What changed in this filing

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Item 1. Financial Statements

2022-04-28 compared with 2021-10-28 · 339 added, 385 removed, 444 unchanged (62% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

September 30, December 31,

March 31, 2022 December 31, 2021

Real estate, at cost:

6 unchanged sentences

Assets held for sale 7,748 2,096

Mortgage loan receivable, net 40,413 —

Cash, cash equivalents and restricted cash 4,687 7,603

12 unchanged sentences

Common stock, $ 0.01 par value, 400,000,000 shares authorized;

39,617,805 and 28,203,545 shares issued and outstanding, respectively

47,921,988 and 44,223,050 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital 886,351 809,724

6 unchanged sentences

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

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NETSTREIT CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except share and per share data)

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Rental revenue (including reimbursable) $ 20,921 $ 11,932

Interest income on mortgage loan receivable 411 —

Total revenues 21,332 11,932

Operating expenses

8 unchanged sentences

Gain on sales of real estate, net 161 —

Gain on forfeited earnest money deposit — — — 250

Total other income (expense), net ( 1,008 ) ( 905 )

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

Net income before income tax expense 2,057 791

Income tax expense ( 91 ) ( 50 )

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 shareholders $ 2,848 $ ( 2,114 ) $ 1,013 $ ( 3,541 )

Amounts available to common shareholders per common share:

Net income 1,966 741

Net income attributable to noncontrolling interests 24 40

Net income attributable to common stockholders $ 1,942 $ 701

Amounts available to common stockholders per common share:

Basic $ 0.04 $ 0.02

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Diluted 45,600,810 30,052,940

Other comprehensive income (loss):

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

Other comprehensive income:

Net income $ 1,966 $ 741

Change in value on derivatives, net 6,211 2,323

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 )

Total comprehensive income 8,177 3,064

Comprehensive income attributable to noncontrolling interests 100 164

Comprehensive income attributable to common stockholders $ 8,077 $ 2,900

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

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NETSTREIT CORP.

2 unchanged sentences

(In thousands, except share data)

Preferred stock Common stock

Shares Par Value Shares Par Value Additional

Shares Par Value Additional

Paid-in Capital Distributions in Excess of Retained Earnings Accumulated Other Comprehensive Income Total Stockholders’ Equity Noncontrolling Interests Total Equity

Balance at December 31, 2021 44,223,050 $ 442 $ 809,724 $ ( 35,119 ) $ 4,123 $ 779,170 $ 10,645 $ 789,815

Issuance of common stock in public offering, net of issuance costs 3,604,736 36 75,461 — — 75,497 — 75,497

OP Units converted to common stock 25,629 — 484 — — 484 ( 484 ) —

Dividends and distributions declared on common stock and OP units — — — ( 8,888 ) — ( 8,888 ) ( 109 ) ( 8,997 )

Dividends declared on restricted stock — — — — — ( 132 ) — ( 132 ) — ( 132 )

Dividends declared on restricted stock, net — — — ( 128 ) — ( 128 ) — ( 128 )

Vesting of restricted stock units 85,224 1 ( 1 ) — — — — —

Repurchase of common stock for tax withholding obligations ( 16,651 ) — ( 362 ) — — ( 362 ) — ( 362 )

Stock-based compensation — — — — 557 — 557 — 557

Stock-based compensation, net — — 1,045 — 1,045 — 1,045

Other comprehensive income — — — — 6,135 6,135 76 6,211

1 unchanged sentence

Balance at March 31, 2022 47,921,988 $ 479 $ 886,351 $ ( 42,193 ) $ 10,258 $ 854,895 $ 10,152 $ 865,047

Issuance of common stock in public offering — — 10,915,688 109 203,468 — — 203,577 — 203,577

Offering and related costs of common stock — — — — ( 9,416 ) — — ( 9,416 ) — ( 9,416 )

OP Units converted to common stock — — 143,173 1 2,744 — — 2,745 ( 2,745 ) —

Dividends and distributions declared on common stock and OP Units — — — — — ( 7,890 ) — ( 7,890 ) ( 287 ) ( 8,177 )

Dividends declared on restricted stock — — — — — ( 132 ) — ( 132 ) — ( 132 )

Stock-based compensation — — — — 1,041 — 1,041 — 1,041

Other comprehensive loss — — — — — — ( 253 ) ( 253 ) ( 12 ) ( 265 )

Net loss — — — — — ( 2,536 ) — ( 2,536 ) ( 94 ) ( 2,630 )

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

Shares Par Value Additional

Paid-in Capital Distributions in Excess of Retained Earnings Accumulated Other Comprehensive Income Total Stockholders’ Equity Noncontrolling Interests Total Equity

Balance at December 31, 2020 28,203,545 $ 282 $ 501,045 $ ( 7,464 ) $ 235 $ 494,098 $ 33,975 $ 528,073

OP Units converted to common stock 253,344 3 4,920 — — 4,923 ( 4,923 ) —

3 unchanged sentences

Repurchase of common stock for tax withholding obligations ( 4,962 ) — ( 90 ) — — ( 90 ) — ( 90 )

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

Stock-based compensation — — 557 — 557 — 557

Other comprehensive income — — — — 2,199 2,199 124 2,323

Net income — — — 701 — 701 40 741

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.

NETSTREIT CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands, except share data)

Preferred stock Common stock

Shares Par Value Shares Par Value Additional

Paid-in Capital Distributions in Excess of Retained Earnings Accumulated Other Comprehensive Income Total Stockholders’ Equity Noncontrolling Interests Total Equity

Balance at December 31, 2019 — $ — 8,860,760 $ 89 $ 164,416 $ 28 $ — $ 164,533 $ 87,899 $ 252,432

Issuance of preferred stock 125 125 — — — — — 125 — 125

Offering and related costs of preferred stock — ( 21 ) — — — — — ( 21 ) — ( 21 )

Issuance of common stock in private offering — — 2,936,885 29 57,974 — — 58,003 — 58,003

Offering and related costs of common stock — — — — ( 3,444 ) — — ( 3,444 ) — ( 3,444 )

Net loss — — — — — ( 1,127 ) — ( 1,127 ) ( 425 ) ( 1,552 )

Balance at March 31, 2021 28,467,117 $ 285 $ 506,432 $ ( 12,582 ) $ 2,434 $ 496,569 $ 28,909 $ 525,478

Dividends declared on preferred stock — — — — — ( 6 ) — ( 6 ) — ( 6 )

Net loss — — — — — ( 294 ) — ( 294 ) ( 111 ) ( 405 )

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.

