What changed in this filing

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Item 1. Financial Statements

2022-07-28 compared with 2022-04-28 · 242 added, 212 removed, 571 unchanged (44% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

March 31, 2022 December 31, 2021

June 30, December 31,

Real estate, at cost:

6 unchanged sentences

Assets held for sale 2,475 2,096

Mortgage loan receivable, net 40,413 —

Mortgage loan receivables, net 46,435 —

Cash, cash equivalents and restricted cash 19,850 7,603

12 unchanged sentences

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

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

50,341,288 and 44,223,050 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 938,043 809,724

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except share and per share data)

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Rental revenue (including reimbursable) $ 22,048 $ 13,798 $ 42,970 $ 25,730

Interest income on mortgage loan receivable 411 —

Interest income on mortgage loan receivables 586 — 997 —

Total revenues 22,634 13,798 43,967 25,730

9 unchanged sentences

Gain on sales of real estate, net 1,858 497 2,019 497

Other income 36 — 36 —

Total other income (expense), net 372 ( 397 ) ( 636 ) ( 1,302 )

Net income before income tax expense 2,057 791

Net income (loss) before income taxes 2,103 ( 2,630 ) 4,160 ( 1,839 )

Income tax expense ( 93 ) — ( 184 ) ( 50 )

Net income 1,966 741

Net income attributable to noncontrolling interests 24 40

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

Net income (loss) 2,010 ( 2,630 ) 3,976 ( 1,889 )

Net income (loss) attributable to noncontrolling interests 23 ( 94 ) 47 ( 54 )

Net income (loss) attributable to common stockholders $ 1,987 $ ( 2,536 ) $ 3,929 $ ( 1,835 )

Amounts available to common stockholders per common share:

4 unchanged sentences

Diluted 48,951,833 38,018,588 47,277,468 33,236,262

Other comprehensive income:

Net income $ 1,966 $ 741

Other comprehensive income (loss):

Net income (loss) $ 2,010 $ ( 2,630 ) $ 3,976 $ ( 1,889 )

Change in value on derivatives, net 1,338 ( 265 ) 7,549 2,058

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

Total comprehensive income (loss) $ 3,348 $ ( 2,895 ) $ 11,525 $ 169

Comprehensive income (loss) attributable to noncontrolling interests 38 ( 106 ) 138 58

Comprehensive income (loss) attributable to common stockholders $ 3,310 $ ( 2,789 ) $ 11,387 $ 111

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

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NETSTREIT CORP.

15 unchanged sentences

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, net of issuance costs 2,397,035 24 49,976 — — 50,000 — 50,000

OP Units converted to common stock 22,265 — 418 — — 418 ( 418 ) —

Dividends and distributions declared on common stock and OP Units — — — ( 9,588 ) — ( 9,588 ) ( 104 ) ( 9,692 )

Dividends declared on restricted stock, net — — — ( 149 ) — ( 149 ) — ( 149 )

Stock-based compensation, net — — 1,298 — — 1,298 — 1,298

Other comprehensive income — — — — 1,323 1,323 15 1,338

Net income — — — 1,987 — 1,987 23 2,010

Balance at June 30, 2022 50,341,288 $ 503 $ 938,043 $ ( 49,943 ) $ 11,581 $ 900,184 $ 9,668 $ 909,852

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)

Shares Par Value Additional

10 unchanged sentences

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

Issuance of common stock in public offering, net of issuance costs 10,915,688 109 194,052 — — 194,161 — 194,161

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

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)

Three Months Ended

Six Months Ended

Cash flows from operating activities

Net income $ 1,966 $ 741

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

Net income (loss) $ 3,976 $ ( 1,889 )

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

Depreciation and amortization 22,730 13,004

7 unchanged sentences

Accounts payable, accrued expenses and other liabilities ( 1,057 ) 166

Lease incentive payments ( 400 ) ( 225 )

Net cash provided by operating activities 22,250 13,758

2 unchanged sentences

Real estate development and improvements ( 8,016 ) ( 5,647 )

