Note 2 – Real Estate:

Real Estate – Portfolio

Leases. At June 30, 2025, NNN's real estate portfolio had a weighted average remaining lease term of 10 years and consisted of 3,606 leases classified as operating leases and an additional four leases accounted for as direct financing leases.

The following is a summary of the general structure of the leases in the Property Portfolio, although the specific terms of each lease can vary significantly. Typically, the Property leases provide for initial terms of 10 to 20 years and a triple-net lease structure, pursuant to which the tenant bears responsibility for operating expenses of the Property, including utilities, real estate taxes and assessments, property and liability insurance, maintenance, repairs and capital expenditures. Certain Properties are subject to leases under which NNN retains responsibility for specific costs and expenses associated with the Property. NNN's leases provide for annual base rental payments (payable in monthly installments), the majority of which include negotiated increases in rent as a result of increases in the Consumer Price Index or set fixed increases.

NNN's leases often provide the tenant with one or more multi-year renewal options, subject to the same terms and conditions provided under the initial lease term, including rent increases. NNN's lease term is based on the non-cancellable base term unless economic incentives make it reasonably certain that an option period to extend the lease will be exercised, in which event NNN includes the renewal options. Some of the leases also provide that in the event NNN wishes to sell the Property subject to that lease, NNN first must offer the lessee the right to purchase the Property on the same terms and conditions as any offer which NNN intends to accept for the sale of the Property.

Some leases provide for a free rent period or scheduled rent increases throughout the lease term. Such amounts are recognized on a straight-line basis over the terms of the leases.

For the six months ended June 30, 2025 and 2024, NNN recognized $84,000 and ($131,000), respectively, of net straight-line accrued rental income, net of reserves, of which ($425,000) and ($95,000) of such income, net of reserves was recorded during the quarters ended June 30, 2025 and 2024, respectively.

Real Estate – Intangibles

The amounts amortized as a net increase to rental income for above-market and below-market leases for the six months ended June 30, 2025 and 2024, were $1,713,000 and $242,000, respectively, of which $1,620,000 and $125,000 were recorded during the quarters ended June 30, 2025 and 2024, respectively. The value of in-place leases amortized to expense for the six months ended June 30, 2025 and 2024 was $5,267,000 and $3,230,000, respectively, of which $3,879,000 and $1,583,000 was recorded for the quarters ended June 30, 2025 and 2024, respectively.

Real Estate – Dispositions

Real Estate – Commitments

NNN has committed to fund construction on 20 Properties. The improvements on such Properties are estimated to be completed within 12 to 18 months. These construction commitments, as of June 30, 2025, are outlined in the table below (dollars in thousands):

Real Estate – Impairments

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

The valuation of impaired assets is determined using widely accepted valuation techniques including discounted cash flow analysis, income capitalization, analysis of recent comparable sales transactions, actual sales negotiations and bona fide purchase offers received from third parties, which are Level 3 inputs. NNN may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate.