Financial News

NETSTREIT Reports Fourth Quarter and Full Year 2023 Financial and Operating Results

– Net income of $0.03 and Adjusted Funds from Operations ("AFFO") of $0.31 Per Diluted Share for Fourth Quarter –

– Completed $119.1 Million of Gross Investment Activity at 7.2% Blended Cash Yield for Fourth Quarter –

– Reaffirms 2024 AFFO Per Share Guidance of $1.24 to $1.28 –

– Completed Forward Equity Offering in January 2024, Raising $190.8 Million of Net Proceeds –

NETSTREIT Corp. (NYSE: NTST) (the “Company”) today announced financial and operating results for the fourth quarter and year ended December 31, 2023.

“We're proud of our strong execution and performance in 2023, completing $481 million of gross investment activity and growing our 2023 AFFO per diluted share by 5% from prior year. With the completion of our January forward equity offering, NETSTREIT is well capitalized to take advantage of attractive investment opportunities to deliver solid growth in 2024,” said Mark Manheimer, Chief Executive Officer of NETSTREIT.

FOURTH QUARTER AND FULL YEAR 2023 HIGHLIGHTS

The following table summarizes the Company's select financial results1 for the three months and year ended December 31, 2023.

 

Three Months Ended December 31,

 

2023

 

2022

 

% Change

 

(Unaudited)

Net Income per Diluted Share

$

0.03

 

$

0.05

 

(40

)%

Funds from Operations per Diluted Share

$

0.30

 

$

0.26

 

15

%

Core Funds from Operations per Diluted Share

$

0.30

 

$

0.28

 

7

%

Adjusted Funds from Operations per Diluted Share

$

0.31

 

$

0.29

 

7

%

 

Year Ended December 31,

 

2023

 

2022

 

% Change

 

(Unaudited)

Net Income per Diluted Share

$

0.11

 

$

0.16

 

(31

)%

Funds from Operations per Diluted Share

$

1.18

 

$

1.08

 

9

%

Core Funds from Operations per Diluted Share

$

1.19

 

$

1.10

 

8

%

Adjusted Funds from Operations per Diluted Share

$

1.22

 

$

1.16

 

5

%

1.

Funds from operations ("FFO"), core funds from operations ("Core FFO"), and adjusted funds from operations ("AFFO") are non-GAAP financial measures. See "Non-GAAP Financial Measures."

INVESTMENT ACTIVITY

The following tables summarize the Company's investment and disposition activities (dollars in thousands) for the three months and year ended December 31, 2023.

 

Three Months Ended December 31, 2023

 

Year Ended December 31, 2023

 

Number of Investments

 

Amount

 

Number of Investments

 

Amount

Investments

57

 

$

119,128

 

 

196

 

$

480,519

 

Dispositions1

6

 

 

15,995

 

 

22

 

 

49,506

 

Net Investment Activity

 

 

$

103,133

 

 

 

 

$

431,013

 

 

 

 

 

 

 

 

 

Investment Activity

 

 

 

 

 

 

 

Cash Yield

 

 

 

7.2

%

 

 

 

 

7.2

%

% of ABR derived from Investment Grade Tenants

 

 

 

94.3

%

 

 

 

 

81.4

%

% of ABR derived from Investment Grade Profile Tenants

 

 

 

4.4

%

 

 

 

 

11.8

%

Weighted Average Lease Term (years)

 

 

 

10.9

 

 

 

 

 

10.7

 

 

 

 

 

 

 

 

 

Disposition Activity

 

 

 

 

 

 

 

Cash Yield1

 

 

 

7.2

%

 

 

 

 

6.9

%

Weighted Average Lease Term (years)

 

 

 

11.2

 

 

 

 

 

7.8

 

 

1. Includes mortgage loan payoffs.

The following table summarizes the Company's on-going development projects and estimated development costs (dollars in thousands) as of December 31, 2023.

