PR Newswire | Nov 2, 2020 08:31AM EST

Inc.

11/02 07:30 CST

Third Quarter 2020 Operating Results Announced By National Retail Properties, Inc. ORLANDO, Fla., Nov. 2, 2020

ORLANDO, Fla., Nov. 2, 2020 /PRNewswire/ -- National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced its operating results for the quarter and nine months ended September 30, 2020. Highlights include:

Operating Results:

* Revenues and net earnings, FFO, Core FFO and AFFO available to common stockholders and diluted per share amounts:

Quarter Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

(in thousands, except per share data)

Revenues $158,633 $168,607 $497,397 $497,111



Net earnings available to common stockholders $51,584 ^(1) $58,111 $154,057 ^(1) $199,648

Net earnings per common share $0.30 ^(1) $0.35 $0.89 ^(1) $1.22



FFO available to common stockholders $106,423 $115,013 $320,670 $336,215

FFO per common share $0.62 $0.70 $1.87 $2.06



Core FFO available to common stockholders $106,423 $115,013 $337,349 $334,884

Core FFO per common share $0.62 $0.70 $1.96 $2.05



AFFO available to common stockholders $106,690 ^(2) $116,870 $311,680 ^(2) $340,119

AFFO per common share $0.62 ^(2) $0.71 $1.81 ^(2) $2.09



^(1) Includes a write-off of $14,758 (or $0.09 per share) of receivables due to reclassifying certain tenants as cash basis for accounting purposes during the quarter and nine months ended September 30, 2020.

^(2) For the quarter and nine months ended September 30, 2020, amounts exclude $8,499 and $38,938, respectively, of net straight-line accrued rent, resulting from the COVID-19 rent deferral lease amendments. Including the straight-line rent would result in AFFO per common share of $0.67 and $2.04 for the quarter and nine months ended September 30, 2020, respectively.

Third Quarter 2020 Highlights:

* As of October 28, 2020, NNN had collected approximately 90% of rent originally due for the quarter ended September 30, 2020, and approximately 94% of rent originally due in October 2020 * Portfolio occupancy was 98.4% at September 30, 2020 as compared to 98.7% at June 30, 2020 and 98.8% at March 31, 2020 * Ended the quarter with $294.9 million of cash and no amounts drawn on $900 million bank credit facility * Invested $3.9 million in property investments, and completed construction with an aggregate 16,000 square feet of gross leasable area * Sold 3 properties for $2.4 million producing $0.1 million of gains on sales * Raised $10.9 million net proceeds from the issuance of 305,115 common shares

Highlights for the nine months ended September 30, 2020:

* Invested $78.0 million in property investments, including the acquisition of 21 properties with an aggregate 299,000 square feet of gross leasable area at an initial cash yield of 6.8% * Sold 25 properties for $42.5 million producing $13.6 million of gains on sales * Raised $64.2 million net proceeds from the issuance of 1,756,338 common shares * Issued $400 million principal amount of 2.50% senior unsecured notes due 2030 generating net proceeds of $395.1 million * Issued $300 million principal amount of 3.10% senior unsecured notes due 2050 generating net proceeds of $290.5 million * Paid off $325 million principal amount of 3.800% senior unsecured notes due 2022

NNN is actively working with its tenants that have been impacted by the COVID-19 pandemic. As of October 28, 2020, NNN had collected approximately 90% of rent originally due for the quarter ended September 30, 2020, and approximately 94% of rent originally due in October 2020.

As a result of the COVID-19 pandemic, as of September 30, 2020, NNN has entered into rent deferral lease amendments with certain tenants representing approximately 6% of the annual rent originally due for the year ending December 31, 2020. On average, 2.7 months of rent was deferred with approximately 77% of deferred rent originally due in the second quarter of 2020 and 23% originally due in the third quarter of 2020. Approximately 66% of this deferred rent is due to be paid to NNN by June 30, 2021 and 89% is due by December 31, 2021.

