National Retail Properties (NNN) 8 Feb 242023 Q4 Earnings call transcript

Greetings. Welcome to the NNN REIT Inc. Q4 and Year-end 2023 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Steve Horn, Chief Executive Officer.

begin. may You

Good Quarter Olli. welcome NNN to Thank earnings morning, call. Fourth XXXX REIT's you, and

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

produced million. press performance along morning's reflects acquisition X.X% XXXX with $XXX this growth core over As volume FFO release in NN's

year rate, high occupancy the at our team all income-producing driven and of than lower NNN. with basis here XXX by were points concluded our addition, XX.X% dispositions In assets acquisition cap best-in-class

near the The what a the term. positioning end for consecutive future. team the the the well of the that NNN of initiative the increase, rebranding XXth But positions highlights proud company XXXX served the of annual few dividend executive of and in year I'm accomplished,

long-term remain average for While XXXX, changed the the in name in at realize our risk value shareholders the simplistic to most form. pliability below core

per we setting bottom-up to on maintaining top-tier a activity by payout One, ratio annual and this to keeping digits core We objective. approach. and philosophy maintain acquisition Continue FFO in our using achieve focusing dividend, execute sheet increase the over management multiple balance the share that disciplined continue and our years. our the mid-single strategy to growing

companies, I'd get Gena with to a operations current I NNN quarter. like significant grows. NNN forward joins the as rule resume experience. fourth Steffens bringing She partnership General and transactional forward Before to late Gina fantastic to public Counsel the market day-to-day [ assumed conditions, welcome I team. private and going into ] executive look in from the

free XXXX by after ability a XXXX has million the based for had NNN amount have $X.X to The great execute on and from million nominal of the year, using $XXX on accomplished XXXX. market capital drawn year-end, is strategy. deploying roughly our earlier, At capital $XXX credit $XXX flow in NNN As alluded initial NNN is $XXX over I in billion guidance, million credit cash we dispositions facility. the of activity facility the This generate million to minimal shape.

pride X requirements for the deploying leaves the selective sources with opportunistically years. And not of a be in overlooked Using allocators, continues asset that great potentially the being I execute long best-in-class accumulators. NNN while should takes distinction that these in mentioned over run. capital year. being raising capital for strategy discipline is company to Management NNN capital the This X and equity not

if there's and NNN the highlights capitalize well given operational the in NNN change the positioned year, being of quarter markets, the we state progress will As discipline in its market of we financial the equity opportunities. right macroeconomic the Shifting is the a fourth February, deploying to sector's maintain capital. on while stand for sense makes results. to in current That here as forces the throughout it said,

the fourth The filing, our tenant. the portfolio Occupancy now highs of was X XX%. the perform of to of of single-tenant And been on historic The contains average NNN assets. leases time X those January, above continue well long-term filing freestanding of well. exceedingly levels which X,XXX is properties XX.X%, quarter Aid to Rite that bankruptcy reached as NNN rejected minimal of at owner impact have the will by of the had X of end

our event, the historical expect assets any recovery so those rent In rent I the market, near are on averages. in is

to the Turning acquisitions.

the capital deployed million $XXX an cap to for quarter, invested initial nearly in with of new provided business XX.X. Nearly of was an all fourth properties, our XX the X.X%, lease the quarter relationship ratio During average rate partners.

of model which the existing In is sale leaseback a projected on acquisition addition, acquisitions shorter-term those X.X%, long-term yield buying the versus reflection is leases.

