Broadstone Net Lease, Inc.
For the period ended Mar 31, 2026. Filed Apr 30, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed Apr 30, 2026
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Item 2. Results of Operations
Results of Operations
The following discussion includes the results of our operations for the periods presented.
Three Months Ended March 31, 2026 Compared to Three Months Ended December 31, 2025
Lease revenues, net
| (in thousands) | For the Three Months Ended | |||
|---|---|---|---|---|
| March 31,2026 · December 31,2025 · Increase/(Decrease) | ||||
| $ · % | ||||
| Contractual rental amounts billed for operating leases | $107,519 | $106,196 | $1,323 | 1.2 % |
| Adjustment to recognize contractual operating lease billings on a straight-line basis | 5,848 | 5,317 | 531 | 10.0 % |
| Net write-offs of accrued rental income | — | (1,103) | 1,103 | 100.0% |
| Variable rental amounts earned | 757 | 1,210 | (453) | (37.4)% |
| Earned income from direct financing leases | 667 | 671 | (4) | (0.6)% |
| Interest income from sales-type leases | 474 | 474 | — | —% |
| Operating expenses billed to tenants | 5,700 | 5,138 | 562 | 10.9 % |
| Other income from real estate transactions | 32 | 392 | (360) | (91.8)% |
| Adjustment to revenue recognized for uncollectible rental amounts billed, net | 404 | — | 404 | 100.0 % |
| Total lease revenues, net | $121,401 | $118,295 | $3,106 | 2.6 % |
The increase in Lease revenues, net, during the three months ended March 31, 2026, was primarily attributable to receiving a full quarter of rents related to $176.7 million of real property acquisitions at a weighted average cash capitalization rate of 7.0% and the stabilization of a $54.1 million build-to-suit development at a cash capitalization rate of 7.5% during the three months ended December 31, 2025. Additionally, we closed on $62.1 million of acquisitions and revenue generating capital expenditures at a weighted average cash capitalization rate of 9.0% during the three months ended March 31, 2026. These increases in rent were partially offset by dispositions during prior periods and during the three months ended March 31, 2026. Lastly, there were no write-offs of accrued rental income during the three months ended March 31, 2026. Write-offs of accrued rental income are discrete charges in a quarter related to collection probabilities and fluctuate quarter to quarter.
Operating expenses
| For the Three Months Ended | ||||
|---|---|---|---|---|
| March 31,2026 · December 31,2025 · Increase/(Decrease) | ||||
| (in thousands) · $ · % | ||||
| Operating expenses | ||||
| Depreciation and amortization | $41,526 | $41,768 | $(242) | (0.6)% |
| Property and operating expense | 6,180 | 6,282 | (102) | (1.6)% |
| General and administrative | 10,349 | 9,666 | 683 | 7.1 % |
| Provision for impairment of investment in rental properties | — | 4,668 | (4,668) | (100.0)% |
| Total operating expenses | $58,055 | $62,384 | $(4,329) | (6.9)% |
Provision for impairment of investment in rental properties
The following table presents the impairment charges for the respective periods:
| For the Three Months Ended | ||
|---|---|---|
| (in thousands, except number of properties) | March 31,2026 | December 31, 2025 |
| Number of properties | — | 4 |
| Carrying value prior to impairment charge | $— | $22,783 |
| Fair value | — | 18,115 |
| Impairment charge | $— | $4,668 |
During the three months ended March 31, 2026, we did not recognize any impairment. The timing and amount of impairment fluctuates from period to period depending on the specific facts and circumstances.
| (in thousands) · For the Three Months Ended · Increase/(Decrease) | ||||
|---|---|---|---|---|
| March 31,2026 | December 31,2025 | |||
| $ · % | ||||
| Other income (expenses) | ||||
| Interest income | $49 | $(14) | $63 | > 100.0 % |
| Interest expense | (25,260) | (25,051) | 209 | 0.8% |
| Gain on sale of real estate | 7,122 | 8,371 | (1,249) | (14.9)% |
| Income taxes | (311) | (392) | (81) | (20.7)% |
| Other income (expenses) | 1,446 | (3,797) | 5,243 | > 100.0 % |
Gain on sale of real estate
Our recognition of a gain or loss on the sale of real estate varies from transaction to transaction based on fluctuations in asset prices and demand in the real estate market. During the three months ended March 31, 2026, we recognized a gain of $7.1 million on the sale of one property, compared to a gain of $8.4 million on the sale of five properties during the three months ended December 31, 2025.
