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Record Annual Results Announced By National Retail Properties, Inc.

February 11, 2020 GMT

ORLANDO, Fla., Feb. 11, 2020 /PRNewswire/ -- National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced operating results for the quarter and year ended December 31, 2019. Highlights include:

Operating Results:


Quarter Ended


Year Ended


December 31,


December 31,


2019


2018


2019


2018


(in thousands, except per share data)

Revenues

$

173,376



$

158,976



$

670,487



$

622,661










Net earnings available to common stockholders

$

58,534



$

27,980



$

258,183



$

258,120


Net earnings per common share

$

0.34



$

0.17



$

1.56



$

1.65










FFO available to common stockholders

$

110,445



$

82,491



$

446,661



$

395,337


FFO per common share

$

0.65



$

0.52



$

2.71



$

2.53










Core FFO available to common stockholders

$

120,301



$

101,001



$

455,186



$

414,590


Core FFO per common share

$

0.70



$

0.63



$

2.76



$

2.65










AFFO available to common stockholders

$

122,205



$

103,523



$

462,325



$

418,702


AFFO per common share

$

0.71



$

0.65



$

2.80



$

2.68


2019 Highlights:

2019 Highlights (continued):

Selected Highlights for the quarter ended December 31, 2019:

Jay Whitehurst, Chief Executive Officer, commented: “2019 was a year of significant milestones for National Retail Properties: our 35th year in business; our 25th year listed on the New York Stock Exchange, and most importantly, our 30th year of consecutive annual dividend increases. Our steady execution continued to produce impressive outcomes. Our Core FFO per share increased by 4.2% over 2018 and our long-term total shareholder returns continued to exceed the REIT averages while, in our opinion, taking below average risk. Moreover, the continued execution of our long-term focused business plan positions National Retail Properties to continue this enviable track record of consistent performance into 2020 and beyond.”

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases. As of December 31, 2019, the company owned 3,118 properties in 48 states with a gross leasable area of approximately 32.5 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 February 11, 2020, 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, 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


Year Ended



December 31,


December 31,



2019


2018


2019


2018

Income Statement Summary


















Revenues:









Rental income


$

173,163



$

158,827



$

669,009



$

621,399


Interest and other income from real estate transactions


213



149



1,478



1,262




173,376



158,976



670,487



622,661











Operating expenses:









General and administrative


10,127



8,267



37,651



34,248


Real estate


7,258



7,649



27,656



25,099


Depreciation and amortization


48,102



44,117



188,871



174,398


Impairment losses – real estate, net of recoveries


10,868



18,494



31,992



28,211


Retirement severance costs




270





1,013




76,355



78,797



286,170



262,969


Gain on disposition of real estate


6,955



8,020



32,463



65,070


Earnings from operations


103,976



88,199



416,780



424,762











Other expenses (revenues):









Interest and other income


(200)



(1,553)



(3,112)



(1,810)


Interest expense


30,307



34,940



120,023



115,847


Leasing transaction costs


83





261




Loss on early extinguishment of debt




18,240





18,240




30,190



51,627



117,172



132,277











Net earnings


73,786



36,572



299,608



292,485


Earnings attributable to noncontrolling interests




(10)



(428)



(38)











Net earnings attributable to NNN


73,786



36,562



299,180



292,447


Series E preferred stock dividends


(911)



(4,097)



(13,201)



(16,387)


Series F preferred stock dividends


(4,485)



(4,485)



(17,940)



(17,940)


Excess of redemption value over carrying value of preferred
shares redeemed


(9,856)





(9,856)




Net earnings available to common stockholders


$

58,534



$

27,980



$

258,183



$

258,120




















Weighted average common shares outstanding:









Basic


170,763



159,193



164,688



155,745


Diluted


171,175



159,772



165,084



156,296











Net earnings per share available to common stockholders:









Basic


$

0.34



$

0.17



$

1.56



$

1.65


Diluted


$

0.34



$

0.17



$

1.56



$

1.65


National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)



Quarter Ended


Year Ended



December 31,


December 31,



2019


2018


2019


2018

Funds From Operations (FFO) Reconciliation:









Net earnings available to common stockholders


$

58,534



$

27,980



$

258,183



$

258,120


Real estate depreciation and amortization


47,998



44,037



188,537



174,076


Gain on disposition of real estate, net of noncontrolling interests


(6,955)



(8,020)



(32,051)



(65,070)


Impairment losses – depreciable real estate, net of recoveries


10,868



18,494



31,992



28,211


Total FFO adjustments


51,911



54,511



188,478



137,217


FFO available to common stockholders


$

110,445



$

82,491



$

446,661



$

395,337











FFO per common share:









Basic


$

0.65



$

0.52



$

2.71



$

2.54


Diluted


$

0.65



$

0.52



$

2.71



$

2.53











Core Funds From Operations Reconciliation:









