Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Jul. 30, 2018 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | NATIONAL RETAIL PROPERTIES, INC. | |
Entity Central Index Key | 751,364 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 156,989,846 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Real estate portfolio: | ||
Accounted for using the operating method, net of accumulated depreciation and amortization | $ 6,609,368 | $ 6,418,700 |
Accounted for using the direct financing method | 9,188 | 9,650 |
Real estate held for sale | 10,463 | 14,311 |
Cash and cash equivalents | 1,885 | 1,364 |
Receivables, net of allowance of $572 and $1,119, respectively | 2,548 | 4,317 |
Accrued rental income, net of allowance of $1,842 and $1,936, respectively | 26,118 | 25,916 |
Debt costs, net of accumulated amortization of $13,378 and $12,667, respectively | 4,781 | 5,380 |
Other assets | 80,590 | 80,896 |
Total assets | 6,744,941 | 6,560,534 |
Liabilities: | ||
Line of credit payable | 166,700 | 120,500 |
Mortgages payable, including unamortized premium and net of unamortized debt costs | 13,000 | 13,300 |
Notes payable, net of unamortized discount and unamortized debt costs | 2,448,390 | 2,446,407 |
Accrued interest payable | 19,401 | 20,311 |
Other liabilities | 108,339 | 119,106 |
Total liabilities | 2,755,830 | 2,719,624 |
Stockholders’ equity: | ||
Common stock, $0.01 par value. Authorized 375,000,000 shares; 156,990,141 and 153,577,028 shares issued and outstanding, respectively | 1,571 | 1,537 |
Capital in excess of par value | 3,734,313 | 3,599,475 |
Accumulated deficit | (368,074) | (379,181) |
Accumulated other comprehensive income (loss) | (11,535) | (13,738) |
Total stockholders’ equity of NNN | 3,988,775 | 3,840,593 |
Noncontrolling interests | 336 | 317 |
Total equity | 3,989,111 | 3,840,910 |
Total liabilities and equity | 6,744,941 | 6,560,534 |
Series E Preferred Stock | ||
Stockholders’ equity: | ||
Preferred stock, $0.01 par value. Authorized 15,000,000 shares | 287,500 | 287,500 |
Series F Preferred Stock | ||
Stockholders’ equity: | ||
Preferred stock, $0.01 par value. Authorized 15,000,000 shares | $ 345,000 | $ 345,000 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Receivables allowance | $ 572 | $ 1,119 |
Accrued rental income allowance | 1,842 | 1,936 |
Debt costs accumulated amortization | $ 13,378 | $ 12,667 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 15,000,000 | 15,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 375,000,000 | 375,000,000 |
Common stock, shares issued (in shares) | 156,990,141 | 153,577,028 |
Common stock, shares outstanding (in shares) | 156,990,141 | 153,577,028 |
Series E Preferred Stock | ||
Dividend rate | 5.70% | 5.70% |
Preferred stock, depositary shares issued (in shares) | 115,000 | 115,000 |
Preferred stock, depositary shares outstanding (in shares) | 115,000 | 115,000 |
Preferred stock, stated liquidation value per share (in dollars per share) | $ 2,500 | $ 2,500 |
Series F Preferred Stock | ||
Dividend rate | 5.20% | 5.20% |
Preferred stock, depositary shares issued (in shares) | 138,000 | 138,000 |
Preferred stock, depositary shares outstanding (in shares) | 138,000 | 138,000 |
Preferred stock, stated liquidation value per share (in dollars per share) | $ 2,500 | $ 2,500 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Revenues: | ||||
Rental income from operating leases | $ 150,969 | $ 141,298 | $ 298,798 | $ 277,791 |
Earned income from direct financing leases | 225 | 246 | 455 | 502 |
Percentage rent | 189 | 198 | 734 | 746 |
Real estate expense reimbursement from tenants | 3,770 | 3,700 | 7,928 | 7,560 |
Interest and other income from real estate transactions | 365 | 108 | 438 | 382 |
Total revenues | 155,518 | 145,550 | 308,353 | 286,981 |
Operating expenses: | ||||
General and administrative | 8,741 | 8,820 | 17,437 | 17,739 |
Real estate | 5,828 | 5,424 | 11,690 | 11,087 |
Depreciation and amortization | 43,304 | 41,326 | 87,802 | 81,469 |
Impairment losses – real estate and other charges, net of recoveries | 3,835 | (39) | 6,083 | 1,167 |
Retirement severance costs | 260 | 7,428 | 521 | 7,428 |
Total operating expenses | 61,968 | 62,959 | 123,533 | 118,890 |
Earnings from operations | 93,550 | 82,591 | 184,820 | 168,091 |
Other expenses (revenues): | ||||
Interest and other income | (37) | (37) | (63) | (175) |
Interest expense | 27,110 | 27,274 | 53,712 | 53,888 |
Total other expenses (revenues) | 27,073 | 27,237 | 53,649 | 53,713 |
Earnings before gain on disposition of real estate | 66,477 | 55,354 | 131,171 | 114,378 |
Gain on disposition of real estate | 4,106 | 3,055 | 42,702 | 17,679 |
Net earnings | 70,583 | 58,409 | 173,873 | 132,057 |
Earnings attributable to noncontrolling interests | (10) | (381) | (19) | (372) |
Net earnings attributable to NNN | 70,573 | 58,028 | 173,854 | 131,685 |
Net earnings attributable to common stockholders | $ 61,992 | $ 49,447 | $ 156,690 | $ 101,068 |
Net earnings per share of common stock: | ||||
Basic (in dollars per share) | $ 0.40 | $ 0.33 | $ 1.02 | $ 0.68 |
Diluted (in dollars per share) | $ 0.40 | $ 0.33 | $ 1.02 | $ 0.68 |
Weighted average number of common shares outstanding: | ||||
Basic (in shares) | 153,810,692 | 148,372,501 | 153,428,365 | 147,655,076 |
Diluted (in shares) | 154,203,938 | 148,719,470 | 153,840,219 | 148,023,668 |
Other comprehensive income: | ||||
Net earnings attributable to NNN | $ 70,573 | $ 58,028 | $ 173,854 | $ 131,685 |
Amortization of interest rate hedges | 531 | 455 | 1,056 | 903 |
Fair value of forward starting swaps | 3,259 | (1,140) | 1,095 | (1,694) |
Net gain (loss) – available-for-sale securities | 184 | (81) | 52 | (7) |
Comprehensive income attributable to NNN | 74,547 | 57,262 | 176,057 | 130,887 |
Series D Preferred Stock | ||||
Other expenses (revenues): | ||||
Dividends | 0 | 0 | 0 | (3,598) |
Excess of redemption value over carrying value of Series D preferred shares redeemed | 0 | 0 | 0 | (9,855) |
Series E Preferred Stock | ||||
Other expenses (revenues): | ||||
Dividends | (4,096) | (4,096) | (8,194) | (8,194) |
Series F Preferred Stock | ||||
Other expenses (revenues): | ||||
Dividends | $ (4,485) | $ (4,485) | $ (8,970) | $ (8,970) |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | ||
Cash flows from operating activities: | |||
Net earnings | $ 173,873,000 | $ 132,057,000 | |
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||
Depreciation and amortization | 87,802,000 | 81,469,000 | |
Impairment losses – real estate and other charges, net of recoveries | 6,083,000 | 1,167,000 | |
Amortization of notes payable discount | 922,000 | 878,000 | |
Amortization of debt costs | 1,781,000 | 1,727,000 | |
Amortization of mortgages payable premium | (43,000) | (42,000) | |
Amortization of interest rate hedges | 1,056,000 | 903,000 | |
Gain on disposition of real estate | (42,702,000) | (17,679,000) | |
Performance incentive plan expense | 4,843,000 | 10,204,000 | |
Performance incentive plan payment | (432,000) | (862,000) | |
Change in operating assets and liabilities, net of assets acquired and liabilities assumed: | |||
Decrease in real estate leased to others using the direct financing method | 462,000 | 443,000 | |
Decrease in receivables | 1,229,000 | 1,210,000 | |
Increase in accrued rental income | (930,000) | (904,000) | |
Decrease (increase) in other assets | (894,000) | 858,000 | |
Increase (decrease) in accrued interest payable | (910,000) | 256,000 | |
Increase (decrease) in other liabilities | (3,944,000) | 3,428,000 | |
Other | 35,000 | (42,000) | |
Net cash provided by operating activities | 228,231,000 | 215,071,000 | |
Cash flows from investing activities: | |||
Proceeds from the disposition of real estate | 83,711,000 | 48,595,000 | |
Additions to real estate: | |||
Accounted for using the operating method | (325,069,000) | (398,963,000) | |
Other | 122,000 | (431,000) | |
Net cash used in investing activities | (241,236,000) | (350,799,000) | |
Cash flows from financing activities: | |||
Proceeds from line of credit payable | 1,167,500,000 | 705,200,000 | |
Repayment of line of credit payable | (1,121,300,000) | (489,700,000) | |
Repayment of mortgages payable | (266,000) | (253,000) | |
