Operator: Hello. And welcome to Broadstone Net Lease's second quarter 26 earnings conference call. My name is Matthew, and I will be your operator today. Please note that today's call is being recorded. I will now turn the call over to Brent Maedl, director of corporate finance and investor relations at Broadstone. Please go ahead.
Brent Maedl: Thank you, everyone, for joining us today for Broadstone Net Lease's second quarter 26 Earnings Call. On today's call, you will hear prepared remarks from Chief Executive Officer, John D. Moragne President and Chief Operating Officer Ryan Albano, and Chief Financial Officer, Kevin Fennell. All 3 will be available for the Q&A portion of this call. As a reminder, the following discussion and answers to questions contain forward-looking statements that are subject to risks and uncertainties that can cause actual results to differ materially due to a variety of factors. We caution you not to place undue reliance on these forward looking statements. For a more detailed discussion of risk factors that may cause such differences, please refer to our SEC filings, including our Form 10-K for the year ended 12/31/2025, and note that such risk factors may be updated in our quarterly SEC filings. Any forward looking statements provided during this conference call are only made as of the date of this call. With that, I will turn the call over to John.
John D. Moragne: Thank you, Brent, and good morning, everyone. Second quarter was, in many respects, the quarter we have been building toward for the last few years. 1 that underscores the earnings power of our differentiated growth strategy and the strength of our portfolio, We advanced our committed build to suit platform through both existing and new relationships, raised our full year investment guidance by more than $100 million at the midpoint, lowered our bad debt assumption which is a direct reflection of the sustained improvement in our portfolio performance, and are raising the midpoint of our full year AFFO per share guidance range to $1.56 representing nearly 5% earnings growth over 2025. And subsequent to quarter end, we announced the largest transaction in our history as a public company, Collectively, these results give us a lot of conviction as we enter the back half of the year and into 2027. Before I walk through the quarter, I want to spend a moment on the news we announced on July 8. Because it is emblematic of everything we have been working toward over the last few years. Subsequent to quarter end, we entered into a joint venture to develop an advanced technology facility in Colorado for a Fortune 20 investment grade company. Adding a $303 million to our committed build to suit pipeline. This is a landmark development for 1 of the most creditworthy tenants in the world. And upon rent commencement, this tenant is expected to become Broadstone's largest by ABR. And the investment is expected to be meaningfully accretive to both our 2027 and 2028 earnings. It is a powerful validation of the strategy we have built and the caliber of opportunities our team and our long standing developer relationships continue to source. The facility will be delivered as a powered shell with 100 megawatts of capacity. All of which is already committed to the site today. Under a 15 year triple net lease with 2 5-year extension options and 3% annual rent increases. The transaction generates a straight line yield of approximately 11.6% with initial cash yields that step up as power is delivered. Approximately 8.5% in year 1 rising to approximately 9.7% in year 2. Substantial completion and rent commencement are anticipated by mid-2027. The joint venture owns and controls the land for the full campus. With a site designed to accommodate a second 100 megawatt powered shell building which the tenant holds a right of first refusal. I would frame that second building as future optionality. And not committed pipeline that we are including in our stated numbers today. But it is a real potential opportunity and is exactly the kind of embedded optionality makes our build to suit strategy uniquely valuable. We are funding the project through our build to suit pipeline over the construction period with approximately $233 million of estimated remaining investment. Turning to our broader investment activity. During the second quarter, we invested $91.5 million comprised primarily of $77.3 million in build to suit developments, $13.5 million in transitional capital. With the addition of the Colorado development, our in process build to suit pipeline now stands at approximately $645 million. Providing a laddered, derisked runway of high quality developments scheduled to reach stabilization through 2027. In total, from our build to suit pipeline alone, we expect approximately $17 million of incremental annualized base rent to come online during the third and fourth quarters of this year, with an additional $29 million coming online in the first half of 2027 as the Colorado development and other projects reach rent commencement. That is approximately $46 million of incremental ABR from committed in process developments reaching stabilization between the third quarter of 2026 and the first half of 2027, equating to over 10% growth on our current in place portfolio ABR. That is a degree of forward visibility into growth that is rare in our space. Turning to our in place portfolio. It continues to perform exactly as designed with no significant concerns. We ended the quarter nearly fully occupied with all but 1 of our 766 properties subject to a lease, and 99.9% of base rents collected. Also remained active with dispositions, continuing to opportunistically recycle capital out of mature and noncore assets into the accretive, growth oriented opportunities our pipeline provides. We sold 9 properties during the quarter for gross proceeds of $62 million at a 6.4% capitalization rate on tenanted properties. And subsequent to quarter end, we sold 2 additional properties, for gross proceeds of $4.2 million bringing our year to date total to 12 properties sold for gross proceeds of $78.3 million. At a weighted average capitalization rate of 6.2%. On tenanted properties. I also want to briefly note that we continue to be incredibly excited about Project Triboro. We made meaningful progress this quarter on each of our 3 key work streams, including power, zoning, and leasing, and our conviction in the value this asset can create for shareholders continues to grow. Brian will provide a more detailed update in a few moments. Based on the strength of our year to date performance, the accretive investment activity we have layered in, and the visibility that our build to suit pipeline provides into the back half of this year