NETSTREIT Q1 2026 Earnings Call - Acquisition momentum ramps after $304M equity raise, guidance hiked

Daniel Guglielmo, Analyst, Capital One Securities3: As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Matt Miller. Thank you. You may begin.

Daniel Guglielmo, Analyst, Capital One Securities0: Good morning, and thank you for joining us for NETSTREIT’s first quarter 2026 earnings conference call. On today’s call, management’s remarks and responses to your questions may contain statements considered forward-looking under federal securities law. These statements address matters subject to risk and uncertainties that may cause actual results to differ from those discussed today. For more information on these factors, we encourage you to review our latest Form 10-K and other SEC filings. All forward-looking statements are made as of today’s date, and NETSTREIT assumes no obligation to update them in the future. In addition, certain financial information presented on this call includes non-GAAP financial measures. Please refer to our earnings release and supplemental package for definitions, reconciliations to the most comparable GAAP measures, and an explanation of their usefulness to investors. These materials can be found in the investor relations section of the company’s website at netstreit.com.

Today’s call is hosted by NETSTREIT’s CEO, Mark Manheimer, and CFO, Daniel Donlan. They will make some prepared remarks, followed by a Q&A session. With that, I’ll turn the call over to Mark.

Mark Manheimer, Chief Executive Officer, NETSTREIT: Thank you, Matt, and good morning, everyone. Thank you for joining us today to discuss NETSTREIT’s first quarter 2026 results. I want to begin by thanking our entire team for their outstanding execution and dedication. We carried strong momentum from our record 2025 into the new year, and the organization has hit the ground running. In the first quarter, we saw continued acceleration on the investment front. We closed on $239 million of gross investment activity, driven by well-priced opportunities in our core necessity and service-based sectors, including grocery, convenience store, quick service restaurants, auto service, and other essential retail. These investments were completed at an attractive blended cash yield of 7.5%, with a weighted average lease term of 14.1 years. Complementing this, we executed targeted dispositions that further enhanced portfolio quality, reduced tenant concentrations, and recycled capital into higher quality, longer duration opportunities.

This robust start to the year reflects the depth of our sourcing platform and our team’s ability to move quickly across a number of smaller transactions while still adhering to our stringent underwriting criteria. While there have been a few new participants enter the net lease business in recent years, something that has happened in each and every cycle, the market remains extremely fragmented and ripe with attractive opportunities. Turning to the portfolio, we ended the quarter with 804 properties leased to 138 tenants across 28 industries and 46 states. Our weighted average remaining lease term increased to 10.2 years, while the percentage of investment grade and investment grade profile tenants remained flat at 58.3% of ABR. Unit level rent coverage across the portfolio remains healthy and ticked up slightly to 3.9 times. Occupancy remained at 99.9%, but subsequent to quarter end, our occupancy has returned to 100%.

In early April, we backfilled our lone vacancy, a former Big Lots location, with A-rated TJ Maxx, a more than 20% increase in rent. While vacancies have been extraordinarily rare in our portfolio, this execution highlights the expertise of our real estate underwriting and the asset management teams. On the balance sheet, we continue to maintain a conservative and flexible capital structure. Following the capital raising completed in the quarter, our leverage was an industry leading 3.2 times. With substantial liquidity under our revolving credit facility and the benefit of previously raised forward equity, we are well positioned to fund accelerated growth without compromising our leverage targets. Given the capital raise during the quarter, as well as the strong momentum in our investment pipeline and attractive opportunities we are seeing, we are increasing our full year 2026 net investment activity guidance to a range of $550 million-$650 million.

We are increasing the bottom end of our AFFO per share guidance range to $1.36-$1.39. In summary, the first quarter represented an excellent start to 2026, highlighted by strong momentum on the acquisitions front and opportunistic capital raising, which largely takes care of our 2026 equity needs. Our differentiated strategy focused on high quality real estate, rigorous underwriting, proactive portfolio management, and a low leverage balance sheet continues to position NETSTREIT for sustainable long term growth and value creation. With that, I’ll turn the call over to Dan to review the first quarter financial results in greater detail. We will then be happy to take your questions.

