Business Context and Reporting Period
Company: Broadstone Net Lease, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: December 21, 2017
Event: Entry into Material Definitive Agreements. On December 21, 2017, the Company entered into a Second Amended and Restated Asset Management Agreement (Second Amended AMA) and a Third Amended and Restated Property Management Agreement (Third Amended PMA). Both agreements were approved by the Board of Directors and the Committee of Independent Directors (IDC) and are effective as of January 1, 2018.
Financial Metrics
This filing is a Current Report regarding contractual agreements and does not contain financial statements, revenue, profit, cash flow, margin, debt, or liquidity data. The filing text does not provide a clear value for any financial performance metrics.
Material Changes Versus Prior Period
The filing details significant amendments to the Company's management agreements compared to the prior versions (Prior AMA and Prior PMA):
- Term Extension: Both agreements extend the recurring term from one year to three years. The initial term runs from January 1, 2018, to December 31, 2018, with automatic renewal for successive three-year terms thereafter.
- Disposition Fees (AMA): The Second Amended AMA introduces separate fees for property sales (1.0% of gross sales price) and "Disposition Events" (1.0% of Aggregate Consideration). Aggregate Consideration is net of transaction expenses and cash held by the Company.
- Key Person Event: A new provision defines a "Key Person Event" if Amy L. Tait and Christopher J. Czarnecki cease to serve as Chairman and CEO of the Property Manager for 60 consecutive days. This triggers a 60-day nomination period and a six-month review period for replacements, potentially leading to termination.
- Termination Fees: The agreements stipulate a termination fee equal to three times the Asset Management Fee earned in the preceding 12 months if terminated by the IDC for a change in control, at the end of a renewal term, due to a Key Person Event, or automatically upon a Disposition Event.
- Indemnification: The Second Amended AMA adds reciprocal indemnification, requiring the Asset Manager to indemnify the Company for losses resulting from fraud, willful misconduct, gross negligence, or reckless disregard.
Guidance, Outlook, and Risks
Management Commentary: The amendments are intended to clarify termination provisions, conform terms to the new three-year renewal structure, and improve overall organization and readability. The agreements automatically terminate upon a Disposition Event (acquisition of the Company or sale of substantially all assets).
Risks and Contingencies:
- Termination for Cause: The IDC may terminate immediately for fraud, gross negligence, breach of fiduciary duty, willful misconduct, material uncured violations, bankruptcy, or felony convictions by affiliates.
- Key Person Dependency: The agreements rely on the continued service of specific executives (Tait and Czarnecki), creating a contingency for potential termination if they depart.
- Change in Control: Termination rights are triggered by changes in control of the Property Manager or the Company.
Key Facts for Investor Verification
- Verify the specific calculation of the "Asset Management Fee" to understand the magnitude of the potential three-times termination fee.
- Confirm the current status of Amy L. Tait and Christopher J. Czarnecki to assess the risk of a Key Person Event.
- Review the full text of Exhibit 10.1 and 10.2 for the complete definition of "Cause" and "Aggregate Consideration."
- Monitor future filings for any actual termination events or disposition transactions that would trigger the new fee structures.