in approach. underwriting to price was in maintain but quarters bid-ask continue NNN X Throughout trend points days spread we close of that last in more with cap market year, that rate deals passing the fluctuated pricing up through is the fourth XX will XX in and discovery first within quarter mode increases the the constantly our the continued a with moment became last the acquisitions. the challenging. for That basis disciplined quarter. XXXX, picked thoughtful There

rate acquisition the similar the that despite resulting extent. from rates needs being quarter down As pressure cap expansion the in to certain first our Slowing quarter. to second competitors' rate hindered cap a is cap the expansion

to Also new proceeds we $XX.X the a raising move of at we as quarter, reinvested million that XX cap, vacant change So through X.X which in quarter. acquisitions. assets assets, sold during could be XX continue the included

don't For approximately year, included deployed rental properties always XXXX, from we is X.X%, X the at in execution points which XX vacant assets, we proved XX managing capital inside XXX stated we excellent but of release I The sale the period. NNN's we'll raised properties. see was which path generating proceeds portfolio. the clear nonperforming $XXX a income where reasonable a with a time as of opening Job basis to million and continue vacancies for X.X%, to sell the within to

to me on and detail quarterly that, color guidance. for With let our turn the Kevin call numbers and over more XXXX

make may law. me certain And results may after the under actual matters that the revisions statements from The considered to in significantly to forward-looking made. were release these with statements may reflect not statements, to differ securities company's we federal future forward-looking Steve. Thanks, changes usual, the as and statements cautionary we statements these statement be forward-looking let start that be will

risks time the release. morning's press press with in and materially in filings in of fourth cause headlines way, detail are this could quarterly from Factors of $X.XX report FFO share company's the and of quarter for this the actual core XXXX. from out that morning's time SEC results differ With to greater per the release results that from expectations to disclosed

of the footnote $X.XX the Page the I below in as continued of with release $X.XX or tenant post income detailed accrual was improvement will the cash in results and on ago connection in of of of press be one per that earnings out, That included from year point condition result quarter basis table accrued basis a $X.XX to pandemic. that reclass rental over its to as up quick financial X.X% accounting the X fourth share. accounting

the $X.XX been with core per So share per FFO a quarter would AFFO's or have fourth share, result. over $X.XX ago year X.X%

For a the X.X% we of full FFO mentioned, results. share, which Steve year full as year, core was year reported $X.XX XXXX, over per ago

the if X.X% $X.XX range guidance top over Now at full was from accounting results of year results, share ago our been would same the or the per which exclude reclass, have we $X.XX last provided. year

impacted $X.XX full the were X.X% year again of per share year not at results, range. are top over which guidance accrued rent results, for our or AFFO prior by the

press release details As the we've deferred of page of last since rent pandemic disclosed provides repayments. our the XXXX,

XXXX. as just so fulfill in in $X.X their million from million those deferred $XX.X are slowing XXXX And rent to tenants the obligations repayment amounts

And so excluding at was. performance bottom at both the repayments a XXXX XX or and XXXX press in what provided share provide the per to have of share and of fundamental release, amount, recurring we forma these per Page adjusted pro the look

show the per X.X% for better X.X% year results and core adjusted reported both these than XXXX of so AFFO, notably growth FFO share number. And full headline for

our the rent but on operating our Page seen, We of expectations. better XX% as core those of picture deferred results now repayments think again good be completed. business a this And gives XX, overall, line quarter, fundamental are a can with in

$XXX after And a approximately was moving beyond. that of payout XXXX in smaller All so cash million for resulted and expenses much the impact payment ratio dividend dividends. the and right. all XXXX they that's that, our will and free flow have XX.X%, in With year, AFFO and on, for of

as of Occupancy rent of share Today, for a revenues of again in all full leases XXXX share. million XXXX core guidance the quarter a was and for to AFFO XX, was representing $X.XX line $X.XX at our place annual year XXXX. $X.XX range base to $XXX.X $X.XX X.X% with initiated our We per G&A per was expense XX.X% range December FFO for ended the year-end. year, also of at $XX.X year, guidance in with with and million the guidance. the $XX.X which we of for million

release they $X of million the $XXX to million $XXX press G&A $XX to underlying $XX $XX million the to expense in net of gives June some you We XXXX. assumptions on of million million million. of do $XX have and $XXX reimbursements of acquisitions, year key of tenant $XXX and of coming dispositions property million expenses due this debt of X.X% to the X million million guidance, include Page details

And so headwind of on couple debt nearly results. that a the refinance of will XXXX pennies create of

bank we funded billion facility. credit cash XXXX, We maintain our $X.X mentioned, with Hopefully, despite in balance the approximately our of million of And the leverage Steve progresses and of Switching liquidity opportunity $XXX million and over done sheet. the plus $XXX in flow XX% of -- near-record with the as our free acquisitions acquisition with as availability the of we $XXX million have $XXX disposition will past, as to million drift consistent proceeds. guidance higher. year to volume profile on good high we've

and fund XXXX approximately continue the environment. our free We we Based and our sensitive of for this proceeds. should acquisition midpoint to flow be disposition on XX% market disposition with capital to external footprint our cash guidance acquisitions in XXXX, of

coming will that coming help all are debt average the years, in weighted the Our REITs headwind years. XX which phasing maturity remains us refinance slow

gross and are which on coverage debt-to-EBITDA we a sheet. and Net charge by through debt our at getting and Net to underwriting December appropriately was We NNN while believe working fixed property controlling book X.Xx risk assets allocate XX. what we for to was was remain all of capital, returns ensuring appropriate X.Xx are to Interest year-end. on owned balance mortgages. sound properties XX% by us focused coverage unencumbered at maintaining means equity are XXXX

disposition growing is over heart for by frankly, it's opinion. or, of the issues cash free issuance or whether any that per more results our equity new company, share fundamental We REIT long believe the adequately is equity one equity proceeds produced a or of term, at flow valuing the any in

to think relatively markets position good So and and results, per uncertainties we're in we closing, which as share continue primary of I economic to a capital measure grow the success. the navigate to view in

to With that the business will questions, But open you. it mindful of long-term remain a this up multiyear is endeavor. are we any Thank shape. we fundamentals And in Olli. good that, our

At session. from is time, Certainly. Spencer conducting Green question for be at [Operator Street. we this Allaway question-and-answer first Instructions] a Your today coming will

are plus to you XX rates next cap sourced thus days. looking maybe deal based you've volume what the is XX see out and just about on talk And can far Can what into you 'XX? how trending how trending similarly,

Spencer, Stephen here. Yes.

a little up the as the in fourth have remarks, quarter. it to that seeing of But kind quarter. we pressure in that, [indiscernible] were going we for other quarter. that acquisition got each higher alluded expect opening volume, That in the not the bit So some And like to second points XXXX, do I I kind priced deals felt put into which basis picking of the we're the close from if the then there's rates. quarter first plateaued might cap noticed REITs the XX

So up definitely trending rates I first kind see half the same, of being of cap they're quarter. first for the the the but

off far not there there sellers the deal And there's discussions second kind rates better coming side, is near more quarter. side, supply future. the the as cap holding that's out As deal of some was as there in the rate that volume, from anticipating as definitely are cuts I when and market, think of the seller third hitting volume in much

said, numbers. we're there plenty there's hit guidance of out volume to being its acquisition that NNN, for NNN our But deal

existing footprint appetite more then tenant Great. base just the maybe that's Or side, just Okay. within based discussions on to showing you've any their current flip on your specific And downsize grow? had? industry

lastly, anybody in push part through as who reevaluating still or the momentum models. in pick again client to we're downsize sectors. through in a is is growth C-store always bit a our auto And of our But and the of growing is no, latter then the market base Everybody question, hearing adding far the big M&A from as not we're their business activity opportunities. some there kind up. center to QSR little certain we're The that still there's wanted of service filtering stores, see

question with next Dennerlein America. coming from of Your Joshua Bank is

Daryl behalf [ on elaborate the if bad debt of I historical. in compared wondering could you Granith especially This any assumption on was to Josh. is ]

yes. -- is This sure. Yes,

kind XXXX points usual, typically of typical that assumed XX our as is So rent in basis in our for we points we run have that typical is and basis guidance. of loss -- XXX would us, baked a included say into to I what what year. And guidance XX

