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What changed in NNN REIT, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of NNN REIT, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+244 added−235 removedSource: 10-K (2024-02-08) vs 10-K (2023-02-09)

Top changes in NNN REIT, INC.'s 2023 10-K

244 paragraphs added · 235 removed · 210 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeIn evaluating a particular acquisition, management may consider a variety of factors, including but not limited to: • the location, visibility, accessibility, zoning and use restrictions of the property, • the geographic area and demographic characteristics of the community, • the local real estate market conditions, including potential for growth, redevelopment, market rents, and existing or potential competing properties or retailers, • the size, age and title status of the property, • the quality of construction and design and the current physical condition of the property, • the potential for, and current extent of, any environmental problems, • the purchase price, • the non-financial lease terms of the proposed acquisition, • the availability of funds or other consideration for the proposed acquisition and the cost thereof, • the compatibility of the property with NNN’s existing Property Portfolio, • the property-level operating history, • the financial and other characteristics of the existing tenant, • the tenant’s business plan, operating history and management team, • the tenant’s industry, • the terms of any lease, • the rent to be paid by the tenant, • any existing debt encumbering the property which may be assumed in connection with acquiring or refinancing these investments, and • the merits relative to other opportunities.
Biggest changeIn evaluating a particular acquisition, management may consider a variety of factors, including but not limited to: • the location, visibility, accessibility, zoning and use restrictions of the property, • the geographic area and demographic characteristics of the community, • the local real estate market conditions, including potential for growth, redevelopment, market rents and existing or potential competing properties or retailers, • the size and age of the improvements on the property and title status of the property, • the quality of construction and design of the improvements on the property and the current physical condition of the property, • the potential for, and current extent of, any environmental issues on or around the property, • the purchase price, • the non-financial lease terms of the proposed acquisition, • the availability of funds or other consideration for the proposed acquisition and the cost thereof, • the compatibility of the property with NNN's existing Property Portfolio, • the property-level operating history, • the financial and other characteristics of the existing tenant, • the tenant's business plan, operating history and management team, • the tenant's industry, • the terms of any lease, • the rent to be paid by the tenant, • any existing debt encumbering the property which may be assumed in connection with acquiring or refinancing these investments, and • the merits relative to other opportunities. 3 NNN intends to engage in future investment activities in a manner that is consistent with the maintenance of its status as a REIT for federal income tax purposes.
In such cases where NNN intends to acquire a property where some level of contamination may exist, NNN generally 7 requires the seller or tenant to (i) remediate the problem, (ii) indemnify NNN for environmental liabilities, and/or (iii) agree to other arrangements deemed appropriate by NNN, including, under certain circumstances, the purchase of environmental insurance to address environmental conditions at the property.
In such cases where NNN intends to acquire a property where some level of contamination may exist, NNN generally requires the seller or tenant to (i) remediate the problem, (ii) indemnify NNN for environmental liabilities, and/or (iii) agree to other arrangements deemed appropriate by NNN, including, under certain circumstances, the purchase of environmental insurance to address environmental conditions at the property.
Holding NNN to such standards is critical to the long-term success of NNN’s stockholders, associates, and community. Sustainability Team. In 2022, NNN created a Sustainability Team, which reports directly to the Executive Vice President, General Counsel and Secretary, with direct oversight by the Governance and Nominating Committee of the Board of Directors.
Holding NNN to such standards is critical to the long-term success of NNN's stockholders, associates, and community. 4 Sustainability Team. In 2022, NNN created a Sustainability Team, which reports directly to the Executive Vice President, General Counsel and Secretary, with direct oversight by the Governance and Nominating Committee of the Board of Directors.
In order to mitigate exposure to environmental liability, NNN maintains an environmental insurance policy which provides some environmental liability coverage for substantially all of the Properties. As a part of its acquisition due diligence process, NNN obtains an environmental site assessment for each property.
In order to mitigate exposure to environmental liability, NNN maintains an environmental insurance policy which provides some environmental liability coverage for substantially all of its Properties. As a part of its acquisition due diligence process, NNN obtains an environmental site assessment for each property.
As stated by the EPA, on average, ENERGY STAR certified buildings use 35 percent less energy and generate 35 percent fewer greenhouse gas emissions than typical buildings. Property Portfolio.
As stated by the EPA, on average, ENERGY STAR certified buildings use 35 percent less energy and generate 35 percent fewer greenhouse gas emissions than typical buildings. 5 Property Portfolio.
The common shares of National Retail Properties, Inc. are traded on the New York Stock Exchange (the "NYSE") under the ticker symbol "NNN." 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").
The common shares of NNN REIT, Inc. are traded on the New York Stock Exchange (the "NYSE") under the ticker symbol "NNN." 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").
In addition to NNN’s donation of time, NNN is also a meaningful financial donor to numerous charities in the Central Florida community, including the Boys and Girls Clubs of Central Florida and Elevate Orlando (a teacher mentor program for high risk urban youth that help young women and men graduate high school with a plan for the future).
In addition to NNN's donation of time, NNN is also a meaningful financial investor to numerous charities in the Central Florida community, including the Boys and Girls Clubs of Central Florida and Elevate Orlando (a teacher mentor program for high risk urban youth that help young women and men graduate high school with a plan for the future).
The tenants will typically have primary responsibility for complying with the ADA, but NNN may incur costs if the tenant does not comply.
NNN's tenants will typically have primary responsibility for complying with the ADA, but NNN may incur costs if the tenant does not comply.
Corporate Responsibility and Environmental, Social and Governance Matters (“ESG”) NNN is focused on achieving success for its stockholders, providing a world-class working environment for NNN associates, enriching the community and preserving environmental resources. NNN operates its business in accordance with the highest ethical standards and strives to have the best-in-class corporate governance standards.
Corporate Responsibility and Environmental, Social and Governance Matters (“ESG”) NNN is focused on achieving success for its stockholders, providing a world-class working environment for NNN associates, enriching the community and preserving environmental resources. NNN operates its business in accordance with the highest ethical standards and strives to have class-leading corporate governance standards.
Item 1. Bu siness The Company NNN, a Maryland corporation, is a fully integrated REIT formed in 1984. NNN's assets are primarily real estate assets. NNN's consolidated financial statements are included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Item 1. Bu siness The Company NNN, a Maryland corporation, is a fully integrated real estate investment trust ("REIT") formed in 1984. NNN's assets are primarily real estate assets. NNN's consolidated financial statements are included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
These 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.
These 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 metrics and profitability measures, industry trends and industry performance compared to that of NNN. NNN evaluates the creditworthiness of its significant current and prospective tenants.
Additional information on NNN’s website includes the guiding policies adopted by NNN, which include NNN’s Corporate Governance Guidelines, Code of Business Conduct Policy and Whistleblower Policy, as well as NNN’s stance on corporate governance and risk management, social responsibility and environmental practices and their impact in the Corporate Responsibility and Sustainability Report. 8
Additional information on NNN's website includes the guiding policies adopted by NNN, which include NNN's Corporate Governance Guidelines, Code of Business Conduct Policy and Whistleblower Policy, as well as NNN's position on corporate governance and risk management, social responsibility and environmental practices and their impact in the Corporate Responsibility and Sustainability Report. 8
NNN’s programs include, but are not limited to, a 401(k) plan with a company match, flexible work schedules, college saving plans, an educational assistance program, adoption benefits, flexible spending and health savings accounts, health and wellness events, and access to a state of the art online wellness platform.
NNN's programs include, but are not limited to, a 401(k) plan with a company match, flexible work schedules, college saving plans, an educational assistance program, adoption benefits, flexible spending and health savings accounts, health and wellness events, and access to a state of the art online wellness platform. Community Service and Partnerships .
Competition NNN faces active competition from many sources, both domestically and internationally, for net-lease investment opportunities in commercial properties. Competitors may be willing to accept rates of return, prices, lease terms, other transaction terms, or levels of risk that NNN finds unacceptable.
Competition NNN faces active competition from many sources, both domestically and internationally, for net-lease investment opportunities in commercial real estate. Competitors may be willing to accept rates of return, prices, lease terms, other transaction terms, or levels of risk that NNN finds unacceptable.
The team has both internal and external projects, including, but not limited to engaging with NNN’s tenants on environmental data collection and property level sustainability . 3 Human Capital Development . As of January 31, 2023, the Company employed 77 associates, all of which are full-time. NNN’s success is dependent upon the dedication and hard work of NNN’s talented associates.
The team has both internal and external projects, including, but not limited to engaging with NNN's tenants on environmental data collection and property level sustainability . Human Capital Development . As of January 31, 2024, the Company employed 82 associates, all of which are full-time. NNN's success is dependent upon the dedication and hard work of NNN's talented associates.
Environmental Practices and Impact . As an owner of a large number of properties throughout the United States, it is important that NNN be a good corporate citizen and steward of the environment. NNN demonstrates its commitment to good stewardship of the environment in a variety of ways both at NNN’s headquarters and at NNN’s Properties across the country.
Environmental Practices and Impact . As an owner of a large number of properties throughout the United States, it is important that NNN be a good steward of the environment. NNN demonstrates its commitment in a variety of ways both at NNN's headquarters and at NNN's Properties across the country.
Qualification as a REIT NNN has made an election to be taxed as a REIT under Sections 856 through 860 of the Code, and related regulations and intends to continue to operate so as to remain qualified as a REIT for federal income tax purposes.
Qualification as a REIT NNN has made an election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), and related regulations and intends to continue to operate so as to remain qualified as a REIT for federal income tax purposes.
NNN's leases provide for annual base rental payments (generally payable in monthly installments) ranging from $7,000 to $4,085,000 (average of $227,000), and generally provide for increases in rent as a result of increases in the Consumer Price Index ("CPI") or fixed increases.
NNN's leases provide for annual base rental payments (generally payable in monthly installments) ranging from $7,000 to $4,085,000 (average of $235,000), and generally provide for limited increases in rent as a result of increases in the Consumer Price Index or fixed increases.
The success of NNN’s commitment to its associates is shown in the long tenure of NNN’s associates. The executive team, department heads, and senior managers average over 21 years of experience with NNN. In addition 47% of NNN’s associates have been with NNN for 10 years or longer.
The success of NNN's commitment to its associates is shown in the long tenure of NNN's associates. The executive team, department heads and senior managers average over 19 years of experience with NNN. In addition 46% of NNN's associates have been with NNN for 10 years or longer.
NNN’s Properties are generally leased to tenants under long-term triple net leases with typical lease terms of 30 to 40 years including base and option terms which gives NNN’s tenants exclusive control over and the ability to institute energy conservation and environmental management programs at the Properties. NNN’s tenants are overwhelmingly large companies with sophisticated conservation and sustainability programs.
NNN's Properties are generally leased to tenants under long-term triple net leases with typical lease terms of 30 to 40 years including base and option terms which gives NNN's tenants exclusive control over the ability to institute energy conservation and environmental management programs at the Properties.
The institutional knowledge and long tenure of NNN’s associates is a true competitive advantage of the Company. In addition, the Company's gender make-up is comprised of 58% females and 42% males. NNN has adopted a Human Capital Policy which is available on the Company's website at www.nnnreit.com . Total Rewards, Benefits & Work-Life Balance .
The institutional knowledge and long tenure of NNN's associates is a true competitive advantage of the Company. In addition, the Company's gender composition is 58% female and 42% male. NNN has adopted a Human Capital Policy which is available on the Company's website at www.nnnreit.com . Total Rewards, Benefits & Work-Life Balance .
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.
NNN's capital resources have and will continue to include, if available, (i) proceeds from issuing debt or equity in the capital markets; (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.
Additionally, NNN may change its financing strategy. Strategies and Policy Changes Any of NNN’s strategies or policies described above may be changed at any time by NNN without notice to or a vote of NNN’s stockholders.
Strategies and Policy Changes Any of NNN's strategies or policies described above may be changed at any time by NNN without notice to or a vote of NNN's stockholders.
NNN may incur costs if the seller or tenant does not comply with these requirements. As of January 30, 2023, NNN had 71 Properties currently under some level of environmental remediation and/or monitoring.
NNN may incur costs if the seller or tenant does not comply with these requirements. As of January 31, 2024, NNN had 68 Properties currently under some level of environmental remediation and/or monitoring.
The ratio of total debt to total market capitalization was approximately 33 percent. Certain financial agreements to which NNN is a party contain covenants that limit NNN’s ability to incur additional debt under certain circumstances. The organizational documents of NNN do not limit the absolute amount or percentage of debt that NNN may incur.
Certain financial agreements to which NNN is a party contain covenants that limit NNN's ability to incur additional debt under certain circumstances. The organizational documents of NNN do not limit the absolute amount or percentage of debt that NNN may incur.
NNN generally will not be subject to federal income tax on income that it distributes to its stockholders, provided that it distributes 100 percent of its REIT taxable income and meets certain other requirements for qualifying as a REIT.
NNN generally will not be subject to federal income taxes on taxable income it distributes to stockholders, provided that it meets certain other requirements for qualifying as a REIT.
NNN owned 3,411 Properties with an aggregate gross leasable area of approximately 35,010,000 square feet, located in 48 states, with a weighted average remaining lease term of 10.4 years as of December 31, 2022. Approximately 99 percent of the Properties were leased as of December 31, 2022.
NNN owned 3,532 Properties with an aggregate gross leasable area of approximately 35,966,000 square feet, located in 49 states, with a weighted average remaining lease term of 10.1 years as of December 31, 2023. Approximately 99 percent of the Properties were leased as of December 31, 2023.
NNN has the third longest record of consecutive annual dividend increases of all publicly traded REITs. 5 Investment in Real Estate or Interests in Real Estate NNN’s management believes that single tenant, freestanding net lease retail properties will continue to provide attractive investment opportunities and that NNN is well suited to take advantage of these opportunities because of its experience in accessing capital markets, and its ability to source, underwrite and acquire such properties.
Investment in Real Estate or Interests in Real Estate NNN's management believes that single tenant, freestanding net lease retail properties will continue to provide attractive investment opportunities and that NNN is well suited to take advantage of these opportunities because of its experience in accessing capital markets, and its ability to source, underwrite and acquire such properties.
As of January 30, 2023, NNN had not been notified by any governmental authority of, nor is NNN’s management aware of, any non-compliance with the ADA that NNN’s management believes would have a material adverse effect on its business, financial position or results of operations.
As of January 31, 2024, NNN had not been notified by any governmental authority of, nor is NNN's management aware of, any non-compliance with the ADA that NNN's management believes would have a material adverse effect on its business, financial position or results of operations. 7 Other Regulations, Rules and Laws State and local governmental entities regulate the use of the Properties.
The Properties are generally leased under triple-net leases, which require the tenant to pay all property taxes and assessments, to maintain the interior and exterior of the property, and to carry property and liability insurance coverage.
Triple-net leases typically require the tenant to pay all utilities and real estate taxes and assessments, to maintain the interior and exterior of the property, and to carry property and liability insurance coverage.
Such an event could materially adversely affect NNN’s income and ability to pay dividends. NNN believes it has been structured as, and its past and present operations qualify NNN as, a REIT.
Such an event could materially adversely affect NNN's income and ability to pay dividends. NNN believes it has been structured as, and its past and present operations qualify NNN as, a REIT. Business Strategies and Policies The following is a discussion of NNN's operating strategy and certain of its investment, financing and other policies.
Many of NNN's tenants have programs that address environmental stewardship of the Properties they occupy and control. NNN Corporate Headquarters. NNN’s corporate headquarters building is ENERGY STAR® certified by meeting the strict energy performance standards set by the Environmental Protection Agency ("EPA").
Many of NNN's tenants have programs that address environmental stewardship of the Properties they occupy and control. NNN Corporate Headquarters. NNN's corporate headquarters is located in a building that meets the Environmental Protection Agency's (“EPA”) strict energy performance standards to achieve ENERGY STAR® certification.
The operating strategies employed by NNN have allowed NNN to increase the annual dividend (paid quarterly) per common share for 33 consecutive years.
The operating strategies employed by NNN have allowed NNN to increase the annual dividend (paid quarterly) per common share for 34 consecutive years. NNN has the third longest record of consecutive annual dividend increases of all publicly traded REITs.
NNN’s risk management associates actively monitor any environmental conditions on NNN’s Properties to make sure that the tenants are meeting their obligations to remediate or remedy any open environmental matters.
NNN's leases generally require the tenants to fully comply with all environmental laws, rules and regulations, including any remediation requirements. NNN's risk management associates actively monitor any environmental conditions on NNN's Properties to make sure that the tenants are meeting their obligations to remediate and/or mitigate any open environmental matters.
On all Properties that NNN acquires, NNN obtains an environmental assessment from a licensed environmental consultant to understand any environmental risks and liabilities associated with a Property and to ensure that the tenant will address any environmental issues on the Properties.
NNN's acquisition process includes obtaining an environmental assessment from a licensed environmental consultant to understand any environmental risks and liabilities associated with a Property and to ensure that the tenant will address any environmental issues. Furthermore, NNN maintains a portfolio environmental insurance policy that covers substantially all of NNN's Properties for certain environmental risks.
NNN intends to engage in future investment activities in a manner that is consistent with the maintenance of its status as a REIT for federal income tax purposes. Additionally, NNN does not intend to engage in activities that will make NNN an investment company under the Investment Company Act of 1940, as amended.
Additionally, NNN does not intend to engage in activities that will make NNN an investment company under the Investment Company Act of 1940, as amended.
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 its short-term liquidity requirements, including investments in additional Properties, with cash and cash equivalents, cash provided from operations and advances from its unsecured revolving credit facility ("Credit Facility").
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, borrowings from its unsecured revolving credit facility ("Credit Facility"), or proceeds from the sale of Properties.
Triple-net leases typically require the tenant to pay property operating expenses such as insurance, utilities, repairs, maintenance, capital expenditures and real estate taxes and assessments. Initial lease terms are generally 10 to 20 years. NNN holds each Property until it determines that the sale of such Property is advantageous in view of NNN’s investment objectives.
Initial lease terms are generally 10 to 20 years. 2 NNN holds each Property until it determines that the sale of such Property is advantageous in view of NNN's investment objectives.
The following table summarizes the Property Portfolio as of December 31, 2022 (in thousands): Size (1) Total Dollars Invested (2) High Low Average High Low Average Land 6,586 5 101 $ 11,899 $ 5 $ 794 Building 179 1 10 45,286 30 2,090 (1) Approximate square feet. (2) Costs vary depending upon size, improvements, local market conditions and other factors.
Approximately 99 percent of total Properties were leased as of December 31, 2023. The following table summarizes the Property Portfolio as of December 31, 2023 (in thousands): Size (1) Total Dollars Invested (2) High Low Average High Low Average Land 3,913 5 101 $ 10,571 $ 5 $ 826 Building 179 1 11 45,286 30 2,160 (1) Approximate square feet.
NNN actively promotes volunteering by its associates by organizing and sponsoring specific volunteer days throughout the year at various charities, including Ronald McDonald House of Central Florida and Give Kids the World. Associates are encouraged to volunteer on work days during work hours.
NNN cares about the communities in which its associates live and work. NNN stands behind a commitment to improving education, strengthening neighborhoods and encouraging volunteer service. NNN actively promotes volunteering by its associates by organizing and sponsoring specific volunteer days throughout the year at various charities, including Ronald McDonald House of Central Florida.
For those Properties located in a nationally designated flood zone, NNN typically requires the tenants to carry flood insurance pursuant to the federal flood insurance program. For those Properties located in an area of high earthquake risk, NNN typically requires the tenants to carry earthquake insurance above what is typically covered in an extended coverage policy.
In the substantial majority of leases, NNN's tenants are required to carry full replacement cost coverage on all improvements located on the Properties. For those Properties located in a nationally designated flood zone, NNN typically requires the tenants to carry flood insurance pursuant to the federal flood insurance program.
In addition, NNN also carries a contingent extended coverage policy on the Property Portfolio, which also provides coverage for certain casualty events, including fire and windstorm. In cases where NNN’s tenants do not provide coverage, or if a Property is vacant, NNN carries the necessary direct insurance coverage.
For those Properties located in an area of high earthquake risk, NNN aims to require its tenants carry earthquake insurance above what is generally covered in an extended coverage policy. In addition, NNN also carries a contingent extended coverage policy on the Property Portfolio, which also provides coverage for certain casualty events, including fire and windstorm.
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. As of December 31, 2022, the weighted average remaining lease term of the Property Portfolio was approximately 10.4 years.
(2) Costs vary depending upon size, improvements, local market conditions and other factors. 6 Leases The following is a summary of the typical 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.
Property Portfolio As of December 31, 2022, NNN owned 3,411 Properties with an aggregate gross leasable area of approximately 35,010,000 square feet, located in 48 states, with a weighted average remaining lease term of 10.4 years. Approximately 99 percent of total Properties were leased as of December 31, 2022.
In cases where NNN's tenants do not provide coverage, or if a Property is vacant, NNN carries the necessary direct insurance coverage. Property Portfolio As of December 31, 2023, NNN owned 3,532 Properties in 49 states with an aggregate gross leasable area of approximately 35,966,000 square feet, and a weighted average remaining lease term of 10.1 years.
As of December 31, 2022, NNN had $2,505,000 of cash and cash equivalents and $933,800,000 was available for future borrowings under the Credit Facility. 6 As of December 31, 2022, NNN’s ratio of total debt to total gross assets (before accumulated depreciation and amortization) was approximately 40 percent and the ratio of secured debt to total gross assets was less than one percent.
As of December 31, 2023, NNN's ratio of total debt, none of which was secured debt, to total gross assets (before accumulated depreciation and amortization) was approximately 42 percent. The ratio of total debt to total market capitalization was approximately 36 percent.
NNN regularly monitors the status of impending natural disasters and the impact of such disasters on the Property Portfolio. In the substantial majority of leases, NNN’s tenants are required to carry full replacement cost coverage on all improvements located on the Properties.
NNN's form leases contain "green lease clauses" which NNN encourages tenants to accept during negotiations to require the tenants to report energy usage and emissions. Climate Preparedness. NNN regularly monitors the status of impending natural disasters and the impact of such disasters on the Property Portfolio.
These programs limit the use of resources and limit the impact of the use of NNN’s Properties on the environment, including, but not limited to, implementing green building and lighting standards, and recycling programs. NNN’s leases also typically require the tenants to fully comply with all environmental laws, rules and regulations, including any remediation requirements.
The majority of NNN's tenants are large companies with sophisticated conservation and sustainability programs designed to conserve environmental resources and limit the impact of the use of NNN's Properties on the environment through, among other initiatives, the implementation of green building and lighting standards, emission reduction programs and recycling programs.
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NNN has been the repeat recipient of numerous wellness awards, including the prestigious Cigna Well-Being Award. Community Service and Partnerships . NNN cares about the communities in which its associates live and work. NNN stands behind a commitment to improving education, strengthening neighborhoods, and encouraging volunteer service.
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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.
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Furthermore, NNN has in place a portfolio environmental insurance policy that covers substantially all of NNN’s Properties for certain environmental risks. 4 NNN’s form leases contain "green lease clauses" which require the tenants to report energy usage and emissions and NNN actively negotiates with tenants in all new acquisitions for their acceptance of green lease clauses. Climate Preparedness.
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As of December 31, 2023, NNN had $5,155,000 of cash, cash equivalents and restricted cash and $968,000,000 available for future borrowings under the Credit Facility. NNN may also fund liquidity requirements with new debt or equity issuances, although newly issued debt may be at higher interest rates than the rates on NNN's existing outstanding debt.
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Business Strategies and Policies The following is a discussion of NNN’s operating strategy and certain of its investment, financing and other policies.
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NNN has the ability to limit future property acquisitions and strategically increase property dispositions. NNN expects these sources of liquidity and the discretionary nature of its property acquisition funding needs will allow NNN to meet its financial obligations over the long term.
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Other Regulations, Rules and Laws State and local governmental entities regulate the use of the Properties.
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Associates are encouraged to volunteer on work days during work hours for these events.
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As of December 31, 2023, the weighted average remaining lease term of the Property Portfolio was approximately 10.1 years. The Properties are generally leased under triple-net leases, which require the tenant to pay all utilities and real estate taxes and assessments, to maintain the interior and exterior of the Property, and to carry property and liability insurance coverage.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAn epidemic or pandemic (such as the outbreak and worldwide spread of 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. 18 An epidemic or pandemic could have a material and adverse effect on or cause disruption to NNN’s business or financial condition, results of operations, cash flows and the market value and trading price of NNN's securities due to, among other factors: • A complete or partial closure of, or other operational issues with, NNN’s Property Portfolio as a result of government or tenant action; • The declines in or instability of the economy or financial markets may result in a recession or negatively impact consumer discretionary spending, which could adversely affect retailers and consumers; • The reduction of economic activity may severely impact NNN’s tenants' business operations, financial condition, liquidity and access to capital resources and may cause one or more of NNN’s tenants to be unable to meet their obligations to NNN in full, or at all, to default on their lease, or to otherwise seek modifications of such obligations; • The inability to access debt and equity capital on favorable terms, if at all, or a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect NNN’s access to capital necessary to fund business operations, pursue acquisition and development opportunities, refinance existing debt, reduce NNN’s ability to make cash distributions to its stockholders and increase NNN’s future interest expense; • A general decline in business activity and demand for real estate transactions would adversely affect NNN’s ability to successfully execute investment strategies or expand the Property Portfolio; • A significant reduction in NNN’s cash flows could impact NNN’s ability to continue paying cash dividends to NNN common and preferred stockholders at expected levels or at all; • The financial impact could negatively affect NNN’s future compliance with financial and other covenants of NNN’s Credit Facility and other debt instruments, and the failure to comply with such covenants could result in a default that accelerates the payment of such debt; and • The potential negative impact on the health of NNN’s associates or Board of Directors, particularly if a significant number are impacted, or the impact of government actions or restrictions, including stay-at-home orders, restricting access to NNN's headquarters located in Orlando, Florida, could result in a deterioration in NNN’s ability to ensure business continuity during a disruption.
Biggest changeAn epidemic or pandemic could have a material and adverse effect on or cause disruption to NNN's business or financial condition, results of operations, cash flows and the market value and trading price of NNN's securities due to, among other factors: • A complete or partial closure of, or other operational issues with, NNN's Property Portfolio as a result of government or tenant action; • The declines in or instability of the economy or financial markets may result in a recession or negatively impact consumer discretionary spending, which could adversely affect retailers and consumers; • The reduction of economic activity may severely impact NNN's tenants' business operations, financial condition, liquidity and access to capital resources and may cause one or more of NNN's tenants to be unable to meet their obligations to NNN in full, or at all, to default on their lease, or to otherwise seek modifications of such obligations; 20 • The inability to access debt and equity capital on favorable terms, if at all, or a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect NNN's access to capital necessary to fund business operations, pursue acquisition and development opportunities, refinance existing debt, reduce NNN's ability to make cash distributions to its stockholders and increase NNN's future interest expense; • A general decline in business activity and demand for real estate transactions would adversely affect NNN's ability to successfully execute investment strategies or expand the Property Portfolio; • A significant reduction in NNN's cash flows could impact NNN's ability to continue paying cash dividends to NNN stockholders at expected levels or at all; • The financial impact could negatively affect NNN's future compliance with financial and other covenants of NNN's Credit Facility and other debt instruments, and the failure to comply with such covenants could result in a default that accelerates the payment of such debt; and • The potential negative impact on the health of NNN's associates or Board of Directors, particularly if a significant number are impacted, or the impact of government actions or restrictions, including stay-at-home orders, restricting access to NNN's headquarters located in Orlando, Florida, could result in a deterioration in NNN's ability to ensure business continuity during a disruption.
