Exhibit 99.1
| | |
| NEWS RELEASE | | |
| For information contact: | | |
| Kevin B. Habicht | | |
| Chief Financial Officer | | |
| (407) 265-7348 | | For Immediate Release |
| | November 6, 2006 |
THIRD QUARTER OPERATING RESULTS AND FFO GUIDANCE
ANNOUNCED BY NATIONAL RETAIL PROPERTIES, INC.
Orlando, Florida, November 6, 2006 – National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced record operating results for the nine months ended September 30, 2006, including a 26.6% increase in revenues and a 6.1% increase in Funds From Operations (“FFO”) per share compared to the same period for 2005. Highlights include:
Operating Results:
| | • | | Net earnings available to common shareholders, revenues and FFO available to common shareholders: |
| | | | | | | | | | | | |
| | | Quarter Ended
September 30, | | Nine Months Ended
September 30, |
| | | 2006 | | 2005 | | 2006 | | 2005 |
| | | (in thousands, except per share data) |
Revenues | | $ | 37,966 | | $ | 31,703 | | $ | 111,138 | | $ | 87,789 |
| | | | |
Net earnings available to common shareholders | | $ | 20,453 | | $ | 15,110 | | $ | 122,098 | | $ | 68,222 |
Net earnings per common share (diluted) | | $ | 0.35 | | $ | 0.28 | | $ | 2.12 | | $ | 1.26 |
| | | | |
FFO available to common shareholders | | $ | 21,917 | | $ | 21,375 | | $ | 70,048 | | $ | 61,825 |
FFO per common share (diluted) | | $ | 0.38 | | $ | 0.40 | | $ | 1.21 | | $ | 1.14 |
| | | | |
FFO available to common shareholders excluding mortgage residual interests valuation impairment(1) | | $ | 26,743 | | $ | 21,375 | | $ | 76,975 | | $ | 61,825 |
FFO per common share (diluted) excluding mortgage residual interests valuation impairment(1) | | $ | 0.46 | | $ | 0.40 | | $ | 1.33 | | $ | 1.14 |
| (1) | Excludes $4.8 million (8 cents per diluted common share) for the quarter ended September 30, 2006 and $6.9 million (12 cents per diluted common share) for the nine months ended September 30, 2006 of valuation impairment charges (net of minority interest) related to mortgage residual interests held by Orange Avenue Mortgage Investments, Inc. (“OAMI”) which is 78.9% owned by National Retail. The valuation impairment charges were primarily the result of increased prepayment speeds of the underlying loan receivables. Since the company’s $9.4 million equity investment in OAMI in May 2005, National Retail’s 78.9% share of OAMI’s net cash flow has been over $15 million. |
| | • | | Investment Portfolio occupancy was 98.2% at September 30, 2006. |
| | |
450 S. Orange Ave., Suite 900 | Orlando, FL 32801 (800) NNN-REIT | www.nnnreit.com | |  |
Investments and Dispositions for the quarter ended September 30, 2006:
| | • | | $131.3 million in the Investment Portfolio, including acquiring 89 properties with an aggregate 573,000 square feet of gross leasable area |
| | • | | $20.4 million in the Development Inventory Portfolio, including acquiring five properties |
| | • | | $10.4 million in the Exchange Inventory Portfolio, including acquiring 19 properties |
| | • | | Five Investment properties with an aggregate 122,000 square feet of gross leasable area, with net proceeds of $20.3 million, resulting in a gain of $4.1 million |
| | • | | One Development Inventory property with net proceeds of $0.4 million, resulting in a gain of $0.1 million, net of intercompany eliminations and minority interest |
| | • | | 17 Exchange Inventory properties with net proceeds of $24.2 million, resulting in a gain of $0.4 million |
Investments and Dispositions for the nine months ended September 30, 2006:
| | • | | $267.5 million in the Investment Portfolio, including acquiring 175 properties with an aggregate 858,000 square feet of gross leasable area |
| | • | | $66.7 million in the Development Inventory Portfolio, including 16 properties |
| | • | | $64.7 million in the Exchange Inventory Portfolio, including 64 properties |
| | • | | 11 Investment properties with an aggregate 761,000 square feet of gross leasable area, with net proceeds of $265.1 million, resulting in a gain of $68.6 million |
| | • | | Five Development Inventory properties with net proceeds of $26.9 million, resulting in a gain of $4.4 million, net of intercompany eliminations and minority interest |
| | • | | 41 Exchange Inventory properties with net proceeds of $44.9 million, resulting in a gain of $2.7 million |
Capital transactions for the quarter ended September 30, 2006:
| | • | | Issued 606,508 shares of common stock generating $12.5 million of net proceeds pursuant to the Dividend Reinvestment and Stock Purchase Plan |
| | • | | Issued $172.5 million of 3.95% convertible senior notes due in 2026 (with 2011 put option) |
National Retail also announced today that it expects FFO to be higher than the previously issued guidance for 2006 and established initial 2007 FFO guidance. FFO per diluted common share for 2006 is now expected to be in the range of $1.64 to $1.66 per share, which represents a 7.1% increase over 2005 to the mid-point of 2006 guidance. This equates to net earnings before any gains or losses from the sale of investment properties of $1.25 to $1.27 per share plus $0.39 per share of expected real estate related depreciation and amortization. For the year 2007, FFO is expected to be $1.74 to $1.80 per diluted common share, which represents a 7.3% increase over 2006 mid-point guidance to the mid-point of 2007 guidance. This equates to net earnings before any gains or losses from the sale of investment properties of $1.35 to $1.41 per share plus $0.39 per share of expected real estate related depreciation and amortization. This guidance is based on current plans and assumptions and subject to the risks and uncertainties more fully described in this press release and the company’s reports filed with the Securities and Exchange Commission.
Craig Macnab, Chief Executive Officer commented, “We are pleased that we are projecting solid FFO per share growth, both in 2006 and for 2007. This growth reflects our strong market position and the outstanding execution by our team.”
National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases. As of September 30, 2006, the company owned 691 Investment properties in 45 states with a gross leasable area of approximately 9.3 million square feet. For more information on the company, visit www.nnnreit.com.
Management will hold a conference call on November 6, 2006 at 10:30 a.m. EST to review these results. The call can be accessed on the National Retail’s web site live athttp://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.
2
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 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.
3
National Retail Properties, Inc.
(in thousands, except per share data)
(unaudited)
| | | | | | | | | | | | | | | | |
| Income Statement Summary | | Quarter Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Revenues: | | | | | | | | | | | | | | | | |
Rental and earned income | | $ | 34,482 | | | $ | 26,620 | | | $ | 98,460 | | | $ | 75,618 | |
Real estate expense reimbursement from tenants | | | 1,126 | | | | 779 | | | | 2,958 | | | | 2,511 | |
Interest and other income from real estate transactions | | | 665 | | | | 1,507 | | | | 3,783 | | | | 4,941 | |
