NNN REIT Q3 2024 Performance Report

NNN REIT (ticker: NNN) reported a solid performance in Q3 2024, with CEO Steve Horn announcing an increase in acquisition guidance and a tightened core FFO per share outlook. The company's strategic portfolio management and robust acquisition activity contributed to this uptick, despite challenges with certain tenants. NNN remains financially strong with a significant cash balance and no debt maturing until late 2025.

Key Takeaways

• NNN raised its acquisition guidance midpoint by 22% to $550 million.
• Core FFO per share guidance for 2024 tightened to $3.28 to $3.32.
• The company raised $175 million through its ATM program and ended the quarter with $175 million in cash.
• NNN maintains a high occupancy rate of 99.3% across its 3,549 properties.
• In Q3, NNN invested $113 million in eight new properties and sold nine for $20 million.
• Core FFO for Q3 was $0.84 per share, a 3.7% increase year-over-year.
• Lease termination fee income was $3.9 million, up from $385,000 last year.
• NNN faces credit challenges with tenants Badcock Furniture and Frisch's but remains optimistic.
• Expected free cash flow for 2024 is approximately $193 million.
• As of September 30, net debt to gross book assets was 39.6%, and net debt to EBITDA was 5.2x.

Company Outlook

• NNN anticipates free cash flow to fund 57% of acquisitions through property dispositions.
• Adjustments to bad debt assumptions for 2025 may be necessary due to tenant challenges.
• The company remains optimistic about per-share growth from acquisitions and existing rent growth.

Bearish Highlights

• Tenant credit issues with Badcock Furniture and Frisch's are challenges.
• Frisch's made only half rent payments in Q3, impacting overall rent collection.

Bullish Highlights

• Strong market interest in retail space noted despite competition.
• Solid acquisition pipeline expected for Q4 and Q1.
• Elevated lease termination fee income may continue into 2025.

Misses

• A slight decline in the midpoint of AFFO guidance occurred due to rounding adjustments.

Q&A Highlights

• The Franchise Group (NASDAQ:FRG)'s guarantee may mitigate some rent losses from Badcock's bankruptcy.
• Plans to minimize tenant improvement expenditures were discussed.
• G&A expense guidance reduced due to lower accruals, with a slight inflationary increase expected in 2025.

NNN REIT's Q3 performance reflects resilience and strategic portfolio management amidst tenant challenges. The company is positioned well for future growth with a strong balance sheet and favorable acquisition outlook.

InvestingPro Insights

The company’s performance is fortified by a market capitalization of $7.99 billion and a revenue growth of 6.87%. NNN's gross profit margin is an impressive 96.65%, reflecting efficient management. NNN has raised its dividend for 35 consecutive years, emphasizing its commitment to shareholder returns. The stock's dividend yield stands at 5.34%, appealing among investors.

Full Transcript – NNN REIT Inc (NNN) Q3 2024

Operator: Greetings. Welcome to the NNN REIT Third Quarter 2024 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Steve Horn, Chief Executive Officer. You may begin.

Steve Horn: Hey, thanks, Holly. Good morning, everyone…

[Full details of the conference call continue]

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