Broadstone(BNL) - 2025 Q2 - Quarterly Results

About the Data The report data is as of and for the three months ended June 30, 2025, unless otherwise specified, and should be read in conjunction with company filings - The report data is as of and for the three months ended June 30, 2025, unless otherwise specified. It should be read in conjunction with the company's 10-K and 10-Q filings[9] - The document contains forward-looking statements subject to various risks and uncertainties, including economic conditions, inflation, interest rates, and tenant financial health. Readers are cautioned not to place undue reliance on these statements[10][11] Company Overview Broadstone Net Lease, Inc. (NYSE: BNL) is an industrial-focused, diversified net lease REIT investing in single-tenant commercial properties with creditworthy tenants and long-term net leases - Broadstone Net Lease, Inc. (NYSE: BNL) is an industrial-focused, diversified net lease REIT. It primarily invests in single-tenant commercial real estate properties, focusing on industrial and retail sectors with creditworthy tenants and long-term net leases[13] - The company's strategy targets properties that are integral to tenants' businesses, allowing tenants to allocate capital to core operations instead of real estate ownership[13] - Key leadership includes John D. Moragne as Chief Executive Officer and Laurie A. Hawkes as Chairman of the Board[14] Financial Performance The company's financial performance in Q2 2025 showed revenue growth and increased FFO/AFFO per share, despite a decline in net income due to impairment provisions Quarterly Financial Summary In Q2 2025, Broadstone Net Lease reported revenues of $113.0 million and net income of $19.8 million, with Core FFO per share at $0.39 and AFFO per share at $0.38 Q2 2025 Key Financial Metrics (in thousands, except per share data) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $112,986 | $108,690 | $105,907 | +6.7% | | Net Income | $19,830 | $17,493 | $35,937 | -44.8% | | FFO per share, diluted | $0.37 | $0.37 | $0.37 | No Change | | Core FFO per share, diluted | $0.39 | $0.38 | $0.37 | +5.4% | | AFFO per share, diluted | $0.38 | $0.36 | $0.36 | +5.6% | | Distributions declared per diluted share | $0.290 | $0.290 | $0.290 | No Change | - Total assets increased to $5.33 billion as of June 30, 2025, up from $5.26 billion a year prior[16] - Net cash provided by operating activities was $79.3 million for the quarter, an increase from $74.2 million in Q2 2024[16] Balance Sheet As of June 30, 2025, the company's balance sheet shows total assets of $5.33 billion, supported by $3.04 billion in total equity, with total liabilities at $2.29 billion Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Investment in rental property, net | $4,454,231 | $4,340,363 | | Cash and cash equivalents | $20,784 | $14,845 | | Total assets | $5,326,679 | $5,216,417 | | Liabilities & Equity | | | | Total liabilities | $2,290,858 | $2,074,993 | | Total equity | $3,035,821 | $3,141,424 | - The primary liability components include $994.0 million in unsecured term loans and $846.4 million in senior unsecured notes, net of costs[17] Income Statement Summary For the three months ended June 30, 2025, BNL generated $113.0 million in lease revenues, with net income of $20.2 million and a $11.9 million provision for impairment Q2 2025 Income Statement (in thousands) | Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Lease revenues, net | $112,986 | $105,907 | | Total operating expenses | $69,088 | $56,463 | | Provision for impairment | $11,939 | $3,852 | | Interest expense | $21,112 | $17,757 | | Net income attributable to BNL | $20,160 | $35,329 | | Diluted EPS | $0.10 | $0.19 | - Depreciation and amortization expense was $42.6 million in Q2 2025, an increase from $37.4 million in Q2 2024[18] Funds From Operations (FFO), Core FFO, and Adjusted Funds From Operations (AFFO) The company reported strong non-GAAP performance metrics for Q2 2025, with FFO at $73.7 million, Core FFO at $77.2 million, and AFFO at $74.3 million, reflecting adjustments for depreciation and foreign