So yes.

maybe of external of guidance? the you given internal through drivers lower can some acquisition growth your And Okay. me walk

Yes.

it's simple -- We assume will kind in one about a portfolio going growth. is Rent to be us, and sense, of For fairly model. X.X%. growth our be internal

add million. XXX But million basis So million, or like probably X.X% which the assumption. we've rent $XX call of would whatever it's it, $XX hopefully we'll number that about of lose points $XXX was, conservative indicated loss, we've a assumed I

negative about then year, And to the $X as $X $X that got million refinance you creep. we'll I $X have million we'll that's And expense for million. then mentioned, of million be probably it $X to $XXX to million interest as So relates higher the million. G&A

of pieces to hopefully, we kind higher, layer you consistent in that of like higher And you the And drift then we and in I so with acquisitions that and to done -- us where got midpoint assume guidance. opportunity our as million said, guidance. $XXX are that's that But out an are progresses were what think the we've past. in we'll terms comfortable guidance starting year I have where if those that the then

Your Rose from coming next at question Citi. for is Smedes today

changed a for sellers go earlier just was maybe It outlook. commentary, and expectations, to moment at little back acquisitions the mentioned holding that relative relative to a off think you your our of in to kind I I about just and bit least wanted of are the some to over light, something was just on front. more wondering, looking little for of last maybe last sort the that better a I And bit for could opportunities them since talk that you maybe pricing is call? your year. later maybe just that the

far at footprint. that Yes. markets looking I think months X capital the consistent a the are outlook, course I of our over as pretty acquisition we've as the mean volume last we light been

changed expecting million the that million the range the March. expecting from but was not the that last the $XXX discussion call during where coming on So cuts to call, has acquisition last delayed. point at kind probability the pretty weren't is they're mid-December is to that being the market was of was those coming sellers of was in table. $XXX That rate And was future That consistent. we cuts, more What now a market felt but item. rate

our is is in Kevin. style thing this And I'd other Smedes, One add that that's approach. our

has back look guessing to you our initial looked where if history, XXXX always ended think guidance like. the relative I I'm acquisition up over year included.

as X, much And mean, maybe real I so the said, it's really we've months, funny pipeline, you X in very a not look our future of but the business, into terms pipeline. have in

going how to in cautious -- is until the it's out. more have probably so we the year little we better going on a And tend front sense of end to a play be

or rents year. as on guess, something of through And that more expect we unusual less then from to you to I that accrual the sort back I it's of might just move I you more wanted that ask the cash tenant payments. Is guess, just, moves or

unusual. to it's you do Yes. unusual us cash the Yes. It's basis unusual you gap unusual when and its recognize due reverse go and was or it for pandemic from actually accrual accounting to to It this. that always do then would revenue income to

basis. on currently we have so rent about base cash is our still X% a of And

potential the future. there's in So that for more the of

just X% [indiscernible] that Now And I that is near reclassification going XX% sense of -- in be and that X -- don't so to there's X% term, that did. consists tenants, the we AMC

expect near So that wouldn't term, on don't anything -- I'd front. the I say in I

Alec is Baird. Feygin question with coming from next Your

how now right want to ask the you of So size and the about trending? see it development I pipeline

bit, XXXX we say call a split-funded was would what I program.

clear, develop we that. tenants to assets. a Just current of source be We're don't more funding on our to

all So time in we're any capital. we by having not speculation, leases and permits the place deploy

and money. high capital, that said, the currently for as tenants deploying Now market us not banks a our XXXX, historic on to so us, weren't XXXX result they pipeline where as XXXX regional for that being of came the the is a was large was banking but

really had strong So in year a we XXXX.

the interest And it. Got question Okay. capitalized for is, are thinking XXXX? in what you second

Yes.

