National Retail Properties (NNN) 1 May 242024 Q1 Earnings call transcript

Greetings, welcome to the NNN REIT Inc.

First Quarter 2024 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Stephen Horne, Chief Executive Officer.

You may begin.

[indiscernible]. Thanks, welcome First and Call. XXXX NNN to morning, Quarter REIT's Earnings Good

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

press strong high As start proprietary tenant volume morning's release company's our the this performance driven XXXX by produced and results, occupancy continued relationships. including in-line acquisition reflects, to

value beyond. are We shareholder a deeper move to position we in into enhancing continue as XXXX and

XX% or perform portfolio. single-tenant results service prior assets the our of continuous to average remains rent primarily to fraction. the long-term X first properties managing a rent. auto freestanding and XX% plus X,XXX quarter the which tenants emphasize The well, had occupancy The of high leasing from of department QSR Highlights actively portfolio leasing with XX.X, maintain levels a exceedingly continued quarter, terrific effort at our above a minus recapture

is This vacant relationship is hard TI to the to tenants give above of NNN NNN working shareholders. value a Remember, to has levels buy Currently, works recapture portfolio, for approximately with which not in rent. the only to historical dollars testament XX%. maximize up assets XX

be almost sold the income into raising During which proceeds $XX reinvested acquisitions. to were million also properties, new producing of all quarter, X we

the point lower originally the points of year. for expirations, which the than the but portfolio overall, the XXXX blended with lease assets of year, we on course regard the basis mention defensively is deployment Over pricing. had target be I'd to disposition sells NNN and we last The XXX to proactively like cap to capital XX rate

departure XXX% the I'm there's of prior not [indiscernible], XX XX% As expecting left to the at end handle, quarter, of rent. renewal but from a the

acquisitions. to Turning

of X.X% If were the XX to the invested that which duration repeat [indiscernible]. $XXX be we solidify were to sub-$X properties in GAAP we an deals team rate X realized deals quarter. competition During required X%. of that at contribute of average deals an model years. the the meaning rent small of good new straight tenants, were would -- business, business deals to second can over initial with the barrier do lease cash about cap feel XX line, share this quarter, XX XX million, we pipeline creating to allows a NNN's deal to from growth. is It relationship FFO for per we million

of rate and year-over-year. With result approximately to cap than environment, in last The initial points regard being a XX points in a for the the top calling mid-fourth and pricing XXX opportunity increase mind, of created good deal year the pricing basis last quarter, quarter XX-point was take was XXXX sheet balance of acquisition advantage quarter our of basis NNN strong our wider a X% to to of closing. which the opportunities. first effort cash position fourth quarter of push NNN because of window our was

flatten. pricing. second to in increasing when be XXXX started in rates cap future. As during as cap the first the of are anticipate the we peers I [ call, today but the sit they the increase I rate observed cap May, ] mentioned rates February the rates be pricing as cap may feel quarter This quarter to lower similar sellers to stabilizing suggests has

longer may dissipate narrative sellers for As and higher macroeconomic the assume environment the the future. in improve near

our XXXX sale-leaseback of lease million on acquisition remain our of tenants. we transactions and deals hopefully through our guidance exceed meet primarily ability our [indiscernible]. volume with comfortable dialogue Based acquisition maintain our $XXX to leaseback with and pipeline $XXX sale will million, due to NNN partners, stable to with on

our sector. the one remains sheet strongest balance of in Our

million to just of $XXX down We increased million million, by this of billion month. at Our outstanding from balance capacity $XXX $X.X credit $XXX only past year-end. facility plenty with has the a capacity

So NNN to is acquisition positioned XXXX fund [indiscernible]. well

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

greater revisions are Factors to the results as And expectations Steve. be securities future detail usual, forward-looking were that and filings disclosed with the the that normal company's statement statements time results statements after discussed the SEC law. made. from statements, under The forward-looking from may in these risks the statements cause this release to these may time to with significantly start company's be Thanks, materially not federal will cautionary from press that actual may I'll statements changes to reflect forward-looking make differ that certain and actual we to in we and could differ in matters morning's release. in

