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]

Financial Data and Key Metrics Changes - The company generated AFFO of $62.8 million or $0.35 per share, representing approximately 6.1% growth over the same period last year [27] - AFFO per share was flat quarter-over-quarter compared to Q1 2022, largely driven by revenue from late Q1 acquisitions offset by accelerated equity raise [27][36] - The company ended the quarter with leverage of 5.3 times on a net debt to annualized adjusted EBITDAre basis, maintaining a conservative leverage profile of less than six times [31][34] Business Line Data and Key Metrics Changes - The company invested $182 million in 15 properties during Q2 at a weighted average initial cash cap rate of 6.4% [15] - Acquisitions during the quarter were heavily concentrated in industrial opportunities at 82%, with retail and healthcare transactions at 11% and 7%, respectively [17] - The portfolio comprised 764 properties with 213 tenants across 57 industries, achieving 100% base rent collection and 99.8% leased status as of quarter end [9][11] Market Data and Key Metrics Changes - The company has underwritten over $4 billion in opportunities through Q2, indicating a significant increase in transaction volume [46] - The acquisition environment has seen a shift with levered buyers exiting the market, creating cap rate relief and making certain asset classes more attractive [48] - Bid ranges across sophisticated parties have widened by 100 to 150 basis points, allowing for more favorable acquisition opportunities [49] Company Strategy and Development Direction - The diversified net lease strategy positions the company defensively in the current economic environment, allowing for consistent and predictable results [6][8] - The company aims to maintain a strong balance sheet while being selective in acquisitions, focusing on industrial and non-investment-grade assets [25][40] - The company is confident in achieving its full-year acquisition guidance range of $700 million to $800 million, with approximately $544 million of acquisitions either closed or under control year-to-date [24][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic uncertainties and rising rates, emphasizing the importance of a diversified portfolio [6][9] - The company is focused on maintaining a strong balance sheet and is prepared to execute additional growth opportunities in the second half of the year [36][40] - Management highlighted the importance of being selective in acquisitions while also being able to pivot quickly in response to market changes [12][25] Other Important Information - The company declared a $0.27 dividend per common share, payable on or before October 14 [38] - The company is evaluating alternative equity raise methods and intends to opportunistically utilize its ATM program to manage its leverage profile [32][30] Q&A Session Summary Question: Can you describe the acquisition environment and pricing changes? - Management noted that transaction volume remains robust, with a significant increase in opportunities underwritten compared to last year, and highlighted the impact of market dynamics on cap rates [46][48] Question: How do you balance raising equity for acquisitions versus additional assets? - Management indicated a preference for funding acquisitions through equity rather than disposing of lower-performing assets, emphasizing the long-term value of their portfolio [60] Question: How is the change in cost of capital impacting tenants and underwriting? - Management stated that they maintain a downside-oriented approach to tenant financial health, with a heightened focus on stress testing and refinancing risks [63][67] Question: Are you winning transactions where you are not the top bid due to your reputation? - Management confirmed that their strong track record and ability to close without financing contingencies have allowed them to win deals even when not the highest bidder [69] Question: How do you view the current environment for your watch list? - Management reported no significant changes to the watch list but continues to monitor tenants, particularly in consumer discretionary sectors [80] Question: What is the opportunity set in Canada? - Management views Canada as complementary to their U.S. portfolio and continues to explore opportunities, particularly in industrial and retail sectors [85][86] Question: Where are you seeing the most cap rate widening? - Management identified non-investment-grade industrial and retail spaces as areas with the most cap rate widening, while healthcare has been quieter this year [88]

