Overview Presentation

Transcription

Overview Presentation
1
© 2015 Broadstone Net Lease, INC. All rights reserved. Updated 2/2015.
Introduction
Introduction
‒‒ Broadstone Net Lease (BNL) is a private Real Estate Investment Trust (REIT) focused on delivering a
dependable dividend yield and attractive total return to investors
‒‒ BNL acquires and holds freestanding, single tenant, net-leased properties
‒‒ Shares are offered via private placement and cannot be purchased on any exchange or from brokers
‒‒ Externally managed by Broadstone Real Estate, LLC, a certified Women’s Business Enterprise (WBE)
‒‒ Founders are the Leenhouts/Tait Families—previously founded Home Properties, Inc. (Public REIT, NYSE: HME)*
‒‒ Admitted first outside shareholders on 12/31/07; currently have more than 930 accredited shareholders, who
have invested nearly $470 million
‒‒ Management team and Board of Directors hold more than $24 million worth of shares, all invested on the
same terms as other investors
‒‒ 6.75% annual dividend (distribution) yield for new investors—paid out of current Funds From Operations;
distribution per share has increased 39% (seven increases), from an annualized amount of $3.50 to $4.86
‒‒ Share price (DSV) has increased 44% (thirteen increases), from $50 to current price of $72
Note: Please see important disclosures on the DSV (Determined Share Value) and distribution yield in the supplemental section of this document. Determination of Management/
Director ownership is based on total shares held multiplied by current DSV of $72. All data as of February 1, 2015.
*There is no current affiliation with Home Properties, Inc.
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Introduction
What is a Triple Net-Leased Property?
‒‒ Tenant pays rent & is responsible for taxes, insurance,
structural repairs, and general maintenance
‒‒ Typically single-tenant, freestanding buildings
‒‒ Can be structured for a variety of industries (retail, specialty
office, medical, industrial, warehouse)
‒‒ The building and/or the location is usually integral to the
business operations
‒‒ Leases tend to be for very long terms – typically 10 to 20
years, plus extension options
‒‒ A sale leaseback of real estate allows business owners to
monetize investments, access capital, and de-lever the
enterprise
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Introduction
Why Triple Net Leased Properties Are Compelling Investments
‒‒ High return relative to risk*
‒‒ Predictable returns due to tenant responsibilities
‒‒ Growth in cash flow and valuation due to contractual rent
increases and long-term leases
‒‒ Access to attractive debt financing due to predictable cash flows
‒‒ Real assets can be a hedge against inflation
‒‒ Still a very fragmented industry and inefficient market
‒‒ Opportunity to add value at time of acquisition through proper
negotiation and underwriting
*BNL’s tenants do not typically have rated debt but must meet BNL’s underwriting and credit criteria.
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Investment Strategy
Our Investment Strategy and Criteria
WHAT WE DO
‒‒ Build a diversified portfolio of free-standing, single-tenant, net leased commercial properties with long-term
leases and annual rent increases
‒‒ Manage and control cost of capital while delivering superior shareholder service
HOW WE DO IT
‒‒ Study and monitor industries, underwrite numerous deals, stress real estate fundamentals
‒‒ Seek developed properties with credit-worthy tenants demonstrating significant rent coverage
‒‒ Diversify by industry, geography, & tenant, targeting recession-resistant businesses and mission-critical facilities
‒‒ Seek to acquire individual properties and portfolios in the $5-$100M range
‒‒ Focus geographically in areas with less individual or institutional buying competition
‒‒ Negotiate long-term leases augmented with personal guarantees or other credit enhancements when necessary
‒‒ Offer predictable outcomes and fast closing without financing contingencies
‒‒ Finance acquisitions with equity capital from shareholders & unsecured debt capital from bank groups
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Results
Achieving Income for Shareholders: Per Share Results
$2.00
$5.36
$4.20
$4.00
$4.24
$3.78
$4.05
$3.61
$3.50
$2.63
$2.93
$3.00
$3.50
$3.37
$4.00
$5.02
AGR
C
%
9.8
$5.00
$5.13
$6.00
$1.00
$0
2008
2009
2010
2011
Annual Distribution Per Share
2012
O-AFFO Per Share
2013
2014
Additional 2 months
of distributions were
paid in 2014
Note: Please see important performance disclosures related to the chart above in the Supplemental Information Section of this presentation. Included in this sections are definitions of
FFO, AFFO, O-AFFO and CAGR (compounded annual growth rate). FFO, AFFO and O-AFFO are non GAAP financial metrics. The definitions in the Supplemental Information Section
provide a road map from GAAP net income to the calculation of these metrics.
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Results
Total Return for Shareholders
AVERAGE ANNUAL TOTAL RETURNS (as of February 1, 2015)
Total Return %
YTD
1-YEAR
3-YEAR
5-YEAR
INCEPTION (1/1/2008)
1.98%
18.89%
16.50%
15.33%
12.73%
CALENDAR YEAR TOTAL RETURNS (as of February 1, 2015)
Annual Return %
2008
2009
2010
2011
2012
2013
2014
5.31%
7.12%
11.64%
15.60%
13.08%
17.89%
18.38%
For 2008 and 2009, BNL’s share price (Determined Share Value – DSV) was fixed at $50 per share under its initial
private placement memorandum. BNL’s Independent Directors did not actively review the DSV until 2010.
Note: Performance data represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance data presented.
BNL is not required by law to follow any standard methodology when calculating and representing performance data. The Average Annual Total Return Chart is prepared on a rolling
12-month basis and assumes dividend reinvestment. For example, the total return figure for the one-year period (top chart) covers the period from February 1, 2014 to February 1, 2015.
