NNN REIT(NNN) - 2024 Q1 - Quarterly Results

Operating and Financial Highlights NNN REIT reported strong Q1 2024 results with year-over-year growth in key financial metrics, high occupancy, and strategic property investments Q1 2024 Operating Results vs. Q1 2023 | Metric | 2024 (in thousands, except per share data) | 2023 (in thousands, except per share data) | |---|---|---| | 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 | - FFO and Core FFO per share increased by 3.8% year-over-year, while AFFO per share increased by 2.4%[3] - The company maintained a high occupancy rate of 99.4% with a weighted average remaining lease term of 10.0 years[3] - During the quarter, NNN invested $124.5 million in 20 new properties, sold six properties for $18.5 million, and raised $21.5 million in net proceeds from issuing common shares[3] - CEO Steve Horn emphasized the quarter's predictable performance, highlighting the $125 million in property acquisitions at an 8.0% initial cash cap rate and an 18-year weighted average lease term[4] Financial Statements This section presents the unaudited summary financial statements for Q1 2024, detailing the company's financial performance and position Income Statement Summary Q1 2024 total revenues increased to $215.4 million from $204.1 million year-over-year, with net earnings growing to $94.4 million Q1 2024 Income Statement Summary (unaudited) | Metric | 2024 (in thousands) | 2023 (in thousands) | |---|---|---| | Revenues | $215,407 | $204,108 | | Rental income | $214,825 | $203,630 | | Operating expenses | $81,907 | $81,383 | | Depreciation and amortization | $60,615 | $59,148 | | Earnings from operations | $138,321 | $129,025 | | Interest expense | $44,069 | $38,891 | | Net earnings | $94,371 | $90,167 | | Diluted Net earnings per share | $0.52 | $0.50 | Balance Sheet Summary As of March 31, 2024, total assets were $8.71 billion, with liabilities at $4.53 billion and equity at $4.17 billion Balance Sheet Summary (unaudited) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | |---|---|---| | Assets | | | | Real estate portfolio, net | $8,586,856 | $8,535,851 | | Total assets | $8,705,742 | $8,661,968 | | Liabilities | | | | Line of credit payable | $116,200 | $132,000 | | Notes payable, net | $4,229,933 | $4,228,544 | | 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 | Reconciliation of Non-GAAP Financial Measures This section reconciles GAAP Net Earnings to non-GAAP metrics FFO, Core FFO, and AFFO, detailing per share performance for Q1 2024 Q1 2024 FFO and Core FFO Reconciliation | Metric | 2024 (in thousands, except per share) | 2023 (in thousands, except per share) | |---|---|---| | Net earnings | $94,371 | $90,167 | | Total FFO adjustments | $56,890 | $55,382 | | FFO | $151,261 | $145,549 | | Diluted FFO per share | $0.83 | $0.80 | | Total Core FFO adjustments | $317 | $423 | | Core FFO | $151,578 | $145,972 | | Diluted Core FFO per share | $0.83 | $0.80 | Q1 2024 AFFO Reconciliation | Metric | 2024 (in thousands, except per share) | 2023 (in thousands, except per share) | |---|---|---| | Core FFO | $151,578 | $145,972 | | Total AFFO adjustments | $1,681 | $2,194 | | AFFO | $153,259 | $148,166 | | Diluted AFFO per share | $0.84 | $0.82 | 2024 Full-Year Guidance NNN REIT provided its full-year 2024 guidance, projecting Core FFO and AFFO per share ranges, alongside acquisition and disposition volumes 2024 Guidance | Metric | 2024 Guidance | |---|---| | Net earnings per share (excluding certain items) | $1.94 - $2.00 per share | | Core FFO per share | $3.25 - $3.31 per share | | AFFO per share | $3.29 - $3.35 per share | | Acquisition volume | $400 - $500 Million | | Disposition volume | $80 - $120 Million | Debt Summary This section details the company's debt profile and covenant compliance as of March 31, 2024, highlighting a strong balance sheet Debt Composition As of March 31, 2024, total unsecured debt was approximately $4.42 billion with a 4.0% weighted average interest rate and 11.8-year weighted average maturity Unsecured Debt Summary as of March 31, 2024 | Debt Type | Principal (in thousands) | Stated Rate | Maturity Date | |---|---|---|---| | Line of credit payable | $116,200 | SOFR + 87.5 bps | June 2025 | | Unsecured notes payable | $4,300,000 | Various (2.500% - 5.600%) | 2024 - 2052 | | Total Unsecured Debt | $4,416,200 | (W.A. 4.0%) | (W.A. 11.8 years) | - As of March 31, 2024, the Net Debt / EBITDA ratio based on annualized current quarter EBITDA is 5.5x[26] Key Financial Covenants The company reported full compliance with all key financial covenants for its unsecured credit facility and notes as of March 31, 2024 Covenant Compliance as of March 31, 2024 | Key Covenants (Unsecured Bank Credit Facility) | Required | Actual | |---|---|---| | Maximum leverage ratio | < 0.60 | 0.39 | | Minimum fixed charge coverage ratio | > 1.50 | 4.43 | | Unencumbered asset value ratio | > 1.67 | 2.64 | | Key Covenants (Unsecured Notes) | Required | Actual | | Limitation on incurrence of total debt | ≤ 60% | 40.9% | | Debt service coverage ratio | ≥ 1.50 | 4.4 | Property Portfolio Analysis As of March 31, 2024, NNN's portfolio comprised 3,546 properties across 49 states, highly diversified by line of trade, geography, and tenancy - 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[4] Diversification by Line of Trade and Geography The portfolio demonstrates strong diversification by industry and location, with top lines of trade and key states highlighted Top 5 Lines of Trade by Annual Base Rent (2024) | Lines of Trade | % of Annual Base Rent | |---|---| | 1. Automotive service | 16.3% | | 2. Convenience stores | 16.2% | | 3. Restaurants – full service | 8.6% | | 4. Restaurants – limited service | 8.5% | | 5. Family entertainment centers | 6.7% | Top 5 States by Annual Base Rent | State | % of Total | |---|---| | 1. Texas | 16.9% | | 2. Florida | 9.4% | | 3. Illinois | 5.1% | | 4. Ohio | 4.9% | | 5. Georgia | 4.8% | Tenant and Lease Expiration Profile The tenant base is highly granular, with the largest tenant comprising 4.4% of annual base rent, and a well-staggered lease expiration schedule Top 5 Tenants by Annual Base Rent | Tenant | % of Total | |---|---| | 1. 7-Eleven | 4.4% | | 2. Mister Car Wash | 4.1% | | 3. Camping World | 3.8% | | 4. Dave & Buster's | 3.5% | | 5. LA Fitness | 3.0% | Lease Expirations by % of Annual Base Rent | Year | % of Total | |---|---| | 2024 | 1.2% | | 2025 | 4.5% | | 2026 | 4.7% | | 2027 | 8.1% | | Thereafter | 50.1% |