Interest income on mortgage residual interests | | | 1,693 | | | | 2,797 | | | | 5,937 | | | | 4,719 | |
| | | | | | | | | | | | | | | | |
| | | 37,966 | | | | 31,703 | | | | 111,138 | | | | 87,789 | |
| | | | | | | | | | | | | | | | |
Gross proceeds from disposition of real estate, Inventory Portfolio | | | 463 | | | | 1,900 | | | | 21,915 | | | | 6,539 | |
Costs of disposition of real estate, Inventory Portfolio | | | (355 | ) | | | (2,038 | ) | | | (14,799 | ) | | | (5,831 | ) |
| | | | | | | | | | | | | | | | |
Gain (loss) from the disposition of real estate, Inventory Portfolio | | | 108 | | | | (138 | ) | | | 7,116 | | | | 708 | |
| | | | |
Operating expenses: | | | | | | | | | | | | | | | | |
General and administrative | | | 4,663 | | | | 6,463 | | | | 18,916 | | | | 16,981 | |
Real estate | | | 1,452 | | | | 1,196 | | | | 4,029 | | | | 3,362 | |
Depreciation and amortization | | | 5,788 | | | | 4,412 | | | | 16,320 | | | | 11,747 | |
Impairment – real estate | | | — | | �� | | 344 | | | | — | | | | 1,673 | |
Impairment – mortgage residual interests valuation adjustments | | | 6,116 | | | | — | | | | 8,779 | | | | — | |
Restructuring costs | | | — | | | | — | | | | 1,580 | | | | — | |
| | | | | | | | | | | | | | | | |
| | | 18,019 | | | | 12,415 | | | | 49,624 | | | | 33,763 | |
| | | | | | | | | | | | | | | | |
Other expenses (revenues): | | | | | | | | | | | | | | | | |
Interest and other income | | | (836 | ) | | | (487 | ) | | | (2,667 | ) | | | (1,252 | ) |
Interest expense | | | 12,078 | | | | 8,790 | | | | 35,387 | | | | 23,051 | |
| | | | | | | | | | | | | | | | |
| | | 11,242 | | | | 8,303 | | | | 32,720 | | | | 21,799 | |
| | | | | | | | | | | | | | | | |
Income tax benefit | | | 3,301 | | | | 432 | | | | 8,725 | | | | 1,378 | |
Minority interest | | | 1,705 | | | | 223 | | | | (1,587 | ) | | | 239 | |
Equity in earnings (losses) of unconsolidated affiliates | | | (76 | ) | | | 111 | | | | 119 | | | | 1,291 | |
| | | | | | | | | | | | | | | | |
Earnings from continuing operations | | | 13,743 | | | | 11,613 | | | | 43,167 | | | | 35,843 | |
| | | | |
Earnings from discontinued operations: | | | | | | | | | | | | | | | | |
Real estate, Investment Portfolio | | | 5,820 | | | | 762 | | | | 75,779 | | | | 16,140 | |
Real estate, Inventory Portfolio, net of income tax expense and minority interest | | | 1,892 | | | | 4,155 | | | | 6,158 | | | | 7,440 | |
| | | | | | | | | | | | | | | | |
| | | 7,712 | | | | 4,917 | | | | 81,937 | | | | 23,580 | |
| | | | | | | | | | | | | | | | |
Earnings before extraordinary gain | | | 21,455 | | | | 16,530 | | | | 125,104 | | | | 59,423 | |
| | | | |
Extraordinary gain, net of income tax expense | | | — | | | | — | | | | — | | | | 11,805 | |
| | | | | | | | | | | | | | | | |
Net earnings | | | 21,455 | | | | 16,530 | | | | 125,104 | | | | 71,228 | |
Series A Preferred Stock dividends | | | (1,002 | ) | | | (1,002 | ) | | | (3,006 | ) | | | (3,006 | ) |
Series B Convertible Preferred Stock dividends | | | — | | | | (418 | ) | | | (419 | ) | | | (1,256 | ) |
| | | | | | | | | | | | | | | | |
Net earnings available to common shareholders – basic | | | 20,453 | | | | 15,110 | | | | 121,679 | | | | 66,966 | |
Series B Convertible Preferred Stock dividends, if dilutive | | | — | | | | — | | | | 419 | | | | 1,256 | |
| | | | | | | | | | | | | | | | |
Net earnings available to common shareholders – diluted | | $ | 20,453 | | | $ | 15,110 | | | $ | 122,098 | | | $ | 68,222 | |
| | | | | | | | | | | | | | | | |
4
National Retail Properties, Inc.
