B R O A D S T O N E NET LEASE, INC. PRESENTATION NOVEMBER 2023 This presentation contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things, our plans, strategies, and prospects, both business and financial. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as "may," "will," "should," "expect," "inte ...

Portfolio Overview - As of September 30, 2023, the company’s portfolio includes 800 properties, with an annualized base rent (ABR) of $390 million[9] - The portfolio is approximately 99.4% leased, with a weighted average remaining lease term of about 10.5 years[9] - The total number of properties in the portfolio is 800, with a total ABR of $390,021,000[17] - The total square footage of the properties is 38,240,000 square feet[17] - The company operates in 44 U.S. states and four Canadian provinces, with no single geographic concentration exceeding 9.9% of ABR[9] Lease Structure - Approximately 97.3% of leases have contractual rent escalations, with a weighted average minimum increase of 2.0%[9] - The company has a weighted average annual minimum increase of 2.0% for its leases, providing organic revenue growth and inflation protection[29] - 80.3% of the ABR is subject to annual lease escalations, contributing to revenue stability[29] Tenant Composition - Total ABR from the top 10 tenants is $75,443,000, representing 19.3% of the total portfolio[15] - The top 20 tenants contribute $124,956,000 in ABR, accounting for 32.0% of the total portfolio[15] - The largest tenant, Roskam Baking Company, has an ABR of $15,605,000, making up 4.0% of the total portfolio[17] - Approximately 93.7% of tenants provide financial reporting, with 86.2% required to submit specified financial information periodically[9] Sector Diversification - The company’s properties are diversified across various sectors, with 51% in industrial, 18% in healthcare, 14% in restaurants, and 11% in retail[11] - The industrial sector includes 193 properties, accounting for 51.2% of total ABR, with manufacturing representing 16.8%[14] - The healthcare sector comprises 129 properties, contributing 17.6% to total ABR, with clinical properties at 7.0%[14] - The restaurant sector consists of 248 properties, making up 13.7% of total ABR, with casual dining and quick service restaurants each at 7.1% and 6.6% respectively[14] Financial Performance - Total lease revenues, net for the three months ended September 30, 2023, were $109,543,000, representing a slight increase of 0.2% compared to $109,353,000 for the previous quarter[31] - Net income for the three months ended September 30, 2023, was $52,145,000, a decrease of 17.2% from $62,996,000 in the previous quarter[38] - Net earnings per diluted share decreased to $0.26, down 18.8% from $0.32 in the previous quarter[38] - The company recognized a gain of $15,163,000 on the sale of real estate during the three months ended September 30, 2023, compared to a gain of $29,462,000 in the previous quarter, reflecting a decrease of 48.5%[35] - Interest income increased by 54.9%, from $82,000 in the previous quarter to $127,000[35] - Total operating expenses for the three months ended September 30, 2023, were $54,383,000, an increase of 1.6% from $53,502,000 in the previous quarter[33] Lease Expirations - Lease expirations in 2030 represent 13.9% of total ABR, amounting to $54,288,000[26] - The company has 73 properties with lease expirations in 2029, representing 6.1% of total ABR[26] - The total ABR for properties expiring in 2024 is $6,438,000, which is 1.7% of the total portfolio[26] - The company has 12 properties with lease expirations categorized as "Thereafter," contributing $12,733,000 or 3.3% of total ABR[26] Other Financial Commitments - The company has a $1.0 billion unsecured revolving credit facility established on January 28, 2022[8] - The company has commitments to fund two build-to-suit transactions with remaining obligations of $157.3 million expected to fund through October 2024[199] - The company executed a ten-year lease for new corporate office space with total expected future lease payments of $8.9 million[200] Adjustments and Expenses - Operating expenses billed to tenants increased by $587,000, or 12.8%, from $4,594,000 in the previous quarter to $5,181,000[31] - The adjustment to revenue recognized for uncollectible rental amounts billed, net improved by $141,000, or 59.7%, from $(236,000) in the previous quarter to $(95,000)[31] - The company has 2 untenanted properties, which do not contribute to the ABR[26]

BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 5 BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 8 This data and other information described herein are as of and for the three months ended June 30, 2023 unless otherwise indicated. Future performance may not be consistent with past performance and is subject to change and inherent risks and uncertainties. This information should be read in conju ...

