Record Annual Results Announced By National Retail Properties, Inc.

News provided by

National Retail Properties, Inc.

Feb 13, 2017, 07:30 ET

ORLANDO, Fla., Feb. 13, 2017 /PRNewswire/ -- National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced operating results for the quarter and year ended December 31, 2016.  Highlights include:

Operating Results:

  • Revenues and net earnings, FFO, Core FFO and AFFO available to common stockholders and diluted per share amounts:

Quarter Ended

Year Ended

December 31,

December 31,

2016

2015

2016

2015

(in thousands, except per share data)

Revenues

$

141,199

$

126,377

$

533,647

$

482,916








Net earnings available to common stockholders

$

54,044

$

33,612

$

200,877

$

162,402

Net earnings per common share

$

0.37

$

0.24

$

1.38

$

1.20








FFO available to common stockholders

$

88,717

$

67,319

$

330,544

$

289,193

FFO per common share

$

0.60

$

0.49

$

2.28

$

2.15








Core FFO available to common stockholders

$

88,717

$

76,661

$

340,643

$

299,171

Core FFO per common share

$

0.60

$

0.56

$

2.35

$

2.22








AFFO available to common stockholders

$

90,285

$

77,953

$

347,933

$

304,772

AFFO per common share

$

0.62

$

0.57

$

2.41

$

2.27
  • Portfolio occupancy was 99.0% at December 31, 2016 and September 30, 2016, as compared to 99.1% at December 31, 2015

2016 Highlights:

  • Increased net earnings per common share 15.0%
  • Increased annual FFO per common share 6.0%
  • Increased annual Core FFO per common share 5.9%
  • Increased annual AFFO per common share 6.2%
  • Dividend yield of 4.0% at December 31, 2016
  • Annual dividend per common share increased to $1.78 marking the 27th consecutive year of annual dividend increases - making the company one of only four equity REITs and one of only 94 public companies with 27 or more consecutive annual dividend increases
  • Maintained high occupancy levels at or above 99.0% for the entire year with a weighted average remaining lease term of 11.6 years
  • Invested $846.9 million in 313 properties with an aggregate gross leasable area of approximately 2,734,000 square feet at an initial cash yield of 6.9%
  • Sold 38 properties for $103.2 million, producing $27.1 million of gains on sale, net of noncontrolling interests, at a cap rate of 6.8%
  • Raised $950.9 million of new long-term capital at attractive pricing
    • Raised $274.0 million in net proceeds from the issuance of 5,903,848 common shares
    • Raised $342.8 million in net proceeds from the issuance of 3.60% senior unsecured notes due 2026
    • Raised $334.1 million in net proceeds from the issuance of 5.20% Series F preferred stock
  • Entire $650 million availability on bank credit facility at December 31, 2016
  • 99.7% of properties are unencumbered with secured mortgage debt
  • Total shareholder return of 14.5% for 2016 exceeds industry averages and general equity averages
  • Total average annual shareholder return of 14.3% over the past 25 years exceeds industry averages and general equity averages

Selected Highlights for the quarter ended December 31, 2016:

  • Investments:
    • $250.4 million in property investments, including the acquisition of 64 properties with an aggregate gross leasable area of approximately 698,000 square feet at an initial cash yield of 6.9%
  • Dispositions:
    • Sold 14 properties with net proceeds of $20.1 million, producing $4.6 million of gains on sales, net of noncontrolling interests, at a cap rate of 7.2%
  • Long-term capital:
    • Raised $965,000 in net proceeds from the issuance of 22,986 common shares
    • Raised $342.8 million in net proceeds from the issuance of 3.60% senior unsecured notes due 2026
    • Raised $334.1 million in net proceeds from the issuance of 5.20% Series F preferred stock

Craig Macnab, Chief Executive Officer, commented: "We are delighted to report another excellent year at NNN, with per share FFO results and acquisitions activity all being records. We were pleased with our capital market activity in 2016 with well executed debt and preferred offerings which were attractively priced and improved our long term cost of capital. As we head into 2017, our balance sheet positions us well for building shareholder value, growing per share results and continuing our 27 year record of annual increases in our dividend."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases.  As of December 31, 2016, the company owned 2,535 properties in 48 states with a gross leasable area of approximately 27.2 million square feet and with a weighted average remaining lease term of 11.6 years.  For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on February 13, 2017, at 10:30 a.m. ET to review these results.  The call can be accessed on the National Retail Properties web site live at http://www.nnnreit.com.  For those unable to listen to the live broadcast, a replay will be available on the company's web site.  In addition, a summary of any earnings guidance given on the call will be posted to the company's web site.

