Exhibit 99.1
| | |
| NEWS RELEASE | | |
| For information contact: | | |
| Kevin B. Habicht | | |
| Chief Financial Officer | | |
| (407) 265-7348 | | For Immediate Release |
| | May 3, 2006 |
RECORD FIRST QUARTER OPERATING RESULTS
ANNOUNCED BY NATIONAL RETAIL PROPERTIES, INC.
Orlando, Florida, May 3, 2006 – National Retail Properties, Inc. (NYSE: NNN), formerly known as Commercial Net Lease Realty, Inc., a real estate investment trust, today announced record operating results for the quarter ended March 31, 2006, including a 10.8% increase in funds from operations (“FFO”) per common share (diluted) compared to the prior year period. Highlights include:
Operating Results:
| | • | | Net earnings available to common shareholders, revenues, FFO available to common shareholders: |
| | | | | | |
| | | Quarter Ended
March 31, |
| | | 2006 | | 2005 |
| | | (in thousands, except
per share data) |
Revenues | | $ | 43,470 | | $ | 27,495 |
| | |
Net earnings available to common shareholders | | $ | 22,446 | | $ | 25,002 |
Net earnings per common share (diluted) | | $ | 0.39 | | $ | 0.47 |
| | |
FFO available to common shareholders | | $ | 23,627 | | $ | 19,596 |
FFO per common share (diluted) | | $ | 0.41 | | $ | 0.37 |
| | • | | Investment Portfolio occupancy increased to 98.6% at March 31, 2006, compared to 98.3% at December 31, 2005. |
Investments and Dispositions for the quarter ended March 31, 2006:
| | • | | $36.3 million in the Investment Portfolio, including acquiring 40 properties with an aggregate 109,000 square feet of gross leasable area |
| | • | | $26.3 million in the Development Inventory Portfolio, including acquiring 11 properties |
| | • | | $12.7 million in the Exchange Inventory Portfolio, including acquiring 20 properties |
| | • | | Three Investment properties with an aggregate 84,000 square feet of gross leasable area, with net proceeds of $16.9 million, resulting in a gain of $5.0 million |
| | • | | Two Development Inventory properties with net proceeds of $17.6 million, resulting in a gain of $3.6 million, net of intercompany eliminations and minority interest |
| | • | | Seven Exchange Inventory properties with net proceeds of $7.2 million, resulting in a gain of $807,000 |
Capital Transactions for the quarter ended March 31, 2006:
| | • | | Repaid $18.2 million 7.435% fixed rate loan upon maturity in February 2006, which was secured by a first mortgage lien on certain Investment properties |
| | • | | Issued 1,067,700 shares of common stock generating $23.2 million of net proceeds pursuant to the Dividend Reinvestment and Stock Purchase Plan |
450 S. Orange Ave., Suite 900 | Orlando, FL 32801
(800) NNN-REIT | www.nnnreit.com
Craig Macnab, Chief Executive Officer and President, commented, “We are very pleased to report these strong quarterly results and believe we are on a path to report record results for the year with solid contributions from all areas of our business.”
National Retail also announced that its previously disclosed agreement to sell its Washington, D.C. area office properties to an affiliate of Brookfield Properties Corporation is expected to close in May 2006, subject to consent of the lender and customary closing conditions. The company recently negotiated a revised sale price of $229.3 million, which includes the assumption of a $95.0 million loan secured by the properties.
National Retail Properties invests primarily in high-quality, retail properties subject generally to long-term, net leases with established tenants, such as Barnes & Noble, Best Buy, Circle K, CVS, Uni-Mart and the United States of America. As of March 31, 2006, the company owned 564 Investment Properties in 41 states with a gross leasable area of approximately 9.3 million square feet. These Investment Properties are leased to 178 corporations in 62 industry classifications.
Management will hold a conference call on May 3, 2006 at 10:30 am 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, 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. 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 Securities and Exchange Commission (“SEC”) filings, including, but not limited to, Item 1A. Risk Factors of 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. National Retail 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 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.
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 earnings from continuing operations and an increase in the company’s earnings from discontinued operations. However, the company’s total and per share FFO and net earnings available to common shareholders are not affected.
