8-K
Broadstone Net Lease, Inc. (BNL)
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| Date of Report (Date of earliest event reported): November 01, 2023 |
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BROADSTONE NET LEASE, INC.
(Exact name of Registrant as Specified in Its Charter)
| Maryland | 001-39529 | 26-1516177 |
|---|---|---|
| (State or Other Jurisdiction<br>of Incorporation) | (Commission File Number) | (IRS Employer<br>Identification No.) |
| 207 High Point Drive<br><br>Suite 300 | ||
| Victor, New York | 14564 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
| Registrant’s Telephone Number, Including Area Code: 585 287-6500 | ||
| --- |
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br>Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.00025 par value | BNL | The New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On November 1, 2023, Broadstone Net Lease, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended September 30, 2023. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. Additionally, on November 1, 2023, the Company made available on its website an updated presentation
containing quarterly supplemental information pertaining to its operations and financial results including the quarter ended September 30, 2023. A copy of the quarterly supplemental information is attached hereto as Exhibit 99.2 and is incorporated herein by reference. The press release and quarterly supplemental information are also available on the Company’s website.
The information contained in this Item 2.02, including the information contained in the press release attached as Exhibit 99.1 hereto and quarterly supplemental information attached as Exhibit 99.2 hereto, are being “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. References to the Company’s website in this Current Report on Form 8-K and in the attached Exhibit 99.1 and Exhibit 99.2 to this Current Report on Form 8-K do not incorporate by reference the information on such website into this Current Report on Form 8-K and the Company disclaims any such incorporation by reference.
Item 9.01 Financial Statements and Exhibits.
| (d) | Exhibits |
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INDEX TO EXHIBITS
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated November 1, 2023 |
| 99.2 | Quarterly Supplemental Information for the Quarter Ended September 30, 2023 |
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
| --- | --- |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| BROADSTONE NET LEASE, INC. | |||
|---|---|---|---|
| Date: | November 1, 2023 | By: | /s/ John D. Callan |
| Name: John D. Callan<br>Title: Senior Vice President, General Counsel and Secretary |
EX-99.1
EXHIBIT 99.1
For Immediate Release
November 1, 2023
| Company Contact:<br><br><br><br>Michael Caruso<br><br>SVP, Corporate Strategy & Investor Relations<br><br>michael.caruso@broadstone.com<br><br>585.402.7842 |
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Broadstone Net Lease Announces Third Quarter 2023 Results
VICTOR, N.Y. – Broadstone Net Lease, Inc. (NYSE: BNL) (“BNL,” the “Company,” “we,” “our,” or “us”), today announced its operating results for the quarter ended September 30, 2023.
THIRD QUARTER 2023 HIGHLIGHTS
| INVESTMENT ACTIVITY | •<br>During the third quarter, we invested $16.5 million in four industrial properties and one retail property, including $4.8 million in revenue generating capital expenditures and $11.7 million in both new and existing development fundings. Revenue generating capital expenditures had a weighted average initial cash capitalization rate of 6.7%, a weighted average initial term of 14.1 years, and minimum annual rent increases of 2.0%. Year-to-date, we have completed investments totaling $101.5 million, including $25.6 million in new property acquisitions, $26.6 million in revenue generating capital expenditures, and $49.3 million in development fundings. The new property acquisitions and revenue generating capital expenditures had a weighted average initial cash capitalization rate of 7.1%.<br><br>•<br>Subsequent to quarter-end, we invested an additional $9.9 million in development fundings and $15.9 million in revenue generating capital expenditures. As of the date of this release, we have $76.1 million of acquisitions under control, $147.4 million of commitments to fund developments, and $12.0 million of commitments to fund revenue generating capital expenditures with existing tenants.<br><br>•<br>During the third quarter we sold two properties for gross proceeds of $62.3 million at a weighted average cash capitalization rate of 6.2%. Year-to-date and through the date of this release, we have sold 11 properties for gross proceeds of $189.1 million at a weighted average cash capitalization rate of 6.0% on tenanted properties. |
|---|---|
| OPERATING RESULTS | •<br>Collected 99.9% of base rents due for the third quarter for all properties subject to a lease.<br><br>•<br>Portfolio was 99.4% leased based on rentable square footage, with only two of our 800 properties vacant and not subject to a lease at quarter end.<br><br>•<br>Incurred $10.1 million of general and administrative expenses, inclusive of $1.5 million of stock-based compensation.<br><br>•<br>Generated net income of $52.1 million, or $0.26 per share.<br><br>•<br>Generated adjusted funds from operations (“AFFO”) of $70.0 million, or $0.36 per share. |
| CAPITAL MARKETS ACTIVITY | •<br>Ended the quarter with total outstanding debt of $1.9 billion, Net Debt of $1.9 billion, and a Net Debt to Annualized Adjusted EBITDAre ratio of 4.9x.<br><br>•<br>At September 30, 2023, had $925.9 million of capacity on our Revolving Credit Facility<br><br>•<br>Declared an increase in our quarterly dividend from $0.28 to $0.285, or a 1.8% increase over the prior period. |
MANAGEMENT COMMENTARY
“We remained highly selective this quarter in light of the current economic environment and rapid increase in interest rates, deploying capital only into previously identified development projects and revenue generating capital expenditures with existing tenants,” said John Moragne, BNL’s Chief Executive Officer. “The pace of cap rate expansion on new deals continued to lag the pace of interest rate increases, eroding risk adjusted returns. Our existing portfolio remains healthy, with 99.9% rent collections on leased properties and minimal vacancies, and we continued to opportunistically dispose of assets with either elevated credit risk or lease rollover risk, recognizing accretive cap rates relative to our cost of debt and new investment opportunities. We continue to be opportunistic in sourcing investment opportunities presented by this distressed lending environment and believe our prudence in capital allocation will preserve and enhance investor value as the economic environment evolves.”
SUMMARIZED FINANCIAL RESULTS
| For the Three Months Ended | For the Nine Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands, except per share data) | September 30,<br>2023 | June 30, <br>2023 | September 30,<br>2022 | September 30,<br>2023 | September 30,<br>2022 | |||||
| Revenues | $ | 109,543 | $ | 109,353 | $ | 103,524 | $ | 337,887 | $ | 295,378 |
| Net income, including non-controlling interests | $ | 52,145 | $ | 62,996 | $ | 28,709 | $ | 156,515 | $ | 92,702 |
| Net earnings per share - diluted | $ | 0.26 | $ | 0.32 | $ | 0.16 | $ | 0.80 | $ | 0.52 |
| FFO | $ | 75,478 | $ | 72,524 | $ | 72,169 | $ | 229,179 | $ | 202,013 |
| FFO per share | $ | 0.39 | $ | 0.37 | $ | 0.39 | $ | 1.17 | $ | 1.13 |
| Core FFO | $ | 74,754 | $ | 74,381 | $ | 66,677 | $ | 223,608 | $ | 196,739 |
| Core FFO per share | $ | 0.38 | $ | 0.38 | $ | 0.36 | $ | 1.14 | $ | 1.10 |
| AFFO | $ | 69,958 | $ | 69,004 | $ | 63,386 | $ | 206,446 | $ | 186,590 |
| AFFO per share | $ | 0.36 | $ | 0.35 | $ | 0.35 | $ | 1.05 | $ | 1.04 |
| Diluted Weighted Average Shares Outstanding | 196,372 | 196,228 | 182,971 | 196,282 | 179,132 |
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 UPDATE
As of September 30, 2023, we owned a diversified portfolio of 800 individual net leased commercial properties with 793 properties located in 44 U.S. states and seven properties located in four Canadian provinces, comprising approximately 38.2 million rentable square feet of operational space. As of September 30, 2023, all but two of our properties were subject to a lease, and our properties were occupied by 220 different commercial tenants, with no single tenant accounting for more than 4.0% of ABR. Properties subject to a lease represent 99.4% 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 September 30, 2023, was 10.5 years and 2.0%, respectively.
BALANCE SHEET AND CAPITAL MARKETS ACTIVITIES
As of September 30, 2023, we had total outstanding debt of $1.9 billion, Net Debt of $1.9 billion, and a Net Debt to Annualized Adjusted EBITDAre ratio of 4.9x. We had $925.9 million of available capacity on our revolving credit facility as of quarter end, and have no material debt maturities until 2026.
We did not raise any equity during the quarter and have approximately $145.4 million of capacity remaining on our ATM Program as of September 30, 2023.
DISTRIBUTIONS
At its October 26, 2023, meeting, our board of directors declared an increase in our quarterly dividend from $0.28 to $0.285 distribution per common share and OP Unit to stockholders and OP unitholders. This increase represents a 1.8% increase over the prior period and is effective for our shareholders of record as of December 29, 2023, payable on or before January 12, 2024.
2023 GUIDANCE
The Company has affirmed its per share guidance range for the 2023 full year and currently expects to report AFFO of between $1.40 and $1.42 per diluted share.
The guidance range is based on the following key assumptions:
(i) investments in real estate properties up to $250 million, revised down from between $300 million and $500 million;
(ii) dispositions of real estate properties of approximately $200 million, in-line with the top end of our previous range of $150 million and $200 million; and
(iii) total cash general and administrative expenses between $31 million and $33 million, revised down from 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 third quarter earnings conference call and audio webcast on Thursday, November 2, 2023, at 10:00 a.m. Eastern Time.
To access the live webcast, which will be available in listen-only mode, please visit: https://events.q4inc.com/attendee/492451212. If you prefer to listen via phone, U.S. participants may dial: 1-833-470-1428 (toll free) or 1-646-904-5544 (local), access code 001761. International access numbers are viewable here: https://www.netroadshow.com/events/global-numbers?confId=56723.
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 phone, U.S. participants may dial: 1-866-813-9403 (toll free) or 1-929-458-6194 (local), access code 528080. The replay will be available via dial-in until Thursday, November 16, 2023. 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 acquires, owns, and manages 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 September 30, 2023, BNL’s diversified portfolio consisted of 800 individual net leased commercial properties with 793 properties located in 44 U.S. states and seven properties located in four Canadian provinces across the industrial, healthcare, restaurant, 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 “may,” “will,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “would be,” “believe,” “continue,” or other similar words. Forward-looking statements, including our 2023 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, 2022, which BNL filed with the SEC on February 23, 2023, which you are encouraged to read, and is 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
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
| December 31,<br>2022 | |||||
|---|---|---|---|---|---|
| Assets | |||||
| Accounted for using the operating method: | |||||
| Land | 752,708 | $ | 768,667 | ||
| Land improvements | 330,214 | 340,385 | |||
| Buildings and improvements | 3,819,745 | 3,888,756 | |||
| Equipment | 9,608 | 10,422 | |||
| Total accounted for using the operating method | 4,912,275 | 5,008,230 | |||
| Less accumulated depreciation | (601,895 | ) | (533,965 | ) | |
| Accounted for using the operating method, net | 4,310,380 | 4,474,265 | |||
| Accounted for using the direct financing method | 26,751 | 27,045 | |||
| Accounted for using the sales-type method | 572 | 571 | |||
| Property under development | 49,819 | — | |||
| Investment in rental property, net | 4,387,522 | 4,501,881 | |||
| Cash and cash equivalents | 35,061 | 21,789 | |||
| Accrued rental income | 152,268 | 135,666 | |||
| Tenant and other receivables, net | 1,372 | 1,349 | |||
| Prepaid expenses and other assets | 42,309 | 64,180 | |||
| Interest rate swap, assets | 79,086 | 63,390 | |||
| Goodwill | 339,769 | 339,769 | |||
| Intangible lease assets, net | 297,656 | 329,585 | |||
| Total assets | 5,335,043 | $ | 5,457,609 | ||
| Liabilities and equity | |||||
| Unsecured revolving credit facility | 74,060 | $ | 197,322 | ||
| Mortgages, net | 79,613 | 86,602 | |||
| Unsecured term loans, net | 895,633 | 894,692 | |||
| Senior unsecured notes, net | 845,121 | 844,555 | |||
| Accounts payable and other liabilities | 44,886 | 47,547 | |||
| Dividends payable | 55,770 | 54,460 | |||
| Accrued interest payable | 9,186 | 7,071 | |||
| Intangible lease liabilities, net | 55,301 | 62,855 | |||
| Total liabilities | 2,059,570 | 2,195,104 | |||
| Commitments and contingencies | |||||
| Equity | |||||
| Broadstone Net Lease, Inc. stockholders' 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, 187,272 and 186,114 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 47 | 47 | |||
| Additional paid-in capital | 3,430,725 | 3,419,395 | |||
| Cumulative distributions in excess of retained earnings | (393,571 | ) | (386,049 | ) | |
| Accumulated other comprehensive income | 83,575 | 59,525 | |||
| Total Broadstone Net Lease, Inc. stockholders' equity | 3,120,776 | 3,092,918 | |||
| Non-controlling interests | 154,697 | 169,587 | |||
| Total equity | 3,275,473 | 3,262,505 | |||
| Total liabilities and equity | 5,335,043 | $ | 5,457,609 |
All values are in US Dollars.
