EX-99.1 2 nnn8-k20170331exhibit991.htm EXHIBIT 99.1 Exhibit

nnnlogo201700331.jpg    

NEWS RELEASE
For information contact:
Kevin B. Habicht
Chief Financial Officer
(407) 265-7348    FOR IMMEDIATE RELEASE
May 2, 2017

FIRST QUARTER 2017 OPERATING RESULTS AND INCREASE OF LOWER END OF 2017 GUIDANCE ANNOUNCED BY NATIONAL RETAIL PROPERTIES, INC.

Orlando, Florida, May 2, 2017 – National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced its operating results for the quarter ended March 31, 2017. Highlights include:

Operating Results:
•
Revenues and net earnings, FFO, Core FFO and AFFO available to common stockholders and diluted per share amounts:
 
Quarter Ended
 
March 31,
 
2017
 
2016
 
(in thousands, except per share data)
Revenues
$
141,432

 
$
126,980

 
 
 
 
Net earnings available to common stockholders
$
51,622

 
$
61,824

Net earnings per common share
$
0.35

 
$
0.44

 
 
 
 
FFO available to common stockholders
$
78,267

 
$
80,098

FFO per common share
$
0.53

 
$
0.57

 
 
 
 
Core FFO available to common stockholders
$
88,122

 
$
80,318

Core FFO per common share
$
0.60

 
$
0.57

 
 
 
 
AFFO available to common stockholders
$
89,045

 
$
81,749

AFFO per common share
$
0.60

 
$
0.58


First Quarter 2017 Highlights:
•
Core FFO per common share increased 5.3% over prior year results
•
AFFO per common share increased 3.4% over prior year results
•
Portfolio occupancy was 99.1% at March 31, 2017 as compared to 99.0% at December 31, 2016 and 99.1% at March 31, 2016
•
Invested $107.9 million in property investments, including the acquisition of 24 properties with an aggregate 250,000 square feet of gross leasable area at an initial cash yield of 6.9%
•
Sold 17 properties for $39.0 million producing $14.6 million of gains on sales
•
Raised $48.5 million net proceeds from the issuance of 1,103,675 common shares
•
Redeemed all 11,500,000 depositary shares representing interests in our 6.625% Series D Cumulative preferred stock at the liquidation value of $25.00 per depositary share, for $287.5 million

April Transactions:
•
Invested $151.4 million in property investments, including the acquisition of 73 properties with an aggregate 282,000 square feet of gross leasable area


Core FFO guidance for 2017 was increased from a range of $2.42 to $2.48 to a range of $2.44 to $2.48 per share. The 2017 AFFO is estimated to be $2.48 to $2.52 per share. The Core FFO guidance equates to net earnings of $1.37 to $1.41 per share, plus $1.07 per share of expected real estate depreciation and amortization and excludes any gains from the sale of real estate and any charges for impairments, retirement severance costs, or 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.

Jay Whitehurst, Chief Executive Officer, commented: "Early 2017 results are off to a good start which has put us in position to increase the lower end of our 2017 guidance. The portfolio and balance sheet remain in excellent condition and we continue to find opportunities to deploy capital accretively into high quality properties sourced both through our deep tenant relationships and in the open market. Lastly, on behalf of all the associates at National Retail Properties, I want to say “Thank You” to Craig Macnab for his thirteen years of inspiring leadership as our CEO and Chairman."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases. As of March 31, 2017, the company owned 2,543 properties in 48 states with a gross leasable area of approximately 27.3 million square feet and with a weighted average remaining lease term of 11.4 years. For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on May 2, 2017, 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 ended March 31, 2017. 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

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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.


3

National Retail Properties, Inc.
(in thousands, except per share data)
(unaudited)

 
 
Quarter Ended
 
 
March 31,
 
 
2017
 
2016
Income Statement Summary
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
Rental and earned income
 
$
137,298

 
$
122,475

Real estate expense reimbursement from tenants
 
3,860

 
3,590

Interest and other income from real estate transactions
 
189

 
463

Interest income on commercial mortgage residual interests
 
85

 
452

 
 
141,432

 
126,980

 
 
 
 
 
Operating expenses:
 
 
 
 
General and administrative
 
8,919

 
9,249

Real estate
 
5,663

 
4,787

Depreciation and amortization
 
40,143

 
34,655

Impairment – commercial mortgage residual interests valuation
 
—

 
220

Impairment losses – real estate and other charges, net of recoveries
 
1,206

 
572

 
 
55,931

 
49,483

 
 
 
 
 
Other expenses (revenues):
 
 
 
 
Interest and other income
 
(137
)
 
(19
)
Interest expense
 
26,614

 
23,586

Real estate acquisition costs
 
—

 
129

 
 
