EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO

 

NEWS RELEASE     
For information contact:     
Kevin B. Habicht     
Chief Financial Officer     
(407) 265-7348    For Immediate Release
     February 3, 2006

 

INCREASED OPERATING RESULTS AND 2006 GUIDANCE ANNOUNCED BY

COMMERCIAL NET LEASE REALTY, INC.

 

Orlando, Florida, February 3, 2006 - Commercial Net Lease Realty, Inc. (NYSE: NNN), a real estate investment trust, today announced operating results for the quarter and year ended December 31, 2005. Highlights include:

 

Operating Results:

 

  •   Net earnings available to common shareholders, revenues, funds from operations (“FFO”) available to common shareholders:

 

     Quarter Ended
December 31,
     Year Ended
December 31,
  
     2005
     2004
     2005
     2004
  
     (in thousands, except per share data)  

Revenues

    $ 41,037     $ 32,420     $ 145,177     $ 127,190  

Net earnings available to common shareholders

    $ 16,751     $ 17,924 (1)   $ 85,392     $ 59,251 (1)

Net earnings per common share (diluted)

    $ 0.31     $ 0.34 (1)   $ 1.56     $ 1.15 (1)

FFO available to common shareholders

    $ 19,560 (2)   $ 20,760 (1)   $ 81,803 (2)   $ 73,065 (1)

FFO per common share (diluted)

    $ 0.36 (2)   $ 0.39 (1)   $ 1.50 (2)   $ 1.41 (1)

FFO (Operations) available to common shareholders

    $ 21,942 (4)   $ 21,249 (3)   $ 84,185 (5)   $ 76,806 (3)

FFO (Operations) per common share (diluted)

    $ 0.40 (4)   $ 0.40 (3)   $ 1.54 (5)   $ 1.48 (3)
(1) Includes transition costs of $489 ($0.01 per share) and $3,741 ($0.07 per share) for the quarter and year ended December 31, 2004, respectively.
(2) Excludes extraordinary gain of $2,980 ($0.06 per share) and $14,786 ($0.27 per share) related to acquisition of Orange Avenue Mortgage Investments, Inc. for the quarter and year ended December 31, 2005, respectively.
(3) Excludes transition costs of $489 ($0.01 per share) and $3,741 ($0.07 per share) for the quarter and year ended December 31, 2004, respectively
(4) Excludes extraordinary gain of $2,980 ($0.06 per share) and impairment charge of $2,382 ($0.04 per share) related to acquisition and REIT conversion of Orange Avenue Mortgage Investment, Inc. for the quarter ended December 31, 2005.
(5) Excludes extraordinary gain of $14,786 ($0.27 per share) and impairment charge of $2,382 ($0.04 per share) related to acquisition and REIT conversion of Orange Avenue Mortgage Investment, Inc. for the year ended December 31, 2005.

 

  •   Investment Portfolio occupancy increased to 98.3% at December 31, 2005, compared to 97.4% at December 31, 2004.

 

              

450 S. Orange Avenue, Suite 900

Orlando, FL 32801

(800) NNN-REIT

(407) 265-7348

Fax: (407) 650-1044

www.nnnreit.com

 

NYSE:NNN

Investments and Dispositions for the quarter ended December 31, 2005:

 

  •   Investments:

 

  •   $156.7 million in the Investment Portfolio, including acquiring 60 properties with an aggregate 270,000 square feet of gross leasable area

 

  •   $18.3 million in the Development Inventory Portfolio, including acquiring two properties

 

  •   $51.9 million in the Exchange Inventory Portfolio, including acquiring 35 properties

 

  •   Dispositions:

 

  •   Three Investment properties with an aggregate 27,000 square feet of gross leasable area, with net proceeds of $3.4 million, resulting in a gain of $104,000

 

  •   Four Development Inventory properties with net proceeds of $16.7 million, resulting in a gain of $3.3 million, net of intercompany eliminations and minority interest

 

  •   Six Exchange Inventory properties with net proceeds of $4.8 million, resulting in a gain of $688,000

 

Investments and Dispositions for the year ended December 31, 2005:

 

  •   Investments:

 

  •   $332.4 million in the Investment Portfolio, including acquiring 170 properties with an aggregate 1,150,000 square feet of gross leasable area

 

  •   $67.8 million in the Development Inventory Portfolio, including acquiring 15 properties

 

  •   $66.6 million in the Exchange Inventory Portfolio, including acquiring 58 properties

 

  •   $9.4 million to acquire 78.9 percent of Orange Avenue Mortgage Investments, Inc.

