☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2025
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 001-11290
NNN REIT, INC.
(Exact name of registrant as specified in its charter)
Maryland
56-1431377
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
450 South Orange Avenue, Suite 900
Orlando, Florida32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 265-7348
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Trading Symbol(s):
Name of exchange on which registered:
Common Stock, $0.01 par value
NNN
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 30, 2025, the registrant had 188,781,890 shares of common stock, $0.01 par value, outstanding.
Real estate portfolio, net of accumulated depreciation and amortization
$
9,023,171
$
8,746,168
Cash and cash equivalents
5,973
8,731
Restricted cash and cash held in escrow
775
331
Receivables, net of allowance of $599 and $617, respectively
2,499
2,975
Accrued rental income, net of allowance of $3,290 and $4,156, respectively
33,594
34,005
Debt costs, net of accumulated amortization of $28,449 and $27,002, respectively
7,698
8,958
Other assets
74,967
71,560
Total assets
$
9,148,677
$
8,872,728
LIABILITIES AND EQUITY
Liabilities:
Line of credit payable
$
267,700
$
—
Notes payable, net of unamortized discount and unamortized debt costs
4,376,893
4,373,803
Accrued interest payable
30,685
29,699
Other liabilities
110,994
106,951
Total liabilities
4,786,272
4,510,453
Equity:
Stockholders' equity:
Common stock, $0.01 par value. Authorized 375,000,000 shares; 188,206,484 and 187,540,929 shares issued and outstanding, respectively
1,884
1,877
Capital in excess of par value
5,217,161
5,197,644
Accumulated deficit
(849,201
)
(829,287
)
Accumulated other comprehensive income (loss)
(7,439
)
(7,959
)
Total equity
4,362,405
4,362,275
Total liabilities and equity
$
9,148,677
$
8,872,728
See accompanying notes to condensed consolidated financial statements.
1
NNN REIT, INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(dollars in thousands, except per share data)
(unaudited)
Quarter Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Revenues:
Rental income
$
226,498
$
216,140
$
457,072
$
430,965
Interest and other income from real estate transactions
304
673
584
1,255
226,802
216,813
457,656
432,220
Operating expenses:
General and administrative
11,217
11,789
24,225
24,373
Real estate
8,838
6,758
18,213
13,912
Depreciation and amortization
68,349
62,503
132,966
123,118
Leasing transaction costs
74
20
204
53
Impairment losses – real estate, net of recoveries
4,535
944
6,047
2,148
Retirement and severance costs
191
153
2,364
470
93,204
82,167
184,019
164,074
Gain on disposition of real estate
16,198
17,621
20,011
22,442
Earnings from operations
149,796
152,267
293,648
290,588
Other expenses (revenues):
Interest and other income
(15
)
(976
)
(344
)
(1,095
)
Interest expense
49,282
46,577
97,005
90,646
49,267
45,601
96,661
89,551
Net earnings
$
100,529
$
106,666
$
196,987
$
201,037
Net earnings per share:
Basic
$
0.54
$
0.58
$
1.05
$
1.10
Diluted
$
0.54
$
0.58
$
1.05
$
1.10
Weighted average shares outstanding:
Basic
186,876,693
182,438,791
186,865,955
182,119,471
Diluted
187,070,288
182,807,374
187,088,160
182,528,333
Other comprehensive income:
Net earnings
$
100,529
$
106,666
$
196,987
$
201,037
Amortization of interest rate hedges
469
610
929
1,242
Fair value of forward starting swaps
(117
)
—
(409
)
—
Total comprehensive income
$
100,881
$
107,276
$
197,507
$
202,279
See accompanying notes to condensed consolidated financial statements.
2
NNN REIT, INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Quarter Ended June 30, 2025
(dollars in thousands, except per share data)
(unaudited)
Common Stock
Capital in Excess of Par Value
Accumulated Deficit
Accumulated Other Comprehensive Income (Loss)
Total Equity
Balances at March 31, 2025
$
1,881
$
5,203,561
$
(841,164
)
$
(7,791
)
$
4,356,487
Net earnings
—
—
100,529
—
100,529
Dividends declared and paid:
$0.5800 per share of common stock
1
637
(108,566
)
—
(107,928
)
Issuance of common stock:
8,688 shares – director compensation
—
268
—
—
268
1,694 shares – stock purchase plan
—
69
—
—
69
236,906 shares – ATM equity program
2
10,228
—
—
10,230
Stock issuance costs
—
(167
)
—
—
(167
)
Amortization of deferred compensation
—
2,565
—
—
2,565
Amortization of interest rate hedges
—
—
—
469
469
Fair value of forward starting swap
—
—
—
(117
)
(117
)
Balances at June 30, 2025
$
1,884
$
5,217,161
$
(849,201
)
$
(7,439
)
$
4,362,405
See accompanying notes to condensed consolidated financial statements.
3
NNN REIT, INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY – CONTINUED
Quarter Ended June 30, 2024
(dollars in thousands, except per share data)
(unaudited)
Common Stock
Capital in Excess of Par Value
Accumulated Deficit
Accumulated Other Comprehensive Income (Loss)
Total Equity
Balances at March 31, 2024
$
1,835
$
4,996,698
$
(814,196
)
$
(9,479
)
$
4,174,858
Net earnings
—
—
106,666
—
106,666
Dividends declared and paid:
$0.5650 per share of common stock
—
570
(103,159
)
—
(102,589
)
Issuance of common stock:
9,655 shares – director compensation
—
319
—
—
319
1,204 shares – stock purchase plan
—
51
—
—
51
303,443 shares – ATM equity program
3
12,799
—
—
12,802
Stock issuance costs
—
(132
)
—
—
(132
)
Amortization of deferred compensation
—
2,337
—
—
2,337
Amortization of interest rate hedges
—
—
—
610
610
Balances at June 30, 2024
$
1,838
$
5,012,642
$
(810,689
)
$
(8,869
)
$
4,194,922
See accompanying notes to condensed consolidated financial statements.
4
NNN REIT, INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY – CONTINUED
Six Months Ended June 30, 2025
(dollars in thousands, except per share data)
(unaudited)
Common Stock
Capital in Excess of Par Value
Accumulated Deficit
Accumulated Other Comprehensive Income (Loss)
Total Equity
Balances at December 31, 2024
$
1,877
$
5,197,644
$
(829,287
)
$
(7,959
)
$
4,362,275
Net earnings
—
—
196,987
—
196,987
Dividends declared and paid:
$1.1600 per share of common stock
1
1,242
(216,901
)
—
(215,658
)
Issuance of common stock:
17,629 shares – director compensation
—
535
—
—
535
2,940 shares – stock purchase plan
—
120
—
—
120
236,906 shares – ATM equity program
2
10,228
—
—
10,230
390,929 restricted shares – net of forfeitures
4
(4
)
—
—
—
Stock issuance costs
—
(252
)
—
—
(252
)
Amortization of deferred compensation
—
7,648
—
—
7,648
Amortization of interest rate hedges
—
—
—
929
929
Fair value of forward starting swap
—
—
—
(409
)
(409
)
Balances at June 30, 2025
$
1,884
$
5,217,161
$
(849,201
)
$
(7,439
)
$
4,362,405
See accompanying notes to condensed consolidated financial statements.
5
NNN REIT, INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY – CONTINUED
Six Months Ended June 30, 2024
(dollars in thousands, except per share data)
(unaudited)
Common Stock
Capital in Excess of Par Value
Accumulated Deficit
Accumulated Other Comprehensive Income (Loss)
Total Equity
Balances at December 31, 2023
$
1,826
$
4,971,625
$
(805,883
)
$
(10,111
)
$
4,157,457
Net earnings
—
—
201,037
—
201,037
Dividends declared and paid:
$1.1300 per share of common stock
—
1,306
(205,843
)
—
(204,537
)
Issuance of common stock:
19,224 shares – director compensation
—
639
—
—
639
1,987 shares – stock purchase plan
—
83
—
—
83
803,443 shares – ATM equity program
8
33,719
—
—
33,727
349,975 restricted shares – net of forfeitures
4
(4
)
—
—
—
Stock issuance costs
—
(310
)
—
—
(310
)
Amortization of deferred compensation
—
5,584
—
—
5,584
Amortization of interest rate hedges
—
—
—
1,242
1,242
Balances at June 30, 2024
$
1,838
$
5,012,642
$
(810,689
)
$
(8,869
)
$
4,194,922
See accompanying notes to condensed consolidated financial statements.
6
NNN REIT, INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Six Months Ended June 30,
2025
2024
Cash flows from operating activities:
Net earnings
$
196,987
$
201,037
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
132,966
123,118
Impairment losses – real estate, net of recoveries
6,047
2,148
Amortization of notes payable discount
1,593
1,384
Amortization of debt costs
2,944
3,088
Amortization of interest rate hedges
929
1,242
Settlement of forward starting swaps
(409
)
—
Gain on disposition of real estate
(20,011
)
(22,442
)
Performance incentive plan expense
8,692
6,852
Performance incentive plan payment
(1,702
)
(1,274
)
Change in operating assets and liabilities, net of assets acquired and liabilities assumed:
Decrease in receivables
476
1,098
Decrease (increase) in accrued rental income
(84
)
131
Increase in other assets
(1,560
)
(1,602
)
Increase (decrease) in accrued interest payable
986
(3,443
)
Increase (decrease) in other liabilities
(5,247
)
61
Other
95
(204
)
Net cash provided by operating activities
322,702
311,194
Cash flows from investing activities:
Proceeds from the disposition of real estate
67,198
86,268
Additions to real estate
(453,909
)
(224,986
)
Principal payments received on mortgages and notes receivable
460
344
Other
(718
)
(974
)
Net cash used in investing activities
(386,969
)
(139,348
)
See accompanying notes to condensed consolidated financial statements.
