Press release from PR Newswire
Third Quarter 2012 Operating Results Announced by National Retail Properties, Inc.
Monday, November 05, 2012
Third Quarter 2012 Operating Results Announced by National Retail Properties, Inc.08:30 EST Monday, November 05, 2012ORLANDO, Fla., Nov. 5, 2012 /PRNewswire/ -- National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced operating results for the quarter and nine months ended September 30, 2012. Highlights include:Operating Results:Revenues and net earnings, FFO, recurring FFO and AFFO available to common stockholders and diluted per share amounts:Quarter EndedNine Months EndedSeptember 30,September 30,2012201120122011(in thousands, except per share data)Revenues$85,013$66,626$244,856$188,729Net earnings available to common stockholders$33,253$20,936$85,588$59,666Net earnings per common share$0.30$0.24$0.79$0.69FFO available to common stockholders$57,044$34,623$142,595$98,196FFO per common share$0.52$0.39$1.32$1.15Recurring FFO available to common stockholders$47,409$35,238$138,578$99,207Recurring FFO per common share$0.43$0.40$1.28$1.16AFFO available to common stockholders$51,365$37,972$146,582$108,086AFFO per common share$0.47$0.43$1.36$1.27Portfolio occupancy was 97.9% at September 30, 2012, as compared to 97.4% at December 31, 2011, and 97.2% at September 30, 2011Investments and Dispositions for the quarter ended September 30, 2012:Investments: $139.6 million in the Property Portfolio, including acquiring 30 properties with an aggregate 575,000 square feet of gross leasable areaDispositions: 8 properties with net proceeds of $20.3 millionInvestments and Dispositions for the nine months ended September 30, 2012:Investments: $452.6 million in the Property Portfolio, including acquiring 124 properties with an aggregate 2,048,000 square feet of gross leasable areaDispositions: 18 properties with net proceeds of $32.1 millionCapital transactions for the quarter ended September 30, 2012:Issued 1,969,203 common shares generating $58.0 million of net proceeds Issued $325.0 million principal amount of 3.80% senior unsecured notes due 2022 generating net proceeds of $317.1 million received on August 14, 2012 Repayment of $18.2 million of maturing 6.90% mortgage From October 1, 2012 through November 2, 2012 approximately $100.6 million principal amount of the 3.95% convertible senior notes due 2026 had been surrendered for conversion, leaving approximately $38.1 million principal amount of the 3.95% notes outstandingNational Retail Properties announced an increase in 2012 FFO guidance from a range of $1.67 to $1.72 to a range of $1.71 to $1.73 per share excluding first quarter's $3.1 million preferred stock redemption charge, third quarter's $7.7 million income tax benefit and $2.0 million of non-recurring joint venture income and excluding any impairment charges. 2012 AFFO is estimated to be $1.81 to $1.83 per share. The change in guidance is primarily related to an increase in projected volume and timing of property acquisitions and recent capital markets activity. This FFO guidance equates to net earnings before any gains or losses from the sale of real estate, impairment charges and other items noted above of $1.03 to $1.05 per share plus $0.68 per share of expected real estate depreciation and amortization. The guidance is based on current plans and assumptions and subject to risks and uncertainties more fully described in this press release and the company's reports filed with the Securities and Exchange Commission.The Company also announced 2013 FFO guidance of $1.77 to $1.81 per share and estimated 2013 AFFO to be $1.86 to $1.90 per share. This FFO guidance equates to net earnings before any gains or losses from the sale of real estate and impairment charges of $1.07 to $1.11 per share plus $0.70 per share of expected real estate related depreciation and amortization. The guidance is based on current plans, assumptions, and estimates and is subject to the risks and uncertainties more fully described in this press release and the company's reports filed with the Securities and Exchange Commission.National Retail Properties, Inc. also announced that its 15% owned joint venture NNN Retail Properties Fund I, LLC sold all 21 convenience stores owned by the joint venture in the third quarter of 2012 for approximately $87.5 million. The investors' $33.3 million total equity investment produced approximately $61.6 million of total cash distributions from operations and net sale proceeds since the joint venture was formed in September 2007. Craig Macnab, Chief Executive Officer, commented: "As evidenced by our