Earnings call transcript Q2 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Hello. And welcome to Broadstone Net Lease’s Second Quarter 2023 Earnings Conference Call. My name is Jordan, and I will be your operator today. Please note that today’s call is being recorded.

I will now turn the call over to Mike Caruso, Senior Vice President of Corporate Strategy and Investor Relations at Broadstone. ahead. go Please

Mike Caruso

CEO, And will for Operator. call. everyone joining portion Kevin call. remarks for today’s Ryan this and Thank and of available Albano; Net thank for Lease’s today CFO, from prepared hear Broadstone you All earnings Moragne; second us President call, COO, three you, Fennell. will you John be quarter On Q&A XXXX the

subject forward-looking to remind to and Before we of statements, that following cause which presentation would factors. are differ to could begin, that everyone contains to materially risks the uncertainties like results a I actual due variety

December We and XXXX, detailed more of to refer this place including forward-looking for not the caution our discussion that are may during the provided risk to Any reliance call. conference ended date SEC made differences. filings you call for on cause only XX, statements of you of this statements XX-K such our a these forward-looking Form factors undue year as the

I turn to over will John. the now call

John Moragne

and Thank call. everyone. today’s all joining for morning, you, good Thank you Mike,

last the detailed XXXX. am allocation of we As capital pleased page and in another of strong we release, quarter earnings to results the turn as first thoughtful night’s half on report I

for chosen Our employ for long-term believe have laid mission selective this is we growth to year deliver creation shareholders to foundation BNL and the we sustainable that. approach and and value that prudent has the

strategy, to growing patient our balance and second solid flexible to capital invest pipeline for to and results and because results of half beyond, efforts. quarter disciplined diversified provide by Our and second the and opportunities positioned shareholders and same-store were driven continue of of in portfolio, our year recycling sheet. performance our fortified solid BNL capital accretive is our portfolio our accretive execution predictable the

operate tenants, different existing Starting unique with XXX of across our who XX portfolio industries.

cycles. all cash and positioned to Our provide market defensively across best-in-class diversification flow durable consistent us has

view for rent our benefits, to combined as key diversification significant differentiator tier continue annual or in of especially tenant markets. downside mitigation escalations uncertain a provide when which top We Broadstone, X%, industry difficult and with risk

estate well, to by leased collections quarter industrial evidenced and to XX.X% is exceptionally during continues as perform restaurant retail and portfolio, real tenant as the of Our rent and occupancy which XX.X% June XXth. predominantly second defensive

and of As to vacant a two only XXX were not lease. quarter our properties end, of subject

who always, closely As we the of may more tenants, health are to evolving operating susceptible all those but of environment. today’s monitoring our challenges the especially be in

success at year, tremendous of recycling which generating average untenanted provide gross this will properties, rate cash of million in capital moments. We our efforts in just X.X% have a Ryan few detail $XXX.X proceeds experienced a additional weighted cap

risk also proactive credit mitigate residual dry attractive deployed while approach spreads. at to and additional corresponding helped to and Our our disposition portfolio, to both powder providing current have asset efforts management within accretively be

opportunistically the through stock where we destiny, year a look the accretive as near-term of recycling core will rely strategy capital will half be have the own With continue and pillar and of we control first year. execute of capital, during disciplined we sales as our equity we to half second to would on intend our the comfortable raising asset price done to this additional below well

second healthy fundings. and a our to disciplined during remain development and the approach quarter, an and included which mix accretively On of property new assets revenue generating to patient capital front, found existing external we deploy growth our investments ways have acquisitions, committed in creative

the market belief growth, many calibrated not on risk cap properly $XX and approach that While we are have evaluated for sourced rates, dynamics selective of assets investment external given employed opportunities new billion year-to-date, have reward a over currently and we our trade-offs to market.

