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: August 1, 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)

Not applicable

(Former name or former address, if changed since last report)

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 August 1, 2006, National Retail Properties, Inc. issued a press release announcing its results of operations and financial condition for the quarter ended June 30, 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.

(d) Exhibits.

99.1      Press Release, dated August 1, 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: August 1, 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 August 1, 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
	August 1, 2006

RECORD SECOND QUARTER OPERATING RESULTS

ANNOUNCED BY NATIONAL RETAIL PROPERTIES, INC.

Orlando, Florida, August 1, 2006 – National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced record operating results for the quarter ended June 30, 2006, including a 10.5% increase in funds from operations (“FFO”) per common share (diluted) compared to the second quarter 2005. Highlights include:

Operating Results:

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

	Quarter Ended June 30,				Six Months Ended June 30,
	2006		2005		2006		2005
	(in thousands, except per share data)
Revenues	$	38,133	$	30,857	$	81,603	$	58,352
Net earnings available to common shareholders	$	79,199	$	27,691	$	101,645	$	52,693
Net earnings per common share (diluted)	$	1.37	$	0.51	$	1.77	$	0.98
FFO available to common shareholders	$	24,504	$	20,435	$	48,131	$	40,031
FFO per common share (diluted)	$	0.42	$	0.38	$	0.84	$	0.75

• Investment Portfolio occupancy was 98.4% at June 30, 2006, compared to 98.6% at March 31, 2006.

Investments and Dispositions for the quarter ended June 30, 2006:

• Investments:

• $99.8 million in the Investment Portfolio, including acquiring 46 properties with an aggregate 176,000 square feet of gross leasable area

• $20.0 million in the Development Inventory Portfolio

• $41.6 million in the Exchange Inventory Portfolio, including acquiring 25 properties

• Dispositions:

• Three Investment properties with an aggregate 555,000 square feet of gross leasable area, with net proceeds of $227.9 million, resulting in a gain of $59.5 million

• Two Development Inventory properties with net proceeds of $9.0 million, resulting in a gain of $0.9 million, net of intercompany eliminations and minority interest

• 17 Exchange Inventory properties with net proceeds of $13.4 million, resulting in a gain of $1.5 million

450 S. Orange Ave., Suite 900 | Orlando, FL 32801 (800) NNN-REIT | www.nnnreit.com

Investments and Dispositions for the six months ended June 30, 2006:

• Investments:

• $136.1 million in the Investment Portfolio, including acquiring 86 properties with an aggregate 285,000 square feet of gross leasable area

• $46.3 million in the Development Inventory Portfolio, including 11 properties

• $54.3 million in the Exchange Inventory Portfolio, including 45 properties

• Dispositions:

• Six Investment properties with an aggregate 639,000 square feet of gross leasable area, with net proceeds of $244.7 million, resulting in a gain of $64.4 million

• Four Development properties with net proceeds of $26.5 million, resulting in a gain of $4.4 million, net of intercompany eliminations and minority interest

• 24 Exchange Inventory properties with net proceeds of $20.7 million, resulting in a gain of $2.3 million

Capital transactions for the quarter ended June 30, 2006:

• $95 million 5.42% fixed rate mortgage assumed by the buyer of the Washington, D.C. office properties

• Issued 328,696 shares of common stock generating $7.0 million of net proceeds pursuant to the Dividend Reinvestment and Stock Purchase Plan

• Converted 10,000 shares of 6.70% Series B convertible preferred stock into 1,293,996 shares of common stock

Craig Macnab, Chief Executive Officer commented, “We are pleased to report record results and remain very comfortable with our increased 2006 earnings guidance announced in June. The sale of our Washington, D.C. office properties in May provides an opportunity to increase returns on a meaningful amount of capital and leaves our portfolio focused on retail properties.”

National Retail Properties invests primarily in high-quality properties subject generally to long-term, net leases with retail tenants such as Barnes & Noble, Best Buy, Circle K (Susser), CVS and Uni-Mart. As of June 30, 2006, the company owned 607 Investment properties in 41 states with a gross leasable area of approximately 8.9 million square feet. These Investment properties are leased to 180 corporations in 63 industry classifications.

Management will hold a conference call on August 1, 2006 at 2:00 pm 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.

2

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.

3

National Retail Properties, Inc.

(in thousands, except per share data)

Income Statement Summary

	Quarter Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Revenues:
Rental and earned income	$	33,041		$	25,639		$	65,315		$	50,345
Real estate expense reimbursement from tenants		914			794			1,910			1,807
Gain on disposition of real estate, Inventory Portfolio (Note 1)		563			378			7,007			846
Interest and other income from real estate transactions		1,668			2,124			3,127			3,432
Interest income on mortgage residual interests		1,947			1,922			4,244			1,922
		38,133			30,857			81,603			58,352
Operating expenses:
General and administrative		7,088			5,739			14,258			10,518
Real estate		1,359			996			2,697			2,272
Depreciation and amortization		5,358			3,872			10,709			7,497
Impairment – real estate		—			741			—			1,328
Impairment – mortgage residual interests		842			—			2,662			—
Restructuring costs		1,580			—			1,580			—
		16,227			11,348			31,906			21,615
Other expenses (revenues):
Interest and other income		(1,015	)		(308	)		(1,831	)		(764	)
Interest expense		11,217			7,566			23,152			14,261
		10,202			7,258			21,321			13,497
Income tax benefit		3,535			343			5,428			946
Minority interest		(255	)		2			(3,452	)		16
Equity in earnings of unconsolidated affiliates		228			100			195			1,180
Earnings from continuing operations		15,212			12,696			30,547			25,382
Earnings from discontinued operations:
Real estate, Investment Portfolio		62,510			2,301			68,831			14,225
Real estate, Inventory Portfolio, net of income tax expense and minority interest		2,479			1,891			4,271			3,285
		64,989			4,192			73,102			17,510
Earnings before extraordinary gain		80,201			16,888			103,649			42,892
Extraordinary gain, net of income tax expense		—			11,805			—			11,805
Net earnings		80,201			28,693			103,649			54,697
Series A Preferred Stock dividends		(1,002	)		(1,002	)		(2,004	)		(2,004	)
Series B Convertible Preferred Stock dividends		—			(419	)		(419	)		(838	)
Net earnings available to common shareholders – basic		79,199			27,272			101,226			51,855
Series B Convertible Preferred Stock dividends, if dilutive		—			419			419			838
Net earnings available to common shareholders – diluted	$	79,199		$	27,691		$	101,645		$	52,693

4

National Retail Properties, Inc.

(in thousands, except per share data)

	Quarter Ended June 30,				Six Months Ended June 30,
	2006		2005		2006		2005
Weighted average common shares outstanding:
Basic		57,259		52,164		56,368		52,035
Diluted		57,785		53,914		57,376		53,733
Net earnings per share available to common shareholders:
Basic:
Continuing operations	$	0.25	$	0.22	$	0.50	$	0.43
Discontinued operations		1.13		0.08		1.30		0.34
Extraordinary gain		—		0.22		—		0.23
Net earnings	$	1.38	$	0.52	$	1.80	$	1.00
Diluted:
Continuing operations	$	0.25	$	0.21	$	0.50	$	0.43
Discontinued operations		1.12		0.08		1.27		0.33
Extraordinary gain		—		0.22		—		0.22
Net earnings	$	1.37	$	0.51	$	1.77	$	0.98

5

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 June 30, 2006, as discontinued operations. The following is a summary of earnings from discontinued operations from the Investment Portfolio.

	Quarter Ended June 30,					Six Months Ended June 30,
	2006			2005		2006			2005
Revenues:
Rental and earned income	$	4,827		$	6,172	$	9,685		$	12,780
Real estate expense reimbursement from tenants		231			586		709			1,230
Interest and other income from real estate transactions		112			153		188			214
		5,170			6,911		10,582			14,224
Expenses:
General and administrative		67			68		97			101
Real estate		804			1,775		2,276			3,371
Depreciation and amortization		31			947		1,284			1,896
Impairment – real estate		420			575		420			1,978
Interest		672			1,261		1,959			2,454
		1,994			4,626		6,036			9,800
Loss on extinguishment of mortgage payable		(167	)		—		(167	)		—
Gain on disposition of real estate(Note 1)		59,501			16		64,452			9,801
Earnings from discontinued operations	$	62,510		$	2,301	$	68,831		$	14,225

