National Retail Properties Inc.

10/31/2024 | Press release | Distributed by Public on 10/31/2024 06:32

Third Quarter 2024 Operating Results Announced by NNN REIT, Inc Form 8 K

Third Quarter 2024 Operating Results

Announced by NNN REIT, Inc.

Orlando, Florida, October 31, 2024 - NNN REIT, Inc. (NYSE: NNN), a real estate investment trust, today announced its operating results for the quarter and nine months ended September 30, 2024. Highlights include:

Operating Results:

•
Revenues and net earnings, FFO, Core FFO and AFFO and diluted per share amounts:

Quarter Ended
September 30,

Nine Months Ended
September 30,

2024

2023

2024

2023

(dollars in thousands, except per share data)

Revenues

$

218,564

$

205,132

$

650,784

$

611,880

Net earnings

$

97,904

$

106,787

$

298,941

$

295,658

Net earnings per share

$

0.53

$

0.59

$

1.63

$

1.63

FFO

$

154,171

$

147,223

$

457,812

$

437,362

FFO per share

$

0.84

$

0.81

$

2.50

$

2.41

Core FFO

$

154,327

$

147,376

$

458,438

$

438,247

Core FFO per share

$

0.84

$

0.81

$

2.50

$

2.42

AFFO

$

155,701

$

148,281

$

462,556

$

442,526

AFFO per share

$

0.84

$

0.82

$

2.52

$

2.44

Third Quarter 2024 Highlights:

•
FFO and Core FFO per share increased 3.7% over prior year results
•
AFFO per share increased 2.4% over prior year results
•
Maintained high occupancy levels at 99.3%, with a weighted average remaining lease term of 10.0 years, at September 30, 2024 as compared to 99.3% at June 30, 2024 and 99.5% at December 31, 2023
•
$113.6 million in property investments, including the acquisition of eight properties with an aggregate gross leasable area of approximately 626,000 square feet at an initial cash cap rate of 7.6%
•
Sold nine properties for $20.0 million, producing $7.8 million of gains on sales
•
Raised $178.9 million in net proceeds from the issuance of 3,863,700 common shares
•
Maintained sector-leading 12.3 year weighted average debt maturity

1

Highlights for the nine months ended September 30, 2024:

•
FFO per share increased 3.7% over prior year results
•
Core FFO and AFFO per share increased 3.3% over prior year results
•
$348.6 million in property investments, including the acquisition of 44 properties with an aggregate gross leasable area of approximately 1,181,000 square feet at an initial cash cap rate of 7.8%
•
Sold 29 properties for $105.9 million, producing $30.2 million of gains on sales
•
Raised $213.7 million in net proceeds from the issuance of 4,701,452 common shares
•
Issued $500 million principal amount of 5.500% senior unsecured notes due 2034
•
Redeemed $350 million principal amount of 3.900% senior unsecured notes due 2024
•
Expanded line of credit borrowing capacity from $1.1 billion to $1.2 billion and extended maturity to April 2028

Previous Core FFO per share guidance for 2024 was narrowed from a range of $3.27 to $3.33 per share to a range of $3.28 to $3.32 per share. The 2024 AFFO is estimated to be $3.31 to $3.35 per share. The Core FFO guidance equates to net earnings of $1.93 to $1.97 per share, plus $1.35 per share of expected real estate depreciation and amortization and excludes any gains from the sale of real estate, charges for impairments and executive retirement costs. 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.

Steve Horn, Chief Executive Officer, commented: "NNN continues to perform consistently, with a 3.7 percent increase in FFO and Core FFO per share results in the third quarter 2024 compared to prior year results. With over $175 million of cash, $1.2 billion available on our revolving credit facility and no debt maturities until the fourth quarter of 2025, our balance sheet continues to allow NNN to capitalize on sufficiently accretive opportunities and remain well positioned to provide long-term shareholder value."

NNN REIT invests primarily in high-quality retail properties subject generally to long-term, net leases. As of September 30, 2024, the company owned 3,549 properties in 49 states with a gross leasable area of approximately 36.6 million square feet and a weighted average remaining lease term of 10.0 years. NNN is one of only three publicly traded real estate investment trusts to have increased annual dividends for 35 or more consecutive years. For more information on the company, visit www.nnnreit.com.

Management will hold a conference call on October 31, 2024, at 10:30 a.m. ET to review its results of operations. The call can be accessed on the NNN REIT website live at www.nnnreit.com. For those unable to listen to the live broadcast, a replay will be available on the company's website. In addition, a summary of any earnings guidance given on the call will be posted to the company's website.

