel Donlan, our Chief Financial Officer. We cannot guarantee we will retain any of our executive leadership team and they could be difficult to replace.
A substantial number of our properties are leased to unrated tenants and the tools we use to determine the creditworthiness of our tenants may not be accurate. As of December 31, 2022, 37.1% of our properties are leased to unrated or sub-investment grade tenants that we determine, through our disciplined underwriting and risk management strategy, to be creditworthy.
A substantial number of our properties are leased to unrated tenants and the tools we use to determine the creditworthiness of our tenants may not be accurate. As of December 31, 2023, 29.5% of our properties are leased to unrated or sub-investment grade tenants that we determine, through our disciplined underwriting and risk management strategy, to be creditworthy.
A failure or weakness in our information systems could materially and adversely affect us, and the remediation of any such problems could result in significant unplanned expenditures. Our reliance on vendors could introduce new cybersecurity risks and vulnerabilities, and other threats to our business operations.
A failure or weakness in our information systems (or those of the third parties upon which we rely) could materially and adversely affect us, and the remediation of any such problems could result in significant unplanned expenditures. Our reliance on vendors could introduce new cybersecurity risks and vulnerabilities, and other threats to our business operations.
In addition, a significant portion of our portfolio holdings (based on ABR as of December 31, 2022) were located in the South (42.5%) and Midwest (33.3%) regions of the United States (as defined by the U.S. Census Bureau).
In addition, a significant portion of our portfolio holdings (based on ABR as of December 31, 2023) were located in the South (43.4%) and Midwest (31.3%) regions of the United States (as defined by the U.S. Census Bureau).
Our portfolio includes properties leased to single tenants that operate in multiple locations, which means that, as of December 31, 2022, we owned numerous properties leased by the same entity (or related group of entities), including CVS, Walgreens, Dollar General, Hobby Lobby, 7-Eleven, Advance Auto Parts, Sam’s / Walmart, Lowe’s, Dollar Tree / Family Dollar and Best Buy.
Our portfolio includes properties leased to single tenants that operate in multiple locations, which means that, as of December 31, 2023, we owned numerous properties leased by the same entity (or related group of entities), including Dollar General, CVS, Walgreens, Dollar Tree / Family Dollar, Food Lion / Stop & Shop, Hobby Lobby, 7-Eleven, Festival Foods, Advance Auto Parts and Sam’s / Walmart.
Moreover, the partnership agreement of our operating partnership provides that our operating partnership is required to indemnify the general partner and its members, managers, managing members, officers, employees, agents and designees from and against any and all claims that relate to the operations of our operating partnership, except (i) if the act or omission of the person was material to the matter giving rise to the action and either was committed in bad faith or was the result of active or deliberate dishonesty, (ii) for any transaction for which the indemnified party received an improper personal benefit, in money, property or services or otherwise in violation or breach of any provision of the partnership agreement or (iii) in the case of a criminal proceeding, if the indemnified person had reasonable cause to believe that the act or omission was unlawful.
Moreover, the partnership agreement of our operating partnership provides that our operating partnership is required to indemnify the general partner and its members, managers, managing members, officers, employees, agents and designees from and against any and all claims that relate to the operations of our operating partnership, except (i) if the act or omission of the person was material to the matter giving rise to the action and either was committed in bad faith or was the result of active or deliberate dishonesty, (ii) for any transaction for which the indemnified party received an improper personal benefit, in money, property or services or otherwise in violation or breach of any provision of the partnership agreement or (iii) in the case of a criminal proceeding, if the indemnified person had reasonable cause to believe that the act or omission was unlawful. 27 Table of Contents If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud.
These restrictions on ownership and transfer of our stock may, among other things: discourage a tender offer or other transactions or a change in management or of control that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interests; or result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of one or more charitable beneficiaries and, as a result, the forfeiture by the acquirer of the benefits of owning the additional shares.
These restrictions on ownership and transfer of our stock may, among other things: discourage a tender offer or other transactions or a change in management or of control that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interests; or result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of one or more charitable beneficiaries and, as a result, the forfeiture by the acquirer of the benefits of owning the additional shares. 21 Table of Contents The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.
We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
If our vendors experience a security incident or other interruption, we could experience adverse consequences, including harm to our business, results of operations and financial condition. 16 Table of Contents We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
If environmental contamination exists on our properties, we could be subject to strict, joint and/or several liability for the contamination by virtue of our ownership interest; we may face liability regardless of our knowledge of the contamination, the timing of the contamination, the cause of the contamination, or the party responsible for the contamination of the property. 23 Table of Contents If our environmental liability insurance is inadequate, we may become subject to material losses for environmental liabilities.
If environmental contamination exists on our properties, we could be subject to strict, joint and/or several liability for the contamination by virtue of our ownership interest; we may face liability regardless of our knowledge of the contamination, the timing of the contamination, the cause of the contamination, or the party responsible for the contamination of the property.
We are subject to risks related to tenant concentration, and an adverse development with respect to a large tenant could materially and adversely affect us. The top five tenants in our portfolio — CVS, Walgreens, Dollar General, Hobby Lobby and 7-Eleven — contributed 10.1%, 6.5%, 6.2%, 5.5%, and 4.6%, respectively, of our ABR as of December 31, 2022.
We are subject to risks related to tenant concentration, and an adverse development with respect to a large tenant could materially and adversely affect us. The top five tenants in our portfolio — Dollar General, CVS, Walgreens, Dollar Tree and Home Depot — contributed 10.9%, 7.8%, 6.9%, 5.0%, and 4.7%, respectively, of our ABR as of December 31, 2023.
However, the Phase I environmental site assessments are limited in scope and therefore may not reveal all environmental conditions affecting a property.
We typically obtain Phase I environmental site assessments on all properties we finance or acquire. However, the Phase I environmental site assessments are limited in scope and therefore may not reveal all environmental conditions affecting a property.
We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in stockholder dilution and limit our ability to sell such assets. In the future we may acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for OP units, which may result in stockholder dilution.
In the future we may acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for OP units, which may result in stockholder dilution.
In addition, if we are unable to obtain financing in order to make distributions required to maintain our qualification as a REIT, we may make taxable in-kind distributions of our own stock, which may cause our stockholders to be required to pay income taxes 18 Table of Contents with respect to such distributions in excess of any cash they receive, or we may be required to withhold taxes with respect to such distributions in excess of any cash our stockholders receive.
In addition, if we are unable to obtain financing in order to make distributions required to maintain our qualification as a REIT, we may make taxable in-kind distributions of our own stock, which may cause our stockholders to be required to pay income taxes with respect to such distributions in excess of any cash they receive, or we may be required to withhold taxes with respect to such distributions in excess of any cash our stockholders receive. 18 Table of Contents Our level of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility.
The fiduciary duties and obligations of NETSTREIT GP, LLC, as the general partner of our operating partnership, and its limited partners may come into conflict with the duties of our directors and officers to our company. 25 Table of Contents Under the terms of the partnership agreement of our operating partnership, if there is a conflict between the interests of our stockholders on one hand and any limited partners on the other, we will endeavor in good faith to resolve the conflict in a manner not adverse to either our stockholders or any limited partners; provided, however, that any conflict that cannot be resolved in a manner not adverse to either our stockholders or any limited partners must be resolved in favor of our stockholders.
Under the terms of the partnership agreement of our operating partnership, if there is a conflict between the interests of our stockholders on one hand and any limited partners on the other, we will endeavor in good faith to resolve the conflict in a manner not adverse to either our stockholders or any limited partners; provided, however, that any conflict that cannot be resolved in a manner not adverse to either our stockholders or any limited partners must be resolved in favor of our stockholders.
As of December 31, 2022, our portfolio included substantial holdings in Illinois (8.7%), Texas (8.1%), Wisconsin (6.9%), Georgia (6.0%), Virginia (5.7%), Ohio (5.5%) and Pennsylvania (5.1%) based on ABR as of December 31, 2022.
As of December 31, 2023, our portfolio included substantial holdings in Illinois (8.6%), Texas (7.6%), Wisconsin (7.2%), New York (6.5%), North Carolina (5.9%), Georgia (5.4%), Alabama (5.1%), and Ohio (5.1%) based on ABR as of December 31, 2023.
If a transaction intended to qualify as a 1031 Exchange is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax-deferred basis. 21 Table of Contents In order to avoid potentially significant taxable gains upon the sale of properties that no longer meet our investment criteria, we intend to dispose of properties in 1031 Exchanges.
If a transaction intended to qualify as a 1031 Exchange is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax-deferred basis.
Failure to comply with these laws and regulations could result in imposition of fines by the government or an award of damages to private litigants, or both.
Our properties are subject to the Americans with Disabilities Act, or ADA, fire and safety regulations, building codes and other regulations. Failure to comply with these laws and regulations could result in imposition of fines by the government or an award of damages to private litigants, or both.
In addition, exposure to mold by our tenants or others could subject us to liability if property damage or health concerns arise. If we were to become subject to significant mold-related liabilities, we could be materially and adversely affected.
In addition, exposure to mold by our tenants or others could subject us to liability if property damage or health concerns arise.
As discussed above, the current and continued macro-economic conditions of high inflation and rising interest rates have increased the costs associated with acquiring new properties and decreased the availability of financing on terms that we find acceptable, which has reduced our ability to acquire properties at our historical rate with attractive terms.
Our ability to expand our portfolio through property acquisitions requires us to identify and complete acquisitions or investment opportunities on attractive terms that are compatible with our growth strategy and to successfully integrate newly acquired properties into our portfolio.The current and continued macro-economic conditions of high inflation and high interest rates have increased the costs associated with acquiring new properties and decreased the availability of financing on terms that we find acceptable, which has reduced our ability to acquire properties at our historical rate with attractive terms.
For example, if circumstances make it not profitable or otherwise uneconomical for us to remain in certain states or geographical markets, the 100% tax could delay our ability to exit those states or markets by selling our assets in those states or markets other than through a TRS, which could harm our operating profits.
For example, if circumstances make it not profitable or otherwise uneconomical for us to remain in certain states or geographical markets, the 100% tax could delay our ability to exit those states or markets by selling our assets in those states or markets other than through a TRS, which could harm our operating profits. 20 Table of Contents Furthermore, even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local income, property and excise taxes on our income or property.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.
Our debt financing agreements, including the Credit Agreements, contain or may contain restrictions and covenants which may limit our ability to enter into or obtain funding for certain transactions, operate our business or make distributions to our common stockholders.
Failure to hedge effectively against changes in interest rates relating to the interest expense of our future floating-rate borrowings may materially and adversely affect us. Our debt financing agreements contain or may contain restrictions and covenants which may limit our ability to enter into or obtain funding for certain transactions, operate our business or make distributions to our common stockholders.
In addition, we would be responsible for all of the operating costs of a property following a vacancy at a single-tenant building. Because our properties have generally 13 Table of Contents been built to suit a particular tenant's specific needs, we may also incur significant costs to make the leased premises ready for another tenant.
Because our properties have generally been built to suit a particular tenant's specific needs, we may also incur significant costs to make the leased premises ready for another tenant. 13 Table of Contents Our assessment that certain businesses are e-commerce resistant and recession-resilient may prove to be incorrect.
The U.S. federal income tax treatment of the cash that we might receive from cash settlement of the forward sale agreement is unclear and could jeopardize our ability to meet the REIT qualification requirements.
In addition, losses in any TRS in which we own an interest will generally not provide any tax benefit, except that such losses could theoretically be carried forward against future taxable income in such TRS. 22 Table of Contents The U.S. federal income tax treatment of the cash that we might receive from cash settlement of the forward sale agreement is unclear and could jeopardize our ability to meet the REIT qualification requirements.
A TRS will typically pay federal, state and local income tax at regular corporate rates on any income that it earns. In addition, the Code imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are treated as not being conducted on an arm's-length basis.
We do not anticipate material income tax obligations in connection with our ownership of interests in TRSs. In addition, the Code imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are treated as not being conducted on an arm's-length basis.
