National Retail Properties (NNN) 2 Nov 172017 Q3 Earnings call transcript

Greetings, and welcome to the National Retail Properties Third Quarter 2017 Operating Results Conference. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. CEO. Whitehurst, Jay Thank you. Mr. begin. may you Whitehurst,

Tim. Retail Good to you, and morning third quarter National Properties call. the XXXX Thank welcome earnings release

FFO on our a Kevin strong that increasing XXXX meaningful FFO to National guidance the We're to Retail per year. our page core to results, is reflects share Details our financial guidance After generating range XXXX which midpoint I'll prior this on continues release. more found projected Officer, share discuss X the per me $X.XX of of detail. in the turn be to Habicht. actual remarks, some results. core over a to Chief over today's for of press growth at can of call $X.XX, Properties in results X.X% increase earnings Kevin over opening Joining Financial call post consistent

pleased rather solid highly share our As size and you've on is and selective heard per especially have us focus say than decisions. to investment be absolute our underwriting while continuing times, to achieved growth in many we're results, these

XXXX almost of remains retail tenant portfolio Our very healthy. properties single

properties and growing former the triple across to apparel necessities Our very openings customer our experiences XX-year leases, store rent. our vacancies recovery in World of of the properties the is a with tenant triple XX rate are we of closer October, dollars consumer XX% tenant regular include in improvement customer of net credit this trade long tenants' rent. importantly to little of XX% with Mountain the rent properties portfolio, to focused Nonetheless, in worthy in services, into into very able struggling Camping leases are re-leasing bumps instance, expanding we our little In around Mountain term of are on quickly prior e-commerce Delving concepts be back this former a resistant to portfolio XX% exposure competition. averages businesses deeper Gander investment put fact service re-leased net our pleased Gander providing and that or under achieve for that these all of country. all retail national Moreover, no many generally typical to on while or to are e-commerce with other re-leasing with with to primary lines rent. rate prior

most Camping leases these very Our started the the occupancy are Mountain completed quarter, shortly announced becoming Gander term bankruptcy have in longstanding happy discussions World after of XX%. our at with long of exceed portfolio Mountain the XX Gander its filing rate and to tenant. Despite our our with relationship high third XX.X%, vacant continues average properties for quarter which remained we to

properties single Over XX% of average retail and years. relationship our for invested end lease acquisition portfolio of our duration acquired third million front, in average of rate retail cash quarter, single of an and properties of the $XXX XX we the cap an tenants. XXX X.X% of have the XX September tenant Through initial On $XX.X under we've million invested an cap term average XX, just years. X.X% at of in at the with been third cash dollars through an lease quarter rate with XX.X with tenant

on higher our a that's are with tenant from requirements. quality based superior unit focus us performance, level initial self-selected Our yield, rent better to and a operators provides the acquisitions estate, tailored on directly by sourcing typically lease which real bumps retail document stores

capital pipeline Properties our that, relationship ATM process a turn the portfolio, quarter capital. healthy To recycling selective With date, business and to diversified and deliver program in well-priced continued quarter Retail tenants, strong Kevin and and broadly continued regional strong quarter, remains with the sheet through of balance from underwriting our on third issuance the more by and the to a million from bolstered of equity National Our third of of I'll results. sum $XXX year by national highly dispositions. access flexible almost results up continues to call direct the share per details a for to compelling over our

which not these the be made. may differ actual significantly were expectations and reflect SEC the release Jay start morning's from in securities headlines the release. from press the share cause FFO over share and results company's differ forward-looking announcing forward-looking filings may to growth under from in that represents that in to and over the I'll you, results. discussed with year time-to-time as be to disclosed statement in statements increase statements as that statements, represents XXXX with XX.X% third third well are of considered changes results, $X.XX could this results which materially federal will press statements that, future may actual per results from make matters AFFO, $X.XX per The greater these Factors release after law. morning's of we include revisions risks Thank usual core X.X% operating and we prior cautionary certain With quarter statements as to this forward-looking of quarter detail

year per prior and compared For X.X% months, FFO the increased to core $X.XX AFFO X.X% per share nine results. share to grew

Mountain AFFO balance maintained acquisition fewer Gander the bankruptcy XXXX rate large XX at only results producing increased per while US XX dividend, floating XXth Occupancy our makes share announced XX% we're record anticipated point growth for conclusion US. surprisingly payout and than the held a the companies with dividend another and months again given to which term not quarter consecutive fourth fourth XXXX first well ratio in of September and by the track year allowed debt. to XX, amounts us solid liquid four These results for quarter strong year short the the at the ticked coupled relying and sheet activity morning. guidance public in basis So on dividend increase recently of discussed. maintaining our down Jay XX.X% REITs not nine of We on this and of

revenues G&A months compared with of month X.X% additional decreasing nine for period. drive to with that's of nine XXXX X.X% expense to efficiencies for and XXXX the first continue operating the We

of in all September modeling place as the XXXX purposes million. for For rent was leases of base results, $XXX.X XX annual

