Earnings call transcript: NNN REIT Q4 2024 beats EPS estimates, stock rises

NNN REIT Inc. reported its fourth-quarter 2024 earnings, surpassing analyst expectations with an earnings per share (EPS) of $0.52 compared to the forecasted $0.484. The company’s revenue also exceeded projections, reaching $218.35 million against an anticipated $216.78 million. Following the announcement, NNN REIT’s stock price increased by 6.38%, reflecting a positive market reaction. With an impressive track record of raising dividends for 35 consecutive years and maintaining payments for 41 years, NNN REIT demonstrates remarkable financial stability, earning a "GREAT" overall financial health score according to InvestingPro analysis.

Key Takeaways

• NNN REIT’s EPS exceeded expectations by 7.4%.
• Revenue outperformed forecasts, contributing to the stock’s rise.
• The company maintained a high occupancy rate of 98.5%.
• Strategic acquisitions and dispositions were highlighted as key growth drivers.
• The stock price surged by 6.38% post-earnings announcement.

Company Performance

NNN REIT demonstrated robust performance in the fourth quarter of 2024, driven by strategic acquisitions and efficient portfolio management. The company acquired 31 new properties, enhancing its portfolio and ensuring long-term revenue streams. Despite a slight decrease in occupancy, NNN REIT maintained a strong position with a 98.5% occupancy rate. The company’s strong operational efficiency is reflected in its impressive 96.6% gross profit margin and healthy current ratio of 2.93x. InvestingPro subscribers can access 6 more key tips about NNN REIT’s financial strength and growth potential.

Financial Highlights

• Revenue: $218.35 million, surpassing the forecast of $216.78 million.
• Earnings per share: $0.52, above the estimated $0.484.
• Core FFO growth: 1.8% for 2024.
• Free cash flow: $196 million.
• Annual base rent: $860.6 million as of December 31, 2024.

Earnings vs. Forecast

NNN REIT’s actual EPS of $0.52 exceeded the forecasted $0.484, representing a positive surprise of 7.4%. This performance marks a consistent trend of beating earnings expectations, reinforcing investor confidence. The revenue also surpassed estimates, contributing to the company’s strong financial standing.

Market Reaction

Following the earnings announcement, NNN REIT’s stock price rose by 6.38%, closing at $38.06. The stock’s performance was well-received by the market, reflecting optimism about the company’s future prospects. This increase positions the stock closer to its 52-week high of $49.57, indicating positive investor sentiment. According to InvestingPro analysis, analysts have set price targets ranging from $41 to $48.25, suggesting potential upside. Based on InvestingPro’s comprehensive Fair Value model, the stock appears to be trading near its fair value. For detailed valuation insights and access to the full Pro Research Report covering NNN REIT, investors can subscribe to InvestingPro.

Outlook & Guidance

NNN REIT provided guidance for 2025, projecting Core FFO between $3.33 and $3.38 per share and AFFO between $3.39 and $3.44 per share. The company plans to invest $500-$600 million in acquisitions and expects dispositions of $80-$120 million. These strategic initiatives aim to enhance portfolio quality and drive growth. The company’s current dividend yield of 6.1% and five-year revenue CAGR of 6% demonstrate its commitment to delivering shareholder value. Investors seeking deeper insights into NNN REIT’s growth strategy and comprehensive financial analysis can access the detailed Pro Research Report, available exclusively on InvestingPro.

Executive Commentary

CEO Steve Horn emphasized the company’s commitment to long-term value creation, stating, "Our core philosophy remained unchanged, delivering long-term value with below-average risk for our shareholders." CFO Kevin Habbock expressed optimism about rent recovery, noting, "We remain optimistic that at the end of the day, we can improve upon our 70% recovery."

Risks and Challenges

• Potential cap rate compression due to increased market competition.
• Credit losses anticipated at 60 basis points, higher than historical averages.
• Challenges in re-leasing properties like Badcock and Frisch’s.
• Economic uncertainties that may impact tenant credit risks.

Q&A

During the earnings call, analysts inquired about re-leasing efforts for specific properties and potential acquisitions. Executives expressed confidence in quick re-leasing and highlighted a potential large family entertainment portfolio acquisition under consideration.

Full transcript - NNN REIT Inc (NNN) Q4 2024:

Holly, Conference Operator: Greetings. Welcome to the NNN Re, Inc. Fourth Quarter twenty twenty four Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Please note this conference is being recorded. I will now turn the conference over to your host, Steve Horn, CEO. You may begin.

Steve Horn, CEO, NNN REIT: Hey, thanks, Holly. Good morning, and welcome to NNN REIT’s fourth quarter twenty twenty four earnings call. Joining me today is the current Chief Financial Officer, Kevin Habbock and our incoming CFO, Vincent Chap. As outlined in this morning’s press release, NNN delivered 1.8% core FFO growth for 2024, alongside over $550,000,000 in acquisition volume. The year concluded with a strong 98.5% occupancy rate, while our dispositions of income producing assets were executed at a cap rate 40 basis points lower than our acquisition yield, including several strategic and defensive asset sales.

These achievements reflect the dedication and the expertise of our best in class team at NNN, positioning us well for the near term. Key highlights I’m particularly proud of for the year: thirty five consecutive years of annual dividend increases maintaining a sector leading twelve point one year weighted average of debt maturity and strategically positioning our executive team for the future. Despite the overall theme of maintaining a light capital markets footprint for 2024, our core philosophy remained unchanged, delivering long term value with below average risk for our shareholders. At its simplest, our strategy focuses bottom up investment approach, continuing to increase the annual dividend while maintaining a top tier payout ratio. FFO growth per share in the mid single digits over multiple years.

This disciplined approach drives our acquisition and disposition strategy as well as our balance sheet management ensuring we stay on track to achieve our objectives. Before diving into the market conditions and operational updates, I would like to formally welcome Vincent Childs to the executive team. Vincent joins NNN in early January and officially assumes the CFO role at the start of the second quarter. He brings extensive public company and investment banking experience with an expertise in capital markets, corporate finance, investor relations. I look forward to our partnership as we continue to grow NNN.

