Thesis

Broadstone Net Lease went public in late September of this year. The company’s diversified portfolio insulates it from covid risks. Its stable properties have been protected by essential tenants, keeping rental collections above 90% for Q2. With a superior portfolio, ample acquisition opportunities post-IPO, and a discounted valuation, Broadstone is positioned to benefit from the K-shaped net lease recovery.

Diversified Portfolio

Broadstone has a highly diversified portfolio consisting of industrial, healthcare, office, restaurant, and retail properties. A majority of BNL’s portfolio consists of industrial (44%), healthcare (20%), and office (10%), all of which are subject to very little negative impact from covid. Each of these three sectors had over 95% Q2 rental collection rates.

Source- 10-Q

These three sectors also provide protection against the growth in e-commerce, a potential long-term threat to the viability and necessity of net lease properties.

Industrial Portfolio

  • Set to benefit from the increasing penetration of e-commerce, as e-commerce is less efficient than brick and mortar in utilizing industrial space. At the end of 2019, e-commerce consisted of just 15% of total retail sales. This number jumped to 25% by May 2020 due to the increased adoption of e-commerce.

Healthcare Portfolio

  • Medical properties have been largely insulated from e-commerce penetration. The country’s aging population will continue to drive demand for such properties.

Office Portfolio

  • While high rise office properties located in urban cores are high risk long-term due to high rental costs and growing adoption of work from home, BNL’s portfolio is concentrated in single tenant properties in non-core markets. Such properties have seen increased tenant and investor demand as the urban to suburban shift may be in early stages, and many companies are seeking suburban, satellite outposts and offices to relocate or expand to.

Lack of Experiential Real Estate

Experiential real estate was viewed