NNN REIT Q3 2026 Earnings Call Transcript

NNN REIT (NYSE:NNN) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Access the full call at https://www.webcaster5.com/Webcast/Page/2178/54559

Summary

NNN REIT reported 5.8% growth in AFFO compared to the prior year, marking its 37th consecutive year of dividend growth.

The company maintains a strong balance sheet with $1.4 billion in total availability and an industry-leading average debt maturity of nearly 10 years.

NNN REIT focused on disciplined capital allocation, with acquisitions totaling $222 million across 76 properties at a 7.3% cap rate and projecting a long-term yield of 8.4%.

Occupancy remained high at 99.2%, with a notable lease recovery rate and rent renewals at 105% of prior rent.

The company is prepared to fund acquisitions through undrawn forward equity, free cash flow and strategic dispositions, avoiding equity capital access.

Management remains vigilant on market conditions, repricing acquisition pipelines to reflect changes in cost of capital and anticipating further upward movement in acquisition yields.

The company raised $50 million from selling 32 properties, including 11 vacant ones, and expects to maintain a leverage-neutral balance sheet.

NNN REIT announced a quarterly dividend increase to 62 cents, representing a 6% dividend yield and a 68% AFFO payout ratio.

The company maintains its AFFO per share guidance for 2026 at $3.55 to $3.59, representing 3.8% growth, with plans to adjust for changing market conditions.

Full Transcript

OPERATOR

Good day, ladies and gentlemen, and welcome to the NNN REIT third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode, and a question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press 0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Mr. Steve Horn, CEO at NNN REIT.

Sir, the floor is yours.

Stephen Horn (Chief Executive Officer)

Thanks, Ali. Good morning. Thank you for joining NNN REIT’s third quarter 2026 earnings call today. On the call with me is our Chief Financial Officer, Vin Chow. NNN REIT’s disciplined growth strategy, proven operations and commitment to deploying shareholder capital in sufficiently accretive acquisitions continues. Our focus remains on delivering long-term value, navigating market challenges and capitalizing on opportunities that drive sustainable growth.

As detailed in this morning’s press release, NNN REIT delivered another strong quarter of operating and financial performance highlighted by 5.8% growth in AFFO compared to the prior year, and delivered its 37th year of dividend growth, being only one of three publicly traded REITs that hit that milestone. With $1.4 billion in total availability and an industry-leading average debt maturity of nearly 10 years, our balance sheet remains a significant competitive advantage, providing us with the capacity to pursue attractive investment opportunities while maintaining our disciplined approach to capital allocation.

As we look ahead to the fourth quarter and begin planning for 2027, we remain focused on our core objective, delivering sustainable long-term value growth for shareholders through disciplined capital allocation and accretive growth. NNN REIT is in position to fund our acquisition activity through the undrawn forward equity, internally generated free cash flow and strategic dispositions without the need to access equity capital while maintaining a leverage-neutral balance sheet.

This allows us to pursue investment opportunities without putting unnecessary pressure on our balance sheet or diluting existing shareholders. Importantly, we retain significant flexibility to accelerate dispositions should compelling acquisition opportunities emerge. One of the distinct advantages of our mature portfolio is the substantial value we’ve created in our real estate over decades of ownership and active asset management. These embedded gains provide us with a valuable source of capital that we can selectively unlock and redeploy into higher-return opportunities.

Before I get into the details of the quarter, I’d like to take a moment to welcome Christina Chu and Chaz Mueller to the NNN REIT Board of Directors. Both are highly respected leaders who bring extensive public REIT and board experience along with valuable real estate experience and perspectives. Their insights will be important as we continue to execute our strategy and focus on creating long-term value for our shareholders. I look forward to working with both.

At the same time, I want to express my sincere appreciation to Betsy Holden for her many years of dedicated service to NNN REIT. Her leadership, sound judgment and steady voice have been invaluable to our company and our board. NNN REIT is a stronger company today because of her contributions, and we are grateful for her commitment to our success. We wish her all the best in the years ahead. Shifting to the highlights of the third quarter financial results, our portfolio of 3,817 freestanding, single-tenant properties continued to deliver consistent and predictable performance supported by our weighted average remaining lease term of approximately 10 years. Occupancy remained exceptionally strong at 99.2%, above our long-term historical average of approximately 98%, with only 31 vacant properties across the entire portfolio. Contributing to that high occupancy was re-leasing five assets during the quarter and 18 year to date, with a recovery rate of 132% and 121%, respectively.