long-term create of value are capitalize We that current as the focused direct several shareholders emerged opportunities market. for making and have a have on result that successfully our on unique intensely investments

opportunistically traditional our for Of differentiated our new efforts. our shareholders relationships, driven This environment to and for that existing partnered investing of market add the we and to have a approach note, to supplement value core strengthening is partnerships navigating our approach demonstrates we acquisition challenging component more found sourcing with By current financing current many our creative have both. tenants relationship establishing that conditions of developers success. remain ways as

investment and industry and estate beyond. our disciplined has patient With the value on in in long-term faces difficulties XXXX focused been strategy the entire and real XXXX, maximizing being shareholder

profile X% to leverage into growth and at and will in half conservative X% support range dispositions attractive from Our second strategy cap XXXX. balance the rates flexible year in low coupled with of proceeds high sheet the the our

As make said BNL that market. decisions especially I have in is have currently in to, position decisions a the to, distinction past, we want an we that to today’s estate in real not important

on the details of additional status our over quarter who our Ryan, second turn and pipeline activity capital call efforts, And growing will with our opportunities. now portfolio, that, to I the recycling accretive investment investment of will provide

Ryan Albano

thank Beginning have with of us of status Thanks, to joined all John, the today. our existing and you our who portfolio. listeners

year-to-date. many Our the have highly remains despite tenant challenging macroeconomic base headwinds resilient of faced they

are of our tenant there we note monitor routine While at a on this overarching time. closely basis, no trends entire thematic roster

a I we quarters. standpoint, update individual tenants to closely few for an watchlist been tenant have am regarding several an our pleased on monitoring provide that From

grow invigorate the and cost. lower returned turnaround momentum first Lobster’s same-store Lobster’s Red labor as to continues result year the gain interest, of the profitability company sales, overhead effort Red customer unnecessary quarter as during of a cut to First, concerted to

the Lobster communicated has remains business. Union and publicly Red its to committed support fully Thai of

to several will quarters results, released look quarter days. these beginning over next will coming confirm the Thai second the in trends Union’s with We be which

our we site encouraged are for property and individual to monitor what As the we seeing performance sites, by are level continue at level.

unlevered investment real and the in IRRs value properties in As confident on the of sold our to-date. double-digit we discussed capturing previous on remain low calls, have underlying we estate,

have X.X% capital. our of over investment, XX yield currently remaining initial locations XX% invested are even with on that We north earning cash recouped of

as represent of of X.X% ABR total sites end. remaining Our quarter

the we encouraged pursues return up results for Second, and increase recent records growth. EBITDA year-over-year. company’s the gross it profit XX% second to set financial to steps company and profitability taken unit, quarter was adjusted are Carvana flexibility Carvana’s by as which per by

While debt Carvana also long-term expenses lowered reduced its its and burden.

investments in are which located. mission as We fundamentals remain news nature the well are encouraged our also both sites, the the positioning, by and driven by our they submarket recent of industrial critical in as confident the in defensive

of represented end, of Carvana ABR. As quarter X.X% our total

reopening monitoring Green Valley Medical the of closely Finally, we are Center. progress towards

regular are the progress routine and with tenant in contact updates. current are We receiving

the our tenant defined certain To-date, has milestones achieve by failed to as agreement.

property during of However, operations they this commence at will hopeful remain QX the year. that

provide working we this is the While to towards will of continue the time reopening all achieved. as we closely more are alternatives tenant at are clarity and the hospital, with we potential updates evaluating

as of individualized quarter-over-quarter. These specific coupled comprise with smaller our tenant portion three which the tenants, watchlist, is of a a other measured percentage consistent handful ABR of tenants largely

initiatives executed the As quarter. on John previously we second mentioned, our during accretive capital successfully recycling

on sold weighted proceeds tenanted average During four a quarter, of X.X% cap at million we of rate properties. cash gross $XX.X for properties the

cash sold properties quarter Together end, tenanted with cap gross million of our closed we proceeds dispositions properties. for on sales since and rate eight QX weighted $XXX.X at of asset X.X% average a

our while accretively half have spreads. providing intend to powder sales risk redeployed both mitigated asset opportunistically credit and at residual portfolio, also We dry the in in year. to on asset of second attractive These sales be investment execute the

remained relatively cap across front, rates an largely consistent growth On external off leveled and property have core types. quarter-over-quarter our

ways bolster strong efforts. with augment opportunities success that pursue creative traditional the sourcing of selectively we our real more to also continue had investments, estate return we our profile risk While fundamentals have finding to

