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NNN REIT, INC. (NNN)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered stable GAAP EPS of $0.51, Core FFO per share of $0.85 (+1.2% YoY) and AFFO per share of $0.86 (+2.4% YoY), while revenue rose to $230.2M; annualized base rent (ABR) increased 7.2% YoY to $912.2M .
  • Management raised full-year guidance: Core FFO per share to $3.36–$3.40 (from $3.34–$3.39), AFFO per share to $3.41–$3.45 (from $3.40–$3.45), and acquisition volume to $850–$950M (from $600–$700M); disposition volume increased to $170–$200M (from $120–$150M) .
  • Record quarterly acquisitions since 2018: $283.0M at a 7.3% initial cash cap and 17.8-year WALT; sector-leading balance sheet with $1.4B liquidity, 10.7-year debt maturity, and no floating-rate debt .
  • Temporary occupancy dip to 97.5% due to a restaurant-tenant legal dispute is being actively resolved; management expects occupancy to exceed 98% by year-end—an important near-term stock catalyst alongside the guidance raise and record acquisition pace .

What Went Well and What Went Wrong

What Went Well

  • “Home run” on renewals: 92 of 100 renewed, ahead of the historical ~85% rate; rental rates renewed at 108% of prior rents and seven new re-leases at 124% of previous rents, demonstrating pricing power and asset quality .
  • Record acquisition execution: $283.0M across 57 assets at 7.3% initial cap and 17.8-year WALT; YTD investments $748.0M, exceeding the high end of prior guidance .
  • AFFO slightly ahead of internal expectations, driven by lower bad debt and higher interest income on cash balances; free cash flow after dividend ~$48M in Q3 .

What Went Wrong

  • Occupancy fell to 97.5% (from 98.0% in Q2), primarily due to a restaurant-operator legal dispute leading to asset take-backs; management is monetizing/resolving >75% of affected assets by Q1 2026 .
  • Real estate expense net elevated due to vacancies; management expects normalization toward historical ~$12M as vacancies resolve, implying some near-term AFFO headwind offset by lower real estate expense net later .
  • Lease termination fees normalized to $0.669M in Q3 (vs outsized earlier levels), creating an ~$8M annual headwind into 2026 relative to elevated 2025 YTD levels, albeit partly offset by lower real estate expense net .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$230.854 $226.802 $230.159
Diluted EPS ($USD)$0.51 $0.54 $0.51
FFO per share (Diluted)$0.85 $0.84 $0.84
Core FFO per share (Diluted)$0.86 $0.84 $0.85
AFFO per share (Diluted)$0.87 $0.85 $0.86
EBITDAre ($USD Millions)$206.497 $206.497 $212.094

Margins (from S&P Global; values marked with asterisk)

MetricQ1 2025Q2 2025Q3 2025
EBIT Margin %62.26%*60.99%*61.95%*
Net Income Margin %41.78%*44.32%*42.07%*
EBITDA Margin %90.25%*91.12%*90.40%*

Values retrieved from S&P Global.

KPIs and Portfolio

KPIQ1 2025Q2 2025Q3 2025
Number of properties3,641 3,663 3,697
Total gross leasable area (sq ft)37,311,000 38,322,000 39,209,000
Occupancy rate97.7% 98.0% 97.5%
Weighted avg remaining lease term (years)9.9 9.8 10.1
ABR ($USD Thousands)$874,301 $893,782 $912,218
Acquisitions closed ($USD Thousands)$232,393 $232,536 $283,027
Acquisition initial cap rate (%)7.4% 7.4% 7.3%
Dispositions net proceeds ($USD Thousands)$15,839 $51,248 $41,336

