10-Q

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 June 30, 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 July 28, 2023, the registrant had 182,408,264 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	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
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		33

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NNN REIT, INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

	June 30, 2023			December 31, 2022
	(unaudited)
ASSETS
Real estate portfolio, net of accumulated depreciation and amortization	$	8,221,192		$	8,020,814
Cash and cash equivalents		2,281			2,505
Restricted cash and cash held in escrow		2,971			4,273
Receivables, net of allowance of $686 and $708, respectively		2,246			3,612
Accrued rental income, net of allowance of $3,861 and $3,836, respectively		28,422			27,795
Debt costs, net of accumulated amortization of $22,807 and $21,663, respectively		4,333			5,352
Other assets		84,490			81,694
Total assets	$	8,345,935		$	8,146,045
LIABILITIES AND EQUITY
Liabilities:
Line of credit payable	$	332,500		$	166,200
Mortgages payable, including unamortized premium and net of unamortized debt costs		—			9,964
Notes payable, net of unamortized discount and unamortized debt costs		3,742,012			3,739,890
Accrued interest payable		24,779			23,826
Other liabilities		96,410			82,663
Total liabilities		4,195,701			4,022,543
Equity:
Stockholders’ equity:
Common stock, $0.01 par value. Authorized 375,000,000 shares; 182,407,911 and     181,424,670 shares issued and outstanding, respectively		1,825			1,815
Capital in excess of par value		4,963,808			4,928,034
Accumulated deficit		(804,040	)		(793,765	)
Accumulated other comprehensive income (loss)		(11,359	)		(12,582	)
Total stockholders’ equity of NNN		4,150,234			4,123,502
Total liabilities and equity	$	8,345,935		$	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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenues:
Rental income	$	202,426		$	190,536		$	406,056		$	380,299
Interest and other income from real estate transactions		214			247			692			763
		202,640			190,783			406,748			381,062
Operating expenses:
General and administrative		10,740			9,740			22,991			20,782
Real estate		6,836			6,173			13,682			13,371
Depreciation and amortization		59,875			57,444			119,023			110,124
Leasing transaction costs		52			76			127			164
Impairment losses – real estate, net of recoveries		34			4,618			2,674			6,250
Executive retirement costs		309			2,655			732			6,249
		77,846			80,706			159,229			156,940
Gain on disposition of real estate		13,930			775			20,230			4,767
Earnings from operations		138,724			110,852			267,749			228,889
Other expenses (revenues):
Interest and other income		(74	)		(52	)		(107	)		(87	)
Interest expense		40,094			36,739			78,985			73,438
		40,020			36,687			78,878			73,351
Net earnings		98,704			74,165			188,871			155,538
Loss attributable to noncontrolling interests		—			6			—			5
Net earnings attributable to common stockholders	$	98,704		$	74,171		$	188,871		$	155,543
Net earnings per share of common stock:
Basic	$	0.54		$	0.42		$	1.04		$	0.89
Diluted	$	0.54		$	0.42		$	1.04		$	0.89
Weighted average number of common shares outstanding:
Basic		181,092,031			174,956,856			180,969,809			174,867,049
Diluted		181,627,857			175,107,914			181,544,275			175,021,871
Other comprehensive income:
Net earnings attributable to NNN	$	98,704		$	74,171		$	188,871		$	155,543
Amortization of interest rate hedges		616			592			1,223			1,175
Comprehensive income attributable to NNN		99,320			74,763			190,094			156,718
Comprehensive loss attributable to       noncontrolling interests		—			(6	)		—			(5	)
Total comprehensive income	$	99,320		$	74,757		$	190,094		$	156,713

See accompanying notes to condensed consolidated financial statements.

2

NNN REIT, INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Quarter Ended June 30, 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 March 31, 2023	$	1,822	$	4,948,024		$	(802,999	)	$	(11,975	)	$	4,134,872		$	—	$	4,134,872
Net earnings		—		—			98,704			—			98,704			—		98,704
Dividends declared and paid:
$0.550 per share of common stock		—		731			(99,745	)		—			(99,014	)		—		(99,014	)
Issuance of common stock:
7,623 shares – director compensation		—		270			—			—			270			—		270
1,444 shares – stock purchase plan		—		62			—			—			62			—		62
300,326 shares – ATM equity program		3		12,779			—			—			12,782			—		12,782
Stock issuance costs		—		(264	)		—			—			(264	)		—		(264	)
Amortization of deferred compensation		—		2,206			—			—			2,206			—		2,206
Amortization of interest rate hedges		—		—			—			616			616			—		616
Balances at June 30, 2023	$	1,825	$	4,963,808		$	(804,040	)	$	(11,359	)	$	4,150,234		$	—	$	4,150,234

See accompanying notes to condensed consolidated financial statements.

3

NNN REIT, INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY – CONTINUED

Quarter Ended June 30, 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 March 31, 2022	$	1,759	$	4,669,590		$	(759,232	)	$	(14,373	)	$	3,897,744		$	2		$	3,897,746
Net earnings		—		—			74,171			—			74,171			(6	)		74,165
Dividends declared and paid:
$0.530 per share of common stock		—		647			(92,878	)		—			(92,231	)		—			(92,231	)
Issuance of common stock:
8,040 shares – director compensation		—		304			—			—			304			—			304
1,394 shares – stock purchase plan		—		60			—			—			60			—			60
717,473 shares – ATM equity program		7		31,586			—			—			31,593			—			31,593
66,651 restricted shares – net of forfeitures		1		(1	)		—			—			—			—			—
Stock issuance costs		—		(510	)		—			—			(510	)		—			(510	)
Amortization of deferred compensation		—		4,085			—			—			4,085			—			4,085
Amortization of interest rate hedges		—		—			—			592			592			—			592
Distributions to noncontrolling interests		—		—			—			—			—			(278	)		(278	)
Other		—		(282	)		—			—			(282	)		282			—
Balances at June 30, 2022	$	1,767	$	4,705,479		$	(777,939	)	$	(13,781	)	$	3,915,526		$	—		$	3,915,526

See accompanying notes to condensed consolidated financial statements.

4

NNN REIT, INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY – CONTINUED

Six Months Ended June 30, 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		—		—			188,871			—			188,871			—		188,871
Dividends declared and paid:
$1.100 per share of common stock		—		1,455			(199,146	)		—			(197,691	)		—		(197,691	)
Issuance of common stock:
15,806 shares – director compensation		—		539			—			—			539			—		539
3,576 shares – stock purchase plan		—		160			—			—			160			—		160
650,135 shares – ATM equity program		7		29,143			—			—			29,150			—		29,150
255,667 restricted shares – net of forfeitures		3		(3	)		—			—			—			—		—
Stock issuance costs		—		(558	)		—			—			(558	)		—		(558	)
Amortization of deferred compensation		—		5,038			—			—			5,038			—		5,038
Amortization of interest rate hedges		—		—			—			1,223			1,223			—		1,223
Balances at June 30, 2023	$	1,825	$	4,963,808		$	(804,040	)	$	(11,359	)	$	4,150,234		$	—	$	4,150,234

See accompanying notes to condensed consolidated financial statements.

5

NNN REIT, INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY – CONTINUED

Six Months Ended June 30, 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		—		—			155,543			—			155,543			(5	)		155,538
Dividends declared and paid:
$1.060 per share of common stock		—		1,343			(185,629	)		—			(184,286	)		—			(184,286	)
Issuance of common stock:
16,469 shares – director compensation		—		609			—			—			609			—			609
2,567 shares – stock purchase plan		—		112			—			—			112			—			112
717,473 shares – ATM equity program		7		31,586			—			—			31,593			—			31,593
219,951 restricted shares – net of forfeitures		3		(3	)		—			—			—			—			—
Stock issuance costs		—		(575	)		—			—			(575	)		—			(575	)
Amortization of deferred compensation		—		9,975			—			—			9,975			—			9,975
Amortization of interest rate hedges		—		—			—			1,175			1,175			—			1,175
Distributions to noncontrolling interests		—		—			—			—			—			(278	)		(278	)
Other		—		(282	)		—			—			(282	)		282			—
Balances at June 30, 2022	$	1,767	$	4,705,479		$	(777,939	)	$	(13,781	)	$	3,915,526		$	—		$	3,915,526

See accompanying notes to condensed consolidated financial statements.

6

NNN REIT, INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

	Six Months Ended June 30,
	2023			2022
Cash flows from operating activities:
Net earnings	$	188,871		$	155,538
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		119,023			110,124
Impairment losses – real estate, net of recoveries		2,674			6,250
Amortization of notes payable discount		869			837
Amortization of debt costs		2,401			2,349
Amortization of mortgages payable premium		(21	)		(43	)
Amortization of interest rate hedges		1,223			1,175
Gain on disposition of real estate		(20,230	)		(4,767	)
Performance incentive plan expense		6,290			10,837
Performance incentive plan payment		(916	)		(103	)
Change in operating assets and liabilities, net of assets acquired and liabilities assumed:
Decrease in receivables		550			542
Decrease (increase) in accrued rental income		(1,003	)		2,643
Increase in other assets		(721	)		(1,369	)
Increase (decrease) in accrued interest payable		953			(745	)
Decrease in other liabilities		(721	)		(8,008	)
Other		52			51
Net cash provided by operating activities		299,294			275,311
Cash flows from investing activities:
Proceeds from the disposition of real estate		40,450			29,203
Additions to real estate		(327,739	)		(357,460	)
Principal payments received on mortgages and notes receivable		324			306
Other		(1,144	)		(1,505	)
Net cash used in investing activities		(288,109	)		(329,456	)

See accompanying notes to condensed consolidated financial statements.

7

NNN REIT, INC.

and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED

(dollars in thousands)

(unaudited)

	Six Months Ended June 30,
	2023			2022
Cash flows from financing activities:
Proceeds from line of credit payable	$	513,500		$	126,000
Repayment of line of credit payable		(347,200	)		(86,000	)
Repayment of mortgages payable		(9,947	)		(328	)
Payment of debt issuance costs		(125	)		(126	)
Proceeds from issuance of common stock		30,765			33,048
Stock issuance costs		(558	)		(575	)
Payment of common stock dividends		(199,146	)		(185,629	)
Noncontrolling interests distributions		—			(278	)
Net cash used in financing activities		(12,711	)		(113,888	)
Net decrease in cash, cash equivalents and restricted cash		(1,526	)		(168,033	)
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)	$	5,252		$	3,289
Supplemental disclosure of cash flow information:
Interest paid, net of amount capitalized	$	74,686		$	70,139
Supplemental disclosure of noncash investing and financing activities:
Change in other comprehensive income	$	1,223		$	1,175
Right-of-use asset recorded in connection with lease liability	$	6,401		$	—
Work in progress accrual balance at end of period	$	21,149		$	14,707

(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 June 30, 2023, NNN had restricted cash of $2,971. NNN did not have restricted cash and cash held in escrow as of June 30, 2022.

See accompanying notes to condensed consolidated financial statements.

8

NNN REIT, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 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").

	June 30, 2023
Property Portfolio:
Total Properties		3,479
Gross leasable area (square feet)		35,492,000
States		49
Weighted average remaining lease term (years)		10.2

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 and six months ended June 30, 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 $1,126,000 and $274,000 in capitalized interest during the development period for the six months ended June 30, 2023 and 2022, respectively, of which $721,000 and $176,000 was recorded during the quarters ended June 30, 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.

9

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.

10

As a result of the review of lease payments collectability, NNN recorded a write-off of $348,000 of outstanding receivables and related accrued rent for certain tenants reclassified to cash basis for accounting purposes during the six months ended June 30, 2023. No such outstanding receivables and related accrued rent were written off during the six months ended June 30, 2022.

The following table summarizes those tenants classified as cash basis for accounting purposes as of June 30:

	2023			2022
Number of tenants		9			8
Cash basis tenants as a percent of:
Total Properties		5.0	%		5.3	%
Total annual base rent(1)		7.1	%		7.2	%
Total gross leasable area		6.8	%		6.9	%

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

During the six months ended June 30, 2023 and 2022, NNN recognized $30,088,000 and $31,285,000, respectively, of rental income from certain tenants classified as cash basis for accounting purposes, of which $14,523,000 and $15,499,000 was recognized during the quarters ended June 30, 2023 and 2022, respectively.

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 June 30, 2023 and December 31, 2022, NNN had recorded real estate held for sale of $1,904,000 (two Properties) 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 six months ended June 30, 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.

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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 $1,224,000 and $1,530,000 included in other assets on the Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, respectively, net of $78,000 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 June 30, 2023 and December 31, 2022, NNN held $2,971,000 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 defined below) 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 June 30, 2023 and December 31, 2022, net of accumulated amortization of $12,946,000 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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Basic and Diluted Earnings:
Net earnings available to NNN’s common stockholders	$	98,704		$	74,171		$	188,871		$	155,543
Less: Earnings allocated to unvested restricted shares		(162	)		(165	)		(295	)		(319	)
Net earnings used in basic and diluted earnings per share	$	98,542		$	74,006		$	188,576		$	155,224
Basic and Diluted Weighted Average Shares Outstanding:
Weighted average number of shares outstanding		182,123,555			175,989,323			181,923,011			175,813,456
Less: Unvested restricted shares		(295,441	)		(310,844	)		(267,861	)		(300,810	)
Less: Unvested contingent restricted shares		(736,083	)		(721,623	)		(685,341	)		(645,597	)
Weighted average number of shares outstanding used in     basic earnings per share		181,092,031			174,956,856			180,969,809			174,867,049
Other dilutive securities		535,826			151,058			574,466			154,822
Weighted average number of shares outstanding used in     diluted earnings per share		181,627,857			175,107,914			181,544,275			175,021,871

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 June 30, 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 six months ended June 30, 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		1,223		(2)
Ending balance, June 30, 2023	$	(11,359	)

(1) Additional disclosure is included in Note 6 – 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 which 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 June 30, 2023, NNN’s real estate portfolio had a weighted average remaining lease term of 10.2 years and consisted of 3,492 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):

	June 30, 2023			December 31, 2022
Land and improvements(1)	$	2,765,263		$	2,669,498
Buildings and improvements		7,166,833			6,985,394
Leasehold interests		355			355
		9,932,451			9,655,247
Less accumulated depreciation and amortization		(1,766,177	)		(1,660,308	)
		8,166,274			7,994,939
Work in progress and improvements		49,823			21,737
Accounted for using the operating method		8,216,097			8,016,676
Accounted for using the direct financing method		3,191			3,352
Classified as held for sale		1,904			786
	$	8,221,192		$	8,020,814

(1) Includes $63,991 and $22,356 in land for Properties under construction at June 30, 2023 and December 31, 2022, respectively.

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

	Quarter Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Rental income from operating leases	$	197,629	$	185,791	$	395,812	$	370,102
Earned income from direct financing leases		143		150		287		301
Percentage rent		291		295		1,054		996
Real estate expense reimbursement from tenants		4,363		4,300		8,903		8,900
	$	202,426	$	190,536	$	406,056	$	380,299

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, as a result of the COVID-19 pandemic, NNN entered into rent deferral lease amendments with certain tenants in the Property Portfolio, for an aggregate $4,722,000 and $51,723,000 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 June 30, 2023, an aggregate of approximately 92 percent of deferred rent has been repaid with $2,172,000 and $8,062,000 of deferred rent repaid during the six months ended June 30, 2023 and 2022, respectively, of which $486,000 and $4,005,000 of deferred rent was repaid during the quarters ended June 30, 2023 and 2022, respectively. The remaining deferred rents are substantially due by December 31, 2023.

For the six months ended June 30, 2023 and 2022, NNN recognized $1,003,000 and ($2,643,000), respectively, of net straight-line accrued rental income, net of reserves, of which $534,000 and ($1,547,000) of such income, net of reserves was recorded during the quarters ended June 30, 2023 and 2022, respectively.

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 six months ended June 30, 2023 and 2022, NNN recorded ($19,000) and ($3,509,000), respectively, of net straight-line accrued rental income related to such amendments, of which ($10,000) and ($1,729,000) was recorded during the quarters ended June 30, 2023 and 2022, respectively.

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):

	June 30, 2023			December 31, 2022
Intangible lease assets (included in other assets):
Above-market in-place leases	$	15,356		$	15,356
Less: accumulated amortization		(11,816	)		(11,477	)
Above-market in-place leases, net	$	3,540		$	3,879
In-place leases	$	123,468		$	124,198
Less: accumulated amortization		(82,845	)		(79,675	)
In-place leases, net	$	40,623		$	44,523
Intangible lease liabilities (included in other liabilities):
Below-market in-place leases	$	41,267		$	41,371
Less: accumulated amortization		(28,634	)		(28,121	)
Below-market in-place leases, net	$	12,633		$	13,250

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The amounts amortized as a net increase to rental income for above-market and below-market in-place leases for the six months ended June 30, 2023 and 2022, were $234,000 and $280,000, respectively, of which $122,000 and $140,000 were recorded for the quarters ended June 30, 2023 and 2022, respectively. The value of in-place leases amortized to expense for the six months ended June 30, 2023 and 2022, was $3,527,000 and $3,544,000, respectively, of which $1,767,000 and $1,771,000 was recorded for the quarters ended June 30, 2023 and 2022, respectively.

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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
	# of Sold Properties	Net Gain		# of Sold Properties	Net Gain		# of Sold Properties	Net Gain		# of Sold Properties	Net Gain
Gain on disposition of real estate	7	$	13,930	8	$	775	13	$	20,230	18	$	4,767

Real Estate – Commitments

NNN has committed to fund construction on 39 Properties. The improvements on such Properties are estimated to be completed within 12 months. These construction commitments, as of June 30, 2023, are outlined in the table below (dollars in thousands):

Total commitment(1)	$	268,159
Less amount funded		(113,814	)
Remaining commitment	$	154,345

(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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Total real estate impairments, net of recoveries	$	34	$	4,618	$	2,674	$	6,250
Number of Properties:
Vacant		—		3		3		6
Occupied		—		3		1		5

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 $228,576,000 and a weighted average interest rate of 5.67% during the six months ended June 30, 2023. In December 2022, NNN entered into an amendment to the Credit Facility, to change the base interest rate from the London Interbank Offer Rate ("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 June 30, 2023, $332,500,000 was outstanding and $767,500,000 was available for future borrowings under the Credit Facility, and NNN was in compliance with each of the financial covenants.

Note 4 – Mortgages Payable:

In April 2023, NNN repaid the remaining mortgages payable principal balance of $9,774,000.

Note 5 – 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 June 30, 2023		7,722,511

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

	Six Months Ended June 30,
	2023		2022
Shares of common stock		650,135		717,473
Average price per share (net)	$	43.98	$	43.23
Net proceeds	$	28,592	$	31,018
Stock issuance costs(1)	$	558	$	575

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

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):

	Six Months Ended June 30,
	2023		2022
Shares of common stock		35,922		34,396
Net proceeds	$	1,615	$	1,456

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

	Quarter Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Dividends	$	99,745	$	92,878	$	199,146	$	185,629
Per share		0.550		0.530		1.100		1.060

In July 2023, NNN declared a dividend of $0.5650 per share, which is payable in August 2023 to its common stockholders of record as of July 31, 2023.

Note 6 – 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 June 30, 2023, $11,359,000 remained in accumulated other comprehensive income (loss) related to NNN’s previously terminated interest rate hedges. During the six months ended June 30, 2023 and 2022, NNN reclassified out of accumulated other comprehensive income (loss) $1,223,000 and $1,175,000, respectively, of which $616,000 and $592,000 was reclassified during the quarters ended June 30, 2023 and 2022, respectively, as an increase in interest expense. Over the next 12 months, NNN estimates that an additional $2,490,000 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 June 30, 2023.

Note 7 – 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 December 31, 2022 approximate fair value based upon current market prices of comparable instruments (Level 3). NNN had no mortgages payable outstanding at June 30, 2023. At June 30, 2023 and December 31, 2022, the fair value of NNN’s notes payable excluding unamortized discount and debt costs was $3,135,564,000 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.

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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 NNN's actual results to differ materially from those presented in NNN's 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 (as defined below);

•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;

20

•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 June 30, 2023, NNN owned 3,479 Properties, with an aggregate gross leasable area of approximately 35,492,000 square feet, located in 49 states, with a weighted average remaining lease term of 10.2 years. Approximately 99 percent of the Properties were leased as of June 30, 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) (17.7%), convenience store (16.9%), and automotive service (14.5%) 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 June 30, 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:

	June 30, 2023			December 31, 2022			June 30, 2022
Properties Owned:
Number		3,479			3,411			3,305
Total gross leasable area (square feet)		35,492,000			35,010,000			33,758,000
Properties:
Leased and unimproved land		3,457			3,390			3,275
Percent of Properties – leased and unimproved land		99	%		99	%		99	%
Weighted average remaining lease term (years)		10.2			10.4			10.6
Total gross leasable area (square feet) – leased		35,252,000			34,829,000			33,526,000

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	June 30, 2023	December 31, 2022	June 30, 2022
1.	Convenience stores	16.9%	16.5%	17.0%
2.	Automotive service	14.5%	13.7%	13.1%
3.	Restaurants – full service	8.9%	9.1%	9.6%
4.	Restaurants – limited service	8.8%	8.9%	9.2%
5.	Family entertainment centers	5.7%	5.9%	6.2%
6.	Health and fitness	4.7%	4.9%	5.0%
7.	Theaters	4.3%	4.3%	4.3%
8.	Recreational vehicle dealers, parts and accessories	4.2%	4.1%	4.2%
9.	Equipment rental	3.0%	3.1%	3.2%
10.	Wholesale clubs	2.5%	2.6%	2.4%
11.	Automotive parts	2.5%	2.6%	2.9%
12.	Drug stores	2.5%	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	1.8%	1.9%	2.0%
16.	Home furnishings	1.5%	1.4%	1.5%
17.	General merchandise	1.5%	1.6%	1.6%
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%	1.2%
	Other	8.4%	8.1%	7.6%
		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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Acquisitions:
Number of Properties		36			43			79			102
Gross leasable area (square feet)(1)		278,000			348,000			553,000			1,227,000
Cap rate(2)		7.2	%		6.2	%		7.1	%		6.2	%
Total dollars invested(3)	$	181,296		$	153,769		$	337,541		$	364,592

(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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Number of properties		7			8			13			18
Gross leasable area (square feet)		37,000			94,000			54,000			175,000
Net sales proceeds	$	28,233		$	7,905		$	40,158		$	27,979
Net gain on disposition of real estate	$	13,930		$	775		$	20,230		$	4,767
Cap rate(1)		5.1	%		7.9	%		5.6	%		6.2	%

(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 disposition proceeds to either pay down the Credit Facility or reinvest in real estate.

Analysis of Revenue

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

	Quarter Ended June 30,				Percent Increase			Six Months Ended June 30,				Percent Increase
	2023		2022		(Decrease)			2023		2022		(Decrease)
Rental Revenues(1)	$	198,063	$	186,236		6.4	%	$	397,153	$	371,399		6.9	%
Real estate expense reimbursement     from tenants		4,363		4,300		1.5	%		8,903		8,900		0.0	%
Rental income		202,426		190,536		6.2	%		406,056		380,299		6.8	%
Interest and other income from real estate     transactions		214		247		(13.4	)%		692		763		(9.3	)%
Total revenues	$	202,640	$	190,783		6.2	%	$	406,748	$	381,062		6.7	%

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

Rental Income. Rental income increased for the quarter and six months ended June 30, 2023, as compared to the same periods in 2022. The increase is primarily due to the Rental Revenues from NNN's recent Property acquisitions (see "Results of Operations – Property Analysis – Property Acquisitions").

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Analysis of Expenses

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

	Quarter Ended June 30,						Percent Increase			Six Months Ended June 30,						Percent Increase
	2023			2022			(Decrease)			2023			2022			(Decrease)
General and administrative	$	10,740		$	9,740			10.3	%	$	22,991		$	20,782			10.6	%
Real estate		6,836			6,173			10.7	%		13,682			13,371			2.3	%
Depreciation and amortization		59,875			57,444			4.2	%		119,023			110,124			8.1	%
Leasing transaction costs		52			76			(31.6	)%		127			164			(22.6	)%
Impairment losses – real estate, net of     recoveries		34			4,618			(99.3	)%		2,674			6,250			(57.2	)%
Executive retirement costs		309			2,655			(88.4	)%		732			6,249			(88.3	)%
Total operating expenses	$	77,846		$	80,706			(3.5	)%	$	159,229		$	156,940			1.5	%
Interest and other income	$	(74	)	$	(52	)		42.3	%	$	(107	)	$	(87	)		23.0	%
Interest expense		40,094			36,739			9.1	%		78,985			73,438			7.6	%
Total other expenses	$	40,020		$	36,687			9.1	%	$	78,878		$	73,351			7.5	%

As a percentage of total revenues:
General and administrative	5.3%	5.1%	5.7%	5.5%
Real estate	3.4%	3.2%	3.4%	3.5%

General and Administrative. General and administrative expense increased for the quarter and six months ended June 30, 2023, as compared to the same periods in 2022. The increase is primarily attributable to an increase in long-term incentive compensation costs.

Depreciation and Amortization. Depreciation and amortization expense increased for the quarter and six months ended June 30, 2023, as compared to the same periods in 2022. The increase is primarily due to the increase in NNN's Property Portfolio from recent acquisitions (see "Results of Operations – Property Analysis – Property Acquisitions").

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 for the quarter and six months ended June 30, 2023 and 2022, which were 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. 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 quarter and six months ended June 30, 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 and six months ended June 30, 2023, as compared to the same periods in 2022. The increase is primarily due to the Credit Facility having a weighted average outstanding balance of $228,576,000 with a weighted average interest rate of 5.67% for the six months ended June 30, 2023 compared to a weighted average outstanding balance of $9,028,000 with a weighted average interest rate of 2.04% for the six months ended June 30, 2022.

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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 June 30, 2023, NNN had $2,281,000 of cash and cash equivalents and $767,500,000 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.

Cash Flows. NNN had $2,281,000 in cash and cash equivalents and $2,971,000 in restricted cash or cash held in escrow at June 30, 2023. The table below summarizes NNN’s cash flows (dollars in thousands):

	Six Months Ended June 30,
	2023			2022
Cash and cash equivalents:
Provided by operating activities	$	299,294		$	275,311
Used in investing activities		(288,109	)		(329,456	)
Used in financing activities		(12,711	)		(113,888	)
Decrease		(1,526	)		(168,033	)
Net cash at beginning of period		6,778			171,322
Net cash at end of period	$	5,252		$	3,289

Cash flow activities include:

Operating Activities. Cash provided by operating activities represents cash received primarily from rental income 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 six months ended June 30, 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 six months ended June 30, 2023, included the following significant transactions:

•$166,300,000 in net borrowings from NNN's Credit Facility,

•$28,592,000 from the issuance of 650,135 shares of common stock in connection with the at-the-market ("ATM") equity program,

•$1,615,000 from the issuance of 35,922 shares of common stock in connection with the Dividend Reinvestment and Stock Purchase Plan ("DRIP"),

•$199,146,000 in dividends paid to common stockholders, and

•$9,774,000 payment in April for the repayment of the remaining mortgages payable principal.

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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 June 30, 2023 (see "Capital Structure") (dollars in thousands):

	Date of Obligation
	Total		2023		2024		2025		2026		2027		Thereafter
Long-term debt(1)	$	3,800,000	$	—	$	350,000	$	400,000	$	350,000	$	400,000	$	2,300,000
Long-term debt – interest(2)		1,753,441		68,200		129,006		120,750		106,225		91,233		1,238,027
Credit Facility		332,500		—		—		332,500		—		—		—
Headquarters office lease		10,515		412		837		210		981		1,005		7,070
Total contractual cash     obligations	$	5,896,456	$	68,612	$	479,843	$	853,460	$	457,206	$	492,238	$	3,545,097

(1)	Includes only principal amounts outstanding under notes payable and excludes unamortized note discounts and debt costs.
(2)	Interest calculation on notes payable based on stated rate of the principal amount.

Property Construction. NNN has committed to fund construction on 39 Properties. The improvements of such Properties are estimated to be completed within 12 months. These construction commitments, at June 30, 2023, are outlined in the table below (dollars in thousands):

Total commitment(1)	$	268,159
Less amount funded		(113,814	)
Remaining commitment	$	154,345

(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 June 30, 2023, NNN owned 22 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 July 31, 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 one tenant currently in bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. As a result, this tenant has the right to reject or affirm its lease with NNN.

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

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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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Dividends	$	99,745	$	92,878	$	199,146	$	185,629
Per share		0.550		0.530		1.100		1.060

In July 2023, NNN declared a dividend of $0.5650 per share which is payable in August 2023 to its common stockholders of record as of July 31, 2023.

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):

	June 30, 2023		Percentage of Total			December 31, 2022		Percentage of Total
Line of credit payable	$	332,500		8.2	%	$	166,200		4.2	%
Mortgages payable(1)		—		—			9,964		0.3	%
Notes payable		3,742,012		91.8	%		3,739,890		95.5	%
Total outstanding debt	$	4,074,512		100.0	%	$	3,916,054		100.0	%

(1) In April 2023, NNN repaid the remaining mortgages payable principal balance of $9,774.

Line of Credit Payable. NNN's $1,100,000,000 Credit Facility had a weighted average outstanding balance of $228,576,000 and a weighted average interest rate of 5.67% during the six months ended June 30, 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 June 30, 2023, $332,500,000 was outstanding and $767,500,000 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.

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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 6 – Notes Payable and Derivatives.
(4)	The aggregate principal balance of the unsecured note maturities for the next five years is $1,500,000.

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 June 30, 2023, NNN was in compliance with those covenants.

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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 June 30, 2023	7,722,511

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

	Six Months Ended June 30,
	2023		2022
Shares of common stock		650,135		717,473
Average price per share (net)	$	43.98	$	43.23
Net proceeds	$	28,592	$	31,018
Stock issuance costs(1)	$	558	$	575

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

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):

	Six Months Ended June 30,
	2023		2022
Shares of common stock		35,922		34,396
Net proceeds	$	1,615	$	1,456

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 is 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.

29

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 June 30, 2023, NNN had no outstanding derivatives.

As of June 30, 2023, NNN's variable rate Credit Facility had $332,500,000 outstanding, a weighted average outstanding balance of $228,576,000 with a weighted average interest rate of 5.67% compared to a weighted average outstanding balance of $9,028,000 with a weighted average interest rate of 2.04% 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 June 30, 2023. The table incorporates only those debt obligations that existed as of June 30, 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 six months ended June 30, 2023.

Debt Obligations (dollars in thousands)
	Variable Rate Debt					Fixed Rate Debt
	Credit Facility					Unsecured Debt(1)
	Debt Obligation		Weighted Average Interest Rate			Principal Debt Obligation		Effective Interest Rate
2023	$	—		—		$	—		—
2024		—		—			350,000		3.92	%
2025		332,500		5.67	%		400,000		4.03	%
2026		—		—			350,000		3.73	%
2027		—		—			400,000		3.55	%
Thereafter		—		—			2,300,000		3.58	%	(2)
Total	$	332,500		5.67	%	$	3,800,000		3.67	%
Fair Value:
June 30, 2023	$	332,500				$	3,135,564
December 31, 2022	$	166,200				$	3,140,774

(1)	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.
(2)	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 June 30, 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 herewith).
		3.2	Third Amended and Restated Bylaws of the Registrant, as amended through the Fifth Amendment to Bylaws, dated May 1, 2023 (filed herewith).
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 June 30, 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.

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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 August, 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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EX-3.1

Exhibit 3.1

TABLE OF CONTENTS

Part I	First Amended and Restated Articles of Incorporation of Commercial Net Lease Realty, Inc.	2
Part II	Articles of Amendment to First Amended and Restated Articles of Incorporation of Commercial Net Lease Realty, Inc.	15
	Articles of Merger Merging Commercial Net Lease Realty Services, Inc. Into Commercial Net Lease Realty, Inc.	17
	Articles of Amendment to First Amended and Restated Articles of Incorporation of Commercial Net Lease Realty, Inc.	20
	Articles of Amendment to First Amended and Restated Articles of Incorporation of National Retail Properties, Inc.	21
	Second Amendment to First Amended and Restated Articles of Incorporation of National Retail Properties, Inc.	23

1

PART I

FIRST AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
COMMERCIAL NET LEASE REALTY, INC.

Commercial Net Lease Realty, Inc., a Maryland corporation (hereinafter the “Corporation”), hereby certifies to the Department of Assessments and Taxation of the State of Maryland, that:

FIRST: The Corporation desires to amend and restate its charter as currently in effect.

SECOND: Prior to this amendment and restatement the total number of shares of all classes of capital stock that the Corporation had authority to issue was one 180,000,000 shares, consisting of (i) 90,000,000 shares of common stock, par value $0.01 per share: and (ii) 90,000,000 shares of excess stock, par value $0.01 per share. The aggregate par value of all of the authorized shares of all classes of capital stock having a par value was $1,800,000.00. After this amendment and restatement the total number of shares of all classes of capital stock that the Corporation will have authority to issue will be 210,000,000 shares consisting of (i) 90,000,000 shares of common stock, par value $0.01; (ii) 15,000,000 shares of preferred stock, par value $0.01; and 105,000,000 shares of excess stock, par value $0.01. The aggregate par value of all of the authorized shares of all classes of capital stock having a par value will be $2,100,000.

THIRD: The provisions of the charter which are now in effect and as amended hereby, stated in accordance with the Maryland General Corporation Law are as follows:

ARTICLE I
NAME

The name of the Corporation is Commercial Net Lease Realty, Inc.

ARTICLE II
DURATION

The duration of the Corporation is perpetual.

ARTICLE III
PURPOSES AND POWERS

The purpose for which the Corporation is formed is to engage in any lawful business, act or activity for which corporations may be organized under the laws of the State of Maryland and, in general, to possess and exercise all the purposes, powers, rights and privileges granted to, or conferred upon, corporations by the laws of the State of Maryland now or hereafter in force, and to exercise any powers suitable, convenient or proper for the accomplishment of the purposes herein enumerated, implied or incidental to the powers herein enumerated or which at any time may appear conducive to or expedient for the accomplishment of such purposes. The foregoing shall, except where otherwise expressed, in no way be limited or restricted by reference to or inference from the terms of any other clause of this or any other provision of this Charter or of any amendment hereto or restatement hereof, and shall each be regarded as independent and construed as powers as well as purposes.

2

ARTICLE IV
PRINCIPLE OFFICE AND RESIDENT AGENT

The post office address of the principal office of the Corporation is c/o The Corporation Trust Incorporated, 300 East Lombard Street, Baltimore, MD 21202. The resident agent of the Corporation is The Corporation Trust Incorporated, 300 E. Lombard Street, Baltimore, Maryland 21202. Said resident agent is a Maryland corporation.

ARTICLE V
BOARD OF DIRECTORS

The number of directors shall be no less than three (3), unless a lesser number is permitted pursuant to the terms of the Maryland General Corporation Law as in effect from time to time or any successor statute thereto (the “MGCL”). Subject to the foregoing, the number of directors of the Corporation shall be fixed by the Bylaws of the Corporation and maybe increased or deceased from time to time in such a manner as may be prescribed by the Bylaws. The following persons will serve as directors of the Corporation until the annual meeting and until their successors are elected and qualify:

Robert A. Bourne	Ted B. Lanier
Edward Clark	James M. Seneff, Jr.
Clifford R. Hinkle

ARTICLE VI
AUTHORIZED STOCK

SECTION 1. TOTAL CAPITALIZATION

The total number of shares of all classes of capital stock that the Corporation has authority to issue is two hundred ten million (210,000,000) shares consisting of (i) ninety million (90,000,000) shares of common stock, par value $0.01 (the “Common Stock”); (ii) fifteen million (15,000,000) shares of preferred stock, par value $0.01 (the “Preferred Stock”); and one hundred five million (105,000,000) shares of excess stock, par value $0.01 (the “Excess Stock”). The aggregate par value of all of the authorized shares of all classes of capital stock having a par value is $2,100,000.

SECTION 2. CAPITAL STOCK

A. COMMON STOCK

(1) COMMON STOCK SUBJECT TO TERMS OF PREFERRED STOCK. The Common Stock shall be subject to the express terms of the Preferred Stock.

(2) DIVIDEND RIGHTS. The holders of shares of Common Stock shall be entitled to receive such dividends as may be declared by the Board of Directors of the Corporation out of funds legally available therefore.

(3) RIGHTS UPON LIQUIDATION. In the event of any voluntary or involuntary liquidation, dissolution or winding up, or any distribution of the assets, of the Corporation, the aggregate amount available for distribution to holders of shares of Common Stock (including, for purposes of this sentence, holders of shares of Excess Stock) shall be determined by applicable law. Except as provided below, each holder of shares of the Common Stock shall be entitled to receive that portion of such aggregate amount, ratably with (i) each other holder of shares of Common Stock and (ii) each holder of shares of Excess Stock, as the number of shares of the Common Stock held by such holder bears to the total number of shares of Common Stock and Excess Stock. Anything herein to the contrary notwithstanding, in no event shall the amount payable to a holder of shares with respect to Excess Stock hereunder exceed (i) the price per share such holder paid for the Common Stock in the purported Transfer (as that term is defined in paragraph A of Section 3 of this Article VI) that resulted in the Excess Stock or (ii) if the holder did not give full value for such Excess Stock (as through a gift, devise or other event or transaction), a price per share equal to the Market Price (as the term is defined in paragraph A of Section 3 of this Article VI) for the shares of the

3

Common Stock on the date of the purported Transfer that resulted in such Excess Stock. Any amount available for distribution in excess of the foregoing limitations shall be paid ratably to holders of Common Stock and other holders of Excess Stock resulting from the exchange of Common Stock to the extent permitted by the foregoing limitations.

(4) VOTING RIGHTS. Except as may be provided in this Charter, and subject to the express terms of any series of Preferred Stock, the holders of shares of the Common Stock shall have the exclusive right to vote on all matters (as to which a common stockholder shall be entitled to vote) at all meetings of the stockholders of the Corporation, and shall be entitled to one (1) vote for each share of the Common Stock entitled to vote at such meetings.

B. PREFERRED STOCK

The Preferred Stock may be issued from time to time in one or more series as authorized by the Board of Directors. Prior to the issuance of shares of each such series, the Board of Directors, by resolution, shall fix the number of shares to be included in each series, and the terms, rights, restrictions and qualifications of the shares of each series. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following:

(i)	The designation of the series, which may be by distinguishing number, letter or title;
(ii)	The dividend rate on the shares of the series, if any, whether any dividends shall be cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of the series;
(iii)	The redemption rights, including conditions and the price or prices, if any, for shares of the series;
(iv)	The terms and amounts of any sinking fund for the purchase or redemption of shares of the series;
(v)	The rights of the shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, and the relative rights of priority, if any, of payment of shares of the series;
(vi)	Whether the shares of the series shall be convertible into shares of any other class or series, or any other security, of the Corporation or any other corporation or other entity, and, if so, the specification of such other class or series of such other security, the conversion price or prices or dates on which such shares shall be convertible and all other terms and conditions upon which such conversion may be made;
(vii)	Restrictions on the issuance of shares of the same series or of any other class or series;
(viii)	The voting rights, if any, of the holders of shares of the series; and
(ix)	Any other relative rights, preferences and limitations on that series.

Subject to the express provisions of any other series of Preferred Stock then outstanding, notwithstanding any other provision of this Charter, the Board of Directors may increase or decrease (but not below the number of shares of such series then outstanding) the number of shares, or alter the designation or classify or reclassify any unissued shares of a particular series of Preferred Stock, by fixing or altering, in one or more respects, from time to time before issuing the shares, the terms, rights, restrictions and qualifications of the shares of any such series of Preferred Stock.

4

SECTION 3. RESTRICTIONS ON TRANSFER; ACQUISITIONS AND REDEMPTION SHARES

A. DEFINITIONS. For purposes of Sections 3 and 4 of this Article VI, the following terms shall have the following meanings:

“Beneficial Ownership” shall mean ownership of shares of Capital Stock by an individual who would be treated as an owner of such shares under Section 542(a)(2) of the Code, either directly or constructively through the application of Section 544, as modified by Section 856(h)(1)(B). For purposes of this definition, the term “individual” also shall include any organization, trust or other entity that is treated as an individual for purposes of Section 542(a)(2) of the Code. The terms “Beneficial Owner,” “Beneficially Own,” “Beneficially Owns” and “Beneficially Owned” shall have correlative meanings.

“Beneficiary” shall mean a beneficiary of the Trust as determined pursuant to paragraph A of Section 4 of this Article VI.

“Board of Directors” shall mean the Board of Directors of the Corporation.

“Bylaws” shall mean the Bylaws of the Corporation.

“Capital Stock” shall mean collectively the stock of the Corporation that is either Common Stock and Preferred Stock.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable regulations thereto and judicial decisions as in effect from time to time.

“Constructive Ownership” shall mean ownership of shares of Capital Stock by a Person who would be treated as an owner of such shares, either actually or constructively, through the application of Section 318 of the Code, as modified by Section 856(d)(5) thereof. The terms “Constructive Owner,” “Constructively Own,” “Constructively Owns” and “Constructively Owned” shall have correlative meanings.

“Market Price” on any day shall mean the average of the Closing Prices for the ten (10) consecutive Trading Days immediately preceding such day (or those days during such 10-day period for which Closing Prices are available). The “Closing Price” on any day shall mean the last sale price, regular way, on such day or if no such sale takes place on that day, the average of the closing bid and asked prices, regular way, in either case as reported on the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or the American Stock Exchange, or if the Capital Stock is not so listed or admitted to trading, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange (including the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation System) on which the Capital Stock is listed or admitted to trading or, if the Capital Stock is not so listed or admitted to trading, the last quoted price, or if not quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal automated quotation system then in use or, if the Capital Stock is not so quoted by any such system, the average of the closing bid and asked prices as furnished by a professional market maker selected by the Board of Directors making a market in the Capital Stock or, if there is no such market maker or such closing prices otherwise are not available, the fair market value of the Capital Stock as of such day, as determined by the Board of Directors in its discretion.

“Ownership Limit” shall mean 9.8 percent of the Value of the outstanding Capital Stock.

“Person” shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or a group as that term is used for purposes of Section

5

13(d)(3) of the Securities Exchange Act of 1934, as amended; but does not include an underwriter which participated in a public offering of Capital Stock for a period of sixty (60) days following the purchase by such underwriter of Capital Stock therein, provided that the foregoing exclusion shall apply in an underwriting only if the ownership of such Capital Stock by such underwriter would not cause the Corporation to fail to qualify as a REIT by reason of being “closely held” within the meaning of Section 856(a) of the Code or otherwise cause the Corporation to fail to qualify as a REIT.

“Purported Beneficial Transferee” shall mean, with respect to any purported Transfer which results in Excess Stock, the purported beneficial transferee for whom the Purported Record Transferee would have acquired shares of Capital Stock if such Transfer had been valid under paragraph B of this Section 3.

“Purported Record Transferee” shall mean, with respect to any purported Transfer which results in Excess Stock, the record holder of the Capital Stock if such Transfer had been valid under paragraph B of this Section 3.

“REIT” shall mean a real estate investment trust under Sections 856 through 860 of the Code.

“Restriction Termination Date” shall mean the first day on which the Board of Directors and the stockholders of the Corporation determine that it is no longer in the best interests of the Corporation to attempt, or continue, to qualify as a REIT.

“Trading Day” shall mean a day on which the principal national securities exchange on which the Capital Stock is listed or admitted to trading is open for the transaction of business or, if the Capital Stock is not listed or admitted to trading, shall mean any day other than a Saturday, Sunday or other day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

“Transfer” shall mean any sale, transfer, gift, hypothecation, assignment, devise or other disposition of Capital Stock (including (i) the granting of any option (including any option to acquire any option or any series of such options) or entering into any agreement for the sale, transfer or other disposition of Capital Stock or (ii) the sale, transfer assignment or other disposition of any securities or rights convertible into or exchangeable for Capital Stock), whether voluntary or involuntary, of record, constructively or beneficially, and whether by operation of law or otherwise. The terms “Transfers” and “Transferred” shall have correlative meanings.

“Trust” shall mean the trust created pursuant to paragraph A of Section 4 of this Article VI.

“Trustee” shall mean the Corporation as trustee for the Trust, and any successor trustee appointed by the Corporation.

“Value” shall mean, as of any given date, the Market Price per share of each class of Capital Stock then outstanding, multiplied by the number of shares of such class then outstanding.

B. OWNERSHIP AND TRANSFER LIMITATION

(1) Notwithstanding any other provision of this Charter, except as provided in paragraph I of this Section 3 and Section 5 of this Article VI, prior to the Restriction Termination Date, no Person shall Beneficially or Constructively Own shares of Capital Stock in excess of the Ownership Limit.

(2) Notwithstanding any other provision of this Charter, except as provided in paragraph I of this Section 3 and Section 5 of this Article VI, prior to the Restriction Termination Date, any Transfer, change in the capital structure of the Corporation, or other purported change in Beneficial or Constructive Ownership of Capital Stock that, if effective, would result in any Person Beneficially or Constructively Owning Capital Stock in excess of the Ownership Limit shall be void ab initio as to the Transfer, change in the capital structure of the Corporation, or other purported change in Beneficial or Constructive Ownership with respect to that number of shares of Capital Stock which would otherwise be Beneficially or Constructively Owned by Such Person in excess of the Ownership Limit, and neither the Purported Beneficial Transferee nor the Purported Record Transferee shall acquire any rights in that number of shares of Capital Stock.

6

(3) Notwithstanding any other provision of this Charter, except as provided in Section 5 of this Article VI, prior to the Restriction Termination Date, any Transfer, change in the capital structure of the Corporation, or other purported change in ownership of Capital Stock that, if effective, would result in the Capital Stock being owned by fewer than 100 Persons (determined without reference to any rules of attribution) shall be void ab initio as to the Transfer, change in the capital structure of the Corporation, or other purported change in ownership with respect to that number of shares which otherwise would be owned by the transferee, and the intended transferee or subsequent owner (including a Beneficial Owner) shall acquire no rights in that number of shares of Capital Stock.

(4) Notwithstanding any other provisions of this Charter except Section 5 of this Article VI, prior to the Restriction Termination Date, any Transfer, change in the capital structure of the Corporation, or other purported change in Beneficial Ownership of shares of Capital Stock that, if effective, would cause the Corporation to fail to qualify as a REIT by reason of being “closely held” within the meaning of Section 856(h) of the Code or otherwise, directly or indirectly, would cause the Corporation to fail to qualify as a REIT shall be void ab initio as to the Transfer, change in the capital structure of the Corporation, or other purported change in Beneficial Ownership with respect to that number of shares of Capital Stock which would cause the Corporation to be “closely held” within the meaning of Section 856(h) of the Code or otherwise, directly or indirectly, would cause the Corporation to fail to qualify as a REIT, and the intended transferee or subsequent Beneficial Owner shall acquire no rights in that number of shares of Capital Stock.

C. EXCHANGE FOR EXCESS STOCK.

(1) If, notwithstanding the other provisions contained in this Article VI, at any time prior to the Restriction Termination Date, there is a purported Transfer, change in the capital structure of the Corporation or other purported change in the Beneficial or Constructive Ownership of Capital Stock such that any person would either Beneficially or Constructively Own Capital Stock in excess of the Ownership Limit, then, except as otherwise provided in paragraph I of this Section 3, such shares of Capital Stock (rounded up to the next whole number of shares) in excess of the Ownership Limit automatically shall be exchanged for an equal number of shares of Excess Stock having terms, rights, restrictions and qualifications identical thereto, except to the extent that this Article VI requires different terms. Such exchange shall be effective as of the close of business on the business day next preceding the date of the purported Transfer, change in capital structure or other change in purported Beneficial or Constructive Ownership of Capital Stock.

