Business Wire | Mar 4, 2021 04:15PM EST

NETSTREIT Reports Fourth Quarter and Full Year 2020 Financial and Operating Results

Mar. 04, 2021

DALLAS--(BUSINESS WIRE)--Mar. 04, 2021--NETSTREIT (NYSE: NTST) (the "Company"), today announced financial and operating results for the fourth quarter and full year ended December 31, 2020.

"2020 was a very important year for NETSTREIT, and we are extremely proud of all of our accomplishments. Our portfolio performed well throughout a period of elevated economic stress and we credit our sector-leading collections to our portfolio quality and the defensive characteristics that define our strategy. We also completed our Initial Public Offering, which enhances our access to capital as we look to continue to grow. Further, we continued to improve our already strong portfolio composition through thoughtful acquisitions and dispositions which resulted in a larger, more diversified and higher quality asset base, which is another example of our ability to execute our strategy to drive cash flow growth and generate a strong, safe yield over time," said Mark Manheimer, Chief Executive Officer of NETSTREIT. "As we look ahead to 2021, we are focused on continuing to capitalize on our significant growth opportunity within the net lease sector, utilizing our dedicated platform and high-quality balance sheet."

FOURTH QUARTER AND FULL YEAR 2020 HIGHLIGHTS

* Reported net income per diluted share of $0.15, Core Funds from Operations ("Core FFO") per diluted share of $0.181 and AFFO per diluted share of $0.201 (see non-GAAP financial measures reconciliation) for the fourth quarter of 2020 * Reported net income per diluted share of $0.01, Core FFO per diluted share of $0.652 and AFFO per diluted share of $0.692 (see non-GAAP financial measures reconciliation) for the full year 2020 * Prior to giving any consideration to deferral or abatement arrangements granted as a result of COVID, the Company collected 100.0% of fourth quarter contractual rent. For the full year 2020, the Company collected 96.9% of contractual rent

PORTFOLIO UPDATE

As of December 31, 2020, the NETSTREIT portfolio was comprised of 203 properties, contributing $41.8 million of annualized base rent3, with a weighted-average remaining lease term of 10.5 years, of which 70.0% were leased to investment grade rated tenants and 8.0% were leased to tenants with investment grade profiles (unrated tenants with more than $1.0 billion in annual sales and a debt to adjusted EBITDA ratio of less than 2.0x). The portfolio was 100.0% occupied as of December 31, 2020.

INVESTMENT ACTIVITY

During the quarter ended December 31, 2020, the Company invested approximately $81.2 million in 26 properties at an initial cash capitalization rate of 6.8%. Acquisitions completed during the quarter had a weighted-average remaining lease term of 8.8 years, and 68.7% are occupied by investment grade rated tenants.

Over the same period, the Company sold 12 properties for total proceeds of $37.4 million. The cash capitalization rate on the 12 properties was 6.6%.

During the year ended December 31, 2020, the Company invested approximately $409 million in 124 properties at an initial cash capitalization rate of 6.7%. Acquisitions completed during the year had a weighted-average remaining lease term of 11.2 years, and 71.9% were occupied by investment grade rated tenants.

Over the same period, the Company sold 15 properties, including one vacant property, for total proceeds of $50 million. The cash capitalization rate on the 14 occupied properties was 6.6%.

Over the course of 2020, the Company's portfolio increased from 94 properties to 203 properties. The portfolio's weighted average lease term remaining improved from 10.1 years to 10.5 years, and the portfolio's investment grade percentage increased from 63.7% to 70.0%. During the year, the Company added 23 new tenants, 4 new industries, and 10 new states to its portfolio.

BALANCE SHEET AND LIQUIDITY

At quarter end, total debt outstanding was $175 million, with a weighted average term of four years and a contractual interest rate, including the impact of the fixed rate swap, of 1.36% (excluding the impact of deferred fee amortization). Including the effect of the interest rate swap, 100% of the Company's outstanding debt balances were at a fixed rate and the Company's net debt to annualized adjusted EBITDA ratio was 2.8x. Additionally, the ending cash balance, which included $14.8 million of restricted cash held in 1031 exchange accounts, was $92.6 million, and the Company had an unused revolving line of credit with $250 million of capacity.

DIVIDEND

On March 3, 2021, the Company's Board of Directors declared a quarterly cash dividend of $0.20 per share for the first quarter of 2021, which will be paid on March 30, 2021 to shareholders of record on March 15, 2021.

