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NNN National Retail Properties

Filed: 4 May 21, 8:39am

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from                      to                     
Commission file number 001-11290
NATIONAL RETAIL PROPERTIES, INC.
(Exact name of registrant as specified in its charter) 
Maryland56-1431377
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
450 South Orange Avenue, Suite 900
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (407) 265-7348
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, $0.01 par valueNNNNew York Stock Exchange
Depositary Shares, each representing one-hundredth of a share of 5.200% Series F Preferred Stock, $0.01 par valueNNN/PFNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer  Non-accelerated filerSmaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No  
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.
175,580,463 shares of common stock, $0.01 par value, outstanding as of April 29, 2021.



TABLE OF CONTENTS
 



PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

NATIONAL RETAIL PROPERTIES, INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
March 31, 2021December 31, 2020
ASSETS(unaudited)
Real estate portfolio$7,249,613 $7,212,655 
Real estate held for sale6,498 5,671 
Cash and cash equivalents311,231 267,236 
Receivables, net of allowance of $846 and $835, respectively4,611 4,338 
Accrued rental income, net of allowance of $6,030 and $6,947, respectively45,450 53,958 
Debt costs, net of accumulated amortization of $17,764 and $17,294, respectively1,492 1,917 
Other assets93,308 92,069 
Total assets$7,712,203 $7,637,844 
LIABILITIES AND EQUITY
Liabilities:
Mortgages payable, including unamortized premium and net of unamortized debt costs$11,222 $11,395 
Notes payable, net of unamortized discount and unamortized debt costs3,298,302 3,209,527 
Accrued interest payable44,668 19,401 
Other liabilities70,172 78,217 
Total liabilities3,424,364 3,318,540 
Equity:
Stockholders’ equity:
Preferred stock, $0.01 par value. Authorized 15,000,000 shares
5.200% Series F, 138,000 shares issued and outstanding, at stated liquidation value of $2,500 per share345,000 345,000 
Common stock, $0.01 par value. Authorized 375,000,000 shares; 175,579,683 and 175,232,971 shares issued and outstanding, respectively1,757 1,753 
Capital in excess of par value4,639,680 4,633,771 
Accumulated deficit(683,525)(644,779)
Accumulated other comprehensive income (loss)(15,077)(16,445)
Total stockholders’ equity of NNN4,287,835 4,319,300 
Noncontrolling interests
Total equity4,287,839 4,319,304 
Total liabilities and equity$7,712,203 $7,637,844 
See accompanying notes to condensed consolidated financial statements.
3


NATIONAL RETAIL PROPERTIES, INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(dollars in thousands, except per share data)
(unaudited)
 Quarter Ended March 31,
  20212020
Revenues:
Rental income$179,198 $174,547 
Interest and other income from real estate transactions580 516 
179,778 175,063 
Operating expenses:
General and administrative11,748 10,100 
Real estate7,725 7,635 
Depreciation and amortization49,980 49,188 
Leasing transaction costs38 36 
Impairment losses – real estate, net of recoveries2,131 5,513 
71,622 72,472 
Gain on disposition of real estate4,281 12,770 
Earnings from operations112,437 115,361 
Other expenses (revenues):
Interest and other income(65)(164)
Interest expense34,587 33,670 
Loss on early extinguishment of debt21,328 16,679 
55,850 50,185 
Net earnings56,587 65,176 
Loss attributable to noncontrolling interests
Net earnings attributable to NNN56,587 65,178 
Series F preferred stock dividends(4,485)(4,485)
Net earnings attributable to common stockholders$52,102 $60,693 
Net earnings per share of common stock:
Basic$0.30 $0.35 
Diluted$0.30 $0.35 
Weighted average number of common shares outstanding:
Basic174,589,300 171,039,017 
Diluted174,714,617 171,231,828 
Other comprehensive income:
Net earnings attributable to NNN$56,587 $65,178 
Amortization of interest rate hedges1,368 383 
Fair value of forward starting swaps(7,617)
Comprehensive income attributable to NNN57,955 57,944 
Comprehensive income attributable to noncontrolling interests
Total comprehensive income$57,955 $57,946 

See accompanying notes to condensed consolidated financial statements.

4


NATIONAL RETAIL PROPERTIES, INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Quarter Ended March 31, 2021
(dollars in thousands, except per share data)
(Unaudited)

Series F
Preferred
Stock
Common
Stock
Capital in
  Excess of  
Par Value
Accumulated DeficitAccumulated
Other
Comprehensive
Income (Loss)
Total
 Stockholders’
Equity of NNN
  Noncontrolling
Interests
Total
Equity
Balances at December 31, 2020$345,000 $1,753 $4,633,771 $(644,779)$(16,445)$4,319,300 $$4,319,304 
Net earnings— — — 56,587 — 56,587 — 56,587 
Dividends declared and paid:
$0.3250 per depositary share of Series F preferred stock— — — (4,485)— (4,485)— (4,485)
$0.5200 per share of common stock— — 578 (90,848)— (90,270)— (90,270)
Issuance of common stock:
8,324 shares – director compensation— — 267 — — 267 — 267 
1,715 shares – stock purchase plan— — 70 — — 70 — 70 
30,000 shares – ATM equity program— 1,233 — — 1,234 — 1,234 
287,957 restricted shares – net of forfeitures— (3)— — — 
Stock issuance costs— — (156)— — (156)— (156)
Amortization of deferred compensation— — 3,920 — — 3,920 — 3,920 
Amortization of interest rate hedges— — — — 1,368 1,368 — 1,368 
Balances at March 31, 2021$345,000 $1,757 $4,639,680 $(683,525)$(15,077)$4,287,835 $$4,287,839 

See accompanying notes to condensed consolidated financial statements.

5


NATIONAL RETAIL PROPERTIES, INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Quarter Ended March 31, 2020
(dollars in thousands, except per share data)
(Unaudited)

Series F
Preferred
Stock
Common
Stock
Capital in
  Excess of  
Par Value
Accumulated DeficitAccumulated
Other
Comprehensive
Income (Loss)
Total
 Stockholders’
Equity of NNN
  Noncontrolling
Interests
Total
Equity
Balances at December 31, 2019$345,000 $1,718 $4,495,314 $(499,229)$(11,128)$4,331,675 $$4,331,682 
Net earnings— — — 65,178 — 65,178 (2)65,176 
Dividends declared and paid:
$0.3250 per depositary share of Series F preferred stock— — — (4,485)— (4,485)— (4,485)
$0.5150 per share of common stock— — 620 (88,148)— (87,528)— (87,528)
Issuance of common stock:
6,112 shares – director compensation— — 298 — — 298 — 298 
1,477 shares – stock purchase plan— — 76 — — 76 — 76 
253,406 restricted shares – net of forfeitures— (3)— — — 
Amortization of deferred compensation— — 2,950 — — 2,950 — 2,950 
Amortization of interest rate hedges— — — — 383 383 — 383 
Fair value of forward starting swaps— — — — (7,617)(7,617)— (7,617)
Balances at March 31, 2020$345,000 $1,721 $4,499,255 $(526,684)$(18,362)$4,300,930 $$4,300,935 

See accompanying notes to condensed consolidated financial statements.










6


NATIONAL RETAIL PROPERTIES, INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)

 Quarter Ended March 31,
 20212020
Cash flows from operating activities:
Net earnings$56,587 $65,176 
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization49,980 49,188 
Impairment losses – real estate, net of recoveries2,131 5,513 
Loss on early extinguishment of debt21,328 16,679 
Amortization of notes payable discount993 1,897 
Amortization of debt costs1,840 1,816 
Amortization of mortgages payable premium(21)(21)
Amortization of interest rate hedges1,368 383 
Settlement of forward starting swaps(13,141)
Gain on disposition of real estate(4,281)(12,770)
Performance incentive plan expense4,318 3,078 
Performance incentive plan payment(721)(846)
Change in operating assets and liabilities, net of assets acquired and liabilities assumed:
Increase in receivables(273)(1,340)
Decrease (increase) in accrued rental income8,332 (61)
Decrease in other assets1,067 183 
Increase in accrued interest payable25,267 23,448 
Decrease in other liabilities(6,438)(11,299)
Other(307)201 
Net cash provided by operating activities161,170 128,084 
Cash flows from investing activities:
Proceeds from the disposition of real estate18,067 33,384 
Additions to real estate:
Accounted for using the operating method(106,490)(64,197)
Principal payments received on mortgages and notes receivable93 100 
Other(182)59 
Net cash used in investing activities(88,512)(30,654)
 
See accompanying notes to condensed consolidated financial statements.
7


NATIONAL RETAIL PROPERTIES, INC.
and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(dollars in thousands)
(Unaudited)

 Quarter Ended March 31,
 20212020
Cash flows from financing activities:
Proceeds from line of credit payable$$311,000 
Repayment of line of credit payable(444,600)
Repayment of mortgages payable(156)(147)
Proceeds from notes payable441,594 692,646 
Repayment of notes payable(350,000)(325,000)
Payment for early extinguishment of debt(21,328)(16,679)
Payment of debt issuance costs(5,145)(6,397)
Proceeds from issuance of common stock1,882 696 
Stock issuance costs(177)(45)
Payment of Series F preferred stock dividends(4,485)(4,485)
Payment of common stock dividends(90,848)(88,148)
Net cash provided by (used in) financing activities(28,663)118,841 
Net increase in cash, cash equivalents and restricted cash43,995 216,271 
Cash, cash equivalents and restricted cash at beginning of period(1)
267,236 1,112 
Cash, cash equivalents and restricted cash at end of period(1)
$311,231 $217,383 
Supplemental disclosure of cash flow information:
Interest paid, net of amount capitalized$5,203 $6,613 
Supplemental disclosure of noncash investing and financing activities:
Change in other comprehensive income (loss)$1,368 $(7,234)
Work in progress accrual balance$4,739 $24,579 
Mortgage receivable issued in connection with real estate disposition$$3,000 
  (1) Cash, cash equivalents and restricted cash is the aggregate of cash and cash equivalents and restricted cash and cash held in escrow from the Condensed Consolidated Balance Sheets. NNN had 0 restricted cash and cash held in escrow at March 31, 2021 and 2020.

