PR Newswire | Aug 3, 2020 08:30AM EDT

Inc.

08/03 07:30 CDT

Second Quarter 2020 Operating Results Announced By National Retail Properties, Inc. ORLANDO, Fla., Aug. 3, 2020

ORLANDO, Fla., Aug. 3, 2020 /PRNewswire/ -- National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced its operating results for the quarter and six months ended June 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 Six Months Ended

June 30, June 30,

2020 2019 2020 2019

(in thousands, except per share data)

Revenues $ 163,701 $ 164,792 $ 338,764 $ 328,504

Net earnings available to common stockholders $ 41,780 $ 70,097 $ 102,473 $ 141,537

Net earnings per common share $ 0.24 $ 0.43 $ 0.60 $ 0.87

FFO available to common stockholders $ 111,738 $ 110,859 $ 214,247 $ 221,203

FFO per common share $ 0.65 $ 0.68 $ 1.25 $ 1.37

Core FFO available to common stockholders $ 111,738 $ 110,859 $ 230,926 $ 219,872

Core FFO per common share $ 0.65 $ 0.68 $ 1.35 $ 1.36

AFFO available to common stockholders $ 83,240 ^(1) $ 112,619 $ 204,990 $ 223,249

AFFO per common share $ 0.49^ (1) $ 0.69 $ 1.20 ^(1) $ 1.38

^(1) Excludes $30,223 of straight-line accrued rent, net of reserves, resultingfrom the COVID-19 rent deferral lease amendments.Including the straight-line rent would result in AFFO per common share of $0.66and $1.37 for the quarter and six months ended June30, 2020, respectively.

Second Quarter 2020 Highlights:

* Portfolio occupancy was 98.7% at June 30, 2020 as compared to 98.8% at March 31, 2020 and 99.0% at December 31, 2019 * Invested $6.9 million in property investments, and completed construction on 8 properties with an aggregate 67,000 square feet of gross leasable area * Sold 8 properties for $3.8 million producing $0.7 million of gains on sales * Raised $52.6 million net proceeds from the issuance of 1,438,695 common shares * Ended the quarter with $224.6 million of cash and no amounts drawn on $900 million bank credit facility

First Half of 2020 Highlights:

* Invested $74.1 million in property investments, including the acquisition of 21 properties with an aggregate 284,000 square feet of gross leasable area at an initial cash yield of 6.9% * Sold 22 properties for $40.1 million producing $13.5 million of gains on sales * Raised $53.3 million net proceeds from the issuance of 1,451,223 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 July 30, 2020, NNN had collected approximately 69% of rent due for the quarter ended June 30, 2020, and approximately 84% of rent originally due in July 2020.

During the second quarter, NNN entered into rent deferral lease amendments with certain tenants representing approximately 21% of rent due for the quarter ended June 30, 2020. On average, 2.4 months of rent was deferred with approximately 86% of deferred rent originally due in the second quarter of 2020 and 14% 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 94% is due by December 31, 2021.

Jay Whitehurst, Chief Executive Officer, commented: "National Retail Properties' second quarter results reflect the basic strength and resiliency of our long-term strategy and business model. We ended the quarter with a balance sheet that is one of the strongest in our industry and recently announced an increase in our common stock dividend, thus making 2020 the 31st consecutive year of annual dividend increases for National Retail Properties."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases. As of June 30, 2020, the company owned 3,117 properties in 48 states with a gross leasable area of approximately 32.5 million square feet and with a weighted average remaining lease term of 10.9 years. For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on August 3, 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 six months ended June 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 performancemeasure. 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 Six Months Ended

June 30, June 30,

2020 2019 2020 2019

Income Statement Summary

Revenues:

Rental income $ 163,479 $ 164,596 $ 338,026 $ 327,622

Interest and other income from real estate transactions 222 196 738 882

163,701 164,792 338,764 328,504

Operating expenses:

General and administrative 9,395 9,276 19,495 18,798

Real estate 6,323 6,600 13,959 13,692

Depreciation and amortization 48,936 46,241 98,124 92,421

Leasing transaction costs - 75 36 127

Impairment losses - real estate, net of recoveries 21,854 7,187 27,367 10,432

86,508 69,379 158,981 135,470

Gain on disposition of real estate 719 13,002 13,489 23,447

Earnings from operations 77,912 108,415 193,272 216,481

Other expenses (revenues):

