Increased First Quarter 2011 Operating Results Announced by National Retail Properties, Inc.

News provided by

May 05, 2011, 08:30 ET

ORLANDO, Fla., May 5, 2011 /PRNewswire/ -- National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced operating results for the quarter ended March 31, 2011. Highlights include:

Operating Results:

Revenues, net earnings, FFO and AFFO available to common stockholders:


	Quarter Ended March 31,
	2011		2010

	(in thousands, except per share data)
Revenues	$	61,952	$	56,494

Net earnings available to common stockholders	$	19,124	$	14,669
Net earnings per common share (diluted)	$	0.23	$	0.18

FFO available to common stockholders	$	31,393	$	25,259
FFO per common share (diluted)	$	0.38	$	0.31

AFFO available to common stockholders	$	34,516	$	31,444
AFFO per common share (diluted)	$	0.41	$	0.38

NNN paid cash dividends to its common stockholders of $0.38 per share during the quarter ended March 31, 2011.
Investment Portfolio occupancy was 96.9% at March 31, 2011, as compared to 96.9% at December 31, 2010, and 96.4% at March 31, 2010.

Investments and Dispositions for the quarter ended March 31, 2011:

Investments:
- $55.1 million in the Investment Portfolio, including acquiring 29 properties with an aggregate 354,000 square feet of gross leasable area
Dispositions:
- Two properties with net proceeds of $1.8 million

Capital transactions for the quarter ended March 31, 2011:

Issued 818,156 shares of common stock generating $20,081,000 of net proceeds pursuant to the Dividend Reinvestment and Stock Purchase Plan

National Retail Properties also announced revised 2011 FFO guidance of $1.49 to $1.53 per share before any impairment expense and estimated AFFO to be $1.63 to $1.67 per share. The change in guidance is primarily related to projected volume and timing of property acquisitions. This guidance equates to net earnings before any gains or losses from the sale of real estate of $0.91 to $0.95 per share plus $0.58 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.

Craig Macnab, Chief Executive Officer, commented: "We are pleased with the encouraging start in 2011. The property portfolio and balance sheet remain in very good condition and property acquisitions have come together better and earlier than originally projected. These strong early results have allowed us to increase our FFO guidance."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases. As of March 31, 2011, the company owned 1,223 Investment Properties in 46 states with a gross leasable area of approximately 13.3 million square feet. For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on May 5, 2011, 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 with the SEC on Form 10-Q for the quarter ended March 31, 2011. 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, and the company's share of these items from the company's unconsolidated partnerships.

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 further adjusts FFO for certain non-cash items that reduce or increase net income in accordance with GAAP. Management considers AFFO a useful supplemental measure of the company's performance. The company's computation of AFFO may differ from the calculation used by other equity REITs and therefore may not be comparable to such other REITs. A reconciliation of net earnings to AFFO is included in 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 March 31,
	2011		2010
Income Statement Summary

Revenues:
Rental and earned income	$	58,213	$	52,737
Real estate expense reimbursement from tenants		2,335		1,758
Interest and other income from real estate transactions		637		950
Interest income on commercial mortgage residual interests		767		1,049
		61,952		56,494

Retail operations:
Revenues		8,850		6,536
Operating expenses		(8,852)		(6,669)
Net		(2)		(133)

Operating expenses:
General and administrative		6,657		5,581
Real estate		3,722		3,472
Depreciation and amortization		13,525		11,807
Impairment - commercial mortgage residual interests valuation		129		3,683
		24,033		24,543

Other expenses (revenues):
Interest and other income		(342)		(252)
Interest expense		17,662		15,989
		17,320		15,737

Income tax benefit (expense)		19		(104)
Equity in earnings of unconsolidated affiliate		109		105

Earnings from continuing operations		20,725		16,082

Earnings (loss) from discontinued operations:
Real estate, Investment Portfolio, net of income tax benefit (expense)		(4)		75
Real estate, Inventory Portfolio, net of income tax expense		132		141
		128		216

Earnings including noncontrolling interests		20,853		16,298

Loss (earnings) attributable to noncontrolling interests:
Continuing operations		26		143
Discontinued operations		(59)		(76)
		(33)		67

Net earnings attributable to NNN		20,820		16,365
Series C preferred stock dividends		(1,696)		(1,696)
Net earnings available to common stockholders	$	19,124	$	14,669


National Retail Properties, Inc. (in thousands, except per share data) (unaudited)
	Quarter Ended March 31,
	2011		2010
Weighted average common shares outstanding:
Basic		83,123		82,321
Diluted		83,570		82,446