National Retail Properties, Inc.
(in thousands, except per share data)
| | | | | | | | |
| | | Quarter Ended March 31, | |
| | | 2006 | | | 2005 | |
Income Statement Summary | | | | | | | | |
Revenues: | | | | | | | | |
Rental and earned income | | $ | 32,274 | | | $ | 24,705 | |
Real estate expense reimbursement from tenants | | | 996 | | | | 1,013 | |
Gain on disposition of real estate, Inventory Portfolio (Note 1) | | | 6,444 | | | | 469 | |
Interest and other income from real estate transactions | | | 1,459 | | | | 1,308 | |
Interest income on mortgage residual interests | | | 2,297 | | | | — | |
| | | | | | | | |
| | | 43,470 | | | | 27,495 | |
| | | | | | | | |
Operating expenses: | | | | | | | | |
General and administrative | | | 7,200 | | | | 4,780 | |
Real estate | | | 1,338 | | | | 1,276 | |
Depreciation and amortization | | | 5,351 | | | | 3,626 | |
Impairment – real estate | | | — | | | | 587 | |
Impairment - mortgage residual interests | | | 1,820 | | | | — | |
| | | | | | | | |
| | | 15,709 | | | | 10,269 | |
| | | | | | | | |
Other expenses (revenues): | | | | | | | | |
Interest and other income | | | (846 | ) | | | (456 | ) |
Interest expense | | | 11,935 | | | | 6,695 | |
| | | | | | | | |
| | | 11,089 | | | | 6,239 | |
| | | | | | | | |
Income tax benefit | | | 1,893 | | | | 603 | |
Minority interest | | | (3,197 | ) | | | 15 | |
Equity in earnings (losses) of unconsolidated affiliates | | | (33 | ) | | | 1,081 | |
| | | | | | | | |
Earnings from continuing operations | | | 15,335 | | | | 12,686 | |
| | |
Earnings from discontinued operations: | | | | | | | | |
Real estate, Investment Portfolio | | | 6,321 | | | | 11,924 | |
Real estate, Inventory Portfolio, net of income tax expense and minority interest | | | 1,792 | | | | 1,394 | |
| | | | | | | | |
| | | 8,113 | | | | 13,318 | |
| | | | | | | | |
Net earnings | | | 23,448 | | | | 26,004 | |
Series A Preferred Stock dividends | | | (1,002 | ) | | | (1,002 | ) |
Series B Convertible Preferred Stock dividends | | | (419 | ) | | | (419 | ) |
| | | | | | | | |
Net earnings available to common shareholders – basic | | | 22,027 | | | | 24,583 | |
Series B Convertible Preferred Stock dividends, if dilutive | | | 419 | | | | 419 | |
| | | | | | | | |
Net earnings available to common stockholders – diluted | | $ | 22,446 | | | $ | 25,002 | |
| | | | | | | | |
Weighted average common shares outstanding: | | | | | | | | |
Basic | | | 55,408 | | | | 51,868 | |
| | | | | | | | |
Diluted | | | 56,957 | | | | 53,539 | |
| | | | | | | | |
Net earnings per share available to common shareholders: | | | | | | | | |
Basic: | | | | | | | | |
Continuing operations | | $ | 0.25 | | | $ | 0.22 | |
Discontinued operations | | | 0.15 | | | | 0.25 | |
| | | | | | | | |
Net earnings | | $ | 0.40 | | | $ | 0.47 | |
| | | | | | | | |
Diluted: | | | | | | | | |
Continuing operations | | $ | 0.25 | | | $ | 0.22 | |
Discontinued operations | | | 0.14 | | | | 0.25 | |
| | | | | | | | |
Net earnings | | $ | 0.39 | | | $ | 0.47 | |
| | | | | | | | |
National Retail Properties, 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, 2006, as discontinued operations. The following is a summary of earnings from discontinued operations from the Investment Portfolio.