 

  •   Dispositions:

 

  •   Twelve Investment properties with an aggregate 476,000 square feet of gross leasable area, with net proceeds of $40.3 million, resulting in a gain of $9.8 million

 

  •   Twelve Development Inventory properties with net proceeds of $61.1 million, resulting in a gain of $13.0 million, net of intercompany eliminations and minority interest

 

  •   Sixteen Exchange Inventory properties with net proceeds of $17.7 million, resulting in a gain of $2.6 million

 

The Company also announced increased FFO per share guidance for 2006 at $1.58 - $1.62 per share. This equates to estimated net earnings per share before any gains or losses from the sale of investment properties of $1.22 - $1.26 per share plus $0.36 per share of expected real estate related depreciation.

 

Craig Macnab, Chief Executive Officer and President, commented, “2005 was a record year for our shareholders. More importantly, we are encouraged about the outlook for 2006. Our associates are firing on all cylinders and the timing of our activity over the last 60 days positions us well for the new year.”

 

Commercial Net Lease Realty invests primarily in high-quality, retail properties subject generally to long-term, net leases with established tenants, such as Barnes & Noble, Best Buy, CVS, OfficeMax and the United States of America. As of December 31, 2005, the Company owned 524 Investment Properties in 41 states with a gross leasable area of approximately 9.2 million square feet. These Investment Properties are leased to 176 corporations in 61 industry classifications.

 

Management will hold a conference call on February 3, 2006 at 10:00 am EST to review the Company’s results. The call can be accessed on the Company’s 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, the Company will post a summary of any earnings guidance given on the call to the Company’s web site.

Statements in this press release that 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 Securities and Exchange Commission (“SEC”) 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 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 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 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) on the disposition of real estate held for investment, 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 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 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.

 

The Company has determined that there are earnings from discontinued operations in each of its segments, real estate held for investment and real estate held for sale. All property dispositions from the Company’s held for investment segment are classified as discontinued operations. In addition, certain properties in the Company’s held for sale segment that have generated revenues before disposition are classified as discontinued operations. These held for sale properties have not historically been classified as discontinued operations, prior period comparable condensed consolidated financial statements have been restated to include these properties in its earnings from discontinued operations. These adjustments resulted in a decrease in the Company’s reported total revenues and total and per share income from continuing operations and an increase in the Company’s income from discontinued operations. However, the Company’s total and per share FFO and net income available to common shareholders are not affected.

Commercial Net Lease Realty, Inc.

(in thousands, except per share data)

 

     Quarter Ended
December 31,
     Year Ended
December 31,
  

Income Statement Summary

 

    2005
     2004
     2005
     2004
  

Revenues:

                                 

Rental and earned income

    $ 33,701     $ 27,742     $ 123,252     $ 109,036  

Real estate expense reimbursement from tenants

      2,129       1,830       6,350       5,756  

Gain on disposition of real estate, Inventory Portfolio (Note 1)

      1,302       574       2,010       4,700  

Interest and other income from real estate transactions

      1,275       2,274       6,216       7,698  

Interest income on mortgage residual interests

      2,630       —         7,349       —    
    
 
 
 
       41,037       32,420       145,177       127,190  
    
 
 
 

Operating expenses:

                                 

General and administrative

      6,578       5,846       23,411       22,995  

Real estate

      3,860       3,034       11,534       11,870  

Depreciation and amortization

      6,457       4,312       22,276       16,682  

Transition costs

      —         489       —         3,741  

Impairment - real estate

      —         —         1,673       —    

Impairment - mortgage residual interests

      2,382       —         2,382       —    
    
 
 
 
       19,277       13,681       61,276       55,288  
    
 
 
 

Other expenses (revenues):

                                 

Interest and other income

      (862 )     (704 )     (2,054 )     (3,761 )

Interest expense

      10,827       8,338       35,941       32,381  
    
 
 
 
       9,965       7,634       33,887       28,620  
    
 
 
 

Income tax benefit

      1,395       551       2,776       2,544  

Minority interest

      (102 )     (227 )     137       (1,243 )

Equity in earnings of unconsolidated affiliates

      (82 )     1,030       1,209       4,724  
    
 
 
 

Earnings from continuing operations

      13,006       12,459       54,136       49,307  

Earnings from discontinued operations:

                                 

Real estate, Investment Portfolio

      252       2,293       11,102       6,080  

Real estate, Inventory Portfolio, net of income tax expense and minority interest

      1,934       4,174       9,376       9,547  
    
 
 
 
       2,186       6,467       20,478       15,627  
    
 
 
 

Earnings before extraordinary gain

      15,192       18,926       74,614       64,934  

Extraordinary gain

      2,980       —         14,786       —    
    
 
 
