National Retail Properties Annual Report 2009

FY2009 Annual Report · National Retail Properties

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Consistent Dividends Delivered.

2009 ANNUAL REPORT

Twenty Consecutive Years of Increased Dividends

CONSISTENT DIVIDENDS DELIVERED.

We pride ourselves in creating and sustaining long-term value for our shareholders. For twenty years
in a row, NNN shareholders have received increasing annual dividends. Less than 2% of all U.S. public
companies have achieved that track record.

Through good times and bad, our dividend has remained reliable and secure. As a result, many of our
shareholders have been able to use the income from their NNN dividends to make their dreams a reality.

Twenty consecutive years of increased dividends. Twenty consecutive years of dreams realized.

Twenty Consecutive Years of Dreams Realized

IN THIS REPORT

2 | Company Profi le

3 | Letter to Shareholders

13 | Dividend Reinvestment & Direct Stock Purchase

14 | Historical Financial Highlights

16 | Directors & Offi cers

Inside Back Cover

| Shareholder Information

National Retail Properties (NYSE: NNN), a real estate
investment trust, invests in single tenant net-leased
retail properties nationwide.

NNN has generated consistent returns for more than
a decade supported by its strong dividend yield and
20 consecutive years of increased annual dividends.
Its average annual total return for the past 15 years
has been 12.5%.

are located in 44 states with a total gross leasable area
of approximately 11.4 million square feet. Current
occupancy is 96.4% and these properties are leased to
more than 250 national and regional tenants in
34 industry classifications. A net lease shifts property
operating expenses (i.e., maintenance, taxes, insurance
and utilities) to the tenant, so the rental revenue
NNN receives has significantly fewer expenses and
more stable net cash flow.

NNN maintains a conservatively managed, diversified
real estate portfolio with properties subject to long-term,
net leases with established tenants. Its 1,015 properties

NNN is one of 156 publicly traded companies
in America to have increased annual dividends
for 20 or more consecutive years.

2 | TWENTY CONSECUTIVE YEARS OF INCREASED DIVIDENDS

ANNUAL TOTAL RETURN COMPARISON ((For periods ending December 31, 2009)
ANNUAL TOTAL RETURN COMPARISON
((((
For periods ending December 31, 2009)

Strong Track
Record

NNN shareholders

have enjoyed a 15-year

average annual total

return of 12.5 percent.

1 Year

3 Years

5 Years

10 Years

15 Years

National Retail Properties (NNN)

33.7%

4.5%

7.6%

16.6%

12.5%

S&P 500 Index (SPX)

26.4%

-5.6%

0.4%

-1.0%

8.0%

Nasdaq (CCMP)

45.3%

-1.2%

1.7%

-5.1%

8.2%

S&P 600 Index (SML)

25.5%

-4.8%

1.4%

6.3%

9.8%

Total Return is comprised of share price appreciation plus dividends paid.

Dear Fellow NNN Shareholder:

I am pleased to report that 2009 marked the
twentieth consecutive increase in our annual
dividend. This accomplishment places us
in an elite group of 156 public companies
that have achieved this milestone.

Despite the challenges of the past 18 months,
our strategy to build long-term value for our
shareholders has not altered, namely:

• to pay a safe and growing dividend;

• to generate steady and consistent annual

FFO per share growth; and,

• to achieve these dual objectives

while assuming below-average risk.

In last year’s shareholder letter, we anticipated
that a small number of our tenants would be
challenged by weak consumer spending. We also
projected that our acquisition activities would
be modest, which directly impacts our ability to
grow our FFO. In 2009, we had Adjusted Funds
from Operations (AFFO) of $1.65 per share before
impairment charges that we took. Despite a difficult
year in absolute terms, the total return realized by
our shareholders in 2009 was 33.7% as investors
recognized the strength of our balance sheet and
the merits of our business model. More importantly,

TWENTY CONSECUTIVE YEARS OF DREAMS REALIZED | 3

4 | TWENTY CONSECUTIVE YEARS OF INCREASED DIVIDENDS

WELL-COVERED DIVIDENDS
WELL-COVERED DIVIDENDS

Safe and Growing
Dividend

NNN’s dividend remains

comfortably covered

by its funds available

for distribution.

the average annual total return to NNN shareholders
has been 12.5% over the past 15 years.

Our 2009 Performance

Our Long-Term Focus and Strategy

Although many companies were forced to make
meaningful, panic-induced changes in 2008
and 2009, the key elements of our long-term
operating strategy remained unchanged:

• Maintain a diversified and well-occupied

net-leased retail portfolio.

• Acquire carefully underwritten net-leased retail
properties to further diversify our portfolio.

• Sell select locations and reinvest the proceeds into
newer, higher yielding properties to improve the
quality and growth prospects of our core portfolio.

• Maintain a strong balance sheet

with prudent leverage.

• Continue developing our talented

team of associates.

In 2009, the accomplishments by our
excellent team included the following:

• Maintained a fortress-like balance sheet. At the
end of the year we had zero outstanding on our
$400 million line of credit and $15 million in cash
waiting to be deployed on accretive acquisitions.

• Issued $67 million of common equity which
further strengthened our balance sheet.

• Increased our annual dividend to $1.50 per share,
which is the 20th consecutive year of dividend
increases. We are proud to be one of only
156 public companies who have raised their
dividend for 20 or more consecutive years.

• Acquired $20 million of our convertible bonds

that will come due in 2011 and 2013 at discounted
prices, generating $3.4 million of gains.

• Leased 26 properties and maintained

96% occupancy.

TWENTY CONSECUTIVE YEARS OF DREAMS REALIZED | 5

Despite our strong foundation and solid performance,
we are not immune to the realities of a weaker
economy. In the fourth quarter, we recognized
$42.2 million of non-cash impairments. The majority
of these non-cash charges were taken against the
auto service business and its real estate that is
discussed below, plus undeveloped land and vacant
properties. These charges reflect our assessment of
the current market value of these individual assets.

Our Core Portfolio

As of December 31, 2009, we owned 1,015
properties which were 96.4% leased. The average
remaining lease term of our net-lease retail assets

is 12 years. Also, we have modest re-leasing risk
with only 36 leases, representing 2.3% of our base
rent, expiring in 2010. Our properties are located in
44 states and are leased to more than 250 national
and regional tenants operating in 34 different
retail industry classifications. In summary, we
own a well-balanced, diversified portfolio.

A year ago we began to foresee problems with a
tenant that operated an auto service business in
California. Ultimately, we evicted the tenant and
took over the operation of the business. We have
engaged one of the leading auto service operators
to manage this business on our behalf and under

LEASE EXPIRATIONS
((
(as a percentage of base rent – December 31, 2009)

Long-Term Leases

Our typical initial lease terms of 15-20 years allow us

to ride out most economic and real estate cycles.

Our current average remaining lease term is more

than 12 years, giving us a steady, contractually-

obligated rental income stream.

6 | TWENTY CONSECUTIVE YEARS OF INCREASED DIVIDENDS

Diversification
Reduces Risk

As of December 31, 2009,

NNN owned 1,015 properties

in 44 states leased to more

than 250 national and

regional tenants.

this new management, operations have
steadily improved. As the business further stabilizes,
we will explore our options which will hopefully
lead to a sale of the operation while maintaining
ownership of the land and buildings. It is worth
noting that this temporary foray into retail
operations is a small part of our operating income
and is not something that we expect to repeat.

Our Net-Leased Retail Real Estate

We feel that our niche of net-leased retail real
estate remains a compelling long-term investment
opportunity for the following reasons:

• Our niche of smaller, freestanding retail

properties is very large, yet our segment lacks
significant institutional competition which
allows us to earn higher initial risk-adjusted
returns than many other real estate sectors.

• The ratio of land value to the total cost of each
property is high when compared to other real
estate categories, such as offices, apartments
and large regional malls. The land value of our
well-located corners at busy intersections is in
the range of 40-45% of the total value for most
of our properties at the time of purchase. With
economic growth, inflation and the difficulty
of replacing these well-located sites, the land

TWENTY CONSECUTIVE YEARS OF DREAMS REALIZED | 7

value at the end of the lease can reasonably
approximate the price that we paid for both
the land and the building upon acquisition.

• The quality of the rental revenue that we

receive from our triple-net leases is remarkably
high. Our tenants are responsible for property
taxes, insurance and maintenance. As a result,
our operating cash flow is more secure and
consistent than many other types of real estate
because we are not as negatively impacted
as much by increases in these costs.

• Our leases are long-term. In the current cautious
retail environment, it is comforting to us that

our average tenant is contractually obligated
to pay rent for the next 12 years or more.

Our Strong Balance Sheet

We have consistently raised equity in the past
to ensure that we have a strong balance sheet.
In 2009 we issued just over 3.7 million shares at
an average price of $17.88 per share, raising just
over $67 million. As of year end, on a gross-book
basis, our total debt comprised 36.8% of our assets.
Nearly all of our debt (98%) is unsecured which
provides us significant flexibility as we manage our
portfolio. Finally, our fixed-charge coverage ratio

PORTFOLIO OCCUPANCY

Historically High Occupancy

NNN has steadily maintained

a high occupancy rate in large

part because of its well-located

retail sites. The characteristics of

freestanding stores – high visibility

and easy access – have kept that

format popular with both consumers

and retail operators.

8 | TWENTY CONSECUTIVE YEARS OF INCREASED DIVIDENDS

TWENTY CONSECUTIVE YEARS OF DREAMS REALIZED | 9

was 3.0x in 2009, which was measurably better
than the average REIT ratio of approximately 2.0x.

Our Outlook for the Future

Our Safe and Growing Dividend

Historically REIT stocks have been characterized by
their high yield from cash dividends. In 2009, while
many REITs cut or suspended their dividends and
others elected to pay their dividends in stock,
we continued to pay our dividend in cash.
We hope that we are able to continue our multi-
year record of consecutive annual dividend
increases, paid in cash, and are very proud of
our record of 20 consecutive years of increased
annual dividend payments to NNN stockholders.

Consumer spending, which has recently accounted
for about 70% of our nation’s economic activity,
has declined. This is the inevitable result of high
levels of consumer indebtedness, declining personal
wealth (lower house prices and the loss of value
in financial assets) and an unemployment rate in
excess of 10%, which is the highest in 26 years.

An improvement in the general outlook for
commercial landlords has historically followed
job growth. With lackluster corporate revenue
growth and employers continuing to focus
on efficiency and cost-cutting, the impact

BALANCE SHEET

(Percent of total Gross Book Assets – December 31, 2009)

Prudent Leverage

Maintaining a strong balance sheet with prudent

leverage enhances our access to capital.

10 | TWENTY CONSECUTIVE YEARS OF INCREASED DIVIDENDS

of government measures to stimulate job growth
may be less effective than we all hope.

ready to take advantage of the higher quality
transactions when those deals materialize.

In planning for 2010 we are not anticipating much, if
any, improvement in the economy as a whole. If our
concern is proven wrong, we will rapidly adapt and
celebrate the more buoyant economic environment.

In a credit-constrained environment, well-capitalized
companies like NNN should have an opportunity
to outperform for their shareholders. In the last
couple of quarters, we have been selectively
seeking growth opportunities, but quality real
estate acquisition targets have recently been
elusive. With our strong balance sheet, we are

On behalf of the associates and directors of
NNN, we thank you, our loyal shareholders,
for your continued support. We are committed
to working hard to maintain your respect
and confidence in 2010 and beyond.

Sincerely,

Craig Macnab
Chairman &
Chief Executive Officer

TWENTY CONSECUTIVE YEARS OF DREAMS REALIZED | 11

12 | TWENTY CONSECUTIVE YEARS OF INCREASED DIVIDENDS

With a 2009 dividend of

$1.50 per share, and AFFO

per share of $1.65, NNN’s

dividend is well protected.

Dividend Reinvestment & Direct Stock Purchase

We offer a dividend reinvestment and direct stock purchase plan designed
to make purchasing our stock economical and convenient. The plan
is open to current shareholders as well as new investors.

Plan Highlights:

• You can become a shareholder with a minimum initial investment of only $100.

This investment can be made by check or money order.

• Dividends can be reinvested to purchase additional shares on some

or all of your common stock.

• Reinvested dividends are currently offered at a 1% discount (subject to change).

• Shares in the amount of $100 to $10,000 may be purchased on an optional monthly basis

which may be set up as an automatic deduction from your banking account.

• Additionally, shares in the amount of $100 to $10,000 may be purchased on a one-time basis.

• Unlike other direct stock purchase plans, we do not charge an enrollment fee,
fees for investment, or plan maintenance fees, except in the event you decide
to sell your common shares.

• Fees for the sale of shares: $15 transaction fee plus a $0.10 per share

brokerage commission fee.

To learn more about our Dividend Reinvestment and Stock Purchase plan,
please review the prospectus posted on our website at www.nnnreit.com
or request one by filling out and mailing the enclosed comment card.

TWENTY CONSECUTIVE YEARS OF DREAMS REALIZED | 13

HISTORICAL FINANCIAL HIGHLIGHTS (Dollars in thousands, except per share data)

Gross revenues(1)

243,932

247,352

208,629

180,877

151,831

2009

2008

2007

2006

2005

Earnings from continuing operations

Earnings including noncontrolling interests

Net earnings attributable to NNN

Total assets

Total debt

Total stockholders’ equity

Cash dividends declared to:

Common stockholders

Series A preferred stockholders

Series B convertible preferred stockholders

Series C preferred stockholders

Weighted average common shares:

Basic

Diluted

Per share information:

Earnings from continuing operations:

57,690

56,399

54,810

2,590,962

987,346

1,564,240

98,582

119,971

117,153

2,649,471

1,027,391

1,566,860

77,232

155,742

154,599

2,539,673

1,049,154

1,417,647

59,232

184,422

181,800

46,395

95,559

89,400

1,917,516

1,736,588

890,127

1,109,479

861,045

828,087

120,256

110,107

92,989

6,785

76,035

4,376

419

923

69,018

4,008

1,675

79,846,258

74,249,137

66,152,437

57,428,063

52,984,821

79,953,499

74,344,231

66,263,980

57,965,508

54,418,806

Basic

Diluted

Net earnings:

Basic

Diluted

Cash Dividends declared to:

Common stockholders

Series A preferred stockholders

Series B convertible preferred stockholders

0.62

0.61

0.60

1.50

1.23

1.48

1.06

2.23

2.22

1.40

0.89

3.05

3.03

1.32

2.45625

41.875

Series C preferred depositary stockholders

1.84375

0.250955

0.76

0.77

1.57

1.56

1.30

2.25

167.50

Other data:

Cash fl ows provided by (used in):

Operating activities

Investing activities

Financing activities

Funds from operations – diluted(2)

149,502

237,459

130,147

1,676

19,226

(28,063)

(256,304)

(536,717)

(90,099)

(230,783)

(108,840)

90,087

(6,028)

142,355

432,394

121,602

81,864

96,416

217,844

81,803

(1) Gross revenues include revenues from NNN’s continuing and discontinued operations. In accordance with FASB guidance on

Accounting for the Impairment or Disposal of Long-Lived Assets, NNN has classified the revenues related to (i) all Investment Properties
that were sold and leasehold interest which expired, (ii) all Inventory Properties which generated revenues prior to disposition, and
(iii) all Investment and Inventory Properties which generated revenue and were held for sale at December 31, 2009, as discontinued
operations.

(2) The National Association of Real Estate Investment Trusts (“NAREIT”) developed Funds from Operations (“FFO”) as a relative non-GAAP
financial measure of performance of a REIT in order to recognize that income-producing real estate historically has not depreciated on
the basis determined under generally accepted accounting principles (“GAAP”). FFO is defined by NAREIT and is used by NNN as follows:
net earnings (computed in accordance with GAAP) plus depreciation and amortization of assets unique to the real estate industry,
excluding gains (or including losses) on the disposition of Investment Assets and NNN’s share of these items from NNN’s unconsolidated
partnerships and joint ventures.

14 | TWENTY CONSECUTIVE YEARS OF INCREASED DIVIDENDS

TWENTY CONSECUTIVE YEARS OF DREAMS REALIZED | 15

Directors & Ofﬁ cers

DIRECTORS

Craig Macnab
Chairman

Ted B. Lanier†
Lead Director

Don DeFosset

Left to right: (seated) Craig Macnab, Julian E. Whitehurst,
(standing) Paul E. Bayer, Kevin B. Habicht, Christopher P. Tessitore

Retired Chairman, President
& Chief Executive Officer
Walter Industries, Inc.

Dennis E. Gershenson

President, Chief Executive Officer & Chairman
Ramco-Gershenson Properties Trust

Kevin B. Habicht

Executive Vice President & Chief Financial Officer
National Retail Properties, Inc.

Richard B. Jennings†

President
Realty Capital International LLC

Robert C. Legler

Retired Chairman
First Marketing Corporation

Robert Martinez†

Fortieth Governor of Florida
& Senior Policy Advisor
Holland & Knight

EXECUTIVE OFFICERS

Craig Macnab

Chairman & Chief Executive Officer

Julian E. Whitehurst

President & Chief Operating Officer

Kevin B. Habicht

Executive Vice President & Chief Financial Officer

Paul E. Bayer

Executive Vice President of Portfolio Management

Christopher P. Tessitore

Executive Vice President & General Counsel

† Member audit committee (Committees as of February 18, 2010)

16 | TWENTY CONSECUTIVE YEARS OF INCREASED DIVIDENDS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K

(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF

1934.

For the fiscal year ended December 31, 2009
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT

OF 1934.

For the transition period from

Commission file number 001-11290
NATIONAL RETAIL PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

Maryland
(State or other jurisdiction of
incorporation or organization)

56-1431377
(I.R.S. Employer Identification No.)

450 South Orange Avenue, Suite 900
Orlando, Florida 32801
(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (407) 265-7348

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:
Common Stock, $0.01 par value
7.375% Series C Preferred Stock, $0.01 par value

Name of exchange on which registered:
New York Stock Exchange
New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act:
None
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes È No ‘

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes ‘ No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. È

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer È

Accelerated filer ‘

Non-accelerated filer ‘

Smaller reporting company ‘

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È

The aggregate market value of voting common stock held by non-affiliates of the registrant as of June 30, 2009 was $1,371,916,984.

The number of shares of common stock outstanding as of February 16, 2010 was 82,916,942.

DOCUMENTS INCORPORATED BY REFERENCE:

Registrant incorporates by reference into Part III (Items 10, 11, 12, 13 and 14) of this Annual Report on
Form 10-K portions of National Retail Properties, Inc.’s definitive Proxy Statement for the 2010 Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission (the “Commission”)
pursuant to Regulation 14A. The definitive Proxy Statement will be filed with the Commission not later
than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

TABLE OF CONTENTS

PAGE
REFERENCE

Part I

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . .
Item 4.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and

Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results

of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . .
Item 8.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9. Changes in and Disagreements with Accountants on Accounting and

Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management and

Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 13. Certain Relationships and Related Transactions, and Director

Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part IV

Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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9
18
18
18
18

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21

23
44
45

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88

88
88

89
94

PART I

Unless the context otherwise requires, references in this Annual Report on Form 10-K to the terms
“registrant” or “NNN” or the “Company” refer to National Retail Properties, Inc. and all of its
consolidated subsidiaries. NNN has elected to treat certain subsidiaries as taxable real estate investment
trust subsidiaries. These subsidiaries and their majority owned and controlled subsidiaries are collectively
referred to as the “TRS.”

Statements contained in this annual report on Form 10-K, including the documents that are incorporated by
reference, that are not historical facts are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”).
Also, when NNN uses any of the words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,”
or similar expressions, NNN is making forward-looking statements. Although management believes that the
expectations reflected in such forward-looking statements are based upon present expectations and
reasonable assumptions, NNN’s actual results could differ materially from those set forth in the forward-
looking statements. Certain factors that could cause actual results or events to differ materially from those
NNN anticipates or projects are described in Item 1A. “Risk Factors” of this Annual Report on Form 10-K.

Given these uncertainties, readers are cautioned not to place undue reliance on such statements, which
speak only as of the date of this Annual Report on Form 10-K or any document incorporated herein by
reference. NNN undertakes no obligation to publicly release any revisions to these forward-looking
statements that may be made to reflect events or circumstances after the date of this Annual Report on
Form 10-K.

Item 1. Business

The Company

Real Estate Assets

NNN acquires, owns, invests in, manages and develops properties that are leased primarily to retail tenants
under long-term net leases and primarily held for investment (“Investment Properties” or “Investment
Portfolio”). The Inventory Assets typically represent direct and indirect investment interests in real estate
assets acquired or developed primarily for the purpose of selling the real estate (“Inventory Properties” or
“Inventory Portfolio”). Inventory Assets typically consist of two types of properties, property for
development (“Development Properties or Development Portfolio”) and improved properties (“Exchange
Properties” or “Exchange Portfolio”). As of December 31, 2009, NNN owned 1,015 Investment Properties,
with an aggregate leasable area of 11,373,000 square feet, located in 44 states. Approximately 96 percent of
total properties in NNN’s Investment Portfolio were leased or operated at December 31, 2009. As of
December 31, 2009, NNN owned 19 Inventory Properties.

Competition

NNN generally competes with numerous other REITs, commercial developers, real estate limited
partnerships and other investors, including but not limited to, insurance companies, pension funds and
financial institutions, that own, manage, finance or develop retail and net leased properties.

Employees

As of January 31, 2010, NNN employed 57 full-time associates including executive and administrative
personnel.

Other Information

NNN’s executive offices are located at 450 S. Orange Avenue, Suite 900, Orlando, Florida 32801, and its
telephone number is (407) 265-7348. NNN has an Internet website at www.nnnreit.com where NNN’s
filings with the Securities and Exchange Commission (the “Commission”) can be downloaded free of
charge.

The common shares of National Retail Properties, Inc. are traded on the New York Stock Exchange (the
“NYSE”), under the ticker symbol “NNN.” The depositary shares, each representing 1/100th of a share of
7.375% Series C Cumulative Redeemable Preferred Stock, par value $0.01 per share (“Series C Preferred
Stock”), of NNN are traded on the NYSE under the ticker symbol “NNNPRC.”

Business Strategies and Policies

The following is a discussion of NNN’s operating strategy and certain of its investment, financing and other
policies. These strategies and policies have been set by management and/or the Board of Directors and, in
general, may be amended or revised from time to time by management and/or the Board of Directors
without a vote of NNN’s stockholders.

Operating Strategies

NNN’s strategy is to invest primarily in retail real estate that is typically located along high-traffic
commercial corridors near areas of commercial and residential density. Management believes that these
types of properties, generally pursuant to triple-net leases, provide attractive opportunities for a stable
current return and the potential for increased returns and capital appreciation. Triple-net leases typically
require the tenant to pay property operating expenses such as real estate taxes, assessments and other
government charges, insurance, utilities, repairs and maintenance and capital expenditures. Initial lease
terms are generally 15 to 20 years.

In some cases, NNN’s investment in real estate is in the form of mortgages, structured finance investments
or other loans which may be secured by real estate, a borrower’s pledge of ownership interests in the entity
that owns the real estate or other assets. These investments may be subordinated to senior loans
encumbering the underlying real estate or assets. Subordinated positions are generally subject to a higher
risk of nonpayment of principal and interest than the more senior loans.

NNN holds investment real estate assets until it determines that the sale of such a property is advantageous
in view of NNN’s investment objectives. In deciding whether to sell a real estate investment asset, NNN
may consider factors such as potential capital appreciation, net cash flow, tenant credit quality, market lease
rates, potential use of sale proceeds and federal income tax considerations.

NNN acquires and/or develops inventory real estate assets primarily for the purpose of resale.

NNN’s management team considers certain key indicators to evaluate the financial condition and operating
performance of NNN. The key indicators for NNN may include items such as: the composition of NNN’s
Investment Portfolio (including but not limited to tenant, geographic and line of trade diversification), the
occupancy rate of NNN’s Investment Portfolio, certain financial performance ratios, profitability measures,
industry trends and performance of competitors compared to that of NNN.

The operating strategies employed by NNN have allowed it to increase the annual dividend (paid quarterly)
per common share for 20 consecutive years.

Investment in Real Estate or Interests in Real Estate

NNN’s management believes that single tenant, freestanding net lease retail properties will continue to be
attractive investment opportunities and that NNN is well suited to take advantage of these opportunities
because of its experience in accessing capital markets, ability to underwrite and acquire properties, and
because of management’s experience in seeking out, identifying and evaluating potential acquisitions.

In evaluating a particular acquisition, management may consider a variety of factors, including:

•

the location, visibility and accessibility of the property,

the geographic area and demographic characteristics of the community, as well as the local real
estate market, including potential for growth, market rents, and existing or potential competing
properties or retailers,

the size of the property,

the purchase price,

the non-financial terms of the proposed acquisition,

the availability of funds or other consideration for the proposed acquisition and the cost thereof,

the compatibility of the property with NNN’s existing portfolio,

the potential for, and current extent of, any environmental problems,

the quality of construction and design and the current physical condition of the property,

the financial and other characteristics of the existing tenant,

the tenant’s business plan, operating history and management team,

the tenant’s industry,

the terms of any existing leases, and

the rent to be paid by the tenant.

NNN intends to engage in future investment activities in a manner that is consistent with the maintenance
of its status as a REIT for federal income tax purposes and that will not make NNN an investment company
under the Investment Company Act of 1940, as amended. Equity investments in acquired properties may be
subject to existing mortgage financings and other indebtedness or to new indebtedness which may be
incurred in connection with acquiring or refinancing these investments.

Investments in Real Estate Mortgages, Commercial Mortgage Residual Interests, and Securities of or
Interests in Persons Engaged in Real Estate Activities

While NNN’s primary business objectives and Investment Properties emphasize retail properties, NNN may
invest in (i) a wide variety of property types and tenant types, (ii) leases, mortgages, commercial mortgage
residual interests and other types of real estate interests, (iii) loans secured by personal property, (iv) loans
secured by membership interests, or (v) securities of other REITs, other entities engaged in real estate
activities or securities of other issuers, including for the purpose of exercising control over such entities. For
example, NNN from time to time has made investments in mortgage loans or held mortgages on properties
that NNN has sold and has made structured finance investments and other loans related to properties
acquired or sold.

Financing Strategy

NNN’s financing objective is to manage its capital structure effectively in order to provide sufficient capital
to execute its operating strategies while servicing its debt requirements and providing value to its
stockholders. NNN generally utilizes debt and equity security offerings, bank borrowings, the sale of
properties, and to a lesser extent, internally generated funds to meet its capital needs.

NNN typically funds its short-term liquidity requirements including investments in additional retail
properties with cash from its $400,000,000 unsecured revolving credit facility (“Credit Facility”). As of
December 31, 2009, no balance was outstanding and $400,000,000 was available for future borrowings
under the Credit Facility, excluding undrawn letters of credit totaling $653,000.

For the year ended December 31, 2009, NNN’s ratio of total liabilities to total gross assets (before
accumulated depreciation) was approximately 37 percent and the secured indebtedness to total gross assets
was approximately one percent. The total debt to total market capitalization was approximately 36 percent.
Certain financial agreements to which NNN is a party contain covenants that limit NNN’s ability to incur
debt under certain circumstances.

NNN anticipates it will be able to obtain additional financing for short-term and long-term liquidity
requirements as further described in “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Liquidity.” 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.

The organizational documents of NNN do not limit the absolute amount or percentage of indebtedness that
NNN may incur. Additionally, NNN may change its financing strategy at any time. NNN has not engaged
in trading, underwriting or agency distribution or sale of securities of other issuers and does not intend to do
so.

Strategies and Policy Changes

Any of NNN’s strategies or policies described above may be changed at any time by NNN without notice to
or a vote of NNN’s stockholders.

Investment Properties

As of December 31, 2009, NNN owned 1,015 Investment Properties with an aggregate gross leasable area
of 11,373,000 square feet, located in 44 states. Approximately 96 percent of the Investment Properties were
leased at December 31, 2009.

The following table summarizes NNN’s Investment Properties as of December 31, 2009 (in thousands):

Land
Building

High

2,223
135

Size(1)
Low

Average

High

Acquisition Cost(2)
Low

Average

7
1

109
11

$ 8,882
17,049

25
44

1,086
1,520

(1) Approximate square feet.
(2) Costs vary depending upon size and local demographic factors.

In connection with the development of two Investment Properties, NNN has agreed to fund construction
commitments (including construction, land costs and tenant improvements) of $14,651,000. As of
December 31, 2009, NNN had funded $12,261,000 of this commitment, with $2,390,000 remaining to be
funded.

As of December 31, 2009, NNN did not have any tenant that accounted for ten percent or more of its rental
income.