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NETSTREIT CORP.

2 unchanged sentences

(In thousands, except share and per share data)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities

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

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

Net income $ 1,966 $ 741

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

Depreciation and amortization 10,980 5,929

2 unchanged sentences

Stock-based compensation expense 1,045 557

Gain on sale of real estate, net ( 2,452 ) ( 1,070 )

Gain on forfeited earnest money deposit — ( 250 )

Gain on sales of real estate, net ( 161 ) —

Provisions for impairment — 69

2 unchanged sentences

Accounts payable, accrued expenses and other liabilities ( 2,742 ) ( 1,644 )

Lessee improvement obligations ( 1 ) ( 1,893 )

Lease incentive payments ( 4,004 ) —

Net cash provided by operating activities 8,954 4,270

2 unchanged sentences

Real estate development and improvements ( 4,378 ) ( 1,346 )

Investment in mortgage loan receivable ( 40,426 ) —

Earnest money deposits ( 630 ) ( 451 )

3 unchanged sentences

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 —

Issuance of common stock in private offering, net — 54,559

Issuance of preferred stock, net — 104

Payment of preferred stock dividends — ( 8 )

Issuance of common stock in public offerings, net 75,497 —

Payment of common stock dividends ( 8,888 ) ( 5,687 )

Payment of OP unit distributions ( 109 ) ( 307 )

Redemption of preferred stock — ( 138 )

Payment of restricted stock dividends ( 106 ) ( 5 )

1 unchanged sentence

Repayments under revolving credit facility ( 72,000 ) —

Proceeds under property development incentives 375 —

Repurchase of common stock for tax withholding obligations ( 363 ) ( 90 )

Deferred offering costs ( 568 ) ( 86 )

Deferred financing costs — ( 75 )

Net cash provided by financing activities 121,838 6,825

5 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 $ —

Dividends declared and unpaid on restricted stock $ 128 $ 132

Deferred offering costs included in accounts payable, accrued expenses and other liabilities $ 88 $ —

Cash flow hedge change in fair value $ 6,211 $ 2,323

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

Accrued construction and development costs $ 345 $ —

Accrued capital expenditures and real estate development and improvement costs $ 1,418 $ —

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

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NETSTREIT CORP.

3 unchanged sentences

NETSTREIT Corp.

(“Successor” or the “Company”) was incorporated on October 11, 2019 as a Maryland corporation and commenced operations on December 23, 2019.

(“Company”) was incorporated on October 11, 2019 as a Maryland corporation and commenced operations on December 23, 2019.

The Company conducts its operations through NETSTREIT, L.P., a Delaware limited partnership (the “Operating Partnership”).

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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 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

On December 23, 2019, the Company completed a series of transactions (collectively the “Private Offering”) pursuant to which the Company sold 8,860,760 shares of common stock at $ 19.75 per share in a private placement under Rule 144A and Regulation D under the Securities Act of 1933, as amended (the “Securities Act”).

In connection with the Private Offering, the Company completed the formation transactions described below.

On January 30, 2020, the initial purchaser in the Private Offering exercised its over-allotment option to purchase 2,936,885 shares of the Company’s common stock, which were delivered on February 6, 2020.

The Company contributed the net proceeds of $ 219.0 million from the Private Offering to the Operating Partnership in exchange for 11,797,645 Class A units of limited partnership of the Operating Partnership (“Class A OP Units”).

Upon completion of the Private Offering and the over-allotment option, noncontrolling interest holders owned approximately 27.4 % of the Operating Partnership (the Operating Partnership issued total Class A and Class B OP Units of 15,449,794 and 796,870 , respectively).

Concurrently with the closing of the Private Offering, EverSTAR Income and Value Fund V, LP, a Delaware limited partnership (the “Predecessor”), was merged with and into the Operating Partnership, with the Operating Partnership surviving, and the continuing investors in the Operating Partnership receiving an aggregate of 3,652,149 Class A OP Units, other than the Chief Executive Officer of the Company, who received 8,884 Class B units of limited partnership of the Operating Partnership (“Class B OP Units,” and collectively with Class A OP Units, “OP Units”), and an affiliate of the Predecessor’s general partner, which received 287,234 Class B OP Units.

The Operating Partnership entered into a contribution agreement with EBA EverSTAR LLC, a Texas limited liability company, to internalize the Company’s management infrastructure, whereby EBA EverSTAR LLC contributed 100 % of the membership interests in EBA EverSTAR Management, LLC, a Texas limited liability company and the manager of the Predecessor, to the Operating Partnership in exchange for 500,752 Class B OP Units.

In connection with the internalization, EBA EverSTAR Management, LLC was re-domiciled in Delaware and its name was changed to NETSTREIT Management, LLC.

A 0.01 % interest in NETSTREIT Management, LLC was issued to NETSTREIT TRS.

Concurrently with the consummation of the Private Offering, the Company entered into a $ 175.0 million term loan and $ 250.0 million revolving credit facility.

On December 23, 2019, in connection with the acquisition of the Predecessor, the Company fully drew down on its term loan and used the proceeds to acquire the Predecessor, which concurrently settled its outstanding debt facilities.

As part of the acquisition, the Company did not assume any obligations under the Predecessor’s then outstanding debt facilities.

Series A Preferred Stock

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 (“Series A Preferred Stock”), 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.

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

Initial Public Offering

On August 17, 2020, the Company completed the initial public offering of its common stock.

The Company sold 12,244,732 shares of common stock and selling stockholders sold 255,268 shares of common stock at a price of $ 18.00 per share.

The Company's common stock began trading on the New York Stock Exchange under the symbol “NTST” on August 13, 2020.

On September 16, 2020, the Company issued an additional 1,436,829 shares of its common stock pursuant to the underwriters' over-allotment option in connection with the Company's initial public offering.

The net proceeds to the Company from the initial public offering was $ 227.3 million, which is net of transaction costs and underwriter fees of $ 18.9 million.

The Company contributed the net proceeds of the initial public offering and related over-allotment option to the Operating Partnership in exchange for 13,681,561 Class A OP Units.

In addition, an equivalent number of Class A OP Units were issued for the 255,268 shares sold by selling stockholders.

April 2021 Offering

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 of the offering, the Company issued 10,915,688 shares of common stock and received net proceeds of $ 194.2 million after deducting the underwriting discount and transaction costs of $ 9.4 million.

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.

As of March 31, 2022, the Company owned or had investments in 363 properties, located in 42 states.

Note 2 – Summary of Significant Accounting Policies

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The accompanying condensed consolidated financial statements include the accounts of the Company and subsidiaries in which the Company has a controlling financial interest.

All intercompany accounts and transactions have been eliminated in consolidation and the Company’s net income (loss) is reduced by the portion of net income (loss) attributable to noncontrolling interests.

All intercompany accounts and transactions have been eliminated in consolidation and the Company’s net income is reduced by the portion of net income attributable to noncontrolling interests.

Interim Unaudited Financial Information

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

The results of operations for the three months ended March 31, 2022 and 2021 are not necessarily indicative of the results for the full year.

Noncontrolling Interests

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.

The Company presents noncontrolling interests, which represent limited partnership units in the operating partnership (the “OP Units”) not owned by the Company, 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.

Net income or loss of the Operating Partnership is allocated to its noncontrolling interests based on the noncontrolling interests’ ownership percentages in the Operating Partnership throughout the period.

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Net income of the Operating Partnership is allocated to its noncontrolling interests based on the noncontrolling interests’ ownership percentages in the Operating Partnership throughout the period.

Ownership percentage is calculated by dividing the number of OP Units held by the noncontrolling interests by the total OP Units outstanding.

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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 September 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 March 31, 2022 inherently less certain than they would be absent the current and potential impacts of COVID-19.

Actual results could differ from those estimates.

Risk and Uncertainties

On March 11, 2020, the World Health Organization announced a new strain of coronavirus (“COVID-19”) was reported worldwide, resulting in COVID-19 being declared a pandemic, and on March 13, 2020 the U.S.

President announced a National Emergency relating to the disease.

COVID-19 and the measures taken to limit its spread have, and may continue to, negatively impact the economy across many industries, including industries in which our tenants operate.

The impacts may continue and increase in severity as the duration of the pandemic lengthens or new variants are identified.

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 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.

The Company does not anticipate these policies to have any adverse impact on its ability to continue to operate its business.

Transitioning to a remote-work environment has not had a material adverse impact on the Company's general ledger system, internal controls or controls and procedures related to its financial reporting process.

The ongoing COVID-19 pandemic, and the measures taken to limit its spread have negatively impacted the economy across many industries, including industries in which our tenants operate.

The impacts may continue and/or increase in severity as the duration of the pandemic lengthens.

The Company continues to monitor the global outbreak of COVID-19 and to take steps to mitigate the potential risks to us posed by the pandemic, including the identification and spread of variants.

However, the Company’s operations and cash flows during the years presented in the consolidated financial statements were not materially impacted by COVID-19.

Real Estate Held for Investment

Real estate is recorded and stated at cost less any provision for impairment.

Assets are recognized at fair value at acquisition date.

At acquisition date, the purchase price of an acquired property is allocated to tangible and identifiable intangible assets or liabilities based on their relative fair values.

For properties developed by the Company, all direct and indirect costs related to planning, development and construction, including interest, real estate taxes and other miscellaneous costs incurred during the construction period, are capitalized for financial reporting purposes and recorded as property under development until construction has been completed.

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Intangible assets include the value of in-place leases and above-market leases and intangible liabilities include below-market leases.

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The fair value of the tangible assets of an acquired property with an in-place operating lease is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to the tangible assets based on the fair value of the tangible assets.

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The fair value of above-market or below-market leases is recorded based on the net present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between the contractual amount to be paid pursuant to the in-place lease and the Company’s estimate of the fair market lease rate for the corresponding in-place lease, measured over the remaining non-cancelable term of the lease including any below-market fixed rate renewal options for below-market leases.

In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including real estate valuations prepared by independent valuation firms.

In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including real estate valuations prepared by an independent valuation firm.

The Company also considers information and other factors including market conditions, the industry that the tenant operates in, characteristics of the real estate;

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Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets:

Buildings 13 – 35 years

Building improvements 15 years

Tenant improvements Shorter of the term of the related lease or useful life

Acquired in-place leases Remaining terms of the respective leases

Assembled workforce 3 years

Computer equipment 3 years

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;

13 – 35 years

Building improvements

Tenant improvements

Shorter of the term of the related lease or useful life

Acquired in-place leases or leasing commissions

Remaining terms of the respective leases

Assembled workforce

Computer equipment and other corporate assets

Total depreciation and amortization expense was $ 11.0 million and $ 5.9 million during the three months ended March 31, 2022 and 2021, respectively.

Depreciation expense on real estate held for investment and computer equipment and other corporate assets was $ 7.3 million and $ 4.1 million during the three months ended March 31, 2022 and 2021, respectively.

Amortization expense on acquired in-place lease and assembled workforce intangible assets, and leasing commission costs were $ 3.6 million and $ 1.8 million during the three months ended March 31, 2022 and 2021, respectively.

Repairs and maintenance are charged to property operating expense as incurred;

major renewals and betterments that extend the useful life or improve the operating capacity of the asset are capitalized.

Upon the sale or disposition of a property, the asset and the related accumulated depreciation are removed from the condensed consolidated balance sheets with the difference between the proceeds received, net of sales costs, and the carrying value of the asset group recorded as a gain or loss on sale, subject to impairment considerations.

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Assets Held for Sale

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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 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.

Accordingly, we have not reclassified results of operations for properties disposed during the interim period ended March 31, 2022 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 March 31, 2022 and December 31, 2021, there was one property classified as held for sale.

Impairment of Long-Lived Assets

Fair value measurement of an asset occurs when events or changes in circumstances related to an asset indicate that the carrying amount of the asset is no longer recoverable.

If indicators are present, the Company will prepare a projection of the undiscounted future cash flows of the property, excluding interest charges, and determine if the carrying amount of the real estate is recoverable.

When a carrying amount is not recoverable, an impairment loss is recognized to the extent that the carrying amount of the asset exceeds its fair market value.

Fair value measurement of an asset group occurs when events or changes in circumstances related to an asset indicate that the carrying amount of the asset is no longer recoverable.

An example of an event or changed circumstance is a reduction in the expected holding period of a property.

When a carrying amount is not recoverable, an impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair market value.

The Company estimates fair value using data such as operating income, estimated capitalization rates or multiples, leasing prospects, local market information, and with regard to assets held for sale, based on the estimated or negotiated selling price, less estimated costs of disposal.

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

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

2021 2020 2021 2020

Three Months Ended

Total provision for impairment $ — $ 69

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(1) Includes the number of properties that were impaired and classified as held for sale or impaired and disposed of during the respective periods.

Excludes properties that did not have impairment recorded during the year.

Excludes properties that did not have impairment recorded during the period.

Cash, Cash Equivalents and Restricted Cash

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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.

The Company had no restricted cash as of March 31, 2022 or December 31, 2021.

The Company’s bank balances as of March 31, 2022 and December 31, 2021 include certain amounts over the Federal Deposit Insurance Corporation limits.

Revenue Recognition and Related Matters

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Rent from leases that have fixed and determinable rent increases is recognized on a straight-line basis over the non-cancellable initial term of the lease and reasonably certain renewal periods, from the later of the date of the commencement of the lease or the date of acquisition of the property subject to the lease.

The difference between rental revenue recognized and the cash rent due under the provisions of the lease is recorded as deferred rent receivable and included as a component of other assets in the condensed consolidated balance sheets.

The difference between rental revenue recognized and the cash rent

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due under the provisions of the lease is recorded as deferred rent receivable and included as a component of other assets in the condensed consolidated balance sheets.

Variable lease revenues include tenant reimbursements, lease termination fees, changes in the index or market-based indices after the inception of the lease or percentage rents.

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The Company recognized variable lease revenue related to tenant reimbursements and lease termination fees for the periods presented.

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.

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.

Capitalized above-market and below-market lease values 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.

Reserves for uncollectible amounts are 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 specifically 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.

As of March 31, 2022 and December 31, 2021, the Company had an immaterial reserve for uncollectible amounts specific to uncharged reimbursable expenses.

Mortgage Loan Receivable

The Company holds one loan receivable, which is a mortgage loan secured by real estate, for long-term investment.

The loan receivable is carried at amortized cost.

The Company recognizes interest income on the loan receivable using the effective-interest method.

Direct costs associated with originating loans, along with any premium or discount, is deferred and amortized as an adjustment to interest income over the term of the related loan receivable using the effective interest method.

The Company evaluates its loans receivable balance, including accrued interest, for potential credit losses by analyzing the credit of the borrower, the remaining time to maturity of the loan, collateral value and quality (if any), and other relevant factors.

A loan receivable is placed on nonaccrual status when management determines that full recovery of the contractually specified payments of principal and interest is doubtful.

Stock-Based Compensation

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.

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 income.

We classify 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.

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The Company recognizes forfeitures as they occur.

Forward Equity Sales

The Company occasionally sells shares of common stock through forward sale agreements to enable the Company to set the price of such shares upon pricing the offering (subject to certain adjustments) while delaying the issuance of such shares and the receipt of the net proceeds by the Company.

To account for the forward sale agreements, the Company considers the accounting guidance governing financial instruments and derivatives.

To date, the Company has concluded that its forward sale agreements are not liabilities as they do not embody obligations to repurchase its shares nor do they embody obligations to issue a variable number of shares for which the monetary value are predominantly fixed, varying with something other than the fair value of the shares, or varying inversely in relation to its shares.

The Company then evaluates whether the agreements meet the derivatives and hedging guidance scope exception to be accounted for as equity instruments.

The Company has concluded that the agreements are classifiable as equity contracts based on the following assessments:

(i) none of the agreements’ exercise contingencies are based on observable markets or indices besides those related to the market for the Company’s own stock price and operations;

and (ii) none of the settlement provisions precluded the agreements from being indexed to its own stock.

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The Company also considers the potential dilution resulting from the forward sale agreements on the earnings per share calculations.

Prior to settlement, a forward sale agreement will be reflected in the diluted earnings per share calculations using the treasury stock method.

Under this method, the number of shares of the Company’s common stock used in diluted earnings per share is deemed to be increased by the excess, if any, of the number of shares of the Company’s common stock that would be issued upon full physical settlement of such forward sale agreement over the number of shares of the Company’s common stock that could be purchased by the Company in the market (based on the average market price during the period) using the proceeds receivable upon full physical settlement (based on the adjusted forward sale price at the end of the reporting period).

Consequently, prior to settlement of a forward sale agreement, there will be no dilutive effect on the Company’s earnings per share except during periods when the average market price of the Company’s common stock is above the adjusted forward sale price.

However, upon settlement of a forward sales agreement, if the Company’s elects to physically settle or net share settle such forward sale agreement, delivery of the Company’s shares will result in dilution to the Company’s earnings per share.

Transaction Costs

Transaction costs represent costs incurred by the Company to facilitate the private offering, formation transactions and initial public offering.

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

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.

Transaction costs were $ 0.2 million for each of the three months ended March 31, 2022 and 2021, respectively, and represent acquisition related expenses, including costs associated with abandoned acquisitions.

The Company elected to be treated and qualify as a REIT for U.S.

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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.

federal or state income tax to the extent that it makes qualifying distributions of all of its taxable income to its stockholders 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 2022 to receive a full dividends paid deduction.

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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 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 recognizes 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.

All provisions for federal income taxes in the accompanying condensed 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 years and periods presented.

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

Additionally, there were no material accruals for interest or penalties as of March 31, 2022 and December 31, 2021.

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

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Additionally, state tax returns for years prior to 2017 are generally no longer subject to examination.

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Earnings Per Share

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

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

Basic earnings per share (“EPS”) is computed by dividing net income allocated to common stockholders by the weighted-average number of common shares outstanding for the reporting period.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

No effect is shown for any securities that are anti-dilutive.

Net income (loss) allocated to common stockholders represents net income (loss) less income allocated to participating securities and noncontrolling interests.

Net income allocated to common stockholders represents net income less income allocated to participating securities and noncontrolling interests.

None of the Company’s equity awards are participating securities.

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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 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.

Provisions for impairment recognized in the three months ended March 31, 2021 related to an asset 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, amounts due under the mortgage loan receivable, 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 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 the three months ended March 31, 2022, the Company’s rental revenues were derived from 71 separate tenants leasing 354 total properties.

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

During the three months ended March 31, 2021, the Company’s rental revenues were derived from 63 separate tenants leasing 234 total properties.

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

Segment Reporting

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There were no intersegment sales during the periods presented.