 
See accompanying notes to condensed consolidated financial statements.
8


NATIONAL RETAIL PROPERTIES, INC.
and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)

Note 1 – Organization and Summary of Significant Accounting Policies:
Organization and Nature of Business – National Retail Properties, Inc., a Maryland corporation, is a fully integrated real estate investment trust (“REIT”) formed in 1984. The terms "NNN" or the "Company" refer to National Retail Properties, Inc. and all of its consolidated subsidiaries.
NNN's assets primarily include real estate assets. NNN acquires, owns, invests in and develops properties that are leased primarily to retail tenants under long-term net leases and primarily held for investment ("Properties", "Property Portfolio", or individually a "Property").
 March 31, 2021
Property Portfolio:
Total properties3,161 
Gross leasable area (square feet)32,717,000 
States48 
Weighted average remaining lease term (years)10.6
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles ("GAAP"). The unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Operating results for the quarter ended March 31, 2021, may not be indicative of the results that may be expected for the year ending December 31, 2021. See "Footnote 8 – Subsequent Events." Amounts as of December 31, 2020 included in the condensed consolidated financial statements have been derived from the audited consolidated financial statements as of that date. The unaudited condensed consolidated financial statements, included herein, should be read in conjunction with the consolidated financial statements and notes thereto as well as Management's Discussion and Analysis of Financial Condition and Results of Operations in NNN's Form 10-K for the year ended December 31, 2020.
COVID-19 Pandemic – During the quarter ended March 31, 2021, NNN and its tenants continue to be impacted by the COVID-19 pandemic which has resulted in the loss of revenue for certain tenants and challenged their ability to pay rent. NNN has entered into rent deferral lease amendments with certain tenants (See Note 2).
Principles of Consolidation – NNN’s condensed consolidated financial statements include the accounts of each of the respective majority owned and controlled affiliates, including transactions whereby NNN has been determined to be the primary beneficiary in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codifications ("ASC") guidance included in Consolidation. All significant intercompany account balances and transactions have been eliminated.
Real Estate Portfolio – NNN records the acquisition of real estate at cost, including acquisition and closing costs. The cost of Properties developed or funded by NNN includes direct and indirect costs of construction, property taxes, interest and other miscellaneous costs incurred during the development period until the project is substantially complete and available for occupancy. NNN recorded $63,000 and $466,000 in capitalized interest during the development period for the quarters ended March 31, 2021 and 2020, respectively.
Purchase Accounting for Acquisition of Real Estate Subject to a Lease – In accordance with the FASB guidance on business combinations, consideration for the real estate acquired is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and, if applicable, to identified intangible assets and liabilities, consisting of the value of above-market and below-market leases and the value of in-place leases, as applicable, based on their respective fair values.
The fair value estimate is sensitive to significant assumptions, such as establishing a range of relevant market assumptions for land, building and rent and where the acquired property falls within that range. These market assumptions for land, building and rent use the most relevant comparable properties for an acquisition. The final range relies upon ranking comparable properties' attributes from most similar to least similar.
The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to land, building and tenant improvements based on the determination of their fair values.
In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded as other assets or liabilities based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases, and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining term of the lease and the applicable option terms if it is probable that the tenant will exercise options. The capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. The capitalized below-market lease values are amortized as an increase to rental income over the initial term unless the Company believes that it is likely that the tenant will renew the lease for an option term whereby the Company amortizes the value attributable to the renewal over the renewal period.
The aggregate value of other acquired intangible assets, consisting of in-place leases, is measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases to market rental rates over (ii) the estimated fair value of the property as-if-vacant, determined as set forth above. The value of in-place leases exclusive of the value of above-market and below-market in-place leases is amortized to expense over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be written off in that period. The value of tenant relationships is reviewed on individual transactions to determine if future value was derived from the acquisition.
Lease Accounting – In accordance with FASB Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)," ("ASC 842"), NNN recorded Right-Of-Use ("ROU") assets and operating lease liabilities as lessee under operating leases.
In April 2020, the FASB issued interpretive guidance relating to the accounting for lease concessions provided as a result of COVID-19. In this guidance, entities can elect not to apply lease modification accounting with respect to such lease concessions and instead, treat the concession as if it was a part of the existing contract. This guidance is only applicable to COVID-19 related lease concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. NNN elected to make this policy election for COVID-19 lease concessions, including the rent deferral lease amendments effective during the year ended December 31, 2020 and the quarter ended March 31, 2021.
In accordance with ASC 842, NNN reviews the collectability of its lease payments on an ongoing basis. NNN considers collectability indicators when analyzing accounts receivable (and accrued rent) and historical bad debt levels, tenant credit-worthiness and current economic trends, all of which assists in evaluating the probability of outstanding and future lease payment collections. In addition, tenants in bankruptcy are analyzed and considerations are made in connection with the expected recovery of pre-petition and post-petition bankruptcy claims. At the point NNN deems the collection of lease payments not probable, previously recognized rental revenue and any related accrued rent is reversed and, subsequently, any lease revenue is only recognized when cash receipts are received. As a result of the review of lease payments collectability, no outstanding receivables and related accrued rent were written off during the quarter ended March 31, 2021 and no tenants were reclassified as cash basis for accounting purposes.
NNN includes an allowance for doubtful accounts in rental income on the Consolidated Statements of Income and Comprehensive Income.
As of March 31, 2021, approximately 6 percent of total Properties, and approximately 8 percent of aggregate gross leasable area held in the Property Portfolio, was leased to 12 tenants that NNN has determined to recognize revenue on a cash basis. During the quarters ended March 31, 2021 and 2020, NNN recognized $11,314,000 and $203,000, respectively, of rental income from certain tenants for periods following their classification to cash basis for accounting.
Impairment – Real Estate – Based upon certain events or changes in circumstances, management periodically assesses its Properties for possible impairment whenever the carrying value of the asset, including accrued rental income, may not be recoverable through operations. Events or circumstances that may occur include changes in real estate market conditions, the ability of NNN to re-lease properties that are currently vacant or become vacant and the ability to sell properties at a price that exceeds NNN's carrying value. Management evaluates whether an impairment in carrying value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), and the residual value of the real estate, with the carrying value of the individual asset. The future undiscounted cash flows are primarily driven by estimated future market rents. Future cash flow estimates are sensitive to the assumptions made by management regarding future market rents, which are affected by expectations about future market and economic conditions. If an impairment is indicated, a loss will be recorded for the amount by which the carrying value of the asset exceeds its estimated fair value. NNN's Properties are leased primarily to retail tenants under long-term net leases and primarily held for investment. Generally, NNN’s Property leases provide for
initial terms of 10 to 20 years, which provide for cash flows over this term. NNN generally intends to hold these assets for the long-term, therefore, a temporary change in cash flows due to COVID-19 alone would not be an indicator of impairment.
Credit Losses on Financial Instruments – FASB ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326),” (“ASC 326”) requires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings. The guidance requires a lifetime credit loss expected at inception and requires pooling of assets, which share similar risk characteristics. NNN is required to evaluate current economic conditions, as well as, make future expectations of economic conditions. In addition, the measurement of the expected credit loss is over the asset’s contractual term.
As of March 31, 2021 and December 31, 2020, NNN had mortgages receivable of $2,395,000 and $2,482,000, respectively, included in other assets on the Condensed Consolidated Balance Sheets, net of $153,000 and $158,000 allowance for credit loss, respectively. NNN measures the allowance for credit loss based on the fair value of the collateral and the historical collectability trend analysis over 15 years.
Debt Costs – Notes Payable Debt costs incurred in connection with the issuance of NNN’s notes payable have been deferred and are being amortized to interest expense over the term of the respective debt obligation using the effective interest method. These costs of $33,177,000 and $31,140,000, as of March 31, 2021 and December 31, 2020, respectively, are included in notes payable on the Condensed Consolidated Balance Sheets net of accumulated amortization of $7,543,000 and $9,317,000, respectively.
Earnings Per Share – Earnings per share have been computed pursuant to the FASB guidance included in Earnings Per Share. The guidance requires classification of the Company’s unvested restricted share units, which carry rights to receive nonforfeitable dividends, as participating securities requiring the two-class method of computing earnings per share. Under the two-class method, earnings per common share are computed by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted average shares outstanding during the period.
The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted earnings per common share using the two-class method (dollars in thousands):
Quarter Ended March 31,
20212020
Basic and Diluted Earnings:
Net earnings attributable to NNN$56,587 $65,178 
Less: Series F preferred stock dividends(4,485)(4,485)
Net earnings available to NNN’s common stockholders52,102 60,693 
Less: Earnings allocated to unvested restricted shares(151)(160)
Net earnings used in basic and diluted earnings per share$51,951 $60,533 
Basic and Diluted Weighted Average Shares Outstanding:
Weighted average number of shares outstanding175,391,723 171,827,815 
Less: Unvested restricted shares(288,658)(311,553)
Less: Unvested contingent restricted shares(513,765)(477,245)
Weighted average number of shares outstanding used in basic earnings per share174,589,300 171,039,017 
Other dilutive securities125,317 192,811 
Weighted average number of shares outstanding used in diluted earnings per share174,714,617 171,231,828 
Fair Value Measurement – NNN’s estimates of fair value of financial and non-financial assets and liabilities are based on the framework established in the fair value accounting guidance. The framework specifies a hierarchy of valuation inputs which was established to increase consistency, clarity and comparability in fair value measurements and related disclosures. The guidance describes a fair value hierarchy based upon three levels of inputs that may be used to measure fair value, two of which are considered observable and one that is considered unobservable. The following describes the three levels:
Level 1 – Valuation is based upon quoted prices in active markets for identical assets or liabilities.
Level 2 – Valuation is based upon inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include option pricing models, discounted cash flow models and similar techniques.
Accumulated Other Comprehensive Income (Loss) – The following table outlines the changes in accumulated other comprehensive income (loss) for the quarter ended March 31, 2021, (dollars in thousands):
Gain (Loss) on Cash Flow Hedges (1)
Beginning balance, December 31, 2020$(16,445)
Reclassifications from accumulated other comprehensive income to net earnings1,368 (2)
Net other comprehensive income (loss)1,368 
Ending balance, March 31, 2021$(15,077)
(1) Additional disclosure is included in Note 6 – Derivatives.
(2) Recorded in interest expense on the Condensed Consolidated Statements of Income and Comprehensive Income.
Use of Estimates – Additional critical accounting policies of NNN include management’s estimates and assumptions relating to the reporting of assets and liabilities, revenues and expenses and the disclosure of contingent assets and liabilities and are required to prepare the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Significant accounting policies include management’s estimates of the useful lives used in calculating depreciation expense relating to real estate asset purchase accounting for acquisition of real estate subject to a lease, the recoverability of the carrying value of long-lived assets and management's evaluation of the probability of outstanding and future lease payment collections. Actual results could differ from those estimates.