In addition, 33 of 36 assets renewed at 105% of prior rent for the quarter, and 106 of 121 year to date at 104% of the prior rent. Tracking above historical averages, this continued stability reinforces the quality of our real estate, the strength of our tenant relationships and the durability of the cash flows that support the dividend. Turning to acquisitions, during the quarter we invested $222 million in 76 properties at an initial cap rate of 7.3%. Importantly, when you factor in the contractual rent escalators, these investments are expected to generate a projected long-term yield of 8.4%. The transactions also carried a weighted average lease term of over 19 years, reflecting the attractive economics and long-term income visibility associated with the sale-leaseback strategy.

Through the first nine months of the year we invested $658 million in 206 properties at an initial cap rate of 7.3% as well, with an expected projected long-term yield of 8.6%. One point worth noting is nearly 40% of our closings were transactions under $5 million. We continue to believe the smaller transactions represent an important and often overlooked opportunity to create shareholder value. While these investments may not individually attract significant attention, collectively they provide attractive risk-adjusted returns, expand our investment opportunity set and demonstrate the scalability and efficiency of the acquisition platform.

Ultimately, our focus is on the quality of real estate, the returns we generate and the long-term value we create for our shareholders. As we move towards year end, we are seeing a meaningful shift in the acquisition market with cap rates moving higher following the third quarter. It’s important to recognize that the transactions we closed during the third quarter were either completed or fully committed before significant moves in both the debt and equity capital markets. As a result, initial pricing on those investments was largely established before the market adjusted late in the quarter—call it mid-September.

We took a disciplined approach to repricing our acquisition pipeline to reflect the changes in cost of capital and our return expectations. In some cases, sellers accepted the revised economics while others elected not to move forward. While this resulted in elevated deal costs, which is in our revised guidance, we believe walking away from transactions that no longer meet our investment criteria is the right decision for the shareholders. Looking ahead, we expect initial cap rates on fourth quarter acquisitions to reflect the higher pricing environment and, assuming markets behave rationally, we anticipate further upward movement in initial acquisition yields during the first part of 2027. Our objective remains unchanged: to deploy shareholder capital only when the risk-adjusted returns justify the investment, recognizing that sometimes the most valuable decision we make is the transaction we choose not to pursue.

During the quarter we sold 32 properties, which included 11 vacant, raising $50 million of proceeds. Income-producing assets were sold at a 7.8% cap rate. Year to date we have now raised $123 million of proceeds from the sale of 83 assets, which included 46 vacant. The income-producing were sold at a 7.3% cap rate, but if you include the vacant assets it’s about a 3.2% cap rate. The mission is always to re-lease vacancies, but we will continue to sell non-performing assets when we don’t see a clear path to generate rental income within a reasonable time frame.

Our balance sheet remains one of the strongest in the sector. Our credit facility is nearly fully available and the 9.8-year weighted debt maturity remains industry-leading. NNN REIT is in good position to fund the remainder of 2026 and beyond. With that I’ll flip the call over to Ben for more color and detail on the quarterly numbers and updated guidance.

Ben (Chief Financial Officer)

Thanks, Steve. Let’s start with our customary cautionary statements. During this call we will make certain statements that may be considered forward-looking statements under federal securities laws. The Company’s actual future results may differ significantly from matters discussed in these forward-looking statements, and we may not release revisions to these forward-looking statements to reflect changes after the statements are made. Factors and risks that could cause actual results to differ from expectations are disclosed in greater detail in the Company’s filings with the SEC and in this morning’s press release.

Now moving on to results. This morning we reported AFFO per share of $0.91 and Core FFO per share of $0.90, up 5.8% and 5.9% respectively over the prior year. Results were ahead of our internal projections with upside driven primarily by lower than expected bad debt and higher than expected interest and other income from real estate transactions. The upside in this line item was driven by settlement income from prior bankruptcies as well as land sale income.

Our NOI margin for the quarter was 96.7%, up 10 basis points sequentially as occupancy continued to tick higher to 99.2%. Annualized base rent was 974 million at quarter end, up 6.8% year over year fueled by our strong year to date. G&A as a percentage of total revenue was 5.4%, down from 5.8% last quarter, while our cash G&A margin was 4.1% compared with 4.4% in the second quarter. Free cash flow after dividend was about 56 million in the third quarter.