7
NNN REIT, INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED
(dollars in thousands)
(unaudited)
Six Months Ended June 30,
2025
2024
Cash flows from financing activities:
Proceeds from line of credit payable
$
618,000
$
408,000
Repayment of line of credit payable
(350,300
)
(528,000
)
Proceeds from notes payable
—
493,840
Repayment of notes payable
—
(350,000
)
Payment of debt issuance costs
(187
)
(13,014
)
Proceeds from issuance of common stock
11,593
35,116
Stock issuance costs
(252
)
(298
)
Payment of common stock dividends
(216,901
)
(205,843
)
Net cash provided by (used in) financing activities
61,953
(160,199
)
Net increase (decrease) in cash, cash equivalents and restricted cash(1)
(2,314
)
11,647
Cash, cash equivalents and restricted cash at beginning of period(1)
9,062
5,155
Cash, cash equivalents and restricted cash at end of period(1)
$
6,748
$
16,802
Supplemental disclosure of cash flow information:
Interest paid, net of amount capitalized
$
92,016
$
91,851
Supplemental disclosure of noncash investing and financing activities:
Change in other comprehensive income
$
520
$
1,242
Change in work in progress accrual
$
11,020
$
10,048
(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. As of June 30, 2025, December 31, 2024 and June 30, 2024, NNN had restricted cash of $775, $331 and $14,672, respectively.
See accompanying notes to condensed consolidated financial statements.
8
NNN REIT, INC.
and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2025
(Unaudited)
Note 1 – Organization and Summary of Significant Accounting Policies:
Organization and Nature of Business. NNN REIT, Inc., a Maryland corporation, is a fully integrated real estate investment trust (“REIT”) formed in 1984. The term "NNN" or the "Company" refers to NNN REIT, Inc. and all of its consolidated subsidiaries. NNN may elect to treat certain of its subsidiaries as taxable REIT subsidiaries.
NNN's assets primarily include real estate assets. NNN acquires, owns, invests in and develops high-quality properties that are leased primarily to tenants under long-term, net leases and are primarily held for investment ("Properties" or "Property Portfolio", or individually a "Property").
June 30, 2025
Property Portfolio:
Total Properties
3,663
Gross leasable area (square feet)
38,322,000
States
50
Weighted average remaining lease term (years)
10
In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") guidance included in Topic 280, Segment Reporting, NNN's operations are reported within one reportable segment in the unaudited condensed consolidated financial statements and all properties are considered part of the Properties or Property Portfolio. As such, property counts and calculations involving property counts reflect all NNN properties. See additional disclosure in "Note 7 – Segment Information."
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. 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, 2025, may not be indicative of the results that may be expected for the year ending December 31, 2025. Amounts as of December 31, 2024, 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, 2024.
Principles of Consolidation. NNN's unaudited 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 FASB ASC guidance included in Topic 810, 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 or funded by NNN includes direct and indirect costs of construction, property taxes, interest, third-party costs and other miscellaneous costs incurred during the development period until the project is substantially complete and available for occupancy. NNN recorded $1,463,000 and $3,476,000 in capitalized interest during the development period for the six months ended June 30, 2025 and 2024, respectively, of which $542,000 and $1,617,000 was recorded during the quarters ended June 30, 2025 and 2024, respectively.
Purchase Accounting for Acquisition of Real Estate. In accordance with the FASB ASC guidance on business combinations, consideration for the real estate acquired is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and, if applicable, to 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.
9
The fair value estimate is sensitive to significant assumptions, such as establishing a range of relevant market assumptions for land, building and rent and where the acquired property falls within that range. These market assumptions for land, building and rent use the most relevant comparable properties for an acquisition. The final value relies upon ranking comparable properties' attributes from most to least similar.
The fair value of the tangible assets of an acquired 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 renewal 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 valued by comparing the purchase price paid for a property after adjusting for existing in-place leases to the estimated fair value of the property as-if-vacant, determined as set forth above. This intangible asset 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.
Lease Accounting. NNN records its leases on the Property Portfolio in accordance with FASB ASC Topic 842, Leases ("ASC 842").
NNN's real estate is typically leased to tenants under triple-net leases, whereby the tenant is responsible for all operating expenses relating to the Property, including utilities, real estate taxes and assessments, property and liability insurance, maintenance, repairs and capital expenditures. The leases on the Property Portfolio are predominantly classified as operating leases and are accounted for as follows:
Operating method – Properties with leases accounted for using the operating method are recorded at the cost of the real estate and depreciated on the straight-line method over their estimated remaining useful lives, which generally range from 20 to 40 years for buildings and improvements and 15 years for land improvements. Leasehold interests are amortized on the straight-line method over the terms of their respective leases. Revenue is recognized as rentals are earned and expenses (including depreciation) are charged to operations as incurred. When scheduled rentals vary during the lease term, income is recognized on a straight-line basis so as to produce a constant periodic rent over the term of the lease. Accrued rental income is the aggregate difference between the scheduled rents which vary during the lease term and the income recognized on a straight-line basis.
NNN adopted certain practical expedients in ASC 842 and does not separate the non-lease components from the lease components when the timing and patterns of transfer for the lease and non-lease components are the same and the lease is classified as an operating lease. As a result, all income earned pursuant to tenant leases is reflected as one-line, rental income, in the Condensed Consolidated Statements of Income and Comprehensive Income. In addition, NNN records right-of-use assets and operating lease liabilities as lessee under operating leases in accordance with ASC 842.
Collectability. In accordance with ASC 842, NNN reviews the collectability of its lease payments on an ongoing basis. NNN considers collectability indicators when analyzing accounts receivable (and accrued rent), historical bad debt levels, tenant credit-worthiness and current economic trends, all of which assist in evaluating the probability of outstanding and future rental income collections and the adequacy of the allowance for doubtful accounts. In addition, tenants in bankruptcy are analyzed and considerations are made in connection with the expected recovery of pre-petition and post-petition bankruptcy claims.
10
When NNN deems the collection of rental income from a tenant not probable, uncollected and previously recognized rental revenue and any related accrued rent are reversed as a reduction to rental income and, subsequently, rental income is only recognized when cash receipts are received. At this point, a tenant is deemed cash basis for accounting purposes. If NNN subsequently deems the collection of rental income is probable, any related accrued rental income or expense is restored.
As a result of the review of collectability, NNN recorded a write-off of $2,099,000 and $473,000 of outstanding receivables and related accrued rent during the six months ended June 30, 2025 and 2024, respectively, and reclassified certain tenants as cash basis for accounting purposes.
The following table summarizes those tenants classified as cash basis for accounting purposes as of June 30:
2025
2024
Number of tenants
12
11
Cash basis tenants as a percent of:
Total Properties
2.5
%
3.4
%
% of Annualized Base Rent ("ABR")(1)
4.7
%
(2)
5.0
%
(3)
% of gross leasable area
7.4
%
4.8
%
(1)
ABR represents the monthly cash base rent for all leases in place as of the end of the period multiplied by 12. Based on ABR of:
(2)
$893,782,000 as of June 30, 2025.
(3)
$837,568,000 as of June 30, 2024.
During the six months ended June 30, 2025 and 2024, NNN recognized $15,316,000 and $20,883,000, respectively, of rental income from certain tenants for periods following their classification to cash basis for accounting purposes, of which $7,584,000 and $11,108,000 was recognized during the quarters ended June 30, 2025 and 2024, respectively.
NNN includes an allowance for doubtful accounts in rental income on the Condensed Consolidated Statements of Income and Comprehensive Income.
Real Estate – Held For Sale. Real estate held for sale is not depreciated and is recorded at the lower of cost or fair value, less cost to sell. On a quarterly basis, the Company evaluates its Properties for held for sale classification based on specific criteria as outlined in FASB ASC Topic 360, Property, Plant and 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. At June 30, 2025 and December 31, 2024, NNN had recorded real estate held for sale of $9,205,000 (seven properties) and $283,000 (two properties), respectively, in real estate portfolio on the Condensed Consolidated Balance Sheets. The properties classified as held for sale as of December 31, 2024 were sold during the six months ended June 30, 2025.
Real Estate Dispositions. When real estate is disposed, the related cost, accumulated depreciation or amortization and any accrued rental income from operating leases and the net investment from direct financing leases are removed from the accounts and gains and losses from the dispositions are reflected in income. FASB ASC Topic 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets ("ASC 610-20"), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. An entity that transfers a nonfinancial asset in the scope of ASC 610-20 follows a two-step derecognition model to determine whether (and when) to derecognize the asset. NNN determined the key revenue stream impacted by ASC 610-20 is gain on disposition of real estate reported on the Condensed Consolidated Statements of Income and Comprehensive Income. In accordance with ASC 610-20, NNN evaluates any separate contracts or performance obligations to determine proper timing and/or amount of revenue recognition, as well as transfer of control and transaction price allocation in determining the amount of gain or loss to record.
11
Impairment – Real Estate.NNN periodically assesses its long-lived real estate assets for possible impairment whenever certain events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. These indicators include, but are not limited to: changes in real estate market conditions, the ability of NNN to re-lease properties that are currently vacant or become vacant, properties reclassified as held for sale, persistent vacancies greater than one year and properties leased to tenants in bankruptcy. Management evaluates whether an impairment in carrying value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), and the residual value of the real estate, with the carrying value of the individual asset. The future undiscounted cash flows are primarily driven by estimated future market rents. Future cash flow estimates are sensitive to the assumptions made by management regarding future market rents, which are affected by expectations about future market and economic conditions. If an impairment is indicated, a loss will be recorded for the amount by which the carrying value of the asset exceeds its estimated fair value. NNN's Properties are leased primarily to tenants under long-term net leases and primarily held for investment. Generally, NNN's Property leases provide for initial terms of 10 to 20 years, with cash flows provided over the entire term.