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 June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Revenues:
Rental and earned income	$	2,076		$	711		$	4,002		$	1,145
Real estate expense reimbursement from tenants		102			7			150			38
Gain on disposition of real estate(Note 1)		2,566			2,592			3,726			4,654
Interest and other income from real estate transactions		—			64			—			191
		4,744			3,374			7,878			6,028
Expenses:
General and administrative		53			4			57			13
Real estate		108			37			133			136
Depreciation and amortization		—			10			—			21
Interest		5			252			141			520
		166			303			331			690
Income tax expense		(1,515	)		(1,157	)		(2,613	)		(2,010	)
Minority interest		(584	)		(23	)		(663	)		(43	)
Earnings from discontinued operations	$	2,479		$	1,891		$	4,271		$	3,285

6

National Retail Properties, Inc.

(in thousands, except per share data)

	Quarter Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Reconciliation of net earnings to FFO and FFO available to common shareholders:
Net earnings	$	80,201		$	28,693		$	103,649		$	54,697
Real estate depreciation and amortization:
Continuing operations		4,900			3,470			9,639			6,739
Discontinued operations		31			947			1,284			1,896
Partnership real estate depreciation		140			148			280			309
Partnership gain on sale of asset		(265	)		—			(265	)		—
Gain on disposition of real estate held for investment from discontinued operations		(59,501	)		(16	)		(64,452	)		(9,801	)
Extraordinary gain, net of income taxes		—			(11,805	)		—			(11,805	)
FFO		25,506			21,437			50,135			42,035
Series A Preferred Stock dividends		(1,002	)		(1,002	)		(2,004	)		(2,004	)
Series B Convertible Preferred Stock dividends		—			(419	)		(419	)		(838	)
FFO available to common shareholders – basic		24,504			20,016			47,712			39,193
Series B Convertible Preferred Stock dividends – if dilutive		—			419			419			838
FFO available to common shareholders - diluted	$	24,504		$	20,435		$	48,131		$	40,031
FFO per share:
Basic	$	0.43		$	0.38		$	0.85		$	0.75
Diluted	$	0.42		$	0.38		$	0.84		$	0.75

Note 1: Real Estate Disposition Summary

	Quarter Ended June 30,							Six Months Ended June 30,
	2006				2005			2006				2005
	# of Properties				# of Properties			# of Properties				# of Properties
Reconciliation of gain on disposition between continuing and discontinued operations:
Continuing operations	1	$	563		1	$	378	2	$	7,007		2	$	846
Discontinued operations:
Investment Portfolio	3		59,501		2		16	6		64,452		6		9,801
Inventory Portfolio	18		2,566		7		2,592	26		3,726		11		4,654
Minority interest, Inventory Portfolio	—		(787	)	—		—	—		(4,009	)	—		—
	22	$	61,843		10	$	2,986	34	$	71,176		19	$	15,301
Reconciliation of gain on disposition of type:
Inventory Portfolio:
Development	2	$	1,573		3	$	2,251	4	$	8,334		5	$	3,622
Exchange	17		1,468		5		633	24		2,275		8		1,739
Intercompany eliminations	—		88		—		86	—		124		—		139
Minority interest, Development	—		(787	)	—		—	—		(4,009	)	—		—
	19		2,342		8		2,970	28		6,724		13		5,500
Investment Portfolio	3		59,501		2		16	6		64,452		6		9,801
	22	$	61,843		10	$	2,986	34	$	71,176		19	$	15,301

7

National Retail Properties, Inc.

