Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2022 | Oct. 25, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2022 | |
Document Transition Report | false | |
Entity File Number | 001-39443 | |
Entity Registrant Name | NETSTREIT Corp. | |
Entity Incorporation, State or Country Code | MD | |
Entity Tax Identification Number | 84-3356606 | |
Entity Address, Address Line One | 2021 McKinney Avenue | |
Entity Address, Address Line Two | Suite 1150 | |
Entity Address, City or Town | Dallas | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 75201 | |
City Area Code | 972 | |
Local Phone Number | 200-7100 | |
Title of 12(b) Security | Common stock, par value $0.01 per share | |
Trading Symbol | NTST | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 54,876,295 | |
Entity Central Index Key | 0001798100 | |
Amendment Flag | false | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2022 | |
Current Fiscal Year End Date | --12-31 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Real estate, at cost: | ||
Land | $ 380,092 | $ 299,935 |
Buildings and improvements | 839,305 | 626,457 |
Total real estate, at cost | 1,219,397 | 926,392 |
Less accumulated depreciation | (53,255) | (30,669) |
Property under development | 17,475 | 17,896 |
Real estate held for investment, net | 1,183,617 | 913,619 |
Assets held for sale | 23,985 | 2,096 |
Mortgage loans receivable, net | 46,406 | 0 |
Cash, cash equivalents and restricted cash | 16,190 | 7,603 |
Lease intangible assets, net | 149,357 | 124,772 |
Other assets, net | 54,087 | 20,351 |
Total assets | 1,473,642 | 1,068,441 |
Liabilities: | ||
Term loans, net | 373,202 | 174,330 |
Revolving credit facility | 30,000 | 64,000 |
Mortgage note payable, net | 7,901 | 0 |
Lease intangible liabilities, net | 31,438 | 23,316 |
Liabilities related to assets held for sale | 416 | 0 |
Accounts payable, accrued expenses and other liabilities | 21,200 | 16,980 |
Total liabilities | 464,157 | 278,626 |
Commitments and contingencies | ||
Stockholders’ equity | ||
Common stock, $0.01 par value, 400,000,000 shares authorized; 54,876,295 and 44,223,050 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | 549 | 442 |
Additional paid-in capital | 1,032,634 | 809,724 |
Distributions in excess of retained earnings | (58,747) | (35,119) |
Accumulated other comprehensive income | 25,335 | 4,123 |
Total stockholders’ equity | 999,771 | 779,170 |
Noncontrolling interests | 9,714 | 10,645 |
Total equity | 1,009,485 | 789,815 |
Total liabilities and equity | $ 1,473,642 | $ 1,068,441 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2022 | Dec. 31, 2021 |
Equity: | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 400,000,000 | 400,000,000 |
Common stock, shares issued | 54,876,295 | 44,223,050 |
Common stock, shares outstanding | 54,876,295 | 44,223,050 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Revenues | ||||
Rental revenue (including reimbursable) | $ 24,339 | $ 15,603 | $ 67,309 | $ 41,333 |
Interest income on mortgage loans receivable | 674 | 0 | 1,671 | 0 |
Total revenues | 25,013 | 15,603 | 68,980 | 41,333 |
Operating expenses | ||||
Property | 2,539 | 1,737 | 8,156 | 4,002 |
General and administrative | 4,552 | 3,776 | 13,608 | 10,904 |
Depreciation and amortization | 13,407 | 8,074 | 36,137 | 21,078 |
Provisions for impairment | 0 | 0 | 1,114 | 3,539 |
Transaction costs | 51 | 132 | 704 | 464 |
Total operating expenses | 20,549 | 13,719 | 59,719 | 39,987 |
Other income (expense) | ||||
Interest expense, net | (3,017) | (895) | (5,708) | (2,693) |
Gain on sales of real estate, net | 143 | 1,955 | 2,162 | 2,452 |
Other income | 0 | 0 | 36 | 0 |
Total other income (expense), net | (2,874) | 1,060 | (3,510) | (241) |
Net income before income taxes | 1,590 | 2,944 | 5,751 | 1,105 |
Income tax expense | (171) | 0 | (356) | (50) |
Net income | 1,419 | 2,944 | 5,395 | 1,055 |
Net income attributable to noncontrolling interests | 16 | 96 | 63 | 42 |
Net income attributable to common stockholders | $ 1,403 | $ 2,848 | $ 5,332 | $ 1,013 |
Amounts available to common stockholders per common share: | ||||
Basic (in dollars per share) | $ 0.03 | $ 0.07 | $ 0.11 | $ 0.03 |
Diluted (in dollars per share) | $ 0.03 | $ 0.07 | $ 0.11 | $ 0.03 |
Weighted average common shares: | ||||
Basic (in shares) | 50,449,735 | 39,559,605 | 47,679,870 | 35,359,551 |
Diluted (in shares) | 51,384,758 | 41,333,579 | 48,657,049 | 37,108,425 |
Other comprehensive income: | ||||
Net income | $ 1,419 | $ 2,944 | $ 5,395 | $ 1,055 |
Change in value on derivatives, net | 13,887 | 5 | 21,436 | 2,063 |
Total comprehensive income | 15,306 | 2,949 | 26,831 | 3,118 |
Comprehensive income attributable to noncontrolling interests | 149 | 95 | 287 | 153 |
Comprehensive income attributable to common stockholders | $ 15,157 | $ 2,854 | $ 26,544 | $ 2,965 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Cash flows from operating activities | ||
Net income | $ 5,395 | $ 1,055 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 36,137 | 21,078 |
Amortization of deferred financing costs | 553 | 471 |
Noncash revenue adjustments | (2,076) | (1,289) |
Stock-based compensation expense | 3,646 | 2,623 |
Gain on sales of real estate, net | (2,162) | (2,452) |
Provisions for impairment | 1,114 | 3,539 |
Changes in assets and liabilities, net of assets acquired and liabilities assumed: | ||
Other assets, net | (3,641) | (3,879) |
Accounts payable, accrued expenses and other liabilities | 676 | 2,065 |
Lessee improvement obligations | 0 | (1) |
Lease incentive payments | (936) | (4,004) |
Net cash provided by operating activities | 38,706 | 19,206 |
Cash flows from investing activities | ||
Acquisitions of real estate | (328,986) | (292,046) |
Real estate development and improvements | (15,492) | (9,512) |
Investment in mortgage loans receivable | (46,466) | 0 |
Earnest money deposits | (3,486) | (789) |
Purchase of computer equipment and other corporate assets | (595) | (52) |
Proceeds from sale of real estate | 13,837 | 30,436 |
Net cash used in investing activities | (381,188) | (271,963) |
Cash flows from financing activities | ||
Issuance of common stock in public offerings, net | 219,019 | 194,161 |
Payment of common stock dividends | (28,549) | (21,493) |
Payment of OP unit distributions | (316) | (859) |
Payment of restricted stock dividends | (154) | (29) |
Proceeds under revolving credit facilities | 365,000 | 30,000 |
Repayments under revolving credit facilities | (399,000) | (13,000) |
Proceeds from term loans | 200,000 | 0 |
Payments of mortgage note payable | (12) | 0 |
Proceeds under property development incentives | 605 | 0 |
Repurchase of common stock for tax withholding obligations | (549) | (318) |
Deferred offering costs | (1,220) | (704) |
Payments of Financing Costs | (3,755) | 0 |
Net cash provided by financing activities | 351,069 | 187,758 |
Net change in cash, cash equivalents and restricted cash | 8,587 | (64,999) |
Cash, cash equivalents and restricted cash at beginning of the period | 7,603 | 92,643 |
Cash, cash equivalents and restricted cash at end of the period | 16,190 | 27,644 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | 4,345 | 2,118 |
Cash paid for income taxes | 45 | 0 |
Supplemental disclosures of non-cash investing and financing activities: | ||
Dividends declared and unpaid on restricted stock | 411 | 382 |
Deferred offering costs included in accounts payable, accrued expenses and other liabilities | 0 | 88 |
Cash flow hedge change in fair value | 21,436 | 2,063 |
Involuntary conversion of building and improvements and change in related insurance proceeds receivable | 0 | 490 |
Mortgage note assumed at fair value | 7,913 | 0 |
Accrued capital expenditures and real estate development and improvement costs | 952 | 345 |
Accrued lease incentives | $ 1,690 | $ 0 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Changes in Equity - USD ($) $ in Thousands | Total | IPO | IPO - Shares From Existing Shareholders | Total Stockholders’ Equity | Total Stockholders’ Equity IPO | Total Stockholders’ Equity IPO - Shares From Existing Shareholders | Common stock | Common stock IPO | Common stock IPO - Shares From Existing Shareholders | Additional Paid-in Capital | Additional Paid-in Capital IPO | Additional Paid-in Capital IPO - Shares From Existing Shareholders | Distributions in Excess of Retained Earnings | Accumulated Other Comprehensive Income | Noncontrolling Interests | Noncontrolling Interests IPO - Shares From Existing Shareholders |
Beginning balance (in shares) at Dec. 31, 2020 | 28,203,545 | |||||||||||||||
Beginning balance at Dec. 31, 2020 | $ 528,073 | $ 494,098 | $ 282 | $ 501,045 | $ (7,464) | $ 235 | $ 33,975 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
OP Units converted to common stock (in shares) | 253,344 | |||||||||||||||
Issuance of common stock in public offering, net of issuance costs | $ 0 | $ 4,923 | $ 3 | $ 4,920 | $ (4,923) | |||||||||||
OP Units converted to common stock | (5,994) | (5,687) | (5,687) | (307) | ||||||||||||
Dividends and distributions declared on common stock and OP Units | (132) | (132) | (132) | |||||||||||||
Vesting of restricted stock units (in shares) | 15,190 | |||||||||||||||
Repurchase of common stock for tax withholding obligations (in shares) | (4,962) | |||||||||||||||
Repurchase of common stock for tax withholding obligations | (90) | (90) | (90) | |||||||||||||
Repurchase of common stock for tax withholding obligations | 557 | 557 | 557 | |||||||||||||
Other comprehensive income | 2,323 | 2,199 | 2,199 | 124 | ||||||||||||
Net income (loss) | 741 | 701 | 701 | 40 | ||||||||||||
Ending balance (in shares) at Mar. 31, 2021 | 28,467,117 | |||||||||||||||
Ending balance at Mar. 31, 2021 | 525,478 | 496,569 | $ 285 | 506,432 | (12,582) | 2,434 | 28,909 | |||||||||
Beginning balance (in shares) at Dec. 31, 2020 | 28,203,545 | |||||||||||||||
Beginning balance at Dec. 31, 2020 | 528,073 | 494,098 | $ 282 | 501,045 | (7,464) | 235 | 33,975 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
OP Units converted to common stock (in shares) | 462,357 | |||||||||||||||
Net income (loss) | 1,055 | |||||||||||||||
Ending balance (in shares) at Sep. 30, 2021 | 39,617,805 | |||||||||||||||
Ending balance at Sep. 30, 2021 | 704,923 | 680,569 | $ 396 | 706,312 | (28,326) | 2,187 | 24,354 | |||||||||
Beginning balance (in shares) at Mar. 31, 2021 | 28,467,117 | |||||||||||||||
Beginning balance at Mar. 31, 2021 | 525,478 | 496,569 | $ 285 | 506,432 | (12,582) | 2,434 | 28,909 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
Issuance of stock (in shares) | 10,915,688 | |||||||||||||||
Issuance of stock | $ 194,161 | $ 194,161 | $ 109 | $ 194,052 | ||||||||||||
OP Units converted to common stock (in shares) | 143,173 | |||||||||||||||
Issuance of common stock in public offering, net of issuance costs | $ 0 | 2,745 | $ 1 | 2,744 | (2,745) | |||||||||||
OP Units converted to common stock | (8,177) | (7,890) | (7,890) | (287) | ||||||||||||
Dividends and distributions declared on common stock and OP Units | (132) | (132) | (132) | |||||||||||||
Repurchase of common stock for tax withholding obligations | 1,041 | 1,041 | 1,041 | |||||||||||||
Other comprehensive income | (265) | (253) | (253) | (12) | ||||||||||||
Net income (loss) | (2,630) | (2,536) | (2,536) | (94) | ||||||||||||
Ending balance (in shares) at Jun. 30, 2021 | 39,525,978 | |||||||||||||||
Ending balance at Jun. 30, 2021 | 709,476 | 683,705 | $ 395 | 704,269 | (23,140) | 2,181 | 25,771 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
OP Units converted to common stock (in shares) | 65,840 | |||||||||||||||
Issuance of common stock in public offering, net of issuance costs | 0 | 1,247 | $ 1 | 1,246 | (1,247) | |||||||||||
OP Units converted to common stock | (8,181) | (7,916) | (7,916) | (265) | ||||||||||||
Dividends and distributions declared on common stock and OP Units | (125) | (125) | (125) | |||||||||||||
Vesting of restricted stock units (in shares) | 35,000 | |||||||||||||||
Repurchase of common stock for tax withholding obligations (in shares) | (9,013) | |||||||||||||||
Repurchase of common stock for tax withholding obligations | (229) | (229) | (229) | |||||||||||||
Repurchase of common stock for tax withholding obligations | 1,033 | 1,033 | 1,026 | 7 | ||||||||||||
Other comprehensive income | 5 | 6 | 6 | (1) | ||||||||||||
Net income (loss) | 2,944 | 2,848 | 2,848 | 96 | ||||||||||||
Ending balance (in shares) at Sep. 30, 2021 | 39,617,805 | |||||||||||||||
Ending balance at Sep. 30, 2021 | 704,923 | 680,569 | $ 396 | 706,312 | (28,326) | 2,187 | 24,354 | |||||||||
Beginning balance (in shares) at Dec. 31, 2021 | 44,223,050 | |||||||||||||||
Beginning balance at Dec. 31, 2021 | 789,815 | 779,170 | $ 442 | 809,724 | (35,119) | 4,123 | 10,645 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
Issuance of stock (in shares) | 3,604,736 | |||||||||||||||
Issuance of stock | 75,497 | 75,497 | $ 36 | 75,461 | ||||||||||||
OP Units converted to common stock (in shares) | 25,629 | |||||||||||||||
Issuance of common stock in public offering, net of issuance costs | $ 0 | 484 | 484 | (484) | ||||||||||||
OP Units converted to common stock | (8,997) | (8,888) | (8,888) | (109) | ||||||||||||
Dividends and distributions declared on common stock and OP Units | (128) | (128) | (128) | |||||||||||||
Vesting of restricted stock units (in shares) | 85,224 | |||||||||||||||
Vesting of restricted stock units | 0 | $ 1 | (1) | |||||||||||||
Repurchase of common stock for tax withholding obligations (in shares) | (16,651) | |||||||||||||||
Repurchase of common stock for tax withholding obligations | (362) | (362) | (362) | |||||||||||||
Repurchase of common stock for tax withholding obligations | 1,045 | 1,045 | 1,045 | |||||||||||||
Other comprehensive income | 6,211 | 6,135 | 6,135 | 76 | ||||||||||||
Net income (loss) | 1,966 | 1,942 | 1,942 | 24 | ||||||||||||
Ending balance (in shares) at Mar. 31, 2022 | 47,921,988 | |||||||||||||||
Ending balance at Mar. 31, 2022 | 865,047 | 854,895 | $ 479 | 886,351 | (42,193) | 10,258 | 10,152 | |||||||||
Beginning balance (in shares) at Dec. 31, 2021 | 44,223,050 | |||||||||||||||
Beginning balance at Dec. 31, 2021 | 789,815 | 779,170 | $ 442 | 809,724 | (35,119) | 4,123 | 10,645 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
OP Units converted to common stock (in shares) | 47,894 | |||||||||||||||
Net income (loss) | 5,395 | |||||||||||||||
Ending balance (in shares) at Sep. 30, 2022 | 54,876,295 | |||||||||||||||
Ending balance at Sep. 30, 2022 | 1,009,485 | 999,771 | $ 549 | 1,032,634 | (58,747) | 25,335 | 9,714 | |||||||||
Beginning balance (in shares) at Mar. 31, 2022 | 47,921,988 | |||||||||||||||
Beginning balance at Mar. 31, 2022 | 865,047 | 854,895 | $ 479 | 886,351 | (42,193) | 10,258 | 10,152 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
Issuance of stock (in shares) | 2,397,035 | |||||||||||||||
Issuance of stock | 50,000 | 50,000 | $ 24 | 49,976 | ||||||||||||
OP Units converted to common stock (in shares) | 22,265 | |||||||||||||||
Issuance of common stock in public offering, net of issuance costs | $ 0 | $ 418 | $ 418 | $ (418) | ||||||||||||
OP Units converted to common stock | (9,692) | (9,588) | (9,588) | (104) | ||||||||||||
Dividends and distributions declared on common stock and OP Units | (149) | (149) | (149) | |||||||||||||
Repurchase of common stock for tax withholding obligations | 1,298 | 1,298 | 1,298 | |||||||||||||
Other comprehensive income | 1,338 | 1,323 | 1,323 | 15 | ||||||||||||
Net income (loss) | 2,010 | 1,987 | 1,987 | 23 | ||||||||||||
Ending balance (in shares) at Jun. 30, 2022 | 50,341,288 | |||||||||||||||
Ending balance at Jun. 30, 2022 | 909,852 | 900,184 | $ 503 | 938,043 | (49,943) | 11,581 | 9,668 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
Issuance of stock (in shares) | 4,512,003 | |||||||||||||||
Issuance of stock | $ 93,522 | $ 93,522 | $ 45 | $ 93,477 | ||||||||||||
OP Units converted to common stock | (10,176) | (10,073) | (10,073) | (103) | ||||||||||||
Dividends and distributions declared on common stock and OP Units | (141) | (141) | (141) | |||||||||||||
Vesting of restricted stock units (in shares) | 31,865 | |||||||||||||||
Vesting of restricted stock units | 0 | $ 1 | (1) | |||||||||||||
Repurchase of common stock for tax withholding obligations (in shares) | (8,861) | |||||||||||||||
Repurchase of common stock for tax withholding obligations | (187) | (187) | (187) | |||||||||||||
Repurchase of common stock for tax withholding obligations | 1,309 | 1,309 | 1,302 | 7 | ||||||||||||
Other comprehensive income | 13,887 | 13,754 | 13,754 | 133 | ||||||||||||
Net income (loss) | 1,419 | 1,403 | 1,403 | 16 | ||||||||||||
Ending balance (in shares) at Sep. 30, 2022 | 54,876,295 | |||||||||||||||
Ending balance at Sep. 30, 2022 | $ 1,009,485 | $ 999,771 | $ 549 | $ 1,032,634 | $ (58,747) | $ 25,335 | $ 9,714 |
Organization and Description of
