National Retail Properties (NNN) 3 May 222022 Q1 Earnings call transcript

Good morning ladies and gentlemen, and welcome to the National Retail Properties First Quarter 2022 Earnings Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, President and CEO, Steve Horn. Sir, the floor is yours.

Thanks, Mathew. to Retail welcome XXXX first and call. earnings morning, the Properties National quarter Good

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

start As is release press for fantastic this Properties. National reflects, Retail morning's also XXXX

financial ongoing financial NNN. get NNN’s corporate and portfolio the commitments, the initiatives inaugural and ISOS achievements, our NNN report report into The an We responsibility results early direction the sustainability quarter, current Beyond want April basis. the I includes we released to group. created the report. Also, before with post detail, and on highlights address of

As consistent year, of plan growth. executing NNN mentioned on core remain We year-over-year operators, estate continuously plan model the and course delivering underwriting repeatable to right acquiring real FFO market currently growth. I continue I earlier and opportunities, this but locating, with to vigilant business delivering long evaluating the while standing stay the I all

to the range Given increase this of of a X.XX on to our X guidance strong X.XX from his will in in a beginning are remarks. to year, Kevin X.XX more per have announce XXXX FFO per to of our increase details share an for core range pleased share. we

to Turning results. of quarter first financial highlights the our

of number high tenants strong activity regional out our of XX.X, national portfolio of at ticked which perform result single leasing some increase remains up average Our of a The take our enjoyed a XX. our of in tenant Occupancy The quarter freestanding out above vacancies. to level to is department. department exceedingly interest by XX of and well. X,XXX properties continued the basis a and of points long-term

five portfolio. to quarters have we NNN zero for within issues and a here that tenants had report we It's quarter, did trend any credit the NNN at [bankroll]. During consecutive starting can be not the

at an relationships traditional quarter NNN on business. cap which discipline of initial this XX underwriting, model approximately lease XXX maintain a thoughtful with to were we years, prides calling itself all-time average duration with remain maintaining sale low, In leaseback the of almost relationship at do the and result underwriting the an the be on of we'll our QX business department. tenant. sale in lows and pricing in effort in of was is million for acquisition to NNN. for at X.X XX environment repeat X.X, to of continue rate transactions historic new acquisition and of the transactions primarily pursue Although regard initial environment, we depth our an past properties quarter rates where we our cap acquisition our leaseback NNN with at continue our cap an all very our cash acquired rate With that acquisition

expect call, As mentioned XXXX. more little and a XXXX cap pressure we February during on for the the rates

is sit now NNN and rate moment behind This feels we of us. here rates competition at little. private May feeling As has a is the compression for bottomed out like it result cap dissipated have that cap the beginning

XXX about of our with During on also guidance the accretive will million and XX proceeds, disposition we properties first of quarter, is pace This acquisition. generated XX million sold activity which reinvested into be to $XX million.

NNN until to regional X.X to well in credit, terrific zero leasing our billion XXXX. still our believe debt the quarter and cash XXXX our to long-term we once of Kevin again strategy summary, In activity, target acquiring strong properties. sheet new the consistent of rent validates of parcels So outcomes, position record, of occupancy rock-solid, with XXX rate, keep collection leased located and quarterly million operators We'll first material maintain turn XX more updated in sheet. Thus, bank, is in call on reasonable we that, Kevin national mid With our his flexible up ended like a broken balance I finish the risk for and rents. over acquisition no detail balance line XXX balance to of me at team a fund sounding our strong the the numbers and let guidance. at maturities

