Maryland | 001-11290 | 56-1431377 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employment Identification No.) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits. |
99.1 | Press Release, dated February 13, 2018, of National Retail Properties, Inc. | ||
99.2 | Supplemental Data, dated February 13, 2018, of National Retail Properties, Inc. |
National Retail Properties, Inc. | ||||
Dated: February 13, 2018 | By: | /s/ Kevin B. Habicht | ||
Kevin B. Habicht | ||||
Executive Vice President and Chief Financial Officer |
• | 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, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in thousands, except per share data) | |||||||||||||||
Revenues | $ | 150,247 | $ | 141,199 | $ | 584,933 | $ | 533,647 | |||||||
Net earnings available to common stockholders | $ | 63,586 | $ | 54,044 | $ | 217,193 | $ | 200,877 | |||||||
Net earnings per common share | $ | 0.42 | $ | 0.37 | $ | 1.45 | $ | 1.38 | |||||||
FFO available to common stockholders | $ | 95,267 | $ | 88,717 | $ | 359,179 | $ | 330,544 | |||||||
FFO per common share | $ | 0.63 | $ | 0.60 | $ | 2.40 | $ | 2.28 | |||||||
Core FFO available to common stockholders | $ | 95,459 | $ | 88,717 | $ | 376,991 | $ | 340,643 | |||||||
Core FFO per common share | $ | 0.63 | $ | 0.60 | $ | 2.52 | $ | 2.35 | |||||||
AFFO available to common stockholders | $ | 95,692 | $ | 90,285 | $ | 379,083 | $ | 347,933 | |||||||
AFFO per common share | $ | 0.63 | $ | 0.62 | $ | 2.54 | $ | 2.41 |
• | Portfolio occupancy was 99.1% at December 31, 2017 as compared to 98.8% at September 30, 2017, and 99.0% at December 31, 2016 |
• | Increased annual net earnings per common share 5.1% |
• | Increased annual FFO per common share 5.3% |
• | Increased annual Core FFO per common share 7.2% |
• | Increased annual AFFO per common share 5.4% |
• | Dividend yield of 4.3% at December 31, 2017 |
• | Annual dividend per common share increased 4.3% to $1.86 marking the 28th consecutive year of annual dividend increases - making the company one of only three equity REITs and one of only 88 public companies with 28 or more consecutive annual dividend increases |
• | Maintained high occupancy levels at 99.1% with a weighted average remaining lease term of 11.5 years |
• | Invested $754.9 million in 276 properties with an aggregate gross leasable area of approximately 2,243,000 square feet at an initial cash yield of 6.9% |
• | Sold 48 properties for $96.8 million, producing $36.3 million of gains on sale, net of noncontrolling interests, at a cap rate of 6.0% |
• | Raised $647.9 million of new long-term capital at attractive pricing |
◦ | Raised $253.2 million in net proceeds from the issuance of 6,051,062 common shares |
◦ | Raised $394.7 million in net proceeds from the issuance of 3.50% senior unsecured notes due 2027 |
• | Paid off $250 million principal amount of 6.875% senior unsecured notes due 2017 |
• | Expanded unsecured bank credit facility to $900 million while extending the term to January 2022 and reducing the interest rate to LIBOR + 87.5 basis points |
• | $779.5 million availability on bank credit facility at December 31, 2017 |
• | 99.7% of properties are unencumbered with secured mortgage debt |
• | Total average annual shareholder return of over 11% for the past 5-, 10-, 15-, 20-, and 25-years exceeds industry averages |
• | Investments: |
◦ | $257.4 million in property investments, including the acquisition of 94 properties with an aggregate gross leasable area of approximately 955,000 square feet at an initial cash yield of 6.9% |
• | Dispositions: |
◦ | Sold 17 properties with net proceeds of $41.0 million, producing $15.8 million of gains on sales at a cap rate of 5.7% |
• | Long-term capital: |
◦ | Raised $81.0 million in net proceeds from the issuance of 1,946,089 common shares |
National Retail Properties, Inc. (in thousands, except per share data) (unaudited) | ||||||||||||||||
Quarter Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Income Statement Summary | ||||||||||||||||
Revenues: | ||||||||||||||||
Rental and earned income | $ | 145,187 | $ | 135,947 | $ | 568,083 | $ | 515,954 | ||||||||
Real estate expense reimbursement from tenants | 4,338 | 4,732 | 15,512 | 14,984 | ||||||||||||
Interest and other income from real estate transactions | 356 | 128 | 724 | 1,032 | ||||||||||||
Interest income on commercial mortgage residual interests | 366 | 392 | 614 | 1,677 | ||||||||||||
150,247 | 141,199 | 584,933 | 533,647 | |||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 8,712 | 9,408 | 33,805 | 36,508 | ||||||||||||
Real estate | 6,465 | 6,555 | 23,105 | 20,852 | ||||||||||||
