Financial Data and Key Metrics Changes - NNN reported core FFO of $0.85 per share and AFFO of $0.86 per share for Q3 2025, representing increases of 1.2% and 2.4% year-over-year respectively [10] - Annualized base rent reached $912 million at the end of the quarter, an increase of over 7% year-over-year [10] - The company's NOI margin was 98% for the quarter, with G&A as a percentage of total revenues at about 5% [11] Business Line Data and Key Metrics Changes - NNN closed 20 deals containing 57 assets for $283 million during the quarter, with an initial cap rate of 7.3% and an average lease duration of nearly 18 years [2][7] - The company executed a high renewal rate of 92% for leases, with rental rates at 108% above prior rents [6] - Seven new properties were leased to new tenants at rates of 124% of previous rents, indicating strong demand [6] Market Data and Key Metrics Changes - The company is increasing its 2025 acquisition volume guidance to a midpoint of $900 million, which would be an all-time high for NNN [3][15] - NNN's balance sheet remains strong with $1.4 billion in liquidity and an industry-leading average debt maturity of nearly 11 years [2][8] Company Strategy and Development Direction - NNN's strategy focuses on disciplined growth, proactive management, and optimizing its portfolio to drive sustainable growth and enhance shareholder value [2][8] - The company aims to resolve more than 75% of its vacant assets by the end of Q1 2026, positioning itself for future growth [5][6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving an occupancy rate exceeding 98% by year-end, despite temporary reductions due to legal disputes with tenants [5][6] - The company raised its guidance for core FFO per share to a range of $3.36-$3.40 and AFFO per share to $3.41-$3.45, reflecting year-to-date outperformance [15] Other Important Information - NNN has maintained a healthy 70% AFFO payout ratio with a quarterly dividend of $0.60, equating to a 5.6% annualized yield [14] - The company has proactively managed risks, including the successful resolution of the At Home bankruptcy, which significantly de-risked its capital structure [12][16] Q&A Session Summary Question: Could we get more color around the outsized interest income? - Management attributed the increase in interest income to a high cash balance and better-than-expected interest rates on short-term deposits [18] Question: What is the rationale behind using equity to fund acquisitions? - The company aims for a 60/40 mix of equity and debt for funding, and current market conditions allow for accretive acquisitions despite higher costs of capital [20][21] Question: Are you seeing increased competition impacting pricing? - Management acknowledged heightened competition but emphasized that NNN's long-standing tenant relationships allow for continued execution without significant pricing pressure [26] Question: What are the bad debt assumptions now compared to earlier in the year? - The company reduced its bad debt assumption for the full year to 25 basis points, down from 60 basis points, due to limited losses and successful tenant resolutions [30] Question: What is the expected occupancy trajectory going forward? - Management expects to resolve a significant number of vacancies by year-end, aiming for improved occupancy rates as leases are renewed and assets are disposed of [32][34] Question: How does the company plan to handle debt maturity in 2026? - NNN is exploring various options for refinancing, including bank loans and bond markets, to manage upcoming debt maturities effectively [59]

Financial Data and Key Metrics Changes - The company reported net income of $1.7 million or $0.02 per diluted share for the first quarter of 2025 [12] - Core FFO for the quarter was $24.6 million or $0.30 per diluted share, and AFFO was $26.2 million or $0.32 per diluted share, representing a 3.2% increase over the previous year [12] - Total recurring G&A increased by 5% year over year to $5.1 million, but represented 11% of total revenues compared to 13% in the prior year [12] Business Line Data and Key Metrics Changes - The company completed $90.7 million of gross investments at a blended cash yield of 7.7% during the quarter [4] - The weighted average lease term for these investments was 9.2 years, with 66% of ABR from investment grade and investment grade profile tenants [5] - The top five tenant concentration declined by 70 basis points to 28.2% of ABR, with the top tenant Dollar General reduced by 50 basis points to 8.1% of ABR [6] Market Data and Key Metrics Changes - The company ended the quarter with investments in 695 properties leased to 101 tenants across 26 industries in 45 states [5] - 71% of total ABR is leased to investment grade or investment grade profile tenants, with a weighted average lease term remaining of 9.7 years [6] Company Strategy and Development Direction - The company aims to reduce tenant concentrations and diversify its portfolio while maintaining a low leverage balance sheet [4] - The management is prepared to accelerate investment activity if there is a sustained improvement in the cost of equity [5] - The focus remains on necessity, discount, and service-oriented industries, which account for 88% of ABR, to weather economic downturns [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving diversification goals and noted strong demand for properties despite economic uncertainties [8] - The company has maintained zero credit losses during COVID and continues to perform well despite negative headlines in the industry [9] - Management remains cautious about growth, emphasizing that they will not sacrifice the balance sheet for growth [11] Other Important Information - The company declared a quarterly cash dividend of $0.21 per share, payable on June 16, with an AFFO payout ratio of 66% for the first quarter [16] - Adjusted net debt was reported at $724 million, with a weighted average interest rate of 4.57% [14] Q&A Session Summary Question: Update on appetite for pharmacy and dollar stores - Management expects to reduce exposures to Dollar General and Walgreens below 5% by year-end, with strong interest from institutional buyers [18][19] Question: Expectations for ratings upgrade - Preliminary discussions for a ratings upgrade are planned for the latter half of the year, with potential savings of at least 30 basis points on debt [21][24] Question: Clarification on net investment activity - Management indicated that they would not increase acquisitions unless there is a change in equity price, maintaining a capital recycling strategy [27][28] Question: Update on Big Lots asset in Maryland - There is significant interest from retailers, and management is negotiating attractive LOIs while waiting for market dynamics to play out [34][35] Question: Impact of Walgreens take-private on risk profile - Management believes the take-private will not change the risk profile of Walgreens assets, as the focus will be on retail operations [37] Question: Expectations for portfolio changes and cap rates - Dispositions are expected to occur at mid to high 6% cap rates, while acquisitions will likely remain above 7.5% [45][46] Question: New store opening appetite - Tenants are still in growth mode, but uncertainty due to tariffs is causing some hesitation in decision-making [72][75] Question: Impact of tariffs on tenants - Tariffs have created confusion but are not expected to significantly impact tenant credit quality [103] Question: New tenant relationships in acquisitions - The company added three new tenants in the quarter, indicating ongoing diversification efforts [107]