Increased Second Quarter Operating Results Announced by National Retail Properties, Inc.

ORLANDO, Fla., July 31, 2008 /PRNewswire-FirstCall via COMTEX/ -- RTAP | Quote | Chart | News | PowerRating -- National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust, today announced operating results for the quarter ended June 30, 2008, including a 26.7% increase in revenues and a 6.4% increase in Funds From Operations ("FFO") per share compared to the same period for 2007. Additionally, the company announced a 32% increase in revenues and a 5.2% increase in FFO per share for the six months ended June 30, 2008 compared to the same period for 2007. Highlights include:

Operating Results: -- Revenues, net earnings and FFO available to common stockholders: Quarter Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 -------- -------- -------- -------- (in thousands, except per share data) Revenues $ 57,026 $ 44,998 $111,783 $ 84,692 Net earnings available to common stockholders $ 29,192 $ 46,959 $ 60,549 $ 71,967 Net earnings per common share (diluted)$ 0.40 $ 0.70 $ 0.83 $ 1.13 FFO available to common stockholders $ 36,654 $ 31,481 $ 73,628 $ 61,092 FFO per common share (diluted) $ 0.50 $ 0.47 $ 1.01 $ 0.96 -- Investment Portfolio occupancy was 98.4% at June 30, 2008. Investments and Dispositions for the quarter ended June 30, 2008: -- Investments:

-- $103.2 million in the Investment Portfolio, including acquiring 34 properties with an aggregate 208,000 square feet of gross leasable area

-- $1.9 million of development funding in the Inventory Portfolio

-- Dispositions:

-- 7 Investment properties with an aggregate 70,000 square feet of gross leasable area, with net proceeds of $26.5 million, resulting in a gain of $2.7 million

-- 7 Inventory properties with net proceeds of $29 million Investments and Dispositions for the six months ended June 30, 2008: -- Investments:

-- $253.8 million in the Investment Portfolio, including acquiring 61 properties with an aggregate 598,000 square feet of gross leasable area

-- $24.7 million in the Inventory Portfolio, including acquiring 5 properties and funding $3.1 million of development

-- Dispositions:

-- 11 Investment properties with an aggregate 108,000 square feet of gross leasable area, with net proceeds of $36.8 million, resulting in a gain of $6.6 million

-- 15 Inventory properties with net proceeds of $100.8 million

Capital transactions for the quarter ended June 30, 2008:

-- Issued 931,581 shares of common stock generating $20.6 million of net proceeds pursuant to the Dividend Reinvestment and Stock Purchase Plan

Craig Macnab, Chief Executive Officer, commented: "Our portfolio and balance sheet remain in very good condition. High visibility of 2008's FFO per share growth paved the way to increase our quarterly dividend by 5.6% in the second quarter. We are on track to making 2008 the 19th consecutive year of increased annual dividends even while enhancing the safety of the increased dividend as our payout ratio declines to record lows."

National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases. As of June 30, 2008, the company owned 959 Investment properties in 44 states with a gross leasable area of approximately 11 million square feet. For more information on the company, visit www.nnnreit.com .

Management will hold a conference call on July 31, 2008 at 10:00 a.m. EDT to review these results. The call can be accessed on National Retail Properties, Inc. web site live at http://www.nnnreit.com . For those unable to listen to the live broadcast, a replay will be available on the company's web site. In addition, a summary of any earnings guidance given on the call will be posted to the company's web site.

Statements in this press release that are not strictly historical are "forward-looking" statements. Forward-looking statements involve known and unknown risks, which may cause the company's actual future results to differ materially from expected results. These risks include, among others, general economic conditions, local real estate conditions, changes in interest rates, increases in operating costs, the availability of capital, and the profitability of the company's taxable subsidiary. Additional information concerning these and other factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the company's Securities and Exchange Commission ("SEC") filings, including, but not limited to, the company's Annual Report on Form 10-K. Copies of each filing may be obtained from the company or the SEC. Consequently, such forward-looking statements should be regarded solely as reflections of the company's current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release. National Retail undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date these statements were made.

Funds From Operations, commonly referred to as FFO, is a relative non-GAAP financial measure of operating performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. FFO is defined by the National Association of Real Estate Investment Trusts and is used by the company as follows: net earnings (computed in accordance with GAAP) plus depreciation and amortization of assets unique to the real estate industry, excluding gains (or including losses) on the disposition of real estate held for investment, and the company's share of these items from the company's unconsolidated partnerships.

