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FIRST QUARTER 2024 OPERATING RESULTS ANNOUNCED BY NNN REIT, INC.

NNN REIT, Inc. (PRNewsfoto/National Retail Properties, Inc.)

News provided by

NNN REIT, Inc.

May 01, 2024, 08:30 ET

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ORLANDO, Fla., May 1, 2024 /PRNewswire/ -- NNN REIT, Inc. (NYSE: NNN), a real estate investment trust, today announced its operating results for the quarter ended March 31, 2024. Highlights include:

Operating Results:

  • Revenues and net earnings, FFO, Core FFO and AFFO and diluted per share amounts:


Quarter Ended
March 31,




2024


2023





(dollars in thousands,
except per share data)

Revenues


$

215,407



$

204,108











Net earnings


$

94,371



$

90,167



Net earnings per share


$

0.52



$

0.50











FFO


$

151,261



$

145,549



FFO per share


$

0.83



$

0.80











Core FFO


$

151,578



$

145,972



Core FFO per share


$

0.83



$

0.80











AFFO


$

153,259



$

148,166



AFFO per share


$

0.84



$

0.82



First Quarter 2024 Highlights:

  • FFO and Core FFO per share increased 3.8% over prior year results
  • AFFO per share increased 2.4% over prior year results
  • Maintained high occupancy levels at 99.4%, with a weighted average remaining lease term of 10.0 years, at March 31, 2024 as compared to 99.5% at December 31, 2023 and 99.4% at March 31, 2023
  • $124.5 million in property investments, including the acquisition of 20 properties with an aggregate gross leasable area of approximately 284,000 square feet at an initial cash cap rate of 8.0%
  • Sold six properties for $18.5 million, producing $4.8 million of gains on sales
  • Raised $21.5 million in net proceeds from the issuance of 519,494 common shares
  • Maintained sector leading 11.8 year weighted average debt maturity

Steve Horn, Chief Executive Officer, commented: "NNN's first quarter was consistent and predictable with nearly $125 million in property acquisitions, yielding an initial cash cap rate of eight percent with an 18-year weighted average remaining lease term. With our strong property portfolio combined with over $1 billion of liquidity and strategic balance sheet management, NNN remains positioned to deliver long-term shareholder value as we progress through the year."

NNN REIT invests primarily in high-quality retail properties subject generally to long-term, net leases.  As of March 31, 2024, the company owned 3,546 properties in 49 states with a gross leasable area of approximately 36.1 million square feet and a weighted average remaining lease term of 10.0 years.  NNN is one of only three publicly traded real estate investment trusts to have increased annual dividends for 34 or more consecutive years. For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on May 1, 2024, at 10:30 a.m. ET to review its results of operations.  The call can be accessed on the NNN REIT website live at www.nnnreit.com.  For those unable to listen to the live broadcast, a replay will be available on the company's website.  In addition, a summary of any earnings guidance given on the call will be posted to the company's website.

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, including inflation, 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 real estate investment trust ("REIT"), and the potential impacts of an epidemic or pandemic on the company's business operations, financial results, and financial position on the world economy.  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, 2023 and (ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 2024.  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.  NNN REIT, 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 noncontrolling interests 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 such as transaction related gains, income or expense, impairments on land or commercial mortgage residual interests, executive retirement costs or other non-core amounts as they occur.  The company's computation of Core FFO may differ from the methodology for calculating Core FFO used by other equity REITs, and therefore, may not be comparable to such other REITs. A reconciliation of net earnings (computed in accordance with GAAP) to Core FFO is included in the financial information accompanying this release.

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

NNN REIT, Inc.