(2) If, notwithstanding the other provisions contained in this Article VI, prior to the Restriction Termination Date, there is a purported Transfer, change in the capital structure of the Corporation or other purported change in Beneficial Ownership of Capital Stock which, if effective, would cause the Corporation to fail to qualify as a REIT by reason of being “closely held” within the meaning of Section 856(h) of the Code, or otherwise, directly or indirectly would cause the Corporation to fail to qualify as a REIT, then the shares of Capital Stock (rounded up to the next whole number of shares), being Transferred or which are otherwise affected by the change in capital structure or other purported change in Beneficial Ownership and which, in any case, would cause the Corporation to be “closely held” within the meaning of such Section 856(h) or otherwise would cause the Corporation to fail to qualify as a REIT automatically shall be exchanged for an equal number of shares of Excess Stock having terms, rights, restrictions and qualifications identical thereto, except to the extent that this Article VI requires different terms. Such exchange shall be effective as of the close of business on the business day next preceding the date of the purported Transfer, change in capital structure or other purported change in Beneficial Ownership.

D. REMEDIES FOR BREACH. If the Board of Directors or its designee shall at any time determine in good faith that a Transfer or change in the capital structure of the Corporation has taken place in violation of paragraph B of this Section 3 or that a Person intends to acquire or has attempted to acquire Beneficial or Constructive Ownership of any shares of Capital Stock in violation of paragraph B of this Section 3, the Board of Directors or its designee shall take such actions as it deems advisable to refuse to give effect to or to prevent such Transfer, change in capital structure of the Corporation or other attempt to acquire Beneficial or Constructive Ownership of any shares of Capital Stock, including, but not limited to, refusing to give effect thereto on the books of the Corporation or instituting injunctive proceedings with respect thereto; provided, however, that any Transfer, change in the capital structure of the Corporation, attempted Transfer or other attempt to acquire Beneficial or Constructive Ownership of any shares of Capital Stock in violation of subparagraphs (2), (3) and (4) of paragraph B of this Section 3 (as

7

applicable) shall be void ab initio and where applicable automatically shall result in the exchange described in paragraph C of this Section 3, irrespective of any action (or inaction) by the Board of Directors or its designee.

E. NOTICE OF RESTRICTED TRANSFER. Any Person who acquires or attempts to acquire Beneficial or Constructive Ownership of shares of Capital Stock in violation of paragraph B of this Section 3 and any Person who Beneficially or Constructively owns Excess Stock pursuant to paragraph C of this Section 3 shall immediately give written notice to the Corporation, or, in the event of a proposed or attempted Transfer or purported change in Beneficial Ownership, shall give at least fifteen (15) days prior written notice to the Corporation, of such event and shall promptly provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer, attempted Transfer or purported change in Beneficial Ownership on the Corporation’s status as a REIT.

F. OWNERS REQUIRED TO PROVIDE INFORMATION. Prior to the Restriction Termination Date:

(1) Every Beneficial or Constructive Owner of more than 5.0 percent, or such lower percentages as required pursuant to regulations under the Code or as may be requested by the Board of Directors, of the Value of the outstanding Capital Stock of the Corporation shall annually, no later than January 31 of each calendar year, give written notice to the Corporation stating (i) the name and address of such Beneficial or Constructive Owner; (ii) the number of shares of Capital Stock Beneficially or Constructively Owned and (iii) a description of how such shares are held. Each such Beneficial or Constructive Owner promptly shall provide to the Corporation such additional information as the Corporation, in its sole discretion, may request in order to determine the effect, if any, of such Beneficial or Constructive Ownership on the Corporation’s status as a REIT and to ensure compliance with the Ownership Limit.

(2) Each person who is a Beneficial or Constructive Owner of Capital Stock and each Person (including the stockholder of record) who is holding Capital Stock for a Beneficial or Constructive Owner promptly shall provide to the Corporation such information as the Corporation, in its sole discretion, may request in order to determine the Corporation’s status as a REIT, to comply with the requirements of any taxing authority or other governmental agency, to determine any such compliance or to ensure compliance with the Ownership Limit.

G. REMEDIES NOT LIMITED. Noting contained in this Article VI except Section 5 hereof shall limit scope or application of the provisions of this Section 3, the ability of the Corporation to implement or enforce compliance with the terms thereof or the authority of the Board of Directors to take any such other action or actions as it may deem necessary or advisable to protect the Corporation and the interests of its stockholders by preservation of the Corporation’s status as a REIT and to ensure compliance with the Ownership Limit, including, without limitation, refusal to give effect to a transaction on the books of the Corporation.

H. AMBIGUITY. In the case of an ambiguity in the application of any of the provisions of this Section 3, including any definition contained in paragraph A hereof, the Board of Directors shall have the power and authority, in its sole discretion, to determine the application of the provisions of this Section 3 with respect to any situation based on the facts known to it.

I. EXCEPTION. The Board of Directors, upon receipt of a ruling from the Internal Revenue Service, an opinion of counsel, or other evidence satisfactory to the Board of Directors, in its sole discretion, in each case to the effect that the restrictions contained in subparagraph 3 and subparagraph 4 of paragraph B of this Section 3 will not be violated, may waive, in whole or in part, the application of the Ownership Limit with respect to any Person. In connection with any exemption, the Board of Directors may require such representations and undertakings from such Person and may impose such other conditions as the Board deems necessary, in its sole discretion, to determine the effect, if any, of the proposed Transfer on the Corporation’s status as a REIT.

J. LIMITATIONS ON MODIFICATIONS.

(1) The Ownership Limit may not be increased (nor may any additional ownership limitations be created) if, after giving effect to such increase or creation, the Corporation would be “closely held” within the meaning of

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Section 856(h) of the Code (assuming ownership of shares of Capital Stock by all Persons equal to the greater of the Beneficial Ownership of Capital Stock by such Person or the Ownership Limit,

(2) Prior to any modification of the Ownership Limit, the Board of Directors may require such opinions of counsel, affidavits, undertakings or agreements as it may deem necessary, advisable or prudent in order to determine or ensure the Corporation’s status a REIT.

K. LEGEND. Each certificate for shares of Capital Stock shall bear substantially the following legend:

“The securities represented by this certificate are subject to restrictions on transfer for the purpose of maintenance of the Corporation’s status as a real estate investment trust under the Internal Revenue Code of 1986, as mended (the “Code”). Except as otherwise provided pursuant to he Charter of the Corporation, no Person may (i) Beneficially or Constructively Own shares of Capital Stock in excess of 9.8 percent of the Value of the outstanding shares of Capital Stock of the Corporation; or (ii) Beneficially Own Capital Stock which could result in the Corporation being “closely held” under Section 856(h) of the Code or otherwise would cause the Corporation to fail to qualify as a REIT. Any Person who attempts or proposes to Beneficially or Constructively Own shares of Capital Stock in excess of the above limitations must notify the Corporation in writing at least fifteen (15) days prior to the proposed or attempted transfer. If the transfer restrictions referred to herein are violated, the shares of Capital Stock represented hereby automatically will be exchanged for shares of Excess Stock and will be held in trust by the Corporation, all as provided in the Charter of the Corporation. All capitalized terms in this legend have the meanings identified in the Corporation’s Charter, as the same may be amended or restated from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each stockholder who so requests.”

SECTION 4. EXCESS STOCK.

A. OWNERSHIP IN TRUST. Upon any purported Transfer, change in the capital structure of the Corporation or other purported change in Beneficial Ownership that results in Excess Stock pursuant to paragraph C of Section 3 of this Article VI, such Excess Stock shall be deemed to have been transferred to the Corporation as Trustee of a Trust for the benefit of such Beneficiary or Beneficiaries to whom an interest in such Excess Stock may later be transferred pursuant to paragraph E of this Section 4. Shares of Excess Stock so held in trust shall be issued and outstanding stock of the Corporation. The Purported Record Transferee shall have no rights in such Excess Stock except the right to designate a transferee of such Excess Stock upon the terms specified in paragraph E of this Section 4. The Purported Beneficial Transferee shall have no rights in such Excess Stock except as provided in paragraph C of this Section 4.

B. DIVIDEND RIGHTS. Excess Stock shall not be entitled to any dividends. Any dividend or distribution paid prior to the discovery by the Corporation that the shares of Capital Stock have been exchanged for Excess Stock shall be repaid to the Corporation upon demand, and any dividend or distribution declared but unpaid at the time of such discovery shall be rescinded as void ab initio with respect to such shares of Excess Stock.

C. RIGHTS UPON LIQUIDATION.

(1) Except as provided below, in the event of any voluntary or involuntary liquidation, dissolution or winding up, or any other distribution of the assets, of the Corporation, each holder of shares of Excess Stock resulting from the exchange of Preferred Stock of any specified series shall be entitled to receive, ratably with each other holder of shares of Excess Stock resulting from the exchange of shares of Preferred Stock of such series and each holder of shares of Preferred Stock of such series, such accrued and unpaid dividends, liquidation preferences and other preferential payments, if any, as are due to holders of shares of Preferred Stock of such series. In the event that holders of shares of any series of Preferred stock are entitled to participate in the Corporation’s distribution of its residual assets, each holder of shares of Excess Stock resulting from the exchange of Preferred Stock of any such series shall be entitled to participate, ratably with (i) each other holder of shares of Excess stock resulting from the exchange of shares of Preferred Stock of all series entitled to so participate; (ii) each holder of shares of Preferred Stock of all series entitled to so participate; and (iii) each holder of shares of Common Stock and Excess Stock resulting from the exchange of shares of Common Stock (to the extent permitted by paragraph C of Section 3 of Article VI hereof), that portion of the aggregate assets available for distribution (determined in accordance with applicable law) as the number of shares of such Excess Stock held by such holder bears to the total number of (i)

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outstanding shares of Excess Stock resulting from the exchange of Preferred Stock of all series entitled to so participate; (ii) outstanding shares of Preferred Stock of all series entitled to so participate; and (iii) outstanding shares of Common Stock and shares of Excess Stock resulting from the exchange of shares of Common Stock. The Corporation, as holder of the Excess Stock in trust, or, if the Corporation shall have been dissolved, any trustee appointed by the Corporation prior to its dissolution, shall distribute ratably to the Beneficiaries of the Trust, when determined, any such assets received in respect of the Excess Stock in any liquidation, dissolution or winding up, or any distribution of the assets, of the Corporation. Anything to the contrary herein notwithstanding, in no event shall the amount payable to a holder with respect to shares of Excess Stock resulting from the exchange of shares of Preferred Stock exceed (i) the price per share such holder paid for the Preferred Stock in the purported Transfer that resulted in the Excess Stock or (ii) if the holder did not give full value for such Excess Stock (as through a gift, devise or other event or transaction), a price per share equal to the Market Price for the shares of Preferred Stock on the date of the purported Transfer that resulted in such Excess Stock. Any amount available for distribution in excess of the foregoing limitations shall be paid ratably to the holders of shares of Preferred Stock and other holders of Excess Stock resulting from the exchange of Preferred Stock to the extent permitted by the foregoing limitations.

(2) Except as provided below, in the event of any voluntary of involuntary liquidation, dissolution or winding up, or any other distribution of the assets, of the Corporation, each holder of shares of Excess Stock resulting from the exchange of Common Stock shall be entitled to receive, ratably with (i) each other holder of shares of such Excess Stock and (ii) each holder of Common Stock, that portion of the aggregate assets available for distribution to holders of shares of Common Stock (including holders of Excess Stock resulting from the exchange of Common Stock pursuant to paragraph C of Section 3 of Article VI hereof), determined in accordance with applicable law, as the number of shares of such Excess Stock held by such holder bears to the total number of shares of outstanding Common Stock and outstanding Excess Stock resulting from the exchange of Common Stock then outstanding. The Corporation, as holder of the Excess Stock in trust, or, if the Corporation shall have been dissolved, any trustee appointed by the Corporation prior to its dissolution, shall distribute ratably to the Beneficiaries of the Trust, when determined, any such assets received in respect of the Excess Stock in any liquidation, dissolution or winding up, or any distribution of the assets, of the Corporation. Anything herein to the contrary notwithstanding, in no event shall the amount payable to a holder with respect to shares of Excess Stock exceed (i) the price per share such holder paid for the Common Stock in the purported Transfer that resulted in the Excess Stock or (ii) if the holder did not give full value for such Excess Stock (as through a gift, devise or other event or transaction), a price per share equal to the Market Price for the shares of Common Stock on the date of the purported Transfer that resulted in such Excess Stock. Any amount available for distribution in excess of the foregoing limitations shall be paid ratably to the holders of shares of Common Stock and other holders of Excess Stock resulting from the exchange of Common Stock to the extent permitted by the foregoing limitations.

D. VOTING RIGHTS. The holders of shares of Excess Stock shall not be entitled to vote on any matters (except as required by MGCL).

E. RESTRICTIONS ON TRANSFER; DESIGNATION OF BENEFICIARY.

(1) Excess Stock shall not be transferable. The Purported Record Transferee may freely designate a Beneficiary of its interest in the Trust (representing the number of shares of Excess Stock held by the Trust attributable to a purported Transfer that resulted in the Excess Stock, if (i) the shares of Excess Stock held in the Trust would not be Excess Stock in the hands of such Beneficiary and (ii) the Purported Beneficial Transferee does not receive a price for designating such Beneficiary that reflects a price per share for such Excess Stock that exceeds (x) the price per share such Purported Beneficial Transferee paid for the Capital Stock in the purported Transfer that resulted in the Excess Stock or (y) if the Purported Beneficial Transferee did not give value for such shares of Excess Stock (as through a gift, device or other event or transaction), a price per share equal to the Market Price for the shares of Capital Stock on the date of the purported Transfer that resulted in the Excess Stock. Upon such transfer of an interest in the Trust, the corresponding shares of Excess Stock in the Trust automatically shall be exchanged for an equal number of shares of Capital Stock and such shares of Capital Stock shall be transferred of record to the Beneficiary of the interest in the Trust designated by the Purported Record Transferee, as described above, if such Capital Stock would not be Excess Stock in the hands of such Beneficiary. Prior to any transfer of any interest in the Trust, the Purported Record Transferee must give advance notice to the Corporation of the intended transfer and the Corporation must have waived in writing its purchase rights under paragraph F of this Section 4.

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(2) Notwithstanding the foregoing, if a Purported Beneficial Transferee receives a price for designating a Beneficiary of an interest in the Trust that exceeds the amounts allowable under subparagraph (1) of this paragraph E, such Purported Beneficial Transferee shall pay, or cause the Beneficiary of the interest in the Trust to pay, such excess to the Corporation.

(3) If any of the transfer restrictions set forth in this paragraph E, or any application thereof, is determined to be void, invalid or unenforceable by any court having jurisdiction over the issue, the Purported Record Transferee may be deemed, at the option of the Corporation, to have acted as the agent of the Corporation in acquiring the Excess Stock as to which such restrictions would, by their terms, apply, and to hold such Excess Stock on behalf of the Corporation.

F. PURCHASE RIGHT IN EXCESS STOCK. Shares of Excess Stock shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that created such Excess Stock (or, in the case of devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price of the Capital Stock exchanged for such Excess Stock on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of ninety (90) days after the later of (i) the date of the purported Transfer, change in capital structure of the Corporation or purported change in Beneficial Ownership which resulted in such Excess Stock and (ii) the date on which the Board of Directors determines in good faith that a Transfer, change in capital structure of the Corporation or purported change in Beneficial Ownership resulting in Excess Stock has occurred, if the Corporation does not receive a notice pursuant to paragraph E of Section 3 of this Article VI, but in no event later than a permitted Transfer pursuant to and in compliance with the terms of paragraph E of this Section 4.

G. REMEDIES NOT LIMITED. Nothing contained in this Article VI except Section 5 hereof shall limit scope or application of the provisions of this Section 4, the ability of the Corporation to implement or enforce compliance with the terms thereof or the authority of the Board of Directors to take any such other action or actions as it may deem necessary or advisable to protect the Corporation and the interests of its stockholders by preservation of the Corporation’s status as a REIT and to ensure compliance with the Ownership Limit, including, without limitation, refusal to give effect to a transaction on the books of the Corporation.

SECTION 5. SETTLEMENTS.

Nothing in Sections 3 and 4 of this Article VI shall preclude the settlement of any transaction with respect to the Capital Stock entered into through the facilities of the New York Stock Exchange or other national securities exchange on which the Capital Stock is listed.

SECTION 6. SEVERABILITY

If any provision of this Article VI or any application of any such provision is determined to be void, invalid or unenforceable by any court having jurisdiction over the issue, the validity and enforceability of the remainder of this Article VI shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court.

ARTICLE VII
MATTERS RELATING TO THE POWERS OF THE CORPORATION AND ITS
DIRECTORS AND STOCKHOLDERS

The following provisions are hereby adopted for the purpose of defining, limiting and regulating the powers of the Corporation and of the directors and stockholders thereof:

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SECTION 1. MATTERS RELATING TO THE BOARD OF DIRECTORS.

A. AUTHORITY AS TO BYLAWS. Except as otherwise provided herein, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws of the Corporation and the Corporation may, in its Bylaws, confer powers on the Board of Directors in addition to these contained herein or conferred by applicable law.

B. AUTHORITY AS TO STOCK ISSUANCES. The Board of Directors of the Corporation may authorize the issuance from time to time of shares of its stock of any class, whether now or hereafter authorized, or securities convertible into shares now or hereafter authorized, for such consideration as the Board of Directors may deem advisable, subject to such restrictions or limitations, if any, as may be set forth in the Charter or the Bylaws of the Corporation or in the general laws of the State of Maryland.

C. MANNER OF ELECTION. Unless and except to the extent that the Bylaws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot.

D. REMOVAL OF DIRECTORS. Any director may be removed from office at any time, with or without cause, by the affirmative vote of the holders of a majority of the then outstanding Capital Stock entitled to vote generally in the election of directors.

E. PERMISSIBLE CRITERIA FOR CONSIDERATION OF BEST INTERESTS. In determining what is in the best interest of the Corporation, a director of the Corporation shall consider the interests of the stockholders of the Corporation and, in his or her discretion, may consider the interests of the Corporation’s employees, suppliers, creditors and tenants and the long-term as well as short-term interests of the Corporation and its stockholders, including the possibility that these interests may be best served by the continued independence of the Corporation.

F. DETERMINATIONS BY BOARD. The determination as to any of the following matters, made in good faith by or pursuant to the direction of the Board of Directors consistent with the Charter of the Corporation and in the absence of actual receipt of an improper benefit in money, property or services or active and deliberate dishonesty established by a court, shall be final and conclusive and shall be binding upon the Corporation and every holder of shares of its stock: (i) the amount of the net income of the Corporation for any period and the amount of assets at any time legally available for the payment of dividends, redemption of its stock or the payment of other distributions on its stock; (ii) the amount of paid-in surplus, net assets, other surplus, annual or other net profit, net assets in excess of capital, undivided profits or excess of profits over losses on sales of assets; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves shall have been created shall have been paid or discharged); (iii) the fair value, or any sale, bid or asked priced to be applied in determining the fair value, of any asset owned or held by the Corporation; and (iv) any matters relating to the acquisition, holding and disposition of any assets by the Corporation.

G. RESERVED POWERS OF BOARD. The enumeration and definition of particular powers of the Board of Directors included in this Article VII shall in no way be limited or restricted by reference to or inference from the terms of any other clause of this or any other provision of the Charter of the Corporation, or construed or deemed by inference or otherwise in any manner to exclude or limit the powers conferred upon the Board of Directors under the laws of the State of Maryland as now or hereafter in force.

H. ALTERATION OF AUTHORITY GRANTED TO THE BOARD OF DIRECTORS. The affirmative vote of that proportion of the then-outstanding Capital Stock necessary to approve an amendment to this Charter pursuant to the MGCL and Article XI hereof shall be required to amend, repeal or adopt any provision inconsistent with Section 1 of this Article VII or with Section 3.12 of the Bylaws of the Corporation (including defined terms therein).

I. REIT QUALIFICATION. The Board of Directors shall use its best efforts to cause the Corporation and its stockholders to qualify for U.S. federal income tax treatment in accordance with the provisions of the Code applicable to REITs. In furtherance of the foregoing, the Board of Directors shall use its best efforts to take such actions as are necessary, and may take such actions as it deems desirable (in its sole judgment and discretion) to

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preserve the status of the Corporation as a REIT (as that term is defined in paragraph A of Section 3 of Article VI hereof); provided, however, that in the event that the Board of Directors determines, in its sole judgment and discretion, that it is no longer in the best interests of the Corporation to qualify as a REIT, the Board of Directors shall take such actions as are required by the Code (as that term is defined in paragraph A of Section 3 of Article VI hereof), the MGCL and other applicable law, to cause the matter of termination of qualification as a REIT to be submitted to a vote of the stockholders of the Corporation pursuant to paragraph A of Section 2 of this Article VII.

SECTION 2. MATTERS RELATING TO THE STOCKHOLDERS.

A. TERMINATION OF REIT STATUS. Notwithstanding anything contained in this Charter to the contrary, the affirmative vote of the holders of a majority of the then-outstanding Capital Stock entitled to vote generally in the election of directors and the approval of the Board of Directors shall be required to terminate voluntarily the Corporation’s status as a REIT (as that term is defined in paragraph A of Section 3 of Article VI).

B. NO CUMULATIVE RIGHTS. Stockholders of the Corporation shall not have cumulative voting rights in the election of directors.

C. NO PREEMPTIVE RIGHTS. No holders of stock of the Corporation, of whatever class, shall have any preferential right of subscription to any shares of stock of any class or to any securities convertible into shares of stock of any class of the Corporation, nor any right of subscription to any thereof.

ARTICLE VIII
DIRECTORS’ LIABILITY

To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of directors and officers, no director or officer of the Corporation shall be liable to the Corporation or its stockholders for money damages. Neither the amendment nor repeal of this Article VIII, nor the adoption or amendment of any provision of the Charter or Bylaws of the Corporation inconsistent with this Article VIII, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.

ARTICLE IX
INDEMNIFICATION

Each person who is or was or who agrees to become a director or officer of the Corporation, or each person who, while a director of the Corporation, is or was serving or who agrees to serve, at the request of the Corporation, as a director, officer, partner, joint venture, employee or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (including the heirs, executor, administrators or estate of such person), shall be indemnified by the Corporation, and shall be entitled to have paid on his behalf or be reimbursed for reasonable expenses in advance of final disposition of a proceeding, in accordance with the Bylaws of the Corporation, to the full extent permitted from time to time by the Maryland General Corporation Law as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) or any other applicable laws presently or hereafter in effect. The Corporation shall have the power, with the approval of the Board of Directors, to provide such indemnification and advancement of expenses to any employee or agent of the Corporation, in accordance with the Bylaws of the Corporation. Without limiting the generality or the effect of the foregoing, the Corporation may enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this Article IX. Any amendment or repeal of this Article IX shall not adversely affect any right or protection existing hereunder immediately prior to such amendment or repeal.

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ARTICLE X
APPLICATION OF CERTAIN PROVISIONS OF LAW

SECTION 1. BUSINESS COMBINATIONS.

Notwithstanding any other provision of this Charter or any contrary provision of law, Title 3, subtitle 6 of the Corporations and Associations Article of the Annotated Code of Maryland, as amended from time to time, or any successor statute thereto, shall not apply to any “business combination” (as defined in Section 3.601(d) of the Corporations and Associations Article of the Annotated Code of Maryland, as amended from time to time, or any successor statute thereto) involving the Corporation.

SECTION 2. CONTROL SHARE TRANSACTIONS.

Notwithstanding any other provision of this Charter or any contrary provision of law, Title 3, subtitle 7 of the Corporations and Associations Article of the Annotated Code of Maryland, as amended from time to time, or any successor statute thereto shall not apply to any acquisition of shares of stock of the Corporation.

ARTICLE XI
AMENDMENT

The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in its Charter and any other provisions authorized by the laws of the State of Maryland at the time in force may be added or inserted in the manner now or hereafter prescribed herein or by applicable law, and all rights, preferences and privileges of whatsoever nature conferred upon stockholder, directors or any other persons whomsoever by and pursuant to this Charter in its present form or as hereafter amended are granted subject to the rights reserved in this Article XI; provided, however, that any amendment or repeal of Articles VIII, IX or this Article XI of this Charter shall not adversely affect any right or protection existing hereunder immediately prior to such amendment or repeal.

