NETSTREIT Corp. Achieves Steady Growth in Q2 2024

NETSTREIT Corp. Reports Stable Q2 Results Amid Strategic Growth Initiatives

NETSTREIT Corp., a real estate investment trust, has demonstrated a steady performance in the second quarter of 2024, highlighting significant gross investment activities and a continued emphasis on acquiring high-performing assets with extended lease terms.

Although the company recorded a net loss for the quarter, it exhibited resilience with Core FFO and AFFO numbers meeting expectations, and it has maintained its yearly guidance. The company also declared a quarterly cash dividend amid ongoing strategic asset sales and efforts to onboard new tenants.

Key Takeaways

• NETSTREIT Corp. reported gross investment activity exceeding $116 million, achieving a blended cash yield of 7.5%.
• The company welcomed Life Time Fitness as a new Top 10 tenant and initiated rent on six development projects.
• The portfolio consists of 649 investments leased to 90 tenants across 45 states.
• The company reported a net loss of $2.3 million, yet declared a quarterly cash dividend of $0.21 per share.
• Focus remains on diversification, with a strong dialogue ongoing with Walgreens, while minimal impact is anticipated from store closures at Big Lots.
• CEO Mark Manheimer addressed the company’s strategy regarding re-tenanting, acquisition pace, and balance sheet management during the earnings call.

Company Outlook

• NETSTREIT continues to maintain its AFFO per share guidance for 2024 between $1.25 and $1.28.
• The company expects cap rates to stabilize in the third quarter.
• The new CEO is set to optimize a larger portion of their asset source.

Bearish Highlights

• A net loss of $2.3 million was reported for the quarter.
• Walgreens has faced declining margins due to reduced demand for discretionary items.
• A fraud incident was recorded, prompting measures to prevent future occurrences.

Bullish Highlights

• NETSTREIT is diversifying its portfolio, notably adding Life Time Fitness as a key tenant.
• The weighted average lease term stands at nine years, indicating stability.
• The company expects acquisition volume to continue at its current pace, showcasing confidence in its investment strategy.

Misses

• The net loss incurred during the quarter, despite robust investment activity and portfolio growth.

Q&A Highlights

• Management stated that NETSTREIT is prepared to efficiently re-tenant assets in case of tenant bankruptcy.
• The company remains unaffected by Stop & Shop closures and expresses confidence in ongoing tenant relationships.
• NETSTREIT is considering leveraging its accordion feature on the term loan or possibly issuing new loans based on market conditions, preferring to extend debt maturities with no immediate action until 2025.

NETSTREIT Corp.’s second-quarter results underscore its commitment to strategic growth and diversification within its portfolio, aiming for long-term stability. While facing a net loss and some margin pressures, the firm’s diversified investments and proactive management approach convey a steady trajectory moving forward. With clear acquisition strategies and strong tenant relations, NETSTREIT continues to adeptly navigate the real estate landscape, focusing on resilience and long-term value creation.