American Association of Individual Investors

Document Sample
American Association of Individual Investors Powered By Docstoc
					American Association of
 Individual Investors
       November 2007
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
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
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
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
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
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
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 15-20 years
  •   Provide NNN with more consistent property-level operating income which
      produces a more stable earnings profile throughout economic and real estate
      cycles




                                                                                    8
Investment Strategy: Consistency

                     Stable Cash Flow

                                                            Diversification
                                                            • Geographic
                                                            • Line of Trade




                                              Div
Tenant
               nt
                                                            • Tenant
• Credit


                            Real Estate
                 a




                                                  ers
             Ten



• Business




                                                    caifi
                                                      tio
                                                            n
                                          Real Estate
                                          •   Location
                                          •   Replacement Cost
                                          •   Market Rent
                                                                              9
Diversification Reduces Risk
(September 30, 2007)
                               876 Properties
                               194 Tenants
                               43 States




                                                11
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%
        2007 2008 2009 2010   2011 2012   2013   2014   2015 2016   2017 2018   2019 2020 2021 2022 2023 2024Thereafter




                                                                                                                          12
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
18 Years of Increased Dividends
(One of 181 companies)
  $1.40

                                                                      Dividend Yield = 5.8%*
  $1.35


  $1.30


  $1.25


  $1.20


  $1.15


  $1.10


  $1.05


  $1.00
          1990   1991 1992 1993 1994 1995 1996   1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

                                       *Based on the closing price of $24.38 on September 30, 2007.       14
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
National Retail Properties, Inc.
          NYSE: NNN



        800-NNN-REIT
       www.nnnreit.com