Edgar Filing: NATIONAL RETAIL PROPERTIES, INC.

Form 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended December 31, 2010

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to .

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

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 x 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 x

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 x 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 x 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. x

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 x		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 x

The aggregate market value of voting common stock held by non-affiliates of the registrant as of June 30, 2010 was $1,766,742,768.

The number of shares of common stock outstanding as of February 15, 2011 was 83,759,282.

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 2011 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		1
Item 1A.	Risk Factors		8
Item 1B.	Unresolved Staff Comments		18
Item 2.	Properties		18
Item 3.	Legal Proceedings		18
Item 4.	[Removed and Reserved]		18
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		19
Item 6.	Selected Financial Data		21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		43
Item 8.	Financial Statements and Supplementary Data		44
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		82
Item 9A.	Controls and Procedures		82
Item 9B.	Other Information		84
Part III
Item 10.	Directors, Executive Officers and Corporate Governance		85
Item 11.	Executive Compensation		85
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		85
Item 13.	Certain Relationships and Related Transactions, and Director Independence		85
Item 14.	Principal Accountant Fees and Services		85
Part IV
Item 15.	Exhibits and Financial Statement Schedules		86
Signatures			92

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 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, 2010, NNN owned 1,195 Investment Properties (including 11 properties with retail operations that NNN operates), with an aggregate leasable area of 12,972,000 square feet, located in 46 states. Approximately 97 percent of total properties in NNN’s Investment Portfolio were leased or operated as of December 31, 2010.

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”). As of December 31, 2010, NNN owned 17 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, 2011, NNN employed 58 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 1/100^th 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 well located for its tenants’ lines of trade within each local market. 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 21 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 property level operating history,

•

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 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, 2010, $161,000,000 was outstanding and $239,000,000 was available for future borrowings under the Credit Facility, excluding undrawn letters of credit totaling $647,000.

For the year ended December 31, 2010, NNN’s ratio of total liabilities to total gross assets (before accumulated depreciation) was approximately 40 percent and the secured indebtedness to total gross assets was approximately two percent. The total debt to total market capitalization was approximately 34 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 Portfolio

As of December 31, 2010, NNN owned 1,195 Investment Properties with an aggregate gross leasable area of 12,972,000 square feet, located in 46 states. Approximately 97 percent of total properties in the Investment Portfolio were leased or operated by NNN as of December 31, 2010.

The following table summarizes NNN’s Investment Properties as of December 31, 2010 (in thousands):


	Size⁽¹⁾						Acquisition Cost⁽²⁾
	High		Low		Average		High		Low		Average
Land		2,223		5		101	$	8,882	$	5	$	974
Building		135		1		11		19,917		44		1,435

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

In connection with the development of 28 Investment Properties, NNN has agreed to fund construction commitments (including construction, land costs and tenant improvements) of $68,746,000. As of December 31, 2010, NNN had funded $50,196,000 of these commitments, with $18,550,000 remaining to be funded.

As of December 31, 2010, 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, 2010, 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 $6,000 to $1,876,000 (average of $199,000). Tenant leases generally provide for limited increases in rent as a result of fixed increases, increases in the Consumer Price Index (“CPI”), and/or, to a lesser extent, 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 provided under 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.

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, 2010:


	% of Annual Base Rent⁽¹⁾		# of Properties		Gross Leasable Area⁽²⁾			% of Annual Base Rent⁽¹⁾		# of Properties		Gross Leasable Area⁽²⁾

2011		1.5%		18		260,000	2017		3.9%		28		682,000
2012		3.1%		35		520,000	2018		2.6%		24		345,000
2013		4.4%		40		839,000	2019		4.0%		41		618,000
2014		4.4%		42		577,000	2020		4.0%		83		694,000
2015		4.5%		72		1,011,000	Thereafter		65.4%		745		6,167,000
2016		2.2%		19		407,000

⁽¹⁾Based on annualized base rent for all leases in place as of December 31, 2010. ⁽²⁾Approximate square feet.

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


		% of Annual Base Rent⁽¹⁾
	Top 10 Lines of Trade	2010		2009		2008

1.	Convenience Stores		23.7%		26.7%		25.7%
2.	Restaurants – Full Service		10.1%		9.2%		8.7%
3.	Automotive Parts		7.8%		6.8%		5.1%
4.	Theaters		5.7%		6.3%		6.1%
5.	Automotive Service		5.3%		5.7%		8.9%
6.	Sporting Goods		4.5%		3.2%		3.3%
7.	Restaurants – Limited Service		4.1%		3.5%		3.3%
8.	Drug Stores		4.0%		4.1%		4.0%
9.	Books		3.8%		4.1%		4.0%
10.	Grocery		2.7%		2.9%		2.6%
	Other		28.3%		27.5%		28.3%

			100.0%		100.0%		100.0%


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

The following table shows the top 10 states in which NNN’s Investment Properties are located as of December 31, 2010:


	State	# of Properties		% of Annual Base Rent⁽¹⁾

1.	Texas		220		18.7%
2.	Florida		93		10.0%
3.	Illinois		47		6.7%
4.	North Carolina		73		6.2%
5.	Georgia		60		5.0%
6.	Indiana		39		4.4%
7.	Ohio		38		4.1%
8.	Pennsylvania		84		3.9%
9.	Tennessee		33		2.9%
10.	Missouri		28		2.9%
	Other		480		35.2%

			1,195		100.0%


⁽¹⁾Based on annualized base rent for all leases in place as of December 31, 2010.

Mortgages and Notes Receivable

Mortgages are secured by real estate, real estate securities or other assets and include structured finance investments which 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):


	2010			2009
Mortgages and notes receivable	$	29,750		$	41,707
Accrued interest receivables, net of reserves		644			269
Unamortized discount		(63	)		-

	$	30,331		$	41,976

Commercial Mortgage Residual Interests

Orange Avenue Mortgage Investments, Inc. (“OAMI”), a wholly 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 $15,915,000 and $20,153,000 at December 31, 2010 and 2009, respectively.

For more information regarding NNN’s Investment Portfolio, see Note 23 of NNN’s Consolidated Financial Statements.

Inventory Portfolio

NNN’s Inventory Portfolio, which is owned by the TRS, 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, 2010, the Inventory Portfolio consisted of 10 completed development projects and seven land parcels.

The following table summarizes the completed Inventory Portfolio as of December 31, 2010 (in thousands):


	Size⁽¹⁾						Acquisition Cost⁽²⁾
	High		Low		Average		High		Low		Average
Land		527		17		106	$	2,248	$	108	$	953
Building		42		4		12		7,159		341		1,849

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

For more information regarding NNN’s Inventory Portfolio, see Note 23 of NNN’s Consolidated Financial Statements.

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.

As of February 15, 2011, NNN has 59 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.

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 and similar state and local laws and regulations (collectively, 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 15, 2011, 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. NNN’s leases generally require each tenant to undertake 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 volatile and any 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 operating 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 may be limited or unavailable, 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, reduce NNN’s ability to make cash distributions to its shareholders and increase NNN’s future interest expense;

•

reduced values of NNN’s properties which 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. Nearly all of NNN’s debt, including the Credit Facility, is subject to balloon principal payments due at maturity. These maturities range between 2011 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 29 percent of NNN’s annual base rent as of December 31, 2010. 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 and/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, 2010, approximately,

•

53 percent of NNN’s Investment Portfolio annual base rent is generated from five retail lines of trade, including convenience stores (24 percent) and full-service restaurants (10 percent),

•

29 percent of NNN’s Investment Portfolio annual base rent is generated from five tenants, including The Pantry, Inc. (eight percent) and Susser Holdings Corp. (eight percent),

•

47 percent of NNN’s Investment Portfolio annual base rent is generated from five states, including Texas (19 percent) and Florida (10 percent).

Any financial hardship and/or economic 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 of space, reduction in demand for space, intense competition for tenants, or a geographic shift in the market away from NNN’s properties,

•

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

•

changes in zoning, regulatory restrictions, or tax laws, 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.

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

NNN cannot predict what other 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, including, but not limited to environmental laws and regulations. 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 liability and could cause a material adverse effect on NNN’s results of operation.

NNN may be subject to known or unknown environmental liabilities and hazardous materials on properties owned by NNN.

There may be known or unknown environmental liabilities associated with properties owned or acquired in the future by NNN. Certain particular uses of some properties may also have a heightened risk of environmental liability because of the hazardous materials used in performing services on those properties, such as convenience stores with underground petroleum storage tanks or auto parts and auto service businesses using lube, paint and machine solvents. Some of NNN’s properties may contain asbestos or asbestos-containing materials, or may contain or may develop mold or other bio-contaminants. Asbestos-containing materials must be handled, managed and removed in accordance with applicable governmental laws, rules and regulations. Mold and other bio-contaminants can produce airborne toxins, may cause a variety of health issues in individuals and must be remediated in accordance with applicable governmental laws, rules and regulations.

As part of its due diligence process, NNN generally obtains an environmental site assessment for each property it acquires. In 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 contamination in accordance with applicable laws, rules and regulations, (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. Although sellers or tenants may be contractually responsible for remediating hazardous materials on a property and may be responsible for indemnifying NNN for any liability resulting from the use of a property and for any failure to comply with any applicable environmental laws, rules or regulations, NNN has no assurance that sellers or tenants shall be able to meet their remediation and indemnity obligations to NNN. A tenant or seller may not have the financial ability to meet its remediation and indemnity obligations to NNN when needed. Furthermore, NNN may have strict liability to governmental agencies or third parties as a result of the existence of hazardous materials on properties, whether or not NNN knew about or caused such hazardous materials to exist.

As of February 15, 2011 NNN has 59 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.

If NNN is responsible for hazardous materials located on its properties, NNN’s liability may include investigation and remediation costs, property damage to third parties, personal injury to third parties, and governmental fines and penalties. Furthermore, the presence of hazardous materials on a property may adversely impact the property value or NNN’s ability to sell the property. Significant environmental liability could impact NNN’s results of operations, ability to make distributions to shareholders, and its ability to meet its debt obligations.

In order to mitigate exposure to environmental liability, NNN has an environmental insurance policy on certain of its convenience store and travel plaza properties which expires in August 2013. However, the policy is subject to exclusions and limitations and does not cover all of the properties owned by NNN, and for those properties covered under the policy, insurance may not fully compensate NNN for any environmental liability. NNN has no assurance that the insurer on its environmental insurance policy will be able to meet its obligations under the policy. NNN may not desire to renew the environmental insurance policy in place upon expiration or a replacement policy may not be available at a reasonable cost, if at all.

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

NNN may not 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, 2010, the Residuals had a carrying value of $15,915,000. 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, 2010, mortgages and notes receivables had an outstanding principal balance of $29,750,000. 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 certain 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 certain 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 certain Investment Properties.

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

NNN’s properties are generally covered by comprehensive liability, fire, 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, 2010, NNN owned 37 vacant, un-leased Investment Properties, which accounted for approximately three percent of total Investment Properties held in NNN’s Investment Portfolio. 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 January 31, 2011, approximately one percent of the total gross leasable area of NNN’s Investment Portfolio was leased to four 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.

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, 2010, NNN had total mortgage debt outstanding of approximately $24,269,000, total unsecured notes payable of $948,416,000 and $161,000,000 outstanding on the unsecured 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 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.

As of December 31, 2010, NNN had approximately $1,133, 685,000 of outstanding indebtedness, of which approximately $24,269,000 was secured indebtedness. 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,

•

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, 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.

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 weak economic environment,

•

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 2012). 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 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, 2010, 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 or NNN’s tenants’ 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. Similarly, these changes could have a material impact on NNN’s tenants’ reported financial condition or results of operations and affect their preferences regarding leasing real estate.

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 are 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. [Removed and Reserved]

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, 2005 and ending December 31, 2010. The graph assumes an investment of $100 on December 31, 2005.

Comparison to Five-Year Cumulative Total Return

LOGO

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.


2010	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Year

High	$	23.73	$	24.59	$	25.94	$	28.11	$	28.11
Low		19.19		20.50		20.82		24.85		19.19
Close		22.83		21.44		25.11		26.50		26.50

Dividends paid per share		0.375		0.375		0.380		0.380		1.510

2009

High	$	17.52	$	19.48	$	22.80	$	21.59	$	22.80
Low		12.26		14.95		15.85		18.87		12.26
Close		15.84		17.35		21.47		21.22		21.22

Dividends paid per share		0.375		0.375		0.375		0.375		1.500

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


	2010			2009

Ordinary dividends	$	1.072446	71.0229%	$	1.495182	99.6788%
Qualified dividends		0.081661	5.4080%		-	-
Capital gain		0.000861	0.0570%		0.003051	0.2034%
Unrecaptured Section 1250 gain		0.000498	0.0330%		0.001767	0.1178%
Nontaxable distributions		0.354534	23.4791%		-	-

	$	1.510000	100.0000%	$	1.500000	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 Code and such other factors as the Board of Directors deems relevant.

In February 2011, NNN paid dividends to its stockholders of $31,678,000 or $0.38 per share of common stock.

On January 31, 2011, there were 1,848 stockholders of record of common stock.

Item 6. Selected Financial Data

Historical Financial Highlights

(dollars in thousands, except per share data)


	2010			2009			2008			2007			2006

Gross revenues⁽¹⁾	$	237,062		$	243,932		$	247,352		$	208,629		$	180,877
Earnings from continuing operations		71,202			56,129			97,858			76,642			58,739
Earnings including noncontrolling interests		73,353			56,399			119,971			155,743			184,422
Net earnings attributable to NNN		72,997			54,810			117,153			154,599			181,800
Total assets		2,713,575			2,590,962			2,649,471			2,539,673			1,917,516
Total debt		1,133,685			987,346			1,027,391			1,049,154			890,127
Total stockholders’ equity		1,527,483			1,564,240			1,566,860			1,417,647			1,109,479
Cash dividends declared to:
Common stockholders		125,391			120,256			110,107			92,989			76,035
Series A preferred stockholders		-			-			-			-			4,376
Series B convertible preferred stockholders		-			-			-			-			419
Series C preferred stockholders		6,785			6,785			6,785			6,785			923
Weighted average common shares:
Basic		82,715,645			79,846,258			74,249,137			66,152,437			57,428,063
Diluted		82,849,362			79,953,499			74,344,231			66,263,980			57,965,508
Per share information:
Earnings from continuing operations:
Basic	$	0.77		$	0.60		$	1.22		$	1.05		$	0.88
Diluted		0.77			0.60			1.22			1.05			0.88
Net earnings:
Basic		0.80			0.60			1.48			2.23			3.05
Diluted		0.80			0.60			1.48			2.22			3.03
Cash dividends declared to:
Common stockholders		1.51			1.50			1.48			1.40			1.32
Series A preferred stockholders		-			-			-			-			2.45625
Series B convertible preferred stockholders		-			-			-			-			41.875
Series C preferred depositary stockholders		1.84375			1.84375			1.84375			1.84375			0.250955
Other data:
Cash flows provided by (used in):
Operating activities	$	187,914		$	149,502		$	237,459		$	130,147		$	1,676
Investing activities		(220,260	)		(28,063	)		(256,304	)		(536,717	)		(90,099	)
Financing activities		19,169			(108,840	)		(6,028	)		432,394			81,864
Funds from operations – diluted⁽²⁾		108,328			89,506			132,996			110,589			86,749

(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, 2010, 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 certain 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 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 both of its financial 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 a decrease in NNN’s reported total revenues and total and per share earnings from continuing operations and an increase 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:


	2010			2009			2008			2007			2006
Reconciliation of funds from operations:
Net earnings attributable to NNN’s stockholders	$	72,997		$	54,810		$	117,153		$	154,599		$	181,800
Real estate depreciation and amortization:
Continuing operations		43,464			42,838			40,336			28,632			19,099
Discontinued operations		186			1,438			1,454			1,750			3,320
Partnership/joint venture real estate depreciation		178			178			177			31			463
Partnership gain on sale of asset		-			-			-			-			(262	)
Gain on disposition of equity investment		-			-			-			-			(11,373	)
Gain on disposition of investment assets		(1,134	)		(2,392	)		(9,980	)		(56,625	)		(91,332	)
Gain on disposition of inventory assets		(578	)		(581	)		(9,359	)		(11,013	)		(9,667	)

FFO		115,113			96,291			139,781			117,374			92,048
Series A preferred stock dividends⁽¹⁾		-			-			-			-			(4,376	)
Series B convertible preferred stock dividends⁽¹⁾		-			-			-			-			(419	)
Series C preferred stock dividends		(6,785	)		(6,785	)		(6,785	)		(6,785	)		(923	)

FFO available to common stockholders – basic		108,328			89,506			132,996			110,589			86,330
Series B convertible preferred stock dividends, if dilutive		-			-			-			-			419

FFO available to common stockholders – diluted	$	108,328		$	89,506		$	132,996		$	110,589		$	86,749

⁽¹⁾

The Series A and Series B preferred stock 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, and commercial mortgage residual interests (collectively, “Investment Assets”), and (ii) inventory real estate assets (“Inventory Assets”). NNN acquires, owns, invests in 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”).

