Broadstone Net Lease, Inc. Q1 FY2025 earnings call

• Build to Suit Pipeline: Strong execution with $305.9 million in committed build to suit developments, including a new $78.2 million project with Prologis for FCA U.S. LLC. Visibility to embedded revenue growth through 2026 and 2027.
• Investment Activity: Year-to-date, $103.9 million invested in new property acquisitions, build to suit developments, and revenue generating CapEx. $132.9 million of acquisitions under control and $4.5 million of commitments for revenue generating CapEx with existing tenants.
• Portfolio: 99.1% occupancy and 99.1% rent collection in Q1. Minimal near term rollover concerns. Monitors consumer centric tenants, healthcare properties, and home furnishing space. Resolved Zips Car Wash bankruptcy with expected recovery of ~80% of ABR and ~9-10 basis points bad debt.
• Financials: Adjusted funds from operations $71.8 million or $0.36 per share. Amended $1 billion revolving credit facility and refinanced $400 million term loan. Pro forma leverage 5 times, $826 million available on revolver. Dividend maintained at $0.29 per share.

In the first quarter, Broadstone Net Lease's investments were weighted approximately 80% to industrial properties and 20% to retail. Year-to-date, $103.9 million was invested in new property acquisitions, build to suit developments, and revenue generating CapEx. The completed acquisitions and revenue generating CapEx had a weighted average initial cash cap rate of 7.2%, lease term of 13.8 years, and annual rent increase of 2.5% with an attractive weighted average straight line yield of 8.3%. The $305.9 million pipeline of in process build to suit developments is fully signed up and committed, with $255.8 million remaining estimated investments to be funded through the third quarter of 2026, and $22.6 million of incremental ABR to come online later this year and in 2026, representing approximately 5.6% growth in current ABR.

• Maintained 2025 AFFO guidance range at $1.45 to $1.49 per share, ~3% growth at midpoint. Considered raising bottom end but maintained due to macroeconomic uncertainty, will revisit as year progresses.
• Goal to add at least $500 million in additional build to suit developments to stabilize and pay rent in 2026-2027.

• Macroeconomic environment impacts including tariffs, economy, capital markets, and consumer spending. Credit risk in consumer centric industries, entities with less flexible capital structures, and potential tariff-induced inflation affecting inventory and consumer spending.

Q: Looking at industrial exposure and tariffs, how is Broadstone watching credit?

A: Took top down and bottom up approach, assessed individual tenants and industries, evaluated ability to pass costs, inventory sourcing, etc.

Q: Bad debt guidance and cushion?

A: Started at 125 basis points, Zips bankruptcy resolved with ~9-10 basis points bad debt, will reassess after Q2/Q3.

Q: Claire's exposure?

A: 78 basis points, owns their sole US distribution facility, Claire's working on realigning logistics and footprint.

Q: Build to suit pipeline update?

A: Pipeline robust, goal to add $500 million, adding developer partners, $78.2 million project with Prologis announced.

Q: Development funding and permanent financing?

A: Ample capital on revolver, $100 million term loan available, no immediate need for permanent financing, will consider if equity markets favorable.

Q: Prologis partnership details?

A: Relationship based, Prologis wants to service clients and generate revenue, asset standard, geographic location outside traditional Prologis area.

Q: Impact of onshoring on industrial portfolio?

A: Bullish, well positioned to benefit from onshoring trend, industrial market competitive, private buyers active.

Q: Healthcare exposure disposition strategy?

A: Reduce clinical surgical assets, hold healthcare services assets long term, open to further investment if risk-adjusted returns make sense.

Q: Development value chain and personnel?

A: Primarily capital availability, developers seek surety of execution, adding personnel to manage build to suit projects during construction.

Q: Prologis relationship size and construction pricing?

A: Hoping for multiple deals, deal size larger, construction pricing has changes but structured to manage cost volatility.