What changed in this filing

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Item 1. Financial Statements

2021-10-28 compared with 2021-07-29 · 256 added, 182 removed, 573 unchanged (43% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

June 30, December 31,

September 30, December 31,

Real estate, at cost:

12 unchanged sentences

Term loan, net $ 174,274 $ 174,105

Revolving credit facility 17,000 —

Lease intangible liabilities, net 22,150 16,930

16 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except share and per share data)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

7 unchanged sentences

Total operating expenses 13,719 11,029 39,987 24,080

Other (expense) income

Other income (expense)

Interest expense, net ( 895 ) ( 1,018 ) ( 2,693 ) ( 3,815 )

1 unchanged sentence

Gain on forfeited earnest money deposit — — — 250

Total other (expense) income, net ( 397 ) ( 82 ) ( 1,302 ) ( 1,531 )

Net loss before income tax expense ( 2,630 ) ( 405 ) ( 1,839 ) ( 1,957 )

Total other income (expense), net 1,060 ( 964 ) ( 241 ) ( 2,495 )

Net income (loss) before income tax expense 2,944 ( 2,341 ) 1,105 ( 4,298 )

Income tax expense — — ( 50 ) —

Net loss ( 2,630 ) ( 405 ) ( 1,889 ) ( 1,957 )

Net loss attributable to noncontrolling interests ( 94 ) ( 111 ) ( 54 ) ( 536 )

Net income (loss) 2,944 ( 2,341 ) 1,055 ( 4,298 )

Net income (loss) attributable to noncontrolling interests 96 ( 263 ) 42 ( 799 )

Preferred stock dividends — 36 — 42

Net loss attributable to common shareholders $ ( 2,536 ) $ ( 300 ) $ ( 1,835 ) $ ( 1,427 )

Net income (loss) attributable to common shareholders $ 2,848 $ ( 2,114 ) $ 1,013 $ ( 3,541 )

Amounts available to common shareholders per common share:

4 unchanged sentences

Diluted 41,333,579 18,825,389 37,108,425 13,771,457

Other comprehensive (loss) income:

Net loss $ ( 2,630 ) $ ( 405 ) $ ( 1,889 ) $ ( 1,957 )

Other comprehensive income (loss):

Net income (loss) $ 2,944 $ ( 2,341 ) $ 1,055 $ ( 4,298 )

Change in value on derivatives, net 5 ( 128 ) 2,063 ( 128 )

Total comprehensive (loss) income $ ( 2,895 ) $ ( 405 ) $ 169 $ ( 1,957 )

Comprehensive (loss) income attributable to noncontrolling interests ( 106 ) ( 111 ) 58 ( 536 )

Comprehensive (loss) income attributable to common shareholders $ ( 2,789 ) $ ( 294 ) $ 111 $ ( 1,421 )

Total comprehensive income (loss) $ 2,949 $ ( 2,469 ) $ 3,118 $ ( 4,426 )

Comprehensive income (loss) attributable to noncontrolling interests 95 ( 281 ) 153 ( 817 )

Comprehensive income (loss) attributable to common shareholders $ 2,854 $ ( 2,188 ) $ 2,965 $ ( 3,609 )

The accompanying notes are an integral part of these condensed consolidated financial statements.

25 unchanged sentences

Balance at June 30, 2021 — $ — 39,525,978 $ 395 $ 704,269 $ ( 23,140 ) $ 2,181 $ 683,705 $ 25,771 $ 709,476

OP Units converted to common stock — — 65,840 1 1,246 — — 1,247 ( 1,247 ) —

Dividends and distributions declared on common stock and OP Units — — — — — ( 7,916 ) — ( 7,916 ) ( 265 ) ( 8,181 )

Dividends declared on restricted stock — — — — — ( 125 ) — ( 125 ) — ( 125 )

Vesting of restricted stock units — — 35,000 — — — — — — —

Repurchase of common stock for tax withholding obligations — — ( 9,013 ) — ( 229 ) — — ( 229 ) — ( 229 )

Stock-based compensation, net — — — — 1,026 7 — 1,033 — 1,033

Other comprehensive income — — — — — — 6 6 ( 1 ) 5

Net income — — — — — 2,848 — 2,848 96 2,944

Balance at September 30, 2021 — $ — 39,617,805 $ 396 $ 706,312 $ ( 28,326 ) $ 2,187 $ 680,569 $ 24,354 $ 704,923

The accompanying notes are an integral part of these condensed consolidated financial statements.

16 unchanged sentences

Balance at June 30, 2020 125 $ 104 11,797,645 $ 118 $ 218,946 $ ( 1,399 ) $ — $ 217,769 $ 87,363 $ 305,132

Issuance of common stock in initial public offering — — 13,681,561 136 246,132 246,268 246,268

Offering and related costs of common stock — — — — ( 18,947 ) — — ( 18,947 ) — ( 18,947 )

Dividends declared on preferred stock — — — — — ( 2 ) — ( 2 ) — ( 2 )

Dividends and distributions declared on common stock and OP Units — — — — — ( 2,430 ) — ( 2,430 ) ( 419 ) ( 2,849 )

Dividends declared on restricted stock — — — — — ( 41 ) — ( 41 ) — ( 41 )

Redemption of preferred stock upon initial public offering ( 125 ) ( 104 ) — — — ( 34 ) — ( 138 ) — ( 138 )

Redemption of OP Units and issuance of common stock in initial public offering — — 255,268 3 5,027 — — 5,030 ( 5,030 ) —

Stock-based compensation — — — — 1,753 — — 1,753 — 1,753

Other comprehensive loss — — — — — — ( 110 ) ( 110 ) ( 18 ) ( 128 )

Net loss — — — — — ( 2,078 ) — ( 2,078 ) ( 263 ) ( 2,341 )

Balance at September 30, 2020 — $ — 25,734,474 $ 257 $ 452,911 $ ( 5,984 ) $ ( 110 ) $ 447,074 $ 81,633 $ 528,707

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

(in thousands, except share and per share data)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities

Net loss $ ( 1,889 ) $ ( 1,957 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Net income (loss) $ 1,055 $ ( 4,298 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 21,078 10,153

15 unchanged sentences

Earnest money deposits ( 789 ) ( 43 )

Purchase of computer equipment ( 10 ) ( 41 )

Purchase of computer equipment and other corporate assets ( 52 ) ( 51 )

Proceeds from sale of real estate 30,436 11,778

1 unchanged sentence

Cash flows from financing activities

Issuance of common stock in initial public offering, net — 227,321

Issuance of common stock in public offering, net 194,161 —

4 unchanged sentences

Payment of OP unit distributions ( 859 ) ( 419 )

Redemption of preferred stock — ( 138 )

Payment of restricted stock dividends ( 29 ) —

11 unchanged sentences

Supplemental disclosures of non-cash investing and financing activities:

Redemption of OP Units and issuance of common stock upon initial public offering $ — $ 5,030

Reclassification of deferred offering expenses to additional paid-in capital upon initial public offering $ — $ 4,171

OP units converted into common stock $ 8,914 $ —

2 unchanged sentences

Cash flow hedge change in fair value $ 2,063 $ 128

Involuntary conversion of building and improvements and change in related insurance proceeds receivable $ 490 $ —

Accrued construction and development costs $ 345 $ —

The accompanying notes are an integral part of these condensed consolidated financial statements.

8 unchanged sentences

The Company elected to be treated and to qualify as a real estate investment trust (“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.

federal income tax purposes beginning with its short taxable year ended December 31, 2019.

Additionally, the Operating Partnership formed NETSTREIT Management TRS, LLC (“NETSTREIT TRS”), which together with the Company jointly elected to be treated as a taxable REIT subsidiary under Section 856(a) of the Internal Revenue Code of 1986, as amended, (the “Code”) for U.S.

