National Retail Properties (NNN) 1 Aug 242024 Q2 Earnings call transcript

Greetings, and welcome to NNN REIT Inc.

Second Quarter 2024 Earnings Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Mr. Steve Horn, Chief Executive Officer of NNN REIT. begin. may you Sir,

morning, Call. to Good Quarter REIT's XXXX Earnings and Ali. NNN welcome Second Thanks,

joining on usual, Habicht. As me Officer, Chief Kevin Financial the call is

the tenant high occupancy performance in-line acquisitions company's quarter As by produced and reflects our driven the proprietary and including through second consistent results, strong volume release press relationships. carried the

emphasize the up as our market quarter executing X,XXX into portfolio Having the This conditions XXXX share deeper We roughly of a recapture year the to position FFO of move managing second actively are occupancy effort year-to-date core above portfolio leasing XXX%. the continue of to well. department data identifying portfolio with prior strong and remains XXX% analytics recapture midpoint start quarter, and average continuous we high freestanding perform for setting XX%. Knowing in The experience. Maintained above feels financial continued which of levels of QSR results historical which long-term during continue the to The performance, enhancing per from and approximately the is increasing shareholder comfortable levels $X.XX. of rent acquisition by XX.X%, the the single-tenant of rate value brings XXXX. Highlights properties our exceedingly recapture with XX%. tenants. pipeline, about of guidance $X.XX and by NNN start

shareholders. does hard testament the relationship not Just in has want to working tries is vacant only NNN rent." TI clear value to which maximize a -- "buy XX that be portfolio, up dollars NNN for tenants with Currently, to remember to give not to to assets

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

to and the $XX has capital lift the be assets of million sells points cap which blended has I'd $XX $XXX a we year, Year-to-date, end the lease near XXX the landed up, for renewals. disposition mention course the disposition NNN defensively XX sold portfolio, expirations, resulted about million but guidance with pricing. but on than deployment rate assets our of to the about the all we historical million. Staying we in is proactively had wrapped to into overall, from basis headed originally lower right target NNN Over average of and lower of year regard to which XXXX like of XX%

the to assets asset based cause attention Now see acquisitions. department renewals, On no to concern management which and its for tenants. turning of makeup the kind I is of XXXX on

tenants, new if During $XXX we initial are in the creating with NNN cap were potential line straight about deal invested the million relationship it business, of of years. barriers would X.X%, over be of XX from XXX% we to we lease to quarter, yield a repeat for. deals million, or competition cash the properties the do an XX average duration rate which required to at X.X% solidify an

pricing leaseback the of the the XXXX far was target part tighter with locked rate we environment, our pipeline sector remainder better prices and the in equity our to in kind first second quarter sale long-duration and $XXX to XX XXXX with in quarter current is cuts. Knowing one, meet initial assumption deals. in remain My than of for exceed remain XX the cost landlord-friendly market the of price approximately hopefully partners, is million, XXXX more on to of as acquisition guidance million acquisition direct And is of, most last run-up lease $XXX form, triple starting will the our of year. the high result the our of the and points Xs rates dialogue Two, primarily on basis lot for NNN's create mid- to a net quarter, the market points the the a for equity. acquisitions cap short-term lastly, rate kind which our quarter ability acquisition in. As than marginally is is than the basis expectation wider via of third pricing the XXXX. comfortable our cap transaction This

to credit billion. balance until with and Kevin year-end. for plenty dry just maturity of guidance well strongest facility XX.X quarter the updated power with let the sheet XXXX. the -- We debt Our a sector in beyond. With fourth debt end leading call average balance maturity, more positioned positioned quarterly remains is and our quarter down increased to the the isn't to fund million, acquisition detail approximately next one in of our a that, of and year The of $XX color $X.X guidance. numbers me from at the NNN over million turn capacity $XXX XXXX has