Financial Data and Key Metrics Changes - The company generated AFFO of $69 million or $0.35 per share, reflecting a 2.9% increase in per share results quarter-over-quarter, driven by same-store portfolio growth [49] - The leverage ratio decreased to 5.0 times on a net-debt-to-annualized adjusted EBITDA basis [50] - The company maintained a dividend of $0.28 per common share, consistent with the prior quarter, aligning with a targeted AFFO payout ratio in the mid-to-high 70% range [53] Business Line Data and Key Metrics Changes - The real estate portfolio achieved 99.9% rent collections and 99.4% occupancy as of June 30, 2023, with only two of the 801 properties vacant [17][18] - The company successfully executed capital recycling initiatives, generating $168.3 million in gross proceeds at a weighted average cash cap rate of 5.9% on tenanted properties [19][38] - Investments during the second quarter totaled $64.9 million at a weighted average initial cash cap rate of 7.3%, including three industrial new property acquisitions [41] Market Data and Key Metrics Changes - The company sourced and evaluated over $17 billion of new investment opportunities year-to-date, employing a selective approach due to misaligned cap rates and market dynamics [23][83] - Cap rates have plateaued in the high 5% to low 6% range for dispositions, with expectations for continued focus on industrial assets [69][85] Company Strategy and Development Direction - The company aims to control its destiny through disciplined capital recycling and opportunistic asset sales, especially given the current stock price [21][62] - A focus on building partnerships with tenants and developers is emphasized to navigate challenging financing conditions [25] - The company is committed to a patient and disciplined investment strategy, targeting long-term value creation for shareholders [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the tenant base despite macroeconomic challenges, with no overarching negative trends noted [30] - The company remains optimistic about the potential for growth in the second half of the year, with a larger pipeline of advanced stage opportunities [84] - Management highlighted the importance of maintaining financial flexibility to support opportunistic growth [50] Other Important Information - The company is closely monitoring the performance of tenants on its watchlist, including Red Lobster and Carvana, both of which have shown signs of recovery [31][34] - The build-to-suit project for a distribution facility leased to United Natural Foods is expected to drive significant growth in earnings, with a projected opening in Q3 2024 [44][46] Q&A Session Summary Question: Can you talk about your capital sources and growth plans for the next year? - Management indicated that they are comfortable with their current leverage and capital sources, focusing on dispositions until equity markets improve [68] Question: What is your approach to bad debt budgeting? - The company is budgeting 75 basis points against revenue for bad debt, with year-to-date experience in single-digit basis points [64] Question: Can you discuss the Green Valley Medical Center's milestones? - Management noted that while certain milestones have not been met, the financial impact for the year is minimal as rent has been collected [71][92] Question: What is the expected mix of asset types moving forward? - Management expects to maintain a focus on industrial assets, which have been a significant part of their portfolio growth over the past five years [90]

Portfolio Overview - As of June 30, 2023, the company’s portfolio includes 801 properties, with an annualized base rent (ABR) of approximately $15,605,000 from the top tenant, Roskam Baking Company, accounting for 4.0% of the total portfolio[125] - The portfolio is approximately 99.4% leased, with an ABR weighted average remaining lease term of approximately 10.7 years, excluding renewal options[125] - The properties are located in 44 U.S. states and four Canadian provinces, with no single geographic concentration exceeding 9.8% of the ABR[125] - The portfolio comprises approximately 38.5 million rentable square feet of operational space[125] - Total ABR (Annual Base Rent) for the portfolio is $390.974 million, with healthcare facilities contributing 13.9% and restaurants 13.7%[130] Tenant and Lease Information - Approximately 97.3% of leases have contractual rent escalations, with an ABR weighted average minimum increase of 