Hello, and welcome to the Broadstone Net Lease's First Quarter 2022 earnings conference call. My name is Sam, and I will be your operator today. Please note that today's call is being recorded. I'll now turn the call over to Mike Caruso, Senior Vice President of Corporate Finance and Investor Relations of Broadstone. Mike, please go ahead.

Thank you, operator, and thank you, everyone, for joining us today for Broadstone Net Lease's first quarter 2022 earnings call. On today's call, you will hear from our Chief Executive Officer, Chris Czarnecki; our Chief Financial Officer, Ryan Albano; and our Chief Operating Officer, John Moragne, who will be available for Q&A. Before we begin, I would like to remind everyone that the following presentation contains forward-looking statements, which are subject to risks and uncertainties that can cause actual results to differ materially due to a variety of factors. We caution you not to place undue reliance on these forward-looking statements and refer you to our SEC filings, including our Form 10-K for the year ended December 31, 2021, for a more detailed discussion of the risk factors that may cause such differences. Any forward-looking statements provided during this conference call are only made as of the date of this call. I will now turn the call over to our Chief Executive Officer, Chris Czarnecki.

Good afternoon and welcome everyone. I'm pleased to report a strong start to 2022 with a first quarter of solid operating results. The first quarter represented several firsts for BNL including the largest first quarter of acquisition volume, and the strongest start to a year since we began investing in net lease real estate over 15 years ago. Additionally, we completed our first targeted acquisition north of the border, which has expanded our footprint into several very attractive new markets all across Canada. I will provide further details on both of these milestones in just a few moments. But first, I'd like to touch on how our diversified strategy has uniquely positioned us to successfully navigate the current market environment and many of the challenges facing the broader Net Lease space. Following what was a historic year in the Net Lease acquisition market during 2021, the current transaction environment remains highly competitive. Asset prices have generally held firm as substantial amounts of capital from private and public buyers continue to aggressively chase transactions. Although sustained levels of elevated inflation, rising interest rates, and volatility in equity markets pose new challenges in the first few months of the year, our diversified strategy positions us to flexibly navigate this dynamic environment. Our diversified approach to investing allows us to adapt quickly during periods where changes in cap rates lag changes in cost of capital. We are able to adjust our capital allocation decisions across a wider buy box to ensure a consistent flow of acquisition opportunities that meet our evolving cost of capital and our risk-adjusted return expectations. In addition, a smaller asset base provides the ability to remain highly selective while still producing meaningful growth in earnings with relatively modest levels of acquisitions. Granular diversification successfully acted as a defensive hedge during the COVID pandemic. Now, diversification will prove to be an offensive advantage in today's market environment. During the first quarter, we invested $210 million in 27 properties at a weighted average initial cash cap rate of 5.7%. The leases include a strong weighted average lease term of 19.3 years, and solid 1.5% annual rent escalations, translating into a GAAP cap rate of 6.4%. Acquisitions completed during the first quarter continue to showcase how our diversified approach to capital allocation creates a consistent pipeline of attractive opportunities, despite highly competitive market dynamics. Acquisitions completed during Q1 were more heavily weighted towards restaurants and retail at 50% and 37%, respectively, while industrial accounted for the remaining 13%. We remain committed to sourcing and closing acquisitions across all of our core property verticals. While the composition may vary from quarter-to-quarter, we expect the overall portfolio concentration levels by property type to remain stable, given the size of our existing portfolio and the composition of our current pipeline. On the financing side, successful capital markets execution during the second half of 2021 helped to fuel our accretive growth during the first quarter. Capital rates as part of our inaugural public bond and follow-on offerings, coupled with equity issuance via our ATM program in Q4, allowed us to creatively transact on several high-quality opportunities that I'm pleased to provide additional detail on. During the quarter, we acquired a portfolio of 16 upscale restaurants located across 10 different states for a total of $100 million. These will include weighted average annual rent escalations of 1.1% and a weighted average lease term of 19.5 years. The 16 sites were diversified across four different concepts and master leased to a national operator with nearly 50 total locations and over 30 years of experience. The assets are located in attractive retail corridors and exhibit strong operating metrics that translate into robust rent to sales and rent coverage ratios. We're excited to add additional restaurant exposure to the portfolio. Since returning to invest in the restaurant space during Q4, we have thoughtfully and modestly increased our exposure from 13% to 15% of total ABR through two separate restaurant portfolio transactions. We also had nine retail assets in three separate transactions for a total of $83 million during the first quarter. The leases include weighted average annual rent escalations of 1.9% and a weighted average 19.4-year lease term. These retail transactions include our first targeted portfolio acquisition in Canada, which is comprised of six high-quality retail locations master leased to Canada's leading retailer of outdoor recreation gear. The assets are located in premier urban markets, including Vancouver, Calgary, Winnipeg, Ottawa, and Toronto. This milestone transaction has allowed us to meaningfully expand our footprint into new markets through a high-quality portfolio of scale. We now own seven assets in Canada representing 2.4% of total ABR and will continue to evaluate select opportunities north of the border that complement our existing portfolio. Finally, we acquired two industrial assets in transactions for a total of $27 million during the first quarter. The leases include attractive weighted average annual rent escalations of 2.1% and a weighted average lease term of 18.5 years. The largest of the two transactions was a sale leaseback of a food-grade manufacturing facility located in Minneapolis. Fifty percent of their assets footprint is dedicated to cold storage space, and the site is intended to be a small production facility for over 120 prepared food products. The second industrial transaction completed during Q1 was an off-market acquisition of a warehouse specifically leased to one of the largest wholesale distributors of materials in the U.S. The property is located just downtown Oklahoma City. We're thrilled to have both of these industrial assets added to our portfolio amidst what has been a challenging industrial acquisition market. We remain committed to maintaining our underwriting standards and continue to transact on select industrial assets, such as these, that fit within our overall risk-return profile. Since quarter end, we've closed on $27.2 million of transactions and currently have over $164 million of opportunities under control, which we define as executed contracts or letters of intent. With a strong start to the year and a robust pipeline of opportunities, I would like to reiterate our confidence in our ability to issue acquisition guidance of $700 million to $800 million. We remain intensely focused on prudent capital allocation and will continue to prove how our diversified approach to investing provides a unique advantage in the current environment. Our portfolio continues to perform exceptionally well with 100% of base rents collected during the first quarter, an occupancy of 99.8% as of quarter end. All but two of our 752 properties were subject to a lease, and our properties were occupied by 210 different commercial tenants with no single tenant accounting for more than 2.1% of ABR. Our portfolio has been deliberately constructed and is uniquely positioned to weather any singular tenant credit event. I'll now turn the call over to Ryan to provide additional detail on our Q1 2022 results, recent capital market activity, and our current guidance for 2022. Ryan?

