UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission file number 001-11290

NNN REIT, INC.

(Exact name of registrant as specified in its charter)

Maryland	56-1431377
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

450 South Orange Avenue, Suite 900

Orlando, Florida 32801

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (407) 265-7348

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, $0.01 par value	NNN	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 27, 2023, the registrant had 182,087,200 shares of common stock, $0.01 par value, outstanding.

TABLE OF CONTENTS

		PAGE REFERENCE
Part I – Financial Information
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income and Comprehensive Income	2
	Condensed Consolidated Statements of Equity	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31
Part II – Other Information
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	32
Signatures		34

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NNN REIT, INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

	March 31, 2023			December 31, 2022
	(unaudited)
ASSETS
Real estate portfolio, net of accumulated depreciation and amortization	$	8,111,622		$	8,020,814
Cash and cash equivalents		3,240			2,505
Restricted cash and cash held in escrow		2,086			4,273
Receivables, net of allowance of $701 and $708, respectively		2,568			3,612
Accrued rental income, net of allowance of $3,851 and $3,836, respectively		28,145			27,795
Debt costs, net of accumulated amortization of $22,235 and $21,663, respectively		4,830			5,352
Other assets		85,623			81,694
Total assets	$	8,238,114		$	8,146,045
LIABILITIES AND EQUITY
Liabilities:
Line of credit payable	$	209,000		$	166,200
Mortgages payable, including unamortized premium and net of unamortized debt costs		9,774			9,964
Notes payable, net of unamortized discount and unamortized debt costs		3,740,945			3,739,890
Accrued interest payable		58,218			23,826
Other liabilities		85,305			82,663
Total liabilities		4,103,242			4,022,543
Equity:
Stockholders’ equity:
Common stock, $0.01 par value. Authorized 375,000,000 shares; 182,087,429 and     181,424,670 shares issued and outstanding, respectively		1,822			1,815
Capital in excess of par value		4,948,024			4,928,034
Accumulated deficit		(802,999	)		(793,765	)
Accumulated other comprehensive income (loss)		(11,975	)		(12,582	)
Total stockholders’ equity of NNN		4,134,872			4,123,502
Total liabilities and equity	$	8,238,114		$	8,146,045

See accompanying notes to condensed consolidated financial statements.

1

NNN REIT, INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(dollars in thousands, except per share data)

(unaudited)

	Quarter Ended March 31,
	2023			2022
Revenues:
Rental income	$	203,630		$	189,763
Interest and other income from real estate transactions		478			516
		204,108			190,279
Operating expenses:
General and administrative		12,251			11,042
Real estate		6,846			7,198
Depreciation and amortization		59,148			52,680
Leasing transaction costs		75			88
Impairment losses – real estate, net of recoveries		2,640			1,632
Executive retirement costs		423			3,594
		81,383			76,234
Gain on disposition of real estate		6,300			3,992
Earnings from operations		129,025			118,037
Other expenses (revenues):
Interest and other income		(33	)		(35	)
Interest expense		38,891			36,699
		38,858			36,664
Net earnings		90,167			81,373
Earnings attributable to noncontrolling interests		—			(1	)
Net earnings attributable to common stockholders	$	90,167		$	81,372
Net earnings per share of common stock:
Basic	$	0.50		$	0.46
Diluted	$	0.50		$	0.46
Weighted average number of common shares outstanding:
Basic		180,845,503			174,772,243
Diluted		181,434,345			174,911,213
Other comprehensive income:
Net earnings attributable to NNN	$	90,167		$	81,372
Amortization of interest rate hedges		607			583
Comprehensive income attributable to NNN		90,774			81,955
Comprehensive earnings attributable to noncontrolling interests		—			1
Total comprehensive income	$	90,774		$	81,956

See accompanying notes to condensed consolidated financial statements.

2

NNN REIT, INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Quarter Ended March 31, 2023

(dollars in thousands, except per share data)

(unaudited)

	Common Stock		Capital in   Excess of Par Value			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total  Stockholders’ Equity of NNN			Noncontrolling Interests		Total Equity
Balances at December 31, 2022	$	1,815	$	4,928,034		$	(793,765	)	$	(12,582	)	$	4,123,502		$	—	$	4,123,502
Net earnings		—		—			90,167			—			90,167			—		90,167
Dividends declared and paid:
$0.550 per share of common stock		—		724			(99,401	)		—			(98,677	)		—		(98,677	)
Issuance of common stock:
8,183 shares – director compensation		—		269			—			—			269			—		269
2,132 shares – stock purchase plan		—		98			—			—			98			—		98
349,809 shares – ATM equity program		4		16,364			—			—			16,368			—		16,368
256,517 restricted shares – net of forfeitures		3		(3	)		—			—			—			—		—
Stock issuance costs		—		(294	)		—			—			(294	)		—		(294	)
Amortization of deferred compensation		—		2,832			—			—			2,832			—		2,832
Amortization of interest rate hedges		—		—			—			607			607			—		607
Balances at March 31, 2023	$	1,822	$	4,948,024		$	(802,999	)	$	(11,975	)	$	4,134,872		$	—	$	4,134,872

See accompanying notes to condensed consolidated financial statements.

3

NNN REIT, INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY – CONTINUED

Quarter Ended March 31, 2022

(dollars in thousands, except per share data)

(unaudited)

	Common Stock		Capital in   Excess of Par Value			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total  Stockholders’ Equity of NNN			Noncontrolling Interests		Total Equity
Balances at December 31, 2021	$	1,757	$	4,662,714		$	(747,853	)	$	(14,956	)	$	3,901,662		$	1	$	3,901,663
Net earnings		—		—			81,372			—			81,372			1		81,373
Dividends declared and paid:
$0.530 per share of common stock		—		696			(92,751	)		—			(92,055	)		—		(92,055	)
Issuance of common stock:
8,429 shares – director compensation		—		305			—			—			305			—		305
1,173 shares – stock purchase plan		—		52			—			—			52			—		52
153,300 restricted shares – net of forfeitures		2		(2	)		—			—			—			—		—
Stock issuance costs		—		(65	)		—			—			(65	)		—		(65	)
Amortization of deferred compensation		—		5,890			—			—			5,890			—		5,890
Amortization of interest rate hedges		—		—			—			583			583			—		583
Balances at March 31, 2022	$	1,759	$	4,669,590		$	(759,232	)	$	(14,373	)	$	3,897,744		$	2	$	3,897,746

See accompanying notes to condensed consolidated financial statements.

4

NNN REIT, INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

	Quarter Ended March 31,
	2023			2022
Cash flows from operating activities:
Net earnings	$	90,167		$	81,373
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		59,148			52,680
Impairment losses – real estate, net of recoveries		2,640			1,632
Amortization of notes payable discount		432			415
Amortization of debt costs		1,199			1,171
Amortization of mortgages payable premium		(21	)		(21	)
Amortization of interest rate hedges		607			583
Gain on disposition of real estate		(6,300	)		(3,992	)
Performance incentive plan expense		3,466			6,246
Performance incentive plan payment		(916	)		(103	)
Change in operating assets and liabilities, net of assets acquired and liabilities assumed:
Decrease in receivables		337			338
Decrease (increase) in accrued rental income		(469	)		1,096
Decrease (increase) in other assets		832			(115	)
Increase in accrued interest payable		34,392			34,099
Decrease in other liabilities		(4,670	)		(11,043	)
Other		(22	)		(21	)
Net cash provided by operating activities		180,822			164,338
Cash flows from investing activities:
Proceeds from the disposition of real estate		12,136			20,315
Additions to real estate		(153,726	)		(209,483	)
Principal payments received on mortgages and notes receivable		111			102
Other		(867	)		(577	)
Net cash used in investing activities		(142,346	)		(189,643	)

See accompanying notes to condensed consolidated financial statements.

