Form 8-K
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 8-K

 


CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 16, 2006

 


NATIONAL RETAIL PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

 


 

Maryland   001-11290   56-1431377

(State or other jurisdiction

of incorporation)

  (Commission File Number)  

(IRS Employer

Identification No.)

 

450 South Orange Avenue

Suite 900

Orlando, Florida

  32801
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code (407) 265-7348

Not applicable

(Former name or former address, if changed since last report.)

 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



Table of Contents

Item 2.01. Completion of Acquisition or Disposition of Assets.

On May 16, 2006, National Retail Properties, Inc. (the “Company”) completed the sale of its office properties located in the Pentagon City submarket of the Washington, DC metropolitan area (“DC Office Buildings”) to Brookfield Financial Properties, L.P., an affiliate of Brookfield Properties Corporation for $229,330,000, which includes the assumption of a $95,000,000 loan secured by the properties. The properties are leased to the United States of America and serve as the headquarters of the Transportation Security Administration under a lease that expires in 2014.

Item 7.01. Regulation FD Disclosure.

On May 16, 2006, National Retail Properties, Inc. (the “Company”) issued a press release announcing the sale of its office property described in Item 2.01 above. The press release is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of such section, nor shall such information be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(b) Pro Forma Financial Information


Table of Contents

NATIONAL RETAIL PROPERTIES, INC.

and SUBSIDIARIES

INDEX TO PRO FORMA INFORMATION

 

     Page
Pro Forma (Unaudited) Condensed Consolidated Balance Sheet as of March 31, 2006    F-3
Pro Forma (Unaudited) Condensed Consolidated Statement of Earnings from Continuing Operations for the quarter ended March 31, 2006    F-4
Pro Forma (Unaudited) Condensed Consolidated Statement of Earnings from Continuing Operations for the year ended December 31, 2005    F-5
Notes and Management’s Assumptions to Unaudited Pro Forma Condensed Consolidated Financial Information    F-7

 

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NATIONAL RETAIL PROPERTIES, INC.

and SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2006, and the unaudited Pro Forma Condensed Consolidated Statements of Earnings from Continuing Operations for the quarter ended March 31, 2006, and for the year ended December 31, 2005, are based on the historical financial statements of the Company.

The unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2006, is presented as if the following transactions occurred on March 31, 2006: (i) disposition of the DC Office Buildings including the buyer’s assumption of the related mortgage payable, and (ii) the repayment of the Company’s credit facility with the proceeds from the disposition of the DC Office Buildings.

The historical balance sheet includes the 87 Investment Properties which were acquired between December 2005 and January 2006 for approximately $173 million, including closing costs. In addition, the historical amounts include the 21 Inventory Properties which were acquired in December 2005 for approximately $31 million, including closing costs.

The unaudited Pro Forma Condensed Consolidated Statements of Earnings from Continuing Operations for the quarter ended March 31, 2006, and for the year ended December 31, 2005, are presented as if the following transactions occurred on January 1, 2005 (i) the disposition of the DC Office Buildings, including the buyer’s assumption of the related mortgage payable, (ii) the acquisition of 87 Investment Properties and 21 Inventory Properties financed with the proceeds from the credit facility, and (iii) the repayment of the Company’s credit facility with the proceeds from the disposition of the DC Office Buildings. The unaudited pro forma information should be read in conjunction with the historical financial statements and notes related thereto appearing in the Company’s Form 10-K for the year ended December 31, 2005 and the Form 10-Q for the quarter ended March 31, 2006.

Preparation of the pro forma information was based on assumptions considered appropriate by the Company’s management. The pro forma financial information is unaudited and is not necessarily indicative of the results which would have occurred if the transactions described above had been consummated on January 1, 2005 for the Pro Forma Condensed Consolidated Statements of Earnings from Continuing Operations and on March 31, 2006 for the Pro Forma Condensed Consolidated Balance Sheet, nor does it purport to represent the future financial position and the results of operations for future periods. In management’s opinion, all adjustments necessary to reflect the effects of the transactions have been made.

