Broadstone Net Lease, Inc. [BNL] Filings

10-Q 1 bnl-20220331.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2022, or

☐ Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 001-39529

BROADSTONE NET LEASE, INC.

(Exact name of registrant as specified in its charter)


Maryland	26-1516177
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

800 Clinton Square

Rochester, New York

14604

(Address of principal executive offices)

(Zip Code)

(585) 287-6500

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00025 par value

BNL

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 169,306,032 shares of the Registrant's Common Stock, $0.00025 par value per share, outstanding as of May 2, 2022.

BROADSTONE NET LEASE, INC.

TABLE OF CONTENTS


		Page
Part I - FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)	2
	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
	Cautionary Note Regarding Forward-Looking Statements	20
	Explanatory Note and Certain Defined Terms	20
	Overview	21
	Real Estate Portfolio Information	22
	Results of Operations	28
	Liquidity and Capital Resources	31
	Derivative Instruments and Hedging Activities	34
	Contractual Obligations	34
	Cash Flows	35
	Non-GAAP Measures	35
	Critical Accounting Policies	38
	Impact of Recent Accounting Pronouncements	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39
Part II - OTHER INFORMATION		40
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Broadstone Net Lease, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except per share amounts)


	March 31, 2022			December 31, 2021
Assets
Accounted for using the operating method:
Land	$	709,962		$	655,374
Land improvements		300,300			295,329
Buildings and improvements		3,381,990			3,242,618
Equipment		10,422			11,870
Total accounted for using the operating method		4,402,674			4,205,191
Less accumulated depreciation		(454,122	)		(430,141	)
Accounted for using the operating method, net		3,948,552			3,775,050
Accounted for using the direct financing method		28,684			28,782
Accounted for using the sales-type method		571			571
Investment in rental property, net		3,977,807			3,804,403
Cash and cash equivalents		54,103			21,669
Accrued rental income		120,117			116,874
Tenant and other receivables, net		1,160			1,310
Prepaid expenses and other assets		22,525			17,275
Interest rate swap, assets		8,944			—
Goodwill		339,769			339,769
Intangible lease assets, net		311,277			303,642
Debt issuance costs – unsecured revolving credit facility, net		7,427			4,065
Leasing fees, net		9,391			9,641
Total assets	$	4,852,520		$	4,618,648

Liabilities and equity
Unsecured revolving credit facility	$	266,118		$	102,000
Mortgages, net		96,141			96,846
Unsecured term loans, net		586,884			646,671
Senior unsecured notes, net		843,990			843,801
Interest rate swap, liabilities		1,154			27,171
Accounts payable and other liabilities		40,611			38,038
Dividends payable		47,682			45,914
Accrued interest payable		9,845			6,473
Intangible lease liabilities, net		68,775			70,596
Total liabilities		1,961,200			1,877,510

Commitments and contingencies (See Note 15)

Equity
Broadstone Net Lease, Inc. stockholders' equity:
Preferred stock, $0.001 par value; 20,000 shares authorized, no shares issued or outstanding		—			—
Common stock, $0.00025 par value; 500,000 shares authorized, 168,750 and 162,383 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		42			41
Additional paid-in capital		3,056,560			2,924,168
Cumulative distributions in excess of retained earnings		(336,988	)		(318,476	)
Accumulated other comprehensive income (loss)		5,027			(28,441	)
Total Broadstone Net Lease, Inc. stockholders’ equity		2,724,641			2,577,292
Non-controlling interests		166,679			163,846
Total equity		2,891,320			2,741,138
Total liabilities and equity	$	4,852,520		$	4,618,648

The accompanying notes are an integral part of these condensed consolidated financial statements.

Broadstone Net Lease, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)

(in thousands, except per share amounts)


	For the Three Months Ended March 31,
	2022			2021
Revenues
Lease revenues, net	$	93,841		$	82,698

Operating expenses
Depreciation and amortization		34,290			30,713
Property and operating expense		5,044			4,605
General and administrative		8,828			10,633
Provision for impairment of investment in rental properties		—			2,012
Total operating expenses		48,162			47,963

Other income (expenses)
Interest income		—			5
Interest expense		(16,896	)		(16,108	)
Cost of debt extinguishment		—			(126	)
Gain on sale of real estate		1,196			4,733
Income taxes		(412	)		(413	)
Change in fair value of earnout liability		—			1,124
Other (expenses) income		(1,126	)		10
Net income		28,441			23,960
Net income attributable to non-controlling interests		(1,683	)		(1,737	)
Net income attributable to Broadstone Net Lease, Inc.	$	26,758		$	22,223

Weighted average number of common shares outstanding
Basic		163,809			145,338
Diluted		174,288			156,724
Net earnings per share attributable to common stockholders
Basic and diluted	$	0.16		$	0.15

Comprehensive income
Net income	$	28,441		$	23,960
Other comprehensive income
Change in fair value of interest rate swaps		34,961			28,680
Realized loss (gain) on interest rate swaps		659			(41	)
Comprehensive income		64,061			52,599
Comprehensive income attributable to non-controlling interests		(3,790	)		(3,813	)
Comprehensive income attributable to Broadstone Net Lease, Inc.	$	60,271		$	48,786

The accompanying notes are an integral part of these condensed consolidated financial statements.

