National Retail Properties, Inc. (NYSE:NNN) Q2 2016 Earnings Conference Call - Final Transcript

Aug 02, 2016 • 10:30 am ET


National Retail Properties, Inc. (NYSE:NNN) Q2 2016 Earnings Conference Call - Final Transcript


Loading Event

Loading Transcript


Greetings and welcome to the National Retail Properties Second Quarter 2016 Earnings Call. A question-and-answer session will follow the formal presentation. [Operator Instructions]

I would now like to turn the conference over to your host, Mr. Craig Macnab. Thank you. You may begin.

Craig Macnab

Good morning, and welcome to our second quarter earnings release call. On this call with me are Jay Whitehurst, our President; and Kevin Habicht, our Chief Financial Officer, who will review details of our second quarter financial results following my brief opening comments.

We are pleased to have produced another consistent strong quarter at National Retail Properties with continued predictable per share growth. Also, we are delighted to be raising our dividend, which will make this our 27th consecutive year of increased dividends. I would like to point out that our dividend remains very well covered by portfolio cash flow, as Kevin will further describe. In the second quarter, we were very active growing our retail portfolio by investing $344 million at an initial cash yield of 6.9%. These acquisitions were all within our primary retail lines of trade, with noticeable activity taking place within the restaurant sector.

We've continued to remain highly selective in making acquisitions with our due diligence colleagues keenly focused on real estate metrics as they visit each and every property that we acquire. Field flow for quality acquisitions continues to be solid, and of course our access to capital and the cost of net capital has seldom been more attractive. The average lease duration for properties acquired in the second quarter is just over 18 years. Based on our current visibility, acquisitions in the second half of the year look good, although not as robust as in the past six months. As a result, we are raising our acquisition guidance for 2016 to a range of $650 million to $750 million.

As a reminder, acquisitions in the first half of the year had more impact on calendar year results than acquisitions that closed in the months ahead. Our fully diversified portfolio is in outstanding shape, and we remain 99.1% leased. In general, our tenants continued to perform to our expectations. The convenience stores sector has recently had the wind in their sails, with lower gasoline prices which has led to wider than normal margins at the pump. After many years of positive same-store sales growth, restaurants are all competing for market share in an environment of slightly growing sales. However, their ability to pay our rent remains very good.

At a higher level, we're encouraged about the outlook for consumer spending. If jobs keep getting created at almost 200,000 per month and wages slowly creep higher, consumers will have more disposable income which results in modestly higher consumer spending, which benefits all of our tenants. This year, we've utilized our ATM consistent with our capital market strategy, which includes tapping the markets when capital is available and well-priced. The amount of our equity issuance has occurred slightly earlier in the calendar year than