Broadstone Net Lease Announces First Quarter 2024 Results

VICTOR, N.Y.–(BUSINESS WIRE)–Broadstone Net Lease, Inc. (NYSE: BNL) (“BNL”, the “Company”, “we”, “our”, or “us”), today announced its operating results for the quarter ended March 31, 2024.

MANAGEMENT COMMENTARY

“Adding to the positive momentum discussed in our April 3 press release, we’ve now closed on $202 million of investments during 2024 and have $122 million of investments under control,” said John Moragne, BNL’s Chief Executive Officer. “Executing on our healthcare portfolio simplification strategy and returning to consistent growth is our top priority. Despite historically low net lease transaction volumes, our recent deals highlight our ability to creatively source and structure high quality, direct investments, including certain transitional capital allocations that provided access to otherwise unavailable assets. With a resilient and soon-to-be streamlined portfolio, fortified balance sheet, proven ability to source accretive investments, and relatively smaller asset base compared to other net lease peers, we’re primed for sustainable growth in the years to come.”

FIRST QUARTER 2024 HIGHLIGHTS

INVESTMENT ACTIVITY	During the first quarter, we invested $40.1 million, including $37.1 million in development fundings and $3.0 million in revenue generating capital expenditures. The revenue generating capital expenditures had a weighted average initial cash capitalization rate of 8.0%, a lease term of 8.0 years, and annual rent increase of 2.5%. During the first quarter and through the date of this release, we sold 39 properties primarily as part of our healthcare portfolio simplification strategy for gross proceeds of $274.0 million at a weighted average cash capitalization rate of 7.8%. The gross proceeds represented a $2.5 million gain over original purchase price and a $56.5 million net gain over carrying value. Subsequent to quarter-end, we invested $162.3 million and have $121.8 million of investments under control. The investments closed include $12.8 million in development fundings, a $65.0 million acquisition of an industrial portfolio, and an $84.5 million investment in a retail center that included seven outparcel properties for $32.5 million and $52.0 million of transitional capital.
OPERATING RESULTS	Generated net income of $68.2 million, or $0.35 per share. Generated adjusted funds from operations (“AFFO”) of $70.9 million, or $0.36 per share. Incurred $9.4 million of general and administrative expenses, inclusive of $1.5 million of stock-based compensation and $0.1 million of severance and executive transition costs. Portfolio was 99.2% leased based on rentable square footage, with only three of our 759 properties vacant and not subject to a lease at quarter end. Collected 99.0% of base rents due for the first quarter for all properties under lease. Excluding rents from Green Valley Medical Center, rent collections were 99.9%.
CAPITAL MARKETS ACTIVITY	Ended the quarter with total outstanding debt of $1.9 billion, Net Debt of $1.7 billion, a Net Debt to Annualized Adjusted EBITDAre ratio of 4.8x, and a Pro Forma Net Debt to Annualized Adjusted EBITDAre ratio of 4.6x. At March 31, 2024, had $926.2 million of capacity on our unsecured revolving credit facility. Declared an increase in our quarterly dividend from $0.285 to $0.29, or a 1.8% increase over the prior period. Renewed our stock repurchase program for up to $150 million through March 2025.

SUMMARIZED FINANCIAL RESULTS

		For the Three Months Ended
(in thousands, except per share data)		March 31, 2024				December 31, 2023				March 31, 2023
Revenues		$	105,366			$	105,000			$	118,992
Net income, including non-controlling interests		$	68,177			$	6,797			$	41,374
Net earnings per share – diluted		$	0.35			$	0.03			$	0.21
FFO		$	73,135			$	69,443			$	81,177
FFO per share		$	0.37			$	0.35			$	0.41
Core FFO		$	74,072			$	75,275			$	74,473
Core FFO per share		$	0.38			$	0.38			$	0.38
AFFO		$	70,873			$	71,278			$	67,485
AFFO per share		$	0.36			$	0.36			$	0.34
Diluted Weighted Average Shares Outstanding			196,417				196,373				196,176

FFO, Core FFO, and AFFO are measures that are not calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See the Reconciliation of Non-GAAP Measures later in this press release.