Payment of debt costs | (112,000) | (172,000) | |
Proceeds from issuance of common stock | 132,191,000 | 74,503,000 | |
Stock issuance costs | (1,740,000) | (1,238,000) | |
Redemption of Series D preferred stock | 0 | (287,500,000) | |
Payment of common stock dividends | (145,583,000) | (134,440,000) | |
Net cash provided by (used in) financing activities | 13,526,000 | (154,362,000) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 521,000 | (290,090,000) | |
Cash, cash equivalents and restricted cash at beginning of period | [1] | 1,364,000 | 294,540,000 |
Cash, cash equivalents and restricted cash at end of period | [1] | 1,885,000 | 4,450,000 |
Supplemental disclosure of cash flow information: | |||
Interest paid, net of amount capitalized | 52,810,000 | 51,279,000 | |
Taxes received | 0 | (3,000) | |
Supplemental disclosure of noncash investing and financing activities: | |||
Increase (decrease) in other comprehensive income | (2,203,000) | 798,000 | |
Change in lease classification (direct financing lease to operating lease) | 0 | 696,000 | |
Restricted cash and cash held in escrow | 0 | 0 | |
Series D Depositary Share | |||
Cash flows from financing activities: | |||
Payment of Series D, E and F preferred stock dividends | 0 | (3,598,000) | |
Series E Depositary Share | |||
Cash flows from financing activities: | |||
Payment of Series D, E and F preferred stock dividends | (8,194,000) | (8,194,000) | |
Series F Preferred Stock | |||
Cash flows from financing activities: | |||
Payment of Series D, E and F preferred stock dividends | $ (8,970,000) | $ (8,970,000) | |
[1] | Cash, cash equivalents and restricted cash is the aggregate of Cash and cash equivalents and Restricted cash and cash held in escrow from the Condensed Consolidated Balance Sheets. NNN had no Restricted cash and cash held in escrow at June 30, 2018 and 2017 |
Organization and Summary of Sig
Organization and Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Organization and Summary of Significant Accounting Policies | Organization and Summary of Significant Accounting Policies: Organization and Nature of Business – National Retail Properties, Inc., a Maryland corporation, is a fully integrated real estate investment trust (“REIT”) formed in 1984. The terms "NNN" or the "Company" refer to National Retail Properties, Inc. and all of its consolidated subsidiaries. NNN's assets primarily include real estate assets. NNN acquires, owns, invests in and develops properties that are leased primarily to retail tenants under long-term net leases and primarily held for investment ("Properties", "Property Portfolio", or individually a "Property") . June 30, 2018 Property Portfolio: Total properties 2,846 Gross leasable area (square feet) 29,389,000 States 48 Weighted average remaining lease term (years) 11.5 The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles ("GAAP"). The unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Operating results for the quarter and six months ended June 30, 2018 , may not be indicative of the results that may be expected for the year ending December 31, 2018 . Amounts as of December 31, 2017 , included in the condensed consolidated financial statements have been derived from the audited consolidated financial statements as of that date. The unaudited condensed consolidated financial statements, included herein, should be read in conjunction with the consolidated financial statements and notes thereto as well as Management's Discussion and Analysis of Financial Condition and Results of Operations in NNN's Form 10-K for the year ended December 31, 2017 . Principles of Consolidation – NNN’s condensed consolidated financial statements include the accounts of each of the respective majority owned and controlled affiliates, including transactions whereby NNN has been determined to be the primary beneficiary in accordance with the Financial Accounting Standards Board (“FASB”) guidance included in Consolidation. All significant intercompany account balances and transactions have been eliminated. Real Estate Portfolio – NNN records the acquisition of real estate at cost, including acquisition and closing costs. The cost of properties developed by NNN includes direct and indirect costs of construction, property taxes, interest and other miscellaneous costs incurred during the development period until the project is substantially complete and available for occupancy. NNN recorded $1,904,000 and $1,113,000 in capitalized interest during the development period for the six months ended June 30, 2018 and 2017 , respectively, of which $1,076,000 and $560,000 was recorded during the quarter ended June 30, 2018 and 2017 , respectively. Purchase Accounting for Acquisition of Real Estate Subject to a Lease – In accordance with the FASB guidance on business combinations, the fair value of the real estate acquired with in-place leases is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases and the value of in-place leases, as applicable, based on their respective fair values. The fair value of the tangible assets of an acquired leased property is determined by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to land, building and tenant improvements based on the determination of their fair values. In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded as other assets or liabilities based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases, and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining term of the lease and the applicable option terms if it is probable that the tenant will exercise options. The capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. The capitalized below-market lease values are amortized as an increase to rental income over the initial term unless the Company believes that it is likely that the tenant will renew the lease for an option term whereby the Company amortizes the value attributable to the renewal over the renewal period. The aggregate value of other acquired intangible assets, consisting of in-place leases, is measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases to market rental rates over (ii) the estimated fair value of the property as-if-vacant, determined as set forth above. The value of in-place leases exclusive of the value of above-market and below-market in-place leases is amortized to expense over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be written off in that period. The value of tenant relationships is reviewed on individual transactions to determine if future value was derived from the acquisition. Intangible assets and liabilities consisted of the following as of (dollars in thousands): June 30, 2018 December 31, 2017 Intangible lease assets (included in Other assets): Above-market in-place leases $ 15,329 $ 16,583 Less: accumulated amortization (9,197 ) (9,299 ) Above-market in-place leases, net $ 6,132 $ 7,284 In-place leases $ 101,887 $ 104,592 Less: accumulated amortization (60,070 ) (61,004 ) In-place leases, net $ 41,817 $ 43,588 Intangible lease liabilities (included in Other liabilities): Below-market in-place leases $ 41,912 $ 44,468 Less: accumulated amortization (25,151 ) (26,055 ) Below-market in-place leases, net $ 16,761 $ 18,413 The amounts amortized as a net increase to rental income for capitalized above-market and below-market leases were $2,115,000 and $1,341,000 for the six months ended June 30, 2018 and 2017 , respectively, of which $1,417,000 and $682,000 were recorded for the quarter ended June 30, 2018 and 2017 , respectively. The value of in-place leases amortized to expense were $5,516,000 and $6,608,000 for the six months ended June 30, 2018 and 2017 , respectively, of which $2,370,000 and $3,281,000 were recorded for the quarter ended June 30, 2018 and 2017 , respectively. Debt Costs – Line of Credit Payable – Debt costs incurred in connection with NNN’s $900,000,000 line of credit have been deferred and are being amortized to interest expense over the term of the loan commitment using the straight-line method, which approximates the effective interest method. NNN has recorded debt costs associated with the line of credit as an asset, in Debt costs on the Condensed Consolidated