NNN REIT Q2 Earnings Call Highlights

Key Points

• NNN REIT raised its 2026 outlook for the second time this year, increasing AFFO-per-share guidance to $3.55–$3.59 and lifting the midpoint of acquisition guidance to $750 million. Lower-than-expected bad debt and stronger operating performance supported the upgrade.
• Second-quarter AFFO rose 5.9% year over year to $0.90 per share, while occupancy improved to 99.1%. NNN invested more than $290 million in 89 properties and maintained strong rent collections and portfolio performance.
• The company increased its quarterly dividend 3.3% to $0.62 per share, marking its 37th consecutive annual increase. NNN ended the quarter with $1.4 billion in liquidity and continued shifting dispositions toward vacant-property sales and re-leasing efforts.

NNN REIT NYSE: NNN raised its 2026 outlook after reporting second-quarter growth in adjusted funds from operations, higher occupancy and increased acquisition activity, while management said its portfolio remains in strong condition with limited near-term tenant credit concerns.

The company reported second-quarter adjusted funds from operations, or AFFO, of $0.90 per share, up 5.9% from a year earlier. Core FFO was $0.89 per share, up 6.0% year over year. Chief Financial Officer Vin Chao said results exceeded the company’s internal projections, primarily because bad debt was lower than expected at roughly two basis points of quarterly annualized base rent.

Annualized base rent rose more than 7% from the prior year to $959 million, supported by acquisition volume. NNN’s net operating income margin was 96.6%, up 70 basis points from the first quarter as occupancy increased and net real estate expenses declined. Free cash flow after dividends was about $56 million during the quarter.

Guidance Raised for Second Time This Year

NNN increased its 2026 AFFO-per-share guidance to a range of $3.55 to $3.59, representing its second guidance increase of the year. At the midpoint, the updated outlook implies approximately 3.8% year-over-year growth, compared with 2.7% growth in 2025, according to Chao.

The company also raised the midpoint of its annual acquisition guidance to $750 million from $600 million. Chao said the stronger earnings outlook reflects better-than-expected second-quarter performance, an additional $150 million of expected acquisition volume and a $500,000 reduction in expected net real estate expenses due to faster-than-planned vacancy reductions.

NNN lowered its full-year bad-debt expectation to about 40 basis points from 60 basis points previously, while keeping its second-half credit-loss assumptions unchanged. The company also increased the midpoint of its annual disposition guidance by $10 million to $140 million.

Chao said the updated guidance range was narrowed as the year progresses rather than expanded fully at the high end. He identified bad debt, the timing and volume of acquisitions, and the timing of capital-markets activity as key factors that could influence full-year results.

Acquisitions, Occupancy and Portfolio Management

During the second quarter, NNN invested just over $290 million in 89 properties at an initial cash capitalization rate of 7.3%. The acquisitions had an average lease duration of nearly 18 years and were concentrated in auto service, discount retail and early childhood education. The median purchase price was $2.1 million, while the average was $3.2 million.

For the first half of 2026, the company invested $430 million in 130 properties at an initial cash cap rate of 7.4% and an average lease duration of more than 18 years. Chief Executive Officer Steve Horn said cap rates have remained relatively stable over the past six quarters, although the company expects modest compression in the second half due to the makeup of its active pipeline and portfolios currently on the market.

Horn said most expected acquisitions are anticipated to come through direct, originated sale-leaseback transactions with relationship tenants. He described the company’s pipeline as robust, though he said NNN does not intend to assume potential transactions will close before they are completed.

The portfolio contained 3,774 freestanding, single-tenant properties at quarter-end. Occupancy increased 50 basis points from the first quarter to 99.1%, up 110 basis points from a year earlier. Rent collections were also strong, with less than five basis points of uncollected rent, Horn said.

Management said it sees particular acquisition opportunities in auto service, convenience stores and early childhood education, while limited-service restaurants and movie theaters have provided fewer growth opportunities. NNN completed a small early childhood education portfolio acquisition during the quarter involving a new relationship tenant that Chao described as having a strong management team, low leverage, attractive real estate and high initial rent coverage.

Horn said tenant mergers and acquisitions could affect future deal activity with individual tenants. He cited Mavis Tire’s announced agreement to acquire Pep Boys and Big Brand Tire’s agreement to acquire Belle Tire, which would create a network of more than 530 stores with over $1.5 billion in annual revenue. While acquired companies may no longer require NNN’s capital after a transaction, the company continues to seek new tenant relationships to support future growth, he said.

Dispositions Shift Toward Re-Leasing Vacant Assets

NNN sold 26 properties during the second quarter for approximately $37 million in proceeds, including 19 vacant assets. Income-producing properties sold during the quarter were primarily non-core assets and were disposed of at cap rates roughly 170 basis points below the company’s acquisition cap rate, according to Horn.

Management said the income-producing dispositions included lower-performing Ruby Tuesday and Bob Evans locations. Horn said sales can involve defensive portfolio management where tenants indicate they may not renew, as well as sales to buyers that place greater value on specific properties, including 1031 exchange buyers.

Through the first half, the company sold 35 vacant properties. Horn said NNN has largely completed the sale of vacant properties it wanted to dispose of and expects the majority of remaining vacant assets to be re-leased. Some re-leasing activity may begin contributing in the fourth quarter, while other properties could take until the third quarter of 2027 because of permitting and lease negotiations, he said.

NNN also said it remains focused on reducing movie theater exposure where properties have not fully recovered to pre-pandemic performance. Chao noted that the movie theater business has performed well this year, with stronger box-office activity and a recent S&P credit upgrade for AMC.

Balance Sheet and Dividend

NNN ended the quarter with $1.4 billion of available liquidity, no encumbered assets and 2.5% of debt tied to floating rates. Net debt to EBITDA was 5.7 times, unchanged from the prior quarter, while pro forma net debt to EBITDA including unsettled forward equity was 5.4 times.

During the quarter, the company increased its term loan by $200 million to $500 million. It swapped $400 million of that loan to a 4.1% all-in fixed rate and lowered spreads on its term loan and revolving credit facility by five basis points. NNN also sold roughly 6 million common shares on a forward basis at just under $46 per share and had approximately $272 million of unsettled forward equity as of June 30.

The company declared a quarterly dividend of $0.62 per share, a 3.3% increase that marked its 37th consecutive annual dividend increase. Chao said the dividend equates to a 5.3% annualized yield and a 69% AFFO payout ratio.

About NNN REIT (NYSE:NNN)

NNN REIT NYSE: NNN, formally known as National Retail Properties, is a publicly traded real estate investment trust focused on acquiring, owning and managing a diversified portfolio of retail properties across the United States. As a net-lease REIT, the company enters into long-term, triple-net leases with national and regional tenants, shifting most property-related expenses, including maintenance, taxes and insurance, to its lessees. This structure provides NNN REIT with predictable cash flows and a stable income stream rooted in essential retail uses such as convenience stores, dollar stores, drug stores and quick-service restaurants.

Founded in 1984 and headquartered in Orlando, Florida, NNN REIT has steadily grown its footprint through disciplined acquisitions and selective lease underwriting.

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