REAL ESTATE PORTFOLIO AND HEALTHCARE PORTFOLIO SIMPLIFICATION STRATEGY

As of March 31, 2024, we owned a diversified portfolio of 759 individual net leased commercial properties with 752 properties located in 44 U.S. states and seven properties located in four Canadian provinces, comprising approximately 37.6 million rentable square feet of operational space. As of March 31, 2024, all but three of our properties were subject to a lease, and our properties were occupied by 200 different commercial tenants, with no single tenant accounting for more than 4.3% of our annualized base rent (“ABR”). Properties subject to a lease represent 99.2% of our portfolio’s rentable square footage. The ABR weighted average lease term and ABR weighted average annual minimum rent increase, pursuant to leases on properties in the portfolio as of March 31, 2024, was 10.6 years and 2.0%, respectively.

During the first quarter and through the date of this release, we sold 38 properties as part of our healthcare portfolio simplification strategy for gross proceeds of $262.2 million at a weighted average cash capitalization rate of 7.8%. The gross proceeds represented a $2.1 million gain over original purchase price and a $55.5 million net gain over carrying value. We have redeployed $162.3 million of the proceeds subsequent to quarter-end and plan to redeploy the remaining proceeds in our current investments under control. With these sales, we have reduced our healthcare exposure from 17.6% of our ABR to 13.4%, with the near-term goal of reducing it below 10.0%.

BALANCE SHEET AND CAPITAL MARKETS ACTIVITIES

As of March 31, 2024, we had total outstanding debt of $1.9 billion, Net Debt of $1.7 billion, a Net Debt to Annualized Adjusted EBITDAre ratio of 4.8x, and a Pro Forma Net Debt to Annualized Adjusted EBITDAre ratio of 4.6x. We had $926.2 million of available capacity on our unsecured revolving credit facility as of year end, and have no material debt maturities until 2026.

We did not raise any equity during the quarter, and had approximately $145.4 million of capacity remaining on our ATM Program as of March 31, 2024.

DISTRIBUTIONS

At its April 25, 2024, meeting, our board of directors declared a quarterly dividend of $0.29 per common share and OP Unit to holders of record as of June 28, 2024, payable on or before July 15, 2024.

2024 GUIDANCE

For 2024, BNL expects to report AFFO of between $1.41 and $1.43 per diluted share, which has been revised upward to reflect the timing of redeployment from our healthcare portfolio simplification strategy sales.

The guidance is based on the following key assumptions, which are unchanged:

(i)				investments in real estate properties between $350 million and $700 million;
(ii)				dispositions of real estate properties between $300 million and $500 million; and
(iii)				total cash general and administrative expenses between $32 million and $34 million.

Our per share results are sensitive to both the timing and amount of real estate investments, property dispositions, and capital markets activities that occur throughout the year.

The Company does not provide guidance for the most comparable GAAP financial measure, net income, or a reconciliation of the forward-looking non-GAAP financial measure of AFFO to net income computed in accordance with GAAP, because it is unable to reasonably predict, without unreasonable efforts, certain items that would be contained in the GAAP measure, including items that are not indicative of the Company’s ongoing operations, including, without limitation, potential impairments of real estate assets, net gain/loss on dispositions of real estate assets, changes in allowance for credit losses, and stock-based compensation expense. These items are uncertain, depend on various factors, and could have a material impact on the Company’s GAAP results for the guidance periods.

CONFERENCE CALL AND WEBCAST

The company will host its fourth quarter earnings conference call and audio webcast on Thursday, May 2, 2024, at 11:00 a.m. Eastern Time.