Developments

Three Months Ended December 31, 2023

Amount Funded During the Quarter

$

25,499

 

 

 

As of December 31, 2023

Number of Developments

 

24

Amount Funded to Date

$

41,118

Estimated Funding Remaining on Developments

 

26,642

Total Estimated Development Cost

$

67,760

PORTFOLIO UPDATE

The following table summarizes the Company's real estate portfolio (weighted by ABR, dollars in thousands) as of December 31, 2023.

 

As of December 31, 2023

Number of Investments

 

598

 

ABR

$

131,859

 

States

 

45

 

Square Feet

 

10,624,183

 

Tenants

 

85

 

Industries

 

26

 

Occupancy

 

100.0

%

Weighted Average Lease Term (years)

 

9.5

 

Investment Grade %

 

70.5

%

Investment Grade Profile %

 

14.1

%

SUBSEQUENT ACTIVITY

In January 2024, the Company entered into forward sale agreements related to 11,040,000 shares of its common stock at a public offering price of $18.00 per share. The Company will have until January 9, 2025 to settle the forward sale agreements. The following table summarizes the Company's forward equity offering (dollars in thousands, except per share data).

January 2024 Forward Equity Offering

As of February 14, 2024

Shares Unsettled

 

11,040,000

Price Per Share (Gross)

$

18.00

Net Value of Unsettled Forward Equity

$

190,771

CAPITAL MARKETS AND BALANCE SHEET

The following tables summarize the Company's leverage, balance sheet, liquidity, ATM issuances, and settlement of our forward equity offerings (dollars in thousands, except per share data) as of and for December 31, 2023.

Leverage

As of December 31, 2023

Net Debt / Annualized Adjusted EBITDAre

5.0x

Adjusted Net Debt / Annualized Adjusted EBITDAre

4.1x

Proforma Adjusted Net Debt / Annualized Adjusted EBITAre1

2.5x

 

 

Liquidity

 

Unused Unsecured Revolver Capacity

$

319,850

Cash, Cash Equivalents and Restricted Cash

 

29,929

Net Value of Unsettled Forward Equity from 2023 ATM Issuance2

 

98,594

Remaining Available Principal of 2029 Term Loan3

 

100,000

Total Liquidity

$

548,373

Net Value of Unsettled Forward Equity from January 2024 Follow-On

 

190,771

Total Proforma Liquidity

$

739,144

 

 

ATM Program

 

Shares Issued During Quarter

 

4,478,539

Weighted Average Price Per Share (Gross)

$

17.27

Net Proceeds

$

76,667

 

 

2023 ATM Program Initial Capacity

$

300,000

ATM Capacity Remaining as of December 31, 2023

$

222,677

 

 

Unsettled Forward Equity

 

Shares Unsettled as of December 31, 2023

 

5,983,711

Weighted Average Price Per Share (Net)

$

16.48

Net Value of Unsettled Forward Equity from 2023 ATM Issuance2

$

98,594

1.

Adjusted to include the net value of unsettled shares from the January 2024 follow-on offering.

2.

Reflects 5,983,711 of unsettled forward equity shares under the ATM program at the December 31, 2023 available net settlement price of $16.48.

3.

All-in fixed rate of 4.99% consists of the fixed rate SOFR swap of 3.74% on $250.0 million of notional value, plus a credit spread adjustment of 0.10% and a borrowing spread of 1.15%.

DIVIDEND

On February 13, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $0.205 per share for the first quarter of 2024. On an annualized basis, the dividend of $0.82 per share of common stock represents an increase of $0.02 per share over the prior year annualized dividend. The dividend will be paid on March 28, 2024 to shareholders of record on March 15, 2024.

2024 GUIDANCE

The Company is reaffirming its initial full year 2024 AFFO per share guidance in the range of $1.24 to $1.28. The Company also expects cash G&A to be in the range of $13.5 million to $14.5 million (exclusive of transaction costs and severance payments).

The Company's 2024 guidance is based on a number of assumptions that are subject to change and many of which are outside the Company's control. If actual results vary from these assumptions, the Company's expectations may change. There can be no assurance that the Company will achieve these results.