Leases

Although there are variations in the specific terms of the leases, the following is a summary of the general
structure of NNN’s leases. Generally, the leases of the Investment Properties provide for initial terms of 15
to 20 years. As of December 31, 2009, the weighted average remaining lease term was approximately 12
years. The Investment Properties are generally leased under net leases pursuant to which the tenant typically
will bear responsibility for substantially all property costs and expenses associated with ongoing
maintenance and operation, including utilities, property taxes and insurance. In addition, the majority of
NNN’s leases provide that the tenant is responsible for roof and structural repairs. The leases of the
Investment Properties provide for annual base rental payments (payable in monthly installments) ranging
from $8,000 to $1,876,000 (average of $213,000). Tenant leases generally provide for limited increases in
rent as a result of fixed increases, increases in the Consumer Price Index (“CPI”), and/or increases in the
tenant’s sales volume.

Generally, the Investment Property leases provide the tenant with one or more multi-year renewal options
subject to generally the same terms and conditions as the initial lease. Some of the leases also provide that
in the event NNN wishes to sell the Investment Property subject to that lease, NNN first must offer the
lessee the right to purchase the Investment Property on the same terms and conditions as any offer which
NNN intends to accept for the sale of the Investment Property.

Certain Investment Properties have leases that provide the tenant with a purchase option to acquire the
Investment Property from NNN. The purchase price calculations are generally stated in the lease agreement
or are based on the current market value at the time of exercise.

The following table summarizes the lease expirations, assuming none of the tenants exercise renewal
options, of NNN’s Investment Portfolio for each of the next 10 years and then thereafter in the aggregate as
of December 31, 2009:

% of
Annual
Base
Rent(1)

# of
Properties

2.3%
2.1%
3.3%
4.7%
5.0%
3.1%

36
21
34
39
44
22

Gross
Leasable
Area(2)

408,000
389,000
484,000
849,000
622,000
539,000

% of
Annual
Base
Rent(1)

# of
Properties

2016
2017
2018
2019
Thereafter

1.7%
4.3%
2.9%
4.3%
66.3%

13
27
24
42
676

Gross
Leasable
Area(2)

240,000
676,000
345,000
632,000
5,324,000

2010
2011
2012
2013
2014
2015

(1) Based on annualized base rent for all leases in place as of December 31, 2009.
(2) Approximate square feet.

The following table summarizes the diversification of trade of NNN’s Investment Portfolio based on the top
10 lines of trade:

Top 10 Lines of Trade

Convenience Stores
Restaurants – Full Service
Automotive Parts
Theaters
Automotive Service
Books
Drug Stores
Restaurants – Limited Service
Sporting Goods
Grocery
Other

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

% of Annual Base Rent(1)
2008

2009

2007

26.7%
9.2%
6.8%
6.3%
5.7%
4.1%
4.1%
3.5%
3.2%
2.9%
27.5%

25.7%
8.7%
5.1%
6.1%
8.9%
4.0%
4.0%
3.3%
3.3%
2.6%
28.3%

23.9%
10.3%
4.9%
4.2%
5.2%
4.4%
5.0%
3.7%
3.9%
2.9%
31.6%

100.0%

(1)

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

The following table shows the top 10 states in which NNN’s Investment Properties are located as of
December 31, 2009:

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

State

Texas
Florida
Illinois
North Carolina
Georgia
Indiana
Pennsylvania
Ohio
Tennessee
Arizona
Other

# of
Properties

% of
Annual
Base Rent(1)

210
85
39
62
57
37
87
31
30
30
347

20.1%
10.0%
7.0%
6.3%
5.5%
4.4%
4.3%
3.8%
3.1%
2.8%
32.7%

1,015

100.0%

(1) Based on annualized base rent for all leases in place as of

December 31, 2009.

Mortgages and Notes Receivable

Mortgages are secured by real estate, real estate securities or other assets. Structured finance investments
are secured by the borrowers’ pledge of their respective membership interests in the entities which own the
respective real estate.

Mortgages and notes receivable consisted of the following at December 31 (dollars in thousands):

Mortgages and notes receivable
Structured finance investments
Accrued interest receivables
Unamortized premium

Less loan origination fees, net

2009

2008

$ 41,707
-
269
-

41,976
-

$ 55,495
4,514
387
84

60,480
(8)

$ 41,976

$ 60,472

Commercial Mortgage Residual Interests

Orange Avenue Mortgage Investments, Inc. (“OAMI”), a majority owned and consolidated subsidiary of
NNN, holds the residual interests (“Residuals”) from seven commercial real estate loan securitizations.
Each of the Residuals is reported at fair value based upon an independent valuation; unrealized gains or
losses are reported as other comprehensive income in stockholders’ equity, and other than temporary losses
as a result of a change in timing or amount of estimated cash flows are recorded as an other than temporary
valuation impairment. The Residuals had an estimated fair value of $20,153,000 and $22,000,000 at
December 31, 2009 and 2008, respectively.

Inventory Assets

The Inventory Portfolio, which is owned by the TRS, is comprised of two components: the Development
Portfolio and the Exchange Portfolio. NNN’s Inventory Portfolio is held with the intent to sell the properties
to purchasers who are looking for replacement like-kind Exchange Property or to other purchasers with
different investment objectives. As of December 31, 2009, the Inventory Portfolio consisted of 18
Development Properties (12 completed and six land parcels) and one Exchange Property.

The following table summarizes the 12 completed Development Properties and one Exchange Property as
of December 31, 2009 (in thousands):

Land
Building

High

527
224

Size(1)
Low

15
2

Average

High

Acquisition Cost(2)
Low

Average

114
27

$ 8,959
28,717

108
352

$ 1,526
3,668

(1) Approximate square feet.
(2) Costs vary depending upon size and local demographic factors.

Governmental Regulations Affecting Properties

Property Environmental Considerations. Subject to a determination of the level of risk and potential cost
of remediation, NNN may acquire a property where some level of contamination may exist. Investments in
real property create a potential for substantial environmental liability on the part of the owner of such
property from the presence or discharge of hazardous substances on the property or the improper disposal of
hazardous substances emanating from the property, regardless of fault. As a part of its acquisition due
diligence process, NNN generally obtains an environmental site assessment for each property. In such cases
where NNN intends to acquire real estate where some level of contamination may exist, NNN generally
requires the seller or tenant to (i) remediate the problem, (ii) indemnify NNN for environmental liabilities,
and/or (iii) agree to other arrangements deemed appropriate by NNN, including, under certain
circumstances, the purchase of environmental insurance to address environmental conditions at the
property.

Americans with Disabilities Act of 1990. The Investment and Inventory Properties, as commercial
facilities, are required to comply with Title III of the Americans with Disabilities Act of 1990 (the “ADA”).
Investigation of a property may reveal non-compliance with the ADA. The tenants will typically have
primary responsibility for complying with the ADA, but NNN may incur costs if the tenant does not
comply. As of February 19, 2010, NNN has not been notified by any governmental authority of, nor is
NNN’s management aware of, any non-compliance with the ADA that NNN’s management believes would
have a material adverse effect on its business, financial position or results of operations.

Other Regulations. State and local fire, life-safety and similar requirements regulate the use of NNN’s
Investment and Inventory Properties. The leases generally require that each tenant will have primary
responsibility for complying with regulations, but failure to comply could result in fines by governmental
authorities, awards of damages to private litigants, or restrictions on the ability to conduct business on such
properties.

Item 1A. Risk Factors

Carefully consider the following risks and all of the other information set forth in this Annual Report on
Form 10-K, including the consolidated financial statements and the notes thereto. If any of the events or
developments described below were actually to occur, NNN’s business, financial condition or results of
operations could be adversely affected.

Current financial and economic conditions may have an adverse impact on NNN, its tenants, and
commercial real estate in general.

Current financial and economic conditions continue to be challenging and the continuation or worsening of
such conditions, including any disruption in the capital markets, could adversely affect NNN’s business and
results of operations and the financial condition of NNN’s tenants, developers, borrowers, lenders or the
institutions that hold NNN’s cash balances and short-term investments, which may expose NNN to
increased risks of default by these parties.

There can be no assurance that actions of the United States Government, Federal Reserve or other
government and regulatory bodies intended to stabilize the economy or financial markets will achieve their
intended effect. Additionally, some of these actions may adversely affect financial institutions, capital
providers, retailers, consumers or NNN’s financial condition, results of operations or the trading price of
NNN’s shares.

Potential consequences of the current financial and economic conditions include:

•

the financial condition of NNN’s tenants, which operate in the retail industry may be adversely
affected, which may result in tenant defaults under the leases due to bankruptcy, lack of liquidity,
operational failures or for other reasons;

the ability to borrow on terms and conditions that NNN finds acceptable, or at all, may be limited,
which could reduce NNN’s ability to pursue acquisition and development opportunities and
refinance existing debt, reduce NNN’s returns from acquisition and development activities and
increase NNN’s future interest expense;

reduced values of NNN’s properties may limit NNN’s ability to dispose of assets at attractive
prices and may reduce the availability of buyer financing;

the value and liquidity of NNN’s short-term investments and cash deposits could be reduced as a
result of a deterioration of the financial condition of the institutions that hold NNN’s cash
deposits or the institutions or assets in which NNN has made short-term investments, the
dislocation of the markets for NNN’s short-term investments, increased volatility in market rates
for such investments or other factors; and

one or more lenders under the Credit Facility could fail and NNN may not be able to replace the
financing commitment of any such lenders on favorable terms, or at all.

NNN may be unable to obtain debt or equity capital on favorable terms, if at all.

NNN may be unable to obtain capital on favorable terms, if at all, to further its business objectives or meet
its existing obligations. Debt and equity capital availability in the real estate market is severely strained.
Nearly all of NNN’s debt, including the Credit Facility, is subject to balloon principal payments due at
maturity. These maturities range between 2010 and 2017. The ability of NNN to make these scheduled

principal payments may be adversely impacted by NNN’s inability to extend or refinance the Credit
Facility, the inability to dispose of assets at an attractive price or the inability to obtain additional debt or
equity capital. Capital that may be available may be materially more expensive or available under terms that
are materially more restrictive than NNN’s existing capital which would have an adverse impact on NNN’s
business, financial condition or results of operations.

Loss of revenues from tenants would reduce NNN’s cash flow.

NNN’s five largest tenants accounted for an aggregate of approximately 32 percent of NNN’s annual base
rent as of December 31, 2009. The default, financial distress, bankruptcy or liquidation of one or more of
NNN’s tenants could cause substantial vacancies among NNN’s Investment Portfolio. Vacancies reduce
NNN’s revenues, increase property expenses and could decrease the ultimate sale value of each such vacant
property. Upon the expiration of the leases that are currently in place, the tenant may choose not to renew
the lease or, NNN may not be able to re-lease the vacant property at a comparable lease rate or without
incurring additional expenditures in connection with such renewal or re-leasing.

A significant portion of the source of NNN’s Investment Portfolio annual base rent is heavily concentrated
in specific industry classifications, tenants and in specific geographic locations.

As of December 31, 2009, approximately,

•

55 percent of NNN’s Investment Portfolio annual base rent is generated from five retail lines of
trade, including convenience stores (27 percent) and full-service restaurants (9 percent),

32 percent of NNN’s Investment Portfolio annual base rent is generated from five tenants,
including Pantry (9 percent) and Susser (9 percent),

49 percent of NNN’s Investment Portfolio annual base rent is generated from five states,
including Texas (20 percent) and Florida (10 percent).

Any financial hardship and/or changes in these lines of trade, tenants or states could have an adverse effect
on NNN’s results of operations.

Owning real estate and indirect interests in real estate carries inherent risks.

NNN’s economic performance and the value of its real estate assets are subject to the risk that if NNN’s
properties do not generate revenues sufficient to meet its operating expenses, including debt service,
NNN’s cash flow and ability to pay distributions to its shareholders will be adversely affected. As a real
estate company, NNN is susceptible to the following real estate industry risks, which are beyond its control:

•

changes in national, regional and local economic conditions and outlook,

decreases in consumer spending and retail sales,

economic downturns in the areas where NNN’s properties are located,

adverse changes in local real estate market conditions, such as an oversupply, reduction in
demand or intense competition for tenants,

changes in tenant preferences that reduce the attractiveness of NNN’s properties to tenants,

zoning, regulatory restrictions, or change in taxes, and

changes in interest rates or availability of financing.

All of these factors could result in decreases in market rental rates and increases in vacancy rates, which
could adversely affect NNN’s results of operations.

NNN’s real estate investments are illiquid.

Because real estate investments are relatively illiquid, NNN’s ability to adjust the portfolio promptly in
response to economic or other conditions is limited. Certain significant expenditures generally do not
change in response to economic or other conditions, including: (i) debt service (if any), (ii) real estate taxes,
and (iii) operating and maintenance costs. This combination of variable revenue and relatively fixed
expenditures may result, under certain market conditions, in reduced earnings and could have an adverse
effect on NNN’s financial condition.

NNN may be subject to known or unknown environmental liabilities.

Subject to a determination of the level of risk and potential cost of remediation, NNN may acquire a
property where some level of contamination may exist. Investments in real property create a potential for
substantial environmental liability on the part of the owner of such property from the presence or discharge
of hazardous substances on the property or the improper disposal of hazardous substances emanating from
the property, regardless of fault. As a part of its acquisition due diligence process, NNN generally obtains
an environmental site assessment for each property. In such cases where NNN intends to acquire real estate
where some level of contamination may exist, NNN generally requires the seller or tenant to (i) remediate
the problem, (ii) indemnify NNN for environmental liabilities, and/or (iii) agree to other arrangements
deemed appropriate by NNN, including, under certain circumstances, the purchase of environmental
insurance to address environmental conditions at the property.

As of February 19, 2010, NNN has 68 Investment Properties currently under some level of environmental
remediation. In general, the seller, the tenant or an adjacent land owner is responsible for the cost of the
environmental remediation for each of these Investment Properties. In the event of a bankruptcy or other
inability on the part of these parties to cover these costs, NNN may have to cover the costs of remediation,
fines or other environmental liabilities at these and other properties and may have liability to third parties.
NNN may also own properties where required remediation has not begun or adverse environmental
conditions have not yet been detected. This may require remediation or otherwise subject NNN to liability
including liability to third parties. NNN cannot assure that (i) it will not be required to undertake or pay for
removal or remediation of any contamination of the properties currently or previously owned by NNN,
(ii) NNN will not be subject to fines by governmental authorities or litigation, (iii) NNN will not be subject
to litigation by and liability to third parties, or (iv) the costs of such removal, remediation fines, third party
liability, or litigation would not be material.

NNN may not be able to successfully execute its acquisition or development strategies.

NNN cannot assure that it will be able to implement its investment strategies successfully. Additionally,
NNN cannot assure that its property portfolio will expand at all, or if it will expand at any specified rate or
to any specified size. In addition, investment in additional real estate assets is subject to a number of risks.
Because NNN expects to invest in markets other than the ones in which its current properties are located or
properties which may be leased to tenants other than those to which NNN has historically leased properties,
NNN will also be subject to the risks associated with investment in new markets or with new tenants that
may be relatively unfamiliar to NNN’s management team.

NNN’s development activities are subject to, without limitation, risks relating to the availability and timely
receipt of zoning and other regulatory approvals, the cost and timely completion of construction (including
risks from factors beyond NNN’s control, such as weather or labor conditions or material shortages), the
risk of finding tenants for the properties and the ability to obtain both construction and permanent financing
on favorable terms. These risks could result in substantial unanticipated delays or expenses and, under
certain circumstances, could prevent completion of development activities once undertaken or provide a
tenant the opportunity to terminate a lease. Any of these situations may delay or eliminate proceeds or cash
flows NNN expects from these projects, which could have an adverse effect on NNN’s financial condition.

NNN may not be able to dispose of properties consistent with its operating strategy.

NNN may be unable to sell properties targeted for disposition (including its Inventory Properties) due to
adverse market conditions. This may adversely affect, among other things, NNN’s ability to sell under
favorable terms, execute its operating strategy, achieve target earnings or returns, retire or repay debt or pay
dividends.

A change in the assumptions used to determine the value of commercial mortgage residual interests could
adversely affect NNN’s financial position.

As of December 31, 2009, the Residuals had a carrying value of $20,153,000. The value of these Residuals
is based on assumptions made by NNN to determine their value. These assumptions include discount rate,
loan loss, prepayment speed and interest rate assumptions made by NNN to determine their value. If actual
experience differs materially from these assumptions, the actual future cash flow could be less than
expected and the value of the Residuals, as well as NNN’s earnings, could decline.

NNN may suffer a loss in the event of a default or bankruptcy of a borrower.

If a borrower defaults on a mortgage, structured finance loan or other loan made by NNN, and does not
have sufficient assets to satisfy the loan, NNN may suffer a loss of principal and interest. In the event of the
bankruptcy of a borrower, NNN may not be able to recover against all or any of the assets of the borrower,
or the assets of the borrower may not be sufficient to satisfy the balance due on the loan. In addition, certain
of NNN’s loans may be subordinate to other debt of a borrower. These investments are typically loans
secured by a borrower’s pledge of its ownership interests in the entity that owns the real estate or other
assets. These agreements are typically subordinated to senior loans secured by other loans encumbering the
underlying real estate or assets. Subordinated positions are generally subject to a higher risk of nonpayment
of principal and interest than the more senior loans. As of December 31, 2009, mortgages and notes
receivables had an outstanding principal balance of $41,707,000. If a borrower defaults on the debt senior
to NNN’s loan, or in the event of the bankruptcy of a borrower, NNN’s loan will be satisfied only after the
borrower’s senior creditors’ claims are satisfied. Where debt senior to NNN’s loans exists, the presence of
intercreditor arrangements may limit NNN’s ability to amend loan documents, assign the loans, accept
prepayments, exercise remedies and control decisions made in bankruptcy proceedings relating to
borrowers. Bankruptcy proceedings and litigation can significantly increase the time needed for NNN to
acquire underlying collateral, if any, in the event of a default, during which time the collateral may decline
in value. In addition, there are significant costs and delays associated with the foreclosure process.

Certain provisions of NNN’s leases or loan agreements may be unenforceable.

NNN’s rights and obligations with respect to its leases, structured finance loans, mortgage loans or other
loans are governed by written agreements. A court could determine that one or more provisions of such an
agreement are unenforceable, such as a particular remedy, a loan prepayment provision or a provision
governing NNN’s security interest in the underlying collateral of a borrower or lessee. NNN could be
adversely impacted if this were to happen with respect to an asset or group of assets.

Property ownership through joint ventures and partnerships could limit NNN’s control of those
investments.

Joint ventures or partnerships involve risks not otherwise present for direct investments by NNN. It is
possible that NNN’s co-venturers or partners may have different interests or goals than NNN at any time
and they may take actions contrary to NNN’s requests, policies or objectives, including NNN’s policy with
respect to maintaining its qualification as a REIT. Other risks of joint venture or partnership investments
include impasses on decisions because in some instances no single co-venturer or partner has full control
over the joint venture or partnership, respectively, or the co-venturer or partner may become

insolvent, bankrupt or otherwise unable to contribute to the joint venture or partnership, respectively.
Further, disputes may develop with a co-venturer or partner over decisions affecting the property, joint
venture or partnership that may result in litigation, arbitration or some other form of dispute resolution.

Competition with numerous other REITs, commercial developers, real estate limited partnerships and other
investors may impede NNN’s ability to grow.

NNN may not be in a position or have the opportunity in the future to complete suitable property
acquisitions or developments on advantageous terms due to competition for such properties with others
engaged in real estate investment activities. NNN’s inability to successfully acquire or develop new
properties may affect NNN’s ability to achieve anticipated return on investment or realize its investment
strategy, which could have an adverse effect on its results of operations.

Operating losses from retail operations on 12 Investment Properties may adversely impact NNN’s results of
operations.

In June 2009, NNN acquired the operations of the auto service business which was operated on 12
Investment Properties. A third party manages and staffs these operations on behalf of NNN. The results of
business operations from these properties are subject to the typical execution risks inherent with many retail
operations including: merchandising, pricing, customer service, competition, consumer preferences and
behavior, safety, compliance with various federal, state and local laws, ordinances and regulations,
environmental contamination, unfavorable weather conditions, or other trends in the markets they serve.
These factors could negatively impact NNN’s results of operations from these 12 Investment Properties.

Uninsured losses may adversely affect NNN’s ability to pay outstanding indebtedness.

NNN’s properties are generally covered by comprehensive liability, fire, flood, and extended insurance
coverage. NNN believes that the insurance carried on its properties is adequate in accordance with industry
standards. There are, however, types of losses (such as from hurricanes, wars or earthquakes) which may be
uninsurable, or the cost of insuring against these losses may not be economically justifiable. If an uninsured
loss occurs or a loss exceeds policy limits, NNN could lose both its invested capital and anticipated
revenues from the property, thereby reducing NNN’s cash flow.

Acts of violence, terrorist attacks or war may affect the markets in which NNN operates and NNN’s results
of operations.

Terrorist attacks or other acts of violence may negatively affect NNN’s operations. There can be no
assurance that there will not be terrorist attacks against businesses within the United States. These attacks
may directly impact NNN’s physical facilities or the businesses or the financial condition of its tenants,
developers, borrowers, lenders or financial institutions with which NNN has a relationship. The United
States is engaged in armed conflict, which could have an impact on these parties. The consequences of
armed conflict are unpredictable, and NNN may not be able to foresee events that could have an adverse
effect on its business.

More generally, any of these events or threats of these events could cause consumer confidence and
spending to decrease or result in increased volatility in the United States and worldwide financial markets
and economies. They also could result in, or cause a deepening of, economic recession in the United States
or abroad. Any of these occurrences could have an adverse impact on NNN’s financial condition or results
of operations.

Vacant properties or bankrupt tenants could adversely affect NNN’s business or financial condition.

As of December 31, 2009, NNN owned 37 vacant, un-leased Investment Properties, including two vacant
land parcels, which accounted for approximately four percent of total Investment Properties. NNN is
actively marketing these properties for sale or lease but may not be able to sell or lease these properties on

favorable terms or at all. The lost revenues and increased property expenses resulting from the rejection by
any bankrupt tenant of any of their respective leases with NNN could have a material adverse effect on the
liquidity and results of operations of NNN if NNN is unable to re-lease the Investment Properties at
comparable rental rates and in a timely manner. As of December 31, 2009, approximately one percent of the
total gross leasable area of NNN’s Investment Portfolio was leased to two tenants that have filed a
voluntary petition for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code and have the right to reject
or affirm their lease with NNN. NNN anticipates the number of vacancies and bankrupt tenants will
increase.

The amount of debt NNN has and the restrictions imposed by that debt could adversely affect NNN’s
business and financial condition.

As of December 31, 2009, NNN had total mortgage debt outstanding of approximately $25,290,000, total
unsecured notes payable of $962,056,000 and no balance outstanding on the Credit Facility. NNN’s
organizational documents do not limit the level or amount of debt that it may incur. If NNN incurs
additional indebtedness and permits a higher degree of leverage, debt service requirements would increase
and could adversely affect NNN’s financial condition and results of operations, as well as NNN’s ability to
pay principal and interest on the outstanding indebtedness or cash dividends to its stockholders. In addition,
increased leverage could increase the risk that NNN may default on its debt obligations. The Credit Facility
contains financial covenants that could limit the amount of distributions to NNN’s common and preferred
stockholders.

The amount of debt outstanding at any time could have important consequences to NNN’s stockholders. For
example, it could:

•

require NNN to dedicate a substantial portion of its cash flow from operations to payments on
its debt, thereby reducing funds available for operations, real estate investments and other
appropriate business opportunities that may arise in the future,

increase NNN’s vulnerability to general adverse economic and industry conditions,

limit NNN’s ability to obtain any additional financing it may need in the future for working
capital, debt refinancing, capital expenditures, real estate investments, development or other
general corporate purposes,

• make it difficult to satisfy NNN’s debt service requirements,

•

limit NNN’s ability to pay dividends in cash on its outstanding common and preferred stock,

limit NNN’s flexibility in planning for, or reacting to, changes in its business and the factors
that affect the profitability of its business, and

limit NNN’s flexibility in conducting its business, which may place NNN at a disadvantage
compared to competitors with less debt or debt with less restrictive terms.

NNN’s ability to make scheduled payments of principal or interest on its debt, or to retire or refinance such
debt will depend primarily on its future performance, which to a certain extent is subject to the
creditworthiness of its tenants, competition, and economic, financial, and other factors beyond its control.
There can be no assurance that NNN’s business will continue to generate sufficient cash flow from
operations in the future to service its debt or meet its other cash needs. If NNN is unable to generate
sufficient cash flow from its business, it may be required to refinance all or a portion of its existing debt,
sell assets or obtain additional financing to meet its debt obligations and other cash needs.

NNN cannot assure stockholders that any such refinancing, sale of assets or additional financing would be
possible or, if possible, on terms and conditions, including but not limited to the interest rate, which NNN
would find acceptable or would not result in a material decline in earnings.

NNN is obligated to comply with financial and other covenants in its debt that could restrict its operating
activities, and the failure to comply with such covenants could result in defaults that accelerate the payment
under such debt.

NNN’s unsecured debt contains various restrictive covenants which include, among others, provisions
restricting NNN’s ability to:

•

incur or guarantee additional debt,

• make certain distributions, investments and other restricted payments, including dividend

payments on its outstanding common and preferred stock,

•

limit the ability of restricted subsidiaries to make payments to NNN,

enter into transactions with certain affiliates,

create certain liens,

consolidate, merge or sell NNN’s assets, and

pre-pay debt.

NNN’s secured debt generally contains customary covenants, including, among others, provisions:

•

relating to the maintenance of the property securing the debt,

restricting its ability to sell, assign or further encumber the properties securing the debt,

restricting its ability to incur additional debt,

restricting its ability to amend or modify existing leases, and

relating to certain prepayment restrictions.

NNN’s ability to meet some of its debt covenants, including covenants related to the condition of the
property or payment of real estate taxes, may be dependent on the performance by NNN’s tenants under
their leases.

In addition, certain covenants in NNN’s debt, including its Credit Facility, require NNN, among other
things, to:

•

limit certain leverage ratios,

• maintain certain minimum interest and debt service coverage ratios,

•

limit dividends declared and paid to NNN’s common and preferred stockholders, and

limit investments in certain types of assets.

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.

Costs of complying with changes in governmental laws and regulations may adversely affect NNN’s results
of operations.

NNN cannot predict what other environmental laws or regulations will be enacted in the future, how future
laws or regulations will be administered or interpreted, or how future laws or regulations will affect NNN’s
properties. Compliance with new laws or regulations, or stricter interpretation of existing laws,

may require NNN, its retail tenants, or consumers to incur significant expenditures or impose significant
environmental liability and could cause a material adverse effect on NNN’s results of operation.

The market value of NNN’s equity and debt securities is subject to various factors that may cause
significant fluctuations or volatility.

As with other publicly traded securities, the market price of NNN’s equity and debt securities depends on
various factors, which may change from time-to-time and/or may be unrelated to NNN’s financial
condition, operating performance or prospects that may cause significant fluctuations or volatility in such
prices. These factors, among others, include:

•

general economic and financial market conditions including the current global economic
downturn,

level and trend of interest rates,

• NNN’s ability to access the capital markets to raise additional capital,

•

the issuance of additional equity or debt securities,

changes in NNN’s funds from operations or earnings estimates,

changes in NNN’s debt ratings or analyst ratings,

• NNN’s financial condition and performance,

• market perception of NNN compared to other REITs, and

• market perception of REITs compared to other investment sectors.

NNN’s failure to qualify as a real estate investment trust for federal income tax purposes could result in
significant tax liability.

NNN intends to operate in a manner that will allow NNN to continue to qualify as a REIT. NNN believes it
has been organized as, and its past and present operations qualify NNN as a REIT. However, the Internal
Revenue Service (“IRS”) could successfully assert that NNN is not qualified as such. In addition, NNN may
not remain qualified as a REIT in the future. Qualification as a REIT involves the application of highly
technical and complex provisions of the Internal Revenue Code of 1986, as amended (the “Code”) for
which there are only limited judicial or administrative interpretations and involves the determination of
various factual matters and circumstances not entirely within NNN’s control. Furthermore, new tax
legislation, administrative guidance or court decisions, in each instance potentially with retroactive effect,
could make it more difficult or impossible for NNN to qualify as a REIT or avoid significant tax liability.