2021 OUTLOOK

On January 5, 2021, the Company announced the following external growth targets for full year 2021:

* The Company expects acquisition activity, net of dispositions, to total $320 million * The Company expects to continue to review its portfolio and complete opportunistic dispositions to further improve portfolio diversification and mitigate risk

In addition, the Company is introducing the following targets for full year 2021:

* The Company expects cash G&A to be in the range of $11.0 to $12.0 million, with additional non-cash compensation expense of $3.0 to $4.0 million * The Company expects cash interest expense, including unused line of credit facility fees, of $3.0 to $3.5 million, and an additional $0.6 million of non-cash deferred financing fee amortization * The Company expects to incur state and franchise taxes in the range of $0.2 to $0.3 million which will be reported as "income taxes" in the Company's financial statements for 2021.

EARNINGS WEBCAST AND CONFERENCE CALL

A conference call will be held on Friday, March 5, 2021 at 10:00 AM ET. During the conference call the Company's officers will review fourth quarter performance, discuss recent events, and conduct a question and answer period.

The webcast will be accessible on the "Investor Relations" section of the Company's website at www.NETSTREIT.com. To listen to the live webcast, please go to the site at least fifteen minutes prior to the scheduled start time to register, as well as download and install any necessary audio software. A replay of the webcast will be available for 90 days on the Company's website shortly after the call.

The conference call can also be accessed by dialing 1-877-451-6152 for domestic callers or 1-201-389-0879 for international callers. A dial-in replay will be available starting shortly after the call until March 12, 2021, which can be accessed by dialing 1-844-512-2921 for domestic callers or 1-412-317-6671 for international callers. The passcode for this dial-in replay is 13714402.

SUPPLEMENTAL PACKAGE

The Company's supplemental package will be available prior to the conference call in the Investor Relations section of the Company's website at www.investors.netstreit.com.

About NETSTREIT

NETSTREIT is an internally managed Real Estate Investment Trust (REIT) based in Dallas, Texas that specializes in acquiring single-tenant net lease retail properties nationwide. The growing portfolio consists of high-quality properties leased to e-commerce resistant tenants with healthy balance sheets. Led by a management team of seasoned commercial real estate executives, NETSTREIT's strategy is to create the highest quality net lease retail portfolio in the country with the goal of generating consistent cash flows and dividends for its investors.

(1) Per share amounts include weighted average common shares of 27,897,168 and weighted average operating partnership units of 2,033,718 for the three-months ended December 31, 2020.

(2) Per share amounts include weighted average common shares of 17,322,182 and weighted average operating partnership units of 3,807,022 for the twelve-months ended December 31, 2020.

(3) Annualized base rent, or ABR, is calculated by multiplying (i) cash rental payments (a) for the month ended December 31, 2020 (or, if applicable, the next full month's cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of December 31, 2020, plus (b) for properties under development, the first full month's permanent cash rent contractually due after the development period by (ii) 12).

NON-GAAP FINANCIAL MEASURES

This press release contains non-GAAP financial measures, including FFO, Core FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, NOI, and Cash NOI. A reconciliation from net loss available to common shareholders to each non-GAAP financial measure, and definitions of each non-GAAP measure, are included below.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements concerning our business and growth strategies, investment, financing and leasing activities and trends in our business, including trends in the market for single-tenant, retail commercial real estate. Words such as "expects," "anticipates," "intends," "plans," "likely," "will," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this press release may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see the information under the heading "Risk Factors" in our prospectus dated August 13, 2020, relating to our initial public offering, filed with the Securities and Exchange Commission (the "SEC") on August 14, 2020 and other reports filed with the SEC from time to time. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this press release. New risks and uncertainties may arise over time and it is not possible for us to predict those events or how they may affect us. Many of the risks identified herein and in our periodic reports have been and will continue to be heightened as a result of the ongoing and numerous adverse effects arising from the novel coronavirus (COVID-19). We expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.

