BNL - Earnings call transcript Q2 2024 | Broadstone Net Lease, Inc.

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Operator

Hello, and welcome to Broadstone Net Lease Second Quarter 2024 Earnings Conference Call. My name is Kiki, and I will be your operator today. Please note that today's call is being recorded. I will now turn the call over to Brent Maedl, Director of Corporate Finance and Investor Relations at Broadstone. Please go ahead.

Brent Maedl

Thank you, everyone, for joining us today for Broadstone Net Lease's second quarter 2024 earnings call. Fennell. will President remarks Ryan and Chief Officer, you Officer, Chief Albano; call, Financial Moragne; John Chief Kevin today's hear from prepared Executive and On Operating Officer, Q&A All portion X available will for of call. be this the

reliance factors. answers to differ As contain year these your filings, to over a materially detailed December on the date to including and due only to our factors forward-looking discussion differences. cause Form call XX-K call. With place the can of subject during questions uncertainties this of are of statements XXXX, to to that and a We for which actual statements that more are I'll the following not this a refer reminder, forward-looking as cause turn SEC risks call our the undue caution and the such ended you John. statements, results forward-looking Any variety to made for of risk that, may XX, discussion provided you conference

John Moragne

you, pleased quarter to everyone. report I Brent, am strong results. of morning, another and Thank good

that proceeds am proud cusp strong substantially our development building redeployed We supplement our process. we investments, the attractive that exceptionally partners traditional into that generating the revenue closed were blocks are growth, existing committed simplification build our those our successfully same acquisition funding and proceeds of time, fully on investment on completing into tenants pipeline. lease with with opportunities. and portfolio At our able the navigate I and opportunities to build-to-suit net to we seeing incremental continuing strategy, pipeline are focused having a healthcare redeployed of core capital expenditures

our for of we've made strategic We are the progress incredibly objectives proud XXXX. on

consistent the broader lease our we current a beginning successful for strategic initiatives. rates we tailwind for execution the provided to our space, believe net reward are and on outlook recognize interest investors has that While

we objectives. at believe plenty or continued high, as growth around room there for expansion are an and multiple still of XX-month our now Our trading shares is fulfill we

investment and the Throughout mission box, and opportunities $XXX.X core million our that last As relationships. commitments within were opportunities call, an We early through key sourced including to in creatively direct quarter, important previously existing investments buy to continued on part build-to-suit and QX the believe sustainable we reported closed quarter's quarter we've long-term the fit relationships. discussed building in forward a drive of growth. notably in blocks are our flowing made the our differentiator of source we and cash through these majority of

scenario our XXXX XXXX, healthcare, for us am be back per result AFFO year a that the view cash G&A our into for and our year, more pleased AFFO that set strategically growth as will neutral we move might decision I up this XXXX. $X.XX we in result As ranges. are year half share to of range with $X.XX investment our disposition our adjusting share a of per modest this slightly the of to result will a and and Starting well guidance maintaining best-case exit importantly, and clinical execution

like healthcare you walk this fund through achieved year encompasses simplification I we've new significant control and strategy. under of progress our which our pipeline, growing I $XXX.X commitments nearly Before now million details developments, on investments would on the further clinical investment to highlight to

average to healthcare XXXX. early October. we XX% of end closing close the to $XXX.X continued reduce the investment early first cap our the on cash clinical additional our of dispositions sale this of our rate a July incremental to in bring anticipate on of executed Our in them efforts our and half a healthcare activity, in transactions the quarter weighted the with for redeployment through with completing $XXX million. year, ABR will in total quarter, remaining of first This early at exposure the with third-party and XX diligence momentum completing will XX approximately X.X%. Combined decisively third buyer assets at successful team These XX of scheduled the assets, X million assets year-to-date total due

long-term overall fund in compelling successfully to more number commitments approximately walk drive new assets, strategy and continue to in have under growth. Of and a for transactions to $XXX.X been outcomes. With look disposition and the and highly mission management as pipeline substantial QSR these simplification investments control delivering developments, million engage and distribution, manufacturing we majority marketing cold will sustainable are remaining negotiations we of clinically excited healthcare in properties storage, food industrial follow build-to-suit build-to-suit million specialized night, approach $XXX to including our brand to healthcare ahead and seeing anticipate achieve opportunities higher going behind sales part traditional rates to acquisition us of investment clinical and optimal to I'm represent evolving the yields product way in including unique cap we you capture investments through assets, that we cash pursuing last These time market. of us, are take XXXX that our for While and our regular oriented our straight-line much XXXX. announced we compared of in asset the a a typical

up we are with than creatively the these they XXX are these up are would assets we XXX stabilized, running because to believe but to partners. structuring trade completed and and developer risk is are our points construction achieving sourcing points executed. Once because investment spectrum, attractive basis where We we tighter we yields not opportunities basis

acquisitions. increasingly development revenue-generating external to in traditional attractive opportunities generating will only best-in-class pipeline some around sustainable include current of as Ryan more into not of the specifics escalations, part existing creating set. We accretion. opportunity blocks assets, growth, these are investments our fixed and funding rent our go NAV also view development an and detail opportunities, building yields and tenants long-term are value core long-term CapEx on which we and build-to-suits, our on high-quality important We

estate Broadstone the as played real these environment long-term funding we has choice certainly partner in generating of commercial opportunities, Lease the role and believe Net role lending for a our there's a While for even development rates way we absolute of as is interest into though remain activity transaction and to back market the regular get increased year, compressed show when levels half eventually The the decline. third partners, case deals. more volumes today is of and muted control naturally of of will highly building vary to what million market traditional believe underlying The sale-leaseback on assumption excited price expect close much about we in remain the we as the we and with seeing the our have continues at quarter. to risks. We are levels combination conditions, are misrepresent blocks $XX.X the under based and for investments selective beginning

where one see to return the a ability more Our risk-adjusted on growth. compelling path and near to than best earnings the opportunities areas rely creation channel capital to provides allocate and value and we medium-term investment

through perform occupancy Turning gradually Valley assets collections portfolio quarter sectors. industrial ongoing of opportunities, as investment during well retail as is to XXXX. June our and weighted dispositions portfolio evidenced more continued restaurant our towards our Green and composition XX, XX.X% excluding and by rent These the to becoming and defensive XX.X%

impact our results transaction the due arise. With pockets tenant proven over portfolio vigilant great credit from of to of capital maintain efforts, additional its our to an limits While call remain less that, flexible our that incremental effect to strong, broader efforts our risk seeing any consumer-centric are the be growth, confidence which appears turn as credit on and our structures. rates our diversified individual higher We in we impact blocks any to monitoring entities on having remain manage I'll event interest industries the portfolio may the through construction, potential building and operating who duration in updates. of with and overall provide for situation and Ryan, will ability such details

Ryan Albano

Thanks, today. for John, thank and joining all you us

built-to-suit Before growing turning expand updates, portfolio our routine of to wanted opportunities. on we to pipeline

to John a fund mentioned, currently committed build of opportunities million. we for As cost to X approximately estimated $XXX total have

have of that anticipate to still varying will permitting dates structuring dates we developments period pipeline have activity. buildings, built-to-suit as we in rate X% over cash typically other opportunities investment investments relevant to mid-Xs alongside robust superior are of credit XXXX. Outside straight-line that believe are million actively are we X%. hiking low-Xs of additional constructed X the QX north more that than rent and taken of of commencement there phased with the $XXX way transactions yields together will the represent We with began. acquisition yields be XXXX, of compelling, evaluated tenant QX regular While end strong these with since typically start well-located balance newly of long this X%, construction these evaluating final are through and and the highly that most lease the traditional XXXX funding anticipate of these interest between in subject cycle opportunities, initial approvals, opportunities and build-to-suit we to assets, into escalations These and and rent yields translate terms

Now routine attention back turning updates. our to

first portfolio half comprised simplification for mentioned, the after portfolio tranche tranche shortly scheduled X% John strategy our of sold the properties close cap inside we early X.X% through next X-phase pieces execute As just healthcare rate. year, the October. the $XXX.X the portfolio of during rate. during able for quarter of at is cap million of quarter, And the a healthcare to assets the a we in were Further, an first XX sale first on key completion of to a XX