A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. Overall, no more than 20% of the value of a REIT's assets may consist of securities of one or more TRSs.
Overall, no more than 20% of the value of a REIT's assets may consist of securities of one or more TRSs.
Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make unanticipated expenditures that materially and adversely affect us. Our properties are subject to the Americans with Disabilities Act, or ADA, fire and safety regulations, building codes and other regulations.
If we were to become subject to significant mold-related liabilities, we could be materially and adversely affected. 25 Table of Contents Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make unanticipated expenditures that materially and adversely affect us.
As of December 31, 2022, we had a $200.0 million senior unsecured term loan (the “2028 Term Loan”), a $175.0 million senior unsecured term loan (the “2024 Term Loan”) and $113.0 million of borrowings outstanding under our $400.0 million senior unsecured revolving credit facility (the “Revolver”).
As of December 31, 2023, we had a $200.0 million 2028 Term Loan, a $175.0 million 2027 Term Loan, a $150.0 million 2029 Term Loan and $80.0 million of borrowings outstanding under our $400.0 million Revolver.
Liabilities arising under environmental laws may materially and adversely affect us. The properties we own or have owned in the past may subject us to known and unknown environmental liabilities. We typically obtain Phase I environmental site assessments on all properties we finance or acquire.
Prospective investors should consult their tax advisors regarding the application and effect of state and local income and other tax laws on an investment in our stock. Liabilities arising under environmental laws may materially and adversely affect us. The properties we own or have owned in the past may subject us to known and unknown environmental liabilities.
We may be unable in the future to detect vulnerabilities in our information technology systems because such threats and techniques change frequently and are often sophisticated in nature. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.
We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems. We may not, however, detect and remediate all such vulnerabilities including on a timely basis. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. Vulnerabilities could be exploited and result in a security incident.
Additionally, these restrictions may adversely affect our operating and financial flexibility and may limit our ability to respond to changes in our business or competitive environment, all of which may materially and adversely affect us.
Additionally, these restrictions may adversely affect our operating and financial flexibility and may limit our ability to respond to changes in our business or competitive environment, all of which may materially and adversely affect us. 19 Table of Contents Risks Related to Government Regulation and Tax Matters Our failure to qualify or maintain our qualification as a REIT for U.S. federal income tax purposes would reduce the amount of funds we have available for distribution and limit our ability to make distributions to our stockholders.
In the event there is damage to our properties that is not covered by insurance, we may be materially and adversely affected. The ongoing COVID-19 pandemic and the future outbreak of other highly infectious or contagious diseases could materially and adversely affect us.
In the event there is damage to our properties that is not covered by insurance, we may be materially and adversely affected. 17 Table of Contents We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in stockholder dilution and limit our ability to sell such assets.
In addition, such leadership transitions can be inherently difficult to manage, and a poorly executed transition involving our new Chief Financial Officer may cause disruption to our business, including to our relationships with tenants, stockholders and employees. Any material failure, weakness, interruption or breach in security of our information systems could prevent us from effectively operating our business.
Any material failure, weakness, interruption or breach in security of our information systems or data, or those of our third party vendors, could prevent us from effectively operating our business.
Removed
Our ability to expand our portfolio through property acquisitions requires us to identify and complete acquisitions or investment opportunities on attractive terms that are compatible with our growth strategy and to successfully integrate newly acquired properties into our portfolio.
Added
In addition, we would be responsible for all of the operating costs of a property following a vacancy at a single-tenant building.
Removed
Our assessment that certain businesses are e-commerce resistant and recession-resilient may prove to be incorrect.
Added
Security incidents and attendant consequences may prevent or cause customers to stop using our services, deter new customers from using our services, and negatively impact our ability to grow and operate our business. Data privacy risks, including evolving laws, regulations, and other obligations and compliance efforts, may result in business interruption and increased costs and liabilities.
Removed
If we do not successfully manage the transition associated with the resignation of our former Chief Financial Officer and the appointment of a new Chief Financial Officer, it could be viewed negatively by our tenants and stockholders and could have an adverse impact on our business.
Added
Laws, regulations and other obligations (including applicable guidance, industry standards, external and internal privacy and security policies and contractual requirements) relating to personal data are constantly evolving, as federal, state, local and foreign governments continue to adopt new measures addressing data privacy, data security, and processing personal data.
Removed
On November 7, 2022, we announced that our board of directors planned to conduct a search process to identify and appoint a new permanent Chief Financial Officer. Our board of directors has commenced an active search to select our next Chief Financial Officer from internal and external candidates.
Added
Existing privacy and data protection laws and regulations in the United States (including the California Consumer Privacy Act, as amended (“CCPA”)), Europe (including the E.U.’s General Data Protection Regulation) and other jurisdictions impose stringent obligations on such activities.
Removed
If we are unable to attract and retain a qualified candidate to become our Chief Financial Officer in a timely manner, our ability to meet our financial and operational goals and strategic plans, as well as our financial performance, may be adversely impacted. It may also make it more difficult to retain and hire key employees.
Added
For example, the CCPA, which applies to business representative and other types of personal data of California residents, provides for fines of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages.
Removed
If our vendors experience a security incident or other interruption, we could experience adverse consequences, including harm to our business, results of operations and financial condition.
Added
Such laws and regulations may be interpreted or applied in a manner that is inconsistent with each other and may complicate our existing data management practices. Evolving compliance and operational requirements under the privacy laws of the jurisdictions in which we operate, regulations, and other obligations have become increasingly burdensome and complex.
Removed
The ongoing COVID-19 pandemic has negatively impacted, and continues to negatively impact, the economy across many industries, including industries in which our tenants operate.
Added
Privacy-related claims or lawsuits initiated by governmental bodies, customers or other third parties, irrespective of the merits, could be time consuming, result in costly enforcement actions (including regulatory proceedings, investigations, fines,penalties, audits, and inspections), litigation (including class action claims) or mass arbitration demands, penalties and fines, require us to change our business practices or cause business interruptions and may lead to administrative, civil, or criminal liability.
Removed
The COVID-19 pandemic, including economic conditions surrounding the COVID-19 pandemic, has also exacerbated other risks disclosed in these “Risk Factors” including, but not limited to, the ability of our tenants to pay rent, our ability acquire properties on attractive terms or at all and our access to external sources of capital.
Added
In order to avoid potentially significant taxable gains upon the sale of properties that no longer meet our investment criteria, we intend to dispose of properties in 1031 Exchanges.
Removed
There is uncertainty regarding the extent to which and how long the COVID-19 pandemic will continue to impact the global economy and the effect of the pandemic on our operations and those of our tenants will depend on future developments, which are uncertain and cannot be predicted with confidence.
Added
A TRS is a corporation other than a REIT in which a REIT directly or indirectly holds stock, and that has made a joint election with such REIT to be treated as a TRS.
Removed
Closures by our tenants of their locations and early terminations by our tenants of their leases as a result of the COVID-19 pandemic or an outbreak of another highly 17 Table of Contents infectious disease could reduce our cash flows, which could impact our ability to continue paying dividends to our stockholders at expected levels or at all.
Added
A TRS also includes any corporation other than a REIT with respect to which a TRS owns securities possessing more than 35% of the total voting power or value of the outstanding securities of such corporation.
Removed
If the COVID-19 pandemic continues to have a negative impact on economic conditions, or there is an outbreak of another highly infectious disease the impacts economic conditions, we could be materially and adversely impacted.
Added
Other than some activities relating to lodging and health care facilities, a TRS may generally engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT.
Removed
Our level of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility.
Added
A TRS is subject to income tax as a regular C corporation. 23 Table of Contents A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT.
Removed
Failure to hedge effectively against changes in interest rates relating to the interest expense of our future floating-rate borrowings may materially and adversely affect us.
Added
If the IRS were to determine that the value of our interests in all of our TRSs exceeded this limit at the end of any calendar quarter, then we may fail to qualify as a REIT if relief provisions do not apply.
Removed
The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.
Added
If we determine it to be in our best interest to own a substantial number of our properties through one or more TRSs, then it is possible that the IRS may conclude that the value of our interests in our TRSs exceeds 20% of the value of our total assets at the end of any calendar quarter and therefore cause us to fail to qualify as a REIT.
Removed
In addition, losses in any TRS in which we own an interest will generally not provide any tax benefit, except that such losses could theoretically be carried forward against future taxable income in such TRS.
Added
Additionally, as a REIT, no more than 25% of our gross income with respect to any year may, in general, be from sources other than certain real estate-related assets. Dividends paid to us from a TRS are typically considered to be non-real estate income.

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Item 2. Properties

Properties — owned and leased real estate

11 edited+4 added−5 removed2 unchanged
Biggest change(2) The Home Improvement industry has two properties and the Drug Stores & Pharmacies, Dollar Stores, and Discount Retail industries all have one property that reside in NETSTREIT Management TRS, LLC (“NETSTREIT TRS”), representing an aggregate of approximately 1.1% of ABR. 28 Table of Contents Geographic Diversification The following table presents ABR by state for our portfolio as of December 31, 2022 (dollars in thousands): ABR Gross Leasable Area Tenant State Number of Leases Dollars % of Total Square Feet % of Total Illinois 23 $ 8,663 8.7 % 536,614 6.3 % Texas 35 8,022 8.1 % 433,723 5.1 % Wisconsin 21 6,874 6.9 % 701,272 8.3 % Georgia 28 5,949 6.0 % 727,868 8.6 % Virginia 9 5,674 5.7 % 256,267 3.0 % Ohio 33 5,427 5.5 % 621,721 7.3 % Pennsylvania 23 5,102 5.1 % 364,305 4.3 % New York 16 4,674 4.7 % 529,016 6.2 % Louisiana 10 4,187 4.2 % 333,184 3.9 % California 13 4,174 4.2 % 190,390 2.2 % Indiana 18 4,126 4.2 % 315,248 3.7 % Michigan 19 3,616 3.6 % 376,498 4.4 % Mississippi 14 3,203 3.2 % 445,102 5.3 % Alabama 18 3,119 3.1 % 236,266 2.8 % Florida 17 2,507 2.5 % 121,810 1.4 % North Carolina 11 2,277 2.3 % 321,469 3.8 % Arizona 5 1,837 1.9 % 161,661 1.9 % New Mexico 7 1,516 1.5 % 86,726 1.0 % Washington 3 1,399 1.4 % 116,222 1.4 % Nevada 6 1,379 1.4 % 135,547 1.6 % Other (1) 98 15,458 15.6 % 1,459,585 17.2 % Total 427 $ 99,183 100.0 % 8,470,494 100.0 % (1) Includes 23 states each generating less than 1.38% of annualized base rent. 29 Table of Contents Lease Terms and Expirations Our leases typically have initial lease terms of approximately 10 years and contain two or more options for the tenant to extend the lease term, most often for additional five-year periods.
Biggest change(2) The Drug Stores & Pharmacies industry has one property that resides in NETSTREIT Management TRS, LLC (“NETSTREIT TRS”), representing approximately 0.3% of ABR. 32 Table of Contents Geographic Diversification The following table presents ABR by state for our portfolio as of December 31, 2023 (dollars in thousands): ABR Gross Leasable Area Tenant State Number of Leases Dollars % of Total Square Feet % of Total Illinois 26 $ 11,391 8.6 % 752,941 7.1 % Texas 43 10,063 7.6 % 591,104 5.6 % Wisconsin 24 9,507 7.2 % 920,831 8.7 % New York 25 8,609 6.5 % 728,008 6.9 % North Carolina 70 7,721 5.9 % 531,814 5.0 % Georgia 36 7,056 5.4 % 815,324 7.7 % Alabama 45 6,698 5.1 % 536,199 5.0 % Ohio 42 6,685 5.1 % 690,087 6.5 % Virginia 11 5,892 4.5 % 281,363 2.6 % Pennsylvania 28 5,697 4.3 % 405,328 3.8 % Indiana 20 5,184 3.9 % 407,252 3.8 % Louisiana 13 4,447 3.4 % 347,985 3.3 % Mississippi 23 4,186 3.2 % 516,243 4.9 % California 13 4,174 3.2 % 190,390 1.8 % Florida 29 3,965 3.0 % 280,914 2.6 % Michigan 19 3,616 2.7 % 376,373 3.5 % Oregon 3 3,343 2.5 % 148,422 1.4 % New Mexico 8 1,658 1.3 % 97,292 0.9 % Iowa 12 1,488 1.1 % 239,596 2.3 % Kentucky 5 1,479 1.1 % 167,479 1.6 % Other (1) 103 19,002 14.4 % 1,599,238 15.1 % Total 598 $ 131,861 100.0 % 10,624,183 100.0 % (1) Includes 25 states. 33 Table of Contents Lease Terms and Expirations Our leases typically have initial lease terms of approximately 10 years and contain two or more options for the tenant to extend the lease term, most often for additional five-year periods.
Item 2. Properties During the year ended December 31, 2022, we acquired 105 single-tenant retail net lease properties with an aggregate purchase price of $424.8 million. As of December 31, 2022, our diversified portfolio consisted of 427 single-tenant retail net leased properties spanning 43 states, with 80 different tenants represented across 25 retail sectors.
Item 2. Properties During the year ended December 31, 2023, we acquired 103 single-tenant retail net lease properties with an aggregate purchase price of $345.1 million. As of December 31, 2023, our diversified portfolio consisted of 598 single-tenant retail net leased properties spanning 45 states, with 85 different tenants represented across 26 retail sectors.
As of December 31, 2022, our portfolio had a WALT of 9.5 years and consisted of approximately 63% and 17% of investment grade tenants and investment grade profile tenants, respectively, by ABR.
As of December 31, 2023, our portfolio consisted of approximately 71% and 14% of investment grade tenants and investment grade profile tenants, respectively, by ABR, and had a WALT of 9.5 years (exclusive of mortgage loans receivable).
As of December 31, 2022, our portfolio consisted of 8.5 million square feet and was 100% occupied. 26 Table of Contents As of December 31, 2022, our portfolio generated ABR of $99.2 million.
As of December 31, 2023, our portfolio consisted of 10.6 million square feet and was 100% occupied. As of December 31, 2023, our portfolio generated ABR of $131.9 million.
The breakdown of our necessity-based retail, service-oriented, discount-focused, and other, non-defensive retail industries by sector and by percentage of ABR as of December 31, 2022 is set forth below (dollars in thousands): ABR (1) Gross Leasable Area Tenant Industry and Sector Number of Leases Dollars % of Total Square Feet % of Total Necessity-Based Retail Drug Stores & Pharmacies (2) 54 $ 16,399 16.5 % 715,948 8.5 % Grocery 23 12,760 12.9 % 1,124,125 13.3 % Home Improvement (2) 33 11,969 12.1 % 1,281,342 15.1 % Auto Parts 61 5,526 5.6 % 481,156 5.7 % General Retail 6 3,708 3.7 % 829,233 9.8 % Healthcare 12 2,352 2.4 % 87,126 1.0 % Farm Supplies 7 1,596 1.6 % 172,446 2.0 % Banking 3 457 0.5 % 9,668 0.1 % Wholesale Warehouse Club 1 417 0.4 % 110,858 1.3 % Total Necessity-Based Retail 200 55,185 55.6 % 4,811,902 56.8 % Service-Oriented Industry Convenience Stores 24 5,353 5.4 % 95,070 1.1 % Quick Service Restaurants 18 2,923 2.9 % 52,778 0.6 % Automotive Service 15 1,634 1.6 % 95,557 1.1 % Health and Fitness 1 985 1.0 % 33,616 0.4 % Casual Dining 5 767 0.8 % 25,790 0.3 % Equipment Rental and Leasing 5 679 0.7 % 49,275 0.6 % Total Service-Oriented Industry 68 12,342 12.4 % 352,086 4.2 % Discount-Focused Industry Dollar Stores (2) 96 9,566 9.6 % 932,915 11.0 % Discount Retail (2) 32 8,357 8.4 % 1,093,487 12.9 % Total Discount-Focused Industry 128 17,923 18.1 % 2,026,402 23.9 % Defensive Retail Industries 396 85,450 86.2 % 7,190,390 84.9 % Other, Non-Defensive Industries Arts & Crafts 14 5,468 5.5 % 767,814 9.1 % Consumer Electronics 6 3,211 3.2 % 285,495 3.4 % Specialty 2 1,719 1.7 % 46,593 0.6 % Sporting Goods 1 1,636 1.6 % 81,780 1.0 % Furniture Stores 2 885 0.9 % 47,101 0.6 % Apparel 4 481 0.5 % 39,126 0.5 % Gift, Novelty, and Souvenir Shops 1 200 0.2 % 8,081 0.1 % Home Furnishings 1 134 0.1 % 4,114 — % Total Other, Non-Defensive 31 13,733 13.8 % 1,280,104 15.1 % Total, All Industries 427 $ 99,183 100.0 % 8,470,494 100.0 % (1) Certain figures in this table may not foot due to rounding.
The breakdown of our necessity-based retail, service-oriented, discount-focused, and other, non-defensive retail industries by sector and by percentage of ABR as of December 31, 2023 is set forth below (dollars in thousands): ABR (1) Gross Leasable Area Tenant Industry and Sector Number of Leases Dollars % of Total Square Feet % of Total Necessity-Based Retail Grocery 31 $ 20,261 15.4 % 1,589,648 15.0 % Drug Stores & Pharmacies (2) 61 19,294 14.6 % 817,176 7.7 % Home Improvement 29 15,269 11.6 % 1,424,030 13.4 % Auto Parts 61 5,526 4.2 % 481,156 4.5 % General Retail 6 3,753 2.8 % 829,233 7.8 % Healthcare 12 2,366 1.8 % 87,126 0.8 % Farm Supplies 7 1,615 1.2 % 172,446 1.6 % Banking 3 467 0.4 % 9,668 0.1 % Wholesale Warehouse Club 1 417 0.3 % 110,858 1.0 % Total Necessity-Based Retail 211 68,968 52.3 % 5,521,341 52.0 % Service-Oriented Industry Convenience Stores 73 9,641 7.3 % 201,697 1.9 % Quick Service Restaurants 22 3,170 2.4 % 64,215 0.6 % Automotive Service 18 2,038 1.5 % 117,803 1.1 % Casual Dining 7 1,066 0.8 % 39,490 0.4 % Health and Fitness 1 985 0.7 % 33,616 0.3 % Equipment Rental and Leasing 5 687 0.5 % 49,275 0.5 % Total Service-Oriented Industry 126 17,587 13.3 % 506,096 4.8 % Discount-Focused Industry Dollar Stores 193 20,890 15.8 % 2,020,021 19.0 % Discount Retail 32 8,134 6.2 % 1,113,096 10.5 % Total Discount-Focused Industry 225 29,024 22.0 % 3,133,116 29.5 % Defensive Retail Industries 562 115,579 87.7 % 9,160,553 86.2 % Other, Non-Defensive Industries Arts & Crafts 14 5,475 4.2 % 767,816 7.2 % Sporting Goods 4 3,841 2.9 % 251,669 2.4 % Consumer Electronics 6 3,188 2.4 % 285,495 2.7 % Specialty 2 1,719 1.3 % 46,593 0.4 % Furniture Stores 2 932 0.7 % 47,101 0.4 % Apparel 4 481 0.4 % 39,126 0.4 % Telecommunications 2 314 0.2 % 13,635 0.1 % Gift, Novelty, and Souvenir Shops 1 200 0.2 % 8,081 0.1 % Home Furnishings 1 132 0.1 % 4,114 — % Total Other, Non-Defensive 36 16,282 12.3 % 1,463,629 13.8 % Total, All Industries 598 $ 131,861 100.0 % 10,624,183 100.0 % (1) Certain figures in this table may not foot due to rounding.
As of December 31, 2022, the leases in our portfolio had a WALT of 9.5 years, with no lease expiring prior to September 2024.
As of December 31, 2023, the leases in our portfolio had a WALT of 9.5 years (exclusive of mortgage loans receivable).
As of December 31, 2022, none of our tenants represented more than 10.1% of our portfolio by ABR, and our top 10 largest tenants represented in aggregate 50.9% of our ABR. Eight of our top 10 tenants are publicly traded companies and nine have investment grade credit ratings, in addition to Hobby Lobby, an investment grade profile tenant.
Eight of our top 10 tenants are publicly traded companies, or are subsidiaries of publicly traded companies, that have investment grade credit ratings, in addition to Hobby Lobby and Festival Foods, investment grade profile tenants. 30 Table of Contents Tenant Diversification As of December 31, 2023, our 598 properties were operated by 85 different tenants, each representing a distinct brand or concept, with no one tenant representing more than 10.9% of our portfolio by ABR.
(2) Weighted by ABR. 27 Table of Contents Tenant Industry Diversification The majority of our portfolio is comprised of properties leased to tenants operating in defensive retail industries, with 86.2% of our ABR as of December 31, 2022 coming from necessity, service-oriented, and/or discount industries.
(Big Lots) 8 302,587 2,011 1.5 % 6.65 Top 20 Subtotal 441 8,425,791 100,019 75.9 % 11.87 Other 157 2,198,392 31,842 24.1 % 14.48 Total / Weighted Average 598 10,624,183 $ 131,861 100.0 % $ 12.41 (1) Represents tenant or guarantor. 31 Table of Contents Tenant Industry Diversification The majority of our portfolio is comprised of properties leased to tenants operating in defensive retail industries, with 87.7% of our ABR as of December 31, 2023 coming from necessity, service-oriented, and/or discount industries.
(Advance Auto Parts) 40 286,706 3,900 3.9 % 13.60 8.6 Wal-Mart Stores, Inc. 6 813,688 3,770 3.8 % 4.63 6.8 Lowe's Companies, Inc. 4 501,771 3,578 3.6 % 7.13 11.2 Dollar Tree Stores, Inc. / Family Dollar Stores, Inc. 33 318,479 3,367 3.4 % 10.57 6.1 Best Buy Stores, L.P. 6 285,495 3,211 3.2 % 11.25 4.5 Koninklijke Ahold Delhaize N.V.
(Advance Auto Parts) 40 286,706 3,900 3.0 % 13.60 Wal-Mart Stores, Inc. 6 813,688 3,770 2.9 % 4.63 Lowe's Companies, Inc. 4 501,771 3,578 2.7 % 7.13 The Kroger Co. 7 396,089 3,407 2.6 % 8.60 Best Buy Stores, L.P. 6 285,495 3,188 2.4 % 11.17 Floor & Décor Outlets of America, Inc. 2 164,770 2,615 2.0 % 15.87 Ollie's Bargain Outlet, Inc. 10 373,976 2,435 1.8 % 6.51 Winn-Dixie Stores, Inc. 4 213,830 2,356 1.8 % 11.02 Dick's Sporting Goods, Inc. 2 133,247 2,186 1.7 % 16.41 Big Lots Stores, Inc. / PNS Stores, Inc.
The following table details information about our tenants as of December 31, 2022 (dollars in thousands): Tenant (1) Number of Properties Square Feet ABR % of ABR ABR per Square Foot Weighted Average Lease Term (2) CVS Health Corporation 32 391,097 $ 9,971 10.1 % $ 25.50 13.0 Walgreen Co. 22 324,851 6,428 6.5 % 19.79 11.8 Dollar General Corporation 63 614,436 6,199 6.2 % 10.09 9.3 Hobby Lobby Stores, Inc. 14 767,816 5,468 5.5 % 7.12 9.8 7-Eleven, Inc. 20 69,968 4,611 4.6 % 65.90 12.8 Advance Stores Company, Inc.
