NNN REIT INC

Previous wording

As of June 30, 2024, NNN owned 3,548 Properties in 49 states, with an aggregate gross leasable area of approximately 36,095,000 square feet, and a weighted average remaining lease term of 10.0 years. Approximately 99 percent of the Properties were leased as of June 30, 2024.

Current wording

As of September 30, 2024, NNN owned 3,549 Properties in 49 states, with an aggregate gross leasable area of approximately 36,550,000 square feet, and a weighted average remaining lease term of 10.0 years. Approximately 99 percent of the Properties were leased as of September 30, 2024.

Previous wording

NNN continues to maintain its diversification by tenant, line of trade and geography. NNN's largest line of trade concentrations are the restaurant (including full and limited service) (16.9%), automotive service (16.7%), and convenience store (16.2%) sectors. These sectors represent a large part of the freestanding retail property marketplace and NNN's management believes these sectors present attractive investment opportunities. The Property Portfolio is geographically concentrated in the southeast (26.4%) and south (22.9%) 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.

Current wording

NNN continues to maintain its diversification by tenant, line of trade and geography. NNN's largest line of trade concentrations are the automotive service (16.8%), restaurant (including full and limited service) (16.7%) and convenience store (15.9%) sectors. These sectors represent a large part of the freestanding retail property marketplace and NNN's management believes these sectors present attractive investment opportunities. The Property Portfolio is geographically concentrated in the southeast (26.2%) and south (23.2%) 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.

Previous wording

Rental Income. Rental income increased for the quarter and six months ended June 30, 2024, as compared to the same periods in 2023. The increase is primarily due to the Rental Revenues from NNN's recent Property acquisitions (see "Results of Operations – Property Analysis – Property Acquisitions").

Current wording

Rental Income. Rental income increased for the quarter and nine months ended September 30, 2024, as compared to the same periods in 2023. The increase is primarily due to the Rental Revenues from NNN's recent Property acquisitions (see "Results of Operations – Property Analysis – Property Acquisitions").

Previous wording

General and Administrative. General and administrative expenses increased in amount; however, remained relatively flat as a percentage of total revenues for the quarter and six months ended June 30, 2024 as compared to the same periods in 2023. The increase is primarily attributable to an increase in compensation costs.

Current wording

General and Administrative. General and administrative expenses increased in amount; however, remained relatively flat as a percentage of total revenues for the quarter and nine months ended September 30, 2024 as compared to the same periods in 2023. The increase is primarily attributable to an increase in compensation costs.

Previous wording

Real Estate. Total real estate expenses remained relatively consistent for the quarter and six months ended June 30, 2024, as compared to the same periods in 2023. 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 expenses or (ii) vacant properties.

Current wording

Real Estate. Total real estate expenses increased for the quarter and nine months ended September 30, 2024 as compared to the same periods in 2023. However, 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 remained relatively flat as a percentage of total revenues for the quarter and nine months ended September 30, 2024 as compared to the same periods in 2023.

Previous wording

Impairment Losses – Real Estate, Net of Recoveries. As a result of NNN's review of long-lived assets, including identifiable intangible assets, NNN recognized real estate impairments, net of recoveries for the quarters and six months ended June 30, 2024 and 2023, 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 retail 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.

Current wording

Impairment Losses – Real Estate, Net of Recoveries. As a result of NNN's review of long-lived assets, including identifiable intangible assets, NNN recognized real estate impairments, net of recoveries for the quarters and nine months ended September 30, 2024 and 2023, 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 retail 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.

Previous wording

Interest Expense. Interest expense increased for the quarter and six months ended June 30, 2024, as compared to the same periods in 2023. The following represents the primary changes in fixed rate long-term debt that impacted interest expense (dollars in thousands):

Current wording

Interest Expense. Interest expense increased for the quarter and nine months ended September 30, 2024, as compared to the same periods in 2023. The following represents the primary changes in fixed rate long-term debt that impacted interest expense (dollars in thousands):

Previous wording

In addition to the transactions outlined above, the Credit Facility had 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 compared to a weighted average outstanding balance of $228,576,000 with a weighted average interest rate of 5.67% for the six months ended June 30, 2023.

Current wording

The increase in interest expense was partially offset by the Credit Facility having a weighted average outstanding balance of $75,769,000 with a weighted average interest rate of 6.28% for the nine months ended September 30, 2024 compared to a weighted average outstanding balance of $201,296,000 with a weighted average interest rate of 5.79% for the nine months ended September 30, 2023.