As noted earlier, bad debt was better than expected as near term credit issues remain limited. While we will always remain vigilant, there have been no material changes to our watch list. We continue to proactively identify opportunities to improve portfolio quality through leasing and targeted asset sales prior to potential issues arising. On the capital markets front, we sold about 500,000 shares under forward sale agreements at an average price of over $47 per share. In the third quarter we also settled over 2 million forward shares, generating just under 90 million in net proceeds. As of September 30th we had about 204 million of available unsettled forward equity. Subsequent to quarter end we entered into swaps totaling 100 million that when combined with previously completed swaps, fully hedged our $500 million term loan at an all-in fixed rate of 4.35%.

Turning to the balance sheet, at quarter end we had no encumbered assets, $1.4 billion of available liquidity and just 2.3% of our debt was tied to floating rates. Net debt to EBITDA of 5.6 times was down 10 basis points from last quarter and, when including the impact of unsettled forward equity pro forma, net debt to EBITDA was 5.3 times, down from 5.4 times last quarter. We ended the third quarter with a sector-leading debt duration of 9.8 years which continues to be well matched versus our average lease duration of 10.1 years.

On October 15th we announced the 62 cent quarterly dividend, an increase of 3.3% over the prior year, and paid a 62 cent quarterly dividend in the third quarter, marking our 37th consecutive annual dividend increase. The current dividend equates to an attractive 6% dividend yield and a well-covered 68% AFFO payout ratio. Finally, I’ll end my comments with some additional color regarding our updated 2026 outlook. As disclosed in our earnings release, we are maintaining our AFFO per share guidance for 2026 of $3.55 to $3.59, which represents 3.8% year over year growth at the midpoint and an acceleration from 2.7% growth in 2025. There are a few line item updates that are summarized on page three of our earnings release. First, given year to date activity and expected sales in the fourth quarter, we are raising our disposition outlook by 30 million at the midpoint to a new range of $160 to $180 million.

The increase reflects our disciplined approach to portfolio management as well as strong demand for our high quality properties. We also increased our G&A guidance by 1 million at the midpoint. This was primarily driven by typical year end true-ups as well as some dead deal costs booked in the quarter as we remain disciplined on transaction pricing. From a credit loss perspective, we are leaving our fourth quarter assumption unchanged, but given the year to date outperformance versus plan, we now project full year bad debt to be about 25 basis points of ABR, down from 40 basis points as of last quarter. Regarding our $350 million bond that matures in mid December, we have assumed in our model a permanent financing in our forecast to repay the notes while maintaining a low year end balance on our line of credit.

Given our liquidity and access to multiple sources of capital, we have optionality regarding how we ultimately address the maturity. A few other run rate items to keep in mind as you update your models. First, we booked roughly 1 million in settlement and/or land sale income for the third quarter that is not expected to recur. Second, our lease termination fees for the quarter totaled 1.4 million, but as we look forward we do not expect a material amount of lease termination fees in the fourth quarter. And lastly, the 2 million shares that we settled in the third quarter settled in late September and therefore did not have a material impact on our reported average diluted share count.

So please keep that in mind as you’re updating your models. In closing, we are very pleased with our quarterly and year to date performance and, with $1.4 billion of total liquidity including over 200 million of unsettled forward equity, over $200 million of annual free cash flow generation, and a conservatively managed balance sheet, NNN REIT remains well positioned to perform in the currently evolving environment. With that, I’ll turn the call back to Ollie for questions.

OPERATOR

Thank you. Ladies and gentlemen, at this time we will be conducting our question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue and you may press star 2 if you wish to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

Thank you. Our first question today is coming from Nick Joseph with Citigroup. Your line is live.

Nick Joseph (Analyst)

Thanks. Appreciate the comments about cap rates moving. I think mid September and after the third quarter, obviously rates rose significantly. We’ve seen them pull back a bit. Just hoping you could quantify kind of where you’re seeing cap rates today and how you’re thinking about returns just given the volatility that we’re seeing in the interest rate environment.

Stephen Horn (Chief Executive Officer)

Yeah, I’ll take the first part about that, Nick, and then we’ll handle the second part. As far as the cap rates, kind of said in the opening remarks the third quarter was pretty much baked and it was really kind of, you know, last couple weeks of the third quarter that when we revisited our pipeline, in some cases we were moving 50, 60 basis points. But overall, kind of seeing that 30 to 40 basis point movement for the fourth quarter, expect it to go higher if everybody remains rational in the first part of 2027.

