Broadstone Net Lease raises 2025 AFFO per share guidance to $1.49-$1.50 amid robust build-to-suit momentum

Earnings Call Insights: Broadstone Net Lease (BNL) Q3 2025

MANAGEMENT VIEW

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CEO John Moragne reported a "strong quarter of results that reflects the continued success of our differentiated growth strategy as well as the deep expertise and strategic acumen of our team." He highlighted investments of $204 million in acquisitions and development projects, full rent collection, and resolution of the At Home and Claire’s tenant situations, with no bad debt incurred. Moragne announced a sequential quarterly contractual rental obligation growth of 1.2% and a 5.7% increase in quarterly AFFO per share compared to Q3 2024. He stated, "we are raising our full year 2025 guidance to $1.49 to $1.50 of AFFO per share, representing 4.2% to 4.9% growth for the year."

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Moragne discussed $552.6 million year-to-date investments, including $353.4 million in new acquisitions, $150.2 million in build-to-suit developments, $40.7 million in transitional capital, and $8.3 million in revenue-generating capex. The weighted average initial cash capitalization rate for new property acquisitions was 7.1%, with a straight-line yield of 8.2%. He noted, "the estimated returns in our build-to-suit pipeline are even better, standing at 7.5% on an initial cash capitalization rate basis and 8.9% on a straight-line basis."

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The company completed a $350 million public offering of 5% senior unsecured notes due in 2032, which was nearly 7x oversubscribed. Moragne said, "we have delivered total shareholder return of more than 30% since the beginning of 2023" and "year-to-date, we've delivered total shareholder return of nearly 20%."

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President and COO Ryan Albano described a build-to-suit pipeline expected to deliver approximately $28 million of additional ABR between Q4 2025 and the end of 2026, representing 6.7% growth in current ABR. Eight in-process developments comprise $370.9 million, with average initial yield of 7.5% and straight-line yield of 8.9%, and weighted average lease term of 13.1 years.

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CFO Kevin Fennell stated, "During the quarter, we generated adjusted funds from operations of $74.3 million or $0.37 per share, in line with the prior quarter and a 5.7% increase over Q3 of last year." He noted core G&A totaled $7.4 million for the quarter and $21.7 million year-to-date. Fennell added, "we ended the quarter with pro forma leverage of 5.4x net debt, approximately $38 million of unsettled equity and over $900 million available on our revolver."

OUTLOOK

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The company raised 2025 per share guidance to a range of $1.49 to $1.50, reflecting expected investment volume between $650 million and $750 million, and disposition volume between $75 million and $100 million. Disposition expectations include identified transactions already occurred or expected by year-end. Management expects "little to no bad debt to close out the year."

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Moragne indicated confidence in the industrial-focused strategy and build-to-suit program, citing e-commerce and reshoring as long-term growth drivers, with opportunities geographically centered on logistics hubs.

FINANCIAL RESULTS

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Broadstone reported adjusted funds from operations of $74.3 million or $0.37 per share for the quarter. Core G&A totaled $7.4 million for the quarter and $21.7 million year-to-date. The company reported 99.5% leased at quarter end and 100% rent collection for all properties under lease, a 90-basis point increase compared to Q3 2024. The weighted average initial cash cap rate for new acquisitions was 7.1%, with straight-line yield of 8.2%. Subsequent to quarter end, an additional $103.2 million in acquisitions closed, with $67 million under control for Q4.

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The $350 million 5% senior unsecured notes issuance was used to pay down the revolver balance, maintaining ample liquidity.

Q&A

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John Kim, BMO Capital Markets, asked about the preference between capital recycling and holding build-to-suit assets. CEO Moragne responded, "It's certainly not preferred. I'd like to joke that these are our babies. We're growing them up. We'd love to hold on to them for the long term...Our plan is to make sure that we can control our destiny. And if we need to sell off some of these assets and capture the upside, not only is that going to be a great source of capital...it also helps prove out the concept."

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Upal Rana, KeyBanc, inquired about criteria for issuing equity. Moragne answered, "That's a little bit of both, but we lean more towards the opportunity set and looking at what the incremental cost of capital is relative to the investment pipeline."

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Anthony Paolone, JPMorgan, questioned lease expirations through 2027. Moragne stated, "Nothing material. The executions that we've had so far this year have been really good. We've been at like 108% from leases that we have executed...and are having advanced discussions with those folks for '26 and even some for '27."

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Caitlin Burrows, Goldman Sachs, asked about transitional capital investments and funding strategies. Management described the retail investment as "less than $1 million" and the industrial project as intended for a future build-to-suit, with "lots of upside" and ongoing tenant interest.

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Ronald Kamdem, Morgan Stanley, queried about acquisition volume and cap rates. Management noted product supply remains muted, competition is fierce, and cap rates have "plateaued a little bit." Construction costs have increased, mainly affecting hard costs, but have not impacted the economics of their projects.

SENTIMENT ANALYSIS

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Analysts pressed on capital recycling, funding strategy, lease rollover, competition, and tenant credit, indicating a slightly positive to neutral tone, with questions focused on execution consistency, upside realization, and risk management.

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Management maintained a confident and disciplined tone in both prepared remarks and Q&A, emphasizing strong execution, flexibility, and growth visibility. Phrases such as "we feel good about where we are headed" and "we believe there's still a lot of share price valuation upside" indicated high confidence.

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Compared to the previous quarter, management’s tone remains confident, while analysts’ tone shifted slightly more positive due to improved execution on tenant credit and guidance raise.

QUARTER-OVER-QUARTER COMPARISON

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Guidance for AFFO per share was raised from a midpoint of $1.49 in Q2 to a range of $1.49-$1.50 in Q3, with investment volume guidance increased at the midpoint by $100 million.

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Tenant credit concerns have been resolved for At Home and Claire’s, with no bad debt incurred in Q3, compared to ongoing uncertainty in Q2.

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Lease collection and occupancy improved, with rent collection reaching 100% and occupancy at 99.5% versus 99.1% in the prior quarter.

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The tone shifted from addressing lingering concerns in Q2 to highlighting proven execution and value creation in Q3.

RISKS AND CONCERNS

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Competitive acquisition environment and muted product supply could impact deal flow and pricing.

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Construction and labor costs have increased, though management reported no material impact on project economics.

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Management closely monitors the home furnishing sector, casual dining, and tenants with near-term debt maturities, but no material individual tenant risks were cited for 2026.

FINAL TAKEAWAY

Broadstone Net Lease’s third quarter results demonstrated continued execution on its differentiated build-to-suit strategy, robust acquisition activity, and effective tenant risk management, leading to a raised full-year AFFO guidance and strong balance sheet flexibility. Management emphasized confidence in delivering sustained growth and shareholder value, supported by a well-leased portfolio, full rent collection, and a pipeline aligned with long-term industrial and logistics tailwinds.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/bnl/earnings/transcripts]

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