26,477

 
23,696

 
 
 
 
 
Earnings before gain on disposition of real estate
 
59,024

 
53,801

 
 
 
 
 
Gain on disposition of real estate
 
14,624

 
16,875

 
 
 
 
 
Earnings including noncontrolling interests
 
73,648

 
70,676

 
 
 
 
 
Loss attributable to noncontrolling interests
 
9

 
7

 
 
 
 
 
Net earnings attributable to NNN
 
73,657

 
70,683

Series D preferred stock dividends
 
(3,598
)
 
(4,762
)
Series E preferred stock dividends
 
(4,097
)
 
(4,097
)
Series F preferred stock dividends
 
(4,485
)
 
—

Excess of redemption value over carrying value of Series D
   preferred shares redeemed
 
(9,855
)
 
—

Net earnings available to common stockholders
 
$
51,622

 
$
61,824

 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
Basic
 
146,930

 
140,840

Diluted
 
147,280

 
141,326

 
 
 
 
 
Net earnings per share available to common stockholders:
 
 
 
 
Basic
 
0.35

 
0.44

Diluted
 
0.35

 
0.44

 
 
 
 
 

4

National Retail Properties, Inc.
(in thousands, except per share data)
(unaudited)

 
 
Quarter Ended
 
 
March 31,
 
 
2017
 
2016
Funds From Operations (FFO) Reconciliation:
 
 
 
 
Net earnings available to common stockholders
 
$
51,622

 
$
61,824

Real estate depreciation and amortization
 
40,063

 
34,577

Gain on disposition of real estate, net of noncontrolling interest
 
(14,624
)
 
(16,875
)
Impairment losses – depreciable real estate, net of recoveries
 
1,206

 
572

Total FFO adjustments
 
26,645

 
18,274

FFO available to common stockholders
 
$
78,267

 
$
80,098

 
 
 
 
 
FFO per common share:
 
 
 
 
Basic
 
$
0.53

 
$
0.57

Diluted
 
$
0.53

 
$
0.57

 
 
 
 
 
Core Funds from Operations Reconciliation:
 
 
 
 
Net earnings available to common stockholders
 
$
51,622

 
$
61,824

Total FFO adjustments
 
26,645

 
18,274

FFO available to common stockholders
 
78,267

 
80,098

 
 
 
 
 
Excess of redemption value over carrying value of preferred
   share redemption
 
9,855

 
—

Impairment – commercial mortgage residual interests valuation
 
—

 
220

Total Core FFO adjustments
 
9,855

 
220

Core FFO available to common stockholders
 
$
88,122

 
$
80,318

 
 
 
 
 
Core FFO per common share:
 
 
 
 
Basic
 
$
0.60

 
$
0.57

Diluted
 
$
0.60

 
$
0.57

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

5

National Retail Properties, Inc.
(in thousands, except per share data)
(unaudited)

 
 
Quarter Ended
 
 
March 31,
 
 
2017
 
2016
Adjusted Funds From Operations (AFFO) Reconciliation:
 
 
 
 
Net earnings available to common stockholders
 
$
51,622

 
$
61,824

Total FFO adjustments
 
26,645

 
18,274

Total Core FFO adjustments
 
9,855

 
220

Core FFO available to common stockholders
 
88,122

 
80,318

 
 
 
 
 
Straight line accrued rent
 
(675
)
 
(242
)
Net capital lease rent adjustment
 
231

 
340

Below market rent amortization
 
(660
)
 
(859
)
Stock based compensation expense
 
2,581

 
2,703

Capitalized interest expense
 
(554
)
 
(511
)
Total AFFO adjustments
 
923

 
1,431

AFFO available to common stockholders
 
$
89,045

 
$
81,749

 
 
 
 
 
AFFO per common share:
 
 
 
 
Basic
 
$
0.61

 
$
0.58

Diluted
 
$
0.60

 
$
0.58

 
 
 
 
 
Other Information:
 
 
 
 
Percentage rent
 
$
548

 
$
474

Amortization of debt costs
 
$
859

 
$
756

Scheduled debt principal amortization (excluding maturities)
 
$
127

 
$
260

Non-real estate depreciation expense
 
$
82

 
$
81

 
 
 
 
 
2017 Earnings Guidance:
 
Core FFO guidance for 2017 is $2.44 to $2.48 per share. The 2017 AFFO is estimated to be $2.48 to $2.52 per share. The FFO guidance equates to net earnings of $1.37 to $1.41 per share, plus $1.07 per share of expected real estate depreciation and amortization and excludes any gains from the sale of real estate and any charges for impairments, retirement severance costs, or 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.

