NETSTREIT Corp. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Special Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), 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 and trends in our business, including trends in the market for single-tenant, retail commercial real estate. 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 Quarterly Report on Form 10-Q 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” Part I, Item 1A. in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC”) on March 4, 2021 and other reports filed with the Securities and Exchange Commission from time to time. Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report on Form 10-Q. 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 the novel coronavirus (COVID-19). 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. Overview We are an internally-managed real estate company that acquires, owns and manages a diversified portfolio of single-tenant, retail commercial real estate subject to long-term net leases with high credit quality tenants across the United States. Our diversified portfolio consists of 234 single-tenant retail net leased properties spanning 39 states, with tenants representing 59 different brands or concepts across 23 retail sectors. Our portfolio generates annualized base rent (“ABR”) of $48.0 million and is 100% occupied, with a WALT of 10.1 years and consisting of approximately 70% and 11% of investment grade tenants and investment grade profile tenants, by ABR, which we believe provides us with a strong, stable source of recurring cash flow. Our tenants operate in industries where a physical location is critical to the generation of sales and profits, with a focus on necessity goods and essential services in the retail sector, including home improvement, auto parts, drug stores and pharmacies, general retail, grocers, convenient stores, discount stores, and quick-service restaurants, which we refer to as defensive retail industries. We believe these characteristics make our tenants’ businesses e-commerce resistant and resilient through all economic cycles. We completed our initial public offering on August 17, 2020 and our common stock trades on the New York Stock Exchange under the symbol “NTST.” ABR is calculated by multiplying (i) cash rental payments (a) for the month ended March 31, 2021 (or, if applicable, the next full month's cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of March 31, 2021, plus (b) for properties under development, the first full month's permanent cash rent contractually due after the development period by (ii) 12. 28 Table of Contents COVID-19 We continue to monitor the global outbreak of COVID-19 and to take steps to mitigate the potential risks to us posed by the pandemic. In addition, we continue to stay in close contact with our tenants and monitor the timeliness of rental payments and any significant changes in our tenants' businesses. See “Note 2 - Summary of Significant Accounting Policies” to our condensed consolidated financial statements included herein. The Company’s operations and cash flows for the three months ended March 31, 2021 and 2020 were not materially impacted by COVID-19. Recent Developments We seek to maximize long-term earnings growth and shareholder value primarily through the acquisition of strategically positioned assets throughout the U.S., specifically focusing on properties with tenants which are considered essential businesses. We have deployed all of the $227.3 million from the Company's initial public offering to fund acquisitions through March 31, 2021 and to repay the $50 million of outstanding borrowings under our Revolver as of September 30, 2020. On April 12, 2021, the Company completed a public offering of 10,915,688 shares of common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,423,785 shares of common stock. Upon closing, the Company issued 10,915,688 shares of common stock and received net proceeds of $194.3 million after deducting the underwriting discount and estimated transaction costs. We intend to use the net proceeds to repay the $13.0 million of outstanding borrowings under the Revolver and use the remainder of the net proceeds for general corporate purposes, including the acquisition of properties in our pipeline. Results of Operations Overall The Company continued to grow its assets held for investment by increasing its asset base from 203 properties as of December 31, 2020 to 234 properties as of the end of March 31, 2021. In addition, the Company has committed to one real estate development project with total projected capital spend of $4.4 million of which $1.3 million has been funded as of March 31, 2021. This growth was facilitated by successfully raising equity capital of $219.0 million and $227.3 million as result of the private offerings and initial public offering, respectively, totaling $446.3 million of net capital raised by the Company since December 23, 2019. Acquisitions During the three months ended March 31, 2021, the Company acquired 31 retail net lease properties for a total purchase price, inclusive of capitalized acquisition costs, of $88.2 million. The acquisitions were all accounted for as asset acquisitions. These properties are located in 19 states with a weighted average lease term of approximately 8.8 years. The underwritten weighted-average capitalization rate on the Company’s first quarter acquisitions was approximately 6.7%. Development During the three months ended March 31, 2021, the Company invested $1.3 million in a development project in Yuma, Arizona. The Company has a non-binding purchase option to acquire the property upon development. The Company’s total investment is expected to be $4.4 million with the sole tenant in the property commencing lease payments in 2022. Dispositions There were no dispositions for the three months ended March 31, 2021. 