million. second $XX.X cash million three property of average weighted acquisitions we new X.X%, quarter, for the which invested During a industrial at rate included cap initial $XX.X

generating with have view the also as deploy to existing we invested We our CapEx revenue $X while existing value projects of capital way assets. tenants. a underlying bolstering tenants accretively in million differentiated with partnering Additionally,

and a future increase of currently active have become have in in pipeline We unfunded our currently additional types financing with consideration. growing existing investments towards million projects have $XX commitments conditions along under seen as an more future opportunities of of properties, challenging these

on funding $XXX.X Additionally, previously a we and announced million closed build-to-suit transaction. development began

land second on closed acquisition the we a XXth. the quarter, funded have total June the and of During million through $XX.X of

additional million the an $XX.X the remainder through fund to expect of year. We

than is next of food health of a is publicly facility The Canada. a October build-to-suit distribution commencing third facility foot Sarasota, United transaction States in the in United for leading distributor Inc., Natural and new million specialty to no XXXX to year. tri-climate X rent square projected open quarter traded and of with leased The Florida, later the Foods, in

pursuant leased X.X% rent multiple with capitalized interest of earn facility the period, lease rate into and current a and X.X%. to XX-month completed, with completion XX-year escalations X.X% GAAP a be approximately annual cap The customary construction rent -- will upon UNFI the and options will will together once we yield will During be at stabilized rates translate to escalations. renewal approximately

state the years in come. industrial to This earnings growth drive art our We are for significant of excited to add to portfolio. to transaction this expected facility is

similar focused predominant while external yielding financing securing as opportunities today’s the to on developers, remain are in current We to see opportunistic, acquiring with of and continue difficulty we have partner had growth. market we assets who source

$XX.X acquisitions, $XX in million million $XX.X generating million $XX.X totaling in CapEx investments completed have million revenue we development new property including and in fundings. Year-to-date,

$X.X acquisitions weighted The properties million initial and and rate average included cash million in had new cap a revenue CapEx retail in property. $XX.X property X.X% and generating industrial of

will to that, over now turn the call Kevin. with I And

Kevin Fennell

everyone. Thank you. morning, Ryan, and good

Turning to our financial results.

quarter, X.X% share portfolio an AFFO were share, million of driven in and or $XX performance. During same-store largely we Results by per results the per generated growth quarter-over-quarter. $X.XX of increase

our QX, million in the of G&A, tracks with line which During year. for guidance cash $X.X incurred we

our opportunistic appropriate. that We quarter times be decreased leverage basis on net-debt-to-annualized a quarter-over-quarter. the to EBITDA at adjusted ability are maintaining always support ended to on We X.X flexibility focused financial when

XX% of at $XXX remaining capacity. As of quarter revolving with line million just unutilized end, credit of over over was largely our

of of us pressures fixed longer upward hikes rate reminder, rate our and interest the a has from capital structure higher expectations. the with As associated string substantially rate for debt insulated many

second forward our additional the to fixed year. half in Moving rates balance pipelines evaluate of outstanding swap in the and opportunity of acquisition will we the revolver we disposition the our portions to potential visibility into as near-term, gain

a strategies investment equity core Our volume. remains market consider opportunistically component that our overall to of allows ATM us raising alongside capital

on Given we capacity million in approximately current program. $XXX quarter, maintained activity no of the the

attractive Board XXXX. payout mid-to-high October our with to aligns quarterly The dividend quarter on AFFO our dividend OP before a our or payable the range in and targeted of of relative consistent an our with is peers. meeting, yield At of in share $X.XX covered, XX, unit, well dividend and per common approved the is Directors prior represents XX% ratio many

maintaining Finally, we per share per our per to of $X.XX guidance with share XXXX are range today an share. AFFO $X.XX

our guidance half of will year. maintaining last acquisition, detail release as reference G&A further previously also the and we revisions guidance Please are second that ranges communicated. for and We into progress we night’s we additional disposition earnings the evaluate

With that, open the for questions. we up will call now

Operator

first Ki please Kim Instructions] from ahead. [Operator Securities. question Bin Truist Ki, go Our comes of

Ki Bin Kim

morning. today, Good talk priced is given you how to and thinking your John. Can Thanks, -- where capital next just can year? company the price equity grow about over what’s sources the in your you for your

John Moragne

that with where capital Yeah. us our Sure. a so pretty meet investment success of our comfortably. X and/or it’s point has year there had our and for we this have targets you you lot around exceed think, I’d been next to this our the dispositions year as and There’s marry consistent times been capacity source get leverage of into Ki year to Bin, sitting that I far. to leverage.