Investment in mortgage loan receivable ( 40,426 ) —

Investment in mortgage loan receivables ( 46,466 ) —

Earnest money deposits ( 39,659 ) 349

18 unchanged sentences

Cash paid for interest $ 2,345 $ 1,352

Cash paid for income taxes $ 45 $ —

Supplemental disclosures of non-cash investing and financing activities:

2 unchanged sentences

Accrued capital expenditures and real estate development and improvement costs $ 2,848 $ —

Accrued lease incentives $ 500 $ —

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

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NETSTREIT CORP.

11 unchanged sentences

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

As of June 30, 2022, the Company owned or had investments in 384 properties, located in 42 states.

Note 2 – Summary of Significant Accounting Policies

4 unchanged sentences

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 is reduced by the portion of net income attributable to noncontrolling interests.

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.

Interim Unaudited Financial Information

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

These unaudited interim condensed consolidated financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements, and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto on the Annual Report on Form 10-K as of and for the year ended December 31, 2021, which provide a more complete understanding of the Company’s accounting policies, financial position, operating results, business properties, and other matters.

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC.

These unaudited interim condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements, and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto on the Annual Report on Form 10-K as of and for the year ended December 31, 2021, which provide a more complete understanding of the Company’s accounting policies, financial position, operating results, business properties, and other matters.

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

The results of operations for the three and six months ended June 30, 2022 and 2021 are not necessarily indicative of the results for the full year.

Noncontrolling Interests

3 unchanged sentences

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.

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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.

6 unchanged sentences

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

Further, the uncertainty over the ultimate impact COVID-19 will have on the global economy and the Company’s business makes any estimates and assumptions as of March 31, 2022 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 and instability in macroeconomic conditions will have on the global economy and the Company’s business makes any estimates and assumptions as of June 30, 2022 inherently less certain than they would be absent the current and potential impacts of COVID-19 and instability in macroeconomic conditions.

Actual results could differ from those estimates.

15 unchanged sentences

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.

The fair value of in-place leases is determined by considering estimates of carrying costs during the expected lease-up periods, current market conditions, as well as costs to execute similar leases based on the specific characteristics of each tenant’s lease.

The Company estimates the cost to execute leases with terms similar to the remaining lease terms of the in-place leases, including leasing commissions, legal and other related expenses.

The Company estimates the cost to execute leases with terms similar to the remaining lease

terms of the in-place leases, including leasing commissions, legal and other related expenses.

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.

7 unchanged sentences

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

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.

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 or leasing commissions Remaining terms of the respective leases

Assembled workforce 3 years

Computer equipment and other corporate assets 3 – 5 years

Total depreciation and amortization expense was $ 11.8 million and $ 7.1 million during the three months ended June 30, 2022 and 2021, respectively.

Total depreciation and amortization expense was $ 22.7 million and $ 13.0 million during the six months ended June 30, 2022 and 2021, respectively.

Depreciation expense on real estate held for investment and computer equipment and other corporate assets was $ 7.9 million and $ 4.9 million during the three months ended June 30, 2022 and 2021, respectively.

Depreciation expense on real estate held for investment and computer equipment and other corporate assets was $ 15.3 million and $ 9.0 million during the six months ended June 30, 2022 and 2021, respectively.

Amortization expense on acquired in-place lease and assembled workforce intangible assets and leasing commission costs were $ 3.8 million and $ 2.2 million during the three months ended June 30, 2022 and 2021, respectively.

Amortization expense on acquired in-place lease and assembled workforce intangible assets and leasing commission costs were $ 7.4 million and $ 4.0 million during the six months ended June 30, 2022 and 2021, respectively.

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

1 unchanged sentence

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

3 unchanged sentences

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

Accordingly, we have not reclassified results of operations for properties disposed during the interim period ended 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.

