National Retail Properties (NNN) 3 Aug 202020 Q2 Earnings call transcript

Good day, ladies and gentlemen, and welcome to your National Retail Properties Second Quarter 2020 Operating Results Conference Call. All lines have been placed on listen-only mode. And the floor will be open for your questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host Jay Whitehurst. Sir, the floor is yours.

you. Thank welcome Retail and XXXX Second the Call. Earnings to morning, Properties National Quarter Good

this our call Kevin on me Joining is Habicht. Chief Officer, Financial

care the our quarter. and first ingenuity, flexibility First, appreciation our respect of for pandemic Properties express on to as healthy, and lives the who health And their responders, all associates we myriad COVID-XX other all business impacts address for and dedication, I past Retail and there the through at this deepest out work, those my to of and hard each safe well. National work want to keeping heartfelt workers, are the thanks us as offer I of

strength We of business plus available with the quarter our strategy and $XXX the long-term ended $XXX and in of resiliency strong Second National million the for results liquidity model. our bank, million in Retail line quarter a Properties cash position of credit. on of basic capacity reflect

to public two Our dividend. approximately and rents. other of agreed feat collected matched by fortress-like an common our XX% XXXX only year and our become the quarter factors a driving dividends less is companies in increase announcement were share than of second United the XX% will our defer REITs perspective second recent that rents later behind this and of the dividend quarter XXst XX of in our approximately paid We States. month due in balance increased Once long-term sheet

fair. were measured approach spread very National with tenants the materially Retail that and and pandemic Properties collaborative down, remaining shut while consistent impacted, a As those businesses adopted

of months rent of a XXXX. term agreement behaves. three than long-term way the the and commencing partnership To continuing typical a in end had with deferral of this us, the the quarter fourth Our is deferred through less typically rent repayment

our for legal we're deferral Today's our includes, also only July approximately we do For forgiven or rent quarterly, release. with payment that the monthly our lease. of agree those negotiations base a our of our unwilling were long-term that of pursuing reporting to and It tenants, noteworthy quarterly not remedies disclosure August rent release only and results of tenants arrangement, enforcement all rent agreements practice X.X% is collections with earnings to pay Consistent anticipate or we have third rent. our that for XX%. collections quarter prior September reporting were to in press

in by rate were X% lease Our consistently high demand evidenced of to consistently high well-located to true as plus approximately prior remain properties prior our those we XXXX, properties occupancy of or impressive XX%, COVID-XX the XX% rate will at of retail in high our first in minus to the renewal tenant pandemic, post of continued demand through XXX% pandemic world. Both the metrics our believe and XX% of rent. and hold half high

approach million property ATM balance capital We liquidity to strong to of ended were acquisitions second issuing at I our acquired leased prices, tenants an we and continued to half supported want Our the the position. start all at the XXXX. commitments we our first shareholder sheet to that basis. more Year-to-date, to low-leveraged pause leverage. the a call of quarter the on a $XX through all have equity we quarter, with of of creating in evident national second the all in thoughtful reasonable with We're was some in With continuing investing end to acquired value of initial details formula capital on properties enviable position QX, and without closing, business. that that, projects for estate, for the rate. of have long-term Consistent and new underway. real via no right regional $XX million dispositions results. to second turn staff a our We half million which year. only well-located $X believe already reasonable new approach experts, cap raising by maintaining quarter on cash philosophy, raise and $XX through than that increasing rents, strong the aspects the invested focusing XXXX the X.X% cash to and from at industry In a million remains take more as is complete This a to second our balance long-tenured on our multiyear Kevin sheet at I'll reiterate over

The quarter. our XXXX noncash and the the or per we was points of quarter per discussed of quarter after changes filings And usual, and that's forward-looking of from the million actual make revenues Factors headlines $X.XX made. under and the at morning's be company's this press future start X.X% shutdown. statements revenues our was that's may from Jay. certain end, per quarter. down was forward-looking considered second in share cause company's agreements that, may of down quarter in of economic last reported statements was you, that G&A federal quarter statements as collections X.X% per cautionary risks in reflects primary to and the with straight-line materially results from the rent AFFO expense will these could connection second that statements arising differ that first these with The rents rent from XX.X% differ be actual for law. to from to -- securities are expectations in and from morning's share the revisions the at in in disclosed this matters statement detail results which $X.XX With results with forward-looking basis FFO of release. not share note share, prior receivables. are we to the results I'll deferral $XX.X in were from for release the $X.XX release significantly may quarterly quarter items reflect XX SEC discussed time-to-time second report statements Occupancy Thank we greater and press

