NNN REIT, Inc.

We also leased seven new properties to new tenants at rates of 124% of previous rents, demonstrating strong demand and execution. Our asset management team and leasing team have done a fantastic job getting deals done at a high level. Our tenant base remains stable, no material concerns at this time. Moving to acquisitions, during the quarter we invested $283,057,000 in new assets, an initial cap rate of 7.3. with an average lease duration nearly 18 years due to the sale-leaseback nature of our deals. The first nine months, we've invested $750 million in 184 properties. The cash cap rate is 7.4, which has NNN tracked into a record year of acquisition volume. As we've moved through the year, cap rates, for the most part, have stabilized, and I don't see any material way either up or down as we head into the fourth quarter and for the deals we were pricing for the first quarter of 2026. As one of the original net lease companies in the public markets, NNN has successfully operated through diverse economic cycles. While private capital has increased competition, especially for the large portfolios, our disciplined approach and long-standing tenant relationships enable us to consistently execute and deliver a highly competitive environment. During the quarter, we sold 23 properties, 11 of which were vacant, generating $41 million in proceeds for redeployment into income-producing properties. Also, the properties we sold were not core assets, and the sales were executed at approximately 145 basis points below our invested cash cap rate, demonstrating strong upfront underwriting and value extraction. Our balance sheet is one of the strongest in the sector. Our credit facility has plenty of capacity, as I mentioned earlier, with no balance outstanding, and we maintain the industry-best nearly 11 years' weighted debt maturity. NNN is well-positioned to fund our remaining 2025 acquisition guidance and beyond. With a robust pipeline, strong financial foundation, and proven leadership, NNN is well-positioned for continued success. We are committed to optimizing our portfolio, driving sustainable growth, and enhancing shareholder value. With that, let me turn the call over to Vin for more color and detail on our quarterly numbers and 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 law. The company's actual 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 remain. 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 releases. Now on to results. This morning we reported core FO 85 cents per share and AFO of 86 cents per share for the third quarter of 2025, up 1.2% and 2.4% respectively over the prior year periods. Annualized base rent was 912 million at the end of the quarter, an increase of over 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 3.6% of total revenues. AFO per share for the quarter was slightly ahead of our expectations, driven primarily by lower than planned bad debt and higher interest income on our cash balances. Free cash flow after dividend was about $48 million in the third quarter. Lease termination fees totaled $669,000 in the quarter, or less than half a penny per share. This line item has begun to normalize following the proactive monetization of the largest of our dark but paying tenants. From a watch list perspective, there have been no material changes since last quarter, and while we remain vigilant regarding potential issues, we do not currently view any of our watch list tenants as near-term concerns. At Home, which remains on the watch list, successfully exited bankruptcy with a significantly de-risked capital structure, reducing total debt by $1.5 billion through the bankruptcy process. As expected, At Home assumed all of our properties, reflecting the strength of our underwriting and the high quality of our real estate. Turning to the balance sheet. Our BAA1 balance sheet remains in great shape. At the end of the quarter, we had no floating rate debt, no encumbered assets, and $1.4 billion of liquidity, including full capacity on our $1.2 billion revolver, and almost $160 million of cash. Our leverage ticked down modestly to 5.6 times from 5.7 times last quarter, and our debt duration remained the highest in the net lease space at 10.7 years. As previously announced, on July 1st, we issued $500 million of 4.6% five-year unsecured notes, Additionally, during the quarter, we issued 1.7 million shares, primarily through our ATM, as part of our overall capital plan for the year. In total, we raised $72 million in gross proceeds at a weighted average price of $42.89 per share. Looking forward, we have a $400 million 4% coupon bond maturing later this month. With our July bond offering, we have pre-funded a portion of this pending maturity, and our forced balance sheet provides us with multiple options to refinance the balance. As I've stated on prior calls, our balance sheet is a source of strength, and we will look for ways to utilize this competitive advantage to support growth while protecting downside risk. On October 14th, we announced a $0.60 quarterly dividend payable on November 14th, which equates to an attractive 5.6% analyzed dividend yield and a healthy 70% to AFFO payout ratio. Notably, since going public in 1984, NNN has paid over $5 billion in total dividends. I will conclude my opening remarks with some additional comments regarding our updated outlook. We are raising core FO per share guidance to a new range of $3.36 to $3.40, and AF FO per share to $3.41 to $3.45. Increases reflect our year-to-date outperformance versus plan, as well as our updated assumptions over the balance of the year. We now expect to complete 850 to 950 million of acquisitions, up 250 million from a prior forecast, We expect fourth quarter acquisitions will be weighted towards the back half of the quarter. At the $900 million midpoint, our updated guidance represents a record level of annual investment volume for the company. We are also increasing our disposition outlook by $50 million to a new range of $170 to $200 million. As a reminder, we typically fund our investments with a leverage neutral 60-40 mix of equity and debt. From a credit loss perspective, we are now including 25 basis points of bad debt in our full year outlook. including about 20 basis points booked year-to-date. This is down from our prior 60 basis points projection given our limited losses thus far, the successful resolution of the at-home bankruptcy, and the collection of preposition rent from at-home. Lastly, there were no notable run rate adjustments to call out in the third quarter. With that, I'll turn the call back over to the operator for questions.

