ORLANDO, Fla., Feb. 3 -- Commercial Net Lease
Realty, Inc. (NYSE: NNN), a real estate investment trust, today announced
operating results for the quarter and year ended December 31, 2005.
Highlights include:
Operating Results:
* Net earnings available to common shareholders, revenues, funds from
operations ("FFO") available to common shareholders:
Quarter Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
-------- -------- -------- --------
(in thousands, except per share data)
Revenues $ 41,037 $ 32,420 $ 145,177 $ 127,190
Net earnings
available to
common shareholders $ 16,751 $ 17,924(1) $ 85,392 $ 59,251(1)
Net earnings per
common share
(diluted) $ 0.31 $ 0.34(1) $ 1.56 $ 1.15(1)
FFO available to
common
shareholders $ 19,560(2) $ 20,760(1) $ 81,803(2) $ 73,065(1)
FFO per common
share (diluted) $ 0.36(2) $ 0.39(1) $ 1.50(2) $ 1.41(1)
FFO (Operations)
available to
common shareholders $ 21,942(4) $ 21,249(3) $ 84,185(5) $ 76,806(3)
FFO (Operations)
per common share
(diluted) $ 0.40(4) $ 0.40(3) $ 1.54(5) $ 1.48(3)
(1) Includes transition costs of $489 ($0.01 per share) and $3,741
($0.07 per share) for the quarter and year ended December 31, 2004,
respectively.
(2) Excludes extraordinary gain of $2,980 ($0.06 per share) and $14,786
($0.27 per share) related to acquisition of Orange Avenue Mortgage
Investments, Inc. for the quarter and year ended December 31, 2005,
respectively.
(3) Excludes transition costs of $489 ($0.01 per share) and $3,741
($0.07 per share) for the quarter and year ended December 31, 2004,
respectively
(4) Excludes extraordinary gain of $2,980 ($0.06 per share) and
impairment charge of $2,382 ($0.04 per share) related to acquisition
and REIT conversion of Orange Avenue Mortgage Investment, Inc. for
the quarter ended December 31, 2005.
(5) Excludes extraordinary gain of $14,786 ($0.27 per share) and
impairment charge of $2,382 ($0.04 per share) related to acquisition
and REIT conversion of Orange Avenue Mortgage Investment, Inc. for
the year ended December 31, 2005.
* Investment Portfolio occupancy increased to 98.3% at December 31, 2005,
compared to 97.4% at December 31, 2004.
Investments and Dispositions for the quarter ended December 31, 2005:
* Investments:
-- $156.7 million in the Investment Portfolio, including acquiring 60
properties with an aggregate 270,000 square feet of gross leasable
area
-- $18.3 million in the Development Inventory Portfolio, including
acquiring two properties
-- $51.9 million in the Exchange Inventory Portfolio, including
acquiring 35 properties
* Dispositions:
-- Three Investment properties with an aggregate 27,000 square feet of
gross leasable area, with net proceeds of $3.4 million, resulting in
a gain of $104,000
-- Four Development Inventory properties with net proceeds of
$16.7 million, resulting in a gain of $3.3 million, net of
intercompany eliminations and minority interest
-- Six Exchange Inventory properties with net proceeds of $4.8 million,
resulting in a gain of $688,000
Investments and Dispositions for the year ended December 31, 2005:
* Investments:
-- $332.4 million in the Investment Portfolio, including acquiring 170
properties with an aggregate 1,150,000 square feet of gross leasable
area
-- $67.8 million in the Development Inventory Portfolio, including
acquiring 15 properties
-- $66.6 million in the Exchange Inventory Portfolio, including
acquiring 58 properties
-- $9.4 million to acquire 78.9 percent of Orange Avenue Mortgage
Investments, Inc.
* Dispositions:
-- Twelve Investment properties with an aggregate 476,000 square feet of
gross leasable area, with net proceeds of $40.3 million, resulting in
a gain of $9.8 million
-- Twelve Development Inventory properties with net proceeds of
$61.1 million, resulting in a gain of $13.0 million, net of
intercompany eliminations and minority interest
-- Sixteen Exchange Inventory properties with net proceeds of
$17.7 million, resulting in a gain of $2.6 million
The Company also announced increased FFO per share guidance for 2006 at
$1.58 - $1.62 per share. This equates to estimated net earnings per share
before any gains or losses from the sale of investment properties of $1.22 -
$1.26 per share plus $0.36 per share of expected real estate related
depreciation.