In addition, increased leverage could increase the risk that NNN may default on its debt obligations. The amount of debt outstanding at any time could have important consequences to NNN’s stockholders.
In addition, increased leverage could increase the risk that NNN may default on its debt obligations. The amount of outstanding debt at any time could have important consequences to NNN's stockholders.
Further, disputes may develop with a co-venturer or partner over decisions affecting the property, joint venture or partnership that may result in litigation, arbitration or some other form of dispute resolution. Risks Related to Financing NNN’s Business NNN may be unable to obtain debt or equity capital on favorable terms, if at all.
Further, disputes may develop with a co-venturer or partner over decisions affecting the property, joint venture or partnership that may result in litigation, arbitration or some other form of dispute resolution. 14 Risks Related to Financing NNN's Business NNN may be unable to obtain debt or equity capital on favorable terms, if at all.
Mold and other bio-contaminants can produce airborne toxins, may cause a variety of health issues in individuals and must be remediated in accordance with applicable governmental laws, rules and regulations. As part of its due diligence process, NNN generally obtains an environmental site assessment for each Property it acquires.
Mold and other bio-contaminants can produce airborne toxins, may cause a variety of health issues in individuals and must be remediated in accordance with applicable governmental laws, rules and regulations. 17 As part of its due diligence process, NNN generally obtains an environmental site assessment for each property it acquires.
Unless entitled to relief under certain statutory provisions, NNN would also be disqualified from treatment as a REIT for the four taxable years following the year during which the qualification was lost. Compliance with REIT requirements, including distribution requirements, may limit NNN’s flexibility and may negatively affect NNN’s operating decisions.
Unless entitled to relief under certain statutory provisions, NNN would also be disqualified from treatment as a REIT for the four taxable years following the year during which the qualification was lost. 18 Compliance with REIT requirements, including distribution requirements, may limit NNN's flexibility and may negatively affect NNN's operating decisions.
For example, it could: • require NNN to dedicate a substantial portion of its cash flow from operations to payments on its debt, thereby reducing funds available for operations, real estate investments and other business opportunities that may arise in the future, • increase NNN’s vulnerability to general adverse economic and industry conditions, • limit NNN’s ability to obtain any additional financing it may need in the future for working capital, debt refinancing, capital expenditures, real estate investments, development or other general corporate purposes, • make it difficult to satisfy NNN’s debt service requirements, • limit NNN’s ability to pay dividends in cash on its outstanding common and preferred stock, • limit NNN’s flexibility in planning for, or reacting to, changes in its business and the factors that affect the profitability of its business, and • limit NNN’s flexibility in conducting its business, which may place NNN at a disadvantage compared to competitors with less debt or debt with less restrictive terms.
For example, it could: • require NNN to dedicate a substantial portion of its cash flow from operations to payments on its debt, thereby reducing funds available for operations, real estate investments and other business opportunities that may arise in the future, • increase NNN's vulnerability to general adverse economic and industry conditions, • limit NNN's ability to obtain any additional financing it may need in the future for working capital, debt refinancing, capital expenditures, real estate investments, development or other general corporate purposes, • make it difficult to satisfy NNN's debt service requirements, • limit NNN's ability to pay dividends in cash on its outstanding stock, • limit NNN's flexibility in planning for, or reacting to, changes in its business and the factors that affect the profitability of its business, and • limit NNN's flexibility in conducting its business, which may place NNN at a disadvantage compared to competitors with less debt or debt with less restrictive terms.
Additionally, an increase in the number of vacant properties would increase NNN's real estate expenses, including expenses associated with ongoing maintenance and repairs, utilities, property taxes, and property and liability insurance. The rapid development and fluidity of an epidemic or pandemic precludes any prediction as to the ultimate adverse impact on NNN.
Additionally, an increase in the number of vacant properties would increase NNN's real estate expenses, including expenses associated with ongoing maintenance and repairs, utilities, real estate taxes and assessments, and property and liability insurance. The rapid development and fluidity of an epidemic or pandemic precludes any prediction as to the ultimate adverse impact on NNN.
NNN may not desire to renew the environmental insurance policy in place upon expiration or a replacement policy may not be available at a reasonable cost, if at all. 16 Risks Related to – Tax Matters NNN’s failure to qualify as a REIT for federal income tax purposes could result in significant tax liability.
NNN may not desire to renew the environmental insurance policy in place upon expiration or a replacement policy may not be available at a reasonable cost, if at all. Risks Related to – Tax Matters NNN's failure to qualify as a REIT for federal income tax purposes could result in significant tax liability.
Capital that may be available may be materially more expensive or available under terms that are materially more restrictive which would have an adverse impact on NNN’s business, financial condition and results of operations. 13 The amount of debt NNN has and the restrictions imposed by that debt could adversely affect NNN’s business and financial condition.
Capital that may be available may be materially more expensive or available under terms that are materially more restrictive which would have an adverse impact on NNN's business, financial condition and results of operations. The amount of debt NNN has and the restrictions imposed by that debt could adversely affect NNN's business and financial condition.
These restrictions on transferability and ownership will not apply, however, if the Board of Directors determines that it is no longer in NNN’s best interest to continue to qualify as a REIT or that 17 compliance with the restrictions is no longer required in order for NNN to continue to so qualify as a REIT.
These restrictions on transferability and ownership will not apply, however, if the Board of Directors determines that it is no longer in NNN's best interest to continue to qualify as a REIT or that compliance with the restrictions is no longer required in order for NNN to continue to so qualify as a REIT.
Although NNN endeavors to monitor compliance by tenants with their lease obligations, NNN may not always be able to ascertain or forestall deterioration in the condition of a property or the financial circumstances of a tenant. Vacant properties or bankrupt tenants could adversely affect NNN’s business or financial condition.
Although NNN endeavors to monitor compliance by tenants with their lease obligations, NNN may not always be able to ascertain or forestall deterioration in the condition of a property or the financial circumstances of a tenant. 11 Bankrupt tenants or vacant Properties could adversely affect NNN's business or financial condition.
Any of these situations may delay or eliminate proceeds or cash flows NNN expects from these projects, which could have an adverse effect on NNN’s financial condition. NNN may not be able to dispose of properties consistent with its operating strategy.
Any of these situations may delay or eliminate proceeds or cash flows NNN expects from these projects, which could have an adverse effect on NNN's financial condition. 10 NNN may not be able to dispose of Properties consistent with its operating strategy.
NNN may not complete suitable property acquisitions or developments on advantageous terms, if at all, due to competition for such properties with others engaged in real estate investment activities or lack of properties for sale on terms deemed acceptable to NNN.
NNN may not complete suitable property acquisitions or developments on advantageous terms, if at all, due to competition for such properties with others engaged in real estate investment activities or a lack of properties for sale on terms deemed acceptable to NNN.
Potential consequences of challenging and volatile financial and economic conditions include: • the financial condition of NNN’s tenants may be adversely affected, which may result in tenant defaults under the leases due to bankruptcy, lack of liquidity, operational failures or for other reasons, • the ability to raise equity capital or borrow on terms and conditions that NNN finds acceptable may be limited or unavailable, which could reduce NNN’s ability to pursue acquisition and development opportunities and refinance existing debt, reduce NNN’s returns from acquisition and development activities, reduce NNN’s ability to make cash distributions to its stockholders and increase NNN’s future interest expense, • the recognition of impairment charges on or reduced values of the Properties or tenant receivables, may adversely affect NNN's results of operations, • reduced values of the Properties may limit NNN's ability to dispose of assets at attractive prices and reduce the availability of buyer financing, and • the value and liquidity of NNN’s short-term investments and cash deposits could be reduced as a result of (i) a deterioration of the financial condition of the institutions that hold NNN’s cash deposits or the institutions or assets in which NNN has made short-term investments, (ii) the dislocation of the markets for NNN’s short-term investments, (iii) increased volatility in market rates for such investments or (iv) other factors.
Potential consequences of challenging and volatile financial and economic conditions include: • the financial condition of NNN's tenants may be adversely affected, which may result in tenant defaults under the leases due to bankruptcy, lack of liquidity, operational failures or for other reasons, • the ability to raise equity capital or borrow on terms and conditions that NNN finds acceptable may be limited or unavailable, which could reduce NNN's ability to pursue acquisition and development opportunities and refinance existing debt, reduce NNN's returns from acquisition and development activities, reduce NNN's ability to make cash distributions to its stockholders and increase NNN's future interest expense, • the recognition of impairment charges on or reduced values of the Properties or tenant receivables, may adversely affect NNN's results of operations, • reduced values of the Properties may limit NNN's ability to dispose of assets at attractive prices and reduce the availability of buyer financing, and • the value and liquidity of NNN's short-term investments and cash deposits could be reduced as a result of (i) a deterioration of the financial condition of the institutions that hold NNN's cash deposits or the institutions or assets in which NNN has made short-term investments, (ii) the dislocation of the markets for NNN's short-term investments, (iii) increased volatility in market rates for such investments or (iv) other factors. 9 Loss of rent from tenants would reduce NNN's cash flow.
All of these factors could result in decreases in market rental rates and increases in vacancy rates, which could adversely affect NNN’s results of operations. 15 NNN’s real estate investments are illiquid. Because real estate investments are relatively illiquid, NNN’s ability to adjust the portfolio promptly in response to economic or other conditions is limited.
All of these factors could result in decreases in market rental rates and increases in vacancy rates, which could adversely affect NNN's results of operations. NNN's real estate investments are illiquid. Because real estate investments are relatively illiquid, NNN's ability to adjust the Property Portfolio promptly in response to economic or other conditions is limited.
Legislation could cause shares in non-REIT entities to be a more attractive investment to individual investors than shares in REITs, and could have an adverse effect on the value of NNN’s securities. 20 Item 1B. Unresol ved Staff Comments None.
Legislation could cause shares in non-REIT entities to be a more attractive investment to individual investors than shares in REITs, and could have an adverse effect on the value of NNN's securities. 22 Item 1B. Unresol ved Staff Comments None.
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 N NN . There may be known or unknown environmental liabilities associated with Properties owned or acquired in the future by NNN.
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. There may be known or unknown environmental liabilities associated with Properties owned or acquired in the future by NNN.
Additionally, NNN cannot assure that its Property Portfolio will expand at all, or if it will expand at any specified rate or to any specified size. In addition, investment in additional real estate assets is subject to a number of risks.
Additionally, NNN cannot ensure that its Property Portfolio will expand at all, or if it will expand at any specified rate or to any specified size. In addition, investment in additional real estate assets is subject to a number of risks.
Certain provisions of NNN’s leases or loan agreements may be unenforceable. NNN’s rights and obligations with respect to its leases, mortgage loans or other loans are governed by written agreements.
Certain provisions of NNN's leases or loan agreements may be unenforceable. NNN's rights and obligations with respect to its leases and loans are governed by written agreements.
As of December 31, 2022, NNN held mortgages receivable of $1,530,000, which represented less than one percent of total assets. If a borrower defaults on a mortgage or other loan made by NNN, and does not have sufficient assets to satisfy the loan, NNN may suffer a loss of principal and interest.
As of December 31, 2023, NNN held mortgages receivable of $1,002,000, which represented less than one percent of total assets. If a borrower defaults on a mortgage or other loan made by NNN, and does not have sufficient assets to satisfy the loan, NNN may suffer a loss of principal and interest.
A significant and extended disruption could damage NNN’s business or reputation and cause: • loss of revenues or tenant relationships, • unintended and/or unauthorized public disclosure or the misappropriation of proprietary, personal identifying and confidential information, and • NNN to incur significant expenses to address and remediate or otherwise resolve these kinds of issues.
A significant and extended disruption or other material cyber incident could damage NNN's business or reputation and cause: • loss of revenues or tenant relationships, • unintended and/or unauthorized public disclosure or the misappropriation of proprietary, personal identifying and confidential information, and • NNN to incur significant expenses to address and remediate or otherwise resolve these kinds of issues.
As of January 30, 2023, NNN had not been notified by any governmental authority of, nor is NNN’s management aware of, any non-compliance with the ADA that NNN’s management believes would have a material adverse effect on its business, financial position or results of operations.
As of January 31, 2024, NNN had not been notified by any governmental authority of, nor is NNN's management aware of, any non-compliance with the ADA that NNN's management believes would have a material adverse effect on its business, financial position or results of operations.
As of January 30, 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 that is currently in bankruptcy under Chapter 11 of the U.S. Bankruptcy Code.
As of January 31, 2024, 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 that is currently in bankruptcy under Chapter 11 of the U.S. Bankruptcy Code.
NNN may be unable to obtain capital on favorable terms, if at all, to further its business objectives or meet its existing obligations. Nearly all of NNN’s debt, including the Credit Facility, is subject to balloon principal payments due at maturity. These maturities range between 2023 and 2052.
NNN may be unable to obtain capital on favorable terms, if at all, to further its business objectives or meet its existing obligations. Nearly all of NNN's debt, including the Credit Facility, is subject to balloon principal payments due at maturity. These maturities range from 2024 to 2052.
Furthermore, NNN may have strict liability to governmental agencies or third parties as a result of the existence of hazardous materials on Properties, whether or not NNN knew about or caused such hazardous materials to exist. As of January 30, 2023, NNN had 71 Properties currently under some level of environmental remediation and/or monitoring.
Furthermore, NNN may have strict liability to governmental agencies or third parties as a result of the existence of hazardous materials on Properties, whether or not NNN knew about or caused such hazardous materials to exist. As of January 31, 2024, NNN had 68 Properties currently under some level of environmental remediation and/or monitoring.