And now to Kevin. After over thirty years of dedicated service, including four CEOs and over $5,000,000,000 of cash dividends paid, Kevin’s commitment to excellence and an integral part of the fabric of NNN, his work ethic, leadership and passion for doing the right thing has been consistently evident, leaving an indelible mark that is woven deeply into the very DNA of NNN. Through every challenge, he has not only contributed to our success, but has shaped the values of the culture that will continue to guide us long after his departure. His legacy is not just in the work completed, but in the principles and standards he’s instilled to those who had the privilege to work alongside him. With that, Kevin, on behalf of the entire company, the Board, the analysts and the investor community, we want to express our heartfelt gratitude and knowledge, that you will undoubtedly miss.

As we move forward as you move forward to the next chapter in your life, we wish you nothing but the best. This is when you kind of wish you record these phone calls. Hey, as we move forward to the first quarter of twenty twenty five, NNN maintains a robust position. We anticipate another strong quarter of acquisitions and are making significant progress with the assets related to Frisch’s and Badcock Home Furniture. Kevin will provide a lot more detail on the activities concerning these tenants during the upcoming remarks.

Regarding the fourth quarter financial highlights, our portfolio now comprises 3,568 freestanding single tenant properties and they continue to perform exceptionally well. Occupancy decreased to 98.5 due to the challenges with two specific tenants. However, this rate remains above our long term average of roughly 98% plus or minus. And I anticipate the level increasing as the year progresses because as we report today, I feel good about the remaining tenants in the portfolio and the activities the leasing team is generating currently. In terms of acquisitions, during the quarter, we invested $217,000,000 in 31 new properties, achieving an initial cap rate of 7.6, average lease duration basically twenty years.

Over 80% of the capital deployed this quarter was allocated to our business relationship partners. Additionally, the long term projected yield on these acquisitions would be 8.8%, reflecting our preference for the sale leaseback acquisition model opposed to purchasing existing shorter term leases despite they may offer higher yields. They don’t align with the assessment of our optimal risk adjusted returns. Disposition activity was elevated this year with nearly $150,000,000 sold at a 7.3% cap. At the start of the year, as I mentioned earlier, the team identified several non performing assets for strategic and defensive sales, leading to more of a compressed spread between disposition and acquisition cap rate compared to previous years.

However, this proactive portfolio management enhances the overall strength of the portfolio as we move forward. You need to go back over a decade to find the acquisition year with an initial cap rate higher than our 2024 deal flow. The current pricing for the pipeline coming in this quarter will be slightly tighter than the fourth quarter of 7.6%. And as I look ahead in the next few quarters, I expect pricing to compress a little bit further at the margins due to the heightened competition as market players push to achieve high acquisition volumes. That said, I’m confident in our team’s ability to identify and execute the right risk adjusted deals to meet our 2025 annual objective.

With that, let me turn the call over to Kevin for the final time to provide more color and detail on our quarterly numbers and 2025 guidance.

Kevin Habbock, CFO, NNN REIT: Great. Thanks. Thank you, Steve. As usual, I’m going to start with a cautionary statement that we will make certain statements that may be considered to be forward looking statements under federal securities law. The company’s actual future results may differ significantly from the matters discussed in these forward looking statements, and we may not release revisions to these forward looking statements to reflect changes after the statements were made.

Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company’s filings with the SEC and in this morning’s press release. Okay. With that, headlines from this morning’s press release report quarterly core FFO results of $0.82 per share for the fourth quarter of twenty twenty four. That’s flat with year ago results once you adjust 2023 results for the incremental accrued rental income that we noted in footnote one on the press release. AFFO results were $0.82 per share for the fourth quarter, which was also flat compared to year ago results.

For the year, core FFO and AFFO were $3.32 per share and $3.35 per share respectively, And that results in a 1.8% increase in core FFO per share results for 2024 and a 2.8% increase in AFFO per share. These results were generally in line with our expectations and put us at the top of our previous guidance range. Results in the fourth quarter, did include $1,200,000 of lease termination fee income and for the full year of 2024, dollars ’11 point ’4 million, which as we noted throughout last year is well above historical norms and was above our full year twenty twenty three’s ’2 point ’4 million dollars of lease termination fee income. Also in the fourth quarter, ’20 ’20 ’4 G and A expense included a state franchise tax refund due to a retroactive change in Tennessee tax law that reduced G and A by $1,700,000 to $8,700,000 for the fourth quarter and to $43.443.0.44 $300,000 for the full year. And that represents 5.1% of total revenues for the year and 5.2% of total NOI.

Occupancy was 98.5% at quarter end, which as anticipated dipped 80 basis points for the quarter due to two failing tenants we talked about on last quarter’s call, more about which in a moment. Our AFFO dividend payout ratio for the year 2024 was 68.2% that resulted in approximately $196,000,000 of free cash flow and that’s after the payment of all expenses and dividends. We ended the quarter with $860,600,000 of annual base rent in place for all leases as of 12/31/2024, which would that would take into account all the acquisitions and dispositions completed through year end. So first, yes, a quick update on our two troubled tenants, which we discussed last quarter. First, Badcock Furniture, which was in liquidation.

They completed their going out of business sales and in the fourth quarter rejected the leases on all 32 properties we had leased to them. Prior to the fourth quarter, those leases produced $5,200,000 of annual base rent and that was 0.6% of our ABR at the beginning of the fourth quarter. Prior to rejecting the leases, Badcock paid us roughly half of what they would normally would have paid us during the fourth quarter. We’ve been working on plans to lease or sell these properties and we’ve had a good start in that effort given we just got possession of the stores mid fourth quarter. So by year end, we were able to release five of those properties at roughly our long term average of 70% rent recovery, again with no TIs for our vacancy releasing.

Additionally, we were able to sell six properties generating net proceeds of $21,800,000 which using prior bad cop rent on these properties would produce a 5.1% cap rate on those dispositions. So assuming we invested these sale proceeds at the fourth quarter’s ’7 point ’6 percent acquisition cap rate, this would result in generating 49% more rent on those stores than Badcock was previously paying us. If you combine the outcome of the five pre leased properties and the six sold properties, the rent recovery on those 11 stores is approximately 113% of prior rent. Now while these averages may not hold up for all Badcock’s, we are off to a very good start in terms of economic outcome as well as minimizing the downtime for this first batch of or call it 35% of our former Badcock stores. Next (LON:NXT), second tenant of note is Frisch’s, that’s a Midwest big boy hamburger concept that’s been around for several decades.

They only paid us half the rent owed us in the third quarter last year and they paid us no rent in the fourth quarter. We owned 64 Frisch’s properties at the beginning of the fourth quarter, which represented 1.5% of our annual base rent or $12,600,000 As you may recall, in this case, the tenant did not file for bankruptcy. So we had to go through the time intensive process of getting back possession of the stores through evictions. We’ve initiated that eviction process for all 64 stores and as of year end had possession of 33 stores. Of those 33 stores, we’ve released 28 of those stores to another restaurant operator.