The performance of BNL may not be directly comparable to the performance of other private or registered REITs. Please see the Supplemental Information Section of the presentation
for important definitions and calculation methodologies. All performance data above is presented net of fees.
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Results
Growth of $250K Since Inception
$605,000
$585,743
$575,000
$536,753
$545,000
$515,000
$485,000
$455,000
$425,000
$395,000
$360,000
$365,000
$335,000
$305,000
$275,000
$245,000
2008
2009
Value of BNL Shares (DSV)
2010
2011
Cumulative total of non-DRIP dividends
2012
2013
2014
2015
Account value of utilizing BNL "DRIP" program
Total Value of BNL Shares assumes $250,000 investment at Broadstone Net Lease inception at a $50 DSV and reinvestment of dividends at 98% of determined share value after
December 31, 2009. Performance data represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance
data presented. BNL is not required by law to follow any standard methodology when calculating and representing performance data. The performance of BNL may not be directly
comparable to the performance of other private or registered REITs. All data as of February 1, 2015.
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Results
A Track Record of Consistent Growth
$1.1B
Share Price: $71
$1B
*2/1/15
Share price $72
$900M
$800M
$700M
$600M
$500M
$400M
$300M
$200M
$100M
Share Price: $50
Q
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$0
Total Equity
Fixed Rate/Hedged Debt
Unsecured Floating Rate Debt
Note: Total equity is calculated by multiplying the total number of common shares and operating company units outstanding at each quarter end by BNL’s then current determined
share value (DSV). Please see important information on how BNL’s DSV is calculated in the Supplemental Information Section of this presentation.
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Investment Opportunity
Minimum Initial Investment (Direct):
$500K
Minimum Initial Investment (via Financial Advisor):
$250K
Next Investment Date:
Monthly closings
Determined Share Value (DSV):
$72 per share (held through April 30, 2015)
Current Yield on New Investments:
Approximately 6.75%
Additional Incremental Investments:
$10K minimum
Accredited Investors Only
Note: Please see important disclosures on the DSV, distribution yield and definition of “accredited investor” in the Supplemental Information Section of this document. We are not
offering, or soliciting, an investment through this presentation. Investments may only be made by accredited investors, through BNL’s private placement memorandum (PPM) and
subscription agreement. Please review BNL’s PPM for more information and certain risk factors.
10
Liquidity for Investors with Share Redemption Program
‒‒ Redemptions permitted on a quarterly basis
‒‒ Shares are repurchased by the REIT at 100% of Determined Share Value (DSV) if held for more than 5 years
or 95.0% of the DSV if held for less than 5 years
‒‒ DSV is set by independent directors with input from fund management
‒‒ Total quarterly fund redemptions limited to 1.0% of all outstanding common shares plus 50.0% of value of
reinvestment of distributions
‒‒ Shareholders can vote to liquidate the fund if 20.0% of shares are unredeemed after 12 months
‒‒ Since inception, there have been 13 redemptions for a total of $1,960,058
Note: Please see important disclosures on the DSV, distribution yield and definition of “accredited investor” in the Supplemental Information Section of this document. We are not
offering, or soliciting, an investment through this presentation. Investments may only be made by accredited investors, through BNL’s private placement memorandum (PPM) and
subscription agreement. Please review BNL’s PPM for more information and certain risk factors.
11
Fee Schedule
BNL Fee Schedule
Brokerage Commissions/Placement Fees:
None
Carried Interest:
None
Financing:
None
Commitment fees for uncalled capital:
None
Expenses relating to equity raising:
0.5% of equity raised (one-time fee)
Asset Management:
1.0% of aggregate equity value
Property Management:
3.0% of gross revenue
Property Acquisition/Sale:
1.0% OR 2.0% if transaction involves the negotiation of
a new lease
Termination Fee:
3x prior 12-month’s fees if management contract is
terminated
More detail can be found in BNL’s Private Placement Memorandum.
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Portfolio
The Current Portfolio
‒‒ Over $1B portfolio value (at current share price of $72)
‒‒ 232 properties in 32 states with 66 tenants, diversified by industry
‒‒ Average remaining lease term of approximately 14 years
‒‒ None expire prior to 2020
‒‒ Approximately 30% of lease revenue from leases expiring after 2030
‒‒ Conservative 50% leverage target
MEDICAL
RETAIL
INDUSTRIAL
All data as of February 1, 2015.
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Portfolio
Focus on Long-Term Leases
35%
30%
25%
20%
15%
NO LEASE
EXPIRATIONS
UNTIL 2020
10%
5%
0%
5
201
6
201
7
201
8
201
9
201
0
202
1
202
2
202
3
202
4
202
5
202
6
202
7
202
8
202
9
202
0+
203
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Portfolio
BNL Tenants and Brands
RETAIL
MEDICAL
Americas
Drive•In
INDUSTRIAL
SM
Note: The collection of logos above does not represent all of the tenants in BNL’s portfolio. In addition, the logos above may not represent BNL’s actual tenant, but a lease gurantor,
tenant franchise, or a D/B/A (doing business as). Please refer to BNL’s most current private placement memorandum (PPM) for a complete property schedule.
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Portfolio
Minimizing Risk Through Geographic and Sector Diversification
RETAIL
Restaurants (84)
Other Retail (20)
C-Stores (6)
INDUSTRIAL
Specialty Office (8)
Industrial (50)
MEDICAL
MOB (64)
TOTAL PROPERTIES: 232 TOTAL STATES: 32
Note: The points above represent approximate locations of BNL’s properties. Please refer to BNL’s most current private placement memorandum (PPM) for a complete property
schedule with addresses.
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Portfolio
Risk Reduction Through Industry Diversification
Medical
28.6%
Industrial
RENTAL
REVENUE
C-Stores
1.9%
39.9%
Retail
6.4%
Restaurant
16%
Office
7.2%
Note: The percentages above are calculated based upon BNL’s current monthly potential contractual rental revenue on a per property type basis divided by total potential contractual
rental revenue. Late payments, non payments or other unscheduled payments are not considered in the calculation.
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Portfolio
Diversified Rent Revenue Reduces Risk
RENTAL REVENUE BY TENANT/BRAND – LIMIT 10%
TENANT/BRAND
INDUSTRY
% OF REVENUE
# OF LOCATIONS
Wendy’s (2 Tenants)
Restaurant
6.2%
34
Siemens
Industrial
5.7%
2
Big Tex Trailers
Industrial/Retail
5.4%
15
Taco Bell (5 Tenants)
Restaurant
4.7%
30
My Dentist
Medical
4.5%
21
Rochester General Health System
Medical
3.6%
1
Shemin
Retail
3.5%
9
Hess Collection Winery
Industrial
3.0%
1
Shutterfly
Industrial
2.9%
1
Applebees (3 Tenants)
Restaurant
2.7%
8
TOTAL
42.2%
122
ALL OTHERS
57.8%
110
Note: The percentages above are calculated based upon BNL’s current monthly potential contractual rental revenue on a per property basis divided by total potential contractual rental
revenue. Late payments, non payments or other unscheduled payments are not considered in the calculation.
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Portfolio
A Stronger Portfolio Through Geographic Diversification
16%
14%
12%
10%
8%
6%
Investment Policy limits any state to 20% weighting,
any metropolitan area to 15% exposure
4%
2%
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Total Properties: 232 Total States: 32
Note: The percentages above are calculated based upon BNL’s current monthly potential contractual rental revenue on a per state basis divided by total potential contractual rental
revenue. Late payments, non payments or other unscheduled payments are not considered in the calculation.
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Case Studies
Shutterfly
JUNE 2014: Acquisition of 217,622 sq. ft., Newly Constructed Shutterfly Facility
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Location:
Shakopee, MN
Acquisition Price:
$28.6 million
Acquisition Cap Rate:
7.29%
Lease Terms:
New 10-year lease
Annual Rent Increases:
2.0%
Case Studies
Shemin Nurseries
FALL 2013: Portfolio Sale Leaseback with National Landscape Supply Company
Locations:
8 Sites in MD, VA, NC, PA, OH, CT
Acquisition Price:
$13.8 million
9.1%
Lease Terms:
16 years
2.5%
SPRING 2014: Sale Leaseback of Shemin HQ Site
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Location:
Greenwich, CT
Acquisition Price:
$17.8 million
7.0%
Lease Terms:
25-years
CPI Annually (2.0% - 4.0%)
Case Studies
Wendy’s
MARCH 2014: Acquisition of Portfolio of 16 Wendy’s Restaurants
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Locations:
NM, OK, TX, NE
Acquisition Price:
$27.7 million
7.25%
Lease Terms:
20 years
1.7%
Case Studies
Big Tex Trailers, Inc.
DECEMBER 2014: Acquisition of 15 Industrial Properties Across Three States
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Locations:
15 locations across TX, GA, OK
Acquisition Price:
$56.7 million
7.0%
Lease Terms:
15 years
CPI
Portfolio Analytics
Acquisition Cap Rates by Deal Size
10%
9%
8%
7%
10-year Treasury
plus 200 bps
6%
5%
4%
3%
014
015
014
013
013
012
012
011
011
010
010
009
009
008
008
007
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T2
T2
T2
T2
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M
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S
S
S
S
S
RETAIL
INDUSTRIAL
Restaurants
Other Retail
C-Stores
Specialty Office
MEDICAL
Industrial
MOB
Acquisition Pipeline
(Under Contract)
24
Capital Structure
Current Capitalization
Common Stock ($521.5M):
50.5%
Operating Company
Interests ($38.6M):
3.7%
TOTAL EQUITY:
54.2% ($560.1M)
Fixed Rate Mortgage Debt
($107.0M):
10.4%
Fixed Rate/Hedged
Unsecure Debt ($333.3M):
32.2%
Unsecured Floating
Rate Debt ($33.2M):
3.2%
TOTAL DEBT:
45.8% ($473.5M)
TOTAL PORTFOLIO CAPITALIZATION: $1.0B
Unsecured Floating
Rate Debt
Fixed Rate/Hedged
Unsecure Debt
TOTAL
$1.0B
Common Equity
Fixed Rate
Mortgage Debt
OP Unit Equity
Note: The value of common stock and operating company unit equity is calculated by multiplying the total number of common shares and units by BNL’s current DSV of $72. The data
above assumes cash balances used to pay down line of credit (LOC) after month end. The fixed/hedged unsecured debt encompasses both outstanding term notes and a portion of
BNL’s LOC.