29 Table of Contents Three Months Ended March 31, 2021 Compared with Three Months Ended March 31, 2020 The following table sets forth our operating results for the periods indicated (in thousands): Three Months Ended March 31, 2021 2020 Revenues Rental revenue (including reimbursable) $ 11,932 $ 5,508 Operating expenses Property 950 285 General and administrative 3,137 1,886 Depreciation and amortization 5,929 2,346 Provisions for impairment 69 — Transaction costs 151 1,094 Total operating expenses 10,236 5,611 Other income (expense) Interest expense, net (905) (1,699) Gain on forfeited earnest money deposit — 250 Total other income (expense), net (905) (1,449) Net income (loss) before income tax expense 791 (1,552) Income tax expense (50) — Net income (loss) 741 (1,552) Revenue. Revenue for the three months ended March 31, 2021 increased by $6.4 million to $11.9 million from $5.5 million for the three months ended March 31, 2020. This is primarily due to an increase in the real estate portfolio from 94 properties as of January 1, 2020 to 234 properties as of March 31, 2021. The increase includes an increase in cash rental receipts of $5.6 million with $0.8 million of combined net increases in straight-line rental revenue, property expense reimbursement, and amortization of above- and below market lease related to intangible assets. Total Operating Expenses. Total expenses increased by $4.6 million to $10.2 million for the three months ended March 31, 2021 as compared to $5.6 million for the three months ended March 31, 2020. The increase in operating expenses is primarily attributed to the increase in the number of operating properties, increase in stock-based compensation, offset by prior period expenses associated with the consummation of the Company’s initial public offering in August 2020. Total operating expenses include the following: • Property Expenses. Property expenses increased $0.7 million to $1.0 million for the three months ended March 31, 2021 from $0.3 million for the three months ended March 31, 2020. The increase is primarily attributed to the increase in the real estate portfolio from 94 to 234 properties. The largest increases are from reimbursable property taxes of $0.3 million and reimbursable maintenance expense of $0.2 million. • General and Administrative Expenses. General and administrative expenses increased $1.2 million to $3.1 million for the three months ended March 31, 2021 from $1.9 million for the three months ended March 31, 2020. The increase is primarily due to payroll expense associated with the internalization of management and staff to support the Company as a newly public company of $0.4 million, an increase in stock-based compensation expense of $0.6 million, an increase to insurance related expenses of $0.2 million, net increases to professional and administrative expenses of $0.4 million, offset by a decrease in audit fees of $0.4 million. • Depreciation and Amortization. Depreciation and amortization expense increased $3.6 million to $5.9 million for the three months ended March 31, 2021 from $2.3 million for the three months ended March 31, 2020. The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period primarily with associated increases in building depreciation expense of $1.6 million, in-place lease amortization expense of $1.1 million, and building improvements depreciation expense of $0.8 million. 30 Table of Contents • Provision for Impairment. For the three months ended March 31, 2021, we recorded a provision for impairment of $0.1 million on one property which was classified as held-for-sale as of December 31, 2020. The property was sold subsequent to March 31, 2021. No provision for impairment was recorded for the three months ended March 31, 2020. This impairment and subsequent disposal relates to our plan of strategically identifying properties that can be re-leased or disposed of in an effort to improve returns and manage risk exposure. Transaction costs. Transaction costs decreased by $0.9 million to $0.2 million for the three months ended March 31, 2021 from $1.1 million for the three months ended March 31, 2020. The decrease in transaction costs includes a decrease of $0.7 million of expenses incurred in 2020 to facilitate the private and public offerings of common stock and a decrease of $0.2 million of expenses incurred for abandoned acquisitions and expenses associated with property acquisitions. Interest Expense. Interest expense decreased by $0.8 million to $0.9 million for the three months ended March 31, 2021 from $1.7 million for the three months ended March 31, 2020. The decrease is primarily due to the decrease in the effective interest rate of the Term Loan. Net income (loss). Net income increased $2.3 million to $0.7 million for the three months ended March 31, 2021 from a net loss of $1.6 million for the three months ended March 31, 2020. Net income increased primarily due to the growth in the size of our real estate investment portfolio, which generated additional rental revenues, and due to a decrease in interest expense and transaction costs, offset by the impact of increases in depreciation and amortization expenses related to our growth, and to increases in general and administrative expenses related to both our growth and the result of becoming a public company, as set forth above. Liquidity and Capital Resources Our primary capital requirements are to fund property acquisitions and required interest