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Good day, everyone. Welcome to the NNN REIT, Inc first quarter 2026 earnings call. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Steve Horn. The floor is yours.

Hey, thank you, Kelly. Good morning. Thank you for joining NNN's first quarter 2026 earnings call. I'm joined today with our Chief Financial Officer, Vin Chao. NNN's disciplined, efficient, and self-funded growth strategy continues to deliver results. Our proven long-term operating platform and consistent capital allocation focused on sufficiently accretive acquisitions remains central to our approach. We are committed to long-term value creation, navigating market conditions with discipline, and capitalizing on opportunities that support that durable growth. As detailed in the press release this morning, NNN delivered a strong quarter. We closed 15 transactions comprising of 41 properties for a total investment of $145 million, with an initial cash yield of 7.5%.

At the same time, we maintained significant balance sheet flexibility, ending the quarter with $1.2 billion of total liquidity and the industry-leading weighted average debt maturity of nearly 11 years. Reflecting on our consistent performance and visibility into the remainder of the year, we are raising our 2026 AFFO per share guidance to a range of $3.53-$3.59. This increase underscores the strength of our portfolio and effectiveness of our multiyear growth strategy. Just one additional item before I get into the operations. If you haven't reviewed our updated investor presentation, it was released during the quarter. I encourage you to visit the website and take a look. Turning to the operating performance, our portfolio of approximately 3,700 freestanding single-tenant properties across all 50 states continues to perform well.

During the quarter, we renewed 36 of 43 lease expirations, consistent with our historical renewal rate of approximately 85% at rental rates 2% above prior levels. We leased seven properties to new tenants at rent rates about 10% above previous levels. It's demonstrating the continued demand of our assets and the outstanding job our asset management team is executing at high levels. Our tenant base remains healthy with no material credit concerns currently. Occupancy increased sequentially by 30 basis points to 98.6, now above our long-term average. This improvement reflects the strong execution of our leasing and disposition teams who are actively repositioning vacant assets to maximize value. In several cases, the team has secured high-quality investment-grade tenants, further enhancing asset value and contributing incremental value creation.

With only 53 assets remaining and active solutions underway, combining with the solid overall performance of the portfolio, we expect occupancy to continue trending upward in the near term. On the acquisition front, as I said earlier, we invested $145 million, 41 properties with a cash cap rate of 7.5%. More importantly, with a weighted average lease term of 19 years. The sale leaseback nature of our transactions continues to provide accretive risk-adjusted returns, long duration, predictable cash flows. Regarding market conditions, cap rates in the first quarter remained largely consistent with recent quarters. While we are seeing some modest compression early in the second quarter, we expect relative stability going forward. As always, our platform is designed to operate effectively across many macro environments.

We do benefit from stable interest rate backdrop, and the 10-year has remained fairly range-bound, which continues to support transaction activity. We've had an elevated volume in 2025, and we are seeing a good amount of investment opportunity for the first half of the year. During the quarter, we sold 25 properties, including 16 vacant assets, generating $36 million in proceeds of redeployment. Dispositions of income-producing assets were primarily non-core, and we were executing approximately 30 basis points below our acquisition cap rate. As we discussed previously, we expect to take more of a proactive approach to asset sales in 2026 to further optimize portfolio quality for the long term. As you know, tenant credit evolves, market shift and consumer behavior changes, which results in active portfolio management becoming essential to maintaining high quality, durable cash flow.

Our balance sheet remains one of the strongest in the sector. We ended the quarter with just $80 million drawn on our credit facility and maintain a weighted average asset debt maturity, as I said before, nearly 11 years. NNN is well positioned to fund the remainder of 2026 acquisition pipeline and support continued growth. With a robust pipeline, strong financial position, and proven leadership, we are confident in our outlook. We remain committed to our self-funded model, disciplined capital allocation, and delivering sustainable long-term value for our shareholders, targeting mid-single digits earnings growth, plus a dividend which we've increased for 36 consecutive years, one of only three REITs. With that, I'll turn the call over to Vin to give more detail on the financial results and updated guidance.