 

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NATIONAL RETAIL PROPERTIES, INC.

and SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2006

(dollars in thousands, except per share data)

(unaudited)

 

      Historical     Pro Forma
Adjustments
    Pro Forma
ASSETS       

Real estate, Investment Portfolio:

      

Accounted for using the operating method, net of accumulated depreciation and amortization and impairment

   $ 1,158,639 (A)   $ —       $ 1,158,639

Accounted for using the direct financing method

     89,803       —         89,803

Held for sale, net of impairment

     164,129       (162,529 )(B)     1,600

Real estate, Inventory Portfolio, held for sale

     151,878 (A)     —         151,878

Mortgages, notes and accrued interest receivable, net of allowance

     51,981       —         51,981

Mortgage residual interests, net of impairment

     47,438       —         47,438

Cash and cash equivalents

     20,322       —         20,322

Restricted cash

     30,549       —         30,549

Receivables, net of allowance

     7,438       (221 )(B)     7,217

Accrued rental income, net of allowance

     28,112       (1,776 )(B)     26,336

Debt costs, net of accumulated amortization

     5,606       (169 )(B)     5,437

Other assets

     20,450       (2,668 )(B)     17,782
                      

Total assets

   $ 1,776,345     $ (167,363 )   $ 1,608,982
                      
LIABILITIES AND STOCKHOLDERS’ EQUITY       

Line of credit payable

   $ 191,500     $ (133,863 )(C)   $ 57,637

Mortgages payable

     37,176       —         37,176

Mortgages payable, held for sale

     95,000       (95,000 )(D)     —  

Notes payable – secured

     28,250       —         28,250

Notes payable, net of unamortized discount

     489,700       —         489,700

Financing lease obligation

     26,041       —         26,041

Accrued interest payable

     8,609       (286 )(D)     8,323

Other liabilities

     20,668       (6 )(B)     20,662

Income tax liability

     13,593       —         13,593
                      

Total liabilities

     910,537       (229,155 )     681,382
                      

Minority interest

     5,168       —         5,168

Stockholders’ equity:

      

Preferred stock, $0.01 par value. Authorized 15,000,000 shares

      

Series A, 1,781,589 shares issued and outstanding, stated liquidation value of $25 per share

     44,540       —         44,540

Series B Convertible, 10,000 shares issued and outstanding, stated liquidation value of $2,500 per share

     25,000       —         25,000

Common stock, $0.01 par value. Authorized 190,000,000 shares; 56,274,304 shares issued and outstanding

     563       —         563

Excess stock, $0.01 par value. Authorized 205,000,000 shares; none issued or outstanding

     —         —         —  

Capital in excess of par value

     803,414       —         803,414

Accumulated dividends in excess of net earnings

     (16,473 )     61,792 (E)     45,319

Other comprehensive income

     3,596       —         3,596
                      

Total stockholders’ equity

     860,640       61,792       922,432
                      
   $ 1,776,345     $ (167,363 )   $ 1,608,982
                      

 

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NATIONAL RETAIL PROPERTIES, INC.

and SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FROM CONTINUING OPERATIONS

FOR THE QUARTER ENDED MARCH 31, 2006

(dollars in thousands, except per share data)

(unaudited)

 

     Historical     Pro Forma
Adjustments(J)
    Pro Forma  

Revenues:

      

Rental income from operating leases

   $ 29,482     $ 204 (F)   $ 29,686  

Earned income from direct financing leases

     2,336       —         2,336  

Contingent rental income

     456       —         456  

Real estate expense reimbursement from tenants

     996       —         996  

Gain on disposition of real estate, Inventory Portfolio

     6,444       —         6,444  

Interest income from real estate transactions

     1,459       —         1,459  

Interest income on mortgage residual interests

     2,297       —         2,297  
                        
     43,470       204       43,674  
                        

Operating expenses:

      

