Broadstone Net Lease, Inc.

Hello and welcome to the Broadstone Net Lease fourth quarter 2021 earnings conference call. My name is Tania and I will be your operator today. Please note that today's call is being recorded. I would now like to turn the call over to Mike Caruso, Senior Vice President of Corporate Finance and Investor Relations at Broadstone. Please go ahead.

Thank you, operator, and thank you everyone for joining us today for Broadstone Net Lease's fourth quarter 2021 earnings call. On today's call, you will hear from our Chief Executive Officer, Chris Czarnecki, our Chief Financial Officer, Ryan Albano, and our Chief Operating Officer, John Morana, will be available for Q&A. Before we begin, I would like to remind everyone that the following presentation contains forward-looking statements, which are subject to risks and uncertainties that can cause actual results to differ materially due to a variety of factors. 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 31 2021 for more detailed discussion of the risk factors that may cause such differences. Any forward looking statements provided during this conference call or only made as of the date of this call, I will now turn the call over to our chief executive officer Chris are necky good afternoon.

I'm pleased to report a strong fourth quarter of results, which represents the successful culmination of our first full calendar year as a publicly traded company. I'm incredibly proud of all that my colleagues accomplished in 2021, and most importantly, the results we were able to deliver for our shareholders. Execution across all facets of our business translated into 9.2% growth in AFFO per share over our annualized Q4 2020 results. which we view as an accurate proxy for full year 2020 performance following our IPO in late September 2020. This outstanding result was driven by strong same-store portfolio performance, robust and accretive external growth, as well as prudent capital markets execution and balance sheet management. During 2021, we collected 100% of contractual runs owed, and average occupancy for the year was 99.8%. These near perfect operating results coupled with our best in class annual rent escalations of 2% helped generate strong same store portfolio growth year over year. On an external growth front, our diversified investment strategy provided the flexibility to navigate what was a record setting year in the net lease transaction market. Despite heightened levels of demand and competition, we were able to close over $650 million of accretive acquisition opportunities diversified across all of our core property types at a weighted average initial cash cap rate of 6.3% and a 15.9 year weighted average lease term and 1.5% weighted average annual rent escalations. The B&L story truly shone through in all of our 2021 accomplishments. We delivered on our defensive growth strategy during the year and continued to remain laser focused on best in class diversification across all facets of the business during the year. Industrial assets led the way in 2021 comprising 47% of our transaction volume. Retail assets were second at 26% followed by healthcare at 23% and restaurant at 4%. Our top tenant exposures declined by 40 basis points to 2.1% and our top 10 and top 20 tenant exposures declined by 120 and 140 basis points respectively. All of these statistics demonstrate that we can continue to meaningfully grow earnings per share while not feeling pressured to overly concentrate with any one tenant or in any single sector. Growth in 2021 was supported by outstanding execution in the capital markets, including an inaugural follow-on equity offering, a debut 10-year public bond offering, and routine equity issuance through our newly established ATM program. These actions have positioned us to continue to execute on our defensive growth strategy in 2022, as we look to deliver another year of solid results for our shareholders. Now, turning to B&L's recent performance, during the fourth quarter, we invested $147.5 million in 36 properties at a weighted average initial cash cap rate of 6%. Q4 marks the first quarter since our IPO in which we acquired properties across all of our core property types, including industrial, healthcare, investment-grade retail, and restaurants. The leases include 1.5% annual rent escalations and 14.2 years of remaining lease term, translating into a weighted average gap cap rate of 6.6%. I'd now like to provide additional detail regarding a few key transactions completed during the fourth quarter. During the quarter, we acquired five industrial facilities and four separate transactions for a total of $60 million at a weighted average cash cap rate of 5.9%. The leases include a weighted average 1.9 annual rent escalations and a weighted 15.3 year lease term included in these acquisitions are two additional investments in the food processing space that are critical to the tenants operations as evidenced by the significant renovations undertaken in the past two years by these tenants we are thrilled to continue to add additional food manufacturing and associated cold storage