(dollars in thousands, except per share data)

(unaudited)




Quarter Ended
March 31,



2024



2023

Income Statement Summary






Revenues:






Rental income


$

214,825



$

203,630

Interest and other income from real estate transactions



582




478




215,407




204,108







Operating expenses:






General and administrative



12,584




12,251

Real estate



7,154




6,846

Depreciation and amortization



60,615




59,148

Leasing transaction costs



33




75

Impairment losses – real estate, net of recoveries



1,204




2,640

Executive retirement costs



317




423




81,907




81,383

Gain on disposition of real estate



4,821




6,300

Earnings from operations



138,321




129,025







Other expenses (revenues):






Interest and other income



(119)




(33)

Interest expense



44,069




38,891




43,950




38,858







Net earnings


$

94,371



$

90,167







Weighted average shares outstanding:






Basic



181,794,208




180,845,503

Diluted



182,212,897




181,434,345







Net earnings per share available to stockholders:






Basic


$

0.52



$

0.50

Diluted


$

0.52



$

0.50

NNN REIT, Inc.

(dollars in thousands, except per share data)

(unaudited)




Quarter Ended
March 31,



2024



2023

Funds From Operations ("FFO") Reconciliation:






Net earnings


$

94,371



$

90,167

Real estate depreciation and amortization



60,507




59,042

Gain on disposition of real estate



(4,821)




(6,300)

Impairment losses – depreciable real estate, net of recoveries



1,204




2,640

Total FFO adjustments



56,890




55,382

FFO


$

151,261



$

145,549







FFO per share:






Basic


$

0.83



$

0.80

Diluted


$

0.83



$

0.80







Core Funds From Operations ("Core FFO") Reconciliation:






Net earnings


$

94,371



$

90,167

Total FFO adjustments



56,890




55,382

FFO



151,261




145,549







Executive retirement costs



317




423

Total Core FFO adjustments



317




423

Core FFO


$

151,578



$

145,972







Core FFO per share:






Basic


$

0.83



$

0.81

Diluted


$

0.83



$

0.80

NNN REIT, Inc.

(dollars in thousands, except per share data)

(unaudited)






Quarter Ended
March 31,




2024



2023


Adjusted Funds From Operations ("AFFO") Reconciliation:







Net earnings


$

94,371



$

90,167


Total FFO adjustments



56,890




55,382


Total Core FFO adjustments



317




423


Core FFO



151,578




145,972









Straight-line accrued rent, net of reserves



36




(469)


Net capital lease rent adjustment



54




79


Below-market rent amortization



(117)




(112)


Stock based compensation expense



3,567




3,101


Capitalized interest expense



(1,859)




(405)


Total AFFO adjustments



1,681




2,194


AFFO


$

153,259



$

148,166









AFFO per share:







Basic


$

0.84



$

0.82


Diluted


$

0.84



$

0.82









Other Information:







Rental income from operating leases(1)


$

209,084



$

198,183


Earned income from direct financing leases(1)


$

119



$

144


Percentage rent(1)


$

888



$

763









Real estate expense reimbursement from tenants(1)


$

4,734



$

4,540


Real estate expenses



(7,154)




(6,846)


Real estate expenses, net of tenant reimbursements


$

(2,420)



$

(2,306)









Amortization of debt costs


$

1,301



$

1,199


Scheduled debt principal amortization (excluding maturities)


$

—



$

173

(2)

Non-real estate depreciation expense


$

111



$

109




(1)

For the quarters ended March 31, 2024 and 2023, the aggregate of such amounts is $214,825 and $203,630, respectively, and is classified as rental income on the income statement summary.



(2)

In April 2023, NNN repaid the remaining mortgages payable principal balance of $9,774.

NNN REIT, Inc.

2024 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.



2024 Guidance

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


$1.94 - $2.00 per share

Real estate depreciation and amortization per share


$1.31 per share

Core FFO per share


$3.25 - $3.31 per share

AFFO per share


$3.29 - $3.35 per share

General and administrative expenses


$46 - $48 Million

Real estate expenses, net of tenant reimbursements


$9 - $11 Million

Acquisition volume


$400 - $500 Million

Disposition volume


$80 - $120 Million

NNN REIT, Inc.