Broadstone Net Lease, Inc. and Subsidiaries
Condensed Consolidated Statements of Income and Comprehensive Income
(in thousands, except per share amounts)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br>2023 | June 30, <br>2023 | September 30,<br>2023 | September 30,<br>2022 | |||||||||
| Revenues | ||||||||||||
| Lease revenues, net | $ | 109,543 | $ | 109,353 | $ | 337,887 | $ | 295,378 | ||||
| Operating expenses | ||||||||||||
| Depreciation and amortization | 38,533 | 39,031 | 119,348 | 109,201 | ||||||||
| Property and operating expense | 5,707 | 4,988 | 16,580 | 15,376 | ||||||||
| General and administrative | 10,143 | 9,483 | 30,043 | 28,058 | ||||||||
| Provision for impairment of investment in rental properties | - | — | 1,473 | 5,535 | ||||||||
| Total operating expenses | 54,383 | 53,502 | 167,444 | 158,170 | ||||||||
| Other income (expenses) | ||||||||||||
| Interest income | 127 | 82 | 370 | 4 | ||||||||
| Interest expense | (19,665 | ) | (20,277 | ) | (61,081 | ) | (54,879 | ) | ||||
| Gain on sale of real estate | 15,163 | 29,462 | 48,040 | 5,328 | ||||||||
| Income taxes | (104 | ) | (448 | ) | (1,030 | ) | (1,169 | ) | ||||
| Other income (expenses) | 1,464 | (1,674 | ) | (227 | ) | 6,210 | ||||||
| Net income | 52,145 | 62,996 | 156,515 | 92,702 | ||||||||
| Net income attributable to non-controlling interests | (2,463 | ) | (2,982 | ) | (7,515 | ) | (5,319 | ) | ||||
| Net income attributable to Broadstone Net <br> Lease, Inc. | $ | 49,682 | $ | 60,014 | $ | 149,000 | $ | 87,383 | ||||
| Weighted average number of common shares outstanding | ||||||||||||
| Basic | 186,766 | 186,733 | 186,545 | 168,680 | ||||||||
| Diluted | 196,372 | 196,228 | 196,282 | 179,132 | ||||||||
| Net earnings per common share | ||||||||||||
| Basic | $ | 0.27 | $ | 0.32 | $ | 0.80 | $ | 0.52 | ||||
| Diluted | $ | 0.26 | $ | 0.32 | $ | 0.80 | $ | 0.52 | ||||
| Comprehensive income | ||||||||||||
| Net income | $ | 52,145 | $ | 62,996 | $ | 156,515 | $ | 92,702 | ||||
| Other comprehensive income | ||||||||||||
| Change in fair value of interest rate swaps | 13,943 | 19,652 | 15,696 | 93,772 | ||||||||
| Realized loss (gain) on interest rate swaps | 522 | 522 | 1,566 | 1,993 | ||||||||
| Comprehensive income | 66,610 | 83,170 | 173,777 | 188,467 | ||||||||
| Comprehensive income attributable to non-controlling <br> interests | (3,147 | ) | (3,937 | ) | (8,285 | ) | (10,809 | ) | ||||
| Comprehensive income attributable to Broadstone Net <br> Lease, Inc. | $ | 63,463 | $ | 79,233 | $ | 165,492 | $ | 177,658 |
Reconciliation of Non-GAAP Measures
The following is a reconciliation of net income to FFO, Core FFO, and AFFO for the three months ended September 30, 2023 and June 30, 2023 and for the nine months ended September 30, 2023 and 2022. 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 | For the Nine Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands, except per share data) | September 30,<br>2023 | June 30, <br>2023 | September 30,<br>2023 | September 30,<br>2022 | ||||||||
| Net income | $ | 52,145 | $ | 62,996 | $ | 156,515 | $ | 92,702 | ||||
| Real property depreciation and amortization | 38,496 | 38,990 | 119,231 | 109,104 | ||||||||
| Gain on sale of real estate | (15,163 | ) | (29,462 | ) | (48,040 | ) | (5,328 | ) | ||||
| Provision for impairment on investment in rental properties | — | — | 1,473 | 5,535 | ||||||||
| FFO | $ | 75,478 | $ | 72,524 | $ | 229,179 | $ | 202,013 | ||||
| Net write-offs of accrued rental income | — | — | 297 | 1,326 | ||||||||
| Lease termination fees | — | — | (7,500 | ) | (791 | ) | ||||||
| Cost of debt extinguishment | — | 3 | 3 | 231 | ||||||||
| Severance and executive transition costs(1) | 740 | 183 | 1,404 | 401 | ||||||||
| Other (income) expenses(2) | (1,464 | ) | 1,671 | 225 | (6,441 | ) | ||||||
| Core FFO | $ | 74,754 | $ | 74,381 | $ | 223,608 | $ | 196,739 | ||||
| Straight-line rent adjustment | (6,785 | ) | (7,276 | ) | (21,332 | ) | (15,075 | ) | ||||
| Adjustment to provision for credit losses | — | (10 | ) | (10 | ) | (5 | ) | |||||
| Amortization of debt issuance costs | 983 | 986 | 2,955 | 2,704 | ||||||||
| Amortization of net mortgage premiums | — | (52 | ) | (78 | ) | (78 | ) | |||||
| Loss on interest rate swaps and other non-cash <br> interest expense | 522 | 521 | 1,565 | 1,993 | ||||||||
| Amortization of lease intangibles | (1,056 | ) | (1,085 | ) | (4,832 | ) | (3,501 | ) | ||||
| Stock-based compensation | 1,540 | 1,539 | 4,570 | 3,813 | ||||||||
| AFFO | $ | 69,958 | $ | 69,004 | $ | 206,446 | $ | 186,590 | ||||
| Diluted WASO(3) | 196,372 | 182,971 | 196,282 | 179,132 | ||||||||
| Net earnings per diluted share(4) | $ | 0.26 | $ | 0.16 | $ | 0.80 | $ | 0.52 | ||||
| FFO per diluted share(4) | 0.39 | 0.37 | 1.17 | 1.13 | ||||||||
| Core FFO per diluted share(4) | 0.38 | 0.38 | 1.14 | 1.10 | ||||||||
| AFFO per diluted share(4) | 0.36 | 0.35 | 1.05 | 1.04 |
1 Amount includes $0.7 million and $0.2 million of employee severance costs and executive transition costs during the three months ended September 30, 2023, and June 30, 2023, respectively. Amount includes $1.4 million of employee severance costs and executive transition costs and $0.4 million of employee severance costs during the nine months ended September 30, 2023 and 2022, respectively.
2 Amount includes $(1.4) million and $1.7 million of unrealized foreign exchange (gain) loss for the three months ended September 30, 2023 and June 30, 2023, respectively, and $0.3 million and $(6.4) million of unrealized foreign exchange loss (gain) for the nine months ended September 30, 2023 and 2022, respectively, primarily associated with our Canadian dollar denominated revolving borrowings.
3 Excludes 506,172, and 504,161 weighted average shares of unvested restricted common stock for the three months ended September 30, 2023 and June 30, 2023, respectively. Excludes 480,849, and 381,220 weighted average shares of unvested restricted common stock for the nine months ended September 30, 2023 and 2022, respectively.
4 Excludes $0.1 million from the numerator for the three months ended September 30, 2023 and June 30, 2023. Excludes $0.4 million and $0.3 million from the numerator for the nine months ended September 30, 2023 and 2022, 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, gains and losses from change in control, 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 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, gain on insurance recoveries, cost of debt extinguishments, 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 AFFO by adjusting Core FFO for certain non-cash revenues and expenses, including straight-line rents, amortization of lease intangibles, amortization of debt issuance costs, amortization of net mortgage premiums, (gain) loss on interest rate swaps and other non-cash interest expense, stock-based compensation, and other specified non-cash items. We believe that excluding such items assists management and investors in distinguishing whether changes in our operations are due to growth or decline of operations at our properties or from other factors. We use AFFO as a measure of our performance when we formulate corporate goals, and is a factor in determining management compensation. We believe that AFFO is a useful supplemental measure for investors to consider because it will help them to better assess our operating performance without the distortions created by non-cash revenues or expenses.
Specific to our adjustment for straight-line rents, our leases include cash rents that increase over the term of the lease to compensate us for anticipated increases in market rental rates over time. Our leases do not include significant front-loading or back-loading of payments, or significant rent-free periods. Therefore, we find it useful to evaluate rent on a contractual basis as it allows for comparison of existing rental rates to market rental rates.
FFO, Core FFO, and AFFO may not be comparable to similarly titled measures employed by other REITs, and comparisons of our FFO, Core FFO, and AFFO with the same or similar measures disclosed by other REITs may not be meaningful.
Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments to FFO that we use to calculate Core FFO and AFFO. In the future, the SEC, Nareit or another regulatory body may decide to standardize the allowable adjustments across the REIT industry and in response to such standardization we may have to adjust our calculation and characterization of Core FFO and AFFO accordingly.
The following is a reconciliation of net income to EBITDA, EBITDAre, and Adjusted EBITDAre, debt to Net Debt and Net Debt to Annualized Adjusted EBITDAre as of and for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022:
| For the Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | September 30,<br>2023 | June 30, <br>2023 | September 30,<br>2022 | ||||||
| Net income | $ | 52,145 | $ | 62,996 | $ | 28,709 | |||
| Depreciation and amortization | 38,533 | 39,031 | 39,400 | ||||||
| Interest expense | 19,665 | 20,277 | 20,095 | ||||||
| Income taxes | 104 | 448 | 356 | ||||||
| EBITDA | $ | 110,447 | $ | 122,752 | $ | 88,560 | |||
| Provision for impairment of investment in rental properties | — | — | 4,155 | ||||||
| Gain on sale of real estate | (15,163 | ) | (29,462 | ) | (61 | ) | |||
| EBITDAre | $ | 95,284 | $ | 93,290 | $ | 92,654 | |||
| Adjustment for current quarter investment activity (1) | 26 | 342 | 2,358 | ||||||
| Adjustment for current quarter disposition activity (2) | (400 | ) | (444 | ) | — | ||||
| Adjustment to exclude non-recurring and other expenses (3) | 740 | 183 | — | ||||||
| Adjustment to exclude realized / unrealized foreign exchange <br> (gain) loss | (1,433 | ) | 1,681 | (4,934 | ) | ||||
| Adjustment to exclude cost of debt extinguishments | — | 3 | 231 | ||||||
| Adjustment to exclude lease termination fees | — | — | (791 | ) | |||||
| Adjusted EBITDAre | $ | 94,217 | $ | 95,055 | $ | 89,518 | |||
| Annualized EBITDAre | $ | 381,136 | $ | 373,160 | $ | 370,616 | |||
| Annualized Adjusted EBITDAre | $ | 376,868 | $ | 380,220 | $ | 358,072 |
1 Reflects an adjustment to give effect to all investments during the quarter as if they had been made as of the beginning of the quarter.
2 Reflects an adjustment to give effect to all dispositions during the quarter as if they had been sold as of the beginning of the quarter.
3 Amount includes $0.7 million and $0.2 million of employee severance and executive transition costs during the three months ended September 30, 2023 and June 30, 2023, respectively.
| (in thousands) | September 30,<br>2023 | June 30, <br>2023 | September 30,<br>2022 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Debt | |||||||||
| Unsecured revolving credit facility | $ | 74,060 | $ | 122,912 | $ | 219,537 | |||
| Unsecured term loans, net | 895,633 | 895,319 | 894,378 | ||||||
| Senior unsecured notes, net | 845,121 | 844,932 | 844,367 | ||||||
| Mortgages, net | 79,613 | 80,141 | 94,753 | ||||||
| Debt issuance costs | 9,360 | 9,872 | 11,498 | ||||||
| Gross Debt | 1,903,787 | 1,953,176 | 2,064,533 | ||||||
| Cash and cash equivalents | (35,061 | ) | (20,763 | ) | (75,912 | ) | |||
| Restricted cash | (15,436 | ) | (15,502 | ) | (6,449 | ) | |||
| Net Debt | $ | 1,853,290 | $ | 1,916,911 | $ | 1,982,172 | |||
| Anticipated proceeds from forward equity agreement | 4.9x | — | (270,732 | ) | |||||
| Pro Forma Net Debt | $ | 1,853,290 | $ | 1,916,911 | $ | 1,711,440 | |||
| Net Debt to Annualized EBITDAre | 4.9x | 5.1x | 5.3x | ||||||
| Net Debt to Annualized Adjusted EBITDAre | 4.9x | 5.0x | 5.5x | ||||||
| Pro Forma Net Debt to Annualized Adjusted EBITDAre | 4.9x | 5.0x | 4.8x |
We define Net Debt as gross debt (total reported debt plus debt issuance costs) less cash and cash equivalents and restricted cash. We believe that the presentation of Net Debt to Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre is useful to investors and analysts because these ratios provide information about gross debt less cash and cash equivalents, which could be used to repay debt, compared to our performance as measured using EBITDAre.
We compute EBITDA as earnings before interest, income taxes and depreciation and amortization. EBITDA is a measure commonly used in our industry. We believe that this ratio provides investors and analysts with a measure of our performance that includes our operating results unaffected by the differences in capital structures, capital investment cycles and useful life of related assets compared to other companies in our industry. We compute EBITDAre in accordance with the definition adopted by Nareit, as EBITDA excluding gains (losses) from the sales of depreciable property and provisions for impairment on investment in real estate. We believe EBITDA and EBITDAre are useful to investors and analysts because they provide important supplemental information about our operating performance exclusive of certain non-cash and other costs. EBITDA and EBITDAre are not measures of financial performance under GAAP, and our EBITDA and EBITDAre may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA and EBITDAre as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.