1 unchanged sentence

The Company is structured as an umbrella partnership real estate investment trust (commonly referred to as an “UPREIT”) and is an internally managed real estate company that acquires, owns and manages a diversified portfolio of single-tenant, retail commercial real estate leased on a long-term basis to high credit quality tenants across the United States.

As of June 30, 2021, the Company owned 266 properties, located in 39 states, including two properties under development, and an additional property under development with a non-binding option to purchase, for a total of 267 properties.

As of September 30, 2021, the Company owned 290 properties, located in 40 states, including four properties under development, with a non-binding option to purchase an additional property under development.

Private Offering and Formation Transactions

38 unchanged sentences

In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation have been included.

The results of operations for the three and six months ended June 30, 2021 and 2020 are not necessarily indicative of the results for the full year.

The results of operations for the three and nine months ended September 30, 2021 and 2020 are not necessarily indicative of the results for the full year.

Noncontrolling Interests

The Company presents noncontrolling interests, which represents OP Units, and classifies such interests as a component of permanent equity, separate from the Company's stockholders’ equity.

The Company presents noncontrolling interests, which represent OP Units, and classifies such interests as a component of permanent equity, separate from the Company's stockholders’ equity.

Noncontrolling interests were created as part of an asset acquisition and recognized at fair value as of the date of the transaction.

Effective with the Company’s initial public offering, each limited partner of the Operating Partnership has the right to require the Operating Partnership to redeem part or all of its OP Units for cash, based upon the value of an equivalent number of shares of the Company’s common stock at the time of the redemption, or, at the Company’s election, shares of the Company’s common stock on a one-for-one basis, subject to certain adjustments and the restrictions on ownership and transfer of the Company’s common stock.

Effective with the Company’s initial public offering, each limited partner of the Operating Partnership has the right to require the Operating Partnership to redeem part or all of its OP

Units for cash, based upon the value of an equivalent number of shares of the Company’s common stock at the time of the redemption, or, at the Company’s election, shares of the Company’s common stock on a one-for-one basis, subject to certain adjustments and the restrictions on ownership and transfer of the Company’s common stock.

The election to pay cash or issue common stock is solely within the control of the Company to satisfy a noncontrolling interest holder's redemption request.

7 unchanged sentences

The Company evaluates its estimates on an ongoing basis and makes revisions to these estimates and related disclosures as experience develops or new information becomes known.

Further, the uncertainty over the ultimate impact COVID-19 will have on the global economy and the Company’s business makes any estimates and assumptions as of June 30, 2021 inherently less certain than they would be absent the current and potential impacts of COVID-19.

Further, the uncertainty over the ultimate impact COVID-19 will have on the global economy and the Company’s business makes any estimates and assumptions as of September 30, 2021 inherently less certain than they would be absent the current and potential impacts of COVID-19.

Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to conform with current period presentation.

Transaction costs within the condensed consolidated statements of operations and comprehensive (loss) income were previously included within the caption “general and administrative.”

Risk and Uncertainties

4 unchanged sentences

As a result, the Company is not yet able to determine the full impact of COVID-19 on its operations, and therefore, whether any such impact will be material.

However, the Company’s operations and cash flows during the three and six months ended June 30, 2021 were not materially impacted by COVID-19.

The Company has collected 100.0 % of all rent payments for the three and six months ended June 30, 2021.

In addition, the Company has not provided for any rent abatements or deferrals since August 1, 2020.

However, the Company’s operations and cash flows during the three and nine months ended September 30, 2021 were not materially impacted by COVID-19.

The Company has collected 100.0 % of all rent payments for the three and nine months ended September 30, 2021.

In addition, the Company has not provided for any rent abatements or deferrals since August 1, 2020 relating to COVID-19.

The Company also adopted an optional remote-work policy and other physical distancing policies for its corporate office.

30 unchanged sentences

Computer equipment 3 years

Total depreciation and amortization expense was $ 7.1 million and $ 3.1 million during the three months ended June 30, 2021 and 2020, respectively.

Total depreciation and amortization expense was $ 13.0 million and $ 5.5 million during the six months ended June 30, 2021 and 2020, respectively.

Depreciation expense on real estate held for investment and computer equipment was $ 4.9 million and $ 2.2 million during the three months ended June 30, 2021 and 2020, respectively.

Depreciation expense on real estate held for investment and computer equipment was $ 9.0 million and $ 3.8 million during the six months ended June 30, 2021 and 2020, respectively.

Amortization expense on acquired in-place lease and assembled workforce intangible assets and leasing commissions were $ 2.2 million and $ 0.9 million during the three months ended June 30, 2021 and 2020, respectively.

Amortization expense on acquired in-place lease and assembled workforce intangible assets and leasing commissions were $ 4.0 million and $ 1.7 million during the six months ended June 30, 2021 and 2020, respectively.

Total depreciation and amortization expense was $ 8.1 million and $ 4.7 million during the three months ended September 30, 2021 and 2020, respectively.

Total depreciation and amortization expense was $ 21.1 million and $ 10.2 million during the nine months ended September 30, 2021 and 2020, respectively.

Depreciation expense on real estate held for investment and computer equipment and other corporate assets was $ 5.6 million and $ 3.2 million during the three months ended September 30, 2021 and 2020, respectively.

Depreciation expense on real estate held for investment and computer equipment was $ 14.5 million and $ 7.0 million during the nine months ended September 30, 2021 and 2020, respectively.

Amortization expense on acquired in-place lease and assembled workforce intangible assets and leasing commissions were $ 2.5 million and $ 1.4 million during the three months ended September 30, 2021 and 2020, respectively.

Amortization expense on acquired in-place lease and assembled workforce intangible assets and leasing commissions were $ 6.5 million and $ 3.1 million during the nine months ended September 30, 2021 and 2020, respectively.

Repairs and maintenance are charged to operations as incurred;

6 unchanged sentences

Only disposals representing a strategic shift in operations are presented as discontinued operations.

Accordingly, we have not reclassified results of operations for properties disposed during the interim period ended June 30, 2021 or held for sale as discontinued operations, as these events are a normal part of the Company’s operations and do not represent strategic shifts in the Company’s operations.

As of June 30, 2021 and December 31, 2020, there were five and three properties, respectively, classified as held for sale.

Accordingly, we have not reclassified results of operations for properties disposed during the interim period ended September 30, 2021 or held for sale as discontinued operations, as these events are a normal part of the Company’s operations and do not represent strategic shifts in the Company’s operations.

As of September 30, 2021 and December 31, 2020, there were one and three properties, respectively, classified as held for sale.

Impairment of Long-Lived Assets

5 unchanged sentences

The following table summarizes the provision for impairment during the periods indicated below (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

8 unchanged sentences

Restricted cash includes cash restricted for property tenant improvements and cash proceeds from the sale of assets held by qualified intermediaries in anticipation of the acquisition of replacement properties in tax-free exchanges under Section 1031 of the Code.

The Company had $ 2.3 million of restricted cash as of June 30, 2021, which was included in cash, cash equivalents, and restricted cash on the condensed consolidated balance sheets.

The Company had $ 14.8 million of restricted cash as of December 31, 2020.

The Company’s bank balances as of June 30, 2021 and December 31, 2020 include certain amounts over the Federal Deposit Insurance Corporation limits.

Restricted cash is included in cash, cash equivalents, and restricted cash on the condensed consolidated balance sheets.

The Company had no restricted cash as of September 30, 2021 and had $ 14.8 million of restricted cash as of December 31, 2020.

The Company’s bank balances as of September 30, 2021 and December 31, 2020 include certain amounts over the Federal Deposit Insurance Corporation limits.