payments, as well as working capital needs, operating expenses, and capital expenditures. Our capital resources primarily consist of cash from operations, sales of equity securities (including private and public offerings) and borrowings under our Credit Facility. As of March 31, 2021, we had a $175.0 million Term Loan and $13.0 of borrowings outstanding under our $250.0 million Revolver. We believe that the net proceeds of $194.3 million from our April 2021 public offering of our common stock plus both our cash flows from operations and available borrowing capacity will be adequate to support our ongoing operations and to fund our debt service requirements, capital expenditures and working capital for at least the next 12 months. Contractual Obligations As of March 31, 2021, our contractual obligation include the maturity on our $175.0 million Term Loan with the scheduled principal payment due on December 23, 2024. In addition, our contractual obligations include the repayment due on the Revolver. During the three months ended March 31, 2021, we borrowed $13.0 million on our $250.0 million Revolver at an effective interest rate of 1.29% to fund specifically identified property acquisitions. A portion of the net proceeds from our April 12, 2021 public offering were used to repay the borrowings in full. The following table provides information with respect to our commitments as of March 31, 2021 (in thousands): Payment Due by Period Total From April 1, 2021 to December 31, 2021 1 – 3 Years 3 – 5 Years Contractual Obligations Term Loan – Principal $ 175,000 $ — $ — $ 175,000 Term Loan – Variable interest (1) 8,858 1,782 4,752 2,324 Revolver - Borrowings (2) 13,000 13,000 — — Unutilized borrowing fees on Revolver (3) 1,704 468 1,236 — Total $ 198,562 $ 15,250 $ 5,988 $ 177,324 31 Table of Contents (1) Effective September 28, 2020, we entered into an interest rate hedge to fix the interest rate on our Term Loan. Accordingly, the projected interest rate obligations for the variable rate Term Loan is based on the hedged fixed rate (one-month) of 0.21% compared to the variable Term Loan one-month LIBOR rate as of March 31, 2021 of 0.11%, plus a margin of 1.15% based on the $175.0 million Term Loan outstanding through the maturity date of December 23, 2024. (2) We intend to repay the outstanding borrowings under the Revolver in April 2021. (3) We are subject to a variable unutilized borrowing fee on the unused portion of our $250.0 million Revolver. As of March 31, 2021, we had $13.0 million of borrowings outstanding on our $250.0 million Revolver, however we continue to incur the unutilized borrowing fee on the unused portion of the Revolver. This reflects our projected unutilized borrowing fee at 0.25% assuming repayment of the $13.0 million in April 2021 and as if the Revolver has no additional borrowing through the maturity date of December 23, 2023. Additionally, in the normal course of business, the Company enters into various types of commitments to purchase real estate properties or fund development projects. These commitments are generally subject to the Company’s customary due diligence process and, accordingly, a number of specific conditions must be met before the Company is obligated or receives an option to purchase the properties. As of March 31, 2021, the Company had commitments to fund properties under development totaling $4.4 million, of which $1.3 million has been funded to date and the remaining is expected to be funded over the next twelve months. Credit Facility In December 2019, we entered into a Credit Facility consisting of (i) a $175.0 million senior secured Term Loan and (ii) a $250.0 million senior secured Revolver. Wells Fargo Securities, LLC is lead arranger and bookrunner and Wells Fargo Bank, National Association is the Administrative Agent. The Term Loan matures on December 23, 2024 and the Revolver matures on December 23, 2023, subject to extension up to one year. The Administrative Agent released the collateral in connection with the Company’s satisfaction of the Collateral Release Requirements in the fourth quarter of 2020, therefore interest rates under the Credit Facility are based on the Company’s consolidated total leverage ratio, and are determined by (A) in the case of Term Loan either (i) LIBOR, plus a margin ranging from 1.15% to 1.60%, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the Credit Facility), plus a margin ranging from 0.15% to 0.60%, based on the Company’s consolidated total leverage ratio and (B) in the case of Revolving Loans either (i) LIBOR, plus a margin ranging from 1.20% to 1.80%, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the Credit Facility), plus a margin ranging from 0.20% to 0.80%, based on the Company’s consolidated total leverage ratio. Prior to the collateral release, the Credit Facility was secured by a first priority perfected security interest in and lien on all existing and future equity interests of the Company’s direct and indirect subsidiaries of any Eligible Property (as defined in the Credit Facility) owned by the Company or any of the Company’s subsidiaries. The Credit Facility also provided that the Administrative Agent has the option to release the collateral securing the Credit Facility upon delivery of satisfactory evidence from the Company that Collateral Release Requirements (as defined in the Credit Facility) have been met, which requirements include, among others, conditions related to the unencumbered asset value and asset diversification of the Company. The Company uses interest rate derivative contracts to manage its exposure to changes in interest rates on its variable rate debt. These