Daniel Guglielmo, Analyst, Capital One Securities0: Thank you, Mark. Looking at our first quarter earnings, we reported a net income of $5.7 million or $0.06 per diluted share. Core FFO for the quarter was $32 million or $0.32 per diluted share, and AFFO was $33.2 million or $0.34 per diluted share, which was a 6.3% increase over last year. Turning to the expense front, our total recurring G&A in the quarter increased 9.7% year-over-year to $5.8 million, which is mostly the result of increased staffing and further investment in our team. That said, with our total recurring G&A representing 10% of total revenues this quarter versus 11% in the prior year quarter, our G&A continues to rationalize relative to our revenue base. Turning to the capital markets, we completed a 12.6 million share forward equity offering in early February, which raised $230.3 million of net proceeds.

This was supplemented by our ATM activity of 4 million shares or $73.8 million of net proceeds. In total, we sold 16.6 million forward shares or $304.1 million of net proceeds in the quarter, which puts us in an excellent position to fund our forecasted net investment activity this year.

Daniel Donlan, Chief Financial Officer, NETSTREIT: Turning to the balance sheet, our adjusted net debt, which includes the impact of all forward equity, was $629 million. Our weighted average debt maturity is 3.8 years, and our weighted average interest rate was 4.27%. Including the extension options, which can be exercised at our discretion, we have no material debt maturing until February of 2028. In addition, our total liquidity was $1.1 billion at quarter end, which consisted of approximately $11 million of cash on hand, $412 million available on a revolving credit facility, $606 million of unsettled forward equity, and $100 million of undrawn term loan capacity. From a leverage perspective, our adjusted net debt to annualized adjusted EBITDAre was 3.2 times at quarter end, which remains comfortably below our targeted leverage range of 4.5-5.5 times. Moving on to 2026 guidance.

We’re increasing the low end of our AFFO per share guidance to a new range of $1.36-$1.39 and increasing our net investment activity guidance to $550 million-$650 million. We continue to expect cash G&A to range between $16 million-$17 million. In addition, the company’s AFFO per share guidance range now includes $0.03-$0.06 of estimated dilution due to the impact of the company’s outstanding forward equity, calculated in accordance with the treasury stock method. Lastly, on April 16th, the board declared a quarterly cash dividend of $0.22 per share. The dividend will be payable on June 15th to shareholders of record as of June 1st. With that, operator, you will now open the line for questions.

Daniel Guglielmo, Analyst, Capital One Securities3: Thank you. At this time, we’ll be conducting a question and answer session. If you’d like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you’d like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Haendel St. Juste with Mizuho. Please proceed with your question.

Haendel St. Juste, Analyst, Mizuho: Hey, guys. Good morning, and congrats on a strong quarter here. Seems like things are clicking on all cylinders here. I guess I was curious about the level of activity in the first quarter. I guess it was close to a record quarter for you guys. If you think about what implies for the rest of the year, it seems there’s pretty meaningful slowdown in activity. Maybe some color on what you saw in the first quarter that drove such robust activity and what you’re seeing in the pipeline and maybe expectations near term, given what the new guide implies for activity going forward. Thanks.

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah. Thanks, Hendel. Yeah, I think obviously it was a very strong quarter, similar to the fourth quarter that we just had. We’re just really seeing very attractively priced opportunities that fit our investment criteria, which I think is a credit to the acquisitions team and the underwriting team of kind of getting all of that through the system pretty quickly. We’re seeing a very similar environment right now. Pricing, we expect to remain relatively the same, give or take 10 basis points. We just want to be conservative with what’s going to happen on the back half of the year. We certainly feel very comfortable that we can sustain this level of acquisitions, but we want to make sure that we’re out ahead of our capital needs.

Haendel St. Juste, Analyst, Mizuho: That’s helpful. I guess, is there anything more on the competitive side that you can maybe share? There’s been lots of geopolitical macro volatility. I’m curious if you’re seeing maybe perhaps some of the private equity players step back a bit here. Your ability to win your fair share of deals seems to not face any headwinds. I guess I’m curious, that competitive set, what you’re seeing from them and perhaps if you’re expecting the landscape near term to be more of the same or perhaps for maybe just a change in the level of volume or competition near term given what we’re seeing in the macro. Thanks.

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah. No, look, I think it’s a credit to the net lease space that there are more people looking to get in. I think there are a few that have been pretty active. We’re not really running into them very often on a one-off basis. Yeah, I think the competition’s really been in the space for a long period of time. You go back to kind of post-financial crisis, you had Cole and ARC and the non-traded deploying a ton of capital, even more than what we’re even seeing from the private equity world, and there were still plenty of opportunities for the publicly traded REITs that had a reasonable cost of capital to go out and compete. I wouldn’t expect that to change.