We are focused on a disciplined and targeted investment strategy, together with active asset management that includes selective sales of properties. We manage our leverage profile using a ratio of Net Debt to Annualized Adjusted EBITDAre, discussed below, which we believe is a useful measure of our ability to repay debt and a relative measure of leverage, and is used in communications with our lenders and rating agencies regarding our credit rating. As we fund new investments using our unsecured revolving credit facility, our leverage profile and Net Debt will be immediately impacted by current quarter investments. However, the full benefit of EBITDAre from new investments will not be received in the same quarter in which the properties are acquired. Additionally, EBITDAre for the quarter includes amounts generated by properties that have been sold during the quarter. Accordingly, the variability in EBITDAre caused by the timing of our investments and dispositions can temporarily distort our leverage ratios. We adjust EBITDAre (“Adjusted EBITDAre”) for the most recently completed quarter (i) to recalculate as if all investments and dispositions had occurred at the beginning of the quarter, (ii) to exclude certain GAAP income and expense amounts that are either non-cash, such as cost of debt extinguishments, realized or unrealized gains and losses on foreign currency transactions, or gains on insurance recoveries, or that we believe are one time, or unusual in nature because they relate to unique circumstances or transactions that had not previously occurred and which we do not anticipate occurring in the future, and (iii) to eliminate the impact of lease termination fees and other items, that are not a result of normal operations. While investments in property developments have an immediate impact to Net Debt, we do not make an adjustment to EBITDAre until the quarter in which the lease commences. We then annualize quarterly Adjusted EBITDAre by multiplying it by four (“Annualized Adjusted EBITDAre”). You should not unduly rely on this measure as it is based on assumptions and estimates that may prove to be inaccurate. Our actual reported EBITDAre for future periods may be significantly different from our Annualized Adjusted EBITDAre. Adjusted EBITDAre and Annualized Adjusted EBITDAre are not measurements of performance under GAAP, and our Adjusted EBITDAre and Annualized Adjusted EBITDAre may not be comparable to similarly titled measures of other companies. You should not consider our Adjusted EBITDAre and Annualized Adjusted EBITDAre as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.
EX-99.2
Exhibit 99.2
Q1 2023 QUARTERLY SUPPLEMENTAL INFORMATION Broadstone Net Lease, Inc. (NYSE: BNL) is a Real Estate Investment Trust (REIT) that acquires, owns, and manages single-tenant commercial real estate properties that are net leased on a long-term basis to a diversified group of tenants. www.broadstone.com
Table of Contents
| Section | Page |
|---|---|
| About the Data | 3 |
| Company Overview | 4 |
| Quarterly Financial Summary | 5 |
| Balance Sheet | 6 |
| Income Statement Summary | 7 |
| Funds From Operations (FFO), Core Funds From Operations (Core FFO), and Adjusted Funds From Operations (AFFO) | 8 |
| EBITDA, EBITDAre, and Other Non-GAAP Operating Measures | 9 |
| Lease Revenues Detail | 10 |
| Capital Structure | 11 |
| Equity Rollforward | 12 |
| Debt Outstanding | 13 |
| Net Debt Metrics | 14 |
| Covenants | 15 |
| Debt Maturities | 16 |
| Investment Activity | 17 |
| Dispositions | 18 |
| Portfolio at a Glance: Key Metrics | 19 |
| Diversification: Tenants and Brands | 20-23 |
| Diversification: Property Type | 24-25 |
| Key Statistics by Property Type | 26 |
| Diversification: Tenant Industry | 27 |
| Diversification: Geography | 28 |
| Lease Expirations | 29 |
| Portfolio Occupancy | 30 |
| Definitions and Explanations | 31-32 |
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 2
About the Data
This data and other information described herein are as of and for the three months ended September 30, 2023 unless otherwise indicated. Future performance may not be consistent with past performance and is subject to change and inherent risks and uncertainties. This information should be read in conjunction with Broadstone Net Lease, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2022, including the financial statements and the management's discussion and analysis of financial condition and results of operations sections.
Forward Looking Statements
Information set forth herein contains forward-looking statements, which reflect our current views regarding our business, financial performance, growth prospects and strategies, market opportunities, and market trends. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "approximately," "projects," "predicts," "intends," "plans," "estimates," "anticipates," or the negative version of these words or other comparable words. All of the forward-looking statements herein are subject to various risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results, performance, and achievements could differ materially from those expressed in or by the forward-looking statements and may be affected by a variety of risks and other factors. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from such forward-looking statements. These factors include, but are not limited to, 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, and property acquisitions and the timing of these investments and acquisitions. These and other risks, assumptions, and uncertainties are described in our filings with the SEC, which are available on the SEC's website at www.sec.gov.
You are cautioned not to place undue reliance on any forward-looking statements included herein. All forward-looking statements are made as of the date of this document and the risk that actual results, performance, and achievements will differ materially from the expectations expressed or referenced herein will increase with the passage of time. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by law.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 3
Company Overview
Broadstone Net Lease, Inc. (NYSE:BNL) (the "Company," "BNL," "us," "our" and "we") is an industrial-focused, diversified net lease real estate investment trust ("REIT") that acquires, owns, and manages primarily single-tenant commercial real estate properties that are net leased on a long-term basis to a diversified group of tenants. Since our inception, we have selectively invested in real estate across the industrial, healthcare, restaurant, retail, and office property types. We target properties with credit worthy tenants in industries characterized by positive business drivers and trends, where the properties are an integral part of the tenants' businesses and there are opportunities to secure long-term net leases. Through long-term net leases, our tenants are able to retain operational control of their strategically important locations, while allocating their debt and equity capital to fund core business operations rather than real estate ownership.
| Executive Team<br><br>John D. Moragne<br><br>Chief Executive Officer and Member, Board of Directors<br><br>Ryan M. Albano<br><br>President and Chief Operating Officer<br><br>Kevin M. Fennell<br><br>Executive Vice President and Chief Financial Officer<br><br>John D. Callan, Jr.<br><br>Senior Vice President, General Counsel, and Secretary<br><br>Michael B. Caruso<br><br>Senior Vice President, Corporate Strategy & Investor Relations<br><br>Timothy D. Dieffenbacher<br><br>Senior Vice President, Chief Accounting Officer, and Treasurer<br><br>Jennie L. O'Brien<br><br>Senior Vice President, Accounting, and Controller<br><br>Roderick A. Pickney<br><br>Senior Vice President, Acquisitions<br><br>Molly Kelly Wiegel<br><br>Senior Vice President, Human Resources & Administration<br><br>Andrea T. Wright<br><br>Senior Vice President, Property Management | Board of Directors<br><br>Laurie A. Hawkes<br><br>Chairman of the Board<br><br>John D. Moragne<br><br>Chief Executive Officer<br><br>Denise Brooks-Williams<br><br>Michael A. Coke<br><br>Jessica Duran<br><br>Laura Felice<br><br>David M. Jacobstein<br><br>Shekar Narasimhan<br><br>James H. Watters |
|---|---|
| Company Contact Information<br><br>Michael Caruso<br>SVP, Corporate Strategy & Investor Relations<br><br>michael.caruso@broadstone.com<br><br>585-402-7842<br><br><br><br><br><br>Transfer Agent<br><br>Computershare Trust Company, N.A.<br><br>150 Royall Street<br><br>Canton, Massachusetts 02021<br><br>800-736-3001 | |
| --- |
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 4
Quarterly Financial Summary
(unaudited, dollars in thousands, except per share data)
| Q3 2023 | Q2 2023 | Q1 2023 | Q4 2022 | Q3 2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Financial Summary | |||||||||||||||
| Investment in rental property | $ | 4,939,598 | $ | 4,981,430 | $ | 5,002,330 | $ | 5,035,846 | $ | 4,775,460 | |||||
| Less accumulated depreciation | (601,895 | ) | (578,616 | ) | (558,410 | ) | (533,965 | ) | (505,456 | ) | |||||
| Property under development | 49,819 | 37,449 | — | — | — | ||||||||||
| Investment in rental property, net | 4,387,522 | 4,440,263 | 4,443,920 | 4,501,881 | 4,270,004 | ||||||||||
| Cash and cash equivalents | 35,061 | 20,763 | 15,412 | 21,789 | 75,912 | ||||||||||
| Restricted cash | 15,436 | 15,502 | 3,898 | 38,251 | 6,449 | ||||||||||
| Total assets | 5,335,043 | 5,368,150 | 5,335,868 | 5,457,609 | 5,239,192 | ||||||||||
| Unsecured revolving credit facility | 74,060 | 122,912 | 108,330 | 197,322 | 219,537 | ||||||||||
| Mortgages, net | 79,613 | 80,141 | 85,853 | 86,602 | 94,753 | ||||||||||
| Unsecured term loans, net | 895,633 | 895,319 | 895,006 | 894,692 | 894,378 | ||||||||||
| Senior unsecured notes, net | 845,121 | 844,932 | 844,744 | 844,555 | 844,367 | ||||||||||
| Total liabilities | 2,059,570 | 2,106,553 | 2,103,551 | 2,195,104 | 2,231,045 | ||||||||||
| Total Broadstone Net Lease, Inc. <br> stockholders' equity | 3,120,776 | 3,107,536 | 3,079,207 | 3,092,918 | 2,840,692 | ||||||||||
| Total equity (book value) | 3,275,473 | 3,261,597 | 3,232,317 | 3,262,505 | 3,008,147 | ||||||||||
| Revenues | 109,543 | 109,353 | 118,992 | 112,135 | 103,524 | ||||||||||
| General and administrative - <br> other | 8,603 | 7,944 | 8,924 | 7,814 | 8,439 | ||||||||||
| Stock based compensation | 1,540 | 1,539 | 1,492 | 1,503 | 1,503 | ||||||||||
| General and administrative | 10,143 | 9,483 | 10,416 | 9,317 | 9,942 | ||||||||||
| Total operating expenses | 54,383 | 53,502 | 59,559 | 61,320 | 59,133 | ||||||||||
| Interest expense | 19,665 | 20,277 | 21,139 | 23,773 | 20,095 | ||||||||||
| Net income | 52,145 | 62,996 | 41,374 | 36,773 | 28,709 | ||||||||||
| Net earnings per common share,<br> diluted | $ | 0.26 | $ | 0.32 | $ | 0.21 | $ | 0.20 | $ | 0.16 | |||||
| FFO | 75,478 | 72,524 | 81,177 | 71,718 | 72,169 | ||||||||||
| FFO per share, diluted | $ | 0.39 | $ | 0.37 | $ | 0.41 | $ | 0.39 | $ | 0.39 | |||||
| Core FFO | 74,754 | 74,381 | 74,473 | 70,527 | 66,677 | ||||||||||
| Core FFO per share, diluted | $ | 0.38 | $ | 0.38 | $ | 0.38 | $ | 0.38 | $ | 0.36 | |||||
| AFFO | 69,958 | 69,004 | 67,485 | 65,584 | 63,386 | ||||||||||
| AFFO per share, diluted | $ | 0.36 | $ | 0.35 | $ | 0.34 | $ | 0.36 | $ | 0.35 | |||||
| Net cash provided by operating <br> activities | 73,888 | 62,228 | 74,376 | 60,440 | 77,515 | ||||||||||
| Net cash used in investing <br> activities | 42,528 | 1,713 | 29,633 | (274,485 | ) | (205,187 | ) | ||||||||
| Net cash provided by financing <br> activities | (102,184 | ) | (46,986 | ) | (144,739 | ) | 191,724 | 181,057 | |||||||
| Distributions declared | 54,274 | 55,419 | 54,887 | 45,824 | 46,242 | ||||||||||
| Distributions declared per diluted <br> share | $ | 0.280 | $ | 0.280 | $ | 0.275 | $ | 0.275 | $ | 0.270 |
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 5
Balance Sheet
(unaudited, in thousands)
| June 30,<br>2023 | March 31,<br>2023 | December 31,<br>2022 | September 30,<br>2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Assets | ||||||||||||||
| Accounted for using the operating method: | ||||||||||||||
| Land | 752,708 | $ | 754,402 | $ | 760,142 | $ | 768,667 | $ | 755,206 | |||||
| Land improvements | 330,214 | 332,757 | 337,296 | 340,385 | 331,858 | |||||||||
| Buildings and improvements | 3,819,745 | 3,857,236 | 3,866,952 | 3,888,756 | 3,650,275 | |||||||||
| Equipment | 9,608 | 9,608 | 10,422 | 10,422 | 10,422 | |||||||||