To access the live webcast, which will be available in listen-only mode, please visit: https://events.q4inc.com/attendee/505999171. If you prefer to listen via phone, U.S. participants may dial: 1-833-470-1428 (toll free) or 1-404-975-4839 (local), access code 189053. International access numbers are viewable here: https://www.netroadshow.com/events/global-numbers?confId=63406.

A replay of the conference call webcast will be available approximately one hour after the conclusion of the live broadcast. To listen to a replay of the call via the web, which will be available for one year, please visit: https://investors.bnl.broadstone.com.

About Broadstone Net Lease, Inc.

BNL is an industrial-focused, diversified net lease REIT that invests in primarily single-tenant commercial real estate properties that are net leased on a long-term basis to a diversified group of tenants. Utilizing an investment strategy underpinned by strong fundamental credit analysis and prudent real estate underwriting, as of March 31, 2024, BNL’s diversified portfolio consisted of 759 individual net leased commercial properties with 752 properties located in 44 U.S. states and seven properties located in four Canadian provinces across the industrial, restaurant, healthcare, retail, and office property types.

Forward-Looking Statements

This press release contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things, our plans, strategies, and prospects, both business and financial. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “outlook,” “potential,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “projects,” “predicts,” “expect,” “intends,” “anticipates,” “estimates,” “plans,” “would be,” “believes,” “continues,” or the negative version of these words or other comparable words. Forward-looking statements, including our 2024 guidance and assumptions, involve known and unknown risks and uncertainties, which may cause BNL’s actual future results to differ materially from expected results, including, without limitation, risks and uncertainties related to general economic conditions, including but not limited to increases in the rate of inflation and/or interest rates, local real estate conditions, tenant financial health, property investments and acquisitions, and the timing and uncertainty of completing these property investments and acquisitions, and uncertainties regarding future distributions to our stockholders. These and other risks, assumptions, and uncertainties are described in Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on February 22, 2024, which you are encouraged to read, and will be available on the SEC’s website at www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. The Company assumes no obligation to, and does not currently intend to, update any forward-looking statements after the date of this press release, whether as a result of new information, future events, changes in assumptions, or otherwise.

Notice Regarding Non-GAAP Financial Measures

In addition to our reported results and net earnings per diluted share, which are financial measures presented in accordance with GAAP, this press release contains and may refer to certain non-GAAP financial measures, including Funds from Operations (“FFO”), Core Funds From Operations (“Core FFO”), Adjusted Funds from Operations (“AFFO”), Net Debt, and Net Debt to Annualized Adjusted EBITDAre. We believe the use of FFO, Core FFO, and AFFO are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs. FFO, Core FFO, and AFFO should not be considered alternatives to net income as a performance measure or to cash flows from operations, as reported on our statement of cash flows, or as a liquidity measure, and should be considered in addition to, and not in lieu of, GAAP financial measures. We believe presenting Net Debt to Annualized Adjusted EBITDAre is useful to investors because it provides information about gross debt less cash and cash equivalents, which could be used to repay debt, compared to our performance as measured using Annualized Adjusted EBITDAre. You should not consider our Annualized Adjusted EBITDAre as an alternative to net income or cash flows from operating activities determined in accordance with GAAP. A reconciliation of non-GAAP measures to the most directly comparable GAAP financial measure and statements of why management believes these measures are useful to investors are included below.