Credit Losses on Financial Instruments. FASB ASC Topic 326, Financial Instruments – Credit Losses, requires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings. The guidance requires a lifetime credit loss expected at inception and requires pooling of assets, which share similar risk characteristics. NNN is required to evaluate current economic conditions, as well as make future expectations of economic conditions. In addition, the measurement of the expected credit loss is over the asset's contractual term.
NNN held mortgages receivable, including accrued interest, of $454,000 included in other assets on the Condensed Consolidated Balance Sheets as of December 31, 2024, net of $9,000 allowance for credit loss. As of June 30, 2025, NNN held no mortgages receivable.
Cash and Cash Equivalents. NNN considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of cash and money market accounts. Cash equivalents are stated at cost plus accrued interest, which approximates fair value. Cash accounts maintained on behalf of NNN in demand deposits at commercial banks and money market funds may exceed federally insured levels or may be held in accounts without any federal insurance or any other insurance or guarantee. However, NNN has not experienced any losses in such accounts.
Restricted Cash and Cash Held in Escrow. Restricted cash and cash held in escrow may include (i) cash proceeds from the sale of assets held by qualified intermediaries in anticipation of the acquisition of replacement properties in tax-deferred exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) cash that has been placed in escrow for the future funding of construction commitments, or (iii) cash that is not immediately available to NNN. NNN held $775,000 and $331,000 in restricted cash and cash held in escrow as of June 30, 2025 and December 31, 2024, respectively.
Debt Costs – Line of Credit Payable. Debt costs incurred in connection with NNN's $1,200,000,000 unsecured revolving 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 Credit Facility (as defined in "Note 3 – Line of Credit Payable") as an asset, in debt costs on the Condensed Consolidated Balance Sheets.
Debt Costs – Notes Payable. Debt costs incurred in connection with the issuance of NNN's unsecured notes have been deferred and are being amortized to interest expense over the term of the respective debt obligation using the effective interest method. NNN had debt costs of $43,820,000, included in notes payable on the Condensed Consolidated Balance Sheets, as of June 30, 2025 and December 31, 2024, net of accumulated amortization of $15,557,000 and $14,060,000, respectively.
Revenue Recognition. Rental revenues for properties under construction commence upon completion of construction and delivery of the leased asset to the tenant. Rental revenues for non-development real estate assets are recognized when earned in accordance with ASC 842, based on the terms of the lease of the leased asset. Leasehold interests are amortized on the straight-line method over the terms of their respective leases. When scheduled rentals vary during the lease term, income is recognized on a straight-line basis so as to produce a constant periodic rent over the term of the lease. Lease termination fees are recognized when collected subsequent to the related lease that is cancelled and NNN no longer has continuing involvement with the former tenant with respect to that property.
12
Earnings Per Share. Earnings per share have been computed pursuant to the FASB guidance included in FASB ASC Topic 260, Earnings Per Share. The guidance requires classification of the Company's unvested restricted share units, which contain 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 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 share using the two-class method (dollars in thousands):
Quarter Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Basic and Diluted Earnings:
Net earnings
$
100,529
$
106,666
$
196,987
$
201,037
Less: Earnings allocated to unvested restricted shares
(190
)
(189
)
(357
)
(333
)
Net earnings used in basic and diluted earnings per share
$
100,339
$
106,477
$
196,630
$
200,704
Basic and Diluted Weighted Average Shares Outstanding:
Weighted average shares outstanding
187,974,275
183,532,421
187,868,489
183,116,552
Less: Unvested restricted shares
(328,001
)
(324,620
)
(308,258
)
(294,671
)
Less: Unvested contingent restricted shares
(769,581
)
(769,010
)
(694,276
)
(702,410
)
Weighted average shares outstanding used in basic earnings per share
186,876,693
182,438,791
186,865,955
182,119,471
Other dilutive securities
193,595
368,583
222,205
408,862
Weighted average shares outstanding used in diluted earnings per share
187,070,288
182,807,374
187,088,160
182,528,333
Income Taxes. NNN has made an election to be taxed as a REIT under Sections 856 through 860 of the Code, and related regulations. NNN generally will not be subject to federal income taxes on taxable income it distributes to stockholders, provided it meets certain other requirements for qualifying as a REIT. As of June 30, 2025, NNN believes it has qualified as a REIT. Notwithstanding NNN's qualification for taxation as a REIT, NNN is subject to certain state and local income, franchise and excise taxes.
Fair Value Measurement. NNN's estimates of fair value of financial and non-financial assets and liabilities are based on the framework established in FASB ASC Topic 820, Fair Value Measurement ("ASC 820"). 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.
13
Accumulated Other Comprehensive Income (Loss).The following table outlines the changes in accumulated other comprehensive income (loss) for the six months ended June 30, 2025 (dollars in thousands):
Gain (Loss) on Cash Flow Hedges(1)
Beginning balance, December 31, 2024
$
(7,959
)
Other comprehensive income (loss)
(409
)
Reclassifications from accumulated other comprehensive income to net earnings
929
(2)
Ending balance, June 30, 2025
$
(7,439
)
(1)
Additional disclosure is included in "Note 4 – Notes Payable and Derivatives".
(2)
Recorded in interest expense on the Condensed Consolidated Statements of Income and Comprehensive Income. There is no income tax expense (benefit) resulting from this reclassification.
New Accounting Pronouncements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), effective for annual periods beginning after December 15, 2024. The amendments in the update require public business entities on an annual basis to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold of equal to or greater than five percent of the amount computed by multiplying pretax income by the statutory income tax rate. The amendments also require that entities disclose on an annual basis information about the amount of income taxes paid disaggregated by federal, state and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than five percent of total income taxes paid. The amendments eliminate some of the previous required disclosures for all entities relating to estimates of the change in unrecognized tax benefits reasonably possible within 12 months. NNN has evaluated ASU 2023-09 and determined it will have no material impact on its future disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expense ("ASU 2027-03"), effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The amendments in this update require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses and a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. NNN is currently evaluating the potential impact the adoption of ASU 2024-03 will have on its future disclosures.
Use of Estimates. Additional critical accounting policies of NNN include management's estimates and assumptions relating to the reporting of assets and liabilities, revenues and expenses and the disclosure of contingent assets and liabilities which are required to prepare the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Significant accounting policies include management's estimates of the purchase accounting for acquisition of real estate, the recoverability of the carrying value of long-lived assets and management's evaluation of the probability of outstanding and future lease payment collections. Estimates are sensitive to evaluations by management about current and future expectations of market and economic conditions. Actual results could differ from those estimates.
14
Note 2 – Real Estate:
Real Estate – Portfolio
Leases. At June 30, 2025, NNN's real estate portfolio had a weighted average remaining lease term of 10 years and consisted of 3,606 leases classified as operating leases and an additional four leases accounted for as direct financing leases.
The following is a summary of the general structure of the leases in the Property Portfolio, although the specific terms of each lease can vary significantly. Typically, the Property leases provide for initial terms of 10 to 20 years and a triple-net lease structure, pursuant to which the tenant bears responsibility for operating expenses of the Property, including utilities, real estate taxes and assessments, property and liability insurance, maintenance, repairs and capital expenditures. Certain Properties are subject to leases under which NNN retains responsibility for specific costs and expenses associated with the Property. NNN's leases provide for annual base rental payments (payable in monthly installments), the majority of which include negotiated increases in rent as a result of increases in the Consumer Price Index or set fixed increases.
NNN's leases often provide the tenant with one or more multi-year renewal options, subject to the same terms and conditions provided under the initial lease term, including rent increases. NNN's lease term is based on the non-cancellable base term unless economic incentives make it reasonably certain that an option period to extend the lease will be exercised, in which event NNN includes the renewal options. Some of the leases also provide that in the event NNN wishes to sell the Property subject to that lease, NNN first must offer the lessee the right to purchase the Property on the same terms and conditions as any offer which NNN intends to accept for the sale of the Property.
Real Estate Portfolio. NNN's real estate consisted of the following at (dollars in thousands):
June 30, 2025
December 31, 2024
Land and improvements(1)
$
2,977,752
$
2,919,976
Buildings and improvements
8,159,894
7,805,939
Leasehold interests
355
355
11,138,001
10,726,270
Less accumulated depreciation and amortization
(2,170,211
)
(2,065,316
)
8,967,790
8,660,954
Work in progress and improvements
43,778
82,411
Accounted for using the operating method
9,011,568
8,743,365
Accounted for using the direct financing method
2,398
2,520
Classified as held for sale(2)
9,205
283
$
9,023,171
$
8,746,168
(1)
Includes $20,574 and $34,356 in land for Properties under construction at June 30, 2025 and December 31, 2024, respectively.
(2)
As of June 30, 2025, seven Properties were classified as held for sale. The two properties classified as held for sale as of December 31, 2024 were sold during the six months ended June 30, 2025.
15
NNN recognized the following revenues in rental income (dollars in thousands):
Quarter Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Rental income from operating leases
$
221,714
$
211,557
$
445,770
$
420,641
Earned income from direct financing leases
112
118
226
237
Percentage rent
284
259
1,170
1,147
Rental revenues
222,110
211,934
447,166
422,025
Real estate expenses reimbursed from tenants
4,388
4,206
9,906
8,940
$
226,498
$
216,140
$
457,072
$
430,965
Some leases provide for a free rent period or scheduled rent increases throughout the lease term. Such amounts are recognized on a straight-line basis over the terms of the leases.
