NNN REIT (NYSE:NNN) executives emphasized operating stability, record acquisition activity, and continued vacancy resolution efforts while outlining a self-funded growth plan for 2026 during the company’s fourth-quarter 2025 earnings call.
2025 results and portfolio performance
CEO Steve Horn said NNN delivered “a solid operating and financial performance” in 2025, including 2.7% growth in AFFO per share and more than $900 million of acquisitions, which he described as the highest annual acquisition volume in the company’s history. He also highlighted the company’s 36th consecutive annual dividend increase, a “best in class” 10.8-year weighted average debt maturity, and $1.2 billion of total available liquidity with no encumbered assets.
Horn said fourth-quarter renewal and leasing activity was “in line,” with 55 of 64 leases renewed (above the company’s historical 85% renewal rate). Management said renewed rental rates were 104% of prior rents, and the company leased four properties to new tenants at 109% of prior rent.
Earnings, expenses, and cash flow
CFO Vincent Chao reported core FFO and AFFO of $0.87 per share for the fourth quarter, each up 6.1% year-over-year. For the full year, core FFO per share was $3.41 and AFFO per share was $3.44, both up 2.7% from 2024. Chao said quarterly AFFO per share came in slightly ahead of expectations due to several “smaller positive variances,” including lower net real estate expenses, lower G&A, and higher interest income, and said there were no notable run-rate items to call out.
Chao said G&A was 4.9% of total revenue for the quarter and 5.1% for the full year. As a percentage of NOI, he said G&A was 5.1% for the quarter and 5.3% for the year. Free cash flow after dividends was about $51 million in the fourth quarter.
NNN’s annualized base rent was $928 million at quarter end, up nearly 8% year-over-year, which management attributed to strong acquisition activity.
Acquisitions, cap rates, and portfolio management
Horn said NNN’s approach remains “selective and opportunistic,” with an emphasis on bottom-up sourcing through longstanding relationships. He noted the company does not typically target investment-grade portfolios, which management said often have more tenant-friendly lease provisions and lower organic growth.
During the fourth quarter, NNN invested just over $180 million across 55 properties at an initial cash cap rate of 7.4% and a weighted average lease term of over 18 years. Horn said cap rates have “stabilized for the most part,” with fourth-quarter initial cap rates in line with the third quarter and a similar trend continuing early in the first quarter of 2026. He added the company anticipates slight cap rate compression later in 2026, which he attributed to competitive pressure as peers seek to deploy capital; he later characterized early second-quarter pricing as reflecting about 5 to 10 basis points of compression versus prior levels.
In Q&A, Horn described “proactive portfolio management” as identifying potential renewal risk and acting earlier—sometimes by selling an asset with years remaining on the lease if management believes renewal is unlikely—aimed at improving portfolio renewal rates over time. He said this effort is focused more on real estate considerations, while credit is monitored continuously.
Asked about tenant segments likely to grow more aggressively, Horn said the company does not target a specific sector but noted that auto services and convenience stores appeared to be the biggest opportunities in the current pipeline.
Vacancy resolution and dispositions
Horn provided updates on assets tied to prior tenant issues. For the furniture-related assets, he said the company had the last five properties under contract for sale, with most expected to close during the current quarter, though one or two could slip into the second quarter. For the restaurant-related assets, he said 32 properties remained, with 15 for sale, four in advanced leasing discussions, and 13 actively being marketed. Management said it expects to reach resolution progressively throughout the year via sales, re-leasing, or redevelopment.
In the fourth quarter, NNN sold 18 income-producing properties and 42 vacant properties, generating $82 million of proceeds. For the full year, dispositions totaled $190 million. Horn said re-leasing remains the priority, but the company will selectively dispose of non-performing assets where there is no clear path to near-term income generation. Management also noted that the fourth-quarter occupancy improvement was driven “pretty heavily” by vacant asset sales, with some additional re-leasing contribution.
In Q&A, management discussed portfolio pruning and said it sold some shorter-duration leases. Horn cited that the lease duration of income-producing assets sold was 6.1 years, and noted that some sold properties were dark but still paying rent.
Balance sheet, dividend, and 2026 guidance
Chao said the company’s BBB+ rated balance sheet remains in strong shape, with no encumbered assets and $1.2 billion of liquidity. He said that on a pro forma basis for the full draw of the company’s term loan, floating-rate debt would represent about 1% of total debt. Leverage was 5.6x, and debt duration remained 10.8 years, which management said is well matched with the portfolio’s 10.2-year lease duration.
Capital markets activity included paying off a $400 million 4% note at maturity in November. In December, the company closed a $300 million delayed-draw term loan and entered forward-starting swaps totaling $200 million that fixed SOFR at 3.22%. The company also amended its revolver to eliminate the SOFR credit spread adjustment, reducing the effective revolver rate by 10 basis points. After quarter end, NNN drew $200 million on the term loan, leaving $100 million available.
The company declared a $0.60 quarterly dividend, which Chao said represented a 3.4% year-over-year increase and equated to a 69% AFFO payout ratio.
For 2026, management issued initial guidance of $3.52 to $3.58 AFFO per share and $3.47 to $3.53 core FFO per share. At the midpoint, the AFFO outlook implies 3.2% year-over-year growth, which management said reflects moving past tenant issues experienced in late 2024. The midpoint assumes $600 million of acquisitions funded primarily through:
- ~$210 million of expected free cash flow
- ~$130 million of dispositions
- Incremental debt financing intended to remain leverage neutral
Management said it has no appetite to increase leverage above current levels to drive higher acquisition volume. The company also embedded 75 basis points of bad debt into its 2026 outlook, which executives described as a prudently conservative starting point given historical realized bad debt levels and no material new issues on the watchlist. Management said the watchlist has not changed materially since last quarter and characterized current issues as more idiosyncratic than trend-driven.
Horn closed by saying the company is “in good shape to turn the page on 2025 and get back to growth in 2026.”
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.
