NATIONAL RETAIL PROPERTIES, INC. - FORM 8-K - EX-99.2 - EXHIBIT 99.2

NATIONAL RETAIL PROPERTIES, INC. - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - February 13, 2017

Attached files

Attached files

NATIONAL RETAIL PROPERTIES, INC. Reports

file	filename
EX-99.2 - EXHIBIT 99.2 - NATIONAL RETAIL PROPERTIES, INC.	ex99212312016r27.pdf
EX-99.1 - EXHIBIT 99.1 - NATIONAL RETAIL PROPERTIES, INC.	ex99112312016r78.pdf
EX-99.1 - EXHIBIT 99.1 - NATIONAL RETAIL PROPERTIES, INC.	ex991-12312016.htm
8-K - 8-K - NATIONAL RETAIL PROPERTIES, INC.	nnn8-k20161231.htm

Exhibit 99.2

ANNUAL SUPPLEMENTAL DATA

As of December 31, 2016

TABLE OF CONTENTS



	PAGE REFERENCE
Financial Summary
Income Statement Summary	1
Funds From Operations (FFO)	3
Core Funds From Operation	3
Adjusted Funds From Operations (AFFO)	4
Other Information	4
Balance Sheet	5
Debt Summary	6
Credit Metrics	7
Credit Facility and Note Covenants	7
Long-Term Dividend History	8
Transaction Summary
Property Acquisitions	9
Property Dispositions	9
Property Portfolio
Lease Expirations	10
Top 20 Lines of Trade	11
Top 10 States	11
Portfolio By Region	12
Top Tenants	12
Same Store Rental Income	13
Leasing Data	13
Other Property Portfolio Data	14
Earnings Guidance	14

Statements in this supplemental 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, 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 a REIT 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 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 Annual Report on Form 10-K. Copies of each filing may be obtained from the company or the Commission. Such forward-looking statements should be regarded solely as reflections of the company’s current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release. National Retail Properties, Inc. undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.



INCOME STATEMENT SUMMARY
(in thousands, except per share data)
(unaudited)

	Quarter Ended						Year Ended
	December 31,						December 31,
	2016			2015			2016			2015
Revenues:
Rental and earned income	$	135,947		$	121,106		$	515,954		$	465,282
Real estate expense reimbursement from tenants	4,732			4,561			14,984			14,868
Interest and other income from real estate transactions	128			264			1,032			988
Interest income on commercial mortgage residual interests	392			446			1,677			1,778
	141,199			126,377			533,647			482,916

Operating expenses:
General and administrative	9,408			9,657			36,508			34,736
Real estate	6,555			5,575			20,852			19,776
Depreciation and amortization	38,987			34,848			149,101			134,798
Impairment – commercial mortgage residual interests valuation	—			51			6,830			531
Impairment losses – real estate and other charges, net of recoveries	338			708			11,287			4,420
	55,288			50,839			224,578			194,261

Other expenses (revenues):
Interest and other income	(62		)	(42		)	(170		)	(109		)
Interest expense	24,429			24,548			96,352			90,008
Real estate acquisition costs	42			33			563			927
	24,409			24,539			96,745			90,826

Income tax expense	—			(9,827		)	—			(10,318		)

Earnings before gain on disposition of real estate, net of income tax expense	61,502			41,172			212,324			187,511

Gain on disposition of real estate, net of income tax expense	4,624			1,305			27,182			10,450
Earnings including noncontrolling interests	66,126			42,477			239,506			197,961

Earnings from continuing operations attributable to noncontrolling interests:	(34		)	(6		)	(6		)	(125		)
Net earnings attributable to NNN	66,092			42,471			239,500			197,836







INCOME STATEMENT SUMMARY
(in thousands, except per share data)
(unaudited)

	Quarter Ended						Year Ended
	December 31,						December 31,
	2016			2015			2016			2015

Net earnings attributable to NNN	66,092			42,471			239,500			197,836
Series D preferred stock dividends	(4,762		)	(4,762		)	(19,047		)	(19,047		)
Series E preferred stock dividends	(4,097		)	(4,097		)	(16,387		)	(16,387		)
Series F preferred stock dividends	(3,189		)	—			(3,189		)	—
Net earnings available to common stockholders	$	54,044		$	33,612		$	200,877		$	162,402

Weighted average common shares outstanding:
Basic	146,266			137,111			144,176			133,999
Diluted	146,763			137,623			144,661			134,489