They may look to acquire more than what they’ve done in the past, but I don’t think that’s really going to have a huge impact on pricing and really our opportunity set.

Haendel St. Juste, Analyst, Mizuho: That’s great, guys. Thank you, and congrats again.

Mark Manheimer, Chief Executive Officer, NETSTREIT: Thanks, Haendel.

Daniel Donlan, Chief Financial Officer, NETSTREIT: Thanks.

Daniel Guglielmo, Analyst, Capital One Securities3: Our next question is from John Kilichowski with Wells Fargo. Your line is now live.

John Kilichowski, Analyst, Wells Fargo: Good morning. Thank you. My first question is on just the treasury stock method dilution in the quarter. Could you tell us what your expectations are, what’s included at the midpoint in terms of expectation of price versus the low end and the high end?

Daniel Donlan, Chief Financial Officer, NETSTREIT: Yeah, I don’t want to go too much into detail. Obviously, we’re expecting $0.03-$0.06 at the midpoint. We’re expecting, call it, $0.045. I think we’ve been fairly conservative on the high end even, probably assuming even more than kind of $0.045. Our expectation is that we’ll kind of drift somewhere into the low 20s and stay there. To the degree that that doesn’t happen, obviously that would probably be upside relative to what we provided. We kind of just stair step up the price per share from kind of where we ended the quarter, each and every quarter this year. Without going into too much detail, but there’s a healthy amount of conservatism baked in, even to the high end, just from a dilution standpoint.

John Kilichowski, Analyst, Wells Fargo: Okay. Thanks, Dan. Maybe a follow-up to that would just be, what’s the strategy to manage those forwards? You have some older dated, outstanding forwards. I’m just curious if your strategy for managing those changes based on the stock price. How does this impact your growth profile heading into 2027 as you get rid of these and maybe you have a faster churn of your forwards into eventually new investments?

Daniel Donlan, Chief Financial Officer, NETSTREIT: Yeah. The dates really don’t matter to us. What matters is, what are the lowest price forwards that we have? There is a 12-month kind of expiration to these. We haven’t had an issue extending those. It’s really just taking what the lowest price forwards are and selling those first, because those are the most dilutive. As far as our plan for this year, we’d like to get done with everything that’s still outstanding that we sold in 2024 and 2025. I think you should expect that to occur ratably over the course of the year.

Mark Manheimer, Chief Executive Officer, NETSTREIT: You hit on something important there too, John. Looking to 2027, we’re taking some of that dilution now, so that just makes it more accretive when we actually do take down the shares and really allows us to have better growth in 2027 and future years. Mm-hmm. Very helpful. Thank you.

Daniel Guglielmo, Analyst, Capital One Securities3: Our next question comes from Greg McGinniss with Scotiabank. Your line is now live.

Greg McGinniss, Analyst, Scotiabank: Hey, good morning. Obviously, with the G&A guidance maintained, but plenty of liquidity and a good acquisition market, is there any push or need in your mind to increase the size of the acquisitions team, kind of given the success that they’ve had and the potential for more going forward?

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, that’s a good question. I think right now the acquisitions team is really humming and really bringing in a ton of really attractive opportunities, and really the filter has been pricing and where we’re getting the best risk-adjusted returns. I don’t necessarily think if we bring on more team, that’s going to automatically translate into a lot more volume. We’re always making sure that we have a deep enough bench there, and right now, I think the team not only gets along great and fits in very well with our culture, but they’re bringing in plenty of opportunities for us to be able to hit our growth goals and beyond.

Greg McGinniss, Analyst, Scotiabank: Just looking at, on the disposition side, healthy 6.6% cash yield on those. Anything specific in there that you can talk about, or the types of tenants or assets that you either sold in Q1 or that you’re looking to sell later this year?

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, I think the difference between this year and last year is going to be, you’re going to see certainly fewer dispositions. We’re always open to selling any asset in the portfolio if someone’s willing to pay us an aggressive cap rate. It’s really going to center around less so on the tenant concentrations, although you’ll see a couple here and there with some pharmacies and maybe a couple of dollar stores here and there. It’s really going to be more focused on where we’re seeing some potential deterioration, whether it be corporate credit or unit level performance.

