NETSTREIT Corp. Announces Pricing of Upsized Forward Common Stock Offering
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The announcement by NETSTREIT Corp. regarding the pricing of its public offering at $18.00 per share is a strategic financial move which merits analysis from a capital markets perspective. By entering into forward sale agreements, NETSTREIT is hedging against potential price volatility between the offering and the settlement dates. The use of these agreements indicates a proactive approach to managing future capital, with the company locking in the sale price upfront.
From an investor's standpoint, the decision to delay the receipt of proceeds until the physical settlement of the forward sale agreements could be viewed as a liquidity management strategy. This approach allows NETSTREIT to align the capital inflow with its projected funding needs, optimizing the use of capital for acquisitions and development activities as outlined. The potential repayment of credit facilities could improve the company's debt profile and possibly lead to a more favorable credit rating.
However, investors should be aware of the risks associated with forward sale agreements, such as counterparty risk and the potential for dilution of existing shareholders upon settlement. The impact on the stock price will depend on how the market perceives the company's growth prospects and its ability to effectively deploy the raised capital.
NETSTREIT Corp.'s decision to offer additional shares through a public offering and the subsequent entry into forward sale agreements are indicative of broader market trends in the real estate investment trust (REIT) sector. REITs often rely on equity offerings to raise capital for property acquisitions and development due to the requirement to distribute the majority of taxable income to shareholders, which limits retained earnings.
By analyzing the offering's size and the company's market capitalization, one can infer the potential impact on shareholder value. The offering's timing and pricing also reflect market sentiment and the company's valuation. The involvement of multiple reputable financial institutions as book-runners and co-managers suggests confidence in the company's financial prospects and may enhance the offering's credibility among investors.
The choice of general corporate purposes and property development for the use of proceeds aligns with the industry's growth-focused investment strategies. However, the effectiveness of these investments in generating shareholder returns will depend on market conditions and the company's operational efficiency.
The legal framework governing NETSTREIT Corp.'s public offering and forward sale agreements is significant in ensuring compliance with securities regulations. The offering's conformance with the U.S. Securities and Exchange Commission (SEC) requirements, via a shelf registration statement, facilitates a more expedited process for capital raising, reducing time-to-market for the securities.
The stipulation that the offering is not an offer to sell or a solicitation of an offer to buy in any jurisdiction where it would be unlawful highlights the importance of adhering to state and federal securities laws. The forward sale agreements are complex financial instruments that must be structured to avoid legal pitfalls, particularly concerning future settlement and the conditions under which the company can elect for cash or net share settlement.
Investors should note the forward sale agreements' legal implications, such as the rights and obligations of both NETSTREIT and the forward purchasers. The legal structuring of these agreements can affect the timing and amount of proceeds received by the company and, consequently, its financial strategy.
Wells Fargo Securities and BofA Securities are acting as book-running managers and representatives of the underwriters for the offering. Jefferies, Truist Securities, Capital One Securities, Scotiabank, Regions Securities LLC, TD Securities, Mizuho, Stifel and Citigroup are acting as joint book-running managers for the offering.
The Company has entered into forward sale agreements with affiliates of Wells Fargo Securities and BofA Securities (the "forward purchasers") with respect to 9,600,000 shares of its common stock (and expects to enter into forward sale agreements with respect to an aggregate of 11,040,000 shares if the underwriters exercise their option to purchase additional shares in full). In connection with the forward sale agreements, the forward purchasers or their affiliates are expected to borrow and sell to the underwriters an aggregate of 9,600,000 shares of the common stock that will be delivered in this offering (or an aggregate of 11,040,000 shares if the underwriters exercise their option to purchase additional shares in full). Subject to its right to elect cash or net share settlement, which right is subject to certain conditions, the Company intends to deliver, upon physical settlement of such forward sale agreements on one or more dates specified by the Company occurring no later than January 9, 2025, an aggregate of 9,600,000 shares of its common stock (or an aggregate of 11,040,000 shares if the underwriters exercise their option to purchase additional shares in full) to the forward purchasers in exchange for cash proceeds per share equal to the applicable forward sale price, which will be the public offering price, less underwriting discounts and commissions, and will be subject to certain adjustments as provided in the forward sale agreements.
The Company initially will not receive any proceeds from the sale of shares of its common stock by the forward purchasers. The Company expects to contribute the net proceeds, if any, it receives upon the future settlement of the forward sale agreements to its operating partnership in exchange for Class A limited partnership units in the operating partnership and the operating partnership intends to use the net proceeds for general corporate purposes, which may include the repayment of amounts outstanding from time to time under the Company’s revolving credit facility, and funding of acquisitions of properties and development activities in the Company’s pipeline. Selling common stock through the forward sale agreements enables 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 until the expected funding requirements described above have occurred.
The offering is being made pursuant to the Company’s shelf registration statement, which was automatically effective upon filing with the
This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
About NETSTREIT Corp.
NETSTREIT Corp. is an internally managed real estate investment trust (REIT) based in
Forward-Looking and Cautionary Statements
This press release contains “forward-looking statements.” Forward-looking statements include statements regarding the proposed public offering and other statements identified by words such as “could,” “may,” “might,” “will,” “likely,” “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “continues,” “projects” and similar references to future periods, or by the inclusion of forecasts or projections. Forward-looking statements, including statements regarding the expected use of proceeds of the offering and expected timing for closing of the offering, are based on the Company’s current expectations and assumptions regarding the Company’s business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, the Company’s actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include financial market and regulatory conditions, general real estate market conditions, the Company’s competitive environment and other factors set forth under “Risk Factors” in the Company’s prospectus supplement and accompanying prospectus and in the Company’s annual and quarterly reports and other documents filed with the
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Investor Relations
ir@netstreit.com
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Source: NETSTREIT Corp.
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