NEWS RELEASE
For information contact:
Kevin B. Habicht
Chief Financial Officer
(407) 265-7348
For Immediate Release
May 3, 2005
INCREASED FIRST QUARTER OPERATING RESULTS ANNOUNCED BY
COMMERCIAL NET LEASE REALTY, INC.
Orlando, Florida, May 3, 2005 —Commercial Net Lease Realty, Inc. (NYSE: NNN), a real estate investment trust, announced operating results for the quarter ended March 31, 2005. Highlights for the quarter include:
- Net earnings available to common shareholders increased to $25.0 million or $0.47 per share compared to $14.8 million or $0.29 per share for the same period last year
- Revenues increased 12 percent to $33.1 million compared to the same period last year
- Funds from operations ("FFO") available to common shareholders increased to $19.6 million or $0.37 per share compared to $18.4 million for $0.36 per share for the same period last year
- Invested $47.0 million in the Investment Portfolio, including acquiring 21 properties
- Invested $18.6 million in the Development Inventory Portfolio, including acquiring three properties
- Invested $2.0 million in the Exchange Inventory Portfolio, including acquiring six properties
- Sold four Investment properties with net proceeds of $31.8 million, resulting in a gain of $9.8 million
- Sold two Development Inventory properties with net proceeds of $5.8 million, resulting in a gain of $1.4 million
- Sold three Exchange Inventory properties with net proceeds of $9.3 million, resulting a gain of $1.1 million
- Investment Portfolio occupancy was 97.5% at March 31, 2005, compared to 96.7% at March 31, 2004
Craig Macnab, Chief Executive Officer and President, said, “Our increased first quarter revenue over the same period last year results directly from the efficient execution of streamlining our retail property sector activities. We have been able to increase our stable rental revenue stream, and our acquisitions and development teams continue building relationships that position us to quickly act on advantageous opportunities and generate repeat business.”
Commercial Net Lease Realty invests primarily in high-quality, single-tenant retail properties subject generally to long-term, net leases with established tenants, such as Barnes & Noble, Best Buy, CVS, OfficeMax and the United States of America. As of March 31, 2005, the Company owns 379 Investment Properties in 38 states with a gross leasable area of approximately 8.5 million square feet. These Investment Properties are leased to 155 corporations in 58 industry classifications.
Management will hold a conference call on May 3, 2005, at 11:00 a.m. EDT to review the Company’s results. The call can be accessed on the Company’s 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, the Company will post a summary of any earnings guidance given on the call to the Company’s web site.
Statements in this press release that are not strictly historical are “forward-looking” statements. 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, local real estate conditions, changes in interest rates, increases in operating costs, the availability of capital, and the profitability of the Company’s taxable subsidiary. Additional information concerning these and other factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the Company’s SEC filings, including, but not limited to, the Company’s Annual Report on Form 10-K. Copies of each filing may be obtained from the Company or the SEC. Consequently, 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. The Company 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 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) on the disposition of real estate held for investment, and the Company’s share of these items from the Company’s unconsolidated partnerships.
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 income 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.
The Company has determined that there are earnings from discontinued operations in each of its segments, real estate held for investment and real estate held for sale. All property dispositions from the Company’s held for investment segment are classified as discontinued operations. In addition, certain properties in the Company’s held for sale segment that have generated revenues before disposition are classified as discontinued operations. These held for sale properties have not historically been classified as discontinued operations. Prior period comparable condensed consolidated financial statements have been restated to include these properties in its earnings from discontinued operations. These adjustments resulted in a decrease in the Company’s reported total revenues and total and per share income from continuing operations and an increase in the Company’s income from discontinued operations. However, the Company’s total and per share FFO and net income available to common shareholders are not affected.
| | | | | | | | |
Commercial Net Lease Realty, Inc.