Revenue Recognition and Related Matters

6 unchanged sentences

Capitalized above-market and below-market lease values and lease incentives are amortized on a straight-line basis as a reduction or increase of rental revenue as appropriate over the remaining non-cancellable terms of the respective leases.

An allowance for doubtful accounts is provided against the portion of accounts receivable, net including straight-line rents, which is estimated to be uncollectible, which includes a portfolio-based reserve and reserves for specific disputed amounts.

Such allowances are reviewed each period based upon recovery experience and the specific facts of each outstanding amount.

As of June 30, 2021 and December 31, 2020, there was no allowance for doubtful accounts.

Reserves for uncollectible amounts are provided against the portion of accounts receivable, net including straight-line rents, which are estimated to be uncollectible, which include a portfolio-based reserve and reserves for specific disputed amounts.

Such reserves are reviewed each period based upon recovery experience and the specific facts of each outstanding amount.

As of September 30, 2021 and December 31, 2020, there were no reserves for uncollectible amounts.

Stock-Based Compensation

The Company has a share-based compensation award program for our employees and directors.

Stock-based compensation expense associated with these awards is recognized in general and administrative expenses in our condensed consolidated statements of operations and comprehensive (loss) income.

We classify stock-based payment awards either as equity awards or liability awards based upon an analysis of ASC 718 and ASC 480.

The Company has a share-based compensation award program for its employees and directors.

Stock-based compensation expense associated with these awards is recognized in general and administrative expenses in the condensed consolidated statements of operations and comprehensive income (loss).

The Company classifies stock-based payment awards either as equity awards or liability awards based upon an analysis of ASC 718 and ASC 480.

Equity classified awards are measured based on the fair value on the date of grant.

5 unchanged sentences

In addition, transaction costs include the costs associated with abandoned acquisitions and other acquisition related activity.

There were no offering costs incurred during the three or six months ended June 30, 2021.

Offering costs for the three and six months ended June 30, 2020 were $ 0.6 million and $ 1.3 million, respectively.

Acquisition related expenses were $ 0.2 million and less than $ 0.1 million for the three months ended June 30, 2021 and 2020, respectively.

Acquisition related expenses were $ 0.3 million and $ 0.4 million for the six months ended June 30, 2021 and 2020, respectively.

There were no offering costs expensed during the three or nine months ended September 30, 2021.

Offering costs expensed for the three and nine months ended September 30, 2020 were $ 0.9 million and $ 2.2 million, respectively.

Acquisition related expenses were $ 0.1 million and $ 0.4 million for the three months ended September 30, 2021 and 2020, respectively.

Acquisition related expenses were $ 0.5 million and $ 0.8 million for the nine months ended September 30, 2021 and 2020, respectively.

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.

federal income tax purposes beginning with its short taxable year ended December 31, 2019.

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.

1 unchanged sentence

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.

NETSTREIT TRS is 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 the three and six months ended June 30, 2021, the Company recognized franchise and other state and local tax expenses which are included in general and administrative and recognized state and federal income tax expense which is included in income tax expense in the accompanying condensed consolidated statements of operations and comprehensive (loss) income.

During the three and nine months ended September 30, 2021, the Company recognized franchise and other state and local tax expenses in general and administrative and recognized state and federal income tax expense in income tax expense in the accompanying condensed consolidated statements of operations and comprehensive income (loss).

All provisions for federal income taxes in the accompanying consolidated financial statements are attributable to NETSTREIT TRS.

Deferred income tax expense and its ending balance in deferred tax assets and liabilities were immaterial for the three and nine months ended September 30, 2021 and 2020.

The Company has elected to record related interest and penalties, if any, as general and administrative expense or as income tax expense based on the nature of the tax on the condensed consolidated statements of operations and comprehensive income (loss).

The Company had no material interest or penalties relating to income, franchise, and other state and local taxes for the three and

nine months ended September 30, 2021 and 2020.

Additionally, there were no material accruals for interest or penalties as of September 30, 2021 and December 31, 2020.

The Company files federal, state and local income tax returns.

The Company regularly analyzes its various federal and state filing positions and only recognizes the income tax effect in its financial statements when certain criteria regarding uncertain income tax positions have been met.

The Company believes that its income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities.

Therefore, no provisions for uncertain income tax positions have been recorded in the condensed consolidated financial statements.

All federal tax returns for years prior to 2018 are no longer subject to examination.

Additionally, state tax returns for years prior to 2016 are generally no longer subject to examination.

Earnings Per Share

20 unchanged sentences

The fair value of the Company’s cash, cash equivalents and restricted cash (including money market accounts), other assets and accounts payable, accrued expenses and other liabilities approximate their carrying value because of the short-term nature of these instruments.

Provisions for impairments recognized in the three and six months ended June 30, 2021 and 2020 related to assets held for sale and the impairment was determined based on the estimated or negotiated selling price, less costs of disposal, compared to the carrying value of the property.

Provisions for impairments recognized in the three and nine months ended September 30, 2021 and 2020 related to assets held for sale and the impairment was determined based on the estimated or negotiated selling price, less costs of disposal, compared to the carrying value of the property.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents.

The Company is exposed to credit risk with respect to cash held at various financial institutions, access to its Credit

Facility, and amounts due or payable under derivative contracts.

The Company is exposed to credit risk with respect to cash held at various financial institutions, access to its Credit Facility, and amounts due or payable under derivative contracts.

The credit risk exposure with regard to the Company’s cash, credit facilities, and derivative instruments is spread among a diversified group of investment grade financial institutions.

During the three months ended June 30, 2021 and 2020, the Company’s rental revenues were derived from 64 separate tenants leasing 270 total properties and 53 separate tenants leasing 162 properties, respectively.

During these periods there were no tenants with rental revenue that exceeded 10% of total rental revenue.

During the six months ended June 30, 2021 and 2020, the Company’s rental revenues were derived from 65 separate tenants leasing 271 total properties and 53 separate tenants leasing 162 properties, respectively.

During the three months ended September 30, 2021 and 2020, the Company’s rental revenues were derived from 61 separate tenants leasing 292 total properties and 56 separate tenants leasing 190 properties, respectively.

There was no tenant with rental revenue that exceeded 10% of total rental revenue during the three months ended September 30, 2021.

During the three months ended September 30, 2020, one tenant, 7-Eleven, accounted for 12.2 % of total rental revenue.

During the nine months ended September 30, 2021 and 2020, the Company’s rental revenues were derived from 63 separate tenants leasing 297 total properties and 56 separate tenants leasing 190 properties, respectively.

During this period there were no tenants with rental revenue that exceeded 10% of total rental revenue.

14 unchanged sentences

The Company acquires, owns and manages commercial single-tenant lease properties, with the majority being long-term triple-net leases where the tenant is generally responsible for all improvements and contractually obligated to pay all operating costs (such as real estate taxes, utilities and repairs and maintenance costs).

As of June 30, 2021, the Company owned 266 single-tenant retail net leased properties spanning 39 states, with tenants representing 59 different brands or concepts across 23 retail sectors.

As of June 30, 2021, the remaining terms of leases range from 2 - 33 years.

As of September 30, 2021, the Company owned 290 single-tenant retail net leased properties spanning 40 states, with tenants representing 60 different brands or concepts across 22 retail sectors.

As of September 30, 2021, the remaining terms of leases range from 2 - 32 years.

The Company’s property leases have been classified as operating leases and some have scheduled rent increases throughout the lease term.

All lease-related income is reported as a single line item, rental revenue (including reimbursable), in the condensed consolidated statements of operations and comprehensive (loss) income and is presented net of provision for doubtful accounts.

There were no provisions for doubtful accounts during the three and six months ended June 30, 2021 and 2020.