NETSTREIT CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(Unaudited)

December 31,

2020 2019

Assets

Real estate, at cost:

Land $ 189,373 $ 83,996

Buildings and improvements 358,360 140,057

Total real estate, at cost 547,733 224,053

Less accumulated depreciation (10,111 ) (132 )

Real estate held for investment, net 537,622 223,921

Assets held for sale 14,802 8,532

Cash, cash equivalents and restricted cash 92,643 169,319

Acquired lease intangible assets, net 75,024 28,846

Other assets, net 5,724 3,304

Total assets $ 725,815 $ 433,922

Liabilities and equity

Liabilities:

Term loan, net $ 174,105 $ 173,913

Lease intangible liabilities, net 16,930 4,672

Liabilities related to assets held for sale 399 189

Accounts payable, accrued expenses and other 6,308 2,716 liabilities

Total liabilities 197,742 181,490

Commitments and contingencies

Equity:

Stockholders' equity

Common stock, $0.01 par value, 400,000,000 sharesauthorized; 28,203,545 and 8,860,760 shares issued 282 89 and outstanding as of December 31, 2020 and 2019,respectively

Additional paid-in capital 501,045 164,416

Retained (loss) earnings (7,464 ) 28

Accumulated other comprehensive income 235 -

Total stockholders' equity 494,098 164,533

Noncontrolling interests 33,975 87,899

Total equity 528,073 252,432

Total liabilities and equity $ 725,815 $ 433,922

NETSTREIT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except share and per share data)

(Unaudited)

Successor

Predecessor

Year Ended December 31,

For the Period fromDecember 23 to December 31,

For the Period fromJanuary 1 to December 22,

2020

2019

Revenues

Rental revenue (including reimbursable)

$

33,727

$

513

$

19,805

Operating expenses

Property

2,569

52

1,113

General and administrative

11,340

49

3,555

Depreciation and amortization

15,459

195

10,422

Provisions for impairment

2,690

-

7,186

Transaction costs

3,169

2

535

Total operating expenses

35,227

298

22,811

Other income (expense)

Interest expense, net

(4,741

)

(173

)

(10,712

)

Gain on sales of real estate, net

6,213

-

5,646

Gain on forfeited earnest money deposit

250

-

-

Other income (expense), net

(10

)

-

-

Total other income (expense), net

1,712

(173

)

(5,066

)

Net income (loss)

212

42

(8,072

)

Net (loss) income attributable to noncontrolling interests

(518

)

14

-

Preferred stock dividends and redemption premium

42

-

-

Net income (loss) attributable to common stockholders

$

688

$

28

$

(8,072

)

Amounts available to common stockholders per common share:

Basic

$

0.04

$

-

N/A

Diluted

$

0.01

$

-

N/A

Weighted average common shares outstanding:

Basic

17,322,182

8,860,760

N/A

Diluted

21,157,996

8,860,760

N/A

Other comprehensive income (loss):

Net income (loss)

$

212

$

42

$

(8,072

)

Change in unrealized gain on derivatives, net

253

-

55

Total comprehensive income (loss)

465

42

(8,017

)

Comprehensive (loss) income attributable to noncontrolling interests

(500

)

14

-

Comprehensive income (loss) attributable to common stockholders

$

965

$

28

$

(8,017

)

NETSTREIT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except share and per share data)

(Unaudited)

Successor Predecessor

For the For the Period from Period from Year Ended December 23 January 1 December 31, to to December December 31, 22,

2020 2019

Revenues

Rental revenue (including $ 33,727 $ 513 $ 19,805 reimbursable)

Operating expenses

Property 2,569 52 1,113

General and administrative 11,340 49 3,555

Depreciation and amortization 15,459 195 10,422

Provisions for impairment 2,690 - 7,186

Transaction costs 3,169 2 535

Total operating expenses 35,227 298 22,811

Other income (expense)

Interest expense, net (4,741 ) (173 ) (10,712 )

Gain on sales of real estate, net 6,213 - 5,646

Gain on forfeited earnest money 250 - - deposit

Other income (expense), net (10 ) - -

Total other income (expense), net 1,712 (173 ) (5,066 )

Net income (loss) 212 42 (8,072 )

Net (loss) income attributable to (518 ) 14 - noncontrolling interests

Preferred stock dividends and 42 - - redemption premium

Net income (loss) attributable to $ 688 $ 28 $ (8,072 )common stockholders

Amounts available to common stockholders per common share:

Basic $ 0.04 $ - N/A

Diluted $ 0.01 $ - N/A

Weighted average common shares outstanding:

Basic 17,322,182 8,860,760 N/A

Diluted 21,157,996 8,860,760 N/A

Other comprehensive income (loss):

Net income (loss) $ 212 $ 42 $ (8,072 )

Change in unrealized gain on 253 - 55 derivatives, net

Total comprehensive income (loss) 465 42 (8,017 )