2.0%[125] - Approximately 94.2% of tenants provide financial reporting, with 86.3% required to provide specified financial information periodically[125] - The top 10 tenants contribute 19.4% of the total ABR, with a total of 170 properties leased to these tenants[128] - The total ABR from the top 20 tenants is $124,560,000, representing 32.1% of the total portfolio[128] - Master leases contributed to 69.3% of the ABR associated with multi-site tenants and 41.5% of overall ABR as of June 30, 2023[133] - As of June 30, 2023, the company had 801 properties in its portfolio, with 408 properties under master lease structures[133] Financial Performance - The company recognized a decrease in lease revenues of $7.5 million due to lease termination income in Q1 2023 compared to no income in Q2 2023[137] - Gain on sale of real estate was $29.462 million for the three months ended June 30, 2023, compared to $3.415 million in the previous quarter, representing an increase of over 100%[139] - The company sold one property with a carrying value of approximately $37.0 million for total proceeds of $47.0 million, resulting in a gain on sale of approximately $9.3 million[145] - Interest expense decreased by 4.1% from $21.139 million in Q1 2023 to $20.277 million in Q2 2023[139] Debt and Financing - The company maintains a $1.0 billion unsecured revolving credit facility, dated January 28, 2022[124] - Fixed-rate debt had a carrying value of approximately $1.9 billion and a fair value of $1.7 billion as of June 30, 2023[251] - Total borrowings under the Revolving Credit Facility and other variable-rate debt amounted to $1.0 billion as of June 30, 2023, with $975.4 million swapped to a fixed rate[251] - A 1% increase in market interest rates would decrease the fair value of fixed-rate debt by approximately $68.0 million[251] - A 1% change in interest rates would result in a corresponding $0.5 million increase or decrease in annual interest expense[251] Risk Management - The company is exposed to foreign currency exchange rate risk due to investments in Canada, funded significantly through Canadian dollar borrowings[251] - Unrealized foreign currency gains and losses from Canadian dollar borrowings do not impact cash flows from operations until settled[251] - The foreign currency exchange rate risk on remaining cash flows is considered immaterial by the company[251] Corporate Governance - There have been no changes in internal control over financial reporting that materially affected the company during the quarter ended June 30, 2023[253] Future Commitments - The company has a remaining commitment of $167.3 million for a build-to-suit transaction expected to fund through October 2024[143] - A quarterly distribution of $0.28 per share was declared for Q3 2023, payable on or before October 13, 2023[145] Disposition Strategy - The company disposed of properties with credit risk or lease rollover risk at advantageous pricing relative to redeployment yields[137]

Portfolio Overview - As of March 31, 2023, the company’s portfolio includes 801 properties, with an annualized base rent (ABR) of $389.5 million[118] - The portfolio is approximately 99.4% leased, with an ABR weighted average remaining lease term of approximately 10.8 years[118] - The company’s properties are diversified across 54 different industries, with no single tenant accounting for more than 4% of the ABR[118] - The total square footage of the portfolio is 39,058,000 square feet[126] - The company has a total of 801 properties with an overall ABR of $389,472,000[126] Lease and Rental Income - Approximately 97.3% of leases have contractual rent escalations, with an ABR weighted average minimum increase of 2.0%[118] - Leases contributing 97.3% of the ABR provided for annual increases generally ranging from 1.5% to 3.0%[136] - The company recognized $7.5 million in lease termination income in Q1 2023, contributing to an increase in net lease revenues[138] - Total lease revenues, net for the three months ended March 31, 2023, increased by $6,858,000 or 6.1% compared to the previous quarter[144] - The company reported a 16.2% increase in contractual rental amounts billed for operating leases, totaling $98,102,000 for the three months ended March 31, 2023, compared to $84,396,000 for the same period in 2022[153] Property Segmentation - The industrial property type constitutes 51.8% of the total portfolio ABR, with manufacturing alone accounting for 16.5%[122] - Healthcare properties represent 