| Total accounted for using the operating method | 4,912,275 | 4,954,003 | 4,974,812 | 5,008,230 | 4,747,761 | |||||||||
| Less accumulated depreciation | (601,895 | ) | (578,616 | ) | (558,410 | ) | (533,965 | ) | (505,456 | ) | ||||
| Accounted for using the operating method, net | 4,310,380 | 4,375,387 | 4,416,402 | 4,474,265 | 4,242,305 | |||||||||
| Accounted for using the direct financing method | 26,751 | 26,855 | 26,947 | 27,045 | 27,128 | |||||||||
| Accounted for using the sales-type method | 572 | 572 | 571 | 571 | 571 | |||||||||
| Property under development | 49,819 | 37,449 | — | — | — | |||||||||
| Investment in rental property, net | 4,387,522 | 4,440,263 | 4,443,920 | 4,501,881 | 4,270,004 | |||||||||
| Cash and cash equivalents | 35,061 | 20,763 | 15,412 | 21,789 | 75,912 | |||||||||
| Accrued rental income | 152,268 | 148,697 | 142,031 | 135,666 | 129,579 | |||||||||
| Tenant and other receivables, net | 1,372 | 1,895 | 2,004 | 1,349 | 791 | |||||||||
| Prepaid expenses and other assets | 42,309 | 42,322 | 29,764 | 64,180 | 34,221 | |||||||||
| Interest rate swap, assets | 79,086 | 65,143 | 45,490 | 63,390 | 66,602 | |||||||||
| Goodwill | 339,769 | 339,769 | 339,769 | 339,769 | 339,769 | |||||||||
| Intangible lease assets, net | 297,656 | 309,298 | 317,478 | 329,585 | 322,314 | |||||||||
| Total assets | 5,335,043 | $ | 5,368,150 | $ | 5,335,868 | $ | 5,457,609 | $ | 5,239,192 | |||||
| Liabilities and equity | ||||||||||||||
| Unsecured revolving credit facility | 74,060 | $ | 122,912 | $ | 108,330 | $ | 197,322 | $ | 219,537 | |||||
| Mortgages, net | 79,613 | 80,141 | 85,853 | 86,602 | 94,753 | |||||||||
| Unsecured term loans, net | 895,633 | 895,319 | 895,006 | 894,692 | 894,378 | |||||||||
| Senior unsecured notes, net | 845,121 | 844,932 | 844,744 | 844,555 | 844,367 | |||||||||
| Accounts payable and other liabilities | 44,886 | 44,147 | 46,090 | 47,547 | 52,594 | |||||||||
| Dividends payable | 55,770 | 55,640 | 54,515 | 54,460 | 49,886 | |||||||||
| Accrued interest payable | 9,186 | 5,889 | 9,654 | 7,071 | 10,559 | |||||||||
| Intangible lease liabilities, net | 55,301 | 57,573 | 59,359 | 62,855 | 64,971 | |||||||||
| Total liabilities | 2,059,570 | 2,106,553 | 2,103,551 | 2,195,104 | 2,231,045 | |||||||||
| Equity | ||||||||||||||
| Broadstone Net Lease, Inc. stockholders' equity: | ||||||||||||||
| Preferred stock, 0.001 par value | — | — | — | — | — | |||||||||
| Common stock, 0.00025 par value | 47 | 47 | 47 | 47 | 43 | |||||||||
| Additional paid-in capital | 3,430,725 | 3,430,692 | 3,434,534 | 3,419,395 | 3,148,075 | |||||||||
| Cumulative distributions in excess of retained earnings | (393,571 | ) | (391,631 | ) | (398,890 | ) | (386,049 | ) | (369,260 | ) | ||||
| Accumulated other comprehensive Income | 83,575 | 68,428 | 43,516 | 59,525 | 61,834 | |||||||||
| Total Broadstone Net Lease, Inc. stockholders’ equity | 3,120,776 | 3,107,536 | 3,079,207 | 3,092,918 | 2,840,692 | |||||||||
| Non-controlling interests | 154,697 | 154,061 | 153,110 | 169,587 | 167,455 | |||||||||
| Total equity | 3,275,473 | 3,261,597 | 3,232,317 | 3,262,505 | 3,008,147 | |||||||||
| Total liabilities and equity | 5,335,043 | $ | 5,368,150 | $ | 5,335,868 | $ | 5,457,609 | $ | 5,239,192 |
All values are in US Dollars.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 6
Income Statement Summary
(unaudited, in thousands, except per share data)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br>2023 | June 30,<br>2023 | March 31,<br>2023 | December 31,<br>2022 | September 30,<br>2022 | |||||||||||
| Revenues | |||||||||||||||
| Lease revenues, net | $ | 109,543 | $ | 109,353 | $ | 118,992 | $ | 112,135 | $ | 103,524 | |||||
| Operating expenses | |||||||||||||||
| Depreciation and amortization | 38,533 | 39,031 | 41,784 | 45,606 | 39,400 | ||||||||||
| Property and operating <br> expense | 5,707 | 4,988 | 5,886 | 6,397 | 5,636 | ||||||||||
| General and administrative | 10,143 | 9,483 | 10,416 | 9,317 | 9,942 | ||||||||||
| Provision for impairment of <br> investment in rental <br> properties | — | — | 1,473 | — | 4,155 | ||||||||||
| Total operating expenses | 54,383 | 53,502 | 59,559 | 61,320 | 59,133 | ||||||||||
| Other income (expenses) | |||||||||||||||
| Interest income | 127 | 82 | 162 | 40 | 4 | ||||||||||
| Interest expense | (19,665 | ) | (20,277 | ) | (21,139 | ) | (23,773 | ) | (20,095 | ) | |||||
| Gain on sale of real estate | 15,163 | 29,462 | 3,415 | 10,625 | 61 | ||||||||||
| Income taxes | (104 | ) | (448 | ) | (479 | ) | (106 | ) | (356 | ) | |||||
| Other (expenses) income | 1,464 | (1,674 | ) | (18 | ) | (828 | ) | 4,704 | |||||||
| Net income | 52,145 | 62,996 | 41,374 | 36,773 | 28,709 | ||||||||||
| Net income attributable to <br> non-controlling interests | (2,463 | ) | (2,982 | ) | (2,070 | ) | (2,041 | ) | (1,600 | ) | |||||
| Net income attributable to <br> Broadstone Net Lease, Inc. | $ | 49,682 | $ | 60,014 | $ | 39,304 | $ | 34,732 | $ | 27,109 | |||||
| Weighted average number of common shares outstanding | |||||||||||||||
| Basic1 | 186,766 | 186,733 | 186,130 | 173,283 | 172,578 | ||||||||||
| Diluted1 | 196,372 | 196,228 | 196,176 | 183,592 | 182,971 | ||||||||||
| Net earnings per common share2 | |||||||||||||||
| Basic | $ | 0.27 | $ | 0.32 | $ | 0.21 | $ | 0.20 | $ | 0.16 | |||||
| Diluted | $ | 0.26 | $ | 0.32 | $ | 0.21 | $ | 0.20 | $ | 0.16 |
1 Excludes 506,172, 504,161, 431,392, 396,924, and 395,441, weighted average shares of unvested restricted common stock for the three months ended September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022, respectively.
2 Excludes $0.1 million from the numerator for the three months ended September 30, 2023, and June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022, related to dividends declared on shares of unvested restricted stock.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 7
Funds From Operations (FFO), Core Funds From Operations (Core FFO), and Adjusted Funds From Operations (AFFO)
(unaudited, in thousands, except per share data)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br>2023 | June 30,<br>2023 | March 31,<br>2023 | December 31,<br>2022 | September 30,<br>2022 | |||||||||||
| Net income | $ | 52,145 | $ | 62,996 | $ | 41,374 | $ | 36,773 | $ | 28,709 | |||||
| Real property depreciation and <br> amortization | 38,496 | 38,990 | 41,745 | 45,570 | 39,366 | ||||||||||
| Gain on sale of real estate | (15,163 | ) | (29,462 | ) | (3,415 | ) | (10,625 | ) | (61 | ) | |||||
| Provision for impairment of investment <br> in rental properties | — | — | 1,473 | — | 4,155 | ||||||||||
| FFO | $ | 75,478 | $ | 72,524 | $ | 81,177 | $ | 71,718 | $ | 72,169 | |||||
| Net write-offs of accrued rental income | — | — | 297 | — | — | ||||||||||
| Lease termination fees | — | — | (7,500 | ) | (1,678 | ) | (791 | ) | |||||||
| Cost of debt extinguishment | — | 3 | — | 77 | 231 | ||||||||||
| Gain on insurance recoveries | — | — | — | (341 | ) | — | |||||||||
| Severance and executive transition costs1 | 740 | 183 | 481 | — | 3 | ||||||||||
| Other (income) expenses2 | (1,464 | ) | 1,671 | 18 | 751 | (4,935 | ) | ||||||||
| Core FFO | $ | 74,754 | $ | 74,381 | $ | 74,473 | $ | 70,527 | $ | 66,677 | |||||
| Straight-line rent adjustment | (6,785 | ) | (7,276 | ) | (7,271 | ) | (6,826 | ) | (5,175 | ) | |||||
| Adjustment to provision for credit <br> losses | — | (10 | ) | — | — | (4 | ) | ||||||||
| Amortization of debt issuance costs | 983 | 986 | 986 | 988 | 948 | ||||||||||
| Amortization of net mortgage <br> premiums | — | (52 | ) | (26 | ) | (26 | ) | (26 | ) | ||||||
| Loss on interest rate swaps and <br> other non-cash interest expense | 522 | 521 | 522 | 522 | 639 | ||||||||||
| Amortization of lease intangibles | (1,056 | ) | (1,085 | ) | (2,691 | ) | (1,308 | ) | (1,176 | ) | |||||
| Stock-based compensation | 1,540 | 1,539 | 1,492 | 1,503 | 1,503 | ||||||||||
| Deferred taxes | — | — | — | 204 | — | ||||||||||
| AFFO | $ | 69,958 | $ | 69,004 | $ | 67,485 | $ | 65,584 | $ | 63,386 | |||||
| Diluted weighted average shares <br> outstanding3 | 196,372 | 196,228 | 196,176 | 183,592 | 182,971 | ||||||||||
| Net earnings per diluted share4 | $ | 0.26 | $ | 0.32 | $ | 0.21 | $ | 0.20 | $ | 0.16 | |||||
| FFO per diluted share4 | 0.39 | 0.37 | 0.41 | 0.39 | 0.39 | ||||||||||
| Core FFO per diluted share4 | 0.38 | 0.38 | 0.38 | 0.38 | 0.36 | ||||||||||
| AFFO per diluted share4 | 0.36 | 0.35 | 0.34 | 0.36 | 0.35 |
1 Amount includes $0.7 million and $ 0.2 million of employee severance costs and executive transition costs during the three months ended September 30, 2023 and the three months ended June 30, 2023. Amounts include a combined $0.5 million of executive transition costs and accelerated amortization of stock-based compensation for the three months ended March 31, 2023, related to the departure of our previous chief executive officer.
2 Amount includes $(1.4) million, $1.7 million, $18 thousand, $0.8 million, and ($4.9) million of unrealized and realized foreign exchange (gain) loss for the three months ended September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, respectively, primarily associated with our Canadian dollar denominated revolver borrowings.
3 Excludes 506,172, 504,161, 431,392, 396,924, and 395,441, weighted average shares of unvested restricted common stock for the three months ended September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022, respectively.
4 Excludes $0.1 million from the numerator for the three months ended September 30, 2023, and June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022, related to dividends declared on shares of unvested restricted stock.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 8
EBITDA, EBITDAre, and Other-Non GAAP Operating Measures
(unaudited, in thousands)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br>2023 | June 30,<br>2023 | March 31,<br>2023 | December 31,<br>2022 | September 30,<br>2022 | |||||||||||
| Net income | $ | 52,145 | $ | 62,996 | $ | 41,374 | $ | 36,773 | $ | 28,709 | |||||
| Depreciation and amortization | 38,533 | 39,031 | 41,784 | 45,606 | 39,400 | ||||||||||
| Interest expense | 19,665 | 20,277 | 21,139 | 23,773 | 20,095 | ||||||||||
| Income taxes | 104 | 448 | 479 | 105 | 356 | ||||||||||
| EBITDA | $ | 110,447 | $ | 122,752 | $ | 104,776 | $ | 106,257 | $ | 88,560 | |||||
| Provision for impairment of investment in <br> rental properties | — | — | 1,473 | — | 4,155 | ||||||||||
| Gain on sale of real estate | (15,163 | ) | (29,462 | ) | (3,415 | ) | (10,625 | ) | (61 | ) | |||||
| EBITDAre | $ | 95,284 | $ | 93,290 | $ | 102,834 | $ | 95,632 | $ | 92,654 | |||||
| Adjustment for current quarter investment activity 1 | 26 | 342 | 406 | 1,283 | 2,358 | ||||||||||
| Adjustment for current quarter disposition activity 2 | (400 | ) | (444 | ) | (365 | ) | (440 | ) | — | ||||||
| Adjustment to exclude non-recurring and other expenses 3 | 740 | 183 | (1,023 | ) | — | — | |||||||||
| Adjustment to exclude gain on insurance recoveries | — | — | — | (341 | ) | — | |||||||||
| Adjustment to exclude net write-offs of accrued rental income | — | — | 297 | — | — | ||||||||||
| Adjustment to exclude realized / unrealized foreign exchange (gain) loss | (1,433 | ) | 1,681 | 18 | 796 | (4,934 | ) | ||||||||
| Adjustment to exclude cost of debt extinguishments | — | 3 | — | 77 | 231 | ||||||||||
| Adjustment to exclude lease termination fees | — | — | (7,500 | ) | (1,678 | ) | (791 | ) | |||||||
| Adjusted EBITDAre | $ | 94,217 | $ | 95,055 | $ | 94,667 | $ | 95,329 | $ | 89,518 | |||||
| General and administrative | 9,404 | 9,300 | 9,935 | 9,318 | 9,942 | ||||||||||
| Adjusted Net Operating Income ("NOI") | $ | 103,621 | $ | 104,355 | $ | 104,602 | $ | 104,647 | $ | 99,460 | |||||
| Straight-line rental revenue, net | (6,744 | ) | (7,277 | ) | (7,425 | ) | (7,315 | ) | (5,750 | ) | |||||
| Other amortization and non-cash charges | (1,087 | ) | (1,095 | ) | (1,668 | ) | (1,353 | ) | (1,177 | ) | |||||
| Adjusted Cash NOI | $ | 95,789 | $ | 95,983 | $ | 95,509 | $ | 95,979 | $ | 92,533 | |||||
| Annualized EBITDAre | $ | 381,136 | $ | 373,160 | $ | 411,336 | $ | 382,528 | $ | 370,616 | |||||
| Annualized Adjusted EBITDAre | 376,868 | 380,220 | 378,668 | 381,315 | 358,072 | ||||||||||
| Annualized Adjusted NOI | 414,483 | 417,420 | 418,411 | 418,585 | 397,834 | ||||||||||
| Annualized Adjusted Cash NOI | 383,157 | 383,932 | 382,043 | 383,914 | 370,128 |
1 Reflects an adjustment to give effect to all investments during the quarter as if they had been made as of the beginning of the quarter.