Recent Accounting Pronouncements Issued But Not Yet Adopted

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Recent Accounting Pronouncements Adopted

In March 2020, the FASB issued ASU 2020-04 “Topic 848:

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The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In August 2020, the FASB issued ASU 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies accounting for convertible instruments by removing major separation models currently required.

Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features.

ASU 2020-06 also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it.

ASU 2020-06 also simplifies the diluted earnings per share calculation in certain areas.

Effective January 1, 2022 the Company adopted this standard with no material impact to the condensed consolidated financial statements.

Note 3 – Leases

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 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.

As of March 31, 2022, the Company had investments in 361 single-tenant retail net leased properties spanning 42 states, with 71 different tenants represented across 23 retail sectors.

As of March 31, 2022, the remaining terms of leases range from one to 32 years, with weighted average lease term of 9.6 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 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 Company’s leases typically provide the tenant one or more multi-year renewal options to extend their leases, subject to generally the same terms and conditions, including rent increases, consistent with the initial 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 income and is presented net of any reserves for uncollectible amounts.

There were no material reserves for uncollectible amounts during the three months ended March 31, 2022.

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

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

2021 2020 2021 2020

Three Months Ended

Rental revenue

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Variable lease income (2)

1,434 458 3,290 1,104

Other rental revenue:

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Lease incentives ( 118 ) —

Rental revenue (including reimbursables) $ 15,603 $ 9,652 $ 41,333 $ 22,277

Rental revenue (including reimbursable) $ 20,921 $ 11,932

(1) Fixed lease income includes contractual rents under lease agreements with tenants recognized on a straight-line basis over the lease term.

(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 September 30, 2021 are as follows (in thousands):

(2) Variable lease income primarily includes tenant reimbursements for real estate taxes, insurance, common area maintenance, and lease termination fees, and the write-off of uncollectible amounts.

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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 March 31, 2022 are as follows (in thousands):

Future Minimum Base

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In addition, the future minimum rents do not include any contingent rents based on a percentage of the lessees' gross sales or lease escalations based on future changes in the Consumer Price Index (“CPI”) or other stipulated reference rate.

Corporate Office Lease

In August 2021, the Company entered into a lease agreement on a new corporate office space, which commenced in October 2021 and is classified as an operating lease.

The Company began operating out of the new office in February 2022.

The lease has a remaining noncancellable lease term of 10.3 years that expires on July 31, 2032, with a one-time option to terminate in 2029 exercisable by the Company.

The lease is also renewable at the Company’s option for two additional periods of five years .

No renewals were incorporated in the calculation of the corporate lease right-of-use asset and liability as it is not reasonably certain that the Company will exercise the options.

Further, the lease agreement does not contain any material residual value guarantees or material restrictive covenants.

The corporate office lease contains variable lease costs related to the lease of parking spaces and non-lease components related to the reimbursement of property operating expenses and certain common area maintenance expenses, all of which are recognized as incurred.

The Company elected to use the component practical expedient, which permits the Company to not separate non-lease components from lease components if timing and pattern of transfer is the same.

The following table presents the lease expense components for the three months ended March 31, 2022 (in thousands):

Three Months Ended

Operating lease cost $ 135 $ —

Variable lease cost

The Company recorded a right-of-use asset and operating lease liability of approximately $ 4.5 million at lease commencement.

As of March 31, 2022, the right-of-use asset and operating lease liability were $ 4.5 million and $ 5.5 million, respectively.

The right-of-use asset is included in other assets, net and the operating lease liability is included in accounts payable, accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets.

The following table reflects the maturity analysis of payments due from the Company over the next five years and thereafter for the corporate office lease obligation as of March 31, 2022 (in thousands):

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Future Minimum Lease Payments

Remainder of 2022 $ 150

Thereafter 3,981

Total lease payments 6,570

amount representing interest (1)

Present value of operating lease liabilities $ 5,480

(1) Imputed interest was calculated using a discount rate of 3.25 %.

The discount rate is based on the estimated incremental borrowing rate, calculated as the treasury rate for the same period as the underlying lease term, plus a spread determined using factors including REIT industry performance.

Note 4 – Real Estate Investments

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.

As of March 31, 2022, the Company owned or had investments in 363 properties, including nine properties currently under development.

The gross real estate investment portfolio, including properties under development, totaled approximately $ 1.15 billion and consisted of the gross acquisition cost of land, buildings, improvements, and lease intangible assets and liabilities.

The investment portfolio is geographically dispersed throughout 42 states with gross real estate investments in Texas and Illinois representing 11.2 % and 10.5 %, respectively, of the total gross real estate investment of the Company’s entire portfolio.

During the three months ended March 31, 2022, the Company acquired 34 properties for a total purchase price of $ 90.0 million, inclusive of $ 1.2 million of capitalized acquisition costs.

During the three months ended March 31, 2021, the Company acquired 31 properties for a total purchase price of $ 88.2 million, inclusive of $ 1.1 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):

Nine Months Ended September 30,

Three Months Ended

Land $ 14,654 $ 21,490

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Above-market lease intangible assets 108 —

Assumed receivables 44 —

Construction-in-progress assets — —

Fuel equipment — 156

91,420 90,563

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Purchase price (including acquisition costs) $ 89,973 $ 88,225

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 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.

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As of March 31, 2022, the Company had nine property developments under construction.

During the three months ended March 31, 2022, the Company invested $ 5.0 million in property developments, including the acquisition of one new build-to-suit project with an initial purchase price of $ 1.0 million.

During the three months ended March 31, 2022, the Company completed development on one project under development and reclassified approximately $ 4.7 million from property under development to land, building, and improvements in the accompanying condensed consolidated balance sheets.

Additionally, on January 1, 2022, rent commenced on a development that was previously completed in the fourth quarter of 2021.

The remaining nine developments in progress are expected to be substantially completed with rent commencing at various points throughout 2022.

The purchase price, including acquisition costs, and subsequent development are included in property under development in the accompanying condensed consolidated balance sheets as of March 31, 2022.

Additionally, during the first three months of 2022, the Company capitalized less than $ 0.1 million of interest expense associated with properties under development.

No interest expense was capitalized during the first three months of 2021.

During the three months ended March 31, 2021, the Company invested a combined total of $ 1.3 million in a development project in Yuma, Arizona.

The Company has a non-binding purchase option to acquire the property upon completion.

The Company’s total investment is expected to be $ 4.4 million with the sole tenant in the property commencing lease payments in 2022.

