Third Quarter 2013 Operating Results And 2014 FFO Guidance Announced By National Retail Properties, Inc.

ORLANDO, Fla., Nov. 5, 2013 /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, 2013.  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,


2013


2012


2013


2012


(in thousands, except per share data)

Revenues

$

100,621



$

84,391



$

289,100



$

243,073










Net earnings available to common stockholders

$

34,810



$

33,253



$

96,839



$

85,588


Net earnings per common share

$

0.29



$

0.30



$

0.81



$

0.79










FFO available to common stockholders

$

59,946



$

57,044



$

168,828



$

142,595


FFO per common share

$

0.49



$

0.52



$

1.41



$

1.32










Recurring FFO available to common stockholders

$

59,465



$

47,409



$

169,106



$

138,578


Recurring FFO per common share

$

0.49



$

0.43



$

1.42



$

1.28










AFFO available to common stockholders

$

60,898



$

51,365



$

175,269



$

146,582


AFFO per common share

$

0.50



$

0.47



$

1.47



$

1.36


 

  • Portfolio occupancy was  98.1% at September 30, 2013, as compared to 97.9% at December 31, 2012, and 97.9% at September 30, 2012

Investments and Dispositions for the quarter ended September 30, 2013:

  • Investments:
    • $90.0 million in property investments, including the acquisition of 35 properties with an aggregate 243,000 square feet of gross leasable area
  • Dispositions:
    • 22 properties with net proceeds of $36.0 million producing $811,000 of gains on sales, net of income tax

Investments and Dispositions for the nine months ended September 30, 2013:

  • Investments:
    • $570.3 million in property investments, including the acquisition of 261 properties with an aggregate 1,468,000 square feet of gross leasable area
  • Dispositions:
    • 31 properties with net proceeds of $52.6 million producing $3,467,000 of gains on sales, net of income tax and noncontrolling interest

Capital transactions for the quarter ended September 30, 2013:

  • Raised $5.2 million in net proceeds from the issuance of 158,280 common shares
  • Settled $223.0 million principal amount of 5.125% convertible senior notes due 2028

Capital transactions for the nine months ended September 30, 2013:

  • Raised $881.7 million of new long term capital at attractive pricing:
    • Raised $259.8 million in net proceeds from the issuance of 7,591,138 common shares
    • Raised $277.6 million in net proceeds from the issuance of 5.70% Series E preferred stock
    • Raised $344.3 million in net proceeds from the issuance of 3.30% senior unsecured notes due 2023
  • Settled $223.0 million principal amount of 5.125% convertible senior notes due 2028

National Retail Properties  announced an increase in 2013 FFO guidance from a range of $1.86 to $1.90 to a range of $1.88 to $1.90 per share before any impairment expense. 2013 AFFO is estimated to be $1.96 to $1.98 per share. The FFO guidance equates to net earnings before any gains or losses from the sale of real estate of $1.06 to $1.08 per share, plus $0.82 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 2014 FFO guidance of $1.94 to $1.99 per share and estimated 2014 AFFO to be $2.00 to $2.05 per share. This FFO guidance equates to net earnings before any gains or losses from the sale of real estate and impairment charges of $1.08 to $1.13 per share plus $0.86 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 remain focused on making investments that drive per share accretion allowing us to increase our annual dividend for the 24th consecutive year in the third quarter.  We are on track to produce 8% - 9% of FFO per share growth for 2013 while simultaneously reducing leverage.  Our very strong balance sheet positions us attractively for continued per share growth in 2014.   Our capital costs remain among the lowest in the sector and at the lowest levels they have been for most of the past two decades.  With 1,850 properties, our portfolio is more than fully diversified and by continuing to focus on traditional real estate metrics we are finding attractive risk-adjusted opportunities."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases.  As of September 30, 2013, the company owned 1,850 properties in 47 states with a gross leasable area of approximately 20.3 million square feet.  For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on November 5, 2013, 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 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 ended September 30, 2013.  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.

