NNN REIT, Inc. (NYSE:NNN) Q1 2023 Results Conference Call May 2, 2023 10:30 AM ET
Company Participants
Steve Horn - CEO
Kevin Habicht - CFO
Conference Call Participants
Spenser Allaway - Green Street
Joshua Dennerlein - Bank of America
Eric Roth - Citi
Rob Stevenson - Janney
Wes Golladay - Baird
John Massocca - Ladenburg Thalmann
Operator
Greetings, and welcome to the NNN REIT First Quarter 2023 Earnings Call. At this time all participants are in a listen-only mode, and a question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.
I will now turn the conference over to your host, Mr. Steve Horn, CEO of NNN REIT. Sir, you may begin.
Steve Horn
Thanks, Ali. Good morning, and welcome to the inaugural NNN REIT First Quarter 2023 Earnings Call. Joining me on this call is Chief Financial Officer, Kevin Habicht.
As this morning’s press release reflects NNN’s performance in the first quarter produced 3.9% core FFO growth along with acquisitions, slightly over $155 million with a 7% initial cash yield. In addition, our portfolio retained a high occupancy of 99.4%, which I attribute to the upfront due diligence on property acquisitions and the continuous portfolio management that NNN does every day. But before we continue with the operational performance, I want to address the name change, which I’m excited about.
First, as I stated in the press release, the change does not signal a strategy shift with acquisitions, balance sheet management with deliberate and consistent NNN. We felt it was time to take advantage of the NNN brand. The reality is NNN is what we are called with our circle of investors, peers, clients every day. In addition, our website and emails use the NNN REIT brand. Therefore, the change is making NNN even more consistent within our sector.
Turning to the highlights of the first quarter financial results. Our portfolio of 3,449 freestanding, single-tenant retail properties continue to perform exceedingly well. As I stated earlier, occupancy ended at 99.4% for the quarter, which is above our long-term average of 98%.
Occupancy remained flat from year-end. At the quarter-end, NNN only had 20 vacant assets, which is one less than the year-end, which is a product of our leasing department enjoying a high level of interest by a number of strong national and regional tenants in our vacancies. In addition, 91% of our leases that were up for renewal during the quarter exercised an extension. I’m sure we’ll cover more of the credit watch list in the Q&A, but I just want to get a little bit more color. There were some large names that filed bankruptcy, and our portfolio is still performing at high levels. And we expect that trend to continue. One of the recent filings of Bed Bath & Beyond, which NNN currently owns three of their assets with an average rent of $13 per square foot. We’ve been getting a lot of inbound interest on the assets because of the quality of real estate. So I expect when the time comes to release the assets, we’ll have superior recovery rate in a timely manner. Remember, as I stated earlier, the average occupancy from NNN since 2003 is 98%. So the portfolio has stood the test of time through GFC and COVID.