NATIONAL RETAIL PROPERTIES, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

 This section generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this annual report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Commission on February 11, 2021.  

The term “NNN” or the “Company” refers to National Retail Properties, Inc. and all of its consolidated subsidiaries. NNN may elect to treat certain subsidiaries as taxable real estate investment trust subsidiaries, (“TRS”).

Forward-Looking Statements

  The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. NNN makes statements in this section that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this report entitled "Forward-Looking Statements." Certain risks may cause NNN's actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a discussion of such risk factors, see "Item 1A. Risk Factors."  

Overview

  NNN, a Maryland  
corporation, is a fully integrated real estate investment trust ("REIT") formed in 1984. NNN's assets are primarily real estate assets. NNN acquires, owns, invests in and develops properties that are leased primarily to retail tenants under long-term net leases and are primarily held for investment ("Properties," or "Property Portfolio," or individually a "Property").

NNN owned 3,223 Properties with an aggregate gross leasable area of ​​approximately 32,753,000 square feet, located in 48 states, with a weighted average remaining lease term of 10.6 years as of December 31, 2021. Approximately 99 percent of the Properties were leased as of December 31, 2021.

  NNN's management team focuses on certain key indicators to evaluate the financial condition and operating performance of NNN. The key indicators for NNN include items such as: the composition of the Property Portfolio (such as tenant, geographic and line of trade diversification), the occupancy rate of the Property Portfolio, certain financial performance ratios and profitability measures, industry trends and industry performance compared to that of NNN.  NNN evaluates the creditworthiness of its current and prospective tenants. This evaluation may include reviewing available financial statements, store level financial performance, press releases, public credit ratings from major credit rating agencies, industry news publications and financial market data (debt and equity pricing). NNN may also evaluate the business and operations of its tenants, including past payment history and periodically meeting with senior management of certain tenants.  NNN continues to maintain its diversification by tenant, geography and tenant's line of trade. NNN's largest lines of trade concentrations are the convenience store (17.9%), automotive service (12.3%) and restaurant (19.2%) (including full and limited service) sectors. These sectors represent a large part of the freestanding retail property marketplace and NNN's management believes these sectors present attractive investment opportunities. The Property Portfolio is geographically concentrated in the south and southeast United States,  
which are regions of historically above-average population growth. Given these concentrations, any financial hardship within these sectors or geographic regions could have a material adverse effect on the financial condition and operating performance of NNN.

As of December 31, 2021, 2020 and 2019, the Property Portfolio remained at least 98 percent leased and had a weighted average remaining lease term of approximately 11 years. High occupancy levels coupled with a net lease structure, provides enhanced probability of maintaining operating earnings.

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Impact

of COVID-19 on NNN’s Business

Overview. Since March 2020, the evolution of the pandemic and worldwide spread of COVID-19 has continued to pose significant risk and uncertainty to the potential adverse effects to the economy and financial markets. Several countries, including the United Statestook steps to restrict travel, temporarily close businesses and issue quarantine orders.

  As a result, the COVID-19 pandemic and the government reaction to it negatively affected almost every industry directly or indirectly. A number of NNN's tenants experienced temporary closures of their operations and/or requested adjustments to their lease terms during this pandemic. As a result, these economic hardships have increased uncertainty with respect to the collectability of lease payments and have had a negative effect on NNN's financial results, including increased accounts receivables and related allowances and recognizing revenue on a cash basis from certain of its tenants.  

During the years ended December 31, 2021 and 2020, NNN and certain of NNN’s tenants were impacted by the COVID-19 pandemic which has resulted in the continued loss of revenue for certain tenants and challenged their ability to pay rent.

  As of December 31, 2021, NNN has entered into rent deferral lease amendments with certain tenants, for an aggregate $4,758,000 and $52,019,000 of rent originally due for the year ending December 31, 2021 and 2020, respectively. The rent deferral lease amendments required the deferred rents to be repaid at a later time during the lease term. Approximately $31,776,000 and $3,259,000 of the deferred rent was repaid in 2021 and 2020, respectively. Deferred rents of $14,526,000 are due to be repaid during the year ending December 31, 2022, with the substantially all remaining deferred rent coming due periodically by December 31, 2023.  

The following table outlines the rent deferred and corresponding scheduled repayment of the rent deferral lease amendments executed as of December 31, 2021
(dollars in thousands):

                             Deferred                                         

Scheduled Repayment

         Accrual        Cash                     % of        Accrual        Cash                     % of       Cumulative           Basis        Basis        Total       Total         Basis        Basis        Total       Total         Total 2020     $ 33,594     $ 18,425     $ 52,019       91.7 %     $  3,239     $     20     $  3,259        5.7 %            5.7 % 2021          990        3,768        4,758        8.3 %       25,935        5,841       31,776       56.0 %           61.7 % 2022            -            -            -          -          5,391        9,135       14,526       25.6 %           87.3 % 2023            -            -            -          -             19        3,334        3,353        5.9 %           93.2 % 2024            -            -            -          -              -        1,932        1,932        3.4 %           96.6 % 2025            -            -            -          -              -        1,931        1,931        3.4 %          100.0 %          $ 34,584     $ 22,193     $ 56,777                  $ 34,584     $ 22,193     $ 56,777                                            27 
--------------------------------------------------------------------------------   The following table details the rental revenue for the quarter ended December 31, 2021 (collected as of January 31, 2022), as a percentage of annualized base rent, excluding the repayments of amounts previously deferred according to the rent deferral lease amendments:                                                                  % of                                                               Total                                                              Annual                                                               Base      % of Rent       Lines of Trade                                         Rent(1)    Collected  1.   Convenience stores                                      17.9%      100.0%  2.   Automotive service                                      12.3%       99.5%  3.   Restaurants - full service                              9.8%        

97.3%

  4.   Restaurants - limited service                           9.4%        

99.6%

  5.   Family entertainment centers                            5.9%        99.9%  6.   Health and fitness                                      5.2%        98.9%  7.   Theaters                                                4.5%        99.9%  8.   Recreational vehicle dealers, parts and accessories     3.9%        99.9%  9.   Equipment rental                                        3.2%       100.0% 10.   Automotive parts                                        3.0%        99.7% 11.   Wholesale clubs                                         2.5%       100.0% 12.   Home improvement                                        2.5%       100.0% 13.   Medical service providers                               2.0%        98.4% 14.   Furniture                                               1.7%       100.0% 15.   General merchandise                                     1.7%       100.0% 16.   Consumer electronics                                    1.5%       100.0% 17.   Home furnishings                                        1.5%       100.0% 18.   Travel plazas                                           1.5%        98.9% 19.   Automobile auctions, wholesale                          1.3%        99.9% 20.   Drug stores                                             1.3%       100.0%       Other                                                   7.4%        98.4%       Total                                                  100.0%       99.4%   (1)

Based on annualized base rent for all leases in place as of December 31, 2021.

