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Real Estate | 12 Months Ended
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Dec. 31, 2023
Real Estate [Abstract] |
Real Estate | Note 2 – Real Estate: Real Estate – Portfolio Leases. At December 31, 2023, NNN's real estate portfolio has a weighted average remaining lease term of 10.1 years and consisted of 3,551 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 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, real estate taxes and assessments 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 increases in the Consumer Price Index 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):
|  | 2023 |  |  | 2022 |
Land and improvements (1) |  | $ | 2,878,400 |  |  | $ | 2,669,498 |
Buildings and improvements |  |  | 7,368,873 |  |  |  | 6,985,394 |
Leasehold interests |  |  | 355 |  |  |  | 355 |
|  |  | 10,247,628 |  |  |  | 9,655,247 |
Less accumulated depreciation and amortization |  |  | (1,863,451 | ) |  |  | (1,660,308 | )
|  |  | 8,384,177 |  |  |  | 7,994,939 |
Work in progress and improvements |  |  | 144,068 |  |  |  | 21,737 |
Accounted for using the operating method |  |  | 8,528,245 |  |  |  | 8,016,676 |
Accounted for using the direct financing method |  |  | 3,033 |  |  |  | 3,352 |
Classified as held for sale(2) |  |  | 4,573 |  |  |  | 786 |
|  | $ | 8,535,851 |  |  | $ | 8,020,814 |
(1) Includes $96,464 and $22,356 in land for Properties under construction as of December 31, 2023 and 2022, respectively. (2) As of December 31, 2023, one P roperty was classified as held for sale. The two properties classified as held for sale as of December 31, 2022 were sold during the year ended December 31, 2023. NNN recognized the following revenues in rental income for the years ended December 31 (dollars in thousands):
|  | 2023 |  |  | 2022 |  |  | 2021 |
Rental income from operating leases |  | $ | 805,136 |  |  | $ | 751,680 |  |  | $ | 703,865 |
Earned income from direct financing leases |  |  | 560 |  |  |  | 595 |  |  |  | 623 |
Percentage rent |  |  | 1,631 |  |  |  | 1,541 |  |  |  | 706 |
Rental revenues |  |  | 807,327 |  |  |  | 753,816 |  |  |  | 705,194 |
Real estate expense reimbursement from tenants |  |  | 18,763 |  |  |  | 17,802 |  |  |  | 18,665 |
|  | $ | 826,090 |  |  | $ | 771,618 |  |  | $ | 723,859 |
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. During 2021 and 2020, as a result of the COVID-19 pandemic, NNN entered into rent deferral lease amendments with certain tenants in the Property Portfolio, for an aggregate $4,722,000 and $51,723,000 of rent originally due for the years ended December 31, 2021 and 2020, respectively. The rent deferral lease amendments require the deferred rents to be repaid at a later time during the lease term. As of December 31, 2023, an aggregate of approximately 93 percent of deferred rent has been repaid, with $3,124,000, $14,478,000 and $31,776,000 of deferred rent repaid during the years ended December 31, 2023, 2022 and 2021, respectively. For the years ended December 31, 2023, 2022 and 2021, NNN recognized $7,453,000, ($3,559,000) and ($21,137,000), 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, 2023 (dollars in thousands):
2024 |  | $ | 765,337 |
2025 |  |  | 744,061 |
2026 |  |  | 701,437 |
2027 |  |  | 655,268 |
2028 |  |  | 604,084 |
Thereafter |  |  | 4,286,914 |
|  | $ | 7,757,101 |
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 Consumer Price Index or future contingent rents which may be received on the leases based on a percentage of the tenant's sales volume. 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 December 31 (dollars in thousands):
|  | 2023 |  |  | 2022 |
Intangible lease assets (included in other assets): |  |  |  |  |  |
Above-market in-place leases |  | $ | 15,297 |  |  | $ | 15,356 |
Less: accumulated amortization |  |  | (12,080 | ) |  |  | (11,477 | )
Above-market in-place leases, net |  | $ | 3,217 |  |  | $ | 3,879 |
In-place leases |  | $ | 122,802 |  |  | $ | 124,198 |
Less: accumulated amortization |  |  | (85,332 | ) |  |  | (79,675 | )
In-place leases, net |  | $ | 37,470 |  |  | $ | 44,523 |
Intangible lease liabilities (included in other liabilities): |  |  |  |  |  |
Below-market in-place leases |  | $ | 41,244 |  |  | $ | 41,371 |
Less: accumulated amortization |  |  | (29,117 | ) |  |  | (28,121 | )
Below-market in-place leases, net |  | $ | 12,127 |  |  | $ | 13,250 |
The amounts amortized as a net increase to rental income for capitalized above-market and below-market leases for the years ended December 31, 2023, 2022 and 2021 were $430,000, $510,000 and $710,000, respectively. The value of in-place leases amortized to expense for the years ended December 31, 2023, 2022 and 2021 was $6,793,000, $7,132,000 and $7,687,000, 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, 2023 (dollars in thousands):
|  | Above-Market and Below- Market In-Place Lease Intangibles(1) |  |  | In-Place Lease Intangibles(2) |
2024 |  | $ | 451 |  |  | $ | 6,139 |
2025 |  |  | 437 |  |  |  | 5,421 |
2026 |  |  | 448 |  |  |  | 4,835 |
2027 |  |  | 468 |  |  |  | 4,010 |
2028 |  |  | 642 |  |  |  | 3,566 |
Thereafter |  |  | 6,464 |  |  |  | 13,499 |
|  | $ | 8,910 |  |  | $ | 37,470 |
Weighted average amortization period (years) |  |  | 16.3 |  |  |  | 8.5 |
(1) Recorded as a net increase to rental income over the life of the lease. (2) Amortized as an increase to amortization expense. Real Estate – Dispositions 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):
|  | 2023 |  |  | 2022 |  |  | 2021 |
|  | # of Sold Properties |  |  | Gain |  |  | # of Sold Properties |  |  | Gain |  |  | # of Sold Properties |  |  | Gain |
Gain on disposition of real estate |  |  | 45 |  |  | $ | 47,485 |  |  |  | 33 |  |  | $ | 17,443 |  |  |  | 74 |  |  | $ | 23,094 |
Real Estate – Commitments As of December 31, 2023, NNN has committed to fund construction of 53 Properties. The improvements of such Properties are estimated to be completed within 12 to 18 months. These construction commitments, at December 31, 2023, are outlined in the table below (dollars in thousands):
Total commitment(1) |  | $ | 379,674 |
Less amount funded |  |  | (240,532 | )
Remaining commitment |  | $ | 139,142 |
(1) | Includes land, construction costs, tenant improvements, lease costs, capitalized interest and third-party costs.
Real Estate – Impairments 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):
|  | 2023 |  |  | 2022 |  |  | 2021 |
Total real estate impairments, net of recoveries |  | $ | 5,990 |  |  | $ | 8,309 |  |  | $ | 21,957 |
Number of Properties: |  |  |  |  |  |  |  |  |
Vacant |  |  | 11 |  |  |  | 9 |  |  |  | 30 |
Occupied |  |  | 3 |  |  |  | 7 |  |  |  | 12 |
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.

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- Definition The entire disclosure for certain real estate investment financial statements, real estate investment trust operating support agreements, real estate owned, retail land sales, time share transactions, as well as other real estate related disclosures. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 976 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//976/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 978 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//978/tableOfContent Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 970 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//970/tableOfContent Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 972 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//972/tableOfContent Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 974 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//974/tableOfContent + Details
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