First, rent of rent deferrals, rent and second progress work a with rent hindsight hoping relatively doing benefit with of our being midst the months quarter but collections path of a we a the tenants collections the the much the of with and owe find July. it's for us. the to forward never made too into monthly July. of throughout In reported are And as the storm, XX% struck our Today clear month pleased number or we're we're of balance. reasonable to the quarter approximately for little we've second too with XX% if we three totally they we pay improved

will it uncertainty before on better get and how be However, XXXX it's read continues the economy is a perform. our we all going opinion to

rays collections we to but on we So, some see of cautious the light options, reserve front. looking remain

over Now, to receivables.

relates done as my AFFO accrued have referenced consistent beginning rent GAAP called to rent is First, the These into AFFO. would FFO, recognized the did if net this rent been months accrued core deferral results. On X.X the with the $X.X of rent, in XX% in rent had income footnote second agreements excluded receivables, with We which we what $XX.X of rent amendments. But I tenant calculating rent third we deferrals to million of past of the represented our rental but covered accrued producing straight-line at deferral it's and were remarks. second end. our quarter. quarter -- accrued reserved certain in XX% tenants a we the earnings, with This when lease straight-line deferral rent and practice, in which for average, included rent sometimes included related rental FFO million income quarter entered to rent, connection related agreements, due not rent of million those of increase $XX.X in XX% quarter accrued

rent We us deferrals expect of these XXXX. back have to to end of paid the by XX%

our fitness, have theaters, family trades lines of which the the generally receivables a retail increase of call million quarter. second hit and million rent four quarter's restaurants, resulting last on for by and $X.X $XX.X been the our Secondly, net namely established million increased quarter. in in entertainment. reserve These rent noted hardest, of the $XX where concentrated receivable full-service health we receivables are a We collections during

We be facility. bank with these will second resolved ended We million litigation. many with a in receivables as not line up outstanding down end -- credit of our amounts paid draw our the hand, $XXX receivables companies our or no rental expect We did bank on deferral quarter did. agreement cash on

common large equity in -- $XX scheme debt opted but have And investments in share as new-property liquidity XX% our not more off Not to and help low maturity a the ATM. very our its preserving amount just rallied second the cushion stock is it, XXXX, read bit quarter average made into shouldn't We of and we near you our of position. and good we're things, on -- in material issue lowest adding too per so options. via a next much in a

X weighted debt on shape in average release. XX.X interest press maturity weighted good years Our X.X%. page is covenant the rate Financial outlined is now as average a with of compliance in

fixed Interest guidance generally encumbered new good gross X.X remain June in XX.X%. economic coverage and read was might precisely we charge next million. the quarter, debt-to-EBITDA X.X we're the we very provided get years. out. was X.X liquidity mortgages book the better for our very strong. properties XXXX things to a earnings times Until three the was a on of in of we're like, was Net light and in assets able by coverage X,XXX Only reasonably in look the not with at metrics second predict and So how are last with during what debt capital five position obligations recovery XX. Leverage play will very times $XX Net uncertainty have the few quarter. Consistent times retail economy to totaling normal particular. only not in

will endeavor through for in we we for we will As Karen, work opportunity that to years. to challenging continue succeed the global best is to XXXX it the up questions. NNN And with coming any give economy undoubtedly open what the a