  As of January 31, 2022, NNN has collected 99.4% and 98.8% of the rental revenue for the quarter and year ended December 31, 2021, respectively, as a percentage of annualized base rent, excluding the repayments of amounts previously deferred according to the rent deferral lease amendments.  

Historical rent collections and rent relief requests may not be indicative of rent collections and requests in the future. Depending on macroeconomic conditions and their impact on a tenant’s business and operations, deferred rents may be difficult to collect.

  While as of December 31, 2021, NNN's rent collections have returned to pre-pandemic levels, the extent to which COVID-19 impacts NNN's operations and those of NNN's tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the outbreak, the actions taken to contain the outbreak or mitigate its impact, and the direct and indirect economic effects of the outbreak and containment measures, among others.  A prolonged continuation of or repeated temporary business closures, reduced capacity at businesses or other social-distancing practices, and quarantine orders may adversely impact NNN's tenants' ability to generate sufficient revenues to meet financial obligations, and could force tenants to default on their leases, or result in the bankruptcy of tenants, which would diminish the rental revenue NNN receives under its leases. Additionally, an increase in the number of vacant properties would increase NNN's real estate expenses, including expenses associated with ongoing maintenance and repairs, utilities, property taxes and property and liability insurance.  NNN will continue to monitor the impact of the economic downturn on retailers, retail real estate, capital markets and investment returns, among other things, when considering new property investments. As of December 31, 2021, NNN had $171,322,000 of cash and cash equivalents and $1,100,000,000 available for borrowings under its unsecured revolving credit                                         28  --------------------------------------------------------------------------------

facility (the “Credit Facility”). While the impacts of COVID-19 continue to unfold, NNN currently expects these combined resources, in addition to the cash provided by NNN’s operations to be sufficient to meet NNN’s demand for funds.

  Business Continuity. As a result of the COVID-19 pandemic, NNN provided the flexibility for its associates to work remotely without any adverse impact on its ability to continue to operate its business nor any material adverse impact on NNN's financial reporting systems, internal controls over financial reporting or disclosure controls and procedures.  The rapid development and fluidity of the economic downturn precludes any prediction as to the ultimate adverse impact on the economy, retailing and NNN and will ultimately depend on future developments, none of which can be predicted with any certainty. Nevertheless, the COVID-19 related economic disruption presents uncertainty and risk with respect to NNN's performance, business or financial condition, results of operations and cash flows. See Item "1A. Risk Factors."  Critical Accounting Estimates  The preparation of NNN's consolidated financial statements in conformance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as other disclosures in the financial statements. On an ongoing basis, management evaluates its estimates and assumptions; however, actual results may differ from these estimates and assumptions, which in turn could have a material impact on NNN's financial statements. A summary of NNN's accounting policies and procedures are included in Note 1 of NNN's consolidated financial statements. Management believes the following critical accounting policies, among others, affect its more significant estimates and assumptions used in the preparation of NNN's consolidated financial statements.  Real Estate Portfolio. NNN records the acquisition of real estate at cost, including acquisition and closing costs. The cost of properties developed or funded by NNN includes direct and indirect costs of construction, property taxes, interest and other miscellaneous costs incurred during the development period until the project is substantially complete and available for occupancy.  Purchase Accounting for Acquisition of Real Estate. In accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") guidance on business combinations, consideration for the real estate acquired is allocated to the acquired tangible assets, consisting of land, building and tenant improvements and, if applicable, to identified intangible assets and liabilities, consisting of the value of above-market and below-market leases and value of in-place leases, as applicable, based on their respective fair values.  The fair value estimate is sensitive to significant assumptions, such as establishing a range of relevant market assumptions for land, building and rent and where the acquired property falls within that range. These market assumptions for land, building and rent use the most relevant comparable properties for an acquisition. The final range relies upon ranking comparable properties' attributes from most similar to least similar.  Lease Accounting. NNN records its leases on the Property Portfolio in accordance with FASB Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)," ("ASC 842").  NNN's real estate is generally leased to tenants on a net lease basis, whereby the tenant is responsible for all operating expenses relating to the Property, including property taxes, insurance, maintenance, repairs and capital expenditures.  NNN's Property Portfolio primarily consists of leases accounted for using the operating method. Under the operating method, revenue is recognized as rentals are earned and expenses (including depreciation) are charged to operations as incurred. When scheduled rentals vary during the lease term, income is recognized on a straight-line basis so as to produce a constant periodic rent over the term of the lease. Accrued rental income is the aggregate difference between the scheduled rents which vary during the lease term and the income recognized on a straight-line basis.  In April 2020, the FASB issued interpretive guidance relating to the accounting for lease concessions provided as a result of COVID-19. In this guidance, entities can elect not to apply lease modification accounting with respect to such lease concessions and instead, treat the concession as if it was a part of the existing contract. This guidance is only applicable to                                         29  --------------------------------------------------------------------------------   COVID-19 related lease concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. NNN elected to make this policy election for COVID-19 lease concessions, including the rent deferral lease amendments effective during the years ended December 31, 2021 and 2020.  Collectability. In accordance with ASC 842, NNN reviews the collectability of its lease payments on an ongoing basis. NNN considers collectability indicators when analyzing accounts receivable (and accrued rent) and historical bad debt levels, tenant credit-worthiness and current economic trends, all of which assists in evaluating the probability of outstanding and future lease payment collections. In addition, tenants in bankruptcy are analyzed and considerations are made in connection with the expected recovery of pre-petition and post-petition bankruptcy claims.  At the point NNN deems the collection of lease payments not probable, previously recognized and uncollected rental revenue and any related accrued rent are reversed as a reduction to rental income and, subsequently, any lease revenue is only recognized when cash receipts are received. As a result of the review of lease payments collectability, NNN recorded a write-off of $21,792,000 of outstanding receivables and related accrued rent during the year ended December 31, 2020, and reclassified certain tenants as cash basis for accounting purposes. During the year ended December 31, 2021, no outstanding receivables and related accrued rent were written off and no tenants were reclassified as cash basis for accounting purposes.    

NNN includes an allowance for doubtful accounts in rental income on the Consolidated Statements of Income and Comprehensive Income.

  As of December 31, 2021, approximately six percent of total Properties, and approximately seven percent of aggregate gross leasable area held in the Property Portfolio, were leased to 11 tenants that NNN has determined to recognize revenue on a cash basis. During the years ended December 31, 2021 and 2020, NNN recognized $52,129,000 and $4,722,000, respectively, of rental income from certain tenants for periods following their classification to cash basis for accounting. NNN had no tenants classified as cash basis for accounting purposes for the year ended December 31, 2019.  