IN WITNESS WHEREOF, these First Amended and Restated Articles of Incorporation are hereby executed by Gary M. Ralston, the President of the Corporation, who hereby acknowledges that the First Amended and Restated Articles of Incorporation are the act of the Corporation, and who does hereby state under the penalties of perjury that the matters and facts set forth herein with respect to authorization and approval of such Articles are true in all material respects to the best of his knowledge, information and belief.

Dated: August 10, 1998

By:	/s/ Gary M. Ralston
	Gary M. Ralston, President
ATTEST
By:	/s/ Kevin B. Habicht
	Kevin B. Habicht, Secretary

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PART II

ARTICLES OF AMENDMENT
TO
FIRST AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
COMMERCIAL NET LEASE REALTY, INC.

Commercial Net Lease Realty, Inc., a Maryland corporation having its principal office in Baltimore, Maryland (hereinafter, the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:

FIRST: The First Amended and Restated Articles of Incorporation (the “Articles of Incorporation”) are hereby amended by renaming Article XI “AMENDMENT AND CERTAIN EXTRAORDINARY ACTIONS” and deleting Article XI in its entirety and inserting the following new Article XI:

Section 1. Amendment

The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in its Charter and any other provisions authorized by the laws of the State of Maryland at the time in force may be added or inserted in the manner now or hereafter prescribed herein or by applicable law, and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other person whomsoever by and pursuant to this Charter in its present form or as hereafter amended are granted subject to the rights reserved in this Article XI, provided, however, that any amendment or repeal of Articles VIII, IX or this Article XI of this Charter shall not adversely affect any right or protection existing hereunder immediately prior to such amendment or repeal. Subject to the provisions of any class or series of Preferred Stock at the time outstanding, this Charter may be amended by the affirmative vote of the holders of not less than a majority of the Common Stock then outstanding and entitled to vote thereon.

Section 2. Consolidation, Merger, Share Exchange or Transfer of Assets

Subject to the provisions of any class or series of Preferred Stock at the time outstanding, the Board of Directors shall have the power to (i) consolidate the Corporation with one or more other entities into a new entity, (ii) merge the Corporation into another entity, (iii) effect a share exchange with another domestic or foreign corporation or other entity or (iv) sell or otherwise dispose of all or substantially all of the Corporation’s assets; provided, however, that such action shall have been approved by the holders of not less than a majority of the Common Stock then outstanding and entitled to vote thereon.

SECOND: The total number of all classes of capital stock which the Corporation has authority to issue immediately prior to this amendment is two hundred ten million (210,000,000) shares consisting of (i) ninety million (90,000,000) shares of common stock, par value $0.01 (the “Common Stock”); (ii) fifteen million (15,000,000) shares of preferred stock, par value $0.01 (the “Preferred Stock”); and one hundred five million (105,000,000) shares of excess stock, par value $0.01 (the “Excess Stock”). The aggregate par value of all of the authorized shares of all classes of capital stock having a par value is $2,100,000.

THIRD: The Articles of Incorporation are hereby amended by deleting Article VI, Section 1 in its entirety and inserting the following new Article VI, Section 1:

The total number of shares of all classes of capital stock that the Corporation has authority to issue is four hundred ten million (410,000,000) shares consisting of (i) one hundred ninety million (190,000,000) shares of common stock, par value $0.01 (the “Common Stock”); (ii) fifteen million (15,000,000) shares of preferred stock, par value $0.01 (the “Preferred Stock”); and (iii) two hundred five million (205,000,000) shares of excess stock, par value $0.01 (the “Excess Stock”). The aggregate par value of all of the authorized shares of all classes of capital stock having a par value is $4,100,000.

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FOURTH: The information required by subsection (b)(2)(i) of Section 2-607 of the Maryland General Corporation Law will not be changed by these Articles of Amendment; and

FIFTH: The amendments to the Articles of Incorporation as hereinabove set forth have been duly advised by the Board of Directors and approved by the stockholders of the Corporation.

IN WITNESS WHEREOF, Commercial Net Lease Realty, Inc. has caused these presents to be signed in its name and on its behalf by its Executive Vice President and Chief Operating Officer and attested by its Assistant Secretary on September 23, 2004.

THE UNDERSIGNED, Executive Vice President and Chief Operating Officer of Commercial Net Lease Realty, Inc., who executed on behalf of said corporation, the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said corporation, the foregoing Articles of Amendment to be the corporate act of said corporation and further certifies that, to the best of his knowledge, information, and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.

ATTEST:	Commercial Net Lease Realty, Inc.
/s/ Kella W. Schaible	/s/ Julian E. Whitehurst
Kella W. Schaible	Julian E. Whitehurst
Assistant Secretary	Executive Vice President and Chief Operating Officer

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ARTICLES OF MERGER MERGING COMMERCIAL NET LEASE REALTY SERVICES, INC. (a Maryland corporation)
INTOCOMMERCIAL NET LEASE REALTY, INC. (a Maryland corporation)

The undersigned corporations, in accordance with the Annotated Code of Maryland, Corporations and Associations, Section 3-101 et seq. (the “Code”) hereby adopt and execute the following Articles of Merger:

ARTICLE I

The names of the corporations proposing to merge are: (i) Commercial Net Lease Realty Services, Inc., a corporation organized and existing under the laws of the State of Maryland (hereinafter sometimes referred to as the “Merged Corporation”), and (ii) Commercial Net Lease Realty, Inc., a corporation organized and existing under the laws of the State of Maryland (hereinafter sometimes referred to as the “Surviving Corporation”), both of which corporations agree to effect such merger (the “Merger”) upon the terms and subject to the conditions set forth herein.

Pursuant to these Articles of Merger, Commercial Net Lease Realty Services, Inc. will merge with and into Commercial Net Lease Realty, Inc., its sole stockholder, with Commercial Net Lease Realty, Inc. being the Surviving Corporation.

ARTICLE II

The principal office of the Merged Corporation, organized under the laws of the State of Maryland, is located in Baltimore City, State of Maryland.

The principal office of the Surviving Corporation, organized under the laws of the State of Maryland, is located in Baltimore City, State of Maryland.

ARTICLE III

The Merged Corporation does not own real property or any other interest in land in the State of Maryland.

ARTICLE IV

The terms and conditions of the transaction set forth in these Articles of Merger (“Articles”) were advised, authorized, and approved by each corporation party to the Articles in the manner and by the vote required by its charter and the laws of the State of Maryland.

(i) The Merger was duly advised, authorized and approved by the Board of Directors of the Merged Corporation by a Unanimous Written Consent of the Board of Directors of the Merged Corporation dated October 31, 2005, declaring that the Merger herein proposed is advisable and in the best interests of the Merged Corporation substantially upon the terms and conditions set forth in these Articles. Pursuant to Section 3-106(c)(1) of the Code, a meeting of the sole shareholder of the Merged Corporation was not necessary.

(ii) The Merger was duly advised, authorized and approved by the Board of Directors of the Surviving Corporation by a Unanimous Written Consent of the Board of Directors of the Surviving Corporation dated October 31, 2005, declaring that the Merger herein proposed is advisable and in the best interests of the Surviving Corporation substantially upon the terms and conditions set forth in these Articles.

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ARTICLE V

The total number of shares of stock that the Merged Corporation has authority to issue is 40,000 shares consisting of (i) 30,000 shares of Common Stock, with a par value $0.01 per share, 29,500 shares of which are designated as Non-Voting Common Stock and 500 shares of which are designated as Voting Common Stock; and (ii) 10,000 shares of Preferred Stock, with a par value of $0.01 per share. The aggregate par value of all such shares is Four Hundred Dollars ($400.00).

The total number of shares of stock that the Surviving Corporation has authority to issue is 410,000,000 shares consisting of (i) 190,000,000 shares of Common Stock, with a par value of $0.01 per share; (ii) 15,000,000 shares of Preferred Stock, with a par value of $0.01 per share; and (iii) 205,000,000 shares of Excess Stock, with a par value of $0.01 per share. The aggregate par value of all such shares is Four Million One Hundred Thousand Dollars ($4,100,000.00).

ARTICLE VI

The Merger shall not effect any amendment changing the foregoing information in this Article VI with respect to the Surviving Corporation.

ARTICLE VII

The manner and basis of converting or exchanging the shares of the Merged Corporation into shares of the Surviving Corporation shall be as follows: upon the effective time of the Merger, each share of stock of the Merged Corporation held by Commercial Net Lease Realty, Inc., the sole stockholder of the Merged Corporation, shall cease to be outstanding, shall be cancelled and retired and shall cease to exist.

ARTICLE VIII

The Merger shall be effective as of 9:05 a.m. EST on November 1, 2005.

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IN WITNESS WHEREOF, these Articles of Merger are hereby signed for and on behalf of the Merged Corporation by its Executive Vice President, who does hereby acknowledge that said Articles of Merger are the corporate act of said corporation, and who does hereby state under the penalties for perjury that the matters and facts stated therein with respect to the authorization and approval of said merger are true in all material respects to the best of his knowledge, information, and belief, and attested to by the Secretary.

		COMMERCIAL NET LEASE REALTY SERVICES, INC., a Maryland corporation
		By:	/s/ Kevin B. Habicht
		Name:	Kevin B. Habicht
		Title:	Executive Vice President
ATTEST:
/s/ Julian E. Whitehurst
Name:	Julian E. Whitehurst
Title:	Secretary
Dated: October 31, 2005

IN WITNESS WHEREOF, these Articles of Merger are hereby signed for and on behalf of the Surviving Corporation by its Executive Vice President, who does hereby acknowledge that said Articles of Merger are the corporate act of said corporation, and who does hereby state under the penalties for perjury that the matters and facts stated therein with respect to the authorization and approval of said merger are true in all material respects to the best of his knowledge, information, and belief, and attested to by the Assistant Secretary.

		COMMERCIAL NET LEASE REALTY, INC.,  a Maryland corporation
		By:	/s/ Julian E. Whitehurst
		Name:	Julian E. Whitehurst
		Title:	Executive Vice President
ATTEST:
/s/ Kevin B. Habicht
Name:	Kevin B. Habicht
Title:	Assistant Secretary
Dated: October 31, 2005

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ARTICLES OF AMENDMENT

TO

FIRST AMENDED AND RESTATED ARTICLES OF INCORPORATION

OF

COMMERCIAL NET LEASE REALTY, INC.

Commercial Net Lease Realty, Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:

FIRST: The First Amended and Restated Articles of Incorporation (the “Articles of Incorporation”) are hereby amended by deleting Article I in its entirety and inserting the following new Article I:

The name of the Corporation is National Retail Properties, Inc.

SECOND: The information required by subsection (b)(2)(i) of Section 2-607 of the Maryland General Corporation Law will not be changed by these Articles of Amendment; and

THIRD: The amendment to the Articles of Incorporation as hereinabove set forth have been approved by the Board of Directors of the Corporation and is limited to the change expressly authorized by Section 2-605 of the Maryland General Corporation Law to be made without action by the stockholders.

IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its Executive Vice President and Chief Operating Officer and attested by its Assistant Secretary effective 9:00am, May 1st, 2006.

THE UNDERSIGNED, Executive Vice President and Chief Operating Officer of the Corporation, who executed on behalf of said corporation, the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said corporation and further certifies that, to the best of his knowledge, information, and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.

ATTEST:	Commercial Net Lease Realty, Inc.
/s/ Kella W. Schaible	/s/ Julian E. Whitehurst
Kella W. Schaible	Julian E. Whitehurst
Assistant Secretary	Executive Vice President and Chief Operating Officer

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ARTICLES OF AMENDMENT

TO

FIRST AMENDED AND RESTATED ARTICLES OF INCORPORATION

OF

NATIONAL RETAIL PROPERTIES, INC.

National Retail Properties, Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of the State of Maryland that:

FIRST: The total number of shares of all classes of capital stock that the Corporation has authority to issue is four hundred ten million (410,000,000) shares consisting of (i) one hundred ninety million (190,000,000) shares of common stock, par value $0.01 (the “Common Stock”); (ii) fifteen million (15,000,000) shares of preferred stock, par value $0.01 (the “Preferred Stock”); and (iii) two hundred five million (205,000,000) shares of excess stock, par value $0.01 (the “Excess Stock”). The aggregate par value of all of the authorized shares of all classes of capital stock having a par value is $4,100,000.

SECOND: The First Amended and Restated Articles of Incorporation, as amended (the “Articles of Incorporation”), are hereby amended by deleting Article VI, Section 1 in its entirety and inserting the following new Article VI, Section 1:

The total number of shares of all classes of capital stock that the Corporation has authority to issue is seven hundred eighty million (780,000,000) shares consisting of (i) three hundred seventy five million (375,000,000) shares of common stock, par value $0.01 per share (the “Common Stock”); (ii) fifteen million (15,000,000) shares of preferred stock, par value $0.01 per share (the “Preferred Stock”); and (iii) three hundred ninety million (390,000,000) shares of excess stock, par value $0.01 per share (the “Excess Stock”). The aggregate par value of all of the authorized shares of all classes of capital stock having a par value is $7,800,000.

THIRD: The information required by subsection (b)(2)(i) of Section 2-607 of the Maryland General Corporation Law will not be changed by these Articles of Amendment; and

FOURTH: The amendments to the Articles of Incorporation as hereinabove set forth have been advised by the Board of Directors of the Corporation and approved by the stockholders of the Corporation.

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IN WITNESS WHEREOF,National Retail Properties, Inc. has caused these Articles of Amendment to be signed in its name and on its behalf by Kevin B. Habicht, its Executive Vice President, Chief Financial Officer, Assistant Secretary and Treasurer, and attested by Christopher P. Tessitore, its Executive Vice President, General Counsel and Secretary, on May 31, 2012.

THE UNDERSIGNED, Executive Vice President, Chief Financial Officer, Assistant Secretary and Treasurer of National Retail Properties, Inc., who executed in the name and on behalf of said corporation, the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said corporation, the foregoing Articles of Amendment to be the corporate act of said corporation and further certifies that, to the best of his knowledge, information, and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.

Attest:	NATIONAL RETAIL PROPERTIES, INC.
/s/ Christopher P. Tessitore	/s/ Kevin B. Habicht
Christopher P. Tessitore Executive Vice President, General Counsel and Secretary	Kevin B. Habicht Executive Vice President, Chief Financial Officer, Assistant Secretary and Treasurer

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SECOND AMENDMENT

TO

FIRST AMENDED AND RESTATED ARTICLES OF INCORPORATION

OF

NATIONAL RETAIL PROPERTIES, INC.

National Retail Properties, Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:

FIRST: The First Amended and Restated Articles of Incorporation (the “Articles of Incorporation”) are hereby amended by deleting Article I in its entirety and inserting the following new Article I:

The name of the Corporation is NNN REIT, Inc.

SECOND: The information required by subsection (b)(2)(i) of Section 2-607 of the Maryland General Corporation Law will not be changed by these Articles of Amendment; and

THIRD: The amendment to the First Amended and Restated Articles of Incorporation as hereinabove set forth have been approved by the Board of Directors of the Corporation and is limited to the change expressly authorized by Section 2-605 of the Maryland General Corporation Law to be made without action by the stockholders.

IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its President and Chief Executive Officer and attested by its Secretary on April 13, 2023, to be effective May 1, 2023.

THE UNDERSIGNED, President and Chief Executive Officer of the Corporation, who executed on behalf of said corporation, the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said corporation and further certifies that, to the best of his knowledge, information, and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.

ATTEST:	NATIONAL RETAIL PROPERTIES, INC.
/s/ Christopher P. Tessitore	/s/ Stephen A. Horn, Jr.
Christopher P. Tessitore Secretary	Stephen A. Horn, Jr. President and Chief Executive Officer

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EX-3.2

Exhibit 3.2

TABLE OF CONTENTS

Part I	Third Amended and Restated Bylaws of Commercial Net Lease Realty, Inc.	2
Part II	Certification of First Amendment to Third Amended and Restate Bylaws of Commercial Net Lease Realty, Inc.	15
	Exhibit A to First Amendment to the Third Amended and Restated Bylaws of Commercial Net Lease Realty, Inc.	16
	Second Amendment to Third Amended and Restated Bylaws of National Retail Properties, Inc.	17
	Third Amendment to Third Amended and Restated Bylaws of National Retail Properties, Inc.	20
	Fourth Amendment to Third Amended and Restated Bylaws of National Retail Properties, Inc.	21
	Fifth Amendment to Third Amended and Restated Bylaws of National Retail Properties, Inc.	27

1

PART I

THIRD AMENDED AND RESTATED

BYLAWS

OF

COMMERCIAL NET LEASE REALTY, INC.

(adopted on August 18, 2005)

ARTICLE I

OFFICES

Section 1. Registered Office. The registered Office of Commercial Net Lease Realty, Inc. (the “Corporation”) shall be 300 East Lombard Street, Baltimore, Maryland 21202. The registered agent of the Corporation at such address is The Corporation Trust Incorporated.

Section 2. Additional Offices. The Corporation may also have offices at such other places, both within and without the State of Maryland, as the board of directors of the Corporation (the “Board of Directors”) may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETING OF STOCKHOLDERS

Section 1. Time and Place. Meetings of the stockholders of the Corporation (the “Stockholders”) shall be held at such places, either within or without the State of Maryland, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof.

Section 2. Annual Meeting. The Annual Meeting of Stockholders for the election of directors and the transaction of other business shall be held, in each year, commencing with the year 1995, after delivery of the annual report referred to in Section 12 of this Article II, on such date and at such time and location as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Failure to hold the Annual Meeting does not invalidate the Corporation’s existence or affect any otherwise valid acts of the Corporation.

Section 3. Special Meetings. The Chairman of the Board, the Chief Executive Officer or a majority of the members of the Board of Directors may call a Special Meeting of the Stockholders. A Special Meeting shall also be called by the Secretary of the Corporation upon the written request of the Stockholders entitled to cast not less than a majority of all the votes entitled to be cast at such meeting. The Secretary shall inform such Stockholders of the reasonably estimated cost of preparing and mailing notice of the meeting and, upon payment by such Stockholders to the Corporation of such costs, the Secretary shall give notice to each Stockholder entitled to notice of the meeting. Unless requested by Stockholders entitled to cast a majority of all votes entitled to be cast at such meeting, a Special Meeting need not be called to consider any matter which is substantially the same as a matter voted on at any meeting of the Stockholders held during the preceding twelve (12) months.

Section 4. Notice. Written notice of any meeting of Stockholders stating the place, date and hour of the meeting shall be given to each Stockholder entitled to vote thereat, either personally or by mail, not less than ten (10) nor more than ninety (90) days before the date of the meeting, unless a greater period of notice is required by statute in a particular case. In the case of a Special Meeting, the notice shall also state the purpose or purposes for which the meeting is called. If mailed, such notice shall be deemed to have been given when deposited in the United States mail, postage prepaid, directed to the Stockholder at the Stockholder’s address as it appears on the records of the Corporation.

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Section 5. Corporate Records and Stockholder Lists. The officer who has charge of the stock ledger of the Corporation shall prepare and keep, or cause to have prepared and kept, as part of the books and records of the Corporation, a list of the names and addresses of all Stockholders of the Corporation. Inspection of all the books and records of the Corporation by Stockholders shall be permitted to the extent provided by the Maryland General Corporation Law.

Section 6. Quorum; Adjournments. Unless otherwise provided by statute or the Articles of Incorporation, at a meeting of Stockholders, the presence in person or by proxy of Stockholders entitled to cast a majority of all the votes entitled to be cast at a meeting of Stockholders shall constitute a quorum. If, however, such quorum shall not be present or represented at any meeting of the Stockholders, the Stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without further notice to a date not more than one hundred twenty (120) days after the original record date. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

Section 7. Voting. A plurality of all votes cast at a meeting of Stockholders duly called and at which a quorum is present shall be sufficient to elect a Director. Each share of stock may be voted for as many individuals as there are Directors to be elected and for whose election the shares of stock are entitled to be voted. When a quorum is present at any meeting, the vote of the holders of a majority of the votes cast shall decide any other question brought before such meeting, unless more than a majority of the votes cast is required herein or by statute or by the Articles of Incorporation.

Section 8. Voting Procedure. Unless otherwise provided in the Articles of Incorporation, each Stockholder shall, at every meeting of the Stockholders, regardless of class, be entitled to one (1) vote in person or by proxy for each share of stock held by such Stockholder.

Section 9. Proxies. A Stockholder may cast the votes entitled to be cast by the share of stock owned of record by the Stockholder either in person or by proxy executed by the Stockholder or by the Stockholder’s duly authorized agent in any manner allowed by law. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy.

Section 10. Voting of Stock By Certain Holders. Shares of stock of the Corporation registered in the name of a corporation, partnership, limited liability company, trust or other entity, if entitled to be voted, may be voted by the president or a vice president, a general partner, a manager, a managing member or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a by-law or a resolution of the governing board of such corporation or other entity or agreement of the partners of the partnership or agreement of the members of the limited liability company presents a certified copy of such by-law, resolution or agreement, in which case such person may vote such stock. Any trustee or other fiduciary may vote stock registered in such person’s name as such fiduciary, either in person or by proxy.

Shares of stock of the Corporation directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares of stock entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares of stock at any given time.

The Directors may adopt by resolution a procedure by which a Stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the Stockholder are held for the account of a specified person other than the Stockholder. The resolution shall set forth the class of Stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Directors consider necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the

3

purposes set forth in the certification, the Stockholder of record of the specified shares of stock in place of the Stockholder who makes the certification.

Section 11. Inspectors. At any meeting of Stockholders, the Chairman of the meeting may appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares of stock represented at the meeting based upon their determination of the validity and effect of proxies, count all votes, report the results and perform such other acts as are proper to conduct the election and voting with impartiality and fairness to all the Stockholders.

Each report of an inspector shall be in writing and signed by the inspector or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares of stock represented at the meeting and the results of the voting shall be prima facie evidence thereof.

Section 12. Reports to Stockholders. The Directors shall submit to the Stockholders at or before the Annual Meeting of Stockholders a report of the business and operations of the Corporation during such fiscal year, containing a balance sheet and a statement of income and surplus of the Corporation, accompanied by the certification of an independent certified public accountant, and such further information as the Directors may determine is required pursuant to any law or regulation to which the Corporation is subject. Within the earlier of twenty (20) days after the Annual Meeting of Stockholders or one hundred twenty (120) days after the end of the fiscal year of the Corporation, the Directors shall place the annual report on file at the principal office of the Corporation and with any governmental agencies as may be required by law and as the Directors may deem appropriate.

Section 13. Nominations and Proposals by Stockholders.

(a) Annual Meetings of Stockholders.

(i) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the Stockholders may be made at an Annual Meeting of Stockholders: (A) pursuant to the Corporation’s notice of meeting; (B) by or at the direction of the Directors; or (C) by any Stockholder of the Corporation who was a Stockholder of record both at the time of giving of notice provided for in this Section 13(a) and at the time of the annual meeting, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 13(a).

(ii) For nominations or other business to be properly brought before an Annual Meeting by a Stockholder pursuant to clause (C) of paragraph (a) (i) of this Section 13, the Stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for action by Stockholders. To be timely, a Stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 120th calendar day before the first anniversary of the date of the Corporation’s proxy statement released to Stockholders in connection with the preceding year’s Annual Meeting; provided, however, that in the event that the date of the current year’s Annual Meeting has been changed by more than thirty (30) days from the date of the preceding year’s meeting or if the Corporation did not hold an Annual Meeting the preceding year, notice by the Stockholder to be timely must be so delivered within a reasonable time before the Annual Meeting begins to print and mail its proxy materials. In no event shall the public announcement of a postponement or adjournment of an Annual Meeting to a later date or time commence a new time period for the giving of a Stockholder’s notice as described above. Such Stockholder’s notice shall set forth: (A) as to each person whom the Stockholder proposes to nominate for election or reelection as a Director all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); (B) as to any other business that the Stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such Stockholder and of the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the Stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made: (i) the name and address of such Stockholder, as it appears on the Corporation’s

4

books, and of such beneficial owner; and (ii) the number of each class of shares of the Corporation which are owned beneficially and of record by such Stockholder and such beneficial owner.

