UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2026
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, Florida 32801
(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 April 27, 2026, the registrant had 190,248,177 shares of common stock, $0.01 par value, outstanding.
PAGE
Part I – Financial Information
Item 1.
Financial Statements (unaudited):
Condensed Consolidated Balance Sheets
1
Condensed Consolidated Statements of Income and Comprehensive Income
2
Condensed Consolidated Statements of Equity
3
Condensed Consolidated Statements of Cash Flows
5
Notes to Condensed Consolidated Financial Statements
7
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
20
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
31
Item 4.
Controls and Procedures
32
Part II – Other Information
Legal Proceedings
33
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
Signatures
34
and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
March 31,2026
December 31,2025
(unaudited)
ASSETS
Real estate portfolio, net of accumulated depreciation and amortization
$
9,280,628
9,239,542
Cash and cash equivalents
4,570
5,046
Restricted cash and cash held in escrow
827
776
Receivables, net of allowance of $659 and $609, respectively
3,805
3,470
Accrued rental income, net of allowance of $3,475 and $3,393, respectively
36,021
34,914
Debt costs, net of accumulated amortization of $30,850 and $29,930, respectively
7,814
8,645
Other assets
88,626
86,962
Total assets
9,422,291
9,379,355
LIABILITIES AND EQUITY
Liabilities:
Line of credit payable
80,000
348,100
Term loan payable
300,000
—
Notes payable, net of unamortized discount and unamortized debt costs
4,474,123
4,472,324
Accrued interest payable
72,320
40,557
Other liabilities
100,579
110,072
Total liabilities
5,027,022
4,971,053
Equity:
Stockholders' equity:
Common stock, $0.01 par value. Authorized 375,000,000 shares; 190,249,614 and 189,937,404 shares issued and outstanding, respectively
1,904
1,901
Capital in excess of par value
5,300,076
5,295,434
Accumulated deficit
(902,263
)
(882,712
Accumulated other comprehensive income (loss)
(4,448
(6,321
Total equity
4,395,269
4,408,302
Total liabilities and equity
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Quarter Ended March 31,
2026
2025
Revenues:
Rental income
240,014
230,574
Interest and other income from real estate transactions
410
280
240,424
230,854
Operating expenses:
General and administrative
14,106
13,008
Real estate
9,799
9,375
Depreciation and amortization
70,797
64,617
Leasing transaction costs
144
130
Impairment losses – real estate, net of recoveries
10,680
1,512
Retirement and severance costs
434
2,173
105,960
90,815
Gain on disposition of real estate
12,185
3,813
Earnings from operations
146,649
143,852
Other expenses (revenues):
Interest and other income
(28
(329
Interest expense
52,726
47,723
52,698
47,394
Net earnings
93,951
96,458
Net earnings per share:
Basic
0.50
0.52
Diluted
0.51
Weighted average shares outstanding:
189,031,812
186,855,097
189,458,620
187,080,084
Other comprehensive income:
Amortization of interest rate hedges
75
460
Fair value of forward starting swaps
1,798
(292
Total comprehensive income
95,824
96,626
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Quarter Ended March 31, 2026
CommonStock
Capital in Excess of Par Value
AccumulatedDeficit
AccumulatedOtherComprehensiveIncome (Loss)
TotalEquity
Balances at December 31, 2025
Dividends declared and paid:
$0.600 per share of common stock
648
(113,502
(112,854
Issuance of common stock:
8,916 shares – director compensation
265
1,178 shares – stock purchase plan
51
294,155 restricted shares – net of forfeitures
(3
Stock issuance costs
(100
Amortization of deferred compensation
3,781
Fair value of forward starting swap
Balances at March 31, 2026
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY – CONTINUED
Quarter Ended March 31, 2025
Total Equity
Balances at December 31, 2024
1,877
5,197,644
(829,287
(7,959
4,362,275
$0.580 per share of common stock
605
(108,335
(107,730
8,941 shares – director compensation
268
1,246 shares – stock purchase plan
50
390,929 restricted shares – net of forfeitures
4
(4
(85
5,083
Balances at March 31, 2025
1,881
5,203,561
(841,164
(7,791
4,356,487
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Cash flows from operating activities:
Adjustments to reconcile net earnings to net cash provided by operating activities:
Amortization of notes payable discount
967
791
Amortization of debt costs
1,752
1,466
(12,185
(3,813
Performance incentive plan expense
4,323
5,637
Performance incentive plan payment
(487
(1,702
Change in operating assets and liabilities, net of assets acquired and liabilities assumed:
Increase in receivables
(335
(602
Increase in accrued rental income
(1,291
(509
Decrease (increase) in other assets
(792
1,326
Increase in accrued interest payable
31,763
44,999
Decrease in other liabilities
(12,030
(7,392
Other
(157
Net cash provided by operating activities
187,031
203,282
Cash flows from investing activities:
Proceeds from the disposition of real estate
36,257
15,935
Additions to real estate
(142,274
(231,508
Principal payments received on mortgages and notes receivable
(347
(189
Net cash used in investing activities
(106,364
(215,302
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED
Cash flows from financing activities:
Proceeds from line of credit payable
149,000
249,500
Repayment of line of credit payable