Certainly. The floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a moment while we vote for any questions. Your first question is coming from Jana Galan with Bank of America. Please pose your question. Your line is live.

Good morning. This is Dan Bion off for Jana. My first question is, Could we get a little bit more color around the outsized interest income as well as just what caused the increase at the low end of the range?

Yes. For interest income, really, we did do the debt offering on July 1st, and so we were sitting on a fairly high cash balance and interest rates on that. We were deploying that into money markets and other short-term interest-bearing deposits, and the rates were a little bit better than we had projected, so that was driving interest income. As far as the low end of the AFO guidance, I mean, we did outperform for the quarter, and I think the upside is really fueled by the acquisition volume that we've had so far, as well as what we expect for the balance of the year. You know, offset by a couple things, and so I want to point this out. I think I saw a couple notes suggesting the flow-through wasn't wasn't as much as expected, but if you look at our G&A guidance for the year, sort of the implied fourth quarter is a little bit higher than we had in the third quarter, so that's just naturally just the timing of G&A expenses, and so there's a little bit of higher G&A in the fourth quarter than the third quarter, and as we deploy that cash into acquisitions, we will see interest income come down as well, so those are two things that are sort of a little bit of a headwind for the fourth quarter.

Got it. Thank you. And just to follow up on the acquisition volume, just could we get a bit more on the rationale behind using equity to fund this, given at the current stock price? In your presentation, you showed that your cost of capital is around 7.3 year-to-date. It's around 7.4 cap rates. If we can get a little bit more on just the investment spread and the rationale behind that.

Yeah, look, I mean, I think when we think about how we deploy capital, we're looking to issue or fund it 60-40 equity and debt. And, you know, as far as the WAC, you know, I think what we put in the deck, really, we don't try to change that too often. That's probably higher than, you know, on a long-term debt perspective, that's higher than we would be issuing today. And so think about Where we could issue today and the potential for using, you know, a little bit shorter-term debt, just given how long our debt duration is, you know, we probably could be in the, you know, mid-sixes, maybe slightly higher than that on an all-in WAC. And so, you know, at that level, we can still fund 60-40 and, you know, be accretive on our acquisitions.

Got it. Thank you very much. We're certainly not looking to lever up, you know, to drive growth. Got it. Thank you.

Your next question is coming from Brad Heffern with RBC Capital Markets. Please pose your question. Your line is live.

Yeah. Morning, everyone. Maybe as a follow-on to that last question, I mean, tripling has never really been a volume story historically, and it doesn't seem like spreads are uniquely attractive right now. So I guess I'm just wondering why we're seeing record volumes. Is it a pull from your relationship tenants, or is there something that I'm missing on the cost of capital side that makes it more attractive than normal?

No, again, you've been touched base on the cost of capital. Yeah, but our relationships are in the market, and we had the ability to do a little bit more elevated volume in the third quarter. And, yeah, basically the tenants are kind of pushing us to do a little bit of the deals. And, you know, it's still accretive, maybe not historically as accretive. But, yeah, it's good deals, good real estate, and we can service the tenant basis.