Ki Bin Kim

we is models And dispositions, our like for that forward? in rate approximate your going can cap assume what an

John Moragne

I as on I in remarks success a million release you tenanted mean Xs, to high and you had and have heard continue lot year far so assume in last X.X% properties. our the this of Xs. as lower think $XXX we night,

about the destiny want and investments this is even we to throughout are for continuing into going ourselves we deploying to next with we of capital. control being selective focus the had we disciplined spread that are though type providing are year have our be year The that we and executing where and on, going

we opportunistic we that focused do on So that on will make to spread. pursue sure that maintain can dispositions, be the we trying

Ki Bin Kim

the financial what met, let’s squeeze could weren’t The Green the isn’t Center, here. I third if and a were you standpoint, milestone And one met Medical a milestones is talk Okay. standpoint? from about from to, say Valley can this what of downside impact that a in financial some just year, impact that

John Moragne

Yeah.

the So information for in is year. on as been entirety have public of huge, private difficulty same some or of financial this I standpoint for getting publicly this the year not property things into mean a that’s The with rent the isn’t a tenant. is we way that like as collecting the This bankruptcy available that. specifics

of that a doors hospital last reimbursement a up of you with at well can been you expect to lot that hurdles only financing them. money of as through operator, from not new with to process its current over there, for a a Medicare months have to more opening open hospital, and prior up expect it’s new the to it incrementally But through particularly the and working operational do takes so hurdles as the would have you changing shut difficult XX the types trying worked conditions, months XX looking open to purchase conditions up assets to course all trying new and had of the but financing hospital

Ki Bin Kim

you. Thank Okay.

Operator

next of BTIG. Please Michael comes from Our question Michael. go Gorman ahead.

Michael Gorman

some what’s Yeah. tenants for favorable morning. adding you do opportunity Thanks. that in just of bit come in project? new sense them of seeing also how of in-place more approach are set new a the you could to but revenue Good kind there in, and scale as of opportunity time the potential average talking approach make already are maybe the spend about these and how more generating a the the is side a then you the here underwriting lease duration and opportunities CapEx these do terms understanding Maybe and give the little CapEx terms underwriting, of portfolio, exist the you of changing the

John Moragne

something an XX% lease in it’s our net as and of us for diversified REIT clear We industrial our question space with we that’s lot a industrial are think Great on. spending ABR assets. time Yeah. that that a differentiator this to of focus tied focused

have we our add building shareholders in for do there a example. projects, use We differentiate revenue to and from to rest way expansions improvement think unique industrial space, lease the are of than this net see CapEx, return because tenant retail more the to opportunities restaurant, as you a for generating in and opportunity additional ourselves would

length they of few The some if the trying they it XX you to projects months months, build-to-suits that There some are do. a varies. these the up depending on are what larger then at so. of of is, of some can expansions, are these to And to or look last XX months or

the from we an to have that We mark-to-market standpoint with through the that we similar where we comfortable make sure overall with process to that we have on new anytime internally work to that credit, estate, look to capital. to There whole is tenant a a at still sit going real underwriting are we feel that feel rents relative comfortable deploying we that basis. be

box. the have still check All things to of those

are trade-off, portfolio, with the The good assets place risk a do. deploying where quality are nice lease the the our but in with we improving about now to these not reward which overall the of thing nature difficult sometimes that net capital is feel business long leases you of in already only our you in then

tenant also business strengthening has tenant the are the relationship site. you potential that that and are for you future the strengthening opportunities with But that relationship with

that be the likelihood partner a long-term to the us goes and up. they for with So long-term going and are stay renew

a the about So we for and it’s future. pretty that an we are lot area like excited

