8-K
Broadstone Net Lease, Inc. (BNL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, 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 5, 2020
BROADSTONE NET LEASE, INC.
(Exact name of registrant as specified in its charter)
| Maryland | 001-39529 | 26-1516177 |
|---|---|---|
| (State or other jurisdiction of<br>incorporation or organization) | (Commission File Number) | (I.R.S. Employer<br>Identification No.) |
| 800 Clinton Square, Rochester, New York | 14604 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
(585) 287-6500
(Registrant’s telephone number, including area code)
N/A
(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 Exchange Act:
| Title of each class | Trading<br><br><br>Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.00025 par value^1^ | BNL | New York Stock Exchange |
| Class A Common Stock, $0.00025 par value^1^ | BNL | New York Stock Exchange |
^1^ Each share of Class A Common Stock will automatically convert to one share of Common Stock on March 20, 2021, the date that is 180 days after the completion of the initial public offering of the Class A Common Stock. The Common Stock will be listed and tradeable on the New York Stock Exchange on March 22, 2021.
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 5, 2020, Broadstone Net Lease, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended September 30, 2020. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. Additionally, on November 5, 2020, 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, 2020. 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 |
|---|
INDEX TO EXHIBITS
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated November 5, 2020 |
| 99.2 | Quarterly Supplemental Information for the Quarter Ended September 30, 2020 |
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 hereunto duly authorized.
| BROADSTONE NET LEASE, INC. |
|---|
| /s/ John D. Moragne |
| Name: John D. Moragne<br><br><br>Title: Executive Vice President, Chief Operating Officer, and Secretary |
Date: November 5, 2020
ck1424182-ex991_316.htm
EXHIBIT 99.1
For Immediate Release
November 5, 2020
| Company Contact:<br><br><br>Ryan M. Albano<br><br><br>EVP and Chief Financial Officer<br><br><br><br><br><br>ryan.albano@broadstone.com<br><br><br>585.287.6498 |
|---|
Broadstone Net Lease, Inc. Reports 2020 Third Quarter Results
ROCHESTER, N.Y. – Broadstone Net Lease, Inc. (NYSE: BNL), an internally-managed real estate investment trust (“BNL,” the “Company,” “we,” “our,” or “us”), today announced its operating results for the quarter ended September 30, 2020. All per share amounts presented in this press release are on a diluted per share basis unless stated otherwise. All historic share and per share amounts have been adjusted to give retrospective effect to the four-for-one stock split of the Company’s outstanding shares of Common Stock that occurred on September 18, 2020.
MANAGEMENT COMMENT
“We are excited to report our first quarterly results as a publicly-traded company,” said Chris Czarnecki, BNL’s Chief Executive Officer. “During the quarter, we completed our initial public offering, executed a new revolving credit facility with increased borrowing capacity, and lowered our leverage ratio, all of which further solidify our investment grade balance sheet. As a result of our thoughtfully constructed and highly diversified portfolio of net leased properties, we collected approximately 97.9% of third quarter rents, as well as 98.5% to date for October, despite the challenges from the COVID-19 pandemic. This transformative quarter and continued strong portfolio performance in light of the general market disruption are a testament to the strength of our established platform, experienced management team, and differentiated investment strategy. With a robust pipeline of attractive potential investment opportunities, we are now focused on building solid momentum for the future.”
THIRD QUARTER HIGHLIGHTS
| - | Completed our initial public offering (“IPO”), generating net proceeds of $588.2 million, inclusive of the underwriters’ partial exercise of their overallotment option after quarter end. |
|---|---|
| - | Proceeds used to repay $456.7 million of outstanding borrowings (including accrued interest), significantly reducing our leverage to 5.0x on a Net Debt to Annualized Adjusted EBITDAre basis, pro forma to include the proceeds from the exercise of the overallotment. |
| --- | --- |
| - | Refinanced our unsecured revolving credit facility, which increased our capacity to $900.0 million and extended our debt maturity profile, providing ample liquidity and financial flexibility. |
| --- | --- |
| - | Rent collection for the quarter of 97.9% which increased to 98.5% for October. |
| --- | --- |
| - | Net income of $9.7 million, or $0.08 per diluted share. |
| --- | --- |
| - | AFFO of $47.1 million, or $0.38 per diluted share. |
| --- | --- |
| - | Declared a quarterly dividend on November 5, 2020, of $0.25 per share for shareholders as of record on December 31, 2020. |
| --- | --- |
FINANCIAL RESULTS
| For the three months ended | For the nine months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 30, | September 30, | |||||||
| (in thousands, except per share data) | 2020 | 2019 | 2020 | 2019 | ||||
| Revenues | $ | 80,744 | $ | 76,401 | $ | 239,346 | $ | 213,884 |
| Net income, including non-controlling interests | $ | 9,711 | $ | 25,038 | $ | 38,657 | $ | 57,402 |
| Net earnings per diluted share | $ | 0.08 | $ | 0.24 | $ | 0.32 | $ | 0.57 |
| FFO | $ | 54,726 | $ | 43,280 | $ | 148,783 | $ | 122,071 |
| FFO per diluted share | $ | 0.44 | $ | 0.41 | $ | 1.24 | $ | 1.21 |
| AFFO | $ | 47,077 | $ | 38,819 | $ | 134,201 | $ | 107,625 |
| AFFO per diluted share | $ | 0.38 | $ | 0.37 | $ | 1.12 | $ | 1.07 |
| Diluted Weighted Average Shares Outstanding | 123,381 | 105,516 | 119,747 | 100,523 |
COVID-19 PANDEMIC UPDATE
We continue to monitor the impact of the COVID-19 pandemic and its associated economic and market disruptions on our business, including our results of operations, liquidity and capital resources. The most direct impact of the pandemic to date has been in the form of tenant requests for potential rent relief, all of which we addressed by the end of the second quarter. No additional requests for rent relief were received during the third quarter or as of the date of this press release.
As of the date of this press release, we have collected 97.9% of third quarter contractual base rents due, and 100% of amounts that had been due during the third quarter under deferred rent agreements entered into in response to the pandemic. We have collected approximately 98.5% of October contractual base rents due and 100% of amounts that were due in October under deferred rent agreements.
At September 30, 2020, the deferral periods for the 14 tenants to whom we had granted partial rent deferrals had expired. At September 30, 2020, approximately $1.8 million of scheduled repayments remained under the terms of those agreements, which will be repaid over a weighted average repayment period of 4.2 months. Additionally, in exchange for a three-year lease extension, we agreed to a partial rent abatement with one tenant. At September 30, 2020, this agreement had a remaining term of four months. The tenant is required to pay a minimum amount of base rent, which increases during the abatement period, as well as additional base rent based upon sales if certain thresholds are met or exceeded, pursuant to the terms of an upside percentage rent clause in effect during the period. The Company received an aggregate amount of approximately $0.2 million of additional base rent in accordance with these provisions for the months of August and September.
REAL ESTATE PORTFOLIO UPDATE
As of September 30, 2020, we owned a diversified portfolio of 627 individual net leased commercial properties located in 41 U.S. states and one property located in British Columbia, Canada, and comprising approximately 27.3 million rentable square feet of operational space. As of September 30, 2020, all but six of our properties were subject to a lease, and our properties were occupied by 182 different commercial tenants, with no single tenant accounting for more than 2.5% of ABR. Properties under leases represent
99.8% of our portfolio’s rentable square footage. The ABR weighted average annual minimum rent increases on properties in the portfolio as of September 30, 2020, was 2.1%.
During the three months ended September 30, 2020, we sold five properties for net proceeds of $9.4 million, recognizing a gain over carrying value of $1.1 million. Three of the properties were vacant at the time of sale. The weighted average capitalization rate realized on the tenanted properties was 8.7%. For the nine months ended September 30, 2020, we sold 18 properties representing approximately 1.4% of our December 31, 2019 portfolio value, for net proceeds of $54.8 million, and recognized a gain over carrying value of $9.7 million. The weighted average capitalization rate realized on tenanted properties was 6.8%.
As previously disclosed, BNL currently has a robust pipeline of potential investment opportunities, including two acquisitions that are currently under executed contract. The Company is a party to two purchase and sale agreements for an aggregate purchase price of approximately $33 million (excluding transaction costs) for a weighted average initial cash capitalization rate of approximately 7.03%. BNL expects that these transactions will close during the fourth quarter of 2020. At the time of acquisition, the properties will have an expected weighted average remaining lease term of approximately 18.2 years and weighted average annual rent increases of approximately 1.92%. In connection with these acquisitions, the Company expects to enter into or assume leases with an initial ABR of approximately $2.3 million. While the Company regards the completion of these pending acquisitions to be probable, these transactions are subject to customary closing conditions, including the completion of due diligence, and there can be no assurance that these acquisitions will be completed on the terms described above or at all. These acquisitions will be funded using the net proceeds raised pursuant to the Company’s IPO.
CAPITAL MARKETS ACTIVITIES
On September 21, 2020, we completed our IPO of 33,500,000 shares of our Class A Common Stock at a price of $17.00 per share, and on October 20, 2020, the underwriters partially exercised their overallotment option, resulting in the issuance of an additional 3,500,000 shares. Total net proceeds from both the offering and the partial exercise of the overallotment option were approximately $588.2 million, after deducting underwriting discounts and commissions and other estimated expenses. We used the net proceeds to repay in full the $240.2 million outstanding balance and accrued interest on an unsecured term loan that had been due in 2021, as well as to repay in full the $216.5 million outstanding balance and accrued interest on our revolving credit facility. Net Debt to Annualized Adjusted EBITDAre was 5.20x at quarter end, or 5.00x on a pro forma basis taking into consideration the net proceeds received after quarter end from the partial exercise of the overallotment option.
On September 21, 2020, we replaced our former $600 million unsecured revolving credit facility with a $900 million unsecured revolving credit agreement (“Revolving Credit Agreement”), and executed amendments to our remaining outstanding senior unsecured term loans to conform certain provisions of those respective term loan agreements, including in regard to the calculation of certain financial covenants, to the terms of the Revolving Credit Agreement. The Revolving Credit Agreement matures in September 2023 and provides for two six-month extensions at our election, subject to certain customary conditions. As of September 30, 2020, there were no outstanding borrowings under the Revolving Credit Agreement.
Given our current cash available for deployment, zero balance on our revolver, and a leverage target of less than 6.0x on a Net Debt to Annualized Adjusted EBITDAre basis, we believe we have sufficient liquidity and financial flexibility to pursue our growth objectives in the near term, while also providing strength and stability in light of the continued economic uncertainty and evolving circumstances related to the COVID-19 pandemic.