All lease-related income is reported as a single line item, rental revenue (including reimbursable), in the condensed consolidated statements of operations and comprehensive income (loss) and is presented net of any reserves for uncollectible amounts.

There were no reserves for uncollectible amounts during the three and nine months ended September 30, 2021 and 2020.

The following table provides a disaggregation of lease income recognized under ASC 842 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

10 unchanged sentences

(2) Variable lease income primarily includes tenant reimbursements for real estate taxes, insurance, common area maintenance, and lease termination fees.

Scheduled future minimum base rental payments (excluding base rental payments from properties classified as held for sale and straight line rent adjustments for all properties) due to be received under the remaining non-cancelable term of the operating leases in place as of June 30, 2021 are as follows (in thousands):

Future Minimum Base

5 unchanged sentences

Note 4 – Real Estate Investments

During the six months ended June 30, 2021, the Company acquired 66 properties for a total purchase price of $ 205.2 million, inclusive of $ 2.3 million of capitalized acquisition costs.

During the six months ended June 30, 2020, the Company acquired 68 properties for a total purchase price of $ 224.7 million, inclusive of $ 2.5 million of capitalized acquisition costs.

During the nine months ended September 30, 2021, the Company acquired 92 properties for a total purchase price of $ 292.0 million, inclusive of $ 3.0 million of capitalized acquisition costs.

During the nine months ended September 30, 2020, the Company acquired 98 properties for a total purchase price of $ 327.3 million, inclusive of $ 3.6 million of capitalized acquisition costs.

The acquisitions were all accounted for as asset acquisitions.

An allocation of the purchase price and acquisition costs paid for the completed acquisitions is as follows (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Land $ 73,600 $ 98,381

12 unchanged sentences

Purchase price (including acquisition costs) $ 292,046 $ 327,338

During the six months ended June 30, 2021, the Company invested a total of $ 1.9 million in a development project in Yuma, Arizona.

The Company has a non-binding purchase option to acquire the property upon completion with the sole tenant commencing lease payments in 2022.

These amounts are included in property under development in the accompanying condensed consolidated balance sheets as of June 30, 2021.

During the six months ended June 30, 2021, the Company also invested a total of $ 3.4 million, including the purchase price of $ 3.2 million, in two properties in Fond Du Lac, Wisconsin.

Upon acquisition, the Company commenced development of two build-to-suit projects, which are expected to be completed in September 2021.

The purchase price, including acquisitions costs, and subsequent development are included in property under development in the accompanying condensed consolidated balance sheets as of June 30, 2021.

During the six months ended June 30, 2020, the Company acquired two properties in North Little Rock, Arkansas and commenced development of two build-to-suit projects.

The total combined cost for the projects was $ 2.5 million which were completed in July and December 2020, respectively.

Rent commenced in July 2020 and January 2021, respectively.

During the nine months ended September 30, 2021, the Company invested a total of $ 9.5 million, including the purchase price of $ 5.4 million, in five properties, including one that contains a non-binding purchase option to acquire the property upon completion.

Upon acquisition or investment in these properties, the Company commenced development of build-to-suit projects.

These developments are expected to be substantially completed with rent commencing during the fourth and first quarter of 2021 and 2022, respectively.

The purchase price, including acquisitions costs, and subsequent development are included in property under development in the accompanying condensed consolidated balance sheets as of September 30, 2021.

During the nine months ended September 30, 2020, the Company invested a total of $ 4.7 million, including the purchase price of $ 3.5 million, in two properties.

Upon acquisition in these properties, the Company commenced development of build-to-suit projects which were completed in July and December 2020, respectively.

Rent commenced in July 2020 and January 2021,

respectively.

These amounts were included in buildings and improvements in the accompanying condensed consolidated balance sheets as of December 31, 2020.

During the six months ended June 30, 2021, the Company sold five properties for a total sales price, net of disposal costs, of $ 12.3 million, recognizing a gain of $ 0.5 million on the sales.

During the six months ended June 30, 2020, the Company sold two properties for a total sales price, net of disposal costs, of $ 9.9 million, recognizing a gain of $ 1.0 on the sales.

During the nine months ended September 30, 2021, the Company sold nine properties for a total sales price, net of disposal costs, of $ 30.4 million, recognizing a net gain of $ 2.5 million on the sales.

During the nine months ended September 30, 2020, the Company sold three properties for a total sales price, net of disposal costs, of $ 11.8 million, recognizing a net gain of $ 1.1 million on the sales.

During 2019, the Company entered into an agreement to sell one property to a third-party and received a nonrefundable $ 0.3 million earnest money deposit, which upon the third-party’s failure to perform under the purchase and sale agreement in the first quarter of 2020, was recognized as a gain.

1 unchanged sentence

Intangible assets and liabilities consisted of the following (in thousands):

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Amount Accumulated Amortization Net Carrying Amount Gross

6 unchanged sentences

Below-market leases $ 24,493 $ ( 2,343 ) $ 22,150 $ 17,951 $ ( 1,021 ) $ 16,930

The remaining weighted average amortization period for the Company’s intangible assets and liabilities as of June 30, 2021 and as of December 31, 2020 by category were as follows:

The remaining weighted average amortization period for the Company’s intangible assets and liabilities as of September 30, 2021 and as of December 31, 2020 by category were as follows:

Years Remaining

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

In-place leases 9.9 11.1

4 unchanged sentences

The Company records amortization of in-place lease assets and assembled workforce intangible assets to amortization expense, and records net amortization of above-market and below-market lease intangibles as well as amortization of lease incentives to rental revenue.

The following amounts in the accompanying condensed consolidated statements of operations and comprehensive (loss) income related to the amortization of intangibles assets and liabilities for all property and ground leases (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

The following amounts in the accompanying condensed consolidated statements of operations and comprehensive income (loss) related to the amortization of intangibles assets and liabilities for all property and ground leases (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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$ 159 $ 219 $ 583 $ 340

The following table provides the projected amortization of in-place lease assets and assembled workforce intangible assets to amortization expense, and the net amortization of above-market, below-market, and lease incentive lease intangibles to rental revenue as of June 30, 2021, for the next five years and thereafter (in thousands):

The following table provides the projected amortization of in-place lease assets and assembled workforce intangible assets to amortization expense, and the net amortization of above-market, below-market, and lease incentive lease intangibles to rental revenue as of September 30, 2021, for the next five years and thereafter (in thousands):

Remainder of 2021

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Debt consists of the following (in thousands):

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Term Loan (due December 23, 2024) $ 175,000 $ 175,000

Revolver (due December 23, 2023) 17,000 —

Total debt 192,000 175,000

Unamortized discount and debt issuance costs ( 726 ) ( 895 )

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The Credit Facility is unsecured as 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.

from 0.20 % to 0.80 %, based on the Company’s consolidated total leverage ratio.

Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings.

The stated interest rate as of June 30, 2021 was 1.25 %.

The stated interest rate as of September 30, 2021 was 1.25 %.

The Company is required to pay a Revolver facility fee at an annual rate of 0.15 % of the unused capacity if usage exceeds 50% of the total available facility, or 0.25 % of the unused facility if usage does not exceed 50%.

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The Company incurred and capitalized less than $ 0.1 million of financing costs relating to this amendment, which has been pro-rated to the Term Loan and Revolver based on their respective borrowing capacities.

The Company further amended and redefined its debt covenant calculation during the third quarter of 2021 through the execution of two separate amendments.

Effective September 28, 2020, the Company entered into an interest rate derivative contract to fix the interest rate on the Term Loan.

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Deferred financing costs are being amortized over the remaining terms of each respective loan.