Thank open go with and question. Brian ahead, you. [Operator sir. Please RBC for Markets. Ladies take question now from floor Capital Hawthorne is the gentlemen, We'll our first Instructions]

demand have you've deep the leases? throughout the for just guys. Hi, talk the seen seen renewals your environment. I interest in And for kind of How any pandemic? you wanted guess, change about is to leasing

would renewing stores. usual opening my mean, But comments yes, to Brian, than what as lot about good do morning. tenants their of that our that waiting say of there's lease at that just of renewal. around The very morning, and metrics right to a businesses now remained are is or tenant the demand around of want any renewal I that XXX% in this lease average rent I without incentivize have new they the incentive dollars long-term reported is our landlord less XX% for properties. additional the think, vacant leasing -- I for prior providing to with lease see I XX% to consistent

are So as-is an on those renewals basis.

with remained long-term our average. consistent far So very it's

I Great. really agreements? extensions? any guess, look And you at like extending look what start that if potentially cause then, And you those what were deferral to could would to doing

Yes.

talked deferral. in prior a call, proposition and taken tenants as first we've with this call we've As about approach collaborative an a earlier the initial our very in for

through year the that have term. do tools lot were extent forgiveness this typically. disrupted be be to tenant do discuss talk typically that talk that And that but latter we about deferral-only We you might and willing or was bumps we that's deferrals of to We ones significantly the to next to to ways talk more a about then have we if starting rent with work a not short-term to repaid make Phase X what to deferral-only And further continuing have toolkit. far-ranging the to new extending can tenant's of part term a of tenants transactions. tenants extent later the of properties currently We National year enough refer So business talk tenant the in that not would for things discussion, the provisions out. about Retail in to other folks lease with Properties will we can to which leased might for be -- are substitution sometimes create swap during changing can for value engage about lease. start as want discussion about some out. to the we can We quick

with deal July that completely So structured deferrals play with said, that all. it were you've theater initial as there's not tools so great rents first with to us has almost in in success good really up lot quarter of far in come notably. started rent. We've second seen a pick had to then but these Kevin toolkit, measure any into at And that

Okay. Great. Thank you, guys

Please Spenser take next ahead, with from go We'll question our Advisors. sir. Street Allaway Green

add XQ? you, tenant which industries Hi. more a on are specific collections rent Thank guys. Can the July you versus driving bit increased just little in color

good across of been struggle a during and reopened. of -- and question, that's the but has those those the Spenser think board. theaters the kind trade businesses that -- been get most few months and as difficult to health lines struggling of last that's kind The lines continue of trade I it's it's fitness and have those to opened as the

think, has not the say otherwise, I'd to businesses better. increase. got But I board probably across the much So that contributed the

to you have line. the quarter in access Okay. ample And then and equity you the guys and liquidity raised obviously,

order what in half So the aggressive the external-growth get to you year? more to for in of you back guys occur front would on the need

things the just want out to we Spenser, see settle how over long-term.

month already call April us take said one few is and play-out. that how continues to a times, a little better gotten we've but see in we Each no by have to things saying since you no this a felt this this a behind want means view better little is -- we the and As business -- just yet. of long-term

of a So of as few as -- relates how feel we get months as as pricing capital. play to going for well are to pricing just out to the properties want next cost as cost that well better for capital

you. Thank

We'll take Janney. question our Please ahead. Rob from with Stevenson go next

guys. morning, Good

to around year-end not additional to revolving anticipating any some of that -- guys -- take with First to XXXX that? program dispositions question possibly the the Are election. queuing changes the Is you advantage given up strategy into on rates than and you able point? assets cards that January to How the or be thinking cap February? significantly about in or are ability in at the the at this potentially sell guys opportunistic lower

or steady the dispositions we we it it a XXXX those us competency Rob, so gone don't and at and core time has of business. been looked us deal call for disposition flow been about exchange XX% in that have buyers good terms a of dispositions a minus a to Yes. dispositions. long we've for When great only plus anticipate of and our back affecting have

of of We come trying inquiries that contacted we reverse ramp year. we're are our kind will are the through. dispositions see XXXX up being where of if by end the who A lot buyers to get

So the year you're do of at be a be we'll there big will our may to but right overall a platform. the of not It's of component that that disposition see. end kind push demand-driven,

rather operator assets that expirations being point than those where the Main your lease you at theaters whether Okay. Dave has out XXXX, any there or look get significant And when at then been coming there up it the in Buster's, the to and gyms, & renewal? challenged categories or challenged more back be not you're Chuck-E-Cheese's, is likely in the Event operators a

answer trade. the expirations disproportionate no. those that's nothing Rob, short in lines to not upcoming There's that is lease think of the I to

honest of Yes. it's lines trade. those To outside of be really

fine. So we near-term should expirations be

Okay. All was Appreciate trying That Thanks was right. to at. your what get time. I guys.

our next take with go ahead. Ladenburg Thalmann. from Massocca We'll John Please question

John?

with Malhotra ahead. to with is no It Mr. Massocca longer there. next Morgan Vikram move question our Malhotra? Mr. go Please appears We'll that Stanley.

you Can hear me?

go Please ahead. now. you hear can We

you can Hello, hear me?

Yes. We can.

Vikram. Go ahead,

In clarify just what sales, that kind quarter. give you're I mean of second clarify apologize. you And on Okay. the if on asset a properties? that just more thinking I us – to how about missed impairment just I can I then vacant took you wanted the bit this you case was? color Could

Yes. Sure.

to $XX.X On the of million quarter. Probably small of operator looking retailer during sell that impairment roughly we two-thirds a family-entertainment the properties. to one number had that related we're

And what that so to. bulk related the that's of

between As and occupied it's been it usual balance a dispositions, to relates so our vacant. kind of far

this eight of eight our sold vacant, second again in the of of in quarter of three three normal. terms kind – which mix were think I the quarter past it's properties our

we'll – to kind – we'll I think see sorry forward that. keep of saying going again,

like You will see that just have not. seems or but would It it see. picks up we'll if to

strategic a release be a vacant kind at level of job just Vikram to to our – one continues business-model Yes. properties. is

Historically, money to as you that's and foremost had that little a a so have to a and we them to properties months getting we that what nine longer see turn always. or dispose And within if will those, first be quicker we may us do than acquisitions. held we re-leased may into monetize re-leased of properties not be attempt vacant quicker monetize year. bit that bit sometimes But to trying little and and them new get success

I belt XX certain hypothetical of from GFC? the then Okay. a And updated during it recession versus wanted next the just occupancy that on months. think a thinking trajectory the NAREIT, on wondering were know kind to I'm more about we're here couple how months just about on call occupancy. of say your over offer you'd like view thoughts of occupancy how to six under bear-case our And on now you the a I effects

three I of We optimistic XXX we with had this that were. very of will than Yes. XXX, couple like feels XXXX up. I we're still I that, it we've have said moving ways got answer actually mean, to agreement." you points feels slightly this obviously the in We're like agreements the rent hard Having more direction. slightly Collections we we – XXXX, basis I are – say, I one that. sent months to is lost and occupancy It's that the "We've hard said worse things of and deferral probably framed of the back pay the rent. that. need deferral think money. the benefit right hindsight, a of said At don't We going got to and think better. than us picked margin

metrics. more engine, it number So be will kind know obviously, balance and think we back which of the just becomes that. we'll it don't just obviously than whatever all But returning a dividend, be fine, terms the re-leasing in it on is, critical that we we or that due think it's appropriate. acquisition of appears properties of we sheet, course, really And think, when matter back getting in

Okay. And me, I can then just clarify. last one for if

as alluded you certain offer certain about that, terms a at deferrals more Like, in the through we look think had the you if need just this think et you months, next to case? percentage bumps fact to as your You of are But, six might is of to of the deferrals for year? planning you -- base the pulling levers, just continue balance cetera.

We're would deferrals on Vikram, had of majority the have won't question. I we We're about I to-date, tenants of be -- some optimism the our into to echo kinds quarter we've And with need initial other will get do sense things, otherwise regular restructurings tenants. deferrals, deferrals But very with that, modest will few to And think, year. that problems. discussions understand date and It rent-payment tenants. or those assume some third unrealistic end to Kevin's, be to of the lease additional this optimistic paid some through on back schedule, the the the of back schedule. the

much. Thanks so Okay. Great.

open. return John Sir, your at is Ladenburg now We'll Massocca line to Thalmann.

morning. Good

Hi John.