25
Capital Structure
Unsecured Credit Facilities
5-YEAR FACILITY (Expanded December 2014; Recast of October 2012, 5-year Facility)
‒‒ $400M ($300M LoC & $100M term note)
‒‒ Previously recast in June 2014, which decreased borrowing rate by 25-35 bps (dependent upon level of leverage)
‒‒ Participants: M&T Bank (Joint Lead Arranger and Administrative Agent), Regions Bank (Joint Lead Arranger),
Bank of Montreal, RBS Citizens, Wells Fargo Bank N.A., SunTrust
7-YEAR TERM FACILITY (Closed October 2013)
‒‒ $185M senior unsecured credit facility
‒‒ Participants: Regions Bank (Sole Lead Arranger and Administrative Agent), Wells Fargo Bank N.A. (Syndication
Agent), Bank of Montreal (Documentation Agent), RBS Citizens, SunTrust
Note: The 5-year facility has an initial term of 3 years with 2, 1-year extension options (borrower options). This facility is shown as a 2019 maturity on page 28. The 7-year
facility has an initial term of 3 years with 2, 2-year extension options (borrower options). This facility is shown as a 2020 maturity on page 28.
26
Capital Structure
BNL Interest Rate Exposure
$90M
4.9%
$80M
3.4%
$70M
5.0%
5.1%
$60M
4.7%
$50M
4.3%
$40M
4.5%
4.3%
$30M
$20M
3.8%
$10M
6.6%
$0
5
201
6
201
7
201
9
201
0
202
Mortgage Debt
1
202
2
202
3
202
4
202
5+
202
Interest Rate Swaps
Note: Totals reflects original balances without adjusting for regular amortization payments and assumes unsecured term loans and line of credit extension options to 2019 and 2020
have been exercised. For a complete list of BNL’s mortgage debt and interest rate swap exposure please see the most current copy of BNL’s private placement memorandum.
27
Capital Structure
Staggered Debt Maturities
$250M
$200M
$150M
$100M
$50M
$0
5
201
6
201
7
201
8
201
Mortgage Debt
9
201
0
202
1
202
2
202
3
202
Unsecured Credit Facilities
Note: Totals reflects original balances without adjusting for regular amortization payments and assumes unsecured term loans and line of credit extension options to 2019 and 2020
have been exercised. For a complete list of BNL’s mortgage debt and interest rate swap exposure please see the most current copy of BNL’s private placement memorandum.
28
Hypothetical Acquisition
Hypothetical Acquisition at 50% Leverage Target
SOURCES AND USES
BNL TARGET
Property Purchase Price: $10,000,000
Leverage (Percent of Purchase Price):
50%
Acquisition, Financing, Transaction
Costs (4%): $400,000
Debt:
$5,000,000
Equity:
$5,400,000
Rental Income (at 7.0% Cap Rate):
$700,000
Vacancy Reserve (2%):
($14,000)
Management Fee (3% of Net Rent):
($20,580)
Asset Management Fee
(1% of Equity):
($54,000)
Other Costs:
($20,000)
EBITDA:
$591,420
Annual Interest Expense at 4.35%:
($217,500)
Funds from Operations (FFO):
$373,920
Current Return on Equity:
6.9%
TOTAL COSTS: $10,400,000
Note: This model is for discussion purposes only and actual results may vary. BNL’s current implied cap rate (at $72 per share) is equivalent to an implied 6.61% cap rate. The fees
present above are actual fees paid to BRE. Please see the Supplemental Information Section of this document for the definition of FFO. As of the date of this document, management
estimates that BNL’s weighted interest costs for unsecured debt is approximately 4.35%. Actual borrowing costs may vary.
29
Hypothetical Acquisition: Property Appreciation
SOURCES AND USES
BNL TARGET
Property Purchase Price: $10,000,000
Leverage:
50%
Acquisition, Financing, Transaction
Costs (4%): $400,000
Annual Property Appreciation (2%):
$200,000
Return on Equity from Appreciation:
3.7%
Allowance for Selling Costs:
(0.5%)
Net Appreciation Return:
3.2%
+ Current Equity Return:
6.9%
Current Return on Equity:
10.1%
TOTAL COSTS: $10,400,000
Note: This model is for discussion purposes only and actual results may vary. Annual property appreciation of 2.0% is based on BNL’s portfolio wide rent increasing by 2.0% annually. In
general, net lease properties are bought and sold as a percentage of the rent. Management’s assumption is that property values increase by 2.0% annually as annual rents increase by
2.0%. Actual increases/decreases in property values may vary. Selling costs assume a 5.0% fee and a 10-year holding period (0.5% annually).
30
Hypothetical Acquisition: Tax Sheltered Investment
ALLOCATION
DEPRECIATION PERIOD
DEPRECIATION AMOUNT
Land Costs:
$1,500,000
N/A
$0
Land Improvements:
$1,200,000
15
$80,000
Building Improvements:
$7,300,000
40
$182,500
TOTAL:
$10,000,000
$262,500
Current Funds from Operation (FFO):
$373,920
Minus Depreciation:
($262,500)
TAXABLE INCOME:
$111,420*
SHELTERED INCOME:
$262,500
*Reflects approximately 31% of $361,800 ($5.4 million x 6.7%) annual distribution.
Note: This model is for discussion purposes only and actual results may vary. The example above assumes continuation of BNL’s target leverage of 50%. Allocations between land, land
improvements and buildings vary by property. The distribution is assumed to be 6.7% on the equity invested in this model. Historically the sheltering of BNL’s distributions has ranged
from 35%-75%. Future sheltering levels may vary.