(in thousands, except per share data) |
| Income Statement Summary | Quarter Ended March 31, | |
| 2005
| | 2004
| |
| Revenues: |
| Rental and earned income | | $ | 29,254 | | $ | 25,892 | |
| Real estate expense reimbursement from tenants | | 1,657 | | | 1,705 | |
| Contingent rental income | | 393 | | | 329 | |
| Gain (loss) on disposition of real estate, Inventory Portfolio(Note 1) | | 469 | | | (31 | ) |
| Interest and other income from real estate transactions | | 1,308 | | | 1,715 | |
|
| |
| |
| 33,081 | | | 29,610 | |
|
| |
| |
| Operating expenses: |
| General and administrative | | 4,813 | | | 5,907 | |
| Real estate | | 2,824 | | | 2,916 | |
| Depreciation and amortization | | 4,546 | | | 4,052 | |
| Impairments | | 587 | | | - | |
|
| |
| |
| 12,770 | | | 12,875 | |
|
| |
| |
| Other expenses (revenues): |
| Interest and other income | | (467 | ) | | (1,067 | ) |
| Interest expense | | 7,866 | | | 7,571 | |
|
| |
| |
| 7,399 | | | 6,504 | |
|
| |
| |
| |
| Provision for income taxes | | 570 | | | 943 | |
| Minority interest | | 15 | | | 175 | |
| Equity in earnings of unconsolidated affiliates | | 1,081 | | | 1,253 | |
|
| |
| |
| |
| Earnings from continuing operations | | 14,578 | | | 12,602 | |
| |
| Earnings from discontinued operations: |
| Real estate, Investment Portfolio | | 10,086 | | | 1,320 | |
Real estate, Inventory Portfolio, net of provision for income
taxes and minority interest | | 1,340 | | | 2,346 | |
|
| |
| |
| 11,426 | | | 3,666 | |
|
| |
| |
| |
| Net earnings | | 26,004 | | | 16,268 | |
| Series A Preferred Stock dividends | | (1,002 | ) | | (1,002 | ) |
| Series B Convertible Preferred Stock dividends | | (419 | ) | | (419 | ) |
|
| |
| |
| Net earnings available to common shareholders - basic | | 24,583 | | | 14,847 | |
| Series B Convertible Preferred Stock dividends | | 419 | | | - | |
|
| |
| |
| Net earnings available to common shareholders - diluted | | $ | 25,002 | | $ | 14,847 | |
|
| |
| |
| |
| Weighted average common shares outstanding: |
| Basic | | 51,868 | | | 50,711 | |
|
| |
| |
| Diluted | | 53,539 | | | 51,052 | |
|
| |
| |
| |
| Net earnings per share available to common shareholders: |
| Basic: |
| Continuing operations | | $ | 0.25 | | $ | 0.22 | |
| Discontinued operations | | $ | 0.22 | | $ | 0.07 | |
|
| |
| |
| Net earnings | | $ | 0.47 | | $ | 0.29 | |
|
| |
| |
| |
| Diluted: |
| Continuing operations | | $ | 0.25 | | $ | 0.22 | |
| Discontinued operations | | $ | 0.22 | | $ | 0.07 | |
|
| |
| |
| Net earnings | | $ | 0.47 | | $ | 0.29 | |
|
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| |
| | | | | | | | |
Commercial Net Lease Realty, Inc.
(in thousands)
|
Earnings from Discontinued Operations - Investment Portfolio:
In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), the Company has classified its investment assets sold and leasehold interests expired subsequent to December 31, 2001, the effective date of SFAS No. 144, as discontinued operations. In addition, the Company has classified any investment asset that was held for sale at March 31, 2005, as discontinued operations. The following is a summary of earnings from discontinued operations from the real estate Investment Portfolio. |
| Quarter Ended
March 31, | |
| 2005
| | 2004
| |
| Revenues: |
| Rental and earned income | | $ | 1,751 | | $ | 1,126 | |
| Real estate expense reimbursements from tenants | | | - | | | 2 | |
| Interest and other income from real estate transactions | | | 50 | | | 105 | |
|
| |
| |
| | 1,801 | | | 1,233 | |
|
| |
| |
| |
| Expenses: |
| General and administrative | | | - | | | 3 | |
| Real estate | | | 48 | | | 61 | |
| Depreciation and amortization | | | 28 | | | 213 | |
| Impairment | | | 1,403 | | | - | |
| Interest | | | 21 | | | 62 | |
|
| |
| |
| | 1,500 | | | 339 | |
|
| |
| |
| Gain on disposition of real estate(Note 1) | | | 9,785 | | | 426 | |
|
| |
| |
| Earnings from discontinued operations | | $ | 10,086 | | $ | 1,320 | |
|
| |
| |
Earnings from Discontinued Operations - Inventory Portfolio:
The Company has classified its Inventory Properties that are currently held for sale and generating rental revenues as discontinued operations. The Company has reclassified all held for sale properties that have generated rental revenue before disposition which were sold subsequent to December 31, 2001, the effective date of SFAS No. 144, as discontinued operations. The following is a summary of earnings from discontinued operations from the real estate Inventory Portfolio.
