NNN REIT, Inc.

are on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Steve Horn, Chief Executive Officer of NNN REIT, Inc. Sir, the floor is yours.

Thank you, Matthew. Good morning, and welcome to NNN's second quarter 2025 earnings call. Joining me today on the call, Chief Financial Officer, Ben Chow. As outlined in the morning's press release, NNN continued to deliver strong performance in the first half of 2025. Notably, we've improved our balance sheet flexibility following capital markets activity with a sector-leading average debt maturity of 11 years, solid acquisitions driven by our tenant relationships, and we published the third annual corporate sustainability report. These results and actions position us well to continue enhancing shareholder value as we enter the second half of the year and beyond. Also, as usual, we always have to mention the dividend. In July, we announced a 3.4% increase in our common stock dividend, payable August 15th. This marks our 36th consecutive year of annual dividend increases, a milestone that places us among very few, less than 80, US public companies, and only two other REITs to have achieved such a track record. Before we get into the operational performance and marketing conditions, I'd like to touch on a few key recent events. First, I'm thrilled to welcome Mr. Josh Lewis to the Executive Leadership Team as our new Chief Investment Officer. Josh has been with the company since 2008 and has played a pivotal role from day one. Known for his prolific deal-making ability and deep market relationships, Josh ensures that shareholder capital is deployed towards the most compelling, risk-adjusted opportunities. I'm fully confident we have the right person focused every day on driving long-term value for our shareholders. On a capital markets front, we successfully completed 500 million five-year unsecured bond offerings with a 4.6 coupon. In true end-to-end fashion, the execution and timing of the deal in today's market environment were exceptional. More importantly, the transaction positions us strongly to continue executing our strategy moving forward. Given our continued strong performance, we are also pleased to announce an increase in our 2025 guidance for core FFO per share. now expecting to range between 334 and 339. This update reflects the consistency of our multi-year growth strategy and the discipline with which we pursue long-term shareholder value. Turning to the highlights of NNN's second quarter financial results, our portfolio consisting of approximately 3,663 freestanding single-tenant properties, including 410 tenants across all 50 states, is performing well. Our leasing and asset management teams are operating at a high level. During the quarter, we renewed 17 of 20 leases. Those renewals aligned with our long-term historical trend of 85%, give or take, while achieving rental rates 108 above prior rent. Additionally, the team successfully leased seven properties to new tenants at rates 105% above prior rents, reflecting strong execution and ongoing demand for our assets. As we sit here today, I feel good about the overall health of the portfolio. There isn't a single 10 that currently gives me concerns keeping me up at night. We've had ongoing discussions with analysts and investors over many quarters regarding at-home, which finally officially filed for bankruptcy this past June. Regarding our exposure, none of our 11 properties were included on the initial closure list. Additionally, at-home remains current on all rent for all 11 locations post-filing. We feel positive about the long-term prospects for these assets as the company works through the restructuring. Acquisitions during the quarter, we invested just over $230 million in 45 new properties, achieving an initial cap rate of 7.4 and an average lease term of more than 17 years. Notably, eight of the 11 closings this quarter were with existing relationships, partners whom we do repeat business. For the first half of 2025, we invested $460 million across 127 properties, achieving an initial cap rate of 7.4 and an average lease term of over 18 years. Based on our strong transaction volume year-to-date, the robust pipeline of assets currently under LOI or in contract, the high level of activity across our acquisition team, we have raised the midpoint for our full-year acquisition volume to $650 million. As one of the original net-lease companies in the public markets, we have successfully operated through a wide range of economic and competitive cycles. While private capital has increasingly entered the space, raising competition, particularly for large portfolio transactions, we have consistently demonstrated our ability to execute in a highly competitive environment. We remain committed to a disciplined and thoughtful underwriting approach while continuing to emphasize acquisition volume through sale-leaseback transactions with our long-standing relationships. During the second quarter, we sold 23 properties, generating over 50 million in proceeds to be redeployed into new acquisitions. Year-to-date dispositions have reached 33 properties, including 14 vacant assets, raising over 65 million in proceeds. Importantly, the income-producing properties sold were not considered the gems of our portfolio, and we sold at approximately 170 basis points below our investing cash cap rate of 7.4%. This reinforces the strength of our underwriting and our ability to extract value from the underperformer holdings. Well, the primary focus remains on releasing vacancies. Where our leasing team continues to deliver strong performance, we will continue to dispose of underperforming assets when there is no clear path to generating stable rental income within a reasonable timeframe. This disciplined approach supports portfolio optimization and enhances long-term shareholder value. Our balance sheet remains one of the strongest in the sector, supported by the average debt maturity of over 11 years I mentioned earlier. With nearly $1.5 billion in available liquidity, we are well positioned to fully fund our 2025 acquisition targets and maintain flexibility for additional opportunities. The financial strength provides us with a significant competitive advantage as we continue to execute our growth strategy without the immediate need for external capital. With that, I'll turn the call over to Vin. He'll walk through our quarterly results and provide more detail on the updated guidance.