Comprehensive (loss) incomeattributable to noncontrolling (500 ) 14 - interests

Comprehensive income (loss) $ 965 $ 28 $ (8,017 )attributable to common stockholders

NETSTREIT CORP. AND SUBSIDIARIES

RECONCILIATION OF NET LOSS TO FFO, CORE FFO AND ADJUSTED FFO

(in thousands, except share and per share data)

(Unaudited)

Three Months Ended

Twelve Months Ended

Successor

Predecessor

Successor

Predecessor

December 31,

For the Period fromDecember 23 to December 31,

For the Period fromOctober 1 to December 22,

December 31,

For the Period fromDecember 23 to December 31,

For the Period fromJanuary 1 to December 22,

2020

2019

2020

2019

Net income (loss)

$

4,510

$

42

$

(3,523

)

$

212

$

42

$

(8,072

)

Depreciation and amortization of real estate

5,229

188

2,357

15,154

188

10,422

Provision for impairment

917

-

919

2,690

-

7,186

Gain on sale of real estate, net

(5,143

)

-

127

(6,213

)

-

(5,646

)

FFO

5,513

230

(120

)

11,843

230

3,890

Adjustments:

Gain on forfeited earnest money deposit

-

-

-

(250

)

-

-

144A and IPO transaction costs (1)

-

-

449

2,170

-

450

Core FFO

5,513

230

329

13,763

230

4,340

Adjustments:

Straight-line rental revenue

(271

)

(15

)

349

(1,688

)

(15

)

1,037

Amortization of deferred financing costs

157

14

249

621

14

1,024

Amortization of above/below market lease intangibles

(164

)

2

78

(504

)

2

563

Non-cash compensation expense

699

-

-

2,452

-

-

AFFO

$

5,934

$

231

$

1,005

$

14,644

$

231

$

6,964

Weighted average common shares outstanding, basic

27,897,168

8,860,760

N/A

17,322,182

8,860,760

N/A

Weighted average operating partnership units outstanding

2,033,718

4,449,019

N/A

3,807,022

4,449,019

N/A

Weighted average dilutive securities

90,864

-

N/A

28,792

-

N/A

Weighted average common shares outstanding, diluted

30,021,750

13,309,779

N/A

21,157,996

13,309,779

N/A

FFO per common share, diluted

$

0.18

$

0.02

N/A

$

0.56

$

0.02

N/A

Core FFO per common share, diluted

$

0.18

$

0.02

N/A

$

0.65

$

0.02

N/A

AFFO per common share, diluted

$

0.20

$

0.02

N/A

$

0.69

$

0.02

N/A

NETSTREIT CORP. AND SUBSIDIARIES

RECONCILIATION OF NET LOSS TO FFO, CORE FFO AND ADJUSTED FFO

(in thousands, except share and per share data)

(Unaudited)

Three Months Ended Twelve Months Ended

Successor Predecessor Successor Predecessor

For the For the For the For the Period Period Period Period December from from December from from 31, December 23 October 1 to 31, December 23 January 1 to to December December 22, to December December 22, 31, 31,

2020 2019 2020 2019

Net income $ 4,510 $ 42 $ (3,523 ) $ 212 $ 42 $ (8,072 )(loss)

Depreciationandamortization 5,229 188 2,357 15,154 188 10,422 of realestate

Provision for 917 - 919 2,690 - 7,186 impairment

Gain on saleof real (5,143 ) - 127 (6,213 ) - (5,646 )estate, net

FFO 5,513 230 (120 ) 11,843 230 3,890

Adjustments:

Gain onforfeited - - - (250 ) - - earnest moneydeposit

144A and IPOtransaction - - 449 2,170 - 450 costs (1)

Core FFO 5,513 230 329 13,763 230 4,340

Adjustments:

Straight-linerental (271 ) (15 ) 349 (1,688 ) (15 ) 1,037 revenue

Amortizationof deferred 157 14 249 621 14 1,024 financingcosts

Amortizationof above/below market (164 ) 2 78 (504 ) 2 563 leaseintangibles

Non-cashcompensation 699 - - 2,452 - - expense

AFFO $ 5,934 $ 231 $ 1,005 $ 14,644 $ 231 $ 6,964



Weightedaveragecommon shares 27,897,168 8,860,760 N/A 17,322,182 8,860,760 N/A outstanding,basic