5

NNN REIT, INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED

(dollars in thousands)

(unaudited)

	Quarter Ended March 31,
	2023			2022
Cash flows from financing activities:
Proceeds from line of credit payable	$	218,000		$	—
Repayment of line of credit payable		(175,200	)		—
Repayment of mortgages payable		(173	)		(165	)
Payment of debt issuance costs		(50	)		(48	)
Proceeds from issuance of common stock		17,190			748
Stock issuance costs		(294	)		(65	)
Payment of common stock dividends		(99,401	)		(92,751	)
Net cash used in financing activities		(39,928	)		(92,281	)
Net decrease in cash, cash equivalents and restricted cash		(1,452	)		(117,586	)
Cash, cash equivalents and restricted cash at beginning of period(1)		6,778			171,322
Cash, cash equivalents and restricted cash at end of period(1)	$	5,326		$	53,736
Supplemental disclosure of cash flow information:
Interest paid, net of amount capitalized	$	2,687		$	550
Supplemental disclosure of noncash investing and financing activities:
Change in other comprehensive income	$	607		$	583
Right-of-use asset recorded in connection with lease liability	$	6,401		$	—
Work in progress accrual balance at end of period	$	13,974		$	8,914

(1) Cash, cash equivalents and restricted cash is the aggregate of cash and cash equivalents and restricted cash and cash held in escrow from the Condensed Consolidated Balance Sheets. As of March 31, 2023, NNN had restricted cash of $2,086. NNN did not have restricted cash and cash held in escrow as of March 31, 2022.

See accompanying notes to condensed consolidated financial statements.

6

NNN REIT, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

Note 1 – Organization and Summary of Significant Accounting Policies:

Organization and Nature of Business – NNN REIT, Inc., a Maryland corporation, formerly known as National Retail Properties, Inc., is a fully integrated real estate investment trust (“REIT”) formed in 1984. The term "NNN" or the "Company" refers to NNN REIT, Inc. and all of its consolidated subsidiaries. NNN may elect to treat certain subsidiaries as taxable REIT subsidiaries. On May 1, 2023, National Retail Properties, Inc. changed its name to NNN REIT, Inc.

NNN's assets primarily include real estate assets. NNN acquires, owns, invests in and develops properties that are leased primarily to retail tenants under long-term net leases and primarily held for investment ("Properties", "Property Portfolio", or individually a "Property").

	March 31, 2023
Property Portfolio:
Total Properties		3,449
Gross leasable area (square feet)		35,251,000
States		49
Weighted average remaining lease term (years)		10.3

NNN's operations are reported within one operating segment in the condensed consolidated financial statements and all properties are considered part of the Properties or Property Portfolio. As such, property counts and calculations involving property counts reflect all NNN Properties.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles. The unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Operating results for the quarter ended March 31, 2023, may not be indicative of the results that may be expected for the year ending December 31, 2023. Amounts as of December 31, 2022, included in the condensed consolidated financial statements have been derived from the audited consolidated financial statements as of that date. The unaudited condensed consolidated financial statements, included herein, should be read in conjunction with the consolidated financial statements and notes thereto as well as Management's Discussion and Analysis of Financial Condition and Results of Operations in NNN's Form 10-K for the year ended December 31, 2022.

COVID-19 Pandemic – During 2020 and 2021, NNN and its tenants were impacted by the novel strain of coronavirus and its variants ("COVID-19") pandemic which resulted in the loss of revenue for certain tenants and challenged their ability to pay rent. As a result, NNN entered into rent deferral lease amendments with certain tenants (see "Note 2 – Real Estate").

Principles of Consolidation – NNN’s condensed consolidated financial statements include the accounts of each of the respective majority owned and controlled affiliates, including transactions whereby NNN has been determined to be the primary beneficiary in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codifications ("ASC") guidance included in Consolidation. All significant intercompany account balances and transactions have been eliminated.

Real Estate Portfolio – NNN records the acquisition of real estate at cost, including acquisition and closing costs. The cost of Properties developed or funded by NNN includes direct and indirect costs of construction, property taxes, interest and other miscellaneous costs incurred during the development period until the project is substantially complete and available for occupancy. NNN recorded $405,000 and $98,000 in capitalized interest during the development period for the quarters ended March 31, 2023 and 2022, respectively.

Purchase Accounting for Acquisition of Real Estate – In accordance with the FASB guidance on business combinations, consideration for the real estate acquired is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and, if applicable, to identified intangible assets and liabilities, consisting of the value of above-market and below-market leases and the value of in-place leases, as applicable, based on their respective fair values.

7

The fair value estimate is sensitive to significant assumptions, such as establishing a range of relevant market assumptions for land, building and rent and where the acquired property falls within that range. These market assumptions for land, building and rent use the most relevant comparable properties for an acquisition. The final value relies upon ranking comparable properties' attributes from most to least similar.

The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to land, building and tenant improvements based on the determination of their fair values.

In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded as other assets or liabilities based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases, and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining term of the lease and the renewal option terms if it is probable that the tenant will exercise options. The capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. The capitalized below-market lease values are amortized as an increase to rental income over the initial term unless the Company believes that it is likely that the tenant will renew the lease for an option term whereby the Company amortizes the value attributable to the renewal over the renewal period.

The aggregate value of other acquired intangible assets, consisting of in-place leases, is valued by comparing the purchase price paid for a property after adjusting for existing in-place leases to the estimated fair value of the property as-if-vacant, determined as set forth above. This intangible asset is amortized to expense over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be written off in that period. The value of tenant relationships is reviewed on individual transactions to determine if future value was derived from the acquisition.

Lease Accounting – NNN records its leases on the Property Portfolio in accordance with FASB Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)," ("ASC 842"). In addition, NNN records right-of-use assets and operating lease liabilities as lessee under operating leases in accordance with ASC 842.

NNN's real estate is generally leased to tenants on a net lease basis, whereby the tenant is responsible for all operating expenses relating to the Property, including property taxes, insurance, maintenance, repairs and capital expenditures. The leases on the Property Portfolio are predominantly classified as operating leases and are accounted for as follows:

Operating method – Properties with leases accounted for using the operating method are recorded at the cost of the real estate and depreciated on the straight-line method over their estimated remaining useful lives, which generally range from 20 to 40 years for buildings and improvements and 15 years for land improvements. Leasehold interests are amortized on the straight-line method over the terms of their respective leases. Revenue is recognized as rentals are earned and expenses (including depreciation) are charged to operations as incurred. When scheduled rentals vary during the lease term, income is recognized on a straight-line basis so as to produce a constant periodic rent over the term of the lease. Accrued rental income is the aggregate difference between the scheduled rents which vary during the lease term and the income recognized on a straight-line basis.

Collectability – In accordance with ASC 842, NNN reviews the collectability of its rental income on an ongoing basis. NNN considers collectability indicators when analyzing accounts receivable (and accrued rent) and historical bad debt levels, tenant credit-worthiness and current economic trends, all of which assists in evaluating the probability of outstanding and future rental income collections. In addition, tenants in bankruptcy are analyzed and considerations are made in connection with the expected recovery of pre-petition and post-petition bankruptcy claims.

When NNN deems the collection of rental income from a tenant not probable, uncollected previously recognized rental revenue and any related accrued rent are reversed as a reduction to rental income and, subsequently, any rental income is only recognized when cash receipts are received. At this point, a tenant is deemed cash basis for accounting purposes.

8

As a result of the review of lease payments collectability, NNN recorded a write-off of $232,000 of outstanding receivables and related accrued rent for certain tenants reclassified to cash basis for accounting purposes during the quarter ended March 31, 2023. No such outstanding receivables and related accrued rent were written off during the quarter ended March 31, 2022.

The following table summarizes those tenants classified as cash basis for accounting purposes as of:

	March 31,
	2023			2022
Number of tenants		10			9
Cash basis tenants as a percent of:
Total Properties		5.0	%		5.4	%
Total annual base rent(1)		7.1	%		7.3	%
Total gross leasable area		6.7	%		7.0	%

(1) Based on annualized base rent for all leases in place for each respective period.

During the quarters ended March 31, 2023 and 2022, NNN recognized $15,565,000 and $15,786,000, respectively, of rental income from certain tenants for periods following their classification to cash basis for accounting purposes.