Okay. Got it. And then there's been a decent amount of talk on your peers calls this quarter about increased competition. Obviously you're seeing, you know, very high volume. So I'm curious, are you seeing that? And is it impacting pricing at all?

I mean, we've always operated in a highly competitive market since I've been with the company. You know, you had private REITs, non-traded REITs always in the market and it's a highly competitive space. The difference is now you're having more financial institution brand names that people recognize in the space. So that being said, the larger portfolios, we're seeing increased competition, and they're using leverage to lower the cap rates. The good news is MNN doesn't need to do that ridiculously high volume, so we don't need the big portfolios. And the $15 to $20 million deals, We're not seeing that much competition outside of our ordinary competitors. You know, we did five deals this past quarter under $5 million. So we're still finding our fair share.

Okay. Thank you.

Your next question is coming from Michael Goldsmith with UBS. Please pose your question. Your line is live.

Good morning. Thanks a lot for taking my question. You provide an update on that home, and it seems like the fish is dolly situation, but are you seeing any other credit issues within your portfolio, and what are your bad debt assumptions now maybe compared to where they were earlier in the year?

I'll take the first half of that. Currently, our overall portfolio, just based on the bad debt that we mentioned earlier, is in really good shape. And we are getting to solution on the restaurant and the furniture tenants here in short order the next four months. And I'll let Vin talk about the bad debt assumptions.

Yeah, hey, Michael. As far as bad debt goes, as I mentioned in my prepared remarks here, we have assumed for the full year now 25 basis points of bad debt. That is down from our prior expectation of 60 basis points. And that's largely a function of at-home resolving with no issues. you know, and assuming all of our leases. We've also had, you know, pretty limited bad debt so far this year, roughly 20 basis points booked a year to date. And then, you know, what's helping fourth quarter a little bit here is we are actually getting pre-petition rent from at-home. So we'll have no, you know, credit loss from at-home by the end of the year.

Got it. And as a follow up, can you just kind of walk through the occupancy path going forward? I think you kind of laid out some sort of laid out kind of the plan of disposing of some assets, but can you just kind of walk through the trajectory and where it should be kind of by the end of the year and the set up, you know, as you enter in 2026? Thanks.

Yeah, it's kind of what I touch base on my prepared remarks. You know, for the most part, it's the restaurant operator And 15 have been solved. So we have 12 more that will be resolved by the year end, which will help with our occupancy. And we have 14 more that are under contract or under advanced negotiations that potentially can be resolved a little bit in the end of the year. But if not, for the most part, it will be resolved in the fourth quarter. and kind of what we talked about with our renewals being at 92% this past quarter, that helps with the occupancy on a go-forward basis. And we don't see any other tenants in the portfolio that are calling us that there's issues.

Yeah, one other thing on that, Michael, Steve mentioned the former restaurant tenant, but on the former furniture tenant, we do have line of sight on 10 additional resolutions by the end of the year. So that's another 10 vacancies that we're targeting to be completed by year end.

Thank you very much.

Good luck in the fourth quarter.

Thanks. Your next question is coming from John Chilikowski with Wells Fargo. Please pose your question. Your line is live.

Hi, good morning out there. Just the first one for me would be back on the cost of capital question. I'm just trying to think about 26 here, and Vin, I think you gave some helpful color on that your cost of debt might be a little bit tighter, and therefore there's some spread here, but it's inside of 100 bits. I'm curious, at what point would your stock need to trade, or where would your AFFO yield or your CAPM need to be, where the spread, you would say, is insufficient, and therefore equity is no longer a consideration?

Yeah, look, I think the way we think about, you know, if we're thinking about 2026, right, we've stated, you know, repeatedly that, you know, we can self-fund about $550 million without really hitting the equity markets. And so that part is sort of, you know, addressed up front. And then beyond that, we would require some additional equity if we wanted to maintain leverage neutrality. You know, part of the solution could be to lean into dispositions a bit more. We do have higher vacancies than than usual, and so that is a potential source of capital that can offset some of the equity needs or stock needs, I should say. But as far as when the stock price or where the stock price would be to say, hey, we're just cutting off equity, I think that is a hard question without knowing exactly what we're talking about buying, but I think the reality is we certainly don't want to be sufficiently less than where we're at today. I think it's a case-by-case situation when we're dealing with a deal in front of us. It's hard to kind of talk theoretically.