Balance Sheets. Debt Costs – Mortgages Payable – Debt costs incurred in connection with NNN’s mortgages payable have been deferred and are being amortized over the term of the respective loan commitment using the straight-line method, which approximates the effective interest method. These costs of $147,000 at June 30, 2018 and December 31, 2017 , are included in Mortgages payable on the Condensed Consolidated Balance Sheets net of accumulated amortization of $64,000 and $55,000 , respectively. Debt Costs – Notes Payable – Debt costs incurred in connection with the issuance of NNN’s notes payable have been deferred and are being amortized to interest expense over the term of the respective debt obligation using the effective interest method. These costs of $22,682,000 at June 30, 2018 and December 31, 2017 , are included in Notes payable on the Condensed Consolidated Balance Sheets net of accumulated amortization of $7,399,000 and $6,337,000 , respectively. Revenue Recognition – In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606). The core principle of ASU 2014-09, is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Certain contracts are excluded from ASU 2014-09, including lease contracts within the scope of the FASB guidance included in Leases (Topic 842). NNN adopted ASU 2014-09 on January 1, 2018, and applied the cumulative catch-up transition method. Through the evaluation and implementation process, NNN determined the key revenue stream impacted by ASU 2014-09 is Gain on disposition of real estate reported on the Condensed Consolidated Statements of Income and Comprehensive Income. Prior to the adoption of ASU 2014-09, NNN recognized revenue at the time of closing (i.e., transfer of asset). Following the adoption of ASU 2014-09, NNN evaluates any separate contracts or performance obligations to determine proper timing of revenue recognition, as well as, transaction price allocation. The adoption of ASU 2014-09 did not have a material impact on NNN's financial position and results of operations. Earnings Per Share – Earnings per share have been computed pursuant to the FASB guidance included in Earnings Per Share . The guidance requires classification of the Company’s unvested restricted share units, which carry rights to receive nonforfeitable dividends, as participating securities requiring the two-class method of computing earnings per share. Under the two-class method, earnings per common share are computed by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted average shares outstanding during the period. The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted earnings per common share using the two-class method (dollars in thousands): Quarter Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Basic and Diluted Earnings: Net earnings attributable to NNN $ 70,573 $ 58,028 $ 173,854 $ 131,685 Less: Series D preferred stock dividends — — — (3,598 ) Less: Series E preferred stock dividends (4,096 ) (4,096 ) (8,194 ) (8,194 ) Less: Series F preferred stock dividends (4,485 ) (4,485 ) (8,970 ) (8,970 ) Less: Excess of redemption value over carrying value of Series D preferred shares redeemed — — — (9,855 ) Net earnings available to NNN’s common stockholders 61,992 49,447 156,690 101,068 Less: Earnings allocated to unvested restricted shares (141 ) (137 ) (273 ) (267 ) Net earnings used in basic and diluted earnings per share $ 61,851 $ 49,310 $ 156,417 $ 100,801 Basic and Diluted Weighted Average Shares Outstanding: Weighted average number of shares outstanding 154,593,456 149,119,191 154,138,711 148,354,604 Less: Unvested restricted stock (295,444 ) (301,206 ) (266,690 ) (293,588 ) Less: Unvested contingent restricted shares (487,320 ) (445,484 ) (443,656 ) (405,940 ) Weighted average number of shares outstanding used in basic earnings per share 153,810,692 148,372,501 153,428,365 147,655,076 Other dilutive securities 393,246 346,969 411,854 368,592 Weighted average number of shares outstanding used in diluted earnings per share 154,203,938 148,719,470 153,840,219 148,023,668 Fair Value Measurement – NNN’s estimates of fair value of financial and non-financial assets and liabilities are based on the framework established in the fair value accounting guidance. The framework specifies a hierarchy of valuation inputs which was established to increase consistency, clarity and comparability in fair value measurements and related disclosures. The guidance describes a fair value hierarchy based upon three levels of inputs that may be used to measure fair value, two of which are considered observable and one that is considered unobservable. The following describes the three levels: • Level 1 – Valuation is based upon quoted prices in active markets for identical assets or liabilities. • Level 2 – Valuation is based upon inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include option pricing models, discounted cash flow models and similar techniques. Accumulated Other Comprehensive Income (Loss) – The following table outlines the changes in accumulated other comprehensive income (loss) (dollars in thousands): Gains or (Losses) on Cash Flow Hedges (1) Gains on Available-for-Sale Securities Total Beginning balance, December 31, 2017 $ (14,655 ) $ 917 $ (13,738 ) Other comprehensive income 1,095 52 1,147 Reclassifications from accumulated other comprehensive income to net earnings 1,056 (2) — 1,056 Net current period other comprehensive income 2,151 52 2,203 Ending balance, June 30, 2018 $ (12,504 ) $ 969 $ (11,535 ) (1) Additional disclosure is included in Note 5 – Derivatives. (2) Reclassifications out of other comprehensive income (loss) are recorded in Interest expense on the Condensed Consolidated Statements of Income and Comprehensive Income. New Accounting Pronouncements – In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)," effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The FASB issued final guidance that requires lessees to put most leases on their balance sheets but recognize expenses in the income statement in a manner similar to today’s accounting. The guidance also eliminates today’s real estate-specific provisions and changes the guidance on sale-leaseback transactions, initial direct costs and lease executory costs for all entities. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. NNN is currently evaluating to determine the potential impact the adoption of ASU 2016-02 will have on its financial position or results of operations. Use of Estimates – Management of NNN has made a number of estimates and assumptions relating to the reporting of assets and liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements in conformity with GAAP. Significant estimates include provisions for impairment and allowances for certain assets, accruals, useful lives of assets and purchase price allocation. Actual results could differ from those estimates. Reclassification |
Real Estate
Real Estate | 6 Months Ended |
Jun. 30, 2018 | |
Real Estate [Abstract] | |