NNN includes an allowance for doubtful accounts in rental income on the Condensed Consolidated Statements of Income and Comprehensive Income.

Right-Of-Use ("ROU") Assets and Operating Lease Liabilities – In accordance with ASC 842, NNN records ROU assets and operating lease liabilities as lessee under operating lease.

NNN is a lessee for three ground lease arrangements and for its headquarters office lease. NNN recognizes a ROU asset (recorded in other assets on the Condensed Consolidated Balance Sheets) and an operating lease liability (recorded in other liabilities on the Condensed Consolidated Balance Sheets) for the present value of the minimum lease payments. NNN uses its estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of the lease payments. NNN gives consideration to the Company's debt issuances, as well as, publicly available data for secured instruments with similar characteristics when calculating its incremental borrowing rates.

In January 2023, NNN amended its headquarters office lease and extended the lease term until March 31, 2034. The amendment resulted in an increase in the ROU asset and operating lease liability of approximately $6,401,000.

Real Estate – Held for Sale – Real estate held for sale is not depreciated and is recorded at the lower of cost or fair value, less cost to sell. 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. At March 31, 2023 and December 31, 2022, NNN had recorded real estate held for sale of $3,410,000 (one property) and $786,000 (two properties), respectively, in real estate portfolio on the Condensed Consolidated Balance Sheets. The two properties classified as held for sale as of December 31, 2022 were sold during the quarter ended March 31, 2023.

Real Estate Dispositions – When real estate is disposed, the related cost, accumulated depreciation or amortization and any accrued rental income from operating leases and the net investment from direct financing leases are removed from the accounts, and gains and losses from the dispositions are reflected in income. Gains from the disposition of real estate are generally recognized using the full accrual method in accordance FASB, ASC 610-20, "Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets" ("ASC 610-20"), provided that various criteria relating to the terms of the sale and any subsequent involvement by NNN with the real estate sold are met.

9

Impairment – Real Estate – 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, with cash flows provided over the entire term.

Credit Losses on Financial Instruments – FASB ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326),” requires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings. The guidance requires a lifetime credit loss expected at inception and requires pooling of assets, which share similar risk characteristics. NNN is required to evaluate current economic conditions, as well as, make future expectations of economic conditions. In addition, the measurement of the expected credit loss is over the asset’s contractual term.

NNN held mortgages receivable, including accrued interest, of $1,426,000 and $1,530,000 included in other assets on the Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, respectively, net of $91,000 and $98,000 allowance for credit loss, respectively. NNN measures the allowance for credit loss based on the fair value of the collateral and the historical collectability trend analysis over 15 years.

Cash and Cash Equivalents – NNN considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of cash and money market accounts. Cash equivalents are stated at cost plus accrued interest, which approximates fair value. Cash accounts maintained on behalf of NNN in demand deposits at commercial banks and money market funds may exceed federally insured levels or may be held in accounts without any federal insurance or any other insurance or guarantee. However, NNN has not experienced any losses in such accounts.

Restricted Cash and Cash Held in Escrow – Restricted cash and cash held in escrow include (i) cash proceeds from the sale of assets held by qualified intermediaries in anticipation of the acquisition of replacement properties in tax-free exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) cash that has been placed in escrow for the future funding of construction commitments, or (iii) cash that is not immediately available to NNN. As of March 31, 2023 and December 31, 2022, NNN held $2,086,000 and $4,273,000, respectively, in escrow and other restricted accounts.

Valuation of Trade Receivables – NNN estimates the collectability of its accounts receivable related to rents, expense reimbursements and other revenues. NNN analyzes accounts receivable and historical bad debt levels, tenant credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, tenants in bankruptcy are analyzed and estimates are made in connection with the expected recovery of pre-petition and post-petition claims.

Debt Costs – Line of Credit Payable – Debt costs incurred in connection with NNN's $1,100,000,000 unsecured revolving line of credit have been deferred and are being amortized to interest expense over the term of the loan commitment using the straight-line method, which approximates the effective interest method. NNN has recorded debt costs associated with the credit facility as an asset, in debt costs on the Condensed Consolidated Balance Sheets.

Debt Costs – Notes Payable – Debt costs incurred in connection with the issuance of NNN’s notes payable have been deferred and are being amortized to interest expense over the term of the respective debt obligation using the effective interest method. NNN had debt costs of $38,145,000, included in notes payable on the Condensed Consolidated Balance Sheets, as of March 31, 2023 and December 31, 2022, net of accumulated amortization of $12,316,000 and $11,693,000, respectively.

Revenue Recognition – Rental revenues for properties under construction commence upon completion of construction of the leased asset and delivery of the leased asset to the tenant. Rental revenues for non-development real estate assets are recognized when earned in accordance with ASC 842, based on the terms of the lease of the leased asset. Leasehold interests are amortized on the straight-line method over the terms of their respective leases. When scheduled rentals vary during the lease term, income is recognized on a straight-line basis so as to produce a constant periodic rent over the term of the lease. Lease termination fees are recognized when collected subsequent to the related lease that is cancelled and NNN no longer has continuing involvement with the former tenant with respect to that property.

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The core principle of ASU 2014-09, “Revenue from Contracts with Customers" (Topic 606), is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Certain contracts are excluded from ASU 2014-09, including lease contracts within the scope of ASC 842. NNN determined the key revenue stream impacted by ASU 2014-09 is gain on disposition of real estate reported on the Condensed Consolidated Statements of Income and Comprehensive Income. In accordance with ASU 2014-09, NNN evaluates any separate contracts or performance obligations to determine proper timing and/or amount of revenue recognition, as well as, transaction price allocation.

Earnings Per Share – Earnings per share have been computed pursuant to the FASB guidance included in Earnings Per Share. The guidance requires classification of the Company’s unvested restricted share units, which carry rights to receive nonforfeitable dividends, as participating securities requiring the two-class method of computing earnings per share. Under the two-class method, earnings per common share are computed by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted average shares outstanding during the period.

The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted earnings per common share using the two-class method (dollars in thousands):

	Quarter Ended March 31,
	2023			2022
Basic and Diluted Earnings:
Net earnings available to NNN’s common stockholders	$	90,167		$	81,372
Less: Earnings allocated to unvested restricted shares		(132	)		(156	)
Net earnings used in basic and diluted earnings per share	$	90,035		$	81,216
Basic and Diluted Weighted Average Shares Outstanding:
Weighted average number of shares outstanding		181,720,238			175,635,634
Less: Unvested restricted shares		(240,699	)		(294,665	)
Less: Unvested contingent restricted shares		(634,036	)		(568,726	)
Weighted average number of shares outstanding used in     basic earnings per share		180,845,503			174,772,243
Other dilutive securities		588,842			138,970
Weighted average number of shares outstanding used in     diluted earnings per share		181,434,345			174,911,213

Income Taxes – NNN has made an election to be taxed as a REIT under Sections 856 through 860 of the Code, and related regulations. NNN generally will not be subject to federal income taxes on income it distributes to stockholders, providing it distributes 100 percent of its REIT taxable income and meets certain other requirements for qualifying as a REIT. As of March 31, 2023, NNN believes it has qualified as a REIT. Notwithstanding NNN’s qualification for taxation as a REIT, NNN is subject to certain state and local income, franchise and excise taxes.

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Fair Value Measurement – NNN’s estimates of fair value of financial and non-financial assets and liabilities are based on the framework established in the fair value accounting guidance. The framework specifies a hierarchy of valuation inputs which was established to increase consistency, clarity and comparability in fair value measurements and related disclosures. The guidance describes a fair value hierarchy based upon three levels of inputs that may be used to measure fair value, two of which are considered observable and one that is considered unobservable. The following describes the three levels:

•Level 1 – Valuation is based upon quoted prices in active markets for identical assets or liabilities.

•Level 2 – Valuation is based upon inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include option pricing models, discounted cash flow models and similar techniques.

Accumulated Other Comprehensive Income (Loss) – The following table outlines the changes in accumulated other comprehensive income (loss) for the quarter ended March 31, 2023 (dollars in thousands):

	Gain (Loss) on Cash Flow Hedges(1)
Beginning balance, December 31, 2022	$	(12,582	)
Reclassifications from accumulated other comprehensive income to net earnings		607		(2)
Ending balance, March 31, 2023	$	(11,975	)

(1) Additional disclosure is included in Note 5 – Notes Payable and Derivatives.

(2) Recorded in interest expense on the Condensed Consolidated Statements of Income and Comprehensive Income.

Use of Estimates – Additional critical accounting policies of NNN include management’s estimates and assumptions relating to the reporting of assets and liabilities, revenues and expenses and the disclosure of contingent assets and liabilities are required to prepare the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Significant accounting policies include management’s estimates of the purchase accounting for acquisition of real estate, the recoverability of the carrying value of long-lived assets and management's evaluation of the probability of outstanding and future lease payment collections. Actual results could differ from those estimates.

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Note 2 – Real Estate:

Real Estate – Portfolio

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.

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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.

Real Estate – Intangibles

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.

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Real Estate – Dispositions

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

Real Estate – Commitments

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):

Total commitment(1)	$	253,106
Less amount funded		(100,365	)
Remaining commitment	$	152,741

(1) Includes land, construction costs, tenant improvements, lease costs and capitalized interest.

Real Estate – Impairments

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.

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Note 3 – Line of Credit Payable:

NNN's $1,100,000,000 revolving credit facility (the "Credit Facility") had a weighted average outstanding balance of $182,350,000 and a weighted average interest rate of 5.35% during the quarter ended March 31, 2023. In December 2022, NNN entered into an amendment to the Credit Facility, to change the base interest rate from LIBOR to the Secured Overnight Financing Rate ("SOFR") plus a SOFR adjustment of 10 basis points ("Adjusted SOFR"). The Credit Facility bears interest at Adjusted SOFR plus 77.5 basis points; however, such interest rate may change pursuant to a tiered interest rate structure based on NNN's debt rating. Additionally, as part of NNN's environmental, social and governance ("ESG") initiative, pricing may be reduced if specified ESG metrics are achieved. The Credit Facility matures in June 2025, unless the Company exercises its options to extend maturity to June 2026. The Credit Facility also includes an accordion feature which permits NNN to increase the facility size up to $2,000,000,000, subject to lender approval. In connection with the Credit Facility, loan costs are classified as debt costs on the Condensed Consolidated Balance Sheets. As of March 31, 2023, $209,000,000 was outstanding and $891,000,000 was available for future borrowings under the Credit Facility, and NNN was in compliance with each of the financial covenants.

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Note 4 – Stockholders' Equity:

Universal Shelf Registration Statement – In August 2020, NNN filed a shelf registration statement with the Securities and Exchange Commission (the "Commission") which was automatically effective and permits the issuance by NNN of an indeterminate amount of debt and equity securities.

At-The-Market Offerings – Under NNN's shelf registration statement, NNN has established an at-the-market equity program ("ATM") which allows NNN to sell shares of common stock from time to time. The following outlines NNN's ATM program:

	2020 ATM
Established date	August 2020
Termination date	August 2023
Total allowable shares		17,500,000
Total shares issued as of March 31, 2023		7,422,185

The following table outlines the common stock issuances pursuant to NNN's ATM equity program for the quarter ended March 31, 2023 (dollars in thousands, except per share data):

Shares of common stock		349,809
Average price per share (net)	$	45.95
Net proceeds	$	16,074
Stock issuance costs(1)	$	294

(1) Stock issuance costs consist primarily of underwriters' fees and commissions, and legal and accounting fees.

There were no common stock issuances pursuant to NNN's ATM equity program for the quarter ended March 31, 2022.

Dividend Reinvestment and Stock Purchase Plan – In February 2021, NNN filed a shelf registration statement that was automatically effective with the Commission for its Dividend Reinvestment and Stock Purchase Plan ("DRIP"), which permits NNN to issue up to 6,000,000 shares of common stock. The following table outlines the common stock issuances pursuant to NNN's DRIP (dollars in thousands):

	Quarter Ended March 31,
	2023		2022
Shares of common stock		17,760		17,571
Net proceeds	$	822	$	748

Dividends – The following table outlines the dividends declared and paid for NNN's common stock (dollars in thousands, except per share data):

	Quarter Ended March 31,
	2023		2022
Common stock:
Dividends	$	99,401	$	92,751
Per share		0.550		0.530

In April 2023, NNN declared a dividend of $0.550 per share, which is payable in May 2023 to its common stockholders of record as of April 28, 2023.

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Note 5 – Notes Payable and Derivatives:

Information related to NNN's notes payable and derivatives is included in NNN's Annual Report on Form 10-K for the year ended December 31, 2022.

As of March 31, 2023, $11,975,000 remained in accumulated other comprehensive income (loss) related to NNN’s previously terminated interest rate hedges. During the quarters ended March 31, 2023 and 2022, NNN reclassified out of accumulated other comprehensive income (loss) $607,000 and $583,000, respectively, as an increase in interest expense. Over the next 12 months, NNN estimates that an additional $2,497,000 will be reclassified as an increase in interest expense from these terminated derivatives. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on NNN’s long-term debt.

NNN does not use derivatives for trading or speculative purposes. NNN had no derivative financial instruments outstanding at March 31, 2023.

Note 6 – Fair Value of Financial Instruments:

NNN believes the carrying value of its Credit Facility approximates fair value based upon its nature, terms and variable interest rate. NNN believes that the carrying value of its mortgages payable at March 31, 2023 and December 31, 2022, approximate fair value based upon current market prices of comparable instruments (Level 3). At March 31, 2023 and December 31, 2022, the fair value of NNN’s notes payable excluding unamortized discount and debt costs was $3,207,626,000 and $3,140,774,000, respectively, based upon quoted market prices as of the close of the period, which is a Level 1 valuation since NNN's notes payable are publicly traded.

Note 7 – Subsequent Events:

NNN has reviewed its subsequent events which have occurred after March 31, 2023, the date of the Condensed Consolidated Balance Sheet.

In April 2023, NNN repaid the remaining mortgages payable principal balance of $9,774,000 which was due in July 2023. No penalty was incurred as a result of this repayment.

There were no other reportable subsequent events or transactions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in the Annual Report on Form 10-K of NNN REIT, Inc. for the year ended December 31, 2022 ("2022 Annual Report"). The term “NNN” or the “Company” refers to NNN REIT, Inc. and all of its consolidated subsidiaries. Effective May 1, 2023, National Retail Properties, Inc. changed its name to NNN REIT, Inc.

Forward-Looking Statements

The information herein contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 (the “Exchange Act”). Also, when NNN uses any of the words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” or similar expressions, NNN is making forward-looking statements. Although management believes that the expectations reflected in such forward-looking statements are based upon present expectations and reasonable assumptions, NNN’s actual results could differ materially from those set forth in the forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and NNN undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law. The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statement:

•Changes in financial and economic conditions, including inflation may have an adverse impact on NNN, its tenants, and commercial real estate in general;

•Loss of rent from tenants would reduce NNN's cash flow;

•A significant portion of NNN's annual base rent is concentrated in specific industry classifications, tenants and geographic locations;

•NNN may not be able to successfully execute its acquisition or development strategies;

•NNN may not be able to dispose of properties consistent with its operating strategy;

•Certain provisions of NNN's leases or loan agreements may be unenforceable;

•Competition from numerous other real estate investment trusts (“REIT”), commercial developers, real estate limited partnerships and other investors may impede NNN’s ability to grow;

•A natural disaster or impacts of weather or other event resulting in uninsured loss may adversely affect the operations of NNN's tenants and therefore the ability of NNN's tenants to pay rent, NNN's operating results and asset values of NNN's property portfolio;

•NNN's ability to fully control the management of its net-leased properties may be limited;

•Vacant properties or bankrupt tenants could adversely affect NNN's business or financial condition;

•Cybersecurity risks and cyber incidents as well as other significant disruptions of NNN's information technology networks and related systems and resources, could adversely affect NNN's business, disrupt operations and expose NNN to liabilities to tenants, employees, capital providers, and other third parties;

•Future investment in international markets could subject NNN to additional risks;

•NNN may suffer a loss in the event of a default of or bankruptcy of a borrower;

•Property ownership through joint ventures and partnerships could limit NNN's control of those investments;

•NNN may be unable to obtain debt or equity capital on favorable terms, if at all;

•The amount of debt NNN has and the restrictions imposed by that debt could adversely affect NNN's business and financial condition;

•NNN is obligated to comply with financial and other covenants in its debt instruments that could restrict its operating activities, and the failure to comply with such covenants could result in defaults that accelerate the payment of such debt;

•NNN's ability to pay dividends in the future is subject to many factors;

•Owning real estate and indirect interests in real estate carries inherent risks;

•NNN's real estate investments are illiquid;

•NNN may be subject to known or unknown environmental liabilities and risks, including but not limited to liabilities and risks resulting from the existence of hazardous materials on or under properties owned by NNN;

•NNN's failure to qualify as a REIT for federal income tax purposes could result in significant tax liability;

•Compliance with REIT requirements, including distribution requirements, may limit NNN's flexibility and may negatively affect NNN's operating decisions;

•The share ownership restrictions of the Internal Revenue Code of 1986, as amended (the "Code"), for REITs and the 9.8% share ownership limit in NNN's charter may inhibit market activity in NNN's shares of stock and restrict NNN's business combination opportunities;

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•The cost of complying with changes in governmental laws and regulations may adversely affect NNN's results of operations;

•Non-compliance with Title III of the Americans with Disabilities Act of 1990 and similar state and local laws could have an adverse effect on NNN's business and operating results;

•NNN's loss of key management personnel could adversely affect performance and the value of its securities;

•NNN's failure to maintain effective internal control over financial reporting could have a material adverse effect on its business, operating results and the market value of NNN's securities;

•An epidemic or pandemic (such as the outbreak and worldwide spread of a novel strain of coronavirus, and its variants ("COVID-19")), and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, may precipitate or materially exacerbate one or more of the other risks, and may significantly disrupt NNN's tenants' ability to operate their businesses and/or pay rent to NNN or prevent NNN from operating its business in the ordinary course for an extended period;

•Acts of violence, terrorist attacks or war may affect NNN's properties, the markets in which NNN operates and NNN's results of operations;

•Changes in accounting pronouncements could adversely impact NNN's or NNN's tenants' reported financial performance;

•The market value of NNN's equity and debt securities is subject to various factors that may cause significant fluctuations or volatility;

•Even if NNN remains qualified as a REIT, NNN faces other tax liabilities that reduce operating results and cash flow; and

•Adverse legislative or regulatory tax changes could reduce NNN's earnings and cash flow and the market value of NNN's securities.

Additional information related to these risks and uncertainties are included in "Item 1A. Risk Factors" of NNN's 2022 Annual Report.

These risks and uncertainties may cause NNN's actual future results to differ materially from expected results. Readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. NNN undertakes no obligation to update or revise such forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

NNN, a Maryland corporation, is a fully integrated REIT formed in 1984. NNN's assets are primarily real estate assets. NNN acquires, owns, invests in and develops properties that are leased primarily to retail tenants under long-term net leases and are primarily held for investment ("Properties" or "Property Portfolio", or individually a "Property").

As of March 31, 2023, NNN owned 3,449 Properties, with an aggregate gross leasable area of approximately 35,251,000 square feet, located in 49 states, with a weighted average remaining lease term of 10.3 years. Approximately 99 percent of the Properties were leased as of March 31, 2023.

NNN’s management team focuses on certain key indicators to evaluate the financial condition and operating performance of NNN. The key indicators for NNN include items such as: the composition of the Property Portfolio (such as tenant, geographic and line of trade diversification), the occupancy rate of the Property Portfolio, certain financial performance ratios and profitability measures, industry trends and industry performance compared to that of NNN.

NNN evaluates the creditworthiness of its significant current and prospective tenants. This evaluation may include reviewing available financial statements, store level financial performance, press releases, public credit ratings from major credit rating agencies, industry news publications and financial market data (debt and equity pricing). NNN may also evaluate the business and operations of its significant tenants, including past payment history and periodically meeting with senior management of certain tenants.

NNN continues to maintain its diversification by tenant, geography and tenant's line of trade. NNN’s largest line of trade concentrations are the restaurant (including full and limited service) (17.9%), convenience store (16.3%), and automotive service (14.4%) sectors. These sectors represent a large part of the freestanding retail property marketplace and NNN’s management believes these sectors present attractive investment opportunities. The Property Portfolio is geographically concentrated in the south and southeast United States, which are regions of historically above-average population growth. Given these concentrations, any financial hardship within these sectors or geographic regions could have a material adverse effect on the financial condition and operating performance of NNN.

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As of March 31, 2023 and 2022, the Property Portfolio remained at least 99 percent leased and had a weighted average remaining lease term of approximately 10 years. High occupancy levels coupled with a net lease structure, provides enhanced probability of maintaining operating earnings.

Additional information related to NNN and the Property Portfolio is included in NNN's 2022 Annual Report.

Results of Operations

Property Analysis

General. The following table summarizes the Property Portfolio:

	March 31, 2023			December 31, 2022			March 31, 2022
Properties Owned:
Number		3,449			3,411			3,271
Total gross leasable area (square feet)		35,251,000			35,010,000			33,545,000
Properties:
Leased and unimproved land		3,429			3,390			3,245
Percent of Properties – leased and unimproved land		99	%		99	%		99	%
Weighted average remaining lease term (years)		10.3			10.4			10.6
Total gross leasable area (square feet) – leased		35,019,000			34,829,000			33,258,000

The following table summarizes the diversification of the Property Portfolio based on the top 20 lines of trade:

		% of Annual Base Rent(1)
	Lines of Trade	March 31, 2023	December 31, 2022	March 31, 2022
1.	Convenience stores	16.3%	16.5%	17.5%
2.	Automotive service	14.4%	13.7%	12.6%
3.	Restaurants – full service	9.0%	9.1%	9.7%
4.	Restaurants – limited service	8.9%	8.9%	9.2%
5.	Family entertainment centers	5.8%	5.9%	6.2%
6.	Health and fitness	4.8%	4.9%	5.0%
7.	Theaters	4.3%	4.3%	4.4%
8.	Recreational vehicle dealers, parts and accessories	4.1%	4.1%	4.1%
9.	Equipment rental	3.1%	3.1%	3.1%
10.	Automotive parts	2.6%	2.6%	3.0%
11.	Wholesale clubs	2.6%	2.6%	2.4%
12.	Drug stores	2.6%	2.6%	1.2%
13.	Home improvement	2.3%	2.3%	2.4%
14.	Furniture	2.1%	2.3%	2.4%
15.	Medical service providers	1.9%	1.9%	2.0%
16.	General merchandise	1.5%	1.6%	1.6%
17.	Home furnishings	1.4%	1.4%	1.5%
18.	Consumer electronics	1.4%	1.4%	1.5%
19.	Travel plazas	1.3%	1.4%	1.5%
20.	Automobile auctions, wholesale	1.2%	1.3%	1.3%
	Other	8.4%	8.1%	7.4%
		100.0%	100.0%	100.0%

(1) Based on annualized base rent for all leases in place for each respective period.

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Property Acquisitions. The following table summarizes the Property acquisitions (dollars in thousands):

	Quarter Ended March 31,
	2023			2022
Acquisitions:
Number of Properties		43			59
Gross leasable area (square feet)(1)		275,000			879,000
Cap rate(2)		7.0	%		6.2	%
Total dollars invested(3)	$	156,244		$	210,823

(1)	Includes additional square footage from completed construction on existing Properties.
(2)	The cap rate is a weighted average, calculated as the initial cash annual base rent divided by the total purchase price of the Properties.
(3)	Includes dollars invested in projects under construction or tenant improvements for each respective period.

NNN typically funds Property acquisitions either through borrowings under NNN's unsecured revolving credit facility (the "Credit Facility") or by issuing its debt or equity securities in the capital markets.

