Nnn Reit, Inc. · NYSE:NNN
Nnn Reit — National Retail Properties — NAREIT REITWeek 2015
47 slides from Nnn Reit's conference presentation, June 2015
Slide 1: Investor Update
Single Tenant Retail Property REIT with 25 Consecutive Years of Dividend Increases Investor Update June 2015
Slide 2: Safe Harbor
Safe Harbor This presentation contains certain statements that are the Company’s and Management’s hopes, intentions, beliefs, expectations, or projections of the future and might be considered to be forward-looking statements under Federal Securities laws. Prospective investors are cautioned that an
Slide 3: See
See LA|FITNESs
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Slide 5: NNN's Unique Long Term Strategy
NNN’s Unique Long Term Strategy Consistent Predictable Earnings Growth with Low Volatility Strong Investment Grade Balance Sheet Elite Level Long-Term Total Returns 5
Slide 6: Summary – Attributes, Advantages & Risk Mitigation
Summary – Attributes, Advantages & Risk Mitigation High quality portfolio produces consistent results High occupancy through cycle Strong lease renewal rates with very little capital expenditure (not buying-up rent) Long term, net leases adds stability to operating results Quality comes fr
Slide 7: Summary – Attributes, Advantages & Risk Mitigation
Summary – Attributes, Advantages & Risk Mitigation Proven, tenured management team with domain expertise Top six executives – average NNN tenure 15 years (range 10-32 years) Next five SVPs – average NNN tenure 16 years (range 6-23 years) Sustainable model Projections – no heroic assumption
Slide 8: Core Competency Focus: Single Tenant Retail Properties
Core Competency Focus: Single Tenant Retail Properties Why Retail? (vs. multiple property types) Higher lease renewal probability – better risk-adjusted returns Retail tenants are more particular location driven than non-retail Retail tenants are not likely to risk disrupting established custo
Slide 9: Low Risk Strategy Generates Consistent Growth
Low Risk Strategy Generates Consistent Growth Strong Investment Grade Balance Sheet Long-Term Track Record of Success Q1 Highlights and Valuation 9
Slide 10: Consistent and Simple Strategy
Consistent and Simple Strategy Focus on single-tenant net lease retail properties Sustain high occupancy and maximize value of existing real estate assets Maintain fully diversified portfolio Grow through internal portfolio growth and well underwritten acquisitions Utilize asset sales to m
Slide 11: NNN's Long-Term Retail Net Lease Strategy
NNN’s Long-Term Retail Net Lease Strategy Creates a Solid Foundation of Highly Predictable Operating Income NNN’s Disciplined Acquisition Approach Generates Steady Earnings Growth Through Higher Yields With Less Risk Than Development and Other Acquisition Approaches Strategy Generated 8+% FFO Per Sh
Slide 12: Retail Net Lease Strategy Generates a Reliable Income Stream with Low Volatility
Retail Net Lease Strategy Generates a Reliable Income Stream with Low Volatility Well selected retail tenants provide stronger performance through various economic cycles than office, industrial or other tenant types. Main street locations provide strong market for replacement tenants and rent g
Slide 13: NNN's Strategy Results in Higher Occupancy and Less Volatility
NNN’s Strategy Results in Higher Occupancy and Less Volatility From 2003 – Q1 2015, NNN’s occupancy never fell below 96.4% while the REIT industry average never rose above 94.0%. NNN 100% REIT Industry (Ex Hotels & Health Care) 98.8% 98.6% 98.3% 98.2% 98.3% 98.2% 97.9% 97.4% 96.9% 97.4% 97.0% 96.7%
Slide 14: NNN's Acquisition Approach is Unique Because It's More Difficult
NNN’s Acquisition Approach is Unique Because It’s More Difficult Acquisition quality over quantity requires selectivity, discipline and patience: Small transactions in areas of historical expertise (retail) rather than large portfolio transactions provides higher risk adjusted returns Retail – N