Net earnings per share available to common stockholders:
Basic	$	0.37		$	0.24		$	1.39		$	1.21
Diluted	$	0.37		$	0.24		$	1.38		$	1.20



FUNDS FROM OPERATIONS (FFO)
(in thousands, except per share data)
(unaudited)	Quarter Ended						Year Ended
	December 31,						December 31,
	2016			2015			2016			2015
Net earnings available to common stockholders	$	54,044		$	33,612		$	200,877		$	162,402
Real estate depreciation and amortization:	38,907			34,754			148,779			134,380
Gain on disposition of real estate, net of income tax and noncontrolling interests	(4,579		)	(1,305		)	(27,137		)	(10,397		)
Impairment losses – depreciable real estate, net of recoveries and income tax	345			258			8,025			2,808
Total FFO adjustments	34,673			33,707			129,667			126,791
FFO available to common stockholders	$	88,717		$	67,319		$	330,544		$	289,193

FFO per common share:
Basic	$	0.61		$	0.49		$	2.29		$	2.16
Diluted	$	0.60		$	0.49		$	2.28		$	2.15



CORE FUNDS FROM OPERATIONS
(in thousands, except per share data)
(unaudited)	Quarter Ended					Year Ended
	December 31,					December 31,
	2016		2015			2016		2015
Net earnings available to common stockholders	$	54,044	$	33,612		$	200,877	$	162,402
Total FFO adjustments	34,673		33,707			129,667		126,791
FFO available to common stockholders	88,717		67,319			330,544		289,193

Impairment – commercial mortgage residual interests valuation	—		51			6,830		531
Impairment losses – non-depreciable real estate and other charges	—		—			—		156
Bad debt expense – loans	—		—			3,269		—
Income tax benefit	—		(316		)	—		(316		)
Taxable REIT subsidiary revocation election⁽¹⁾	—		9,607			—		9,607
Total Core FFO adjustments	—		9,342			10,099		9,978
Core FFO available to common stockholders	$	88,717	$	76,661		$	340,643	$	299,171

Core FFO per common share:
Basic	$	0.61	$	0.56		$	2.36	$	2.23
Diluted	$	0.60	$	0.56		$	2.35	$	2.22

⁽¹⁾ At the close of business on December 31, 2015, NNN elected to revoke its election to classify the TRS as taxable REIT subsidiaries. This TRS revocation election resulted in an additional tax expense of approximately $9,607 for 2015.



ADJUSTED FUNDS FROM OPERATIONS (AFFO)
(in thousands, except per share data)
(unaudited)
	Quarter Ended						Year Ended
	December 31,						December 31,
	2016			2015			2016			2015
Net earnings available to common stockholders	$	54,044		$	33,612		$	200,877		$	162,402
Total FFO adjustments	34,673			33,707			129,667			126,791
Total Core FFO adjustments	—			9,342			10,099			9,978
Core FFO available to common stockholders	88,717			76,661			340,643			299,171

Straight-line accrued rent	(273		)	(529		)	(252		)	(368		)
Net capital lease rent adjustment	309			331			1,364			1,277
Below market rent amortization	(662		)	(671		)	(2,842		)	(3,046		)
Stock based compensation expense	2,689			2,461			10,758			9,671
Capitalized interest expense	(495		)	(750		)	(1,738		)	(2,383		)
Loss on sale of mortgage receivable	—			450			—			450
Total AFFO adjustments	1,568			1,292			7,290			5,601
AFFO available to common stockholders	$	90,285		$	77,953		$	347,933		$	304,772

AFFO per common share:
Basic	$	0.62		$	0.57		$	2.41		$	2.27
Diluted	$	0.62		$	0.57		$	2.41		$	2.27



OTHER INFORMATION
(in thousands)
(unaudited)
	Quarter Ended				Year Ended
	December 31,				December 31,
	2016		2015		2016		2015
Percentage rent	$	776	$	802	$	1,735	$	1,430
Amortization of debt costs	$	810	$	773	$	3,086	$	2,915
Scheduled debt principal amortization (excluding maturities)	$	129	$	378	$	656	$	1,587
Non-real estate depreciation expense	$	83	$	77	$	333	$	418

BALANCE SHEET

(in thousands)

(unaudited)



