FIRST QUARTER 2022 OPERATING RESULTS AND INCREASED 2022 GUIDANCE ANNOUNCED BY NATIONAL RETAIL PROPERTIES, INC.

News provided by

National Retail Properties, Inc.

May 03, 2022, 08:30 ET

ORLANDO, Fla., May 3, 2022 /PRNewswire/ -- National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced its operating results for the quarter ended March 31, 2022.  Highlights include:

Operating Results:

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


Quarter Ended
March 31,





2022



2021





(in thousands, except per share data)



Revenues


$

190,279



$

179,778











Net earnings available to common stockholders


$

81,372



$

52,102



Net earnings per common share


$

0.46



$

0.30











FFO available to common stockholders


$

131,593



$

99,821



FFO per common share


$

0.75



$

0.57











Core FFO available to common stockholders


$

135,187



$

121,149



Core FFO per common share


$

0.77



$

0.69











AFFO available to common stockholders


$

138,721


(1)

$

133,532


(2)

AFFO per common share


$

0.79


(1)

$

0.76


(2)

(1)


Amounts include $1,780 of net straight-line accrued rent from net rent deferral repayments from the COVID-19 rent deferral lease amendments for the quarter ended March 31, 2022. Excluding such, AFFO per common share would have been $0.78 for the quarter ended March 31, 2022.

(2)


Amounts exclude $9,381 of net straight-line accrued rent from net rent deferral repayments from the COVID-19 rent deferral lease amendments for the quarter ended March 31, 2021. Excluding such, AFFO per common share would have been $0.71 for the quarter ended March 31, 2021.

First Quarter 2022 Highlights:

  • Maintained high occupancy levels at 99.2%, with a weighted average remaining lease term of 10.6 years, at March 31, 2022 as compared to 99.0% at December 31, 2021 and 98.3% at March 31, 2021
  • Invested $210.8 million in property investments, including the acquisition of 59 properties with an aggregate 879,000 square feet of gross leasable area at an initial cash yield of 6.2%
  • Sold 10 properties for $20.1 million producing $4.0 million of gains on sales
  • Ended the quarter with $53.7 million of cash and no amounts drawn on the $1.1 billion bank credit facility
  • Maintained sector leading 14.5 year weighted average debt maturity with 100% fixed rate debt

Core FFO guidance for 2022 was increased from a range of $2.93 to $3.00 per share to a range of $3.01 to $3.08 per share. The 2022 AFFO is estimated to be $3.08 to $3.15 per share. The Core FFO guidance equates to net earnings of $1.80 to $1.87 per share, plus $1.21 per share of expected real estate depreciation and amortization and excludes any gains from the sale of real estate, charges for impairments and executive retirement costs. 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.

Steve Horn, Chief Executive Officer, commented: "We are very pleased with the strong start to 2022. Our first quarter results allow us to increase guidance to levels that project to approximately 6% growth in Core FFO per share for the year.  Our portfolio occupancy remains above our long-term average and our balance sheet remains well positioned to fund future acquisitions.   NNN's position in the triple net market, combined with our robust relationship tenant program, sets us up for consistent per share growth on a multi-year basis."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases.  As of March 31, 2022, the company owned 3,271 properties in 48 states with a gross leasable area of approximately 33.5 million square feet and with a weighted average remaining lease term of 10.6 years.  For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on May 3, 2022, 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, the potential impacts of the COVID-19 pandemic on the company's business operations, financial results and financial position and on the world economy, 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 (i) Annual Report on Form 10-K for the year ended December 31, 2021 and (ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.  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.