(in thousands)

Balance Sheet Summary

	June 30, 2006		December 31, 2005
	(unaudited)
Assets:
Cash and cash equivalents	$	4,682	$	8,234
Restricted cash		33,959		30,191
Receivables, net of allowance		7,797		8,547
Mortgages, notes and accrued interest receivable, net of allowance		24,328		51,086
Real estate, Investment Portfolio:
Accounted for using the operating method, net of accumulated depreciation and amortization and impairment		1,254,077		1,296,793
Accounted for using the direct financing method		89,061		95,704
Held for sale, net of impairment		1,180		1,600
Real estate, Inventory Portfolio held for sale		193,471		131,074
Mortgage residual interests, net of impairment		41,925		55,184
Accrued rental income, net of allowance		27,215		27,999
Other assets		22,827		27,004
Total assets	$	1,700,522	$	1,733,416
Liabilities and shareholders’ equity:
Line of credit payable		149,700		162,300
Mortgages payable		36,758		151,133
Notes payable – secured		26,250		28,250
Notes payable, net of unamortized discount		489,733		493,321
Financing lease obligation		26,041		26,041
Income tax liability		11,517		13,748
Other liabilities		25,082		25,957
Minority interest		4,979		4,939
Shareholders’ equity		930,462		828,087
Total liabilities and equity	$	1,700,522	$	1,733,416
Common shares outstanding		57,998		55,131
Gross leasable area, Investment Portfolio		8,872		9,227

8

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	June 30, 2006		December 31, 2005,
	(unaudited)		(unaudited)
Assets:
Cash and cash equivalents	$	1,387	$	2,200
Restricted cash		22,713		15,778
Receivables and other assets		5,794		6,632
Mortgage residual interests, net of impairment		41,925		55,184
	$	71,819	$	79,794
Liabilities:
Notes payable – secured	$	26,250	$	28,250
Income tax liability		11,855		14,551
Other liabilities		352		474
	$	38,457	$	43,275
Minority interest	$	3,986	$	3,682

Income Statement Summary	Quarter Ended June 30, 2006			Six Months Ended June 30, 2006			May 2, 2005 Through June 30, 2005
	(unaudited)			(unaudited)			(unaudited)
Revenues:
Interest income on mortgage residual interests	$	1,947		$	4,244		$	1,922
Interest and other income		404			800			144
		2,351			5,044			2,066
Expenses:
General and administrative		177			347			96
Impairment – mortgage residual interests		842			2,662			—
Interest		718			1,424			542
Amortization		66			133			44
		1,803			4,566			682
Income tax amortization		1,337			2,695			(254	)
Minority interest		(225	)		(304	)		(88	)
Net earnings	$	1,660		$	2,869		$	1,042

9

National Retail Properties, Inc.

Investment Portfolio

Top 20 Tenants

	Tenant	% of Total(1)
1.	Circle K (Susser)	8.2	%
2.	CVS	5.6	%
3.	Best Buy	4.3	%
4.	Uni-Mart	4.3	%
5.	Barnes & Noble	3.8	%
6.	OfficeMax	3.8	%
7.	Eckerd	3.4	%
8.	Academy	3.3	%
9.	The Sports Authority	2.7	%
10.	Road Ranger	2.5	%
11.	Majestic Liquors	2.3	%
12.	Borders Books	2.3	%
13.	Taco Bell	2.2	%
14.	United Rentals	2.1	%
15.	Quik Trip	1.6	%
16.	Circuit City	1.4	%
17.	Jared Jewelers	1.3	%
18.	Bed Bath & Beyond	1.3	%
19.	Food 4 Less	1.2	%
20.	CarMax	1.2	%

Top 10 States

	State	% of Total(1)
1.	Texas	23.6	%
2.	Florida	13.6	%
3.	Pennsylvania	5.8	%
4.	California	5.1	%
5.	Georgia	4.9	%
6.	Virginia	4.0	%
7.	Illinois	3.5	%
8.	Missouri	3.3	%
9.	Ohio	2.8	%
10.	New Jersey	2.6	%

Lease Expirations

	% of Total(1)		# of Properties	Gross Leasable Area(2)
2006	0.5	%	5	121,000
2007	1.8	%	18	236,000
2008	2.2	%	22	440,000
2009	2.6	%	24	475,000
2010	4.1	%	22	351,000
2011	3.7	%	20	389,000
2012	4.4	%	23	478,000
2013	6.0	%	29	682,000
2014	7.9	%	33	610,000
2015	5.2	%	24	627,000
2016	5.4	%	23	557,000
Thereafter	56.2	%	354	3,767,000

⁽¹⁾ Based on annual base rent of $136,739,000, which is the annualized base rent for all leases in place as of June 30, 2006.

⁽²⁾ Square feet.

10