Leases. At December 31, 2024, NNN's real estate portfolio has a weighted average remaining lease term of 10 years and consisted of 3,533 leases classified as operating leases and an additional four leases accounted for as direct financing leases.

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. Typically, the Property leases provide for initial terms of 10 to 20 years. The Properties are generally leased under triple-net leases, pursuant to which the tenant typically bears responsibility for all operating expenses of the Property, including utilities, real estate taxes and assessments, property and liability insurance, maintenance, repairs and capital expenditures. Certain Properties are subject to leases under which NNN retains responsibility for specific costs and expenses associated with 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 increases in the Consumer Price Index ("CPI") or fixed increases.

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 renewal options. Some of the leases also provide that in the event NNN wishes to sell the Property subject to that lease, NNN first must offer the lessee the right to purchase the Property on the same terms and conditions as any offer which NNN intends to accept for the sale of the Property.

Real Estate Portfolio. NNN's real estate consisted of the following at December 31 (dollars in thousands):


	2024			2023
Land and improvements (1)	$	2,919,976		$	2,878,400
Buildings and improvements		7,805,939			7,368,873
Leasehold interests		355			355
		10,726,270			10,247,628
Less accumulated depreciation and amortization		(2,065,316	)		(1,863,451	)
		8,660,954			8,384,177
Work in progress and improvements		82,411			144,068
Accounted for using the operating method		8,743,365			8,528,245
Accounted for using the direct financing method		2,520			3,033
Classified as held for sale(2)		283			4,573
	$	8,746,168		$	8,535,851

(1)

Includes $34,356 and $96,464 in land for Properties under construction as of December 31, 2024 and 2023, respectively.

(2)

As of December 31, 2024, two Properties were classified as held for sale. The property classified as held for sale as of December 31, 2023 was sold during the year ended December 31, 2024.

NNN recognized the following revenues in rental income for the years ended December 31 (dollars in thousands):


	2024		2023		2022
Rental income from operating leases	$	846,653	$	805,136	$	751,680
Earned income from direct financing leases		468		560		595
Percentage rent		1,536		1,631		1,541
Rental revenues		848,657		807,327		753,816
Real estate expense reimbursement from tenants		18,811		18,763		17,802
	$	867,468	$	826,090	$	771,618

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 years ended December 31, 2024, 2023 and 2022, NNN recognized $294,000, $7,453,000 and ($3,559,000), respectively, of net-straight-line accrued rental income, net of reserves. During the year ended December 31, 2023, one tenant was reclassified to accrual basis for accounting purposes due to their improved qualitative and/or quantitative credit factors, which resulted in an increase of accrued rental income in the amount of $5,573,000.

The following is a schedule of undiscounted cash flows to be received on noncancellable operating leases as of December 31, 2024 (dollars in thousands):


2025	$	807,969
2026		773,249
2027		730,349
2028		677,780
2029		639,162
Thereafter		4,488,602
	$	8,117,111

Since lease renewal periods are exercisable at the option of the tenant, the above table only presents undiscounted cash flows due during the current lease terms. In addition, this table does not include amounts for potential variable rent increases that are based on the CPI or future contingent rents which may be received on the leases based on a percentage of the tenant's sales volume.

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 December 31 (dollars in thousands):


	2024			2023
Intangible lease assets (included in other assets):
Above-market in-place leases	$	14,753		$	15,297
Less: accumulated amortization		(12,159	)		(12,080	)
Above-market in-place leases, net	$	2,594		$	3,217

In-place leases	$	116,549		$	122,802
Less: accumulated amortization		(85,741	)		(85,332	)
In-place leases, net	$	30,808		$	37,470

Intangible lease liabilities (included in other liabilities):
Below-market in-place leases	$	39,869		$	41,244
Less: accumulated amortization		(28,946	)		(29,117	)
Below-market in-place leases, net	$	10,923		$	12,127

The amounts amortized as a net increase to rental income for above-market and below-market leases for the years ended December 31, 2024, 2023 and 2022 were $495,000, $430,000 and $510,000, respectively. The value of in-place leases amortized to expense for the years ended December 31, 2024, 2023 and 2022 was $6,108,000, $6,793,000 and $7,132,000, respectively.

The following is a schedule of the amortization of acquired above-market and below-market in-place lease intangibles and the amortization of the in-place lease intangibles as of December 31, 2024 (dollars in thousands):


	Above-Market and Below- Market In-Place Lease Intangibles(1)		In-Place Lease Intangibles(2)
2025	$	392	$	5,293
2026		402		4,711
2027		460		3,963
2028		638		3,526
2029		686		3,100
Thereafter		5,751		10,215
	$	8,329	$	30,808

Weighted average amortization period (years)		15		8

(1)

Recorded as a net increase to rental income over the life of the lease.

(2)

Amortized as an increase to amortization expense.

The following table summarizes the properties sold and the corresponding gain recognized on the disposition of properties for the years ended December 31 (dollars in thousands):


	2024				2023				2022
	# of Sold Properties		Net Gain		# of Sold Properties		Net Gain		# of Sold Properties		Net Gain
Gain on disposition of real estate		41	$	42,290		45	$	47,485		33	$	17,443

As of December 31, 2024, NNN has committed to fund construction of 15 Properties. The improvements of such Properties are estimated to be completed within 12 to 18 months. These construction commitments, at December 31, 2024, are outlined in the table below (dollars in thousands):

NNN periodically assesses its long-lived real estate assets for possible impairment whenever certain events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

As a result of NNN's review of long-lived real estate assets, including identifiable intangible assets, NNN recognized real estate impairments, net of recoveries as summarized in the table below (dollars in thousands):


	2024		2023		2022
Total real estate impairments, net of recoveries	$	6,632	$	5,990	$	8,309
Number of Properties:
Vacant		4		11		9
Occupied		9		3		7

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.