FIRST QUARTER 2024 OPERATING RESULTS ANNOUNCED BY NNN REIT, INC.
NNN REIT, Inc. (NYSE: NNN) announced its first quarter 2024 operating results, showcasing revenue growth and increased per share metrics. The company maintained high occupancy levels and made significant property investments, while also issuing new common shares. CEO Steve Horn emphasized the company's stability, strong portfolio, and future value creation for shareholders.
Revenue growth in the first quarter of 2024
Increased FFO, Core FFO, and AFFO per share compared to prior year
Maintained high occupancy levels at 99.4% with a long remaining lease term
Significant property investments and acquisitions during the quarter
Issued new common shares raising $21.5 million in net proceeds
Strong balance sheet management and over $1 billion in liquidity
Minor decrease in occupancy levels compared to the previous quarter
Reduced gross leasable area from property sales
Dilution for existing shareholders due to issuance of new common shares
Insights
Operating Results:
- Revenues and net earnings, FFO, Core FFO and AFFO and diluted per share amounts:
Quarter Ended | |||||||||
2024 | 2023 | ||||||||
(dollars in thousands, | |||||||||
Revenues | $ | 215,407 | $ | 204,108 | |||||
Net earnings | $ | 94,371 | $ | 90,167 | |||||
Net earnings per share | $ | 0.52 | $ | 0.50 | |||||
FFO | $ | 151,261 | $ | 145,549 | |||||
FFO per share | $ | 0.83 | $ | 0.80 | |||||
Core FFO | $ | 151,578 | $ | 145,972 | |||||
Core FFO per share | $ | 0.83 | $ | 0.80 | |||||
AFFO | $ | 153,259 | $ | 148,166 | |||||
AFFO per share | $ | 0.84 | $ | 0.82 | |||||
First Quarter 2024 Highlights:
- FFO and Core FFO per share increased
3.8% over prior year results - AFFO per share increased
2.4% over prior year results - Maintained high occupancy levels at
99.4% , with a weighted average remaining lease term of 10.0 years, at March 31, 2024 as compared to99.5% at December 31, 2023 and99.4% at March 31, 2023 $124.5 million 8.0% - Sold six properties for
$18.5 million $4.8 million - Raised
$21.5 million - Maintained sector leading 11.8 year weighted average debt maturity
Steve Horn, Chief Executive Officer, commented: "NNN's first quarter was consistent and predictable with nearly
NNN REIT invests primarily in high-quality retail properties subject generally to long-term, net leases. As of March 31, 2024, the company owned 3,546 properties in 49 states with a gross leasable area of approximately 36.1 million square feet and a weighted average remaining lease term of 10.0 years. NNN is one of only three publicly traded real estate investment trusts to have increased annual dividends for 34 or more consecutive years. For more information on the company, visit www.nnnreit.com.
Management will hold a conference call on May 1, 2024, at 10:30 a.m. ET to review its results of operations. The call can be accessed on the NNN REIT website live at www.nnnreit.com. For those unable to listen to the live broadcast, a replay will be available on the company's website. In addition, a summary of any earnings guidance given on the call will be posted to the company's website.
Statements in this press release that are not strictly historical are "forward-looking" statements. These statements generally are characterized by the use of terms such as "believe," "expect," "intend," "may," "estimated," or other similar words or expressions. Forward-looking statements involve known and unknown risks, which may cause the company's actual future results to differ materially from expected results. These risks include, among others, general economic conditions, including inflation, local real estate conditions, changes in interest rates, increases in operating costs, the preferences and financial condition of the company's tenants, the availability of capital, risks related to the company's status as a real estate investment trust ("REIT"), and the potential impacts of an epidemic or pandemic on the company's business operations, financial results, and financial position on the world economy. Additional information concerning these and other factors that could cause actual results to differ materially from these forward-looking statements is contained from time to time in the company's Securities and Exchange Commission (the "Commission") filings, including, but not limited to, the company's (i) Annual Report on Form 10-K for the year ended December 31, 2023 and (ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 2024. Copies of each filing may be obtained from the company or the Commission. Such forward-looking statements should be regarded solely as reflections of the company's current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release. NNN REIT, Inc. undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.
Funds From Operations, commonly referred to as "FFO", is a relative non-GAAP financial measure of operating performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. FFO is defined by the National Association of Real Estate Investment Trusts ("NAREIT") and is used by the company as follows: net earnings (computed in accordance with GAAP) plus depreciation and amortization of assets unique to the real estate industry, excluding gains (or including losses), any applicable taxes and noncontrolling interests on the disposition of certain assets, the company's share of these items from the company's noncontrolling interests and any impairment charges on a depreciable real estate asset.
