PR Newswire | May 4, 2021 08:31AM EDT

Inc.

05/04 07:30 CDT

First Quarter 2021 Operating Results Announced By National Retail Properties, Inc. ORLANDO, Fla., May 4, 2021

ORLANDO, Fla., May 4, 2021 /PRNewswire/ -- National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced its operating results for the quarter ended March 31, 2021. Highlights include:

Operating Results:

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

Quarter Ended

March 31,

2021 2020

(in thousands, except per share data)

Revenues $179,778 $175,063



Net earnings available to common stockholders$52,102 $60,693

Net earnings per common share $0.30 $0.35



FFO available to common stockholders $99,821 $102,509

FFO per common share $0.57 $0.60



Core FFO available to common stockholders $121,149 $119,188

Core FFO per common share $0.69 $0.70



AFFO available to common stockholders $133,532 ^(1) $121,750

AFFO per common share $0.76 ^(1) $0.71



Amounts include $9,385 of net straight-line accrued rent from rent deferral^ repayments from the COVID-19 rent deferral lease amendments. Excluding(1) such, AFFO per common share would have been $0.71 for the quarter ended March 31, 2021.

First Quarter 2021 Highlights:

* As of April 28, 2021, NNN had collected approximately 97% of rent originally due for the quarter ended March 31, 2021, and approximately 98% of rent originally due in April 2021 * Collected approximately $2.2 million of receivables written-off in 2020 from cash basis tenants * Maintained high occupancy levels at 98.3%, with a weighted average remaining lease term of 10.6 years, at March 31, 2021 as compared to 98.5% at December 31, 2020 and 98.8% at March 31, 2020 * Invested $105.6 million in property investments, including the acquisition of 29 properties with an aggregate 355,000 square feet of gross leasable area at an initial cash yield of 6.4% * Sold 11 properties for $17.6 million producing $4.3 million of gains on sales * Issued $450 million principal amount of 3.500% senior unsecured notes due 2051 * Redeemed $350 million principal amount of 3.300% senior unsecured notes due 2023 * Weighted average debt maturity increased to 13.3 years at March 31, 2021 * Ended the quarter with $311.2 million of cash and no amounts drawn on the $900 million bank credit facility

NNN has entered into rent deferral lease amendments with certain tenants for an aggregate $51,269,000 and $4,677,000 of rent originally due for the years ended December 31, 2020 and December 31, 2021, respectively. The rent deferral lease amendments require the deferred rents to be repaid at a later time during the lease term. Approximately $3,259,000 of deferred rent was repaid in 2020 and approximately $10,817,000 of deferred rent was repaid in the quarter ending March 31, 2021.

Core FFO guidance for 2021 was increased from a range of $2.55 to $2.62 to a range of $2.70 to $2.75 per share. The 2021 AFFO is estimated to be $2.91 to $2.96 per share. The Core FFO guidance equates to net earnings of $1.56 to $1.61 per share, plus $1.14 per share of expected real estate depreciation and amortization and excludes any gains from the sale of real estate and any charges for impairments or loss on early extinguishment of debt. 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.

Jay Whitehurst, Chief Executive Officer, commented: "2021 is off to a great start for National Retail Properties. As the economic effects of the pandemic appear to recede, our impressive results have once again validated our consistent, long-term strategy of acquiring well-located parcels leased to strong regional and national operators at reasonable rents, all while maintaining low leverage and a flexible balance sheet. Based on our continued high occupancy, strong rent collections, solid quarter of acquisitions, and fortress-like balance sheet, we are pleased to increase our guidance for Core FFO per share by approximately six percent. Our acquisition pipeline of direct sale-leaseback transactions with our relationship tenants continues to grow, and with over $300 million of cash in the bank, zero balance drawn on our line of credit, no material debt maturities until 2024, and an average debt duration of over 13 years, we are well positioned to fund our 2021 acquisition guidance with the available capital on hand."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases. As of March 31, 2021, the company owned 3,161 properties in 48 states with a gross leasable area of approximately 32.7 million square feet and with a weighted average remaining lease term of 10.6 years. For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on May 4, 2021, 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, 2020 and (ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 2021. 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

March 31,

2021 2020

Income Statement Summary



Revenues:

Rental income $179,198 $174,547

Interest and other income from real estate transactions 580 516

179,778 175,063



Operating expenses:

General and administrative 11,748 10,100

Real estate 7,725 7,635

Depreciation and amortization 49,980 49,188

Leasing transaction costs 38 36

Impairment losses - real estate, net of recoveries 2,131 5,513

71,622 72,472

Gain on disposition of real estate 4,281 12,770

Earnings from operations 112,437 115,361



Other expenses (revenues):