If NNN fails to qualify as a REIT, it would not be allowed a deduction for dividends paid to stockholders in
computing taxable income and would become subject to federal income tax at regular corporate rates. In
this event, NNN could be subject to potentially significant tax liabilities and penalties. Unless entitled to
relief under certain statutory provisions, NNN would also be disqualified from treatment as a REIT for the
four taxable years following the year during which the qualification was lost.

Even if NNN remains qualified as a REIT, NNN may face other tax liabilities that reduce operating results
and cash flow.

Even if NNN remains qualified for taxation as a REIT, NNN may be subject to certain federal, state and
local taxes on its income and assets, including taxes on any undistributed income, tax on income from some
activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes, such
as mortgage recording taxes. Any of these taxes would decrease earnings and cash available

for distribution to stockholders. In addition, in order to meet the REIT qualification requirements, NNN
holds some of its assets through the TRS.

Adverse legislative or regulatory tax changes could reduce NNN’s earnings, cash flow and market price of
NNN’s common stock.

At any time, the federal and state income tax laws governing REITs or the administrative interpretations of
those laws may change. Any such changes may have retroactive effect, and could adversely affect NNN or
its stockholders. For example, legislation enacted in 2003 and extended in 2006 generally reduced the
federal income tax rate on most dividends paid by corporations to individual investors to a maximum of 15
percent (through 2010). REIT dividends, with limited exceptions, will not benefit from the rate reduction,
because a REIT’s income generally is not subject to corporate level tax. As such, this legislation could
cause shares in non-REIT corporations to be a more attractive investment to individual investors than shares
in REITs, and could have an adverse effect on the value of NNN’s common stock.

Compliance with REIT requirements, including distribution requirements, may limit NNN’s flexibility and
negatively affect NNN’s operating decisions.

To maintain its status as a REIT for U.S. federal income tax purposes, NNN must meet certain requirements
on an on-going basis, including requirements regarding its sources of income, the nature and diversification
of its assets, the amounts NNN distributes to its stockholders and the ownership of its shares. NNN may
also be required to make distributions to its stockholders when it does not have funds readily available for
distribution or at times when NNN’s funds are otherwise needed to fund capital expenditures or to fund
debt service requirements. NNN generally will not be subject to federal income taxes on amounts
distributed to stockholders, providing it distributes 100 percent of its REIT taxable income and meets
certain other requirements for qualifying as a REIT. For each of the years in the three-year period ended
December 31, 2009, NNN believes it has qualified as a REIT. Notwithstanding NNN’s qualification for
taxation as a REIT, NNN is subject to certain state taxes on its income and real estate.

Changes in accounting pronouncements could adversely impact NNN’s reported financial performance.

Accounting policies and methods are fundamental to how NNN records and reports its financial condition
and results of operations. From time to time the Financial Accounting Standards Board (“FASB”) and the
Commission, who create and interpret appropriate accounting standards, may change the financial
accounting and reporting standards or their interpretation and application of these standards that govern the
preparation of NNN’s financial statements. These changes could have a material impact on NNN’s reported
financial condition and results of operations. In some cases, NNN could be required to apply a new or
revised standard retroactively, resulting in restating prior period financial statements.

NNN’s failure to maintain effective internal control over financial reporting could have a material adverse
effect on its business, operating results and share price.

Section 404 of the Sarbanes-Oxley Act of 2002 requires annual management assessments of the
effectiveness of the Company’s internal control over financial reporting. If NNN fails to maintain the
adequacy of its internal control over financial reporting, as such standards may be modified, supplemented
or amended from time to time, NNN may not be able to ensure that it can conclude on an ongoing basis that
it has effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-
Oxley Act of 2002. Moreover, effective internal control over financial reporting, particularly those related
to revenue recognition, are necessary for NNN to produce reliable financial reports and to maintain its
qualification as a REIT and are important in helping to prevent financial fraud. If NNN cannot provide
reliable financial reports or prevent fraud, its business and operating results could be harmed, REIT
qualification could be jeopardized, investors could lose confidence in the Company’s reported financial
information, and the trading price of NNN’s shares could drop significantly.

NNN’s ability to pay dividends in the future is subject to many factors.

NNN’s ability to pay dividends may be impaired if any of the risks described in this section were to occur.
In addition, payment of NNN’s dividends depends upon NNN’s earnings, financial condition, maintenance
of NNN’s REIT status and other factors as NNN’s Board of Directors may deem relevant from time to time.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Please refer to Item 1. “Business.”

Item 3. Legal Proceedings

In the ordinary course of its business, NNN is a party to various legal actions that management believes is
routine in nature and incidental to the operation of the business of NNN. Management believes that the
outcome of these proceedings will not have a material adverse effect upon its operations, financial condition
or liquidity.

Item 4. Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities

The common stock of NNN currently is traded on the NYSE under the symbol “NNN.” Set forth below is a
line graph comparing the cumulative total stockholder return on NNN’s common stock, based on the market
price of the common stock and assuming reinvestment of dividends, with the FTSE National Association of
Real Estate Investment Trusts Equity Index (“NAREIT”) and the S&P 500 Index (“S&P 500”) for the five
year period commencing December 31, 2004 and ending December 31, 2009. The graph assumes an
investment of $100 on December 31, 2004.

Indexed Total Annual Return
(As of December 31, 2009)

e
u
l
a
V
x
e
d
n
I

175

150

125

100

Dec-04

Dec-05

Dec-06

Dec-07

Dec-08

Dec-09

NNN

NAREIT

S&P 500

For each calendar quarter indicated, the following table reflects respective high, low and closing sales
prices for the common stock as quoted by the NYSE and the dividends paid per share in each such period.

2009

High
Low
Close

Dividends paid per share

2008

High
Low
Close

Dividends paid per share

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Year

17.52
12.26
15.84

0.375

23.66
19.63
22.05

0.355

19.48
14.95
17.35

0.375

24.00
20.75
20.90

0.375

22.80
15.85
21.47

0.375

24.57
19.60
23.95

0.375

21.59
18.87
21.22

0.375

23.66
10.53
17.19

0.375

22.80
12.26
21.22

1.500

24.57
10.53
17.19

1.480

The following presents the characterizations for tax purposes of such common stock dividends for the years
ended December 31:

Ordinary dividends
Capital gain
Unrecaptured Section 1250 Gain

2009

2008

1.495182
0.003051
0.001767

99.6788% $
0.2034%
0.1178%

1.480000
-
-

100.0000%

-
-

1.500000

100.000% $

1.480000

100.0000%

NNN intends to pay regular quarterly dividends to its stockholders, although all future distributions will be
declared and paid at the discretion of the Board of Directors and will depend upon cash generated by
operating activities, NNN’s financial condition, capital requirements, annual distribution requirements
under the REIT provisions of the Internal Revenue Code of 1986, as amended, and such other factors as the
Board of Directors deems relevant.

In February 2010, NNN paid dividends to its stockholders of $31,026,000 or $0.375 per share of common
stock.

On January 29, 2010, there were 1,857 stockholders of record of common stock.

Item 6. Selected Financial Data

Historical Financial Highlights
(dollars in thousands, except per share data)

Gross revenues(1)
Earnings from continuing operations
Earnings including noncontrolling interests
Net earnings attributable to NNN
Total assets
Total debt
Total stockholders’ equity
Cash dividends declared to:
Common stockholders
Series A preferred stockholders
Series B convertible preferred stockholders
Series C preferred stockholders
Weighted average common shares:

Basic
Diluted

Per share information:

Earnings from continuing operations:

Basic
Diluted
Net earnings:

Basic
Diluted

Cash dividends declared to:
Common stockholders
Series A preferred stockholders
Series B convertible preferred stockholders
Series C preferred depositary stockholders

Other data:

Cash flows provided by (used in):

Operating activities
Investing activities
Financing activities

Funds from operations – diluted(2)

2009

2008

2007

2006

2005

243,932 $
57,690
56,399
54,810
2,590,962
987,346
1,564,240

247,352 $
98,582
119,971
117,153
2,649,471
1,027,391
1,566,860

208,629 $
77,232
155,742
154,599
2,539,673
1,049,154
1,417,647

180,877 $
59,232
184,422
181,800
1,917,516
890,127
1,109,479

151,831
46,395
95,559
89,400
1,736,588
861,045
828,087

120,256
-
-
6,785

110,107
-
-
6,785

92,989
-
-
6,785

76,035
4,376
419
923

69,018
4,008
1,675
-

79,846,258
79,953,499

74,249,137
74,344,231

66,152,437
66,263,980

57,428,063
57,965,508

52,984,821
54,418,806

0.62 $
0.61

1.23 $
1.23

1.06 $
1.06

0.89 $
0.89

0.60
0.60

1.50
-
-
1.84375

1.48
1.48

1.48
-
-
1.84375

2.23
2.22

1.40
-
-
1.84375

3.05
3.03

1.32
2.45625
41.875
0.250955

0.76
0.77

1.57
1.56

1.30
2.25
167.50
-

149,502 $
(28,063)
(108,840)
90,087

237,459 $
(256,304)
(6,028)
142,355

130,147 $
(536,717)
432,394
121,602

1,676 $

(90,099)
81,864
96,416

19,226
(230,783)
217,844
81,803

(1) Gross revenues include revenues from NNN’s continuing and discontinued operations. In accordance with FASB

guidance on Accounting for the Impairment or Disposal of Long-Lived Assets, NNN has classified the revenues related to
(i) all Investment Properties that were sold and leasehold interest which expired, (ii) all Inventory Properties which
generated revenues prior to disposition, and (iii) all Investment and Inventory Properties which generated revenue and
were held for sale at December 31, 2009, as discontinued operations.

(2) The National Association of Real Estate Investment Trusts (“NAREIT”) developed Funds from Operations (“FFO”) as a
relative non-GAAP financial measure of performance of a REIT in order to recognize that income-producing real estate
historically has not depreciated on the basis determined under generally accepted accounting principles (“GAAP”). FFO
is defined by NAREIT and is used by NNN as follows: net earnings (computed in accordance with GAAP) plus
depreciation and amortization of assets unique to the real estate industry, excluding gains (or including losses) on the
disposition of Investment Assets and NNN’s share of these items from NNN’s unconsolidated partnerships and joint
ventures.

FFO is generally considered by industry analysts to be the most appropriate measure of operating
performance of real estate companies. FFO does not necessarily represent cash provided by operating
activities in accordance with generally accepted accounting principles GAAP and should not be considered
an alternative to net income as an indication of NNN’s operating performance or to cash flow as a measure
of liquidity or ability to make distributions. Management considers FFO an appropriate measure of
operating performance of an equity REIT because it primarily excludes the assumption that the value of the

real estate assets diminishes predictably over time, and because industry analysts have accepted it as an
operating performance measure. NNN’s computation of FFO may differ from the methodology for
calculating FFO used by other equity REITs, and therefore, may not be comparable to such other REITs.

NNN has earnings from discontinued operations in each of its segments, investment assets and inventory
assets. All property dispositions from NNN’s investment segment are classified as discontinued operations.
In addition, certain properties in NNN’s inventory segment that have generated revenues before disposition
are classified as discontinued operations. These inventory properties have not historically been classified as
discontinued operations, therefore, prior period comparable consolidated financial statements have been
restated to include these properties in its earnings from discontinued operations. These adjustments resulted
in an increase in NNN’s reported total revenues and total and per share earnings from continuing operations
and a decrease in NNN’s earnings from discontinued operations. However, NNN’s total and per share net
earnings available to common stockholders is not affected.

The following table reconciles FFO to their most directly comparable GAAP measure, net earnings for the
years ended December 31:

Reconciliation of funds from operations:

Net earnings attributable to NNN’s stockholders
Real estate depreciation and amortization:

Continuing operations
Discontinued operations

Partnership/joint venture real estate depreciation
Partnership gain on sale of asset
Gain on disposition of equity investment
Gain on disposition of investment assets
Extraordinary gain

FFO
Series A preferred stock dividends(1)
Series B convertible preferred stock dividends(1)
Series C preferred stock dividends

FFO available to common stockholders – basic
Series B convertible preferred stock dividends, if dilutive

2009

2008

2007

2006

2005

$ 54,810 $117,153 $154,599 $181,800 $ 89,400

43,067
1,209
178
-
-
(2,392)
-

96,872
-
-
(6,785)

90,087
-

40,850
940
177
-
-
(9,980)
-

149,140
-
-
(6,785)

28,864
1,518
31
-
-
(56,625)
-

128,387
-
-
(6,785)

19,171
3,248
463
(262)
(11,373)
(91,332)
-

101,715
(4,376)
(419)
(923)

142,355
-

121,602
-

95,997
419

13,355
7,052
606
-
-
(9,816)
(14,786)

85,811
(4,008)
(1,675)
-

80,128
1,675

FFO available to common stockholders – diluted

$ 90,087 $142,355 $121,602 $ 96,416 $ 81,803

(1)

The Series A and Series B preferred stock issuances are no longer outstanding.

For a discussion of material events affecting the comparability of the information reflected in the selected
financial data, refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results
of Operations.”

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with Item 6. “Selected Financial
Data,” and the consolidated financial statements and related notes included elsewhere in this Annual Report
on Form 10-K, and the forward-looking disclaimer language in italics before Item 1. “Business.”

The term “NNN” or the “Company” refers to National Retail Properties, Inc. and all of its consolidated
subsidiaries. NNN has elected to treat certain subsidiaries as taxable real estate investment trust
subsidiaries. These subsidiaries and their majority owned and controlled subsidiaries are collectively
referred to as the “TRS.”

Overview

NNN, a Maryland corporation, is a fully integrated real estate investment trust (“REIT”) formed in 1984.
NNN’s operations are divided into two primary business segments: (i) investment assets, including real
estate assets, mortgages and notes receivable (including structured finance investments), and commercial
mortgage residual interests (collectively, “Investment Assets”), and (ii) inventory real estate assets
(“Inventory Assets”). NNN acquires, owns, invests in, manages and develops properties that are leased
primarily to retail tenants under long-term net leases and primarily held for investment (“Investment
Properties” or “Investment Portfolio”). The Inventory Assets typically represent direct and indirect
investment interests in real estate assets acquired or developed primarily for the purpose of selling the real
estate (“Inventory Properties” or “Inventory Portfolio”). Inventory Assets typically consist of two types of
properties, property for development (“Development Properties or Development Portfolio”) and improved
properties (“Exchange Properties” or “Exchange Portfolio”).

As of December 31, 2009, NNN owned 1,015 Investment Properties (including 12 properties with retail
operations that NNN operates), with an aggregate gross leasable area of approximately 11,373,000 square
feet, located in 44 states. Approximately 96 percent of total properties in NNN’s Investment Portfolio was
leased or operated at December 31, 2009. In addition, as of December 31, 2009, NNN had $41,976,000 in
mortgages and notes receivable (including accrued interest receivable and structured finance investments)
and $20,153,000 of commercial mortgage residual interests. As of December 31, 2009, NNN owned 19
Inventory Properties, of which 18 were Development Properties (12 completed Inventory and six land
parcels) and one was an Exchange Property.

NNN transferred 11 properties from the Inventory Portfolio to the Investment Portfolio in December 2009.

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
NNN’s Investment Portfolio and structured finance investments (such as tenant, geographic and line of
trade diversification), the occupancy rate of NNN’s Investment Portfolio, certain financial performance
ratios and profitability measures, and industry trends and performance compared to that of NNN.

NNN continues to maintain its diversification by tenant, geography and line of trade. NNN’s highest lines
of trade concentrations are the convenience store and restaurant (including full and limited service) sectors.
These sectors represent a large part of the freestanding retail property marketplace which NNN believes
represents an area of attractive investment opportunity. NNN also has some geographic concentration in the
south and southeast which NNN believes are historically areas of above-average population growth. Given
these concentrations, any financial hardship within these sectors or geographic locations, respectively,
could have a material adverse effect on the financial condition and operating performance of NNN.

During the years ended December 31, 2009, 2008 and 2007, Investment Properties have remained at least
96 percent leased. The Investment Portfolio’s average remaining lease term of 12 years has remained

fairly constant over the past three years which, coupled with its net lease structure, provides enhanced
probability of maintaining occupancy and operating earnings.

The poor current economic environment has made it more difficult and more expensive to obtain debt and
equity capital, which will likely reduce the pace of investments in new acquisitions or developments as well
as the volume of dispositions. Additionally, the poor economic and retail environment will result in more
retailers filing for bankruptcy and will make it more difficult to lease properties, which may have an
adverse impact on NNN’s occupancy.

Critical Accounting Policies and 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 judgments
on 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
judgments; 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 judgments and estimates
used in the preparation of NNN’s consolidated financial statements.

Real Estate – Investment Portfolio. NNN records the acquisition of real estate at cost, including acquisition
and closing costs. The cost of properties developed 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 Subject to a Lease. In accordance with the FASB
guidance on business combinations, the fair value of the real estate acquired with in-place leases is
allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and
identified intangible assets and liabilities, consisting of the value of above-market and below-market leases,
value of in-place leases, and value of tenant relationships, based in each case on their relative fair values.

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, generally including property taxes, insurance, maintenance and
repairs. The leases are accounted for using either the operating or the direct financing method. Such
methods are described below:

Operating method – Leases accounted for using the operating method are recorded at the cost of
the real estate. Revenue is recognized as rentals are earned and expenses (including depreciation)
are charged to operations as incurred. Buildings are depreciated on the straight-line method over
their estimated useful lives. Leasehold interests are amortized on the straight- line method over the
terms of their respective leases. When scheduled rental revenue varies 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.

Direct financing method – Leases accounted for using the direct financing method are recorded at
their net investment (which at the inception of the lease generally represents the cost of the
property). Unearned income is deferred and amortized into income over the lease terms so as to
produce a constant periodic rate of return on NNN’s net investment in the leases.

Real Estate – Inventory Portfolio. The TRS acquires and/or develops and owns properties primarily for
the purpose of selling the real estate. The properties that are classified as held for sale at any given time
may consist of properties that have been acquired in the marketplace with the intent to sell and properties

that have been, or are currently being, constructed by the TRS. The TRS records the acquisition of the real
estate at cost, including the acquisition and closing costs. The cost of the real estate developed by the TRS
also includes direct and indirect costs of construction, interest and other miscellaneous costs incurred during
the development period until the project is substantially complete and available for occupancy. Real estate
held for sale is not depreciated and is recorded at the lower of cost or fair value.

Commercial Mortgage Residual Interest at Fair Value. Commercial mortgage residual interests, classified
as available for sale, are reported at their market values with unrealized gains and losses reported as other
comprehensive income in stockholders’ equity. The commercial mortgage residual interests were acquired
in connection with the acquisition of 78.9 percent equity interest of Orange Avenue Mortgage Investments,
Inc. (“OAMI”). NNN recognizes the excess of all cash flows attributable to the commercial mortgage
residual interests estimated at the acquisition/transaction date over the initial investment (the accretable
yield) as interest income over the life of the beneficial interest using the effective yield method. Losses are
considered other than temporary valuation impairments if and when there has been a change in the timing
or amount of estimated cash flows, exclusive of changes in interest rates, that leads to a loss in value.

Revenue Recognition. Rental revenues for non-development real estate assets are recognized when earned
in accordance with the FASB guidance on accounting for leases, based on the terms of the lease at the time
of acquisition of the leased asset. Rental revenues for properties under construction commence upon
completion of construction of the leased asset and delivery of the leased asset to the tenant.

Adoption of New Accounting Standards with change in Accounting Principles. Effective January 1, 2009,
NNN adopted the new FASB guidance on accounting for convertible debt instruments that may be settled in
cash upon conversion. The new guidance requires the liability and equity components of convertible debt
instruments that may be settled in cash upon conversion (including partial cash settlement) to be separately
accounted for in a manner that reflects the issuer’s non-convertible debt borrowing rate. The debt
component is to be recorded based upon the estimated fair value of non-convertible debt with similar terms.
The resulting debt discount is amortized over the period during which the debt is outstanding as additional
non-cash interest expense. The new guidance has been applied retrospectively.

Effective January 1, 2009, NNN adopted the new FASB guidance on determining whether instruments
granted in share-based payment transactions are participating securities which also required retrospective
application. The adoption of the new guidance on convertible debt and share-based payments resulted in
non-cash adjustments to the amounts and per share amounts.

Use of Estimates. Additional critical accounting policies of NNN include management’s estimates and
assumptions relating to the reporting of assets and liabilities, revenues and expenses and the disclosure of
contingent assets and liabilities to prepare the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America. Additional critical accounting
policies include management’s estimates of the useful lives used in calculating depreciation expense
relating to real estate assets, the recoverability of the carrying value of long-lived assets, including the
commercial mortgage residual interests, the recoverability of the income tax benefit, the collectibility of
receivables from tenants, including accrued rental income and capitalized overhead relating to development
projects. Actual results could differ from those estimates.

Results of Operations

Property Analysis – Investment Portfolio

General. The following table summarizes NNN’s Investment Portfolio as of December 31:

Investment Properties Owned:

Number
Total gross leasable area (square feet)

Investment Properties:

2009

2008

2007

1,015
11,373,000

1,005
11,251,000

908
10,610,000

Leased
Operated
Percent of Investment Properties – leased and operated
Weighted average remaining lease term (years)
Total gross leasable area (square feet) – leased and operated

966
12
96%
12
10,508,000

972
-
97%
13
10,728,000

892
-
98%
13
10,355,000

NNN transferred 11 properties from the Inventory Portfolio to the Investment Portfolio in December 2009.

% of
Annual
Base Rent(1)

# of
Properties

Gross
Leasable
Area(2)

2010
2011
2012
2013
2014
2015

2.3%
2.1%
3.3%
4.7%
5.0%
3.1%

36
21
34
39
44
22

408,000
389,000
484,000
849,000
622,000
539,000

2016
2017
2018
2019
Thereafter

%
of Annual
Base
Rent(1)

1.7%
4.3%
2.9%
4.3%
66.3%

# of
Properties

13
27
24
42
676

Gross
Leasable
Area(2)

240,000
676,000
345,000
632,000
5,324,000

(1) Based on the annualized base rent for all leases in place as of December 31, 2009.
(2) Approximate square feet.

The following table summarizes the diversification of NNN’s Investment Portfolio based on the top 10 lines
of trade:

Lines of Trade

2009

2008

2007

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Convenience Stores
Restaurants – Full Service
Automotive Parts
Theaters
Automotive Service
Books
Drug Stores
Restaurants – Limited Service
Sporting Goods
Grocery
Other

26.7%
9.2%
6.8%
6.3%
5.7%
4.1%
4.1%
3.5%
3.2%
2.9%
27.5%

25.7%
8.7%
5.1%
6.1%
8.9%
4.0%
4.0%
3.3%
3.3%
2.6%
28.3%

23.9%
10.3%
4.9%
4.2%
5.2%
4.4%
5.0%
3.7%
3.9%
2.9%
31.6%

100.0%

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

The following table shows the top 10 states in which NNN’s Investment Properties are located in as of
December 31, 2009:

State

1. Texas
2. Florida
3.
Illinois
4. North Carolina
5. Georgia
6.
Indiana
7. Pennsylvania
8. Ohio
9. Tennessee
10. Arizona

Other

# of
Properties

%
of Annual
Base Rent(1)

210
85
39
62
57
37
87
31
30
30
347

20.1%
10.0%
7.0%
6.3%
5.5%
4.4%
4.3%
3.8%
3.1%
2.8%
32.7%

1,015

100.0%

(1) Based on annualized base rent for all leases in

place as of December 31, 2009.

Property Acquisitions. The following table summarizes the Investment Property acquisitions for each of
the years ended December 31 (dollars in thousands):

Acquisitions:

Number of Investment Properties
Gross leasable area (square feet)

2009

2008

2007

8
290,000

109
868,000

235
2,205,000

Total dollars invested(1)

36,335

355,107

696,682

(1)

Includes dollars invested on projects under construction for each respective year.

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

Number of properties
Gross leasable area (square feet)
Net sales proceeds
Net gain

2009

9
234,000
15,621
2,392

$
$

2008

19
290,000
59,796
9,980

$
$

2007

37
997,000
146,041
56,625

$
$

NNN typically uses the proceeds from property sales either to pay down the outstanding indebtedness of
NNN’s revolving credit facility (the “Credit Facility”) or reinvest in real estate.

Property Analysis – Inventory Portfolio

General. The following table summarizes the number of properties held for sale in NNN’s Inventory
Portfolio as of December 31:

Development Portfolio:

Completed Inventory Properties
Properties under construction
Land parcels

Exchange Portfolio:

Inventory Properties

Total Inventory Properties

2009

2008

2007

12
-
6

11
1
7

8
9
6

Property Acquisitions. The following table summarizes the property acquisitions and dollars invested in the
Inventory Portfolio for each of the years ended December 31 (dollars in thousands):

Development Portfolio:

Number of properties acquired
Dollars invested(1)

Exchange Portfolio:

Number of properties acquired
Dollars invested
Total dollars invested

2009

2008

2007

2
2,633

-
-
2,633

$
$

3
9,545

4
19,994
29,539

3
64,694

23
105,152
169,846

$
$

(1)

Includes dollars invested in projects under construction or tenant improvements
for each respective year.

Property Dispositions. The following table summarizes the number of Inventory Properties sold and the
corresponding gain recognized from the disposition of real estate held for sale included in earnings from
continuing and discontinued operations for each of the years ended December 31 (dollars in thousands):

2009

2008

2007

# of
Properties

Gain

# of
Properties

Gain

# of
Properties

Gain

Development(1)
Exchange

3
1

569
12

581

6
19

4,751
4,607

9,358

13
58

5,125
5,888

11,013

(1) Net of noncontrolling interests.

Revenue from Continuing Operations Analysis

General. During the year ended December 31, 2009, NNN’s rental income increased primarily due to the
acquisition of Investment Properties (See “Results of Operations – Property Analysis – Investment Portfolio
– Property Acquisitions”). NNN anticipates any significant increase in rental income will continue to come
primarily from additional property acquisitions.

The following summarizes NNN’s revenues from continuing operations (dollars in thousands):

2009

2008

2007

2009

Percent of Total
2008

2007

2009
Versus
2008
Percent
Increase
(Decrease)

2008
Versus
2007
Percent
Increase
(Decrease)

$ 214,625 $ 210,684 $ 163,669

92.6%

92.4%

91.2%

1.9%

28.7%

8,387

7,012

5,591

3.6%

3.1%

19.6%

25.4%

4,535

5,804

5,268

2.0%

2.5%

3.0%

(21.9)%

10.2%

4,252

4,636

4,882

1.8%

2.0%

2.7%

(8.3)%

(5.0)%

Rental Income(1)
Real estate expense

reimbursement from
tenants

Interest and other income

from real estate
transactions
Interest income on

commercial mortgage
residual interests

Total revenues from

continuing operations

$ 231,799 $ 228,136 $ 179,410

100.0%

1.6%

27.2%

(1)

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

Revenue from Operations by Source of Income. NNN has identified two primary operating segments, and
thus, sources of revenue: (i) earnings from NNN’s Investment Assets, and (ii) earnings from NNN’s
Inventory Assets. NNN revenues from continuing operations come primarily from Investment Assets. The
following table summarizes the revenues from continuing operations for each of the years ended
December 31 (dollars in thousands):

2009

2008

2007

2009

Percent of Total
2008

Investment Assets
Inventory Assets

$ 231,623
176

$ 228,009
127

$ 179,079
331

99.9%
0.1%

2007

99.8%
0.2%

Total revenues

$ 231,799

$ 228,136

$ 179,410

100.0%

Comparison of Year Ended December 31, 2009 to Year Ended December 31, 2008.

2009
Versus
2008
Percent
Increase
(Decrease)

1.6%
38.6%

1.6%

2008
Versus
2007
Percent
Increase
(Decrease)

27.3%
(61.6)%

27.2%

Rental Income. Rental Income increased for the year ended December 31, 2009, as compared to 2008, due
to a full year of Rental Income from the 109 Investment Properties with an aggregate gross leasable area of
868,000 square feet which were acquired during 2008. Additionally, eight Investment Properties were
acquired in 2009 with an aggregate gross leasable area of 290,000 square feet. In addition, NNN recorded
$5,072,000 as compared to $2,671,000 in lease termination fees and rent settlement fees during the years
ended December 31, 2009 and 2008, respectively.

Real Estate Expense Reimbursement from Tenants. Real estate expense reimbursements from tenants
increased for the year ended December 31, 2009, as compared to 2008. The increase is attributable to the
reimbursements from certain properties acquired in 2008 as well as reimbursements resulting from the
re-leasing of existing vacancies.

