Second Quarter 2013 Operating Results And Increased 2013 FFO Guidance Announced By National Retail Properties, Inc.

News provided by

National Retail Properties, Inc.

Aug 01, 2013, 08:30 ET

ORLANDO, Fla., Aug. 1, 2013 /PRNewswire/ -- National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced its operating results for the quarter and six months ended June 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

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

(in thousands, except per share data)

Revenues

$

96,121

$

81,206

$

188,599

$

158,439








Net earnings available to common stockholders

$

32,724

$

27,579

$

62,029

$

52,334

Net earnings per common share

$

0.27

$

0.26

$

0.52

$

0.49








FFO available to common stockholders

$

54,265

$

43,731

$

108,884

$

85,551

FFO per common share

$

0.45

$

0.41

$

0.92

$

0.80








Recurring FFO available to common stockholders

$

54,265

$

46,279

$

109,643

$

91,169

Recurring FFO per common share

$

0.45

$

0.43

$

0.93

$

0.85








AFFO available to common stockholders

$

57,381

$

48,957

$

114,373

$

95,218

AFFO per common share

$

0.47

$

0.46

$

0.97

$

0.89
  • Portfolio occupancy was  98.1% at June 30, 2013, as compared to 97.9% at December 31, 2012, and 98.2% at June 30, 2012

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

  • Investments:
    • $437.7 million in property investments, including the acquisition of 209 properties with an aggregate 1,063,000 square feet of gross leasable area
  • Dispositions:
    • Seven properties with net proceeds of $13.0 million producing $2,150,000 of gains on sales, net of income tax and minority interest (not included in FFO)

Investments and Dispositions for the six months ended June 30, 2013:

  • Investments:
    • $480.3 million in property investments, including the acquisition of 226 properties with an aggregate 1,225,000 square feet of gross leasable area
  • Dispositions:
    • Nine properties with net proceeds of $16.6 million producing $2,655,000 of gains on sales, net of income tax and minority interest (not included in FFO)

Capital transactions for the quarter ended June 30, 2013:

  • Raised $90.6 million in net proceeds from the issuance of 2,391,321 common shares
  • Issued 11,500,000 depositary shares representing interests in its 5.70% Series E preferred stock generating net proceeds of $277.6 million
  • Issued $350 million principal amount of 3.30% senior unsecured notes due 2023 generating net proceeds of $344.3 million
  • Called $223.0 million principal amount of 5.125% convertible senior notes due 2028 which will be settled during the third quarter

Capital transactions for the six months ended June 30, 2013:

  • Raised $876.5 million of new long term capital at attractive pricing:
    • Raised $254.6 million in net proceeds from the issuance of 7,432,858 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
  • Called $223.0 million principal amount of 5.125% convertible senior notes due 2028 for redemption which will be settled during the third quarter
  • Paid off $174.2 million bank credit facility balance leaving full availability of $500 million

National Retail Properties also announced an increase in 2013 FFO guidance from a range of $1.85 to $1.89 to a range of $1.86 to $1.90 per share before any impairment expense. 2013 AFFO is estimated to be $1.94 to $1.98 per share. The FFO guidance equates to net earnings before any gains or losses from the sale of real estate of $1.02 to $1.09 per share, plus $0.81 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.

Craig Macnab, Chief Executive Officer, commented: "We are very pleased to have completed a number of attractive acquisitions during the second quarter which allowed us to increase our earnings guidance again to a level that produces approximately 8% growth in FFO per share over 2012's results. Additionally, we raised $877 million of very well-priced long-term capital during the first half which positions us well to fund future acquisitions. While this may modestly constrain 2013 per share results, securing this low cost capital provides us with increased visibility in per share growth for 2014."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases.  As of June 30, 2013, the company owned 1,838 properties in 47 states with a gross leasable area of approximately 20.2 million square feet.  For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on August 1, 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 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 June 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 and any applicable taxes (or including losses) 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 June 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

Six Months Ended


June 30,

June 30,


2013

2012

2013

2012

Income Statement Summary
















Revenues:







   Rental and earned income

$

92,013

$

77,340

$

180,524

$

150,302

   Real estate expense reimbursement from tenants

3,149

2,556

6,126

5,366

   Interest and other income from real estate transactions

371

594

754

1,300

   Interest income on commercial mortgage residual interests

588

716

1,195

1,471


96,121

81,206

188,599

158,439









Retail operations:







   Revenues

—

7,784

—

19,008

   Operating expenses

—

(7,480)

—

(18,542)

   Net

—

304

—

466









Operating expenses:







   General and administrative

9,412

7,025

17,676

14,630

   Real estate

4,301

4,040

8,218

8,549

   Depreciation and amortization

22,552

18,678

46,270

36,388

   Impairment losses and other charges, net of recoveries


160

2,548

1,972

2,583


36,425

32,291

74,136

62,150









Other expenses (revenues):







   Interest and other income

(377)

(361)

(711)

(720)

   Interest expense

23,394

19,569

45,221

39,387


23,017

19,208

44,510

38,667









Income tax benefit (expense)

(432)

(156)

2

(271)

Equity in earnings of unconsolidated affiliate

—

155

—

305









Earnings from continuing operations

36,247

30,010

69,955

58,122









Earnings from discontinued operations

1,359

3,466

1,554

5,177









Earnings including noncontrolling interests

37,606

33,476

71,509

63,299









Loss (earnings) attributable to noncontrolling interests:







   Continuing operations

40

32

259

46

   Discontinued operations

(160)

(3)

(216)

(8)


(120)

29

43

38









Net earnings attributable to NNN

37,486

33,505

71,552

63,337

Series C preferred stock dividends

—

—

—

(1,979)

Series D preferred stock dividends

(4,762)

(5,926)

(9,523)

(5,926)

Excess of redemption value over carrying value of Series C

   preferred shares redeemed

—

—

—

(3,098)

Net earnings available to common stockholders

$

32,724

$

27,579

$

62,029

$

52,334









 

 

 

National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)

 











Quarter Ended


Six Months Ended



June 30,

June 30,


2013

2012

2013

2012









Weighted average common shares outstanding:







   Basic

117,813

105,992

115,664

105,418

   Diluted

120,866

107,459

118,404

106,844









Net earnings per share available to common stockholders:







  Basic:







   Continuing operations

$

0.27

$

0.23

$

0.52

$

0.44

   Discontinued operations

0.01

0.03

0.01

0.05

   Net earnings

$

0.28

$

0.26

$

0.53

$

0.49









Diluted:







   Continuing operations

$

0.26

$

0.23

$

0.51

$

0.44

   Discontinued operations

0.01

0.03

0.01

0.05

   Net earnings

$

0.27

$

0.26

$

0.52

$

0.49


















National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)

 


Quarter Ended

Six Months Ended


June 30,

June 30,


2013

2012

2013

2012

Funds From Operations (FFO) Reconciliation:







Net earnings available to common stockholders

$

32,724

$

27,579

$

62,029

$

52,334

Real estate depreciation and amortization:







  Continuing operations

22,508

17,825

46,162

34,681

  Discontinued operations

30

376

103

820

Joint venture real estate depreciation

—

44

—

88

Gain on disposition of real estate, net of tax and minority interest

(2,150)

(2,438)

(2,655)

(2,752)

Impairment losses - real estate

1,153

345

3,245

380

        Total FFO adjustments

21,541

16,152

46,855

33,217

FFO available to common stockholders

$

54,265

$

43,731

$

108,884

$

85,551









FFO per share:







  Basic

$

0.46

$

0.41

$

0.94

$

0.81

  Diluted

$

0.45

$

0.41

$

0.92

$

0.80









Recurring Funds from Operations Reconciliation:







Net earnings available to common shareholders

$

32,724

$

27,579

$

62,029

$

52,334

Total FFO adjustments

21,541

16,152

46,855

33,217

FFO available to common shareholders

54,265

43,731

108,884

85,551









Excess of redemption value over carrying value of preferred

   share redemption

—

—

—

3,098

Impairment losses and other charges, net of recoveries

—

2,548

759

2,520

        Total Recurring FFO adjustments

—

2,548

759

5,618

Recurring FFO available to common shareholders

$

54,265

$

46,279

$

109,643

$

91,169









Recurring FFO per share:







  Basic

$

0.46

$

0.44

$

0.95

$

0.86

  Diluted

$

0.45

$

0.43

$

0.93

$

0.85

















































































National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)




















Quarter Ended

Six Months Ended


June 30,

June 30,


2013

2012

2013

2012

Adjusted Funds From Operations (AFFO) Reconciliation:







   Net earnings available to common shareholders

$

32,724

$

27,579

$

62,029

$

52,334

   Total FFO adjustments

21,541

16,152

46,855

33,217

   Total Recurring FFO adjustments

—

2,548

759

5,618

   Recurring FFO available to common stockholders

54,265

46,279

109,643

91,169









  Straight line accrued rent

805

265

27

(529)

   Net capital lease rent adjustment

410

405

810

807

   Below market rent amortization

(622)

(602)

(1,247)

(1,237)

   Stock based compensation expense

1,894

1,983

3,608

3,768

   Capitalized interest expense

(321)

(436)

(540)

(867)

   Convertible debt interest expense

950

1,063

2,072

2,107

        Total AFFO adjustments

3,116

2,678

4,730

4,049

   AFFO available to common stockholders

$

57,381

$

48,957

$

114,373

$

95,218









AFFO per share:







   Basic

$

0.49

$

0.46

$

0.99

$

0.90

   Diluted

$

0.47

$

0.46

$

0.97

$

0.89









Other Information:







   Percentage rent

$

162

$

221

$

534

$

330

   Amortization of debt costs

$

900

$

828

$

1,806

$

1,656

   Scheduled debt principal amortization (excluding maturities)

$

265

$

391

$

526

$

679

   Non-real estate depreciation expense

$

61

$

18

$

123

$

40

   Real estate acquisition costs (included in general and
    administrative expense)

$

1,604

$

252

$

1,604

$

305

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 June 30, 2013 and generated revenue, as discontinued operations.  The following is a summary of the earnings (loss) from discontinued operations.











Quarter Ended

Six Months Ended


June 30,

June 30,


2013

2012

2013

2012









Revenues:







  Rental and earned income

$

523

$

2,113

$

1,149

$

4,347

  Real estate expense reimbursement from tenants

60

55

132

199

  Interest and other income from real estate transactions

31

4

36

6


614

2,172

1,317

4,552









Expenses:







  General and administrative

212

3

214

5

  Real estate

135

178

202

527

  Depreciation and amortization

61

389

148

847

  Impairment losses and other charges, net of recoveries

1,008

345

2,047

317

  Interest

145

185

308

369


1,561

1,100

2,919

2,065









Gain on disposition of real estate

2,669

2,438

3,174

2,752

Income tax expense

(363)

(44)

(18)

(62)









Earnings from discontinued operations attributable to

  NNN

1,359

3,466

1,554

5,177

Earnings attributable to noncontrolling interests

(160)

(3)

(216)

(8)

Earnings from discontinued operations attributable to

  NNN

$

1,199

$

3,463

$

1,338

$

5,169

National Retail Properties, Inc.

