Broadstone Net Lease, Inc. Q2 FY2025 earnings call

• John Moragne highlighted that the company raised full-year 2025 AFFO guidance to $1.48 to $1.50 per share, with second quarter AFFO at $0.38 per share (5.6% growth). The portfolio has been repositioned, reducing clinical health care exposure to 2.4% of ABR. - Ryan Albano discussed investment activities, with $262.2 million invested in 2025, including $113.7 million in new property acquisitions and $371.2 million in build-to-suit projects. The in-place portfolio was 99.1% leased at quarter end. - Kevin Fennell noted adjusted funds from operations growth and core G&A tracking in line with expectations.

In the second quarter, Broadstone Net Lease generated adjusted funds from operations of $74.3 million or $0.38 per share, a 5.6% increase compared to Q2 2024. Core G&A totaled $6.9 million for the quarter. Year-to-date bad debt totaled 45 basis points. The company has $262.2 million invested in new property acquisitions, build-to-suit developments, etc. Revenue contribution details by product segment were not explicitly provided in the transcript.

• Raised full-year 2025 AFFO guidance to $1.48 to $1.50 per share, midpoint 4.2% growth. Second quarter AFFO $0.38 per share, 5.6% growth vs 2024. - Reduced bad debt reserve in guidance for remainder of year to 75 basis points due to successful tenant matter resolutions. - Investment volume expected between $500 million and $700 million, with disposition volume between $50 million and $100 million, and core G&A between $30 million and $31 million.

• Tenant credit events are a risk, but the company has shown ability to manage them. - Competition in acquisitions, particularly in retail, is a risk with high interest rates and pressure on cap rates. - Market conditions and potential impacts on tenant performance, such as those affected by tariffs or inflation, pose risks.

Q: On the build-to-suit development pipeline, asked if still plan to announce $500 million of incremental developments in 2025 and if seeing interest pick up for supply chain fortification.

A: John Moragne said $500 million goal is still in play, and there's increased interest due to industry trends and the company's growing reputation.

Q: On regular way acquisition side, asked about $236 million of acquisitions under control, cadence, asset types, and initial cap rate.

A: John Moragne said generally 7 cap range, primarily industrial deals, with big chunk closing in third quarter.

Q: On allowability of accelerated depreciation driving deals, asked about impact.

A: John Moragne said there's pickup in certain industries like car washes, but not a huge focus for industrial.

Q: On build-to-suit deal flow and focus, asked if leaning toward specific tenant types or property types.

A: John Moragne said trying to get as many deals in funnel as possible and pick those with best risk-adjusted returns.

Q: On leverage, asked about target leverage and if 6x is something they would do.

A: John Moragne said staying comfortably inside 6x is goal, comfortable running closer in near term but not sustained.

Q: On build-to-suit deals, asked why companies choose build-to-suit over existing vacant buildings.

A: John Moragne said it's long-term strategic decisions regarding location and facility specificity.

Q: On bad debt, asked if 50 basis points reduction in guidance related to specific tenants and remaining bad debt.

A: John Moragne said it's combination of clear visibility on resolved tenants, portfolio performance, and prudent unknowns.

Q: On weighted average cost of capital and investment spreads, asked about traditional acquisitions and build-to-suit projects.

A: John Moragne said marginal dollar is in high 4, low 5 context, cost of equity is high 8%, and debt spread is T plus 110 to 135 for 5-year.

Q: On build-to-suit and industry expertise, asked about developing expertise for higher dollar size deals.

A: John Moragne said funnel is wide open, but reputation is building, pushing deal flow.

Q: On cold storage subsector impact, asked about tenant base impacts.

A: John Moragne said cold storage is owner-operator, not taking additional risk, but monitoring tenant credit.

Q: On retail vs industrial acquisitions distribution, asked about target exposure and competition.

A: John Moragne said retail competition is fierce, historical average 70-30 industrial retail, mix can shift quarter-over-quarter.

Q: On stock repurchases, asked about thoughts given stock price and execution.

A: John Moragne said stock price is not reflecting value, stock repurchase plan is a tool, hoping for stock price improvement.

Q: On build-to-suit process, asked if coordinated with tenant or third-party developer.

A: John Moragne said it can be either, with examples of direct tenant and developer-brought tenant deals.

Q: On escalators for build-to-suit projects, asked why higher.

A: John Moragne said it's a combination of general industrial escalator trends and the company's strategy maturity.