Net earnings available to common stockholders


$

58,534



$

27,980



$

258,183



$

258,120


Total FFO adjustments


51,911



54,511



188,478



137,217


FFO available to common stockholders


110,445



82,491



446,661



395,337











Excess of redemption value over carrying value of preferred

share redemption


9,856





9,856




Retirement severance costs




270





1,013


Gain on sale of equity investments






(1,331)




Loss on early extinguishment of debt




18,240





18,240


Total Core FFO adjustments


9,856



18,510



8,525



19,253


Core FFO available to common stockholders


$

120,301



$

101,001



$

455,186



$

414,590











Core FFO per common share:









Basic


$

0.70



$

0.63



$

2.76



$

2.66


Diluted


$

0.70



$

0.63



$

2.76



$

2.65































Quarter Ended


Year Ended



December 31,


December 31,



2019


2018


2019


2018

Adjusted Funds From Operations (AFFO) Reconciliation:









Net earnings available to common stockholders


$

58,534



$

27,980



$

258,183



$

258,120


Total FFO adjustments


51,911



54,511



188,478



137,217


Total Core FFO adjustments


9,856



18,510



8,525



19,253


Core FFO available to common stockholders


120,301



101,001



455,186



414,590











Straight-line accrued rent


(631)



124



(2,333)



(747)


Net capital lease rent adjustment


94



220



602



874


Below market rent amortization


(189)



(288)



(768)



(2,622)


Stock based compensation expense


2,932



2,641



10,737



9,282


Capitalized interest expense


(302)



(175)



(1,099)



(2,675)


Total AFFO adjustments


1,904



2,522



7,139



4,112


AFFO available to common stockholders


$

122,205



$

103,523



$

462,325



$

418,702











AFFO per common share:









Basic


$

0.72



$

0.65



$

2.81



$

2.69


Diluted


$

0.71



$

0.65



$

2.80



$

2.68











Other Information:









Rental income from operating leases(1)


$

167,805



$

152,915



$

650,112



$

602,131


Earned income from direct financing leases(1)


$

174



$

226



$

798



$

923


Percentage rent(1)


$

260



$

543



$

1,310



$

1,561











Real estate expense reimbursement from tenants(1)


$

4,924



$

5,143



$

16,789



$

16,784


Real estate expenses


(7,258)



(7,649)



(27,656)



(25,099)


Real estate expenses, net of tenant reimbursements


$

(2,334)



$

(2,506)



$

(10,867)



$

(8,315)











Amortization of debt costs


$

944



$

1,917



$

3,731



$

4,611


Scheduled debt principal amortization (excluding maturities)


$

145



$

138



$

567



$

538


Non-real estate depreciation expense


$

108



$

83



$

346



$

332



(1)

The consolidated financial statements for the quarter and year ended December 31, 2019 and 2018 are presented under the new accounting standard, ASU 2016-02, "Leases (Topic 842)." For the quarter and year ended December 31, 2019, the aggregate of such amounts is $173,163 and $669,009, respectively, classified as rental income on the income statement summary. For the quarter and year ended December 31, 2018, the aggregate of such amounts is $158,827 and $621,399, respectively.

2020 Earnings Guidance (Unchanged from October 2019):








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.




2020 Guidance

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


$1.70 - $1.74 per share

Real estate depreciation and amortization per share


$1.13 per share

Core FFO per share


$2.83 - $2.87 per share

AFFO per share


$2.90 - $2.94 per share

General and administrative expenses


$42.0 - $43.0 Million

Real estate expenses, net of tenant reimbursements


$8.0 - $9.0 Million

Acquisition volume


$550 - $650 Million

Disposition volume


$80 - $120 Million

National Retail Properties, Inc.

(in thousands)

(unaudited)



December 31,
2019


December 31,
2018

Balance Sheet Summary










Assets:





Real estate:





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


$

7,290,025



$

6,845,446


Accounted for using the direct financing method


4,204



8,069


Real estate held for sale


7,010



21,917


Cash and cash equivalents


1,112



114,267


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


2,874



3,797


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


28,897



25,387


Debt costs, net of accumulated amortization of $15,574 and $14,118, respectively


2,783



4,081


Other assets


97,962



80,474


Total assets


$

7,434,867



$

7,103,438







Liabilities:





Line of credit payable


$

133,600



$


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


12,059



12,694


Notes payable, net of unamortized discount and unamortized debt costs


2,842,698



2,838,701


Accrued interest payable


18,250



19,519


Other liabilities


96,578



77,919


Total liabilities


3,103,185



2,948,833







Stockholders' equity of NNN


4,331,675



4,154,250


Noncontrolling interests


7



355


Total equity


4,331,682



4,154,605







Total liabilities and equity


$

7,434,867



$

7,103,438







Common shares outstanding


171,694



161,504







Gross leasable area, Property Portfolio (square feet)


32,460



30,487


National Retail Properties, Inc.