FFO is generally considered by industry analysts to be the most appropriate measure of performance of real estate companies. FFO does not necessarily represent cash provided by operating activities in accordance with GAAP and should not be considered an alternative to net earnings as an indication of the company's performance or to cash flow as a measure of liquidity or ability to make distributions. Management considers FFO an appropriate measure of performance of an equity REIT because it primarily excludes the assumption that the value of the real estate assets diminishes predictably over time, and because industry analysts have accepted it as a performance measure. The company's computation of FFO may differ from the methodology for calculating FFO used by other equity REITs, and therefore, may not be comparable to such other REITs. A reconciliation of net earnings (computed in accordance with GAAP) to FFO, as defined by NAREIT, is included in the financial information accompanying this release.
Core Funds From Operations ("Core FFO") is a non-GAAP measure of operating performance that adjusts FFO to eliminate the impact of certain GAAP income and expense amounts that the company believes are infrequent and unusual in nature and/or not related to its core real estate operations. Exclusion of these items from similar FFO-type metrics is common within the REIT industry, and management believes that presentation of Core FFO provides investors with a potential metric to assist in their evaluation of the company's operating performance across multiple periods and in comparison to the operating performance of its peers because it removes the effect of unusual items that are not expected to impact the company's operating performance on an ongoing basis. Core FFO is used by management in evaluating the performance of the company's core business operations and is a factor in determining management compensation. Items included in calculating FFO that may be excluded in calculating Core FFO may include items such as transaction related gains, income or expense, impairments on land or commercial mortgage residual interests, executive retirement costs or other non-core amounts as they occur. The company's computation of Core FFO may differ from the methodology for calculating Core FFO used by other equity REITs, and therefore, may not be comparable to such other REITs. A reconciliation of net earnings (computed in accordance with GAAP) to Core FFO is included in the financial information accompanying this release.
Adjusted Funds From Operations ("AFFO") is a non-GAAP financial measure of operating performance used by many companies in the REIT industry. AFFO adjusts FFO for certain non-cash items that reduce or increase net income in accordance with GAAP. AFFO should not be considered an alternative to net earnings, as an indication of the company's performance or to cash flow as a measure of liquidity or ability to make distributions. Management considers AFFO a useful supplemental measure of the company's performance. The company's computation of AFFO may differ from the methodology for calculating AFFO used by other equity REITs, and therefore, may not be comparable to such other REITs. A reconciliation of net earnings (computed in accordance with GAAP) to AFFO is included in the financial information accompanying this release.
NNN REIT, Inc. (dollars in thousands, except per share data) (unaudited) | |||||||
Quarter Ended | |||||||
2024 | 2023 | ||||||
Income Statement Summary | |||||||
Revenues: | |||||||
Rental income | $ | 214,825 | $ | 203,630 | |||
Interest and other income from real estate transactions | 582 | 478 | |||||
215,407 | 204,108 | ||||||
Operating expenses: | |||||||
General and administrative | 12,584 | 12,251 | |||||
