NETSTREIT CORP earnings calls

capital deployment and leverage plan

Q (Haendel Sanjoust · Mizuho): He asked how much capital runway they have and whether capital deployment will slow, with more dispositions and higher leverage.

A: Management said they have roughly 550 million of net investment capacity before reaching 5x, the midpoint of their leverage comfort zone. They see a path to mid-single-digit AFFO growth next year without raising equity through 2027 year-end, though pace depends on cost of equity and how quickly they deploy capital. They plan to be judicious with the capital they have raised.

"So, you know, as we think about the next 5 quarters, we have roughly 550 million of net investment capacity." — Daniel Paul Donlan (CFO)

tenant credit and transaction market

Q (Jay Kornreich · Cantor Fitzgerald): He asked about tenant credit — the low sub-1x rent coverage bucket — whether the watch list or guidance changed. He also asked if the overall transaction market and pipeline remain healthy.

A: Management said they are not seeing many credit issues — maybe one or two assets out of 913 — and do not expect anything material. They said the under-1x bucket fell in part due to dispositions and improving asset/unit performance. On transactions, they said supply remains strong while demand has weakened, so repricing is what will allow them to be more aggressive.

"So we do not really think there is gonna be anything material there." — Mark Manheimer (CEO)

Q4 investment pace and tenant trends

Q (Jamie Feldman · Wells Fargo): He asked whether the $150 million implied for Q4 is conservative or a deliberate pullback and if $150 million could be a run rate for early 2027. He also asked what tenants are saying about expansion plans.

A: Management said the $150 million ties into their at-least $800 million investment expectation, and if pricing improves they can ramp materially above that. They said pricing today is not exactly where they want it, but the pipeline and ability to ramp exist. On tenants, they said some store openings are more conservative, but necessity, servicing and deep-discount sectors remain defensive and continue to expand.

"Know, the $150 million you know, we did say at least 800 million So, you know, if things do not really change all that much, you know, then it will be probably you know, right on." — Mark Manheimer (CEO)

equity issuance framework and spreads

Q (Nick Joseph · Citi): He asked them to remind the framework for issuing shares and what investment spread they need before issuing equity.

A: Management said their current spread is about 60 to 70 basis points and historically they want to be north of 100 basis points before raising equity. Given current capacity, they have no near-term need to raise equity and do not have to raise equity next year if they choose. They will revisit if spreads improve sustainably.

"Look, as we sit here today, we think our spreads are about 60 to 70 basis points." — Daniel Paul Donlan (CFO)

speed of cap rate repricing and equity timing

Q (Greg McGinniss · Scotiabank): He asked if cap rates may move faster in this cycle than historically, how to categorize sellers willing to reprice, and whether they think about equity already raised or current environment when assessing deals.

A: Management said they are optimistic cap rates may reprice faster because seller conversations were more constructive this time, though they cannot say how much quicker. Seller flexibility depends on seller sophistication and how much pressure they face to transact. They also said they consider current market conditions (the latter), not past equity raises, when evaluating new investments and expect equity issuance to be light for a couple quarters and pick up in back half of 2027.

"And so I think people kind of get it a little bit more this time." — Mark Manheimer (CEO)

settling shares, ratings and dispositions

Q (Michael Goldsmith · UBS): He asked why they chose to settle shares to pay down debt now and whether lower reported leverage will affect rating agency discussions. He also asked about capital recycling and planned disposals in pharmacy and dollar sectors.

A: Management said settling shares improves their standing with rating agencies because agencies look at leverage without the forward; at 5x they are comfortably below the 6.5x level the agencies watch. They said settling also lets them delay pulling down the 7-year term loan and may allow swapping at better rates. On dispositions, they will continue selling in pharmacy and dollar sectors, expect more sales in Q4, and remain opportunistic to redeploy capital into better assets or structures like bonus-depreciation buyers.

