NNN REIT, INC. (NNN) Business

Item 1. Business

The Company

Overview

NNN, a Maryland corporation, is a fully integrated real estate investment trust ("REIT") formed in 1984. The common shares of NNN REIT, Inc. are traded on the New York Stock Exchange (the "NYSE") under the ticker symbol "NNN."

NNN acquires, owns, invests in and develops high-quality properties that are leased primarily to tenants under long-term, net leases, with minimal ongoing capital expenditures and are primarily held for investment ("Properties" or "Property Portfolio," or individually a "Property"). NNN owned 3,692 Properties in all 50 states, the District of Columbia and Puerto Rico, with an aggregate gross leasable area of approximately 39,578,000 square feet and a weighted average remaining lease term of 10.2 years as of December 31, 2025. As of December 31, 2025, 98.3 percent of the Properties were leased.

Competition

NNN faces active competition from many sources, both domestically and internationally, for net-lease investment opportunities in commercial real estate. Competitors may be willing to accept rates of return, prices, lease terms, other transaction terms or levels of risk that NNN finds unacceptable.

Qualification as a REIT

NNN has made an election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), and related regulations and intends to continue to operate so as to remain qualified as a REIT for federal income tax purposes. NNN generally will not be subject to federal income taxes on taxable income it distributes to stockholders, provided it meets certain other requirements for qualifying as a REIT. If NNN fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four years following the year during which qualification is lost. Such an event could materially adversely affect NNN's income and ability to pay dividends. NNN believes it has been structured as, and its past and present operations qualify NNN as, a REIT.

Business Strategies and Policies

The following is a discussion of NNN's operating strategy and certain of its investment, financing and other policies. These strategies and policies have been set by management and the Board of Directors and, in general, may be amended or revised from time to time by management and the Board of Directors without a vote of NNN's stockholders.

Operating Strategies

NNN's strategy is to invest in real estate that is well located within each local market for its tenants' lines of trade. Management believes that these types of properties, typically leased pursuant to triple-net leases, provide attractive opportunities for stable current returns and the potential for increased returns and capital appreciation. In most cases, the Property leases provide for initial terms of 10 to 20 years and a triple-net lease structure, pursuant to which the tenant bears responsibility for operating expenses of the Property, including utilities, real estate taxes and assessments, property and liability insurance, maintenance, repairs and capital expenditures.

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NNN holds each Property until it determines that the sale of such Property is advantageous relative to NNN's investment objectives. In deciding whether to sell a Property, factors NNN may consider include, but are not limited to, potential capital appreciation, net cash flow, tenant's credit quality, tenant's line of trade, tenant's lease renewal probability, the composition of the Property Portfolio, market lease rates, local market conditions, future uses of the Property, potential use of sale proceeds and federal and state income tax considerations.

NNN's management team focuses on certain key indicators to evaluate the financial condition and operating performance of NNN. Key indicators include items such as: the composition of the Property Portfolio (such as tenant, line of trade and geographic diversification), the occupancy rate of the Property Portfolio, certain financial performance metrics and profitability measures, industry trends and industry performance compared to that of NNN.

NNN evaluates the creditworthiness of its significant current and prospective tenants. This evaluation may include reviewing available financial statements, store level financial performance, press releases, public credit ratings from major credit rating agencies, industry news publications and financial market data (debt and equity pricing). NNN may also evaluate the business and operations of its significant tenants, including past payment history and periodically meeting with senior management of certain tenants.

The operating strategies employed by NNN have allowed NNN to increase the annual dividend (paid quarterly) per common share for 36 consecutive years. NNN has the third longest record of consecutive annual dividend increases of all publicly traded REITs.

Investment in Real Estate or Interests in Real Estate

NNN's management believes that single-tenant, freestanding net lease properties will continue to provide attractive investment opportunities and that NNN is well suited to take advantage of these opportunities because of its experience in accessing capital markets and its ability to source, underwrite and acquire such properties.

In evaluating a particular acquisition, management may consider a variety of factors, including but not limited to:

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the location, visibility, accessibility, zoning and use restrictions of the property,

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the geographic area and demographic characteristics of the community,

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the local real estate market conditions, including potential for growth, redevelopment, market rents and existing or potential competing properties or retailers,

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the title status of the property,

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the quality of construction and design of the improvements on the property and the current physical condition of the property, including the size and age of the improvements on the property,

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the potential for, and current extent of, any environmental issues on or around the property,

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the environmental sustainability related factors pertaining to the property,

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the purchase price,

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the non-financial lease terms of the proposed acquisition,

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the availability of funds or other consideration for the proposed acquisition and the cost thereof,

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the compatibility of the property with NNN's existing Property Portfolio,

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the property-level operating history,

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the financial and other characteristics of the existing tenant,

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the tenant's business plan, operating history and management team,

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the tenant's industry,

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the terms of any lease, including the rent to be paid by the tenant,

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any existing debt encumbering the property which may be assumed in connection with acquiring or refinancing these investments, and

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the merits relative to other opportunities.