Statements in this press release that are not strictly historical are "forward-looking" statements.  These statements generally are characterized by the use of terms such as "believe," "expect," "intend," "may," "estimated," or other similar words or expressions. Forward-looking statements involve known and unknown risks, which may cause the company's actual future results to differ materially from expected results.  These risks include, among others, general economic conditions, local real estate conditions, changes in interest rates, increases in operating costs, the preferences and financial condition of the company's tenants, the availability of capital and risks related to the company's status as a REIT.  Additional information concerning these and other factors that could cause actual results to differ materially from these forward-looking statements is contained from time to time in the company's Securities and Exchange Commission (the "Commission") filings, including, but not limited to, the company's Annual Report on Form 10-K.  Copies of each filing may be obtained from the company or the Commission.  Such forward-looking statements should be regarded solely as reflections of the company's current operating plans and estimates.  Actual operating results may differ materially from what is expressed or forecast in this press release.  National Retail Properties, Inc. undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.

The reported results are preliminary and not final and there can be no assurance that the results will not vary from the final information filed on Form 10-K with the Commission for the quarter and year ended December 31, 2016.  In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made. 

Funds From Operations, commonly referred to as FFO, is a relative non-GAAP financial measure of operating performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP.  FFO is defined by the National Association of Real Estate Investment Trusts ("NAREIT") and is used by the company as follows:  net earnings (computed in accordance with GAAP) plus depreciation and amortization of assets unique to the real estate industry, excluding gains (or including losses), any applicable taxes and noncontrolling interests on the disposition of certain assets, the company's share of these items from the company's unconsolidated partnerships and any impairment charges on a depreciable real estate asset.

FFO is generally considered by industry analysts to be the most appropriate measure of performance of real estate companies.  FFO does not necessarily represent cash provided by operating activities in accordance with GAAP and should not be considered an alternative to net earnings as an indication of the company's performance or to cash flow as a measure of liquidity or ability to make distributions.  Management considers FFO an appropriate measure of performance of an equity REIT because it primarily excludes the assumption that the value of the real estate assets diminishes predictably over time, and because industry analysts have accepted it as a performance measure.  The company's computation of FFO may differ from the methodology for calculating FFO used by other equity REITs, and therefore, may not be comparable to such other REITs.  A reconciliation of net earnings (computed in accordance with GAAP) to FFO, as defined by NAREIT, is included in the financial information accompanying this release.

Core Funds From Operations ("Core FFO") is a non-GAAP measure of operating performance that adjusts FFO to eliminate the impact of certain GAAP income and expense amounts that the company believes are infrequent and unusual in nature and/or not related to its core real estate operations. Exclusion of these items from similar FFO-type metrics is common within the REIT industry, and management believes that presentation of Core FFO provides investors with a potential metric to assist in their evaluation of the company's operating performance across multiple periods and in comparison to the operating performance of its peers because it removes the effect of unusual items that are not expected to impact the company's operating performance on an ongoing basis. Core FFO is used by management in evaluating the performance of the company's core business operations and is a factor in determining management compensation. Items included in calculating FFO that may be excluded in calculating Core FFO may include items like transaction related gains, income or expense, impairments on land or commercial mortgage residual interests, preferred stock redemption costs or other non-core amounts as they occur. The company's computation of Core FFO may differ from the methodology for calculating Core FFO used by other equity REITs, and therefore, may not be comparable to such other REITs. A reconciliation of net earnings (computed in accordance with GAAP) to Core FFO is included in the financial information accompanying this release.

Adjusted Funds From Operations ("AFFO") is a non-GAAP financial measure of operating performance used by many companies in the REIT industry. AFFO adjusts FFO for certain non-cash items that reduce or increase net income in accordance with GAAP. AFFO should not be considered an alternative to net earnings, as an indication of the company's performance or to cash flow as a measure of liquidity or ability to make distributions. Management considers AFFO a useful supplemental measure of the company's performance. The company's computation of AFFO may differ from the methodology for calculating AFFO used by other equity REITs, and therefore, may not be comparable to such other REITs. A reconciliation of net earnings (computed in accordance with GAAP) to AFFO is included in the financial information accompanying this release.