And that’s our opportunity set. The mix of clients that we deal with and some of the sellers didn’t want to take any increase, which is okay, and we’ll move on to other transactions. But yes, 30 to 40 basis points range.

Ben (Chief Financial Officer)

Yes, Nick. On the return side of things, Nick, our outlook and our expectations on returns really don’t change given the volatility. I mean, we are repricing deals. We did push back on some of the pricing that we had in the third quarter and, and again in the fourth quarter. You know, I think the volatility means folks are not sure what they’re willing to accept on the seller side. And so we have built in a little bit of cushion in the fourth quarter outlook on acquisitions that people might walk away from some deals.

So we’re going to continue to be disciplined like we have over the last 40 plus years. We’ve operated in high interest rate cycles, low interest rate cycles. We’ve operated through lots of different economic cycles. And so all of that has allowed us to continue to raise that dividend year in, year out, regardless of what’s going on around us. And so we’re going to maintain that discipline going forward.

Nick Joseph (Analyst)

That’s very helpful. Thank you. And then it looked like Mavis Tire, I think, increased by 13 properties, ABR up about 60 basis points. Can you just touch on kind of what drove that and exposure to the tenant?

Ben (Chief Financial Officer)

The main driver of that increase was an M&A event where they acquired a tenant of ours, not that we did any more deals with them directly.

Nick Joseph (Analyst)

Great, thank you.

OPERATOR

Thank you. Our next question is coming from Jamie Feldman with Wells Fargo. Your line is live.

Jamie Feldman (Analyst)

Great, thanks for taking the question. So I guess just to follow up on the changes in the market, I mean, can you talk more about the types of assets that you think are moving the most, types of sellers that are willing to change and those that are less willing to change, just so we have a better sense of how the sand’s shifting?

Stephen Horn (Chief Executive Officer)

Yeah, good question, Jamie. You know, we’re in the market, but we don’t participate as far as transactions in every industry. So I can only specifically speak to what we’re pursuing. And for us it was more the sale-leaseback transaction of the middle market. Clients that are sophisticated, as you know, we joke internally they have CFOs. So the groups that understand that interest rates were changing because they’re always talking in the capital markets, primarily those are the ones that accept the change.

The open market transaction where there may be an existing lease, those we found were a little bit stickier initially. Do I think they’ll move up? Eventually, yes, but it’s usually the sale-leaseback guys are moving a little bit quicker and the open market are a little bit stickier currently.

Jamie Feldman (Analyst)

Okay. And then I guess with the election results last night, just wondering if bonus depreciation transactions accelerate a bit. Just people may be concerned that it’s not going to be around for much longer. Just can you remind us, is that something you, you know, as you think about your disposition pipeline, you know, what would qualify in the portfolio, like how large of a magnitude of assets do you think you could even sell under those kind of deals?

And just any other thoughts on the disposition market and how those buyers are changing based on rates?

Stephen Horn (Chief Executive Officer)

Specifically on the disposition market, you know, when we look at dispositions, we look at defensive sales when we’re having conversations with our tenants that they may or may not renew an asset or the store level performance that we’re monitoring is slipping over a course of time. So we’ll look to do active portfolio management and sell those, and they may be at a little bit elevated cap rates because of the performance. As far as the accelerated depreciation, it’s primarily convenience stores and car washes.

And, you know, our portfolio, we have a lot of convenience stores and car washes that qualify for that. And we selectively will sell into that market. When somebody is willing to pay us an extremely low cap rate, we will, and we do. We prune the portfolio that way where we don’t sell our gems. You can’t sell the real bad assets per se over time, so kind of sell the lower performers that the accelerated depreciation asset will pay.

Jamie Feldman (Analyst)

So can you provide like just a ballpark of just dollar amount, like how big that potential sales bucket might be in the portfolio just on the bonus depreciation side?

Ben (Chief Financial Officer)

Yeah, Jamie, that’s pretty hard to quantify just because those sellers kind of come in very late and last minute because they’re tax planning at the end of the year. For instance, last year we had a deal come in on the 15th of December, I want to say, and they were trying to close by year end, so it’s a little episodic. I think from our perspective, we have a large pool of potential sellable properties we have identified. We proactively identified a pool that we would be happy to part ways with at the right price.

So if someone does come to us, we’re ready to go pretty quickly. And again, it’s a great opportunity for both sides, really. I mean, I think there’s this view that depreciated buyers are not sophisticated or don’t know what they’re doing. I mean, obviously they are getting a legitimate benefit with the tax savings, and so we’re kind of splitting that value between them and us and so we can get better cap rates. And also they’re a little bit less quality focused because again, their primary goal is to reduce their taxes.