2 Reflects an adjustment to give effect to all dispositions during the quarter as if they had been sold as of the beginning of the quarter.
3 Amount includes $0.7 million and $ 0.2 million of employee severance costs and executive transition costs during the three months ended September 30, 2023 and the three months ended June 30, 2023. Amounts include a combined $0.5 million of executive transition costs and accelerated amortization of stock-based compensation for the three months ended March 31, 2023, related to the departure of our previous chief executive officer. Additionally amount includes $(1.5) million of accelerated amortization of lease intangibles during the three months ended March 31, 2023.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 9
Lease Revenues Detail
(unaudited, in thousands)
| Three Months Ended | |||||
|---|---|---|---|---|---|
| September 30,<br>2023 | June 30,<br>2023 | March 31,<br>2023 | December 31,<br>2022 | September 30,<br>2022 | |
| Contractual rental amounts billed for <br> operating leases | $96,333 | $96,456 | $98,102 | $96,208 | $91,208 |
| Adjustment to recognize contractual <br> operating lease billings on a straight-<br> line basis | 6,891 | 7,380 | 7,370 | 6,898 | 5,344 |
| Net write-offs of accrued rental income | — | — | (105) | — | — |
| Variable rental amounts earned | 513 | 452 | 341 | 721 | 309 |
| Earned income from direct financing <br> leases | 687 | 689 | 691 | 693 | 719 |
| Interest income from sales-type <br> leases | 14 | 15 | 14 | 15 | 14 |
| Operating expenses billed to tenants | 5,181 | 4,594 | 5,075 | 5,720 | 5,061 |
| Other income from real estate <br> transactions | 19 | 3 | 7,392 | 2,019 | 874 |
| Adjustment to revenue recognized for <br> uncollectible rental amounts billed, net | (95) | (236) | 112 | (139) | (5) |
| Total Lease revenues, net | $109,543 | $109,353 | $118,992 | $112,135 | $103,524 |
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 10
Capital Structure
(in thousands, except per share data)
| EQUITY | |||
|---|---|---|---|
| Shares of Common Stock | 187,272 | ||
| OP Units | 9,283 | ||
| Common Stock & OP Units | 196,555 | ||
| Price Per Share / Unit at September 30, 2023 | $ | 14.30 | |
| IMPLIED EQUITY MARKET CAPITALIZATION | $ | 2,810,737 | |
| % of Total Capitalization | 59.6 | % | |
| DEBT | |||
| Unsecured Revolving Credit Facility - 2026 | $ | 74,060 | |
| Unsecured Term Loans | 900,000 | ||
| Unsecured Term Loan - 2026 | 400,000 | ||
| Unsecured Term Loan - 2027 | 200,000 | ||
| Unsecured Term Loan - 2029 | 300,000 | ||
| Senior Unsecured Notes | 850,000 | ||
| Senior Unsecured Notes - 2027 | 150,000 | ||
| Senior Unsecured Notes - 2028 | 225,000 | ||
| Senior Unsecured Notes - 2030 | 100,000 | ||
| Senior Unsecured Public Notes - 2031 | 375,000 | ||
| Mortgage Debt - Various | 79,727 | ||
| TOTAL DEBT | $ | 1,903,787 | |
| % of Total Capitalization | 40.4 | % | |
| Floating Rate Debt % | 0.0 | % | |
| Fixed Rate Debt % | 100.0 | % | |
| Secured Debt % | 4.2 | % | |
| Unsecured Debt % | 95.8 | % | |
| Total Capitalization | $ | 4,714,524 | |
| Less: Cash and Cash Equivalents | (35,061 | ) | |
| Enterprise Value | $ | 4,679,463 |
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 11
Equity Rollforward
(in thousands)
| Shares of Common Stock | OP Units | Total Diluted Shares | |
|---|---|---|---|
| Balance, January 1, 2023 | 186,114 | 10,205 | 196,319 |
| Grants of restricted stock awards - Employees | 259 | — | 259 |
| Retirement of common shares under equity incentive plan | (66) | — | (66) |
| OP conversion | 896 | (896) | — |
| Balance, March 31, 2023 | 187,203 | 9,309 | 196,512 |
| Grants of restricted stock awards - Board of Directors | 50 | — | 50 |
| Grants of restricted stock awards - Employees | 1 | — | 1 |
| Forfeiture of restricted stock awards | (6) | — | (6) |
| OP conversion | 25 | (25) | — |
| Balance, June 30, 2023 | 187,273 | 9,284 | 196,557 |
| Forfeiture of restricted stock awards | (2) | — | (2) |
| OP conversion | 1 | (1) | — |
| Balance, September 30, 2023 | 187,272 | 9,283 | 196,555 |
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 12
Debt Outstanding
(in thousands)
| Outstanding Balance | ||||||||
|---|---|---|---|---|---|---|---|---|
| September 30, | December 31, | |||||||
| 2023 | 2022 | Interest Rate | Maturity Date | |||||
| Unsecured revolving credit facility | $ | 74,060 | $ | 197,322 | Applicable reference rate <br>+ 0.85%1 | Mar. 20264 | ||
| Unsecured term loans: | ||||||||
| 2026 Unsecured Term Loan | 400,000 | 400,000 | one-month adjusted SOFR + 1.00%2 3 | Feb. 2026 | ||||
| 2027 Unsecured Term Loan | 200,000 | 200,000 | one-month adjusted SOFR + 0.95%3 | Aug. 2027 | ||||
| 2029 Unsecured Term Loan | 300,000 | 300,000 | one-month adjusted SOFR + 1.25%3 | Aug. 2029 | ||||
| Total unsecured term loans | 900,000 | 900,000 | ||||||
| Unamortized debt issuance costs, net | (4,367 | ) | (5,308 | ) | ||||
| Total unsecured term loans, net | 895,633 | 894,692 | ||||||
| Senior unsecured notes: | ||||||||
| 2027 Senior Unsecured Notes - Series A | 150,000 | 150,000 | 4.84% | Apr. 2027 | ||||
| 2028 Senior Unsecured Notes - Series B | 225,000 | 225,000 | 5.09% | Jul. 2028 | ||||
| 2030 Senior Unsecured Notes - Series C | 100,000 | 100,000 | 5.19% | Jul. 2030 | ||||
| 2031 Senior Unsecured Public Notes | 375,000 | 375,000 | 2.60% | Sep. 2031 | ||||
| Total senior unsecured notes | 850,000 | 850,000 | ||||||
| Unamortized debt issuance costs and<br> original issuance discount, net | (4,879 | ) | (5,445 | ) | ||||
| Total senior unsecured notes, net | 845,121 | 844,555 | ||||||
| Total unsecured debt, net | $ | 1,814,814 | $ | 1,936,569 |
1 At September 30, 2023 and December 31, 2022, a balance of $0.0 million and $123.5 million was subject to the one-month SOFR of 5.32% and 4.36%, respectively. The remaining balance of $100 million Canadian Dollar ("CAD") borrowings remeasured to $74.1 million United States Dollar ("USD") and $73.8 million USD, at September 30, 2023 and December 31, 2022, respectively, and was subject to the one-month CDOR of 5.39% and 4.74%, respectively.
2 At September 30, 2023, one-month SOFR was 5.32%. At December 31, 2022, the applicable interest rate was 1-month LIBOR of 4.39% plus 1.00%.
3 At September 30, 2023 and December 31, 2022, one-month SOFR was 5.32% and 4.36%, respectively.
4 Our Revolving Credit Facility contains two six-month extension options subject to certain conditions, including the payment of an extension fee equal to 0.0625% of the revolving commitments.
| Origination | Maturity | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Date | Date | Interest | September 30, | December 31, | ||||||
| Lender | (Month/Year) | (Month/Year) | Rate | 2023 | 2022 | |||||
| Wilmington Trust National Association | Apr-19 | Feb-28 | 4.92% | $ | 44,542 | $ | 45,516 | |||
| Wilmington Trust National Association | Jun-18 | Aug-25 | 4.36% | 18,834 | 19,150 | |||||
| PNC Bank | Oct-16 | Nov-26 | 3.62% | 16,351 | 16,675 | |||||
| Aegon | Apr-12 | Oct-23 | 6.38% | — | 5,413 | |||||
| Total mortgages | 79,727 | 86,754 | ||||||||
| Debt issuance costs, net | (114 | ) | (152 | ) | ||||||
| Mortgages, net | $ | 79,613 | $ | 86,602 | ||||||
| Year of Maturity | Revolving <br>Credit Facility | Mortgages | Term Loans | Senior Notes | Total | |||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2023 | $ | — | $ | 554 | $ | — | $ | — | $ | 554 |
| 2024 | — | 2,260 | — | — | 2,260 | |||||
| 2025 | — | 20,195 | — | — | 20,195 | |||||
| 2026 | 74,060 | 16,843 | 400,000 | — | 490,903 | |||||
| 2027 | — | 1,597 | 200,000 | 150,000 | 351,597 | |||||
| Thereafter | — | 38,277 | 300,000 | 700,000 | 1,038,277 | |||||
| Total | $ | 74,060 | $ | 79,726 | $ | 900,000 | $ | 850,000 | $ | 1,903,786 |
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 13
Net Debt Metrics
(in thousands)
| September 30,<br>2023 | June 30,<br>2023 | March 31,<br>2023 | December 31,<br>2022 | September 30,<br>2022 | |
|---|---|---|---|---|---|
| Debt | |||||
| Unsecured revolving credit facility | $74,060 | $122,912 | $108,330 | $197,322 | $219,537 |
| Unsecured term loans, net | 895,633 | 895,319 | 895,006 | 894,692 | 894,378 |
| Senior unsecured notes, net | 845,121 | 844,932 | 844,744 | 844,555 | 844,367 |
| Mortgages, net | 79,613 | 80,141 | 85,853 | 86,602 | 94,753 |
| Debt issuance costs | 9,360 | 9,872 | 10,390 | 10,905 | 11,498 |
| Gross Debt | 1,903,787 | 1,953,176 | 1,944,323 | 2,034,076 | 2,064,533 |
| Cash and cash equivalents | (35,061) | (20,763) | (15,412) | (21,789) | (75,912) |
| Restricted cash | (15,436) | (15,502) | (3,898) | (38,251) | (6,449) |
| Net Debt | $1,853,290 | $1,916,911 | $1,925,013 | $1,974,036 | $1,982,172 |
| Anticipated proceeds from forward equity agreement | — | — | — | — | (270,732) |
| Pro Forma Net Debt | $1,853,290 | $1,916,911 | $1,925,013 | $1,974,036 | $1,711,440 |
| Net Debt to Annualized EBITDAre | 4.9x | 5.1x | 4.7x | 5.2x | 5.3x |
| Net Debt to Annualized Adjusted <br> EBITDAre | 4.9x | 5.0x | 5.1x | 5.2x | 5.5x |
| Pro Forma Net Debt to Annualized <br> Adjusted EBITDAre | 4.9x | 5.0x | 5.1x | 5.2x | 4.8x |
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 14
Covenants
The following is a summary of key financial covenants for the Company's unsecured debt instruments. The covenants associated with the Revolving Credit Facility, Unsecured Term Loans with commercial banks, and the Series A-C Senior Unsecured Notes, are reported to the respective lenders via quarterly covenant reporting packages. The covenants associated with the 2031 Senior Unsecured Public Notes are not required to be reported externally to third parties, and are instead calculated in connection with borrowing activity and for financial reporting purposes only. These calculations, which are not based on U.S. GAAP measurements, are presented to investors to show that as of September 30, 2023, the Company believes it is in compliance with the covenants.
| Covenants | Required | Revolving Credit Facility and Unsecured Term Loans | Senior Unsecured <br>Notes Series <br>A, B, & C | 2031 Senior Unsecured Public Notes | |||
|---|---|---|---|---|---|---|---|
| Leverage ratio | ≤ 0.60 to 1.00 | 0.32 | 0.33 | Not Applicable | |||
| Secured indebtedness ratio | ≤ 0.40 to 1.00 | 0.01 | 0.01 | Not Applicable | |||
| Unencumbered coverage ratio | ≥ 1.75 to 1.00 | 3.77 | Not Applicable | Not Applicable | |||
| Fixed charge coverage ratio | ≥ 1.50 to 1.00 | 4.26 | 4.26 | Not Applicable | |||
| Total unsecured indebtedness to <br> total unencumbered eligible <br> property value | ≤ 0.60 to 1.00 | 0.34 | 0.35 | Not Applicable | |||
| Dividends and other restricted <br> payments | Only applicable <br>in case of default | Not Applicable | Not Applicable | Not Applicable | |||
| Aggregate debt ratio | ≤ 0.60 to 1.00 | Not Applicable | Not Applicable | 0.35 | |||
| Consolidated income available for <br> debt to annual debt service <br> charge | ≥ 1.50 to 1.00 | Not Applicable | Not Applicable | 4.71 | |||
| Total unencumbered assets to <br> total unsecured debt | ≥ 1.50 to 1.00 | Not Applicable | Not Applicable | 2.90 | |||
| Secured debt ratio | ≤ 0.40 to 1.00 | Not Applicable | Not Applicable | 0.01 |
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 15
Debt Maturities
(dollars in millions)
The Company utilizes diversified sources of debt capital including unsecured bank debt, unsecured notes, and secured mortgages (where appropriate).