Investment and Portfolio Overview - The company invested $392.4 million in 42 properties during the six months ended June 30, 2022, at a weighted average initial cash capitalization rate of 6.1%[102]. - As of June 30, 2022, the portfolio comprised 764 properties, with 757 located in 44 U.S. states and 7 in four Canadian provinces[102]. - The portfolio was approximately 99.8% leased with an ABR weighted average remaining lease term of approximately 10.6 years[102]. - The company has a diversified portfolio of approximately 34.4 million rentable square feet of operational space[102]. - The acquisitions included properties in industrial (47.2%), restaurant (25.4%), retail (23.8%), and healthcare (3.6%) asset classes[102]. - The company’s properties are diversified across 57 different industries, with no single tenant accounting for more than 2.0% of the ABR[102]. Lease and Rental Information - Approximately 97.3% of leases have contractual rent escalations, with an ABR weighted average minimum increase of 2.0%[102]. - The portfolio's annualized base rent (ABR) was $360.0 million as of June 30, 2022[104]. - Total portfolio consists of 764 properties with an aggregate ABR of $360,019,000, representing 100% of the total portfolio[107]. - The company has a weighted average remaining lease term of approximately 10.6 years, with 67.4% of ABR derived from leases expiring in 2030 and beyond[118]. - The company’s properties are predominantly leased under long-term net leases, with 99.8% of the portfolio subject to a lease as of June 30, 2022[117]. Tenant and Revenue Concentration - Total revenue from the top 10 tenants reached $59.453 million, accounting for 16.5% of the total portfolio[109]. - The top 20 tenants generated a total of $105.742 million, representing 29.4% of the total portfolio[109]. - The top 10 brands generated a total ABR of $58.644 million, representing 16.2% of the total portfolio[109]. - The top 20 brands produced an ABR of $104.533 million, accounting for 29.0% of the total portfolio[109]. Financial Performance - Net income for the six months ended June 30, 2022, was $63,993,000, a 36.8% increase from $46,780,000 in the same period of 2021[150]. - Net earnings per diluted share increased to $0.36, up 20.0% from $0.30 in the prior year[150]. - Lease revenues for the six months ended June 30, 2022, totaled $191,854,000, reflecting a 14.6% increase from $167,457,000 in the same period of 2021[140]. - The increase in lease revenues was primarily driven by growth in the real estate portfolio, with contractual rental amounts billed for operating leases rising to $171,901,000, a 15.9% increase from $148,256,000[140]. - Funds From Operations (FFO) for the six months ended June 30, 2022, was $129.84 million, up from $102.11 million for the same period in 2021[173]. Debt and Liquidity - The total outstanding indebtedness of the company is $1.9 billion, with approximately $200.5 million (10.8%) being variable rate debt[135]. - As of June 30, 2022, total debt outstanding was $1.9 billion, with a Net Debt to Annualized Adjusted EBITDAre ratio of 5.3x, below the target of 6.0x[152]. - The company has a $1.0 billion unsecured revolving credit facility established on January 28, 2022[101]. - The company has $679.3 million of available capacity under its Revolving Credit Facility, which is expected to meet long-term liquidity needs[155]. - The company has contractual obligations totaling approximately $2.22 billion as of June 30, 2022, including interest expenses and mortgages[164]. Operating Expenses and Gains - Operating expenses totaled $50,875,000 for the three months ended June 30, 2022, reflecting a 5.6% increase from $48,162,000 in the previous quarter[130]. - The company recognized a gain of $4.1 million on the sale of three properties during the three months ended June 30, 2022, compared to a gain of $1.2 million on the sale of one property in the previous quarter[136]. - The company recognized a gain of $5.3 million on the sale of four properties during the six months ended June 30, 2022, compared to a gain of $8.6 million on the sale of 19 properties in the same period of 2021[147]. Cash Flow and Investments - Net cash provided by operating activities increased to $117.96 million for the six months ended June 30, 2022, compared to $99.02 million for the same period in 2021, primarily due to growth in the real estate portfolio[169]. - Net cash used in investing activities rose to $(379.97) million for the six months ended June 30, 2022, up from $(242.71) million in the prior year, driven by increased acquisition volume[169]. - Net cash provided by financing activities increased to $263.22 million for the six months ended June 30, 2022, compared to $119.98 million in 2021, reflecting higher borrowings on the unsecured revolving credit facility[169]. Interest Rate Management - The company has entered into interest rate swaps to manage interest rate risk, with $717.7 million of variable-rate debt swapped to fixed rate[182]. - A 1% increase in market interest rates would decrease the fair value of fixed-rate debt by approximately $82.4 million as of June 30, 2022[182]. - As of June 30, 2022, the company had 28 interest rate swaps with an aggregate notional amount of $717.7 million to manage interest rate risk[167].

