NNN REIT, Inc. (NYSE:NNN) Q2 2024 Earnings Conference Call August 1, 2024 10:30 AM ET

Company Participants

Steve Horn - Chief Executive Officer
Kevin Habicht - Chief Financial Officer

Conference Call Participants

Spenser Allaway - Green Street
Farrell Granath - Bank of America
Kathryn Graves - UBS
John Massocca - B. Riley
Ronald Kamdem - Morgan Stanley

Operator

Greetings, and welcome to NNN REIT Inc. Second Quarter 2024 Earnings Call. At this time all participants are in 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, Chief Executive Officer of NNN REIT. Sir, you may begin.

Steve Horn

Thanks, Holly. Good morning, and welcome to NNN REIT's second quarter 2024 earnings call. As usual, joining me on the call is Chief Financial Officer, Kevin Habicht.

As the press release reflects the company's consistent performance carried through the second quarter and produced strong results, including high occupancy and in-line acquisitions volume driven by our proprietary tenant relationships. We are in a position to continue enhancing shareholder value as we move deeper into 2024 and start setting up for 2025.

Highlights of the second quarter financial results emphasize our continuous effort actively managing the portfolio with data analytics and experience. The portfolio of 3,548 freestanding single-tenant properties continue to perform exceedingly well maintained high occupancy levels of 99.3%, which remains above our long-term average of roughly 98%.

Knowing the acquisition pipeline, market conditions and portfolio performance, NNN feels comfortable about increasing the midpoint of core FFO per share guidance by $0.02 to $3.30. The leasing department continued the strong start of the year by identifying and executing with QSR tenants. Having 158% recapture rate from the prior rent during the quarter, which brings year-to-date recapture of 102%. This recapture is above historical levels of approximately 70%.

Just want to be clear to remember that NNN does not -- tries hard not to give TI dollars to quote buy up rent. Currently, NNN only has 26 vacant assets in the portfolio which is a testament to working with relationship tenants to maximize value for shareholders. During the quarter, we also sold 14 properties, which 11 were income producing, raising $67 million of proceeds to be reinvested into new acquisitions. Over the course of the year, NNN sells assets defensively and proactively but overall, we target a blended disposition cap rate to be about 100 basis points lower than the deployment of capital pricing. Year-to-date, NNN has sold $85 million of assets which has resulted in the lift of the disposition guidance lower end to $100 million from $80 million.