	December 31, 2016		December 31, 2015
Assets:
Real estate:
Accounted for using the operating method, net of accumulated depreciation and amortization	$	5,881,280	$	5,231,413
Accounted for using the direct financing method	11,230		14,518
Real estate held for sale	23,850		57,527
Cash and cash equivalents	294,540		13,659
Restricted cash and cash held in escrow	—		601
Receivables, net of allowance	3,418		3,344
Mortgages, notes and accrued interest receivable, net of allowance	1,252		8,688
Accrued rental income, net of allowance	25,101		25,529
Debt costs, net of accumulated amortization	2,715		4,003
Commercial mortgage residual interests	36		11,115
Other assets	90,729		89,647
Total assets	$	6,334,151	$	5,460,044

Liabilities:
Line of credit payable	$	—	$	—
Mortgages payable, including unamortized premium and net of unamortized debt cost	13,878		23,964
Notes payable, net of unamortized discount and unamortized debt costs	2,297,811		1,951,980
Accrued interest payable	19,665		20,113
Other liabilities	85,869		121,594
Total liabilities	2,417,223		2,117,651

Stockholders’ equity of NNN	3,916,799		3,342,134
Noncontrolling interests	129		259
Total equity	3,916,928		3,342,393

Total liabilities and equity	$	6,334,151	$	5,460,044

Common shares outstanding	147,150		141,008

Gross leasable area, Property Portfolio (square feet)	27,204		24,964

DEBT SUMMARY

(in thousands)

As of December 31, 2016



Unsecured Debt	Principal		Principal, Net of Unamortized Discount			Stated Rate	Effective Rate	Maturity Date
Line of credit payable	$	—	$	—		L + 92.5 bps	—	January 2019

Unsecured notes payable:
2017	250,000		249,907			6.875%	6.924%	October 2017
2021	300,000		297,764			5.500%	5.689%	July 2021
2022	325,000		321,917			3.800%	3.985%	October 2022
2023	350,000		348,269			3.300%	3.388%	April 2023
2024	350,000		349,451			3.900%	3.924%	June 2024
2025	400,000		399,131			4.000%	4.029%	November 2025
2026	350,000		346,153			3.600%	3.733%	December 2026
Total	2,325,000		2,312,592

Total unsecured debt ⁽¹⁾	$	2,325,000	$	2,312,592

Debt costs			(21,157		)
Accumulated amortization			6,376
Debt costs, net of accumulated amortization			(14,781		)
Notes payable, net of unamortized discount and unamortized debt costs			$	2,297,811

⁽¹⁾ Unsecured notes payable have a weighted average interest rate of 4.4% and a weighted average maturity of 6.6 years



Mortgages Payable	Interest Rate		Maturity Date	Principal Balance
Mortgage⁽¹⁾	5.230	%	July 2023	$	13,987


Debt costs				(147		)
Accumulated amortization				38
Debt costs, net of accumulated amortization				(109		)
Mortgages payable, including unamortized premium and net of unamortized debt costs				$	13,878

⁽¹⁾ Includes unamortized premium



CREDIT METRICS ⁽¹⁾
Ratings: Moody’s Baa1; S&P BBB+; Fitch BBB+
	2012		2013		2014		2015		2016		2016 Pro Forma Pfd Stock Redemption⁽²⁾
Debt / Total assets (gross book)	37.5	%	32.9	%	32.6	%	33.2	%	30.2	%	34.5	%
Debt + preferred / Total assets (gross book)	44.3	%	44.9	%	43.3	%	42.9	%	43.9	%	44.0	%
Debt / EBITDA (last quarter annualized)	5.1		4.3		4.2		4.4		4.0		4.6
Debt / EBITDA (last four quarters)	5.3		4.5		4.5		4.6		4.3		4.9
Debt + Pref Stock / EBITDA	6.3		6.1		6.0		5.9		6.2		6.2
EBITDA / Interest expense (cash)	3.7		4.1		4.4		4.6		4.8
EBITDA / Fixed charges (cash)	3.0		3.1		3.1		3.3		3.4

⁽¹⁾ Debt amounts used in calculation are net of cash balances.

⁽²⁾ Pro forma credit metrics reflect redemption of Series D Preferred shares in February 2017 using $287.5 million of cash balances available

on December 31, 2016



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 December 31, 2016, the company believes it is in compliance with the covenants.



