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Record Annual Results Announced By National Retail Properties, Inc.

ORLANDO, Fla., Feb. 12, 2019 /PRNewswire/ -- National Retail Properties, Inc. (NNN), a real estate investment trust, today announced operating results for the quarter and year ended December 31, 2018.  Highlights include:

Operating Results:

  • Revenues and net earnings, FFO, Core FFO and AFFO available to common stockholders and diluted per share amounts:

Quarter Ended


Year Ended


December 31,


December 31,


2018


2017


2018


2017


(in thousands, except per share data)

Revenues

$

158,976



$

150,247



$

622,661



$

584,933










Net earnings available to common stockholders

$

27,980



$

63,586



$

258,120



$

217,193


Net earnings per common share

$

0.17



$

0.42



$

1.65



$

1.45










FFO available to common stockholders

$

82,491



$

95,267



$

395,337



$

359,179


FFO per common share

$

0.52



$

0.63



$

2.53



$

2.40










Core FFO available to common stockholders

$

101,001



$

95,459



$

414,590



$

376,991


Core FFO per common share

$

0.63



$

0.63



$

2.65



$

2.52










AFFO available to common stockholders

$

103,523



$

95,692



$

418,702



$

379,083


AFFO per common share

$

0.65



$

0.63



$

2.68



$

2.54


 

  • Portfolio occupancy was 98.2% at December 31, 2018 as compared to 98.7% at September 30, 2018, and 99.1% at December 31, 2017

2018 Highlights:

  • Increased annual net earnings per common share 13.8%
  • Increased annual FFO per common share 5.4%
  • Increased annual Core FFO per common share 5.2%
  • Increased annual AFFO per common share 5.5%
  • Dividend yield of 4.0% at December 31, 2018
  • Annual dividend per common share increased 4.8% to $1.95 marking the 29th consecutive year of annual dividend increases - making the company one of only three equity REITs and 86 publicly traded companies in America to have increased annual dividends for 29 or more consecutive years
  • Maintained high occupancy levels at 98.2% with a weighted average remaining lease term of 11.5 years


2018 Highlights (continued):

  • Invested $715.6 million in 265 properties with an aggregate gross leasable area of approximately 2,167,000 square feet at an initial cash yield of 6.8%
  • Sold 61 properties for $147.6 million, producing $65.1 million of gains on sale, at a cap rate of 5.1%
  • Raised $1,027.4 million of new long-term capital at attractive pricing
  • Paid off $300 million principal amount of 5.500% senior unsecured notes due 2021
  • $900 million availability on bank credit facility at December 31, 2018
  • 99.7% of properties are unencumbered with secured mortgage debt
  • Total average annual shareholder return of 12.8% over the past 25 years exceeds industry and general equity averages

Selected Highlights for the quarter ended December 31, 2018:

  • Investments:
  • Dispositions:
  • Long-term capital:

Jay Whitehurst, Chief Executive Officer, commented: "After a busy and productive fourth quarter, National Retail Properties once again delivered above average returns to our investors while taking below average risk.  Our commitment to consistent per share growth on a multi-year basis produced an annual dividend increase of 4.8% and annual AFFO per share growth of 5.5% in 2018, all while maintaining our low leverage, conservatively financed balance sheet.  Driven by our consistent strategy and focused execution, we are well positioned to continue producing total shareholder returns that we believe will exceed the REIT averages over the long term."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases.  As of December 31, 2018, the company owned 2,969 properties in 48 states with a gross leasable area of approximately 30.5 million square feet and with a weighted average remaining lease term of 11.5 years.  For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on February 12, 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-K with the Commission for the quarter and year ended December 31, 2018.  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


Year Ended



December 31,


December 31,



2018


2017


2018


2017

Income Statement Summary


















Revenues:









Rental and earned income


$

153,684



$

145,187



$

604,615



$

568,083


Real estate expense reimbursement from tenants


5,143



4,338



16,784



15,512


Interest and other income from real estate transactions


149



722



1,262



1,338




158,976



150,247



622,661



584,933











Operating expenses:









General and administrative


8,267



8,712



34,248



33,805


Real estate


7,649



6,465



25,099



23,105


Depreciation and amortization


44,117



43,843



174,398



173,720


Impairment losses – real estate and other charges, net of 
     recoveries


18,494



7,708



28,211



8,955


Retirement severance costs


270



192



1,013



7,845




78,797



66,920



262,969



247,430


Gain on disposition of real estate


8,020



15,791



65,070



36,655


Earnings from operations


88,199



99,118



424,762



374,158











Other expenses (revenues):









Interest and other income


(1,553)



(83)



(1,810)



(322)


Interest expense


34,940



27,016



115,847



109,109


Loss on early extinguishment of debt


18,240





18,240






51,627



26,933



132,277



108,787


Net earnings


36,572



72,185



292,485



265,371


Earnings attributable to noncontrolling interests


(10)



