National Retail Properties (NNN) 1 Nov 182018 Q3 Earnings call transcript

Greetings, and welcome to the National Retail Properties Third Quarter 2018 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Jay Whitehurst, President and CEO. Please go ahead, Mr. Whitehurst.

and Earnings the Call. morning, Third Retail Good XXXX Quarter Jerry. welcome National to Properties Thanks,

remarks, call Joining Chief details its Habicht. opening consistent Financial on on Officer, turn me this Retail the Kevin After call our results. performance some Properties for in to Kevin over is National our I’ll more the continued brief quarter. third

our multiyear reflect creating shareholder consistently growing on basis. our a value on focus FFO strategic results share solid Our per by

our consecutive annual and share. accomplished increased by feat During X.X% our companies per the we X by third been $X dividend We’ve public XX annual in to quarter, REITs that’s than only by dividend years, the increased fewer now United for XX a States.

but September, offering. largest-ever executed interest $XXX at in we rate to XX-year of bonds. in income appreciate of total of to inaugural of bonds fixed issued color ever and X.X%. Properties On successfully We provide National support and which have the a very few do million Kevin investors. one highlight the bond included the $XXX an I his We of details million, is issuance Retail our markets that our raised XX-year REITs more comments, confidence capital of front, will want greatly

to the sheet balance maturity and guidance. FFO midpoint pleased the tighten from our the share year core team our proceeds our XXXX of announced and debt Based offering $XXX for we’re his I per using this we’re accretively to maturity push repayment congratulate derisk results to series X.X% to also guidance of our transactions. for next of raise XX-year Kevin We XXXX Effectively, the important in on our the XXXX. want date, the million. amount and to debt bond

to XXXX FFO. also and We’re core AFFO guidance for introduce pleased

strategy to consistent in I business multiyear generate to a Although more share growth our XXXX XXXX and remain provide highlight Kevin per for with both on want that comments, will basis. his our details guidance consistent

deeply more Looking results. into our quarterly

broadly remained occupancy portfolio almost our the properties diversified of with single-tenant an quarter, retail X,XXX During third rate of XX.X%. healthy

in well by or million road tenants with approximately $XX or other with commented typically box high-traffic top concepts customer fungibility. disruptions e-commerce-resistant a average count. portfolio other respective invested rate our signalized we businesses In an or a actual retail on and we’ve their of before, grow cash visibility, small focus are with exposure minimal initial at continue apparel located The services, site As signage, access and X.X%. to along customer at that trade in struggling intersection perform Amazon the or new single-tenant our under our a retail lines cap good primary in experiences consumer necessities third and properties portfolio perceived just to property their retailers. of Moreover, Internet-based XX quarter, the in store is

the level While rate, is run cause than acquisition typical of is our this volume closings. completely to due less of timing the

million to acquisition indicates, million the our range $XXX $XXX year. to press we’ve release our XXXX a As for of increased full guidance

Properties to our dollars our do thereafter. two we is continued X/X over been relationship with for invested quarter, positioned want approach this tenants. success And have end business well that over the portfolio the emphasize In with National third the extraordinarily as continue retailers. to We and through primarily of I closing, XXXX of year of years relationship dozen Retail

balance sheet is in Our great shape.

well-located our on with primarily e-commerce-resistant healthy and by pipeline robust, is parcels, is acquisition long-standing tenant portfolio driven our retailers Our relationships.

position and Retail REITs to than of is Properties. in weather economic a the we challenges always National there marketplace believe no For uncertain, advantage future take better are opportunities

appointment moment and Realty Well to as a hard Before applaud gentlemen. a true CEO I work on provide his Income. with his ask it’s his want recognized. see is Kevin, Sumit to both to Sumit Income. departing pleasure to CEO want the of our call additional take of to John his dedication to I talent, over results also Case for me professional, Roy turning a congratulate done And on term as that, tremendous let year those our and Kevin Realty guidance. of eight to comments the and

to represents results from of third the with press core X.X% in morning’s federal $X.XX company’s changes That I’ll over for cause prior may significantly FFO XXXX. With in this risks to from actual are securities these of future Thanks, SEC these cautionary were increase usual time of to expectations share represents first for reflect results. materially results a we to disclosed be actual statements made. be XXXX X.X% the of detail a certain prior may greater revisions discussed time nine forward-looking statements matters that Factors quarterly with differ law. start over release. report statements, year make may my results the not the share per company’s per release after forward-looking FFO headlines and statements could in Jay, results. in release and forward-looking considered we’ll statements The filings and months from this statement to quarter Core the that differ press the increase from morning’s $X.XX and under that, year that