Interest and other income (106) (487) (271) (2,411)

Interest expense^(1) 31,753 29,811 65,423 59,768

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

31,647 29,324 81,831 57,357

Net earnings 46,265 79,091 111,441 159,124

Loss (earnings) attributable to noncontrolling interests - (413) 2 (423)

Net earnings attributable to NNN 46,265 78,678 111,443 158,701

Series E preferred stock dividends - (4,096) - (8,194)

Series F preferred stock dividends (4,485) (4,485) (8,970) (8,970)

Net earnings available to common stockholders $ 41,780 $ 70,097 $ 102,473 $ 141,537

Weighted average common shares outstanding:

Basic 171,389 161,893 171,214 161,502

Diluted 171,485 162,352 171,374 161,995

Net earnings per share available to common stockholders:

Basic $ 0.24 $ 0.43 $ 0.60 $ 0.87

Diluted $ 0.24 $ 0.43 $ 0.60 $ 0.87

^(1) Includes $2,291 in connection with the early redemption of 3.80% seniorunsecured notes due 2022 for the six months ended June 30, 2020.

National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)

Quarter Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019

Funds From Operations (FFO) Reconciliation:

Net earnings available to common stockholders $ 41,780 $ 70,097 $ 102,473 $ 141,537

Real estate depreciation and amortization 48,823 46,165 97,896 92,269

Gain on disposition of real estate, net of noncontrolling

interests (719) (12,590) (13,489) (23,035)

Impairment losses - depreciable real estate, net of 21,854 7,187 27,367 10,432 recoveries

Total FFO adjustments 69,958 40,762 111,774 79,666

FFO available to common stockholders $ 111,738 $ 110,859 $ 214,247 $ 221,203

FFO per common share:

Basic $ 0.65 $ 0.68 $ 1.25 $ 1.37

Diluted $ 0.65 $ 0.68 $ 1.25 $ 1.37

Core Funds From Operations (Core FFO) Reconciliation:

Net earnings available to common stockholders $ 41,780 $ 70,097 $ 102,473 $ 141,537

Total FFO adjustments 69,958 40,762 111,774 79,666

FFO available to common stockholders 111,738 110,859 214,247 221,203

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 $ 111,738 $ 110,859 $ 230,926 $ 219,872

Core FFO per common share:

Basic $ 0.65 $ 0.68 $ 1.35 $ 1.36

Diluted $ 0.65 $ 0.68 $ 1.35 $ 1.36

National Retail Properties, Inc.

(in thousands, except per share data)

(unaudited)

Quarter Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019

Adjusted Funds From Operations (AFFO) Reconciliation:

Net earnings available to common stockholders $ 41,780 $ 70,097 $ 102,473 $ 141,537

Total FFO adjustments 69,958 40,762 111,774 79,666

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

Core FFO available to common stockholders 111,738 110,859 230,926 219,872

Straight-line accrued rent, net of reserves (30,984) (413) (31,045) (1,160)

Net capital lease rent adjustment 22 167 83 338

Below-market rent amortization (190) (173) (410) (401)

Stock based compensation expense 3,074 2,524 6,322 5,071

Capitalized interest expense (420) (345) (886) (471)

Total AFFO adjustments (28,498) 1,760 (25,936) 3,377

AFFO available to common stockholders $ 83,240 ^(1) $ 112,619 $ 204,990 ^(1) $ 223,249

AFFO per common share:

Basic $ 0.49 $ 0.70 $ 1.20 $ 1.38

Diluted $ 0.49 ^(1) $ 0.69 $ 1.20 ^(1) $ 1.38

Other Information:

Rental income from operating leases^(2) $ 159,300 $ 160,234 $ 328,033 $ 318,632

Earned income from direct financing leases^(2) $ 162 $ 208 $ 326 $ 420

Percentage rent^(2) $ 165 $ 300 $ 568 $ 722

Real estate expense reimbursement from tenants^(2) $ 3,852 $ 3,854 $ 9,099 $ 7,848

Real estate expenses (6,323) (6,600) (13,959) (13,692)

Real estate expenses, net of tenant reimbursements $ (2,471) $ (2,746) $ (4,860) $ (5,844)

Amortization of debt costs^(3) $ 1,026 $ 931 $ 2,842 $ 1,851

Scheduled debt principal amortization (excluding $ 147 $ 139 $ 294 $ 281maturities)

Non-real estate depreciation expense $ 115 $ 78 $ 233 $ 158

Excludes $30,223 of straight-line accrued rent, net of reserves, resulting from the COVID-19 rent deferral lease amendments. Including(1) the straight-line rent would result in AFFO per common share of $0.66 and $1.37 for the quarter and six months ended June 30, 2020, respectively.