Accordingly, we have not reclassified results of operations for properties disposed during the interim period ended June 30, 2022 or held for sale as discontinued operations as of June 30, 2022, as these events are a normal part of the Company’s operations and do not represent strategic shifts in the Company’s operations.

As of June 30, 2022 and December 31, 2021, there were two and one properties, respectively, classified as held for sale.

Impairment of Long-Lived Assets

6 unchanged sentences

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

Three Months Ended

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

2022 2021 2022 2021

Total provision for impairment $ 1,114 $ 3,469 $ 1,114 $ 3,539

2 unchanged sentences

Disposed within the period 1 — 1 1

(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 period.

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

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

Cash, Cash Equivalents and Restricted Cash

2 unchanged sentences

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 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.

The Company had no restricted cash as of June 30, 2022 or December 31, 2021.

The Company’s bank balances as of June 30, 2022 and December 31, 2021 include certain amounts over the Federal Deposit Insurance Corporation limits.

Revenue Recognition and Related Matters

2 unchanged sentences

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.

5 unchanged sentences

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

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.

As of June 30, 2022 and December 31, 2021, the Company had an immaterial reserve for uncollectible amounts specific to uncharged reimbursable expenses.

Mortgage Loan Receivables

The Company holds loan receivables, which are mortgage loans secured by real estate, for long-term investment.

Loan receivables are carried at amortized cost.

The Company recognizes interest income on loan receivables 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.

The Company evaluates its loan receivable balances, 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.

1 unchanged sentence

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.

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 (loss).

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

11 unchanged sentences

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.

4 unchanged sentences

Transaction Costs

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.

Transaction costs were $ 0.5 million and $ 0.2 million for the three months ended June 30, 2022 and 2021, respectively, and represent acquisition related expenses, including costs associated with abandoned acquisitions.

Transaction costs were $ 0.7 million and $ 0.3 million for the six months ended June, 30, 2022 and 2021.

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

7 unchanged sentences

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.

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 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.

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.

Additionally, there were no material accruals for interest or penalties as of June 30, 2022 and December 31, 2021.

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

4 unchanged sentences

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

Net income (loss) allocated to common stockholders represents net income (loss) 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 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.

Provisions for impairments recognized in the three and six months ended June 30, 2022 and 2021 related to assets held for sale and the impairment was determined based on the estimated or negotiated selling price, less costs of disposal, compared to the carrying value of the property.

Concentrations of Credit Risk

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

The Company is exposed to credit risk with respect to cash held at various financial institutions, access to its Credit Facility, amounts due under the mortgage loan receivable, 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 receivables, 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 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.

During the three and six months ended June 30, 2022 and 2021, there were no tenants with rental revenue that exceeded 10% of total rental revenue.

Segment Reporting

3 unchanged sentences

There were no intersegment sales during the periods presented.

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Recent Accounting Pronouncements Adopted

Recent Accounting Pronouncements Issued But Not Yet Adopted

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

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The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

On July 1, 2020, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

On July 1, 2020, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future London Inter-Bank Offered Rate (“LIBOR”) indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

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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 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.

As of June 30, 2022, the Company had 381 single-tenant retail net leases spanning 42 states, with 75 different tenants represented across 24 retail sectors.

As of June 30, 2022, the remaining terms of leases range from 1 - 21 years, with weighted average lease term of 9.5 years.

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

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.

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 material reserves for uncollectible amounts during the three and six months ended June 30, 2022 and 2021.

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

Three Months Ended

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

2022 2021 2022 2021

Rental revenue

2 unchanged sentences

Variable lease income (2)

2,229 1,067 4,918 1,856

Other rental revenue:

4 unchanged sentences

(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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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):

The following table presents the lease expense components for the three and six months ended June 30, 2022 (in thousands):

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Operating lease cost $ 135 $ — $ 270 $ —

1 unchanged sentence

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.