acquisition volume thus far this year, our team continues to identify attractive investment opportunities which enable us to deploy capital at initial yields well in excess of our cost of capital and drive very accretive results. These property acquisitions also further diversify our net lease retail portfolio. We are pleased with 2012's projected 9.6% increase in FFO per share results and the opportunity to continue the growth into 2013."National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases. As of September 30, 2012, the company owned 1,530 properties in 47 states with a gross leasable area of approximately 18.3 million square feet. For more information on the company, visit www.nnnreit.com.Management will hold a conference call on November 5, 2012, at 10:30 a.m. ET to review these results. The call can be accessed on the National Retail Properties 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 preferences and financial condition of our tenants, the availability of capital, risks related to our status as a REIT 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. 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 Properties 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.The reported results are preliminary and not final and there can be no assurance that the results will not vary from the final information filed on Form 10-Q with the SEC for the quarter ended September 30, 2012. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been 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 ("NAREIT") 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 certain assets, the company's share of these items from the company's unconsolidated partnerships and any impairment charges on a depreciable real estate asset.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. A reconciliation of net earnings (computed in accordance with GAAP) to FFO, as defined by NAREIT, is included in the financial information accompanying this release.Adjusted Funds From Operations ("AFFO") is a non-GAAP financial measure of operating performance used by many companies in the REIT industry. AFFO adjusts FFO for certain non-cash items that reduce or increase net income in accordance with GAAP. AFFO 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 AFFO a useful supplemental measure of the company's performance. The company's computation of AFFO may differ from the methodology for calculating AFFO used by other equity REITs, and therefore, may not be comparable to such other REITs. A reconciliation of net earnings (computed in accordance with GAAP) to AFFO is included in the financial information accompanying this release.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. The results of operations for prior periods for these properties now classified as discontinued operations have been restated to reflect the results in earnings from discontinued operations for comparability purposes. 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 stockholders are not affected.National Retail Properties, Inc.(in thousands, except per share data)(unaudited) Quarter EndedNine Months EndedSeptember 30,September 30,2012201120122011Income Statement SummaryRevenues:Rental and earned income$81,261$63,026$232,843$178,011Real estate expense reimbursement from tenants2,6472,4377,9676,859Interest and other income from real estate transactions5123811,9821,534Interest income on commercial mortgage residual interests5937822,0642,32585,01366,626244,856188,729Retail operations:Revenues?12,40219,00833,702Operating expenses?(11,563)(18,543)(32,175)Net?8394651,527Operating expenses:General and administrative8,6527,03623,27820,261Real estate3,8784,43412,43711,983Depreciation and amortization17,46514,77754,25341,707Impairment ? commercial mortgage residual interests valuation??2,718396Impairment losses and other charges7,261?7,296?37,25626,24799,98274,347Other expenses (revenues):Interest and other income(1,194)(457)(1,913)(1,083)Interest expense22,86620,08661,90555,26021,67219,62959,99254,177Income tax benefit (expense)7,426(68)7,190(258)Equity in earnings of unconsolidated affiliate3,7691094,074321Earnings from continuing operations37,28021,63096,61161,795Earnings from discontinued operations7109784,6792,936Earnings including noncontrolling interests37,99022,608101,29064,731Loss (earnings) attributable to noncontrolling interests:Continuing operations322087113Discontinued operations(7)4(24)(89)25246324Net earnings attributable to NNN38,01522,632101,35364,755Series C preferred stock dividends?(1,696)(1,979)(5,089)Series D preferred stock dividends(4,762)?