The condensed consolidated financial statements for the quarter and six months ended June 30, 2020 and 2019 are presented under the new accounting standard, ASU 2016-02, "Leases (Topic 842)." For the quarter(2) and six months ended June 30, 2020, the aggregate of such amounts is $163,479 and $338,026, respectively, and is classified as rental income on the income statement summary. For the quarter and six months ended June 30, 2019, the aggregate of such amounts is $164,596 and $327,622, respectively.

(3) Includes $851 in connection with the redemption of the 3.80% senior unsecured notes due 2022 for the six months ended June 30, 2020.

National Retail Properties, Inc.

(in thousands)

(unaudited)

June 30, December 31,

2020 2019

Balance Sheet Summary

Assets:

Real estate:

Accounted for using the operating method, netof accumulated

depreciation and amortization $ $ 7,221,418 7,289,048

Accounted for using the direct financing method 4,121 4,204

Real estate held for sale 3,615 7,987

Cash and cash equivalents 224,560 1,112

Receivables, net of allowance of $3,085 and $506, 18,645 2,874respectively

Accrued rental income, net of allowance of $7,481 and 59,459 28,897$1,842, respectively

Debt costs, net of accumulated amortization 2,809 2,783

Other assets 98,301 97,962

Total assets $ 7,632,928 $ 7,434,867

Liabilities:

Line of credit payable $ $ - 133,600

Mortgages payable, including unamortized premium and 11,731 12,059net of unamortized debt cost

Notes payable, net of unamortized discount and 3,207,545 2,842,698unamortized debt costs

Accrued interest payable 21,652 18,250

Other liabilities 81,200 96,578

Total liabilities 3,322,128 3,103,185

Stockholders' equity of NNN 4,310,795 4,331,675

Noncontrolling interests 5 7

Total equity 4,310,800 4,331,682

Total liabilities and equity $ $ 7,632,928 7,434,867

Common shares outstanding 173,408 171,694

Gross leasable area, Property Portfolio (square feet) 32,454 32,460

National Retail Properties, Inc.

Debt Summary

As of June 30, 2020

(in thousands)

(unaudited)



Principal, Unsecured Debt PrincipalNet of Stated Rate Effective RateMaturity Date Unamortized Discount

Line of credit payable $ - $ -L + 87.5 bps 2.546 % January 2022



Unsecured notes payable:

2023 350,000 349,187 3.300 % 3.388 % April 2023

2024 350,000 349,689 3.900 % 3.924 % June 2024

2025 400,000 399,438 4.000 % 4.029 % November 2025

2026 350,000 347,349 3.600 % 3.733 % December 2026

2027 400,000 398,767 3.500 % 3.548 % October 2027

2028 400,000 397,565 4.300 % 4.388 % October 2028

2030 400,000 398,747 2.500 % 2.536 % April 2030

2048 300,000 295,876 4.800 % 4.890 % October 2048

2050 300,000 293,971 3.100 % 3.205 % April 2050



Total 3,250,000 3,230,589



Total unsecured debt ^(1) $ 3,250,000 $ 3,230,589



Debt costs (31,140)

Accumulated amortization 8,096

Debt costs, net of accumulated amortization (23,044)

Notes payable, net of unamortized discount and $ 3,207,545 unamortized debt costs



^(1) Unsecured notes payable have a weighted average interest rate of 3.7% and a weighted average maturity of 10.7 years.

Mortgages Payable Principal Interest Rate Maturity Balance Date

Mortgage^(1) $ 11,779 5.230 % July 2023

Debt costs (147)

Accumulated amortization 99

Debt costs, net of accumulated (48)amortization

Mortgages payable, includingunamortized $ 11,731 premium and net of unamortizeddebt costs

^(1) Includes unamortized premium

National Retail Properties, Inc.