(417,100
(133,200
Proceeds from term loan payable
Payment of debt issuance costs
(89
(53
Proceeds from issuance of common stock
699
655
Payment of common stock dividends
Net cash provided by (used in) financing activities
(81,092
8,482
Net decrease in cash, cash equivalents and restricted cash(1)
(425
(3,538
Cash, cash equivalents and restricted cash at beginning of period(1)
5,822
9,062
Cash, cash equivalents and restricted cash at end of period(1)
5,397
5,524
Supplemental disclosure of cash flow information:
Interest paid, net of amount capitalized
18,749
928
Supplemental disclosure of noncash investing and financing activities:
Change in other comprehensive income
1,873
168
Change in work in progress accrual
3,120
885
(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 March 31, 2026, December 31, 2025 and March 31, 2025, NNN had restricted cash of $827, $776 and $427, respectively.
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2026
(Unaudited)
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 its consolidated subsidiaries. NNN may elect to treat certain of its subsidiaries as taxable REIT subsidiaries.
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").
Property Portfolio:
Total Properties
3,711
Gross leasable area (square feet) (unaudited)
39,597,000
States
Weighted average remaining lease term (years)
10.1
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 9 – 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 ended March 31, 2026, may not be indicative of the results that may be expected for the year ending December 31, 2026. Amounts as of December 31, 2025, 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, 2025.
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 completed and available for occupancy. NNN recorded $580,000 and $921,000 in capitalized interest during the development period for the quarters ended March 31, 2026 and 2025, respectively.
Purchase Accounting for Acquisition of Real Estate. In accordance with the FASB ASC Topic 805, 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 in-place leases and the value of in-place leases, as applicable, based on their respective fair values.
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 predominantly 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. Substantially all the leases on the Property Portfolio are 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 typically 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.
8
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 $66,000 of outstanding receivables and related accrued rent during the quarter ended March 31, 2026, and reclassified certain tenants as cash basis for accounting purposes. No such outstanding receivables and related accrued rent were written off during the quarter ended March 31, 2025.
The following table summarizes those tenants classified as cash basis for accounting purposes as of March 31:
Number of tenants
14
10
Cash basis tenants as a percent of:
1.7
%
1.5
Total Annualized Base Rent ("ABR")(1)
4.1
(2)
3.4
(3)
Total gross leasable area
6.9
3.7
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:
$934,612,000 as of March 31, 2026.
$874,301,000 as of March 31, 2025.
During the quarters ended March 31, 2026 and 2025, NNN recognized $9,570,000 and $7,732,000, respectively, of rental income from certain tenants for periods following their classification to cash basis for accounting purposes.
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 March 31, 2026 and December 31, 2025, NNN had recorded real estate held for sale of $19,345,000 (13 properties) and $21,198,000 (10 properties), respectively, in real estate portfolio on the Condensed Consolidated Balance Sheets. Seven of the properties classified as held for sale as of December 31, 2025 were sold during the quarter ended March 31, 2026.
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.
9
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 under contract and/or 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 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 predominantly leased to tenants under long-term net leases and held for investment. In most cases, NNN's Property leases provide for initial terms of 10 to 20 years, with cash flows provided over the entire term.
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 $827,000 and $776,000 in restricted cash and cash held in escrow as of March 31, 2026 and December 31, 2025, 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 had costs of $36,199,000 and $36,146,000, included in debt costs on the Condensed Consolidated Balance Sheets, as of March 31, 2026 and December 31, 2025, respectively, net of accumulated amortization of $30,623,000 and $29,898,000, respectively.
Debt Costs – Term Loan. Debt costs incurred in connection with NNN's $300,000,000 senior unsecured term loan 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 had costs of $2,465,000 and $2,429,000, included in debt costs on the Condensed Consolidated Balance Sheets, as of March 31, 2026 and December 31, 2025, respectively, net of accumulated amortization of $227,000 and $32,000, respectively.
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 $44,420,000, included in notes payable on the Condensed Consolidated Balance Sheets, as of March 31, 2026 and December 31, 2025, net of accumulated amortization of $14,582,000 and $13,750,000, respectively.