Thank you, Steve. Let's start with our customary cautionary statements. During this call, we will make certain statements that may be considered forward-looking statements under federal securities laws. The company's actual or future results may differ significantly from the matters discussed in these forward-looking statements, and we may not release revisions to these forward-looking statements to reflect changes after the statements are made. Factors and risks that could cause actual results to differ from expectations are disclosed in greater detail in the company's filings with the SEC and in this morning's press release. Now onto results. This morning we reported core FFO of 84 cents per share and AFFO of 85 cents per share for the second quarter of 2025, each up 1.2% over the prior year period. Annualized base rent was $894 million at the end of the quarter, an increase of almost 7% year-over-year. Our NOI margin was 98% for the quarter, while G&A as a percentage of total revenues and as a percentage of NOI was about 5%. Cash G&A was 3.7% of total revenues. AFO per share for the quarter was slightly ahead of our expectations, driven primarily by lower-than-planned bad debt. Free cash flow after dividend was about $50 million in the second quarter. Lease termination fees, as footnoted on page 8 of the release, totaled $2.2 million in the quarter, or about $0.01 per share. This quarter's fees were in line with our expectations and were primarily driven by the termination of an auto parts store and a full-service restaurant. The auto parts store is under contract for sale, and the restaurant has already been re-leased and rent commenced to another restaurant concept, highlighting our proactive portfolio management strategy. From a watchlist perspective, at home is the major news for the quarter, We have been flagging at-home as a risk for some time, and as we discussed on last quarter's call, we believe we have appropriately accounted for them in our outlook and expect the final resolution to be within our budget for the year. To reiterate what Steve said, none of our 11 stores were on the initial store closure list, and given the quality of our locations, we have already received inbound interest from high-credit retailers. Outside of at-home, there have been notable changes to the watch list. Turning to the balance sheet. Just after the quarter end, we significantly bolstered our liquidity and de-risked our capital requirements for the rest of the year by closing on NNN's inaugural five-year, $500 million unsecured notes offering and an attractive 4.6% coupon. While this offering was earlier and larger than we were originally planning, given the positive market backdrop and strong investor demand, we decided to move forward with the deal. Pro forma for the offering, which closed on July 1st, we had close to $1.5 billion of liquidity no floating rate debt, and no secured debt. Our debt duration remained a sector-leading 11 years, even after accounting for the new issuance. Our balance sheet is a source of strength, and we will continue to look for ways to utilize this competitive advantage to support growth while protecting downside risk. Also, given the positive momentum in the stock that we experienced at the end of the quarter, we issued 254,000 shares at an average price of just over $43 per share. primarily through our ATM program, raising roughly $11 million in gross proceeds. We will remain opportunistic in the equity markets and issue if and when we believe we can achieve an appropriate cost of equity relative to our deployment opportunities. On July 15th, we increased our quarterly dividend to $0.60 per share, up from $0.58 per share previously, which equates to an attractive 5.6% annualized dividend yield and a healthy 71% AFO payout ratio. As Steve mentioned, NNN has now raised its annual dividend for 36 consecutive years. The ability to grow the dividend through various economic cycles and black swan events is a true testament to the strength of NNN's platform and its strategy. I will conclude my opening remarks with some additional comments regarding our updated outlook. We are raising core FFO per share guidance to a new range of $3.34 to $3.39 and AFO per share to $3.40 to $3.45, each up one cent at the midpoint. This reflects our outperformance versus plan year to date, as well as updated assumptions over the balance of the year. We now expect to complete 600 to 700 million of acquisitions, up 100 million from our initial expectation. We are also increasing our disposition outlook by 35 million to a new range of 120 to 150 million. And lastly, you will notice that we increased our net real estate expense forecast, which is the result of delays in the expected timing of the release of certain properties as we balance the impacts on near and long-term earnings. Despite this headwind, we are still in a position to raise overall earnings guidance for the year. From a bad debt perspective, we continue to embed 60 basis points of bad debt for the full year into our outlook, which includes about 15 basis points booked through the second quarter. As you update your models, there are a few other items to point out. As noted earlier, we booked $2.2 million of lease termination fees in the second quarter, which is well below the first quarter level of $8.2 million, but still above what I would consider a typical quarterly amount. Also this quarter, we took some non-cash write-offs of accrued rent and below-market rent related to at-home that in total added about $660,000 of income to core FFO, which should be excluded from your forward run rates. These non-cash items had no impact on reported AFFO. With that, I'll turn the call back over to Matthew for questions.