Broadstone Net Lease, Inc.

Hello and welcome to BroadStone Net Leases first quarter 2021 earnings conference call. My name is Andrew and I will be your operator today. Please note that today's call is being recorded. If you require operator assistance, please press star then zero. I will now turn the call over to Mike Caruso, Senior Vice President of Corporate Finance and Investor Relations at BroadStone. Please go ahead.

Thank you for joining us today for BroadStone NetLease's first quarter 2021 earnings call. On today's call, you will hear from our CEO, Chris Czarnecki, and our CFO, Ryan Albano. Before we begin, we want to remind everyone that the following presentation contains forward-looking statements, which are subject to risks and uncertainties, including but not limited to those related to the ongoing COVID-19 pandemic. Should one or more of these risks or uncertainties materialize, actual results may differ materially. We caution you not to place undue reliance on these forward-looking statements and refer you to our SEC filings, including our Form 10-K for the year ended December 31st, 2020, for more detailed discussion of the risk factors that may cause such differences. Any forward-looking statements provided during this conference call are only made as of the date of this call. I will now turn the call over to our CEO, Chris Czarnecki.

Thank you, Mike, and welcome to everyone joining our Q1 2021 earnings call. As always, I would first like to wish our listeners continued good health and safety. In reflecting on the time since our IPO, I'm incredibly proud of our team, how they have executed our strategy, managed the portfolio, and the results they've delivered. Our diversified strategy has produced predictable results and provided significant downside protection during this rapidly changing economic environment. Our best-in-class geographic, property type, and tenant diversification has yielded rent collections among the best in the net lease space over the past year, and the first quarter of 2021 was no exception. Our portfolio operating metrics continue to reflect pre-pandemic levels, a trend that has continued for several quarters. During the first quarter, we collected 99.8% of rent, and the portfolio was 99.7% leased as of quarter end. All deferral and abatement periods have concluded and we are currently scheduled to receive less than $500,000 of remaining deferred rent, which is immaterial in comparison to our annualized base rent of more than $302 million. With widespread vaccine distribution efforts well underway, significant reductions in case counts across the country, and all of our tenants currently open for business, We believe our normalized pre-pandemic operating profile exhibited during Q1 should continue throughout 2021. While most of our tenants have seen limited disruption over the past 12 months, we expect macroeconomic tailwinds to continue to strengthen for certain property types more directly impacted by the pandemic, namely casual dining. In areas of the country that may experience a slow recovery, we believe that our granular diversification will continue to provide downside protection and position us for continued success. What we love about our diversified strategy is that it not only provides for a differentiated advantage during challenging economic environments, but it also positions us to excel and be nimble during periods of growth. It is no surprise that the net lease space has returned to external growth following a temporary pandemic-induced pause during 2020. An increase in capital pursuing net lease opportunities, coupled with the pandemic's creation of have and have not asset types, has resulted in a competitive acquisition environment in 2021. Despite heightened levels of competition, our flexible capital allocation strategy continues to translate into a robust pipeline of attractive acquisition opportunities. Our diversified approach to investing gives us flexibility and allows us to selectively pursue attractive risk-adjusted opportunities across a variety of asset types despite changes in sector-specific dynamics. We've embraced the strategic flexibility throughout our 15 years of operating history, and our investment activity during Q1 2021 was no different. During the first quarter, we closed five transactions comprising 28 properties for a total investment of $87.3 million. The weighted average going in cash cap rate for acquisitions completed during the quarter was 6.4%. Leases include 1.4% weighted average rent escalations and a 15.3-year weighted average remaining lease term. Although we've seen heightened competition in some of our core property types, such as industrial and quick service restaurants, we were able to source and close acquisitions that possess risk-adjusted profiles complementary to our existing portfolio. Acquisitions completed during the quarter were more heavily weighted toward select retail and healthcare property types, which we believe is a testament to the benefits of our diversified acquisition strategy. During the quarter, we acquired 24 select retail properties in two transactions for a total