With year out share. results FFO ago press and up yes, were the results. termination quarter way, lease for high $X.X share core release first of report ago first fee or $X.XX year the first of million have from with of did share so which of prior per X.X% per for AFFO quarterly XXXX, is morning's that's headlines year first and Okay. X.X% $X.XX $X.X results in quarter, that per $X.XX the the over We in than of $X.XX this million or quarter, $X.XX quarter. higher compares unusually income that the results

annual lease past income. fee about the years, million X we've termination Over $X averaged of

at with average. overall, in was line was even So another well that Occupancy end. this But income with expectations. million good our quarter's XX.X% quarter quarter $X.X and incremental above

As and versus revenues Steve $XX.X expense represent our mentioned, million of guidance. and quarter. at X.X% G&A in prior line quarter, That's X.X% the year for with came for again, up the in

all approximate anticipate this coming in the of XX% after that dividends. AFFO Our in the flow quarter amount payment $XXX the currently full year approximately for We first expenses for cash free million payout dividend for XXXX of and ratio million flow free cash XXXX. at the of quarter $XX.X was resulted

in quarter million XX, the as all $XXX for We XXXX. annual of March rent with leases of ended base place

$XXX increasing of the There loan. amount items. $X.X at many, a our the over over of quarter sheet, in to million a with years. over maintain of during the all $XX end, on availability by billion Switching changes our terms support to facility. little into we material leverage completed during that term $XX would So bank We couple billion facility small would after good to issuance over account to balance out take credit and just share, completed and generating liquidity bank the bank equity no XXXX. of greatly and quarter. $X appreciate were a April of group capacity We was million proceeds little that credit recast Shortly our dispositions quarter. extending profile other of acquisitions a the net many a the There

light mentioned nearly funded our $XXX.X proceeds. the million of disposition maintaining the quarter million talked of our capital cash million market I we've with free first As we've $XX.X $XX.X and of footprint, about, flow XX% of acquisitions

free And of then close with on XXXX fund positions should disposition to the flow based proceeds. of XXXX, for our midpoint XX% we and and acquisition disposition cash guidance

for help fixed Our at all gross Net the are the charge X.Xx weighted headwind X.Xx maturity was remains coverage the companies facing interest average years. assets quarter. first that which XX.X coming Couple in debt us debt-to-EBITDA XX.X%, years coverage March and to debt XX, slow was end, was stats. quarter book refinance will at of

encumbered by our are [indiscernible]. again, And none properties of

adequately, through balance allocating on controlling sound property returns cash appropriate term is proceeds at opinion. results focused sheet, which on heart equity remain whether our disposition underwriting valuing per over our share risk of long flow, and or produced equity equity issuances in means appropriately that by us we believe are we equity ensuring the maintaining to getting while we a capital, new So growing free what the

The continue focus to this in share start we're the out good and and about QX, we results, growing in per position of fundamentals So our the a shape. the to remain year. as solid we that in are navigate We are relatively closing on think we mindful business good endeavor long-term as a a multiyear believe is uncertainties there to business.

And with will that, any [indiscernible]. it open up Thanks. questions, to we

first Bank of Dennerlein [Operator from Joshua with Your Instructions] today for question America. is

over And go there then fee lease as in bad you to what's additional the is assume as do any What income guidance debt . wanted guidance? in for far goes? you Just included guys that year. term

Yes.

to loss bad not in from we points loss it relates strained is in signal XXX loss rent worried as So our that -- assumed of than some guidance. do, typically we're that We're we're should what trying practice. to it meaning and realized Historically, debt, that. XX be that, than basis That's less points. higher that XX basis our we've -- to

of in of realm, feels that will, that you on kind if still front. like of normal collections we're so And kind

little bit have And amount, kind we termination We million sporadically. In fees, not things have amount, quarter. for didn't terms much. guidance up some in first of come a our of those did not that but $X.X that more lease

out so XX, into a historically, full longer-term don't on a happening. year months that the we meaning future, very assume projection, And project, much of XX

comes of value, really opportunity as by we [ about pursue than ] it there's function portfolio create properties, of working circumstances an we some across BOE income to in particular cases particular So particular of come termination the possibility it. just a that kind

typically that in $X year. And we said, and run understand so it's a particularly million around notice. lumpy Like I not we it's

we assume year it. we -- more in any give don't get So some just your of has guidance we'll And tough that we predict. some it more. But we'll to too some varies assume it this to regularity a to have because But question, sense, degree get little because we quarter-to-quarter. answer around always some it's just

missed say lease And . related sorry Appreciate then that color. if fee you term did what what but the to, tenant? like it, I

we're into really us. think it's it's -- enhancing that, mean, for activity we not we -- details Yes, get rather but -- of No. value I not the

or so potentially new of it tenant and buyer potentially a involves a either a tenant property. the always And