The following table details information about our tenants as of December 31, 2023 (dollars in thousands): Tenant (1) Number of Properties Square Feet ABR % of ABR ABR per Square Foot Dollar General Corporation 134 1,386,713 $ 14,350 10.9 % $ 10.35 CVS Health Corporation 33 403,949 10,246 7.8 % 25.36 Walgreen Co. 28 413,227 9,047 6.9 % 21.89 Dollar Tree Stores, Inc. / Family Dollar Stores, Inc. 59 633,308 6,540 5.0 % 10.33 Home Depot U.S.A, Inc. 4 483,134 6,197 4.7 % 12.83 Koninklijke Ahold Delhaize N.V.
The following table illustrates contractual lease expirations within the Company's portfolio as of December 31, 2022, assuming no exercise of contractual extension options (dollars in thousands): ABR Gross Leasable Area Year Number of Leases Dollars % of Total Square Feet % of Total 2023 — $ — — % — — % 2024 2 293 0.3 % 34,820 0.4 % 2025 10 2,826 2.8 % 376,674 4.4 % 2026 16 3,099 3.1 % 331,751 3.9 % 2027 21 5,145 5.2 % 474,863 5.6 % 2028 36 7,295 7.4 % 756,144 8.9 % 2029 53 8,169 8.2 % 708,273 8.4 % 2030 41 9,870 10.0 % 1,055,336 12.5 % 2031 66 12,353 12.5 % 1,204,370 14.2 % 2032 33 9,052 9.1 % 1,280,409 15.1 % 2033 27 5,224 5.3 % 349,619 4.1 % 2034 26 9,591 9.7 % 338,916 4.0 % 2035 23 8,206 8.3 % 428,117 5.1 % 2036 27 5,894 5.9 % 328,062 3.9 % 2037 29 7,589 7.7 % 613,634 7.2 % Thereafter 17 4,578 4.6 % 189,506 2.2 % Total 427 $ 99,183 100.0 % 8,470,494 100.0 % 30 Table of Contents Developments As of December 31, 2022, the Company had 12 development projects completed or under construction.
The following table illustrates contractual lease expirations within the Company's portfolio as of December 31, 2023, assuming no exercise of contractual extension options (dollars in thousands): ABR Gross Leasable Area Year Number of Leases Dollars % of Total Square Feet % of Total 2024 13 $ 4,056 3.1 % 329,292 3.1 % 2025 65 7,653 5.8 % 491,842 4.6 % 2026 10 2,563 1.9 % 282,727 2.7 % 2027 17 4,602 3.5 % 429,665 4.0 % 2028 26 10,128 7.7 % 817,615 7.7 % 2029 43 9,759 7.4 % 760,148 7.2 % 2030 39 9,896 7.5 % 1,052,878 9.9 % 2031 64 12,187 9.2 % 1,150,824 10.8 % 2032 34 9,085 6.9 % 1,236,792 11.6 % 2033 61 12,590 9.5 % 1,015,117 9.6 % 2034 39 11,095 8.4 % 441,606 4.2 % 2035 28 8,861 6.7 % 499,310 4.7 % 2036 21 4,977 3.8 % 269,010 2.5 % 2037 23 6,666 5.1 % 533,383 5.0 % 2038 91 11,441 8.7 % 1,048,698 9.9 % Thereafter 24 6,302 4.8 % 265,276 2.5 % Total 598 $ 131,861 100.0 % 10,624,183 100.0 % Developments During 2023, rent commenced on 22 completed property developments.
Removed
Tenant Diversification As of December 31, 2022, our 427 properties were operated by 80 different tenants, each representing a distinct brand or concept, with no one tenant representing more than 10.1% of our portfolio by ABR.
Added
As of December 31, 2023, none of our tenants represented more than 10.9% of our portfolio by ABR, and our top 10 largest tenants represented in aggregate 53.7% of our ABR.
Removed
(Food Lion / Stop & Shop) 5 246,941 3,000 3.0 % 12.15 6.3 MDSFEST, Inc. (Festival Foods) 2 201,527 2,719 2.7 % 13.49 14.9 Floor & Décor Outlets of America, Inc. 2 164,770 2,615 2.6 % 15.87 10.3 Big Lots Stores, Inc. / PNS Stores, Inc.
Added
(Food Lion / Stop & Shop) 7 362,103 5,808 4.4 % 16.04 Hobby Lobby Stores, Inc. 15 825,816 5,531 4.2 % 6.70 7-Eleven, Inc. 20 69,968 4,611 3.5 % 65.90 Speedway, LLC 49 106,627 4,288 3.3 % 40.21 MDSFEST, Inc. (Festival Foods) 3 268,787 3,955 3.0 % 14.71 Advance Stores Company, Inc.
Removed
(Big Lots) 10 372,948 2,543 2.6 % 6.82 7.8 Ollie's Bargain Outlet, Inc. 10 373,976 2,435 2.5 % 6.51 7.3 Winn-Dixie Stores, Inc. 4 213,830 2,356 2.4 % 11.02 8.7 Home Depot U.S.A, Inc. 2 228,362 1,944 2.0 % 8.51 4.7 Harbor Freight Tools USA, Inc. 13 259,303 1,884 1.9 % 7.26 6.2 Dick's Sporting Goods, Inc. 1 81,780 1,636 1.6 % 20.00 10.1 Tractor Supply Company 7 172,446 1,596 1.6 % 9.25 10.5 Top 20 Subtotal 296 6,690,190 73,231 73.8 % 10.95 9.7 Other 131 1,780,304 25,952 26.2 % 14.58 9.1 Total / Weighted Average (2) 427 8,470,494 $ 99,183 100 % $ 11.71 9.5 (1) Represents tenant or guarantor.
Added
As of December 31, 2023, we had 24 property developments with rent expected to commence at various dates throughout 2024. The following table illustrates actual and anticipated rent commencement of those developments.
Removed
Actual and anticipated total costs for these projects are approximately $51.8 million and are included in the following completed or commenced projects: Tenant Industry Land Acquired Location Lease Structure Lease Term Actual or Anticipated Rent Commencement Status Discount Retail 5/18/2021 Fond Du Lac, WI Build-to-Suit 10 years 1/1/2022 Complete Home Improvement 7/8/2021 Sioux Falls, SD Build-to-Suit 12 years 3/19/2022 Complete Arts & Crafts 5/18/2021 Fond Du Lac, WI Build-to-Suit 10 years 5/16/2022 Complete Discount Retail 2/8/2021 Yuma, AZ Build-to-Suit 10 years 6/14/2022 Complete Dollar Stores 11/12/2021 Woodland, AL Build-to-Suit 10 years 8/1/2022 Complete Discount Retail 12/3/2021 Sheboygan, WI Build-to-Suit 10 years 10/27/2022 Complete Arts & Crafts 12/3/2021 Sheboygan, WI Build-to-Suit 10 years Second quarter 2023 Complete Arts & Crafts 12/29/2021 D'Iberville, MS Build-to-Suit 15 years First quarter 2023 Under Construction Arts & Crafts 12/30/2021 Winder, GA Build-to-Suit 15 years First quarter 2023 Under Construction Discount Retail 3/30/2022 Alpena, MI Build-to-Suit 10 years Third quarter 2023 Under Construction Home Improvement 10/24/2022 Bossier City, LA Build-to-Suit 12 years Third quarter 2023 Under Construction TBD (1) 8/23/2021 Sumter, SC Redevelopment TBD TBD Redevelopment Property (1) In August 2021, we acquired an undeveloped property with the intent to develop and lease to an identified tenant at acquisition.
Added
Tenant Industry Location Lease Term (Years) Actual/ Anticipated Rent Commencement Arts & Craft D'Iberville 15 Commenced 1Q'23 Arts & Craft Winder, GA 15 Commenced 1Q'23 Arts & Craft Sheboygan, WI 10 Commenced 2Q'23 Home Improvement Bossier City, LA 12 Commenced 3Q'23 Discount Retail Alpena, MI 10 Commenced 3Q'23 Dollar Stores (multiple programs) Various (3 completed) 10 Commenced 3Q'23 Dollar Stores (multiple programs) Various (13 completed) 10 to 15 Commenced 4Q'23 Automotive Service (multiple programs) Various (1 completed) 15 Commenced 4Q'23 Dollar Stores (multiple programs) Various (15 in progress) 10 to 15 1Q'24 to 3Q'24 Automotive Service (multiple programs) Various (6 in progress) 15 1Q'24 to 3Q'24 Farm Supplies Malakoff, TX 20 years 1Q'24 Home Improvement Butte, MT 15 years 3Q'24 Pet Supplies Sumter, SC 10 years 4Q'24
Removed
The build-to-suit agreement was terminated in 2021 and we have made efforts to identify a new tenant. As of December 31, 2022, we have identified a new tenant and are in build-to-suit lease negotiations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 3. Legal Proceedings From time to time, we may be party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not currently subject to any lawsuits, claims, or other legal proceedings. Item 4. Mine Safety Disclosures Not applicable. PART II — OTHER INFORMATION
Biggest changeItem 3. Legal Proceedings From time to time, we may be party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not currently subject to any lawsuits, claims, or other legal proceedings. 34 Table of Contents Item 4. Mine Safety Disclosures Not applicable. PART II — OTHER INFORMATION

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−0 removed1 unchanged
Biggest changeDuring the years ended December 31, 2022 and 2021, we declared and paid the following common stock dividends (in thousands, except per share data): Year Ended December 31, 2022 Declaration Date Dividend Per Share Record Date Total Amount Payment Date February 2, 2022 $ 0.20 March 15, 2022 $ 8,888 March 30, 2022 April 26, 2022 0.20 June 1, 2022 9,588 June 15, 2022 July 26, 2022 0.20 September 1, 2022 10,073 September 15, 2022 October 25, 2022 0.20 December 1, 2022 10,984 December 15, 2022 $ 0.80 $ 39,533 Year Ended December 31, 2021 Declaration Date Dividend Per Share Record Date Total Amount Payment Date March 3, 2021 $ 0.20 March 15, 2021 $ 5,687 March 30, 2021 April 27, 2021 0.20 June 1, 2021 7,890 June 15, 2021 July 27, 2021 0.20 September 1, 2021 7,916 September 15, 2021 October 26, 2021 0.20 December 1, 2021 8,702 December 15, 2021 $ 0.80 $ 30,195 The holders of OP Units are entitled to an equal distribution per each OP Unit held as of each record date.
Biggest changeDuring the years ended December 31, 2023 and 2022, we declared and paid the following common stock dividends (in thousands, except per share data): Year Ended December 31, 2023 Declaration Date Dividend Per Share Record Date Total Amount Payment Date February 21, 2023 $ 0.200 March 15, 2023 $ 11,650 March 30, 2023 April 25, 2023 0.200 June 1, 2023 12,173 June 15, 2023 July 24, 2023 0.205 September 1, 2023 13,768 September 15, 2023 October 24, 2023 0.205 December 1, 2023 14,084 December 15, 2023 $ 0.810 $ 51,675 Year Ended December 31, 2022 Declaration Date Dividend Per Share Record Date Total Amount Payment Date February 22, 2022 $ 0.200 March 15, 2022 $ 8,888 March 30, 2022 April 26, 2022 0.200 June 1, 2022 9,588 June 15, 2022 July 26, 2022 0.200 September 1, 2022 10,073 September 15, 2022 October 25, 2022 0.200 December 1, 2022 10,984 December 15, 2022 $ 0.800 $ 39,533 The holders of OP Units are entitled to an equal distribution per each OP Unit held as of each record date.
Period Ending Index 8/13/2020 12/31/2020 12/31/2021 12/31/2022 NETSTREIT Corp. $ 100.00 $ 111.58 $ 136.05 $ 113.24 S&P 500 $ 100.00 $ 112.05 $ 144.21 $ 118.08 NAREIT US EQUITY REIT Index $ 100.00 $ 106.04 $ 149.84 $ 112.46 The information above shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
Period Ending Index 8/13/2020 12/31/2020 12/31/2021 12/31/2022 12/31/2023 NETSTREIT Corp. $ 100.00 $ 111.58 $ 136.05 $ 113.24 $ 115.61 S&P 500 $ 100.00 $ 112.05 $ 144.21 $ 118.08 $ 149.14 NAREIT US EQUITY REIT Index $ 100.00 $ 106.04 $ 149.84 $ 112.46 $ 125.23 The information above shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
Recent Sales of Unregistered Securities None. 32 Table of Contents Performance Graph The following graph compares our cumulative total stockholder return based on the market price of our common stock, assuming dividends are reinvested, with the Standard & Poor’s 500 Composite Stock Index (“S&P 500”) and the NAREIT US Equity REIT Index for the period beginning August 13, 2020 (the date our common stock began trading on the NYSE exchange) and ending December 31, 2022.