Interest and other income (65) (164)

Interest expense 34,587 ^(1) 33,670 ^(2)

Loss on early extinguishment of debt 21,328 16,679

55,850 50,185



Net earnings 56,587 65,176

Loss attributable to noncontrolling interests - 2



Net earnings attributable to NNN 56,587 65,178

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

Net earnings available to common stockholders $52,102 $60,693



Weighted average common shares outstanding:

Basic 174,589 171,039

Diluted 174,715 171,232



Net earnings per share available to common stockholders:

Basic $0.30 $0.35

Diluted $0.30 $0.35



^(1) Includes $2,078 in connection with the redemption of 3.30% senior unsecured notes due 2023 for the quarter ended March 31, 2021.

^(2) Includes $2,291 in connection with the redemption of 3.80% senior unsecured notes due 2022 for the quarter ended March 31, 2020.

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



Quarter Ended

March 31,

2021 2020

Funds From Operations (FFO) Reconciliation:

Net earnings available to common stockholders $52,102 $60,693

Real estate depreciation and amortization 49,869 49,073

Gain on disposition of real estate (4,281) (12,770)

Impairment losses - depreciable real estate, net of recoveries2,131 5,513

Total FFO adjustments 47,719 41,816

FFO available to common stockholders $99,821 $102,509



FFO per common share:

Basic $0.57 $0.60

Diluted $0.57 $0.60



Core Funds From Operations (Core FFO) Reconciliation:

Net earnings available to common stockholders $52,102 $60,693

Total FFO adjustments 47,719 41,816

FFO available to common stockholders 99,821 102,509



Loss on early extinguishment of debt 21,328 16,679

Total Core FFO adjustments 21,328 16,679

Core FFO available to common stockholders $121,149 $119,188



Core FFO per common share:

Basic $0.69 $0.70

Diluted $0.69 $0.70











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



Quarter Ended

March 31,

2021 2020

Adjusted Funds From Operations (AFFO) Reconciliation:

Net earnings available to common stockholders $52,102 $60,693

Total FFO adjustments 47,719 41,816

Total Core FFO adjustments 21,328 16,679

Core FFO available to common stockholders 121,149 119,188



Straight-line accrued rent, net of reserves 8,332 (61)

Net capital lease rent adjustment 90 61

Below-market rent amortization (162) (220)

Stock based compensation expense 4,186 3,248

Capitalized interest expense (63) (466)

Total AFFO adjustments 12,383 2,562

AFFO available to common stockholders $133,532^(1)$121,750



AFFO per common share:

Basic $0.76 ^(1)$0.71

Diluted $0.76 ^(1)$0.71



Other Information:

Rental income from operating leases^(2) $173,583 $168,733

Earned income from direct financing leases^(2) $158 $164

Percentage rent^(2) $104 $403



Real estate expense reimbursement from tenants^(2) $5,353 $5,247

Real estate expenses (7,725) (7,635)

Real estate expenses, net of tenant reimbursements $(2,372) $(2,388)



Amortization of debt costs $1,840 ^(3)$1,816 ^(4)

Scheduled debt principal amortization (excluding maturities) $156 $147

Non-real estate depreciation expense $113 $118



Amounts include the net straight-line accrued rent impact of the rent^ deferral repayments from the COVID-19 rent deferral lease amendments of(1) $9,385 for the quarter ended March 31, 2021. Excluding such, AFFO per common share results would have been $0.71 for the quarter ended March 31, 2021.

^ For the quarter ended March 31, 2021 and 2020, the aggregate of such(2) amounts is $179,198 and $174,547, respectively, classified as rental income on the income statement summary.

^ Includes $745 in connection with the redemption of the 3.30% senior(3) unsecured notes due 2023 for the quarter ended March 31, 2021.

^ Includes $851 in connection with the redemption of the 3.80% senior(4) unsecured notes due 2022 for the quarter ended March 31, 2020.

2021 Earnings Guidance:

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 Commission.

2021 Guidance

Net earnings per common share excluding any gains on disposition of real estate, impairment charges and loss on early $1.56 - $1.61 per share extinguishment of debt

Real estate depreciation and amortization per share $1.14 per share

Core FFO per share $2.70 - $2.75 per share

AFFO per share^(1) $2.91 - $2.96 per share

General and administrative expenses $43 - $45 Million

Real estate expenses, net of tenant reimbursements $11 - $13 Million

Acquisition volume $400 - $500 Million

Disposition volume $80 - $100 Million

^ Estimates include the net straight-line accrued rent impact of the rent(1) repayment from the COVID-19 rent deferral lease amendments of $24,961,000 for 2021. Absent such, AFFO per common share guidance would have been $2.77 - $2.82 per share for 2021.

