EX-99 3 pr-012104.htm FINANCIAL STATEMENTS AND EXHIBITS

NEWS RELEASE

For information contact:
Kevin B. Habicht
Chief Financial Officer
(407) 265-7348

For Immediate Release
January 21, 2004

INCREASED YEAR-END OPERATING RESULTS
ANNOUNCED BY COMMERCIAL NET LEASE REALTY, INC.

Orlando, Florida, January 21, 2004 — Commercial Net Lease Realty, Inc. (NYSE:NNN), an equity real estate investment trust, reported funds from operations (“FFO”) for the fourth quarter ended December 31, 2003 were $18,432,000 or 38 cents per share compared to $14,758,000 or 36 cents per share for the same period last year. Funds from operations for the year ended December 31, 2003 were $64,162,000 or $1.46 per share compared to $57,881,000 or $1.43 per share for the year ended December 31, 2002.

Revenues for the fourth quarter increased to $28,648,000 compared to $22,383,000 for last year’s fourth quarter. Net earnings available to common stockholders for the quarter ended December 31, 2003 were $14,588,000 or $0.30 per diluted share compared to $12,219,000 or $0.30 per diluted share for the same period last year. Net earnings available to common stockholders for the year ended December 31, 2003 were $49,465,000 or $1.13 per diluted share compared to $44,048,000 or $1.09 per diluted share for the same period last year.

     2003 Highlights:

  • Dividends increased to $1.28 per share marking 14 consecutive years of increases
  • Invested $281.8 million in properties owned by the Company and its affiliates
  • Invested $43.4 million in mezzanine loans
  • Increased occupancy from 95% to 97%
  • Launched broadened property sector diversification strategy
  • Sold 14 properties generating $25.0 million of net proceeds
  • Increased interest and fixed charge coverage ratios to 3.5x and 2.8x, respectively
  • Total return to common stockholders of 25.3%

The Company and its affiliated subsidiaries invested $78,043,000 during the fourth quarter of 2003 and $325,269,000 during the year 2003 in additional properties, construction in progress and mezzanine loan investments on seven office properties in Sacramento, CA and two office properties in Los Angeles, CA. These mezzanine loan investments, totaling $43,433,000 bear an annual interest rate of 13.5%, of which 2.5% accrues and is payable at maturity in November 2007.

For the year ended December 31, 2003, the Company generated total net proceeds from the dispositions of 14 properties of $25,023,000 resulting in a net gain of $161,000 for financial reporting purposes.

Gary M. Ralston, President and Chief Operating Officer, stated, "2003 was another year of solid performance and we believe the Company is well positioned for 2004 and beyond."

During the fourth quarter of 2003, the Company raised additional debt and equity capital. In November, the Company closed on a $95,000,000 interest-only mortgage secured by the two office buildings in the Washington, D.C. metropolitan area acquired in August 2003. The debt bears interest at a fixed rate of 5.42% and is payable in full at maturity in November 2013. In December, the Company completed a 3,737,500 share common equity offering generating net proceeds of approximately $64,362,000.

Based on the current annual base rent in place as of December 31, 2003, 83% of the Company’s annualized base rent was derived from retail properties and 17% from office properties. As of December 31, 2003, three tenants in the Company’s property portfolio each accounted for more than 5% of annualized base rent (United States of America 16.7%; Eckerd 11.0%; Best Buy 5.4%). The weighted average lease maturity of the portfolio was approximately 11 years as of December 31, 2003.

Commercial Net Lease Realty invests in high quality, single-tenant retail, office and industrial properties subject generally to long-term, net leases with established tenants, such as Barnes & Noble, Best Buy, Eckerd, OfficeMax and the United States of America. The Company currently owns, either directly or through investment interests, 349 properties in 39 states with a gross leasable area of approximately 7.9 million square feet. These properties are leased to 128 corporations in 47 industrial classifications.

Management will hold a conference call on January 21, 2004 at 10:30 am EST to review the Company’s results. The call can be accessed on the Company’s web site live at http://www.cnlreit.com. For those unable to listen to the live broadcast, a replay will be available on the Company’s web site. In addition, the Company will post a summary of any earnings guidance given on the call to the Company’s website.

