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: January 31, 2007

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 January 31, 2007, National Retail Properties, Inc. issued a press release announcing its results of operations and financial condition for the quarter and year ended December 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.

(d) Exhibits.

99.1 Press Release, dated January 31, 2007, 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 hereunto duly authorized.

	National Retail Properties, Inc.
Dated: January 31, 2007	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 January 31, 2007, 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
	January 31, 2007

RECORD OPERATING RESULTS

ANNOUNCED BY NATIONAL RETAIL PROPERTIES, INC.

Orlando, Florida, January 31, 2007 – National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced record operating results for the quarter and year ended December 31, 2006. Annual revenues increased 27.3% and Funds From Operations (“FFO”) per share increased 11.3% compared to 2005. For the quarter ended December 31, 2006 revenues increased 27.9% and FFO per share increased 27.8% compared to the quarter ended December 31, 2005. Highlights include:

Operating Results:

• Revenues and net earnings and FFO available to common shareholders:

	Quarter Ended December 31,				Year Ended December 31,
	2006		2005		2006		2005
	(in thousands, except per share data)
Revenues	$	41,578	$	32,517	$	150,788	$	118,422
Net earnings available to common shareholders	$	55,108	$	16,751	$	177,206	$	85,392
Net earnings per common share (diluted)	$	0.93	$	0.31	$	3.05	$	1.56
FFO available to common shareholders	$	27,073	$	19,560	$	97,121	$	81,803
FFO per common share (diluted)	$	0.46	$	0.36	$	1.67	$	1.50

• Investment Portfolio occupancy was 98.2% at December 31, 2006.

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

• Investments:

• $104.4 million in the Investment Portfolio, including acquiring 38 properties with an aggregate 272,000 square feet of gross leasable area

• $69.7 million in the Inventory Portfolio, including acquiring 13 properties

• Dispositions:

• 19 Investment properties with an aggregate 254,000 square feet of gross leasable area, with net proceeds of $54.3 million, resulting in a gain of $22.8 million

• 18 Inventory properties with net proceeds of $42.4 million

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

Investments and Dispositions for the year ended December 31, 2006:

• Investments:

• $371.9 million in the Investment Portfolio, including acquiring 213 properties with an aggregate 1,130,000 square feet of gross leasable area

• $201.1 million in the Inventory Portfolio, including acquiring 93 properties

• Dispositions:

• 30 Investment properties with an aggregate 1,015,000 square feet of gross leasable area, with net proceeds of $319.4 million, resulting in a gain of $91.3 million

• 64 Inventory properties with net proceeds of $114.2 million

Capital transactions for the quarter ended December 31, 2006:

• Issued 1,043,571 shares of common stock generating $23.1 million of net proceeds pursuant to the Dividend Reinvestment and Stock Purchase Plan

• Issued 3,680,000 depositary shares of 7.375% Series C Redeemable Preferred Stock generating $88.9 million of net proceeds

Craig Macnab, Chief Executive Officer commented, “2006 was an outstanding year for National Retail Properties. We were pleased to have added more than 200 retail net lease properties and we already have a strong pipeline of accretive acquisitions in place for the first half of 2007. Our team continues to focus on consistent and meaningful FFO per share growth, our fully diversified Investment Portfolio is in great shape and our balance sheet has plenty of capacity for future growth. With the visibility that we have for the first half of the year, I am optimistic that 2007 will be another record year for NNN.”

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases. As of December 31, 2006, the company owned 710 Investment properties in 44 states with a gross leasable area of approximately 9.3 million square feet. For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on January 31^st at 10:30 a.m. EST to review these results. The call can be accessed on National Retail’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, 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)