As of December 31, 2010, NNN owned 1,195 Investment Properties (including 11 properties with retail operations that NNN operates), with an aggregate gross leasable area of approximately 12,972,000 square feet, located in 46 states. Approximately 97 percent of total properties in NNN’s Investment Portfolio was leased or operated as of December 31, 2010. As of December 31, 2010, NNN owned 17 Inventory Properties.

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 (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 tenant’s 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 and NNN’s management believes these sectors present attractive investment opportunities. NNN’s Investment Portfolio is geographically concentrated in the south and southeast United States, which are regions of historically above-average population growth. Given these concentrations, any financial hardship within these sectors or geographic locations, respectively, could have a material adverse effect on the financial condition and operating performance of NNN.

As of year end December 31, 2010, 2009 and 2008, 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 weak economic environment during the past three years has made it more difficult and more expensive to obtain debt and equity capital, and has reduced the pace of investments in new acquisitions or developments as well as the volume of dispositions. Additionally, the weak economic and retail environment has resulted in more retailers filing for bankruptcy and has made 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.

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 significant changes in real estate market condition or the ability of NNN to re-lease or sell properties that are vacant or become vacant. 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.

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 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. In 2010, NNN acquired the 21.1% non-controlling interest in its majority owned and controlled subsidiary, OAMI, for $1,603,000 pursuant to which OAMI became a wholly owned subsidiary of NNN. NNN accounted for the transaction as an equity transaction in accordance with the FASB guidance on consolidation.

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.

New Accounting Pronouncements. Refer to Note 1 to the December 31, 2010, Consolidated Financial Statements.

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:


	2010		2009		2008
Investment Properties Owned:
Number		1,195		1,015		1,005
Total gross leasable area (square feet)		12,972,000		11,373,000		11,251,000

Investment Properties:
Leased		1,147		966		972
Operated		11		12		-
Percent of Investment Properties – leased and operated		97%		96%		97%
Weighted average remaining lease term (years)		12		12		13
Total gross leasable area (square feet) – leased and operated		12,215,000		10,508,000		10,728,000


	% of Annual Base Rent⁽¹⁾		# of Properties		Gross Leasable Area⁽²⁾			% of Annual Base Rent⁽¹⁾		# of Properties		Gross Leasable Area⁽²⁾
2011		1.5%		18		260,000	2017		3.9%		28		682,000
2012		3.1%		35		520,000	2018		2.6%		24		345,000
2013		4.4%		40		839,000	2019		4.0%		41		618,000
2014		4.4%		42		577,000	2020		4.0%		83		694,000
2015		4.5%		72		1,011,000	Thereafter		65.4%		745		6,167,000
2016		2.2%		19		407,000

⁽¹⁾ Based on the annualized base rent for all leases in place as of December 31, 2010. ⁽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	2010		2009		2008
1.	Convenience Stores		23.7%		26.7%		25.7%
2.	Restaurants – Full Service		10.1%		9.2%		8.7%
3.	Automotive Parts		7.8%		6.8%		5.1%
4.	Theaters		5.7%		6.3%		6.1%
5.	Automotive Service		5.3%		5.7%		8.9%
6.	Sporting Goods		4.5%		3.2%		3.3%
7.	Restaurants – Limited Service		4.1%		3.5%		3.3%
8.	Drug Stores		4.0%		4.1%		4.0%
9.	Books		3.8%		4.1%		4.0%
10.	Grocery		2.7%		2.9%		2.6%
	Other		28.3%		27.5%		28.3%

			100.0%		100.0%		100.0%


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

The following table shows the top 10 states in which NNN’s Investment Properties are located in as of December 31, 2010:


	State	# of Properties	% of Annual Base Rent⁽¹⁾
1.	Texas	220		18.7%
2.	Florida	93		10.0%
3.	Illinois	47		6.7%
4.	North Carolina	73		6.2%
5.	Georgia	60		5.0%
6.	Indiana	39		4.4%
7.	Ohio	38		4.1%
8.	Pennsylvania	84		3.9%
9.	Tennessee	33		2.9%
10.	Missouri	28		2.9%
	Other	480		35.2%

		1,195		100.0%


⁽¹⁾Based on annualized base rent for all leases in place as of December 31, 2010.

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


	2010		2009		2008
Acquisitions:
Number of Investment Properties		194		8		109
Gross leasable area (square feet)		1,700,000		290,000		868,000

Total dollars invested⁽¹⁾	$	256,077	$	36,335	$	355,107

⁽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):


	2010		2009		2008
Number of properties		14		9		19
Gross leasable area (square feet)		100,000		234,000		290,000
Net sales proceeds	$	15,980	$	15,621	$	59,796
Net gain	$	1,134	$	2,392	$	9,980

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:


	2010		2009		2008
Completed Inventory Properties		10		13		24
Properties under construction		-		-		1
Land parcels		7		6		7


Total Inventory Properties		17		19		32

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

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):


	2010		2009		2008
Number of properties acquired		-		2		7
Total dollars invested⁽¹⁾	$	493	$	2,633	$	29,539

⁽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):


	2010					2009					2008
	# of Properties		Gain			# of Properties		Gain			# of Properties		Gain
Continuing operations		2	$	641			2	$	37			1	$	21
Noncontrolling interest				(320	)				(14	)				(10	)

Total continuing operations attributable to NNN				321					23					11

Discontinued operations		2		300			2		558			24		12,644
Noncontrolling interest				(43	)				-					(3,297	)

Total discontinued operations attributable to NNN				257					558					9,347

		4	$	578			4	$	581			25	$	9,358

Revenue from Continuing Operations Analysis

General. During the year ended December 31, 2010, 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 increases in rental income will continue to come from additional property acquisitions and increases in rents pursuant to lease terms.

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


	2010		2009		2008		Percent of Total						2010 Versus 2009 Percent Increase (Decrease)			2009 Versus 2008 Percent Increase (Decrease)
							Percent of Total
							2010		2009		2008
Rental Income⁽¹⁾	$	215,132	$	213,666	$	209,541		93.9%		92.6%		92.3%		0.7%			2.0%
Real estate expense reimbursement from tenants		7,438		8,361		6,980		3.3%		3.6%		3.1%		(11.0	)%		19.8%
Interest and other income from real estate transactions		3,026		4,535		5,807		1.3%		2.0%		2.6%		(33.3	)%		(21.9	)%
Interest income on commercial mortgage residual interests		3,460		4,252		4,636		1.5%		1.8%		2.0%		(18.6	)%		(8.3	)%

Total revenues from continuing operations	$	229,056	$	230,814	$	226,964		100.0%		100.0%		100.0%		(0.8	)%		1.7%


⁽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 revenues generated from NNN’s Inventory Assets are typically classified as discontinued operations.

Comparison of Year Ended December 31, 2010 to Year Ended December 31, 2009.

Rental Income. Rental Income remained relatively stable in amount and as a percent of the total revenues from continuing operations for the year ended December 31, 2010 as compared to 2009.