Michael Gorman

That’s great. maybe the agree. on one follow-up, John, Yeah. And side. I acquisition

in the on the of the it most that give the that opportunities you predominantly terms Can in where bid-ask these underwriting? where in is mentioned just little spread are you disconnect the you are pricing, assets fit of coming is that a kind of billion of Is the of some is disconnect $XX still of don’t bit reviewed. the I us it opportunities through you there think marketplace? flavor that the quality,

John Moragne

always for us. It be can

but are depending the today, on everything to views just and company more. think you which said you I are I speaking think different,

cap remarks, with of market we number out in prepared of today said the are our still of are of the we triangulation among in opportunities we the how market and risk thinking financing rates, that sort our trade-off, struggling how is. overall should on about investing sort should As the view be a about our and views where be underwriting, reward and we spread thinking capital of cost

economy own sort estate general to real rising overall to and The to rates And is uncertainty that overall and its issues this reason disciplined experiencing doing where the appears taken that with be selective have market. relative year, interest real of whatever speaking, the intend continue just else, well, for but focused approach relatively we estate that. in we

Now guidance all and beginning hit our of that at we remain year the the absolutely to in issued have being said, confident we ability it.

was Our it of pipeline the in year. than first is bigger half the

number stage hope about are of as into year, we are as larger work we There to half this will seeing. weighted we pretty opportunities to that the we a pipeline that’s we of the what And come that be are and excited always in came we it. advanced back rest fruition are and plan through

we be in said that’s what disciplined because been range we bit that’s feel we we are have rates half year like are into to X, start have we and deploying of low his came and most planning continue what comfortable they that mean will we and high in remarks, deals, but X doesn’t weighted year going the patient back do. chasing to seeing whole the plateaued the As Ryan a terms into capital, cap places feel just where

Michael Gorman

the Thanks for time. Great.

John Moragne

Thank you.

Operator

of the is Our BMO line Markets. yours. John John, next Kim question Capital comes from

John Kim

should your achieve this and sales disposition in year Red many weighted towards we industrial, are within in to expected industrial the disposition expect deals cap pool back to Lobsters morning. there? the driven given quarter the X.X% your half of be Good by just the rate On how your

John Moragne

Yeah. those, talked and we are There’s there. about mentioned We a handful of of down in XX started of again. it We Red times Ryan to this a Lobsters number XX. with

We year. a a ratio continue we that I Lobster with turn very full a they coverage will for comfortable are but this to point decrease at are today. mean last where reasons, on they to Red rent host were of sits exposure than higher look

assets So if those that. for comfortable long-term, feel to with hold very we need we the

back year. wait Overall, the the of half for

certainly chunkier, we the those for are look at We continue a give credit Look to where that going to us are have opportunities looking will we either some where continue we think rents are a basis little on for. of sort to mark-to-market to that risk are mitigation, concerns. some do spread or

of will some absolutely is from would mean space, interested us healthcare the be back little that Lobster of and bucket, where we rates you disposition those a a half industrial will more I with sort natural, it attractive in sit are handful to is looking that see because portfolio things Certainly particularly our the and in but retail some in than not other aren’t bit, a that healthcare. opportunities industrial, cap can Red spot find in sort those we a XXXX you But buyers of pulling are see but than standpoint, of particularly we at industrial. of the restaurant

the would So rest the I be balance year. for the where think of that’s

John Kim

months? the you the XX type next to of meaningfully your over Do mix shift expect assets

John Moragne

industrial on since were in we have then years five acquired we years. than with little adjusted revenue that north reasons that billion the and what of for Not worth industrial When all last to the trend $X CapEx. has we you about at have bit how we seen Since XX% necessarily other been of side, about the generating respect look opportunity we XX% ago. talked assets, the have the a XXXX, in five of

about U.S. thinking north something investment of a success on industrial to in new spread about The new side, near-shoring trends, you massive people in amount with the recent policy we -- country and is $XXX industrial year have the billion onshoring way are million which got construction. that of two the in close this last of the years, construction with throughout private the way macroeconomic $XXX broader throughout and new are the thinking

comfortable area We place for an we feel relationships that with the and really a to shareholders. is tenant This differentiator for leg opportunity us grab those the think it’s value continue and long-term great the where into. also it’s to will for we most our

trend So nothing from that altogether line seen. different have the that you

put to the industrial. continuing are on We focus

John Kim

Okay.

disclosure square that to to not yield provided. foot appreciate it’s million On takes build-to-suit, project? the sure get level? realize I stabilized X.X%. am the you will X of I How get take while it to the long if it a additional

John Moragne

Ryan?