So it is a great opportunity for us. You know, hard to say, you know, what the total potential is just because they’re very episodic in when they come in.

Jamie Feldman (Analyst)

Okay, great. Thank you.

OPERATOR

Thank you. Our next question is coming from Jana Gallon with Bank of America. Your line is live.

Jana Gallon (Analyst)

Thank you. Good morning. This year you’ve had very favorable performance on the portfolio bad debt. So just curious how you’re thinking about the watch list from here and any categories you’re watching more closely.

Ben (Chief Financial Officer)

Yes. So, hey Jana, how are you doing? I mean we look at the headlines just like you guys do and we obviously have our conversations with our tenants very regularly. So we are always actively monitoring the portfolio. As I mentioned in my prepared remarks, we don’t have any real changes to the watch list today, but we certainly are aware of the consumer pressures on the consumer today. You know, and some of the, you know, there’s been some pressure in the QSR space, a couple full-service restaurants as well.

But it is not completely broad based. Right. There are lots of QSR and lots of full service that are doing quite well. And so, you know, we’re not looking at one broad brush, but we certainly are keeping an eye on those industries. And then entertainment’s been in the news as well. So we do follow that, we do watch it closely. But given our current coverages and current outlook, we don’t really see any immediate impacts on the portfolio front from those areas in any material way.

So we’re hopeful that continues but we will be vigilant.

Jana Gallon (Analyst)

Thanks, Ben. And then I also appreciate you kind of calling out the settlement and land sale and other non-recurring items. I guess just as we think about next year, if you can kind of help us think any one-timers in 26 that could be either positive or negatively offset.

Ben (Chief Financial Officer)

Yeah, I mean that’s the nature of the one-timer. Hard to predict, unfortunately. Jan, I wish I could tell you with a crystal ball there but look, we always do have some of that stuff. So I mean, I wouldn’t say it’s not predict. Non-recurring is not a good word. It’s not predictable but it is recurring. We do have that stuff come through every year, some amount. I just can’t tell you exactly when it’s going to hit. But if you look at historically we’ve always had some amount of that.

Some years more than others. I don’t think there’s anything to look into for next year that would particularly jump out at us as something meaningful. I think lease termination fees are in that bucket. We talked about those more in the past. Thankfully we talked about it less today, which is great. But you know, we don’t have as many of the really, really big sort of DARPA-paying or sublease tenants out there that created some very large swings in lease termination fees a couple years ago.

So we do think we’ll have a similar level in 27 as 26 in terms of lease termination fees for the full year. Exactly when they hit, I can’t really say.

Jana Gallon (Analyst)

Thank you.

OPERATOR

Thank you. Our next question is coming from Ronald Camden with Morgan Stanley. Your line is live.

Jenny (Analyst)

Hey, good morning. This is Jenny on for Ron. Thanks for taking my question. I think my first is I want to ask about the balance sheet. So think about term loan swap reset to 3.55 in mid-November. Yeah, maybe talk a little bit more on the impact of interest expenses next year and how should we think about refinancing upcoming?

Ben (Chief Financial Officer)

Sure, sure. So I mean, one, we have very, very little floating-rate debt. Following the swap in November we’ll have even less. And so the actual short-term rate movements that we’re expecting and people are projecting increases on shouldn’t really have much of an impact on our 2027 outlook. We do have a $350 million loan, or bond I should say, that comes due in December. That’s at a 3.6% coupon. And so, you know, we would be hard pressed to find a 3.6% coupon that had any sort of duration to it.

So there will be some, you know, some drag from that in 2027. You know, the range of options available to us, you know, we could hit the term loan market. Again, it’s not my preference obviously. We do have unsecured bonds that we could issue anywhere, you know, you can pick your duration there. But, you know, a five-year bond would be probably in the mid-5s, you know, 5.6, 5.7 range today. A 10-year bond would be more like 6.0, 6.1. So those are, you know, extremes there.

A lot of our peers in the space have been active in the convert market. That’s something we have explored as well. So we could get a bit better of a coupon than the five-year that I just mentioned on a convert. So those are all things that we are evaluating and watching, and just given the volatility in the markets with the 10-year moves that we’ve seen in the last couple weeks and months and this year overall we want to be nimble and we want to be able to act quickly when the time is right.