Financial Data and Key Metrics Changes - The company reported an AFFO of $60.4 million or $0.35 per share, representing a growth of approximately 13% year-over-year and 3% quarter-over-quarter [22] - The company ended the quarter with a leverage of 5.1x net debt to annualized adjusted EBITDAre, consistent with the previous quarter [24] - The company reiterated its AFFO per share guidance for 2022 to be between $1.38 and $1.42, implying a growth rate of 6.9% at the midpoint compared to 2021 [26] Business Line Data and Key Metrics Changes - During Q1, the company invested $210 million in 27 properties with a weighted average initial cash cap rate of 5.7% and a GAAP cap rate of 6.4% [11] - The acquisitions were primarily focused on restaurants (50%) and retail (37%), with industrial properties making up the remaining 13% [12] - The company increased its restaurant exposure from 13% to 15% of total ABR through two separate transactions [15] Market Data and Key Metrics Changes - The company successfully expanded its footprint into Canada with its first targeted acquisition, which included six high-quality retail locations [16] - The Canadian assets now represent 2.4% of total ADR, and the company plans to evaluate additional opportunities in Canada [17] Company Strategy and Development Direction - The company emphasized its diversified strategy, which allows it to adapt quickly to changes in the market environment and maintain a consistent flow of acquisition opportunities [9] - The management highlighted the importance of maintaining a selective approach to acquisitions while still achieving meaningful growth in earnings [10] - The company aims to continue its prudent capital allocation and maintain a conservative leverage profile of less than 6x [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current competitive transaction environment, despite challenges such as elevated inflation and rising interest rates [8] - The company is focused on carrying the momentum from Q1 into the remainder of 2022, believing that its diversified strategy will yield exceptional results [29] Other Important Information - The company declared a $0.27 dividend per common share, representing an increase of approximately 2% over the previous rate [27] - The company has a robust pipeline with over $164 million of opportunities under control, defined as executed contracts or letters of intent [19] Q&A Session Summary Question: What were some of the key decisions regarding the Canadian expansion? - Management highlighted the exceptional nature of the portfolio and the opportunity for scaled acquisitions as key factors in their comfort with underwriting assets in Canada [31][32] Question: Is there a difference in cap rates between the U.S. and Canada? - Management indicated that cap rates are very similar across the border, particularly in large urban markets [37] Question: Can you elaborate on the portfolio's tenant health and any potential headwinds? - Management reported strong rent collection and a stable internal watch list, focusing on potential risks related to inflation and labor pressures [40][41] Question: What are the thoughts on the capital release strategy for this year? - Management stated that there is currently no need for a debt offering this year, but they are well-positioned to pursue growth objectives without immediate market access [46] Question: Can you provide details on the disposition strategy? - Management mentioned that the disposition strategy includes portfolio pruning and the sale of a casual dining site, with plans to sell an office asset later in the year [48][49]

Investment and Portfolio Overview - The company invested $210.0 million in 27 properties during the three months ended March 31, 2022, at a weighted average initial cash capitalization rate of 5.7%[79] - As of March 31, 2022, the portfolio comprised 752 properties, with an annualized base rent (ABR) of $347.7 million[81] - The portfolio was approximately 99.8% leased with an ABR weighted average remaining lease term of approximately 10.5 years[79] - Approximately 97.3% of leases have contractual rent escalations, with an ABR weighted average minimum increase of 2.0%[79] - The company’s properties are diversified across 56 different industries, with no single tenant accounting for more than 2.1% of the ABR[79] - The industrial property type represents 46% of the total portfolio ABR, with manufacturing and distribution & warehouse making up 14.6% and 14.1% respectively[82] - Healthcare properties account for 19.1% of the total portfolio ABR, with clinical and healthcare services comprising 7.4% and 3.6% respectively[84] - Restaurant properties make up 15.0% of the total portfolio ABR, with casual dining and quick service restaurants at 7.8% and 7.2% respectively[84] - The portfolio includes properties located in 43 U.S. states and four Canadian provinces, with no single geographic concentration exceeding 10.5% of the ABR[79] Tenant and Revenue Information - Total top 10 tenants contributed $59,529,000 in annual base rent (ABR), representing 17.1% of the total portfolio[86] - The top 20 tenants accounted for $104,215,000 in ABR, which is 30.0% of the total portfolio[86] - The largest tenant, Jack's Family Restaurants LP, has 43 properties with an ABR of $7,166,000, making up 2.1% of the total portfolio[86] - Dollar General Corporation operates 55 properties with an ABR of $5,391,000, representing 1.6% of the total portfolio[86] - The total square footage for the top 10 tenants is 4,215,000 square feet, which is 12.9% of the total portfolio[86] - The top 20 brands have a total ABR of $103,446,000, accounting for 29.8% of the total portfolio[86] - Krispy Kreme Doughnut Corporation has 27 properties with an ABR of $5,034,000, representing 1.4% of the total portfolio[86] - The largest property type by ABR is Quick Service Restaurants, contributing $12,200,000 across multiple tenants[86] - The total number of properties for the top 20 tenants is 327, with a total square footage of 7,815,000 square feet[86] - The ABR for the top 10 brands is $58,545,000, which is 16.8% of the total portfolio[86] Financial Performance - Total lease revenues for the