Steve. Thanks,

not time company's XXXX, way, share. which year than quarter, the release results forward-looking changes were risks that and statements forward-looking results press revisions these certain make in were from considered usual, differ may FFO of year release. With share future second the made. Factors the under or materially $X.XX per cause of per that's quarter press securities As to the could for may these with $X.XX X% in quarterly report, are or be and per headlines The disclosed second typical to the from start statements filings statement forward-looking share this results. higher be the we may SEC results release to so after morning's statements is and X.X% in a that statements, law. company's yes, time expectations detail ago morning's over cautionary actual of $X.XX I'll $X.XX this discussed to and actual matters of results we federal from reflect core greater statements ago significantly out from for in that with results that will differ AFFO $X.XX the our to

income, $XXX,XXX quarter in of of with income compares the quarter and did second recall, in we this as Second for might year. million of of you $X.X fee lease the include $X.X which fee termination first us, results relatively XXXX. And quarter that lease reported high termination million is

the lease for versus income, XXXX. $X.X we're XXXX the million $X first half So million for termination fee first of half of first of half, reporting

X have the look If million termination averaged over you years, of $X last income. we back annual lease fee

quarter that all is say, our But well without running So to this in with that it even was income year line a and above expectations. overall, normal. incremental good

which XX.X% is guidance. X.X% in quarter quarter represents of I'll a our occupancy quarter, in And with line also G&A expense and million was for percentage as for folks half, my mentioned, the for here begin for about that end, Steve the As of revenues revenues and the companies $XX.X at push think I'll us X.X% was about in to to returns. lease in is first G&A enjoy line, the talk due second what obviously quarter. And for revenue the this companies of bottom advantages, I'll which But versus more I course. net of supports more shareholder total the one NOI, which call highlights lease drops think X.X% that it our gross of

the we payment dispositions XXXX, AFFO the amount million cash we dividend, in and for XX.X%, payout ratio the take X XXXX for after is at which base leases about account XX% flow coming ended all annual in completed Incorporating of was half year. We million the expenses as the all quarter. with free $XXX of of recently place dividends. of $XXX.X Our the flow anticipate into the year first payout currently for announced, increased the and acquisitions rent ratio XXXX, cash approximately approximately this which months resulted dividend for full of for would June quarter in XX, all $XXX million which free during

any did end a core the with per per new share of notes in due of the we proceeds. With $XX share, As $XXX end bank balance were XXXX. at increase a million line. In of $X.XX the in year. Switching years. X.X% issuance range big changes FFO mentioned, capacity not June completed staying And a XX by did bottom $X.X quarter other April, a group acquisition to of Steve by off small XXXX million volume facility, we share the Steve amount small we that new in due per in equity in to little by in million thanks share. second to a supportive extending The There not same, notes to recast million paid all May, change X.X% guidance and for our G&A assumptions our a a to of underlying the generating June, to term net notably. $X.XX the $XXX volume million that million increase a the $X.XX issued to terms for and disposition $XX over came XX. we increasing very in bank really $XXX of the our as material over $XXX was of There billion bank to credit the $XXX sheet. top expectations guidance mentioned,

companies of our years. We us of and liquidity this refinance help balance of $X.X $XXX with slow free nearly flow which that market refinance XX% and the million of capital sheet year-to-date quarter with life XX.X our with have So debt $XX in quarter we average $XXX liquidity the we weighted billion proceeds. acquisitions, strong Maintaining facing footprint, debt million up available coming kept our end, position will leverage of at maturity ticked the are activity, years at headwind maintained to funded disposition all in good cash end. million