exposure to our industrial segment of the portfolio have historically found strong risk-adjusted returns in this space that are highly complementary to our overall portfolio construction we also added five casual dining restaurants in a sale and leaseback transaction with a well-established and growing regional casual dining operator located in houston texas these five restaurant locations were purchased in addition to the company's small corporate headquarters for 28.5 million dollars all of the properties are master leased and include 1.5% annual rent escalations over a new 20-year lease term. This transaction represents our first investment in the casual dining space since the onset of the COVID pandemic. We have meticulously followed the space over the past two years, closely monitoring how different concepts within our existing restaurant portfolio performed during and recovered from a period of temporary distress. We are growing increasingly more comfortable with the space as operating and financial trends continue to recover to pre-pandemic levels. Each of the five restaurant locations purchased during the fourth quarter currently exhibit strong rent-to-sales and rent-to-coverage ratios. We're excited to make a return to investing in the casual dining space and with this attractive risk-adjusted opportunity. Finally, we acquired $42 million of investment-grade retail assets during the quarter comprised of 22 properties and a weighted average cash cap rate of 5.8%. The investments include three existing B&L tenants, And the properties are located in geographically diverse markets across Michigan, Georgia, Kentucky, and Tennessee. The leases have a weighted average remaining lease term of 10.3 years and include 50 basis points of weighted average annual rent escalations. Many of the properties were built in the last five years and include upgraded construction consistent with their respective concepts, modern redesigns. We have generally focused on growing our investment grade retail exposure over the past year. This quarter's activity includes a mix of single site acquisitions and a larger portfolio that helped bolster the results with long weighted average lease terms and annual rent escalations. An average asset size of approximately $2 million, coupled with tenant and geographic diversification, makes this a highly attractive opportunity to add significant investment grade exposure without taking on outsized concentration risk. Acquisitions completed during the fourth quarter bring total volume for 2021 to $654.7 million at a weighted average cash cap rate of 6.3%, consistent with the midpoint of our last guidance update for the year. 2022 is off an exciting start and is currently on pace to be one of the strongest beginnings to a year with respect to acquisition volumes in our nearly 15-year history of investing in net lease real estate. Since quarter end, we've closed 32.9 million of transactions and currently have over 200 million of opportunities under our control, which we define as under contract or executed letter of intent. I'm pleased to announce our initial 2022 acquisition guidance range of $700 to $800 million, which reflects approximately 16% growth over our year-ending gross asset value at the midpoint of the range. Our asset base relative to many of our larger peers allows us to generate meaningful growth and results at highly achievable levels of acquisitions. Our diversified investment strategy will continue to provide flexibility to source accretive opportunities without sacrificing our underwriting standards in 2022. Ryan will provide additional detail regarding further guidance updates in just a few moments. During the fourth quarter, we sold six properties for $15.8 million. These sales continued to reflect our disposition strategy, primarily focused on risk mitigation and included three vacant property sales and the disposal of three lower performing automotive retail sites at a 7.5% cap rate. We continue to monitor the portfolio closely with heightened level of focus placed on the current macroeconomic outlook and how that could impact our tenants. Best-in-class diversification by property type, industry, tenant, and geography act as a natural defensive hedge amid expectations of both rising inflation and interest rates. Our portfolio has been deliberately constructed and is uniquely positioned to weather any singular tenant credit event. Diversification has proven beneficial throughout many challenging economic environments, including most recently the COVID pandemic. In addition, our best in class portfolio weighted average minimum rent escalation of 2% will help generate better same store growth during a period of higher inflation relative to many others in the net lease space. As of December 31, 2021, all but two of our properties were subject to a lease and our properties were occupied by 204 different commercial tenants with no single tenant accounting for more than 2.1% of ABR. I'll now turn the call over to Ryan to provide additional detail on our Q4 and fiscal 2021 results, recent capital markets activity, and our initial guidance for 2022.