AFFO is a non-GAAP financial measure. The Company does not provide a reconciliation of such forward-looking non-GAAP measure to the most directly comparable financial measures calculated and presented in accordance with GAAP because to do so would be potentially misleading and not practical given the difficulty of projecting event driven transactional and other non-core operating items in any future period. The magnitude of these items, however, may be significant.

EARNINGS CONFERENCE CALL

A conference call will be held on Thursday, February 15, 2024 at 12:00 PM ET. During the conference call the Company’s officers will review fourth quarter and full year 2023 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 15 minutes prior to the scheduled start time to register, as well as download and install any necessary audio software.

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 February 22, 2024, 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 13743515.

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 Corp.

NETSTREIT Corp. 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.

NON-GAAP FINANCIAL MEASURES

This press release contains non-GAAP financial measures, including FFO, Core FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, Annualized Adjusted EBITDAre, Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI Estimated Run Rate, Total Property-Level Cash NOI Estimated Run Rate, Net Debt and Adjusted Net Debt. A reconciliation of each non-GAAP financial measure to the most comparable GAAP 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, including estimated development costs, trends in our business, including trends in the market for single-tenant, retail commercial real estate and our 2024 guidance. 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 Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2023 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 macroeconomic conditions, including inflation, interest rates and instability in the banking system. 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,

 

2023

 

2022

Assets

 

 

 

Real estate, at cost:

 

 

 

Land

$

460,896

 

 

$

401,146

 

Buildings and improvements

 

1,149,809

 

 

 

907,084

 

Total real estate, at cost

 

1,610,705

 

 

 

1,308,230

 

Less accumulated depreciation

 

(101,210

)

 

 

(62,526

)

Property under development

 

29,198

 

 

 

16,796

 

Real estate held for investment, net

 

1,538,693

 

 

 

1,262,500

 

Assets held for sale

 

52,451

 

 

 

23,208

 

Mortgage loans receivable, net

 

114,472

 

 

 

46,378

 

Cash, cash equivalents and restricted cash

 

29,929

 

 

 

70,543

 

Lease intangible assets, net

 

161,354

 

 

 

151,006

 

Other assets, net

 

49,337

 

 

 

52,057

 

Total assets

$

1,946,236

 

 

$

1,605,692

 

Liabilities and equity

 

 

 

Liabilities:

 

 

 

Term loans, net

$

521,912

 

 

$

373,296

 

Revolving credit facility

 

80,000

 

 

 

113,000

 

Mortgage note payable, net

 

7,883

 

 

 

7,896

 

Lease intangible liabilities, net

 

25,353

 

 

 

30,131

 

Liabilities related to assets held for sale

 

1,158

 

 

 

406

 

Accounts payable, accrued expenses and other liabilities

 

36,498

 

 

 

22,540

 

Total liabilities

 

672,804

 

 

 

547,269

 

Commitments and contingencies

 

 

 

Equity:

 

 

 

Stockholders’ equity

 

 

 

Common stock, $0.01 par value, 400,000,000 shares authorized; 73,207,080 and 58,031,879 shares issued and outstanding as of December 31, 2023 and 2022, respectively

 

732

 

 

 

580

 

Additional paid-in capital

 

1,367,505

 

 

 

1,091,514

 

Distributions in excess of retained earnings

 

(112,276

)

 

 

(66,937

)

Accumulated other comprehensive income

 

8,943

 

 

 

23,673

 

Total stockholders’ equity

 

1,264,904

 

 

 

1,048,830

 

Noncontrolling interests

 

8,528

 

 

 

9,593

 

Total equity

 

1,273,432

 

 

 

1,058,423

 

Total liabilities and equity

$

1,946,236

 

 

$

1,605,692

 

NETSTREIT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(Unaudited)

 

 

Year Ended December 31,

 

2023

 

2022

 

2021

Revenues

 

 

 

 

 

Rental revenue (including reimbursable)

$

123,967

 

 

$

93,934

 

 

$

59,140

 

Interest income on loans receivable

 

7,388

 

 

 

2,345

 

 

 

 

Other revenue

 

550

 

 

 

 

 

 

 

Total revenues

 