Real Estate | Real Estate: Real Estate – Portfolio Leases – The following outlines key information for NNN’s leases: June 30, 2018 Lease classification: Operating 2,856 Direct financing 7 Building portion – direct financing/land portion – operating 2 Weighted average remaining lease term (years) 11.5 The leases generally provide for limited increases in rent as a result of fixed increases, increases in the consumer price index, and/or increases in the tenant’s sales volume. Generally, the tenant is also required to pay all property taxes and assessments, substantially maintain the Property and carry property and liability insurance coverage. Certain Properties are subject to leases under which NNN retains responsibility for specific costs and expenses of the Property. Generally, the leases provide the tenant with one or more multi-year renewal options, subject to generally the same terms and conditions of the base term of the lease, including rent increases. Real Estate Portfolio – Accounted for Using the Operating Method – Real estate subject to operating leases consisted of the following as of (dollars in thousands): June 30, 2018 December 31, 2017 Land and improvements (1) $ 2,316,395 $ 2,287,100 Buildings and improvements 5,152,418 4,962,530 Leasehold interests 3,971 5,261 7,472,784 7,254,891 Less accumulated depreciation and amortization (945,626 ) (878,111 ) 6,527,158 6,376,780 Work in progress for buildings and improvements 82,210 41,920 $ 6,609,368 $ 6,418,700 (1) Includes $27,203 and $25,799 in land for Properties under construction at June 30, 2018 and December 31, 2017, respectively. Real Estate – Held For Sale On a quarterly basis, the Company evaluates its Properties for held for sale classification based on specific criteria as outlined in ASC 360, Property, Plant & Equipment, including management’s intent to commit to a plan to sell the asset. NNN anticipates the disposition of Properties classified as held for sale to occur within 12 months. As of June 30, 2018 , NNN had seven of its Properties categorized as held for sale. NNN's real estate held for sale at December 31, 2017 , included nine Properties, two of which were sold in 2018. Real estate held for sale consisted of the following as of (dollars in thousands): June 30, 2018 December 31, 2017 Land and improvements $ 4,424 $ 5,229 Building and improvements 11,098 12,956 15,522 18,185 Less accumulated depreciation and amortization (2,798 ) (3,010 ) Less impairment (2,261 ) (864 ) $ 10,463 $ 14,311 Real Estate – Dispositions The following table summarizes the Properties sold and the corresponding gain recognized on the disposition of Properties (dollars in thousands): Quarter Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 # of Sold Properties Gain # of Sold Properties Gain # of Sold Properties Gain # of Sold Properties Gain Gain on disposition of real estate 13 $ 4,106 8 $ 3,055 28 $ 42,702 (1) 25 $ 17,679 (1) Amount includes the recognition of a deferred gain related to a leasehold interest that was fully amortized in 2018. Real Estate – Commitments NNN has committed to fund construction commitments on 17 Properties. The improvements on such Properties are estimated to be completed within 12 months . These construction commitments, as of June 30, 2018 , are outlined in the table below (dollars in thousands): Total commitment (1) $ 134,726 Less amount funded 109,413 Remaining commitment $ 25,313 (1) Includes land, construction costs, tenant improvements, lease costs and capitalized interest. Real Estate – Impairments Management periodically assesses its real estate for possible impairment whenever certain events or changes in circumstances indicate that the carrying amount of the asset, including accrued rental income, may not be recoverable through operations. Events or circumstances that may occur include significant changes in real estate market conditions and the ability of NNN to re-lease or sell properties that are vacant or become vacant in a reasonable period of time. Impairments are measured as the amount by which the current book value of the asset exceeds the estimated fair value of the asset. As a result of the Company's review of long-lived assets, including identifiable intangible assets, NNN recognized real estate impairments, net of recoveries of $6,083,000 and $1,167,000 for the six months ended June 30, 2018 and 2017 , respectively, of which $ 3,835,000 and ($39,000) was recorded during the quarter ended June 30, 2018 and 2017 , respectively. |
Line of Credit Payable
Line of Credit Payable | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Line of Credit Payable | Line of Credit Payable : NNN's $900,000,000 unsecured revolving credit facility (the “Credit Facility”) had a weighted average outstanding balance of $187,331,000 and a weighted average interest rate of 2.7 % during the six months ended June 30, 2018 . The Credit Facility matures January 2022, unless the Company exercises its option to extend maturity to January 2023. The Credit Facility bears interest at LIBOR plus 87.5 basis points; however, such interest rate may change pursuant to a tiered interest rate structure based on NNN's debt rating. The Credit Facility also includes an accordion feature to increase the facility size up to $1,600,000,000 , subject to lender approval. As of June 30, 2018 , $166,700,000 was outstanding and $733,300,000 was available for future borrowings under the Credit Facility, excluding undrawn letters of credit totaling $58,000 |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | Stockholders' Equity : In February 2018, NNN filed a shelf registration statement with the Securities and Exchange Commission (the "Commission") which permits the issuance by NNN of an indeterminate amount of debt and equity securities. Dividend Reinvestment and Stock Purchase Plan – In February 2018, NNN filed a shelf registration statement with the Commission for its Dividend Reinvestment and Stock Purchase Plan ("DRIP") which permits the issuance by NNN of up to 10,000,000 shares of common stock. The following table outlines the common stock issuances pursuant to NNN's DRIP (dollars in thousands): Six Months Ended June 30, 2018 2017 Shares of common stock 143,997 34,466 Net proceeds $ 5,471 $ 1,413 At-The-Market Offerings – NNN has established an at-the-market equity program ("ATM") which allows NNN to sell shares of common stock from time to time. The following outlines NNN's ATM programs: 2018 ATM 2016 ATM Established date February 2018 March 2016 Termination date February 2021 February 2018 Total allowable shares 12,000,000 12,000,000 Total shares issued as of June 30, 2018 3,037,464 10,044,656 The following table outlines the common stock issuances pursuant to NNN's ATM equity programs for the six months ended June 30, 2018 (dollars in thousands, except per share data): Six Months Ended June 30, 2018 2017 Shares of common stock 3,037,464 1,653,155 Average price per share (net) $ 41.17 $ 43.64 Net proceeds $ 125,052 $ 72,139 Stock issuance costs (1) $ 1,633 $ 1,183 (1) Stock issuance costs consist primarily of underwriters' fees and commissions, and legal and accounting fees. Dividends – The following table outlines the dividends declared and paid for each issuance of NNN's stock (dollars in thousands, except per share data): Quarter Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Series D preferred stock (1) : Dividends $ — $ — $ — $ 3,598 Per depositary share — — — 0.312847 Series E preferred stock (2) : Dividends 4,096 4,096 8,194 8,194 Per depositary share 0.356250 0.356250 0.712500 0.712500 Series F preferred stock (3) : Dividends 4,485 4,485 8,970 8,970 Per depositary share 0.325000 0.325000 0.650000 0.650000 Common stock: Dividends 72,850 67,660 145,583 134,440 Per share 0.475 0.455 0.950 0.910 (1) The 6.625% Series D Cumulative Redeemable Preferred Stock (the "Series D Preferred Stock") was redeemed in February 2017. The dividends paid in 2017 included accumulated and unpaid dividends through the redemption date. (2) The 5.700% Series E Cumulative Redeemable Preferred Stock (the "Series E Preferred Stock") has no maturity date and will remain outstanding unless redeemed by NNN. As of May 2018, the Series E Preferred Stock is redeemable by NNN. (3) The 5.200% Series F Cumulative Redeemable Preferred Stock (the "Series F Preferred Stock") has no maturity date and will remain outstanding unless redeemed by NNN. The earliest redemption date for the Series F Preferred Stock is October 2021. In July 2018 , NNN declared a dividend of $0.500 per share, which is payable in August 2018 to its common stockholders of record as of July 31, 2018 |
Derivatives
Derivatives | 6 Months Ended |