DISTRIBUTIONS
At its November 5, 2020 meeting, our board of directors declared a $0.25 distribution per common share and OP Unit to stockholders and OP Unit holders of record as of December 31, 2020, payable on or before January 15, 2021.
CONFERENCE CALL AND WEBCAST
The company will host its third quarter earnings conference call and audio webcast on Friday, November 6, 2020, at 12:00 p.m. Eastern Time.
To access the live webcast, which will be available in listen-only mode, please visit: https://services.choruscall.com/links/bnl201106.html. If you prefer to listen via phone, please dial: 1-888-349-0109 and request to join the Broadstone Net Lease, Inc. call. International callers may dial 1-412-542-4109, and Canadian participants may dial 1-855-669-9657.
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, please visit: http://investors.bnl.broadstone.com. The replay will be available through November 20, 2020.
About Broadstone Net Lease, Inc.
BNL is an internally-managed 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. The Company utilizes an investment strategy underpinned by strong fundamental credit analysis and prudent real estate underwriting. As of September 30, 2020, BNL’s diversified portfolio consisted of 627 properties in 41 U.S. states and one property in Canada across the industrial, healthcare, restaurant, office, and retail property types, with an aggregate gross asset value of approximately $4.0 billion.
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 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 the COVID-19 pandemic and its related impacts on us and our tenants, general economic conditions, local real estate conditions, tenant financial health, property acquisitions, and the timing and uncertainty of completing these 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, 2019, which BNL filed with the SEC on February 27, 2020, and updated in BNL’s Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 2020 and the quarterly period ended June 30, 2020, which BNL filed with the SEC on May 7, 2020 and August 4, 2020, respectively. These documents, which you are encouraged to read, are 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, or FFO, Adjusted Funds from Operations, or AFFO, Net Debt, and Net Debt to Annualized Adjusted EBITDAre. We believe the use of 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 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 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.
^1^We calculate ABR as annualized contractual cash rent due for the last month of the reporting period (excluding the impacts of short-term rent deferrals and abatements agreed to as a result of COVID-19 tenant requests for rent relief, discussed above), adjusted to remove rent from properties sold during the month and to include a full month of contractual cash rent for properties acquired during the month.
Broadstone Net Lease, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
| December 31,<br><br><br>2019 | |||||
|---|---|---|---|---|---|
| Assets | |||||
| Accounted for using the operating method, net of accumulated depreciation | 3,304,002 | $ | 3,415,400 | ||
| Accounted for using the direct financing method | 30,902 | 41,890 | |||
| Investment in rental property, net | 3,334,904 | 3,457,290 | |||
| Cash and cash equivalents | 101,787 | 12,455 | |||
| Accrued rental income | 97,517 | 84,534 | |||
| Tenant and other receivables, net | 3,957 | 934 | |||
| Prepaid expenses and other assets | 19,522 | 12,613 | |||
| Interest rate swap, assets | — | 2,911 | |||
| Goodwill | 339,769 | — | |||
| Intangible lease assets, net | 288,971 | 331,894 | |||
| Debt issuance costs – unsecured revolving credit facility, net | 7,027 | 2,380 | |||
| Leasing fees, net | 11,015 | 12,847 | |||
| Total assets | 4,204,469 | $ | 3,917,858 | ||
| Liabilities and equity | |||||
| Unsecured revolving credit facility | — | $ | 197,300 | ||
| Mortgages and notes payable, net | 108,752 | 111,793 | |||
| Unsecured term notes, net | 1,433,495 | 1,672,081 | |||
| Interest rate swap, liabilities | 81,326 | 24,471 | |||
| Earnout liability | 13,177 | — | |||
| Accounts payable and other liabilities | 55,339 | 37,377 | |||
| Accrued interest payable | 9,453 | 3,594 | |||
| Intangible lease liabilities, net | 81,220 | 92,222 | |||
| Total liabilities | 1,782,762 | 2,138,838 | |||
| 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; 440,000 shares authorized, 107,773 shares issued and outstanding at September 30, 2020; 320,000 shares authorized, 104,006 shares issued and outstanding at December 31, 2019 | 27 | 26 | |||
| Class A common stock, 0.00025 par value; 60,000 shares authorized, 33,500 shares issued and outstanding at September 30, 2020; no shares authorized, issued or outstanding at December 31, 2019 | 8 | — | |||
| Additional paid-in capital | 2,506,008 | 1,895,935 | |||
| Cumulative distributions in excess of retained earnings | (239,520 | ) | (208,261 | ) | |
| Accumulated other comprehensive loss | (74,729 | ) | (20,086 | ) | |
| Total Broadstone Net Lease, Inc. stockholders’ equity | 2,191,794 | 1,667,614 | |||
| Non-controlling interests | 229,913 | 111,406 | |||
| Total equity | 2,421,707 | 1,779,020 | |||
| Total liabilities and equity | 4,204,469 | $ | 3,917,858 |
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<br><br><br>September 30, | For the nine months ended<br><br><br>September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Revenues | ||||||||||||
| Lease revenues, net | $ | 80,744 | $ | 76,401 | $ | 239,346 | $ | 213,884 | ||||
| Operating expenses | ||||||||||||
| Depreciation and amortization | 31,363 | 28,392 | 102,503 | 77,989 | ||||||||
| Asset management fees | — | 5,610 | 2,461 | 16,048 | ||||||||
| Property management fees | — | 2,098 | 1,275 | 5,918 | ||||||||
| Property and operating expense | 4,187 | 3,855 | 12,492 | 11,497 | ||||||||
| General and administrative | 7,214 | 1,315 | 18,756 | 3,807 | ||||||||
| Provision for impairment of investment in rental properties | 14,732 | 2,435 | 17,399 | 3,452 | ||||||||
| Total operating expenses | 57,496 | 43,705 | 154,886 | 118,711 | ||||||||
| Other income (expenses) | ||||||||||||
| Interest income | — | 5 | 20 | 6 | ||||||||
| Interest expense | (18,511 | ) | (18,465 | ) | (59,015 | ) | (51,025 | ) | ||||
| Cost of debt extinguishment | (392 | ) | (455 | ) | (414 | ) | (1,176 | ) | ||||
| Gain on sale of real estate | 1,060 | 12,585 | 9,725 | 16,772 | ||||||||
| Income taxes | (129 | ) | (405 | ) | (1,080 | ) | (1,153 | ) | ||||
| Internalization expenses | (1,929 | ) | (923 | ) | (3,523 | ) | (1,195 | ) | ||||
| Change in fair value of earnout liability | 6,362 | — | 8,506 | — | ||||||||
| Other gains (losses) | 2 | — | (22 | ) | — | |||||||
| Net income | 9,711 | 25,038 | 38,657 | 57,402 | ||||||||
| Net income attributable to non-controlling interests | (961 | ) | (1,650 | ) | (3,738 | ) | (3,942 | ) | ||||
| Net income attributable to Broadstone Net Lease, Inc. | $ | 8,750 | $ | 23,388 | $ | 34,919 | $ | 53,460 | ||||
| Weighted average number of common shares outstanding | ||||||||||||
| Basic | 111,155 | 98,568 | 108,228 | 93,575 | ||||||||
| Diluted | 123,381 | 105,516 | 119,747 | 100,523 | ||||||||
| Net earnings per share attributable to common stockholders | ||||||||||||
| Basic and diluted | $ | 0.08 | $ | 0.24 | $ | 0.32 | $ | 0.57 | ||||
| Comprehensive income (loss) | ||||||||||||
| Net income | $ | 9,711 | $ | 25,038 | $ | 38,657 | $ | 57,402 | ||||
| Other comprehensive loss | ||||||||||||
| Change in fair value of interest rate swaps | 4,352 | (16,380 | ) | (59,766 | ) | (52,182 | ) | |||||
| Realized gain on interest rate swaps | (42 | ) | (41 | ) | (125 | ) | (163 | ) | ||||
| Comprehensive income (loss) | 14,021 | 8,617 | (21,234 | ) | 5,057 | |||||||
| Comprehensive (income) loss attributable to non-controlling interests | (1,387 | ) | (557 | ) | 1,510 | (315 | ) | |||||
| Comprehensive income (loss) attributable to Broadstone Net Lease, Inc. | $ | 12,634 | $ | 8,060 | $ | (19,724 | ) | $ | 4,742 |
Reconciliation of Non-GAAP Measures
The following is a reconciliation of net income to FFO and AFFO for the three and nine months ended September 30, 2020 and 2019. 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 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | September 30, | |||||||||||
| (in thousands, except per share data) | 2020 | 2019 | 2020 | 2019 | ||||||||
| Net income | $ | 9,711 | $ | 25,038 | $ | 38,657 | $ | 57,402 | ||||
| Real property depreciation and amortization | 31,343 | 28,392 | 102,452 | 77,989 | ||||||||
| Gain on sale of real estate | (1,060 | ) | (12,585 | ) | (9,725 | ) | (16,772 | ) | ||||
| Provision for impairment on investment in rental properties | 14,732 | 2,435 | 17,399 | 3,452 | ||||||||
| FFO | $ | 54,726 | $ | 43,280 | $ | 148,783 | $ | 122,071 | ||||
| Capital improvements / reserves | 1,662 | — | 1,662 | (97 | ) | |||||||
| Straight-line rent adjustment | (6,943 | ) | (5,499 | ) | (14,706 | ) | (15,882 | ) | ||||
| Adjustment to provision for credit losses | (15 | ) | — | (142 | ) | — | ||||||
| Cost of debt extinguishment | 392 | 455 | 414 | 1,176 | ||||||||
| Amortization of debt issuance costs | 819 | 611 | 2,528 | 1,761 | ||||||||
| Amortization of net mortgage premiums | (34 | ) | (37 | ) | (106 | ) | (108 | ) | ||||
| Gain on interest rate swaps and other non-cash<br><br><br>interest expense | (42 | ) | (41 | ) | (125 | ) | (163 | ) | ||||
| Amortization of lease intangibles | 151 | (873 | ) | 32 | (2,328 | ) | ||||||
| Internalization expenses | 1,929 | 923 | 3,523 | 1,195 | ||||||||
| Stock-based compensation | 796 | — | 796 | — | ||||||||
| Severance | — | — | 26 | — | ||||||||
| Change in fair value of earnout liability | (6,362 | ) | — | (8,506 | ) | — | ||||||
| Other losses | (2 | ) | — | 22 | — | |||||||
| AFFO | $ | 47,077 | $ | 38,819 | $ | 134,201 | $ | 107,625 | ||||
| Diluted WASO ^1^ | 123,381 | 105,516 | 119,747 | 100,523 | ||||||||
| Net earnings per share, basic and diluted ^2^ | $ | 0.08 | $ | 0.24 | $ | 0.32 | $ | 0.57 | ||||
| FFO per diluted share ^2^ | 0.44 | 0.41 | 1.24 | 1.21 | ||||||||
| AFFO per diluted share ^2^ | 0.38 | 0.37 | 1.12 | 1.07 |
^1^ Excludes 216 and 72 weighted average shares of unvested restricted common stock for the three and nine months ended September 30, 2020, respectively.
