NATIONAL RETAIL PROPERTIES, INC. - FORM 8-K - EX-99.1 - May 4, 2021

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NEWS RELEASE
For information contact:
Kevin B. Habicht
Chief Financial Officer
(407) 265-7348    FOR IMMEDIATE RELEASE
    May 4, 2021

FIRST QUARTER 2021 OPERATING RESULTS
ANNOUNCED BY NATIONAL RETAIL PROPERTIES, INC.

Orlando, Florida, May 4, 2021 – 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,
20212020
(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 
(1) Amounts include $9,385 of net straight-line accrued rent from rent deferral repayments from the COVID-19 rent deferral lease
     amendments. Excluding 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.
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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.







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National Retail Properties, Inc.
(in thousands, except per share data)
(unaudited)
Quarter Ended
March 31,
20212020
Income Statement Summary
Revenues:
Rental income$179,198 $174,547 
Interest and other income from real estate transactions580 516 
179,778 175,063 
Operating expenses:
General and administrative11,748 10,100 
Real estate7,725 7,635 
Depreciation and amortization49,980 49,188 
Leasing transaction costs38 36 
Impairment losses – real estate, net of recoveries
2,131 5,513 
71,622 72,472 
Gain on disposition of real estate4,281 12,770 
Earnings from operations112,437 115,361 
Other expenses (revenues):
Interest and other income(65)(164)
Interest expense34,587 
(1)
33,670 
(2)
Loss on early extinguishment of debt21,328 16,679 
55,850 50,185 
Net earnings56,587 65,176 
Loss attributable to noncontrolling interests— 2 
Net earnings attributable to NNN56,587 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:
Basic174,589 171,039 
Diluted174,715 171,232 
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.


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National Retail Properties, Inc.
(in thousands, except per share data)
(unaudited)
Quarter Ended
March 31,
20212020
Funds From Operations (FFO) Reconciliation:
Net earnings available to common stockholders$52,102 $60,693 
Real estate depreciation and amortization49,869 49,073 
Gain on disposition of real estate(4,281)(12,770)
Impairment losses – depreciable real estate, net of recoveries
2,131 5,513 
Total FFO adjustments47,719 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 adjustments47,719 41,816 
FFO available to common stockholders99,821 102,509 
Loss on early extinguishment of debt21,328 16,679 
Total Core FFO adjustments21,328 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 
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National Retail Properties, Inc.
(in thousands, except per share data)
(unaudited)
Quarter Ended
March 31,
20212020
Adjusted Funds From Operations (AFFO) Reconciliation:
Net earnings available to common stockholders$52,102 $60,693 
Total FFO adjustments47,719 41,816 
Total Core FFO adjustments21,328 16,679 
Core FFO available to common stockholders121,149 119,188 
Straight-line accrued rent, net of reserves8,332 (61)
Net capital lease rent adjustment90 61 
Below-market rent amortization(162)(220)
Stock based compensation expense4,186 3,248 
Capitalized interest expense(63)(466)
Total AFFO adjustments12,383 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 
(1)Amounts include the net straight-line accrued rent impact of the rent deferral repayments from the COVID-19 rent deferral lease amendments of $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.
(2)For the quarter ended March 31, 2021 and 2020, the aggregate of such amounts is $179,198 and $174,547, respectively, classified as rental income on the income statement summary.
(3)Includes $745 in connection with the redemption of the 3.30% senior unsecured notes due 2023 for the quarter ended March 31, 2021.
(4)Includes $851 in connection with the redemption of the 3.80% senior unsecured notes due 2022 for the quarter ended March 31, 2020.


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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 extinguishment of debt$1.56 - $1.61 per share
  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
(1) Estimates include the net straight-line accrued rent impact of the rent 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.