	Quarter Ended December 31,						Year Ended December 31,
Income Statement Summary	2006			2005			2006			2005
Revenues:
Rental and earned income	$	37,657		$	27,051		$	134,196		$	100,836
Real estate expense reimbursement from tenants		1,911			1,583			4,862			4,094
Interest and other income from real estate transactions		679			1,253			4,462			6,143
Interest income on mortgage residual interests		1,331			2,630			7,268			7,349
		41,578			32,517			150,788			118,422
Disposition of real estate, Inventory Portfolio:
Gross proceeds		14,790			7,030			36,705			13,569
Costs		(13,906	)		(5,728	)		(28,705	)		(11,559	)
Gain		884			1,302			8,000			2,010
Operating expenses:
General and administrative		6,034			6,213			24,012			22,418
Real estate		2,591			2,212			7,088			5,938
Depreciation and amortization		6,650			5,045			22,971			16,792
Impairment – real estate, Investment Portfolio		—			—			—			1,673
Impairment – mortgage residual interests valuation adjustments		—			2,382			8,779			2,382
Restructuring costs		—			—			1,580			—
		15,275			15,852			64,430			49,203
Other expenses (revenues):
Interest and other income		(1,148	)		(860	)		(3,815	)		(2,039	)
Interest expense		10,820			9,991			45,874			33,309
		9,672			9,131			42,059			31,270
Income tax benefit		2,706			1,407			11,143			2,778
Minority interest		202			(102	)		(1,399	)		137
Equity in earnings (losses) of unconsolidated affiliates		3			(82	)		122			1,209
Gain on disposition of equity investment		11,373			—			11,373			—
Earnings from continuing operations		31,799			10,059			73,538			44,083
Earnings from discontinued operations:
Real estate, Investment Portfolio		23,246			3,179			100,925			21,151
Real estate, Inventory Portfolio, net of income tax expense and minority interest		2,356			1,954			8,042			9,380
		25,602			5,133			108,967			30,531
Earnings before extraordinary gain		57,401			15,192			182,505			74,614
Extraordinary gain		—			2,980			—			14,786
Net earnings		57,401			18,172			182,505			89,400
Series A Preferred Stock dividends		(1,370	)		(1,002	)		(4,376	)		(4,008	)
Series B Convertible Preferred Stock dividends		—			(419	)		(419	)		(1,675	)
Series C Redeemable Preferred Stock dividends		(923	)		—			(923	)		—
Net earnings available to common shareholders – basic		55,108			16,751			176,787			83,717
Series B Convertible Preferred Stock dividends, if dilutive		—			—			419			1,675
Net earnings available to common shareholders – diluted	$	55,108		$	16,751		$	177,206		$	85,392

4

National Retail Properties, Inc.

(in thousands, except per share data)

	Quarter Ended December 31,						Year Ended December 31,
	2006			2005			2006			2005
Weighted average common shares outstanding:
Basic		58,936			54,160			57,428			52,985
Diluted		59,201			54,508			58,080			54,640
Net earnings per share available to common shareholders:
Basic:
Continuing operations	$	0.50		$	0.16		$	1.18		$	0.72
Discontinued operations		0.43			0.09			1.90			0.58
Extraordinary gain		—			0.06			—			0.28
Net earnings	$	0.93		$	0.31		$	3.08		$	1.58
Diluted:
Continuing operations	$	0.50		$	0.16		$	1.17		$	0.73
Discontinued operations		0.43			0.09			1.88			0.56
Extraordinary gain		—			0.06			—			0.27
Net earnings	$	0.93		$	0.31		$	3.05		$	1.56
Supplemental Information:
Contingent percentage rent	$	197		$	10		$	766		$	486
Earned income from direct financing leases	$	2,096		$	2,527		$	9,192		$	10,519
Decrease in real estate classified as direct financing leases		(2,798	)		(3,266	)		(12,174	)		(13,434	)
Net direct financing lease adjustment		(702	)		(739	)		(2,982	)		(2,915	)
Accrued rental income		840			501			5,819			(552	)
Net lease accounting adjustments	$	138		$	(238	)	$	2,837		$	(3,467	)
Net Inventory Portfolio gain on disposition	$	2,435		$	3,940		$	9,666		$	15,628
Capitalized interest	$	666		$	464		$	2,278		$	2,563
Scheduled debt principal amortization (excluding maturities)	$	439		$	911		$	2,036		$	3,848

5

National Retail Properties, Inc.

(in thousands, except per share data)

	Quarter Ended December 31,						Year Ended December 31,
Reconciliation of net earnings to FFO and FFO available to common shareholders:	2006			2005			2006			2005
Net earnings	$	57,401		$	18,172		$	182,505		$	89,400
Real estate depreciation and amortization:
Continuing operations		6,042			4,332			20,874			14,871
Discontinued operations		12			1,413			1,545			5,536
Partnership real estate depreciation		45			148			463			606
Partnership gain on sale of asset		3			—			(262	)		—
Gain on disposition of equity investment		(11,373	)		—			(11,373	)		—
Gain on disposition of real estate Investment Portfolio		(22,764	)		(104	)		(91,332	)		(9,816	)
Extraordinary gain		—			(2,980	)		—			(14,786	)
FFO		29,366			20,981			102,420			85,811
Series A Preferred Stock dividends		(1,370	)		(1,002	)		(4,376	)		(4,008	)
Series B Convertible Preferred Stock dividends		—			(419	)		(419	)		(1,675	)
Series C Redeemable Preferred Stock dividends		(923	)		—			(923	)		—
FFO available to common shareholders – basic		27,073			19,560			96,702			80,128
Series B Convertible Preferred Stock dividends – if dilutive		—			—			419			1,675
FFO available to common shareholders – diluted	$	27,073		$	19,560		$	97,121		$	81,803
FFO per share:
Basic	$	0.46		$	0.36		$	1.68		$	1.51
Diluted	$	0.46		$	0.36		$	1.67		$	1.50