NNN could be adversely impacted if this were to happen with respect to an asset or group of assets. 10 Competition from numerous other REITs, commercial developers, real estate limited partnerships and other investors may impede NNN’s ability to grow.
NNN could be adversely impacted if this were to happen with respect to an asset or group of assets. Competition from numerous other REITs, commercial developers, real estate limited partnerships and other investors or a lack of properties for sale may impede NNN's ability to grow.
As of December 31, 2022, approximately, • 54.1% of the Property Portfolio annual base rent is generated from tenants in five retail lines of trade: full-service and limited-service restaurants (18.0%), convenience stores (16.5%), automotive service (13.7%) and family entertainment centers (5.9%), • 19.5% of the Property Portfolio annual base rent is generated from five tenants: 7-Eleven (4.7%), Mister Car Wash (4.4%), Camping World (3.9%), LA Fitness (3.4%) and GPM Investments (convenience stores) (3.1%), and • 41.0% of the Property Portfolio annual base rent is generated from properties located in five states: Texas (17.1%), Florida (8.8%), Illinois (5.3%), Ohio (5.2%) and Georgia (4.6%).
As of December 31, 2023, approximately, • 55.6% of the Property Portfolio annual base rent is generated from tenants in five retail lines of trade: full-service and limited-service restaurants (17.2%), convenience stores (16.4%), automotive service (15.6%) and family entertainment centers (6.4%), • 19.0% of the Property Portfolio annual base rent is generated from five tenants: 7-Eleven (4.4%), Mister Car Wash (4.2%), Camping World (3.8%), Dave & Buster's (3.5%) and LA Fitness (3.1%), and • 41.0% of the Property Portfolio annual base rent is generated from properties located in five states: Texas (16.8%), Florida (9.4%), Illinois (5.2%), Ohio (4.9%) and Georgia (4.7%).
General Risks NNN's loss of key management personnel could adversely affect performance and the value of its securities. NNN is dependent on the efforts of its key management. The executive team, department heads, and senior managers average over 21 years of experience with NNN.
General Risks NNN's loss of key management personnel could adversely affect performance and the value of its securities. NNN is dependent on the efforts of its key management. As of January 31, 2024, the executive team, department heads and senior managers average over 19 years of experience with NNN.
NNN’s failure to comply with certain of its debt covenants could result in defaults that accelerate the payment under such debt and limit the dividends paid to NNN’s common and preferred stockholders which would likely have a material adverse impact on NNN’s financial condition and results of operations.
NNN's failure to comply with certain of its debt covenants could result in defaults that accelerate the payment under such debt and limit the dividends paid to NNN's stockholders which would likely have a material adverse impact on NNN's financial condition and results of operations. In addition, these defaults could impair its access to the debt and equity markets.
Although NNN and its service providers employ what NNN believes are adequate security, disaster recovery and other preventative and corrective measures, NNN’s security measures, taken as a whole, may not be sufficient for all possible situations and may be vulnerable to, among other things, fraud, hacking, employee error, system error, and faulty password management.
Although NNN and its service providers employ what NNN believes are adequate security, disaster recovery and other preventative and corrective measures, NNN's security measures, taken as a whole, may not be sufficient for all possible situations and may be vulnerable to, among other things, fraud, hacking, associate error, system error, vendors' use of generative artificial intelligence technologies, and faulty password management.
NNN generally will not be subject to federal income taxes on amounts distributed to stockholders, so long as it distributes 100 percent of its REIT taxable income and meets certain other requirements for qualifying as a REIT. For each of the years in the three-year period ended December 31, 2022, NNN believes it has qualified as a REIT.
NNN generally will not be subject to federal income taxes on taxable income it distributes to stockholders, providing it meets certain other requirements for qualifying as a REIT. For each of the years in the three-year period ended December 31, 2023, NNN believes it has qualified as a REIT.
Compliance with new laws or regulations, or stricter interpretation of existing laws, may require NNN, its tenants, or consumers to incur significant expenditures, impose significant liability, restrict or prohibit business activities and could cause a material adverse effect on NNN’s results of operation.
Compliance with new laws or regulations, or stricter interpretation of existing laws, may require NNN, its tenants, or consumers to incur significant expenditures, impose significant liability, restrict or prohibit business activities and could cause a material adverse effect on NNN's results of operation. 19 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.
As of December 31, 2022, NNN had outstanding debt, including mortgages payable of $9,964,000, total unsecured notes payable of $3,739,890,000 and $166,200,000 outstanding on the Credit Facility. NNN’s organizational documents do not limit the level or amount of debt that it may incur.
As of December 31, 2023, NNN had outstanding debt, including total unsecured notes payable of $4,228,544,000 and $132,000,000 outstanding on the Credit Facility. NNN's organizational documents do not limit the level or amount of debt that it may incur.
As a result, this tenant has the right to reject or affirm their leases with NNN. 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, governmental regulators, and other third parties.
Cybersecurity risks and cyber incidents as well as other significant disruptions of NNN's information technology networks and related systems and resources, or those of NNN's vendors or other third-parties, could adversely affect NNN's business, disrupt operations and expose NNN to liabilities to tenants, associates, capital providers, governmental regulators and other third parties.
In addition, these defaults could impair its access to the debt and equity markets. NNN’s ability to pay dividends in the future is subject to many factors. NNN’s ability to pay dividends may be impaired if any of the risks described in this section were to occur.
NNN's ability to pay dividends in the future is subject to many factors. NNN's ability to pay dividends may be impaired if any of the risks described in this section were to occur.
NNN cannot predict with certainty what tenants will want or what the impact will be on market rents. The default, financial distress, bankruptcy or liquidation of one or more of NNN’s tenants could cause substantial vacancies in the Property Portfolio. Vacancies reduce NNN’s revenues, increase property expenses and could decrease the value of each vacant Property.
The default, financial distress, bankruptcy or liquidation of one or more of NNN's tenants could cause substantial vacancies in the Property Portfolio. Vacancies reduce NNN's revenues, increase property expenses and could decrease the value of each vacant Property.
NNN cannot assure stockholders that any such refinancing, sale of assets or additional financing would be possible or, if possible, on terms and conditions, including but not limited to the interest rate, which NNN would find acceptable or would not result in a material decline in earnings.
NNN cannot assure stockholders that any such refinancing, sale of assets or additional financing would be possible or, if possible, on terms and conditions, including but not limited to the interest rate, which NNN would find acceptable or would not result in a material decline in earnings. 15 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.
Upon the expiration of a lease, the tenant may choose not to renew the lease and NNN may not be able to re-lease the vacant Property at a comparable lease rate.
Upon the expiration of a lease, the tenant may choose not to renew the lease and NNN may not be able to re-lease the vacant Property at a comparable lease rate. Furthermore, NNN may incur additional expenditures in connection with such renewal or re-leasing.
In addition, the costs of maintaining adequate protection against data security threats, based on considerations of their evolution, increasing sophistication, pervasiveness and frequency and/or government-mandated standards or obligations regarding protective efforts, could be material to NNN’s financial position, results of operations, cash flows, and the market price of NNN's common stock in a particular period or over various periods. 12 Future investment in international markets could subject NNN to additional risks.
In addition, the costs of maintaining adequate protection against data security threats, based on considerations of their evolution, increasing sophistication, pervasiveness and frequency and/or government-mandated standards or obligations regarding protective efforts, could be material to NNN's financial position, results of operations, cash flows, and the market price of NNN's common stock in a particular period or over various periods. 13 NNN relies upon cloud computing services to operate certain aspects of its business and any disruption could have an adverse effect on its financial condition and results of operations.
Loss of rent from tenants would reduce NNN’s cash flow. NNN's tenants encounter significant macroeconomic, governmental and competitive forces. Adverse changes in consumer spending or consumer preferences for particular goods, services or store based retailing could severely impact their ability to pay rent.
NNN's tenants encounter significant macroeconomic, governmental and competitive forces. Adverse changes in consumer spending or consumer preferences for particular goods, services or store-based retailing could severely impact their ability to pay rent. Shifts from in-store to online shopping could increase due to changing consumer shopping patterns as well as the increase in consumer adoption and use of mobile electronic devices.
NNN’s unsecured debt instruments contain various restrictive covenants which include, among others, provisions restricting NNN’s ability to: • incur or guarantee additional debt, • make certain distributions, investments and other restricted payments, • enter into transactions with certain affiliates, • create certain liens, • consolidate, merge or sell NNN’s assets, and • prepay debt. 14 NNN’s secured debt instruments generally contain customary covenants, including, among others, provisions: • requiring the maintenance of the property securing the debt, • restricting its ability to sell, assign or further encumber the properties securing the debt, • restricting its ability to incur additional debt on the property securing the debt, • restricting modifications to property improvements, • restricting its ability to amend or modify existing leases on the property securing the debt, and • establishing certain prepayment restrictions.
Secured debt instruments generally contain customary covenants, including, among others, provisions: • requiring the maintenance of the property securing the debt, • restricting its ability to sell, assign or further encumber the properties securing the debt, • restricting its ability to incur additional debt on the property securing the debt, • restricting modifications to property improvements, • restricting its ability to amend or modify existing leases on the property securing the debt, and • establishing certain prepayment restrictions.
Non-compliance with Title III of the Americans with Disabilities Act of 1990 could have an adverse effect on NNN's business and operating results. The Properties, as commercial facilities, are required to comply with the ADA. NNN's tenants will typically have primary responsibility for complying with the ADA, but NNN may incur costs if the tenant does not comply.
The Properties, as commercial facilities, are required to comply with the ADA. NNN's tenants will typically have primary responsibility for complying with the ADA, but NNN may incur costs if the tenant does not comply.
Furthermore, NNN may incur additional expenditures in connection with such renewal or re-leasing. 9 A significant portion of the source of the Property Portfolio annual base rent is concentrated in specific industry classifications, tenants and geographic locations.
A significant portion of the source of the Property Portfolio annual base rent is concentrated in specific industry classifications, tenants and geographic locations.
The consequences of armed conflict are unpredictable, and NNN may not be able to foresee events that could have an adverse effect on its business or be insured for such. 19 More generally, any of these events or threats of these events could cause consumer confidence and spending to decrease or result in increased volatility in the United States and worldwide financial markets and economies.
The United States is engaged in armed conflict, which could have an impact on these parties. The consequences of armed conflict are unpredictable, and NNN may not be able to foresee events that could have an adverse effect on its business or be insured for such.
Accordingly, NNN may be unable to anticipate these techniques or to implement adequate security barriers, disaster recovery or other preventative or corrective measures, and thus it is impossible for NNN to entirely counteract this risk or fully mitigate the harms after such an attack.
Accordingly, NNN may be unable to anticipate these techniques or to implement adequate security barriers, disaster recovery or other preventative or corrective measures, and thus it is impossible for NNN to entirely counteract this risk or fully mitigate the harms after such an attack. 12 NNN has implemented systems and processes intended to address ongoing and evolving cybersecurity risks, secure its information technology, applications and computer systems, and prevent unauthorized access to or loss of sensitive, confidential and personal data.
As part of NNN’s normal business activities, (i) NNN allows associates to perform some or all of their business activities remotely, and (ii) NNN collects and stores certain personal identifying and confidential information relating to its tenants, employees, vendors and suppliers, and (iii) maintains operational and financial information related to NNN’s business. 11 NNN faces risks associated with security breaches through cyber-attacks or cyber-intrusions, malware, computer viruses and malicious codes, ransomware, attachments to e-mail, unauthorized access attempts, denial of service attacks, phishing, social engineering, persons with access to systems inside NNN’s organization, and other significant disruptions of NNN’s information technology networks and related systems.
NNN faces risks associated with security breaches through cyber-attacks or cyber-intrusions, malware, computer viruses and malicious codes, ransomware, attachments to e-mail, unauthorized access attempts, denial of service attacks, phishing, social engineering, persons with access to systems inside NNN's organization, and other significant disruptions of NNN's information technology networks and related systems.
In addition, payment of NNN’s dividends depends upon NNN’s earnings, financial condition, maintenance of NNN’s REIT status and other factors as NNN’s Board of Directors may deem relevant from time to time. Risks Related to – Real Estate Ownership Owning real estate and indirect interests in real estate carries inherent risks.
In addition, payment of NNN's dividends depends upon NNN's earnings, financial condition, maintenance of NNN's REIT status and other factors as NNN's Board of Directors may deem relevant from time to time. Future issuances of NNN's equity securities could dilute the interest of NNN's common stockholders.
NNN uses information technology and other computer resources to carry out important operational activities and to maintain its business records.
NNN uses information technology and other computer resources to carry out important operational activities and to maintain its business records. This includes the use of third-party software, technologies, tools and a broad array of services and functions.
As of December 31, 2022, NNN owned 21 vacant, un-leased Properties, which accounted for approximately one percent of total Properties held in the Property Portfolio. NNN is actively marketing these Properties for sale or lease but may not be able to sell or lease these Properties on favorable terms or at all.
NNN is actively marketing these Properties for sale or lease but may not be able to sell or lease these Properties on favorable terms or at all.
They also could result in, or cause a deepening of, economic recession in the United States or abroad. Any of these occurrences could have an adverse impact on NNN’s financial condition or results of operations. Changes in accounting pronouncements could adversely impact NNN’s or NNN’s tenants’ reported financial performance.
Any of these occurrences could have an adverse impact on NNN's financial condition or results of operations. 21 Changes in accounting pronouncements could adversely impact NNN's or NNN's tenants' reported financial performance. Accounting policies and methods are fundamental to how NNN records and reports its financial condition and results of operations.
Shifts from in-store to online shopping could increase due to changing consumer shopping patterns as well as the increase in consumer adoption and use of mobile electronic devices. This expansion of e-commerce could have an adverse impact on NNN's tenants' ongoing viability and the size, type and location of space tenants lease in the future.