large the to relying debt. XXXX’s XXXX well years and growth over short-term we multiyear which a floating-rate And per while goal. do amounts with we consistent grow our results, So share maintaining balance of X% and liquid results positioned past X% strong several and this and/or not is remain on to sheet

months. XX% ticked dividend XX. points XX.X% the Occupancy September XX was basis to nine payout at ratio first for up AFFO Our

operating efficiencies G&A for ago. months with X.X% revenues to We a to decreasing first drive compared to additional of XXXX of continue X.X% expense nine the year

which timing projections to share base Year-to-date acquisitions take the at and $XXX all you leases of per estimation the has million allows via XX% some XX, might disposition in of in provided X.X purposes the guesswork the the Combining property X. capital after with common equity payments, of the million. current $XXX free XXXX XXX% $XX total operating year, $XXX.X million of ATM. $XXX flow. issuance cash first disposition in has flow October annual results, equity proceeds our QX total that proceeds purposes We investments combination plus full for $XX of million. million during nine in of XXXX place of million for operating equity September that with for and dispositions estimates, we third of of shares or For This that of modeling of new rent out cash of approximately was totaled XXXX, this believe issuance approximately that we our equity million acquisition start all issuance, on issued equity-like period. common of dividend nine-month acquisitions months, the $XXX we invested our fund funded quarter Based approximately will common free of the as a

So leverage this acquisition and position an with us liquidity active maintain to effort good very leaves into XXXX.

mentioned, issue another fairly structure, the the we so X.X% duration the was incremental yield, we modest X.X% demand our a REIT yield. we range the XX-year of view $XXX fixed-rate Jay points late the raising a strong be debt. to reason of end effective the Shifting unsecured were maturity few capital coupon basis XX-year that $XXX to and with $X.XX pleased coupon share. debt We of debt. a a duration issuers of with million core craved tighten X.XX% X.XX% it in and long-term to pleased a industry. per investor issuance raised we as Additionally, lower share effective the This $X.XX XX-year million between first We XXXX guidance to had by a very XX-year $X.XX revised third in were million up a had. as maturity guidance. We longer among had $XXX did our XX-year quarter, to our and debt, of and unsecured XX-year FFO per the with and XX-year XX in

unchanged. increased redemption connection assumptions early to will our of notes. are that largely the our fourth excludes charge the note prepayment the $XXX in Additionally, make-whole guidance we underlying in but up acquisition $XX.X that million, guidance XXXX million will $XXX million the to with this I quarter otherwise, show

we million And that redemption. X% core results guidance XXXX. guidance. is $X.XX to was we of and, we $X.XX rate started charge, FFO expense addition prepayment X% treasury note not calculating over and will and This expense guidance with share flow per which implies fairly out, per introduced which to AFFO I growth interest this for XXXX consistent also no-discount guidance no-cost, AFFO with lab the growth per XXXX where $X.X in through the of $X.XX in added approximately our In will $X.XX FFO with year share, morning, to share that associated point core back XXXX XXXX, to will costs of

All cash press release. the with ended to with capital expect dispositions and in bank to behavior be amounts million no sheet. of plans, available our to in found capital range, $X reimbursement, guidance to we it’s anticipate the don’t net XXXX to remain in that line, notable balance million bottom our $XX.X that third view markets meaning going leverage in should our high property sheet. In million; guidance XX company to we of when of the to million the expense include October, $XXX can cash. We well you past million on profile $XXX priced, maintain $X.X had due redeem million We XXXX. and occupancy. Property $XXX fixed-cap of million. a G&A $XXX but in the We Shifting multiyear a give lastly, $XXX Page consistent of million and mid-to our to our and acquisitions used expenses, at million we’re million. managing of and of $XX X on years, quarter our with balance any million the notes $XX.X Assumptions get of change outstanding of don’t the conservative X.X% all $XXX

million XXXX charge in excluded FFO core which and resulted October, As is in an results. from I mentioned, our AFFO $XX.X this penalty guidance prepayment

Our maturity years. is XXXX, our in debt and next maturity debt weighted now is average X.X

debt from I that position. remain and note, very all fixed-rate perspective we a debt. liquidity leverage positioned a will outstanding well So of our is too,

to position weather good Our in and future balance turmoil. economic fund is acquisitions market potential capital sheet and

XX.X% quarter-end. quarter-end of Looking debt-to-gross few assets Net metrics. at book a leverage the was at

