Nnn Reit, Inc. · NYSE:NNN
Nnn Reit — Investor Presentation (October 2024)
40 slides from Nnn Reit's investor presentation, October 2024
Slide 1: Investor Update
Investor Update Single Tenant Retail Property REIT with 35 consecutive annual dividend increases October 2024
Slide 2: Safe Harbor
Safe Harbor (All data as of September 30, 2024) This presentation contains certain statements that are the Company’s and Management’s hopes, intentions, beliefs, expectations, or projections of the future and might be considered to be forward-looking statements under Federal Securities laws. Prospec
Slide 3: Slide 3
Slide 4: Low Risk Strategy Generates Consistent Growth
◆ Low Risk Strategy Generates Consistent Growth ◆ Strong Investment Grade Balance Sheet ◆ Long-Term Track Record of Success ◆ Third Quarter 2024 Highlights 4
Slide 5: Consistent and Simple Strategy
Consistent and Simple Strategy ◆ Focus on single-tenant net lease retail properties ◆ Operate with multi-year strategy focus on per share results ◆ Sustain high occupancy and maximize value of existing real estate assets ◆ Maintain fully diversified portfolio ◆ Grow through internal portfolio growth
Slide 6: Summary – Attributes, Advantages & Risk Mitigation
Summary – Attributes, Advantages & Risk Mitigation ◆ High-quality portfolio produces consistent results ◆ High occupancy through cycle ◆ Strong lease renewal rates with very little capital expenditure (not buying-up rent) ◆ Long-term, net leases add stability to operating results ◆ Quality comes fro
Slide 7: Summary – Attributes, Advantages & Risk Mitigation
Summary – Attributes, Advantages & Risk Mitigation ◆ Proven, tenured management team with domain expertise ◆ Top five executives – average NNN tenure 22 years ◆ Next 9 SVPs – average NNN tenure 22 years ◆ Sustainable model ◆ Projections – no heroic assumptions (acquisitions volume, debt tenor, capit
Slide 8: Retail Net Lease Strategy Generates a Reliable Income Stream with Low Volatility
Retail Net Lease Strategy Generates a Reliable Income Stream with Low Volatility ◆ Well-selected retail tenants provide stronger performance through various economic cycles than office, industrial or other tenant types ◆ Main street locations provide strong market for replacement tenants and rent gr
Slide 9: NNN's Strategy Results in Higher Occupancy and Less Volatility
NNN’s Strategy Results in Higher Occupancy and Less Volatility From 2004 – 2024, NNN’s occupancy never fell below 96.4% while the REIT industry average never rose above 93.7% NNN REIT Industry (Excludes Hotels & Health Care) 100.0% 99.4% 99.5% 99.2% 99.3% 99.1% 99.1% 99.0% 99.0% 98.6% 98.5% 98.3% 98
Slide 10: NNN's Acquisition Approach is Unique Because It Is More Difficult
NNN’s Acquisition Approach is Unique Because It Is More Difficult Acquisition quality over quantity requires selectivity, discipline and patience: ◆ Small transactions in areas of historical expertise (retail) rather than large portfolio transactions provides higher risk-adjusted returns ◆ Retail –
Slide 11: NNN's Unique Acquisition Approach Generates Strong FFO Growth
NNN’s Unique Acquisition Approach Generates Strong FFO Growth ◆ Less buyer competition: ◆ Retail net lease market is very large, but with smaller properties ◆ NNN’s focused relationship-based acquisition approach is more difficult and time consuming ◆ Results in higher initial cap rates and built-in
Slide 12: 2007-2024 Acquisition Volume by Source
2007-2024 Acquisition Volume by Source Relationship @ 7.5% Average Cap Rate ($7,678 million = 72%) Market / Auction @ 7.3% Average Cap Rate ($2,923 million = 28%) ($ in Millions) $848 $820 $900 $847 $850 $772 $800 $755 $716 $752 $726 $750 $697 $707 $700 $630 $618 $650 $600 $555 $550 $500 $450 $400 $
Slide 13: NNN's Acquisition Volume vs. Other REIT Property Types
NNN’s Acquisition Volume vs. Other REIT Property Types NNN has consistently generated strong acquisition volumes at significantly higher cap rates than other REIT property types Historical Acquisition Volume at Weighted Average Initial Cap Rates $900 6.9% 6.4% 7.3% 8.4% 6.9% $800 6.9% 8.3% 7.2% 6.8%
Slide 14: Low Risk Strategy Generates Consistent Growth
◆ Low Risk Strategy Generates Consistent Growth ◆ Strong Investment Grade Balance Sheet ◆ Long-Term Track Record of Success ◆ Third Quarter 2024 Highlights 14
Slide 15: Durable Capital Structure
Durable Capital Structure Long-Term Balance Sheet Management Objectives ◆ Avoid financing risk (never need capital) ◆ Maintain access to capital & flexibility to take advantage of market opportunities and weather economic storms ◆ Reduce cost of capital – competitive advantage ◆ Longer duration capi
Slide 16: Strong Investment Grade Balance Sheet – Risk Management is a Core Competency
Strong Investment Grade Balance Sheet – Risk Management is a Core Competency ◆ Investment-grade debt rating (BBB+ / Baa1) supported by industry leading leverage ratios ◆ 100% of assets unencumbered – no secured debt ◆ Well-laddered debt maturities with 12.3-year weighted average debt maturity and 4.