As of June 30, 2022, the right-of-use asset and operating lease liability were $ 4.4 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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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 June 30, 2022 (in thousands):

Future Minimum Lease Payments

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Note 4 – Real Estate Investments

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

As of June 30, 2022, the Company owned or had investments in 384 properties, including six properties currently under development.

The gross real estate investment portfolio, including properties under development, totaled approximately $ 1.3 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 10.0 % and 9.5 %, 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.

During the six months ended June 30, 2022, the Company acquired 56 properties for a total purchase price of $ 207.3 million, inclusive of $ 1.9 million of capitalized acquisition costs.

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

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):

Three Months Ended

Six Months Ended June 30,

Land $ 49,073 $ 49,634

4 unchanged sentences

Above-market lease intangible assets 353 6,487

Construction-in-progress assets — —

Assumed receivables — 44

213,629 211,227

3 unchanged sentences

Purchase price (including acquisition costs) $ 207,289 $ 205,167

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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

As of June 30, 2022, the Company had six property developments under construction.

During the six months ended June, 30, 2022, the Company invested $ 9.6 million in property developments, including the acquisition of one new build-to-suit project with an initial purchase price of $ 1.0 million.

During this period, the Company completed development on four projects and reclassified approximately $ 14.7 million from property under development to land, building, and improvements in the accompanying condensed consolidated balance sheets.

The remaining six 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 June 30, 2022.

Additionally, during the first six months of 2022 and 2021, the Company capitalized less than $ 0.1 million of interest expense associated with properties under development.

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

The Company exercised its non-binding purchase option to acquire the property upon completion in 2022 and rent commenced in the second quarter of 2022.

This amount, and subsequent development costs, were included in property under development in the accompanying condensed consolidated balance sheets as of December 31, 2021.

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

Upon acquisition, the Company commenced development of two build-to-suit projects, one of which was completed during the fourth quarter of 2021 and the other in the second quarter of 2022.

Rent commenced for both of these developments in 2022.

The purchase price, including acquisitions costs, and subsequent development costs are included in property under development in the accompanying condensed consolidated balance sheets as of December 31, 2021.

During the three months ended June 30, 2022, the Company sold two properties for a total sales price, net of disposal costs, of $ 9.9 million, recognizing a gain of $ 1.9 million on the sales.

During the six months ended June, 30, 2022, the Company sold three properties for a total sales price, net of disposal costs, of $ 12.2 million, recognizing a gain of $ 2.0 million on the sales.

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

Investment in Mortgage Loan Receivables

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

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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.

The funds provided under the loan, in addition to loan origination costs of $ 0.1 million, are included in loan receivables, net in the accompanying condensed consolidated balance sheets as of June 30, 2022.

On June 30, 2022, the Company executed a fully collateralized $ 6.0 million loan receivable with a stated interest rate of 6.5 %.

The scheduled maturity date is June 30, 2023, however the Company has the right, subject to certain terms and conditions, to purchase the underlying collateralized properties.

The loan receivable is collateralized by real estate that is leased by two separate tenants, one of which is an investment grade profile tenant.

The funds provided under the loan, in addition to loan origination costs of less than $ 0.1 million, are included in loan receivables, net in the accompanying condensed consolidated balance sheets as of June 30, 2022.

Note 5 – Intangible Assets and Liabilities

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Amount Accumulated Amortization Net Carrying Amount Gross

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Below-market leases $ 32,217 $ ( 4,007 ) $ 28,210 $ 26,185 $ ( 2,869 ) $ 23,316

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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:

The remaining weighted average amortization period for the Company’s intangible assets and liabilities as of June 30, 2022 and as of December 31, 2021 by category were as follows:

Years Remaining

March 31, 2022 December 31, 2021

June 30, 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 related to the amortization of intangibles assets and liabilities for all property and ground leases (in thousands):

Three Months Ended March 31,

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 June 30, Six Months Ended June 30,

2022 2021 2022 2021

Amortization:

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Lease incentives ( 128 ) ( 3 ) ( 246 ) ( 3 )

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):

$ 166 $ 234 $ 331 $ 423

The following table provides the projected amortization of in-place lease assets and assembled workforce intangible assets to amortization expense, and the net amortization of above-market, below-market, and lease incentive lease intangibles to rental revenue as of June 30, 2022, for the next five years and thereafter (in thousands):

Remainder of 2022

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Net adjustment to rental revenue $ 524 $ 849 $ 795 $ 774 $ 662 $ 3,176 $ 6,780

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Note 6 – Debt

Debt consists of the following (in thousands):

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

Maturity Date Interest Rate June 30, 2022 December 31, 2021

Term Loan (1)

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(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 %.