and into 2027, we are raising our full year 2026 guidance. We now expect AFFO per share of $1.55 to $1.57 revised up from $1.53 to $1.57, with the midpoint of our guidance range moving to 1.56 representing nearly 5% earnings growth over 2025. This raise reflects both the durability of our in place portfolio and our conviction in the pipeline we have assembled. Which gives us a clear line of sight into earnings growth that we have had in our history. On the capital side, the environment is more constructive for us than it has been at any point in the last few years. Our shares are trading at 52-week highs, Our cost of equity has improved materially. Our balance sheet is well structured, and our pipeline of accretive investment opportunities is the deepest it has been since we became a public company. That combination of a strong cost of capital alongside a high quality visible opportunity set is exactly the setup in which disciplined capital deployment can create the most value for shareholders. That said, our approach has not changed. And we will remain disciplined and opportunistic across all of our capital sources. During the quarter, we raised approximately $45.5 million of equity under our ATM program, on a forward basis at a weighted average price of $20.77 per share. And as I noted earlier, we continue to recycle capital through accretive dispositions, with year to date gross proceeds of $78.3 million at a weighted average capitalization rate of 6.2%, Together, this balance of constructive equity capital and accretive dispositions has kept us well funded for the pipeline ahead, while maintaining the financial discipline that has defined our approach over the last few years. Kevin will take you through the details of our balance sheet and funding plan in a moment. The momentum we are carrying into the back half of this year is not accidental. It is the product of our differentiated growth strategy and years of disciplined execution, deliberate portfolio construction, and a unique build to suit platform that is now delivering at scale, with meaningful contributions still ahead in 2027 and 2028. I am excited about what we have in front of us, happy to hand the call over to Ryan and Kevin who will each walk you through more of what is driving our confidence.
Ryan Albano: Thank you, John, and good morning, everyone. The Colorado transaction speaks for itself in terms of scale. But I want to spend a moment on what it says about our platform more broadly because the same discipline is showing up across the entire pipeline. Let me walk you through where that pipeline stands today how our in place portfolio is performing, and then turn to Project Triboro, where we made real progress this quarter. Starting with the pipeline, inclusive of Colorado, our committed and in process built to suit investments now total approximately $645 million with a weighted average estimated initial cash yield of approximately 7.9% and a weighted average straight line yield of approximately 9.9% supported by weighted average lease term of approximately 13.7 years and annual rent escalations of approximately 2.7%. These are tenant driven, mission critical developments structured from the outset to mitigate the risks that typically come with ground up development. And they are the engine behind the growth John just walked you through. Turning to our in place portfolio. Occupancy remained strong at nearly 100% on a square footage basis during the quarter, with all but 1 property subject to a lease. Same-store rental revenue grew 2.2% year over year, led by 3.3% growth across our industrial portfolio, and our remaining 2026 lease expirations are modest. At approximately 1.9% of ABR. I also want to spend a moment on our redevelopment activity because it is a good example of value creation that is only possible because of the platform we have built. Having in house development capability trusted external advisers, and a deep network of developers means that when these roles were not limited to selling the asset or holding it vacant. Redevelopment is a real option. 1 we evaluate asset by asset. This quarter, we began redeveloping a functionally obsolete office asset in the Chicago MSA, previously leased to C. H. Robinson into industrial space. The site sits in a dense infill industrial submarket with limited supply and robust tenant demand given its proximity to O'Hare. We have commenced demolition of the existing building and plan to construct a new approximately 156 thousand-square-foot building on-site. Total estimated project investment is approximately $17.9 million. The asset carried original annualized base rent of approximately $1.4 million. We expect stabilized ABR of approximately $2.7 million upon completion nearly double what rent was expiring. With stabilization targeted for the second quarter of 27. We are already seeing interest from tenants in the market and are responding to several RFPs. We added a second redevelopment project at the start of the third quarter. Our former Claire's asset in Hoffman Estates, Illinois along Interstate 90. We evaluated several options for the property, including re leasing, a vacant sale and redevelopment. We believe the market backdrop supports a redevelopment project, scrape and rebuild and we currently are sharpening our evaluation between a full-- any renovation of the existing structure to make it more functional and desirable for future tenants. Separately, continue to market the property for lease or sale while we advance that work as we do with all of our assets. Now turning to Project Triboro. As a reminder, this is a large site in Northeastern Pennsylvania more than 550 acres of land with a committed 1 gigawatt power supply. We made meaningful progress this quarter, and I want to be clear about why we continue to view this as such a unique asset. We did not underwrite Triborough as a single outcome investment and today, we see 3 distinct paths forward each of which creates real value for shareholders. First, we could monetize the land in the near term, either by selling some or all of the individual parcels to industrial developers, as a powered land sale or given the site and power work we have advanced today, to a data center developer. We have received unsolicited interest at valuations that are potentially multiples of our approximately $120 million of invested capital. And we would participate in any upside from a sale under the terms of our joint venture. Second, as originally underwritten, the site can support 4 large box industrial buildings totaling approximately 4.5 million square feet. Representing an estimated $520 million of total development with a mid to high 7% yield on cost range at current market rent levels. Our view is