(iii) Notwithstanding anything in the second sentence of paragraph (a) (ii) of this Section 13 to the contrary, in the event that the number of Directors to be elected to the Board of Directors is increased and there is no public announcement by the Corporation naming all of the nominees for Director or specifying the size of the increased Board of Directors at least seventy (70) days prior to the first anniversary of the preceding year’s annual meeting, a Stockholder’s notice required by this Section 13(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

(b) Special Meetings of Stockholders. Only such business shall be conducted at a Special Meeting of Stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a Special Meeting of Stockholders at which Directors are to be elected: (i) pursuant to the Corporation’s notice of meeting; (ii) by or at the direction of the Board of Directors; or (iii) provided that the Board of Directors has determined that Directors shall be elected at such Special Meeting, by any Stockholder of the Corporation who was a Stockholder of record both at the time of giving of notice provided for in this Section 13(b) and at the time of the Special Meeting, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 13(b). In the event the Corporation calls a Special Meeting of Stockholders for the purpose of electing one or more Directors to the Board of Directors, any such Stockholder may nominate a person or persons (as the case may be) for election to such position as specified in the Corporation’s notice of meeting, if the Stockholder’s notice containing the information required by paragraph (a) (ii) of this Section 13 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to such Special Meeting and not later than the close of business on the later of the 90th day prior to such Special Meeting or the 10th day following the day on which public announcement is first made of the date of the Special Meeting and of the nominees proposed by the Directors to be elected at such meeting. In no event shall the public announcement of a postponement or adjournment of a Special Meeting to a later date or time commence a new time period for the giving of a Stockholder’s notice as described above.

(c) General.

(i) Only such persons who are nominated in accordance with the procedures set forth in this Section 13 shall be eligible to be elected as Directors and only such business shall be conducted at a meeting of Stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 13. The chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 13 and, if any proposed nomination or business is not in compliance with this Section 13, to declare that such nomination or proposal shall be disregarded.

(ii) For purposes of this Section 13, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(iii) Notwithstanding the foregoing provisions of this Section 13, a Stockholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 13. Nothing in this Section 13 shall be deemed to affect any rights of Stockholders to request inclusion of proposals in, nor the right of the Corporation to omit a proposal from, the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 14. Informal Action by Stockholders.

(a) Any action by Stockholders may be taken without a meeting, if a majority of shares of stock entitled to vote on the matter (or such larger proportion of shares of stock as shall be required to take such action) consent to the action in writing and the written consents are filed with the records of the meetings of Stockholders.

5

(b) In order that the Corporation may determine the Stockholders entitled to consent to action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any Stockholder of record seeking to have the Stockholders authorize or take action by written consent shall, by written notice to the Secretary of the Corporation, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten (10) days of the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten (10) days of the date on which such a request is received and no prior action by the Board of Directors is required by applicable law, the record date for determining Stockholders entitled to consent to action in writing without a meeting shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Maryland, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of Stockholders meetings are recorded, in each case to the attention of the Secretary of Corporation. Delivery shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors within ten (10) days of the date on which such a request is received and prior action by the Board of Directors is required by applicable law, the record date for determining Stockholders entitled to consent to action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action.

Section 15. Voting by Ballot. Voting on any question or in any election may be by voice unless the presiding officer shall order or any Stockholder shall demand that voting be by ballot.

ARTICLE III

DIRECTORS

Section 1. Number. The number of directors(“Directors”) which shall constitute the whole Board shall be no fewer than three (3) and no more than twelve (12). Such numbers may be altered (but not to less than three (3)) by amendment to this By-law.

Section 2. Selection. The Directors shall be elected at the Annual Meeting of the Stockholders, except as provided in Section 5 of this Article,and except that the first Directors of the Corporation were named in the Articles of Incorporation, each Director elected shall hold office until the next Annual Meeting of the Stockholders and until the Director’s successor is elected and qualified, or until the Director’s earlier resignation or removal.

Section 3. Composition. A majority of the members of the Board of Directors shall, except during the period of a vacancy or vacancies therein, be “Independent Directors,” as such term is defined or construed from time to time in the Exchange Act and the rules and regulations of the Securities and Exchange Commission, the rules and regulations of any stock exchange or automated inter dealer quotation system on which any shares of stock of the Corporation are listed or quoted, and other laws and regulations applicable to the Corporation.

Section 4. Resignation; Removal. Any Director may resign at anytime upon written notice to the Corporation. Any Director may be removed, with or without cause,by the vote or written consent of the holders of a majority of the outstanding shares of Common Stock then entitled to vote for the election of Directors.

Section 5. Vacancies. If for any reason any or all the Directors cease to be Directors, such event shall not terminate the Corporation or affect these Bylaws or the powers of the remaining Directors hereunder (even if fewer than three Directors remain).Subject to the rights of holders of one or more classes or series of preferred shares then outstanding, any vacancy on the Board of Directors (including a vacancy created by an increase in the number of Directors) shall be filled by a majority of the remaining Directors or, if the remaining Directors fail to act or there is no remaining Director, by the votes of holders of at least a majority of the shares of stock entitled to vote thereon and present in person or by proxy at any meeting of the Stockholders called for that purpose. Any individual so elected as Director shall hold office for the unexpired term of the Director he or she is replacing.

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Section 6. Chairman of the Board. The Board of Directors may elect from among the Directors a Chairman of the Board of Directors by affirmative vote of a majority of the full Board of Directors taken at any regular or special meeting of Directors. The Chairman of the Board shall act as chairman at all meetings of the Stockholders at which the Chairman of the Board is present and shall preside at all meetings of the Board of Directors at which the Chairman of the Board is present. In the absence of the Chairman of the Board,the duties of the Chairman of the Board shall be performed and the authority of the Chairman of the Board may be exercised by the Vice Chairman of the Board.

Section 7. Vice Chairman of the Board. The Board of Directors may elect from among the Directors a Vice Chairman of the Board of Directors by affirmative vote of a majority of the full Board of Directors taken at any regular or special meeting of Directors. The Vice Chairman of the Board shall, in the absence of the Chairman of the Board, act as chairman at all meetings of the Stockholders at which the Vice Chairman of the Board is present and shall preside at all meetings of the Board of Directors at which the Vice Chairman of the Board is present.

Section 8. General Powers. The business and affairs of the Corporation shall be managed by its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the Stockholders. A Director shall be an individual at least twenty-one (21) years of age who is not under legal disability. In case of failure to elect Directors at an Annual Meeting of Stockholders, the Directors holding over shall continue to direct the management of the business and affairs of the Corporation until their successors are elected and qualify.

Section 9. Place of Meetings. The Board of Directors of the Corporation may hold meetings,both regular and special, either within or without the State of Maryland at such place or places as the Board may from time to time designate (in the case of regular meetings) or as shall be specified in the notice of such meeting (in the case of special meetings).

Section 10. Regular Meetings. The Directors may provide, by resolution, the time and place, either within or without the State of Maryland, for the holding of regular meetings of the Board of Directors without other notice than such resolution.

Section 11. Special Meetings. Special meetings of the Board may be called by the Chairman or the Chief Executive Officer; special meetings shall also be called by the Chairman or Secretary pursuant to the written request of a majority of the Directors.

Section 12. Notice. Notice of any special meeting of the Board shall be given by written notice delivered personally, telegraphed, facsimile-transmitted, mailed electronically or mailed to each Director at the Director’s business or residence address. Personally delivered or telegraphed notices shall be given at least two (2) days prior to the meeting. Notice by mail shall be given at least five (5) days prior to the meeting.Telephone, facsimile- transmitted or electronically mailed notice shall be given at least twenty-four (24) hours prior to the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. If given by telegram, such notice shall be deemed to be given when the telegram is delivered to the telegraph company. Telephone notice shall be deemed given when the Director is personally given such notice in a telephone call to which the Director is a party. Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address previously given by the Director to, and on file with, the Corporation. Facsimile-transmission notice shall be deemed given upon completion of the transmission of the message to the number previously given by the Director to, and on file with,the Corporation and receipt of a completed transmission report confirming delivery. Neither the business to be transacted at, nor the purpose of, any annual,regular or special meeting of the Directors need be stated in the notice, unless specifically required by statute or these Bylaws.

Section 13. Quorum; Voting.

(a) At all meetings of the Board, a majority of the total number of Directors shall constitute a quorum for the transaction of business and the act of a majority of the Directors present at any meeting at which a

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quorum is present shall be the act of the Board of Directors, unless statute, the Articles of Incorporation or these Bylaws require a greater proportion.

(b) If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting of the time and place of the adjourned meeting, until a quorum shall be present.

(c) The Directors present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough Directors to leave less than a quorum.

Section 14. Telephone Meetings. Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 15. Action by Written Consent. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the Board consent thereto in writing, and if the writing or writings are filed with the minutes of proceedings of the Board.

Section 16. Compensation; Financial Assistance. Directors shall not receive any stated salary for their services as Directors but, by resolution of the Directors, may receive compensation per year and/or per meeting and for any service or activity they performed or engaged in as Directors. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Directors or of any committee thereof; and for their expenses, if any, in connection with any other service or activity performed or engaged in as Directors; but nothing herein contained shall be construed to preclude any Directors from serving the Corporation in any other capacity and receiving compensation therefor.

Section 17. Loss of Deposits. No Director shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association, or other institution with whom moneys or shares have been deposited.

Section 18. Surety Bonds. Unless required by law, no Director shall be obligated to give any bond or surety or other security for the performance of any of the Director’s duties.

ARTICLE IV

COMMITTEES

Section 1. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the Directors of the Corporation and the Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee; provided, however, that the majority of the members of the Corporation’s audit committee, and at least one (1) member of each and any other committee, except during the period of a vacancy or vacancies therein, shall be Independent Directors. Any such committee, to the extent provided in the resolution, and subject to any restrictions imposed by statute, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, except the power to (i) declare dividends or distributions of stock; (ii) issue stock, except in accordance with resolution of the Board or by adoption of a stock option or other plan; (iii) recommend to the Stockholders any action which requires Stockholder approval; (iv) amend these Bylaws; (v) approve any merger or share exchange which does not require Stockholder approval; or (vi) take such other action which may be from time to time prohibited by the Maryland General Corporation Law. Such committee or committees may also authorize the seal of the Corporation to be affixed to all papers which may require it.

Section 2. Meetings. Each committee may designate a chairman of such committee. Meetings of any committee may be called by or at the request of the chairman of the committee, the Chief Executive Officer or by a majority of the members of the committee. The person or persons authorized to call meetings of any committee

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may fix any place, either within or without the State of Maryland, as the place for holding any meetings of the committee called by them. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not the member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

Section 3. Notice of Committee Meetings. Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors.

Section 4. Quorum for Committee Meetings. The presence of a majority of the total membership of any committee shall constitute a quorum for the transaction of business at any meeting of such committee and the act of a majority of those present shall be necessary and sufficient for the taking of any action at such meeting.

Section 5. Vacancies, Removal and Dissolution. Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternative members to replace any absent or disqualified member, or to dissolve any such committee.

Section 6. Telephone Meetings. Members of a committee may participate in a committee meeting by means of a conference telephone or similar communications equipment if all persons participating in the committee meeting can hear each other at the same time. Participation in a committee meeting by these means shall constitute presence in person at the committee meeting.

Section 7. Informal Action by Committees. Any action required or permitted to be taken at any committee meeting may be taken without a committee meeting, if a consent in writing to such action is signed by each member of the committee and such written consent is filed with the minutes of proceedings of the committee.

Section 8. Minutes of Committees. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

ARTICLE V

WAIVER OF NOTICE

Section 1. Waiver. Whenever any notice is required to be given under the provisions of any applicable statute or of the Articles of Incorporation or of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of a person at a meeting of Stockholders, Directors, or a committee of Directors, shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Stockholders, Directors, or members of a committee of Directors need to be specified in any written waiver of notice unless so required by the Articles of Incorporation or these Bylaws.

ARTICLE VI

OFFICERS

Section 1. Number; Qualification. The officers of the Corporation shall include a Chief Executive Officer, a President, a Treasurer, and a Secretary. The officers of the Corporation may also include the Chairman of the Board, one or more Vice Presidents, including Executive Vice Presidents and Senior Vice Presidents, one or more Assistant Treasurers or Assistant Secretaries, and any other officers with such powers and duties as necessary or desirable. Any number of offices may be held by the same person unless the Articles of Incorporation or these Bylaws provide otherwise, but the President may not serve concurrently as Vice President.

Section 2. Election. The following officers of the Corporation shall be elected annually by the Board of Directors: a Chief Executive Officer, a President, any Executive Vice Presidents, a Treasurer, and a Secretary. The

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Chief Executive Officer or President may from time to time appoint one or more Senior Vice Presidents, Vice Presidents (not designated as Executive Vice President), Assistant Treasurers, Assistant Secretaries, and any other officers. Each officer shall hold office until the officer’s successor is elected and qualifies or until the officer’s death, resignation or removal in the manner hereinafter provided. Election of an officer or agent shall not of itself create contract rights between the Corporation and such officer or agent.

Section 3. Compensation. The salaries of all officers and agents of the Corporation shall be fixed by or in the manner prescribed by the Board of Directors.

Section 4. Removal and Resignation. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the whole Board if, in its judgment, the Board finds that the best interests of the Corporation will be served, but such removal shall be without prejudice to the contractual rights of any person so removed. Any officer may resign at any time upon written notice to the Corporation. Any officer appointed by either the Chief Executive Officer or the President may be removed by either the Chief Executive Officer or the President if, in such officer’s judgment, the officer finds that the best interests of the Corporation will be served, but such removal shall be without prejudice to the contractual rights of any person so removed. Any resignation shall take effect at any time subsequent to the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation.

Section 5. Vacancy. Any vacancy occurring in any office of the Corporation shall be filled by or in the manner prescribed by the Board of Directors.

Section 6. Chief Executive Officer. The Directors may designate a Chief Executive Officer from among the elected officers. The Chief Executive Officer shall direct, coordinate and control the Corporation’s business and activities and its operating expenses and capital expenditures, and shall have general authority to exercise all the powers necessary for the chief executive officer of the Corporation, all in accordance with basic policies established by and subject to the control of the Board of Directors. The Chief Executive Officer may employ and discharge employees and agents of the Corporation, except such as shall be appointed by the Board, and the Chief Executive Officer may delegate these powers. The Chief Executive Officer shall have general authority to execute bonds, deeds and contracts in the name and on behalf of the Corporation.

Section 7. President. In the absence of a designation of a Chief Executive Officer by the Directors, the President shall be the chief executive officer. The President shall have general authority to execute bonds, deeds and contracts in the name and on behalf of the Corporation, except in cases where the execution thereof shall be expressly delegated by the Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of President and such other duties as may be prescribed by the Directors from time to time.

Section 8. Vice President. In the absence of the President, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order of seniority designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The Vice President shall generally assist the Chairman of the Board and the President and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. The Directors may designate one or more Vice Presidents as Executive Vice President, Senior Vice President or as Vice President for particular areas of responsibility.

Section 9. Secretary. The Secretary shall attend all meetings of the Board of Directors and meetings of the Stockholders and shall record all the proceedings of the meetings of the Stockholders and of the Board of Directors in a book to be kept for that purpose. The Secretary shall give, or cause to be given, required notice of all meetings of the Stockholders and the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors. The Secretary shall have custody of the stock certificate books and Stockholder records and such other books and records as the Board of Directors may direct. The Secretary shall have custody of the corporate seal of the Corporation and shall have authority to affix the same to any instrument requiring it and when so affixed, it

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may be attested by the Secretary’s signature. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by the Secretary’s signature.

Section 10. Treasurer. The Treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors and shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all the Treasurer’s transactions as treasurer and of the financial condition of the Corporation. If required by the Directors, the Treasurer shall give the trust a bond in such sum and with such surety or sureties as shall be satisfactory to the Directors for the faithful performance of the duties of the office and for the restoration to the Corporation, in case of the Treasurer’s death, resignation, retirement or removal from office, of all books, papers, vouchers, moneys and other property of whatever kind in the Treasurer’s possession or under the Treasurer’s control belonging to the Corporation. The Treasurer shall perform such other duties and have such other powers as the Board of Directors or Chairman may from time to time prescribe.

Section 11. Assistant Secretaries and Assistant Treasurers. The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties as shall be assigned to them by the Secretary or Treasurer, respectively, or by the Chief Executive Officer or the Directors. The Assistant Treasurers shall, if required by the Directors, give bonds for the faithful performance of their duties in such sums and with such surety or sureties as shall be satisfactory to the Directors.

ARTICLE VII

CERTIFICATES OF STOCK

Section 1. Form and Number. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by the Chairman of the Board, the President or the Vice President and countersigned by the Treasurer, the Secretary or an Assistant Treasurer or Assistant Secretary certifying the number of shares owned by the holder in the Corporation. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation as if the officer, transfer agent or registrar were such officer, transfer agent or registrar at the date of issue. Each certificate representing shares of stock which are restricted as to their transferability or voting powers, which are preferred or limited as to their dividends or as to their allocable portion of the assets upon liquidation or which are redeemable at the option of the Corporation, shall have a statement of such restriction, limitation, preference or redemption provision, or a summary thereof, plainly stated on the certificate. In lieu of such statement or summary, the Corporation may set forth upon the face or back of the certificate a statement that the Corporation will furnish to any Stockholder, upon request and without charge, a full statement of such information.

Section 2. Lost Certificates. The Board of Directors may direct that a new stock certificate or certificates be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the owner claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or the owner’s legal representative, to give the Corporation a bond in such sum as it may direct as Indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

Section 3. Transfer of Shares. Certificates shall be treated as negotiable, and title thereto and to the shares they represent shall be transferred by delivery thereof to the same extent as those of a Maryland stock corporation. No transfers of shares of the Company shall be made if (i) void ab initio pursuant to any provision of the Articles of Incorporation, (ii) the Board of Directors, pursuant to any provision of the Articles of Incorporation or other written agreement between or among any Stockholder(s) and the Corporation, shall have refused to permit the transfer of such shares, or (iii) the shares have not been registered under the Securities Act of 1933, as amended (the “Act”), or

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under applicable state blue-sky or securities laws, unless exemptions from the registration requirements of the Act and applicable state blue-sky or securities laws are, in the opinion of counsel, satisfactory to the Corporation, for the transferor, available. Permitted transfers of shares of the Corporation shall be made on the stock records of the Corporation only upon the instruction of the registered holder thereof, or by the registered holder’s attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer agent or transfer clerk, and upon surrender of the certificate or certificates, if issued, for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares accompanied by proper evidence of authority to transfer, as to any transfers not prohibited by any provision of the Articles of Incorporation or by action of the Board of Directors thereunder, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

Section 4. Fixing Record Date. In order that the Corporation may determine the Stockholders entitled to notice of or to vote at any meeting of Stockholders or any adjournment thereof, to receive payment of any dividend or other distribution or allotment of any rights, to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall not be more than ninety (90) nor less than ten (10) days before the date of a Stockholders’ meeting, nor more than ninety (90) days prior to the payment of such dividends, the distribution or exercise of such rights or the taking of any other lawful action.

In lieu of fixing a record date, the Directors may provide that the stock transfer books shall be closed for a stated period but not longer than twenty (20) days. If the stock transfer books are closed for the purpose of determining Stockholders entitled to notice of or to vote at a meeting of Stockholders, such books shall be closed for at least ten (10) days before the date of such meeting.

If no record date is fixed and the stock transfer books are not closed for the determination of Stockholders, (a) the record date for the determination of Stockholders entitled to notice of or to vote at a meeting of Stockholders shall be at the close of business on the day on which the notice of meeting is mailed or the 30th day before the meeting, whichever is the closer date to the meeting; and (b) the record date for the determination of Stockholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the Directors, declaring the dividend or allotment of rights, is adopted, but the payment or allotment may not be made more than sixty (60) days after the date on which the resolution is adopted.

When a determination of Stockholders entitled to vote at any meeting of Stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer books and the stated period of closing has expired or (ii) the meeting is adjourned to a date more than one hundred twenty (120) days after the record date fixed for the original meeting, in either of which case a new record date shall be determined set forth herein.

Section 5. Registered Stockholders. The Corporation shall be entitled to treat the record holder of any shares of stock of the Corporation as the owner thereof for all purposes, including all rights deriving from such shares, and except as required by law shall not be bound to recognize any equitable or other claim to, or interest in, such shares or rights deriving from such shares, on the part of any other person, including, but without limiting the generality thereof, a purchaser, assignee or transferee of such shares or rights deriving from such shares, unless and until such purchaser, assignee, transferee or other person becomes the record holder of such shares, whether or not the Corporation shall have either actual or constructive notice of the interest of such purchaser, assignee, transferee or other person. Except as required by law, no such purchaser, assignee, transferee or other person shall be entitled to receive notice of the meetings of Stockholders, to vote at such meetings, to examine a complete list of the Stockholders entitled to vote at meetings, or to own, enjoy, and exercise any other property or rights deriving from such shares against the Corporation, until such purchaser, assignee, transferee or other person has become the record holder of such shares.

Section 6. Fractional Shares; Issuance of Units. The Directors may issue fractional shares or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the Articles of Incorporation or these Bylaws, the Directors may issue units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical

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securities issued by the Corporation, except that the Directors may provide that for a specified period securities of the Corporation issued in such units may be transferred on the books of the Corporation only in such units.

ARTICLE VIII

INDEMNIFICATION OF OFFICERS AND DIRECTORS

Section 1. Right to Indemnification. To the maximum extent permitted by Maryland law in effect from time to time, the Corporation shall indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or officer of the Corporation and who is made a party to the proceeding by reason of his or her service in that capacity or (b) any individual who, while a director of the Corporation and at the request of the Corporation, serves or has served as a director, officer, partner or trustee of such corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made a party to the proceeding by reason of his or her service in that capacity. To the maximum extent permitted by Maryland law in effect from time to time, the Corporation shall provide such indemnification and advance for expenses to a person who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the Corporation or a predecessor of the Corporation.

Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of the Bylaws or Articles of Incorporation of the Corporation inconsistent with this Article, shall apply to or affect in any respect the applicability of the preceding paragraph with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.

Section 2. Indemnification of Employees and Agents of the Corporation. With the approval of the Board of Directors, the Corporation shall, to the maximum extent permitted by the Maryland law in effect from time to time, and to such further extent as it shall deem appropriate under the circumstances, provide such indemnification and advancement of expenses as described in Section 1 above, to any employee or agent of the Corporation or a predecessor of the Corporation.

Section 3. Insurance. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of another Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, manager, member, trustee, employee or agent of another corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the specified statutory authority, the Articles of Incorporation or the provisions of this Article.

Section 4. Reliance on Certain Information. In performing a Director’s duties, a Director shall be entitled to rely on any information, opinion, report or statement, including any financial statement or other financial data, in each case prepared or presented by any of the following:

(a) One or more officers or employees of the Corporation whom the Director reasonably believes to be reliable and competent in the matters presented.

(b) A lawyer, certified public accountant, or other person as to matters which a Director reasonably believes to be within the person’s professional or expert competence.

(c) A committee of the Board of Directors upon which the Director does not serve, as to matters within its designated authority, which the Director reasonably believes to merit confidence; provided however that a Director shall not be considered to be acting in good faith if the Director has any knowledge concerning the matter in question that would cause the Director’s reliance to be unwarranted.

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ARTICLE IX

MISCELLANEOUS

Section 1. Fiscal Year. The fiscal year of the Corporation shall be from January 1 through December 31.

Section 2. Deposits; Checks. The Corporation shall establish a bank account for deposit of the funds of the Corporation and the drawing of checks or drafts thereon. All checks or drafts drawn on such account shall require the signature of such officer or officers, agent or agents of the Corporation in such manner as shall from time to time be determined by the Directors. The appointment of additional signatories of the bank account and the opening of additional bank accounts shall require the approval of the Board of Directors or such officers of the Corporation as shall from time to time be determined by the Directors.

Section 3. Contracts. The Directors may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document executed by one or more of the Directors or by an authorized person shall be valid and binding upon the Directors and upon the Corporation when authorized or ratified by action of the Directors.