Real Estate – Held For Sale. Real estate held for sale is not depreciated and is recorded at the lower of cost or fair value, less costs to sell.

  Impairment - Real Estate. 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. These indicators include, but are not limited to: changes in real estate market conditions, the ability of NNN to re-lease properties that are currently vacant or become vacant, properties reclassified as held for sale, persistent vacancies greater than one year, and properties leased to tenants in bankruptcy. Management evaluates whether an impairment in carrying value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), and the residual value of the real estate, with the carrying value of the individual asset. The future undiscounted cash flows are primarily driven by estimated future market rents. Future cash flow estimates are sensitive to the assumptions made by management regarding future market rents, which are affected by expectations about future market and economic conditions. If an impairment is indicated, a loss will be recorded for the amount by which the carrying value of the asset exceeds its estimated fair value. NNN's Properties are leased primarily to retail tenants under long-term net leases and primarily held for investment. Generally, NNN's Property leases provide for initial terms of 10 to 20 years, which provide for cash flows over this term. NNN generally intends to hold these assets for the long-term, therefore, a temporary change in cash flows due to the COVID-19 pandemic alone was determined not to be an indicator of impairment.                                           30  --------------------------------------------------------------------------------   Revenue Recognition. Rental revenues for properties under construction commence upon completion of construction of the leased asset and delivery of the leased asset to the tenant. Rental revenues for non-development real estate assets are recognized when earned in accordance with ASC 842, based on the terms of the lease of the leased asset. Lease termination fees are recognized when collected subsequent to the related lease that is cancelled and NNN no longer has continuing involvement with the former tenant with respect to that property.  

The core principle of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which

  the entity expects to be entitled in exchange for those goods or services. Certain contracts are excluded from ASU 2014-09, including lease contracts within the scope of ASC 842. NNN determined the key revenue stream impacted by ASU 2014-09 is gain on disposition of real estate reported on the Consolidated Statements of Income and Comprehensive Income. In accordance with ASU 2014-09, NNN evaluates any separate contracts or performance obligations to determine proper timing and/or amount of revenue recognition, as well as, transaction price allocation.  

New Accounting Pronouncements. Refer to Note 1 of the December 31, 2021Consolidated Financial Statements for a summary and the anticipated impact of each accounting pronouncement on NNN’s financial position or results of operations.

  Results of Operations  Property Analysis  General. The following table summarizes the Property Portfolio as of December 31:                                                 2021             2020             2019 Properties Owned: Number                                          3,223            3,143            3,118 Total gross leasable area (square feet)                                      32,753,000       32,461,000       32,460,000 Properties: Leased and unimproved land                      3,191            3,096            3,086 Percent of Properties - leased and unimproved land                                    99 %             99 %             99 % Weighted average remaining lease term (years)                                          10.6             10.7      

11.2

 Total gross leasable area (square feet) - leased                             32,395,000       31,631,000      

31,818,000

The following table summarizes the lease expirations, assuming none of the tenants exercise renewal options, of the Property Portfolio for each of the next 10 years and then thereafter in the aggregate as of December 31, 2021:

         % of                                             % of        Annual                   Gross                   Annual                    Gross         Base        # of       Leasable                  Base        # of       Leasable        Rent(1)   Properties    Area(2)                  Rent(1)   Properties     Area(2) 2022    2.8%         75          739,000         2028    4.7%        157         1,245,000 2023    2.6%        113        1,402,000         2029    2.8%         71           987,000 2024    3.3%         93        1,455,000         2030    3.7%        106         1,194,000 2025    5.9%        192        2,013,000         2031    8.3%        190         2,781,000 2026    5.5%        217        2,139,000   Thereafter    51.9%      1,751       15,065,000 2027    8.5%        224        3,375,000     (1) Based on the annualized base rent for all leases in place as of December 31, 2021. (2) Approximate square feet.                                         31 
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The following table summarizes the diversification of the Property Portfolio based on the top 20 lines of trade:

                                                        % of Annual Base Rent(1)       Lines of Trade                            2021           2020          2019  1.   Convenience stores                        17.9%          18.2%         18.2%  2.   Automotive service                        12.3%          10.3%         9.6%  3.   Restaurants - full service                9.8%           10.5%        

11.1%

  4.   Restaurants - limited service             9.4%           9.7%         

8.8%

  5.   Family entertainment centers              5.9%           5.9%          6.7%  6.   Health and fitness                        5.2%           5.3%          5.2%  7.   Theaters                                  4.5%           4.4%          4.7%

Recreational vehicle dealers, parts

 8.   and accessories                           3.9%           3.5%          3.4%  9.   Equipment rental                          3.2%           2.6%          2.6% 10.   Automotive parts                          3.0%           3.1%          3.1% 11.   Wholesale clubs                           2.5%           2.6%          2.5% 12.   Home improvement                          2.5%           2.6%          2.6% 13.   Medical service providers                 2.0%           2.2%          2.1% 14.   Furniture                                 1.7%           1.7%          1.6% 15.   General merchandise                       1.7%           1.7%          1.8% 16.   Consumer electronics                      1.5%           1.5%          1.5% 17.   Home furnishings                          1.5%           1.6%          1.7% 18.   Travel plazas                             1.5%           1.5%          1.6% 19.   Automobile auctions, wholesale            1.3%           1.1%          1.0% 20.   Drug stores                               1.3%           1.5%          1.6%       Other                                     7.4%           8.5%          8.6%                                                100.0%         100.0%        100.0%   (1)

Based on annualized base rent for all leases in place as of December 31 of the respective year.

The following table summarizes the diversification of the Property Portfolio by state as of December 31, 2021:

                                                 # of               % of Annual Base        State                               Properties                 Rent(1)   1.   Texas                                   502                     16.9%   2.   Florida                                 229                     8.6%   3.   Ohio                                    192                     5.5%   4.   Illinois                                163                     5.5%   5.   North Carolina                          163                     4.7%   6.   Georgia                                 153                     4.6%   7.   Indiana                                 149                     4.0%   8.   Tennessee                               150                     3.8%   9.   Virginia                                116                     3.4%  10.   California                               65                     3.3%        Other                                  1,341                    39.7%                                               3,223                   100.0% 
  (1)   Based on annualized base rent for all leases in place as of December 31,        2021.                                              32 
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Property Acquisitions. The following table summarizes the Property acquisitions for each of the years ended December 31 (dollars in thousands):

                                             2021           2020           2019 Acquisitions: Number of Properties                           156            63             210 Gross leasable area (square feet)(1)     1,341,000       449,000       3,164,000 Initial cash yield                             6.5 %         6.5 %           6.9 % Total dollars invested(2)              $   555,415     $ 179,967     $   752,497   (1) Includes additional square footage from completed construction on existing Properties. (2) Includes dollars invested in projects under construction or tenant improvements for each respective year.  