Jenny (Analyst)

Very helpful. I guess the follow-up is on the equity is you do have about 25 million shares ATM program now and think about dividend yield move to about 6%. So how should we think about going forward? You measure issuing equities versus using lines from here?

Ben (Chief Financial Officer)

Well, I mean the equity and debt question is always a function of leverage. Right. We’re trying to maintain a leverage neutrality targeting sort of five and a half times, plus or minus. We’re very close to that right now. And so whatever we buy, we’re going to do it on a leverage-neutral mix as far as actual equity versus, say, dispositions or free cash flow. Right now, one thing I really do think is a great advantage for us is that we use less, you know, common equity as part of our acquisition plans year in, year out than most of our peers do.

So we rely on free cash flow and dispositions to fund a very large percentage of our investment activity. And so we don’t have to enter the equity markets if we don’t need to. And we are sitting on 200 million or so that was raised at just under $46 a share. So we feel pretty good about that equity that we raised already. And, you know, when you combine that with our sort of, call it $600 million of annual acquisition volume that we can do without new equity, we probably have buying power in the, call it, 900 to a billion-ish range.

You know, whether or not we execute on that depends on if we get the price that makes sense to us. We’re not just going to buy because our, you know, our raised cost of equity or cost of capital is lower doesn’t mean we’re going to, you know, overpay for assets. So that’s kind of how we’re thinking about that.

Jenny (Analyst)

You were helpful. Thank you.

OPERATOR

Thank you. Our next question is coming from Brad Heffern with RBC. Your line is live.

Brad Heffern (Analyst)

Hey everybody, thanks. Wanted to check in on a couple tenant things. First on CVS. I know it’s not in the top 20 list anymore, but I assume you still own some. Any initial thoughts on the separation and how you would view that for the outlook there?

Ben (Chief Financial Officer)

Yeah, look, I mean it’s pretty recent news. I mean, I think it’s funny. I was a retail sell-side analyst covering CVS when they bought the PBM business and got into the insurance side of things and it was this great, great deal. Now they’re unwinding it. I think as a landlord it probably makes it simpler, you know, if you just have the retail business rather than having to worry about the insurance side as well. But, you know, we really don’t have exposure to PBMs, so, you know, we’re not really, I guess we really haven’t thought about it that much.

Brad Heffern (Analyst)

Okay, got it. Thanks for that. And I was wondering if you could give an update on Dave & Buster’s. Obviously been some negative ratings outlook changes there. The debt is trading at a pretty penal level, I guess. Do you have any coverage data on your locations? And then how would you be positioned if something were to happen there?

Ben (Chief Financial Officer)

Yeah, look, Dave & Buster’s is an entertainment company. It’s going through a cycle right now, downward shift in the cycle. So they’ve been, you know, they’ve been posting less than great results for a while. At the corporate level, I would say that at the property level, our coverages are still very healthy. And even at the corporate level, even though EBITDA margins have come down fairly significantly over the last, say, two years or so, they’re still relatively high.

And so again, we think that we have priced those deals at a level where we can weather the current cycle, but we will want to see some improvement here relatively soon. They do have a new management team in place. They do have a back-to-basics strategy in place. We think that will help them. But if the consumer is under pressure, then obviously a concept like a Dave & Buster’s will typically have a little bit more difficulty. But right now, again, we’re not seeing anything in the numbers, anything in our property level that would cause us to have immediate concerns, but that’s one we’re watching.

Brad Heffern (Analyst)

Okay, thank you.

OPERATOR

Thank you. Our next question is coming from Michael Goldsmith with UBS. Your line is live.

Michael Goldsmith (Analyst)

Good morning. Thanks a lot for taking my question. While we’re talking about tenants, maybe can we talk a little bit about Camping World as well? Their third quarter adjusted EBITDA was down 62% year over year. Just wanted to get a sense of what you’re seeing from that tenant in terms of coverage and how you’re thinking about it going forward.

Ben (Chief Financial Officer)

Yes. So not to sound like a broken record, but yes, same kind of situation, obviously a different market. But RVs are a more cyclical business by nature. Consumers under pressure. And this most recent quarter, which was this week, certainly reflected that. I think in the case of Camping World, they really have been doing everything they can to offset some of the pressures that they’re seeing on the business near term. So they had leaned into their used business for a long time and that was a successful strategy.

The used business has also seen some pressure this most recent quarter, but they’ve also leaned into their insurance business, which is performing well and seeing margin expansion. Even their used business saw margin expansion this quarter even though the volumes were down. And I think the key there is they are doing whatever they can control, they are controlling. So they brought inventory down. It’s as low as it’s ever been in like five or six years.