As various credit through into risk. timelines rates, effort and address begin combination identified, we focusing extend transaction need the duration, step lease shorter that anticipate to this and on properties the given of disposition elevated space comfortably we remaining utilization XXXX, some

past, and for tactical we on intently our execution sales maximizing As the healthcare focused have shareholders. of our in value communicated are the we property

opportunities, with we investment, industrial of $XX.X UNFI properties funding a investment disposition $XX.X vacant representing including we on sale million rate executed the a X.X%, our property, office an during and property activity additional X tenanted properties. Alongside other build-to-suit set capital. sold included transitional million, $XXX.X healthcare a of individual previously This discussed corresponding associated basis, million property with X.X% second rate executing acquisitions to cap for efforts, on of investment the and of the related million million to of closing $XXX.X cap addition X $XX.X In strong quarter, our investments. X on X an portfolio small

a Company, newly As activity Ferrara part subsidiary to the during of our acquired of Candy excited roster. tenant Candy Belly Company, quarter, top to add our XX are Jelly we investment

have million through As rent this later the project and UNFI than build-to-suit quick $XXX.X our track commencement delivery for update on of approximately and remains XXth, year. investment, a on October we June funded no

to importance we building provide can evidenced we blocks a pipeline, seller, capital we not variable opportunities across is earlier built-to-suit transitional stages the the where our source towards pipeline of investment capital investments investments. and holistic look all the our and our price sole where to favor of continue As our of as core by investment of growing generally solution

briefly I'll strength shift in-place our Now, our the focus of towards portfolio.

through trends the largely we remain second progress As unchanged. quarter,

rent Our of collections high in for the degree our to quarter strength of portfolio. overall provide continue the confidence

durable our generate to remain flows, While which we deliver strong macroeconomic will and sensitive continued that of discretionary and remain industries predictable performance the are backdrop, cash confident that spending. includes caution continue portfolio on to cautious consumer we

remained list Our far focus. has this healthcare properties our consistent remaining of watch some tenants, and well year remain fairly as consumer-centric in clinically-oriented as so

which watch As quarters, Lobster, remains we've X.X% highlighted on represents our in ABR of Red list. previous

half As of resolution of company XX Chapter appears to be the heading towards headlines, second in a reported proceedings its recent year. the the in

our properties any distribution center lease retail through ever home, alongside a monitor back. to Raleigh, to updates own which be and were get markets are we we we well both located towards in reorganization space, interest we if remain in continue related provide them of from Plano, believe of sites alternative negative furnishing Carolina, X% the home approximately would event. a Our ABR. site both to master users potential we and available. With significant strong Further, expect headlines which XX Texas they would tenant in and to and strong North assumed sector, resolution recurring the will as proceedings the open including a at work specifically represents continue We garner

the update resulting while targeted for downtime We Lastly, we begin anticipate properties way as while the actively remains value properties. In of for regular late we only this had commence simultaneously minimal active at approach of negotiating demonstrate to challenging, diversified were employing for differentiated over to enhance June turn an portfolio X I'll criteria align focusing strong year, to new the leases next summary, quarter. on pursuit allocation, to acquisitions management of early rent continue that tenants. XXth, strategy operating on with these results and lease performance. With leases highly paying him Kevin for market net our X our which provide financial an capital we to broader vacant including or portfolio, that our call that, drive to the year environment the and investment our investments the in with execution

Kevin Fennell

Thank you, Ryan.

During $XX expense per were lower an per the offset of simplification million share, quarter, and of interest AFFO a result partially year-over-year. of increase in Results share healthcare lower by both by results driven or generated we strategy. $X.XX X.X% lease as our revenues, largely

and the continues show points realizing excluding well to year-over-year. be or quarter, of Cash resiliency, million year-to-date, John incurring our Green basis As Ryan bad to X.X% a XX continues G&A mentioned, portfolio $X.X decrease during controlled, Valley. debt

$XX.X G&A we to million quarter a position first in with our the $XX lowering net As strong to and debt, million the guidance ended leverage X.Xx $XX.X at slightly from a up we from $XX flexible the X.Xx again, quarter. financial of of to end million million. Once result, are

of rate debt swaps basis March opportunities. To of swaps begin XXXX. net maintained and XX, on million near-term meeting, scheduled ample as XX, we average Our investment uncertainty during across build-to-suit capacity of our incremental $XXX XXXX quarterly was rate million SOFR our some and share gives in next quarter. maturities, reduce spread supplemental per of UNFI combined XXXX, are holders a payable through in These with record or our X.Xx, $X.XX forward-starting new the $XXX common X.X%. At Board availability maturity and with Directors mitigate dividend XXXX, a year on weighted as approximately pro revolver unit, we OP us to for of our are SOFR our in locking in of before which, October evaluate September executed swap rolling of forma

and well Given our represents remains covered relative successful attractive redeployment yield still efforts, this environment. our in dividend an market

to reaffirming $X.XX range guidance AFFO $X.XX of are Lastly, our we per share.

cash details. And to to million last now are $XXX night's questions. reduction release with $XXX to investment the the addition from $XXX and earnings Please In mentioned, million, dispositions for we to million previously will low that, of the open end I additional million. call our range G&A for raising tightening $XXX reference guidance we

Operator

Instructions] [Operator from question Borden BMO Eric first from The is Capital Markets.

