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Third Quarter 2018 Operating Results And 2019 Guidance Announced By National Retail Properties, Inc.

ORLANDO, Fla., Nov. 1, 2018 /PRNewswire/ -- National Retail Properties, Inc. (NNN), a real estate investment trust, today announced its operating results for the quarter and nine months ended September 30, 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


Nine Months Ended


September 30,


September 30,


2018


2017


2018


2017


(in thousands, except per share data)

Revenues

$

155,331



$

147,705



$

463,683



$

434,686










Net earnings available to common stockholders

$

73,450



$

52,538



$

230,140



$

153,606


Net earnings per common share

$

0.47



$

0.35



$

1.48



$

1.03










FFO available to common stockholders

$

105,134



$

97,760



$

312,847



$

263,911


FFO per common share

$

0.67



$

0.65



$

2.02



$

1.78










Core FFO available to common stockholders

$

105,356



$

97,985



$

313,590



$

281,532


Core FFO per common share

$

0.67



$

0.65



$

2.02



$

1.90










AFFO available to common stockholders

$

106,997



$

97,934



$

315,180



$

283,391


AFFO per common share

$

0.68



$

0.65



$

2.03



$

1.91


 

Third Quarter 2018 Highlights:

  • FFO and Core FFO per common share increased 3.1% over prior year results
  • AFFO per common share increased 4.6% over prior year results
  • Portfolio occupancy was 98.7% at September 30, 2018 as compared to 98.5% on June 30, 2018 and 99.2% on March 31, 2018
  • Invested $78.6 million in property investments, including the acquisition of 18 properties with an aggregate 529,000 square feet of gross leasable area at an initial cash yield of 6.9%
  • Sold 18 properties for $37.6 million producing $14.3 million of gains on sales
  • Raised $87.2 million net proceeds from the issuance of 1,940,583 common shares
  • Issued $400 million principal amount of 4.30% senior unsecured notes due 2028 generating net proceeds of $393.5 million
  • Issued $300 million principal amount of 4.80% senior unsecured notes due 2048 generating net proceeds of $292.4 million

Highlights for the nine months ended September 30, 2018:

  • FFO per share increased 13.5% over prior year results
  • Core FFO and AFFO per share increased 6.3% over prior year results
  • Invested $396.1 million in property investments, including the acquisition of 129 properties with an aggregate 1,265,000 square feet of gross leasable area at an initial cash yield of 6.9%
  • Sold 46 properties for $121.1 million producing $57.1 million of gains on sales
  • Raised $903.6 million of new long-term capital at attractive pricing

Core FFO guidance mid-point for 2018 was increased from a range of $2.62 to $2.66 to a range of $2.64 to $2.66 per share. The 2018 AFFO is estimated to be $2.66 to $2.68 per share. The Core FFO guidance equates to net earnings of $1.53 to $1.55 per share, plus $1.11 per share of expected real estate depreciation and amortization and excludes any gains from the sale of real estate, and any charges for impairments, retirement severance costs and $18.2 million make-whole charge in connection with redeeming $300 million of 5.50% notes due 2021. 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.

The company also announced 2019 Core FFO guidance of $2.71 to $2.76 per share and estimated 2019 AFFO to be $2.76 to $2.81 per share. The Core FFO guidance equates to net earnings of $1.60 to $1.65 per share, plus $1.11 per share of expected real estate depreciation and amortization and excludes any gains from the sale of real estate, and any charges for impairments and retirement severance costs. 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.

Jay Whitehurst, Chief Executive Officer, commented: "National Retail Properties continued its consistent performance in the third quarter. Our ability to access almost $800M of long-term capital at very attractive pricing positions us well to address future opportunities and challenges. We are pleased to raise the mid-point of our guidance for 2018 and to introduce 2019 guidance, which reflects our strategic focus on consistently growing per share results on a multi-year basis."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases.  As of September 30, 2018, the company owned 2,847 properties in 48 states with a gross leasable area of approximately 29.7 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 November 1, 2018, 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 and nine months ended September 30, 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


Nine Months Ended



September 30,


September 30,



2018


2017


2018


2017

Income Statement Summary


















Revenues:









Rental and earned income


$

150,944



$

143,856



$

450,930



$

422,895


Real estate expense reimbursement from tenants


3,712



3,614



11,640



11,174


Interest and other income from real estate transactions


675



235



1,113



617




155,331



147,705



463,683



434,686











Operating expenses:









General and administrative


8,543



7,354



25,980



25,093


Real estate


5,759



5,553



17,449



16,640


Depreciation and amortization


42,479



48,409



130,280



129,878


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


3,635



80



9,718



1,247


Retirement severance costs


222



225



743



7,653




60,638



61,621



184,170



180,511











Other expenses (revenues):









Interest and other income


(195)



(64)



(258)



(239)


Interest expense


27,194



28,204



80,906



82,092




26,999



28,140



80,648



81,853











Earnings before gain on disposition of real estate


67,694



57,944



198,865



172,322











Gain on disposition of real estate


14,348



3,185



57,050



20,864











Earnings including noncontrolling interests


82,042



61,129



255,915



193,186











Earnings attributable to noncontrolling interests


(10)



(9)



(29)



(381)











Net earnings attributable to NNN


82,032



61,120



255,886



192,805


Series D preferred stock dividends








(3,598)


Series E preferred stock dividends


(4,097)



(4,097)



(12,291)



(12,291)


Series F preferred stock dividends


(4,485)



(4,485)



(13,455)



(13,455)


Excess of redemption value over carrying value of Series D

   preferred shares redeemed








(9,855)


Net earnings available to common stockholders


$

73,450



$

52,538



$

230,140



$

153,606











Weighted average common shares outstanding:









Basic


156,853



149,341



154,582



148,223


Diluted


157,286



149,668



155,008



148,526











Net earnings per share available to common stockholders:









Basic


$

0.47



$

0.35



$

1.49



$

1.03


Diluted


$

0.47



$

0.35



$

1.48



$

1.03


 

 

National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)




Quarter Ended


Nine Months Ended



September 30,


September 30,



2018


2017


2018


2017

Funds From Operations (FFO) Reconciliation:









Net earnings available to common stockholders


$

73,450



$

52,538



$

230,140



$

153,606


Real estate depreciation and amortization


42,397



48,329



130,039



129,640


Gain on disposition of real estate


(14,348)



(3,185)



(57,050)



(20,467)


Impairment losses – depreciable real estate, net of recoveries


3,635



78



9,718



1,132


Total FFO adjustments


31,684



45,222



82,707



110,305


FFO available to common stockholders


$

105,134



$

97,760



$

312,847



$

263,911











FFO per common share:









Basic


$

0.67



$

0.65



$

2.02



$

1.78


Diluted


$

0.67



$

0.65



$

2.02



$

1.78











Core Funds From Operations Reconciliation:









Net earnings available to common stockholders


$

73,450



$

52,538



$

230,140



$

153,606


Total FFO adjustments


31,684



45,222



82,707



110,305


FFO available to common stockholders


105,134



97,760



312,847



263,911











Excess of redemption value over carrying value of preferred share
redemption








9,855


Impairment losses – non-depreciable real estate








113


Retirement severance costs


222



225



743



7,653


Total Core FFO adjustments


222



225



743



17,621


Core FFO available to common stockholders


$

105,356



$

97,985



$

313,590



$

281,532











Core FFO per common share:









Basic


$

0.67



$

0.66



$

2.03



$

1.90


Diluted


$

0.67



$

0.65



$

2.02



$

1.90














National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)




Quarter Ended


Nine Months Ended



September 30,


September 30,



2018


2017


2018


2017

Adjusted Funds From Operations (AFFO) Reconciliation:









Net earnings available to common stockholders


$

73,450



$

52,538



$

230,140



$

153,606


Total FFO adjustments


31,684



45,222



82,707



110,305


Total Core FFO adjustments


222



225



743



17,621


Core FFO available to common stockholders


105,356



97,985



313,590



281,532











Straight line accrued rent


59



(295)



(871)



(1,199)


Net capital lease rent adjustment


192



218



655



661


Below-market rent amortization


(219)



(1,355)



(2,334)



(2,696)


