Broadstone Net Lease, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This annual filing includes fourth-quarter information, but does not provide a clear standalone Q4 revenue or earnings summary in the supplied text.
Business context
Broadstone Net Lease is an internally managed REIT that owns primarily single-tenant commercial properties under long-term net leases. At year-end, its 726-property portfolio covered 32.2 million rentable square feet across 42 U.S. states and British Columbia. The portfolio was 99.8% leased, with a 10.5-year ABR-weighted average remaining lease term. Industrial properties represented 47.4% of ABR, healthcare 19.8%, restaurants 13.8%, retail 11.2%, and office 7.8%.
Financial and operating results
| Metric | 2021 | 2020 |
|---|---|---|
| Lease revenues, net | $382.9 million | $321.6 million |
| Net income | $109.5 million | $56.3 million |
| Net income attributable to Broadstone | $102.4 million | $51.2 million |
| Diluted earnings per share | $0.67 | $0.44 |
| FFO | $256.2 million; $1.56 per diluted share | $193.0 million |
| AFFO | $216.0 million; $1.31 per diluted share | $181.1 million |
| Net cash provided by operating activities | $244.9 million | $179.0 million |
Lease revenue rose 19.0%, principally from acquisitions and a $35.0 million lease termination fee. Net income increased 94.6%; diluted EPS increased 52.3%. Operating expenses were $215.1 million, including $132.1 million of depreciation and amortization, $36.4 million of general and administrative expense, and $28.2 million of property impairments. The filing does not provide a headline operating-margin measure.
Cash and cash equivalents were $21.7 million at year-end, plus $6.1 million of restricted cash. Gross debt was approximately $1.70 billion; Net Debt was $1.67 billion. Net Debt to Annualized Adjusted EBITDAre was 5.13x, versus 5.15x at year-end 2020. The company reported $798 million of unused capacity on its $900 million revolving facility at year-end and said it was in compliance with debt covenants.
Annual distributions declared were $1.025 per share. The board declared a first-quarter 2022 distribution of $0.265 per share. Future distributions remain subject to board discretion, cash flow, financing restrictions, and REIT requirements.
Material changes and notable items
- Acquired 116 properties for $654.7 million, excluding capitalized acquisition costs, at a 6.3% weighted-average initial cash capitalization rate; acquisition leases averaged 15.9 years.
- Sold 31 properties for net proceeds of $83.8 million and recognized $13.5 million of gains. Occupancy increased 60 basis points to 99.8%, and the company reported collecting 100% of base rent due during 2021.
- Completed a $253.5 million net follow-on equity offering, raised $27.3 million net through its ATM program, and issued $375 million of 10-year notes at a fixed 2.60% coupon.
- Interest expense declined to $64.1 million from $76.1 million, reflecting lower average borrowings and borrowing costs, including improved credit spreads and a repricing and partial repayment of the 2026 term loan.
- In September, an investment-grade office tenant paid a $35 million fee to terminate a master lease; Broadstone then sold the vacant properties. The transactions produced a net $4.0 million increase to GAAP net income. The termination fee increased FFO by $33.8 million but had no impact on AFFO or the reported net-debt-to-Adjusted-EBITDAre measure.
- Property impairment charges increased to $28.2 million from $19.1 million; approximately $25.7 million related to the terminated lease and associated property sale.
- The 2021 comparison reflects a full year of internal-management costs, whereas 2020 included external management fees through February and did not include the full year of internalized operating costs.
Outlook, risks and contingencies
No specific earnings or acquisition-volume guidance is provided. Management intends to continue disciplined acquisitions, active portfolio management, and balance-sheet management, generally targeting Net Debt below 6.0x Annualized Adjusted EBITDAre on a sustained basis. After year-end, Broadstone amended its revolver: capacity increased to $1.0 billion, maturity extended to March 2026, and the applicable margin was 0.85%.
Principal risks include tenant default or bankruptcy, reliance on single-tenant leases, re-leasing specialty properties, acquisition competition and financing availability, interest-rate and refinancing exposure, inflation outpacing contractual rent increases, and economic or sector weakness—particularly in restaurant, retail, and office markets. COVID-19 effects remain uncertain. Only 15.7% of ABR came from investment-grade-rated tenants. LIBOR transition and hedge-counterparty risks are also disclosed.
Tax-protection agreements could create approximately $22.3 million of indemnification exposure if specified taxable dispositions occur; management said such triggering events were not believed likely in the foreseeable future. A $17.4 million building-expansion commitment was expected to be completed in 2022 in exchange for increased rent. No material pending legal proceeding was identified. The auditor issued an unqualified opinion on the financial statements and internal controls; management also concluded controls were effective.
Important facts for investors to verify
- Reconcile GAAP net income, FFO, and AFFO, including the treatment of the $35 million termination fee and impairment.
- Review debt maturities, variable-rate exposure, swap coverage, covenant headroom, and the post-year-end revolver amendment.
- Assess tenant credit quality, master-lease concentrations, and lease rollover and re-leasing risks; only 15.7% of ABR was from investment-grade tenants.
- Compare acquisition yields and rent escalators with financing costs and inflation; 97.3% of leases had escalations, with a 2.0% ABR-weighted average minimum increase.
- Evaluate distribution sustainability against AFFO, debt service, capital needs, and REIT distribution requirements.
- Check subsequent acquisition and ATM issuance activity disclosed through February 2022, as well as the tax-protection and property-expansion commitments.