Leases. At December 31, 2023, NNN's real estate portfolio has a weighted average remaining lease term of 10.1 years and consisted of 3,551 leases classified as operating leases and an additional four 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. Typically, 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, real estate taxes and assessments 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 increases in the Consumer Price Index or fixed increases.

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 December 31 (dollars in thousands):


	2023			2022
Land and improvements (1)	$	2,878,400		$	2,669,498
Buildings and improvements		7,368,873			6,985,394
Leasehold interests		355			355
		10,247,628			9,655,247
Less accumulated depreciation and amortization		(1,863,451	)		(1,660,308	)
		8,384,177			7,994,939
Work in progress and improvements		144,068			21,737
Accounted for using the operating method		8,528,245			8,016,676
Accounted for using the direct financing method		3,033			3,352
Classified as held for sale(2)		4,573			786
	$	8,535,851		$	8,020,814

(1)

Includes $96,464 and $22,356 in land for Properties under construction as of December 31, 2023 and 2022, respectively.

(2)

As of December 31, 2023, one Property was classified as held for sale. The two properties classified as held for sale as of December 31, 2022 were sold during the year ended December 31, 2023.

NNN recognized the following revenues in rental income for the years ended December 31 (dollars in thousands):


	2023		2022		2021
Rental income from operating leases	$	805,136	$	751,680	$	703,865
Earned income from direct financing leases		560		595		623
Percentage rent		1,631		1,541		706
Rental revenues		807,327		753,816		705,194
Real estate expense reimbursement from tenants		18,763		17,802		18,665
	$	826,090	$	771,618	$	723,859

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 December 31, 2023, an aggregate of approximately 93 percent of deferred rent has been repaid, with $3,124,000, $14,478,000 and $31,776,000 of deferred rent repaid during the years ended December 31, 2023, 2022 and 2021, respectively.

For the years ended December 31, 2023, 2022 and 2021, NNN recognized $7,453,000, ($3,559,000) and ($21,137,000), respectively, of net-straight-line accrued rental income, net of reserves. During the year ended December 31, 2023, one tenant was reclassified to accrual basis for accounting purposes due to their improved qualitative and/or quantitative credit factors, which resulted in an increase of accrued rental income in the amount of $5,573,000.

The following is a schedule of undiscounted cash flows to be received on noncancellable operating leases as of December 31, 2023 (dollars in thousands):


2024	$	765,337
2025		744,061
2026		701,437
2027		655,268
2028		604,084
Thereafter		4,286,914
	$	7,757,101

Since lease renewal periods are exercisable at the option of the tenant, the above table only presents undiscounted cash flows due during the current lease terms. In addition, this table does not include amounts for potential variable rent increases that are based on the Consumer Price Index or future contingent rents which may be received on the leases based on a percentage of the tenant's sales volume.

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 December 31 (dollars in thousands):


	2023			2022
Intangible lease assets (included in other assets):
Above-market in-place leases	$	15,297		$	15,356
Less: accumulated amortization		(12,080	)		(11,477	)
Above-market in-place leases, net	$	3,217		$	3,879

In-place leases	$	122,802		$	124,198
Less: accumulated amortization		(85,332	)		(79,675	)
In-place leases, net	$	37,470		$	44,523

Intangible lease liabilities (included in other liabilities):
Below-market in-place leases	$	41,244		$	41,371
Less: accumulated amortization		(29,117	)		(28,121	)
Below-market in-place leases, net	$	12,127		$	13,250

The amounts amortized as a net increase to rental income for capitalized above-market and below-market leases for the years ended December 31, 2023, 2022 and 2021 were $430,000, $510,000 and $710,000, respectively. The value of in-place leases amortized to expense for the years ended December 31, 2023, 2022 and 2021 was $6,793,000, $7,132,000 and $7,687,000, respectively.

The following is a schedule of the amortization of acquired above-market and below-market in-place lease intangibles and the amortization of the in-place lease intangibles as of December 31, 2023 (dollars in thousands):


	Above-Market and Below- Market In-Place Lease Intangibles(1)		In-Place Lease Intangibles(2)
2024	$	451	$	6,139
2025		437		5,421
2026		448		4,835
2027		468		4,010
2028		642		3,566
Thereafter		6,464		13,499
	$	8,910	$	37,470

Weighted average amortization period (years)		16.3		8.5

(1)

Recorded as a net increase to rental income over the life of the lease.

(2)

Amortized as an increase to amortization expense.

The following table summarizes the properties sold and the corresponding gain recognized on the disposition of properties for the years ended December 31 (dollars in thousands):


	2023				2022				2021
	# of Sold Properties		Gain		# of Sold Properties		Gain		# of Sold Properties		Gain
Gain on disposition of real estate		45	$	47,485		33	$	17,443		74	$	23,094

As of December 31, 2023, NNN has committed to fund construction of 53 Properties. The improvements of such Properties are estimated to be completed within 12 to 18 months. These construction commitments, at December 31, 2023, are outlined in the table below (dollars in thousands):

NNN periodically assesses its long-lived real estate assets for possible impairment whenever certain events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

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


	2023		2022		2021
Total real estate impairments, net of recoveries	$	5,990	$	8,309	$	21,957
Number of Properties:
Vacant		11		9		30
Occupied		3		7		12

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.