investment of $68.2 million. The properties primarily include car washes and dollar store sites located in geographically diverse markets. Leases are subject to a weighted average rent escalation of 1.1% and have a weighted average lease term of approximately 16.3 years. Acquiring strong performing sites under long-term leases with experienced operators is an exciting addition to the retail segment of our portfolio. We've also added four healthcare properties as part of two transactions for a total investment of $19 million during the quarter. The properties include several plasma collection centers and a newly constructed eye care facility leased to an existing tenant. The leases are subject to a weighted average rent escalation of 2% and have weighted average lease terms of approximately 11.5 years. We continue to view healthcare as a unique differentiator for us, and we intend to remain focused on adding attractive assets leased to tenants affiliated with large health systems or significant regional physicians groups. Spending on the healthcare transactions completed during the quarter, the acquisition of the newly constructed iCare facility demonstrates our ability to work with our existing tenant base to drive new growth opportunities. Additionally, through our work on the property management side of the business, We also successfully identified and released a previously vacant healthcare property during Q1 under a new 15-year lease with the same tenant. Building strong relationships that lead to new acquisition opportunities with existing tenants has been and will continue to be a key strategic focus. Although the acquisitions we completed during the first quarter were more heavily weighted towards select retail and healthcare properties, we continue to source and evaluate opportunities across all of our core property types. Despite some minor seasonality and volume, typical of the first quarter of the year, we are very pleased with our current pipeline and have $206.5 million of additional transactions under our control, which we define as either under contract or executed letter of intent. These opportunities are well diversified across industrial, healthcare, and select retail assets. With nearly $300 million of acquisitions either closed during the first quarter or currently under our control and a robust underwriting pipeline, of Q2 and second half of 2021 opportunities, I'd reiterate our confidence in our initial full-year acquisitions guidance range of $450 to $550 million. Ryan will provide a more complete update on our 2021 full-year guidance in just a few moments. During the quarter, we sold eight properties for $23 million at a weighted average cap rate of 7%, representing a $3.5 million gain over original purchase price. These sales continue to reflect our disposition strategy focused on risk mitigation and included several non-core healthcare assets and weaker performing casual dining locations. We continue to closely monitor and assess the long-term impacts to segments of the portfolio that have been more directly impacted by the COVID-19 pandemic, namely casual dining and office properties. Granular tenant diversification, long-term leases, and strong tenant credit affords us the opportunity to patiently assess all available options to preserve and enhance long-term shareholder value. As of March 31st, our portfolio included 660 net lease properties located across 41 U.S. states and one property in Canada. The portfolio had a weighted average remaining lease term of 10.6 years with 2.1% in-place contractual annual rent escalators. Occupancy increased 50 basis points quarter over quarter to 99.7%. as we successfully re-tenanted three properties during the first quarter, leaving only six of our 661 total properties vacant at quarter end. Our forward lease maturities continue to be negligible and represent just 0.3% of ABR in 2021 and a total of 2.7% of ABR through 2023. Lastly, I'd like to highlight some exciting governance-related news that was announced earlier in the quarter. During Q1, our Board of Directors nominated Denise Brooks-Williams and Michael Koch for election to the Board at our annual meeting, which will be held this month. I look forward to welcoming both nominees to the Board of Directors as each brings a wealth of experience in their respective industries. Ms. Brooks-Williams currently serves as the Senior Vice President and CEO of the North Market for the Henry Ford Health System, a leading not-for-profit healthcare and medical services provider in Michigan. Denise has more than 30 years of experience in the healthcare industry and will contribute immensely as we seek to expand our healthcare portfolio. Mr. Koch is the co-founder and current president of Terreno Realty Corporation, a publicly traded REIT focusing on infill industrial properties in six major coastal markets, and has over 30 years experience in the industrial real estate sector, as well as significant experience as a director and executive of publicly traded REITs. With that, I'll now turn the call over to Ryan to provide additional detail on our Q1 results and our full year 2021 outlook.