Investor Update FEBRUARY 2020 Safe Harbor (All data as of December - - PowerPoint PPT Presentation

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Investor Update FEBRUARY 2020 Safe Harbor (All data as of December - - PowerPoint PPT Presentation

Aug 28, 2023 90 likes •341 views

Investor Update FEBRUARY 2020 Safe Harbor (All data as of December 31, 2019) This presentation contains certain statements that are the Companys and Managements hopes, intentions, beliefs, expectations, or projections of the future and

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Investor Update

FEBRUARY 2020

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Safe Harbor

(All data as of December 31, 2019) 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 any such forward-looking statements are not guarantees of future performance, and involve risks and uncertainties. The company’s actual future results may differ significantly from the matters discussed in these forward- looking statements, and we may not release revisions to these forward-looking statements to reflect changes after we’ve made the statements. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company’s filings with the SEC including, but not limited to, the Company’s report on Form 10-K, as well as company press releases.

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Current Information

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Current Information

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  • Real Estate Investment Trust (NYSE: NNN)
  • December 31, 2019 closing price: $53.62
  • December 31, 2019 dividend yield: 3.8%
  • 30 Consecutive annual dividend increases
  • Dividend payout ratio: 72% of AFFO
  • Healthy portfolio: 99.0% current occupancy
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Consistent and Simple Strategy

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  • Long term investors of single-tenant, freestanding retail properties

(no malls or strip centers)

  • Avoid retail categories most susceptible to ecommerce threat
  • 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 manage risk, enhance value and partially finance new property

acquisitions

  • Preserve conservative balance sheet and financial flexibility through access to

multiple sources of capital and unsecured debt

  • Produce safe and growing dividends
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Consistent and Simple Strategy

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High quality, broadly diversified portfolio:

  • $8.5 billion total assets (gross book basis)
  • 3,118 properties (32.5 million SF) in 48 states
  • 400+ national and regional retail tenants
  • Top 25 tenants (58% of annual rent) average 1,099 stores each

Maintaining this strategy has resulted in:

  • 30 consecutive annual dividend increases
  • Total shareholder returns exceeding REIT and general equity averages over 2-,

3-, 5-, 10-, 15-, 20- and 25-year periods

  • Generation of 5.8% average annual Core FFO growth per share since 2014
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Diversification Reduces Risk

8 Top 5 States by Number of Properties Texas 502 Florida 230 Ohio 199

  • N. Carolina

156 Georgia 151

(As a percentage of annual base rent – December 31, 2019)

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Top Ten Lines of Trade

9 Convenience stores, 18.2% Automotive service, 9.6% Restaurants - limited service, 8.8% 6.7% Health and fitness, 5.2% Theaters, 4.7% RV dealers, parts and accessories, 3.4% Automotive parts, 3.1% Equipment rental, 2.6%

Family entertainment centers, 6.7% Restaurants – full service, 11.1%

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From 2003 – 2019, NNN’s occupancy never fell below 96.4% while the REIT industry average never rose above 93.7%.

Source: SNL Financial *REIT Industry Average as of Q3 2019 85% 90% 95% 100% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

NNN REIT Industry (Excludes Hotels & Health Care)

97.0% 98.3% 98.2% 98.3% 96.7% 96.4% 96.9% 97.9% 98.2% 98.6% 99.1% 99.0% 99.1% 98.2% 99.0% 92.1% 93.0% 93.5% 93.5% 92.8% 92.0% 95.0% 90.1% 90.8% 90.7% 92.0% 92.7% 92.5% 93.3% 93.5% 93.7% *93.6% 97.4% 97.4%

98.0% Avg.

