Third Quarter 2012 Operating Results Announced by National Retail Properties, Inc.

ORLANDO, Fla., Nov. 5, 2012 /PRNewswire/ -- National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced operating results for the quarter and nine months ended September 30, 2012.  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,


2012


2011


2012


2011


(in thousands, except per share data)

Revenues

$

85,013


$

66,626


$

244,856


$

188,729









Net earnings available to common stockholders

$

33,253


$

20,936


$

85,588


$

59,666

Net earnings per common share

$

0.30


$

0.24


$

0.79


$

0.69









FFO available to common stockholders

$

57,044


$

34,623


$

142,595


$

98,196

FFO per common share

$

0.52


$

0.39


$

1.32


$

1.15









Recurring FFO available to common stockholders

$

47,409


$

35,238


$

138,578


$

99,207

Recurring FFO per common share

$

0.43


$

0.40


$

1.28


$

1.16









AFFO available to common stockholders

$

51,365


$

37,972


$

146,582


$

108,086

AFFO per common share

$

0.47


$

0.43


$

1.36


$

1.27

















  • Portfolio occupancy was 97.9% at September 30, 2012, as compared to 97.4% at December 31, 2011, and 97.2% at September 30, 2011

Investments and Dispositions for the quarter ended September 30, 2012:

  • Investments:
    • $139.6 million in the Property Portfolio, including acquiring 30 properties with an aggregate 575,000 square feet of gross leasable area
  • Dispositions:
    • 8 properties with net proceeds of $20.3 million

Investments and Dispositions for the nine months ended September 30, 2012:

  • Investments:
    • $452.6 million in the Property Portfolio, including acquiring 124 properties with an aggregate 2,048,000 square feet of gross leasable area
  • Dispositions:
    • 18 properties with net proceeds of $32.1 million

Capital transactions for the quarter ended September 30, 2012:

  • Issued 1,969,203 common shares generating $58.0 million of net proceeds
  • Issued $325.0 million principal amount of 3.80% senior unsecured notes due 2022 generating net proceeds of $317.1 million received on August 14, 2012
  • Repayment of $18.2 million of maturing 6.90% mortgage
  • From October 1, 2012 through November 2, 2012 approximately $100.6 million principal amount of the 3.95% convertible senior notes due 2026 had been surrendered for conversion, leaving approximately $38.1 million principal amount of the 3.95% notes outstanding

National Retail Properties announced an increase in 2012 FFO guidance from a range of $1.67 to $1.72 to a range of  $1.71 to $1.73 per share excluding first quarter's $3.1 million preferred stock redemption charge, third quarter's $7.7 million income tax benefit and $2.0 million of non-recurring joint venture income and excluding any impairment charges. 2012 AFFO is estimated to be $1.81 to $1.83 per share.  The change in guidance is primarily related to an increase in projected volume and timing of property acquisitions and recent capital markets activity.  This FFO guidance equates to net earnings before any gains or losses from the sale of real estate, impairment charges and other items noted above of $1.03 to $1.05 per share plus $0.68 per share of expected real estate depreciation and amortization.  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 2013 FFO guidance of $1.77 to $1.81 per share and estimated 2013 AFFO to be $1.86 to $1.90 per share. This FFO guidance equates to net earnings before any gains or losses from the sale of real estate and impairment charges of $1.07 to $1.11 per share plus $0.70 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.

National Retail Properties, Inc. also announced that its 15% owned joint venture NNN Retail Properties Fund I, LLC sold all 21 convenience stores owned by the joint venture in the third quarter of 2012 for approximately $87.5 million. The investors' $33.3 million total equity investment produced approximately $61.6 million of total cash distributions from operations and net sale proceeds since the joint venture was formed in September 2007.

Craig Macnab, Chief Executive Officer, commented: "As evidenced by our acquisition volume thus far this year, our team continues to identify attractive investment opportunities which enable us to deploy capital at initial yields well in excess of our cost of capital and drive very accretive results. These property acquisitions also further diversify our net lease retail portfolio. We are pleased with 2012's projected 9.6% increase in FFO per share results and the opportunity to continue the growth into 2013."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases.  As of September 30, 2012, the company owned 1,530 properties in 47 states with a gross leasable area of approximately 18.3 million square feet.  For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on November 5, 2012, 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.  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 our tenants, the availability of capital, risks related to our 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 those 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 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 ended September 30, 2012.  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) 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.

The company has determined that there are earnings from discontinued operations in each of its segments, real estate held for investment and real estate held for sale.  All property dispositions from the company's held for investment segment are classified as discontinued operations.  In addition, certain properties in the company's held for sale segment that have generated revenues before disposition are classified as discontinued operations.  The results of operations for prior periods for these properties now classified as discontinued operations have been restated to reflect the results in earnings from discontinued operations for comparability purposes.  These adjustments resulted in a decrease in the company's reported total revenues and total and per share earnings from continuing operations and an increase in the company's earnings from discontinued operations.  However, the company's total and per share FFO and net earnings available to common stockholders are not affected.