Unsecured Credit Facility Key Covenants	Required	December 31, 2016
Maximum leverage ratio	< 0.60	0.32
Minimum fixed charge coverage ratio	> 1.50	3.44
Maximum secured indebtedness ratio	< 0.40	0.002
Unencumbered asset value ratio	> 1.67	3.15
Unencumbered interest ratio	> 1.75	5.37

Unsecured Notes Key Covenants	Required	December 31, 2016
Limitation on incurrence of total debt	≤ 60%	32.6%
Limitation on incurrence of secured debt	≤ 40%	0.2%
Debt service coverage ratio	≥ 1.50	4.82
Maintenance of total unencumbered assets	≥ 150%	307.2%

LONG-TERM DIVIDEND HISTORY

PROPERTY ACQUISITIONS

(dollars in thousands)



	Year Ended December 31,
	2016			2015
Total dollars invested	$	846,906		$	726,303
Number of Properties	313			221
Gross leasable area (square feet)	2,734,000			2,706,000
Cash cap rate	6.9		%	7.2		%

PROPERTY DISPOSITIONS

(dollars in thousands)



	Year Ended December 31,
	2016										2015
	Occupied			Vacant				Total			Occupied			Vacant				Total
Number of properties	33			5		⁽¹	⁾	38			11			8		⁽¹	⁾	19
Gross leasable area (square feet)	419,000			71,000				490,000			106,000			126,000				232,000
Acquisition costs	$	91,203		$	7,787			$	98,990		$	28,092		$	11,264			$	39,356
Net book value	$	73,041		$	2,992			$	76,033		$	24,535		$	3,892			$	28,427
Net sale proceeds	$	99,954		$	3,261			$	103,215		$	35,030		$	4,086			$	39,116
Cash cap rate	6.8		%	—				6.8		%	5.9		%	—				5.9		%

⁽¹⁾ Includes two excess land parcels

LEASE EXPIRATIONS



	% of Total⁽¹⁾		# of Properties	Gross Leasable Area ⁽²⁾		% of Total⁽¹⁾		# of Properties	Gross Leasable Area⁽²⁾
2017	1.2	%	27	502,000	2023	2.5	%	85	1,014,000
2018	3.2	%	90	1,153,000	2024	2.6	%	50	883,000
2019	3.0	%	76	1,122,000	2025	5.0	%	132	1,116,000
2020	3.8	%	132	1,571,000	2026	6.0	%	181	1,830,000
2021	4.4	%	122	1,320,000	2027	9.0	%	190	2,842,000
2022	6.1	%	111	1,456,000	Thereafter	53.2	%	1,305	11,891,000


⁽¹⁾	Based on the annual base rent of $543,446,000, which is the annualized base rent for all leases in place as of December 31, 2016.


⁽²⁾	Square feet.

TOP 20 LINES OF TRADE



		As of December 31, 2016			As of December 31, 2015
	Line of Trade	% of Total⁽¹⁾		Properties	% of Total⁽²⁾		Properties
1.	Convenience stores	16.9	%	502	16.7	%	448
2.	Restaurants - full service	11.8	%	414	11.0	%	294
3.	Restaurants - limited service	7.5	%	347	7.2	%	297
4.	Automotive service	6.6	%	201	7.0	%	197
5.	Family entertainment centers	5.8	%	88	5.6	%	80
6.	Health and fitness	5.7	%	35	3.8	%	28
7.	Theaters	4.9	%	30	5.2	%	30
8.	Automotive parts	3.9	%	182	4.2	%	183
9.	Recreational vehicle dealers, parts and accessories	3.4	%	32	3.6	%	32
10.	Banks	3.1	%	124	3.4	%	124
11.	Sporting goods	2.5	%	15	3.3	%	21
12.	Medical service providers	2.4	%	76	2.2	%	60
13.	Wholesale clubs	2.4	%	8	2.6	%	7
14.	Drug stores	2.1	%	39	2.3	%	39
15.	Consumer electronics	2.0	%	20	2.2	%	20
16.	Travel plazas	1.9	%	28	2.1	%	29
17.	Furniture	1.9	%	42	1.1	%	24
18.	General merchandise	1.8	%	58	1.9	%	60
19.	Home improvement	1.8	%	23	1.8	%	21
20.	Home furnishings	1.7	%	18	1.9	%	18
	Other	9.9	%	253	10.9	%	245
	Total	100.0	%	2,535	100.0	%	2,257

⁽¹⁾ Based on the annualized base rent for all leases in place as of December 31, 2016.

⁽²⁾ Based on the annualized base rent for all leases in place as of December 31, 2015.

TOP 10 STATES



	State	% of Total⁽¹⁾		Properties		State	Properties	% of Total⁽¹⁾
1.	Texas	18.4	%	448	6.	Georgia	118	4.3	%
2.	Florida	9.1	%	197	7.	Indiana	118	4.2	%
3.	Illinois	5.7	%	132	8.	Virginia	88	3.5	%
4.	Ohio	5.7	%	165	9.	Alabama	101	3.0	%
5.	North Carolina	4.7	%	134	10.	Tennessee	77	2.8	%

⁽¹⁾ Based on the annualized base rent for all leases in place as of December 31, 2016.

