Broadstone Net Lease, Inc.

Hello and welcome to Broadstone NetLease's fourth quarter 2025 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 Madel, Director of Corporate Finance and Investor Relations at Broadstone. Please go ahead.

Thank you everyone for joining us today for Broadstone NetLease's fourth quarter 2025 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 Funnell. 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 risk 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. For a more detailed discussion of risk factors that may cause such differences, please refer to our SEC filings, including our Form 10-K for the year ended December 31st, 2025, and note that such risk factors may be updated in our quarterly SEC filings. Any forward-looking statements provided during this conference call are only made as of the date of this call. With that, I'll turn the call over to John.

Thank you, Brent, and good morning, everyone. Before I dive into our results and outlook, I want to briefly reflect on what we accomplished in 2025, because I believe it was an important year in Broadstone's history. 2025 was pivotal in terms of proving out the promise of this company and our strategy, and was crucial in terms of establishing a strong foundation for B&L's future. We successfully executed our investor day and used it to reinforce who we are as a company and why we believe our differentiated strategy is built to generate consistent and attractive long-term shareholder value. Delivering on our strategic objectives last year required significant effort across the entire organization, and I couldn't be prouder of what our team accomplished. As a reminder, our strategy continues to be driven by our three core building blocks. First, solid in-place portfolio performance, anchored by our top tier contractual rent escalations, same store growth potential, and revenue generating capex. Second, and most importantly, a laddered pipeline of committed build-to-suit development projects that provide attractive yields, value creation, and de-risk future AFFO per share growth. And third, stabilized acquisitions, including sale leasebacks and lease assumptions, particularly those that are directly sourced and relationship-based, that supplement and enhance our built-in growth profile. In 2025, we made meaningful progress across each of these building blocks, And as we look ahead, we believe our build-a-suit strategy will provide meaningful, embedded long-term growth and value creation. With high-quality, mission-critical facilities with attractive economics and high-quality tenants, our portfolio and pipeline provide a powerful driver of durable growth that is unique within the net lease space. With our differentiated strategy established and our team firing on all cylinders, we delivered a strong year on all fronts, including generating $1.49 of ASFO per share and representing 4.2% growth year-over-year. We also maintained solid portfolio performance, ending the year 99% leased and 99.8% of rents collected. We also incrementally disposed of some of our remaining legacy clinical healthcare assets, and we continued to tightly manage expenses and grow cash flows. On the investment side, we deployed $748.4 million, including $429.9 million in new property acquisitions, $209.3 million in build-to-suit developments, $100.8 million in transitional capital, and $8.3 million in revenue-generating capital expenditures. The new property acquisitions and revenue-generating capital expenditures had a weighted average initial cash capitalization rate of 7%, a weighted average remaining lease term of 14.2 years, and weighted average annual rent increases of 2.6%, providing contractual growth that is 50 basis points above our portfolio average. On a weighted average basis, these investments also carried a straight-line yield of 8.4%, reflecting attractive, growth-oriented returns while extending the duration and embedded rent growth profile of our portfolio. Alongside our investments, we also successfully navigated multiple headline tenant situations throughout the year, and I want to give our team all the credit here. These situations require a lot of work, and our organization has tangible, tested experience in managing them to completion. Our team brings a creative and solutions oriented mindset to find outcomes that work for us and our tenants. It's the ability to find mutually beneficial solutions to difficult problems that helps us build long term relationships with our tenants and clients, which you hear us talk about often. Despite the headlines, the actual financial impact from tenant situations last year was limited, with bad debt for 2025 amounting to only 31 basis points. That outcome underscores the strength and reliance of our portfolio as well as our team's ability to manage through these events and should serve as a reminder that while credit events are bound to happen, in most cases, the underlying impact on the business is minimal and does not necessitate the outsized swings in our share price that we have experienced historically. A recent example of this disconnect was when American Signature filed for bankruptcy over a weekend in November last year, a