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, general economic conditions, including inflation, 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, risks related to the company's status as areal estate investment trust ("REIT"), and the potential impacts of an epidemic or pandemic on the company's business operations, financial results, and financial position on the world economy. 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, 2023 and (ii) Quarterly Report on Form 10-Q for the quarters ended March 31, 2024, June 30, 2024 and September 30, 2024. 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. NNN REIT, 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.

2

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 noncontrolling interests and any impairment charges on a depreciable real estate asset, net of recoveries.

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 such as transaction related gains, income or expense, impairments on land or commercial mortgage residual interests, executive retirement 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.

3

NNN REIT, Inc.

(dollars in thousands, except per share data)

(unaudited)

Quarter Ended
September 30,

Nine Months Ended
September 30,

2024

2023

2024

2023

Income Statement Summary

Revenues:

Rental income

$

218,155

$

204,856

$

649,120

$

610,912

Interest and other income from real estate transactions

409

276

1,664

968

218,564

205,132

650,784

611,880

Operating expenses:

General and administrative

11,209

10,225

35,582

33,216

Real estate

7,263

6,459

21,175

20,141

Depreciation and amortization

63,369

59,523

186,487

178,546

Leasing transaction costs

22

96

75

223

Impairment losses - real estate, net of recoveries

760

1,001

2,908

3,675

Executive retirement costs

156

153

626

885

82,779

77,457

246,853

236,686

Gain on disposition of real estate

7,765

19,992

30,207

40,222

Earnings from operations

143,550

147,667

434,138

415,416

Other expenses (revenues):

Interest and other income

(845

)

(644

)

(1,940

)

(751

)

Interest expense

46,491

41,524

137,137

120,509

45,646

40,880

135,197

119,758

Net earnings

$

97,904

$

106,787

$

298,941

$

295,658

Weighted average shares outstanding:

Basic

184,007,176

181,398,273

182,757,097

181,120,963

Diluted

184,561,431

181,721,467

183,301,570

181,460,622

Net earnings per share available to stockholders:

Basic

$

0.53

$

0.59

$

1.63

$

1.63

Diluted

$

0.53

$

0.59

$

1.63

$

1.63

4

NNN REIT, Inc.

(dollars in thousands, except per share data)

(unaudited)

Quarter Ended
September 30,

Nine Months Ended
September 30,

2024

2023

2024

2023

Funds From Operations ("FFO") Reconciliation:

Net earnings

$

97,904

$

106,787

$

298,941

$

295,658

Real estate depreciation and amortization

63,272

59,427

186,170

178,251

Gain on disposition of real estate

(7,765

)

(19,992

)

(30,207

)

(40,222

)

Impairment losses - depreciable real estate,
net of recoveries

760

1,001

2,908

3,675

Total FFO adjustments

56,267

40,436

158,871

141,704

FFO

$

154,171

$

147,223

$

457,812

$

437,362

FFO per share:

Basic

$

0.84

$

0.81

$

2.51

$

2.41

Diluted

$

0.84

$

0.81

$

2.50

$

2.41

Core Funds From Operations ("Core FFO") Reconciliation:

Net earnings

$

97,904

$

106,787

$

298,941

$

295,658

Total FFO adjustments

56,267

40,436

158,871

141,704

FFO

154,171

147,223

457,812

437,362

Executive retirement costs

156

153

626

885

Total Core FFO adjustments

156

153

626

885

Core FFO

$

154,327

$

147,376

$

458,438

$

438,247

Core FFO per share:

Basic

$

0.84

$

0.81

$

2.51

$

2.42

Diluted

$

0.84

$

0.81

$

2.50

$

2.42

5

NNN REIT, Inc.

(dollars in thousands, except per share data)

(unaudited)

Quarter Ended
September 30,

Nine Months Ended
September 30,

2024

2023

2024

2023

Adjusted Funds From Operations ("AFFO") Reconciliation:

Net earnings

$

97,904

$

106,787

$

298,941

$

295,658

Total FFO adjustments

56,267

40,436

158,871

141,704

Total Core FFO adjustments

156

153

626

885

Core FFO

154,327

147,376

458,438

438,247

Straight-line accrued rent, net of reserves

(123

)

(493

)

8

(1,496

)

Net capital lease rent adjustment

56

83

164

244

Below-market rent amortization

(109

)

(115

)

(351

)

(349

)

Stock based compensation expense

2,818

2,678

9,041

8,254

Capitalized interest expense

(1,268

)

(1,248

)

(4,744

)

(2,374

)

Total AFFO adjustments

1,374

905

4,118

4,279

AFFO

$

155,701

$

148,281

$

462,556

$

442,526

AFFO per share:

Basic

$

0.85

$

0.82

$

2.53

$

2.44

Diluted

$

0.84

$

0.82

$

2.52

$

2.44

Other Information:

Rental income from operating leases(1)

$

213,447

$

200,287

$

634,088

$

596,099

Earned income from direct financing leases(1)

$

116

$

140

$

353

$

427

Percentage rent(1)

$

200

$

336

$

1,347

$

1,390

Real estate expenses reimbursed from tenants(1)

$

4,392

$

4,093

$

13,332

$

12,996

Real estate expenses

(7,263

)

(6,459

)

(21,175

)

(20,141

)

Real estate expenses, net of tenant reimbursements

$

(2,871

)

$

(2,366

)

$

(7,843

)

$

(7,145

)

Amortization of debt costs

$

1,450

$

1,247

$

4,538

$

3,648

Scheduled debt principal amortization (excluding maturities)

$

-

$

-

$

-

$

173

(2)

Non-real estate depreciation expense

$

101

$

98

$

327

$

303

(1)

For the quarters ended September 30, 2024 and 2023, the aggregate of such amounts is $218,155 and $204,856, respectively, and $649,120 and $610,912, for the nine months ended September 30, 2024 and 2023, respectively, and is classified as rental income on the income statement summary.

(2)

In April 2023, NNN repaid the remaining mortgages payable principal balance of $9,774.

6

NNN REIT, Inc.

2024 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.

2024 Guidance

Net earnings per share excluding any gains on disposition of real
estate, impairment charges, and executive retirement costs

$1.93 - $1.97 per share

Real estate depreciation and amortization per share

$1.35 per share

Core FFO per share

$3.28 - $3.32 per share

AFFO per share

$3.31 - $3.35 per share

General and administrative expenses

$45 - $46 Million

Real estate expenses, net of tenant reimbursements

$11 - $12 Million

Acquisition volume

$500 - $600 Million

Disposition volume

$110 - $130 Million

7

NNN REIT, Inc.

(dollars in thousands)

(unaudited)

September 30,
2024

December 31,
2023

Balance Sheet Summary

Assets:

Real estate portfolio, net of accumulated depreciation and amortization

$

8,625,489

$

8,535,851

Cash and cash equivalents

173,526

1,189

Restricted cash and cash held in escrow

4,986

3,966

Receivables, net of allowance of $592 and $669, respectively

2,224

3,649

Accrued rental income, net of allowance of $4,117 and $4,168, respectively

33,849

34,611

Debt costs, net of accumulated amortization of $26,280 and $23,952, respectively

9,656

3,243

Other assets

73,913

79,459

Total assets

$

8,923,643

$

8,661,968

Liabilities:

Line of credit payable

$

-

$

132,000

Notes payable, net of unamortized discount and unamortized debt costs

4,372,293

4,228,544

Accrued interest payable

75,399

34,374

Other liabilities

107,025

109,593

Total liabilities

4,554,717

4,504,511

Total equity

4,368,926

4,157,457

Total liabilities and equity

$

8,923,643

$

8,661,968

Common shares outstanding

187,525,891

182,474,770

Gross leasable area, Property Portfolio (square feet)

36,550,000

35,966,000

8

NNN REIT, Inc.

Debt Summary

As of September 30, 2024

(dollars in thousands)

(unaudited)

Unsecured Debt

Principal

Principal,
Net of
Unamortized
Discount

Stated
Rate

Effective
Rate

Maturity Date

Line of credit payable

$

-

$

-

SOFR +
87.5 bps

-

April 2028

Unsecured notes payable:

2025

400,000

399,872

4.000

%

4.029

%

November 2025

2026

350,000

349,022

3.600

%

3.733

%

December 2026

2027

400,000

399,447

3.500

%

3.548

%

October 2027

2028

400,000

398,704

4.300

%

4.388

%

October 2028

2030

400,000

399,254

2.500

%

2.536

%

April 2030

2033

500,000

489,352

5.600

%

5.905

%

October 2033

2034

500,000

494,002

5.500

%

5.662

%

June 2034

2048

300,000

296,197

4.800

%

4.890

%

October 2048

2050

300,000

294,526

3.100

%

3.205

%

April 2050

2051

450,000

442,184

3.500

%

3.602

%

April 2051

2052

450,000

440,226

3.000

%

3.118

%

April 2052

Total

4,450,000

4,402,786

Total unsecured debt(1)

$

4,450,000

$

4,402,786

Debt costs

$

(43,820

)

Accumulated amortization

13,327

Debt costs, net of accumulated amortization

(30,493

)

Notes payable, net of unamortized discount and
unamortized debt costs

$

4,372,293

(1)

Unsecured debt has a weighted average interest rate of 4.1% and a weighted average maturity of 12.3 years.

9

NNN REIT, Inc.