Thank you, Steve. Let's start with our customary cautionary statements. During this call, we will make certain statements that may be considered forward-looking statements under federal securities laws. The company's actual future results may differ significantly from matters discussed in these forward-looking statements, and we may not release revisions to these forward-looking statements to reflect changes after the statements are made. Factors and risks that could cause actual results to differ from expectations are disclosed in greater detail in the company's filings with the SEC and in this morning's press release. Turning to results. This morning, we reported core FFO of $0.86 per share and AFFO of $0.87 per share, each flat over the prior year.

As disclosed on page eight of today's earnings release, we booked $739,000 of lease termination fees this quarter versus $8.2 million a year ago, representing a $0.04 headwind, without which AFFO per share growth was a solid 4.8%. Results were modestly ahead of our internal projections, with upside driven primarily by lower than expected bad debt and net real estate expense. Bad debt represented about 15 basis points of quarterly ABR, which was better than our 75 basis point assumption. Our NOI margin was 95.9% in the first quarter, reflecting the efficiency of our triple net lease structure. G&A, as a percentage of total revenue, was 5.9%, in line with our expectations, while our cash G&A margin was 4.2%.

Annualized base rent grew 7% year-over-year to $935 million, driven by our strong acquisition activity, while free cash flow after dividend was about $52 million in the first quarter. Regarding our watch list, as Steve mentioned, we are not currently tracking any significant near-term credit issues in the portfolio, and we are optimistic that we can outperform our bad debt assumptions for the year. That said, we remain proactive portfolio managers and will continue to look for ways to de-risk the portfolio ahead of potential future issues without incurring unwarranted de-dilution. Included in this quarter's dispositions was one AMC as well as an entertainment property.

Our occupied dispositions had only three years of remaining lease term, and despite the de-risking nature and shorter term of the property sold, we were still able to generate an economic gain of over 6% on the sales, given our low cost basis in the assets, which is a key component of our risk controls. Turning to capital markets. During the quarter, we drew down the full $300 million available to us on our delayed draw term loan. The rate on the term loan has been swapped to a fixed all-in rate of 4.1%. We also sold roughly 1.7 million common shares on a forward basis through our ATM at just under $45 per share. We did not settle any forward equity, leaving us with expected future net proceeds of $74 million as of March 31st.

Our next debt maturity is our $350 million unsecured note due in December of this year. As a reminder, we have an accordion feature that allows us to expand our existing term loan by $200 million, and IG credit spreads have recently revisited historical lows following a brief widening in the immediate aftermath of the Iran conflict. This gives us multiple options with which to address our pending maturity as well as financing our investment plans on a leverage-neutral basis. Moving to the balance sheet. Our Baa1 rated balance sheet remains a competitive advantage that provides us with the flexibility to fund future growth while protecting against downside risk.

At the end of the quarter, we had no encumbered assets, $1.2 billion of available liquidity, and just 1.6% of our debt tied to floating rates. Including the impact of our unsettled forward equity, pro forma net debt to EBITDA was 5.6 times unchanged from last quarter. Our debt duration remains the highest in the net lease space at 10.5 years and is well matched with our lease duration of 10.1 years. On April 15th, we announced a $0.60 quarterly dividend representing 3.4% year-over-year growth and equating to an attractive 5.7% annualized dividend yield and a conservative 66.9% AFFO payout ratio. I will end my opening remarks with some additional color on our updated 2026 outlook.

Based on our better-than-expected first quarter performance and our growing pipeline of investment opportunities, we are raising the midpoint of both our AFFO and core FFO per share guidance by $0.01 to new ranges of $3.53-$3.59 and $3.48-$3.54, respectively. The midpoint of our increased AFFO per share guidance represents an acceleration of year-over-year growth to 3.5% from 2.7% last year. Line item guidance, which is summarized on page three of our earnings release, remains unchanged.

Although I would highlight that we are tracking to the low end of the $14 million-$15 million range for net real estate expenses and, towards the high end of our $550 million-$650 million acquisition guidance based on our near-term pipeline visibility. With expected free cash flow of about $212 million, $130 million of expected dispositions, and $1.2 billion of available liquidity, we are well positioned to fund our acquisition plans for the year. From a credit loss perspective, we are lowering our bad debt assumption for the full year from 75 basis points to 60 basis points, which reflects the outperformance in the first quarter.