Real Estate Expense Reimbursement from Tenants. Real estate expense reimbursements from tenants decreased for the year ended December 31, 2010, as compared to 2009 but remained fairly consistent as a percentage of total revenues from continuing operations. The decrease is primarily attributable to the increase in reimbursed tax assessments in 2009 as compared to 2010.

Interest and Other Income from Real Estate Transactions. Interest and other income from real estate transactions decreased for the year ended December 31, 2010, as compared to 2009, primarily due to a lower weighted average principal balance and a lower weighted average interest rate on NNN’s mortgages receivable and structured finance investments during the year ended December 31, 2010. For the years ended December 31, 2010 and 2009, the weighted average outstanding principal balance and interest rates on NNN’s mortgages receivable and structured finance investments was $31,925,000 at 9.04% and $38,968,000 at 9.50%, respectively. The decrease was also due to two defaulted loans at December 31, 2010.

Interest Income on Commercial Mortgage Residual Interests. Interest income on commercial mortgage residual interests (“Residuals”) decreased for the year ended December 31, 2010, as compared to December 31, 2009, but remained fairly stable as a percent of total revenue from continuing operations. The decrease in interest income on Residuals is primarily the result of declining loan balances from prepayments and scheduled loan amortization.

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

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 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.

Analysis of Expenses from Continuing Operations

General. During 2010, operating expenses from continuing operations decreased primarily due to lower impairment losses and other charges recorded during the year ended December 31, 2010, as compared to the same period in 2009. The following summarizes NNN’s expenses from continuing operations (dollars in thousands):


	2010			2009			2008
General and administrative	$	22,778		$	21,773		$	24,875
Real estate		13,534			13,642			10,152
Depreciation and amortization		48,328			46,539			43,668
Impairment losses and other charges		7,458			36,080			1,234
Impairment – commercial mortgage residual interests valuation		3,995			498			758
Restructuring costs		-			731			-

Total operating expenses	$	96,093		$	119,263		$	80,687


Interest and other income	$	(1,513	)	$	(1,371	)	$	(3,748	)
Interest expense		65,179			62,151			63,964
Loss on interest rate hedge		-			-			804

Total other expenses (revenues)	$	63,666		$	60,780		$	61,020


	Percentage of Total Operating Expenses						Percentage of Revenues from Continuing Operations						2010 Versus 2009 Percent Increase (Decrease)		2009 Versus 2008 Percent Increase (Decrease)
	2010		2009		2008		2010		2009		2008		2010 Versus 2009 Percent Increase (Decrease)		2009 Versus 2008 Percent Increase (Decrease)
General and administrative		23.7%		18.3%		30.8%		9.9%		9.4%		11.0%		4.6%		(12.5)%
Real estate		14.1%		11.4%		12.6%		5.9%		5.9%		4.5%		(0.8)%		34.4%
Depreciation and amortization		50.2%		39.0%		54.1%		21.1%		20.2%		19.2%		3.8%		6.6%
Impairment losses and other charges		7.8%		30.3%		1.5%		3.3%		15.6%		0.5%		(79.3)%		2,823.8%
Impairment – commercial mortgage residual interests valuation adjustment		4.2%		0.4%		1.0%		1.7%		0.2%		0.3%		702.2%		(34.3)%
Restructuring costs		-		0.6%		-		-		0.3%		-		(100.0)%		N/C	⁽¹⁾

Total operating expenses		100.0%		100.0%		100.0%		41.9%		51.6%		35.5%		(19.4)%		47.8%

Interest and other income		(2.4)%		(2.3)%		(6.1)%		(0.7)%		(0.6)%		(1.7)%		10.4%		(63.4)%
Interest expense		102.4%		102.3%		104.8%		28.5%		26.9%		28.2%		4.9%		(2.8)%
Loss on interest rate hedge		-		-		1.3%		-		-		0.4%		-		(100.0)%

Total other expenses (revenues)		100.0%		100.0%		100.0%		27.8%		26.3%		26.9%		4.7%		(0.4)%


⁽¹⁾ Not calculable (“N/C”)

Comparison of Year Ended December 31, 2010 to Year Ended December 31, 2009.

General and Administrative Expenses. General and administrative expenses increased for the year ended December 31, 2010, as compared to the same period in 2009 and increased both as a percentage of total operating expenses and as a percentage of revenues from continuing operations. The increase in general and administrative expenses for the year ended December 31, 2010, is primarily attributable to an increase in noncash long-term incentive compensation. This increase is partially offset by a decrease in lost pursuit costs and capitalized overhead.

Real Estate. Real estate expenses increased as a percentage of total operating expenses, but remained stable as a percentage of revenues from continuing operations for the year ended December 31, 2010, as compared to the same period in 2009.

Depreciation and Amortization. Depreciation and amortization expenses increased as a percentage of total operating expenses but remained fairly stable as a percentage of revenues from continuing operations for the year ended December 31, 2010, as compared to the year ended December 31, 2009. The dollar increase is primarily a result of an increase in the amortization of loan costs associated with a credit agreement NNN entered into in November 2009.

Impairment Losses and Other Charges. 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 determines 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. The decrease in impairment losses and other charges is primarily due to real estate impairments of $28,884,000 recorded in 2009, as compared to zero in 2010.

Impairment – Commercial Mortgage Residual Interests Valuation. In connection with the independent valuations of the Residuals’ fair value, during the years ended December 31, 2010 and 2009, NNN recorded an other than temporary valuation adjustment of $3,995,000 and $498,000, 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 2010.

Interest Expense. Interest expense increased for the year ended December 31, 2010, as compared to the same period in 2009, and increased as a percentage of revenues from continuing operations but remained relatively stable as a percentage of total operating expenses.

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

(i)

the repurchase of $11,000,000 of convertible notes payable due June 2028 with an effective interest rate of 7.192% in 2009,

(ii)

the repurchase of $8,800,000 of convertible notes payable due September 2026 with an effective interest rate of 5.840% in 2009,

(iii)

the payoff of the $20,000,000 8.5% notes payable in September 2010,

(iv)

the increase of $7,037,000 in the weighted average debt outstanding on the Credit Facility for year ended December 31, 2010, as compared to the same period in 2009,

(v)

the increase in the weighted average interest rate on the Credit Facility from 1.19% during the year ended December 31, 2009, to 3.80% during the year ended December 31, 2010,

(vi)

the decrease of $626,000 in capitalized interest expense for the year ended December 31, 2010, as compared to the same period in 2009, and

(vii)

the increase of $850,000 in amortization of loan commitment fees related to the Credit Facility entered into November 2009.

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 Losses and Other Charges. 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 $28,884,000 and $1,234,000, respectively. In addition, during the year ended December 31, 2009, NNN recognized a loss on a note receivable foreclosure of $7,196,000.

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)

repurchase of $11,000,000 of convertible notes payable due June 2028 with an effective interest rate of 7.192% in 2009,

(ii)

repurchase of $8,800,000 of convertible notes payable due September 2026 with an effective interest rate of 5.840% in 2009,

(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)

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

(vi)

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.

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, 2010. 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):


	2010						2009							2008
	# of Sold Properties		Gain		Earnings/ (Loss)		# of Sold Properties		Gain		Earnings/ (Loss)			# of Sold Properties		Gain		Earnings/ (Loss)
Investment Assets		14	$	1,134	$	1,859		9	$	2,392	$	1,776			19	$	9,980	$	12,914
Inventory Assets		2		300		292		2		558		(1,506	)		24		12,644		9,199
Noncontrolling interests		-		-		11		-		-		(166	)		-		-		(2,722	)

		16	$	1,434	$	2,162		11	$	2,950	$	104			43	$	22,624	$	19,391

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 Losses and Other Charges. 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 significant changes in real estate market conditions and the ability of NNN to re-lease or sell properties that are vacant or become vacant. 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, and 2008, NNN recognized real estate impairments on discontinued operations of $5,630,000, and $4,426,000, respectively. During the year ended December 31, 2010, NNN did not recognize any real estate impairments on discontinued operations.