Craig Macnab, Chief Executive Officer and President, commented, "2005 was
a record year for our shareholders. More importantly, we are encouraged about
the outlook for 2006. Our associates are firing on all cylinders and the
timing of our activity over the last 60 days positions us well for the new
year."
Commercial Net Lease Realty invests primarily in high-quality, retail
properties subject generally to long-term, net leases with established
tenants, such as Barnes & Noble, Best Buy, CVS, OfficeMax and the United
States of America. As of December 31, 2005, the Company owned 524 Investment
Properties in 41 states with a gross leasable area of approximately 9.2
million square feet. These Investment Properties are leased to 176
corporations in 61 industry classifications.
Management will hold a conference call on February 3, 2006 at 10:00 am EST
to review the Company's results. The call can be accessed on the Company's web
site live at http://www.nnnreit.com . For those unable to listen to the live
broadcast, a replay will be available on the Company's web site. In addition,
the Company will post a summary of any earnings guidance given on the call to
the Company's web site.
Statements in this press release that are not strictly historical are
"forward-looking" statements. 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, local real estate conditions, changes in interest rates,
increases in operating costs, the availability of capital, and the
profitability of the Company's taxable subsidiary. Additional information
concerning these and other factors that could cause actual results to differ
materially from those forward-looking statements is contained from time to
time in the Company's Securities and Exchange Commission ("SEC") filings,
including, but not limited to, the Company's Annual Report on Form 10-K.
Copies of each filing may be obtained from the Company or the SEC.
Consequently, 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. The Company 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 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) on the disposition of real estate held for investment, and the
Company's share of these items from the Company's unconsolidated partnerships.
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 income 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.
The Company has determined that there are earnings from discontinued
operations in each of its segments, real estate held for investment and real
estate held for sale. All property dispositions from the Company's held for
investment segment are classified as discontinued operations. In addition,
certain properties in the Company's held for sale segment that have generated
revenues before disposition are classified as discontinued operations. These
held for sale properties have not historically been classified as discontinued
operations; prior period comparable condensed consolidated financial
statements have been restated to include these properties in its earnings from
discontinued operations. These adjustments resulted in a decrease in the
Company's reported total revenues and total and per share income from
continuing operations and an increase in the Company's income from
discontinued operations. However, the Company's total and per share FFO and
net income available to common shareholders are not affected.
Commercial Net Lease Realty, Inc.
(in thousands, except per share data)
Income Statement
Summary Quarter Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
-------- -------- -------- --------
Revenues:
Rental and earned
income $ 33,701 $ 27,742 $ 123,252 $ 109,036
Real estate expense
reimbursement from
tenants 2,129 1,830 6,350 5,756
Gain on disposition
of real estate,
Inventory Portfolio
(Note 1) 1,302 574 2,010 4,700
Interest and other
income from real
estate transactions 1,275 2,274 6,216 7,698
Interest income on
mortgage residual
interests 2,630 -- 7,349 --
-------- -------- -------- --------
41,037 32,420 145,177 127,190
-------- -------- -------- --------
Operating expenses:
General and
administrative 6,578 5,846 23,411 22,995
Real estate 3,860 3,034 11,534 11,870
Depreciation and
amortization 6,457 4,312 22,276 16,682
Transition costs -- 489 -- 3,741
Impairment - real
estate -- -- 1,673 --
Impairment -
mortgage residual
interests 2,382 -- 2,382 --
-------- -------- -------- --------
19,277 13,681 61,276 55,288
-------- -------- -------- --------
Other expenses
(revenues):
Interest and other
income (862) (704) (2,054) (3,761)
Interest expense 10,827 8,338 35,941 32,381
-------- -------- -------- --------
9,965 7,634 33,887 28,620
-------- -------- -------- --------
Income tax benefit 1,395 551 2,776 2,544
Minority interest (102) (227) 137 (1,243)
Equity in earnings of
unconsolidated
affiliates (82) 1,030 1,209 4,724
-------- -------- -------- --------
Earnings from
continuing
operations 13,006 12,459 54,136 49,307
-------- -------- -------- --------
Earnings from
discontinued
operations:
Real estate,
Investment
Portfolio 252 2,293 11,102 6,080
Real estate,
Inventory
Portfolio, net of
income tax expense
and minority
interest 1,934 4,174 9,376 9,547
-------- -------- -------- --------
2,186 6,467 20,478 15,627
-------- -------- -------- --------
Earnings before
extraordinary gain 15,192 18,926 74,614 64,934
Extraordinary gain 2,980 -- 14,786 --
-------- -------- -------- --------
Net earnings 18,172 18,926 89,400 64,934
Series A Preferred
Stock dividends (1,002) (1,002) (4,008) (4,008)
Series B Convertible
Preferred Stock
dividends (419) (419) (1,675) (1,675)
-------- -------- -------- --------
Net earnings
available to common
shareholders - basic 16,751 17,505 83,717 59,251
Series B Convertible
Preferred Stock
dividends, if
dilutive -- 419 1,675 --
-------- -------- -------- --------
Net earnings
available to common
stockholders -
diluted $ 16,751 $ 17,924 $ 85,392 $ 59,251
======== ======== ======== ========
Weighted average
common shares
outstanding:
Basic 54,160 51,725 52,985 51,312
======== ======== ======== ========
Diluted 54,508 53,460 54,640 51,743
======== ======== ======== ========
Commercial Net Lease Realty, Inc.