(in thousands, except per share data)
(unaudited)
| | | | | | | | | | | | | | | | |
| | | Quarter Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Weighted average common shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 57,999 | | | | 53,652 | | | | 56,920 | | | | 52,596 | |
| | | | | | | | | | | | | | | | |
Diluted | | | 58,225 | | | | 53,901 | | | | 57,676 | | | | 54,122 | |
| | | | | | | | | | | | | | | | |
Net earnings per share available to common shareholders: | | | | | | | | | | | | | | | | |
Basic: | | | | | | | | | | | | | | | | |
Continuing operations | | $ | 0.22 | | | $ | 0.19 | | | $ | 0.70 | | | $ | 0.60 | |
Discontinued operations | | | 0.13 | | | | 0.09 | | | | 1.44 | | | | 0.45 | |
Extraordinary gain | | | — | | | | — | | | | — | | | | 0.22 | |
| | | | | | | | | | | | | | | | |
Net earnings | | $ | 0.35 | | | $ | 0.28 | | | $ | 2.14 | | | $ | 1.27 | |
| | | | | | | | | | | | | | | | |
Diluted: | | | | | | | | | | | | | | | | |
Continuing operations | | $ | 0.22 | | | $ | 0.19 | | | $ | 0.70 | | | $ | 0.61 | |
Discontinued operations | | | 0.13 | | | | 0.09 | | | | 1.42 | | | | 0.43 | |
Extraordinary gain | | | — | | | | — | | | | — | | | | 0.22 | |
| | | | | | | | | | | | | | | | |
Net earnings | | $ | 0.35 | | | $ | 0.28 | | | $ | 2.12 | | | $ | 1.26 | |
| | | | | | | | | | | | | | | | |
Supplemental Information: | | | | | | | | | | | | | | | | |
| | | | |
Contingent percentage rent | | $ | 58 | | | $ | 26 | | | $ | 569 | | | $ | 476 | |
| | | | | | | | | | | | | | | | |
Earned income from direct financing leases | | $ | 2,338 | | | $ | 2,648 | | | $ | 7,096 | | | $ | 7,992 | |
Decrease in real estate classified as direct financing leases | | | (3,100 | ) | | | (3,395 | ) | | | (9,376 | ) | | | (10,168 | ) |
| | | | | | | | | | | | | | | | |
Net direct financing lease adjustment | | | (762 | ) | | | (747 | ) | | | (2,280 | ) | | | (2,176 | ) |
Accrued rental income | | | 851 | | | | (2,048 | ) | | | 4,979 | | | | (1,053 | ) |
| | | | | | | | | | | | | | | | |
Net lease accounting adjustments | | $ | 89 | | | $ | (2,795 | ) | | $ | 2,699 | | | $ | (3,229 | ) |
| | | | | | | | | | | | | | | | |
Net Inventory Portfolio gain on sale | | $ | 507 | | | $ | 6,187 | | | $ | 7,232 | | | $ | 11,687 | |
| | | | | | | | | | | | | | | | |
Capitalized interest | | $ | 580 | | | $ | 1,656 | | | $ | 1,612 | | | $ | 2,099 | |
| | | | | | | | | | | | | | | | |
Scheduled debt principal amortization (excluding maturities) | | $ | 427 | | | $ | 989 | | | $ | 1,597 | | | $ | 2,937 | |
| | | | | | | | | | | | | | | | |
5
National Retail Properties, Inc.
(in thousands)
(unaudited)
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 September 30, 2006, as discontinued operations. The following is a summary of earnings from discontinued operations from the Investment Portfolio.
| | | | | | | | | | | | | | | | |
| | | Quarter Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Revenues: | | | | | | | | | | | | | | | | |
Rental and earned income | | $ | 1,865 | | | $ | 3,142 | | | $ | 12,887 | | | $ | 17,268 | |
Real estate expense reimbursement from tenants | | | 6 | | | | 405 | | | | 792 | | | | 1,710 | |
Interest and other income from real estate transactions | | | 57 | | | | 30 | | | | 255 | | | | 233 | |
| | | | | | | | | | | | | | | | |
| | | 1,928 | | | | 3,577 | | | | 13,934 | | | | 19,211 | |
| | | | | | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | | | | | |
General and administrative | | | — | | | | (230 | ) | | | 103 | | | | (129 | ) |
Real estate | | | 21 | | | | 1,074 | | | | 2,411 | | | | 4,552 | |
Depreciation and amortization | | | 73 | | | | 2,065 | | | | 1,533 | | | | 4,123 | |
Impairment – real estate | | | 273 | | | | 78 | | | | 693 | | | | 2,056 | |
Interest | | | (143 | ) | | | (261 | ) | | | 1,816 | | | | 2,181 | |
| | | | | | | | | | | | | | | | |
| | | 224 | | | | 2,726 | | | | 6,556 | | | | 12,783 | |
| | | | | | | | | | | | | | | | |
Loss on extinguishment of mortgage payable | | | — | | | | — | | | | (167 | ) | | | — | |
| | | | |
