Broadstone Net Lease, Inc. Q4 FY2024 earnings call

Board Changes - Thanked Shekar Narasimhan and Denise Brooks-Williams for their service, welcomed Rick Imperiale and Joe Saffire to the Board. - 2024 Results: Generated $1.43 AFFO per share, 1.4% increase from 2023. Substantially completed clinical health care portfolio simplification. - 2025 Plans: Ambitious growth goals with focus on build-to-suit development strategy. Goal to add at least $500 million in additional build-to-suit developments. - Investment Activity 2024: Invested $404.8 million, including $234.3 million in new property acquisitions, $115.3 million in build-to-suit developments, etc. - In-Place Portfolio: Executed 7 lease rollovers in 2024, minimal near-term rollover concerns in 2025 and 2026. Monitors incremental credit risk in consumer-centric industries.

In 2024, Broadstone Net Lease achieved $1.43 of AFFO per share, a 1.4% increase compared to 2023. The portfolio is more than 99% leased and over 99% rent collected. They executed on over $400 million in total investments. Through the clinical health care portfolio simplification strategy, clinical and surgical assets were reduced from 9.7% of ABR to 3.2%. The core property types are industrial (approximately 70% of investments in 2024) and retail (approximately 30%), including restaurants and medtail assets.

2025 Guidance - AFFO per share: $1.45 to $1.49 (approximately 3% growth at midpoint). - Investment volume: $400 million to $600 million (money out the door, mix of regular way deals and build-to-suit). - Disposition volume: $50 million to $100 million. - Core G&A: $30 million to $31 million. - Bad debt: 125 basis points included in guidance, revisited throughout the year.

• Higher interest rates placing strain on consumer-centric industries and entities with inflexible capital structures. - Competitive market for investments affecting regular way transaction volumes, cap rates, and asset quality. - Credit risk in some tenants, including consumer-centric and remaining clinical-oriented health care properties.

Q: Anthony Paolone with JPMorgan asked about whether $400 million to $600 million investment guidance is money out the door and how much contributes to earnings during the year.

A: John Moragne said it's money out the door, mix of regular way deals contributing net rent today and build-to-suit investments. There will be a balance with some deployed into current earning assets quickly and others coming online later.

Q: Eric Borden with BMO asked about funding side of developments, leverage, and changes in acquisitions over 90 days.

A: John Moragne said funding for developments will be on revolver and through dispositions. Leverage will be laddered considering future cash flows. Acquisitions are still heavily weighted towards industrial, with some deals taking time to close due to pricing gaps.

Q: Upal Rana with KeyBanc Capital Markets asked about Zips Car Wash bankruptcy, lighter investment activity in 4Q 2024.

A: John Moragne said Zips Car Wash bankruptcy has active discussions, and lighter investment activity in 4Q is due to competitive environment and disciplined approach to investing.

Q: Jay Kornreich with BTIG asked about build-to-suit pipeline drivers, disposition guidance composition.

A: John Moragne said build-to-suit pipeline drivers include industrial focus, attractive yields, and expanding relationships. Disposition guidance includes clinical assets and general portfolio pruning.

Q: Michael Gorman with BTIG asked about Zips Car Wash coverage, build-to-suit competition, tenant plant/equipment investment, transitional capital appetite.

A: John Moragne said Zips Car Wash coverage was close to 2 before bankruptcy. Build-to-suit competition is long and competitive. Tenants invest varying amounts in plant/equipment. Open to transitional capital on direct relationship basis.

Q: Michael Goldsmith with UBS asked about bad debt reserve indication and retail focus.

A: John Moragne said 125 basis points bad debt reserve is due to early year credit risks. Retail focus remains 70-30 industrial-retail, with focus on food production-related distribution in industrial.

Q: Spenser Allaway with Green Street asked about disposition guidance composition and retenanting vacant spaces stance.

A: John Moragne said disposition guidance includes clinical and other assets, buyer pool varies by asset. Open to providing CapEx/TIs for retenanting based on economics.

Q: Caitlin Burrows with Goldman Sachs asked about build-to-suit sourcing evolution, funding with retained cash, dividend comparison to taxable income.

A: John Moragne said build-to-suit sourcing is evolving with organic marketing, referrals, and expanded team. Kevin Fennell said retained cash is around $60 million, no expectation of dividend reduction.

Q: Ronald Kamdem with Morgan Stanley asked about build-to-suit pipeline economics and interest in selling other assets.

A: John Moragne said $500 million build-to-suit goal has similar economics to existing pipeline. Office assets will be held, clinical/surgical assets will be disposed of selectively.