This expansion of e-commerce could have an adverse impact on NNN's tenants' ongoing viability and the size, type and location of space tenants lease in the future. NNN cannot predict with certainty what tenants will want or what the impact will be on market rents.
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NNN has implemented systems and processes intended to address ongoing and evolving cybersecurity risks, secure its information technology, applications and computer systems, and prevent unauthorized access to or loss of sensitive, confidential and personal data.
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This “Risk Factors” section contains references to NNN's “stockholders.” Unless expressly stated otherwise, the references represent NNN's common stock and any class or series of preferred stock which may be outstanding from time to time.
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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. As of December 31, 2022, NNN had approximately $3,916,054,000 of outstanding debt, of which approximately $9,964,000 was secured debt.
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The occurrence of a tenant bankruptcy or insolvency could diminish or eliminate the income NNN receives from its tenant. A bankruptcy court might authorize a tenant to terminate one or more of its leases with NNN.
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The United States is engaged in armed conflict, which could have an impact on these parties.
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If that happens, NNN's claim against the bankrupt tenant for unpaid future rent would be subject to statutory limitations that most likely would result in rent payments that would be substantially less than the remaining rent NNN is owed under the lease(s) or NNN may elect not to pursue claims against a tenant for a terminated lease(s).
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Accounting policies and methods are fundamental to how NNN records and reports its financial condition and results of operations.
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Any claims NNN has for unpaid past rent, may not be paid in full, or at all. Moreover, in the case of a tenant’s lease(s) that are not terminated as the result of its bankruptcy, NNN may be required or elect to reduce the rent payable under those leases or provide other concessions, reducing amounts NNN receives under such lease(s).
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As a result, tenant bankruptcies may have a material adverse effect on NNN's results of operations and financial condition. Any of these events could adversely affect NNN's cash flow from operations.
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As a result, this tenant has the right to reject or affirm their leases with NNN. As of December 31, 2023, NNN owned 18 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.
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As part of NNN's normal business activities, NNN (i) maintains operational and financial information related to NNN's business, (ii) collects, processes, stores and transmits certain personal identifying and confidential information relating to its tenants, associates and vendors, within NNN's systems and utilizing those of third-party providers, and (iii) allows associates to perform some or all of their business activities remotely.
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NNN's business depends upon cloud computing services provided by third-parties to provide a distributed computing infrastructure platform for certain NNN business operations, including data processing, storage capabilities, communications, disaster recovery and other services. Such third-party cloud computing services are vulnerable to damage or interruption from infrastructure changes, natural disasters, cybersecurity attacks, power outages, terrorist attacks and other events or acts.
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NNN expects that in the future it will experience interruptions, delays and outages in service and availability from its third-party cloud computing providers from time to time due to a variety of factors, including, but not limited to, infrastructure changes, human or software errors, website hosting disruptions and capacity constraints.
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Because NNN cannot easily switch its cloud computing operations to other third-party providers without significant costs, any disruption of or interference with its use of third-party cloud computing service providers could have a materially negative impact on NNN's business and results of operations. Future investment in international markets could subject NNN to additional risks.
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As of December 31, 2023, NNN had approximately $4,360,544,000 of outstanding debt, none of which was secured debt.
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NNN's unsecured debt instruments contain various restrictive covenants which include, among others, provisions restricting NNN's ability to: • incur or guarantee additional debt, • make certain distributions, investments and other restricted payments, • enter into transactions with certain affiliates, • create certain liens, • consolidate, merge or sell NNN's assets, and • prepay debt.
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Raising additional capital through the issuance of common or preferred equity securities can dilute or otherwise adversely affect the interests of holders of NNN's common stock and in the case of certain series of preferred equity securities, create a priority interest for holders of such series of preferred equity securities.
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The interests of NNN's common stockholders could also be diluted by the issuance of shares of common stock pursuant to NNN's performance incentive plan. 16 Risks Related to – Real Estate Ownership Owning real estate and indirect interests in real estate carries inherent risks.
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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.
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More generally, any of these events or threats of these events could cause consumer confidence and spending to decrease or result in increased volatility in the United States and worldwide financial markets and economies. They also could result in, or cause a deepening of, economic recession in the United States or abroad.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings In the ordinary course of its business, NNN is a party to various legal actions that management believes are routine in nature and incidental to the operation of the business of NNN. Management does not believe that any of these proceedings are material. Item 4. Mine Safe ty Disclosures None. 21 PAR T II
Biggest changeItem 3. Legal Proceedings In the ordinary course of its business, NNN is a party to various legal actions that management believes are routine in nature and incidental to the operation of the business of NNN. Management does not believe that any of these proceedings are material. Item 4. Mine Safe ty Disclosures None. 24 PAR T II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSet forth below is a line graph comparing the cumulative total stockholder return on NNN’s common stock, based on the market price of the common stock and assuming reinvestment of dividends, with the FTSE National Association of Real Estate Investment Trusts Equity Index (“FNER”) and the S&P 500 Index (“S&P”) for the five-year period commencing December 31, 2017 and ending December 31, 2022.
Biggest changeMarket for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The common stock of NNN currently is traded on the NYSE under the symbol “NNN.” Performance Graphs Set forth below is a line graph comparing the cumulative total stockholder return on NNN's common stock, based on the market price of the common stock and assuming reinvestment of dividends, with the FTSE National Association of Real Estate Investment Trusts Equity Index (“FNER”) and the S&P 500 Index (“S&P 500”) for the five-year period commencing December 31, 2018 and ending December 31, 2023.
Many of NNN's shares of common stock are held by brokers and institutions on behalf of stockholders, NNN is unable to estimate the total number of stockholders represented by these record holders. Securities Authorized for Issuance Under Equity Compensation Plans. None. Sale of Unregistered Securities. None. Issuer Purchases of Equity Securities. None. Item 6. [Reserved] 23
Many of NNN's shares of common stock are held by brokers and institutions on behalf of stockholders, NNN is unable to estimate the total number of stockholders represented by these record holders. 26 Securities Authorized for Issuance Under Equity Compensation Plans None. Sale of Unregistered Securities None. Issuer Purchases of Equity Securities None. Item 6. [Reserved] 27
Comparison to Five-Year Cumulative Total Return 22 Set forth below is a line graph comparing the cumulative total stockholder return on NNN’s common stock, based on the market price of the common stock and assuming reinvestment of dividends, with the FNER and the S&P for the fifteen-year period commencing December 31, 2007 and ending December 31, 2022.
Comparison to Five-Year Cumulative Total Return 25 Set forth below is a line graph comparing the cumulative total stockholder return on NNN's common stock, based on the market price of the common stock and assuming reinvestment of dividends, with the FNER and the S&P 500 for the fifteen-year period commencing December 31, 2008 and ending December 31, 2023.
The graph assumes an investment of $100 on December 31, 2017.
The graph assumes an investment of $100 on December 31, 2018.
NNN intends to pay regular quarterly dividends to its stockholders, although all future distributions will be declared and paid at the discretion of the Board of Directors and will depend upon cash generated by operating activities, NNN’s financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Directors deems relevant.
Comparison to Fifteen-Year Cumulative Total Return Dividends NNN intends to pay regular quarterly dividends to its stockholders, although all future distributions will be declared and paid at the discretion of the Board of Directors and will depend upon cash generated by operating activities, NNN's financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, and such other factors as the Board of Directors deems relevant.
In January 2023, NNN declared dividends payable to its stockholders of $99,401,000, or $0.550 per share, of common stock. Holders. On January 30, 2023, there were 1,562 registered holders of record of NNN's common stock.
In January 2024, NNN declared dividends payable to its stockholders of $102,683,000, or $0.5650 per share, of common stock. Holders On January 31, 2024, there were 1,509 registered holders of record of NNN's common stock.
The graph assumes an investment of $100 on December 31, 2007. Comparison to Fifteen-Year Cumulative Total Return Dividends.
The graph assumes an investment of $100 on December 31, 2008.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information. The common stock of NNN currently is traded on the NYSE under the symbol “NNN.” Performance Graphs.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeMaterial 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.
Biggest changeNNN's financing activities for the year ended December 31, 2023, included the following significant transactions: • $34,200,000 in net repayments of NNN's Credit Facility, • $483,930,000 in net proceeds from the issuance of the 5.600% notes payable due in October 2033, • $28,292,000 from the issuance of 650,135 shares of common stock in connection with the at-the-market equity program ("ATM"), • $3,082,000 from the issuance of 76,229 shares of common stock in connection with the Dividend Reinvestment and Stock Purchase Plan (“DRIP”), • $404,458,000 in dividends paid to common stockholders, and • $9,774,000 payment in April for the repayment of the remaining mortgages payable principal. 37 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.
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.
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.
Restaurants – limited service 8.9% 9.4% 9.7% 5. Family entertainment centers 5.9% 5.9% 5.9% 6. Health and fitness 4.9% 5.2% 5.3% 7. Theaters 4.3% 4.5% 4.4% 8. Recreational vehicle dealers, parts and accessories 4.1% 3.9% 3.5% 9. Equipment rental 3.1% 3.2% 2.6% 10. Automotive parts 2.6% 3.0% 3.1% 11. Wholesale clubs 2.6% 2.5% 2.6% 12.
Restaurants – limited service 8.5% 8.9% 9.4% 5. Family entertainment centers 6.4% 5.9% 5.9% 6. Recreational vehicle dealers, parts and accessories 4.6% 4.1% 3.9% 7. Health and fitness 4.5% 4.9% 5.2% 8. Theaters 4.1% 4.3% 4.5% 9. Equipment rental 3.0% 3.1% 3.2% 10. Wholesale clubs 2.5% 2.6% 2.5% 11. Automotive parts 2.5% 2.6% 3.0% 12.
Drug stores 2.6% 1.3% 1.5% 13. Home improvement 2.3% 2.5% 2.6% 14. Furniture 2.3% 1.7% 1.7% 15. Medical service providers 1.9% 2.0% 2.2% 16. General merchandise 1.6% 1.7% 1.7% 17. Consumer electronics 1.4% 1.5% 1.5% 18. Home furnishings 1.4% 1.5% 1.6% 19. Travel plazas 1.4% 1.5% 1.5% 20.
Drug stores 2.4% 2.6% 1.3% 13. Home improvement 2.2% 2.3% 2.5% 14. Furniture 2.0% 2.3% 1.7% 15. Medical service providers 1.7% 1.9% 2.0% 16. General merchandise 1.4% 1.6% 1.7% 17. Consumer electronics 1.4% 1.4% 1.5% 18. Home furnishings 1.3% 1.4% 1.5% 19. Travel plazas 1.3% 1.4% 1.5% 20.
(2) The amount reported in accumulated other comprehensive income will be reclassified to interest expense as interest payments are made on the related notes payable. Each series of notes represents senior, unsecured obligations of NNN and is subordinated to all secured debt of NNN.
(2) The amount reported in accumulated other comprehensive income will be reclassified to interest expense as interest payments are made on the related notes payable. Each series of the notes represents senior, unsecured obligations of NNN and is subordinated to all secured debt of NNN.
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 26 properties leased to tenants in bankruptcy.
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.
In the event that NNN violates any of these restrictive financial covenants, it could cause the debt under the Credit Facility to be accelerated and may impair NNN’s access to the debt and equity markets and limit NNN’s ability to pay dividends to its common and preferred stockholders, each of which would likely have a material adverse impact on NNN’s financial condition and results of operations.
In the event that NNN violates any of these restrictive financial covenants, it could cause the debt under the Credit Facility to be accelerated and may impair NNN's access to the debt and equity markets and limit NNN's ability to pay dividends to its stockholders, each of which would likely have a material adverse impact on NNN's financial condition and results of operations.
In accordance with the terms of the Credit Facility, NNN is required to meet certain restrictive financial covenants, which, among other things, require NNN to maintain certain (i) leverage ratios, (ii) debt service coverage, (iii) cash flow coverage, and (iv) investment limitations. At December 31, 2022, NNN was in compliance with those covenants.
In accordance with the terms of the Credit Facility, NNN is required to meet certain restrictive financial covenants, which, among other things, require NNN to maintain certain (i) leverage ratios, (ii) debt service coverage, (iii) cash flow coverage, and (iv) investment limitations. At December 31, 2023, NNN was in compliance with those covenants.
The excess carrying amount of the Series F Preferred Stock redeemed over the cash paid to redeem the Series F Preferred Stock was $10,897,000, representing issuance costs which is reflected as a reduction to earnings attributable to common stockholders. As of December 31, 2022, NNN had no outstanding shares of preferred stock. At-The-Market Offerings.
The excess carrying amount of the Series F Preferred Stock redeemed over the cash paid to redeem the Series F Preferred Stock was $10,897,000, representing issuance costs which is reflected as a reduction to earnings attributable to common stockholders. As of December 31, 2023, NNN had no outstanding shares of preferred stock. At-The-Market Offerings.
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 December 31, 2022, NNN was in compliance with those covenants.
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 December 31, 2023, NNN was in compliance with those covenants.
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.
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 metrics and profitability measures, industry trends and industry performance compared to that of NNN. NNN evaluates the creditworthiness of its significant current and prospective tenants.
(2) The note discounts are amortized to interest expense over the respective term of each debt obligation using the effective interest method. (3) Includes the effects of the discount at issuance. (4) The aggregate principal balance of the unsecured note maturities for the next five years is $1,500,000.
(2) The note discounts are amortized to interest expense over the respective term of each debt obligation using the effective interest method. (3) Includes the effects of the discount at issuance. (4) The aggregate principal balance of the unsecured note maturities for the next five years is $1,900,000.
Changes in cash for investing activities are primarily attributable to 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.