National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)

Quarter Ended

Year Ended

December 31,

December 31,

2016

2015

2016

2015

Income Statement Summary














Revenues:






Rental and earned income

$

135,947

$

121,106

$

515,954

$

465,282

Real estate expense reimbursement from tenants

4,732

4,561

14,984

14,868

Interest and other income from real estate transactions

128

264

1,032

988

Interest income on commercial mortgage residual interests

392

446

1,677

1,778

141,199

126,377

533,647

482,916








Operating expenses:






General and administrative

9,408

9,657

36,508

34,736

Real estate

6,555

5,575

20,852

19,776

Depreciation and amortization

38,987

34,848

149,101

134,798

Impairment – commercial mortgage residual interests valuation

—

51

6,830

531

Impairment losses – real estate and other charges, net of recoveries

338

708

11,287

4,420

55,288

50,839

224,578

194,261








Other expenses (revenues):






Interest and other income

(62)

(42)

(170)

(109)

Interest expense

24,429

24,548

96,352

90,008

Real estate acquisition costs

42

33

563

927

24,409

24,539

96,745

90,826








Income tax expense

—

(9,827)

—

(10,318)








Earnings before gain on disposition of real estate, net of income tax expense

61,502

41,172

212,324

187,511








Gain on disposition of real estate, net of income tax expense

4,624

1,305

27,182

10,450








Earnings including noncontrolling interests

66,126

42,477

239,506

197,961








Earnings from continuing operations attributable to noncontrolling interests:

(34)

(6)

(6)

(125)








Net earnings attributable to NNN

66,092

42,471

239,500

197,836

Series D preferred stock dividends

(4,762)

(4,762)

(19,047)

(19,047)

Series E preferred stock dividends

(4,097)

(4,097)

(16,387)

(16,387)

Series F preferred stock dividends

(3,189)

—

(3,189)

—

Net earnings available to common stockholders

$

54,044

$

33,612

$

200,877

$

162,402
















Weighted average common shares outstanding:






Basic

146,266

137,111

144,176

133,999

Diluted

146,763

137,623

144,661

134,489








Net earnings per share available to common stockholders:






Basic

$

0.37

$

0.24

$

1.39

$

1.21

Diluted

$

0.37

$

0.24

$

1.38

$

1.20

National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)

Quarter Ended

Year Ended

December 31,

December 31,

2016

2015

2016

2015

Funds From Operations (FFO) Reconciliation:






Net earnings available to common stockholders

$

54,044

$

33,612

$

200,877

$

162,402

Real estate depreciation and amortization:

38,907

34,754

148,779

134,380

Gain on disposition of real estate, net of income tax and noncontrolling interests

(4,579)

(1,305)

(27,137)

(10,397)

Impairment losses – depreciable real estate, net of recoveries and income tax

345

258

8,025

2,808

Total FFO adjustments

34,673

33,707

129,667

126,791

FFO available to common stockholders

$

88,717

$

67,319

$

330,544

$

289,193








FFO per common share:






Basic

$

0.61

$

0.49

$

2.29

$

2.16

Diluted

$

0.60

$

0.49

$

2.28

$

2.15








Core Funds from Operations Reconciliation:






Net earnings available to common stockholders

$

54,044

$

33,612

$

200,877

$

162,402

Total FFO adjustments

34,673

33,707

129,667

126,791

FFO available to common stockholders

88,717

67,319

330,544

289,193








Impairment – commercial mortgage residual interests valuation

—

51

6,830

531

Impairment losses – non-depreciable real estate and other charges

—

—

—

156

Bad debt expense – loans

—

—

3,269

—

Income tax benefit

—

(316)

—

(316)

TRS revocation election

—

9,607

—

9,607

Total Core FFO adjustments

—

9,342

10,099

9,978

Core FFO available to common stockholders

$

88,717

$

76,661

$

340,643

$

299,171








Core FFO per common share:






Basic

$

0.61

$

0.56

$

2.36

$

2.23

Diluted

$

0.60

$

0.56

$

2.35

$

2.22

































































Quarter Ended

Year Ended

December 31,

December 31,

2016

2015

2016

2015

Adjusted Funds From Operations (AFFO) Reconciliation:






Net earnings available to common stockholders

$

54,044

$

33,612

$

200,877

$

162,402

Total FFO adjustments

34,673

33,707

129,667

126,791

Total Core FFO adjustments

—

9,342

10,099

9,978

Core FFO available to common stockholders

88,717

76,661

340,643

299,171








Straight-line accrued rent

(273)

(529)

(252)

