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NETSTREIT Corp. (NTST)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered record gross investments of $195.1M at a 7.4% blended cash yield and strong portfolio activity, while AFFO per diluted share was $0.32 and GAAP diluted EPS was a net loss of $(0.07) .
  • Management accelerated diversification: Walgreens exposure fell to 3.8% of ABR and Dollar General to 8.6%, with a stated goal of having no tenant above 5% by year-end 2025 .
  • 2025 guidance introduced: AFFO per share of $1.27–$1.30, net investment activity of $75–$125M, and cash G&A of $14.5–$15.5M; Board declared a $0.21 quarterly dividend for Q1 2025 (annualized $0.84, +$0.02 YoY) .
  • Balance sheet flexibility improved via $275M in additional financing commitments, an upsized $500M revolver, and pro forma liquidity of $635M; forwards are expected to settle in H2 2025, an important overhang management plans to address .

What Went Well and What Went Wrong

What Went Well

  • “Completed over $195 million of gross investments, our highest quarter on record at a blended cash yield of 7.4%... with 14 years of weighted average lease term” .
  • “We expect our top 10 concentration to more closely mirror the sector average... having no tenant above 5% of ABR by year-end,” with Walgreens at 3.8% and Dollar General at 8.6% after Q4 actions .
  • Liquidity and debt profile strengthened: new $175M term loan fixed at 5.12%, revolver upsized to $500M, pro forma liquidity $635M, and adjusted net debt/annualized adjusted EBITDAre at 4.5x (within 4.5–5.5x target) .

What Went Wrong

  • GAAP net loss persisted (Q4 diluted EPS $(0.07)), driven in part by impairments (Q4 provisions for impairment $12.6M) despite steady non-GAAP cash flow per share .
  • Acquisition spread context: management indicated AFFO guidance assumes no equity raise and that current spreads are “less than 100 basis points,” limiting external growth accretion until cost of equity improves .
  • Macro and sector headwinds: pharmacy reimbursement pressure and a softening lower-income consumer continued to weigh on tenant narratives, requiring additional handholding in Walgreens sales processes .

Financial Results

Per-Share Metrics

Metric (Per Diluted Share)Q2 2024Q3 2024Q4 2024
Net (Loss) per Diluted Share ($)$(0.03) $(0.07) $(0.07)
Funds from Operations (FFO) ($)$0.27 $0.32 $0.32
Core FFO ($)$0.31 $0.32 $0.32
Adjusted FFO (AFFO) ($)$0.32 $0.32 $0.32

Revenue and EPS vs Estimates

MetricQ2 2024Q3 2024Q4 2024
Total Revenues ($USD Millions)$39.567 $41.444 N/A – not disclosed in quarterly table
Net (Loss) per Diluted Share ($)$(0.03) $(0.07) $(0.07)
Consensus Revenue EstimateUnavailable via S&P Global at time of analysis
Consensus EPS EstimateUnavailable via S&P Global at time of analysis

Note: S&P Global consensus estimates were unavailable due to a system limit at the time of analysis; comparisons to Wall Street estimates could not be completed.

Investment Activity and Capital Recycling

MetricQ2 2024Q3 2024Q4 2024
Gross Investments ($MM)$115.734 $151.555 $195.079
Investment Cash Yield (%)7.5% 7.5% 7.4%
Investment WALT (years)16.7 12.5 14.0
Dispositions ($MM)$12.707 $24.105 $59.337
Disposition Cash Yield (%)6.8% 7.3% 7.1%
Loan Repayments ($MM)$2.324 $8.857 $13.627
Loan Repayment Yield (%)10.3% 8.7% 9.3%
Net Investment Activity ($MM)$100.703 $118.593 $122.115

Portfolio KPIs and Credit Mix

KPIQ2 2024Q3 2024Q4 2024
# Investments649 671 687
ABR ($000s)148,258 156,999 165,070
States45 45 45
Tenants90 93 98
Industries26 26 26
Occupancy (%)100.0% 100.0% 99.9%
WALT (years)9.5 9.5 9.8
Investment Grade (%)68.9% 60.9% 55.8%
Investment Grade Profile (%)13.7% 14.4% 15.0%

Leverage and Liquidity

MetricQ2 2024Q3 2024Q4 2024
Net Debt / Annualized Adjusted EBITDAre (x)5.3x 5.3x 5.8x
Adjusted Net Debt / Annualized Adjusted EBITDAre (x)3.4x 4.0x 4.5x
Total Liquidity ($000s)$569,155 $464,074 $635,233 (pro forma)
Unused Revolver ($000s)$301,850 $249,850 $435,850 (pro forma)
Unsettled Forward Equity (Net Value, $000s)$253,579 $185,474 $185,063