17.4% of the total portfolio ABR, with clinical healthcare making up 7.0%[122] - Restaurant properties account for 13.4% of the total portfolio ABR, with casual dining at 7.0% and quick service restaurants at 6.4%[122] - The healthcare facilities segment has 104 properties with an ABR of $53,183,000, making up 13.7% of the total portfolio[126] - The restaurant segment consists of 250 properties with an ABR of $53,141,000, accounting for 13.6% of the total portfolio[126] - The packaged foods and meats segment has 29 properties with an ABR of $38,843,000, representing 10.0% of the total portfolio[126] - The other industries category includes 39 industries with an ABR of $104,084,000, representing 26.7% of the total portfolio[126] Financial Performance - The company recognized a net income of $41,374,000 for the three months ended March 31, 2023, reflecting a 12.5% increase from $36,773,000 in the previous quarter[151] - Net income for the three months ended March 31, 2023, was $41,374 thousand, a 45.5% increase from $28,441,000 in the same period of 2022[161] - Net earnings per diluted share increased by 31.3% to $0.21, up from $0.16 year-over-year[161] - Funds From Operations (FFO) for the three months ended March 31, 2023, was $81,177 thousand, compared to $61,504 thousand for the same period in 2022, reflecting a year-over-year increase of 32%[180] - Core Funds From Operations (Core FFO) for the three months ended March 31, 2023, was $74,473 thousand, up from $64,076 thousand in the prior year[180] - Adjusted Funds From Operations (AFFO) for the three months ended March 31, 2023, was $67,485 thousand, compared to $60,401 thousand for the same period in 2022[180] Expenses and Impairments - Total operating expenses decreased by 2.9% from $61,320,000 in Q4 2022 to $59,559,000 in Q1 2023[139] - The company experienced an increase of 11.8% in general and administrative expenses, rising from $9,318,000 to $10,416,000[139] - The company reported a provision for impairment of investment in rental properties amounting to $1,473,000 in Q1 2023[139] - The company recognized an impairment charge of $1,473,000 on investments in rental properties during the three months ended March 31, 2023, with no impairment recognized in the same period of 2022[158] Debt and Liquidity - The company has a $1.0 billion unsecured revolving credit facility established on January 28, 2022[117] - The company maintained a Net Debt to Annualized Adjusted EBITDAre ratio of 5.1x, below the target of 6.0x[163] - The company has $891.7 million of available capacity under its Revolving Credit Facility as of March 31, 2023[167] - The company reported a decrease in cash and cash equivalents of $40,730 thousand for the three months ended March 31, 2023[179] - The company had an outstanding balance of $108,330 thousand on its unsecured revolving credit facility as of March 31, 2023[174] Market and Economic Factors - A 1% increase in market interest rates would decrease the fair value of the company's fixed-rate debt by approximately $72.2 million[189] - The company is exposed to foreign currency exchange rate risk due to investments in Canada, funded partially through Canadian dollar borrowings[190] Strategic Management - The company employs a disciplined acquisition strategy and active asset management, including selective property sales[183] - The company expects to meet long-term liquidity needs primarily through borrowings under its Revolving Credit Facility and future debt and equity financings[167]

Financial Data and Key Metrics Changes - The company generated an AFFO of $65.6 million or $0.36 per share in Q4 2022, representing a 6% growth year-over-year and approximately 3% growth quarter-over-quarter [11] - Full year 2022 AFFO reached $252 million or $1.40 per share, marking a 6.9% increase over 2021 results [64] - The company maintained a conservative leverage profile of 5.2 times net debt to annualized adjusted EBITDAre and ended the year with approximately $825 million of liquidity [58][90] Business Line Data and Key Metrics Changes - In Q4 2022, the company invested approximately $310 million in 17 properties at a weighted average initial cash cap rate of 6.7% [59] - The weighted average annual rent escalation remained at 2%, with a weighted average remaining lease term of approximately 10.9 years [8] - The company sold three properties for net proceeds of $39.2 million at a weighted average cash cap rate of 5.8% [52] Market Data and Key Metrics Changes - The