Recent Sales of Unregistered Securities None. 35 Table of Contents Performance Graph The following graph compares our cumulative total stockholder return based on the market price of our common stock, assuming dividends are reinvested, with the Standard & Poor’s 500 Composite Stock Index (“S&P 500”) and the NAREIT US Equity REIT Index for the period beginning August 13, 2020 (the date our common stock began trading on the NYSE exchange) and ending December 31, 2023.
In addition, as of February 21, 2023 there were 513,467 outstanding Class A units of limited partnership of the operating partnership (“Class A OP Units”) which are convertible into shares of our common stock on a one-for-one basis.
In addition, as of February 12, 2024 there were 479,298 outstanding Class A units of limited partnership of the operating partnership (“Class A OP Units”) which are convertible into shares of our common stock on a one-for-one basis.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock, Holders of Record, and Distribution Policy Our common stock is traded on the NYSE under the symbol “NTST.” As of February 21, 2023 there were 58,031,879 shares of our common stock issued and outstanding which were held by approximately 42 stockholders of record.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock, Holders of Record, and Distribution Policy Our common stock is traded on the NYSE under the symbol “NTST.” As of February 12, 2024 there were 73,221,810 shares of our common stock issued and outstanding which were held by approximately 53 stockholders of record.
In addition, there are no remaining Class B units of limited partnership of the operating partnership (“Class B OP Units”), which have all been converted into shares of our common stock prior to 2022. 31 Table of Contents We intend to pay regular quarterly dividends to our stockholders, although all future distributions will be declared and paid at the discretion of our board of directors, and their form, timing and amount, if any, will depend upon a number of factors, including our actual and projected results of operations, liquidity, cash flows and financial condition, our REIT taxable income, the annual REIT distribution requirements, applicable law, including restrictions on distributions under Maryland law, and such other factors as our board of directors deems relevant.
We intend to pay regular quarterly dividends to our stockholders, although all future distributions will be declared and paid at the discretion of our board of directors, and their form, timing and amount, if any, will depend upon a number of factors, including our actual and projected results of operations, liquidity, cash flows and financial condition, our REIT taxable income, the annual REIT distribution requirements, applicable law, including restrictions on distributions under Maryland law, and such other factors as our board of directors deems relevant.
Added
In addition, there are no remaining Class B units of limited partnership of the operating partnership (“Class B OP Units”), which have all been converted into shares of our common stock prior to 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

71 edited+38 added−45 removed38 unchanged
Biggest changeThe following table sets forth a reconciliation of NOI and Cash NOI for the periods presented (in thousands): 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
Biggest changeThe following table sets forth a reconciliation of Property-Level NOI and Property-Level Cash NOI for the periods presented (in thousands): Year Ended December 31, 2023 2022 Net income $ 6,890 $ 8,205 General and administrative 20,176 19,053 Depreciation and amortization 63,677 50,075 Provisions for impairment 7,083 1,114 Transaction costs 456 839 Interest expense, net 19,058 9,181 Gain on sales of real estate, net (1,175) (4,148) Income tax (benefit) expense (49) 396 Loss on debt extinguishment 128 — Interest income on mortgage loans receivable (7,388) (2,345) Lease termination fees (550) — Other income, net (752) (131) Property-Level NOI 107,554 82,239 Straight-line rent adjustments (1,163) (1,286) Amortization of lease-related intangibles (611) (889) Property-Level Cash NOI $ 105,780 $ 80,064 48 Table of Contents The following table sets forth a reconciliation of Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate for the period presented (in thousands): Three Months Ended December 31, 2023 Net income $ 1,962 General and administrative 4,876 Depreciation and amortization 17,078 Provisions for impairment 2,709 Transaction costs 189 Interest expense, net 5,646 Gain on sales of real estate, net (506) Gain on forfeited earnest money deposit — Income tax expense 10 Loss on debt extinguishment — Interest income on mortgage loans receivable (2,243) Lease termination fees — Other income, net (166) Property-Level NOI 29,555 Straight-line rent adjustments (456) Amortization of lease-related intangibles (93) Property-Level Cash NOI $ 29,006 Adjustment for intraquarter acquisitions, dispositions and completed development (1) 705 Property-Level Cash NOI Estimated Run Rate $ 29,711 Interest income on mortgage loans receivable 2,243 Adjustments for intraquarter mortgage loan activity (2) 115 Total Cash NOI - Estimated Run Rate $ 32,069 (1) Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments completed during the year ended December 31, 2023 had occurred on January 1, 2023.
EBITDA, EBITDA re and Adjusted EBITDA re 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.
EBITDA, EBITDA re , Adjusted EBITDA re and Annualized Adjusted EBITDA re 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.
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, EBITDA re and Adjusted EBITDA re as measures of our operating performance and not as measures of liquidity.
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, EBITDA re , Adjusted EBITDA re and Annualized Adjusted EBITDA re as measures of our operating performance and not as measures of liquidity.
Additionally, our computation of EBITDA, EBITDA re and Adjusted EBITDA re 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.
Additionally, our computation of EBITDA, EBITDA re , Adjusted EBITDA re and Annualized Adjusted EBITDA re 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.
Also refer to “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s previously filed Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 24, 2022, for additional discussion of our financial condition and results of operations, including a comparison of our results of operations for the year ended December 31, 2021 and the year ended December 31, 2020, which is incorporated herein by reference. 33 Table of Contents Business Overview We are an internally managed real estate company that acquires, owns and manages a diversified portfolio of single-tenant, retail commercial real estate subject to long-term net leases with high credit quality tenants across the United States.
Also refer to “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s previously filed Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 23, 2023, for additional discussion of our financial condition and results of operations, including a comparison of our results of operations for the year ended December 31, 2022 and the year ended December 31, 2021, which is incorporated herein by reference. 36 Table of Contents Business Overview We are an internally managed real estate company that acquires, owns, invests in and manages a diversified portfolio of single-tenant, retail commercial real estate subject to long-term net leases with high credit quality tenants across the United States.
The lease has an initial noncancellable term of 10.3 years that expires on July 31, 2032 and is renewable at our option for two additional periods of five years. Future minimum base rental payments under the lease are outlined in “Note 3 – Leases.” Annual rent expense, excluding operating expenses, is approximately $0.5 million during the initial term.
The lease has a remaining noncancellable term of 8.6 years that expires on July 31, 2032 and is renewable at our option for two additional periods of five years. Future minimum base rental payments under the lease are outlined in “Note 3 – Leases.” Annual rent expense, excluding operating expenses, is approximately $0.5 million during the initial term.
Accordingly, the projected interest rate obligations for the variable rate 2028 Term Loan are based on the hedged fixed rate of 2.63% compared to the variable 2028 Term Loan one-month SOFR rate as of December 31, 2022 of 4.12%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $200.0 million 2028 Term Loan outstanding through the maturity date of February 11, 2028.
Accordingly, the projected interest rate obligations for the variable rate 2028 Term Loan are based on the hedged fixed rate of 2.63% compared to the variable 2028 Term Loan one-month SOFR rate as of December 31, 2023 of 5.34%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $200.0 million 2028 Term Loan outstanding through the maturity date of February 11, 2028.
(2) We are subject to a facility fee of 0.15% on our New Revolver. (3) Effective August 11, 2022, we entered into three interest rate hedges to fix the base interest rate (one-month SOFR) on our 2028 Term Loan.
(2) We are subject to a facility fee of 0.15% on our Revolver. (3) We entered into three interest rate hedges to fix the base interest rate (one-month SOFR) on our 2028 Term Loan.
These include non-recurring severance and related charges and gain on insurance proceeds. 42 Table of Contents 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.
These include non-recurring executive transition costs, severance and related charges, gain on insurance proceeds, and loss on debt extinguishments and other related costs. 44 Table of Contents 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 and 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.
The Company intends to make sufficient distributions during 2022 to receive a full dividends paid deduction. We maintain a taxable REIT subsidiary (“TRS”) which may be subject to U.S. federal, state, and local income taxes on its taxable income.
The Company expects the distributions made during 2023 are sufficient to receive a full dividends paid deduction. We maintain a taxable REIT subsidiary (“TRS”) which may be subject to U.S. federal, state, and local income taxes on its taxable income.
Additionally, in the normal course of business, we enter into various types of commitments to purchase real estate properties or fund development projects. These commitments are generally subject to our customary due diligence process and, accordingly, a number of specific conditions must be met before the Company is obligated or receives an option to purchase the properties.
Additionally, in the normal course of business, we enter into various types of commitments to purchase real estate properties, fund development projects, or extend funds under mortgage notes receivable. These commitments are generally subject to our customary due diligence process and, accordingly, a number of specific conditions must be met before we are obligated to purchase or extend funding.
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 compute Property-Level 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, interest income on mortgage loans receivable, loss on debt extinguishment, lease termination fees and other income (or expense).
Under Accounting Standards Update (“ASU”) 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”), an acquisition does not qualify as a business when substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets or the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay. 41 Table of Contents Transaction costs related to acquisitions that qualify as asset acquisitions are capitalized as part of the cost basis of the acquired assets, while transaction costs for acquisitions that are deemed to be acquisitions of a business are expensed as incurred.
Under Accounting Standards Update (“ASU”) 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”), an acquisition does not qualify as a business when substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets or the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay.
We believe that the availability of proceeds from future issuances of shares of our common stock under the ATM Program and the physical settlement of forward sales of our common stock, coupled with our cash flows from operations and available borrowing capacity under the New Revolver, will be adequate to support our ongoing operations and to fund our debt service requirements, capital expenditures and working capital for at least the next 12 months.
We believe that the availability of proceeds from future issuances of shares of our common stock under the 2023 ATM Program or subsequent at-the-market sale programs, coupled with our cash flows from operations and available borrowing capacity under the Revolver and 2029 Term Loan, will be adequate to support our ongoing operations and to fund our debt service requirements, capital expenditures and working capital requirements for at least the next 12 months.
The increase was largely attributed to the increase in the size of the Company’s real estate investment portfolio with an increase in rental receipts of $28.4 million, offset primarily by increases in operating and general and administrative expenses paid associated with our larger portfolio. Cash Flows Used In Investing Activities.
The increase was largely attributed to the increase in the size of our real estate investment portfolio with an increase in rental receipts of $27.7 million and an increase in mortgage loan receivable interest of $5.0 million, offset primarily by increases in operating and general and administrative expenses paid associated with our larger portfolio. Cash Flows Used In Investing Activities.
Acquisitions During 2022, we acquired 105 properties for a total purchase price of $424.8 million, inclusive of $4.2 million of capitalized acquisition costs. The acquisitions were all accounted for as asset acquisitions. These properties are located in 29 states with a WALT of approximately 10.6 years. The underwritten weighted-average capitalization rate on our year to date acquisitions was approximately 6.6%.
Acquisitions During 2023, we acquired 103 properties for a total purchase price of $345.1 million, inclusive of $3.5 million of capitalized acquisition costs. The acquisitions were all accounted for as asset acquisitions. These properties are located in 25 states with a WALT of approximately 10.4 years. The underwritten weighted-average capitalization rate on our year to date acquisitions was approximately 6.9%.
The table below summarizes the properties sold for the periods indicated (in thousands): Year Ended December 31, 2022 2021 Number of properties sold 7 9 Sales price, net of disposal costs $ 25,515 $ 31,119 Gain on sales of real estate, net $ 4,148 $ 2,997 Other income, net.