Interest and Other Income from Real Estate Transactions. Interest and other income from real estate
transactions decreased for the year ended December 31, 2009, as compared to 2008, primarily due to a
lower weighted average principal balance on NNN’s mortgages receivable and structured finance
investments during the year ended December 31, 2009. For the years ended December 31, 2009 and 2008,
the weighted average outstanding principal balance on NNN’s mortgages receivable and structured finance
investments was $38,968,000 and $57,475,000, respectively.

Interest Income on Commercial Mortgage Residual Interests. Interest income on commercial mortgage
residual interests (“Residuals”) decreased for the year ended December 31, 2009, as compared to
December 31, 2008 but remained stable as a percent of total revenue from continuing operations. The
decrease in interest income on Residuals is primarily the result of the increase in the loan delinquencies and
asset amortization, which is partially offset by a decrease in loan prepayments.

Comparison of Year Ended December 31, 2008 to Year Ended December 31, 2007.

Rental Income. Rental Income increased for the year ended December 31, 2008, as compared to the same
period in 2007, primarily from the addition of 109 Investment Properties with an aggregate gross leasable
area of 868,000 square feet. In addition, the increase in Rental Income is also attributable to a full year of
Rental Income from the 235 Investment Properties with an aggregate gross leasable area of 2,205,000
square feet which were acquired during the year ended December 31, 2007.

Real Estate Expense Reimbursement from Tenants. Real estate expense reimbursements from tenants
remained consistent as a percentage of total revenues from continuing operations. The increase for the year
ended December 31, 2008, as compared to 2007, was attributable to a full year of reimbursements from
certain tenants acquired in 2007 and the reimbursements from newly acquired properties in 2008.

Interest and Other Income from Real Estate Transactions. Interest and other income from real estate
transactions increased slightly for the year ended December 31, 2008, as compared to 2007. The increase
was primarily due to an increase in the weighted average outstanding principal balance on NNN’s
mortgages receivable balance. For the year ended December 31, 2008 and 2007, the weighted average
outstanding principal balance on NNN’s mortgages receivable was $57,475,000 and $47,705,000,
respectively. The increase was partially offset by a decrease in interest income earned on the structured
finance investments. For the years ended December 31, 2008 and 2007, the weighted average outstanding
principal balance on NNN’s structured finance investments was $8,614,000 and $16,795,000, respectively.

Interest Income on Commercial Mortgage Residual Interests. Interest income on the Residuals for the year
ended December 31, 2008, as compared to December 31, 2007, decreased slightly as a result of lower
outstanding loan balances. The decrease was partially offset by an increase in interest income due to the
increase in the discount rate from 17% to 25% during the third quarter of 2007.

Gain from Disposition of Real Estate, Inventory Portfolio. Inventory Properties typically are operating
properties and are classified as discontinued operations. However, the gains on the sale of Inventory
Properties which are sold prior to rent commencement are reported in continuing operations. The slight
decrease in the gain from the disposition of real estate is solely dependent on respective sales price and cost
basis of the Inventory Properties sold.

Analysis of Expenses from Continuing Operations

General. During 2009, operating expenses from continuing operations increased primarily due to the
impairments recorded on real estate. The following summarizes NNN’s expenses from continuing
operations (dollars in thousands):

General and administrative
Real estate
Depreciation and amortization
Impairment – real estate
Impairment – commercial mortgage residual interests valuation
Restructuring costs

Total operating expenses

Interest and other income
Interest expense
Loss on interest rate hedge

Total other expenses (revenues)

Percentage of Total
Operating Expenses
2008

2007

2009

2008

2007

21,776
13,684
46,769
28,114
498
731

$ 111,572

(1,375)
62,151
-

24,878
10,007
44,181
1,234
758
-

81,058

(3,748)
63,964
804

23,565
7,805
31,340
416
638
-

63,764

(4,751)
51,846
-

60,776

61,020

47,095

Percentage of
Revenues from
Continuing Operations
2007
2008
2009

2009
Versus
2008
Percent
Increase
(Decrease)

2008
Versus
2007
Percent
Increase
(Decrease)

General and administrative
Real estate
Depreciation and amortization
Impairment – real estate
Impairment – commercial mortgage residual

interests valuation adjustment

Restructuring costs

19.5% 30.7% 37.0% 9.4% 10.9% 13.1%
12.3% 12.4% 12.2% 5.9% 4.4% 4.4%
41.9% 54.5% 49.1% 20.2% 19.4% 17.5%
25.2%

(12.5)%
36.7%
5.9%
0.7% 12.1% 0.5% 0.2% 2,178.3%

1.5%

0.4%
0.7%

0.9%
-

1.0% 0.2% 0.3% 0.4%
-

0.3%

(34.3)%
N/C(1)

Total operating expenses

100.0% 100.0% 100.0% 48.1% 35.5% 35.6%

37.6%

Interest and other income
Interest expense
Loss on interest rate hedge

(2.3)% (6.1)% (10.1)% (0.6)% (1.7)% (2.7)%
102.3% 104.8% 110.1% 26.8% 28.0% 28.9%
-
-

0.4%

1.3%

(63.3)%
(2.8)%
(100.0)%

5.6%
28.2%
41.0%
196.6%

18.8%
-

27.1%

(21.1)%
23.4%
N/C(1)

Total other expenses (revenues)

100.0% 100.0% 100.0% 26.2% 26.7% 26.2%

(0.4)%

29.6%

(1) Not calculable (“N/C”)

Comparison of Year End December 31, 2009 to Year Ended December 31, 2008.

General and Administrative Expenses. General and administrative expenses decreased for the year ended
December 31, 2009, as compared to the same period in 2008 and decreased both as a percentage of total
operating expenses and as a percentage of revenues from continuing operations. The decrease in general
and administrative expenses for the year ended December 31, 2009, is primarily attributable to a decrease in
compensation of personnel and a decrease in lost pursuit costs.

Real Estate. Real estate expenses remained fairly stable as a percentage of total operating expenses, but
increased as a percentage of revenues from continuing operations for the year ended December 31, 2009, as
compared to the same period in 2008. The increase in real estate expenses for the year ended December 31,
2009, is primarily attributable to an increase in tenant reimbursable real estate expenses from 2008
acquisitions as well as an increase in expenses related to un-leased properties.

Depreciation and Amortization. Depreciation and amortization expenses decreased as a percentage of total
operating expenses and increased as a percentage of revenues from continuing operations for the year ended
December 31, 2009, as compared to the year ended December 31, 2008. The dollar increase is primarily a
result of depreciation recognized on the 109 Investment Properties with an aggregate gross leasable area of
868,000 square feet acquired in 2008. This increase is partially offset by the additional amortization in
connection with the termination of certain leases during 2008.

Impairment – Real Estate. Based upon the events or changes in certain circumstances, management
periodically assesses its Investment Properties for possible impairment indicating that the carrying value of
the asset, including accrued rental income, may not be recoverable through operations. Events or
circumstances that may occur include changes in real estate market conditions, the ability of NNN to
re-lease properties that are currently vacant or become vacant, and the ability to sell properties at an
attractive return. Generally, NNN calculates a possible impairment by comparing the estimated future cash
flows to the current net book value. Impairments are measured as the amount by which the current book
value of the asset exceeds the fair value of the asset. As a result of the Company’s review of long-lived
assets for impairments, for the years ended December 31, 2009, and 2008, NNN recorded real estate
impairments totaling $28,114,000 and $1,234,000, respectively.

Impairment – Commercial Mortgage Residual Interests Valuation. In connection with the independent
valuations of the Residuals’ fair value, during the years ended December 31, 2009 and 2008, NNN recorded
an other than temporary valuation adjustment of $498,000 and $758,000 respectively, as a reduction of
earnings from operations.

Restructuring Costs. During the year ended December 31, 2009, NNN recorded restructuring costs of
$731,000 in connection with a workforce reduction. No such costs were incurred during 2008.

Interest Expense. Interest expense decreased for the year ended December 31, 2009, as compared to the
same period in 2008, and decreased as a percentage of total operating expenses and as a percentage of
revenues from continuing operations. The decrease in interest expense is primarily attributable to a decrease
of $99,907,000 in weighted average long-term debt outstanding.

The following represents the primary changes in debt that have impacted interest expense:

(i)

(ii)

repurchase of $2,500,000 and $8,500,000 of convertible notes payable due June 2028 with an
effective interest rate of 7.192% in May 2009 and February 2009, respectively,

repurchase of $3,800,000, $5,000,000 and $25,000,000 of convertible notes payable due
September 2026 with an effective interest rate of 5.840% in March 2009, January 2009 and
November 2008, respectively,

(iii)

issuance of $234,035,000 of convertible notes payable due June 2028, with an effective interest
rate of 7.192% in March 2008,

(iv)

payoff of the $100,000,000 7.125% notes payable in March 2008,

(v)

(vi)

payoff of the $12,000,000 10.00% secured note payable in February 2008,

the decrease of $78,860,000 in the weighted average debt outstanding on the Credit Facility for
year ended December 31, 2009 as compared to 2008, and

(vii)

the decrease in weighted average interest rate on the Credit Facility from 3.83% during the year
ended December 31, 2008, to 1.19% during the year ended December 31, 2009.

Comparison of Year End December 31, 2008 to Year Ended December 31, 2007.

General and Administrative Expenses. General and administrative expenses increased for the year ended
December 31, 2008, as compared to the same period in 2007, but decreased both as a percentage of total
operating expenses and as a percentage of revenues from continuing operations. The increase in the

amount of general and administrative expenses for the year ended December 31, 2008, is primarily related
to an increase in lost pursuit costs.

Real Estate. Real estate expenses remained stable as a percentage of revenues from continuing operations,
but increased slightly as a percentage of total operating expenses for the year ended December 31, 2008, as
compared to the same period in 2007. The increase in real estate expenses for the year ended December 31,
2008, is primarily attributable to an increase in tenant reimbursable real estate expenses related to newly
acquired Investment Properties as well as an increase in expenses related to vacant properties.

Depreciation and Amortization. Depreciation and amortization expenses increased both as a percentage of
total operating expenses and as a percentage of revenues from continuing operations for the year ended
December 31, 2008, as compared to the year ended December 31, 2007. The increase is primarily a result of
the depreciation recognized on (i) the 109 Investment Properties with an aggregate gross leasable area of
868,000 square feet, acquired in 2008, and (ii) a full year of depreciation and amortization on the 235
Investment Properties with an aggregate gross leasable area of 2,205,000 square feet which were acquired
during the year ended December 31, 2007.

Impairment – Real Estate. NNN reviews long-lived assets for impairment whenever certain events or
changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Events or
circumstances that may occur include changes in real estate market conditions, the ability of NNN to
re-lease properties that are currently vacant or become vacant, and the ability to sell properties at an
attractive return. Generally, NNN calculates a possible impairment by comparing the estimated future cash
flows to the current net book value. Impairments are measured as the amount by which the current book
value of the asset exceeds the fair value of the asset. During the years ended December 31, 2008 and 2007,
$1,234,000 and $416,000 of real estate impairments were recorded, respectively.

Impairment – Commercial Mortgage Residual Interests Valuation. In connection with the independent
valuations of the Residuals’ fair value, during the years ended December 31, 2008 and 2007, NNN recorded
an other than temporary valuation adjustment of $758,000 and $638,000, respectively, as a reduction of
earnings from operations.

Interest Expense. Interest expense increased for the year ended December 31, 2008, as compared to the
same period in 2007, but decreased as a percentage of total operating expense and as a percentage of
revenues from continuing operations. The increase in interest expenses is primarily attributable to an
increase of $233,201,000 in weighted average long-term debt outstanding. The increase in interest expense
was partially offset by an overall decrease in weighted average interest rate for 2008 as compared to 2007.

The following represents the primary changes in debt that have impacted interest expense:

(i)

(ii)

repurchase of $25,000,000 of convertible notes payable due September 2026 with an effective
interest rate of 5.840% in November 2008,

issuance of $234,035,000 of convertible notes payable due June 2028, with an effective interest
rate of 7.192% in March 2008,

(iii) payoff of the $100,000,000 7.125% notes payable in March 2008,

(iv)

payoff of the $12,000,000 10.00% secured note payable in February 2008,

(v)

payoff of $26,041,000 10-year financing lease obligation with interest rate of 5.00% in
November 2007,

(vi)

payoff of the $10,500,000 10.00% secured note in December 2007,

(vii) payoff of the $20,800,000 variable rate term note in October 2007,

(viii) repayment of mortgage in September 2007, with balance of $7,305,000 at December 31, 2006,

(ix)

(x)

(xi)

and an interest rate of 7.37%,
issuance of $250,000,000 of notes payable due October 2017, with an effective interest rate of
6.92% in September 2007,

decrease of $5,403,000 in the weighted average debt outstanding on the revolving Credit
Facility for the year ended December 31, 2008, as compared to the same period in 2007, and

decrease in weighted average interest rate on the revolving Credit Facility from 6.24% for the
period ended December 31, 2007, to 3.83% for the period ended December 31, 2008.

Discontinued Operations

Earnings (Loss)

NNN classified as discontinued operations the revenues and expenses related to its Investment Properties
that were sold, its leasehold interests that expired or were terminated and any Investment Properties that
were held for sale at December 31, 2009. NNN also classified as discontinued operations the revenues and
expenses of its Inventory Properties that generated rental revenues. NNN records discontinued operations
by NNN’s identified segments: (i) Investment Assets, and (ii) Inventory Assets. The following table
summarizes the earnings from discontinued operations for the years ended December 31 (dollars in
thousands):

Investment Assets
Inventory Assets
Noncontrolling interests

# of Sold
Properties

9
2
-

2009

Gain

2,392
558
-

2,950

Earnings/
(Loss)

# of Sold
Properties

2008

Gain

Earnings/
(Loss)

# of Sold
Properties

2007

Gain

Earnings/
(Loss)

260
(1,551)
(47)

(1,338)

19 $
24
-

9,980 $ 12,112
9,277
9,347
(2,927)
-

37 $ 56,625 $ 68,976
9,534
69
(1,299)
-

10,681
-

43 $ 19,327 $ 18,462

106 $ 67,306 $ 77,211

NNN periodically sells Investment Properties and may reinvest the sales proceeds to purchase additional
properties. NNN evaluates its ability to pay dividends to stockholders by considering the combined effect of
income from continuing and discontinued operations.

Impairment—Real Estate. NNN periodically assesses its real estate for possible impairment whenever
certain events or changes in circumstances indicate that the carrying amount of the asset, including accrued
rental income, may not be recoverable through operations. Events or circumstances that may occur include
changes in real estate market conditions, the ability of NNN to re-lease properties that are vacant, and the
ability to sell properties at an attractive price. Generally, NNN calculates a possible impairment by
comparing the estimated future cash flows to the current net book value. Impairments are measured as the
amount by which the current book value of the asset exceeds the fair value of the asset. During the years
ended December 31, 2009, 2008, and 2007, NNN recognized real estate impairments on discontinued
operations of $6,400,000, $4,426,000, and $1,554,000, respectively.

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 consumer price index, and/or increases in the tenant’s sales volume. During times when
inflation is greater than increases in rent, rent increases may not keep up with the rate of inflation.

The Investment Properties are leased to tenants under long-term, net leases which typically require the
tenant to pay certain operating expenses of a property, thus, NNN’s exposure to inflation is reduced.
Inflation may have an adverse impact on NNN’s tenants.

Liquidity

General. 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) origination of mortgages and
notes receivable (including structured finance investments); (iv) capital expenditures; (v) payment of
principal and interest on its outstanding indebtedness; and (vi) other investments.

NNN expects to meet these requirements (other than amounts required for additional property investments,
mortgages and notes receivables, including structured finance investments) through cash provided from
operations and NNN’s Credit Facility. NNN utilizes the Credit Facility to meet its short-term working
capital requirements. As of December 31, 2009, no balance was outstanding and $400,000,000 was
available for future borrowings under the Credit Facility, excluding undrawn letters of credit totaling
$653,000. NNN anticipates that any additional investments in properties, mortgages and notes receivables
and structured finance investments during the next 12 months will be funded by the Credit Facility, cash
provided from operations, the issuance of long-term debt or the issuance of common or preferred equity or
other instruments convertible into or exchangeable for common or preferred equity. 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.

Cash and Cash Equivalents. The table below summarizes NNN’s cash flows for each of the years ended
December 31 (in thousands):

Cash and cash equivalents:

Provided by operating activities
Used in investing activities
Provided by (used in) financing activities

Increase (decrease)
Net cash at beginning of period

Net cash at end of period

2009

2008

2007

149,502
(28,063)
(108,840)

12,599
2,626

237,459
(256,304)
(6,028)

(24,873)
27,499

130,147
(536,717)
432,394

25,824
1,675

15,225

2,626

27,499

Cash provided by operating activities represents cash received primarily from rental income from tenants,
proceeds from the disposition of Inventory Properties and interest income less cash used for general and
administrative expenses, interest expense and acquisition and disposition of its Inventory Properties. NNN’s
cash flow from operating activities, net of cash used in and provided by the acquisition and disposition of
its Inventory Properties, has been sufficient to pay the distributions for each period presented. NNN uses
proceeds from its Credit Facility to fund the acquisition of its Inventory Properties. The change in cash
provided by operations for the years ended December 31, 2009, 2008 and 2007, 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.

Changes in cash for investing activities are primarily attributable to the acquisitions and dispositions of
Investment Properties.

NNN’s financing activities for the year ended December 31, 2009, included the following significant
transactions:

•

$8,588,000 in net payments on the repurchase of $11,000,000 of convertible notes payable due
June 2028 with an effective interest rate of 7.192%,

$6,994,000 in net payments on the repurchase of $8,800,000 of convertible notes payable due
September 2026 with an effective interest rate of 5.84%,

•

$120,256,000 in dividends paid to common stockholders,

$6,785,000 in dividends paid to holders of the depositary shares of NNN’s Series C Preferred
Stock,

$67,354,000 in net proceeds from the issuance of 3,766,452 shares of common stock in
connection with the Dividend Reinvestment and Stock Purchase Plan (“DRIP”), and

$26,500,000 in net payments on NNN’s Credit Facility.

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 and
providing value to NNN’s stockholders. NNN generally utilizes debt and equity security offerings, bank
borrowings, the sale of properties, and to a lesser extent, internally generated funds to meet its capital
needs.

NNN typically funds its short-term liquidity requirements including investments in additional Investment
Properties with cash from its Credit Facility. As of December 31, 2009, no balance was outstanding and
$400,000,000 was available for future borrowings under the Credit Facility, excluding undrawn letters of
credit totaling $653,000.

Contractual Obligations and Commercial Commitments. The information in the following table
summarizes NNN’s contractual obligations and commercial commitments outstanding as of December 31,
2009. There was no outstanding balance on the Credit Facility at December 31, 2009. The table presents
principal cash flows by year-end of the expected maturity for debt obligations and commercial
commitments outstanding as of December 31, 2009.

Total

2010

Expected Maturity Date (dollars in thousands)
2012

2011

2013

2014

Thereafter

Long-term debt(1)
Operating lease

$ 1,007,025
4,557

$ 21,022
891

$ 139,798
917

$ 69,290
945

$ 223,898
973

$ 150,881
831

$ 402,136
-

Total contractual cash

obligations(2)

$ 1,011,582

$ 21,913

$ 140,715

$ 70,235

$ 224,871

$ 151,712

$ 402,136

(1)

(2)

Includes amounts outstanding under the mortgages payable, convertible notes payable and notes payable and excludes
unamortized note discounts.
Excludes $7,471 of accrued interest payable.

In addition to the contractual obligations outlined above, in connection with the development of two
Investment Properties, NNN has agreed to fund construction commitments (including construction, land
costs and tenant improvements) of $14,651,000. As of December 31, 2009, NNN had funded $12,261,000
of this commitment, with $2,390,000 remaining to be funded. As of December 31, 2009, NNN did not have
any funding commitments relating to the development of Inventory Properties.

As of December 31, 2009, NNN had outstanding letters of credit totaling $653,000 under its Credit Facility.

As of December 31, 2009, NNN did not have any other material contractual cash obligations, such as
purchase obligations, financing lease obligations or other long-term liabilities other than those reflected in
the table. In addition to items reflected in the table, NNN has issued preferred stock with cumulative
preferential cash distributions, as described below under “Dividends.”

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.

Many of the Investment Properties are recently constructed and are generally net leased. Therefore,
management anticipates that capital demands to meet obligations with respect to these Investment
Properties will be modest for the foreseeable future and can be met with funds from operations and working
capital. Certain of NNN’s Investment Properties are subject to leases under which NNN retains
responsibility for certain costs and expenses associated with the Investment Property. Management
anticipates the costs associated with NNN’s vacant Investment Properties or those Investment 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 unforeseen significant
capital expenditures.

The lost revenues and increased property expenses resulting from vacant properties or uncollectibility of
lease revenues could have a material adverse effect on the liquidity and results of operations if NNN is
unable to release the Investment Properties at comparable rental rates and in a timely manner. As of
December 31, 2009, NNN owned 37 vacant, un-leased Investment Properties (including two vacant land
parcels) which accounted for approximately four percent of total Investment Properties held in NNN’s
Investment Portfolio. Additionally, as of January 31, 2010, one Investment Property is leased to a tenant
that filed a voluntary petition for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. As a result,
this tenant has the right to reject or affirm its leases with NNN.

In May 2008, one of NNN’s tenants, Uni-Mart, Inc. (“Uni-Mart”), which leased 77 properties, filed a
petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. During the year ended
December 31, 2008, Uni-Mart elected to reject the leases of 16 properties owned by NNN. NNN had
re-leased 15 of the 16 properties as of December 31, 2009. On April 1, 2009, Uni-Mart rejected the leases
of 36 additional properties. All of the 36 properties were subject to subleases with convenience store
operators and all of the subleases with the operators were assigned from Uni-Mart to NNN effective
April 1, 2009. On April 30, 2009, Uni-Mart assumed all of the remaining leases for 24 properties between
Uni-Mart and NNN. In January 2010, these leases were assigned from Uni-Mart to other operators, and
NNN no longer has any leases with Uni-Mart as of January 8, 2010. For the years ended December 31,
2009 and 2008, NNN recorded $3,371,000 and $2,421,000, respectively, of income in connection with the
Uni-Mart bankruptcy rent settlement.

On April 20, 2009, one of NNN’s tenants, Titlemax Holdings, LLC and its affiliated companies
(collectively, “Titlemax”), which leased 30 Investment Properties from NNN, filed a petition of
reorganization under Chapter 11 of the U.S. Bankruptcy Code. On February 3, 2010, Titlemax assumed all
of its leases with NNN.

Dividends. NNN has made an election to be taxed as a REIT under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended, and related regulations and intends to continue to operate so
as to remain qualified as a REIT for federal income tax purposes. NNN generally will not be subject to
federal income tax on income that it distributes to its stockholders, provided that it distributes 100 percent
of its REIT taxable income and meets certain other requirements for qualifying as a REIT. If NNN fails to
qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at
regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax
purposes for four years following the year during which qualification is lost. Such an event could materially
adversely affect NNN’s income and ability to pay dividends.

One of NNN’s primary objectives, consistent with its policy of retaining sufficient cash for reserves and
working capital purposes and maintaining its status as a REIT, is to distribute a substantial portion of its
funds available from operations to its stockholders in the form of dividends. During the years ended
December 31, 2009, 2008 and 2007, NNN declared and paid dividends to its common stockholders of
$120,256,000, $110,107,000, and $92,989,000, respectively, or $1.50, $1.48 and $1.40 per share,
respectively, of common stock.

The following presents the characterizations for tax purposes of such common stock dividends for the years
ended December 31:

2009

2008

2007

Ordinary dividends
Qualified dividends
Capital gain
Unrecaptured Section 1250

Gain

1.495182
-
0.003051

99.6788% $

-
0.2034%

1.480000
-
-

0.001767

0.1178%

100.000% $

-
-

1.397402
0.000414
0.002184

99.8144%
0.0296%
0.1560%

1.500000

100.000% $

1.480000

100.000% $

1.400000

100.0000%

In February 2010, NNN paid dividends to its common stockholders of $31,026,000, or $0.375 per share of
common stock.

Holders of NNN’s preferred stock issuance 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 outlines the issuance of NNN’s preferred stock:

Non Voting
Preferred Stock
Issuance

Shares
Outstanding
At December 31,
2009

Liquidation
Preference Per
Share

Fixed Annual
Cash
Distribution
(per share)

7.375% Series C(1)

3,680,000

25.00

1.84375

(1) In October 2006, NNN issued 3,680,000 depositary shares, each
representing 1/100th of a share of 7.375% Series C Cumulative
Redeemable Preferred Stock. See “Capital Resources – Debt and
Equity Securities.”

NNN declared and paid dividends to its Series C Preferred stockholders of $6,785,000 or $1.84375 per
depository share during each of the years ended December 31, 2009, 2008 and 2007. The Series C Preferred
Stock has no maturity date and will remain outstanding unless redeemed.

Capital Resources

Generally, cash needs for property acquisitions, mortgages and notes receivable investments, debt
payments, dividends, structured finance investments, capital expenditures, development and other
investments have been funded by equity and debt offerings, bank borrowings, the sale of properties and, to
a lesser extent, by internally generated funds. Cash needs for other items have been met from operations. If
available, future sources of capital include proceeds from the public or private offering of NNN’s debt or
equity securities, secured or unsecured borrowings from banks or other lenders, proceeds from the sale of
properties, as well as undistributed funds from operations.

Debt

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

Line of credit payable
Mortgages payable
Notes payable – convertible
Notes payable

2009

-
25,290
343,380
618,676

Percentage of
Total

-
2.6%
34.8%
62.6%

2008

26,500
26,290
356,122
618,479

Percentage of
Total

2.6%
2.6%
34.6%
60.2%

Total outstanding debt

987,346

100.0%

1,027,391

100.0%

Indebtedness. NNN expects to use indebtedness primarily for property acquisitions and development of
single-tenant retail properties, either directly or through investment interests, and mortgages and notes
receivable.

Line of Credit Payable. NNN’s $400,000,000 revolving Credit Facility had a weighted average outstanding
balance of $10,824,000 and a weighted average interest rate of 1.19% during the year ended December 31,
2009. In November 2009, NNN entered into a credit agreement for a new $400,000,000 credit facility,
replacing the former revolving credit facility (as the context requires, the previous and new revolving credit
facility, the “Credit Facility”). The Credit Facility matures November 2012, with an option to extend
maturity to November 2013. The Credit Facility bears interest at LIBOR plus 280 basis points with a 1.0%
LIBOR floor; however, such interest rate may change pursuant to a tiered interest rate structure based on
NNN’s debt rating. The Credit Facility also includes an accordion feature for NNN to increase, at its option,
the facility size up to $500,000,000. As of December 31, 2009, no balance was outstanding, and
$400,000,000 was available for future borrowings under the Credit Facility, excluding undrawn letters of
credit totaling $653,000.

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, 2009, NNN was in
compliance with those covenants. In the event that NNN violates any of these restrictive financial
covenants, it could cause the indebtedness 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 operation.

Mortgages Payable. The following table outlines the mortgages payable included in NNN’s consolidated
financial statements (dollars in thousands):

Entered

Balance

Interest
Rate

Maturity(3)

Carrying
Value of
Encumbered
Asset(s)(1)

Outstanding Principal
Balance at December 31,

2009

2008

December 1999(4)
December 2001(2)
December 2001(2)
December 2001(2)
June 2002
February 2004(2)
March 2005(2)

350
623
698
485
21,000
6,952
1,015

8.50% December 2009
9.00% April 2014
9.00% April 2019
9.00% April 2019
6.90% July 2012
6.90% January 2017
8.14% September 2016

-
820
1,247
1,215
24,505
11,764
1,341

-
267
392
201
19,170
4,554
706

40,892

25,290

49
315
418
214
19,477
5,036
781

26,290

(1)

Each loan is secured by a first mortgage lien on certain of NNN’s properties. The carrying values of the assets are as of December 31,
2009.

(2) Date entered represents the date that NNN acquired real estate subject to a mortgage securing a loan. The corresponding original

principal balance represents the outstanding principal balance at the time of acquisition.
(3) Monthly payments include interest and principal, if any; the balance is due at maturity.
(4)

In December 2009, upon maturity NNN repaid the outstanding principal balance and the property was released from the mortgage
lien. This was a self-amortizing mortgage.