company reported that its collections for the year exceeded 99.9%, maintaining a strong track record of rent collections [61] - The acquisition cap rate expanded by 100 basis points from Q1 to Q4 2022, indicating a shift in market conditions [85] - The company noted a slower start to 2023, with an annualized opportunity volume of $20 billion to $25 billion, reflecting a more normalized market [31] Company Strategy and Development Direction - The company is focused on deploying available capital in a selective manner, with a conservative acquisition guidance range of $300 million to $500 million for 2023 [12] - The strategy includes increasing scrutiny of the internal portfolio review process and credit stress testing due to ongoing economic uncertainty [8] - The company aims to build dry powder for accretive deployment during pricing discovery and to lengthen its debt maturity profile for greater flexibility [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate economic uncertainty and highlighted the importance of a diversified investment strategy [5][53] - The company anticipates a back-end weighted acquisition strategy for 2023, with potential adjustments based on market conditions [17] - Management remains cautious regarding tenant exposure and is actively monitoring key tenants like Red Lobster and Carvana [42][35] Other Important Information - The company announced a dividend of $0.0275 per common share, representing a 3.8% increase over the annualized dividend amount from Q1 2022 [25] - The board of directors welcomed new members with strong backgrounds in retail and private equity, enhancing the company's governance [48] Q&A Session Summary Question: What changes should be expected with the new management? - Management indicated that the strategy and approach will remain consistent, focusing on long-term shareholder value [28][94] Question: Can you elaborate on the new top tenant, Roskam Baking Company? - Management expressed confidence in the tenant's defensive position and ability to pass through costs, highlighting a moderate leverage profile [33][34] Question: Any updates on Red Lobster's business performance? - Management acknowledged the challenges faced by Red Lobster but emphasized ongoing communication and confidence in the investment [35][100] Question: Are there any near-term rent cuts being considered? - Management confirmed that there are no active discussions regarding rent cuts for any tenants at this time [42] Question: What is the expected cap rate trend for acquisitions? - Management noted that cap rates in industrial assets have moved more rapidly than other sectors, with expectations for continued price discovery [96]

Portfolio Composition - As of December 31, 2022, approximately 51.5% of the company's ABR (Annual Base Rent) came from industrial properties, 17.1% from healthcare properties, 13.5% from restaurant properties, 11.5% from retail properties, and 6.5% from office properties[32]. - The company owns a total of 804 properties with an ABR of $389,094,000, covering 39,139,000 square feet[12]. - The company targets specific acquisition opportunities in industrial, healthcare, restaurant, and retail property types, aiming for no single tenant to represent more than 5% of ABR[20]. - A significant portion of the company's portfolio is leased to tenants relying on discretionary consumer spending, making it sensitive to economic downturns[42]. - The top 10 tenants represented approximately 19.0% of the company's Annual Base Rent (ABR) as of December 31, 2022, with the largest tenant, Roskam Baking Company, accounting for about 4.0% of the ABR[62]. Financial Performance - Pro forma revenues for the year ended December 31, 2020, were $321.637 million, with a net income of $60.783 million[49]. - The company reported net cash provided by operating activities of $255.9 million for the year ended December 31, 2022, compared to $244.9 million in 2021[251]. - Net income attributable to Broadstone Net Lease, Inc. for 2022 was $122,115,000, up 19.2% from $102,426,000 in 2021[299]. - Basic and diluted net earnings per share increased to $0.72 in 2022 from $0.67 in 2021, representing a growth of 7.5%[299]. - Comprehensive income attributable to Broadstone Net Lease, Inc. for 2022 was $209,849,000, compared to $139,748,000 in 2021, marking a substantial increase of 50.1%[299]. Expenses and Liabilities - The company incurred $3.7 million in non-recurring costs associated with the Internalization during the year