Gain (loss) on disposition of real estate | | | 4,116 | | | | (89 | ) | | | 68,568 | | | | 9,712 | |
| | | | | | | | | | | | | | | | |
Earnings from discontinued operations | | $ | 5,820 | | | $ | 762 | | | $ | 75,779 | | | $ | 16,140 | |
| | | | | | | | | | | | | | | | |
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
September 30, | | | Nine Months Ended
September 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Revenues: | | | | | | | | | | | | | | | | |
Rental income | | $ | 2,643 | | | $ | 250 | | | $ | 6,646 | | | $ | 1,394 | |
Real estate expense reimbursement from tenants | | | 63 | | | | — | | | | 213 | | | | 39 | |
Interest and other income from real estate transactions | | | — | | | | 614 | | | | — | | | | 805 | |
| | | | | | | | | | | | | | | | |
| | | 2,706 | | | | 864 | | | | 6,859 | | | | 2,238 | |
| | | | | | | | | | | | | | | | |
Gross proceeds from disposition of real estate | | | 24,503 | | | | 33,534 | | | | 51,755 | | | | 55,458 | |
Cost of disposition of real estate | | | (24,104 | ) | | | (21,816 | ) | | | (47,630 | ) | | | (39,086 | ) |
| | | | | | | | | | | | | | | | |
Gain from the disposition of real estate | | | 399 | | | | 11,718 | | | | 4,125 | | | | 16,372 | |
| | | | |
Expenses: | | | | | | | | | | | | | | | | |
General and administrative | | | (30 | ) | | | 20 | | | | 27 | | | | 33 | |
Real estate | | | 97 | | | | 36 | | | | 236 | | | | 172 | |
Depreciation and amortization | | | — | | | | — | | | | — | | | | 21 | |
Interest | | | (147 | ) | | | 186 | | | | (163 | ) | | | 706 | |
| | | | | | | | | | | | | | | | |
| | | (80 | ) | | | 242 | | | | 100 | | | | 932 | |
| | | | | | | | | | | | | | | | |
Income tax expense | | | (1,158 | ) | | | (2,542 | ) | | | (3,767 | ) | | | (4,552 | ) |
Minority interest | | | (135 | ) | | | (5,643 | ) | | | (959 | ) | | | (5,686 | ) |
| | | | | | | | | | | | | | | | |
Earnings from discontinued operations | | $ | 1,892 | | | $ | 4,155 | | | $ | 6,158 | | | $ | 7,440 | |
| | | | | | | | | | | | | | | | |
6
National Retail Properties, Inc.
(in thousands, except per share data)
(unaudited)
| | | | | | | | | | | | | | | | |
| | | Quarter Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
| Reconciliation of net earnings to FFO and FFO available to common shareholders: | | | | | | | | | | | | |
Net earnings | | $ | 21,455 | | | $ | 16,530 | | | $ | 125,104 | | | $ | 71,228 | |
Real estate depreciation and amortization: | | | | | | | | | | | | | | | | |
Continuing operations | | | 5,369 | | | | 3,963 | | | | 14,832 | | | | 10,540 | |
Discontinued operations | | | 73 | | | | 2,065 | | | | 1,533 | | | | 4,123 | |
Partnership real estate depreciation | | | 138 | | | | 148 | | | | 418 | | | | 457 | |
Partnership gain on sale of asset | | | — | | | | — | | | | (265 | ) | | | — | |
(Gain) loss on disposition of real estate held for investment from discontinued operations | | | (4,116 | ) | | | 89 | | | | (68,568 | ) | | | (9,712 | ) |
Extraordinary gain, net of income taxes | | | — | | | | — | | | | — | | | | (11,805 | ) |
| | | | | | | | | | | | | | | | |
FFO | | | 22,919 | | | | 22,795 | | | | 73,054 | | | | 64,831 | |
Series A Preferred Stock dividends | | | (1,002 | ) | | | (1,002 | ) | | | (3,006 | ) | | | (3,006 | ) |
Series B Convertible Preferred Stock dividends | | | — | | | | (418 | ) | | | (419 | ) | | | (1,256 | ) |
| | | | | | | | | | | | | | | | |
FFO available to common shareholders – basic | | | 21,917 | | | | 21,375 | | | | 69,629 | | | | 60,569 | |
Series B Convertible Preferred Stock dividends – if dilutive | | | — | | | | — | | | | 419 | | | | 1,256 | |
| �� | | | | | | | | | | | | | | | |
FFO available to common shareholders – diluted | | $ | 21,917 | | | $ | 21,375 | | | $ | 70,048 | | | $ | 61,825 | |
| | | | | | | | | | | | | | | | |
FFO per share: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.38 | | | $ | 0.40 | | | $ | 1.22 | | | $ | 1.15 | |
| | | | | | | | | | | | | | | | |
Diluted | | $ | 0.38 | | | $ | 0.40 | | | $ | 1.21 | | | $ | 1.14 | |
| | | | | | | | | | | | | | | | |
7
National Retail Properties, Inc.