National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)

 



Quarter Ended


Nine Months Ended



September 30,


September 30,



2012


2011


2012


2011

Income Statement Summary






















Revenues:









Rental and earned income


$

81,261


$

63,026


$

232,843


$

178,011

Real estate expense reimbursement from tenants


2,647


2,437


7,967


6,859

Interest and other income from real estate transactions


512


381


1,982


1,534

Interest income on commercial mortgage residual interests


593


782


2,064


2,325



85,013


66,626


244,856


188,729










Retail operations:









Revenues



12,402


19,008


33,702

Operating expenses



(11,563)


(18,543)


(32,175)

Net



839


465


1,527










Operating expenses:









General and administrative


8,652


7,036


23,278


20,261

Real estate


3,878


4,434


12,437


11,983

Depreciation and amortization


17,465


14,777


54,253


41,707

Impairment – commercial mortgage residual interests

   valuation




2,718


396

Impairment losses and other charges


7,261



7,296




37,256


26,247


99,982


74,347










Other expenses (revenues):









Interest and other income


(1,194)


(457)


(1,913)


(1,083)

Interest expense


22,866


20,086


61,905


55,260



21,672


19,629


59,992


54,177










Income tax benefit (expense)


7,426


(68)


7,190


(258)

Equity in earnings of unconsolidated affiliate


3,769


109


4,074


321










Earnings from continuing operations


37,280


21,630


96,611


61,795










Earnings from discontinued operations


710


978


4,679


2,936










Earnings including noncontrolling interests


37,990


22,608


101,290


64,731










Loss (earnings) attributable to noncontrolling interests:









Continuing operations


32


20


87


113

Discontinued operations


(7)


4


(24)


(89)



25


24


63


24










Net earnings attributable to NNN


38,015


22,632


101,353


64,755

Series C preferred stock dividends



(1,696)


(1,979)


(5,089)

Series D preferred stock dividends


(4,762)



(10,688)


Excess of redemption value over carrying value of preferred

   shares redeemed




(3,098)


Net earnings available to common stockholders


$

33,253


$

20,936


$

85,588


$

59,666
























National Retail Properties, Inc.
(in thousands, except per share data)
(unaudited)













September 30,


September 30,



2012


2011


2012


2011










Weighted average common shares outstanding:









Basic


107,488


87,109


106,140


84,897

Diluted


110,340


87,788


108,092


85,439










Net earnings per share available to common stockholders:









Basic:









Continuing operations


$

0.30


$

0.23


$

0.76


$

0.67

Discontinued operations


0.01


0.01


0.04


0.03

Net earnings


$

0.31


$

0.24


$

0.80


$

0.70










Diluted:









Continuing operations


$

0.29


$

0.23


$

0.75


$

0.66

Discontinued operations


0.01


0.01


0.04


0.03

Net earnings


$

0.30


$

0.24


$

0.79


$

0.69










 


National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)

 



Quarter Ended


Nine Months Ended



September 30,


September 30,



2012


2011


2012


2011

Funds From Operations (FFO) Reconciliation:

















Net earnings available to common stockholders


$

33,253


$

20,936


$

85,588


$

59,666

Real estate depreciation and amortization:









Continuing operations


19,086


13,426


54,186


37,792

Discontinued operations


54


225


453


699

Joint venture real estate depreciation


23


44


112


133

Joint venture gain on disposition of real estate


(2,341)



(2,341)


Gain on disposition of real estate


(1,694)


(8)


(4,446)


(94)

Impairment losses - real estate


8,663



9,043


Total FFO adjustments


23,791


13,687


57,007


38,530

FFO available to common stockholders


$

57,044


$

34,623


$

142,595


$

98,196










FFO per share:









Basic


$

0.53


$

0.40


$

1.34


$

1.16

Diluted


$

0.52


$

0.39


$

1.32


$

1.15










Recurring Funds from Operations Reconciliation:









Net earnings available to common shareholders


$

33,253


$

20,936


$

85,588


$

59,666

Total FFO Adjustments


23,791


13,687


57,007


38,530

FFO available to common shareholders


57,044


34,623


142,595


98,196










Excess of redemption value over carrying value of preferred

   share redemption




3,098


Impairment losses and other charges, net of recoveries



615


2,520


1,011

Income tax benefit


(7,671)



(7,671)


Joint venture disposition fee and promote income


(1,964)



(1,964)


Total Recurring FFO adjustments


(9,635)


615


(4,017)


1,011

Recurring FFO available to common shareholders


$

47,409


$

35,238


$

138,578


$

99,207










Recurring FFO per share:









Basic


$

0.44


$

0.40


$

1.31


$

1.17

Diluted


$

0.43


$

0.40


$

1.28


$

1.16




























National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)





















Quarter Ended


Nine Months Ended



September 30,


September 30,



2012


2011


2012


2011

Adjusted Funds From Operations (AFFO) Reconciliation:









Net earnings available to common shareholders


$

33,253


$

20,936


$

85,588


$

59,666

Total FFO Adjustments


23,791


13,687


57,007


38,530

Total Recurring FFO adjustments


(9,635)


615


(4,017)


1,011

Recurring FFO available to common stockholders


47,409


35,238


138,578


99,207










Straight line accrued rent


(528)


(105)


(1,058)


(55)

Net capital lease rent adjustment


414


389


1,222


1,191

Below market rent amortization


(628)


(278)


(1,865)


(491)

Stock based compensation expense


1,988


1,428


5,756


4,269

Capitalized interest expense


(336)


(278)


(1,204)


(846)

Convertible debt interest expense


1,082


1,578


3,189


4,811

Joint venture disposition fee and promote income


1,964



1,964


Total AFFO adjustments


3,956


2,734


8,004


8,879

AFFO available to common stockholders


$

51,365


$

37,972


$

146,582


$

108,086










AFFO per share:









Basic


$

0.48


$

0.44


$

1.38


$

1.27

Diluted


$

0.47


$

0.43


$

1.36


$

1.27










Other Information:









Percentage rent


$

242


$

230


$

572


$

476

Amortization of debt costs


$

850


$

1,310


$

2,506


$

3,790

Scheduled debt principal amortization (excluding maturities)


$

252


$

274


$

931


$

815

Non-real estate depreciation expense


$

40


$

46


$

80


$

141

 


National Retail Properties, Inc.

(in thousands)
(unaudited)

 

 

Earnings from Discontinued Operations:  NNN classified the revenues and expenses related to properties which were sold

or were held for sale as of September 30, 2012 and generated revenue, as discontinued operations.  The following is a

summary of the earnings from discontinued operations.












Quarter Ended


Nine Months Ended



September 30,


September 30,



2012


2011


2012


2011














Revenues:









Rental and earned income


$

1,011


$

2,182


$

4,078


$

5,606

Interest and other income from real estate transactions


138


144


417


514



1,149


2,326


4,495


6,120










Expenses:









General and administrative


3


4


11


11

Real estate


269


283


785


929

Depreciation and amortization


78


248


525


766

Impairment losses - real estate


1,402


431


1,747


431

Interest


356


345


1,072


1,025



2,108


1,311


4,140


3,162










Gain on disposition of real estate


1,694


8


4,446


140

Income tax expense


(25)


(45)


(122)


(162)










Earnings from discontinued operations including noncontrolling

   interests


710


978


4,679


2,936

Loss (earnings) attributable to noncontrolling interests


(7)


4


(24)


(89)










Earnings from discontinued operations attributable to NNN


$

703


$

982


$

4,655


$

2,847

 


National Retail Properties, Inc.

(in thousands)

(unaudited)

 



September 30,

2012


December 31,

2011

Balance Sheet Summary














Assets:





Cash and cash equivalents


$

141,446


$

2,082

Receivables, net of allowance


1,220


2,149

Investment in unconsolidated affiliate



4,358

Mortgages, notes and accrued interest receivable


29,682


33,428

Real estate:





Accounted for using the operating method, net of

   accumulated depreciation and amortization


3,565,782


3,211,022

Accounted for using the direct financing method


24,539


26,518

Real estate held for sale


53,361


50,202

Commercial mortgage residual interests


12,508


15,299

Accrued rental income, net of allowance


25,806


25,187

Other assets


79,854


64,184

Total assets


$

3,934,198


$

3,434,429






Liabilities:





Line of credit payable


$


$

65,600

Mortgages payable, net of unamortized premium


10,873


23,171

Notes payable - convertible, net of unamortized discount


358,561


355,371

Notes payable, net of unamortized discount


1,165,429


894,967

Other liabilities


121,257


91,444

Total liabilities


1,656,120


1,430,553






Stockholders' equity of NNN


2,276,763


2,002,498

Noncontrolling interests


1,315


1,378

Total equity


2,278,078


2,003,876






Total liabilities and equity


$

3,934,198


$

3,434,429






Common shares outstanding


109,422


104,755






Gross leasable area, Property Portfolio (square feet)


18,331


16,428






 


NNN Retail Properties Fund I LLC
(in thousands)
(unaudited)


 

In September 2007, the company entered into a joint venture, NNN Retail Properties Fund I LLC, with

an affiliate of Crow Holdings Realty Partners IV, L.P.  The company owns a 15% equity interest, and the

following summary represents the Balance Sheet and Income Statement Summary for the joint venture. 