NNN’s Strategy Results in Higher Occupancy and Less Volatility

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Core Competency Focus: Single Tenant Retail Properties

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Why Retail (vs. multiple property types)

  • Higher lease renewal probability – better risk-adjusted returns
  • Retail tenants are not likely to risk disrupting established customer base to save

moderate amounts of rent in new location

  • Particular location less meaningful to office/industrial tenants (cheaper commodity

space in same zip code may work fine)

  • Higher renewal rates result in lower vacancy and lower tenant build out costs

creating more consistent returns

  • Large market with less buyer competition than other property types because

properties are smaller

  • Good retail locations provide deeper market for replacement tenants
  • Core competency of management and deep market penetration
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Core Competency Focus: Single Tenant Retail Properties

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Net Lease Strategy Generates Reliable Income Stream w/Low Volatility

  • Tenants pay taxes, maintenance and insurance

Why Selective Non-Investment Grade Tenants (vs. investment grade focus)

  • Better pricing – higher cap rate, lower investment
  • Better rent growth over lease term
  • Durability of tenant credit can be fleeting
  • Opportunity for tenant credit improvement

Long-Term Approach

  • Initial lease terms are 15-20 years (renewal options)
  • Don’t overreact to short-term market fluctuations
  • Multi-year perspective to running our portfolio
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Core Competency Focus: Single Tenant Retail Properties

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Buy Smart with Extensive Underwriting Process Up Front

  • Look for strong retail real estate locations
  • For existing tenant AND any future alternative retail tenant

Lower Initial Investment in Property

  • Less money invested allows us to offer lower rent to retailer
  • Lower rent = lower occupancy costs for retailer
  • As a result, retailer more likely to succeed at that location
  • Lower rent = easier to re-lease property without reduction in rent
  • We have contractual rent increases built into the lease
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Current State of Retail

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E-Commerce Threat

  • NNN focuses on retail categories that we believe are less susceptible to the e-

commerce threat:

  • Convenience stores, restaurants, fitness centers, car washes, etc. are all

categories that aren’t under attack from the internet. (We own nearly no apparel oriented retailers.)

  • Most susceptible categories in our portfolio (books, consumer electronics,
  • ffice supplies) are each less than 2% categories. And we believe the real

estate that we own for those stores is well-located.

  • Successful bricks-and-mortar stores have an online presence AND many e-

retailers are now adding physical stores (Omni-channel). (See 5/16/17 WSJ: “Web-Retail Startups Turn for Growth to Bricks-and-Mortar”)

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Lease Expirations

(As a percentage of annual base rent – December 31, 2019)

0% 10% 20% 30% 40% 50% 60% 70% 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Thereafter

  • Weighted average remaining lease term of 11.2 years
  • Only 10.7% of leases expire through 2022
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$17 $220 $194 $293 $333 $109 $249 $188 $106 $104 $221 $552 $513 $337 $285 $617 $598 $567 $610 $648

$0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $550 $600 $650 $700 $750 $800 $850 $900 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Relationship @ 7.5% Average Cap Rate ($4,948 million = 73%) Market / Auction @ 7.3% Average Cap Rate ($1,813 million = 27%)

$238 $772 $707 $630 $618 $726 $755 $716 $752 $847

2010 – 2019 Acquisitions Volume in $ Millions by Source

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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 (7.5% since 2010; 6.9% recent

acquisitions) create much more room for spread compression before acquisitions cease being accretive

  • Less exposure to refinancing risk – from low leverage balance sheet and long

duration maturities

  • Little floating rate debt – NNN’s $900 million bank credit facility has an
  • utstanding balance of $133.6 million at 12/31/19
  • Less than $327 million of debt maturing through 2022
  • Well-laddered debt maturities limits a particular year’s exposure to rate spikes

NNN in a Rising Interest Rate Environment

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Investment-grade debt rating (BBB+ / Baa1 / BBB+) supported by industry leading leverage ratios

1 Weighted average maturity 8.3 years; weighted average effective interest rate 4.0%

Secured Debt Unsecured Debt Preferred Equity Common Equity

0.1% Ӏ $12.1 million 35.1% Ӏ $2,976.3 million 4.1% Ӏ $345.0 million 60.7% Ӏ $5,142.8 million

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5.2% 5.2% 3.8% 3.5% 4.3% $- $50 $100 $150 $200 $250 $300 $350 $400 $450 2020 2021 2022 2023 2024 2025 2026 2027 2028 2048