Statements in this press release, which are not strictly historical, are “forward-looking” statements. 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 availability of capital, and the profitability of the Company’s taxable subsidiary. Additional information concerning these and other factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the Company’s SEC filings, including, but not limited to, the Company’s report on Form 10-K. Copies of each filing may be obtained from the Company or the SEC. Consequently, 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. The Company 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.

Funds From Operations, commonly referred to as FFO, is a 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. The Company defines FFO as net earnings excluding depreciation, gains and losses on the disposition of real estate and extraordinary items of income and expense of the Company, and the Company’s share of these items from the Company’s unconsolidated partnerships.

FFO is generally considered by industry analysts to be the most appropriate measure of performance. FFO does not necessarily represent cash provided by operating activities in accordance with accounting principles generally accepted in the United States of America and should not be considered an alternative to net income 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.

Commercial Net Lease Realty, Inc.
 (in thousands, except per share data)
 
For the Quarter Ended
December 31,		 For the Year Ended
December 31,
2003
 2002
 2003
 2002
Income Statement Summary                    
 
Income:  
    Rental and earned income   $ 26,197   $ 20,486   $ 95,790   $ 82,392  
    Interest and other income    2,451    1,897    6,868    8,499  
     28,648    22,383    102,658    90,891  
Expenses:  
    General and administrative    3,687    2,348    11,486    9,465  
    Real estate    936    377    2,406    1,446  
    Interest    7,613    6,887    27,731    26,720  
    Depreciation and amortization    4,049    2,857    13,467    11,142  
    Provision for loss on impairment of real estate    -    -    -    2,256  
    Dissenting stockholders' settlement    -    -    2,413    -  
     16,285    12,469    57,503    51,029  
Earnings from continuing operations before equity in  
   earnings of unconsolidated affiliates
    12,363    9,914    45,155    39,862  

Equity in earnings of unconsolidated affiliates		    3,174    1,182    6,154    3,216  
Earnings from continuing operations
    15,537    11,096    51,309    43,078  
Earnings from discontinued operations    54    2,126  2,164    4,980  
Net earnings    15,591    13,222    53,473    48,058  
Series A Preferred Stock dividends       (1,003 )   (1,003 )   (4,008 )   (4,010 )
Series B Preferred Stock dividends       (418 )   -   (502 )   -
Net earnings available to common stockholders - basic   14,170   12,219   48,963   44,048  
Series B Preferred Stock dividends       418   -   502   -
Net earnings available to common stockholders - diluted   $ 14,588   $ 12,219   $ 49,465   $ 44,048  
Weighted average number of common shares outstanding:  
    Basic    47,121    40,332    43,108    40,383  
    Diluted    48,768    40,607    43,897    40,589  
Net earnings per share available to common stockholders:  
    Basic:  
        Continuing operations   $ 0.30   $ 0.25   $ 1.09   $ 0.97  
        Discontinued operations    -    0.05  0.05    0.12  
        Net earnings   $ 0.30   $ 0.30   $ 1.14   $ 1.09  
    Diluted:  
       Continuing operations   $ 0.30   $ 0.25   $ 1.08   $ 0.97  
       Discontinued operations    -    0.05  0.05    0.12  
       Net earnings   $ 0.30   $ 0.30   $ 1.13   $ 1.09  
Commercial Net Lease Realty, Inc.
 (in thousands, except per share data)
 
For the Quarter Ended
December 31,		 For the Year Ended
December 31,
2003
 2002
 2003
 2002
Reconciliation of funds from operations:                    
    Net earnings available to common stockholders - diluted   $ 14,588   $ 12,219   $ 49,465   $ 44,048  
      Real estate depreciation and amortization:  
         Continuing operations    3,650    2,483    11,770    9,729  
         Discontinued operations    1    82    102    600  
      Partnership real estate depreciation    193    193    699    479  
      Loss (gain) on disposition and impairment of  
        real estate:  
         Continuing operations    -    -    -    2,256  
         Discontinued operations    -  (219 )  (287 )  769  
      Dissenting stockholders' settlement    -    -    2,413    -  
    Funds from operations   $ 18,432   $ 14,758   $ 64,162   $ 57,881  
 
Funds from operations per diluted share:   $ 0.38   $ 0.36   $ 1.46   $ 1.43  

In accordance with Financial Accounting Standard Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets, ” the Company has classified its 33 properties sold during 2003 and 2002 as discontinued operations. Accordingly, the results of operations related to these properties have been reclassified to earnings from discontinued operations. The following is a summary of earnings from discontinued operations.