(in thousands, except per share data)
Income Statement
Summary Quarter Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
-------- -------- -------- --------
Net earnings per
share available to
common shareholders:
Basic:
Continuing
operations $ 0.21 $ 0.22 $ 0.91 $ 0.85
Discontinued
operations 0.04 0.12 0.39 0.30
Extraordinary
gain 0.06 -- 0.28 --
------- ------ ------ ------
Net earnings $ 0.31 $ 0.34 $ 1.58 $ 1.15
======= ====== ====== ======
Diluted:
Continuing
operations $ 0.21 $ 0.22 $ 0.92 $ 0.85
Discontinued
operations 0.04 0.12 0.37 0.30
Extraordinary
gain 0.06 -- 0.27 --
------- ------ ------ ------
Net earnings $ 0.31 $ 0.34 $ 1.56 $ 1.15
======= ====== ====== ======
Commercial Net Lease Realty, Inc.
(in thousands)
Earnings from Discontinued Operations - Investment Portfolio:
In accordance with Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
No. 144"), the Company has classified its investment assets sold and
leasehold interests expired subsequent to December 31, 2001, the
effective date of SFAS No. 144, as discontinued operations. In addition,
the Company has classified any investment asset that was held for sale at
December 31, 2005, as discontinued operations. The following is a
summary of earnings from discontinued operations from the real estate
Investment Portfolio.
Quarter Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
-------- -------- -------- --------
Revenues:
Rental and earned
income $ 31 $ 1,062 $ 3,365 $ 4,540
Real estate expense
reimbursements
from tenants -- (1) -- 3
Interest and other
income from real
estate
transactions 125 49 358 257
-------- -------- -------- --------
156 1,110 3,723 4,800
-------- -------- -------- --------
Expenses:
General and
administrative 1 -- 20 (4)
Real estate 6 121 251 411
Depreciation and
amortization 1 133 53 711
Impairment - real
estate -- -- 2,056 --
Interest -- (52) 57 125
-------- -------- -------- --------
8 202 2,437 1,243
-------- -------- -------- --------
Gain on disposition
of real estate
(Note 1) 104 1,385 9,816 2,523
-------- -------- -------- --------
Earnings from
discontinued
operations from
real estate held
for investment $ 252 $ 2,293 $ 11,102 $ 6,080
======== ======== ======== ========
Earnings from Discontinued Operations - Inventory Portfolio:
The Company has classified its Inventory Properties that are currently
held for sale and generating rental revenues as discontinued operations.
The Company has reclassified all held for sale properties that generated
rental revenue before disposition which were sold subsequent to December
31, 2001, the effective date of SFAS No. 144, as discontinued operations.
The following is a summary of earnings from discontinued operations from
the real estate Inventory Portfolio.
Quarter Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
-------- -------- -------- --------
Revenues:
Rental income $ 598 $ 598 $ 1,992 $ 2,336
Real estate expense
reimbursements
from tenants 30 14 69 183
Gain on disposition
of real estate,
held for sale
(Note 1) 3,244 7,898 19,617 18,702
Interest and other
income from real
estate transactions 21 121 826 202
-------- -------- -------- --------
3,893 8,631 22,504 21,423
-------- -------- -------- --------
Expenses:
General and
administrative 3 10 37 33
Real estate 55 101 222 343
Depreciation and
amortization -- 3 21 5
Interest 109 283 815 511
-------- -------- -------- --------
167 397 1,095 892
-------- -------- -------- --------
Income tax expense (1,183) (2,554) (5,737) (5,841)
Minority interest (609) (1,506) (6,296) (5,143)
-------- -------- -------- --------
Earnings from
discontinued
operations $ 1,934 $ 4,174 $ 9,376 $ 9,547
======== ======== ======== ========
Commercial Net Lease Realty, Inc.