I trying it's of it's out. in don't we go amount of a we be X And details on like bit it's one, to or just don't that the any is yes, to the we're X details dialogue negotiation said, X can which be a or tenants. front. small, But some the amount not so with them planning that that. to we tenant work have But going to And or level give kind usually, have larger. tri-party yes, of And on

X And could sneak I in. just then more maybe if

having some are potentially dialogue the them saw has I like guys the any closing top them? with recently. with on What's latest And stores? you some looks on [indiscernible] stores tenants, Just . closed

Yes.

in our that any we've are history on where list. rule kind have tenants time. period some news rumblings any fine of for the XX-XX So our se, They have of talked it XX% of challenges. challenges. the have fishes There's no somewhat stores It's there. report minds of of XX% have about to conform don't our Watch per to a been I We and mean restructuring

think I that's as get they ones And the on. the And with just case need work that I to so so think you -- those are to them well.

And so but there. yes, news no --

have we're so that just and really report. kind And time through of anything to new with working don't

Yes.

out that work Just But be may kind of if thought working we're today the it of on and first get them. And we're all working to what carrying rent to a day-to-day site reason. the want [indiscernible] is with due. our with or out they is tenants .

Heffern from RBC Your Brad Markets. with next question Capital is

termination Kevin, lease on understood I commentary, I'm really not that. sure that

the their just So can sell proactively reach can someone that and to to Or them you they to release you terminate . or are so explain you works? tenants might that how leases that you saying suggest out else? want that properties

is circumstance different. every Yes,

lot. And so all over the it varies

so And or we how get not we performing stores store-level because performing. performance, know are

-- And our with a so we're and in tenants. potential dialogue it's

And to properties. as for relates feel know what it are thoughts a so have particular we their

as ] it's with if going a just -- relationships from going economic back despite is turn it we're the it's pursue there's but it's that -- to the maintaining not. and include But we on actively and it we're best it case-by-case involved we're our termination outcome to always extract tenants value an so might with good but the portfolio, [ And then properties not not annuitous our we're the working lease it's -- tenants X,XXX can. properties. And devil comes specific income, economic from trying in really to because details, and income, the

the sound on usual through wondering then And watch go list? . I'm would quick Joan's on specifically you [indiscernible], you a suspects the be Okay. talked about the can great, too. bite but about but others

stores obviously many, Joanne composition and for hasn't changed. talking file about really size the the many And -- in [ did And list for talked about X quarters. Yes. quarters. We've ], We've [indiscernible] We have is with them. which of bankruptcy. we've everybody recent only mentioned theaters

than X.X% both worked will less process will [ and that ], affirmed. those of X of leases since So actually stores point affirm our tenant have of ours. it's kind a be ] [ bankruptcy be And they through

And exposure loss so we're any looking not there. at

quarters we talked X.X% The of at is X.X% Again, a larger other big We'll recent exposure goes, rent. which lots. that stores. is at ones mentioned where we've about in have tenant. see home kind X We for our of us stores,

We have that stores just with with them. challenge they're XX those the boxes. is potentially And bigger

get So with they're a it's those to if and like again, current little have that. of work. one on runway they back, feels you rent, some more it continue But

like to quarters we in are that notably. changed So haven't any changed kind the don't really the names report news we've recent they've about Those don't that. of on situations and feel have talked

Your next is coming Rose question Smedes Citi. . from with

this I'm have I maturities you maturities? in assuming wondering some think your just coming guidance are later year. what -- up wondering, just around We were those debt is what you

mean but -- give guidance any activities, we this, I'll we markets it's on I have say don't capital Yes. optionality.