General and administrative

     7,200       —         7,200  

Real estate

     1,338       —         1,338  

Depreciation and amortization

     5,351       18 (G)     5,369  

Impairment – mortgage residual interests

     1,820       —         1,820  
                        
     15,709       18       15,727  
                        

Earnings from operations

     27,761       186       27,947  
                        

Other expenses (revenues):

      

Interest and other income

     (846 )     —         (846 )

Interest expense

     11,935       (2,000 )(H)     9,935  
                        
     11,089       (2,000 )     9,089  
                        

Earnings from continuing operations before income tax benefit, minority interest and equity in earnings (losses) of unconsolidated affiliates

     16,672       2,186       18,858  

Income tax benefit

     1,893       —         1,893  

Minority interest

     (3,197 )     —         (3,197 )

Equity in earnings (losses) of unconsolidated affiliates

     (33 )     —         (33 )
                        

Earnings from continuing operations

     15,335       2,186       17,521  

Series A preferred stock dividends

     (1,002 )     —         (1,002 )

Series B convertible preferred stock dividends

     (419 )     —         (419 )
                        

Earnings from continuing operations available to common stockholders – basic

     13,914       2,186       16,100  

Series B convertible preferred stock dividends, if dilutive

     419       —         419  
                        

Earnings from continuing operations available to common stockholders – diluted

   $ 14,333     $ 2,186     $ 16,519  
                        

Earnings from continuing operations per share of common stock:

      

Basic

   $ 0.25       $ 0.29  
                  

Diluted

   $ 0.25       $ 0.29  
                  

Weighted average number of common shares outstanding:

      

Basic

     55,408,126         55,408,126  
                  

Diluted

     56,956,636         56,956,636  
                  

 

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NATIONAL RETAIL PROPERTIES, INC.

and SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FROM CONTINUING OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2005

(dollars in thousands, except per share data)

(unaudited)

 

     Historical     Adjusted for
Discontinued
Operations(K)
    DC Office
Buildings (I)
    Pro Forma
Adjustments(J)
    Pro Forma  

Revenues:

          

Rental income from operating leases

   $ 112,384     $ (499 )   $ (15,940 )   $ 15,251 (F)   $ 111,196  

Earned income from direct financing leases

     10,388       (437 )     —         —         9,951  

Contingent rental income

     480       —         —         —         480  

Real estate expense reimbursement from tenants

     6,350       (21 )     (2,017 )     —         4,312  

Gain on disposition of real estate, Inventory Portfolio

     2,010       —         —         —         2,010  

Interest income from real estate transactions

     6,216       —         —         —         6,216  

Interest income on mortgage residual interests

     7,349       —         —         —         7,349  
                                        
     145,177       (957 )     (17,957 )     15,251       141,514  
                                        

Operating expenses:

          

General and administrative

     23,411       (1 )     83       —         23,493  

Real estate

     11,534       (26 )     (5,822 )     —         5,686  

Depreciation and amortization

     22,276       (25 )     (5,135 )     2,135 (G)     19,251  

Impairment – real estate

     1,673       —         —         —         1,673  

Impairment – mortgage residual interests

     2,382       —         —         —         2,382  
                                        
     61,276       (52 )     (10,874 )     2,135       52,485  
                                        

Earnings from operations

     83,901       (905 )     (7,083 )     13,116       89,029  
                                        

Other expenses (revenues):

          

Interest and other income

     (2,054 )     1       15       —         (2,038 )

Interest expense

     35,941       1       (3,097 )     2,305 (H)     35,150  
                                        
     33,887       2       (3,082 )     2,305       33,112  
                                        

Earnings from continuing operations before income tax benefit, minority interest and equity in earnings of unconsolidated affiliates

     50,014       (907 )     (4,001 )     10,811       55,917  

Income tax benefit

     2,776       (1 )     —         —         2,775  

Minority interest

     137       —         —         —         137  

Equity in earnings of unconsolidated affiliates

     1,209       —         —         —         1,209  
                                        

Earnings from continuing operations

     54,136       (908 )     (4,001 )     10,811       60,038  

 

