Core Viewpoint - Broadstone Net Lease, Inc. (BNL) reported quarterly funds from operations (FFO) of $0.36 per share, exceeding the Zacks Consensus Estimate of $0.35 per share, and showing a year-over-year increase from $0.35 per share [1][2] Financial Performance - The company posted revenues of $105.91 million for the quarter ended June 2024, which was slightly below the Zacks Consensus Estimate by 0.04% and a decrease from $109.35 million year-over-year [2] - Over the last four quarters, Broadstone Net Lease has surpassed consensus FFO estimates three times, indicating a positive trend in FFO performance [2] Stock Performance - Broadstone Net Lease shares have increased approximately 4.7% since the beginning of the year, while the S&P 500 has gained 14.5%, indicating underperformance relative to the broader market [3] - The current consensus FFO estimate for the upcoming quarter is $0.35 on revenues of $107.36 million, and for the current fiscal year, it is $1.42 on revenues of $429.67 million [7] Industry Outlook - The REIT and Equity Trust - Residential industry, to which Broadstone Net Lease belongs, is currently ranked in the top 22% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in estimate revisions, which could impact Broadstone Net Lease's stock performance [5][6]

Core Viewpoint - Broadstone Net Lease (BNL) is a diversified real estate investment trust (REIT) that offers an attractive yield and valuation, appealing to income-oriented investors [1] Group 1: Portfolio Composition - The largest exposure of BNL is in the industrial sector at 54.2%, followed by casual dining restaurants at 14.2%, healthcare at 13.4%, and retail at 11.9% [3] - BNL owns 759 properties with 200 tenants across 53 different industries, with a high occupancy rate of 99.2% and a collection of base rents at 99% [9] Group 2: Financial Performance and Outlook - BNL has a net debt to adjusted EBITDAre ratio of 4.8x, which is stable and reflects a trend of lower leverage over the past year [5] - The latest AFFO for the last two quarters was $0.36, resulting in an AFFO payout ratio of 80.6%, indicating that the current yield is well-supported [14] - Despite a challenging environment, BNL has increased its dividend by 1.8%, from $0.285 to $0.29, continuing a trend of semi-annual increases [6] Group 3: Market Position and Valuation - BNL is trading at a P/FFO of 10.67x, which is more attractive compared to peers like W. P. Carey at 11.55x and Essential Properties Realty Trust at 14.71x [15] - Analysts expect BNL's FFO to decline by -2.49% in 2024, but the company has historically beaten FFO estimates in 8 out of the last 12 quarters, suggesting potential for limited decline [15] Group 4: Strategic Initiatives - BNL is simplifying its healthcare portfolio, having disposed of 37 healthcare assets for gross proceeds of $251.7 million, which accounts for approximately 50% of the targeted assets [11][25] - The company aims to reduce healthcare exposure to below 10% of annual base rent, currently at 13.4% [17]

Company Participation and Announcements - Broadstone Net Lease, Inc. announced participation at Nareit's REITWeek: 2024 Investor Conference[3] - The company issued a press release on June 3, 2024, detailing recent business activities[3] - The press release dated June 3, 2024, is referenced as Exhibit 99.1[20] Financial Reporting and Compliance - Financial results and operational updates are included in Exhibit 99.1 of the Current Report[7] - The report is filed under the Securities Exchange Act of 1934, indicating compliance with regulatory requirements[10] - The information in Exhibit 99.1 is being "furnished" and not deemed "filed" under the Exchange Act[21] - The report was signed by John D. Callan, Jr., Senior Vice President, General Counsel and Secretary[16] Company Information - The registrant's telephone number for inquiries is 585 287-6500[13] - The company is incorporated in Maryland and has a Commission File Number of 001-39529[9] - The company is classified as an emerging growth company under the Securities Act[19]