EBITDA quarter. assets XXXX based a A of June our debt stats should and properties as fund was to couple of XX% of fixed for at Interest disposition full cash disposition book Net guidance, X.Xx acquisitions XX.X%. our balance the our close and sheet. For none proceeds. year coverage are XXXX, flow was to encumbered charge gross with free mortgages. by the we midpoint second X.Xx Net to and on reminder, XX. And debt acquisition of was

a us, focus any relatively and in risk to we by capital, what is the achievement. In means tracking appropriately sound cash issuance growing results. are produced are out with to on XXXX proceeds balance over helps flow, on So we us focused equity underwriting at that largely we maintaining there mindful of whether and which ensuring the long getting we to believe uncertainties equity disposition confuse activity a is share to us sheet. property not we term as are for multiyear per on of controlling are allocate closing, good results share remain navigate long-term this per free as Valuing position that is the believe new endeavor. returns continue or we're while equity sufficient adequately, we And expected through growing and equity working is a heart

open we up will to questions. any that, with So it

[Operator Instructions]

Our with Green Allaway from first Spenser question is coming Street.

market transaction kind cap rates far the you guys XQ? the in of on and just some Can trending provide thus updated color have been where

Yes, Spenser.

So tenants, the my to opportunity The overall was up market, days talking a today current overall XX it pick larger deal volume expectations, bit. ago. set is than to are acquisition guys the little starting

hit And So that's deal. couple a portfolios there's of the good market. larger starting a to

kind the I what As mentioned far rates, of cap in statements. as opening

Third X, pretty XX basis quarter seeing cap in is of quarter. wide and with first not quarter, quarter. second rates give line our our Timing the points, I'm baked as but get in to take, deals with much might our starting second as line or

second second that from being I'm said, the remainder -- of was the head, I'm what For in year, half year. out my our of the that the kind projecting of quarter

color just on in you share dispositions little a can quarter. more the bit then the And made

I were there think income-producing you assets. XX mentioned

the the would that well, talk for then about divestments. the depth could you if pool just buyer rationale And perhaps be of So great. as just the

Yes.

were income yes, producing. XX So XX we sold assets,

couple assets is of don't a more that decade leaning But was good had centers couple and pretty we net over there sales. to that a -- much lease over of the was core portfolio X a to X. We shopping it use a better into vacancies redeploy it to sold think we are We or accretive up defensive So for company. a sell a decided of vacant time, acquisitions. mixture, investment assets multi-tenant owning a or in so, the not picked we

than decided few assets. rates. of kind some people more those they we cap did, So lot really had to And then and love were exit the sold we accretive real a a we estate at

Dennerlein of is coming from America. with Our Josh Bank next question

any you coming specific under? in wanted This on Granath term are that category comments Are in the there just your is elevated second on over Josh. to I behalf or of fees these historic you follow to been now And is levels. seeing being also that Are coming Farrell the earlier? any up situations? falling have trend they on and quarter these

will anecdotal of and no in. lease Farrell, to I and income notes Hey I attention various just termination it's Not other is kind late, what pay Kevin. are fee this by much I've more there of trends. don't companies going because totally comments say, various out seen -- in real REITs. discussions

a know or trend not. So I if there's don't

us, going But returns any customer, that to from a staying and difficult the least for there with For tenant, helping while together. Because the it's just process of with and to, I maximize portfolio, and it's prone trying really in comes come when predictability. kind think working frankly, not parties, tenant. Because the X very is it if typically, property. kind involves degree something our of of so us of real of to have them usually, episodic on our then to and contact the and priorities, might at if predict that each it's competing even

in termination that And case, some proceeds biggest the lease to related a underperforming. fee recent the most involved, that condemnation chunk the was had a income quarter of so property store

And buy up property. the those so lease had sense And opportunity plants the things all pull condemnation term kind a to trigger. to proceeds, an of take up we buyer had kind fee a make line to us line for and to to those of had

trying fee getting project to lease so the about it's first elusive, indefinite than of be not the million so future. -- to trying X-year into to levels rather I predict. to of high And encourage think hard of year I'm average folks to -- $X the And our more termination half a income but

And XX you any on comes -- it was level? when of not top Are XX watch any your increasing excuse in your XX and the also also, or top anything I performance curious, on tenant list? list to those me, those top monitoring list

mean we're always I Yes. monitoring.

