Record Third Quarter 2015 Operating Results And 2016 FFO Guidance Announced By National Retail Properties, Inc.

News provided by

National Retail Properties, Inc.

Nov 03, 2015, 08:30 ET

ORLANDO, Fla., Nov. 3, 2015 /PRNewswire/ -- National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced its operating results for the quarter and nine months ended September 30, 2015.  Highlights include:

Operating Results:

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

Quarter Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

(in thousands, except per share data)

Revenues

$

123,143

$

109,856

$

356,537

$

319,532








Net earnings available to common stockholders

$

46,339

$

39,081

$

128,789

$

110,268

Net earnings per common share

$

0.34

$

0.31

$

0.96

$

0.89








FFO available to common stockholders

$

77,940

$

65,369

$

221,873

$

188,700

FFO per common share

$

0.58

$

0.52

$

1.66

$

1.53








Recurring FFO available to common stockholders

$

77,993

$

65,390

$

222,510

$

188,956

Recurring FFO per common share

$

0.58

$

0.52

$

1.67

$

1.53








AFFO available to common stockholders

$

79,516

$

66,644

$

226,819

$

192,072

AFFO per common share

$

0.59

$

0.53

$

1.70

$

1.56

Third Quarter 2015 Highlights:

  • FFO per share and Recurring FFO per share increased 11.5% over prior year results
  • AFFO per share increased 11.3% over prior year results
  • Portfolio occupancy was 99.1% at September 30, 2015, as compared to 98.8% at June 30, 2015 and March 31, 2015
  • Invested $263.8 million in 97 properties with an aggregate 732,000 square feet of gross leasable area at an initial cash yield of 7.2%
  • Sold five properties for $8.2 million producing $1.9 million of gains on sales, net of income tax
  • Raised $38.2 million in net proceeds from the issuance of 1,045,972 common shares
  • Results include $1.95 million of rental revenue from a 2013 tenant default settlement

Highlights for the nine months ended September 30, 2015:

  • FFO per share increased 8.5% over prior year results
  • Recurring FFO per share increased 9.2% over prior year results
  • AFFO per share increased 9.0% over prior year results
  • Invested $566.8 million in 190 properties with an aggregate 2,183,000 square feet of gross leasable area at an initial cash yield of 7.2%
  • Sold 14 properties for $33.6 million producing $9.1 million of gains on sales, net of income tax and noncontrolling interest
  • Raised $125.6 million in net proceeds from the issuance of 3,253,116 common shares

In October 2015, the company issued $400 million of 4.00% senior unsecured notes due 2025. The notes were offered at 99.759% of the principal amount with a yield to maturity of 4.029%. The company received approximately $395.3 million of net proceeds in connection with the issuance of the notes, which were partially used to repay outstanding indebtedness under the line of credit facility.

FFO guidance for 2015 was increased from a range of $2.16 to $2.19 to a range of $2.20 to $2.23 per share before any impairment expense. The 2015 AFFO is estimated to be $2.25 to $2.28 per share. The FFO guidance equates to net earnings before any gains or losses from the sale of real estate of $1.19 to $1.22 per share, plus $1.01 per share of expected real estate depreciation, amortization and impairments.  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.

The company also announced 2016 FFO guidance of $2.28 to $2.34 per share and estimated 2016 AFFO to be $2.33 to $2.39 per share. This FFO guidance equates to net earnings before any gains or losses from the sale of real estate and impairment charges of $1.31 to $1.37 per share plus $0.97 per share of expected real estate related depreciation and amortization. The guidance is based on current plans, assumptions, and estimates and is subject to the risks and uncertainties more fully described in this press release and the company's reports filed with the Securities and Exchange Commission.