Note 2 – Real Estate:
Real Estate – Portfolio
Leases – At March 31, 2021, NNN’s real estate portfolio had a weighted average remaining lease term of 10.6 years and consisted of 3,150 leases classified as operating leases and an additional 6 leases accounted for as direct financing.
The following is a summary of the general structure of the leases in the Property Portfolio, although the specific terms of each lease can vary significantly. Generally, the Property leases provide for initial terms of 10 to 20 years. The Properties are generally leased under net leases, pursuant to which the tenant typically bears responsibility for substantially all property costs and expenses associated with ongoing maintenance, repair, replacement and operation of the property, including utilities, property taxes and property and liability insurance. Certain Properties are subject to leases under which NNN retains responsibility for specific costs and expenses of the Property. NNN's leases provide for annual base rental payments (generally payable in monthly installments), and generally provide for limited increases in rent as a result of (i) increases in the Consumer Price Index ("CPI"), (ii) fixed increases, or, to a lesser extent, (iii) increases in the tenant’s sales volume.
Generally, NNN's leases provide the tenant with one or more multi-year renewal options, subject to generally 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 event NNN includes the 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.
As of March 31, 2021, NNN has entered into rent deferral lease amendments with certain tenants, for an aggregate $51,269,000 and $4,677,000 of rent originally due for the years ending December 31, 2020 and 2021, respectively. The rent deferral lease amendments require the deferred rents to be repaid at a later time during the lease term. Approximately $3,259,000 of deferred rent was repaid in 2020 and approximately $10,817,000 of deferred rent was repaid during the quarter ended March 31, 2021. An additional $21,107,000 is due in 2021, with the remaining deferred rent to be collected periodically by December 31, 2025.
9


Historical rent collections and rent relief requests may not be indicative of collections and requests in the future. Depending on the macroeconomic conditions and the impact on tenants, deferred rents may be difficult to collect.
Real Estate Portfolio – NNN's real estate consisted of the following at (dollars in thousands):
March 31, 2021December 31, 2020
Land and improvements(1)
$2,501,471 $2,489,243 
Buildings and improvements6,098,338 6,009,797 
Leasehold interests355 355 
8,600,164 8,499,395 
Less accumulated depreciation and amortization(1,358,764)(1,317,407)
7,241,400 7,181,988 
Work in progress for buildings and improvements4,309 26,673 
Accounted for using the operating method7,245,709 7,208,661 
Accounted for using the direct financing method3,904 3,994 
$7,249,613 $7,212,655 
(1)Includes $2,328 and $8,421 in land for Properties under construction at March 31, 2021 and December 31, 2020, respectively.
NNN recognized the following revenues in rental income (dollars in thousands):
Quarter Ended March 31,
20212020
Rental income from operating leases$173,583 $168,733 
Earned income from direct financing leases158 164 
Percentage rent104 403 
Real estate expense reimbursement from tenants5,353 5,247 
$179,198 $174,547 
Some leases provide for a free rent period or scheduled rent increases throughout the lease term. Such amounts are recognized on a straight-line basis over the terms of the leases.
For the quarter ended March 31, 2020, NNN recognized accrued rental income, net of reserves and write-offs of ($177,000).
During the quarter ended March 31, 2021, NNN recognized accrued rental income, net of reserves and write-offs of ($8,445,000), which includes ($9,385,000) of net straight-line accrued rent from rent deferral repayments related to the impacts of the rent deferral lease amendments NNN entered into as a result of the COVID-19 pandemic.
At March 31, 2021 and December 31, 2020, the balance of accrued rental income was $45,450,000 and $53,958,000, respectively, net of allowance of $6,030,000 and $6,947,000, respectively.
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Real Estate – Intangibles
In accordance with purchase accounting for the acquisition of real estate subject to a lease, NNN has recorded intangible assets and lease liabilities that consisted of the following at (dollars in thousands):
March 31, 2021December 31, 2020
Intangible lease assets (included in other assets):
Above-market in-place leases$15,408 $15,474 
Less: accumulated amortization(10,327)(10,271)
Above-market in-place leases, net$5,081 $5,203 
In-place leases$121,486 $118,416 
Less: accumulated amortization(68,986)(68,695)
In-place leases, net$52,500 $49,721 
Intangible lease liabilities (included in other liabilities):
Below-market in-place leases$41,077 $41,101 
Less: accumulated amortization(26,559)(26,486)
Below-market in-place leases, net$14,518 $14,615 

The amounts amortized as a net increase to rental income for above-market and below-market in-place leases for the quarters ended March 31, 2021 and 2020, were $162,000 and $220,000, respectively. The value of in-place leases amortized to expense for the quarters ended March 31, 2021 and 2020, were $1,800,000 and $2,395,000, respectively.
Real Estate – Held For Sale
On a quarterly basis, the Company evaluates its Properties for held for sale classification based on specific criteria as outlined in ASC 360, Property, Plant and Equipment, including management’s intent to commit to a plan to sell the asset. NNN anticipates the disposition of Properties classified as held for sale to occur within 12 months. As of March 31, 2021, NNN had 5 of its Properties categorized as held for sale. NNN's real estate held for sale at December 31, 2020, included 5 Properties, 4 of which were sold in 2021. Real estate held for sale consisted of the following as of (dollars in thousands):
March 31, 2021December 31, 2020
Land and improvements$4,313 $3,841 
Building and improvements5,480 4,971 
9,793 8,812 
Less accumulated depreciation and amortization(2,316)(2,536)
Less impairment(979)(605)
$6,498 $5,671 
Real Estate – Dispositions
The following table summarizes the Properties sold and the corresponding gain recognized on the disposition of Properties (dollars in thousands):
Quarter Ended March 31,
 20212020
# of Sold
Properties
Net Gain# of Sold
Properties
Net Gain
Gain on disposition of real estate11$4,281 14$12,770 
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Real Estate – Commitments
NNN has committed to fund construction on 8 Properties. The improvements on such Properties are estimated to be completed within 12 months. These construction commitments, as of March 31, 2021, are outlined in the table below (dollars in thousands):
Total commitment(1)
$12,077 
Less amount funded6,637 
Remaining commitment$5,440 
(1)Includes land, construction costs, tenant improvements, lease costs and capitalized interest.
Real Estate – Impairments
Management periodically assesses its real estate for possible impairment whenever certain events or changes in circumstances indicate that the carrying amount of the asset, including accrued rental income, may not be recoverable through operations. Events or circumstances that may occur include changes in real estate market conditions, the ability of NNN to re-lease properties that are currently vacant or become vacant, and the ability to sell properties at a price that exceeds NNN's carrying value. Management evaluates whether an impairment in carrying value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), and the residual value of the real estate, with the carrying value of the individual asset. The future undiscounted cash flows are primarily driven by estimated future market rents. Future cash flow estimates are sensitive to the assumptions made by management regarding future market rents, which are affected by expectations about future market and economic conditions. If an impairment is indicated, a loss will be recorded for the amount by which the carrying value of the asset exceeds its estimated fair value. NNN's Properties are leased primarily to retail tenants under long-term net leases and primarily held for investment. Generally, NNN’s Property leases provide for initial terms of 10 to 20 years, which provide for cash flows over this term.  NNN generally intends to hold these assets for the long-term, therefore, a temporary change in cash flows due to COVID-19 alone would not be an indicator of impairment. As a result of the Company's review of long-lived assets, including identifiable intangible assets, NNN recognized real estate impairments, net of recoveries of $2,131,000 and $5,513,000 for the quarters ended March 31, 2021 and 2020, respectively.