	Quarter Ended December 31,								Year Ended December 31,
	2006				2005				2006				2005
Real Estate Disposition Summary	# of Properties				# of Properties				# of Properties				# of Properties
Reconciliation of gain on disposition between continuing and discontinued operations:
Continuing operations	3	$	884		3	$	1,302		6	$	8,000		6	$	2,010
Discontinued operations:
Investment Portfolio	19		22,764		3		104		30		91,332		12		9,816
Inventory Portfolio	15		1,656		7		3,244		58		5,780		22		19,617
Minority interest, Inventory Portfolio	—		(105	)	—		(606	)	—		(4,114	)	—		(5,999	)
	37	$	25,199		13	$	4,044		94	$	100,998		40	$	25,444
Reconciliation of gain on disposition of type:
Inventory Portfolio:
Development	4	$	1,255		4	$	3,502		9	$	9,698		12	$	18,065
Exchange	14		1,219		6		688		55		3,892		16		2,641
Intercompany eliminations	—		66		—		356		—		190		—		921
Minority interest, Development	—		(105	)	—		(606	)	—		(4,114	)	—		(5,999	)
Total NNN TRS gain	18		2,435		10		3,940		64		9,666		28		15,628
Investment Portfolio	19		22,764		3		104		30		91,332		12		9,816
	37	$	25,199		13	$	4,044		94	$	100,998		40	$	25,444

6

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 December 31, 2006, as discontinued operations. The following is a summary of earnings from discontinued operations from the Investment Portfolio.

	Quarter Ended December 31,				Year Ended December 31,
	2006		2005		2006			2005
Revenues:
Rental and earned income	$	441	$	6,681	$	15,249		$	25,781
Real estate expense reimbursement from tenants		42		546		834			2,256
Interest and other income from real estate transactions		53		125		308			358
		536		7,352		16,391			28,395
Expenses:
General and administrative		—		65		93			(82	)
Real estate		42		1,840		2,484			6,411
Depreciation and amortization		12		1,413		1,545			5,536
Impairment – real estate		—		—		693			2,056
Interest		—		959		1,816			3,139
		54		4,277		6,631			17,060
Loss on extinguishment of mortgage payable		—		—		(167	)		—
Gain on disposition of real estate		22,764		104		91,332			9,816
Earnings from discontinued operations	$	23,246	$	3,179	$	100,925		$	21,151

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 December 31,						Year Ended December 31,
	2006			2005			2006			2005
Revenues:
Rental income	$	2,589		$	598		$	9,235		$	1,992
Real estate expense reimbursement from tenants		90			30			311			69
Interest and other income from real estate transactions		336			43			336			899
		3,015			671			9,882			2,960
Disposition of real estate:
Gross proceeds		29,101			15,508			80,856			70,967
Costs		(27,445	)		(12,264	)		(75,076	)		(51,350	)
Gain		1,656			3,244			5,780			19,617
Expenses:
General and administrative		35			—			57			8
Real estate		124			48			365			318
Depreciation and amortization		8			—			8			21
Interest		428			108			1,047			815
		595			156			1,477			1,162
Income tax expense		(1,442	)		(1,195	)		(4,920	)		(5,739	)
Minority interest		(278	)		(610	)		(1,223	)		(6,296	)
Earnings from discontinued operations	$	2,356		$	1,954		$	8,042		$	9,380

7

National Retail Properties, Inc.

(in thousands)

Balance Sheet Summary	December 31, 2006		December 31, 2005
Assets:
Cash and cash equivalents	$	1,675	$	8,234
Restricted cash		36,587		30,191
Receivables, net of allowance		7,915		8,547
Mortgages, notes and accrued interest receivable, net of allowance		30,945		51,086
Real estate, Investment Portfolio:
Accounted for using the operating method, net of accumulated depreciation and amortization:
Held for investment		1,439,002		1,297,254
Held for sale		1,994		1,139
Accounted for using the direct financing method:
Held for investment		70,683		94,134
Held for sale		651		1,570
Real estate, Inventory Portfolio held for sale		228,159		131,074
Mortgage residual interests		31,512		55,184
Accrued rental income, net of allowance		26,413		27,999
Other assets		41,249		27,004
Total assets	$	1,916,785	$	1,733,416
Liabilities and shareholders’ equity:
Line of credit payable		28,000		162,300
Mortgages payable		35,892		151,133
Notes payable – secured		24,500		28,250
Notes payable – convertible		172,500		—
Notes payable, net of unamortized discount		489,804		493,321
Financing lease obligation		26,041		26,041
Income tax liability		6,340		13,748
Other liabilities		36,105		25,597
Minority interest		1,098		4,939
Shareholders’ equity		1,096,505		828,087
Total liabilities and equity	$	1,916,785	$	1,733,416
Common shares outstanding		59,823		55,131
Gross leasable area, Investment Portfolio		9,341		9,227