These amounts are included in property under development in the accompanying condensed consolidated balance sheets as of December 31, 2021.

During the three months ended March 31, 2022, the Company sold one property for a total sales price, net of disposal costs, of $ 2.3 million, recognizing a net gain of $ 0.2 million on the sale.

There were no dispositions for the three months ended March 31, 2021.

Investment in Mortgage Loan Receivable

On January 26, 2022, the Company executed a fully collateralized $ 40.3 million loan receivable with a stated interest rate of 6.0 %.

The scheduled maturity date is July 26, 2023, however the Company has the right, subject to certain terms and conditions, to purchase a portion of the underlying collateralized property.

The loan receivable is collateralized by real estate that is leased by three separate investment-grade tenants.

The funds provided under the loan, in addition to loan origination costs of $ 0.1 million, are included in loan receivable, net in the accompanying condensed consolidated balance sheets as of March 31, 2022.

Note 5 – Intangible Assets and Liabilities

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Amount Accumulated Amortization Net Carrying Amount Gross

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Below-market leases $ 27,425 $ ( 3,410 ) $ 24,015 $ 26,185 $ ( 2,869 ) $ 23,316

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:

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The remaining weighted average amortization period for the Company’s intangible assets and liabilities as of March 31, 2022 and as of December 31, 2021 by category were as follows:

Years Remaining

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

In-place leases 7.3 9.7

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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 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

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

Three Months Ended March 31,

Amortization:

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Lease incentives ( 118 ) —

$ 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 September 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 March 31, 2022, for the next five years and thereafter (in thousands):

Remainder of 2022

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Net adjustment to rental revenue $ 511 $ 617 $ 563 $ 541 $ 426 $ 590 $ 3,248

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Note 6 – Debt

Debt consists of the following (in thousands):

September 30, 2021 December 31, 2020

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

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

Maturity Date Interest Rate March 31, 2022 December 31, 2021

Term Loan (1)

December 23, 2024 1.36 % $ 175,000 $ 175,000

December 23, 2023 1.64 % 120,000 64,000

Total debt 295,000 239,000

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Total debt, net $ 293,691 $ 237,534

(1) Interest rate includes the effect of a variable interest rate that has been swapped to a fixed interest rate.

(2) The annual interest rate of the Revolver assumes one-month LIBOR as of March 31, 2022 of 0.44 %.

Additionally, the Revolver may be extended up to one year.

(3) The Company records deferred financing costs for the Revolver in other assets, net on its condensed consolidated balance sheets.

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The Term Loan matures on December 23, 2024 and the Revolver matures on December 23, 2023, subject to extension up to one year .

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.

The Credit Facility, effective during the fourth quarter of 2020, is unsecured as the Administrative Agent released the collateral in connection with the Company’s satisfaction of the collateral release requirements.

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 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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Loans from the Revolver may not exceed the total revolving commitments.

During the second quarter of 2020, the Company entered into an amendment to the Credit Facility to amend and redefine its debt covenant calculations.

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.

The interest rate is effectively fixed to 1.36 % which includes the fixed rate (one-month LIBOR) of 0.21 % plus a margin of 1.15 %.

Effective September 28, 2020, the Company entered into an interest rate derivative contract to fix the base interest rate (one-month LIBOR) on the Term Loan.

The total interest rate includes the fixed base interest rate of 0.21 % plus a leverage-based margin of 1.15 % as of March 31, 2022.

The interest rate hedge is further described in “Note 7 - Derivative Financial Instruments.”

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 $ 0.7 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.

Deferred financing, discount and debt issuance costs are being amortized over the remaining terms of each respective loan.

Total costs amortized on the Term Loan and Revolver were $ 0.2 million for each of the three months ended March 31, 2022 and March 31, 2021, respectively.

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

For the three months ended March 31, 2022 and 2021, 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 1.32 % and 1.30 %, respectively.

The Company incurred interest expense of $ 0.6 million in connection with the Term Loan for each of the three months ended March 31, 2022 and 2021, respectively.

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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 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.

The Company determined that the carrying value materially approximated the estimated fair value of the Term Loan as of March 31, 2022 and December 31, 2021.

During the three months ended March 31, 2022 and March 31, 2021, the Company incurred interest expense, exclusive of facility fees for unused capacity, on borrowings under the Revolver of $ 0.4 million and less than $ 0.1 million, respectively, with a weighted average interest rate, exclusive of amortization of deferred financing costs, of 1.39 % and 1.29 %, respectively.

As of March 31, 2022 and December 31, 2021, the Company had $ 120.0 million and $ 64.0 million in borrowings outstanding under the Revolver.

The Company also incurred interest expense in connection with unused capacity for the three months ended March 31, 2022 and 2021 of $ 0.1 million and $ 0.2 million, respectively.

During the first three months of 2022, the Company capitalized less than $ 0.1 million of interest expense associated with properties under development.

No interest expense was capitalized during the first three months of 2021.

The Company was in compliance with all of its debt covenants as of March 31, 2022 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 September 30, 2021 of 0.09 %, 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 March 31, 2022 of 0.23 %, 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 September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020

Interest Rate Derivatives March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021

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 September 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 March 31, 2022 and December 31, 2021 (in thousands):

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Derivative Assets

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Derivatives Designated as Hedging Instruments:

Balance Sheet Location September 30, 2021 December 31, 2020

Balance Sheet Location March 31, 2022 December 31, 2021

Interest rate swaps Other assets, net $ 10,520 $ 4,310

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

The following table presents the effect of the Company's interest rate swaps on the condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2022 and 2021 (in thousands):

Amount of Gain or (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

(Effective Portion)

Derivatives in Cash Flow Hedging Relationships 2022 2021 2022 2021

For the Three Months Ended September 30

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

For the Nine Months Ended September 30

For the Three Months Ended March 31

Interest Rate Products $ 6,188 $ 2,290 Interest expense, net $ ( 23 ) $ ( 34 )

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.

The Company did not exclude any amounts from the assessment of hedge effectiveness for the three months ended March 31, 2022 and 2021.

During the next twelve months, the Company estimates that $ 2.8 million will be reclassified as a decrease to interest expense.

The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative.

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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 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.

