Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Broadstone Net Lease Inc successfully executed the sale of 37 healthcare assets, generating gross proceeds of $251.7 million, significantly advancing their healthcare portfolio simplification strategy.
- The company has increased its per-share AFFO guidance to a range of $1.41 to $1.43, reflecting strong operational performance and strategic asset management.
- Broadstone Net Lease Inc reported robust investment activity with $202 million invested year-to-date and an additional $122 million under control, demonstrating effective capital deployment in a challenging market.
- The company maintained high occupancy and rent collection rates, with 99.9% rent collections and 99.2% occupancy as of March 31, 2024, underscoring the strength of its tenant relationships and portfolio quality.
- Broadstone Net Lease Inc is actively reducing its healthcare exposure, aiming to decrease it to below 10% of their ABR, aligning with their strategy to focus more on industrial and defensive retail sectors.
Negative Points
- The transaction market for single-tenant net lease properties is at a historic low, which has created a challenging environment for acquiring new assets.
- Interest rate increases have exacerbated the misalignment between buyers and sellers, further complicating investment activities in the commercial real estate sector.
- Broadstone Net Lease Inc faces incremental pockets of credit risk due to the prolonged higher interest rate environment, which could potentially impact tenant financial stability.
- The company noted specific concerns with tenants like Red Lobster and The Room Place, indicating potential issues in sectors sensitive to discretionary consumer spending.
- While the company is progressing with its healthcare portfolio simplification, the remaining assets expected to be sold in stages may face challenges, potentially affecting the speed and valuation of these dispositions.
Q & A Highlights
Q: Could you elaborate on how you are navigating the investment environment and the types of returns you are targeting for build-to-suit or innovative transactions like the recent retail center deal?
A: John Moragne, CEO, explained that the current low transaction volumes require more effort to secure deals. BNL focuses on direct deals and leveraging relationships, emphasizing build-to-suit opportunities due to the disruption in real estate lending. They target solid yields in the sevens and are cautious about running up the risk spectrum for higher yields.
Q: As you approach the rent commencement on the UNFI project, how does this influence your appetite for new build-to-suit projects?
A: John Moragne, CEO, mentioned a strong appetite for build-to-suit projects, especially as the UNFI project nears completion. He highlighted the strategic approach to have a laddered structure for build-to-suit projects to ensure continuous growth.
Q: Can you discuss the differences in the healthcare properties that are expected to sell quickly versus those that might take longer?
A: John Moragne, CEO, noted that properties expected to sell quickly fit into larger portfolio deals, while others might require individual transactions, potentially needing lease extensions or investments to make them attractive for sale.
Q: Regarding the additional healthcare asset sales expected in 2024, will these be single or multiple transactions?
A: John Moragne, CEO, indicated that they are working on a single transaction with staged closings planned for the second half of the year.
Q: Could you provide more details on the retail deal mentioned in the press release, particularly how it came about and its structure?
A: John Moragne, CEO, described the deal as a unique opportunity brought by a partner, Sansone, which involved BNL stepping in as a holistic capital provider due to a lack of commercial real estate lending. The deal included acquiring seven retail sites with strong tenants and providing transitional capital for other parts of the retail center.
Q: How are you managing the balance between deploying capital for development opportunities and the delay in NOI generation from these investments?
A: John Moragne, CEO, emphasized the importance of balancing these factors, noting the attractiveness of having a laddered structure for development opportunities to ensure a consistent growth profile while maintaining a focus on current rent-paying opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