Debt Summary - Continued

As of September 30, 2024

(unaudited)

Credit Facility and Notes 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 September 30, 2024, the company believes it is in compliance with the covenants.

Key Covenants

Required

September 30, 2024

Unsecured Bank Credit Facility:

Maximum leverage ratio

< 0.60

0.37

Minimum fixed charge coverage ratio

> 1.50

4.29

Maximum secured indebtedness ratio

< 0.40

-

Unencumbered asset value ratio

> 1.67

2.71

Unencumbered interest ratio

> 1.75

4.22

Unsecured Notes:

Limitation on incurrence of total debt

≤ 60%

40.0%

Limitation on incurrence of secured debt

≤ 40%

-

Debt service coverage ratio

≥ 1.50

4.2

Maintenance of total unencumbered assets

≥ 150%

250%

10

NNN REIT, Inc.

Property Portfolio

As of September 30, 2024

Top 20 Lines of Trade

As of September 30,

Lines of Trade

2024(1)

2023(2)

1.

Automotive service

16.8%

14.7%

2.

Convenience stores

15.9%

16.8%

3.

Restaurants - limited service

8.4%

8.8%

4.

Restaurants - full service

8.3%

8.8%

5.

Family entertainment centers

7.2%

5.8%

6.

Recreational vehicle dealers, parts and accessories

5.1%

4.7%

7.

Theaters

4.0%

4.2%

8.

Health and fitness

4.0%

4.6%

9.

Equipment rental

3.2%

3.0%

10.

Wholesale clubs

2.4%

2.5%

11.

Automotive parts

2.4%

2.5%

12.

Drug stores

2.2%

2.5%

13.

Home improvement

2.1%

2.3%

14.

Furniture

1.9%

2.1%

15.

Medical service providers

1.8%

1.8%

16.

General merchandise

1.4%

1.5%

17.

Pet supplies and services

1.3%

1.0%

18.

Home furnishings

1.3%

1.3%

19.

Consumer electronics

1.3%

1.4%

20.

Travel plazas

1.2%

1.3%

Other

7.8%

8.4%

Total

100.0%

100.0%

Top 10 States

State

% of
Total(1)

State

% of
Total(1)

1.

Texas

17.3%

6.

Tennessee

3.9%

2.

Florida

9.2%

7.

North Carolina

3.8%

3.

Illinois

5.1%

8.

Indiana

3.6%

4.

Ohio

4.7%

9.

Virginia

3.3%

5.

Georgia

4.6%

10.

Arizona

3.2%

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

(1)

$850,976,000 as of September 30, 2024.

(2)

$800,194,000 as of September 30, 2023.

11

NNN REIT, Inc.

Property Portfolio - Continued

As of September 30, 2024

Top 20 Tenants

Tenant

# of
Properties

% of
Total(1)

1.

7-Eleven

146

4.6%

2.

Mister Car Wash

121

4.1%

3.

Dave & Buster's

34

3.9%

4.

Camping World

48

3.8%

5.

GPM Investments (convenience stores)

150

2.9%

6.

Flynn Restaurant Group (Taco Bell/Arby's)

204

2.7%

7.

AMC Theatre

20

2.6%

8.

LA Fitness

26

2.5%

9.

BJ's Wholesale Club

13

2.4%

10.

Mavis Tire Express Services

140

2.2%

11.

Couche Tard (Pantry)

92

2.2%

12.

Chuck-E-Cheese

53

1.8%

13.

Walgreens

49

1.8%

14.

Sunoco

53

1.8%

15.

United Rentals

49

1.6%

16.

Fikes (convenience stores)

58

1.5%

17.

Frisch's Restaurants

64

1.5%

18.

Tidal Wave Auto Spa

35

1.3%

19.

Bob Evans

106

1.3%

20.

Life Time Fitness

3

1.3%

Lease Expirations(2)

% of
Total(1)

# of
Properties

Gross Leasable
Area(3)

% of
Total(1)

# of
Properties

Gross Leasable
Area(3)

2024

0.1%

8

52,000

2030

3.9%

128

1,691,000

2025

3.8%

153

1,254,000

2031

7.0%

184

2,655,000

2026

4.2%

205

1,992,000

2032

5.7%

215

2,361,000

2027

7.8%

232

3,542,000

2033

4.6%

135

1,403,000

2028

5.5%

228

2,109,000

Thereafter

52.8%

1,893

17,101,000

2029

4.6%

143

2,083,000

(1)

Based on the annual base rent of $850,976,000, which is the annualized base rent for all leases in place as of September 30, 2024.

(2)

As of September 30, 2024, the weighted average remaining lease term is 10.0 years.

(3)

Square feet.

12