Because we had a read on prior store sales for these properties and also in order to speed up the leasing process on a large group of property, we were willing to trade off some base rent for more potential percentage rent. So these 28 stores will produce approximately $2,800,000 of annual base rent, but we will also get seven percent of store sales above a fixed breakpoint. That rent commences, 05/01/2025. We’re not at this time, we’re not looking to articulate other lease terms, and as we have a number of other frish’s to release. We will soon have possession of all the former frish’s properties, and are in full releasing mode on that batch of stores.

Bigger picture and really the key point of the combined Badcock frish’s vacancy. Consistent with these early resolutions I just reviewed, we remain optimistic to A, get them at least re leased or sold more quickly than usual and B, hopefully improve upon our typical vacant property rent recovery of 70% versus prior rent with no TIs. We will provide further updates with first quarter results. But most importantly, when the dust settles on all of this and say 2026, we believe per share results should be impacted by less than 1% versus the prior rents we were getting from the original tenant. So a very modest impact on bottom line results when the dust settles.

Okay. With that, switching gears, today we initiated our 2025 core FFO guidance at a range of $3.33 to $3.38 per share and 2025 AFFO guidance with a range of $3.39 to $3.44 per share. Page eight of the press release gives you some details on the key assumptions underlying that guidance and that includes $500,000,000 to $600,000,000 of acquisitions, dollars 80,000,000 to $120,000,000 of dispositions, G and A expense of $47,000,000 to $48,000,000 and property expenses net of reimbursements of $15,000,000 to $16,000,000 and which is higher than usual due to the bad cock and Frisch’s vacancy. Hopefully, we will have the opportunity to drift FFO guidance higher as the year progresses as we have done in the past. Moving to the balance sheet, we ended the year with no amount outstanding on our $1,200,000,000 bank line.

So we’re in very good leverage and liquidity position as we roll into 2025. Our next debt maturity is November 2025 and our weighted average debt maturity stands at twelve point one years at year end. Maintaining our light capital market footprint, we funded 61% of our $565,000,000 of 2024 acquisitions with free cash flow of $196,000,000 dollars plus $149,000,000 of disposition proceeds. Net debt to gross book assets was 40.5% at year end, that’s down about 150 basis points from the year before. Net debt to EBITDA was 5.5 times at December 31.

Interest coverage and fixed charge coverage was 4.2 times, for 2024. And as a reminder, none of our properties are encumbered by mortgages. So we remain focused on working to appropriately allocate capital, which to us means ensuring we’re getting what we believe are sufficient returns on equity while controlling risk through property underwriting and maintaining a sound balance sheet. Valuing equity adequately, whether that equity is produced by free cash flow, disposition proceeds or new equity issuance is at the heart of growing per share results over the long term and it helps us not to confuse activity with achievement. And Steve, thanks for your kind words earlier.

In closing, I will say it’s very bittersweet for me to be on my last quarterly earnings call. I think I’ve been on well over 100 of them. NNN is in very good shape and its approach to navigating investment opportunities and capital markets is well ingrained in this institution. So I leave you, in the capable very capable hands of Steve and Vin and the rest of the team here at NNN. Thanks to so many of you on this call whom I’ve known and worked with for many years and who have been gracious to tolerate my many issues.

These, long term relationships have made the journey for me much more enjoyable and satisfying. And as I’ve said a number of times this past month, the boundary lines of my life have fallen in pleasant places and that has included my time and relationships in REITWORLD. It’s been a great ride and I can be nothing but thankful to the investor and capital markets community and especially my colleagues here at Triple N. I will cherish the memories and welcome the opportunity to stay in touch. With that, Holly, we will open it up to any questions.

Holly, Conference Operator: Certainly. At this time, we will be conducting a question and answer session. Your first question for today is from Brad Heffern with RBC.

Brad Heffern, Analyst, RBC: Hey, good morning everyone. Congratulations Kevin. Hope you have a great retirement. Knowing you, I suspect you’ve been saving up for it. And welcome to Vincent as well.

For the AFFO guidance, I’m a little surprised that you’re able to deliver this 2% growth just given the elevated lease termination from last year, the impact of Badcock and Frisch’s. There’s also this 4Q tax benefit. Is there some sort of offset to that that I’m not thinking of? Or just any color you can give on the bridge that would sort of preserve that growth number?

Kevin Habbock, CFO, NNN REIT: Yes, not in particular. We are having, I would say, somewhat better than expected kind of releasing outcomes or resolving air frushes and bedpack. That’s all happening more quickly. Particularly timing is of great value as you know in that process. And so that’s been very helpful.

And but yes, there’s no other big major items to speak of. At least termination fees are always we don’t give guidance and they’re always they’re so difficult to give guidance on. And so that’s that will play out the way that plays out during the year. But, but, yes, nothing else to speak to of note. Timing is really critical.

And we had a solid fourth quarter acquisitions, a solid second half of 2024 acquisitions. And that really accrues to the benefit primarily of 2025. And so all those things kind of add up to help push results along a little bit.

Brad Heffern, Analyst, RBC: Okay, got it. And then maybe you didn’t give this on purpose, but the $2,800,000 for the released frushes, how does that compare to the prior rent on those stores? And then for the percentage rent, is that set at a level where you would expect to regularly realize that right away or is that something that requires upside?

Kevin Habbock, CFO, NNN REIT: Yes, yes. So fair question. Yes, the $2,800,000 I would call it roughly 50% of prior rent. And we like I said, we were willing to take that kind of pain, if you will, on the annual base rent to get the benefit of what we think will produce notable potential percentage rent on those stores. We had the prior store sales, and this was a way again for us to speed up the process.

We just got these 33 stores back in the fourth quarter and we had them released in the fourth quarter. So it’s very quick again with no TI and so that we saw material value in that, in that part of the equation. And so because we had prior store sales, we’re optimistic that we’ll be able to achieve something north of our normal 70% rent recovery on releasing vacant spaces. And we’ll see how much better we can do than that, but we think there is upside there.

Brad Heffern, Analyst, RBC: Okay. Thank you.

Holly, Conference Operator: Your next question is from Spencer Glumter with Green Street. Thank you.