Jay Whitehurst, Chief Executive Officer, commented: "The third quarter of 2020 marks the 31st consecutive year of increased common stock dividends for National Retail Properties. This impressive record has been matched by only two other REITs, and by less than 90 US public companies. Our liquidity position remains very solid, with almost $300M of cash in the bank and no amounts drawn on our $900M line of credit. Rent collections continued to trend positively as we collected 90% of rent due for the third quarter and 94% of rent for the month of October. After taking a pause in acquisitions during the height of the pandemic and related store closures, our pipeline of acquisitions is beginning to grow, primarily driven by new transactions with our existing relationship tenants. Lastly, and most importantly, our associates have remained healthy, energized and productive during this year of unforeseen challenges."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases. As of September 30, 2020, the company owned 3,114 properties in 48 states with a gross leasable area of approximately 32.4 million square feet and with a weighted average remaining lease term of 10.7 years. For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on November 2, 2020, 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. These statements generally are characterized by the use of terms such as "believe," "expect," "intend," "may," "estimated," or other similar words or expressions. 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, the potential impacts of the COVID-19 pandemic on the company's business operations, financial results and financial position and on the world economy, general economic conditions, local real estate conditions, changes in interest rates, increases in operating costs, the preferences and financial condition of the company's tenants, the availability of capital, and, risks related to the company's status as a REIT. Additional information concerning these and other factors that could cause actual results to differ materially from these forward-looking statements is contained from time to time in the company's Securities and Exchange Commission (the "Commission") filings, including, but not limited to, the company's (i) Annual Report on Form 10-K for the year ended December 31, 2019 and (ii) Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, 2020. Copies of each filing may be obtained from the company or the Commission. 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, Inc. 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 ("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), any applicable taxes and noncontrolling interests 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.

Core Funds From Operations ("Core FFO") is a non-GAAP measure of operating performance that adjusts FFO to eliminate the impact of certain GAAP income and expense amounts that the company believes are infrequent and unusual in nature and/or not related to its core real estate operations. Exclusion of these items from similar FFO-type metrics is common within the REIT industry, and management believes that presentation of Core FFO provides investors with a potential metric to assist in their evaluation of the company's operating performance across multiple periods and in comparison to the operating performance of its peers because it removes the effect of unusual items that are not expected to impact the company's operating performance on an ongoing basis. Core FFO is used by management in evaluating the performance of the company's core business operations and is a factor in determining management compensation. Items included in calculating FFO that may be excluded in calculating Core FFO may include items like transaction related gains, income or expense, impairments on land or commercial mortgage residual interests, preferred stock redemption costs or other non-core amounts as they occur. The company's computation of Core FFO may differ from the methodology for calculating Core 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 Core FFO 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.

National Retail Properties, Inc. (in thousands, except per share data) (unaudited)



Quarter Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Income Statement Summary



Revenues:

Rental income $157,865 $168,224 $495,891 $495,846

Interest and other income from real estate transactions 768 383 1,506 1,265

158,633 168,607 497,397 497,111



Operating expenses:

General and administrative 9,419 8,726 28,914 27,524

Real estate 6,345 6,706 20,304 20,398

Depreciation and amortization 49,404 48,348 147,528 140,769

Leasing transaction costs - 51 36 178

Impairment losses - real estate, net of recoveries 5,695 10,692 33,062 21,124

70,863 74,523 229,844 209,993

Gain on disposition of real estate 148 2,061 13,637 25,508

Earnings from operations 87,918 96,145 281,190 312,626



Other expenses (revenues):

Interest and other income (74) (501) (345) (2,912)

Interest expense^(1) 31,924 29,948 97,347 89,716

Loss on early extinguishment of debt - - 16,679 -

31,850 29,447 113,681 86,804



Net earnings 56,068 66,698 167,509 225,822

Loss (earnings) attributable to noncontrolling interests 1 (5) 3 (428)



Net earnings attributable to NNN 56,069 66,693 167,512 225,394

Series E preferred stock dividends - (4,097) - (12,291)

Series F preferred stock dividends (4,485) (4,485) (13,455) (13,455)

Net earnings available to common stockholders $51,584 $58,111 $154,057 $199,648



Weighted average common shares outstanding:

Basic 172,681 164,884 171,707 162,641

Diluted 172,782 165,362 171,815 163,126



Net earnings per share available to common stockholders:

Basic $0.30 $0.35 $0.89 $1.23

Diluted $0.30 $0.35 $0.89 $1.22



^(1) Includes $2,291 in connection with the early redemption of 3.80% senior unsecured notes due 2022 for the nine months ended September 30, 2020.