^2^ Excludes $46 from the numerator for the three and nine months ended September 30, 2020, 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 and AFFO, each of which are non-GAAP measures. We believe the use of 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 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. To derive AFFO, we modify the Nareit computation of FFO to include other adjustments to GAAP net income related to certain non-cash and non-recurring revenues and expenses, including straight-line rents, contingent earnout expense (income), cost of debt extinguishments, 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, realized gains or losses on foreign currency transactions, internalization expenses, stock-based compensation expense, severance, extraordinary items, and other specified non-cash items. We believe that such items are not a result of normal operations and thus we believe 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.
Our leases include cash rents that increase over the term of the lease to compensate us for anticipated increases in market rentals 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. In situations where we have granted short-term rent deferrals as a result of the COVID-19 pandemic, and such deferrals are probable of collection and expected to be repaid within a short term, we will continue to recognize the same amount of GAAP lease revenue each period. Amounts we agreed to defer will remain in accounts receivable until fully repaid. Consistent with GAAP lease revenues, the short-term deferrals associated with COVID-19 will not impact our AFFO.
We further exclude contingent consideration expense (income), costs or gains recorded on the extinguishment of debt, non-cash interest expense and gains, the amortization of debt issuance costs, net mortgage premiums, and lease intangibles, realized gains and losses on foreign currency transactions, internalization expenses, stock-based compensation and severance, as these items are not indicative of ongoing operational results. We use AFFO as a measure of our performance when we formulate corporate goals.
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 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 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. FFO and AFFO may not be comparable to similarly titled measures employed by other REITs, and comparisons of our 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 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 AFFO accordingly.
The following is a reconciliation of net income to Annualized Adjusted EBITDAre, debt to Net Debt and Net Debt to Annualized Adjusted EBITDAre as of and for the three months ended September 30, 2020 and 2019. Net Debt to Annualized Adjusted EBITDAre is also presented on a pro forma basis to reflect the receipt of net proceeds from the partial exercise of the underwriters’ overallotment option:
| For the three months ended September 30, | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | 2020 | 2019 | ||||
| Net income | $ | 9,711 | $ | 25,038 | ||
| Depreciation and amortization | 31,363 | 28,392 | ||||
| Interest expense | 18,511 | 18,465 | ||||
| Income taxes | 129 | 405 | ||||
| EBITDA | $ | 59,714 | $ | 72,300 | ||
| Provision for impairment of investment in rental properties | 14,732 | 2,435 | ||||
| Gain on sale of real estate | (1,060 | ) | (12,585 | ) | ||
| EBITDAre | $ | 73,386 | $ | 62,150 | ||
| Adjustment for current quarter investment activity ^1^ | — | 8,898 | ||||
| Adjustment for current quarter disposition activity ^2^ | (78 | ) | (549 | ) | ||
| Adjustment to exclude non-recurring expenses (income) ^3^ | 1,929 | 923 | ||||
| Adjustment to exclude change in fair value of earnout liability | (6,362 | ) | — | |||
| Adjustment to exclude cost of debt extinguishments | 392 | 455 | ||||
| Adjustment to exclude lease termination fees | — | (407 | ) | |||
| Adjusted EBITDAre | $ | 69,267 | $ | 71,470 | ||
| Annualized EBITDAre | $ | 293,544 | $ | 248,600 | ||
| Annualized Adjusted EBITDAre | $ | 277,068 | $ | 285,880 |
^1^ Reflects an adjustment to give effect to all acquisitions during the quarter as if they had been acquired 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^ Amounts represent expenses directly associated with the Internalization.
| As of September 30, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2020<br><br><br>(Pro forma^4^) | 2020<br><br><br>(Historical) | 2019<br><br><br>(Historical) | ||||||
| Debt | |||||||||
| Mortgages and notes payable, net | $ | 108,752 | $ | 108,752 | $ | 112,562 | |||
| Unsecured term notes, net | 1,433,495 | 1,433,495 | 1,671,511 | ||||||
| Revolving Credit Facility | — | — | 303,300 | ||||||
| Debt issuance costs | 6,829 | 6,829 | 8,862 | ||||||
| Gross Debt | 1,549,076 | 1,549,076 | 2,096,235 | ||||||
| Cash and cash equivalents | (157,717 | ) | (101,787 | ) | (14,008 | ) | |||
| Restricted cash | (7,200 | ) | (7,200 | ) | (30,107 | ) | |||
| Net Debt | $ | 1,384,159 | $ | 1,440,089 | $ | 2,052,120 | |||
| Net Debt to Annualized EBITDAre | 4.72x | 4.91x | 8.25x | ||||||
| Net Debt to Annualized Adjusted EBITDAre | 5.00x | 5.20x | 7.18x |
^4^ Reflects net proceeds from partial exercise of underwriters’ overallotment option subsequent to quarter end.
We define Net Debt as gross debt (total reported debt plus deferred financing 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 (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. 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.
As we fund new acquisitions initially using our unsecured Revolving Credit Facility, our leverage profile and Net Debt are immediately impacted by current quarter acquisitions. However, the full benefit of EBITDAre from newly acquired properties is not 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 acquisitions 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 acquisitions 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 or the change in fair value of our earnout liability, 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, which are not a result of normal operations. 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.
11
ck1424182-ex992_7.htm
Exhibit 99.2
Q3 2020 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 lease on a long-term basis to a diversified group of tenants. www.broadstone.com
| Q3 2020 SUPPLEMENTAL INFORMATION |
|---|
Table of Contents
| Section | Page | ||
|---|---|---|---|
| Company Overview | 4 | ||
| Quarterly Financial Summary | 5 | ||
| Balance Sheet | 6 | ||
| Income Statement Summary | 7 | ||
| Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO) | 8 | ||
| EBITDA, EBITDAre, and Other Non-GAAP Operating Measures | 9 | ||
| Lease Revenues | 10 | ||
| Capital Structure | 11 | ||
| Debt Outstanding | 12 | ||
| Net Debt Metrics | 12 | ||
| Covenants | 13 | ||
| Debt Maturities and Interest Rate Exposure | 14 | ||
| Acquisitions | 15 | ||
| Dispositions | 15 | ||
| Portfolio at a Glance: Key Metrics | 16 | ||
| Diversification: Tenants and Brands | 17-18 | ||
| Diversification: Property Type | 19-20 | ||
| Key Statistics by Property Type | 21 | ||
| Diversification: Tenant Industry | 22 | ||
| Diversification: Geography | 23 | ||
| Lease Expirations | 24 | ||
| Portfolio Occupancy | 25 | ||
| Definitions and Explanations | 26-27 | ||
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 2 |
| --- | --- | ||
| Q3 2020 SUPPLEMENTAL INFORMATION | |||
| --- |
About the Data
This data and other information described herein are as of and for the three months ended September 30, 2020 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 the financial statements and the management's discussion and analysis of financial condition and results of operations sections contained in Broadstone Net Lease, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2019, and Quarterly Reports on Form 10-Q for the periods ended September 30, 2020, June 30, 2020, March 31, 2020, and September 30, 2019.
Stock Split
All share and per share data as of June 30, 2020, March 31, 2020, December 31, 2019, and September 30, 2019, contained herein, have been adjusted to reflect the four-for-one stock split that was effected on September 18, 2020.
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 the COVID-19 pandemic and its related impacts on us and our tenants, general economic conditions, local real estate conditions, tenant financial health, and property acquisitions and the timing of these 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 | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 3 |
|---|---|---|---|
| Q3 2020 SUPPLEMENTAL INFORMATION | |||
| --- |
Company Overview
Broadstone Net Lease, Inc. (NYSE:BNL) (the “Company,” “BNL,” “us,” “our” and “we”) is an internally-managed REIT, formed as a Maryland corporation in 2007 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, office, and retail 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 their core business operations rather than real estate ownership.