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, to a lesser extent, 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; (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 receivable) 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, 2010, $161,000,000 was outstanding and $239,000,000 was available for future borrowings under the Credit Facility, excluding undrawn letters of credit totaling $647,000. NNN anticipates that any additional investments in properties, mortgages and notes receivables 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):


	2010			2009		2008
Cash and cash equivalents:
Provided by operating activities	$	187,914		$	149,502	$	237,459
Used in investing activities		(220,260)			(28,063)		(256,304)
Provided by (used in) financing activities		19,169			(108,840)		(6,028	)

Increase (decrease)		(13,177	)		12,599		(24,873	)
Net cash at beginning of period		15,225			2,626		27,499

Net cash at end of period	$	2,048		$	15,225	$	2,626

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 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, 2010, 2009 and 2008, 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, 2010, included the following significant transactions:

•

$125,391,000 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,

•

$17,631,000 in net proceeds from the issuance of 793,759 shares of common stock in connection with the Dividend Reinvestment and Stock Purchase Plan (“DRIP”), and

•

$161,000,000 in net proceeds from NNN’s Credit Facility,

•

$6,453,000 in repayments of mortgages, and

•

$20,000,000 in repayment of notes payable.

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, 2010, $161,000,000 was outstanding and $239,000,000 was available for future borrowings under the Credit Facility, excluding undrawn letters of credit totaling $647,000.

Contractual Obligations and Commercial Commitments. The information in the following table summarizes NNN’s contractual obligations and commercial commitments outstanding as of December 31, 2010. The table presents principal cash flows by year-end of the expected maturity for debt obligations and commercial commitments outstanding as of December 31, 2010.


	Expected Maturity Date (dollars in thousands)
	Total		2011			2012		2013			2014		2015		Thereafter
Long-term debt⁽¹⁾	$	986,004	$	139,798	⁽³⁾	$	69,290	$	223,898	⁽³⁾	$	150,881	$	150,917	$	251,220
Credit Facility		161,000		-			161,000		-			-		-		-
Operating lease		3,666		917			945		973			831		-		-

Total contractual cash obligations⁽²⁾	$	1,150,670	$	140,715		$	231,235	$	224,871		$	151,712	$	150,917	$	251,220


⁽¹⁾ Includes amounts outstanding under the mortgages payable, convertible notes payable and notes payable and excludes unamortized note discounts. ⁽²⁾ Excludes $7,342 of accrued interest payable. ⁽³⁾ Maturity dates are based on put option dates under NNN’s convertible notes.

In addition to the contractual obligations outlined above, in connection with the development of 28 Investment Properties, NNN has agreed to fund construction commitments (including construction, land costs and tenant improvements) of $68,746,000. As of December 31, 2010, NNN had funded $50,196,000 of this commitment, with $18,550,000 remaining to be funded. As of December 31, 2010, NNN did not have any funding commitments relating to the development of Inventory Properties.

As of December 31, 2010, NNN had outstanding letters of credit totaling $647,000 under its Credit Facility.

As of December 31, 2010, 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.

Generally the Investment Properties are leased under long-term net leases. 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, 2010, NNN owned 37 vacant, un-leased Investment Properties which accounted for approximately three percent of total Investment Properties held in NNN’s Investment Portfolio. Additionally, as of January 31, 2011, approximately one percent of the total gross leasable area of NNN’s Investment Portfolio was leased to four tenants that filed a voluntary petition for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. As a result, these tenants have the right to reject or affirm their leases with NNN.

In February 2011, one of NNN’s tenants, Borders Group, Inc. (“Borders”), which leased five Investment Properties from NNN, filed a petition of reorganization under Chapter 11 of the U.S. Bankruptcy Code. In February 2011, Borders moved to reject three leases with NNN and retains the right to reject the remaining two leases with NNN.

In February 2011, one of NNN’s tenants, Robb & Stucky, LTD, which leases 1 Investment Property from NNN, filed a petition of reorganization under Chapter 11 of the U.S. Bankruptcy Code and retains the right to reject its lease with NNN.

On April 20, 2009, one of NNN’s tenants, Titlemax Holdings, LLC and its affiliated companies (“Titlemax”), which leased 30 Investment Properties from NNN, filed a petition of reorganization under Chapter 11 of the U.S. Bankruptcy Code. In January 2010, Titlemax assumed all of its leases with NNN. In April 2010, Titlemax’s plan of reorganization was approved by the U.S. Bankruptcy Court and Titlemax exited bankruptcy. Titlemax’s Chapter 11 filing did not have an effect on NNN’s operations or financial position.

In June 2010, one of NNN’s tenants, Majestic Liquor Stores, Inc. (“Majestic”), which leased 13 Investment Properties from NNN, filed a petition of reorganization under Chapter 11 of the U.S. Bankruptcy Code. In addition, in June 2010, the principals of Majestic, (the “Majestic Principals”), which are the borrowers on a loan from NNN secured by one Majestic property, filed a petition of reorganization under Chapter 11 of the U.S. Bankruptcy Code. In June 2010, Majestic elected to reject the leases of four properties owned by NNN and the one property securing the loan to the Majestic Principals. In November 2010 NNN foreclosed on the property securing the loan to the Majestic Principals. In addition, during the year ended December 31, 2010, NNN recorded a $5,625,000 charge in connection with the loan to the Majestic Principals. In December 2010, Majestic assumed all 9 of the remaining leases with NNN. Also in December 2010

Majestic and Majestic Principals plan of reorganization was approved by the U.S. Bankruptcy court and Majestic and the Majestic Principals exited bankruptcy.

Dividends. NNN has made an election to be taxed as a REIT under Sections 856 through 860 of the Code, 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, 2010, 2009 and 2008, NNN declared and paid dividends to its common stockholders of $125,391,000, $120,256,000 and $110,107,000, respectively, or $1.51, $1.50 and $1.48 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:


	2010			2009			2008

Ordinary dividends	$	1.072446	71.0229%	$	1.495182	99.6788%	$	1.480000	100.0000%
Qualified dividends		0.081661	5.4080%		-	-		-	-
Capital gain		0.000861	0.0570%		0.003051	0.2034%		-	-
Unrecaptured Section 1250 Gain		0.000498	0.0330%		0.001767	0.1178%		-	-
Nontaxable distributions		0.354534	23.4791%		-	-		-	-

	$	1.510000	100.0000%	$	1.500000	100.0000%	$	1.480000	100.0000%

In February 2011, NNN paid dividends to its common stockholders of $31,678,000, or $0.38 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.

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, 2010, 2009 and 2008. The Series C Preferred Stock has no maturity date and will remain outstanding unless redeemed.

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


	2010			2009			2008

Ordinary dividends	$	1.703170	92.3753%	$	1.837828	99.6788%	$	1.843750	100.0000%
Qualified dividends		0.140580	7.6247%		-	-		-	-
Capital gain		-	-		0.003750	0.2034%		-	-
Unrecaptured Section 1250 Gain		-	-		0.002172	0.1178%		-	-

	$	1.843750	100.0000%	$	1.843750	100.0000%	$	1.843750	100.0000%

Capital Resources

Generally, cash needs for property acquisitions, mortgages and notes receivable investments, debt payments, dividends, 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):


	2010		Percentage of Total		2009		Percentage of Total

Line of credit payable	$	161,000		14.2%	$	-		-
Mortgages payable		24,269		2.2%		25,290		2.6%
Notes payable – convertible		349,534		30.8%		343,380		34.8%
Notes payable		598,882		52.8%		618,676		62.6%

Total outstanding debt	$	1,133,685		100.0%	$	987,346		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 $17,861,000 and a weighted average interest rate of 3.8% during the year ended December 31, 2010. 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 credit 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, 2010, $161,000,000 was outstanding, and $239,000,000 was available for future borrowings under the Credit Facility, excluding undrawn letters of credit totaling $647,000.

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, 2010, 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 operations.

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,
Entered	Balance		Interest Rate			Maturity⁽³⁾		Carrying Value of Encumbered Asset(s)⁽¹⁾		2010		2009

December 2001⁽²⁾		623		9.00	%		April 2014	$	734	$	215	$	267
December 2001⁽²⁾		698		9.00	%		April 2019		1,186		364		392
December 2001⁽²⁾		485		9.00	%		April 2019		1,152		187		201
June 2002		21,000		6.90	%		July 2012		24,051		18,841		19,170
February 2004⁽²⁾		6,952		6.90	%		January 2017		11,522		4,038		4,554
March 2005⁽²⁾		1,015		8.14	%		September 2016		1,322		624		706

								$	39,967	$	24,269	$	25,290

⁽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, 2010.