For the six months ended June 30, 2025 and 2024, NNN recognized $84,000 and ($131,000), respectively, of net straight-line accrued rental income, net of reserves, of which ($425,000) and ($95,000) of such income, net of reserves was recorded during the quarters ended June 30, 2025 and 2024, respectively.
Real Estate – Intangibles
In accordance with purchase accounting for the acquisition of real estate subject to a lease, NNN has recorded intangible assets and lease liabilities that consisted of the following at (dollars in thousands):
June 30, 2025
December 31, 2024
Intangible lease assets (included in other assets):
Above-market in-place leases
$
14,350
$
14,753
Less: accumulated amortization
(10,961
)
(12,159
)
Above-market in-place leases, net
$
3,389
$
2,594
In-place leases
$
114,383
$
116,549
Less: accumulated amortization
(81,539
)
(85,741
)
In-place leases, net
$
32,844
$
30,808
Intangible lease liabilities (included in other liabilities):
Below-market in-place leases
$
36,488
$
39,869
Less: accumulated amortization
(27,694
)
(28,946
)
Below-market in-place leases, net
$
8,794
$
10,923
The amounts amortized as a net increase to rental income for above-market and below-market leases for the six months ended June 30, 2025 and 2024, were $1,713,000 and $242,000, respectively, of which $1,620,000 and $125,000 were recorded during the quarters ended June 30, 2025 and 2024, respectively. The value of in-place leases amortized to expense for the six months ended June 30, 2025 and 2024 was $5,267,000 and $3,230,000, respectively, of which $3,879,000 and $1,583,000 was recorded for the quarters ended June 30, 2025 and 2024, respectively.
16
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,
2025
2024
2025
2024
# of Sold Properties
Net Gain
# of Sold Properties
Net Gain
# of Sold Properties
Net Gain
# of Sold Properties
Net Gain
Gain on disposition of real estate
23
$
16,198
14
$
17,621
33
$
20,011
20
$
22,442
Real Estate – Commitments
NNN has committed to fund construction on 20 Properties. The improvements on such Properties are estimated to be completed within 12 to 18 months. These construction commitments, as of June 30, 2025, are outlined in the table below (dollars in thousands):
Total commitment(1)
$
103,177
Less amount funded
(64,352
)
Remaining commitment
$
38,825
(1)
Includes land, construction costs, tenant improvements, lease costs, capitalized interest and third-party costs.
Real Estate – Impairments
NNN periodically assesses its long-lived real estate assets for possible impairment whenever certain events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.
As a result of NNN's review of long-lived real estate assets, including identifiable intangible assets, NNN recognized real estate impairments, net of recoveries as summarized in the table below (dollars in thousands):
Quarter Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Total real estate impairments, net of recoveries
$
4,535
$
944
$
6,047
$
2,148
Number of Properties:
Vacant
6
2
8
2
Occupied
1
—
1
3
The valuation of impaired assets is determined using widely accepted valuation techniques including discounted cash flow analysis, income capitalization, analysis of recent comparable sales transactions, actual sales negotiations and bona fide purchase offers received from third parties, which are Level 3 inputs. NNN may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate.
17
Note 3 – Line of Credit Payable:
In April 2024, NNN amended certain terms of its credit agreement to, among other things, increase borrowing capacity under its unsecured revolving credit facility from $1,100,000,000 to $1,200,000,000 (the "Credit Facility"). The Credit Facility had a weighted average outstanding balance of $113,919,000 and a weighted average interest rate of 5.22% during the six months ended June 30, 2025. The Credit Facility has a base interest rate of the Secured Overnight Financing Rate ("SOFR") plus a SOFR adjustment of 10 basis points ("Adjusted SOFR"). The Credit Facility bears interest at Adjusted SOFR plus 77.5 basis points; however, such interest rate may change pursuant to a tiered interest rate structure based on NNN's debt rating. Additionally, as part of NNN's environmental, social and governance ("ESG") initiative, pricing may be reduced if specified ESG metrics are achieved. The Credit Facility matures in April 2028, unless the Company exercises its options to extend maturity to April 2029. The Credit Facility also includes an accordion feature which permits NNN to increase the facility size up to $2,000,000,000, subject to lender approval. In connection with the Credit Facility, loan costs are classified as debt costs on the Condensed Consolidated Balance Sheets. As of June 30, 2025, there was $267,700,000 outstanding and $932,300,000 available for future borrowings under the Credit Facility, and NNN was in compliance with each of the Credit Facility financial covenants.
Note 4 – Notes Payable and Derivatives:
Additional information related to NNN's notes payable and derivatives is included in NNN's Annual Report on Form 10-K for the year ended December 31, 2024.
During the quarter ended June 30, 2025, NNN terminated two forward starting swaps with an aggregate notional amount of $200,000,000, in connection with pricing a $500,000,000 senior unsecured notes offering (see "Note 8 – Subsequent Events"). The forward starting swaps were entered into to hedge the risk of changes in forecasted interest payments on a forecasted issuance of long-term debt. When terminated, the fair value of the forward starting swaps, designated as cash flow hedges, was a net liability of $409,000, which was deferred in accumulated other comprehensive income (loss) and will be amortized as an increase in interest expense over 10 years.
As of June 30, 2025, $7,439,000 remained in accumulated other comprehensive income (loss) related to NNN's previously terminated interest rate hedges. During the six months ended June 30, 2025 and 2024, NNN reclassified out of accumulated other comprehensive income (loss) $929,000 and $1,242,000, respectively, of which $469,000 and $610,000 was reclassified during the quarters ended June 30, 2025 and 2024, respectively, as an increase in interest expense. Over the next 12 months, NNN estimates that an additional $915,000 will be reclassified as an increase in interest expense. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on NNN's long-term debt.
NNN does not use derivatives for trading or speculative purposes. NNN had no derivative financial instruments outstanding at June 30, 2025.
Note 5 – Stockholders' Equity:
Universal Shelf Registration Statement. In August 2023, NNN filed a shelf registration statement with the Securities and Exchange Commission (the "Commission") which became automatically effective ("Universal Shelf"). The Universal Shelf permits the issuance by NNN of an indeterminate amount of debt and equity securities, including preferred stock, depositary shares, common stock, stock purchase contracts, rights, warrants and units. NNN may periodically offer one or more of these securities in amounts, prices and on terms to be announced when and if these securities are offered. The specifics of any future offerings along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.
18
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:
2023 ATM
Shelf registration statement:
Effective date
August 2023
Termination date
August 2026
Total allowable shares
17,500,000
Total shares issued as of June 30, 2025
4,889,006
The following table outlines the common stock issuances pursuant to NNN's ATM (dollars in thousands, except per share data):
Quarter Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Shares of common stock
236,906
303,443
236,906
803,443
Average price per share (net)
$
42.48
$
41.81
$
42.12
$
41.69
Net proceeds
$
10,063
$
12,687
$
9,978
$
33,493
Stock issuance costs(1)
$
167
$
115
$
252
$
234
(1)
Stock issuance costs consist primarily of underwriters' and agents' fees and commissions and legal and accounting fees.
Dividend Reinvestment and Stock Purchase Plan. In February 2024, NNN filed a shelf registration statement for its Dividend Reinvestment and Stock Purchase Plan ("DRIP") with the Commission that was automatically effective and permits NNN to issue up to 4,000,000 shares of common stock. The following outlines the common stock issuances pursuant to NNN's DRIP (dollars in thousands):
Quarter Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Shares of common stock
17,316
14,815
34,092
34,309
Net proceeds
$
707
$
604
$
1,363
$
1,313
Dividends.The following table outlines the dividends declared and paid for NNN's common stock (dollars in thousands, except per share data):
Quarter Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Dividends
$
108,566
$
103,159
$
216,901
$
205,843
Per share
0.5800
0.5650
1.1600
1.1300
In July 2025, NNN declared a dividend of $0.6000 per share, which is payable in August 2025 to its common stockholders of record as of July 31, 2025.
Note 6 – Fair Value of Financial Instruments:
Line of Credit Payable.NNN believes the carrying value of its Credit Facility approximates fair value based upon its nature, terms and variable interest rate.
Notes Payable. At June 30, 2025 and December 31, 2024, the fair value of NNN's notes payable excluding unamortized discount and debt costs were $3,974,301,000 and $3,894,030,000, respectively, based upon quoted market prices as of the close of the period, which is a Level 1 valuation since NNN's notes payable are publicly traded.
19
Note 7 – Segment Information:
NNN's operations are reported within one reportable segment and constitute all of the consolidated entities which are reported in the unaudited condensed consolidated financial statements. NNN primarily derives its revenues from real estate leased to tenants under long-term net leases. NNN’s Properties are located in the United States.
NNN’s Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer. The CODM assesses entity-wide operating results and performance and decides how to allocate resources based on net earnings which is reported on the Condensed Consolidated Statements of Income and Comprehensive Income. Additionally, the measure of segment assets is reported on the Condensed Consolidated Balance Sheets as total assets. Included in the total assets are long-lived real estate assets which include land, buildings, improvements and right-of-use assets subject to operating leases.
The CODM uses net earnings to evaluate income generated from assets (return on assets) in deciding whether to reinvest profits to grow the Property Portfolio or deploy into other aspects of the Company, such as to retire or repay debt or pay dividends. The CODM also uses net earnings to monitor the budget versus actual results, which is used in assessing NNN’s entity-wide operating results and performance.