The company's investment in the joint venture is included in the company's Balance Sheet Summary

under "Investment in unconsolidated affiliate."

 

The joint venture sold all 21 convenience store properties it owned in the third quarter of 2012 for

approximately $87.5 million. The investors' $33.3 million total equity investment produced approximately

$61.6 million of total cash distributions from operations and net sale proceeds over the life of the joint

venture.



September 30,
2012


December 31,
2011










Assets:







Cash and cash equivalents


$

256


$

307

Receivables





200

Real estate





70,911

Other assets





402



$

256


$

71,820

Liabilities:







Notes payable


$


$

42,700

Other liabilities



231



65

Total liabilities



231



42,765








Members' equity



25



29,055








Total liabilities and equity


$

256


$

71,820

 






Quarter Ended


Nine Months Ended


September 30,


September 30,


2012


2011


2012


2011













Revenues:








Rental income

$

1,028


$

1,565


$

4,158


$

4,695









Expenses:








General and administrative

254


73


441


259

Real estate

17


4


25


14

Depreciation and amortization

187


369


833


1,106

Interest

124


459


506


1,365


582


905


1,805


2,744

Gain on disposition of real estate

15,609



15,609










Net earnings

$

16,055


$

660


$

17,962


$

1,951

 


National Retail Properties, Inc.

Property Portfolio

 

 Top 20 Lines of Trade





As of September 30,



Line of Trade


  2012(1)


  2011(2)

1.


Convenience stores


21.6%


21.4%

2.


Restaurants - full service


11.3%


9.9%

3.


Automotive service


6.4%


5.2%

4.


Automotive parts


5.8%


7.1%

5.


Theaters


4.5%


5.5%

6.


Sporting goods


4.5%


5.4%

7.


Wholesale clubs


3.6%


4.4%

8.


Restaurants - limited service


3.5%


3.6%

9.


Home improvement


3.2%


1.2%

10.


Drug stores


3.2%


3.4%

11.


Consumer electronics


3.1%


3.8%

12.


Recreational vehicle dealers, parts and accessories


2.9%


1.8%

13.


Health and fitness


2.8%


2.8%

14.


Travel plazas


2.3%


2.0%

15.


Family entertainment centers


2.1%


2.1%

16.


Books


1.9%


2.3%

17.


Grocery


1.8%


2.3%

18.


Home furnishings


1.5%


0.9%

19.


General merchandise


1.3%


1.2%

20.


Office supplies


1.2%


1.7%



Other


11.5%


12.0%



Total


100.0%


100.0%

 


Top 10 States



State



% of Total(1)



State



% of Total(1)

1.

Texas



21.8%


6.

California



4.5%

2.

Florida



9.2%


7.

Ohio



3.5%

3.

Illinois



5.6%


8.

Virginia



3.4%

4.

North Carolina



5.3%


9.

Indiana



3.3%

5.

Georgia



4.6%


10.

Pennsylvania



3.1%












(1)    Based on the annualized base rent for all leases in place as of September 30, 2012.

(2)    Based on the annualized base rent for all leases in place as of September 30, 2011.


 


National Retail Properties, Inc.
Property Portfolio

Top Tenants




Properties


% of Total (1)


Pantry


95


6.0%


Susser


86


5.7%


CL Thomas


66


4.8%


AMC Theatre


15


3.8%


Mister Car Wash


62


3.7%


BJ's Wholesale Club


7


3.6%


Best Buy


19


3.0%


Camping World


20


2.9%


LA Fitness


11


2.7%


Gander Mountain


9


2.6%


Pull-A-Part


20


2.4%


Road Ranger


27


2.4%


Bloomin' Brands (Outback)


34


2.3%


Logan's Roadhouse


31


2.2%


Pep Boys


17


2.2%







 


Lease Expirations(2)




% of

 Total(1) 


# of

Properties


Gross Leasable

Area (3)




% of

 Total(1) 


# of

Properties


Gross Leasable

Area (3)

2012


0.3%


6


103,000


2018


4.1%


49


1,108,000

2013


2.2%


34


623,000


2019


2.9%


42


704,000

2014


2.9%


42


582,000


2020


3.5%


92


867,000

2015


2.8%


71


960,000


2021


5.0%


91


791,000

2016


2.0%


39


610,000


2022


8.7%


102


1,091,000

2017


4.0%


47


1,003,000


Thereafter


61.6%


875


9,313,000


(1)    Based on the annual base rent of $335,417,000, which is the annualized base rent for all leases in place as of September 30, 2012.

(2)    As of September 30, 2012, the weighted average remaining lease term is 12 years.

(3)    Square feet.


 

SOURCE National Retail Properties, Inc.



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