Slide 15: NNN's Unique Acquisition Approach Generates Strong FFO Growth
NNN’s Unique Acquisition Approach Generates Strong FFO Growth Retail Net Lease market is very large yet has less buyer competition than other property types because properties are smaller NNN’s more focused relationship based acquisition approach is more difficult and time consuming further resu
Slide 16: 2010 – 2014 Acquisitions Volume
2010 – 2014 Acquisitions Volume in $ Millions by Source Acquisition Source: Relationship @ 8.4% Average Cap Rate ($1,908 million = 64%) Market / Auction @ 7.6% Average Cap Rate ($1,057 million = 36%) $850 $800 $772 $750 $707 $700 $630 $618 $650 $600 $550 $500 $552 $450 $513 $337 $400 $285 $350 $300
Slide 17: Strong Acquisition Volumes at Higher Cap Rates
NNN Has Consistently Generated Strong Acquisition Volumes at Significantly Higher Cap Rates than Other REIT Property Types Historical Acquisition Volume at Weighted Average Initial Cap Rates* $800 8.4% 8.4% 8.3% $700 7.8% 7.5% [Guidance] $600 $500 (Millions) $400 8.8% 9.0% 7.0% 9.5% $300 9.5% $200 $
Slide 18: Triple Net vs. Gross Lease Return Profile
Triple Net vs. Gross Lease Return Profile NNN produces higher initial return with lower volatility than typical gross lease investments 11.00% 10.00% 9.00% Cap Rate (Return) 8.00% Excludes volatility and lower 7.00% return from vacancy and tenant improvements 6.00% 5.00% 4.00% 1 2 3 4 5 6 7 8 9 10 1
Slide 19: Strong Investment Grade Balance Sheet
Low Risk Strategy Generates Consistent Growth Strong Investment Grade Balance Sheet Long-Term Track Record of Success Q1 Highlights and Valuation 19
Slide 20: Strong Investment Grade Balance Sheet – Risk Management is a Core Competency
Strong Investment Grade Balance Sheet – Risk Management is a Core Competency Investment-grade debt rating (BBB+ / Baa1 / BBB+) supported by industry leading leverage ratios 99% of assets unencumbered - only $25.9 million of secured debt Well-laddered debt maturities $650 million unsecured ba
Slide 21: Conservative Balance Sheet Management
Conservative Balance Sheet Management (As of March 31, 2015- total gross book assets) Secured Debt 0.5% Unsecured Secured debt - $25.9 million Debt 32.2% Unsecured debt - $1,756.9 million Preferred equity - $575.0 million Common equity - $3,097.1 million Preferred Equity Total Capitalization: $5,454
Slide 22: Credit Metrics Summary
Credit Metrics Summary March 2010 2011 2012 2013 2014 2015 Total debt / Total assets (gross book) 39.2% 37.0% 37.5% 32.9% 32.6% 32.7% Total debt + preferred / Total assets (gross book) 42.3% 39.5% 44.3% 44.9% 43.3% 43.2% Market Cap Leverage 33.9% 33.3% 31.0% 28.2% 24.2% 23.9% Debt / EBITDA (last qua
Slide 23: Acquisition Funding (2011 – 2014)
Acquisition Funding (2011 – 2014) Over past four years, 76% of acquisitions funded with permanent capital while growing AFFO per share 33% (7.4% per year) $3.5 $3.0 $2.5 Long-Term Debt, net $0.6 $2.0 in billions Preferred Equity $0.6 $1.5 Acquisitions 76% of $2.7 acquisitions funded with $1.0 Common
Slide 24: Debt / TTM EBITDA
24 PSA PSB DEA GTY COR LTC SIR CXW DFT CONE SSS NNN GEO PPS PKY NNN’s Lower Risk Operating Strategy is Complemented by it’s Low NHI WRI FRT HIW CUBE EQC BXP CUZ EPR EXR UBA HCP OHI CXP CPT SPG ELS EQY SNH REG SBRA DLR O HME REXR RPAI AVB HCN LXP PLD VNO Source: Citi Investment Research BFS AKR EGP D
Slide 25: Well-Laddered Debt Maturities
Well-Laddered Debt Maturities(a) (March 31, 2015) NNN’s Low Leverage Balance Sheet Strategy is Enhanced by it’s Well Laddered Debt Maturities $450,000,000 $400,000,000 3.4% 3.9% $350,000,000 4.0% 5.7% $300,000,000 6.9% $250,000,000 $200,000,000 6.2% $150,000,000 $100,000,000 $50,000,000 5.9% 5.8% 5.