The valuation of impaired assets is determined using widely accepted valuation techniques including discounted cash flow analysis, income capitalization, analysis of recent comparable sales transactions, actual sales negotiations and bona fide purchase offers received from third parties, which are Level 3 inputs. NNN may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate.

Note 3 – Line of Credit Payable:
NNN's $900,000,000 unsecured revolving credit facility (the "Credit Facility") had 0 weighted average outstanding balance during the quarter ended March 31, 2021. The Credit Facility matures January 2022, unless the Company exercises its option to extend maturity to January 2023. The Credit Facility bears interest at LIBOR plus 87.5 basis points; however, such interest rate may change pursuant to a tiered interest rate structure based on NNN's debt rating. The Credit Facility also includes an accordion feature which permits NNN to increase the facility size up to $1,600,000,000, subject to lender approval. As of March 31, 2021, there was 0 outstanding balance and $900,000,000 was available for future borrowings under the Credit Facility, and NNN was in compliance with each of the financial covenants.

Note 4 – Notes Payable:
In March 2021, NNN filed a prospectus supplement to the prospectus contained in its August 2020 shelf registration statement and issued $450,000,000 aggregate principal amount of 3.500% notes due April 2051 (the “2051 Notes”).

The 2051 Notes were sold at a discount with an aggregate purchase price of $441,594,000 with interest payable semi-annually commencing on October 15, 2021. The discount of $8,406,000 is being amortized to interest expense over the term of the notes using the effective interest method. The effective interest rate for the 2051 Notes after accounting for the note discount is 3.602%.
The 2051 Notes are senior unsecured obligations of NNN and are subordinated to all secured debt and to the debt and other liabilities of NNN's subsidiaries. Additionally, the Notes are each redeemable at NNN's option, in whole or part anytime, for an amount equal to (i) the sum of the outstanding principal balance of the notes being redeemed plus accrued interest thereon to the
12


redemption date, and (ii) the make-whole amount, if any, as defined in the supplemental indenture dated March 10, 2021, relating to the 2051 Notes.

NNN received approximately $436,417,000 of net proceeds in connection with the issuance of the 2051 Notes, after incurring debt issuance costs consisting primarily of underwriting discounts and commissions, legal and accounting fees, rating agency fees and printing expenses, totaling $5,177,000 for the 2051 Notes.
In March 2021, NNN redeemed the $350,000,000 3.300% notes payable due April 2023. The notes were redeemed at a price equal to 100% of the principal amount, plus (i) a make-whole amount of $21,328,000, and (ii) accrued and unpaid interest.

Note 5 – Stockholders' Equity:
In August 2020, NNN filed a shelf registration statement with the Securities and Exchange Commission (the "Commission") which permits the issuance by NNN of an indeterminate amount of debt and equity securities.
At-The-Market Offerings – Under NNN's shelf registration statement, NNN has established an at-the-market equity program ("ATM") which allows NNN to sell shares of common stock from time to time. The following outlines NNN's ATM programs:
2020 ATM2018 ATM
Established dateAugust 2020February 2018
Termination dateAugust 2023August 2020
Total allowable shares17,500,000 12,000,000 
Total shares issued as of March 31, 20211,599,304 11,272,034 
The following table outlines the common stock issuances pursuant to NNN's ATM equity programs for the quarter ended March 31, 2021 (dollars in thousands, except per share data):
2021
Shares of common stock30,000 
Average price per share (net)$38.59 
Net proceeds$1,158 
Stock issuance costs(1)
$75 
(1) Stock issuance costs consist primarily of underwriters' fees and commissions, and legal and accounting fees.
There were no common stock issuances pursuant to NNN's ATM equity program for the quarter ended March 31, 2020.
Dividend Reinvestment and Stock Purchase Plan – In February 2021, NNN filed a shelf registration statement with the Commission for its Dividend Reinvestment and Stock Purchase Plan ("DRIP") which permits the issuance by NNN of up to 6,000,000 shares of common stock. The following table outlines the common stock issuances pursuant to NNN's DRIP (dollars in thousands):
Quarter Ended March 31,
20212020
Shares of common stock15,769 12,528 
Net proceeds$569 $696 
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Dividends – The following table outlines the dividends declared and paid for each issuance of NNN's stock (dollars in thousands, except per share data):
Quarter Ended March 31,
20212020
Series F preferred stock(1):
Dividends$4,485 $4,485 
Per depositary share0.3250 0.3250 
Common stock:
Dividends90,848 88,148 
Per share0.5200 0.5150 
(1)The 5.200% Series F Cumulative Redeemable Preferred Stock (the "Series F Preferred Stock") has no maturity date and will remain outstanding unless redeemed by NNN. The earliest redemption date for the Series F Preferred Stock is October 2021.
In April 2021, NNN declared a dividend of $0.5200 per share, which is payable in May 2021 to its common stockholders of record as of April 30, 2021.

Note 6 – Derivatives:
In accordance with the guidance on derivatives and hedging, NNN records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or a firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.
NNN’s objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements or other identified risks. To accomplish this objective, NNN primarily uses treasury locks, forward starting swaps and interest rate swaps as part of its cash flow hedging strategy. Treasury locks and forward starting swaps are used to hedge forecasted debt issuances. Treasury locks designated as cash flow hedges lock in the yield/price of a treasury security. Forward starting swaps also lock the associated swap spread. Interest rate swaps designated as cash flow hedges are used to hedge the variable cash flows associated with floating rate debt and involve the receipt or payment of variable rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount.
For derivatives designated as cash flow hedges, the change in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings.
NNN discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in the cash flows of the hedged item, the derivative expires or is sold, terminated or exercised, the derivative is re-designated as a hedging instrument or management determines that designation of the derivative as a hedging instrument is no longer appropriate.
When hedge accounting is discontinued, NNN recognizes any changes in its fair value in earnings and continues to carry the derivative on the balance sheet or may choose to settle the derivative at that time with a cash payment or receipt. NNN records a cash settlement of forward starting swaps in the Condensed Consolidated Statements of Cash Flows as an operating activity.
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The following table outlines NNN's terminated derivatives which were hedging the risk of changes in forecasted interest payments on forecasted issuance of long-term debt (dollars in thousands):
Notes PayableTerminatedDescriptionAggregate Notional AmountLiability (Asset) Fair Value When Terminated
Fair Value Deferred In Other Comprehensive Income (1)
2024May 2014NaN forward starting swaps$225,000 $6,312 $6,312 
2025October 2015NaN forward starting swaps300,000 13,369 13,369 
2026December 2016NaN forward starting swaps180,000 (13,352)(13,345)
2027September 2017NaN forward starting swaps250,000 7,690 7,688 
2028September 2018NaN forward starting swaps250,000 (4,080)(4,080)
2030March 2020NaN forward starting swaps200,000 13,141 13,141 
(1) The amount reported in accumulated other comprehensive income will be reclassified to interest expense as interest payments are made on the related notes payable.
As of March 31, 2021, $15,077,000 remained in other comprehensive income related to NNN’s previously terminated interest rate hedges. During the quarters ended March 31, 2021 and 2020, NNN reclassified out of other comprehensive income $1,368,000 and $383,000, respectively, as an increase in interest expense. Over the next 12 months, NNN estimates that an additional $2,271,000 will be reclassified as an increase in interest expense from these terminated derivatives. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on NNN’s long-term debt.
NNN does not use derivatives for trading or speculative purposes or currently have any derivatives that are not designated as hedges. NNN had no derivative financial instruments outstanding at March 31, 2021.

Note 7 – Fair Value of Financial Instruments:
NNN believes the carrying value of its Credit Facility approximates fair value based upon its nature, terms and variable interest rate. NNN believes that the carrying value of its mortgages payable at March 31, 2021 and December 31, 2020, approximate fair value based upon current market prices of comparable instruments (Level 3). At March 31, 2021 and December 31, 2020, the fair value of NNN’s notes payable net of unamortized discount and excluding debt costs was $3,502,237,000 and $3,532,908,000, respectively, based upon quoted market prices, which is a Level 1 valuation since NNN's notes payable are publicly traded.