John. Hey

Hi. John. chance Second

dive helpful. wanted kind are there? views on, views there, of color any going bit kind on given potential what your recovery of to little be early So I Just E. -- would guess Cheese's. on maybe of Chuck a just I what's Kind

We they're in bankruptcy. --

Committee… Kevin, are on We we're Creditors -- the

are. We

already, prices of that -- we for reasonable good projected leases reasonable that, rents. none an they've right? ours. how real that's but at acquiring see us So some which will estate We plays out. to other being just … And -- example locations, and

those the stayed the bankruptcy. And so have in far, in business, properties

to maybe should or that? in mean something norms, with then the environment discounted I in in -- something historical terms maybe operating of recovery, given just we And is line expect we're

it $X.XX on rent our of -- for into that's line be It prior of at. now, the so have be norm may money and dollar. vacant a an right properties, kind we're for think that's it's XX% I to historical on basis, bright feel additional us probably is as-is those may But early that. About collect The we the on about without better And without too putting worse. for us properties. looking or

kind any and automotive of Okay. looking rent rent been with that collection of July? provide of at terms that impacted services. And the have Can collection, kind on are the And in particularly industries the collection hard level was maybe stood that just kind have the rebounded, out they in being industries of that color XQ, then maybe not on, one caused industry? you of traditional of kind what of tenant in low that one industry

when They that tenants, without assumption Yeah. and right, in about to first The -- some those your getting -- rebounded. businesses those talk agreements, -- struck. cases sector specific includes -- also that there many deferral businesses the John. were have is into And so pandemic And about we talking were car washes. the to happy

of sleep paid. of line over, getting getting But back exhibit And so the losing all we're to in rent press deferrals a release. line and the of not terms that those to it is is trade that notable in at full trade

in of of lot that line have We trade. a strong tenants

below Okay. I that collectibility $X.X being it And sure to detailed reserved hearing that threshold, quick then that's just a was you question, potentially for amount make in one The million? right.

Correct.

rent they the the reserve when Yes the a all, to that related all lease into. amendments that's -- is we accrued Sorry. effectively for entered Yes. is rent -- deferral general accrued rent

very much. all Okay. Thank All for right. it me. That’s you

next Please ahead. our Citi. McElroy We'll question go Christy with take from

morning, Thanks. Good guys. Hi.

quick question. Just follow-up that on reserve a

of that the rent And a write-off did straight-line So any Was mentioned also $X.X to a quarter? you Just clarify million? the well $X.X number. you as that. million portion in

Yes.

always lease buckets which of two the significantly rent any over of the to lease off. added accrued the one last deferral amendments. first No, we the yes, the So, a quarter had different but receivables. rent we've the in we didn't second receivable, I'll But, write as the result over years, answer One one. --

so, just rent are There million. typical end up receivable million rent accrued $X.X just And quarter that other accrued which receivables, that reserved rent for receivable. went We $XX.X receivables. is

and a enter didn't into Somebody deferral they agreement. rent didn't pay

$XX that receivable receivable, up went so, for by million. reserved two million We And $X.X that buckets. different

So, $X.X $X.X total guess, for million total yes, receivables. or the million, of of I reserves

Okay. Got deferred it. on the then accounting Thank And of you. the rent. treatment just

it the treated rental the relief So as rent taking the ineligible advantage not nature modification, it about relief, you've it or that looks FASB's a like made was through a Can either a accruing the modification? lease in you modification of way, it that just that revenue of instead went line treating given as it straight-line for as of for to that deferrals decided it line. talk FASB treat the of instead

amendments and did advantage We that treated these all but -- that, as accrued we in rental it not lease No. take leases accrued deferral decided rent. income. reclassify We to did as of so were the book increase

bit remedies? then little unresolved? can you a color in What in And the national that talked second maybe and that you more part about is, July, give then, amount tenants? And And -- the those accrued, amount the on accruing collection, implies as the the out the terms of it deferrals deferred unresolved XX% you the what of July about. of in Gap] opposed guess -- XX% the you rent, bucket. pursuing of legal provide I put through portion are to Increase you can the you that portion are you QX of bucket can which straight-line but that question it in and so remaining, of provide unresolved, [Audio so QX amount in

Yes.