8

Orange Avenue Mortgage Investments, Inc.

(in thousands)

In May 2005, the company acquired a 78.9 percent equity investment of OAMI for $9.4 million. The company’s 78.9 percent share of OAMI’s net cash flow has been over $17 million since May 2005. The following summary represents the balances related to OAMI included in the company’s Balance Sheet and Income Statement Summary:

	December 31, 2006		December 31, 2005
Assets:
Cash and cash equivalents	$	823	$	2,200
Restricted cash		17,165		15,778
Receivables and other assets		5,246		6,632
Mortgage residual interests		31,512		55,184
	$	54,746	$	79,794
Liabilities:
Notes payable – secured	$	24,500	$	28,250
Income tax liability		9,480		14,551
Other liabilities		410		474
	$	34,390	$	43,275
Minority interest	$	1,217	$	3,682

	Quarter Ended December 31,					Year Ended December 31, 2006			May 2, 2005 Through December 31, 2005
	2006		2005
Revenues:
Interest income on mortgage residual interests	$	1,331	$	2,630		$	7,268		$	7,349
Interest and other income		478		453			1,659			825
		1,809		3,083			8,927			8,174
Expenses:
General and administrative		118		208			539			397
Amortization		67		66			266			177
Impairment – mortgage residual interests valuation adjustments		—		2,382			8,779			2,382
Interest		672		767			2,768			2,076
		857		3,423			12,352			5,032
Income tax benefit		—		686			—			28
Income tax amortization		994		—			5,070			—
Minority interest		284		(151	)		(353	)		(378	)
Net earnings	$	2,230	$	195		$	1,292		$	2,792

9

National Retail Properties, Inc.

Investment Portfolio

Top 20 Lines of Trade

		December 31,
	Line of Trade	2006 (1)	2005 (2)
1.	Convenience stores	16.3%	12.1%
2.	Restaurants – full service	12.1%	6.6%
3.	Drug stores	8.3%	10.0%
4.	Sporting goods	7.3%	7.4%
5.	Books	5.7%	5.8%
6.	Grocery	5.7%	6.3%
7.	Consumer electronics	5.6%	5.9%
8.	Restaurants – limited service	4.7%	3.0%
9.	Furniture	4.2%	4.7%
10.	Office supplies	4.1%	4.4%
11.	Travel plazas	3.7%	0.5%
12.	General merchandise	2.8%	2.6%
13.	Beer, wine and liquor	2.1%	2.1%
14.	Auto dealerships	2.1%	2.1%
15.	Equipment rental	1.9%	2.0%
16.	Home furnishings	1.9%	2.4%
17.	Automotive parts	1.6%	0.1%
18.	Craft, fabric and novelty	1.5%	1.4%
19.	Home improvement	1.4%	1.4%
20.	Jewelry	1.2%	1.2%
	Other	5.8%	18.0%
	Total	100.0%	100.0%

Top 10 States

	State	% of Total(1)
1.	Texas	22.2%
2.	Florida	13.4%
3.	Pennsylvania	5.4%
4.	Georgia	5.1%
5.	Virginia	3.9%
6.	California	3.7%
7.	Tennessee	3.5%
8.	Illinois	3.4%
9.	Missouri	3.3%
10.	Ohio	3.0%

Lease Expirations

	% of Total(1)	# of Properties	Gross Leasable Area(3)
2007	1.2%	13	206,000
2008	1.8%	22	406,000
2009	2.6%	25	490,000
2010	3.9%	36	383,000
2011	3.8%	23	439,000
2012	4.6%	30	531,000
2013	5.6%	30	690,000
2014	7.3%	39	591,000
2015	4.6%	22	621,000
2016	4.2%	22	508,000
2017	7.2%	28	808,000
Thereafter	53.2%	407	3,500,000

⁽¹⁾ Based on annual base rent of $149,941,000, which is the annualized base rent for all leases in place as of December 31, 2006.

⁽²⁾ 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.

⁽³⁾ Square feet.

10