8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: May 3, 2006

NATIONAL RETAIL PROPERTIES, INC.

(exact name of registrant as specified in its charter)

Maryland	001-11290	56-1431377
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employment Identification No.)

450 South Orange Avenue, Suite 900, Orlando, Florida 32801

(Address of principal executive offices, including zip code)

(407) 265-7348

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ 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.

On May 3, 2006, National Retail Properties, Inc. issued a press release announcing its results of operations and financial condition for the quarter ended March 31, 2006. The press release is attached hereto as Exhibit 99.1.

The information in this Form 8-K is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of such section, nor shall such information be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits.

99.1   Press Release, dated May 3, 2006, of National Retail Properties, Inc.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	National Retail Properties, Inc.
Dated: May 3, 2006	By:	/s/ Kevin B. Habicht
		Kevin B. Habicht
		Executive Vice President and
		Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release, dated May 3, 2006, of National Retail Properties, Inc.

EX-99.1

Exhibit 99.1

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

RECORD FIRST QUARTER OPERATING RESULTS

ANNOUNCED BY NATIONAL RETAIL PROPERTIES, INC.

Orlando, Florida, May 3, 2006 – National Retail Properties, Inc. (NYSE: NNN), formerly known as Commercial Net Lease Realty, Inc., a real estate investment trust, today announced record operating results for the quarter ended March 31, 2006, including a 10.8% increase in funds from operations (“FFO”) per common share (diluted) compared to the prior year period. Highlights include:

Operating Results:

• Net earnings available to common shareholders, revenues, FFO available to common shareholders:

	Quarter Ended March 31,
	2006		2005
	(in thousands, except per share data)
Revenues	$	43,470	$	27,495
Net earnings available to common shareholders	$	22,446	$	25,002
Net earnings per common share (diluted)	$	0.39	$	0.47
FFO available to common shareholders	$	23,627	$	19,596
FFO per common share (diluted)	$	0.41	$	0.37

• Investment Portfolio occupancy increased to 98.6% at March 31, 2006, compared to 98.3% at December 31, 2005.

Investments and Dispositions for the quarter ended March 31, 2006:

• Investments:

• $36.3 million in the Investment Portfolio, including acquiring 40 properties with an aggregate 109,000 square feet of gross leasable area

• $26.3 million in the Development Inventory Portfolio, including acquiring 11 properties

• $12.7 million in the Exchange Inventory Portfolio, including acquiring 20 properties

• Dispositions:

• Three Investment properties with an aggregate 84,000 square feet of gross leasable area, with net proceeds of $16.9 million, resulting in a gain of $5.0 million

• Two Development Inventory properties with net proceeds of $17.6 million, resulting in a gain of $3.6 million, net of intercompany eliminations and minority interest

• Seven Exchange Inventory properties with net proceeds of $7.2 million, resulting in a gain of $807,000

Capital Transactions for the quarter ended March 31, 2006:

• Repaid $18.2 million 7.435% fixed rate loan upon maturity in February 2006, which was secured by a first mortgage lien on certain Investment properties

• Issued 1,067,700 shares of common stock generating $23.2 million of net proceeds pursuant to the Dividend Reinvestment and Stock Purchase Plan

450 S. Orange Ave., Suite 900  |  Orlando, FL 32801

(800) NNN-REIT  |  www.nnnreit.com

Craig Macnab, Chief Executive Officer and President, commented, “We are very pleased to report these strong quarterly results and believe we are on a path to report record results for the year with solid contributions from all areas of our business.”

National Retail also announced that its previously disclosed agreement to sell its Washington, D.C. area office properties to an affiliate of Brookfield Properties Corporation is expected to close in May 2006, subject to consent of the lender and customary closing conditions. The company recently negotiated a revised sale price of $229.3 million, which includes the assumption of a $95.0 million loan secured by the properties.

National Retail Properties invests primarily in high-quality, retail properties subject generally to long-term, net leases with established tenants, such as Barnes & Noble, Best Buy, Circle K, CVS, Uni-Mart and the United States of America. As of March 31, 2006, the company owned 564 Investment Properties in 41 states with a gross leasable area of approximately 9.3 million square feet. These Investment Properties are leased to 178 corporations in 62 industry classifications.

Management will hold a conference call on May 3, 2006 at 10:30 am EDT 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, 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. 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, Item 1A. Risk Factors of 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. National Retail 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 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.

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 earnings from continuing operations and an increase in the company’s earnings from discontinued operations. However, the company’s total and per share FFO and net earnings available to common shareholders are not affected.

National Retail Properties, Inc.