Slide 26: NNN in a Rising Interest Rate Environment
NNN in a Rising Interest Rate Environment NNN is better positioned to successfully execute its strategy than its triple-net and non-triple net peers in a rising interest rate environment NNN’s historically higher acquisition cap rates (8.2% since 2010; 7.3% recent acquisitions) create much more ro
Slide 27: Long-Term Track Record of Success
Low Risk Strategy Generates Consistent Growth Strong Investment Grade Balance Sheet Long-Term Track Record of Success Q1 Highlights and Valuation 27
Slide 28: NNN Consistently Outperforms the REIT Industry and the Major Indices
NNN Consistently Outperforms the REIT Industry and the Major Indices NNN Outperforms 1 Year 3 Years 5 Years 10 Years 15 Years 20 Years 25 Years (NNN = $40.97 at 03/31/15) National Retail Properties (NNN) 24.7% 20.2% 18.4% 14.9% 17.3% 14.4% 15.9% Indices * NAREIT Equity REIT Index (FNERTR) 22.7% 14.0
Slide 29: Dividends Per Share
Long-Term Dividend History 25 consecutive years of annual dividend increases – Fourth longest of all public REITs and 98% of all public companies $1.70 $1.60 Dividends Per Share $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 2013 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2
Slide 30: Q1 Highlights and Valuation
Low Risk Strategy Generates Consistent Growth Strong Investment Grade Balance Sheet Long-Term Track Record of Success Q1 Highlights and Valuation 30
Slide 31: Q1 Highlights and Valuation
Q1 Highlights and Valuation Recurring FFO per share increased 5.9% to $0.54 Dividend yield at March 31, 2015 of 4.1% Maintained high level of occupancy at 98.8% Invested $155.2 million in 56 properties @ average 7.3% cap rate (initial cash yield) Sold 6 properties for $23.3 million produci
Slide 32: NNN's Multiple Does Not Reflect its Unique Advantage
32 HPP KRC PGRE PKY VNO BXP FRT TCO ESRT AAT EQC EQY REG SLG AVB ESS DCT EQR MAC PPS EXR PSB AKR PSA Advantage of Low Risk / Consistent Growth TRNO AEC NNN’s Multiple Does Not Reflect its Unique CUBE UDR DEI PLD 2015 AFFO Per Share Multiples UE CXP BFS FR ALX GGP FCE.A ROIC AIV KIM SPG EGP DRE SSS E
Slide 33: REIT Industry Dividend Yields
33 FCE.A ARPI CCG ARCP 25 consecutive years of annual dividend increases with a declining AMH LTC HPP IRC ESRT BXP SLG KRC FR STAG PGRE SWAY AAT CSG SBY VNO GGP Superior operating risk profile and growth strategy; and ESS FRT PSB TRNO CONE Investment-grade debt rating (BBB+ / Baa1 / BBB+) CUBE
Slide 34: Appendix
NATIONAL RETAIL W PROPERTIES NYSE:NNN Appendix
Slide 35: NNN Attributes
NNN Attributes Triple-net long-term leases Small properties – typically $2 to $4 million investment size High land value per asset Net leases reduce volatility of returns – rent growth drops to bottom line Large universe of investment opportunities Fragmented non-institutional competitio
Slide 36: Diversification Reduces Risk
Diversification Reduces Risk (As a percentage of base rent – March 31, 2015) 2,104 Properties 400+ Tenants 47 States Northeast Southeast 14.6% 27.5% Midwest 23.1% Rocky West Mountain 4.4% South 6.3% 24.1% 36
Slide 37: Lease Expirations
Lease Expirations (As a percentage of base rent – March 31, 2015) 70% Weighted average remaining lease term of 11.5 years 60% Only 5.6% of leases expire through 2017 50% 40% 30% 20% 10% 0% Thereafter 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 37