However, as of March 31, 2022, 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 September 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 March 31, 2022, 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

September 30, 2021

March 31, 2022

Derivative assets $ — $ 10,520 $ — $ 10,520

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Derivative assets — 4,310 — 4,310

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Note 8 – Supplemental Detail for Certain Components of the Condensed Consolidated Balance Sheets

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

September 30, 2021 December 31, 2020

Earnest money deposits $ 1,424 $ 634

March 31, 2022 December 31, 2021

Accounts receivable, net $ 4,147 $ 2,801

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Prepaid assets 2,589 1,473

Earnest money deposits 1,483 853

Fair value of interest rate swaps 10,520 4,309

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Deferred financing costs, net 696 796

Other assets 1,419 387

Right-of-use asset 4,490 4,581

Leasehold improvements and other corporate assets 2,212 1,657

Interest receivable 202 —

Other assets, net 673 1,003

$ 30,528 $ 20,351

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Accrued expenses $ 5,851 $ 6,254

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Prepaid rent 1,791 1,918

Operating lease liability 5,480 5,442

Accounts payable 1,014 419

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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.

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 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 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.

Net proceeds to the Company from the over-allotment option exercise were $ 54.6 million which was net of initial purchaser’s discount and placement fees of $ 3.4 million.

The over-allotment option exercise resulted in the issuance of 2,936,885 shares of common stock.

On January 13, 2022, the Company completed a registered public offering of 10,350,000 shares of its common stock at a public offering price of $ 22.25 per share.

In connection with the offering, the Company entered into forward sale agreements for 10,350,000 shares of its common stock.

The Company did not initially receive any proceeds from the sale of shares of common stock by the forward purchasers.

The Company expects to physically settle the forward sale agreements (by the delivery of shares of common stock) and receive proceeds from the sale of those shares upon one or more forward settlement dates, which shall occur no later than January 10, 2023.

The Company may also elect to cash settle or net share settle all or a portion of its obligations under a forward sale agreement if it concludes it is in its best interest to do so.

If the Company elects to cash settle a forward sale agreement, it may not receive any proceeds and may owe cash to the relevant forward counterparty in certain circumstances.

On March 30, 2022, the Company settled 3,440,962 shares of common stock at a price of $ 22.25 per share in accordance with the forward sale agreements.

The Company received net proceeds from the offering of $ 72.0 million, net of underwriting discounts and offering costs of $ 4.6 million.

The Company contributed the net proceeds to the Operating Partnership in exchange for 3,440,962 Class A OP Units.

Preferred Equity

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.

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 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):

On September 1, 2021, the Company entered into a new $ 250.0 million at-the-market equity program (the “ATM Program”) through which, from time to time, it may sell shares of its common stock in registered transactions.

For the three months ended March 31, 2022, the Company issued 163,774 shares of common stock at a weighted average price of $ 22.08 per share in connection with the ATM Program for net proceeds of approximately $ 3.5 million, net of sales commissions and offering costs

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of less than $ 0.1 million.

The Company contributed the net proceeds to the Operating Partnership in exchange for 163,774 Class A OP Units.

During the three months ended March 31, 2022, portions of restricted stock unit awards (“RSUs”) granted to certain of the Company’s officers, directors, and employees vested.

The vesting of these awards, granted pursuant to the NETSTREIT Corp.

2019 Omnibus Incentive Compensation Plan (the “Omnibus Incentive Plan”), 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 and employees elected to surrender 17 thousand RSUs valued at approximately $ 0.4 million, solely to pay the associated statutory tax withholding.

The surrendered RSUs are included in the row entitled “repurchase of shares of common stock” on the condensed consolidated statements of cash flows.

During the three months ended March 31, 2022, 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

March 3, 2021 $ 0.20 March 15, 2021 $ 5,687 March 30, 2021

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

February 22, 2022 $ 0.20 March 15, 2022 $ 8,888 March 30, 2022

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

Accordingly, during the three months ended March 31, 2022, the Operating Partnership paid distributions of $ 0.1 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 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.

As of March 31, 2022 and December 31, 2021, noncontrolling interests represented 1.1 % and 1.3 %, respectively, of OP Units.

During the three months ended March 31, 2022, OP Unit holders redeemed 25,629 OP units into shares of common stock on a one-for-one basis.

During the three months ended March 31, 2021, OP Unit holders redeemed 253,344 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”), 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.

Under 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, RSUs, 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 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 .

Performance-Based Restricted Stock Units

Pursuant to the Omnibus Incentive Plan, the Company made performance-based restricted stock unit grants to certain employees and non-employee directors.

As of March 31, 2022, the only stock-based compensation granted by the Company were RSUs.

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 was $ 1.0 million and $ 0.6 million for the three months ended March 31, 2022 and 2021.

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

Performance-Based RSUs (effectiveness of shelf registration)

Pursuant to the Omnibus Incentive Plan, the Company granted performance-based RSUs to certain employees and non-employee directors.

The performance condition required the Company to effectively file a shelf registration statement.

Up until the point of filing the registration statement, performance was not deemed probable and accordingly, no restricted stock units had the capability of vesting and no stock-based compensation expense was recorded.

Up until the point of filing the registration statement, performance was not deemed probable and accordingly, no RSUs had the capability of vesting, and no stock-based compensation expense was recorded.

As a result of the Company's initial public offering in August 2020, the performance condition was satisfied, and the Company recorded a stock-based compensation expense catch-up adjustment of $ 1.4 million.

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 September 30, 2021:

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

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The following table summarizes performance-based restricted stock unit activity for the period ended March 31, 2022:

Shares Weighted Average Grant Date Fair Value per Share

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Vested during the period ( 15,190 ) 19.75

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.

The grant date fair value of unvested restricted units is calculated as the per share price determined in the Private Offering.

Service-Based Restricted Stock Units

Pursuant to the Omnibus Incentive Plan, the Company has made service-based restricted stock unit grants to certain employees and non-employee directors.

Unvested restricted stock grants outstanding as of March 31, 2022 142,190 $ 19.75

For the three months ended March 31, 2022, the Company recognized $ 0.2 million in stock-based compensation expense associated with performance-based RSUs.

As of March 31, 2022 and December 31, 2021, the remaining unamortized stock-based compensation expense totaled $ 1.1 million and $ 1.3 million, respectively, and as of March 31, 2022, these awards are expected to be recognized over a remaining weighted average period of 2.0 years.

These units are subject to graded vesting and amortization is recognized ratably over the requisite service period for each vesting tranche in the award.

The weighted average grant date fair value of unvested restricted units is calculated as the per share price determined on December 23, 2019, through a series of completed transactions (collectively the “Private Offering”).