(in thousands, except per share data)
Real Estate Disposition Summary
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2006 | | 2005 | | | 2006 | | | 2005 | |
| | | # of
Properties | | | | # of
Properties | | | | | # of
Properties | | | | | # of
Properties | | | |
Reconciliation of gain (loss) on disposition between continuing and discontinued operations: | | | | | | | | | | | | | | | | | | | | | | | |
Continuing operations | | 1 | | $ | 108 | | 1 | | $ | (138 | ) | | 3 | | $ | 7,116 | | | 3 | | $ | 708 | |
Discontinued operations: | | | | | | | | | | | | | | | | | | | | | | | |
Investment Portfolio | | 5 | | | 4,116 | | 3 | | | (89 | ) | | 11 | | | 68,568 | | | 9 | | | 9,712 | |
Inventory Portfolio | | 17 | | | 399 | | 4 | | | 11,718 | | | 43 | | | 4,125 | | | 15 | | | 16,372 | |
Minority interest, Inventory Portfolio | | — | | | — | | — | | | (5,393 | ) | | — | | | (4,009 | ) | | — | | | (5,393 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 23 | | $ | 4,623 | | 8 | | $ | 6,098 | | | 57 | | $ | 75,800 | | | 27 | | $ | 21,399 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of gain (loss) on disposition of type: | | | | | | | | | | | | | | | | | | | | | | | |
Inventory Portfolio: | | | | | | | | | | | | | | | | | | | | | | | |
Development | | 1 | | $ | 108 | | 3 | | $ | 10,940 | | | 5 | | $ | 8,443 | | | 8 | | $ | 14,562 | |
Exchange | | 17 | | | 399 | | 2 | | | 214 | | | 41 | | | 2,674 | | | 10 | | | 1,953 | |
Intercompany eliminations | | — | | | — | | — | | | 426 | | | — | | | 124 | | | — | | | 565 | |
Minority interest, Development | | — | | | — | | — | | | (5,393 | ) | | — | | | (4,009 | ) | | — | | | (5,393 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 18 | | | 507 | | 5 | | | 6,187 | | | 46 | | | 7,232 | | | 18 | | | 11,687 | |
Investment Portfolio | | 5 | | | 4,116 | | 3 | | | (89 | ) | | 11 | | | 68,568 | | | 9 | | | 9,712 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 23 | | $ | 4,623 | | 8 | | $ | 6,098 | | | 57 | | $ | 75,800 | | | 27 | | $ | 21,399 | |
| | | | | | | | | | | | | | | | | | | | | | | |
8
National Retail Properties, Inc.