out do. get restaurant Obviously, concept talked on the called that's notably. some we've what the regularity So -- quite rent been part to with you top pay about it about increase bit. And list watch The doesn't a that little struggling fall, but fishes, of tenant those really attention, just kind if came a of we've never we and really so good will. it's more list and is they a what of call but our talked pandemic continue on one that one I

I our Moly did then into there I'd slate really XX very AMC out on been And discussed. I theaters, company's it. them XX as over months well that's others back issuance say we aren't we and that's equity so office productive. given AMC's and much And wasn't refinancing well about been that going today recent top ago, results list. go feel tenant of mean, to as that frankly, late and than movies and of the box that has quarters the better

about And that so better feeling one.

it's we've that of as we watching dozen connected So furnishings bit stores, X.X% Others as Home, those a big that a that struggling top our well At talked include one list in about home are the to XX. which lots. X have the rent on our

about of see have Badcock top a in stores, other of called Badcock where those retailer rent. The by a that recently a and that's which Furniture, And our from in One's Rite but company guarantor Conn's, our XX, that We two that tenants Badcock rent, then three been we became -- again, one a only sold over stores. Badcock we a Badcock have very around time. ago. that do have X.X%. that left that's and of bought filed, year within I'd small X.X% lead. part They remains is we'll We for of a not early. Conn's are but percentage. The mention, is company bankruptcy. our our But the Conn's to and no company X.X% two we Aids called on which The a Conn's which own have long just have is bankruptcy. we And goes, it's

and So process moment, see they're the some on end at it's We'll it to may early the provide with the that right. hopefully, incremental us. But support day, at Badcock. where goes turn the in of

next is Michael coming Our UBS. Goldsmith with question from

This I wanted is for just to on Michael. Catherine Graves ask.

low-end consumer? might trends health you're that context consumer about particularly and how the thinking tenants the be generally, of consumer, and impacting Just how tenant strain in your on the

Good question, Catherine.

our at -- industries. we look we have through do So March. across property our we all level our data, lately And was

So to the then And time it's it data ratios part, industries. the and a It's process the stale. across because rent throughout takes little not just all real data. the have we most our seen, coverage for portfolio time bit get

stable. been the most part, it have For

or softness the Now of and certain of part, trending little in midrange not model. But the the we a consumers coverage held of a within future down, when our EBITDA tenant our do yes, does go financing, you the on discount leaseback, business concern. consumer. cause assets it's we but underwriting for from most When do yes, a we're X.X% sale, result covers, kind put a the up a X.XX% But selection for when of self that's for asset. portfolio. But the low-end an industries, consumer

the what to as XX-year better So would pick because XX- dogs, the call actually us, signing they they're opposed lease. assets to that or sell we

a relationship to us. with committing they're long-term So

send us above-average So the they properties.

competition competition off seen from maybe of buyers my going And particularly are private into coming second then now? XXXX, question, them seeing half the you buyers, you equity of the on increased any second sideline any

as active doing just with Kevin, not the market, ago. market come But highly for banking have years, years a been part, were the years, three this always been and they most names as We've the gone. since I've competitive XX-plus in for XX-plus

still always target again, far in because to model really business our We market. our competitive The of the on of opportunity But deals it. base, as have entrants a acquisitions. But sidelines any acquisition hit into with our we're repeat we new current highly as haven't tenant private doing money seen plenty of our targets.