At-The-Market and Forward Equity Sales. The Company may sell shares of its common stock from time to time pursuant to an equity distribution agreement which was entered into with designated sales agents, and which established an at-the-market equity program ("ATM"). The ATM provides that in addition to the issuance and sale of common stock by NNN through a sales agent acting as a sales agent or directly to the sales agent acting as a principal for its own account at a price agreed upon at the time of sale, NNN may also enter into forward sale agreements with each of the forward purchasers or their respective affiliates.
The Company accounts for its forward sale agreements in accordance with FASB guidance applicable to financial instruments and derivatives and has concluded that the agreements do not meet the definition of liabilities, as they do not obligate the Company to repurchase its shares nor require the issuance of a variable number of shares with a predominantly fixed monetary value or a value that varies inversely with the Company’s common stock.
The Company evaluates the impact of its forward sale agreements on earnings per share in accordance with FASB ASC Topic 260, Earnings Per Share ("ASC 260"). Prior to settlement, the forward sale agreements are included in diluted earnings per share using the treasury stock method and are generally non-dilutive, except during periods in which the average market price of the Company’s common stock exceeds the adjusted forward sale price. Upon settlement of a forward sale agreement, if the Company elects physical settlement or net share settlement, the issuance of shares of common stock will result in dilution to earnings per share.
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.
Earnings Per Share. Earnings per share have been computed in accordance with ASC 260. 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):
Basic and Diluted Earnings:
Less: Earnings allocated to unvested restricted shares
(163
(167
Net earnings used in basic and diluted earnings per share
93,788
96,291
Basic and Diluted Weighted Average Shares Outstanding:
Weighted average shares outstanding
190,020,317
187,761,527
Less: Unvested restricted shares
(271,459
(288,296
Less: Unvested contingent restricted shares
(717,046
(618,134
Weighted average shares outstanding used in basic earnings per share
Other dilutive securities
426,808
224,987
Weighted average shares outstanding used in diluted earnings per share
The potential dilutive shares related to the forward sale agreements outstanding at March 31, 2026, were not included in the computation of earnings per share because their effects would be antidilutive.
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. NNN believes it has been organized as and its past and present operations qualify NNN 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.
11
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. 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:
Accumulated Other Comprehensive Income (Loss). The following table outlines the changes in accumulated other comprehensive income (loss) for the quarter ended March 31, 2026 (dollars in thousands):
Gain or Loss on Cash Flow Hedges(1)
Beginning balance, December 31, 2025
Other comprehensive income (loss)
Reclassifications from accumulated other comprehensive income to net earnings
Ending balance, March 31, 2026
Additional disclosure is included in "Note 7 – Derivatives".
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 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 2024-03"), 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.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets ("ASU 2025-05"), effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The amendments in this update provide all entities with a practical expedient, which allows entities to assume current conditions as of the balance sheet date do not change for the remaining life of the asset, in developing reasonable and supportable forecasts as part of estimating expected credit losses. In January 2026, NNN adopted the provisions of ASU 2025-05. The ASU had no impact on its current disclosures, and NNN anticipates it will have no material impact on its future disclosures.
12
In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements ("ASU 2025-09"), effective for annual and interim reporting periods beginning after December 15, 2026. The amendments in this update (i) expand the hedged risks permitted to be aggregated in a group of individual forecasted transactions in a cash flow hedge by changing the requirement to designate a group of individual forecasted transactions from having a shared risk exposure to having a similar risk exposure, (ii) provide a model to facilitate the application of cash flow hedge accounting to forecasted interest payments on variable-rate debt instruments with contractual terms that permit the borrower to change the interest rate index and interest rate tenor upon which interest is accrued, (iii) expand hedge accounting for forecasted purchases and sales of nonfinancial assets, (iv) improve generally accepted accounting principles by updating the hedge accounting guidance to accommodate differences in the loan and swap markets that developed after the cessation of the London Interbank Offered Rate, and (v) eliminate the recognition and presentation mismatch related to foreign-currency-denominated debt instrument both designed as the hedging instrument in a net investment hedge and designed as the hedged item in a fair value hedge of interest rate risk. NNN is currently evaluating the potential impact of the adoption of ASU 2025-09.
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.
13
Real Estate – Portfolio
Leases. At March 31, 2026, NNN's real estate portfolio had a weighted average remaining lease term of 10.1 years and consisted of 3,677 leases classified as operating leases and an additional three leases accounted for as direct financing leases.