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, executive retirement costs, loss on early extinguishment of debt 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
March 31,





2022



2021



Income Statement Summary








Revenues:








     Rental income


$

189,763



$

179,198



     Interest and other income from real estate transactions



516




580






190,279




179,778











Operating expenses:








     General and administrative



11,042




11,748



     Real estate



7,198




7,725



     Depreciation and amortization



52,680




49,980



     Leasing transaction costs



88




38



     Impairment losses – real estate, net of recoveries



1,632




2,131



     Executive retirement costs



3,594




—






76,234




71,622



Gain on disposition of real estate



3,992




4,281



Earnings from operations



118,037




112,437











Other expenses (revenues):








     Interest and other income



(35)




(65)



     Interest expense



36,699




34,587


(1)

     Loss on early extinguishment of debt



—




21,328






36,664




55,850











Net earnings



81,373




56,587



Earnings attributable to noncontrolling interests



(1)




—











Net earnings attributable to NNN



81,372




56,587



Series F preferred stock dividends



—




(4,485)



Net earnings available to common stockholders


$

81,372



$

52,102











Weighted average common shares outstanding:








     Basic



174,772




174,589



     Diluted



174,911




174,715











Net earnings per share available to common stockholders:








     Basic


$

0.46



$

0.30



     Diluted


$

0.46



$

0.30



(1)


Includes $2,078 in connection with the redemption of 3.30% senior unsecured notes due 2023 for the quarter ended March 31, 2021.

National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)








Quarter Ended
March 31,





2022



2021



Funds From Operations (FFO) Reconciliation:








     Net earnings available to common stockholders


$

81,372



$

52,102



     Real estate depreciation and amortization



52,581




49,869



     Gain on disposition of real estate



(3,992)




(4,281)



     Impairment losses – depreciable real estate, net of recoveries



1,632




2,131



          Total FFO adjustments



50,221




47,719



FFO available to common stockholders


$

131,593



$

99,821











FFO per common share:








     Basic


$

0.75



$

0.57



     Diluted


$

0.75



$

0.57











Core Funds From Operations (Core FFO) Reconciliation:








     Net earnings available to common stockholders


$

81,372



$

52,102



     Total FFO adjustments



50,221




47,719



     FFO available to common stockholders



131,593




99,821











     Executive retirement costs



3,594




—



     Loss on early extinguishment of debt



—




21,328



          Total Core FFO adjustments



3,594




21,328



Core FFO available to common stockholders


$

135,187



$

121,149











Core FFO per common share:








     Basic


$

0.77



$

0.69



     Diluted


$

0.77



$

0.69



National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)








Quarter Ended
March 31,





2022



2021



Adjusted Funds From Operations (AFFO) Reconciliation:








     Net earnings available to common stockholders


$

81,372



$

52,102



     Total FFO adjustments



50,221




47,719



     Total Core FFO adjustments



3,594




21,328



     Core FFO available to common stockholders



135,187




121,149











     Straight-line accrued rent, net of reserves



1,096




8,332



     Net capital lease rent adjustment



75




90



     Below-market rent amortization



(140)




(162)



     Stock based compensation expense



2,601




4,186



     Capitalized interest expense



(98)




(63)



          Total AFFO adjustments



3,534




12,383



AFFO available to common stockholders


$

138,721


(1)

$

133,532


(2)









AFFO per common share:








     Basic


$

0.79


(1)

$

0.76


(2)

     Diluted


$

0.79


(1)

$

0.76


(2)









Other Information:








     Rental income from operating leases(3)


$

184,311



$

173,583



     Earned income from direct financing leases(3)


$

151



$

158



     Percentage rent(3)


$

701



$

104











     Real estate expense reimbursement from tenants(3)


$

4,600



$

5,353



     Real estate expenses



(7,198)




(7,725)



     Real estate expenses, net of tenant reimbursements


$

(2,598)



$

(2,372)











     Amortization of debt costs


$

1,171



$

1,840


(4)

     Scheduled debt principal amortization (excluding maturities)


$

165



$

156



     Non-real estate depreciation expense


$

102



$

113



(1)

Amounts include $1,780 of net straight-line accrued rent from net rent deferral repayments from the COVID-19 rent deferral lease amendments for the quarter ended March 31, 2022. Excluding such, AFFO per common share would have been $0.78 for the quarter ended March 31, 2022.