(17)



(38)



(398)











Net earnings attributable to NNN


36,562



72,168



292,447



264,973


Series D preferred stock dividends








(3,598)


Series E preferred stock dividends


(4,097)



(4,097)



(16,387)



(16,387)


Series F preferred stock dividends


(4,485)



(4,485)



(17,940)



(17,940)


Excess of redemption value over carrying value of Series D 
     preferred shares redeemed








(9,855)


Net earnings available to common stockholders


$

27,980



$

63,586



$

258,120



$

217,193




















Weighted average common shares outstanding:









Basic


159,193



151,791



155,745



149,111


Diluted


159,772



152,148



156,296



149,433











Net earnings per share available to common stockholders:









Basic


$

0.17



$

0.42



$

1.65



$

1.45


Diluted


$

0.17



$

0.42



$

1.65



$

1.45




National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)

 



Quarter Ended


Year Ended



December 31,


December 31,



2018


2017


2018


2017

Funds From Operations (FFO) Reconciliation:









Net earnings available to common stockholders


$

27,980



$

63,586



$

258,120



$

217,193


Real estate depreciation and amortization:


44,037



43,764



174,076



173,404


Gain on disposition of real estate, net of noncontrolling interests


(8,020)



(15,791)



(65,070)



(36,258)


Impairment losses – depreciable real estate, net of recoveries


18,494



3,708



28,211



4,840


Total FFO adjustments


54,511



31,681



137,217



141,986


FFO available to common stockholders


$

82,491



$

95,267



$

395,337



$

359,179











FFO per common share:









Basic


$

0.52



$

0.63



$

2.54



$

2.41


Diluted


$

0.52



$

0.63



$

2.53



$

2.40











Core Funds from Operations Reconciliation:









Net earnings available to common stockholders


$

27,980



$

63,586



$

258,120



$

217,193


Total FFO adjustments


54,511



31,681



137,217



141,986


FFO available to common stockholders


82,491



95,267



395,337



359,179











Excess of redemption value over carrying value of preferred

   share redemption








9,855


Impairment losses – non-depreciable real estate








112


Retirement severance costs


270



192



1,013



7,845


Loss on early extinguishment of debt


18,240





18,240




Total Core FFO adjustments


18,510



192



19,253



17,812


Core FFO available to common stockholders


$

101,001



$

95,459



$

414,590



$

376,991











Core FFO per common share:









Basic


$

0.63



$

0.63



$

2.66



$

2.53


Diluted


$

0.63



$

0.63



$

2.65



$

2.52






















Quarter Ended


Year Ended



December 31,


December 31,



2018


2017


2018


2017

Adjusted Funds From Operations (AFFO) Reconciliation:









Net earnings available to common stockholders


$

27,980



$

63,586



$

258,120



$

217,193


Total FFO adjustments


54,511



31,681



137,217



141,986


Total Core FFO adjustments


18,510



192



19,253



17,812


Core FFO available to common stockholders


101,001



95,459



414,590



376,991











Straight-line accrued rent


124



(552)



(747)



(1,752)


Net capital lease rent adjustment


220



223



874



884


Below market rent amortization


(288)



(659)



(2,622)



(3,355)


Stock based compensation expense


2,641



1,962



9,282



8,750


Capitalized interest expense


(175)



(741)



(2,675)



(2,435)


Total AFFO adjustments


2,522



233



4,112



2,092


AFFO available to common stockholders


$

103,523



$

95,692



$

418,702



$

379,083











AFFO per common share:









Basic


$

0.65



$

0.63



$

2.69



$

2.54


Diluted


$

0.65



$

0.63



$

2.68



$

2.54











Other Information:









Percentage rent


$

543



$

715



$

1,561



$

1,700


Amortization of debt costs


$

1,917



$

891



$

4,611



$

3,502


Scheduled debt principal amortization (excluding maturities)


$

138



$

130



$

538



$

510


Non-real estate depreciation expense


$

83



$

82



$

332



$

327



















2019 Earnings Guidance (Unchanged from November 2018):








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


$35.5 - $36.5 Million

  Real estate expenses, net of tenant reimbursements


$8.5 - $9.0 Million

  Acquisition volume


$550 - $650 Million

  Disposition volume


$80 - $120 Million

 

National Retail Properties, Inc.