We like to try to get way out ahead of that, and I think we’ve been successful doing that and getting out ahead of some risks well before they start reaching headlines and really start to get more difficult to sell, which is why our credit loss stats are what they are.

Greg McGinniss, Analyst, Scotiabank: Okay. Thanks, Mark.

Mark Manheimer, Chief Executive Officer, NETSTREIT: Thanks, Greg.

Daniel Guglielmo, Analyst, Capital One Securities3: Our next question is from Michael Goldsmith with UBS. Your line is now live.

Daniel Guglielmo, Analyst, Capital One Securities1: Good morning. Thanks a lot for taking my questions. Investment volume was robust in the first quarter. You took up the acquisition guidance pretty materially, and you have the pre-funding. I guess, what are the factors that would limit your acquisitions kind of going forward? Fourth quarter was strong, first quarter was equally strong. Should we expect you to kind of continue to step on the gas, or what would kind of hold you back in any way?

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, sure. It’s a good question. We’ve got visibility going out 60, 90 days. If you get beyond that, it’s hard to predict not only what the opportunity set’s going to look like, but also what the acquisition environment looks like and what opportunities there are, what the pricing is. Obviously, with the war going on and a lot of geopolitical risks out there, we didn’t want to get too far over our skis and predict what that’s going to look like. Yeah, I think that’s something that we’re likely to revisit if the market remains the same and our cost of capital remains the same, then I think there’s no reason why we can’t keep this clip going forward for several quarters.

Daniel Guglielmo, Analyst, Capital One Securities1: Just to follow up, you’re able to continue to acquire quite a bit, but at a similar cap rate. I think you mentioned earlier in the prepared remarks, you are happy with the opportunities and the risk-reward on what you’re buying. Can you just talk a little bit about the pricing environment, what you’re seeing, and what would need to happen for it to change and turn less favorable?

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, sure. I think the number one thing that could make it a little bit less favorable also has an offset where our debt would get cheaper. I think if interest rates come down, then you may see cap rates come down along with it. I don’t really foresee there being much of a slowdown in the opportunity set. You go back to 2021, where the five-year was under 1% all the way up until the end of the year there. That allowed a lot of people to kind of enter the space, kind of small family offices that got very aggressive, put five-year debt on a lot of those acquisitions that they made. That debt’s coming due at higher interest rates.

We’re starting to see some of those people that maybe don’t want to refinance and are looking to sell some smaller portfolios. I think that’s going to certainly continue for the rest of the year because you’ve really had that really cheap debt through 2021, and you put five years on that, it really gets us through the end of 2026 and into 2027. Hard to predict there being much of a slowdown in opportunity set, but interest rates can certainly drive some cap rates down, but we just don’t really see that happening too much here in the short term.

Daniel Guglielmo, Analyst, Capital One Securities1: Thank you very much. Good luck in the second quarter.

Mark Manheimer, Chief Executive Officer, NETSTREIT: Thanks, Michael.

Daniel Guglielmo, Analyst, Capital One Securities3: Our next question comes from Jay Kornreich with Cantor Fitzgerald. Your line is now live.

Jay Kornreich, Analyst, Cantor Fitzgerald: Hey, thanks. Good morning. Wanted to ask about the tenant credit and the watch list, recognizing it’s only been a couple of months since the last quarter’s earnings. Has there been any change just to the watch list or how you’re thinking about bad debt baked into guidance at this point?

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, no. We don’t see much of a change. In fact, I think if you look at the histograms that we provide in the investor presentation on slide 13 there, you’ve seen some improvement really across the board with unit level performance as well as corporate performances has improved a little bit. Look, we have a few assets under 1x coverage. I believe there’s three assets that kind of fit that category and three or four that are triple C plus on an implied rating basis. Those are ones that we’re paying attention to. But in each of those situations, we feel like we’ll have a pretty good outcome. Really don’t see much in terms of impacting AFFO for the next several years.

Jay Kornreich, Analyst, Cantor Fitzgerald: Okay. Thanks for that. If I can just follow up on the question relating to the dilution from the treasury stock method accounting. I guess, should we be expecting that number to come down throughout the year as you settle forward equity or as you’re maybe going to be employing future capital markets activity? Is kind of that $0.045 range more of a sticky number to expect going forward?