Okay, thank you. And then the second one would just be on sort of one-time fees, termination fees, anything else that you've received this year that you would expect to roll off next year to be somewhat of a headwind? I know I think Historically, you've talked about maybe a $3 million being a run rate number. Is that a reasonable expectation for next year, and what would that mean as far as decel from this year?

Yeah, well, I think we had booked about $11 million year-to-date, so I think $3 million is probably more consistent with historical levels. You saw that our volume, or at least our mission volume in the quarter, did normalize down to about $670,000, so we are starting to see some normalization, as I mentioned last quarter, I think. We had a number of very large DARPA paying tenants that we've been working our way through, and that was driving the outsizing of termination fees. So, you know, call it $11 million to $3 million would be an $8 million headwind. But I will point out, though, if you look at our real estate expense net, that's going to be the offset, you know, maybe not 100%, but we do expect to be around $17.5 million of real estate expense net this year. That's largely because of the vacancies. As those vacancies are addressed, and we kind of outlined visibility on, you know, 2020-plus by the end of the year to be resolved, you know, that real estate expense from that will come down to our historical levels, which is closer to $12 million or so. So that will be a natural offset to some of these termination headwinds.

Got it. Thank you.

Your next question is coming from Spencer Glimcher with Green Street. Please pose your question. Your line is live.

Thank you. In regards to the higher acquisition volume, despite the lower spreads you're seeing today, do you think that the increased competition is impeding your ability to push cap rates with existing tenants? Because I would think with the longstanding relationships here, you have some leverage just given surety of close and just familiarity with your team. Do you think that the alternative capital sources are kind of swinging the pricing power pendulum more to tenants than we've seen historically?

I mean, our relationship tenants are very sophisticated tenants and understand what the market is. So, you know, we're not stealing properties from our tenants. Yes, we may get five, ten basis points for, you know, certainty of closing, you know, saving money on the transaction costs because our documents are in place. But I don't think it's the increased competition because what I stated, we're always operating in a highly competitive market. Just the names come and go.

Okay. Yeah, thank you. And then I think you mentioned, you know, you did deals with seven new tenants. And sorry if I missed this, but can you just provide some color on what industries or segments these are in? And have you got a sense from these newer tenants what their growth pipelines look like in the next 12 to 24 months? Just trying to get a sense if. that these are higher growth tenants in the near term?

Yeah, the seven new tenants were just vacancies that we re-leased. And, you know, primarily in the convenience store, QSR, auto service sector. But no, I don't have a, you know, a grasp to give you a good number about their growth trajectory over the next 12 months. However, there's high demand for our vacant assets. So I feel like our tenants are trying to grow, and we're actually getting some new tenants in the portfolio.

Okay, great. Thank you. Your next question is coming from Smeets Road with Citi. Please pose your question. Your line is live.

Your line is live. Smeets, your line is live. Please ask your question.

We'll come back to Smeets.

Okay, you got it. Your next question is Rich Hightower with Barclays. Please pose your question. Your line is live.

Thank you. Good morning. I guess really quickly on the at-home rent, have you guys disclosed the amount of pre-petition rent that you've gotten from them or that you expect in 4Q?

Yeah, Rich, at this point, and we haven't disclosed the dollar amount, but at this point we have collected all of June 1 from that home.

Okay, great. And then I guess maybe bigger picture, just, you know, it seems like renewal spreads have been pretty good, maybe relative to history. I mean, do you expect that trend to continue maybe just with sort of the supply-demand tightness in retail generally? I mean, what are you kind of seeing on that front?

As we move forward, I'm not expecting it to be below our historical norms, given the kind of conversations we're having for the 2026 renewals. But do I think it's sustainable on the releasing to have 125%? Probably not. It will be closer to kind of our, you know, 100% renewal prior to 2026 or releasing. And the renewals, I kind of expect a fall between that 85%, 95% range.