Core Viewpoint - The real estate industry, particularly REITs, is facing challenges due to prolonged high interest rates, but Broadstone Net Lease (BNL) stands out positively due to its specific real estate focus and strong balance sheet [1][11]. Company Overview - BNL is a diversified, single-tenant operated REIT with a significant concentration in industrial properties (54.2%), followed by restaurant (14.2%), healthcare (13.4%), retail (11.9%), and office (6.3%) [1][2]. - The largest tenant, Roskam Foods, accounts for only 4.2% of the portfolio, indicating low dependency on any single tenant [2]. Strategic Positioning - BNL focuses on industrial properties near major transportation routes, enhancing logistics efficiency for tenants [2]. - The company is well-positioned for future acquisitions, with a significant increase in cash and equivalents from $19.5 million to over $221.7 million [4]. Balance Sheet Analysis - Total assets have slightly increased, while liabilities have decreased, including a $17 million reduction in the credit facility [3][4]. - The debt maturity schedule is well-managed, with unsecured term loans maturing between 2026-2029 at variable rates of approximately 6.00%-6.60% and fixed rates as low as 2.60% for the longest maturity [4]. Financial Performance - Revenue for Q1 2024 was stable at $105 million, with a $5 million reduction in expenses and a $400,000 decrease in interest expenses [5][6]. - The gain on the sale of real estate increased by $53 million due to healthcare simplification efforts [5]. Valuation Metrics - BNL is trading at a price to forward AFFO ratio of 10.5x, which is lower compared to peers like Realty Income (12.9x) and Agree Realty Corp (13.9x), suggesting it may be undervalued [9][10]. - The adjusted funds from operations (AFFO) for the quarter were $0.36, with a recent increase in the quarterly dividend from $0.28 to $0.285 [7]. Conclusion - BNL's strong balance sheet, significant liquidity, and diversification indicate potential for growth and expansion in the current market [11]. - The company is positioned to increase dividends, appealing to income-focused investors [11].

Investment Thesis - Broadstone Net Lease (BNL) offers an attractive dividend yield of approximately 7.5% with a low AFFO payout ratio of around 80%, indicating a strong value proposition that the market has underestimated [1][43]. Business Overview - BNL operates as a diversified REIT with 759 properties across 44 states and 4 Canadian provinces, leased to 200 tenants in 53 industries, totaling a rentable area of 37.6 million square feet [4]. - The company is smaller compared to its peers in the REIT sector and has experienced poor stock performance over the last three years [3]. Key Business Metrics - BNL's occupancy rate stands at 99.2%, significantly above the REIT median, showcasing the quality of its portfolio [13]. - The weighted average lease term (WALT) is 10.6 years, indicating strong lease stability [14]. - BNL has a weighted average rent escalation of 2.0%, which is beneficial for long-term cash flow growth [16]. Financial Stance - BNL's AFFO per share has shown modest growth, with a projected increase of 0.7% year-over-year for 2024, which is considered a weak point compared to peers [23][24]. - The company has initiated a healthcare portfolio simplification strategy, focusing on more productive segments such as industrial, restaurant, and retail properties [26][29]. Liquidity and Credit Metrics - BNL maintains a strong balance sheet with a BBB- credit rating and a fixed charge coverage ratio of 4.6x, indicating solid financial health [31]. - As of March 2024, BNL has $221.7 million in cash and cash equivalents, supported by an undrawn revolving credit facility of $926 million [34]. Valuation Outlook - BNL is currently trading at a P/FFO multiple of 10.2x, which is lower than its peers, suggesting potential for multiple appreciation as the company executes its portfolio reorganization strategy [36][37]. - The market has underestimated BNL's long-term cash flow generation ability, and there is a clear path to double-digit total returns through dividend growth and portfolio expansion [2][43].

Group 1: Company Overview - Broadstone Net Lease, Inc. (NYSE:BNL) operates a diversified portfolio of net lease assets, which has led to a positive reassessment of its investment potential despite initial concerns about its industrial exposure [1][9] - The REIT has a weighted average lease term of 10.6 years, 99% rental collections, and 99.2% occupancy, indicating low counterparty risk and high property demand [10][12] Group 2: Financial Performance - For the three months ended March 31, 2024, Broadstone reported revenues of $105.366 million, net income of $68.177 million, and funds from operations (FFO) of $73.135 million, reflecting a year-over-year increase in FFO per share to $0.37 [13] - The REIT's price-to-funds from operations ratio stands at 10.6x, below the sector median of 13.15x, while its forward dividend yield of 7.39% exceeds the sector median of 4.6%, showcasing relative value and strong income prospects [21] Group 3: Market Conditions - Since the U.S. Federal Reserve began its contractionary monetary cycle in 2022, commercial real estate valuations have declined, with all property values down 7% over the past 12 months [2][3] - The REIT market has seen U.S. REITs lose more than 7% of their year-to-date value, influenced by real economic factors and financial market rotation cycles [7] Group 4: Strategic Acquisitions - Broadstone invested $64.1 million in three industrial properties and two restaurants during its fourth quarter, achieving an implied cash capitalization rate of 7.5%, which is significantly higher than the average U.S. industrial capitalization rate of 5.35% in 2023 [19][20] - The REIT sold five properties for gross proceeds of $16.5 million, indicating active portfolio management [19] Group 5: Economic Outlook - The outlook suggests that Broadstone will benefit from flat to declining inflation, which may enhance its pricing power and reduce operating expenses [15][23] - The REIT's capital structure is primarily financed by common stock, providing flexibility for future leveraged acquisitions as interest rates decrease [17]