XXXX, don’t know, which metrics therefore, particularly around XX. five mortgages Only of third not cap-based we XXXX. relevant, found Interest coverage our was debt-to-EBITDA, X.X $XX believe, sheet third coverage leverage relevant we’ve X.X September net was you As times at and, manage our is balance market More them. properties million. quarter totaling times and encumbered for fixed charge of the X,XXX for by X.X quarter was are times

in allocation sourcing been results, multiple and be So we solid will have year believe and easy. another of prior XXXX investment capital comps making years, When per capital for capital long-term growth cost conclusion, the of a think not long-term operating a share basis driving decisions, is the and or our at results forefront on and cost a investment about view. minds. making marginal we with Similarly, decisions short-term multiyear of view frankly, not

and Our type balance consistent many tenant we investment will With that, in strategy been for very all questions. strategy up terms it years. of open to sheet have any type Jerry, and property our

[Operator first Citigroup. Christy McElroy, The is Instructions] from question

McConnell Katy on is This Christy. with

at currently expecting or more a timing the in color as sense be you transactions more back-end-weighted, the can for versus opportunities you mix provide Now process sale-leaseback deals? in-place to looking in any tenant acquisitions have on that of pipeline QX just as you’re well get better to the in you’re

both Katy. you morning, to Welcome of National and coverage to Good Retail Yes. Christy. Properties

you to on have board. glad We’re

the As delays fourth I lighter totally slipped this just with. comments, our million mentioned – in in year, fourth $XXX to closings And drifted the very million for by quarter into $XXX guidance for the into quarter quarter. some we’re was that comfortable activity the driven the

expect the hope expectation of middle that of The first to portfolio the the right be we close this at fit fairway pipeline and in really end guidance properties the Our and is overall down that year. come end in the will are that with the our overall our high of we quarter that acquisitions.

tenants fourth for The and our looks trade, this of year a of our lot it’s the portfolio year to similar. deals, mix broad and general. but it very in of a relationship lines quarter very pipeline looks different similar So

for Okay, the great. Thanks color.

Morgan Malhotra, Vikram ahead The next go is question sir. from Stanley. Please

maybe just Thanks far? taking – were this for disposition you you Could a sense so cap year the rates quarter give and just quick, real questions. this of us on could the the what

Yes.

running been on us of they’ve the I Xs for So generally, in mean, dispositions low in terms average.

long-term situations year, value we’re from to it’s we a the properties as closer in that don’t allows holds quarter rate, cap good at offensive cap this lower people we strategically, been at as strong of of some year, value rate from low a kind than harvesting the rates. this at had transaction the a first sales – focus that large mentioned, look very Kevin year, as and trading the to – are For of dispositions think sales very our low quarter result some that we’ve don’t we’ve defensive in which are really a then those our actually and properties fourth the of X% year, some cap proceeds. properties And us actually for is that barbell, the cap nine a Vikram, on the want in portfolio disposition where that got months. to – rate of we accretively redeploy for some

is we so arrow us for do to dollars where investing rates availability. it’s when quiver a below strategic – and our new in another we’re to capital And really cap able comes it dispositions access from driver capital at to be

That’s was fourth the a question, segue. good my part for which quarter. actually It’s of you sort of about talked Yes. next funding –

of are of in looking into kind we environment. XXXX, the where rate Just terms

You’ve managed sheet your well. balance very

sense a capital. of Just dispositions kind part of bigger of year’s could a get like next be

a not of see Yes. in whole anything to as XXXX, markets and/or lot we of to terms We’ve well chopped capital lot in pretty do of dispositions. But need a wood high see so can guessing we much from $XXX of I’m to our put side $XX year. like guidance, million you we the that, year. this are next lean for out And million to XXXX we’ll

in up. to front to on at think So of But opportunistic competency that of probably on number lot clear billion anticipate a we’ve our is be end in last XXXX this over XXXX have dispositions the properties a will my point. that sold that, looks so guess years. where core visibility on I we company, try XX-plus want and don’t some is $X.X like do We we

Jay part – so it important as quantitative a we we And aspect of terms rate. an what well it’s what cap as to do. there’s as said, qualitative in And of

talk in Any looking one. last restaurant-related that large you about? there you Anything market just then out And sale-leasebacks be can at? great. Okay, the may

the market, property to tenant the Upfront, sort it rent get type is for Vikram, are be those low for per property, is come all to it A – is easier return. easier and there And we to it we we over going do low lower. And on on rent able it for allows us we this that. back and property, per restaurant in important site to to to to where term – for or and filter we hit underwrite the store-level big in see deal that us the through cost do coverage. better the over best transactions any transactions it which for makes risk-adjusted then the National the out to time. if long makes event it cost the happens succeed is with occupancy us Retail Properties think

market for strong looking other or of estate we prices that selective no close rents reiterate operators in very that leased and that to being vicinity locations focused particular and on are very highly but reasonable real So rent. at good are comments and the than just or to underwriting at

Thanks.