Changes in cash for investing activities are primarily attributable to acquisitions and dispositions of Properties as discussed in "Results of Operations - Property Analysis." NNN typically uses cash on hand, borrowings from its Credit Facility or proceeds from the sale of Properties to fund the acquisition of its Properties. Financing Activities.
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.
In February 2021, NNN filed a shelf registration statement that was automatically effective with the Commission for a term of three years, 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.
Refer to Note 1 of the December 31, 2022, Consolidated Financial Statements for a summary and the anticipated impact of each accounting pronouncement on NNN's financial position and results of operations. Results of Operations Property Analysis General.
Refer to Note 1 of the December 31, 2023, Consolidated Financial Statements for a summary and the anticipated impact of each accounting pronouncement on NNN's financial position and results of operations. Results of Operations Property Analysis General.
The change in cash provided by operations for the years ended December 31, 2022, 2021 and 2020, 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. 33 Investing Activities.
The change in cash provided by operations for the years ended December 31, 2023, 2022 and 2021, 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.
A number of NNN’s tenants experienced temporary closures of their operations which resulted in the continued loss of revenue and challenged their ability to pay rent. Certain of these NNN tenants requested adjustments to their lease terms during this pandemic.
Risk Factors." A number of NNN's tenants experienced temporary closures of their operations which resulted in the loss of revenue and challenged their ability to pay rent. Certain of these NNN tenants requested adjustments to their lease terms during this pandemic.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This section generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Risk Factors." 32 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 debt; and (v) other investments. Financing Strategy.
Risk Factors." 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 construction commitments, (iii) capital expenditures, (iv) payment of principal and interest on its outstanding debt, and (v) other investments. Financing Strategy.
Cash provided by operating activities represents cash received primarily from Rental Revenues 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.
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 year presented.
Automobile auctions, wholesale 1.3% 1.3% 1.1% Other 8.1% 7.4% 8.5% 100.0% 100.0% 100.0% (1) Based on annualized base rent for all leases in place as of December 31 of the respective year. 28 The following table summarizes the diversification of the Property Portfolio by state as of December 31, 2022: State # of Properties % of Annual Base Rent (1) 1.
Automobile auctions, wholesale 1.1% 1.3% 1.3% Other 8.4% 8.1% 7.4% 100.0% 100.0% 100.0% (1) Based on annualized base rent for all leases in place as of December 31 of the respective year. The following table summarizes the diversification of the Property Portfolio by state as of December 31, 2023: State # of Properties % of Annual Base Rent (1) 1.
Impact of Inflation NNN’s leases typically contain provisions to mitigate the adverse impact of inflation on NNN’s results of operations. Tenant leases generally provide for limited increases in rent as a result of fixed increases, capped increases in the CPI, and/or, to a lesser extent, increases in the tenant’s sales volume.
Impact of Inflation NNN's leases typically contain provisions to mitigate the adverse impact of inflation on NNN's results of operations. Tenant leases generally provide for limited increases in rent as a result of fixed increases, capped increases in the Consumer Price Index, and/or, to a lesser extent, increases in the tenant's sales volume.
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. Impairment – Real Estate.
On a quarterly basis, the Company evaluates its Properties for held for sale classification based on specific criteria as outlined in FASB ASC Topic 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.
The final value relies upon ranking comparable properties' attributes from most similar to least similar. 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.
The final value relies upon ranking comparable properties' attributes from most to least similar. Lease Accounting. NNN records its leases on the Property Portfolio in accordance with FASB ASC Topic 842, Leases ("ASC 842"). In addition, NNN records right-of-use assets and operating lease liabilities as lessee under operating leases in accordance with ASC 842.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this annual report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Commission on February 9, 2022.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this annual report on Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission ("Commission" or "SEC") on February 9, 2023.
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.
Typically, the Properties are leased under long-term triple net leases, which require the tenant to pay all real estate taxes and assessments, utilities, to maintain the interior and exterior of the Property, and to carry property and liability insurance coverage.
NNN entered into rent deferral lease amendments with certain tenants, for an aggregate $4,758,000 and $52,019,000 of rent originally due for the years ending December 31, 2021 and 2020, respectively, which require the deferred rents to be repaid at a later time during the lease term.
NNN entered into rent deferral lease amendments with certain tenants, for an aggregate $4,722,000 and $51,723,000 of rent originally due for the years ending December 31, 2021 and 2020, respectively, which require the deferred rents to be repaid at a later time during the lease term.
(2) Interest calculation on mortgage and notes payable based on stated rate of the principal amount. Property Construction. NNN has committed to fund construction of 19 Properties. The improvements of such Properties are estimated to be completed within 12 months.
(2) Interest calculation on notes payable based on stated rate of the principal amount. Property Construction. NNN has committed to fund construction of 53 Properties. The improvements of such Properties are estimated to be completed within 12 to 18 months.
As of December 31, 2022, NNN had no outstanding shares of preferred stock. 35 C apital 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.
(See "Capital Structure – Preferred Stock"). As of December 31, 2023, NNN had no outstanding shares of preferred stock. 39 C apital Structure NNN has used, and expects to use in the future, various forms of debt and equity securities primarily to fund property acquisitions and construction on its Properties and to pay down or refinance its outstanding debt.
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.
NNN's capital resources have and will continue to include, if available (i) proceeds from issuing debt or equity in the capital markets; (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.
Each of NNN’s outstanding series of unsecured notes is summarized in the table below (dollars in thousands): Notes (1) Issue Date Principal Discount (2) Net Price Stated Rate Effective Rate (3) Maturity Date 2024 May 2014 $ 350,000 $ 707 $ 349,293 3.900% 3.924% June 2024 (4) 2025 October 2015 400,000 964 399,036 4.000% 4.029% November 2025 (4) 2026 December 2016 350,000 3,860 346,140 3.600% 3.733% December 2026 (4) 2027 September 2017 400,000 1,628 398,372 3.500% 3.548% October 2027 (4) 2028 September 2018 400,000 2,848 397,152 4.300% 4.388% October 2028 2030 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 September 2021 450,000 10,422 439,578 3.000% 3.118% April 2052 (1) The proceeds from the note issuances were used to pay down outstanding debt of NNN’s Credit Facility, fund future property acquisitions and for general corporate purposes.
Each of NNN's outstanding series of unsecured notes is summarized in the table below (dollars in thousands): Notes (1) Issue Date Principal Discount (2) Net Price Stated Rate Effective Rate (3) Maturity Date 2024 May 2014 $ 350,000 $ 707 $ 349,293 3.900% 3.924% June 2024 (4)(5) 2025 October 2015 400,000 964 399,036 4.000% 4.029% November 2025 (4) 2026 December 2016 350,000 3,860 346,140 3.600% 3.733% December 2026 (4) 2027 September 2017 400,000 1,628 398,372 3.500% 3.548% October 2027 (4) 2028 September 2018 400,000 2,848 397,152 4.300% 4.388% October 2028 (4) 2030 March 2020 400,000 1,288 398,712 2.500% 2.536% April 2030 2033 August 2023 500,000 11,620 488,380 5.600% 5.905% October 2033 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 September 2021 450,000 10,422 439,578 3.000% 3.118% April 2052 (1) The proceeds from each note issuance were used to (i) pay down the outstanding balance on NNN's Credit Facility, (ii) redeem notes payable prior to maturity, (iii) redeem outstanding preferred stock, (iv) fund future property acquisitions, and/or (v) for general corporate purposes.
(2) Approximate square feet. 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 2022 2021 2020 1. Convenience stores 16.5% 17.9% 18.2% 2. Automotive service 13.7% 12.3% 10.3% 3. Restaurants – full service 9.1% 9.8% 10.5% 4.
(2) Square feet. 32 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 2023 2022 2021 1. Convenience stores 16.4% 16.5% 17.9% 2. Automotive service 15.6% 13.7% 12.3% 3. Restaurants – full service 8.7% 9.1% 9.8% 4.
NNN’s failure to comply with certain of its debt covenants could result in defaults that accelerate the payment under such debt and limit the dividends paid to NNN’s common and preferred stockholders which would likely have a material adverse impact on NNN’s financial condition and results of operations.
NNN's failure to comply with certain of its debt covenants could result in defaults that accelerate the payment under such debt and limit the dividends paid to NNN's stockholders which would likely have a material adverse impact on NNN's financial condition and results of operations. In addition, these defaults could impair its access to the debt and equity markets.
The following table summarizes the Property acquisitions for each of the years ended December 31 (dollars in thousands): 2022 2021 2020 Acquisitions: Number of Properties 223 156 63 Gross leasable area (square feet) (1) 2,629,000 1,341,000 449,000 Cap rate (2) 6.4 % 6.5 % 6.5 % Total dollars invested (3) $ 847,747 $ 555,415 $ 179,967 (1) Includes additional square footage from completed construction on existing Properties.
The following table summarizes the Property acquisitions for each of the years ended December 31 (dollars in thousands): 2023 2022 2021 Acquisitions: Number of Properties 165 223 156 Gross leasable area (square feet) (1) 1,281,000 2,629,000 1,341,000 Cap rate (2) 7.3 % 6.4 % 6.5 % Total dollars invested (3) $ 819,710 $ 847,747 $ 555,415 (1) Includes additional square footage from completed construction on existing Properties.
The term "NNN" or the "Company" refers to National Retail Properties, Inc. and all of its consolidated subsidiaries. NNN may elect to treat certain subsidiaries as taxable real estate investment trust subsidiaries, ("TRS").
The term "NNN" or the "Company" refers to NNN REIT, Inc. and all of its consolidated subsidiaries. NNN may elect to treat certain of its subsidiaries as taxable real estate investment trust subsidiaries ("TRS"). Effective May 1, 2023, National Retail Properties, Inc. changed its name to NNN REIT, Inc.
Mortgages Payable. As of December 31, 2022 and 2021, NNN had mortgages payable, including unamortized premium and net of unamortized debt costs, of $9,964,000 and $10,697,000 respectively. The mortgages payable had an interest rate of 5.23% and matures July 2023.
Mortgages Payable. As of December 31, 2022, NNN had mortgages payable, including unamortized premium and net of unamortized debt costs, of $9,964,000. The mortgages payable had an interest rate of 5.23% and matured July 2023.
Real estate expenses decreased in amount and as a percentage of total revenues for the year ended December 31, 2022, as compared to the same period in 2021. NNN focuses on real estate expenses, net of reimbursements from tenants. NNN's net real estate expenses for the years ended December 31, 2022 and 2021 were $8,479,000 and $9,720,000, respectively.
Real estate expenses increased in amount and remained consistent as a percentage of revenues for the year ended December 31, 2023, as compared to the same period in 2022. NNN focuses on real estate expenses, net of reimbursements from tenants. NNN's net real estate expenses for the years ended December 31, 2023 and 2022 were $9,615,000 and $8,479,000, respectively.
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. 25 Purchase Accounting for Acquisition of Real Estate .
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, third-party costs and other miscellaneous costs incurred during the development period until the project is substantially complete and available for occupancy.
On January 13, 2023, NNN declared a dividend of $0.550 per share, payable February 15, 2023, to its common stockholders of record as of January 31, 2023. Preferred Stock Distributions.
On January 16, 2024, NNN declared a dividend of $0.5650 per share, payable February 15, 2024, to its common stockholders of record as of January 31, 2024. Preferred Stock Distributions.
As of December 31, 2022, NNN had $2,505,000 of cash and cash equivalents and $933,800,000 was 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.
As of December 31, 2023, NNN had $5,155,000 of cash, cash equivalents and restricted cash and $968,000,000 available for future borrowings under the Credit Facility. NNN may also fund liquidity requirements with new debt or equity issuances, although newly issued debt may be at higher interest rates than the rates on NNN's existing outstanding debt.
The following table summarizes the Properties sold by NNN for each of the years ended December 31 (dollars in thousands): 2022 2021 2020 Number of properties 33 74 38 Gross leasable area (square feet) 311,000 1,015,000 425,000 Net sales proceeds $ 65,216 $ 122,018 $ 54,488 Net gain on disposition of real estate $ 17,443 $ 23,094 $ 16,238 Cap rate (1) 5.9 % 7.4 % 6.1 % (1) The cap rate is a weighted average, calculated as the cash annual base rent dividend by the total sale price of the properties.
The following table summarizes the properties sold by NNN for each of the years ended December 31 (dollars in thousands): 2023 2022 2021 Number of properties 45 33 74 Gross leasable area (square feet) 293,000 311,000 1,015,000 Net sales proceeds $ 115,716 $ 65,216 $ 122,018 Net gain on disposition of real estate $ 47,485 $ 17,443 $ 23,094 Cap rate (1) 5.9 % 5.9 % 7.4 % (1) The cap rate is a weighted average of properties occupied at disposition, calculated as the cash annual base rent dividend by the total sales price of the properties.
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.
NNN typically funds Property acquisitions either through borrowings under NNN's unsecured revolving credit facility (the "Credit Facility"), by issuing its debt or equity securities in the capital markets, with undistributed funds from operations or with proceeds from the sale of Properties. Property Dispositions.
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 Consolidated Balance Sheet.
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 Consolidated Balance Sheet.
Under NNN's shelf registration statement, NNN has established an ATM which allows NNN to sell shares of common stock from time to time.
NNN has established an ATM which allows NNN to sell shares of common stock from time to time.
The following table outlines the rent deferred and corresponding scheduled repayment of the rent deferral lease amendments executed as of December 31, 2022 (dollars in thousands): Deferred Scheduled Repayment Accrual Basis Cash Basis Total % of Total Accrual Basis Cash Basis Total % of Total Cumulative Total 2020 $ 33,594 $ 18,425 $ 52,019 91.7 % $ 3,239 $ 20 $ 3,259 5.7 % 5.7 % 2021 990 3,768 4,758 8.3 % 25,935 5,841 31,776 56.0 % 61.7 % 2022 — — — — 5,391 9,135 14,526 25.6 % 87.3 % 2023 — — — — 19 3,334 3,353 5.9 % 93.2 % 2024 — — — — — 1,932 1,932 3.4 % 96.6 % 2025 — — — — — 1,931 1,931 3.4 % 100.0 % $ 34,584 $ 22,193 $ 56,777 100.0 % $ 34,584 $ 22,193 $ 56,777 100.0 % While NNN's rent collections have returned to pre-pandemic levels, NNN's operation and those of NNN's tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
The following table outlines the rent deferred and corresponding scheduled repayment of the rent deferral lease amendments executed as of December 31, 2023 (dollars in thousands): Deferred Scheduled Repayment Accrual Basis Cash Basis Total % of Total Accrual Basis Cash Basis Total % of Total Cumulative Total 2020 $ 33,594 $ 18,129 $ 51,723 91.6 % $ 3,239 $ 20 $ 3,259 5.8 % 5.8 % 2021 990 3,732 4,722 8.4 % 25,935 5,841 31,776 56.3 % 62.1 % 2022 — — — — 5,391 9,087 14,478 25.7 % 87.8 % 2023 — — — — 19 3,105 3,124 5.5 % 93.3 % 2024 — — — — — 1,904 1,904 3.3 % 96.6 % 2025 — — — — — 1,904 1,904 3.4 % 100.0 % $ 34,584 $ 21,861 $ 56,445 100.0 % $ 34,584 $ 21,861 $ 56,445 100.0 % While NNN's rent collections have returned to pre-pandemic levels, NNN's operation and those of NNN's tenants will depend on future developments, which are highly uncertain and cannot be predicted with high confidence.
NNN owned 3,411 Properties with an aggregate gross leasable area of approximately 35,010,000 square feet, located in 48 states, with a weighted average remaining lease term of 10.4 years as of December 31, 2022. Approximately 99 percent of the Properties were leased as of December 31, 2022.
As of December 31, 2023, NNN owned 3,532 Properties in 49 states, with an aggregate gross leasable area of approximately 35,966,000 square feet, and a weighted average remaining lease term of 10.1 years. Approximately 99 percent of the Properties were leased as of December 31, 2023.
The table below summarizes NNN’s cash flows for each of the years ended December 31 (dollars in thousands): 2022 2021 2020 Cash, cash equivalents and restricted cash: Provided by operating activities $ 578,355 $ 568,425 $ 450,194 Used in investing activities (777,631 ) (432,177 ) (142,816 ) Provided by (used in) financing activities 34,732 (232,162 ) (41,254 ) Increase (decrease) in cash, cash equivalents and restricted cash (164,544 ) (95,914 ) 266,124 Cash, cash equivalents and restricted cash at the beginning of the year 171,322 267,236 1,112 Cash, cash equivalents and restricted cash at the end of the year $ 6,778 $ 171,322 $ 267,236 Cash flow activities include: Operating Activities.
The table below summarizes NNN's cash flows for each of the years ended December 31 (dollars in thousands): 2023 2022 2021 Cash, cash equivalents and restricted cash: Provided by operating activities $ 612,410 $ 578,355 $ 568,425 Used in investing activities (680,660 ) (777,631 ) (432,177 ) Provided by (used in) financing activities 66,627 34,732 (232,162 ) Decrease in cash, cash equivalents and restricted cash (1,623 ) (164,544 ) (95,914 ) Cash, cash equivalents and restricted cash at the beginning of the year 6,778 171,322 267,236 Cash, cash equivalents and restricted cash at the end of the year $ 5,155 $ 6,778 $ 171,322 Cash flow activities include: Operating Activities.
As of December 31, 2022, an aggregate of approximately $49,561,000 or 87 percent of the deferred rent has been repaid to NNN. The remaining deferred rents are expected to be repaid and coming due periodically by December 31, 2025.
As of December 31, 2023, an aggregate of approximately $52,637,000 or 93 percent of the deferred rent has been repaid to NNN. The remaining deferred rents are expected to be repaid as due periodically by December 31, 2025.
NNN generally monitors the financial performance of its significant tenants on an ongoing basis. Common Stock 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.
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.
Comparison of Revenues – 2022 versus 2021 Rental Income. Rental income increased for the year ended December 31, 2022, as compared to the same period in 2021.
Rental Income. Rental income increased for the year ended December 31, 2023, as compared to the same period in 2022.
The following summarizes NNN's revenues for each of the years ended December 31 (dollars in thousands): 2022 2021 2020 2022 Versus 2021 2021 Versus 2020 Rental Revenues (1) $ 753,816 $ 705,194 $ 640,754 6.9 % 10.1 % Real estate expense reimbursement from tenants 17,802 18,665 18,039 (4.6 )% 3.5 % Rental income 771,618 723,859 658,793 6.6 % 9.9 % Interest and other income from real estate transactions 1,435 2,548 1,888 (43.7 )% 35.0 % Total revenues $ 773,053 $ 726,407 $ 660,681 6.4 % 9.9 % (1) Includes rental income from operating leases, earned income from direct financing leases and percentage rent ("Rental Revenues").
Analysis of Revenues The following summarizes NNN's revenues for each of the years ended December 31 (dollars in thousands): 2023 2022 2021 2023 Versus 2022 2022 Versus 2021 Rental Revenues (1) $ 807,327 $ 753,816 $ 705,194 7.1 % 6.9 % Real estate expense reimbursement from tenants 18,763 17,802 18,665 5.4 % (4.6 )% Rental income 826,090 771,618 723,859 7.1 % 6.6 % Interest and other income from real estate transactions 2,021 1,435 2,548 40.8 % (43.7 )% Total revenues $ 828,111 $ 773,053 $ 726,407 7.1 % 6.4 % (1) Includes rental income from operating leases, earned income from direct financing leases and percentage rent ("Rental Revenues").
Certain financial agreements to which NNN is a party contain covenants that limit NNN’s ability to incur additional debt under certain circumstances. The organizational documents of NNN do not limit the absolute amount or percentage of debt that NNN may incur. Additionally, NNN may change its financing strategy. Cash Flows.
The ratio of total debt to total market capitalization was approximately 36 percent. Certain financial agreements to which NNN is a party contain covenants that limit NNN's ability to incur additional debt under certain circumstances. The organizational documents of NNN do not limit the absolute amount or percentage of debt that NNN may incur. Cash Flows.
In October 2021, NNN redeemed all outstanding depositary shares (13,800,000) representing interests in its 5.200% Series F Preferred Stock. The Series F Preferred Stock was redeemed at $25.00 per depositary share ($345,000,000), plus all accrued and unpaid dividends through, but not including, the redemption date, for an aggregate redemption price of $25.111944 per depositary share.
The Series F Preferred Stock was redeemed at $25.00 per depositary share ($345,000,000), plus all accrued and unpaid dividends through, but not including, the redemption date, for an aggregate redemption price of $25.111944 per depositary share.
General and administrative expenses decreased in amount and as a percentage of total revenues for the year ended December 31, 2022, as compared to the same period in 2021. The decrease in general and administrative expenses for the year ended December 31, 2022 is primarily attributable to a decrease in compensation costs as a result of executive retirement. Real Estate.
General and administrative expenses increased in amount and remained consistent as a percentage of total revenues for the year ended December 31, 2023, as compared to the same period in 2022. The increase is primarily attributable to personnel compensation costs. Real Estate.
Holders of NNN’s preferred stock issuances are entitled to receive, when and as authorized by the Board of Directors, cumulative preferential cash distributions based on the stated rate and liquidation preference per annum. NNN's 5.200% Cumulative Redeemable Preferred Stock (the "Series F Preferred Stock") was redeemed in October 2021. (See "Capital Structure – Preferred Stock").
Holders of NNN's preferred stock issuances are entitled to receive, when and as authorized by the Board of Directors, cumulative preferential cash distributions based on the stated rate and liquidation preference per annum.
The following table outlines the dividends declared and paid for NNN's common stock for the years ended December 31 (dollars in thousands, except per share data): 2022 2021 2020 Dividends $ 380,538 $ 367,291 $ 356,409 Per share 2.1600 2.1000 2.0700 The following table presents the characterizations for tax purposes of NNN's common stock dividends for the years ended December 31: 2022 2021 2020 Ordinary dividends (1) $ 2.156330 99.8301 % $ 1.615753 76.9406 % $ 1.659755 80.1814 % Nontaxable distributions 0.003670 0.1699 % 0.484247 23.0594 % 0.410245 19.8186 % $ 2.160000 100.0000 % $ 2.100000 100.0000 % $ 2.070000 100.0000 % (1) Eligible for the 20% qualified business income deduction under section 199A of the Code.
The following table outlines the dividends declared and paid for NNN's common stock for the years ended December 31 (dollars in thousands, except per share data): 2023 2022 2021 Dividends $ 404,458 $ 380,538 $ 367,291 Per share 2.230 2.160 2.100 The following table presents the characterizations for tax purposes of NNN's common stock dividends for the years ended December 31: 2023 2022 2021 Ordinary dividends (1) $ 2.192636 98.3245 % $ 2.156330 99.8301 % $ 1.615753 76.9406 % Nontaxable distributions 0.037364 1.6755 % 0.003670 0.1699 % 0.484247 23.0594 % $ 2.230000 100.0000 % $ 2.160000 100.0000 % $ 2.100000 100.0000 % (1) Eligible for the 20% qualified business income deduction under section 199A of the Internal Revenue Code of 1986, as amended (the "Code").
The following table outlines NNN's active ATM programs for the three years ended December 31, 2022: 2020 ATM 2018 ATM Established date August 2020 February 2018 Termination date August 2023 August 2020 Total allowable shares 17,500,000 12,000,000 Total shares issued as of December 31, 2022 7,072,376 11,272,034 The following table outlines the common stock issuances pursuant to NNN's ATM equity programs for the years ended December 31 (dollars in thousands, except per share data): 2022 2021 2020 Shares of common stock 5,473,072 30,000 3,119,153 Average price per share (net) $ 45.15 $ 33.65 $ 38.21 Net proceeds $ 247,129 $ 1,009 $ 119,185 Stock issuance costs (1) $ 3,761 $ 224 $ 2,130 (1) Stock issuance costs consist primarily of underwriters' and agent's fees and commissions, and legal and accounting fees. 38 Dividend Reinvestment and Stock Purchase Plan.
The following table outlines NNN's ATM: 2023 ATM 2020 ATM Shelf registration statement: Effective date August 2023 August 2020 Termination date August 2026 August 2023 Total allowable shares 17,500,000 17,500,000 Total shares issued as of December 31, 2023 — 7,722,511 The following table outlines the common stock issuances pursuant to NNN's ATM for the years ended December 31 (dollars in thousands, except per share data): 2023 2022 2021 Shares of common stock 650,135 5,473,072 30,000 Average price per share (net) $ 43.52 $ 45.15 $ 33.65 Net proceeds $ 28,292 $ 247,129 $ 1,009 Stock issuance costs (1) $ 858 $ 3,761 $ 224 (1) Stock issuance costs consist primarily of underwriters' and agent's fees and commissions, and legal and accounting fees. 42 Dividend Reinvestment and Stock Purchase Plan.
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. 34 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.
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 December 31, 2022, there was $166,200,000 outstanding and $933,800,000 was available for future borrowings under the Credit Facility.
As of December 31, 2023, there was $132,000,000 outstanding and $968,000,000 available for future borrowings under the Credit Facility.
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. New Accounting Pronouncements.
In accordance with ASC 610-20, NNN evaluates any separate contracts or performance obligations to determine proper timing and/or amount of revenue recognition, as well as, transfer of control and transaction price allocation in determining the amount of gain or loss to record. 31 New Accounting Pronouncements.
These construction commitments, at December 31, 2022, are outlined in the table below (dollars in thousands): Total commitment (1) $ 117,640 Less amount funded (44,093 ) Remaining commitment $ 73,547 (1) Includes land, construction costs, tenant improvements, lease costs and capitalized interest.
These construction commitments, at December 31, 2023, are outlined in the table below (dollars in thousands): Total commitment (1) $ 379,674 Less amount funded (240,532 ) Remaining commitment $ 139,142 (1) Includes land, construction costs, tenant improvements, lease costs, capitalized interest and third-party costs.
Critical Accounting Estimates The preparation of NNN’s consolidated financial statements in conformance with accounting principles generally accepted in the United States of America 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 financial statements.
Depending on macroeconomic conditions and their impact on a tenant's business and operations, the remaining $3,808,000 of deferred rents may be difficult to collect. 29 Critical Accounting Estimates The preparation of NNN's consolidated financial statements in conformance with accounting principles generally accepted in the United States of America 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 financial statements.
Debt issuance costs for all note issuances have been deferred and are being amortized over the term of the respective notes using the effective interest method. 37 As a part of NNN's financing strategy, NNN may opt to redeem outstanding notes payable prior to the original maturity date.
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.
The following summarizes NNN’s expenses for the year ended December 31 (dollars in thousands): 2022 2021 2020 2022 Versus 2021 2021 Versus 2020 General and administrative $ 41,695 $ 44,640 $ 38,161 (6.6 )% 17.0 % Real estate 26,281 28,385 28,362 (7.4 )% 0.1 % Depreciation and amortization 223,834 205,220 196,623 9.1 % 4.4 % Leasing transaction costs 320 203 76 57.6 % 167.1 % Impairment losses – real estate, net of recoveries 8,309 21,957 37,442 (62.2 )% (41.4 )% Executive retirement costs 7,520 — 1,766 N/C (100.0 )% Total operating expenses $ 307,959 $ 300,405 $ 302,430 2.5 % (0.7 )% Interest and other income $ (149 ) $ (216 ) $ (417 ) (31.0 )% (48.2 )% Interest expense 148,065 137,874 129,431 7.4 % 6.5 % Loss on early extinguishment of debt — 21,328 16,679 (100.0 )% 27.9 % Total other expenses $ 147,916 $ 158,986 $ 145,693 (7.0 )% 9.1 % As a percentage of total revenues: General and administrative 5.4 % 6.1 % 5.8 % Real estate 3.4 % 3.9 % 4.3 % Comparison of Expenses – 2022 versus 2021 General and Administrative Expenses.