Kilechewski next Our from Wells is coming with Fargo. John question

This XXX been I any basis basis points it Curious was does know this and like? is Cheryl look announcement? in XX to will guide, I John bad basis closure on on different Conn's wondering average. points to bankruptcy and what have debt for know if points XX be store with you typically year your Kilechewski. Walgreens it's

because watch I asking assume -- kind my given the And we of XXX question important about Yes. It's list. I loss year. that credit no, in mentioned yes, any Yes. appreciate should in have earlier of the points you basis about discussion always rent

have changed moment, wear of moment the in our what our normal that telling we outside retail you on which tenants a impact not and and We we our anything at the of flow. terms in all consider at is projections, kind see don't tear that of maybe way cash portfolio of would on

it We sure. points to touch anyway. where points. your at is basis XX XX think while we're basis end don't this levels. Historically, at XXX operate I'm way yes, higher, year, well that the as And not we think it's -- basis it points exactly year we in be question, to our within we in feels will believe, this might assume I any points good that to been answer about but this we've shape a point will XXX, so It's think in real It next that moment, actual the regard. under even but up, closer basis probably XX -- need those more change for to rent And loss see year. guidance, of

And just a follow-up.

hearing QSR concerns sector, weakness portfolio? the you from in QSR With the in tenants are

cautionary And calling sales us up not rent are thrown anybody rent But portfolio. solid. our property for because up, QSR very the QSR we're hearing flag our is the again, has at portfolio asking coverage no, us on Nobody to No. the softening. reductions level, in their

next question from Smedes is Our with coming Rose Citi.

Vargas ] Smedes. Matti is [ This on for

dry issuances during going shares about going you issued how forward the into are to powder quarter, build Given thinking XXXX? share the

my to where with Yes. we Not goes. I acquisitions is for dispositions. that can I our comments, we'll don't as issue need mentioned in cash any see point, key elusive. over I X/X We and year that -- the this to be flow mean, get of overly guess, just funded don't free

no need equity. we So have for really

not. to pick as to can we issue or our equity when think So points appropriate some it's we

you As our only back deck can we've institutional last that issued equity. over the you worth XX $XX look -- months, years in in million recent we've at history about see our investor online, of

when our our So well an we're to And price very and dependent well may priced. we thoughts it's opinion look most not But opinion. that's it share source priced it's source not understand and when available on. it around we'll in importantly, that others differ that. We'll

need playing at real to no see things we point this so equity as raise any And out.

back balance or there And where tenants Are the year? transaction the opportunities the seeing just sectors you're particular the circling through most on of market. any areas,

Yes.

portfolio. As with recently. set like I starting pretty to has at of It the convenience seems look auto frothy opportunity as activity up as been and far kind pick the our our is sector outside some store service

try I'll As of things, there current lean side portfolio, too in activity, our to time. maybe and been carwash hasn't much recent a the activity QSR less little family far entertainment as

question from B. is final Riley. Massocca with Our John coming

a volume issuance the anticipating pushes I mean, line maybe expectations. slight fee But the of is thinking debt put quarter something lease when So you were bit. expectations was pulls the disposition I in some increase guidance Obviously, kind of in termination there kind income little the about also, guess there? kind in with well? just received change? XQ? And the any your to were a out What as and Or you of just of guidance was

year the question. guidance. A, would little fair mean, tend in quite to say, weren't I to a There conservative of lot honest. some be -- a we variables start Yes.

increase creates for And hopefully, we some guidance. as that can year progresses, upside. opportunity an so And the

lightning But like pieces a income when predictable. not we and of kind lease if the with. Yes, won't termination kind there I thought. very we on the of episodic. might we I is it's start that And lot strike that, a because as more timing may involved. happen it's that, fee of that's say, So is, base say mentioned, than have is

tend into to basis then we forward-looking too thoughts bake haven't is this of room. bit much points generally. And there our so not And to I the like said, fully a little of and mean, margin. increase assumption all helps these -- things the numbers by allows I that at the on are us at that pretty $X.XX in the based half, half the utilized guidance rent we first first And into that are that small XXX results. the extent to for loss margin

so way And of that's yes, about that. so -- kind the we think

you And bit reflecting within in in or that margin just of that talked the margin of bottom some I -- a that a those mind, little more of that guidance the end little on up mean, things the estate point? mean I the are is events earlier recent into expense the the real expectation some came are of at call, this credit that kind about baked bit.

