Broadstone Net Lease (NYSE:BNL) raised its 2026 adjusted funds from operations guidance after reporting second-quarter results supported by same-store rent growth, build-to-suit investments reaching stabilization and continued portfolio occupancy near 100%.
The company reported adjusted funds from operations, or AFFO, of $78.2 million, or $0.39 per share, for the second quarter, up 2.6% from the year-earlier period. Chief Financial Officer Kevin Fennell said results benefited from same-store rental growth and recently stabilized build-to-suit investments.
Colorado development expands build-to-suit pipeline
Following the quarter’s end, Broadstone entered a joint venture to develop an advanced technology facility in Colorado for a Fortune 20 investment-grade company. The transaction adds an estimated $303 million to Broadstone’s committed build-to-suit pipeline and is the largest transaction in the company’s history as a public company, Moragne said.
The powered-shell facility will have 100 megawatts of capacity, all committed under a 15-year triple-net lease with two five-year extension options and 3% annual rent escalations. Broadstone expects substantial completion and rent commencement by March 2027.
The project is expected to generate an approximately 11.6% straight-line yield, with initial cash yields of about 8.5% in the first year and 9.7% in the second year as power is delivered. Moragne said the tenant is expected to become Broadstone’s largest by annualized base rent, or ABR, once rent begins, and that the investment is expected to be meaningfully accretive to earnings in 2027 and 2028.
The joint venture controls land for a full campus that could support a second 100-megawatt powered-shell building. The tenant has a right of first refusal on that future building, though Broadstone is not including it in its committed pipeline.
Including the Colorado project, Broadstone’s committed in-process build-to-suit pipeline totaled approximately $645 million at quarter-end. President and Chief Operating Officer Ryan Albano said the pipeline has a weighted-average estimated initial cash yield of about 7.9%, a weighted-average straight-line yield of roughly 9.9%, a 13.7-year weighted-average lease term and average annual rent escalations of 2.7%.
The company expects about $17 million of incremental annualized base rent from its build-to-suit pipeline to begin during the third and fourth quarters of 2026, followed by an additional $29 million in the first half of 2027. In total, Broadstone expects approximately $46 million of ABR from committed developments to stabilize between the third quarter of 2026 and the first half of 2027.
Portfolio performance and capital recycling
Broadstone ended the quarter with all but one of its 766 properties subject to a lease and collected 99.9% of base rents. Same-store rental revenue rose 2.2% year over year, led by 3.3% growth in the industrial portfolio. Remaining lease expirations for 2026 represented about 1.9% of ABR.
During the quarter, the company invested $91.5 million, including $77.3 million in build-to-suit development activity and $13.5 million in transitional capital.
Broadstone also sold nine properties for $62 million during the second quarter at a 6.4% capitalization rate on tenanted assets. After selling two additional properties subsequent to quarter-end, the company had sold 12 properties year-to-date for $78.3 million at a weighted-average cap rate of 6.2% on tenanted properties.
Moragne said the disposition activity allows the company to recycle capital from mature and non-core assets toward its growth pipeline. In response to investor questions, he said the company evaluates potential sales asset by asset, including the Colorado facility, although he described the new project’s tenant and yield as attractive.
Redevelopment activity and Project Triborough
Broadstone began redeveloping a functionally obsolete Chicago-area office property previously leased to C.H. Robinson into an industrial facility. The company has begun demolishing the existing building and plans to construct an approximately 156,000-square-foot building near O’Hare International Airport.
The project is expected to require about $17.9 million of investment. Broadstone expects stabilized ABR of approximately $2.7 million, compared with $1.4 million of annualized base rent at the prior property, with stabilization targeted for the second quarter of 2027. Albano said Broadstone expects to have a rent-paying tenant by that time and has received tenant interest and requests for proposals.
The company also began evaluating redevelopment alternatives for its former Claire’s property in Hoffman Estates, Illinois, including either a full rebuild or renovation. Albano said Broadstone will continue marketing the property for lease or sale while it evaluates those options.
Broadstone also reported progress at Project Triborough, its more than 550-acre site in northeastern Pennsylvania with a committed one-gigawatt power supply. The company is evaluating three potential paths for the site: selling powered land, developing approximately 4.5 million square feet of industrial space, or pursuing a multistage hyperscale data-center campus.
Albano said Broadstone has received unsolicited interest for a powered-land sale at valuations potentially representing multiples of its approximately $120 million of invested capital. Under an industrial scenario, the company estimates total development costs of about $520 million and a yield on cost in the mid-to-high 7% range. A hyperscale data-center campus could entail total costs exceeding $2.5 billion.
The first of four building pads is expected to be ready during the fourth quarter, while the remaining pads are planned for 2027. Broadstone said it expects more clarity on zoning, power and tenant demand by year-end before determining the site’s highest and best use.
Funding plan and revised investment outlook
Broadstone ended the quarter with $2.7 billion of total debt and pro forma leverage of 5.9 times. Subsequent to quarter-end, it entered a new $300 million delayed-draw term loan with a 12-month draw period and an initial maturity of Jan. 30, 2030. The company also amended pricing grids on existing bank loans, reducing applicable margins by five basis points.
During the second quarter, Broadstone sold 2.2 million shares on a forward basis at a weighted-average gross price of $20.77 per share. It subsequently sold another 1.6 million shares at $21.45 per share. Total unsettled equity sales were approximately $163 million at a weighted-average price of $19.97 per share.
Fennell said the company had approximately $1 billion of in-place liquidity when combining the new term loan, revolver capacity and unsettled equity. Broadstone intends to manage toward a pro forma leverage target of about six times.
The company increased its 2026 real estate investment guidance to $600 million to $800 million from $500 million to $625 million. It also raised expected dispositions to $100 million to $150 million from $75 million to $100 million and lowered its bad-debt assumption to 50 basis points from 75 basis points.
Broadstone’s board declared a quarterly dividend of $0.2925 per share, payable on or before Oct. 15 to shareholders of record as of Sept. 30.
About Broadstone Net Lease (NYSE:BNL)
Broadstone Net Lease, Inc (NYSE: BNL) is a publicly traded real estate investment trust focused on owning and operating single-tenant commercial properties under long-term net leases. The company specializes in acquiring properties that are leased to creditworthy tenants, allowing it to generate predictable, stable rental income while transferring most operating expenses and responsibilities to its lessees.
Broadstone Net Lease’s portfolio spans a variety of property types, including industrial facilities, distribution centers, manufacturing plants, life science and office buildings, and essential retail locations.