The increase is primarily due to the Rental Revenues from NNN's recent Property acquisitions (see "Results of Operations – Property Analysis – Property Acquisitions"). 34 Analysis of Expenses The following summarizes NNN's expenses for the year ended December 31 (dollars in thousands): 2023 2022 2021 2023 Versus 2022 2022 Versus 2021 General and administrative $ 43,746 $ 41,695 $ 44,640 4.9 % (6.6 )% Real estate 28,378 26,281 28,385 8.0 % (7.4 )% Depreciation and amortization 238,625 223,834 205,220 6.6 % 9.1 % Leasing transaction costs 299 320 203 (6.6 )% 57.6 % Impairment losses – real estate, net of recoveries 5,990 8,309 21,957 (27.9 )% (62.2 )% Executive retirement costs 3,454 7,520 — (54.1 )% N/C Total operating expenses $ 320,492 $ 307,959 $ 300,405 4.1 % 2.5 % Interest and other income $ (1,134 ) $ (149 ) $ (216 ) 661.1 % (31.0 )% Interest expense 163,898 148,065 137,874 10.7 % 7.4 % Loss on early extinguishment of debt — — 21,328 — % (100.0 )% Total other expenses $ 162,764 $ 147,916 $ 158,986 10.0 % (7.0 )% As a percentage of total revenues: General and administrative 5.3 % 5.4 % 6.1 % Real estate 3.4 % 3.4 % 3.9 % General and Administrative Expenses.
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 accounting policies and procedures are included in Note 1 of NNN’s consolidated financial statements.
Estimates are sensitive to evaluations by management about current and future expectations of market and economic conditions. 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.
In accordance with ASC 842, NNN reviews the collectability of its lease payments 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 lease payment collections.
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 and the adequacy of the allowance for doubtful accounts.
The loan is secured by a first lien on five of the Properties and the carrying value of the assets was $18,485,000 as of December 31, 2022. NNN anticipates using proceeds from NNN's Credit Facility to repay the mortgage payable in 2023. Universal Shelf Registration Statement.
The loan was secured by a first lien on five of the Properties and the carrying value of the assets was $18,485,000 as of December 31, 2022. In April 2023, NNN repaid the remaining mortgages payable principal balance of $9,774,000. Universal Shelf Registration Statement.
NNN includes an allowance for doubtful accounts in rental income on the Consolidated Statements of Income and Comprehensive Income. 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.
Real estate held for sale is not depreciated and is recorded at the lower of cost or fair value, less cost to sell.
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 NNN’s Credit Facility.
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, borrowings from NNN's Credit Facility or proceeds from the sale of Properties.
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): 2022 2021 Total real estate impairments, net of recoveries $ 8,309 $ 21,957 Number of Properties: Vacant 9 30 Occupied 7 12 For the years ended December 31, 2022 and 2021, real estate impairments, net of recoveries, was less than one percent of NNN's total assets for the respective periods as reported on the Consolidated Balance Sheets.
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 for the years ended December 31, 2023 and 2022, which were less than one percent of NNN's total assets for the respective years as reported on the Consolidated Balance Sheets.
The following is a summary of NNN’s total outstanding debt as of December 31 (dollars in thousands): 2022 Percentage of Total 2021 Percentage of Total Line of credit payable $ 166,200 4.2 % $ — — % Mortgages payable 9,964 0.3 % 10,697 0.3 % Notes payable 3,739,890 95.5 % 3,735,769 99.7 % Total outstanding debt $ 3,916,054 100.0 % $ 3,746,466 100.0 % Line of Credit Payable.
The following is a summary of NNN's total outstanding debt as of December 31 (dollars in thousands): 2023 Percentage of Total 2022 Percentage of Total Line of credit payable $ 132,000 3.0 % $ 166,200 4.2 % Mortgages payable (1) — — % 9,964 0.3 % Notes payable 4,228,544 97.0 % 3,739,890 95.5 % Total outstanding debt $ 4,360,544 100.0 % $ 3,916,054 100.0 % (1) In April 2023, NNN repaid the remaining mortgages payable principal balance of $9,774.
The following table summarizes the Property Portfolio as of December 31: 2022 2021 2020 Properties Owned: Number 3,411 3,223 3,143 Total gross leasable area (square feet) 35,010,000 32,753,000 32,461,000 Properties: Leased and unimproved land 3,390 3,191 3,096 Percent of Properties – leased and unimproved land 99 % 99 % 99 % Weighted average remaining lease term (years) 10.4 10.6 10.7 Total gross leasable area (square feet) – leased 34,829,000 32,395,000 31,631,000 27 The following table summarizes the lease expirations, assuming none of the tenants exercise renewal options, of the Property Portfolio for each of the next 10 years and then thereafter in the aggregate as of December 31, 2022: % of Annual Base Rent (1) # of Properties Gross Leasable Area (2) % of Annual Base Rent (1) # of Properties Gross Leasable Area (2) 2023 1.6% 83 889,000 2029 2.9% 82 1,032,000 2024 3.0% 90 1,439,000 2030 3.5% 107 1,207,000 2025 5.4% 187 1,986,000 2031 7.8% 186 2,704,000 2026 5.2% 219 2,162,000 2032 6.3% 221 2,358,000 2027 8.7% 240 3,637,000 Thereafter 50.5% 1,794 15,662,000 2028 5.1% 179 1,753,000 (1) Based on the annualized base rent for all leases in place as of December 31, 2022.
The following table summarizes the Property Portfolio as of December 31: 2023 2022 2021 Properties Owned: Number 3,532 3,411 3,223 Total gross leasable area (square feet) 35,966,000 35,010,000 32,753,000 Properties: Leased and unimproved land 3,514 3,390 3,191 Percent of Properties – leased and unimproved land 99 % 99 % 99 % Weighted average remaining lease term (years) 10.1 10.4 10.6 Total gross leasable area (square feet) – leased 35,683,000 34,829,000 32,395,000 Total annualized base rent $ 818,749,000 $ 771,984,000 $ 713,169,000 The following table summarizes the lease expirations, assuming none of the tenants exercise renewal options, of the Property Portfolio for each of the next 10 years and then thereafter in the aggregate as of December 31, 2023: % of Annual Base Rent (1) # of Properties Gross Leasable Area (2) % of Annual Base Rent (1) # of Properties Gross Leasable Area (2) 2024 1.7% 54 803,000 2030 3.3% 109 1,221,000 2025 5.1% 185 1,941,000 2031 7.3% 185 2,697,000 2026 4.8% 212 2,127,000 2032 5.9% 215 2,328,000 2027 8.2% 235 3,591,000 2033 4.9% 138 1,467,000 2028 5.7% 229 2,172,000 Thereafter 49.1% 1,831 15,592,000 2029 4.0% 119 1,744,000 (1) Based on the annualized base rent for all leases in place as of December 31, 2023.
Management believes the following critical accounting policies, among others, affect its more significant estimates and assumptions used in the preparation of NNN’s consolidated financial statements. Real Estate Portfolio. NNN records the acquisition of real estate at cost, including acquisition and closing costs.
A summary of NNN's accounting policies and procedures is included in Note 1 of the December 31, 2023, Consolidated Financial Statements. Management believes the following critical accounting policies, among others, affect its more significant estimates and assumptions used in the preparation of NNN's consolidated financial statements. Real Estate Portfolio.
California 76 3.5% Other 1,443 40.3% 3,411 100.0% (1) Based on annualized base rent for all leases in place as of December 31, 2022. Property Acquisitions.
Virginia 118 3.3% Other 1,513 41.0% 3,532 100.0% (1) Based on annualized base rent for all leases in place as of December 31, 2023. 33 Property Acquisitions.
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 Consolidated Statements of Income and Comprehensive Income.
NNN determined the key revenue stream impacted by ASC 610-20 is gain on disposition of real estate reported on the Consolidated Statements of Income and Comprehensive Income.
Additionally, as of January 30, 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, these tenants have the right to reject or affirm their leases with NNN.
As of December 31, 2023, NNN owned 18 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. 38 Additionally, as of January 31, 2024, 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.
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 year ended December 31, 2022, NNN recorded executive retirement costs in connection with the long-term incentive compensation related to the retirement and transition agreement. Interest Expense.
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.
This guidance is only applicable to COVID-19 related lease concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. NNN elected to make this policy election for COVID-19 lease concessions, provided in the rent deferral lease amendments effective during the years ended December 31, 2021 and 2020. Collectability .
This guidance is only applicable to COVID-19 related lease concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee.
In addition, these defaults could impair its access to the debt and equity markets. NNN does not use derivatives for trading or speculative purposes or currently have any derivatives that are not designated as hedges. NNN had no derivative financial instruments outstanding at December 31, 2022. Equity Securities Preferred Stock.
NNN does not use derivatives for trading or speculative purposes or currently have any derivatives that are not designated as hedges. NNN had no derivative financial instruments outstanding at December 31, 2023. Equity Securities Preferred Stock. In October 2021, NNN redeemed all outstanding depositary shares (13,800,000) representing interests in its Series F Preferred Stock.
Depreciation and Amortization. Depreciation and amortization expenses increased in amount for the year ended December 31, 2022, as compared to the same period in 2021.
The increase is primarily attributable to non-reimbursable real estate expenses and certain properties that became vacant. Depreciation and Amortization. Depreciation and amortization expenses increased in amount for the year ended December 31, 2023, as compared to the same period in 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeDebt Obligations (dollars in thousands) Variable Rate Debt Fixed Rate Debt Credit Facility Mortgages (1) Unsecured Debt (2) Debt Obligation Weighted Average Interest Rate Principal Debt Obligation Weighted Average Interest Rate Principal Debt Obligation Effective Interest Rate 2023 $ — — $ 9,947 5.23 % $ — — 2024 — — — 350,000 3.92 % 2025 166,200 4.13 % — — 400,000 4.03 % 2026 — — — — 350,000 3.73 % 2027 — — — — 400,000 3.55 % Thereafter — — — — 2,300,000 3.58 % (3) Total $ 166,200 4.13 % $ 9,947 5.23 % $ 3,800,000 3.67 % Fair Value: December 31, 2022 $ 166,200 $ 9,947 $ 3,140,774 December 31, 2021 $ — $ 10,611 $ 4,032,757 (1) NNN's mortgages payable represent principal payments by year and exclude both unamortized premiums and debt costs.
Biggest changeDebt Obligations (1) (dollars in thousands) Variable Rate Debt Fixed Rate Debt Credit Facility Unsecured Debt (2) Debt Obligation Weighted Average Interest Rate Principal Debt Obligation Effective Interest Rate 2024 $ — — $ 350,000 3.92 % 2025 132,000 5.86 % 400,000 4.03 % 2026 — — 350,000 3.73 % 2027 — — 400,000 3.55 % 2028 — — 400,000 4.39 % Thereafter — — 2,400,000 3.92 % (3) Total $ 132,000 5.86 % $ 4,300,000 3.93 % Fair Value: December 31, 2023 $ 132,000 $ 3,801,367 December 31, 2022 $ 166,200 $ 3,140,774 (1) NNN's unsecured debt obligations have a weighted average interest rate of 4.0% and a weighted average maturity of 12.0 years.
(2) Includes NNN’s notes payable, each exclude unamortized discounts and debt costs. The fair value is based upon quoted market prices as of the close of the period, which is a Level 1 valuation since NNN's notes payable are publicly traded on the over-the-counter market. (3) Weighted average effective interest rate for periods after 2027. 40
(2) Includes NNN's notes payable, each exclude unamortized discounts and debt costs. The fair value is based upon quoted market prices as of the close of the year, which is a Level 1 valuation since NNN's notes payable are publicly traded on the over-the-counter market. (3) Weighted average effective interest rate for years after 2028. 44
If interest rates on NNN’s variable rate debt increased by one percent, NNN’s interest expense would have increased by less than one percent for the year ended December 31, 2022.
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 year ended December 31, 2023.
As of December 31, 2022, NNN had no outstanding derivatives. As of December 31, 2022, NNN's variable rate Credit Facility had $166,200,000 outstanding.
As of December 31, 2023, NNN had no outstanding derivatives. As of December 31, 2023, NNN's variable rate Credit Facility had $132,000,000 outstanding.
The table presents, by year of expected maturity, principal payments and related interest rates for debt obligations outstanding as of December 31, 2022. The table incorporates only those debt obligations that existed as of December 31, 2022, and it does not consider those debt obligations or positions which could arise after this date and therefore has limited predictive value.
The table incorporates only those debt obligations that existed as of December 31, 2023, and it does not consider those debt obligations or positions which could arise after this date and therefore has limited predictive value.
For the year ended December 31, 2022, the Credit Facility had a weighted average outstanding balance of $39,220,000 and a weighted average interest rate of 4.13% compared to no weighted average outstanding balance for the same period in 2021. The information in the table below summarizes NNN’s market risks associated with its outstanding debt obligations.
For the year ended December 31, 2023, the Credit Facility had a weighted average outstanding balance of $169,620,000 and a weighted average interest rate of 5.86% compared to a weighted average outstanding balance of $39,220,000 and a weighted average interest rate of 4.13% for the same period in 2022.
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The information in the table below summarizes NNN's market risks associated with its outstanding debt obligations. The table presents, by year of expected maturity, principal payments and related interest rates for debt obligations outstanding as of December 31, 2023.

Other NNN 10-K year-over-year comparisons