The following is a summary of the structure of the leases in the Property Portfolio, although the specific terms of each lease can vary significantly. In most cases, 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 case 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):
Land and improvements(1)
3,138,543
3,100,444
Buildings and improvements
8,361,314
8,323,201
Leasehold interests
355
11,500,212
11,424,000
Less accumulated depreciation and amortization
(2,297,215
(2,248,856
9,202,997
9,175,144
Work in progress and improvements
57,151
42,019
Accounted for using the operating method
9,260,148
9,217,163
Accounted for using the direct financing method
1,135
1,181
Classified as held for sale(2)
19,345
21,198
Includes $39,335 and $24,523 in land for Properties under construction as of March 31, 2026 and December 31, 2025, respectively.
As of March 31, 2026, 13 Properties were classified as held for sale. Seven of the 10 properties classified as held for sale as of December 31, 2025 were sold during the quarter ended March 31, 2026.
NNN recognized the following revenues in rental income (dollars in thousands):
Rental income from operating leases
233,571
224,056
Earned income from direct financing leases
82
114
Percentage rent
316
886
Rental revenues
233,969
225,056
Real estate expense reimbursement from tenants
6,045
5,518
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 quarters ended March 31, 2026 and 2025, NNN recognized $1,291,000 and $509,000, respectively, of net straight-line accrued rental income, net of reserves.
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):
Intangible lease assets (included in other assets):
Above-market in-place leases
14,055
14,051
Less: accumulated amortization
(11,249
(11,115
Above-market in-place leases, net
2,806
2,936
In-place leases
117,924
117,302
(84,238
(82,926
In-place leases, net
33,686
34,376
Intangible lease liabilities (included in other liabilities):
Below-market in-place leases
37,098
37,758
(26,894
(27,293
Below-market in-place leases, net
10,204
10,465
The amounts amortized as a net increase to rental income for above-market and below-market in-place leases for the quarters ended March 31, 2026 and 2025, were $126,000 and $93,000, respectively. The value of in-place leases amortized to expense for the quarters ended March 31, 2026 and 2025, was $1,365,000 and $1,388,000, respectively.
Real Estate – Dispositions
The following table summarizes the properties sold and the corresponding gain recognized on the disposition of properties (dollars in thousands):
# of SoldProperties
NetGain
25
15
Real Estate – Commitments
NNN has committed to fund construction on 24 Properties. The improvements on such Properties are estimated to be completed within 12 to 18 months. These construction commitments, at March 31, 2026, are outlined in the table below (dollars in thousands):
Total commitment(1)
170,694
Less amount funded
(96,486
Remaining commitment
74,208
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):
Total real estate impairments, net of recoveries
Number of Properties:
Vacant
Occupied
The valuation of impaired assets, including assets held for sale, 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.
NNN's $1,200,000,000 unsecured revolving credit facility (the "Credit Facility") had a weighted average outstanding balance of $132,576,000 and a weighted average interest rate of 4.45% during the quarter ended March 31, 2026. In December 2025, NNN entered into an amendment to the Credit Facility to remove the 10 basis point Secured Overnight Financing Rate ("SOFR") credit spread adjustment. As amended in December 2025, the Credit Facility bears interest at SOFR plus an applicable margin of 77.5 basis points; however, such applicable margin may change pursuant to a tiered margin 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, NNN incurred loan costs of $36,199,000 which are included in debt costs on the Condensed Consolidated Balance Sheets. As of March 31, 2026, there was $80,000,000 outstanding and $1,120,000,000 available for future borrowings under the Credit Facility, and NNN was in compliance with each of the Credit Facility financial covenants.
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Information related to NNN's notes payable is included in NNN's Annual Report on Form 10-K for the year ended December 31, 2025. There were no issuances or repayments of long-term fixed rate debt during the quarter ended March 31, 2026. At March 31, 2026, NNN was in compliance with each of the 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. 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.
At-The-Market Offerings. 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 March 31, 2026
6,579,993
During the quarter ended March 31, 2026, NNN sold 1,667,232 shares of common stock pursuant to forward sale agreements under the Company's ATM at a weighted average price of $44.93 per share. NNN may physically settle the forward sale agreements (by the delivery of shares of common stock) and receive proceeds from the sale of those shares on one or more forward settlement dates, which shall occur no later than February 2027.
There were no issuances of common stock pursuant to NNN's ATM for the quarters ended March 31, 2026 and 2025.
As of March 31, 2026, the Company had 1,667,232 shares of unsettled common stock issued pursuant to forward sale agreements.
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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):
Shares of common stock
16,321
16,776
Net proceeds
Dividends. The following table outlines the dividends declared and paid for NNN's common stock (dollars in thousands, except per share data):
Dividends
113,502
108,335
Per share
0.600
0.580
In April 2026, NNN declared a dividend of $0.600 per share, which is payable in May 2026 to its common stockholders of record as of April 30, 2026.