(dollars in thousands)

(unaudited)






March 31,
2024



December 31,
2023


Balance Sheet Summary














Assets:







Real estate portfolio, net of accumulated depreciation and amortization


$

8,586,856



$

8,535,851


Cash and cash equivalents



1,128




1,189


Restricted cash and cash held in escrow



—




3,966


Receivables, net of allowance of $717 and $669, respectively



3,569




3,649


Accrued rental income, net of allowance of $4,153 and $4,168, respectively



34,404




34,611


Debt costs, net of accumulated amortization of $24,525 and $23,952, respectively



2,723




3,243


Other assets



77,062




79,459


Total assets


$

8,705,742



$

8,661,968









Liabilities:







Line of credit payable


$

116,200



$

132,000


Notes payable, net of unamortized discount and unamortized debt costs



4,229,933




4,228,544


Accrued interest payable



75,487




34,374


Other liabilities



109,264




109,593


Total liabilities



4,530,884




4,504,511









Total equity



4,174,858




4,157,457









Total liabilities and equity


$

8,705,742



$

8,661,968









Common shares outstanding



183,350,322




182,474,770









Gross leasable area, Property Portfolio (square feet)



36,137,000




35,966,000


NNN REIT, Inc.

Debt Summary

As of March 31, 2024

(dollars in thousands)

(unaudited)



Unsecured Debt


Principal



Principal,
Net of
Unamortized
Discount



Stated
Rate



Effective
Rate



Maturity Date

Line of credit payable


$

116,200



$

116,200



SOFR +
87.5 bps




6.185

%


June 2025

















Unsecured notes payable:
















2024



350,000




349,982




3.900

%



3.924

%


June 2024


2025



400,000




399,817




4.000

%



4.029

%


November 2025


2026



350,000




348,811




3.600

%



3.733

%


December 2026


2027



400,000




399,361




3.500

%



3.548

%


October 2027


2028



400,000




398,559




4.300

%



4.388

%


October 2028


2030



400,000




399,192




2.500

%



2.536

%


April 2030


2033



500,000




488,912




5.600

%



5.905

%


October 2033


2048



300,000




296,156




4.800

%



4.890

%


October 2048


2050



300,000




294,457




3.100

%



3.205

%


April 2050


2051



450,000




442,096




3.500

%



3.602

%


April 2051


2052



450,000




440,114




3.000

%



3.118

%


April 2052

Total



4,300,000




4,257,457


























Total unsecured debt(1)


$

4,416,200



$

4,373,657


























Debt costs





$

(42,595)










Accumulated amortization




15,071










Debt costs, net of accumulated amortization




(27,524)










Notes payable, net of unamortized discount and

    unamortized debt costs



$

4,229,933













(1)


Unsecured debt has a weighted average interest rate of 4.0% and a weighted average maturity of 11.8 years.




As of March 31, 2024, Net Debt / EBITDA based on current quarter EBITDA annualized is 5.5x.

NNN REIT, Inc.
Debt Summary – Continued
As of March 31, 2024
(unaudited)

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, 2024, the company believes it is in compliance with the covenants.

Key Covenants


Required


March 31, 2024

Unsecured Bank Credit Facility:





Maximum leverage ratio


< 0.60


0.39

Minimum fixed charge coverage ratio


> 1.50


4.43

Maximum secured indebtedness ratio


< 0.40


—

Unencumbered asset value ratio


> 1.67


2.64

Unencumbered interest ratio


> 1.75


4.39

Unsecured Notes:





Limitation on incurrence of total debt


≤ 60%


40.9 %

Limitation on incurrence of secured debt


≤ 40%


—

Debt service coverage ratio


≥ 1.50


4.4

Maintenance of total unencumbered assets


≥ 150%


244 %

NNN REIT, Inc.

Property Portfolio

As of March 31, 2024


Top 20 Lines of Trade





As of March 31,



Lines of Trade


2024(1)


2023(2)

1.