| Executive Management<br><br><br>Christopher J. Czarnecki<br><br><br>Chief Executive Officer, President, and Director<br><br><br>Ryan M. Albano<br><br><br>Executive Vice President and Chief Financial Officer<br><br><br>Sean T. Cutt<br><br><br>Executive Vice President and Chief Investment Officer<br><br><br>John D. Moragne<br><br><br>Executive Vice President, Chief Operating Officer, and Secretary | Board of Directors<br><br><br>Amy L. Tait<br><br><br>Chairman of the Board<br><br><br>Christopher J. Czarnecki<br><br><br>Chief Executive Officer and President<br><br><br>Laurie A. Hawkes<br><br><br>Lead Independent Director<br><br><br><br><br><br>David M. Jacobstein<br><br><br>Shekar Narasimhan<br><br><br>Geoffrey H. Rosenberger<br><br><br>James H. Watters<br><br><br>Agha S. Khan | ||
|---|---|---|---|
| Corporate Office & Contact Information<br><br><br>800 Clinton Square<br>Rochester, New York 14604<br>585-287-6500<br><br>info@broadstone.com <br>www.broadstone.com<br><br><br><br><br><br>Transfer Agent<br><br><br>Computershare Trust Company, N.A.<br><br><br>250 Royall Street<br><br><br>Canton, Massachusetts 02021<br><br><br>800-736-3001 | |||
| --- | |||
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 4 |
| --- | --- | ||
| Q3 2020 SUPPLEMENTAL INFORMATION | |||
| --- |
Quarterly Financial Summary
(unaudited, dollars in thousands, except per share data)
| Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Financial Summary | |||||||||||||||
| Investment in rental property, net | $ | 3,334,904 | $ | 3,377,745 | $ | 3,407,527 | $ | 3,457,290 | $ | 3,501,546 | |||||
| Total assets | 4,204,469 | 4,144,055 | 4,274,054 | 3,917,858 | 3,991,788 | ||||||||||
| Mortgage and notes payable, net | 108,752 | 109,512 | 110,464 | 111,793 | 112,562 | ||||||||||
| Unsecured term notes, net and revolver | 1,433,495 | 1,921,392 | 2,025,887 | 1,869,381 | 1,974,811 | ||||||||||
| Total liabilities | 1,782,762 | 2,267,408 | 2,395,541 | 2,138,838 | 2,263,288 | ||||||||||
| Total mezzanine equity | — | 178,535 | 178,534 | — | — | ||||||||||
| Total Broadstone Net Lease, Inc. stockholders'<br><br><br>equity | 2,191,794 | 1,591,633 | 1,593,437 | 1,667,614 | 1,623,362 | ||||||||||
| Total equity (book value) | 2,421,707 | 1,698,112 | 1,699,979 | 1,779,020 | 1,728,500 | ||||||||||
| Revenues | 80,744 | 80,371 | 78,231 | 84,931 | 76,401 | ||||||||||
| Total operating expenses | 57,496 | 50,345 | 47,045 | 45,124 | 43,705 | ||||||||||
| Interest expense | 18,511 | 19,513 | 20,991 | 21,509 | 18,465 | ||||||||||
| Net income | 9,711 | 17,098 | 11,848 | 27,712 | 25,038 | ||||||||||
| Net earnings per common share,<br><br><br>diluted | $ | 0.08 | $ | 0.14 | $ | 0.10 | $ | 0.25 | $ | 0.24 | |||||
| FFO | 54,726 | 56,485 | 37,572 | 45,399 | 43,280 | ||||||||||
| FFO per share, diluted | $ | 0.44 | $ | 0.47 | $ | 0.32 | $ | 0.41 | $ | 0.41 | |||||
| AFFO | 47,077 | 46,056 | 41,068 | 41,572 | 38,819 | ||||||||||
| AFFO per share, diluted | $ | 0.38 | $ | 0.38 | $ | 0.35 | $ | 0.38 | $ | 0.37 | |||||
| Net cash provided by operating activities | 53,506 | 39,139 | 40,319 | 36,425 | 46,214 | ||||||||||
| Net cash provided by (used in) investing<br><br><br>activities | 5,469 | 6,264 | 4,474 | 38,520 | (749,333 | ) | |||||||||
| Net cash (used in) provided by financing<br><br><br>activities | 40,170 | (132,273 | ) | 31,608 | (98,749 | ) | 734,516 | ||||||||
| Distributions declared | 20,477 | 13,099 | 38,560 | 36,183 | 34,883 | ||||||||||
| Distributions declared per diluted share | $ | 0.135 | $ | 0.11 | $ | 0.33 | $ | 0.33 | $ | 0.33 | |||||
| Portfolio Metrics | |||||||||||||||
| Properties | 628 | 633 | 636 | 646 | 662 | ||||||||||
| Rentable square feet | 27.3M | 27.4M | 27.4M | 27.5M | 27.5M | ||||||||||
| % Leased | 99.8 | % | 99.6 | % | 99.6 | % | 99.8 | % | 99.8 | % | |||||
| Physical occupancy | 99.6 | % | 99.5 | % | 99.5 | % | 99.7 | % | 99.7 | % | |||||
| Weighted average remaining lease term (years) | 10.8 | 11.0 | 11.3 | 11.5 | 11.7 | ||||||||||
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 5 | ||||||||||||
| --- | --- | ||||||||||||||
| Q3 2020 SUPPLEMENTAL INFORMATION | |||||||||||||||
| --- |
Balance Sheet
(unaudited, in thousands)
| June 30,<br><br><br>2020 | March 31,<br><br><br>2020 | December 31,<br><br><br>2019 | September 30,<br><br><br>2019 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Assets | ||||||||||||||
| Accounted for using the operating<br> method, net of accumulated<br> depreciation | 3,304,002 | $ | 3,346,792 | $ | 3,367,566 | $ | 3,415,400 | $ | 3,459,626 | |||||
| Accounted for using the direct financing<br> method | 30,902 | 30,953 | 39,961 | 41,890 | 41,920 | |||||||||
| Investment in rental property, net | 3,334,904 | 3,377,745 | 3,407,527 | 3,457,290 | 3,501,546 | |||||||||
| Cash and cash equivalents | 101,787 | 9,241 | 93,151 | 12,455 | 14,008 | |||||||||
| Accrued rental income | 97,517 | 90,545 | 84,932 | 84,534 | 81,251 | |||||||||
| Tenant and other receivables, net | 3,957 | 5,045 | 1,287 | 934 | 861 | |||||||||
| Prepaid expenses and other assets | 19,522 | 9,819 | 12,397 | 12,613 | 34,594 | |||||||||
| Interest rate swap, assets | — | — | — | 2,911 | 1,120 | |||||||||
| Goodwill | 339,769 | 339,769 | 339,769 | — | — | |||||||||
| Intangible lease assets, net | 288,971 | 298,741 | 320,418 | 331,894 | 342,478 | |||||||||
| Debt issuance costs – unsecured<br> revolving credit facility, net | 7,027 | 1,782 | 2,081 | 2,380 | 2,679 | |||||||||
| Leasing fees, net | 11,015 | 11,368 | 12,492 | 12,847 | 13,251 | |||||||||
| Total assets | 4,204,469 | $ | 4,144,055 | $ | 4,274,054 | $ | 3,917,858 | $ | 3,991,788 | |||||
| Liabilities and equity | ||||||||||||||
| Unsecured revolving credit facility | — | $ | 248,300 | $ | 353,300 | $ | 197,300 | $ | 303,300 | |||||
| Mortgages and notes payable, net | 108,752 | 109,512 | 110,464 | 111,793 | 112,562 | |||||||||
| Unsecured term notes, net | 1,433,495 | 1,673,092 | 1,672,587 | 1,672,081 | 1,671,511 | |||||||||
| Interest rate swap, liabilities | 81,326 | 85,678 | 79,622 | 24,471 | 37,489 | |||||||||
| Earnout liability | 13,177 | 37,975 | 44,296 | — | — | |||||||||
| Accounts payable and other liabilities | 55,339 | 25,550 | 35,835 | 37,377 | 34,008 | |||||||||
| Due to related parties | — | — | — | — | 433 | |||||||||
| Accrued interest payable | 9,453 | 4,144 | 9,764 | 3,594 | 9,482 | |||||||||
| Intangible lease liabilities, net | 81,220 | 83,157 | 89,673 | 92,222 | 94,503 | |||||||||
| Total liabilities | 1,782,762 | 2,267,408 | 2,395,541 | 2,138,838 | 2,263,288 | |||||||||
| Mezzanine equity | ||||||||||||||
| Common stock | — | 66,376 | 66,376 | — | — | |||||||||
| Non-controlling interests | — | 112,159 | 112,158 | — | — | |||||||||
| Total mezzanine equity | — | 178,535 | 178,534 | — | — | |||||||||
| Equity | ||||||||||||||
| Broadstone Net Lease, Inc. stockholders'<br> equity: | ||||||||||||||
| Preferred stock, 0.001 par value | — | — | — | — | — | |||||||||
| Common stock, 0.00025 par value | 27 | 26 | 26 | 26 | 25 | |||||||||
| Class A Common Stock, 0.00025 par<br> value | 8 | — | — | — | — | |||||||||
| Additional paid-in capital | 2,506,008 | 1,899,751 | 1,899,616 | 1,895,935 | 1,852,038 | |||||||||
| Cumulative distributions in excess of<br> retained earnings | (239,520 | ) | (229,531 | ) | (233,067 | ) | (208,261 | ) | (194,790 | ) | ||||
| Accumulated other comprehensive<br> income | (74,729 | ) | (78,613 | ) | (73,138 | ) | (20,086 | ) | (33,911 | ) | ||||
| Total Broadstone Net Lease, Inc.<br> stockholders’ equity | 2,191,794 | 1,591,633 | 1,593,437 | 1,667,614 | 1,623,362 | |||||||||
| Non-controlling interests | 229,913 | 106,479 | 106,542 | 111,406 | 105,138 | |||||||||
| Total equity | 2,421,707 | 1,698,112 | 1,699,979 | 1,779,020 | 1,728,500 | |||||||||
| Total liabilities, mezzanine<br> and equity | 4,204,469 | $ | 4,144,055 | $ | 4,274,054 | $ | 3,917,858 | $ | 3,991,788 |
All values are in US Dollars.
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 6 |
|---|---|---|---|
| Q3 2020 SUPPLEMENTAL INFORMATION | |||
| --- |
Income Statement Summary
(unaudited, in thousands, except per share data)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br><br>2020 | June 30,<br><br><br>2020 | March 31,<br><br><br>2020 | December 31,<br><br><br>2019 | September 30,<br><br><br>2019 | |||||||||||
| Revenues | |||||||||||||||
| Lease revenues, net | $ | 80,744 | $ | 80,371 | $ | 78,231 | $ | 84,931 | $ | 76,401 | |||||
| Operating expenses | |||||||||||||||
| Depreciation and amortization | 31,363 | 39,921 | 31,219 | 30,829 | 28,392 | ||||||||||
| Asset management fees | — | — | 2,461 | 5,815 | 5,610 | ||||||||||
| Property management fees | — | — | 1,275 | 2,338 | 2,098 | ||||||||||
| Property and operating expense | 4,187 | 4,190 | 4,115 | 4,493 | 3,855 | ||||||||||
| General and administrative | 7,214 | 5,700 | 5,842 | 1,649 | 1,315 | ||||||||||
| Provision for impairment of investment<br><br><br>in rental properties | 14,732 | 534 | 2,133 | — | 2,435 | ||||||||||
| Total operating expenses | 57,496 | 50,345 | 47,045 | 45,124 | 43,705 | ||||||||||
| Other income (expenses) | |||||||||||||||
| Interest income | — | 11 | 9 | 3 | 5 | ||||||||||
| Interest expense | (18,511 | ) | (19,513 | ) | (20,991 | ) | (21,509 | ) | (18,465 | ) | |||||
| Cost of debt extinguishment | (392 | ) | — | (22 | ) | — | (455 | ) | |||||||
| Gain on sale of real estate | 1,060 | 1,046 | 7,619 | 13,142 | 12,585 | ||||||||||
| Income taxes | (129 | ) | (402 | ) | (549 | ) | (1,262 | ) | (405 | ) | |||||
| Internalization expenses | (1,929 | ) | (389 | ) | (1,205 | ) | (2,463 | ) | (923 | ) | |||||
| Change in fair value of earnout liability | 6,362 | 6,321 | (4,177 | ) | — | — | |||||||||
| Other losses | 2 | (2 | ) | (22 | ) | (6 | ) | — | |||||||
| Net income | 9,711 | 17,098 | 11,848 | 27,712 | 25,038 | ||||||||||
| Net income attributable to<br><br><br>non-controlling interests | (961 | ) | (1,745 | ) | (1,032 | ) | (1,778 | ) | (1,650 | ) | |||||
| Net income attributable to<br><br><br>Broadstone Net Lease, Inc. | $ | 8,750 | $ | 15,353 | $ | 10,816 | $ | 25,934 | $ | 23,388 | |||||
| Weighted average number of common shares outstanding | |||||||||||||||
| Basic^1^ | 111,155 | 107,422 | 106,108 | 102,941 | 98,568 | ||||||||||
| Diluted^1^ | 123,381 | 119,648 | 116,210 | 109,889 | 105,516 | ||||||||||
| Net earnings per common share^2^ | |||||||||||||||
| Basic and diluted | $ | 0.08 | $ | 0.14 | $ | 0.10 | $ | 0.25 | $ | 0.24 |
^1^ Excludes 216 weighted average shares of unvested restricted common stock for the three months ended September 30, 2020.