Additional information related to NNN's derivatives is included in NNN's Annual Report on Form 10-K for the year ended December 31, 2025.
As of March 31, 2026, NNN had the following outstanding interest rate derivatives that were designated as cash flow hedges to hedge the risk of changes in the interest-related cash outflows associated with the Term Loan (dollars in thousands):
# of Swap Agreements
Floating Rate Rate Received
Aggregate Notional Amount
Fixed Rate Paid(1)
Estimated Fair Value(2)
Effective Date
Maturity Date
Two(3)
SOFR
200,000
3.22%
1,599
January 15, 2026
January 15, 2029
One(3)
100,000
3.32%
556
February 13, 2026
February 15, 2029
Total
3.25%
2,155
Fixed rate paid is average of strike price for the associated hedges.
Included in other assets and other comprehensive income on the Condensed Consolidated Balance Sheets (see "Note 8 – Fair value of Financial Instruments").
No hedge ineffectiveness was recognized during the quarter ended March 31, 2026.
As of March 31, 2026, $6,603,000 remained in accumulated other comprehensive income (loss) related to NNN's previously terminated interest rate hedges. During the quarters ended March 31, 2026 and 2025, NNN reclassified $75,000 and $460,000, respectively, out of accumulated other comprehensive income (loss) as an increase in interest expense. Over the next 12 months, NNN estimates that an additional $766,000 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 nor does NNN currently have any derivatives which are not designated as hedges.
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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.
Term Loan Payable. NNN believes the carrying value of its Term Loan approximates fair value based upon its nature, terms and variable interest rate.
Notes Payable. At March 31, 2026 and December 31, 2025, the fair value of NNN's notes payable excluding unamortized discount and debt costs were $4,067,139,000 and $4,124,161,000, 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.
Derivative Financial Instruments. At March 31, 2026, the aggregate carrying value of NNN's outstanding derivative financial instruments was $2,155,000 (see "Note 7 – Derivatives") based on a Level 2 valuation to approximate fair value using widely accepted valuation techniques with observable market inputs. The valuation represents the theoretical net cost to cash settle the transaction as of March 31, 2026, including a credit valuation adjustment ("CVA") as required by ASC 820 to reflect counterparty credit risk and any credit enhancements. NNN determined the CVA's overall impact to the derivative valuation was insignificant and classified its derivative financial instrument as Level 2 within the fair value reporting hierarchy.
Note 9 – 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 predominantly 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."
19
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, 2025 ("2025 Annual Report"). The term "NNN" or the "Company" refers to NNN REIT, Inc. and 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:
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 acquires, owns, invests in and develops high-quality properties that are leased primarily to tenants under long-term, net leases, with minimal ongoing capital expenditures and are primarily held for investment ("Properties" or "Property Portfolio" or individually a "Property").
As of March 31, 2026, NNN owned 3,711 Properties in all 50 states, the District of Columbia and Puerto Rico, with an aggregate gross leasable area of approximately 39,597,000 square feet and a weighted average remaining lease term of 10.1 years. As of March 31, 2026, 98.6 percent of the Properties were leased.
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.
NNN continues to maintain its diversification by tenant, line of trade and geography. NNN's top line of trade concentrations are the automotive service (18.7%), convenience stores (16.3%) and restaurants (including full and limited service) (14.4%) sectors. NNN's management believes these sectors present attractive investment opportunities. The Property Portfolio is geographically concentrated in regions of historically above-average population growth, including the southeastern (25.3%) and southern (24.4%) United States. 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.
Additional information related to NNN and the Property Portfolio is included in NNN's 2025 Annual Report.
Results of Operations
Property Analysis
General. The following table summarizes the Property Portfolio:
December 31, 2025
March 31, 2025
Properties Owned:
Number
3,692
3,641
Total gross leasable area (square feet)
39,578,000
37,311,000
Properties:
Leased and unimproved land
3,658
3,628
3,558
Percent of Properties – leased and unimproved land
98.6
98.3
97.7
10.2
9.9
Total gross leasable area (square feet) – leased
39,051,000
38,955,000
36,331,000
934,612,000
928,081,000
874,301,000
ABR represents the monthly cash base rent for all leases in place as of the end of the period multiplied by 12.
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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
1.
Automotive service
18.7%
18.6%
18.2%
2.
Convenience stores
16.3%
16.8%
3.
Restaurants – limited service
8.0%
7.9%
8.3%
4.
Entertainment
7.1%
7.2%
5.