that on for split-funded million so we'll interest continue activity based in capitalized last for so XXXX. our and program, $X.X year, it And have totaled to

it somewhat that. think will be I than less

I But plays call I $X that's think for it how does -- of don't a it probably So deduct let's out. our that. reminder, around in million will see calculation we'll interest now we everybody just AFFO. maybe. And think do as I don't everybody. capitalized

so kind of just highlight And I that. wanted to

Tsai Jefferies. is question with next Your from Linda coming

the Could in you sale-leaseback some seeing trends the market? you're discuss of

is trend last it's pretty way the the similar Yes, years. the much few Linda. to been

more. the opportunity an with back, bit to pulled funding. opportunity for larger a going narrowed XXXX. little think But nearly in going to be the XXXX of quarter. was the a because to banks -- the banks I'm a rate a pricing more large starting the just cap question there XXXX of fairly is as leaseback you has point in regional And spread us million substantially not I bid-ask in case It is fourth always $XXX say throughout sale are doing know. lend it's

the It's to But selective opportunity markets little more very we into being bit undefined side the a again, out capital feel we're the of deals. are by open. XXXX market, and sale-leaseback equity as on size, do there's there plenty. there's But until going plenty

the do you And and that disposition acquisition delta quarter? where each rates, then think between trends cap

kind look we points at kind a bit of more for call. always XXX our was year us, get that. the than for kind highlighted and to XXX on been little model, basis But that's of basis points. we a basis why in points significant it's of XXX try Historically, us we

debt tenant you the compare bad I but are list Just just expectations ago? you low, a year watch one could last versus today one. know for

pretty new & A Bed There's a X popping or a think real I'd couple up. handful To Rite the worse of consistent. about say have -- got year names Bath had for But off we ago. is -- better it's Aid. We've no in list Beyond. terms dropped of

And so the still We our about JoAnne. X others X X talked in list. lots believe. big big are they'll at The But recent that on die got a natural and homes. I death, lots quarters we've

about concept Boy concerns that [indiscernible] Boys, some own also restaurant Midwest We about. which a Big is have we've come hamburger we talked restaurants, Big and

of a -- separate kind exposure, honest, little theater good be term. a rent the are in of the bucket then, And feel of in I about course, don't terms but And they us feel where the moment put I that's their to pay in ability and the pretty bit. to we liquidity near at

but say size composition is, of the the so real list in or that the change So list. to all yes, or no yes,

next from Your Ronald question is with Stanley. Kamden Morgan coming

you know on obviously, a staying low-end that, a but Just I seeing the little are sort you slowing. tenants sales with tenants, get is that the of lag, bit. suggesting from consumer anything

hear concepts but sort of showing it, think softness about if tenants or we of are a curious there. any lot I your

I live, debt exactly, sometimes stale. tenant is quarterly, discussions, not it devolves obtain but our every the we tenants it From and process more the that through to data in seeing it's think, is It is it annually of not dropping. we're more takes real-time and sales time get it

well. if all any by but out I killing they're currently. the of performing soft performing They're say, getting it's thinking not So can means park,

the margin up. tenant overall, softness significant costs some their price not meaning expansion through our them seeing within But still get a can see base. QSR we're not they labor eating within that do We are and the

that bit. the opening today little talk maybe competition versus a your XXXX of previously? some switching about XX And buyers but months mentioned Great. ago, Maybe now. REITs in I just the who you then are more to know today curious market comments, the versus is bit a what gears you competing private X, about acquisition just --

the we a That it's sale We approach, the return. that's leaseback because play a model. think XXXX market. risk-adjusted Yes, go in our lot after don't of better we

equity speak the of buyers guys So XXXX would into all sidelines have into for but we on don't run at run while. been to a we the that the private