Real estate | 7,154 | 6,846 | |||||
Depreciation and amortization | 60,615 | 59,148 | |||||
Leasing transaction costs | 33 | 75 | |||||
Impairment losses – real estate, net of recoveries | 1,204 | 2,640 | |||||
Executive retirement costs | 317 | 423 | |||||
81,907 | 81,383 | ||||||
Gain on disposition of real estate | 4,821 | 6,300 | |||||
Earnings from operations | 138,321 | 129,025 | |||||
Other expenses (revenues): | |||||||
Interest and other income | (119) | (33) | |||||
Interest expense | 44,069 | 38,891 | |||||
43,950 | 38,858 | ||||||
Net earnings | $ | 94,371 | $ | 90,167 | |||
Weighted average shares outstanding: | |||||||
Basic | 181,794,208 | 180,845,503 | |||||
Diluted | 182,212,897 | 181,434,345 | |||||
Net earnings per share available to stockholders: | |||||||
Basic | $ | 0.52 | $ | 0.50 | |||
Diluted | $ | 0.52 | $ | 0.50 | |||
NNN REIT, Inc. (dollars in thousands, except per share data) (unaudited) | |||||||
Quarter Ended | |||||||
2024 | 2023 | ||||||
Funds From Operations ("FFO") Reconciliation: | |||||||
Net earnings | $ | 94,371 | $ | 90,167 | |||
Real estate depreciation and amortization | 60,507 | 59,042 | |||||
Gain on disposition of real estate | (4,821) | (6,300) | |||||
Impairment losses – depreciable real estate, net of recoveries | 1,204 | 2,640 | |||||
Total FFO adjustments | 56,890 | 55,382 | |||||
FFO | $ | 151,261 | $ | 145,549 | |||
FFO per share: | |||||||
Basic | $ | 0.83 | $ | 0.80 | |||
Diluted | $ | 0.83 | $ | 0.80 | |||
Core Funds From Operations ("Core FFO") Reconciliation: | |||||||
Net earnings | $ | 94,371 | $ | 90,167 | |||
Total FFO adjustments | 56,890 | 55,382 | |||||
FFO | 151,261 | 145,549 | |||||
Executive retirement costs | 317 | 423 | |||||
Total Core FFO adjustments | 317 | 423 | |||||
Core FFO | $ | 151,578 | $ | 145,972 | |||
Core FFO per share: | |||||||
Basic | $ | 0.83 | $ | 0.81 | |||
Diluted | $ | 0.83 | $ | 0.80 | |||
NNN REIT, Inc. (dollars in thousands, except per share data) (unaudited) | ||||||||
Quarter Ended | ||||||||
2024 | 2023 | |||||||
Adjusted Funds From Operations ("AFFO") Reconciliation: | ||||||||
Net earnings | $ | 94,371 | $ | 90,167 | ||||
Total FFO adjustments | 56,890 | 55,382 | ||||||
Total Core FFO adjustments | 317 | 423 | ||||||
Core FFO | 151,578 | 145,972 | ||||||
Straight-line accrued rent, net of reserves | 36 | (469) | ||||||
Net capital lease rent adjustment | 54 | 79 | ||||||
Below-market rent amortization | (117) | (112) | ||||||
Stock based compensation expense | 3,567 | 3,101 | ||||||
Capitalized interest expense | (1,859) | (405) | ||||||
Total AFFO adjustments | 1,681 | 2,194 | ||||||
AFFO | $ | 153,259 | $ | 148,166 | ||||
AFFO per share: | ||||||||
Basic | $ | 0.84 | $ | 0.82 | ||||
Diluted | $ | 0.84 | $ | 0.82 | ||||
Other Information: | ||||||||
Rental income from operating leases(1) | $ | 209,084 | $ | 198,183 | ||||
Earned income from direct financing leases(1) | $ | 119 | $ | 144 | ||||
Percentage rent(1) | $ | 888 | $ | 763 | ||||
Real estate expense reimbursement from tenants(1) | $ | 4,734 | $ | 4,540 | ||||
Real estate expenses | (7,154) | (6,846) | ||||||
Real estate expenses, net of tenant reimbursements | $ | (2,420) | $ | (2,306) | ||||
Amortization of debt costs | $ | 1,301 | $ | 1,199 | ||||
Scheduled debt principal amortization (excluding maturities) | $ | — | $ | 173 | (2) | |||
Non-real estate depreciation expense | $ | 111 | $ | 109 | ||||
(1) | For the quarters ended March 31, 2024 and 2023, the aggregate of such amounts is |
(2) | In April 2023, NNN repaid the remaining mortgages payable principal balance of |
NNN REIT, Inc.
2024 Earnings Guidance
Guidance is based on current plans and assumptions and subject to risks and uncertainties more fully described in this press release and the company's reports filed with the Commission.