^2^ Excludes $46 from the numerator for the three months ended September 30, 2020, related to dividends paid or declared on shares of unvested restricted common stock.
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 7 |
|---|---|---|---|
| Q3 2020 SUPPLEMENTAL INFORMATION | |||
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Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO)
(unaudited, in thousands, except per share data)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br><br>2020 | June 30,<br><br><br>2020 | March 31,<br><br><br>2020 | December 31,<br><br><br>2019 | September 30,<br><br><br>2019 | |||||||||||
| Net income | $ | 9,711 | $ | 17,098 | $ | 11,848 | $ | 27,712 | $ | 25,038 | |||||
| Real property depreciation and<br><br><br>amortization | 31,343 | 39,899 | 31,210 | 30,829 | 28,392 | ||||||||||
| Gain on sale of real estate | (1,060 | ) | (1,046 | ) | (7,619 | ) | (13,142 | ) | (12,585 | ) | |||||
| Provision for impairment of investment<br><br><br>in rental properties | 14,732 | 534 | 2,133 | — | 2,435 | ||||||||||
| FFO | $ | 54,726 | $ | 56,485 | $ | 37,572 | $ | 45,399 | $ | 43,280 | |||||
| Capital improvements / reserves | 1,662 | — | — | — | — | ||||||||||
| Straight-line rent adjustment | (6,943 | ) | (6,151 | ) | (1,612 | ) | (6,061 | ) | (5,499 | ) | |||||
| Adjustment to provision of credit losses | (15 | ) | (110 | ) | (17 | ) | — | — | |||||||
| Cost of debt extinguishment | 392 | — | 22 | — | 455 | ||||||||||
| Amortization of debt issuance costs | 819 | 821 | 888 | 924 | 611 | ||||||||||
| Amortization of net mortgage premiums | (34 | ) | (37 | ) | (35 | ) | (35 | ) | (37 | ) | |||||
| Gain on interest rate swaps and other<br><br><br>non-cash interest expense | (42 | ) | (41 | ) | (42 | ) | (42 | ) | (41 | ) | |||||
| Amortization of lease intangibles | 151 | 1,019 | (1,138 | ) | (1,082 | ) | (873 | ) | |||||||
| Internalization expenses | 1,929 | 389 | 1,205 | 2,463 | 923 | ||||||||||
| Stock-based compensation | 796 | — | — | — | — | ||||||||||
| Severance | — | — | 26 | — | — | ||||||||||
| Change in fair value of earnout liability | (6,362 | ) | (6,321 | ) | 4,177 | — | — | ||||||||
| Other losses | (2 | ) | 2 | 22 | 6 | — | |||||||||
| AFFO | $ | 47,077 | $ | 46,056 | $ | 41,068 | $ | 41,572 | $ | 38,819 | |||||
| Diluted weighted average shares<br><br><br>outstanding^1^ | 123,381 | 119,648 | 116,210 | 109,889 | 105,516 | ||||||||||
| Net earnings per diluted share^2^ | $ | 0.08 | $ | 0.14 | $ | 0.10 | $ | 0.25 | $ | 0.24 | |||||
| FFO per diluted share^2^ | 0.44 | 0.47 | 0.32 | 0.41 | 0.41 | ||||||||||
| AFFO per diluted share^2^ | 0.38 | 0.38 | 0.35 | 0.38 | 0.37 |
^1^ Excludes 216 weighted average shares of unvested restricted common stock for the three months ended September 30, 2020.
^2^ Excludes $46 from the numerator for the three months ended September 30, 2020, related to dividends paid or declared on shares of unvested restricted common stock.
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 8 |
|---|---|---|---|
| Q3 2020 SUPPLEMENTAL INFORMATION | |||
| --- |
EBITDA, EBITDAre, and Other-Non GAAP Operating Measures
(unaudited, in thousands)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br><br>2020 | June 30,<br><br><br>2020 | March 31,<br><br><br>2020 | December 31,<br><br><br>2019 | September 30,<br><br><br>2019 | |||||||||||
| Net income | $ | 9,711 | $ | 17,098 | $ | 11,848 | $ | 27,712 | $ | 25,038 | |||||
| Depreciation and amortization | 31,363 | 39,921 | 31,219 | 30,829 | 28,392 | ||||||||||
| Interest expense | 18,511 | 19,513 | 20,991 | 21,509 | 18,465 | ||||||||||
| Income taxes | 129 | 402 | 549 | 1,262 | 405 | ||||||||||
| EBITDA | $ | 59,714 | $ | 76,934 | $ | 64,607 | $ | 81,312 | $ | 72,300 | |||||
| Provision for impairment of investment in<br><br><br>rental properties | 14,732 | 534 | 2,133 | — | 2,435 | ||||||||||
| Gain on sale of real estate | (1,060 | ) | (1,046 | ) | (7,619 | ) | (13,142 | ) | (12,585 | ) | |||||
| EBITDAre | $ | 73,386 | $ | 76,422 | $ | 59,121 | $ | 68,170 | $ | 62,150 | |||||
| Adjustment for current quarter investment<br><br><br>activity ^1^ | — | — | — | 346 | 8,898 | ||||||||||
| Adjustment for current quarter disposition<br><br><br>activity ^2^ | (78 | ) | (52 | ) | (285 | ) | (1,015 | ) | (549 | ) | |||||
| Adjustment to exclude non-recurring<br><br><br>expenses (income) ^3^ | 1,929 | 389 | 1,205 | 2,463 | 923 | ||||||||||
| Adjustment to exclude change in fair value<br><br><br>of earnout liability | (6,362 | ) | (6,321 | ) | 4,177 | — | — | ||||||||
| Adjustment to exclude write-off of accrued<br><br><br>rental income | — | — | 3,993 | — | — | ||||||||||
| Adjustment to exclude cost of debt<br><br><br>extinguishments | 392 | — | 22 | — | 455 | ||||||||||
| Adjustment to exclude lease termination<br><br><br>fees | — | (276 | ) | — | — | (407 | ) | ||||||||
| Adjusted EBITDAre | $ | 69,267 | $ | 70,162 | $ | 68,233 | $ | 69,964 | $ | 71,470 | |||||
| Asset management fees | — | — | 2,461 | 5,815 | 5,610 | ||||||||||
| Property management fees | — | — | 1,275 | 2,338 | 2,098 | ||||||||||
| General and administrative | 7,214 | 5,700 | 5,842 | 1,649 | 1,315 | ||||||||||
| Adjusted Net Operating Income ("NOI") | $ | 76,481 | $ | 75,862 | $ | 77,811 | $ | 79,766 | $ | 80,493 | |||||
| Straight-line rental revenue, net | (6,947 | ) | (6,151 | ) | (5,594 | ) | (6,017 | ) | (6,306 | ) | |||||
| Other amortization and non-cash charges | 1,810 | 911 | (1,133 | ) | (1,076 | ) | (873 | ) | |||||||
| Adjusted Cash NOI | $ | 71,344 | $ | 70,622 | $ | 71,084 | $ | 72,673 | $ | 73,314 | |||||
| Annualized EBITDAre | $ | 293,544 | $ | 305,688 | $ | 236,484 | $ | 272,680 | $ | 248,600 | |||||
| Annualized Adjusted EBITDAre | 277,068 | 280,648 | 272,932 | 279,856 | 285,880 | ||||||||||
| Annualized Adjusted NOI | 305,924 | 303,448 | 311,244 | 319,064 | 321,972 | ||||||||||
| Annualized Adjusted Cash NOI | 285,376 | 282,488 | 284,336 | 290,692 | 293,256 |
^1^ Reflects an adjustment to give effect to all acquisition during the quarter as if they had been acquired 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^ Amounts represent expenses directly associated with the Internalization.
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 9 |
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| Q3 2020 SUPPLEMENTAL INFORMATION | |||
| --- |
Lease Revenues Detail
(unaudited, in thousands)
| Three Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br><br>2020 | June 30,<br><br><br>2020 | March 31,<br><br><br>2020 | December 31,<br><br><br>2019 | September 30,<br><br><br>2019 | |||||||||
| Contractual rental amounts billed for<br><br><br>operating leases | $ | 69,270 | $ | 67,342 | $ | 72,828 | $ | 73,403 | $ | 65,579 | |||
| Adjustment to recognize contractual<br><br><br>operating lease billings on a straight-<br><br><br>line basis | 6,768 | 8,276 | 1,665 | 6,094 | 5,575 | ||||||||
| Variable rental amounts earned | 234 | 51 | 3 | 152 | — | ||||||||
| Earned income from direct financing<br><br><br>leases | 757 | 855 | 987 | 1,004 | 1,005 | ||||||||
| Operating expenses billed to tenants | 3,389 | 4,335 | 3,732 | 4,042 | 3,811 | ||||||||
| Other income from real estate<br><br><br>transactions | 64 | 702 | 49 | 237 | 431 | ||||||||
| Adjustment to revenue recognized for<br><br><br>uncollectible rental amounts billed | 262 | (1,190 | ) | (1,033 | ) | (1 | ) | — | |||||
| Total Lease revenues, net | $ | 80,744 | $ | 80,371 | $ | 78,231 | $ | 84,931 | $ | 76,401 | |||
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 10 | ||||||||||
| --- | --- | ||||||||||||
| Q3 2020 SUPPLEMENTAL INFORMATION | |||||||||||||
| --- |
Capital Structure
(unaudited, in thousands, except per share data)
| EQUITY | |||
|---|---|---|---|
| Shares of Common Stock including Class A Common Stock | 141,273 | ||
| OP Units | 12,226 | ||
| Common Stock & OP Units | 153,499 | ||
| Price Per Share / Unit | $ | 16.78 | |
| IMPLIED EQUITY MARKET CAPITALIZATION | $ | 2,575,710 | |
| % of Total Capitalization | 62.4 | % | |
| DEBT | |||
| Unsecured Revolving Credit Facility - 2023 | $ | — | |
| Unsecured Term Loan Facilities | 965,000 | ||
| Unsecured Term Loan - 2022 | 60,000 | ||
| Unsecured Term Loan - 2023 | 265,000 | ||
| Unsecured Term Loan - 2024 | 190,000 | ||
| Unsecured Term Loan - 2026 | 450,000 | ||
| Senior Unsecured Notes | 475,000 | ||
| Senior Unsecured Notes - 2027 | 150,000 | ||
| Senior Unsecured Notes - 2028 | 225,000 | ||
| Senior Unsecured Notes - 2030 | 100,000 | ||
| Mortgage Debt - Various | 109,076 | ||
| TOTAL DEBT | $ | 1,549,076 | |
| % of Total Capitalization | 37.6 | % | |
| % of Total Capitalization Floating Rate Debt | 2.7 | % | |
| % of Total Capitalization Fixed Rate Debt | 34.9 | % | |
| ENTERPRISE VALUE | |||
| Total Capitalization | $ | 4,124,786 | |
| Less: Cash and Cash Equivalents | (101,787 | ) | |
| Enterprise Value | $ | 4,022,999 |
The value of common stock and OP Units is calculated by multiplying the total number of shares and units by the closing price of BNL’s Common Stock of $16.78 as of September 30, 2020.
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 11 |
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| Q3 2020 SUPPLEMENTAL INFORMATION | |||
| --- |
Debt Outstanding
(unaudited, in thousands)
| Year of Maturity | Term Loans | Revolver | Senior Notes | Mortgages and Notes Payable | Total | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | $ | — | $ | — | $ | — | $ | 818 | $ | 818 |
| 2021 | — | — | — | 18,006 | 18,006 | |||||
| 2022 | 60,000 | — | — | 2,907 | 62,907 | |||||
| 2023 | 265,000 | — | — | 8,173 | 273,173 | |||||
| 2024 | 190,000 | — | — | 2,260 | 192,260 | |||||
| Thereafter | 450,000 | — | 475,000 | 76,912 | 1,001,912 | |||||
| Total | $ | 965,000 | $ | — | $ | 475,000 | $ | 109,076 | $ | 1,549,076 |
| Outstanding Balance | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| September 30, | December 31, | |||||||||
| 2020 | 2019 | Interest Rate | Maturity Date | |||||||
| Revolving credit facilities | $ | — | $ | 197,300 | one-month LIBOR + 1.20% | 0 ^1^ | ||||
| 2020 Unsecured Term Loan | — | 300,000 | one-month LIBOR + 1.25% | Feb. 2021 ^2^ | ||||||
| 2022 Unsecured Term Loan | 60,000 | — | one-month LIBOR + 1.25% | Feb.2022 | ||||||
| 2023 Unsecured Term Loan | 265,000 | 265,000 | one-month LIBOR + 1.35% | Jan. 2023 | ||||||
| 2024 Unsecured Term Loan | 190,000 | 190,000 | one-month LIBOR + 1.25% | Jun. 2024 | ||||||
| 2026 Unsecured Term Loan | 450,000 | 450,000 | one-month LIBOR + 1.85% | Feb. 2026 | ||||||
| Senior Notes | ||||||||||
| Series A | 150,000 | 150,000 | 4.84% | Apr. 2027 | ||||||
| Series B | 225,000 | 225,000 | 5.09% | Jul. 2028 | ||||||
| Series C | 100,000 | 100,000 | 5.19% | Jul. 2030 | ||||||
| 475,000 | 475,000 | |||||||||
| Total | 1,440,000 | 1,877,300 | ||||||||
| Debt issuance costs, net | (6,505 | ) | (7,919 | ) | ||||||
| $ | 1,433,495 | $ | 1,869,381 |
^1^ On September 21, 2020, the Company replaced its prior $600 million revolving credit facility with a maturity date of January 2022, with a new $900 million facility with a maturity date of September 2023.
^2^ The Company had extended this loan prior to its repayment.
Net Debt Metrics
(unaudited, in thousands)
| September 30, 2020 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Pro forma^3^) | (Historical) | June 30,<br><br><br>2020 | March 31,<br><br><br>2020 | December 31,<br><br><br>2019 | September 30,<br><br><br>2019 | |||||||||||||
| Debt | ||||||||||||||||||
| Mortgages and notes payable, net | $ | 108,752 | $ | 108,752 | $ | 109,512 | $ | 110,464 | $ | 111,793 | $ | 112,562 | ||||||
| Unsecured term notes, net | 1,433,495 | 1,433,495 | 1,673,092 | 1,672,587 | 1,672,081 | 1,671,511 | ||||||||||||
| Revolving Credit Facility | — | — | 248,300 | 353,300 | 197,300 | 303,300 | ||||||||||||
| Debt issuance costs | 6,829 | 6,829 | 7,268 | 7,767 | 8,277 | 8,862 | ||||||||||||
| Gross Debt | 1,549,076 | 1,549,076 | 2,038,172 | 2,144,118 | 1,989,451 | 2,096,235 | ||||||||||||
| Cash and cash equivalents | (157,717 | ) | (101,787 | ) | (9,241 | ) | (93,151 | ) | (12,455 | ) | (14,008 | ) | ||||||
| Restricted cash | (7,200 | ) | (7,200 | ) | (601 | ) | (3,561 | ) | (7,856 | ) | (30,107 | ) | ||||||
| Net Debt | $ | 1,384,159 | $ | 1,440,089 | $ | 2,028,330 | $ | 2,047,406 | $ | 1,969,140 | $ | 2,052,120 | ||||||
| Net Debt to Annualized EBITDAre | 4.72x | 4.91x | 6.64x | 8.66x | 7.22x | 8.25x | ||||||||||||
| Net Debt to Annualized Adjusted<br><br><br>EBITDAre | 5.00x | 5.20x | 7.23x | 7.50x | 7.04x | 7.18x |
^3^ Reflects net proceeds from partial exercise of underwriters’ overallotment option subsequent to quarter end.
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 12 |
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| Q3 2020 SUPPLEMENTAL INFORMATION | |||
| --- |
Covenants
(unaudited)
The following is a summary of key financial covenants for the Company’s unsecured credit facility and unsecured term loans and senior notes. These calculations, which are not based on U.S. GAAP measurements, are presented to investors to show that as of September 30, 2020, the Company believes it is in compliance with the covenants.
| Covenants | Required | Revolving Credit Facility and Unsecured Term Loans | Senior Notes | ||
|---|---|---|---|---|---|
| Leverage ratio | ≤ 0.60 to 1.00 | 0.37 | 0.37 | ||
| Secured indebtedness ratio | ≤ 0.40 to 1.00 | 0.03 | 0.03 | ||
| Unencumbered coverage ratio | ≥ 1.75 to 1.00 | 5.42 | Not Applicable | ||
| Fixed charge coverage ratio | ≥ 1.50 to 1.00 | 3.25 | 3.25 | ||
| Total unsecured indebtedness to total<br><br><br>unencumbered eligible property value | ≤ 0.60 to 1.00 | 0.38 | 0.40 | ||
| Dividends and other restricted payments | Only applicable in case of default | Not Applicable | Not Applicable | ||
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 13 | ||
| --- | --- | ||||
| Q3 2020 SUPPLEMENTAL INFORMATION | |||||
| --- |
Debt Maturities and Interest Rate Exposure
(unaudited, dollars in millions)
Debt Maturities
The Company utilizes diversified sources of debt capital including unsecured bank debt, private placement debt, and secured mortgages (where appropriate).
Interest Rate Exposure
The Company uses interest rate swaps, fixed-rate private placement notes, and fixed-rate mortgages to mitigate the impact of interest rate variability.
Interest rate exposure not inclusive of floating rate debt, as borrowings are short-term in nature.
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 14 |
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| Q3 2020 SUPPLEMENTAL INFORMATION | |||
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Portfolio Activity
Acquisitions
The Company has not acquired any new properties through the first nine months of 2020.
Dispositions
(unaudited, square feet and dollars in thousands)
The following table summarizes the Company’s property disposition activity during 2020.
| Q1 2020 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Property Type | Number of Properties | Square Feet ('000s) | Acquisition Price ('000s) | Disposition Price ('000s) | Net Book Value ('000s) | Cash Cap Rate | |||||
| Restaurant | 4 | 15 | 5.8 | % | |||||||
| Other | 3 | 49 | 6.8 | % | |||||||
| Healthcare | 2 | 9 | 7.6 | % | |||||||
| Retail | 1 | 3 | 7.0 | % | |||||||
| Total Properties | 10 | 76 | 6.6 | % | |||||||
| Q2 2020 | |||||||||||
| Property Type | Number of Properties | Square Feet ('000s) | Acquisition Price ('000s) | Disposition Price ('000s) | Net Book Value ('000s) | Cash Cap Rate | |||||
| Restaurant | 2 | 12 | 6.6 | % | |||||||
| Healthcare | 1 | 5 | 7.7 | % | |||||||
| Total Properties | 3 | 17 | 6.8 | % | |||||||
| Q3 2020 | |||||||||||
| Property Type | Number of Properties | Square Feet ('000s) | Acquisition Price ('000s) | Disposition Price ('000s) | Net Book Value ('000s) | Cash Cap Rate | |||||
| Restaurant | 3 | 9 | 8.7 | % | ^1^ | ||||||
| Healthcare | 1 | 24 | N/A | ^2^ | |||||||
| Industrial | 1 | 51 | N/A | ^2^ | |||||||
| Total Properties | 5 | 83 | 8.7 | % | ^1^ |
All values are in US Dollars.
^1^ Weighted average cash cap rate on tenanted properties sold.
^2^ Properties were vacant at the time of disposition.
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 15 |
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| Q3 2020 SUPPLEMENTAL INFORMATION | |||
| --- |
Portfolio at a Glance: Key Metrics
| Properties | 628 |
|---|---|
| States | 41 |
| Canada | 1 |
| Total Building Sq. Footage | 27.3M |
| Enterprise Value | $4.0B |
| Tenants | 182 |
| Brands | 169 |
| Industries | 54 |
| % Leased (based on SF) | 99.8% |
| Physical Occupancy (based on SF) | 99.6% |
| Top Ten Tenant Concentration | 18.7% |
| Top Twenty Tenant Concentration | 31.8% |
| Investment Grade (tenant/guarantor)^1^ | 17.8% |
| Financial Reporting Coverage^2^ | 94.8% |
| Rent Coverage Ratio^3^ | 3.0x |
| Weighted Average Annual Rent Increases | 2.1% |
| Weighted Average Remaining Lease Term | 10.8 years |
^1^ Reflects investment grade credit rating assigned to Tractor Supply Co. (NYSE: TSCO) in October 2020.