Thank you, Chris. And good afternoon, everyone. During the first quarter, we generated AFFO of $60.4 million or $0.35 cents per share, which represents growth on a per share basis of approximately 13% and 3% over our Q1 and Q4 2021 results, respectively. Growth in AFFO this quarter was largely driven by late Q4 acquisitions that closed in December 2021, as well as acquisitions completed during the first quarter. During the quarter, we incurred total G&A expenses of $8.8 million, which includes $7.9 million of cash G&A expenses. During Q1, we sold approximately 6.3 million shares of common stock at a weighted average sale price of $21.82 per share for total net proceeds of $134.3 million. As of quarter-end, there was approximately $235.3 million of capacity remaining on our ATM program. Equity issued via the ATM during Q1 will help fuel our growth objectives for the remainder of the year. We ended the quarter with leverage of 5.1 times net debt to annualized adjusted EBITDAre basis, consistent quarter-over-quarter. We continue to target a conservative leverage profile of less than 6 times. Q1 equity issuance has provided the leverage capacity and liquidity to execute our current acquisition guidance and flexibly navigate the second half of 2022 without compromising the integrity of our balance sheet. As I stated on our Q4 earnings call, we amended and restated our revolving credit facility, upsizing the capacity to $1 billion, extending its maturity date to March of 2026, and reducing the applicable margin to 85 basis points based on our BBB and Baa2 ratings. We also provided for a $500 million sub-limit for Canadian dollar and other foreign currency borrowings, which we used to fund the Canadian portfolio acquisition during the first quarter. For fiscal year 2022, we are reiterating our initial AFFO per share guidance range of between $1.38 and $1.42, which represents an implied growth rate of 6.9% at the midpoint of our guidance range over our 2021 full-year results of $1.31 per share. This guidance range is based on the following key assumptions: Acquisition volume between $700 million and $800 million, which remains unchanged; disposition volume between $75 million and $100 million, which remains unchanged; and total cash G&A between $31 million and $33 million, which remains unchanged. As a reminder, our per-share results for the year are sensitive to both the timing and amount of acquisition, disposition, and capital markets activity that occurs throughout the year. Finally, at our Board Meeting held on April 29, our Directors declared a $0.27 dividend per common share and OP unit to holders of record as of June 30, payable on or before July 15. This represents an increase of approximately 2% over the previous dividend rate. We will continue to evaluate additional future increases to our dividend with our Board on a quarterly basis. With that, I will turn it back over to Chris for closing remarks.