(368)

Net capital lease rent adjustment

309

331

1,364

1,277

Below market rent amortization

(662)

(671)

(2,842)

(3,046)

Stock based compensation expense

2,689

2,461

10,758

9,671

Capitalized interest expense

(495)

(750)

(1,738)

(2,383)

Loss on sale of mortgage receivable

—

450

—

450

Total AFFO adjustments

1,568

1,292

7,290

5,601

AFFO available to common stockholders

$

90,285

$

77,953

$

347,933

$

304,772








AFFO per common share:






Basic

$

0.62

$

0.57

$

2.41

$

2.27

Diluted

$

0.62

$

0.57

$

2.41

$

2.27








Other Information:






Percentage rent

$

776

$

802

$

1,735

$

1,430

Amortization of debt costs

$

810

$

773

$

3,086

$

2,915

Scheduled debt principal amortization (excluding maturities)

$

129

$

378

$

656

$

1,587

Non-real estate depreciation expense

$

83

$

77

$

333

$

418
















2017 Earnings Guidance:














Core FFO guidance for 2017 is $2.42 to $2.48 per share. The 2017 AFFO is estimated to be $2.46 to $2.52 per share. The FFO guidance equates to net earnings of $1.37 to $1.43 per share, plus $1.05 per share of expected real estate depreciation and amortization and excludes any gains from the sale of real estate and any charges for impairments, severance costs, or preferred stock redemption charges. The guidance is based on current plans and assumptions and subject to risks and uncertainties more fully described in this press release and the company's reports filed with the Securities and Exchange Commission.


2017 Guidance

 Net earnings per common share excluding any gains on sale of real estate, impairment charges, severance charges or charges in connection with preferred stock redemption

$1.37 - $1.43 per share

 Real estate depreciation and amortization per share

$1.05 per share

Core FFO per share

$2.42 - $2.48 per share

  AFFO per share

$2.46 - $2.52 per share

  G&A expenses (excluding severance charges)

$34 - $35 Million

  Real estate expenses, net of tenant reimbursements

$6.0 - $6.5 Million

  Acquisition volume

$500 - $600 Million

  Disposition volume

$80 - $120 Million

National Retail Properties, Inc.

(in thousands)

(unaudited)


December 31, 2016

December 31, 2015

Balance Sheet Summary








Assets:



Real estate:



Accounted for using the operating method, net of accumulated depreciation and amortization

$

5,881,280

$

5,231,413

Accounted for using the direct financing method

11,230

14,518

Real estate held for sale

23,850

57,527

Cash and cash equivalents

294,540

13,659

Restricted cash and cash held in escrow

—

601

Receivables, net of allowance

3,418

3,344

Mortgages, notes and accrued interest receivable, net of allowance

1,252

8,688

Accrued rental income, net of allowance

25,101

25,529

Debt costs, net of accumulated amortization

2,715

4,003

Commercial mortgage residual interests

36

11,115

Other assets

90,729

89,647

Total assets

$

6,334,151

$

5,460,044





Liabilities:



Line of Credit Payable

$

-

$

-

Mortgages payable, including unamortized premium and net of unamortized debt cost

13,878

23,964

Notes payable, net of unamortized discount and unamortized debt costs

2,297,811

1,951,980

Accrued interest payable

19,665

20,113

Other liabilities

85,869

121,594

Total liabilities

2,417,223

2,117,651





Stockholders' equity of NNN

3,916,799

3,342,134

Noncontrolling interests

129

259

Total equity

3,916,928

3,342,393





Total liabilities and equity

$

6,334,151

$

5,460,044





Common shares outstanding

147,150

141,008





Gross leasable area, Property Portfolio (square feet)

27,204

24,964





National Retail Properties, Inc.

Debt Summary

As of December 31, 2016

(in thousands)

(unaudited)

Unsecured Debt

Principal

Principal,
Net of
Unamortized
Discount

Stated Rate

Effective Rate

Maturity Date

Line of credit payable

$

—

$

—

L + 92.5 bps

—

January 2019











Unsecured notes payable:




















2017

250,000

249,907

6.875%

6.924%

October 2017

2021

300,000

297,764

5.500%

5.689%

July 2021

2022

325,000

321,917

3.800%

3.985%

October 2022

2023

350,000

348,269

3.300%

3.388%

April 2023

2024

350,000

349,451

3.900%

3.924%

June 2024

2025

400,000

399,131

4.000%

4.029%

November 2025

2026

350,000

346,153

3.600%

3.733%

December 2026

Total

2,325,000

2,312,592

















Total unsecured debt (1)