Term Loan deferred financing costs of $ 1.1 million, of which $ 0.8 million and $ 0.9 million is unamortized at June 30, 2021 and December 31, 2020,

respectively, is included within Term Loan, net on the condensed consolidated balance sheets.

Revolver deferred financing costs of $ 1.6 million, of which $ 1.0 million and $ 1.2 million is unamortized at June 30, 2021 and December 31, 2020, respectively, is included within other assets, net on the condensed consolidated balance sheets.

Total deferred financing costs amortized on the Term Loan and Revolver for the three months ended June 30, 2021 and 2020 were $ 0.2 million and $ 0.2 million, respectively and $ 0.3 and $ 0.3 for the six months ended June 30, 2021 and 2020, respectively.

This is included in interest expense, net on the Company’s condensed consolidated statements of operations and comprehensive (loss) income.

For the three months ended June 30, 2021 and 2020, the Term Loan had a weighted average interest rate, exclusive of amortization of deferred financing costs and the effects of the interest rate hedge, of 1.30 % and 1.87 %, respectively and 1.28 % and 2.55 % for the six months ended June 30, 2021 and 2020, respectively.

The Company incurred interest expense in connection with the Term Loan for the three months ended June 30, 2021 and 2020 of $ 0.6 million and $ 0.8 million, respectively and $ 1.2 million and $ 2.2 million for the six months ended June 30, 2021 and 2020, respectively.

Term Loan deferred financing costs of $ 1.1 million, of which $ 0.7 million and $ 0.9 million is unamortized at September 30, 2021 and December 31, 2020, respectively, is included within Term Loan, net on the condensed consolidated balance sheets.

Revolver deferred financing costs of $ 1.6 million, of which $ 0.9 million and $ 1.2 million is unamortized at September 30, 2021 and December 31, 2020, respectively, is included within other assets, net on the condensed consolidated balance sheets.

Total deferred financing costs amortized on the Term Loan and Revolver for the three months ended September 30, 2021 and 2020 were $ 0.2 million and $ 0.2 million, respectively and $ 0.5 and $ 0.5 for the nine months ended September 30, 2021 and 2020, respectively.

This is included in interest expense, net on the Company’s condensed consolidated statements of operations and comprehensive income (loss).

For the three months ended September 30, 2021 and 2020, the Term Loan had a weighted average interest rate, exclusive of amortization of deferred financing costs and the effects of the interest rate hedge, of 1.26 % and 1.44 %, respectively and 1.28 % and 2.18 % for the nine months ended September 30, 2021 and 2020, respectively.

The Company incurred interest expense in connection with the Term Loan for the three months ended September 30, 2021 and 2020 of $ 0.6 million and $ 0.6 million, respectively and $ 1.8 million and $ 2.9 million for the nine months ended September 30, 2021 and 2020, respectively.

The estimated fair value of the Company’s Term Loan has been derived based on market observable inputs such as interest rates and discounted cash flow analysis using estimates of the amount and timing of future cash flows.

These measurements are classified as Level 2 within the fair value hierarchy.

The Company determined that the carrying value materially approximated the estimated fair value of the Term Loan as of June 30, 2021 and December 31, 2020.

The Company incurred interest expense, exclusive of facility fees for unused capacity, on borrowings under the Revolver of less than $ 0.1 million for the three months ended June 30, 2021 with a weighted average interest rate of 0.33 %.

No interest was incurred for the three months ended June 30, 2020.

For the six months ended June 30, 2021, interest expense was less than $ 0.1 million, with a weighted average interest rate of 1.24 %.

No interest was incurred for the six months ended June 30, 2020.

As of June 30, 2021 and December 31, 2020, the Company had no borrowings under the Revolver.

The Company also incurred interest expense in connection with unused capacity for the three months ended June 30, 2021 and 2020 of $ 0.2 million and $ 0.2 million, respectively and $ 0.3 million and $ 0.3 million for the six months ended June 30, 2021 and 2020, respectively.

For the three and six months ended June 30, 2021, the Company capitalized less than $ 0.1 million of interest expense associated with properties under development.

No interest expense was capitalized for the three and six months ended June 30, 2020.

The Company was in compliance with all of its debt covenants as of June 30, 2021 and expects to be in compliance for the following twelve-month period.

The Company determined that the carrying value materially approximated the estimated fair value of the Term Loan as of September 30, 2021 and December 31, 2020.

The Company incurred interest expense, exclusive of facility fees for unused capacity, on borrowings under the Revolver of less than $ 0.1 million and approximately $ 0.1 million for the three months ended September 30, 2021 and 2020 with a weighted average interest rate of 1.26 % and 1.54 %, respectively.

For the nine months ended September 30, 2021 and 2020, interest expense was less than $ 0.1 million and approximately $ 0.1 million, with a weighted average interest rate of 1.24 % and 1.54 %, respectively.

As of September 30, 2021, the Company had $ 17.0 million borrowings outstanding under the Revolver.

As of December 31, 2020, the Company had no borrowings outstanding under the Revolver.

The Company also incurred interest expense in connection with unused capacity for the three months ended September 30, 2021 and 2020 of $ 0.2 million and $ 0.1 million, respectively and $ 0.5 million and $ 0.4 million for the nine months ended September 30, 2021 and 2020, respectively.

For the three and nine months ended September 30, 2021, the Company capitalized less than $ 0.1 million of interest expense associated with properties under development.

No interest expense was capitalized for the three and nine months ended September 30, 2020.

The Company was in compliance with all of its debt covenants as of September 30, 2021 and expects to be in compliance for the following twelve-month period.

Debt Maturity

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Effective September 28, 2020, such derivatives were initiated to hedge the variable cash flows associated with Term Loan.

Accordingly, the interest rate 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 June 30, 2021 of 0.10 %, plus a margin of 1.15 %.

Accordingly, the interest rate 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 September 30, 2021 of 0.09 %, plus a margin of 1.15 %.

The maturity date of the interest rate swaps coincide with the maturity date of the Term Loan.

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Number of Instruments Notional

Interest Rate Derivatives June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020

Interest Rate Derivatives September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020

Interest rate swaps 4 4 $ 175,000 $ 175,000

The following table presents the fair value of the Company's derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020 (in thousands):

The following table presents the fair value of the Company's derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020 (in thousands):

Derivative Assets

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Derivatives Designated as Hedging Instruments:

Balance Sheet Location June 30, 2021 December 31, 2020

Balance Sheet Location September 30, 2021 December 31, 2020

Interest rate swaps Other assets, net $ 2,316 $ 253

The following table presents the effect of the Company's interest rate swaps on the condensed consolidated statements of operations and comprehensive (loss) income for the three and six months ended June 30, 2021 and 2020 (in thousands):

The following table presents the effect of the Company's interest rate swaps on the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of (Loss) Reclassified from Accumulated OCI into Income

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Derivatives in Cash Flow Hedging Relationships 2021 2020 2021 2020

For the Three Months Ended June 30

For the Three Months Ended September 30

Interest Rate Products $ ( 47 ) $ ( 129 ) Interest expense, net $ ( 52 ) $ ( 1 )

For the Six Months Ended June 30

For the Nine Months Ended September 30

Interest Rate Products $ 1,932 $ ( 129 ) Interest expense, net $ ( 131 ) $ ( 1 )

The Company did not exclude any amounts from the assessment of hedge effectiveness for the three and six months ended June 30, 2021 and 2020.

The Company did not exclude any amounts from the assessment of hedge effectiveness for the three and nine months ended September 30, 2021 and 2020.

During the next twelve months, the Company estimates that an additional $ 0.1 million will be reclassified as an increase to interest expense.

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Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties.

However, as of June 30, 2021, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.

However, as of September 30, 2021, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.