Spencer Glumter, Analyst, Green Street: I’m just curious on the transaction front, what you guys have been seeing in terms of 4Q activity and then 1Q, just as it relates to the mix of portfolio deals versus one off for anything that you’re doing outside of relationship deals?

Steve Horn, CEO, NNN REIT: Yes. I mean, outside the relationship deals, there has been much large scale portfolios for our market. It’s been a little bit slow. That’s why we’ve been mining 80% of our deal flow in the fourth quarter was through the relationships, which one of the transactions was pretty notable, which did not get marketed just as a direct deal. First quarter, is looking pretty good right now, but it’s a lot what I would call doubles, kind of that $20,000,000 to $30,000,000 deal range.

We’re not seeing the $150,000,000 to $200,000,000 deal. Now there is one potential large portfolio coming out kind of in the family entertainment space that we’re aware of, but it’s a little early to save the pricing on that right now.

Spencer Glumter, Analyst, Green Street: Okay. And then Kevin, yes, congratulations. We will miss you. One, just last one for you. Has anything changed since last quarter just in terms of the amount of credit losses being underwritten for ’25?

Kevin Habbock, CFO, NNN REIT: Yes, not materially. So, in our guidance and I might or should have added this into the comment on the last question from Brad, was for this year, we’ve assumed 60 basis points of rent loss. Historically, we’ve been more in the closer to 100 category. We typically don’t experience that level. So we think we’ve got enough baked in for credit loss for this year.

We don’t really have any other tenants in the immediate horizon that it feels like we have real exposure to in terms of credit loss A and B, that 60 basis points obviously does any pain from bad cock and frish is above and beyond that 60 basis points. So let’s put it that way if folks are wondering. So, yes, we think we’re in good shape on that front. And like I said, are not pointing investors to any other notable concerns at the moment for Penn and Credit.

Holly, Conference Operator: Okay. Great. Thank you. Yes. Your next question for today is from Michael Goldsmith with UBS.

Michael Goldsmith, Analyst, UBS: Good morning. Thanks a lot for taking my questions billing away President, I’ll ask you to walk us through kind of what you baked into your guidance for frishies and bad cuts related to the timing of the leasing and recovery rate for 2025? Thanks.

Kevin Habbock, CFO, NNN REIT: Yes. And I’ll in my usual way, I’ll be sufficiently elusive because it’s a work in process and progress, I should say. And it’s unfolding as we speak. The only thing I can say is we remain historically over the years, re leasing something in nine or twelve months was kind of normal and typical. It’s going along more quickly than that on both Badcock and Frisch’s as evidenced in the fourth quarter and that continues into the first quarter.

I mean, I don’t have a lot of details, to kind of give you on that releasing effort. Like I say, it’s very current and we, it’s just tough for us to put a hard stake in the ground on that as we speak. But it’s only to say it’s going better than normal in terms of timing as well as economic outcomes.

Michael Goldsmith, Analyst, UBS: So just to clarify that, right, like so we should assume that you’re baking in you’re baking in something better than historical of the ninety twelve months and the 70% recovery rate, but the rest is I guess kind of you’re not giving anything else on beyond that.

Kevin Habbock, CFO, NNN REIT: Yes. No, we’re in a state of flux until we get some of these pinned down. But we’ve got a number of deals in the hopper working and we’ll see how that all shakes out. But the process and our guidance has the opportunity to drift higher hopefully throughout the year, if we can improve upon things.

Michael Goldsmith, Analyst, UBS: Got it. And then on the 60 basis points of credit reserve for 2025, right, like lower than what you’ve seen historically or what you typically bake in 100 basis points. Maybe

Smedes Rose, Analyst, Citi: you

Michael Goldsmith, Analyst, UBS: can just provide some context in terms of what do you what’s the long term average for that and how that 60 basis points compares to it just to put some perspective because you just went through two large events and now you’re reducing what you’re baking in for the year.

Steve Horn, CEO, NNN REIT: So I’m just trying to understand.

Kevin Habbock, CFO, NNN REIT: Yes, fair question. Yes. Absent, which was a highly unusual two tenants simultaneously going away, which that was 200 basis points. And so historically, our credit loss typically runs in the kind of the 30 to 50 basis points kind of range. And so there is some assumption on our part that we’ve got two of the two of our biggest credit concerns out of the way in some respects and resolved outside of that 60 basis points that we really don’t need 100 in our guidance.

And so we’re we frankly hope that there’s maybe a degree of conservatism in the 60 basis points, given our historical averages and like I say, having cleared out two of the weaker links, if you will, in our tenant credit.

Michael Goldsmith, Analyst, UBS: Congrats again.

Kevin Habbock, CFO, NNN REIT: Thank you.

Holly, Conference Operator: Your next question for today is from John Kielczkowski with Wells Fargo (NYSE:WFC).

John Kielczkowski, Analyst, Wells Fargo: Good morning and congrats again, Kevin. Maybe if we could start just kind of go back to the transaction market here and just talk about how deal flow looks at this point versus maybe this time last year. I know you talked about it sounds like elevated deal flow, but also elevated competition. Maybe how do you think that that could manifest in changes to your acquisition guide near the lower high end or if there’s room to maybe push above the high end? And then when you talk about that elevated competition, who is that?

What are the returns that they’re looking for?

Steve Horn, CEO, NNN REIT: Yes. No, it’s a good question, John. As far as our guide for the year, historically, we’ve beaten our guide over many years. Just the visibility is only ninety days from the transaction market. So we’re conservative, so we usually start on the lower end.

What I know is pricing in the first quarter. I’m confident we have a good start to that guide for the year. The market is elevated as far as deal flow compared to last year. Last year, when we came into the year, it was more of a capital markets issue that we didn’t want to access the equity market. So we set our expectations for the year on the lower end to primarily use the free cash flow to fund acquisitions.

As far as competition, I’ve been doing this twenty plus years. Kevin has been doing it thirty plus years. It’s always a competitive market. It’s just the names have changed. There’s only a few of us that have been around that long.

Now as far as there’s some private money coming back into the market a little bit, but their return expectations are a little bit higher. But more importantly, the amount of money they have to deploy into acquisitions is significantly higher than ours. So they are going to go after what we would call the elephant deal flow, not the, analog deal flow or base hits. So they really don’t play in our world. And again, 80% of our deal flow came from, relationships, which we have a pretty good moat, around that, to avoid competition playing in our field.