PORTFOLIO BY REGION

As a percentage of annual base rent - December 31, 2016

TOP TENANTS

Creditworthy Retailers


▪	20% of annual base rent is from tenants with investment grade rated debt


▪	65% of annual base rent is from tenants that are publicly traded and/or have rated debt


▪	Top 25 tenants (59% of annual base rent) operate an average of over 1,000 stores each



Top Tenants (>2.0%)	Properties	% of Total ⁽¹⁾
Sunoco	125	5.4	%
Mister Car Wash	90	4.0	%
LA Fitness	29	3.8	%
AMC Theatres	20	3.5	%
Camping World	32	3.4	%
Couche-Tard (Pantry)	86	3.3	%
7-Eleven	77	3.3	%
SunTrust	121	3.0	%
Bell American (Taco Bell)	115	2.8	%
Chuck E. Cheese's	53	2.5	%
BJ's Wholesale Club	8	2.4	%
Frisch's Restaurant	74	2.2	%
Gander Mountain	12	2.2	%
Bob Evans	117	2.0	%



	Rent Coverage (With Corp. Overhead)	Fixed Charge Coverage
Range	1.1x - 7.4x	0.9x - 4.9x
Average	3.6x	2.5x
Weighted average	3.8x	2.5x

⁽¹⁾ Based on the annual base rent of $543,446,000, which is the annualized base rent for all leases in place as of December 31, 2016.

SAME STORE RENTAL INCOME

(dollars in thousands)



Same Store Rental Income (Cash Basis) ⁽¹⁾
Number of leases	1,972
Year ended December 31, 2016	$	424,920
Year ended December 31, 2015	$	421,497
Increase (in dollars)	$	3,423
Increase (percent)	0.8		%
⁽¹⁾ Includes all properties owned for current and prior year period excluding any vacant properties or properties under development or re-development.

LEASING DATA

(dollars in thousands)



	Renewals With Same Tenant⁽¹⁾
Year Ended December 31, 2016	SunTrust			Other			Total			Vacancy Re-lease To New Tenant			Re-leasing Totals
Number of leases	90			49			139			16			155
Prior cash rents	$	12,527		$	9,537		$	22,064		$	2,726		$	24,790
New cash rents	$	12,715		$	9,627		$	22,342		$	2,266		$	24,608		⁽²⁾
Re-leasing spread	101.5		%	100.9		%	101.3		%	83.1		%	99.3		%

Tenant improvements	$	—		$	102		$	102		$	3,925		$	4,027


⁽¹⁾	Renewal rate for past five years (2011-2016) was 88%


⁽²⁾	Represents 4.5% of total annualized base rent as of December 31, 2016

OTHER PROPERTY PORTFOLIO DATA

As of December 31, 2016

Tenant Financials



Rent Increases	% of Annual Base Rent
	Annual		Five Year		Other		Total
CPI – Based	33	%	40	%	2	%	75	%
Fixed Rate	4	%	13	%	3	%	20	%
No increases	—		—		5	%	5	%
	37	%	53	%	10	%	100	%

Lease Structure


▪	90% of the company's annual base rent is from NNN leases


▪	94% of the company's annual base rent is from NNN leases and NN leases (with roof warranty)

EARNINGS GUIDANCE

Core FFO guidance for 2017 is $2.42 to $2.48 per share. The 2017 AFFO is estimated to be $2.46 to $2.52 per share. The FFO guidance equates to net earnings of $1.37 to $1.43 per share, plus $1.05 per share of expected real estate depreciation and amortization and excludes any gains from the sale of real estate and any charges for impairments, severance costs, or preferred stock redemption charges. 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.



		2017 Guidance
Net earnings per common share excluding any gains on sale of real estate, impairment charges, severance charges or charges in connection with preferred stock redemption		$1.37 - $1.43 per share
Real estate depreciation and amortization per share		$1.05 per share
Core FFO per share		$2.42 - $2.48 per share
AFFO per share		$2.46 - $2.52 per share
G&A expenses (excluding severance charges)		$34 - $35 Million
Real estate expenses, net of tenant reimbursements		$6.0 - $6.5 Million
Acquisition volume		$500 - $600 Million
Disposition volume		$80 - $120 Million

# of Properties

% of Annual Base Rent

Property Level Financial Information

Tenant Corporate Financials