|
| |
| Revenues: |
| Rental income | | $ | 347 | | $ | 517 | |
| Real estate expense reimbursements from tenants | | | 31 | | | 33 | |
| Gain on disposition of real estate, Inventory Portfolio(Note 1) | | | 2,062 | | | 3,411 | |
| Interest and other income from real estate transactions | | | 126 | | | 81 | |
|
| |
| |
| | 2,566 | | | 4,042 | |
|
| |
| |
| |
| Expenses: |
| General and administrative | | | 9 | | | 2 | |
| Real estate | | | 98 | | | 36 | |
| Depreciation and amortization | | | 11 | | | - | |
| Interest | | | 268 | | | 98 | |
|
| |
| |
| | | 386 | | | 136 | |
|
| |
| |
| Provision for income taxes | | | (820 | ) | | (1,435 | ) |
| Minority interest | | | (20 | ) | | (125 | ) |
|
| |
| |
| Earnings from discontinued operations | | $ | 1,340 | | $ | 2,346 | |
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| | | | | | | | |
Commercial Net Lease Realty, Inc.
(in thousands)
|
| Quarter Ended March 31, | |
| 2005
| | 2004
| |
Reconciliation of net earnings to FFO and FFO available to
common shareholders: |
| Net earnings | | $ | 26,004 | | $ | 16,268 | |
| Real estate depreciation and amortization: |
| Continuing operations | | | 4,190 | | | 3,601 | |
| Discontinued operations | | | 28 | | | 213 | |
| Partnership real estate depreciation | | | 161 | | | 159 | |
Gain on disposition of real estate held for investment
from discontinued operations | | | (9,785 | ) | | (426 | ) |
|
| |
| |
| FFO | | | 20,598 | | | 19,815 | |
| Series A Preferred Stock dividends | | | (1,002 | ) | | (1,002 | ) |
| Series B Convertible Preferred Stock dividends | | | (419 | ) | | (419 | ) |
|
| |
| |
| FFO available to common shareholders – basic | | | 19,177 | | | 18,394 | |
| Series B Convertible Preferred dividends | | | 419 | | | - | |
|
| |
| |
| FFO available to common shareholders – diluted | | $ | 19,596 | | $ | 18,394 | |
|
| |
| |
| |
| Funds from operations per share: |
| Basic | | $ | 0.37 | | $ | 0.36 | |
|
| |
| |
| Diluted | | $ | 0.37 | | $ | 0.36 | |
|
| |
| |
| |
| | | | | | | | | | | |
| Note 1: | Quarter Ended March 31, | |
| 2005
| | 2004
|
| # of
Properties
| | # of
Properties
| | | | | |
Reconciliation of gain (loss) on disposition between
continuing and discontinued operations: |
| Continuing operations | | 1 | | $ | 469 | | 2 | | $ | (31 | ) |
| Discontinued operations, Investment Portfolio | | 4 | | | 9,785 | | 1 | | | 426 | |
| Discontinued operations, Inventory Portfolio | | 4 | | | 2,062 | | 3 | | | 3,411 | |
| Minority interest, Inventory Portfolio | | - | | | - | | - | | | 18 | |
|
| |
| |
| |
|
| | 9 | | $ | 12,316 | | 6 | | $ | 3,824 | |
|
| |
| |
| |
|
| Reconciliation of gain on disposition of type: |
| Investment Portfolio | | 4 | | $ | 9,785 | | 1 | | $ | 426 | |
| Inventory Portfolio: |
| Development | | 2 | | | 1,351 | | 5 | | | 3,270 | |
| Exchange | | 3 | | | 1,127 | | - | | | - | |
| Intercompany eliminations | | - | | | 53 | | - | | | 110 | |
| Minority interest on Development gain | | - | | | - | | - | | | 18 | |
|
| |
| |
| |
|
| | 9 | | $ | 12,316 | | 6 | | $ | 3,824 | |
|
| |
| |
| |
|
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Commercial Net Lease Realty, Inc.