But no, the overall, I feel good sitting here today on the call as far as the activity, what’s in the pipeline, what our team is evaluating. And there’s no deals our competitors have done that we did not see. So until then, I know our acquisition guys are doing the right thing.

John Kielczkowski, Analyst, Wells Fargo: Great. And I appreciate the analogy. And maybe if we could jump to rent coverage levels. I know they’re not provided, but if you can kind of give any color on how those are trending within the portfolio, maybe particularly in the carwash and QSR space, where we’ve heard of some pressure anecdotally?

Steve Horn, CEO, NNN REIT: Yes. I mean, let’s just address the carwash space. NNN does a fabulous job meeting with management teams. We view ourselves indirectly as an investor in the company. So we meet with all the management teams, hear their game plan.

I can argue that we institutionalized the car wash business doing sale leasebacks back in 02/2005 when we initially started with Mr. Car Wash, our number two tenant. So we have a fair amount of experience and we have zero zips. And that’s kind of the recent headline in the car wash industry. Our car wash is just Mr.

Car Wash year over year rent coverage went up. It’s north of four. And the other car washes that we’ve been doing kind of in the 2.5 to 3.5 range, and they’re performing well. We’re highly selective when we do car washes that we actually, for the most part, shut it down in the fourth quarter, and let things kind of stabilize. QSR, we’re kind of seeing sales flat for the most part.

They’re still trying to absorb the labor issues where their margins got compressed. But overall, I’m comfortable with our QSR exposure, and there’s no tenants that we’re concerned with on the QSR or car wash side of things currently. Great. Thank you.

Holly, Conference Operator: Your next question is from Farrell Granath with Bank of America.

Spencer Glumter, Analyst, Green Street: Hi, good morning. This is Farrell Granath. I want to say congratulations to both Kevin and Vincent for your next chapters in your life. But I also wanted to ask about the type of demand that you’re seeing for both the Badcock and Frisch assets. Are you receiving a lot of inbounds?

And are they within the same industry verticals?

Steve Horn, CEO, NNN REIT: We’re seeing a ton of interest on the Frishes and a fair amount on the Badcock. As Kevin addressed on it in his remarks, we’re doing really well with the Badcock, but it’s a portfolio and the easier assets to sell are the good ones and they go first. So our team has some work to do as we move through the process. As far as industries, yes, you’re getting a lot of restaurant interest, and it’s not only casual dining, there’s QSR, again, back to car washes, there’s a fair amount of car wash interest and auto service. So it’s across a wide range because the reality is, there are 5,000, six thousand square foot boxes on an acre and a half.

There’s a lot of tenants that like that use. I would be concerned if they were 20,000, 30 thousand foot boxes, that makes it a little more challenging to release. But a small restaurant acre and a half well located, hard corner, there’s a lot of users for those.

Spencer Glumter, Analyst, Green Street: Okay. Thank you. And I also wanted to comment on the 50 basis points. I know we’ve been harping on it a little bit of the credit loss assumed in guidance. I know you made some commentary about there’s no near term tenants that are raising a concern and that was also a factor in the reduction.

But do you still maintain a credit watch list and is there a certain percentage of ABR that’s associated with that?

Kevin Habbock, CFO, NNN REIT: Yes. Those who know me well, I’m perpetually worried about a lot of tenants, always. But none rise to the level that influence our thoughts around what credit loss might be for this year. And so, but yes, we’ve talked about names over the years. We don’t need really talk as much about Frisches and Badcock anymore, but At Home has been one that we’ve thought about and still watching very leveraged.

AMC, of course, has been on the list, but to be quite candid, we are past the point that they seem to have found, A, their business is getting better, and so the fundamentals are better, and B, they’re perpetual issuers of capital that has kept landlords very happy. And I have really no near term concerns about their ability to pay us rent in 2025. And so the ones that remain on the list, and there’s a number of them, A, they’re generally are not larger exposures and B, I don’t feel like they’re imminent kind of at risk of not paying rent. But we think the 60 basis points should comfortably handle whatever exposure we have on that list.

Spencer Glumter, Analyst, Green Street: Thank you so much.

Kevin Habbock, CFO, NNN REIT: Yes. Thank you.

Holly, Conference Operator: Your next question for today is from Smedes Rose with Citi.

Smedes Rose, Analyst, Citi: Hi, thanks. I just wanted to follow-up. You mentioned that you might see or there might be a larger portfolio of family entertainment assets coming. Is that something that you I mean, I guess price depending, but is that an area that you would be interested in increasing your exposure to if it were to come to market at a price that is reasonable to you?

Steve Horn, CEO, NNN REIT: Yes. Making sure everything fits in our underwriting philosophy, price being important. Yes, it’s something if the economics make sense, but more importantly, the real estate fundamentals make sense, it’s something we would look at and do it. Now the question is, at the start of the year, as you know, Speed, there’s people are coming out with guidance and give overly aggressive amount of acquisitions. If I had to do $1,500,000,000 I’d probably have this answer a little more confident like, yes, Xfinity, we would do it.

But with the guide trying to do kind of that $500,000,000 6 hundred million dollars we get a little bit more conservative on the underwriting and our box gets a little bit tighter. And I think that’s kind of proven out with the bad stock and the frushes on our re leasing efforts.

Smedes Rose, Analyst, Citi: Right. I just wanted to ask you kind of big picture too. It sounds like you expect kind of a slight sort of maybe downward bias in cap rates over the course of the year, given some of the things you’ve talked about. I mean, so does this sort of imply, I guess, that the spreads for you are compressing a little bit or how and given elevated debt cost or how are you kind of thinking about your investing spreads at this point?

Steve Horn, CEO, NNN REIT: As far as the cap rates, yes, I mean, at the margin, I’m seeing them go down. It’s at ten, fifteen basis points. But that’s just a result of having to win deals, and our competition is going to drive them down. But as far as looking at spreads, Kevin, do you want to answer it?

Kevin Habbock, CFO, NNN REIT: Yes. I mean, our typical sixty-forty roughly equity and debt and the way we think our debt long term ten year debt today for us is around 5.5%. So that’s called 40% in the equation. And then the way we think about equities when we’re making these kind of capital allocation investment decisions that we’ve historically we’ve burdened our equity internally at about 8.5%. So that creates a weighted average cost of capital hurdle, not we don’t need a spread above our hurdle, in the low sevens.

And so as long as we’re kind of operating in that low to mid seven range, we feel like we’re producing sufficient returns to shareholders and returns on equity to allow to consider making capital allocation or investment.