NNN typically funds Property acquisitions either through borrowings under the Credit Facility or by issuing its debt or equity securities in the capital markets.

Property Dispositions. The following table summarizes the Properties sold by NNN for each of the years ended December 31 (dollars in thousands):

                                               2021           2020           2019 Number of properties                              74            38              59

Gross leasable area (square feet) 1,015,000 425,000 1,113,000 Net sales proceeds

                       $   122,018     $  54,488     $   

126.194

 Net gain on disposition of real estate   $    23,094     $  16,238     $    32,463 Cap rate                                         7.4 %         6.1 %           5.9 %  

NNN typically uses the proceeds from a Property disposition to either pay down the Credit Facility or reinvest in real estate.

Analysis of Revenue

  General. NNN's total revenues increased for the year ended December 31, 2021, as compared to the same period ended in 2020. The increase is primarily due to a decrease in receivables reserves, scheduled rent increases based on increases in the Consumer Price Index ("CPI") and to the income generated from newly acquired Properties. NNN's total revenues decreased for the year ended December 31, 2020, as compared to the same period ended in 2019. The decrease is primarily due to the write-off of receivables and lower rent collection from certain tenants due to the impact of the COVID-19 pandemic. (See "Results of Operations - Property Analysis - Property Acquisitions").  The following summarizes NNN's revenues for each of the years ended December 31 (dollars in thousands):                                                                                   2021        2020                                                                               Versus      Versus                                                                                2020        2019                                      2021          2020          2019         Percent     Percent Rental Revenues(1)                 $ 705,194     $ 640,754     $ 652,220          10.1 %      (1.8 )% Real estate expense reimbursement from tenants            18,665        18,039        16,789           3.5 %       7.4 % Rental income                        723,859       658,793       669,009           9.9 %      (1.5 )% Interest and other income from real estate transactions               2,548         1,888         1,478          35.0 %      27.7 % Total revenues                     $ 726,407     $ 660,681     $ 670,487           9.9 %      (1.5 )%   (1)

Includes rental income from operating leases, earned income from direct financing leases and percentage rent (“Rental Revenues”).

Comparison of Revenues – 2021 versus 2020

  Rental Income. Rental income increased for the year ended December 31, 2021, as compared to the same period in 2020. The increase is primarily due to a change in receivables reserves, scheduled rent increases based on increases in the CPI and Property acquisitions:  

(the)

a partial year of Rental Revenue from 156 Properties with aggregate gross leasable area of ​​approximately 1,341,000 square feet acquired in 2021, and

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(ii)

a full year of Rental Revenue from 63 Properties with aggregate gross leasable area of ​​approximately 449,000 square feet acquired in 2020.

Comparison of Revenues – 2020 versus 2019

  Refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of NNN's Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Commission on February 11, 2021, for a detailed comparison of revenues for the years ended December 31, 2020 versus December 31, 2019.  

Analysis of Expenses

  General. Operating expenses decreased primarily due to a decrease in impairment losses recognized on real estate during the year ended December 31, 2021, as compared to the same period in 2020. The decrease in impairment losses was partially offset by an increase in depreciation and amortization as a result of the continued growth of NNN's Property Portfolio as well as an increase in general and administrative expenses. The following summarizes NNN's expenses for the year ended December 31 (dollars in thousands):                                                                              2021          2020                                                                          Versus        Versus                                                                           2020          2019                                 2021          2020          2019         Percent      Percent General and administrative    $  44,640     $  38,161     $  37,651          17.0 %         1.4 % Real estate                      28,385        28,362        27,656           0.1 %         2.6 % Depreciation and amortization                    205,220       196,623       188,871           4.4 %         4.1 % Leasing transaction costs           203            76           261         167.1 %       (70.9 )% Impairment losses - real estate, net of   recoveries                     21,957        37,442        31,992         (41.4 )%       17.0 % Executive retirement costs            -         1,766             -        (100.0 )%        N/C Total operating expenses      $ 300,405     $ 302,430     $ 286,431          (0.7 )%        5.6 %  Interest and other income     $    (216 )   $    (417 )   $  (3,112 )       (48.2 )%      (86.6 )% Interest expense                137,874       129,431       120,023           6.5 %         7.8 % Loss on early extinguishment of debt           21,328        16,679             -          27.9 %         N/C Total other expenses          $ 158,986     $ 145,693     $ 116,911           9.1 %        24.6 %  As a percentage of total revenues: General and administrative          6.1 %         5.8 %         5.6 % Real estate                         3.9 %         4.3 %         4.1 %    

Comparison of Expenses – 2021 versus 2020

  General and Administrative Expenses. General and administrative expenses increased in amount and as a percentage of total revenues for the year ended December 31, 2021, as compared to the same period in 2020. The increase in general and administrative expenses for the year ended December 31, 2021, is primarily attributable to an increase in incentive compensation costs.  Impairment Losses - Real Estate, Net of Recoveries. 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. These indicators include, but are not limited to: changes in real estate market conditions, the ability of NNN to re-lease properties that are currently vacant or become vacant, properties reclassified as held for sale, persistent vacancies greater than one year, and properties leased to tenants in bankruptcy. Management evaluates whether an impairment in carrying value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), and the residual value of the real estate, with the carrying value of the individual asset. The future undiscounted cash flows are primarily driven by estimated future market rents. Future cash flow estimates are sensitive to the assumptions made by management regarding future market rents, which are affected by expectations about future market and economic conditions. If an impairment is                                         34  --------------------------------------------------------------------------------   indicated, a loss will be recorded for the amount by which the carrying value of the asset exceeds its estimated fair value. NNN's Properties are leased primarily to retail tenants under long-term net leases and primarily held for investment. Generally, NNN's Property leases provide for initial terms of 10 to 20 years, which provide for cash flows over this term. NNN generally intends to hold these assets for the long-term, therefore, a temporary change in cash flows due to the COVID-19 pandemic alone was determined not to be an indicator of impairment.  

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

                                                       2021         2020      

2019

Total real estate impairments, net of recoveries $ 21,957 $ 37,442

 $ 31,992  Number of Properties: Vacant                                                   30           14           27 Occupied                                                 12           17           12   For the years ended December 31, 2021, 2020, and 2019, real estate impairments, net of recoveries, was less than one percent of NNN's total assets for the respective periods as reported on the Consolidated Balance Sheets. Due to NNN's core business of investing in real estate leased primarily to retail tenants under long-term net leases, the inherent risks of owning commercial real estate, and unknown potential changes in financial and economic conditions that may impact NNN's tenants, NNN believes it is reasonably possible to incur real estate impairment charges in the future.  