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net earnings per share (excl. gains, impairments, retirement/severance)FY 2025$1.93–$1.98 $1.93–$1.97 Narrowed (lowered upper bound)
Real estate depreciation & amortization per shareFY 2025$1.41 $1.43 Raised
Core FFO per shareFY 2025$3.34–$3.39 $3.36–$3.40 Raised
AFFO per shareFY 2025$3.40–$3.45 $3.41–$3.45 Raised (tightened)
General & administrative expenses ($M)FY 2025$47–$48 $47–$48 Maintained
Real estate expenses, net of tenant reimbursements ($M)FY 2025$17–$18 $17–$18 Maintained
Acquisition volume ($M)FY 2025$600–$700 $850–$950 Raised
Disposition volume ($M)FY 2025$120–$150 $170–$200 Raised
Quarterly dividend ($/share)Q4 2025$0.58 (prior) $0.60 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025, Q2 2025)Current Period (Q3 2025)Trend
Tenant credit and legal resolutionsInitiated evictions at 64 restaurant assets; re-leased/sold a portion; furniture retailer bankruptcy assets being resolved Restaurant legal dispute led to temporary occupancy dip; >75% resolutions targeted by Q1 2026; At Home affirmed all NNN leases in bankruptcy Improving resolution path
Acquisition pace & spreadsQ1: $232M at 7.4% cap; Q2: $233M at 7.4% cap; guidance raised Q3: $283M at 7.3% cap; record volume since 2018; 2025 acquisition guidance raised to $850–$950M Accelerating volume
Balance sheet & liquidityQ1: 11.6-year WAM, $1.1B liquidity; Q2: $1.4B pro forma liquidity (2031 notes) $1.4B liquidity, no floating-rate debt, 10.7-year WAM; net debt/EBITDAre ~5.6x Stable/strong
Bad debt & termination feesElevated termination fees early in year; bad debt assumptions rising Bad debt cut to 25 bps full-year (from 60 bps); termination fees normalized ($0.669M in Q3) Improving credit outlook
Dispositions mixQ1/Q2: mixed occupied/vacant sales; cap rates ~4.9%–6.2% Q4 mix likely >50% vacant sales due to restaurant asset strategy; occupied sales ~100 bps inside deployment cap for modeling More vacancy-driven near term

Management Commentary

  • CEO Steve Horn: “NNN’s team invested over $280 million… attaining its highest quarterly acquisition volume since 2018… This strong operational execution… allows us to raise our earnings guidance for 2025.” .
  • CEO Steve Horn on renewals: “92 of the 100 renewed… rental rates were 108% above prior rents… leased seven new properties… at 124% of previous rents.” .
  • CFO Vin Chao: “We are raising Core FFO per share guidance to $3.36–$3.40 and AFFO per share to $3.41–$3.45… We now expect $850–$950 million of acquisitions… and $170–$200 million of dispositions.” .
  • CFO Vin Chao: “Our Baa1 balance sheet remains in great shape… no floating-rate debt, no encumbered assets, and $1.4 billion of liquidity.” .

Q&A Highlights

  • Funding mix and cost of capital: Management targets a leverage-neutral 60/40 equity-debt mix; all-in WACC seen mid-6%s to fund accretive deals; not seeking to lever up for growth .
  • Acquisition rationale and competition: Elevated volume supported by tenant relationships and certainty of close; competition heavier in large portfolios, less so in $15–$20M or sub-$5M deals .
  • Bad debt and occupancy trajectory: Bad debt assumption lowered to 25 bps (from 60 bps) with limited losses YTD; occupancy expected to exceed 98% by year-end as resolutions complete .
  • Termination fees and OpEx: Termination fees normalized; real estate expense net expected to fall from ~$17.5M to historical ~$12M as vacancies resolve, partially offsetting fee normalization headwind .
  • Dispositions mix and pricing: Q4 dispositions could be >50% vacant sales; for occupied sales, model cap rates ~100 bps inside deployment cap rate .

Estimates Context

Q3 2025 vs S&P Global Wall Street Consensus (values marked with asterisk; S&P Global)

MetricConsensusActual
Primary EPS$0.479*$0.490*
Revenue ($USD)$228.866M*$230.159M*
EBITDA ($USD)$209.744M*$208.063M*

Values retrieved from S&P Global.

  • Beat on Primary EPS and revenue versus consensus; slight miss on EBITDA versus consensus. Actual GAAP diluted EPS reported by NNN was $0.51 .

Key Takeaways for Investors

  • Guidance raise (Core FFO and AFFO) and record acquisition volume are near-term positive catalysts; liquidity and duration profile provide strategic flexibility .
  • Occupancy dip appears transitory, with line-of-sight to >98% by year-end; expect real estate expense net to normalize as vacancies resolve .
  • Acquisition spreads remain accretive on a leverage-neutral basis; competition concentrated in large portfolios, with NNN advantaged in smaller, relationship-driven deals .
  • Credit trends improving: bad debt reduced to 25 bps for FY, At Home affirmed all NNN leases post-bankruptcy, and pre-petition rent collection supports Q4 .
  • Capital markets optionality: pre-funded part of November 2025 bond maturity; options include revolver, bank loan aligned with maturity ladder, or public bonds .
  • Dividend increased to $0.60 per quarter (annualized $2.40), with a ~70% AFFO payout ratio, underpinned by stable FCF and balance sheet strength .
  • Model Q4 dispositions with higher vacant sales mix and occupied sales ~100 bps inside acquisition caps; watch G&A timing and lower interest income as cash is deployed .