XX proceeds During our via the payments, of with third quarter, investments. equity year-to-date we've we $XX that's and acquisition XX issued far to our of our totals XXX dividend as well retained equity this capital year of and date the combine AFFO total million date if light year common ATM after as so million you million. million of million to And of equity $XXX this million all raised disposition raised of year XX% $XXX

to X.X% a As Jay increase mentioned, our XXXX XXXX results. the guidance, which to compared midpoint we did suggests growth

per XXXX indicates but introduced don't to to $X FFO XXXX, in and X% not our occupancy. to assumptions million. capital million X $X.XX tenant acquisitions give reimbursements market and on plans, should of expense growth remain net of behavior assumptions to of include, million you We're the our to $X.XX, dispositions property guidance of $X those results guidance million also $XX $XX in We mid to million of current expenses, midpoint expect million through any high of balance in We million $XXX past XXXX. $X.XX cap guidance to Property our maintain for core meaning, the guidance leverage when our managing the of million based which available per to to get with anticipating AFFO $X.XX with long sheet. conservative of and share the $XXX and a we're profile change share G&A view consistent years, capital on and company of all $XX XX going multi-year a it's and well-priced, range. to $XXX term

end, $XXX term million million issue repaid we of on yield. million right $XXX notes. quarter, availability just XX, announced from that And XXXX. after we third did the had ten-year $XXX Day. bank $XXX the a facility, extending to Labor of had to notes last and and a two week, we weeks our later Subsequent X.XXX% X.X% million October During of we January They coupon increasing to credit unsecured quarter recast X.XXX%

that I on costs, basis Additionally, XX.X sector. started with to lowest XXXX. plus our quarter in the debt facility, current reduced how line, which borrowing which the our the on rating bank nothing drawn on is was ended LIBOR based believe we We've points, modestly our is

of nine months line bank outstanding During the weighted XXXX, balance our the on $XXX million. average was

heavy from a we've user its very particularly that perspective So capital, been not leverage and attractive positioned rate well variable position. We a term pricing. despite liquidity of remain short

of fixed outstanding is rate. All debt our

years with of XX, of balance average the we $XXX If weighted debt million X.X%. interest sheet weighted average you that the XX, take $XXX September October is cash made using debt maturity X.X on account our million on our was into at rate a repayment

to market turmoil. whether sheet as fund capital position as acquisitions any remains So our balance in well and potential great economic to

leverage at to Looking XX our net gross book assets September was metrics, debt XX.X%.

you market manage balance we metrics. around based sheet market know, cap, based cap As our don't leverage

quarter XXXX Interest was More importantly, of XX. times five charge X.X encumbered net mortgages the September properties X.X was times X.X by coverage quarter. times are fixed was third $XX EBITDA at Only and for debt for to our third coverage totaling million. the

our per scale basis results, at XXXX's capital share is capital is share enough portfolio produce than well-priced a not on volume result. allocation of track access and the growth well have When diversified better a for making slightly We mind, multi-year size. sourcing more driving Following capital. to per decisions, XXXX a in the already and forefront X% on investment or results

of in will per of one. per the year results share more is We're hopeful be will building job are growth results same. share solid allow optimistic So another operating XXXX XXXX and

our for very and track able we years equity years. open an many raising Tim, XXth of part our year optimistic With which that, has been it been general consistent market many to indices outperforming any perpetuate we're indices up will REIT question. that equity dividend, for we'll has strategy and be important of consecutive for record Our

Tim, we're ready questions. to take

of of [Operator Our first Citigroup. question Joseph the Instructions] from line comes Nick

debt the then you'll benefit count, the I'd then you FFO from coupon the and quarter the get October XQ Kevin, debt and know you'll higher off some below and implied is guidance feel XQ which I it from in $X.XX at from impact share but third like midpoint, $X.XX benefit of full and high is issuance looks the XQ acquisitions. core the what did imagine paying

you get fourth provide So, the moving in number on to some can core to that parts lower the quarter? color

there. the be out we'll at other high the vacancy end on cetera. some range that we've et that hopeful of put We obviously Gander, have We're around headwinds

weigh be for guidance that things a XXXX. go results get little precisely will we'll the planned, to end as on that But able of I high to So bit. think if the

start When to Camping did World pay rent?