Property Dispositions. The following table summarizes the Properties sold by NNN (dollars in thousands):

	Quarter Ended March 31,
	2023			2022
Number of properties		6			10
Gross leasable area (square feet)		16,000			81,000
Net sales proceeds	$	11,925		$	20,074
Net gain on disposition of real estate	$	6,300		$	3,992
Cap rate(1)		6.6	%		5.9	%

(1) The cap rate is a weighted average of properties occupied at disposition, calculated as the cash annual base rent divided by the total sales price of the properties.

NNN typically uses the proceeds from a Property disposition to either pay down the Credit Facility or reinvest in real estate.

Analysis of Revenue

General. During the quarter ended March 31, 2023, total revenues increased as compared to the same period in 2022, primarily due to the income generated from newly acquired Properties. (See "Results of Operations – Property Analysis – Property Acquisitions").

The following table summarizes NNN’s revenues (dollars in thousands):

	Quarter Ended March 31,				Percent Increase
	2023		2022		(Decrease)
Rental Revenues(1)	$	199,090	$	185,163		7.5	%
Real estate expense reimbursement from tenants		4,540		4,600		(1.3	)%
Rental income		203,630		189,763		7.3	%
Interest and other income from real estate transactions		478		516		(7.4	)%
Total revenues	$	204,108	$	190,279		7.3	%

(1) Includes rental income from operating leases, earned income from direct financing leases and percentage rent ("Rental Revenues").

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Quarter Ended March 31, 2023 versus Quarter Ended March 31, 2022

Rental Income. Rental income increased for the quarter ended March 31, 2023, as compared to the same period in 2022. The increase is primarily due to Property acquisitions:

•a partial period of Rental Revenue from 43 Properties with aggregate gross leasable area of approximately 275,000 square feet acquired in 2023, and

•a full period of Rental Revenue from 223 Properties with aggregate gross leasable area of approximately 2,629,000 square feet acquired in 2022.

Analysis of Expenses

General. Operating expenses increased for the quarter ended March 31, 2023, as compared to the same period in 2022. The following table summarizes NNN’s expenses (dollars in thousands):

	Quarter Ended March 31,						Percent Increase
	2023			2022			(Decrease)
General and administrative	$	12,251		$	11,042			10.9	%
Real estate		6,846			7,198			(4.9	)%
Depreciation and amortization		59,148			52,680			12.3	%
Leasing transaction costs		75			88			(14.8	)%
Impairment losses – real estate, net of recoveries		2,640			1,632			61.8	%
Executive retirement costs		423			3,594			(88.2	)%
Total operating expenses	$	81,383		$	76,234			6.8	%
Interest and other income	$	(33	)	$	(35	)		(5.7	)%
Interest expense		38,891			36,699			6.0	%
Total other expenses	$	38,858		$	36,664			6.0	%

As a percentage of total revenues:
General and administrative	6.0%	5.8%
Real estate	3.4%	3.8%

Quarter Ended March 31, 2023 versus Quarter Ended March 31, 2022

General and Administrative. General and administrative expenses increased in amount and as a percentage of total revenues for the quarter ended March 31, 2023, as compared to the same period in 2022. The increase is primarily attributable to an increase in long-term incentive compensation costs.

Depreciation and Amortization. Depreciation and amortization expenses increased for the quarter ended March 31, 2023, as compared to the same period in 2022, primarily due to the acquisition of 43 Properties with an aggregate gross leasable area of approximately 275,000 square feet in 2023 and 223 Properties with an aggregate gross leasable area of approximately 2,629,000 square feet in 2022.

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Impairment Losses – Real Estate, Net of Recoveries. 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

For the quarters ended March 31, 2023 and 2022, real estate impairments, net of recoveries, was less than one percent of NNN's total assets for the respective periods as reported on the Condensed Consolidated Balance Sheets. Due to NNN's core business of investing in real estate leased primarily to retail tenants under long-term net leases, the inherent risks of owning commercial real estate, and unknown potential changes in financial and economic conditions that may impact NNN's tenants, NNN believes it is reasonably possible to incur real estate impairment charges in the future.

Executive Retirement Costs. Executive retirement costs decreased for the quarter ended March 31, 2023, as compared to the same period in 2022. In April 2022, the former President and Chief Executive Officer retired from employment, as contemplated under the Company’s long-term executive succession planning process and as previously announced in January 2022. During the quarters ended March 31, 2023 and 2022, NNN recorded executive retirement costs in connection with the long-term incentive compensation related to the retirement and transition agreement.

Interest Expense. Interest expense increased for the quarter ended March 31, 2023, as compared to the same period in 2022. The increase is primarily due to the Credit Facility having a weighted average outstanding balance of $182,350,000 with a weighted average interest rate of 5.35% for the quarter ended March 31, 2023 compared to no weighted average outstanding balance for the quarter ended March 31, 2022.

Liquidity and Capital Resources

NNN’s demand for funds has been, and will continue to be, primarily for (i) payment of operating expenses and cash dividends; (ii) Property acquisitions and development; (iii) capital expenditures; (iv) payment of principal and interest on its outstanding indebtedness; and (v) other investments.

Financing Strategy. NNN’s financing objective is to manage its capital structure effectively in order to provide sufficient capital to execute its operating strategy while servicing its debt requirements, maintaining its investment grade credit rating, staggering debt maturities and providing value to NNN’s stockholders. NNN’s capital resources have and will continue to include, if available (i) proceeds from the issuance of public or private equity or debt capital market transactions; (ii) secured or unsecured borrowings from banks or other lenders; (iii) proceeds from the sale of Properties; and (iv) to a lesser extent, by internally generated funds as well as undistributed funds from operations. However, there can be no assurance that additional financing or capital will be available, or that the terms will be acceptable or advantageous to NNN.

NNN typically expects to fund both its short-term and long-term liquidity requirements, including investments in additional Properties, with cash and cash equivalents, cash provided from operations and advances from NNN's Credit Facility. As of March 31, 2023, NNN had $3,240,000 of cash and cash equivalents and $891,000,000 available for future borrowings under the Credit Facility. NNN may also fund liquidity requirements with new debt or equity issuances, although newly issued debt may be at higher interest rates than the rates on NNN's existing debt outstanding. NNN has the ability to limit future property acquisitions and strategically increase property dispositions. NNN expects these sources of liquidity and the discretionary nature of its property acquisition funding needs will allow NNN to meet its financial obligations over the long term.

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Cash Flows. NNN had $3,240,000 in cash and cash equivalents and $2,086,000 in restricted cash or cash held in escrow at March 31, 2023. The table below summarizes NNN’s cash flows (dollars in thousands):

	Quarter Ended March 31,
	2023			2022
Cash and cash equivalents:
Provided by operating activities	$	180,822		$	164,338
Used in investing activities		(142,346	)		(189,643	)
Used in financing activities		(39,928	)		(92,281	)
Decrease		(1,452	)		(117,586	)
Net cash at beginning of period		6,778			171,322
Net cash at end of period	$	5,326		$	53,736

Cash flow activities include:

Operating Activities. Cash provided by operating activities represents cash received primarily from Rental Revenue and interest income less cash used for general and administrative expenses. NNN’s cash flow from operating activities has been sufficient to pay the distributions for each period presented. The change in cash provided by operations for the quarters ended March 31, 2023 and 2022, is primarily the result of changes in revenues and expenses as discussed in “Results of Operations.” Cash generated from operations is expected to fluctuate in the future.

Investing Activities. Changes in cash for investing activities are primarily attributable to the acquisitions and dispositions of Properties as discussed in "Results of Operations – Property Analysis." NNN typically uses cash on hand or proceeds from its Credit Facility to fund the acquisition of its Properties.

Financing Activities. NNN’s financing activities for the quarter ended March 31, 2023, included the following significant transactions:

•$42,800,000 in net borrowings from NNN's Credit Facility,

•$16,074,000 from the issuance of 349,809 shares of common stock in connection with the at-the-market ("ATM") equity program,

•$822,000 from the issuance of 17,760 shares of common stock in connection with the Dividend Reinvestment and Stock Purchase Plan ("DRIP"), and

•$99,401,000 in dividends paid to common stockholders.