 

Net earnings

      18,172       18,926       89,400       64,934  

Series A Preferred Stock dividends

      (1,002 )     (1,002 )     (4,008 )     (4,008 )

Series B Convertible Preferred Stock dividends

      (419 )     (419 )     (1,675 )     (1,675 )
    
 
 
 

Net earnings available to common shareholders – basic

      16,751       17,505       83,717       59,251  

Series B Convertible Preferred Stock dividends, if dilutive

      —         419       1,675       —    
    
 
 
 

Net earnings available to common stockholders – diluted

    $ 16,751     $ 17,924     $ 85,392     $ 59,251  
    
 
 
 

Weighted average common shares outstanding:

                                 

Basic

      54,160       51,725       52,985       51,312  
    
 
 
 

Diluted

      54,508       53,460       54,640       51,743  
    
 
 
 

Commercial Net Lease Realty, Inc.

(in thousands, except per share data)

 

     Quarter Ended
December 31,
    Year Ended
December 31,

Income Statement Summary

 

    2005
    2004
    2005
    2004

Net earnings per share available to common shareholders:

                            

Basic:

                            

Continuing operations

    $ 0.21    $ 0.22    $ 0.91    $ 0.85

Discontinued operations

      0.04      0.12      0.39      0.30

Extraordinary gain

      0.06      —        0.28      —  
    
  
  
  

Net earnings

    $ 0.31    $ 0.34    $ 1.58    $ 1.15
    
  
  
  

Diluted:

                            

Continuing operations

    $ 0.21    $ 0.22    $ 0.92    $ 0.85

Discontinued operations

      0.04      0.12      0.37      0.30

Extraordinary gain

      0.06      —        0.27      —  
    
  
  
  

Net earnings

    $ 0.31    $ 0.34    $ 1.56    $ 1.15
    
  
  
  

Commercial Net Lease Realty, Inc.

(in thousands)

 

Earnings from Discontinued Operations – Investment Portfolio:

 

In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), the Company has classified its investment assets sold and leasehold interests expired subsequent to December 31, 2001, the effective date of SFAS No. 144, as discontinued operations. In addition, the Company has classified any investment asset that was held for sale at December 31, 2005, as discontinued operations. The following is a summary of earnings from discontinued operations from the real estate Investment Portfolio.

 

     Quarter Ended
December 31,
     Year Ended
December 31,
  
     2005
    2004
     2005
    2004
  

Revenues:

                               

Rental and earned income

    $ 31    $ 1,062     $ 3,365    $ 4,540  

Real estate expense reimbursements from tenants

      —        (1 )     —        3  

Interest and other income from real estate transactions

      125      49       358      257  
    
  
 
  
       156      1,110       3,723      4,800  
    
  
 
  

Expenses:

                               

General and administrative

      1      —         20      (4 )

Real estate

      6      121       251      411  

Depreciation and amortization

      1      133       53      711  

Impairment – real estate

      —        —         2,056      —    

Interest

      —        (52 )     57      125  
    
  
 
  
       8      202       2,437      1,243  
    
  
 
  

Gain on disposition of real estate (Note 1)

      104      1,385       9,816      2,523  
    
  
 
  

Earnings from discontinued operations from real estate held for investment

    $ 252    $ 2,293     $ 11,102    $ 6,080  
    
  
 
  

 

Earnings from Discontinued Operations – Inventory Portfolio:

 

The Company has classified its Inventory Properties that are currently held for sale and generating rental revenues as discontinued operations. The Company has reclassified all held for sale properties that generated rental revenue before disposition which were sold subsequent to December 31, 2001, the effective date of SFAS No. 144, as discontinued operations. The following is a summary of earnings from discontinued operations from the real estate Inventory Portfolio.

 

    

Quarter Ended

December 31,

    

Year Ended

December 31,

  
     2005
     2004
     2005
     2004
  

Revenues:

                                 

Rental income

    $ 598     $ 598     $ 1,992     $ 2,336  

Real estate expense reimbursements from tenants

      30       14       69       183  

Gain on disposition of real estate, held for sale (Note 1)

      3,244       7,898       19,617       18,702  

Interest and other income from real estate transactions

      21       121       826       202  
    
 
 
 
       3,893       8,631       22,504       21,423  
    
 
 
 

Expenses:

                                 

General and administrative

      3       10       37       33  

Real estate

      55       101       222       343  

Depreciation and amortization

      —         3       21       5  

Interest

      109       283       815       511  
    
 
 
 
       167       397       1,095       892  
    
 
 
 

Income tax expense

      (1,183 )     (2,554 )     (5,737 )     (5,841 )

Minority interest

      (609 )     (1,506 )     (6,296 )     (5,143 )
    
 
 
 

Earnings from discontinued operations

    $ 1,934     $ 4,174     $ 9,376     $ 9,547  
    
 
 
 

Commercial Net Lease Realty, Inc.