phase will of in on the the leases rent The will next Nick. start the to couple over it Camping for Mountain World Gander - quarters,

should prior if as phase rent to about five on of three average, think average, you months You in to it commencement. over will, on will maybe said, vacancy but Jay time

on theaters, on Thanks. from risks And if to it's X% premium you then that overall on exposure, of thoughts any just industry kind of video your demand? just your see and get wanted

to first is healthy. Nick, our very portfolio just I think reiterate,

are we've box broad got but boxes. bigger room for small portfolio this We primarily retail purpose properties, inside special more

very theaters that may we're We're with happy be our And with that of and and exposure estate it our at it of them, to the portfolio we've grow the - looking We're along, We tenants level operations theater the portion but where comes that portfolio are we're There not happy largest got. we're comfortable what looking not two own growing are is. our at with AMC with substantially. in we The real the very property meaningfully. occasional the Cinemark. there.

the of comes Please question Donlan from of Ladenburg Dan proceed your next with Our line question. Thalmann.

don't you got all the us if want World. you me, to. to share coverage great, any rent able gave back get you would weighted if going Just of average in Mountain there understand if of curious you I'm And could concessions or or to just Camping lowering maybe but that terms Gander term. I now type to and the for coverages any Are you Gander are be Mountain, you give excuse or could lease maybe concessions what's

Dan, take of let it me back. kind

what dollars CapEx our for that those know XX-year with it's behind we all is triple this, I committed no Dan, let with to national say us. dollars that leases of TI I net get talk later highlight leases. a announcement those committed with And leases, get to that you it's numbers. think baked after - me retailer let headline is first about the Gander really no into But us, behind the don't plus me the say that now Gander we'll

our kind So generation which than less go of no terms typically space, when all get the was better get get very balance opportunity the ahead The somewhat to our second get getting national on and and you the we XX-year what CapEx with That made than it really tied sooner a are bird least it substantially typically the was process. in dollars not we take appealing. tenant put and and with properties vacancies. thought those is releasing quickly to the up hand on in brainer of rent lease

tenants et And we on of potentially lease were that to we period compares and and a it basis of that, and in Jay's creating value about the longer vacancy quality approach when spreadsheet, some that point TI with leasing course lower you commissions favorably as all of dollars cetera present all terms. thinking put to

opted us for certainty. For we

guess selling different products can't they're I guess. mean, coverage really to as completely you give because I I be going

there to there. nothing correct, That's report

Are financials able you what is CPI? bumps, there to maybe could tell to and be going annual it get us the are you bumps,

rent consistent average are which reporting acquisitions, out with range I kind we to says the of lease in lease what financial with of about across Dan. recall pretty - are our X% portfolio The X.X% X.X entire get year to new not to do what per bumps in the the

And said like are you a release third felt a kind as and that or maybe marks, it - then to confident you'd give the are you XX%. really think then I remaining call in you were to I your of, pertains about sell vacancies SunTrust, call don't the should missed could How there, think how going if on think it. you last I said we guidance third much you you it prepared it

in that we in of about the tendency. be just thinking how Kevin earnings curious your So kind model should

of little Dan, vacancies bit others and process. selling and are pending And resolved let that's detail now. far. so mix a little a of we've the detail And right me of We've just some that four where seven some. are give on you listeners got we a in been SunTrust leasing

total team those remaining will our recollection So of to they to, - XXXX amount about that in that the there's is will April Dan, And of expire rent. amounts working is, XX where lease XX my still SunTrust's on. our X.X%

the the we still and our that proceeding smaller, expected. minutes team in it's context smaller So getting but is working on at about pace

deal - you guys then, now put - I And now, you think. Gander we I is have bed that think to with have Shopko to

your guidance I what's think thought some you terms have there process guys in there. Shopkos, of

we to We don't thinking time performing we our small context now. for own, own And very again, that percentage rent just are them, of step back otherwise much about right Shopkos Dan. spend in

I your at midpoint, Kevin, just in of at was G&A, then is XXXX XX.X XX.X me, the question And your last million. million, just was from in your XXXX guidance looking G&A G&A

from going curious another of been given Craig, departure So or that not back why you keep the upwards? just haven't up trending COO it kind just simply able or just added we to have that's curious, is

that's going a years to been That's be quite on for trend honest.

way go XXXX, all So was of guidance sub-six. year G&A if And to XX.X% this the our revenues. our you is for back

we've larger to chunk we've So operating of been got equation. over the able the efficiencies achieve years,

higher pay the we haven't rate. is positions which here, piece Another mentioned, you back of filled executive as one is