Slide 17: Conservative Balance Sheet Management
Conservative Balance Sheet Management As of September 30, 2024 – Total Gross Book Assets Unsecured Debt 39.6% Unsecured Debt - $4,193.8 million *wtd. avg. maturity 12.3yrs; wtd. avg. effective interest rate 4.1% Common Equity - $6,385.6 million Total Capitalization $10.6 billion (gross book) Interes
Slide 18: Credit Metrics Summary
Credit Metrics Summary (Ratings: Moody’s Baa1; S&P BBB+) 2019 2020 2021 2022 2023 Q3 2024 Net Debt / Total assets (gross book) 35.3% 34.4% 39.9% 40.4% 42.0% 39.6% Net Debt + preferred / Total assets (gross book) 39.3% 38.4% 39.9% 40.4% 42.0% 39.6% Net Debt / EBITDA (last quarter annualized) 4.8 5.0
Slide 19: Well-Laddered Debt Maturities
Well-Laddered Debt Maturities NNN’s Low Leverage Balance Sheet Strategy is Enhanced by its Well-Laddered Debt Maturities* $550 5.6% 5.5% $500 3.5% 3.0% $450 4.0% 3.5% 4.3% 2.5% $400 3.6% $350 4.8% 3.1% Millions $300 $250 $200 $150 $100 $50 $0 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2048 20
Slide 20: Bank Credit Facility and Note Covenants
Bank Credit Facility and Note Covenants The following is a summary of key financial covenants for the Company's unsecured bank credit facility and notes, as defined and calculated per the terms of the facility's credit agreement and the notes' governing documents, respectively, which are included in
Slide 21: Long-Term Track Record of Success
◆ Low Risk Strategy Generates Consistent Growth ◆ Strong Investment Grade Balance Sheet ◆ Long-Term Track Record of Success ◆ Third Quarter 2024 Highlights 21
Slide 22: NNN Consistently Outperforms the REIT Industry and Major Indices
NNN Consistently Outperforms the REIT Industry and Major Indices Annual Total Return Comparison For Periods Ending September 30, 2024 NNN Outperforms 1 Year 2 Years 3 Years 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years (NNN = $48.49 at 9/30/2024) NNN REIT, Inc. (NNN) 44.9% 16.3% 9.4% 2.0% 8.4
Slide 23: NNN v. Gross Lease Returns
NNN v. Gross Lease Returns Triple Net Leases produce higher initial returns with lower volatility than typical Gross Lease investments. 13.00% 12.00% 11.00% 10.00% 9.00% 8.00% 7.00% Assumes: Initial cap rate 150bps lower than net lease (6.50% vs 8.00%) 3.30% annual NOI growth Vacancy 4.0% higher tha
Slide 24: Long-Term Dividend History
Long-Term Dividend History 35 Consecutive Years of Annual Dividend Increases Third longest of all public REITS $2.30 $2.20 $2.10 $2.00 $1.90 $1.80 $1.70 $1.60 $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Slide 25: Third Quarter 2024 Highlights
◆ Low Risk Strategy Generates Consistent Growth ◆ Strong Investment Grade Balance Sheet ◆ Long-Term Track Record of Success ◆ Third Quarter 2024 Highlights 25
Slide 26: Q3 2024 Highlights
Q3 2024 Highlights ◆ Dividend Yield at September 30, 2024 of 4.7% ◆ Maintained high level of occupancy at 99.3% ◆ Invested $113.6 million in property investments, including the acquisition of eight properties @ 7.6% initial cash cap rate, with a weighted average remaining lease term of 18 years ◆ So
Slide 27: Appendix
Appendix CONSECUTIVE ANNUAL DIVIDEND INCREASES 27
Slide 28: NNN Attributes
NNN Attributes ◆ Triple-net long-term leases ◆ Small properties – average $3 million and average GLA of 11,000 square feet ◆ High land value per asset ◆ Net leases reduce volatility of returns – rent growth drops to bottom line ◆ Fragmented non-institutional competition; NNN is a clear leader ◆ Stru
Slide 29: Diversification Reduces Risk