Smedes Rose, Analyst, Citi: Okay. I appreciate it. And I just I wanted to ask you just one quick one. We’ve just seen some negative headlines around Denny’s (NASDAQ:DENN) and I was just wondering is that sort of showing up on your screen at all? Sorry for us to know which ones you own and which ones they’re talking about.

Is that on your watch list or?

Kevin Habbock, CFO, NNN REIT: Yes. We own some Denny’s. I will say again, which is critical for us is the price per pound that we own those stores at and therefore the rents on those stores are very attractive. And so and some of them are operated by franchisees of Denny’s. And so, yes, sometimes it’s hard to when you’re looking at headlines to appreciate kind of the, whether that’s particularly applicable to us or not.

But yes, the chain Veni’s has been struggling for a while, don’t get me wrong. We’ve been watching that for a while, but we feel like our locations and particularly the rents on our locations are at levels that we’re not too anxious about.

Smedes Rose, Analyst, Citi: Okay. Thank you very much.

Steve Horn, CEO, NNN REIT: Yes. Real quick, Smedes, our Denny’s for the most part were bought in 02/2006. Yes, yes.

Smedes Rose, Analyst, Citi: Got it. Okay. Thank you.

Holly, Conference Operator: Your next question is from Ronald Kamvin with Morgan Stanley (NYSE:MS).

Ronald Kamvin, Analyst, Morgan Stanley: Hey, congrats Kevin and Vin. Just two quick ones. One obviously is just on the bad debt. And I’m sure as you guys sort of thought about the guidance for this year, you debated whether it was 100 basis points like historical or going with 60 basis points. I’m just wondering like what sort of got you comfortable to be able to put this number out?

The CFO transition is happening, it’s still early in the year. Is it literally just because the two bankruptcies went through or comfort to go out with the 60 basis points here versus 100 basis points historical? Thanks.

Kevin Habbock, CFO, NNN REIT: Yes. Well, historically, we’ve not ever really used the 100 basis points. It’s more been kind of that 30 to 50 kind of range. And so that’s part of it. But two, to your point, yes, some of the deadwood is cleared out already, and the near term most acute credit concerns are accounted for elsewhere, if you will, outside of that 60 basis points.

And then lastly, then layered on top of that, we just don’t have any particular tenants that were, have immediate concerns about. And so all those things made us comfortable to do that. And so that’s how we got there.

Ronald Kamvin, Analyst, Morgan Stanley: Great. And then my follow-up question, which is a quick two parter. One is just, I think you talked about releasing the boxes are probably happening faster than you expected. Can you talk about sort of

Kevin Habbock, CFO, NNN REIT: the mark to market on

Ronald Kamvin, Analyst, Morgan Stanley: rents is number one? And then number two is just on the debt coming due this year. What are the plans for that? And where do you think you could issue? Thanks.

Kevin Habbock, CFO, NNN REIT: Yes. On terms of I’ll speak to the debt first. Just yes, we think ten year debt for us today is around 5.5%. That maturity is not till November, and so we have a good bit of flexibility in deciding where to actually execute a transaction to refinance that debt. And obviously, along the way, we could always hedge some of that or lock in some of that interest rate risk ahead of time if we wanted to.

But historically, we’ve not given guidance on capital markets activity. So I don’t have much more specific than that. As it relates to re leasing spreads on the frishies at Badcock, I mean the initial round of Badcock is if you look at the re leasing, which the lease portion was closer than our typical 70% kind of number. But if you layer in the dispositions on bad cop, that was at well above and you reinvest those sale proceeds at kind of our mid-seven percent kind of acquisition cap rate, you end up with Brent well above 113% combined for the release and the disposition sold Badcock. And so that’s going very, very well.

As I said, we don’t expect that likely to hold up at those levels, but the early indication for the first thirty five percent of our bad comp exposure is going very well. And so we’re encouraged about that. On the fridges, I think it will be more of the same. We in the first big batch, we took we’re willing to take a little bit of pain on annual base rent and we’ll capture more potential rent from percentage rent upside there. And so we think we’ll we can get back to equal to or better than our historical 70% kind of number.

We know what the store sales were at those locations previously. And we know that given that the company went out of business, maybe they weren’t run the best that they could have been. And so we’re optimistic about that. But we think timing will go faster than typical for us and we remain optimistic that at the end of the day, we can improve upon our 70% recovery.

Ronald Kamvin, Analyst, Morgan Stanley: Great. Thanks so much.

Holly, Conference Operator: Your next question for today is from Rich Hightower at Barclays (LON:BARC).

Rich Hightower, Analyst, Barclays: Hi, good morning guys. And again, congrats to Kevin on a great career in REITs and congrats to Vin on the incoming into that seat. Obviously covered a lot of ground on the call this morning, but I want to go back and I must have missed this, but on the re leasing of the Badcock space in particular, did you guys mention maybe the retailer tenant mix that is occupying that space or what that looks like? And then I’ve got one follow-up after that.

Steve Horn, CEO, NNN REIT: Yes. No, we didn’t mention the retailer mix. There’s actually a couple of them on the re leasing. We’re home furniture tenants. And then the other re leasing aspect, Kevin is making the assumption, we sold those assets and then redeploying the sales proceeds at a 7.6% as far as the recapture rate.

Kevin Habbock, CFO, NNN REIT: But yes, it’s coming from a variety on the Badcock, it’s a variety of uses. We’ve seen interest from kind of medical, kind of space. And so it’s it’s a it’s a it’s a potpourri. It’s a potpourri, yes. Some hardware.

It’s a real mixture of uses for that box is 17,000 square feet. Our rent was $9 a square foot from Badcock. And so, it’s sufficiently fungible and we think we can end up with a reasonable outcome there on the releasing efforts.

Rich Hightower, Analyst, Barclays: Okay, great. I’m going to make sure to put potpourri in my notes here. Potpourri, it’s a big seller, yes. And then just a quick follow-up as I kind of scroll through the top tenants list. I mean, I appreciate the fact that maybe no immediate watch list worries as you guys have articulated on the call so far.

But if I think about Mr. Car Wash, Dave and Buster’s, Camping World and I just look at the equity values of all of those companies, some of which are coming off of maybe a post COVID high and the Car Wash business is kind of its own separate category. But is there anything differentiating about your locations in particular that makes you less worried than perhaps the average location in the portfolios generally for those companies?