(in thousands, except per share data)

	Quarter Ended March 31,
	2006			2005
Income Statement Summary
Revenues:
Rental and earned income	$	32,274		$	24,705
Real estate expense reimbursement from tenants		996			1,013
Gain on disposition of real estate, Inventory Portfolio (Note 1)		6,444			469
Interest and other income from real estate transactions		1,459			1,308
Interest income on mortgage residual interests		2,297			—
		43,470			27,495
Operating expenses:
General and administrative		7,200			4,780
Real estate		1,338			1,276
Depreciation and amortization		5,351			3,626
Impairment – real estate		—			587
Impairment - mortgage residual interests		1,820			—
		15,709			10,269
Other expenses (revenues):
Interest and other income		(846	)		(456	)
Interest expense		11,935			6,695
		11,089			6,239
Income tax benefit		1,893			603
Minority interest		(3,197	)		15
Equity in earnings (losses) of unconsolidated affiliates		(33	)		1,081
Earnings from continuing operations		15,335			12,686
Earnings from discontinued operations:
Real estate, Investment Portfolio		6,321			11,924
Real estate, Inventory Portfolio, net of income tax expense and minority interest		1,792			1,394
		8,113			13,318
Net earnings		23,448			26,004
Series A Preferred Stock dividends		(1,002	)		(1,002	)
Series B Convertible Preferred Stock dividends		(419	)		(419	)
Net earnings available to common shareholders – basic		22,027			24,583
Series B Convertible Preferred Stock dividends, if dilutive		419			419
Net earnings available to common stockholders – diluted	$	22,446		$	25,002
Weighted average common shares outstanding:
Basic		55,408			51,868
Diluted		56,957			53,539
Net earnings per share available to common shareholders:
Basic:
Continuing operations	$	0.25		$	0.22
Discontinued operations		0.15			0.25
Net earnings	$	0.40		$	0.47
Diluted:
Continuing operations	$	0.25		$	0.22
Discontinued operations		0.14			0.25
Net earnings	$	0.39		$	0.47

National Retail Properties, 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 March 31, 2006, as discontinued operations. The following is a summary of earnings from discontinued operations from the Investment Portfolio.

	Quarter Ended March 31,
	2006		2005
Revenues:
Rental and earned income	$	4,858	$	6,607
Real estate expense reimbursements from tenants		477		644
Interest and other income from real estate transactions		76		50
		5,411		7,301
Expenses:
General and administrative		30		33
Real estate		1,471		1,596
Depreciation and amortization		1,253		949
Impairment – real estate		—		1,403
Interest		1,287		1,181
		4,041		5,162
Gain on disposition of real estate (Note 1)		4,951		9,785
Earnings from discontinued operations	$	6,321	$	11,924

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 Inventory Portfolio.

	Quarter Ended March 31,
	2006			2005
Revenues:
Rental income	$	1,926		$	434
Real estate expense reimbursements from tenants		48			31
Gain on disposition of real estate (Note 1)		1,160			2,062
Interest and other income from real estate transactions		—			126
		3,134			2,653
Expenses:
General and administrative		4			9
Real estate		26			98
Depreciation and amortization		—			11
Interest		136			268
		166			386
Income tax expense		(1,097	)		(853	)
Minority interest		(79	)		(20	)
Earnings from discontinued operations	$	1,792		$	1,394

National Retail Properties, Inc.

(in thousands, except per share data)

	Quarter Ended March 31,
	2006			2005
Reconciliation of net earnings to FFO and FFO available to common shareholders:
Net earnings	$	23,448		$	26,004
Real estate depreciation and amortization:
Continuing operations		4,739			3,269
Discontinued operations		1,253			949
Partnership real estate depreciation		140			161
Gain on disposition of real estate held for investment from discontinued operations		(4,951	)		(9,785	)
FFO		24,629			20,598
Series A Preferred Stock dividends		(1,002	)		(1,002	)
Series B Convertible Preferred Stock dividends		(419	)		(419	)
FFO available to common stockholders – basic		23,208			19,177
Series B Convertible Preferred Stock dividends, if dilutive		419			419
FFO available to common stockholders – diluted	$	23,627		$	19,596
FFO per share:
Basic	$	0.42		$	0.37
Diluted	$	0.41		$	0.37

Note 1: Real Estate Disposition Summary

	Quarter Ended March 31,
	2006				2005
	# of Properties				# of Properties
Reconciliation of gain on disposition between continuing and discontinued operations:
Continuing operations	1	$	6,444		1	$	469
Discontinued operations:
Investment Portfolio	3		4,951		4		9,785
Inventory Portfolio	8		1,160		4		2,062
Minority interest, Inventory Portfolio	—		(3,222	)	—		—
	12	$	9,333		9	$	12,316
Reconciliation of gain on disposition of type:
Inventory Portfolio:
Development	2	$	6,761		2	$	1,372
Exchange	7		807		3		1,106
Intercompany eliminations	—		36		—		53
Minority interest, Development	—		(3,222	)	—		—
	9		4,382		5		2,531
Investment Portfolio	3		4,951		4		9,785
	12	$	9,333		9	$	12,316

National Retail Properties, Inc.