Daniel Donlan, Chief Financial Officer, NETSTREIT: Yeah, it’s difficult to answer the question because I don’t know where the stock price is going to go. I think what you should expect us to model is the stock price rising throughout the year, and so even though you’re settling more shares, and there therefore be less dilution from those shares, the dilution stays about even, because the stock price is going higher throughout the year. That’s how you should think about it. It’s certainly going to be higher. We’re certainly modeling higher than what it was in the first quarter. Our average stock price in the quarter was $19.26. As we sit here today, it’s been in the 19s and 20s or higher 19s and 20s.

What the midpoint assumes is kind of you’re staying in and around kind of the $20-$21 level, and that probably equates to anywhere from 4-5 million shares every quarter, until you get out to next year.

Jay Kornreich, Analyst, Cantor Fitzgerald: Okay, that’s helpful. Thank you. That’s it for me.

Daniel Guglielmo, Analyst, Capital One Securities3: Our next question comes from Smedes Rose with Citi. Your line is now live.

Daniel Guglielmo, Analyst, Capital One Securities4: Hi, thanks. I just wanted to ask a little bit more about what you’re seeing kind of in the opportunity set. It looked like you leaned into convenience stores a little more in the quarter. I know you’ve talked in the past about QSRs and maybe some more fitness, and just wondering where those kind of line up on your interest level right now and kind of any pricing changes around those categories.

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, sure. We did buy more convenience stores in the quarter. I think that’s probably not going to be the case as much in the second quarter. I think what we’re going to be buying is going to be maybe a little bit more diversified than what we typically have bought. In the past, we did a lot of sale-leasebacks, just under half of what we bought in the first quarter were sale-leasebacks, and a lot of that were convenience store more regional operators buying smaller operators, which is kind of our favorite type of sale-leaseback because you’re seeing a fixed charge coverage ratio typically go up after those acquisitions versus financing. Those were some attractive opportunities.

Right now we’re seeing maybe a little bit of a different opportunity set in that there’s some more diversified pools of assets that we have under contract and are looking forward to adding to the portfolio. Yeah, the convenience store space is certainly one that we like. The fitness business is another one that we like as long as we’re dealing with some of the more sophisticated operators that provide unit level coverage and get very comfortable that they have enough members at those locations to generate strong enough rent coverage in the future. We were able to source a decent amount of those in the fourth quarter and the first quarter, maybe a little bit less so in the second quarter. Quick service restaurants is always an area that we like, just sometimes the pricing can get pretty aggressive there.

It can be a little bit tricky to get our hands on, but we did buy a handful of Starbucks in the quarter that were really strong on Placer and are doing very well. It’s always a little bit of a mix and each quarter is a little bit different. I think, I’d expect the second quarter to be a little bit more diversified.

Daniel Guglielmo, Analyst, Capital One Securities4: Okay. We noticed that Family Dollar was, I guess, upgraded to an investment-grade profile from sub-investment-grade, and we’re just wondering what drove that.

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, it was really that they were willing to allow us to put that out there, as they are a private company now, and so we are subject to NDAs. We can’t just share everybody’s financial statements and financial condition, and so we got them to agree to allow us to. They’ve always been investment grade profile ever since they spun out, but now we’re able to share that with the public.

Daniel Guglielmo, Analyst, Capital One Securities4: Okay, fair enough. Thank you.

Daniel Guglielmo, Analyst, Capital One Securities3: Our next question comes from Wes Golladay with Baird. Your line is now live.

Daniel Guglielmo, Analyst, Capital One Securities6: Hey. Good morning, everyone. I just have a few housekeeping questions for you. For the TJ Maxx lease that you signed, has that tenant commenced rent paying as of this moment?

Mark Manheimer, Chief Executive Officer, NETSTREIT: They have not. They have some work that they need to do within the store. It’s a relocation store for them. We have about a year before they actually start paying rent.

Daniel Guglielmo, Analyst, Capital One Securities6: Okay. We did notice a few loans were extended, but they were just for a very short period. Can you kind of give us an idea of what’s going on and the visibility on them being repaid?

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, sure. I think you’re probably specifically talking about Speedway. That is an ongoing negotiation, where that will get extended much further. We may end up acquiring some of the assets, kind of TBD a little bit, but it should have a very positive outcome for us.

Daniel Guglielmo, Analyst, Capital One Securities6: Okay. Thank you very much.