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National Retail Properties, Inc.
(in thousands)
(unaudited)
March 31, 2021December 31, 2020
Balance Sheet Summary
Assets:
Real estate portfolio$7,249,613 $7,212,655 
Real estate held for sale6,498 5,671 
Cash and cash equivalents
311,231 267,236 
Receivables, net of allowance of $846 and $835, respectively4,611 4,338 
Accrued rental income, net of allowance of $6,030 and $6,947, respectively45,450 53,958 
Debt costs, net of accumulated amortization of $17,764 and $17,294, respectively1,492 1,917 
Other assets93,308 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 cost
11,222 11,395 
 Notes payable, net of unamortized discount and unamortized debt costs
3,298,302 3,209,527 
Accrued interest payable44,668 19,401 
Other liabilities70,172 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 outstanding175,580 175,233 
Gross leasable area, Property Portfolio (square feet)32,717 32,461 

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National Retail Properties, Inc.
Debt Summary
As of March 31, 2021
(in thousands)
(unaudited)
Unsecured DebtPrincipalPrincipal, Net of Unamortized DiscountStated RateEffective RateMaturity Date
Line of credit payable$— $— L + 87.5 bps— %   January 2022
Unsecured notes payable:
2024350,000 349,744 3.900 %3.924 %   June 2024
2025400,000 399,509 4.000 %4.029 %   November 2025
2026350,000 347,625 3.600 %3.733 %   December 2026
2027400,000 398,880 3.500 %3.548 %   October 2027
2028400,000 397,751 4.300 %4.388 %   October 2028
2030400,000 398,834 2.500 %2.536 %April 2030
2048300,000 295,928 4.800 %4.890 %   October 2048
2050300,000 294,065 3.100 %3.205 %April 2050
2051450,000 441,601 3.500 %3.602 %April 2051
Total3,350,000 3,323,937 
Total unsecured debt(1)
$3,350,000 $3,323,937 
Debt costs(33,178)
Accumulated amortization7,543 
Debt costs, net of accumulated amortization(25,635)
Notes payable, net of unamortized discount and unamortized debt costs$3,298,302 
(1)Unsecured notes payable have a weighted average interest rate of 3.7% and a weighted average maturity of 13.3 years.

Mortgages PayablePrincipal BalanceInterest RateMaturity Date
Mortgage(1)
$11,257 5.230 %   July 2023
Debt costs(147)
Accumulated amortization112 
Debt costs, net of accumulated amortization
(35)
Mortgages payable, including unamortized premium and net of unamortized debt costs
$11,222 
(1) Includes unamortized premium

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National Retail Properties, Inc.
Debt Summary
As of March 31, 2021

Credit Facility and Note Covenants

The following is a summary of key financial covenants for the company's unsecured credit facility and notes, as defined and calculated per the terms of the 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, are presented to investors to show that as of March 31, 2021, the company believes it is in compliance with the covenants.
Unsecured Credit Facility Key CovenantsRequiredMarch 31, 2021
Maximum leverage ratio< 0.600.38
Minimum fixed charge coverage ratio> 1.503.95
Maximum secured indebtedness ratio< 0.400.001
Unencumbered asset value ratio> 1.672.67
Unencumbered interest ratio> 1.754.96
Unsecured Notes Key CovenantsRequiredMarch 31, 2021
Limitation on incurrence of total debt≤ 60%36.5%
Limitation on incurrence of secured debt≤ 40%0.1%
Debt service coverage ratio≥ 1.504.37
Maintenance of total unencumbered assets  ≥ 150%274%
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National Retail Properties, Inc.
Property Portfolio