1 Our Revolving Credit Facility contains two six-month extension options subject to certain conditions, including the payment of an extension fee equal to 0.0625% of the revolving commitments.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 16
Investment Activity
(square feet and dollars in thousands)
The following tables summarize the Company's investment activity during 2023.
| Q1 20231 | Q2 2023 | Q3 2023 | YTD 2023 | |
|---|---|---|---|---|
| Acquisitions: | ||||
| Number of transactions | 1 | 2 | — | 3 |
| Number of properties | 1 | 3 | — | 4 |
| Square feet | 10 | 144 | — | 154 |
| Acquisition price | $5,221 | $20,384 | — | $25,605 |
| Industrial | — | 20,384 | — | 20,384 |
| Retail | 5,221 | — | — | 5,221 |
| Restaurant | — | — | — | — |
| Healthcare | — | — | — | — |
| Initial cash capitalization rate | 6.8% | 7.4% | — | 7.3% |
| GAAP capitalization rate | 8.0% | 8.6% | — | 8.5% |
| Weighted avg. lease term (years) | 20.1 | 14.2 | — | 15.3 |
| Weighted average annual rent increase | 1.8% | 2.0% | — | 2.0% |
| Revenue generating capital expenditures: | ||||
| Number of existing properties | 2 | 1 | 3 | 6 |
| Investments2 | $14,825 | $7,000 | $4,755 | $26,580 |
| Industrial | 14,825 | 7,000 | 4,755 | 26,580 |
| Retail | — | — | — | — |
| Restaurant | — | — | — | — |
| Healthcare | — | — | — | — |
| Initial cash capitalization rate | 7.0% | 7.0% | 6.7% | 6.9% |
| Weighted avg. lease term (years) | 18.2 | 18.4 | 14.1 | 17.6 |
| Weighted average annual rent increase | 1.8% | 1.8% | 2.0% | 1.8% |
| Development funding opportunities: | ||||
| Number of new properties | — | 1 | 1 | 2 |
| Investments on new developments2 | — | $37,549 | $739 | $38,288 |
| Investments on existing developments2 | — | — | 11,007 | 11,007 |
| Total development funding opportunities | — | — | 11,746 | 49,295 |
| Total investments | $20,046 | $64,933 | $16,501 | $101,480 |
| Total initial cash capitalization rate3 | 7.0% | 7.3% | 6.7% | 7.1% |
| Total weighted average lease term (years)3 | 18.7 | 15.2 | 14.1 | 16.4 |
| Total weighted average annual rent increase3 | 1.8% | 1.9% | 2.0% | 1.9% |
1 During the first quarter, we entered into an agreement under the terms of an existing lease to substitute two properties with a tenant in exchange for one new property of equal value. Property substitutions are not included in the acquisition/disposition activity, however will affect the total number of properties reported as of September 30, 2023.
2 Total unfunded investment commitments at September 30, 2023, include up to $157.2 million in development fundings and $11.0 million in revenue generating capital expenditures.
3 Due to the nature of development funding opportunities not generating revenue during construction, these developments are excluded from the calculation of total capitalization rates, weighted average lease terms, and rent increases.
Developments4
(square feet and dollars in thousands)
The following table summarizes the Company's current developments as of September 30, 2023:
| Property | Property Type | Projected Rentable Square Feet | Start Date4 | Target Completion Date4 | Initial Purchase Price4 | Estimated Project Development Costs4 | Estimated Total Project Investment4 | QTD Q3 2023 Investment | Cumulative Investment at 9/30/23 | Estimated Stabilized Yield4 | Estimated GAAP Capitalization Rate |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Under Construction: | |||||||||||
| UNFI (8380 21st Street) | Industrial | 1,016 | 5/2023 | 10/2024 | $17,300 | $187,500 | $204,800 | $11,007 | $48,556 | 7.2% | 8.3% |
| 7 Brew (4845 S. Memorial Drive) | Restaurant | 1 | 7/2023 | 10/2023 | 460 | 1,242 | 1,702 | 739 | 739 | 7.0% | 7.8% |
| Total | 1,017 | $17,760 | $188,742 | $206,502 | $11,746 | $49,295 | 7.2% | 8.3% |
4 Refer to definitions and explanations appearing at the end of this supplemental document.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 17
Dispositions1
(square feet and dollars in thousands)
The following table summarizes the Company's property disposition activity during 2023.
| Q1 20231 | |||||
|---|---|---|---|---|---|
| Property Type | Number of Properties | Square Feet | Acquisition Price | Disposition Price | Net Book <br>Value |
| Office2 | 1 | 282 | $33,050 | 32,000 | $30,881 |
| Industrial | 1 | 74 | 16,240 | 18,550 | 15,015 |
| Restaurant | 1 | 5 | 1,186 | 1,324 | 1,099 |
| Total Properties | 3 | 361 | $50,476 | $51,874 | $46,995 |
| Weighted average cash cap rate2 | 6.0% | ||||
| Q2 2023 | |||||
| Property Type | Number of Properties | Square Feet | Acquisition Price | Disposition Price | Net Book <br>Value |
| Office | 1 | 58 | $5,925 | $3,000 | $2,701 |
| Industrial | 2 | 601 | $43,000 | $61,950 | $32,961 |
| Retail | 1 | 4 | $3,454 | $4,440 | $2,719 |
| Total Properties | 4 | 663 | $52,379 | $69,390 | $38,381 |
| Weighted average cash cap rate | 5.6% | ||||
| Q3 2023 | |||||
| Property Type | Number of Properties | Square Feet | Acquisition Price | Disposition Price | Net Book <br>Value |
| Industrial | 2 | 298 | $51,054 | $62,300 | $45,770 |
| Total Properties | 2 | 298 | $51,054 | $62,300 | $45,770 |
| Weighted average cash cap rate | 6.2% | ||||
| 2023 Dispositions | |||||
| Property Type | Number of Properties | Square Feet | Acquisition Price | Disposition Price | Net Book <br>Value |
| Office2 | 2 | 340 | $38,975 | $35,000 | $33,582 |
| Industrial | 5 | 973 | $110,294 | $142,800 | $93,746 |
| Retail | 1 | 4 | $3,454 | $4,440 | $2,719 |
| Restaurant | 1 | 5 | 1,186 | 1,324 | 1,099 |
| Total Properties | 9 | 1,322 | $153,909 | $183,564 | $131,146 |
| Weighted average cash cap rate2 | 5.9% |
1 During the first quarter, we entered into an agreement under the terms of an existing lease to substitute two properties with a tenant in exchange for one new property of equal value. Property substitutions are not included in the acquisition/disposition activity, however will affect the total number of properties reported as of September 30, 2023.
2 Sale of office asset executed simultaneously with a $7.5 million lease buyout for total proceeds of $39.5 million, representing an all-in cash capitalization rate of 6.1%. Amounts have been excluded from the weighted average cash capitalization rate due to the nature of the separate transactions.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 18
Portfolio at a Glance: Key Metrics
| September 30,<br>2023 | June 30,<br>2023 | March 31,<br>2023 | December 31,<br>2022 | September 30,<br>2022 | |
|---|---|---|---|---|---|
| Properties1 | 800 | 801 | 801 | 804 | 790 |
| U.S. States | 44 | 44 | 44 | 44 | 44 |
| Canadian Provinces | 4 | 4 | 4 | 4 | 4 |
| Total Annualized Base Rent | $390.0M | $391.0M | $389.5M | $389.1M | $371.9M |
| Total Rentable Sq. Footage | 38.2M | 38.5M | 39.1M | 39.1M | 36.8M |
| Tenants | 220 | 221 | 221 | 221 | 218 |
| Brands | 208 | 209 | 209 | 211 | 208 |
| Industries | 54 | 54 | 54 | 55 | 56 |
| Occupancy (based on SF) | 99.4% | 99.4% | 99.4% | 99.4% | 99.3% |
| Rent Collection | 99.9% | 99.9% | 100.0% | 99.9% | 100.0% |
| Top 10 Tenant Concentration | 19.4% | 19.4% | 19.2% | 19.0% | 17.1% |
| Top 20 Tenant Concentration | 32.1% | 32.1% | 31.4% | 31.4% | 29.8% |
| Investment Grade (tenant/guarantor) | 15.3% | 15.3% | 15.6% | 15.4% | 16.0% |
| Financial Reporting Coverage2 | 93.7% | 94.2% | 94.3% | 94.3% | 94.1% |
| Rent Coverage Ratio (Restaurants Only) | 3.4x | 3.3x | 3.2x | 3.2x | 3.1x |
| Weighted Average Annual Rent Increases | 2.0% | 2.0% | 2.0% | 2.0% | 2.0% |
| Weighted Average Remaining Lease Term | 10.5 years | 10.7 years | 10.8 years | 10.9 years | 10.7 years |
| Master Leases (based on ABR) | |||||
| Total Portfolio | 41.6% | 41.5% | 41.2% | 40.8% | 37.7% |
| Multi-site tenants | 69.3% | 69.3% | 69.3% | 67.7% | 65.4% |
1 During the first quarter, we entered into an agreement under the terms of an existing lease to substitute two properties with a tenant in exchange for one new property of equal value. Property substitutions are not included in the acquisition/disposition activity, however will affect the total number of properties reported as of September 30, 2023.
2 Includes 7.5%, 7.9%, 7.9%, 8.5%, and 8.8%, related to tenants not required to provide financial information under the terms of our lease, but whose financial statements are available publicly at September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 19
Diversification: Tenants & Brands
Top 20 Tenants
| Tenant | Property Type | # <br>Properties | ABR('000s) | ABR as a <br>% of Total <br>Portfolio | Square <br>Feet <br>('000s) | SF as a <br>% of Total <br>Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Roskam Baking Company, LLC* | Food Processing | 7 | 4.0 | % | 2,250 | 5.9 | % | |||||
| AHF, LLC* | Distribution & Warehouse/Manufacturing | 8 | 2.4 | % | 2,284 | 6.0 | % | |||||
| Jack's Family Restaurants LP* | Quick Service Restaurants | 43 | 1.9 | % | 147 | 0.4 | % | |||||
| Joseph T. Ryerson & Son, Inc | Distribution & Warehouse | 11 | 1.7 | % | 1,537 | 4.0 | % | |||||
| Red Lobster Hospitality & Red Lobster Restaurants LLC* | Casual Dining | 19 | 1.6 | % | 157 | 0.4 | % | |||||
| Axcelis Technologies, Inc. | Flex and R&D | 1 | 1.6 | % | 417 | 1.1 | % | |||||
| J. Alexander's, LLC* | Casual Dining | 16 | 1.6 | % | 131 | 0.3 | % | |||||
| Salm Partners, LLC* | Food Processing | 2 | 1.5 | % | 368 | 0.9 | % | |||||
| Hensley & Company* | Distribution & Warehouse | 3 | 1.5 | % | 577 | 1.5 | % | |||||
| Dollar General Corporation | General Merchandise | 60 | 1.5 | % | 562 | 1.5 | % | |||||
| Total Top 10 Tenants | 170 | 19.3 | % | 8,430 | 22.0 | % | ||||||
| BluePearl Holdings, LLC** | Animal Health Services | 13 | 1.4 | % | 166 | 0.5 | % | |||||
| Krispy Kreme Doughnut Corporation | Quick Service Restaurants/<br>Food Processing | 27 | 1.4 | % | 156 | 0.4 | % | |||||
| Outback Steakhouse of Florida LLC* | Casual Dining | 22 | 1.4 | % | 140 | 0.4 | % | |||||
| Tractor Supply Company | General Merchandise | 21 | 1.4 | % | 417 | 1.1 | % | |||||
| Big Tex Trailer Manufacturing Inc.* | Automotive/Distribution & Warehouse/Manufacturing/ Corporate Headquarters | 17 | 1.3 | % | 1,302 | 3.4 | % | |||||
| Carvana, LLC* | Industrial Services | 2 | 1.2 | % | 230 | 0.6 | % | |||||
| Klosterman Bakery* | Food Processing | 11 | 1.2 | % | 549 | 1.4 | % | |||||
| Nestle' Dreyer's Ice Cream Company2 | Cold Storage | 1 | 1.2 | % | 309 | 0.8 | % | |||||
| Arkansas Surgical Hospital | Surgical | 1 | 1.1 | % | 129 | 0.3 | % | |||||
| Chiquita Holdings Limited | Food Processing | 1 | 1.1 | % | 335 | 0.9 | % | |||||
| Total Top 20 Tenants | 286 | 32.0 | % | 12,163 | 31.8 | % |
All values are in US Dollars.