Craig Macnab, Chief Executive Officer, commented: "We are pleased with the excellent acquisition activity we have achieved thus far this year.  Our strong balance sheet will allow us to continue to take advantage of the attractive deals that we are sourcing.  As a result, we are optimistic that 2016 will be another good year for NNN with consistent growth in per share results."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases.  As of September 30, 2015, the company owned 2,231 properties in 47 states with a gross leasable area of approximately 24.5 million square feet and with a weighted average remaining lease term of 11.5 years.  For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on November 3, 2015, 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, risks related to the company's status as a REIT and the profitability of the company's taxable subsidiary.  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 ("SEC") 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 SEC.  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-Q with the SEC for the quarter and nine months ended September 30, 2015.  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.

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

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Income Statement Summary
















Revenues:







Rental and earned income

$

118,889

$

105,617

$

344,177

$

306,593

Real estate expense reimbursement from tenants

3,469

3,323

10,307

9,783

Interest and other income from real estate transactions

345

452

721

1,786

Interest income on commercial mortgage residual interests

440

464

1,332

1,370


123,143

109,856

356,537

319,532









Operating expenses:







General and administrative

8,643

8,046

25,078

24,807

Real estate

4,782

4,583

14,199

13,669

Depreciation and amortization

33,607

29,768

99,950

85,787

Impairment – commercial mortgage residual interests
   valuation

53

21

481

256

Impairment losses, net of recoveries

(3)

77

3,711

562


47,082

42,495

143,419

125,081









Other expenses (revenues):







Interest and other income

(20)

(87)

(67)

(245)

Interest expense

21,996

21,641

65,460

63,681

Real estate acquisition costs

199

961

894

1,188


22,175

22,515

66,287

64,624









Income tax expense

(545)

(372)

(491)

(721)









Earnings from continuing operations

53,341

44,474

146,340

129,106









Earnings from discontinued operations, net of income tax
   expense

—

142

—

124

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

53,341

44,616

146,340

129,230









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

1,914

3,356

9,145

8,166









Earnings including noncontrolling interests

55,255

47,972

155,485

137,396









Earnings attributable to noncontrolling interests:







Continuing operations

(57)

(32)

(120)

(552)









Net earnings attributable to NNN

55,198

47,940

155,365

136,844

Series D preferred stock dividends

(4,762)

(4,762)

(14,285)

(14,285)

Series E preferred stock dividends

(4,097)

(4,097)

(12,291)

(12,291)

Net earnings available to common stockholders

$

46,339

$

39,081

$

128,789

$

110,268






















































National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)





Quarter Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014







Weighted average common shares outstanding:







Basic

133,893

124,554

132,950

122,884

Diluted

134,246

125,045

133,306

123,366









Net earnings per share available to common stockholders:







Basic:







  Continuing operations

$

0.34

$

0.31

$

0.96

$

0.89

  Net earnings

$

0.34

$

0.31

$

0.96

$

0.89









Diluted:







  Continuing operations

$

0.34

$

0.31

$

0.96

$

0.89

  Net earnings

$

0.34

$

0.31

$

0.96

$

0.89

National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)





Quarter Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Funds From Operations (FFO) Reconciliation:







Net earnings available to common stockholders

$

46,339

$

39,081

$

128,789

$

110,268

Real estate depreciation and amortization:







Continuing operations

33,513

29,707

99,626

85,605

Discontinuing operations


3



3

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

   noncontrolling interest

(1,914)

(3,499)

(9,092)

(7,801)

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

2

77

2,550

625

Total FFO adjustments

31,601

26,288

93,084

78,432

FFO available to common stockholders

$

77,940

$

65,369

$

221,873

$

188,700









FFO per common share:







Basic

$

0.58

$

0.52

$

1.67

$

1.54

Diluted

$

0.58

$

0.52

$

1.66

$

1.53









Recurring Funds from Operations Reconciliation:







Net earnings available to common stockholders

$

46,339

$

39,081

$

128,789

$

110,268

Total FFO adjustments

31,601

26,288

93,084

78,432

FFO available to common stockholders

77,940

65,369

221,873

188,700









Impairment  – commercial mortgage residual interests valuation

53

21

481

256

Impairment losses – non-depreciable real estate

—

—

156

—

Total Recurring FFO adjustments

53

21

637

256

Recurring FFO available to common stockholders

$

77,993

$

65,390

$

222,510

$

188,956









Recurring FFO per common share:







Basic

$

0.58

$

0.52

$

1.67

$

1.54

Diluted

$

0.58

$

0.52

$

1.67

$

1.53





















































































































National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)





Quarter Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Adjusted Funds From Operations (AFFO) Reconciliation:







Net earnings available to common stockholders

$

46,339

$

39,081

$

128,789

$

110,268

Total FFO adjustments

31,601

26,288

93,084

78,432

Total Recurring FFO adjustments

53

21

637

256

Recurring FFO available to common stockholders

77,993

65,390

222,510

188,956









Straight line accrued rent

179

(296)

161

(1,414)

Net capital lease rent adjustment

270

346

946

1,013

Below market rent amortization

(675)

(680)

(2,375)

(1,939)

Stock based compensation expense

2,434

2,281

7,210

6,774

Capitalized interest expense

(685)

(397)

(1,633)

(1,318)

Total AFFO adjustments

1,523

1,254

4,309

3,116

AFFO available to common stockholders

$

79,516

$

66,644

$

226,819

$

192,072









AFFO per common share:







Basic

$

0.59

$

0.54

$

1.71

$

1.56

Diluted

$

0.59

$

0.53

$

1.70

$

1.56









Other Information:







Percentage rent

$

331

$

177

$

628

$

489

Amortization of debt costs

$

719

$

713

$

2,142

$

2,066

Scheduled debt principal amortization (excluding maturities)

$

390

$

271

$

1,209

$

825

Non-real estate depreciation expense

$

100

$

66

$

340

$

199

National Retail Properties, Inc.

(in thousands)

(unaudited)





September 30,

2015

December 31,

 2014

Balance Sheet Summary








Assets:



Cash and cash equivalents

$

2,615

$

10,604

Receivables, net of allowance

2,020

3,013

Mortgages, notes and accrued interest receivable, net of allowance

10,427

11,075

Real estate portfolio:



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

5,163,123

4,716,368

Accounted for using the direct financing method

14,850

16,974

Real estate held for sale

3,593

6,707

Commercial mortgage residual interests

10,974

11,626

Accrued rental income, net of allowance

25,087

25,659

Debt costs, net of accumulated amortization

14,386

16,453

Other assets

102,160

108,235

Total assets

$

5,349,235

$

4,926,714





Liabilities:



Line of credit payable

$

282,400

$

—

Mortgages payable, including unamortized premium

24,527

26,339

Notes payable, net of unamortized discount

1,715,679

1,714,715

Accrued interest payable

29,513

17,396

Other liabilities

131,930

85,172

Total liabilities

2,184,049

1,843,622





Stockholders' equity:



Preferred stockholders' equity (stated liquidation value)

575,000

575,000

Common stockholders' equity

2,589,782

2,507,515

Total stockholders' equity of NNN

3,164,782

3,082,515

Noncontrolling interests

404

577

Total equity

3,165,186

3,083,092





Total liabilities and equity

$

5,349,235

$

4,926,714





Common shares outstanding

135,485

132,010





Gross leasable area, Property Portfolio (square feet)

24,451

22,479





National Retail Properties, Inc.

Debt Summary

As of September 30, 2015

(in thousands)

(unaudited)




















Unsecured Debt

Principal

Principal,

 Net of

Discount

Stated Rate

Effective

Rate

Maturity Date

Line of credit payable

$

282,400

$

282,400

L + 92.5 bps

1.119%

January 2019









Unsecured notes payable:









2015

150,000

149,989

6.150%

6.185%

December 2015

2017

250,000

249,769

6.875%

6.924%

October 2017

2021

300,000

297,243

5.500%

5.689%

July 2021

2022

325,000

321,338

3.800%

3.985%

October 2022

2023

350,000

347,966

3.300%

3.388%

April 2023

2024

350,000

349,374

3.900%

3.924%

June 2024

Total

1,725,000

1,715,679

















Total unsecured debt

$

2,007,400

$

1,998,079





















Note: October 2015, the company issued $400 million of 4.00% notes payable due 2025 with an effective interest rate of 4.029%.