(10,688)?Excess of redemption value over carrying value of preferred shares redeemed??(3,098)?Net earnings available to common stockholders$33,253$20,936$85,588$59,666National Retail Properties, Inc.(in thousands, except per share data)(unaudited)September 30,September 30,2012201120122011Weighted average common shares outstanding:Basic107,48887,109106,14084,897Diluted110,34087,788108,09285,439Net earnings per share available to common stockholders:Basic:Continuing operations$0.30$0.23$0.76$0.67Discontinued operations0.010.010.040.03Net earnings$0.31$0.24$0.80$0.70Diluted:Continuing operations$0.29$0.23$0.75$0.66Discontinued operations0.010.010.040.03Net earnings$0.30$0.24$0.79$0.69 National Retail Properties, Inc.(in thousands, except per share data)(unaudited) Quarter EndedNine Months EndedSeptember 30,September 30,2012201120122011Funds From Operations (FFO) Reconciliation:Net earnings available to common stockholders$33,253$20,936$85,588$59,666Real estate depreciation and amortization:Continuing operations19,08613,42654,18637,792Discontinued operations54225453699Joint venture real estate depreciation2344112133Joint venture gain on disposition of real estate(2,341)?(2,341)?Gain on disposition of real estate(1,694)(8)(4,446)(94)Impairment losses - real estate8,663?9,043?Total FFO adjustments23,79113,68757,00738,530FFO available to common stockholders$57,044$34,623$142,595$98,196FFO per share:Basic$0.53$0.40$1.34$1.16Diluted$0.52$0.39$1.32$1.15Recurring Funds from Operations Reconciliation:Net earnings available to common shareholders$33,253$20,936$85,588$59,666Total FFO Adjustments23,79113,68757,00738,530FFO available to common shareholders57,04434,623142,59598,196Excess of redemption value over carrying value of preferred share redemption??3,098?Impairment losses and other charges, net of recoveries?6152,5201,011Income tax benefit(7,671)?(7,671)?Joint venture disposition fee and promote income(1,964)?(1,964)?Total Recurring FFO adjustments(9,635)615(4,017)1,011Recurring FFO available to common shareholders$47,409$35,238$138,578$99,207Recurring FFO per share:Basic$0.44$0.40$1.31$1.17Diluted$0.43$0.40$1.28$1.16National Retail Properties, Inc.(in thousands, except per share data)(unaudited)Quarter EndedNine Months EndedSeptember 30,September 30,2012201120122011Adjusted Funds From Operations (AFFO) Reconciliation:Net earnings available to common shareholders$33,253$20,936$85,588$59,666Total FFO Adjustments23,79113,68757,00738,530Total Recurring FFO adjustments(9,635)615(4,017)1,011Recurring FFO available to common stockholders47,40935,238138,57899,207Straight line accrued rent(528)(105)(1,058)(55)Net capital lease rent adjustment4143891,2221,191Below market rent amortization(628)(278)(1,865)(491)Stock based compensation expense1,9881,4285,7564,269Capitalized interest expense(336)(278)(1,204)(846)Convertible debt interest expense1,0821,5783,1894,811Joint venture disposition fee and promote income1,964?1,964?Total AFFO adjustments3,9562,7348,0048,879AFFO available to common stockholders$51,365$37,972$146,582$108,086AFFO per share:Basic$0.48$0.44$1.38$1.27Diluted$0.47$0.43$1.36$1.27Other Information:Percentage rent$242$230$572$476Amortization of debt costs$850$1,310$2,506$3,790Scheduled debt principal amortization (excluding maturities)$252$274$931$815Non-real estate depreciation expense$40$46$80$141 National Retail Properties, Inc.(in thousands)(unaudited) Earnings from Discontinued Operations: NNN classified the revenues and expenses related to properties which were sold or were held for sale as of September 30, 2012 and generated revenue, as discontinued operations. The following is a summary of the earnings from discontinued operations.Quarter EndedNine Months EndedSeptember 30,September 30,2012201120122011Revenues:Rental and earned income$1,011$2,182$4,078$5,606Interest and other income from real estate transactions1381444175141,1492,3264,4956,120Expenses:General and administrative341111Real estate269283785929Depreciation and amortization78248525766Impairment losses - real estate1,4024311,747431Interest3563451,0721,0252,1081,3114,1403,162Gain on disposition of real estate1,69484,446140Income tax expense(25)(45)(122)(162)Earnings from discontinued operations including noncontrolling interests7109784,6792,936Loss (earnings) attributable to noncontrolling interests(7)4(24)(89)Earnings from discontinued operations attributable to NNN$703$982$4,655$2,847 National Retail Properties, Inc.