ended December 31, 2020[50]. - The company experienced $20.5 million in expenses related to the Internalization, including general and administrative expenses and interest expenses[50]. - Total operating expenses for 2022 were $219,490,000, slightly up from $215,129,000 in 2021, indicating a marginal increase of 1.1%[299]. - Interest expense rose to $78,652,000 in 2022 from $64,146,000 in 2021, reflecting an increase of 22.6%[299]. - The company has approximately $2.0 billion principal balance of indebtedness outstanding, which may expose it to the risk of default under its debt obligations[76]. Risk Factors - The company faces risks related to market conditions that could pressure total returns on investments, potentially leading to lower yield characteristics for future acquisitions[27]. - The company acknowledges that property vacancies could result in significant capital expenditures and illiquidity, particularly for specialty properties[33]. - The company faces risks from tenant bankruptcies or defaults, which could materially affect rental income[56]. - Changes in market interest rates could increase interest costs on existing and future debt, adversely affecting the company's stock price[58]. - Climate change poses risks to the company's properties, potentially increasing costs and impacting tenant operations[44]. Compliance and Regulations - Effective internal controls over financial reporting are necessary to prevent fraud and ensure reliable financial reports[38]. - The company is subject to numerous federal, state, and local laws and regulations that may require substantial capital expenditures for compliance[46]. - The company has elected to be taxed as a REIT since the taxable year ended December 31, 2008, and intends to maintain this status to avoid significant tax consequences[85]. - To qualify as a REIT, the company must distribute at least 90% of its REIT taxable income annually, or face U.S. federal corporate income tax on undistributed income[86]. - The company may face penalties for failing to satisfy REIT requirements, with a minimum penalty of $50,000 per failure[86]. Capital Structure and Financing - The company has the authority to issue up to 520,000,000 shares of stock, with no preemptive rights for Common Stock holders[80]. - The company relies on distributions from the Operating Partnership (OP) to meet obligations and pay dividends, indicating structural subordination of stockholder claims[83]. - The company has a leverage ratio target of ≤ 0.60 to 1.00 and a fixed charge coverage ratio of ≥ 1.50 to 1.00[247]. - The company entered into two new unsecured bank term loans totaling $500 million, with variable interest rates based on credit ratings[246]. - The company has $145.4 million of available capacity under its ATM Program as of December 31, 2022, allowing for gross sales of up to $400 million[243]. Asset Management and Valuation - The fair value of the Company's interest rate swap assets was $63,390,000 as of December 31, 2022, while the liabilities were $27,171,000[114]. - The Company's long-term debt had a carrying amount of $2,034,076,000 and a fair value of $1,841,381,000 as of December 31, 2022[114]. - The fair value of the Company's net asset value per diluted share was estimated at $21.30, based on the fair value of its real estate investment portfolio[112]. - The company recognized an earnout liability of $7,509,000 at the beginning of 2021, with a change in fair value of $5,539,000 during the year[114]. - The company evaluated goodwill for impairment and concluded that goodwill was not impaired as of November 30, 2022[284]. Acquisition and Investment Strategy - The company focuses on acquiring freestanding, single-tenant commercial real estate properties that are under lease and fully occupied at the time of acquisition[20]. - The company may pursue opportunistic investments that do not meet its diversification criteria if they present compelling risk-adjusted returns[20]. - The company acquired $878.4 million of real estate during the year ended December 31, 2022, excluding capitalized acquisition costs[292]. - Total outstanding borrowings increased by $334.9 million to partially fund acquisitions, with approximately 93.5% of total indebtedness fixed or hedged against interest rate fluctuations[239]. - The company achieved all four earnout milestones related to the Internalization, resulting in a total earnout consideration of $75 million, paid in cash, common stock, and OP Units[134].