Top 20 Lines of Trade
% of Rent Collections Quarter Ended March 31, 2021(3)
As of March 31,
Line of Trade
2021(1)
2020(2)
1.Convenience stores18.0 %18.1 %99.9 %
2.Automotive service10.7 %9.9 %98.7 %
3.Restaurants – full service10.2 %11.0 %91.5 %
4.Restaurants – limited service9.5 %8.7 %99.9 %
5.Family entertainment centers6.0 %6.7 %99.6 %
6.Health and fitness5.2 %5.2 %94.2 %
7.Theaters4.4 %4.7 %75.8 %
8.Recreational vehicle dealers, parts and accessories3.5 %3.4 %100.0 %
9.Equipment rental3.1 %2.6 %100.0 %
10.Automotive parts3.1 %3.1 %99.7 %
11.Home improvement2.6 %2.6 %99.1 %
12.Wholesale clubs2.5 %2.5 %100.0 %
13.Medical service providers2.1 %2.1 %99.6 %
14.General merchandise1.7 %1.7 %99.1 %
15.Furniture1.7 %1.7 %99.2 %
16.Home furnishings1.6 %1.6 %99.9 %
17.Travel plazas1.5 %1.5 %100.0 %
18.Consumer electronics1.5 %1.5 %100.0 %
19.Drug stores1.4 %1.5 %100.0 %
20.Bank1.3 %1.3 %100.0 %
Other8.4 %8.6 %99.7 %
Total100.0 %100.0 %97.5 %

Top 10 States
State
% of Total(1)
State
% of Total(1)
1.Texas17.4 %6.Georgia4.4 %
2.Florida8.7 %7.Indiana4.2 %
3.Ohio5.7 %8.Tennessee3.7 %
4.Illinois5.1 %9.California3.4 %
5.North Carolina4.4 %10.Virginia3.4 %
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.



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National Retail Properties, Inc.
Property Portfolio

Top 20 Tenants
Properties
% of Total(1)
1.7-Eleven140 5.0 %
2.Mister Car Wash115 4.5 %
3.Camping World47 4.3 %
4.LA Fitness30 3.8 %
5.Flynn Restaurant Group (Taco Bell/Arby's)202 3.4 %
6.GPM Investments (Convenience Stores)153 3.3 %
7.AMC Theatre19 2.8 %
8.Couche Tard (Pantry)82 2.7 %
9.BJ's Wholesale Club11 2.5 %
10.Sunoco59 2.2 %
11.Mavis Tire Express Services120 2.1 %
12.Main Event18 1.8 %
13.Frisch's Restaurants74 1.8 %
14.Bob Evans114 1.6 %
15.Fikes (Convenience Stores)56 1.6 %
16.Chuck E. Cheese's53 1.6 %
17.Best Buy15 1.5 %
18.Life Time Fitness3 1.5 %
19.Dave & Buster's11 1.4 %
20.Ahern Rentals35 1.4 %

Lease Expirations(2)
% of
Total(1)
# of
Properties
Gross Leasable
Area(3)
% of
Total(1)
# of
Properties
Gross Leasable Area(3)
20212.0 %79 765,000 20276.4 %176 2,563,000 
20225.2 %119 1,493,000 20284.8 %157 1,183,000 
20232.7 %113 1,417,000 20293.0 %75 1,052,000 
20243.5 %95 1,473,000 20303.7 %106 1,190,000 
20256.2 %198 2,092,000 20318.7 %192 2,920,000 
20265.3 %200 2,000,000 Thereafter48.5 %1,593 13,762,000 

(1)Based on the annual base rent of $684,283,000, which is the annualized base rent for all leases in place as of March 31, 2021.
(2)As of March 31, 2021, the weighted average remaining lease term is 10.6 years.
(3)Square feet.









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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):

DeferredScheduled Repayment
Accrual BasisCash BasisTotal% of TotalAccrual BasisCash BasisTotal% of TotalCumulative Total
2020$33,610 $17,659 $51,269 91.6 %$3,239 $20 $3,259 5.8 %5.8 %
2021Q1678 1,937 2,615 4.7 %10,063 754 10,817 19.3 %25.1 %
Q2278 750 1,028 1.8 %8,603 1,823 10,426 18.6 %43.7 %
Q334 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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NATIONAL RETAIL PROPERTIES, INC. Reports