Automotive service


16.3 %


14.4 %

2.


Convenience stores


16.2 %


16.3 %

3.


Restaurants – full service


8.6 %


9.0 %

4.


Restaurants – limited service


8.5 %


8.9 %

5.


Family entertainment centers


6.7 %


5.8 %

6.


Recreational vehicle dealers, parts and accessories


4.6 %


4.1 %

7.


Health and fitness


4.4 %


4.8 %

8.


Theaters


4.1 %


4.3 %

9.


Equipment rental


2.9 %


3.1 %

10.


Wholesale clubs


2.5 %


2.6 %

11.


Automotive parts


2.4 %


2.6 %

12.


Drug stores


2.3 %


2.6 %

13.


Home improvement


2.2 %


2.3 %

14.


Furniture


2.0 %


2.1 %

15.


Medical service providers


1.8 %


1.9 %

16.


General merchandise


1.4 %


1.5 %

17.


Consumer electronics


1.3 %


1.4 %

18.


Home furnishings


1.3 %


1.4 %

19.


Travel plazas


1.3 %


1.3 %

20.


Pet supplies and services


1.1 %


0.9 %



Other


8.1 %


8.7 %



Total


100.0 %


100.0 %

Top 10 States




State


% of
Total(1)




State


% of
Total(1)

1.


Texas


16.9 %


6.


North Carolina


3.8 %

2.


Florida


9.4 %


7.


Tennessee


3.7 %

3.


Illinois


5.1 %


8.


Indiana


3.7 %

4.


Ohio


4.9 %


9.


Virginia


3.3 %

5.


Georgia


4.8 %


10.


California


3.2 %


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


(1)

$831,010,000 as of March 31, 2024.


(2)

$781,909,000 as of March 31, 2023.

NNN REIT, Inc.

Property Portfolio – Continued

As of March 31, 2024


Top 20 Tenants




Tenant


# of
Properties


% of
Total(1)

1.


7-Eleven


138


4.4 %

2.


Mister Car Wash


121


4.1 %

3.


Camping World


47


3.8 %

4.


Dave & Buster's


32


3.5 %

5.


LA Fitness


28


3.0 %

6.


GPM Investments (convenience stores)


150


2.9 %

7.


Flynn Restaurant Group (Taco Bell/Arby's)


204


2.7 %

8.


AMC Theatre


20


2.7 %

9.


BJ's Wholesale Club


13


2.5 %

10.


Mavis Tire Express Services


140


2.2 %

11.


Couche Tard (Pantry)


92


2.2 %

12.


Sunoco


61


2.0 %

13.


Walgreens


49


1.9 %

14.


Chuck-E-Cheese


53


1.8 %

15.


United Rentals


49


1.6 %

16.


Frisch's Restaurants


68


1.6 %

17.


Fikes (convenience stores)


58


1.5 %

18.


Life Time Fitness


3


1.3 %

19.


Bob Evans


106


1.3 %

20.


Best Buy


16


1.3 %

Lease Expirations(2)




% of
Total(1)


# of
Properties


Gross Leasable
Area(3)




% of
Total(1)


# of
Properties


Gross Leasable
Area(3)

2024


1.2 %


39


534,000


2030


3.7 %


115


1,560,000

2025


4.5 %


176


1,539,000


2031


7.2 %


185


2,697,000

2026


4.7 %


211


2,111,000


2032


5.8 %


215


2,328,000

2027


8.1 %


235


3,591,000


2033


4.8 %


137


1,460,000

2028


5.7 %


230


2,173,000


Thereafter


50.1 %


1,853


15,972,000

2029


4.2 %


126


1,874,000












(1)


Based on the annual base rent of $831,010,000, which is the annualized base rent for all leases in place as of March 31, 2024.

(2)


As of March 31, 2024, the weighted average remaining lease term is 10.0 years.

(3)


Square feet.

SOURCE NNN REIT, Inc.

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