2024 Guidance | ||
Net earnings per share excluding any gains on disposition of real | ||
Real estate depreciation and amortization per share | ||
Core FFO per share | ||
AFFO per share | ||
General and administrative expenses | ||
Real estate expenses, net of tenant reimbursements | ||
Acquisition volume | ||
Disposition volume |
NNN REIT, Inc. (dollars in thousands) (unaudited) | ||||||||
March 31, | December 31, | |||||||
Balance Sheet Summary | ||||||||
Assets: | ||||||||
Real estate portfolio, net of accumulated depreciation and amortization | $ | 8,586,856 | $ | 8,535,851 | ||||
Cash and cash equivalents | 1,128 | 1,189 | ||||||
Restricted cash and cash held in escrow | — | 3,966 | ||||||
Receivables, net of allowance of | 3,569 | 3,649 | ||||||
Accrued rental income, net of allowance of | 34,404 | 34,611 | ||||||
Debt costs, net of accumulated amortization of | 2,723 | 3,243 | ||||||
Other assets | 77,062 | 79,459 | ||||||
Total assets | $ | 8,705,742 | $ | 8,661,968 | ||||
Liabilities: | ||||||||
Line of credit payable | $ | 116,200 | $ | 132,000 | ||||
Notes payable, net of unamortized discount and unamortized debt costs | 4,229,933 | 4,228,544 | ||||||
Accrued interest payable | 75,487 | 34,374 | ||||||
Other liabilities | 109,264 | 109,593 | ||||||
Total liabilities | 4,530,884 | 4,504,511 | ||||||
Total equity | 4,174,858 | 4,157,457 | ||||||
Total liabilities and equity | $ | 8,705,742 | $ | 8,661,968 | ||||
Common shares outstanding | 183,350,322 | 182,474,770 | ||||||
Gross leasable area, Property Portfolio (square feet) | 36,137,000 | 35,966,000 | ||||||
NNN REIT, Inc. Debt Summary As of March 31, 2024 (dollars in thousands) (unaudited) | |||||||||||||||||||
Unsecured Debt | Principal | Principal, | Stated | Effective | Maturity Date | ||||||||||||||
Line of credit payable | $ | 116,200 | $ | 116,200 | SOFR + | 6.185 | % | June 2025 | |||||||||||
Unsecured notes payable: | |||||||||||||||||||
2024 | 350,000 | 349,982 | 3.900 | % | 3.924 | % | June 2024 | ||||||||||||
2025 | 400,000 | 399,817 | 4.000 | % | 4.029 | % | November 2025 | ||||||||||||
2026 | 350,000 | 348,811 | 3.600 | % | 3.733 | % | December 2026 | ||||||||||||
2027 | 400,000 | 399,361 | 3.500 | % | 3.548 | % | October 2027 | ||||||||||||
2028 | 400,000 | 398,559 | 4.300 | % | 4.388 | % | October 2028 | ||||||||||||
2030 | 400,000 | 399,192 | 2.500 | % | 2.536 | % | April 2030 | ||||||||||||
2033 | 500,000 | 488,912 | 5.600 | % | 5.905 | % | October 2033 | ||||||||||||
2048 | 300,000 | 296,156 | 4.800 | % | 4.890 | % | October 2048 | ||||||||||||
2050 | 300,000 | 294,457 | 3.100 | % | 3.205 | % | April 2050 | ||||||||||||
2051 | 450,000 | 442,096 | 3.500 | % | 3.602 | % | April 2051 | ||||||||||||
2052 | 450,000 | 440,114 | 3.000 | % | 3.118 | % | April 2052 | ||||||||||||
Total | 4,300,000 | 4,257,457 | |||||||||||||||||
Total unsecured debt(1) | $ | 4,416,200 | $ | 4,373,657 | |||||||||||||||
Debt costs | $ | (42,595) | |||||||||||||||||
Accumulated amortization | 15,071 | ||||||||||||||||||
Debt costs, net of accumulated amortization | (27,524) | ||||||||||||||||||
Notes payable, net of unamortized discount and unamortized debt costs | $ | 4,229,933 | |||||||||||||||||
(1) | Unsecured debt has a weighted average interest rate of | |
As of March 31, 2024, Net Debt / EBITDA based on current quarter EBITDA annualized is 5.5x. | ||
NNN REIT, Inc.
Debt Summary – Continued
As of March 31, 2024
(unaudited)
Credit Facility and Note Covenants
The following is a summary of key financial covenants for the company's unsecured credit facility and notes, as defined and calculated per the terms of the facility's credit agreement and the notes' governing documents, respectively, which are included in the company's filings with the Commission. These calculations, which are not based on
Key Covenants | Required | March 31, 2024 | ||