The table below summarizes the properties sold for the periods indicated (in thousands): Year Ended December 31, 2023 2022 Number of properties sold 19 7 Sales price, net of disposal costs $ 40,259 $ 25,515 Gain on sales of real estate, net $ 1,175 $ 4,148 Other income, net.
The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period with associated increases in building depreciation expense of $8.5 million, in-place lease amortization expense of $6.5 million, building improvements depreciation expense of $3.6 million, leasehold improvement depreciation expense of $0.5 million, and other corporate assets depreciation expense of $0.2 million. • Provisions for impairment.
The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period with associated increases in building depreciation expense of $7.7 million, in-place lease amortization expense of $3.3 million, building improvements depreciation expense of $2.6 million, and leasehold improvements depreciation expense of $0.3 million.
Net cash provided by operating activities increased by $19.1 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Net cash provided by operating activities increased by $29.6 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Contractual Obligations and Commitments As of December 31, 2022, our contractual debt obligations primarily include the maturity of our 2024 Term Loan with the scheduled principal payment due on December 23, 2024, the maturity of our 2028 Term Loan with the scheduled principal payment due on February 11, 2028, and repayment of borrowings on our New Revolver with a maturity of August 11, 2026.
Contractual Obligations and Commitments As of December 31, 2023, our contractual debt obligations primarily include the maturity of our 2027 Term Loan with the scheduled principal payment due on January 15, 2026, the maturity of our 2028 Term Loan with the scheduled principal payment due on February 11, 2028, the maturity of our 2029 Term Loan with the scheduled principal payment due on July 3, 2026, and repayment of borrowings on our Revolver with a maturity of August 11, 2026.
We may physically settle the forward sale agreements (by the delivery of shares of common stock) and receive proceeds from the sale of those shares upon one or more forward settlement dates, which shall occur no later than August 3, 2023.
We may physically settle this forward confirmation (by the delivery of shares of common stock) and receive proceeds from the sale of those shares on one or more forward settlement dates, which shall occur no later than September 13, 2024.
Net gain on sales of real estate increased by $1.1 million to $4.1 million for the year ended December 31, 2022 from $3.0 million for the year ended December 31, 2021.
Net gain on sales of real estate decreased by $2.9 million to $1.2 million for the year ended December 31, 2023 from $4.1 million for the year ended December 31, 2022.
During the years ended 2022 and 2021, the Company recognized franchise and other state and local tax expenses, which are included in general and administrative and recognized state and federal income tax expense, which is included in income tax expense in the accompanying consolidated statements of operations and comprehensive income.
During the years ended 2023 and 2022, we recognized franchise and other state and local tax expenses in general and administrative and federal income tax in income tax benefit (expense) in the accompanying consolidated statements of operations and comprehensive income (loss).
The funds provided under the loan, in addition to loan 35 Table of Contents origination costs of less than $0.1 million, are included in loans receivable, net in the accompanying consolidated balance sheets as of December 31, 2022.
The funds provided under the loans, in addition to discount and loan origination costs of $0.1 million and $0.1 million, respectively, are included in mortgage loans receivable, net in the accompanying consolidated balance sheets as of December 31, 2023.
We anticipate funding our long-term capital needs through cash provided from operations, borrowings under our New Revolver and issuances of common stock, including settlement of existing forward sales agreements.
We anticipate funding our long-term capital needs through cash provided from operations, borrowings under our Revolver, 2029 Term Loan and issuances of common stock.
The increase is primarily attributed to the increase in the real estate portfolio from 318 to 423 operating properties, including combined net increases of reimbursable property expenses of $4.6 million, of which $2.5 million, $1.5 million, and $0.6 million was related to reimbursable property taxes, reimbursable common area maintenance costs and reimbursable insurance costs, respectively.
The increase is primarily attributed to an increase in the number of operating properties, including combined net increases of reimbursable property expenses of $4.4 million, of which $2.8 million, $1.3 million, and $0.3 million were related to reimbursable property taxes, reimbursable common area maintenance costs, and reimbursable insurance costs, respectively.
Interest expense increased by $5.5 million to $9.2 million for the year ended December 31, 2022 from $3.7 million for the year ended December 31, 2021.
Interest expense increased by $9.9 million to $19.1 million for the year ended December 31, 2023 from $9.2 million for the year ended December 31, 2022.
Historical Cash Flow Information Year Ended December 31, 2022 Compared with the Year Ended December 31, 2021 Year Ended December 31, (in thousands) 2022 2021 Net cash provided by (used in): Operating activities $ 50,647 $ 31,478 Investing activities (468,361) (430,128) Financing activities 480,654 313,610 Cash Flows Provided By Operating Activities.
Historical Cash Flow Information Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022 Year Ended December 31, (in thousands) 2023 2022 Net cash provided by (used in): Operating activities $ 80,155 $ 50,647 Investing activities (451,953) (468,361) Financing activities 331,184 480,654 Cash Flows Provided By Operating Activities.
Transaction costs increased by $0.1 million to $0.8 million for the year ended December 31, 2022 from $0.7 million for the year ended December 31, 2021, which primarily relates to increases in costs incurred for abandoned acquisitions. Interest Expense.
Transaction costs decreased by $0.3 million to $0.5 million for the year ended December 31, 2023 from $0.8 million for the year ended December 31, 2022, which primarily relates to a decrease in costs incurred for abandoned acquisitions. Interest Expense.
Net cash used in investing activities increased by $38.3 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Net cash used in investing activities decreased by $16.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
As of December 31, 2022, our portfolio was 100% occupied and generated ABR of $99.2 million with a weighted average remaining lease term (“WALT”) of 9.5 years, which we believe provides us with a strong stable source of recurring cash flow from our portfolio.
Exclusive of mortgage loans receivable, our portfolio was 100% occupied with a weighted average remaining lease term (“WALT”) of 9.5 years, which we believe provides us with a strong stable source of recurring cash flow from our portfolio.
Total expenses increased by $27.1 million to $82.8 million for the year ended December 31, 2022 as compared to $55.7 million for the year ended December 31, 2021.
Total expenses increased by $25.0 million to $107.8 million for the year ended December 31, 2023 as compared to $82.8 million for the year ended December 31, 2022.
Depreciation and amortization expense increased by $19.3 million to $50.1 million for the year ended December 31, 2022 from $30.8 million for the year ended December 31, 2021.
Depreciation and amortization expense increased by $13.6 million to $63.7 million for the year ended December 31, 2023 from $50.1 million for the year ended December 31, 2022.
Net income increased $5.0 million to $8.2 million for the year ended December 31, 2022 from $3.2 million for the year ended December 31, 2021.
Net income decreased $1.3 million to $6.9 million for the year ended December 31, 2023 from $8.2 million for the year ended December 31, 2022.
Year Ended December 31, 2022 Compared with the Year Ended December 31, 2021 The following table sets forth our operating results for the periods indicated (in thousands): Year Ended December 31, 2022 2021 Revenues Rental revenue (including reimbursable) $ 93,934 $ 59,140 Interest income on loans receivable 2,345 — Total revenues 96,279 59,140 Operating expenses Property 11,695 5,803 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 Total operating expenses 82,776 55,659 Other income (expense) Interest expense, net (9,181) (3,700) Gain on sales of real estate, net 4,148 2,997 Other income, net 131 431 Total other expense, net (4,902) (272) Net income before income taxes 8,601 3,209 Income tax expense (396) (59) Net income $ 8,205 $ 3,150 Revenue.
Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022 The following table sets forth our operating results for the periods indicated (in thousands): Year Ended December 31, 2023 2022 Revenues Rental revenue (including reimbursable) $ 123,967 $ 93,934 Interest income on loans receivable 7,388 2,345 Other revenue 550 — Total revenues 131,905 96,279 Operating expenses Property 16,413 11,695 General and administrative 20,176 19,053 Depreciation and amortization 63,677 50,075 Provisions for impairment 7,083 1,114 Transaction costs 456 839 Total operating expenses 107,805 82,776 Other income (expense) Interest expense, net (19,058) (9,181) Gain on sales of real estate, net 1,175 4,148 Loss on debt extinguishment (128) — Other income, net 752 131 Total other income (expense), net (17,259) (4,902) Net income before income taxes 6,841 8,601 Income tax benefit (expense) 49 (396) Net income $ 6,890 $ 8,205 Revenue.
The following table sets forth a reconciliation of FFO, Core FFO and AFFO for the periods presented to net income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands): 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 43 Table of Contents EBITDA, EBITDA re and Adjusted EBITDA re We compute EBITDA as earnings before interest expense, income tax expense, and depreciation and amortization.
The following table sets forth a reconciliation of FFO, Core FFO and AFFO for the periods presented to net income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands): Year Ended December 31, 2023 2022 Net income $ 6,890 $ 8,205 Depreciation and amortization of real estate 63,379 49,498 Provisions for impairment 7,083 1,114 Gain on sales of real estate, net (1,175) (4,148) FFO 76,177 54,669 Adjustments: Non-recurring executive transition costs, severance and related charges 362 848 Loss on debt extinguishment and other related costs 223 — Gain on insurance proceeds (78) (126) Core FFO 76,684 55,391 Adjustments: Straight-line rent adjustments (1,163) (1,286) Amortization of deferred financing costs 1,730 862 Amortization of above/below-market assumed debt 114 29 Amortization of loan origination costs 163 88 Amortization of lease-related intangibles (611) (889) Earned development interest 515 — Capitalized interest expense (1,060) (452) Non-cash interest expense (2,124) — Non-cash compensation expense 4,822 4,774 AFFO $ 79,070 $ 58,517 EBITDA, EBITDAre, Adjusted EBITDAre and Annualized Adjusted EBITDAre We compute EBITDA as earnings before interest expense, income tax expense, and depreciation and amortization.
We also disclose the following non-GAAP financial measures: Funds From Operations (“FFO”), Core FFO, Adjusted FFO (“AFFO”), earnings before interest expense, income tax expense, and depreciation and amortization (“EBITDA”), EBITDA adjusted to exclude gains (or losses) from the sales of depreciable property and real estate impairment losses (“EBITDA re ”), EBITDA re further adjusted to exclude straight-line rent, non-cash compensation expense, non-recurring severance and related charges, and gain on insurance proceeds (“Adjusted EBITDA re ”), net operating income (“NOI”) and cash net operating income (“Cash NOI”).
We also disclose the following non-GAAP financial measures: Funds From Operations (“FFO”), Core FFO, Adjusted FFO (“AFFO”), earnings before interest expense, income tax expense, and depreciation and amortization (“EBITDA”), EBITDA further adjusted to exclude gains (or losses) from the sales of depreciable property and real estate impairment losses (“EBITDA re ”), Adjusted EBITDA re , Annualized Adjusted EBITDA re , Net Debt, Adjusted Net Debt, property-level net operating income (“Property-Level NOI”), property-level cash net operating income (“Property-Level Cash NOI”), property-level cash net operating income estimated run rate (“Property-Level Cash NOI Estimated Run Rate”), and total property-level cash net operating income estimated run rate (“Total Property-Level Cash NOI Estimated Run Rate”), all of which are detailed below.
Liquidity and Capital Resources Our primary capital requirements are to fund property acquisitions and required interest payments, as well as working capital needs, operating expenses and capital expenditures. Our capital resources primarily consist of cash from operations, sales of equity securities and borrowings under our 2024 Term Loan, 2028 Term Loan and New Revolver.
Liquidity and Capital Resources Our primary capital requirements are to fund property acquisitions and developments, fund investments in mortgage loans receivable and required interest payments, and fund working capital needs, operating expenses, and capital expenditures. Our capital resources primarily consist of cash from operations, sales of equity securities and available borrowing facilities.
Accordingly, the projected interest rate obligations for the variable rate 2024 Term Loan are based on the hedged fixed rate of 0.21% compared to the variable 2024 Term Loan one-month LIBOR rate as of December 31, 2022 of 4.12%, plus the applicable margin of 1.15% based on the $175.0 million 2024 Term Loan outstanding through the maturity date of December 23, 2024.
