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Broadstone(BNL) - 2022 Q4 - Earnings Call Transcript
BNLBroadstone(BNL)2023-02-26 00:22
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Financial Data and Key Metrics Changes - The company generated an AFFO of 65.6millionor65.6 million or 0.36 per share in Q4 2022, representing a 6% growth year-over-year and approximately 3% growth quarter-over-quarter [11] - Full year 2022 AFFO reached 252millionor252 million or 1.40 per share, marking a 6.9% increase over 2021 results [64] - The company maintained a conservative leverage profile of 5.2 times net debt to annualized adjusted EBITDAre and ended the year with approximately 825millionofliquidity[58][90]BusinessLineDataandKeyMetricsChanges−InQ42022,thecompanyinvestedapproximately825 million of liquidity [58][90] Business Line Data and Key Metrics Changes - In Q4 2022, the company invested approximately 310 million in 17 properties at a weighted average initial cash cap rate of 6.7% [59] - The weighted average annual rent escalation remained at 2%, with a weighted average remaining lease term of approximately 10.9 years [8] - The company sold three properties for net proceeds of 39.2millionataweightedaveragecashcaprateof5.839.2 million at a weighted average cash cap rate of 5.8% [52] Market Data and Key Metrics Changes - The company reported that its collections for the year exceeded 99.9%, maintaining a strong track record of rent collections [61] - The acquisition cap rate expanded by 100 basis points from Q1 to Q4 2022, indicating a shift in market conditions [85] - The company noted a slower start to 2023, with an annualized opportunity volume of 20 billion to 25billion,reflectingamorenormalizedmarket[31]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedondeployingavailablecapitalinaselectivemanner,withaconservativeacquisitionguidancerangeof25 billion, reflecting a more normalized market [31] Company Strategy and Development Direction - The company is focused on deploying available capital in a selective manner, with a conservative acquisition guidance range of 300 million to 500millionfor2023[12]−Thestrategyincludesincreasingscrutinyoftheinternalportfolioreviewprocessandcreditstresstestingduetoongoingeconomicuncertainty[8]−Thecompanyaimstobuilddrypowderforaccretivedeploymentduringpricingdiscoveryandtolengthenitsdebtmaturityprofileforgreaterflexibility[10]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceinthecompany′sabilitytonavigateeconomicuncertaintyandhighlightedtheimportanceofadiversifiedinvestmentstrategy[5][53]−Thecompanyanticipatesaback−endweightedacquisitionstrategyfor2023,withpotentialadjustmentsbasedonmarketconditions[17]−ManagementremainscautiousregardingtenantexposureandisactivelymonitoringkeytenantslikeRedLobsterandCarvana[42][35]OtherImportantInformation−Thecompanyannouncedadividendof500 million for 2023 [12] - The strategy includes increasing scrutiny of the internal portfolio review process and credit stress testing due to ongoing economic uncertainty [8] - The company aims to build dry powder for accretive deployment during pricing discovery and to lengthen its debt maturity profile for greater flexibility [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate economic uncertainty and highlighted the importance of a diversified investment strategy [5][53] - The company anticipates a back-end weighted acquisition strategy for 2023, with potential adjustments based on market conditions [17] - Management remains cautious regarding tenant exposure and is actively monitoring key tenants like Red Lobster and Carvana [42][35] Other Important Information - The company announced a dividend of 0.0275 per common share, representing a 3.8% increase over the annualized dividend amount from Q1 2022 [25] - The board of directors welcomed new members with strong backgrounds in retail and private equity, enhancing the company's governance [48] Q&A Session Summary Question: What changes should be expected with the new management? - Management indicated that the strategy and approach will remain consistent, focusing on long-term shareholder value [28][94] Question: Can you elaborate on the new top tenant, Roskam Baking Company? - Management expressed confidence in the tenant's defensive position and ability to pass through costs, highlighting a moderate leverage profile [33][34] Question: Any updates on Red Lobster's business performance? - Management acknowledged the challenges faced by Red Lobster but emphasized ongoing communication and confidence in the investment [35][100] Question: Are there any near-term rent cuts being considered? - Management confirmed that there are no active discussions regarding rent cuts for any tenants at this time [42] Question: What is the expected cap rate trend for acquisitions? - Management noted that cap rates in industrial assets have moved more rapidly than other sectors, with expectations for continued price discovery [96]