Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Netstreit Corp (NTST, Financial) completed over $116 million of gross investment activity at a blended cash yield of 7.5% in Q2 2024.
- The company added Life Time Fitness as a new top 10 tenant, acquiring two high-performing properties.
- Netstreit Corp (NTST) commenced rent on 6 development projects totaling $12 million, with a development pipeline of 12 projects.
- The portfolio consists of 649 investments with an ABR of $148 million, and 83% of the portfolio is leased to investment grade or investment grade profile tenants.
- The company reported a 6% increase in AFFO to $23.8 million or $0.32 per diluted share compared to last year.
Negative Points
- Netstreit Corp (NTST) reported a net loss of $2.3 million or $0.03 per diluted share for Q2 2024.
- The company experienced a $2.8 million loss due to a fraud incident involving a business email compromise.
- Total recurring G&A expenses, while declining, still represent 12% of total revenues.
- The weighted average debt maturity is relatively short at 3.6 years, with a weighted average interest rate of 4.43%.
- Concerns about tenant performance, particularly with Walgreens and Big Lots, which have been in the news for store closures and financial struggles.
Q & A Highlights
Q: Can you talk about what categories are in the acquisition pipeline and the held-for-sale assets?
A: It's a mix of different types of transactions, including sale-leasebacks, developments, Dollar stores, quick-service restaurants, and Tractor Supply. (Mark Manheimer, CEO)
Q: Regarding Big Lots, you mentioned potential upside in rent. Can you talk about the rent for the asset that was closed and any CapEx needed?
A: The rent on that location is $5.29 per square foot. It has not closed yet, but we are confident in our ability to re-tenant the location with potential upside in rent. (Mark Manheimer, CEO)
Q: How do you feel about your exposure to Stop & Shop, and are there any other tenants on your watch list?
A: We have two Stop & Shop locations, less than 2% of revenues, and we don't see any risk to our locations. We are also monitoring Big Lots closely. (Mark Manheimer, CEO)
Q: Can you provide an update on overall acquisition activity and the dynamics that caused activity to slow?
A: The pace has been similar but slightly slower. We are being selective with assets and prudent with capital. We expect a similar pace as last year for the next 60-90 days. (Mark Manheimer, CEO)
Q: What's the bad debt reserve currently embedded in your guide, and why not raise the guide given your acquisition pace?
A: We are modeling 50 basis points at the low end and essentially nothing at the high end. We are not raising guidance due to potential dilution from unsettled forward equity. (Daniel Donlan, CFO)
Q: Has your acquisition strategy shifted towards experiential real estate rather than Dollar stores and pharmacies?
A: No, our strategy has not shifted. The Life Time Fitness acquisitions were unique opportunities with high-quality real estate. We continue to look at various types of assets. (Mark Manheimer, CEO)
Q: What has changed at Life Time or on the demand side for those assets to now be priced attractively for you?
A: The demand side has fallen off with fewer buyers in the market. We are seeing more attractive sale-leaseback opportunities with high-quality real estate. (Mark Manheimer, CEO)
Q: Are you getting P&Ls on the Life Time assets, and can you disclose the rent coverage?
A: We do get unit-level coverage, and they are very high. (Mark Manheimer, CEO)
Q: How are you thinking about the $150 million accordion remaining on the term loan versus issuing a new loan?
A: We would look at both options, depending on bank demand. We are not planning any actions until 2025. (Daniel Donlan, CFO)
Q: Can you provide some color on the current in-place rents on the 27 Walgreens properties and where the market is at for those properties?
A: The average rent is about $21 per square foot, which is slightly above market. (Mark Manheimer, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