National Retail Properties, Inc. (in thousands, except per share data) (unaudited)



Quarter Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Funds From Operations (FFO) Reconciliation:

Net earnings available to common stockholders $51,584 ^(1) $58,111 $154,057 ^(1) $199,648

Real estate depreciation and amortization 49,292 48,271 147,188 140,539

Gain on disposition of real estate, net of noncontrolling (148) (2,061) (13,637) (25,096) interests

Impairment losses - depreciable real estate, net of 5,695 10,692 33,062 21,124 recoveries

Total FFO adjustments 54,839 56,902 166,613 136,567

FFO available to common stockholders $106,423 $115,013 $320,670 $336,215



FFO per common share:

Basic $0.62 $0.70 $1.87 $2.07

Diluted $0.62 $0.70 $1.87 $2.06



Core Funds From Operations (Core FFO) Reconciliation:

Net earnings available to common stockholders $51,584 ^(1) $58,111 $154,057 ^(1) $199,648

Total FFO adjustments 54,839 56,902 166,613 136,567

FFO available to common stockholders 106,423 115,013 320,670 336,215



Loss on early extinguishment of debt (early redemption of - - 16,679 - notes payable due 2022)

Gain on sale of equity investments - - - (1,331)

Total Core FFO adjustments - - 16,679 (1,331)

Core FFO available to common stockholders $106,423 $115,013 $337,349 $334,884



Core FFO per common share:

Basic $0.62 $0.70 $1.96 $2.06

Diluted $0.62 $0.70 $1.96 $2.05



^(1) Includes a write-off of $14,758 (or $0.09 per share) of receivables due to reclassifying certain tenants as cash basis for accounting purposes during the quarter and nine months ended September 30, 2020.





















National Retail Properties, Inc. (in thousands, except per share data) (unaudited)



Quarter Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Adjusted Funds From Operations (AFFO) Reconciliation:

Net earnings available to common stockholders $51,584 ^(1) $58,111 $154,057 ^(1) $199,648

Total FFO adjustments 54,839 56,902 166,613 136,567

Total Core FFO adjustments - - 16,679 (1,331)

Core FFO available to common stockholders 106,423 115,013 337,349 334,884



Straight-line accrued rent, net of reserves (2,419) (542) (33,464) (1,702)

Net capital lease rent adjustment 61 170 144 508

Below-market rent amortization (301) (178) (711) (579)

Stock based compensation expense 3,258 2,734 9,580 7,805

Capitalized interest expense (332) (327) (1,218) (797)

Total AFFO adjustments 267 1,857 (25,669) 5,235

AFFO available to common stockholders $106,690 ^(2) $116,870 $311,680 ^(2) $340,119



AFFO per common share:

Basic $0.62 ^(2) $0.71 $1.82 ^(2) $2.09

Diluted $0.62 ^(2) $0.71 $1.81 ^(2) $2.09



Other Information:

Rental income from operating leases^(3) $153,825 $163,673 $481,858 $482,306

Earned income from direct financing leases^(3) $161 $204 $487 $624

Percentage rent^(3) $160 $329 $728 $1,051



Real estate expense reimbursement from tenants^(3) $3,719 $4,017 $12,818 $11,865

Real estate expenses (6,345) (6,706) (20,304) (20,398)

Real estate expenses, net of tenant reimbursements $(2,626) $(2,689) $(7,486) $(8,533)



Amortization of debt costs $1,082 $936 $3,924 ^(4) $2,787

Scheduled debt principal amortization (excluding $149 $141 $443 $422 maturities)

Non-real estate depreciation expense $114 $80 $347 $238

^ Includes a write-off of $14,758 (or $0.09 per share) of receivables due to (1)reclassifying certain tenants as cash basis for accounting purposes during the quarter and nine months ended September 30, 2020.

For the quarter and nine months ended September 30, 2020, amounts exclude ^ $8,499 and $38,938, respectively, of net straight-line accrued rent, resulting (2)from the COVID-19 rent deferral lease amendments. Including the straight-line rent would result in AFFO per common share of $0.67 and $2.04 for the quarter and nine months ended September 30, 2020, respectively.

The condensed consolidated financial statements for the quarter and nine months ended September 30, 2020 and 2019 are presented under the new accounting standard, ASU 2016-02, "Leases (Topic 842)." For the ^ quarter and nine months ended September 30, (3)2020, the aggregate of such amounts is $157,865 and $495,891, respectively, and is classified as rental income on the income statement summary. For the quarter and nine months ended September 30, 2019, the aggregate of such amounts is $168,224 and $495,846, respectively.

^ Includes $851 in connection with the redemption of the 3.80% senior unsecured (4)notes due 2022 for the nine months ended September 30, 2020.

National Retail Properties, Inc. (in thousands) (unaudited)



September 30,December 31, 2020 2019

Balance Sheet Summary



Assets:

Real estate:

Accounted for using the operating method, net of accumulated depreciation $7,167,992 $7,287,374 and amortization

Accounted for using the direct financing method 4,060 4,204

Real estate held for sale 5,408 9,661

Cash and cash equivalents 294,860 1,112

Receivables, net of allowance of $879 and $506, respectively 4,126 2,874

Accrued rental income, net of allowance of $7,978 and $1,842, respectively61,754 28,897

Debt costs, net of accumulated amortization 2,340 2,783

Other assets 94,157 97,962

Total assets $7,634,697 $7,434,867



Liabilities:

Line of credit payable $- $133,600

Mortgages payable, including unamortized premium and net of unamortized 11,565 12,059 debt cost

Notes payable, net of unamortized discount and unamortized debt costs 3,208,533 2,842,698

Accrued interest payable 51,327 18,250

Other liabilities 76,063 96,578

Total liabilities 3,347,488 3,103,185



Stockholders' equity of NNN 4,287,205 4,331,675

Noncontrolling interests 4 7

Total equity 4,287,209 4,331,682



Total liabilities and equity $7,634,697 $7,434,867









Common shares outstanding 173,727 171,694



Gross leasable area, Property Portfolio (square feet) 32,421 32,460



National Retail Properties, Inc. Debt Summary As of September 30, 2020 (in thousands) (unaudited)



Principal, Unsecured Debt Principal Net of Stated Rate Effective Rate Maturity Date Unamortized Discount



Line of credit payable $ - $- L + 87.5 bps 2.556 % January 2022



Unsecured notes payable:

2023 350,000 349,256 3.300 % 3.388 % April 2023

2024 350,000 349,708 3.900 % 3.924 % June 2024

2025 400,000 399,461 4.000 % 4.029 % November 2025

2026 350,000 347,440 3.600 % 3.733 % December 2026

2027 400,000 398,804 3.500 % 3.548 % October 2027

2028 400,000 397,626 4.300 % 4.388 % October 2028

2030 400,000 398,777 2.500 % 2.536 % April 2030

2048 300,000 295,893 4.800 % 4.890 % October 2048

2050 300,000 294,003 3.100 % 3.205 % April 2050



Total 3,250,000 3,230,968



Total unsecured debt^(1) $ 3,250,000 $3,230,968



Debt costs (31,140)

Accumulated amortization 8,705

Debt costs, net of accumulated amortization (22,435)

Notes payable, net of unamortized discount and $3,208,533 unamortized debt costs



^(1) Unsecured notes payable have a weighted average interest rate of 3.7% and a weighted average maturity of 10.4 years.

Mortgages Payable PrincipalInterest RateMaturity Date Balance

Mortgage^(1) $11,6095.230 % July 2023



Debt costs (147)

Accumulated amortization 103

Debt costs, net of accumulated amortization (44)

Mortgages payable, including unamortized $11,565 premium and net of unamortized debt costs



^(1) Includes unamortized premium





National Retail Properties, Inc.

Debt Summary

As of September 30, 2020

Credit Facility and Note Covenants

The following is a summary of key financial covenants for the company'sunsecured credit facility and notes, as defined and calculated per the terms ofthe facility's credit agreement and the notes' governing documents,respectively, which are included in the company's filings with the Commission.These calculations, which are not based on U.S. GAAP measurements, arepresented to investors to show that as of September 30, 2020, the companybelieves it is in compliance with the covenants.

Unsecured Credit Facility Key Required September 30, 2020Covenants

Maximum leverage ratio < 0.60 0.38

Minimum fixed charge coverage ratio > 1.50 3.93

Maximum secured indebtedness ratio < 0.40 0.001

Unencumbered asset value ratio > 1.67 2.67

Unencumbered interest ratio > 1.75 4.58

September 30, 2020

Unsecured Notes Key Covenants Required Notes Due ^(1) Notes Due ^(2)

Limitation on incurrence of total debt ? 60% 36.1% 36.2%

Limitation on incurrence of secured ? 40% 0.1% 0.1%debt

Debt service coverage ratio ? 1.50 4.55 4.55

Maintenance of total unencumbered ? 150% 277.1% 276.9%assets

^(1) Calculations pursuant to covenants for notes payable due 2023-2028 and2048

^(2) Calculations pursuant to covenants for notes payable due 2030 and 2050

National Retail Properties, Inc. Property Portfolio



Top 20 Lines of Trade



% of Rent Collections As of September 30,Quarter EndedSeptember 30, Line of Trade 2020^(1) 2019^(2)2020^(3)