131,905

 

 

 

96,279

 

 

 

59,140

 

Operating expenses

 

 

 

 

 

Property

 

16,413

 

 

 

11,695

 

 

 

5,803

 

General and administrative

 

20,176

 

 

 

19,053

 

 

 

14,810

 

Depreciation and amortization

 

63,677

 

 

 

50,075

 

 

 

30,807

 

Provisions for impairment

 

7,083

 

 

 

1,114

 

 

 

3,539

 

Transaction costs

 

456

 

 

 

839

 

 

 

700

 

Total operating expenses

 

107,805

 

 

 

82,776

 

 

 

55,659

 

Other income (expense)

 

 

 

 

 

Interest expense, net

 

(19,058

)

 

 

(9,181

)

 

 

(3,700

)

Gain on sales of real estate, net

 

1,175

 

 

 

4,148

 

 

 

2,997

 

Loss on debt extinguishment

 

(128

)

 

 

 

 

 

 

Other income, net

 

752

 

 

 

131

 

 

 

431

 

Total other income (expense), net

 

(17,259

)

 

 

(4,902

)

 

 

(272

)

Net income before income taxes

 

6,841

 

 

 

8,601

 

 

 

3,209

 

Income tax benefit (expense)

 

49

 

 

 

(396

)

 

 

(59

)

Net income

 

6,890

 

 

 

8,205

 

 

 

3,150

 

Net income attributable to noncontrolling interests

 

53

 

 

 

88

 

 

 

104

 

Net income attributable to common stockholders

$

6,837

 

 

$

8,117

 

 

$

3,046

 

Amounts available to common stockholders per common share:

 

 

 

 

 

Basic

$

0.11

 

 

$

0.16

 

 

$

0.08

 

Diluted

$

0.11

 

 

$

0.16

 

 

$

0.08

 

Weighted average common shares:

 

 

 

 

 

Basic

 

63,922,973

 

 

 

49,517,977

 

 

 

36,999,459

 

Diluted

 

64,665,439

 

 

 

50,431,822

 

 

 

38,672,565

 

NETSTREIT CORP. AND SUBSIDIARIES

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

(in thousands, except share and per share data)

(Unaudited)

 

 

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

 

 

 

 

 

Weighted average common shares outstanding, basic

 

63,922,973

 

 

 

49,517,977

 

Weighted average operating partnership units outstanding

 

501,751

 

 

 

526,859

 

Weighted average dilutive securities

 

165,420

 

 

 

248,602

 

Weighted average unsettled shares under forwards

 

75,295

 

 

 

138,384

 

Weighted average common shares outstanding, diluted

 

64,665,439

 

 

 

50,431,822

 

 

 

 

 

FFO per common share, diluted

$

1.18

 

 

$

1.08

 

Core FFO per common share, diluted

$

1.19

 

 

$

1.10

 

AFFO per common share, diluted

$

1.22

 

 

$

1.16

 

NETSTREIT CORP. AND SUBSIDIARIES

RECONCILIATION OF NET INCOME TO EBITDA, EBITDAre AND ADJUSTED EBITDAre

(in thousands, except share and per share data)

(Unaudited)

 

 

Three Months Ended December 31,

 

2023

 

2022

Net income

$

1,962

 

 

$

2,810

 

Depreciation and amortization of real estate

 

17,000

 

 

 

13,797

 

Amortization of lease-related intangibles

 

(93

)

 

 

(246

)

Non-real estate depreciation and amortization

 

78

 

 

 

141

 

Interest expense, net

 

5,646

 

 

 

3,473

 

Income tax expense

 

10

 

 

 

41

 

Amortization of loan origination costs

 

80

 

 

 

28

 

EBITDA

 

24,683

 

 

 

20,044

 

Adjustments:

 

 

 

Provisions for impairment

 

2,709

 

 

 

 

Gain on sales of real estate, net

 

(506

)

 

 

(1,986

)

EBITDAre

 

26,886

 

 

 

18,058

 

Adjustments:

 

 

 

Straight-line rent adjustments

 

(456

)

 