Ryan Albano

rent Yeah. year. That online -- it of in comes with should commencement October date next

John Kim

X.X%, one that So the year yield?

Ryan Albano

Yeah. Correct.

John Kim

Got it.

Ryan Albano

that the at time, level commencing effective rent an of in-place tenant yield day stabilized rent translates With one. X.X%, into

John Kim

it. Thanks. Got

John Moragne

you. Thank

Operator

of Our next from ahead. comes question Kamdem Morgan Stanley. Ronald, Ronald please go

Ronald Kamdem

Hey.

that on about acquisitions, you those leaning of hundreds the towards tens are here? even this one-off maybe to sense from you thinking right, just deals more talk staying can any build-to-suit, as down seems is color more tenants, construction, Just away bit million or had maybe other get to be are this this maybe more if about more bit there’s couple or there little tenant dollars if you or trying a of a with on little the a pipeline a pipe like

John Moragne

the on just of Absolutely. jump I the one big Ryan as deal. for comes We the cash size it Ron. next find yield trying about. development a was paying terms initial comfortable getting great talking us This been of here. think But to in before with in the what XX Thanks, this the opportunity of space of nature months this, online at start balance think side off us right the is for the of Yeah. over and X.X% capitalized longer that’s was in terms overall, yield there’s paying between a us taking term year with to dividends

the building experience whether we and set same, here, be more, it, opportunity level a there’s to we comfort with do the have tenant developer with to that of it’s remains that with the or this same. we others, others, think it’s real be or to with have in remains expertise But whether

we having right of lot a fit discussions stage now, the a and people things advanced a build handful similar build-to-suit are in opportunities terms with opportunities. a But in would of there’s good pipeline of that

So we be we about it going feel towards working to pretty and to it. good that hope and we see more able are hard

Ronald Kamdem

forth. Great. think on doing obviously, to I the guess so second question -- if dispositions the my I of about about, little business, funding until you bit more come so can just, willingness a comes in saw started front the take through was talk are and and I as maybe back your a equity bigger quarter the Maybe step you to that you forth? on back do

John Moragne

that’s plan. mean the I Yeah.

We trading a need control and in where to looking long our we do and would will The need higher be are currently as for internal destiny of with short ability is long to that process where happy be portfolio terms built we comfortable we we not to up we stock as the as so is think answer equity. to. for an and have we as raising and

we year the go believe this XXXX. the throughout $X came we we into point, with be of we with going that belief where were and trading raising to were equity at so this where And weren’t markets

fund be we point. strategic looking to dispositions is will will that will price first our rest additional in where growth stock time to and a comfortable we with and place be and using be the the We we going we be the that still that do be work around that believe in hopefully that until will looking sometime and where XXXX of are to

Ronald Kamdem

I could how the bad much how have on already, I you about sort us have maybe you comments budgeting if you then And Lobster forth, this and much gone more, one sneak holistic basis, appreciate so remind Great. about think obviously, you how year, Red opening of I a through just just debt, do but on the can that? you just are

John Moragne

Yeah.

holding are XX the We revenue basis debt year-to-date. points still and call bad for against at

basis I something, points have are that We in recently. single-digit think, just we experienced on

Ronald Kamdem

so much. Thanks Awesome.

Operator

on We phone have line. no questions the further

to back hand closing will I So John remarks. for

John Moragne

everyone a several thank for interest seeing connecting great to continued Have second Enjoyed your Thank in day. Jordan. and BNL. the of of months support of us And you and you year. joining the the you, Thanks and past many today half look forward all. for

Operator

call. concludes for joining. you This today’s Thank

your disconnect lines. now may You

Broadstone Net Lease (BNL) 3 Aug 232023 Q2 Earnings call transcript