Leases – At March 31, 2023, NNN’s real estate portfolio had a weighted average remaining lease term of 10.3 years and consisted of 3,469 leases classified as operating leases and an additional five leases accounted for as direct financing leases.

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, (ii) fixed increases, or (iii) to a lesser extent, 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 renewal 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.

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


	March 31, 2023			December 31, 2022
Land and improvements(1)	$	2,718,117		$	2,669,498
Buildings and improvements		7,054,296			6,985,394
Leasehold interests		355			355
		9,772,768			9,655,247
Less accumulated depreciation and amortization		(1,713,611	)		(1,660,308	)
		8,059,157			7,994,939
Work in progress and improvements		45,783			21,737
Accounted for using the operating method		8,104,940			8,016,676
Accounted for using the direct financing method		3,272			3,352
Classified as held for sale		3,410			786
	$	8,111,622		$	8,020,814


(1)	Includes $54,582 and $22,356 in land for Properties under construction at March 31, 2023 and December 31, 2022, respectively.

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


	Quarter Ended March 31,
	2023		2022
Rental income from operating leases	$	198,183	$	184,311
Earned income from direct financing leases		144		151
Percentage rent		763		701
Real estate expense reimbursement from tenants		4,540		4,600
	$	203,630	$	189,763

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.

During 2021 and 2020, NNN entered into rent deferral lease amendments with certain tenants in the Property Portfolio, for an aggregate $4,722,000 and $51,945,000 of rent originally due for the years ended 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. As of March 31, 2023, an aggregate of approximately 91 percent of deferred rent has been repaid with $1,706,000 and $4,057,000 of deferred rent repaid during the quarters ended March 31, 2023 and 2022, respectively. The remaining deferred rents are substantially due periodically by December 31, 2023.

For the quarters ended March 31, 2023 and 2022, NNN recognized $469,000 and ($1,096,000), respectively, of net straight-line accrued rental income, net of reserves. Included in accrued rental income are the net impacts of the rent deferred and corresponding scheduled repayments from the lease amendments NNN entered into as a result of the COVID-19 pandemic. During the quarters ended March 31, 2023 and 2022, NNN recorded ($9,000) and ($1,780,000), respectively, of net straight-line accrued rental income related to such amendments.

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):


	March 31, 2023			December 31, 2022
Intangible lease assets (included in other assets):
Above-market in-place leases	$	15,356		$	15,356
Less: accumulated amortization		(11,647	)		(11,477	)
Above-market in-place leases, net	$	3,709		$	3,879

In-place leases	$	124,198		$	124,198
Less: accumulated amortization		(81,435	)		(79,675	)
In-place leases, net	$	42,763		$	44,523

Intangible lease liabilities (included in other liabilities):
Below-market in-place leases	$	41,371		$	41,371
Less: accumulated amortization		(28,403	)		(28,121	)
Below-market in-place leases, net	$	12,968		$	13,250

The amounts amortized as a net increase to rental income for above-market and below-market in-place leases for the quarters ended March 31, 2023 and 2022, were $112,000 and $140,000, respectively. The value of in-place leases amortized to expense for the quarters ended March 31, 2023 and 2022, was $1,760,000 and $1,773,000, respectively.

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


	Quarter Ended March 31,
	2023			2022
	# of Sold Properties	Net Gain		# of Sold Properties	Net Gain
Gain on disposition of real estate	6	$	6,300	10	$	3,992

NNN has committed to fund construction on 32 Properties. The improvements on such Properties are estimated to be completed within 12 months. These construction commitments, as of March 31, 2023, 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.

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 March 31,
	2023		2022
Total real estate impairments, net of recoveries	$	2,640	$	1,632

Number of Properties:
Vacant		3		3
Occupied		1		2

The valuation of impaired assets is determined using widely accepted valuation techniques including discounted cash flow analysis, income capitalization, analysis of recent comparable sales transactions, actual sales negotiations and bona fide purchase offers received from third parties, which are Level 3 inputs. NNN may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate.