Record Annual Results Announced By National Retail Properties, Inc.

February 12, 2019 8:30 AM | 75 min read |

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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
    • Raised $341.5 million in net proceeds from the issuance of 7,689,211 common shares
    • Raised $393.5 million in net proceeds from the issuance of 4.30% senior unsecured notes due 2028
    • Raised $292.4 million in net proceeds from the issuance of 4.80% senior unsecured notes due 2048
  • 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:
    • $319.5 million in property investments, including the acquisition of 136 properties with an aggregate gross leasable area of approximately 902,000 square feet at an initial cash yield of 6.7%
  • Dispositions:
    • Sold 15 properties with net proceeds of $26.5 million, producing $8.0 million of gains on sales at a cap rate of 6.2%
  • Long-term capital:
    • Raised $123.8 million in net proceeds from the issuance of 2,567,167 common shares

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 View original content:http://www.prnewswire.com/news-releases/record-annual-results-announced-by-national-retail-properties-inc-300793593.html

SOURCE National Retail Properties, Inc.

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