Mark Manheimer, Chief Executive Officer, NETSTREIT: Thanks, Weston.

Daniel Guglielmo, Analyst, Capital One Securities3: Our next question comes from Eric Borden with BMO Capital Markets. Your line is now live.

Eric Borden, Analyst, BMO Capital Markets: Hey, thanks. Good morning. As you continue to lean into IG profile and non-IG investments, they do tend to have better escalators than true IG. Do you have internal growth target for these assets? How should we be thinking about the longer-term internal growth for the overall portfolio?

Mark Manheimer, Chief Executive Officer, NETSTREIT: Well, you’re right. We try to negotiate any time that we can to try to get better escalators. You have a little bit more leverage, more specifically, when you’re doing a sale-leaseback and you’re writing the lease. A lot of the sub-investment grade or IGP opportunities that we’re doing are in those categories. We try to get 2% annual is what we shoot for. I think we’re probably, on a blended basis, going to be kind of probably more in the 1.25%. It’s probably a good thing to model for future acquisitions. That’ll continue to bring up our average escalators in the portfolio.

Eric Borden, Analyst, BMO Capital Markets: Great. Could you just quantify what’s assumed in guidance for bad debt?

Mark Manheimer, Chief Executive Officer, NETSTREIT: At the midpoint, we’re looking in and around kind of 50 basis points.

Eric Borden, Analyst, BMO Capital Markets: All right, great. Thank you.

Daniel Guglielmo, Analyst, Capital One Securities3: Our next question comes from Michael Gorman with BTIG. Your line is now live.

Daniel Guglielmo, Analyst, Capital One Securities2: Yeah, thanks. Good morning. If we could just go back to the forward equity for a minute. Obviously, you’ve been pretty strong and opportunistic there. With kind of more than $600 million outstanding, that just back of the envelope is kind of 18 months worth of acquisition volume at a pretty conservative leverage level. What’s the target there for you to keep a runway? Is it that 18-month target, or how should we think about that going forward?

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, as we think about it, our target leverage range is kind of 4.5-5.5. That’s where we feel comfortable running the balance sheet. We could complete the $650 at the high end of our guidance and still be at 4.5. I think we’ll be opportunistic with the ATM where we think it makes sense. To the degree that we continue to see opportunities at the same clip we saw in the first quarter, you should expect us to access that market when appropriate. I think your assessment of kind of our runway is fair. We want to stay on our front foot and make sure we’re never in a position where we have to raise equity.

Daniel Guglielmo, Analyst, Capital One Securities2: Okay. That’s helpful. Makes sense. Mark, maybe just thinking about the loan book again, with some of the, let’s call it the volatility in the private credit space, are you seeing more opportunities maybe on the loan book side of the portfolio to expand that? If so, how are you thinking about that in terms of the investment pipeline?

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, no, it’s a good question. The answer is no. Really, we’re looking at providing developers with capital and kind of some acquisition capital here and there for some people like we did on Speedway. We’re not lending directly to tenants, and I think we’ll likely avoid that as best we can. I don’t think we’d be competing with any of them, and I would not expect that to have any impact on what we’re doing. In fact, I think the opportunity set on the loan side is probably not quite as good as what it was maybe a couple of years ago. I would expect us to do maybe fewer loans on a go-forward basis.

Daniel Guglielmo, Analyst, Capital One Securities2: That’s very helpful. Then maybe last one for me, because it’s come up a few times. Obviously, C stores are an important exposure in a space that you like. It’s also one that’s going through an evolution in kind of form and how operators are thinking about it. I think 7-Eleven announced about 650 closures last week. Can you maybe just remind us how you think about underwriting the space, both in terms of the existing portfolio and new acquisitions in terms of kind of KPIs, formats, just how you think about that as a sector? Thanks.

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, sure. I think that the 7-Eleven news is they’re a very old company. They have a lot of very old, smaller stores that they’re doing away with. We don’t own any of those. We’re constantly looking at kind of a few different factors as it relates to C stores. What is the gallonage that they’re generating? Is that going up or going down? We’ve seen pretty consistent levels across the portfolio in the C store space. In fact, it’s gone up a little bit. Then how is the inside sales doing? They’re really kind of two separate revenue drivers. Making sure that they’re getting enough volume and the margins are staying the same. Seeing pretty consistent performance across our convenience store operators.