(in thousands)

(unaudited)

 


June 30,
2013

December 31,
2012

Balance Sheet Summary








Assets:



   Cash and cash equivalents

$

236,916

$

2,076

   Receivables, net of allowance

3,443

3,112

   Mortgages, notes and accrued interest receivable

26,203

27,770

   Real estate portfolio:



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

4,158,943

3,791,282

      Accounted for using the direct financing method

22,407

23,217

   Real estate held for sale

46,691

20,308

   Commercial mortgage residual interests

14,173

13,096

   Accrued rental income, net of allowance

25,226

25,458

   Debt costs, net of accumulated amortization

14,189

12,781

   Other assets

101,161

68,926

        Total assets

$

4,649,352

$

3,988,026





Liabilities:



   Line of credit payable

$

—

$

174,200

   Mortgages payable, including unamortized premium

10,048

10,602

   Notes payable - convertible, net of unamortized discount

222,944

236,500

   Notes payable, net of unamortized discount

1,513,587

1,165,662

   Accrued interest payable

17,277

17,527

   Other liabilities

87,925

85,950

        Total liabilities

1,851,781

1,690,441





Stockholders' equity of NNN

2,796,314

2,296,285

Noncontrolling interests

1,257

1,300

        Total equity

2,797,571

2,297,585





        Total liabilities and equity

$

4,649,352

$

3,988,026





Common shares outstanding

119,287

111,555





Gross leasable area, Property Portfolio (square feet)

20,218

19,168






National Retail Properties, Inc.

Property Portfolio

Top 20 Lines of Trade




As of June 30,


Line of Trade

2013(1)

2012 (2)

1.

Convenience stores

19.9%

22.6%

2.

Restaurants - full service

9.9%

11.4%

3.

Automotive service

7.6%

5.9%

4.

Automotive parts

5.2%

6.0%

5.

Restaurants - limited service

4.9%

3.6%

6.

Banks

4.7%

0.2%

7.

Theaters

4.4%

4.6%

8.

Health and fitness

3.7%

2.6%

9.

Sporting goods

3.7%

4.5%

10.

Wholesale clubs

3.1%

3.7%

11.

Recreational vehicle dealers, parts and accessories

2.8%

2.9%

12.

Drug stores

2.7%

3.2%

13.

Home improvement

2.7%

2.2%

14.

Consumer electronics

2.7%

3.2%

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

11.6%

12.5%


Total

100.0%

100.0%

Top 10 States

State

% of Total(1)

State

% of Total(1)

1.

Texas

21.1%

6.

Virginia

4.7%

2.

Florida

10.7%

7.

Indiana

3.9%

3.

Illinois

5.2%

8.

California

3.8%

4.

Georgia

5.0%

9.

Pennsylvania

3.3%

5.

North Carolina

4.7%

10.

Ohio

3.1%

(1) Based on the annualized base rent for all leases in place as of June 30, 2013.

(2) Based on the annualized base rent for all leases in place as of June 30, 2012.

National Retail Properties, Inc.

Property Portfolio

Top Tenants (> 2.0%)



Properties

% of Total (1)

Susser

86

5.1

%

Mister Car Wash

84

4.9

%

Pantry

84

4.5

%

SunTrust

139

4.5

%

7-Eleven

68

4.3

%

LA Fitness

18

3.7

%

AMC Theatre

15

3.6

%

BJ's Wholesale Club

7

3.1

%

Camping World

21

2.8

%

Best Buy

19

2.7

%

Gander Mountain

9

2.3

%

Mid-Atlantic Convenience Stores

38

2.2

%

Road Ranger

27

2.1

%

Pull-A-Part

20

2.1

%

Logan's Roadhouse

29

2.0

%

Lease Expirations(2)






% of
Total(1)

# of
Properties

Gross Leasable
Area (3)


% of
Total(1)

# of
Properties

Gross Leasable
Area (3)

2013

0.5

%

12

153,000

2019

2.6

%

46

778,000

2014

2.4

%

41

587,000

2020

3.1

%

96

907,000

2015

2.1

%

33

615,000

2021

4.6

%

99

912,000

2016

1.7

%

32

565,000

2022

6.8

%

92

1,060,000

2017

3.5

%

46

1,009,000

2023

3.1

%

50

879,000

2018

8.8

%

203

2,029,000

Thereafter

60.8

%

1,045

10,181,000









(1)

Based on the annual base rent of $390,754,000, which is the annualized base rent for all leases in place as of June 30, 2013.

(2)

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

(3)

Square feet.

SOURCE National Retail Properties, Inc.

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