Net earnings per share available to common stockholders:
Basic:
Continuing operations	$	0.23	$	0.18
Discontinued operations		0.00		0.00
Net earnings	$	0.23	$	0.18

Diluted:
Continuing operations	$	0.23	$	0.18
Discontinued operations		0.00		0.00
Net earnings	$	0.23	$	0.18


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

	Quarter Ended March 31,
	2011		2010
Funds From Operations (FFO) Reconciliation:
Net earnings available to common stockholders	$	19,124	$	14,669
Real estate depreciation and amortization:
Continuing operations		12,306		10,534
Discontinued operations		5		79
Joint venture real estate depreciation		44		44
Gain on disposition of real estate		(86)		(67)
Total FFO adjustments		12,269		10,590
FFO available to common stockholders	$	31,393	$	25,259

FFO per share:
Basic	$	0.38	$	0.31
Diluted	$	0.38	$	0.31

Adjusted Funds From Operations (AFFO) Reconciliation:
Net earnings available to common stockholders	$	19,124	$	14,669
Total FFO adjustments		12,269		10,590
FFO available to common stockholders		31,393		25,259

Straight-line accrued rent		4		(319)
Net capital lease rent adjustment		413		372
Below market rent amortization		(97)		(96)
Stock based compensation expense		1,393		1,113
Capitalized interest expense		(322)		(53)
Convertible debt interest expense		1,603		1,501
Impairment - commercial mortgage residual interests valuation		129		3,683
Other		-		(16)
Total AFFO adjustments		3,123		6,185
AFFO available to common stockholders	$	34,516	$	31,444

AFFO per share:
Basic	$	0.42	$	0.38
Diluted	$	0.41	$	0.38

Other Information:

Percentage rent	$	113	$	54

Amortization of debt costs	$	1,176	$	1,133

Scheduled debt principal amortization (excluding maturities)	$	272	$	253

Non-real estate depreciation expense	$	49	$	145

National Retail Properties, Inc.

(in thousands)

(unaudited)

Earnings from Discontinued Operations: The company has classified its investment assets sold and leasehold interests expired as discontinued operations. In addition, the company has classified any investment or revenue generating inventory asset that was held for sale at March 31, 2011, as discontinued operations. The following is a summary of earnings from discontinued operations.

	Quarter Ended March 31,
	2011		2010
Earnings from Discontinued Operations - Investment Portfolio:
Revenues:
Rental and earned income	$	26	$	185
Real estate expense reimbursement from tenants		3		15
Interest and other income from real estate transactions		-		28
		29		228

Expenses:
General and administrative		-		14
Real estate		55		84
Depreciation and amortization		5		79
		60		177

Gain on disposition of real estate		30		22
Income tax benefit (expense)		(3)		2

Earnings (loss) from discontinued operations attributable to NNN	$	(4)	$	75


Earnings from Discontinued Operations – Inventory Portfolio:
Revenues:
Rental income	$	473	$	1,152
Real estate expense reimbursement from tenants		106		987
Interest and other income from real estate transactions		14		36
		593		2,175

Disposition of real estate:
Gross proceeds		1,100		802
Costs		(998)		(715)
Gain		102		87

Expenses:
General and administrative		4		37
Real estate		154		1,041
Depreciation and amortization		21		61
Interest		340		943
		519		2,082

Income tax expense		(44)		(39)

Earnings from discontinued operations including noncontrolling interests		132		141
Earnings attributable to noncontrolling interests		(59)		(76)

Earnings from discontinued operations attributable to NNN	$	73	$	65


National Retail Properties, Inc. (in thousands) (unaudited)

	Quarter Ended March 31,
	2011			2010
	# of Properties		Gain	# of Properties		Gain
Real Estate Disposition Summary:
Reconciliation of gain on disposition in discontinued operations:
Investment Portfolio	1	$	30	5	$	22
Inventory Portfolio	1		102	1		87
Noncontrolling interest, Inventory Portfolio	-		(46)	-		(42)
	2	$	86	6	$	67


National Retail Properties, Inc. (in thousands) (unaudited)
	March 31, 2011		December 31, 2010
Balance Sheet Summary

Assets:
Cash and cash equivalents	$	2,557	$	2,048
Receivables, net of allowance		2,831		3,403
Investment in unconsolidated affiliate		4,466		4,515
Mortgages, notes and accrued interest receivable		29,905		30,331
Real estate, Investment Portfolio:
Accounted for using the operating method, net of accumulated depreciation and amortization		2,560,213		2,519,950
Accounted for using the direct financing method		31,107		29,773
Real estate, Inventory Portfolio, held for sale		31,230		32,076
Commercial mortgage residual interests		16,402		15,915
Accrued rental income, net of allowance		25,482		25,535
Other assets		49,504		50,029