FFO is generally considered by industry analysts to be the most appropriate measure of performance of real estate companies. FFO does not necessarily represent cash provided by operating activities in accordance with GAAP and should not be considered an alternative to net earnings as an indication of the company's performance or to cash flow as a measure of liquidity or ability to make distributions. Management considers FFO an appropriate measure of performance of an equity REIT because it primarily excludes the assumption that the value of the real estate assets diminishes predictably over time, and because industry analysts have accepted it as a performance measure. The company's computation of FFO may differ from the methodology for calculating FFO used by other equity REITs, and therefore, may not be comparable to such other REITs.

The company has determined that there are earnings from discontinued operations in each of its segments, real estate held for investment and real estate held for sale. All property dispositions from the company's held for investment segment are classified as discontinued operations. In addition, certain properties in the company's held for sale segment that have generated revenues before disposition are classified as discontinued operations. The results of operations for prior periods for these properties now classified as discontinued operations have been restated to reflect the results in earnings from discontinued operations for comparability purposes. These adjustments resulted in a decrease in the company's reported total revenues and total and per share earnings from continuing operations and an increase in the company's earnings from discontinued operations. However, the company's total and per share FFO and net earnings available to common stockholders are not affected.

National Retail Properties, Inc. (In thousands, except per share data) (unaudited) Quarter Ended June 30, Six Months Ended June 30, 2008 2007 2008 2007 -------- -------- -------- -------- Income Statement Summary Revenues: Rental and earned income $ 52,992 $ 41,444 $103,579 $ 77,441 Real estate expense reimbursement from tenants 1,456 1,453 3,035 2,706 Interest and other income from real estate transactions 1,407 957 2,642 2,157 Interest income on commercial mortgage residual interests 1,171 1,144 2,527 2,388 -------- -------- -------- -------- 57,026 44,998 111,783 84,692 -------- -------- -------- -------- Disposition of real estate, Inventory Portfolio: Gross proceeds - - 4,900 825 Costs - - (4,879) (493) -------- -------- -------- -------- Gain - - 21 332 -------- -------- -------- -------- Operating expenses: General and administrative 6,040 5,946 13,600 12,267 Real estate 2,254 1,935 4,677 3,774 Depreciation and amortization 10,894 7,575 20,998 14,314 Impairment - commercial mortgage residual interests valuation - - 758 - -------- -------- -------- -------- 19,188 15,456 40,033 30,355 -------- -------- -------- -------- Other expenses (revenues): Interest and other income (1,008) (1,024) (2,229) (2,327) Interest expense 14,665 12,442 30,032 23,544 Loss on interest rate hedge - - 804 - -------- -------- -------- -------- 13,657 11,418 28,607 21,217 -------- -------- -------- -------- Income tax benefit 1,769 2,421 4,421 5,215 Minority interest (246) 148 768 337 Equity in earnings of unconsolidated affiliate 101 - 180 - -------- -------- -------- -------- Earnings from continuing operations 25,805 20,693 48,533 39,004 Earnings from discontinued operations: Real estate, Investment Portfolio 3,629 26,169 9,006 30,804 Real estate, Inventory Portfolio, net of income tax expense and minority interest 1,454 1,793 6,402 5,551 -------- -------- -------- -------- 5,083 27,962 15,408 36,355 -------- -------- -------- -------- Net earnings 30,888 48,655 63,941 75,359 Series C preferred stock dividends (1,696) (1,696) (3,392) (3,392) -------- -------- -------- -------- Net earnings available to common stockholders - basic and diluted 29,192 46,959 60,549 71,967 ======== ======== ======== ======== National Retail Properties, Inc. (In thousands, except per share data) (unaudited) Quarter Ended June 30, Six Months Ended June 30, 2008 2007 2008 2007 -------- -------- -------- -------- Weighted average common shares outstanding: Basic 73,070 66,432 72,692 63,399 ======== ======== ======== ======== Diluted 73,348 66,664 