Broadstone Net Lease, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

(in thousands, except per share amounts)


	Common Stock		Additional Paid-in Capital			Cumulative Distributions in Excess of Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Non- controlling Interests			Total Stockholders' Equity
Balance, January 1, 2022	$	41	$	2,924,168		$	(318,476	)	$	(28,441	)	$	163,846		$	2,741,138
Net income		—		—			26,758			—			1,683			28,441
Issuance of 6,427 shares of common stock		1		136,825			—			—			—			136,826
Offering costs, discounts, and commissions		—		(2,218	)		—			—			—			(2,218	)
Stock-based compensation, net		—		929			—			—			—			929
Retirement of 59 shares of common stock		—		(1,301	)		—			—			—			(1,301	)
Distributions declared ($0.265 per share and OP Unit)		—		—			(45,270	)		—			(2,845	)		(48,115	)
Change in fair value of interest rate swap agreements		—		—			—			32,893			2,068			34,961
Realized loss on interest rate swap agreements		—		—			—			620			39			659
Adjustment to non-controlling interests		—		(1,843	)		—			(45	)		1,888			—
Balance, March 31, 2022	$	42	$	3,056,560		$	(336,988	)	$	5,027		$	166,679		$	2,891,320


	Common Stock		Class A Common Stock			Additional Paid-in Capital			Cumulative Distributions in Excess of Retained Earnings			Accumulated Other Comprehensive Loss			Non- controlling Interests			Total Stockholders' Equity
Balance, January 1, 2021	$	27	$	9		$	2,624,997		$	(259,673	)	$	(66,255	)	$	179,976		$	2,479,081
Net income		—		—			—			22,223			—			1,737			23,960
Issuance of 211 shares of common stock		—		—			233			—			—			—			233
Offering costs, discounts, and commissions		—		—			(500	)		—			—			—			(500	)
Stock-based compensation		—		—			1,769			—			—			—			1,769
Retirement of 45 shares of common stock		—		—			(832	)		—			—			—			(832	)
Conversion of 37,000 Class A common stock to 37,000 shares of common stock		9		(9	)		—			—			—			—			—
Conversion of 38 OP Units to 38 shares of common stock		—		—			606			—			—			(606	)		—
Distributions declared ($0.250 per share and OP Unit)		—		—			—			(36,690	)		—			(2,963	)		(39,653	)
Change in fair value of interest rate swap agreements		—		—			—			—			26,602			2,078			28,680
Realized gain on interest rate swap agreements		—		—			—			—			(39	)		(2	)		(41	)
Adjustment to non-controlling interests		—		—			(953	)		—			1,008			(55	)		—
Balance, March 31, 2021	$	36	$	—		$	2,625,320		$	(274,140	)	$	(38,684	)	$	180,165		$	2,492,697

The accompanying notes are an integral part of these condensed consolidated financial statements.

Broadstone Net Lease, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	For the Three Months Ended March 31,
	2022			2021
Operating activities
Net income	$	28,441		$	23,960
Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities:
Depreciation and amortization including intangibles associated with investment in rental property		33,132			29,985
Provision for impairment of investment in rental properties		—			2,012
Amortization of debt issuance costs and original issuance discount charged to interest expense		830			879
Stock-based compensation expense		929			1,769
Straight-line rent, direct financing and sales-type lease adjustments		(3,584	)		(4,632	)
Cost of debt extinguishment		—			126
Gain on sale of real estate		(1,196	)		(4,733	)
Change in fair value of earnout liability		—			(1,124	)
Other non-cash items		2,275			(95	)
Changes in assets and liabilities, net of acquisition:
Tenant and other receivables		150			582
Prepaid expenses and other assets		804			1,072
Accounts payable and other liabilities		(6,049	)		(3,894	)
Accrued interest payable		3,372			5,873
Net cash provided by operating activities		59,104			51,780

Investing activities
Acquisition of rental property accounted for using the operating method		(211,902

Broadstone Net Lease, Inc. [BNL] Filings
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10-K	[2021-02-25]
10-Q	[2020-11-05]
10-Q	[2020-08-04]
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