I'm pleased with how we have started 2022, but also recognize that our work is far from complete. We are focused on carrying the momentum of Q1 into the remainder of 2022 and believe that our diversified strategy will continue to yield exceptional results for our shareholders on both the same-store portfolio performance and external growth front. I look forward to seeing many of you in person over the coming months at various industry events. Finally, please be on the lookout for the launch of our new website. Our team is very excited to unveil some new pieces of content with a higher degree of user functionality, and hope it will prove to be useful for all of our stakeholders. This concludes our prepared remarks. Operator, you can now open the line for questions.

Thank you, Chris. We will now begin the Q&A session. We will now take our first question from the line of John Kim with BMO Capital Markets. John, your line is open.

Hey, guys, good afternoon. It's Eric on for John. Maybe kind of sticking with the Canadian expansion. What were some of the key decisions that helped you become more comfortable underwriting assets in the new market? And then maybe going forward, will Canada become a bigger part of the mix in terms of the portfolio?

Absolutely, thanks for the question, Eric. I think we have, even going back to our IPO, talked about potentially being more active in Canada. We had one asset at the IPO and have continued to look at various portfolios along the way that might make sense. And I'll let John talk a little bit more about future activity. But where we got comfortable with this opportunity in the retail space was really the exceptional nature of the portfolio and the opportunity that we could do something a little bit more scaled than a simple one-off acquisition. So as we looked across the markets and an infill location in settings where there's very limited space for further development, that was a really big part of it—the strength of the brand, the 20-year lease, the master lease component, the solid rent growth, and just being able to acquire in some really premier sites across Canada and bigger markets was incredibly attractive for us. So that was a lot of what went into it. In terms of the business, it was a very standard from a regular underwriting procedure, and that was fairly straightforward, but we loved the individual side dynamics here with very low rent to sales and very strong rent coverage ratios and just where the brand has been going through its ownership group and what they've been able to achieve in a relatively short period of time. So, for us, these opportunities don't come along every day. That was one where we felt like these would be cornerstone assets for us in the portfolio given their quality of build, their location, and then what we liked about the tenant. And so that's how we got comfortable with expanding the aperture a little bit to do something north of the border. We took a good hard look at it with our board over the last couple of quarters.

Sure, so I think Canada for us is a really natural expansion of what's already a highly diversified geographic strategy relative to the portfolio. In many ways, we're thinking about our opportunity in Canada in a similar way to the same opportunity in the United States. We're not going to be active often in the largest markets in Canada, but there are some secondary and tertiary markets that we focus on here in the U.S. that we'll be able to focus on in Canada as well. That being said, I don't think anyone should expect that this is going to be a large effort by us in Canada. I think the most exciting part of it is, in the same way that our diversified strategy differentiates us from some of the other competitors on portfolio or sale-leaseback opportunities where we're able to take down the entirety of a portfolio where others aren't able to do so because they don't invest in a particular vertical. We now would be able to do the same thing with Canada, where if there was a larger portfolio sale-leaseback that included some Canadian assets, others may have to exclude, which then makes their bid a little bit less competitive. That should hopefully be a differentiator and a competitive advantage for us. So we're not looking to take a big position overnight in Canada; we will continue to explore opportunities there. But we expect it to be slow and methodical, with a continued commitment to maintaining our highly diversified approach and disciplined underwriting.

I appreciate that and then kind of switching to pricing for a minute. Is there a delta between the U.S. and Canada in terms of cap rates, or are they pretty similar across the border?