As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The table below presents the Company’s derivative liabilities measured at fair value on a recurring basis as of June 30, 2021, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

The table below presents the Company’s derivative liabilities measured at fair value on a recurring basis as of September 30, 2021, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

Fair Value Hierarchy Level

Description Level 1 Level 2 Level 3 Total Fair Value

June 30, 2021

September 30, 2021

Derivative assets $ — $ 2,316 $ — $ 2,316

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Other assets, net consist of the following (in thousands):

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Earnest money deposits $ 1,424 $ 634

Deferred financing costs, net 997 1,198

Accounts receivable, net 2,773 1,489

Deferred rent receivable 1,889 1,407

Prepaid assets 2,561 356

Fair value of interest rate swaps 2,316 253

Deferred offering costs 792 —

Deferred financing costs, net 897 1,198

Other assets 1,419 387

1 unchanged sentence

Accounts payable, accrued expenses and other liabilities consists of the following (in thousands):

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Accrued expenses $ 3,813 $ 2,035

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Note 9 – Shareholders’ Equity, Partners’ Capital and Preferred Equity

In September 2021, the Company and its Operating Partnership entered into an Equity Distribution Agreement with the financial institutions named therein pursuant to which the Company may, at its discretion, issue and sell its common stock with an aggregate gross offering price of up to $ 250.0 million (the “ATM Program”).

In connection with the ATM Program, the Company may enter into forward sale agreements with certain financial institutions acting as forward purchasers whereby, at the Company's discretion, the forward purchasers may borrow and sell shares of common stock under the ATM Program.

The use of forward sale agreements allows the Company to fix a share price on the sale of shares of common stock at the time the respective forward sale agreements are executed but defer settling the forward sale agreements and receiving the proceeds from the sale of shares until a later date.

The proceeds from any sale of shares under the ATM program will be used for general corporate purposes, including funding investment activities.

Effective September 1, 2021, the Board of Directors of the Company (the “Board”) authorized a repurchase program for up to $ 150.0 million of common stock.

Repurchases of common stock may be made at management’s discretion from time to time in open market transactions, privately negotiated transactions or by other means (including through Rule 10b5-1 trading plans or one or more accelerated stock repurchase programs).

The timing of share repurchases and the number of shares of common stock to be repurchased will depend upon prevailing market conditions and other factors and there can be no assurances that the Company will make any purchases under the common stock repurchase program.

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.

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The Company contributed the net proceeds of the offering and related underwriters’ option to the Operating Partnership in exchange for 10,915,688 Class A OP Units.

During the six months ended June 30, 2021, portions of restricted stock unit awards granted to certain of the Company’s officers and directors vested.

During the nine months ended September 30, 2021, portions of restricted stock unit awards granted to certain of the Company’s officers, directors and employees vested.

The vesting of these awards, granted pursuant to the Omnibus Incentive Plan (as defined in “Note 10 - Stock-Based Compensation”), resulted in federal and state income tax liabilities for the recipients.

As permitted by the terms of the Omnibus Incentive Plan and the award grants, certain executive officers elected to surrender approximately five thousand shares of common stock valued at approximately $ 0.1 million, solely to pay the associated statutory tax withholding during the

year ended December 31, 2021.

As permitted by the terms of the Omnibus Incentive Plan and the award grants, certain executive officers and employees elected to surrender a total of 14 thousand shares of common stock valued at approximately $ 0.3 million, solely to pay the associated statutory tax withholding.

The surrendered shares are included in repurchase of shares of common stock on the condensed consolidated statements of cash flows.

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To maintain the Company’s status as a REIT, on January 27, 2020, the Company issued and sold 125 shares of 12.0 % Series A Cumulative Non-Voting Preferred Stock, par value $ 0.01 per share, for $ 1,000 per share to accredited investors pursuant to Regulation D under the Securities Act.

The shares of Series A Preferred Stock may be redeemed solely at the Company’s option for consideration equal to $ 1,000 per share, plus accrued and unpaid dividends thereon to and including the date fixed for redemption, plus a redemption premium as follows (i) until December 31, 2021, $ 100 and (ii) thereafter, no redemption premium.

redemption, plus a redemption premium as follows (i) until December 31, 2021, $ 100 and (ii) thereafter, no redemption premium.

In May 2020, the Company declared a preferred dividend of $ 51.33 per share of Series A Preferred Stock to holders of record as of June 15, 2020.

The preferred dividend was settled in cash on June 30, 2020.

The Company redeemed all 125 outstanding shares of Series A Preferred Stock upon the completion of the initial public offering.

During the six months ended June 30, 2021, the Company declared and paid the following common stock dividends (in thousands, except per share data):

The Company redeemed all 125 outstanding shares of Series A Preferred Stock upon the completion of the initial public offering for approximately $ 0.1 million, which included the payment of accrued dividends for the period from July 1, 2020 to August 18, 2020 and a redemption premium of $ 100 per share.

As of December 31, 2020, there were no shares of preferred stock outstanding.

During the nine months ended September 30, 2021, the Company declared and paid the following common stock dividends (in thousands, except per share data):

Declaration Date Dividend Per Share Record Date Total Amount Payment Date

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April 27, 2021 0.20 June 1, 2021 7,890 June 15, 2021

July 27, 2021 0.20 September 1, 2021 7,916 September 15, 2021

$ 0.60 $ 21,493

The holders of OP Units are entitled to an equal distribution per Class A and B OP Unit held as of each record date.

Accordingly, during the six months ended June 30, 2021, the Operating Partnership paid distributions of $ 0.6 million to holders of OP Units.

There were no dividends or distributions declared or paid for the three and six months ended June 30, 2020.

Accordingly, during the nine months ended September 30, 2021, the Operating Partnership paid distributions of $ 0.9 million to holders of OP Units.

Noncontrolling Interests

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OP Units are convertible into common stock as the OP Units may be redeemed for cash or, at the Company’s election, exchanged for shares of the Company’s common stock on a one-for-one basis.

As of June 30, 2021 and December 31, 2020, noncontrolling interests represented 3.3 % and 5.9 %, respectively of OP Units.

During the three months ended June 30, 2021, OP Unit holders redeemed 143,173 OP units into shares of common stock on a one-for-one basis.

During the six months ended June 30, 2021, OP Unit holders redeemed 396,517 OP units into shares of common stock on a one-for-one basis.

There were no redemptions for the three and six months ended June 30, 2020.

As of September 30, 2021 and December 31, 2020, noncontrolling interests represented 3.2 % and 5.9 %, respectively of OP Units.

During the three months ended September 30, 2021, OP Unit holders redeemed 65,840 OP units into shares of common stock on a one-for-one basis.

During the nine months ended September 30, 2021, OP Unit holders redeemed 462,357 OP units into shares of common stock on a one-for-one basis.

Note 10 – Stock-Based Compensation

Under the NETSTREIT Corp.

2019 Omnibus Incentive Compensation Plan (the “Omnibus Incentive Plan”), which became effective on December 23, 2019, 2,094,976 shares of common stock are reserved for issuance.

2019 Omnibus Incentive Compensation Plan (the “Omnibus Incentive Plan”), 2,094,976 shares of common stock are reserved for issuance.

The Omnibus Incentive Plan provides for the grant of stock options, stock appreciation rights, restricted shares, restricted stock units, long-term incentive plan units, dividend equivalent rights, and other share-based, share-related or cash-based awards, including performance-based awards, to employees, directors and consultants, with each grant evidenced by an award agreement providing the terms of the award.

The Omnibus Incentive Plan is administered by the Compensation Committee of the Board of Directors.

As of June 30, 2021, the only stock-based compensation granted by the Company were restricted stock units.

The total amount of stock-based compensation costs recognized in general and administrative expense in the accompanying condensed consolidated statements of operations and comprehensive (loss) income was $ 1.0 million and $ 1.6 million for the three and six months ended June 30, 2021.