The company has earnings from discontinued operations. The company classified the revenues and expenses related to properties which generated revenue and were sold or generated revenue and were held for sale as of September 30, 2013, 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,



2013


2012


2013


2012

Income Statement Summary


















Revenues:









Rental and earned income


$

96,573



$

80,628



$

277,013



$

231,003


Real estate expense reimbursement from tenants


3,113



2,658



9,203



8,024


Interest and other income from real estate transactions


341



512



1,095



1,982


Interest income on commercial mortgage residual interests


594



593



1,789



2,064




100,621



84,391



289,100



243,073











Retail operations:









Revenues








19,008


Operating expenses








(18,543)


Net








465











Operating expenses:









General and administrative


7,534



8,653



25,209



23,282


Real estate


4,420



3,842



12,580



12,376


Depreciation and amortization


25,856



17,242



72,126



53,574


Impairment – commercial mortgage residual interests

     valuation


16





16



2,718


Impairment losses and other charges, net of recoveries




3,223



1,972



3,258




37,826



32,960



111,903



95,208











Other expenses (revenues):









Interest and other income


(722)



(1,194)



(1,433)



(1,913)


Interest expense


19,989



23,039



65,210



62,425




19,267



21,845



63,777



60,512











Income tax benefit (expense)


(365)



7,438



(363)



7,167


Equity in earnings of unconsolidated affiliate




3,769





4,074











Earnings from continuing operations


43,163



40,793



113,057



99,059











Earnings (loss) from discontinued operations, net of income tax expense


1,179



(2,803)



2,794



2,231











Earnings including noncontrolling interests


44,342



37,990



115,851



101,290











Loss (earnings) attributable to noncontrolling interests:









Continuing operations


17



27



276



73


Discontinued operations


(7)



(2)



(223)



(10)




10



25



53



63











Net earnings attributable to NNN


44,352



38,015



115,904



101,353


Series C preferred stock dividends








(1,979)


Series D preferred stock dividends


(4,762)



(4,762)



(14,285)



(10,688)


Series E preferred stock dividends


(4,780)





(4,780)




Excess of redemption value over carrying value of Series C

   preferred shares redeemed








(3,098)


Net earnings available to common stockholders


$

34,810



$

33,253



$

96,839



$

85,588













September 30,


September 30,



2013


2012


2013


2012










Weighted average common shares outstanding:









Basic


120,288



107,488



117,222



106,140


Diluted


121,230



110,340



119,356



108,092











Net earnings per share available to common stockholders:









Basic:









Continuing operations


$

0.28



$

0.33



$

0.80



$

0.78


Discontinued operations


0.01



(0.02)



0.02



0.02


Net earnings


$

0.29



$

0.31



$

0.82



$

0.80











Diluted:









Continuing operations


$

0.28



$

0.32



$

0.79



$

0.77


Discontinued operations


0.01



(0.02)



0.02



0.02


Net earnings


$

0.29



$

0.30



$

0.81



$

0.79




















 

National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)

 



Quarter Ended


Nine Months Ended



September 30,


September 30,



2013


2012


2013


2012

Funds From Operations (FFO) Reconciliation:









Net earnings available to common stockholders


$

34,810



$

33,253



$

96,839



$

85,588


Real estate depreciation and amortization:









Continuing operations


25,939



18,852



72,100



53,475


Discontinued operations


9



288



112



1,164


Joint venture real estate depreciation




23





112


Joint venture gain on disposition of real estate




(2,341)





(2,341)


Gain on disposition of real estate, net of tax and

     noncontrolling interest


(811)



(1,694)



(3,467)



(4,446)


Impairment losses (recoveries) - real estate


(1)



8,663



3,244



9,043


Total FFO adjustments


25,136



23,791



71,989



57,007


FFO available to common stockholders


$

59,946



$

57,044



$

168,828



$

142,595











FFO per share:









Basic


$

0.50



$

0.53



$

1.44



$

1.34


Diluted


$

0.49



$

0.52



$

1.41



$

1.32











Recurring Funds from Operations Reconciliation:









Net earnings available to common shareholders


$

34,810



$

33,253



$

96,839



$

85,588


Total FFO adjustments


25,136



23,791



71,989



57,007


FFO available to common shareholders


59,946



57,044



168,828



142,595











Excess of redemption value over carrying value of preferred

   share redemption








3,098


Impairment losses and other charges, net of recoveries


16





775



2,520


Income tax benefit




(7,671)





