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
      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

    LOGO

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.

 

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