31
Supplemental Information
32
Key Staff Biographies
AMY L. TAIT
Chairman and Chief Executive Officer
Amy has over 30 years of commercial real estate experience. Beginning in 1980, she
spent three years with Chemical Bank in management training and commercial real
estate lending before joining Home Leasing Corporation, the predecessor to Home
Properties (NYSE:HME). She then served as the Executive Vice President of HME
from its IPO in 1994 to her retirement in 2001. Amy’s responsibilities have included
acquisitions, finance, capital markets, investor relations, legal, human resources,
and strategic planning. She served as a Director and Chair of Home Properties’ Real
Estate Investment Committee until 2012. Amy co-founded and joined Broadstone
Real Estate in 2006. Other recent activities have included Chair of the Greater
Rochester United Way Board of Directors, Trustee of the Allendale Columbia School,
and a Director of IEC Electronics.
Amy is a member of Pension Real Estate Association (PREA) and serves on the Board
of Governors of the National Association of Real Estate Investment Trusts® (NAREIT). She is also currently a Director of Broadstone Net Lease, Inc., Broadtree Homes,
Inc. and M&T Bank’s Rochester Regional Advisory Board. Her community activities
include the Simon School Executive Advisory Committee and National Council,
VisitRochester, and the Finger Lakes Regional Economic Advisory Council. She holds
a BS degree in Civil Engineering from Princeton University and an MBA from the
Simon Graduate School of Business.
33
NORMAN LEENHOUTS
Chief Investment Officer and Director
Norman has over 40 years of experience in residential and commercial real estate,
including retail, industrial, office and land development. He and his brother Nelson
Leenhouts formed Home Leasing Corporation in 1967. They took their apartments
public in 1994 to form Home Properties, Inc. where Norm served as Co-Chief
Executive Officer and Chairman of the Board. As Co-CEO, he supervised acquisitions
totaling several billion dollars. The company now has a total market capitalization of
over $5 billion. Norman co-founded and joined Broadstone Real Estate in 2006.
Norm serves on the boards of the University of Rochester, Roberts Wesleyan College,
the Free Methodist Church of North America and chairs the boards of the Charles
Finney School, Heritage Christian Foundation, and Edgewood Free Methodist
Church. He is a graduate of the University of Rochester, a certified public accountant,
and a real estate broker.
34
CHRIS CZARNECKI
President and Chief Financial Officer
Chris Czarnecki joined Broadstone Real Estate in 2009 and leads capital markets
activities. His primary responsibilities include raising new debt and equity capital for
investment, managing investor relations, conducting industry research, board and
investor communications, and property management. Prior to joining Broadstone,
Chris was a commercial real estate lender and credit analyst for Branch Banking &
Trust Co. (BB&T). Based in Baltimore, MD, he was responsible for the underwriting of
new commercial construction projects, portfolio management, and credit analysis.
Chris is a graduate of BB&T’s Leadership Development Program. He is a member
of PREA, NAREIT and the ULI. Chris holds a BA in economics from the University of
Rochester, a Diploma in Management Studies from the Judge Business School at the
University of Cambridge, and an MBA (finance and corporate accounting) from the
Simon Graduate School of Business.
35
SEAN CUTT
Senior Vice President
Sean joined Broadstone at the beginning of 2012 to assist with growing the
Broadstone portfolio. He is responsible for leading the acquisition and disposition
team that focuses on identifying, analyzing, and acquiring real estate opportunities.
Prior to joining Broadstone, Sean was an Assistant Vice President of Development for
Macerich and was responsible for managing large scale development projects across
the country. Before Macerich, he worked at SWBR Architects as a Project Manager.
Sean sits on the board for the Rochester American Diabetes Association in addition
to the Executive Committee for the Rochester Tour de Cure. He holds a bachelor
degree in management from Roberts Wesleyan College and an MBA from the Simon
School of Business at the University of Rochester.
36
BNL Board of Directors
GEOFFREY ROSENBERGER
Independent Director and Chair
of the Independent Directors Committee
Geoffrey began his professional investment career in 1976 when he
joined Manning & Napier Advisors, Inc. as a security analyst covering
a broad range of businesses and industries. In 1984, Geoff co-founded
Clover Capital Management, Inc., a Rochester, New York based
investment management firm with over $2 billion of client assets under
management. Twenty years later, Geoff retired from Clover Capital
(n/k/a Federated Clover) and has since focused his time both on the notfor-profit sector as well as being actively involved as an “angel” investor
funding new business formations.
Geoff serves as a board member of Broadstone Net Lease, Inc., the
Greater Rochester Health Foundation, the Center for Governmental
Research, Vnomics Corp., Simpore, Inc., True North Rochester
Preparatory Charter School, and Holy Sepulchre Cemetery. Geoff
has also served as a past chair of the Greater Rochester Chapter of
the American Red Cross, where he currently serves as an advisory
board member, and previously served on the boards of the Junior
Achievement of Rochester, McQuaid Jesuit High School and St.
Bernard’s Institute. Geoff is a Chartered Financial Analyst and earned
both his B.S. in Economics and MBA from the University of Kentucky.
‒‒
Chair, Audit Committee
SHEKAR NARASIMHAN
Independent Director
Shekar is the founder and Managing Partner of Beekman Advisors, a
leading boutique investment bank in the real estate financial services
sector in the United States. Shekar is also the Chief Executive Officer
of Beekman Helix India Partners, one of the first real estate merchant
banks located in India and focused on capital solutions for Indian real
estate developers. Prior to founding Beekman Advisors, Shekar was
Managing Director at Prudential where he headed Prudential Real
Estate Fixed Income Investors (PREFII), the commercial mortgage funds
management group for institutional investors, and oversaw the agency
business consisting of Fannie Mae multifamily lending and the FHA
lending business. Immediately prior to Shekar’s time at Prudential, he
was Chairman & Chief Executive Officer of the WMF Group, a publicly
traded, commercial mortgage financial services company.