(2) The annual interest rate of the Revolver assumes one-month LIBOR as of June 30, 2022 of 1.56 %.

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

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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 total interest rate includes the fixed base interest rate of 0.21 % plus a leverage-based margin of 1.15 %.

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

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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Total costs amortized on the Term Loan and Revolver were $ 0.2 million each for the three months ended June 30, 2022 and 2021, respectively, and $ 0.3 million each for the six months ended June, 30, 2022 and 2021, 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 June 30, 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 1.94 % and 1.30 %, respectively.

For the six months ended June, 30, 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 1.63 % and 1.28 %, respectively.

The Company incurred interest expense in connection with the Term Loan for both the three and six months ended June 30, 2022 and 2021 of $ 0.6 million and incurred $ 1.2 million, respectively.

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

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

The Company determined that the carrying value materially approximated the estimated fair value of the Term Loan as of 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.

The Company determined that the carrying value materially approximated the estimated fair value of the Term Loan as of June 30, 2022 and December 31, 2021.

During the three months ended June 30, 2022 and 2021, the Company incurred interest expenses, exclusive of facility fees for unused capacity, on borrowings under the Revolver of $ 0.8 million and less than $ 0.1 million, respectively, with a weighted average interest rate, exclusive of amortization of deferred financing costs of 2.08 % and 0.33 %, respectively.

During the six months ended June, 30, 2022 and 2021, the Company incurred interest expenses, exclusive of facility fees for unused capacity, on borrowings under the Revolver of $ 1.2 million and less than $ 0.1 million, respectively, with a weighted average interest rate, exclusive of amortization of deferred financing costs of 1.78 % and 1.24 %, respectively.

As of June 30, 2022 and December 31, 2021, the Company had $ 237.0 million and $ 64.0 million in borrowings under the Revolver, respectively.

The Company also incurred interest expense in connection with unused capacity for the three months ended June 30, 2022 and 2021 of less than $0.1 million and $ 0.2 million, respectively and $ 0.1 million and $ 0.3 million for the six months ended June, 30, 2022 and 2021, respectively.

During the three and six months ended June, 30, 2022 and 2021, the Company capitalized less than $ 0.1 million of interest expense associated with properties under development.

The Company was in compliance with all of its debt covenants as of June 30, 2022 and expects to be in compliance for the following twelve-month period.

Debt Maturity

Payments on the Term Loan are interest only through maturity.

All outstanding amounts on the Term Loan are due on December 23, 2024.

All outstanding amounts on the Term Loan and Revolver are due on December 23, 2024 and December 23, 2023, respectively.

The Revolver may be extended up to one year .

Note 7 – Derivative Financial Instruments

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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 March 31, 2022 of 0.23 %, 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 June 30, 2022 of 1.06 %, 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 March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021

Interest Rate Derivatives June 30, 2022 December 31, 2021 June 30, 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 March 31, 2022 and December 31, 2021 (in thousands):

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The following table presents the fair value of the Company's derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021 (in thousands):

Derivative Assets

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Derivatives Designated as Hedging Instruments:

Balance Sheet Location March 31, 2022 December 31, 2021

Balance Sheet Location June 30, 2022 December 31, 2021

Interest rate swaps Other assets, net $ 11,857 $ 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 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

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 six months ended June 30, 2022 and 2021 (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 Gain (Loss) Reclassified from Accumulated OCI into Income

(Effective Portion)

Derivatives in Cash Flow Hedging Relationships 2022 2021 2022 2021

For the Three Months Ended March 31

For the Three Months Ended June 30

Interest Rate Products $ 1,591 $ ( 311 ) Interest expense, net $ 253 $ ( 45 )

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.