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NATIONAL RETAIL PROPERTIES, INC.

and SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FROM CONTINUING OPERATIONS – CONTINUED

FOR THE YEAR ENDED DECEMBER 31, 2005

(dollars in thousands, except per share data)

(unaudited)

 

     Historical     Adjusted for
Discontinued
Operations(K)
    DC Office
Buildings (I)
    Pro Forma
Adjustments(J)
   Pro Forma  

Earnings from continuing operations

     54,136       (908 )     (4,001 )     10,811      60,038  

Series A preferred stock dividends

     (4,008 )     —         —         —        (4,008 )

Series B convertible preferred stock dividends

     (1,675 )     —         —         —        (1,675 )
                                       

Earnings from continuing operations available to common stockholders – basic

     48,453       (908 )     (4,001 )     10,811      54,355  

Series B convertible preferred stock dividends, if dilutive

     1,675       —         —         —        1,675  
                                       

Earnings from continuing operations available to common stockholders – diluted

   $ 50,128     $ (908 )   $ (4,001 )   $ 10,811    $ 56,030  
                                       

Earnings from continuing operations per share of common stock:

           

Basic

   $ 0.91            $ 1.03  
                       

Diluted

   $ 0.92            $ 1.03  
                       

Weighted average number of common shares outstanding:

           

Basic

     52,984,821              52,984,821  
                       

Diluted

     54,640,143              54,640,143  
                       

 

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NATIONAL RETAIL PROPERTIES, INC.

and SUBSIDIARIES

NOTES AND MANAGEMENT’S ASSUMPTIONS

TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1. Adjustments to the Pro Forma Condensed Consolidated Balance Sheet:

 

  (A) The historical “Real estate, Investment Portfolio” includes the 87 Investment Properties which were acquired between December 2005 and January 2006 for approximately $173 million, including closing costs. In addition, the historical “Real estate, Inventory Portfolio, held for sale” includes the 21 Inventory Properties which were acquired in December 2005 for approximately $31 million, including closing costs.

 

  (B) Decrease in “Real estate, Investment Portfolio, held for sale,” “Accrued rental income, net of allowance,” “Receivables,” “Debt costs, net of allowance,” “Other assets” and “Other liabilities” represents the removal of the assets and liabilities associated with the disposition of the DC Office Buildings.

 

  (C) The decrease in the “Line of credit payable” represents the net cash from the disposition of the DC Office Buildings, and is outlined below (dollars in thousands):

 

Net sales price

   $ 227,958  

Less mortgage payable, held for sale

     (95,000 )
        

Cash to Company

     132,958  

Reimbursements from seller for amounts prepaid

     1,197  

Payment to seller for accrued liabilities

     (292 )
        
   $ 133,863  
        

 

  (D) Decrease in “Mortgage payable, held for sale” represents the assumption by the buyer of the loan secured by a first mortgage lien on the DC Office Buildings. The decrease in “Accrued interest payable” represents the Company’s payment of any accrued interest on the mortgage payable at the time of assumption.

 

  (E) The increase in the “Accumulated dividends in excess of net earnings” is outlined below (dollars in thousands):

 

Gain on disposition of DC Office Buildings

   $ 59,435  

Recognition of deferred revenues associated with DC Office Buildings

     2,526  

Write off of debt costs

     (169 )
        
   $ 61,792  
        

 

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2. Adjustments to the Pro Forma Condensed Consolidated Statements of Earnings from Continuing Operations:

 

  (F) Rental income has been adjusted to reflect the lease payments from the 87 Investment Properties acquired. Rental income was calculated on a pro forma basis in accordance with rent provisions in the leases, assuming the leases were entered into on January 1, 2005.

 

  (G) Depreciation and amortization have been adjusted based on the allocated purchase price of the 87 Investment Properties acquired using an estimated useful life of 40 years, assuming the acquisition occurred on January 1, 2005.