Jun. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives | Derivatives : In accordance with the guidance on derivatives and hedging, NNN records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or a firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. NNN’s objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements or other identified risks. To accomplish this objective, NNN primarily uses treasury locks, forward starting swaps and interest rate swaps as part of its cash flow hedging strategy. Treasury locks and forward starting swaps are used to hedge forecasted debt issuances. Treasury locks designated as cash flow hedges lock in the yield/price of a treasury security. Forward swaps also lock the associated swap spread. Interest rate swaps designated as cash flow hedges are used to hedge the variable cash flows associated with floating rate debt and involve the receipt or payment of variable rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. NNN discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in the cash flows of the hedged item, the derivative expires or is sold, terminated or exercised, the derivative is re-designated as a hedging instrument or management determines that designation of the derivative as a hedging instrument is no longer appropriate. When hedge accounting is discontinued, NNN recognizes any changes in its fair value in earnings and continues to carry the derivative on the balance sheet or may choose to settle the derivative at that time with a cash payment or receipt. The following table outlines NNN's terminated derivatives which were hedging the risk of changes in forecasted interest payments on forecasted issuance of long-term debt (dollars in thousands): Terminated Description Aggregate Notional Amount Liability (Asset) Fair Value When Terminated Fair Value Deferred In Other Comprehensive Income (1) June 2011 Two treasury locks $ 150,000 $ 5,300 $ 5,218 April 2013 Four forward starting swaps 240,000 3,156 3,141 May 2014 Three forward starting swaps 225,000 6,312 6,312 October 2015 Four forward starting swaps 300,000 13,369 13,369 December 2016 Two forward starting swaps 180,000 (13,352 ) (13,345 ) September 2017 Two forward starting swaps 250,000 7,690 7,688 (1) The amount reported in accumulated other comprehensive income will be reclassified to interest expense as interest payments are made on the related notes payable. As of June 30, 2018 , $13,599,000 remained in other comprehensive income related to the effective portion of NNN’s previously terminated interest rate hedges. During the six months ended June 30, 2018 and 2017 , NNN reclassified out of other comprehensive income $1,056,000 and $903,000 , respectively, as an increase in interest expense. Over the next 12 months, NNN estimates that an additional $2,192,000 will be reclassified as an increase in interest expense. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on NNN’s long-term debt. During the six months ended June 30, 2018 , NNN entered into two forward starting swaps with a total notional amount of $250,000,000 to hedge the risk of changes in the interest-related cash outflows associated with the potential issuance of long-term debt. The outstanding forward swaps were designated as cash flow hedges, and at June 30, 2018 , have a fair value of $1,095,000 included in Other assets and Accumulated other comprehensive income (loss) on the Condensed Consolidated Balance Sheets. The fair value of the forward starting swaps was based on a Level 2 valuation. No hedge ineffectiveness was recognized during the six months ended June 30, 2018 . These derivative financial instruments were still outstanding as of June 30, 2018 . |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 6 Months Ended |
Jun. 30, 2018 | |
Financial Instruments, Owned, at Fair Value [Abstract] | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments : NNN believes the carrying value of its Credit Facility approximates fair value based upon its nature, terms and variable interest rate. NNN believes that the carrying value of its mortgages payable at June 30, 2018 and December 31, 2017 , approximate fair value based upon current market prices of comparable instruments (Level 3). At June 30, 2018 and December 31, 2017 , the fair value of NNN’s notes payable net of unamortized discount and excluding debt costs was $2,416,221,000 and $2,507,106,000 |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events : NNN reviewed its subsequent events and transactions that have occurred after June 30, 2018 |
Organization and Summary of S13
Organization and Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation – NNN’s condensed consolidated financial statements include the accounts of each of the respective majority owned and controlled affiliates, including transactions whereby NNN has been determined to be the primary beneficiary in accordance with the Financial Accounting Standards Board (“FASB”) guidance included in Consolidation. |
Real Estate Portfolio | Real Estate Portfolio – NNN records the acquisition of real estate at cost, including acquisition and closing costs. The cost of properties developed by NNN includes direct and indirect costs of construction, property taxes, interest and other miscellaneous costs incurred during the development period until the project is substantially complete and available for occupancy. NNN recorded $1,904,000 and $1,113,000 in capitalized interest during the development period for the six months ended June 30, 2018 and 2017 , respectively, of which $1,076,000 and $560,000 was recorded during the quarter ended June 30, 2018 and 2017 , respectively. Purchase Accounting for Acquisition of Real Estate Subject to a Lease – In accordance with the FASB guidance on business combinations, the fair value of the real estate acquired with in-place leases is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases and the value of in-place leases, as applicable, based on their respective fair values. The fair value of the tangible assets of an acquired leased property is determined by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to land, building and tenant improvements based on the determination of their fair values. In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded as other assets or liabilities based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases, and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining term of the lease and the applicable option terms if it is probable that the tenant will exercise options. The capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. The capitalized below-market lease values are amortized as an increase to rental income over the initial term unless the Company believes that it is likely that the tenant will renew the lease for an option term whereby the Company amortizes the value attributable to the renewal over the renewal period. |
Debt Costs | Debt Costs – Notes Payable – – Debt costs incurred in connection with NNN’s $900,000,000 line of credit have been deferred and are being amortized to interest expense over the term of the loan commitment using the straight-line method, which approximates the effective interest method. NNN has recorded debt costs associated with the line of credit as an asset, in Debt costs on the Condensed Consolidated Balance Sheets. Debt Costs – Mortgages Payable – |
Revenue Recognition | Revenue Recognition – In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606). The core principle of ASU 2014-09, is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Certain contracts are excluded from ASU 2014-09, including lease contracts within the scope of the FASB guidance included in Leases (Topic 842). NNN adopted ASU 2014-09 on January 1, 2018, and applied the cumulative catch-up transition method. Through the evaluation and implementation process, NNN determined the key revenue stream |
Earnings Per Share | Earnings Per Share – Earnings per share have been computed pursuant to the FASB guidance included in Earnings Per Share |
Fair Value Measurement | Fair Value Measurement – NNN’s estimates of fair value of financial and non-financial assets and liabilities are based on the framework established in the fair value accounting guidance. The framework specifies a hierarchy of valuation inputs which was established to increase consistency, clarity and comparability in fair value measurements and related disclosures. The guidance describes a fair value hierarchy based upon three levels of inputs that may be used to measure fair value, two of which are considered observable and one that is considered unobservable. The following describes the three levels: • Level 1 – Valuation is based upon quoted prices in active markets for identical assets or liabilities. • Level 2 – Valuation is based upon inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • |
New Accounting Pronouncements | New Accounting Pronouncements – In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)," effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The FASB issued final guidance that requires lessees to put most leases on their balance sheets but recognize expenses in the income statement in a manner similar to today’s accounting. The guidance also eliminates today’s real estate-specific provisions and changes the guidance on sale-leaseback transactions, initial direct costs and lease executory costs for all entities. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. NNN is currently evaluating to determine the potential impact the adoption of ASU 2016-02 will have on its financial position or results of operations. |
Use of Estimates | Use of Estimates – Management of NNN has made a number of estimates and assumptions relating to the reporting of assets and liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements in conformity with GAAP. Significant estimates include provisions for impairment and allowances for certain assets, accruals, useful lives of assets and purchase price allocation. Actual results could differ from those estimates. |
Reclassification | Reclassification – Certain items in the prior year’s consolidated financial statements and notes to consolidated financial statements have been reclassified to conform to the 2018 presentation. |
Organization and Summary of S14
Organization and Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Summary of NNN's Investment Portfolio | NNN acquires, owns, invests in and develops properties that are leased primarily to retail tenants under long-term net leases and primarily held for investment ("Properties", "Property Portfolio", or individually a "Property") . June 30, 2018 Property Portfolio: Total properties 2,846 Gross leasable area (square feet) 29,389,000 States 48 Weighted average remaining lease term (years) 11.5 |
Intangible Assets and Liabilities | Intangible assets and liabilities consisted of the following as of (dollars in thousands): June 30, 2018 December 31, 2017 Intangible lease assets (included in Other assets): Above-market in-place leases $ 15,329 $ 16,583 Less: accumulated amortization (9,197 ) (9,299 ) Above-market in-place leases, net $ 6,132 $ 7,284 In-place leases $ 101,887 $ 104,592 Less: accumulated amortization (60,070 ) (61,004 ) In-place leases, net $ 41,817 $ 43,588 Intangible lease liabilities (included in Other liabilities): Below-market in-place leases $ 41,912 $ 44,468 Less: accumulated amortization (25,151 ) (26,055 ) Below-market in-place leases, net $ 16,761 $ 18,413 |
Computation of Basic and Diluted Earnings Per Share | The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted earnings per common share using the two-class method (dollars in thousands): Quarter Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Basic and Diluted Earnings: Net earnings attributable to NNN $ 70,573 $ 58,028 $ 173,854 $ 131,685 Less: Series D preferred stock dividends — — — (3,598 ) Less: Series E preferred stock dividends (4,096 ) (4,096 ) (8,194 ) (8,194 ) Less: Series F preferred stock dividends (4,485 ) (4,485 ) (8,970 ) (8,970 ) Less: Excess of redemption value over carrying value of Series D preferred shares redeemed — — — (9,855 ) Net earnings available to NNN’s common stockholders 61,992 49,447 156,690 101,068 Less: Earnings allocated to unvested restricted shares (141 ) (137 ) (273 ) (267 ) Net earnings used in basic and diluted earnings per share $ 61,851 $ 49,310 $ 156,417 $ 100,801 Basic and Diluted Weighted Average Shares Outstanding: Weighted average number of shares outstanding 154,593,456 149,119,191 154,138,711 148,354,604 Less: Unvested restricted stock (295,444 ) (301,206 ) (266,690 ) (293,588 ) Less: Unvested contingent restricted shares (487,320 ) (445,484 ) (443,656 ) (405,940 ) Weighted average number of shares outstanding used in basic earnings per share 153,810,692 148,372,501 153,428,365 147,655,076 Other dilutive securities 393,246 346,969 411,854 368,592 Weighted average number of shares outstanding used in diluted earnings per share 154,203,938 148,719,470 153,840,219 148,023,668 |
Schedule of AOCI | The following table outlines the changes in accumulated other comprehensive income (loss) (dollars in thousands): Gains or (Losses) on Cash Flow Hedges (1) Gains on Available-for-Sale Securities Total Beginning balance, December 31, 2017 $ (14,655 ) $ 917 $ (13,738 ) Other comprehensive income 1,095 52 1,147 Reclassifications from accumulated other comprehensive income to net earnings 1,056 (2) — 1,056 Net current period other comprehensive income 2,151 52 2,203 Ending balance, June 30, 2018 $ (12,504 ) $ 969 $ (11,535 ) (1) Additional disclosure is included in Note 5 – Derivatives. (2) |
Real Estate (Tables)
Real Estate (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Real Estate [Abstract] | |
Classification of Investment Property Leases | The following outlines key information for NNN’s leases: June 30, 2018 Lease classification: Operating 2,856 Direct financing 7 Building portion – direct financing/land portion – operating 2 Weighted average remaining lease term (years) 11.5 |
Summary of Real Estate Subject to Operating Leases | Real estate subject to operating leases consisted of the following as of (dollars in thousands): June 30, 2018 December 31, 2017 Land and improvements (1) $ 2,316,395 $ 2,287,100 Buildings and improvements 5,152,418 4,962,530 Leasehold interests 3,971 5,261 7,472,784 7,254,891 Less accumulated depreciation and amortization (945,626 ) (878,111 ) 6,527,158 6,376,780 Work in progress for buildings and improvements 82,210 41,920 $ 6,609,368 $ 6,418,700 (1) Includes $27,203 and $25,799 in land for Properties under construction at June 30, 2018 and December 31, 2017, respectively. |
Disclosure of Long Lived Assets Held-for-sale | Real estate held for sale consisted of the following as of (dollars in thousands): June 30, 2018 December 31, 2017 Land and improvements $ 4,424 $ 5,229 Building and improvements 11,098 12,956 15,522 18,185 Less accumulated depreciation and amortization (2,798 ) (3,010 ) Less impairment (2,261 ) (864 ) $ 10,463 $ 14,311 |
Disclosure of Long Lived Assets Held-for-sale, Gains Recognized | The following table summarizes the Properties sold and the corresponding gain recognized on the disposition of Properties (dollars in thousands): Quarter Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 # of Sold Properties Gain # of Sold Properties Gain # of Sold Properties Gain # of Sold Properties Gain Gain on disposition of real estate 13 $ 4,106 8 $ 3,055 28 $ 42,702 (1) 25 $ 17,679 (1) Amount includes the recognition of a deferred gain related to a leasehold interest that was fully amortized in 2018. |
Real Estate Funding Commitments | These construction commitments, as of June 30, 2018 , are outlined in the table below (dollars in thousands): Total commitment (1) $ 134,726 Less amount funded 109,413 Remaining commitment $ 25,313 (1) Includes land, construction costs, tenant improvements, lease costs and capitalized interest. |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Schedule of Stock Issuance | The following table outlines the common stock issuances pursuant to NNN's DRIP (dollars in thousands): Six Months Ended June 30, 2018 2017 Shares of common stock 143,997 34,466 Net proceeds $ 5,471 $ 1,413 |
Schedule of ATM Program | The following outlines NNN's ATM programs: 2018 ATM 2016 ATM Established date February 2018 March 2016 Termination date February 2021 February 2018 Total allowable shares 12,000,000 12,000,000 Total shares issued as of June 30, 2018 3,037,464 10,044,656 |
Schedule of Stock by Class | The following table outlines the common stock issuances pursuant to NNN's ATM equity programs for the six months ended June 30, 2018 (dollars in thousands, except per share data): Six Months Ended June 30, 2018 2017 Shares of common stock 3,037,464 1,653,155 Average price per share (net) $ 41.17 $ 43.64 Net proceeds $ 125,052 $ 72,139 Stock issuance costs (1) $ 1,633 $ 1,183 (1) Stock issuance costs consist primarily of underwriters' fees and commissions, and legal and accounting fees. |