 
 
2017 Guidance 
  Net earnings per common share excluding any gains on sale of real estate, impairment charges, retirement severance charges or charges in connection with preferred stock redemption
 
$1.37 - $1.41 per share
  Real estate depreciation and amortization per share
 
$1.07 per share
Core FFO per share
 
$2.44 - $2.48 per share
  AFFO per share
 
$2.48 - $2.52 per share
  G&A expenses (excluding retirement severance charges)
 
$33 - $34 Million
  Real estate expenses, net of tenant reimbursements
 
$6.5 - $7.0 Million
  Acquisition volume
 
$500 - $600 Million
  Disposition volume
 
$80 - $120 Million


6

National Retail Properties, Inc.
(in thousands)
(unaudited)

 
 
March 31, 2017
 
December 31, 2016
Balance Sheet Summary
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
Real estate:
 
 
 
 
Accounted for using the operating method, net of accumulated depreciation and amortization
 
$
5,944,220

 
$
5,875,488

Accounted for using the direct financing method
 
10,303

 
11,230

Real estate held for sale
 
7,263

 
29,642

Cash and cash equivalents
 
34,418

 
294,540

Receivables, net of allowance
 
3,111

 
3,418

Accrued rental income, net of allowance
 
25,549

 
25,101

Debt costs, net of accumulated amortization
 
2,394

 
2,715

Other assets
 
87,514

 
92,017

Total assets
 
$
6,114,772

 
$
6,334,151

 
 
 
 
 
Liabilities:
 
 
 
 
Line of credit payable
 
$
—

 
$
—

 Mortgages payable, including unamortized premium and net of unamortized debt costs
 
13,734

 
13,878

 Notes payable, net of unamortized discount and unamortized debt costs
 
2,298,755

 
2,297,811

Accrued interest payable
 
36,379

 
19,665

Other liabilities
 
90,973

 
85,869

Total liabilities
 
2,439,841

 
2,417,223

 
 
 
 
 
Stockholders' equity of NNN
 
3,674,811

 
3,916,799

Noncontrolling interests
 
120

 
129

Total equity
 
3,674,931

 
3,916,928

 
 
 
 
 
Total liabilities and equity
 
$
6,114,772

 
$
6,334,151

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common shares outstanding
 
148,579

 
147,150

 
 
 
 
 
Gross leasable area, Property Portfolio (square feet)
 
27,311

 
27,204

 
 
 
 
 


7

National Retail Properties, Inc.
Debt Summary
As of March 31, 2017
(in thousands)
(unaudited)
Unsecured Debt
 
Principal
 
Principal, Net of Unamortized Discount
 
Stated Rate
 
Effective Rate
 
Maturity Date
Line of credit payable
 
$
—

 
$
—

 
L + 92.5 bps

 
1.449
%
 
   January 2019
 
 
 
 
 
 
 
 
 
 
 
Unsecured notes payable:
 
 
 
 
 
 
 
 
 
 
2017
 
250,000

 
249,936

 
6.875
%
 
6.924
%
 
   October 2017
2021
 
300,000

 
297,873

 
5.500
%
 
5.689
%
 
   July 2021
2022
 
325,000

 
322,035

 
3.800
%
 
3.985
%
 
   October 2022
2023
 
350,000

 
348,330

 
3.300
%
 
3.388
%
 
   April 2023
2024
 
350,000

 
349,467

 
3.900
%
 
3.924
%
 
   June 2024
2025
 
400,000

 
399,152

 
4.000
%
 
4.029
%
 
   November 2025
2026
 
350,000

 
346,235

 
3.600
%
 
3.733
%
 
   December 2026
Total
 
2,325,000

 
2,313,028

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total unsecured debt(1)
 
$
2,325,000

 
$
2,313,028

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt costs
 
 
 
(21,157
)
 
 
 
 
 
 
Accumulated amortization
 
6,884

 
 
 
 
 
 
Debt costs, net of accumulated amortization
 
(14,273)
 
 
 
 
 
 
Notes payable, net of unamortized discount and unamortized debt costs
 
$
2,298,755

 
 
 
 
 
 

(1) Unsecured notes payable have a weighted average interest rate of 4.4% and a weighted average maturity of 6.3 years


Mortgages Payable
 
Principal Balance
 
Interest Rate
 
Maturity Date
Mortgage(1)
 
$
13,839

 
5.230
%
 
   July 2023
 
 
 
 
 
 
 
Debt costs
 
(147)
 
 
 
 
Accumulated amortization
 
42
 
 
 
 
Debt costs, net of accumulated amortization
 
(105)
 
 
 
 
Mortgages payable, including unamortized premium and net of unamortized debt costs
 
$
13,734

 
 
 
 
 
 
 
 
 
 
 
(1) Includes unamortized premium
 
 
 
 
 
 


8

National Retail Properties, Inc.
Property Portfolio

Top 20 Lines of Trade
 
 
 
 
As of March 31,
 
 
Line of Trade
 
2017(1)
 
2016(2)
1.
 