(in thousands)

(unaudited)

 



December 31,
2018


December 31,
2017

Balance Sheet Summary










Assets:





Real estate:





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


$

6,853,757



$

6,403,638


Accounted for using the direct financing method


8,069



9,650


Real estate held for sale


13,606



29,373


Cash and cash equivalents


114,267



1,364


Receivables, net of allowance


3,797



4,317


Accrued rental income, net of allowance


25,387



25,916


Debt costs, net of accumulated amortization


4,081



5,380


Other assets


80,474



80,896


Total assets


$

7,103,438



$

6,560,534







Liabilities:





Line of credit payable


$



$

120,500


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


12,694



13,300


Notes payable, net of unamortized discount and unamortized 
     debt costs


2,838,701



2,446,407


Accrued interest payable


19,519



20,311


Other liabilities


77,919



119,106


Total liabilities


2,948,833



2,719,624







Stockholders' equity of NNN


4,154,250



3,840,593


Noncontrolling interests


355



317


Total equity


4,154,605



3,840,910







Total liabilities and equity


$

7,103,438



$

6,560,534







Common shares outstanding


161,504



153,577







Gross leasable area, Property Portfolio (square feet)


30,487



29,093


 

National Retail Properties, Inc.

Debt Summary

As of December 31, 2018

(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


2.823%


January 2022












Unsecured notes payable:






















2022


325,000



322,903



3.800%


3.985%


October 2022

2023


350,000



348,780



3.300%


3.388%


April 2023

2024


350,000



349,583



3.900%


3.924%


June 2024

2025


400,000



399,301



4.000%


4.029%


November 2025

2026


350,000



346,818



3.600%


3.733%


December 2026

2027


400,000



398,550



3.500%


3.548%


October 2027

2028


400,000



397,215



4.300%


4.388%


October 2028

2048


300,000



295,778



4.800%


4.890%


October 2048

Total


2,875,000



2,858,928



















Total unsecured debt


$

2,875,000



$

2,858,928



















Debt costs


(26,932)








Accumulated amortization


6,705








Debt costs, net of accumulated amortization


(20,227)








Notes payable, net of unamortized discount and
unamortized debt costs (1)


$

2,838,701



















(1) Unsecured notes payable have a weighted average interest rate of 4.0% and a weighted average maturity of 9.3 years

 

Mortgages Payable


Principal
Balance


Interest Rate


Maturity Date

Mortgage(1)


$

12,768



5.230%


July 2023


Debt costs


(147)






Accumulated amortization


73






Debt costs, net of accumulated amortization


(74)






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


$

12,694













(1) Includes unamortized premium







 

National Retail Properties, Inc.

Property Portfolio


Top 20 Lines of Trade






As of December 31,



Line of Trade


2018(1)


2017(2)

1.


Convenience stores


18.0

%


18.1

%

2.


Restaurants - full service


11.4

%


12.1

%

3.


Restaurants - limited service


8.9

%


7.6

%

4.


Automotive service


8.6

%


6.9

%

5.


Family entertainment centers


7.1

%


6.4

%

6.


Health and fitness


5.6

%


5.6

%

7.


Theaters


5.0

%


4.8

%

8.


Automotive parts


3.4

%


3.6

%

9.


Recreational vehicle dealers, parts and accessories


3.4

%


3.4

%

10.


Wholesale clubs


2.3

%


2.2

%

11.


Medical service providers


2.2

%


2.4

%

12.


Home improvement


2.2

%


1.8

%

13.


Equipment rental


1.9

%


2.0

%

14.


Drug stores


1.8

%


1.9

%

15.


Travel plazas


1.7

%


1.8

%

16.


Furniture


1.7

%


1.9

%

17.


Bank


1.6

%


2.5

%

18.


Consumer electronics


1.6

%


1.8

%

19.


General merchandise


1.6

%


1.8

%

20.


Home furnishings


1.5

%


1.6

%



Other


8.5

%


9.8

%



Total


100.0

%


100.0

%

 

Top 10 States



State



% of Total(1)



State



% of Total(1)

1.

Texas



17.3

%


6.

Georgia



4.5

%

2.

Florida



8.7

%


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 December 31, 2018.

(2)    Based on the annualized base rent for all leases in place as of December 31, 2017.

 

National Retail Properties, Inc.

Property Portfolio


Top Tenants (≥ 2.0%)





Properties


% of Total (1)


7-Eleven


140


5.4%


Mister Car Wash


106


4.4%


Camping World


47


4.3%


LA Fitness


30


4.0%


Flynn Restaurant Group (Taco Bell/Arby's)


201


3.6%


GPM Investments (Convenience Stores)


151


3.6%


AMC Theatres


20


3.2%


Couche-Tard (Pantry)


86


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


1.7%


51


648,000


2025


4.4%


129


1,130,000

2020


3.0%


116


1,498,000


2026


5.0%


179


1,697,000

2021


3.8%


121


1,317,000


2027


7.6%


193


2,600,000

2022


5.9%


124


1,636,000


2028


5.0%


162


1,188,000

2023


2.9%


113


1,420,000


2029


3.3%


73


1,208,000

2024


3.0%


75


1,284,000


Thereafter


54.4%


1,578


13,813,000


(1)

Based on the annual base rent of $626,451,000, which is the annualized base rent for all leases in place as of December 31, 2018.

(2)

As of December 31, 2018, the weighted average remaining lease term is 11.5 years.

(3)

Square feet.

 

Cision

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