Our assumptions for the balance of the year are unchanged, as I mentioned earlier, given year-to-date trends, we are hopeful we can outperform our bad debt projections in the coming quarters. With that, I'll turn the call back over to Kelly for questions. Kelly?

Can you hear me?

Yep, we can hear you, Kelly.

Okay, sorry about that. Certainly, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, can you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a moment while we poll for questions. Your first question is coming from John Kilichowski with Wells Fargo. Please pose your question. Your line is live.

Hi, good morning. Thanks for taking my question. Vin, very helpful color in the opening remarks on the funding for the acquisition guide. If I think about the incremental $74 that you've raised, and the term loan, it sounds like you have capacity to go well above the acquisition guide here and you are trending up. What's keeping that acquisition guide sort of consistent here in 1Q?

Hey, John, Steve, I'll take that. We have a very robust pipeline and opportunity set that we're looking at currently. You know, the old adage, you don't wanna count them until they're done. You know, we're actively in negotiations, trading paper. Until they're, you know, well advanced closing stage, you know, we don't wanna get above our skis here.

Mm-hmm.

Yeah. John, you are correct in the sense that $75 or $74 million of equity does give us a little bit of additional capacity. At our typical 60/40 equity debt mix, you know, it'd be about $125 million of additional capacity.

Very helpful. Thank you. The second one is just on the credit loss guide. Appreciate the updated color on the 60 basis points. Of that, what is pure conservatism versus what is something you feel like you have an outlook on? Maybe an extension of that would be the 7-Eleven headlines on store closures. Have you had any discussions with them? Is there any impact to you that would be in that guide?

No, from 7-Eleven. I'll let Steve opine a little bit more on that. As far as the credit loss assumption, there's very little in terms of, you know, embedded or something that we expect to happen other than, you know, there was a small amount, 15 basis points in the first quarter. Beyond that, there's really nothing, you know, material that's known that we would, you know, put into that number.

No. As far as the 7-Eleven, you know, we've never done quote business with 7-Eleven. They acquired a lot of our large regional operators that we did business with year-over-year. Our average cost basis in our 7-Eleven portfolio is about $2.2 million. We just did a significant renewal in 2025 with 7-Eleven. Our average lease term with 7-Eleven is about eight and a half years. We're very confident. We haven't had any discussions or none of our stores are on the closure list.

Got it. Thank you.

Your next question is coming from Yana Galan with Bank of America. Please pose your question. Your line is live.

Morning. This is Dan on for Yana. Following the recent ATM issuance, could you characterize your current overall WACC and your investment spreads today?

Yeah, look, the WACC, it does change on a daily basis, but I'd say if you're talking about just the near term sort of AFFO yield and debt math, we're probably in the high sixes at 6.8%, maybe 6.75%, in that area.

Yeah. For my next question, last quarter, you expected cap rates to compress more in 2Q and 3Q. Is that still your view, or is the higher rate environment and reduced competition? Yeah, go ahead.

No, no, it's fair to. My view is the same on cap rates as it was, you know, the first quarter, and it's coming into reality that our first quarter cap rates were in line with the last many quarters. We expected second quarter some compression. I do still expect that for the deals that I see being priced. Then I kind of see them being at that compressed level. As of right now, things change for modeling purpose at that lower level.

Thank you very much.

Your next question is coming from Spenser Glimcher with Green Street. Please pose your question. Your line is live.

Thank you. You mentioned proactive portfolio management several times. Also, you noted that you don't have anything active on your watch list. If there are no imminent credit issues, can you just, you know, share some color or walk us through kind of what you're leaning on to guide your asset management decisions today?

Hey, Spenser. Good to hear from you. Yeah, I mean, I wouldn't say we don't have a watch list. I mean, we're watching a lot. You know, we always watch tenants. We do have a watch list. You know, case in point, AMC is on our watch list. We've talked about that before. We were able to sell one in the quarter, and I think we were pretty pleased with that outcome given, you know, the nature of AMC sales. You know, we're still able to, on net for the quarter, come out with an economic gain, not a GAAP gain, for our occupied properties. That's the kind of thing that we're gonna look at.

Yes, in the near term, meaning the next, you know, for this year, we're not seeing any material concerns that we think are worth calling out. That doesn't mean we don't have tenants that we think are maybe medium to longer term, are ones that we are watching a little bit more carefully. We'll look to try to address some of those as we can.