(in thousands, except per share data)

 

    

Quarter Ended

December 31,

     Year Ended
December 31,
  
     2005
     2004
     2005
     2004
  

Reconciliation of net earnings to FFO and FFO available to common shareholders:

                                 

Net earnings

    $ 18,172     $ 18,926     $ 89,400     $ 64,934  

Real estate depreciation and amortization:

                                 

Continuing operations

      5,744       3,932       20,354       15,004  

Discontinued operations

      1       133       53       711  

Partnership real estate depreciation

      148       156       606       622  

Gain on disposition of real estate held for investment from discontinued operations

      (104 )     (1,385 )     (9,816 )     (2,523 )

Extraordinary gain

      (2,980 )     —         (14,786 )     —    
    
 
 
 

FFO

      20,981       21,762       85,811       78,748  

Series A Preferred Stock dividends

      (1,002 )     (1,002 )     (4,008 )     (4,008 )

Series B Convertible Preferred Stock dividends

      (419 )     (419 )     (1,675 )     (1,675 )
    
 
 
 

FFO available to common stockholders – basic

      19,560       20,341       80,128       73,065  

Series B Convertible Preferred Stock dividends, if dilutive

      —         419       1,675       —    
    
 
 
 

FFO available to common stockholders – diluted

      19,560       20,760       81,803       73,065  

Transition costs

      —         489       —         3,741  

Impairment – mortgage residual interests

      2,382       —         2,382       —    
    
 
 
 

FFO (Operations) available to common shareholders

    $ 21,942     $ 21,249     $ 84,185     $ 76,806  
    
 
 
 

Funds from operations per share:

                                 

Basic

    $ 0.36     $ 0.39     $ 1.51     $ 1.42  
    
 
 
 

Diluted

    $ 0.36     $ 0.39     $ 1.50     $ 1.41  
    
 
 
 

Diluted (Operations)

    $ 0.40     $ 0.40     $ 1.54     $ 1.48  
    
 
 
 

 

Note 1: Real Estate Disposition Summary

 

     Quarter Ended December 31,
     Year Ended December 31,
  
     2005
     2004
     2005
     2004
  
     # of
Properties
          # of
Properties
          # of
Properties
          # of
Properties
       
Reconciliation of gain on disposition between     continuing and discontinued operations:                                                     

Continuing operations

    3    $ 1,302     1    $ 574     6    $ 2,010     7    $ 4,700  

Discontinued operations:

                                                     

Investment Portfolio

    3      104     6      1,385     12      9,816     20      2,523  

Inventory Portfolio

    7      3,244     9      7,898     22      19,617     17      18,702  

Minority interest, Inventory Portfolio

    —        (606 )   —        (1,760 )   —        (5,999 )   —        (6,422 )
    
  
 
  
 
  
 
  
     13    $ 4,044     16    $ 8,097     40    $ 25,444     44    $ 19,503  
    
  
 
  
 
  
 
  

Reconciliation of gain on disposition of type:

                                                     

Inventory Portfolio:

                                                     

Development

    4    $ 3,502     5    $ 6,730     12    $ 18,065     16    $ 20,673  

Exchange

    6      688     5      1,505     16      2,641     8      1,912  

Intercompany eliminations

    —        356     —        237     —        921     —        817  

Minority interest, Development

    —        (606 )   —        (1,760 )   —        (5,999 )   —        (6,422 )
    
  
 
  
 
  
 
  
     10      3,940     10      6,712     28      15,628     24      16,980  

Investment Portfolio

    3      104     6      1,385     12      9,816     20      2,523  
    
  
 
  
 
  
 
  
     13    $ 4,044     16    $ 8,097     40    $ 25,444     44    $ 19,503  
    
  
 
  
 
  
 
  

Commercial Net Lease Realty, Inc.