Note 8 – Subsequent Events:
NNN reviewed its subsequent events and transactions that have occurred after March 31, 2021, the date of the condensed consolidated balance sheet.
As of April 28, 2021, NNN had collected approximately 97% of rent originally due in the quarter ended March 31, 2021 and 98% of rent originally due in April 2021.
There were no other reportable subsequent events or transactions.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in the Annual Report on Form 10-K of National Retail Properties, Inc. for the year ended December 31, 2020 ("2020 Annual Report"). The terms “NNN” and the “Company” refer to National Retail Properties, Inc. and all of its consolidated subsidiaries.
Forward-Looking Statements
The information herein contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 (the “Exchange Act”). Also, when NNN uses any of the words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” or similar expressions, NNN is making forward-looking statements. Although management believes that the expectations reflected in such forward-looking statements are based upon present expectations and reasonable assumptions, NNN’s actual results could differ materially from those set forth in the forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and NNN undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law. The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statement:
Changes in financial and economic conditions may have an adverse impact on NNN, its tenants, and commercial real estate in general;
An epidemic or pandemic (such as the outbreak and worldwide spread of a novel strain of coronavirus ("COVID-19")), and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, may precipitate or materially exacerbate one or more of the other risks, and may significantly disrupt NNN's tenants' ability to operate their businesses and/or pay rent to NNN or prevent NNN from operating its business in the ordinary course for an extended period;
Loss of rent from tenants would reduce NNN's cash flow;
A significant portion of NNN's annual base rent is concentrated in specific industry classifications, tenants and geographic locations;
NNN may not be able to successfully execute its acquisition or development strategies;
NNN may not be able to dispose of properties consistent with its operating strategy;
Certain provisions of NNN's leases or loan agreements may be unenforceable;
Competition from numerous other real estate investment trusts (“REIT”), commercial developers, real estate limited partnerships and other investors may impede NNN’s ability to grow;
Uninsured losses may adversely affect NNN's operating results and asset values;
NNN's ability to fully control the management of its net-leased properties may be limited;
Vacant properties or bankrupt tenants could adversely affect NNN's business or financial condition;
Cybersecurity risks and cyber incidents could adversely affect NNN's business, disrupt operations and expose NNN to liabilities to tenants, employees, capital providers, and other third parties;
Future investment in international markets could subject NNN to additional risks;
NNN may suffer a loss in the event of a default of or bankruptcy of a tenant or a borrower;
Property ownership through joint ventures and partnerships could limit NNN's control of those investments;
NNN may be unable to obtain debt or equity capital on favorable terms, if at all;
The amount of debt NNN has and the restrictions imposed by that debt could adversely affect NNN's business and financial condition;
NNN is obligated to comply with financial and other covenants in its debt instruments that could restrict its operating activities, and the failure to comply with such covenants could result in defaults that accelerate the payment of such debt;
NNN's ability to pay dividends in the future is subject to many factors;
Owning real estate and indirect interests in real estate carries inherent risks;
NNN's real estate investments are illiquid;
NNN may be subject to known or unknown environmental liabilities and risks, including but not limited to liabilities and risks resulting from the existence of hazardous materials on or under Properties owned by NNN;
NNN's failure to qualify as a REIT for federal income tax purposes could result in significant tax liability;
Compliance with REIT requirements, including distribution requirements, may limit NNN's flexibility and may negatively affect NNN's operating decisions;
The share ownership restrictions of the Internal Revenue Code of 1986, as amended (the "Code"), for REITs and the 9.8% share ownership limit in NNN's charter may inhibit market activity in NNN's shares of stock and restrict NNN's business combination opportunities;
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The cost of complying with changes in governmental laws and regulations may adversely affect NNN's results of operations;
Non-compliance with Title III of the Americans with Disabilities Act of 1990 could have an adverse effect on NNN's business and operating results;
NNN's loss of key management personnel could adversely affect performance and the value of its securities;
NNN's failure to maintain effective internal control over financial reporting could have a material adverse effect on its business, operating results and the market value of NNN's securities;
Acts of violence, terrorist attacks or war may affect NNN's properties, the markets in which NNN operates and NNN's results of operations;
Changes in accounting pronouncements could adversely impact NNN's or NNN's tenants' reported financial performance;
The market value of NNN's equity and debt securities is subject to various factors that may cause significant fluctuations or volatility;
The phase-out of LIBOR could affect interest rates under NNN's variable rate debt;
Even if NNN remains qualified as a REIT, NNN faces other tax liabilities that reduce operating results and cash flow; and
Adverse legislative or regulatory tax changes could reduce NNN's earnings and cash flow and the market value of NNN's securities.

Additional information related to these risks and uncertainties are included in "Item 1A. Risk Factors" of NNN's 2020 Annual Report.
These risks and uncertainties may cause NNN's actual future results to differ materially from expected results, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. NNN undertakes no obligation to update or revise such forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
NNN, a Maryland corporation, is a fully integrated REIT formed in 1984. NNN's assets are primarily real estate assets. NNN acquires, owns, invests in and develops properties that are leased primarily to retail tenants under long-term net leases and are primarily held for investment ("Properties" or "Property Portfolio", or individually a "Property").
As of March 31, 2021, NNN owned 3,161 Properties, with an aggregate gross leasable area of approximately 32,717,000 square feet, located in 48 states, with a weighted average remaining lease term of 10.6 years. Approximately 98 percent of the Properties were leased as of March 31, 2021.
NNN’s management team focuses on certain key indicators to evaluate the financial condition and operating performance of NNN. The key indicators for NNN include items such as: the composition of the Property Portfolio (such as tenant, geographic and line of trade diversification), the occupancy rate of the Property Portfolio, certain financial performance ratios and profitability measures, industry trends and industry performance compared to that of NNN.
NNN evaluates the creditworthiness of its 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 tenants, including past payment history and periodically meeting with senior management of certain tenants.
NNN continues to maintain its diversification by tenant, geography and tenant's line of trade. NNN’s largest lines of trade concentrations are the convenience store and restaurant (including full and limited service) sectors. These sectors represent a large part of the freestanding retail property marketplace and NNN’s management believes these sectors present attractive investment opportunities. The Property Portfolio is geographically concentrated in the south and southeast United States, which are regions of historically above-average population growth. Given these concentrations, any financial hardship within these sectors or geographic regions could have a material adverse effect on the financial condition and operating performance of NNN.
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Impact of COVID-19 on NNN’s Business
In 2020, the COVID-19 pandemic and the government reaction to it negatively affected almost every industry directly or indirectly. A number of NNN’s tenants experienced temporary closures of their operations and/or requested adjustments to their lease terms during this pandemic. As a result, these economic hardships have increased uncertainty with respect to the collectability of lease payments and have had a negative effect on NNN's financial results, including increased accounts receivables and related allowances and recognizing revenue on a cash basis from certain of its tenants.
During the quarter ended March 31, 2021, NNN and certain of NNN's tenants continue to be impacted by the COVID-19 pandemic which has resulted in the continued loss of revenue for certain tenants and challenged their ability to pay rent.
As of March 31, 2021, NNN has entered into rent deferral lease amendments with certain tenants for an aggregate $51,269,000 and $4,677,000 of rent originally due for the years ending December 31, 2020 and December 31, 2021, respectively. The rent deferral lease amendments require the deferred rents to be repaid at a later time during the lease term. Approximately $3,259,000 of deferred rent was repaid in 2020 and approximately $10,817,000 of deferred rent was repaid during the quarter ended March 31, 2021. An additional $21,107,000 is due in 2021, with the remaining deferred rent to be collected periodically by December 31, 2025.
The following table details the rental revenue for the quarter ended March 31, 2021 (collected as of April 28, 2021), excluding the repayments of amounts previously deferred according to the rent deferral lease amendments as a percentage of annualized base rent:
% of Total Annual Base Rent(1)
% of Rent Collected (2)
1.Convenience stores18.0 %99.9 %
2.Automotive service10.7 %98.7 %
3.Restaurants - full service10.2 %91.5 %
4.Restaurants – limited service9.5 %99.9 %
5.Family entertainment centers6.0 %99.6 %
6.Health and fitness5.2 %94.2 %
7.Theaters4.4 %75.8 %
8.Recreational vehicle dealers, parts and accessories3.5 %100.0 %
9.Equipment rental3.1 %100.0 %
10.Automotive parts3.1 %99.7 %
11.Home improvement2.6 %99.1 %
12.Wholesale clubs2.5 %100.0 %
13.Medical service providers2.1 %99.6 %
14.General merchandise1.7 %99.1 %
15.Furniture1.7 %99.2 %
16.Home furnishings1.6 %99.9 %
17.Travel plazas1.5 %100.0 %
18.Consumer electronics1.5 %100.0 %
19.Drug stores1.4 %100.0 %
20.Bank1.3 %100.0 %
Other8.4 %99.7 %
Total100.0 %97.5 %
(1) Based on annualized base rent for all leases in place as of March 31, 2021.
(2) As of April 28, 2021, NNN has collected approximately 98% of rent originally due in April 2021.
Historical rent collections and rent relief requests may not be indicative of collections and requests in the future. Depending on the macroeconomic conditions and the impact on tenants, deferred rents may be difficult to collect.
NNN will continue to monitor the impact of the economic downturn, among other things, when considering new property investments in 2021. As of March 31, 2021, NNN had $311,231,000 of cash and cash equivalents and $900,000,000 available
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for borrowings under its unsecured revolving credit facility. NNN currently expects these combined resources, in addition to the cash provided by NNN's operations to be sufficient to meet NNN's demand for funds.
The rapid development and fluidity of the economic downturn precludes any prediction as to the ultimate adverse impact on the economy, retailing and NNN and will ultimately depend on future developments, none of which can be predicted with any certainty. Nevertheless, the economic downturn presents material uncertainty and risk with respect to NNN’s performance, business or financial condition, results of operations and cash flows.
Results of Operations
Property Analysis
General.  The following table summarizes the Property Portfolio:
March 31, 2021December 31, 2020March 31, 2020
Properties Owned:
Number3,161 3,143 3,125 
Total gross leasable area (square feet)32,717,000 32,461,000 32,500,000 
Properties:
Leased and unimproved land3,106 3,096 3,088 
Percent of Properties – leased and unimproved land98 %99 %99 %
Weighted average remaining lease term (years)10.610.711.1
Total gross leasable area (square feet) – leased31,910,000 31,631,000 31,910,000 