 

(142

)

Non-recurring executive transition costs, severance and related charges

 

86

 

 

 

848

 

Gain on insurance proceeds

 

(31

)

 

 

(90

)

Non-cash compensation expense

 

1,264

 

 

 

1,128

 

Adjustment for construction in process (1)

 

719

 

 

 

315

 

Adjustment for intraquarter investment activities (2)

 

820

 

 

 

1,334

 

Adjusted EBITDAre

$

29,288

 

 

$

21,451

 

Annualized Adjusted EBITDAre (3)

$

117,152

 

 

 

 

 

 

 

Net Debt

As of December 31, 2023

 

 

Principal amount of total debt

$

613,361

 

 

 

Less: Cash, cash equivalents and restricted cash

 

(29,929

)

 

 

Net Debt

 

583,432

 

 

 

Less: Net value of unsettled forward equity from 2023 ATM issuance (4)

 

(98,594

)

 

 

Adjusted Net Debt

$

484,838

 

 

 

Less: Net value of unsettled forward equity from January 2024 offering (5)

 

(190,771

)

 

 

Proforma Adjusted Net Debt

$

294,067

 

 

 

 

 

 

 

Leverage

 

 

 

Net debt / Annualized Adjusted EBITDAre

5.0 x

 

 

Adjusted Net Debt / Annualized Adjusted EBITDAre

4.1 x

 

 

Proforma Adjusted Net Debt / Annualized Adjusted EBITDAre

2.5 x

 

 

(1)

Adjustment reflects the estimated cash yield on developments in process as of December 31, 2023.

(2)

Adjustment assumes all re-leasing activity, investments in and dispositions of real estate, including developments and interest earning loan activity completed during the three months ended December 31, 2023 and 2022 had occurred on October 1, 2023 and 2022, respectively.

(3)

We calculate Annualized Adjusted EBITDAre by multiplying Adjusted EBITDAre by four.

(4)

There were 5,983,711 of unsettled forward equity shares under the ATM program at the December 31, 2023 available net settlement price of $16.48.

(5)

Reflects 11,040,000 of unsettled shares from the January 2024 offering.

NETSTREIT CORP. AND SUBSIDIARIES

RECONCILIATION OF NET INCOME TO NOI AND CASH NOI

(in thousands, except share and per share data)

(Unaudited)

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net income

$

1,962

 

 

$

2,810

 

 

$

6,890

 

 

$

8,205

 

General and administrative

 

4,876

 

 

 

5,444

 

 

 

20,176

 

 

 

19,053

 

Depreciation and amortization

 

17,078

 

 

 

13,938

 

 

 

63,677

 

 

 

50,075

 

Provisions for impairment

 

2,709

 

 

 

 

 

 

7,083

 

 

 

1,114

 

Transaction costs

 

189

 

 

 

135

 

 

 

456

 

 

 

839

 

Interest expense, net

 

5,646

 

 

 

3,473

 

 

 

19,058

 

 

 

9,181

 

Gain on sales of real estate, net

 

(506

)

 

 

(1,986

)

 

 

(1,175

)

 

 

(4,148

)

Income tax expense

 

10

 

 

 

41

 

 

 

(49

)

 

 

396

 

Loss on debt extinguishment

 

 

 

 

 

 

 

128

 

 

 

 

Interest income on mortgage loans receivable

 

(2,243

)

 

 

(674

)

 

 

(7,388

)

 

 

(2,345

)

Lease termination fees

 

 

 

 

 

 

 

(550

)

 

 

 

Other income, net

 

(166

)

 

 

(95

)

 

 

(752

)

 

 

(131

)

Property-Level NOI

 

29,555

 

 

 

23,086

 

 

 

107,554

 

 

 

82,239

 

Straight-line rent adjustments

 

(456

)

 

 

(142

)

 

 

(1,163

)

 

 

(1,286

)

Amortization of lease-related intangibles

 

(93

)

 

 

(246

)

 

 

(611

)

 

 

(889

)

Property-Level Cash NOI

$

29,006

 

 

$

22,698

 

 

$

105,780

 

 

$

80,064

 

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 three months ended December 31, 2023, had occurred on October 1, 2023.