Total assets	$	2,753,697	$	2,713,575

Liabilities:
Line of credit payable	$	184,200	$	161,000
Mortgages payable		23,997		24,269
Notes payable - convertible, net of unamortized discount		351,138		349,534
Notes payable, net of unamortized discount		598,932		598,882
Other liabilities		58,559		51,116
Total liabilities		1,216,826		1,184,801

Stockholders' equity of NNN		1,535,539		1,527,483
Noncontrolling interests		1,332		1,291
Total equity		1,536,871		1,528,774

Total liabilities and equity	$	2,753,697	$	2,713,575

Common shares outstanding		84,571		83,613

Gross leasable area, Investment Portfolio (square feet)		13,320		12,972

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 percent 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."


	March 31, 2011		December 31, 2010
Assets:
Cash and cash equivalents	$	647	$	999
Receivables		200		200
Real estate		71,799		72,095
Other assets		485		561
	$	73,131	$	73,855

Liabilities:
Notes payable	$	43,200	$	43,600
Other liabilities		746		995
Total liabilities		43,946		44,595


Members' equity		29,185		29,260

Total liabilities and equity	$	73,131	$	73,855


	Quarter Ended March 31,
	2011		2010
Revenues:
Rental income	$	1,565	$	1,565

Expenses:
General and administrative		73		107
Real estate		5		5
Depreciation and amortization		369		369
Interest		454		447
		901		928

Net earnings	$	664	$	637

National Retail Properties, Inc. Investment Portfolio
Top 20 Lines of Trade

		As of March 31,
	Line of Trade	2011(1)	2010(2)
1.	Convenience stores	23.3%	26.5%
2.	Restaurants - full service	10.7%	9.2%
3.	Automotive parts	7.8%	6.7%
4.	Theaters	5.6%	6.2%
5.	Automotive service	5.4%	5.6%
6.	Sporting goods	4.4%	3.1%
7.	Restaurants - limited service	4.1%	3.2%
8.	Drug stores	3.9%	4.4%
9.	Books	3.8%	4.1%
10.	Health and fitness	2.7%	1.6%
11.	Grocery	2.6%	2.9%
12.	Consumer electronics	2.4%	2.7%
13.	Office supplies	2.3%	2.5%
14.	Furniture	2.3%	2.6%
15.	Travel plazas	2.3%	2.5%
16.	General merchandise	1.6%	1.3%
17.	Family entertainment centers	1.3%	0.9%
18.	Financial services	1.2%	1.2%
19.	Beer, wine and liquor	1.2%	2.0%
20.	Equipment rental	1.2%	1.4%
	Other	9.9%	9.4%
	Total	100.0%	100.0%

Top 10 States

	State	% of Total(1)		State	% of Total(1)
1.	Texas	19.2%	6.	Indiana	4.2%
2.	Florida	10.0%	7.	Ohio	4.0%
3.	Illinois	6.6%	8.	Pennsylvania	3.8%
4.	North Carolina	6.1%	9.	Colorado	2.9%
5.	Georgia	5.2%	10.	Tennessee	2.8%

(1) Based on the annualized base rent for all leases in place as of March 31, 2011.

(2) Based on the annualized base rent for all leases in place as of March 31, 2010.

National Retail Properties, Inc. Investment Portfolio
Top Tenants

		Properties	% of Total(1)
	Pantry	96	8.1%
	Susser	86	8.0%
	AMC Theatre	15	5.4%
	Road Ranger	34	3.5%
	Mister Car Wash	40	3.3%
	Pull-A-Part	20	3.2%
	Pep Boys	17	3.0%
	LA Fitness	7	2.6%
	Barnes & Noble	9	2.4%
	Best Buy	7	2.4%
	Logan's Roadhouse	20	2.2%

Lease Expirations

	% of Total(1)	# of Properties	Gross Leasable Area(2)		% of Total(1)	# of Properties	Gross Leasable Area(2)
2011	1.2%	16	211,000	2017	3.9%	28	682,000
2012	3.0%	33	506,000	2018	2.6%	25	352,000
2013	4.3%	41	875,000	2019	3.9%	40	614,000
2014	4.4%	42	578,000	2020	3.9%	83	694,000
2015	4.4%	72	1,008,000	2021	6.1%	82	674,000
2016	2.3%	28	485,000	Thereafter	60.0%	684	5,784,000