(in thousands, except per share data)
Quarter Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
------- ------- ------- -------
Reconciliation of net earnings
to FFO and FFO available to
common shareholders:
------------------------------
Net earnings $ 18,172 $ 18,926 $ 89,400 $ 64,934
Real estate depreciation and
amortization:
Continuing operations 5,744 3,932 20,354 15,004
Discontinued operations 1 133 53 711
Partnership real estate
depreciation 148 156 606 622
Gain on disposition of real
estate held for investment
from discontinued operations (104) (1,385) (9,816) (2,523)
Extraordinary gain (2,980) -- (14,786) --
------- ------- ------- -------
FFO 20,981 21,762 85,811 78,748
Series A Preferred Stock
dividends (1,002) (1,002) (4,008) (4,008)
Series B Convertible Preferred
Stock dividends (419) (419) (1,675) (1,675)
------- ------- ------- -------
FFO available to common
stockholders - basic 19,560 20,341 80,128 73,065
Series B Convertible Preferred
Stock dividends, if dilutive -- 419 1,675 --
------- ------- ------- -------
FFO available to common
stockholders - diluted 19,560 20,760 81,803 73,065
Transition costs -- 489 -- 3,741
Impairment - mortgage residual
interests 2,382 -- 2,382 --
------- ------- ------- -------
FFO (Operations) available to
common shareholders
$ 21,942 $ 21,249 $ 84,185 $ 76,806
======== ======== ======== ========
Funds from operations per share:
Basic $ 0.36 $ 0.39 $ 1.51 $ 1.42
======== ======== ======== ========
Diluted $ 0.36 $ 0.39 $ 1.50 $ 1.41
======== ======== ======== ========
Diluted (Operations) $ 0.40 $ 0.40 $ 1.54 $ 1.48
======== ======== ======== ========
Note 1: Real Estate Disposition Summary
---------------------------------------
Quarter Ended December 31,
2005 2004
------------------- -------------------
# of # of
Properties Properties
---------- ----------
Reconciliation of gain on
disposition between
continuing and discontinued
operations:
----------------------------
Continuing operations 3 $ 1,302 1 $ 574
Discontinued operations:
Investment Portfolio 3 104 6 1,385
Inventory Portfolio 7 3,244 9 7,898
Minority interest, Inventory
Portfolio -- (606) -- (1,760)
------ ------ ------ ------
13 $ 4,044 16 $ 8,097
====== ======= ====== =======
Reconciliation of gain on
disposition of type:
----------------------------
Inventory Portfolio:
Development 4 $ 3,502 5 $ 6,730
Exchange 6 688 5 1,505
Intercompany eliminations -- 356 -- 237
Minority interest,
Development -- (606) -- (1,760)
------ ------ ------ ------
10 3,940 10 6,712
Investment Portfolio 3 104 6 1,385
------ ------ ------ ------
13 $ 4,044 16 $ 8,097
====== ======= ====== =======
Note 1: Real Estate Disposition Summary
---------------------------------------
Year Ended December 31,
2005 2004
------------------- -------------------
# of # of
Properties Properties
---------- ----------
Reconciliation of gain on
disposition between
continuing and discontinued
operations:
----------------------------
Continuing operations 6 $ 2,010 7 $ 4,700
Discontinued operations:
Investment Portfolio 12 9,816 20 2,523
Inventory Portfolio 22 19,617 17 18,702
Minority interest, Inventory
Portfolio -- (5,999) -- (6,422)
------ ------ ------ ------
40 $ 25,444 44 $ 19,503
====== ======== ====== ========
Reconciliation of gain on
disposition of type:
----------------------------
Inventory Portfolio:
Development 12 $ 18,065 16 $ 20,673
Exchange 16 2,641 8 1,912
Intercompany eliminations -- 921 -- 817
Minority interest,
Development -- (5,999) -- (6,422)
------ ------- ------ -------
28 15,628 24 16,980
Investment Portfolio 12 9,816 20 2,523
------ ------ ------ ------
40 $ 25,444 44 $ 19,503
====== ======== ====== ========
Commercial Net Lease Realty, Inc.