Yes, they're very similar. You're looking at sort of the lower cap rates in their largest markets, particularly in Canada with the concentration of the population along the border in their urban centers where there's opportunity for us outside of some transactions like this will be outside of those markets. But those cap rates are pretty consistent in terms of what you're seeing in large urban areas versus secondary markets, similar to the U.S.

All right, thank you guys. Appreciate it.

Thank you, John. The next question is from the line of Ronald Kamdem with Morgan Stanley. Ronald, your line is open.

Thank you so much. You have Rosemary on behalf of Ronald. I had a quick one on the portfolio's tenant health; can you elaborate on that and any headwinds that your tenants might see in the near future? Thank you.

Sure, Rosemary, thank you. I think for us, we've been in a pretty solid position for multiple quarters at this point, from a rent collection perspective, which is obviously the most real-time indicator. Our portfolio review process, and just looking very granularly at each of our tenants on an annual basis through our asset management or property management and credit teams lens has been steady for the past year. Our internal watch list has just a handful of names with a few that came out in this quarter and a few that came off, so nothing particularly material to talk about there. I'd say where we continue to focus our efforts is just making sure that we're aware of any changes that might be happening as a result of inflation or some of the labor pressures and all the topics that we're all discussing and seeing regularly—our discussions with tenants where they might be particularly sensitive to some of those metrics are really where we're focused from a risk management perspective. You can guess where those would be, perhaps on the restaurant side. That just tends to be where we were spending more of our time. But given the performance of those assets and how they've been able to grow sales over the pandemic, and where we are today, it hasn't been an overarching concern yet. But that's generally where we are from a portfolio management perspective.

Awesome, thank you so much.

Thank you.

Thank you, Rosemary. The next question is from Ki Bin Kim of Truist. Ki, your line is open.

Yes, you have Kyle for Ki Bin. I was wondering if you could share what your thoughts were on the capital release strategy for this year. Just give where some of the inputs there have gone.

Kyle, would you mind repeating your question? You got a little quiet there; it was thoughts around and then it got quiet; could you repeat that for us?

Sorry, yes, I'm just talking about if you guys were contemplating a raise towards the end of this year and what those interest rates look like?

Okay, so that potential debt raise and what that would look like, okay. Please, Ryan, go ahead.

Sure, so I think sort of backing up in terms of what we've accomplished so far, and how that's provided flexibility as we continue to move through the year and the volatility that we're seeing in the markets. I would say that as of right now, we don't have a need for a debt offering this year. We have contemplated whether or not there would be an opportunistic point to do so and to term out some of the debt from our revolver into a more permanent basis. However, we don't have the need right now. The markets are clearly choppy; we've seen base rates obviously expand quite a bit, and whatnot in any given week. At this point, it's either 20 basis points up or down, so it's really hard to say where that rate is. What I guess I would say is that given the bond offering that we did last year, as well as some of the revolver work and the increase in our size there, I think we're well-positioned today along with our leverage to be able to continue to pursue our growth objectives without having any need to go to the market anytime soon.

Got you, okay. And I guess, switching over to some of the dispositions guidance, just curious if you guys could share more detail there, on whether or not that's more strategic asset sales or just your general portfolio pruning?

Sure, on the disposition front during the first quarter, we sold one casual dining site that's consistent with sort of a portfolio pruning approach that we've been applying to the casual dining and a few quick-service restaurants over the past 18 months. We do have a few of those assets out there that as we seek to tighten up our master leases and just enhance the overall portfolio quality that is flowing through. Contemplated in the disposition guidance, we also anticipate selling an office asset either late Q3 or Q4 that's under contract. That's been contemplated in our guidance. We negotiated that late last year, so sort of locked into the initial guidance for the year, and that's a little bit of a chunkier asset. But that would really round up here.

Got you, that's helpful. That's all I got on my end. Thanks, guys.

Thank you, Kyle.

Thank you. There are no questions waiting at this time. We do not have any further questions registered in our queue. So I'll hand the call back over to the management team for any closing remarks.

Thank you very much for joining us all today. We had a really strong first quarter, and the team is excited to continue to deliver during the second quarter and execute in our pipeline. As I said before, we look forward to seeing many of you at NAREIT and other events in the coming weeks and months. We'll talk to you again soon. Thank you. Bye.

That concludes the Broadstone Net Lease, Inc. Q1 2022 earnings conference call. Thank you all for your participation. You may now disconnect your lines.