love we so that. And

X And to try so the create to things that's position of balance we that optionality. our sheet

so years my in debt tenure issue We've here. XX-year. we And long-term not issued than can less anything XX meaning

high lower priced if And period because could rates so today, it months, we mid- have be that for kind we but a also Xs. of maybe availability ticking park had would such leave be And line in -- there, view there to bank could it we that a the we later. would our on of

low option. Xs. call in an be is, would it, that that the today cost So And

huge not so line. difference a material And and at between debt our XX-year cost the bank moment there's

we option up the alternatives. whichever on so won't much impact end And line those between choosing have X bottom

tuned, see yes. we'll stay so And how plays and that out

you other ask, change I of are where advantage opportunities, looking picture, of a them? that. sort sort of kind just just or capital out you providers have the any relative to Or pool to speak maybe you feel could of in of to Okay. side? when at sort maybe And like bigger eroding if distinct wanted that of Or things on you're acquisition just

roster, model On the current current vast come current real volume the acquisition roster. owning our has our acquisition the side, tenant we're believes And tenant with The estate. of really in from sale-leaseback portfolio. not mining our majority the

providers just they're not sources against. really other the at sale there and rate So for what capital out competing looking of going They're looking that is. leaseback we're

of our looking to not money into we're sector we're for seeing no, yes, So what any other do. buckets coming

if probably do ability we Now had or we guidance at billion But in competition $X.X to any to current not billion, $X would have more our execute. seeing competition. we're

next today Street. Your Allaway for Green question is Spencer with from

continuing unit been mentioned Maybe months? just with comment rent or have in recent been in you there's operations. And the if coverage health negotiations up levels tenant on you . that's there receiving changes Can any whether topic. level anything come tenants just notable with Kevin, to on

but not Yes. in coverages, is No, bit little been there's notable. I softening the of mean answer a no.

have if so, will, a really in and hang maintain you there, able you generally reasonable if to And so tenants margin, far, been will. our

ability so an not it's from concerns our to grown have at standpoint, rent And all. pay

we front. still And on good feel that so

item And becoming I to specifically the in all bear terms burdensome property your this and tenants? is side, brought Okay. nationwide, that insurance been realize for But that's then of premiums in just your this any insurance given line on something the . cost. attention spikes at tenants

not I that it's hearing tenants aware are a a the mean, driver their impact we're real our mean, of I expense, mean but many I but of we're business. not of yes, for rents on those insurance issue. as big that not But hundreds, rent, to and with deal a across are tenant, insurance generally they large property we operate property because on of stores, of the if lesser sharp number properties. they pretty coverages, and profitability getting thousands degree, their a coverage

And property yes, bid. reasonable the be. a or them to But so as get the whole is think I hard to of bit margin helps can very that kind market enough at they best insurance rates

last Okay. know I X for XX mentioned the And then vacant you me. assets.

terms plan just missed XX yet assets? sale out like earmarked for which kind I versus of been this, you what portion those laid portion assets can of plan for the provide commentary some in guys if sorry a Or have you of on And the have but re-tenanting? or

So asset always do all XX, economic we a out vacant end thing retenant time value get rates, if a it. and revenue try than these ] scrape analysis, at day, for first the we try get the first into times delay of of we're they're always That's retenanting present as a to the [ of told just do earmarked the truth But sell decision not rebuild it. that acceptable more tenants the after time getting it, by frame, retenanting. reoccurring sell it, the because to And would certain you not, at to we rental it. the

Jefferies. Your Tsai next Linda question is from with

Can cap a and you little on you're rate front seeing automotive what in more talk of expansion? services QSR terms the about bit

mean I the a Yes. -- currently X had car But see quarters in straight seeing for mean, X. increase repair the collision pretty that wash did the more auto the we've all of to we're just Xs quarter, ] high Xs, the [ today's given we're bit on market sector. in we rate we and we're X kind low around really car the in services what cap X, is auto this that had a seeing bandwidth sequential rates, starting service I cap past tight for and little cash is quarter

or top on But do for for narrative fourth Now quarter, the there, would [indiscernible] third and longer it's for well. I continues, the think quarter above X expect the it an far out I in X of to at see quarter quarter. the see second the higher is going third too if the I first pricing right as

any AMC include just a big tenants then home, And at lots? on for basis, that does cash Frisch's

includes AMC Frisch's. and Those It Yes. primary are ones. the

But really something home is not at [indiscernible].

No. evaluate. candid putting and right basis. method. it's We're not our at No. And a about honest, think, mean, of now, cash that I look adverse be a something it about mostly we cash accounting quite judgment be we it's at is I up to But call. ], quarterly AMC and tenants [ basis, tenants, better Frisch's to make is honest, which X% on

of And XX%, backfills? it. restructuring you XX/XX the is about they that Or would they're a due, as think you do mostly they're Got have rent any don't extent talked close the think you stores get they Frisch's. then those on To just clarification would and vacant? and better if move do out, sold you the

I think well-located the estate being drive-thru. it's a real of restaurant piece a asset, a with

I have retenanting we assets. would easy the So an think time Frisch's

most the really For it's real good part, estate.