Broadstone Net Lease, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands, except per share amounts)
		March 31, 2024				December 31, 2023
Assets
Accounted for using the operating method:
Land		$	724,199			$	748,529
Land improvements			316,170				328,746
Buildings and improvements			3,591,260				3,803,156
Equipment			8,247				8,265
Total accounted for using the operating method			4,639,876				4,888,696
Less accumulated depreciation			(606,225	)			(626,597	)
Accounted for using the operating method, net			4,033,651				4,262,099
Accounted for using the direct financing method			26,522				26,643
Accounted for using the sales-type method			571				572
Property under development			133,064				94,964
Investment in rental property, net			4,193,808				4,384,278
Cash and cash equivalents			221,740				19,494
Accrued rental income			149,203				152,724
Tenant and other receivables, net			836				1,487
Prepaid expenses and other assets			33,149				36,661
Interest rate swap, assets			57,900				46,096
Goodwill			339,769				339,769
Intangible lease assets, net			273,250				288,226
Total assets		$	5,269,655			$	5,268,735
Liabilities and equity
Unsecured revolving credit facility		$	73,820			$	90,434
Mortgages, net			78,517				79,068
Unsecured term loans, net			896,260				895,947
Senior unsecured notes, net			845,498				845,309
Accounts payable and other liabilities			40,655				47,534
Dividends payable			56,871				56,869
Accrued interest payable			9,377				5,702
Intangible lease liabilities, net			50,953				53,531
Total liabilities			2,051,951				2,074,394
Commitments and contingencies
Equity
Broadstone Net Lease, Inc. equity:
Preferred stock, $0.001 par value; 20,000 shares authorized, no shares issued or outstanding			—				—
Common stock, $0.00025 par value; 500,000 shares authorized, 188,435 and 187,614 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively			47				47
Additional paid-in capital			3,446,910				3,440,639
Cumulative distributions in excess of retained earnings			(430,169	)			(440,731	)
Accumulated other comprehensive income			56,834				49,286
Total Broadstone Net Lease, Inc. equity			3,073,622				3,049,241
Non-controlling interests			144,082				145,100
Total equity			3,217,704				3,194,341
Total liabilities and equity		$	5,269,655			$	5,268,735

Broadstone Net Lease, Inc. and Subsidiaries Consolidated Statements of Income and Comprehensive Income (in thousands, except per share amounts)
		For the Three Months Ended
		March 31, 2024				December 31, 2023				March 31, 2023
Revenues
Lease revenues, net		$	105,366			$	105,000			$	118,992
Operating expenses
Depreciation and amortization			37,772				39,278				41,784
Property and operating expense			5,660				5,995				5,886
General and administrative			9,432				9,383				10,416
Provision for impairment of investment in rental properties			26,400				29,801				1,473
Total operating expenses			79,264				84,457				59,559
Other income (expenses)
Interest income			233				141				162
Interest expense			(18,578	)			(18,972	)			(21,139	)
Gain on sale of real estate			59,132				6,270				3,415
Income taxes			(408	)			268				(479	)
Other income (expenses)			1,696				(1,453	)			(18	)
Net income			68,177				6,797				41,374
Net income attributable to non-controlling interests			(3,063	)			(319	)			(2,070	)
Net income attributable to Broadstone Net Lease, Inc.		$	65,114			$	6,478			$	39,304
Weighted average number of common shares outstanding
Basic			187,290				186,829				186,130
Diluted			196,417				196,373				196,176
Net earnings per common share
Basic and Diluted		$	0.35			$	0.03			$	0.21
Comprehensive income
Net income		$	68,177			$	6,797			$	41,374
Other comprehensive income
Change in fair value of interest rate swaps			11,804				(32,989	)			(17,899	)
Realized loss (gain) on interest rate swaps			159				317				522
Comprehensive income			80,140				(25,875	)			23,997
Comprehensive income attributable to non-controlling interests			(3,600	)			1,215				(1,200	)
Comprehensive income attributable to Broadstone Net Lease, Inc.		$	76,540			$	(24,660	)		$	22,797

Reconciliation of Non-GAAP Measures

The following is a reconciliation of net income to FFO, Core FFO, and AFFO for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023. Also presented is the weighted average number of shares of our common stock and OP Units used for the diluted per share computation:

		For the Three Months Ended
(in thousands, except per share data)		March 31, 2024				December 31, 2023				March 31, 2023
Net income		$	68,177			$	6,797			$	41,374
Real property depreciation and amortization			37,690				39,115				41,745
Gain on sale of real estate			(59,132	)			(6,270	)			(3,415	)
Provision for impairment on investment in rental properties			26,400				29,801				1,473
FFO		$	73,135			$	69,443			$	81,177
Net write-offs of accrued rental income			2,556				4,161				297
Lease termination fees			—				—				(7,500	)
Severance and executive transition costs			77				218				481
Other (income) expenses1			(1,696	)			1,453				18
Core FFO		$	74,072			$	75,275			$	74,473
Straight-line rent adjustment			(4,980	)			(5,404	)			(7,271	)
Amortization of debt issuance costs			983				983				986
Amortization of net mortgage premiums			—				—				(26	)
Non-capitalized transaction costs			182				—				—
Loss on interest rate swaps and other non-cash interest expense			159				319				522
Amortization of lease intangibles			(1,018	)			(1,014	)			(2,691	)
Stock-based compensation			1,475				1,401				1,492
Deferred taxes			—				(282	)			—
AFFO		$	70,873			$	71,278			$	67,485
Diluted WASO2			196,417				196,373				196,176
Net earnings per diluted share3		$	0.35			$	0.03			$	0.21
FFO per diluted share3			0.37				0.35				0.41
Core FFO per diluted share3			0.38				0.36				0.38
AFFO per diluted share3			0.36				0.36				0.34

1		Amount includes ($1.7) million, $1.5 million, and $18 thousand of unrealized foreign exchange (gain) loss for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, respectively, primarily associated with our Canadian dollar denominated revolving borrowings.
2		Excludes 663,196, 493,524, and 431,392 weighted average shares of unvested restricted common stock for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, respectively.
3		Excludes $0.4 million from the numerator for the three months ended March 31, 2024, and $0.1 million from the numerator for the three months ended December 31, 2023, and March 31, 2023, respectively, related to dividends paid or declared on shares of unvested restricted common stock.

Our reported results and net earnings per diluted share are presented in accordance with GAAP. We also disclose FFO, Core FFO, and AFFO, each of which are non-GAAP measures. We believe the use of FFO, Core FFO, and AFFO are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs. FFO, Core FFO, and AFFO should not be considered alternatives to net income as a performance measure or to cash flows from operations, as reported on our statement of cash flows, or as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures.

We compute FFO in accordance with the standards established by the Board of Governors of Nareit, the worldwide representative voice for REITs and publicly traded real estate companies with an interest in the U.S. real estate and capital markets. Nareit defines FFO as GAAP net income or loss adjusted to exclude net gains (losses) from sales of certain depreciated real estate assets, depreciation and amortization expense from real estate assets, and impairment charges related to certain previously depreciated real estate assets. FFO is used by management, investors, and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers, primarily because it excludes the effect of real estate depreciation and amortization and net gains (losses) on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions.

We compute Core Funds From Operations (“Core FFO”) by adjusting FFO, as defined by Nareit, to exclude certain GAAP income and expense amounts that we believe are infrequently recurring, unusual in nature, or not related to its core real estate operations, including write-offs or recoveries of accrued rental income, lease termination fees, unrealized and realized gains or losses on foreign currency transactions, severance and executive transition costs, and other extraordinary items. Exclusion of these items from similar FFO-type metrics is common within the equity REIT industry, and management believes that presentation of Core FFO provides investors with a metric to assist in their evaluation of our operating performance across multiple periods and in comparison to the operating performance of our peers, because it removes the effect of unusual items that are not expected to impact our operating performance on an ongoing basis.

We compute Adjusted Funds From Operations (“AFFO”), by adjusting Core FFO for certain revenues and expenses that are non-cash or unique in nature, including straight-line rents, amortization of lease intangibles, amortization of debt issuance costs, amortization of net mortgage premiums, non-capitalized transaction costs such as acquisition costs related to deals that failed to transact, (gain) loss on interest rate swaps and other non-cash interest expense, deferred taxes, stock-based compensation, and other specified non-cash items.

Contacts

Company Contact:

Brent Maedl

Director, Corporate Finance & Investor Relations

[email protected]
585.382.8507

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