Significant expense categories, including general and administrative, real estate, depreciation and amortization and interest, are included on NNN’s Condensed Consolidated Statements of Income and Comprehensive Income. Asset information is included in the Condensed Consolidated Balance Sheets and “Note 2 – Real Estate.”
Note 8 – Subsequent Events:
On July 1, 2025, NNN closed on its public offering of $500,000,000 principal amount of 4.600% senior unsecured notes due February 15, 2031 (“2031 Notes”). The public offering price was 99.182% of the principal amount for a yield to maturity of 4.766%. The 2031 Notes are senior unsecured obligations of the Company and are registered under the Company's existing shelf registration statement filed with the Commission.
20
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in the Annual Report on Form 10-K of NNN REIT, Inc. for the year ended December 31, 2024 ("2024 Annual Report"). The term “NNN” or the “Company” refers to NNN REIT, Inc. and all of its consolidated subsidiaries.
Forward-Looking Statements
The information herein contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 (the “Exchange Act”). Also, when NNN uses any of the words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend” or similar expressions, NNN is making forward-looking statements. Although management believes that the expectations reflected in such forward-looking statements are based upon present expectations and reasonable assumptions, NNN's actual results could differ materially from those set forth in the forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and NNN undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law. The following is a summary of the risks and uncertainties, although not all risks and uncertainties, that could cause NNN's actual results to differ materially from those presented in NNN's forward-looking statement:
•
Changes in financial and economic conditions, including inflation and tariffs impacting international trade, may have an adverse impact on NNN, its tenants and commercial real estate in general;
•
Loss of rent from tenants would reduce NNN's cash flow;
•
A significant portion of the source of the Property Portfolio annual base rent is concentrated in specific industry classifications, tenants and geographic locations;
•
NNN may not be able to successfully execute its acquisition or development strategies;
•
NNN may not be able to dispose of Properties consistent with its operating strategy;
•
Certain provisions of NNN's leases or loan agreements may be unenforceable;
•
Competition from numerous other real estate investment trusts (“REIT”), commercial developers, real estate limited partnerships and other investors or a lack of properties for sale may impede NNN's ability to grow;
•
A natural disaster or impacts of weather or other event resulting in uninsured loss may adversely affect the operations of NNN's tenants and therefore the ability of NNN's tenants to pay rent, NNN's operating results and asset values of NNN's Property Portfolio (as defined below);
•
NNN's ability to fully control the management of its net-leased Properties may be limited;
•
Bankrupt tenants or vacant Properties could adversely affect NNN's business or financial condition;
•
Cybersecurity risks and cyber incidents as well as other significant disruptions of NNN's information technology networks and related systems and resources, or those of NNN's vendors or other third-parties, could adversely affect NNN's business, disrupt operations and expose NNN to liabilities to tenants, associates, capital providers, governmental regulators and other third parties;
•
NNN relies upon cloud computing services to operate certain aspects of its business and any disruption could have an adverse effect on its financial condition and results of operations;
•
Future investment in international markets could subject NNN to additional risks;
•
NNN may suffer a loss in the event of a default or bankruptcy of a borrower;
•
Property ownership through joint ventures and partnerships could limit NNN's control of those investments;
•
NNN may be unable to obtain debt or equity capital on favorable terms, if at all;
•
The amount of debt NNN has and the restrictions imposed by that debt could adversely affect NNN's business and financial condition;
•
NNN is obligated to comply with financial and other covenants in its debt instruments that could restrict its operating activities, and the failure to comply with such covenants could result in defaults that accelerate the payment of such debt;
•
NNN's ability to pay dividends in the future is subject to many factors;
•
Future issuances of NNN's equity securities could dilute the interest of NNN's common stockholders;
•
Owning real estate and indirect interests in real estate carries inherent risks;
•
NNN's real estate investments are illiquid;
•
NNN may be subject to known or unknown environmental liabilities and risks, including but not limited to liabilities and risks resulting from the existence of hazardous materials on or under Properties owned by NNN;
21
•
NNN's failure to qualify as a REIT for federal income tax purposes could result in significant tax liability;
•
Compliance with REIT requirements, including distribution requirements, may limit NNN's flexibility and may negatively affect NNN's operating decisions;
•
The share ownership restrictions of the Internal Revenue Code of 1986, as amended (the "Code"), for REITs and the 9.8% share ownership limit in NNN's charter may inhibit market activity in NNN's shares of stock and restrict NNN's business combination opportunities;
•
Costs of complying with changes in governmental laws and regulations may adversely affect NNN's results of operations;
•
Non-compliance with Title III of the Americans with Disabilities Act of 1990 and similar state and local laws could have an adverse effect on NNN's business and operating results;
•
NNN's loss of key management personnel could adversely affect performance and the value of its securities;
•
NNN's failure to maintain effective internal control over financial reporting could have a material adverse effect on its business, operating results and the market value of NNN's securities;
•
An epidemic or pandemic and/or the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, may precipitate or materially exacerbate one or more of the other risks and may significantly disrupt NNN's tenants' ability to operate their businesses and/or pay rent to NNN or prevent NNN from operating its business in the ordinary course for an extended period;
•
Acts of violence, terrorist attacks or war may affect NNN's Properties, the markets in which NNN operates and NNN's results of operations;
•
Changes in accounting pronouncements could adversely impact NNN's or NNN's tenants' reported financial performance;
•
The market value of NNN's equity and debt securities is subject to various factors that may cause significant fluctuations or volatility;
•
Even if NNN remains qualified as a REIT, NNN faces other tax liabilities that reduce operating results and cash flow; and
•
Adverse legislative or regulatory tax changes could reduce NNN's earnings and cash flow and the market value of NNN's securities.
Additional information related to these risks and uncertainties are included in "Item 1A. Risk Factors" of NNN's 2024 Annual Report.
These risks and uncertainties may cause NNN's actual future results to differ materially from expected results. Readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. NNN undertakes no obligation to update or revise such forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
NNN, a Maryland corporation, is a fully integrated REIT formed in 1984. NNN's assets primarily include real estate assets. NNN acquires, owns, invests in and develops high-quality properties that are leased primarily to tenants under long-term, net leases and are primarily held for investment ("Properties" or "Property Portfolio", or individually a "Property").
As of June 30, 2025, NNN owned 3,663 Properties in 50 states, with an aggregate gross leasable area of approximately 38,322,000 square feet, and a weighted average remaining lease term of 10 years. Approximately 98 percent of the Properties were leased as of June 30, 2025.
NNN's management team focuses on certain key indicators to evaluate the financial condition and operating performance of NNN. Key indicators include items such as: the composition of the Property Portfolio (such as tenant, line of trade and geographic diversification), the occupancy rate of the Property Portfolio, certain financial performance metrics and profitability measures, industry trends and industry performance compared to that of NNN.
NNN evaluates the creditworthiness of its significant current and prospective tenants. This evaluation may include reviewing available financial statements, store level financial performance, press releases, public credit ratings from major credit rating agencies, industry news publications and financial market data (debt and equity pricing). NNN may also evaluate the business and operations of its significant tenants, including past payment history and periodically meeting with senior management of certain tenants.
22
NNN continues to maintain its diversification by tenant, line of trade and geography. NNN's top five line of trade concentrations are the automotive service (18.2%), convenience store (16.5%), restaurant (including full and limited service) (15.2%) and entertainment (7.3%) sectors. NNN's management believes these sectors present attractive investment opportunities. The Property Portfolio is geographically concentrated in the southeast (25.0%) and south (24.7%) United States, which are regions of historically above-average population growth. Given these concentrations, any financial hardship within these sectors or geographic regions could have a material adverse effect on the financial condition and operating performance of NNN.
As of June 30, 2025 and 2024, the Property Portfolio remained leased at approximately 98 percent or higher and had a weighted average remaining lease term of approximately 10 years. High occupancy levels coupled with a triple-net lease structure provides enhanced probability of achieving consistent operating results.
Additional information related to NNN and the Property Portfolio is included in NNN's 2024 Annual Report.
Results of Operations
Property Analysis
General. The following table summarizes the Property Portfolio:
June 30, 2025
December 31, 2024
June 30, 2024
Properties Owned:
Number
3,663
3,568
3,548
Total gross leasable area (square feet)
38,322,000
36,557,000
36,095,000
States
50
49
49
Properties:
Leased and unimproved land
3,590
3,514
3,522
Percent of Properties – leased and unimproved land
98
%
98
%
99
%
Weighted average remaining lease term (years)
10
10
10
Total gross leasable area (square feet) – leased
37,476,000
35,826,000
35,747,000
Total Annualized Base Rent ("ABR")(1)
$
893,782,000
$
860,562,000
$
837,568,000
(1)
ABR represents the monthly cash base rent for all leases in place as of the end of the period multiplied by 12.
23
The following table summarizes the diversification of the Property Portfolio for the top 20 lines of trade as a percentage of ABR:
Lines of Trade
June 30, 2025
December 31, 2024
June 30, 2024
1.
Automotive service
18.2%
17.1%
16.9%
2.
Convenience stores
16.5%
17.0%
16.2%
3.
Restaurants – limited service
8.2%
8.4%
8.5%
4.
Entertainment
7.3%
7.2%
6.6%
5.
Restaurants – full service
7.0%
7.8%
8.4%
6.
Dealerships
6.7%
5.8%
5.4%
7.
Health and fitness
4.1%
3.9%
4.0%
8.
Theaters
3.8%
4.0%
4.1%
9.
Equipment rental
3.1%
3.2%
3.3%
10.
Automotive parts
2.4%
2.4%
2.4%
11.
Wholesale clubs
2.3%
2.4%
2.4%
12.