Notes Payable – Convertible. Each of NNN’s outstanding series of convertible notes are summarized in the
table below (dollars in thousands):

Terms

2026
Notes(1)(2)(4)

2028
Notes(2)(5)(6)

Issue Date
Net Proceeds
Stated Interest Rate(8)
Debt Issuance Costs
Earliest Conversion Date
Earliest Put Option Date
Maturity Date
Original Principal
Repurchases

Outstanding principal balance at December 31, 2009

September 2006
168,650
3.950%

3,850(3) $

September 2025
September 2011
September 2026
172,500
(33,800)

138,700

March 2008
228,576
5.125%

5,459(7)

June 2027
June 2013
June 2028
234,035
(11,000)

223,035

(1) NNN repurchased $3,800, $5,000 and $25,000 in March 2009, January 2009 and November 2008, respectively, for a

purchase price of $3,100, $3,894 and $19,188, respectively, resulting in a gain of $607, $958 and $4,961,
respectively.

(2) Debt issuance costs include underwriting discounts and commissions, legal and accounting fees, rating agency fees

and printing expenses. These costs have been deferred and are being amortized over the period to the earliest put
option date of the holders using the effective interest method.
Includes $48, $66 and $349 of note costs which were written off in connection with the repurchase of $3,800, $5,000
and $25,000 of the 2026 Notes, respectively.
The conversion rate per $1 principal amount was 41.6750 shares of NNN’s common stock, which is equivalent to a
conversion price of $23.9952 per share of common stock.
The conversion rate per $1 principal amount was 39.3459 shares of NNN’s common stock, which is equivalent to a
conversion price of $25.4156 per share of common stock.

(3)

(4)

(5)

(6) NNN repurchased $2,500 and $8,500 in May 2009 and February 2009, respectively, for a purchase price of $2,049

(7)

and $6,539, respectively, resulting in a gain of $342 and $1,525, respectively.
Includes $48 and $171 of note costs which were written off in connection with the repurchase of $2,500 and $8,500
of the 2028 Notes, respectively.

(8) With the adoption of the new accounting guidance on convertible debt securities, the effective interest rate for the

2026 Notes and the 2028 Notes are 5.840% and 7.192%, respectively.

Each series of convertible notes represents senior, unsecured obligations of NNN and are subordinated to all
secured indebtedness of the Company. Each note is 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 accrued
and unpaid interest thereon through but not including the redemption date, and (ii) the make-whole amount,
if any, as defined in the applicable supplemental indenture relating to the notes.
Notes Payable. Each of NNN’s outstanding series of non-convertible notes are summarized in the table
below (dollars in thousands):

Notes

Issue Date
September 2000
June 2002
June 2004
November 2005
September 2007

2010(1)
2012(1)
2014(1)(2)(5)
2015(1)
2017(1)(6)
(1) The proceeds from the note issuance were used to pay down outstanding indebtedness of NNN’s Credit Facility.
(2) The proceeds from the note issuance were used to repay the obligation of the 2004 Notes.
(3) The note discounts are amortized to interest expense over the respective term of each debt obligation using the effective interest

Principal Discount(3) Net Price
19,874
$ 20,000
49,713
50,000
149,560
150,000
149,610
150,000
249,123
250,000

Effective
Rate(4)
8.595% September 2010
7.833% June 2012
5.910% June 2014
6.185% December 2015
6.924% October 2017

Stated
Rate
8.500%
7.750%
6.250%
6.150%
6.875%

Maturity
Date

126
287
440
390
877

method.
Includes the effects of the discount, treasury lock gain and swap gain (as applicable).

(4)
(5) NNN entered into a forward starting interest rate swap agreement which fixed a swap rate of 4.61% on a notional amount of

$94,000. Upon issuance of the 2014 Notes, NNN terminated the forward starting interest rate swap agreement resulting in a gain of
$4,148. The gain has been deferred and is being amortized as an adjustment to interest expense over the term of the 2014 Notes
using the effective interest method.

(6) NNN entered into an interest rate hedge with a notional amount of $100,000. Upon issuance of the 2017 Notes, NNN terminated the
interest rate hedge agreement resulting in a liability of $3,260, of which $3,228 was recorded to other comprehensive income. The
liability has been deferred and is being amortized as an adjustment to interest expense over the term of the 2017 Notes using the
effective interest method.

Each series of notes represent senior, unsecured obligations of NNN and are subordinated to all secured
indebtedness 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 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 note and convertible note offerings, NNN incurred debt issuance costs totaling
$5,459,000 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.

In accordance with the terms of the indentures, pursuant to which NNN’s notes and convertible 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,
2009, NNN was in compliance with those covenants.

In March 2008, NNN repaid the 7.125% $100,000,000 notes that were due in March 2008.

Debt and Equity Securities

NNN has used, and expects to use in the future, issuances of debt and equity securities primarily to pay
down its outstanding indebtedness and to finance investment acquisitions. NNN has maintained investment
grade debt ratings from Standard and Poor’s, Moody’s Investor Service and Fitch Ratings on its senior,
unsecured debt since 1998. In June 2008, NNN’s debt rating was upgraded by Moody’s Investor Service. In
February 2009, NNN filed a shelf registration statement with the Securities and Exchange Commission (the
“Commission”) which was automatically effective and permits the issuance by NNN of an indeterminate
amount of debt and equity securities.

A description of NNN’s outstanding series of publicly held notes is found under “Debt – Notes Payable –
Convertible” and “Debt – Notes Payable” above.

7.375% Series C Cumulative Redeemable Preferred Stock. In October 2006, NNN issued 3,200,000
depositary shares, each representing 1/100th of a share of 7.375% Series C Cumulative Redeemable
Preferred Stock (“Series C Preferred Stock”), and received gross proceeds of $80,000,000. In addition,
NNN issued an additional 480,000 depositary shares in connection with the underwriters’ over-allotment
option and received gross proceeds of $12,000,000. In connection with this offering, NNN incurred stock
issuance costs of approximately $3,098,000, consisting primarily of underwriting commissions and fees,
legal and accounting fees and printing expenses.

Holders of the depositary shares are entitled to receive, when and as authorized by the Board of Directors,
cumulative preferential cash dividends at the rate of 7.375% of the $25.00 liquidation preference per
depositary share per annum (equivalent to a fixed annual amount of $1.84375 per depositary share). The
Series C Preferred Stock underlying the depositary shares ranks senior to NNN’s common stock with
respect to dividend rights and rights upon liquidation, dissolution or winding up of NNN. The Series C
Preferred Stock has no maturity date and will remain outstanding unless redeemed. NNN may redeem the
Series C Preferred Stock underlying the depositary shares on or after October 12, 2011, for cash, at a
redemption price of $2,500.00 per share (or $25.00 per depositary share), plus all accumulated, accrued and
unpaid dividends.

In January 2007, NNN used $44,540,000 of the net proceeds from the offering to redeem the Series A
Preferred Stock; and the remainder of the net proceeds were used to repay borrowings under the Credit
Facility.

Common Stock Issuances. In March 2007, NNN issued 5,000,000 shares of common stock at a price of
$24.70 per share and received net proceeds of $118,020,000. Subsequently, in April 2007, NNN issued an
additional 750,000 shares of common stock in connection with the underwriters’ over-allotment option and
received net proceeds of $17,730,000. In connection with this offering, NNN incurred stock issuance costs
totaling approximately $6,217,000 consisting primarily of underwriters’ fees and commissions, legal and
accounting fees and printing expenses.

In October 2007, NNN issued 4,000,000 shares of common stock at a price of $25.94 per share and
received net proceeds of $99,150,000. In connection with this offering, NNN incurred stock issuance costs
totaling approximately $4,874,000 consisting primarily of underwriters’ fees and commissions, legal and
accounting fees. In October 2007, NNN used a portion of the net proceeds to repay the outstanding
principal balance on its term note.

In October 2008, NNN issued 3,450,000 shares of common stock in a registered, underwritten public
offering at a price of $23.05 per share and received net proceeds of $75,958,000. In connection with this
offering, NNN incurred stock issuance costs totaling approximately $3,565,000 consisting primarily of
underwriters’ fees and commissions, legal and accounting fees. NNN used the net proceeds to repay
borrowings under the Credit Facility and to acquire Investment Properties.

Dividend Reinvestment and Stock Purchase Plan. In June 2009, NNN filed a shelf registration statement
which was automatically effective, with the Commission for its DRIP, which permits the issuance by NNN
of 16,000,000 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 NNN’s DRIP for each of the years ended December 31
(dollars in thousands):

2009

2008

2007

Shares of common stock
Net proceeds

3,766,452
67,354

2,146,640
47,372

2,645,257
62,980

The proceeds from the issuances were used to pay down outstanding indebtedness under NNN’s Credit
Facility.

Mortgages and Notes Receivable.

Mortgages and notes receivable consisted of the following at December 31 (dollars in thousands):

Mortgages and notes receivable
Structured finance investments
Accrued interest receivable
Unamortized premium

Less loan origination fees, net

2009

2008

41,707
-
269
-
41,976
-
41,976

55,495
4,514
387
84
60,480
(8)
60,472

Commercial Mortgage Residual Interests.

In connection with the independent valuations of the Residuals’ fair value, NNN adjusted carrying value of
the Residuals to reflect such fair value at December 31, 2009. Due to changes in market conditions relating
to residual assets, the independent valuation changed several valuation assumptions. The following table
summarizes the changes to the key assumptions used in determining the value of the Residuals as of
December 31:

Discount rate

Average life equivalent CPR speeds

range
Foreclosures:

2009

2008

25%

14.5% to 20.7% CPR

31.7% to 39.4% CPR

Frequency curve default model
Loss severity of loans in foreclosure

6% average rate
20%

1.1% maximum rate
10%

Yield:

LIBOR
Prime

Forward 3-month curve Forward 3-month curve
Forward curve

Forward curve

The following table summarizes the recognition of unrealized gains and/or losses recorded as other
comprehensive income as well as other than temporary valuation impairment as of December 31 (dollars in
thousands):

Unrealized gains
Unrealized losses
Other than temporary valuation impairment

-
1,640
498

2,009
-
758

-
326
638

2009

2008

2007

Business Combination.

In connection with the default of a note receivable and certain lease agreements between NNN and one of
its tenants, in June 2009, NNN acquired the operations of the auto service business which was operated on
12 Investment Properties. The note foreclosure resulted in a loss of $7,816,000. NNN recorded the value of
the assets received at fair value. No liabilities were assumed. The fair value of the assets resulted in
goodwill of $3,400,000.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

NNN is exposed to interest rate risk primarily as a result of its variable rate Credit Facility and its fixed rate
debt which is used to finance NNN’s development and acquisition activities, as well as for general
corporate purposes. NNN’s interest rate risk management objective is to limit the impact of interest rate
changes on earnings and cash flows and to lower its overall borrowing costs. To achieve its objectives,
NNN borrows at both fixed and variable rates on its long-term debt. As of December 31, 2009, NNN had no
outstanding derivatives.

The information in the table below summarizes NNN’s market risks associated with its debt obligations
outstanding as of December 31, 2009 and 2008. The table presents principal payments and related interest
rates by year for debt obligations outstanding as of December 31, 2009. NNN has a variable interest rate
risk on its Credit Facility which had no outstanding balance as of December 31, 2009. The weighted
average rate for the Credit Facility for the year ended December 31, 2009 was 1.19%. The fair value of the
Credit Facility as of December 31, 2009 and 2008 was $0 and $26,500,000, respectively. The table
incorporates only those debt obligations that existed as of December 31, 2009; it does not consider those
debt obligations or positions which could arise after this date. Moreover, because firm commitments are not
presented in the table below, the information presented therein has limited predictive value. As a result,
NNN’s ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures
that arise during the period, NNN’s hedging strategies at that time and interest rates. If interest rates on
NNN’s variable rate debt increased by one percent, NNN’s interest expense would have increased by one
percent for the year ended December 31, 2009.

Fixed Rate Debt Obligations (dollars in thousands)

Mortgages

Unsecured Debt(1)

2010
2011
2012
2013
2014
Thereafter

Total

Fair Value:

December 31, 2009

December 31, 2008

Debt
Obligation
1,022
$
1,098
19,290
863
880
2,137

Weighted
Average
Interest Rate

Debt
Obligation
19,987
134,421
49,909
208,960
149,771
399,008

7.19% $
7.20%
6.92%
7.35%
7.27%
7.36%

Effective
Interest Rate
8.60%
5.84%
7.83%
7.19%
5.91%
6.65%

25,290

7.01% $

962,056

6.64%

25,290

26,290

987,275

709,944

(1) Includes NNN’s notes payable and convertible notes payable, each net of unamortized discounts. NNN

uses Bloomberg software to determine the fair value.

NNN is also exposed to market risks related to NNN’s Residuals. Factors that may impact the market value of
the Residuals include delinquencies, loan losses, prepayment speeds and interest rates. The Residuals, which
are reported at market value based upon an independent valuation, had a carrying value of $20,153,000 and
$22,000,000 as of December 31, 2009 and 2008, respectively. Unrealized gains and losses are reported as
other comprehensive income in stockholders’ equity. Losses are considered other than temporary and reported
as a valuation impairment in earnings from operations if and when there has been a change in the timing or
amount of estimated cash flows that leads to a loss in value.

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of National Retail Properties, Inc. and Subsidiaries

We have audited National Retail Properties, Inc. and Subsidiaries’ internal control over financial reporting
as of December 31, 2009, based on criteria established in Internal Control – Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). National
Retail Properties, Inc. and Subsidiaries’ management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting included in the accompanying Management’s Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the company’s internal control over financial
reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the
financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, National Retail Properties, Inc. and Subsidiaries maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of National Retail Properties, Inc. and Subsidiaries
as of December 31, 2009 and 2008, and the related consolidated statements of earnings, stockholders’
equity, and cash flows for each of the three years in the period ended December 31, 2009 and our report
dated February 25, 2010 expressed an unqualified opinion thereon.

Miami, Florida
February 25, 2010

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of National Retail Properties, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of National Retail Properties, Inc. and
Subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of earnings,
stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009.
Our audits also included the financial statement schedules listed in the index at Item 15(a). These financial
statements and schedules are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of National Retail Properties, Inc. and Subsidiaries at December 31, 2009
and 2008, and the consolidated results of their operations and their cash flows for each of the three years in
the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), National Retail Property Inc.’s internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25,
2010 expressed an unqualified opinion thereon.

Miami, Florida
February 25, 2010

NATIONAL RETAIL PROPERTIES, INC.
and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)

ASSETS

December 31,
2009

December 31,
2008

Real estate, Investment Portfolio:

Accounted for using the operating method, net of accumulated depreciation and

amortization

Accounted for using the direct financing method

Real estate, Inventory Portfolio, held for sale
Investment in unconsolidated affiliate
Mortgages, notes and accrued interest receivable, net of allowance
Commercial mortgage residual interests
Cash and cash equivalents
Receivables, net of allowance of $583 and $4,003, respectively
Accrued rental income, net of allowance of $2,875 and $4,144, respectively
Debt costs, net of accumulated amortization of $10,008 and $12,852, respectively
Other assets

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Line of credit payable
Mortgages payable
Notes payable – convertible, net of unamortized discount of $18,355 and $25,413,

respectively

Notes payable, net of unamortized discount of $1,324 and $1,521, respectively
Accrued interest payable
Other liabilities

Total liabilities

Commitments and contingencies (Note 26)

Stockholders’ equity:

2,329,827
31,317
72,423
4,703
41,976
20,153
15,225
1,946
25,745
13,884
33,763

2,373,878
31,240
85,122
4,927
60,472
22,000
2,626
3,612
23,972
11,342
30,280

2,590,962

2,649,471

-
25,290

343,380
618,676
7,471
29,283

26,500
26,290

356,122
618,479
7,608
45,526

1,024,100

1,080,525

Preferred stock, $0.01 par value. Authorized 15,000,000 shares

Series C, 3,680,000 depositary shares issued and outstanding, at stated liquidation value

of $25 per share

92,000

Common stock, $0.01 par value. Authorized 190,000,000 shares; 82,427,560 and

78,340,428 shares issued and outstanding, respectively

Excess stock, $0.01 par value. Authorized 205,000,000 shares; none issued or outstanding
Capital in excess of par value
Retained earnings
Accumulated other comprehensive income

Total stockholders’ equity of National Retail Properties, Inc.

Noncontrolling interests

Total equity

Total liabilities and equity

825
-
1,408,491
62,413
511

1,564,240
2,622

1,566,862

784
-
1,337,018
134,644
2,414

1,566,860
2,086

1,568,946

2,590,962

2,649,471

See accompanying notes to consolidated financial statements.

NATIONAL RETAIL PROPERTIES, INC.
and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands, except per share data)

Revenues:

Rental income from operating leases
Earned income from direct financing leases
Percentage rent
Real estate expense reimbursement from tenants
Interest and other income from real estate transactions
Interest income on commercial mortgage residual interests

Disposition of real estate, Inventory Portfolio:

Gross proceeds
Costs

Gain

Retail operations:
Revenues
Operating expenses

Net

Operating expenses:

General and administrative
Real estate
Depreciation and amortization
Impairment – real estate
Impairment – commercial mortgage residual interests valuation adjustment
Restructuring costs

Earnings from operations

Other expenses (revenues):

Interest and other income
Interest expense
Loss on interest rate hedge

Earnings from continuing operations before income tax benefit, equity in earnings of

unconsolidated affiliate, loss on note receivable foreclosure and gain on
extinguishment of debt

Income tax benefit
Equity in earnings of unconsolidated affiliate
Loss on note receivable foreclosure
Gain on extinguishment of debt

Earnings from continuing operations

Earnings (loss) from discontinued operations (Note 18):

Real estate, Investment Portfolio
Real estate, Inventory Portfolio, net of income tax expense

Year Ended December 31,
2008

2009

2007

210,215
3,070
1,340
8,387
4,535
4,252
231,799

953
(916)

15,595
(15,176)

419

21,776
13,684
46,769
28,114
498
731

111,572

120,683

(1,375)
62,151
-

60,776

59,907
1,126
421
(7,196)
3,432

57,690

260
(1,551)

(1,291)

206,477
3,103
1,104
7,012
5,804
4,636
228,136

4,900
(4,879)

-
-

24,878
10,007
44,181
1,234
758
-

81,058

159,065
3,221
1,383
5,591
5,268
4,882
179,410

1,750
(1,418)

332

-
-

23,565
7,805
31,340
416
638
-

63,764

147,099

115,978

(3,748)
63,964
804

61,020

86,079
7,178
364
-
4,961

98,582

12,112
9,277

21,389

(4,751)
51,846
-

47,095

68,883
8,300
49
-
-

77,232

68,976
9,534

78,510

See accompanying notes to consolidated financial statements.

NATIONAL RETAIL PROPERTIES, INC.
and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS – CONTINUED
(dollars in thousands, except per share data)

Earnings including noncontrolling interests
Loss (earnings) attributable to noncontrolling interests:

Continuing operations
Discontinued operations

Net earnings attributable to National Retail Properties, Inc.
Other comprehensive income

Total comprehensive income

Net earnings attributable to National Retail Properties, Inc.
Series C preferred stock dividends

Net earnings attributable to common stockholders

Net earnings per share of common stock:

Basic:

Continuing operations
Discontinued operations

Net earnings

Diluted:

Continuing operations
Discontinued operations

Net earnings

Weighted average number of common shares outstanding:

Basic

Diluted

Year Ended December 31,
2008

2009

2007

56,399

119,971

155,742

(1,542)
(47)

(1,589)

54,810
(1,903)

52,907

54,810
(6,785)

48,025

0.62
(0.02)

0.60

0.61
(0.01)

0.60

109
(2,927)

(2,818)

117,153
1,688

118,841

117,153
(6,785)

110,368

1.23
0.25

1.48

1.23
0.25

1.48

156
(1,299)

(1,143)

154,599
(3,622)

150,977

154,599
(6,785)

147,814

1.06
1.17

2.23

1.06
1.16

2.22

79,846,258

74,249,137

66,152,437

79,953,499

74,344,231

66,263,980

See accompanying notes to consolidated financial statements.

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S

NATIONAL RETAIL PROPERTIES, INC.
and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)

Year Ended December 31,
2008

2009

2007

Cash flows from operating activities:

Earnings including noncontrolling interests
Adjustments to reconcile net earnings to net cash provided by operating activities:

Stock compensation expense
Stock options expense – tax effect
Depreciation and amortization
Impairment – real estate
Impairment – commercial mortgage residual interests valuation
Amortization of notes payable discount
Amortization of deferred interest rate hedges
Equity in earnings of unconsolidated affiliates
Distributions received from unconsolidated affiliates
Gain on disposition of real estate, Investment Portfolio
Gain on extinguishment of debt
Loss on note receivable foreclosure
Gain on disposition of real estate, Inventory Portfolio
Deferred income taxes
Income tax valuation allowance

Change in operating assets and liabilities, net of assets acquired and liabilities assumed in business

combinations:

Additions to real estate, Inventory Portfolio
Proceeds from disposition of real estate, Inventory Portfolio
Decrease in real estate leased to others using the direct financing method
Decrease (increase) in work in process
Increase in mortgages, notes and accrued interest receivable
Decrease in receivables
Increase in commercial mortgage residual interests
Increase in accrued rental income
Decrease (increase) in other assets
Increase (decrease) in accrued interest payable
Increase (decrease) in other liabilities
Increase (decrease) in current tax liability

56,399

$ 119,971

$ 155,742

4,172
190
48,485
34,514
498
6,006
(159)
(421)
607
(2,392)
(3,432)
7,196
(595)
(16,649)
14,900

(2,457)
6,276
1,378
(786)
(10)
941
(291)
(2,061)
(172)
(137)
(2,930)
432

3,299
-
45,347
5,660
758
5,670
(162)
(364)
439
(9,980)
(4,961)
-
(12,665)
(5,593)
-

(33,745)
128,785
1,195
47
(217)
243
-
(978)
951
(3,635)
(1,463)
(1,143)

2,604
-
32,927
1,970
638
2,724
(309)
(49)
30
(56,625)
-
-
(12,133)
(4,590)
-

(165,160)
160,173
2,130
(4,217)
(301)
3,924
-
(2,631)
3,615
5,254
4,510
(79)

Net cash provided by operating activities

149,502

237,459

130,147

Cash flows from investing activities:

Proceeds from the disposition of real estate, Investment Portfolio
Additions to real estate, Investment Portfolio:
Accounted for using the operating method

Investment in unconsolidated affiliate
Increase in mortgages and notes receivable
Principal payments on mortgages and notes receivable
Cash received from commercial mortgage residual interests
Restricted cash
Payment of lease costs
Other

Net cash used in investing activities

14,588

60,027

136,295

(44,433)
-
(959)
4,009
-
-
(451)
(817)

(352,618)
(901)
(29,934)
64,589
3,591
-
(922)
(136)

(677,101)
(4,156)
(44,888)
19,862
6,208
36,587
(2,912)
(6,612)

(28,063)

(256,304)

(536,717)

See accompanying notes to consolidated financial statements.

NATIONAL RETAIL PROPERTIES, INC.
and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED
(dollars in thousands)

Year Ended December 31,
2008

2009

2007

Cash flows from financing activities:

Proceeds from line of credit payable
Repayment of line of credit payable
Repayment of mortgages payable
Proceeds from notes payable – convertible
Repurchase of notes payable – convertible – debt component
Repurchase of notes payable – convertible – equity component
Repayment of notes payable – secured
Proceeds from notes payable
Repayment of notes payable
Payment of interest rate hedge
Payment of debt costs
Repayment of financing lease obligation
Proceeds from issuance of common stock
Redemption of 1,781,589 shares of Series A preferred stock
Payment of Series C preferred stock dividends
Payment of common stock dividends
Noncontrolling interest distributions
Noncontrolling interest contributions
Stock issuance costs

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

132,400
(158,900)
(1,000)
-
(14,785)
(795)
-
-
-
-
(6,275)
-
68,060
-
(6,785)
(120,256)
(552)
152
(104)

(108,840)

12,599
2,626

516,000
(619,300)
(1,190)
234,035
(18,420)
(768)
(12,000)
-
(100,000)
-
(5,813)
-
127,328
-
(6,785)
(110,107)
(5,483)
41
(3,566)

(6,028)

(24,873)
27,499

15,225

2,626

662,300
(560,500)
(8,412)
-
-
-
(33,300)
249,122
-
(3,228)
(2,453)
(26,007)
310,208
(44,540)
(6,785)
(92,989)
(62)
155
(11,115)

432,394

25,824
1,675

27,499

See accompanying notes to consolidated financial statements.

NATIONAL RETAIL PROPERTIES, INC.
and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED
(dollars in thousands)

Year Ended December 31,
2008

2009

2007

Supplemental disclosure of cash flow information:

Interest paid, net of amount capitalized

Taxes paid (received)

Supplemental disclosure of non-cash investing and financing activities:

Issued 262,546, 225,517 and 211,118 shares of restricted and unrestricted common stock in 2009,

2008 and 2007, respectively, pursuant to NNN’s performance incentive plan

Issued 6,594, 12,766 and 7,750 shares of common stock in 2009, 2008 and 2007, respectively, to

directors pursuant to NNN’s performance incentive plan

Issued 41,604, 26,879 and 16,346 shares of common stock in 2009, 2008 and 2007, respectively,

pursuant to NNN’s Deferred Director Fee Plan

Surrender of 2,520 and 8,600 shares of restricted common stock in 2008 and 2007, respectively

Change in other comprehensive income

Change in lease classification (direct financing lease to operating lease)

Transfer of real estate from Inventory Portfolio to Investment Portfolio

Note and mortgage receivable accepted in connection with real estate transactions

Interest rate hedge

Real estate acquired in connection with note receivable foreclosure

Assets received in note receivable foreclosure

Note receivable foreclosures

61,475

69,395

(63) $

3,441

4,290

118

611

3,796

262

449

(1,903) $

1,439

16,058

1,550

4,240

5,527

(17,013) $

300

29,948

24,245

2,497

51,824

1,375

4,323

182

331

182

(3,723)

14,845

9,747

109

See accompanying notes to consolidated financial statements.

NATIONAL RETAIL PROPERTIES, INC.
and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009, 2008 and 2007

Note 1 – Organization and Summary of Significant Accounting Policies:

Organization and Nature of Business – National Retail Properties, Inc., a Maryland corporation, is a
fully integrated real estate investment trust (“REIT”) formed in 1984. The term “NNN” or the
“Company” refers to National Retail Properties, Inc. and all of its consolidated subsidiaries. NNN
has elected to treat certain subsidiaries as taxable REIT subsidiaries. These taxable subsidiaries and
their majority owned and controlled subsidiaries are collectively referred to as the “TRS.”

NNN’s operations are divided into two primary business segments: (i) investment assets, including
real estate assets, mortgages and notes receivable (including structured finance investments) on the
consolidated balance sheets and commercial mortgage residual interests (collectively, “Investment
Assets”), and (ii) inventory real estate assets (“Inventory Assets”). NNN acquires, owns, invests in,
manages and develops properties that are leased primarily to retail tenants under long-term net
leases and primarily held for investment (“Investment Properties” or “Investment Portfolio”). As of
December 31, 2009, NNN owned 1,015 Investment Properties (including 12 properties with retail
operations that NNN operates), with an aggregate gross leasable area of 11,373,000 square feet,
located in 44 states. In addition, as of December 31, 2009, NNN’s Investment Assets included
$41,976,000 in mortgages, notes and interest receivable (including structured finance investments)
and $20,153,000 in commercial mortgage residual interests. The Inventory Assets typically
represent direct and indirect investment interests in real estate assets acquired or developed
primarily for the purpose of selling the real estate (“Inventory Properties” or “Inventory Portfolio”).
Inventory Assets typically consist of two types of properties, property for development and
improved properties. As of December 31, 2009, NNN owned 19 Inventory Properties.

Principles of Consolidation – NNN’s consolidated financial statements include the accounts of each
of the respective majority owned and controlled affiliates, including transactions whereby NNN has
been determined to be the primary beneficiary in accordance with the Financial Accounting
Standards Board (“FASB”) guidance included in Consolidation. All significant intercompany
account balances and transactions have been eliminated. NNN applies the equity method of
accounting to investments in partnerships and joint ventures that are not subject to control by NNN
due to the significance of rights held by other parties.

The TRS develops real estate through various joint venture development affiliate agreements. NNN
consolidates the joint venture development entities listed in the table below based upon either NNN
being the primary beneficiary of the respective variable interest entity or NNN having a controlling
interest over the respective entity. NNN eliminates significant intercompany

balances and transactions and records a noncontrolling interest for its other partners’ ownership
percentage. The following table summarizes each of the investments as of December 31, 2009:

Date of Agreement

Entity Name

November 2002

February 2003

February 2006

September 2006

WG Grand Prairie TX, LLC

Gator Pearson, LLC

CNLRS BEP, L.P.