Eric Borden

multiple progress sourcing certainly number a investments investment verticals. made you've solid of through John, some

does out developing asking in here, Just the curious, of next you the and pure-play development opportunities, guidance that the other mix play not terms for in how but XX acquisitions, for things months of any be may pipeline?

John Moragne

Eric. Thanks, Yes.

So it's here. a balance

the in in build-to-suit development We've million development prospect great deals active really $XXX lot of $XXX that we got pipeline, a the opportunities that million or excited that so in With about. active X the we're have another bucket. the in very plus

starting the we're this talked earlier have the core we're of process blocks for investors development that we one this growth, providing with we and and excited As very that building sustainable have way about planned into laddering had that year.

how out what of are there, as but and the disappointed acquisitions the that balance. where sit balance we're a today. of if little product towards forma million that We a with X.X% more goes way great a to to next regular-way standpoint pricing sheet there's still on is today bit you've and volumes seeing terms the I a out months the pro depending the where side, is got today XX course think of over as So landing. be to little thing a playing rate on a quality at start the still volume. The interest the bit in the we're from months having so, on basis. view We've little relief of regular But we well got in Fed see the a $XX.X acquisition in you continue is strategy pipeline well, or meeting of X

as room got to have be well do land would ample acquisitions. regular course pipeline, evaluated we and we've stay it. to liquidity, X% over way that ample we able below And We throughout development comfortably as where of the

that So our the know be are to attractive give able type we expecting. growth things shareholders balance those our of and is to goal together

Eric Borden

I capital via appreciate Are of be Or XX% has leverage outlay majority to willing here will funded you the on that. just your allocation And the months, shares equity capital future capital changed? issue with side, over on today? last X and the then up a basis? the neutral program investments on recycling thoughts potentially

John Moragne

Yes.

constructive being now. any got That the So don't we need equity is right more than ago. X was months it We've liquidity. ample certainly today said,

Our leverage availability been the in months, got we recycling, to this the selling today. at that be We've also months and we're the able revolver if on and debt we'd cap XX that a the our very in a year, dispositions capital things in needed year assets basis. isn't cost clinical of if between attractive as through our last on great to XX as is recycling well are where capital continuing been well that we've X a comfortable through last We've to million growth healthcare did looking to pretty that we sustained south at on handful operate successful of fund we the markets equity very to. We're us. sell we've looking of $XXX identified

more we'll role need those don't that be. of plays not it this And So constructive, we things And want but well. a in now we as something course, but balance opportunity set, where right it's all to certainly either. together,

Eric Borden

last targeting you opportunities. missed cash mid-Xs, the just for Ryan, up the sorry you're And did the on this, me, one into yields low-Xs? development if in new appreciate say are I I the that. but

John Moragne

Yes.

cash yields of straight the upfront we're And in So when it mid-X, over in sometimes low-Xs. that if you now you're you're opportunities, at, lease line that looking right term development looking the at then got the we've mid-Xs. the

what relative way still sort a line. on is seeing attractive cash low-Xs straight settling basis in into an Xs getting the of the in very to So space, on regular upfront that we're which yield

Operator

is next The question from from Capital Upal Markets. KeyBanc Rana

Upal Rana

development the commitments? commitments $XXX those funding mentioned on million. you additional color provide You of can Any

John Moragne

Yes.