The following table summarizes the diversification of the Property Portfolio based on the top 20 lines of trade:
% of Annual Base Rent (1)
Lines of TradeMarch 31, 2021December 31, 2020March 31, 2020
1.Convenience stores18.0 %18.2 %18.1 %
2.Automotive service10.7 %10.3 %9.9 %
3.Restaurants – full service10.2 %10.5 %11.0 %
4.Restaurants – limited service9.5 %9.7 %8.7 %
5.Family entertainment centers6.0 %5.9 %6.7 %
6.Health and fitness5.2 %5.3 %5.2 %
7.Theaters4.4 %4.4 %4.7 %
8.Recreational vehicle dealers, parts and accessories3.5 %3.5 %3.4 %
9.Equipment rental3.1 %2.6 %2.6 %
10.Automotive parts3.1 %3.1 %3.1 %
11.Home improvement2.6 %2.6 %2.6 %
12.Wholesale clubs2.5 %2.6 %2.5 %
13.Medical service providers2.1 %2.2 %2.1 %
14.General merchandise1.7 %1.7 %1.7 %
15.Furniture1.7 %1.7 %1.7 %
16.Home furnishings1.6 %1.6 %1.6 %
17.Travel plazas1.5 %1.5 %1.5 %
18.Consumer electronics1.5 %1.5 %1.5 %
19.Drug stores1.4 %1.5 %1.5 %
20.Bank1.3 %1.3 %1.3 %
Other8.4 %8.3 %8.6 %
100.0 %100.0 %100.0 %
(1) Based on annualized base rent for all leases in place for each respective period.
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Property Acquisitions.  The following table summarizes the Property acquisitions (dollars in thousands):
Quarter Ended March 31,
20212020
Acquisitions:
Number of Properties29 21 
Gross leasable area (square feet)(1)
355,000 217,000 
Initial cash yield6.4 %6.9 %
Total dollars invested(2)
$105,626 $67,197 
(1) Includes additional square footage from completed construction on existing Properties.
(2) Includes dollars invested in projects under construction or tenant improvements for each respective year.
NNN typically funds Property acquisitions either through borrowings under NNN's unsecured revolving credit facility (the "Credit Facility") (See "Debt – Line of Credit Payable") or by issuing its debt or equity securities in the capital markets.
Property Dispositions.  The following table summarizes the Properties sold by NNN (dollars in thousands):
Quarter Ended March 31,
20212020
Number of properties11 14 
Gross leasable area (square feet)96,000 176,000 
Net sales proceeds$17,575 $36,266 
Net gain$4,281 $12,770 

NNN typically uses the proceeds from a Property disposition to either pay down the Credit Facility or reinvest in real estate.
Analysis of Revenue
General.  During the quarter ended March 31, 2021, total revenues increased as compared to the same period in 2020, primarily due to scheduled rent increases based on increases in the Consumer Price Index ("CPI") and to the income generated from Properties acquired during the year ended December 31, 2020 and quarter ended March 31, 2021 (See "Results of Operations - Property Analysis - Property Acquisitions").
The following table summarizes NNN’s revenues (dollars in thousands):
Quarter Ended March 31,
Percent
Increase
(Decrease)
20212020
Rental Revenues(1)
$173,845 $169,300 2.7%
Real estate expense reimbursement from tenants5,353 5,247 2.0%
Rental income179,198 174,547 2.7%
Interest and other income from real estate transactions580 516 12.4%
Total revenues$179,778 $175,063 2.7%
(1)Includes rental income from operating leases, earned income from direct financing leases and percentage rent ("Rental Revenues").
Quarter Ended March 31, 2021 versus Quarter Ended March 31, 2020
Rental Income. Rental income increased for the quarter ended March 31, 2021, as compared to the same period in 2020. The increase for the quarter ended March 31, 2021, is primarily due to scheduled rent increases and Property acquisitions:
(i)a partial year of Rental Revenue from 29 properties with aggregate gross leasable area of approximately 355,000 square feet during 2021, and
(ii)a full year of Rental Revenue from 63 properties with aggregate gross leasable area of approximately 449,000 square feet in 2020.
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Analysis of Expenses
General.  Operating expenses decreased for the quarter ended March 31, 2021, as compared to the same period in 2020, primarily due to the decrease in impairment losses recognized on real estate which was partially offset by an increase in general and administrative expenses. The following table summarizes NNN’s expenses (dollars in thousands):
Quarter Ended March 31,
Percent Increase (Decrease)
20212020
General and administrative$11,748 $10,100 16.3%
Real estate7,725 7,635 1.2%
Depreciation and amortization49,980 49,188 1.6%
Leasing transaction costs38 36 5.6%
Impairment losses – real estate, net of recoveries2,131 5,513 (61.3)%
Total operating expenses$71,622 $72,472 (1.2)%
Interest and other income$(65)$(164)(60.4)%
Interest expense34,587 33,670 2.7%
Loss on early extinguishment of debt21,328 16,679 27.9%
Total other expenses$55,850 $50,185 11.3%
As a percentage of total revenues:
General and administrative6.5 %5.8 %
Real estate4.3 %4.4 %
Quarter Ended March 31, 2021 versus Quarter Ended March 31, 2020
General and Administrative.   General and administrative expenses increased in amount and as a percentage of total revenues for the quarter ended March 31, 2021, as compared to the same period in 2020. The increase is primarily attributable to an increase in long-term incentive compensation costs.
Impairment Losses – real estate, net of recoveries. NNN reviews long-lived assets for impairment whenever certain events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Events or circumstances that may occur include changes in real estate market conditions, the ability of NNN to re-lease properties that are currently vacant or become vacant, and the ability to sell properties at a price that exceeds NNN's carrying value. Management evaluates whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), and the residual value of the real estate, with the carrying cost of the individual asset. The future undiscounted cash flows are primarily driven by estimated future market rents. Future cash flow estimates are sensitive to the assumptions made by management regarding future market rents, which are affected by expectations about future market and economic conditions. If an impairment is indicated, a loss will be recorded for the amount by which the carrying value of the asset exceeds its fair value. NNN's Properties are leased primarily to retail tenants under long-term net leases and primarily held for investment. Generally, NNN’s Property leases provide for initial terms of 10 to 20 years, which provide for cash flows over this term. NNN generally intends to hold these assets for the long-term, therefore, a temporary change in cash flows due to COVID-19 alone would not be an indicator of impairment. NNN recognized real estate impairments, net of recoveries of $2,131,000 and $5,513,000 for the quarters ended March 31, 2021 and 2020, respectively.

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Interest expense. Interest expense increased for the quarter ended March 31, 2021, as compared to the same period in 2020. The following represents the primary changes in debt that have impacted interest expense (dollars in thousands):
TransactionEffective DatePrincipalStated Interest RateOriginal Maturity
Issuance 2030 NotesMarch 2020$400,000 2.500 %April 2030
Issuance 2050 NotesMarch 2020300,000 3.100 %April 2050
Redemption 2022 NotesMarch 2020(325,000)3.800 %October 2022
Issuance 2051 NotesMarch 2021450,000 3.500 %April 2051
Redemption 2023 NotesMarch 2021(350,000)3.300 %April 2023
In addition to the note payable transactions outlined in the table above, interest expense was impacted due to the Credit Facility having no weighted average outstanding balance at March 31, 2021 compared to a $75,996,000 weighted average outstanding balance with a weighted average interest rate of 2.5% for the quarter ended March 31, 2020. In addition, interest expense for the quarters ended March 31, 2021 and 2020 includes $2,078,000 and $2,291,000, respectively, in connection with the early redemption of the 2023 Notes and 2022 Notes, respectively.
Loss on Early Extinguishment of Debt. In March 2021, NNN redeemed the $350,000,000 3.300% notes payable due April 2023. The notes were redeemed at a price equal to 100% of the principal amount, plus (i) a make-whole amount of $21,328,000, and (ii) accrued and unpaid interest.
In March 2020, NNN redeemed the $325,000,000 3.800% notes payable due October 2022. The notes were redeemed at a price equal to 100% of the principal amount, plus (i) a make-whole amount of $16,679,000, and (ii) accrued and unpaid interest.