(in thousands)
| | | | | | |
| Balance Sheet Summary | | September 30,
2006 | | December 31,
2005 |
| | | (unaudited) | | (Note 1) |
Assets: | | | | | | |
Cash and cash equivalents | | $ | 9,211 | | $ | 8,234 |
Restricted cash | | | 36,980 | | | 30,191 |
Receivables, net of allowance | | | 8,989 | | | 8,547 |
Mortgages, notes and accrued interest receivable, net of allowance | | | 23,269 | | | 51,086 |
Real estate, Investment Portfolio: | | | | | | |
Accounted for using the operating method, net of accumulated depreciation and amortization: | | | | | | |
Held for investment | | | 1,347,432 | | | 1,290,748 |
Held for sale | | | 6,614 | | | 7,645 |
Accounted for using the direct financing method: | | | | | | |
Held for investment | | | 86,467 | | | 91,445 |
Held for sale | | | 3,281 | | | 4,259 |
Real estate, Inventory Portfolio held for sale | | | 199,123 | | | 131,074 |
Mortgage residual interests | | | 32,130 | | | 55,184 |
Accrued rental income, net of allowance | | | 27,894 | | | 27,999 |
Other assets | | | 38,026 | | | 27,004 |
| | | | | | |
Total assets | | $ | 1,819,416 | | $ | 1,733,416 |
| | | | | | |
Liabilities and shareholders’ equity: | | | | | | |
Line of credit payable | | | 78,800 | | | 162,300 |
Mortgages payable | | | 36,331 | | | 151,133 |
Notes payable – secured | | | 26,250 | | | 28,250 |
Notes payable – convertible | | | 172,500 | | | — |
Notes payable, net of unamortized discount | | | 489,768 | | | 493,321 |
Financing lease obligation | | | 26,041 | | | 26,041 |
Income tax liability | | | 7,973 | | | 13,748 |
Other liabilities | | | 34,049 | | | 25,597 |
Minority interest | | | 3,247 | | | 4,939 |
Shareholders’ equity | | | 944,457 | | | 828,087 |
| | | | | | |
Total liabilities and equity | | $ | 1,819,416 | | $ | 1,733,416 |
| | | | | | |
Common shares outstanding | | | 58,620 | | | 55,131 |
| | | | | | |
Gross leasable area, Investment Portfolio | | | 9,324 | | | 9,227 |
| | | | | | |
Note 1: Amounts are derived from audited condensed consolidated financial statements included in the company’s Form 10-K.
9
Orange Avenue Mortgage Investments, Inc.
(in thousands)
(unaudited)
In May 2005, the company acquired a 78.9 percent equity investment of OAMI for $9.4 million. The company’s 78.9 percent share of OAMI’s net cash flow has been over $15 million since May 2005. The following summary represents the balances related to OAMI included in the company’s Balance Sheet and Income Statement Summary:
| | | | | | |
| | | September 30,
2006 | | December 31,
2005 |
Assets: | | | | | | |
Cash and cash equivalents | | $ | 1,599 | | $ | 2,200 |
Restricted cash | | | 25,589 | | | 15,778 |
Receivables and other assets | | | 5,732 | | | 6,632 |
Mortgage residual interests | | | 32,130 | | | 55,184 |
| | | | | | |
| | $ | 65,050 | | $ | 79,794 |
| | | | | | |
Liabilities: | | | | | | |
Notes payable – secured | | $ | 26,250 | | $ | 28,250 |
Income tax liability | | | 10,475 | | | 14,551 |
Other liabilities | | | 406 | | | 474 |
| | | | | | |
| | $ | 37,131 | | $ | 43,275 |
| | | | | | |
Minority interest | | $ | 3,045 | | $ | 3,682 |
| | | | | | |
| | | | | | | | | | | | | | | | |
| | | Quarter Ended
September 30, | | | Nine Months
Ended
September 30, 2006 | | | May 2, 2005
Through
September 30, 2005 | |
| | | 2006 | | | 2005 | | | |
Revenues: | | | | | | | | | | | | | | | | |
Interest income on mortgage residual interests | | $ | 1,693 | | | $ | 2,797 | | | $ | 5,937 | | | $ | 4,719 | |
Interest and other income | | | 378 | | | | 227 | | | | 1,181 | | | | 371 | |
| | | | | | | | | | | | | | | | |
| | | 2,071 | | | | 3,024 | | | | 7,118 | | | | 5,090 | |
Expenses: | | | | | | | | | | | | | | | | |
General and administrative | | | 74 | | | | 93 | | | | 421 | | | | 188 | |
Amortization | | | 66 | | | | 66 | | | | 199 | | | | 111 | |
Impairment – mortgage residual interests valuation adjustments | | | 6,116 | | | | — | | | | 8,778 | | | | — | |
Interest | | | 672 | | | | 767 | | | | 2,096 | | | | 1,309 | |
| | | | | | | | | | | | | | | | |
| | | 6,928 | | | | 926 | | | | 11,494 | | | | 1,608 | |
| | | | | | | | | | | | | | | | |
Income tax expense | | | — | | | | (405 | ) | | | — | | | | (659 | ) |
Income tax amortization | | | 1,380 | | | | — | | | | 4,076 | | | | — | |
Minority interest | | | (941 | ) | | | (140 | ) | | | (637 | ) | | | (227 | ) |
| | | | | | | | | | | | | | | | |
Net earnings (loss) | | $ | (4,418 | ) | | $ | 1,553 | | | $ | (937 | ) | | $ | 2,596 | |
| | | | | | | | | | | | | | | | |
10
National Retail Properties, Inc.