(2)

Amounts exclude $9,381 of net straight-line accrued rent from net rent deferral repayments from the COVID-19 rent deferral lease amendments for the quarter ended March 31, 2021. Excluding such, AFFO per common share would have been $0.71 for the quarter ended March 31, 2021.

(3)

For the quarters ended March 31, 2022 and 2021, the aggregate of such amounts is $189,763 and $179,198, respectively, and is classified as rental income on the income statement summary.

(4)

Includes $745 in connection with the redemption of the 3.30% senior unsecured notes due 2023 for the quarter ended March 31, 2021.

2022 Earnings Guidance:
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 Commission.



2022 Guidance

Net earnings per common share excluding any gains on disposition
    of real estate, impairment charges, and executive retirement costs


$1.80 - $1.87 per share

Real estate depreciation and amortization per share


$1.21 per share

Core FFO per share


$3.01 - $3.08 per share

AFFO per share(1)


$3.08 - $3.15 per share

General and administrative expenses


$40 - $42 Million

Real estate expenses, net of tenant reimbursements


$10 - $12 Million

Acquisition volume


$550 - $650 Million

Disposition volume


$80 - $100 Million

(1)


Estimates include the net straight-line accrued rent impact of the net rent repayment from the COVID-19 rent deferral lease amendments of $5.4 million for 2022. Excluding such, AFFO per common share guidance would have been $3.05 - $3.12 for 2022.

National Retail Properties, Inc.

(in thousands)

(unaudited)










March 31,
2022



December 31,
2021


Balance Sheet Summary














Assets:







     Real estate portfolio


$

7,591,643



$

7,444,289


     Real estate held for sale



562




5,557


     Cash and cash equivalents



53,736




171,322


     Receivables, net of allowance of $717 and $782, respectively



2,816




3,154


     Accrued rental income, net of allowance of $4,351 and $4,587, respectively



30,727




31,942


     Debt costs, net of accumulated amortization of $19,946 and $19,377, respectively



6,921




7,443


     Other assets



85,408




87,347


          Total assets


$

7,771,813



$

7,751,054









Liabilities:







     Line of credit payable


$

—



$

—


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



10,515




10,697


     Notes payable, net of unamortized discount and unamortized debt costs



3,736,781




3,735,769


     Accrued interest payable



58,022




23,923


     Other liabilities



68,749




79,002


          Total liabilities



3,874,067




3,849,391









Stockholders' equity of NNN



3,897,744




3,901,662


Noncontrolling interests



2




1


          Total equity



3,897,746




3,901,663









Total liabilities and equity


$

7,771,813



$

7,751,054









Common shares outstanding



175,810




175,636









Gross leasable area, Property Portfolio (square feet)



33,545




32,753


National Retail Properties, Inc. 

Debt Summary 

As of March 31, 2022 

(in thousands) 

(unaudited) 
















Unsecured Debt


Principal



Principal,
Net of
Unamortized
Discount



Stated
Rate



Effective
Rate



Maturity Date

Line of credit payable


$

—



$

—



L + 77.5 bps




—

%


June 2025
















Unsecured notes payable:















2024



350,000




349,821




3.900

%



3.924

%


June 2024

2025



400,000




399,608




4.000

%



4.029

%


November 2025

2026



350,000




348,006




3.600

%



3.733

%


December 2026

2027



400,000




399,035




3.500

%



3.548

%


October 2027

2028



400,000




398,009




4.300

%



4.388

%


October 2028

2030



400,000




398,950




2.500

%



2.536

%


April 2030

2048



300,000




296,000




4.800

%



4.890

%


October 2048

2050



300,000




294,192




3.100

%



3.205

%


April 2050

2051



450,000




441,761




3.500

%



3.602

%


April 2051

2052



450,000




439,685




3.000

%



3.118

%


April 2052

Total



3,800,000




3,765,067

























Total unsecured debt(1)


$

3,800,000



$

3,765,067

























Debt costs





$

(38,145)










Accumulated amortization




9,859










Debt costs, net of accumulated amortization




(28,286)










Notes payable, net of unamortized discount and
     unamortized debt costs



$

3,736,781










(1)


Unsecured notes payable have a weighted average interest rate of 3.7% and a weighted average maturity of 14.5 years.