Convenience stores
 
16.8
%
 
16.5
%
2.
 
Restaurants – full service
 
11.7
%
 
10.8
%
3.
 
Restaurants – limited service
 
7.5
%
 
7.9
%
4.
 
Automotive service
 
7.0
%
 
7.0
%
5.
 
Family entertainment centers
 
6.1
%
 
5.7
%
6.
 
Health and fitness
 
5.7
%
 
4.0
%
7.
 
Theaters
 
4.9
%
 
5.1
%
8.
 
Automotive parts
 
3.8
%
 
4.1
%
9.
 
Recreational vehicle dealers, parts and accessories
 
3.4
%
 
3.6
%
10.
 
Banks
 
2.7
%
 
3.4
%
11.
 
Sporting goods
 
2.5
%
 
2.9
%
12.
 
Medical service providers
 
2.4
%
 
2.3
%
13.
 
Wholesale clubs
 
2.3
%
 
2.3
%
14.
 
Drug stores
 
2.1
%
 
2.3
%
15.
 
Consumer electronics
 
1.9
%
 
2.2
%
16.
 
Home improvement
 
1.9
%
 
2.0
%
17.
 
Travel plazas
 
1.9
%
 
2.0
%
18.
 
Furniture
 
1.9
%
 
1.3
%
19.
 
General merchandise
 
1.8
%
 
2.0
%
20.
 
Home furnishings
 
1.7
%
 
1.8
%
 
 
Other
 
10.0
%
 
10.8
%
 
 
Total
 
100.0
%
 
100.0
%

Top 10 States
 
State
 
 
% of Total(1)
 
 
State
 
 
% of Total(1)
1.
Texas
 
 
18.6
%
 
6.
Georgia
 
 
4.3
%
2.
Florida
 
 
8.8
%
 
7.
Indiana
 
 
4.1
%
3.
Illinois
 
 
5.7
%
 
8.
Virginia
 
 
3.5
%
4.
Ohio
 
 
5.6
%
 
9.
Alabama
 
 
3.0
%
5.
North Carolina
 
 
4.6
%
 
10.
Tennessee
 
 
2.7
%

(1) 
Based on the annualized base rent for all leases in place as of March 31, 2017.
(2) 
Based on the annualized base rent for all leases in place as of March 31, 2016.


9

National Retail Properties, Inc.
Property Portfolio

Top Tenants ( ≥ 2.0%)
 
 
 
Properties
 
% of Total (1)
 
Sunoco
 
125

 
5.3
%
 
Mister Car Wash
 
96

 
4.3
%
 
LA Fitness
 
29

 
3.8
%
 
AMC Theatre
 
20

 
3.5
%
 
Camping World
 
32

 
3.4
%
 
7-Eleven
 
77

 
3.3
%
 
Couche-Tard (Pantry)
 
86

 
3.3
%
 
Bell American (Taco Bell)
 
115

 
2.7
%
 
SunTrust
 
111

 
2.6
%
 
Chuck E. Cheese's
 
53

 
2.5
%
 
BJ's Wholesale Club
 
8

 
2.3
%
 
Frisch's Restaurant
 
74

 
2.2
%
 
Gander Mountain
 
12

 
2.2
%

Lease Expirations(2) 
 
 
% of
Total(1)
 
# of
Properties
 
Gross Leasable
Area (3)
 
 
 
% of
Total(1)
 
# of
Properties
 
Gross Leasable Area (3)
2017
 
0.5
%
 
17

 
238,000

 
2023
 
2.5
%
 
85

 
1,014,000

2018
 
3.2
%
 
90

 
1,145,000

 
2024
 
2.6
%
 
50

 
883,000

2019
 
2.9
%
 
76

 
1,134,000

 
2025
 
5.0
%
 
131

 
1,115,000

2020
 
3.8
%
 
130

 
1,560,000

 
2026
 
5.9
%
 
181

 
1,830,000

2021
 
4.4
%
 
122

 
1,320,000

 
2027
 
8.9
%
 
190

 
2,815,000

2022
 
6.7
%
 
119

 
1,739,000

 
Thereafter
 
53.6
%
 
1,321

 
12,122,000


(1) 
Based on the annual base rent of $550,067,000, which is the annualized base rent for all leases in place as of March 31, 2017.
(2) 
As of March 31, 2017, the weighted average remaining lease term is 11.4 years.
(3) 
Square feet.










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