Executive Retirement Costs. For the year ended December 31, 2020executive retirement costs relate primarily to the retirement of NNN’s former Chief Investment Officer on December 31, 2020.

  Interest Expense. Interest expense increased for the year ended December 31, 2021, compared to the same period in 2020. The increase is attributable to an increase in outstanding debt, including the following activity related to NNN's notes payable (dollars in thousands):                                                           Stated      Original                           Effective                     Interest     Maturity      Transaction             Date        Principal        Rate         Date Issuance 2030 Notes       March 2020     $  400,000      2.500%    April 2030 Issuance 2050 Notes       March 2020        300,000      3.100%    April 2050 Redemption 2022 Notes     March 2020       (325,000 )    3.800%    October 2022 Issuance 2051 Notes       March 2021        450,000      3.500%    April 2051 Redemption 2023 Notes     March 2021       (350,000 )    3.300%    April 2023 Issuance 2052 Notes     September 2021      450,000      3.000%    April 2052   In addition to the note payable transactions outlined above, interest expense was also impacted due to the Credit Facility having no weighted average outstanding balance at December 31, 2021 and a weighted average outstanding balance of $18,895,000 with a weighted average interest rate of 2.6% at December 31, 2020. In addition, interest expense for the years ended December 31, 2021 and 2020, includes $2,078,000 and $2,291,000, respectively, in connection with the early redemption of the 2023 Notes and 2022 Notes, respectively.  Loss on Early Extinguishment of Debt. As part of NNN's financing strategy, NNN may opt to redeem outstanding notes payable prior to the original maturity date. Upon an early redemption, notes are redeemed at a price equal to 100% of the principal amount, plus (i) a make-whole amount, and (ii) accrued and unpaid interest. In March 2021, NNN redeemed the $350,000,000 3.300% notes payable that were due in April 2023 with a make-whole amount of $21,328,000. In March 2020, NNN redeemed the $325,000,000 3.800% notes payable that were due in October 2022 with a make-whole amount of $16,679,000. The make-whole amounts are included in loss on early extinguishment of debt on the Consolidated Statement of Income and Comprehensive Income.                                         35 
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Comparison of Expenses – 2020 versus 2019

  Refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of NNN's Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Commission on February 11, 2021, for a detailed comparison of expenses for the years ended December 31, 2020 versus December 31, 2019.    

Impact of Inflation

  NNN's leases typically contain provisions to mitigate the adverse impact of inflation on NNN's results of operations. Tenant leases generally provide for limited increases in rent as a result of fixed increases, increases in the CPI, and/or, to a lesser extent, increases in the tenant's sales volume. During times when inflation is greater than increases in rent, rent increases will not keep up with the rate of inflation.  Properties are leased to tenants under long-term, net leases which typically require the tenant to pay certain operating expenses for a Property, thus, NNN's exposure to inflation is reduced with respect to these expenses. Inflation may have an adverse impact on NNN's tenants and challenge their ability to meet lease obligations, including to pay rent.    

Liquidity and Capital Resources

  NNN's demand for funds has been and will continue to be primarily for (i) payment of operating expenses and cash dividends; (ii) Property acquisitions and development; (iii) capital expenditures; (iv) payment of principal and interest on its outstanding debt; and (v) other investments.  Financing Strategy. NNN's financing objective is to manage its capital structure effectively in order to provide sufficient capital to execute its operating strategy while servicing its debt requirements, maintaining its investment grade credit rating, staggering debt maturities and providing value to NNN's stockholders. NNN's capital resources have and will continue to include, if available (i) proceeds from the issuance of public or private equity or debt capital market transactions; (ii) secured or unsecured borrowings from banks or other lenders; (iii) proceeds from the sale of Properties; and (iv) to a lesser extent, by internally generated funds as well as undistributed funds from operations. However, there can be no assurance that additional financing or capital will be available, or that the terms will be acceptable or advantageous to NNN.  NNN typically expects to fund its short-term liquidity requirements, including investments in additional Properties, with cash and cash equivalents, cash provided from operations and NNN's Credit Facility. As of December 31, 2021, NNN had $171,322,000 of cash and cash equivalents and $1,100,000,000 was available for future borrowings under the Credit Facility. (See "Overview - Impact of COVID-19 on NNN's Business").  As of December 31, 2021, NNN's ratio of total debt to total gross assets (before accumulated depreciation and amortization) was approximately 40 percent and the ratio of secured debt to total gross assets was less than one percent. The ratio of total debt to total market capitalization was approximately 30 percent. Certain financial agreements to which NNN is a party contain covenants that limit NNN's ability to incur additional debt under certain circumstances. The organizational documents of NNN do not limit the absolute amount or percentage of debt that NNN may incur. Additionally, NNN may change its financing strategy.                                         36  --------------------------------------------------------------------------------   Cash and Cash Equivalents. NNN's cash and cash equivalents includes the aggregate of cash and cash equivalents and restricted cash and cash held in escrow from the Consolidated Balance Sheets. NNN did not have restricted cash, including cash held in escrow as of December 31, 2021, 2020 and 2019. The table below summarizes NNN's cash flows for each of the years ended December 31 (dollars in thousands):                                                    2021           2020           2019 Cash and cash equivalents: Provided by operating activities             $  568,425     $  450,194     $  501,727 Used in investing activities                   (432,177 )     (142,816 )     (619,408 ) Provided by (used in) financing activities     (232,162 )      (41,254 )        4,526 Increase (decrease)                             (95,914 )      266,124       (113,155 ) Net cash at beginning of year                   267,236          1,112        114,267 Net cash at end of year                      $  171,322     $  267,236     $    1,112   Cash flow activities include:  Operating Activities. Cash provided by operating activities represents cash received primarily from Rental Revenues and interest income less cash used for general and administrative expenses. NNN's cash flow from operating activities has been sufficient to pay the distributions for each period presented. The change in cash provided by operations for the years ended December 31, 2021, 2020 and 2019, is primarily the result of changes in revenues and expenses as discussed in "Results of Operations." Cash generated from operations is expected to fluctuate in the future.  Investing Activities. Changes in cash for investing activities are primarily attributable to acquisitions and dispositions of Properties as discussed in "Results of Operations - Property Analysis." NNN typically uses cash on hand or proceeds from its Credit Facility to fund the acquisition of its Properties.  