Millions

3.9% 4.0% 3.6% 3.3% 4.8% Weighted average debt maturity of 8.3 years

Well Laddered Debt Maturities

Total Capitalization: $8.5 billion (gross book) Interest coverage ratio: 5.0x Fixed-Charge coverage ratio: 4.0x Debt / EBITDA: 4.9x

Conservative Balance Sheet Management

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Great People in a Supportive Culture

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Over 440

440 volunteer hours in 2018

NNN University

  • 3000+ online courses available to associates 24/7
  • 73% of associates completed NNNU training certifications.

Educational Seminars

  • Departmental overviews to reinforce how each department

creates shareholder value

  • Data Security, protecting NNN and our associates from

cyber intrusion and data breaches

  • Retirement planning

Learning & Development Community Service Average tenure of Senior Leadership is

19 years 10 years is the average tenure

  • f an NNN employee

46% 20%

>10 yrs 5-10 yrs

33%

<5 yrs

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Long-Term Dividend History

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$1.00 $1.10 $1.20 $1.30 $1.40 $1.50 $1.60 $1.70 $1.80 $1.90 $2.00 $2.10

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Dividends Per Share

30 consecutive years of annual dividend increases – Third longest of all public REITs and 99% of all public companies

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NNN Consistently Outperforms the REIT Industry and Major Indices Total Return Comparison Value of $1,000 Investment

NNN Outperforms 1 Year 2 Years 3 Years 5 Years 10 Years 15 Years 20 Years 25 Years (NNN = $53.62 at 12/31/19)

National Retail Properties (NNN) 14.8% 16.2% 11.3% 10.9% 15.1% 12.6% 15.9% 13.6%

Indices * NAREIT Equity REIT Index (FNERTR) 28.7% 11.1% 10.3% 8.4% 12.6% 8.4% 11.6% 10.9% * Morgan Stanley REIT Index (RMS G) 25.8% 9.6% 8.1% 7.0% 11.9% 7.9% 11.2% 10.5% S&P 500 Index (SPX) 31.5% 12.1% 15.3% 11.7% 13.5% 9.0% 6.1% 10.2% * S&P 400 Index (MID) 26.2% 5.9% 9.2% 9.0% 12.7% 9.5% 9.5% 12.1%

* NNN is a member of this index Source: Bloomberg

NNN Outperforms 1 Year 2 Years 3 Years 5 Years 10 Years 15 Years 20 Years 25 Years

National Retail Properties (NNN) $1,148 $1,378 $1,378 $1,680 $4,077 $5,915 $19,194 $24,023

Indices * NAREIT Equity REIT Index (FNERTR) $1,287 $1,234 $1,341 $1,498 $3,270 $3,330 $8,964 $13,223 * Morgan Stanley REIT Index (RMS G) $1,258 $1,200 $1,261 $1,405 $3,084 $3,120 $8,313 $11,999 S&P 500 Index (SPX) $1,315 $1,256 $1,531 $1,737 $3,560 $3,637 $3,238 $11,338 * S&P 400 Index (MID) $1,262 $1,121 $1,303 $1,539 $3,303 $3,880 $6,108 $17,229

* NNN is a member of this index

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2019 Highlights and Valuation

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  • Long term investors of single-tenant, freestanding retail properties

(no malls or strip centers)

  • Dividend yield at December 31, 2019 of 3.8%
  • Maintained high level of occupancy at 99.0%
  • Invested $752.5 million in property investments @ average 6.9% cap rate

(initial cash yield)

  • Sold 59 properties for $126.2 million
  • Total average annual shareholder return of over 10% for the past 2-, 3-, 5-, 10-, 15-,

20- and 25-years exceeds industry averages

  • Maintained dividend payout ratio of approximately 72% of AFFO
  • Maintained significant balance sheet capacity for future acquisitions
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National Retail Properties, Inc. (NYSE: NNN) 800-NNN-REIT www.nnnreit.com