Mortgages Payable


Principal
Balance



Interest
Rate



Maturity Date

Mortgage(1)


$

10,532




5.230

%


July 2023










Debt costs



(147)







Accumulated amortization



130







Debt costs, net of accumulated amortization



(17)







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


$

10,515


















(1)


Includes unamortized premium

As of March 31, 2022, Debt / EBITDA based on current quarter annualized is 5.3x.

National Retail Properties, Inc.
Debt Summary
As of March 31, 2022

Credit Facility and Note Covenants

The following is a summary of key financial covenants for the company's unsecured credit facility and notes, as defined and calculated per the terms of the facility's credit agreement and the notes' governing documents, respectively, which are included in the company's filings with the Commission. These calculations, which are not based on U.S. GAAP measurements, are presented to investors to show that as of March 31, 2022, the company believes it is in compliance with the covenants.

Unsecured Credit Facility Key Covenants


Required


March 31, 2022

Maximum leverage ratio


< 0.60


0.36

Minimum fixed charge coverage ratio


> 1.50


4.54

Maximum secured indebtedness ratio


< 0.40


—

Unencumbered asset value ratio


> 1.67


2.81

Unencumbered interest ratio


> 1.75


4.92






Unsecured Notes Key Covenants


Required


March 31, 2022

Limitation on incurrence of total debt


≤ 60%


40%

Limitation on incurrence of secured debt


≤ 40%


0.1%

Debt service coverage ratio


≥ 1.50


4.71

Maintenance of total unencumbered assets


≥ 150%


248%

National Retail Properties, Inc.
Property Portfolio

Top 20 Lines of Trade





As of March 31,



Lines of Trade


2022(1)


2021(2)

1.


Convenience stores


17.5%


18.0%

2.


Automotive service


12.6%


10.7%

3.


Restaurants – full service


9.7%


10.2%

4.


Restaurants – limited service


9.2%


9.5%

5.


Family entertainment centers


6.2%


6.0%

6.


Health and fitness


5.0%


5.2%

7.


Theaters


4.4%


4.4%

8.


Recreational vehicle dealers, parts and accessories


4.1%


3.5%

9.


Equipment rental


3.1%


3.1%

10.


Automotive parts


3.0%


3.1%

11.


Home improvement


2.4%


2.6%

12.


Wholesale clubs


2.4%


2.5%

13.


Furniture


2.4%


1.7%

14.


Medical service providers


2.0%


2.1%

15.


General merchandise


1.6%


1.7%

16.


Home furnishings


1.5%


1.6%

17.


Consumer electronics


1.5%


1.5%

18.


Travel plazas


1.5%


1.5%

19.


Automobile auctions, wholesale


1.3%


1.1%

20.


Drug stores


1.2%


1.4%



Other


7.4%


8.6%



Total


100.0%


100.0%

Top 10 States



State


% of
Total(1)




State


% of
Total(1)

1.


Texas


16.9%


6.


North Carolina


4.6%

2.


Florida


8.9%


7.


Indiana


4.0%

3.


Illinois


5.5%


8.


Tennessee


3.8%

4.


Ohio


5.4%


9.


Virginia


3.3%

5.


Georgia


4.7%


10.


California


3.3%

As a percentage of annual base rent, which is the annualized base rent for all leases in place.


(1)

$732,042,000 as of March 31, 2022.


(2)

$684,283,000 as of March 31, 2021.