Stock based compensation expense


2,205



1,962



6,640



6,787


Capitalized interest expense


(596)



(581)



(2,500)



(1,694)


Total AFFO adjustments


1,641



(51)



1,590



1,859


AFFO available to common stockholders


$

106,997



$

97,934



$

315,180



$

283,391











AFFO per common share:









Basic


$

0.68



$

0.66



$

2.04



$

1.91


Diluted


$

0.68



$

0.65



$

2.03



$

1.91











Other Information:









Percentage rent


$

284



$

239



$

1,018



$

985


Amortization of debt costs


$

913



$

884



$

2,695



$

2,611


Scheduled debt principal amortization (excluding maturities)


$

134



$

127



$

400



$

379


Non-real estate depreciation expense


$

84



$

82



$

249



$

246






Earnings Guidance:




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.



2018 Guidance


2019 Guidance

  Net earnings per common share excluding any gains on sale of real
    estate, impairment charges, retirement severance costs or 2021
    note redemption charge


$1.53 - $1.55 per share


$1.60 - $1.65 per share

  Real estate depreciation and amortization per share


$1.11 per share


$1.11 per share

 Core FFO per share


$2.64 - $2.66 per share


$2.71 - $2.76 per share

  AFFO per share


$2.66 - $2.68 per share


$2.76 - $2.81 per share

  G&A expenses (excluding retirement severance costs)


$34.0 - $34.5 Million


$35.5 - $36.5 Million

  Real estate expenses, net of tenant reimbursements


$8.0 - $8.5 Million


$8.5 - $9.0 Million

  Acquisition volume


$600 - $700 Million


$550 - $650 Million

  Disposition volume


$120 - $140 Million


$80 - $120 Million

 

 

National Retail Properties, Inc.

(in thousands)

(unaudited)




September 30,
2018


December 31,
2017

Balance Sheet Summary










Assets:





Real estate:





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


$

6,624,165



$

6,426,602


Accounted for using the direct financing method


8,688



9,650


Real estate held for sale


3,309



6,409


Cash and cash equivalents


607,672



1,364


Receivables, net of allowance


2,171



4,317


Accrued rental income, net of allowance


25,687



25,916


Debt costs, net of accumulated amortization


4,426



5,380


Other assets


82,605



80,896


Total assets


$

7,358,723



$

6,560,534







Liabilities:





Line of credit payable


$



$

120,500


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


12,849



13,300


 Notes payable, net of unamortized discount and unamortized
   debt costs


3,135,311



2,446,407


Accrued interest payable


35,298



20,311


Other liabilities


98,045



119,106


Total liabilities


3,281,503



2,719,624







Stockholders' equity of NNN


4,076,874



3,840,593


Noncontrolling interests


346



317


Total equity


4,077,220



3,840,910







Total liabilities and equity


$

7,358,723



$

6,560,534






















Common shares outstanding


158,933



153,577







Gross leasable area, Property Portfolio (square feet)


29,739



29,093







 

 

National Retail Properties, Inc.

Debt Summary

As of September 30, 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


2.815

%


   January 2022












Unsecured notes payable:











2021


300,000



298,560



5.500

%


5.689

%


   July 2021

2022


325,000



322,775



3.800

%


3.985

%


   October 2022

2023


350,000



348,714



3.300

%


3.388

%


   April 2023

2024


350,000



349,566



3.900

%


3.924

%


   June 2024

2025


400,000



399,279



4.000

%


4.029

%


   November 2025

2026


350,000



346,733



3.600

%


3.733

%


   December 2026

2027


400,000



398,515



3.500

%


3.548

%


   October 2027

2028


400,000



397,161



4.300

%


4.388

%


   October 2028

2048


300,000



295,763



4.800

%


4.890

%


   October 2048

Total


3,175,000



3,157,066



















Total unsecured debt(1)


$

3,175,000



$

3,157,066



















Debt costs




(29,707)








Accumulated amortization


7,952








Debt costs, net of accumulated amortization


(21,755)








Notes payable, net of unamortized discount and
unamortized debt costs


$

3,135,311









(1)  Unsecured notes payable have a weighted average interest rate of 4.1% and a weighted average maturity of 9.0 years.