Financing Activities. NNN’s financing activities for the year ended December 31, 2021included the following significant transactions:

(i) Issuance and redemption of notes payable resulted in the following:

 $436,417,000 in net proceeds from the issuance in March of the 3.500% notes payable due in April 2051, • $350,000,000 payment in March for the early redemption of the 3.300% notes payable due in April 2023, • $21,328,000 payment in March of the make-whole amount from the early redemption of the 3.300% notes payable due in April 2023, and • $434,611,000 in net proceeds from the issuance in September of the 3.000% notes payable due in April 2052.  

(ii) Issuance and redemption of equity securities resulted in the following:

 $345,000,000 payment to redeem the 13,800,000 depository shares of NNN's 5.200% Series F Cumulative Redeemable Preferred Stock (the "Series F Preferred Stock"), • $1,009,000 from the issuance of 30,000 shares of common stock in connection with the at-the-market ("ATM") equity program, and • $2,744,000 from the issuance of 62,577 shares of common stock in connection with the Dividend Reinvestment and Stock Purchase Plan ("DRIP").  

(iii) Dividends paid:

 $367,291,000 to common stockholders, and • $14,999,000 to holders of the depositary shares of the Series F Preferred Stock.                                           37 
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Material Cash Requirements

  NNN's material cash requirements include (i) long-term debt maturities; (ii) interest on long-term debt; (iii) to a lesser extent, Property construction and other Property related costs that may arise; and (iv) common stock dividends (although all future distributions will be declared and paid at the discretion of the Board of Directors).  

The table presents material cash requirements related to NNN’s long-term debt outstanding as of December 31, 2021 (dollars in thousands):

                                                                         Date of Obligation                                   Total          2022          2023          2024          2025          2026        Thereafter Long-term debt(1)              $ 3,810,611     $     664     $   9,947    

$ 350,000 $ 400,000 $ 350,000 $ 2,700,000
Long-term debt – interest (2) 1,958,889 136,947 136,701

 129,006       120,750       106,225       1,329,260 Total                          $ 5,769,500     $ 137,611     $ 146,648     $ 479,006     $ 520,750     $ 456,225     $ 4,029,260   (1) Includes only principal amounts outstanding under mortgages payable and notes payable and excludes unamortized mortgage premiums, note discounts and note costs. See "Capital Structure - Mortgages Payable" and "Capital Structure - Notes Payable". (2) Interest calculation on mortgage and notes payable based on stated rate of the principal amount. See "Capital Structure - Mortgages Payable" and "Capital Structure - Notes Payable".  Property Construction. NNN has committed to fund construction of 13 Properties. The improvements of such Properties are estimated to be completed within 12 months. These construction commitments, at December 31, 2021, are outlined in the table below (dollars in thousands):    Total commitment(1)    $ 40,991 Less amount funded       16,256 Remaining commitment   $ 24,735   (1)

Includes land, construction costs, tenant improvements, lease costs and capitalized interest.

  Management anticipates satisfying these obligations with a combination of NNN's cash provided from operations, current capital resources on hand, its Credit Facility, debt or equity financings and asset dispositions.  Properties. Generally, the Properties are leased under long-term triple net leases, which require the tenant to pay all property taxes and assessments, to maintain the interior and exterior of the Property, and to carry property and liability insurance coverage. Therefore, management anticipates that capital demands to meet obligations with respect to these Properties will be modest for the foreseeable future and can be met with funds from operations and working capital. Certain Properties are subject to leases under which NNN retains responsibility for specific costs and expenses associated with the Property. Management anticipates the costs associated with these Properties, NNN's vacant Properties or those Properties that become vacant will also be met with funds from operations and working capital. NNN may be required to borrow under its Credit Facility or use other sources of capital in the event of significant capital expenditures or major repairs.  

The lost revenues and increased property expenses resulting from vacant Properties or the inability to collect lease revenues could have a material adverse effect on the liquidity and results of operations if NNN is unable to re-lease the Properties at comparable rental rates and in a timely manner .

As of December 31, 2021NNN owned 32 vacant, a-leased Properties which accounted for less than one percent of total Properties held in the Property Portfolio.

Additionally, as of February 2, 2022NNN had no tenants in bankruptcy under Chapter 11 of the US Bankruptcy Code.

NNN generally monitors the financial performance of its significant tenants on an ongoing basis.

  A prolonged continuation of or repeated temporary business closures, reduced capacity at businesses or other social-distancing practices and quarantine orders as a result of COVID-19 may adversely impact NNN's tenants' ability to generate sufficient revenues to meet financial obligations, and could force tenants to default on their leases, or result in the bankruptcy of tenants, which would diminish the Rental Revenue NNN receives under its leases. NNN currently expects a short-term decrease in cash                                         38  --------------------------------------------------------------------------------   from operations as its tenants continue to be impacted by the COVID-19 pandemic and, while contractually obligated, some have not paid all rent amounts due. Additionally, an increase in the number of vacant properties would increase NNN's real estate expenses, including expenses associated with ongoing maintenance and repairs, utilities, property taxes, and property and liability insurance. The ongoing development and fluidity of the COVID-19 pandemic precludes any prediction as to the ultimate adverse impact on NNN (see "Overview - Impact of COVID-19 on NNN's Business").  

Common Stock Dividends. One of NNN’s primary objectives is to distribute a substantial portion of its funds available from operations to its stockholders in the form of dividends, while retaining sufficient cash for reserves and working capital purposes and maintaining its status as a REIT.

  The following table outlines the dividends declared and paid for NNN's common stock for the years ended December 31 (dollars in thousands, except per share data):                  2021          2020          2019 Dividends   $ 367,291     $ 356,409     $ 333,692 Per share      2.1000        2.0700        2.0300  

The following table presents the characterizations for tax purposes of NNN’s common stock dividends for the years ended December 31:

                                         2021                          2020                          2019 

Ordinary dividends (1) $ 1.615753 76.9406% $ 1.659755 80.1814% $ 1.762899 86.8423% Nontaxable distributions 0.484247 23.0594% 0.410245 19.8186% 0.267101 13.1577%

                            $ 2.100000       100.0000 %   $ 2.070000       

100.0000% $ 2.030000 100.0000%

(1)

Eligible for the 20% qualified business income deduction under section 199A of the Code.

Hon January 14, 2022NNN declared a dividend of $ 0.530 per share, payable
February 15, 2022to its common stockholders of record as of January 31, 2022.