| | | | | | |
| | | Quarter Ended March 31, |
| | | 2006 | | 2005 |
Revenues: | | | | | | |
Rental and earned income | | $ | 4,858 | | $ | 6,607 |
Real estate expense reimbursements from tenants | | | 477 | | | 644 |
Interest and other income from real estate transactions | | | 76 | | | 50 |
| | | | | | |
| | | 5,411 | | | 7,301 |
| | | | | | |
Expenses: | | | | | | |
General and administrative | | | 30 | | | 33 |
Real estate | | | 1,471 | | | 1,596 |
Depreciation and amortization | | | 1,253 | | | 949 |
Impairment – real estate | | | — | | | 1,403 |
Interest | | | 1,287 | | | 1,181 |
| | | | | | |
| | | 4,041 | | | 5,162 |
| | | | | | |
Gain on disposition of real estate (Note 1) | | | 4,951 | | | 9,785 |
| | | | | | |
Earnings from discontinued operations | | $ | 6,321 | | $ | 11,924 |
| | | | | | |
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 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 Inventory Portfolio.
| | | | | | | | |
| | | Quarter Ended March 31, | |
| | | 2006 | | | 2005 | |
Revenues: | | | | | | | | |
Rental income | | $ | 1,926 | | | $ | 434 | |
Real estate expense reimbursements from tenants | | | 48 | | | | 31 | |
Gain on disposition of real estate (Note 1) | | | 1,160 | | | | 2,062 | |
Interest and other income from real estate transactions | | | — | | | | 126 | |
| | | | | | | | |
| | | 3,134 | | | | 2,653 | |
| | | | | | | | |
Expenses: | | | | | | | | |
General and administrative | | | 4 | | | | 9 | |
Real estate | | | 26 | | | | 98 | |
Depreciation and amortization | | | — | | | | 11 | |
Interest | | | 136 | | | | 268 | |
| | | | | | | | |
| | | 166 | | | | 386 | |
| | | | | | | | |
Income tax expense | | | (1,097 | ) | | | (853 | ) |
Minority interest | | | (79 | ) | | | (20 | ) |
| | | | | | | | |
Earnings from discontinued operations | | $ | 1,792 | | | $ | 1,394 | |
| | | | | | | | |
National Retail Properties, Inc.
(in thousands, except per share data)
| | | | | | | | |
| | | Quarter Ended March 31, | |
| | | 2006 | | | 2005 | |
Reconciliation of net earnings to FFO and FFO available to common shareholders: | | | | | | | | |
Net earnings | | $ | 23,448 | | | $ | 26,004 | |
Real estate depreciation and amortization: | | | | | | | | |
Continuing operations | | | 4,739 | | | | 3,269 | |
Discontinued operations | | | 1,253 | | | | 949 | |
Partnership real estate depreciation | | | 140 | | | | 161 | |
Gain on disposition of real estate held for investment from discontinued operations | | | (4,951 | ) | | | (9,785 | ) |
| | | | | | | | |
FFO | | | 24,629 | | | | 20,598 | |
Series A Preferred Stock dividends | | | (1,002 | ) | | | (1,002 | ) |
Series B Convertible Preferred Stock dividends | | | (419 | ) | | | (419 | ) |
| | | | | | | | |
FFO available to common stockholders – basic | | | 23,208 | | | | 19,177 | |
Series B Convertible Preferred Stock dividends, if dilutive | | | 419 | | | | 419 | |
| | | | | | | | |
FFO available to common stockholders – diluted | | $ | 23,627 | | | $ | 19,596 | |
| | | | | | | | |
FFO per share: | | | | | | | | |
Basic | | $ | 0.42 | | | $ | 0.37 | |
| | | | | | | | |
Diluted | | $ | 0.41 | | | $ | 0.37 | |
| | | | | | | | |
Note 1: Real Estate Disposition Summary
| | | | | | | | | | | |
| | | Quarter Ended March 31, |
| | | 2006 | | | 2005 |
| | | # of
Properties | | | | | # of
Properties | | |
Reconciliation of gain on disposition between continuing and discontinued operations: | | | | | | | | | | | |
Continuing operations | | 1 | | $ | 6,444 | | | 1 | | $ | 469 |
Discontinued operations: | | | | | | | | | | | |
Investment Portfolio | | 3 | | | 4,951 | | | 4 | | | 9,785 |
Inventory Portfolio | | 8 | | | 1,160 | | | 4 | | | 2,062 |
Minority interest, Inventory Portfolio | | — | | | (3,222 | ) | | — | | | — |
| | | | | | | | | | | |
| | 12 | | $ | 9,333 | | | 9 | | $ | 12,316 |
| | | | | | | | | | | |
Reconciliation of gain on disposition of type: | | | | | | | | | | | |
Inventory Portfolio: | | | | | | | | | | | |
Development | | 2 | | $ | 6,761 | | | 2 | | $ | 1,372 |
Exchange | | 7 | | | 807 | | | 3 | | | 1,106 |
Intercompany eliminations | | — | | | 36 | | | — | | | 53 |
Minority interest, Development | | — | | | (3,222 | ) | | — | | | — |
| | | | | | | | | | | |
| | 9 | | | 4,382 | | | 5 | | | 2,531 |
Investment Portfolio | | 3 | | | 4,951 | | | 4 | | | 9,785 |
| | | | | | | | | | | |
| | 12 | | $ | 9,333 | | | 9 | | $ | 12,316 |
| | | | | | | | | | | |
National Retail Properties, Inc.