Previous wording

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, 2024, NNN had $16,802,000 of cash, cash equivalents and restricted cash or cash held in escrow and $1,188,000,000 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 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.

Current wording

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 September 30, 2024, NNN had $178,512,000 of cash, cash equivalents and restricted cash or cash held in escrow and $1,200,000,000 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 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.

Previous wording

Cash Flows. NNN had $16,802,000 of cash, cash equivalents and restricted cash, of which $14,672,000 was restricted cash or cash held in escrow at June 30, 2024. The table below summarizes NNN's cash flows (dollars in thousands):

Current wording

Cash Flows. NNN had $178,512,000 of cash, cash equivalents and restricted cash, of which $4,986,000 was restricted cash or cash held in escrow at September 30, 2024. The table below summarizes NNN's cash flows (dollars in thousands):

Previous wording

Operating Activities. Cash provided by operating activities represents cash received primarily from rental income and interest income less cash used for general and administrative 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, 2024 and 2023, 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.

Current wording

Operating Activities. Cash provided by operating activities represents cash received primarily from rental income and interest income less cash used for general and administrative 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 nine months ended September 30, 2024 and 2023, 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.

Previous wording

Financing Activities. NNN's financing activities for the six months ended June 30, 2024, included the following significant transactions:

Current wording

Financing Activities. NNN's financing activities for the nine months ended September 30, 2024, included the following significant transactions:

Previous wording

$120,000,000 in net repayments of NNN's Credit Facility,

Current wording

$132,000,000 in net repayments of NNN's Credit Facility,

Previous wording

$33,493,000 from the issuance of 803,443 shares of common stock in connection with the at-the-market equity program ("ATM"),

Current wording

$211,727,000 from the issuance of 4,652,100 shares of common stock in connection with the at-the-market equity program ("ATM"),

Previous wording

$1,313,000 from the issuance of 34,309 shares of common stock in connection with the Dividend Reinvestment and Stock Purchase Plan ("DRIP"), and

Current wording

$1,988,000 from the issuance of 49,352 shares of common stock in connection with the Dividend Reinvestment and Stock Purchase Plan ("DRIP"), and

Previous wording

$205,843,000 in dividends paid to common stockholders.

Current wording

$311,920,000 in dividends paid to common stockholders.

Previous wording

Property Construction. NNN has committed to fund construction on 27 Properties. The improvements of such Properties are estimated to be completed within 12 to 18 months. These construction commitments, at June 30, 2024, are outlined in the table below (dollars in thousands):

Current wording

Property Construction. NNN has committed to fund construction on 16 Properties. The improvements of such Properties are estimated to be completed within 12 to 18 months. These construction commitments, at September 30, 2024, are outlined in the table below (dollars in thousands):

Previous wording

As of June 30, 2024, NNN owned 26 vacant, un-leased Properties which accounted for less than one percent of total Properties, and approximately one percent of aggregate gross leasable area held in the Property Portfolio.

Current wording

As of September 30, 2024, NNN owned 24 vacant, un-leased Properties which accounted for less than one percent of total Properties, and approximately one percent of aggregate gross leasable area held in the Property Portfolio.

Previous wording

Line of Credit Payable. In April 2024, NNN amended and restated its credit agreement to increase borrowing capacity under its unsecured revolving credit facility from $1,100,000,000 to $1,200,000,000 and amended certain other terms under the former revolving credit facility (as the context requires, the previous and new revolving credit facility, the "Credit Facility"). The Credit Facility had a weighted average outstanding balance of $111,966,000 and a weighted average interest rate of 6.26% during the six months ended June 30, 2024. 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 asdebt costs on the Condensed Consolidated Balance Sheets. As of June 30, 2024, there was $12,000,000 outstanding and $1,188,000,000 available for future borrowings under the Credit Facility, and NNN was in compliance with each of the Credit Facility financial covenants.

Current wording

Line of Credit Payable. In April 2024, NNN amended and restated its credit agreement to increase borrowing capacity under its unsecured revolving credit facility from $1,100,000,000 to $1,200,000,000 and amended certain other terms under the former revolving credit facility (as the context requires, the previous and new revolving credit facility, the "Credit Facility"). The Credit Facility had a weighted average outstanding balance of $75,769,000 and a weighted average interest rate of 6.28% during the nine months ended September 30, 2024. 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 asdebt costs on the Condensed Consolidated Balance Sheets. As of September 30, 2024, there was no amount outstanding and $1,200,000,000 was available for future borrowings under the Credit Facility, and NNN was in compliance with each of the Credit Facility financial covenants.