Weightedaverageoperating 2,033,718 4,449,019 N/A 3,807,022 4,449,019 N/A partnershipunitsoutstanding

Weightedaverage 90,864 - N/A 28,792 - N/A dilutivesecurities

Weightedaveragecommon shares 30,021,750 13,309,779 N/A 21,157,996 13,309,779 N/A outstanding,diluted



FFO percommon share, $ 0.18 $ 0.02 N/A $ 0.56 $ 0.02 N/A diluted

Core FFO percommon share, $ 0.18 $ 0.02 N/A $ 0.65 $ 0.02 N/A diluted

AFFO percommon share, $ 0.20 $ 0.02 N/A $ 0.69 $ 0.02 N/A diluted

RECONCILIATION OF NET LOSS TO EBITDA, EBITDAre AND ADJUSTED EBITDAre

(in thousands, except share and per share data)

(Unaudited)

Three Months Ended

Twelve Months Ended

Successor

Predecessor

Successor

Predecessor

December 31,

For the Period fromDecember 23 to December 31,

For the Period fromOctober 1 to December 22,

December 31,

For the Period fromDecember 23 to December 31,

For the Period fromJanuary 1 to December 22,

2020

2019

2020

2019

Net income (loss)

$

4,510

$

42

$

(3,523

)

$

212

$

42

$

(8,072

)

Depreciation and amortization of real estate

5,229

188

2,357

15,154

188

10,422

Amortization of above/below market lease intangibles

(164

)

2

78

(504

)

2

563

Non-real estate depreciation and amortization

77

7

-

305

7

-

Interest expense, net

926

173

2,363

4,741

173

10,712

EBITDA

10,578

412

1,275

19,908

412

13,625

Adjustments:

Provision for impairments

917

-

919

2,690

-

7,186

Gain on sale of real estate, net

(5,143

)

-

127

(6,213

)

-

(5,646

)

EBITDAre

6,352

412

2,321

16,385

412

15,165

Adjustments:

Straight-line rental revenue

(271

)

(15

)

349

(1,688

)

(15

)

1,037

Gain on forfeited earnest money deposit

-

-

-

(250

)

-

-

144A and IPO transaction costs (1)

-

-

449

2,170

-

450

Non-cash compensation expense

699

-

-

2,452

-

-

Adjusted EBITDAre

$

6,780

$

397

$

3,119

$

19,069

$

397

$

16,652

RECONCILIATION OF NET LOSS TO EBITDA, EBITDAre AND ADJUSTED EBITDAre

(in thousands, except share and per share data)

(Unaudited)

Three Months Ended Twelve Months Ended

Successor Predecessor Successor Predecessor

For the For the Period For the Period For the from Period from Period December December from December December from 31, 23 October 1 to 31, 23 January 1 to to December 22, to December 22, December December 31, 31,

2020 2019 2020 2019

Net income $ 4,510 $ 42 $ (3,523 ) $ 212 $ 42 $ (8,072 )(loss)

Depreciationandamortization 5,229 188 2,357 15,154 188 10,422 of realestate

Amortizationof above/below market (164 ) 2 78 (504 ) 2 563 leaseintangibles

Non-realestatedepreciation 77 7 - 305 7 - andamortization

Interest 926 173 2,363 4,741 173 10,712 expense, net

EBITDA 10,578 412 1,275 19,908 412 13,625

Adjustments:

Provision for 917 - 919 2,690 - 7,186 impairments

Gain on saleof real (5,143 ) - 127 (6,213 ) - (5,646 )estate, net

EBITDAre 6,352 412 2,321 16,385 412 15,165

Adjustments:

Straight-linerental (271 ) (15 ) 349 (1,688 ) (15 ) 1,037 revenue

Gain onforfeited - - - (250 ) - - earnest moneydeposit

144A and IPOtransaction - - 449 2,170 - 450 costs (1)

Non-cashcompensation 699 - - 2,452 - - expense

Adjusted $ 6,780 $ 397 $ 3,119 $ 19,069 $ 397 $ 16,652 EBITDAre

RECONCILIATION OF NET LOSS TO NOI AND CASH NOI

(in thousands, except share and per share data)

(Unaudited)

Three Months Ended

Twelve Months Ended

Successor

Predecessor

Successor

Predecessor

December 31,

For the Period fromDecember 23 to December 31,

For the Period fromOctober 1 to December 22,

December 31,

For the Period fromDecember 23 to December 31,

For the Period fromJanuary 1 to December 22,

2020

2019

2020

2019

Net income (loss)