(in thousands)(unaudited) September 30, 2012December 31, 2011Balance Sheet SummaryAssets:Cash and cash equivalents$141,446$2,082Receivables, net of allowance1,2202,149Investment in unconsolidated affiliate?4,358Mortgages, notes and accrued interest receivable29,68233,428Real estate:Accounted for using the operating method, net of accumulated depreciation and amortization3,565,7823,211,022Accounted for using the direct financing method24,53926,518Real estate held for sale53,36150,202Commercial mortgage residual interests12,50815,299Accrued rental income, net of allowance25,80625,187Other assets79,85464,184Total assets$3,934,198$3,434,429Liabilities:Line of credit payable$?$65,600Mortgages payable, net of unamortized premium10,87323,171Notes payable - convertible, net of unamortized discount358,561355,371Notes payable, net of unamortized discount1,165,429894,967Other liabilities121,25791,444Total liabilities1,656,1201,430,553Stockholders' equity of NNN2,276,7632,002,498Noncontrolling interests1,3151,378Total equity2,278,0782,003,876Total liabilities and equity$3,934,198$3,434,429Common shares outstanding109,422104,755Gross leasable area, Property Portfolio (square feet)18,33116,428 NNN Retail Properties Fund I LLC(in thousands) (unaudited) In September 2007, the company entered into a joint venture, NNN Retail Properties Fund I LLC, with an affiliate of Crow Holdings Realty Partners IV, L.P. The company owns a 15% equity interest, and the following summary represents the Balance Sheet and Income Statement Summary for the joint venture. The company's investment in the joint venture is included in the company's Balance Sheet Summary under "Investment in unconsolidated affiliate." The joint venture sold all 21 convenience store properties it owned in the third quarter of 2012 for approximately $87.5 million. The investors' $33.3 million total equity investment produced approximately $61.6 million of total cash distributions from operations and net sale proceeds over the life of the joint venture.September 30, 2012December 31, 2011Assets:Cash and cash equivalents$256$307Receivables?200Real estate?70,911Other assets?402$256$71,820Liabilities:Notes payable$?$42,700Other liabilities23165Total liabilities23142,765Members' equity2529,055Total liabilities and equity$256$71,820 Quarter EndedNine Months EndedSeptember 30,September 30,2012201120122011Revenues:Rental income$1,028$1,565$4,158$4,695Expenses:General and administrative25473441259Real estate1742514Depreciation and amortization1873698331,106Interest1244595061,3655829051,8052,744Gain on disposition of real estate15,609?15,609?Net earnings$16,055$660$17,962$1,951 National Retail Properties, Inc.Property Portfolio Top 20 Lines of TradeAs of September 30,Line of Trade 2012(1) 2011(2)1.Convenience stores21.6%21.4%2.Restaurants - full service11.3%9.9%3.Automotive service6.4%5.2%4.Automotive parts5.8%7.1%5.Theaters4.5%5.5%6.Sporting goods4.5%5.4%7.Wholesale clubs3.6%4.4%8.Restaurants - limited service3.5%3.6%9.Home improvement3.2%1.2%10.Drug stores3.2%3.4%11.Consumer electronics3.1%3.8%12.Recreational vehicle dealers, parts and accessories2.9%1.8%13.Health and fitness2.8%2.8%14.Travel plazas2.3%2.0%15.Family entertainment centers2.1%2.1%16.Books1.9%2.3%17.Grocery1.8%2.3%18.Home furnishings1.5%0.9%19.General merchandise1.3%1.2%20.Office supplies1.2%1.7%Other11.5%12.0%Total100.0%100.0% Top 10 StatesState% of Total(1)State% of Total(1)1.Texas21.8%6.California4.5%2.Florida9.2%7.Ohio3.5%3.Illinois5.6%8.Virginia3.4%4.North Carolina5.3%9.Indiana3.3%5.Georgia4.6%10.Pennsylvania3.1%(1) Based on the annualized base rent for all leases in place as of September 30, 2012.(2) Based on the annualized base rent for all leases in place as of September 30, 2011. National Retail Properties, Inc.Property PortfolioTop TenantsProperties% of Total (1)Pantry956.0%Susser865.7%CL Thomas664.8%AMC Theatre153.8%Mister Car Wash623.7%BJ's Wholesale Club73.6%Best Buy193.0%Camping World202.9%LA Fitness112.7%Gander Mountain92.6%Pull-A-Part202.4%Road Ranger272.4%Bloomin' Brands (Outback)342.3%Logan's Roadhouse312.2%Pep Boys172.2% Lease Expirations(2)% of Total(1) # ofPropertiesGross LeasableArea (3)% of Total(1) # ofPropertiesGross Leasable Area (3)20120.3%6103,00020184.1%491,108,00020132.2%34623,00020192.9%42704,00020142.9%42582,00020203.5%92867,00020152.8%71960,00020215.0%91791,00020162.0%39610,00020228.7%1021,091,00020174.0%471,003,000Thereafter61.6%8759,313,000(1) Based on the annual base rent of $335,417,000, which is the annualized base rent for all leases in place as of September 30, 2012.(2) As of September 30, 2012, the weighted average remaining lease term is 12 years.(3) Square feet. SOURCE National Retail Properties, Inc.For further information: Kevin B. Habicht, Chief Financial Officer, +1-407-265-7348