Liquidity
General.  NNN’s demand for funds has been, and will continue to be, primarily for (i) payment of operating expenses and cash dividends; (ii) Property acquisitions and development; (iii) capital expenditures; (iv) payment of principal and interest on its outstanding indebtedness; and (v) other investments.
While the total impacts of the economic downturn are unknown, NNN expects to meet short-term liquidity requirements through cash and cash equivalents, cash provided from operations and NNN's Credit Facility. As of March 31, 2021, NNN has $311,231,000 of cash and cash equivalents and $900,000,000 available for borrowings under its Credit Facility.
NNN anticipates its long-term capital needs will be funded by the Credit Facility, cash provided from operations, the issuance of long-term debt or the issuance of common or preferred equity or other instruments convertible into or exchangeable for common or preferred equity. 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.
Cash and Cash Equivalents.  NNN's cash and cash equivalents includes the aggregate of cash and cash equivalents and restricted cash and cash held in escrow from the Condensed Consolidated Balance Sheets. NNN did not have restricted cash, including cash held in escrow as of March 31, 2021 and December 31, 2020. The table below summarizes NNN’s cash flows (dollars in thousands):
Quarter Ended March 31,
20212020
Cash and cash equivalents:
Provided by operating activities$161,170 $128,084 
Used in investing activities(88,512)(30,654)
Provided by (used in) financing activities(28,663)118,841 
Increase43,995 216,271 
Net cash at beginning of period267,236 1,112 
Net cash at end of period$311,231 $217,383 

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Cash provided by operating activities represents cash received primarily from Rental Revenue and interest income less cash used for general and administrative expenses. NNN’s cash flow from operating activities has been sufficient to pay the distributions for each period presented. The change in cash provided by operations for the quarters ended March 31, 2021 and 2020, is primarily the result of changes in revenues and expenses as discussed in “Results of Operations.” Cash generated from operations is expected to fluctuate in the future.
Changes in cash for investing activities are primarily attributable to the acquisitions and dispositions of Properties. NNN typically uses cash on hand or proceeds from its Credit Facility to fund the acquisition of its Properties.
NNN’s financing activities for the quarter ended March 31, 2021, included the following significant transactions:
(i) Issuance and redemption of notes payable resulted in the following:
$436,417,000 in net proceeds from the issuance in March of the 3.500% notes payable due in April 2051;
$350,000,000 payment in March for the early redemption of the 3.300% notes payable due in April 2023; and
$21,328,000 payment in March of the make-whole amount from the early redemption of the 3.300% notes payable due in April 2023.
(ii) Issuance of common stock resulted in the following net proceeds:
$1,158,000 from the issuance of 30,000 shares of common stock in connection with the at-the-market ("ATM") equity program; and
$569,000 from the issuance of 15,769 shares of common stock in connection with the Dividend Reinvestment and Stock Purchase Plan ("DRIP").
(iii) Dividends paid:
$90,848,000 to common stockholders; and
$4,485,000 to holders of the depositary shares of NNN's 5.200% Series F Cumulative Redeemable Preferred Stock (the "Series F Preferred Stock").
Contractual Obligations and Commercial Commitments. The information in the following table summarizes NNN’s contractual obligations and commercial commitments outstanding as of March 31, 2021. The table presents principal cash flows by year-end of the expected maturity for debt obligations and commercial commitments outstanding as of March 31, 2021.
 Expected Maturity Date (dollars in thousands)
 Total20212022202320242025Thereafter
Long-term debt(1)
$3,361,085 $474 $664 $9,947 $350,000 $400,000 $2,600,000 
Long-term debt – interest(2)
1,642,562 92,610 123,447 123,201 115,506 107,250 1,080,548 
Headquarters office lease(3)
3,266 594 804 821 837 210 — 
Ground leases(4)
7,741 432 582 582 601 639 4,905 
Total contractual cash obligations$5,014,654 $94,110 $125,497 $134,551 $466,944 $508,099 $3,685,453 
(1)Includes only principal amounts outstanding under mortgages payable and notes payable and excludes unamortized mortgage
premiums, note discounts and note costs. See "Debt-Notes Payable".
(2)Interest calculation based on stated rate of the principal amount.
(3)NNN is a lessee for its headquarters office lease.
(4)NNN is a lessee for three ground lease arrangements.
In addition to the contractual obligations outlined above, NNN has committed to fund construction on eight Properties. The improvements on such Properties are estimated to be completed within 12 months. These construction commitments, at March 31, 2021, are outlined in the table below (dollars in thousands):
Total commitment(1)
$12,077 
Less amount funded6,637 
Remaining commitment$5,440 
(1) Includes land, construction costs, tenant improvements, lease costs and capitalized interest.
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As of March 31, 2021, NNN did not have any other material contractual cash obligations, such as purchase obligations, financing lease obligations or other long-term liabilities other than those reflected in the tables above and previously disclosed under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in NNN's Annual Report on Form 10-K for the year ended December 31, 2020. In addition to items reflected in the tables, NNN has issued preferred stock with cumulative preferential cash distributions, as described below under “Dividends.”
Management anticipates satisfying these obligations with a combination of NNN’s cash provided from operations, current capital resources on hand, its credit facility, debt or equity financings and asset dispositions.
Generally, the Properties are leased under long-term triple net leases, which require the tenant to pay all property taxes and assessments, to maintain the interior and exterior of the property, and to carry property and liability insurance coverage. Therefore, management anticipates that capital demands to meet obligations with respect to these Properties will be modest for the foreseeable future and can be met with funds from operations and working capital. Certain Properties are subject to leases under which NNN retains responsibility for specific costs and expenses associated with the Property. Management anticipates that the costs associated with these Properties, NNN's vacant Properties or those Properties that become vacant will also be met with funds from operations and working capital. NNN may be required to borrow under its credit facility or use other sources of capital in the event of significant capital expenditures or major repairs.
The lost revenues and increased property expenses resulting from vacant Properties or uncollectability of lease revenues could have a material adverse effect on the liquidity and results of operations if NNN is unable to re-lease the Properties at comparable rental rates and in a timely manner. NNN currently expects a short-term decrease in cash from operations as its tenants are impacted by the pandemic and, while contractually obligated, some have not paid all rent amounts due (See "Impact of COVID-19 on NNN's Business").
As of March 31, 2021, NNN owned 55 vacant, un-leased Properties which accounted for approximately two percent of total Properties held in the Property Portfolio.
Additionally, as of April 28, 2021, less than one percent of total Properties, and less than one percent of aggregate gross leasable area held in the Property Portfolio was leased to one tenant that is currently in bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. As a result, this tenant has the right to reject or affirm its lease with NNN.
NNN generally monitors the financial performance of its significant tenants on an ongoing basis.
A prolonged continuation of business closures, reduced capacity at businesses or other social-distancing practices as a result of COVID-19 may adversely impact NNN's tenants’ ability to generate sufficient revenues to meet financial obligations, and could force tenants to default on their leases, or result in the bankruptcy of tenants, which would diminish the rental revenue NNN receives under its leases. Additionally, an increase in the number of vacant properties would increase NNN's real estate expenses, including expenses associated with ongoing maintenance and repairs, utilities, property taxes, and property and liability insurance. The ongoing development and fluidity of the pandemic precludes any prediction as to the ultimate adverse impact on NNN (See “Impact of COVID-19 on NNN’s Business”).
Dividends.  NNN has made an election to be taxed as a REIT under Sections 856 through 860 of the Code, as amended, 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 tax on income that it distributes to its stockholders, provided that it distributes 100 percent of its REIT taxable income and 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.
One of NNN’s primary objectives, consistent with its policy of retaining sufficient cash for reserves and working capital purposes and maintaining its status as a REIT, is to distribute a substantial portion of its funds available from operations to its stockholders in the form of dividends.
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The following table outlines the dividends declared and paid for each issuance of NNN's stock (dollars in thousands, except per share data):
Quarter Ended March 31,
20212020
Series F Preferred Stock(1):
Dividends$4,485 $4,485 
Per depositary share0.3250 0.3250 
Common stock:
Dividends90,848 88,148 
Per share0.5200 0.5150 
(1) The Series F Preferred Stock has no maturity date and will remain outstanding unless redeemed by NNN. The earliest redemption date for the Series F Preferred Stock is October 2021.
In April 2021, NNN declared a dividend of $0.5200 per share which is payable in May 2021 to its common stockholders of record as of April 30, 2021.

Capital Resources
Generally, cash needs for Property acquisitions, debt payments, capital expenditures, development and other investments have been funded by equity and debt offerings, bank borrowings, the sale of Properties and, to a lesser extent, by internally generated funds. Cash needs for operating and interest expenses and dividends have generally been funded by internally generated funds. If available, future sources of capital include proceeds from the public or private offering of NNN’s debt or equity securities, secured or unsecured borrowings from banks or other lenders, proceeds from the sale of Properties, as well as undistributed funds from operations.