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
AFFO per ShareFY2025N/A$1.27–$1.30 Introduced
Net Investment Activity ($)FY2025N/A$75–$125M Introduced
Cash G&A ($)FY2025N/A$14.5–$15.5M (excl. transaction costs & severance) Introduced
Dividend (Quarterly)Q1 2025Prior year annualized $0.82$0.21/qtr; $0.84 annualized (+$0.02 YoY) Increased YoY
AFFO per ShareFY2024$1.25–$1.28 (maintained midpoint $1.265) $1.26–$1.27 (maintained midpoint) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Tenant diversificationReduced Walgreens from 5.9% to 4.8% ABR; proactive sales incl. seller financing; Big Lots managed with temporary relief and re-tenanting Walgreens down to 3.8%; Dollar General down to 8.6%; aim for no tenant >5% by YE; record dispositions $59.3M Accelerating diversification; more dispositions with accretive recycling
Acquisition mix & returnsSale-leasebacks prominent; WALT 16.7 (Q2), 12.5 (Q3); risk-adjusted returns better in non-IG; IG cap rates sticky Continued sale-leasebacks; best opportunities in IG profile/sub-IG; spreads <100bps given no equity raising in guidance Favoring non-IG/IG-profile with better internal growth; disciplined pace until cost of equity improves
Big Lots bankruptcy outcomeOne asset on closure list; confident re-tenanting at or above prior rent Expect 6 of 7 stores assumed; one Bowie, MD store rejected with rent replacement at or above prior; no downtime expected Managed through with minimal rent loss; positive re-tenanting dynamics
Financing & liquidityLeverage low; revolver and forwards provide flexibility; planning to recast in 2025 $275M commitments; $500M revolver; term loan fixed at 5.12%; pro forma liquidity $635M; forwards to settle H2 2025 Stronger liquidity and maturity ladder; forward equity settlement path clarified
Underwriting & technologyEmphasis on unit-level cash flow and strong real estate; Placer AI used to assess foot traffic “Technology and asymmetrical information” underpin underwriting; portfolio rent coverage ~4x Data-driven underwriting continues to limit credit losses
Macro/consumerLower-income consumer under pressure; cautious on discretionary; pharmacy margin pressure Inflation abated from peak but lower-end consumer softening; watchful stance Still cautious; consumer softness lingering
Pharmacy sector mechanicsReimbursement rate pressure; Walgreens rents slightly above market (~$21/ft avg) Walgreens dispositions to 1031 buyers at varied cap rates; “handholding” required; confidence stores won’t close Narrative evolving; execution remains feasible with buyer comfort

Management Commentary

  • “We completed over $195 million of gross investments... at a blended cash yield of 7.4%... with 14 years of weighted average lease term” emphasizing sale-leasebacks and improved risk-adjusted returns vs traditional IG acquisitions .
  • “Top 10 concentration declined 410 basis points to 45.1% of ABR... Walgreens to 3.8%... Dollar General to 8.6%... expect no tenant above 5% of ABR by year-end” — reinforcing diversification priority .
  • “We strive to remain thoughtful and opportunistic... we will not grow for the sake of growth, and we will remain patient with our cost of capital,” underscoring disciplined external growth pacing .
  • CFO: “Introducing our 2025 AFFO per share guidance range at $1.27 to $1.30... net investment activity $75–$125M... cash G&A $14.5–$15.5M... AFFO payout ratio for Q4 was 66%... $0.21 dividend payable March 31” .
  • Capital markets update: “$175 million senior unsecured term loan... swapped to an all-in fixed rate of 5.12%... upsized $500 million revolving credit facility... pro forma liquidity $635 million” .

Q&A Highlights

  • Forward equity settlement timing: “You should expect us to settle the equity in the back half of 2025” — clarifies dilution and capital plan for H2’25 .
  • Acquisition spreads and IG mix: “Spreads... less than 100 basis points,” with best near-term opportunities in sale-leasebacks and sub-/IG-profile tenants to maximize risk-adjusted returns .
  • Walgreens/CVS dispositions: Walgreens sales showed a wide cap-rate range (some in the 6s, others “far north”), CVS expected at lower cap rates; buyer appetite exists with proper diligence .
  • Portfolio rent coverage: management estimated “in the neighborhood of 4x” across the portfolio (derived via sales, tenant dialogue, and Placer data) .
  • Big Lots guidance: “We do not expect any downtime at all” on the six locations expected to be assumed; Bowie, MD expected to re-tenant at or above prior rent .

Estimates Context

  • Wall Street consensus (S&P Global) was unavailable at the time of analysis due to a system limit; therefore, we cannot provide beat/miss comparisons versus consensus for Q4 2024. We will refresh and update estimate comparisons once S&P Global data access is restored.

Key Takeaways for Investors

  • External growth was robust and diversified: record Q4 investments ($195.1M) and record dispositions ($59.3M) at accretive yields, supporting internal growth via annual rent bumps and longer WALT .
  • Tenant diversification is a central 2025 catalyst: Walgreens down to 3.8% ABR and Dollar General to 8.6% with an explicit target of no tenant >5% by YE, reducing headline risk and potential volatility .
  • Balance sheet optionality improved: $275M financing commitments and a $500M revolver underpin $635M pro forma liquidity and push out maturities; forwards planned for H2’25 settlement clarify capital roadmap .
  • Near-term acquisition spread constraints (<100bps) imply measured deployment until cost of equity improves; expect continued focus on sale-leasebacks and IG-profile assets to optimize risk-adjusted returns .
  • Big Lots process appears de-risked: six of seven stores expected to be assumed, one re-tenanting at or above prior rent, and no downtime expected — a positive read-through on underwriting discipline .
  • Pharmacy narrative manageable with buyer education: Walgreens dispositions to 1031 buyers at varied cap rates and management confidence in store viability support diversification progress without economic leakage .
  • Trading implications: watch for updates on dispositions (cap rates and volume), sale-leaseback pipeline cadence, and forward equity settlement timing in H2’25; these are likely stock-moving events as cost of capital dynamics evolve .