Accordingly, the projected interest rate obligations for the variable rate 2027 Term Loan are based on the hedged fixed rate of 1.87% through December 23, 2024, and 2.40% thereafter, compared to the variable 2027 Term Loan daily SOFR rate as of December 31, 2023 of 5.31%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $175.0 million 2027 Term Loan outstanding through the contractual maturity date of January 15, 2026.
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.
We believe Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate 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.
You should not consider our measures as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.
The increase in operating expenses is primarily attributed to the increase in the number of operating properties, with the most significant increases being depreciation and amortization expense, property-specific reimbursable and non-reimbursable expenses, stock-based compensation, payroll and severance costs, and other general and administrative expenses associated with our growth, offset by a decrease in provisions for impairment.
The increase is primarily attributed to an increase in the number of operating properties, with the most significant increases being depreciation and amortization expense, provisions for impairment, property-specific reimbursable expenses, and payroll costs. Total operating expenses include the following: 39 Table of Contents • Property Expenses.
In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDA re . We compute EBITDA re in accordance with the definition adopted by NAREIT. NAREIT defines EBITDA re as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and impairment charges on depreciable real property.
In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDA re . We compute EBITDA re in accordance with the definition adopted by NAREIT.
We have also fully hedged the 2028 Term Loan with an all-in interest rate of 3.88%. Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings.
Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings.
Notwithstanding the rising interest rates, an increase of $1.8 million is attributed to the increase in the average balances outstanding under the Prior Revolver, an increase of $1.1 million and $3.0 million is attributed to interest incurred under the New Revolver and 2028 Term Loan, respectively, as a result of the New Credit Agreement, an increase of $0.2 million is attributed to deferred financing cost amortization as a result of the New Credit Facility and an increase of $0.1 million is attributed to interest incurred under the mortgage note payable.
The increase is primarily attributed to an increase of $4.5 million of interest incurred under the 2028 Term Loan, an increase of $4.4 million of interest incurred under the 2029 Term Loan, a net increase of $2.1 million under the Revolver as a result of higher interest rates, offset by a decrease in average borrowings outstanding during the respective periods, and an increase of $0.3 million of interest incurred under the mortgage note payable.
Net income increased primarily due to the growth in the size of our real estate investment portfolio, which generated additional rental revenues, including interest income associated with our mortgage loans receivable, in addition to decreases in provisions for impairment, offset by the impact of increases in depreciation and amortization expenses, increases in interest expense, and increases in general and administrative expenses, as set forth above.
This is offset primarily by increases in rental revenues due to the growth in the size of our real estate investment portfolio, including interest income associated with our mortgage loans receivable.
We allocate the purchase price of acquired properties accounted for as asset acquisitions to tangible and identifiable intangible assets or liabilities based on their relative fair values. Tangible assets may include land, buildings, site improvements and tenant improvements. Intangible assets include the value of in-place leases and above-market leases and intangible liabilities include below-market leases.
Tangible assets may include land, buildings, site improvements and tenant improvements. Intangible assets include the value of in-place leases and above-market leases and intangible liabilities include below-market leases.
As of December 31, 2022, 7,376,056 shares remained unsettled under the forward sale agreements. 34 Table of Contents ATM Program On September 1, 2021, we entered into a $250.0 million at-the-market equity program (the “ATM Program”) through which, from time to time, we may sell shares of its common stock in registered transactions.
ATM Program On October 25, 2023, we entered into a $300.0 million at-the-market equity program (the “2023 ATM Program”) through which, from time to time, we may sell shares of our common stock in registered transactions.
Total operating expenses include the following: 36 Table of Contents • Property Expenses. Property expenses increased $5.9 million to $11.7 million for the year ended December 31, 2022 from $5.8 million for the year ended December 31, 2021.
Property expenses increased $4.7 million to $16.4 million for the year ended December 31, 2023 from $11.7 million for the year ended December 31, 2022.
This is offset by $0.4 million less of facility fees incurred for unused capacity and $0.3 million of increased capitalized interest on our property developments. Gain on sales of real estate, net.
Additional increases of $1.0 million and $0.4 million are attributed to increased loan fee amortization and increased facility fees, respectively. This is offset by $2.1 million in amortization of deferred gains on interest rate swaps and $0.6 million of increased capitalized interest on our property developments. Gain on sales of real estate, net.
This growth was financed through the settlement of shares of common stock through our forward sale agreements in an amount of $272.2 million, the issuance of common stock under the ATM Program in an amount of $5.5 million and net borrowings of $185.0 million on our revolving credit facilities during 2022.
This growth was financed through the settlement of shares of common stock through our forward sale agreements in an amount of $141.1 million, the issuance of common stock under the 2023 ATM Program and the 2021 ATM Program in an amount of $76.5 million and $53.7 million, respectively, the execution of the 2029 Term Loan Agreement and receipt of proceeds of $150.0 million under the 2029 Term Loan, net borrowings on our $400.0 million senior unsecured revolving credit facility (the “Revolver”), and cash flows from operations during the year ended December 31, 2023.
For the year ended December 31, 2022, we recorded a provision for impairment of $1.1 million on one property which was also sold during the year. For the year ended December 31, 2021, we recorded provisions for impairment of $3.5 million on three properties, all of which were previously classified as held-for-sale and sold before December 31, 2021.
Two of the properties are held for investment as of the year ended December 31, 2023, but were approved for sale subsequent to year-end. For the year ended December 31, 2022, we recorded a provision for impairment of $1.1 million on one property. For the year ended December 31, 2023, we sold four properties that were impaired.
As of December 31, 2022, we had $175.0 million outstanding principal amount of the 2024 Term Loan, $200.0 million outstanding principal amount of the 2028 Term Loan, and $113.0 million of borrowings outstanding under our New Revolver. Additionally, as of December 31, 2022, we had 7,376,056 shares that were unsettled under open forward equity contracts.
As of December 31, 2023, we had $175.0 million outstanding principal amount under the senior unsecured term loan (the “2027 Term Loan”), $200.0 million outstanding principal amount under the 2028 Term Loan, $150.0 million outstanding principal amount under the 2029 Term Loan, and $80.0 million of borrowings outstanding under our Revolver.
Additionally, approximately $0.1 million of property damages were recorded in the current year. 37 Table of Contents Income tax expense. Income tax expense increased by $0.3 million for year ended December 31, 2022. The increase relates to provisions for federal and state income taxes on the financial results of NETSTREIT Management TRS, LLC (“NETSTREIT TRS”). Net Income.
Income tax expense decreased by $0.4 million to an income tax benefit of less than $0.1 million for the year ended December 31, 2023. The decrease relates to lower provisions for federal and state income taxes on the financial results of our TRS, including certain losses on sales of real estate in 2023. 40 Table of Contents Net Income.
Additionally, the increase includes combined net increases of non-reimbursable property expenses of $1.0 million, of which $0.6 million was related to common area maintenance costs. • General and Administrative Expenses. General and administrative expenses increased $4.3 million to $19.1 million for the year ended December 31, 2022 from $14.8 million for the year ended December 31, 2021.
Non-reimbursable property expenses increased by approximately $0.2 million. • General and Administrative Expenses. General and administrative expenses increased $1.1 million to $20.2 million for the year ended December 31, 2023 from $19.1 million for the year ended December 31, 2022.
As of December 31, 2022, our portfolio consisted of 427 single-tenant retail net leased properties that were diversified by tenant, industry and geography, including 80 different tenants, across 25 retail sectors in 43 states.
As of December 31, 2023, we owned or had investments in 598 single-tenant retail net leased properties that were diversified by tenant, industry and geography, including 85 different tenants, across 26 retail sectors in 45 states. This excludes 24 property developments where rent has yet to commence.
The remaining five developments are expected to be substantially completed with rent commencing at various points throughout 2023 and the first quarter of 2024. The purchase price, including acquisitions costs, and subsequent development are included in property under development in the accompanying consolidated balance sheets as of December 31, 2022.
During the year, we completed development on 27 projects and reclassified approximately $68.6 million from property under development to land, building, and improvements in the accompanying consolidated balance sheets. The remaining 18 developments are expected to be substantially completed with rent commencing at various points throughout 2024.
The following table sets forth a reconciliation of EBITDA, EBITDA re and Adjusted EBITDA re for the periods presented to net income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands): 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) EBITDA re 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 EBITDA re $ 68,232 $ 39,755 44 Table of Contents NOI and Cash NOI NOI and Cash NOI are non-GAAP financial measures which we use to assess our operating results.
The following table sets forth a reconciliation of EBITDA and EBITDA re for the periods presented to net income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands): Year Ended December 31, 2023 2022 Net income $ 6,890 $ 8,205 Depreciation and amortization of real estate 63,379 49,498 Amortization of lease-related intangibles (611) (889) Non-real estate depreciation and amortization 298 577 Interest expense, net 19,058 9,181 Income tax (benefit) expense (49) 396 Amortization of loan origination costs 163 88 EBITDA 89,128 67,056 Adjustments: Provisions for impairment 7,083 1,114 Gain on sales of real estate, net (1,175) (4,148) EBITDA re $ 95,036 $ 64,022 46 Table of Contents The following table sets forth a reconciliation of EBITDA, EBITDA re , Adjusted EBITDA re and Annualized Adjusted EBITDA re for the period presented to net income before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands): Three Months Ended December 31, 2023 Net income $ 1,962 Depreciation and amortization of real estate 17,000 Amortization of lease-related intangibles (93) Non-real estate depreciation and amortization 78 Interest expense, net 5,646 Income tax expense 10 Amortization of loan origination costs 80 EBITDA 24,683 Adjustments: Provisions for impairment 2,709 Gain on sales of real estate, net (506) EBITDA re 26,886 Adjustments: Straight-line rent adjustments (456) Non-recurring executive transition costs, severance and related charges 86 Gain on insurance proceeds (31) Non-cash compensation expense 1,264 Adjustment for construction in process (1) 719 Adjustment for intraquarter investment activities (2) 820 Adjusted EBITDA re $ 29,288 Annualized Adjusted EBITDA re (3) $ 117,152 Adjusted Net Debt / Annualized Adjusted EBITDA re 4.1 (1) Adjustment reflects the estimated cash yield on developments in process as of December 31, 2023.
The increase includes an increase in cash rental receipts of $28.4 million, combined with net increases of property expense reimbursements of $5.5 million, of which $2.5 million, $2.4 million, and $0.6 million was related to estimated tax reimbursements, estimated common area maintenance reimbursements, and estimated insurance reimbursements, respectively.
The increase includes additional cash rental receipts of $27.7 million, combined with net increases of property expense reimbursements of $4.4 million, an increase of $5.0 million related to interest income on mortgage loans receivable, and an increase of $0.6 million in other revenue related to the receipt of legal settlement proceeds associated with a lease termination.
These impairments and subsequent disposals relate to our plan of strategically identifying properties that can be re-leased or disposed of in an effort to improve returns and manage risk exposure. • Transaction costs.
These disposals relate to management’s continuous assessment of the Company’s portfolio in an effort to improve returns and manage risk exposure. • Transaction costs.
The increase is offset by $16.5 million less spent on the acquisition of real estate. 40 Table of Contents Cash Flows Provided By Financing Activities. Net cash provided by financing activities increased by $167.1 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Net cash provided by financing activities decreased by $149.5 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Revenue for the year ended December 31, 2022 increased by $37.2 million to $96.3 million from $59.1 million for the year ended December 31, 2021. This is primarily due to an increase in the real estate portfolio from 318 operating properties as of January 1, 2021 to 423 operating properties as of December 31, 2022.
Revenue for the year ended December 31, 2023 increased by $35.6 million to $131.9 million from $96.3 million for the year ended December 31, 2022, which is attributed to an increase in the number of our operating leases and properties securing our mortgage loans.
The increase was primarily due to investments in mortgage loans receivable of $46.5 million, increases in real estate development and improvements of $2.5 million, and $5.6 million fewer proceeds received in connection with the sale of real estate.
