National Retail Properties' Q1 2025 Earnings Call: Unpacking Key Contradictions in Strategy, Cap Rates, and Tenant Performance

Acquisition pace and strategy, cap rate expectations, tenant rent coverage and bad debt assumptions, acquisition guidance and market conditions, tenant performance and credit concerns are the key contradictions discussed in National Retail Properties' latest 2025Q1 earnings call.



Earnings and Financial Performance:
- NNN REIT reported a core FFO of $0.86 per share and AFFO of $0.87 per share for Q1 2025, both up 3.6% over the prior year.
- The increase was driven by lower-than-planned bad debt and net real estate expenses, as well as strong leasing activity.

Acquisition Activity and Market Conditions:
- NNN successfully acquired 82 new properties during the quarter for approximately $232 million, with an attractive initial cap rate of 7.4%.
- The acquisition pace was higher-than-expected due to the completion of some M&A deals in the first quarter, despite a competitive market.

Bank and Restaurant Assets Resolution:
- The company is making progress in resolving vacancies in its bank and furniture assets, with 15 resolved through leasing or sale and 15 having significant interest.
- The expected impact on stabilized core FFO per share for the year is only $0.15 to $0.25, highlighting the minimal effect on financial performance.

Tenant Appetite and Rent Coverage:
- Despite current economic volatility, tenant appetite for growth remains, with a focus on strategic expansion rather than heroic M&A deals.
- Rent coverage remains stable, with strong interest from new tenants, and NNN is comfortable with the tariff impacts on its diversified tenant base.