Financial Data and Key Metrics Changes - The company reported an AFFO of $63.4 million or $0.35 per share, representing approximately 6.1% growth over the same period last year [22] - AFFO per share was flat quarter-over-quarter compared to Q2, primarily due to revenue generated from Q2 acquisitions offset by a full quarter share count from equity raised in late Q2 [22] - The company reaffirmed its AFFO guidance range for fiscal year 2022 at $1.38 to $1.40 per diluted share, implying a growth rate of 6.1% at the midpoint over 2021 results [23] Business Line Data and Key Metrics Changes - The company invested approximately $205 million in 28 properties during Q3, with a weighted average initial cash cap rate of 6.5% and a weighted average GAAP cap rate of 7.9% [10] - Investments were predominantly in industrial opportunities at 86%, with the remaining volume in restaurants (6%), health care (5%), and retail (3%) [11] - The weighted average annual rent escalation for the portfolio was 2%, and the weighted average remaining lease term was 10.7 years [8] Market Data and Key Metrics Changes - As of September 30, 2022, all but 3 of the company's 790 properties were subject to a lease, occupied by 218 different commercial tenants across 56 industries [8] - The company noted that heightened levels of economic uncertainty are impacting capital markets, leading to a cautious external growth outlook for the remainder of the fourth quarter [12] Company Strategy and Development Direction - The company is focused on prudent capital allocation and disciplined selectivity in a challenging market environment [6] - The strategy includes conservative balance sheet management, disciplined underwriting, and proactive portfolio management as key pillars for success [7] - The company aims to capitalize on cap rate expansion opportunities in its pipeline, particularly in sectors where supply and demand characteristics are favorable [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's performance, highlighting that 100% of base rents were collected during Q3 [6] - The company is monitoring economic conditions closely and remains committed to maintaining a conservative leverage profile with ample liquidity [21] - Management acknowledged the impact of inflation and rising interest rates on cost of capital, emphasizing a selective approach to acquisitions [18] Other Important Information - The company successfully released a health care property in Arizona under a new 21-year lease with an effective GAAP yield of 7.5% [9] - The company has approximately $902 million of acquisitions either closed or under control year-to-date, reaffirming its acquisition guidance range of $900 million to $1 billion for 2022 [12] Q&A Session Summary Question: Can you talk about the new operator for the Santa Cruz Hospital? - The new operator has extensive experience in hospital turnarounds and is expected to improve the property [27][28] Question: What are the economics of the new lease? - The new lease is a 21-year lease with an effective GAAP yield of 7.5%, including a variable free rent period based on the operator's ability to relicense the hospital [31] Question: Are there any other operators on the watch list? - The heightened credit watch list includes a few individual tenant names, with the Santa Cruz facility being a significant focus [32] Question: How is labor availability impacting underwriting? - Labor availability is a concern, particularly for lower-margin businesses, and is being closely monitored in future acquisitions [37][38] Question: What is the company's outlook on cap rates? - The company has seen cap rate expansion, particularly in industrial properties, and expects further movement as seller pricing expectations adjust [39][41] Question: What is the company's strategy for 2023? - The company plans to remain cautious and selective in acquisitions, with a focus on maintaining liquidity and assessing market conditions [51][52]

Investment and Portfolio Overview - The company invested $596.9 million during the nine months ended September 30, 2022, at a weighted average initial cash capitalization rate of 6.2%[105] - As of September 30, 2022, the portfolio comprised 790 properties, with an annualized base rent (ABR) of $371.9 million[107] - Approximately 99.3% of the portfolio was leased, with an ABR weighted average remaining lease term of approximately 10.7 years[105] - The company acquired properties in various sectors, with industrial assets accounting for 49% of the total volume acquired[108] - The portfolio is diversified across 44 U.S. states and four Canadian provinces, with no single geographic concentration exceeding 10.6% of ABR[105] - The total number of properties in the portfolio is 790, with a total ABR of $371,906,000[116] - The total square footage of the portfolio is 36,788,000 square feet[116] Lease and Tenant Information - Approximately 94.1% of tenants provide financial reporting, with 85.3% required to provide specified financial information periodically[105] - The company targets