(in thousands)

Balance Sheet Summary	March 31, 2006		December 31, 2005
	(unaudited)
Assets:
Cash and cash equivalents	$	20,322	$	8,234
Restricted cash		30,549		30,191
Receivables, net of allowance		7,438		8,547
Mortgages, notes and accrued interest receivable, net of allowance		51,981		51,086
Real estate, Investment Portfolio:
Accounted for using the operating method, net of accumulated depreciation and amortization and impairment		1,158,639		1,133,070
Accounted for using the direct financing method		89,803		95,704
Held for sale, net of impairment		164,129		165,323
Real estate, Inventory Portfolio, held for sale		151,878		131,074
Mortgage residual interests, net of impairment		47,438		55,184
Accrued rental income, net of allowance		28,112		27,999
Other assets		26,056		27,004
Total assets	$	1,776,345	$	1,733,416
Liabilities and stockholders’ equity:
Line of credit payable	$	191,500	$	162,300
Mortgages payable		37,176		56,133
Mortgages payable, held for sale		95,000		95,000
Notes payable - secured		28,250		28,250
Notes payable		489,700		493,321
Financing lease obligation		26,041		26,041
Income tax liability		13,593		13,748
Other liabilities		29,277		25,597
Minority interest		5,168		4,939
Stockholders’ equity		860,640		828,087
Total liabilities and equity	$	1,776,345	$	1,733,416
Common shares outstanding		56,274		55,131
Gross leasable area, Investment Portfolio		9,252		9,227

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:

	March 31, 2006		December 31, 2005
Balance Sheet Summary
Assets
Cash and restricted cash	$	22,433	$	17,978
Receivables and other assets		6,077		6,632
Mortgage residual interests		47,438		55,184
	$	75,948	$	79,794
Liabilities
Notes payable – secured	$	28,250	$	28,250
Income tax liability		13,193		14,551
Other liabilities		359		474
	$	41,802	$	43,275
Minority interest	$	3,761	$	3,682

	Quarter Ended March 31, 2006
Income Statement Summary
Revenues:
Interest income on mortgage residual interests	$	2,297
Interest and other income		398
		2,695
Expenses:
General and administrative		170
Impairment – mortgage residual interests		1,820
Interest		706
Amortization		66
		2,762
Income tax amortization		1,358
Minority interest		(80	)
Net earnings	$	1,211

National Retail Properties, Inc.

Investment Portfolio

Top 20 Tenants

	Tenant	% of Total(1)
1.	United States of America	12.7	%
2.	Circle K	7.6	%
3.	CVS	5.2	%
4.	Best Buy	4.0	%
5.	Uni-Mart	3.9	%
6.	Barnes & Noble	3.6	%
7.	OfficeMax	3.5	%
8.	Eckerd	3.1	%
9.	Academy	3.0	%
10.	The Sports Authority	2.5	%
11.	Majestic Liquors	2.1	%
12.	Borders Books	2.1	%
13.	United Rentals	1.9	%
14.	Quik Trip	1.5	%
15.	Jared Jewelers	1.2	%
16.	Bed Bath & Beyond	1.2	%
17.	Food 4 Less	1.1	%
18.	CarMax	1.1	%
19.	Havertys Furniture	1.0	%
20.	Rite Aid	1.0	%

Top 10 States

	State	% of Total(1)
1.	Texas	21.7	%
2.	Virginia	16.4	%
3.	Florida	12.3	%
4.	Pennsylvania	5.4	%
5.	California	5.0	%
6.	Georgia	4.5	%
7.	Missouri	3.1	%
8.	Ohio	2.6	%
9.	New Jersey	2.4	%
10.	Tennessee	2.4	%

Lease Expirations

	% of Total(1)		# of Properties	Gross Leasable Area(2)
2006	0.5	%	6	124,000
2007	1.7	%	18	236,000
2008	2.1	%	22	440,000
2009	2.4	%	24	475,000
2010	3.8	%	22	351,000
2011	3.6	%	20	404,000
2012	4.0	%	22	473,000
2013	5.7	%	29	688,000
2014	20.0	%	36	1,160,000
2015	4.8	%	23	627,000
2016	4.9	%	23	557,000
Thereafter	46.5	%	305	3,588,000

⁽¹⁾ Based on annual base rent of $147,892,000, which is the annualized base rent for all leases in place as of March 31, 2006.

⁽²⁾ Square feet.