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Broadstone Net Lease, Inc. (BNL)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue rose sequentially to $112.13M, diluted EPS was $0.14, and AFFO/share was $0.36; full-year AFFO/share reached $1.43, the top end of 2024 guidance, underscoring execution despite portfolio repositioning .
  • 2025 guidance calls for AFFO/share of $1.45–$1.49 (~3% growth at midpoint), supported by $400–$600M investments and a laddered build‑to‑suit pipeline; dividend maintained at $0.29 .
  • Management emphasized an industrial‑focused, derisked build‑to‑suit strategy (UNFI stabilized at 7.2% cash cap, 8.6% straight‑line yield) and no plans to issue equity in 2025 absent a material rerating—funding via revolver and accretive dispositions .
  • Watchlist updates and front‑loaded credit events (e.g., Zips Car Wash Ch. 11) drove higher impairments and a 125 bps bad‑debt assumption in 2025 guidance; catalyst path centers on pipeline additions and deleveraging/affordably funded growth .

What Went Well and What Went Wrong

What Went Well

  • Achieved full-year AFFO/share of $1.43 at the top end of guidance; CEO: “I am extremely proud of our 2024 results…executing on over $400 million in total investments…” .
  • UNFI distribution center stabilized (7.2% initial cash cap, 15‑year term, 2.5% bumps; 8.6% straight‑line yield), validating build‑to‑suit economics and laddered growth .
  • Portfolio simplification: clinical & surgical assets reduced to 3.2% of ABR from 9.7% YoY; ABR mix now 59.6% industrial, 31.2% retail, 9.2% other; occupancy 99.1% and rent collection 99.2% in Q4 .

What Went Wrong

  • Sequential net income decline (Q4 $27.6M vs. Q3 $37.3M) driven by higher impairment ($17.7M Q4 vs. $1.1M Q3) despite stronger lease revenues; highlights near‑term credit costs .
  • Front‑loaded tenant credit events (Zips Car Wash bankruptcy across 10 sites, initial rejection list) and watchlist (home furnishings, remaining clinical assets) necessitated higher 2025 bad‑debt assumption (125 bps) .
  • Pipeline variability: November update disclosed a large prospective build‑to‑suit tenant withdrew, trimming commitments, though management reiterated confidence and backfilled with other opportunities .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenues ($USD Thousands)$105,000 $108,397 $112,130
Net Income ($USD Thousands)$6,797 $37,268 $27,607
Diluted EPS ($)$0.03 $0.19 $0.14
FFO ($USD Thousands)$69,443 $73,818 $80,003
FFO per share ($)$0.35 $0.37 $0.41
Core FFO ($USD Thousands)$75,275 $73,971 $74,427
Core FFO per share ($)$0.38 $0.37 $0.38
AFFO ($USD Thousands)$71,278 $70,185 $70,532
AFFO per share ($)$0.36 $0.35 $0.36

Additional operating drivers

MetricQ4 2023Q3 2024Q4 2024
Provision for impairment ($USD Thousands)$29,801 $1,059 $17,690
Gain on sale of real estate ($USD Thousands)$6,270 $2,441 $8,196
Annualized Adjusted EBITDAre ($USD Thousands)$376,196 $384,956 $379,128

Property type ABR mix (Q4 2024)

Property Type# PropertiesABR ($000s)ABR %
Industrial Total210$235,709 59.6%
Retail Total520$123,466 31.2%
Other Total35$36,306 9.2%
Total765$395,481 100.0%

Portfolio KPIs

KPIQ2 2024Q3 2024Q4 2024
Occupancy (by SF)99.3% 99.0% 99.1%
Rent Collection99.0% 99.1% 99.2%
Weighted Avg Lease Term10.4 years 10.3 years 10.2 years
Weighted Avg Annual Rent Increases2.0% 2.0% 2.0%

Leverage & liquidity

MetricQ4 2023Q3 2024Q4 2024
Net Debt to Annualized Adjusted EBITDAre (x)5.0x 5.0x 5.0x
Pro Forma Net Debt to Annualized Adjusted EBITDAre (x)5.0x 4.9x 4.9x
Revolver availability ($USD Millions)—$874.5 $907.0

Narrative drivers and “why”

  • Sequential revenue growth in Q4 was offset by higher impairment charges, explaining the diluted EPS decline from $0.19 to $0.14 despite AFFO/share holding flat; CFO cited bad‑debt and vacant property carrying costs as offsets .
  • FX gains benefited “Other income” in Q4 (+$4.7M unrealized FX), while lease termination fees contributed to FFO/Core FFO adjustments; see non‑GAAP reconciliation details .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
AFFO / shareFY 2025—$1.45–$1.49 New
InvestmentsFY 2025—$400–$600M New
DispositionsFY 2025—$50–$100M New
Core G&AFY 2025—$30–$31M New
Dividend / shareQ1 2025—$0.29 declared Maintained
AFFO / shareFY 2024$1.41–$1.43 (reaffirmed Q3) Achieved $1.43 Achieved top end

Notes:

  • Company does not provide GAAP net income guidance reconciliation due to unpredictability of certain items (impairments, gains/losses, stock-based comp) .
  • Management expects to revisit 2025 guidance assumptions intra‑year and preview 2026–2027 run‑rate contributions as build‑to‑suits phase in .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Build‑to‑suit strategy & economicsQ2: ~$307M committed, mid‑7% cash caps, 9% straight‑line yields; UNFI rent commencement targeted for Q3/Q4 . Q3: UNFI stabilized at 7.2%/8.6%; $405M committed pipeline; Sierra Nevada MROs announced .Emphasis on laddered $227.3M in BTS scheduled for 2025–2026; goal to add ≥$500M new BTS in 2025; no equity raises planned .Expanding, derisked, industrial‑weighted pipeline.
Portfolio simplification (clinical)Q2: ~65% plan completed; clinical exposure trending down . Q3: <10% healthcare exposure post‑sales, aiming to sell remaining clinical over time .Clinical & surgical reduced to 3.2% of ABR; core property types realigned to industrial/retail/other .Largely completed; residual managed opportunistically.
Credit/watchlist & bad debtQ2: Monitoring Red Lobster, home furnishings; minimal vacancies . Q3: Red Lobster resolution with modest rent cut; continued watch on “at home” .Zips Car Wash bankruptcy; 125 bps bad‑debt assumption baked into 2025 guidance; watchlist steady (home furnishings, Stanislaus Surgical) .Front‑loaded credit costs in 2025; monitoring continues.
Funding & leverage disciplineQ2/Q3: Pro forma leverage ~4.9x; $874–$920M revolver availability; forward swaps executed .Fund BTS via revolver + dispositions; willingness to temporarily exceed 6x absolute leverage with plan to return inside; efficient spot ≈5.5x .Balanced; equity off‑table absent rerating.
Acquisition marketQ2/Q3: Highly competitive, mid‑market industrial cap rates tightening; preference for directly sourced deals .~$103.5M regular‑way deals under control; still cautious on market disconnect; focus on BTS accretion .Selective deployment; BTS favored.

Management Commentary

  • “We are well set up for growth in 2025 and beyond…through our differentiated core building blocks of growth, including…build‑to‑suit developments scheduled to phase into completion during 2025 and 2026” — CEO John Moragne .
  • “For 2025, we are initiating our AFFO guidance range at $1.45 to $1.49 per share…We established a differentiated strategy…maintained a fortified investment-grade balance sheet with low pro forma leverage at 4.9x” — CEO .
  • “We currently have $227.3 million in build‑to‑suit developments with attractive initial cash yields in the mid‑ to high 7% range and straight line yields in the mid‑8% to mid‑9% range” — President/COO Ryan Albano .
  • “Our dividend remains well covered…core G&A…$29.3 million for the year” — CFO Kevin Fennell .

Q&A Highlights

  • Investment guidance composition: $400–$600M “money out the door,” a mix of regular‑way and build‑to‑suits; ~$103.5M regular‑way under control likely to contribute in 1H25; company will clarify rent‑paying timing as deals close .
  • Funding plan: BTS funded via revolver plus dispositions; incremental $500M of BTS commitments targeted; equity issuance not planned absent rerating .
  • Leverage guardrails: Willing to temporarily exceed 6x absolute, but target to return below; “efficient spot” ~5.5x; pro forma methodology accepted by agencies .
  • Zips Car Wash bankruptcy: 10 sites (0.62% ABR); initial rejection list ignored master lease; management expects a more favorable outcome, may sell or re‑lease assets if needed; exit possibly March/April .
  • Bad‑debt assumption: 125 bps in 2025 (about +50 bps vs 2024 guide ex‑Green Valley), reflecting front‑loaded events; hope to normalize thereafter .

Estimates Context

  • We attempted to retrieve S&P Global consensus (revenue, FFO/share, EPS) for the last three quarters but data was unavailable in this session due to provider limits. As a result, explicit “vs. estimates” comparisons are not provided here.
  • Investors should note that BNL’s full‑year AFFO/share achievement at the top end of guidance ($1.43) suggests consensus was broadly in line or conservative for FY 2024, but we cannot confirm quarter‑specific consensus figures at this time .

Key Takeaways for Investors

  • Laddered build‑to‑suit strategy is the core growth engine, with mid‑7% cash cap rates and mid‑8%–mid‑9% straight‑line yields and industrial scale; expect incremental announcements near‑term and 2026–2027 run‑rate previews later this year .
  • Funding is disciplined: revolver + dispositions, forward swaps executed, equity off‑table in 2025 absent a rerating; pro forma leverage framework supports temporary flex above 6x with a path back sub‑6x .
  • Operational quality remains high (99%+ occupancy/collections, WALT ~10 years, ABR escalators 2%); portfolio mix re‑centered to industrial (≈60% ABR), reducing clinical exposure to 3.2% ABR .
  • Near‑term credit noise (Zips, watchlist names) is front‑loaded and embedded in guidance (125 bps bad debt); outcomes may provide upside if resolutions are favorable or if re‑leasing proceeds at acceptable economics .
  • Trading setup: 2025 AFFO guide (~3% mid‑point growth) plus visible BTS stabilization in 2025–2026 offers earnings durability; catalysts include BTS commitments, accretive asset recycling, and potential multiple expansion as industrial focus deepens .
  • Monitor updated supplemental schedules and press releases between quarters as land closes and BTS projects move to “committed” status (company policy to announce upon land/control and document execution) .
  • Keep an eye on acquisition market dynamics; management remains selective and favors directly sourced, relationship‑based deals that complement BTS economics .