Market Overview - The market is currently experiencing all-time highs, with the Dow surpassing 40,000 and the S&P 500 reaching over 5,300, making a typical market selloff in May less likely [2] - Despite the market conditions, there are still opportunities for value investors to find undervalued stocks [2] Hercules Capital (HTGC) - Hercules Capital offers an 8.3% yield and focuses on venture debt investments in tech and life sciences [4][11] - The investment portfolio is conservative, with 93% in senior secured loans, providing a strong position for principal recovery in case of defaults [5] - HTGC's Core Yield is 14.0%, significantly above the 11.1% from early 2022, and the company has seen a 14.7% increase in assets under management to $4.5 billion [7][8] - The company achieved $605 million in gross fundings in Q1 2024, the highest in its history, and maintains a low non-accrual rate of 0.1% [8][9] - HTGC's NAV per share improved to $11.63, and the company has a conservative debt-to-equity ratio of 0.94x [9][11] - The current price of HTGC is $19.36, with a Price-to-NAV of 1.67x, indicating it is trading at a premium [12] Broadstone Net Lease (BNL) - Broadstone Net Lease provides a 7.4% yield and focuses on single-tenant commercial real estate with a diversified portfolio [14] - The portfolio includes 54% industrial properties, with a high occupancy rate of 99.2% and a long average lease term of 10.6 years [15] - BNL reported a 5.9% YoY growth in AFFO per share to $0.36, driven by rent escalators and lower G&A costs [16] - The company sold 37 properties for $252 million, which will support future investments in high-quality industrial properties [17] - Management increased its AFFO per share guidance to $1.42, with expectations of significant investment volume for the year [18] - BNL has a strong balance sheet with a net debt to EBITDA ratio of 4.8x, supporting its 7.4% dividend yield [20] - The current price of BNL is $15.69, with a forward P/FFO of 10.6, which is below its peers [21] Investment Summary - Both Hercules Capital and Broadstone Net Lease present attractive investment opportunities characterized by strong dividend yields and conservative financial management [22] - HTGC's focus on high-yield, floating-rate venture debt complements BNL's diversified portfolio of long-term net-leased commercial properties, providing a balanced approach to income generation [23]

Core Viewpoint - The article discusses the advantages of dividend stocks as a better alternative for passive income compared to traditional banking investments like Certificates of Deposit (CDs), especially in the context of rising interest rates and inflation. Group 1: Dividend Stocks as Investment Options - Dividend stocks historically account for approximately 33% of S&P 500 returns, indicating their significance in investment portfolios [4] - Investors seeking passive income typically desire principal safety, high liquidity, comparatively high yields, and ease of transaction, all of which dividend stocks can provide at various risk levels [5][6] - The article highlights three dividend stocks that offer yields exceeding 7.0% APY, making them attractive compared to a Goldman Sachs CD yielding 5.0% [7] Group 2: Specific Dividend Stocks - **ClearBridge Energy Midstream Opportunity Fund Inc (NYSE: EMO)**: Offers a yield of 8.28%, with an annual dividend amount of approximately $414.00 for a $5,000 investment. The fund invests in public US companies, primarily Limited Partnerships and Master Limited Partnerships, without the liabilities associated with direct oil and gas operations [10][12] - **Broadstone Net Lease, Inc. (NYSE: BNL)**: Provides a yield of 7.40%, with an annual dividend amount of around $370.00 for a $5,000 investment. This Real Estate Investment Trust (REIT) manages a diversified portfolio of commercial properties, boasting a 99.4% occupancy rate and 99.2% rent collections as of the end of 2023 [14][15] - **First Interstate BancSystem, Inc. (NASDAQ: FIBK)**: Yields 6.75%, with an annual dividend amount of approximately $337.50 for a $5,000 investment. The bank has shown a 15% increase in earnings and a 25% increase in profits, indicating effective management and operational efficiencies [18][20]

