Financial Data and Key Metrics - AFFO for Q2 2024 was $70 million or $0.36 per share, a 2.9% increase year-over-year, driven by lower interest expense and partially offset by lower lease revenues due to the healthcare simplification strategy [22] - The company maintained its AFFO guidance range of $1.41 to $1.43 per share and slightly adjusted investment, disposition, and cash G&A ranges [6][24] - Leverage stood at 5.1x net debt, up slightly from 4.8x at the end of Q1 2024, with pro forma net debt at 4.9x including the UNFI build-to-suit project [23] Business Line Data and Key Metrics - The company completed the sale of 38 healthcare assets for $262 million in Q2, with an additional 15 assets expected to close in October, bringing total healthcare dispositions to $342.5 million year-to-date at a weighted average cash cap rate of 7.9% [7] - The healthcare exposure is expected to reduce to approximately 11% of total ABR by the end of 2024 [8] - The company closed $247.8 million in investments during Q2, including $165.1 million in acquisitions at a 7.3% cap rate, $30.5 million in UNFI build-to-suit funding, and $52.2 million in transitional capital [17] Market Data and Key Metrics - The portfolio composition is shifting towards industrial and defensive retail and restaurant sectors, with 99.8% rent collections (excluding Green Valley) and 99.3% occupancy as of June 30, 2024 [12] - The company is seeing incremental pockets of credit risk in consumer-centric industries due to higher interest rates, but the diversified portfolio limits the impact of individual credit events [13] Company Strategy and Industry Competition - The company is focusing on build-to-suit and forward commitments, with $408.6 million in new investments under control and commitments to fund developments, including $307 million in specialized industrial and QSR build-to-suit assets [9][10] - The company believes its ability to source and structure investment opportunities creatively with developer partners allows it to achieve attractive yields without increasing risk [9] - The company is maintaining a selective approach to traditional acquisitions, with $69.3 million of investments under control and expected to close in Q3 2024 [11] Management Commentary on Operating Environment and Future Outlook - Management highlighted the successful execution of the healthcare simplification strategy and the redeployment of proceeds into attractive investment opportunities [5][7] - The company is optimistic about the long-term role of Broadstone Net Lease as a funding partner for development partners, even in a declining interest rate environment [11] - Management remains cautious about the macroeconomic backdrop, particularly for industries sensitive to discretionary consumer spending [19] Other Important Information - The company executed $460 million in forward-starting SOFR swaps during the quarter to reduce rate uncertainty through 2025, locking in a weighted average SOFR rate of 3.7% [23] - The Board of Directors maintained a $0.29 dividend per common share and OP unit, payable in October 2024 [24] Q&A Session Summary Question: Investment Mix Over the Next 12 Months - The company plans to balance development opportunities, regular way acquisitions, and other pipeline activities, with $307 million in active development deals and $400 million in prospects [25][26] Question: Capital Allocation and Equity Issuance - The company does not plan to issue equity immediately, as it has ample liquidity and leverage well below target levels, and will continue to fund growth through capital recycling and dispositions [27][28] Question: Development Opportunity Cash Yields - Development opportunities are targeting upfront cash yields in the mid-7s, with straight-line yields reaching mid-8s to low-9s, which are attractive compared to regular way transactions [29] Question: Development Funding Commitments - The $307 million in build-to-suit commitments includes seven opportunities ranging from $2 million to $170 million, with rent commencement dates phased between Q1 2025 and Q2 2026 [32] Question: Healthcare Simplification Strategy Progress - The remaining healthcare assets will be sold through a traditional asset management approach, with some requiring lease extensions or tenant improvements, extending the timeline into 2025 [33] Question: Cap Rate Trends - Cap rates have plateaued, with industrial assets seeing increased competition and cap rates trending into the high-6s, while the company remains disciplined in targeting mid-7s for regular way deals [35][36] Question: Acquisition Pipeline Mix - The $69.3 million acquisition pipeline includes a large retail site and a large industrial acquisition [40] Question: Build-to-Suit Land Acquisition Strategy - The company ensures land is under control by developers or tenants before committing to build-to-suit projects, providing certainty for development pipelines [42]

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]