⁽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.

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


Terms	2026 Notes^(1)(2)(4)			2028 Notes⁽²⁾⁽⁵⁾⁽⁶⁾

Issue Date		September 2006			March 2008
Net Proceeds	$	168,650		$	228,576
Stated Interest Rate⁽⁸⁾		3.950%			5.125%
Debt Issuance Costs	$	3,850	⁽³⁾	$	5,459	⁽⁷⁾
Earliest Conversion Date		September 2025			June 2027
Earliest Put Option Date		September 2011			June 2013
Maturity Date		September 2026			June 2028

Original Principal	$	172,500		$	234,035
Repurchases		(33,800	)		(11,000	)

Outstanding principal balance at December 31, 2010	$	138,700		$	223,035

⁽¹⁾

NNN repurchased $8,800 and $25,000 in 2009 and 2008, respectively, for a purchase price of $6,994 and $19,188, respectively, resulting in a gain of $1,565 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 $463 of note costs which were written off in connection with the repurchase of $33,800 of the 2026 Notes.

⁽⁴⁾

The conversion rate per $1 principal amount was 41.9803 shares of NNN’s common stock, which is equivalent to a conversion price of $23.8207 per share of common stock.

⁽⁵⁾

The conversion rate per $1 principal amount was 39.3620 shares of NNN’s common stock, which is equivalent to a conversion price of $25.4052 per share of common stock.

⁽⁶⁾

NNN repurchased $11,000 in 2009 for a purchase price of $8,588 resulting in a gain of $1,867.

⁽⁷⁾

Includes $219 of note costs which were written off in connection with the repurchase of $11,000 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.

The carrying amounts of the Company’s debt and equity balances are summarized in the table below as of December 31, (dollars in thousands):


	2010			2009

Carrying value of equity component	$	(33,873	)	$	(33,873	)
Principal amount of convertible debt		361,735			361,735
Remaining unamortized debt discount		(12,201	)		(18,355	)

Net carrying value of convertible debt	$	315,661		$	309,507

As of December 31, 2010, the remaining amortization periods for the debt discount were approximately nine months and 18 months for the 2026 Notes and the 2028 Notes, respectively.

The adjusted effective interest rates for the liability components of the 2026 Notes and the 2028 Notes were 5.840% and 7.192%, respectively. The Company recorded noncash interest-related charges of $6,154,000, $5,809,000 and $5,481,000 for the years ended December 31, 2010, 2009 and 2008, respectively. The Company recorded contractual interest expense of $16,909,000, $17,046,000 and $16,548,000 for the years ended December 31, 2010, 2009 and 2008, respectively, relating to the 2026 Notes and 2028 Notes.

The if-converted values that exceed the principal amount as of December 31, 2010, are $15,601,000 and $9,611,000 for the 2026 Notes and the 2028 Notes, respectively. As of December 31, 2009, the if-converted amount did not exceed the value of the principal amount.

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
2012⁽¹⁾	June 2002	$	50,000		287	$	49,713		7.750%		7.833%	June 2012
2014^(1)(2)(5)	June 2004		150,000		440		149,560		6.250%		5.910%	June 2014
2015⁽¹⁾	November 2005		150,000		390		149,610		6.150%		6.185%	December 2015
2017⁽¹⁾⁽⁶⁾	September 2007		250,000		877		249,123		6.875%		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 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 $5,226,000 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, 2010, NNN was in compliance with those covenants.

In September 2010, NNN repaid the 8.500% $20,000,000 notes that were due in September 2010.

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 3,680,000 depositary shares, each representing 1/100^th of a share of 7.375% Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”), and received gross proceeds of $92,000,000. 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.

Common Stock Issuances. 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:


	2010		2009		2008

Shares of common stock		793,759		3,766,452		2,146,640
Net proceeds	$	17,623,000	$	67,354,000	$	47,372,000

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

Mortgages and Notes Receivable.

Mortgages are secured by real estate, real estate securities or other assets. Mortgages and notes receivable consisted of the following at December 31 (dollars in thousands):


	2010			2009

Mortgages and notes receivable	$	29,750		$	41,707
Accrued interest receivable, net of reserves		644			269
Unamortized discount		(63	)		-

	$	30,331		$	41,976

Commercial Mortgage Residual Interests.

In connection with the independent valuations of the Residuals’ fair value, NNN adjusted the carrying value of the Residuals to reflect such fair value as of December 31, 2010. 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:


	2010		2009

Discount rate		25%		25%
Average life equivalent CPR speeds range		4.35% to 20.37% CPR		14.5% to 20.7% CPR
Foreclosures:
Frequency curve default model		0.1% - 15.0% range		6% average rate
Loss severity of loans in foreclosure		20%		20%
Yield:
LIBOR		Forward 3-month curve		Forward 3-month curve
Prime		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):


	2010		2009		2008

Unrealized gains	$	1,273	$	-	$	2,009
Unrealized losses		-		1,640		-
Other than temporary valuation impairment		3,995		498		758

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. In connection with the review of goodwill for impairment, NNN recognized a noncash impairment charge of $1,900,000.

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, 2010, 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, 2010 and 2009. The table presents principal payments and related interest rates by year for debt obligations outstanding as of December 31, 2010. The variable interest rates shown represent weighted average rate for the Credit Facility for the year ended December 31, 2010. The table incorporates only those debt obligations that existed as of December 31, 2010, and 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 less than one percent for the year ended December 31, 2010.


Debt Obligations (dollars in thousands)
	Variable Rate Debt				Fixed Rate Debt
	Credit Facility				Mortgages				Unsecured Debt⁽¹⁾
	Debt Obligation		Weighted Average Interest Rate		Debt Obligation		Weighted Average Interest Rate		Debt Obligation		Effective Interest Rate
2011		$ -		-		$ 1,098		7.20%		$ 136,857		5.84%
2012		161,000		3.80%		19,290		6.92%		49,945		7.83%
2013		-		-		863		7.35%		212,677		7.19%
2014		-		-		881		7.27%		149,817		5.91%
2015		-		-		917		7.22%		149,777		6.19%
Thereafter		-		-		1,220		7.47%		249,343		6.92%

Total		$ 161,000		3.80%		$ 24,269		7.00%		$ 948,416		6.60%


Fair Value:
December 31, 2010		$ 161,000				$ 24,269				$1,044,621

December 31, 2009		$ -				$ 25,290				$ 987,275


⁽¹⁾ Includes NNN’s notes payable and convertible notes payable, each net of unamortized discounts. NNN uses Bloomberg 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 $15,915,000 and $20,153,000 as of December 31, 2010 and 2009, 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, 2010, 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, 2010, 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, 2010 and 2009, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010 and our report dated February 24, 2011 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Miami, Florida

February 24, 2011

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, 2010 and 2009, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010. 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, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statements schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

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, 2010, 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 24, 2011 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Miami, Florida

February 24, 2011

NATIONAL RETAIL PROPERTIES, INC.

and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)


ASSETS	December 31, 2010		December 31, 2009

Real estate, Investment Portfolio:
Accounted for using the operating method, net of accumulated depreciation and amortization	$	2,519,950	$	2,328,576
Accounted for using the direct financing method		29,773		31,317
Real estate, Inventory Portfolio, held for sale		32,076		72,423
Investment in unconsolidated affiliate		4,515		4,703
Mortgages, notes and accrued interest receivable, net of allowance		30,331		41,976
Commercial mortgage residual interests		15,915		20,153
Cash and cash equivalents		2,048		15,225
Receivables, net of allowance of $1,750 and $583, respectively		3,403		1,946
Accrued rental income, net of allowance of $3,609 and $2,875, respectively		25,535		25,745
Debt costs, net of accumulated amortization of $11,198 and $6,870, respectively		9,366		13,884
Other assets		40,663		35,014