Going into the fourth quarter, they have, you know, increased their SG&A sort of run-rate improvements to 150 million annualized. So they’re trying to control the controllables. And based on our property-level performance, we don’t really have any immediate concerns with them either. They’re one of our longest-tenured partners, so we have a very good relationship with them and no maturities for quite a while with these guys.

Stephen Horn (Chief Executive Officer)

Yeah, as far as the fourth quarter, we’re in process of repricing the deals, and that’s why we left it, because we don’t know at the end of the day where it will fall out. So we’re very comfortable putting the midpoint at that 750 range. We’re not giving any guidance for 2027 acquisition volume quite yet, but no, the pipeline, there’s a lot of opportunities in it and it’s pretty big bandwidth which way it goes.

OPERATOR

Thank you. Our next question is coming from Wes Golladay with Baird. Your line is live.

Wes Golladay (Analyst)

Hey, good morning, everyone. For the buyers of the assets you’re selling, are they coming back to you as well saying, hey, we want a little bit of a higher cap rate? And then for the deal that you end up passing on or that the seller walks away, do those ever just come back to you? Rates are volatile right now. So if the 10-year were to go high fours, would those deals come back to you, or do you think they’re just gone for good for the majority of them?

Stephen Horn (Chief Executive Officer)

The buyers that we’re selling into? Yeah, currently, no. Most of it, you know, the 7.8 for the quarter was primarily what I would say defensive sales of the portfolio assets that we wanted to get rid of to strengthen the overall portfolio. That’s why it was elevated. It wasn’t because the buyers came back to change the cap rates. And then you factor in the accelerated depreciation buyers, the overall 1031 guys, they’re still fairly low right now.

They’re incentivized to defer taxes more than anything than actually the price. No, it’s not only if the rates back up do they come back to us. It’s if the seller actually realizes that’s the new pricing of the deal, then they come back to us. So yeah, those conversations are ongoing. Sometimes you lose it. You change the price of a deal and the deal is gone forever because of egos. In some cases the sophisticated seller will come back to you and understand that economics need to change. And if it’s M&A, that seller is also re-changing his pricing on the machine as far as the multiple he’s probably pursuing.

Wes Golladay (Analyst)

Thank you very much.

OPERATOR

Thank you. Our next question is coming from John Massocca with B. Riley. Your line is live.

John Massocca (Analyst)

Good morning. I think you touched on it in terms of where deals were being repriced that you had in the pipeline, but is that same kind of cap rate we get to by adding 30 to 40 basis points to 3Q reflective of what you see in the pipeline for 2027, or you think yields can move even higher just given where rates ultimately have kind of shaken out here? And then on the disposition front, maybe two questions. Any color on what made those rent-producing sales defensive? And then on the vacant assets, is that just kind of a hodgepodge of various things, or is any of that kind of the very tail end of some of the tenant credit-related vacancies you had two years ago now?

Stephen Horn (Chief Executive Officer)

Yeah, the first part, a little bit of color. One of the assets we sold was a fitness center that was leased—or I should say re-leased—to a non-credit tenant, very small. So we elected to divest out of that. That was a little bit higher of a cap rate. And then there’s actually a leasehold position in there which, by definition, leaseholds are a higher cap rate. That skewed that number to the 7.8. All in the same turn, we had some that we sold in there that had four handles on them that were kind of rental equipment facilities.

Ben (Chief Financial Officer)

Yeah. In terms of vacant sales, really we don’t have—I’m trying to think—I think we’re done with the tenants you’re referring to from a couple years ago, are out of the portfolio in terms of the impact. So there was not really anything tied to that. Yeah, I mean it was a hodgepodge at the end of the day. Yeah. I will say too on the cap rates this quarter, there’s the defensive nature that Steve talked about. They also had pretty limited term left, so very short-term deals.

John Massocca (Analyst)

Okay. I appreciate all that detail. That’s it for me. Thank you.

OPERATOR

Thank you. Our next question is coming from Jim Kammert with Evercore. Your line is live.

Jim Kammert (Analyst at Evercore ISI)

Good morning. Thank you. I believe at a recent NACS show, some C-store executives were lamenting indications of stalling foot traffic coming into the stores and maybe impacting the higher-margin in-store sales. I’m curious, are you seeing any of that, hearing any of that color from your C-store tenants, and any translation to potential plateauing or moderation of the rent coverage?