^2^ Includes 6.4% related to tenants not required to provide financial information under the terms of our lease, but whose financial statements are available publicly.
^3^ Represents rent coverage ratio for Restaurants property type.
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 16 |
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| Q3 2020 SUPPLEMENTAL INFORMATION | |||
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Diversification: Tenants & Brands
(unaudited)
Top 20 Tenants
| Tenant | Property Type | # Properties | ABR<br>('000s) | ABR as a % of Total Portfolio | Square Feet ('000s) | SF as a % of Total Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Red Lobster Hospitality & Red Lobster<br><br><br>Restaurants LLC | Casual Dining | 24 | 2.5 | % | 196 | 0.7 | % | |||||
| Jack's Family Restaurants LP | Quick Service Restaurants | 36 | 2.1 | % | 121 | 0.5 | % | |||||
| Axcelis Technologies, Inc. | Flex and R&D | 1 | 2.0 | % | 417 | 1.5 | % | |||||
| Hensley & Company | Distribution & Warehouse | 3 | 2.0 | % | 577 | 2.1 | % | |||||
| Outback Steakhouse of Florida LLC | Casual Dining | 23 | 1.8 | % | 146 | 0.5 | % | |||||
| Krispy Kreme Doughnut Corporation | Quick Service Restaurants/<br><br><br>Food Processing | 27 | 1.8 | % | 156 | 0.6 | % | |||||
| BluePearl Holdings, LLC | Animal Health Services | 12 | 1.7 | % | 154 | 0.6 | % | |||||
| Big Tex Trailer Manufacturing, Inc. | Automotive/Distribution &<br><br><br>Warehouse/Manufacturing/ Corporate Headquarters | 17 | 1.7 | % | 1,302 | 4.8 | % | |||||
| Siemens Medical Solutions USA, Inc. &<br><br><br>Siemens Corporation | Manufacturing/Flex<br><br><br>and R&D | 2 | 1.6 | % | 545 | 2.0 | % | |||||
| Nestle' Dreyer's Ice Cream Company | Cold Storage | 1 | 1.5 | % | 310 | 1.1 | % | |||||
| Total Top 10 Tenants | 146 | 18.7 | % | 3,924 | 14.4 | % | ||||||
| Nationwide Mutual Insurance Company | Strategic Operations | 2 | 1.5 | % | 407 | 1.5 | % | |||||
| Arkansas Surgical Hospital | Surgical | 1 | 1.5 | % | 129 | 0.5 | % | |||||
| American Signature, Inc. | Home Furnishings | 6 | 1.4 | % | 474 | 1.7 | % | |||||
| Cascade Aerospace Inc. | Manufacturing | 1 | 1.3 | % | 231 | 0.9 | % | |||||
| Fresh Express Incorporated | Food Processing | 1 | 1.3 | % | 335 | 1.2 | % | |||||
| Aventiv Technologies, LLC | Corporate Headquarters | 1 | 1.3 | % | 154 | 0.6 | % | |||||
| Bob Evans Restaurants, LLC | Casual Dining | 23 | 1.3 | % | 121 | 0.4 | % | |||||
| Tractor Supply Company | General Merchandise | 14 | 1.2 | % | 281 | 1.0 | % | |||||
| Centene Management Company, LLC | Strategic Operations | 1 | 1.2 | % | 220 | 0.8 | % | |||||
| Zips Car Wash, LLC | Automotive | 14 | 1.1 | % | 57 | 0.2 | % | |||||
| Total Top 20 Tenants | 210 | 31.8 | % | 6,333 | 23.2 | % |
All values are in US Dollars.
| BROADSTONE NET LEASE, INC. | www.broadstone.com | © 2020 Broadstone Net Lease, Inc. All rights reserved. | 17 |
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| Q3 2020 SUPPLEMENTAL INFORMATION | |||
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Top 20 Brands
(unaudited)
| Brand | Property Type | # Properties | ABR<br>('000s) | ABR as a % of Total Portfolio | Square Feet ('000s) | SF as a % of Total Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Red Lobster | Casual Dining | 24 | 2.5 | % | 196 | 0.7 | % | |||||
| Jack's Family Restaurants | Quick Service Restaurants | 36 | 2.1 | % | 121 | 0.5 | % | |||||
| Axcelis | Flex and R&D | 1 | 2.0 | % | 417 | 1.5 | % | |||||
| Hensley | Distribution & Warehouse | 3 | 2.0 | % | 577 | 2.1 | % | |||||
| Bob Evans Farms | Casual Dining/Food<br><br><br>Processing | 24 | 1.9 | % | 297 | 1.0 | % | |||||
| Wendy's | Quick Service Restaurants | 39 | 1.9 | % | 115 | 0.4 | % | |||||
| Krispy Kreme | Quick Service Restaurants/<br><br><br>Food Processing | 27 | 1.8 | % | 156 | 0.6 | % | |||||
| BluePearl Veterinary Partners | Animal Health Services | 12 | 1.7 | % | 154 | 0.6 | % | |||||
| Big Tex Trailers | Automotive/Distribution &<br><br><br>Warehouse/Manufacturing/<br><br><br>Corporate Headquarters | 17 | 1.7 | % | 1,302 | 4.8 | % | |||||
| Siemens | Manufacturing/Flex<br><br><br>and R&D | 2 | 1.6 | % | 545 | 2.0 | % | |||||
| Total Top 10 Brands | 185 | 19.2 | % | 3,880 | 14.2 | % | ||||||
| Outback Steakhouse | Casual Dining | 21 | 1.6 | % | 133 | 0.5 | % | |||||
| Nestle' | Cold Storage | 1 | 1.5 | % | 310 | 1.1 | % | |||||
| Taco Bell | Quick Service Restaurants | 32 | 1.5 | % | 82 | 0.3 | % | |||||
| Nationwide Mutual Insurance Co. | Strategic Operations | 2 | 1.5 | % | 407 | 1.5 | % | |||||
| Arkansas Surgical Hospital | Surgical | 1 | 1.5 | % | 129 | 0.5 | % | |||||
| Value City Furniture | Home Furnishings | 6 | 1.4 | % | 474 | 1.7 | % | |||||
| Cascade Aerospace | Manufacturing | 1 | 1.3 | % | 231 | 0.9 | % | |||||
| Chiquita | Food Processing | 1 | 1.3 | % | 335 | 1.2 | % | |||||
| Securus Technologies^1^ | Corporate Headquarters | 1 | 1.3 | % | 154 | 0.6 | % | |||||
| Tractor Supply Co. | General Merchandise | 14 | 1.2 | % | 281 | 1.0 | % | |||||
| Total Top 20 Brands | 265 | 33.3 | % | 6,416 | 23.5 | % |
All values are in US Dollars.
^1^^^Lease associated with this property requires BNL to pay for certain costs that are not reimbursed by the tenant. Estimated next twelve months net operating income associated with the property is $2,597.
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Diversification: Property Type
(unaudited, rent percentages based on ABR)
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Diversification: Property Type (continued)
(unaudited)
| Property Type | # Properties | ABR<br>('000s) | ABR as a % of Total Portfolio | Square Feet ('000s) | SF as a % of Total Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Industrial | |||||||||||
| Manufacturing | 55 | 14.2 | % | 7,635 | 28.0 | % | |||||
| Distribution & Warehouse | 32 | 13.8 | % | 7,013 | 25.7 | % | |||||
| Food Processing | 14 | 6.3 | % | 2,131 | 7.8 | % | |||||
| Flex and R&D | 7 | 5.8 | % | 1,457 | 5.3 | % | |||||
| Cold Storage | 4 | 4.3 | % | 933 | 3.4 | % | |||||
| Industrial Total | 112 | 44.4 | % | 19,169 | 70.2 | % | |||||
| Healthcare | |||||||||||
| Clinical | 50 | 8.9 | % | 1,081 | 3.9 | % | |||||
| Surgical | 15 | 3.4 | % | 345 | 1.3 | % | |||||
| Animal Health Services | 20 | 2.8 | % | 314 | 1.1 | % | |||||
| Life Science | 9 | 2.6 | % | 549 | 2.0 | % | |||||
| Healthcare Services | 26 | 2.4 | % | 262 | 1.0 | % | |||||
| Healthcare Total | 120 | 20.1 | % | 2,551 | 9.3 | % | |||||
| Restaurant | |||||||||||
| Quick Service Restaurants | 150 | 8.5 | % | 506 | 1.9 | % | |||||
| Casual Dining | 90 | 7.0 | % | 575 | 2.1 | % | |||||
| Restaurant Total | 240 | 15.5 | % | 1,081 | 4.0 | % | |||||
| Office | |||||||||||
| Strategic Operations | 7 | 4.7 | % | 1,021 | 3.7 | % | |||||
| Corporate Headquarters | 6 | 3.3 | % | 671 | 2.5 | % | |||||
| Call Center | 4 | 2.0 | % | 392 | 1.4 | % | |||||
| Office Total | 17 | 10.0 | % | 2,084 | 7.6 | % | |||||
| Retail | |||||||||||
| Automotive | 56 | 3.4 | % | 784 | 2.9 | % | |||||
| General Merchandise | 57 | 2.9 | % | 677 | 2.5 | % | |||||
| Home Furnishings | 15 | 2.0 | % | 860 | 3.1 | % | |||||
| Retail Total | 128 | 8.3 | % | 2,321 | 8.5 | % | |||||
| Other | 11 | 1.7 | % | 117 | 0.4 | % | |||||
| Total | 628 | 100.0 | % | 27,323 | 100.0 | % |
All values are in US Dollars.