the $XXX,XXX about first noted as we And Steve. with rent rental deferred law. results QX, accrued of onetime which an federal that usual, reflect to per of forward-looking the for termination to repayment XX.X% changes cautionary in in percentage include $X.XX $X release certain these quarter materially discussed that these make release. statements the the in Thanks press would per note to may from included may start press in this preceding we've from first of With immediately are for without Gap] we results immediately there. risks or have fourth the preceding in actual to the on XXXX, actual statements matters also per share share million filings $X.XX be lease AFFO These company's to did statements share AFFO the from could in be now of was quarter revenue, core and considered revisions $X.XX. That's under FFO for cause share, differ and after quarter of That's that disclosed with time up statements. from $X.XX up income from this morning's or the from about QX time future adjustment significantly headline up we morning's of that may penny of forward-looking We differ and quarter. our that, items quarter results statements expectations Factors quarter, XXXX from I'll were forward-looking -- $X.XX $X.XX, X.X% produced the fourth rent. securities the and [Audio reported may first first quarterly $X.X it's to $X.XX of a some And XXXX. Today not per footnote AFFO over release Company's the XXXX. results million detail made. greater SEC

I a from we repayments half off first note taper XXXX XXXX will also rent results As peak to kicking took in these vesting our the CEO, in in from XXXX, and noncash quarter levels in of that scheduled acquisitions. all FFO calculations. in stock with of to was connection charge our of seeing $X.X improved core our awards retirement excluded AFFO the of we're which and and first deferred related continue million

we Excluding good the G&A recent XX% expense with levels. point of increased the rent base a Steve the from Occupancy, historical And of all think I share, range to our to XX, a slowdown at the of end $X.XX a albeit, are quarter share of supporting our earlier, dividend we per per guidance million quarter's from place XXXX we annual to the quarter forward. any with for XXXX similarly, mentioned, ratio that The of XXXX We to starting March ended per of as came XXXX, AFFO $XXX ago projections was repayments of scheduled guidance as deferred million range range we thinking increased unchanged FFO assumptions are XX was guidance, million consistent reflects share at to $X $X.XX about $X.XX are which in release. XXXX $X.XX AFFO for $XX.X core charges and $X.XX per on the from executive today's down XX.X% first is rent levels. slightly deferral quarters. that's Steve that's Today, and repayments largely quarter release guidance in on fairly X for from mentioned from for noted and today's folks at up we retirement of going our that's payout $XX guidance. as year mentioned, last our press excluding and in share. page which page a press leases

of what guidance, normally for in assumed despite rent a normally, in well. and that's our we loss rent that level where typically operating loss of the We run is fact a continue we've today to which assume number about we’re X% at as that years, assumption our guidance half

active capital the the to over we long-term. balance on activity unhappy are quarter except year, fairly usual, we quiet of our assumption very first ended cash, the in give $XX the outstanding Switching on We moment. market of the bank and a leveraged the We for guidance with neutral debt be to at million not of activity. quarter terms general sidelines nothing were line. on our As markets capital billion don't to in for over the that manner first assumptions markets in behave intend sheet, last any $X.X

Our liquidity remains in great shape.

the weighted years, debt is now the be seems Our in industry. longest to maturity XX.X among which average

debt. is next our of all is due fixed maturity, mentioned, X.X% -- debt is in mid-XXXX. Steve coming outstanding debt as $XXX million Our debt And debt rate of

positioned well So liquidity balance is very the is and and good leverage shape for XXXX. in sheet

assets coverage book both of couple to interest March gross X.X debt EBITDA XX. quarter a was Net at quarter. at Net was times gross numbers, debt end. first was and coverage stats. XX.X% to fixed the charge for times to And X.X Just

So off start. very a XXXX is to good

environment, capital to may margin. possibly a we now to While lead such disciplined heroic of to level there's midpoint XXXX economic to, think Core uncertainty, the guidance are we assumptions. suggests X% as well helpful FFO alluded positioned the and growth market is which Steve increased for any more us and without acquisition at

we over questions. Matthew, on results to Our it that, open focus And remains growing up will long-term. with share per the any

