Broadstone(BNL)2024-10-31 19:18Financial Data and Key Metrics Changes - The company generated AFFO of 0.35 per share, a decrease of 2.7% in per share results year-over-year, primarily due to lower lease revenues from the healthcare simplification strategy and increased expenses from vacant assets [14][15] - The company maintained its AFFO guidance range of 1.43 per share for the current year [8][15] Business Line Data and Key Metrics Changes - The company successfully reduced its total healthcare exposure below 10%, with clinical assets now representing approximately 4% of its ABR [3][4] - The company reached substantial completion on its UNFI build-to-suit development, contributing to earnings with an initial cash yield of 7.2% and a straight-line yield of 8.6% [4][12] Market Data and Key Metrics Changes - The company closed on 381.9 million, including 405 million with attractive initial cash yields in the mid to high 7% range and straight-line yields exceeding 9% [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's resilience despite pockets of credit risk due to the impact of higher interest rates on consumer-centric industries [7][14] - The company is optimistic about returning to growth in 2025 and 2026, supported by its build-to-suit pipeline [8][9] Other Important Information - The company ended the quarter with pro forma leverage of 4.9 times and has approximately 0.29 per common share, which remains well covered and aligns with its targeted AFFO payout ratio [15] Q&A Session Summary Question: What is keeping the company from raising guidance at this point? - Management indicated that anticipated tenant credit events and additional carrying costs on vacant assets influenced the decision to maintain guidance [16] Question: Can you discuss the acquisition environment and cap rates? - Management noted that while there is volume in the market, the risk-adjusted returns do not align with their investment strategy, leading to a focus on build-to-suit projects instead [17][18] Question: What is the expected investment spending for next year? - Management acknowledged that while acquisitions may be smaller, the focus on build-to-suit projects will maintain historical investment levels over time [21][22] Question: What is the appetite for remaining healthcare assets? - Management stated there is interest from buyers, but the sales will be handled carefully to maintain value [27] Question: How does the company view competition in the transaction market? - Management noted that the mid-market industrial deals remain competitive, but they are prepared to act if opportunities arise [28] Question: How does the company manage development risk? - Management emphasized that they do not take on traditional development risk and only pursue projects with identified tenants [38][39] Question: What are the risks seen in the restaurant portfolio? - Management highlighted that while the overall performance is stable, specific tenants like Red Lobster are being monitored closely due to performance concerns [42][43]