Steve Horn, CEO, NNN REIT: Well, I’ll admit, Mr. Car Wash, we primarily did in 02/2006 timeframe a long time ago. And our cost basis in those assets, and as I mentioned earlier in the call, is extremely low, but the rent coverage on the property level is north of four at the Mr. Car Wash exposure. So very comfortable with those assets, because Mr.

Car Wash is a true operator of car washes. Unlike there’s a lot of entrants in the car wash where private equity money followed, so they were maximizing proceeds, so they didn’t have to put any equity in the deals. Camping World, I would say over the years, we’ve done business with them for a long time, and we’ve called the portfolio with management of substitution or dispositions to ensure that we have the assets that they want to operate in the long run. So and it’s kind of same pool with Dave and Buster’s. We’ve been doing business with them for a long time, and that business is, the asset level for our cost base has been holding up.

Kevin Habbock, CFO, NNN REIT: Okay, great. Thank you.

Holly, Conference Operator: Your next question is from Rob Stevenson with J and E.

Steve Horn, CEO, NNN REIT0: Good morning, guys. Kevin, you talked about the revenue from Babcock and Frisch’s, but can you talk a little bit about any material elevation of expenses that you guys are getting hit with today that might burn off over the course of 2025?

Kevin Habbock, CFO, NNN REIT: Yes, yes, fair question. Yes, so yes, you noticed in our 2025 guidance, the net property expense number of $15,000,000 to $16,000,000 is probably $4,000,000 to $5,000,000 higher than what I would think of as kind of normal for NNN in most years. And so you can attribute pretty much all of that related to bad cop and frictions. So as you roll into 2026, yes, that should fade away.

Steve Horn, CEO, NNN REIT0: Okay. That’s helpful. And then, are you guys expecting to put you talked about releasing the frushes without any CapEx. Are you expecting to put any material amount of money in the Badcock assets or anything else in the portfolio in 2025, from a leasing or from a development redevelopment standpoint?

Kevin Habbock, CFO, NNN REIT: We always consider it. We’re our but you know our predisposition is, we’ll trade off lower rent for no TIs generally. That’s not an absolute rule. Will it be some property or two or three that you we make the decision that’s the best economic decision to make? We so we may put some in, but it shouldn’t be a large number in the scheme of, of triple n size.

And so, you know, and so, yeah, it I don’t think we’re going to waiver too much from that. But there, there might be a little bit more repairs and maintenance a little bit. Some of that will flow through property expenses rather than TI CapEx. But yes, we’re inclined to not think there’s a whole lot of value in TIs. But from time to time, we’ll consider it.

And if it fits in the equation, if you will, in terms of what we’re going to get rent, what the alternatives are, we may pull the trigger on some of that.

Steve Horn, CEO, NNN REIT: But as we sit here right now, there’s no deals in the pipeline that require any significant TI.

Steve Horn, CEO, NNN REIT0: Okay. And then Steve, other than the Kent convenience stores, any major concentrations in the fourth quarter acquisitions that you guys did?

Steve Horn, CEO, NNN REIT: No, it was Kent Quick, was the primary one. And just kind of give you a little bit of color, that relationship goes back as far as the first deal we closed was 2019 and we did a little bit in 2019, ’20 ’20 or 2020. And then two years later, we did a they did an M and A opportunity in Florida, which we helped finance that, and then we did a fairly substantial sale lease back in the fourth quarter with them. So it’s just a relationship that we’ve maintained for a long time. And then the other one was Superstar Car Wash that rolled into our top 20.

That was just some reverse build to suit stuff we had in the pipeline over the year that completed in the fourth quarter.

Steve Horn, CEO, NNN REIT0: Okay. And then Kevin, is my going away present for you one last one here. You talked about the lumpiness of term fees. Anything known in 2025 thus far either received or known of any materiality?

Kevin Habbock, CFO, NNN REIT: Yes. I mean not that we are giving any kind of guidance on it. So that’s which we don’t. We’ve historically not. Historically, so the answer is, we’re not putting out any guidance on that front.

But historically for us, we generate about $3,000,000 a year historically of lease termination fee income. So I expect there to be some. It’s just it’s a bit of a wild card as to knowing the amount and the timing for that over the course of the year, which is why we don’t give guidance.

Steve Horn, CEO, NNN REIT0: Okay. Thanks guys. Have a good day.

Holly, Conference Operator: Your next question is from Alex Fagan with Baird.

Steve Horn, CEO, NNN REIT1: Hi,

John Kielczkowski, Analyst, Wells Fargo: congrats, Kevin. It was a pleasure to work with you and also congrats, Vin, excited to work with you. Kind of to go off the last question on the termination income, is there anything assumed in guidance on that front?

Kevin Habbock, CFO, NNN REIT: Yes, we always have a general assumption in there for lease term. Like I say, normal for us is $3,000,000 a year, and we’ve made some assumptions for that and guidance. But like I said, we don’t publish that because to be candid, we never know precisely where that’s going to end up ourselves. And so we’re reluctant to kind of go out in public and put a stake in the ground on that number.

John Kielczkowski, Analyst, Wells Fargo: Fair. And then does the non reimbursed expense guide assume additional leasing of the recently vacated assets?

Kevin Habbock, CFO, NNN REIT: Yes. It had some in there, but it’s the expenses will hit if you’re talking about the non reimbursed property expenses, the guidance of $15,000,000

Steve Horn, CEO, NNN REIT2: to $16,000,000

Kevin Habbock, CFO, NNN REIT: that should be fairly steady throughout the year. I mean, I think it’s probably a little bit more front half loaded and a little less second half loaded going from memory. But just as we get things leased up, then some of those property expenses become the tenant’s obligation. So, but that’s all loaded into our thoughts around getting these properties resolved, sold or released.

John Kielczkowski, Analyst, Wells Fargo: Got it. Thank you.

Holly, Conference Operator: Your next question is from Linda Tsai with Jefferies.

Steve Horn, CEO, NNN REIT3: Hi, thanks for taking my question. Congratulations, Kevin. You have a lot of fans and will be missed and congrats to Vinh too. The increase in G and A guidance, you highlighted a one time benefit from last year, but you’re also good at cost control. Do you think there’s some room on that G and A guidance to come in lower?

And then Kevin, is there a charge for your retirement embedded in that range?

Kevin Habbock, CFO, NNN REIT: Yes. So the way we’ve handled executive retirements, we have a separate line item for that. So whatever cost involved with Kevin is will be in that line item. So to answer your question, it’s not G and A. I guess the one thing to keep in mind on G and A is twenty twenty four’s actual number came in at, where are we, dollars 44,300,000.0.

