Reit Magazine - March/April 2021 - 60

Broadstone Net Lease, Inc.

raised more than $588 million,
which it designated for future
acquisitions and to pay down
unsecured debt and its revolving credit facility. In keeping
with its pace of acquisitions
over the past five years, this
could translate to roughly $500
million in acquisitions in 2021
for the firm.
" Given our size, that is
meaningful external growth, "
he notes. As a public company
" we're large enough where we
matter and people want to hold
our stock, but not so large that
we need to do $3 billion to $5
billion worth of acquisitions a
year to deliver superior results, "
Czarnecki adds.
The company remains bullish
on industrial and health care
properties. Within the health
care space, Czarnecki says
Broadstone will continue to
focus on facilities leased to
hospital-affiliated providers,
but located off main campuses,
typically in suburban settings.
In addition, Broadstone will
continue to invest in facilities
leased to dominant regional
physicians' groups specializing
in such areas as eye health and
orthopedics.
To a lesser degree, Broadstone
is looking to acquire buildings
occupied by fast-food and
quick-service restaurant chains
and internet-resistant retailers,
such as Tractor Supply Co. and
dollar stores. Tractor Supply Co.
is among the company's top-20
tenants, as measured by contribution to annualized base rent.
Broadstone is taking
something of a wait-and-see
approach to certain other
sectors that remain in the cross
hairs of the pandemic, such as
casual dining and office. " We
have some exposure [to casual
dining], but with the pandemic, many operators are still
finding their footing in terms
of business models, " Czarnecki
explains. " Office is a small

60 |

reit

Tractor Supply Co. is among Broadstone's top-20 tenants.

part of our portfolio, at just 17
properties. We feel good about
the term and credit of our office
exposure, but we want to make
sure we understand the broader
landscape as the work-fromhome trend plays out, " he says.

NAVIGATING A
CROWDED FIELD
Broadstone certainly isn't the
only investor that's bullish
on industrial and health care
net lease assets. BMO Capital
analyst John Kim says there's
plenty of competition for such
properties, but he's confident
that Broadstone will be able to
execute its near-term growth
plan. BMO Capital estimates
that Broadstone will grow its
annual earnings by about 8% in
2021 and 2022, mostly through
acquisitions.  
" Given its track record,
current size, the interest rate
environment and coming
out [of its IPO] with a strong
balance sheet, Broadstone has
a lot of opportunity to grow
earnings, mostly through acquisitions, " Kim says.
Broadstone, he adds, also has
a relatively high level of internal

growth because of its asset
mix. As of December 2020, the
weighted average annual rent
escalation for its portfolio was
2.1%, which, according to Kim,
is relatively high for a net lease
REIT. 
With its IPO in the rear-view
mirror, Broadstone has wasted
no time when it comes to
deploying capital. In the fourth
quarter of 2020, it acquired
more than $100 million of
assets, including industrial,
quick-service restaurant, health
care, and select retail properties.
" For us, it's about continuing
to maintain our discipline and
continuing to pick spots where
it makes sense [to invest], "
says Czarnecki, noting that
deal-making activity in the
fourth quarter illustrates that
Broadstone can continue to
compete for industrial and
health care assets.

RELATIONSHIPS
MATTER
What does Czarnecki see as
his biggest challenge as CEO?
Ensuring that the firm's more
than 70 employees stay engaged
and focused after many months

of working remotely, he says.
Fortunately, Czarnecki says,
many of them have worked
together for years, which has
helped mitigate some of the
challenges tied to remote
work. The company's average
employee tenure is about four
years. For senior employees,
average tenure is just over five
years.
" The longevity of working
together has helped us a lot, "
Czarnecki says. " But we want to
continue to support our people
because that's a huge part of
our business, driving results
through their efforts. "
Also high on Czarnecki's
list of priorities is cultivating stronger ties to investors
who are relatively new to
Broadstone. The company, he
says, has forged strong ties with
many of its pre-IPO investors,
but has more work to do when
it comes to reaching out to
newcomers.
" Connectivity and building
relationships with shareholders
are critical and will be super
important once we're able to
make the rounds [in person]
again, " Czarnecki says.



Reit Magazine - March/April 2021

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Reit Magazine - March/April 2021 - Contents
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