Broadstone(BNL)2022-08-07 13:18Financial Data and Key Metrics Changes - The company generated AFFO of 0.35 per share, representing approximately 6.1% growth over the same period last year [27] - AFFO per share was flat quarter-over-quarter compared to Q1 2022, largely driven by revenue from late Q1 acquisitions offset by accelerated equity raise [27][36] - The company ended the quarter with leverage of 5.3 times on a net debt to annualized adjusted EBITDAre basis, maintaining a conservative leverage profile of less than six times [31][34] Business Line Data and Key Metrics Changes - The company invested 4 billion in opportunities through Q2, indicating a significant increase in transaction volume [46] - The acquisition environment has seen a shift with levered buyers exiting the market, creating cap rate relief and making certain asset classes more attractive [48] - Bid ranges across sophisticated parties have widened by 100 to 150 basis points, allowing for more favorable acquisition opportunities [49] Company Strategy and Development Direction - The diversified net lease strategy positions the company defensively in the current economic environment, allowing for consistent and predictable results [6][8] - The company aims to maintain a strong balance sheet while being selective in acquisitions, focusing on industrial and non-investment-grade assets [25][40] - The company is confident in achieving its full-year acquisition guidance range of 800 million, with approximately 0.27 dividend per common share, payable on or before October 14 [38] - The company is evaluating alternative equity raise methods and intends to opportunistically utilize its ATM program to manage its leverage profile [32][30] Q&A Session Summary Question: Can you describe the acquisition environment and pricing changes? - Management noted that transaction volume remains robust, with a significant increase in opportunities underwritten compared to last year, and highlighted the impact of market dynamics on cap rates [46][48] Question: How do you balance raising equity for acquisitions versus additional assets? - Management indicated a preference for funding acquisitions through equity rather than disposing of lower-performing assets, emphasizing the long-term value of their portfolio [60] Question: How is the change in cost of capital impacting tenants and underwriting? - Management stated that they maintain a downside-oriented approach to tenant financial health, with a heightened focus on stress testing and refinancing risks [63][67] Question: Are you winning transactions where you are not the top bid due to your reputation? - Management confirmed that their strong track record and ability to close without financing contingencies have allowed them to win deals even when not the highest bidder [69] Question: How do you view the current environment for your watch list? - Management reported no significant changes to the watch list but continues to monitor tenants, particularly in consumer discretionary sectors [80] Question: What is the opportunity set in Canada? - Management views Canada as complementary to their U.S. portfolio and continues to explore opportunities, particularly in industrial and retail sectors [85][86] Question: Where are you seeing the most cap rate widening? - Management identified non-investment-grade industrial and retail spaces as areas with the most cap rate widening, while healthcare has been quieter this year [88]