(7,671)


Joint venture disposition fee and promote income




(1,964)





(1,964)


Notes receivable redemption income


(497)





(497)




Total Recurring FFO adjustments


(481)



(9,635)



278



(4,017)


Recurring FFO available to common shareholders


$

59,465



$

47,409



$

169,106



$

138,578











Recurring FFO per share:









Basic


$

0.49



$

0.44



$

1.44



$

1.31


Diluted


$

0.49



$

0.43



$

1.42



$

1.28



































































Quarter Ended


Nine Months Ended



September 30,


September 30,



2013


2012


2013



2012


Adjusted Funds From Operations (AFFO) Reconciliation:









Net earnings available to common shareholders


$

34,810



$

33,253



$

96,839



$

85,588


Total FFO adjustments


25,136



23,791



71,989



57,007


Total Recurring FFO adjustments


(481)



(9,635)



278



(4,017)


Recurring FFO available to common stockholders


59,465



47,409



169,106



138,578











Straight line accrued rent


(346)



(528)



(318)



(1,058)


Net capital lease rent adjustment


420



414



1,230



1,222


Below market rent amortization


(585)



(628)



(1,833)



(1,865)


Stock based compensation expense


1,917



1,988



5,525



5,756


Capitalized interest expense


(470)



(336)



(1,010)



(1,204)


Convertible debt interest expense




1,082



2,072



3,189


Joint venture disposition fee and promote income




1,964





1,964


Notes receivable redemption income


497





497




Total AFFO adjustments


1,433



3,956



6,163



8,004


AFFO available to common stockholders


$

60,898



$

51,365



$

175,269



$

146,582











AFFO per share:









Basic


$

0.51



$

0.48



$

1.50



$

1.38


Diluted


$

0.50



$

0.47



$

1.47



$

1.36











Other Information:









Percentage rent


$

267



$

242



$

801



$

572


Amortization of debt costs


$

654



$

850



$

2,460



$

2,506


Scheduled debt principal amortization (excluding maturities)


$

270



$

252



$

795



$

931


Non-real estate depreciation expense


$

62



$

40



$

185



$

80


Real estate acquisition costs (included in general and

     administrative expense)


$

55



$

40



$

1,659



$

345


 

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, 2013 and generated revenue, as discontinued operations.  The following is a summary of the earnings (loss) from discontinued operations.












Quarter Ended


Nine Months Ended



September 30,


September 30,



2013


2012


2013


2012










Revenues:









Rental and earned income


$

803



$

1,643



$

2,037



$

5,917


Real estate expense reimbursement from tenants


63



124



231



323


Interest and other income from real estate transactions


1



4



37



38




867



1,771



2,305



6,278











Expenses:









General and administrative


3



2



218



7


Real estate


219



305



479



846


Depreciation and amortization


148



301



297



1,204


Impairment losses and other charges, net of recoveries


(1)



5,440



2,046



5,785


Interest


136



183



444



552




505



6,231



3,484



8,394











Gain on disposition of real estate


1,228



1,694



4,402



4,446


Income tax expense


(411)



(37)



(429)



(99)











Earnings (loss) from discontinued operations attributable to

  NNN


1,179



(2,803)



2,794



2,231


Earnings (loss) attributable to noncontrolling interests


(7)



(2)



(223)



(10)


Earnings (loss) from discontinued operations attributable to

  NNN


$

1,172



$

(2,805)



$

2,571



$

2,221


 

National Retail Properties, Inc.

(in thousands)

(unaudited)

 



September 30,

2013


December 31,

2012

Balance Sheet Summary










Assets:





Cash and cash equivalents


$

6,530



$

2,076


Receivables, net of allowance


2,736



3,112


Mortgages, notes and accrued interest receivable


16,693



27,770


Real estate portfolio:





Accounted for using the operating method, net of

     accumulated depreciation and amortization


4,221,892



3,793,416


Accounted for using the direct financing method


21,523



22,692


Real estate held for sale


16,792



18,699


Commercial mortgage residual interests


14,755



13,096


Accrued rental income, net of allowance


25,411



25,458


Debt costs, net of accumulated amortization


13,535



12,781


Other assets


96,993



68,926


Total assets


$

4,436,860



$

3,988,026







Liabilities:





Line of credit payable


$



$

174,200


Mortgages payable, including unamortized premium


9,764



10,602


Notes payable - convertible, net of unamortized discount




236,500


Notes payable, net of unamortized discount


1,513,884



1,165,662


Accrued interest payable


27,913



17,527


Other liabilities


97,369



85,950


Total liabilities


1,648,930



1,690,441







Stockholders' equity of NNN


2,786,683



2,296,285


Noncontrolling interests


1,247



1,300


Total equity


2,787,930



2,297,585







Total liabilities and equity


$

4,436,860



$

3,988,026







Common shares outstanding


121,857



111,555







Gross leasable area, Property Portfolio (square feet)


20,292



19,168







 

National Retail Properties, Inc.
Property Portfolio


 Top 20 Lines of Trade






As of September 30,



Line of Trade


2013(1)


2012 (2)

1.


Convenience stores


19.9%


21.6%

2.


Restaurants - full service


9.8%


11.3%

3.


Automotive service


7.6%


6.4%

4.


Restaurants - limited service


5.4%


3.5%

5.


Automotive parts


5.1%


5.8%

6.


Theaters


4.4%


4.5%

7.


Banks


4.1%


0.2%

8.


Health and fitness


4.0%


2.8%

9.


Sporting goods


3.7%


4.5%

10.


Wholesale clubs


3.1%


3.6%

11.


Recreational vehicle dealers, parts and accessories


3.1%


2.9%

12.


Drug stores


2.7%


3.2%

13.


Consumer electronics


2.7%


3.2%

14.


Home improvement


2.5%


3.1%

15.


Family entertainment centers


2.2%


2.1%

16.


Travel plazas


2.0%


2.3%

17.


Home furnishings


1.6%


1.5%

18.


Books


1.6%


1.9%

19.


Grocery


1.5%


1.8%

20.


General merchandise


1.5%


1.3%



Other


11.5%


12.5%



Total


100.0%


100.0%

 

Top 10 States



State



% of Total(1)



State



% of Total(1)

1.

Texas



20.6%


6.

Virginia



4.6%

2.

Florida



10.6%


7.

Indiana



3.9%

3.

Illinois



5.3%


8.

California



3.6%

4.

Georgia



4.9%


9.

Pennsylvania



3.3%

5.

North Carolina



4.7%


10.

Ohio



3.2%

 

(1)

Based on the annualized base rent for all leases in place as of September 30, 2013.

(2)

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

 

National Retail Properties, Inc.

Property Portfolio


Top Tenants (> 2.0%)





Properties


% of Total (1)


Susser Holdings


86



5.1

%


Mister Car Wash


85



5.0

%


Pantry


84



4.5

%


7-Eleven


68



4.2

%


LA Fitness


19



3.9

%


SunTrust


121



3.9

%


AMC Theatre


15



3.6

%


BJ's Wholesale Club


7



3.1

%


Camping World


23



3.1

%


Best Buy


19



2.7

%


Gander Mountain


9



2.3

%


Energy Transfer Partners (Sunoco)


38



2.1

%


Road Ranger


27



2.1

%


Pull-A-Part


20



2.1

%


Logan's Roadhouse


30



2.0

%

 

Lease Expirations(2)




% of
Total(1)


# of
Properties


Gross Leasable
Area (3)




% of
Total(1)


# of
Properties


Gross Leasable

Area (3)

2013


0.4

%


8



90,000



2019


2.6

%


47



785,000


2014


2.3

%


37



567,000



2020


3.1

%


96



907,000


2015


2.1

%


33



614,000



2021


4.6

%


99



912,000


2016


1.7

%


32



567,000



2022


6.8

%


92



1,060,000


2017


3.5

%


46



1,009,000



2023


3.3

%


53



947,000


2018


8.3

%


186



1,956,000



Thereafter


61.3

%


1,078



10,314,000


 

(1)

Based on the annual base rent of $391,340,000, which is the annualized base rent for all leases in place as of September 30, 2013.

(2)

As of September 30, 2013, the weighted average remaining lease term is 12 years.

(3)

Square feet.

 

SOURCE National Retail Properties, Inc.



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