Broadstone Net Lease, Inc. (BNL) Earnings Call Transcript & Summary

One of the things that we looked at as coming to this year was Net Lease, by its nature is a defensive REITs class. And we wanted to make sure that we were as well positioned as possible for what we knew was going to be a difficult in Rocky 2023 as possible. So we have 99.4% occupancy. We've had 100% rent collection all the way through year-to-date for this year. So the portfolio is performing exceedingly well.

I'm here today with John Moragne, CEO of Broadstone Net lease. Can you talk about Broadstone's capital allocation strategy and how you view opportunities and challenges in today's market?

Yes, sure. So the market backdrop is particularly difficult. We've seen volumes fall off considerably from the last couple of years. Seller expectations remain sort of stubbornly high. A number of buyers has changed, higher for longer interest rate environment. So there's a lot of uncertainty. And so the way that we've responded to that has been to take a really selective disciplined approach. So we have underwritten and looked at north of $10 billion of dealers this year. We've only actively pursued a few hundred million. And to date, we've only chosen to close on $80 million for about 7.1% on a cap rate basis. The thing that we are most excited about from an opportunistic standpoint, shifting away from the challenge is a $200 million-plus industrial build-to-suit in Florida for a brand-new asset with a solid operator in the food distribution space with a long-term Net Lease on it that will -- we've closed on the land, and we'll be funding that over the next 18 months, and it should start rent commencement in 2024, and that's an area that we see a lot of opportunity as sort of real estate lending has had a lot of disruption in it this year.

And Broadstone's portfolio was over 99% leased in Q1. How does that set you up for the rest of the year?

It sets us up really, really well. One of the things that we looked at as coming to this year was Net Lease by its nature, is a defensive REITs class. And we wanted to make sure that we were as well positioned as possible for what we knew was going to be a difficult in Rocky 2023 as possible. So we have 99.4% occupancy. We've had 100% rent collection all the way through year-to-date for this year. So the portfolio is performing exceedingly well. And then on top of that, we've looked to have as much of a fortified and flexible balance sheet as possible. So between really high occupancy, really high rent collections, low leverage and a high amount of liquidity on our revolver, we feel like we are as defensively positioned as possible.

And has Broadstone taken any notable steps to position itself defensively given ongoing market uncertainty?

I think it's a combination of everything we've talked about between -- the low leverage, between really focusing on our tenants and their operations as well as being selective and disciplined about how we're allocating capital. Then on top of that, we have added to it a disposition strategy for this year that also helps position us defensively. We have looked to sell assets that we internally have some concerns about from a risk mitigation standpoint, but we've been able to sell them at accretive cap rates. So through to today, we have sold $121 million of properties at a weighted average cap rate of 5.7%. So strong portfolio, fortified flexible balance sheet, really strong execution on a disposition strategy that has been giving us accretive capital to recycle into assets that we selectively believe are going to be good ones for us to add the portfolio for the long term.