World News: 15:39 GMT Friday 10th August 2018. [Broadstone Real Estate via Globe Newswire via SPi World News]
ROCHESTER, N.Y., Aug. 10, 2018 (GLOBE NEWSWIRE) -- Broadstone Net Lease, Inc. (“BNL,” ”we,” or ”us”), a privately offered real estate investment trust (“REIT”) managed by Broadstone Real Estate, LLC (“Broadstone”), today filed with the Securities and Exchange Commission (“SEC”) its Quarterly Report on Form 10-Q for the three and six months ended June 30, 2018 (the “Q2 2018 10-Q”), which is available free of charge on the SEC’s public website and on our website at: .
“,” said Chris Czarnecki, BNL’s Chief Executive Officer. “
For the three months ended June 30, 2018, we:
For the six months ended June 30, 2018, we:
Subsequent to quarter end, the committee of our board of directors comprised of independent directors (the “Independent Directors Committee” or “IDC”) approved increasing the Determined Share Value (“DSV”) to $85.00 per share, from $83.00 per share, which will remain in effect through October 31, 2018.
FFO and AFFO are performance measures that are not calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We present these non-GAAP measures as we believe certain investors and other users of our financial information use them as part of their evaluation of our historical operating performance. Please see our discussion below under the heading “Reconciliation of Non-GAAP Measures,” which includes a discussion of the definition, purpose, and use of these non-GAAP measures as well as a reconciliation of each to the most comparable GAAP measure, and “Notice Regarding Non-GAAP Financial Measures.”
Revenues increased by approximately $13.3 million, or 30.6%, to $57.0 million for the three months ended June 30, 2018, compared to $43.7 million for the three months ended June 30, 2017. For the six months ended June 30, 2018, revenues increased by approximately $26.7 million, or 31.2%, to $112.6 million compared to $85.9 million in the same period in 2017. The increase in revenues for the three and six months ended June 30, 2018, is primarily attributable to the growth in our real estate portfolio. We acquired $683.6 million in real estate, excluding capitalized acquisition expenses, throughout 2017, mainly during the second half of the year, and $254.8 million in real estate, excluding capitalized acquisition expenses, during the first six months of 2018. The 41 new properties acquired in the first six months of 2018 are expected to contribute to reported year-over-year growth over the remainder of the year.
Net income increased by $2.4 million, or 15.0%, to $18.4 million for the three months ended June 30, 2018, compared to $16.0 million for the three months ended June 30, 2017. Net earnings per diluted share decreased $0.03 during the same period, to $0.86 per share. For the six months ended June 30, 2018, net income increased by $7.6 million, or 25.7%, to $37.4 million, compared to approximately $29.8 million in the six months ended June 30, 2017. Net earnings per diluted share increased $0.07 during the same period, to $1.77 per share.
For both the three and six months ended June 30, 2018, the increase in net income was mainly attributable to increased operating earnings generated by the growth in our real estate investment portfolio as compared to the prior year, combined with decreased expenses associated with the extinguishment of debt. During the second quarter of 2017, we negotiated our current revolving credit facility, replacing debt associated with a prior facility. These factors were partially offset by an increase in interest expense, attributable to increased outstanding borrowings on our unsecured credit facilities in 2018, and to our recognizing a gain of $1.2 million associated with the extinguishment of an interest rate swap concurrent with the paydown of a mortgage in the three and six months ended June 30, 2017. In addition, during the three and six months ended June 30, 2018, we recognized $4.3 million and $7.6 million of gains on sale of real estate, respectively, compared to $5.5 million and $6.3 million, respectively, of such gains in the comparable prior-year periods.
The 15.0% growth in net income used in the numerator of the earnings per share calculation for the three months ended June 30, 2018, was more than offset by the effect of a 19.0% increase in the number of diluted weighted average shares of common stock outstanding used in the denominator of the calculation as compared to the prior year. This resulted in a reported $0.03 decline in earnings per share for the three months ended June 30, 2018, as compared to the three months ended June 30, 2017. For the six months ended June 30, 2018, 25.7% growth in net income was somewhat tempered by a 20.4% increase in the number of diluted weighted average shares outstanding, as compared to the prior year.
FFO increased $9.1 million, or 36.1%, to $34.4 million for the three months ended June 30, 2018, compared to approximately $25.3 million for the three months ended June 30, 2017. FFO per diluted share increased by $0.20 during the same period, to $1.60 per share. FFO increased $16.4 million, or 31.1%, to $69.2 million for the six months ended June 30, 2018, compared to $52.8 million for the six months ended June 30, 2017. FFO per diluted share increased by $0.27 during the same period, to $3.28 per share.
Consistent with the growth in net income, the increase in FFO is primarily driven by the growth in our real estate investment portfolio. The portfolio growth also drove an increase in depreciation and amortization expense, resulting in greater FFO growth than net income growth, as these expenses are added back to net income to compute FFO. For the three months ended June 30, 2018, FFO also benefited from lower gains on the sale of real estate, which are subtracted from net income in calculating FFO. Such gains increased during the six months ended June 30, 2018 as compared to a year ago, somewhat offsetting FFO growth as compared to net income growth during that period.
AFFO increased $5.9 million, or 24.5%, to $29.9 million for the three months ended June 30, 2018, compared to $24.0 million for the three months ended June 30, 2017. AFFO per diluted share increased $0.06 during the same period, to $1.39 per diluted share. For the six months ended June 30, 2018, AFFO increased $12.1 million, or 25.1%, to $60.2 million, compared to $48.1 million for the six months ended June 30, 2017. AFFO per diluted share increased $0.10 during the same period, to $2.85 per diluted share. As compared to the increase in FFO, the lower year-over-year growth in AFFO was mainly due to decreased addback adjustments for cost of debt extinguishment, which reflected our closing on a new credit facility in 2017, and by increased deductions for straight-line rent adjustments, which reflect the growth in our real estate investment portfolio. These factors were somewhat offset by a decrease in the deduction related to gains on interest rate swaps.
As of June 30, 2018, we owned a diversified portfolio of 558 individual net leased commercial properties located in 42 states comprising approximately 17.4 million rentable square feet of operational space. As of June 30, 2018, our properties were 100% subject to a lease and 99.4% occupied, by 141 different commercial tenants, with no single tenant accounting for more than 4% of our annual rental stream. Our properties include those used for retail, industrial, healthcare, office, and other purposes.
During the three months ended June 30, 2018, we acquired 14 properties via eight transactions for $154.3 million, excluding capitalized acquisition expenses, at a weighted average initial cash capitalization rate of 6.9%. The properties acquired had a weighted average lease term of 14.3 years at the time of acquisition and weighted average annual rent increases of 1.8%. During the six months ended June 30, 2018, we acquired 41 properties via ten transactions for $254.8 million, excluding capitalized acquisition expenses, at a weighted average initial cash capitalization rate of 6.7%. The properties acquired had a weighted average lease term of 15.6 years at the time of acquisition and weighted average annual rent increases of 1.9%. During the six months ended June 30, 2018, we disposed of 11 properties for a gain of $7.6 million over carrying value, including six properties disposed during the three months ended June 30, 2018, at a gain of $4.3 million. Our management team plans to continue to be strategic in its disposition activities, to balance the overall quality of our portfolio and capture value for stockholders, as some assets are sold for premiums. To the extent possible, we will deploy proceeds from the sale of real estate in order to make accretive investments, preferably on a tax-deferred basis pursuant to 1031 exchanges.
Based on current market conditions, anticipated equity and debt capital raises, and available capacity under our credit facilities, we continue to target a similar volume of acquisitions in 2018 as in 2017.
During the three months ended June 30, 2018, we raised $72.5 million in new capital investments from stockholders, of which approximately $44.2 million was received in cash, $12.5 million was raised via our Distribution Reinvestment Plan (“DRIP”), and $15.8 million was raised through UPREIT transactions. Approximately 46.6% of our investors participate in the DRIP, calculated based on the number of shares of our common stock and membership units in the Operating Company outstanding as of June 30, 2018.
In addition to continued equity raises, during the three months ended June 30, 2018, we drew the remaining $90.0 million that was available under the seven-year term loan feature of our $880.0 million credit facility, using a portion of the proceeds to partially repay outstanding revolver borrowings. At quarter end, our total outstanding debt principal totaled $1.3 billion, providing a leverage ratio of approximately 41.4% of the approximate market value of our assets.
Subsequent to quarter end, as disclosed in our July 6, 2018, press release, we entered into a Note and Guaranty Agreement (the “NGA”) by and among us, as parent guarantor, the Operating Company, as issuer, and the purchasers party thereto (the “Purchasers”). Pursuant to the terms of the NGA, the Operating Company will issue and sell to the Purchasers $325.0 million aggregate principal amount of unsecured, fixed-rate, interest-only senior notes in two series: (i) $225.0 million aggregate principal amount of 5.09% Series B Guaranteed Senior Notes due July 2, 2028 (the “Series B Notes”), and (ii) $100.0 million aggregate principal amount of 5.19% Series C Guaranteed Senior Notes due July 2, 2030 (the “Series C Notes,” and together with the Series B Notes, the “2018 Senior Notes”). On July 2, 2018, $100.0 million of Series B Notes and $50.0 million of Series C Notes were issued, with the remainder of the 2018 Senior Notes to be issued on September 13, 2018, pursuant to the offering’s delayed draw feature. We intend to use the net proceeds from the offering of the 2018 Senior Notes for general corporate purposes, which may include refinancing existing debt and funding potential acquisitions.