Total assets	$	2,713,575	$	2,590,962

LIABILITIES AND EQUITY

Liabilities:
Line of credit payable	$	161,000	$	-
Mortgages payable		24,269		25,290
Notes payable – convertible, net of unamortized discount of $12,201 and $18,355, respectively		349,534		343,380
Notes payable, net of unamortized discount of $1,118 and $1,324, respectively		598,882		618,676
Accrued interest payable		7,342		7,471
Other liabilities		43,774		29,283

Total liabilities		1,184,801		1,024,100


Commitments and contingencies (Note 26)

Equity:
Stockholders’ equity:
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		92,000
Common stock, $0.01 par value. Authorized 190,000,000 shares; 83,613,289 and 82,427,560 shares issued and outstanding, respectively		838		825
Excess stock, $0.01 par value. Authorized 205,000,000 shares; none issued or outstanding		-		-
Capital in excess of par value		1,429,750		1,408,491
Retained earnings		3,234		62,413
Accumulated other comprehensive income		1,661		511

Total stockholders’ equity of NNN		1,527,483		1,564,240
Noncontrolling interests		1,291		2,622

Total equity		1,528,774		1,566,862

Total liabilities and equity	$	2,713,575	$	2,590,962

See accompanying notes to consolidated financial statements.

NATIONAL RETAIL PROPERTIES, INC.

and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in thousands, except per share data)


	Year Ended December 31,
	2010			2009			2008

Revenues:
Rental income from operating leases	$	211,172		$	209,256		$	205,334
Earned income from direct financing leases		3,001			3,070			3,103
Percentage rent		959			1,340			1,104
Real estate expense reimbursement from tenants		7,438			8,361			6,980
Interest and other income from real estate transactions		3,026			4,535			5,807
Interest income on commercial mortgage residual interests		3,460			4,252			4,636

		229,056			230,814			226,964

Disposition of real estate, Inventory Portfolio:
Gross proceeds		5,600			953			4,900
Costs		(4,959	)		(916	)		(4,879	)

Gain		641			37			21

Retail operations:
Revenues		32,958			15,595			-
Operating expenses		(31,647	)		(15,176	)		-

Net		1,311			419			-

Operating expenses:
General and administrative		22,778			21,773			24,875
Real estate		13,534			13,642			10,152
Depreciation and amortization		48,328			46,539			43,668
Impairment losses and other charges		7,458			36,080			1,234
Impairment – commercial mortgage residual interests valuation adjustment		3,995			498			758
Restructuring costs		-			731			-

		96,093			119,263			80,687

Earnings from operations		134,915			112,007			146,298


Other expenses (revenues):
Interest and other income		(1,513	)		(1,371	)		(3,748	)
Interest expense		65,179			62,151			63,964
Loss on interest rate hedge		-			-			804

		63,666			60,780			61,020

Earnings from continuing operations before income tax benefit (expense), equity in earnings of unconsolidated affiliate and gain on extinguishment of debt		71,249			51,227			85,278
Income tax benefit (expense)		(475	)		1,049			7,255
Equity in earnings of unconsolidated affiliate		428			421			364
Gain on extinguishment of debt		-			3,432			4,961

Earnings from continuing operations		71,202			56,129			97,858

Earnings (loss) from discontinued operations (Note 18):
Real estate, Investment Portfolio, net of income tax expense		1,859			1,776			12,914
Real estate, Inventory Portfolio, net of income tax expense		292			(1,506	)		9,199

		2,151			270			22,113

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)


	Year Ended December 31,
	2010			2009			2008

Earnings including noncontrolling interests	$	73,353		$	56,399		$	119,971
Loss (earnings) attributable to noncontrolling interests:
Continuing operations		(367	)		(1,423	)		(96	)
Discontinued operations		11			(166	)		(2,722	)

		(356	)		(1,589	)		(2,818	)

Net earnings attributable to NNN		72,997			54,810			117,153
Other comprehensive income (loss)		1,150			(1,903	)		1,688

Total comprehensive income	$	74,147		$	52,907		$	118,841

Net earnings attributable to NNN	$	72,997		$	54,810		$	117,153
Series C preferred stock dividends		(6,785	)		(6,785	)		(6,785	)

Net earnings attributable to common stockholders	$	66,212		$	48,025		$	110,368

Net earnings per share of common stock:
Basic:
Continuing operations	$	0.77		$	0.60		$	1.22
Discontinued operations		0.03			-			0.26

Net earnings	$	0.80		$	0.60		$	1.48

Diluted:
Continuing operations	$	0.77		$	0.60		$	1.22
Discontinued operations		0.03			-			0.26

Net earnings	$	0.80		$	0.60		$	1.48

Weighted average number of common shares outstanding:
Basic		82,715,645			79,846,258			74,249,137

Diluted		82,849,362			79,953,499			74,344,231

See accompanying notes to consolidated financial statements.

NATIONAL RETAIL PROPERTIES, INC.

and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

Years Ended December 31, 2010, 2009 and 2008

(dollars in thousands, except per share data)


	Series C Preferred Stock		Common Stock		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity

Balances at December 31, 2007	$	92,000	$	725	$	1,189,564		$	134,383		$	975		$	1,417,647		$	2,956		$	1,420,603

Net earnings		-		-		-			117,153			-			117,153			2,818			119,971
Dividends declared and paid:
$1.84375 per depositary share of Series C preferred stock		-		-		-			(6,785	)		-			(6,785	)		-			(6,785	)
$1.48 per share of common stock		-		4		8,472			(110,107	)		-			(101,631	)		-			(101,631	)
Issuance of common stock:
3,523,285 shares		-		35		80,633			-			-			80,668			-			80,668
1,753,201 shares – discounted stock purchase program		-		18		38,878			-			-			38,896			-			38,896
Issuance of 217,397 shares of restricted common stock		-		2		(2	)		-			-			-			-			-
Stock issuance costs		-		-		(3,582	)		-			-			(3,582	)		-			(3,582	)
Equity component of convertible debt		-		-		20,467			-			-			20,467			-			20,467
Amortization of deferred compensation		-		-		2,588			-			-			2,588			-			2,588
Interest rate hedge termination		-		-		-			-			(162	)		(162	)		-			(162	)
Amortization of interest rate hedges		-		-		-			-			(109	)		(109	)		-			(109	)
Unrealized gain – commercial mortgage residual interests		-		-		-			-			1,760			1,760			249			2,009
Stock value adjustment		-		-		-			-			(50	)		(50	)		-			(50	)
Contributions from noncontrolling interests		-		-		-			-			-			-			41			41
Distributions to noncontrolling interests		-		-		-			-						-			(5,483	)		(5,483	)
Other		-		-		-			-			-			-			1,505			1,505

Balances at December 31, 2008	$	92,000	$	784	$	1,337,018		$	134,644		$	2,414		$	1,566,860		$	2,086		$	1,568,946

See accompanying notes to consolidated financial statements.

NATIONAL RETAIL PROPERTIES, INC.

and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY – CONTINUED

Years Ended December 31, 2010, 2009 and 2008

(dollars in thousands, except per share data)


	Series C Preferred Stock		Common Stock		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity

Balances at December 31, 2008	$	92,000	$	784	$	1,337,018		$	134,644		$	2,414		$	1,566,860		$	2,086		$	1,568,946

Net earnings		-		-		-			54,810			-			54,810			1,589			56,399
Dividends declared and paid:
$1.84375 per depositary share of Series C preferred stock		-		-		-			(6,785	)		-			(6,785	)		-			(6,785	)
$1.50 per share of common stock		-		1		1,797			(120,256	)		-			(118,458	)		-			(118,458	)
Issuance of common stock:
99,738 shares		-		1		1,435			-			-			1,436			-			1,436
3,664,182 shares – discounted stock purchase program		-		36		65,519			-			-			65,555			-			65,555
Issuance of 262,546 shares of restricted common stock		-		3		(3	)		-			-			-			-			-
Stock issuance costs		-		-		(113	)		-			-			(113	)		-			(113	)
Equity component of extinguishment of convertible debt		-		-		(795	)		-			-			(795	)		-			(795	)
Amortization of deferred compensation		-		-		3,443			-			-			3,443			-			3,443
Amortization of interest rate hedges		-		-		-			-			(159	)		(159	)		-			(159	)
Unrealized loss – commercial mortgage residual interests		-		-		-			-			(1,744	)		(1,744	)		104			(1,640	)
Contributions from noncontrolling interests		-		-		-			-			-			-			152			152
Distributions to noncontrolling interests		-		-		-			-			-			-			(552	)		(552	)
Other		-		-		190			-			-			190			(757	)		(567	)

Balances at December 31, 2009	$	92,000	$	825	$	1,408,491		$	62,413		$	511		$	1,564,240		$	2,622		$	1,566,862

See accompanying notes to consolidated financial statements.