Look, I think 2 or 3 years ago, we had 21 7-Elevens, now we have 13. Because we’re constantly looking at which ones are doing well, which ones aren’t. The ones that aren’t going to stay in our portfolio until the end of the lease. We have I think 9.5 years of weighted average lease term on our 7-Eleven, none of them below 8.5 years. I feel pretty strong that we’ve got a lot of time to deal with that. That being said, we’ve got locations that are generating positive cash flow and we don’t think are related to the news that came out around 7-Eleven. Yeah, I think there’s certainly a move towards a larger format.

We’re kind of seeing that across the board, but really, it comes down to the fundamentals that haven’t changed over the past 25 years, and that’s having strong inside sales, having strong gallonage, and being able to push price and not get squeezed on margins. If you’re able to do that, you’re going to be successful for a long time in the convenience store space.

Daniel Guglielmo, Analyst, Capital One Securities2: Great. Thank you for the time.

Mark Manheimer, Chief Executive Officer, NETSTREIT: Thanks, Michael.

Daniel Guglielmo, Analyst, Capital One Securities3: Our next question is from Linda Tsai with Jefferies. Your line is now live.

Linda Tsai, Analyst, Jefferies: Thank you. Just given more volatility year to date in the 10-year, as you look across your key tenant categories, C stores, grocers, home improvement, dollar stores, have you seen cap rates shift more so in any of these categories?

Mark Manheimer, Chief Executive Officer, NETSTREIT: They’ve been pretty consistent, so we really haven’t seen much of a change. In fact, I think we’ve been at 7.5 for ongoing cap rate with very similar mix of tenants. I think the tenant mix will probably change a little bit, be a little bit more diversified in the second quarter, but I’d expect a very similar pricing. We haven’t really seen much movement, if any, across the board.

Linda Tsai, Analyst, Jefferies: Thanks. More of a big picture question. Your AFFO per share CAGR has been high single digit since 2021. How do you think about the CAGR of AFFO per share over the next several years?

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, Linda, we’d like to maintain that level. Obviously, this year at the high end, it’s 5.3% year-over-year growth, and I think consensus assumes even higher growth next year. I think to the degree that we can maintain spreads where they are today in the kind of 190 basis points range, I certainly think we can be north of where we are this year. It just remains to be seen where the stock price goes and where debt is. I think one of the many things that I feel confidence in is our team’s ability to underwrite assets and get them into the portfolio in an expeditious manner. I certainly think if the cost of capital is there, the runway for us to be able to compound earnings is there for sure.

Linda Tsai, Analyst, Jefferies: Thank you.

Daniel Guglielmo, Analyst, Capital One Securities3: Our next question comes from Jana Galan with Bank of America. Your line is now live.

Jana Galan, Analyst, Bank of America: Thank you. Good morning, and congrats on the strong start to the year. There are lots of questions on C stores, but I was wondering if you could remind us on how you’re thinking about the grocery category now that it’s above 15%, and could we see further growth there?

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, no, that’s a good question, Jana. We’ve seen really a lot of great opportunities in the grocery space with some strong performing stores with great credit and good lease terms. We expect that to continue. There’s really not as much in the second quarter, so a little bit difficult to predict. I don’t think we’d let anything get to 20%. I think 15 is kind of nudging up against where we’re comfortable. We don’t really want to let things get too far above that. But if there’s a great opportunity, we don’t want to be precluded from being able to move forward. I would expect that kind of 15%-16% range to be pretty consistent with grocery. Just happens to be an industry that we like a lot, and I think the same can be said for convenience stores.

Jana Galan, Analyst, Bank of America: Thank you. Maybe just an update on the development projects. It’s currently a small part of the business with four underway. Can you remind us of yields there? Would you be willing to kind of increase exposure to development if that’s what some retailers prefer?

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah. Certainly if retailers prefer that route and that’s our best way to get the best risk-adjusted returns, then that is something that we would be more aggressive on. Right now we feel like we’re picking up 25 basis points, and it just happens to be some tenants that we really want to put in the portfolio. But you’re really just not getting paid enough for the risk, in our minds, to get really aggressive on developments right now. If you were picking up 50, 75, 100 basis points, then it would be a lot more interesting to us. But the pricing just isn’t there. People are willing to pay up in single tenant net lease retail for the most part. The development projects are pretty short, so they don’t demand that much of a premium.

