BROADSTONE NET LEASE, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q) - Marketscreener.com

Cautionary Note Regarding Forward-Looking Statements
Regulation FD Disclosures
Explanatory Note and Certain Defined Terms
Unless the context otherwise requires, the following terms and phrases are used throughout this MD&A as described below:
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“Revolving Credit Facility” means our $1.0 billion unsecured revolving credit facility, dated January 28, 2022, with J.P. Morgan Chase Bank, N.A. and the other lenders party thereto.
Overview
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Tenant and Industry Diversification: Our properties are occupied by approximately 213 different commercial tenants who operate 203 different brands that are diversified across 57 differing industries, with no single tenant accounting for more than 2.0% of our ABR.
Real Estate Portfolio Information
Diversification by Property Type
AHF Products* Distribution & Warehouse/
Big Tex Trailers* Automotive/Distribution &
Diversification by Industry
Diversification by Geographic Location
Our Leases
The following table presents certain information based on lease expirations by year. Amounts are in thousands, except for number of properties.
The escalation provisions of our leases (by percentage of ABR) as of June 30, 2022, are displayed in the following chart:
Results of Operations
The following discussion includes the results of our operations for the periods presented.
The increase in depreciation and amortization for the three months ended June 30, 2022 was primarily due to growth in our real estate portfolio.
Provision for impairment of investment in rental properties
During the three months ended June 30, 2022 we recognized $1.4 million of impairment on our investments in rental properties due to change in our long-term hold strategy for a single property, compared to no impairment recognized during the three months ended March 31, 2022. The following table presents the impairment charges for the respective periods:
Ended
2022
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The timing and amount of impairment fluctuates from period to period depending on the specific facts and circumstances.
Gain on sale of real estate
Other income (expenses)
Net income and Net earnings per diluted share
Months Ended
Increase/(Decrease)
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
The increase in depreciation and amortization for the six months ended June 30, 2022 was primarily due to growth in our real estate portfolio.
General and administrative
The decrease in general and administrative expenses mainly reflects decreased severance expense. During the six months ended June 30, 2021, we recognized severance associated with the departure of a named executive officer.
Provision for impairment of investment in rental properties
During the six months ended June 30, 2022, we recognized $1.4 million of impairment on our investments in rental properties, compared to $2.0 million during the six months ended June 30, 2021. The following table presents the impairment charges for the respective periods:
The timing and amount of impairment fluctuates from period to period depending on the specific facts and circumstances.
Gain on sale of real estate
Change in fair value of earnout liability
Other income
Net income and Net earnings per diluted share
Ended
Increase/(Decrease)
%
0.06 20.0 %
Liquidity and Capital Resources
General
Liquidity/REIT Requirements
Short-term Liquidity Requirements
Long-term Liquidity Requirements
Equity Capital Resources
9,509
Our public offerings have been used to repay debt, fund acquisitions, and for other general corporate purposes.
As we continue to invest in accretive real estate properties, we expect to balance our debt and equity capitalization, while maintaining a Net Debt to Annualized Adjusted EBITDAre ratio below 6.0x on a sustained basis, through the anticipated use of follow-on equity offerings and the ATM Program.
Unsecured Indebtedness and Capital Markets Activities as of and for the Six Months Ended June 30, 2022
The following table sets forth our outstanding Revolving Credit Facility, Unsecured Term Loans and Senior Unsecured Notes at June 30, 2022.
On January 28, 2022, we amended and restated the Revolving Credit Facility, upsizing the capacity to $1.0 billion, extending the maturity date to March 2026 and reducing the applicable margin to 0.85% per annum.
On February 25, 2022, we repaid the $60.0 million 2022 Unsecured Term Loan with borrowings under our Revolving Credit Facility.
Debt Covenants
Total Unsecured Indebtedness to Total Unencumbered Eligible Property Value
1.00
case
1.00
The following table provides information with respect to our contractual commitments and obligations as of June 30, 2022 (in thousands). Refer to the discussion in the Liquidity and Capital Resources section above for further discussion over our short and long-term obligations.
At June 30, 2022 investment in rental property of $159.5 million was pledged as collateral against our mortgages.
Derivative Instruments and Hedging Activities
Cash Flows
119,977
FFO, Core FFO, and AFFO may not be comparable to similarly titled measures employed by other REITs, and comparisons of our FFO, Core FFO and AFFO with the same or similar measures disclosed by other REITs may not be meaningful.
The following table reconciles net income (which is the most comparable GAAP measure) to FFO, Core FFO, and AFFO:
For the Six Months Ended
liability
losses
EBITDA, EBITDAre, Adjusted EBITDAre and Annualized Adjusted EBITDAre
2,761
5,604
Net Debt, Net Debt to Annualized EBITDAre and Net Debt to Annualized Adjusted EBITDAre
5.3x
4.8x
Critical Accounting Policies and Estimates
Impact of Recent Accounting Pronouncements
For information on the impact of recent accounting pronouncements on our business, see Note 2 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
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