(in thousands)
| | | | | | |
| Balance Sheet Summary | | March 31,
2006 | | December 31,
2005 |
| | | (unaudited) | | |
Assets: | | | | | | |
Cash and cash equivalents | | $ | 20,322 | | $ | 8,234 |
Restricted cash | | | 30,549 | | | 30,191 |
Receivables, net of allowance | | | 7,438 | | | 8,547 |
Mortgages, notes and accrued interest receivable, net of allowance | | | 51,981 | | | 51,086 |
Real estate, Investment Portfolio: | | | | | | |
Accounted for using the operating method, net of accumulated depreciation and amortization and impairment | | | 1,158,639 | | | 1,133,070 |
Accounted for using the direct financing method | | | 89,803 | | | 95,704 |
Held for sale, net of impairment | | | 164,129 | | | 165,323 |
Real estate, Inventory Portfolio, held for sale | | | 151,878 | | | 131,074 |
Mortgage residual interests, net of impairment | | | 47,438 | | | 55,184 |
Accrued rental income, net of allowance | | | 28,112 | | | 27,999 |
Other assets | | | 26,056 | | | 27,004 |
| | | | | | |
Total assets | | $ | 1,776,345 | | $ | 1,733,416 |
| | | | | | |
Liabilities and stockholders’ equity: | | | | | | |
Line of credit payable | | $ | 191,500 | | $ | 162,300 |
Mortgages payable | | | 37,176 | | | 56,133 |
Mortgages payable, held for sale | | | 95,000 | | | 95,000 |
Notes payable - secured | | | 28,250 | | | 28,250 |
Notes payable | | | 489,700 | | | 493,321 |
Financing lease obligation | | | 26,041 | | | 26,041 |
Income tax liability | | | 13,593 | | | 13,748 |
Other liabilities | | | 29,277 | | | 25,597 |
Minority interest | | | 5,168 | | | 4,939 |
Stockholders’ equity | | | 860,640 | | | 828,087 |
| | | | | | |
Total liabilities and equity | | $ | 1,776,345 | | $ | 1,733,416 |
| | | | | | |
Common shares outstanding | | | 56,274 | | | 55,131 |
| | | | | | |
Gross leasable area, Investment Portfolio | | | 9,252 | | | 9,227 |
| | | | | | |
Orange Avenue Mortgage Investments, Inc.