(in thousands)

 

Balance Sheet Summary

 

    December 31,
2005
    December 31,
2004

Assets:

              

Cash and cash equivalents

    $ 8,234    $ 1,947

Restricted cash

      30,191      —  

Receivables, net of allowance

      8,547      6,636

Mortgages, notes and accrued interest receivable, net of allowance

      51,086      45,564

Real estate, Investment Portfolio:

              

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

      1,296,793      1,009,397

Accounted for using the direct financing method

      95,704      102,311

Held for sale, net of impairment

      1,600      —  

Real estate, Inventory Portfolio, net of accumulated depreciation

      131,074      58,049

Investment in unconsolidated mortgage residual interests

      —        29,672

Mortgage residual interests

      55,184      —  

Accrued rental income, net of allowance

      27,999      28,619

Other assets

      27,004      17,853
    
  

Total assets

    $ 1,733,416    $ 1,300,048
    
  

Liabilities and stockholders’ equity:

              

Line of credit payable

    $ 162,300    $ 17,900

Mortgages payable

      151,133      157,168

Notes payable - secured

      28,250      —  

Notes payable

      493,321      323,132

Financing lease obligation

      26,041      26,041

Income tax liability

      13,748      702

Other liabilities

      25,597      16,079

Minority interest

      4,939      2,028

Stockholders’ equity

      828,087      756,998
    
  

Total liabilities and equity

    $ 1,733,416    $ 1,300,048
    
  

Common shares outstanding

      55,131      52,078
    
  

Gross leaseable area, Investment Portfolio

      9,227      8,542
    
  

 

Orange Avenue Mortgage Investments, Inc.

(in thousands)

 

The Company acquired 78.9 percent of Orange Avenue Mortgage Investments, Inc. (“OAMI”) on May 2, 2005. The following summary represents the balances related to OAMI included in the Company’s Balance Sheet and Income Statement Summary:

 

Balance Sheet Summary

    December 31,
2005

Assets

       

Cash and restricted cash

    $ 17,978

Receivables and other assets

      6,632

Mortgage residual interests

      55,184
    
     $ 79,794
    

Liabilities

       

Notes payable – secured

    $ 28,250

Income tax liability

      14,551

Other liabilities

      474
    
     $ 43,275
    

Minority interest

    $ 3,682
    

 

    

Quarter

Ended

December 31,

2005

    

May 2, 2005

Through

December 31,

2005

  

Income Statement Summary

                 

Revenues:

                 

Interest income on mortgage residual interests

    $ 2,630     $ 7,349  

Interest and other income

      453       825  
    
 
       3,083       8,174  

Expenses:

                 

General and administrative

      208       397  

Impairment – mortgage residual interests

      2,382       2,382  

Interest

      767       2,076  

Amortization

      66       177  
    
 
       3,423       5,032  
    
 

Income tax benefit

      686       28  

Minority interest

      (151 )     (378 )
    
 

Net earnings

    $ 195     $ 2,792  
    
 

 

Commercial Net Lease Realty, Inc.

Investment Portfolio

 

Top 20 Tenants

 

    

Tenant

    % of Total(1)
  
1.   

United States of America

    13.0 %
2.   

Circle K

    7.7 %
3.   

CVS

    5.4 %
4.   

Best Buy

    4.1 %
5.   

OfficeMax

    3.5 %
6.   

Barnes & Noble

    3.5 %
7.   

Eckerd

    3.2 %
8.   

Academy

    3.1 %
9.   

The Sports Authority

    2.6 %
10.   

Borders Books

    2.1 %
11.    Uni-Mart    2.1 %
12.    Majestic Liquors    2.1 %
13.    United Rentals    2.0 %
14.    Quik Trip    1.5 %
15.    Bed Bath & Beyond    1.2 %
16.    Jared Jewelers    1.2 %
17.    Food 4 Less    1.1 %
18.    CarMax    1.1 %
19.    Havertys Furniture    1.1 %
20.    Rite Aid    1.0 %

 

Top 10 States

 

    

State

    % of Total(1)
  
1.    Texas    22.0 %
2.    Virginia    16.8 %
3.    Florida    12.3 %
4.    California    5.1 %
5.    Georgia    4.6 %
6.    Pennsylvania    3.5 %
7.    Missouri    3.2 %
8.    Ohio    2.6 %
9.    Tennessee    2.4 %
10.    New Jersey    2.3 %

 

Lease Expirations

 

   

% of

Total(1)

    

# of

Properties

  

Gross Leasable

Area(2)

2006   0.7 %   9   163,000
2007   1.7 %   17   227,000
2008   2.2 %   22   467,000
2009   2.5 %   24   475,000
2010   3.9 %   22   351,000
2011   3.2 %   17   331,000
2012   4.1 %   22   473,000
2013   5.8 %   29   688,000
2014   20.1 %   36   1,160,000
2015   5.0 %   24   667,000
2016   4.8 %   22   527,000
Thereafter   46.0 %   268   3,537,000
(1) Based on annual base rent of $145,100,000, which is the annualized base rent for all leases in place as of December 31, 2005.
(2) Square feet.