American Association of Individual Investors. November 2007

Transcription

1 American Association of Individual Investors November 2007

2 Terms you will hear today REIT (Pronounced reet) = Real Estate Investment Trust... a company, usually publicly traded, that manages a property portfolio to earn profits for shareholders Very efficient structure for ownership of real estate Required by law to pay 90% of taxable income back to shareholders in the form of dividends Speaking today about publicly traded REITs only NNN = National Retail Properties Our ticker symbol on the New York Stock Exchange; the most common way we are referred to by analysts and investors Also a key real estate industry abbreviation (triple net lease); property taxes, common area maintenance and insurance are all paid by tenant FFO = Funds from Operations... the primary measure of REITs net income excluding depreciation Generally, commercial real estate value has historically maintained residual value or appreciated, not depreciated Payout Ratio = Percentage of REIT s annual FFO per share paid out as cash dividends Freestanding Retail = stand-alone stores... not strip centers or regional malls Consumer convenience; Retailer operational control Sale-Leaseback Form of real estate financing whereby an owner sells his property and simultaneously takes a long-term lease of the property from the purchaser 2

3 Advantages of a REIT Full-time professional management teams Stock must be widely held; 100 shareholders minimum SEC financial reporting and transparency Stock values backed by real assets At least 75 percent of assets must be real property At least 75 percent of revenue must come from real estate Traditional corporate governance and accountability 3

4 Why Invest in REITs? Long-term performance Reliable and significant current income which grows over time Capital preservation and protection from inflation Portfolio diversification 4

5 Dividends Money In the Bank Companies may restate earnings or inflate forecasts, but no company can restate dividends. They re checks that shareholders can take to the bank. Add Value to Stock Dividends offer concrete evidence of real earnings and provide a most reliable valuation measure. A stock derives its value from its current dividends and its dividend potential. Solid History From 1891 to 1980, dividends made up 80 percent of the stock market s total return to investors. Dividends tend to reduce volatility and improve downside risk protection. 5

6 U.S. Retail Environment Consumer spending is still growing (just not as fast as in prior years) Retailers in freestanding format continue to see strong same-store sales; shift in spending from mall-based retailers (Wal-Mart, Target, Home Depot, Walgreens, CVS all still growing) Generally, retailers sales and earnings would have to meaningfully decline (over a long period of time) and would have to file bankruptcy and reject lease before rent-paying ability is affected Retail industry thrives on change... If one retailer fails, another usually replaces it quickly; That is why we own retail real estate there will likely be another retailer willing to lease a strong location 6

7 Company Overview Real Estate Owners Net-leased retail properties Sound real estate underwriting is fundamental High Quality, Diversified Portfolio Over $2.5 billion total market capitalization 876 properties, 43 states, 10.4 million square feet GLA 194 national or regional tenants 35 industry classifications Long-Term Net Leases Enhanced cash flow Long duration leases with 14-year weighted average remaining lease term Financial Strength Maintain strong balance sheet with prudent leverage, stable cash flow and investment grade debt rating Grow FFO per share and provide attractive risk-adjusted total return Pay increasing dividends 18 consecutive annual dividend increases 7

8 Long-Term Net Leases Beneficial Lease Structure Typically require tenant to pay property expenses including: Real estate taxes Maintenance expenses Insurance Utilities Gives tenant control of property Stability & Consistency Typical initial lease term of years Provide NNN with more consistent property-level operating income which produces a more stable earnings profile throughout economic and real estate cycles 8

9 Investment Strategy: Consistency Stable Cash Flow Tenant Credit Business Tenant Real Estate Diversification Diversification Geographic Line of Trade Tenant Real Estate Location Replacement Cost Market Rent 9

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11 Diversification Reduces Risk (September 30, 2007) 876 Properties 194 Tenants 43 States 11

12 Lease Expirations (As a percentage of annual base rent September 30, 2007) 30% Weighted average remaining lease term of 14 years 25% 20% 15% 10% 5% 0% Thereafter 12

13 Balance Sheet (Gross Book Basis September 30, 2007) Unsecured Debt 41.2% Secured Debt 2.0% Preferred Equity 3.6% Common Equity 53.2% 13

14 18 Years of Increased Dividends (One of 181 companies) $1.40 $1.35 Dividend Yield = 5.8%* $1.30 $1.25 $1.20 $1.15 $1.10 $1.05 $ *Based on the closing price of $24.38 on September 30,

15 Annual Total Return Comparison (For periods ending September 30, 2007) 1 Year 3 Years 5 Years 10 Years 15 Years National Retail Properties (NNN) 19.8% 17.2% 16.1% 13.2% 14.1% S&P 500 Index (SPX) 16.5% 13.1% 15.4% 6.0% 11.1% Nasdaq (CCMP) 20.6% 13.4% 18.9% 5.3% 10.8% S&P 600 Index (SML) 15.0% 14.3% 18.7% 9.4% 12.5% 15

16 National Retail Properties, Inc. NYSE: NNN 800-NNN-REIT