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



March 31, December 31, 2021 2020

Balance Sheet Summary



Assets:

Real estate portfolio $7,249,613$7,212,655

Real estate held for sale 6,498 5,671

Cash and cash equivalents 311,231 267,236

Receivables, net of allowance of $846 and $835, respectively 4,611 4,338

Accrued rental income, net of allowance of $6,030 and $6,947, respectively 45,450 53,958

Debt costs, net of accumulated amortization of $17,764 and $17,294, 1,492 1,917 respectively

Other assets 93,308 92,069

Total assets $7,712,203$7,637,844



Liabilities:

Line of credit payable $- $-

Mortgages payable, including unamortized premium and net of unamortized debt 11,222 11,395 cost

Notes payable, net of unamortized discount and unamortized debt costs 3,298,302 3,209,527

Accrued interest payable 44,668 19,401

Other liabilities 70,172 78,217

Total liabilities 3,424,364 3,318,540



Stockholders' equity of NNN 4,287,835 4,319,300

Noncontrolling interests 4 4

Total equity 4,287,839 4,319,304



Total liabilities and equity $7,712,203$7,637,844









Common shares outstanding 175,580 175,233



Gross leasable area, Property Portfolio (square feet) 32,717 32,461



National Retail Properties, Inc. Debt Summary As of March 31, 2021 (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 - % January 2022



Unsecured notes payable:

2024 350,000 349,744 3.900 % 3.924 % June 2024

2025 400,000 399,509 4.000 % 4.029 % November 2025

2026 350,000 347,625 3.600 % 3.733 % December 2026

2027 400,000 398,880 3.500 % 3.548 % October 2027

2028 400,000 397,751 4.300 % 4.388 % October 2028

2030 400,000 398,834 2.500 % 2.536 % April 2030

2048 300,000 295,928 4.800 % 4.890 % October 2048

2050 300,000 294,065 3.100 % 3.205 % April 2050

2051 450,000 441,601 3.500 % 3.602 % April 2051



Total 3,350,000 3,323,937



Total unsecured debt^(1) $3,350,000 $3,323,937



Debt costs (33,178)

Accumulated amortization 7,543

Debt costs, net of accumulated amortization (25,635)

Notes payable, net of unamortized discount and $3,298,302 unamortized debt costs



^(1) Unsecured notes payable have a weighted average interest rate of 3.7% and a weighted average maturity of 13.3 years.

Mortgages Payable PrincipalInterest RateMaturity Date Balance

Mortgage^(1) $11,2575.230 % July 2023



Debt costs (147)

Accumulated amortization 112

Debt costs, net of accumulated amortization(35)

Mortgages payable, including unamortized $11,222 premium and net of unamortized debt costs



^(1) Includes unamortized premium





National Retail Properties, Inc.Debt SummaryAs of March 31, 2021

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 March 31, 2021, the company believesit is in compliance with the covenants.

Unsecured Credit Facility Key Covenants RequiredMarch 31, 2021

Maximum leverage ratio < 0.60 0.38

Minimum fixed charge coverage ratio > 1.50 3.95

Maximum secured indebtedness ratio < 0.40 0.001

Unencumbered asset value ratio > 1.67 2.67

Unencumbered interest ratio > 1.75 4.96



Unsecured Notes Key Covenants RequiredMarch 31, 2021

Limitation on incurrence of total debt ? 60% 36.5%

Limitation on incurrence of secured debt? 40% 0.1%

Debt service coverage ratio ? 1.50 4.37

Maintenance of total unencumbered assets? 150% 274%

National Retail Properties, Inc. Property Portfolio

Top 20 Lines of Trade

% of Rent Collections As of March 31, Quarter EndedMarch 31, Line of Trade 2021^(1)2020^(2)2021^(3)