(in thousands)
|
| Balance Sheet Summary | March 31,
2005
| | December 31,
2004
| |
| Assets: |
| Cash and cash equivalents | | | $ | 3,149 | | $ | 1,947 | |
| Receivables, net of allowance | | | | 4,877 | | | 6,636 | |
| Mortgages, notes and accrued interest receivable, net of allowance | | | | 42,122 | | | 45,564 | |
| Investments in and other receivables from unconsolidated affiliates | | | | 28,199 | | | 29,307 | |
| Real estate, Investment Portfolio: |
Accounted for using the operating method, net of
accumulated depreciation and amortization | | | | 1,027,096 | | | 1,006,319 | |
| Accounted for using the direct financing method | | | | 101,606 | | | 102,311 | |
| Held for sale, net of accumulated depreciation and impairment | | | | 1,650 | | | 3,078 | |
| Real estate, Inventory Portfolio, net of accumulated depreciation | | | | 66,064 | | | 58,049 | |
| Accrued rental income, net of allowance | | | | 29,020 | | | 28,619 | |
| Other assets | | | | 17,623 | | | 18,218 | |
|
| |
| |
| Total assets | | | $ | 1,321,406 | | $ | 1,300,048 | |
|
| |
| |
| |
| Liabilities and stockholders' equity: |
| Line of credit payable | | | $ | 33,000 | | $ | 17,900 | |
| Mortgages payable | | | | 154,817 | | | 157,168 | |
| Notes payable | | | | 323,077 | | | 323,132 | |
| Financing lease obligation | | | | 26,041 | | | 26,041 | |
| Other liabilities | | | | 17,524 | | | 16,781 | |
| Minority interest | | | | 1,567 | | | 2,028 | |
| Stockholders' equity | | | | 765,380 | | | 756,998 | |
|
| |
| |
| Total liabilities and equity | | | $ | 1,321,406 | | $ | 1,300,048 | |
|
| |
| |
| Common shares outstanding | | | | 52,190 | | | 52,078 | |
|
| |
| |
| Gross leasable area, Investment Portfolio | | | | 8,465 | | | 8,542 | |
|
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| |
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Commercial Net Lease Realty, Inc.
Investment Portfolio
(Based on annual base rent of $121,922,000 as of March 31, 2005)
|
Top 20 Tenants
|
| Tenant | % of Total | | | Tenant | % of Total | |
| 1. | United States of America | 15.1% | | 11. | Majestic Liquors | 1.9% | |
| 2. | CVS | 6.3% | | 12. | Jared Jewelers | 1.6% | |
| 3. | Best Buy | 4.8% | | 13. | Bed Bath & Beyond | 1.4% | |
| 4. | OfficeMax | 4.1% | | 14. | CarMax | 1.3% | |
| 5. | Barnes & Noble | 4.1% | | 15. | Food 4 Less | 1.3% | |
| 6. | Eckerd | 3.8% | | 16. | Havertys Furniture | 1.3% | |
| 7. | The Sports Authority | 3.0% | | 17. | Rite Aid | 1.2% | |
| 8. | Academy | 2.9% | | 18. | Dick's Sporting Goods | 1.1% | |
| 9. | Borders Books | 2.6% | | 19. | Reliable | 1.1% | |
| 10. | United Rentals | 2.0% | | 20. | Ashley Furniture | 1.0% | |
| |
| |
Top 10 States
|
| | State | % of Total | | | State | % of Total | |
| 1. | Virginia | 19.4% | | 6. | Ohio | 3.0% | |
| 2. | Texas | 15.9% | | 7. | Missouri | 3.0% | |
| 3. | Florida | 14.0% | | 8. | New Jersey | 2.8% | |
| 4. | California | 5.9% | | 9. | Maryland | 2.8% | |
| 5. | Georgia | 5.6% | | 10. | Colorado | 2.6% | |
| | | | | | | |
| Lease Expirations |
| |
| # of Properties | % of Total | | | # of Properties | % of Total | |
| 2005 | 7 | 0.4% | | 2011 | 14 | 2.9% | |
| 2006 | 6 | 1.4% | | 2012 | 19 | 4.6% | |
| 2007 | 16 | 1.9% | | 2013 | 27 | 6.6% | |
| 2008 | 21 | 2.5% | | 2014 | 37 | 23.7% | |
| 2009 | 19 | 2.6% | | 2015 | 19 | 5.4% | |
| 2010 | 16 | 4.0% | | Thereafter | 168 | 44.0% | |