Dealerships
6.4%
6.6%
5.7%
6.
Restaurants – full service
7.
Health and fitness
3.9%
4.0%
8.
Theaters
3.6%
3.7%
9.
Automotive parts
3.3%
3.2%
2.4%
10.
Equipment rental
3.0%
3.1%
11.
Wholesale clubs
2.2%
2.3%
12.
Drug stores
1.9%
2.0%
2.1%
13.
Home improvement
14.
Medical service providers
1.8%
15.
Early childhood education
1.4%
1.1%
16.
Pet supplies and services
1.7%
1.6%
17.
Discount retail
1.3%
18.
Furniture
1.2%
19.
Travel plazas
20.
Automobile auctions, wholesale
1.0%
100.0%
ABR
Property Acquisitions. The following table summarizes the Property acquisitions (dollars in thousands):
Acquisitions:
Number of Properties
41
Gross leasable area (square feet)(1)
304,000
831,000
Weighted average cap rate(2)
7.5
7.4
Total dollars invested(3)
145,394
232,393
Includes additional square footage from completed construction on existing Properties.
Calculated as the initial cash annual base rent divided by the total purchase price of the Properties.
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.
22
Property Dispositions. The following table summarizes the properties sold by NNN (dollars in thousands):
Number of properties(1)
Gross leasable area (square feet)
246,000
72,000
Net sales proceeds
35,827
15,839
Net gain on disposition of real estate
7.2
4.9
Sold 16 vacant and nine income producing properties during the quarter ended March 31, 2026 compared to one vacant and nine income producing properties sold during the quarter ended March 31, 2025.
Calculated as the cash annual base rent divided by the total gross proceeds received for the occupied 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):
Change
Rental Revenues(1)
8,913
Real estate expenses reimbursed from tenants(2)
527
9,440
Total revenues
9,570
Includes rental income from operating leases, earned income from direct financing leases and percentage rent ("Rental Revenues").
See "Results of Operations – Analysis of Expenses – Real Estate" for additional information.
Rental Income. Rental income increased for the quarter ended March 31, 2026, compared to the same period in 2025. The increase is primarily due to the Rental Revenues from NNN's recent Property acquisitions (see "Results of Operations – Property Analysis – Property Acquisitions").
23
Analysis of Expenses
The following table summarizes NNN's expenses (dollars in thousands):
1,098
Real estate:
Reimbursed from tenants
Non-reimbursed
3,754
3,857
(103
Total real estate
424
6,180
9,168
(1,739
Total operating expenses
15,145
301
5,003
Total other expenses
5,304
As a percentage of total revenues:
5.9
5.6
Non-reimbursed real estate
1.6
General and Administrative. General and administrative expenses increased in amount and as a percentage of total revenues for the quarter ended March 31, 2026, as compared to the same period in 2025. The increase was primarily attributable to an increase in incentive compensation costs.
Real Estate. Total real estate expenses increased for the quarter ended March 31, 2026, compared to the same period in 2025. NNN focuses on non-reimbursed real estate expenses (total real estate expenses, net of reimbursements from tenants). In most cases, these expenses are 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 decreased in amount and as a percentage of total revenues for the quarter ended March 31, 2026, compared to the same period in 2025 primarily due a decrease in the number of vacant properties.
Depreciation and Amortization. Depreciation and amortization expenses increased for the quarter ended March 31, 2026, compared to the same period in 2025. The increase was primarily attributable to the increase in NNN's Property Portfolio from recent acquisitions and was partially offset by recent dispositions (see "Results of Operations – Property Analysis").
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 quarter ended March 31, 2026 and 2025, 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. In March 2025, the former Executive Vice President, Chief Financial Officer, Assistant Secretary and Treasurer retired from employment. During the quarters ended March 31, 2026 and 2025, NNN recorded retirement and severance costs primarily in connection with this retirement and transition agreement.