that stabilized valuations would reflect approximately 150 basis points or more of spread relative to that yield on cost. That view is supported by the leasing environment on the ground, where large box products in Northeastern Pennsylvania remain scarce. With well under 2 million square feet of existing 700 thousand-plus-square-foot space in the submarket. And the 2 large box leases signed in the market over the past year closed at rents consistent with our underwriting. Our first building could be delivered as early as mid 28. And third, currently our highest and best use, a hyperscale data center campus with a multiphase build out, power beginning to deliver as early as mid 28 and total project costs in excess of $2.5 billion. The economics here would likely look similar to the transaction we just announced in Colorado. Turning to the work underway to advance all 3 paths. On-site work, we continue to progress earthwork that is common to both an industrial and a data center outcome. Meaning this work supports our optionality across paths rather than committing us to 1. The first of 4 building pads remains on track to be pad ready during the fourth quarter, with the remaining 3 following during 2027. Empower, PPL has completed its required public town hall meetings and has selected both the site for its new substation, and the transmission line path to our property. We currently are reviewing a draft of the electric service agreement. And design and engineering work on our on-site substation continues. The time line remains consistent with our previous expectations. On zoning, we continue to engage constructively with the borough regarding our position that a data center is permitted by right under the property's existing zoning. At the same time, the borough has adopted a zoning ordinance amendment that allows data centers as a conditional use, providing an alternative path to development if needed. We remain focused on working collaboratively with the borough to advance the project while preserving the flexibility afforded by both the by-right and conditional use paths. Along side this work, we have seen increased interest from potential hyperscale tenants and we are currently engaging with several on the project. Overall, we continue to expect clarity on zoning, power, and tenant demand this year, which supports our target of deciding among our 3 paths near term land monetization, industrial development, or hyperscale data center campus, still our view of the site's highest and best use by year end. Taken together, Colorado and Triborough represent the clearest demonstration yet of what this platform can do. Our pipeline has never been deeper, Our external adviser and developer relationships have never been stronger. And the growth visibility we are building into 2027 and 2028 is something very few companies in our space can offer. With that, I will turn the call over to Kevin.
Kevin Fennell: Thank you, Ryan. During the quarter, we generated adjusted funds from operations of $78.2 million or $0.39 per share. Representing a 2.6% increase over the second quarter of 25. Results benefited from same store rent growth and from recent investment activity in build to suits reaching stabilization. General and administrative expenses were in line with expectations. With core G&A of $7.3 million pacing nicely to achieve our full year G&A guidance. of $30 million to $31 million. With respect to the balance sheet, we ended the quarter with total debt of $2.7 billion pro form a leverage of 5.9 times. We took 2 steps subsequent to quarter-end to strengthen our financial flexibility and lower our cost of capital. First, we entered into a new $300 million delayed draw term loan with our banks. The facility has a 12-month delayed draw period, a 01/30/2030 initial maturity, comes with 2 12-month extension options, providing us incremental optionality in future years. The delayed draw structure aligns well with our funding needs into 2027 including the Colorado development. Second, in connection with this financing, we amended the pricing grids on our existing bank loans to reduce the applicable margin by 5 basis points. We appreciate the continued commitments from our highly supportive bank group as we evaluate and navigate this highly volatile medium and long term rate backdrop. On the equity side, during the second quarter, we sold 2.2 million shares of common stock on a forward basis at a weighted average gross price of $20.77 per share. Subsequent to quarter end, we sold an additional 1.6 million shares at a weighted average gross price of $21.45 per share. Bringing our total unsettled equity sales to approximately $163 million at a weighted average price of $19.97. We have approximately $197 million of capacity remaining under our existing ATM program, and we continue to evaluate forward sales to more closely match fund our capital with rent commencements from our build to suit pipeline. The combination of our new term loan, existing revolver capacity, and unsettled equity provide us with approximately $1 billion of in place liquidity. Looking ahead, we will continue to assess all potential sources of funding. Managing around a pro form a leverage target of 6x. And optimally finding ourselves in a position to opportunistically reduce pro form a leverage inside of that level. Creating additional capacity to pursue incremental investments as opportunities arise. Last week, our board of directors declared a quarterly dividend of $0.2925 per share payable to holders of record as of 09/30/2026, on or before October 15. Now turning to guidance updates that John alluded to. Given our strong year to date performance and accretive investment activity, we are raising our full year 2026 AFFO guidance to a range of $1.55 to $1.57 per diluted share. This guidance is based on investments in real estate of between $600 million and $800 million revised up from $500 to $625 million. Dispositions of between $100 and $150 million revised up from $75 to $100 million. And finally, total core general and administrative expenses of between $30 and $31 million. Additionally, we are lowering our full year bad debt assumption to 50 basis points from 75 basis points. This reduction is a direct reflection of the work we have done across the business over the last 3 years. Which has improved our tenant base and strengthened our proactive asset management. As always, it is worth reminding everyone that our per share results for the year are sensitive to the timing, amount, and mix of investment and disposition activity as well as any capital markets activities that may occur during the year. Please reference last night's earnings release for additional details we will now open the call up for questions.
Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press 1 to raise your hand. To withdraw your question, press 1 again. We ask that you pick up your handset closer to your mouth when asking a question to allow for optimum sound quality If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Anthony Paolone. From JPMorgan. Anthony, your line is open. Please go ahead.
Anthony Paolone: Brent. Thank you. I guess my first question is on the Colorado data center deal. I mean, with the yield that high and just, given what seems like a really strong transaction, like, how do you think about keeping something like that long term, or is this something where this becomes a very attractive source of capital in the future?
John D. Moragne: Thanks, Tony. Great question. it is something that we talk about with every asset in our portfolio. Every asset that we look at in our PRC in terms of our hold sales strategy, we evaluate what is the right decision to make Should we be holding this for the long term? And as you said, I mean, the yield on this is really attractive. The tenant is very attractive. This is a fantastic opportunity for us to have a Fortune 20 tenant as our number 1 tenant, which we will be very proud to have. But at the same time, every asset is for sale at some price. And so if it makes the most sense for us to recycle that capital at some point in the future, we are certainly open to it, but we will take that day by day, asset by asset.
Anthony Paolone: Okay. And, you know, you have a partner on the deal, and I am not sure if there is any sort of a promote structure for them or how that would work. But can you maybe describe that at all, whether they stay in or out or if you own this 100% or if any sort of promote changes that yield as we look ahead.
John D. Moragne: Yeah. Promote structure would not change the yield. In terms of what we are getting in on current cash and rent basis. It is what it is. Which is why we have got those upfront yields of for the first year and the first second year in there. But there is a promote structure built in. You know, our partner on the deal does have the ability to get some additional upside if we were to sell this in the future. But just like with the other JVs that we have, we do participate in the upside as well. So, everyone's got incentives aligned in terms of whether we are staying in or we potentially sell this in the future.
Anthony Paolone: Okay. Thank you.
Operator: Your next question comes from the line of Jay Kornreich from the office of Cantor Fitzgerald.
Jay Kornreich: Hey. Thanks. Good morning. I guess, at a broader level, previous goalpost for the annual announced build to suit developments was $350 to $500 million number. And as the platform, you know, has really gotten bigger relationships with developers and tenants have expanded, really highlighted by the recent Colorado $303 million PowerShell deal. How do you think about the next phase of growth for BNL? Maybe what are the new goalposts for volume of annually announced deals, just as the overall platform is running on full cylinders at this point?
John D. Moragne: Yeah. 350 to 500 is the goal that we had for the year. We certainly exceeded that with the Colorado deal. But that being said, the Colorado deal is unique in terms of its size and scope. So we are not expecting to sort of continually land $100 million build to suits, every single quarter, quarter in and quarter out. So we do want it to grow over time as the denominator grows. You know, we are not looking to be here 5 years from now, still talking about $350 to $500 million in a committed build-to-suit pipeline. So we want it to grow. We expect it to grow. That is the goal for us to sort of take $350 to 500 incrementally higher in 2027 than 2028 and so forth? But, you know, we are not planning on taking a huge leap forward where all of a sudden it is going to go to $600 to a billion or something like that. It will be more incremental from there.
Jay Kornreich: Okay. Appreciate that. And then I guess just, you know, moving to Triborough. Appreciate all the color you gave at the beginning of the call. I guess as things stand now, I guess what is the current level conviction of being able to get approval for the data center is there any thoughts around timeline to getting that?
John D. Moragne: Yeah. We are cautiously optimistic since you heard Ryan's comments, we are doing everything we can in terms of working productively with the borough council to sort of work this to a place where it can move forward. We feel very strong in our by right conviction around our opportunity there for data center development. We do have multiple paths to extract value from that opportunity, but we feel cautiously optimistic right now, and we are hopeful that, we are closer than we have been this year to getting some resolution, but, you know, the next couple of months and quarters will determine that.
Jay Kornreich: Okay. Appreciate it. I will hold it there. Thank you.
Operator: Your next question comes from the line of Caitlin Burrows from the office of Goldman Sachs. Caitlin, your line is open. Please go ahead.
Caitlin Burrows: Hi, everyone. Congrats on the quarter and all that you have done this year. I guess maybe just looking at the amount of dispositions you have done, it is in line with guidance. I would not say it is surprising. But when you are considering funding with dispositions versus your option of equity now, I guess, what is made dispositions attractive? Is it just the pricing and the market was there, managing risk? So, yeah, what drove that disposition activity, and then also what will drive the timing of the equity settlement?
John D. Moragne: I will take the first part on dispositions and let Kevin take the second. From a disposition scaling everything that you said. Opportunity to sell these at prices that we think are really attractive. Relative to how we think about the value. Risk mitigation continues to play a role in it. You know, we are not necessarily selling things that we are super excited to continue to hold. it is often going to be that clinical noncore or, you know, short remaining lease term or you name it. You know, our asset management team has done a fantastic job of combing through the portfolio, really thinking about where are the opportunities to sell and to do so accretively. And if you look at what we have done this year, $74 million at a 6.2% cap rate, that is a fantastic place for us to be recycling capital, and it continues to trend from the last 4 years in terms of our ability to control our own destiny, sell assets, recycle those proceeds accretively.
Kevin Fennell: And now, thankfully, we are in a place where, you know, our equity is far more constructive than it is been at any time in the last 4 years. And so we have been raising incrementally on the ATM. And I will let Kevin take the second part. Yeah. Sure. I think the punch line on settlement is just look at the build-to-suit delivery schedule. We will look to match fund as best as we are able in those quarters where those properties deliver. And I think more macro based, you know, the granular level focus on how we are funding our investments probably a little bit extra intense over here, whether that is a dispo dollar or dollar from the ATM. We are really thinking about it by project So, future settlement alongside rent commencement is the short answer.
Caitlin Burrows: Got it. Thanks. And then maybe so it sounds like you guys have 2 redevelopments going on now? I guess I would say those are different from your build to suits in that you do not have the tenant in hand yet. So first, wondering if you can talk about what gives you comfort in those 2 pursuits And then second, as you look into next year, you do have some additional office expirations. Do you think there is further opportunity to redevelop office into industrial, or do you think this is more of like a 1 off opportunity?
Ryan Albano: Sure. I will take that 1. This is Ryan. I would say, you know, when we comb the portfolio, we are looking at all assets inclusive of the office bucket for redevelopment opportunities. I would consider these probably more 1-off There are a few others that we are evaluating right now. But I would consider these more of a 1 off situation. More to your first question, you know, we have high conviction in the C.H. Robinson redevelopment. The O'Hare market is very strong. Like I had mentioned in earlier in the presentation. We are already fielding tenant interest in RFPs on the property, and that was even before we started to take the building down. We feel very comfortable with that. I would say the second 1 that we have added as consideration at this point and are pursuing We feel good about the market. We feel good about where our exiting or expiring rent level is versus where market rent levels are. We are still kind of evaluating whether it is a scrape and rebuild or kind of retooling the existing building itself. Think that there are options under both But as we sort of hone our focus there, sharpen the pencil and the numbers, you know, we will have further thoughts and detail to share. That said, as with all of our properties, we will continue to keep this listed for lease or sale. We continue to entertain offers on the property. And we will weigh these 2 against each other like we do for you know, all of our properties under management.
Caitlin Burrows: 1 more follow-up. On the, C.H. Robinson location, you guys listed as a target stabilization of May 2027. Does that mean that you expect you will have somebody rent paying May 2027, or just that it will be completed in available by then?
Ryan Albano: That we will have rent paying by then.
Caitlin Burrows: Thanks. Thanks.
Operator: Your next question comes from the line of Ryan Caviola. From the office of Green Street. Ryan, your line is now open. Go ahead.