72,915 63,596 ======== ======== ======== ======== Net earnings per share available to common stockholders: Basic: Continuing operations $ 0.33 $ 0.29 $ 0.62 $ 0.57 Discontinued operations 0.07 0.42 0.21 0.57 -------- -------- -------- -------- Net earnings $ 0.40 $ 0.71 $ 0.83 $ 1.14 ======== ======== ======== ======== Diluted: Continuing operations $ 0.33 $ 0.28 $ 0.62 $ 0.56 Discontinued operations 0.07 0.42 0.21 0.57 -------- -------- -------- -------- Net earnings $ 0.40 $ 0.70 $ 0.83 $ 1.13 ======== ======== ======== ======== Supplemental Information: Percentage rent $ 302 $ 141 $ 361 $ 599 ======== ======== ======== ======== Earned income from direct financing leases $ 783 $ 1,764 $ 1,669 $ 3,586 Decrease in real estate classified as direct financing leases (1,073) (2,406) (2,272) (4,868) -------- -------- -------- -------- Net direct financing lease adjustment (290) (642) (603) (1,282) Accrued rental income (straight-line) 550 701 1,129 1,391 -------- -------- -------- -------- Net lease accounting adjustments $ 260 $ 59 $ 526 $ 109 ======== ======== ======== ======== Net Inventory Portfolio gain on disposition (TRS) $ 917 $ 1,714 $ 6,550 $ 6,383 ======== ======== ======== ======== Capitalized interest $ 440 $ 826 $ 972 $ 1,444 ======== ======== ======== ======== Scheduled debt principal amortization (excluding maturities) $ 293 $ 451 $ 584 $ 902 ======== ======== ======== ======== National Retail Properties, Inc. (in thousands, except per share data) (unaudited) Quarter Ended June 30, Six Months Ended June 30, 2008 2007 2008 2007 -------- -------- -------- -------- Reconciliation of net earnings to FFO and FFO available to common stockholders: Net earnings $ 30,888 $ 48,655 $ 63,941 $ 75,359 Real estate depreciation and amortization: Continuing operations 10,067 6,995 19,440 13,152 Discontinued operations 60 173 137 382 Joint venture real estate depreciation 44 - 88 - Gain on disposition of real estate Investment Portfolio (2,709) (22,646) (6,586) (24,409) -------- -------- -------- -------- FFO 38,350 33,177 77,020 64,484 Series C preferred stock dividends (1,696) (1,696) (3,392) (3,392) -------- -------- -------- -------- FFO available to common stockholders - basic and diluted 36,654 31,481 73,628 61,092 ======== ======== ======== ======== FFO per share: Basic $ 0.50 $ 0.47 $ 1.01 $ 0.96 ======== ======== ======== ======== Diluted $ 0.50 $ 0.47 $ 1.01 $ 0.96 ======== ======== ======== ======== Real Estate Disposition Summary Quarter Ended June 30, Six Months Ended June 30, 2008 2007 2008 2007 ------------- -------------- ------------- -------------- # of # of # of # of Proper- Proper- Proper- Proper- ties Gain ties Gain ties Gain ties Gain -------- ------ ------- ------ ------- ------ ------ ------ Reconciliation of gain on disposition between continuing and discontinued operations: Continuing operations - $ - - $ - 1 $ 21 1 $ 332 Discontinued operations: Investment Portfolio 7 2,709 9 22,646 11 6,586 14 24,409 Inventory Portfolio 7 707 16 1,893 14 9,835 38 6,230 Minority interest, Inventory Portfolio - 210 - (179) - (3,306) - (179) ------ ------ ------ ------- ------ ------- ----- ------- 14 $3,626 25 $24,360 26 $13,136 53 $30,792 ====== ====== ====== ======= ====== ======= ===== ======= Reconciliation of gain on disposition by type: Inventory Portfolio: Development - $ (420) 3 $ 1,018 4 $ 7,864 8 $ 2,814 Exchange 7 1,127 13 875 11 1,992 31 3,748 Minority interest, Development - 210 - (179) - (3,306) - (179) ------ ------ ------ ------- ------ ------- ----- ------- Total Inventory gain (TRS) 7 917 16 1,714 15 6,550 39 6,383 Investment Portfolio 7 2,709 9 22,646 11 6,586 14 24,409 ------ ------ ------ ------- ------ ------- ----- ------- 14 $3,626 25 $24,360 26 $13,136 53 $30,792 ====== ====== ====== ======= ====== ======= ===== ======= National Retail Properties, Inc. (in thousands) (unaudited)

Earnings from Discontinued Operations: In accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"), the company has classified its investment assets sold and leasehold interests expired subsequent to December 31, 2001, the effective date of SFAS No. 144, as discontinued operations. In addition, the company has classified any investment asset or revenue generating inventory asset that was held for sale at June 30, 2008, as discontinued operations. The following is a summary of earnings from discontinued operations.