Unsecured Bank Credit Facility: | ||||
Maximum leverage ratio | < 0.60 | 0.39 | ||
Minimum fixed charge coverage ratio | > 1.50 | 4.43 | ||
Maximum secured indebtedness ratio | < 0.40 | — | ||
Unencumbered asset value ratio | > 1.67 | 2.64 | ||
Unencumbered interest ratio | > 1.75 | 4.39 | ||
Unsecured Notes: | ||||
Limitation on incurrence of total debt | ≤ | 40.9 % | ||
Limitation on incurrence of secured debt | ≤ | — | ||
Debt service coverage ratio | ≥ 1.50 | 4.4 | ||
Maintenance of total unencumbered assets | ≥ | 244 % |
NNN REIT, Inc. Property Portfolio As of March 31, 2024 | ||||||
Top 20 Lines of Trade | ||||||
As of March 31, | ||||||
Lines of Trade | 2024(1) | 2023(2) | ||||
1. | Automotive service | 16.3 % | 14.4 % | |||
2. | Convenience stores | 16.2 % | 16.3 % | |||
3. | Restaurants – full service | 8.6 % | 9.0 % | |||
4. | Restaurants – limited service | 8.5 % | 8.9 % | |||
5. | Family entertainment centers | 6.7 % | 5.8 % | |||
6. | Recreational vehicle dealers, parts and accessories | 4.6 % | 4.1 % | |||
7. | Health and fitness | 4.4 % | 4.8 % | |||
8. | Theaters | 4.1 % | 4.3 % | |||
9. | Equipment rental | 2.9 % | 3.1 % | |||
10. | Wholesale clubs | 2.5 % | 2.6 % | |||
11. | Automotive parts | 2.4 % | 2.6 % | |||
12. | Drug stores | 2.3 % | 2.6 % | |||
13. | Home improvement | 2.2 % | 2.3 % | |||
14. | Furniture | 2.0 % | 2.1 % | |||
15. | Medical service providers | 1.8 % | 1.9 % | |||
16. | General merchandise | 1.4 % | 1.5 % | |||
17. | Consumer electronics | 1.3 % | 1.4 % | |||
18. | Home furnishings | 1.3 % | 1.4 % | |||
19. | Travel plazas | 1.3 % | 1.3 % | |||
20. | Pet supplies and services | 1.1 % | 0.9 % | |||
Other | 8.1 % | 8.7 % | ||||
Total | 100.0 % | 100.0 % | ||||
Top 10 States | ||||||||||
State | % of | State | % of | |||||||
1. | 16.9 % | 6. | 3.8 % | |||||||
2. | 9.4 % | 7. | 3.7 % | |||||||
3. | 5.1 % | 8. | 3.7 % | |||||||
4. | 4.9 % | 9. | 3.3 % | |||||||
5. | 4.8 % | 10. | 3.2 % | |||||||
As a percentage of annual base rent, which is the annualized base rent for all leases in place. | ||
(1) | ||
(2) | ||
NNN REIT, Inc. Property Portfolio – Continued As of March 31, 2024 | ||||||
Top 20 Tenants | ||||||
Tenant | # of | % of | ||||
1. | 7-Eleven | 138 | 4.4 % | |||
2. | Mister Car Wash | 121 | 4.1 % | |||
3. | Camping World | 47 | 3.8 % | |||
4. | Dave & Buster's | 32 | 3.5 % | |||
5. | LA Fitness | 28 | 3.0 % | |||
6. | GPM Investments (convenience stores) | 150 | 2.9 % | |||
7. | Flynn Restaurant Group (Taco Bell/Arby's) | 204 | 2.7 % | |||
8. | AMC Theatre | 20 | 2.7 % | |||
9. | BJ's Wholesale Club | 13 | 2.5 % | |||
10. | Mavis Tire Express Services | 140 | 2.2 % | |||
11. | Couche Tard (Pantry) | 92 | 2.2 % | |||
12. | Sunoco | 61 | 2.0 % | |||
13. | Walgreens | 49 | 1.9 % | |||
14. | Chuck-E-Cheese | 53 | 1.8 % | |||
15. | United Rentals | 49 | 1.6 % | |||
16. | Frisch's Restaurants | 68 | 1.6 % | |||
17. | Fikes (convenience stores) | 58 | 1.5 % | |||
18. | Life Time Fitness | 3 | 1.3 % | |||
19. | Bob | 106 | 1.3 % | |||
20. | Best Buy | 16 | 1.3 % | |||
Lease Expirations(2) | ||||||||||||||
% of | # of | Gross Leasable | % of | # of | Gross Leasable | |||||||||
2024 | 1.2 % | 39 | 534,000 | 2030 | 3.7 % | 115 | 1,560,000 | |||||||
2025 | 4.5 % | 176 | 1,539,000 | 2031 | 7.2 % | 185 | 2,697,000 | |||||||
2026 | 4.7 % | 211 | 2,111,000 | 2032 | 5.8 % | 215 | 2,328,000 | |||||||
2027 | 8.1 % | 235 | 3,591,000 | 2033 | 4.8 % | 137 | 1,460,000 | |||||||
2028 | 5.7 % | 230 | 2,173,000 | Thereafter | 50.1 % | 1,853 | 15,972,000 | |||||||
2029 | 4.2 % | 126 | 1,874,000 | |||||||||||
(1) | Based on the annual base rent of | |
(2) | As of March 31, 2024, the weighted average remaining lease term is 10.0 years. | |
(3) | Square feet. |
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SOURCE NNN REIT, Inc.
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