Depreciation and amortization | 43,843 | 38,987 | 173,720 | 149,101 | ||||||||||||
Impairment – commercial mortgage residual interests valuation | — | — | — | 6,830 | ||||||||||||
Impairment losses – real estate and other charges, net of recoveries | 7,708 | 338 | 8,955 | 11,287 | ||||||||||||
Retirement severance costs | 192 | — | 7,845 | — | ||||||||||||
66,920 | 55,288 | 247,430 | 224,578 | |||||||||||||
Other expenses (revenues): | ||||||||||||||||
Interest and other income | (83 | ) | (62 | ) | (322 | ) | (170 | ) | ||||||||
Interest expense | 27,016 | 24,429 | 109,109 | 96,352 | ||||||||||||
Real estate acquisition costs | — | 42 | — | 563 | ||||||||||||
26,933 | 24,409 | 108,787 | 96,745 | |||||||||||||
Earnings before gain on disposition of real estate | 56,394 | 61,502 | 228,716 | 212,324 | ||||||||||||
Gain on disposition of real estate | 15,791 | 4,624 | 36,655 | 27,182 | ||||||||||||
Net earnings | 72,185 | 66,126 | 265,371 | 239,506 | ||||||||||||
Earnings attributable to noncontrolling interests | (17 | ) | (34 | ) | (398 | ) | (6 | ) | ||||||||
Net earnings attributable to NNN | 72,168 | 66,092 | 264,973 | 239,500 | ||||||||||||
Series D preferred stock dividends | — | (4,762 | ) | (3,598 | ) | (19,047 | ) | |||||||||
Series E preferred stock dividends | (4,097 | ) | (4,097 | ) | (16,387 | ) | (16,387 | ) | ||||||||
Series F preferred stock dividends | (4,485 | ) | (3,189 | ) | (17,940 | ) | (3,189 | ) | ||||||||
Excess of redemption value over carrying value of Series D preferred shares redeemed | — | — | (9,855 | ) | — | |||||||||||
Net earnings available to common stockholders | $ | 63,586 | $ | 54,044 | $ | 217,193 | $ | 200,877 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 151,791 | 146,266 | 149,111 | 144,176 | ||||||||||||
Diluted | 152,148 | 146,763 | 149,433 | 144,661 | ||||||||||||
Net earnings per share available to common stockholders: | ||||||||||||||||
Basic | $ | 0.42 | $ | 0.37 | $ | 1.45 | $ | 1.39 | ||||||||
Diluted | $ | 0.42 | $ | 0.37 | $ | 1.45 | $ | 1.38 |
National Retail Properties, Inc. (in thousands, except per share data) (unaudited) | ||||||||||||||||
Quarter Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Funds From Operations (FFO) Reconciliation: | ||||||||||||||||
Net earnings available to common stockholders | $ | 63,586 | $ | 54,044 | $ | 217,193 | $ | 200,877 | ||||||||
Real estate depreciation and amortization: | 43,764 | 38,907 | 173,404 | 148,779 | ||||||||||||
Gain on disposition of real estate, net of noncontrolling interests | (15,791 | ) | (4,579 | ) | (36,258 | ) | (27,137 | ) | ||||||||
Impairment losses – depreciable real estate, net of recoveries | 3,708 | 345 | 4,840 | 8,025 | ||||||||||||
Total FFO adjustments | 31,681 | 34,673 | 141,986 | 129,667 | ||||||||||||
FFO available to common stockholders | $ | 95,267 | $ | 88,717 | $ | 359,179 | $ | 330,544 | ||||||||
FFO per common share: | ||||||||||||||||
Basic | $ | 0.63 | $ | 0.61 | $ | 2.41 | $ | 2.29 | ||||||||
Diluted | $ | 0.63 | $ | 0.60 | $ | 2.40 | $ | 2.28 | ||||||||
Core Funds from Operations Reconciliation: | ||||||||||||||||
Net earnings available to common stockholders | $ | 63,586 | $ | 54,044 | $ | 217,193 | $ | 200,877 | ||||||||
Total FFO adjustments | 31,681 | 34,673 | 141,986 | 129,667 | ||||||||||||
FFO available to common stockholders | 95,267 | 88,717 | 359,179 | 330,544 | ||||||||||||
Excess of redemption value over carrying value of preferred share redemption | — | — | 9,855 | — | ||||||||||||
Impairment – commercial mortgage residual interests valuation | — | — | — | 6,830 | ||||||||||||
Impairment losses – non-depreciable real estate | — | — | 112 | — | ||||||||||||
Retirement severance costs | 192 | — | 7,845 | — | ||||||||||||
Bad debt expense – loans | — | — | — | 3,269 | ||||||||||||
Total Core FFO adjustments | 192 | — | 17,812 | 10,099 | ||||||||||||
Core FFO available to common stockholders | $ | 95,459 | $ | 88,717 | $ | 376,991 | $ | 340,643 | ||||||||
Core FFO per common share: | ||||||||||||||||
Basic | $ | 0.63 | $ | 0.61 | $ | 2.53 | $ | 2.36 | ||||||||
Diluted | $ | 0.63 | $ | 0.60 | $ | 2.52 | $ | 2.35 | ||||||||
National Retail Properties, Inc. (in thousands, except per share data) (unaudited) | ||||||||||||||||
Quarter Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Adjusted Funds From Operations (AFFO) Reconciliation: | ||||||||||||||||
Net earnings available to common stockholders | $ | 63,586 | $ | 54,044 | $ | 217,193 | $ | 200,877 | ||||||||
Total FFO adjustments | 31,681 | 34,673 | 141,986 | 129,667 | ||||||||||||
Total Core FFO adjustments | 192 | — | 17,812 | 10,099 | ||||||||||||
Core FFO available to common stockholders | 95,459 | 88,717 | 376,991 | 340,643 | ||||||||||||