exchange losses Reconciliation of Net Income to AFFO for Q2 2025 (in thousands) | Metric | Amount | | :--- | :--- | | Net income | $19,830 | | Real property depreciation and amortization | $42,492 | | Provision for impairment | $11,939 | | FFO | $73,695 | | Other (income) expenses (incl. FX loss) | $3,445 | | Core FFO | $77,150 | | Straight-line rent adjustment | ($5,586) | | Stock-based compensation | $2,471 | | AFFO | $74,308 | - A significant adjustment in the quarter was a $3.4 million unrealized and realized foreign exchange loss, primarily from Canadian dollar denominated revolver borrowings[20] Lease Revenues Detail Total lease revenues of $113.0 million in Q2 2025 were primarily composed of $101.0 million in contractual rental amounts, with a $5.8 million straight-line rent adjustment Q2 2025 Lease Revenue Components (in thousands) | Component | Amount | | :--- | :--- | | Contractual rental amounts billed (operating leases) | $101,014 | | Straight-line rent adjustment | $5,753 | | Operating expenses billed to tenants | $4,795 | | Other income/adjustments | $1,424 | | Total lease revenues, net | $112,986 | Capitalization and Debt Management The company maintains a conservative capital structure with predominantly fixed-rate, unsecured debt, and a well-staggered maturity profile Capital Structure As of June 30, 2025, BNL's total capitalization was approximately $5.3 billion, with a conservative structure of 59.9% equity and 40.1% debt Capitalization as of June 30, 2025 (in thousands) | Component | Amount | % of Total | | :--- | :--- | :--- | | Implied Equity Market Capitalization | $3,170,389 | 59.9% | | Total Debt | $2,123,612 | 40.1% | | Total Capitalization | $5,294,001 | 100.0% | - The company's debt profile is heavily weighted towards fixed-rate (97.7%) and unsecured (96.4%) obligations, minimizing exposure to interest rate volatility and maintaining a large unencumbered asset pool[25] Equity Rollforward During the first half of 2025, the total number of diluted shares increased slightly from 197.3 million to 197.5 million, primarily due to restricted stock grants Change in Total Diluted Shares (in thousands) | Description | Total Diluted Shares | | :--- | :--- | | Balance, January 1, 2025 | 197,272 | | Net activity in H1 2025 | +260 | | Balance, June 30, 2025 | 197,532 | Debt Outstanding As of June 30, 2025, total debt outstanding was $2.12 billion, comprising a revolving credit facility, unsecured term loans, senior unsecured notes, and mortgages Debt Composition as of June 30, 2025 (in thousands) | Debt Type | Amount | | :--- | :--- | | Unsecured revolving credit facility | $197,880 | | Unsecured term loans | $1,000,000 | | Senior unsecured notes | $850,000 | | Mortgages | $75,732 | | Total | $2,123,612 | - The company refinanced its 2026 Unsecured Term Loan on February 28, 2025, using funds from the newly established 2028 Unsecured Term Loan[29] Interest Rate Swaps As of June 30, 2025, BNL held interest rate swaps with a total notional amount of $1.35 billion to manage interest rate risk, with a weighted average maturity of 3.6 years Interest Rate Swap Summary as of June 30, 2025 | Swap Type | Notional Amount (thousands) | Fair Value (thousands) | | :--- | :--- | :--- | | Effective Swaps | $1,148,080 | $19,069 | | Forward Starting Swaps | $205,000 | ($3,204) | | Total Swaps | $1,353,080 | $15,865 | - The weighted average maturity for effective swaps is 3.3 years, and for the combined effective and forward-starting swaps, it is 3.6 years[31] - The weighted average interest rate on all outstanding borrowings was 3.89%, inclusive of a weighted average fixed rate on effective interest rate swaps of 2.62%[32] EBITDA, EBITDAre, and Other Non-GAAP Operating Measures For Q2 2025, the company reported EBITDAre of $95.1 million and Adjusted EBITDAre of $98.2 million, with Annualized Adjusted Cash NOI reaching $402.0 million Q2 2025 Non-GAAP Operating Measures (in thousands) | Metric | Q2 2025 | Annualized | | :--- | :--- | :--- | | EBITDAre | $95,089 | $380,356 | | Adjusted EBITDAre | $98,242 | $392,968 | | Pro Forma Adjusted EBITDAre | $99,871 | $399,484 | | Adjusted Net Operating Income (NOI) | $107,766 | $431,064 | | Adjusted Cash NOI | $100,504 | $402,016 | - Adjustments to EBITDAre to arrive at Adjusted EBITDAre include normalizing for investment and disposition activity, and excluding items like foreign exchange losses and other non-recurring expenses[34] Net Debt Metrics & Covenants As of June 30, 2025, the company's Net Debt was $2.1 billion, with Net Debt to Annualized Adjusted EBITDAre at 5.3x, and compliance with all financial covenants Leverage Ratios as of June 30, 2025 | Ratio | Value | | :--- | :--- | | Net Debt to Annualized EBITDAre | 5.5x | | Net Debt to Annualized Adjusted EBITDAre | 5.3x | | Pro Forma Net Debt to Annualized Adjusted EBITDAre | 5.2x | - The company is in compliance with its key financial covenants, such as the leverage ratio (0.34 vs. required ≤ 0.60) and fixed charge coverage ratio (4.23 vs. required ≥ 1.50)[39] Debt & Swap Maturities The company maintains a well-staggered debt maturity profile with a weighted average maturity of 4.2 years, and no significant maturities until 2027 - The weighted average debt maturity is 4.2 years, assuming the exercise of extension options on its revolving credit facility and 2028 term loan[41][42] - The company has a manageable near-term maturity schedule, with only $19.0 million due in 2025 and $16.8 million in 2026[30] - The weighted average maturity of effective swaps is 3.3 years, and when including forward-starting swaps, it extends to 3.6 years[44] Investment and Disposition Activity The company actively manages its portfolio through strategic investments in acquisitions and build-to-suit developments, alongside dispositions of non-core assets Investment Activity Year-to-date 2025, BNL invested $229.1 million across acquisitions, build-to-suit developments, and transitional capital, primarily in the industrial sector YTD 2025 Investment Summary (dollars in thousands) | Investment Type | Amount | Properties/Transactions | | :--- | :--- | :--- | | Acquisitions | $113,726 | 7 Properties | | Build-to-suit developments | $89,789 | - | | Transitional capital | $22,781 | 2 Transactions | | Total investments | $229,131 | | - Acquisitions year-to-date had a weighted average initial cash capitalization rate of 7.1% and a weighted average lease term of 12.2 years[46] Built-to-Suit Development Projects As of June 30, 2025, the company has an in-process build-to-suit development pipeline with an estimated total project investment of $329.6 million In-Process Development Pipeline Summary (dollars in thousands) | Metric | Value | | :--- | :--- | | Number of Projects | 6 | | Total Rentable Square Feet | 1,959 | | Estimated Total Project Investment | $329,558 | | Cumulative Investment to Date | $90,719 | | Remaining Investment | $238,838 | | Weighted Average Est. Cash Cap Rate | 7.5% | Transitional Capital In Q2 2025, the company made two preferred equity transitional capital investments totaling $75.0 million in retail and industrial properties - Invested $52.7 million in preferred equity for a St. Louis, MO retail center with a 2-year term and an 8.0% stabilized cash capitalization rate[52] - Invested $22.3 million in preferred equity for an industrial park in Olyphant, PA, designated for build-to-suit development, with a 3-year term and a 7.8% stabilized cash capitalization rate[52][53] Dispositions Year-to-date 2025, BNL disposed of 11 properties for a total price of $20.5 million, with a weighted average cash capitalization rate of 9.4% YTD 2025 Disposition Summary (dollars in thousands) | Metric | Value | | :--- | :--- | | Number of Properties | 11 | | Disposition Price | $20,483 | | Net Book Value | $26,430 | | Weighted average cash cap rate | 9.4% | Portfolio Overview and Diversification The company's portfolio is highly diversified by property type, tenant, industry, and geography, maintaining high occupancy and a long weighted average lease term Portfolio at a Glance: Key Metrics As of June 30, 2025, the portfolio consisted of 766 properties with 99.1% occupancy and a weighted average remaining lease term of 9.7 years