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NNN intends to engage in future investment activities in a manner that is consistent with the maintenance of its status as a REIT for federal income tax purposes. Additionally, NNN does not intend to engage in activities that will make NNN an investment company under the Investment Company Act of 1940, as amended.

Investments in Real Estate Mortgages and Securities of or Interests in Entities Engaged in Real Estate Activities

While NNN's primary business objectives emphasize retail properties, NNN may invest in (i) a wide variety of property and tenant types, (ii) leases, mortgages and other types of real estate interests, (iii) loans secured by personal property, (iv) loans secured by partnership or membership interests in partnerships or limited liability companies, respectively, or (v) securities of other REITs, or other issuers, including for the purpose of exercising control over such entities.

Financing Strategy

NNN's financing objective is to manage its capital structure effectively in order to provide sufficient capital to execute its operating and investing strategies while servicing its debt obligations, maintaining its investment grade credit ratings, staggering debt maturities and providing value to NNN's stockholders. NNN's capital resources have and will continue to include, if available, (i) proceeds from issuing debt or equity in the capital markets; (ii) secured or unsecured borrowings from banks or other lenders; (iii) proceeds from the sale of Properties; and (iv) to a lesser extent, by internally generated funds as well as undistributed funds from operations. However, there can be no assurance that additional financing or capital will be available or that the terms will be acceptable or advantageous to NNN.

NNN expects to fund both its short-term and long-term liquidity requirements, including investments in additional properties, with cash and cash equivalents, cash provided from operations, borrowings from its unsecured revolving credit facility ("Credit Facility") or senior unsecured term loan ("Term Loan") or proceeds from the sale of Properties. As of December 31, 2025, NNN had $5,822,000 of cash, cash equivalents and restricted cash or cash held in escrow, and $851,900,000 and $300,000,000 were available for future borrowings under the Credit Facility and Term Loan, respectively. NNN may also fund liquidity requirements with new debt or equity issuances. NNN also has the ability to limit future property acquisitions and strategically increase property dispositions. NNN expects these liquidity sources and the discretionary nature of its property acquisition funding needs will allow NNN to meet its financial obligations over the long term.

As of December 31, 2025, NNN's ratio of total debt, none of which was secured debt, to total gross assets (before accumulated depreciation and amortization) was approximately 42 percent. The ratio of total debt to total market capitalization was approximately 39 percent. Certain financial agreements, to which NNN is a party, contain covenants that limit NNN's ability to incur additional debt under certain circumstances. The organizational documents of NNN do not limit the absolute amount or percentage of debt that NNN may incur.

Human Capital

As of January 30, 2026, the Company employed 85 talented and dedicated associates whose hard work and expertise drive NNN's success. Ingrained in the Company's talent philosophy is ensuring associates have access to engage in continuing professional and meaningful personal development opportunities. Additionally, NNN offers associate training programs and formalized talent development programs at all levels within the Company. The success of NNN's efforts to nurture the growth and development of the Company's associates is evident in the average tenure, with nearly 40% of the associates having been with the Company for 10 or more years.

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The Company provides comprehensive benefits to ensure associates receive competitive compensation and support for work and life outside of work. NNN's total rewards system includes compensation, benefits, wellness initiatives and professional development. In addition to medical, dental and vision insurance benefits, the Company offers a 401(k) plan with employer matching contributions, fully paid parental leave, adoption benefits, flexible work schedules, college savings benefits, educational assistance, flexible spending and health savings accounts, access to an online wellness platform and Company-paid life and long-term care insurance.

Community Service and Partnerships

NNN supports associates volunteering in our local communities, including organized volunteer days at charities such as Ronald McDonald House of Central Florida and Orange County Animal Services. Additionally, NNN has been a long-time contributor to several local community charities, including Elevate Orlando and Boys & Girls Clubs of Central Florida.

Strategies and Policy Changes

Any of NNN's strategies or policies described above may be changed at any time by NNN without notice to or a vote of NNN's stockholders.

Property Portfolio

As of December 31, 2025, NNN owned 3,692 Properties in all 50 states, the District of Columbia and Puerto Rico, with an aggregate gross leasable area of approximately 39,578,000 square feet and a weighted average remaining lease term of 10.2 years. As of December 31, 2025, 98.3 percent of the Properties were leased.