Straight-line accrued rent | (552 | ) | (273 | ) | (1,752 | ) | (252 | ) | ||||||||
Net capital lease rent adjustment | 223 | 309 | 884 | 1,364 | ||||||||||||
Below market rent amortization | (659 | ) | (662 | ) | (3,355 | ) | (2,842 | ) | ||||||||
Stock based compensation expense | 1,962 | 2,689 | 8,750 | 10,758 | ||||||||||||
Capitalized interest expense | (741 | ) | (495 | ) | (2,435 | ) | (1,738 | ) | ||||||||
Total AFFO adjustments | 233 | 1,568 | 2,092 | 7,290 | ||||||||||||
AFFO available to common stockholders | $ | 95,692 | $ | 90,285 | $ | 379,083 | $ | 347,933 | ||||||||
AFFO per common share: | ||||||||||||||||
Basic | $ | 0.63 | $ | 0.62 | $ | 2.54 | $ | 2.41 | ||||||||
Diluted | $ | 0.63 | $ | 0.62 | $ | 2.54 | $ | 2.41 | ||||||||
Other Information: | ||||||||||||||||
Percentage rent | $ | 715 | $ | 776 | $ | 1,700 | $ | 1,735 | ||||||||
Amortization of debt costs | $ | 891 | $ | 810 | $ | 3,502 | $ | 3,086 | ||||||||
Scheduled debt principal amortization (excluding maturities) | $ | 130 | $ | 129 | $ | 510 | $ | 656 | ||||||||
Non-real estate depreciation expense | $ | 82 | $ | 83 | $ | 327 | $ | 333 | ||||||||
2018 Earnings Guidance (Unchanged from November 2017): | ||||||||||||||||
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 | $1.53 - $1.57 per share | |||||||||||||||
Real estate depreciation and amortization per share | $1.07 per share | |||||||||||||||
Core FFO per share | $2.60 - $2.64 per share | |||||||||||||||
AFFO per share | $2.64 - $2.68 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 | $80 - $120 Million |
National Retail Properties, Inc. (in thousands) (unaudited) | ||||||||
December 31, 2017 | December 31, 2016 | |||||||
Balance Sheet Summary | ||||||||
Assets: | ||||||||
Real estate: | ||||||||
Accounted for using the operating method, net of accumulated depreciation and amortization | $ | 6,428,928 | $ | 5,879,046 | ||||
Accounted for using the direct financing method | 9,650 | 11,230 | ||||||
Real estate held for sale | 4,083 | 26,084 | ||||||
Cash and cash equivalents | 1,364 | 294,540 | ||||||
Receivables, net of allowance | 4,317 | 3,418 | ||||||
Accrued rental income, net of allowance | 25,916 | 25,101 | ||||||
Debt costs, net of accumulated amortization | 5,380 | 2,715 | ||||||
Other assets | 80,896 | 92,017 | ||||||
Total assets | $ | 6,560,534 | $ | 6,334,151 | ||||
Liabilities: | ||||||||
Line of credit payable | $ | 120,500 | $ | — | ||||
Mortgages payable, including unamortized premium and net of unamortized debt cost | 13,300 | 13,878 | ||||||
Notes payable, net of unamortized discount and unamortized debt costs | 2,446,407 | 2,297,811 | ||||||
Accrued interest payable | 20,311 | 19,665 | ||||||
Other liabilities | 119,106 | 85,869 | ||||||
Total liabilities | 2,719,624 | 2,417,223 | ||||||
Stockholders’ equity of NNN | 3,840,593 | 3,916,799 | ||||||
Noncontrolling interests | 317 | 129 | ||||||
Total equity | 3,840,910 | 3,916,928 | ||||||
Total liabilities and equity | $ | 6,560,534 | $ | 6,334,151 | ||||
Common shares outstanding | 153,577 | 147,150 | ||||||
Gross leasable area, Property Portfolio (square feet) | 29,093 | 27,204 | ||||||
National Retail Properties, Inc. Debt Summary As of December 31, 2017 (in thousands) (unaudited) | ||||||||||||||
Unsecured Debt | Principal | Principal, Net of Unamortized Discount | Stated Rate | Effective Rate | Maturity Date | |||||||||
Line of credit payable | $ | 120,500 | $ | 120,500 | L + 87.5 bps | 2.155% | January 2022 | |||||||
Unsecured notes payable: | ||||||||||||||
2021 | 300,000 | 298,209 | 5.500% | 5.689% | July 2021 | |||||||||
2022 | 325,000 | 322,400 | 3.800% | 3.985% | October 2022 | |||||||||
2023 | 350,000 | 348,520 | 3.300% | 3.388% | April 2023 | |||||||||
2024 | 350,000 | 349,516 | 3.900% | 3.924% | June 2024 | |||||||||
2025 | 400,000 | 399,214 | 4.000% | 4.029% | November 2025 | |||||||||
2026 | 350,000 | 346,481 | 3.600% | 3.733% | December 2026 | |||||||||
2027 | 400,000 | 398,412 | 3.500% | 3.548% | October 2027 | |||||||||
Total | 2,475,000 | 2,462,752 | ||||||||||||
Total unsecured debt | $ | 2,595,500 | $ | 2,583,252 | ||||||||||
Debt costs | (22,682 | ) | ||||||||||||
Accumulated amortization | 6,337 | |||||||||||||
Debt costs, net of accumulated amortization | (16,345 | ) | ||||||||||||
Notes payable, net of unamortized discount and unamortized debt costs (1) | $ | 2,446,407 | ||||||||||||
(1) Unsecured notes payable have a weighted average interest rate of 4.0% and a weighted average maturity of 6.9 years |
Mortgages Payable | Principal Balance | Interest Rate | Maturity Date | |||||
Mortgage(1) | $ | 13,392 | 5.230% | July 2023 | ||||
Debt costs | (147 | ) | ||||||