The decrease was primarily due to a decrease in cash spent on acquisitions of real estate of $84.3 million, offset by increases in cash spent on real estate development and improvements of $56.4 million and cash spent on investments in mortgage loans receivable of $25.9 million.
During the year ended December 31, 2022, we borrowed $515.0 million on our revolving credit facilities at a weighted average interest rate of 2.59%, of which $32.0 million was borrowed from the New Revolver to fully pay down the Prior Revolver, with remaining borrowings used to fund specifically identified property acquisitions.
During the year ended December 31, 2023, we borrowed $361.0 million at a weighted average interest rate of 5.92% and also repaid $394.0 million on our revolving credit facilities.
As of December 31, 2022, we had commitments to fund properties under development totaling $10.2 million, all of which is expected to be funded over the next 12 months. Credit Facilities On August 11, 2022, we entered into a sustainability-linked senior unsecured credit facility consisting of (i) our $200.0 million 2028 Term Loan and (ii) our $400.0 million New Revolver.
As of December 31, 2023, we had commitments to fund properties under development and extend funds under mortgage notes receivable totaling $35.7 million and $13.7 million, respectively, all of which is expected to be funded over the next 12 months.
Adjusted EBITDA re is a non-GAAP financial measure defined as EBITDA re 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, EBITDA re and Adjusted EBITDA re as they are measures commonly used in our industry.
NAREIT defines EBITDA re as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and impairment charges on depreciable real property. 45 Table of Contents Adjusted EBITDA re is a non-GAAP financial measure defined as EBITDA re further adjusted to exclude straight-line rent, non-cash compensation expense, non-recurring executive transition costs, severance and related charges, loss on debt extinguishment and other related costs, gain on insurance proceeds, other non-recurring expenses (income), lease termination fees, adjustment for construction in process, and adjustment for intraquarter activities.
The following table provides information with respect to our debt obligations and other commitments as of December 31, 2022 (in thousands): Payment Due by Period Total Less than 1 Year 1 – 3 Years 3 – 5 Years Thereafter Contractual Obligations 2024 Term Loan – Principal $ 175,000 $ — $ 175,000 $ — $ — Term Loan – Variable interest (1) 4,700 2,376 2,324 — — New Revolver – Borrowings 113,000 — — 113,000 — New Revolver – Variable interest 22,112 6,124 12,247 3,741 — Facility Fee (2) 2,167 600 1,200 367 — 2028 Term Loan – Principal 200,000 — — — 200,000 2028 Term Loan – Variable Interest (3) 39,696 7,761 15,522 15,522 891 Mortgage Note – Principal 8,498 155 332 8,011 — Mortgage Note – Interest 1,805 382 742 681 — Property development under contract 10,150 10,150 — — — Tenant Improvement Allowances 4,089 2,726 1,363 — — Corporate office lease obligations 6,420 533 1,253 1,323 3,311 Total $ 587,637 $ 30,807 $ 209,983 $ 142,645 $ 204,202 38 Table of Contents (1) Effective September 28, 2020, we entered into four interest rate hedges to fix the base interest rate (one-month LIBOR) on our 2024 Term Loan.
The following table provides information with respect to our commitments as of December 31, 2023 (in thousands): Payment Due by Period Total 2024 2025 - 2026 2027 - 2028 Thereafter Contractual Obligations 2027 Term Loan – Principal $ 175,000 $ — $ 175,000 $ — $ — 2027 Term Loan – Variable interest (1) 12,135 5,492 6,643 — — Revolver – Borrowings 80,000 — 80,000 — — Revolver – Variable interest 13,556 5,192 8,364 — — Facility Fee (2) 1,567 600 967 — — 2028 Term Loan – Principal 200,000 — — 200,000 — 2028 Term Loan – Variable interest (3) 31,932 7,760 15,521 8,651 — 2029 Term Loan – Principal 150,000 — 150,000 — 2029 Term Loan – Variable interest (4) 18,358 7,331 11,027 — Mortgage Note – Principal 8,361 162 348 7,851 — Mortgage Note – Interest 1,423 375 726 322 — Property developments under contract 35,690 35,690 — — — Additional principal under mortgage notes receivable 13,737 13,737 — — — Tenant Improvement Allowances 4,089 4,089 — — — Corporate office lease obligations 5,888 617 1,289 1,359 2,623 Total $ 751,736 $ 81,045 $ 449,885 $ 218,183 $ 2,623 41 Table of Contents (1) We entered into five interest rate hedges to fix the base interest rate (daily SOFR) on our 2027 Term Loan.
Additionally, the increase includes a $0.6 million increase related to straight-line rental revenue, an increase of $0.6 million related to amortization of above- and below-market lease related intangible assets, offset by a decrease of $0.4 million related to amortization of lease incentives. Lastly, $2.3 million relates to an increase of interest income on mortgage loans receivable. Total Operating Expenses.
The increase in revenue is offset by a $0.5 million decrease in straight-line rental revenue, $0.8 million decrease related to prior year recoveries, a $0.4 million increase in reserves for uncollectible amounts, and a $0.2 million decrease in lease incentive adjustments. Total Operating Expenses.
While the Federal Reserve has been continuing to raise interest rates in an effort to lower inflation, the pace at which it may continue to do so is unclear leading to uncertainties in the financing market and a volatile economy.
While the Federal Reserve had been raising interest rates in an effort to lower inflation throughout 2022 and the first half of 2023, there continues to be uncertainty entering into 2024 as to whether rates will be kept steady or potentially cut, leading to uncertainties in the financing market and a volatile economy.
The 2028 Term Loan matures on February 11, 2028 and the New Revolver matures on August 11, 2026, subject to extension of up to one year. Borrowings under the New Credit Facility are repayable at our option in whole or in part without premium or penalty.
The 2027 Term Loan is repayable at our option in whole or in part without premium or penalty.
Development During 2022, we invested $22.0 million in our property developments, including the acquisition of two new build-to-suit projects with an initial purchase price of $1.8 million. In addition, we completed development on six projects and reclassified approximately $23.1 million from property under development to land, building, and improvements in the accompanying consolidated balance sheets.
Development As of December 31, 2023, we had 18 property developments under construction. During 2023, we invested $81.0 million in our property developments, including the land acquisition of 40 new developments with a combined initial purchase price of $27.3 million.
Removed
Approximately 63% of our ABR is from investment grade credit rated tenants and an additional 17% of our ABR is derived from tenants with an investment grade profile. 2022 Debt Refinancing Transaction On August 11, 2022, we entered into a credit agreement (the “New Credit Agreement”) related to our sustainability-linked senior unsecured credit facility consisting of (i) a $200.0 million senior unsecured term loan (the “2028 Term Loan”) and (ii) a $400.0 million senior unsecured revolving credit facility (the “New Revolver” and together with the 2028 Term Loan, the “New Credit Facility”).
Added
As of December 31, 2023, our investments generated ABR 1 of $131.9 million. Approximately 71% of our ABR is from investment grade 2 credit rated tenants and an additional 14% of our ABR is derived from tenants with an investment grade profile 3 .
Removed
The New Credit Facility may be increased by $400.0 million in the aggregate. The New Revolver refinanced and upsized our existing $250.0 million senior unsecured revolving credit facility (“Prior Revolver”) pursuant to the credit agreement, dated as of December 23, 2019, governing such facility (the “Prior Credit Agreement”).
Added
From October 25, 2023 through December 31, 2023, we sold 4,478,539 shares of our common stock at a weighted average price of $17.27 per share, from which we received net proceeds of $76.5 million.
Removed
We used the proceeds from the borrowings made on the closing date to repay in full our Prior Revolver. The remaining and future proceeds of the loans under the New Credit Facility will be used by us and our subsidiaries for general corporate purposes, including acquisitions.
Added
As of December 31, 2023, we had $222.7 million in remaining gross proceeds available for future issuances of shares of our common stock under the 2023 ATM Program. Effective October 24, 2023, in connection with the establishment of the 2023 ATM Program, we terminated our prior $250.0 million at-the-market equity program (the “2021 ATM Program”).
Removed
Our $175.0 million senior unsecured term loan (“2024 Term Loan”) under the Prior Credit Agreement, which matures in December 2024, remained outstanding upon the closing of the New Credit Facility. The 2028 Term Loan matures on February 11, 2028 and the New Revolver matures on August 11, 2026, subject to extension of up to one year.
Added
As a result of such termination, we will not offer or sell any additional shares of common stock under the 2021 ATM Program. We have entered into a forward confirmation with respect to 5,983,711 shares of common stock under the 2021 ATM Program that remains unsettled.
Removed
Borrowings under the New Credit Facility are repayable at our option in whole or in part without premium or penalty. Borrowings under the New Revolver may be repaid and reborrowed from time to time prior to the maturity date.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBased on the results of our sensitivity analysis and daily outstanding borrowings on our revolving credit facilities during 2022, which assumes a 1% adverse change in the interest rate as of December 31, 2022, the estimated market risk exposure was approximately $1.1 million. 45 Table of Contents Our 2024 Term Loan, which matures on December 23, 2024, is indexed to LIBOR, and provides for procedures for determining an alternative base rate.
Biggest changeBased on the results of our sensitivity analysis and daily outstanding borrowings on the Revolver during 2023, which assumes a 1% adverse change in the interest rate as of December 31, 2023, the estimated market risk exposure was approximately $0.8 million. 49 Table of Contents
Additionally, we will occasionally fund acquisitions through the use of our New Revolver which bears an interest rate determined by either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 1.00% to 1.45%, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the New Credit Facility), plus a margin ranging from 0.00% to 0.45%, based on our consolidated total leverage ratio.
Additionally, we will occasionally fund acquisitions through the use of our Revolver which bears an interest rate determined by either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 1.00% to 1.45%, based on our consolidated total leverage ratio, or (ii) a Base Rate (as defined in the New Credit Facility), plus a margin ranging from 0.00% to 0.45%, based on our consolidated total leverage ratio.
For the years ended December 31, 2022 and 2021, we had average daily outstanding borrowings on our revolving credit facilities of $109.5 million and $12.4 million, respectively.
For the years ended December 31, 2023 and 2022, we had average daily outstanding borrowings on our revolving credit facilities of $82.5 million and $109.5 million, respectively.
As of December 31, 2022, we had total indebtedness of approximately $175.0 million under the 2024 Term Loan, $200.0 million under the 2028 Term Loan, and $113.0 million of borrowings under the New Revolver, all of which are floating rate debt with a variable interest rate.
As of December 31, 2023, we had total indebtedness of approximately $175.0 million under the 2027 Term Loan, $200.0 million under the 2028 Term Loan, $150.0 million under the 2029 Term Loan, and $80.0 million of borrowings under the Revolver, all of which are floating rate debt with a variable interest rate.
On September 28, 2020 and August 11, 2022 and effective through the maturity dates of December 23, 2024 and February 11, 2028, respectively, we entered into interest rate derivative contracts in order to hedge our market interest risk associated with the 2024 Term Loan and the 2028 Term Loan, respectively.
Effective through the maturity dates of January 15, 2027, February 11, 2028, and January 3, 2029, we entered into interest rate derivative contracts in order to hedge our market interest risk associated with the 2027 Term Loan, 2028 Term Loan, and 2029 Term Loan, respectively.
During the year, we also funded acquisitions through the use of our Prior Revolver, which was fully paid down in conjunction with the execution of the New Credit Agreement. Many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control contribute to our interest rate risk.
Many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control contribute to our interest rate risk.
Removed
On January 27, 2023, we executed an amendment to the Prior Credit Agreement that replaced the interest rate benchmark from LIBOR to Secured Overnight Financing Rate (“SOFR”).
Removed
Additionally, on January 30, 2023 and effective through the maturity date of December 31, 2024, we converted our four existing LIBOR swap agreements associated with the 2024 Term Loan into four new SOFR swaps that convert the SOFR variable rate to a fixed rate of 0.12%. See also “Note 14 – Subsequent Events – LIBOR to SOFR Transition.”

Other NTST 10-K year-over-year comparisons