For the Six Months Ended June 30

Interest Rate Products $ 7,779 $ 1,979 Interest expense, net $ 230 $ ( 79 )

The Company did not exclude any amounts from the assessment of hedge effectiveness for the three and six months ended June 30, 2022 and 2021.

During the next twelve months, the Company estimates that an additional $ 5.1 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 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.

However, as of June 30, 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 March 31, 2022, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

The table below presents the Company’s derivative assets measured at fair value on a recurring basis as of June 30, 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

March 31, 2022

June 30, 2022

Derivative assets $ — $ 11,857 $ — $ 11,857

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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):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Accounts receivable, net $ 5,489 $ 2,801

6 unchanged sentences

Right-of-use asset 4,399 4,581

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

Leasehold improvements and other corporate assets, net 2,128 1,657

Interest receivable 202 —

2 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Accrued expenses $ 6,772 $ 6,254

3 unchanged sentences

Accounts payable 1,981 419

Tenant allowances payable 1,825 —

Other liabilities 618 1,205

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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 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.

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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.

As of June 30, 2022, there were 4,512,003 shares unsettled under forward sale agreements.

On June 23, 2022, the Company settled 2,397,035 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 $ 50.0 million, net of underwriting discounts and offering costs of $ 3.3 million.

The Company contributed the net proceeds to the Operating Partnership in exchange for 2,397,035 Class A OP Units.

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.

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

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.

On September 1, 2021, the Company entered into a $ 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 six months ended June, 30, 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 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.

During the six months ended June, 30, 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.

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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):

During the six months ended June 30, 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

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

April 26, 2022 0.20 June 1, 2022 $ 9,588 June 15, 2022

$ 0.40 $ 18,476

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.

Accordingly, during the six months ended June, 30, 2022 and 2021 the Operating Partnership paid distributions of $ 0.2 million and $ 0.6 million, respectively, 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 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.

As of June 30, 2022 and December 31, 2021, noncontrolling interests represented 1.0 % and 1.3 %, respectively of OP Units.

During the three months ended June 30, 2022 and 2021, OP Unit holders redeemed 22,265 and 143,173 OP units, respectively, into shares of common stock on a one -for-one basis.

During the six months ended June, 30, 2022 and 2021, OP Unit holders redeemed 47,894 and 396,517 OP units, respectively, into shares of common stock on a one -for-one basis.

Note 10 – Stock-Based Compensation

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

As of June 30, 2022, 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 $ 1.3 million and $ 1.0 million for the three months ended June 30, 2022 and 2021, respectively.

Stock-based compensation expense was $ 2.3 million and $ 1.6 million for the six months ended June, 30, 2022 and 2021, respectively.

All awards of unvested restricted stock units 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.

Pursuant to the Omnibus Incentive Plan, the Company made 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 RSUs 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 restricted stock units 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 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:

The following table summarizes performance-based restricted stock unit activity for the period ended June 30, 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 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”).

Unvested restricted stock grants outstanding as of June 30, 2022 142,190 $ 19.75

For the three and six months ended June 30, 2022, the Company recognized $ 0.2 million and $ 0.4 million, respectively, in stock-based compensation expense associated with performance-based restricted stock units.

As of June 30, 2022 and December 31, 2021, the remaining unamortized stock-based compensation expense totaled $ 1.0 million and $ 1.3 million, respectively and as of June 30, 2022, these awards are expected to be recognized over a remaining weighted average period of 1.8 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 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.

Pursuant to the Omnibus Incentive Plan, the Company has made 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 March 31, 2022:

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

Unvested restricted stock grants outstanding as of June 30, 2022 362,004 $ 19.63

For the three and six months ended June 30, 2022, the Company recognized $ 0.7 million and $ 1.2 million, respectively, in stock-based compensation expense associated with service-based restricted stock units.