Accumulated amortization | 55 | |||||||
Debt costs, net of accumulated amortization | (92 | ) | ||||||
Mortgages payable, including unamortized premium and net of unamortized debt costs | $ | 13,300 | ||||||
(1) Includes unamortized premium |
As of December 31, | ||||||||
Line of Trade | 2017(1) | 2016(2) | ||||||
1. | Convenience stores | 18.1 | % | 16.9 | % | |||
2. | Restaurants - full service | 12.1 | % | 11.8 | % | |||
3. | Restaurants - limited service | 7.6 | % | 7.5 | % | |||
4. | Automotive service | 6.9 | % | 6.6 | % | |||
5. | Family entertainment centers | 6.4 | % | 5.8 | % | |||
6. | Health and fitness | 5.6 | % | 5.7 | % | |||
7. | Theaters | 4.8 | % | 4.9 | % | |||
8. | Automotive parts | 3.6 | % | 3.9 | % | |||
9. | Recreational vehicle dealers, parts and accessories | 3.4 | % | 3.4 | % | |||
10. | Banks | 2.5 | % | 3.1 | % | |||
11. | Medical service providers | 2.4 | % | 2.4 | % | |||
12. | Wholesale clubs | 2.2 | % | 2.4 | % | |||
13. | Equipment Rental | 2.0 | % | 0.7 | % | |||
14. | Drug stores | 1.9 | % | 2.1 | % | |||
15. | Furniture | 1.9 | % | 1.9 | % | |||
16. | General Merchandise | 1.8 | % | 1.8 | % | |||
17. | Home Improvement | 1.8 | % | 1.8 | % | |||
18. | Consumer Electronics | 1.8 | % | 2.0 | % | |||
19. | Travel Plazas | 1.8 | % | 1.9 | % | |||
20. | Home furnishings | 1.6 | % | 1.7 | % | |||
Other | 9.8 | % | 11.7 | % | ||||
Total | 100.0 | % | 100.0 | % |
State | % of Total(1) | State | % of Total(1) | |||||||||
1. | Texas | 18.2 | % | 6. | Georgia | 4.3 | % | |||||
2. | Florida | 8.7 | % | 7. | Tennessee | 4.0 | % | |||||
3. | Illinois | 5.4 | % | 8. | Virginia | 3.9 | % | |||||
4. | Ohio | 5.3 | % | 9. | Indiana | 3.9 | % | |||||
5. | North Carolina | 5.1 | % | 10. | Alabama | 3.1 | % |
(1) | Based on the annualized base rent for all leases in place as of December 31, 2017. |
(2) | Based on the annualized base rent for all leases in place as of December 31, 2016. |
Properties | % of Total (1) | ||||
Sunoco | 124 | 5.1% | |||
Camping World | 46 | 4.2% | |||
Mister Car Wash | 96 | 4.1% | |||
LA Fitness | 30 | 3.8% | |||
AMC Theatres | 20 | 3.4% | |||
Couche-Tard (Pantry) | 86 | 3.2% | |||
7-Eleven | 77 | 3.1% | |||
GPM Investments (Convenience Stores) | 103 | 2.8% | |||
Bell American (Taco Bell) | 115 | 2.6% | |||
Chuck E. Cheese's | 53 | 2.3% | |||
Suntrust | 101 | 2.3% | |||
BJ's Wholesale Club | 8 | 2.2% | |||
Frisch's Restaurant | 74 | 2.0% |
% of Total(1) | # of Properties | Gross Leasable Area (3) | % of Total(1) | # of Properties | Gross Leasable Area (3) | |||||||||||
2018 | 2.0% | 61 | 787,000 | 2024 | 2.2% | 50 | 833,000 | |||||||||
2019 | 2.7% | 75 | 1,081,000 | 2025 | 4.7% | 128 | 1,123,000 | |||||||||
2020 | 3.5% | 127 | 1,559,000 | 2026 | 5.6% | 184 | 1,854,000 | |||||||||
2021 | 4.1% | 121 | 1,320,000 | 2027 | 8.7% | 197 | 2,766,000 | |||||||||
2022 | 6.4% | 125 | 1,697,000 | 2028 | 5.5% | 171 | 1,326,000 | |||||||||
2023 | 2.6% | 99 | 1,143,000 | Thereafter | 52.0% | 1,395 | 13,214,000 |
(1) | Based on the annual base rent of $585,304,000, which is the annualized base rent for all leases in place as of December 31, 2017. |
(2) | As of December 31, 2017, the weighted average remaining lease term is 11.5 years. |
(3) | Square feet. |
PAGE REFERENCE | |
Financial Summary | |
Income Statement Summary | |
Funds From Operations (FFO) | |
Core Funds From Operation | |
Adjusted Funds From Operations (AFFO) | |
Other Information | |
Balance Sheet | |
Debt Summary | |
Credit Metrics | |
Credit Facility and Note Covenants | |
Long-Term Dividend History | |
Transaction Summary | |
Property Acquisitions | |
Property Dispositions | |
Property Portfolio | |
Lease Expirations | |
Top 20 Lines of Trade | |
Top 10 States | |
Portfolio By Region | |
Top Tenants | |
Same Store Rental Income | |
Leasing Data | |
Other Property Portfolio Data | |
Earnings Guidance |
INCOME STATEMENT SUMMARY | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
(unaudited) | ||||||||||||||||
Quarter Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Rental and earned income | $ | 145,187 | $ | 135,947 | $ | 568,083 | $ | 515,954 | ||||||||
Real estate expense reimbursement from tenants | 4,338 | 4,732 | 15,512 | 14,984 | ||||||||||||
Interest and other income from real estate transactions | 356 | 128 | 724 | 1,032 | ||||||||||||
Interest income on commercial mortgage residual interests | 366 | 392 | 614 | 1,677 | ||||||||||||
150,247 | 141,199 | 584,933 | 533,647 | |||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 8,712 | 9,408 | 33,805 | 36,508 | ||||||||||||
Real estate | 6,465 | 6,555 | 23,105 | 20,852 | ||||||||||||
Depreciation and amortization | 43,843 | 38,987 | 173,720 | 149,101 | ||||||||||||