CNLRS Rockwall, L.P.

NNN Harrison Crossing, L.P.

CNLRS RGI Bonita Springs, LLC

TRS’
Ownership %

60%

50%

In September 2007, NNN entered into a joint venture, NNN Retail Properties Fund I LLC (the
“NNN Crow JV”) with an affiliate of Crow Holdings Realty Partners IV, LP.

Real Estate – Investment Portfolio – NNN records the acquisition of real estate at cost, including
acquisition and closing costs. The cost of properties developed 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 Subject to a Lease – In accordance with the
FASB guidance on business combinations, the fair value of the real estate acquired with in-place
leases is allocated to the acquired tangible assets, consisting of land, building and tenant
improvements, and identified intangible assets and liabilities, consisting of the value of above-
market and below-market leases, value of in-place leases and value of tenant relationships, based in
each case on their relative fair values.

The fair value of the tangible assets of an acquired leased property is determined by valuing the
property as if it were vacant, and the “as-if-vacant” value is then allocated to land, building and
tenant improvements based on the determination of the relative fair values of these assets. The
as-if-vacant fair value of a property is provided to management by a qualified appraiser.

In allocating the fair value of the identified intangible assets and liabilities of an acquired property,
above-market and below-market in-place lease values are recorded as other assets or liabilities based
on the present value (using an interest rate which reflects the risks associated with the leases
acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place
leases, and (ii) management’s estimate of fair market lease rates for the corresponding in-place
leases, measured over a period equal to the remaining non-cancelable term of the lease. The
capitalized above-market lease values are amortized as a reduction of rental income over the
remaining non-cancelable terms of the respective leases. The capitalized below-market lease values
are amortized as an increase to rental income over the initial term.

The aggregate value of other acquired intangible assets, consisting of in-place leases, is measured by
the excess of (i) the purchase price paid for a property after adjusting existing in-place leases to
market rental rates over (ii) the estimated fair value of the property as-if-vacant, determined as set
forth above. The value of in-place leases exclusive of the value of above-market and below-market
in-place leases is amortized to expense over the remaining non-cancelable periods of the respective
leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts
relating to that lease would be written off.

The value of tenant relationships is reviewed on individual transactions to determine if future value
was derived from the acquisition.

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 and
repairs. The leases are accounted for using either the operating or the direct financing method. Such
methods are described below:

Operating method – Leases accounted for using the operating method are recorded at the
cost of the real estate. Revenue is recognized as rentals are earned and expenses (including
depreciation) are charged to operations as incurred. Buildings are depreciated on the straight-
line method over their estimated useful lives. Leasehold interests are amortized on the
straight-line method over the terms of their respective leases. 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.

Direct financing method – Leases accounted for using the direct financing method are
recorded at their net investment (which at the inception of the lease generally represents the
cost of the property). Unearned income is deferred and amortized into income over the lease
terms so as to produce a constant periodic rate of return on NNN’s net investment in the
leases.

Real Estate – Inventory Portfolio – The TRS acquires and/or develops and owns properties primarily
for the purpose of selling the real estate. The properties that are classified as held for sale at any
given time may consist of properties that have been acquired in the marketplace with the intent to
sell and properties that have been, or are currently being, constructed by the TRS. The TRS records
the acquisition of the real estate at cost, including the acquisition and closing costs. The cost of the
real estate developed by the TRS includes direct and indirect costs of construction, interest and other
miscellaneous costs incurred during the development period until the project is substantially
complete and available for occupancy. Real estate held for sale is not depreciated and is recorded at
the lower of cost or fair value. In accordance with the FASB guidance included in Real Estate, the
TRS classifies its real estate held for sale as discontinued operations for each property in which
rental revenues are generated.

Impairment – Real Estate – Based upon events or changes in certain circumstances, management
periodically assesses its Investment Properties for possible impairment indicating that the carrying
value of the asset, including accrued rental income, may not be recoverable through operations.
Events or circumstances that may occur include changes in real estate market condition, the ability
of NNN to re-lease properties that are vacant, and the ability to sell properties at an attractive price.
Management determines whether an impairment in value has occurred by comparing the estimated
future cash flows (undiscounted and without interest charges), including the residual value of the
real estate, with the carrying cost of the individual asset. If an impairment is indicated, a loss will be
recorded for the amount by which the carrying value of the asset exceeds its fair value.

Real Estate Dispositions – When real estate is disposed of, the related cost, accumulated
depreciation or amortization and any accrued rental income for operating leases and the net
investment for direct financing leases are removed from the accounts and gains and losses from the
dispositions are reflected in income. Gains from the disposition of real estate are generally
recognized using the full accrual method in accordance with the FASB guidance included in Real
Estate Sales, provided that various criteria relating to the terms of the sale and any subsequent
involvement by NNN with the real estate sold are met. Lease termination fees are recognized when
the related leases are cancelled and NNN no longer has a continuing obligation to provide services
to the former tenants.

Valuation of Mortgages, Notes and Accrued Interest – The allowance related to the mortgages, notes
and accrued interest is NNN’s best estimate of the amount of probable credit losses. The allowance
is determined on an individual note basis in reviewing any payment past due for over 90 days. Any
outstanding amounts are written off against the allowance when all possible means of collection
have been exhausted.

Investment in an Unconsolidated Affiliate – NNN accounts for its investment in an unconsolidated
affiliate under the equity method of accounting.

Commercial Mortgage Residual Interests, at Fair Value – Commercial mortgage residual interests,
classified as available for sale, are reported at their market values with unrealized gains and losses
reported as other comprehensive income in stockholders’ equity. The commercial mortgage residual
interests were acquired in connection with the acquisition of 78.9 percent equity interest of Orange
Avenue Mortgage Investments, Inc. (“OAMI”). NNN recognizes the excess of all cash flows
attributable to the commercial mortgage residual interests estimated at the acquisition/transaction
date over the initial investment (the accretable yield) as interest income over the life of the
beneficial interest using the effective yield method. Losses are considered other than temporary
valuation impairments if and when there has been a change in the timing or amount of estimated
cash flows, exclusive of changes in interest rates, that leads to a loss in value.

Cash and Cash Equivalents – NNN considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Cash and cash equivalents consist of cash
and money market accounts. Cash equivalents are stated at cost plus accrued interest, which
approximates fair value.

Cash accounts maintained on behalf of NNN in demand deposits at commercial banks and money
market funds may exceed federally insured levels; however, NNN has not experienced any losses in
such accounts.

Valuation of Receivables – NNN estimates of the collectibility of its accounts receivable related to
rents, expense reimbursements and other revenues. NNN analyzes accounts receivable and historical
bad debt levels, customer credit-worthiness and current economic trends when evaluating the
adequacy of the allowance for doubtful accounts. In addition, tenants in bankruptcy are analyzed
and estimates are made in connection with the expected recovery of pre-petition and post-petition
claims.

Goodwill – Goodwill arises from business combinations and represents the excess of the cost of an
acquired entity over the net fair value amounts that were assigned to the assets acquired and the
liabilities assumed. In accordance with the FASB guidance included in Goodwill, NNN performs
impairment testing on goodwill annually. The impairment test compares the fair value of goodwill to its
carrying amount.

Debt Costs – Debt costs incurred in connection with NNN’s $400,000,000 line of credit and
mortgages payable have been deferred and are being amortized over the term of the respective loan
commitment using the straight-line method, which approximates the effective interest method. Debt
costs incurred in connection with the issuance of NNN’s notes payable have been deferred and are
being amortized over the term of the respective debt obligation using the effective interest method.

Revenue Recognition – Rental revenues for non-development real estate assets are recognized when
earned in accordance with the FASB guidance included in Leases, based on the terms of the lease at
the time of acquisition of the leased asset. Rental revenues for properties under construction

commence upon completion of construction of the leased asset and delivery of the leased asset to the
tenant.

Earnings Per Share – Earnings per share have been computed pursuant to the FASB guidance
included in Earnings Per Share. Effective January 1, 2009, the guidance requires classification of
the Company’s unvested restricted share units which contain rights to receive nonforfeitable
dividends, as participating securities requiring the two-class method of computing earnings per
share. Under the two-class method, earnings per common share are computed by dividing the sum
of distributed earnings to common stockholders and undistributed earnings allocated to common
stockholders by the weighted average number of common shares outstanding for the period. In
applying the two-class method, undistributed earnings are allocated to both common shares and
participating securities based on the weighted average shares outstanding during the period. The
following table is a reconciliation of the numerator and denominator used in the computation of
basic and diluted earnings per common share using the two-class method for the years ended
December 31 (dollars in thousands):

2009

2008

2007

Basic and Diluted Earnings:

Net earnings attributable to NNN

Less: Series C preferred stock dividends

Net earnings available to NNN’s common stockholders

Less: Earnings attributable to unvested restricted shares

Net earnings used in basic earnings per share
Reallocated undistributed income (loss)

54,810
(6,785)

48,025
(290)

47,735
(1)

117,153
(6,785)

110,368
(485)

109,883
-

154,599
(6,785)

147,814
(622)

147,192
1

Net earnings used in diluted earnings per share

47,734

109,883

147,193

Basic and Diluted Weighted Average Shares Outstanding:

Weighted average number of shares outstanding
Less: Unvested restricted stock

Weighted average number of shares outstanding used in

basic earnings per share
Effects of dilutive securities:
Common stock options
Directors’ deferred fee plan

80,486,215
(639,957)

74,732,844
(483,707)

66,519,519
(367,082)

79,846,258

74,249,137

66,152,437

9,037
98,204

35,900
59,194

69,040
42,503

Weighted average number of shares outstanding used in

diluted earnings per share

79,953,499

74,344,231

66,263,980

The potential dilutive shares related to convertible notes payable were not included in computing
earnings per common share because their effects would be antidilutive.

Stock-Based Compensation – On January 1, 2006, NNN adopted the FASB guidance included in
Equity – Based Payments to Non-Employees, under the modified prospective method. Under the
modified prospective method, compensation cost is recognized for all awards granted after the
adoption of this standard and for the unvested portion of previously granted awards that are
outstanding as of that date. In accordance with the FASB guidance, NNN estimates the fair value of
restricted stock and stock option grants at the date of grant and amortizes those amounts into
expense on a straight line basis or amount vested, if greater, over the appropriate vesting period.

Income Taxes – NNN has made an election to be taxed as a REIT under Sections 856 through 860
of the Internal Revenue Code of 1986, as amended (the “Code”), and related regulations. NNN
generally will not be subject to federal income taxes on amounts distributed to stockholders,
providing it distributes 100 percent of its REIT taxable income and meets certain other requirements
for qualifying as a REIT. For each of the years in the three-year period ended December 31, 2009,
NNN believes it has qualified as a REIT. Notwithstanding NNN’s qualification for taxation as a
REIT, NNN is subject to certain state taxes on its income and real estate.

NNN and its taxable REIT subsidiaries have made timely TRS elections pursuant to the provisions
of the REIT Modernization Act. A taxable REIT subsidiary is able to engage in activities resulting
in income that previously would have been disqualified from being eligible REIT income under the
federal income tax regulations. As a result, certain activities of NNN which occur within its TRS
entities are subject to federal and state income taxes (See Note 17). All provisions for federal
income taxes in the accompanying consolidated financial statements are attributable to NNN’s
taxable REIT subsidiaries and to OAMI’s built-in-gain tax liability.

Income taxes are accounted for under the asset and liability method as required by the FASB
guidance included in Income Taxes. Deferred tax assets and liabilities are recognized for the
temporary differences based on estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the enactment date.

Fair Value Measurement – NNN’s estimates of fair value of financial and non-financial assets and
liabilities based on the framework established in the fair value accounting guidance. The framework
specifies a hierarchy of valuation inputs which was established to increase consistency, clarity and
comparability in fair value measurements and related disclosures. The guidance describes a fair
value hierarchy based upon three levels of inputs that may be used to measure fair value, two of
which are considered observable and one that is considered unobservable. The following describes
the three levels:

• Level 1 – Valuation is based upon quoted prices in active markets for identical assets or

liabilities.

• Level 2 – Valuation is based upon inputs other than Level 1 that are observable, either

directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in
markets that are not active or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities.

• Level 3 – Valuation is generated from model-based techniques that use at least one

significant assumption not observable in the market. These unobservable assumptions reflect
estimates of assumptions that market participants would use in pricing the asset or liability.
Valuation techniques include option pricing models, discounted cash flow models and
similar techniques.

New Accounting Pronouncements – In January 2009, FASB issued new guidance on impairments
included in Beneficial Interests in Securitized Financial Assets. The new guidance was effective for
interim and annual periods ending after December 15, 2008. Retroactive application was not
permitted. The adoption of the new guidance did not have a significant impact on NNN’s financial
position or results of operations.

Effective January 1, 2009, NNN adopted the new FASB guidance for the accounting of
noncontrolling interests. The new guidance requires noncontrolling interests, previously called
minority interest, to be presented as a component of equity. In addition, the guidance requires
disclosure on the face of the consolidated statement of earnings of the amounts of consolidated net
income attributable to the parent and to the noncontrolling interests. The guidance was applied
prospectively with the exception of presentation and disclosure requirements, which were applied
retrospectively for all periods presented. The adoption of the new guidance did not have a material
impact on NNN’s financial position or results of operations.

In April 2009, FASB issued additional application guidance and enhancements to disclosures
regarding fair value measurements. The new guidance enhances consistency in financial reporting
by increasing the frequency of fair value disclosures. The guidance also provides guidelines for
making fair value measurements more consistent. The guidance was effective for interim and annual
periods ending after June 15, 2009. The adoption of the guidance did not have a significant impact
on NNN’s financial position or results of operations.

In April 2009, FASB issued revised guidance on the recognition and measurement, subsequent
measurement and accounting and disclosure of assets and liabilities arising from contingencies in a
business combination. The adoption of the guidance did not have a significant impact on NNN’s
financial position or result of operations.

In May 2009, FASB issued new guidance for accounting for subsequent events. The guidance
establishes general standards of accounting for and disclosure of events that occur after the balance
sheet date but before financial statements are issued or are available to be issued. The guidance
provides, among other things, that companies should recognize in the financial statements the
effects of all subsequent events that provide additional evidence about conditions that existed at the
date of the balance sheet, including estimates inherent in the process of preparing financial
statements. The new guidance was effective for interim or annual reporting periods ending after
June 15, 2009. The adoption of the guidance did not have a significant impact on NNN’s financial
position or result of operations.

In June 2009, FASB issued Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles (the “Codification”). The Codification reorganized existing U.S.
accounting and reporting standards issued by the FASB and other related private sector standard
setters into a single source of authoritative accounting principles arranged by topic. The Codification
supersedes all existing U.S. accounting standards; all other accounting literature not included in the
Codification (other than the Securities and Exchange Commission (the “Commission”) guidance for
publicly-traded companies) is considered non-authoritative. The Codification was effective for
interim and annual reporting periods ending after September 15, 2009. The adoption of the
Codification changed the Company’s references to accounting standards under generally accepted
accounting principles (“GAAP”) but did not impact the Company’s financial position or results of
operations.

In June 2009, FASB issued guidance on the accounting for the transfers of financial assets. The new
guidance eliminates the concept of a qualifying special-purpose entity and changes the requirements
for derecognizing financial assets. The new guidance is effective on a prospective basis for annual
periods beginning after November 15, 2009, and interim and annual periods thereafter. The adoption
of the standard will not have a significant impact on NNN’s financial position or results of
operations.

In June 2009, FASB issued revised guidance on the accounting for variable interest entities. The
revised guidance reflects the elimination of the concept of a qualifying special-purpose entity. The
guidance also replaces the quantitative-based risks and rewards calculation of the previous guidance
for determining which company, if any, has a controlling financial interest in a variable interest
entity with an approach that is primarily qualitative. The new guidance requires ongoing
assessments of whether an enterprise is the primary beneficiary of the variable interest entity as well
as additional disclosures. The guidance is effective for financial statements issued for fiscal years
beginning after November 15, 2009. The adoption of the standard will not have a significant impact
on NNN’s financial position or results of operations.

In August 2009, FASB issued new guidance for the accounting for the fair value measurement of
liabilities. The new guidance provides clarification that in circumstances in which a quoted price in
an active market for the identical liability is not available, a reporting entity is required to measure
fair value using one or more of the approved techniques. The new guidance clarifies that both a
quoted price in an active market for the identical liability at the measurement date and the quoted
price for the identical liability when traded as an asset in an active market when no adjustments to
the quoted price of the asset are required are Level 1 fair value measurements. The guidance is
effective for the first reporting period (including interim periods) beginning after issuance. The
Company is currently evaluating the provisions to determine the potential impact, if any, the
adoption will have on NNN’s financial position or results of operations.

Adoption of New Accounting Standards with change in Accounting Principles – Effective
January 1, 2009, NNN adopted the new FASB guidance on accounting for convertible debt
instruments that may be settled in cash upon conversion. The new guidance requires the liability and
equity components of convertible debt instruments that may be settled in cash upon conversion
(including partial cash settlement) was separately accounted for in a manner that reflects the issuer’s
non-convertible debt borrowing rate. The debt component was recorded based upon the estimated
fair value of non-convertible debt with similar terms. The resulting debt discount is amortized over
the period during which the debt is outstanding as additional non-cash interest expense. This
guidance required retrospective application, the effects of adopting such, has been reflected in all
periods presented.

Effective January 1, 2009, NNN adopted the new FASB guidance on determining whether
instruments granted in share-based payment transactions are participating securities, which also
required retrospective application. The adoption of the guidance did not have a significant impact on
NNN’s financial position or results of operations.

Use of Estimates – Management of NNN has made a number of estimates and assumptions relating
to the reporting of assets and liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities to prepare these consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America. Significant estimates
include provision for impairment and allowances for certain assets, accruals, useful lives of assets
and capitalization of costs. Actual results could differ from those estimates.

Reclassification – Certain items in the prior year’s consolidated financial statements and notes to
consolidated financial statements have been reclassified to conform to the 2009 presentation. NNN
transferred 11 properties from the Inventory Portfolio to the Investment Portfolio in December 2009.
These reclassifications had no effect on stockholders’ equity or net earnings.

Note 2 – Real Estate – Investment Portfolio:

Leases – As of December 31, 2009, 984 of the Investment Property leases had been classified as
operating leases, and 23 leases had been classified as direct financing leases. For the Investment
Property leases classified as direct financing leases, the building portions of the property leases are
accounted for as direct financing leases while the land portions of seven of these leases are
accounted for as operating leases. Substantially all leases have initial terms of 10 to 20 years
(expiring between 2010 and 2029) and provide for minimum rentals. In addition, the leases
generally provide for limited increases in rent as a result of fixed increases, increases in the
Consumer Price Index (“CPI”), and/or increases in the tenant’s sales volume. Generally, the tenant
is also required to pay all property taxes and assessments, substantially maintain the interior and
exterior of the building and carry property and liability insurance coverage. Certain of NNN’s
Investment Properties are subject to leases under which NNN retains responsibility for certain costs
and expenses of the property. As of December 31, 2009, the weighted average remaining lease term
was approximately 12 years. Generally, the leases of the Investment Properties provide the

tenant with one or more multi-year renewal options subject to generally the same terms and
conditions as the initial lease.

Investment Portfolio – Accounted for Using the Operating Method – Real estate subject to operating
leases consisted of the following as of December 31 (dollars in thousands):

Land and improvements
Buildings and improvements
Leasehold interests

Less accumulated depreciation and amortization

Work in progress

2009

2008

1,054,888
1,451,608
1,290

2,507,786
(183,956)

1,063,419
1,413,438
2,532

2,479,389
(146,296)

2,323,830
5,997

2,333,093
40,785

2,329,827

2,373,878

Some leases provide for scheduled rent increases throughout the lease term. Such amounts are
recognized on a straight-line basis over the terms of the leases. For the years ended December 31,
2009, 2008 and 2007, NNN recognized collectively in continuing and discontinued operations,
$2,102,000, $1,020,000, and $2,672,000, respectively, of such income. At December 31, 2009 and
2008, the balance of accrued rental income, net of allowances of $2,875,000 and $4,144,000,
respectively, was $25,745,000 and $23,972,000, respectively.

In connection with the development of two Investment Properties, NNN has agreed to fund
construction commitments (including construction, land costs and tenant improvements) of
$14,651,000. As of December 31, 2009, NNN had funded $12,261,000 of this commitment, with
$2,390,000 remaining to be funded.

The following is a schedule of future minimum lease payments to be received on noncancellable
operating leases at December 31, 2009 (dollars in thousands):

2010
2011
2012
2013
2014
Thereafter

202,038
198,594
193,894
185,630
176,374
1,574,516

2,531,046

Since lease renewal periods are exercisable at the option of the tenant, the above table only presents
future minimum lease payments due during the initial lease terms. In addition, this table does not
include amounts for potential variable rent increases that are based on the CPI or future contingent
rents which may be received on the leases based on a percentage of the tenant’s gross sales.

Investment Portfolio – Accounted for Using the Direct Financing Method – The following lists the
components of net investment in direct financing leases at December 31 (dollars in thousands):

Minimum lease payments to be received
Estimated unguaranteed residual values
Less unearned income

Net investment in direct financing leases

2009

2008

42,244
12,297
(23,224)

43,275
11,755
(23,790)

31,317

31,240

The following is a schedule of future minimum lease payments to be received on direct financing
leases held for investment at December 31, 2009 (dollars in thousands):

2010
2011
2012
2013
2014
Thereafter

4,545
4,531
4,558
4,508
3,750
20,352

42,244

The above table does not include future minimum lease payments for renewal periods, potential
variable CPI rent increases or contingent rental payments that may become due in future periods
(See Real Estate – Accounted for Using the Operating Method).

Note 3 – Real Estate – Inventory Portfolio:

As of December 31, 2009, the TRS owned 19 Inventory Properties: 13 completed inventory and six
land parcels. As of December 31, 2008, the TRS owned 32 Inventory Properties: 24 completed
inventory, one under construction and seven land parcels. The real estate Inventory Portfolio
consisted of the following (dollars in thousands):

Inventory:
Land
Building

Construction projects:

Land
Work in process

Less impairment

2009

2008

19,732
47,684

67,416

20,238
47,925

68,163

17,719
(363)

17,356
(12,349)

19,031
1,469

20,500
(3,541)

72,423

85,122

The following table summarizes the number of Inventory Properties sold and the corresponding gain
recognized on the disposition of Inventory Properties included in continuing and discontinued
operations for the years ended December 31 (dollars in thousands):

Continuing operations
Noncontrolling interest

Total continuing operations

attributable to NNN

Discontinued operations
Intersegment eliminations
Noncontrolling interest

Total discontinued operations

attributable to NNN

2009

2008

2007

# of
Properties

Gain

37
(14)

527
31
-

558

# of
Properties

Gain

# of
Properties

Gain

21
(10)

12,315
329
(3,297)

9,347

332
-

332

10,957
844
(1,120)

10,681

581

9,358

11,013

Note 4 – Impairments – Real Estate:

Management periodically assesses its real estate for possible impairment whenever certain events or
changes in circumstances indicate that the carrying amount of the asset, including accrued rental
income, may not be recoverable through operations. Events or circumstances that may occur include
changes in real estate market conditions, the ability of NNN to re-lease properties that are vacant,
and the ability to sell properties at an attractive price. Impairments are measured as the amount by
which the current book value of the asset exceeds the estimated fair value of the asset. As a result of
the Company’s review of long lived assets, including identifiable intangible assets, NNN recognized
the following real estate impairments for the years ended December 31 (dollars in thousands):

Continuing operations
Discontinued operations

2009
28,114
6,400
34,514

2008

2007

1,234
4,426
5,660

416
1,554
1,970

The valuation of impaired assets is determined using widely accepted valuation techniques including
discounted cash flow analysis, income capitalization, analysis of recent comparable sales
transactions, actual sales negotiations and bona fide purchase offers received from third parties.
NNN may consider a single valuation technique or multiple valuation techniques, as appropriate,
when measuring the fair value of its real estate.

The following table presents information about NNN’s impaired assets that were measured at fair
value. The table indicates the fair value hierarchy of the valuation techniques utilized by NNN to
determine the fair vale on a nonrecurring basis of such assets (dollars in thousands):

Investment Portfolio
Inventory Portfolio

Level 1

Level 2

-
-
-

8,203
45,369
$ 53,572

Level 3
$ 18,610
-
$ 18,610

Total
$ 26,813
45,369
$ 72,182

Total
Losses

25,706
8,808
34,514

The Investment Portfolio is substantially comprised of assets held for use. NNN recorded an
impairment charge related to 18 Investment Properties totaling $25,706,000, during the year ended
December 31, 2009. The Inventory Portfolio is reported at lower of cost or fair value. During the
year ended December 31, 2009, NNN recorded an impairment charge related to seven Inventory
Properties totaling $8,808,000.

Note 5 – Business Combinations:

In connection with the default of a note receivable and certain lease agreements between NNN and
one of NNN’s tenants, in June of 2009, NNN acquired the operations of the auto service business
which was operated on 12 Investment Properties. The note foreclosure resulted in a loss of
$7,816,000. NNN recorded the value of the assets received at fair value. No liabilities were
assumed. The fair value of the assets resulted in goodwill of $3,400,000.

Note 6 – Mortgages, Notes and Accrued Interest Receivable:

Mortgages are secured by real estate, real estate securities or other assets. Structured finance
investments are secured by the borrowers’ pledge of their respective membership interests in the
entities which own the respective real estate. Mortgages and notes receivable consisted of the
following at December 31 (dollars in thousands):

Mortgages and notes receivable
Structured finance investments
Accrued interest receivables
Unamortized premium

Less loan origination fees, net

2009

2008

41,707
-
269
-
41,976
-
41,976

55,495
4,514
387
84
60,480
(8)
60,472

Note 7 – Commercial Mortgage Residual Interests:

OAMI holds the commercial mortgage residual interests (“Residuals”) from seven securitizations.
The following table summarizes the investment interests in each of the transactions:

Securitization

Company(1) OAMI(2)

3rd Party

Investment Interest

BYL 99-1
CCMH I, LLC
CCMH II, LLC
CCMH III, LLC
CCMH IV, LLC
CCMH V, LLC
CCMH VI, LLC

-
42.7%
44.0%
36.7%
38.3%
38.4%
-

59.0%
57.3%
56.0%
63.3%
61.7%
61.6%
100.0%

41.0%
-
-
-
-
-
-

(1) NNN owned these investment interests prior to its acquisition of the

equity interest in OAMI.

(2) NNN owns 78.9 percent of OAMI’s investment interest.

Each of the Residuals is recorded at fair value based upon an independent valuation. Unrealized
gains and losses are reported as other comprehensive income in stockholders’ equity and other than
temporary losses as a result of a change in the timing or amount of estimated cash flows are
recorded as an other than temporary valuation impairment. Due to changes in market conditions
relating to residual assets, the independent valuation changed several valuation assumptions during
the year: prepayment speeds, default curves and loss severity.

Unrealized gains
Unrealized losses
Other than temporary valuation impairment

2009

2008

2007

-
1,640
498

2,009
-
758

-
326
638

The following table summarizes the changes to the key assumptions used in determining the value
of the Residuals as of December 31:

Discount rate
Average life equivalent CPR speeds range
Foreclosures:

Frequency curve default model
Loss severity of loans in foreclosure

Yield:

LIBOR
Prime

2009

2008

25%
14.5% to 20.7% CPR

25%
31.7% to 39.4% CPR

6% average rate
20%

1.1% maximum rate
10%

Forward 3-month curve
Forward curve

The following table shows the effects on the key assumptions affecting the fair value of the
Residuals at December 31, 2009 (dollars in thousands):

Carrying amount of retained interests

Discount rate assumption:

Fair value at 27% discount rate
Fair value at 30% discount rate

Prepayment speed assumption:

Fair value of 1% increases above the CPR Index
Fair value of 2% increases above the CPR Index

Expected credit losses:

Fair value 2% adverse change
Fair value 3% adverse change

Yield Assumptions:

Fair value of Prime/LIBOR spread contracting 25 basis points
Fair value of Prime/LIBOR spread contracting 50 basis points

Residuals

20,153

$
$

19,474
18,523

20,079
20,065

19,748
19,576

19,828
20,993

These sensitivities are hypothetical and should be used with caution. As the figures indicate,
changes in fair value based on variations in assumptions generally cannot be extrapolated because
the relationship of the change in assumption to the change in fair value may not be linear. Also, in
this table, the effect of a variation of a particular assumption on the fair value of the retained interest
is calculated without changing any other assumptions; in reality, changes in one factor may result in
changes in another, which might magnify or counteract the sensitivities.