derivatives are considered cash flow hedges and are recorded on a gross basis at fair value. Effective September 28, 2020, such derivatives were used to hedge the variable cash flows associated with the Term Loan. Historical Cash Flow Information Three Months Ended March 31, 2021 Compared with Three Months Ended March 31, 2020 Three Months Ended March 31, 2021 2020 (in thousands) (Unaudited) Net cash provided by (used in): Operating activities $ 4,270 $ 891 Investing activities (90,022) (74,709) Financing activities 6,825 54,376 32 Table of Contents Cash Flows Provided By Operating Activities. Net cash provided by operating activities increased by $3.4 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase was largely attributed to the increase in the size of the Company’s real estate investment portfolio with an increase in rental income, including reimbursable expenses of $6.2 million, offset primarily by increases in operating and general and administrative expenses paid associated with our larger portfolio of $2.7 million. Cash Flows Used In Investing Activities. Net cash used in investing activities increased by $15.3 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase is primarily due to acquisition and development activity. The Company spent $88.2 million on the acquisition of real estate and $1.3 million was provided to fund real estate development during the three months ended March 31, 2021 compared to $74.2 million during the three months ended March 31, 2020. Cash Flows Provided By Financing Activities. Net cash provided by financing activities decreased by $47.6 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The decrease is primarily attributed to the exercise of the over-allotment option in the Private Offering of common stock of $54.6 million which occurred during the three months ended March 31, 2020. Additionally, the Company paid $5.7 million of dividends during the three months ended March 31, 2021 and none in the prior period. Lastly, the net decrease is offset by $13.0 million on borrowings under the Revolver during the three months ended March 31, 2021. Income Taxes The Company elected to be treated and qualify as a REIT for U.S. federal income tax purposes beginning with its short taxable year ended December 31, 2019 upon the filing of its U.S. federal income tax return for such taxable year. To qualify as a REIT, the Company must meet certain organizational, income, asset and distribution tests. Accordingly, the Company will generally not be subject to corporate U.S. federal or state income tax to the extent that it makes qualifying distributions of all of its taxable income to its shareholders and provided it satisfies on a continuing basis, through actual investment and operating results, the REIT requirements, including certain asset, income, distribution and share ownership tests. The Company intends to make sufficient distributions during 2021 to receive a full dividends paid deduction. The Company made a joint election with NETSTREIT TRS for it to be treated as a taxable REIT subsidiary which may be subject to U.S. federal, state, and local income taxes on its taxable income. In general, NETSTREIT TRS may perform services for tenants of the Company, hold assets that the Company cannot hold directly and may engage in any real estate or non-real estate-related business. During three months ended March 31, 2021, the Company recognized state and local and franchise tax expense which is included in income tax expense in the accompanying condensed consolidated statements of operations and comprehensive income (loss). Recent Accounting Pronouncements A discussion of new accounting standards and the possible effects of these standards on our condensed consolidated financial statements is included in “Note 2 - Summary of Significant Accounting Policies” of our condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Critical Accounting Policies and Estimates Our accounting policies have been established to conform with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes that we have made these estimates and assumptions in an appropriate manner and in a way that accurately reflects our financial condition. We continually test and evaluate these estimates and assumptions using our historical knowledge of the business, as well as other factors, to ensure that they are reasonable for reporting purposes. However, actual results may differ from these estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to the various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may 33 Table of Contents impact comparability of our results of operations to those of companies in similar businesses. A summary of the our critical accounting policies is included in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020, which is accessible on the SEC’s website at www.sec.gov. There have been no material changes to these policies during the periods covered by this quarterly report. Non-GAAP Financial Measures Our reported results are presented in accordance with GAAP. We also disclose the following non-GAAP financial measures: FFO, Core FFO, AFFO, earnings before interest, taxes, depreciation and amortization (“EBITDA”), EBITDA adjusted to exclude gains (or losses) on sales of depreciable property and real estate impairment losses (“EBITDA re ”), EBITDA re further adjusted to exclude straight-line rent, gains from forfeited earnest money deposits, non-recurring public company costs, representing consulting fees that we have incurred in preparing to become a public company and non-cash compensation expense (“Adjusted EBITDA re ”), net operating income (“NOI”) and cash net