Shekar is Chair of the Audit Committee of the National Housing
Conference and on the boards of the Community Preservation
Development Corp. and Low Income Investment Fund. He was
appointed a Fellow at the Joint Center of Housing Studies at Harvard
University and to the Advisory Board of Housing Development Reporter.
Shekar has served several terms on the Mortgage Bankers Association
of America (MBA) Board of Directors, was the first Chair of the MBA’s
Commercial/Multifamily Board of Governors and founding Chair of the
Campaign for Affordable Housing. He has received numerous awards
and recognition in the real estate industry including the MBA’s highest
honor in 1999 and the Fannie Mae Lifetime Achievement Award in
2003. He holds a BS in Chemical Engineering from the Indian Institute
of Technology, New Delhi, India and an MBA from the Katz Graduate
School of Business, University of Pittsburgh, Pennsylvania. He has earned
the designation of Certified Mortgage Banker (CMB).
‒‒
37
Member, Nominating & Governance Committee
JAMES H. WATTERS
DAVID JACOBSTEIN
Jim is Senior Vice President and Treasurer, Finance and Administration,
for Rochester Institute of Technology. He has held this position since
1997 where he is responsible for the direct investment of $140 million
of working capital, the administration of the investment process for
$640 million of endowment assets, and the management and issuance
of $300 million of public debt. Jim serves in the senior leadership role
to over 750 full-time staff charged with responsibility for the financial,
physical, human capital, and information assets of the university. Jim is
vice chairman of RIT’s global subsidiary where he negotiates business
models and real estate transactions for RIT’s global campuses. He has
instructed various graduate business courses during his tenure in the
College of Applied Sciences and the E. Philip Saunders College of
Business. He serves on Fidelity Investments H.E. Advisory Board and on
various profit and not for profit boards throughout Rochester.
David has more than 25 years of real estate experience and, since July
2009, has provided consulting services to real estate related businesses.
David was the senior advisor to Deloitte LLP’s real estate industry
group from June 2007 to June 2009, where he advised Deloitte’s real
estate practitioners on strategy, maintained and developed key client
relationships, and shaped thought leadership that addressed key
industry and market trends. From 1999 to 2007, he was President and
Chief Operating Officer of Developers Diversified Realty Corporation,
now known as DDR Corp. (NYSE: DDR), a leading owner, developer, and
manager of market-dominant community shopping centers. David also
served on DDR’s Board of Directors from 2000 to 2004. Prior to DDR,
he was Vice Chairman and Chief Operating Officer of Wilmorite, Inc.,
a Rochester, New York based developer of regional shopping malls.
Prior to joining RIT , Jim spent 16 years with the University of Pittsburgh
in positions as Assistant Vice Chancellor for Finance and Business,
and Assistant Vice Chancellor for Real Estate and Management.
He began his career in higher education administration assisting in
the management of off shore insurance captives for the University
of Pittsburgh. Jim holds a BS, MS and Ph.D. from the University of
Pittsburgh.
‒‒
Chair, Nominating & Governance Committee
‒‒
Member, Audit Committee
David began his career as a corporate and securities lawyer. He
graduated from Colgate University with a Bachelors of Arts degree and
from The George Washington University Law Center with a Juris Doctor
degree. He is a member of the National Association of Corporate
Directors (NACD) and the International Council of Shopping Centers
(ICSC). David serves on the Board of Corporate Office Properties Trust
(NYSE:OFC), a specialty office REIT. He also serves on the Advisory
Board of White Oak Partners, LLC, a private equity firm concentrating in
multi-family real estate based in Columbus, Ohio. David also served on
the Advisory Board of The Marcus & Millichap Company, a diversified
real estate holding company based in Palo Alto, California, from
2007-2013.
‒‒
38
Member, Audit Committee
MARY BETH MCCORMICK
Mary Beth currently serves as a Senior Advisor to Almanac Realty
Investors and a Director of the public REIT, EastGroup Properties
(NYSE: EGP). From 1989 to 2005, Mary Beth was with the Ohio
Public Employees Retirement System, where she served as Assistant
Investment Officer – Real Estate from 1995 to 2005.
She has served as a Director and Chair of the Pension Real Estate
Association, Council Vice Chair for the Urban Land Institute, Chair of the
Portfolio Management Committee of the National Council of Real Estate
Investment Fiduciaries, and as a member of the Board of Governors
of the National Association of Real Estate Investment Trusts. She also
served as a Director for Mid America Apartment Communities from
2006 to 2010. Mary Beth received a Bachelor’s Degree and an MBA
from The Ohio State University.
‒‒
39
Member, Nominating & Governance Committee
Important Disclosures Regarding Broadstone Net Lease, Inc. (BNL)
Not an offer to sell securities: This is not an offer to sell securities or the solicitation of an offer to purchase securities. Offers, solicitations, and sales are not
made in jurisdictions where not lawful or prohibited.
Not intended as an advertisement: This presentation is not intended as an advertisement in any security and should not be copied or redistributed in any
jurisdiction where unlawful.
BNL’s securities are not registered: BNL’s securities have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any other
applicable securities law. BNL’s securities have not been approved or disapproved by the U.S. Securities and Exchange Commission (the “SEC”), the attorney
general of the State of New York, any other state securities commission or any other regulatory authority, nor have any of the foregoing passed upon the
accuracy or adequacy of the information presented. Any representation to the contrary is a criminal offense.
The offering of BNL’s securities is made pursuant to an exemption from the registration requirements of the Securities Act and certain state securities laws.