Impairment – commercial mortgage residual interests valuation | — | — | — | 6,830 | ||||||||||||
Impairment losses – real estate and other charges, net of recoveries | 7,708 | 338 | 8,955 | 11,287 | ||||||||||||
Retirement severance costs | 192 | — | 7,845 | — | ||||||||||||
66,920 | 55,288 | 247,430 | 224,578 | |||||||||||||
Other expenses (revenues): | ||||||||||||||||
Interest and other income | (83 | ) | (62 | ) | (322 | ) | (170 | ) | ||||||||
Interest expense | 27,016 | 24,429 | 109,109 | 96,352 | ||||||||||||
Real estate acquisition costs | — | 42 | — | 563 | ||||||||||||
26,933 | 24,409 | 108,787 | 96,745 | |||||||||||||
Earnings before gain on disposition of real estate | 56,394 | 61,502 | 228,716 | 212,324 | ||||||||||||
Gain on disposition of real estate | 15,791 | 4,624 | 36,655 | 27,182 | ||||||||||||
Net earnings | 72,185 | 66,126 | 265,371 | 239,506 | ||||||||||||
Earnings from continuing operations attributable to noncontrolling interests: | (17 | ) | (34 | ) | (398 | ) | (6 | ) | ||||||||
Net earnings attributable to NNN | $ | 72,168 | $ | 66,092 | $ | 264,973 | $ | 239,500 | ||||||||
![]() | ||||||||||||||||
INCOME STATEMENT SUMMARY | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
(unaudited) | ||||||||||||||||
Quarter Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net earnings attributable to NNN | $ | 72,168 | $ | 66,092 | $ | 264,973 | $ | 239,500 | ||||||||
Series D preferred stock dividends | — | (4,762 | ) | (3,598 | ) | (19,047 | ) | |||||||||
Series E preferred stock dividends | (4,097 | ) | (4,097 | ) | (16,387 | ) | (16,387 | ) | ||||||||
Series F preferred stock dividends | (4,485 | ) | (3,189 | ) | (17,940 | ) | (3,189 | ) | ||||||||
Excess of redemption value over carrying value of Series D preferred shares redeemed | — | — | (9,855 | ) | — | |||||||||||
Net earnings available to common stockholders | $ | 63,586 | $ | 54,044 | $ | 217,193 | $ | 200,877 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 151,791 | 146,266 | 149,111 | 144,176 | ||||||||||||
Diluted | 152,148 | 146,763 | 149,433 | 144,661 | ||||||||||||
Net earnings per share available to common stockholders: | ||||||||||||||||
Basic | $ | 0.42 | $ | 0.37 | $ | 1.45 | $ | 1.39 | ||||||||
Diluted | $ | 0.42 | $ | 0.37 | $ | 1.45 | $ | 1.38 |
FUNDS FROM OPERATIONS (FFO) | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
(unaudited) | Quarter Ended | Year Ended | ||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net earnings available to common stockholders | $ | 63,586 | $ | 54,044 | $ | 217,193 | $ | 200,877 | ||||||||
Real estate depreciation and amortization: | 43,764 | 38,907 | 173,404 | 148,779 | ||||||||||||
Gain on disposition of real estate, net of noncontrolling interests | (15,791 | ) | (4,579 | ) | (36,258 | ) | (27,137 | ) | ||||||||
Impairment losses – depreciable real estate, net of recoveries | 3,708 | 345 | 4,840 | 8,025 | ||||||||||||
Total FFO adjustments | 31,681 | 34,673 | 141,986 | 129,667 | ||||||||||||
FFO available to common stockholders | $ | 95,267 | $ | 88,717 | $ | 359,179 | $ | 330,544 | ||||||||
FFO per common share: | ||||||||||||||||
Basic | $ | 0.63 | $ | 0.61 | $ | 2.41 | $ | 2.29 | ||||||||
Diluted | $ | 0.63 | $ | 0.60 | $ | 2.40 | $ | 2.28 |
CORE FUNDS FROM OPERATIONS | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
(unaudited) | Quarter Ended | Year Ended | ||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net earnings available to common stockholders | $ | 63,586 | $ | 54,044 | $ | 217,193 | $ | 200,877 | ||||||||
Total FFO adjustments | 31,681 | 34,673 | 141,986 | 129,667 | ||||||||||||
FFO available to common stockholders | 95,267 | 88,717 | 359,179 | 330,544 | ||||||||||||
Excess of redemption value over carrying value of preferred share redemption | — | — | 9,855 | — | ||||||||||||
Impairment – commercial mortgage residual interests valuation | — | — | — | 6,830 | ||||||||||||
Impairment losses – non-depreciable real estate | — | — | 112 | — | ||||||||||||
Retirement severance costs | 192 | — | 7,845 | — | ||||||||||||
Bad debt expense – loans | — | — | — | 3,269 | ||||||||||||
Total Core FFO adjustments | 192 | — | 17,812 | 10,099 | ||||||||||||
Core FFO available to common stockholders | $ | 95,459 | $ | 88,717 | $ | 376,991 | $ | 340,643 | ||||||||
Core FFO per common share: | ||||||||||||||||
Basic | $ | 0.63 | $ | 0.61 | $ | 2.53 | $ | 2.36 | ||||||||
Diluted | $ | 0.63 | $ | 0.60 | $ | 2.52 | $ | 2.35 |
ADJUSTED FUNDS FROM OPERATIONS (AFFO) | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
(unaudited) | ||||||||||||||||
Quarter Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net earnings available to common stockholders | $ | 63,586 | $ | 54,044 | $ | 217,193 | $ | 200,877 | ||||||||
