Broadstone Net Lease, Inc.

Hello and welcome to Broadstone Net Lease's fourth quarter 2024 earnings conference call. My name is Emily and I'll be your operator today. Please note that today's call is being recorded. I will now turn the call over to Brent Maidle, Director of Corporate Finance and Investor Relations at Broadstone. Please go ahead.

Thank you everyone for joining us today for Broadstone Net Lease's fourth quarter 2024 earnings call. On today's call, You will hear prepared remarks from Chief Executive Officer John Marana, President and Chief Operating Officer Ryan Albano, and Chief Financial Officer Kevin Fennell. All three will be available for the Q&A portion of this call. As a reminder, the following discussion and answers to your questions contain 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 under reliance on these forward and refer you to our SEC filings, including our Form 10-K for the year ended December 31st, 2024, for a more detailed discussion of the risk factors that may cause such differences. Any forward-looking statements provided during this call are only made as of date of this call. With that, I'll turn the call over to John.

Thank you, Brent, and good afternoon, everyone. I am extremely proud of our 2024 results, achieving $1.43 of AFFO per share. At the top end of our guidance range, with a portfolio that is more than 99% leased and with more than 99% rent collection and executing on over 400 million in total investments while substantially completing our clinical healthcare portfolio simplification strategy. But before I dive further into our 2024 results and plans for 2025, I want to take a moment to thank Shekhar Narasimhan and Denise Brooks-Williams for their dedicated service to BNL during their respective tenures on our board of directors. As we announced on Tuesday, They will not be standing for reelection to the board at our annual meeting in May. Shaker has been a member of the board since the company's inception in October of 2007, and Denise has been a member of the board since May of 2021. We are incredibly grateful for their years of service to the company and their contributions to our success, particularly in the last several years post-IPO as we have worked to reposition B&L and put this company on its current path to generating consistent and attractive long-term shareholder value. As also announced on Tuesday, I am delighted to welcome Rick Imperiali and Joe Sapphire to B&L's Board of Directors. Rick's extensive experience managing investments in REITs and alternative asset strategies at Uniplan Investment Council, as well as his previous service as a director for multiple publicly traded REITs, will provide invaluable insight to the Board. Further, the Board will benefit greatly from the insights and experience Joe acquired during his accomplished tenure as the Chief Executive Officer of Life Storage. Rick's and Joe's appointments represent the next step in the evolution of B&L's board as we continue to implement our differentiated investment strategy built upon our core building blocks of growth. Turning to our 2024 results, we had a solid year all the way around, including generating $1.43 of AFFO per share, representing 1.4% increase compared to 2023, which I believe is a fantastic achievement. Craig Vaughn, Considering the substantial portfolio repositioning we undertook last year to our clinical healthcare portfolio simplification strategy. Craig Vaughn, which could have resulted in negative to neutral FFO per share growth, as is the case with most portfolio repositioning efforts when considered in that light 1.4% growth is a homerun. Craig Vaughn, As of December 31 we have substantially completed our simplification strategy. Reducing our clinical and surgical assets to 3.2% of our ABR from 9.7% at the end of 2023. As a result, we updated our core property types to industrial, retail, including restaurants and MedTail assets, and other to realign our portfolio reporting and emphasize our core growth property types. With the success we achieved on this front in 2024, we are now turning our focus towards our long-term growth strategy. I do not intend to emphasize our continued efforts with respect to our remaining clinical assets, some of which could find a more permanent home in our portfolio if we do not believe proper value can be achieved in the dispositions market. Turning to our 2025 plans and strategy for growth, we have ambitious goals for the year and intend to meet or exceed them, positioning B&L for even better growth in 2026 and beyond. As a reminder, our differentiated strategy as an industrial focused, diversified net lease rate is driven by our four core building blocks. First, solid in place portfolio performance anchored by 2% weighted average annual rent escalations. Second, revenue generating capex with our existing tenants, which helps our tenants grow their businesses and improve the quality of our portfolio while providing better than market returns. Third, and arguably most importantly, a laddered pipeline of committed build-to-suit development projects constructing high-quality new buildings for creditworthy tenants that provide attractive yields and de-risked future AFFO per share growth. And fourth, regular way acquisitions, that is, sale leasebacks and lease assumptions, particularly those that are directly sourced and relationship-based, that supplement and enhance our built-in growth profile. We are well set up for growth in 2025 and beyond through these differentiated core building blocks, including a strong pipeline of new investments with 103.5 million of acquisitions under control, 5.4 million of commitments to fund revenue-generating CapEx with existing tenants, and 227.3 million of high-quality build-to-suit developments scheduled to reach stabilization during 2025 and 2026, adding approximately 17.6 million of incremental ABR with more than 700 million of build-to-suit developments in active discussions that would be scheduled for stabilization in 2026 and 2027. As we saw in 2024, when we reached stabilization on our UNFI build-to-suit development, which we funded at an initial cash yield of 7.2%, that when coupled with a 15-year lease term and 2.5% annual rent escalations, results in a straight line yield of 8.6%, our build-to-suit development strategy is an incredibly powerful tool for driving long-term, accretive, de-risked growth in ways unique to the net lease space. While the traditional net lease model relies on inorganic growth from a regular way transaction market, it can, at times, experience unexpected shifts in volatility in volumes, cap rates, and asset quality. We are seeking to drive B&L's growth through this differentiated and long-term focused build suit development strategy. With above average tenant credit quality, brand new construction, mission critical facilities and real estate, in attractive economics with straight line yields in the mid to high 8% range or better. There is a lot to love here. Added to that, with our industrial focus, we have consistent access to build-to-suit transactions of considerable size that move the needle for our growth based on our attractive denominator. And with a valuation increase we can capture of 75 to 100 basis points or more once our developments reach stabilization, we are also generating a consistent pool of assets that we can use to fund our growth plans without needing to rely on the equity capital markets. At a time when our share price is not where we believe it should be, unless there is a material and significant re-rating of our multiple, we have no plans to raise any equity in 2025 or for the foreseeable future and will manage our equity capital needs and cost of capital through accretive dispositions as needed. We have large goals for our Build a Suit development strategy and are looking forward to making some exciting announcements in the next few months. Our goal for this year is to add at least $500 million in additional build-to-suit developments to our committed schedule for projects that would stabilize and begin paying rent in 2026 and 2027, further strengthening our laddered build-to-suit approach. For 2025, we are initiating our AFFO guidance range at $1.45 to $1.49 per share, or approximately 3% growth at the midpoint. As the year progresses, we expect to revisit our guidance range as well as the underlying assumptions. which Kevin will review with you in a moment. Later this year, we also hope to be able to provide you with a preview of our forecasted run rate growth for 2026 and 2027 based on the contributions we expect to receive from our core building blocks and our execution in 2025. During 2024, we made decisions that we believe are in the best interest of B&L and its investors for the long term and are confident that those decisions will lead to attractive and sustainable AFFO per share growth in B&L's future. We established a differentiated strategy through our high-quality portfolio of diversified properties with strong operating metrics, pruned tenant credit risk and lease rollover risk through targeted dispositions, and maintained a fortified investment-grade balance sheet with low pro forma leverage at 4.9 times and ample liquidity to capitalize on additional investment opportunities. Most importantly, we put a stake in the ground as to who we are as a company and what our differentiated growth strategy will be for the future. We are proud of our accomplishments in 2024 and excited for what's to come in 2025. With that, I'll turn the call over to Ryan, who will provide additional updates on our build to suit and acquisitions pipeline, as well as portfolio matters.