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First Quarter 2019 Operating Results Announced By National Retail Properties, Inc.

ORLANDO, Fla., May 1, 2019 /PRNewswire/ -- National Retail Properties, Inc. (NNN), a real estate investment trust, today announced its operating results for the quarter ended March 31, 2019.  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,


2019


2018


(in thousands, except per share data)

Revenues

$

163,712



$

152,836






Net earnings available to common stockholders

$

71,441



$

94,698


Net earnings per common share

$

0.44



$

0.62






FFO available to common stockholders

$

110,345



$

102,769


FFO per common share

$

0.68



$

0.67






Core FFO available to common stockholders

$

109,014



$

103,030


Core FFO per common share

$

0.67



$

0.67






AFFO available to common stockholders

$

110,631



$

102,880


AFFO per common share

$

0.68



$

0.67


First Quarter 2019 Highlights:

  • FFO and AFFO per common share increased 1.5% over prior year results
  • Portfolio occupancy was 98.2% at March 31, 2019 as compared to 98.2% on December 31, 2018 and 99.2% on March 31, 2018
  • Invested $117.0 million in property investments, including the acquisition of 33 properties with an aggregate 434,000 square feet of gross leasable area at an initial cash yield of 7.0%
  • Sold 17 properties for $19.4 million producing $10.4 million of gains on sales
  • Raised $5.3 million net proceeds from the issuance of 101,180 common shares

Jay Whitehurst, Chief Executive Officer, commented: "2019 is off to a steady, consistent start for National Retail Properties, with occupancy remaining above our long-term average and our new acquisitions being driven by our relationship tenants at strong initial cash yields, with future rent growth, and with long-term triple net leases.  Coupled with our low leveraged, flexible balance sheet, we remain well positioned to continue our 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, 2019, the company owned 2,984 properties in 48 states with a gross leasable area of approximately 30.7 million square feet and with a weighted average remaining lease term of 11.4 years.  For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on May 1, 2019, 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, 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 Annual Report on Form 10-K.  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.

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 Commission for the quarter ended March 31, 2019.  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), 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 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,



2019


2018

Income Statement Summary










Revenues:





Lease income


$

163,026



$


Rental income from operating leases




147,829


Earned income from direct financing leases




230


Percentage rent




546


Real estate expense reimbursement from tenants




4,158


Interest and other income from real estate transactions


686



73




163,712



152,836







Operating expenses:





General and administrative


9,521



8,697


Real estate


7,093



5,862


Depreciation and amortization


46,180



44,498


Impairment losses – real estate, net of recoveries


3,245



2,248


Retirement severance costs




261




66,039



61,566


Gain on disposition of real estate


10,445



38,596


Earnings from operations


108,118



129,866







Other expenses (revenues):





Interest and other income


(1,924)



(25)


Interest expense


29,957



26,602


Leasing transaction costs


52






28,085



26,577







Net earnings


80,033



103,289


Earnings attributable to noncontrolling interests


(10)



(9)







Net earnings attributable to NNN


80,023



103,280


Series E preferred stock dividends


(4,097)



(4,097)


Series F preferred stock dividends


(4,485)



(4,485)


Net earnings available to common stockholders


$

71,441



$

94,698







Weighted average common shares outstanding:





Basic


161,105



153,041


Diluted


161,614



153,393







Net earnings per share available to common stockholders:





Basic


$

0.44



$

0.62


Diluted


$

0.44



$

0.62


 

 

National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)



Quarter Ended



March 31,



2019


2018

Funds From Operations (FFO) Reconciliation:





Net earnings available to common stockholders


$

71,441



$

94,698


Real estate depreciation and amortization


46,104



44,419


Gain on disposition of real estate


(10,445)



(38,596)


Impairment losses – depreciable real estate, net of recoveries


3,245



2,248


Total FFO adjustments


38,904



8,071


FFO available to common stockholders


$

110,345



$

102,769







FFO per common share:





Basic


$

0.68



$

0.67


Diluted


$

0.68



$

0.67







Core Funds From Operations Reconciliation:





Net earnings available to common stockholders


$

71,441



$

94,698


Total FFO adjustments


38,904



8,071


FFO available to common stockholders


110,345



102,769







Retirement severance costs




261


Gain on sale of equity investments


(1,331)




Total Core FFO adjustments


(1,331)



261


Core FFO available to common stockholders


$

109,014



$

103,030







Core FFO per common share:





Basic


$

0.68



$

0.67


Diluted


$

0.67



$

0.67
































































Quarter Ended



March 31,



2019


2018

Adjusted Funds From Operations (AFFO) Reconciliation:





Net earnings available to common stockholders


$

71,441



$

94,698


Total FFO adjustments


38,904



8,071


Total Core FFO adjustments


(1,331)



261


Core FFO available to common stockholders


109,014



103,030







Straight-line accrued rent


(747)



(998)


Net capital lease rent adjustment


172



228


Below-market rent amortization


(228)



(697)


Stock based compensation expense


2,546



2,145


Capitalized interest expense


(126)



(828)


Total AFFO adjustments


1,617



(150)


AFFO available to common stockholders


$

110,631



$

102,880







AFFO per common share:





Basic


$

0.69



$

0.67


Diluted


$

0.68



$

0.67







Other Information:





Rental income from operating leases(1)


$

158,398



$

147,829


Earned income from direct financing leases(1)


$

213



$

230


Percentage rent(1)


$

422



$

546







Real estate expense reimbursement from tenants(1)


$

3,993



$

4,158


Real estate expenses


(7,092)



(5,863)


Real estate expenses, net of tenant reimbursements


$

(3,099)



$

(1,705)







Amortization of debt costs


$

920



$

888


Scheduled debt principal amortization (excluding maturities)


$

141



$

134


Non-real estate depreciation expense


$

79



$

81











(1)

The condensed consolidated financial statement for the quarter ended March 31, 2019 is presented under the new accounting
standard, ASU 2016-02, "Leases (Topic 842)," while comparative periods presented are not adjusted and continue to be reported in
accordance with NNN's historical accounting policy.  For the quarter ended March 31, 2019, the aggregate of such amounts is
$163,026 and classified as lease income on the income statement summary. For the quarter ended March 31, 2018, the aggregate of
such amounts is $152,763.

 

 

2019 Earnings Guidance (Unchanged from February 2019):



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.



2019 Guidance

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


$1.60 - $1.65 per share

  Real estate depreciation and amortization per share


$1.11 per share

Core FFO per share


$2.71 - $2.76 per share

  AFFO per share


$2.76 - $2.81 per share

  G&A expenses


$36.5 - $37.5 Million

  Real estate expenses, net of tenant reimbursements


$9.0 - $10.0 Million

  Acquisition volume


$550 - $650 Million

  Disposition volume


$80 - $120 Million

 

 

National Retail Properties, Inc.

(in thousands)

(unaudited)



March 31,
2019


December 31,
2018

Balance Sheet Summary










Assets:





Real estate:





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


$

6,900,747



$

6,844,018


Accounted for using the direct financing method


7,219



8,069


Real estate held for sale


21,397



23,345


Cash and cash equivalents


80,521



114,267


Receivables, net of allowance


2,910



3,797


Accrued rental income, net of allowance


28,120



25,387


Debt costs, net of accumulated amortization


3,757



4,081


Other assets


92,317



80,474


Total assets


$

7,136,988



$

7,103,438







Liabilities:





Line of credit payable


$



$


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


12,536



12,694


 Notes payable, net of unamortized discount and unamortized debt costs


2,839,678



2,838,701


Accrued interest payable


47,456



19,519


Other liabilities


84,431



77,919


Total liabilities


2,984,101



2,948,833







Stockholders' equity of NNN


4,152,522



4,154,250


Noncontrolling interests


365



355


Total equity


4,152,887



4,154,605







Total liabilities and equity


$

7,136,988



$

7,103,438






















Common shares outstanding


161,978



161,504







Gross leasable area, Property Portfolio (square feet)


30,698



30,487







 

 

National Retail Properties, Inc.

Debt Summary

As of March 31, 2019

(in thousands)

(unaudited)

Unsecured Debt


Principal


Principal,
Net of
Unamortized
Discount


Stated Rate


Effective
Rate


Maturity Date

Line of credit payable


$



$



L + 87.5 bps


%


   January 2022












Unsecured notes payable:











2022


325,000



323,031



3.800

%


3.985

%


   October 2022

2023


350,000



348,846



3.300

%


3.388

%


   April 2023

2024


350,000



349,601



3.900

%


3.924

%


   June 2024

2025


400,000



399,323



4.000

%


4.029

%


   November 2025

2026


350,000



346,905



3.600

%


3.733

%


   December 2026

2027


400,000



398,586



3.500

%


3.548

%


   October 2027

2028


400,000



397,269



4.300

%


4.388

%


   October 2028

2048


300,000



295,793



4.800

%


4.890

%


   October 2048

Total


2,875,000



2,859,354



















Total unsecured debt(1)


$

2,875,000



$

2,859,354



















Debt costs




(26,932)








Accumulated amortization


7,256








Debt costs, net of accumulated amortization


(19,676)








Notes payable, net of unamortized discount and unamortized debt costs


$

2,839,678









(1)  Unsecured notes payable have a weighted average interest rate of 4.0% and a weighted average maturity of 9.1 years.