1. Convenience stores 18.0 % 18.1 % 99.9 %

2. Automotive service 10.7 % 9.9 % 98.7 %

3. Restaurants - full service 10.2 % 11.0 % 91.5 %

4. Restaurants - limited service 9.5 % 8.7 % 99.9 %

5. Family entertainment centers 6.0 % 6.7 % 99.6 %

6. Health and fitness 5.2 % 5.2 % 94.2 %

7. Theaters 4.4 % 4.7 % 75.8 %

8. Recreational vehicle dealers, parts and accessories3.5 % 3.4 % 100.0 %

9. Equipment rental 3.1 % 2.6 % 100.0 %

10.Automotive parts 3.1 % 3.1 % 99.7 %

11.Home improvement 2.6 % 2.6 % 99.1 %

12.Wholesale clubs 2.5 % 2.5 % 100.0 %

13.Medical service providers 2.1 % 2.1 % 99.6 %

14.General merchandise 1.7 % 1.7 % 99.1 %

15.Furniture 1.7 % 1.7 % 99.2 %

16.Home furnishings 1.6 % 1.6 % 99.9 %

17.Travel plazas 1.5 % 1.5 % 100.0 %

18.Consumer electronics 1.5 % 1.5 % 100.0 %

19.Drug stores 1.4 % 1.5 % 100.0 %

20.Bank 1.3 % 1.3 % 100.0 %

Other 8.4 % 8.6 % 99.7 %

Total 100.0% 100.0% 97.5 %

Top 10 States



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

1.Texas 17.4 % 6. Georgia 4.4 %

2.Florida 8.7 % 7. Indiana 4.2 %

3.Ohio 5.7 % 8. Tennessee 3.7 %

4.Illinois 5.1 % 9. California 3.4 %

5.North Carolina 4.4 % 10. Virginia 3.4 %



As a percentage of annual base rent, which is the annualized base rent for all leases in place.

^(1) $684,283,000 as of March 31, 2021.

^(2) $677,536,000 as of March 31, 2020.

^(3) Rent collections received as of April 28, 2021, excluding the repayment of amounts previously deferred according to the rent deferral lease amendments.

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)202 3.4 %

6. GPM Investments (Convenience Stores) 153 3.3 %

7. AMC Theatre 19 2.8 %

8. Couche Tard (Pantry) 82 2.7 %

9. BJ's Wholesale Club 11 2.5 %

10.Sunoco 59 2.2 %

11.Mavis Tire Express Services 120 2.1 %

12.Main Event 18 1.8 %

13.Frisch's Restaurants 74 1.8 %

14.Bob Evans 114 1.6 %

15.Fikes (Convenience Stores) 56 1.6 %

16.Chuck E. Cheese's 53 1.6 %

17.Best Buy 15 1.5 %

18.Life Time Fitness 3 1.5 %

19.Dave & Buster's 11 1.4 %

20.Ahern Rentals 35 1.4 %

Lease Expirations^(2)



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

20212.0% 79 765,000 2027 6.4 % 176 2,563,000

20225.2% 119 1,493,000 2028 4.8 % 157 1,183,000

20232.7% 113 1,417,000 2029 3.0 % 75 1,052,000

20243.5% 95 1,473,000 2030 3.7 % 106 1,190,000

20256.2% 198 2,092,000 2031 8.7 % 192 2,920,000

20265.3% 200 2,000,000 Thereafter48.5 % 1,593 13,762,000

^ Based on the annual base rent of $684,283,000, which is the annualized base(1) rent for all leases in place as of March 31, 2021.

^ As of March 31, 2021, the weighted average remaining lease term is 10.6(2) years.

^(3) Square feet.

National Retail Properties, Inc. Rent Deferral Lease Amendments (in thousands)

The following table outlines the rent deferred and corresponding recapture payback by quarter of the rent deferral lease amendments executed as of March 31, 2021 (dollars in thousands):





Deferred Scheduled Repayment

Accrual Cash Total % of TotalAccrual Cash Total % of TotalCumulative Basis Basis Basis Basis Total

2020 $33,610$17,659$51,269 91.6 %$3,239 $20 $3,259 5.8 %5.8 %



2021Q1 678 1,937 2,615 4.7 %10,063 754 10,817 19.3 %25.1 %

Q2 278 750 1,028 1.8 %8,603 1,823 10,426 18.6 %43.7 %

Q3 34 750 784 1.4 %4,332 1,698 6,030 10.8 %54.5 %

Q4 - 250 250 0.4 %2,953 1,698 4,651 8.3 %62.8 %

990 3,687 4,677 8.4 %25,951 5,973 31,924 57.0 %62.8 %



2022Q1 - - - - 1,780 2,117 3,897 7.0 %69.8 %

Q2 - - - - 1,729 2,117 3,846 6.9 %76.7 %

Q3 - - - - 1,201 2,117 3,318 5.9 %82.6 %

Q4 - - - - 681 2,117 2,798 5.0 %87.6 %

- - - - 5,391 8,468 13,859 24.8 %87.6 %



2023 - - - - 19 3,021 3,040 5.4 %93.0 %



2024 - - - - - 1,932 1,932 3.5 %96.5 %



2025 - - - - - 1,932 1,932 3.5 %100.0 %



$34,600$21,346$55,946 $34,600 $21,346 $55,946

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SOURCE National Retail Properties, Inc.