National Retail Properties, Inc.
Property Portfolio

Top 20 Tenants



Tenant


# of
Properties


% of
Total(1)

1.


7-Eleven


138


4.9%

2.


Mister Car Wash


121


4.5%

3.


Camping World


47


4.0%

4.


LA Fitness


30


3.5%

5.


GPM Investments (Convenience Stores)


152


3.1%

6.


Flynn Restaurant Group (Taco Bell/Arby's)


204


3.0%

7.


AMC Theatre


20


2.8%

8.


Couche Tard (Pantry)


81


2.6%

9.


BJ's Wholesale Club


12


2.4%

10.


Sunoco


59


2.1%

11.


Mavis Tire Express Services


123


2.0%

12.


Chuck E. Cheese's


53


2.0%

13.


Frisch's Restaurants


69


1.8%

14.


Main Event


18


1.7%

15.


Fikes (Convenience Stores)


59


1.7%

16.


Life Time Fitness


3


1.5%

17.


Best Buy


16


1.5%

18.


Bob Evans


106


1.4%

19.


Dave & Buster's


11


1.4%

20.


Pull-A-Part


20


1.3%

Lease Expirations(3)



% of
Total(1)


# of
Properties


Gross
Leasable
Area (2)




% of
Total(1)


# of
Properties


Gross
Leasable
Area (2)

2022


1.3%


40


433,000


2028


4.6%


158


1,286,000

2023


2.4%


109


1,321,000


2029


3.1%


79


1,015,000

2024


3.2%


92


1,447,000


2030


3.6%


107


1,205,000

2025


5.7%


190


2,000,000


2031


8.2%


190


2,781,000

2026


5.4%


217


2,139,000


2032


6.3%


212


2,063,000

2027


8.7%


231


3,546,000


Thereafter


47.5%


1,618


14,022,000

(1)


Based on the annual base rent of $732,042,000, which is the annualized base rent for all leases in place as of March 31, 2022.

(2)


Square feet.

(3)


As of March 31, 2022, the weighted average remaining lease term is 10.6 years.

National Retail Properties, Inc.
Rent Deferral Lease Amendments
(in thousands)

The following table outlines the rent deferred and corresponding scheduled repayment by quarter of the COVID-19 rent deferral lease amendments executed as of March 31, 2022 (dollars in thousands):




Deferred




Scheduled Repayment





Accrual
Basis



Cash
Basis



Total



% of
Total




Accrual
Basis



Cash
Basis



Total



% of
Total



Cumulative
Total


2020



$

33,594



$

18,425



$

52,019




91.7

%



$

3,239



$

20



$

3,259




5.7

%



5.7

%































2021




990




3,768




4,758




8.3

%




25,935




5,841




31,776




56.0

%



61.7

%































2022

Q1



—




—




—




—





1,780




2,283




4,063




7.2

%



68.9

%


Q2



—




—




—




—





1,729




2,284




4,013




7.1

%



76.0

%


Q3



—




—




—




—





1,201




2,284




3,485




6.1

%



82.1

%


Q4



—




—




—




—





681




2,284




2,965




5.2

%



87.3

%





—




—




—




—





5,391




9,135




14,526




25.6

%



87.3

%































2023

Q1



—




—




—




—





9




1,704




1,713




2.9

%



90.2

%


Q2



—




—




—




—





10




543




553




1.0

%



91.2

%


Q3



—




—




—




—





—




543




543




1.0

%



92.2

%


Q4



—




—




—




—





—




544




544




1.0

%



93.2

%





—




—




—




—





19




3,334




3,353




5.9

%



93.2

%































2024




—




—




—




—





—




1,932




1,932




3.4

%



96.6

%































2025




—




—




—




—





—




1,931




1,931




3.4

%



100.0

%


































$

34,584



$

22,193



$

56,777







$

34,584



$

22,193



$

56,777








SOURCE National Retail Properties, Inc.