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

Aug 04, 2011, 08:30 ET from National Retail Properties, Inc.

ORLANDO, Fla., Aug. 4, 2011 /PRNewswire/ -- National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced operating results for the quarter and six months ended June 30, 2011.  Highlights include:

Operating Results:

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

Quarter Ended

June 30,

Six Months Ended

June 30,

2011

2010

2011

2010

(in thousands, except per share data)

Revenues

$

62,516

$

56,412

$

124,469

$

112,906

Net earnings available to common stockholders

$

19,607

$

19,510

$

38,731

$

34,179

Net earnings per common share (diluted)

$

0.23

$

0.23

$

0.46

$

0.41

FFO available to common stockholders

$

32,180

$

29,444

$

63,573

$

54,704

FFO per common share (diluted)

$

0.38

$

0.36

$

0.75

$

0.66

AFFO available to common stockholders

$

35,598

$

32,830

$

70,115

$

64,273

AFFO per common share (diluted)

$

0.42

$

0.40

$

0.83

$

0.78

  • NNN paid cash dividends to its common stockholders of $0.38 per share during the quarter and $0.76 for the six months ended June 30, 2011.
  • Investment Portfolio occupancy was 96.9% at June 30, 2011, as compared to 96.9% at December 31, 2010, and 97.3% at June 30, 2010.

Investments for the quarter ended June 30, 2011:

  • Investments:
  • $54.2 million in the Investment Portfolio, including acquiring 25 properties with an aggregate 303,000 square feet of gross leasable area

Investments and Dispositions for the six months ended June 30, 2011:

  • Investments:
  • $109.3 million in the Investment Portfolio, including acquiring 54 properties with an aggregate 657,000 square feet of gross leasable area
  • Dispositions:
  • Two properties with net proceeds of $1.8 million

Capital markets activity for the quarter ended June 30, 2011:

  • May 2011  –  Amended and restated unsecured revolving credit facility increasing borrowing capacity to $450.0 million, extending maturity to May 2015 and reducing interest rate to LIBOR + 150 bps
  • June 2011  –  Standard & Poor's Rating Services upgraded its corporate credit rating and unsecured debt rating to "BBB" from "BBB-"
  • Offered $300.0 million principal amount of 5.50% senior unsecured notes due 2021 generating net proceeds of $293.8 million received on July 6, 2011
  • Issued 1,466,179 shares of common stock generating $36,366,000 of net proceeds pursuant to the Dividend Reinvestment and Stock Purchase Plan

National Retail Properties also announced increased 2011 FFO guidance of $1.50 to $1.53 per share before any impairment expense and estimated AFFO to be $1.64 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 $0.94 per share plus $0.59 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: "Operating results and acquisition activity have been encouraging in the first half of 2011 and visibility for the second half looks solid.  We were pleased to complete capital markets transactions during the second quarter that will provide additional capacity to fund acquisitions and reduce our debt costs.  More recently, we were very glad to announce an increase in our third quarter dividend which will pave the way for 2011 to be the 22nd consecutive year in which the annual dividend per share has increased."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases.  As of June 30, 2011, the company owned 1,248 Investment Properties in 46 states with a gross leasable area of approximately 13.6 million square feet.  For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on August 4, 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 June 30, 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 June 30,

Six Months Ended June 30,

2011

2010

2011

2010

Income Statement Summary

Revenues:

Rental and earned income

$

58,999

$

52,990

$

117,212

$

105,728

Real estate expense reimbursement from tenants

2,197

1,591

4,532

3,349

Interest and other income from real estate transactions

543

973

1,181

1,922

Interest income on commercial mortgage residual interests

777

858

1,544

1,907

62,516

56,412

124,469

112,906

Disposition of real estate, Inventory Portfolio:

Gross proceeds

-

5,600

-

5,600

Costs

-

(4,959)

-

(4,959)

Gain

-

641

-

641

Retail operations:

Revenues

12,450

8,696

21,300

15,233

Operating expenses

(11,760)

(8,265)

(20,612)

(14,935)

Net

690

431

688

298

Operating expenses:

General and administrative

6,568

5,775

13,226

11,372

Real estate

4,026

3,143

7,748

6,615

Depreciation and amortization

13,871

11,926

27,395

23,732

Impairment - commercial mortgage residual interests valuation

267

165

396

3,848

24,732

21,009

48,765

45,567

Other expenses (revenues):

Interest and other income

(283)

(637)

(625)

(905)

Interest expense

17,512

16,034

35,174

32,024

17,229

15,397

34,549

31,119

Income tax expense

(210)

(223)

(191)

(327)

Equity in earnings of unconsolidated affiliate

104

108

213

214

Earnings from continuing operations

21,139

20,963

41,865

37,046

Earnings (loss) from discontinued operations:

Real estate, Investment Portfolio, net of income tax expense

(17)

566

(21)

641

Real estate, Inventory Portfolio, net of income tax expense

147

121

279

261

130

687

258

902

Earnings including noncontrolling interests

21,269

21,650

42,123

37,948

Loss (earnings) attributable to noncontrolling interests:

Continuing operations

67

(489)

93

(346)

Discontinued operations

(33)

45

(93)

(31)

34

(444)

-

(377)

Net earnings attributable to NNN

21,303

21,206

42,123

37,571

Series C preferred stock dividends

(1,696)

(1,696)

(3,392)

(3,392)

Net earnings available to common stockholders

$

19,607

$

19,510

$

38,731

$

34,179

National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)

Quarter Ended June 30,

Six Months Ended June 30,

2011

2010

2011

2010

Weighted average common shares outstanding:

Basic

84,410

82,695

83,772

82,590

Diluted

84,726

82,825

84,271

82,718

Net earnings per share available to common stockholders:

Basic:

Continuing operations

$

0.23

$

0.22

$

0.46

$

0.40

Discontinued operations

0.00

0.01

0.00

0.01

Net earnings

$

0.23

$

0.23

$

0.46

$

0.41

Diluted:

Continuing operations

$

0.23

$

0.22

$

0.46

$

0.40

Discontinued operations

0.00

0.01

0.00

0.01

Net earnings

$

0.23

$

0.23

$

0.46

$

0.41

National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)

Quarter Ended June 30,

Six Months Ended June 30,

2011

2010

2011

2010

Funds From Operations (FFO) Reconciliation:

Net earnings available to common stockholders

$

19,607

$

19,510

$

38,731

$

34,179

Real estate depreciation and amortization:

  Continuing operations

12,526

10,719

24,831

21,252

  Discontinued operations

4

59

9

139

Joint venture real estate depreciation

44

44

88

89

Gain on disposition of real estate

(1)

(888)

(86)

(955)

Total FFO adjustments

12,573

9,934

24,842

20,525

FFO available to common stockholders

$

32,180

$

29,444

$

63,573

$

54,704

FFO per share:

Basic

$

0.38

$

0.36

$

0.76

$

0.66

Diluted

$

0.38

$

0.36

$

0.75

$

0.66

Adjusted Funds From Operations (AFFO)

    Reconciliation:

Net earnings available to common stockholders

$

19,607

$

19,510

$

38,731

$

34,179

Total FFO adjustments

12,573

9,934

24,842

20,525

FFO available to common stockholders

32,180

29,444

63,573

54,704

Straight-line accrued rent

47

130

51

(190)

Net capital lease rent adjustment

388

381

802

753

Below market rent amortization

(116)

(96)

(213)

(192)

Stock based compensation expense

1,448

1,463

2,841

2,576

Capitalized interest expense

(246)

(132)

(569)

(185)

Convertible debt interest expense

1,630

1,526

3,234

3,026

Impairment - commercial mortgage residual

       interests valuation

267

165

396

3,848

Other

-

(51)

-

(67)

Total AFFO adjustments

3,418

3,386

6,542

9,569

AFFO available to common stockholders

$

35,598

$

32,830

$

70,115

$

64,273

AFFO per share:

Basic

$

0.42

$

0.40

$

0.84

$

0.78

Diluted

$

0.42

$

0.40

$

0.83

$

0.78

Other Information:

Percentage rent

$

132

$

129

$

245

$

184

Amortization of debt costs

$

1,304

$

1,146

$

2,480

$

2,279

Scheduled debt principal amortization

       (excluding maturities)

$

269

$

280

$

541

$

533

Non-real estate depreciation expense

$

46

$

66

$

95

$

212

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 June 30, 2011, as discontinued operations.  The following is a summary of earnings from discontinued operations.