Key Portfolio Metrics as of June 30, 2025 | Metric | Value | | :--- | :--- | | Properties | 766 | | Occupancy (based on SF) | 99.1% | | Rent Collection | 99.6% | | Weighted average remaining lease term | 9.7 years | | Top 10 tenant concentration | 21.8% | | Investment grade (tenant/guarantor) | 20.7% | Diversification: Tenants and Brands The portfolio demonstrates strong tenant diversification with the top 10 tenants accounting for 21.8% of total ABR, and the largest tenant representing 4.0% - The top 10 tenants represent 21.8% of total Annualized Base Rent (ABR), and the top 20 tenants represent 35.2%[62] - The top three tenants by ABR are Roskam Baking Company (4.0%), United Natural Foods, Inc. (3.6%), and AHF, LLC (2.4%)[62] Diversification: Property Type The portfolio is heavily weighted towards industrial properties, which constitute 60.7% of ABR and 81.5% of total square footage, reflecting a strategic focus Portfolio Breakdown by Property Type (% of ABR) | Property Type | % of ABR | | :--- | :--- | | Industrial | 60.7% | | Retail | 31.0% | | Other | 8.3% | - Within the industrial segment, the largest sub-types are Distribution & Warehouse (19.1% of ABR) and Manufacturing (17.6% of ABR)[73] Key Statistics by Property Type The portfolio's allocation to industrial properties increased from 56.0% to 60.7% of ABR year-over-year, aligning with the company's strategic focus on industrial assets Change in ABR % by Property Type (YoY) | Property Type | Q2 2025 ABR % | Q2 2024 ABR % | | :--- | :--- | :--- | | Industrial | 60.7% | 56.0% | | Retail | 31.0% | 31.8% | | Other | 8.3% | 12.2% | - Industrial properties have a weighted average lease term of 10.5 years and an average annual rent escalation of 2.1%[74] Diversification: Tenant Industry The portfolio is diversified across 56 tenant industries, with the top three being Restaurants (13.6%), Packaged Foods & Meats (12.7%), and Food Distributors (6.8%) Top 5 Tenant Industries by ABR % | Tenant Industry | % of Total ABR | | :--- | :--- | | Restaurants | 13.6% | | Packaged Foods & Meats | 12.7% | | Food Distributors | 6.8% | | Healthcare Facilities | 5.3% | | Auto Parts & Equipment | 5.2% | Diversification: Geography The company's portfolio is geographically diversified across 44 U.S. states and 4 Canadian provinces, with Texas (9.5%) as the largest state exposure - The portfolio is primarily located in the U.S. (98.0% of ABR), with a minor presence in Canada (2.0% of ABR)[77] Top 5 State Exposures by ABR % | State | % of Total ABR | | :--- | :--- | | Texas (TX) | 9.5% | | Michigan (MI) | 9.1% | | Florida (FL) | 6.6% | | Illinois (IL) | 5.7% | | California (CA) | 5.5% | Lease Expirations The portfolio has a well-laddered lease expiration schedule with minimal near-term risk, with only 0.8% of ABR expiring in 2025 and 3.0% in 2026 Near-Term Lease Expirations (% of Total ABR) | Expiration Year | ABR as a % of Total Portfolio | | :--- | :--- | | 2025 | 0.8% | | 2026 | 3.0% | | 2027 | 6.5% | | 2028 | 4.9% | | 2029 | 4.6% | - A significant portion of the portfolio's ABR (68.9%) expires in 2030 or later[81] Portfolio Occupancy The portfolio maintains a very high occupancy rate of 99.1% by rentable square footage as of June 30, 2025, with stable vacant properties - Portfolio occupancy by rentable square footage was 99.1% as of June 30, 2025[82][59] - The number of vacant properties remained at 2 at the end of Q2 2025, unchanged from the beginning of the year, as 7 lease expirations were balanced by 4 leasing activities and 3 vacant property dispositions[84] Definitions and Explanations This section provides detailed definitions for non-GAAP financial measures and key operational metrics used throughout the report - This section provides detailed definitions for non-GAAP financial measures used throughout the report, including FFO, Core FFO, AFFO, EBITDAre, Adjusted EBITDAre, and Adjusted NOI[86][90][91] - It also clarifies the calculation methods for key operational metrics such as Annualized Base Rent (ABR), Cash Capitalization Rate, Occupancy, and various terms related to development properties[88][89][93][96]