Debt
NNN expects to use debt primarily for property acquisitions and development of single-tenant retail properties, either directly or through investment interests. Additionally, debt may be used to refinance existing debt. The following is a summary of NNN’s total outstanding debt as of (dollars in thousands):
March 31, 2021Percentage
of Total
December 31, 2020Percentage
of Total
Mortgages payable$11,222 0.3 %$11,395 0.4 %
Notes payable3,298,302 99.7 %3,209,527 99.6 %
Total outstanding debt$3,309,524 100.0 %$3,220,922 100.0 %

Line of Credit Payable. NNN's $900,000,000 unsecured revolving credit facility (the “Credit Facility”) had no weighted average outstanding balance during the quarter ended March 31, 2021. The Credit Facility matures January 2022, unless the Company exercises its option to extend maturity to January 2023. The Credit Facility bears interest at LIBOR plus 87.5 basis points; however, such interest rate may change pursuant to a tiered interest rate structure based on NNN's debt rating. The Credit Facility also includes an accordion feature which permits NNN to increase the facility size up to $1,600,000,000, subject to lender approval. As of March 31, 2021, there was no outstanding balance and $900,000,000 was available for future borrowings under the Credit Facility, and NNN was in compliance with each of the financial covenants.
Notes Payable. In March 2021, NNN filed a prospectus supplement to the prospectus contained in its August 2020 shelf registration statement and, subsequently, in March 2021, issued $450,000,000 aggregate principal amount of 3.500% notes due April 2051 (the “2051 Notes”).

The 2051 Notes were sold at a discount with an aggregate purchase price of $441,594,000 with interest payable semi-annually commencing on October 15, 2021. The discount of $8,406,000 is being amortized to interest expense over the term of the notes using the effective interest method. The effective interest rate for the 2051 Notes after accounting for the note discount is 3.602%.

The 2051 Notes are senior unsecured obligations of NNN and are subordinated to all secured debt and to the debt and other liabilities of NNN's subsidiaries. Additionally, the 2051 Notes are each redeemable at NNN's option, in whole or part anytime,
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for an amount equal to (i) the sum of the outstanding principal balance of the notes being redeemed plus accrued interest thereon to the redemption date, and (ii) the make-whole amount, if any, as defined in the supplemental indenture dated March 10, 2021, relating to the 2051 Notes.

NNN received approximately $436,417,000 of net proceeds in connection with the issuance of the 2051 Notes after incurring debt issuance costs consisting primarily of underwriting discounts and commissions, legal and accounting fees, rating agency fees and printing expenses, totaling $5,177,000. NNN used the net proceeds from the issuance of the 2051 Notes to redeem all of its 3.300% notes payable that were due 2023, fund future property acquisitions and for general corporate purposes.
In March 2021, NNN redeemed the $350,000,000 3.300% notes payable due April 2023. The notes were redeemed at a price equal to 100% of the principal amount, plus (i) a make-whole amount of $21,328,000, and (ii) accrued and unpaid interest.

Debt and Equity Securities
NNN has used, and expects to use in the future, issuances of debt and equity securities primarily to pay down its outstanding debt and to finance acquisitions.
Securities Offerings. In August 2020, NNN filed a shelf registration statement with the Securities and Exchange Commission (the “Commission”) which was automatically effective and permits the issuance by NNN of an indeterminate amount of debt and equity securities.
Information related to NNN's publicly held debt and equity securities is included in NNN's Annual Report on Form 10-K for the year ended December 31, 2020.
At-The-Market Offerings. Under NNN's shelf registration statement, NNN established an ATM equity program which allows NNN to sell shares of common stock from time to time. The following outlines NNN's ATM programs:
2020 ATM2018 ATM
Established dateAugust 2020February 2018
Termination dateAugust 2023August 2020
Total allowable shares17,500,000 12,000,000 
Total shares issued as of March 31, 20211,599,304 11,272,034 
The following table outlines the common stock issuances pursuant to NNN's ATM equity programs for the quarter ended March 31, 2021 (dollars in thousands, except per share data):
2021
Shares of common stock30,000 
Average price per share (net)$38.59 
Net proceeds$1,158 
Stock issuance costs(1)
$75 
(1) Stock issuance costs consist primarily of underwriters' fees and commissions, and legal and accounting fees.
There were no common stock issuances pursuant to NNN's ATM equity program for the quarter ended March 31, 2020.
Dividend Reinvestment and Stock Purchase Plan.  In February 2021, NNN filed a shelf registration statement which was automatically effective with the Commission for its DRIP, which permits the issuance by NNN of up to 6,000,000 shares of common stock. NNN’s DRIP provides an economical and convenient way for current stockholders and other interested new investors to invest in NNN’s common stock. The following outlines the common stock issuances pursuant to NNN’s DRIP (dollars in thousands):
Quarter Ended March 31,
20212020
Shares of common stock15,769 12,528 
Net proceeds$569 $696 


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Recent Accounting Pronouncements

Refer to Note 1 to the March 31, 2021, condensed consolidated financial statements.
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Item 3.Quantitative and Qualitative Disclosures About Market Risk

NNN is exposed to interest rate risk primarily as a result of its variable rate Credit Facility and its fixed rate debt which is used to finance NNN’s development and acquisition activities, as well as for general corporate purposes. NNN’s interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to reduce overall borrowing costs. To achieve its objectives, NNN borrows at both fixed and variable rates on its long-term debt. As of March 31, 2021, NNN had no outstanding derivatives.
The information in the table below summarizes NNN’s market risks associated with its debt obligations outstanding as of March 31, 2021 and December 31, 2020. The table presents principal payments and related interest rates by year for debt obligations outstanding as of March 31, 2021. NNN has a variable interest rate risk on its Credit Facility which had no outstanding balance as of March 31, 2021 and December 31, 2020. The weighted average interest rate for the Credit Facility for year ended December 31, 2020 was 2.6%. The table incorporates only those debt obligations that existed as of March 31, 2021, and it does not consider those debt obligations or positions which could arise after this date and therefore has limited predictive value. As a result, NNN’s ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period, NNN’s hedging strategies at that time and interest rates. If interest rates on NNN's variable rate debt increased by one percent, NNN's interest expense would remain unchanged for the quarter ended March 31, 2021.
Debt Obligations (dollars in thousands)
  Fixed Rate Debt
  
Mortgages(1)
Unsecured Debt(2)
  Debt
Obligation
Weighted
Average Effective
Interest Rate
Debt
Obligation
Effective
Interest
Rate
2021$539 5.23%$— 
2022750 5.23%— 
20239,968 5.23%— 
2024— 349,744 3.92%
2025— 399,509 4.03%
Thereafter— 2,574,684 3.67%(3)
Total$11,257 5.23%3,323,937 3.74%
Fair Value:
March 31, 2021$11,257 $3,502,237 
December 31, 2020$11,434 $3,532,908 
(1) NNN's mortgages payable represent principal payments by year and include unamortized premiums and exclude debt costs.
(2) Includes NNN’s notes payable, each exclude debt costs and are net of unamortized discounts. NNN uses market prices quoted from Bloomberg, a third party, which is a Level 1 input, to determine the fair value.
(3) Weighted average effective interest rate for periods after 2025.
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Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures. An evaluation was performed under the supervision and with the participation of NNN's management, including NNN's Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, of the effectiveness as of March 31, 2021, of the design and operation of NNN's disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer concluded that the design and operation of these disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting. There has been no change in NNN's internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, NNN's internal control over financial reporting.
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PART II. OTHER INFORMATION

Item 1.Legal Proceedings. Not applicable.

Item 1A.Risk Factors.
There were no material changes in NNN's risk factors disclosed in Item 1A. Risk Factors in NNN's Annual Report on Form 10-K for the year ended December 31, 2020.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds. Not applicable.

Item 3.Defaults Upon Senior Securities. Not applicable.

Item 4.Mine Safety Disclosures. Not applicable.

Item 5.Other Information. Not applicable.

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Item 6.Exhibits

The following exhibits are filed as a part of this report.
3.Articles of Incorporation and Bylaws
3.1 
4.Instruments Defining the Rights of Security Holders, Including Indentures
4.1 
4.2 
31.
Section 302 Certifications(1)
31.1
31.2 
32.
Section 906 Certifications(1)
32.1
32.2
101.Interactive Data File
101.1The following materials from National Retail Properties, Inc. Quarterly Report on Form 10-Q for the period ended March 31, 2021, are formatted in Extensible Business Reporting Language: (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of income and comprehensive income, (iii) condensed consolidated statements of cash flows, and (iv) notes to condensed consolidated financial statements.
104.1 Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.
(1) In accordance with item 601((b)(32) of regulation S-K, this exhibit is not deemed "filed" for purposes of section 18 of the exchange act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the securities act or the exchange act, except to the extent that the registrant specifically incorporates it by reference.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DATED this 4th day of May, 2021.
 
NATIONAL RETAIL PROPERTIES, INC.
By:
 /s/ Julian E. Whitehurst
 Julian E. Whitehurst
 Chief Executive Officer, President and Director
By:
 /s/ Kevin B. Habicht
 Kevin B. Habicht
Chief Financial Officer, Executive Vice President and Director


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