Section 4. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate Seal, Maryland.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

ARTICLE X

[Reserved]

ARTICLE XI

AMENDMENTS

Section 1. Articles of Incorporation. Subject to the terms of the Articles of Incorporation of the Corporation, these Bylaws may be repealed or amended, or new Bylaws adopted, by the Board of Directors; provided, however that the Board of Directors shall have no power or authority to modify, alter or repeal Section 3 or Section 5(a) of Article III, Section 1 of Article IV or this Article XI, and that the affirmative vote of that portion of the then outstanding Common Stock entitled to vote generally in the election of directors necessary to approve an amendment to the Corporation’s Articles of Incorporation pursuant to the Maryland General Corporation Law shall be required to approve such modification, alteration or repeal.

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PART II

CERTIFICATION

OF

FIRST AMENDMENT TO

THIRD AMENDED AND RESTATED BYLAWS

OF

COMMERCIAL NET LEASE REALTY, INC.

I, Julian E. Whitehurst, certify that I am the Executive Vice President, Chief Operating Officer and Secretary of Commercial Net Lease Realty, Inc., a Maryland corporation (the “Corporation”), that I am duly authorized to make and deliver this certification, and that the attached Exhibit A reflects a true and correct copy of the First Amendment to the Third Amended and Restated Bylaws of the Corporation adopted by the Corporation’s Board of Directors on April 17, 2006, and effective as of May 1, 2006.

Dated: April 19, 2006

/s/ Julian E. Whitehurst_____________

Julian E. Whitehurst

Executive Vice President,

Chief Operating Officer and Secretary

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EXHIBIT A

FIRST AMENDMENT TO THE

THIRD AMENDED AND RESTATED BYLAWS OF

COMMERCIAL NET LEASE REALTY, INC.

1. This First Amendment to the Third Amended and Restated Bylaws of Commercial Net Lease Realty, Inc. (the “Bylaws”) shall be effective as of May 1, 2006.

2. Article I, Section 1. is hereby amended by striking the first sentence and inserting in lieu thereof the following:

“The registered office of National Retail Properties, Inc. (the “Corporation”) shall be 300 East Lombard Street, Baltimore, Maryland 21202.”

3. All references in the Bylaws to the “Corporation” shall mean National Retail Properties, Inc.

IN WITNESS WHEREOF, this First Amendment is executed as of the 19th day of April, 2006.

COMMERCIAL NET LEASE REALTY, INC.,

a Maryland corporation

By: /s/ Julian E. Whitehurst________________

Julian E. Whitehurst

Executive Vice President,

Chief Operating Officer and Secretary

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SECOND AMENDMENT TO THE THIRD AMENDED AND RESTATED BYLAWS

OF

NATIONAL RETAIL PROPERTIES, INC.

(adopted on December 13, 2007)

Article VII of the Third Amended and Restated Bylaws of National Retail Properties, Inc., is hereby deleted in its entirety and replaced with the following:

Section 1. Form and Number. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by the Chairman of the Board, the President or the Vice President and countersigned by the Treasurer, the Secretary or an Assistant Treasurer or Assistant Secretary certifying the number of shares owned by the holder in the Corporation. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation as if the officer, transfer agent or registrar were such officer, transfer agent or registrar at the date of issue. Each certificate representing shares of stock which are restricted as to their transferability or voting powers, which are preferred or limited as to their dividends or as to their allocable portion of the assets upon liquidation or which are redeemable at the option of the Corporation, shall have a treatment of such restriction, limitation, preference or redemption provision, or a summary thereof, plainly stated on the certificate. In lieu of such statement or summary, the Corporation may set forth upon the face or back of the certificate a statement that the Corporation will furnish to any Stockholder, upon request and without charge, a full statement of such information. Notwithstanding anything to the contrary provided in these Bylaws, the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares (except that the foregoing shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation). To the extent required by Maryland law, within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the holder thereof a written notice that shall set forth (i) the name of the Corporation, (ii) the name of the holder or other person to whom the shares are issued, (iii) the class of stock and number of shares represented, (iv) the designations, preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of the stock of each class of the Corporation, (v) the differences in the relative rights and preferences between the shares of each series to the extent they have been set and the authority of the Board of Directors to set the relative rights and preferences of subsequent series, and (vi) any restrictions on transferability of the shares issued, if any, and a full statement of the restrictions or a statement that the Corporation will furnish information about the restrictions to the holder on request without charge.

Section 2. Lost Certificates. The Board of Directors may direct that a new stock certificate or certificates be issued in place of any certificate or certificates therefore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the owner claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or the owner’s legal representative, to give the Corporation a bond in such sum as it may direct as Indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

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Section 3. Transfer of Shares. Certificates shall be treated as negotiable, and title thereto and to the shares they represent shall be transferred by delivery thereof to the same extent as those of a Maryland stock corporation. No transfers of shares of the Company shall be made if (i) void ab initio pursuant to any provision of the Articles of Incorporation, (ii) the Board of Directors, pursuant to any provision of the Articles of Incorporation or other written agreement between or among any Stockholder(s) and the Corporation, shall have refused to permit the transfer of such shares, or (iii) the shares have not been registered under the Securities Act of 1933, as amended (the “Act”), or under applicable state blue-sky or securities laws, unless exemptions from the registration requirements of the Act and applicable state blue-sky or securities laws are, in the opinion of counsel, satisfactory to the Corporation, for the transferor, available. Permitted transfers of shares of the Corporation shall be made on the stock records of the Corporation only upon the instruction of the registered holder thereof, or by the registered holder’s attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer agent or transfer clerk, and upon surrender of the certificate or certificates, if issued, for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares accompanied by proper evidence of authority to transfer, as to any transfer not prohibited by any provision of the Articles of Incorporation or by action of the Board of Directors thereunder, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Shares of stock that are not represented by a certificate shall be transferable or assignable on the stock transfer books of the Corporation by the holder submitting to the Corporation or its transfer agent such evidence of transfer and following such other procedures as the Corporation or its transfer agent may reasonably require.

Section 4. Fixing Record Date. In order that the Corporation may determine the Stockholders entitled to notice of or to vote at any meeting of Stockholders or any adjournment thereof, to receive payment of any dividend or other distribution or allotment of any rights, to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall not be more than ninety (90) nor less than ten (10) days before the date of a Stockholders’ meeting, nor more than ninety (90) days prior to the payment of such dividends, the distribution or exercise of such rights or the taking of any other lawful action.

In lieu of fixing a record date, the Directors may provide that the stock transfer books shall be closed for a stated period but not longer than twenty (20) days. If the stock transfer books are closed for the purpose of determining Stockholders entitled to notice of or to vote at a meeting of Stockholders, such books shall be closed for at least ten (10) days before the date of such meeting.

If no record date is fixed and the stock transfer books are not closed for the determination of Stockholders, (a) the record date for the determination of Stockholders entitled to notice of or to vote at a meeting of Stockholders shall be at the close of business on the day on which the notice of meeting is mailed or the 30th day before the meeting, whichever is the closer date to the meeting; and (b) the record date for the determination of Stockholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the Directors, declaring the dividend or allotment of rights, is adopted, but the payment or allotment may not be made more than sixty (60) days after the date on which the resolution is adopted.

When a determination of Stockholders entitled to vote at any meeting of Stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer books and the stated period of closing has expired or (ii) the meeting is adjourned to a date more than one hundred twenty (120) days after record date fixed for the original meeting, in either of which case a new record date shall be determined set forth herein.

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Section 5. Registered Stockholders. The Corporation shall be entitled to treat the record holder of any shares of stock of the Corporation, whether certificated or uncertificated, as the owner thereof for all purposes, including all rights deriving from such shares, and except as required by law shall not be bound to recognize any equitable or other claim to, or interest in, such shares or rights deriving from such shares, on the part of any other person, including, but without limiting the generality thereof, a purchaser, assignee or transferee of such shares or rights deriving from such shares, unless and until such purchaser, assignee, transferee or other person becomes the record holder of such shares, whether or not the Corporation shall have either actual or constructive notice of the interest of such purchaser, assignee, transferee or other person. Except as required by law, no such purchaser, assignee, transferee or other person shall be entitled to receive notice of the meetings of Stockholders, to vote at such meetings, to examine a complete list of the Stockholders entitled to vote at meetings, or to own, enjoy, and exercise any other property or rights deriving from such shares against the Corporation, until such purchaser, assignee, transferee or other person has become the record holder of such shares.

Section 6. Fractional Shares; Issuance of Units. The Board of Directors may issue fractional shares or provide for the issuance of scrip, both in certificated or uncertificated form, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the Articles of Incorporation or these Bylaws, the Board of Directors may issue units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the Board of Directors may provide that for a specified period securities of the Corporation issued in such units may be transferred on the books of the Corporation only in such units.

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THIRD AMENDMENT TO THE

THIRD AMENDED AND RESTATED BYLAWS OF

NATIONAL RETAIL PROPERTIES, INC.

(adopted on February 13, 2014)

Article II, Section 7 of the Third Amended and Restated Bylaws of National Retail Properties, Inc., as amended, is hereby deleted in its entirety and replaced with the following:

“Section 7. Voting. Each director to be elected by the stockholders of the Corporation shall be elected by the affirmative vote of a majority of the votes cast with respect to such nominee by the holders of shares represented and entitled to vote therefor at a meeting of the stockholders for the election of directors at which a quorum is present (an “Election Meeting”); provided, however, that if the Board determines that the number of nominees exceeds the number of directors to be elected at such meeting, and the Board has not rescinded such determination by the record date for the Election Meeting as initially announced, each of the directors to be elected at the Election Meeting shall be elected by the affirmative vote of a plurality of the votes cast by the holders of shares represented and entitled to vote at such meeting with respect to the election of such director. Each share of stock may be voted for as many individuals as there are Directors to be elected and for whose election the shares of stock are entitled to be voted. When a quorum is present at any meeting, the vote of the holders of a majority of the votes cast shall decide any other question brought before such meeting, unless more than a majority of the votes cast is required herein or by statute or by the Articles of Incorporation.”

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FOURTH AMENDMENT TO THE

THIRD AMENDED AND RESTATED BYLAWS OF

NATIONAL RETAIL PROPERTIES, INC.

(adopted on February 17, 2021)

Article II, Section 13 of the Third Amended and Restated Bylaws of National Retail Properties, Inc., as amended, is hereby deleted in its entirety and replaced with the following:

Section 13. Nominations and Proposals by Stockholders.

(a) Annual Meetings of Stockholders.

(i) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the Stockholders may be made at an Annual Meeting of Stockholders: (A) pursuant to the Corporation’s notice of meeting; (B) by or at the direction of the Directors; or (C) by any Stockholder of the Corporation who was a Stockholder of record both at the time of giving of notice provided for in this Section 13(a) and at the time of the annual meeting, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 13(a).

(ii) For nominations or other business to be properly brought before an Annual Meeting by a Stockholder pursuant to clause (C) of paragraph (a)(i) of this Section 13, the Stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for action by Stockholders. To be timely, a Stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 120th calendar day before the first anniversary of the date of the Corporation’s proxy statement released to Stockholders in connection with the preceding year’s Annual Meeting; provided, however, that in the event that the date of the current year’s Annual Meeting has been changed by more than thirty (30) days from the date of the preceding year’s meeting or if the Corporation did not hold an Annual Meeting the preceding year, notice by the Stockholder to be timely must be so delivered within a reasonable time before the Annual Meeting begins to print and mail its proxy materials. In no event shall the public announcement of a postponement or adjournment of an Annual Meeting to a later date or time commence a new time period for the giving of a Stockholder’s notice as described above. Such Stockholder’s notice shall set forth: (A) as to each person whom the Stockholder proposes to nominate for election or reelection as a Director all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); (B) as to any other business that the Stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such Stockholder and of the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the Stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made: (i) the name and address of such Stockholder, as it appears on the Corporation’s books, and of such beneficial owner; and (ii) the number of each class of shares of the Corporation which are owned beneficially and of record by such Stockholder and such beneficial owner.

(b) Stockholder Nominations Included in the Corporation’s Proxy Materials.

(i) Subject to the provisions of this Section 13, if expressly requested in the relevant Nomination Notice (as defined below), the Corporation shall include in its proxy statement for any annual meeting of stockholders:

a. the name of any person nominated for election (the “Nominee”) by any Eligible Holder (as defined below) or group of up to 20 Eligible Holders that has (individually and collectively, in the case of a group) satisfied all applicable conditions and complied with all applicable procedures set forth in this Section 13 (such Eligible Holder or group being a “Nominating Stockholder”);

b. disclosure about the Nominee and the Nominating Stockholder required under the rules of the SEC or other applicable law to be included in the proxy statement;

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c. any statement included by the Nominating Stockholder in the Nomination Notice for inclusion in the proxy statement in support of the Nominee’s election to the Board of Directors, if such statement does not exceed 500 words; and

d. any other information that the Corporation or the Board of Directors determines, in their discretion, to include in the proxy statement relating to the nomination of the Nominee, including, without limitation, any statement in opposition to the nomination and any of the information provided pursuant to this Section 13.

(ii) Inclusion of Nominee on Ballot and Form of Proxy. The name of any Nominee included in the proxy statement pursuant to this Section 13 for an Annual Meeting of Stockholders shall be included on any ballot relating to the election of directors distributed at such annual meeting and shall be set forth on a form of proxy (or other format through which the Corporation permits proxies to be submitted) distributed by the Corporation in connection with election of directors at such annual meeting so as to permit shareholders to vote on the election of such Nominee.

(iii) Maximum Number of Nominees.

a. The maximum number of Nominees nominated by all Eligible Holders and entitled to be included in the Corporation’s proxy materials with respect to an Annual Meeting of Stockholders shall be the greater of (i) 20% of the total number of directors of the Corporation on the last day on which a Nomination Notice may be submitted pursuant to this Section 13 (rounded down to the nearest whole number, but not less than one), or (ii) two (the “Maximum Number”). The Maximum Number for a particular annual meeting shall be reduced by (1) Nominees who are subsequently withdrawn or that the Board of Directors itself decides to nominate for election at such annual meeting and (2) the number of incumbent directors who had been Nominees at any of the preceding three annual meetings and whose reelection at the upcoming annual meeting is being recommended by the Board of Directors. In the event that one or more vacancies for any reason occurs on the Board of Directors after the deadline set forth in this Section 13 but before the date of the Annual Meeting of Stockholders and the Board of Directors resolves to reduce the size of the board in connection therewith, the Maximum Number shall be calculated based on the number of directors in office as so reduced.

b. If the number of Nominees pursuant to this Section 13 for any Annual Meeting of Stockholders exceeds the Maximum Number then, promptly upon notice from the Corporation, each Nominating Stockholder will select one Nominee for inclusion in the proxy statement until the Maximum Number is reached, going in order of the amount (largest to smallest) of the net long position disclosed in each Nominating Stockholder’s Nomination Notice, with the process repeated if the Maximum Number is not reached after each Nominating Stockholder has selected one Nominee. If, after the deadline for submitting a Nomination Notice as set forth in this Section 13, a Nominating Stockholder becomes ineligible or withdraws its nomination or a Nominee becomes unwilling to serve on the Board of Directors, whether before or after the mailing of definitive proxy statement, then the nomination shall be disregarded, and the Corporation (1) shall not be required to include in its proxy statement or on any ballot or form of proxy the disregarded Nominee or any successor or replacement nominee proposed by the Nominating Stockholder or by any other Nominating Stockholder and (2) may otherwise communicate to its stockholders, including without limitation by amending or supplementing its proxy statement or ballot or form of proxy, that the Nominee will not be included as a Nominee in the proxy statement or on any ballot or form of proxy and will not be voted on at the Annual Meeting of Stockholders.

(iv) Eligibility of Nominating Stockholder.

a. An “Eligible Holder” is a person who has either (1) been a record holder of the shares of common stock used to satisfy the eligibility requirements in this Section 13 continuously for the relevant three-year period or (2) provides to the Secretary of the Corporation, within the time period referred to in this Section 13, evidence of continuous ownership of such shares for such three-year period from one or more securities intermediaries in a form that the Board of Directors or its designee, acting in good faith, determines would be deemed acceptable for purposes of a shareholder proposal under Rule 14a-8(b)(2) under the Exchange Act (or any successor rule).

b. An Eligible Holder or group of up to 20 Eligible Holders may submit a nomination in accordance with this Section 13 only if the person or group (in the aggregate) has continuously been a holder of full voting rights and a net long position in at least the Minimum Number (as defined below) of shares of the

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Corporation’s common stock throughout the three-year period preceding and including the date of submission of the Nomination Notice, and continues to hold full voting rights and a net long position in at least the Minimum Number through the date of the Annual Meeting of Stockholders.

c. The “Minimum Number” of shares of the Corporation’s common stock means 3% of the number of outstanding shares of common stock as of the most recent date for which such amount is given in any filing by the Corporation with the SEC prior to the submission of the Nomination Notice.

d. For purposes of this Section, a person or group’s “net long position” shall be determined in accordance with Rule 14e-4 under the Exchange Act (or any successor rule), provided that (1) the reference in Rule 14e-4 to “the date that a tender offer is first publicly announced or otherwise made known by the bidder to holders of the security to be acquired” shall be the date of submission of the Nomination Notice and the reference to the “highest tender offer price or stated amount of the consideration offered for the subject security” shall refer to the closing sales price of the Corporation’s common stock on such date of submission (or, if such date is not a trading day, the immediately preceding trading day) and (2) to the extent not covered by such definition, the net long position shall be reduced by any shares of common stock subject to any “put equivalent position” (as defined in Rule 16a-1(h) under the Exchange Act (or any successor rule)) or that the Board of Directors determines that the person or group does not, or will not, have the right to vote (or direct the voting of) at the Annual Meeting of Stockholders.

e. No person shall be permitted to be in more than one group constituting a Nominating Stockholder, and if any person appears as a member of more than one group, it shall be deemed to be a member of the group that has the largest net long position as reflected in the Nomination Notice.

(v) Nomination Notice. To nominate a Nominee, the Nominating Stockholder must, no earlier than 150 calendar days and no later than 120 calendar days before the anniversary of the date that the Corporation mailed its proxy statement for the prior year’s annual meeting, submit to the Secretary of the Corporation at the principal executive office of the Corporation all of the following information and documents (collectively, the “Nomination Notice”); provided, however, that if (and only if) the Annual Meeting of Stockholders is not scheduled to be held within a period that commences 30 days before such anniversary date and ends 30 days after such anniversary date (an annual meeting date outside such period being referred to herein as an “Other Meeting Date”), the Nomination Notice shall be given in the manner provided herein by the later of the close of business on (i) the date that is 180 days prior to such Other Meeting Date or (ii) the tenth day following the date such Other Meeting Date is first publicly announced or disclosed:

a. A Schedule 14N (or any successor form) relating to the Nominee, completed and filed with the SEC by the Nominating Stockholder as applicable, in accordance with SEC rules;

b. A written notice, in a form deemed satisfactory by the Board of Directors or its designee, acting in good faith, of the nomination of such Nominee that includes the following additional information, agreements, representations and warranties by the Nominating Stockholder (including each group member):

i. the information required with respect to the nomination of directors pursuant to this Section 13;

ii. the details of any relationship that existed within the past three years and that would have been described pursuant to Item 6(e) of Schedule 14N (or any successor item) if it existed on the date of submission of the Schedule 14N;

iii. a representation and warranty that the Nominating Stockholder did not acquire, and is not holding, securities of the Corporation for the purpose or with the effect of influencing or changing control of the Corporation;

iv. a representation and warranty that the Nominee’s candidacy or, if elected, Board membership would not violate applicable state or federal law or the rules of any stock exchange on which the Corporation’s securities are traded;

v. a representation and warranty that the Nominee:

1. does not have any direct or indirect relationship with the Corporation other than those relationships that have been deemed categorically immaterial and otherwise qualifies as independent under the rules of the primary stock exchange on which the Corporation’s securities are traded;

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2. meets the audit committee independence requirements under the rules of any stock exchange on which the Corporation’s securities are traded;

3. is a “non-employee director” for the purposes of Rule 16b-3 under the Exchange Act (or any successor rule);

4. is not and has not been subject to any event specified in Item 401(f) of Regulation S-K (or any successor rule), without reference to whether the event is material to an evaluation of the ability or integrity of the Nominee or whether the event occurred in the ten-year time period referenced in such Item;

vi. a representation and warranty that the Nominating Stockholder satisfies the eligibility requirements set forth in this Section and has provided evidence of ownership to the extent required by this Section;

vii. a representation and warranty that the Nominating Stockholder intends to continue to satisfy the eligibility requirements described in this Section through the date of the Annual Meeting of Stockholders;

viii. details of any position of the Nominee as an officer or director of any competitor (that is, any entity that produces products or provides services that compete with or are alternatives to the products produced or services provided by the Corporation or its affiliates) of the Corporation, within the three years preceding the submission of the Nomination Notice;

ix. a representation and warranty that the Nominating Stockholder will not engage in a “solicitation” within the meaning of Rule 14a-1(l) (without reference to the exception in Section 14a-(l)(2)(iv)) (or any successor rules) with respect to the Annual Meeting of Stockholders, other than with respect to the Nominee;

x. if desired, a statement for inclusion in the proxy statement in support of the Nominee’s election to the Board of Directors, provided that such statement shall not exceed 500 words; and

xi. in the case of a nomination by a group, the designation by all group members of one group member that is authorized to act on behalf of all group members with respect to matters relating to the nomination, including withdrawal of the nomination; and

c. an executed agreement, in a form deemed satisfactory by the Board of Directors or its designee, acting in good faith, pursuant to which the Nominating Stockholder (including each group member) agrees:

i. to comply with all applicable laws, rules and regulations in connection with the nomination and election;

ii. to assume all liability stemming from an action, suit or proceeding concerning any actual or alleged legal or regulatory violation arising out of any communication by the Nominating Stockholder with the Corporation, its stockholders or any other person in connection with the nomination or election of directors, including, without limitation, the Nomination Notice;

iii. to indemnify and hold harmless (jointly with all other group members, in the case of a group member) the Corporation and each of its directors, officers and employees individually against any liability, loss, damages, expenses, or other costs (including attorneys’ fees) incurred in connection with any threatened or pending action, suit or proceeding, whether legal, administrative, or investigative, against the Corporation or any of its directors, officers, or employees arising out of or relating to a failure or alleged failure of the Nominating Stockholder to comply with, or any breach or alleged breach of, its obligations, agreements or representations under this Section 13; and

iv. in the event that any information included in the Nomination Notice, or any other communications by the Nominating Stockholder (including with respect to any group member), with the Corporation, its stockholders or any other person in connection with the nomination or election ceases to be true and accurate in all material respects (or due to a subsequent development omits a material fact necessary to make the statements made not misleading), or that the Nominating Stockholder (including any group member) has failed to continue to satisfy the eligibility requirements described in this Section 13, to promptly (and in any event within 48 hours of discovering such misstatement or omission) notify the Corporation and any other recipient of such

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communication of the misstatement or omission in such previously provided information and of the information that is required to correct the misstatement or omission.

d. an executed agreement, in a form deemed satisfactory by the Board of Directors or its designee, acting in good faith, by the Nominee:

i. provide to the Corporation such other information, including completion of the Corporation’s director questionnaire, as it may reasonably request;

ii. that the Nominee has read and agrees, if elected, to serve as a member of the Board of Directors, to adhere to the Corporation’s Corporate Governance Guidelines and Code of Business Conduct and any other Corporation policies and guidelines applicable to directors; and

iii. that the Nominee is not and will not become a party to any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity in connection with service or action as a director of the Corporation, or any agreement, arrangement or understanding with any person or entity as to how the Nominee would vote or act on any issue or question as a director, in each case that has not been disclosed to the Corporation.

The information and documents required by this Section 13(b)(v) shall be (i) provided with respect to and executed by each group member, in the case of information applicable to group members; and (ii) provided with respect to the persons specified in Instruction 1 to Item 6(c) and (d) of Schedule 14N (or any successor item) in the case of a Nominating Stockholder or group member that is an entity. The Nomination Notice shall be deemed submitted on the date on which all of the information and documents referred to in this Section 13(b)(v) (other than such information and documents contemplated to be provided after the date the Nomination Notice is provided) have been provided to the Secretary of the Corporation.