(2)

Adjustment assumes all loan activity completed during the three months ended December 31, 2023, had occurred on October 1, 2023.

NON-GAAP FINANCIAL MEASURES

FFO, Core FFO and AFFO

The National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a widely accepted non-GAAP financial measure of operating performance known as FFO. Our FFO is net income in accordance with GAAP, excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortization and impairment charges on depreciable real property.

Core FFO is a non-GAAP financial measure defined as FFO adjusted to remove the effect of unusual and non-recurring items that are not expected to impact our operating performance or operations on an ongoing basis. These include non-recurring executive transition costs, severance and related charges, gain on insurance proceeds, and loss on debt extinguishments and other related costs.

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, 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.

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 FFO, 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 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, Adjusted EBITDAre, and Annualized Adjusted EBITDAre

We compute EBITDA as earnings before interest expense, income tax expense, 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 impairment charges on depreciable real property.

Adjusted EBITDAre is a non-GAAP financial measure defined as EBITDAre 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. Beginning in the quarter ended June 30, 2023, we modified our definition of Adjusted EBITDAre to include adjustments for construction in process and intraquarter investment activities. Prior periods have been recast to reflect this new definition.

Annualized Adjusted EBITDAre is Adjusted EBITDAre multiplied by four.

We present EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized 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, Adjusted EBITDAre, and Annualized Adjusted EBITDAre as measures of our operating performance and not as measures of liquidity.

EBITDA, EBITDAre, Adjusted EBITDAre and Annualized 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, Adjusted EBITDAre and Annualized 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.

Net Debt and Adjusted Net Debt

We calculate our Net Debt as our principal amount of total debt outstanding excluding deferred financing costs, net discounts and debt issuance costs less cash, cash equivalents and restricted cash available for future investment. We believe excluding cash, cash equivalents and restricted cash available for future investment from our principal amount, all of which could be used to repay debt, provides an estimate on the net contractual amount of borrowed capital to be repaid. We believe these adjustments are additional beneficial disclosures to investors and analysis.

We further adjust Net Debt by the net value of unsettled forward equity as of period end to derive Adjusted Net Debt.

Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate

Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate are non-GAAP financial measures which we use to assess our operating results. 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). We further adjust Property-Level NOI for non-cash revenue components of straight-line rent and amortization of lease-intangibles to derive Property-Level Cash NOI. We further adjust Property-Level Cash NOI for intraquarter acquisitions, dispositions and completed developments to derive Property-Level Cash NOI - Estimated Run Rate. We further adjust Property-Level Cash NOI - Estimated Run Rate for interest income on mortgage loans receivable and intraquarter mortgage loan activity to derive Total Cash NOI - Estimated Run Rate. 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.

Property-Level NOI, Property-Level Cash NOI, Property-Level Cash NOI - Estimated Run Rate, and Total Cash NOI - Estimated Run Rate are not measurements of financial performance under GAAP, and 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.

OTHER DEFINITIONS

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.

Cash Yield is the annualized base rent contractually due from acquired properties, interest income from mortgage loans receivable, and completed developments, divided by the gross investment amount, or gross proceeds in the case of dispositions.

Investments are lease agreements in place at owned properties, properties that have leases associated with mortgage loans receivable, developments where rent commenced, or in the case of master lease arrangements each property under the master lease is counted as a separate lease.

Investment Grade are investments, or investments that are subsidiaries of a parent entity, with a credit rating of BBB- (S&P/Fitch), Baa3 (Moody's) or NAIC2 (National Association or Insurance Commissioners) or higher.

Investment Grade Profile are investments with investment grade credit metrics (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, Fitch, Moody's, or NAIC.

Occupancy is expressed as a percentage, and is the number of economically occupied properties divided by the total number of properties owned, excluding mortgage loans receivable and properties under development.

Weighted Average Lease Term is weighted by the annualized base rent, excluding lease extension options and investments associated with mortgage loans receivable.

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