Drug stores
2.1%
2.2%
2.3%
13.
Home improvement
2.0%
2.1%
2.2%
14.
Medical service providers
1.9%
1.8%
1.8%
15.
Pet supplies and services
1.6%
1.3%
1.2%
16.
Discount retail
1.4%
1.6%
1.6%
17.
Furniture
1.3%
1.3%
2.0%
18.
Travel plazas
1.2%
1.2%
1.3%
19.
Consumer electronics
1.2%
1.3%
1.3%
20.
Home furnishings
1.1%
1.1%
1.3%
Other
6.6%
6.9%
6.8%
100.0%
100.0%
100.0%
ABR
$
893,782,000
$
860,562,000
$
837,568,000
Property Acquisitions. The following table summarizes the Property acquisitions (dollars in thousands):
Quarter Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Acquisitions:
Number of Properties
45
16
127
36
Gross leasable area (square feet)(1)
1,399,000
272,000
2,230,000
555,000
Weighted average cap rate(2)
7.4
%
7.9
%
7.4
%
8.0
%
Total dollars invested(3)
$
232,536
$
110,542
$
464,929
$
235,034
(1)
Includes additional square footage from completed construction on existing Properties.
(2)
Calculated as the initial cash annual base rent divided by the total purchase price of the Properties.
(3)
Includes dollars invested in projects under construction or tenant improvements for each respective period.
NNN typically funds Property acquisitions either through borrowings under NNN's Credit Facility (as defined in "Capital Structure – Line of Credit Payable"), by issuing its debt or equity securities in the capital markets, with undistributed funds from operations, or with proceeds from the sale of Properties.
24
Property Dispositions. The following table summarizes the properties sold by NNN (dollars in thousands):
Quarter Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Number of properties
23
14
33
20
Gross leasable area (square feet)
358,000
303,000
430,000
417,000
Net sales proceeds
$
51,248
$
67,274
$
67,087
$
85,805
Net gain on disposition of real estate
$
16,198
$
17,621
$
20,011
$
22,442
Weighted average cap rate(1)
6.2
%
7.7
%
5.7
%
7.4
%
(1)
Calculated as the cash annual base rent divided by the total gross proceeds received for the properties.
NNN typically uses the disposition proceeds to either pay down the Credit Facility or reinvest in real estate.
Analysis of Revenues
The following table summarizes NNN's revenues (dollars in thousands):
Quarter Ended June 30,
Percent Increase
Six Months Ended June 30,
Percent Increase
2025
2024
(Decrease)
2025
2024
(Decrease)
Rental Revenues(1)
$
222,110
$
211,934
4.8
%
$
447,166
$
422,025
6.0
%
Real estate expenses reimbursed from tenants(2)
4,388
4,206
4.3
%
9,906
8,940
10.8
%
Rental income
226,498
216,140
4.8
%
457,072
430,965
6.1
%
Interest and other income from real estate transactions
304
673
(54.8
)%
584
1,255
(53.5
)%
Total revenues
$
226,802
$
216,813
4.6
%
$
457,656
$
432,220
5.9
%
(1)
Includes rental income from operating leases, earned income from direct financing leases and percentage rent ("Rental Revenues").
(2)
See "Results of Operations – Analysis of Expenses – Real Estate" for additional information.
Rental Income.Rental income increased for the quarter and six months ended June 30, 2025, as compared to the same periods in 2024. The increase is primarily due to the Rental Revenues from NNN's recent Property acquisitions (see "Results of Operations – Property Analysis – Property Acquisitions").
25
Analysis of Expenses
The following table summarizes NNN's expenses (dollars in thousands):
Quarter Ended June 30,
Percent Increase
Six Months Ended June 30,
Percent Increase
2025
2024
(Decrease)
2025
2024
(Decrease)
General and administrative
$
11,217
$
11,789
(4.9
)%
$
24,225
$
24,373
(0.6
)%
Real estate:
Reimbursed from tenants
4,388
4,206
4.3
%
9,906
8,940
10.8
%
Non-reimbursed
4,450
2,552
74.4
%
8,307
4,972
67.1
%
Total real estate
8,838
6,758
30.8
%
18,213
13,912
30.9
%
Depreciation and amortization
68,349
62,503
9.4
%
132,966
123,118
8.0
%
Leasing transaction costs
74
20
270.0
%
204
53
284.9
%
Impairment losses – real estate, net of recoveries
4,535
944
380.4
%
6,047
2,148
181.5
%
Retirement and severance costs
191
153
24.8
%
2,364
470
403.0
%
Total operating expenses
$
93,204
$
82,167
13.4
%
$
184,019
$
164,074
12.2
%
Interest and other income
$
(15
)
$
(976
)
(98.5
)%
$
(344
)
$
(1,095
)
(68.6
)%
Interest expense
49,282
46,577
5.8
%
97,005
90,646
7.0
%
Total other expenses
$
49,267
$
45,601
8.0
%
$
96,661
$
89,551
7.9
%
As a percentage of total revenues:
General and administrative
4.9
%
5.4
%
5.3
%
5.6
%
Non-reimbursed real estate
2.0
%
1.2
%
1.8
%
1.2
%
Real Estate.Total real estate expenses increased for the quarter and six months ended June 30, 2025, as compared to the same periods in 2024. NNN focuses on non-reimbursed real estate expenses (total real estate expenses, net of reimbursements from tenants). These expenses are typically attributable to (i) Properties for which the lease terms do not obligate the tenant to pay certain operating expenses, or (ii) vacant Properties. Non-reimbursed real estate expenses increased in amount and as a percentage of total revenues for the quarter and six months ended June 30, 2025, as compared to the same periods in 2024 primarily due to an increase in the number of vacant properties.
Depreciation and Amortization. Depreciation and amortization expenses increased for the quarter and six months ended June 30, 2025, as compared to the same periods in 2024. The increase was primarily attributable to the increase in NNN's Property Portfolio from recent acquisitions (see "Results of Operations – Property Analysis – Property Acquisitions") and was partially offset by recent dispositions (see "Results of Operations – Property Analysis – Property Dispositions").
Impairment Losses – Real Estate, Net of Recoveries.As a result of NNN's review of long-lived real estate assets, including identifiable intangible assets, NNN recognized real estate impairments, net of recoveries for the quarters and six months ended June 30, 2025 and 2024, which were less than one percent of NNN's total assets for the respective periods as reported on the Condensed Consolidated Balance Sheets. Due to NNN's core business of investing in real estate leased primarily to tenants under long-term net leases, the inherent risks of owning commercial real estate and unknown potential changes in financial and economic conditions that may impact NNN's tenants, NNN believes it is reasonably possible to incur real estate impairment charges in the future.
Retirement and Severance Costs. Retirement and severance costs increased for the six months ended June 30, 2025, as compared to the same period in 2024, primarily due to costs in connection with the retirement and transition agreement of the former Executive Vice President and Chief Financial Officer.
26
Interest Expense. Interest expense increased for the quarter and six months ended June 30, 2025, as compared to the same periods in 2024. The following represents the primary changes in fixed rate long-term debt that impacted interest expense (dollars in thousands):
Transaction
Effective Date
Principal
Stated Rate
Original Maturity
Issuance 2034 Notes
May 2024
$
500,000
5.500%
June 2034
Redemption 2024 Notes
June 2024
(350,000
)
3.900%
June 2024
The increase in interest expense was partially offset by the Credit Facility having a weighted average outstanding balance of $113,919,000 with a weighted average interest rate of 5.22% for the six months ended June 30, 2025, compared to a weighted average outstanding balance of $111,966,000 with a weighted average interest rate of 6.26% for the six months ended June 30, 2024.
Liquidity and Capital Resources
NNN's demand for funds has been and will continue to be primarily for (i) payment of operating expenses and dividends, (ii) property acquisitions and construction commitments, (iii) capital expenditures, (iv) payment of principal and interest on its outstanding debt, and (v) other investments.
Financing Strategy. NNN's financing objective is to manage its capital structure effectively in order to provide sufficient capital to execute its operating and investing strategies while servicing its debt requirements, maintaining its investment grade credit rating, staggering debt maturities and providing value to NNN's stockholders. NNN's capital resources have and will continue to include, if available (i) proceeds from issuing debt or equity in the capital markets; (ii) secured or unsecured borrowings from banks or other lenders; (iii) proceeds from the sale of Properties; and (iv) to a lesser extent, by internally generated funds as well as undistributed funds from operations. However, there can be no assurance that additional financing or capital will be available, or that the terms will be acceptable or advantageous to NNN.
NNN typically expects to fund both its short-term and long-term liquidity requirements, including investments in additional properties, with cash and cash equivalents, cash provided from operations, borrowings from NNN's Credit Facility or proceeds from the sale of Properties. As of June 30, 2025, NNN had $6,748,000 of cash, cash equivalents and restricted cash or cash held in escrow and $932,300,000 was available for future borrowings under the Credit Facility. NNN may also fund liquidity requirements with new debt or equity issuances, although newly issued debt may be at higher interest rates than the rates on NNN's existing outstanding debt. NNN also has the ability to limit future property acquisitions and strategically increase property dispositions. NNN expects these sources of liquidity and the discretionary nature of its property acquisition funding needs will allow NNN to meet its financial obligations over the long term.