Organization and Description of Business | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Description of Business | Organization and Description of Business NETSTREIT Corp. (“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”). NETSTREIT GP, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company, is the sole general partner of the Operating Partnership. The Company elected to be treated and to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with its short taxable year ended December 31, 2019. Additionally, the Operating Partnership formed NETSTREIT Management TRS, LLC (“NETSTREIT TRS”), which together with the Company jointly elected to be treated as a taxable REIT subsidiary under Section 856(a) of the Internal Revenue Code of 1986, as amended, (the “Code”) for U.S. federal income tax purposes. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). 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. Interim Unaudited Financial Information 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 and nine months ended September 30, 2022 and 2021 are not necessarily indicative of the results for the full year. Noncontrolling Interests 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. 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 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. Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s most significant assumptions and estimates relate to the useful lives of real estate assets, lease accounting, real estate impairment assessments, and allocation of fair value of purchase consideration. These estimates are based on historical experience and other assumptions which management believes are reasonable under the circumstances. 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 and instability in macroeconomic conditions will have on the global economy and the Company’s business makes any estimates and assumptions as of September 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. Risk and Uncertainties COVID-19 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 periods presented in the condensed 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. 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. The Company evaluates each acquisition transaction to determine whether the acquired asset meets the definition of a business and therefore accounted for as a business combination or if the acquisition transaction should be accounted for as an asset acquisition. Under Accounting Standards Update (“ASU”) 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”), an acquisition does not qualify as a business when substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets or the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay. Transaction costs related to acquisitions that qualify as asset acquisitions are capitalized as part of the cost basis of the acquired assets, while transaction costs for acquisitions that are deemed to be acquisitions of a business are expensed as incurred. The Company allocates the purchase price of acquired properties accounted for as asset acquisitions to tangible and identifiable intangible assets or liabilities based on their relative fair values. Tangible assets may include land, buildings, site improvements and tenant improvements. Intangible assets include the value of in-place leases and above-market leases and intangible liabilities include below-market leases. 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 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 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; e.g., location, size, demographics, value and comparative rental rates; tenant credit profile and the importance of the location of the real estate to the operations of the tenant’s business. Additionally, the Company considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets and liabilities acquired. Based on these inputs for measuring and allocating the fair value of real estate acquisitions, the Company utilizes both observable market data (categorized as level 2 on the three-level valuation hierarchy of Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement), and unobservable inputs that reflect the Company’s own internal assumptions (categorized as level 3 under ASC Topic 820). Depreciation and Amortization 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 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 $13.4 million and $8.1 million during the three months ended September 30, 2022 and 2021, respectively. Total depreciation and amortization expense was $36.1 million and $21.1 million during the nine months ended September 30, 2022 and 2021, respectively. Depreciation expense on real estate held for investment and computer equipment and other corporate assets was $9.1 million and $5.6 million during the three months ended September 30, 2022 and 2021, respectively. Depreciation expense on real estate held for investment and computer equipment and other corporate assets was $24.4 million and $14.5 million during the nine months ended September 30, 2022 and 2021, respectively. Amortization expense on acquired in-place lease and assembled workforce intangible assets and leasing commission costs were $4.3 million and $2.5 million during the three months ended September 30, 2022 and 2021, respectively. Amortization expense on acquired in-place lease and assembled workforce intangible assets and leasing commission costs were $11.7 million and $6.5 million during the nine months ended September 30, 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. Assets Held for Sale The Company is continually evaluating the portfolio of real estate assets and may elect to dispose of assets considering criteria including, but not limited to, tenant concentration, tenant credit quality, unit financial performance, local market conditions and lease rates, asset location, and tenant operation type (e.g., tenant or retail sector). Real estate assets held for sale are expected to be sold within twelve months. Properties classified as held for sale, including the related intangibles, on the condensed consolidated balance sheets include only those properties available for immediate sale in their present condition, which are actively being marketed, and for which management believes that it is probable that a sale of the property will be completed within one year. Properties held for sale are carried at the lower of cost or fair value, less estimated selling costs. No depreciation expense or amortization expense is recognized on properties held for sale and the related intangible assets or liabilities once they have been classified as such. 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, 2022 or held for sale as discontinued operations as of September 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 September 30, 2022 and December 31, 2021, there were twelve and one properties, respectively, classified as held for sale. Impairment of Long-Lived Assets 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. 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 asset group is recoverable. 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. Based on these unobservable inputs, the Company determined that its valuations of impaired real estate and intangible assets fall within Level 3 of the fair value hierarchy under ASC Topic 820. 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, 2022 2021 2022 2021 Total provision for impairment $ — $ — $ 1,114 $ 3,539 Number of properties: (1) Classified as held for sale — — — 3 Disposed within the period — — 1 3 (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 The Company considers all cash balances, money market accounts and highly liquid investments with original maturities of three months or less to be cash and cash equivalents. Restricted cash includes cash restricted for property tenant improvements and cash proceeds from the sale of assets held by qualified intermediaries in anticipation of the acquisition of replacement properties in tax-free exchanges under Section 1031 of the Code. 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, 2022 or December 31, 2021. The Company’s bank balances as of September 30, 2022 and December 31, 2021 include certain amounts over the Federal Deposit Insurance Corporation limits. Revenue Recognition and Related Matters The Company’s rental revenue is primarily related to rent received from tenants under leases accounted for as operating leases. 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. 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. Variable lease revenues are not recognized until the specific events that trigger the variable payments have occurred. 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 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, 2022 and December 31, 2021, the Company had an immaterial reserve for uncollectible amounts specific to uncharged reimbursable expenses. Mortgage Loans Receivable The Company holds loans receivable, which are mortgage loans secured by real estate, for long-term investment. Loans receivable are carried at amortized cost. The Company recognizes interest income on loans 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 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. Stock-Based Compensation The Company has a share-based compensation award program for our employees and directors. Stock-based compensation expense associated with these awards is recognized in general and administrative expenses in our condensed consolidated statements of operations and comprehensive 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. Liability classified awards are remeasured to fair value each reporting period. Stock-based compensation expense is recognized over the requisite service or performance period. The Company recognizes forfeitures as they occur. Forward Equity Sales The Company sells shares of common stock through forward sale agreements from time to time 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. 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 were $0.1 million and $0.1 million for the three months ended September 30, 2022 and 2021, respectively, and represent acquisition related expenses, including costs associated with abandoned acquisitions. Transaction costs were $0.7 million and $0.5 million for the nine months ended September 30, 2022 and 2021. Income Taxes The Company elected to be treated and qualify as a REIT for U.S. federal income tax purposes beginning with its short taxable year ended December 31, 2019. To qualify as a REIT, the Company must meet certain organizational, income, asset and distribution tests. Accordingly, the Company will generally not be subject to corporate U.S. federal or state income tax to the extent that it makes qualifying distributions of all of its taxable income to its 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. NETSTREIT TRS is treated as a taxable REIT subsidiary which may be subject to U.S. federal, state, and local income taxes on its taxable income. In general, NETSTREIT TRS may perform services for tenants of the Company, hold assets that the Company cannot hold directly and may engage in any real estate or non-real estate-related business. 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 related 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 September 30, 2022 and December 31, 2021. The Company files federal, state and local income tax returns. The Company regularly analyzes its various federal and state filing positions and only recognizes the income tax effect in its financial statements when certain criteria regarding uncertain income tax positions have been met. The Company believes that its income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities. Therefore, no provisions for uncertain income tax positions have been recorded in the condensed consolidated financial statements. All federal tax returns for years prior to 2019 are no longer subject to examination. Additionally, state tax returns for years prior to 2017 are generally no longer subject to examination. 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. 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. None of the Company’s equity awards are participating securities. Fair Value Measurement Fair value measurements are utilized in the accounting of the Company’s assets acquired and liabilities assumed in an asset acquisition and also affect the Company’s accounting for certain of its financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The hierarchy described below prioritizes inputs to the valuation techniques used in measuring the fair value of assets and liabilities. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs to be used when available. The hierarchy is broken down into three levels based on the reliability of inputs as follows: Level 1 inputs, such as quoted prices in an active market; Level 2 inputs, which are observable inputs for similar assets; or Level 3 inputs, which are unobservable inputs. The Company uses the following inputs in its fair value measurements: – Level 2 inputs for its debt and derivative financial instrument fair value disclosures. See “Note 6 – Debt” and “Note 7 – Derivative Financial Instruments,” respectively; and – Level 2 and Level 3 inputs when assessing the fair value of assets and liabilities in connection with real estate acquisitions and impairment. See “Note 4 – Real Estate Investments.” 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, 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 facilities, amounts due under mortgage loans 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 and nine months ended September 30, 2022 and 2021, there were no tenants with rental revenue that exceeded 10% of total rental revenue. Segment Reporting The Company considers each one of its properties to be an operating segment, none of which meets the threshold for a reportable segment. The Company allocates resources and assesses operating performance based on individual property needs. All of the Company’s operating segments meet the aggregation criteria, and thus, the Company reports one segment, rental operations. In addition, there were no intersegment sales during the periods presented. Recent Accounting Pronouncements Adopted In March 2020, the FASB issued ASU 2020-04 “Topic 848: Reference Rate Reform.” ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives, and other contracts. 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 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. The Company determined these elections have not materially impacted the Company's condensed consolidated financial statements. 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. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2022 | |
Leases [Abstract] | |
Leases | 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, 2022, the Company had 406 single-tenant retail net leases spanning 42 states, with 77 different tenants represented across 24 retail sectors. As of September 30, 2022, the remaining terms of leases range from 1-21 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. 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 and nine months ended September 30, 2022 and 2021. 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, 2022 2021 2022 2021 Rental revenue Fixed lease income (1) $ 21,940 $ 14,010 $ 59,661 $ 37,460 Variable lease income (2) 2,086 1,434 7,004 3,290 Other rental revenue: Above/below market lease amortization, net 444 182 1,021 609 Lease incentives (131) (23) (377) (26) Rental revenue (including reimbursable) $ 24,339 $ 15,603 $ 67,309 $ 41,333 (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, and the write-off of uncollectible amounts. 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, 2022 are as follows (in thousands): Future Minimum Base Remainder of 2022 $ 22,429 2023 90,548 2024 91,527 2025 90,798 2026 87,941 Thereafter 503,378 Total $ 886,621 Future minimum rentals exclude amounts that may be received from tenants for reimbursements of operating costs and property taxes. 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 9.8 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 and nine months ended September 30, 2022 (in thousands): Three Months Ended Nine Months Ended 2022 2021 2022 2021 Operating lease cost $ 135 $ — $ 406 $ — Variable lease cost $ 33 $ — $ 42 $ — The Company recorded a right-of-use asset and operating lease liability of approximately $4.5 million at lease commencement. As of September 30, 2022, the right-of-use asset and operating lease liability were $4.3 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 September 30, 2022 (in thousands): Future Minimum Lease Payments Remainder of 2022 $ 111 2023 533 2024 617 2025 636 2026 653 Thereafter 3,982 Total lease payments 6,532 Less: amount representing interest (1) (1,001) Present value of operating lease liabilities $ 5,531 (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. |
Real Estate Investments
Real Estate Investments | 9 Months Ended |
Sep. 30, 2022 | |
Real Estate [Abstract] | |
Real Estate Investments | Real Estate InvestmentsAs of September 30, 2022, the Company owned or had investments in 409 properties, including six properties currently under development. The gross real estate investment portfolio, including properties under development, totaled approximately $1.4 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 Illinois and Texas representing 9.8% and 9.4%, respectively, of the total gross real estate investment of the Company’s entire portfolio. Acquisitions During the nine months ended September 30, 2022, the Company acquired 82 properties for a total purchase price of $329.0 million, inclusive of $3.2 million of capitalized acquisition costs. During the nine months ended September 30, 2021, the Company acquired 92 properties for a total purchase price of $292.0 million, inclusive of $3.0 million of capitalized acquisition costs. 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, 2022 2021 Land $ 84,248 $ 73,600 Buildings 204,623 161,362 Site improvements 18,059 19,844 Tenant improvements 3,046 4,663 In-place lease intangible assets 35,021 32,384 Above-market lease intangible assets 2,676 6,701 Assumed receivables — 44 347,673 298,598 Liabilities assumed Below-market lease intangible liabilities (10,734) (6,552) Mortgage note payable (7,913) — Accounts payable, accrued expense and other liabilities (40) — Purchase price (including acquisition costs) $ 328,986 $ 292,046 Development As of September 30, 2022, the Company had six property developments under construction. During the nine months ended September 30, 2022, the Company invested $14.3 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 nine-month 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 through the first quarter of 2023. The purchase price, including acquisition costs, and subsequent development are included in property under development in the accompanying condensed consolidated balance sheets as of September 30, 2022. Additionally, during the first nine months of 2022 and 2021, the Company capitalized approximately $0.1 million of interest expense associated with properties under development. During the nine months ended September 30, 2021, the Company invested a total of $2.6 million in a development project in Yuma, Arizona. The Company exercised its non-binding purchase option to acquire the property upon completion 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 nine months ended September 30, 2021, the Company also invested a total of $6.9 million, including the purchase price of $5.4 million, in four properties. Upon acquisition, the Company commenced development of four build-to-suit projects, of which three total properties have been completed during the fourth quarter of 2021, the first quarter of 2022, and the second quarter of 2022, respectively. Rent commenced for the three completed 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. Dispositions During the three months ended September 30, 2022, the Company sold one property for a total sales price, net of disposal costs, of $1.7 million, recognizing a gain of $0.1 million. During the nine months ended September 30, 2022, the Company sold four properties for a total sales price, net of disposal costs, of $13.8 million, recognizing a gain of $2.2 million. During the three months ended September 30, 2021, the Company sold four properties for a total sales price, net of disposal costs, of $18.1 million, recognizing a gain on $2.0 million. 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 gain of $2.5 million. Investment in Mortgage Loans 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 loans receivable, net in the accompanying condensed consolidated balance sheets as of September 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 has an investment grade profile. The funds provided under the loan, in addition to loan origination costs of less than $0.1 million, are included in loans receivable, net in the accompanying condensed consolidated balance sheets as of September 30, 2022. |
Intangible Assets and Liabiliti
Intangible Assets and Liabilities | 9 Months Ended |
Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Liabilities | Intangible Assets and Liabilities Intangible assets and liabilities consisted of the following (in thousands): September 30, 2022 December 31, 2021 Gross Accumulated Amortization Net Carrying Amount Gross Accumulated Amortization Net Carrying Amount Assets: In-place leases $ 148,489 $ (24,197) $ 124,292 $ 116,368 $ (13,408) $ 102,960 Above-market leases 20,022 (2,519) 17,503 17,348 (1,516) 15,832 Assembled workforce 873 (812) 61 873 (592) 281 Lease incentives 7,969 (468) 7,501 5,821 (122) 5,699 Total Intangible assets $ 177,353 $ (27,996) $ 149,357 $ 140,410 $ (15,638) $ 124,772 Liabilities: Below-market leases $ 36,143 $ (4,705) $ 31,438 $ 26,185 $ (2,869) $ 23,316 The remaining weighted average amortization period of the Company’s intangible assets and liabilities as of September 30, 2022 and as of December 31, 2021 by category were as follows: Years Remaining September 30, 2022 December 31, 2021 In-place leases 9.6 9.7 Above-market leases 13.4 12.8 Below-market leases 11.9 12.3 Assembled workforce 0.3 1.0 Lease incentives 12.1 12.7 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 September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Amortization: Amortization of in-place leases $ 4,201 $ 2,444 $ 11,489 $ 6,296 Amortization of assembled workforce 73 73 220 220 $ 4,274 $ 2,517 $ 11,709 $ 6,516 Net adjustment to rental revenue: Above-market lease assets (343) (346) (1,003) (723) Below-market lease liabilities 787 528 2,024 1,332 Lease incentives (131) (23) (377) (26) $ 313 $ 159 $ 644 $ 583 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, 2022, for the next five years and thereafter (in thousands): Remainder of 2022 2023 2024 2025 2026 Thereafter Total In-place leases $ 4,291 $ 16,161 $ 15,389 $ 14,815 $ 13,602 $ 60,034 $ 124,292 Assembled workforce 61 — — — — — 61 Amortization expense $ 4,352 $ 16,161 $ 15,389 $ 14,815 $ 13,602 $ 60,034 $ 124,353 Above-market lease assets (351) (1,405) (1,401) (1,400) (1,399) (11,547) (17,503) Below-market lease liabilities 784 3,075 3,024 3,002 2,910 18,643 31,438 Lease incentives (171) (682) (682) (682) (682) (4,602) (7,501) Net adjustment to rental revenue $ 262 $ 988 $ 941 $ 920 $ 829 $ 2,494 $ 6,434 |
Debt
Debt | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Debt | Debt Debt consists of the following (in thousands): Maturity Date Interest Rate September 30, 2022 December 31, 2021 Debt: Prior Revolver December 23, 2023 — $ — $ 64,000 2024 Term Loan (1) December 23, 2024 1.36% 175,000 175,000 New Revolver (2) August 11, 2026 3.95% 30,000 — 2028 Term Loan (3) February 11, 2028 3.88% 200,000 — Mortgage Note November 1, 2027 4.53% 8,534 — Total debt 413,534 239,000 Unamortized discount and debt issuance costs (2,431) (670) Unamortized deferred financing costs, net (4) (2,871) (796) Total debt, net $ 408,232 $ 237,534 (1) Loan is a floating-rate loan which resets monthly at one-month LIBOR plus the applicable margin which was 1.15% as of September 30, 2022. The Company has entered into four interest rate swap agreements that effectively convert the floating rate to the fixed rate noted as of September 30, 2022. (2) The annual interest rate of the New Revolver assumes one-month SOFR as of September 30, 2022 of 2.85% plus a SOFR adjustment of 0.10% plus the applicable margin which was 1.00% as of September 30, 2022. Additionally, the New Revolver may be extended up to one year. (3) Loan is a floating-rate loan which resets monthly at one-month term SOFR plus a SOFR adjustment of 0.10% plus the applicable margin which was 1.15% as of September 30, 2022. The Company has entered into three interest rate swap agreements that effectively convert the floating rate to the fixed rate noted as of September 30, 2022. (4) The Company records deferred financing costs for the New Revolver in other assets, net on its condensed consolidated balance sheets. New Credit Facility On August 11, 2022, the Company entered into a sustainability-linked senior unsecured credit facility consisting of (i) a $200.0 million senior unsecured term loan (the “2028 Term Loan”) and (ii) a $400.0 million senior unsecured revolving credit facility (the “New Revolver”, and together with the 2028 Term Loan, the “New Credit Facility”). The New Credit Facility may be increased by $400.0 million in the aggregate. The New Revolver refinanced and upsized the Company’s existing $250.0 million senior unsecured revolving credit facility (the “Prior Revolver”) pursuant to the credit agreement, dated as of December 23, 2019, governing such facility (the “Prior Credit Agreement”). The Company used the proceeds from the borrowings made on the closing date to repay in full the Prior Revolver. Remaining and future borrowings under the New Revolver will be used by the Company for general corporate purposes of the Company and its subsidiaries, including acquisitions in the Company’s pipeline. The Company’s $175.0 million senior unsecured term loan (“2024 Term Loan”) under the Prior Credit Agreement, which matures in December 2024, remained outstanding upon the closing of the New Credit Facility. The 2028 Term Loan matures on February 11, 2028 and the New Revolver matures on August 11, 2026, subject to extension of up to one year. Borrowings under the New Credit Facility are repayable at the Company’s option in whole or in part without premium or penalty. Borrowings under the New Revolver may be repaid and reborrowed from time to time prior to the maturity date. Prior to the date the Company obtains an investment grade rating, interest rates are based on the Company’s consolidated total leverage ratio, and are determined by (A) in the case of the 2028 Term Loan either (i) SOFR, plus a SOFR adjustment of 0.10%, 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 agreement governing the New Credit Facility (the “New Credit Agreement”)), 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 the New Revolver either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 1.00% to 1.45%, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the New Credit Agreement), plus a margin ranging from 0.00% to 0.45%, based on the Company’s consolidated total leverage ratio. After the date the Company obtains an investment grade rating, interest rates are based on the Company’s investment grade rating, and are determined by (A) in the case of the 2028 Term Loan either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 0.80% to 1.60%, based on the Company’s investment grade rating, or (ii) a Base Rate (as defined in the New Credit Agreement), plus a margin ranging from 0.00% to 0.60%, based on the Company’s investment grade rating and (B) in the case of the New Revolver either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 0.725% to 1.40%, based on the Company’s investment grade rating, or (ii) a Base Rate (as defined in the New Credit Agreement), plus a margin ranging from 0.00% to 0.40%, based on the Company’s investment grade rating. Additionally, the Company will incur a facility fee based on the total commitment amount of $400.0 million under the New Revolver. Prior to the date the Company obtains an investment grade rating, the applicable facility fee will range from 0.15% to 0.30% based on the Company’s consolidated total leverage ratio. After the date the Company obtains an investment grade rating, the applicable facility fee will range from 0.125% to 0.30% based on the Company’s investment grade rating. The New Credit Facility also contains a sustainability-linked pricing component pursuant to which the Company will receive interest rate reductions up to 0.025% based on its performance against a sustainability performance target focused on the portion of the Company’s annualized base rent attributable to tenants with commitments or quantifiable targets for reduced greenhouse gas emission in accordance with the standards of the Science Based Targets initiative (“SBTi”). The Company has fully hedged the 2028 Term Loan with an all-in interest rate of 3.88%. Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings. The interest rate hedge is further described in “Note 7 – Derivative Financial Instruments.” In connection with the New Credit Facility, the Company incurred $3.8 million of deferred financing costs which were allocated between the New Revolver and 2028 Term Loan in the amounts of $2.4 million and $1.3 million, respectively. Additionally, $0.5 million of unamortized deferred financing costs associated with the Prior Revolver were reclassed to the New Revolver. Deferred financing costs are amortized over the remaining terms of each respective borrowing and are included in interest expense, net on the Company’s condensed consolidated statements of operations and comprehensive income. Prior Credit Facility In December 2019, the Company entered into the Prior Credit Agreement for a senior credit facility consisting of the Prior Revolver and the 2024 Term Loan (collectively, the “Prior Credit Facility”). The 2024 Term Loan matures on December 23, 2024 and the Prior Revolver was set to mature on December 23, 2023, subject to extension up to one year, prior to the Company using the proceeds from the New Credit Facility to repay the Prior Revolver in full. Interest rates under the Prior Credit Facility are based on the Company’s consolidated total leverage ratio, and are determined by (A) in the case of the 2024 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 Prior 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 the Prior Revolver 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 Prior Credit Facility), plus a margin ranging from 0.20% to 0.80%, based on the Company’s consolidated total leverage ratio. Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings. The Company was required to pay a Prior Revolver facility fee at an annual rate of 0.15% of the unused capacity if usage exceeded 50% of the total available facility, or 0.25% of the unused facility if usage did not exceed 50%. Loans from the Prior Revolver were generally restricted if, among other things, the proposed usage of the proceeds from the loan did not meet certain criteria as outlined in the Prior Credit Agreement, if an event of default exists, or if the requested loan will create an event of default. Effective September 28, 2020, the Company entered into an interest rate derivative contract to fix the base interest rate (one-month LIBOR) on the 2024 Term Loan. 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.” During the third quarter of 2022, the Company executed an amendment to the Prior Credit Agreement that governs the 2024 Term Loan, which conformed financial covenants and event of default materiality thresholds to align with those under the New Credit Facility, added a carve-out to the derivatives contracts negative covenant to permit forward sale transactions, and added erroneous payment provisions. Mortgage Note Payable As of September 30, 2022, the Company had total gross mortgage indebtedness of $8.8 million, which was collateralized by related real estate and a tenant’s lease with an aggregate net book value of $13.2 million. The Company incurred debt issuance costs of less than $0.1 million and recorded a debt discount of $0.6 million, both of which are recorded as a reduction of the principal balance in mortgage note payable, net on the Company’s condensed consolidated balance sheets. Debt Maturities Payments on the 2024 and 2028 Term Loan are interest only through maturity. As of September 30, 2022, scheduled maturities, including balloon payments, are as follows (in thousands): Scheduled Principal Balloon Payment Total Remainder of 2022 $ 38 $ — $ 38 2023 155 — 155 2024 162 175,000 175,162 2025 170 — 170 2026 178 30,000 30,178 Thereafter 170 207,663 207,833 Total $ 873 $ 412,663 $ 413,536 Interest Expense The following table is a summary of the components of interest expense related to the Company’s borrowings (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revolving credit facilities (1) $ 1,222 $ 154 $ 2,518 $ 459 Term loans 1,670 608 2,854 1,801 Mortgage note payable 1 — 1 — Non-cash: Amortization of deferred financing costs 153 101 354 302 Amortization of debt discount, net 86 56 199 169 Capitalized interest (115) (24) (218) (38) Total interest expense, net $ 3,017 $ 895 $ 5,708 $ 2,693 (1) Includes facility fees and non-utilization fees of approximately $0.1 million and $0.2 million for the three months ended September 30, 2022 and 2021, and facility fees of $0.5 million and $0.2 million for the nine months ended September 30, 2022 and 2021. Deferred financing, discount, and debt issuance costs are amortized over the remaining terms of each respective borrowing and are included in interest expense, net on the Company’s condensed consolidated statements of operations and comprehensive income. For the three months ended September 30, 2022 and 2021, term loans had a weighted average interest rate, exclusive of amortization of deferred financing costs and the effects of interest rate hedges, of 3.53% and 1.26%, respectively. For the nine months ended September 30, 2022 and 2021, the term loans had a weighted average interest rate, exclusive of amortization of deferred financing costs and the effects of interest rate hedges, of 2.49% and 1.28%, respectively. During the three months ended September 30, 2022 and 2021, the Company incurred interest expense on revolving credit facilities with a weighted average interest rate, exclusive of amortization of deferred financing costs, of 3.28% and 1.26%, respectively. During the nine months ended September 30, 2022 and 2021, the Company incurred interest expense on revolving credit facilities with a weighted average interest rate, exclusive of amortization of deferred financing costs, of 2.29% and 1.24%, respectively. The estimated fair values of the Company’s term loans have 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 loans as of September 30, 2022 and December 31, 2021. The Company was in compliance with all of its debt covenants as of September 30, 2022 and expects to be in compliance for the following twelve-month period. |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Sep. 30, 2022 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Financial Instruments | Derivative Financial Instruments The Company uses interest rate derivative contracts to manage its exposure to changes in interest rates on its variable rate debt. These derivatives are considered cash flow hedges and are recorded on a gross basis at fair value. Assessments of hedge effectiveness are performed quarterly using either a qualitative or quantitative approach. The Company recognizes the entire change in the fair value in Accumulated Other Comprehensive Income (“AOCI”) and the change is reflected as cash flow hedge changes in fair value in the supplemental disclosures of non-cash investing and financing activities in the consolidated statements of cash flows. Effective September 28, 2020 and September 1, 2022, such derivatives were initiated to hedge the variable cash flows associated with the 2024 Term Loan and 2028 Term Loan, respectively. Accordingly, the interest rate for the variable rate 2024 Term Loan is based on the hedged fixed rate of 0.21% compared to the variable 2024 Term Loan one-month LIBOR rate as of September 30, 2022 of 2.56%, plus the applicable margin of 1.15%. The interest rate for the variable rate 2028 Term Loan is based on the hedged fixed rate of 2.63% compared to the variable 2028 Term Loan one-month SOFR rate as of September 30, 2022 of 2.51%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15%. The maturity dates of the interest rate swaps coincide with the respective maturity dates of the 2024 and 2028 Term Loans. Amounts will subsequently be reclassified to earnings when the hedged item affects earnings. The Company does not enter into derivative contracts for speculative or trading purposes and does not have derivative netting arrangements. The Company is exposed to credit risk in the event of non-performance by its derivative counterparties. The Company evaluates counterparty credit risk through monitoring the creditworthiness of counterparties, which includes review of debt ratings and financial performance. To mitigate credit risk, the Company enters into agreements with counterparties it considers credit-worthy, such as large financial institutions with favorable credit ratings. The Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (in thousands, except number of instruments): Number of Instruments Notional Interest Rate Derivatives September 30, 2022 December 31, 2021 September 30, 2022 December 31, 2021 Interest rate swaps 7 4 $ 375,000 $ 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, 2022 and December 31, 2021 (in thousands): Derivative Assets Fair Value at Derivatives Designated as Hedging Instruments: Balance Sheet Location September 30, 2022 December 31, 2021 Interest rate swaps Other assets, net $ 25,745 $ 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 and nine months ended September 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 Derivatives in Cash Flow Hedging Relationships 2022 2021 2022 2021 For the Three Months Ended September 30 Interest Rate Products $ 14,761 $ (47) Interest expense, net $ 874 $ (52) For the Nine Months Ended September 30 Interest Rate Products $ 22,539 $ 1,932 Interest expense, net $ 1,103 $ (131) The Company did not exclude any amounts from the assessment of hedge effectiveness for the three and nine months ended September 30, 2022 and 2021. During the next twelve months, the Company estimates that an additional $10.2 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. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. 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, 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 assets measured at fair value on a recurring basis as of September 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 September 30, 2022 Derivative assets $ — $ 25,745 $ — $ 25,745 December 31, 2021 Derivative assets $ — $ 4,310 $ — $ 4,310 |
Supplemental Detail for Certain
Supplemental Detail for Certain Components of the Condensed Consolidated Balance Sheets | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Supplemental Detail for Certain Components of the Condensed Consolidated Balance Sheets | Supplemental Detail for Certain Components of the Condensed Consolidated Balance Sheets Other assets, net consist of the following (in thousands): September 30, 2022 December 31, 2021 Accounts receivable, net $ 5,792 $ 2,801 Deferred rent receivable 3,731 2,263 Prepaid assets 1,717 1,473 Earnest money deposits 4,539 853 Fair value of interest rate swaps 25,745 4,309 Deferred offering costs 1,153 615 Deferred financing costs, net 2,871 796 Right-of-use asset 4,326 4,581 Leasehold improvements and other corporate assets, net 2,045 1,657 Interest receivable 218 — Other assets, net 1,950 1,003 $ 54,087 $ 20,351 Accounts payable, accrued expenses and other liabilities consists of the following (in thousands): September 30, 2022 December 31, 2021 Accrued expenses $ 6,898 $ 6,254 Accrued bonus 1,221 1,742 Prepaid rent 3,510 1,918 Operating lease liability 5,531 5,442 Accounts payable 430 419 Other liabilities 3,610 1,205 $ 21,200 $ 16,980 |
Shareholders_ Equity, Partners_
Shareholders’ Equity, Partners’ Capital and Preferred Equity | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Shareholders’ Equity, Partners’ Capital and Preferred Equity | Shareholders’ Equity, Partners’ Capital and Preferred Equity January 2022 Follow-On Offering 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. As of September 30, 2022, the Company fully physically settled the forward sale agreements (by the delivery of shares of common stock) as follows: • On September 29, 2022 the Company settled 4,512,003 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 $93.5 million, net of underwriting discounts and offering costs of $6.9 million. The Company contributed the net proceeds to the Operating Partnership in exchange for 4,512,003 Class A OP Units. • 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. 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. August 2022 Follow-On Offering On August 8, 2022, the Company completed a registered public offering of 9,000,000 shares of its common stock at a public offering price of $20.20 per share which excluded an over-allotment option to the underwriters to purchase an additional 1,350,000 shares, which was exercised on August 10, 2022. 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 sales of shares of common stock by the forward purchasers upon registration of the offering. 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 August 3, 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 over the prescribed offering period. 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 September 30, 2022, 10,350,000 shares remained unsettled under the August 8, 2022 forward sale agreements. ATM Program 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 nine months ended September 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. Share Repurchase Authorization 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. During the nine months ended September 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. 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 26 thousand RSUs valued at approximately $0.5 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. Dividends During the nine months ended September 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 July 26, 2022 0.20 September 1, 2022 10,068 September 15, 2022 $ 0.60 $ 28,544 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 nine months ended September 30, 2022 and 2021 the Operating Partnership paid distributions of $0.3 million and $0.9 million, respectively, to holders of OP Units. Noncontrolling Interests |
Stock Based Compensation
Stock Based Compensation | 9 Months Ended |
Sep. 30, 2022 | |
Share-based Payment Arrangement [Abstract] | |
Stock Based Compensation | Stock-Based Compensation 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, 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 was $1.3 million and $1.0 million for the three months ended September 30, 2022 and 2021, respectively. Stock-based compensation expense was $3.6 million and $2.6 million for the nine months ended September 30, 2022 and 2021, respectively. All awards of unvested restricted stock units are expected to fully vest over the next one Performance-Based RSUs (effectiveness of shelf registration) 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 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 The following table summarizes performance-based restricted stock unit activity for the period ended September 30, 2022: Shares Weighted Average Grant Date Fair Value per Share Unvested restricted stock grants outstanding as of December 31, 2021 157,380 $ 19.75 Vested during the period (15,823) 19.75 Unvested restricted stock grants outstanding as of September 30, 2022 141,557 $ 19.75 For the three and nine months ended September 30, 2022, the Company recognized $0.2 million and $0.6 million, respectively, in stock-based compensation expense associated with performance-based restricted stock units. As of September 30, 2022 and December 31, 2021, the remaining unamortized stock-based compensation expense totaled $0.8 million and $1.3 million, respectively and as of September 30, 2022, these awards are expected to be recognized over a remaining weighted average period of 1.7 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 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 The following table summarizes service-based restricted stock unit activity for the period ended September 30, 2022: Shares Weighted Average Grant Date Fair Value per Share Unvested restricted stock grants outstanding as of December 31, 2021 295,207 $ 17.84 Granted during the period 148,913 22.09 Forfeited during the period (16,030) 18.55 Vested during the period (101,266) 17.68 Unvested restricted stock grants outstanding as of September 30, 2022 326,824 $ 19.79 For the three and nine months ended September 30, 2022, the Company recognized $0.7 million and $1.9 million, respectively, in stock-based compensation expense associated with service-based restricted stock units. As of September 30, 2022 and December 31, 2021, the remaining unamortized stock-based compensation expense totaled $4.6 million and $4.1 million, respectively, and as of September 30, 2022, these awards are expected to be recognized over a remaining weighted average period of 2.3 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. Performance-Based RSUs (total shareholder return) 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 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 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, 2022: Shares Weighted Average Grant Date Fair Value per Share Unvested restricted stock grants outstanding as of December 31, 2021 134,467 $ 17.77 Granted during the period 106,645 22.38 Forfeited during the period (2,816) 18.65 Vested during the period — — Unvested restricted stock grants outstanding as of September 30, 2022 238,296 $ 19.82 For the three and nine months ended September 30, 2022, the Company recognized $0.4 million and $1.0 million, respectively, in stock-based compensation expense associated market-based restricted stock units. As of September 30, 2022 and December 31, 2021, the remaining unamortized stock-based compensation expense totaled $3.0 million and $1.8 million, respectively, and as of September 30, 2022, these awards are expected to be recognized over a remaining weighted average period of 2.1 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 be 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 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 and nine months ended September 30, 2022, the Company recognized approximately $0.1 million and $0.2 million, respectively 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. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per ShareNet 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 per common share for the three and nine months ended September 30, 2022 and 2021. Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except share and per share data) 2022 2021 2022 2021 Numerator: Net income $ 1,419 $ 2,944 $ 5,395 $ 1,055 Net (income) attributable to noncontrolling interest (16) (96) (63) (42) Net income attributable to common shares, basic 1,403 2,848 5,332 1,013 Net income (loss) attributable to noncontrolling interest 16 96 63 42 Net income attributable to common shares, diluted $ 1,419 $ 2,944 $ 5,395 $ 1,055 Denominator: Weighted average common shares outstanding, basic 50,449,735 39,559,605 47,679,870 35,359,551 Effect of dilutive shares for diluted net income per common share: OP Units 514,890 1,334,571 530,940 1,462,419 Unvested RSUs 255,613 439,403 261,727 286,455 Unsettled shares under open forward equity contracts 164,520 — 184,512 — Weighted average common shares outstanding, diluted 51,384,758 41,333,579 48,657,049 37,108,425 Net income available to common stockholders per common share, basic $ 0.03 $ 0.07 $ 0.11 $ 0.03 Net income available to common stockholders per common share, diluted $ 0.03 $ 0.07 $ 0.11 $ 0.03 As of September 30, 2022 and December 31, 2021, there were 514,890 and 562,784 of OP Units outstanding, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Litigation and Regulatory Matters In the ordinary course of business, from time to time, the Company may be subject to litigation, claims and regulatory matters, none of which are currently outstanding, which the Company believes could have, individually or in the aggregate, a material adverse effect on its business, financial condition or results of operations, liquidity or cash flows. Environmental Matters The Company is subject to environmental regulations related to the ownership of real estate. The cost of complying with the environmental regulations was not material to the Company’s results of operations for any of the periods presented. The Company is not aware of any environmental condition on any of its properties that is likely to have a material adverse effect on the condensed consolidated financial statements when the fair value of such liability can be reasonably estimated and is required to be recognized. Commitments In the normal course of business, the Company enters into various types of commitments to purchase real estate properties or fund development projects. These commitments are generally subject to the Company’s customary due diligence process and, accordingly, a number of specific conditions must be met before the Company is obligated or receives an option to purchase the properties. Additionally, as of September 30, 2022, the Company had commitments to fund six properties under development totaling $11.2 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 a remaining noncancellable term of 9.8 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 September 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. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2022 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related-Party TransactionsEffective 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 and nine months ended September 30, 2021, the Company incurred less than $0.1 million in related expenses. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events The Company has evaluated all events that occurred subsequent to September 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 October 25, 2022, the Company's Board of Directors declared a cash dividend of $0.20 per share for the fourth quarter of 2022 which will be paid on December 15, 2022 to shareholders of record on December 1, 2022. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Interim Unaudited Financial Information | Basis of Presentation The accompanying interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). 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. Interim Unaudited Financial Information |
Noncontrolling Interests | Noncontrolling Interests 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. 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 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. |
Use of Estimates | Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s most significant assumptions and estimates relate to the useful lives of real estate assets, lease accounting, real estate impairment assessments, and allocation of fair value of purchase consideration. These estimates are based on historical experience and other assumptions which management believes are reasonable under the circumstances. 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 and instability in macroeconomic conditions will have on the global economy and the Company’s business makes any estimates and assumptions as of September 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. |
Risk and Uncertainties and Concentrations of Credit Risk | Risk and Uncertainties COVID-19 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 periods presented in the condensed consolidated financial statements were not materially impacted by COVID-19. 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 facilities, amounts due under mortgage loans 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. |
Real Estate Held for Investment | Real Estate Held for Investment Real estate is recorded and stated at cost less any provision for impairment. 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. The Company evaluates each acquisition transaction to determine whether the acquired asset meets the definition of a business and therefore accounted for as a business combination or if the acquisition transaction should be accounted for as an asset acquisition. Under Accounting Standards Update (“ASU”) 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”), an acquisition does not qualify as a business when substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets or the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay. Transaction costs related to acquisitions that qualify as asset acquisitions are capitalized as part of the cost basis of the acquired assets, while transaction costs for acquisitions that are deemed to be acquisitions of a business are expensed as incurred. The Company allocates the purchase price of acquired properties accounted for as asset acquisitions to tangible and identifiable intangible assets or liabilities based on their relative fair values. Tangible assets may include land, buildings, site improvements and tenant improvements. Intangible assets include the value of in-place leases and above-market leases and intangible liabilities include below-market leases. 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 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 an independent valuation firm. The Company also considers information and other factors including market conditions, the industry |
Depreciation and Amortization | Depreciation and Amortization 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 or leasing commissions Remaining terms of the respective leases Assembled workforce 3 years Computer equipment and other corporate assets 3 – 5 years |
Assets Held for Sale | Assets Held for SaleThe Company is continually evaluating the portfolio of real estate assets and may elect to dispose of assets considering criteria including, but not limited to, tenant concentration, tenant credit quality, unit financial performance, local market conditions and lease rates, asset location, and tenant operation type (e.g., tenant or retail sector). Real estate assets held for sale are expected to be sold within twelve months. Properties classified as held for sale, including the related intangibles, on the condensed consolidated balance sheets include only those properties available for immediate sale in their present condition, which are actively being marketed, and for which management believes that it is probable that a sale of the property will be completed within one year. Properties held for sale are carried at the lower of cost or fair value, less estimated selling costs. No depreciation expense or amortization expense is recognized on properties held for sale and the related intangible assets or liabilities once they have been classified as such. 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, 2022 or held for sale as discontinued operations as of September 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. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets 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. 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 asset group is recoverable. 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. Based on these unobservable inputs, the Company determined that its valuations of impaired real estate and intangible assets fall within Level 3 of the fair value hierarchy under ASC Topic 820. |
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash The Company considers all cash balances, money market accounts and highly liquid investments with original maturities of three months or less to be cash and cash equivalents. Restricted cash includes cash restricted for property tenant improvements and cash proceeds from the sale of assets held by qualified intermediaries in anticipation of the acquisition of replacement properties in tax-free exchanges under Section 1031 of the Code. 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, 2022 or December 31, 2021. The Company’s bank balances as of September 30, 2022 and December 31, 2021 include certain amounts over the Federal Deposit Insurance Corporation limits. |
Revenue Recognition and Related Matters | Revenue Recognition and Related Matters The Company’s rental revenue is primarily related to rent received from tenants under leases accounted for as operating leases. 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. 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. Variable lease revenues are not recognized until the specific events that trigger the variable payments have occurred. 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 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, 2022 and December 31, 2021, the Company had an immaterial reserve for uncollectible amounts specific to uncharged reimbursable expenses. Mortgage Loans Receivable The Company holds loans receivable, which are mortgage loans secured by real estate, for long-term investment. Loans receivable are carried at amortized cost. The Company recognizes interest income on loans 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 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. |
Stock-Based Compensation | Stock-Based Compensation The Company has a share-based compensation award program for our employees and directors. Stock-based compensation expense associated with these awards is recognized in general and administrative expenses in our condensed consolidated statements of operations and comprehensive 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. Liability classified awards are remeasured to fair value each reporting period. Stock-based compensation expense is recognized over the requisite service or performance period. The Company recognizes forfeitures as they occur. |
Forward Equity Sales | Forward Equity Sales The Company sells shares of common stock through forward sale agreements from time to time 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. 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. |
Income Taxes | Income Taxes The Company elected to be treated and qualify as a REIT for U.S. federal income tax purposes beginning with its short taxable year ended December 31, 2019. To qualify as a REIT, the Company must meet certain organizational, income, asset and distribution tests. Accordingly, the Company will generally not be subject to corporate U.S. federal or state income tax to the extent that it makes qualifying distributions of all of its taxable income to its 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. NETSTREIT TRS is treated as a taxable REIT subsidiary which may be subject to U.S. federal, state, and local income taxes on its taxable income. In general, NETSTREIT TRS may perform services for tenants of the Company, hold assets that the Company cannot hold directly and may engage in any real estate or non-real estate-related business. 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 related 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 September 30, 2022 and December 31, 2021. The Company files federal, state and local income tax returns. The Company regularly analyzes its various federal and state filing positions and only recognizes the income tax effect in its financial statements when certain criteria regarding uncertain income tax positions have been met. The Company believes that its income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities. Therefore, no provisions for uncertain income tax positions have been recorded in the condensed consolidated financial statements. |
Earnings Per Share | 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. 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. None of the Company’s equity awards are participating securities. |
Fair Value Measurement | Fair Value Measurement Fair value measurements are utilized in the accounting of the Company’s assets acquired and liabilities assumed in an asset acquisition and also affect the Company’s accounting for certain of its financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The hierarchy described below prioritizes inputs to the valuation techniques used in measuring the fair value of assets and liabilities. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs to be used when available. The hierarchy is broken down into three levels based on the reliability of inputs as follows: Level 1 inputs, such as quoted prices in an active market; Level 2 inputs, which are observable inputs for similar assets; or Level 3 inputs, which are unobservable inputs. The Company uses the following inputs in its fair value measurements: – Level 2 inputs for its debt and derivative financial instrument fair value disclosures. See “Note 6 – Debt” and “Note 7 – Derivative Financial Instruments,” respectively; and – Level 2 and Level 3 inputs when assessing the fair value of assets and liabilities in connection with real estate acquisitions and impairment. See “Note 4 – Real Estate Investments.” |
Segment Reporting | Segment ReportingThe Company considers each one of its properties to be an operating segment, none of which meets the threshold for a reportable segment. The Company allocates resources and assesses operating performance based on individual property needs. All of the Company’s operating segments meet the aggregation criteria, and thus, the Company reports one segment, rental operations. In addition, there were no intersegment sales during the periods presented. |
Recent Accounting Pronouncements Issued But Not Yet Adopted | Recent Accounting Pronouncements Adopted In March 2020, the FASB issued ASU 2020-04 “Topic 848: Reference Rate Reform.” ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives, and other contracts. 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 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. The Company determined these elections have not materially impacted the Company's condensed consolidated financial statements. 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. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Estimated Useful Lives of Assets | 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 or leasing commissions Remaining terms of the respective leases Assembled workforce 3 years Computer equipment and other corporate assets 3 – 5 years |
Schedule of Provision for Impairment | 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, 2022 2021 2022 2021 Total provision for impairment $ — $ — $ 1,114 $ 3,539 Number of properties: (1) Classified as held for sale — — — 3 Disposed within the period — — 1 3 (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. |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Leases [Abstract] | |
Disaggregation of Lease Income | 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, 2022 2021 2022 2021 Rental revenue Fixed lease income (1) $ 21,940 $ 14,010 $ 59,661 $ 37,460 Variable lease income (2) 2,086 1,434 7,004 3,290 Other rental revenue: Above/below market lease amortization, net 444 182 1,021 609 Lease incentives (131) (23) (377) (26) Rental revenue (including reimbursable) $ 24,339 $ 15,603 $ 67,309 $ 41,333 (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, and the write-off of uncollectible amounts. |
Schedule of Future Minimum Base Rental Receipts | 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, 2022 are as follows (in thousands): Future Minimum Base Remainder of 2022 $ 22,429 2023 90,548 2024 91,527 2025 90,798 2026 87,941 Thereafter 503,378 Total $ 886,621 |
Lease Expense Components | The following table presents the lease expense components for the three and nine months ended September 30, 2022 (in thousands): Three Months Ended Nine Months Ended 2022 2021 2022 2021 Operating lease cost $ 135 $ — $ 406 $ — Variable lease cost $ 33 $ — $ 42 $ — |
Schedule of Future Minimum Base Rental Payments | 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 September 30, 2022 (in thousands): Future Minimum Lease Payments Remainder of 2022 $ 111 2023 533 2024 617 2025 636 2026 653 Thereafter 3,982 Total lease payments 6,532 Less: amount representing interest (1) (1,001) Present value of operating lease liabilities $ 5,531 (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. |
Real Estate Investments (Tables
Real Estate Investments (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Real Estate [Abstract] | |
Allocation of Purchase Price Paid for Completed 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, 2022 2021 Land $ 84,248 $ 73,600 Buildings 204,623 161,362 Site improvements 18,059 19,844 Tenant improvements 3,046 4,663 In-place lease intangible assets 35,021 32,384 Above-market lease intangible assets 2,676 6,701 Assumed receivables — 44 347,673 298,598 Liabilities assumed Below-market lease intangible liabilities (10,734) (6,552) Mortgage note payable (7,913) — Accounts payable, accrued expense and other liabilities (40) — Purchase price (including acquisition costs) $ 328,986 $ 292,046 |
Intangible Assets and Liabili_2
Intangible Assets and Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Summary of Intangible Assets and Liabilities | Intangible assets and liabilities consisted of the following (in thousands): September 30, 2022 December 31, 2021 Gross Accumulated Amortization Net Carrying Amount Gross Accumulated Amortization Net Carrying Amount Assets: In-place leases $ 148,489 $ (24,197) $ 124,292 $ 116,368 $ (13,408) $ 102,960 Above-market leases 20,022 (2,519) 17,503 17,348 (1,516) 15,832 Assembled workforce 873 (812) 61 873 (592) 281 Lease incentives 7,969 (468) 7,501 5,821 (122) 5,699 Total Intangible assets $ 177,353 $ (27,996) $ 149,357 $ 140,410 $ (15,638) $ 124,772 Liabilities: Below-market leases $ 36,143 $ (4,705) $ 31,438 $ 26,185 $ (2,869) $ 23,316 |
Weighted Average Amortization Period for Intangible Assets and Liabilities | The remaining weighted average amortization period of the Company’s intangible assets and liabilities as of September 30, 2022 and as of December 31, 2021 by category were as follows: Years Remaining September 30, 2022 December 31, 2021 In-place leases 9.6 9.7 Above-market leases 13.4 12.8 Below-market leases 11.9 12.3 Assembled workforce 0.3 1.0 Lease incentives 12.1 12.7 |
Amortization of Intangible Assets and Liabilities | 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 September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Amortization: Amortization of in-place leases $ 4,201 $ 2,444 $ 11,489 $ 6,296 Amortization of assembled workforce 73 73 220 220 $ 4,274 $ 2,517 $ 11,709 $ 6,516 Net adjustment to rental revenue: Above-market lease assets (343) (346) (1,003) (723) Below-market lease liabilities 787 528 2,024 1,332 Lease incentives (131) (23) (377) (26) $ 313 $ 159 $ 644 $ 583 |
Projected Amortization of Intangible Assets and Liabilities | 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, 2022, for the next five years and thereafter (in thousands): Remainder of 2022 2023 2024 2025 2026 Thereafter Total In-place leases $ 4,291 $ 16,161 $ 15,389 $ 14,815 $ 13,602 $ 60,034 $ 124,292 Assembled workforce 61 — — — — — 61 Amortization expense $ 4,352 $ 16,161 $ 15,389 $ 14,815 $ 13,602 $ 60,034 $ 124,353 Above-market lease assets (351) (1,405) (1,401) (1,400) (1,399) (11,547) (17,503) Below-market lease liabilities 784 3,075 3,024 3,002 2,910 18,643 31,438 Lease incentives (171) (682) (682) (682) (682) (4,602) (7,501) Net adjustment to rental revenue $ 262 $ 988 $ 941 $ 920 $ 829 $ 2,494 $ 6,434 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | 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, 2022, for the next five years and thereafter (in thousands): Remainder of 2022 2023 2024 2025 2026 Thereafter Total In-place leases $ 4,291 $ 16,161 $ 15,389 $ 14,815 $ 13,602 $ 60,034 $ 124,292 Assembled workforce 61 — — — — — 61 Amortization expense $ 4,352 $ 16,161 $ 15,389 $ 14,815 $ 13,602 $ 60,034 $ 124,353 Above-market lease assets (351) (1,405) (1,401) (1,400) (1,399) (11,547) (17,503) Below-market lease liabilities 784 3,075 3,024 3,002 2,910 18,643 31,438 Lease incentives (171) (682) (682) (682) (682) (4,602) (7,501) Net adjustment to rental revenue $ 262 $ 988 $ 941 $ 920 $ 829 $ 2,494 $ 6,434 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Schedule of Debt | Debt consists of the following (in thousands): Maturity Date Interest Rate September 30, 2022 December 31, 2021 Debt: Prior Revolver December 23, 2023 — $ — $ 64,000 2024 Term Loan (1) December 23, 2024 1.36% 175,000 175,000 New Revolver (2) August 11, 2026 3.95% 30,000 — 2028 Term Loan (3) February 11, 2028 3.88% 200,000 — Mortgage Note November 1, 2027 4.53% 8,534 — Total debt 413,534 239,000 Unamortized discount and debt issuance costs (2,431) (670) Unamortized deferred financing costs, net (4) (2,871) (796) Total debt, net $ 408,232 $ 237,534 (1) Loan is a floating-rate loan which resets monthly at one-month LIBOR plus the applicable margin which was 1.15% as of September 30, 2022. The Company has entered into four interest rate swap agreements that effectively convert the floating rate to the fixed rate noted as of September 30, 2022. (2) The annual interest rate of the New Revolver assumes one-month SOFR as of September 30, 2022 of 2.85% plus a SOFR adjustment of 0.10% plus the applicable margin which was 1.00% as of September 30, 2022. Additionally, the New Revolver may be extended up to one year. (3) Loan is a floating-rate loan which resets monthly at one-month term SOFR plus a SOFR adjustment of 0.10% plus the applicable margin which was 1.15% as of September 30, 2022. The Company has entered into three interest rate swap agreements that effectively convert the floating rate to the fixed rate noted as of September 30, 2022. (4) The Company records deferred financing costs for the New Revolver in other assets, net on its condensed consolidated balance sheets. |
Schedule of Maturities | Payments on the 2024 and 2028 Term Loan are interest only through maturity. As of September 30, 2022, scheduled maturities, including balloon payments, are as follows (in thousands): Scheduled Principal Balloon Payment Total Remainder of 2022 $ 38 $ — $ 38 2023 155 — 155 2024 162 175,000 175,162 2025 170 — 170 2026 178 30,000 30,178 Thereafter 170 207,663 207,833 Total $ 873 $ 412,663 $ 413,536 |
Components of Interest Expense | The following table is a summary of the components of interest expense related to the Company’s borrowings (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revolving credit facilities (1) $ 1,222 $ 154 $ 2,518 $ 459 Term loans 1,670 608 2,854 1,801 Mortgage note payable 1 — 1 — Non-cash: Amortization of deferred financing costs 153 101 354 302 Amortization of debt discount, net 86 56 199 169 Capitalized interest (115) (24) (218) (38) Total interest expense, net $ 3,017 $ 895 $ 5,708 $ 2,693 (1) Includes facility fees and non-utilization fees of approximately $0.1 million and $0.2 million for the three months ended September 30, 2022 and 2021, and facility fees of $0.5 million and $0.2 million for the nine months ended September 30, 2022 and 2021. |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Interest Rate Derivatives | The Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (in thousands, except number of instruments): Number of Instruments Notional Interest Rate Derivatives September 30, 2022 December 31, 2021 September 30, 2022 December 31, 2021 Interest rate swaps 7 4 $ 375,000 $ 175,000 |
Fair Value of Derivative Financial Instruments | 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, 2022 and December 31, 2021 (in thousands): Derivative Assets Fair Value at Derivatives Designated as Hedging Instruments: Balance Sheet Location September 30, 2022 December 31, 2021 Interest rate swaps Other assets, net $ 25,745 $ 4,310 |
Effect of Interest Rate Swaps | 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 and nine months ended September 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 Derivatives in Cash Flow Hedging Relationships 2022 2021 2022 2021 For the Three Months Ended September 30 Interest Rate Products $ 14,761 $ (47) Interest expense, net $ 874 $ (52) For the Nine Months Ended September 30 Interest Rate Products $ 22,539 $ 1,932 Interest expense, net $ 1,103 $ (131) |
Schedule of Derivative Liabilities at Fair Value | The table below presents the Company’s derivative assets measured at fair value on a recurring basis as of September 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 September 30, 2022 Derivative assets $ — $ 25,745 $ — $ 25,745 December 31, 2021 Derivative assets $ — $ 4,310 $ — $ 4,310 |
Supplemental Detail for Certa_2
Supplemental Detail for Certain Components of the Condensed Consolidated Balance Sheets (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Other Assets, net | Other assets, net consist of the following (in thousands): September 30, 2022 December 31, 2021 Accounts receivable, net $ 5,792 $ 2,801 Deferred rent receivable 3,731 2,263 Prepaid assets 1,717 1,473 Earnest money deposits 4,539 853 Fair value of interest rate swaps 25,745 4,309 Deferred offering costs 1,153 615 Deferred financing costs, net 2,871 796 Right-of-use asset 4,326 4,581 Leasehold improvements and other corporate assets, net 2,045 1,657 Interest receivable 218 — Other assets, net 1,950 1,003 $ 54,087 $ 20,351 |
Schedule of Accounts Payable, Accrued Expenses and Other Liabilities | Accounts payable, accrued expenses and other liabilities consists of the following (in thousands): September 30, 2022 December 31, 2021 Accrued expenses $ 6,898 $ 6,254 Accrued bonus 1,221 1,742 Prepaid rent 3,510 1,918 Operating lease liability 5,531 5,442 Accounts payable 430 419 Other liabilities 3,610 1,205 $ 21,200 $ 16,980 |
Shareholders_ Equity, Partner_2
Shareholders’ Equity, Partners’ Capital and Preferred Equity (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Common Stock Dividends Declared and Paid | During the nine months ended September 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 July 26, 2022 0.20 September 1, 2022 10,068 September 15, 2022 $ 0.60 $ 28,544 |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Share-based Payment Arrangement [Abstract] | |
Summary of Restricted Stock Unit Activity | The following table summarizes performance-based restricted stock unit activity for the period ended September 30, 2022: Shares Weighted Average Grant Date Fair Value per Share Unvested restricted stock grants outstanding as of December 31, 2021 157,380 $ 19.75 Vested during the period (15,823) 19.75 Unvested restricted stock grants outstanding as of September 30, 2022 141,557 $ 19.75 The following table summarizes service-based restricted stock unit activity for the period ended September 30, 2022: Shares Weighted Average Grant Date Fair Value per Share Unvested restricted stock grants outstanding as of December 31, 2021 295,207 $ 17.84 Granted during the period 148,913 22.09 Forfeited during the period (16,030) 18.55 Vested during the period (101,266) 17.68 Unvested restricted stock grants outstanding as of September 30, 2022 326,824 $ 19.79 The following table summarizes market-based restricted stock unit activity for the period ended September 30, 2022: Shares Weighted Average Grant Date Fair Value per Share Unvested restricted stock grants outstanding as of December 31, 2021 134,467 $ 17.77 Granted during the period 106,645 22.38 Forfeited during the period (2,816) 18.65 Vested during the period — — Unvested restricted stock grants outstanding as of September 30, 2022 238,296 $ 19.82 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
Schedule of Net Income Attributable to Common Shares, Weighted Average Common Shares and Effect of Dilutive Securities | 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 per common share for the three and nine months ended September 30, 2022 and 2021. Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except share and per share data) 2022 2021 2022 2021 Numerator: Net income $ 1,419 $ 2,944 $ 5,395 $ 1,055 Net (income) attributable to noncontrolling interest (16) (96) (63) (42) Net income attributable to common shares, basic 1,403 2,848 5,332 1,013 Net income (loss) attributable to noncontrolling interest 16 96 63 42 Net income attributable to common shares, diluted $ 1,419 $ 2,944 $ 5,395 $ 1,055 Denominator: Weighted average common shares outstanding, basic 50,449,735 39,559,605 47,679,870 35,359,551 Effect of dilutive shares for diluted net income per common share: OP Units 514,890 1,334,571 530,940 1,462,419 Unvested RSUs 255,613 439,403 261,727 286,455 Unsettled shares under open forward equity contracts 164,520 — 184,512 — Weighted average common shares outstanding, diluted 51,384,758 41,333,579 48,657,049 37,108,425 Net income available to common stockholders per common share, basic $ 0.03 $ 0.07 $ 0.11 $ 0.03 Net income available to common stockholders per common share, diluted $ 0.03 $ 0.07 $ 0.11 $ 0.03 |
Organization and Description _2
Organization and Description of Business (Details) | Sep. 30, 2022 state property |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number owned or invested in properties | property | 409 |
Number of states in which entity operates | state | 42 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Narrative (Details) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 USD ($) property | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) property | Sep. 30, 2021 USD ($) | Dec. 31, 2021 USD ($) property | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
OP Unit conversion ratio per share | 1 | 1 | |||
Depreciation and amortization | $ 13,400,000 | $ 8,100,000 | $ 36,137,000 | $ 21,078,000 | |
Depreciation | 9,100,000 | 5,600,000 | 24,400,000 | 14,500,000 | |
Amortization | $ 4,300,000 | 2,500,000 | $ 11,700,000 | 6,500,000 | |
Number of real estate properties held for sale | property | 12 | 12 | 1 | ||
Restricted cash | $ 0 | $ 0 | $ 0 | ||
Acquisition related expenses | $ 100,000 | $ 100,000 | $ 700,000 | $ 500,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Estimated Useful Lives of Assets (Details) | 9 Months Ended |
Sep. 30, 2022 | |
Assembled workforce | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives of finite-lived intangible assets | 3 years |
Buildings | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives of long-lived assets | 13 years |
Buildings | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives of long-lived assets | 35 years |
Building improvements | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives of long-lived assets | 15 years |
Computer equipment and other corporate assets | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives of long-lived assets | 3 years |
Computer equipment and other corporate assets | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives of long-lived assets | 5 years |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Schedule of Provision for Impairment (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 USD ($) property | Sep. 30, 2021 USD ($) property | Sep. 30, 2022 USD ($) property | Sep. 30, 2021 USD ($) property | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Provisions for impairment | $ | $ 0 | $ 0 | $ 1,114 | $ 3,539 |
Number of properties | ||||
Classified as held for sale | 0 | 0 | 0 | 3 |
Disposed within the period | 0 | 0 | 1 | 3 |
Leases - Narrative (Details)
Leases - Narrative (Details) $ in Thousands | 1 Months Ended | 9 Months Ended | |
Aug. 31, 2021 USD ($) renewal_option | Sep. 30, 2022 USD ($) state property tenant retail_sector | Dec. 31, 2021 USD ($) | |
Lessor, Lease, Description [Line Items] | |||
Number of single-tenant retail net leased properties owned | property | 406 | ||
Number of states in which entity operates | state | 42 | ||
Number of tenants | tenant | 77 | ||
Number of retail sectors in which tenants represent | retail_sector | 24 | ||
Remaining term of leases | 9 years 7 months 6 days | ||
Right-of-use asset | $ 4,326 | $ 4,581 | |
Operating lease liability | $ 5,531 | $ 5,442 | |
Corporate Office Space | |||
Lessor, Lease, Description [Line Items] | |||
Lease term | 9 years 9 months 18 days | ||
Renewal options | renewal_option | 2 | ||
Lease extension term | 5 years | ||
Right-of-use asset | $ 4,500 | ||
Operating lease liability | $ 4,500 | ||
Minimum | |||
Lessor, Lease, Description [Line Items] | |||
Remaining term of leases | 1 year | ||
Maximum | |||
Lessor, Lease, Description [Line Items] | |||
Remaining term of leases | 21 years |
Leases - Disaggregation of Leas
Leases - Disaggregation of Lease Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Rental revenue | ||||
Fixed lease income | $ 21,940 | $ 14,010 | $ 59,661 | $ 37,460 |
Variable lease income | 2,086 | 1,434 | 7,004 | 3,290 |
Other rental revenue: | ||||
Above/below market lease amortization, net | 444 | 182 | 1,021 | 609 |
Lease incentives | (131) | (23) | (377) | (26) |
Rental revenue (including reimbursable) | $ 24,339 | $ 15,603 | $ 67,309 | $ 41,333 |
Leases - Schedule of Future Min
Leases - Schedule of Future Minimum Base Rental Receipts (Details) $ in Thousands | Sep. 30, 2022 USD ($) |
Lessor, Operating Lease, Payments, Fiscal Year Maturity [Abstract] | |
Remainder of 2022 | $ 22,429 |
2023 | 90,548 |
2024 | 91,527 |
2025 | 90,798 |
2026 | 87,941 |
Thereafter | 503,378 |
Total Future Minimum Base Rental Receipts | $ 886,621 |
Leases - Lease Expense Componen
Leases - Lease Expense Components (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Leases [Abstract] | ||||
Operating lease cost | $ 135 | $ 0 | $ 406 | $ 0 |
Variable lease cost | $ 33 | $ 0 | $ 42 | $ 0 |
Leases - Schedule of Future M_2
Leases - Schedule of Future Minimum Base Rental Payments (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Lessee, Operating Lease, Liability, Payment, Due [Abstract] | ||
Remainder of 2022 | $ 111 | |
2023 | 533 | |
2024 | 617 | |
2025 | 636 | |
2026 | 653 | |
Thereafter | 3,982 | |
Total lease payments | 6,532 | |
Less: amount representing interest | (1,001) | |
Present value of operating lease liabilities | $ 5,531 | $ 5,442 |
Lease discount rate | 3.25% |
Real Estate Investments - Narra
Real Estate Investments - Narrative (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2022 USD ($) state property | Sep. 30, 2021 USD ($) property | Sep. 30, 2022 USD ($) state property | Sep. 30, 2021 USD ($) property tenant | Jan. 26, 2022 USD ($) | Dec. 31, 2021 USD ($) | |
Real Estate [Line Items] | ||||||
Number owned or invested in properties | property | 409 | 409 | ||||
Number of properties under development | property | 6 | 6 | ||||
Gross real estate investment portfolio | $ 1,400,000 | $ 1,400,000 | ||||
Number of states in which entity operates | state | 42 | 42 | ||||
Number of properties acquired | property | 82 | 92 | ||||
Payments to acquire real estate held-for-investment | $ 328,986 | $ 292,046 | ||||
Acquisition fees incurred | $ 3,200 | 3,000 | ||||
Property developments under construction | property | 6 | |||||
Investment in real estate development project | $ 14,300 | |||||
Payments to acquire real estate | $ 1,000 | |||||
Properties developed | property | 4 | |||||
Capitalized interest | $ 115 | $ 24 | $ 218 | 38 | ||
Payments to acquire and develop real estate | $ 15,492 | $ 9,512 | ||||
Disposed within the period | property | 0 | 0 | 1 | 3 | ||
Proceeds from sale of real estate | $ 13,837 | $ 30,436 | ||||
Gain on sales of real estate, net | $ 143 | $ 1,955 | 2,162 | 2,452 | ||
Mortgage loans receivable, net | 46,406 | 46,406 | $ 0 | |||
Completed development transfered | 14,700 | |||||
Properties under development | ||||||
Real Estate [Line Items] | ||||||
Capitalized interest | 100 | $ 100 | ||||
Mortgage loan maturing July 26, 2023 | ||||||
Real Estate [Line Items] | ||||||
Mortgage loans receivable, net | $ 40,300 | |||||
Mortgage loan receivables interest rate | 6% | |||||
Loan origination costs | 100 | |||||
Mortgage loan maturing June 30, 2023 | ||||||
Real Estate [Line Items] | ||||||
Mortgage loans receivable, net | $ 6,000 | $ 6,000 | ||||
Mortgage loan receivables interest rate | 6.50% | 6.50% | ||||
Loan origination costs | $ 100 | |||||
Yuma, Arizona | ||||||
Real Estate [Line Items] | ||||||
Investment in real estate development project | $ 2,600 | |||||
Fond Du Lac, Wisconsin | ||||||
Real Estate [Line Items] | ||||||
Number of properties acquired | tenant | 4 | |||||
Payments to acquire real estate | $ 5,400 | |||||
Payments to acquire and develop real estate | $ 6,900 | |||||
Texas | ||||||
Real Estate [Line Items] | ||||||
Percentage of total gross real estate investment | 9.40% | 9.40% | ||||
Illinois | ||||||
Real Estate [Line Items] | ||||||
Percentage of total gross real estate investment | 9.80% | 9.80% | ||||
Two Properties | ||||||
Real Estate [Line Items] | ||||||
Disposed within the period | property | 1 | 9 | ||||
Proceeds from sale of real estate | $ 1,700 | $ 30,400 | ||||
Gain on sales of real estate, net | $ 100 | $ 2,500 | ||||
Three Properties | ||||||
Real Estate [Line Items] | ||||||
Disposed within the period | property | 4 | |||||
Proceeds from sale of real estate | $ 13,800 | |||||
Gain on sales of real estate, net | $ 2,200 | |||||
Five Properties | ||||||
Real Estate [Line Items] | ||||||
Disposed within the period | property | 4 | 4 | ||||
Proceeds from sale of real estate | $ 18,100 | $ 18,100 | ||||
Gain on sales of real estate, net | $ 2,000 | $ 2,000 |
Real Estate Investments - Alloc
Real Estate Investments - Allocation of Purchase Price Paid for Completed Acquisitions (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Real Estate [Line Items] | ||
Assumed receivables | $ 0 | $ 44 |
Asset acquisition, additions | 347,673 | 298,598 |
Liabilities assumed | ||
Below-market lease intangible liabilities | (10,734) | (6,552) |
Mortgage note payable | (7,913) | 0 |
Accounts payable, accrued expense and other liabilities | (40) | 0 |
Purchase price (including acquisition costs) | 328,986 | 292,046 |
In-place leases | ||
Real Estate [Line Items] | ||
Finite-lived intangible assets acquired | 35,021 | 32,384 |
Above-market leases | ||
Real Estate [Line Items] | ||
Finite-lived intangible assets acquired | 2,676 | 6,701 |
Land | ||
Real Estate [Line Items] | ||
Property, plant and equipment, additions | 84,248 | 73,600 |
Buildings | ||
Real Estate [Line Items] | ||
Property, plant and equipment, additions | 204,623 | 161,362 |
Site improvements | ||
Real Estate [Line Items] | ||
Property, plant and equipment, additions | 18,059 | 19,844 |
Tenant improvements | ||
Real Estate [Line Items] | ||
Property, plant and equipment, additions | $ 3,046 | $ 4,663 |
Intangible Assets and Liabili_3
Intangible Assets and Liabilities - Summary of Intangible Assets and Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Assets: | ||
Gross Carrying Amount | $ 177,353 | $ 140,410 |
Accumulated Amortization | (27,996) | (15,638) |
Net Carrying Amount | 149,357 | 124,772 |
Liabilities: | ||
Gross Carrying Amount | 36,143 | 26,185 |
Accumulated Amortization | (4,705) | (2,869) |
Net Carrying Amount | 31,438 | 23,316 |
In-place leases | ||
Assets: | ||
Gross Carrying Amount | 148,489 | 116,368 |
Accumulated Amortization | (24,197) | (13,408) |
Net Carrying Amount | 124,292 | 102,960 |
Above-market leases | ||
Assets: | ||
Gross Carrying Amount | 20,022 | 17,348 |
Accumulated Amortization | (2,519) | (1,516) |
Net Carrying Amount | 17,503 | 15,832 |
Assembled workforce | ||
Assets: | ||
Gross Carrying Amount | 873 | 873 |
Accumulated Amortization | (812) | (592) |
Net Carrying Amount | 61 | 281 |
Lease incentives | ||
Assets: | ||
Gross Carrying Amount | 7,969 | 5,821 |
Accumulated Amortization | (468) | (122) |
Net Carrying Amount | $ 7,501 | $ 5,699 |
Intangible Assets and Liabili_4
Intangible Assets and Liabilities - Weighted Average Amortization Period for Intangible Assets and Liabilities (Details) - Weighted Average | 3 Months Ended | 9 Months Ended |
Mar. 31, 2022 | Sep. 30, 2022 | |
Finite-Lived Intangible Assets [Line Items] | ||
Weighted average amortization period, below-market leases | 12 years 3 months 18 days | 11 years 10 months 24 days |
In-place leases | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted average amortization period, intangible assets | 9 years 8 months 12 days | 9 years 7 months 6 days |
Above-market leases | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted average amortization period, intangible assets | 12 years 9 months 18 days | 13 years 4 months 24 days |
Assembled workforce | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted average amortization period, intangible assets | 1 year | 3 months 18 days |
Lease incentives | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted average amortization period, intangible assets | 12 years 8 months 12 days | 12 years 1 month 6 days |
Intangible Assets and Liabili_5
Intangible Assets and Liabilities - Amortization of Intangible Assets and Liabilities (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization: | $ 4,274 | $ 2,517 | $ 11,709 | $ 6,516 |
Net adjustment to rental revenue: | ||||
Below-market lease liabilities | 787 | 528 | 2,024 | 1,332 |
Net adjustment to rental revenue | 313 | 159 | 644 | 583 |
In-place leases | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization: | 4,201 | 2,444 | 11,489 | 6,296 |
Assembled workforce | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization: | 73 | 73 | 220 | 220 |
Above-market leases | ||||
Net adjustment to rental revenue: | ||||
Above-market lease assets | (343) | (346) | (1,003) | (723) |
Lease incentives | ||||
Net adjustment to rental revenue: | ||||
Above-market lease assets | $ (131) | $ (23) | $ (377) | $ (26) |
Intangible Assets and Liabili_6
Intangible Assets and Liabilities - Projected Amortization of Intangible Assets and Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
Remainder of 2022 | $ 4,352 | |
2023 | 16,161 | |
2024 | 15,389 | |
2025 | 14,815 | |
2026 | 13,602 | |
Thereafter | 60,034 | |
Total | 124,353 | |
Below-market lease liabilities | ||
Remainder of 2022 | 784 | |
2023 | 3,075 | |
2024 | 3,024 | |
2025 | 3,002 | |
2026 | 2,910 | |
Thereafter | 18,643 | |
Net Carrying Amount | 31,438 | $ 23,316 |
Net adjustment to rental revenue | ||
Remainder of 2022 | 262 | |
2023 | 988 | |
2024 | 941 | |
2025 | 920 | |
2026 | 829 | |
Thereafter | 2,494 | |
Total | 6,434 | |
In-place leases | ||
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
Remainder of 2022 | 4,291 | |
2023 | 16,161 | |
2024 | 15,389 | |
2025 | 14,815 | |
2026 | 13,602 | |
Thereafter | 60,034 | |
Total | 124,292 | |
Assembled workforce | ||
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
Remainder of 2022 | 61 | |
2023 | 0 | |
2024 | 0 | |
2025 | 0 | |
2026 | 0 | |
Thereafter | 0 | |
Total | 61 | |
Above-market leases | ||
Above-market lease assets | ||
Remainder of 2022 | (351) | |
2023 | (1,405) | |
2024 | (1,401) | |
2025 | (1,400) | |
2026 | (1,399) | |
Thereafter | (11,547) | |
Total | (17,503) | |
Lease incentives | ||
Above-market lease assets | ||
Remainder of 2022 | (171) | |
2023 | (682) | |
2024 | (682) | |
2025 | (682) | |
2026 | (682) | |
Thereafter | (4,602) | |
Total | $ (7,501) |
Debt - Schedule of Debt (Detail
Debt - Schedule of Debt (Details) $ in Thousands | 9 Months Ended | ||
Aug. 11, 2022 | Sep. 30, 2022 USD ($) derivative | Dec. 31, 2021 USD ($) | |
Debt Instrument [Line Items] | |||
Total debt | $ 413,534 | $ 239,000 | |
Unamortized discount and debt issuance costs | (2,431) | (670) | |
Unamortized deferred financing costs, net | (2,871) | (796) | |
Total debt, net | 408,232 | 237,534 | |
Term Loans | |||
Debt Instrument [Line Items] | |||
Total debt, net | 413,536 | ||
Line of Credit | Prior Credit Agreement | |||
Debt Instrument [Line Items] | |||
Unamortized deferred financing costs, net | (500) | ||
Line of Credit | Prior Credit Agreement | Revolver | |||
Debt Instrument [Line Items] | |||
Total debt | $ 0 | 64,000 | |
Extension | 1 year | ||
Line of Credit | Prior Credit Agreement | Term Loans | |||
Debt Instrument [Line Items] | |||
Interest Rate | 1.36% | ||
Total debt | $ 175,000 | 175,000 | |
Line of Credit | Prior Credit Agreement | Term Loans | Interest rate swaps | |||
Debt Instrument [Line Items] | |||
Number of derivatives | derivative | 4 | ||
Line of Credit | Prior Credit Agreement | Term Loans | LIBOR adjustment | |||
Debt Instrument [Line Items] | |||
Variable rate | 1.15% | ||
Line of Credit | New Credit Facility | Revolver | |||
Debt Instrument [Line Items] | |||
Interest Rate | 3.95% | ||
Total debt | $ 30,000 | 0 | |
Extension | 1 year | 1 year | |
Line of Credit | New Credit Facility | Revolver | SOFR | |||
Debt Instrument [Line Items] | |||
Variable rate | 1% | ||
Line of Credit | New Credit Facility | Revolver | SOFR adjustment | |||
Debt Instrument [Line Items] | |||
Variable rate | 0.10% | ||
Line of Credit | New Credit Facility | Revolver | One-month SOFR | |||
Debt Instrument [Line Items] | |||
Variable rate | 2.85% | ||
Line of Credit | New Credit Facility | Term Loans | |||
Debt Instrument [Line Items] | |||
Interest Rate | 3.88% | ||
Total debt | $ 200,000 | 0 | |
Extension | 1 year | ||
Line of Credit | New Credit Facility | Term Loans | Interest rate swaps | |||
Debt Instrument [Line Items] | |||
Number of derivatives | derivative | 3 | ||
Line of Credit | New Credit Facility | Term Loans | SOFR | |||
Debt Instrument [Line Items] | |||
Variable rate | 1.15% | ||
Line of Credit | New Credit Facility | Term Loans | SOFR adjustment | |||
Debt Instrument [Line Items] | |||
Variable rate | 0.10% | ||
Mortgages | Mortgage Note | |||
Debt Instrument [Line Items] | |||
Interest Rate | 4.53% | ||
Total debt | $ 8,534 | $ 0 |
Debt - Narrative (Details)
Debt - Narrative (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||
Aug. 11, 2022 | Sep. 28, 2020 | Dec. 31, 2019 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Aug. 10, 2022 | Dec. 31, 2021 | |
Debt Instrument [Line Items] | |||||||||
Total debt | $ 413,534,000 | $ 413,534,000 | $ 239,000,000 | ||||||
Unamortized deferred financing costs | $ 2,871,000 | $ 2,871,000 | 796,000 | ||||||
Line of Credit | Revolver | |||||||||
Debt Instrument [Line Items] | |||||||||
Weighted average effective interest rate (as a percent) | 3.28% | 1.26% | 2.29% | 1.24% | |||||
Line of Credit | Term Loans | |||||||||
Debt Instrument [Line Items] | |||||||||
Weighted average effective interest rate (as a percent) | 3.53% | 1.26% | 2.49% | 1.28% | |||||
Line of Credit | New Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Deferred financing costs | $ 3,800,000 | $ 3,800,000 | |||||||
Line of Credit | New Credit Facility | Revolver | |||||||||
Debt Instrument [Line Items] | |||||||||
Senior unsecured revolving credit facility | $ 400,000,000 | ||||||||
Available increase | $ 400,000,000 | ||||||||
Total debt | $ 30,000,000 | $ 30,000,000 | 0 | ||||||
Extension | 1 year | 1 year | |||||||
Sustainability-linked interest rate reduction (up to) | 0.025% | ||||||||
Interest Rate | 3.95% | 3.95% | |||||||
Deferred financing costs | $ 2,400,000 | $ 2,400,000 | |||||||
Line of Credit | New Credit Facility | Revolver | SOFR adjustment | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.10% | ||||||||
Line of Credit | New Credit Facility | Revolver | SOFR adjustment | Prior To Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.10% | ||||||||
Line of Credit | New Credit Facility | Revolver | SOFR adjustment | After Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.10% | ||||||||
Line of Credit | New Credit Facility | Revolver | SOFR | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 1% | ||||||||
Line of Credit | New Credit Facility | Revolver | Minimum | Prior To Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Revolver facility fee (as a percent) | 0.15% | ||||||||
Line of Credit | New Credit Facility | Revolver | Minimum | After Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Revolver facility fee (as a percent) | 0.125% | ||||||||
Line of Credit | New Credit Facility | Revolver | Minimum | SOFR | Prior To Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 1% | ||||||||
Line of Credit | New Credit Facility | Revolver | Minimum | SOFR | After Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.725% | ||||||||
Line of Credit | New Credit Facility | Revolver | Minimum | Base Rate | Prior To Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0% | ||||||||
Line of Credit | New Credit Facility | Revolver | Minimum | Base Rate | After Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0% | ||||||||
Line of Credit | New Credit Facility | Revolver | Maximum | Prior To Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Revolver facility fee (as a percent) | 0.30% | ||||||||
Line of Credit | New Credit Facility | Revolver | Maximum | After Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Revolver facility fee (as a percent) | 0.30% | ||||||||
Line of Credit | New Credit Facility | Revolver | Maximum | SOFR | Prior To Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 1.45% | ||||||||
Line of Credit | New Credit Facility | Revolver | Maximum | SOFR | After Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 1.40% | ||||||||
Line of Credit | New Credit Facility | Revolver | Maximum | Base Rate | Prior To Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.45% | ||||||||
Line of Credit | New Credit Facility | Revolver | Maximum | Base Rate | After Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.40% | ||||||||
Line of Credit | New Credit Facility | Term Loans | |||||||||
Debt Instrument [Line Items] | |||||||||
Senior unsecured term loan | $ 200,000,000 | ||||||||
Total debt | $ 200,000,000 | $ 200,000,000 | 0 | ||||||
Extension | 1 year | ||||||||
Interest Rate | 3.88% | 3.88% | |||||||
Deferred financing costs | $ 1,300,000 | $ 1,300,000 | |||||||
Weighted average effective interest rate (as a percent) | 2.51% | ||||||||
Line of Credit | New Credit Facility | Term Loans | SOFR adjustment | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.10% | ||||||||
Line of Credit | New Credit Facility | Term Loans | SOFR adjustment | Prior To Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.10% | ||||||||
Line of Credit | New Credit Facility | Term Loans | SOFR adjustment | After Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.10% | ||||||||
Line of Credit | New Credit Facility | Term Loans | SOFR | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 1.15% | ||||||||
Line of Credit | New Credit Facility | Term Loans | Minimum | SOFR | Prior To Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 1.15% | ||||||||
Line of Credit | New Credit Facility | Term Loans | Minimum | SOFR | After Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.80% | ||||||||
Line of Credit | New Credit Facility | Term Loans | Minimum | Base Rate | Prior To Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.15% | ||||||||
Line of Credit | New Credit Facility | Term Loans | Minimum | Base Rate | After Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0% | ||||||||
Line of Credit | New Credit Facility | Term Loans | Maximum | SOFR | Prior To Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 1.60% | ||||||||
Line of Credit | New Credit Facility | Term Loans | Maximum | SOFR | After Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 1.60% | ||||||||
Line of Credit | New Credit Facility | Term Loans | Maximum | Base Rate | Prior To Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.60% | ||||||||
Line of Credit | New Credit Facility | Term Loans | Maximum | Base Rate | After Investment Grade | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.60% | ||||||||
Line of Credit | Prior Credit Agreement | |||||||||
Debt Instrument [Line Items] | |||||||||
Unamortized deferred financing costs | 500,000 | $ 500,000 | |||||||
Line of Credit | Prior Credit Agreement | Revolver | |||||||||
Debt Instrument [Line Items] | |||||||||
Senior unsecured revolving credit facility | $ 250,000,000 | ||||||||
Total debt | 0 | 0 | 64,000,000 | ||||||
Extension | 1 year | ||||||||
Line of Credit | Prior Credit Agreement | Revolver | Minimum | |||||||||
Debt Instrument [Line Items] | |||||||||
Revolver facility fee (as a percent) | 0.15% | ||||||||
Line of Credit | Prior Credit Agreement | Revolver | Minimum | Base Rate | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.20% | ||||||||
Line of Credit | Prior Credit Agreement | Revolver | Minimum | LIBOR | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 1.20% | ||||||||
Line of Credit | Prior Credit Agreement | Revolver | Maximum | |||||||||
Debt Instrument [Line Items] | |||||||||
Revolver facility fee (as a percent) | 0.25% | ||||||||
Line of Credit | Prior Credit Agreement | Revolver | Maximum | Base Rate | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.80% | ||||||||
Line of Credit | Prior Credit Agreement | Revolver | Maximum | LIBOR | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 1.80% | ||||||||
Line of Credit | Prior Credit Agreement | Term Loans | |||||||||
Debt Instrument [Line Items] | |||||||||
Total debt | $ 175,000,000 | $ 175,000,000 | 175,000,000 | ||||||
Interest Rate | 1.36% | 1.36% | |||||||
Weighted average effective interest rate (as a percent) | 2.56% | ||||||||
Mortgages | Mortgage Note | |||||||||
Debt Instrument [Line Items] | |||||||||
Total debt | $ 8,534,000 | $ 8,534,000 | $ 0 | ||||||
Interest Rate | 4.53% | 4.53% | |||||||
Deferred financing costs | $ 100,000 | $ 100,000 | |||||||
Total gross mortgage indebtedness | 8,800,000 | 8,800,000 | |||||||
Aggregate net book value | 13,200,000 | 13,200,000 | |||||||
Debt discount | $ 600,000 | $ 600,000 | |||||||
Term Loans | Prior Credit Agreement | LIBOR | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 1.15% | ||||||||
Term Loans | Prior Credit Agreement | Fixed base interest rate | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.21% | ||||||||
Term Loans | Prior Credit Agreement | Minimum | Base Rate | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.15% | ||||||||
Term Loans | Prior Credit Agreement | Minimum | LIBOR | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 1.15% | ||||||||
Term Loans | Prior Credit Agreement | Maximum | Base Rate | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 0.60% | ||||||||
Term Loans | Prior Credit Agreement | Maximum | LIBOR | |||||||||
Debt Instrument [Line Items] | |||||||||
Variable rate | 1.60% |
Debt - Schedule of Maturities (
Debt - Schedule of Maturities (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Debt Instrument [Line Items] | ||
Total debt, net | $ 408,232 | $ 237,534 |
Term Loans | ||
Debt Instrument [Line Items] | ||
Remainder of 2022 | 38 | |
2023 | 155 | |
2024 | 175,162 | |
2025 | 170 | |
2026 | 30,178 | |
Thereafter | 207,833 | |
Total debt, net | 413,536 | |
Term Loans | Scheduled Principal | ||
Debt Instrument [Line Items] | ||
Remainder of 2022 | 38 | |
2023 | 155 | |
2024 | 162 | |
2025 | 170 | |
2026 | 178 | |
Thereafter | 170 | |
Total debt, net | 873 | |
Term Loans | Balloon Payment | ||
Debt Instrument [Line Items] | ||
Remainder of 2022 | 0 | |
2023 | 0 | |
2024 | 175,000 | |
2025 | 0 | |
2026 | 30,000 | |
Thereafter | 207,663 | |
Total debt, net | $ 412,663 |
Debt - Components of Interest E
Debt - Components of Interest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Debt Instrument [Line Items] | ||||
Amortization of deferred financing costs | $ 153 | $ 101 | $ 354 | $ 302 |
Amortization of debt discount, net | 86 | 56 | 199 | 169 |
Capitalized interest | (115) | (24) | (218) | (38) |
Total interest expense, net | 3,017 | 895 | 5,708 | 2,693 |
Mortgages | ||||
Debt Instrument [Line Items] | ||||
Interest expense | 1 | 0 | 1 | 0 |
Revolver | Line of Credit | ||||
Debt Instrument [Line Items] | ||||
Interest expense | 1,222 | 154 | 2,518 | 459 |
Facility fees | 100 | 200 | 500 | 200 |
Term Loans | Line of Credit | ||||
Debt Instrument [Line Items] | ||||
Interest expense | $ 1,670 | $ 608 | $ 2,854 | $ 1,801 |
Derivative Financial Instrume_3
Derivative Financial Instruments - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Line of Credit | Term Loans | ||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||
Weighted average effective interest rate (as a percent) | 3.53% | 1.26% | 2.49% | 1.28% |
Prior Credit Agreement | Line of Credit | Term Loans | ||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||
Weighted average effective interest rate (as a percent) | 2.56% | |||
Prior Credit Agreement | Line of Credit | LIBOR | Term Loans | ||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||
Derivative, Fixed Interest Rate | 0.21% | 0.21% | ||
Prior Credit Agreement | Line of Credit | LIBOR adjustment | Term Loans | ||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||
Variable rate | 1.15% | |||
New Credit Facility | Line of Credit | Term Loans | ||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||
Derivative, Fixed Interest Rate | 2.63% | 2.63% | ||
Weighted average effective interest rate (as a percent) | 2.51% | |||
New Credit Facility | Line of Credit | SOFR | Term Loans | ||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||
Variable rate | 1.15% | |||
New Credit Facility | Line of Credit | SOFR adjustment | Term Loans | ||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||
Variable rate | 0.10% | |||
Interest rate swaps | Interest Expense | ||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||
Amount estimated to be reclassified as increase to interest expense | $ 10.2 | $ 10.2 |
Derivative Financial Instrume_4
Derivative Financial Instruments - Schedule of Interest Rate Derivatives (Details) - Interest rate swaps $ in Thousands | Sep. 30, 2022 USD ($) instrument | Dec. 31, 2021 USD ($) instrument |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Number of Instruments | instrument | 7 | 4 |
Notional | $ | $ 375,000 | $ 175,000 |
Derivative Financial Instrume_5
Derivative Financial Instruments - Fair Value of Derivative Financial Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Derivatives, Fair Value [Line Items] | ||
Derivative Assets | $ 25,745 | $ 4,309 |
Interest rate swaps | Other assets, net | Designated as Hedging Instrument | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets | $ 25,745 | $ 4,310 |
Derivative Financial Instrume_6
Derivative Financial Instruments - Effect of Interest Rate Swaps (Details) - Interest rate swaps - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) | $ 14,761 | $ (47) | $ 22,539 | $ 1,932 |
Interest Expense | ||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | $ 874 | $ (52) | $ 1,103 | $ (131) |
Derivative Financial Instrume_7
Derivative Financial Instruments - Schedule of Derivative Liabilities at Fair Value (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Liabilities, Fair Value Disclosure [Abstract] | ||
Fair value of interest rate swaps | $ 25,745 | $ 4,309 |
Recurring | ||
Liabilities, Fair Value Disclosure [Abstract] | ||
Fair value of interest rate swaps | 25,745 | 4,310 |
Recurring | Level 1 | ||
Liabilities, Fair Value Disclosure [Abstract] | ||
Fair value of interest rate swaps | 0 | 0 |
Recurring | Level 2 | ||
Liabilities, Fair Value Disclosure [Abstract] | ||
Fair value of interest rate swaps | 25,745 | 4,310 |
Recurring | Level 3 | ||
Liabilities, Fair Value Disclosure [Abstract] | ||
Fair value of interest rate swaps | $ 0 | $ 0 |
Supplemental Detail for Certa_3
Supplemental Detail for Certain Components of the Condensed Consolidated Balance Sheets - Schedule of Other Assets, net (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Other assets, net | Other assets, net |
Accounts receivable, net | $ 5,792 | $ 2,801 |
Deferred rent receivable | 3,731 | 2,263 |
Prepaid assets | 1,717 | 1,473 |
Earnest money deposits | 4,539 | 853 |
Fair value of interest rate swaps | 25,745 | 4,309 |
Deferred offering costs | 1,153 | 615 |
Deferred financing costs, net | 2,871 | 796 |
Right-of-use asset | 4,326 | 4,581 |
Leasehold improvements and other corporate assets, net | 2,045 | 1,657 |
Interest receivable | 218 | 0 |
Other assets, net | 1,950 | 1,003 |
Other assets, net | $ 54,087 | $ 20,351 |
Supplemental Detail for Certa_4
Supplemental Detail for Certain Components of the Condensed Consolidated Balance Sheets - Schedule of Accounts Payable, Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Operating Lease, Liability, Statement of Financial Position [Extensible Enumeration] | Accounts payable, accrued expenses and other liabilities | Accounts payable, accrued expenses and other liabilities |
Accrued expenses | $ 6,898 | $ 6,254 |
Accrued bonus | 1,221 | 1,742 |
Prepaid rent | 3,510 | 1,918 |
Operating lease liability | 5,531 | 5,442 |
Accounts payable | 430 | 419 |
Other liabilities | 3,610 | 1,205 |
Accounts payable, accrued expenses and other liabilities | $ 21,200 | $ 16,980 |
Shareholders_ Equity, Partner_3
Shareholders’ Equity, Partners’ Capital and Preferred Equity - Narrative (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||||||||
Sep. 29, 2022 | Aug. 08, 2022 | Jun. 23, 2022 | Mar. 30, 2022 | Jan. 13, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | Sep. 01, 2021 | |
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||
Shares sold (in dollars per share) | $ 20.20 | |||||||||||||
Issuance of common stock in public offerings, net | $ 219,019,000 | $ 194,161,000 | ||||||||||||
Payments of offering costs | 1,220,000 | 704,000 | ||||||||||||
Authorized amount | $ 150,000,000 | |||||||||||||
Payment of OP unit distributions | $ 316,000 | $ 859,000 | ||||||||||||
OP Unit conversion ratio per share | 1 | |||||||||||||
Restricted Stock Units (RSUs) | ||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||
Forfeited during period (in shares) | 26,000 | |||||||||||||
Forfeited during period | $ 500,000 | |||||||||||||
Netstreit, L.P. (The Operating Partnership) | ||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||
Non-controlling interest holders ownership | 0.90% | 1.30% | ||||||||||||
Public Offering | ||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||
Number of shares sold (in shares) | 10,350,000 | 10,350,000 | ||||||||||||
Shares sold (in dollars per share) | $ 22.25 | $ 22.25 | $ 22.25 | $ 22.25 | ||||||||||
Unsettled under forward sale agreements (in shares) | 10,350,000 | |||||||||||||
IPO - Shares From Existing Shareholders | ||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||
Units converted (in shares) | 47,894 | 462,357 | ||||||||||||
IPO - Shares From Existing Shareholders | Common stock | ||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||
Units converted (in shares) | 22,265 | 25,629 | 65,840 | 143,173 | 253,344 | |||||||||
August 2022 Follow-On Offering | ||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||
Number of shares sold (in shares) | 9,000,000 | |||||||||||||
Over-Allotment Option | ||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||
Number of shares sold (in shares) | 1,350,000 | |||||||||||||
Common stock | ||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||
Number of shares sold (in shares) | 4,512,003 | 2,397,035 | 3,440,962 | |||||||||||
Issuance of common stock in public offerings, net | $ 93,500,000 | $ 50,000,000 | $ 72,000,000 | |||||||||||
Payments of offering costs | $ 6,900,000 | $ 3,300,000 | $ 4,600,000 | |||||||||||
Common stock | ATM Program | ||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||
Number of shares sold (in shares) | 163,774 | |||||||||||||
Issuance of common stock in public offerings, net | $ 3,500,000 | |||||||||||||
Payments of offering costs | $ 100,000 | |||||||||||||
At-the-market sale of equity program | $ 250,000,000 | |||||||||||||
Weighted average sold (in dollars per share) | $ 22.08 |
Stockholders_ Equity, Partners_
Stockholders’ Equity, Partners’ Capital and Preferred Equity - Common Stock Dividends Declared and Paid (Details) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | |||||||||
Sep. 15, 2022 | Sep. 01, 2022 | Jul. 26, 2022 | Jun. 01, 2022 | Apr. 26, 2022 | Mar. 30, 2022 | Mar. 15, 2022 | Feb. 22, 2022 | Jun. 15, 2021 | Sep. 30, 2022 | |
Equity [Abstract] | ||||||||||
Cash dividend paid (in dollars per share) | $ 0.20 | $ 0.20 | $ 0.20 | $ 0.60 | ||||||
Cash dividend declared (in dollars per share) | $ 0.20 | $ 0.20 | $ 0.20 | $ 0.60 | ||||||
Dividends, common stock, cash | $ 10,068 | $ 8,888 | $ 9,588 | $ 28,544 |
Stock Based Compensation - Narr
Stock Based Compensation - Narrative (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
Mar. 31, 2021 | Aug. 31, 2020 USD ($) | Sep. 30, 2022 USD ($) shares | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) company $ / shares shares | Sep. 30, 2021 USD ($) | Dec. 31, 2021 USD ($) | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of shares reserved for issuance | shares | 2,094,976 | 2,094,976 | |||||
Stock-based compensation expense | $ 1,300 | $ 1,000 | $ 3,600 | $ 2,600 | |||
Catch-up adjustment | $ 1,400 | ||||||
Stock-based compensation expense | 3,646 | $ 2,623 | |||||
Restricted Stock Units (RSUs) | The Program | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Award vesting period | 4 years | ||||||
Total unrecognized compensation cost | 900 | 900 | |||||
Stock-based compensation expense | 100 | $ 200 | |||||
Restricted Stock Units (RSUs) | Minimum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Award vesting period | 1 year | ||||||
Restricted Stock Units (RSUs) | Maximum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Award vesting period | 5 years | ||||||
Performance-Based RSUs | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Stock-based compensation expense | 200 | $ 600 | |||||
Total unrecognized compensation cost | 800 | $ 800 | $ 1,300 | ||||
Weighted average remaining contractual term | 1 year 8 months 12 days | ||||||
Performance-Based RSUs | Minimum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Award vesting period | 1 year | ||||||
Performance-Based RSUs | Maximum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Award vesting period | 3 years | ||||||
Service-Based RSUs | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Stock-based compensation expense | 700 | $ 1,900 | |||||
Total unrecognized compensation cost | 4,600 | $ 4,600 | 4,100 | ||||
Weighted average remaining contractual term | 2 years 3 months 18 days | ||||||
Granted during the period (in dollars per share) | $ / shares | $ 22.09 | ||||||
Service-Based RSUs | Minimum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Award vesting period | 1 year | ||||||
Service-Based RSUs | Maximum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Award vesting period | 5 years | ||||||
Market-Based Awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Stock-based compensation expense | 400 | $ 1,000 | |||||
Award vesting period | 3 years | ||||||
Total unrecognized compensation cost | $ 3,000 | $ 3,000 | $ 1,800 | ||||
Weighted average remaining contractual term | 2 years 1 month 6 days | ||||||
Expected volatility (as a percent) | 36.30% | ||||||
Minimum expected volatility (as a percent) | 28.70% | ||||||
Maximum expected volatility (as a percent) | 95.30% | ||||||
Weighted average expected volatility (as a percent) | 46.60% | ||||||
Risk free interest rate (as a percent) | 1.61% | ||||||
Targeted TSR (in dollars per share) | $ / shares | $ 26.13 | ||||||
Absolute TSR (in dollars per share) | $ / shares | 20.42 | ||||||
Granted during the period (in dollars per share) | $ / shares | $ 22.38 | ||||||
Market-Based Awards | 40% vesting | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Award vesting period | 3 years | ||||||
Award vesting rights (as a percent) | 40% | ||||||
Market-Based Awards | 60% vesting | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Award vesting rights (as a percent) | 60% | ||||||
Number of companies forming peer group | company | 32 |
Stock Based Compensation - Summ
Stock Based Compensation - Summary of Restricted Stock Unit Activity (Details) | 9 Months Ended |
Sep. 30, 2022 $ / shares shares | |
Performance-Based RSUs | |
Unvested Restricted Stock Grants Outstanding | |
Beginning balance (in shares) | shares | 157,380 |
Vesting during the period (in shares) | shares | (15,823) |
Ending balance (in shares) | shares | 141,557 |
Weighted Average Grant Date Fair Value per Share | |
Beginning balance (in dollars per share) | $ / shares | $ 19.75 |
Vesting during the period (in dollars per share) | $ / shares | 19.75 |
Ending balance (in dollars per share) | $ / shares | $ 19.75 |
Service-Based RSUs | |
Unvested Restricted Stock Grants Outstanding | |
Beginning balance (in shares) | shares | 295,207 |
Forfeited during the period (in shares) | shares | (16,030) |
Vesting during the period (in shares) | shares | (101,266) |
Granted during the period (in shares) | shares | 148,913 |
Ending balance (in shares) | shares | 326,824 |
Weighted Average Grant Date Fair Value per Share | |
Beginning balance (in dollars per share) | $ / shares | $ 17.84 |
Forfeited during the period (in dollars per share) | $ / shares | 18.55 |
Vesting during the period (in dollars per share) | $ / shares | 17.68 |
Granted during the period (in dollars per share) | $ / shares | 22.09 |
Ending balance (in dollars per share) | $ / shares | $ 19.79 |
Market-Based Awards | |
Unvested Restricted Stock Grants Outstanding | |
Beginning balance (in shares) | shares | 134,467 |
Forfeited during the period (in shares) | shares | (2,816) |
Vesting during the period (in shares) | shares | 0 |
Granted during the period (in shares) | shares | 106,645 |
Ending balance (in shares) | shares | 238,296 |
Weighted Average Grant Date Fair Value per Share | |
Beginning balance (in dollars per share) | $ / shares | $ 17.77 |
Forfeited during the period (in dollars per share) | $ / shares | 18.65 |
Vesting during the period (in dollars per share) | $ / shares | 0 |
Granted during the period (in dollars per share) | $ / shares | 22.38 |
Ending balance (in dollars per share) | $ / shares | $ 19.82 |
Earnings Per Share - Narrative
Earnings Per Share - Narrative (Details) | Sep. 30, 2022 shares | Dec. 31, 2021 shares |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
OP Unit conversion ratio per share | 1 | |
OP Units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Units outstanding (in shares) | 514,890 | 562,784 |
Earnings Per Share - Schedule o
Earnings Per Share - Schedule of Net Income Attributable to Common Shares, Weighted Average Common Shares and Effect of Dilutive Securities (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Numerator: | ||||||||
Net income | $ 1,419 | $ 2,010 | $ 1,966 | $ 2,944 | $ (2,630) | $ 741 | $ 5,395 | $ 1,055 |
Net (income) attributable to noncontrolling interest | 16 | 96 | 63 | 42 | ||||
Net income attributable to common shares, basic | 1,403 | 2,848 | 5,332 | 1,013 | ||||
Net income attributable to common shares, diluted | $ 1,419 | $ 2,944 | $ 5,395 | $ 1,055 | ||||
Denominator: | ||||||||
Weighted average common shares outstanding, basic (in shares) | 50,449,735 | 39,559,605 | 47,679,870 | 35,359,551 | ||||
OP Units (in shares) | 514,890 | 1,334,571 | 530,940 | 1,462,419 | ||||
Unvested RSUs (in shares) | 255,613 | 439,403 | 261,727 | 286,455 | ||||
Unsettled shares under open forward equity contracts (in shares) | 164,520 | 0 | 184,512 | 0 | ||||
Weighted average common shares outstanding - diluted (in shares) | 51,384,758 | 41,333,579 | 48,657,049 | 37,108,425 | ||||
Net loss available to common stockholders per common share, basic (in dollars per share) | $ 0.03 | $ 0.07 | $ 0.11 | $ 0.03 | ||||
Net loss available to common stockholders per common share, diluted (in dollars per share) | $ 0.03 | $ 0.07 | $ 0.11 | $ 0.03 |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | 1 Months Ended | 9 Months Ended |
Aug. 31, 2021 USD ($) renewal_option | Sep. 30, 2022 USD ($) | |
Corporate Office Space | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Lease term | 9 years 9 months 18 days | |
Renewal options | renewal_option | 2 | |
Lease extension term | 5 years | |
Annual rent expense | $ 0.5 | |
Six Properties | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected investment in real estate assets | $ 11.2 | |
Remaining funding period of real estate assets | 6 months |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2021 | Sep. 30, 2021 | |
Affiliated Entity | EB Arrow | ||
Related Party Transaction [Line Items] | ||
Fees paid and accrued | $ 0.1 | $ 0.1 |
Subsequent Events (Details)
Subsequent Events (Details) - $ / shares | 9 Months Ended | ||||
Oct. 25, 2022 | Jul. 26, 2022 | Apr. 26, 2022 | Feb. 22, 2022 | Sep. 30, 2022 | |
Subsequent Event [Line Items] | |||||
Cash dividend declared (in dollars per share) | $ 0.20 | $ 0.20 | $ 0.20 | $ 0.60 | |
Subsequent Event | |||||
Subsequent Event [Line Items] | |||||
Cash dividend declared (in dollars per share) | $ 0.20 |