filing that was not communicated to us in advance. In response, our share price declined over 5%, representing approximately $150 million of market capitalization, despite American Signature representing only approximately 1% of our total ABR. As you saw in our earnings release last night, through the court-supervised process, Gardner White Furniture has assumed all six of our American Signature leases at current rents effective as of February 6th. We realized no bad debt throughout the process, and we now have a strong retail furniture operator in all six of our locations with what we expect will eventually be a new and structurally improved long-term lease. Overall portfolio performance remains solid, and our credit and underwriting platform paired with our proactive relationship-based focus allows us to stay close to our tenants and anticipate issues early. We've also been intentional about communicating potential tenant concerns as transparently and as early as possible. With that backdrop, We want to provide an update on what we are seeing across our Red Lobster sites. The tenants post-bankruptcy operating performance has been mixed, with its turnaround strategy positively impacting some sites while others have experienced weaker traffic and profitability. We are monitoring this closely and remain in active dialogue with Red Lobster while we continuously assess each of our sites to understand our highest value pathways forward, which could simply mean maintaining the status quo. Given the continued underperformance at some of our sites, however, we are in the process of evaluating potential mutually beneficial for sale or for lease paths that could reduce our exposure to the brand over time. We remain highly confident in our ability to navigate our exposure to Red Lobster as we have proven with this and other distressed tenants time and time again. Turning to 2026, and as we previously outlined in connection with our investor day, we are reiterating our 2026 AFFO guidance of $1.53 to $1.57 per share or 4% at the midpoint. Kevin will walk you through our key guidance assumptions in his remarks, but I think it's worth reminding everyone that the success we had in 2025 in establishing our build-a-suit pipeline provides for a very strong foundation for 2026. The incremental investment activity required to achieve our 2026 guidance targets is relatively insignificant, and our primary focus in our investment committee conversations centers around what we are seeing that will deliver in 2027. We remain in a great position to start the year, with approximately $350 million of high-quality build-to-suit developments scheduled to reach stabilization during 2026, adding nearly $26 million of incremental ABR. Additionally, we have approximately $142 million of additional build-to-suit developments that are under executed LOIs, consistent with what was previously provided in conjunction with our Investor Day. We are also excited about some opportunities to continue to add to our transitional capital bucket. As many of you have been focused on since our third quarter earnings call and from our Investor Day presentation, our transitional capital investment in Project Triborough is top of mind, and we have now invested approximately $100 million in the project through December 31st. As I've said previously, we are very excited about this project, and we intend to use 2026 to evaluate all available paths for this investment opportunity, while staying actively involved in the development work to preserve optionality and ensure we maximize value for shareholders. Ryan will provide more details on Project Triborough in a few moments. Finally, while we have been encouraged by improving market sentiment around REITs and some improvement in our equity multiple, we remain frustrated with our relative valuation. We continue to focus on disciplined execution to close the remaining gap versus our peer average and expand our ability to fund growth opportunities over time. As you saw in our earnings release last night, we raised a small amount of equity under our ATM since November. In total, on a forward basis, We have raised gross proceeds of approximately $43 million. While the market setup has been incrementally constructive, we do not expect to raise significant amounts of additional equity at these levels, though we will remain opportunistic in our decision-making. As we've made clear over the last three years, we will control our own destiny and look to opportunistic dispositions and alternative opportunities for capital when we do not believe the equity markets are properly valuing our shares. That being said, we know that publicly traded net lease REITs like B&L work best when they are in the virtuous cycle in raising accretive equity capital to be redeployed into attractive investments, and we look forward to the day when we're able to consistently raise equity in that manner again. As I said at the beginning of my remarks, I couldn't be prouder of what our team accomplished in 2025, and I look forward to sharing with you all that we will accomplish in 2026. With that, I will hand the call over to Ryan and Kevin to take you through some of these themes in greater detail.