BNL, therefore, is not required to comply with the specific disclosure requirements that apply to securities sold under registration statements filed with the SEC,
including the requirement to publicly file certain reports with the SEC, so there is little publicly available information about our business, assets, liabilities, results
of operations, and other information typically available regarding publicly traded securities.
Investment Company Act: BNL’s securities are not subject to the protections of the Investment Company Act of 1940, as amended.
Accredited investors only: BNL’s securities are only offered and sold only to “accredited investors,” as defined under the U.S. securities laws, pursuant to BNL’s
private placement memorandum (“PPM”) and related subscription documents. Individuals are accredited investors only if they meet certain minimum net worth
or sustained annual income thresholds. Entities are accredited investors only if they hold sufficient assets or are completely owned by accredited investors.
Transfers restricted; No trading market: Transfers of BNL’s securities are restricted by federal and state securities laws and certain provisions of our
organizational documents. There is no trading market for the shares and there can be no assurance that such a market will develop in the foreseeable future.
BNL’s securities may not be transferred, resold, or otherwise disposed of by an investor unless, in the opinion of counsel acceptable to us, registration under
federal and applicable state securities laws is not required or compliance is made with the registration requirements of such laws.
Liquidity of BNL’s securities is limited: Redemptions by BNL’s securities are limited in amount and require that the shares have been held for required periods.
Provisions of state law, REIT requirements, and other matters may limit redemptions.
40
Important Disclosures Regarding Broadstone Net Lease, Inc. (BNL)
Investments involve significant risks: An investment in BNL’s securities involves significant risks. Only investors who can bear the economic risk of an investment
of this type for an indefinite period of time and the risk of loss of their entire investment should invest in BNL’s securities. Factors that may cause our actual
results, performance, or achievements to differ materially from our stated expectations include, among others: general economic conditions; local real estate
conditions in the markets where our properties are located; financial difficulties of our tenants; loss of key personnel; interest rates rising; compliance with REIT
requirements; and continued access to capital to fund growth. See the section entitled “Risk Factors” in our PPM for additional information.
This is not investment, financial, legal, or tax advice: This information is not investment, financial, legal, or tax advice and has been prepared without reference
to any reader’s investment profile or financial circumstances. You should obtain financial and tax advice and conduct diligent investigation of information material
to you before making any investment decision.
Performance data; Stock price: The value of investments and the income or distributions from investments may fall or rise. BNL’s stock price is not set by any
market in the common stock but by our independent directors based on the net asset value of our portfolio of properties determined as described in the PPM.
We are not required by law to follow any particular methodology in setting the stock price (referred to in our organizational documents as the “Determined
Share Value”). There may be variations from time to time in how our independent directors apply or weight the criteria described in the PPM in setting the
stock price.
No guarantee of future performance: The information contained in this presentation represents the past performance of BNL. Past performance is not a
guarantee of future performance. The current performance of BNL may be lower or higher than the past performance. Distributions are made at the discretion of
BNL’s independent directors and past practices are not guarantees of the timing or amount of future distributions.
Forward-looking statements: This information contains forward-looking statements which we believe are based on reasonable assumptions but results will vary
from our expectations and the variations may be material. You should not rely on forward-looking statements in making an investment decision.
41
Important Performance Definitions
Funds From Operations (FFO): Funds From Operations is a non-GAAP financial performance measure defined by the National Association of Real Estate
Investment Trusts (“NAREIT”) and widely recognized by investors and analysts as one measure of operating performance of a real estate company. FFO
is defined as net income (computed in accordance with generally accepted accounting principles), excluding items such as real estate depreciation and
amortization, gains and losses on the sale of depreciable real estate and impairments of depreciable real estate. Depreciation and amortization as applied in
accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or
fallen with market conditions, it is management’s view, and we believe the view of many industry investors and analysts, that the presentation of operating results
for real estate companies by using historical cost accounting method alone is insufficient. In addition, FFO excludes gains and losses from the sale of depreciable
real estate and impairment charges on depreciable real estate, which we believe provides management and investors with a helpful additional measure of the
performance of our real estate portfolio, as it allows for comparisons, year to year, that reflect the impact of operations from trends in items such as occupancy
rates, rental rates, operating costs, general and administrative expenses, and interest costs. We compute FFO in accordance with NAREIT’s definition.
Adjusted Funds From Operations (AFFO): Adjusted Funds From Operations is a non-GAAP supplemental financial performance measure to evaluate the
operating performance of our real estate portfolio. AFFO, as defined by BNL, excludes from FFO amortization and write off of deferred financing costs, straightline rent adjustments, above and below market lease intangibles amortization, debt prepayment fees, and adjustments for discontinued operations. AFFO allows
for a comparison of the performance of our portfolio with that of other REITs, as AFFO, or an equivalent measure, is routinely reported by other REITs, and we
believe often used by analysts and investors for comparison purposes.