Service-Based RSUs

Pursuant to the Omnibus Incentive Plan, the Company has granted service-based restricted stock unit grants to certain employees and non-employee directors.

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 September 30, 2021:

The following table summarizes service-based restricted stock unit activity for the period ended March 31, 2022:

Shares Weighted Average Grant Date Fair Value per Share

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Vested during the period ( 70,034 ) 17.47

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.

Unvested restricted stock grants outstanding as of March 31, 2022 354,924 $ 19.23

For the three months ended March 31, 2022, the Company recognized $ 0.6 million in stock-based compensation expense associated with service-based RSUs.

As of March 31, 2022 and December 31, 2021, the remaining unamortized stock-based compensation expense totaled $ 5.5 million and $ 4.1 million, respectively, and as of March 31, 2022, these awards are expected to be recognized over a remaining weighted average period of 2.6 years.

Amortization is recognized on a straight-line basis over the total requisite service period for the entire award.

The grant date fair value of service based unvested restricted units is calculated as the per share price determined in the initial public offering for awards granted in 2020 and as the per share price of the Company’s stock on the date of grant for those granted in 2021.

Market-Based Restricted Stock Units

Pursuant to the Omnibus Incentive Plan, the Company has made market-based restricted stock unit grants to certain employees.

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Performance-Based RSUs (total shareholder return)

Pursuant to the Omnibus Incentive Plan, the Company has granted performance-based RSUs to certain employees.

These grants are subject to the participant’s continued service over a three-year period with 40 % of the award based on the Company’s total shareholder return (“TSR”) as compared to the TSR of 32 peer companies and 60 % of the award based on total absolute TSR over the cumulative three-year period.

The performance period of these grants runs through March 8, 2024.

Grant date fair value of the market-based share awards was calculated using the Monte Carlo simulation model, which incorporated stock price volatility of the Company and each of the Company’s peers and other variables over the performance period.

The performance periods of these grants run through March 8, 2024 and February 28, 2025.

Grant date fair values of the performance-based share awards were calculated using the Monte Carlo simulation model, which incorporated stock price volatility of the Company and each of the Company’s peers and other variables over the performance period.

Significant inputs for the 2022 calculation were expected volatility of the Company of 36.3 % and expected volatility of the Company's peers, ranging from 28.7 % to 95.3 %, with an average volatility of 46.6 % and a risk-free interest rate of 1.61 %.

The fair value per share on the grant date specific to the target TSR relative to the Company’s peers was $ 26.13 and the target absolute TSR was $ 20.42 for a weighted average grant date fair value of $ 22.38 per share.

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 September 30, 2021:

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

The following table summarizes performance-based restricted stock unit activity for the period ended March 31, 2022:

Shares Weighted Average Grant Date Fair Value per Share

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Forfeited during the period ( 1,722 ) 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.

Unvested restricted stock grants outstanding as of March 31, 2022 239,390 $ 19.82

For the three months ended March 31, 2022, the Company recognized $ 0.3 million in stock-based compensation expense associated with performance-based RSUs.

As of March 31, 2022, the remaining unamortized stock-based compensation expense totaled $ 3.8 million and as of March 31, 2022, these awards are expected to be recognized over a remaining weighted average period of 2.6 years.

Alignment of Interest Program

During March 2021, the Company adopted the Alignment of Interest Program (the “Program”), which allows employees to elect to receive a portion of their annual bonus in unvested RSUs in the first quarter of the following year that would then vest over a four-year service period beginning in the period that the bonus relates.

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.

The total estimated fair value of the elections made for 2022 under the Program as of March 31, 2022 was approximately $ 0.9 million.

The award will be remeasured to fair value each reporting period until the unvested RSUs are granted.

For the three months ended March 31, 2022, the Company recognized approximately $ 0.1 million in stock-based compensation expense associated with these awards.

Previous awards under the Program that have been granted are included within service based RSUs above.

Note 11 – Earnings Per Share

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.

Net income 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 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 RSUs and unsettled shares under open forward equity contracts and using the if-converted method to determine the potential dilutive effect of the 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 (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,

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 months ended March 31, 2022 and 2021.

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Three Months Ended March 31,

(In thousands, except share and per share data) 2022 2021

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 )

Net income $ 1,966 $ 741

Net (income) attributable to noncontrolling interest ( 24 ) ( 40 )

Net income attributable to common shares, basic 1,942 701

Net (income) attributable to noncontrolling interest ( 24 ) ( 40 )

Net income attributable to common shares, diluted $ 1,966 $ 741

Weighted average common shares outstanding, basic 44,415,807 28,348,975

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Unvested RSUs 294,272 87,960

Unsettled shares under open forward equity contracts 340,058 —

Weighted average common shares outstanding, diluted 45,600,810 30,052,940

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.

Net income available to common stockholders per common share, basic $ 0.04 $ 0.02

Net income available to common stockholders per common share, diluted $ 0.04 $ 0.02

As of March 31, 2022 and December 31, 2021, there were 537,155 and 562,784 of OP Units outstanding, respectively.

Note 12 – Commitments and Contingencies

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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.

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

Additionally, as of March 31, 2022, the Company had commitments to fund nine properties under development totaling $ 20.9 million which is expected to be funded over the next twelve months .

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

The Company began operating out of the new office in February 2022.

The lease has an initial noncancellable term of 10.3 years that expires on July 31, 2032 and is renewable at the Company’s option for two additional periods of five years .

Future minimum base rental payments under the lease are outlined in “Note - 3 - Leases.” Annual rent expense, excluding operating expenses, is expected to be approximately $ 0.5 million during the initial term.

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As of March 31, 2022, 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.

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 and ultimately terminated in July 2021.

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, which was subsequently amended in April 2021 and ultimately terminated in July 2021.

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.

For the three months ended March 31, 2021, the Company incurred less than $ 0.1 million in related expenses.

Note 14 – Subsequent Events

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.

The Company has evaluated all events that occurred subsequent to March 31, 2022 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.

Common Stock Dividend

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.

On April 26, 2022, the Company's Board of Directors declared a cash dividend of $ 0.20 per share for the second quarter of 2022.

The dividend will be paid on June 15, 2022 to stockholders of record on June 1, 2022.

Revolver Activity

In April 2022, the Company borrowed $ 20.0 million on the Revolver which will be used for general corporate purposes, including the acquisition of properties in the Company’s pipeline.

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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