Ryan Caviola: Thank you, and good morning, everyone. The growth in the development pipeline has been very impressive. But just coming to kind of how we were looking, you know, going into 2026. If I remember correctly, there is sort of a soft target to get a larger portion or, you know, maybe closer to half of the investment volume through just regular property acquisitions. Where we stand today, obviously, with the large build-to-suit pipeline and just the $60 million of acquisitions, halfway through the year. Could you just walk us through what shifted throughout 2026 that made developing so much more attractive than buying assets outright?
John D. Moragne: Yeah. Actually, we started the year with the expectation that the majority of our activity this year was going to come from the build to suit. The opposite was last year. Last year, we did the majority of our investment activity through regular way acquisitions, sale lease backs, lease assumptions. But we knew coming into the year in terms of the way that we were thinking about our original guidance range for investment activity that the majority of it starting on January 1,, was going to be in build to suit. So the year has played out really exactly as we would expect it. We were not planning on having a huge amount of regular way deal flow. We continue to pursue it. There are a handful of things that we are pretty excited about that should hopefully come in, in the second half of this year. But in terms of the weighting, you know, our expectation for this year and going forward is that the majority of our investment activity will be in our build to suit, which we think is uniquely valuable in the net lease space.
Ryan Caviola: Got it. Appreciate that. And then just on the Colorado deal, of seems like the language around labeling it as an advanced technology facility was purposeful. Can you just walk us through, any reasoning behind that, differences between that and just being a traditional data center, or if it just is that with a different label. Anything that could be could be helpful. Thanks.
John D. Moragne: Yeah. The terminology that we use is very intentional relative to what the tenant is using it for. This will look and feel like a data center for others in the sense of, you know, if it was going to have a different tenant that was using it. But for this particular tenant and for what they are planning on, this is the way that they think about it, and so that is the way that we think about it.
Ryan Caviola: Got it. that is all for me. Thank you.
Operator: Your next question comes from the line of Ronald Kamdem from the office of Morgan Stanley. Ronald, your line is now open. Please go ahead.
Jenny: Hey. Good morning. This is Jenny on for Ronald. Congrats on the strong quarter. I think on the Colorado deal, I think the yield came in really attractive. I am just curious, do you see more competition or more capital chasing these kinds of deals or do you think this is reputable? Like, that is my question.
John D. Moragne: Yeah. So this came out of the strength of our developer relationships. You know, I do not think this is 1 that is going to be out there sort of on a heavily marketed basis in terms of the yields that people are able to get. But, of course, anything that is data center related or data center adjacent right now has just ungodly amounts of money chasing it. And so we feel, you know, very lucky to have the types of relationships in our Rolodex that allow us to, you know, secure opportunities like this 1.
Jenny: Cool. I guess my second is I am curious, do you guys have a ROFR for the other campuses of this tenant? Or just this 1 or 2? For now?
John D. Moragne: Just this site. So not with respect to the tenant more generally, but with respect to the potential opportunity for this tenant on for another facility on this site. And it is not a roofer for it is we already own the site. So if they are going to execute on their ROFR, it will be, you know, on the other side of the access road from us.
Jenny: Okay. Got it. Okay, cool. Thank you.
Operator: Your next question comes from the line of Upal Rana from the office of KeyBanc Capital Markets. Paul, your line is now open. Go ahead.
Upal Rana: Brent. Thank you. A question for John or Ryan. You know, you have completed only 1 regular acquisition so far this year. Is that a function of you just seeing better opportunities in the build to suit pipeline or something else? And maybe you can talk about what you are seeing in the build to suit today and as well as the regular acquisitions and any color on those types of deals size, pricing, quality would be helpful. Thanks.
John D. Moragne: Yeah. I think a lot of people have heard us talk about this throughout the year. We continue to think the best place to be allocating capital, generally speaking, is in the build to suit pipeline. Getting brand new buildings, fantastic tenant credits, you know, better overall economics. You know, when you look at our build to suit pipeline and you are talking about $645 million of estimated project investment at a 7.9% upfront cap rate and a 9.9% you know, straight line yield. You know, those are not the types of deals that you are going to be getting in the regular market right The regular-way market continues to be heavily competitive. there is a lot of buyers out there for a not sort of parabolically increasing amount of deal flow. So the supply demand characteristics continue to put pressure on pricing in those areas. And then you are also going to be looking at potentially dated real estate, maybe some credit in terms of what we can get in our build to suit pipeline. So we continue to be very open to regular deal flow. We have got some deals that we did earlier in the year, some deals that we are looking at right now. But we are very selective. We want to pursue them. We think there are fantastic opportunities sort of add to the return and the investment that we are gonna be doing in a year, serving our clients as they come to us with opportunities that we never want to say no to if the deal makes sense. But, you know, if you are giving me a new dollar today to allocate, and I can only put it in 1 spot, it is going to be in build to suit.