As of June 30, 2022 and December 31, 2021, the remaining unamortized stock-based compensation expense totaled $ 5.3 million and $ 4.1 million, respectively, and as of June 30, 2022, these awards are expected to be recognized over a remaining weighted average period of 2.5 years.

Stock-based compensation expense 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.

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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.

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

The performance period of these grants runs through March 8, 2024 and February 28, 2025.

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.

Significant inputs for the 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 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:

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

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

Vested during the period — —

Unvested restricted stock grants outstanding as of June 30, 2022 239,390 $ 19.82

For the three and six months ended June 30, 2022, the Company recognized $ 0.4 million and $ 0.6 million, respectively, in stock-based compensation expense associated market-based restricted stock units.

As of June 30, 2022 and December 31, 2021, the remaining unamortized stock-based compensation expense totaled $ 3.4 million and $ 1.8 million, respectively, and as of June 30, 2022, these awards are expected to be recognized over a remaining weighted average period of 2.3 years.

Alignment of Interest Program

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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 total estimated fair value of the elections made for 2022 under the Program 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.

For the three and six months ended June 30, 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 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.

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 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 per common share for the three months ended March 31, 2022 and 2021.

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Three Months Ended March 31,

The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted net income per common share for the three and six months ended June 30, 2022 and 2021.

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

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

Net income $ 1,966 $ 741

Net income (loss) $ 2,010 $ ( 2,630 ) $ 3,976 $ ( 1,889 )

Net (income) attributable to noncontrolling interest ( 23 ) 94 ( 47 ) 54

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

Net income (loss) attributable to common shares, basic 1,987 ( 2,536 ) 3,929 ( 1,835 )

Net (income) attributable to noncontrolling interest ( 23 ) 94 ( 47 ) 54

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

Net income (loss) attributable to common shares, diluted $ 2,010 $ ( 2,630 ) $ 3,976 $ ( 1,889 )

Weighted average common shares outstanding, basic 48,140,041 38,018,588 46,279,122 33,236,262

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Weighted average common shares outstanding, diluted 48,951,833 38,018,588 47,277,468 33,236,262

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.

Net income (loss) available to common stockholders per common share, basic $ 0.04 $ ( 0.07 ) $ 0.08 $ ( 0.06 )

Net income (loss) available to common stockholders per common share, diluted $ 0.04 $ ( 0.07 ) $ 0.08 $ ( 0.06 )

For the three and six months ended June, 30, 2021, diluted net income (loss) per common share does not assume the conversion of OP Units or unvested RSUs as such conversion would be antidilutive.

For the three months ended June 30, 2021 diluted net income (loss) per common share does not assume the conversion of 1,438,969 OP Units or 332,781 unvested RSUs.

For the six months ended June 30, 2021 diluted net income (loss) per common share does not assume the conversion of 1,527,160 OP Units or 210,370 unvested RSUs.

As of June 30, 2022 and December 31, 2021, there were 514,890 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 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 .

Additionally, as of June 30, 2022, the Company had commitments to fund six properties under development totaling $ 19.1 million which is expected to be funded over the next six 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.

The lease has a remaining noncancellable term of 10.1 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 approximately $ 0.5 million during the initial term.

As of June 30, 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, which was subsequently amended in April 2021 and ultimately terminated in July 2021.

Effective with the 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 March 31, 2021, the Company incurred less than $ 0.1 million in related expenses.

For the three and six months ended June 30, 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 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.

The Company has evaluated all events that occurred subsequent to June 30, 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 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.

On July 26, 2022, the Company's Board of Directors declared a cash dividend of $ 0.20 per share for the third quarter of 2022 which will be paid on September 15, 2022 to shareholders of record on September 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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In July 2022, the Company repaid $ 10.0 million under the Revolver.

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