is from Markets. go question Please Hawthorne, RBC Capital The Brian sir. next ahead

of portfolio your the you deals assets? question, more I seeing single first Or between what’s was split and just, guess, portfolio guess, are So deals? within pipeline, my kind I

acquisitions our repeat of tenants. with focus Brian, our business Yes. doing on on portfolio programmatic is relationship

them. of those our day, of of often, portfolio and directly up look We of So and are in But and relationship open acquiring end properties them underwrite portfolios portfolios that not dealing market retailers. instance, properties with with dollars the either at looking retailers broadly being most invested we at all are one-off marketed. the directly end in at most from do or that the our

All of analyze. that say at portfolios throughout are the there that is would it’s to kind right out now been there said, And I and consistent with of year. good market look where the

that picky get and because just pursue of we to our and directly are in with choose about We the economic we the very like dealing document selective we’re to that very quality the the the quality real relationship of estate portfolios retailers. terms really and lease able the

Okay. seeing the of them much so off seeing And kind them, relationships. just for you’re not guess – in well, guess, then, old you’re I change probably I competition are picking you

not competition the feels are and is. rates always moving, like Cap it

in sometimes, And sellers it always feels with companies, private with just for the and, same public with competition about as are We among debt with always. mindset properties. the companies,

question. right, Okay. All thanks for my taking

have a go We Please question Wells Fargo. Belcher, from ahead, Jason sir.

you would and around bit maybe for quarter to wanted your the give all properties. range some little if well us cap level that Just talk share a more can you those across as term saw about acquisitions, occupancy QX see lease of details you as those from a rates if

I from small Good set, a draw much Sure, conclusion it. Jason. morning. so It’s sample wouldn’t

As X.X%. our yield in comments, cash I initial mentioned was my

– of then lease some of I’m think medium-sized all we These to within remember of XX there my I’m deals is relationship – around here that on term. there tenants other dispersion. kind was trying recollection that make trade with right think fit typical different line one-off one our to – did to portfolio trying was something up that I business and that kind

than that I less do for term lease – bit think lease in I the XX-plus our of that was terms for acquisitions lease term XX the believe been doing is average term around the quarters. year-to-date, years. we’ve the quarter, a previous little this year

So that long-term very that’s possible. getting focused we’re on, whenever something is leases

one modeling load think And of a Is fairly there evenly front-end acquisition other you. larger XXXX of we back-end Thank might why reason the guidance. kind it just question across we fair is or quarters? as spread Or that? some that the housekeeping about to portion

I’d call as guidance. second it half a probably XX% first XX% half, general

lot a thanks guys. Great,

Spenser have sir. Street go [Operator Advisors. Green Instructions] Please question We from Allaway, a ahead,

you. Thank

has in were baked-in Going become whether that properties How can quarter? some changed of portfolio? the And to little the those at resolve for color a re-tenanting all you in the in the many on second. to trying dispositions back environment a vacant of provide terms of the

Yes.

So four that’s for us, the which a XX little is related four I’d All of to be properties we vacant, properties a so those call why running that’s honest. than sold, normal. we back, got lot higher quite were of the SunTrust batch to what

context, dispositions sale full six for of Just the our of year was vacant for some properties. properties – vacant XXXX the

yes, XXXX, more it three vacant SunTrust. plus For a vacant than it was XXXX was nine But us. typical properties. little was for only properties bit

about vacant asked and kind I been And consistent. sentiment Spenser, you about – of would it’s there, say leasing that out

lead much past. been seeing not feel than or in anything the to us it’s it’s that easier would harder much We’re like

working been is feels particular they of set. it’s market all – is about But team in these sample the the a leasing past. way Our kind like assets. it’s small of And any quarter the

continues you into want the XXXX guys But also of increase if you to evolving you obviously, that setting? given service, maybe then given industries specific you curious, geared to that the beyond, and are your any the are be And out sort experiential-based just exposure retail. Okay. retail that parameters It look environment. makes guys of to sense, more ton a commented towards portfolio there

finds who reasonable to year with national If buy are you saying that for no signage of the location." or good to regional we succeed we’ve parcels of XXXX going rents, are someone there are we learned are in to away that primary really ends and, able leased own. and good, always location, a current is at can focused should property, to in that is the operator operators. industries well-located estate the – take locations, real looking forward, old but " good and on that where there up what way it we Location, is strong real filter that we filter with there, if the the the in of substitute on think future it pieces estate visibility, every succeed So are access, we look is for hands is I fungible the that what that

you. Thank Okay.

no further for at like Whitehurst? time. are Mr. questions There back closing turn Whitehurst the over comments. call to this Mr. I’d to

much the seeing at you fall All as few for conference look the next you in day. Have to right. listening. weeks season a – approaches. forward many We Thank of very good

teleconference. today’s concludes This

time. You you may disconnect your for your Thank participation. lines at this