Note 8 – Line of Credit Payable:

NNN’s $400,000,000 revolving credit facility had a weighted average outstanding balance of
$10,824,000 and a weighted average interest rate of 1.19% during the year ended December 31,
2009. On November 3, 2009, NNN entered into a credit agreement for a new $400,000,000
revolving credit facility, replacing the existing revolving credit facility (as the context requires, the
previous and new revolving credit facility, the “Credit Facility”). The Credit Facility matures
November 2012, with an option to extend maturity to November 2013. The Credit Facility bears
interest at LIBOR plus 280 basis points with a 1.0% LIBOR floor; however, such interest rate may
change pursuant to a tiered interest rate structure based on NNN’s debt rating. The Credit Facility
also includes an accordion feature for NNN to increase, at its option, the facility size up to
$500,000,000. As of December 31, 2009, no balance was outstanding, and $400,000,000 was
available for future borrowings under the Credit Facility, excluding undrawn letters of credit totaling
$653,000.

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) maximum
leverage ratios, (ii) debt service coverage, (iii) cash flow coverage and (iv) investment and dividend
limitations. At December 31, 2009, NNN was in compliance with those covenants.

Note 9 – Mortgages Payable:

The following table outlines the mortgages payable included in NNN’s consolidated financial
statements (dollars in thousands):

Entered

December 1999(4)
December 2001(2)
December 2001(2)
December 2001(2)
June 2002
February 2004(2)
March 2005(2)

Balance
350
$
623
698
485
21,000
6,952
1,015

Interest
Rate
8.50%
9.00%
9.00%
9.00%
6.90%
6.90%
8.14%

Maturity(3)
December 2009
April 2014
April 2019
April 2019
July 2012
January 2017
September 2016

Carrying
Value of
Encumbered
Asset(s)(1)
$

-
820
1,247
1,215
24,505
11,764
1,341

Outstanding Principal
Balance at December 31,

2009

-
267
392
201
19,170
4,554
706

2008

49
315
418
214
19,477
5,036
781

40,892

25,290

26,290

(1) Each loan is secured by a first mortgage lien on certain of NNN’s properties. The carrying values of the assets are as of

December 31, 2009.

(2) Date entered represents the date that NNN acquired real estate subject to a mortgage securing a loan. The

corresponding original principal balance represents the outstanding principal balance at the time of acquisition.

(3) Monthly payments include interest and principal, if any; the balance is due at maturity.
(4) In December 2009, upon maturity NNN repaid the outstanding principal balance and the property was released from

the mortgage lien. This was a self-amortizing mortgage.

The following is a schedule of the annual maturities of NNN’s mortgages payable at December 31,
2009 (dollars in thousands):

2010
2011
2012
2013
2014
Thereafter

$ 1,022
1,098
19,290
863
880
2,137

$25,290

Note 10 – Notes Payable – Convertible:

Each of NNN’s outstanding series of convertible notes are summarized in the table below (dollars in
thousands):

Terms

2026
Notes(1)(2)(4)

2028
Notes(2)(5)(6)

Issue Date
Net Proceeds
Stated Interest Rate(8)
Debt Issuance Costs
Earliest Conversion Date
Earliest Put Option Date
Maturity Date

Original Principal
Repurchases

Outstanding principal balance at December 31, 2009

168,650
3.950%

September 2006 March 2008
228,576
5.125%
5,457
June 2027
June 2013
June 2028

$
September 2025
September 2011
September 2026

3,850(3) $

172,500
(33,800)

138,700

234,035
(11,000)

223,035

(1) NNN repurchased $3,800, $5,000 and $25,000 in March 2009, January 2009 and November 2008, respectively, for

a purchase price of $3,100, $3,894 and $19,188, respectively, resulting in a gain of $607, $958 and $4,961,
respectively.

(2) Debt issuance costs include underwriting discounts and commissions, legal and accounting fees, rating agency fees
and printing expenses. These costs have been deferred and are being amortized over the period to the earliest put
option date of the holders using the effective interest method.

(3) Includes $48, $66 and $349 of note costs which were written off in connection with the repurchase of $3,800,

$5,000 and $25,000 of the 2026 Notes, respectively.

(4) The conversion rate per $1 principal amount was 41.6750 shares of NNN’s common stock, which is equivalent to a

conversion price of $23.9952 per share of common stock.

(5) The conversion rate per $1 principal amount was 39.3459 shares of NNN’s common stock, which is equivalent to a

conversion price of $25.4156 per share of common stock.

(6) NNN repurchased $2,500 and $8,500 in May 2009 and February 2009, respectively, for a purchase price of $2,049

and $6,539, respectively, resulting in a gain of $342 and $1,525, respectively.

(7) Includes $48 and $171 of note costs which were written off in connection with the repurchase of $2,500 and $8,500

of the 2028 Notes, respectively.

(8) With the adoption of the new accounting guidance on convertible debt securities, the effective interest rate for the

2026 Notes and the 2028 Notes are 5.840% and 7.192%, respectively.

Each series of convertible notes represents senior, unsecured obligations of NNN and are
subordinated to all secured indebtedness of the Company. Each note is 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 accrued and unpaid interest thereon through but not including the
redemption date and (ii) the make whole amount, if any, as defined in the applicable supplemental
indenture relating to the notes.

Note 11 – Notes Payable:

Each of NNN’s outstanding series of non-convertible notes are summarized in the table below
(dollars in thousands).

Notes

Issue Date

Principal

Discount(3)

Net
Price

Stated
Rate

Effective
Rate(4)

Maturity
Date

2010(1)
2012(1)
2014(1)(2)(5)
2015(1)
2017(1)(6)

September 2000
June 2002
June 2004
November 2005
September 2007

20,000
50,000
150,000
150,000
250,000

126
287
440
390
877

19,874
49,713
149,560
149,610
249,123

8.500%
7.750%
6.250%
6.150%
6.875%

8.595% September 2010
7.833% June 2012
5.910% June 2014
6.185% December 2015
6.924% October 2017

(1) The proceeds from the note issuance were used to pay down outstanding indebtedness of NNN’s Credit Facility.
(2) The proceeds from the note issuance were used to repay the obligation of the 2004 Notes.
(3) The note discounts are amortized to interest expense over the respective term of each debt obligation using the effective

interest method.

(4) Includes the effects of the discount, treasury lock gain and swap gain (as applicable).
(5) NNN entered into a forward starting interest rate swap agreement which fixed a swap rate of 4.61% on a notional
amount of $94,000. Upon issuance of the 2014 Notes, NNN terminated the forward starting interest rate swap
agreement resulting in a gain of $4,148. The gain has been deferred and is being amortized as an adjustment to interest
expense over the term of the 2014 Notes using the effective interest method.

(6) NNN entered into an interest rate hedge with a notional amount of $100,000. Upon issuance of the 2017 Notes, NNN
terminated the interest rate hedge agreement resulting in a liability of $3,260, of which $3,228 was recorded to other
comprehensive income. The liability has been deferred and is being amortized as an adjustment to interest expense over
the term of the 2017 Notes using the effective interest method.

Each series of the notes represent senior, unsecured obligations of NNN and are subordinated to all
secured indebtedness of NNN. Each of 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 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 debt offerings, NNN incurred debt issuance costs totaling $5,459,000
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.

In accordance with the terms of the indenture, 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, 2009,
NNN was in compliance with those covenants.

Note 12 – Preferred Stock:

The following table outlines each issuance of NNN’s preferred stock (dollars in thousands):

Non-Voting Preferred Stock Issuance

Shares
Outstanding
At
December 31,
2009

Liquidation
Preference
(per share)

Fixed Annual
Cash
Distribution
(per share)

9% Series A
7.375% Series C Redeemable Depositary Shares

-
3,680,000

25.00
25.00

2.25000
1.84375

9% Non-Voting Series A Preferred Stock. In December 2001, NNN issued 1,999,974 shares of 9%
Non-Voting Series A Preferred Stock (the “Series A Preferred Stock”). Holders of the Series A
Preferred Stock were entitled to receive, when and as authorized by the board of directors,
cumulative preferential cash distributions at a rate of nine percent of the $25.00 liquidation

preference per annum (equivalent to a fixed annual amount of $2.25 per share). The Series A
Preferred Stock ranked senior to NNN’s common stock with respect to distribution rights and rights
upon liquidation, dissolution or winding up of NNN.

In January 2007, NNN redeemed all outstanding shares of Series A Preferred Stock at a redemption
price of $25.00 per share, plus all accumulated and unpaid distributions through the redemption date
of $0.20625 per share.

7.375% Series C Cumulative Redeemable Preferred Stock. In October 2006, NNN filed a
prospectus supplement to the prospectus contained in its February 2006 shelf registration statement
and issued 3,200,000 depositary shares, each representing 1/100th of a share of 7.375% Series C
Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”), and received gross proceeds
of $80,000,000. In addition, NNN issued an additional 480,000 depositary shares in connection with
the underwriters’ over-allotment option and received gross proceeds of $12,000,000. In connection
with this offering NNN incurred stock issuance costs of approximately $3,098,000, consisting
primarily of underwriting commissions and fees, legal and accounting fees and printing expenses.

Holders of the depositary shares are entitled to receive, when and as authorized by the Board of
Directors, cumulative preferential cash dividends at the rate of 7.375% of the $25.00 liquidation
preference per depositary share per annum (equivalent to a fixed annual amount of $1.84375 per
depositary share). The Series C Preferred Stock underlying the depositary shares ranks senior to
NNN’s common stock with respect to dividend rights and rights upon liquidation, dissolution or
winding up of NNN. The Series C Preferred Stock has no maturity date and will remain outstanding
unless redeemed. NNN may redeem the Series C Preferred Stock underlying the depositary shares
on or after October 12, 2011, for cash, at a redemption price of $2,500.00 per share (or $25.00 per
depositary share), plus all accumulated, accrued and unpaid dividends.

Note 13 – Common Stock:

In March 2007, NNN filed a prospectus supplement to the prospectus contained in its February 2006
shelf registration statement and issued 5,000,000 shares of common stock at a price of $24.70 per
share and received net proceeds of $118,020,000. Subsequently, in April 2007, NNN issued an
additional 750,000 shares of common stock in connection with the underwriters’ over-allotment
option and received net proceeds of $17,730,000. In connection with this offering, NNN incurred
stock issuance costs totaling approximately $6,217,000, consisting primarily of underwriters’ fees
and commissions, legal and accounting fees and printing expenses.

In June 2007, NNN filed a registration statement on Form S-8 with the Commission which permits
the issuance by NNN of up to 5,900,000 shares of common stock pursuant to NNN’s 2007
Performance Incentive Plan.

In October 2007, NNN filed a prospectus supplement to the prospectus contained in its February
2006 shelf registration statement and issued 4,000,000 shares of common stock at a price of $25.94
per share and received net proceeds of $99,150,000. In connection with this offering, NNN incurred
stock issuance costs totaling approximately $4,874,000, consisting primarily of underwriters’ fees
and commissions, legal and accounting fees and printing expenses.

In October 2008, NNN filed a prospectus supplement to the prospectus contained in its February
2006 shelf registration statement and issued 3,450,000 shares (including 450,000 shares in
connection with the underwriters’ over allotment) of common stock at a price of $23.05 per share
and received net proceeds of $75,958,000. In connection with this offering, NNN incurred stock
issuance costs totaling approximately $3,565,000, consisting primarily of underwriters’ fees and
commissions, and legal and accounting fees and printing expenses.

In February 2009, NNN filed a shelf registration statement with the Commission which permits the
issuance by NNN of an indeterminate amount of debt and equity securities

Dividend Reinvestment and Stock Purchase Plan. In June 2009, NNN filed a shelf registration
statement with the Commission for its Dividend Reinvestment and Stock Purchase Plan (“DRIP”)
which permits the issuance by NNN of 16,000,000 shares of common stock. The following outlines
the common stock issuances pursuant to the DRIP for the years ended December 31 (dollars in
thousands):

Shares of common stock
Net proceeds

3,766,452
67,354

2,146,640
47,372

2,645,257
62,980

2009

2008

2007

Note 14 – Employee Benefit Plan:

Effective January 1, 1998, NNN adopted a defined contribution retirement plan (the “Retirement
Plan”) covering substantially all of the employees of NNN. The Retirement Plan permits
participants to defer up to a maximum of 60 percent of their compensation, as defined in the
Retirement Plan, subject to limits established by the Code. NNN matches 60 percent of the
participants’ contributions up to a maximum of eight percent of a participant’s annual compensation.
NNN’s contributions to the Retirement Plan for the years ended December 31, 2009, 2008 and 2007
totaled $302,000, $385,000, and $428,000, respectively.

Note 15 – Dividends:

The following presents the characterization for tax purposes of common stock dividends paid to
stockholders for the years ended December 31:

Ordinary dividends
Qualified dividends
Capital gain
Unrecaptured Section 1250 Gain

2009

2008

2007

1.495182 $

1.480000 $

-
0.003051
0.001767

-
-
-

1.397402
0.000414
0.002184
-

1.500000 $

1.480000 $

1.400000

During the years ended December 31, 2009, 2008 and 2007, NNN declared and paid dividends to its
common shareholders of $120,256,000, $110,107,000 and $92,989,000, respectively, or $1.50,
$1.48 and $1.40, respectively per share, respectively, of common stock.

On January 15, 2010, NNN declared a dividend of $0.375 per share, which is payable February 15,
2010 to its common stockholders of record as of January 29, 2010.

The following presents the characterization for tax purposes of preferred stock dividends per share
paid to stockholders for the year ended December 31:

Total

Ordinary
Dividends

Qualified
Dividends

Capital Gain

Unrecaptured
Section 1250
Gains

2009:

Series C

2008:

Series C

2007:

Series A(1)
Series C

1.843750

1.837828

1.843750

0.00375

0.002172

0.206250
1.843750

0.205867
1.840328

0.000061
0.000546

0.000322
0.002876

-
-

(1)

Shares of Series A are no longer outstanding.

NNN declared and paid dividends to its Series C Preferred stockholders of $6,785,000 or $1.84375
per depository share during each of the years ended December 31, 2009, 2008 and 2007. The Series
C Preferred Stock has no maturity date and will remain outstanding unless redeemed.

Note 16 – Restructuring Costs:

During the year ended December 31, 2009, NNN recorded restructuring costs of $731,000, related
to the reduction of its workforce in January 2009.

Note 17 – Income Taxes:

In June 2006, the FASB issued guidance, which clarifies the accounting for uncertainty in income
taxes recognized in a company’s financial statements in accordance with FASB guidance included
in Income Taxes. The interpretation prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or expected to be taken
in a tax return. The interpretation also provides guidance on derecognition, classification, interest
and penalties, accounting in interim periods, disclosure and transition.

NNN is subject to the provisions of the FASB guidance as of January 1, 2007, and has analyzed its
various federal and state filing positions. NNN believes that its income tax filing positions and
deductions are well documented and supported. Additionally, NNN believes that its accruals for tax
liabilities are adequate. Therefore, no reserves for uncertain income tax positions have been
recorded pursuant to the FASB guidance. In addition, NNN did not record a cumulative effect
adjustment related to the adoption of the FASB guidance.

NNN has had no increases or decreases in unrecognized tax benefits for current or prior years since
the date of adoption. Further, no interest or penalties have been included since no reserves were
recorded and no significant increases or decreases are expected to occur within the next 12 months.
When applicable, such interest and penalties will be recorded in non-operating expenses. The
periods that remain open under federal statute are 2006 through 2009. NNN also files in many states
with varying open years under statute.

NNN incurred a new deferred income tax item as a result of NNN taking over the operations of the
12 auto service businesses. See Note 5 – Business Combinations. The new deferred tax item is
goodwill. The amount of the tax deductible goodwill is approximately $11,216,000. It is amortized
for tax purposes using a straight-line method, over 15 years, beginning with the month incurred.

For income tax purposes, NNN has taxable REIT subsidiaries in which certain real estate activities
are conducted. Additionally, in May 2005, NNN acquired a 78.9 percent equity interest in OAMI,
and has consolidated OAMI in its financial statements. OAMI, upon making its REIT election, has
remaining tax liabilities relating to the built-in gain of its assets.

NNN treats some depreciation expense and certain other items differently for tax than for financial
reporting purposes. The principal differences between NNN’s effective tax rates for the years ended
December 31, 2009, 2008 and 2007, and the statutory rates relate to state taxes and nondeductible
expenses such as meals and entertainment expenses.

The components of the net income tax asset consist of the following at December 31 (dollars in
thousands):

Temporary differences:

Built-in gain
Depreciation
Other
Reserves
Goodwill
Excess interest expense carryforward
Net operating loss carryforward

Net deferred income tax asset
Current income tax asset

Subtotal: Income tax asset
Valuation allowance

Income tax asset

2009

2008

$ (4,731) $(5,195)
(723)
(332)
1,894
-
5,721
2,717

(385)
1,992
10,892
2,801
5,678
4,484

$ 20,731
551

$ 4,082
982

21,282
(14,900)

5,064
-

$ 6,382

$ 5,064

In assessing the ability to realize a deferred tax asset, management considers whether it is more
likely than not that some portion or the entire deferred tax asset will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. The net operating loss carryforwards were generated by
NNN’s taxable REIT subsidiaries. The net operating loss carryforwards begin to expire in 2027.
Based upon the level of historical taxable income, projections for future taxable income, and tax
strategies available to NNN over the periods in which the deferred tax assets are deductible,
management believes, with the exception of certain impairments and losses, it is more likely than
not that NNN will realize all of the benefits of these deductible differences that existed as of
December 31, 2009. NNN believes it is more likely than not that the benefit from certain
impairment charges and losses will not be realized. In recognition of this risk, NNN has provided a
valuation allowance of $14,900,000 on the deferred tax assets relating to the impairments and
losses. The income tax benefit consists of the following components for the years ended
December 31 (as adjusted) (dollars in thousands):

Net earnings before income taxes
Provision for income tax benefit (expense):

Current:

Federal
State and local

Deferred:
Federal
State and local

Total benefit for income taxes

2009

2008

2007

53,930

113,859

151,338

(419)
(79)

1,110
268

880

(1,936)
(364)

(1,120)
(209)

4,539
1,055

3,294

3,570
1,020

3,261

Net earnings attributable to NNN’s stockholders

54,810

117,153

154,599

Note 18 – Earnings from Discontinued Operations:

Real Estate – Investment Portfolio – NNN classified the revenues and expenses related to (i) all
Investment Properties that were sold and leasehold interests which expired, and (ii) all Investment
Properties that were held for sale as of December 31, 2009, as discontinued operations. The
following is a summary of the earnings from discontinued operations from the Investment Portfolio
for each of the years ended December 31 (dollars in thousands):

Revenues:

Rental income from operating leases
Earned income from direct financing leases
Percentage rent
Real estate expense reimbursement from tenants
Interest and other income from real estate transactions

Operating expenses:

General and administrative
Real estate
Depreciation and amortization
Impairments – real estate

Earnings (loss) before gain on disposition of real estate
Gain on disposition of real estate

2009

2008

2007

3,826
-
-
182
121

4,129

4
742
1,209
4,306

6,261

(2,132)
2,392

4,513
100
25
176
434

5,248

(74)
520
940
1,730

3,116

2,132
9,980

11,492
2,695
189
479
437

15,292

(42)
755
1,518
710

2,941

12,351
56,625

Earnings from discontinued operations attributable to NNN

260

$ 12,112

68,976

Real Estate – Inventory Portfolio – NNN has classified as discontinued operations the revenues and
expenses related to (i) Inventory Properties which generated rental revenues prior to disposition, and
(ii) Inventory Properties which generated rental revenues and were held for sale as of December 31,
2009. The following is a summary of the earnings from discontinued operations from the Inventory
Portfolio for each of the years ended December 31 (dollars in thousands):

Revenues:

Rental income from operating leases
Percentage rent
Real estate expense reimbursement from tenants
Interest and other from real estate transactions

Disposition of real estate:

Gross proceeds
Costs

Gain

Operating expenses:

General and administrative
Real estate
Depreciation and amortization
Impairments – real estate

Other expenses (revenues):
Interest and other income
Interest expense

Earnings (loss) before income tax expense
Income tax expense

Earnings (loss) from discontinued operations including

noncontrolling interests

Earnings attributable to noncontrolling interests

2009

2008

2007

4,975
-
1,513
141

6,629

8,646
139
867
561

10,213

7,971
-
976
224

9,171

5,402
(4,844)

151,713
(139,069)

164,338
(152,537)

558

12,644

11,801

116
2,169
323
2,094

4,702

-
3,790

3,790

(1,305)
246

(1,551)
(47)

22
1,468
226
2,696

4,412

(8)
5,291

5,283

13,162
3,885

9,277
(2,927)

53
1,511
68
844

2,476

(5)
3,928

3,923

14,573
5,039

9,534
(1,299)

Earnings (loss) from discontinued operations attributable to NNN

(1,598) $

6,350

8,235

Note 19 – Derivatives:

In accordance with the guidance on derivatives and hedging, NNN records all derivatives on the
balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on
the intended use of the derivative and the resulting designation. Derivatives used to hedge the
exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a
particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge
the exposure to variability in expected future cash flows, or other types of forecasted transactions,
are considered cash flow hedges.

NNN’s objective in using derivatives is to add stability to interest expense and to manage its
exposure to interest rate movements or other identified risks. To accomplish this objective, NNN
primarily uses treasury locks and interest rate swaps as part of its cash flow hedging strategy.
Treasury locks designated as cash flow hedges lock in the yield or price of a treasury security.
Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts in
exchange for fixed-rate payments over the life of the agreements without exchange of the underlying
principal amount. To date, such derivatives have been used to hedge the variable cash

flows associated with floating rate debt and forecasted interest payments of a forecasted issuance of
debt.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of
the derivative is initially reported in other comprehensive income (outside of earnings) and
subsequently reclassified to earnings when the hedged transaction affects earnings, and the
ineffective portion of changes in the fair value of the derivative is recognized directly in earnings.

NNN discontinues hedge accounting prospectively when it is determined that the derivative is no
longer effective in offsetting changes in the cash flows of the hedged item, the derivative expires or
is sold, terminated, or exercised, the derivative is re-designated as a hedging instrument or
management determines that designation of the derivative as a hedging instrument is no longer
appropriate.

When hedge accounting is discontinued, NNN continues to carry the derivative at its fair value on
the balance sheet, and recognizes any changes in its fair value in earnings or may choose to cash
settle the derivative at that time.

In February 2008, NNN terminated its interest rate hedge with a notional amount of $100,000,000
that was hedging the risk of changes in forecasted interest payments on a forecasted issuance of
long-term debt. The fair value of the interest rate hedge when terminated was a liability of $804,000,
which NNN recorded as a loss on interest rate hedge.

In September 2007, NNN terminated two interest rate hedges with a combined notional amount of
$100,000,000 that were hedging the risk of changes in forecasted interest payments on a forecasted
issuance of long-term debt. The fair value of the interest rate hedges when terminated was a liability
of $3,260,000, of which $3,228,000 was deferred in other comprehensive income.

In June 2004, NNN terminated its forward-starting interest rate swaps with a notional amount of
$94,000,000 that was hedging the risk of changes in forecasted interest payments on a forecasted
issuance of long-term debt. The fair value of the interest rate swaps when terminated was an asset of
$4,148,000, which was deferred in other comprehensive income.

As of December 31, 2009, $549,000 remains in other comprehensive income related to the fair value
of the interest rate hedges. During the year ended December 31, 2009, 2008 and 2007, NNN
reclassed $159,000, $162,000 and $309,000, respectively, out of other comprehensive income as a
reduction to interest expense. During 2010, NNN estimates that an additional $165,000 will be
reclassified in interest expense. Amounts reported in accumulated other comprehensive income
related to derivatives will be reclassified to interest expense as interest payments are made on
NNN’s long-term debt.

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, 2009.

Note 20 – Performance Incentive Plan:

In June 2007, NNN filed a registration statement on Form S-8 with the Commission which permits
the issuance of up to 5,900,000 shares of common stock pursuant to NNN’s 2007 Performance
Incentive Plan (the “2007 Plan”). The 2007 Plan replaces NNN’s previous Performance Incentive
Plan. The 2007 Plan allows NNN to award or grant to key employees, directors and persons
performing consulting or advisory services for NNN or its affiliates, stock options, stock awards,
stock appreciation rights, Phantom Stock Awards, Performance Awards and Leveraged Stock
Purchase Awards, each as defined in the 2007 Plan.

The following summarizes NNN’s stock-based compensation activity for each of the years ended
December 31:

Number of Shares
2008

2009

2007

Outstanding, January 1
Options granted
Options exercised
Options surrendered

Outstanding, December 31

Exercisable, December 31

77,004
-
(51,500)
(13,350)

118,804
-
(28,000)
(13,800)

236,371
-
(82,767)
(34,800)

12,154

77,004

118,804

12,154

77,004

118,804

The following represents the weighted average option exercise price information for each of the
years ended December 31:

Outstanding, January 1
Granted during the year
Exercised during the year
Outstanding, December 31
Exercisable, December 31

2009

2008

2007

14.00
-
13.72
13.72
13.72

13.64
-
11.17
14.00
14.00

14.92
-
16.12
13.64
13.64

The following summarizes the outstanding options and the exercisable options at December 31,
2009:

Outstanding options:

Number of shares
Weighted-average exercise price
Weighted-average remaining contractual life in years

Exercisable options:

Number of shares
Weighted-average exercise price

Total

12,154
13.72
2.4

12,154
13.72

One-third of the option grant to each individual becomes exercisable at the end of each of the first three
years of service following the date of the grant and the options’ maximum term is 10 years. At
December 31, 2009, the intrinsic value of options outstanding was $117,000. All options outstanding at
December 31, 2009, were exercisable. During the years ended December 31, 2009, 2008 and 2007, NNN
received proceeds totaling $707,000, $313,000 and $1,334,000, respectively, in connection with the
exercise of options. NNN issued new common stock to satisfy share option exercises. The total intrinsic
value of options exercised during the years ended December 31, 2009, 2008 and 2007, was $240,000,
$327,000 and $664,000, respectively.

Pursuant to the 2007 Plan, NNN has granted and issued shares of restricted stock to certain officers,
directors and key associates of NNN. The following summarizes the activity for the year ended
December 31, 2009, of such grants.

Non-vested restricted shares, January 1
Restricted shares granted
Restricted shares vested
Restricted shares forfeited
Non-vested restricted shares, December 31

Number
of
Shares
508,840
262,546
(103,376)
-
668,010

Weighted
Average
Share Price
18.24
$
16.34
21.77

16.95

During the years ended December 31, 2008 and 2007, NNN cancelled 2,520 and 8,600 forfeited
shares, respectively, of restricted stock. No shares were cancelled in 2009.

Compensation expense for the restricted stock which is not tied to performance goals is determined
based upon the fair value at the date of grant, assuming a 1.3% forfeiture rate, and is recognized as
the greater of the amount amortized over a straight lined basis or the amount vested over the vesting
periods. Vesting periods for officers and key associates of NNN range from four to seven years and
generally vest yearly on a straight line basis.

During the year ended December 31, 2007, NNN granted 79,000 performance based shares with a
weighted average grant price of $12.94 to certain executive officers of NNN. The compensation
expense for the grant is based upon the fair value of the grant calculated by a third party using a
lattice model with the following assumptions: (i) risk free interest rate of 4.80%, (ii) a dividend rate
of 5.30%, (iii) a term of five years, and (iv) volatility of 17.50%. Volatility is based upon the
historical volatility of NNN’s stock and other factors. The term is assumed to be the vesting date for
each tranche. The vesting of these shares is contingent upon achievement of certain performance
goals by January 1, 2012.

During the year ended December 31, 2008, NNN granted 81,330 performance based shares with a
weighted average grant price of $8.00 to certain executive officers of NNN. The compensation
expense for the grant is based upon fair market value of the grant calculated by a third party using a
lattice model with the following assumptions: (i) risk free rate of 3.48%, (ii) a dividend rate of
6.50%, (iii) a term of five years, and (iv) a volatility of 19.89%. Volatility is based upon the
historical volatility of NNN’s stock and other factors. The vesting of these shares is contingent upon
the achievement of certain performance goals by January 1, 2013.

The following summarizes other grants made during the year ended December 31, 2009, pursuant to
the 2007 Plan.