Joseph question is first Instructions] from Your [Operator Nicholas coming Citi. from

over XXX guidance. acquisition first million. the Obviously maintain did acquisition, on starting maybe you in quarter, Just

like So it the ahead you're running seems pace. of

in back the what of assuming first half the thought was year the quarter? process? kind And busy relative are you kind the So of what of to

the result But as strong for initial the weighted pretty million, end, of we we currently. fourth you Your our quarter, visibility maintained to visibility. in back don't have got XX% any start. XXX North XXX good. But quarter really the quarter, acquisition we I pipeline to -- a second looks third, first was believe guidance just know, of the XX% of off XXX. the

same. So to prudent leave we be it'd just guidance the thought

cap And in cap rates, obviously last terms then you quarter. maybe of past this talked rates few about, lower being for particularly the quarters, just

interest the particularly in cap to rate rise market susceptible interest of the perspective? how from broader a rates, With kind leaseback sale and is rising rates

noted, low, but or first our priced of January were you a those December. historic lot quarter As deals

now And they've so cleared the market.

deals we with are starting retreated and approach that see not so have the wait get are But or starting to in turning as to much. companies interest private that falling we're to them feeling We feel out. some noticed rise are rates

So they back catch rates start getting year, and that's half of out the deals. we on will we when repriced bottomed hopefully the cap the think up why

next Your coming Doican] America. of from [Lizzie is question Bank from

on was guys it any maybe on dispositions signs And if this buyers? the I What comment if pool, was was occupied could versus outstanding also composition of of kind closed comment difficult wondering of assets? the vacant more could you quarter. to you more find buyers

income were more of there's assets we those a of Three thought in renewal assets. XX producing that of sold sale that of we -- Dispositions, likelihood the a defensive were lack or future.

there. thought first norm. put to which we we foremost, little than assets, in always were So assets. rental our weren't of rates. we tried we do, kind to those vacant release portfolio it. what And seven other finding good bit release the the historical But higher is we That's a try But and we

redeploy So and capital vacant we to decided acquisitions. a it's better into creative dispose the to that

could if And are debt year guys within about full expense I your assuming bad guidance ask now? you

that XX normally we just our runs assumed our continuing mentioned, it rent points the -- usually which to fact everything is assumption we we’ve leased Yeah, just about will and that that, a doesn't not that, we've so for retailers meaning as go to Despite many many, assume many, assume years. level, loss, are we perfectly. quite always of year. I X% get half have general basis And

if will, in past, So that's XX rationale, behind XX.X% rent, of our we quarter points you basis there. Consistent of the first the broad with collected so that. loss

as is normal so it's had years many many, pre-pandemic. for it rent collections loss -- And and behaving as

question from Spenser next coming Your from is Green Street. Allaway

broader weeks. about it economic do provide as slowdown? feel level your levels? your high trade can at looking you gone And lines tenant’s recent of implied event you any is recession market seem in coverage color there primary Just the up though How activity, recent does a current of rent on guys in odds have

real tendency any food of it's Yeah, of the the fairly there. a And like price pressure paying a tenants. rent At ability Spenser. service stress and the our not we to of in beverage. related, lot lot seen fortunately, there's Kevin, moment, point, is low don't feel our We've & notable

of in not you are far, So behavior, if fact consumer that despite we've seen will, a change prices the lot rising. definitely

our like it at so, tenants. lot of And doesn't there's so a -- stress feel it far with top the level, just

of just portion the agreeing linked? coming impact terms concerns any inflationary the those year are can those then have what And do or the renewals of that And high likelihood you leases comment of the due even and you CPI in next, just might same this maybe lease to environment future? tenants on

going come due. to and Lease

what at haven't the based tenants We just nature of we XXXX. XXX% in rent. remaining is XX% norms on of our we're -- historical it. are have seeing are renewing And our retail XX our renewals where that's And properties

anything So we're different not expecting forward renewals. going on

a matter As outstanding But X.X% time X% with ago today fact, at year it’s sitting shape, X.X% of XXXX, over a this on in it ADR given here of basically I of was we're believe. ADR.

are renewals now. XXXX right solid So looking really

coming Golladay Baird. is from Wes from Your next question

tenants. Was quarter? driven more color? a the Can there few you sale you on give by bit in big a it M&A was portfolios this volume what by drove comment Can us activity little there, the leaseback

We were the pure did nine was we transactions, a $XX, of variety were sheet eight one transactions tenants, the couple not. they leaseback reconfigured that the of during a M&A and kind with those then of We portfolios $XX couple just I doubles, balance -- post where leasebacks. did sale think million relationship was of it sale did was that

And then smaller for bigger larger a about bit a less noticing competition. seeing the Are you or difference one-off deals, little deals,? you comment

the coming the kind the -- now. they're still we $XX new The But that where mean, hunting the larger noticed oxygen a companies, deals subsided private larger there's And bit. of level. kind of to right million felt always a a private But of $XX there's deals lot money I they you in, of elephants we've had where competition. competition were -- on we've little haven't lot at million historically,

of cited quarter, end for or the look taken at G&A does few the you. as just non-cash the question was at G&A I the that of term bad that X.X cash and being debt repayment times that we tenants number, then was down, And the cash, EBITDA a lower G&A. income And then master? the a straight-line modeling that cash you – a benefit of to a The their by the the tenets recurring a is debt and guess have when

related. the me I first hit Let is cash one. mean, G&A the mostly

to retiring. we Jay As I charge took a related mentioned, Whitehurst’s

non-cash good, was there so And a that was virtually all kind of impact.

there through extent, -- the any the flowed in of again, line item. to tell question cost missed kind sorry, that second non-cash that, so items And can retirement And was I G&A that. me you say the

EBITDA this well For income debt the this recurring that as and repayment that the benefit at items said of being should as the one-time we quarter, of rent? term the deferred times cited think from have the previously number you're quarter, a X.X to you you as end more the getting the of of year

on step was our to debt between back to numbers, deferral it, historically, call which somewhere income was mid that the if won't below-Xs, The fives. for moment, debt a end high-Xs, and think EBITDA think is in to I us have the where think in think up the I and we've mid preferred material and the to those forward. the two impact call quarter it, operated, low our you we're our term should high-Xs guess in and the repayments going the where operating ranges you this I for we'll lease plus really be. of about in going

question next from TCW. from Pedro coming Your Cardoso is

NOI? bit little a on comment you same-store Can

repeat you low. that one? pretty was Could That

you same-store on comment Can NOI?

across with And go It's consistent that's up what X.X% We a contractual. seeing. rents board. -- fairly the we're year about our

CPI, but tied to are them capped. it's of Some

So bump. fixed, kind a rent of it's fairly effectively,

and and normal too there. so what fairly And vary are and expect run experiencing just at it rate, the is X.X% we moment, that's much doesn't so a from typically

Got it. the rate to cap on change Do leases? you expect your

an But use years down stated cap kind as We are go XX buy monologue not our we but we adjustment do expecting any that. I with to in at further, relationships. that probably the rates, we'll far things As the the of the rates. market see cap opening of what acquisitions

on I -- mean, the has annual capital rate, certain Yeah, increase cap the even

it. Go

at the terms we yes. we I market and of get Not Fair just which of we tenants And question. X.X% In about don't. the sorry, get the kinds do business regional with, because the that's is. increases, X.X%, rent large, market Why moment, for national operators. where do are that's

rates what get persistently rate, take have to rates, to I always of but, impact and going today period to too interest and of to notably rent rate try X%, near-term it's market the get to inflation think that early think, Well, sometimes -- we higher move I the that going increase a for number environment notably. can, and/or it's we numbers, anyway. say is in we the that longer

question from is Massocca Ladenburg next Your coming from John Thalmann.

