Executive Summary / Key Takeaways

• Strategic Acceleration and Diversification: NETSTREIT Corp. (NTST) is rapidly expanding its portfolio, increasing its 2025 net investment guidance to \$350 million - \$400 million, driven by an improved cost of capital and a robust opportunity set. This growth is coupled with aggressive portfolio diversification, significantly reducing top tenant concentrations and aiming for no tenant above 5% of Annualized Base Rent (ABR) by year-end.
• Differentiated Underwriting Technology: NTST leverages advanced technology, including tools like Placer.ai, and asymmetrical information to achieve "best-in-class credit loss statistics," with an average of just 4 basis points since inception. This precision underwriting focuses on unit-level profitability and fungible real estate, providing a critical competitive moat against market volatility and tenant-specific headlines.
• Strong Financial Performance and Liquidity: The company reported a substantial 18.1% year-over-year increase in rental revenue for Q3 2025 and a 20.4% increase for the nine months ended September 30, 2025, reflecting portfolio growth. A well-capitalized balance sheet, including over \$1.1 billion in total liquidity and strategically hedged debt, supports its acquisitive strategy and long-term stability.
• Resilient Portfolio in Defensive Sectors: NTST's portfolio, 99.9% occupied with a 9.9-year Weighted Average Lease Term (WALT), is heavily concentrated in necessity-based retail, such as grocery, auto service, and quick-service restaurants. This focus on "defensive retail industries" has historically insulated the company from economic downturns and tenant distress.
• Outlook for Sustained Growth: Management anticipates continued AFFO per share growth into 2026 and 2027, fueled by current investment momentum and the eventual settlement of forward equity. The company is also pursuing an investment-grade credit rating, which could further reduce debt costs and enhance its competitive financing advantage.

Setting the Scene: A Focused Approach to Net Lease Retail

NETSTREIT Corp., established in late 2019, operates as an internally managed Real Estate Investment Trust (REIT) specializing in the acquisition, ownership, and management of a diversified portfolio of single-tenant commercial retail properties across the United States. The company's foundational strategy centers on securing long-term net leases with high-credit-quality tenants, primarily within "defensive retail industries" where a physical location is critical to sales and profits. These sectors include home improvement, auto parts, drug stores, general retail, grocers, convenience stores, and quick-service restaurants. This deliberate focus has allowed NTST to build a resilient portfolio, as evidenced by its ability to navigate the COVID-19 pandemic with zero credit losses.

In the competitive landscape of net lease retail REITs, NTST positions itself as a specialized player, often trailing larger, more established peers like Realty Income Corporation (O), National Retail Properties (NNN), Spirit Realty Capital (SRC), and Agree Realty Corporation (ADC) in terms of sheer scale and overall market capitalization. While these competitors also target single-tenant net lease properties, NTST differentiates itself through a highly focused strategy on e-commerce-resistant retail and a rigorous, technology-driven underwriting process. This specialization, combined with a management team deeply experienced in commercial real estate, aims to provide superior risk-adjusted returns, even if it means foregoing some of the broader market opportunities pursued by more diversified rivals.

Technological Differentiators: The Underwriting Advantage

NTST's core competitive advantage lies in its sophisticated underwriting methodology, which is significantly enhanced by technology and the strategic use of "asymmetrical information." The company employs tools like Placer.ai, a "phenomenal tool" that provides granular insights into foot traffic and unit-level productivity for its locations. This technological edge allows NTST to "decipher the unit-level productivity of our locations and the strength of our real estate" with high accuracy.

The tangible benefits of this approach are evident in NTST's operational performance. The company consistently emphasizes unit-level rent coverage, which has "ticked up to 3.9x from 3.8x" across its portfolio. This deep understanding of individual property performance enables NTST to carefully manage lease expirations and identify locations where rent is replaceable, even if a tenant faces corporate-level distress. The ultimate financial outcome of this precision underwriting is a remarkably low credit loss rate, averaging "just 4 basis points since inception." This figure stands as a testament to the effectiveness of NTST's due diligence, particularly when compared to the broader market impact experienced by other landlords during tenant bankruptcies or store closures.