Mortgages Payable

Principal
Balance

Interest Rate

Maturity Date

Mortgage(1)

$

14,693

5.230%

July 2023

Mortgage(1)

5,964

5.750%

April 2016

Mortgage(1)

2,834

6.400%

February 2017

Mortgage

1,035

6.900%

January 2017


$

24,526






(1) Includes unamortized premium

National Retail Properties, Inc.

Property Portfolio


 Top 20 Lines of Trade

As of September 30,

Line of Trade

2015(1)

2014(2)

1.

Convenience stores

16.8%

18.8%

2.

Restaurants – full service

11.2%

9.1%

3.

Restaurants – limited service

7.0%

6.6%

4.

Automotive service

6.9%

7.2%

5.

Family entertainment centers

5.4%

5.2%

6.

Theaters

5.1%

4.7%

7.

Automotive parts

4.3%

4.8%

8.

Health and fitness

3.6%

4.0%

9.

Recreational vehicle dealers, parts and accessories                  

3.6%

3.2%

10.

Banks

3.5%

3.8%

11.

Sporting goods

3.3%

3.5%

12.

Wholesale clubs

2.7%

2.9%

13.

Drug stores

2.4%

2.5%

14.

Consumer electronics

2.2%

2.5%

15.

Medical service providers

2.2%

1.9%

16.

Travel plazas

2.2%

1.9%

17.

Grocery

2.0%

1.2%

18.

Home furnishings

1.9%

1.8%

19.

Home improvement

1.8%

2.4%

20.

General merchandise

1.5%

1.6%

Other

10.4%

10.4%

Total

100.0%

100.0%

Top 10 States








State

% of Total(1)

State

% of Total(1)

1.

Texas

19.8%

6.

Georgia

4.6%

2.

Florida

9.3%

7.

Virgina

3.9%

3.

North Carolina

5.3%

8.

Indiana

3.9%

4.

Ohio

5.2%

9.

Pennsylvania

3.0%

5.

Illinois

4.8%

10.

Tennessee

2.9%







(1)

Based on the annualized base rent for all leases in place as of September 30, 2015.

(2)

Based on the annualized base rent for all leases in place as of September 30, 2014.

National Retail Properties, Inc.
Property Portfolio


Top Tenants (> 2.0%)






Properties

% of Total (1)

Sunoco

125

6.1%

Mister Car Wash

87

4.2%

Couche-Tard (Pantry)

86

3.7%

Camping World

32

3.6%

7-Eleven

77

3.6%

LA Fitness

25

3.6%

SunTrust

121

3.3%

AMC Theatre

16

3.0%

Chuck E. Cheese's

53

2.8%

BJ's Wholesale Club

7

2.7%

Frisch's Restaurant

74

2.5%

Gander Mountain

12

2.3%

Bell American (Taco Bell)

78

2.3%

Best Buy

19

2.2%

Lease Expirations(2)















% of

Total(1)

# of

Properties

Gross Leasable

Area (3)


% of

Total(1)

# of

Properties

Gross Leasable
Area (3)

2015

0.3%

11

132,000

2021

4.5%

112

1,142,000

2016

1.1%

27

434,000

2022

5.8%

96

1,143,000

2017

3.1%

53

1,088,000

2023

2.5%

55

903,000

2018

6.4%

184

1,646,000

2024

2.7%

49

767,000

2019

3.5%

80

1,119,000

2025

5.4%

131

982,000

2020

4.3%

135

1,537,000

Thereafter

60.4%

1,270

13,116,000

(1)

Based on the annual base rent of $475,980,000, which is the annualized base rent for all leases in place as of September 30, 2015.

(2)

As of September 30, 2015, the weighted average remaining lease term is 11.5 years.

(3)

Square feet.

SOURCE National Retail Properties, Inc.