properties integral to tenants' businesses, allowing them to secure long-term net leases[105] - 97.2% of leases have contractual rent escalations, with an ABR weighted average minimum increase of 2.0%[105] - Total ABR (Annual Base Rent) from the top 10 tenants is $63,760,000, accounting for 17.1% of the total portfolio[112] - The top 20 tenants contribute a total ABR of $110,717,000, representing 29.8% of the total portfolio[112] - The healthcare sector represents 18.5% of the total portfolio based on ABR[110] - The restaurant sector accounts for 14.2% of the total portfolio based on ABR, with casual dining and quick service restaurants being significant contributors[110] - The healthcare facilities industry has 103 properties with an ABR of $54,541,000, which is 14.7% of the total portfolio[116] - The restaurant industry consists of 253 properties with an ABR of $53,326,000, making up 14.3% of the total portfolio[116] - The packaged foods and meats industry has 22 properties with an ABR of $22,220,000, representing 6.0% of the total portfolio[116] - The healthcare services industry has 18 properties with an ABR of $9,211,000, which is 2.5% of the total portfolio[116] Financial Performance - Net income for the three months ended September 30, 2022, was $28.7 million, a decrease of 19.2% from $35.6 million for the three months ended June 30, 2022[140] - Total lease revenues for the three months ended September 30, 2022, were $103.5 million, representing a 5.6% increase from $98.0 million for the three months ended June 30, 2022[131] - The company reported a net income of $92.7 million for the nine months ended September 30, 2022, up 19.9% from $77.3 million in 2021[151] - Funds From Operations (FFO) for the nine months ended September 30, 2022, was $202.0 million, compared to $194.1 million for the same period in 2021[171] - Core Funds From Operations (Core FFO) reached $196.7 million for the nine months ended September 30, 2022, compared to $168.2 million in the prior year[171] - Adjusted Funds From Operations (AFFO) was $186.6 million for the nine months ended September 30, 2022, compared to $157.3 million for the same period in 2021[171] - The increase in AFFO reflects the company's ability to manage non-cash revenues and expenses effectively[171] Debt and Liquidity - As of September 30, 2022, total outstanding debt was $2.1 billion, with a Net Debt to Annualized Adjusted EBITDAre ratio of 5.5x[153] - The company aims to maintain a Net Debt to Annualized Adjusted EBITDAre ratio generally less than 6.0x to ensure financial stability[153] - The company has $1.97 billion in total unsecured debt as of September 30, 2022, which includes $900 million in unsecured term loans and $850 million in senior unsecured notes[160] - The company completed a public offering in August 2022, selling 13 million shares at $21.35 per share, expected to provide net proceeds of approximately $270.7 million[159] - The company has $780.5 million of available capacity under its Revolving Credit Facility[156] - The company expects to meet long-term liquidity requirements primarily from borrowings under the Revolving Credit Facility, future debt and equity financings, and limited property sales[156] - The company has a total of $2.5 billion in contractual obligations as of September 30, 2022, which includes interest expense projections based on outstanding borrowings[165] Operational Expenses and Impairments - Operating expenses increased by 16.2% to $59.1 million for the three months ended September 30, 2022, compared to $50.9 million for the three months ended June 30, 2022[132] - The company recognized $4.2 million of impairment on investments in rental properties during the three months ended September 30, 2022, compared to $1.4 million for the previous quarter[134] - The provision for impairment of investment in rental properties decreased significantly to $5.5 million from $28.0 million, an 80.2% reduction[144] Interest and Borrowing Costs - Interest expense increased by 12.3% to $20.1 million for the three months ended September 30, 2022, compared to $17.9 million for the previous quarter[136] - Interest expense increased to $54.9 million, a 16.4% rise from $47.1 million in the previous year, attributed to higher average borrowings[147] - The weighted average cost of borrowings increased, with approximately $154.0 million, or 7.5%, of total outstanding indebtedness of $2.1 billion being variable[137] - The company has 32 interest rate swaps outstanding with an aggregate notional amount of $973 million to manage interest rate risk on variable-rate borrowings[167] Strategic Focus and Future Plans - The company plans to continue expanding its real estate portfolio to drive future growth and revenue[168] - The company is focused on a disciplined acquisition strategy and active asset management, including selective property sales[173] - The company’s acquisition growth strategy relies on obtaining acquisition financing on favorable terms while maintaining an appropriate mix of debt and equity capitalization[158]