operating income (“Cash NOI”). We believe these non-GAAP financial measures are industry measures used by analysts and investors to compare the operating performance of REITs. FFO, Core FFO and AFFO FFO is a non-GAAP financial measure defined by NAREIT as net income (computed in accordance with GAAP), excluding real estate-related expenses including, but not limited to, gains (losses) from sales, impairment adjustments, and depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO is consistent with FFO as defined by NAREIT. Core FFO is a non-GAAP financial measure defined as FFO adjusted for gains from forfeited earnest money deposits and non-recurring public company costs. We believe the presentation of Core FFO provides investors with a metric to assist in their evaluation of our operating performance across multiple periods because it removes the effect of unusual and non-recurring items that are not expected to impact our operating performance on an ongoing basis. 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, non-cash compensation expense, and amortization of deferred financing 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 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 all of 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. The following table sets forth a reconciliation of FFO, Core FFO and AFFO for the periods presented to net income (loss) before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands): 34 Table of Contents Three Months Ended March 31, 2021 2020 (Unaudited) Net income (loss) $ 741 $ (1,552) Depreciation and amortization of real estate 5,852 2,272 Provision for impairment 69 — FFO 6,662 720 Adjustments: Gain on forfeited earnest money deposit — (250) 144A and IPO transaction costs (1) — 709 Core FFO 6,662 1,179 Adjustments: Straight-line rental revenue (240) (154) Amortization of deferred financing costs 157 152 Amortization of above/below market lease intangibles (190) 8 Non-cash compensation expense 557 — AFFO $ 6,946 $ 1,185 (1) These expenses represent a subset of transaction costs as presented on the condensed consolidated statement of operations and comprehensive income (loss). EBITDA, EBITDAre and Adjusted EBITDAre We compute EBITDA as earnings before interest, income taxes and depreciation and amortization. In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDA re . We compute EBITDA re in accordance with the definition adopted by NAREIT. NAREIT defines EBITDA re as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and real estate impairment losses. Adjusted EBITDA re is a non-GAAP financial measure defined as EBITDA re further adjusted to exclude straight-line rent, gains from forfeited earnest money deposits, non-recurring public company costs, representing consulting fees that we have incurred in preparing to become a public company and non-cash compensation expense. We present EBITDA, EBITDA re and Adjusted EBITDA re 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, EBITDA re and Adjusted EBITDA re as measures of our operating performance and not as measures of liquidity. EBITDA, EBITDA re and Adjusted EBITDA re 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, EBITDA re and Adjusted EBITDA re 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. The following table sets forth a reconciliation of EBITDA, EBITDA re and Adjusted EBITDA re for the periods presented to net income (loss) before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands): 35 Table of Contents Three Months Ended March 31, 2021 2020 (Unaudited) Net income (loss) $ 741 $ (1,552) Depreciation and amortization of real estate 5,852 2,272 Amortization of above/below market lease intangibles (190) 8 Non-real estate depreciation and amortization 77 74 Interest expense, net 905 1,699 Income tax expense 50 — EBITDA 7,435 2,501 Adjustments: Provision for impairments 69 — EBITDAre 7,504 2,501 Adjustments: Straight-line rental revenue (240) (154) Gain on forfeited earnest money deposit — (250) 144A and IPO transaction costs (1) — 709 Non-cash compensation expense 557 — Adjusted EBITDAre $ 7,821 $ 2,806 (1) These expenses represent a subset of transaction costs as presented on the condensed consolidated statement of operations and comprehensive income (loss). NOI and Cash NOI NOI and Cash NOI are non-GAAP financial measures which we use to assess our operating results. We compute NOI as net income (loss) (computed in accordance with GAAP), excluding general and administrative expenses, interest expense (or income), income tax expense, depreciation and amortization, gains (or losses) on sales of depreciable property, gain from forfeited earnest money deposits and real estate impairment losses. We further adjust NOI for non-cash revenue components of straight-line rent and amortization of lease intangibles to derive Cash NOI. We believe NOI and Cash NOI 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. NOI and Cash NOI are not measurements of financial performance under GAAP, and our NOI and Cash NOI 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. 36 Table of Contents The following table sets forth a reconciliation of NOI and Cash NOI for the periods presented (in thousands): Three Months Ended March 31, 2021 2020 (Unaudited) Net income (loss) $ 741 $ (1,552) General and administrative 3,137 1,886 Depreciation and amortization 5,929 2,346 Provisions for impairment 69 — Transaction costs 151 1,094 Interest expense, net 905 1,699 Income tax expense 50 — Gain on forfeited earnest money deposit — (250) NOI 10,982 5,223 Straight-line rental revenue (240) (154) Amortization of above/below market lease intangibles (190) 8 Cash NOI $ 10,552 $ 5,077