three months ended March 31, 2022, were $93,841,000, an increase of 1.3% compared to $92,642,000 for the three months ended December 31, 2021[99] - The company recognized a gain of $1,196,000 on the sale of real estate during the three months ended March 31, 2022, compared to $3,732,000 for the three months ended December 31, 2021, representing a decrease of 68.0%[104] - Net income for the three months ended March 31, 2022, was $28,441,000, a decrease of 11.7% from $32,226,000 for the three months ended December 31, 2021[106] - The company reported a net earnings per diluted share of $0.16 for the three months ended March 31, 2022, down 15.8% from $0.19 for the three months ended December 31, 2021[106] - Operating expenses for the three months ended March 31, 2022, totaled $48,162,000, an increase of 3.2% from $46,649,000 for the three months ended December 31, 2021[101] - Depreciation and amortization expenses increased to $34,290,000 for the three months ended March 31, 2022, up 2.4% from $33,476,000 for the three months ended December 31, 2021[101] - The company experienced a $1,126,000 increase in other expenses primarily due to a $1,100,000 unrealized foreign exchange loss on CAD borrowings[105] - The company anticipates significant lease expirations in 2030, with 100 properties and an ABR of $53,209,000, accounting for 15.3% of the total portfolio[97] - The company reported a decrease in variable rental amounts earned, totaling $(1,326,000) for the three months ended March 31, 2022, a 100% decline compared to the previous period[99] - Lease revenues increased to $93.841 million for the three months ended March 31, 2022, up 13.5% from $82.698 million in the same period of 2021[108] - The net write-offs of accrued rental income increased by over 100%, from $(442,000) in 2021 to $(1.326 million) in 2022[108] - Net income rose to $28.441 million, an 18.7% increase from $23.960 million in the prior year[118] - The company reported a decrease in general and administrative expenses by 17.0%, from $10.633 million in 2021 to $8.828 million in 2022[108] Debt and Liquidity - Total debt outstanding as of March 31, 2022, was $1.8 billion, with a Net Debt to Annualized Adjusted EBITDAre ratio of 5.14x[121] - The company has a total of 745 properties in the U.S., which accounts for 97.6% of the total portfolio[91] - The company has a remaining capacity of $733.9 million on its Revolving Credit Facility as of March 31, 2022[128] - The company aims to maintain a Net Debt to Annualized Adjusted EBITDAre ratio below 6.0x on a sustained basis through the use of follow-on equity offerings and the ATM Program[126] - Cash and cash equivalents totaled $65.5 million as of March 31, 2022, an increase from $18.4 million at the same time in 2021[137] - The company had approximately $51.9 million of expected obligations due throughout the remainder of 2022, primarily consisting of $48.4 million of interest expense[123] - The company has contractual obligations totaling approximately $2,187.2 million as of March 31, 2022, including interest expenses and tenant improvement allowances[132] - Borrowings under the Revolving Credit Facility and other variable-rate debt totaled $863.6 million as of March 31, 2022, with $720.1 million swapped to a fixed rate[152] Cash Flow and Operations - Net cash provided by operating activities for the three months ended March 31, 2022, was $59,104, compared to $51,780 for the same period in 2021, representing a 14.5% increase[139] - Net cash used in investing activities was $(207,678) for the three months ended March 31, 2022, compared to $(67,661) for the same period in 2021, indicating a significant increase in investment outflows[139] - Net cash provided by financing activities was $186,352 for the three months ended March 31, 2022, compared to $(76,497) for the same period in 2021, showing a substantial improvement in financing cash flows[139] - Funds from Operations (FFO) for the three months ended March 31, 2022, was $61,504, compared to $51,929 for the same period in 2021, reflecting a 18.4% increase[141] - Adjusted EBITDAre for the three months ended March 31, 2022, was $84,440, compared to $81,453 for the same period in 2021, indicating a 3.6% growth[144] - Annualized Adjusted EBITDAre for March 31, 2022, was $337,759, compared to $325,812 for December 31, 2021, showing a 3.7% increase[144] Interest Rate and Currency Risk - The company has fixed-rate debt with a carrying value of approximately $1.7 billion and a fair value of $1.6 billion as of March 31, 2022[150] - A 1% increase in market interest rates would result in a decrease in the fair value of the company's fixed-rate debt by approximately $90.7 million[150] - The company expects a 1% increase or decrease in interest rates to correspond to a $1.4 million increase or decrease in annual interest expense[152] - The company is exposed to foreign currency exchange rate risk due to investments in Canada, funded partially through Canadian dollar borrowings[153] - Unrealized foreign currency gains and losses from Canadian dollar borrowings do not impact cash flows from operations until settled[153] - The company has not engaged in transactions in derivative financial instruments or derivative commodity instruments, except for interest rate swaps[152] - The company believes the foreign currency exchange rate risk on remaining cash flows is immaterial[153] - The company manages interest rate risk by entering into long-term fixed-rate debt and interest rate swaps[150] Accounting Policies and Estimates - There have been no significant changes to critical accounting policies and estimates during the three months ended March 31, 2022[148]

Broadstone Net Lease, Inc. (NYSE:BNL) Q4 2021 Earnings Conference Call February 23, 2022 1:00 PM ET Company Participants Mike Caruso - Senior Vice President of Corporate Finance and Investor Relations Chris Czarnecki - Chief Executive Officer Ryan Albano - Chief Financial Officer John Moragne - Chief Operating Officer Conference Call Participants Caitlin Burrows - Goldman Sachs Ki Bin Kim - Truist Ronald Kamdem - Morgan Stanley Operator Hello, and welcome to the Broadstone Net Lease Fourth Quarter 2021 Earn ...