Schedule of Dividends Declared and Paid | The following table outlines the dividends declared and paid for each issuance of NNN's stock (dollars in thousands, except per share data): Quarter Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Series D preferred stock (1) : Dividends $ — $ — $ — $ 3,598 Per depositary share — — — 0.312847 Series E preferred stock (2) : Dividends 4,096 4,096 8,194 8,194 Per depositary share 0.356250 0.356250 0.712500 0.712500 Series F preferred stock (3) : Dividends 4,485 4,485 8,970 8,970 Per depositary share 0.325000 0.325000 0.650000 0.650000 Common stock: Dividends 72,850 67,660 145,583 134,440 Per share 0.475 0.455 0.950 0.910 (1) The 6.625% Series D Cumulative Redeemable Preferred Stock (the "Series D Preferred Stock") was redeemed in February 2017. The dividends paid in 2017 included accumulated and unpaid dividends through the redemption date. (2) The 5.700% Series E Cumulative Redeemable Preferred Stock (the "Series E Preferred Stock") has no maturity date and will remain outstanding unless redeemed by NNN. As of May 2018, the Series E Preferred Stock is redeemable by NNN. (3) The 5.200% |
Derivatives (Tables)
Derivatives (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Instruments | The following table outlines NNN's terminated derivatives which were hedging the risk of changes in forecasted interest payments on forecasted issuance of long-term debt (dollars in thousands): Terminated Description Aggregate Notional Amount Liability (Asset) Fair Value When Terminated Fair Value Deferred In Other Comprehensive Income (1) June 2011 Two treasury locks $ 150,000 $ 5,300 $ 5,218 April 2013 Four forward starting swaps 240,000 3,156 3,141 May 2014 Three forward starting swaps 225,000 6,312 6,312 October 2015 Four forward starting swaps 300,000 13,369 13,369 December 2016 Two forward starting swaps 180,000 (13,352 ) (13,345 ) September 2017 Two forward starting swaps 250,000 7,690 7,688 (1) The amount reported in accumulated other comprehensive income will be reclassified to interest expense as |
Organization and Summary of S18
Organization and Summary of Significant Accounting Policies (Summary of NNN's Investment Portfolio) (Details) ft² in Thousands | 6 Months Ended |
Jun. 30, 2018ft²stateproperty | |
Property Portfolio: | |
Total properties | property | 2,846 |
Gross leasable area (square feet) | ft² | 29,389 |
States | state | 48 |
Weighted average remaining lease term (years) | 11 years 6 months |
Organization and Summary of S19
Organization and Summary of Significant Accounting Policies (Narrative) (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Debt Instrument [Line Items] | |||||
Interest costs capitalized | $ 1,076,000 | $ 560,000 | $ 1,904,000 | $ 1,113,000 | |
Amortization of above and below market leases | 1,417,000 | 682,000 | 2,115,000 | 1,341,000 | |
Revolving credit facility borrowing capacity | 900,000,000 | 900,000,000 | |||
Mortgages | |||||
Debt Instrument [Line Items] | |||||
Debt costs | 147,000 | 147,000 | $ 147,000 | ||
Debt costs accumulated amortization | 64,000 | 64,000 | 55,000 | ||
Notes Payable to Banks | |||||
Debt Instrument [Line Items] | |||||
Debt costs | 22,682,000 | 22,682,000 | 22,682,000 | ||
Debt costs accumulated amortization | 7,399,000 | 7,399,000 | $ 6,337,000 | ||
In-place leases, net | |||||
Debt Instrument [Line Items] | |||||
Acquired-in-place leases | $ 2,370,000 | $ 3,281,000 | $ 5,516,000 | $ 6,608,000 |
Organization and Summary of S20
Organization and Summary of Significant Accounting Policies (Gross Intangible Assets and Liabilities) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Intangible lease liabilities (included in Other liabilities): | ||
Below-market in-place leases | $ 41,912 | $ 44,468 |
Less: accumulated amortization | (25,151) | (26,055) |
Below-market in-place leases, net | 16,761 | 18,413 |
Above-market in-place leases, net | ||
Intangible lease assets (included in Other assets): | ||
Leases | 15,329 | 16,583 |
Less: accumulated amortization | (9,197) | (9,299) |
Leases, net | 6,132 | 7,284 |
In-place leases, net | ||
Intangible lease assets (included in Other assets): | ||
Leases | 101,887 | 104,592 |
Less: accumulated amortization | (60,070) | (61,004) |
Leases, net | $ 41,817 | $ 43,588 |
Organization and Summary of S21
Organization and Summary of Significant Accounting Policies (Computation of Basic and Diluted Earnings per Share) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Basic and Diluted Earnings: | ||||
Net earnings attributable to NNN | $ 70,573 | $ 58,028 | $ 173,854 | $ 131,685 |
Net earnings attributable to common stockholders | 61,992 | 49,447 | 156,690 | 101,068 |
Less: Earnings allocated to unvested restricted shares | (141) | (137) | (273) | (267) |
Net earnings used in basic and diluted earnings per share | $ 61,851 | $ 49,310 | $ 156,417 | $ 100,801 |
Basic and Diluted Weighted Average Shares Outstanding: | ||||
Weighted average number of shares outstanding (in shares) | 154,593,456 | 149,119,191 | 154,138,711 | 148,354,604 |
Less: Unvested restricted stock (in shares) | (295,444) | (301,206) | (266,690) | (293,588) |
Less: Unvested contingent restricted shares (in shares) | (487,320) | (445,484) | (443,656) | (405,940) |
Weighted average number of shares outstanding used in basic earnings per share (in shares) | 153,810,692 | 148,372,501 | 153,428,365 | 147,655,076 |
Other dilutive securities (in shares) | 393,246 | 346,969 | 411,854 | 368,592 |
Weighted average number of shares outstanding used in diluted earnings per share (in shares) | 154,203,938 | 148,719,470 | 153,840,219 | 148,023,668 |
Series D Preferred Stock | ||||
Basic and Diluted Earnings: | ||||
Less: preferred stock dividends | $ 0 | $ 0 | $ 0 | $ (3,598) |
Excess of redemption value over carrying value of Series D preferred shares redeemed | 0 | 0 | 0 | (9,855) |
Series E Preferred Stock | ||||
Basic and Diluted Earnings: | ||||
Less: preferred stock dividends | (4,096) | (4,096) | (8,194) | (8,194) |
Series F Preferred Stock | ||||
Basic and Diluted Earnings: | ||||
Less: preferred stock dividends | $ (4,485) | $ (4,485) | $ (8,970) | $ (8,970) |
Organization and Summary of S22
Organization and Summary of Significant Accounting Policies (Changes in AOCI) (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |
Beginning balance, December 31, 2017 | $ 3,840,910 |
Other comprehensive income | 1,147 |
Reclassifications from accumulated other comprehensive income to net earnings | 1,056 |
Net current period other comprehensive income | 2,203 |
Ending balance, June 30, 2018 | 3,989,111 |
Gains or (Losses) on Cash Flow Hedges | |
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |
Beginning balance, December 31, 2017 | (14,655) |
Other comprehensive income | 1,095 |
Reclassifications from accumulated other comprehensive income to net earnings | 1,056 |
Net current period other comprehensive income | 2,151 |
Ending balance, June 30, 2018 | (12,504) |
Gains on Available-for-Sale Securities | |
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |
Beginning balance, December 31, 2017 | 917 |
Other comprehensive income | 52 |
Reclassifications from accumulated other comprehensive income to net earnings | 0 |
Net current period other comprehensive income | 52 |
Ending balance, June 30, 2018 | 969 |
Total | |
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | |
Beginning balance, December 31, 2017 | (13,738) |
Ending balance, June 30, 2018 | $ (11,535) |
Real Estate (Classification of
Real Estate (Classification of Investment Property Leases) (Details) | 6 Months Ended |
Jun. 30, 2018propertyoption | |
Lease classification: | |
Weighted average remaining lease term (years) | 11 years 6 months |
Number of renewal options, or more | option | 1 |
Operating | |
Lease classification: | |
Operating | 2,856 |
Direct financing | |
Lease classification: | |
Direct financing | 7 |
Building portion – direct financing/land portion – operating | |
Lease classification: | |
Building portion – direct financing/land portion – operating | 2 |
Real Estate (Summary of Real Es
Real Estate (Summary of Real Estate Subject to Operating Leases) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Property Subject to or Available for Operating Lease [Line Items] | ||