Upal Rana: Brent. Thank you. And then, you know, John, you incurred a $1.6 million you know, cost this quarter on a build to suit option that you ultimately did not pursue. You know, what caused you to walk away and maybe should we expect some more of these kind of pursuit costs like this as the development platform scales further?
Kevin Fennell: Yeah. Upal, I will take the first part of what the number is. It is just a deposit and some legal costs associated with the deal we walked away from. It was really an embedded option on the deal we did complete. And so in terms of our underwriting, we thought about that as a portion of our first opportunity. We still like the economics in total. And then, you know, in terms of anticipating these in the future, will there be some? I am sure. Do we know when or what they will be? No. I think it is as facts play out. You know? But, John's been saying this for better part of 2 years now that this is what gets us to the table on some of these more interesting opportunities. And so, you know, to the extent that we are able, we will absolutely pursue and finish them off. And if it makes sense for us to opt out of them, we will do that. You know, from time to time as well.
Upal Rana: Okay. Brent. Thank you.
Operator: Your next question comes from the line of John Kim of the office of BMO Capital Markets. John, your line is now open. Please go ahead.
John Kim: Thank you. I mean, it sounds like you are doing more spec development or redevelopment, which is consistent with the value creation that you have been doing on BTS, and that is just spread investing. But I just wanted to know about how you think about IRR thresholds or yields on non build to suit development versus redevelopments and if any additional cost that we should think about as far as hiring more people in house.
Ryan Albano: Yeah. I would say when we are looking at opportunities that may be, slightly earlier entry point or have a little less decision around the tenant, which by and large, is not what we are doing or what we are pursuing. But to the extent that we do, I would say we are looking for typical LP style returns associated with that. For any institutional limited partner investor. You know, I would call that, you know, levered IRRs in the 20% plus mark, and MOIC is somewhere in that 2 times range. And we are looking for yield on cost versus stabilized value spread delta in that kind of 150 ish basis point range.
John Kim: Okay. And on the Colorado developments I know that there is been a lot of discussion on this. The yield is very attractive. The tenant is attractive. And it just leads us to ask if there is any associated risk when you have a return that is attractive. So I was wondering if there was any CapEx requirements that you foresee in the future Is this an advanced manufacturing type of facility where you will have to again, put in CapEx or maybe be difficult to release down the road?
John D. Moragne: Yeah. No material CapEx for us. Our yields are baked into the $300 million that we have already disclosed, and we are not anticipating any changes there. Not a manufacturing facility. You know, this continues to be, as we said, an advanced tech facility that will be used, and for most others, it would be in that sort of data center or data center adjacency area, you know, this is also it is a nice little barbell where it is not only just some of the best yields and economics that we are getting from our investment activity, but this will be easily by far the best credit in our portfolio. So we have got no long term concerns about, you know, the 15-year lease and receiving the benefit of the bargain that we struck up front.
John Kim: You.
Operator: Your next question comes from the line of Michael Goldsmith with the office of UBS. Michael, your line is now open. Please go ahead.
Michael Goldsmith: Good morning. Thanks for taking my questions. Just on these data center leases, if you do not meet the development guidelines, like, how do the economics change? Just trying to understand the risk here.
Ryan Albano: Yeah. I would say if there are certain cushions to those deadlines built into the lease agreement. To the extent that there is a time delay on delivery beyond some of those cushions. There are rent credits or rent abatements to it. In until rent actually starts. So it does not really change the yield profile does not really change the overall lease itself. it is more a matter of when does rent start and is it along with some operating expenses abated for a period of time during that time delay? Obviously, that excludes things like force majeure and the like of it. So I would call it not all that dissimilar to you know, what we see in a regular way kind of industrial build to suit. Just with in this case, slightly larger numbers on a monthly run basis.
Michael Goldsmith: Got it. Thanks for that. And as a follow-up, you sold a bunch of vacant assets in the quarter, and then I think you still have some near term lease expirations coming up. I am just wondering just trying to understand, you know, what the negotiations are like for some of these near term maturity or leases expiring and have they been productive or could these be potential additional vacant disposals? Thanks.
John D. Moragne: Yeah. Very productive. For the 1.9% that we have remaining for the year, I want to say almost all of that or all of it has already been taken care of, but you just got to get through the final inking of the docs to the point where we are already having conversations about 2027 and 28. Lease rolls and focusing on, you know, farther out in the future than where we are today. So the team's done a fantastic job of working through, you know, the first year we have had a little bit more elevated lease rolls than we have had in the past, and it is a good prep going into next year and in 2028 as well. So they have done a fantastic job, and we are in a position for the remainder of 2026 and the next couple of years. Thanks.
Michael Goldsmith: And if I can ask 1 more, I do apologize. You had same-store rental revenue growth 2.2% with positive growth in industrial and retail, but other was negative, down 1.6%. What was that?