24
Interest Expense. Interest expense increased for the quarter ended March 31, 2026, compared to the same period in 2025. The following represents the primary changes in fixed rate long-term debt that impacted interest expense:
In addition to the transactions outlined above, the following represents the primary changes in variable rate long-term debt that impacted interest expense:
Liquidity and Capital Resources
NNN's demand for funds has been and will continue to be 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 ratings, 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 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 the Credit Facility, proceeds from the settlement of outstanding forward sale agreements or proceeds from the sale of Properties. As of March 31, 2026, NNN had $5,397,000 of cash, cash equivalents and restricted cash or cash held in escrow and $1,120,000,000 available for future borrowings under the Credit Facility. In addition, NNN had estimated net proceeds of $73,966,000 available from outstanding unsettled forward sale agreements. NNN may also fund liquidity requirements with new debt or equity issuances. NNN also has the ability to limit future property acquisitions and strategically increase property dispositions. NNN expects these liquidity sources 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 $5,397,000 of cash, cash equivalents and restricted cash, of which $827,000 was restricted cash or cash held in escrow at March 31, 2026. The table below summarizes NNN's cash flows (dollars in thousands):
Cash, cash equivalents and restricted cash:
Provided by operating activities
Used in investing activities
Provided by (used in) financing activities
Decrease in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at the beginning of the period
Cash, cash equivalents and restricted cash at the end of the period
Cash flow activities include:
Operating Activities. Cash provided by operating activities represents cash received 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 quarters ended March 31, 2026 and 2025, is 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 largely 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 quarter ended March 31, 2026, included the following significant transactions:
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 March 31, 2026 (see "Capital Structure") (dollars in thousands):
Date of Obligation
2027
2028
2029
2030
Thereafter
Long-term debt(1)
4,550,000
350,000
400,000
3,000,000
Long-term debt – interest(2)
1,957,819
138,413
169,733
155,067
141,450
134,367
1,218,789
Term Loan
Term Loan – interest(3)
35,335
9,217
12,291
1,536
Credit Facility
Total contractual cash obligations
6,923,154
497,630
582,024
647,358
442,986
534,367
4,218,789
Includes only principal amounts outstanding under notes payable and excludes unamortized note discounts and debt costs.
Interest calculation on notes payable based on stated rate of the principal amount.
Interest calculation on Term Loan based on all-in fixed rate of 4.10% (see "Capital Structure – Term Loan").
Property Construction. NNN has committed to fund construction on 24 Properties. The improvements on such Properties are estimated to be completed within 12 to 18 months. These construction commitments, at March 31, 2026, are outlined in the table below (dollars in thousands):
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.
26
Properties. In most cases, 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 March 31, 2026, NNN owned 53 vacant, un-leased Properties which accounted for less than two percent of total Properties and of aggregate gross leasable area held in the Property Portfolio.
Additionally, as of April 27, 2026, NNN had no tenants currently in bankruptcy under Chapter 11 of the U.S. Bankruptcy Code.
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):
Capital Structure
NNN has used, and expects to use in the future, cash and various forms of debt and equity securities 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):
Percentageof Total
6.2
Notes payable
92.2
92.8
Total debt outstanding
4,854,123
100.0
4,820,424
27
Line of Credit Payable. NNN's $1,200,000,000 unsecured revolving credit facility (the "Credit Facility") had a weighted average outstanding balance of $132,576,000 and a weighted average interest rate of 4.45% during the quarter ended March 31, 2026. In December 2025, NNN entered into an amendment to the Credit Facility to remove the 10 basis point Secured Overnight Financing Rate ("SOFR") credit spread adjustment. As amended in December 2025, the Credit Facility bears interest at SOFR plus an applicable margin of 77.5 basis points; however, such applicable margin may change pursuant to a tiered margin 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, NNN incurred loan costs of $36,199,000 which are included in debt costs on the Condensed Consolidated Balance Sheets. As of March 31, 2026, there was $80,000,000 outstanding and $1,120,000,000 was available for future borrowings under the Credit Facility, and NNN was in compliance with each of the Credit Facility financial covenants.
Term Loan. In December 2025, NNN entered into the Term Loan. The Term Loan has a six-month delayed draw commitment period and a $300,000,000 capacity with an accordion option to increase the aggregate facility size up to $500,000,000. The Term Loan matures in February 2029, unless the Company exercises its options to extend maturity to February 2031. The Term Loan bears interest at SOFR plus the applicable margin of 85 basis points; however, such interest rate may change pursuant to a tiered margin structure based on NNN's debt rating.
To hedge the risk of changes in forecasted interest payments on the Term Loan, NNN entered into three forward starting swaps which exchange variable interest rate on the Term Loan of SOFR indexed debt to a weighted average interest rate of 3.25%. As of March 31, 2026, NNN had the following outstanding interest rate derivatives that were designated as cash flow hedges (dollars in thousands):
During the quarter ended March 31, 2026, the Term Loan had a weighted average outstanding balance of $222,222,000 and an all-in fixed interest rate of 4.10%, inclusive of the outstanding swaps and the applicable margin. In connection with the Term Loan, NNN incurred loan costs of $2,465,000 which are included in debt costs on the Condensed Consolidated Balance Sheet. As of March 31, 2026, there was $300,000,000 outstanding, and NNN was in compliance with each of the Term Loan 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.