And that so efficiency. that also contributes to

combination a things. it's of So, two those

we've front a that in it's point year of of XXXX/XXXX rate I think got of in down good But a as be results I that of think on revenues. we're G&A front in probably nearing us. percent another might of we terms where slowing descent -

proceed B. Riley. Please line Our the next of comes your question. David Corak question with of from

a it the seeing got market. some wondering you rate you're about compression bit kind in just we like but cap little Can talk and looks specifically, in environment, C-stores auto the what of

From our remain continue flat. to perspective, cap rates

feels a of And the right the third is that for right environment number. national of it retailers acquisitions. saw really quarter regional at. which properties us for the our rate year's of high we're To looking flat for types our on large You right top just was top number, like and sixes number now we're cap targeting year-to-date on our last

touched of Sunoco Maybe another times a get the just So and about, most what you portfolio did you disposition single the in on of recycling of the quarter. for something size with just nice when next combination, like we look as there year. asking at the XEleven next source. one, or my are sense potential it bigger with. trying comfortable this light Sunoco capital looks usually is sort of but peers a of talk sold way provides a tenant the accretive your breakout But Obviously concentration of to kind of a you guidance to kind

still me with we a by comfortable stores XEleven, transaction very number retained concentrations hands stores our or tenant operators Let parties will both we Sunoco largest is they're the what of and be in two what the the we're by And are Sunoco. now. will saying, in agnostic good real have make whether large working to one tenant the process that completed. that the start that out will it's other. and selling of sold estate be that, still will to XEleven degree is which own great we're be about when of a mix the Those of

however out. So that we're with happy comes

it something market portfolio the would done you of and cases, properties we lot be that all of time in the of a trade playing below of rate the on cap. is capital sources are our a portfolio it with disposition top opposed And on our to able in comes be capital cap about offense a proceeds of to when - Another below about which on, a more we sixes well, any to recycle lot that be look point that properties tenants. at below basis But have a rates to potential across think them concentration six and a number basis worrying are to one-off our to the in at our well pruning. defensive we about harvest cap are and accretively, lot properties and that recycle of want right able the do sell store as levels of acquisition convenience will

disposition next that? portfolio it guidance of the or out you kind a assume does break But year not like did

assume disposition. - we it not does portfolio No don't

next Joshua Our from Bank Lynch. Instructions] question. the [Operator Please comes America question Merrill of line your of Dennerlein proceed of with

Most questions But have kind XXXX, are my lease of you just worried visibility on looking answered. assets, XXXX, vacate beyond expirations that? guys been about would go of any SunTrust anything the for at

XXX% back and our the XX% that history at the step renew at about one the of of expiration tenants leases to expiring lease take Let's XX% time us of remind tells the rent. the our folks,

we And think rent XXXX have So X% renewal rate. to X% expiring ahead kind we XXXX. we, lease very, and base to a what of - look in very high I are and Kevin,

About X.X% year. each

us modest tells it's be And XX - the relatively so a take time are that to number. going And of history give XX% rents those or renewed.

day, kind So numbers. no works that's notable, the portfolios that big or in of big end - vacant modest of years of there's number properties. at to up nothing really the And out it ends becoming there's a next couple be really the

your the of Fargo. Our next question from line question. with Belcher Please Jason proceed from comes Wells

but missed more or us if you there by XXXX. there? little driven that else uptick Is give Mountain is could driving this, on that Sorry if a disposition something and guidance mainly Gander color in just I SunTrust that for

probably year. think sell around Frankly we always any in $XXX mind, what is we million on given will our

assumption came And from. so general where that that's

than dispositions number it the you larger may read not that don't XXXX think. So into despite - will fact have been, that much I really can't is be too

about? or in the Just be there potential terms refinancing debt we horizon, of on thinking any prepayment upcoming anything should opportunities

for in years pretty few Not debt the cleared much really, a maturity. deck terms we've of

on front. pretty that So we're shape clean in

As I now just debt our years. mentioned, is maturity weighted seven average over

XXXX, front. At prepaying XXXX pretty that are And in on those to debt not to I'm on No, rates. clean at we're and the squeaky inclined front. we're maturities that moment, reach so good start terrible out shape they

largely fund will this the driven So acquisition by capital to point. need raising be at

Mr. the no conference. turn the CEO over remarks. further Jay audio There closing of the to the Whitehurst, I conference questions for are like would over portion now back to

you you. out look very at we you. day. Thank this of later Good hectic It's a forward and for thank for And attention seeing there day your you many month. NAREIT to

concludes participation. for conference. your Thank This today's you

You time can day. disconnect your rest wonderful lines and this a have at your of