Total FFO adjustments | 31,681 | 34,673 | 141,986 | 129,667 | ||||||||||||
Total Core FFO adjustments | 192 | — | 17,812 | 10,099 | ||||||||||||
Core FFO available to common stockholders | 95,459 | 88,717 | 376,991 | 340,643 | ||||||||||||
Straight-line accrued rent | (552 | ) | (273 | ) | (1,752 | ) | (252 | ) | ||||||||
Net capital lease rent adjustment | 223 | 309 | 884 | 1,364 | ||||||||||||
Below market rent amortization | (659 | ) | (662 | ) | (3,355 | ) | (2,842 | ) | ||||||||
Stock based compensation expense | 1,962 | 2,689 | 8,750 | 10,758 | ||||||||||||
Capitalized interest expense | (741 | ) | (495 | ) | (2,435 | ) | (1,738 | ) | ||||||||
Total AFFO adjustments | 233 | 1,568 | 2,092 | 7,290 | ||||||||||||
AFFO available to common stockholders | $ | 95,692 | $ | 90,285 | $ | 379,083 | $ | 347,933 | ||||||||
AFFO per common share: | ||||||||||||||||
Basic | $ | 0.63 | $ | 0.62 | $ | 2.54 | $ | 2.41 | ||||||||
Diluted | $ | 0.63 | $ | 0.62 | $ | 2.54 | $ | 2.41 |
OTHER INFORMATION | ||||||||||||||||
(in thousands) | ||||||||||||||||
(unaudited) | ||||||||||||||||
Quarter Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Percentage rent | $ | 715 | $ | 776 | $ | 1,700 | $ | 1,735 | ||||||||
Amortization of debt costs | $ | 891 | $ | 810 | $ | 3,502 | $ | 3,086 | ||||||||
Scheduled debt principal amortization (excluding maturities) | $ | 130 | $ | 129 | $ | 510 | $ | 656 | ||||||||
Non-real estate depreciation expense | $ | 82 | $ | 83 | $ | 327 | $ | 333 |
BALANCE SHEET |
(in thousands) |
(unaudited) |
December 31, 2017 | December 31, 2016 | |||||||
Assets: | ||||||||
Real estate: | ||||||||
Accounted for using the operating method, net of accumulated depreciation and amortization | $ | 6,428,928 | $ | 5,879,046 | ||||
Accounted for using the direct financing method | 9,650 | 11,230 | ||||||
Real estate held for sale | 4,083 | 26,084 | ||||||
Cash and cash equivalents | 1,364 | 294,540 | ||||||
Receivables, net of allowance | 4,317 | 3,418 | ||||||
Accrued rental income, net of allowance | 25,916 | 25,101 | ||||||
Debt costs, net of accumulated amortization | 5,380 | 2,715 | ||||||
Other assets | 80,896 | 92,017 | ||||||
Total assets | $ | 6,560,534 | $ | 6,334,151 | ||||
Liabilities: | ||||||||
Line of credit payable | $ | 120,500 | $ | — | ||||
Mortgages payable, including unamortized premium and net of unamortized debt cost | 13,300 | 13,878 | ||||||
Notes payable, net of unamortized discount and unamortized debt costs | 2,446,407 | 2,297,811 | ||||||
Accrued interest payable | 20,311 | 19,665 | ||||||
Other liabilities | 119,106 | 85,869 | ||||||
Total liabilities | 2,719,624 | 2,417,223 | ||||||
Stockholders’ equity of NNN | 3,840,593 | 3,916,799 | ||||||
Noncontrolling interests | 317 | 129 | ||||||
Total equity | 3,840,910 | 3,916,928 | ||||||
Total liabilities and equity | $ | 6,560,534 | $ | 6,334,151 | ||||
Common shares outstanding | 153,577 | 147,150 | ||||||
Gross leasable area, Property Portfolio (square feet) | 29,093 | 27,204 |
DEBT SUMMARY |
(in thousands) |
As of December 31, 2017 |
Unsecured Debt | Principal | Principal, Net of Unamortized Discount | Stated Rate | Effective Rate | Maturity Date | |||||||||
Line of credit payable | $ | 120,500 | $ | 120,500 | L + 87.5 bps | 2.155% | January 2022 | |||||||
Unsecured notes payable: | ||||||||||||||
2021 | 300,000 | 298,209 | 5.500% | 5.689% | July 2021 | |||||||||
2022 | 325,000 | 322,400 | 3.800% | 3.985% | October 2022 | |||||||||
2023 | 350,000 | 348,520 | 3.300% | 3.388% | April 2023 | |||||||||
2024 | 350,000 | 349,516 | 3.900% | 3.924% | June 2024 | |||||||||
2025 | 400,000 | 399,214 | 4.000% | 4.029% | November 2025 | |||||||||
2026 | 350,000 | 346,481 | 3.600% | 3.733% | December 2026 | |||||||||
2027 | 400,000 | 398,412 | 3.500% | 3.548% | October 2027 | |||||||||
Total | 2,475,000 | 2,462,752 | ||||||||||||
Total unsecured debt | $ | 2,595,500 | $ | 2,583,252 | ||||||||||
Debt costs | (22,682 | ) | ||||||||||||
Accumulated amortization | 6,337 | |||||||||||||
Debt costs, net of accumulated amortization | (16,345 | ) | ||||||||||||
Notes payable, net of unamortized discount and unamortized debt costs (1) | $ | 2,446,407 | ||||||||||||
(1) Unsecured notes payable have a weighted average interest rate of 4.0% and a weighted average maturity of 6.9 years |
Mortgages Payable | Interest Rate | Maturity Date | Principal Balance | |||||||
Mortgage(1) | 5.230 | % | July 2023 | $ | 13,392 | |||||
Debt costs | (147 | ) | ||||||||
Accumulated amortization | 55 | |||||||||
Debt costs, net of accumulated amortization | (92 | ) | ||||||||