(vi) Exceptions.

a. Notwithstanding anything to the contrary contained in this Section 13, the Corporation may omit from its proxy statement any Nominee, and such nomination shall be disregarded and no vote on such Nominee will occur, notwithstanding that proxies in respect of such vote may have been received by the Corporation, if:

i. the Nominating Stockholder or the designated lead group member, as applicable, or any qualified representative thereof, does not appear at the Annual Meeting of Stockholders to present the nomination submitted pursuant to this Section 13;

ii. the Board of Directors, acting in good faith, determines that such Nominee’s nomination or election to the Board of Directors would result in the Corporation violating or failing to be in compliance with any applicable law, rule or regulation to which the Corporation is subject, including any rules or regulations of any stock exchange on which the Corporation’s securities are traded;

iii. the Nominee was nominated for election to the Board of Directors pursuant to this Section 13 at one of the Corporation’s two preceding annual meetings of stockholders and received a vote of less than 25% of the shares of common stock entitled to vote for such Nominee; or

iv. the Corporation is notified, or the Board of Directors acting in good faith determines, that a Nominating Stockholder has failed to continue to satisfy the eligibility requirements described in Section 13, any of the representations and warranties made in the Nomination Notice ceases to be true and accurate in all material respects (or omits a material fact necessary to make the statements made not misleading), the Nominee becomes unwilling or unable to serve on the Board of Directors or any material violation or breach occurs of the obligations, agreements, representations or warranties of the Nominating Stockholder or the Nominee under this Section 13.

b. Notwithstanding anything to the contrary contained in this Section 13, the Corporation may omit from its proxy statement, or may supplement or correct, any information, including all or any portion of the statement in support of the Nominee included in the Nomination Notice, if the Board of Directors in good faith determines that:

i. such information is not true in all material respects or omits a material statement necessary to make the statements made not misleading;

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ii. such information directly or indirectly impugns character, integrity, or personal reputation of, or directly or indirectly makes charges concerning improper, illegal, or immoral conduct or associations, without factual foundation, with respect to, any person; or

iii. the inclusion of such information in the proxy statement would otherwise violate the SEC proxy rules or any other applicable law, rule or regulation.

(c) Special Meetings of Stockholders. Only such business shall be conducted at a Special Meeting of Stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a Special Meeting of Stockholders at which Directors are to be elected: (i) pursuant to the Corporation’s notice of meeting; (ii) by or at the direction of the Board of Directors; or (iii) provided that the Board of Directors has determined that Directors shall be elected at such Special Meeting, by any Stockholder of the Corporation who was a Stockholder of record both at the time of giving of notice provided for in this Section 13(c) and at the time of the Special Meeting, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 13(c). In the event the Corporation calls a Special Meeting of Stockholders for the purpose of electing one or more Directors to the Board of Directors, any such Stockholder may nominate a person or persons (as the case may be) for election to such position as specified in the Corporation’s notice of meeting, if the Stockholder’s notice containing the information required by paragraph (a)(ii) of this Section 13 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to such Special Meeting and not later than the close of business on the later of the 90th day prior to such Special Meeting or the 10th day following the day on which public announcement is first made of the date of the Special Meeting and of the nominees proposed by the Directors to be elected at such meeting. In no event shall the public announcement of a postponement or adjournment of a Special Meeting to a later date or time commence a new time period for the giving of a Stockholder’s notice as described above.

(d) General.

(i) Only such persons who are nominated in accordance with the procedures set forth in this Section 13 shall be eligible to be elected as Directors and only such business shall be conducted at a meeting of Stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 13. The chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 13 and, if any proposed nomination or business is not in compliance with this Section 13, to declare that such nomination or proposal shall be disregarded.

(ii) For purposes of this Section 13, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(iii) Notwithstanding the foregoing provisions of this Section 13, a Stockholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 13. Nothing in this Section 13 shall be deemed to affect any rights of Stockholders to request inclusion of proposals in, nor the right of the Corporation to omit a proposal from, the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

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FIFTH AMENDMENT TO THE

THIRD AMENDED AND RESTATED BYLAWS OF

NATIONAL RETAIL PROPERTIES, INC.

1. This Fifth Amendment to the Third Amended and Restated Bylaws of National Retail Properties, Inc. (the “Bylaws”) shall be effective as of May 1, 2023.

2. Article I, Section 1. is hereby amended by striking the first sentence and inserting in lieu thereof the following:

“The registered office of NNN REIT, Inc. (the “Corporation”) shall be 2 Wisconsin Circle, #700, Chevy Chase, Maryland 20815.”

3. All references in the Bylaws to the “Corporation” shall mean NNN REIT, Inc.

In Witness Whereof, this Fifth Amendment is executed as of the 17th day of April, 2023.

NATIONAL RETAIL PROPERTIES, INC., a Maryland corporation
By:	/s/ Stephen A. Horn, Jr.
	Stephen A. Horn, Jr.
	President & Chief Executive Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen A. Horn, Jr., certify that:

1.I have reviewed this report on Form 10-Q of NNN REIT, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 2, 2023		/s/ Stephen A. Horn, Jr.
Date	Name:	Stephen A. Horn, Jr.
	Title:	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin B. Habicht, certify that:

1.I have reviewed this report on Form 10-Q of NNN REIT, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 2, 2023		/s/ Kevin B. Habicht
Date	Name:	Kevin B. Habicht
	Title:	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Stephen A. Horn, Jr., Chief Executive Officer and President, certifies, to the best of his knowledge, that (1) this Quarterly Report of NNN REIT, Inc. (“NNN”) on Form 10-Q for the period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (this “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in this Report fairly presents, in all material respects, the financial condition of NNN as of June 30, 2023 and December 31, 2022 and its results of operations for the quarter and six months ended June 30, 2023 and 2022.

August 2, 2023		/s/ Stephen A. Horn, Jr.
Date	Name:	Stephen A. Horn, Jr.
	Title:	President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to NNN and will be retained by NNN and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Kevin B. Habicht, Chief Financial Officer and Executive Vice President, certifies, to the best of his knowledge, that (1) this Quarterly Report of NNN REIT, Inc. (“NNN”) on Form 10-Q for the period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (this “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in this Report fairly presents, in all material respects, the financial condition of NNN as of June 30, 2023 and December 31, 2022 and its results of operations for the quarter and six months ended June 30, 2023 and 2022.

August 2, 2023		/s/ Kevin B. Habicht
Date	Name:	Kevin B. Habicht
	Title:	Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to NNN and will be retained by NNN and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover - shares	6 Months Ended
	Jun. 30, 2023	Jul. 28, 2023
Entity Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2023
Document Transition Report	false
Entity File Number	001-11290
Entity Registrant Name	NNN REIT, INC.
Entity Central Index Key	0000751364
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	56-1431377
Entity Address, Address Line One	450 South Orange Avenue, Suite 900
Entity Address, City or Town	Orlando
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	32801
City Area Code	407
Local Phone Number	265-7348
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	NNN
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		182,408,264

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
ASSETS
Real estate portfolio, net of accumulated depreciation and amortization	$ 8,221,192	$ 8,020,814
Cash and cash equivalents	2,281	2,505
Restricted cash or cash held in escrow	2,971	4,273
Receivables, net of allowance of $686 and $708, respectively	2,246	3,612
Accrued rental income, net of allowance of $3,861 and $3,836, respectively	28,422	27,795
Debt costs, net of accumulated amortization of $22,807 and $21,663, respectively	4,333	5,352
Other assets	84,490	81,694
Total assets	8,345,935	8,146,045
Liabilities:
Line of credit payable	332,500	166,200
Mortgages payable, including unamortized premium and net of unamortized debt costs	0	9,964
Notes payable, net of unamortized discount and unamortized debt costs	3,742,012	3,739,890
Accrued interest payable	24,779	23,826
Other liabilities	96,410	82,663
Total liabilities	4,195,701	4,022,543
Stockholders’ equity:
Common stock, $0.01 par value. Authorized 375,000,000 shares; 182,407,911 and 181,424,670 shares issued and outstanding, respectively	1,825	1,815
Capital in excess of par value	4,963,808	4,928,034
Accumulated deficit	(804,040)	(793,765)
Accumulated other comprehensive income (loss)	(11,359)	(12,582)
Total stockholders’ equity of NNN	4,150,234	4,123,502
Total liabilities and equity	$ 8,345,935	$ 8,146,045

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Allowance on receivables	$ 686	$ 708
Accrued rental income allowance	3,861	3,836
Debt costs accumulated amortization	$ 22,807	$ 21,663
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	375,000,000	375,000,000
Common stock, shares issued (in shares)	182,407,911	181,424,670
Common stock, shares outstanding (in shares)	182,407,911	181,424,670

XML

Condensed Consolidated Statements Of Income And Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Revenues:
Rental income	$ 202,426	$ 190,536	$ 406,056	$ 380,299
Interest and other income from real estate transactions	214	247	692	763
Total revenues	202,640	190,783	406,748	381,062
Operating expenses:
General and administrative	10,740	9,740	22,991	20,782
Real estate	6,836	6,173	13,682	13,371
Depreciation and amortization	59,875	57,444	119,023	110,124
Leasing transaction costs	52	76	127	164
Real estate impairments, net of recoveries	34	4,618	2,674	6,250
Executive retirement costs	309	2,655	732	6,249
Total operating expenses	77,846	80,706	159,229	156,940
Gain on disposition of real estate	13,930	775	20,230	4,767
Earnings from operations	138,724	110,852	267,749	228,889
Other expenses (revenues):
Interest and other income	(74)	(52)	(107)	(87)
Interest expense	40,094	36,739	78,985	73,438
Total other expenses (revenues)	(40,020)	36,687	78,878	73,351
Net earnings	98,704	74,165	188,871	155,538
Loss attributable to noncontrolling interests	0	6	0	5
Net earnings attributable to common stockholders	$ 98,704	$ 74,171	$ 188,871	$ 155,543
Net earnings per share of common stock:
Basic (in dollars per share)	$ 0.54	$ 0.42	$ 1.04	$ 0.89
Diluted (in dollars per share)	$ 0.54	$ 0.42	$ 1.04	$ 0.89
Weighted average number of common shares outstanding:
Basic (in shares)	181,092,031	174,956,856	180,969,809	174,867,049
Diluted (in shares)	181,627,857	175,107,914	181,544,275	175,021,871
Other comprehensive income:
Net earnings attributable to NNN	$ 98,704	$ 74,171	$ 188,871	$ 155,543
Amortization of interest rate hedges	616	592	1,223	1,175
Comprehensive income attributable to NNN	99,320	74,763	190,094	156,718
Comprehensive loss attributable to noncontrolling interests	0	(6)	0	(5)
Total comprehensive income	$ 99,320	$ 74,757	$ 190,094	$ 156,713

XML

Condensed Consolidated Statements Of Equity (Unaudited) - USD ($)	Total	Total  Stockholders’ Equity of NNN	Common Stock	Capital in Excess of Par Value	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interests
Balances at Dec. 31, 2021	$ 3,901,663,000	$ 3,901,662,000	$ 1,757,000	$ 4,662,714,000	$ (747,853,000)	$ (14,956,000)	$ 1,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings	155,538,000	155,543,000			155,543,000		(5,000)
Dividends declared and paid:
Common stock dividends declared and paid	(184,286,000)	(184,286,000)		1,343,000	(185,629,000)
Issuance of common stock:
Director compensation	609,000	609,000		609,000
Stock purchase plan	112,000	112,000		112,000
ATM equity program	31,593,000	31,593,000	7,000	31,586,000
Restricted shares, net of forfeitures			3,000	(3,000)
Stock issuance costs	(575,000)	(575,000)		(575,000)
Amortization of deferred compensation	9,975,000	9,975,000		9,975,000
Amortization of interest rate hedges	1,175,000	1,175,000				1,175,000
Distributions to noncontrolling interests	(278,000)						(278,000)
Other		(282,000)		(282,000)			282,000
Balances at Jun. 30, 2022	3,915,526,000	3,915,526,000	1,767,000	4,705,479,000	(777,939,000)	(13,781,000)	0
Balances at Mar. 31, 2022	3,897,746,000	3,897,744,000	1,759,000	4,669,590,000	(759,232,000)	(14,373,000)	2,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings	74,165,000	74,171,000			74,171,000		(6,000)
Dividends declared and paid:
Preferred stock dividends declared and paid	0	0			0
Common stock dividends declared and paid	(92,231,000)	(92,231,000)		647,000	(92,878,000)
Issuance of common stock:
Director compensation	304,000	304,000		304,000
Stock purchase plan	60,000	60,000		60,000
ATM equity program	31,593,000	31,593,000	7,000	31,586,000	0	0	0
Restricted shares, net of forfeitures			1,000	(1,000)
Stock issuance costs	(510,000)	(510,000)		(510,000)
Amortization of deferred compensation	4,085,000	4,085,000		4,085,000
Amortization of interest rate hedges	592,000	592,000				592,000
Distributions to noncontrolling interests	(278,000)						(278,000)
Other		(282,000)		(282,000)			282,000
Balances at Jun. 30, 2022	3,915,526,000	3,915,526,000	1,767,000	4,705,479,000	(777,939,000)	(13,781,000)	$ 0
Balances at Dec. 31, 2022	4,123,502,000	4,123,502,000	1,815,000	4,928,034,000	(793,765,000)	(12,582,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings	188,871,000	188,871,000			188,871,000
Dividends declared and paid:
Common stock dividends declared and paid	(197,691,000)	(197,691,000)		1,455,000	(199,146,000)
Issuance of common stock:
Director compensation	539,000	539,000		539,000
Stock purchase plan	160,000	160,000		160,000
ATM equity program	29,150,000	29,150,000	7,000	29,143,000
Restricted shares, net of forfeitures			3,000	(3,000)
Stock issuance costs	(558,000)	(558,000)		(558,000)
Amortization of deferred compensation	5,038,000	5,038,000		5,038,000
Amortization of interest rate hedges	1,223,000	1,223,000				1,223,000
Balances at Jun. 30, 2023	4,150,234,000	4,150,234,000	1,825,000	4,963,808,000	(804,040,000)	(11,359,000)
Balances at Mar. 31, 2023	4,134,872,000	4,134,872,000	1,822,000	4,948,024,000	(802,999,000)	(11,975,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings	98,704,000	98,704,000			98,704,000
Dividends declared and paid:
Common stock dividends declared and paid	(99,014,000)	(99,014,000)		731,000	(99,745,000)
Issuance of common stock:
Director compensation	270,000	270,000		270,000
Stock purchase plan	62,000	62,000		62,000
ATM equity program	12,782,000	12,782,000	3,000	12,779,000
Stock issuance costs	(264,000)	(264,000)		(264,000)
Amortization of deferred compensation	2,206,000	2,206,000		2,206,000
Amortization of interest rate hedges	616,000	616,000				616,000
Balances at Jun. 30, 2023	$ 4,150,234,000	$ 4,150,234,000	$ 1,825,000	$ 4,963,808,000	$ (804,040,000)	$ (11,359,000)

XML

Condensed Consolidated Statements Of Equity (Unaudited) (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Common stock dividends declared and paid (in dollars per share)	$ 0.550	$ 0.530	$ 1.100	$ 1.060
Issuance of common stock - Director compensation (in shares)	7,623	8,040	15,806	16,469
Issuance of common stock - Stock purchase plan (in shares)	1,444	1,394	3,576	2,567
Issuance of common stock - ATM equity program (in shares)	300,326	717,473	650,135	717,473
Issuance of common stock - restricted shares, net (in shares)		66,651	255,667	219,951

XML

Condensed Consolidated Statements Of Cash Flows (Unaudited) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2023	Jun. 30, 2022
Cash flows from operating activities:
Net earnings		$ 188,871	$ 155,538
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		119,023	110,124
Impairment losses – real estate, net of recoveries		2,674	6,250
Amortization of notes payable discount		869	837
Amortization of debt costs		2,401	2,349
Amortization of mortgages payable premium		(21)	(43)
Amortization of interest rate hedges		1,223	1,175
Gain on disposition of real estate		(20,230)	(4,767)
Performance incentive plan expense		6,290	10,837
Performance incentive plan payment		(916)	(103)
Change in operating assets and liabilities, net of assets acquired and liabilities assumed:
Decrease in receivables		550	542
Decrease in accrued rental income		(1,003)	2,643
Increase in other assets		(721)	(1,369)
Increase (decrease) in accrued interest payable		953	(745)
Increase (decrease) in other liabilities		(721)	(8,008)
Other		52	51
Net cash provided by operating activities		299,294	275,311
Cash flows from investing activities:
Proceeds from the disposition of real estate		40,450	29,203
Additions to real estate		(327,739)	(357,460)
Principal payments received on mortgages and notes receivable		324	306
Other		(1,144)	(1,505)
Net cash used in investing activities		(288,109)	(329,456)
Cash flows from financing activities:
Proceeds from line of credit payable		513,500	126,000
Repayment of line of credit payable		(347,200)	(86,000)
Repayment of mortgages payable		(9,947)	(328)
Payment of debt issuance costs		(125)	(126)
Proceeds from issuance of common stock		30,765	33,048
Stock issuance costs		(558)	(575)
Payment of common stock dividends		(199,146)	(185,629)
Noncontrolling interests distributions		0	(278)
Net cash provided by (used in) financing activities		(12,711)	(113,888)
Net increase (decrease) in cash, cash equivalents and restricted cash		(1,526)	(168,033)
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]	5,252	3,289
Supplemental disclosure of cash flow information:
Interest paid, net of amount capitalized		74,686	70,139
Supplemental disclosure of noncash investing and financing activities:
Change in other comprehensive income		1,223	1,175
Right-of-use asset recorded in connection with lease liability		6,401
Work in progress accrual balance at end of period		$ 21,149	$ 14,707

[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 June 30, 2023, NNN had restricted cash of $2,971. NNN did not have restricted cash and cash held in escrow as of June 30, 2022.

XML

Organization and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Summary of Significant Accounting Policies

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").

	June 30, 2023
Property Portfolio:
Total Properties		3,479
Gross leasable area (square feet)		35,492,000
States		49
Weighted average remaining lease term (years)		10.2

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 and six months ended June 30, 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 $1,126,000 and $274,000 in capitalized interest during the development period for the six months ended June 30, 2023 and 2022, respectively, of which $721,000 and $176,000 was recorded during the quarters ended June 30, 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.

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.

As a result of the review of lease payments collectability, NNN recorded a write-off of $348,000 of outstanding receivables and related accrued rent for certain tenants reclassified to cash basis for accounting purposes during the six months ended June 30, 2023. No such outstanding receivables and related accrued rent were written off during the six months ended June 30, 2022.

The following table summarizes those tenants classified as cash basis for accounting purposes as of June 30:

	2023			2022
Number of tenants		9			8
Cash basis tenants as a percent of:
Total Properties		5.0	%		5.3	%
Total annual base rent(1)		7.1	%		7.2	%
Total gross leasable area		6.8	%		6.9	%

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

During the six months ended June 30, 2023 and 2022, NNN recognized $30,088,000 and $31,285,000, respectively, of rental income from certain tenants classified as cash basis for accounting purposes, of which $14,523,000 and $15,499,000 was recognized during the quarters ended June 30, 2023 and 2022, respectively.

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 June 30, 2023 and December 31, 2022, NNN had recorded real estate held for sale of $1,904,000 (two Properties) 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 six months ended June 30, 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.

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 $1,224,000 and $1,530,000 included in other assets on the Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, respectively, net of $78,000 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 June 30, 2023 and December 31, 2022, NNN held $2,971,000 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 defined below) 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 June 30, 2023 and December 31, 2022, net of accumulated amortization of $12,946,000 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.

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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Basic and Diluted Earnings:
Net earnings available to NNN’s common stockholders	$	98,704		$	74,171		$	188,871		$	155,543
Less: Earnings allocated to unvested restricted shares		(162	)		(165	)		(295	)		(319	)
Net earnings used in basic and diluted earnings per share	$	98,542		$	74,006		$	188,576		$	155,224
Basic and Diluted Weighted Average Shares Outstanding:
Weighted average number of shares outstanding		182,123,555			175,989,323			181,923,011			175,813,456
Less: Unvested restricted shares		(295,441	)		(310,844	)		(267,861	)		(300,810	)
Less: Unvested contingent restricted shares		(736,083	)		(721,623	)		(685,341	)		(645,597	)
Weighted average number of shares outstanding used in     basic earnings per share		181,092,031			174,956,856			180,969,809			174,867,049
Other dilutive securities		535,826			151,058			574,466			154,822
Weighted average number of shares outstanding used in     diluted earnings per share		181,627,857			175,107,914			181,544,275			175,021,871

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 June 30, 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.

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 six months ended June 30, 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		1,223		(2)
Ending balance, June 30, 2023	$	(11,359	)

(1) Additional disclosure is included in Note 6 – 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 which 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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Real Estate

6 Months Ended

Jun. 30, 2023

Real Estate [Abstract]

Real Estate

Note 2 – Real Estate:

Real Estate – Portfolio

Leases – At June 30, 2023, NNN’s real estate portfolio had a weighted average remaining lease term of 10.2 years and consisted of 3,492 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):

	June 30, 2023			December 31, 2022
Land and improvements(1)	$	2,765,263		$	2,669,498
Buildings and improvements		7,166,833			6,985,394
Leasehold interests		355			355
		9,932,451			9,655,247
Less accumulated depreciation and amortization		(1,766,177	)		(1,660,308	)
		8,166,274			7,994,939
Work in progress and improvements		49,823			21,737
Accounted for using the operating method		8,216,097			8,016,676
Accounted for using the direct financing method		3,191			3,352
Classified as held for sale		1,904			786
	$	8,221,192		$	8,020,814

(1) Includes $63,991 and $22,356 in land for Properties under construction at June 30, 2023 and December 31, 2022, respectively.

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

	Quarter Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Rental income from operating leases	$	197,629	$	185,791	$	395,812	$	370,102
Earned income from direct financing leases		143		150		287		301
Percentage rent		291		295		1,054		996
Real estate expense reimbursement from tenants		4,363		4,300		8,903		8,900
	$	202,426	$	190,536	$	406,056	$	380,299

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, as a result of the COVID-19 pandemic, NNN entered into rent deferral lease amendments with certain tenants in the Property Portfolio, for an aggregate $4,722,000 and $51,723,000 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 June 30, 2023, an aggregate of approximately 92 percent of deferred rent has been repaid with $2,172,000 and $8,062,000 of deferred rent repaid during the six months ended June 30, 2023 and 2022, respectively, of which $486,000 and $4,005,000 of deferred rent was repaid during the quarters ended June 30, 2023 and 2022, respectively. The remaining deferred rents are substantially due by December 31, 2023.

For the six months ended June 30, 2023 and 2022, NNN recognized $1,003,000 and ($2,643,000), respectively, of net straight-line accrued rental income, net of reserves, of which $534,000 and ($1,547,000) of such income, net of reserves was recorded during the quarters ended June 30, 2023 and 2022, respectively.

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 six months ended June 30, 2023 and 2022, NNN recorded ($19,000) and ($3,509,000), respectively, of net straight-line accrued rental income related to such amendments, of which ($10,000) and ($1,729,000) was recorded during the quarters ended June 30, 2023 and 2022, respectively.

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):

	June 30, 2023			December 31, 2022
Intangible lease assets (included in other assets):
Above-market in-place leases	$	15,356		$	15,356
Less: accumulated amortization		(11,816	)		(11,477	)
Above-market in-place leases, net	$	3,540		$	3,879
In-place leases	$	123,468		$	124,198
Less: accumulated amortization		(82,845	)		(79,675	)
In-place leases, net	$	40,623		$	44,523
Intangible lease liabilities (included in other liabilities):
Below-market in-place leases	$	41,267		$	41,371
Less: accumulated amortization		(28,634	)		(28,121	)
Below-market in-place leases, net	$	12,633		$	13,250

The amounts amortized as a net increase to rental income for above-market and below-market in-place leases for the six months ended June 30, 2023 and 2022, were $234,000 and $280,000, respectively, of which $122,000 and $140,000 were recorded for the quarters ended June 30, 2023 and 2022, respectively. The value of in-place leases amortized to expense for the six months ended June 30, 2023 and 2022, was $3,527,000 and $3,544,000, respectively, of which $1,767,000 and $1,771,000 was recorded for the quarters ended June 30, 2023 and 2022, respectively.