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Key Statistics by Property Type
| Industrial | |||
|---|---|---|---|
| Number of properties | 112 | ||
| Square feet (000s) | 19,169 | ||
| Weighted average lease term (years) | 10.7 | ||
| Weighted average annual rent escalation | 2.0 | % | |
| Healthcare | |||
| Number of properties | 120 | ||
| Square feet (000s) | 2,551 | ||
| Weighted average lease term (years) | 8.4 | ||
| Weighted average annual rent escalation | 2.3 | % | |
| Restaurants | |||
| Number of properties | 240 | ||
| Square feet (000s) | 1,081 | ||
| Weighted average lease term (years) | 16.1 | ||
| Weighted average annual rent escalation | 1.9 | % | |
| Office | |||
| Number of properties | 17 | ||
| Square feet (000s) | 2,084 | ||
| Weighted average lease term (years) | 7.7 | ||
| Weighted average annual rent escalation | 2.4 | % | |
| Retail | |||
| Number of properties | 128 | ||
| Square feet (000s) | 2,321 | ||
| Weighted average lease term (years) | 11.0 | ||
| Weighted average annual rent escalation | 1.9 | % | |
| Other | |||
| Number of properties | 11 | ||
| Square feet (000s) | 117 | ||
| Weighted average lease term (years) | 11.6 | ||
| Weighted average annual rent escalation | 1.6 | % | |
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Diversification: Tenant Industry (unaudited)
| Industry | # Properties | ABR<br>('000s) | ABR as a % of Total Portfolio | Square Feet ('000s) | SF as a % of Total Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Healthcare Facilities | 95 | 15.8 | % | 1,796 | 6.6 | % | |||||
| Restaurants | 240 | 15.8 | % | 1,105 | 4.1 | % | |||||
| Food Distributors | 7 | 4.4 | % | 1,556 | 5.7 | % | |||||
| Packaged Foods & Meats | 6 | 3.9 | % | 1,131 | 4.1 | % | |||||
| Auto Parts & Equipment | 31 | 3.5 | % | 2,190 | 8.0 | % | |||||
| Metal & Glass Containers | 8 | 3.3 | % | 2,196 | 8.0 | % | |||||
| Specialized Consumer Services | 37 | 3.3 | % | 691 | 2.5 | % | |||||
| Healthcare Services | 16 | 2.8 | % | 481 | 1.8 | % | |||||
| Home Furnishing Retail | 17 | 2.8 | % | 1,291 | 4.7 | % | |||||
| Aerospace & Defense | 6 | 2.6 | % | 921 | 3.4 | % | |||||
| Distributors | 12 | 2.4 | % | 966 | 3.5 | % | |||||
| Electronic Components | 2 | 2.3 | % | 466 | 1.7 | % | |||||
| Air Freight & Logistics | 3 | 2.2 | % | 436 | 1.6 | % | |||||
| Specialty Stores | 15 | 2.2 | % | 809 | 3.0 | % | |||||
| Industrial Machinery | 15 | 1.9 | % | 1,096 | 4.0 | % | |||||
| Other (39 industries) | 112 | 30.8 | % | 10,125 | 37.1 | % | |||||
| Untenanted properties | 6 | — | 67 | 0.2 | % | ||||||
| Total | 628 | 100.0 | % | 27,323 | 100.0 | % |
All values are in US Dollars.
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Diversification: Geography
(unaudited)
| State | # Properties | ABR<br>('000s) | ABR as a % of Total Portfolio | Square Feet ('000s) | SF as a % of Total Portfolio | State | # Properties | ABR<br>('000s) | ABR as a % of Total Portfolio | Square Feet ('000s) | SF as a % of Total Portfolio | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| TX | 53 | 10.5 | % | 3,141 | 11.5 | % | VA | 13 | 1.5 | % | 110 | 0.4 | % | ||||||||||
| IL | 26 | 6.3 | % | 1,981 | 7.2 | % | WA | 15 | 1.4 | % | 150 | 0.6 | % | ||||||||||
| CA | 11 | 5.4 | % | 1,554 | 5.7 | % | MO | 9 | 1.3 | % | 733 | 2.7 | % | ||||||||||
| WI | 32 | 5.4 | % | 1,611 | 5.9 | % | KY | 17 | 1.2 | % | 176 | 0.6 | % | ||||||||||
| FL | 46 | 5.3 | % | 792 | 2.9 | % | LA | 3 | 1.1 | % | 175 | 0.6 | % | ||||||||||
| MI | 35 | 5.0 | % | 1,439 | 5.3 | % | NE | 6 | 1.0 | % | 509 | 1.9 | % | ||||||||||
| OH | 35 | 4.9 | % | 1,369 | 5.0 | % | MD | 4 | 1.0 | % | 293 | 1.1 | % | ||||||||||
| IN | 29 | 4.3 | % | 1,738 | 6.4 | % | NM | 8 | 0.9 | % | 96 | 0.4 | % | ||||||||||
| NC | 28 | 3.7 | % | 1,139 | 4.2 | % | IA | 4 | 0.9 | % | 622 | 2.3 | % | ||||||||||
| MA | 4 | 3.3 | % | 1,009 | 3.7 | % | SC | 11 | 0.8 | % | 289 | 1.1 | % | ||||||||||
| PA | 16 | 3.3 | % | 1,071 | 3.9 | % | UT | 3 | 0.8 | % | 280 | 1.0 | % | ||||||||||
| MN | 20 | 3.2 | % | 1,225 | 4.5 | % | MS | 3 | 0.6 | % | 258 | 0.9 | % | ||||||||||
| NY | 15 | 3.1 | % | 572 | 2.1 | % | CT | 2 | 0.6 | % | 55 | 0.2 | % | ||||||||||
| TN | 37 | 3.1 | % | 372 | 1.4 | % | WV | 8 | 0.6 | % | 36 | 0.1 | % | ||||||||||
| AZ | 8 | 2.9 | % | 761 | 2.8 | % | MT | 7 | 0.5 | % | 43 | 0.2 | % | ||||||||||
| AL | 45 | 2.7 | % | 177 | 0.6 | % | CO | 3 | 0.5 | % | 94 | 0.3 | % | ||||||||||
| AR | 10 | 2.5 | % | 278 | 1.0 | % | NV | 2 | 0.5 | % | 81 | 0.3 | % | ||||||||||
| OK | 21 | 2.4 | % | 806 | 2.9 | % | ND | 2 | 0.3 | % | 28 | 0.1 | % | ||||||||||
| GA | 19 | 2.1 | % | 968 | 3.5 | % | DE | 3 | 0.2 | % | 35 | 0.1 | % | ||||||||||
| KS | 10 | 1.7 | % | 639 | 2.3 | % | WY | 1 | 0.1 | % | 21 | 0.1 | % | ||||||||||
| NJ | 3 | 1.7 | % | 366 | 1.3 | % | Total US | 627 | 98.6 | % | 27,092 | 99.1 | % | ||||||||||
| Total Canada | 1 | 1.4 | % | 231 | 0.9 | % | |||||||||||||||||
| Grand Total | 628 | 100.0 | % | 27,323 | 100.0 | % |
All values are in US Dollars.
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Lease Expirations
(unaudited, rent percentages based on ABR)
WEIGHTED AVERAGE REMAINING LEASE TERM: 10.8 YRS
| Expiration Year | # Properties | ABR<br>('000s) | ABR as a % of Total Portfolio | Square Feet ('000s) | SF as a % of Total Portfolio | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2 | — | 157 | 0.6 | % | ||||||
| 2021 | 6 | 0.5 | % | 89 | 0.3 | % | |||||
| 2022 | 4 | 1.2 | % | 124 | 0.4 | % | |||||
| 2023 | 8 | 1.8 | % | 538 | 2.0 | % | |||||
| 2024 | 12 | 4.7 | % | 1,694 | 6.2 | % | |||||
| 2025 | 19 | 2.7 | % | 682 | 2.5 | % | |||||
| 2026 | 33 | 6.2 | % | 1,394 | 5.1 | % | |||||
| 2027 | 30 | 8.0 | % | 2,029 | 7.4 | % | |||||
| 2028 | 33 | 9.2 | % | 2,708 | 9.9 | % | |||||
| 2029 | 60 | 6.6 | % | 2,529 | 9.3 | % | |||||
| 2030 | 89 | 17.2 | % | 5,046 | 18.5 | % | |||||
| 2031 | 16 | 1.8 | % | 503 | 1.8 | % | |||||
| 2032 | 36 | 7.5 | % | 2,295 | 8.4 | % | |||||
| 2033 | 37 | 5.3 | % | 1,635 | 6.0 | % | |||||
| 2034 | 30 | 1.9 | % | 344 | 1.3 | % | |||||
| 2035 | 54 | 6.2 | % | 1,959 | 7.2 | % | |||||
| 2036 | 28 | 3.3 | % | 811 | 3.0 | % | |||||
| 2037 | 19 | 5.1 | % | 913 | 3.3 | % | |||||
| 2038 | 32 | 2.3 | % | 303 | 1.1 | % | |||||
| 2039 | 12 | 3.1 | % | 933 | 3.4 | % | |||||
| Thereafter | 62 | 5.4 | % | 570 | 2.1 | % | |||||
| Untenanted properties | 6 | — | 67 | 0.2 | % | ||||||
| Total | 628 | 100.0 | % | 27,323 | 100.0 | % |
All values are in US Dollars.
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Portfolio Occupancy
(unaudited, based on square feet)
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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 costs incurred at the corporate level, including asset management, property management, and general and administrative expenses. The asset and property management expenses relate to historical fees paid to our former third-party manager, which are no longer incurred as a result of the internalization of management functions. 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.
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 the short-term rent deferrals and abatements agreed to as a result of tenant requests for rent relief related to the COVID-19 pandemic, and adjusted to remove rent from properties sold during the month and to include a full month of contractual cash rent for properties acquired during the last month.
Cash Cap Rate: Cash Cap Rate represents the estimated first year cash yield to be generated on a real estate investment property, 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.
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. In 2017, 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, issued a white paper recommending that companies that report EBITDA also report EBITDAre in financial reports. 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 acquisitions and dispositions for the quarter as if such acquisitions and dispositions had occurred as of 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 or the change in fair value of our earnout liability, 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, which are not a result of normal operations. We believe that excluding these items, which are not key drivers of our investment decisions and may cause short-term fluctuations in net income, provides a useful supplemental measure to investors and analysts in assessing the net earnings contribution of our real estate portfolio. We 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) and Adjusted Funds From Operations (AFFO): FFO and AFFO are non-GAAP measures. We believe the use of 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 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 Nareit, which 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. To derive AFFO, we modify the Nareit computation of FFO to include other adjustments to GAAP net income related to certain non-cash and non-recurring revenues and expenses, including straight-line rents, contingent earnout (income) or expense, cost of debt extinguishments, 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 expense, severance, realized gains or losses on foreign currency transactions, internalization expenses, extraordinary items and other specified non-cash items. We believe that such items are not a result of normal operations and thus we believe 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.
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Definitions and Explanations (continued)
Gross Debt: We define Gross Debt as total debt plus deferred financing costs.
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” means the quotient of (1) the total 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 as of a specified date.
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.
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