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Third Quarter 2019 Operating Results And 2020 Guidance Announced By National Retail Properties, Inc.

ORLANDO, Fla., Oct. 31, 2019 /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, 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


Nine Months Ended


September 30,


September 30,


2019


2018


2019


2018


(in thousands, except per share data)

Revenues

$

168,607



$

155,331



$

497,111



$

463,683










Net earnings available to common stockholders

$

58,111



$

73,450



$

199,648



$

230,140


Net earnings per common share

$

0.35



$

0.47



$

1.22



$

1.48










FFO available to common stockholders

$

115,013



$

105,134



$

336,215



$

312,847


FFO per common share

$

0.70



$

0.67



$

2.06



$

2.02










Core FFO available to common stockholders

$

115,013



$

105,356



$

334,884



$

313,590


Core FFO per common share

$

0.70



$

0.67



$

2.05



$

2.02










AFFO available to common stockholders

$

116,870



$

106,997



$

340,119



$

315,180


AFFO per common share

$

0.71



$

0.68



$

2.09



$

2.03


Third Quarter 2019 Highlights:

  • FFO and Core FFO per common share increased 4.5% over prior year results
  • AFFO per common share increased 4.4% over prior year results
  • Portfolio occupancy was 99.1% at September 30, 2019 as compared to 98.8% on June 30, 2019 and 98.2% on March 31, 2019
  • Invested $116.8 million in property investments, including the acquisition of 27 properties with an aggregate 533,000 square feet of gross leasable area at an initial cash yield of 6.8%
  • Sold 13 properties for $33.5 million producing $2.1 million of gains on sales
  • Raised $434.6 million net proceeds from the issuance of 8,020,285 common shares

Highlights for the nine months ended September 30, 2019:

  • FFO per share increased 2.0% over prior year results
  • Core FFO per share increased 1.5% over prior year results
  • AFFO per common share increased 3.0% over prior year results
  • Invested $509.6 million in property investments, including the acquisition of 131 properties with an aggregate 2,645,000 square feet of gross leasable area at an initial cash yield of 6.9%
  • Sold 43 properties for $94.8 million producing $25.1 million of gains on sales, net of noncontrolling interest
  • Raised $521.8 million in net proceeds from issuance of 9,653,149 common shares

Core FFO guidance for 2019 was increased from a range of $2.71 to $2.76 per share to a range of $2.74 to $2.77 per share. The 2019 AFFO is estimated to be $2.79 to $2.82 per share. The Core FFO guidance equates to net earnings of $1.60 to $1.63 per share, plus $1.14 per share of expected real estate depreciation and amortization and excludes any gains from the sale of real estate, any charges for impairments and preferred stock redemption charges. 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 2020 Core FFO guidance of $2.83 to $2.87 per share and estimated 2020 AFFO to be $2.90 to $2.94 per share. The Core FFO guidance equates to net earnings of $1.70 to $1.74 per share, plus $1.13 per share of expected real estate depreciation and amortization and excludes any gains from the sale of real estate, and any charges for 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.

Jay Whitehurst, Chief Executive Officer, commented: "National Retail Properties posted another quarter of solid results, highlighted by increasing our annual common stock dividend for the 30th consecutive year and by raising over $434 million of well-priced equity. Driven by our high occupancy rate, strong performance in acquisitions and dispositions and a fortress-like balance sheet, we are pleased to raise our guidance for 2019 and to introduce 2020 guidance.  We run our business with a long-term focus, characterized by consistent per share growth on a multi-year basis, and our guidance for 2019 and 2020 reflects that consistent philosophy."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases.  As of September 30, 2019, the company owned 3,057 properties in 48 states with a gross leasable area of approximately 32.2 million square feet and with a weighted average remaining lease term of 11.2 years.  For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on October 31, 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 and nine months ended September 30, 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


Nine Months Ended



September 30,


September 30,



2019


2018


2019


2018

Income Statement Summary


















Revenues:









Rental income


$

168,224



$

154,656



$

495,846



$

462,570


Interest and other income from real estate transactions


383



675



1,265



1,113




168,607



155,331



497,111



463,683











Operating expenses:









General and administrative


8,726



8,543



27,524



25,980


Real estate


6,706



5,759



20,398



17,449


Depreciation and amortization


48,348



42,479



140,769



130,280


Impairment losses – real estate, net of recoveries


10,692



3,635



21,124



9,718


Retirement severance costs




222





743




74,472



60,638



209,815



184,170


Gain on disposition of real estate


2,061



14,348



25,508



57,050


Earnings from operations


96,196



109,041



312,804



336,563











Other expenses (revenues):









Interest and other income


(501)



(195)



(2,912)



(258)


Interest expense


29,948



27,194



89,716



80,906


Leasing transaction costs


51





178






29,498



26,999



86,982



80,648











Net earnings


66,698



82,042



225,822



255,915


Earnings attributable to noncontrolling interests


(5)



(10)



(428)



(29)











Net earnings attributable to NNN


66,693



82,032



225,394



255,886


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)


Net earnings available to common stockholders


$

58,111



$

73,450



$

199,648



$

230,140











Weighted average common shares outstanding:









Basic


164,884



156,853



162,641



154,582


Diluted


165,362



157,286



163,126



155,008











Net earnings per share available to common stockholders:









Basic


$

0.35



$

0.47



$

1.23



$

1.49


Diluted


$

0.35



$

0.47



$

1.22



$

1.48


 

National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)

 



Quarter Ended


Nine Months Ended



September 30,


September 30,



2019


2018


2019


2018

Funds From Operations (FFO) Reconciliation:









Net earnings available to common stockholders


$

58,111



$

73,450



$

199,648



$

230,140


Real estate depreciation and amortization


48,271



42,397



140,539



130,039


Gain on disposition of real estate, net of noncontrolling interests


(2,061)



(14,348)



(25,096)



(57,050)


Impairment losses – depreciable real estate, net of recoveries


10,692



3,635



21,124



9,718


Total FFO adjustments


56,902



31,684



136,567



82,707


FFO available to common stockholders


$

115,013



$

105,134



$

336,215



$

312,847











FFO per common share:









Basic


$

0.70



$

0.67



$

2.07



$

2.02


Diluted


$

0.70



$

0.67



$

2.06



$

2.02











Core Funds From Operations Reconciliation:









Net earnings available to common stockholders


$

58,111



$

73,450



$

199,648



$

230,140


Total FFO adjustments


56,902



31,684



136,567



82,707


FFO available to common stockholders


115,013



105,134



336,215



312,847











Retirement severance costs




222





743


Gain on sale of equity investments






(1,331)




Total Core FFO adjustments




222



(1,331)



743


Core FFO available to common stockholders


$

115,013



$

105,356



$

334,884



$

313,590











Core FFO per common share:









Basic


$

0.70



$

0.67



$

2.06



$

2.03


Diluted


$

0.70



$

0.67



$

2.05



$

2.02






















Quarter Ended


Nine Months Ended



September 30,


September 30,



2019


2018


2019


2018

Adjusted Funds From Operations (AFFO) Reconciliation:









Net earnings available to common stockholders


$

58,111



$

73,450



$

199,648



$

230,140


Total FFO adjustments


56,902



31,684



136,567



82,707


Total Core FFO adjustments




222



(1,331)



743


Core FFO available to common stockholders


115,013



105,356



334,884



313,590











Straight-line accrued rent


(542)



59



(1,702)



(871)


Net capital lease rent adjustment


170



192



508



655


Below-market rent amortization


(178)



(219)



(579)



(2,334)


Stock based compensation expense


2,734



2,205



7,805



6,640


Capitalized interest expense


(327)



(596)



(797)



(2,500)


Total AFFO adjustments


1,857



1,641



5,235



1,590


AFFO available to common stockholders


$

116,870



$

106,997



$

340,119



$

315,180











AFFO per common share:









Basic


$

0.71



$

0.68



$

2.09



$

2.04


Diluted


$

0.71



$

0.68



$

2.09



$

2.03











Other Information:









Rental income from operating leases(1)


$

163,673



$

150,418



$

482,306



$

449,216


Earned income from direct financing leases(1)


$

204



$

242



$

624



$

696


Percentage rent(1)


$

329



$

284



$

1,051



$

1,018











Real estate expense reimbursement from tenants(1)


$

4,018



$

3,712



$

11,865



$

11,640


Real estate expenses


(6,706)



(5,759)



(20,398)



(17,449)


Real estate expenses, net of tenant reimbursements


$

(2,688)



$

(2,047)



$

(8,533)



$

(5,809)











Amortization of debt costs


$

936



$

913



$

2,787



$

2,695


Scheduled debt principal amortization (excluding maturities)


$

141



$

134



$

422



$

400


Non-real estate depreciation expense


$

80



$

84



$

238



$

249




(1)

The condensed consolidated financial statements for the quarter and nine months ended September 30, 2019 and 2018 are presented under the new accounting standard, ASU 2016-02, "Leases (Topic 842)."  For the quarter and nine months ended September 30, 2019, the aggregate of such amounts is $168,224 and $495,846, respectively, classified as rental income on the income statement summary. For the quarter and nine months ended September 30, 2018, the aggregate of such amounts is $154,656 and $462,570, respectively.

 

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.



2019 Guidance


2020 Guidance

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


$1.60 - $1.63 per share


$1.70 - $1.74 per share

  Real estate depreciation and amortization per share


$1.14 per share


$1.13 per share

Core FFO per share


$2.74 - $2.77 per share


$2.83 - $2.87 per share

  AFFO per share


$2.79 - $2.82 per share


$2.90 - $2.94 per share

  G&A expenses


$37.0 - $38.0 Million


$42.0 - $43.0 Million

  Real estate expenses, net of tenant reimbursements


$10.0 - $10.5 Million


$8.0 - $9.0 Million

  Acquisition volume


$650 - $750 Million


$550 - $650 Million

  Disposition volume


$110 - $130 Million


$80 - $120 Million

 

National Retail Properties, Inc.

(in thousands)

(unaudited)

 



September 30,
2019


December 31,
2018

Balance Sheet Summary










Assets:





Real estate:





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


$

7,121,156



$

6,838,907


Accounted for using the direct financing method


6,882



8,069


Real estate held for sale


13,961



28,456


Cash and cash equivalents


353,688



114,267


Receivables, net of allowance of $506 and $2,273, respectively


2,882



3,797


Accrued rental income, net of allowance of $1,842


28,570



25,387


Debt costs, net of accumulated amortization


3,104



4,081


Other assets


97,441



80,474


Total assets


$

7,627,684



$

7,103,438







Liabilities:





Line of credit payable


$



$


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


12,221



12,694


 Notes payable, net of unamortized discount and unamortized debt costs


2,841,680



2,838,701


Accrued interest payable


45,886



19,519


Other liabilities


101,393



77,919


Total liabilities


3,001,180



2,948,833







Stockholders' equity of NNN


4,626,497



4,154,250


Noncontrolling interests


7



355


Total equity


4,626,504



4,154,605







Total liabilities and equity


$

7,627,684



$

7,103,438






















Common shares outstanding


171,637



161,504







Gross leasable area, Property Portfolio (square feet)


32,209



30,487







 

National Retail Properties, Inc.