Debt Summary

As of June 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 theterms of the facility's credit agreement and the notes' governing documents,respectively, which are included in the company's filings with theCommission. These calculations, which are not based on U.S. GAAP measurements,are presented to investors to show that as of June 30,2020, the company believes it is in compliance with the covenants.

Unsecured Credit Facility Key Covenants Required June 30, 2020

Maximum leverage ratio < 0.60 0.37

Minimum fixed charge coverage ratio > 1.50 3.96

Maximum secured indebtedness ratio < 0.40 0.001

Unencumbered asset value ratio > 1.67 2.74

Unencumbered interest ratio > 1.75 3.99

June 30, 2020

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

Limitation on incurrence of total debt ? 60% 36.4% 36.4%

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

Debt service coverage ratio ? 1.50 4.70 4.70

Maintenance of total unencumbered assets ? 150% 275.3% 275.1%

^(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 As of June 30, Collections Quarter Ended

Line of Trade 2020^ 2019^ June 30 2020^ (1) (2) (3)

1. Convenience stores 18.1% 17.7% 99.0 %

2. Restaurants - full service 10.6% 11.1% 40.5 %

3. Automotive service 10.2% 9.1% 53.8 %

4. Restaurants - limited service 8.8% 8.8% 80.0 %

5. Family entertainment centers 6.7% 6.9% 8.6 %

6. Health and fitness 5.2% 5.4% 58.4 %

7. Theaters 4.7% 4.8% 2.2 %

8. Recreational vehicle dealers, parts and 3.5% 3.4% 100.0 %accessories

9. Automotive parts 3.1% 3.3% 88.0 %

10. Equipment rental 2.6% 2.7% 100.0 %

11. Home improvement 2.6% 2.6% 97.2 %

12. Wholesale clubs 2.5% 2.3% 100.0 %

13. Medical service providers 2.1% 2.2% 58.7 %

14. General merchandise 1.7% 1.8% 91.4 %

15. Furniture 1.7% 1.7% 33.6 %

16. Home furnishings 1.6% 1.7% 21.0 %

17. Travel plazas 1.5% 1.6% 98.1 %

18. Consumer electronics 1.5% 1.6% 98.9 %

19. Drug stores 1.5% 1.6% 100.0 %

20. Bank 1.3% 1.5% 100.0 %

Other 8.5% 8.2% 83.3 %

Total 100.0% 100.0% 68.9 %

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 5.8 % 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 $676,538,000, which is theannualized based rent for all leases in place as of June 30, 2020.

^ (2) Based on the annual base rent of $650,091,000, which is theannualized based rent for all leases in place as of June 30, 2019.

^(3) Rent collections received as of July 30, 2020.

National Retail Properties, Inc.

Property Portfolio

Top 20 Tenants

Properties % of Total^(1)

1. 7-Eleven 140 5.0 %

2. Mister Car Wash 115 4.5 %

3. Camping World 47 4.3 %

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 20 3.0 %

8. Couche Tard (Pantry) 84 2.8 %

9. BJ's Wholesale Club 11 2.5 %

10. Sunoco 59 2.2 %

11. Mavis Tire Express Services 120 2.1 %

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 1.4 %

20. Pull-A-Part 20 1.3 %

Lease Expirations^(2)

% of # of Gross Leasable % of # of Gross Leasable Total^(1) Properties Area^(3) Total^(1) Properties Area^(3)



2020 0.5 % 25 230,000 2026 4.0 % 161 1,546,000

2021 3.9 % 129 1,394,000 2027 6.6 % 176 2,519,000

2022 5.4 % 122 1,583,000 2028 5.1 % 164 1,238,000

2023 2.9 % 117 1,445,000 2029 3.0 % 76 1,054,000

2024 3.7 % 100 1,602,000 2030 3.5 % 102 1,101,000

2025 6.2 % 196 2,065,000 Thereafter 55.2 % 1,706 16,011,000



^(1) Based on the annual base rent of $676,538,000, which is the annualized base rent for all leases in place as of June 30, 2020.

^(2) As of June 30, 2020, the weighted average remaining lease term is 10.9 years.

^(3) Square feet.

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SOURCE National Retail Properties, Inc.