No stock-based compensation expense was recognized for the three and six months ended June 30, 2020.

As of September 30, 2021, the only stock-based compensation granted by the Company were restricted stock units.

The total amount of stock-based compensation costs recognized in general and administrative expense in the accompanying condensed consolidated statements of operations and comprehensive income (loss) was $ 1.0 million and $ 1.8 million for the three months ended September 30, 2021 and 2020.

Stock-based compensation for the nine months ended September 30, 2021 and 2020 was $ 2.6 million and $ 1.8 million, respectively.

All awards of unvested restricted stock units are expected to fully vest over the next one to five years .

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The vesting terms of these grants are specific to the individual grant and vest in equal annual installments over the next three to five years .

The following table summarizes performance-based restricted stock unit activity for the period ended June 30, 2021:

The following table summarizes performance-based restricted stock unit activity for the period ended September 30, 2021:

Shares Weighted Average Grant Date Fair Value per Share

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Vested during the period ( 15,823 ) 19.75

Unvested restricted stock grants outstanding as of June 30, 2021 192,613 $ 19.75

For the three and six months ended June 30, 2021, the Company recognized $ 0.3 million and $ 0.6 million, respectively, in stock-based compensation expense associated with performance-based restricted stock units.

As of June 30, 2021 and December 31, 2020, the remaining unamortized stock-based compensation expense totaled $ 1.9 million and $ 2.6 million, respectively and as of June 30, 2021, these awards are expected to be recognized over a remaining weighted average period of 2.3 years.

Unvested restricted stock grants outstanding as of September 30, 2021 191,980 $ 19.75

For the three and nine months ended September 30, 2021, the Company recognized $ 0.3 million and $ 0.9 million, respectively, in stock-based compensation expense associated with performance-based restricted stock units.

As of September 30, 2021 and December 31, 2020, the remaining unamortized stock-based compensation expense totaled $ 1.6 million and $ 2.6 million, respectively and as of September 30, 2021, these awards are expected to be recognized over a remaining weighted average period of 2.2 years.

These units are subject to graded vesting and stock-based compensation expense is recognized ratably over the requisite service period for each vesting tranche in the award.

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The vesting terms of these grants are specific to the individual grant and vest in equal annual installments over the next one to five years .

The following table summarizes service-based restricted stock unit activity for the period ended June 30, 2021:

The following table summarizes service-based restricted stock unit activity for the period ended September 30, 2021:

Shares Weighted Average Grant Date Fair Value per Share

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Granted during the period 164,076 17.62

Unvested restricted stock grants outstanding as of June 30, 2021 330,978 $ 17.74

For the three and six months ended June 30, 2021, the Company recognized $ 0.5 million and $ 0.7 million, respectively, in stock-based compensation expense associated with service-based restricted stock units.

As of June 30, 2021 and December 31, 2020, the remaining unamortized stock-based compensation expense totaled $ 5.0 million and $ 2.8 million, respectively and as of June 30, 2021, these awards are expected to be recognized over a remaining weighted average period of 3.3 years.

Forfeited during the period ( 7,673 ) 17.93

Vested during the period ( 34,367 ) 18.00

Unvested restricted stock grants outstanding as of September 30, 2021 291,829 $ 17.79

For the three and nine months ended September 30, 2021, the Company recognized $ 0.5 million and $ 1.1 million, respectively, in stock-based compensation expense associated with service-based restricted stock units.

As of September 30, 2021 and December 31, 2020, the remaining unamortized stock-based compensation expense totaled $ 4.4 million and $ 2.8 million, respectively and as of September 30, 2021, these awards are expected to be recognized over a remaining weighted average period of 3.1 years.

Stock-based compensation expense is recognized on a straight-line basis over the total requisite service period for the entire award.

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Stock-based compensation expense associated with unvested market-based share awards is recognized on a straight-line basis over the minimum required service period, which is three years .

The following table summarizes market-based restricted stock unit activity for the period ended June 30, 2021:

The following table summarizes market-based restricted stock unit activity for the period ended September 30, 2021:

Shares Weighted Average Grant Date Fair Value per Share

1 unchanged sentence

Granted during the period 135,766 17.77

Unvested restricted stock grants outstanding as of June 30, 2021 135,766 $ 17.77

For the three and six months ended June 30, 2021, the Company recognized $ 0.2 million in stock-based compensation expense associated market-based restricted stock units.

As of June 30, 2021, the remaining unamortized stock-based compensation expense totaled $ 2.2 million and as of June 30, 2021, these awards are expected to be recognized over a remaining weighted average period of 2.7 years.

Forfeited during the period ( 1,299 ) 17.77

Unvested restricted stock grants outstanding as of September 30, 2021 134,467 $ 17.77

For the three and nine months ended September 30, 2021, the Company recognized $ 0.2 million and $ 0.4 million in stock-based compensation expense associated market-based restricted stock units.

As of September 30, 2021, the remaining unamortized stock-based compensation expense totaled $ 2.0 million and as of September 30, 2021, these awards are expected to be recognized over a remaining weighted average period of 2.4 years.

Note 11 – Earnings Per Share

Net loss per common share has been computed pursuant to the guidance in the FASB ASC Topic 260, Earnings per Share.

Basic earnings per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period.

Net income (loss) per common share has been computed pursuant to the guidance in the FASB ASC Topic 260, Earnings per Share.

Basic earnings per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period.

Diluted earnings per share is similarly calculated except that the denominator is increased by using the treasury stock method to determine the potential dilutive effect of the Company’s outstanding unvested restricted stock units and using the if-converted method to determine the potential dilutive effect of the Company’s OP Units.

The Company has noncontrolling interests in the form of OP Units which are convertible into common stock and represent potentially dilutive securities, as the OP Units may be redeemed for cash or, at the Company’s election, exchanged for shares of the Company’s common stock on a one-for-one basis.

The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted net income per common share for the three and six months ended June 30, 2021 and 2020.

Three Months Ended June 30, Six Months Ended June 30,

The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted net income (loss) per common share for the three and nine months ended September 30, 2021 and 2020.

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands, except share and per share data) 2021 2020 2021 2020

Net loss $ ( 2,630 ) $ ( 405 ) $ ( 1,889 ) $ ( 1,957 )

Net loss attributable to noncontrolling interest 94 111 54 536

Cumulative preferred stock dividends and redemption premium — ( 6 ) — ( 6 )

Net loss attributable to common shares, basic ( 2,536 ) ( 300 ) ( 1,835 ) ( 1,427 )

Net loss attributable to noncontrolling interest 94 111 54 536

Net loss attributable to common shares, diluted $ ( 2,630 ) $ ( 411 ) $ ( 1,889 ) $ ( 1,963 )

Weighted average common shares outstanding, basic and diluted 38,018,588 11,797,645 33,236,262 11,105,709

Net loss available to common stockholders per common share, basic $ ( 0.07 ) $ ( 0.03 ) $ ( 0.06 ) $ ( 0.13 )

Net loss available to common stockholders per common share, diluted $ ( 0.07 ) $ ( 0.03 ) $ ( 0.06 ) $ ( 0.13 )

For the periods presented, diluted net loss per common share does not assume the conversion of OP Units or unvested RSUs as such conversion would be antidilutive.

For the three months ended June 30, 2021 diluted net loss per common share does not assume the conversion of 1,438,969 OP Units or 332,781 unvested RSUs and for the three months ended June 30, 2020 does not assume the conversion of 4,449,019 OP Units.

For the six months ended June 30, 2021 diluted net loss per common share does not assume the conversion of 1,527,160 OP Units or 210,370 unvested RSUs and for the six months ended June 30, 2020 does not assume the conversion of 4,449,019 OP Units.