Okay. Wonderful. Thanks, guys.

Our next question is coming from Wes Galladay with Baird. Please pose your question. Your line is live.

Hey, yeah. Good morning, everyone. I just want to look at the acquisition guidance. It looks like it's implying about $100 million to $200 million for the fourth quarter, which is typically a big quarter for you guys. So just curious if you pulled any deals forward into 3Q, or are you just being conservative here?

I think it's a little bit of a combination, Wes, that we pulled a little bit of the deal volume into the third quarter. And as Ben mentioned, that we have some deals that are slated to close probably back half of the fourth quarter. So you do want to be a little conservative if they did slide to the first quarter.

Okay. Thank you.

Your next question is coming from Ronald Camden with Morgan Stanley. Please pose your question. Your line is live.

Hey, good morning. This is Jenny for Ron. Hope you guys are doing well. Just want to follow up on the at-home portfolio. Just curious, are you looking to hold those assets or if you have any plan to kind of dispose them? Thank you.

Yeah, I mean... Given the position that At Home is in currently, it was a balance sheet issue, and they solved that issue. Their credit profile going forward is pretty solid. But more importantly, it's a testament to the real estate quality and the in-place rent being so low on those assets that they're good real estate, and financially they're performing. So there's no knee-jerk reactions. to sell those assets. Now, if somebody comes and offers us a really good deal, yeah, absolutely, we would sell that at the right price.

That makes sense. Just switching gears to kind of refinancing plan, have you thought about your data maturity in 2026 yet? And what's your approach given the current rate environment? Thanks.

I think you said 26. I think I meant 25, but yes.

Yeah, I said 26.

As far as the November maturity, we are looking at a variety of options. As I mentioned, we have some flexibility on how we deal with it. Certainly, we could run it online for some period of time. We have plenty of capacity, full capacity in our revolver. That's one option. Obviously, we could hit the bond market. We are looking at even considering some bank debt as well. We've got a maturity hole in 2029 that fits, and given the size of what we expect we'll need by the end of the year here, let's fits a bit more in line with a bank loan as opposed to a bond deal. So a couple different options we're weighing, but we certainly are, you know, we've got lots of options as well.

Okay, that's all from me. Thanks.

Your next question is coming from Linda Tsai with Jefferies. Please pose your question. Your line is live.

Hi. If your cost of equity stays the same, would the mix of disposed and free cash flow and debt usage look similar for 2026 acquisitions?

Yeah, I think if our cost of equity stays where it's at, it certainly makes it a little bit more challenging. So, I mean, depending on what we're sourcing on the acquisition side will be part of the equation. But, you know, I think from a disposition perspective, yes, if equity is where it's at today, dispositions could be an alternative form of equity to help fund deals. I think free cash flow is what it is, so it's not like I can increase that or decrease it. That'll be around $200 million or so. I think that's a good point, though, and we're talking about the spread. I know that that's what folks are focused on in terms of earnings and whatnot, but from a cash flow perspective, even if the spread's a little tighter than we'd like it to be, We are still getting a good cash flow spread on that, if we think about the dividend yield. And so that generates more free cash flow, which then generates additional internal capacity.

And then on Steve's comments that tenants are pushing you to do more deals, can you give us some color on who these tenants are, and would these be the same types of tenants that would push you to do higher acquisition volume in 2026?

No, I mean, when I say push, there's opportunities to do deals with NNN. And we pass on a lot, and we did a little elevated number this year. But historically speaking, we kind of did that $750 million range. So midpoint at 900 is not a big jump in acquisition volume, per se. It's just elevated a little bit. But primarily, it was kind of the auto services, auto parts of our portfolio that are being active of doing some new development and small M&A.

Does that continue in 26?

In 2026, you know, we only have line of sight in our industry 60, 90 days. and the first quarter is starting, you know, to, you know, we're pricey deals in the first quarter right now. I can't speak second or third quarter if they continue.

One final follow-up, just on the idea of tenants not calling you with any credit issues, what is the line of sight for that type of situation?

