Leases – At September 30, 2021, NNN’s real estate portfolio had a weighted average remaining lease term of 10.6 years and consisted of 3,187 leases classified as operating leases and an additional six leases accounted for as direct financing.

The following is a summary of the general structure of the leases in the Property Portfolio, although the specific terms of each lease can vary significantly. Generally, the Property leases provide for initial terms of 10 to 20 years. The Properties are generally leased under net leases, pursuant to which the tenant typically bears responsibility for substantially all property costs and expenses associated with ongoing maintenance, repair, replacement and operation of the property, including utilities, property taxes and property and liability insurance. Certain Properties are subject to leases under which NNN retains responsibility for specific costs and expenses of the Property. NNN's leases provide for annual base rental payments (generally payable in monthly installments), and generally provide for limited increases in rent as a result of (i) increases in the Consumer Price Index ("CPI"), (ii) fixed increases, or, to a lesser extent, (iii) increases in the tenant’s sales volume.

Generally, NNN's leases provide the tenant with one or more multi-year renewal options, subject to generally 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 event NNN includes the 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.

As of September 30, 2021, NNN has entered into rent deferral lease amendments with certain tenants, for an aggregate $4,758,000 and $52,019,000 of rent originally due for the years ending December 31, 2021 and 2020, respectively. The rent deferral lease amendments require the deferred rents to be repaid at a later time during the lease term. Approximately $3,259,000 of deferred rent was repaid in 2020 and approximately $6,068,000 and $27,087,000 of deferred rent was repaid during the quarter and nine months ended September 30, 2021, respectively. An additional $4,689,000 is due in 2021, with the remaining deferred rent coming due periodically by December 31, 2025.

Historical rent collections and rent relief requests may not be indicative of collections and requests in the future. Depending on macroeconomic conditions and their impact on a tenant's business and operations, deferred rents may be difficult to collect.

Real Estate Portfolio – NNN's real estate consisted of the following at (dollars in thousands):


	September 30, 2021			December 31, 2020
Land and improvements(1)	$	2,533,379		$	2,489,243
Buildings and improvements		6,331,216			6,009,797
Leasehold interests		355			355
		8,864,950			8,499,395
Less accumulated depreciation and amortization		(1,434,760	)		(1,317,407	)
		7,430,190			7,181,988
Work in progress for buildings and improvements		8,551			26,673
Accounted for using the operating method		7,438,741			7,208,661
Accounted for using the direct financing method		3,732			3,994
	$	7,442,473		$	7,212,655


(1)	Includes $8,844 and $8,421 in land for Properties under construction at September 30, 2021 and December 31, 2020, respectively.

NNN recognized the following revenues in rental income (dollars in thousands):


	Quarter Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Rental income from operating leases	$	175,833	$	153,825	$	522,787	$	481,858
Earned income from direct financing leases		154		161		469		487
Percentage rent		195		160		530		728
Real estate expense reimbursement from tenants		3,842		3,719		13,440		12,818
	$	180,024	$	157,865	$	537,226	$	495,891

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 nine months ended September 30, 2021 and 2020, NNN recognized ($19,427,000) and $33,022,000, respectively, of accrued rental income, net of reserves, of which ($3,509,000) and $2,305,000 of such income, net of reserves, was recorded during the quarters ended September 30, 2021 and 2020, respectively.

Included in accrued rental income are the impacts of the rent deferral lease amendments NNN entered into as a result of the COVID-19 pandemic. During the nine months ended September 30, 2021 and 2020, NNN recorded ($21,996,000) and $38,938,000, respectively, of net straight-line accrued rental income related to such amendments, of which ($4,294,000) and $8,499,000 was recorded during the quarters ended September 30, 2021 and 2020, respectively.

At September 30, 2021 and December 31, 2020, the balance of accrued rental income was $34,341,000 and $53,958,000, respectively, net of allowance of $4,922,000 and $6,947,000, respectively.

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):


	September 30, 2021			December 31, 2020
Intangible lease assets (included in other assets):
Above-market in-place leases	$	15,389		$	15,474
Less: accumulated amortization		(10,699	)		(10,271	)
Above-market in-place leases, net	$	4,690		$	5,203

In-place leases	$	123,470		$	118,416
Less: accumulated amortization		(72,510	)		(68,695	)
In-place leases, net	$	50,960		$	49,721

Intangible lease liabilities (included in other liabilities):
Below-market in-place leases	$	41,932		$	41,101
Less: accumulated amortization		(27,217	)		(26,486	)
Below-market in-place leases, net	$	14,715		$	14,615

The amounts amortized as a net increase to rental income for above-market and below-market in-place leases for the nine months ended September 30, 2021 and 2020, were $430,000 and $711,000, respectively, of which $156,000 and $301,000 was recorded for the quarters ended September 30, 2021 and 2020, respectively. The value of in-place leases amortized to expense for the nine months ended September 30, 2021 and 2020, was $5,451,000 and $6,364,000, respectively, of which $1,840,000 and $2,027,000 was recorded for the quarters ended September 30, 2021 and 2020, respectively.

On a quarterly basis, the Company evaluates its Properties for held for sale classification based on specific criteria as outlined in ASC 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. As of September 30, 2021, NNN had five of its Properties categorized as held for sale. NNN's real estate held for sale at December 31, 2020, included five Properties, all of which were sold in 2021. Real estate held for sale consisted of the following as of (dollars in thousands):


	September 30, 2021			December 31, 2020
Land and improvements	$	9,272		$	3,841
Building and improvements		14,463			4,971
		23,735			8,812
Less accumulated depreciation and amortization		(4,249	)		(2,536	)
Less impairment		(9,777	)		(605	)
	$	9,709		$	5,671

The following table summarizes the Properties sold and the corresponding gain recognized on the disposition of Properties (dollars in thousands):


	Quarter Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
	# of Sold Properties	Net Gain		# of Sold Properties	Net Gain		# of Sold Properties	Net Gain		# of Sold Properties	Net Gain
Gain on disposition of real estate	27	$	9,473	3	$	148	53	$	17,935	25	$	13,637

NNN has committed to fund construction on 10 Properties. The improvements on such Properties are estimated to be completed within 12 months. These construction commitments, as of September 30, 2021, are outlined in the table below (dollars in thousands):

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 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 primarily 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 leased primarily to retail tenants under long-term net leases and primarily held for investment. Generally, NNN’s Property leases provide for initial terms of 10 to 20 years, which provide for cash flows over this term. NNN generally intends to hold these assets for the long-term, therefore, a temporary change in cash flows due to COVID-19 alone would not be an indicator of impairment.

As a result of NNN's review of long-lived assets, including identifiable intangible assets, NNN recognized real estate impairments, net of recoveries as summarized in the table below (dollars in thousands):


	Quarter Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Total real estate impairments, net of recoveries	$	4,781	$	5,695	$	14,647	$	33,062

Number of Properties:
Vacant		5		1		19		10
Occupied		2		—		10		13