  Preferred Stock Distributions. Holders of NNN's preferred stock issuances are entitled to receive, when and as authorized by the Board of Directors, cumulative preferential cash distributions based on the stated rate and liquidation preference per annum. The following table presents the dividends declared and paid for NNN's preferred stock for the years ended December 31 (dollars in thousands, except per share data):                               Series F(1)                   Series E(2)                   2021          2020         2019           2019 Dividends      $   14,999     $ 17,940     $ 17,940     $      13,201 Per share(3)     1.086944       1.3000       1.3000          1.147917    

(1) The Series F Preferred Stock was redeemed in October 2021. The dividends paid

in 2021 include accumulated and unpaid dividends through, but not including,

the redemption date. (2) The Series E preferred stock was redeemed in October 2019. The dividends

paid in 2019 include accumulated and unpaid dividends through, but not

including, the redemption date. (3) 100% of preferred stock dividends were characterized as ordinary dividends

for tax purposes, eligible for the 20% qualified business income deduction

    under section 199A of the Code.     In October 2021, NNN redeemed all outstanding depositary shares (13,800,000) representing interests in its Series F Preferred Stock. As of December 31, 2021, NNN had no outstanding shares of preferred stock.                                         39  --------------------------------------------------------------------------------

Capital Structure

  NNN has used, and expects to use in the future, various forms of debt and equity securities primarily to pay down or refinance its outstanding debt, to finance property acquisitions and to fund construction on its Properties.  

The following is a summary of NNN’s total outstanding debt as of December 31
(dollars in thousands):

                                             Percentage                       Percentage                             2021           of Total          2020           of Total Mortgages payable        $    10,697              0.3 %   $    11,395              0.4 % Notes payable              3,735,769             99.7 %     3,209,527             99.6 % Total outstanding debt   $ 3,746,466            100.0 %   $ 3,220,922            100.0 %     Line of Credit Payable. In June 2021, NNN amended and restated its credit agreement to increase the borrowing capacity under its Credit Facility from $900,000,000 to $1,100,000,000 and amended certain other terms under the former Credit Facility. The Credit Facility had no weighted average outstanding balance during the year ended December 31, 2021. The Credit Facility matures in June 2025, unless the Company exercises its options to extend maturity to June 2026. The Credit Facility bears interest at the London Interbank Offered Rate ("LIBOR") plus 77.5 basis points; however, such interest rate may change pursuant to a tiered interest rate structure based on NNN's debt rating. Additionally, as part of NNN's environmental, social and governance ("ESG") initiatives, pricing may be reduced if specified ESG metrics are achieved. The Credit Facility also includes an accordion feature which permits NNN to increase the facility size up to $2,000,000,000, subject to lender approval. In connection with the Credit Facility, NNN incurred loan costs of $7,489,000 which are included in debt costs on the Consolidated Balance Sheet. As of December 31, 2021, there was no outstanding balance and $1,100,000,000 was available for future borrowings under the Credit Facility.  In accordance with the terms of the Credit Facility, NNN is required to meet certain restrictive financial covenants, which, among other things, require NNN to maintain certain (i) leverage ratios, (ii) debt service coverage, (iii) cash flow coverage, and (iv) investment limitations. At December 31, 2021, NNN was in compliance with those covenants. In the event that NNN violates any of these restrictive financial covenants, it could cause the debt under the Credit Facility to be accelerated and may impair NNN's access to the debt and equity markets and limit NNN's ability to pay dividends to its common and preferred stockholders, each of which would likely have a material adverse impact on NNN's financial condition and results of operations.  LIBOR is used as a reference rate for NNN's revolving Credit Facility. On March 5, 2021, the Financial Conduct Authority ("FCA") announced that USD LIBOR will no longer be published after June 30, 2023. This announcement has several implications, including setting the spread that may be used to automatically convert contracts from LIBOR to the Secured Overnight Financing Rate ("SOFR"). Additionally, as of December 31, 2021, banks are expected to no longer issue any new LIBOR debt. NNN anticipates that LIBOR will continue to be available at least until June 30, 2023. For a discussion of the phase-out of LIBOR and its impact to NNN, see "Item 1A. Risk Factors - General Risks."  Mortgages Payable. As of December 31, 2021 and 2020, NNN had mortgages payable, including unamortized premium and net of unamortized debt costs, of $10,697,000 and $11,395,000 respectively. The mortgages payable had an interest rate of 5.23% and matures July 2023. The loan is secured by a first lien on five of the Properties and the carrying value of the assets was $18,972,000 as of December 31, 2021.   

Universal Shelf Registration Statement. In August 2020NNN filed a shelf registration statement with the Commission which was automatically effective and permits the issuance by NNN of an indeterminate amount of debt and equity securities.

                                       40  --------------------------------------------------------------------------------

Debt Securities – Notes Payable. Each of NNN’s outstanding series of unsecured notes is summarized in the table below (dollars in thousands):

