Broadstone Net Lease, Inc.

Hello and welcome to Broadstone Net Lease's first quarter 2023 earnings conference call. My name is Emily and I'll be your operator today. Please note that today's call is being recorded. I'll now turn the call over to Mike Caruso, Senior Vice President of Corporate Strategy and Investor Relations at Broadstone. Please go ahead.

Thank you, operator. Thank you, everyone, for joining us today for Broadstone Net Lease's first quarter 2023 earnings call. On today's call, you will hear prepared remarks from CEO John Morena, President and COO Ryan Albano, and CFO Kevin Fennell. All three will be available for the Q&A portion of this call. 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 31st, 2022, 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 John.

Thank you, Mike. Good morning, everyone. In what continues to be a challenging macroeconomic environment, I'm proud to report our first quarter 2023 results. Our core mission is to create long-term stockholder value through investing in and managing net lease real estate. There remains a lot of uncertainty in the market as the Federal Reserve continues its balancing act in the fight against persistent inflation and major headwinds surface in the banking world. As stewards of investor capital, we believe a conservative, prudent, and selective approach to capital allocation is the best path to navigate this uncertain market. And our first quarter results reflect that belief. While we sourced and evaluated billions of dollars in potential new acquisitions, given current pricing dynamics and market risks, we did not feel that cap rates had increased enough to justify significant outlays of capital. During the first quarter, we were purposeful in how we evaluated opportunities sourced year to date and limited our pursuit to only those investments that we believed were priced appropriately and accretive to earnings. Times like these require discipline and selectivity, but also creativity and opportunism. As the debt capital markets and the banking systems adjusted to higher interest rates and structural dislocations in lending, we saw opportunities to partner with our existing tenants as well as developers who have turned to us as an alternative financing solution. Through these relationships, we were able to secure creative and accretive ways to deploy capital on a risk-adjusted basis into existing tenants and relationships and real estate with strong fundamentals. As I stated in February, we are not interested in growth for growth's sake But rather, we are focused on making prudent capital allocation decisions that drive sustainable and accretive earnings growth over the long term. This has always been a core B&L principle and one that is critically important in the current environment. While we don't expect uncertainty and volatility to dissipate in the near term, we do believe the strength of our existing portfolio and fortified balance sheet have positioned us to continue to deliver consistent and reliable results for our shareholders. With 221 different tenants in 54 different industries, our best-in-class diversification defensively positions B&L to weather this period of sustained uncertainty and economic pressure. While substantially all our tenants' underlying operating profiles remain healthy, we believe a heightened level of scrutiny is only prudent given today's backdrop and are paying close attention to tenants who may be more susceptible to the topical pressures of today's environment, including tenants with capital structures that may face refinancing risk in the near and medium term. Our portfolio continues to demonstrate its resiliency, despite many of the macro headwinds that have captured headlines as of late, as evidenced by 100% rent collections and 99.4% occupancy in the first quarter. As of quarter end, only two of our 801 properties were vacant and not subject to a lease. Market conditions like these also demand a flexible and fortified balance sheet which B&L certainly has, at 5.1 times leverage on a net debt to annualized adjusted EBITDA RE basis, we have ample liquidity and flexibility to fuel our selective growth strategy for the remainder of 2023. Brooding capital markets execution last year has afforded us the ability to make decisions we want to, not decisions we have to. More to come from Kevin on this. On the capital allocation front, we continue to find ourselves in an extended period of price discovery, and seller expectations remain high and lag changes in both public and private buyer cost of capital. But periods of dislocation like this always provide unique opportunities, many of which we have been able to successfully capitalize on. First, we have had continued success selling assets that we believe possess heightened credit and or residual risk, and we have done so at attractive, accretive cap rates. These types of sales provide the simultaneous benefits of mitigating risk within the current portfolio while building dry powder to be accretively recycled at attractive spreads. Second, we have had success sourcing opportunities as an alternate financing provider given the conditions in the traditional debt markets. Our relationship-based approach to investing has yielded a pipeline of opportunities to partner with our existing tenants on revenue-generating capital expenditure projects that provide a mutually beneficial solution. These projects have helped us to continue to deploy capital at accretive yields in addition to our more traditional acquisition sourcing channels. We have also seen an increase in opportunities to partner with developers on build to suit transactions, most notably a 200 plus million state of the art temperature controlled food distribution facility. Opportunities like this are what make market dislocations exciting and are the reward for maintaining our discipline and selectivity throughout the year. This milestone transaction will add the single largest asset to our portfolio and provide numerous long-term benefits for our shareholders. Most importantly, growth in B&L's future earnings profile. Through this transaction, we have locked in an accretive yield and corresponding investment spread on a high-quality asset that would not have been possible just a year ago. This, coupled with a long-term lease with a leading operator that includes solid fixed annual rent escalations, will translate into consistent earnings growth over the life of the investment. We are focused on making prudent capital allocation decisions that drive value for our shareholders over the long term, not just in the current calendar year. And this opportunity encapsulates that mission and showcases our ability to source and execute on accretive opportunities, despite the current challenging environment. And with that, I will now turn the call over to Ryan, who will provide additional details on the health of our existing portfolio, our accretive capital recycling efforts, and our investment activity, including this exciting build-to-suit opportunity.