the some Can through versus polls expectation, a you the front there issues just bottom maybe guidance? inXQ? cash acquisition guidance curious else have more was increase? anything in move the But expectations tenant no of drove in was us lower kind previously pushes like loaded the kind maybe driving G&A upward walk I of end in Sounds line you credit that that of if was benefit from really

and just I kind of collections, the think whole drifting is little things. on activity. timing, give And Acquisition you a won't markets some than I capital big we that the guidance, running wildcard, then hit G&A mentioned, lower. No, better which decrease other guidance,

of like different capital markets we sometimes we a assumptions would than make to terms do. like what would activity, around and to the think idea have we So, markets we do capital in

change we plans. so And our

to never assumptions, And any we we And an $XXX important an million as million example, price. point piece I'll to that you, we the I'll promise of that But of attractive -- last advantage messes years has going of vice debt. a We when and guidance, what year. model readily regardless the an with priced. capital market to the get offering point is the inclination was were issued current issue But it year well-priced, months assumed good debt it's was in don't we and past, the XX-year $XXX to in last a good a like available year, good your and that of was idea. our And over But capital year available the so feels at take last numbers. And it I your when opportunity benefit assumed versa, it our with our well you've that's puzzle. not felt not what in of it few with it's when projections. not been or hindsight,

wildcard And kind on both scenarios and of to that but is with not number the of a does guidance addition trying those terms a as pin of to that you I so helpful variables mentioned, you a influence not, in can things. answer know the mess it's down to

as I think spent much. that And to the historically the raising Or kind again, still to look revolver traditionally think, kind today, you that maybe I that capital used change you to about are really Is if all and last dynamic? stick point, cash? of current going at the you've in haven't once of you it market markets maybe

over year, we year. good we question, last on we've zero And the last years, six line. had averaged under did $XXX -- note. our million Really all of good Very outstandings and

are and and versa. zagging to zig yes, the when vice try so I And markets want to

we went last bank our lot and issued probably find so, guess more. a persist line us environment this using you'll worse, to extent debt I and/or the of long And duration year,

shorter more using the have shift probably past. means more end line the equation, we of our to in bank the we’ll that debt So than and

But kind a how about yes, comment. as So that's about that’s not we'll see things that. And our -- of that’s fair process we think thought – projection. doing

some were the we at risk. real on line, fortunately, expose a to like duration, average short-term really and company debt years so weighted And XX.X any can we debt, not bank take

Your next Jefferies. is Instructions] Tsai [Operator from Linda question from coming

it where impacting last? inflation isn't might might where But shoppers your terms that extent does, within noted you the it of base. see you industry first and it in see exposure to tenant You

control see the our through way convenience to our customer you see a finding inflation, here. gotten couple where where to yes, for customers But big service it. quarters consumer far serve Arby's But if items, top base, to through. quick As it's the maybe back. as the way accepting pass it pulling a It aren't stores, the tenants, in hasn't finding it been the the would we restaurants, more or of ticket they're would later, out pass -- the they're the expect it's a

industry And industry year-over-year. services most your are XX% threshold high then Is the automotive a And that mix. the how this for of industry about it's there become? increased could

we go. a long Now, have way to

runway XX% were you're the stores. to focused one to of makes the auto the look estate. if asset. real services. low, on we it And plenty rent in it, you'd real been If buying keeping well we covered our at history, really We'll sense because point have buy but the underwriting convenience meaning keep We've pushing still it, right, estate,

to has of within And variety real if will, a just of you folks, kinds that that. businesses remind

wide I So and and carwash oil, within of that collision a tire variety trade. and mean line that service includes

that don't the kind use a that feel but which not And of at at like of high, so lines of within high even line we trade of there's only the overly of we property it's degree despite trades line level, sub XX.X%, within within diversification trade.

to and CEO, session. Horn Thank now hand concludes ahead. closing I'll Please Q&A back remarks. President you. for That go conference the Steve our

NAREIT for We talking thank this or your forward you to you. ICSC at June. good Thank us majority upcoming Have with day. look of vast rest a and a in joining of you morning

This event. concludes gentlemen. and today's Thank you ladies

may this patient. Be day. a have and time wonderful You at disconnect