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Second Quarter 2018 Operating Results Announced By National Retail Properties, Inc.

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Second Quarter 2018 Operating Results Announced By National Retail Properties, Inc.

PR Newswire

ORLANDO, Fla., Aug. 1, 2018 /PRNewswire/ -- National Retail Properties, Inc. (NYSE:NNN), a real estate investment trust, today announced its operating results for the quarter and six months ended June 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


Six Months Ended


June 30,


June 30,


2018


2017


2018


2017


(in thousands, except per share data)

Revenues

$

155,518



$

145,550



$

308,353



$

286,981










Net earnings available to common stockholders

$

61,992



$

49,447



$

156,690



$

101,068


Net earnings per common share

$

0.40



$

0.33



$

1.02



$

0.68










FFO available to common stockholders

$

104,944



$

87,884



$

207,713



$

166,151


FFO per common share

$

0.68



$

0.59



$

1.35



$

1.12










Core FFO available to common stockholders

$

105,204



$

95,425



$

208,234



$

183,547


Core FFO per common share

$

0.68



$

0.64



$

1.35



$

1.24










AFFO available to common stockholders

$

105,303



$

96,412



$

208,182



$

185,457


AFFO per common share

$

0.68



$

0.65



$

1.35



$

1.25


 

Second Quarter 2018 Highlights:

  • FFO per common share increased 15.3% over prior year results
  • Core FFO per common share increased 6.3% over prior year results
  • AFFO per common share increased 4.6% over prior year results
  • Portfolio occupancy was 98.5% at June 30, 2018 as compared to 99.2% on March 31, 2018 and 99.1% on December 31, 2017
  • Invested $140.5 million in property investments, including the acquisition of 59 properties with an aggregate 336,000 square feet of gross leasable area at an initial cash yield of 7.1%
  • Sold 13 properties for $11.9 million producing $4.1 million of gains on sales
  • Raised $129.2 million net proceeds from the issuance of 3,136,802 common shares

First Half 2018 Highlights:

  • FFO per share increased 20.5% over prior year results
  • Core FFO per share increased 8.9% over prior year results
  • AFFO per share increased 8.0% over prior year results
  • Invested $317.5 million in property investments, including the acquisition of 111 properties with an aggregate 736,000 square feet of gross leasable area at an initial cash yield of 6.9%
  • Sold 28 properties for $83.5 million producing $42.7 million of gains on sales
  • Raised $130.5 million in net proceeds from the issuance of 3,181,461 common shares

Core FFO guidance for 2018 is $2.62 to $2.66 per share. The 2018 AFFO is estimated to be $2.66 to $2.70 per share. The Core FFO guidance equates to net earnings of $1.51 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 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 second quarter, driven by a healthy portfolio, a strong pipeline of relationship-driven acquisitions, and continued access to  attractively priced capital.  We were pleased to recently announce a 5.3% increase in our dividend which will make 2018 the 29th consecutive year of increased annual dividends - a record only three publicly traded REITs can claim."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases.  As of June 30, 2018, the company owned 2,846 properties in 48 states with a gross leasable area of approximately 29.4 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 August 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 six months ended June 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


Six Months Ended



June 30,


June 30,



2018


2017


2018


2017

Income Statement Summary


















Revenues:









Rental and earned income


$

151,383



$

141,742



$

299,987



$

279,039


Real estate expense reimbursement from tenants


3,770



3,700



7,928



7,560


Interest and other income from real estate transactions


365



108



438



382




155,518



145,550



308,353



286,981











Operating expenses:









General and administrative


8,741



8,820



17,437



17,739


Real estate


5,828



5,424



11,690



11,087


Depreciation and amortization


43,304



41,326



87,802



81,469


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


3,835



(39)



6,083



1,167


Retirement severance costs


260



7,428



521



7,428




61,968



62,959



123,533



118,890











Other expenses (revenues):









Interest and other income


(37)



(37)



(63)



(175)


Interest expense


27,110



27,274



53,712



53,888




27,073



27,237



53,649



53,713











Earnings before gain on disposition of real estate


66,477



55,354



131,171



114,378











Gain on disposition of real estate


4,106



3,055



42,702



17,679











Earnings including noncontrolling interests


70,583



58,409



173,873



132,057











Earnings attributable to noncontrolling interests


(10)



(381)



(19)



(372)











Net earnings attributable to NNN


70,573



58,028



173,854



131,685


Series D preferred stock dividends








(3,598)


Series E preferred stock dividends


(4,096)



(4,096)



(8,194)



(8,194)


Series F preferred stock dividends


(4,485)



(4,485)



(8,970)



(8,970)


Excess of redemption value over carrying value of Series D

   preferred shares redeemed








(9,855)


Net earnings available to common stockholders


$

61,992



$

49,447



$

156,690



$

101,068











Weighted average common shares outstanding:









Basic


153,811



148,373



153,428



147,655


Diluted


154,204



148,719



153,840



148,024











Net earnings per share available to common stockholders:









Basic


$

0.40



$

0.33



$

1.02



$

0.68


Diluted


$

0.40



$

0.33



$

1.02



$

0.68


 

 

National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)

 



Quarter Ended


Six Months Ended



June 30,


June 30,



2018


2017


2018


2017

Funds From Operations (FFO) Reconciliation:









Net earnings available to common stockholders


$

61,992



$

49,447



$

156,690



$

101,068


Real estate depreciation and amortization


43,223



41,247



87,642



81,311


Gain on disposition of real estate


(4,106)



(2,658)



(42,702)



(17,282)


Impairment losses – depreciable real estate, net of recoveries


3,835



(152)



6,083



1,054


Total FFO adjustments


42,952



38,437



51,023



65,083


FFO available to common stockholders


$

104,944



$

87,884



$

207,713



$

166,151











FFO per common share:









Basic


$

0.68



$

0.59



$

1.35



$

1.13


Diluted


$

0.68



$

0.59



$

1.35



$

1.12











Core Funds From Operations Reconciliation:









Net earnings available to common stockholders


$

61,992



$

49,447



$

156,690



$

101,068


Total FFO adjustments


42,952



38,437



51,023



65,083


FFO available to common stockholders


104,944



87,884



207,713



166,151











Excess of redemption value over carrying value of preferred share
redemption








9,855


Impairment losses – non-depreciable real estate




113





113


Retirement severance costs


260



7,428



521



7,428


Total Core FFO adjustments


260



7,541



521



17,396


Core FFO available to common stockholders


$

105,204



$

95,425



$

208,234



$

183,547











Core FFO per common share:









Basic


$

0.68



$

0.64



$

1.36



$

1.24


Diluted


$

0.68



$

0.64



$

1.35



$

1.24








































Quarter Ended


Six Months Ended



June 30,


June 30,



2018


2017


2018


2017

Adjusted Funds From Operations (AFFO) Reconciliation:









Net earnings available to common stockholders


$

61,992



$

49,447



$

156,690



$

101,068


Total FFO adjustments


42,952



38,437



51,023



65,083


Total Core FFO adjustments


260



7,541



521



17,396


Core FFO available to common stockholders


105,204



95,425



208,234



183,547











Straight line accrued rent


68



(229)



(930)



(904)


Net capital lease rent adjustment


234



213



462



443


Below-market rent amortization


(1,417)



(682)



(2,115)



(1,341)


Stock based compensation expense


2,290



2,245



4,435



4,825


Capitalized interest expense


(1,076)



(560)



(1,904)



(1,113)


Total AFFO adjustments


99



987



(52)



1,910


AFFO available to common stockholders


$

105,303



$

96,412



$

208,182



$

185,457











AFFO per common share:









Basic


$

0.68



$

0.65



$

1.36



$

1.26


Diluted


$

0.68



$

0.65



$

1.35



$

1.25











Other Information:









Percentage rent


$

189



$

198



$

734



$

746


Amortization of debt costs


$

894



$

868



$

1,781



$

1,727


Scheduled debt principal amortization (excluding maturities)


$

132



$

125



$

266



$

253


Non-real estate depreciation expense


$

84



$

81



$

165



$

164


 

2018 Earnings Guidance:


Core FFO guidance for 2018 is $2.62 to $2.66 per share. The 2018 AFFO is estimated to be $2.66 to $2.70 per share. The Core FFO guidance equates to net earnings of $1.51 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 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.



2018 Guidance

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


$1.51 - $1.55 per share

  Real estate depreciation and amortization per share


$1.11 per share

 Core FFO per share


$2.62 - $2.66 per share

  AFFO per share


$2.66 - $2.70 per share

  G&A expenses (excluding retirement severance costs)


$34 - $35 Million

  Real estate expenses, net of tenant reimbursements


$8 - $9 Million

  Acquisition volume


$500 - $600 Million

  Disposition volume


$100 - $140 Million

 

 

National Retail Properties, Inc.

(in thousands)

(unaudited)

 



June 30,
2018


December 31,
2017

Balance Sheet Summary










Assets:





Real estate:





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


$

6,609,368



$

6,418,700


Accounted for using the direct financing method


9,188



9,650


Real estate held for sale


10,463



14,311


Cash and cash equivalents


1,885



1,364


Receivables, net of allowance


2,548



4,317


Accrued rental income, net of allowance


26,118



25,916


Debt costs, net of accumulated amortization


4,781



5,380


Other assets


80,590



80,896


Total assets


$

6,744,941



$

6,560,534







Liabilities:





Line of credit payable


$

166,700



$

120,500


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


13,000



13,300


 Notes payable, net of unamortized discount and unamortized
   debt costs


2,448,390



2,446,407


Accrued interest payable


19,401



20,311


Other liabilities


108,339



119,106


Total liabilities


2,755,830



2,719,624







Stockholders' equity of NNN


3,988,775



3,840,593


Noncontrolling interests


336



317


Total equity


3,989,111



3,840,910







Total liabilities and equity


$

6,744,941



$

6,560,534






















Common shares outstanding


156,990



153,577







Gross leasable area, Property Portfolio (square feet)


29,389



29,093







 

 

National Retail Properties, Inc.

Debt Summary

As of June 30, 2018

(in thousands)

(unaudited)


Unsecured Debt


Principal


Principal,
Net of
Unamortized
Discount


Stated Rate


Effective
Rate


Maturity Date

Line of credit payable


$

166,700



$

166,700



L + 87.5 bps


2.744%


   January 2022












Unsecured notes payable:











2021


300,000



298,441



5.500%


5.689%


   July 2021

2022


325,000



322,649



3.800%


3.985%


   October 2022

2023


350,000



348,649



3.300%


3.388%


   April 2023

2024


350,000



349,549



3.900%


3.924%


   June 2024

2025


400,000



399,257



4.000%


4.029%


   November 2025

2026


350,000



346,648



3.600%


3.733%


   December 2026

2027


400,000



398,480



3.500%


3.548%


   October 2027

Total


2,475,000



2,463,673



















Total unsecured debt(1)


$

2,641,700



$

2,630,373



















Debt costs




(22,682)








Accumulated amortization


7,399








Debt costs, net of accumulated amortization


(15,283)








Notes payable, net of unamortized discount and
unamortized debt costs


$

2,448,390









(1)

Unsecured notes payable have a weighted average interest rate of 4.0% and a weighted average maturity of 6.4 years.

 

 

Mortgages Payable


Principal
Balance


Interest Rate


Maturity Date

Mortgage(1)


13,083


5.230%


July 2023








Debt costs


(147)





Accumulated amortization


64





Debt costs, net of accumulated amortization


(83)





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


$

13,000












(1)   Includes unamortized premium

















 

 

National Retail Properties, Inc.

Property Portfolio



 Top 20 Lines of Trade





As of June 30,


Line of Trade


2018(1)


2017(2)

1.

Convenience stores


18.8

%


18.1

%

2.

Restaurants – full service


12.1

%


11.7

%

3.

Restaurants – limited service


7.9

%


7.8

%

4.

Automotive service


7.7

%


6.9

%

5.

Family entertainment centers


6.5

%


6.1

%

6.

Health and fitness


5.6

%


5.6

%

7.

Theaters


4.8

%


4.7

%

8.

Automotive parts


3.6

%


3.7

%

9.

Recreational vehicle dealers, parts and accessories


3.1

%


3.4

%

10.

Wholesale clubs


2.4

%


2.2

%

11.

Medical service providers


2.3

%


2.4

%

12.

Equipment rental


1.9

%


0.6

%

13.

Bank


1.9

%


2.6

%

14.

Drug stores


1.9

%


2.0

%

15.

Furniture


1.8

%


1.9

%

16.

General merchandise


1.8

%


1.9

%

17.

Travel plazas


1.7

%


1.9

%

18.

Home improvement


1.7

%


1.8

%

19.

Consumer electronics


1.7

%


1.8

%

20.

Home furnishings


1.6

%


1.6

%


Other


9.2

%


11.3

%


Total


100.0

%


100.0

%

 

Top 10 States



State



% of Total(1)



State



% of Total(1)

1.

Texas



18.2

%


6.

Georgia



4.8

%

2.

Florida



8.6

%


7.

Tennessee



3.9

%

3.

Ohio



5.5

%


8.

Indiana



3.9

%

4.

Illinois



5.3

%


9.

Virginia



3.9

%

5.

North Carolina



4.8

%


10.

Alabama



3.1

%


(1)

Based on the annualized base rent for all leases in place as of June 30, 2018.

(2)

Based on the annualized base rent for all leases in place as of June 30, 2017.

 

 

National Retail Properties, Inc.

Property Portfolio



Top Tenants ( ≥ 2.0%)





Properties


% of Total(1)


7-Eleven


140



5.6%


Mister Car Wash


96



4.1%


Camping World


40



4.0%


LA Fitness


30



3.9%


GPM Investments (Convenience Stores)


151



3.7%


AMC Theatre


20



3.4%


Couche Tard (Pantry)


86



3.1%


Bell American (Taco Bell)


115



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


0.6%


17



217,000



2024


2.3%


53



887,000


2019


2.4%


68



974,000



2025


4.6%


130



1,144,000


2020


3.1%


115



1,467,000



2026


5.4%


181



1,838,000


2021


4.0%


120



1,300,000



2027


8.3%


193



2,670,000


2022


6.2%


123



1,675,000



2028


5.5%


173



1,300,000


2023


2.9%


112



1,355,000



Thereafter


54.7%


1,513



13,855,000



(1)

Based on the annual base rent of $599,630,000, which is the annualized base rent for all leases in place as of June 30, 2018.

(2)

As of June 30, 2018, the weighted average remaining lease term is 11.5 years.

(3)

Square feet.

 

 

Cision View original content:http://www.prnewswire.com/news-releases/second-quarter-2018-operating-results-announced-by-national-retail-properties-inc-300688804.html

SOURCE National Retail Properties, Inc.

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