This technological and analytical differentiation provides NTST with a significant competitive moat. It allows the company to pursue attractive opportunities, even with non-investment-grade tenants, where the risk-adjusted returns are compelling due to strong unit-level fundamentals and fungible real estate. While larger competitors might rely more on corporate credit ratings, NTST's ability to assess granular property-level risk enables it to identify value that others might overlook, enhancing its strategic adaptability and resilience in a dynamic market.

Strategic Evolution: Diversification and Growth

NTST's recent history reflects a dynamic strategic evolution, balancing aggressive growth with a disciplined focus on portfolio diversification. The company's investment pace has accelerated significantly, culminating in a record \$203.9 million of gross investments across 50 properties in Q3 2025 alone, at a blended cash yield of 7.4% and an average lease term of 13.4 years. This surge in activity was directly attributed to an "improved cost of capital" and an "attractive opportunity set."

Concurrently, NTST has been proactive in managing tenant concentrations. The company's "year-to-date disposition activity has us well ahead of schedule to exceed our year-end diversification goals," with the top 5 tenancy declining by 600 basis points to 22.9% by the end of Q3 2025. This includes targeted reductions in exposure to tenants like Dollar General (DG) and Walgreens , with a stated goal of having "no tenant above 5% of ABR by year end." Dispositions, such as the sale of 24 properties for \$36 million in Q3 2025, have been "accretively funded" into higher-yielding opportunities, demonstrating effective capital recycling.

This strategic pivot towards aggressive diversification, while maintaining a robust acquisition pipeline, positions NTST favorably. The company has demonstrated remarkable resilience against tenant-specific headlines, such as store closures by Family Dollar, Walgreens (WBA), CVS (CVS), Advanced Auto (AAP), and the bankruptcy of Big Lots . Despite these challenges, NTST experienced "virtually no impact to our in-place cash flow since inception," with only one dark store across 162 properties leased to these tenants. For instance, six of its seven Big Lots (BIG) locations are expected to be assumed by Variety Wholesalers, with the remaining rejected store in Bowie, Maryland, anticipated to be re-leased to an investment-grade tenant at a "more than 20% increase in rent" commencing in 2026. This track record underscores the strength of NTST's underwriting and its focus on "fungible real estate with replaceable rents."

Financial Performance: A Quarter of Accelerated Activity

NETSTREIT's financial performance for the three and nine months ended September 30, 2025, reflects the impact of its accelerated investment and diversification strategies. Total revenues for the three months ended September 30, 2025, increased by \$6.9 million, or 18.1%, to \$48.3 million compared to the prior-year period. For the nine months ended September 30, 2025, total revenues rose by \$23.8 million, or 20.1%, to \$142.5 million. This growth was primarily driven by an increase in operating leases, additional cash rental receipts, and property expense reimbursements. Interest income on mortgage loans receivable also contributed to the nine-month revenue increase.

Net income for the three months ended September 30, 2025, was \$0.6 million, a significant improvement from a net loss of \$5.3 million in the prior-year quarter. For the nine-month period, net income was \$5.6 million, reversing a net loss of \$6.6 million in the corresponding period of 2024. This turnaround was largely due to increased rental revenues, a higher net gain on real estate sales (\$1.1 million in Q3 2025 and \$6.7 million for 9M 2025), and a decrease in provisions for impairment. Provisions for impairment on long-lived assets decreased to \$4.1 million in Q3 2025 from \$9.8 million in Q3 2024, and to \$12.2 million for 9M 2025 from \$17.3 million for 9M 2024.

Operating expenses saw a mixed trend. For Q3 2025, total operating expenses decreased by \$2.8 million to \$36.3 million, mainly due to lower impairment provisions, partially offset by higher depreciation and amortization and payroll expenses. However, for the nine months ended September 30, 2025, total operating expenses increased by \$4.9 million to \$106.8 million, reflecting the growth in the operating property portfolio. Interest expense, net, increased substantially to \$12.6 million in Q3 2025 (from \$8.0 million in Q3 2024) and to \$36.7 million for 9M 2025 (from \$21.7 million in 9M 2024), driven by new term loans and amortization of deferred losses on interest rate swaps.

NTST's portfolio remains robust, with 723 properties across 45 states as of September 30, 2025. The portfolio boasts a 99.9% occupancy rate and a WALT of 9.9 years. Notably, approximately 47% of ABR is derived from investment-grade tenants, with an additional 15% from those with an investment-grade profile, underscoring the company's commitment to credit quality.

Capital Structure and Liquidity: Fueling Future Expansion

NETSTREIT's capital strategy is designed to support its growth ambitions while maintaining balance sheet discipline. As of September 30, 2025, the company commanded over \$1.1 billion in total liquidity, comprising \$53 million in cash, \$500 million available on its revolving credit facility, \$431 million in unsettled forward equity, and \$150 million of undrawn term loan capacity. This robust liquidity position is a direct result of strategic financing activities, including a 12.42 million share public offering in July 2025 and new term loan agreements in September 2025.

The company's debt structure is strategically managed to mitigate interest rate risk. All term loans are floating rate, but NTST utilizes interest rate derivative contracts to hedge this exposure, converting variable rates to fixed rates. For instance, the \$200 million 2031 Term Loan is fully hedged at an all-in fixed rate of 4.59%, and \$200 million of the \$250 million 2032 Term Loan is partially hedged at 4.92%. This proactive hedging strategy insulates the company from significant interest rate fluctuations, with an estimated market risk exposure of only \$1.2 million from a 1% adverse change in the Revolver's interest rate. NTST was in compliance with all debt covenants as of September 30, 2025, and expects to remain so through 2025.

Management is actively pursuing an investment-grade credit rating, which, if achieved, is expected to reduce debt costs by approximately 30 basis points across its term loans and credit facilities. This would further enhance NTST's competitive financing advantage. The company expects to settle 8 million to 9 million shares of forward equity by the end of Q4 2025, with the remainder settled ratably over 2026, providing additional capital for accretive investments.

Outlook and Risks: Navigating Macro Headwinds with Precision

NETSTREIT's outlook for 2025 and beyond is characterized by continued growth and strategic execution. The company has significantly increased its 2025 net investment guidance to \$350 million - \$400 million, up from an initial range of \$75 million - \$125 million, reflecting confidence in its improved cost of capital and attractive investment opportunities. Despite this increased activity, the 2025 AFFO per share guidance is reiterated at \$1.29 - \$1.31, with an assumption of \$0.015 - \$0.025 dilution from the treasury stock method. Recurring cash General & Administrative (G&A) expenses are projected to be between \$15 million and \$15.5 million. Management anticipates Q4 2025 will be the "last quarter of elevated disposition volume," with a return to more normal, opportunistic sales in 2026, suggesting higher net investments in the coming year.

While the macroeconomic environment presents ongoing challenges, NTST's focus on "high-quality and less volatile necessity-based retail properties" serves as a robust defense. Risks include tightening credit markets, lower liquidity, fluctuating interest rates, inflation, and potential declines in consumer spending due to "macroeconomic pressures... including new and proposed tariffs." However, NTST's disciplined underwriting, which prioritizes unit-level performance and fungible real estate, is designed to mitigate these risks. The company's proactive monitoring of commercial real estate and credit markets allows for strategic adjustments to its business strategy as needed.

Conclusion

NETSTREIT Corp. stands as a compelling investment thesis, distinguished by its strategic focus on resilient, necessity-based retail properties and a technologically advanced underwriting approach. The company's history of navigating market challenges, including the COVID-19 pandemic, with minimal credit losses underscores the effectiveness of its precision underwriting, which delves beyond corporate credit to assess unit-level profitability and real estate fungibility. This differentiated capability provides NTST with a significant competitive edge, allowing it to identify and acquire high-quality assets that offer superior risk-adjusted returns, even in a competitive market.

With a robust balance sheet, ample liquidity, and a clear strategic roadmap for portfolio diversification and growth, NTST is well-positioned for sustained earnings expansion. The company's increased investment guidance for 2025 and positive outlook for AFFO per share growth in 2026 and 2027, coupled with its pursuit of an investment-grade credit rating, signal a trajectory of enhanced financial strength and market positioning. Investors looking for consistent cash flows and long-term growth in the net lease retail sector will find NTST's disciplined execution and technological leadership a strong foundation for future value creation.