Operating Adjusted Funds From Operations (O-AFFO): Operating Adjusted Funds From Operations is a non-GAAP supplemental financial performance
measure to evaluate the operating performance of our real estate portfolio. OAFFO, as defined by BNL, excludes from AFFO property acquisition expenses. In
evaluating the performance of our portfolio over time, management employs business models and analyses that differentiate the costs to acquire investments
from the investments’ revenues and expenses. Management believes that excluding the items noted to derive OAFFO provides investors with supplemental
performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance
of our portfolio over time, including after the Company ceases to acquire properties on a frequent and regular basis. OAFFO also allows for a comparison of the
performance of our real estate portfolio with other REITs that are not currently engaging in acquisitions and mergers. Average Annual Total Return: The Average Annual Total Return is defined as the geometric mean that provides a constant rate of return over a given
time period. The Average Annual Total Return presented assumes the reinvestment of distributions and is calculated using the following formula: (Ending
Value∕Beginning Value)^(1/n)−1, where “n” is the number of annual periods. Using a hypothetical example for illustrative purposes with a beginning investment
account value of $1,000 at February 1, 2012, the ending account value at February 1, 2015 would be $1,580 assuming actual share price appreciation and the
reinvestment of all dividends during the respective period. Thus, the 3-Year Average Annual Total Return is 16.5% calculated as follows:
($1,580∕$1,000) ^(1/3)−1=16.5%.
Compound Annual Growth Rate (CAGR): The Compound Annual Growth Rate is defined as the geometric mean that provides a constant rate of return over
a given time period and is calculated using the following formula: (Ending Value∕Beginning Value)^(1/n)−1, where “n” is the number of annual periods. For
example, the 2008-2014 CAGR of OAFFO per share presented on slide 6 herein of 9.8% was calculated as follows: ($5.13∕$2.93)^(1/6)−1=9.8%.
42
Other Important Disclosures and Definitions
UPREIT Transaction: The term UPREIT (short for “Umbrella Partnership Real Estate Investment Trust”) refers to an entity structure that has been used by REIT’s
since 1992 to allow selling property owners the ability to convert their ownership of one or more of their specific real estate properties into an interest which is‚
immediately‚ or can ultimately be converted into‚ a private or public security. BNL has completed several UPREIT transactions.
Accredited Investor: Please see the definition on the SEC website. http://www.sec.gov/answers/accred.htm
What is “Determined Share Value (DSV)?”: The share price or Determined Share Value may be adjusted quarterly by the Independent Directors Committee
based on the net asset value of the portfolio and such other factors as the Independent Directors Committee may, in its sole discretion, determine. The Asset
Manager may, but is not required to, engage consultants, appraisers, and other real estate or investment professionals to assist in their valuations.
How does Broadstone Net Lease calculate its Determined Share Value (DSV)?: On a quarterly basis, BNL’s Independent Directors Committee establishes
and approves the Determined Share Value (DSV), which is derived by adjusting the net asset value per share to reflect the current market value of the real estate
investment portfolio and the entities debt. Each quarter, BRE’s Property Management Team determines the current market value of the real estate investment
portfolio by applying a current market capitalization rate to each property’s upcoming 12-months rental revenue. The appropriate capitalization rate is derived
based on the current market conditions for comparable properties. Due to the significant volume of transactions and straightforward nature of underwriting
in the net lease market resulting from the long-term leases in place and lack of operating expenses or capital expenditures, BNL utilizes leading national real
estate databases to gather real-time sales comparables referenced across geography and property types. Additionally, BRE’s Acquisition Team is active in the
market and studies potential acquisitions every day, providing additional opportunities for market value comparables. All of these factors lead to a strong market
presence that allows management to adjust capitalization rates up or down based on actual market conditions. Further, BNL Property Valuation Policy requires
a third-party appraisal to be conducted within 12 months of property acquisition and then on a rolling three year basis, with properties valued at less than
$1 million appraised internally by BRE’s Vice President – Portfolio Management. The Capital Markets team also calculates a debt mark-to-market adjustment
each quarter which in turn accounts for debt above or below market interest rates. Subsequent to the Property Management Team’s determination of each
property’s current value and the calculation of DSV, the DSV and property valuation summaries are reviewed, BNL’s Management and submitted to the
Independent Directors Committee for review and approval or adjustment. The Independent Directors discuss the valuation recommendations of management at
its quarterly meeting and then sets the final DSV for the next three months. Management and inside Directors do not have a vote on the setting of the DSV.
The valuation guides presented here closely match those of the Investment Program Association and their guidance issued on April 25, 2013 in “The IPA Practice
Guideline 2013-01-Valuations of Publicly Registered Non-Listed REITs.”
How is the Broadstone Net Lease’s distribution per share determined?: On a quarterly basis, BNL’s Board of Directors reviews and declares a distribution
payable for the preceding quarter. Distributions are paid in arrears to shareholders of record on the last day of the calendar quarter. The distribution is at the
sole discretion of the Board and not tied to any specific metric. In general, the Board considers available cash, BNL’s payout ratios (OAFFO, AFFO, FFO),
portfolio performance (past and future expectations), and other factors when setting the amount of the distribution. Past performance is not indicative of future
performance.
43
Additional Information
Additional Information
Auditors: Ernst & Young LLP
Securities Counsel: Nixon Peabody LLP
Real Estate Counsel: Tones Vaisey PLLC
Broadstone Real Estate is a certified Women’s
Business Enterprise (WBE)
CUSTODIAN ACCEPTANCE
TD Ameritrade, Fidelity, Pershing, Charles Schwab,
M&T/Wilmington Trust, Tompkins Financial Advisors,
Canandaigua National Bank, Ameriprise, Equity
Institutional
MAILING ADDRESS
Broadstone Real Estate, LLC
530 Clinton Square
Rochester, NY 14604
Main: 585.287.6500
INVESTOR RELATIONS CONTACTS
DAVE KASPRZAK
Senior Vice President of Investor Relations
[email protected]
585.287.6475
CHRISTOPHER BRODHEAD
Vice President of Investor Relations
[email protected]
585.287.6499
DAN BLASI
Investor Relations Associate
[email protected]
585.287.6504
Broadstone.com
44

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