The increase in other income during the three months ended March 31, 2026 was primarily due to a $1.4 million unrealized foreign exchange gain recognized on the quarterly remeasurement of our $100.0 million Canadian Dollars (“CAD”) Revolving Credit Facility borrowings, compared to a $1.3 million unrealized foreign exchange loss recognized during the three months ended December 31, 2025. Additionally, the Company recognized a $2.5 million write-off of a non-real estate note receivable during the three months ended December 31, 2025 that did not reoccur during the three months ended March 31, 2026.
Net income and Net earnings per diluted share
| For the Three Months Ended · Increase/(Decrease) | ||||||
|---|---|---|---|---|---|---|
| March 31,2026 · December 31,2025 | ||||||
| (in thousands, except per share data) · $ · % | ||||||
| Net income | $46,392 | $35,028 | $11,364 | 32.4 % | ||
| Net earnings per diluted share | 0.24 | 0.17 | 0.07 | 41.2 % | ||
The increase in net income is primarily attributable to a $4.7 million decrease in the provision for impairment of investment in rental properties, a $3.1 million increase in lease revenues, net, a $5.2 million decrease in other expenses, primarily related to a decrease in unrealized foreign exchange loss. This was partially offset by a $1.2 million decrease in gain on sale of real estate.
GAAP net income includes items such as gain or loss on sale of real estate and provisions for impairment, unrealized foreign exchange gain or loss, among others, which can vary from quarter to quarter and impact period-over-period comparisons.
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
Lease revenues, net
| For the Three Months Ended · Increase/(Decrease) | ||||
|---|---|---|---|---|
| March 31, | ||||
| (in thousands) | 2026 | 2025 | $ | % |
| Contractual rental amounts billed for operating leases | $107,519 | $99,314 | $8,205 | 8.3 % |
| Adjustment to recognize contractual operating lease billings on a straight-line basis | 5,848 | 6,064 | (216) | (3.6)% |
| Net write-offs of accrued rental income | — | (2,228) | 2,228 | > 100.0 % |
| Variable rental amounts earned | 757 | 680 | 77 | 11.3 % |
| Earned income from direct financing leases | 667 | 682 | (15) | (2.2)% |
| Interest income from sales-type leases | 474 | 14 | 460 | > 100.0 % |
| Operating expenses billed to tenants | 5,700 | 4,944 | 756 | 15.3 % |
| Other income from real estate transactions | 32 | 77 | (45) | (58.4)% |
| Adjustment to revenue recognized for uncollectible rental amounts billed, net | 404 | (857) | 1,261 | > 100.0 % |
| Total lease revenues, net | $121,401 | $108,690 | $12,711 | 11.7 % |
The increase in lease revenues, net was primarily attributable to growth in our real estate portfolio. Subsequent to the first quarter of 2025, we had a total of $376.4 million of acquisitions and revenue generating capital expenditures at a cash capitalization rate of 7.1%, as well as had a $54.1 million build-to-suit development reach stabilization at a cash capitalization rate of 7.5%. This stabilized investment activity is partially offset by 2025 disposition activity of $96.1 million at a weighted average cash capitalization rate of 7.3% on tenanted properties. Additionally, there were no write-offs of accrued rental income during the three months ended March 31, 2026. Write-offs of accrued rental income are discrete charges in a quarter related to collection probabilities and fluctuate quarter to quarter. The increase in lease revenues, net was partially due to net recoveries of bad debt during the three months ended March 31, 2026 compared to bad debt expense during the three months ended December 31, 2025.
Operating expenses
| For the Three Months Ended · Increase/(Decrease) | ||||
|---|---|---|---|---|
| March 31, | ||||
| (in thousands) | 2026 | 2025 | $ | % |
| Operating expenses | ||||
| Depreciation and amortization | $41,526 | 39,497 | $2,029 | 5.1 % |
| Property and operating expense | 6,180 | 5,488 | 692 | 12.6 % |
| General and administrative | 10,349 | 9,672 | 677 | 7.0 % |
| Provision for impairment of investment in rental properties | — | 16,128 | (16,128) | (100.0)% |
| Total operating expenses | $58,055 | $70,785 | $(12,730) | (18.0)% |
Depreciation and amortization
The increase in depreciation and amortization for the three months ended March 31, 2026 was primarily due to timing and amount of net investment activity in our real estate portfolio as discussed above.
Provision for impairment of investment in rental properties
The following table presents the impairment charges for the respective periods:
| For the Three Months Ended | ||
|---|---|---|
| March 31, | ||
| (in thousands, except number of properties) | 2026 | 2025 |
| Number of properties | — | 7 |
| Carrying value prior to impairment charge | $— | $38,618 |
| Fair value | — | 22,490 |
| Impairment charge | $— | $16,128 |
During the three months ended March 31, 2026, we did not recognize any impairment. The timing and amount of impairment fluctuates from period to period depending on the specific facts and circumstances.
| For the Three Months Ended | ||||
|---|---|---|---|---|
| March 31, · Increase/(Decrease) | ||||
| (in thousands) | 2026 | 2025 | $ | % |
| Other income (expenses) | ||||
| Interest income | $49 | $99 | $(50) | (50.5)% |
| Interest expense | (25,260) | (20,074) | 5,186 | 25.8% |
| Gain on sale of real estate | 7,122 | 405 | 6,717 | > 100.0 % |
| Income taxes | (311) | (355) | (44) | (12.4)% |
| Other income (expenses) | 1,446 | (487) | 1,933 | > 100.0 % |
Interest expense
The increase in interest expense for the three months ended March 31, 2026 is primarily due to the completion of our $350.0 million 5.00% senior unsecured notes during the third quarter of 2025, the proceeds of which were used to fund acquisitions and paydown the Revolving Credit Facility during 2025. Additionally, the increase in interest expense during the three months ended March 31, 2026 is due to increased borrowings on our variable-rate USD Revolving Credit Facility to fund investment activity.
Gain on sale of real estate
Our recognition of a gain or loss on the sale of real estate varies from transaction to transaction based on fluctuations in asset prices and demand in the real estate market. During the three months ended March 31, 2026, we recognized a gain of $7.1 million on the sale of one property, compared to a gain of $0.4 million on the sale of three properties during the three months ended March 31, 2025.
Other (expenses) income
The increase in other income during the three months ended March 31, 2026 was primarily due to a $1.4 million foreign exchange gain recognized on the quarterly remeasurement of our $100.0 million Canadian Dollars (“CAD”) Revolving Credit Facility borrowings, compared to a $0.3 million unrealized foreign exchange loss recognized during the three months ended March 31, 2025.
Net income and Net earnings per diluted share
| For the Three Months Ended · Increase/(Decrease) | ||||
|---|---|---|---|---|
| March 31, | ||||
| (in thousands, except per share data) | 2026 | 2025 | $ | % |
| Net income | $46,392 | $17,493 | $28,899 | > 100.0 % |
| Net earnings per diluted share | 0.24 | 0.09 | 0.15 | > 100.0 % |
The increase in net income is primarily due to a decrease in impairment charges of $16.1 million, an increase in net lease revenues of $12.7 million, and an increase in the gain on sale of real estate of $6.7 million. These are partially offset by an increase in interest expense of $5.2 million and an increase in depreciation and amortization of $2.0 million.
GAAP net income includes items such as gain or loss on sale of real estate and provisions for impairment, unrealized foreign exchange gain or loss, among others, which can vary from quarter to quarter and impact period-over-period comparisons.
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