1. Convenience stores 18.2 % 17.5 %99.9 %

2. Restaurants - full service 10.5 % 11.3 %76.2 %

3. Automotive service 10.2 % 9.3 %100.0 %

4. Restaurants - limited service 8.8 % 8.8 %73.6 %

5. Family entertainment centers 6.7 % 6.8 %85.2 %

6. Health and fitness 5.3 % 5.3 %84.9 %

7. Theaters 4.5 % 4.8 %32.9 %

8. Recreational vehicle dealers, parts and accessories3.5 % 3.5 %99.7 %

9. Automotive parts 3.1 % 3.2 %100.0 %

10.Equipment rental 2.6 % 2.7 %100.0 %

11.Home improvement 2.6 % 2.6 %99.0 %

12.Wholesale clubs 2.6 % 2.6 %99.6 %

13.Medical service providers 2.2 % 2.2 %98.8 %

14.General merchandise 1.7 % 1.8 %99.9 %

15.Furniture 1.7 % 1.6 %96.9 %

16.Home furnishings 1.6 % 1.7 %99.2 %

17.Consumer electronics 1.5 % 1.5 %100.0 %

18.Travel plazas 1.5 % 1.6 %100.0 %

19.Drug stores 1.5 % 1.6 %100.0 %

20.Bank 1.3 % 1.4 %100.0 %

Other 8.4 % 8.2 %98.5 %

Total 100.0% 100.0 %90.1 %

Top 10 States



State % of Total^(1) State % of Total^(1)

1.Texas 17.6 % 6. Georgia 4.5 %

2.Florida 8.8 % 7. Indiana 4.2 %

3.Ohio 5.9 % 8. Tennessee 3.7 %

4.Illinois 5.1 % 9. Virginia 3.5 %

5.North Carolina 4.5 % 10. California 3.3 %

^(1) Based on the annual base rent of 674,077,000, which is the annualized base rent for all leases in place as of September 30, 2020.

^(2) Based on the annual base rent of $658,347,000, which is the annualized base rent for all leases in place as of September 30, 2019.

^(3) Rent collections received as of October 28, 2020.

National Retail Properties, Inc. Property Portfolio



Top 20 Tenants



Properties% of Total^(1)

1. 7-Eleven 140 5.1 %

2. Mister Car Wash 115 4.5 %

3. Camping World 47 4.4 %

4. LA Fitness 30 3.8 %

5. Flynn Restaurant Group (Taco Bell/Arby's)203 3.5 %

6. GPM Investments (Convenience Stores) 151 3.3 %

7. AMC Theatre 19 2.8 %

8. Couche Tard (Pantry) 82 2.7 %

9. BJ's Wholesale Club 11 2.6 %

10.Sunoco 59 2.2 %

11.Mavis Tire Express Services 120 2.2 %

12.Chuck-E-Cheese's 53 2.1 %

13.Main Event 18 1.8 %

14.Frisch's Restaurants 74 1.8 %

15.Bob Evans 116 1.7 %

16.Fikes (Convenience Stores) 56 1.6 %

17.Best Buy 15 1.5 %

18.Life Time Fitness 3 1.5 %

19.Dave & Buster's 11 1.5 %

20.Pull-A-Part 20 1.3 %

Lease Expirations^(2)



% of # of Gross Leasable % of # of Gross Leasable Total^(1)PropertiesArea^(3) Total^(1)PropertiesArea^(3)

20200.3% 21 170,000 2026 4.4 % 170 1,716,000

20213.3% 117 1,166,000 2027 6.6 % 176 2,517,000

20225.4% 121 1,563,000 2028 5.1 % 164 1,237,000

20232.9% 116 1,436,000 2029 3.1 % 76 1,054,000

20243.6% 97 1,484,000 2030 3.6 % 103 1,105,000

20256.3% 199 2,100,000 Thereafter55.4 % 1,700 16,001,000

^ Based on the annual base rent of $674,077,000, which is the annualized (1)base rent for all leases in place as of September 30, 2020.

^ As of September 30, 2020, the weighted average remaining lease term is (2)10.7 years.

^ Square feet. (3)

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SOURCE National Retail Properties, Inc.