I hearing rumblings back more getting on are our competitors. not about starting that would they're expansion. hurting It groups cap were We but to lean they're the the was that thinking price rate the in market

that are quarter, in But early Ron, year. typically for out the the when do the be They in in with companies fourth first feel happens pressure their volume. to honest, late quarter. coming to the guidance the the

year-over-year. that see we So

Your next coming Fargo. Instructions] from Connor with [Operator is Wells question Siversky

paying this expect rate wondering A Can that quick maturity for Kevin keep I'm outlay swaps just at we and the in? you set that roll are how kind up. sheet. balance the the down of should June. in million stack. question $XXX Or I'm looking on same just over associated cash the with

Yes.

derivatives yes, swaps to moment. So any debt we that no at debt or have the or connected

And that we were those the so swaps we derivatives pre were terminated at use and issued if the issuance, only had bond. any we time that you will,

any like So terminated bond. the or cost over of get the with But get the of those issuance. of all time debt derivatives at gain say, associated life I amortized those

So there. nothing outstanding

think They say, debt yes, reasonably are, we accessing you what as $XXX open million of want priced I obviously at So debt about They're in We'll right now. would markets. a see terms do maturity. moment. the true the to that should

for we're but the issuance we a kind do kind may can A, line, would be But not today, our too. of XX-year or love and us probably be optionality, plan a of my guess. we bank For use mid-X% may this

pay bank that we weren't We markets easily capacity to could just we on that bank maturity sufficient we wait, using might line wanted have our credit or like aware off our facility. the if

all That's for me. Okay.

John B. Massocca from coming Riley. next at Your question is

I rent basis in just you do the contractual Sorry but amount questions, cash brackets earlier to from tenant X you of missed today, movement place like responses basis? have tenants the of given accrual have an around the some if of to

Yes.

AMC say, X like the consists a fishes. really it through cash -- really And of X% ABR, base rent our And have we current. are and I but XX% tenants, year, we is they of yes, basis. on all XXXX, annual -- So of annual

no cash relates and And so delta that. to or there revenue between as booked it was book basis

And near again, to basis I term. expect we of from either those mentioned, as accrual I in basis moving expect a tenants cash don't don't -- the

impact so on or we the And I we way real But frankly, way cash no model the remain operate the think wouldn't really they'll basis. things. in we it way it has or and include

pay so we that, baked continue assumption the hopefully forward. to And rent tenant we basis assume rent going said XXX point hiccups they'll for created account on rent any loss Having into of side. our guidance to kind

Okay. small that dealing think sizes, use, or you And for And know they might need repositioned or out to get we're getting you're the what's but Rite and then pharmacy I be with of market will. you do higher guess, for them there's back? potentially sample release I to the there plan kind as a back Aids better if

it a have out X, of have we interest wash, the Currently, rejected if some as we were the surprising that interest the Yes. of lot not but QSR well. X car

So to X I'd and X as those redeveloped Rite far fairly Aid well. put a lease ground be other as the on expect performed

So kind the in near opening of we'll they're those what we They're see if again, But well happens when I market back. stated get remarks, positioned. rent. what and

recapture as as rate. our I'm historical not far a So anything outside averages expecting

given -- of backs bumps. of look portion of And in then of has on be and bumps AFFO, kind us portfolio anything a X-year the terms kind aware to good of terms just modeling rent in of

we're Or year, here? of models. just seasonality any there your be last of is updating kind Just as to aware

sufficiently variety all pencils a X year it in increases of year every Yes. increases, X.X% to out terms increases while we that's have terms we years of for sample or a increases. X one No, varying increases years, annual a rent that those every have about rent size large be or despite

the way for a think this about going and forward. it rent is X.X% year I would So increase

it for me. And That makes sense. that's

the have closing of question-and-answer for remarks. and now call reached Steve session, will over We turn I to the end the

morning. for Thanks joining this Thanks, Olli. us

change. and conference forward as of then XXXX. the of market season. kind good to guys shape we're kind to reiterate We're into many you care. to head upcoming pivot look telling Take the to conditions Just in if of story willing we in Thanks. We

Thank for you. your conference, This may and this your concludes participation. at disconnect Thank you you time. lines today's