bottom you near I the running release, We mean Page see million, highlight been $X.X quarters. net case. can they've real tenant expenses, of bottom. at that's the estate see and guess million our in reimbursements recent $X.X X you the can I Yes. our of of press kind of what

guidance $XX million on million that million range year yes, to to for to so million. from we the And $XX to $X increased the -- $XX

we it. see call margin, line $XXX,XXX it, And the about the So where at terms guidance. of midpoint item, increase of in in that that's the a

margin, -- bit. at we we're a in material not any seeing the that. little don't it's But So change

stuff the all reflects already? essentially, kind talked it call I in you the about of mean, earlier

Yes.

helped has rapid as Or even just the the maybe lower responding bid-ask potential for your then where rates partner bigger Essentially, psychology? kind And trajectory we of activity are interest cap year of fairly of of remainder tenants marketplace? they given about are investment to holding the How kind the tenants the rates. maybe are rates think close that tenant and in in for out broadly of lease spread net kind the interest and moving? decline picture,

a but sector's really at early little bit, tightened run it's started As the margin probably the a whole, July. combination, the equity

say, deals, months, but nobody's human sellers there of cut, priced So nature the with really off But transact. people of rate it's of of expectation that of or for -- equity X, new more close price. deals is think should the activity I lack XX I the want a to result the

high But cap a So back But higher the the like. in coming market, bit. picked of the it's realizing has up. sector activity as not to would to they're as overall definitely probably tightened rate little is market order, quite coming that a deals

a Stanley. do Kamdem have Ronald We final with question Morgan from

and Yes, on Maybe -- us remind bad guidance. there on to I could if your news apologies on on lot late. jumped you about But obviously, the on of on the a debt touch just of been wanted the sector. exposure you're on And how there's thinking touch furniture some the tenants?

Yes.

of category our furniture our called Badcock, rent. is X.X% is exposure the which company in primary So a

remain about recently and retailer they sell that Conn's company bought business guarantor to did a our a I on As lease. any company but a bankruptcy by as called Conn's, which with, we company was the that that did Badcock not a in just ago. The have entered year Badcock it mentioned, is bought

And at play But the comes we'll months we if moment, into a in here see so that and that. news the whole quarters. don't relates coming as to lot it have of

those rents are reasonable. Our properties on

to kind opportunity we So the replace without have economic case, think the much that worst we harm. tenant -- of and too

in guarantor place material very there's risk for and the it's rent out, how a but at and rent, feel our near plays intermediate being but lease in of and the so very all -- -- so we'll like rent X.X% our that moderate, And and a see early, we don't term.

in half the The year just full how nonrecurring one to Can implies. conservative? So year. seems how remind much be me guidance is of the the guidance AFFO shouldn't sort $X.XX guess, you is little, maybe think annualizing? I what onetime my the the $X.XX, about the second is and then just And a of of that second half trying because sort first that much of we

Yes.

was $X.X numbers non-annuities fees. million say I'd in income half the of first So lease termination primary our

a that's, so call this share results. $X.XX And year's for $X.XX, it,

normally termination $X.X some have it might of half might we be of for be that level lease year, million. fees a Now a

of So million plus $X to it. maybe maybe termination think way there's, it, lease unusually about million income high might $X.X call be fee the

and in $X.XX above at So termination normal of I'd would least there's for lease there's quarter, consider I what $X.XX the -- us. the fee there's levels in half, incremental might say

way it. that's about So the think I

you. Thank

we comments. As it Horn queue, closing Mr. I further no in to over have will any hand for questions back

appreciate remainder I positioned the conference season and we'll the you guys rest see of and for Thanks. you enjoy taking interest in We're guys kicks off. your the when the time well NNN. year of and summer,

Thank you. at you may your conclude lines your you for today's and participation. call, we This does disconnect time, thank and this