Broadstone Net Lease Q3 Earnings Call Highlights

Key Points

• Third-quarter AFFO rose 5.4% year over year to $77.8 million, or $0.39 per diluted share. Broadstone reaffirmed its 2026 AFFO guidance of $1.55–$1.57 per share and raised its quarterly dividend 1% to $0.295 per share.
• Broadstone invested $236.6 million during the quarter and expanded its 2026 investment guidance to $700–$800 million. Its $456 million build-to-suit pipeline is expected to generate approximately $36 million in annualized base rent through the end of 2027.
• Balance-sheet flexibility improved: pro forma net leverage declined to 5.4 times, while the company had more than $1 billion of liquidity, including expected proceeds from equity offerings. Project Triboro remains a priority, with management targeting a year-end decision on whether to monetize, develop a data-center campus, or pursue industrial construction.

Broadstone Net Lease NYSE: BNL reported third-quarter adjusted funds from operations of $77.8 million, or $0.39 per diluted share, up 5.4% from the same period of 2025, as same-store rent growth, recent investments and newly stabilized build-to-suit projects supported results.

Chief Executive Officer John Moragne said the company continued to execute its strategy amid a more volatile capital-markets environment, emphasizing disciplined investment selection, balance-sheet management and its build-to-suit development platform. Broadstone reaffirmed its 2026 AFFO guidance of $1.55 to $1.57 per diluted share.

Investment activity and development pipeline

During the third quarter, Broadstone invested $236.6 million, including $63.8 million for a single industrial acquisition, $137.1 million in build-to-suit developments, $35.1 million of transitional capital and $0.6 million in redevelopments.

The industrial acquisition was a roughly 544,000-square-foot property purchased at a 7.7% initial cash capitalization rate. The asset has a 15-year lease, 2% annual rent increases and an 8.8% straight-line yield, according to the company.

Broadstone began three new build-to-suit projects totaling $325.8 million of estimated project costs during the quarter. The projects carry a weighted-average initial cash capitalization rate of 8.4% and a weighted-average straight-line yield of 11.3%. The developments include a Colorado project as well as retail properties in Manor, Texas, for Hobby Lobby and Academy Sports.

The company also stabilized six build-to-suit projects, representing $95.3 million of estimated total investment and a weighted-average cash capitalization rate of 7.3%. Subsequent to quarter-end, Broadstone’s $115 million Southwire facility in Bremen, Georgia, reached stabilization with a first-year cash capitalization rate of 7.8%.

Broadstone’s in-process build-to-suit pipeline stood at about $456 million across seven projects, approximately 83% of which are industrial. About $150 million had been invested as of the call, leaving roughly $306 million of expected remaining investment. The pipeline has a weighted-average estimated cash yield of 8%, a 10.4% straight-line yield, a 14.8-year weighted-average lease term and 2.7% annual rent escalations.

Management expects projects in the pipeline to add approximately $36 million in annualized base rent from the fourth quarter through the end of 2027. About $2 million is expected in the fourth quarter, roughly $31 million during the first half of 2027 and the remainder during the second half of 2027. Moragne said this represents more than 8% growth relative to the company’s current annualized base rent of $449.5 million.

Portfolio performance and redevelopment

The company ended the quarter approximately 100% occupied on a square-footage basis, with all but one of its 767 properties subject to a lease. Broadstone had collected 99.9% of base rent due for the quarter as of the earnings release date.

Third-quarter same-store rental revenue rose 0.7% year over year. Contractual rent increases contributed 1.9% of same-store growth, including 2.1% for industrial properties. President and Chief Operating Officer Ryan Albano said the reported same-store figure was reduced by about $1.2 million of prior-year rent from two industrial properties that have entered redevelopment. Excluding those properties, same-store growth would have been approximately 1.9%.

Broadstone reported a 111% recapture rate on 2026 and 2027 lease renewals completed so far. Moragne cautioned that the company’s historical low- to mid-100% range may be a more reasonable expectation for future recapture rates.

In redevelopment, Broadstone is converting a functionally obsolete Chicago-area office property into roughly 156,000 square feet of industrial space. The project is expected to require $17.9 million of total investment, with $3.7 million invested to date. Management expects stabilized annualized base rent of about $2.7 million, compared with original annualized base rent of approximately $1.4 million, with substantial completion targeted in the second quarter of 2027.

A second redevelopment project in Hoffman Estates, Illinois, is expected to require about $28.4 million, including the property’s remaining basis. Stabilization is anticipated in the third quarter of 2028, with expected annualized base rent of approximately $3.3 million.

Capital, dispositions and guidance

Broadstone completed its first public equity offering in four years during the quarter, selling 12.65 million shares at $20.50 each through forward sale agreements for estimated gross proceeds of about $259 million. Together with forward sales under its at-the-market program, the company had approximately $409 million in expected net proceeds from unsettled forward equity agreements as of Sept. 30.

Chief Financial Officer Kevin Fennell said Broadstone ended the quarter with $2.9 billion of total debt and pro forma net leverage of 5.4 times, down from 5.9 times in the prior quarter. The company had drawn $100 million on a new $300 million delayed-draw term loan and had $428.8 million available under its revolving credit facility, resulting in more than $1 billion of in-place liquidity.

The company raised its 2026 investment guidance to $700 million to $800 million from $600 million to $800 million. It also increased projected dispositions to $150 million to $200 million from $100 million to $150 million. Broadstone sold three properties in the quarter for $12.5 million at a 6.6% capitalization rate, bringing year-to-date dispositions to 13 properties for $86.7 million at a weighted-average 6.3% capitalization rate on tenanted properties.

Broadstone reduced its bad-debt assumption to 25 basis points and maintained core general and administrative expense guidance of $30 million to $31 million. Its board also raised the quarterly dividend by 1% to $0.295 per share, payable on or before Jan. 15, 2027, to shareholders of record as of Dec. 31, 2026.

Project Triboro remains a priority

Management said Project Triboro, a more than 550-acre site in northeastern Pennsylvania with a committed one-gigawatt power supply, remains a priority. Broadstone had approximately $154 million invested in the project as of Sept. 30.

The company is evaluating three potential paths: monetizing the land, developing a hyperscale data-center campus, or constructing four large industrial buildings. Albano said the first of four building pads is nearly ready for vertical construction and initial power delivery remains anticipated in the first half of 2028.

Moragne said zoning is the primary near-term consideration, followed by power agreements and tenant commitments. Broadstone expects clarity on zoning, power and tenant demand this year and continues to target a decision on the project’s direction by year-end. If Triboro advances as a data-center project, Moragne said Broadstone would likely either sell the project or pursue a private-capital financing solution rather than rely on public equity markets to fund a multibillion-dollar development.

About Broadstone Net Lease (NYSE:BNL)

Broadstone Net Lease, Inc NYSE: BNL is a real estate investment trust (REIT) that owns and manages a diversified portfolio of primarily single-tenant commercial properties. The company generally leases its properties under long-term, triple-net agreements, under which tenants are typically responsible for property taxes, insurance and maintenance expenses.

Broadstone's portfolio includes properties used by healthcare providers, industrial and manufacturing companies, office-based businesses, restaurants and retail operators.

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