$

2,325,000

$

2,312,592

















Debt costs

(21,157)






Accumulated amortization

6,376






Debt costs, net of accumulated amortization

(14,781)






Notes payable, net of unamortized discount and unamortized debt costs

$

2,297,811

















(1) Unsecured notes payable have a weighted average interest rate of 4.4% and a weighted average maturity of 6.6 years
















Mortgages Payable

Principal Balance

Interest Rate

Maturity Date

Mortgage(1)

$

13,987

5.230%

July 2023

Debt costs

(147)




Accumulated amortization

38




Debt costs, net of accumulated amortization

(109)




Mortgages payable, including unamortized premium and net of unamortized debt costs

$

13,878











(1) Includes unamortized premium





National Retail Properties, Inc.

Property Portfolio

Top 20 Lines of Trade





As of December 31,


Line of Trade

2016(1)

2015(2)

1.

Convenience stores

16.9

%

16.7

%

2.

Restaurants - full service

11.8

%

11.0

%

3.

Restaurants - limited service

7.5

%

7.2

%

4.

Automotive service

6.6

%

7.0

%

5.

Family entertainment centers

5.8

%

5.6

%

6.

Health and fitness

5.7

%

3.8

%

7.

Theaters

4.9

%

5.2

%

8.

Automotive parts

3.9

%

4.2

%

9.

Recreational vehicle dealers, parts and accessories

3.4

%

3.6

%

10.

Banks

3.1

%

3.4

%

11.

Sporting goods

2.5

%

3.3

%

12.

Medical service providers

2.4

%

2.2

%

13.

Wholesale clubs

2.4

%

2.6

%

14.

Drug stores

2.1

%

2.3

%

15.

Consumer electronics

2.0

%

2.2

%

16.

Travel plazas

1.9

%

2.1

%

17.

Furniture

1.9

%

1.1

%

18.

General merchandise

1.8

%

1.9

%

19.

Home improvement

1.8

%

1.8

%

20.

Home furnishings

1.7

%

1.9

%


Other

9.9

%

10.9

%


Total

100.0

%

100.0

%

Top 10 States


State

% of Total(1)

State

% of Total(1)

1.

Texas

18.4

%

6.

Georgia

4.3

%

2.

Florida

9.1

%

7.

Indiana

4.2

%

3.

Illinois

5.7

%

8.

Virginia

3.5

%

4.

Ohio

5.7

%

9.

Alabama

3.0

%

5.

North Carolina

4.7

%

10.

Tennessee

2.8

%


(1)  

  Based on the annualized base rent for all leases in place as of December 31, 2016.

(2)  

  Based on the annualized base rent for all leases in place as of December 31, 2015.

National Retail Properties, Inc.
Property Portfolio

Top Tenants (≥ 2.0%)




Properties

% of Total (1)

Sunoco

125

5.4%

Mister Car Wash

90

4.0%

LA Fitness

29

3.8%

AMC Theatres

20

3.5%

Camping World

32

3.4%

Couche-Tard (Pantry)

86

3.3%

7-Eleven

77

3.3%

SunTrust

121

3.0%

Bell American (Taco Bell)

115

2.8%

Chuck E. Cheese's

53

2.5%

BJ's Wholesale Club

8

2.4%

Frisch's Restaurant

74

2.2%

Gander Mountain

12

2.2%

Bob Evans

117

2.0%






Lease Expirations(2)



% of
Total(1)

# of
Properties

Gross
Leasable
Area (3)


% of
Total(1)

# of
Properties

Gross
Leasable
Area (3)

2017

1.2%

27

502,000

2023

2.5%

85

1,014,000

2018

3.2%

90

1,153,000

2024

2.6%

50

883,000

2019

3.0%

76

1,122,000

2025

5.0%

132

1,116,000

2020

3.8%

132

1,571,000

2026

6.0%

181

1,830,000

2021

4.4%

122

1,320,000

2027

9.0%

190

2,842,000

2022

6.1%

111

1,456,000

Thereafter

53.2%

1,305

11,891,000


(1)  

Based on the annual base rent of $543,446,000, which is the annualized base rent for all leases in place as of December 31, 2016.

(2)  

As of December 31, 2016, the weighted average remaining lease term is 11.6 years.

(3)  

Square feet.

SOURCE National Retail Properties, Inc.