Stephen Horn (Chief Executive Officer)

You’re spot on. The foot traffic has softened a little bit at the convenience stores. Our primary tenant is 7‑Eleven as far as the C‑store world. But as far as the margin softening inside the store, they’re going from 35 to the low 30s but still highly profitable at the inside store sales, and gallons are kind of remaining flat for the most part and still getting a decent, healthy margin. But as far as the rent coverage deterioration, nothing that we’re concerned with in the C‑store world.

Jim Kammert (Analyst at Evercore ISI)

Great. Thank you, guys.

OPERATOR

Thank you. Our next question is coming from Mark Akinbe with Barclays. Your line is live.

Mark Akinbe (Analyst)

Thank you for taking the question. Just to tack on to a few that were already asked, I was wondering if you could elaborate on how you’re thinking about residual value for your Dave & Buster’s and Camping World properties in a worst-case scenario.

Stephen Horn (Chief Executive Officer)

That’s a pretty theoretical question, so I mean, I don’t know if we really have a great answer on that. I mean, I think it all depends on the location, obviously, and when it happened, what’s going on in the rest of the market. I mean, it’s a pretty hard question to answer. But if you want to know what the 10‑year is going to be on December 31, I can tell you that. Joking. As far as Camping, I’ll speak specifically to Camping World. Camping World, as Vin alluded to earlier, has been a long-term tenant of ours, and we do a lot of portfolio management with Camping World, where they will buy some assets back of markets they want to divest out of and, at the same time, extend term on assets that we own. So our rent coverage, while it’s not as healthy as it was in ’21–’22, it’s still fairly healthy on the Camping World.

So we haven’t gotten into the granular, but those are primarily land plays, so the land percentage of acquisition costs is fairly high. And they’re good real estate, high-visibility real estate. As far as the Dave & Buster’s, yeah, they’re big boxes, so that’s why we try to avoid big boxes. But 50% of our Dave & Buster’s assets were related to Main Event assets, which were a little bit smaller. And the coverage is acceptable right now.

OPERATOR

Thank you. Our next question is coming from Spencer Glimcher with Green Street. Your line is.

Spencer Glimcher (Analyst)

Thank you. Just two quick follow-ups on the credit losses, which I know you guys have noted have trended better than expected. So first, does that figure include any rent negotiations or restructurings? I don’t believe it does. And then, two, has there been much of that activity in ’26, just given the solid health of the portfolio?

Ben (Chief Financial Officer)

Yeah. So in terms of our credit loss, that’s whatever we’re owed, if we got paid or not. So if it’s renegotiated or there’s a new lease in place, then that wouldn’t fall into that bucket now, but it would show up in our rent recapture renewal rates and our releasing rates. So it would show up in that metric. And as far as restructurings this year, no, nothing material.

Spencer Glimcher (Analyst)

Okay, great. Yeah, that’s it for me. Thanks, guys.

OPERATOR

Thank you. As a reminder, ladies and gentlemen, for any questions, please press Star one. Our next question is coming from Jamie Feldman with Wells Fargo. Your line is live.

Jamie Feldman (Analyst)

Great, thanks for taking the follow-up. You know, I guess since the news is fresh, as you thought about the potential for a Democratic sweep in the election last night, or midterms last night, did you or your clients think anything might be different coming out of this? You know, like when you think about the bingo card and plan your strategy, or do you think it’s just business as usual? Just wondering if there’s anything we may not be thinking about that could come from this.

Stephen Horn (Chief Executive Officer)

No, our tenants are thinking it’s business as usual. You know, it’s the one thing, it’s the beauty of the long-term lease that we go through political cycles, interest-rate cycles. So no, it’s business as usual. And then we’ll keep focusing on real estate metrics as the primary security of our investment.

Jamie Feldman (Analyst)

Okay, thank you.

OPERATOR

Thank you. As we have no further questions in queue at this time, I’d like to turn the call back over to Mr. Horne for any closing remarks.

Stephen Horn (Chief Executive Officer)

Thanks, Alex. I appreciate you guys taking the time and interest in NNN REIT. We’re in really good position. Looking forward to finishing out the year strong and getting the 2027 game plan all wrapped up. And we’ll see the majority of you here in a couple weeks at Nareit. Thanks.

OPERATOR

Thank you. Ladies and gentlemen, this does conclude today’s call, and you may disconnect your lines at this time, and we thank you for your participation.

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