NNN REIT, Inc.

Today, everyone, welcome to the NNN Re-Ink First Quarter 2026 Earnings Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Steve Horn. The floor is yours.

Hey, thank you, Kelly. Good morning. Thank you for joining NNN's first quarter 2026 earnings call. I'm joined today with our Chief Financial Officer, Vin Chow. NNN's disciplined, efficient, and self-funded growth strategy continues to deliver results. Our proven long-term operating platform and consistent capital allocation focused on sufficiently accretive acquisitions remain central to our approach. We are committed to long-term value creation, navigating market conditions with discipline, and capitalizing on opportunities that support that durable growth. As detailed in the press release this morning, NNN delivered a strong quarter. We closed 15 transactions, comprising of 41 properties, for a total investment of $145 million, with an initial cash yield of 7.5%. At the same time, we maintain significant balance sheet flexibility, ending the quarter with $1.2 billion of total liquidity and industry-leading weighted average debt maturity of nearly 11 years. Reflecting on our consistent performance and visibility into the remainder of the year, we are raising our 2026 AFF per share guidance to a range of 353 to 359. This increase underscores the strength of our portfolio and effectiveness of our multi-year growth strategy. Just one additional item before I get into the operations. If you haven't reviewed our updated investor presentation, it was released during the quarter. I encourage you to visit the website and take a look. Turning to operating performance, our portfolio of approximately 3,700 freestanding single-tenant properties across all 50 states continues to perform well. During the quarter, we renewed 36 of 43 lease expirations. consistent with our historical renewal rate of approximately 85% and rental rates 2% above prior levels. Additionally, we lease seven properties to new tenants at rent rates about 10% above previous levels. It's demonstrating the continued demand of our assets and the outstanding job our asset management team is executing at high levels. Our tenant base remains healthy with no material credit concerns currently. Occupancy increased sequentially by 30 basis points to 98.6, now above our long-term average. This improvement reflects the strong execution of our leasing and disposition teams, who are actively repositioning vacant assets to maximize value. In several cases, the team has secured high-quality, investment-grade tenants, further enhancing asset value and contributing incremental value creation. With only 53 assets remaining and active solutions underway, combining with the solid overall performance of the portfolio, we expect occupancy to continue trending upward in the near term. On the acquisition front, as I said earlier, we invested 145,041 properties with a cash cap rate of 7.5. More importantly, with a weighted average lease term of 19 years. The sale-lease-packed nature of our transactions continues to provide accretive, risk-adjusted returns long-duration predictable cash flows. Regarding market conditions, cap rates in the first quarter remain largely consistent with recent quarters. While we are seeing some modest compression early in the second quarter, we expect relative stability going forward. As always, our platform is designed to operate effectively across many macro environments. We do benefit from stable interest rate backdrop, and the 10-year has remained fairly range-bound. which continues to support transaction activity. We've had an elevated volume in 2025, and we are seeing a good amount of investment opportunity for the first half of the year. During the quarter, we sold 25 properties, including 16 vacant assets, generating $36 million in proceeds of redeployment. Dispositions of income-producing assets were primarily non-core, and we were executing approximately 30 basis points below our acquisition cap rate. As we discussed previously, we expect to take more of a proactive approach to asset sales in 2026 to further optimize portfolio quality for the long term. As you know, tenant credit involves market shift and consumer behavior changes, which results in active portfolio management becoming essential to maintaining high-quality, durable cash flow. Our balance sheet remains one of the strongest in the sector. We ended the quarter with just $80 million drawn on our credit facility and maintain a weighted asset debt maturity, as I said before, nearly 11 years. NNN is well positioned to fund the remainder of the 2026 acquisition pipeline and support continued growth. With a robust pipeline, strong financial position, and proven leadership, we are confident in our outlook. We remain committed to our self-funded model. disciplined capital allocation, and delivering sustainable long-term value for our shareholders, targeted at mid-single digits earning growth, plus a dividend, which we've increased for 36 consecutive years, one of only three REITs. With that, I'll turn the call over to Vin to give more detail on the financial results 