Ryan Albano: Yeah. that is just the dead C.H. Robinson asset Ryan was talking about flipping into the redevelopment bucket. Would have been formerly an office asset now under redevelopment. So that is that rent rolling off. As it turned into that new property for us.
Michael Goldsmith: Perfect. Yeah. Thank you very much. Good luck in the back half.
Operator: Your next question comes from the line of Michael Gorman from the office of BTIG. Michael, your line is now open. Please go ahead.
Zach Light: Good morning. This is Zach Light on for Mike Gorman. Thanks for taking my question. Building on 1 of the earlier questions with the delayed draw term loan in place, what is the thought process regarding the financing structure for larger assets like the Colorado project and the portfolio? And then longer term, as you continue to get additional large opportunities like this, what is the framework for approaching those financing components?
Kevin Fennell: Yeah. Look. I think we manage the business in totality, and obviously, large projects have an impact on how we think through that in this case and, frankly, in all cases. The nice thing about what we are doing is we have got, on average, 12 to 14 months of forward visibility. Think about our sources of capital. And so, in this case, you know, that term loan certainly helps out on the backside of Colorado given it is sort of back end weighted. But I think the principle is the same. I mentioned this earlier. there is very granular thinking going on in terms of the mix of debt and equity and the types of debt specifically, as we roll forward. And so as has been the case for us for many years, you know, financial flexibility and opportunistic decision making carries a day. And so we did with these term loans, continues to keep that window open about thinking about longer term financing decisions. Got it.
Zach Light: Thank you. that is all from my side.
Operator: Your next question comes from the office. Of Eric Borden. Of BMO Capital Markets Eric, your line is now open. Please go ahead.
Eric Borden: Brent. Thanks for taking my question. John, in your earlier remarks, you talked about taking the incremental development build-to-suit pipeline, you know, adding additional $300 million to $500 million incrementally, but just curious if you are announcement in Colorado and Project Triboro has kind of opened the door and you have seen more inbounds for more powered land or data center-esque developments come to your door.
John D. Moragne: it is something that we look at, but I would say it is not pervasive in any way similar to what we are seeing for industrial and retail. You know, these are certainly more unique 1 off type opportunities that we are seeing with respect to Triborough in Colorado.
Eric Borden: And if those opportunities were to, you know, come knocking on your door, would you, you know, contemplate potentially adding them to the pipeline in an effort to kind of keep that 10% growth that you alluded to in your prepared remarks. Just keep that 10% growth consistent going forward?
John D. Moragne: Yeah. I mean, we are certainly open to it. In terms of seeing good opportunities, but, we have got to be mindful about you know, does it work for us? You know, going back to the last question, how Kevin would be thinking about financing it, where are we from an equity cost to capital standpoint? Do we need to bring in a joint venture partner? Those projects are always much, much larger than the traditional build to suit opportunities. So it just requires a more nuanced, more thoughtful approach to sort of the longer term financing and return structure. So we are very pleased with what we have today. Very happy to see some good movement in the pipeline for regular-way, I mean, for build to suit industrial deals and retail deals that should be filling in around some of these bigger opportunities like Colorado, and if we see more of those, we will certainly evaluate them and see if it is something that makes sense for us to invest or allocate in allocate to.
Eric Borden: Thank you very much. Appreciate the time.
Operator: Your final question comes from Caitlin Burrows of Goldman Sachs. Caitlin, your line is open. Go ahead.
Caitlin Burrows: Hi again. I feel like the answer could be no since it has not come up yet. But, anyways, I was wondering if you had any updates to give on the Charles River project and the, I guess, seemingly industrial development that you are planning on that site and leasing discussions?
Ryan Albano: Sure. On the Charles River site, we have progressed. We are in the process of just about to begin sort of landlord work of separating the 2 parcels and putting in the individualized sort of infrastructure associated with the long term parcel. On the short-term, you know, continue to manage it, and we will be receiving sort of inbound interest on it. We have also started exploring externally leasing activity. So dialogue is occurring. We are still working through site plans and redevelopment efforts and consideration around all of that. So kind of early innings there but at least from the initial work and the things that we plan to accomplish by this point in the year, we are well on track.
Caitlin Burrows: I think that is all. Thanks.
Operator: There are no further questions at this time. I will now turn the call back to John D. Moragne for closing remarks.
John D. Moragne: Thanks all for joining us today. If we do not see you or have a 1-on-1 with you, over the next couple of weeks, hope you have a great rest of the summer, and we will look forward to seeing everyone when conference season kicks back up again in the fall. Thanks all.
Operator: This concludes today's call. Thank you for attending. You may now disconnect.