Quarter Ended June 30, Six Months Ended June 30, 2008 2007 2008 2007 -------- -------- -------- -------- Earnings from Discontinued Operations - Investment Portfolio: Revenues: Rental and earned income $ 813 $ 3,591 $ 1,549 $ 6,702 Real estate expense reimbursement from tenants 2 38 8 130 Interest and other income from real estate transactions 416 192 949 316 -------- -------- -------- -------- 1,231 3,821 2,506 7,148 -------- -------- -------- -------- Expenses: General and administrative - (46) (78) (46) Real estate 99 77 (140) 231 Depreciation and amortization 59 173 137 382 Impairment - real estate 153 95 167 189 Interest - (1) - (3) -------- -------- -------- -------- 311 298 86 753 -------- -------- -------- -------- Gain on disposition of real estate 2,709 22,646 6,586 24,409 -------- -------- -------- -------- Earnings from discontinued operations $ 3,629 $ 26,169 $ 9,006 $ 30,804 ======== ======== ======== ======== Earnings from Discontinued Operations - Inventory Portfolio: Revenues: Rental income $ 2,875 $ 2,209 $ 6,234 $ 5,059 Real estate expense reimbursement from tenants 227 164 556 461 Interest and other income from real estate transactions 332 40 786 46 -------- -------- -------- -------- 3,434 2,413 7,576 5,566 -------- -------- -------- -------- Disposition of real estate: Gross proceeds 29,726 40,355 98,914 100,008 Costs (29,019) (38,462) (89,079) (93,778) -------- -------- -------- -------- Gain 707 1,893 9,835 6,230 -------- -------- -------- -------- Expenses: General and administrative 24 17 49 24 Real estate 329 369 878 801 Depreciation and amortization 67 12 111 32 Interest 1,778 595 2,776 1,411 -------- -------- -------- -------- 2,198 993 3,814 2,268 -------- -------- -------- -------- Income tax expense (890) (1,097) (3,917) (3,396) Minority interest 401 (423) (3,278) (581) -------- -------- -------- -------- Earnings from discontinued operations $ 1,454 $ 1,793 $ 6,402 $ 5,551 ======== ======== ======== ======== National Retail Properties, Inc. (in thousands) Balance Sheet Summary June 30, December 31, 2008 2007 ------------- ------------ (unaudited) (Note 1) Assets: Cash and cash equivalents $ 4,873 $ 27,499 Receivables, net of allowance 4,198 3,818 Investment in unconsolidated affiliate 4,916 4,139 Mortgages, notes and accrued interest receivable, net of allowance 90,114 73,162 Real estate, Investment Portfolio: Accounted for using the operating method, net of accumulated depreciation and amortization 2,270,493 2,055,846 Accounted for using the direct financing method 32,141 37,497 Real estate, Inventory Portfolio, held for sale 176,070 248,611 Commercial mortgage residual interests 22,314 24,340 Accrued rental income, net of allowance 24,499 24,652 Other assets 42,813 40,041 ---------- ----------- Total assets $2,672,431 $2,539,605 ========== =========== Liabilities: Line of credit payable 127,200 129,800 Mortgages payable 26,896 27,480 Notes payable - secured - 12,000 Notes payable - convertible 406,535 172,500 Notes payable, net of unamortized discount 618,385 718,290 Other liabilities 47,694 69,916 ---------- ----------- Total liabilities 1,226,710 1,129,986 Minority interest 1,280 2,334 Stockholders' equity 1,444,441 1,407,285 ---------- ----------- Total liabilities and equity $2,672,431 $2,539,605 ========== =========== Common shares outstanding 73,975 72,528 ========== =========== Gross leasable area, Investment Portfolio (square feet) 11,053 10,610 ========== =========== Note 1: Amounts are derived from audited consolidated financial statements included in the company's Form 10-K, as amended. Orange Avenue Mortgage Investments, Inc. (in thousands)

In May 2005, the company acquired a 78.9 percent equity investment of OAMI for $9.4 million. The company's 78.9 percent share of OAMI's net cash flow has totaled over $25 million since May 2005. The following summary represents the balances related to OAMI included in the company's Balance Sheet and Income Statement Summary:

June 30, December 31, 2008 2007 ----------- ------------ (unaudited) (Note 1) Assets: Cash and cash equivalents $ 394 $ 15,541 Receivables and other assets 36 1,417 Commercial mortgage residual interests 22,314 24,340 -------- -------- $ 22,744 $ 41,298 ======== ======== Liabilities: Notes payable - secured $ - $ 12,000 Income tax liability 5,971 6,768 Other liabilities 71 145 -------- -------- $ 6,042 $ 18,913 ======== ======== Minority interest $ 620 $ 1,895 ======== ======== Quarter Ended June 30, Six Months Ended June 30, 2008 2007 2008 2007 ----------- ----------- ----------- ------------ (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Interest income on commercial mortgage residual interests $ 1,171 $ 1,144 $ 2,527 $ 2,388 Interest and other income 19 430 210 1,132 -------- --------- -------- --------- 1,190 1,574 2,737 3,520 Expenses: General and administrative 69 85 147 210 Amortization - 51 35 115 Impairment - commercial mortgage residual interests valuation - - 758 - Interest - 619 200 1,232 -------- --------- -------- --------- 69 755 1,140 1,557 -------- --------- -------- --------- Income tax benefit 382 689 790 1,459 Minority interest (179) (203) (319) (484) -------- --------- -------- --------- Net earnings $ 1,324 $ 1,305 $ 2,068 $ 2,938 ======== ======== ======== ======== Note 1: Amounts are derived from audited consolidated financial statements included in the company's Form 10-K, as amended. NNN Retail Properties Fund I LLC (dollars in thousands)

In September 2007, the company entered into a joint venture, NNN Retail Properties Fund I LLC, with an affiliate of Crow Holdings Realty Partners IV, L.P. The company owns a 15 percent equity interest, and the following summary represents the Balance Sheet and Income Statement Summary for the joint venture. The company's investment in the joint venture is included in the company's Balance Sheet Summary under "Investment in unconsolidated affiliate."

June 30, December 31, 2008 2007 ----------- ------------ (unaudited) Assets: Cash and cash equivalents $274 $30 Real estate 75,046 65,413 Other assets 2,437 921 --------- --------- $ 77,757 $ 66,364 ========= ======== Liabilities: Notes payable $ 43,600 $ 38,600 Other liabilities 193 180 --------- --------- Total liabilities 43,793 38,780 --------- --------- Members' equity 33,964 27,584 Total liabilities and equity $ 77,757 $ 66,364 ========= ======== Quarter Six Months Ended Ended June 30, 2008 June 30, 2008 ------------- ------------- (unaudited) (unaudited) Revenues: Rental income $ 1,565 $ 3,062 --------- --------- 1,565 3,062 Expenses: General and administrative 66 137 Real estate 5 10 Depreciation and amortization 362 715 Interest 522 1,119 --------- --------- 955 1,981 --------- --------- Net earnings $ 610 $ 1,081 ========= ======== National Retail Properties, Inc. Investment Portfolio Top 20 Lines of Trade --------------------- As of June 30, Line of Trade 2008 (1) 2007 (2) -------------------------- --------- --------- 1. Convenience stores 25.7% 24.5% 2. Restaurants - full service 9.2% 10.6% 3. Automotive service 8.0% 1.0% 4. Theaters 6.2% - 5. Automotive parts 4.8% 1.5% 6. Drug stores 4.2% 6.6% 7. Books 4.0% 4.8% 8. Consumer electronics 3.8% 4.7% 9. Sporting goods 3.6% 5.8% 10. Restaurants - limited service 3.4% 4.2% 11. Travel plazas 2.8% 3.3% 12. Grocery 2.7% 3.9% 13. Furniture 2.6% 3.4% 14. Office supplies 2.5% 3.2% 15. Family entertainment centers 2.0% 2.4% 16. Beer, wine and liquor 1.8% 1.9% 17. General merchandise 1.7% 2.0% 18. Home furnishings 1.4% 1.6% 19. Craft, fabric and novelty 1.3% 1.6% 20. Auto dealerships 1.3% 2.1% Other 7.0% 10.9% -------- -------- Total 100.0% 100.0% ======== ======== Top 10 States ------------- State % of Total(1) State % of Total(1) ----------- ------------ ------------ ------------ 1. Texas 19.3% 6. Georgia 4.9% 2. Florida 10.4% 7. Pennsylvania 4.3% 3. Illinois 7.0% 8. Indiana 4.2% 4. North Carolina 6.1% 9. Colorado 3.1% 5. California 5.1% 10. Arizona 3.1% Lease Expirations ----------------- Gross Gross % of # of Leasable % of # of Leasable Total(1) Properties Area(3) Total(1) Properties Area(3) ------- ---------- -------- ------- ---------- ------ 2008 0.4% 7 186,000 2014 4.4% 31 510,000 2009 1.3% 23 440,000 2015 2.6% 19 463,000 2010 2.9% 42 421,000 2016 1.9% 14 240,000 2011 2.1% 21 338,000 2017 4.4% 26 663,000 2012 3.6% 33 549,000 2018 3.7% 31 479,000 2013 4.3% 35 787,000 Thereafter 68.4% 661 5,733,000 (1) Based on annual base rent of $216,155,000, which is the annualized base rent for all leases in place as of June 30, 2008. (2) Based on annual base rent of $177,858,000, which is the annualized base rent for all leases in place as of June 30, 2007. (3) Square feet.

SOURCE National Retail Properties, Inc.

http://www.nnnreit.com

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