We’re able to get similar opportunities outside of the development area and just put them on the balance sheet right away. That’s right now what we’re looking to do. We’ve had quarters where we’ve had almost half of what we’re doing has been development. Right now it’s about 10% of what we’re doing. It’s a little bit less. If that’s to change, our acquisitions team is pretty skilled at being able to move very quickly and start adding those into the pipeline. We just don’t see that happening anytime soon.

Jana Galan, Analyst, Bank of America: Great. Thank you, Mark.

Daniel Guglielmo, Analyst, Capital One Securities3: Our next question comes from Upal Rana with KeyBanc Capital Markets. Your line is now live.

Daniel Guglielmo, Analyst, Capital One Securities5: Great. Thank you. Mark, I appreciate the color you’ve already provided on investment pace for the rest of the year. Given we’re almost through April, and you probably have a good sense on May as well, I just want to get your sense on the pace of investments for 2Q.

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, second quarter looks strong, so I don’t think you’re going to see too much difference in the second quarter. We’ll see what closes. We’re looking at some opportunities that we have under our control that may close in June, may close in July. We’ll see. We’re kind of getting closer to being done with sourcing for the quarter. Yeah, we like the pipeline, the quality, and the pricing. At least for the second quarter, I think you’re going to expect a pretty similar quarter to the first.

Daniel Guglielmo, Analyst, Capital One Securities5: Okay, great. That was helpful. Then just overall, dispositions for Ruralite this quarter, and you’ve talked about this being the case in the prior calls, but is this a pace that we should be expecting for the remainder of the year as well?

Mark Manheimer, Chief Executive Officer, NETSTREIT: I think so. Every now and then, there’s an opportunity where someone comes to you and they want to pay something aggressive or take some risk off your hands. If that were to happen, we certainly move quickly on that as well. I think in general, you may see a quarter here or there that might be a little bit heavy or a little bit light, but I think in general, yeah, you can expect a pretty similar pace.

Daniel Guglielmo, Analyst, Capital One Securities5: Okay, great. Thank you.

Daniel Guglielmo, Analyst, Capital One Securities3: Our next question comes from Daniel Guglielmo from Capital One Securities. Your line is now live.

Daniel Guglielmo, Analyst, Capital One Securities: Hi, everyone. Thank you for taking my questions. Following up on the escalator question from earlier, as the portfolio mix starts to move from larger tenants to adding some smaller growthier tenants, are there differences in how you all manage a smaller tenant that’s maybe less visible to the public versus a large tenant that’s a public filer and very visible?

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, I don’t think there’s much difference in terms of how we manage it. Certainly, I think we don’t want to let any concentrations get very high with some of the public tenants, just because you subject yourself to some headline risk that isn’t real risk as it relates to our portfolio. But we’re doing the same things across the board on every tenant. We’re tracking the corporate financial performance. Obviously, you probably have a little bit less cushion with the smaller tenants than you do with some of the larger investment-grade tenants, but also tracking foot traffic and the unit level performance. We’ve been pretty aggressive, and we want to be proactive and not reactive on the asset management front when we start to see some potential issues.

I think, if we continue to do that over time, you’re just going to continue to see very low credit loss stats.

Daniel Guglielmo, Analyst, Capital One Securities: Awesome, appreciate that. With private credit seemingly less available this year than it was last year, are you seeing more smaller operators start to search for capital funding elsewhere, like via sale lease back? Or is it too early to see something like that flow through to your transaction market?

Mark Manheimer, Chief Executive Officer, NETSTREIT: Yeah, we have not seen that. I’d be surprised if we see a ton of that. The private credit guys were kind of not only focused on retail. They’re kind of all lending to software companies. That’s gotten a lot of headlines in a lot of different industries that are maybe a little bit less real estate heavy. I don’t think it’s going to have a huge impact one way or the other, and we have not seen any impact to date.

Daniel Guglielmo, Analyst, Capital One Securities: Thank you. Appreciate it.

Daniel Guglielmo, Analyst, Capital One Securities3: We have reached the end of the question and answer session. I’d now like to turn the call back over to Marc Manheimer for closing comments.

Mark Manheimer, Chief Executive Officer, NETSTREIT: Well, thank you all for joining us this morning. Good luck for the rest of the earnings season, and we look forward to seeing you at upcoming conferences. Appreciate the time.

Daniel Guglielmo, Analyst, Capital One Securities3: This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.