1Nestle's ABR excludes $1.6 million of rent paid under a sub-lease for an additional property, which will convert to a prime lease no later than August, 2024
*Subject to a master lease.
**Includes properties leased by multiple tenants, some, not all, of which are subject to master leases.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 20
Top 20 Tenant Descriptions1
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 21
Top 20 Tenant Descriptions1 (continued)
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 22
Top 20 Brands
| Brand | Property Type | # <br>Properties | ABR('000s) | ABR as a <br>% of Total <br>Portfolio | Square <br>Feet <br>('000s) | SF as a <br>% of Total <br>Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Roskam Baking Company, LLC* | Food Processing | 7 | 4.0 | % | 2,250 | 5.9 | % | |||||
| AHF Products* | Distribution & Warehouse/<br>Manufacturing | 8 | 2.4 | % | 2,284 | 6.0 | % | |||||
| Jack's Family Restaurants* | Quick Service Restaurants | 43 | 1.9 | % | 147 | 0.4 | % | |||||
| Ryerson | Distribution & Warehouse | 11 | 1.7 | % | 1,537 | 4.0 | % | |||||
| Red Lobster* | Casual Dining | 19 | 1.6 | % | 157 | 0.4 | % | |||||
| Axcelis | Flex and R&D | 1 | 1.6 | % | 417 | 1.0 | % | |||||
| Salm Partners, LLC* | Food Processing | 2 | 1.6 | % | 368 | 1.0 | % | |||||
| Hensley* | Distribution & Warehouse | 3 | 1.5 | % | 577 | 1.5 | % | |||||
| Dollar General | General Merchandise | 60 | 1.5 | % | 562 | 1.5 | % | |||||
| BluePearl Veterinary Partners** | Animal Health Services | 13 | 1.4 | % | 165 | 0.4 | % | |||||
| Total Top 10 Brands | 167 | 19.2 | % | 8,464 | 22.1 | % | ||||||
| Krispy Kreme | Quick Service Restaurants/<br>Food Processing | 27 | 1.4 | % | 158 | 0.6 | % | |||||
| Bob Evans Farms* | Casual Dining/Food Processing | 21 | 1.4 | % | 281 | 0.7 | % | |||||
| Tractor Supply Company | General Merchandise | 21 | 1.4 | % | 417 | 1.1 | % | |||||
| Big Tex Trailers* | Automotive/Distribution & <br>Warehouse/Manufacturing/<br>Corporate Headquarters | 17 | 1.3 | % | 1,302 | 3.4 | % | |||||
| Outback Steakhouse* | Casual Dining | 20 | 1.2 | % | 126 | 0.3 | % | |||||
| Carvana* | Industrial Services | 2 | 1.2 | % | 230 | 0.6 | % | |||||
| Klosterman Bakery* | Food Processing | 11 | 1.2 | % | 549 | 1.4 | % | |||||
| Nestle'1 | Cold Storage | 1 | 1.2 | % | 309 | 0.8 | % | |||||
| Arkansas Surgical Hospital | Surgical | 1 | 1.1 | % | 129 | 0.3 | % | |||||
| Chiquita Holdings Limited | Food Processing | 1 | 1.1 | % | 335 | 0.9 | % | |||||
| Total Top 20 Brands | 289 | 31.7 | % | 12,300 | 32.2 | % |
All values are in US Dollars.
1Nestle's ABR excludes $1.6 million of rent paid under a sub-lease for an additional property, which will convert to a prime lease no later than August, 2024
*Subject to a master lease.
**Includes properties leased by multiple tenants, some, not all, of which are subject to master leases.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 23
Diversification: Property Type
(rent percentages based on ABR)
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 24
Diversification: Property Type (continued)
| Property Type | # Properties | ABR('000s) | ABR as a % <br>of Total <br>Portfolio | Square Feet ('000s) | SF as a % <br>of Total <br>Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Industrial | |||||||||||
| Manufacturing | 80 | 16.8 | % | 12,178 | 31.8 | % | |||||
| Distribution & Warehouse | 46 | 12.9 | % | 9,158 | 23.9 | % | |||||
| Food Processing | 33 | 11.9 | % | 5,442 | 14.2 | % | |||||
| Flex and R&D | 6 | 4.1 | % | 1,157 | 3.0 | % | |||||
| Industrial Services | 23 | 3.0 | % | 607 | 1.6 | % | |||||
| Cold Storage | 4 | 2.5 | % | 723 | 1.9 | % | |||||
| Untenanted | 1 | 0.0 | % | 122 | 0.3 | % | |||||
| Industrial Total | 193 | 51.2 | % | 29,387 | 76.7 | % | |||||
| Healthcare | |||||||||||
| Clinical | 52 | 7.0 | % | 1,090 | 2.9 | % | |||||
| Healthcare Services | 29 | 3.0 | % | 478 | 1.2 | % | |||||
| Animal Health Services | 27 | 2.8 | % | 405 | 1.1 | % | |||||
| Surgical | 12 | 2.7 | % | 329 | 0.9 | % | |||||
| Life Science | 9 | 2.1 | % | 549 | 1.4 | % | |||||
| Healthcare Total | 129 | 17.6 | % | 2,851 | 7.5 | % | |||||
| Restaurant | |||||||||||
| Casual Dining | 101 | 7.1 | % | 673 | 1.8 | % | |||||
| Quick Service Restaurants | 147 | 6.6 | % | 499 | 1.3 | % | |||||
| Restaurant Total | 248 | 13.7 | % | 1,172 | 3.1 | % | |||||
| Retail | |||||||||||
| General Merchandise | 132 | 6.4 | % | 1,865 | 4.9 | % | |||||
| Automotive | 67 | 3.2 | % | 773 | 2.0 | % | |||||
| Home Furnishings | 13 | 1.9 | % | 797 | 2.1 | % | |||||
| Child Care | 2 | 0.1 | % | 20 | 0.1 | % | |||||
| Retail Total | 214 | 11.6 | % | 3,455 | 9.1 | % | |||||
| Office | |||||||||||
| Strategic Operations | 6 | 2.7 | % | 632 | 1.7 | % | |||||
| Corporate Headquarters | 7 | 2.2 | % | 409 | 1.1 | % | |||||
| Call Center | 2 | 1.0 | % | 288 | 0.7 | % | |||||
| Untenanted | 1 | — | 46 | 0.1 | % | ||||||
| Office Total | 16 | 5.9 | % | 1,375 | 3.6 | % | |||||
| Total | 800 | 100.0 | % | 38,240 | 100.0 | % |
All values are in US Dollars.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 25
Key Statistics by Property Type
| Q3 2023 | Q2 2023 | Q1 2023 | Q4 2022 | Q3 2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Industrial | |||||||||||||||
| Number of properties | 193 | 195 | 193 | 195 | 185 | ||||||||||
| Square feet (000s) | 29,387 | 29,686 | 30,142 | 29,947 | 27,631 | ||||||||||
| Weighted average lease term (years) | 11.5 | 11.8 | 11.9 | 11.2 | 11.2 | ||||||||||
| Weighted average annual rent escalation | 2.0 | % | 2.0 | % | 2.0 | % | 2.0 | % | 2.0 | % | |||||
| Percentage of total ABR | 51.2 | % | 51.6 | % | 51.8 | % | 51.5 | % | 49.0 | % | |||||
| Healthcare | |||||||||||||||
| Number of properties | 129 | 129 | 130 | 130 | 130 | ||||||||||
| Square feet (000s) | 2,851 | 2,852 | 2,870 | 2,870 | 2,869 | ||||||||||
| Weighted average lease term (years) | 6.8 | 6.8 | 7.0 | 8.2 | 8.2 | ||||||||||
| Weighted average annual rent escalation | 2.4 | % | 2.3 | % | 2.3 | % | 2.2 | % | 2.2 | % | |||||
| Percentage of total ABR | 17.6 | % | 17.5 | % | 17.4 | % | 17.1 | % | 18.5 | % | |||||
| Restaurant | |||||||||||||||
| Number of properties | 248 | 247 | 247 | 248 | 250 | ||||||||||
| Square feet (000s) | 1,172 | 1,172 | 1,172 | 1,177 | 1,191 | ||||||||||
| Weighted average lease term (years) | 13.9 | 14.1 | 14.3 | 14.8 | 14.8 | ||||||||||
| Weighted average annual rent escalation | 1.8 | % | 1.8 | % | 1.8 | % | 1.8 | % | 1.8 | % | |||||
| Percentage of total ABR | 13.7 | % | 13.5 | % | 13.4 | % | 13.5 | % | 14.1 | % | |||||
| Retail | |||||||||||||||
| Number of properties | 214 | 214 | 215 | 214 | 209 | ||||||||||
| Square feet (000s) | 3,455 | 3,455 | 3,459 | 3,448 | 3,411 | ||||||||||
| Weighted average lease term (years) | 9.7 | 10.0 | 10.2 | 10.5 | 10.5 | ||||||||||
| Weighted average annual rent escalation | 1.6 | % | 1.6 | % | 1.6 | % | 1.6 | % | 1.6 | % | |||||
| Percentage of total ABR | 11.6 | % | 11.6 | % | 11.6 | % | 11.5 | % | 11.7 | % | |||||
| Office | |||||||||||||||
| Number of properties | 16 | 16 | 16 | 17 | 16 | ||||||||||
| Square feet (000s) | 1,375 | 1,374 | 1,415 | 1,697 | 1,686 | ||||||||||
| Weighted average lease term (years) | 5.6 | 5.9 | 6.0 | 6.1 | 6.1 | ||||||||||
| Weighted average annual rent escalation | 2.5 | % | 2.5 | % | 2.5 | % | 2.5 | % | 2.5 | % | |||||
| Percentage of total ABR | 5.9 | % | 5.8 | % | 5.8 | % | 6.4 | % | 6.7 | % |
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 26
Diversification: Tenant Industry
| Industry | # Properties | ABR('000s) | ABR as a % <br>of Total <br>Portfolio | Square Feet ('000s) | SF as a % <br>of Total <br>Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Health Care Facilities | 104 | 14.0 | % | 2,062 | 5.4 | % | |||||
| Restaurants | 251 | 13.8 | % | 1,214 | 3.2 | % | |||||
| Packaged Foods & Meats | 29 | 10.4 | % | 4,713 | 12.3 | % | |||||
| Distributors | 27 | 4.1 | % | 2,695 | 7.0 | % | |||||
| Auto Parts & Equipment | 44 | 4.0 | % | 2,710 | 7.1 | % | |||||
| Specialty Stores | 31 | 3.7 | % | 1,338 | 3.5 | % | |||||
| Food Distributors | 8 | 3.6 | % | 1,712 | 4.5 | % | |||||
| Home Furnishing Retail | 18 | 3.3 | % | 1,858 | 4.9 | % | |||||
| Specialized Consumer Services | 48 | 3.2 | % | 724 | 1.9 | % | |||||
| Metal & Glass Containers | 8 | 2.6 | % | 2,206 | 5.8 | % | |||||
| General Merchandise Stores | 96 | 2.5 | % | 880 | 2.3 | % | |||||
| Industrial Machinery | 20 | 2.5 | % | 1,949 | 5.1 | % | |||||
| Forest Products | 8 | 2.4 | % | 2,284 | 6.0 | % | |||||
| Health Care Services | 18 | 2.4 | % | 515 | 1.3 | % | |||||
| Internet & Direct Marketing Retail | 3 | 1.8 | % | 447 | 1.2 | % | |||||
| Other (39 industries) | 85 | 25.7 | % | 10,709 | 27.9 | % | |||||
| Untenanted properties | 2 | — | 224 | 0.6 | % | ||||||
| Total | 800 | 100.0 | % | 38,240 | 100.0 | % |
All values are in US Dollars.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 27
Diversification: Geography
(rent percentages based on ABR)
| State / <br>Province | # <br>Properties | ABR<br>($'000s) | ABR as<br>a % of <br>Total <br>Portfolio | Square <br>Feet <br>('000s) | SF as a <br>% of <br>Total <br>Portfolio | State / <br>Province | # <br>Properties | ABR<br>($'000s) | ABR as<br>a % of <br>Total <br>Portfolio | Square <br>Feet <br>('000s) | SF as a <br>% of <br>Total <br>Portfolio |
|---|---|---|---|---|---|---|---|---|---|---|---|
| TX | 72 | $38,471 | 9.9% | 3,621 | 9.5% | WA | 15 | $4,362 | 1.1% | 150 | 0.4% |
| MI | 55 | 32,678 | 8.3% | 3,811 | 10.0% | LA | 4 | 3,407 | 0.9% | 194 | 0.5% |
| IL | 32 | 24,336 | 6.1% | 2,424 | 6.3% | MS | 11 | 3,347 | 0.9% | 430 | 1.1% |
| WI | 35 | 23,318 | 5.9% | 2,163 | 5.7% | NE | 6 | 3,286 | 0.8% | 509 | 1.3% |
| CA | 13 | 19,411 | 5.0% | 1,718 | 4.5% | SC | 13 | 2,969 | 0.8% | 308 | 0.8% |
| FL | 42 | 16,256 | 4.2% | 840 | 2.2% | IA | 4 | 2,804 | 0.7% | 622 | 1.6% |
| OH | 47 | 16,253 | 4.2% | 1,582 | 4.1% | NM | 9 | 2,779 | 0.7% | 107 | 0.3% |
| IN | 32 | 16,216 | 4.2% | 1,906 | 5.0% | CO | 4 | 2,524 | 0.6% | 126 | 0.3% |
| MN | 21 | 15,566 | 4.0% | 2,500 | 6.5% | UT | 3 | 2,450 | 0.6% | 280 | 0.7% |
| TN | 50 | 15,426 | 4.0% | 1,103 | 2.9% | MD | 3 | 2,160 | 0.6% | 205 | 0.5% |
| NC | 36 | 12,465 | 3.2% | 1,135 | 3.0% | CT | 2 | 1,828 | 0.5% | 55 | 0.1% |
| AL | 53 | 12,203 | 3.1% | 873 | 2.3% | ND | 3 | 1,715 | 0.4% | 48 | 0.1% |
| AZ | 9 | 11,916 | 3.1% | 909 | 2.4% | MT | 7 | 1,582 | 0.4% | 43 | 0.1% |
| GA | 33 | 11,806 | 3.0% | 1,576 | 4.1% | DE | 4 | 1,180 | 0.3% | 133 | 0.3% |
| PA | 22 | 9,742 | 2.5% | 1,836 | 4.8% | VT | 2 | 426 | 0.1% | 24 | 0.1% |
| NY | 26 | 9,462 | 2.4% | 680 | 1.8% | WY | 1 | 307 | 0.1% | 21 | 0.1% |
| KY | 24 | 8,600 | 2.2% | 900 | 2.4% | NV | 1 | 268 | 0.1% | 6 | 0.0% |
| OK | 23 | 8,150 | 2.1% | 987 | 2.6% | OR | 1 | 136 | 0.0% | 9 | 0.0% |
| AR | 11 | 7,734 | 2.0% | 283 | 0.7% | SD | 1 | 81 | 0.0% | 9 | 0.0% |
| MA | 3 | 6,543 | 1.7% | 444 | 1.2% | Total U.S. | 793 | $381,477 | 97.8% | 37,810 | 98.8% |
| MO | 12 | 6,231 | 1.6% | 1,138 | 3.0% | BC | 2 | $4,993 | 1.2% | 253 | 0.7% |
| KS | 11 | 5,660 | 1.5% | 648 | 1.7% | ON | 3 | 2,168 | 0.6% | 101 | 0.3% |
| VA | 17 | 5,521 | 1.4% | 204 | 0.5% | AB | 1 | 1,019 | 0.3% | 51 | 0.1% |
| WV | 17 | 4,993 | 1.3% | 884 | 2.3% | MB | 1 | 364 | 0.1% | 25 | 0.1% |
| NJ | 3 | 4,909 | 1.3% | 366 | 1.0% | Total Canada | 7 | $8,544 | 2.2% | 430 | 1.2% |
| Grand Total | 800 | $390,021 | 100.0% | 38,240 | 100.0% |
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 28
Lease Expirations
(rent percentages based on ABR)
| Expiration Year | # Properties | # Leases | ABR('000s) | ABR as a % of Total Portfolio | Square Feet ('000s) | SF as a % of Total Portfolio | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 3 | 4 | 1.0 | % | 467 | 1.2 | % | ||||||