(in thousands)
Balance Sheet Summary December 31, December 31,
2005 2004
----------- -----------
Assets:
Cash and cash equivalents $ 8,234 $ 1,947
Restricted cash 30,191 --
Receivables, net of allowance 8,547 6,636
Mortgages, notes and accrued interest
receivable, net of allowance 51,086 45,564
Real estate, Investment Portfolio:
Accounted for using the operating
method, net of accumulated
depreciation and amortization 1,296,793 1,009,397
Accounted for using the direct
financing method 95,704 102,311
Held for sale, net of impairment 1,600 --
Real estate, Inventory Portfolio, net
of accumulated depreciation 131,074 58,049
Investment in unconsolidated mortgage
residual interests -- 29,672
Mortgage residual interests 55,184 --
Accrued rental income, net of allowance 27,999 28,619
Other assets 27,004 17,853
----------- -----------
Total assets $ 1,733,416 $ 1,300,048
=========== ===========
Liabilities and stockholders' equity:
Line of credit payable $ 162,300 $ 17,900
Mortgages payable 151,133 157,168
Notes payable - secured 28,250 --
Notes payable 493,321 323,132
Financing lease obligation 26,041 26,041
Income tax liability 13,748 702
Other liabilities 25,597 16,079
Minority interest 4,939 2,028
Stockholders' equity 828,087 756,998
----------- -----------
Total liabilities and equity $ 1,733,416 $ 1,300,048
=========== ===========
Common shares outstanding 55,131 52,078
=========== ===========
Gross leaseable area, Investment
Portfolio 9,227 8,542
=========== ===========
Orange Avenue Mortgage Investments, Inc.
(in thousands)
The Company acquired 78.9 percent of Orange Avenue Mortgage Investments,
Inc. ("OAMI") on May 2, 2005. The following summary represents the balances
related to OAMI included in the Company's Balance Sheet and Income Statement
Summary:
December 31,
Balance Sheet Summary 2005
--------------------- -----------
Assets
Cash and restricted cash $ 17,978
Receivables and other assets 6,632
Mortgage residual interests 55,184
-----------
$ 79,794
===========
Liabilities
Notes payable - secured $ 28,250
Income tax liability 14,551
Other liabilities 474
-----------
$ 43,275
===========
Minority interest $ 3,682
===========
Quarter May 2, 2005
Ended Through
December 31, December 31,
2005 2005
----------- -----------
Income Statement Summary
------------------------
Revenues:
Interest income on mortgage
residual interests $ 2,630 $ 7,349
Interest and other income 453 825
----------- -----------
3,083 8,174
Expenses:
General and administrative 208 397
Impairment - mortgage residual interests 2,382 2,382
Interest 767 2,076
Amortization 66 177
----------- -----------
3,423 5,032
----------- -----------
Income tax benefit 686 28
Minority interest (151) (378)
----------- -----------
Net earnings $ 195 $ 2,792
=========== ===========
Commercial Net Lease Realty, Inc.
Investment Portfolio
Top 20 Tenants
--------------
% of % of
Tenant Total(1) Tenant Total(1)
------ -------- ------ --------
1. United States of 11. Uni-Mart 2.1%
America 13.0%
2. Circle K 7.7% 12. Majestic Liquors 2.1%
3. CVS 5.4% 13. United Rentals 2.0%
4. Best Buy 4.1% 14. Quik Trip 1.5%
5. OfficeMax 3.5% 15. Bed Bath & Beyond 1.2%
6. Barnes & Noble 3.5% 16. Jared Jewelers 1.2%
7. Eckerd 3.2% 17. Food 4 Less 1.1%
8. Academy 3.1% 18. CarMax 1.1%
9. The Sports Authority 2.6% 19. Havertys Furniture 1.1%
10. Borders Books 2.1% 20. Rite Aid 1.0%
Top 10 States
-------------
% of % of
State Total(1) State Total(1)
----- -------- ----- --------
1. Texas 22.0% 6. Pennsylvania 3.5%
2. Virginia 16.8% 7. Missouri 3.2%
3. Florida 12.3% 8. Ohio 2.6%
4. California 5.1% 9. Tennessee 2.4%
5. Georgia 4.6% 10. New Jersey 2.3%
Lease Expirations
-----------------
Gross Gross
% of # of Leasable % of # of Leasable
Total(1) Properties Area(2) Total(1) Properties Area(2)
-------- ---------- ------- -------- ---------- -------
2006 0.7% 9 163,000 2012 4.1% 22 473,000
2007 1.7% 17 227,000 2013 5.8% 29 688,000
2008 2.2% 22 467,000 2014 20.1% 36 1,160,000
2009 2.5% 24 475,000 2015 5.0% 24 667,000
2010 3.9% 22 351,000 2016 4.8% 22 527,000
2011 3.2% 17 331,000 Thereafter 46.0% 268 3,537,000
(1) Based on annual base rent of $145,100,000, which is the annualized
base rent for all leases in place as of December 31, 2005.
(2) Square feet.