Other share grants under the 2007 Plan:

Directors’ fees
Deferred Directors’ fees

Weighted
Average
Share Price

6,594
41,604
48,198

17.89
17.95
17.94

Shares available under the 2007 Plan for grant, end of period

5,272,513

The total compensation cost for share-based payments for the years ended December 31, 2009, 2008
and 2007, totaled $4,172,000, $3,341,000 and $2,583,000, respectively, of such

compensation expense. At December 31, 2009, NNN had $7,149,000 of unrecognized compensation
cost related to non-vested share-based compensation arrangements under the 2007 Plan. This cost is
expected to be recognized over a weighted average period of 3.3 years.

Note 21 – Fair Value of Financial Instruments:

NNN believes the carrying value of its Credit Facility approximates fair value based upon its nature,
terms and variable interest rate. NNN believes that the carrying value of its cash and cash
equivalents, mortgages, notes and other receivables, mortgages payable and other liabilities at
December 31, 2009 and 2008, approximate fair value based upon current market prices of similar
issues. At December 31, 2009 and 2008, the carrying value and fair value of NNN’s notes payable
and convertible notes payable, collectively, was $987,275,000 and $709,944,000, respectively,
based upon the quoted market price.

Note 22 – Quarterly Financial Data (unaudited):

The following table outlines NNN’s quarterly financial data (dollars in thousands, except per share
data):

2009

Revenues as originally reported
Reclassified to discontinued operations

Adjusted revenue

Net earnings (loss) attributable to NNN’s

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

57,963
367

58,330

58,681
(297)

58,384

57,035
301

57,336

57,750
-

57,750

stockholders

26,804

26,954

22,443

$ (21,391)

Net earnings (loss) per share(1):

Basic
Diluted

2008

Revenues as originally reported
Reclassified to discontinued operations

Adjusted revenue

Net earnings attributable to NNN’s stockholders

Net earnings per share(1):

Basic
Diluted

0.32
0.32

55,200
(878)

54,322

32,239

0.42
0.42

0.32
0.32

57,026
(81)

56,945

29,266

0.38
0.38

0.26
0.26

58,573
841

59,414

28,766

0.37
0.37

(0.28)
(0.28)

57,244
210

57,454

26,882

0.32
0.32

(1) Calculated independently for each period and consequently, the sum of the quarters may differ

from the annual amount.

Note 23 – Segment Information:

NNN has identified two primary financial segments: (i) Investment Assets, and (ii) Inventory
Assets. The following tables represent the segment data and reconciliation to NNN’s consolidated
totals for the years ended December 31, 2009, 2008 and 2007 (as adjusted) (dollars in thousands):

Investment
Assets

Inventory
Assets

Eliminations
(Intercompany)

Consolidated
Totals

2009

External revenues
Intersegment revenues
Interest revenue
Interest revenue on Residuals
Gain on the disposition of real estate,

Inventory Portfolio
Retail operations, net
Interest expense
Depreciation and amortization
Operating expenses
Impairments – real estate
Impairment – commercial mortgage residual

interests valuation adjustment

Restructuring costs
Equity in earnings of

unconsolidated affiliate

Loss on note receivable foreclosure
Gain on extinguishment of debt
Income tax benefit

Earnings (loss) from continuing operations
Earnings from discontinued operations, net

of income tax expense

Earnings (loss) including noncontrolling

interests

Earnings attributable to noncontrolling
interests from continuing operations
Earnings attributable to noncontrolling

interests from discontinued operations

Net earnings attributable to NNN

Assets

Additions to long-lived assets:

Real estate

224,083
3,035
4,615
4,252

-
419
66,018
46,759
30,382
21,401

498
731

(12,280)
(7,196)
3,432
495

55,066

193
1,042
31
-

5
-
188
10
5,078
6,713

-
-

-
-
-
631

(10,087)

260

(1,551)

-
(4,077)
-
-

32
-
(4,055)
-
-
-

-
-

12,701
-
-
-

12,711

55,326

(11,638)

12,711

(516)

(1,026)

(47)

(12,711) $

12,711

237,715

2,457

(235,161)

224,276
-
4,646
4,252

37
419
62,151
46,769
35,460
28,114

498
731

421
(7,196)
3,432
1,126

57,690

(1,291)

56,399

(1,542)

(47)

54,810

2,590,962

46,890

54,810

2,588,408

44,433

2008

External revenues
Intersegment revenues
Interest revenue
Interest revenue Residuals
Gain on the disposition of real estate,

Inventory Portfolio

Interest expense
Depreciation and amortization
Operating expenses
Impairments – real estate
Impairments – commercial mortgage

residual interests valuation adjustment

Equity in earnings of

unconsolidated affiliates
Loss on derivative instrument
Gain on extinguishment of debt
Income tax benefit

Earnings (loss) from continuing operations
Earnings from discontinued operations, net

of income tax expense

Earnings (loss) including noncontrolling

interests

Loss (earnings) attributable to

noncontrolling interests from continuing
operations

Earnings attributable to noncontrolling

interests from discontinued operations

Net earnings attributable to NNN

Assets

Additions to long-lived assets:

Real estate

Investment
Assets

Inventory
Assets

Eliminations
(Intercompany)

Consolidated
Totals

218,692
12,727
8,351
4,636

176
606
28
-

-
69,763
44,139
25,347
1,234

758

(2,785)
(804)
4,961
1,331

(308)
7,442
42
9,538
-

-
-
-
5,848

105,868

(10,672)

12,112

9,277

-
(13,333)
-
-

329
(13,241)
-
-
-

3,149
-
-
-

3,386

218,868
-
8,379
4,636

21
63,964
44,181
34,885
1,234

758

364
(804)
4,961
7,179

98,582

21,389

117,980

(1,395)

3,386

119,971

(827)

117,153

2,650,040

352,618

936

(2,927)

(3,386) $

128,916

33,745

3,386

(129,485)

109

(2,927)

117,153

2,649,471

386,363

2007

External revenues
Intersegment revenues
Interest revenue
Interest revenue on Residuals
Gain on the disposition of real estate,

Inventory Portfolio

Interest expense
Depreciation and amortization
Operating expenses
Impairments – real estate
Impairments – commercial mortgage residual

interests valuation adjustment

Equity in earnings of unconsolidated affiliates
Income tax benefit

Earnings (loss) from continuing operations
Earnings from discontinued operations, net of

income tax expense

Earnings including noncontrolling interests
Loss (earnings) attributable to noncontrolling

interests from continuing operations
Earnings attributable to noncontrolling

interests from discontinued operations

Net earnings attributable to NNN

Assets

Additions to long-lived assets:

Real estate

Investment
Assets

Inventory
Assets

Eliminations
(Intercompany)

Consolidated
Totals

170,054
15,851
8,858
4,882

327
-
40
-

-
58,193
31,232
23,733
288

638
(1,700)
2,451

86,312

68,976

155,288

(689)

(512)
8,502
108
7,637
128

-
-
5,849

(10,671)

9,534

(1,137)

845

(1,299)

-
(15,851)
-
-

844
(14,849)
-
-
-

-
1,749
-

1,591

170,381
-
8,898
4,882

332
51,846
31,340
31,370
416

638
49
8,300

77,232

78,510

155,742

156

(1,299)

154,599

2,519,428

677,101

(1,591) $

1,591

154,599

263,368

165,160

(243,124) $

2,539,672

842,261

Note 24 – Fair Value Measurements:

NNN currently values its Residuals based upon an independent valuation which provides a
discounted cash flow analysis based upon prepayment speeds, expected loan losses and yield curves.
These valuation inputs are generally considered unobservable; therefore, the Residuals are
considered Level 3 financial assets. The table below presents a reconciliation of the Residuals
during the year ended December 31, 2009 (dollars in thousands):

Balance at beginning of period

22,000

Total gains (losses) – realized/unrealized:

Included in earnings
Included in other comprehensive income

Interest income on Residuals
Cash received from Residuals
Purchases, sales, issuances and settlements, net
Transfers in and/or out of Level 3

Balance at end of period

Changes in gains (losses) included in earnings attributable to a

change in unrealized gains (losses) relating to assets still held at
the end of period

(498)
(1,640)
4,252
(3,961)
-
-

20,153

Note 25 – Major Tenants:

As of December 31, 2009, NNN did not have any tenant that accounted for ten percent or more of
its rental and earned income.

Note 26 – Commitments and Contingencies:

As of December 31, 2009, NNN had letters of credit totaling $653,000 outstanding under its Credit
Facility.

In the ordinary course of its business, NNN is a party to various other legal actions which
management believes is routine in nature and incidental to the operation of the business of NNN.
Management believes that the outcome of the proceedings will not have a material adverse effect
upon its operations, financial condition or liquidity.

Note 27 – Subsequent Events:

NNN reviewed all subsequent events and transactions that have occurred after December 31, 2009,
the date of the consolidated balance sheet, through February 25, 2010, the date of filing this Annual
Report on Form 10-K. Other than included herein, there were no subsequent events or transactions.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Process for Assessment and Evaluation of Disclosure Controls and Procedures and Internal Control over
Financing Reporting.

NNN carried out an assessment as of December 31, 2009, of the effectiveness of the design and operation
of its disclosure controls and procedures and its internal control over financial reporting. This assessment
was done under the supervision and with the participation of management, including NNN’s Chief
Executive Officer and Chief Financial Officer. Rules adopted by the Securities and Exchange Commission
(the “Commission”) require NNN to present the conclusions of the Chief Executive Officer and Chief
Financial Officer about the effectiveness of NNN’s disclosure controls and procedures and the conclusions
of NNN’s management about the effectiveness of NNN’s internal control over financial reporting as of the
end of the period covered by this annual report.

CEO and CFO Certifications. Included as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K are
forms of “Certification” of NNN’s Chief Executive Officer and Chief Financial Officer. The forms of
Certification are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002. This section
of the Annual Report on Form 10-K that stockholders are currently reading is the information concerning
the assessment referred to in the Section 302 certifications and this information should be read in
conjunction with the Section 302 certifications for a more complete understanding of the topics presented.

Disclosure Controls and Procedures and Internal Control over Financial Reporting. Disclosure controls
and procedures are designed with the objective of providing reasonable assurance that information required
to be disclosed in NNN’s reports filed or submitted under the Exchange Act, such as this Annual Report on
Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the
Commission’s rules and forms. Disclosure controls and procedures are also designed with the objective of
providing reasonable assurance that such information is accumulated and communicated to NNN’s
management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.

Internal control over financial reporting is a process designed by, or under the supervision of, NNN’s Chief
Executive Officer and Chief Financial Officer, and affected by NNN’s Board of Directors, management and
other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting
principles (“GAAP”) and includes those policies and procedures that:

•

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of NNN’s assets;

provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that
NNN’s receipts and expenditures are being made in accordance with authorizations of
management or the Board of Directors; and

provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of NNN’s assets that could have a material adverse effect on
NNN’s financial statements.

Scope of the Assessments. The assessment by NNN’s Chief Executive Officer and Chief Financial Officer
of NNN’s disclosure controls and procedures and the assessment by NNN’s management, including NNN’s
Chief Executive Officer and Chief Financial Officer, of NNN’s internal control over financial reporting
included a review of procedures and discussions with NNN’s management and others at NNN. In the course
of the assessments, NNN sought to identify data errors, control problems or acts of fraud and to confirm
that appropriate corrective action, including process improvements, were being undertaken.

NNN’s internal control over financial reporting is also assessed on an ongoing basis by personnel in NNN’s
Accounting department and by NNN’s internal auditors in connection with their internal audit activities.
The overall goals of these various assessment activities are to monitor NNN’s disclosure controls and
procedures and NNN’s internal control over financial reporting and to make modifications as necessary.
NNN’s intent in this regard is that the disclosure controls and procedures and the internal control over
financial reporting will be maintained and updated (including with improvements and corrections) as
conditions warrant. Management also sought to deal with other control matters in the assessment, and in
each case if a problem was identified, management considered what revision, improvement and/or
correction was necessary to be made in accordance with NNN’s on-going procedures. The assessments of
NNN’s disclosure controls and procedures and NNN’s internal control over financial reporting is done on a
quarterly basis so that the conclusions concerning effectiveness of those controls can be reported in NNN’s
Quarterly Reports on Form 10-Q and Annual Report on Form 10-K.

Assessment of Effectiveness of Disclosure Controls and Procedures.

Based upon the assessments, NNN’s Chief Executive Officer and Chief Financial Officer have concluded
that, as of December 31, 2009, NNN’s disclosure controls and procedures were effective.

Management’s Report on Internal Control over Financial Reporting.

Management, including NNN’s Chief Executive Officer and Chief Financial Officer, are responsible for
establishing and maintaining adequate internal control over financial reporting for NNN. Management used
the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal
Control – Integrated Framework to assess the effectiveness of NNN’s internal control over financial
reporting. Based upon the assessments, NNN’s Chief Executive Officer and Chief Financial Officer have
concluded that, as of December 31, 2009, NNN’s internal control over financial reporting was effective.

Attestation Report of the Registered Public Accounting Firm.

Ernst & Young LLP, NNN’s independent registered public accounting firm, audited the financial statements
included in this Annual Report on Form 10-K and has issued an attestation report on NNN’s effectiveness
of internal control over financial reporting, which appears in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting.

During the three months ended December 31, 2009, there were no changes in NNN’s internal control over
financial reporting that has materially affected, or are reasonably likely to materially affect, NNN’s internal
control for financial reporting.

Limitations on the Effectiveness of Controls.

Management, including NNN’s Chief Executive Officer and Chief Financial Officer, do not expect that
NNN’s disclosure controls and procedures or NNN’s internal control over financial reporting will prevent
all errors and all fraud. A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of

controls can provide absolute assurance that all control issues and instances of fraud, if any, within NNN
have been detected. These inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more people, or by
management’s override of the control. The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions; over time, controls may become
inadequate because of changes in conditions, or the degree of compliance with the policies or procedures
may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and not be detected.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Reference is made to the Registrant’s definitive proxy statement to be filed with the Commission pursuant
to Regulation 14(a); information responsive to this Item is contained in the sections thereof captioned
“Proposal I: Election of Directors – Nominees,” “Proposal I: Election of Directors – Executive Officers,”
“Proposal I: Election of Directors – Code of Business Conduct” and “Security Ownership,” and the
information in such sections is incorporated herein by reference.

Item 11. Executive Compensation

Reference is made to the Registrant’s definitive proxy statement to be filed with the Commission pursuant
to Regulation 14(a); information responsive to this Item is contained in the sections thereof captioned
“Proposal I: Election of Directors – Compensation of Directors,” “Executive Compensation” and
“Compensation Committee Report,” and the information in such sections are incorporated herein by
reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

Reference is made to the Registrant’s definitive proxy statement to be filed with the Commission pursuant
to Regulation 14(a); information responsive to this Item is contained in the section thereof captioned
“Executive Compensation – Equity Compensation Plan Information,” and “Security Ownership,” and the
information in such sections are incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Reference is made to the Registrant’s definitive proxy statement to be filed with the Commission pursuant
to Regulation 14(a); information responsive to this Item is contained in the section thereof captioned
“Certain Relationships and Related Transactions” and the information in such section is incorporated herein
by reference.

Item 14. Principal Accountant Fees and Services

Reference is made to the Registrant’s definitive proxy statement to be filed with the Commission pursuant
to Regulation 14(a); information responsive to this Item is contained in the section thereof captioned “Audit
Committee Report” and “Proposal II: Proposal to Ratify Independent Registered Public Accounting Firm,”
and the information in such sections are incorporated herein by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report.

(1) Financial Statements

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2009 and 2008

Consolidated Statements of Earnings for the years ended December 31, 2009, 2008 and
2007

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2009,
2008 and 2007

Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and
2007

Notes to Consolidated Financial Statements

(2) Financial Statement Schedules

Schedule III – Real Estate and Accumulated Depreciation and Amortization and Notes as of
December 31, 2009

Schedule IV – Mortgage Loans on Real Estate and Notes as of December 31, 2009

All other schedules are omitted because they are not applicable or because the required
information is shown in the financial statements or the notes thereto.

(3) Exhibits

The following exhibits are filed as a part of this report.

Articles of Incorporation and Bylaws

3.1

3.2

3.3

First Amended and Restated Articles of Incorporation of the Registrant, as
amended (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K
dated and filed with the Securities and Exchange Commission on May 1, 2006,
and incorporated herein by reference).

Articles Supplementary Establishing and Fixing the Rights and Preferences of
7.375% Series C Cumulative Preferred Stock, par value $0.01 per share, dated
October 11, 2006 (filed as Exhibit 3.2 to the Registrant’s Registration Statement
on Form 8-A dated October 11, 2006 and filed with the Securities and Exchange
Commission on October 12, 2006, and incorporated herein by reference).

Third Amended and Restated Bylaws of the Registrant, as amended (filed as
Exhibit 3.2 to the Registrant’s Current Report on Form 8-K dated and filed with
the Securities and Exchange Commission on May 1, 2006, and incorporated
herein by reference; second amendment filed as Exhibit 3.1 to

the Registrant’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on December 14, 2007, and incorporated herein by
reference).

Instruments Defining the Rights of Security Holders, Including Indentures

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

Specimen Certificate of Common Stock, par value $0.01 per share, of the
Registrant (filed as Exhibit 3.4 to the Registrant’s Registration Statement
No. 1-11290 on Form 8-B filed with the Securities and Exchange Commission
and incorporated herein by reference).

Indenture, dated as of March 25, 1998, between the Registrant and First Union
National Bank, as trustee (filed as Exhibit 4.4 to the Registrant’s Registration
Statement on Form S-3 (Registration No. 333-132095) filed with the Securities
and Exchange Commission on February 28, 2006, and incorporated herein by
reference).

Form of Supplemental Indenture No. 3 dated September 20, 2000, by and among
Registrant and First Union National Bank, Trustee, relating to $20,000,000 of
8.5% Notes due 2010 (filed as Exhibit 4.2 to the Registrant’s Current Report on
Form 8-K dated and filed with the Securities and Exchange Commission on
September 20, 2000, and incorporated herein by reference).

Form of 8.5% Notes due 2010 (filed as Exhibit 4.3 to the Registrant’s Current
Report on Form 8-K dated and filed with the Securities and Exchange
Commission on September 20, 2000, and incorporated herein by reference).

Form of Supplemental Indenture No. 4 dated as of May 30, 2002, by and among
Registrant and Wachovia Bank, National Association, Trustee, relating to
$50,000,000 of 7.75% Notes due 2012 (filed as Exhibit 4.2 to the Registrant’s
Current Report on Form 8-K dated and filed with the Securities and Exchange
Commission on June 4, 2002, and incorporated herein by reference).

Form of 7.75% Notes due 2012 (filed as Exhibit 4.3 to the Registrant’s Current
Report on Form 8-K dated and filed with the Securities and Exchange
Commission on June 4, 2002, and incorporated herein by reference).

Form of Supplemental Indenture No. 5 dated as of June 18, 2004, by and among
Registrant and Wachovia Bank, National Association, Trustee, relating to
$150,000,000 of 6.25% Notes due 2014 (filed as Exhibit 4.1 to the Registrant’s
Current Report on Form 8-K dated June 15, 2004 and filed with the Securities
and Exchange Commission on June 18, 2004, and incorporated herein by
reference).

Form of 6.25% Notes due 2014 (filed as Exhibit 4.2 to the Registrant’s Current
Report on Form 8-K dated June 15, 2004 and filed with the Securities and
Exchange Commission on June 18, 2004, and incorporated herein by reference).

4.9

4.10

4.11

4.12

4.13

4.14

4.15

4.16

4.17

Form of Supplemental Indenture No. 6 dated as of November 17, 2005, by and
among Registrant and Wachovia Bank, National Association, Trustee, relating
to $150,000,000 of 6.15% Notes due 2015 (filed as Exhibit 4.1 to the
Registrant’s Current Report on Form 8-K dated November 14, 2005 and filed
with the Securities and Exchange Commission on November 17, 2005, and
incorporated herein by reference).

Form of 6.15% Notes due 2015 (filed as Exhibit 4.2 to the Registrant’s Current
Report on Form 8-K dated November 14, 2005 and filed with the Securities and
Exchange Commission on November 17, 2005, and incorporated herein by
reference).

Seventh Supplemental Indenture, dated as of September 13, 2006, between
National Retail Properties, Inc. and U.S. Bank National Association relating to
3.95% Convertible Senior Notes due 2026 (filed as Exhibit 4.1 to the
Registrant’s Current Report on Form 8-K dated September 7, 2006 and filed
with the Securities and Exchange Commission on September 13, 2006, and
incorporated herein by reference).

Form of 3.95% Convertible Senior Notes due 2026 (filed as Exhibit 4.2 to the
Registrant’s Current Report on Form 8-K dated September 7, 2006 and filed
with the Securities and Exchange Commission on September 13, 2006, and
incorporated herein by reference).

Specimen certificate representing the 7.375% Series C Cumulative Redeemable
Preferred Stock, par value $.01 per share, of the Registrant (filed as Exhibit 4.4
to the Registrant’s Registration Statement on Form 8-A dated October 11, 2006
and filed with the Securities and Exchange Commission on October 12, 2006,
and incorporated herein by reference).

Deposit Agreement, among the Registrant, American Stock Transfer & Trust
Company, as Depositary, and the holders of depositary receipts (filed as Exhibit
4.18 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities
and Exchange Commission on November 6, 2006, and incorporated herein by
reference).

Form of Supplemental Indenture No. 8 between National Retail Properties, Inc.
and U.S. Bank National Association relating to 6.875% Notes due 2017 (filed as
Exhibit 4.1 to Registrant’s Current Report on Form 8-K dated and filed with the
Securities and Exchange Commission on September 4, 2007, and incorporated
herein by reference).

Form of 6.875% Notes due 2017 (filed as Exhibit 4.2 to the Registrant’s Current
Report on Form 8-K dated and filed with the Securities and Exchange
Commission on September 4, 2007, and incorporated herein by reference).

Form of Ninth Supplemental Indenture between National Retail Properties, Inc.
and U.S. Bank National Association relating to 5.125% Convertible Senior
Notes due 2028 (filed as Exhibit 4.1 to Registrants’ Current Report on Form 8-K
dated February 27, 2008 and filed with the Securities and Exchange Commission
on March 4, 2008, and incorporated herein by reference).

4.18

Form of 5.125% Convertible Senior Notes due 2028 (filed as Exhibit 4.2 to the
Registrant’s Current Report on Form 8-K dated February 27, 2008 and filed with
the Securities and Exchange Commission on March 4, 2008, and incorporated
herein by reference).

10. Material Contracts

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

2007 Performance Incentive Plan (filed as Annex A to the Registrant’s 2007
Annual Proxy Statement on Schedule 14A filed with the Securities and
Exchange Commission on April 3, 2007, and incorporated herein by reference).

Form of Restricted Stock Agreement between NNN and the Participant of NNN
(filed as Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 15, 2005, and incorporated
herein by reference).

Employment Agreement dated as of December 1, 2008, between the Registrant
and Craig Macnab (filed as Exhibit 10.1 to the Registrant’s Current Report on
Form 8-K filed with the Securities and Exchange Commission on December 3,
2008, and incorporated herein by reference).

Employment Agreement dated as of December 1, 2008, between the Registrant
and Julian E. Whitehurst (filed as Exhibit 10.2 to the Registrant’s Current Report
on Form 8-K filed with the Securities and Exchange Commission on
December 3, 2008, and incorporated herein by reference).

Employment Agreement dated as of December 1, 2008, between the Registrant
and Kevin B. Habicht (filed as Exhibit 10.3 to the Registrant’s Current Report
on Form 8-K filed with the Securities and Exchange Commission on
December 3, 2008, and incorporated herein by reference).

Employment Agreement dated as of December 1, 2008, between the Registrant
and Paul E. Bayer (filed as Exhibit 10.5 to the Registrant’s Current Report on
Form 8-K filed with the Securities and Exchange Commission on December 3,
2008, and incorporated herein by reference).

Employment Agreement dated as of December 1, 2008, between the Registrant
and Christopher P. Tessitore (filed as Exhibit 10.4 to the Registrant’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on
December 3, 2008, and incorporated herein by reference).

Form of Indemnification Agreement (as entered into between the Registrant and
each of its directors and executive officers) (filed as Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K dated and filed with the Securities and
Exchange Commission on June 12, 2009, and incorporated herein by reference).

Eighth Amended and Restated Line of Credit and Security Agreement, dated
December 13, 2005, by and among the Registrant, certain lenders and Wachovia
Bank, N.A., as the Agent (filed as Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K dated and filed with the Securities and Exchange
Commission on December 15, 2005, and incorporated herein by reference).

10.10

10.11

First Amendment to Eighth Amended and Restated Line of Credit and Security
Agreement, dated February 20, 2007, by and among the Registrant, certain
lenders and Wachovia Bank, N.A., as the Agent (filed as Exhibit 10.8 to the
Registrant’s Annual Report on Form 10-K filed with the Securities and
Exchange Commission on February 21, 2007, and incorporated herein by
reference).

Credit Agreement, dated as of November 3, 2009, by and among the Registrant,
certain lenders and Wells Fargo Bank, National Association, as the
Administrative Agent (filed as Exhibit 10.1 to the Registrant’s Current Report
on Form 8-K filed with the Securities and Exchange Commission on
November 5, 2009, and incorporated herein by reference).

Statement of Computation of Ratios of Earnings to Fixed Charges (filed herewith).

Subsidiaries of the Registrant (filed herewith).

Consent of Independent Accountants

23.1

Ernst & Young LLP dated February 25, 2010 (filed herewith).

Power of Attorney (included on signature page).

Section 302 Certifications

12.

21.

23.

24.

31.

31.1

31.2

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith).

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith).

32.

Section 906 Certifications

32.1

32.2

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).

99.

Additional Exhibits

99.1

Certification of Chief Executive Officer pursuant to Section 303A.12(a) of the
New York Stock Exchange Listed Company Manual (filed herewith).

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the
25th day of February, 2010.

NATIONAL RETAIL PROPERTIES, INC.

By: /s/ Craig Macnab
Craig Macnab
Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints each of Craig Macnab and
Kevin B. Habicht as his attorney-in-fact and agent, with full power of substitution and resubstitution for
him in any and all capacities, to sign any or all amendments to this report and to file same, with exhibits
thereto and other documents in connection therewith, granting unto such attorney-in-fact and agent full
power and authority to do and perform each and every act and thing requisite and necessary in connection
with such matters and hereby ratifying and confirming all that such attorney-in-fact and agent or his
substitutes may do or cause to be done by virtue hereof.

Signature

Title

Date

/s/ Craig Macnab
Craig Macnab

/s/ Ted B. Lanier
Ted B. Lanier

/s/ Don DeFosset
Don DeFosset

/s/ Dennis E. Gershenson
Dennis E. Gershenson

/s/ Richard B. Jennings
Richard B. Jennings

/s/ Robert C. Legler
Robert C. Legler

/s/ Robert Martinez
Robert Martinez

/s/ Kevin B. Habicht
Kevin B. Habicht

Chairman of the Board and Chief
Executive Officer (Principal
Executive Officer)

February 25, 2010

Lead Director

February 25, 2010

Director

Director, Chief Financial Officer
(Principal Financial and Accounting
Officer), Executive Vice President,
Assistant Secretary and Treasurer

February 25, 2010

Shareholder Information

For General Information:
American Stock Transfer & Trust Company
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
www.amstock.com
Shareholder Toll-free Line: 1-866-627-2644
Worldwide: 718-921-8346
Fax: 718-236-2641

For Dividend Reinvestment:
American Stock Transfer & Trust Company
P.O. Box 922
Wall Street Station
New York, NY 10269

Independent Registered
Public Accounting Firm:
Ernst & Young LLP
Orlando, FL

Counsel:
Pillsbury Winthrop Shaw Pittman LLP
Washington, D.C.

Corporate Office:
National Retail Properties, Inc.
450 S. Orange Avenue, Suite 900
Orlando, FL 32801
(800) NNN-REIT
(407) 265-7348
www.nnnreit.com

FORM 10-K

A copy of the Company’s Form 10-K,

as filed with the Securities and Exchange

Commission (SEC) for fiscal 2009, which

includes as Exhibits the Chief Executive Officer

and Chief Financial Officer certifications

required to be filed with the SEC pursuant

to Section 302 of the Sarbanes-Oxley Act,

has been filed with the SEC and may also be
obtained by stockholders without charge upon

written request to the Company’s Secretary at

the above address, or on our website. During

fiscal 2009, the Company filed with the New

York Stock Exchange (NYSE) the Certification

of its Chief Executive Officer confirming that

the Chief Executive Officer was not aware of

any violations by the Company of the NYSE’s

corporate governance listing standards.

450 S. Orange Avenue, Suite 900
Orlando, FL 32801
(800) NNN-REIT
www.nnnreit.com