Material Cash Requirements

NNN's material cash requirements include (i) long-term debt maturities; (ii) interest on long-term debt; (iii) common stock dividends (although all future distributions will be declared and paid at the discretion of the Board of Directors); and (iv) to a lesser extent, Property construction and other Property related costs that may arise.

The table below presents material cash requirements related to NNN's long-term obligations outstanding as of March 31, 2023 (see "Capital Structure") (dollars in thousands):

	Date of Obligation
	Total		2023			2024		2025		2026		2027		Thereafter
Long-term debt(1)	$	3,809,774	$	9,774	(2)	$	350,000	$	400,000	$	350,000	$	400,000	$	2,300,000
Long-term debt – interest(3)		1,787,713		102,472			129,006		120,750		106,225		91,233		1,238,027
Credit Facility		209,000		—			—		209,000		—		—		—
Headquarters office lease		10,721		618			837		210		981		1,005		7,070
Total contractual cash     obligations	$	5,817,208	$	112,864		$	479,843	$	729,960	$	457,206	$	492,238	$	3,545,097

(1)	Includes only principal amounts outstanding under mortgages payable and notes payable and excludes unamortized mortgage premiums, note discounts and debt costs.
(2)	In April 2023, NNN repaid the remaining mortgages payable principal balance of $9,774 which was due in July 2023. No penalty was incurred as a result of this repayment.
(3)	Interest calculation on notes payable based on stated rate of the principal amount.

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Property Construction. NNN has committed to fund construction on 32 Properties. The improvements of such Properties are estimated to be completed within 12 months. These construction commitments, at March 31, 2023, are outlined in the table below (dollars in thousands):

Total commitment(1)	$	253,106
Less amount funded		(100,365	)
Remaining commitment	$	152,741

(1) Includes land, construction costs, tenant improvements, lease costs and capitalized interest.

Management anticipates satisfying these obligations with a combination of NNN’s cash provided from operations, current capital resources on hand, its Credit Facility, debt or equity financings and asset dispositions.

Properties. Generally, the Properties are leased under long-term triple net leases, which require the tenant to pay all property taxes and assessments, utilities, to maintain the interior and exterior of the property, and to carry property and liability insurance coverage. Therefore, management anticipates that capital demands to meet obligations with respect to these Properties will be modest for the foreseeable future and can be met with funds from operations and working capital. Certain Properties are subject to leases under which NNN retains responsibility for specific costs and expenses associated with the Property. Management anticipates the costs associated with these Properties, NNN's vacant Properties or those Properties that become vacant will also be met with funds from operations and working capital. NNN may be required to borrow under its Credit Facility or use other sources of capital in the event of significant capital expenditures or major repairs.

The lost revenues and increased property expenses resulting from vacant Properties or the inability to collect lease revenues could have a material adverse effect on the liquidity and results of operations if NNN is unable to re-lease the Properties at comparable rental rates and in a timely manner.

As of March 31, 2023, NNN owned 20 vacant, un-leased Properties which accounted for less than one percent of total Properties, and less than one percent of aggregate gross leasable area held in the Property Portfolio.

Additionally, as of April 27, 2023, less than one percent of total Properties, and less than one percent of aggregate gross leasable area held in the Property Portfolio, was leased to two tenants currently in bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. As a result, these tenants have the right to reject or affirm their leases with NNN.

NNN generally monitors the financial performance of its significant tenants on an ongoing basis.

Dividends. One of NNN’s primary objectives is to distribute a substantial portion of its funds available from operations to its stockholders in the form of dividends, while retaining sufficient cash for reserves and working capital purposes and maintaining its status as a REIT.

The following table outlines the dividends declared and paid for NNN's common stock (dollars in thousands, except per share data):

	Quarter Ended March 31,
	2023		2022
Common stock:
Dividends	$	99,401	$	92,751
Per share		0.550		0.530

In April 2023, NNN declared a dividend of $0.550 per share which is payable in May 2023 to its common stockholders of record as of April 28, 2023.

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Capital Structure

NNN has used, and expects to use in the future, various forms of debt and equity securities primarily to pay down or refinance its outstanding debt, to finance property acquisitions and to fund construction on its Properties.

The following is a summary of NNN’s total outstanding debt as of (dollars in thousands):

	March 31, 2023		Percentage of Total			December 31, 2022		Percentage of Total
Line of credit payable	$	209,000		5.3	%	$	166,200		4.2	%
Mortgages payable(1)		9,774		0.2	%		9,964		0.3	%
Notes payable		3,740,945		94.5	%		3,739,890		95.5	%
Total outstanding debt	$	3,959,719		100.0	%	$	3,916,054		100.0	%

(1) In April 2023, NNN repaid the remaining mortgages payable principal balance of $9,774 which was due in July 2023. No penalty was incurred as a result of this repayment.

Line of Credit Payable. NNN's $1,100,000,000 Credit Facility had a weighted average outstanding balance of $182,350,000 and a weighted average interest rate of 5.35% during the quarter ended March 31, 2023. In December 2022, NNN entered into an amendment to the Credit Facility, to change the base interest rate from LIBOR to the Secured Overnight Financing Rate ("SOFR") plus a SOFR adjustment of 10 basis points ("Adjusted SOFR"). The Credit Facility bears interest at Adjusted SOFR plus 77.5 basis points; however, such interest rate may change pursuant to a tiered interest rate structure based on NNN's debt rating. Additionally, as part of NNN's environmental, social and governance ("ESG") initiative, pricing may be reduced if specified ESG metrics are achieved. The Credit Facility matures in June 2025, unless the Company exercises its options to extend maturity to June 2026. The Credit Facility also includes an accordion feature which permits NNN to increase the facility size up to $2,000,000,000, subject to lender approval. In connection with the Credit Facility, loan costs are classified as debt costs on the Condensed Consolidated Balance Sheets. As of March 31, 2023, $209,000,000 was outstanding and $891,000,000 was available for future borrowings under the Credit Facility, and NNN was in compliance with each of the financial covenants.

Universal Shelf Registration Statement. In August 2020, NNN filed a shelf registration statement with the Securities and Exchange Commission (the "Commission") which was automatically effective and permits the issuance by NNN of an indeterminate amount of debt and equity securities. Information related to NNN's publicly held debt and equity securities is included in NNN's 2022 Annual Report.

Debt Securities – Notes Payable. Each of NNN’s outstanding series of unsecured notes is summarized in the table below (dollars in thousands):

Notes	Issue Date	Principal		Discount(1)		Net Price		Stated Rate	Effective Rate(2)	Maturity Date
2024(3)	May 2014	$	350,000	$	707	$	349,293	3.900%	3.924%	June 2024(4)
2025(3)	October 2015		400,000		964		399,036	4.000%	4.029%	November 2025(4)
2026(3)	December 2016		350,000		3,860		346,140	3.600%	3.733%	December 2026(4)
2027(3)	September 2017		400,000		1,628		398,372	3.500%	3.548%	October 2027(4)
2028(3)	September 2018		400,000		2,848		397,152	4.300%	4.388%	October 2028
2030(3)	March 2020		400,000		1,288		398,712	2.500%	2.536%	April 2030
2048	September 2018		300,000		4,239		295,761	4.800%	4.890%	October 2048
2050	March 2020		300,000		6,066		293,934	3.100%	3.205%	April 2050
2051	March 2021		450,000		8,406		441,594	3.500%	3.602%	April 2051
2052(3)	September 2021		450,000		10,422		439,578	3.000%	3.118%	April 2052

(1)	The note discounts are amortized to interest expense over the respective term of each debt obligation using the effective interest method.
(2)	Includes the effects of the discount at issuance.
(3)	NNN entered into forward starting swaps which were hedging the risk of changes in forecasted interest payments on forecasted issuance of long-term debt. Upon the issuance of a series of unsecured notes, NNN terminated such derivatives, and the resulting fair value was deferred in other comprehensive income. The deferred liability (asset) is being amortized over the term of the respective notes using the effective interest method. Additional disclosure is included in Note 5 – Notes Payable and Derivatives.
(4)	The aggregate principal balance of the unsecured note maturities for the next five years is $1,500,000.