"So we are optimistic that we can continue to have constructive dialogue with those parties when and if we decide to get additional ratings, probably sometime next year." — Daniel Paul Donlan (CFO)

coverage drivers and seller flexibility

Q (Eric Borden · BMO): He asked if any categories show weakening tenant margins/coverage and how much of the quarter's improvement came from store performance versus recent investments. He also asked whether sellers are more flexible on terms beyond price.

A: Management said most of the coverage improvement came from some sales, with existing portfolio coverage slightly improved and generally stable. New investments had around 3.5x coverage, which brought the average down a bit but was acceptable to them. They said seller flexibility has helped them cull weaker assets at acquisition, and other terms (like in sale-leasebacks) can also be negotiated when available.

"So I would say most of that came quite frankly from some sales." — Mark Manheimer (CEO)

how much cap rates widened on deals

Q (Linda Tsai · Truist): She asked how much cap rates expanded on the Q3 repriced deals and how much more expansion they expect by back-loading Q4 transactions; she also asked which sectors saw fastest cap-rate expansion.

A: Management said they were able to revisit pricing on 10 different deals in late Q3 and moved pricing on average about 30 basis points on those transactions. They said Q4 expectations for expansion are higher but uncertain and depend on what they can extract from sellers. They added cap-rate moves are driven more by seller sophistication and pressure to transact than by sector.

"we were able to revisit pricing on 10 different deals." — Mark Manheimer (CEO)

lending opportunities to help partners

Q (Alex Fagan · Baird): He asked whether expectations for lending opportunities have changed and if lending could lead to acquisitions or help partners in this environment.

A: Management said they have not seen much on the lending side that is unusually attractive beyond their normal course activity. They think longer disruption could create some one-off opportunities, so lending opportunities could pop up, but they have not seen that yet. They will consider such opportunities if they arise.

"We have not really seen much on the lending side." — Mark Manheimer (CEO)

mortgage-loan opportunities timing

Q (Jana Galan · BofA): She asked how long mortgage-loan opportunities took to enter the pipeline during the last disruption and whether they would consider specific tenant categories or structures.

A: Management said they would consider anything, especially loans that convert to fee ownership, and that their loan book is smaller so they have more capacity. They said last time such opportunities took some time to appear — maybe a quarter or two — and it is difficult to predict if or when it will happen again. They will monitor for financing commitments that fall through or lenders repricing rate locks.

loan payoffs and investment hurdle standard

Q (Upal Rana · KeyBanc): He asked how much loan repayment or conversion activity to expect and how that income replacement affects acquisition needs. He also asked whether they judge deals against past-raised capital or today's replacement cost of capital.

A: Management said most repaid loans are replaced by new developments and new loans, so loan repayments often stand in place, though a couple chunkier low-rate deals could free capital. They said they do not consider where they raised equity in the past when deciding on new investments; they focus on where they can raise capital today and the current cost-of-capital spread. Past equity raises are not relevant to today's investment decisions.

"We never, take into effect where we have raised equity in the past when we think about putting new capital to work." — Mark Manheimer (CEO)

drivers of AFFO growth and bonus depreciation

Q (Jamie Feldman · Wells Fargo): He asked Daniel to walk through the building blocks behind the path to mid-single-digit AFFO growth next year without raising equity through 2027 year-end, and what could move results away from that. He also asked core growth assumptions and about the bonus depreciation pipeline.

A: Management said key factors include refinancing the $175 swap in January, credit losses, cash G&A, timing of investments, and when they pull down and swap the 7-year term loan. They said the growth range assumes 550 million of net investment capacity deployed between now and the end of 2027, and their average escalator is around 1%, give or take 10 to 20 basis points. On bonus depreciation, they said it is opportunistic, escalates late in the year, and convenience-store assets are the primary qualifiers.

"But that growth range is based upon, again, 550 million of net investment capacity being deployed between now and the end of 2027." — Daniel Paul Donlan (CFO)