28
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)
NetPrice
StatedRate
EffectiveRate(3)
2026(4)
December 2016
3,860
346,140
3.600%
3.733%
December 2026(5)(6)
2027(4)
September 2017
1,628
398,372
3.500%
3.548%
October 2027(5)
2028(4)
September 2018
2,848
397,152
4.300%
4.388%
October 2028(5)
2030(4)
March 2020
1,288
398,712
2.500%
2.536%
April 2030(5)
2031(4)
July 2025
500,000
4,090
495,910
4.600%
4.766%
February 2031(5)
2033
11,620
488,380
5.600%
5.905%
October 2033
2034
May 2024
6,160
493,840
5.500%
5.662%
June 2034
2048
4,239
295,761
4.800%
4.890%
October 2048
2050
6,066
293,934
3.100%
3.205%
April 2050
2051
March 2021
450,000
8,406
441,594
3.602%
April 2051
2052(4)
September 2021
10,422
439,578
3.000%
3.118%
April 2052
The proceeds from each note issuance were used to (i) pay down the outstanding balance on the 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.
The note discounts are amortized to interest expense over the respective term of each debt obligation using the effective interest method.
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 $2,050,000.
(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.
In connection with the outstanding note offerings, NNN incurred debt issuance costs totaling $44,420,000 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 March 31, 2026, NNN was in compliance with those covenants.
NNN does not use derivatives for trading or speculative purposes or currently have any derivatives that are not designated as hedges.
29
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:
As of March 31, 2026, the Company had 1,667,232 shares of common stock subject to outstanding forward sale agreements, which upon settlement, are anticipated to raise net proceeds of approximately $74,000,000. Net proceeds include the impact of forward price adjustments through March 31, 2026.
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):
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 2025 Annual Report. NNN has not made any material changes to these policies during the periods covered by this Quarterly Report on Form 10-Q.
30
NNN is exposed to interest rate risk primarily as a result of its variable rate Credit Facility and Term Loan 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 March 31, 2026, NNN's variable rate Credit Facility had $80,000,000 outstanding and a weighted average outstanding balance of $132,576,000 with a weighted average interest rate of 4.45% for the quarter ended March 31, 2026 compared to a weighted average outstanding balance of $70,342,000 with a weighted average interest rate of 5.21% for the same period in 2025.
As of March 31, 2026, the Term Loan had an outstanding balance of $300,000,000. The Company previously entered into forward starting swaps, each effective during the quarter ended March 31, 2026, with a total notional value of $300,000,000. The swaps exchange the variable interest rate SOFR component on the Term Loan to a weighted average fixed interest rate of 3.25%.
During the quarter ended March 31, 2026, the Term Loan had a weighted average outstanding balance of $222,222,000 and an all-in fixed interest rate of 4.10%, inclusive of the swaps and the applicable margin. As of March 31, 2026, the interest rate swaps were valued as an asset of approximately $2,155,000.
The table below summarizes NNN's market risks associated with its outstanding debt obligations as of March 31, 2026, detailing principal payments and related interest rates by maturity year. The table incorporates only debt obligations that existed as of March 31, 2026, and it does not account for future obligations and therefore has limited predictive value. Actual realized gains or losses from interest rate fluctuations will depend on future exposures, interest rates and NNN's hedging strategies. If interest rates on NNN's variable rate debt increased by one percent, NNN's interest expense would have increased by less than two percent for the quarter ended March 31, 2026.
Debt Obligations(1) (dollars in thousands)
Unsecured Debt(2)
Debt Obligation
Weighted Average Interest Rate
Weighted AverageInterestRate
PrincipalDebtObligation
EffectiveInterestRate
3.73
3.55
4.45
4.39
4.10
2.54
4.54
4.20
Fair Value:
4,067,139
4,124,161
NNN's unsecured debt obligations have a weighted average interest rate of 4.2% and a weighted average maturity of 10.5 years.
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.
SOFR component swapped to a weighted average fixed rate of 3.25% on $300,000 notional.
Weighted average effective interest rate for years after 2030.
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 Officer and Chief Technology Officer ("NNN's Chief Officers"), of the effectiveness as of March 31, 2026, 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.
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 in NNN's Annual Report on Form 10-K for the year ended December 31, 2025.
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.
31.
Section 302 Certifications(1)
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.
Section 906 Certifications(1)
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
101.
Interactive Data File
101.1
The following materials from the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 2026, 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.
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.
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.
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 30th day of April, 2026.
By:
/s/ Stephen A. Horn, Jr.
Stephen A. Horn, Jr.
President, Chief Executive Officer and Director
/s/ Vincent H. Chao
Vincent H. Chao
Executive Vice President and Chief Financial Officer