nnnlogo20200331.jpg    

NEWS RELEASE
For information contact:
Kevin B. Habicht
Chief Financial Officer
(407) 265-7348    FOR IMMEDIATE RELEASE
May 4, 2020

FIRST QUARTER 2020 OPERATING RESULTS
ANNOUNCED BY NATIONAL RETAIL PROPERTIES, INC.

Orlando, Florida, May 4, 2020 – National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced its operating results for the quarter ended March 31, 2020. 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,
 
2020
 
2019
 
(in thousands, except per share data)
Revenues
$
175,063

 
$
163,712

 
 
 
 
Net earnings available to common stockholders
$
60,693

 
$
71,441

Net earnings per common share
$
0.35

 
$
0.44

 
 
 
 
FFO available to common stockholders
$
102,509

 
$
110,345

FFO per common share
$
0.60

 
$
0.68

 
 
 
 
Core FFO available to common stockholders
$
119,188

 
$
109,014

Core FFO per common share
$
0.70

 
$
0.67

 
 
 
 
AFFO available to common stockholders
$
121,750

 
$
110,631

AFFO per common share
$
0.71

 
$
0.68


First Quarter 2020 Highlights:
•
Core FFO per common share increased 4.5% over prior year results
•
AFFO per common share increased 4.4% over prior year results
•
Portfolio occupancy was 98.8% at March 31, 2020 as compared to 99.0% on December 31, 2019 and 98.2% on March 31, 2019
•
Invested $67.2 million in property investments, including the acquisition of 21 properties with an aggregate 217,000 square feet of gross leasable area at an initial cash yield of 6.9%
•
Sold 14 properties for $36.3 million producing $12.8 million of gains on sales
•
Issued $400 million principal amount of 2.50% senior unsecured notes due 2030 generating net proceeds of $395.1 million
•
Issued $300 million principal amount of 3.10% senior unsecured notes due 2050 generating net proceeds of $290.5 million
•
Paid off $325 million principal amount of 3.800% senior unsecured notes due 2022
•
Ended the quarter with $217.4 million of cash and no amounts drawn on $900 million bank credit facility



In light of the rapidly evolving and uncertain impact of the COVID-19 pandemic on the economic environment, National Retail Properties has determined to withdraw its previously issued 2020 earnings guidance. NNN is actively working with its tenants that have been impacted by the COVID-19 pandemic.  As of April 29, 2020, NNN has collected approximately 52% of rent originally due in April 2020 and certain tenants, representing approximately 37% of annualized base rent, have requested short term rent deferrals of usually 30 to 90 days. NNN is negotiating terms with these tenants that would require deferred rental payments to be paid in late 2020 through late 2021. 
Jay Whitehurst, Chief Executive Officer, commented: “The first quarter reflected another solid, consistent performance by National Retail Properties, highlighted by fortifying our balance sheet with $700 million of well-priced long term unsecured debt and repayment of our 2022 debt maturities. Although the sudden and unexpected impact of the coronavirus pandemic and related economic turmoil has recently affected many of our tenants, we are continuing to focus on the long-term as we maintain our strong liquidity position, work with our tenants to address the reality of their business interruption, and plan ahead for the time when this turmoil is behind us.”
National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases. As of March 31, 2020, the company owned 3,125 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 11.1 years. For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on May 4, 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, the potential impacts of the COVID-19 pandemic on the company’s business operations, financial results and financial position and on the world economy, 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 (i) Annual Report on Form 10-K for the year ended December 31, 2019 and (ii) the company's quarterly report on form 10-Q for the quarter ended March 31, 2020. 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.

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

2

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,
 
 
2020
 
2019
Income Statement Summary
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
Rental income
 
$
174,547

 
$
163,026

Interest and other income from real estate transactions
 
516

 
686

 
 
175,063

 
163,712

 
 
 
 
 
Operating expenses:
 
 
 
 
General and administrative
 
10,100

 
9,521

Real estate
 
7,635

 
7,093

Depreciation and amortization
 
49,188

 
46,180

Leasing transaction costs
 
36

 
52

Impairment losses – real estate, net of recoveries
 
5,513

 
3,245

 
 
72,472

 
66,091

Gain on disposition of real estate
 
12,770

 
10,445

Earnings from operations
 
115,361

 
108,066

 
 
 
 
 
Other expenses (revenues):
 
 
 
 
Interest and other income
 
(164
)
 
(1,924
)
Interest expense(1)
 
33,670

 
29,957

Loss on early extinguishment of debt
 
16,679

 
—

 
 
50,185

 
28,033

 
 
 
 