(in thousands)
The Company acquired 78.9 percent of Orange Avenue Mortgage Investments, Inc. (“OAMI”) on May 2, 2005. The following summary represents the balances related to OAMI included in the Company’s Balance Sheet and Income Statement Summary:
| | | | | | |
| | | March 31,
2006 | | December 31, 2005 |
Balance Sheet Summary | | | | | | |
Assets | | | | | | |
Cash and restricted cash | | $ | 22,433 | | $ | 17,978 |
Receivables and other assets | | | 6,077 | | | 6,632 |
Mortgage residual interests | | | 47,438 | | | 55,184 |
| | | | | | |
| | $ | 75,948 | | $ | 79,794 |
| | | | | | |
Liabilities | | | | | | |
Notes payable – secured | | $ | 28,250 | | $ | 28,250 |
Income tax liability | | | 13,193 | | | 14,551 |
Other liabilities | | | 359 | | | 474 |
| | | | | | |
| | $ | 41,802 | | $ | 43,275 |
| | | | | | |
Minority interest | | $ | 3,761 | | $ | 3,682 |
| | | | | | |
| | | | |
| | | Quarter
Ended
March 31,
2006 | |
Income Statement Summary | | | | |
| |
Revenues: | | | | |
Interest income on mortgage residual interests | | $ | 2,297 | |
Interest and other income | | | 398 | |
| | | | |
| | | 2,695 | |
Expenses: | | | | |
General and administrative | | | 170 | |
Impairment – mortgage residual interests | | | 1,820 | |
Interest | | | 706 | |
Amortization | | | 66 | |
| | | | |
| | | 2,762 | |
| | | | |
Income tax amortization | | | 1,358 | |
Minority interest | | | (80 | ) |
| | | | |
Net earnings | | $ | 1,211 | |
| | | | |
National Retail Properties, Inc.
Investment Portfolio
Top 20 Tenants
| | | | | |
| | | Tenant | | % of Total(1) | |
| 1. | | United States of America | | 12.7 | % |
| 2. | | Circle K | | 7.6 | % |
| 3. | | CVS | | 5.2 | % |
| 4. | | Best Buy | | 4.0 | % |
| 5. | | Uni-Mart | | 3.9 | % |
| 6. | | Barnes & Noble | | 3.6 | % |
| 7. | | OfficeMax | | 3.5 | % |
| 8. | | Eckerd | | 3.1 | % |
| 9. | | Academy | | 3.0 | % |
| 10. | | The Sports Authority | | 2.5 | % |
| 11. | | Majestic Liquors | | 2.1 | % |
| 12. | | Borders Books | | 2.1 | % |
| 13. | | United Rentals | | 1.9 | % |
| 14. | | Quik Trip | | 1.5 | % |
| 15. | | Jared Jewelers | | 1.2 | % |
| 16. | | Bed Bath & Beyond | | 1.2 | % |
| 17. | | Food 4 Less | | 1.1 | % |
| 18. | | CarMax | | 1.1 | % |
| 19. | | Havertys Furniture | | 1.0 | % |
| 20. | | Rite Aid | | 1.0 | % |
Top 10 States
| | | | | |
| | | State | | % of Total(1) | |
| 1. | | Texas | | 21.7 | % |
| 2. | | Virginia | | 16.4 | % |
| 3. | | Florida | | 12.3 | % |
| 4. | | Pennsylvania | | 5.4 | % |
| 5. | | California | | 5.0 | % |
| 6. | | Georgia | | 4.5 | % |
| 7. | | Missouri | | 3.1 | % |
| 8. | | Ohio | | 2.6 | % |
| 9. | | New Jersey | | 2.4 | % |
| 10. | | Tennessee | | 2.4 | % |
Lease Expirations
| | | | | | | |
| | | % of Total(1) | | | # of Properties | | Gross
Leasable
Area(2) |
| 2006 | | 0.5 | % | | 6 | | 124,000 |
| 2007 | | 1.7 | % | | 18 | | 236,000 |
| 2008 | | 2.1 | % | | 22 | | 440,000 |
| 2009 | | 2.4 | % | | 24 | | 475,000 |
| 2010 | | 3.8 | % | | 22 | | 351,000 |
| 2011 | | 3.6 | % | | 20 | | 404,000 |
| 2012 | | 4.0 | % | | 22 | | 473,000 |
| 2013 | | 5.7 | % | | 29 | | 688,000 |
| 2014 | | 20.0 | % | | 36 | | 1,160,000 |
| 2015 | | 4.8 | % | | 23 | | 627,000 |
| 2016 | | 4.9 | % | | 23 | | 557,000 |
| Thereafter | | 46.5 | % | | 305 | | 3,588,000 |
| (1) | Based on annual base rent of $147,892,000, which is the annualized base rent for all leases in place as of March 31, 2006. |