$

4,510

$

42

$

(3,523

)

$

212

$

42

$

(8,072

)

General and administrative

3,500

49

1,099

11,340

49

3,555

Depreciation and amortization

5,306

195

2,357

15,459

195

10,422

Provisions for impairment

917

-

919

2,690

-

7,186

Transaction costs

199

2

-

3,169

2

535

Interest expense, net

926

173

2,363

4,741

173

10,712

Gain on sales of real estate, net

(5,143

)

-

127

(6,213

)

-

(5,646

)

Gain on forfeited earnest money deposit

-

-

-

(250

)

-

-

Other (income) expense, net

10

-

-

10

-

-

NOI

10,225

461

3,342

31,158

461

18,692

Straight-line rental revenue

(271

)

(15

)

349

(1,688

)

(15

)

1,037

Amortization of above/below market lease intangibles

(164

)

2

78

(504

)

2

563

Cash NOI

$

9,790

$

448

$

3,769

$

28,966

$

448

$

20,292

NON-GAAP FINANCIAL MEASURES

FFO, Core FFO and AFFO

FFO is a non-GAAP financial measure defined by NAREIT as net income (computed in accordance with GAAP), excluding real estate-related expenses including, but not limited to, gains (losses) from sales, impairment adjustments, and depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO is consistent with FFO as defined by NAREIT.

Core FFO is a non-GAAP financial measure defined as FFO adjusted for gains from forfeited earnest money deposits and non-recurring public company costs. We believe the presentation of Core FFO provides investors with a metric to assist in their evaluation of our operating performance across multiple periods because it removes the effect of unusual and non-recurring items that are not expected to impact our operating performance on an ongoing basis.

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, non-cash compensation expense, and amortization of deferred financing costs.

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values historically have risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO to be useful in evaluating potential property acquisitions and measuring operating performance. We further consider Core FFO and AFFO to be useful in determining funds available for payment of distributions. FFO, Core FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP. You should not consider FFO, Core FFO and AFFO to be alternatives to net income as a reliable measure of our operating performance; nor should you consider FFO, Core FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity.

FFO, Core FFO and AFFO do not measure whether cash flow is sufficient to fund all of our cash needs, including principal amortization, capital improvements and distributions to stockholders. FFO, Core FFO and AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP. Further, FFO, Core FFO and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO, Core FFO and AFFO.

EBITDA, EBITDAre and Adjusted EBITDAre

We compute EBITDA as earnings before interest, income taxes and depreciation and amortization. In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDAre. We compute EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and real estate impairment losses.

Adjusted EBITDAre is a non-GAAP financial measure defined as EBITDAre further adjusted to exclude straight-line rent, gains from forfeited earnest money deposits, non-recurring public company costs, representing consulting fees that we have incurred in preparing to become a public company and non-cash compensation expense.

We present EBITDA, EBITDAre and Adjusted EBITDAre as they are measures commonly used in our industry. We believe that these measures are useful to investors and analysts because they provide supplemental information concerning our operating performance, exclusive of certain non-cash items and other costs. We use EBITDA, EBITDAre and Adjusted EBITDAre as measures of our operating performance and not as measures of liquidity.

EBITDA, EBITDAre and Adjusted EBITDAre do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. Additionally, our computation of EBITDA, EBITDAre and Adjusted EBITDAre may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.

NOI and Cash NOI

NOI and Cash NOI are non-GAAP financial measures which we use to assess our operating results. We compute NOI as net income (loss) (computed in accordance with GAAP), excluding general and administrative expenses, interest expense (or income), depreciation and amortization, gains (or losses) on sales of depreciable property, gain from forfeited earnest money deposits and real estate impairment losses. We further adjust NOI for non-cash revenue components of straight-line rent and amortization of lease intangibles to derive Cash NOI. We believe NOI and Cash NOI provide useful and relevant information because they reflect only those income and expense items that are incurred at the property level and present such items on an unlevered basis.

NOI and Cash NOI are not measurements of financial performance under GAAP, and our NOI and Cash NOI may not be comparable to similarly titled measures of other companies. You should not consider our NOI and Cash NOI as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.

(1) These expenses represent a subset of Transaction costs as presented on the Consolidated Statement of Operations and Comprehensive Income (Loss).

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CONTACT: Investor Relations ir@netstreit.com 972-597-4825