Slide 38: Acquisition Accretion
Acquisition Accretion Accretion Equivalents to First Half 2014 Acquisitions $186 million at 7.6% Cap Rate (Leverage Neutral) 9.50% 9.00% All points on line create the same amount of 8.50% leverage neutral accretion per share 8.00% First Half 2014 Actual Cap Rate 7.50% 7.00% 6.50% 6.00% 5.50% - 50,00
Slide 39: Cost of Capital
Cost of Capital Driving Per Share Growth -- Cost of Capital Views "Economic / Expected Return Cost" "Cash / Accounting Cost" (inverse of FFO multiple driven) Dividend yield 5.0% Dividend per share growth 3.0 - 4.0% FFO per share growth 4.0 - 5.0% Weighting Cost Wtd Avg Weighting Cost Wtd Avg Debt 33
Slide 40: T.I. / Capital Expenditures
Historical Lease Renewals 39 Leases $8,500,000 $3,000,000 39 Leases (87% of Prior) $8,000,000 (95% of Prior) $7,500,000 $7,000,000 $2,500,000 T.I. / Capital Expenditures $6,500,000 $6,000,000 31 Leases (101% of Prior) $2,000,000 $5,500,000 Annual Rent $5,000,000 16 Leases (79% of Prior) $4,500,000 3
Slide 41: Top 20 Lines of Trade
Top 20 Lines of Trade (As of March 31, 2015) Percentage Number of Number of Number of Line of Trade of Base Rent Properties Tenants States 1. Convenience stores 17.7% 445 61 24 2. Restaurants - full service 9.0% 220 77 38 3. Automotive service 7.2% 187 14 25 4. Restaurants - limited service 6.9% 264
Slide 42: Line of Trade Concentrations
Line of Trade Concentrations (Concentrations over 10% as a percentage of base rent: 1996 – March, 31 2015) 30.0% 26.7% 25.0% 19.5% 18.9% 20.0% 14.9% 14.1% 13.9% 15.0% 11.1% 10.5% 10.0% 5.0% 0.0% Convenience Books Restaurants Drug Stores Grocery Consumer Sporting Goods Office Supplies Stores Electron
Slide 43: Top Tenants
Top Tenants Rent Coverage Range 1.9x -- 4.5x Average 2.9x Weighted Average 3.1x Fixed Charge Coverage Range 1.4x -- 3.6x Average 2.2x Weighted Average 2.3x Properties % Base Rent Energy Transfer Partners (Sunoco) 125 6.4% Mister Car Wash 87 4.5% Pantry 86 3.9% 7-Eleven 78 3.9% LA Fitness 22 3.8% Sun
Slide 44: NNN Acquisitions Approach has Multiple Advantages
NNN Acquisitions Approach has Multiple Advantages Acquiring properties directly from tenants produces more efficient pricing and higher initial returns NNN assesses discrete risks vs. More risks/unknowns in value-add, development, or Typical lower yielding real estate investment Each deal
Slide 45: NNN Approach to Net Lease Acquisitions
NNN Approach to Net Lease Acquisitions Due Diligence and Determination of Proceeds & Terms The chart to the right summarizes Real Estate Corporate our areas of focus, which: a) Attributes Credit determine our interest in a transaction, and b) drive our specific negotiation of the terms, Property
Slide 46: NNN's Proven Disposition Platform
NNN’s Proven Disposition Platform – Strengthens Portfolio Quality and Long-Term Earning by Reinvesting at Higher Return Rates Highly productive proprietary www.nnn1031.com website enables property sales at premium retail pricing, at volumes far above other triple-net sellers: Standardizes downlo
Slide 47: National Retail Properties, Inc. (NYSE: NNN)
National Retail Properties, Inc. (NYSE: NNN) 800-NNN-REIT www.nnnreit.com