And so to normalize that, you really need to add, if you will, that $1,700,000 that would take it up to $46,000,000 And so compare the $46,000,000 to our next year guide, 2025 guide of $47,000,000 to $48,000,000 is the way I would kind of think about it. So there’s a kind of a general inflationary increase in that number. But again, as a percent of revenues, it’s not moving materially.

Steve Horn, CEO, NNN REIT3: Thanks. And then just one other one. Any thoughts on how Dollar Stores are thinking about their store expansion plans these days?

Steve Horn, CEO, NNN REIT: Elena, it’s Steve. We don’t do much with the Dollar Stores. It has nothing to do with the business model. It was just always primarily the real estate. But over the years, they’ve been one of the big expansion groups for the net lease business.

But yes, we don’t regularly call on the Dollar Store corporate and or developers. So don’t have much insight for you there.

Holly, Conference Operator: Thanks. Your next question for today is from John Massocca with B. Riley.

Steve Horn, CEO, NNN REIT2: Thanks for taking my questions. And Kevin, thank you for taking all of our questions over the many, many years. Just kind of looking for a little color maybe on the outlook for 2025 lease expirations, anything notable that stands out? And I guess you’re kind of expecting the typical recovery rate on rent that’s expiring?

Kevin Habbock, CFO, NNN REIT: Yes. I think it should play out typically. I think we’re a little bit heavy in convenience stores in terms of lease expirations this year, and they’re pretty solid performers. So we’re not expecting adverse outcome relative to historical norms. So, but yes, nothing of note in my mind.

Steve Horn, CEO, NNN REIT2: Okay. And then maybe bigger picture, given transaction volumes have typically been focused on relationship tenants, How much of the investment outlook beyond maybe the LOI and TSA portion of the pipeline is contingent on those tenant partners being kind of active in the M and A space? And I guess the M and A space being kind of robust more broadly.

Steve Horn, CEO, NNN REIT: Outside of kind of let’s go back pre-twenty twenty, I would say a lot of our relationship business was driven by the M and A market side of things. And then kind of post COVID, when the M and A market was slowing down, but yet our large sophisticated tenants still felt the need to grow. So they did a lot of kind of development from themselves. So we were kind of leaning in. If you recall a couple of years ago, where our build to suit, our split funded deal ramped up to $300,000,000 where historically it was kind of $100,000,000 But what I’m seeing in 2025 is the M and A market is picking up a little bit in the auto services and convenience store.

That part of our guide does include a little bit of the M and A, but it’s definitely not dependent on the M and A side of things and the relationships.

Steve Horn, CEO, NNN REIT2: Okay. And then you touched on it a little bit, but in terms of the released Frisches assets or former Frisches assets, is there any reason the percentage rent would be a 2026 event versus 2025? Or should we kind of think about that as something that potentially impacts your 2025 earning leases get started?

Kevin Habbock, CFO, NNN REIT: Well, beyond the fact that the rent on those that first batch doesn’t start till May 1, so there’s that. So in the first half, very, you know, call it zero, close to zero. And so but yes, starting in the second half of this year, you should get some ramp up and percentage rents related to that batch of stores. And obviously for full year next year as new restaurant operators get things up and running.

Steve Horn, CEO, NNN REIT2: Okay. That’s it for me. And Kevin Montacomo, my peers in wishing you the best going forward.

Kevin Habbock, CFO, NNN REIT: John, thanks very much. It’s been fun.

Steve Horn, CEO, NNN REIT: We’ll miss them at breakfast.

Kevin Habbock, CFO, NNN REIT: Yes, exactly. You know what I was going to order, oatmeal.

Steve Horn, CEO, NNN REIT: For $30

Holly, Conference Operator: Your final question for today is from Ometeo Okusanya with Deutsche Bank (ETR:DBKGn).

Steve Horn, CEO, NNN REIT1: Hello, I’m locked up. Also a member of the Kevin Fan Club, you will be missed. Best of luck in retirement. And also a member of the Vin Fan Club. So Vin, welcome aboard at NNN.

My question is around acquisitions. Again, the $500,000,000 to $600,000,000 outlook for the year and also the disposition outlook. Just kind of curious from an acquisition perspective, retail categories that maybe you are looking to get a little bit more invested in versus that on the sales side category that you’re looking to lighten up on? And also if the world of tariffs kind of impact any of that in terms of industries have suddenly become more attracted or less attracted to?

Steve Horn, CEO, NNN REIT: Yes, Tayo, you know our philosophy. We look at the real estate more than the category. Who’s operating the site isn’t as important as long as the real estate fundamentals are in line with market. Because at the end of the day, if that tenant goes away, we get market rent back. So but because we are so relationship focused, I see 2025 being very similar to our current portfolio, where we will dig up our convenience stores and auto service sectors, and we’re starting to see a little bit more activity in the QSR side of things, which I really like the QSR, because the that acre and a half 3,000 square foot box is very fungible on the real estate side.

So I’m looking more for QSRs, convenience stores and auto services, percolating up in 2025. As far as dispositions, that’s more even if it’s a good industry, these retailers don’t always pick performing assets over a fifteen, twenty year lease. Markets change, consumer behavior changes. So we work really hard with the retailer and that’s where the relationship value is. And I think that’s why 85% of our leases renew at the end of terms.

As we look to kind of prune the portfolio each year a little bit, that $100,000,000 range and start weeding out the underperforming assets where the retailer assists us in determining which ones to sell. So it’s not a particular category. I would say last year, medical, kind of urgent care was a targeted sector we disposed of, and we kind of took advantage of the COVID bump on their sales and sold those into the $10.31 market. But this year, there’s not a particular sector I’m looking to get out of. It’s more individual assets that aren’t performing up to the levels of the tenant would like.

Kevin Habbock, CFO, NNN REIT: Thank you very much.

Holly, Conference Operator: We have reached the end of the question and answer session. And I will now turn the call over to Steve Horn, CEO, for closing remarks.

Steve Horn, CEO, NNN REIT: Hey, guys. I appreciate you guys taking the time today. Thanks for joining us. And we’ll see you guys in person in the upcoming conference season. Kevin, one last goodbye.

Kevin Habbock, CFO, NNN REIT: Thank you. Thank you. All right, guys. Thank you. Good bye.

Thank you all.

Holly, Conference Operator: This concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.

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