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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 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.

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
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.

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

 

 

 

 

 

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.

3


 

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