• Cash Flowing Investments: $217.3 million made in Q2.
• FFO Guidance: Maintained at $1.41 to $1.43 per share.
• Clinical Healthcare Dispositions: $342.5 million year to date at a 7.9% cap rate.
• New Investments Under Control: $408.6 million, including $307 million in specialized industrial and QSR build-to-suit assets.
• Rent Collections: 99.8% excluding Green Valley.
• Occupancy Rate: 99.3% as of June 30, 2024.
• AFFO: $70 million or $0.36 per share, a 2.9% increase year-over-year.
• Cash G&A Expenses: $7.8 million, a 1.4% decrease year-over-year.
• Leverage: 5.1 times net debt, with pro forma net debt at 4.9 times.
• Dividend: $0.29 per common share and OP unit.
• Investment Guidance: Raised low end from $350 million to $400 million.
• Dispositions Range: Tightened to $350 million to $450 million.

• Warning! GuruFocus has detected 8 Warning Signs with BNL.

Release Date: July 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Broadstone Net Lease Inc (NYSE:BNL) successfully completed the sale of 38 healthcare assets for $262 million, significantly advancing their healthcare portfolio simplification strategy.
• The company has a robust pipeline of nearly $408.6 million in new investments under control, including specialized industrial and QSR build-to-suit assets.
• BNL reported strong rent collections of 99.8% and maintained a high occupancy rate of 99.3% as of June 30, 2024.
• The company achieved AFFO of $70 million or $0.36 per share, marking a 2.9% increase in per-share results year-over-year.
• BNL's shares are trading at an 18-month high, reflecting investor confidence in their strategic initiatives and growth objectives.

Negative Points

• The company faces incremental pockets of credit risk due to the broader impact of higher interest rates on consumer-centric industries.
• BNL's healthcare simplification strategy is only 65% complete, with the remaining 35% expected to take time to divest.
• The regular-way transaction market remains compressed, with pricing levels that may misrepresent underlying risks.
• The company is experiencing challenges in the broader market environment for regular-way net lease acquisitions that align with their targeted investment criteria.
• BNL's watch list includes tenants like Red Lobster and At Home, which are facing financial uncertainties and could impact future cash flows.

Q & A Highlights

Q: How does the next 12 months play out for Broadstone Net Lease in terms of the mix of development opportunities and acquisitions? A: John D. Moragne, CEO, explained that they have $307 million in active development deals and another $400 million in prospects. They are excited about these opportunities as part of their growth strategy. They also have $69.3 million in regular acquisitions in the pipeline, though they are cautious about the current market volumes and pricing. The company aims to balance development and acquisitions to provide attractive growth for shareholders.

Q: With shares up 23% over the last 3 months, has Broadstone's approach to capital outlay changed? A: John D. Moragne, CEO, stated that while equity is more constructive now, they do not need it currently due to ample liquidity and leverage well below their target. They are comfortable funding growth through recycling and dispositions if market conditions are not favorable for equity or debt issuance.

Q: What are the targeted cash yields for new development opportunities? A: John D. Moragne, CEO, mentioned that they are targeting upfront cash yields in the mid-sevens, with straight-line yields over the lease term reaching mid-eights to low-nines. These yields are attractive compared to regular market transactions.

Q: Can you provide more details on the $339 million development funding commitments? A: Kevin M. Fennell, CFO, explained that the commitments include $32 million for the UNFI project, which is ahead of schedule and under budget. The remaining commitments involve seven opportunities ranging from $2 million to $170 million across various sectors, sourced from new and existing development relationships.

Q: Regarding the healthcare simplification strategy, what is the status of the remaining 35% of assets? A: Kevin M. Fennell, CFO, confirmed that the remaining assets are individual properties that will be managed through traditional asset management approaches. Some may require lease extensions or tenant improvements, with timelines extending into 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.