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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
	# of Sold Properties	Net Gain		# of Sold Properties	Net Gain		# of Sold Properties	Net Gain		# of Sold Properties	Net Gain
Gain on disposition of real estate	7	$	13,930	8	$	775	13	$	20,230	18	$	4,767

Real Estate – Commitments

NNN has committed to fund construction on 39 Properties. The improvements on such Properties are estimated to be completed within 12 months. These construction commitments, as of June 30, 2023, are outlined in the table below (dollars in thousands):

Total commitment(1)	$	268,159
Less amount funded		(113,814	)
Remaining commitment	$	154,345

(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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Total real estate impairments, net of recoveries	$	34	$	4,618	$	2,674	$	6,250
Number of Properties:
Vacant		—		3		3		6
Occupied		—		3		1		5

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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Line of Credit Payable

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Line of Credit Payable

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 $228,576,000 and a weighted average interest rate of 5.67% during the six months ended June 30, 2023. In December 2022, NNN entered into an amendment to the Credit Facility, to change the base interest rate from the London Interbank Offer Rate ("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 June 30, 2023, $332,500,000 was outstanding and $767,500,000 was available for future borrowings under the Credit Facility, and NNN was in compliance with each of the financial covenants.

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Mortgages Payable

6 Months Ended

Jun. 30, 2023

Notes Payable, Noncurrent [Abstract]

Mortgage Payable

Note 4 – Mortgages Payable:

In April 2023, NNN repaid the remaining mortgages payable principal balance of $9,774,000.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2023

Equity [Abstract]

Stockholders' Equity

Note 5 – 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 June 30, 2023		7,722,511

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

	Six Months Ended June 30,
	2023		2022
Shares of common stock		650,135		717,473
Average price per share (net)	$	43.98	$	43.23
Net proceeds	$	28,592	$	31,018
Stock issuance costs(1)	$	558	$	575

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

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):

	Six Months Ended June 30,
	2023		2022
Shares of common stock		35,922		34,396
Net proceeds	$	1,615	$	1,456

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

	Quarter Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Dividends	$	99,745	$	92,878	$	199,146	$	185,629
Per share		0.550		0.530		1.100		1.060

In July 2023, NNN declared a dividend of $0.5650 per share, which is payable in August 2023 to its common stockholders of record as of July 31, 2023.

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Notes Payable and Derivatives

6 Months Ended

Jun. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Notes Payable and Derivatives

Note 6 – 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 June 30, 2023, $11,359,000 remained in accumulated other comprehensive income (loss) related to NNN’s previously terminated interest rate hedges. During the six months ended June 30, 2023 and 2022, NNN reclassified out of accumulated other comprehensive income (loss) $1,223,000 and $1,175,000, respectively, of which $616,000 and $592,000 was reclassified during the quarters ended June 30, 2023 and 2022, respectively, as an increase in interest expense. Over the next 12 months, NNN estimates that an additional $2,490,000 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 June 30, 2023.

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Note 7 – 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 December 31, 2022 approximate fair value based upon current market prices of comparable instruments (Level 3). NNN had no mortgages payable outstanding at June 30, 2023. At June 30, 2023 and December 31, 2022, the fair value of NNN’s notes payable excluding unamortized discount and debt costs was $3,135,564,000 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.

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Organization and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Principles of Consolidation

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 and Impairment

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 $1,126,000 and $274,000 in capitalized interest during the development period for the six months ended June 30, 2023 and 2022, respectively, of which $721,000 and $176,000 was recorded during the quarters ended June 30, 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.

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

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.

As a result of the review of lease payments collectability, NNN recorded a write-off of $348,000 of outstanding receivables and related accrued rent for certain tenants reclassified to cash basis for accounting purposes during the six months ended June 30, 2023. No such outstanding receivables and related accrued rent were written off during the six months ended June 30, 2022.

The following table summarizes those tenants classified as cash basis for accounting purposes as of June 30:

	2023			2022
Number of tenants		9			8
Cash basis tenants as a percent of:
Total Properties		5.0	%		5.3	%
Total annual base rent(1)		7.1	%		7.2	%
Total gross leasable area		6.8	%		6.9	%

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

During the six months ended June 30, 2023 and 2022, NNN recognized $30,088,000 and $31,285,000, respectively, of rental income from certain tenants classified as cash basis for accounting purposes, of which $14,523,000 and $15,499,000 was recognized during the quarters ended June 30, 2023 and 2022, respectively.

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 – 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 June 30, 2023 and December 31, 2022, NNN had recorded real estate held for sale of $1,904,000 (two Properties) 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 six months ended June 30, 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.

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

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 $1,224,000 and $1,530,000 included in other assets on the Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, respectively, net of $78,000 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 June 30, 2023 and December 31, 2022, NNN held $2,971,000 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.

Cash and Cash Equivalents

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 – 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 June 30, 2023 and December 31, 2022, NNN held $2,971,000 and $4,273,000, respectively, in escrow and other restricted accounts

Valuation of Trade Receivables

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

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 defined below) 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 June 30, 2023 and December 31, 2022, net of accumulated amortization of $12,946,000 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.

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 – 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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Basic and Diluted Earnings:
Net earnings available to NNN’s common stockholders	$	98,704		$	74,171		$	188,871		$	155,543
Less: Earnings allocated to unvested restricted shares		(162	)		(165	)		(295	)		(319	)
Net earnings used in basic and diluted earnings per share	$	98,542		$	74,006		$	188,576		$	155,224
Basic and Diluted Weighted Average Shares Outstanding:
Weighted average number of shares outstanding		182,123,555			175,989,323			181,923,011			175,813,456
Less: Unvested restricted shares		(295,441	)		(310,844	)		(267,861	)		(300,810	)
Less: Unvested contingent restricted shares		(736,083	)		(721,623	)		(685,341	)		(645,597	)
Weighted average number of shares outstanding used in     basic earnings per share		181,092,031			174,956,856			180,969,809			174,867,049
Other dilutive securities		535,826			151,058			574,466			154,822
Weighted average number of shares outstanding used in     diluted earnings per share		181,627,857			175,107,914			181,544,275			175,021,871

Income Taxes

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 June 30, 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.

Fair Value Measurement

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 six months ended June 30, 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		1,223		(2)
Ending balance, June 30, 2023	$	(11,359	)

(1) Additional disclosure is included in Note 6 – Notes Payable and Derivatives.

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

Use of Estimates

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 which 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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Organization and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Summary of NNN's Investment Portfolio

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").

	June 30, 2023
Property Portfolio:
Total Properties		3,479
Gross leasable area (square feet)		35,492,000
States		49
Weighted average remaining lease term (years)		10.2

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.

Summary of tenants classified as cash basis

The following table summarizes those tenants classified as cash basis for accounting purposes as of June 30:

	2023			2022
Number of tenants		9			8
Cash basis tenants as a percent of:
Total Properties		5.0	%		5.3	%
Total annual base rent(1)		7.1	%		7.2	%
Total gross leasable area		6.8	%		6.9	%

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

Computation of Basic and Diluted Earnings Per Share

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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Basic and Diluted Earnings:
Net earnings available to NNN’s common stockholders	$	98,704		$	74,171		$	188,871		$	155,543
Less: Earnings allocated to unvested restricted shares		(162	)		(165	)		(295	)		(319	)
Net earnings used in basic and diluted earnings per share	$	98,542		$	74,006		$	188,576		$	155,224
Basic and Diluted Weighted Average Shares Outstanding:
Weighted average number of shares outstanding		182,123,555			175,989,323			181,923,011			175,813,456
Less: Unvested restricted shares		(295,441	)		(310,844	)		(267,861	)		(300,810	)
Less: Unvested contingent restricted shares		(736,083	)		(721,623	)		(685,341	)		(645,597	)
Weighted average number of shares outstanding used in     basic earnings per share		181,092,031			174,956,856			180,969,809			174,867,049
Other dilutive securities		535,826			151,058			574,466			154,822
Weighted average number of shares outstanding used in     diluted earnings per share		181,627,857			175,107,914			181,544,275			175,021,871

Changes in Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss) – The following table outlines the changes in accumulated other comprehensive income (loss) for the six months ended June 30, 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		1,223		(2)
Ending balance, June 30, 2023	$	(11,359	)

(1) Additional disclosure is included in Note 6 – Notes Payable and Derivatives.

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

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Real Estate (Tables)

6 Months Ended

Jun. 30, 2023

Real Estate [Abstract]

Summary of Real Estate Subject to Operating Leases

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

	June 30, 2023			December 31, 2022
Land and improvements(1)	$	2,765,263		$	2,669,498
Buildings and improvements		7,166,833			6,985,394
Leasehold interests		355			355
		9,932,451			9,655,247
Less accumulated depreciation and amortization		(1,766,177	)		(1,660,308	)
		8,166,274			7,994,939
Work in progress and improvements		49,823			21,737
Accounted for using the operating method		8,216,097			8,016,676
Accounted for using the direct financing method		3,191			3,352
Classified as held for sale		1,904			786
	$	8,221,192		$	8,020,814

(1) Includes $63,991 and $22,356 in land for Properties under construction at June 30, 2023 and December 31, 2022, respectively.

Rental Income, Operating Leases

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

	Quarter Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Rental income from operating leases	$	197,629	$	185,791	$	395,812	$	370,102
Earned income from direct financing leases		143		150		287		301
Percentage rent		291		295		1,054		996
Real estate expense reimbursement from tenants		4,363		4,300		8,903		8,900
	$	202,426	$	190,536	$	406,056	$	380,299

Intangible Assets, Lease Liabilities, and Related Amortization

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):

	June 30, 2023			December 31, 2022
Intangible lease assets (included in other assets):
Above-market in-place leases	$	15,356		$	15,356
Less: accumulated amortization		(11,816	)		(11,477	)
Above-market in-place leases, net	$	3,540		$	3,879
In-place leases	$	123,468		$	124,198
Less: accumulated amortization		(82,845	)		(79,675	)
In-place leases, net	$	40,623		$	44,523
Intangible lease liabilities (included in other liabilities):
Below-market in-place leases	$	41,267		$	41,371
Less: accumulated amortization		(28,634	)		(28,121	)
Below-market in-place leases, net	$	12,633		$	13,250

Gains on Dispositions of Properties

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

	Quarter Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
	# of Sold Properties	Net Gain		# of Sold Properties	Net Gain		# of Sold Properties	Net Gain		# of Sold Properties	Net Gain
Gain on disposition of real estate	7	$	13,930	8	$	775	13	$	20,230	18	$	4,767

Remaining Funding Commitments

These construction commitments, as of June 30, 2023, are outlined in the table below (dollars in thousands):

Total commitment(1)	$	268,159
Less amount funded		(113,814	)
Remaining commitment	$	154,345

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

Real Estate Impairments

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Total real estate impairments, net of recoveries	$	34	$	4,618	$	2,674	$	6,250
Number of Properties:
Vacant		—		3		3		6
Occupied		—		3		1		5

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2023

Equity [Abstract]

Schedule of ATM Program

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 June 30, 2023		7,722,511

Schedule of Common Stock Issuances Pursuant to Equity Programs

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

	Six Months Ended June 30,
	2023		2022
Shares of common stock		650,135		717,473
Average price per share (net)	$	43.98	$	43.23
Net proceeds	$	28,592	$	31,018
Stock issuance costs(1)	$	558	$	575

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

Schedule of Common Stock Issuances Pursuant to DRIP

The following table outlines the common stock issuances pursuant to NNN's DRIP (dollars in thousands):

	Six Months Ended June 30,
	2023		2022
Shares of common stock		35,922		34,396
Net proceeds	$	1,615	$	1,456

Schedule of Dividends Declared and Paid

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

	Quarter Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Dividends	$	99,745	$	92,878	$	199,146	$	185,629
Per share		0.550		0.530		1.100		1.060

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Organization and Summary of Significant Accounting Policies (Summary of NNN's Investment Portfolio) (Details)	6 Months Ended
	Jun. 30, 2023 ft²
Property Portfolio:
Total properties	3,479
Gross leasable area (square feet)	35,492,000
States	49
Weighted average remaining lease term	10 years 2 months 12 days

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Organization and Summary of Significant Accounting Policies - (Summary of tenants classified as cash basis) (Details) - Tenant		Jun. 30, 2023	Jun. 30, 2022
Accounting Policies [Abstract]
Number of tenants		9	8
Cash basis tenants as a percent of:
Total Properties		5.00%	5.30%
Total annual base rent	[1]	7.10%	7.20%
Total gross leasable area		6.80%	6.90%

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

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Organization and Summary of Significant Accounting Policies (Computation of Basic and Diluted Earnings per Share) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Earnings Per Share [Abstract]
Net earnings attributable to common stockholders	$ 98,704	$ 74,171	$ 188,871	$ 155,543
Less: Earnings allocated to unvested restricted shares	(162)	(165)	(295)	(319)
Net earnings used in basic and diluted earnings per share	$ 98,542	$ 74,006	$ 188,576	$ 155,224
Basic and Diluted Weighted Average Shares Outstanding:
Weighted average number of shares outstanding	182,123,555	175,989,323	181,923,011	175,813,456
Less: Unvested restricted shares (in shares)	(295,441)	(310,844)	(267,861)	(300,810)
Less: Unvested contingent restricted shares (in shares)	(736,083)	(721,623)	(685,341)	(645,597)
Weighted Average Number of Shares Outstanding, Basic, Total	181,092,031	174,956,856	180,969,809	174,867,049
Other dilutive securities (in shares)	535,826	151,058	574,466	154,822
Weighted average number of shares outstanding used in diluted earnings per share (in shares)	181,627,857	175,107,914	181,544,275	175,021,871

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Organization and Summary of Significant Accounting Policies (Changes in AOCI) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2023 USD ($)
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Balances	$ 4,123,502
Balances	4,150,234
AOCI, cash flow hedges
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Balances	(12,582)	[1]
Reclassifications from accumulated other comprehensive income to net earnings	1,223	[1],[2]
Balances	$ (11,359)	[1]

[1] (1) Additional disclosure is included in Note 6 – Notes Payable and Derivatives.

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

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Organization and Summary of Significant Accounting Policies (Narrative) (Details) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Jan. 31, 2023	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Accounting Policies [Line Items]
Interest costs capitalized		$ 721,000	$ 176,000	$ 1,126,000	$ 274,000
Revenue recognized on cash basis		14,523,000	$ 15,499,000	30,088,000	31,285,000
Revolving credit facility borrowing capacity		767,500,000,000		767,500,000,000
Classified as held for sale		1,904,000		1,904,000		$ 786,000
Write-off of outstanding receivables and related accrued rent				348,000,000	$ 0
Increase in ROU asset and operating lease liability	$ 6,401,000
Escrow and other restricted accounts		2,971,000		$ 2,971,000		4,273,000
Land Improvements [Member]
Accounting Policies [Line Items]
Property estimated useful life				15 years
Mortgage loan
Accounting Policies [Line Items]
Mortgage receivable		1,224,000		$ 1,224,000		1,530,000
Allowance for credit loss		78,000		$ 78,000		98,000
Collectability analysis, period used				15 years
Minimum | Building and Building Improvements [Member]
Accounting Policies [Line Items]
Property estimated useful life				20 years
Maximum | Building and Building Improvements [Member]
Accounting Policies [Line Items]
Property estimated useful life				40 years
Line of Credit
Accounting Policies [Line Items]
Revolving credit facility borrowing capacity		1,100,000,000		$ 1,100,000,000
Loans Payable
Accounting Policies [Line Items]
Debt costs		38,145,000		38,145,000		38,145,000
Debt costs accumulated amortization		$ 12,946,000		$ 12,946,000		$ 11,693,000

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Real Estate (Key Information for Leases) (Details)	6 Months Ended
	Jun. 30, 2023 Property
Lessor, Lease, Description [Line Items]
Weighted average remaining lease term	10 years 2 months 12 days
Leases classified as operating leases	3,492
Leases classified as direct financing leases	5
Minimum
Lessor, Lease, Description [Line Items]
Initial lease term	10 years
Maximum
Lessor, Lease, Description [Line Items]
Initial lease term	20 years

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Real Estate (Summary of Real Estate Subject to Operating Leases) (Details) - USD ($)		Jun. 30, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Land and improvements	[1]	$ 2,765,263,000	$ 2,669,498,000
Buildings and improvements		7,166,833,000	6,985,394,000
Leasehold interests		355,000	355,000
Real estate subject to operating leases, gross		9,932,451,000	9,655,247,000
Less accumulated depreciation and amortization		(1,766,177,000)	(1,660,308,000)
Real estate subject to operating leases, net, before work in progress		8,166,274,000	7,994,939,000
Work in progress and improvements		49,823,000	21,737,000
Accounted for using the operating method		8,216,097,000	8,016,676,000
Accounted for using the direct financing method		3,191,000	3,352,000
Classified as held for sale		1,904,000	786,000
Accounted for using the operating method, net of accumulated depreciation and amortization		8,221,192,000	8,020,814,000
Asset under construction
Property, Plant and Equipment [Line Items]
Land and improvements		$ 63,991,000	$ 22,356,000

[1] (1) Includes $63,991 and $22,356 in land for Properties under construction at June 30, 2023 and December 31, 2022, respectively.  

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Real Estate (Rental Income) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2021	Dec. 31, 2020
Lease Income [Abstract]
Rental income from operating leases	$ 197,629,000	$ 185,791,000	$ 395,812,000	$ 370,102,000
Earned income from direct financing leases	143,000	150,000	287,000	301,000
Percentage rent	291,000	295,000	1,054,000	996,000
Real estate expense reimbursement from tenants	4,363,000	4,300,000	8,903,000	8,900,000
Rental income	202,426,000	190,536,000	406,056,000	380,299,000
Rental income accrued during period	534,000	1,547,000	1,003,000	2,643,000
Repayments of deferred rent	486,000	4,005,000	2,172,000	8,062,000
Originally rent due					$ 4,722,000	$ 51,723,000
Straight-line accrued rent from rent deferral repayments	$ 10,000	$ 1,729,000	$ 19,000	$ 3,509,000

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Real Estate (Intangible Assets and Liabilities) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Intangible lease liabilities (included in other liabilities):
Below-market in-place leases	$ 41,267,000		$ 41,267,000		$ 41,371,000
Less: accumulated amortization	(28,634,000)		(28,634,000)		(28,121,000)
Below-market in-place leases, net	12,633,000		12,633,000		13,250,000
Above-market in-place leases, net
Intangible lease assets (included in other assets):
Leases	15,356,000		15,356,000		15,356,000
Less: accumulated amortization	(11,816,000)		(11,816,000)		(11,477,000)
Leases, net	3,540,000		3,540,000		3,879,000
In-place leases ,net
Intangible lease assets (included in other assets):
Leases	123,468,000		123,468,000		124,198,000
Less: accumulated amortization	(82,845,000)		(82,845,000)		(79,675,000)
Leases, net	40,623,000		40,623,000		$ 44,523,000
Intangible lease liabilities (included in other liabilities):
Amortization expense, in-place leases	1,767,000	$ 1,771,000	3,527,000	$ 3,544,000
Above-market and below-market in-place leases
Intangible lease liabilities (included in other liabilities):
Amortization expense, above- and below-market leases	$ 122,000	$ 140,000	$ 234,000	$ 280,000

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Real Estate (Dispositions) (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023 USD ($) Property	Jun. 30, 2022 USD ($) Property	Jun. 30, 2023 USD ($) Property	Jun. 30, 2022 USD ($) Property
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain | $	$ 13,930	$ 775	$ 20,230	$ 4,767
Assets Held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties sold at a gain | Property	7	8	13	18

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Real Estate (Commitments) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2023 USD ($)
Real Estate [Abstract]
Period for improvements to construction commitments	12 months
Total commitment	$ 268,159	[1]
Less amount funded	(113,814)
Remaining commitment	$ 154,345

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

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Real Estate (Impairments) (Details) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2023 USD ($)	Mar. 31, 2023 Property	Jun. 30, 2022 USD ($)	Mar. 31, 2022 Property	Jun. 30, 2023 USD ($) Property	Jun. 30, 2022 USD ($) Property
Real Estate [Abstract]
Real estate impairments, net of recoveries | $	$ 34		$ 4,618		$ 2,674	$ 6,250
Vacant		3		0	3	6
Occupied		3		0	1	5

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Line of Credit Payable (Details)	6 Months Ended
	Jun. 30, 2023 USD ($)
Line of Credit Facility [Line Items]
Revolving credit facility borrowing capacity	$ 767,500,000,000
Revolving credit facility weighted average outstanding balance	$ 228,576,000,000
Weighted average interest rate	5.67%
Option to increase facility size	$ 2,000,000,000,000
LIBOR
Line of Credit Facility [Line Items]
Basis spread on variable rate	77.50%
Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate	10.00%
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Revolving credit facility borrowing capacity	$ 1,100,000,000,000
Line of Credit
Line of Credit Facility [Line Items]
Revolving credit facility borrowing capacity	1,100,000,000
Line of credit payable	$ 332,500,000,000

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Mortgages Payable (Additional Information) (Details) $ in Thousands	Jun. 30, 2023 USD ($)
Mortgages [Member]
Debt Instrument [Line Items]
Remaining mortgages payable principal balance	$ 9,774,000

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Stockholders' Equity (ATM Program) (Details) - USD ($) $ / shares in Units, $ in Thousands		6 Months Ended
		Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Class of Stock [Line Items]
Total allowable shares (in shares)		375,000,000		375,000,000
Total shares issued (in shares)		182,407,911		181,424,670
Net proceeds		$ 30,765	$ 33,048
Stock issuance costs		$ 125	$ 126
ATM equity programs
Class of Stock [Line Items]
Shares of common stock (in shares)		650,135	717,473
Average price per share (net) (in dollars per share)		$ 43.98	$ 43.23
Net proceeds		$ 28,592	$ 31,018
Stock issuance costs	[1]	$ 558	$ 575
2020 ATM
Class of Stock [Line Items]
Total allowable shares (in shares)		17,500,000
Total shares issued (in shares)		7,722,511

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

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Stockholders' Equity (DRIP) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Feb. 28, 2021
Class of Stock [Line Items]
Common stock, shares authorized (in shares)	375,000,000		375,000,000
Net proceeds	$ 30,765	$ 33,048
DRIP
Class of Stock [Line Items]
Common stock, shares authorized (in shares)				6,000,000
Shares of common stock (in shares)	35,922	34,396
Net proceeds	$ 1,615	$ 1,456

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Stockholders' Equity (Dividends) (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Jul. 31, 2023	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Class of Stock [Line Items]
Common stock dividends				$ 199,146	$ 185,629
Common stock dividends declared (in dollars per share)		$ 0.550	$ 0.530	$ 1.100	$ 1.060
DRIP [Member]
Class of Stock [Line Items]
Common stock dividends		$ 99,745	$ 92,878	$ 199,146	$ 185,629
Common stock dividends per share (in dollars per share)		$ 0.550	$ 0.530	$ 1.100	$ 1.060
Subsequent event
Class of Stock [Line Items]
Common stock dividends declared (in dollars per share)	$ 0.5650

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Notes Payable and Derivatives (Narrative) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Derivative [Line Items]
Gain (loss) reclassification to interest expense	$ 616,000	$ 592,000	$ 1,223,000	$ 1,175,000
Interest rate cash flow hedge gain (loss) to be reclassified over next 12 months, net	2,490,000		2,490,000
AOCI, cash flow hedges
Derivative [Line Items]
Gain (loss) reclassification to interest expense			11,359,000
Accumulated Other Comprehensive Income (Loss)
Derivative [Line Items]
Gain (loss) reclassification to interest expense	$ 616,000	$ 592,000	$ 1,223,000	$ 1,175,000

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Fair Value of Financial Instruments (Details) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Fair Value Disclosures [Abstract]
Fair value of notes payable	$ 3,135,564,000	$ 3,140,774,000