As of June 30, 2021 and December 31, 2020, there were 1,355,365 and 1,751,882 of OP Units outstanding, respectively.

Net income (loss) 2,944 ( 2,341 ) 1,055 ( 4,298 )

Net (income) loss attributable to noncontrolling interests ( 96 ) 263 ( 42 ) 799

Preferred stock dividends — ( 36 ) — ( 42 )

Net income (loss) attributable to common shares, basic 2,848 ( 2,114 ) 1,013 ( 3,541 )

Net income (loss) attributable to noncontrolling interest 96 ( 263 ) 42 ( 799 )

Net income (loss) attributable to common shares, diluted $ 2,944 $ ( 2,377 ) $ 1,055 $ ( 4,340 )

Weighted average common shares outstanding, basic 39,559,605 18,825,389 35,359,551 13,771,457

Effect of dilutive shares for diluted net income per common share:

OP Units 1,334,571 — 1,462,419 —

Unvested RSUs 439,403 — 286,455 —

Weighted average common shares outstanding, diluted 41,333,579 18,825,389 37,108,425 13,771,457

Net income (loss) available to common stockholders per common share, basic $ 0.07 $ ( 0.11 ) $ 0.03 $ ( 0.26 )

Net income (loss) loss available to common stockholders per common share, diluted $ 0.07 $ ( 0.11 ) $ 0.03 $ ( 0.26 )

For the three and nine months ended September 30, 2020, diluted net loss per common share does not assume the conversion of OP Units or unvested RSUs as such conversion would be antidilutive.

For the three months ended September 30, 2020, diluted net loss per common share does not assume the conversion of 4,310,286 OP Units or 24,302 unvested RSUs and for the nine months ended September 30, 2020 does not assume the conversion of 4,402,437 OP Units or 8,101 unvested RSUs.

As of September 30, 2021 and December 31, 2020, there were 1,289,525 and 1,751,882 of OP Units outstanding, respectively.

Note 12 – Commitments and Contingencies

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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

As of June 30, 2021, the Company had commitments to fund properties under development totaling $ 10.4 million, of which $ 5.3 million has been funded to date and the remaining is expected to be funded over the next eight months .

As of June 30, 2021, the Company did not have any other material commitments for re-leasing costs, recurring capital expenditures, non-recurring building improvements, or similar types of costs.

Additionally, as of September 30, 2021, the Company had commitments to fund five properties under development totaling $ 16.9 million, of which $ 9.5 million has been funded to date and the remaining is expected to be funded over the next five months .

In August 2021, the Company entered into a lease agreement on a new corporate office space, which will be classified as an operating lease.

The space is currently undergoing construction with an anticipated move-in date occurring in the first quarter of 2022.

The Company expects to incur approximately $ 2.2 million of leasehold improvement costs, of which $ 1.0 million will be refunded by the landlord through tenant allowances.

The lease has an initial term that expires on July 31, 2032 and is renewable at the Company’s option for two additional periods of five years each after the initial term.

Annual rent expense, excluding operating expenses, is expected to be approximately $ 0.5 million during the initial term.

Furthermore, the Company’s facilities agreement with EB Arrow terminated effective July 2021 and an occupancy license was executed directly with the building owner of the Company’s current corporate office space.

The occupancy license is set to expire in February 2022.

The Company incurred significant damages to a property in Houma, Louisiana as a result of Hurricane Ida making landfall in August 2021.

As of September 30, 2021, the Company recorded a loss based on estimated damages of $ 0.5 million in the accompanying condensed consolidated statements of operations and comprehensive income (loss), which has been fully offset by insurance proceeds deemed probable of recovery.

Repair and replacement costs are expected to be approximately $ 1.3 million which is covered by insurance, less the Company’s $ 0.1 million deductible.

No gain contingency has been realized as of September 30, 2021.

The Company anticipates a construction period of three to six months , during which time customer rental payments will be abated.

During the abatement period, lost rent is also covered by the Company’s insurance policy.

As of September 30, 2021, the Company did not have any other material commitments for re-leasing costs, recurring capital expenditures, non-recurring building improvements, or similar types of costs.

During March 2021, the Company executed the Alignment of Interest Program (the “Program”) which allows employees to elect to receive a portion of their 2021 bonus in unvested restricted stock units in the first quarter of 2022 and would vest over a four-year service period beginning April 1, 2021.

The Program is deemed to be a liability-classified award which will be fair valued and accrued over the applicable service period beginning April 1, 2021.

The total estimated fair value of the Program as of June 30, 2021 is approximately $ 1.0 million.

The Program is deemed to be a liability-classified award (accounted for as an equity-classified award as the service date precedes the grant date and the award would otherwise by classified as equity on grant date) which will be fair-valued and accrued over the applicable service period beginning April 1, 2021.

The total estimated fair value of the Program as of September 30, 2021 is approximately $ 1.0 million.

The award will be remeasured to fair value each reporting period.

For the three and six months ended June 30, 2021, the Company recognized less than $ 0.1 million in stock-based compensation expense associated with liability-classified awards.

For the three and nine months ended September 30, 2021, the Company recognized approximately $ 0.1 million in stock-based compensation expense associated with this award.

Note 13 – Related-Party Transactions

Effective with the Private Offering and commencement of the Company’s operations on December 23, 2019, the Company executed a facilities agreement with a subsidiary of EB Arrow Holdings, LLC (“EB Arrow”), which was subsequently amended in April 2021.

Under the facilities agreement, the Company shares in office rent by paying a fixed monthly rate and office related expenses based on employee headcount.

For the three months ended June 30, 2021 and 2020, the Company incurred less than $ 0.1 million in related expenses.

For the six months ended June 30, 2021 and 2020, the Company incurred approximately $ 0.1 million in related expenses.

Under the facilities agreement, the Company shared in office rent by paying a fixed monthly rate and office related expenses based on employee headcount.

For the three months ended September 30, 2021, the Company incurred no expenses and for the three months ended September 30, 2020, the Company incurred $ 0.1 million related expenses.

For the nine months ended September 30, 2021 and 2020, the Company incurred approximately $ 0.1 million and $ 0.2 million in related expenses.

Note 14 – Subsequent Events

The Company has evaluated all events that occurred subsequent to June 30, 2021 through the date on which these condensed consolidated financial statements were issued to determine whether any of these events required disclosure in the financial statements.

The Company has evaluated all events that occurred subsequent to September 30, 2021 through the date on which these condensed consolidated financial statements were issued to determine whether any of these events required disclosure in the financial statements.

Real Estate Investment Activity

Since September 30, 2021, the Company acquired 12 properties for a total purchase price, including capitalized transaction costs, of $ 90.0 million.

Common Stock Dividend

On July 27, 2021, the Company's Board of Directors declared a cash dividend of $ 0.20 per share for the third quarter of 2021 which will be paid on September 15, 2021 to shareholders of record on September 1, 2021.

On October 26, 2021, the Company's Board of Directors declared a cash dividend of $ 0.20 per share for the fourth quarter of 2021 which will be paid on December 15, 2021 to shareholders of record on December 1, 2021.

Corporate Office Operating Lease

In August 2021, the Company entered into a lease agreement on a new corporate office space, which will be classified as an operating lease.

The lease commenced in October 2021, at which point the Company recorded a right-of-use asset and lease liability of approximately $ 4.6 million.

Revolver Borrowing

In October 2021, the Company borrowed $ 70.0 million on the Revolver which will be used for general corporate purposes, including the acquisition of properties in the Company’s pipeline.

OP Unit Conversions to Common Stock

There were 7,119 OP Units redeemed for shares of common stock on a one-for-one basis subsequent to September 30, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements