Netstreit (NTST) risk factors, FY2025 10-K

Risks Related to Our Business and Properties

1. 01Global market and economic conditions may materially and adversely affect us and our tenants40% rewritten
2. 02We are subject to risks related to commercial real estate ownership that could reduce the value of our properties27% rewritten
3. 03We may not be able to successfully execute our acquisition or development strategies
4. 04Our business is dependent upon our tenants successfully operating their businesses and their failure to do so could materially and adversely affect us
5. 05Single-tenant leases involve significant risks of tenant default
6. 06Our assessment that certain businesses are e-commerce resistant and recession-resilient may prove to be incorrect
7. 07The tools we use to determine the creditworthiness of our tenants may not be accurate
8. 08Our portfolio has geographic market concentrations that make us especially susceptible to adverse developments in those geographic markets58% rewritten
9. 09We are subject to risks related to tenant concentration, and an adverse development with respect to a large tenant could materially and adversely affect us43% rewritten
10. 10We may be unable to renew leases, lease vacant space, or re-lease space as leases expire on favorable terms or at all21% rewritten
11. 11Defaults by borrowers on loans we originate could lead to losses
12. 12Some of our tenants operate under franchise or license agreements, which, if terminated or not renewed prior to the expiration of their leases with us, would likely impair their ability to pay us rent24% rewritten
13. 13The bankruptcy or insolvency of any of our tenants could result in the termination of such tenant’s lease and material losses to us
14. 14Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties and harm our financial condition
15. 15We face significant competition for tenants, which may decrease or prevent increases in occupancy and rental rates of our properties, and competition for acquisitions may reduce the number of acquisitions we are able to complete and increase the costs of these acquisitions
16. 16A loss of key management personnel could adversely affect our performance
17. 17Any material failure, weakness, interruption, or breach in security of our information systems or data, or those of the third parties with whom we work, could prevent us from effectively operating our business
18. 18Data privacy risks, including evolving laws, regulations, and other obligations and compliance efforts, may result in business interruption and increased costs and liabilities36% rewritten
19. 19The use of artificial intelligence presents risks and challenges that may adversely impact our business and operating results or that of our tenantsNew
20. 20Insurance on our properties may not adequately cover losses, and uninsured losses could materially and adversely affect us
21. 21We are subject to risks from natural disasters, such as hurricanes, tornados and flooding, and changes in weather patternsNew
22. 22We also are exposed to risks associated with inclement winter weather which could increase the need for maintenance and repair of our propertiesNew
23. 23We may become subject to litigation, which could materially and adversely affect usNew
24. 24We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in stockholder dilution and limit our ability to sell such assets
25. 25We may experience a decline in the fair value of our assets, which may have a material impact on our financial condition, liquidity, and results of operations and adversely impact the market price of our common stock
26. 26The form, timing, and/or amount of dividend distributions in future periods may vary and be affected by economic and other considerations66% rewritten

Risks Related to Financing our Business

1. 27Our growth depends on external sources of capital that are outside of our control and may not be available to us on commercially reasonable terms or at all
2. 28Our level of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility43% rewritten
3. 29Failure to hedge effectively against interest rate changes may materially and adversely affect us
4. 30Failure to maintain our current credit ratings could adversely affect our cost of funds, related margins, liquidity, and access to the debt capital marketsNew
5. 31Our debt financing agreements contain, and future debt financing agreements may contain, restrictions and covenants that may limit our ability to enter into or obtain funding for certain transactions, operate our business, or make distributions to our common stockholders24% rewritten

Risks Related to Government Regulation and Tax Matters

1. 32Our failure to qualify or maintain our qualification as a REIT for U.S. federal income tax purposes would reduce the amount of funds we have available for distribution and limit our ability to make distributions to our stockholders
2. 33If our operating partnership failed to qualify as a partnership or is not otherwise disregarded for U.S. federal income tax purposes, we would cease to qualify as a REITNew
3. 34Even if we qualify as a REIT for U.S. federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to make distributions to stockholders
4. 35Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends
5. 36The share ownership restrictions of the Code for REITs and the 9.8% share ownership limit in our charter may inhibit market activity in shares of our stock and restrict our business combination opportunities
6. 37The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders
7. 38If a transaction intended to qualify as a 1031 Exchange is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax-deferred basis
8. 39Complying with REIT requirements may limit our ability to hedge our liabilities effectively and may cause us to incur tax liabilities
9. 40The U.S. federal income tax treatment of the cash that we might receive from cash settlement of our forward sale agreements is unclear and could jeopardize our ability to meet the REIT qualification requirements
10. 41Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments
11. 42Our ownership of and relationship with our TRSs will be limited, and a failure to comply with the limits would jeopardize our REIT status and may result in the application of a 100% excise tax
12. 43New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify or remain qualified as a REIT
13. 44We and our subsidiaries and stockholders may be subject to state, local, or foreign tax filing and payment obligations taxation in various jurisdictions, including those in which we or they transact business, own property, or reside
14. 45Liabilities arising under environmental laws may materially and adversely affect us
15. 46Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediation
16. 47Compliance with the Americans with Disabilities Act and fire, safety, and other regulations may require us to make unanticipated expenditures that materially and adversely affect us

Risks Related to Our Organizational Structure and Ownership of Our Common Stock

1. 48Our rights and the rights of our stockholders to take action against our directors and officers are limited
2. 49Future sales or issuances of our common stock or other securities convertible into or exchangeable for our common stock could cause the market price of our common stock to decline and could result in stockholder dilutionNew
3. 50Certain provisions of our charter, bylaws and Maryland law could inhibit changes in control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could trigger rights to require us to redeem our shares of common stockNew
4. 51We are a holding company with no direct operations and we rely on funds received from our operating partnership to pay liabilities
5. 52The market price of shares of our common stock may be volatile and could decline substantially in the future
6. 53Conflicts of interest could arise in the future between the interests of our stockholders and the interests of holders of OP Units, which may impede business decisions that could benefit our stockholders
7. 54If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, our investors could lose confidence in our reported financial information, which could harm our business and the market price of our common stock