Quarter Ended June 30,

Six Months Ended June 30,

2011

2010

2011

2010

Earnings from Discontinued Operations -

   Investment Portfolio:

Revenues:

Rental and earned income

$

30

$

302

$

56

$

487

Real estate expense reimbursement from tenants

4

19

8

34

Interest and other income from real estate

       transactions

5

5

5

33

39

326

69

554

Expenses:

General and administrative

-

-

-

14

Real estate

53

39

108

123

Depreciation and amortization

4

59

9

139

57

98

117

276

Gain on disposition of real estate

1

355

30

377

Income tax expense

-

(17)

(3)

(14)

Earnings (loss) from discontinued operations

            attributable to NNN

$

(17)

$

566

$

(21)

$

641

Earnings from Discontinued Operations –

   Inventory Portfolio:

Revenues:

Rental income

$

666

$

1,216

$

1,139

$

2,368

Real estate expense reimbursement from tenants

98

154

204

1,141

Interest and other income from real estate

       transactions

3

461

17

497

Interest and other income from non-real estate

-

2

-

2

767

1,833

1,360

4,008

Disposition of real estate:

Gross proceeds

-

36,668

1,100

37,470

Costs

-

(36,455)

(998)

(37,170)

Gain

-

213

102

300

Expenses:

General and administrative

3

19

7

56

Real estate

184

380

338

1,421

Depreciation and amortization

23

55

44

116

Interest

340

943

680

1,886

550

1,397

1,069

3,479

Income tax expense

(70)

(528)

(114)

(568)

Earnings from discontinued operations including

             noncontrolling interests

147

121

279

261

Loss (earnings) attributable to noncontrolling interests

(33)

45

(93)

(31)

Earnings from discontinued operations attributable to NNN

$

114

$

166

$

186

$

230

National Retail Properties, Inc.

(in thousands)

(unaudited)

Quarter Ended June 30,

Six Months Ended June 30,

2011

2010

2011

2010

# of

Properties

Gain

# of

Properties

Gain

# of

Properties

Gain

# of

Properties

Gain

Real Estate Disposition Summary

Reconciliation of gain on

    disposition between

    continuing and

    discontinued operations:

Continuing operations

-

$

-

2

$

641

-

$

-

2

$

641

Discontinued operations:

Investment Portfolio

-

1

6

355

1

30

11

377

Inventory Portfolio

-

-

1

213

1

102

2

300

Noncontrolling interest,

    Inventory Portfolio

-

-

-

(321)

-

(46)

-

(363)

-

$

1

9

$

888

2

$

86

15

$

955

National Retail Properties, Inc.

(in thousands)

(unaudited)

June 30,

2011

December 31,

2010

Balance Sheet Summary

Assets:

Cash and cash equivalents

$

3,588

$

2,048

Receivables, net of allowance

2,424

3,403

Investment in unconsolidated affiliate

4,423

4,515

Mortgages, notes and accrued interest receivable

32,402

30,331

Real estate, Investment Portfolio:

Accounted for using the operating method, net of accumulated depreciation and amortization

2,603,827

2,519,950

Accounted for using the direct financing method

28,475

29,773

Real estate, Inventory Portfolio, held for sale

31,350

32,076

Commercial mortgage residual interests

16,245

15,915

Accrued rental income, net of allowance

25,386

25,535

Other assets

50,687

50,029

Total assets

$

2,798,807

$

2,713,575

Liabilities:

Line of credit payable

$

219,200

$

161,000

Mortgages payable

23,728

24,269

Notes payable - convertible, net of unamortized discount

352,768

349,534

Notes payable, net of unamortized discount

598,983

598,882

Other liabilities

47,680

51,116

Total liabilities

1,242,359

1,184,801

Stockholders' equity of NNN

1,555,161

1,527,483

Noncontrolling interests

1,287

1,291

Total equity

1,556,448

1,528,774

Total liabilities and equity

$

2,798,807

$

2,713,575

Common shares outstanding

86,034

83,613

Gross leasable area, Investment Portfolio (square feet)

13,623

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."

June 30, 2011

December 31,

2010

Assets:

Cash and cash equivalents

$

505

$

999

Receivables

200

200

Real estate

71,503

72,095

Other assets

411

561

$

72,619

$

73,855

Liabilities:

Notes payable

$

43,000

$

43,600

Other liabilities

482

995

Total liabilities

43,482

44,595

Members' equity

29,137

29,260

Total liabilities and equity

$

72,619

$

73,855

Quarter Ended June 30,

Six Months Ended June 30,

2011

2010

2011

2010

Revenues:

Rental income

$

1,565

$

1,565

$

3,130

$

3,130

Expenses:

General and administrative

112

77

185

184

Real estate

5

5

10

10

Depreciation and amortization

369

369

737

737

Interest

452

456

907

903

938

907

1,839

1,834

Net earnings

$

627

$

658

$

1,291

$

1,296

National Retail Properties, Inc.

Investment Portfolio

Top 20 Lines of Trade

As of June 30,

Line of Trade

2011 (1)

2010 (2)

1.

Convenience stores

23.1%

26.2%

2.

Restaurants - full service

10.7%

9.2%

3.

Automotive parts

7.7%

6.8%

4.

Theaters

5.8%

6.2%

5.

Automotive service

5.4%

5.6%

6.

Sporting goods

4.6%

3.2%

7.

Restaurants - limited service

4.1%

3.2%

8.

Drug stores

3.8%

4.4%

9.

Books

3.0%

4.0%

10.

Health and fitness

2.9%

1.6%

11.

Grocery

2.5%

2.8%

12.

Consumer electronics

2.4%

2.7%

13.

Furniture

2.2%

2.6%

14.

Travel plazas

2.2%

2.4%

15.

Office supplies

2.2%

2.5%

16.

Family entertainment centers

2.0%

1.3%

17.

General merchandise

1.6%

1.3%

18.

Recreational vehicle dealers, parts and accessories

1.3%

-

19.

Financial services

1.3%

1.2%

20.

Beer, wine and liquor

1.2%

1.6%

Other

10.0%

11.2%

Total

100.0%

100.0%

Top 10 States

State

% of Total(1)

State

% of Total(1)

1.

Texas

18.8%

6.

Indiana

4.2%

2.

Florida

10.5%

7.

Ohio

3.9%

3.

Illinois

6.5%

8.

Pennsylvania

3.6%

4.

North Carolina

6.2%

9.

Arizona

3.0%

5.

Georgia

5.1%

10.

Colorado

2.9%

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

(2)  Based on the annualized base rent for all leases in place as of June 30, 2010.

National Retail Properties, Inc.

Investment Portfolio

Top 10 Tenants

Properties

% of Total(1)

Pantry

96

8.0%

Susser

86

7.8%

AMC Theatre

15

5.3%

Road Ranger

34

3.5%

Mister Car Wash

40

3.3%

Pull-A-Part

20

3.1%

Pep Boys

17

2.9%

LA Fitness

8

2.8%

Barnes & Noble

9

2.3%

Best Buy

7

2.3%

Lease Expirations

% of Total(1)

# of

Properties

Gross Leasable

Area(2)

% of Total(1)

# of

Properties

Gross Leasable

Area(2)

2011

1.3%

14

289,000

2017

3.8%

28

682,000

2012

2.6%

27

508,000

2018

2.4%

25

334,000

2013

4.2%

41

875,000

2019

3.8%

40

614,000

2014

4.3%

42

578,000

2020

3.9%

84

706,000

2015

3.8%

69

930,000

2021

6.2%

85

709,000

2016

2.4%

33

529,000

Thereafter

61.3%

710

6,063,000

(1)  Based on the annual base rent of $242,014,000, which is the annualized base rent for all leases in place as of June 30, 2011.

(2)  Square feet.

SOURCE National Retail Properties, Inc.



RELATED LINKS

http://www.nnnreit.com