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Each series of the notes represents senior, unsecured obligations of NNN and is subordinated to all secured debt of NNN. Each of the notes is redeemable at the option of NNN, in whole or in part, at a redemption price equal to the sum of (i) the principal amount of the notes being redeemed plus all accrued and unpaid interest thereon through the redemption date and (ii) the make-whole amount, if any, as defined in the applicable supplemental indenture relating to the notes.

In connection with the outstanding debt offerings, NNN incurred debt issuance costs totaling $38,145,000 consisting primarily of underwriting discounts and commissions, legal and accounting fees, rating agency fees and printing expenses. Debt issuance costs for all note issuances have been deferred and presented as a reduction to notes payable and are being amortized over the term of the respective notes using the effective interest method.

In accordance with the terms of the indentures, pursuant to which NNN’s notes have been issued, NNN is required to meet certain restrictive financial covenants, which, among other things, require NNN to maintain (i) certain leverage ratios and (ii) certain interest coverage. At March 31, 2023, NNN was in compliance with those covenants.

Equity Securities

At-The-Market Offerings. Under NNN's shelf registration statement, NNN established an ATM equity program which allows NNN to sell shares of common stock from time to time. The following outlines NNN's ATM program:

	2020 ATM
Established date	August 2020
Termination date	August 2023
Total allowable shares	17,500,000
Total shares issued as of March 31, 2023	7,422,185

The following table outlines the common stock issuances pursuant to NNN's ATM equity program for the quarter ended March 31, 2023 (dollars in thousands, except per share data):

Shares of common stock		349,809
Average price per share (net)	$	45.95
Net proceeds	$	16,074
Stock issuance costs(1)	$	294

(1) Stock issuance costs consist primarily of underwriters' fees and commissions, and legal and accounting fees.

There were no common stock issuances pursuant to NNN's ATM equity program for the quarter ended March 31, 2022.

Dividend Reinvestment and Stock Purchase Plan. In February 2021, NNN filed a shelf registration statement that was automatically effective with the Commission for its DRIP, which permits NNN to issue up to 6,000,000 shares of common stock. NNN’s DRIP provides an economical and convenient way for current stockholders and other interested new investors to invest in NNN’s common stock. The following outlines the common stock issuances pursuant to NNN’s DRIP (dollars in thousands):

	Quarter Ended March 31,
	2023		2022
Shares of common stock		17,760		17,571
Net proceeds	$	822	$	748

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Critical Accounting Estimates

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles. The unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The preparation of NNN’s condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as other disclosures in the condensed consolidated financial statements. On an ongoing basis, management evaluates its estimates and assumptions; however, actual results may differ from these estimates and assumptions, which in turn could have a material impact on NNN’s consolidated financial statements. A summary of NNN’s critical accounting estimates are included in NNN’s 2022 Annual Report. NNN has not made any material changes to these policies during the periods covered by this Quarterly Report on Form 10-Q.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

NNN is exposed to interest rate risk primarily as a result of its variable rate Credit Facility and its fixed rate long-term debt which is used to finance NNN’s Property acquisitions and development activities, as well as for general corporate purposes. NNN’s interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to reduce overall borrowing costs. To achieve its objectives, NNN borrows at both fixed and variable rates on its long-term debt and periodically uses derivatives to hedge the interest rate risk of future borrowings. As of March 31, 2023, NNN had no outstanding derivatives.

As of March 31, 2023, NNN's variable rate Credit Facility had $209,000,000 outstanding, a weighted average outstanding balance of $182,350,000 and a weighted average interest rate of 5.35% compared to no weighted average outstanding balance for the same period in 2022.

The information in the table below summarizes NNN’s market risks associated with its debt obligations outstanding. The table presents, by year of expected maturity, principal payments and related interest rates for debt obligations outstanding as of March 31, 2023. The table incorporates only those debt obligations that existed as of March 31, 2023, and it does not consider those debt obligations or positions which could arise after this date and therefore has limited predictive value. As a result, NNN’s ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period, NNN’s hedging strategies at that time and interest rates. If interest rates on NNN's variable rate debt increased by one percent, NNN's interest expense would have increased by approximately one percent for the quarter ended March 31, 2023.

Debt Obligations (dollars in thousands)
	Variable Rate Debt					Fixed Rate Debt
	Credit Facility					Mortgages(1)					Unsecured Debt(2)
	Debt Obligation		Weighted Average Interest Rate			Principal Debt Obligation		Weighted Average Interest Rate			Principal Debt Obligation		Effective Interest Rate
2023	$	—		—		$	9,774		5.23	%	$	—		—
2024		—		—			—		—			350,000		3.92	%
2025		209,000		5.35	%		—		—			400,000		4.03	%
2026		—		—			—		—			350,000		3.73	%
2027		—		—			—		—			400,000		3.55	%
Thereafter		—		—			—		—			2,300,000		3.58	%	(3)
Total	$	209,000		5.35	%	$	9,774		5.23	%	$	3,800,000		3.67	%
Fair Value:
March 31, 2023	$	209,000				$	9,774				$	3,207,626
December 31, 2022	$	166,200				$	9,947				$	3,140,774

(1)	NNN's mortgages payable represent principal payments by year and exclude both unamortized premiums and debt costs. In April 2023, NNN repaid the remaining mortgages payable principal balance of $9,774 which was due in July 2023. No penalty was incurred as a result of this repayment.
(2)	Includes NNN’s notes payable, each exclude unamortized discounts and debt costs. The fair value is based upon quoted market prices as of the close of the period, which is a Level 1 valuation since NNN's notes payable are publicly traded on the over-the-counter market.
(3)	Weighted average effective interest rate for periods after 2027.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. An evaluation was performed under the supervision and with the participation of NNN's management, including NNN's Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer ("NNN's Chief Officers"), of the effectiveness as of March 31, 2023, of the design and operation of NNN's disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, NNN's Chief Officers concluded that the design and operation of these disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting. There has been no change in NNN's internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, NNN's internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings. Not applicable.

Item 1A. Risk Factors.

There were no material changes in NNN's risk factors disclosed in Item 1A. Risk Factors in NNN's Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Not applicable.

Item 3. Defaults Upon Senior Securities. Not applicable.

Item 4. Mine Safety Disclosures. Not applicable.

Item 5. Other Information. Not applicable.

Item 6. Exhibits

The following exhibits are filed as a part of this report.

3.	Articles of Incorporation and By-laws
		3.1	First Amended and Restated Articles of Incorporation of the Registrant, as amended through the Second Amendment, dated May 1, 2023 (filed on April 27, 2023 as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K).
		3.2	Third Amended and Restated Bylaws of the Registrant, as amended through the Fifth Amendment to Bylaws, dated May 1, 2023 (filed on April 27, 2023 as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K).
31.	Section 302 Certifications(1)
		31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
		31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.	Section 906 Certifications(1)
		32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
		32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
101.	Interactive Data File
		101.1	The following materials from NNN REIT, Inc. Quarterly Report on Form 10-Q for the period ended March 31, 2023, are formatted in Inline Extensible Business Reporting Language ("Inline XBRL"): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of income and comprehensive income, (iii) condensed consolidated statements of cash flows, and (iv) notes to condensed consolidated financial statements.
104.	Cover Page Interactive Data File
		104.1	The cover page XBRL tags are embedded within the Inline XBRL document and included in Exhibit 101.
(1)	In accordance with Item 601(b)(32) of Regulation S-K, this exhibit is not deemed "filed" for purposes of section 18 of the exchange act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the securities act or the exchange act, except to the extent that the registrant specifically incorporates it by reference.

32

33

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DATED this 2nd day of May, 2023.

NNN REIT, INC.
By:	/s/ Stephen A. Horn, Jr.
	Stephen A. Horn, Jr.
	Chief Executive Officer, President and Director
By:	/s/ Kevin B. Habicht
	Kevin B. Habicht
	Chief Financial Officer, Executive Vice President and Director

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