Throughout the year, we receive numerous questions from shareholders, customers, employees and other stakeholders. Here are the most frequently asked questions:
- How are REIT dividends different?
- What happens when a tenant goes bankrupt and closes a store?
- What is NNN's dividend policy?
- Please explain how Preferred Stock differs from Common Stock?
- What are the ex-dividend, record and payable dates?
- How can I find National Retail Properties in the daily newspaper's stock listings?
- Do you have a dividend reinvestment plan?
- What is a net lease?
- What is mezzanine debt and how does it fit into your acquisition strategy?
- Why do you sell properties?
Q: How are REIT dividends different?
A: Companies that pay dividends, such as income stocks like REITs, are increasingly attracting more investors, particularly with the recent changes in market conditions. REITs, which do not pay federal income taxes, are required by law to distribute at least 90 percent of their taxable income each year to shareholders. Consequently, as investments, REITs tend to be among those companies paying the highest dividends.
Q: What happens when a tenant goes bankrupt and closes a store?
A: Bankruptcy by a tenant does not necessarily mean loss of rent or vacancy. Tenants in bankruptcy must reject a lease before they can stop making rent payments. We have had a few cases of retailers filing for bankruptcy and never missing a rent payment to us during their reorganization process. If they do reject the lease, they must vacate the property and we can then seek to re-lease the property to another user.
Q: What is NNN's dividend policy?
A: We are proud to be one of only 181 of the more than 10,000 public companies in the United States to have increased annual dividends for 18 or more consecutive years. Our objective is to build long-term value for our shareholders by, among other things, paying a safe and growing dividend. Our dividends are only 74 percent of our funds from operations, providing a margin of safety between dividends paid per share and FFO per share.
Q: Please explain how Preferred Stock differs from Common Stock?
A: Preferred stock - A type of stock that pays a fixed dividend, and which has priority over common stock in the payment of dividends and liquidation proceeds. However, it typically carries no voting rights, may be callable at the company's option and does not participate in the growth of the company's earnings. The fixed income stream of preferred stock makes it similar in many ways to bonds. (NYSE: NNN_PA)
Common stock - Securities that represent an ownership interest in a corporation. If the company has also issued preferred stock, both common and preferred have ownership rights. Common stockholders assume the greater risk, but generally exercise the greater control and may gain greater reward in the form of dividends and capital appreciation. (NYSE: NNN)
Q: What are the ex-dividend, record and payable dates?
A: Ex-Dividend - A synonym for "without dividend." The buyer of an ex-dividend stock is not entitled to the next dividend payment. Dividends are paid quarterly to all those shareholders recorded on the books of the company as of a previous date of record. For example, a dividend may be declared as payable to stockholders of record on a given Friday. Since three business days are allowed for delivery of stock in a regular transaction on the New York Stock Exchange, the shares would trade as of the opening of the market on the preceding Wednesday. That means anyone who bought it on or after that Wednesday would not be entitled to that dividend. When stocks go "ex-dividend", the newspaper stock tables include the symbol "x" following the name.
Record Date - The date on which you must be registered as a shareholder of a company in order to receive a declared dividend or, among other things, to vote on company affairs.
Payable Date - The date on which the dividend is actually paid to shareholders.
Q: How can I find National Retail Properties in the daily newspaper's stock listings?
A: Different newspapers have different methods of listing publicly-traded companies. The majority of newspapers today list companies alphabetically by company name rather than by ticker symbol and usually group companies listed on the same Exchanges together. More often than not, newspapers will use some variation of an abbreviated version of our name. For example, in The Wall Street Journal, our company is listed as NtlRetailProp in the New York Stock Exchange Composite Transactions table. However, in the Orlando Sentinel, we are listed as NatRetPrp in both the Stocks table as well as the Central Florida Stock Index table. If you can not find National Retail Properties listed in your local daily newspaper, we suggest calling the business news desk at the paper and asking them for their version of how they list NNN.
Q: Do you have a dividend reinvestment plan?
A: Yes, you may reinvest all or part of your total shares. Contact our Investor Relations representative at 1-800-666-7348 for the required forms.
Q: What is a net lease?
A: A net lease requires the tenant of a property to bear many of the costs associated with the property. Such costs would typically include real estate taxes, maintenance, utilities and insurance. Many times these are called a "triple net lease" and is the reason for our New York Stock Exchange ticker symbol being "NNN" which is the industry moniker for a triple net lease. We strongly believe that using net leases provide increased stability to our operating cash flow over the long run. Today, a number of real estate sectors are dealing with the negative effects of increased property expenses (e.g., property insurance) that we are insulated against by virtue of using net leases.
Q: What is mezzanine debt and how does it fit into your acquisition strategy?
A: Mezzanine debt refers to the secondary mortgage debt that is subordinate to a first mortgage loan but senior to a borrower's equity investment in a property. A property owner/borrower might have a first mortgage loan-to-value ratio debt of 65 percent; a mezzanine loan may allow the property owner/borrower to increase the combined loan-to-value to 85 percent, for example. So by using a mezzanine loan, a property owner is able to more fully leverage the property and reduce the equity investment.
At National Retail Properties, we underwrite mezzanine loans to the same standards as if we were purchasing the underlying property. While we do not intend to own the property, we want to ensure that we would be comfortable doing so. Such mezzanine lending provides opportunities for relatively high returns.
Q: Why do you sell properties?
A: We sell properties to refine our portfolio and reduce our exposure to any one tenant or line of trade. By selling properties through the 1031 Exchange market, we are effectively buying at wholesale and selling at retail. With our 1031 Exchange program, we can acquire large portfolios, retaining the better properties for our portfolio while re-selling individual properties that are not a good fit.