 
Net earnings
 
65,176

 
80,033

Earnings attributable to noncontrolling interests
 
2

 
(10
)
 
 
 
 
 
Net earnings attributable to NNN
 
65,178

 
80,023

Series E preferred stock dividends
 
—

 
(4,097
)
Series F preferred stock dividends
 
(4,485
)
 
(4,485
)
Net earnings available to common stockholders
 
$
60,693

 
$
71,441

 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
Basic
 
171,039

 
161,105

Diluted
 
171,232

 
161,614

 
 
 
 
 
Net earnings per share available to common stockholders:
 
 
 
 
Basic
 
$
0.35

 
$
0.44

Diluted
 
$
0.35

 
$
0.44

(1) Includes $2,291 in connection with the early redemption of 3.80% senior unsecured notes due 2022 for the quarter ended March 31, 2020.



4

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

 
 
Quarter Ended
 
 
March 31,
 
 
2020
 
2019
Funds From Operations (FFO) Reconciliation:
 
 
 
 
Net earnings available to common stockholders
 
$
60,693

 
$
71,441

Real estate depreciation and amortization
 
49,073

 
46,104

Gain on disposition of real estate
 
(12,770
)
 
(10,445
)
Impairment losses – depreciable real estate, net of recoveries
 
5,513

 
3,245

Total FFO adjustments
 
41,816

 
38,904

FFO available to common stockholders
 
$
102,509

 
$
110,345

 
 
 
 
 
FFO per common share:
 
 
 
 
Basic
 
$
0.60

 
$
0.68

Diluted
 
$
0.60

 
$
0.68

 
 
 
 
 
Core Funds From Operations (Core FFO) Reconciliation:
 
 
 
 
Net earnings available to common stockholders
 
$
60,693

 
$
71,441

Total FFO adjustments
 
41,816

 
38,904

FFO available to common stockholders
 
102,509

 
110,345

 
 
 
 
 
Loss on early extinguishment of debt (early redemption of notes payable due 2022)
 
16,679

 
—

Gain on sale of equity investments
 
—

 
(1,331
)
Total Core FFO adjustments
 
16,679

 
(1,331
)
Core FFO available to common stockholders
 
$
119,188

 
$
109,014

 
 
 
 
 
Core FFO per common share:
 
 
 
 
Basic
 
$
0.70

 
$
0.68

Diluted
 
$
0.70

 
$
0.67

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

5

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

 
 
Quarter Ended
 
 
March 31,
 
 
2020
 
2019
Adjusted Funds From Operations (AFFO) Reconciliation:
 
 
 
 
Net earnings available to common stockholders
 
$
60,693

 
$
71,441

Total FFO adjustments
 
41,816

 
38,904

Total Core FFO adjustments
 
16,679

 
(1,331
)
Core FFO available to common stockholders
 
119,188

 
109,014

 
 
 
 
 
Straight-line accrued rent
 
(61
)
 
(747
)
Net capital lease rent adjustment
 
61

 
172

Below-market rent amortization
 
(220
)
 
(228
)
Stock based compensation expense
 
3,248

 
2,546

Capitalized interest expense
 
(466
)
 
(126
)
Total AFFO adjustments
 
2,562

 
1,617

AFFO available to common stockholders
 
$
121,750

 
$
110,631

 
 
 
 
 
AFFO per common share:
 
 
 
 
Basic
 
$
0.71

 
$
0.69

Diluted
 
$
0.71

 
$
0.68

 
 
 
 
 
Other Information:
 
 
 
 
Rental income from operating leases(1)
 
$
168,733

 
$
158,398

Earned income from direct financing leases(1)
 
$
164

 
$
213

Percentage rent(1)
 
$
403

 
$
422

 
 
 
 
 
Real estate expense reimbursement from tenants(1)
 
$
5,247

 
$
3,993

Real estate expenses
 
(7,635
)
 
(7,092
)
Real estate expenses, net of tenant reimbursements
 
$
(2,388
)
 
$
(3,099
)
 
 
 
 
 
Amortization of debt costs(2)
 
$
1,816

 
$
920

Scheduled debt principal amortization (excluding maturities)
 
$
147

 
$
141

Non-real estate depreciation expense
 
$
118

 
$
79

(1) 
The condensed consolidated financial statements for the quarter ended March 31, 2020 and 2019 are presented under the new accounting standard, ASU 2016-02, "Leases (Topic 842)."  For the quarter ended March 31, 2020 and 2019, the aggregate of such amounts is $174,547 and $163,026, respectively, and is classified as rental income on the income statement summary.
(2)Includes $851 in connection with the redemption of the 3.80% senior unsecured notes due 2022 for the quarter ended March 31, 2020.