                   Issue                                            Net        Stated    Effective    Maturity Notes(1)        Date        Principal       Discount(2)        Price        Rate      Rate(3)       Date                                                                                                  June 2024       May 2014         $  350,000     $         707     $ 349,293     3.900%     3.924%     2024(4)                                                                                                  November 2025       October 2015        400,000               964       399,036     4.000%     4.029%     2025(4)                                                                                                  December 2026       December 2016       350,000             3,860       346,140     3.600%     3.733%     2026(4)                                                                                                  October 2027       September 2017      400,000             1,628       398,372     3.500%     3.548%     2027                                                                                                  October 2028       September 2018      400,000             2,848       397,152     4.300%     4.388%     2028 2030       March 2020          400,000             1,288       398,712     2.500%     2.536%     April 2030                                                                                                  October 2048       September 2018      300,000             4,239       295,761     4.800%     4.890%     2048 2050       March 2020          300,000             6,066       293,934     3.100%     3.205%     April 2050 2051       March 2021          450,000             8,406       441,594     3.500%     3.602%     April 2051 2052       September 2021      450,000            10,422       439,578     3.000%     3.118%     April 2052   (1) The proceeds from the note issuances were used to pay down outstanding debt of NNN's Credit Facility, fund future property acquisitions and for general corporate purposes. Proceeds from the issuance of the 2028 Notes and the 2048 Notes were also used to redeem all of the $300,000 5.500% notes payable that were due 2021. Proceeds from the issuance of the 2030 Notes and the 2050 Notes were also used to redeem all of the $325,000 3.800% notes payable that were due in 2022. Proceeds from the issuance of the 2051 Notes were also used to redeem all of the $350,000 3.300% notes payable that were due in 2023. Proceeds from the issuance of the 2052 Notes were also used to redeem all of NNN's Series F Preferred Stock. (2) The note discounts are amortized to interest expense over the respective term of each debt obligation using the effective interest method. (3) Includes the effects of the discount at issuance. (4) The aggregate principal balance of the unsecured note maturities for the next five years is $1,100,000.  NNN entered into forward starting swaps which were hedging the risk of changes in forecasted interest payments on the forecasted issuance of long-term debt. Upon the issuance of a series of unsecured notes, NNN terminated such derivatives as outlined in the following table (dollars in thousands):                                                                            Liability         Fair Value Deferred                                                     Aggregate          (Asset) Fair             In Other                                                      Notional           Value When           Comprehensive  Notes      Terminated         Description            Amount          Terminated (1)           Income(2)                            Three forward 2024      May 2014         starting swaps         $      225,000     $          6,312     $              6,312                            Four forward 2025      October 2015     starting swaps                300,000               13,369                   13,369                            Two forward starting 2026      December 2016    swaps                         180,000              (13,352 )                (13,345 )                            Two forward starting 2027      September 2017   swaps                         250,000                7,690                    7,688                            Two forward starting 2028      September 2018   swaps                         250,000               (4,080 )                 (4,080 )                            Three forward 2030      March 2020       starting swaps                200,000               13,141                   13,141                            Two forward starting 2052      September 2021   swaps                         120,000                1,584                    1,584   (1) The deferred liability (asset) is being amortized over the term of the respective notes using the effective interest method. (2) The amount reported in accumulated other comprehensive income will be reclassified to interest expense as interest payments are made on the related notes payable.  Each series of notes represents senior, unsecured obligations of NNN and is subordinated to all secured debt of NNN. The notes are redeemable at the option of NNN, in whole or in part, at a redemption price equal to the sum of (i) the principal amount of the notes being redeemed plus all accrued and unpaid interest thereon through the redemption date, and (ii) the make-whole amount, if any, as defined in the applicable supplemental indenture relating to the notes.  In connection with the outstanding note offerings, NNN incurred debt issuance costs totaling $38,145,000 consisting primarily of underwriting discounts and commissions, legal and accounting fees, rating agency fees and printing expenses. Debt issuance costs for all note issuances have been deferred and are being amortized over the term of the respective notes using the effective interest method.                                         41  --------------------------------------------------------------------------------   As a part of NNN's financing strategy, NNN may opt to redeem outstanding notes payable prior to the original maturity date. Upon early redemption, notes are redeemed at a price equal to 100% of the principal amount, plus (i) a make-whole amount, and (ii) accrued and unpaid interest. In March 2021, NNN redeemed the $350,000,000 3.300% notes payable that were due in April 2023 with a make-whole amount of $21,328,000. In March 2020, NNN redeemed the $325,000,000 3.800% notes payable that were due in October 2022 with a make-whole amount of $16,679,000. The make-whole amounts are included in loss on early extinguishment of debt on the Consolidated Statement of Income and Comprehensive Income.  In accordance with the terms of the indentures pursuant to which NNN's notes have been issued, NNN is required to meet certain restrictive financial covenants, which, among other things, require NNN to maintain (i) certain leverage ratios, and (ii) certain interest coverage. At December 31, 2021, NNN was in compliance with those covenants. NNN's failure to comply with certain of its debt covenants could result in defaults that accelerate the payment under such debt and limit the dividends paid to NNN's common and preferred stockholders which would likely have a material adverse impact on NNN's financial condition and results of operations. In addition, these defaults could impair its access to the debt and equity markets.  NNN does not use derivatives for trading or speculative purposes or currently have any derivatives that are not designated as hedges. NNN had no derivative financial instruments outstanding at December 31, 2021.  

Equity Securities

  Preferred Stock. In October 2021, NNN redeemed all outstanding depositary shares (13,800,000) representing interests in its 5.200% Series F Preferred Stock. The Series F Preferred Stock was redeemed at $25.00 per depositary share, plus all accrued and unpaid dividends through, but not including, the redemption date, for an aggregate redemption price of $25.111944 per depositary share. The excess carrying amount of the Series F Preferred Stock redeemed over the cash paid to redeem the Series F Preferred Stock was $10,897,000, representing issuance costs which is reflected as a reduction to earnings attributable to common stockholders.  In October 2019, NNN redeemed all outstanding depositary shares (11,500,000) representing interests in its 5.700% Series E preferred stock. The Series E preferred stock was redeemed at $25.00 per depositary share, plus all accrued and unpaid dividends through, but not including, the redemption date, for an aggregate redemption price of $25.079167 per depositary share. The excess carrying amount of preferred stock redeemed over the cash paid to redeem the preferred stock was $9,856,000, representing issuance costs which is reflected as a reduction to earnings attributable to common stockholders.  

As of December 31, 2021NNN had no outstanding shares of preferred stock.

  Common Stock. In September 2019, NNN filed a prospectus supplement to the prospectus contained in its February 2018 shelf registration statement and issued 7,000,000 shares of common stock at a price of $56.50 per share and received net proceeds of $379,410,000. In connection with this offering, NNN incurred stock issuance costs totaling approximately $16,090,000, consisting primarily of underwriters' fees and commissions, legal and accounting fees and printing expenses. NNN used the net proceeds from this offering to redeem the Series E preferred stock, repay outstanding debt under the Credit Facility, to fund property acquisitions, and for general corporate purposes.    At-The-Market Offerings. Under NNN's shelf registration statement, NNN has established an ATM which allows NNN to sell shares of common stock from time to time. The following table outlines NNN's active ATM programs for the three years ended December 31, 2021:                                                   2020 ATM       2018 ATM Established date                              August 2020   February 2018 Termination date                              August 2023     August 2020 Total allowable shares                         17,500,000      12,000,000

Total shares issued as of December 31, 2021 1,599,304 11,272,034

                                           42 
--------------------------------------------------------------------------------   The following table outlines the common stock issuances pursuant to NNN's ATM equity programs for the years ended December 31 (dollars in thousands, except per share data):                                      2021          2020            2019 Shares of common stock            30,000       3,119,153       2,344,022 Average price per share (net)   $  33.65     $     38.21     $     53.71 Net proceeds                    $  1,009     $   119,185     $   125,905 Stock issuance costs(1)         $    224     $     2,130     $     1,431   (1)

Stock issuance costs consist primarily of underwriters’ and agent’s fees and commissions, and legal and

  accounting fees.  Dividend Reinvestment and Stock Purchase Plan. In February 2021, NNN filed a shelf registration statement that was automatically effective with the Commission for its DRIP, which permits NNN to issue up to 6,000,000 shares of common stock. NNN's DRIP provides an economical and convenient way for current stockholders and other interested new investors to invest in NNN's common stock. The following outlines the common stock issuances pursuant to the DRIP for the years ended December 31 (dollars in thousands):                               2021         2020          2019 Shares of common stock     62,577       138,507       362,918 Net proceeds             $  2,744     $   5,092     $  19,442                                            43 

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