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 laws. The company's actual future results may differ significantly from 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. Turning to results, this morning we reported core FFO of 86 cents per share and AFFO of 87 cents per share, each flat over the prior year. As disclosed on page 8 of today's earnings release, we booked $739,000 of lease termination fees this quarter versus $8.2 million a year ago, representing a $0.04 headwind, without which AFO per share growth was a solid 4.8%. Results were modestly ahead of our internal projections, with upside driven primarily by lower-than-expected bad debt and net real estate expense. Bad debt represented about 15 basis points of quarterly ABR, which was better than our 75 basis point assumptions. Our NOI margin was 95.9% in the first quarter, reflecting the efficiency of our triple net lease structure. G&A as a percentage of total revenue was 5.9%, in line with our expectations, while our cash G&A margin was 4.2%. Annualized base rent grew 7% year-over-year to $935 million, driven by our strong acquisition activity, while free cash flow after dividend was about $52 million in the first quarter. Regarding our watch list, as Steve mentioned, we are not currently tracking any significant near-term credit issues in the portfolio, and we are optimistic that we can outperform our bad debt assumptions for the year. That said, we remain proactive portfolio managers and will continue to look for ways to de-risk the portfolio ahead of potential future issues without incurring unwarranted dilution. Included in this quarter's dispositions was one AMC as well as an entertainment property. Our occupied dispositions had only three years of remaining lease term, and despite the de-risking nature and shorter term of the property sold, we were still able to generate an economic gain of over 6% on the sales, given our low cost basis in the assets, which is a key component of our risk controls. Turning to capital markets. During the quarter, we drew down the full $300 million available to us on our delayed draw term loan. The rate on the term loan has been swapped to a fixed all-in rate of 4.1%. We also sold roughly 1.7 million common shares on a forward basis through our ATM at just under $45 per share. We did not settle any forward equity, leaving us with expected future net proceeds of $74 million as of March 31st. Our next debt maturity is our $350 million unsecured note due in December of this year. As a reminder, we have an accordion feature that allows us to expand our existing term loan by $200 million and IG credit spreads have recently revisited historical lows following a brief widening in the immediate aftermath of the IRA and conflict. This gives us multiple options with which to address our pending maturity as well as financing our investment plans on a leverage neutral basis. Moving to the balance sheet, our BAA1 rated balance sheet remains a competitive advantage that provides us with the flexibility to fund future growth while protecting against downside risk. At the end of the quarter, we had no encumbered assets, $1.2 billion of available liquidity, and just 1.6% of our debt tied to floating rates. Including the impact of our unsettled forward equity, pro forma net debt to EBITDA was 5.6 times unchanged from last quarter. Our debt duration remains the highest in the net lease space at 10.5 years and is well matched with our lease duration at 10.1 years. On April 15th, We announced a $0.60 quarterly dividend representing 3.4% year-over-year growth and equating to an attractive 5.7% annualized dividend yield and a conservative 69% AFFO payout ratio. I will end my opening remarks with some additional color on our updated 2026 outlook. Based on our better-than-expected first quarter performance and our growing pipeline of investment opportunities, we are raising the midpoint of both our AFFO and core AFFO per share guidance by $0.01 to new ranges of $3.53 to $3.59 and $3.48 to $3.54, respectively. The midpoint of our increased AFO per share guidance represents an acceleration of year-over-year growth to 3.5% from 2.7% last year. Line item guidance, which is summarized on page 3 of our earnings release, remains unchanged, although I would highlight that we are tracking to the low end of the $14 to $15 million range for net real estate expenses and towards the high end of our $550 to $650 million acquisition guidance based on our near-term pipeline visibility. With expected free cash flow of about $212 million, $130 million of expected dispositions, and $1.2 billion of available liquidity, we are well positioned to fund our acquisition plans for the year. From a credit loss perspective, we are lowering our bad debt assumption for the full year from 75 basis points to 60 basis points, which reflects the outperformance in the first quarter. Our assumptions for the balance year of the year are unchanged, but as I mentioned earlier, given year-to-date trends, we are hopeful we can outperform our bad debt projections in the coming quarters. With that, I'll turn the call back over to Kelly for questions.