Investment Portfolio
Top 20 Lines of Trade
| | | | | | |
| | | Line of Trade | | September 30,
2006(1) | | December 31,
2005(2) |
1. | | Convenience stores | | 15.4% | | 12.1% |
2. | | Drug stores | | 9.9% | | 10.0% |
3. | | Restaurants – full service | | 9.4% | | 6.6% |
4. | | Sporting goods | | 7.5% | | 7.4% |
5. | | Grocery | | 6.5% | | 6.3% |
6. | | Books | | 5.9% | | 5.8% |
7. | | Consumer electronics | | 5.8% | | 5.9% |
8. | | Restaurants – limited service | | 4.8% | | 3.0% |
9. | | Furniture | | 4.7% | | 4.7% |
10. | | Office supplies | | 4.2% | | 4.4% |
11. | | Travel plazas | | 3.6% | | 0.5% |
12. | | General merchandise | | 2.3% | | 2.6% |
13. | | Beer, wine and liquor | | 2.2% | | 2.1% |
14. | | Auto dealerships | | 2.1% | | 2.1% |
15. | | Equipment rental | | 2.0% | | 2.0% |
16. | | Home furnishings | | 1.8% | | 2.4% |
17. | | Automotive parts | | 1.6% | | 0.1% |
18. | | Craft, fabric and novelty | | 1.6% | | 1.4% |
19. | | Home improvement | | 1.5% | | 1.4% |
20. | | Jewelry | | 1.3% | | 1.2% |
| | | | | | |
| | Total | | 94.1% | | 82.0% |
| | | | | | |
Top 10 States
| | | | |
| | | State | | % of Total(1) |
1. | | Texas | | 22.6% |
2. | | Florida | | 13.6% |
3. | | Pennsylvania | | 5.6% |
4. | | Georgia | | 5.0% |
5. | | California | | 4.4% |
| 6. | | Virginia | | 3.8% |
| 7. | | Illinois | | 3.5% |
| 8. | | Missouri | | 3.4% |
| 9. | | Ohio | | 2.8% |
| 10. | | Indiana | | 2.7% |
Lease Expirations
| | | | | | | |
| | | % of
Total(1) | | | # of
Properties | | Gross
Leasable
Area(3) |
2006 | | 0.3 | % | | 3 | | 99,000 |
2007 | | 1.6 | % | | 17 | | 219,000 |
2008 | | 1.8 | % | | 20 | | 384,000 |
2009 | | 2.7 | % | | 25 | | 491,000 |
2010 | | 4.1 | % | | 36 | | 383,000 |
2011 | | 3.7 | % | | 22 | | 402,000 |
2012 | | 4.4 | % | | 26 | | 501,000 |
2013 | | 5.8 | % | | 30 | | 690,000 |
2014 | | 8.0 | % | | 42 | | 658,000 |
2015 | | 5.1 | % | | 26 | | 652,000 |
2016 | | 5.2 | % | | 24 | | 574,000 |
| Thereafter | | 57.3 | % | | 407 | | 4,102,000 |
| (1) | Based on annual base rent of $145,145,000, which is the annualized base rent for all leases in place as of September 30, 2006. |
| (2) | Based on annual base rent of $145,100,000, which is the annualized base rent for all leases in place as of December 31, 2005. |
11