Usually it's, I mean, it could be 12 months. It's amazing how retailers have the innate ability to keep paying rent when things are going, you know, are being challenged. You know, just per se, when you take a public company that's traded on the stock exchange, just because their stock is getting hit doesn't mean they can't pay rent. They're just not as profitable. So we usually have a line of sight of 12 months plus, just like when we were talking about Frisch's. I mean, we were talking about Frisch's 12, 18 months. because they knew that challenges were coming and we started trying to work with them. But yeah, so right now, as far as 2026, we're not hearing any rumblings.

Thank you. Your next question is coming from Jim Kammer with Evercore ISI. Please pose your question. Your line is live.

Hi, good morning. Thank you. Actually, just on that last point, Steve, this is kind of interesting. You said the tenant had a dispute with his former Landlord, I missed that entirely, and I'm trying to understand also what rent would have been collected by NNN in the third quarter that you would theoretically then lose, correct, in the fourth quarter?

I'll touch on the first part. The former tenant Frisch's entered into a lawsuit with our new tenant to operate in the markets, and it's tied up in the courts, and we thought we were going to have resolution you know, springtime, early spring, but the courts keep delaying the decision. You know, first kicked it out, I believe it was September, then kicked it out into November, and that's when we decided we have to move forward and monetize these assets or release them.

And, Jim, on your second part of your question, I'm not sure I was following there. You were saying something about, you know, collecting some rent and then giving it back later, I wasn't following.

No, I'm sorry. I'm saying did you collect rent from, I guess it was Dolly's or whatever was the new tenant. Did you collect rent from them in the third quarter, meaning that obviously if you're taking these assets back, you'd have a little bit of a head run, in other words, for fourth quarter?

Yeah, I mean, there was an immaterial amount collected early on in the quarter, but nothing material at all. Okay, so that's in your guidance, in other words, okay. Yeah, correct.

Thank you.

Once again, if there are any remaining questions or comments, please press star 1 at this time to ask a question. Your next question is coming from John with B Reilly Securities. Please pose your question. Your line is live.

Good morning. I was amazed I missed this earlier in the call, but, you know, the other element of the guidance, right, is the ramp expected in 4Q in disposition activities. And I'm imagining, you know, the Dolly situation plays a part in that. But is there anything else factoring into the acceleration in dispositions expected by year end? And I guess in the context of, you know, the former restaurant properties, the furniture properties, the broader market? Like, how should we expect the split and 4Q disposition activity to be between vacant and rent-paying assets?

Yeah, I mean, I think you're spot on in terms of the restaurant operator that's soon kind of moving in a different direction there is leading to some additional sale of assets. And so, yeah, there will be a higher mix of vacant sales than maybe we've historically had. You know, exactly what the split is, I can't say for sure, but, you know, I think 50% plus might be vacant sales at this point given our visibility.

And I guess kind of, you know, following on that question, is beyond what's going on with the former restaurant tenant properties, is some of that increase in disposition activity at all a reaction to maybe where, cap rates in capital markets are kind of diverging, or is that just purely kind of working out of the former frishes and bad talk assets?

Yeah, it's the latter part more so that, you know, there's high level of interest and we have the opportunity to dispose of the former restaurant assets at good pricing. And then secondly, you know, there's a fair amount of interest if it's QSR, convenience store, for some of those restaurant assets as well.

So I guess, I mean, I know you don't give guidance on this, but it would be fair to assume kind of cap rate trends from the last two quarters continue into 4Q for occupied sales?

The occupied sales, you know, I still think for modeling purposes, 100 basis points inside where we're deploying capital is probably a better number. Because the tenant mix, we may do some dispositions that are defensive, that would be a little bit elevated for proactive portfolio management. Also, selling assets at a real low cap rate. But yeah, 100 basis points is what I would model.

Okay. I appreciate that detail. That's it for me.

Thank you. Once again, if you do have any remaining questions or comments, please press star 1 at this time. There appear to be no further questions in queue at this time. I would now like to turn the floor back over to Steve Horn for closing remarks.

Thanks for joining us this morning, and we'll see many of you in person in the next few weeks and then in the Navy. Enjoy the rest of your day. Thanks.

Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.