The following table summarizes NNN's Property Portfolio as of December 31, 2025 (in thousands):

Leases

The following is a summary of the structure of the leases in the Property Portfolio, although the specific terms of each lease can vary significantly. In most cases, the Property leases provide for initial terms of 10 to 20 years and a triple-net lease structure, pursuant to which the tenant bears responsibility for operating expenses of the Property, including utilities, real estate taxes and assessments, property and liability insurance, maintenance, repairs and capital expenditures. Additionally, the leases require tenants to fully comply with all environmental laws, rules and regulations, including any remediation requirements. Conversely, the lease terms do grant tenants exclusive control of energy conservation and environmental management initiatives on the premises.

As of December 31, 2025, the weighted average remaining lease term of the Property Portfolio was 10.2 years. NNN's leases provide for annual base rental payments (payable in monthly installments) ranging from $11,000 to $4,085,000 (average of $256,000), the majority of which include negotiated increases in rent as a result of increases in the Consumer Price Index or fixed increases.

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NNN's leases often provide the tenant with one or more multi-year renewal options subject to the same terms and conditions provided under the initial lease term, including rent increases. NNN's lease term is based on the non-cancellable base term unless economic incentives make it reasonably certain that an option period to extend the lease will be exercised, in which case NNN includes the renewal options. Some of the leases also provide that in the event NNN wishes to sell the Property subject to that lease, NNN first must offer the lessee the right to purchase the Property on the same terms and conditions as any offer which NNN intends to accept for the sale of the Property. See "Results of Operations – Property Analysis."

Governmental Regulations Affecting Properties

Property Environmental Considerations

Subject to a determination of the level of risk and potential cost of remediation, NNN may acquire a property with some level of environmental contamination. Investments in real property create a potential for substantial environmental liability for the owner of such property from the presence or discharge of hazardous materials on the property or the improper disposal of hazardous materials emanating from the property, regardless of fault. In order to mitigate exposure to environmental liability, NNN maintains an environmental insurance policy which provides some environmental liability coverage for substantially all of its Properties. As part of its due diligence process, NNN obtains an environmental site assessment for each property it acquires. In cases where NNN intends to acquire real estate where evidence of some level of known contamination may exist, NNN generally requires the seller or tenant to (i) remediate the contamination in accordance with applicable laws, rules and regulations, (ii) indemnify NNN for environmental liabilities, and/or (iii) agree to other arrangements deemed appropriate by NNN, including, under certain circumstances, the purchase of environmental insurance. NNN may incur costs if the seller or tenant does not comply with these requirements.

As of January 30, 2026, NNN had 67 Properties currently under some level of environmental remediation and/or monitoring. In general, the responsible party (which may include NNN, the seller, a previous owner, the tenant or an adjacent or former landowner) is liable for the cost of the environmental remediation for each of these Properties.

Americans with Disabilities Act of 1990 and Similar Local and State Laws

The Properties, as commercial facilities, are required to comply with Title III of the Americans with Disabilities Act of 1990 and similar state and local laws and regulations (collectively, the "ADA"). NNN's tenants will typically have primary responsibility for complying with the ADA, but NNN may incur costs if the tenant does not comply. As of January 30, 2026, NNN had not been notified by any governmental authority of, nor is NNN's management aware of, any non-compliance with the ADA that NNN's management believes would have a material adverse effect on its business, financial position or results of operations.

Other Regulations, Rules and Laws

State and local governmental entities regulate the use of the Properties. NNN's leases typically require each tenant to undertake primary responsibility for complying with all regulations, rules and laws, but failure to comply could result in fines by governmental authorities, awards of damages to private litigants or restrictions on the ability to conduct business on such Properties.

Additional Information

NNN's corporate headquarters is located at 450 South Orange Avenue, Suite 900, Orlando, Florida 32801, and its telephone number is (407) 265–7348.

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NNN's website can be accessed at www.nnnreit.com. NNN intends to comply with the requirements of Item 5.05 of Form 8-K regarding amendments to and waivers under the code of business conduct and ethics applicable to its Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer and Chief Technology Officer by providing such information on its website within four days after effecting any amendment to, or granting any waiver under, that code, and NNN will maintain such information on its website for at least twelve months. The information contained on NNN's website does not constitute part of this Form 10-K.

On NNN's website you can also obtain, free of charge, a copy of this Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as amended, as soon as reasonably practicable, after NNN files such material electronically with, or furnishes it to, the Commission. The public may read and obtain a copy of any materials NNN files electronically with the Commission at www.sec.gov.

Additional information on NNN's website includes the guiding policies adopted by NNN, which include NNN's Corporate Governance Guidelines, Code of Business Conduct, Supplier Code of Conduct and Whistleblower Policy, as well as NNN's position on corporate governance and risk management, social responsibility and environmental practices and their impact in the most recently published Corporate Sustainability Report.