Debt Summary

As of December 31, 2019

(in thousands)

(unaudited)


Unsecured Debt


Principal


Principal,
Net of
Unamortized
Discount


Stated Rate


Effective
Rate


Maturity Date

Line of credit payable


$

133,600



$

133,600



L + 87.5 bps


2.788%


January 2022












Unsecured notes payable:






















2022


325,000



323,426



3.800%


3.985%


October 2022

2023


350,000



349,049



3.300%


3.388%


April 2023

2024


350,000



349,653



3.900%


3.924%


June 2024

2025


400,000



399,391



4.000%


4.029%


November 2025

2026


350,000



347,169



3.600%


3.733%


December 2026

2027


400,000



398,693



3.500%


3.548%


October 2027

2028


400,000



397,445



4.300%


4.388%


October 2028

2048


300,000



295,842



4.800%


4.890%


October 2048

Total


2,875,000



2,860,668



















Total unsecured debt


$

3,008,600



$

2,994,268



















Debt costs


$

(26,932)








Accumulated amortization


8,962








Debt costs, net of accumulated amortization


(17,970)








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


$

2,842,698



















(1) Unsecured notes payable have a weighted average interest rate of 4.0% and a weighted average maturity of 8.3 years

Mortgages Payable


Principal
Balance


Interest Rate


Maturity Date

Mortgage(1)


$

12,116



5.230

%


July 2023


Debt costs


(147)






Accumulated amortization


90






Debt costs, net of accumulated amortization


(57)






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


$

12,059













(1) Includes unamortized premium







National Retail Properties, Inc.

Property Portfolio


Top 20 Lines of Trade






As of December 31,



Line of Trade


2019(1)


2018(2)

1.


Convenience stores


18.2

%


18.0

%

2.


Restaurants - full service


11.1

%


11.4

%

3.


Automotive service


9.6

%


8.6

%

4.


Restaurants - limited service


8.8

%


8.9

%

5.


Family entertainment centers


6.7

%


7.1

%

6.


Health and fitness


5.2

%


5.6

%

7.


Theaters


4.7

%


5.0

%

8.


Recreational vehicle dealers, parts and accessories


3.4

%


3.4

%

9.


Automotive parts


3.1

%


3.4

%

10.


Equipment rental


2.6

%


1.9

%

11.


Home improvement


2.6

%


2.2

%

12.


Wholesale clubs


2.5

%


2.3

%

13.


Medical service providers


2.1

%


2.2

%

14.


General merchandise


1.8

%


1.6

%

15.


Home furnishings


1.7

%


1.5

%

16.


Furniture


1.6

%


1.7

%

17.


Travel plazas


1.6

%


1.7

%

18.


Drug stores


1.6

%


1.8

%

19.


Consumer electronics


1.5

%


1.6

%

20.


Bank


1.3

%


1.6

%



Other


8.3

%


8.5

%



Total


100.0

%


100.0

%

Top 10 States



State



% of Total(1)



State



% of Total(1)

1.

Texas



17.6

%


6.

North Carolina



4.5

%

2.

Florida



8.8

%


7.

Indiana



4.0

%

3.

Ohio



5.8

%


8.

Tennessee



3.8

%

4.

Illinois



5.0

%


9.

Virginia



3.6

%

5.

Georgia



4.5

%


10.

California



3.3

%


(1)

Based on the annualized base rent for all leases in place as of December 31, 2019.

(2)

Based on the annualized base rent for all leases in place as of December 31, 2018.

National Retail Properties, Inc.

Property Portfolio


Top Tenants (≥ 2.0%)



Tenant


Properties


% of Total (1)


7-Eleven


140


5.0%


Mister Car Wash


116


4.6%


Camping World


47


4.2%


LA Fitness


30


3.7%


Flynn Restaurant Group (Taco Bell/Arby's)


204


3.5%


GPM Investments (Convenience Stores)


151


3.3%


AMC Theatres


20


3.0%


Couche-Tard (Pantry)


85


2.8%


BJ's Wholesale Club


11


2.5%


Sunoco


61


2.3%


Chuck E. Cheese's


53


2.1%

Lease Expirations(2)




% of
Total(1)


# of
Properties


Gross
Leasable
Area (3)




% of
Total(1)


# of
Properties


Gross
Leasable
Area (3)

2020


1.7%


66


688,000

1,253,000


2026


4.5%


174


1,672,000

2021


3.5%


115



2027


7.1%


194


2,582,000

2022


5.5%


123


1,634,000


2028


4.5%


153


1,158,000

2023


2.9%


118


1,471,000


2029


3.0%


75


1,030,000

2024


3.7%


100


1,600,000


2030


3.7%


101


1,137,000

2025


5.3%


167


1,850,000


Thereafter


54.6%


1,698


15,743,000


(1)

Based on the annual base rent of $674,338,000, which is the annualized base rent for all leases in place as of December 31, 2019.

(2)

As of December 31, 2019, the weighted average remaining lease term is 11.2 years.

(3)

Square feet.

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SOURCE National Retail Properties, Inc.