6

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

 
 
March 31, 2020
 
December 31, 2019
Balance Sheet Summary
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
Real estate:
 
 
 
 
Accounted for using the operating method, net of accumulated depreciation and amortization
 
$
7,285,236

 
$
7,286,217

Accounted for using the direct financing method
 
4,143

 
4,204

Real estate held for sale
 
4,498

 
10,818

Cash and cash equivalents
 
217,383

 
1,112

Receivables, net of allowance of $506
 
4,214

 
2,874

Accrued rental income, net of allowance of $1,842
 
28,592

 
28,897

Debt costs, net of accumulated amortization
 
2,461

 
2,783

Other assets
 
100,523

 
97,962

Total assets
 
$
7,647,050

 
$
7,434,867

 
 
 
 
 
Liabilities:
 
 
 
 
Line of credit payable
 
$
—

 
$
133,600

 Mortgages payable, including unamortized premium and net of unamortized debt cost
 
11,895

 
12,059

 Notes payable, net of unamortized discount and unamortized debt costs
 
3,206,563

 
2,842,698

Accrued interest payable
 
41,698

 
18,250

Other liabilities
 
85,959

 
96,578

Total liabilities
 
3,346,115

 
3,103,185

 
 
 
 
 
Stockholders' equity of NNN
 
4,300,930

 
4,331,675

Noncontrolling interests
 
5

 
7

Total equity
 
4,300,935

 
4,331,682

 
 
 
 
 
Total liabilities and equity
 
$
7,647,050

 
$
7,434,867

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common shares outstanding
 
171,963

 
171,694

 
 
 
 
 
Gross leasable area, Property Portfolio (square feet)
 
32,500

 
32,460

 
 
 
 
 


7

National Retail Properties, Inc.
Debt Summary
As of March 31, 2020
(in thousands)
(unaudited)
Unsecured Debt
 
Principal
 
Principal, Net of Unamortized Discount
 
Stated Rate
 
Effective Rate
 
Maturity Date
Line of credit payable
 
$
—

 
$
—

 
L + 87.5 bps

 
2.546
%
 
   January 2022
 
 
 
 
 
 
 
 
 
 
 
Unsecured notes payable:
 
 
 
 
 
 
 
 
 
 
2023
 
350,000

 
349,117

 
3.300
%
 
3.388
%
 
   April 2023
2024
 
350,000

 
349,671

 
3.900
%
 
3.924
%
 
   June 2024
2025
 
400,000

 
399,414

 
4.000
%
 
4.029
%
 
   November 2025
2026
 
350,000

 
347,259

 
3.600
%
 
3.733
%
 
   December 2026
2027
 
400,000

 
398,730

 
3.500
%
 
3.548
%
 
   October 2027
2028
 
400,000

 
397,505

 
4.300
%
 
4.388
%
 
   October 2028
2030
 
400,000

 
398,717

 
2.500
%
 
2.536
%
 
April 2030
2048
 
300,000

 
295,859

 
4.800
%
 
4.890
%
 
   October 2048
2050
 
300,000

 
293,939

 
3.100
%
 
3.205
%
 
April 2050
 
 
 
 
 
 
 
 
 
 
 
Total
 
3,250,000

 
3,230,211

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total unsecured debt(1)
 
$
3,250,000

 
$
3,230,211

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Debt costs
 
 
 
(31,140
)
 
 
 
 
 
 
Accumulated amortization
 
7,492

 
 
 
 
 
 
Debt costs, net of accumulated amortization
 
(23,648)
 
 
 
 
 
 
Notes payable, net of unamortized discount and unamortized debt costs
 
$
3,206,563

 
 
 
 
 
 
(1)  Unsecured notes payable have a weighted average interest rate of 3.7% and a weighted average maturity of 11.2 years.

Mortgages Payable
 
Principal Balance
 
Interest Rate
 
Maturity Date
 
Mortgage(1)
 
$
11,947

 
5.230
%
 
   July 2023
 
 
 
 
 
 
 
 
 
Debt costs
 
(147
)
 
 
 
 
 
Accumulated amortization
 
95

 
 
 
 
 
Debt costs, net of accumulated amortization
 
(52)
 
 
 
 
 
Mortgages payable, including unamortized premium and net of unamortized debt costs
 
$
11,895

 
 
 
 
 
(1)   Includes unamortized premium
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

8

National Retail Properties, Inc.
Property Portfolio

Top 20 Lines of Trade
 
 
 
 
As of March 31,
 
 
 
Line of Trade
 
2020(1)
 
2019(2)
 
1.
 
