• Core FFO per Share: $0.86, up 3.6% year-over-year.
• AFFO per Share: $0.87, up 3.6% year-over-year.
• Annualized Base Rent: Increased over 5% year-over-year.
• NOI Margin: 95.9% for the quarter.
• G&A as Percentage of Total Revenues: 5.6%.
• Free Cash Flow after Dividend: Approximately $55 million.
• Occupancy Rate: 97.7% at the end of the quarter.
• Acquisitions: 82 new properties for approximately $232 million with an initial cap rate of 7.4%.
• Dispositions: Sold 10 properties generating $16 million in proceeds.
• Liquidity: $1.1 billion available on a $1.2 billion line of credit.
• Net Debt to EBITDA: 5.5 times.
• Dividend: $0.58 per share, equating to a 5.4% yield.
• 2025 Core FFO per Share Guidance: $3.33 to $3.38.
• 2025 AFFO per Share Guidance: $3.39 to $3.44.

• Warning! GuruFocus has detected 5 Warning Signs with NNN.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• NNN REIT Inc (NYSE:NNN) successfully acquired 82 new properties for approximately $232 million, with an attractive initial cap rate of 7.4% and a long-term lease duration of over 18 years.
• The company has a strong balance sheet with nearly $1.1 billion available on its $1.2 billion line of credit, providing flexibility for future acquisitions.
• NNN REIT Inc (NYSE:NNN) reported core FFO of $0.86 per share and AFFO of $0.87 per share for Q1 2025, each up 3.6% over the prior year period.
• Occupancy remained high at 97.7%, reflecting the stability of the portfolio and its cash flows.
• The company has a history of 35 years of consecutive dividend growth, showcasing its long-term financial stability and commitment to shareholder returns.

Negative Points

• The company experienced a slight dip in occupancy from its long-term average due to the finalization of the eviction process.
• NNN REIT Inc (NYSE:NNN) anticipates some cap rate pressure in 2025 compared to the previous year, which could impact future acquisition pricing.
• The company is dealing with vacancies from two tenant defaults, which are expected to have a minimal impact on annual FFO per share.
• There is ongoing uncertainty in the macroeconomic environment, which could affect tenant growth plans and acquisition opportunities.
• NNN REIT Inc (NYSE:NNN) has a watch list of tenants, including 'At Home,' which could pose potential risks if economic conditions worsen.

Q & A Highlights

Q: 1Q acquisition pace was much higher than expected. Could you expand on that? Do you see less competition in the transaction markets? A: We operate in a highly competitive market, and the elevated acquisition pace was more about timing. We knew there were some M&A deals in the pipeline that landed in the first quarter. It was within our guidance range for the full year, primarily in the auto services sector, where there's consolidation.

Q: Given the recent economic volatility and ongoing uncertainty, can you talk about existing tenant appetite for growth? Are there any tenants who have hit the brakes on growth plans? A: Overall, tenants are re-evaluating their growth plans. Our pipeline for Q2 is solid, and tenants are still looking to grow at the margin. However, we don't expect any major M&A deals in the near term, as the pace has slowed down in the US.

Q: Acquisition cap rates ticked down about 10 basis points in the quarter. Are you expecting that trend to continue? A: We are not seeing a material move up or down for the second quarter pricing. It's in line with the first quarter. There might be slight variations, but we are not expecting significant changes in cap rates.

Q: There's been some negative headlines about discretionary-focused tenants like Dave and Buster's and Camping World. Do you have any concerns from a tenant perspective? A: Camping World is one of our greatest partnerships, and we actively manage that portfolio. Our rent coverage is strong, and we are comfortable with the property level coverage. Dave and Buster's exposure is primarily from Main Event, and the coverage is solid.

Q: Did less than expected bad debt contribute to 1Q results, and how much of your 50 basis points embedded reserves are known versus unknown? A: We had minimal bad debt or credit loss in the first quarter. At home is the primary focus on our watch list, but we have no credit loss associated with it at this point. We feel comfortable with our outlook for credit loss.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.