 

Mortgages Payable


Principal
Balance


Interest Rate


Maturity Date


Mortgage(1)


$

12,606



5.23

%


   July 2023










Debt costs


(147)







Accumulated amortization


77







Debt costs, net of accumulated 
     amortization


(70)







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


$

12,536







(1)   Includes unamortized premium



























 

 

National Retail Properties, Inc.

Property Portfolio



Top 20 Lines of Trade






As of March 31,




Line of Trade


2019(1)


2018(2)


1.


Convenience stores


17.8

%


17.9

%


2.


Restaurants – full service


11.3

%


12.0

%


3.


Restaurants – limited service


9.0

%


8.0

%


4.


Automotive service


8.9

%


7.6

%


5.


Family entertainment centers


7.1

%


6.4

%


6.


Health and fitness


5.5

%


5.6

%


7.


Theaters


4.9

%


4.8

%


8.


Recreational vehicle dealers, parts and accessories


3.5

%


3.1

%


9.


Automotive parts


3.4

%


3.6

%


10.


Home improvement


2.4

%


1.7

%


11.


Wholesale clubs


2.3

%


2.4

%


12.


Medical service providers


2.2

%


2.3

%


13.


Equipment rental


1.9

%


2.0

%


14.


Drug stores


1.7

%


2.0

%


15.


Travel plazas


1.7

%


1.8

%


16.


Furniture


1.6

%


1.9

%


17.


General merchandise


1.6

%


1.8

%


18.


Consumer electronics


1.6

%


1.7

%


19.


Bank


1.6

%


2.4

%


20.


Home furnishings


1.5

%


1.6

%




Other


8.5

%


9.4

%




Total


100.0

%


100.0

%


 

 

Top 10 States














State



% of Total(1)



State



% of Total(1)


1.

Texas



17.4

%


6.

Georgia



4.5

%


2.

Florida



8.9

%


7.

Tennessee



3.9

%


3.

Ohio



5.7

%


8.

Indiana



3.9

%


4.

Illinois



5.2

%


9.

Virginia



3.7

%


5.

North Carolina



4.6

%


10.

Alabama



3.1

%



(1) Based on the annualized base rent for all leases in place as of March 31, 2019.



(2) Based on the annualized base rent for all leases in place as of March 31, 2018.


 

 

National Retail Properties, Inc.

Property Portfolio


Top Tenants ( ≥ 2.0%)





Properties


% of Total(1)


7-Eleven


140



5.3

%


Camping World


47



4.4

%


Mister Car Wash


106



4.4

%


LA Fitness


30



3.9

%


Flynn Restaurant Group (Taco Bell/Arby's)


202



3.6

%


GPM Investments (Convenience Stores)


151



3.5

%


AMC Theatre


20



3.2

%


Couche Tard (Pantry)


85



3.0

%


Sunoco


61



2.4

%


BJ's Wholesale Club


9



2.3

%


Chuck E. Cheese's


53



2.2

%

 

 

Lease Expirations(2)


















% of
Total(1)


# of
Properties


Gross Leasable
Area(3)




% of
Total(1)


# of
Properties


Gross Leasable
Area(3)

2019


1.0

%


30



334,000



2025


5.1

%


140



1,561,000


2020


2.4

%


100



1,090,000



2026


4.9

%


179



1,697,000


2021


3.8

%


119



1,299,000



2027


7.6

%


193



2,600,000


2022


5.8

%


124



1,643,000



2028


4.9

%


158



1,173,000


2023


3.0

%


116



1,453,000



2029


3.4

%


76



1,239,000


2024


3.2

%


81



1,342,000



Thereafter


54.9

%


1,612



14,187,000












































(1)

Based on the annual base rent of $633,239,000, which is the annualized base rent for all leases in place as of March 31, 2019.

(2)

As of March 31, 2019, the weighted average remaining lease term is 11.4 years.

(3)

Square feet.

 

 

 

Cision

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