Diversification Reduces Risk Nationwide Reach (As a percentage of annual base rent – September 30, 2024) WEST 130 Properties Properties 3,549 4.6% MIDWEST NORTHEAST 943 Properties 431 Properties Tenants 375+ 24.6% 14.2% Lines of Trade 37+ ROCKY MOUNTAIN 216 Properties 7.2% Top States by Number of Pr
Slide 30: Lease Expirations
Lease Expirations (As a percentage of annual base rent – September 30, 2024) 70% Weighted average remaining lease term of 10.0 years 60% 57.4% Only 3.9% of leases expire through 2025 50% Historically, tenants renew 83% of expiring leases 40% 30% 20% 10% 7.8% 7.0% 3.8% 4.2% 5.5% 4.6% 5.7% 3.9% 0.1% 0
Slide 31: Cost of Capital in Making Capital Allocation Decisions
Cost of Capital in Making Capital Allocation Decisions Driving Per Share Growth – Return on Equity Hurdles / Cost of Capital View Matters Differing Views on the Return on Equity in making Capital Allocation Decisions (all other variables the same) NNN’s View Other REITs’ View “Economic / Expected Re
Slide 32: Accretion Curve
Accretion Curve Per Share Accretion Equivalents For Varying Acquisition Volume and Cap Rates (Leverage Neutral) 9.0% 8.5% 8.0% 7.5% Cap Rate 7.0% 6.5% 6.0% 5.5% 5.0% $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 Acquisition Volume (Millions) 32
Slide 33: Historical Lease Renewals
Historical Lease Renewals Lease Expirations within 18 Months as of September 30, 2024 $35,000,000 122 $10,000,000 Leases (95%) $9,000,000 $30,000,000 $8,000,000 T.I. / Capital Expenditures 139 $25,000,000 91 Leases $7,000,000 Leases 109 66 (101%) (82%) Leases Leases Annual Rent (107%) (97%) $6,000,0
Slide 34: Top 20 Lines of Trade
Top 20 Lines of Trade As of September 30, 2024 % Base # of # of # of Line of Trade Rent(1) Properties Tenants States 1. Automotive service 16.8% 639 35 35 2. Convenience stores 15.9% 661 32 31 3. Restaurants – limited service 8.4% 619 56 37 4. Restaurants – full service 8.3% 402 73 36 5. Family ente
Slide 35: Top 20 Tenants
Top 20 Tenants As of September 30, 2024 # of Tenant % of Base Rent(1) Properties 1. 7-Eleven 146 4.6% 2. Mister Car Wash 121 4.1% 3. Dave & Buster’s 34 3.9% 4. Camping World 48 3.8% 5. GPM Investments (Convenience Stores) 150 2.9% 6. Flynn Restaurant Group (Taco Bell/Arby’s) 204 2.7% 7. AMC Theatres
Slide 36: NNN Acquisitions Approach has Multiple Advantages
NNN Acquisitions Approach has Multiple Advantages ◆ Acquiring properties directly from tenants produces more efficient pricing and higher initial returns ◆ NNN assess discrete risks vs. ◆ More risks/unknowns in value-add, development, or ◆ Typical lower yielding real estate investment ◆ Each deal is
Slide 37: NNN Approach to Net Lease Acquisitions
NNN Approach to Net Lease Acquisitions Due Diligence and Determination Real Estate Asset-Level of Proceeds & Terms Attributes Performance ◆ Property location ◆ Historical sales and ◆ Underlying land value profitability ◆ Area demographics Sales & Profit trends ◆ The chart to the right summarizes are
Slide 38: NNN's Disposition Approach
NNN’s Disposition Approach NNN’s proven disposition strategy strengthens portfolio quality and long-term earnings by reinvesting at higher return rates ◆ Since 2005, sold 865 properties generating net proceeds over $2.3 billion ◆ Disposition expertise provides ability to sell properties: ◆ That do n
Slide 39: Great People in a Supportive Culture
Great People in a Supportive Culture 11 years Average tenure of is the average tenure Senior Leadership is of an NNN employee 22 years 41% 15% 44% Proud to be a member of the 2023 GEI, > 10 years committed to driving accountability <5 yrs 5-10 yrs through data transparency. Learning & Development Co
Slide 40: 800-NNN-REIT www.nnnreit.com
800-NNN-REIT www.nnnreit.com 40