Mortgages payable, including unamortized premium and net of unamortized debt costs | $ | 13,300 | ||||||||
(1) Includes unamortized premium |
CREDIT METRICS (1) | ||||||||||||||
Ratings: Moody’s Baa1; S&P BBB+; Fitch BBB+ | ||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | ||||||||||
Debt / Total assets (gross book) | 32.9 | % | 32.6 | % | 33.2 | % | 30.2 | % | 35.3 | % | ||||
Debt + preferred / Total assets (gross book) | 44.9 | % | 43.3 | % | 42.9 | % | 43.9 | % | 44.0 | % | ||||
Debt / EBITDA (last four quarters) | 4.5 | 4.5 | 4.6 | 4.3 | 4.9 | |||||||||
Debt + Pref Stock / EBITDA | 6.1 | 6.0 | 5.9 | 6.2 | 6.1 | |||||||||
EBITDA / Interest expense (cash) | 4.1 | 4.4 | 4.6 | 4.8 | 4.7 | |||||||||
EBITDA / Fixed charges (cash) | 3.1 | 3.1 | 3.3 | 3.4 | 3.5 |
CREDIT FACILITY AND NOTES COVENANTS |
Unsecured Credit Facility Key Covenants | Required | December 31, 2017 | ||
Maximum leverage ratio | < 0.60 | 0.34 | ||
Minimum fixed charge coverage ratio | > 1.50 | 3.64 | ||
Maximum secured indebtedness ratio | < 0.40 | 0.002 | ||
Unencumbered asset value ratio | > 1.67 | 3.06 | ||
Unencumbered interest ratio | > 1.75 | 5.16 | ||
Unsecured Notes Key Covenants | Required | December 31, 2017 | ||
Limitation on incurrence of total debt | ≤ 60% | 34.7% | ||
Limitation on incurrence of secured debt | ≤ 40% | 0.2% | ||
Debt service coverage ratio | ≥ 1.50 | 4.63 | ||
Maintenance of total unencumbered assets | ≥ 150% | 289.1% |
LONG-TERM DIVIDEND HISTORY |
PROPERTY ACQUISITIONS |
Year Ended December 31, | ||||||||
2017 | 2016 | |||||||
Total dollars invested | $ | 754,892 | $ | 846,906 | ||||
Number of Properties | 276 | 313 | ||||||
Gross leasable area (square feet) | 2,243,000 | 2,734,000 | ||||||
Cash cap rate | 6.9 | % | 6.9 | % |
PROPERTY DISPOSITIONS |
Year Ended December 31, | |||||||||||||||||||||||
2017 | 2016 | ||||||||||||||||||||||
Occupied | Vacant | Total | Occupied | Vacant | Total | ||||||||||||||||||
Number of properties | 31 | 17 | (1 | ) | 48 | 33 | 5 | (2 | ) | 38 | |||||||||||||
Gross leasable area (square feet) | 161,000 | 185,000 | 346,000 | 419,000 | 71,000 | 490,000 | |||||||||||||||||
Acquisition costs | $ | 61,008 | $ | 20,228 | $ | 81,236 | $ | 91,203 | $ | 7,787 | $ | 98,990 | |||||||||||
Net book value | $ | 52,571 | $ | 7,530 | $ | 60,101 | $ | 73,041 | $ | 2,992 | $ | 76,033 | |||||||||||
Net sale proceeds | $ | 88,382 | $ | 8,375 | $ | 96,757 | $ | 99,954 | $ | 3,261 | $ | 103,215 | |||||||||||
Cash cap rate | 6.0 | % | — | 6.0 | % | 6.8 | % | — | 6.8 | % |
LEASE EXPIRATIONS |
% of Total(1) | # of Properties | Gross Leasable Area (2) | % of Total(1) | # of Properties | Gross Leasable Area (2) | |||||||||||||||
2018 | 2.0 | % | 61 | 787,000 | 2024 | 2.2 | % | 50 | 833,000 | |||||||||||
2019 | 2.7 | % | 75 | 1,081,000 | 2025 | 4.7 | % | 128 | 1,123,000 | |||||||||||
2020 | 3.5 | % | 127 | 1,559,000 | 2026 | 5.6 | % | 184 | 1,854,000 | |||||||||||
2021 | 4.1 | % | 121 | 1,320,000 | 2027 | 8.7 | % | 197 | 2,766,000 | |||||||||||
2022 | 6.4 | % | 125 | 1,697,000 | 2028 | 5.5 | % | 171 | 1,326,000 | |||||||||||
2023 | 2.6 | % | 99 | 1,143,000 | Thereafter | 52.0 | % | 1,395 | 13,214,000 |
(1) | Based on the annual base rent of $585,304,000, which is the annualized base rent for all leases in place as of December 31, 2017. |
(2) | Square feet. |
TOP 20 LINES OF TRADE |
As of December 31, 2017 | As of December 31, 2016 | |||||||||||||
Line of Trade | % of Total(1) | Properties | % of Total(2) | Properties | ||||||||||
1. | Convenience stores | 18.1 | % | 576 | 16.9 | % | 502 | |||||||
2. | Restaurants - full service | 12.1 | % | 455 | 11.8 | % | 414 | |||||||
3. | Restaurants - limited service | 7.6 | % | 394 | 7.5 | % | 347 | |||||||
4. | Automotive service | 6.9 | % | 220 | 6.6 | % | 201 | |||||||
5. | Family entertainment centers | 6.4 | % | 95 | 5.8 | % | 88 | |||||||
6. | Health and fitness | 5.6 | % | 36 | 5.7 | % | 35 | |||||||
7. | Theaters | 4.8 | % | 33 | 4.9 | % | 30 | |||||||
8. | Automotive parts | 3.6 | % | 180 | 3.9 | % | 182 | |||||||
9. | Recreational vehicle dealers, parts and accessories | 3.4 | % | 34 | 3.4 | % | 32 | |||||||
10. | Banks | 2.5 | % | 104 | 3.1 | % | 124 | |||||||
11. | Medical service providers | 2.4 | % | 86 | 2.4 | % | 76 | |||||||
12. | Wholesale clubs | 2.2 | % | 8 | 2.4 | % | 8 | |||||||
13. | Equipment Rental | 2.0 | % | 58 | 0.7 | % | 16 | |||||||
14. | Drug stores | 1.9 | % | 39 | 2.1 | % | 39 | |||||||
15. | Furniture | 1.9 | % | 43 | 1.9 | % | 42 | |||||||
16. | General Merchandise | 1.8 | % | 62 | 1.8 | % | 58 | |||||||
17. | Home Improvement | 1.8 | % | 25 | 1.8 | % | 23 | |||||||
18. | Consumer Electronics | 1.8 | % | 19 | 2.0 | % | 20 | |||||||