Debt Summary

As of September 30, 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


3.165

%


   January 2022












Unsecured notes payable:











2022


325,000



323,293



3.800

%


3.985

%


   October 2022

2023


350,000



348,981



3.300

%


3.388

%


   April 2023

2024


350,000



349,635



3.900

%


3.924

%


   June 2024

2025


400,000



399,368



4.000

%


4.029

%


   November 2025

2026


350,000



347,080



3.600

%


3.733

%


   December 2026

2027


400,000



398,657



3.500

%


3.548

%


   October 2027

2028


400,000



397,385



4.300

%


4.388

%


   October 2028

2048


300,000



295,826



4.800

%


4.890

%


   October 2048

Total


2,875,000



2,860,225



















Total unsecured debt(1)


$

2,875,000



$

2,860,225



















Debt costs




(26,932)








Accumulated amortization


8,387








Debt costs, net of accumulated amortization


(18,545)








Notes payable, net of unamortized discount and
unamortized debt costs


$

2,841,680









(1)  Unsecured notes payable have a weighted average interest rate of 4.0% and a weighted average maturity of 8.6 years.

 

Mortgages Payable


Principal
Balance


Interest Rate


Maturity Date


Mortgage(1)


$

12,282



5.23

%


   July 2023










Debt costs


(147)







Accumulated amortization


86







Debt costs, net of accumulated
   amortization


(61)







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


$

12,221







(1)   Includes unamortized premium



























 

National Retail Properties, Inc.

Property Portfolio

 Top 20 Lines of Trade







As of September 30,





Line of Trade


2019(1)


2018(2)



1.


Convenience stores


17.5

%


18.5

%



2.


Restaurants – full service


11.3

%


11.8

%



3.


Automotive service


9.3

%


7.6

%



4.


Restaurants – limited service


8.8

%


7.8

%



5.


Family entertainment centers


6.8

%


7.0

%



6.


Health and fitness


5.3

%


5.6

%



7.


Theaters


4.8

%


5.1

%



8.


Recreational vehicle dealers, parts and accessories


3.5

%


3.0

%



9.


Automotive parts


3.2

%


3.5

%



10.


Equipment rental


2.7

%


1.9

%



11.


Home improvement


2.6

%


2.2

%



12.


Wholesale clubs


2.6

%


2.4

%



13.


Medical service providers


2.2

%


2.3

%



14.


General merchandise


1.8

%


1.8

%



15.


Home furnishings


1.7

%


1.5

%



16.


Furniture


1.6

%


1.8

%



17.


Drug stores


1.6

%


1.8

%



18.


Travel plazas


1.6

%


1.7

%



19.


Consumer electronics


1.5

%


1.7

%



20.


Banks


1.4

%


1.7

%





Other


8.2

%


9.3

%





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



9.0

%


7.

Indiana



4.0

%



3.

Ohio



5.7

%


8.

Tennessee



3.8

%



4.

Illinois



5.1

%


9.

Virginia



3.7

%



5.

North Carolina



4.6

%


10.

California



3.1

%








(1) Based on the annualized base rent for all leases in place as of September 30, 2019.




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


 

National Retail Properties, Inc.

Property Portfolio

Top Tenants ( ≥ 2.0%)





Properties


% of Total(1)


7-Eleven


140



5.1

%


Mister Car Wash


109



4.3

%


Camping World


47



4.3

%


LA Fitness


30



3.8

%


Flynn Restaurant Group (Taco Bell/Arby's)


204



3.5

%


GPM Investments (Convenience Stores)


151



3.4

%


AMC Theatre


20



3.1

%


Couche Tard (Pantry)


85



2.8

%


BJ's Wholesale Club


11



2.6

%


Sunoco


61



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


0.3

%


17



377,000



2025


5.1

%


145



1,573,000


2020


2.1

%


89



944,000



2026


4.7

%


176



1,681,000


2021


3.7

%


119



1,301,000



2027


7.3

%


193



2,611,000


2022


5.6

%


123



1,634,000



2028


4.7

%


157



1,172,000


2023


3.0

%


118



1,468,000



2029


3.0

%


75



1,030,000


2024


3.8

%


101



1,596,000



Thereafter


56.7

%


1,713



16,264,000




(1)

Based on the annual base rent of $658,347,000, which is the annualized base rent for all leases in place as of September 30, 2019.

(2)

As of September 30, 2019, the weighted average remaining lease term is 11.2 years.

(3)

Square feet.

 

Cision

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