For the Quarter
Ended December 31,		 For the Year
Ended December 31,
2003
 2002
 2003
 2002
Revenues:                    
    Rental and earned income   $ -   $ 2,022   $ 1,833   $ 6,597  
    Interest and other income    55    17    165    22  
     55    2,039    1,998    6,619  
Expenses:  
    General operating and administrative    -    1    15    19  
    Real estate    -  49    4    251  
    Depreciation and amortization    1    82    102    600  
    Provision for loss on impairment of real estate    -    -    -    1,029  
     1  132    121    1,899  
Earnings before gain on disposition of real estate    54    1,907    1,877    4,720  
 
Gain on disposition of real estate    -    219  287    260  
Earnings from discontinued operations   $ 54   $ 2,126 $ 2,164   $ 4,980  
Commercial Net Lease Realty, Inc.
 (in thousands)
 
December 31,
2003
 December 31,
2002
Balance Sheet Summary

            
Assets:  
    Cash and cash equivalents   $ 4,364   $ 1,737  
    Receivables, net of allowance    4,458    1,227  
    Mortgages, notes and accrued interest receivable, net of          
        allowance    56,568    11,253  
    Investments in, mortgages and other receivables from  
        unconsolidated affiliates    114,803    102,633  
    Real estate:  
        Accounted for using the operating method    887,124    703,465  
        Accounted for using the direct financing method    102,970    108,308  
    Other assets    38,023    25,485  
    Total assets   $ 1,208,310   $ 954,108  
Liabilities and stockholders' equity:  
    Current liabilities   $ 12,418   $ 20,378  
    Line of credit    27,800    38,900  
    Mortgages payable    147,580    55,481  
    Notes payable    289,758    290,208  
    Stockholders' equity    730,754    549,141  
    Total liabilities and stockholders' equity   $ 1,208,310   $ 954,108  
Common shares outstanding    50,002    40,404  
Commercial Net Lease Realty, Inc.

Top 20 Tenants
(based on current annual base rent as of December 31, 2003)

Tenant % of Total Tenant % of Total
  1. United States of America 16.7% 11. Bed Bath & Beyond 1.6%
  2. Eckerd 11.0% 12. Food 4 Less 1.4%
  3. Best Buy 5.4% 13. Havertys Furniture 1.4%
  4. OfficeMax 4.6% 14. The Good Guys 1.3%
  5. Barnes & Noble 4.4% 15. Dick's Sporting Goods 1.3%
  6. Academy 3.3% 16. Target 1.2%
  7. Borders Books 3.2% 17. Kash N' Karry 1.2%
  8. The Sports Authority 2.9% 18. Winn-Dixie 1.1%
  9. Bennigan's 1.7% 19. Lowe's 1.1%
10. Jared Jewelers 1.6% 20. Office Depot 1.1%


Top 10 States
(based on current annual base rent as of December 31, 2003)

State % of Total State % of Total
1. Virginia 21.4%   6. New Jersey 3.1%
2. Florida 13.9%   7. Ohio 3.0%
3. Texas 13.7%   8. Maryland 3.0%
4. California 7.9%   9. Tennessee 2.8%
5. Georgia 4.9% 10. Illinois 2.5%


Lease Expirations
(based on current annual base rent as of December 31, 2003)

# of Properties % of Total # of Properties % of Total
2004 7  1.4% 2010 15  4.2%
2005 1  0.1% 2011 14  3.1%
2006 6  1.5% 2012 19  5.1%
2007 18  2.1% 2013 28  7.0%
2008 21  3.5% 2014 32  24.5%
2009 15  3.0% Therefter 160  44.5%