July of should same being unresolved quarter. third that's number, of you meaning XQ the in being the So, There's about think very XX% X% to in deferred that similar probably collected. XX% terms

how between a handicap billed XX% collected, unresolved. XX% mentioned, amount third hard a I little exactly broken quarter to to some the -- get which agreement still still As a It's we've that our deferral to litigate. is it's execute fair and of going is had out deferrals in going collected, then or

of out. the we're stages early so, sorting that And in

Okay. Thank you.

in Christy, optimistic at deferral of likely well to of I it -- -- up about. of just more little XX% add about that tenants And up less that. I'm in about it, in that -- about to bit is a may make after to half that half end discussions the will reasonable. are and chosen, agree I tenants look discussions -- a process. or think, lot When result fair more color strong are happen, have large optimistic legal deferrals with that XX% maybe are to not may pay in those that a deferral little not I'm companies that a with are that But of agreement, simply either we terms to won't

helpful. Okay. guys. Thank you, That’s

Capital our We'll Instructions] go take question Lucas ahead. One. Chris next [Operator from with Please

just insight top of tenants the and are? on to Kevin, guys expense relates into I they how as the have Good side of to morning, that make guys. it guess equation, expenses much do -- on you payments the just those direct have

with mean Yeah. we obviously that again, I along rent. track

-- so the real And taxes most being estate important. taxes

tenants stay top definitely on we sure of on yeah, and that, So are that. of make the top staying

Our deferral just amount. those continue we're the base require expenses, generally rent tenant the to pay deferring to and agreement, typically

of to have -- of or any are deferral and sort you you don't or unknown? when a rent whatever they relates for or provided haven't expenses not percentage collected able agreement, paid on additional rent not, you sort is those as just like it top So, or that an paid of guys stay to metric you that have sort the whether of

No. We know.

of obviously someone's not. sizable. cetera, have The or insurance, less We critical whether taxes and utilities a paid are sense less and good et the

And we estate so, that. yeah, to And the continue the taxes, real big one. is track

your factored collective? that's into And

Correct.

of the all Chris, bucket. the of part make tenants up unresolved AR overall with triple-net Chris. that discussions bucket, XX% expenses tenants Yeah, are that with not that -- have

component big a terms to your second cash guess And opportunity retained to cash as of it us it do want investment us way. Okay. relates in Anyway, if I you call quarter set, flow of have -- flow? for guess I that for a retained been then, has you capital number

mean I I dividends, looking really. versus I at you're Not guess et all quarter for the mean -- cetera? in if

Yeah.

just breakeven That rent we're was XX% mean I collection. at about quarter. for the Yeah.

I -- context. million, that of kind any you $XX think dividend at $XX our look million, of we're you AFFO was gives if if

Thank Yeah. it. Appreciate you.

Yeah.

Yeah. about cash straight we're base, Like on a breakeven.

positive. And the For still half, obviously we're quarter, for yeah. the

Yeah.

Please take our of from go We'll next ahead. question with America. Joshua Bank Dennerlein

Hey guys.

to question. follow-up a Christy's maybe Just

I think we Josh, lost you.

at I'm your industry-- looking

out. Josh you're go if can call Karen let's the back. see and on to cutting Josh get we next

We'll move go with to Vikram Morgan ahead. back Stanley. Malhotra Please

for guys Thanks accommodating.

to clarify. wanted Just

-- the change in in collections and states and from like just or deferrals the On any rent wondering your cases? Florida ramp-up on where experience Texas a tenants seen just we've there's if the even

deal No, in variances have we notable that at Remember statewide haven't all tenants really seen any this regional large we with of point, that or Vikram. everywhere. that businesses

rent be of the tenant in that So, down they're us to there even we're -- to the are still some and the the us up extent that rent. shut the a -- hotspot pops hotspot them causes units extent paying was may paying these to

Thank you.

this to at time. questions we'll appear There no Whitehurst, Instructions] the [Operator you. to turn floor be back Mr. further

joining you of all Have morning. appreciate We you. day. good this Thank us a

does this gentlemen, your thank participation. teleconference. We you for and Ladies conclude today's

a time this may have disconnect your You and day. lines great at