You know, I'll just add one more thing to it. You know, when we're doing active portfolio management, it's not just focusing in on credit. You know, you have credit risk, always credit changes. More importantly, you might have real estate risk and the probability of that being renewed at the end of the term. We're trying to get ahead of that, looking years out, and making the portfolio a more stable platform, because things do change.

Okay, great. Thanks for the color. You also mentioned that you did, I think, some deals with seven new tenants in the quarter. Are you able to share details on what industries these tenants operate in?

It was a combination, primarily quick, you know, fast food restaurants and convenience stores, and I think there was one car wash in there.

Okay, great. Thank you.

Your next question is coming from Smedes Rose with Citi. Please pose your question. Your line is live.

Hi, this is Nick on for Smedes this morning. Thanks for taking the question. I guess the first one is just, are you seeing or hearing anything from any of your tenants that might suggest any changes in underlying consumer spending habits, maybe across, you know, the restaurant or more of the experiential type spaces?

You know, many of our tenants, 61% are public. I mean, we do get those reads, and we also have our own conversations privately with our tenants. There's nothing I would say that's a broad strokes takeaway. You know, obviously certain restaurant tenants are doing better than others. On net, you know, to extent that there is continued pressure on the consumer, then, you know, you would expect that to pressure some of the more cyclical businesses. You know, nothing's bubbled up that is sort of a meaningful, you know, broad stroke kind of takeaway. More specific to the individual tenants.

Got it. That's helpful. Thank you. You know, you mentioned you're trending towards the high end of your acquisition guidance. Could you just remind us what your visibility into your pipeline is like from today or how long that is? Just if you have any color on what that quarterly cadence of acquisition volume would look like through the balance of the year, that would be useful. Thank you.

You, you can really look at it. I encourage you to look at kind of overall, you know, on an annual basis when you're looking at volume, because quarter to quarter it could be very volatile. As I said in the opening remarks, you know, our acquisition opportunity set is really healthy currently. As Vin mentioned, we're trending to the high end of our range currently if everything closes.

Got it. Thank you.

Your next question is coming from Ronald Kamdem with Morgan Stanley. Please pose your question. Your line is live.

Hey, good morning. This is Jenny on for Ron. First question on sale-leaseback. I think you talk about a lot of the acquisitions from longstanding relationships. Just curious, your current relationship conversation, is there any accelerating sale-leaseback given the current macro environment and so forth?

Yeah, I think that's reflective in our pipeline. We've talked about it a couple times on the call, that there's a big opportunity with sale leasebacks currently. It's elevated this year than it was in 2025, and we did have record volume in 2025. It feels like there's a lot of sellers out there that are using the sale leaseback for debt refis, balance sheet management.

That's helpful. Thank you. The second is, can you confirm the latest status of Frisch's and Badcock? Like, what's, are they all cleaned up? Just what's the current status on that?

The current status, all our Badcocks are currently accounted for and cleaned up, and we had near, you know, 100% recovery. Really, in great shape with regard to Badcock. Frisch's, we have a, you know, we're well on our way for Frisch's. All, you know, all the Frisch's are in our 53 vacant assets. And we're working all the assets currently and have a tremendous amount of interest in those assets, and I'm expecting some real good positive outcomes as we move through the year. Jenny, one thing I'd add.

Perfect. Thank you. Yeah.

With occupancy back to 98.6% above our long-term averages, I mean, there's not really a strong pressure to fire sale anything or do anything, you know, that quickly. I mean, I think we're in a good position at this point, and so we can be a little bit pickier and choosier.

Gotcha. Thank you.

Your next question is coming from Alex Fagan with Baird. Please pose your question. Your line is live.

Hey, thanks for taking my question. I guess first one would be, what's the term income currently assumed in guidance?

Yeah. As we don't give lease termination fee guidance per se. What we have commented on is that we think that this year will be a normalized year, which is typically between $3 million-$4 million. Again, not guidance per se because again, these things are episodic. If the right thing to do for the business is to take a lease termination fee because we, you know, can solve a future problem and we can get a fee on top of it, we'll do that. We don't wanna, you know, set artificial guideposts. Historically, I think $3 million-$4 million is about what we've averaged, maybe a little bit less than that. We're, we're expecting this to be more of a normal year.

