In the latest earnings call for Broadstone Net Lease, the company showcased resilience and strategic foresight in navigating both challenges and opportunities. With a focus on strategic initiatives, the company's management team provided insights into its core building blocks of growth and the evolution of its investment strategy.
Achieving Success Amidst Healthcare Simplification
CEO John Moragne highlighted the successful completion of Broadstone Net Lease's healthcare portfolio simplification strategy. The company managed to sell off 38 assets worth $262 million, demonstrating a strategic exit from clinical healthcare. This strategic move has set the stage for a more focused and diversified portfolio, with the anticipated reduction of healthcare exposure to approximately 11% of the total ABR. This achievement underscores Broadstone Net Lease's ability to make strategic decisions that position the company for long-term success.
Building for the Future with Build-to-Suit Opportunities
Broadstone Net Lease is also taking a proactive approach to growth, with a focus on build-to-suit investments. The company's strategy involves creatively sourcing investment opportunities in collaboration with developer partners. This approach has led to a pipeline of $307 million in build-to-suit investments, which are expected to yield higher going-in cash cap rates and straight line yields compared to traditional acquisitions. This strategic shift towards build-to-suits not only generates attractive yields but also creates long-term value and NAV accretion.
A Diversified Portfolio and Strategic Investments
Broadstone Net Lease's portfolio composition is gradually shifting towards industrial and defensive retail and restaurant sectors. This strategic focus is reflected in the company's investment activity, with the addition of Jelly Belly Candy Company to its top 20 tenant roster. The company's ability to source investments across all core building blocks, including development funding opportunities, best-in-class fixed rent escalations, and revenue-generating CapEx investments, positions Broadstone Net Lease for sustained growth.
Financial Performance and Future Outlook
The company's financial performance remains strong, with AFFO of $70 million or $0.36 per share, a 2.9% increase year-over-year. Despite the challenges posed by interest rates and macroeconomic conditions, Broadstone Net Lease continues to demonstrate operational resilience, with a high degree of rent collections and a well-controlled cash G&A. The company's proactive approach to risk management, including the execution of forward-starting SOFR swaps, further underscores its commitment to mitigating rate uncertainty.
Looking Ahead
Broadstone Net Lease's strategic focus on healthcare simplification, build-to-suit investments, and portfolio diversification positions the company for continued success. As the company looks towards the future, it remains committed to delivering attractive yields, creating long-term value, and navigating the evolving market landscape. With a robust investment pipeline, a well-positioned portfolio, and a disciplined approach to capital allocation, Broadstone Net Lease is well-positioned to capitalize on opportunities and navigate challenges in the months ahead.