Financial Data and Key Metrics Changes - The company generated AFFO of $71 million or $0.36 per share, representing a year-over-year increase of 5.9% in per-share results, primarily driven by lower interest and G&A expenses [18][19] - The per-share AFFO guidance has been raised to a range of $1.41 to $1.43 for 2024, reflecting improved clarity on estimated results [4][19] - The company ended the quarter with a strong financial position, maintaining a net debt leverage ratio of 4.8 times, down from five times at the end of 2023 [134] Business Line Data and Key Metrics Changes - The healthcare portfolio simplification strategy has successfully reduced healthcare exposure to approximately 13% of ABR as of March 31, 2024, following the sale of 37 healthcare assets for $251.7 million [5][12][123] - The overall portfolio WALT (Weighted Average Lease Term) improved to 10.6 years due to the recent dispositions [123] - Rent collections remained strong at 99.9% excluding Green Valley, with an occupancy rate of 99.2% as of March 31, 2024 [41] Market Data and Key Metrics Changes - The first quarter transaction market represented the lowest single-tenant net lease transaction volume in at least 15 years, indicating a significant misalignment between buyers and sellers [40][119] - The company has invested $202 million year-to-date, with an additional $122 million of investments currently under control, leveraging existing relationships for nearly $150 million of these investments through direct off-market deals [121][123] Company Strategy and Development Direction - The company aims to position itself as an alternative capital provider, focusing on sourcing off-market investments and unique capital allocation opportunities amid constraints on traditional commercial real estate lending [6][14] - The strategy includes a focus on build-to-suit transactions and maintaining a diversified investment approach, particularly in industrial and defensive retail sectors [14][130] - The company is committed to reducing healthcare exposure below 10% of ABR, which will allow for a more balanced portfolio similar to office assets [128] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current challenging environment, emphasizing the importance of operational expertise and creative deal sourcing [122][133] - The company remains vigilant regarding credit risks, particularly in sectors sensitive to discretionary consumer spending, while maintaining strong rent coverage ratios [41][80] - Management is cautiously optimistic about the future, particularly regarding the potential for new tenant leases and the overall health of the portfolio [85][86] Other Important Information - The company approved a $0.29 dividend per common share, marking a 1.8% increase from the previous quarter and a 3.6% increase over the same quarter last year [46] - The company is actively working on a significant retail investment in St. Louis, which is expected to enhance its portfolio [121][129] Q&A Session Summary Question: What is the bad debt assumption in the guidance? - The company started the year with a bad debt assumption of 75 basis points of cash revenue, maintaining this throughout the year, with 15 basis points for the quarter [84] Question: What is the status of Red Lobster in the portfolio? - The company has reduced exposure to Red Lobster from 25 assets to 18, currently representing 1.6% of ABR, and remains cautiously optimistic about its future despite anticipated bankruptcy [85][86] Question: What is the timeline for the remaining healthcare asset sales? - The company is confident it will be below 10% healthcare exposure by the end of the year, with 20% to 25% of sales expected to close in the second half of 2024 [87] Question: How does the company view the current investment environment? - The company is focused on finding direct deals and leveraging relationships, with a strong emphasis on maintaining discipline in capital allocation [137][138] Question: What is the strategy for build-to-suit opportunities? - The company is actively pursuing build-to-suit transactions, viewing them as a significant part of its growth strategy, with a robust pipeline expected to come online in the next 12 to 24 months [49][130]

