• Core FFO Growth: 1.8% increase for 2024.
• Acquisition Volume: Over $550 million for 2024.
• Occupancy Rate: 98.5% at year-end 2024.
• Acquisitions: $217 million invested in 31 new properties with a 7.6% initial cap rate.
• Dispositions: Nearly $150 million sold at a 7.3% cap rate.
• Core FFO per Share: $3.32 for 2024.
• AFFO per Share: $3.35 for 2024, a 2.8% increase.
• Lease Termination Fee Income: $11.4 million for 2024.
• G&A Expense: $44.3 million for 2024, 5.1% of total revenues.
• Annual Base Rent: $860.6 million as of December 31, 2024.
• Dividend Payout Ratio: 68.2% for 2024.
• Free Cash Flow: Approximately $196 million after expenses and dividends.
• 2025 Core FFO Guidance: $3.33 to $3.38 per share.
• 2025 AFFO Guidance: $3.39 to $3.44 per share.
• Net Debt to Gross Book Assets: 40.5% at year-end 2024.
• Net Debt-to-EBITDA: 5.5 times as of December 31, 2024.
• Interest Coverage: 4.2 times for 2024.

• Warning! GuruFocus has detected 6 Warning Signs with NNN.

Release Date: February 11, 2025

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

Positive Points

• NNN REIT Inc (NYSE:NNN) achieved a 1.8% core FFO growth for 2024, with over $550 million in acquisition volume.
• The company maintained a strong occupancy rate of 98.5%, above its long-term average.
• NNN REIT Inc (NYSE:NNN) has a sector-leading 12.1-year weighted average debt maturity, indicating strong financial stability.
• The company has increased its annual dividend for 35 consecutive years, showcasing a commitment to returning value to shareholders.
• NNN REIT Inc (NYSE:NNN) successfully executed strategic and defensive asset sales at favorable cap rates, enhancing portfolio strength.

Negative Points

• Occupancy decreased to 98.5% due to challenges with two specific tenants, Badcock Furniture and Frisch's.
• The company faced elevated disposition activity, selling nearly $150 million at a 7.3% cap rate, which compressed the spread between disposition and acquisition cap rates.
• NNN REIT Inc (NYSE:NNN) experienced a dip in quarterly core FFO results, remaining flat compared to the previous year.
• The company is dealing with the liquidation of Badcock Furniture, which rejected leases on 32 properties, impacting annual base rent.
• Frisch's, another troubled tenant, paid no rent in the fourth quarter, affecting 1.5% of the company's annual base rent.

Q & A Highlights

Q: For the AFFO guidance, how are you able to deliver 2% growth given the elevated lease termination from last year and the impact of Badcock and Frisch's? A: Kevin Habicht, CFO: We are experiencing better than expected re-leasing outcomes for Frisch's and Badcock, which is happening more quickly than anticipated. Timing is critical, and our solid acquisitions in the latter half of 2024 are contributing to the 2025 results.

Q: How does the $2.8 million for the re-leased Frisch's compare to the prior rent on those stores? A: Kevin Habicht, CFO: The $2.8 million is roughly 50% of the prior rent. We opted for a lower base rent to gain potential percentage rent, which we believe will yield notable returns based on prior store sales.

Q: What are you seeing in terms of transaction activity in 4Q and 1Q, particularly regarding portfolio deals versus one-off transactions? A: Stephen Horn, CEO: Outside of relationship deals, large-scale portfolios have been slow. Most of our deal flow in 4Q came from relationships, with notable transactions not marketed publicly. The first quarter looks promising with deals in the $20 million to $30 million range.

Q: Has anything changed since last quarter regarding the amount of credit losses being underwritten for 2025? A: Kevin Habicht, CFO: We have assumed 60 basis points of rent loss for 2025, down from the historical 100 basis points. We don't foresee any immediate tenant credit concerns, and the 60 basis points should cover potential losses.

Q: Can you provide details on the guidance for Frisch's and Badcock regarding re-leasing and recovery rates for 2025? A: Kevin Habicht, CFO: The re-leasing process is progressing faster than usual, and we are optimistic about achieving better than the historical 70% rent recovery. However, it's a work in progress, and we hope to improve guidance as the year progresses.

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