[Management View]
NNN REIT management raised both core FFO and AFFO per share guidance for 2025, citing better-than-expected execution and operating metrics. Portfolio occupancy temporarily declined to 97.5% at quarter end following proactive asset repositioning but is projected to recover above 98% by year-end 2025 based on asset resolutions already in progress. Funds from operations (non-GAAP) benefited from higher-than-expected interest income and lower bad debt, while recent lease renewals and re-leasing yielded significant rental rate increases. Property acquisitions at a 7.3% initial cap rate, with annual investment volume for 2025 projected to set a new record, funded through a targeted 60%-equity, 40%-debt mix, with recent equity raises and fixed-rate debt issuance strengthening liquidity and extending debt maturities.

[Outlook]
CEO Steve Horn announced an increase in 2025 guidance for core FFO per share to a range of $3.36 to $3.40, reflecting the strength and discipline of their multiyear growth strategy. CFO Vincent Chao confirmed no floating rate debt, no encumbered assets, and access to $1.4 billion in total liquidity, providing flexibility for maturities and growth capital. Management highlighted their disciplined approach and long-standing tenant relationships as key enablers in a competitive market.

[Financial Performance]
- Core FFO per share: 85¢, up 1.22% YoY
- AFFO per share: 86¢, up 4% YoY
- Annualized base rent: $912 million, up 7% YoY
- NOI margin: 98%
- Free cash flow after dividends: $48 million
- Dividend: 60¢ quarterly, 5.6% annualized yield
- Portfolio occupancy: 97.5%, expected to exceed 98% by year-end
- Lease renewal rates: 92% of expiring leases, renewal rental rates at 108% of prior levels
- New lease rates: 124% of prior levels
- Acquisitions: $283 million in 57 assets, annual acquisition guidance midpoint raised to $900 million
- Disposition activity: Sold 23 properties for $41 million
- Liquidity: $1.4 billion, including $1.2 billion undrawn revolver and nearly $160 million in cash
- Balance sheet metrics: Net debt-to-EBITDA leverage at 5.6x, weighted average debt maturity of 10.7 years
- Equity issuance: 1.7 million shares

[Q&A Highlights]
Question 1: Could we get more color around the outsized interest income and the increase at the low end of the range?
Answer: The debt offering on July 1 resulted in a high cash balance, which was deployed into money markets and other short-term interest-bearing deposits, yielding better-than-projected rates. The low end of the AFFO guidance was driven by acquisition volume and higher G&A expenses in the fourth quarter.

Question 2: Could we get more on the rationale behind using equity to fund acquisitions given the current stock price?
Answer: The company deploys capital with a 60%-equity, 40%-debt mix. The weighted average cost of capital (WACC) is higher than long-term debt perspective but still allows for accretive acquisitions.

Question 3: Why are we seeing record volumes despite not uniquely attractive spreads?
Answer: Elevated volume was driven by tenant relationships and accretive deals, even if not historically as accretive. The company can service the tenant base with good real estate deals.

Question 4: Are you seeing increased competition impacting pricing?
Answer: The market has always been competitive, with more financial institutions now involved. Larger portfolios see increased competition, but NNN focuses on smaller deals with less competition.

Question 5: Are there any other credit issues within your portfolio?
Answer: The overall portfolio is in good shape, with bad debt assumptions revised down to 25 basis points from 60. At Home's resolution had no issues, and pre-petition rent from At Home is being collected.

Question 6: Can you walk through the occupancy path going forward?
Answer: Occupancy is expected to improve with the resolution of restaurant and furniture tenant issues. Renewals at 92% help maintain occupancy, with no other tenant issues anticipated.

Question 7: What is the plan for the At Home portfolio?
Answer: The At Home assets are performing well, with no immediate plans to sell unless a good deal is offered.

Question 8: What is your approach to debt maturity in 2026 given the current rate environment?
Answer: Various options are being considered, including using the revolver, bond market, or bank debt, with flexibility due to strong liquidity.

Question 9: Would the mix of disposals and free cash flow and debt usage look similar for 2026 acquisitions if the cost of equity stays the same?
Answer: Dispositions could be an alternative form of equity to fund deals, with free cash flow generating additional internal capacity.

Question 10: Are tenants pushing you to do more deals, and will this continue in 2026?
Answer: Opportunities to do deals are present, with elevated numbers this year. The auto services and auto parts sectors are active, but visibility for 2026 is limited to the first quarter.

[Sentiment Analysis]
The tone of the analysts was inquisitive and focused on understanding the rationale behind financial decisions and future outlook. Management's tone was confident, emphasizing strategic clarity, disciplined growth, and proactive risk management.

[Quarterly Comparison]
| Metric | Q3 2025 | Q3 2024 | YoY Change |
|----------------------------|---------------|---------------|-------------|
| Core FFO per share | 85¢ | 84¢ | +1.22% |
| AFFO per share | 86¢ | 83¢ | +4% |
| Annualized base rent | $912 million | $850 million | +7% |
| NOI margin | 98% | 97% | +1% |
| Portfolio occupancy | 97.5% | 98% | -0.5% |
| Acquisitions | $283 million | $250 million | +13.2% |
| Disposition activity | $41 million | $35 million | +17.1% |
| Liquidity | $1.4 billion | $1.3 billion | +7.7% |
| Net debt-to-EBITDA leverage| 5.6x | 5.7x | -0.1x |

[Risks and Concerns]
- Increased competition in the market could impact pricing and acquisition opportunities.
- Legal disputes involving tenants could delay asset resolutions and affect occupancy rates.
- Economic uncertainties and interest rate fluctuations could impact financial performance and acquisition funding strategies.

[Final Takeaway]
NNN REIT demonstrated strong performance in Q3 2025, with raised guidance for core FFO and AFFO per share, driven by better-than-expected execution and operating metrics. The company is well-positioned for continued growth, supported by a disciplined approach, strong tenant relationships, and proactive risk management. Despite temporary occupancy declines, management is confident in achieving over 98% occupancy by year-end, with significant rental rate increases from renewals and new leases. The record acquisition volume and robust liquidity further strengthen NNN's financial foundation, enabling it to navigate market challenges and capitalize on growth opportunities.