. Last lease similar future the something term we question. On model quarters? should fees, in

But don't for play encourage wouldn't hard quarter that's we no mean give $X.X to And I like sure. million to small as of that. of on kind drew a episodic annualize said, very it's I That's in I guidance run to first all attention Yes. going how rate. to in part out. I that. the really predict and you when kind And that's because and why

million. average Our $X annual is

term around don't of it. an it have give guidance obviously it's large but was not quarter. -- the anticipate future, more and we're generally this going fee to So sums not in unusual may We

Securities. for next Your with today John question Massocca B. Riley is from

that you guidance. you wasn't maybe year-end are I anticipating? why case the wasn't . of to known building fee if answer, kind it when initial guys it then that And kind was [indiscernible] lease why known, the of termination number guess that contemplated last your on that additive that -- was maybe guys So not income

back mean shouldn't I fee that. in our our I [indiscernible] is on the appropriate, guidance income first if lease think Yes. you quarter, I termination meaning say

first I may the you end feel annualize of based guidance our But warrants income And have think view we is yes, If the for moving of termination in mean, income, onetime feel is that guidance on it that's quarter. high first might yes, that's we opportunity that don't quarter fee didn't guidance. lease our -- really like reasonable. I it that the in you that,

maybe roughly? on kind boxes. [indiscernible] occupancy does XX.X%, . Okay. include occupancy, that And the And -- leased in the then [indiscernible] dark of but portfolio any spread what's to true between leased extent split the but and here today at

Yes.

our occupancy no, leased always is on So properties. based

the we it way it. track that's we And that so report also based investment costs And well. also as on lease we dollars

of And but dark as leased so -- or there, as yes. they're least properties but there's always occupied encountered counted component out a

roughly large is . the today? Do in kind that you of know how portfolio

mean the dark I of properties? properties are X% historically dark kind for in The probably us range. the

I But sorry beginning of little have kind on Okay. the did of And over cadence of prepared if volume the course you at the remarks, had sorry? I this a issue acquisition the missed in the the there year, the any remainder then color call. connectivity of of

$XXX million mean range I fourth I our first currently we're line to of But our it the leave that. occur. $XXX we on year. again, reason what and in the with comfortable of hitting $XXX third clarity given that in we at Yes. don't macroeconomic the to we million kind very seeing second we've as with that be feel that in you One $XXX million because on changes had could any the discussion feels this know, quarter, tenants, know have don't John, quarter, quarter. the going number the guidance million, But

Stanley. today [Operator from Ronald Instructions] is next Morgan Your for with Kamdem question

ones. Just quick X

with get number cap of than even the Maybe hearing environment? X% other quarter. we looking to that sort you up the just tenants? you're sort starting from interest higher rates can of given and the had of what there should that be for that's sort cap this opportunities rate right Are you rates. about, of ticked talk Obviously, mark Just sort the this is

No.

use right probably right cap rate now, said, currently. that's as we to I think for the

market. markets [ Now in that but there's being down that's mind, ] XX% said, lot the -- a XXXX the hear bear about you

for accept the a of to buyers unsophisticated that we're And to tenants matter. highly want they they and that. with if increased. cost But companies understand lot market, grow, sellers dealing with sale-leaseback So capital and sophisticated that of that has dealing you're continue

if purposes, wanting for the to of bet see a going on side, the I either longer rate continue. unknown the cap the expansion So into the year. higher for take But I in feel further X% back possibly not comfortable half persists, some would and that should modeling

Great.

have now? And you on, hit could for and what plan . where right the issue if sorry the on that touched you you is maturities

Yes. Yes.

new today. Xs. we line, debt given So that the is low today could then on XX-year which is other have that bank unused And park issuance, kind of have we Xs line, an the we is mid- to high option bank our it

is so the options between not large. X And delta very really those

And at the We so options relatively choose out what don't will be close terms take of it opportunistic give markets and of be to how one can are guidance modeling on this to either best and you not [indiscernible] capital and moment. the out. advantage we play year, in try activities,

that's I So the But we'll June see X.X% million, that's a it how about plays due. our coming $XXX it's think way coupon out. [indiscernible]

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

We second quarter, the Thank time you see look you executing upcoming in guys the forward to we'll Thanks. conferences. this for guys and morning.

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