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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 September 30, 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 173,114,949 shares of the Registrant's Common Stock, $0.00025 par value per share, outstanding as of November 1, 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)

5

 

Notes to the Condensed Consolidated Financial Statements (Unaudited)

6

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

28

 

Cautionary Note Regarding Forward-Looking Statements

28

 

Regulation FD Disclosures

28

 

Explanatory Note and Certain Defined Terms

28

 

Overview

29

 

Real Estate Portfolio Information

30

 

Results of Operations

39

 

Liquidity and Capital Resources

43

 

Derivative Instruments and Hedging Activities

46

 

Cash Flows

46

 

Non-GAAP Measures

46

 

Critical Accounting Policies and Estimates

49

 

Impact of Recent Accounting Pronouncements

49

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

49

Item 4.

Controls and Procedures

50

Part II - OTHER INFORMATION

51

Item 1.

Legal Proceedings

51

Item 1A.

Risk Factors

51

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

51

Item 3.

Defaults upon Senior Securities

51

Item 4.

Mine Safety Disclosures

51

Item 5.

Other Information

51

Item 6.

Exhibits

52

 

 


 

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)

 

 

 

September 30,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Accounted for using the operating method:

 

 

 

 

 

 

Land

 

$

755,206

 

 

$

655,374

 

Land improvements

 

 

331,858

 

 

 

295,329

 

Buildings and improvements

 

 

3,650,275

 

 

 

3,242,618

 

Equipment

 

 

10,422

 

 

 

11,870

 

Total accounted for using the operating method

 

 

4,747,761

 

 

 

4,205,191

 

Less accumulated depreciation

 

 

(505,456

)

 

 

(430,141

)

Accounted for using the operating method, net

 

 

4,242,305

 

 

 

3,775,050

 

Accounted for using the direct financing method

 

 

27,128

 

 

 

28,782

 

Accounted for using the sales-type method

 

 

571

 

 

 

571

 

Investment in rental property, net

 

 

4,270,004

 

 

 

3,804,403

 

Cash and cash equivalents

 

 

75,912

 

 

 

21,669

 

Accrued rental income

 

 

129,579

 

 

 

116,874

 

Tenant and other receivables, net

 

 

791

 

 

 

1,310

 

Prepaid expenses and other assets

 

 

18,984

 

 

 

17,275

 

Interest rate swap, assets

 

 

66,602

 

 

 

 

Goodwill

 

 

339,769

 

 

 

339,769

 

Intangible lease assets, net

 

 

322,314

 

 

 

303,642

 

Debt issuance costs – unsecured revolving credit facility, net

 

 

6,485

 

 

 

4,065

 

Leasing fees, net

 

 

8,752

 

 

 

9,641

 

Total assets

 

$

5,239,192

 

 

$

4,618,648

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

Unsecured revolving credit facility

 

$

219,537

 

 

$

102,000

 

Mortgages, net

 

 

94,753

 

 

 

96,846

 

Unsecured term loans, net

 

 

894,378

 

 

 

646,671

 

Senior unsecured notes, net

 

 

844,367

 

 

 

843,801

 

Interest rate swap, liabilities

 

 

 

 

 

27,171

 

Accounts payable and other liabilities

 

 

52,594

 

 

 

38,038

 

Dividends payable

 

 

49,886

 

 

 

45,914

 

Accrued interest payable

 

 

10,559

 

 

 

6,473

 

Intangible lease liabilities, net

 

 

64,971

 

 

 

70,596

 

Total liabilities

 

 

2,231,045

 

 

 

1,877,510

 

 

 

 

 

 

 

 

Commitments and contingencies (See Note 18)

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 173,115 and 162,383 shares issued
   and outstanding at September 30, 2022 and December 31, 2021, respectively

 

 

43

 

 

 

41

 

Additional paid-in capital

 

 

3,148,075

 

 

 

2,924,168

 

Cumulative distributions in excess of retained earnings

 

 

(369,260

)

 

 

(318,476

)

Accumulated other comprehensive income (loss)

 

 

61,834

 

 

 

(28,441

)

Total Broadstone Net Lease, Inc. stockholders' equity

 

 

2,840,692

 

 

 

2,577,292

 

Non-controlling interests

 

 

167,455

 

 

 

163,846

 

Total equity

 

 

3,008,147

 

 

 

2,741,138

 

Total liabilities and equity

 

$

5,239,192

 

 

$

4,618,648

 

 

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

1


 

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
September 30,

 

 

For the Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Lease revenues, net

 

$

103,524

 

 

$

122,777

 

 

$

295,378

 

 

$

290,234

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

39,400

 

 

 

36,682

 

 

 

109,201

 

 

 

98,620

 

Property and operating expense

 

 

5,636

 

 

 

4,842

 

 

 

15,376

 

 

 

14,019

 

General and administrative

 

 

9,942

 

 

 

8,552

 

 

 

28,058

 

 

 

27,840

 

Provision for impairment of investment in rental properties

 

 

4,155

 

 

 

25,989

 

 

 

5,535

 

 

 

28,001

 

Total operating expenses

 

 

59,133

 

 

 

76,065

 

 

 

158,170

 

 

 

168,480

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

4

 

 

 

 

 

 

4

 

 

 

11

 

Interest expense

 

 

(20,095

)

 

 

(15,611

)

 

 

(54,879

)

 

 

(47,149

)

Cost of debt extinguishment

 

 

(231

)

 

 

(242

)

 

 

(231

)

 

 

(368

)

Gain on sale of real estate

 

 

61

 

 

 

1,220

 

 

 

5,328

 

 

 

9,791

 

Income taxes

 

 

(356

)

 

 

(473

)

 

 

(1,169

)

 

 

(1,187

)

Change in fair value of earnout liability

 

 

 

 

 

(1,059

)

 

 

 

 

 

(5,539

)

Other income (expenses)

 

 

4,935

 

 

 

(25

)

 

 

6,441

 

 

 

(11

)

Net income

 

 

28,709

 

 

 

30,522

 

 

 

92,702

 

 

 

77,302

 

Net income attributable to non-controlling interests

 

 

(1,600

)

 

 

(1,824

)

 

 

(5,319

)

 

 

(5,167

)

Net income attributable to Broadstone Net Lease, Inc.

 

$

27,109

 

 

$

28,698

 

 

$

87,383

 

 

$

72,135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

172,578

 

 

 

159,226

 

 

 

168,680

 

 

 

150,227

 

Diluted

 

 

182,971

 

 

 

169,587

 

 

 

179,132

 

 

 

161,273

 

Net earnings per share attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

0.16

 

 

$

0.18

 

 

$

0.52

 

 

$

0.48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

28,709

 

 

$

30,522

 

 

$

92,702

 

 

$

77,302

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of interest rate swaps

 

 

40,039

 

 

 

4,559

 

 

 

93,772

 

 

 

30,328

 

Realized loss on interest rate swaps

 

 

639

 

 

 

85

 

 

 

1,993

 

 

 

2

 

Comprehensive income

 

 

69,387

 

 

 

35,166

 

 

 

188,467

 

 

 

107,632

 

Comprehensive income attributable to non-controlling interests

 

 

(3,868

)

 

 

(2,101

)

 

 

(10,809

)

 

 

(7,313

)

Comprehensive income attributable to Broadstone Net Lease, Inc.

 

$

65,519

 

 

$

33,065

 

 

$

177,658

 

 

$

100,319

 

 

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

2


 

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 of one share
   of restricted stock forfeited

 

 

 

 

 

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

)