If you look at what we did in the quarter, it's pretty consistent with that.

Got it. Second for me would be, are there any categories that are currently seeing a bid from, you know, private market participants where you can be opportunistic in asset sales? Less so from a real estate or credit perspective, but just seeing a high bid.

Yeah. No, there's not a particular segment. The amount of money they need to deploy. You know what I mean? Obviously, if the pricing is super attractive, we would do something. No, right now we're looking to sell $130 million of assets in the market, and there's no big private capital market bid for those.

Got it. Thanks, guys.

Your next question is coming from Michael Goldsmith with UBS. Please pose your question. Your line is live.

Good morning. Thanks a lot for taking my question. You touched a little bit on it before where you're talking about expected cap rate compression from the first to the second quarter. Is that just broad compression or are there specific asset categories where you are seeing that level of compression?

It's broad as far as, you know, our opportunity set, you know. As you know, you know as well, we do a lot of mining of our portfolio. So it's kind of the auto service, the convenience store sectors primarily that we're seeing a lot of. Not a lot, you know, minimal amount of compression, you know, kind of that 15 to 25 basis points. Sometimes it's just.

Anything specific you think that's driving that?

I think it's. As I always say, it's the first half of the year, people wanna do deals. The competition gets a little bit more aggressive and is willing to compress their spreads.

Got it. Just in terms of specific categories, you mentioned that you bought a car wash. Can you just talk about your comfort level in that category? I think you mentioned that you sold an AMC. Are you able to provide the cap rate on where theaters are trading right now?

We don't provide cap rates on the individual. I mean, overall our income producing cap rates are 30 basis inside our acquisitions. We didn't buy, I didn't say I bought a car wash. It was a car wash operator. It was one of the seven assets that we re-leased. That being said, I'm very comfortable with our car wash holdings. We've done them, you know, since 2005. Our basis is extremely low. NNN didn't get into the pie eating contest when there was a lot of availability for car washes over the years.

Got it. Thank you very much. Good luck in the second quarter.

Thanks, Michael.

Once again, if you do have any remaining questions or comments, please press star one at this time to enter the queue. Your next question is coming from John Massocca with B. Riley Securities. Please ask your question, your line is live.

Good morning. Maybe sticking with the theme around kind of the cap rate compression you're potentially seeing in the pipeline and on the horizon for the remainder of the year, is that changing at all based on any changes in the competitive environment? I guess with interest rates moving around and maybe some dislocation in certain other capital sources, are you seeing less competition outside of other REITs? I guess if you are other REITs kind of filling in that gap? I'm just kind of curious what the overall competitive environment is for your potential partners here.

Yeah, I mean, for the 20+ years I've been doing this, John, it's been a highly competitive environment. It's just the names have come and gone, there's been a couple of us REITs that have been around for the 20+ years. You know, the private capital has always been involved. There are non-traded REITs to now it's the financial institutions have been raising money and creating the REITs. No, it's highly competitive. It always is. Names change. I don't view it as competition, that there's more competition. I view it that people just wanna do more deals right now in the first half of the year.

Have you seen any pullback in, like, non-REIT capital over the course of kind of year to date, just given some of the changes in that environment?

No. I mean, most of the, you know, non-REIT capital are playing in segments we don't play in, the large industrial, so they can deploy vast amount of money at one time. They're not buying a Taco Bell in Terre Haute, Indiana, with a franchisee.

Fair enough. I know you don't wanna disclose the cap rate on the AMC asset sale, but can you maybe talk about who the buyer was? I mean, was it another landlord? Is it a tenant? Is it, someone looking to redevelop? Just kind of curious if this was a true kind of theater to theater transaction.

It was somebody looking to redevelop the asset.

Okay. All right. That's it for me. Thank you very much.

Thanks, John.

There are no further questions in queue at this time. I would now like to turn the floor back over to Steve Horn for closing remarks.

Again, thanks for joining us on the call. NNN's in, you know, really good shape going forward, optimistic. Again, I look forward to seeing many of you, I guess, in the next few weeks at Nareit. Thanks. Good day.

Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.