UNFI got is about about We're we've another So $XX excited of maybe progress got the -- on We that. there. UNFI. million part very

late we're than under to got but of no $XX rent mid-October. slightly ahead in project, or left, commencement slightly so Looking the come We've that and million later come for expecting budget to online, about schedule. QX,

new million million for the $X as $XXX million distribution really feels space ones, as from from are X range These to $XXX existing and the build-to-suits in in as that relationships. different that the small as things good. Of So in spaces. all opportunities QSR and there's manufacturing development large new

working mentioned, we're we're the $XXX prospects with roster or Ryan and we we're So million actively that expanding about evaluating. we that have, good folks so feel as the really active with of that another

Upal Rana

XX%. helpful. then was healthcare complete you looks That in so terms And it strategy, about the of simplification like

XX%, off remaining some that those take one-offs the prior kind will of had time the mentioned that your are On you portfolio? to calls in get

John Moragne

and value of, we'll out Yes. get value great of we maybe in Those asset require traditional management in a sure the right right work sure can are are just value a getting out the approach. will have tenant that that making lease work some onesie-twosies There our end to improvement, we're that some on through the make there that some a all we're those. handful there's that extension, that

comfortably on timeline XXXX. So extend will those the into

Upal Rana

maybe, then do what And and think lastly, it. early might maybe of it trends seems you indication be maybe got XQ where XQ cap from here, on here kind like any headed? Okay, on rates

John Moragne

of hot look if sort like of it really been XXXX. hot that's this seen as we you Yes. year, I rates this we've saw as year sort industrial, mean, -- in at on mid-market plateau cap

[ out on acquisition getting bids XX particular any there. You're that's ]

down the we You're as low-Xs We're starting capital still the think those creep to about in high-Xs. allocation. see past solidly into Xs the

we're looking So for right the opportunity.

regular we're and we're where the say cash mid-Xs in And to continuing if straight on to in very capital. allocate allocate cash we're be in As with cap we're multiple to way the rates, very the heard fortunate Ryan those that then and build-to-suits those looking seeing channels where have you mid-X to and line his remarks, getting focused we're to the it we upfront can deals, capital not low-Xs. rates yields disciplined

around some So a our you're product And more more the terms hopefully, more half the a expectation rates. to year, pricing is see constructive interest there's come to start environment see of risk-adjusted going basis. we'll little back as online a of in bit certainty on

Operator

from Goldman next The question Sachs. Instructions] Burrows [Operator is from Caitlin

Caitlin Burrows

it of that ultimately industrial, Maybe could to you just a the pipeline, we $XX a said extent if be about as like to I mix or get sense you just a small a close? what for acquisition lot that's Could deals go QSR-type on million. larger mix what might of through what think was try couple versus

John Moragne

Yes.

So a a site a other single goods, portion large acquisition, is retail then and large fairly of the is acquisition. supported it industrial

that in deals X pipeline. there's So

Caitlin Burrows

Got it.

then Okay. to the back And build-to-suit topic.

I can think I've be kind past, in this land. of it's but because get difficult heard we've the build-to-suit tough asked the to

yes, get user that, So working And land, I attractive just in you'd any in change you how And again getting it somebody that like, past that mentioned approvals has you kind of be already thinking? would case? you source land wouldn't who they the you still this is guess, the I there's need been can past the do get from do want? that through you to, or how so for hurdle yourself. think talk of buying go, and the But, that's if that

John Moragne

Yes.

their able report to The out needs you tenant, way someone a the process. be been to It's an the depending land process situation. We're around regular have to all, that assumption our is hand but control with funding here. comfortable we'll place is different the to been and and sale-leaseback it deals yet, have else. of by the necessarily the be in land our we in the to the So thinking by where that's hand developments the the than about hand. relationship on great commitments to feel have certainty Net But strategy The as that acquire the the business between fund or to is agreed not under that already opportunity course to the developer lease, very is a very between way. where question. partner we've developer build-to-suit it us the your and over client, land in in

the still land that client documentation, final the is of have move ability and starts whether And critical that's forward is negotiating to development with the to for X the million be because process around but our in in You're the that have to or under control, the pipeline, we not decides surety going $XXX pipeline to that case. that with the project.

Operator

Thank you.

we no like John remarks. over for As to I Moragne currently have closing to further hand questions,

John Moragne

you, joining everyone, Thank you, thank and Kiki, us today. for

We But getting rest we'll your come year. excited QX proud earnings started, this just day. and that so joining our and we're more of Thank enjoy accomplished call to us are the come all you of we've so with for incredibly all far have October-November.

Operator

concludes call. today's conference This

lines. your you. disconnect now may You Thank

Broadstone Net Lease (BNL) 31 Jul 242024 Q2 Earnings call transcript