Portfolio Overview - As of March 31, 2024, the company’s portfolio includes 759 properties, with an annualized base rent (ABR) of $374.1 million[95]. - The portfolio is approximately 99.2% leased, with an ABR weighted average remaining lease term of approximately 10.6 years[95]. - The total rentable square footage of the portfolio is approximately 37.6 million square feet[95]. - Total properties managed by the company amount to 759, with an Annual Base Rent (ABR) of $374,051,000, representing 100% of the total portfolio[101]. - The total square footage of the properties managed is 37,623,000 square feet[101]. - The total number of properties in the U.S. portfolio is 752, with an Annual Base Rent (ABR) of $365,931,000, representing 97.8% of the total portfolio[162]. - The total square footage of the U.S. portfolio is 37,193,000 square feet, with 98.9% of the total portfolio represented[162]. Tenant and Lease Information - Approximately 200 different commercial tenants occupy the properties, with no single tenant accounting for more than 4.3% of the ABR[95]. - Approximately 97.4% of leases have contractual rent escalations, with a minimum increase of 2.0%[95]. - The average annual minimum increase in base rent from lease escalations is 2.0%, with 79.3% of ABR subject to annual escalations[108]. - The top 20 tenants contribute 34% of the total ABR, with a combined ABR of $127,267,000[100]. - The top 10 tenants represent 20.6% of the total ABR, with a combined ABR of $77,212,000[100]. - The company has a diversified tenant base across 38 different industries, with "Other" industries contributing 26.7% of the total ABR[101]. Financial Performance - Net income for the three months ended March 31, 2024, was $68,177,000, an increase of $26,803,000 or 64.8% compared to $41,374,000 for the same period in 2023[121]. - Net earnings per diluted share increased to $0.35, up 66.7% from $0.21 in the prior year[121]. - Total lease revenues for the three months ended March 31, 2024, were $105,366,000, an increase of 0.3% compared to $104,999,000 for the three months ended December 31, 2023[110]. - Total lease revenues, net decreased by $13,626,000 or 11.5% to $105,366,000 for the three months ended March 31, 2024, primarily due to a decrease in lease termination income[121]. - Funds From Operations (FFO) for the three months ended March 31, 2024, was $73,135 thousand, an increase from $69,443 thousand in the previous quarter and a decrease from $81,177 thousand in the same period last year[147]. - Core Funds From Operations (Core FFO) for the three months ended March 31, 2024, was $74,072 thousand, compared to $75,275 thousand in the previous quarter and $74,473 thousand in the same period last year[147]. - Adjusted Funds From Operations (AFFO) for the three months ended March 31, 2024, was $70,873 thousand, slightly down from $71,278 thousand in the previous quarter and up from $67,485 thousand in the same period last year[147]. Impairment and Gains - The impairment charge for the first quarter of 2024 was $26,400,000, resulting from changes in the company's long-term hold strategy and included a $15,200,000 charge on a healthcare property[112]. - The company recognized a gain of $59,132,000 on the sale of 37 properties during the three months ended March 31, 2024, compared to a gain of $6,269,000 on the sale of five properties in the previous quarter[113]. - The company recognized a gain of $59,132,000 on the sale of real estate during the three months ended March 31, 2024, compared to a gain of $3,415,000 in the same period of 2023[119]. Debt and Liquidity - As of March 31, 2024, total debt outstanding was $1.9 billion, with a Net Debt to Annualized Adjusted EBITDAre ratio of 4.8x[127]. - The company had $926.2 million of available capacity under its Revolving Credit Facility as of March 31, 2024[129]. - The company aims to maintain a Leverage Ratio generally less than 6.0x to maximize risk-adjusted returns to stockholders[127]. - The company expects to meet long-term liquidity requirements primarily through borrowings under its Revolving Credit Facility, future debt and equity financings, and limited property sales[132]. - As of March 31, 2024, the total unsecured debt amounts to $1,815,578,000, with $900,000,000 in unsecured term loans and $850,000,000 in senior unsecured notes[134]. - Cash and cash equivalents totaled $222.8 million at March 31, 2024, compared to $19.3 million at March 31, 2023[143]. - The company had net cash used in financing activities of $(73,006,000) for the three months ended March 31, 2024, compared to $(144,739,000) in the same period of 2023[143]. Operating Expenses - Total operating expenses increased by $19,705,000 or 33.1% to $79,264,000 for the three months ended March 31, 2024, driven by higher impairment charges[123]. - Operating expenses billed to tenants decreased to $5,105,000, down 7.4% from $5,513,000 in the previous quarter[110]. - The company reported total operating expenses of $79,264,000 for the three months ended March 31, 2024, a decrease of 6.1% compared to $84,456,000 for the previous quarter[165]. - The company’s general and administrative expenses increased slightly by 0.5% to $9,432,000 compared to the previous quarter[165]. Interest Rate and Currency Risk - The company has 32 interest rate swaps outstanding with an aggregate notional amount of $973.8 million as of March 31, 2024, aimed at managing interest rate risk[142]. - All variable-rate debt was 100% fixed via interest rate swaps as of March 31, 2024, resulting in no effect on annual interest expense from a 1% change in interest rates[174]. - A 1% increase in market interest rates would decrease the fair value of fixed-rate debt by approximately $61.8 million as of March 31, 2024[174]. - A 10% increase or decrease in the exchange rate between the Canadian dollar and USD would result in a corresponding $7.4 million increase or decrease in unrealized foreign currency gain or loss[174].