Convenience stores
 
18.1
%
 
17.8
%
 
2.
 
Restaurants – full service
 
11.0
%
 
11.3
%
 
3.
 
Automotive service
 
9.9
%
 
8.9
%
 
4.
 
Restaurants – limited service
 
8.7
%
 
9.0
%
 
5.
 
Family entertainment centers
 
6.7
%
 
7.1
%
 
6.
 
Health and fitness
 
5.2
%
 
5.5
%
 
7.
 
Theaters
 
4.7
%
 
4.9
%
 
8.
 
Recreational vehicle dealers, parts and accessories
 
3.4
%
 
3.5
%
 
9.
 
Automotive parts
 
3.1
%
 
3.4
%
 
10.
 
Equipment rental
 
2.6
%
 
1.9
%
 
11.
 
Home improvement
 
2.6
%
 
2.4
%
 
12.
 
Wholesale clubs
 
2.5
%
 
2.3
%
 
13.
 
Medical service providers
 
2.1
%
 
2.2
%
 
14.
 
General merchandise
 
1.7
%
 
1.6
%
 
15.
 
Furniture
 
1.7
%
 
1.6
%
 
16.
 
Home furnishings
 
1.6
%
 
1.5
%
 
17.
 
Travel plazas
 
1.5
%
 
1.7
%
 
18.
 
Drug stores
 
1.5
%
 
1.7
%
 
19.
 
Consumer electronics
 
1.5
%
 
1.6
%
 
20.
 
Bank
 
1.3
%
 
1.6
%
 
 
 
Other
 
8.6
%
 
8.5
%
 
 
 
Total
 
100.0
%
 
100.0
%
 

Top 10 States
 
State
 
 
% of Total(1)
 
 
State
 
 
% of Total(1)
 
1.
Texas
 
 
17.5
%
 
6.
North Carolina
 
 
4.5
%
 
2.
Florida
 
 
8.8
%
 
7.
Indiana
 
 
4.1
%
 
3.
Ohio
 
 
5.8
%
 
8.
Tennessee
 
 
3.8
%
 
4.
Illinois
 
 
5.1
%
 
9.
Virginia
 
 
3.5
%
 
5.
Georgia
 
 
4.5
%
 
10.
California
 
 
3.3
%
 
 
(1) Based on the annualized base rent for all leases in place as of March 31, 2020.
 
 
(2) Based on the annualized base rent for all leases in place as of March 31, 2019.
 




9

National Retail Properties, Inc.
Property Portfolio

Top Tenants ( ≥ 2.0%)
 
 
 
Properties
 
% of Total(1)
 
7-Eleven
 
140

 
5.0
%
 
Mister Car Wash
 
115

 
4.5
%
 
Camping World
 
47

 
4.3
%
 
LA Fitness
 
30

 
3.7
%
 
Flynn Restaurant Group (Taco Bell/Arby's)
 
203

 
3.4
%
 
GPM Investments (Convenience Stores)
 
151

 
3.3
%
 
AMC Theatre
 
20

 
3.0
%
 
Couche Tard (Pantry)
 
85

 
2.8
%
 
BJ's Wholesale Club
 
11

 
2.5
%
 
Sunoco
 
59

 
2.2
%
 
Chuck E. Cheese's
 
53

 
2.1
%
 
Mavis Tire Express Services
 
120

 
2.0
%

Lease Expirations(2) 
 
 
% of
Total(1)
 
# of
Properties
 
Gross Leasable
Area(3)
 
 
 
% of
Total(1)
 
# of
Properties
 
Gross Leasable Area(3)
2020
 
1.2
%
 
44

 
526,000

 
2026
 
4.4
%
 
173

 
1,630,000

2021
 
3.5
%
 
112

 
1,238,000

 
2027
 
7.0
%
 
192

 
2,555,000

2022
 
5.5
%
 
121

 
1,624,000

 
2028
 
4.5
%
 
152

 
1,156,000

2023
 
2.9
%
 
118

 
1,473,000

 
2029
 
3.0
%
 
75

 
1,046,000

2024
 
3.7
%
 
100

 
1,602,000

 
2030
 
3.9
%
 
109

 
1,214,000

2025
 
5.6
%
 
175

 
1,918,000

 
Thereafter
 
54.8
%
 
1,715

 
15,928,000


(1) 
Based on the annual base rent of $677,536,000, which is the annualized base rent for all leases in place as of March 31, 2020.
(2) 
As of March 31, 2020, the weighted average remaining lease term is 11.1 years.
(3) 
Square feet.










10