| 2024 | 5 | 5 | 1.7 | % | 741 | 1.9 | % | ||||||
| 2025 | 19 | 21 | 1.8 | % | 394 | 1.0 | % | ||||||
| 2026 | 34 | 35 | 4.5 | % | 1,150 | 3.0 | % | ||||||
| 2027 | 29 | 30 | 6.5 | % | 2,079 | 5.5 | % | ||||||
| 2028 | 36 | 37 | 5.9 | % | 1,930 | 5.0 | % | ||||||
| 2029 | 73 | 74 | 6.1 | % | 2,754 | 7.2 | % | ||||||
| 2030 | 100 | 100 | 13.9 | % | 5,022 | 13.1 | % | ||||||
| 2031 | 33 | 33 | 2.2 | % | 805 | 2.1 | % | ||||||
| 2032 | 62 | 63 | 8.2 | % | 3,469 | 9.1 | % | ||||||
| 2033 | 50 | 50 | 4.9 | % | 1,593 | 4.2 | % | ||||||
| 2034 | 34 | 34 | 1.7 | % | 446 | 1.2 | % | ||||||
| 2035 | 19 | 19 | 3.6 | % | 2,021 | 5.3 | % | ||||||
| 2036 | 88 | 88 | 7.1 | % | 2,952 | 7.7 | % | ||||||
| 2037 | 22 | 22 | 4.3 | % | 1,120 | 3.0 | % | ||||||
| 2038 | 38 | 38 | 2.8 | % | 848 | 2.2 | % | ||||||
| 2039 | 11 | 11 | 2.0 | % | 928 | 2.4 | % | ||||||
| 2040 | 31 | 31 | 1.5 | % | 312 | 0.8 | % | ||||||
| 2041 | 40 | 40 | 5.7 | % | 1,731 | 4.5 | % | ||||||
| 2042 | 59 | 59 | 11.3 | % | 4,813 | 12.6 | % | ||||||
| Thereafter | 12 | 12 | 3.3 | % | 2,441 | 6.4 | % | ||||||
| Untenanted properties | 2 | — | — | 224 | 0.6 | % | |||||||
| Total | 800 | 806 | 100.0 | % | 38,240 | 100.0 | % |
All values are in US Dollars.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 29
Occupancy
Occupancy by Rentable Square Footage
Change in Occupancy
| Number of properties | |||
|---|---|---|---|
| Vacant properties at January 1, 2023 | 3 | ||
| Lease expirations1 | 2 | ||
| Leasing activities | (3 | ) | |
| Vacant dispositions | — | ||
| Vacant properties at March 31, 2023 | 2 | ||
| Lease expirations1 | 3 | ||
| Leasing activities | (3 | ) | |
| Vacant dispositions | — | ||
| Vacant properties at June 30, 2023 | 2 | ||
| Lease expirations1 | 3 | ||
| Leasing activities | (3 | ) | |
| Vacant dispositions | — | ||
| Vacant properties at September 30, 2023 | 2 |
1 Includes scheduled and unscheduled expirations (including leases rejected in bankruptcy), as well as future expirations resolved in the periods indicated above.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 30
Definitions and Explanations
Adjusted NOI, Annualized Adjusted NOI, Adjusted Cash NOI and Annualized Adjusted Cash NOI: Our reported results and net earnings per diluted share are presented in accordance with accounting principles generally accepted in the United States of America (GAAP). Adjusted NOI and Adjusted Cash NOI are non-GAAP financial measures that we believe are useful to assess property-level performance. We compute Adjusted NOI by adjusting Adjusted EBITDAre (defined below) to exclude general and administrative expenses incurred at the corporate level. Given the net lease nature of our portfolio, we do not incur general and administrative expenses at the property level. To compute Adjusted Cash NOI, we adjust Adjusted NOI to exclude non-cash items included in total revenues and property expenses, such as straight-line rental revenue and other amortization and non-cash items, based on an estimate calculated as if all investment and disposition activity that took place during the quarter had occurred on the first day of the quarter. We then annualize quarterly Adjusted NOI and Adjusted Cash NOI by multiplying each amount by four to compute Annualized Adjusted NOI and Annualized Adjusted Cash NOI, respectively, which are also non-GAAP financial measures. We believe Adjusted NOI and Adjusted Cash NOI provide useful and relevant information because they reflect only those income and expense items that are incurred at the property level and present such items on an unlevered basis. We believe that the exclusion of certain non-cash revenues and expenses from Adjusted Cash NOI is a useful supplemental measure for investors to consider because it will help them to better assess our operating performance without the distortions created by non-cash revenues or expenses. You should not unduly rely on Annualized Adjusted NOI and Annualized Adjusted Cash NOI as they are based on assumptions and estimates that may prove to be inaccurate. Our actual reported Adjusted NOI and Adjusted Cash NOI for future periods may be significantly different from our Annualized Adjusted NOI and Annualized Adjusted Cash NOI. Additionally, our computation of Adjusted NOI and Adjusted Cash NOI may differ from the methodology for calculating these metrics used by companies in our industry, and, therefore, may not be comparable to similarly titled measures reported by other companies.
Adjusted Secured Overnight Financing Rate (SOFR): We define Adjusted SOFR as the current one month term SOFR plus an adjustment of 0.10% per the terms of our credit facilities.
Annualized Base Rent (ABR): We define ABR as the annualized contractual cash rent due for the last month of the reporting period, excluding the impacts of short-term rent deferrals, abatements, or free rent, and adjusted to remove rent from properties sold during the month and to include a full month of contractual cash rent for investments made during the month.
Cash Capitalization Rate: Cash Capitalization Rate represents either (1) for acquisitions and new developments, the estimated first year cash yield to be generated on a real estate investment, which was estimated at the time of investment based on the contractually specified cash base rent for the first full year after the date of the investment, divided by the purchase price for the property excluding capitalized acquisitions costs, or (2) for disposition properties, the estimated first year cash yield to be generated subsequent to disposition based on contractually specified cash base rent divided by the disposition price.
EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre: EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre are non-GAAP financial measures. We compute EBITDA as earnings before interest, income taxes and depreciation and amortization. EBITDA is a measure commonly used in our industry. We believe that this ratio provides investors and analysts with a measure of our performance that includes our operating results unaffected by the differences in capital structures, capital investment cycles and useful life of related assets compared to other companies in our industry. We compute EBITDAre in accordance with the definition adopted by Nareit. Nareit defines EBITDAre as EBITDA excluding gains (loss) from the sales of depreciable property and provisions for impairment on investment in real estate. We believe EBITDA and EBITDAre are useful to investors and analysts because they provide important supplemental information about our operating performance exclusive of certain non-cash and other costs. Adjusted EBITDAre represents EBITDAre, adjusted to reflect revenue producing investments and dispositions for the quarter as if such investments and dispositions had occurred at the beginning of the quarter, and to exclude certain GAAP income and expense amounts that are either non-cash, such as cost of debt extinguishments, realized or unrealized gains and losses on foreign currency transactions, or gains on insurance recoveries, or that we believe are one time, or unusual in nature because they relate to unique circumstances or transactions that had not previously occurred and which we do not anticipate occurring in the future, and to eliminate the impact of lease termination fees, and other items that are not a result of normal operations. While investments in developments have an immediate impact to Net Debt, we do not make an adjustment to EBITDAre until the quarter in which the lease commences. We then annualize quarterly Adjusted EBITDAre by multiplying it by four to compute Annualized Adjusted EBITDAre. Our reported EBITDA, EBITDAre, Adjusted EBITDAre, and Annualized Adjusted EBITDAre may not be comparable to similarly titled measures of other companies. You should not consider these measures as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.
Funds From Operations (FFO), Core Funds From Operations (Core FFO), and Adjusted Funds From Operations (AFFO): FFO, Core FFO, and AFFO 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 Core FFO by adjusting FFO 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, the gain on insurance recoveries, cost of debt extinguishments, unrealized and realized gains or losses on foreign currency transactions, severance and executive transition costs, and other extraordinary items. We compute AFFO by adjusting Core FFO for certain non-cash revenues and expenses, including straight-line rents, amortization of lease intangibles, amortization of debt issuance costs, amortization of net mortgage premiums, (gain) loss on interest rate swaps and other non-cash interest expense, stock-based compensation, and other specified non-cash items.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 31
Definitions and Explanations (continued)
GAAP Capitalization Rate: GAAP Capitalization Rate represents the estimated first year GAAP yield to be generated on a real estate investment, which was computed at the time of investment based on the first full year of rental income computed in accordance with GAAP, divided by the purchase price including capitalized costs for the property.
Gross Debt: We define Gross Debt as total debt plus debt issuance costs and original issuance discount.
Net Debt: Net Debt is a non-GAAP financial measure. We define Net Debt as our Gross Debt less cash and cash equivalents and restricted cash.
Occupancy: Occupancy or a specified percentage of our portfolio that is "occupied" or "leased" means as of a specified date the quotient of (1) the total rentable square footage of our properties minus the square footage of our properties that are vacant and from which we are not receiving any rental payment, and (2) the total square footage of our properties.
Rent Coverage Ratio: Rent Coverage Ratio means the ratio of tenant-reported or, when available, management's estimate, based on tenant-reported financial information, of annual earnings before interest, taxes, depreciation, amortization, and cash rent attributable to the leased property (or properties, in the case of a master lease) to the annualized base rental obligation as of a specified date.
Definitions Related to Development Properties:
• Initial Purchase Price: Initial Purchase Price represents the initial contractual price of the property, typically representing purchase of undeveloped land or properties, including closing costs.
• Estimated Project Development Costs: Represents the estimated costs to be incurred to complete development of each project. We expect to update our estimates upon completion of the project, or sooner if there are any significant changes to expected costs from quarter to quarter. Excludes capitalized costs consisting of capitalized interest and other acquisition costs.
• Estimated Total Project Investment: Represents the sum of the Initial Purchase Price and the Estimated Project Development Costs.
• Estimated Stabilized Yield: Calculated by dividing the estimated first year cash yield to be generated on a real estate investment by the Estimated Total Project Investment for the property.
• Start Date: The Start Date represents the period in which we have begun physical construction on a property.
• Target Completion Date: The Target Completion Date is our current estimate of the period in which we will have substantially completed a project and the project is made available for occupancy. We expect to update our timing estimates on a quarterly basis.
BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2023 Broadstone Net Lease, LLC. All rights reserved. 32