 

  (H) Interest expense has been adjusted to reflect the interest costs related to the proceeds from the line of credit, offset by the net cash proceeds from the buyer for the DC Office Buildings, assuming that the borrowings to finance the Properties and the disposition of the DC Office Buildings occurred on January 1, 2005.

 

  (I) The DC Office Buildings are deemed discontinued operations; therefore, all revenues and expenses are reclassified to earnings from discontinued operations.

 

  (J) The 21 Inventory Properties acquired are classified as held for sale, and are deemed discontinued operations; therefore the pro forma effects of the acquisition of these properties are not included in earnings from continuing operations.

 

  (K) The “Adjustments for Discontinued Operations” for the year ended December 31, 2005 does not include the reclassification of the revenues and expenses that are related to the DC Office Buildings.

 

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Exhibits.

 

  2.1 Real Estate Purchase Contract, dated February 9, 2006, among CNLR DC Acquisitions I, LLC, Brookfield Financial Properties, L.P. and the Registrant (filed as Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (the “Form 10-K”) and incorporated herein by reference).

 

  2.2 Amendment to Real Estate Purchase Contract, dated February 14, 2006, by and between CNLR DC Acquisitions I, LLC and Brookfield Financial Properties, L.P. (filed as Exhibit 10.11 to the Form 10-K and incorporated herein by reference).

 

  2.3 Second Amendment to Real Estate Purchase Contract, dated February 15, 2006, by and between CNLR DC Acquisitions I, LLC and Brookfield Financial Properties, L.P. (filed as Exhibit 10.12 to the Form 10-K and incorporated herein by reference).

 

  2.4 Third Amendment to Real Estate Purchase Contract, dated April 18, 2006, by and between CNLR DC Acquisitions I, LLC and Brookfield Financial Properties, L.P. (filed herewith).

 

  2.5 Fourth Amendment to Real Estate Purchase Contract, dated May 10, 2006, by and between CNLR DC Acquisitions I, LLC and Brookfield Financial Properties, L.P. (filed herewith).

 

  2.6 Fifth Amendment to Real Estate Purchase Contract, dated May 12, 2006, by and between CNLR DC Acquisitions I, LLC and Brookfield Financial Properties, L.P. (filed herewith).

 

  99.1 Press release, dated May 16, 2006, of National Retail Properties, Inc. (filed herewith).


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

NATIONAL RETAIL PROPERTIES, INC.
By:  

/s/ Kevin B. Habicht

Name:   Kevin B. Habicht
Title:   Chief Financial Officer

Dated: May 19, 2006


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EXHIBIT INDEX

 

Exhibit No.  

Description

2.1   Real Estate Purchase Contract, dated February 9, 2006, among CNLR DC Acquisitions I, LLC, Brookfield Financial Properties, L.P. and the Registrant (filed as Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (the “Form 10-K”) and incorporated herein by reference).
2.2   Amendment to Real Estate Purchase Contract, dated February 14, 2006, by and between CNLR DC Acquisitions I, LLC and Brookfield Financial Properties, L.P. (filed as Exhibit 10.11 to the Form 10-K and incorporated herein by reference).
2.3   Second Amendment to Real Estate Purchase Contract, dated February 15, 2006, by and between CNLR DC Acquisitions I, LLC and Brookfield Financial Properties, L.P. (filed as Exhibit 10.12 to the Form 10-K and incorporated herein by reference).
2.4   Third Amendment to Real Estate Purchase Contract, dated April 18, 2006, by and between CNLR DC Acquisitions I, LLC and Brookfield Financial Properties, L.P. (filed herewith).
2.5   Fourth Amendment to Real Estate Purchase Contract, dated May 10, 2006, by and between CNLR DC Acquisitions I, LLC and Brookfield Financial Properties, L.P. (filed herewith).
2.6   Fifth Amendment to Real Estate Purchase Contract, dated May 12, 2006, by and between CNLR DC Acquisitions I, LLC and Brookfield Financial Properties, L.P. (filed herewith).
99.1     Press release, dated May 16, 2006, of National Retail Properties, Inc. (filed herewith).