To help balance the timing of equity capital inflows and deployment of those funds in the form of real estate investments, as well as to keep our leverage ratio within our targeted leverage range while remaining well within our investment grade profile, during the fourth quarter of 2017, we implemented a cap and queue program for new and additional investments in shares of our common stock. The use and amount of the cap is based upon, and may be adjusted for, a number of factors, including, among others, our current and targeted leverage profile, our acquisition pipeline and anticipated future capital deployment, and overall market conditions. The monthly cap only applies to new or additional investments, and not to investments made pursuant to our DRIP or equity capital received in connection with UPREIT transactions. For the months of May 2018 and June 2018, new and additional investments were limited to $15.0 million per month. On July 18, 2018, we announced that we were increasing the cap to $20.0 million for the month of July 2018. This cap will remain in place for the months of August 2018, September 2018, and October 2018.
At its August 9, 2018, meeting, the IDC voted to increase the DSV to $85 per share for the period from August 1, 2018, through October 31, 2018. At $85 per share, the implied capitalization rate for our portfolio is 6.75%. The DSV is established in good faith by the IDC based on the net asset value of our portfolio, input from management and third-party consultants, and such other factors as the IDC may determine. Additional information regarding our valuation policy and procedures, and the determination of the DSV by the IDC, is available in our 2017 Form 10-K filed with the SEC on March 15, 2018.
At its August 9, 2018, meeting, our Board of Directors declared monthly distributions of $0.43 per share of our common stock and unit of membership interest in the Operating Company to be paid by us to our stockholders and members of the Operating Company (other than us) of record as follows:
Investors may purchase additional shares of our common stock via cash investment (and the completion of a supplemental subscription agreement), or by electing to reinvest their distributions through the DRIP. The purchase price for shares of our common stock acquired through the DRIP will be 98% of the DSV.
On August 9, 2018, the Company’s sponsor, Broadstone Real Estate, LLC (the “Manager”), announced certain organizational changes in connection with centralizing its real estate investing and operating activities. The Manager provides the Company, directly and through the Manager’s asset management subsidiary, certain property and asset management services. On August 9, 2018, the Company’s Board of Directors announced the following title changes for certain of the Company’s officers:
In conjunction with the release of our operating results, we will host a conference call on Friday, August 10, 2018, at 12:00 p.m. EDT to discuss the results.
To access the live webcast, please visit: . If you prefer to listen via phone, please dial: 1-888-317-6016 and request to join the Broadstone Net Lease, Inc. call.
To view a replay of the call, please visit: through August 24, 2018.
Our current investor presentation and supplemental materials for our second quarter 2018 financial and operating results are available at . This site also offers the capability to sign up for automated email alerts when BNL issues public filings of any kind.
BNL invests in freestanding, single-tenant, net leased commercial properties located throughout the United States, primarily via sale and leaseback, lease assumption, and UPREIT transactions. UPREIT transactions (where “UPREIT” means “umbrella partnership real estate investment trust”) provide a tax deferred exit strategy for owners of real estate who might otherwise recognize a significant taxable gain in a cash sale of a highly appreciated property with a low tax cost basis. With a diversified portfolio of 558 retail, healthcare, industrial, office and other properties in 42 states as of June 30, 2018, the REIT targets individual or portfolio acquisitions within the $5 million to $300 million range.
There are currently more than 2,800 shareholders in BNL, which is externally managed by Broadstone Real Estate, LLC. BNL remains open for new investment by accredited investors on a monthly basis, with a minimum direct investment of $500,000. Shares are offered directly by BNL via private placement. For additional information about BNL, please visit its corporate website at .
Broadstone Net Lease, Inc. and SubsidiariesCondensed Consolidated Balance Sheets(Unaudited)(in thousands, except per share amounts)
Broadstone Net Lease, Inc. and SubsidiariesCondensed Consolidated Statements of Income and Comprehensive Income (Unaudited)(in thousands, except per share amounts)
The following is a reconciliation of net income to FFO and AFFO for the three and six months ended June 30, 2018 and 2017. Also presented is the weighted average number of shares of our common stock and noncontrolling membership units in the Operating Company used for the basic and diluted per share computation:
Globe Newswire: 15:39 GMT Friday 10th August 2018
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