19. | Travel Plazas | 1.8 | % | 27 | 1.9 | % | 28 | |||||||
20. | Home furnishings | 1.6 | % | 18 | 1.7 | % | 18 | |||||||
Other | 9.8 | % | 252 | 11.7 | % | 252 | ||||||||
Total | 100.0 | % | 2,764 | 100.0 | % | 2,535 |
TOP 10 STATES |
State | % of Total(1) | Properties | State | % of Total(1) | Properties | |||||||||||
1. | Texas | 18.2 | % | 457 | 6. | Georgia | 4.3 | % | 127 | |||||||
2. | Florida | 8.7 | % | 211 | 7. | Tennessee | 4.0 | % | 131 | |||||||
3. | Illinois | 5.4 | % | 132 | 8. | Virginia | 3.9 | % | 119 | |||||||
4. | Ohio | 5.3 | % | 168 | 9. | Indiana | 3.9 | % | 123 | |||||||
5. | North Carolina | 5.1 | % | 154 | 10. | Alabama | 3.1 | % | 128 | |||||||
(1) Based on the annualized base rent for all leases in place as of December 31, 2017. |
PORTFOLIO BY REGION |
TOP TENANTS |
▪ | 19% of annual base rent is from tenants with investment grade rated debt |
▪ | 68% of annual base rent is from tenants that are publicly traded and/or have rated debt |
▪ | Top 25 tenants (59% of annual base rent) operate an average of over 1,100 stores each |
Top Tenants (>2.0%) | Properties | % of Total (1) | ||||
Sunoco | 124 | 5.1 | % | |||
Camping World | 46 | 4.2 | % | |||
Mister Car Wash | 96 | 4.1 | % | |||
LA Fitness | 30 | 3.8 | % | |||
AMC Theatres | 20 | 3.4 | % | |||
Couche-Tard (Pantry) | 86 | 3.2 | % | |||
7-Eleven | 77 | 3.1 | % | |||
GPM Investments (Convenience Stores) | 103 | 2.8 | % | |||
Bell American (Taco Bell) | 115 | 2.6 | % | |||
Chuck E. Cheese's | 53 | 2.3 | % | |||
Suntrust | 101 | 2.3 | % | |||
BJ's Wholesale Club | 8 | 2.2 | % | |||
Frisch's Restaurant | 74 | 2.0 | % |
Rent Coverage (With Corp. Overhead) | Fixed Charge Coverage | ||
Range | 1.8x - 6.3x | 1.4x - 4.3x | |
Average | 3.4x | 2.2x | |
Weighted average | 3.6x | 2.3x | |
SAME STORE RENTAL INCOME |
Same Store Rental Income – Leases (Cash Basis) (1) | ||||
Number of leases | 2,127 | |||
Year ended December 31, 2017 | $ | 455,499 | ||
Year ended December 31, 2016 | $ | 448,805 | ||
Increase (in dollars) | $ | 6,694 | ||
Increase (percent) | 1.5 | % | ||
(1) Includes all properties owned for current and prior year period excluding any vacant properties or properties under development or re-development. |
Same Store Rental Income – Properties (Cash Basis) (1) | ||||
Number of properties | 2,148 | |||
Year ended December 31, 2017 | $ | 469,821 | ||
Year ended December 31, 2016 | $ | 467,986 | ||
Increase (in dollars) | $ | 1,835 | ||
Increase (percent) | 0.4 | % | (2) | |
(1) Includes all properties owned for current and prior year period excluding any properties under development or re-development. | ||||
(2) Excluding impact from Gander Mountain bankruptcy, same store rents would have increased 1.2% |
LEASING DATA |
Year Ended December 31, 2017 | Renewals With Same Tenant(1) | Vacancy Re-lease To New Tenant | Re-leasing Totals | ||||||||||
Number of leases | 46 | 27 | 73 | ||||||||||
Prior cash rents | $ | 9,677 | $ | 13,805 | $ | 23,482 | |||||||
New cash rents | $ | 10,010 | $ | 7,000 | $ | 17,010 | (2) | ||||||
Re-leasing spread | 103.4 | % | 50.7 | % | (3) | 72.4 | % | (3) | |||||
Tenant improvements | $ | 40 | $ | 2,151 | (4) | $ | 2,191 |
(1) | Long-term renewal rate was 86.8% for 2017 and 88.0% for the period of 2010 through 2017 |
(2) | Represents 2.9% of total annualized base rent as of December 31, 2017 |
(3) | Excluding 12 Gander Mountain re-leases, re-leasing spread would have been 94.1% for new tenants and 101.9% for re-leasing total |
(4) | NNN has agreed to fund up to $7,803 of tenant improvements for the 12 former Gander Mountain properties re-leased to Camping World. Annual base rent will increase by 9.0% of any amounts funded. As of December 31, 2017, $396 had been funded. |
OTHER PROPERTY PORTFOLIO DATA |
# of Properties | % of Annual Base Rent | |||||
Property Level Financial Information | 2,255 | 79 | % | |||
Tenant Corporate Financials | 2,103 | 78 | % |
Rent Increases | % of Annual Base Rent | ||||||||||
Annual | Five Year | Other | Total | ||||||||
CPI – Based | 33 | % | 43 | % | 2 | % | 78 | % | |||
Fixed Rate | 4 | % | 11 | % | 2 | % | 17 | % | |||
No increases | — | — | 5 | % | 5 | % | |||||
37 | % | 54 | % | 9 | % | 100 | % |
▪ | 92% of the company's annual base rent is from NNN leases |
▪ | 96% of the company's annual base rent is from NNN leases and NN leases (with roof warranty) |
EARNINGS GUIDANCE |
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 | $1.53 - $1.57 per share | |||||||
Real estate depreciation and amortization per share | $1.07 per share | |||||||
Core FFO per share | $2.60 - $2.64 per share | |||||||
AFFO per share | $2.64 - $2.68 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 | $80 - $120 Million |