Cash Flows.NNN had $6,748,000 of cash, cash equivalents and restricted cash, of which $775,000 was restricted cash or cash held in escrow at June 30, 2025. The table below summarizes NNN's cash flows (dollars in thousands):
Six Months Ended June 30,
2025
2024
Cash, cash equivalents and restricted cash:
Provided by operating activities
$
322,702
$
311,194
Used in investing activities
(386,969
)
(139,348
)
Provided by (used in) financing activities
61,953
(160,199
)
Increase (decrease)
(2,314
)
11,647
Net cash at beginning of period
9,062
5,155
Net cash at end of period
$
6,748
$
16,802
27
Cash flow activities include:
Operating Activities.Cash provided by operating activities represents cash received primarily from rental income less cash used for general and administrative and interest expenses. NNN's cash flow from operating activities has been sufficient to pay the distributions for each period presented. The change in cash provided by operations for the six months ended June 30, 2025 and 2024, is primarily the result of changes in revenues and expenses as discussed in “Results of Operations.” Cash generated from operations is expected to fluctuate in the future.
Investing Activities.Changes in cash for investing activities are primarily attributable to the acquisitions and dispositions of Properties as discussed in "Results of Operations – Property Analysis." NNN typically uses cash on hand, borrowings from its Credit Facility or proceeds from the sale of Properties to fund the acquisition of its Properties.
Financing Activities.NNN's financing activities for the six months ended June 30, 2025, included the following significant transactions:
•
$267,700,000 in net borrowings of NNN's Credit Facility,
•
$9,978,000 from the issuance of 236,906 shares of common stock in connection with the at-the-market equity program ("ATM"),
•
$1,363,000 from the issuance of 34,092 shares of common stock in connection with the Dividend Reinvestment and Stock Purchase Plan ("DRIP"), and
•
$216,901,000 in dividends paid to common stockholders.
Material Cash Requirements
NNN's material cash requirements include (i) long-term debt maturities; (ii) interest on long-term debt; (iii) common stock dividends (although all future distributions will be declared and paid at the discretion of the Board of Directors); and (iv) to a lesser extent, Property construction and other Property related costs that may arise.
The table below presents material cash requirements related to NNN's long-term obligations outstanding as of June 30, 2025 (see "Capital Structure") (dollars in thousands):
Date of Obligation
Total
2025
2026
2027
2028
2029
Thereafter
Long-term debt(1)(2)
$
4,450,000
$
400,000
$
350,000
$
400,000
$
400,000
$
—
$
2,900,000
Long-term debt – interest(2)(3)
1,973,381
87,125
161,725
146,733
132,067
118,450
1,327,281
Credit Facility
267,700
—
—
—
267,700
—
—
Total contractual cash obligations
$
6,691,081
$
487,125
$
511,725
$
546,733
$
799,767
$
118,450
$
4,227,281
(1)
Includes only principal amounts outstanding under notes payable and excludes unamortized note discounts and debt costs.
(2)
Excludes $500,000 aggregate principal amount of 4.600% notes due February 2031 issued in July 2025 (see "Capital Structure – Debt Securities – Notes Payable").
(3)
Interest calculation on notes payable based on stated rate of the principal amount.
Property Construction.NNN has committed to fund construction on 20 Properties. The improvements of such Properties are estimated to be completed within 12 to 18 months. These construction commitments, at June 30, 2025, are outlined in the table below (dollars in thousands):
Total commitment(1)
$
103,177
Less amount funded
(64,352
)
Remaining commitment
$
38,825
(1)
Includes land, construction costs, tenant improvements, lease costs, capitalized interest and third-party costs.
Management anticipates satisfying these obligations with a combination of NNN's cash provided from operations, current capital resources on hand, its Credit Facility, debt or equity financings and property dispositions.
28
Properties.Typically, the Property leases provide for initial terms of 10 to 20 years and a triple-net lease structure, pursuant to which the tenant bears responsibility for operating expenses of the Property, including utilities, real estate taxes and assessments, property and liability insurance, maintenance, repairs and capital expenditures. Therefore, management anticipates that capital demands to meet obligations with respect to these Properties will be modest for the foreseeable future and can be met with funds from operations and working capital. Certain Properties are subject to leases under which NNN retains responsibility for specific costs and expenses associated with the Property. Management anticipates the costs associated with these Properties, NNN's vacant Properties or those Properties that become vacant will also be met with funds from operations and working capital. NNN may be required to borrow under its Credit Facility or use other sources of capital in the event of significant capital expenditures or major repairs.
The lost revenues and increased property expenses resulting from vacant Properties or the inability to collect lease payments could have a material adverse effect on the liquidity and results of operations if NNN is unable to re-lease the Properties at comparable rental rates and in a timely manner.
As of June 30, 2025, NNN owned 73 vacant, un-leased Properties which accounted for two percent of total Properties and approximately two percent of aggregate gross leasable area held in the Property Portfolio.
Additionally, as of July 31, 2025, approximately one percent of total annualized base rent, less than one percent of total Properties and less than four percent of aggregate gross leasable area held in the Property Portfolio was leased to two tenants currently in bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. As a result, these tenants have the right to reject or affirm their leases with NNN.
NNN generally monitors the financial performance of its significant tenants on an ongoing basis.
Dividends. One of NNN's primary objectives is to distribute a substantial portion of its funds available from operations to its stockholders in the form of dividends, while retaining sufficient cash for reserves and working capital purposes and maintaining its status as a REIT.
The following table outlines the dividends declared and paid for NNN's common stock (dollars in thousands, except per share data):
Quarter Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Dividends
$
108,566
$
103,159
$
216,901
$
205,843
Per share
0.5800
0.5650
1.1600
1.1300
In July 2025, NNN declared a dividend of $0.6000 per share which is payable in August 2025 to its common stockholders of record as of July 31, 2025.
Capital Structure
NNN has used, and expects to use in the future, various forms of debt and equity securities primarily to fund property acquisitions and construction on its Properties and to pay down or refinance its outstanding debt.
The following is a summary of NNN's total debt outstanding as of (dollars in thousands):
June 30, 2025
Percentage of Total
December 31, 2024
Percentage of Total
Line of credit payable
$
267,700
5.8
%
$
—
—
Notes payable
4,376,893
94.2
%
4,373,803
100.0
%
Total debt outstanding
$
4,644,593
100.0
%
$
4,373,803
100.0
%
29
Line of Credit Payable.In April 2024, NNN amended certain terms of its credit agreement to, among other things, increase borrowing capacity under its unsecured revolving credit facility from $1,100,000,000 to $1,200,000,000 (the "Credit Facility"). The Credit Facility had a weighted average outstanding balance of $113,919,000 and a weighted average interest rate of 5.22% during the six months ended June 30, 2025. The Credit Facility has a base interest rate of the Secured Overnight Financing Rate ("SOFR") plus a SOFR adjustment of 10 basis points ("Adjusted SOFR"). The Credit Facility bears interest at Adjusted SOFR plus 77.5 basis points; however, such interest rate may change pursuant to a tiered interest rate structure based on NNN's debt rating. Additionally, as part of NNN's environmental, social and governance ("ESG") initiative, pricing may be reduced if specified ESG metrics are achieved. The Credit Facility matures in April 2028, unless the Company exercises its options to extend maturity to April 2029. The Credit Facility also includes an accordion feature which permits NNN to increase the facility size up to $2,000,000,000, subject to lender approval. In connection with the Credit Facility, loan costs are classified as debt costs on the Condensed Consolidated Balance Sheets. As of June 30, 2025, there was $267,700,000 outstanding and $932,300,000 available for future borrowings under the Credit Facility, and NNN was in compliance with each of the Credit Facility financial covenants.
Universal Shelf Registration Statement. In August 2023, NNN filed a shelf registration statement with the Securities and Exchange Commission (the "Commission") which became automatically effective ("Universal Shelf"). The Universal Shelf permits the issuance by NNN of an indeterminate amount of debt and equity securities, including preferred stock, depositary shares, common stock, stock purchase contracts, rights, warrants and units.
Debt Securities – Notes Payable.Each of NNN's outstanding series of unsecured notes is summarized in the table below (dollars in thousands):
Notes(1)
Issue Date
Principal
Discount(2)
Net Price
Stated Rate
Effective Rate(3)
Maturity Date
2025(4)
October 2015
$
400,000
$
964
$
399,036
4.000%
4.029%
November 2025(5)(6)
2026(4)
December 2016
350,000
3,860
346,140
3.600%
3.733%
December 2026(5)
2027(4)
September 2017
400,000
1,628
398,372
3.500%
3.548%
October 2027(5)
2028(4)
September 2018
400,000
2,848
397,152
4.300%
4.388%
October 2028(5)
2030(4)
March 2020
400,000
1,288
398,712
2.500%
2.536%
April 2030(5)
2033
August 2023
500,000
11,620
488,380
5.600%
5.905%
October 2033
2034
May 2024
500,000
6,160
493,840
5.500%
5.662%
June 2034
2048
September 2018
300,000
4,239
295,761
4.800%
4.890%
October 2048
2050
March 2020
300,000
6,066
293,934
3.100%
3.205%
April 2050
2051
March 2021
450,000
8,406
441,594
3.500%
3.602%
April 2051
2052(4)
September 2021
450,000
10,422
439,578
3.000%
3.118%
April 2052
(1)
The proceeds from each note issuance were used to (i) pay down the outstanding balance on NNN's Credit Facility, (ii) redeem notes payable prior to maturity, (iii) redeem outstanding preferred stock, (iv) fund future property acquisitions, and/or (v) for general corporate purposes.
(2)
The note discounts are amortized to interest expense over the respective term of each debt obligation using the effective interest method.
(3)
Includes the effects of the discount at issuance.
(4)
NNN entered into forward starting swaps which hedged the risk of changes in forecasted interest payments on forecasted issuance of long-term debt. Upon the issuance of a series of unsecured notes, NNN terminated such derivatives, and the resulting fair value was deferred in other comprehensive income. The deferred liability (asset) is being amortized over the term of the hedged forecasted transaction using the effective interest method.
(5)
The aggregate principal balance of the unsecured note maturities for the next five years is $1,950,000.
(6)
NNN may use proceeds from the Credit Facility and/or potential debt or equity offerings to repay the outstanding debt.
Each series of the notes represents senior, unsecured obligations of NNN and is subordinated to all secured debt of NNN. NNN may redeem each series of notes, in whole or in part, at any time prior to the par call date for the notes at the redemption price as set forth in the applicable supplemental indenture relating to the notes; provided, however, that if NNN redeems the notes on or after the par call date, the redemption price will equal 100 percent of the principal amount of the notes to be redeemed, plus accrued and unpaid interest thereon to, but not including, the redemption date.
30
In connection with the outstanding note offerings, NNN incurred debt issuance costs totaling $43,820,000 consisting primarily of underwriting discounts and commissions, legal and accounting fees, rating agency fees and printing expenses. Debt issuance costs for all note issuances have been deferred and presented as a reduction to notes payable and are being amortized over the term of the respective notes using the effective interest method.
In accordance with the terms of the indentures, pursuant to which NNN's notes have been issued, NNN is required to meet certain restrictive financial covenants, which, among other things, require NNN to maintain (i) certain leverage ratios and (ii) certain interest coverage. At June 30, 2025, NNN was in compliance with those covenants.
In June 2025, NNN filed a prospectus supplement to the prospectus contained in its August 2023 shelf registration statement and, in July 2025, issued $500,000,000 aggregate principal amount of 4.600% notes due February 2031 (the “2031 Notes”).
The 2031 Notes were sold at a discount with an aggregate net price of $495,910,000 with interest payable semi-annually on February 15 and August 15, commencing on February 15, 2026. The discount of $4,090,000 is being amortized to interest expense over the term of the notes using the effective interest method. The effective interest rate for the 2031 Notes after accounting for the note discount is 4.766%.
NNN received approximately $491,710,000 of net proceeds in connection with the issuance of the 2031 Notes, after incurring debt issuance costs consisting primarily of underwriting discounts and commissions, legal and accounting fees, rating agency fees and printing expenses, totaling $4,200,000 for the 2031 Notes. NNN intends to use the net proceeds to repay NNN's outstanding indebtedness under its Credit Facility, to fund future property acquisitions and for general corporate purposes.
The 2031 Notes are senior, unsecured obligations of NNN and are subordinated to all secured debt of NNN. NNN may redeem the 2031 Notes, in whole or in part, at any time prior to the par call date at the redemption price as set forth in the supplemental indenture dated July 1, 2025, relating to the 2031 Notes; provided, however, that if NNN redeems the notes on or after the par call date, the redemption price will equal 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest thereon to, but not including, the redemption date.
NNN previously entered into two forward starting swaps with an aggregate notional amount of $200,000,000. Upon pricing of the 2031 Notes, NNN terminated the forward starting swaps resulting in a net liability of $409,000, which was deferred in accumulated other comprehensive income and will be amortized as an increase in interest expense over 10 years.
Equity Securities
At-The-Market Offerings. NNN has established an ATM which allows NNN to sell shares of common stock from time to time. The following table outlines NNN's ATM:
2023 ATM
Shelf registration statement:
Effective date
August 2023
Termination date
August 2026
Total allowable shares
17,500,000
Total shares issued as of June 30, 2025
4,889,006
31
The following table outlines the common stock issuances pursuant to NNN's ATM (dollars in thousands, except per share data):
Quarter Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Shares of common stock
236,906
303,443
236,906
803,443
Average price per share (net)
$
42.48
$
41.81
$
42.12
$
41.69
Net proceeds
$
10,063
$
12,687
$
9,978
$
33,493
Stock issuance costs(1)
$
167
$
115
$
252
$
234
(1)
Stock issuance costs consist primarily of underwriters' and agent's fees and commissions and legal and accounting fees.
Dividend Reinvestment and Stock Purchase Plan. In February 2024, NNN filed a shelf registration statement for its DRIP with the Commission that was automatically effective and permits NNN to issue up to 4,000,000 shares of common stock. NNN's DRIP provides an economical and convenient way for current stockholders and other interested new investors to invest in NNN's common stock. The following outlines the common stock issuances pursuant to NNN's DRIP (dollars in thousands):
Quarter Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Shares of common stock
17,316
14,815
34,092
34,309
Net proceeds
$
707
$
604
$
1,363
$
1,313
Critical Accounting Estimates
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. 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. The preparation of NNN's unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as other disclosures in the unaudited condensed consolidated financial statements. Estimates are sensitive to evaluations by management about current and future expectations of market and economic conditions. On an ongoing basis, management evaluates its estimates and assumptions; however, actual results may differ from these estimates and assumptions, which in turn could have a material impact on NNN's consolidated financial statements. A summary of NNN's critical accounting estimates is included in NNN's 2024 Annual Report. NNN has not made any material changes to these policies during the periods covered by this Quarterly Report on Form 10-Q.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
NNN is exposed to interest rate risk primarily as a result of its variable rate Credit Facility and its fixed rate long-term debt which is used to finance NNN's Property acquisitions and construction commitments, as well as for general corporate purposes. NNN's interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to reduce overall borrowing costs. To achieve its objectives, NNN borrows at both fixed and variable rates on its long-term debt and periodically uses derivatives to hedge the interest rate risk of future borrowings. As of June 30, 2025, NNN had no outstanding derivatives.
As of June 30, 2025, NNN's variable rate Credit Facility had $267,700,000 outstanding and a weighted average outstanding balance of $113,919,000 with a weighted average interest rate of 5.22% for the six months ended June 30, 2025 compared to a weighted average outstanding balance of $111,966,000 with a weighted average interest rate of 6.26% for the same period in 2024.
The information in the table below summarizes NNN's market risks associated with its debt obligations outstanding. The table presents, by year of expected maturity, principal payments and related interest rates for debt obligations outstanding as of June 30, 2025. The table incorporates only those debt obligations that existed as of June 30, 2025, and it does not consider those debt obligations or positions which could arise after this date and therefore has limited predictive value. As a result, NNN's ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period, NNN's hedging strategies at that time and interest rates. If interest rates on NNN's variable rate debt increased by one percent, NNN's interest expense would have increased by less than one percent for the six months ended June 30, 2025.
Debt Obligations(1) (dollars in thousands)
Variable Rate Debt
Fixed Rate Debt
Credit Facility
Unsecured Debt(2)
Debt Obligation
Weighted Average Interest Rate
Principal Debt Obligation
Effective Interest Rate
2025
$
—
—
$
400,000
4.03
%
2026
—
—
350,000
3.73
%
2027
—
—
400,000
3.55
%
2028
267,700
5.22
%
400,000
4.39
%
2029
—
—
—
—
Thereafter(3)
—
—
2,900,000
4.22
%
(4)
Total
$
267,700
5.22
%
$
4,450,000
4.12
%
Fair Value:
June 30, 2025
$
267,700
$
3,974,301
December 31, 2024
$
—
$
3,894,030
(1)
NNN's unsecured debt obligations have a weighted average interest rate of 4.2% and a weighted average maturity of 11.1 years.
(2)
Includes NNN's notes payable, each exclude unamortized discounts and debt costs. The fair value is based upon quoted market prices as of the close of the period, which is a Level 1 valuation since NNN's notes payable are publicly traded on the over-the-counter market.
(3)
Excludes $500,000 aggregate principal amount of 4.600% notes due February 2031 issued in July 2025 (see "Capital Structure – Debt Securities – Notes Payable").
(4)
Weighted average effective interest rate for years after 2029.
33
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. An evaluation was performed under the supervision and with the participation of NNN's management, including NNN's Chief Executive Officer, Chief Financial Officer and Chief Accounting and Technology Officer ("NNN's Chief Officers"), of the effectiveness as of June 30, 2025, of the design and operation of NNN's disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, NNN's Chief Officers concluded that the design and operation of these disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting. There has been no change in NNN's internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, NNN's internal control over financial reporting.
34
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Not applicable.
Item 1A. Risk Factors.
There were no material changes in NNN's risk factors disclosed in Item 1A. Risk Factors inNNN's Annual Report on Form 10-K for the year ended December 31, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Not applicable.
Item 3. Defaults Upon Senior Securities. Not applicable.
Item 4. Mine Safety Disclosures. Not applicable.
Item 5. Other Information.Not applicable.
Item 6. Exhibits
The following exhibits are filed with the Securities and Exchange Commission ("Commission") as a part of this report, unless otherwise noted, each exhibit was previously filed with the Commission and is incorporated by reference below.
4.
Instruments Defining the Rights of Security Holders, Including Indentures
The following materials from the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2025, are formatted in Inline Extensible Business Reporting Language ("Inline XBRL"): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of income and comprehensive income, (iii) condensed consolidated statements of equity, (iv) condensed consolidated statements of cash flows, and (v) notes to condensed consolidated financial statements.
35
104.
Cover Page Interactive Data File
104.1
The cover page XBRL tags are embedded within the Inline XBRL document and included in Exhibit 101.
(1)
In accordance with Item 601(b)(32) of Regulation S-K, this exhibit is not deemed "filed" for purposes of section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
36
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 thereunto duly authorized.
DATED this 5th day of August, 2025.
NNN REIT, INC.
By:
/s/ Stephen A. Horn, Jr.
Stephen A. Horn, Jr.
President, Chief Executive Officer and Director
By:
/s/ Vincent H. Chao
Vincent H. Chao
Executive Vice President and Chief Financial Officer