      Pro forma impact for the October 19, 2018 redemption of $300 million of the 5.500% notes due 2021 results in a weighted

      average interest rate of 4.0% and a weighted average maturity of 9.6 years.

 

 

Mortgages Payable


Principal
Balance


Interest Rate


Maturity Date


Mortgage(1)


12,927



5.2

%


   July 2023










Debt costs


(147)







Accumulated amortization


69







Debt costs, net of accumulated
   amortization


(78)







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


$

12,849







(1)   Includes unamortized premium








 

 

National Retail Properties, Inc.

Property Portfolio


Top 20 Lines of Trade






As of September 30,




Line of Trade


2018(1)


2017(2)


1.


Convenience stores


18.5

%


18.3

%


2.


Restaurants – full service


11.8

%


11.8

%


3.


Restaurants – limited service


7.8

%


7.9

%


4.


Automotive service


7.6

%


7.0

%


5.


Family entertainment centers


7.0

%


6.4

%


6.


Health and fitness


5.6

%


5.6

%


7.


Theaters


5.1

%


4.8

%


8.


Automotive parts


3.5

%


3.7

%


9.


Recreational vehicle dealers, parts and accessories


3.0

%


3.4

%


10.


Wholesale clubs


2.4

%


2.3

%


11.


Medical service providers


2.3

%


2.5

%


12.


Home improvement


2.2

%


1.9

%


13.


Equipment rental


1.9

%


0.7

%


14.


Drug stores


1.8

%


2.1

%


15.


Furniture


1.8

%


1.9

%


16.


General merchandise


1.8

%


1.9

%


17.


Bank


1.7

%


2.6

%


18.


Travel plazas


1.7

%


1.9

%


19.


Consumer electronics


1.7

%


1.9

%


20.


Home furnishings


1.5

%


1.6

%




Other


9.3

%


9.8

%




Total


100.0

%


100.0

%


 

 

Top 10 States



State



% of Total(1)



State



% of Total(1)


1.

Texas



17.9

%


6.

Georgia



4.6

%


2.

Florida



8.9

%


7.

Tennessee



4.0

%


3.

Ohio



5.7

%


8.

Indiana



3.8

%


4.

Illinois



5.2

%


9.

Virginia



3.8

%


5.

North Carolina



4.7

%


10.

Alabama



3.1

%






(1) Based on the annualized base rent for all leases in place as of September 30, 2018.



(2) Based on the annualized base rent for all leases in place as of September 30, 2017.


 

 

National Retail Properties, Inc.

Property Portfolio


Top Tenants ( ≥ 2.0%)





Properties


% of Total(1)


7-Eleven


140



5.5

%


Mister Car Wash


96



4.0

%


LA Fitness


30



4.0

%


Camping World


40



3.9

%


GPM Investments (Convenience Stores)


151



3.7

%


AMC Theatre


20



3.3

%


Couche Tard (Pantry)


85



3.1

%


Bell American (Taco Bell)


116



2.6

%


Sunoco


61



2.5

%


BJ's Wholesale Club


9



2.4

%


Chuck E. Cheese's


53



2.3

%


Frisch's Restaurant


74



2.0

%

 

 

Lease Expirations(2)




% of
Total(1)


# of
Properties


Gross Leasable
Area(3)




% of
Total(1)


# of
Properties


Gross Leasable
Area(3)

2018


0.3

%


13



277,000



2024


2.5

%


60



1,012,000


2019


2.1

%


62



862,000



2025


4.6

%


130



1,136,000


2020


3.1

%


115



1,492,000



2026


5.3

%


181



1,838,000


2021


3.9

%


121



1,303,000



2027


8.1

%


192



2,665,000


2022


6.1

%


123



1,649,000



2028


5.2

%


166



1,248,000


2023


3.0

%


114



1,446,000



Thereafter


55.8

%


1,528



14,368,000




(1)

Based on the annual base rent of $609,744,000, which is the annualized base rent for all leases in place as of September 30, 2018.

(2)

As of September 30, 2018, the weighted average remaining lease term is 11.4 years.

(3)

Square feet.

 

Cision

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