Real estate subject to operating leases, gross | $ 7,472,784 | $ 7,254,891 |
Less accumulated depreciation and amortization | (945,626) | (878,111) |
Real estate subject to operating leases before work in process | 6,527,158 | 6,376,780 |
Accounted for using the operating method, net of accumulated depreciation and amortization | 6,609,368 | 6,418,700 |
Land and improvements | ||
Property Subject to or Available for Operating Lease [Line Items] | ||
Land and improvements | 2,316,395 | 2,287,100 |
Buildings and improvements | ||
Property Subject to or Available for Operating Lease [Line Items] | ||
Buildings and improvements | 5,152,418 | 4,962,530 |
Leasehold interests | ||
Property Subject to or Available for Operating Lease [Line Items] | ||
Leasehold interests | 3,971 | 5,261 |
Work in progress | ||
Property Subject to or Available for Operating Lease [Line Items] | ||
Work in progress for buildings and improvements | 82,210 | 41,920 |
Asset under Construction | ||
Property Subject to or Available for Operating Lease [Line Items] | ||
Land and improvements | $ 27,203 | $ 25,799 |
Real Estate (Held for Sale) (De
Real Estate (Held for Sale) (Details) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018USD ($)property | Dec. 31, 2017USD ($)property | |
Real Estate [Abstract] | ||
Number of properties classified as held for sale | property | 7 | 9 |
Number of properties sold | property | 2 | |
Land and improvements | $ 4,424 | $ 5,229 |
Building and improvements | 11,098 | 12,956 |
Real estate held-for-sale | 15,522 | 18,185 |
Less accumulated depreciation and amortization | (2,798) | (3,010) |
Less impairment | (2,261) | (864) |
Real estate held for sale | $ 10,463 | $ 14,311 |
Real Estate (Dispositions) (Det
Real Estate (Dispositions) (Details) - Assets Held-for-sale $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018USD ($)property | Jun. 30, 2017USD ($)property | Jun. 30, 2018USD ($)property | Jun. 30, 2017USD ($)property | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Number of sold properties - gain on disposition of real estate | property | 13 | 8 | 28 | 25 |
Gain on disposition of real estate | $ | $ 4,106 | $ 3,055 | $ 42,702 | $ 17,679 |
Real Estate (Commitments) (Deta
Real Estate (Commitments) (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($)property | |
Real Estate [Abstract] | |
Number of properties | property | 17 |
Period for improvements to construction commitments | 12 months |
Total commitment | $ 134,726 |
Less amount funded | 109,413 |
Remaining commitment | $ 25,313 |
Real Estate (Impairments) (Deta
Real Estate (Impairments) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Real Estate [Abstract] | ||||
Impairment losses – real estate and other charges, net of recoveries | $ 3,835 | $ (39) | $ 6,083 | $ 1,167 |
Line of Credit Payable (Details
Line of Credit Payable (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Line of Credit Facility [Line Items] | ||
Revolving credit facility borrowing capacity | $ 900,000,000 | |
Revolving credit facility weighted average outstanding balance | $ 187,331,000 | |
Revolving credit facility weighted average interest rate | 2.70% | |
Option to increase facility size | $ 1,600,000,000 | |
Line of credit payable | 166,700,000 | $ 120,500,000 |
Line of credit facility available for future borrowings | $ 733,300,000 | |
Line of Credit | LIBOR | ||
Line of Credit Facility [Line Items] | ||
Basis spread on variable rate | 0.875% | |
Letter of Credit | ||
Line of Credit Facility [Line Items] | ||
Line of credit facility, undrawn letters of credit | $ 58,000 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Jul. 31, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | Feb. 28, 2018 | |
Class of Stock [Line Items] | |||||||
Total allowable shares (in shares) | 375,000,000 | 375,000,000 | 375,000,000 | ||||
Net proceeds | $ 132,191 | $ 74,503 | |||||
Total shares issued (in shares) | 156,990,141 | 156,990,141 | 153,577,028 | ||||
Stock issuance costs | $ 1,740 | 1,238 | |||||
Common stock Dividends | $ 72,850 | $ 67,660 | $ 145,583 | $ 134,440 | |||
Common stock Per share (in dollars per share) | $ 0.475 | $ 0.455 | $ 0.950 | $ 0.910 | |||
Subsequent Event | |||||||
Class of Stock [Line Items] | |||||||
Common stock, dividends, per share, declared (in dollars per share) | $ 0.500 | ||||||
Series D Preferred Stock | |||||||
Class of Stock [Line Items] | |||||||
Dividends | $ 0 | $ 0 | $ 0 | $ 3,598 | |||
Per depository share (in dollars per share) | $ 0 | $ 0 | $ 0 | $ 0.312847 | |||
Dividend rate | 6.625% | ||||||
Series E Preferred Stock | |||||||
Class of Stock [Line Items] | |||||||
Dividends | $ 4,096 | $ 4,096 | $ 8,194 | $ 8,194 | |||
Per depository share (in dollars per share) | $ 0.356250 | $ 0.356250 | $ 0.712500 | $ 0.712500 | |||
Dividend rate | 5.70% | 5.70% | |||||
Series F Preferred Stock | |||||||
Class of Stock [Line Items] | |||||||
Dividends | $ 4,485 | $ 4,485 | $ 8,970 | $ 8,970 | |||
Per depository share (in dollars per share) | $ 0.325000 | $ 0.325000 | $ 0.650000 | $ 0.650000 | |||
Dividend rate | 5.20% | 5.20% | |||||
DRIP | |||||||
Class of Stock [Line Items] | |||||||
Total allowable shares (in shares) | 10,000,000 | ||||||
Shares of common stock (in shares) | 143,997 | 34,466 | |||||
Net proceeds | $ 5,471 | $ 1,413 | |||||
2018 ATM | |||||||
Class of Stock [Line Items] | |||||||
Total allowable shares (in shares) | 12,000,000 | 12,000,000 | |||||
Total shares issued (in shares) | 3,037,464 | 3,037,464 | |||||
2016 ATM | |||||||
Class of Stock [Line Items] | |||||||
Total allowable shares (in shares) | 12,000,000 | 12,000,000 | |||||
Total shares issued (in shares) | 10,044,656 | 10,044,656 | |||||
ATM Equity Programs | |||||||
Class of Stock [Line Items] | |||||||
Shares of common stock (in shares) | 3,037,464 | 1,653,155 | |||||
Average price per share (net) (in dollars per share) | $ 41.17 | $ 43.64 | |||||
Net proceeds | $ 125,052 | $ 72,139 | |||||
Stock issuance costs | $ 1,633 | $ 1,183 |
Derivatives (Details)
Derivatives (Details) | 3 Months Ended | 6 Months Ended | ||||||||
Jun. 30, 2018USD ($)instrument | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)instrument | Jun. 30, 2017USD ($) | Sep. 30, 2017USD ($)instrument | Dec. 31, 2016USD ($)instrument | Oct. 31, 2015USD ($)instrument | May 31, 2014USD ($)instrument | Apr. 30, 2013USD ($)instrument | Jun. 30, 2011USD ($)instrument | |
Derivative [Line Items] | ||||||||||
Fair value of interest rate hedges recognized in other comprehensive income | $ 13,599,000 | $ 13,599,000 | ||||||||
Interest expense | 27,110,000 | $ 27,274,000 | 53,712,000 | $ 53,888,000 | ||||||
Interest rate cash flow hedge gain (loss) to be reclassified during next 12 months, net | (2,192,000) | (2,192,000) | ||||||||
Gain (loss) on cash flow hedge ineffectiveness, net | 0 | |||||||||
Reclassification out of Accumulated Other Comprehensive Income | ||||||||||
Derivative [Line Items] | ||||||||||
Interest expense | 1,056,000 | $ 903,000 | ||||||||
Treasury Lock | ||||||||||
Derivative [Line Items] | ||||||||||
Number of interest rate derivatives terminated | instrument | 2 | |||||||||
Aggregate Notional Amount | $ 150,000,000 | |||||||||
Liability (Asset) Fair Value When Terminated | 5,300,000 | |||||||||
Fair Value Deferred In Other Comprehensive Income | $ 5,218,000 | |||||||||
Forward Swap | ||||||||||
Derivative [Line Items] | ||||||||||
Number of interest rate derivatives terminated | instrument | 2 | 2 | 4 | 3 | 4 | |||||
Aggregate Notional Amount | 250,000,000 | 250,000,000 | $ 250,000,000 | $ 180,000,000 | $ 300,000,000 | $ 225,000,000 | $ 240,000,000 | |||
Liability (Asset) Fair Value When Terminated | 7,690,000 | 13,369,000 | 6,312,000 | 3,156,000 | ||||||
Liability (Asset) Fair Value When Terminated | $ (1,095,000) | $ (1,095,000) | (13,352,000) | |||||||
Fair Value Deferred In Other Comprehensive Income | $ 7,688,000 | $ (13,345,000) | $ 13,369,000 | $ 6,312,000 | $ 3,141,000 | |||||
Number of interest rate derivatives entered into | instrument | 2 | 2 |
Fair Value of Financial Instr32
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Financial Instruments, Owned, at Fair Value [Abstract] | ||
Fair value of notes payable | $ 2,416,221 | $ 2,507,106 |