Broadstone Net Lease, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet figures are as of March 31, 2024. Broadstone is an industrial-focused, diversified net-lease REIT with 759 properties across 44 U.S. states and four Canadian provinces.
Key financial metrics
| Metric | Q1 2024 | Prior-year comparable |
|---|---|---|
| Lease revenue, net | $105.4 million | $119.0 million |
| Net income | $68.2 million | $41.4 million |
| Net income attributable to BNL | $65.1 million | $39.3 million |
| Diluted earnings per share | $0.35 | $0.21 |
| Net cash from operating activities | $70.9 million | $74.4 million |
| FFO / Core FFO / AFFO | $73.1 million / $74.1 million / $70.9 million | $81.2 million / $74.5 million / $67.5 million |
- Net income includes a $59.1 million gain on property sales and $26.4 million in impairment charges. The filing cautions that these items fluctuate and affect period comparisons.
- At quarter-end, total debt was $1.9 billion, cash and cash equivalents were $221.7 million, and net debt was $1.68 billion. Net debt to annualized Adjusted EBITDAre was 4.8x; pro forma, it was 4.6x.
- Available capacity under the $1.0 billion revolving credit facility was $926.2 million. The company reported compliance with debt covenants and investment-grade ratings of BBB from S&P and Baa2 from Moody’s.
- Operating cash flow was $70.9 million; investing activities provided $204.3 million, principally reflecting property-sale proceeds; financing activities used $73.0 million. Cash, including restricted cash, ended at $222.8 million.
- Portfolio occupancy was approximately 99.2%, with a 10.6-year ABR-weighted average remaining lease term. About 97.4% of leases had contractual rent escalations, averaging a 2.0% minimum annual increase.
Material changes versus Q1 2023
- Lease revenue declined 11.5%, primarily because Q1 2023 included $7.5 million of lease-termination income, alongside lower straight-line rent and higher accrued-rent write-offs and uncollectible-rent adjustments.
- Net income rose 64.8% and diluted EPS increased from $0.21 to $0.35, driven mainly by a $55.7 million increase in property-sale gains. The comparison was partly offset by a $24.9 million increase in impairment charges.
- BNL sold 37 properties for an aggregate sale price of $251.8 million, versus three properties for $51.9 million in Q1 2023. It made no acquisitions during Q1 2024 and invested $38.1 million in property development.
- Operating cash flow decreased by $3.5 million. AFFO increased to $70.9 million from $67.5 million, while FFO decreased to $73.1 million from $81.2 million.
Outlook, commentary, and risks
- The filing provides no specific earnings or investment guidance. Management expects short-term liquidity needs to be met primarily through cash, operating cash flow, revolving-credit borrowings, and property dispositions; long-term needs may require debt and equity financing and selective sales.
- Management said it generally seeks to maintain leverage below 6.0x and reported no material debt maturities before 2026. It stated that all variable-rate debt was fixed through interest-rate swaps at quarter-end.
- Approximately $392.3 million of obligations were expected over the remainder of 2024, including $280.1 million of investment commitments, $55.9 million of declared dividends, and $54.5 million of projected interest expense. A build-to-suit commitment had $74.1 million remaining, expected to be funded through October 2024.
- The company recognized $26.4 million of impairments on 12 properties following changes in its hold strategy and based on actual or expected sale prices. The filing notes that further impairments could result if operating conditions or expected holding periods change.
- Management cited increased bad debt associated with a healthcare tenant. The portfolio simplification strategy included selling clinically oriented healthcare properties; tenant credit and rent collection remain relevant monitoring points.
- Other disclosed exposures include interest-rate and Canadian-dollar movements, dependence on capital markets for long-term funding, and tax-protection agreements that could trigger approximately $20.4 million of liability if specified taxable sales occurred. Management said it did not believe triggering events were likely in the foreseeable future.
- After quarter-end, the company reported acquiring approximately $149.5 million of rental property and related lease assets and liabilities, selling two properties for $22.3 million of proceeds, and declaring a Q2 distribution of $0.29 per share and OP Unit.
Most important facts for investors to verify
- How much reported earnings growth reflects property-sale gains versus recurring rental operations; review Core FFO and AFFO definitions and reconciliations as non-GAAP measures.
- Whether healthcare tenant collections, accrued-rent write-offs, and uncollectible-rent adjustments improve or deteriorate.
- Execution and funding of the $74.1 million build-to-suit obligation and other investment commitments, and the timing and economics of post-quarter acquisitions and dispositions.
- Debt refinancing and interest costs around 2026 maturities, continued covenant compliance, and the assumptions underlying leverage ratios and swap protection.
- Whether the declared distribution is supported by recurring cash generation, given REIT distribution requirements and the company’s reliance on external capital and dispositions for liquidity.