NATIONAL RETAIL PROPERTIES, INC.

and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY – CONTINUED

Years Ended December 31, 2010, 2009 and 2008

(dollars in thousands, except per share data)


	Series C Preferred Stock		Common Stock		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity

Balances at December 31, 2009	$	92,000	$	825	$	1,408,491		$	62,413		$	511		$	1,564,240		$	2,622		$	1,566,862

Net earnings		-		-		-			72,997			-			72,997			356			73,353
Dividends declared and paid:
$1.84375 per depositary share of Series C preferred stock		-		-		-			(6,785	)		-			(6,785	)		-			(6,785	)
$1.51 per share of common stock		-		3		7,350			(125,391	)		-			(118,038	)		-			(118,038	)
Issuance of common stock:												-
39,872 shares		-		1		697			-			-			698			-			698
491,705 shares – discounted stock purchase program		-		5		10,272			-			-			10,277			-			10,277
Issuance of 377,164 shares of restricted common stock		-		4		(4	)		-			-			-			-			-
Stock issuance costs		-		-		(1	)		-			-			(1	)		-			(1	)
Performance incentive plan		-		-		(1,634	)		-			-			(1,634	)		-			(1,634	)
Amortization of deferred compensation		-		-		5,119			-			-			5,119			-			5,119
Amortization of interest rate hedges		-		-		-			-			(165	)		(165	)		-			(165	)
Unrealized gain – commercial mortgage residual interests		-		-		-			-			1,272			1,272			(26	)		1,246
Contributions from noncontrolling interests		-		-		-			-			-			-			43			43
Distributions to noncontrolling interests		-		-		-			-			-			-			(861	)		(861	)
Purchase of noncontrolling interest		-		-		(404	)		-			-			(404	)		(1,199	)		(1,603	)
Other		-		-		(136	)		-			43			(93	)		356			263

Balances at December 31, 2010	$	92,000	$	838	$	1,429,750		$	3,234		$	1,661		$	1,527,483		$	1,291		$	1,528,774

See accompanying notes to consolidated financial statements.

NATIONAL RETAIL PROPERTIES, INC.

and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)


	Year Ended December 31,
	2010			2009			2008
Cash flows from operating activities:
Earnings including noncontrolling interests	$	73,353		$	56,399		$	119,971
Adjustments to reconcile net earnings to net cash provided by operating activities:
Performance incentive plan expense		5,756			4,172			3,299
Stock options expense – tax effect		122			190			-
Depreciation and amortization		49,084			48,485			45,347
Impairment losses and other charges		7,458			41,710			5,660
Impairment – commercial mortgage residual interests valuation		3,995			498			758
Amortization of notes payable discount		6,360			6,006			5,670
Amortization of deferred interest rate hedges		(166	)		(159	)		(162	)
Equity in earnings of unconsolidated affiliates		(428	)		(421	)		(364	)
Distributions received from unconsolidated affiliates		578			607			439
Gain on disposition of real estate, Investment Portfolio		(1,134	)		(2,392	)		(9,980	)
Gain on extinguishment of debt		-			(3,432	)		(4,961	)
Gain on disposition of real estate, Inventory Portfolio		(941	)		(595	)		(12,665	)
Deferred income taxes		(2,544	)		(16,649	)		(5,593	)
Income tax valuation allowance		3,121			14,900			-
Change in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations:
Additions to real estate, Inventory Portfolio		(478	)		(2,457	)		(33,745	)
Proceeds from disposition of real estate, Inventory Portfolio		42,817			6,276			128,785
Decrease in real estate leased to others using the direct financing method		1,544			1,378			1,195
Decrease (increase) in work in process		(755	)		(786	)		47
Increase in mortgages, notes and accrued interest receivable		(467	)		(10	)		(217	)
Decrease (increase) in receivables		(219	)		941			243
Decrease (increase) in commercial mortgage residual interests		1,516			(291	)		-
Decrease (increase) in accrued rental income		124			(2,061	)		(978	)
Decrease (increase) in other assets		(53	)		(172	)		951
Decrease in accrued interest payable		(129	)		(137	)		(3,635	)
Decrease in other liabilities		(431	)		(2,930	)		(1,463	)
Increase (decrease) in current tax liability		(169	)		432			(1,143	)

Net cash provided by operating activities		187,914			149,502			237,459

Cash flows from investing activities:
Proceeds from the disposition of real estate, Investment Portfolio		10,312			14,588			60,027
Additions to real estate, Investment Portfolio:
Accounted for using the operating method		(230,928	)		(44,433	)		(352,618	)
Investment in unconsolidated affiliate		-			-			(901	)
Increase in mortgages and notes receivable		(8,564	)		(959	)		(29,934	)
Principal payments on mortgages and notes receivable		13,818			4,009			64,589
Cash received from commercial mortgage residual interests		-			-			3,591
Payment of lease costs		(1,324	)		(451	)		(922	)
Other		(3,574	)		(817	)		(136	)

Net cash used in investing activities		(220,260	)		(28,063	)		(256,304	)

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,
	2010			2009			2008
Cash flows from financing activities:
Proceeds from line of credit payable	$	278,900		$	132,400		$	516,000
Repayment of line of credit payable		(117,900	)		(158,900	)		(619,300	)
Repayment of mortgages payable		(6,453	)		(1,000	)		(1,190	)
Proceeds from notes payable – convertible		-			-			234,035
Repurchase of notes payable – convertible – debt component		-			(14,785	)		(18,420	)
Repurchase of notes payable – convertible – equity component		-			(795	)		(768	)
Repayment of notes payable – secured		-			-			(12,000	)
Repayment of notes payable		(20,000	)		-			(100,000	)
Payment of debt costs		(75	)		(6,275	)		(5,813	)
Proceeds from issuance of common stock		17,692			68,060			127,328
Payment of Series C preferred stock dividends		(6,785	)		(6,785	)		(6,785	)
Payment of common stock dividends		(125,391	)		(120,256	)		(110,107	)
Noncontrolling interest distributions		(861	)		(552	)		(5,483	)
Noncontrolling interest contributions		43			152			41
Stock issuance costs		(1	)		(104	)		(3,566	)

Net cash provided by (used in) financing activities		19,169			(108,840	)		(6,028	)

Net increase (decrease) in cash and cash equivalents		(13,177	)		12,599			(24,873	)
Cash and cash equivalents at beginning of year		15,225			2,626			27,499

Cash and cash equivalents at end of year	$	2,048		$	15,225		$	2,626


Supplemental disclosure of cash flow information:
Interest paid, net of amount capitalized	$	62,386		$	61,475		$	69,395

Taxes paid (received)	$	472		$	(63	)	$	3,441

Supplemental disclosure of noncash investing and financing activities:
Issued 392,474, 262,546 and 225,517 shares of restricted and unrestricted common stock in 2010, 2009 and 2008, respectively, pursuant to NNN’s performance incentive plan	$	6,889		$	4,290		$	3,796

Issued 10,092, 6,594 and 12,766 shares of common stock in 2010, 2009 and 2008, respectively, to directors pursuant to NNN’s performance incentive plan	$	236		$	118		$	262

Issued 25,066, 41,604 and 26,879 shares of common stock in 2010, 2009 and 2008, respectively, pursuant to NNN’s Deferred Director Fee Plan	$	401		$	611		$	449

Surrender of 2,520 shares of restricted common stock in 2008	$	-		$	-		$	58

Change in other comprehensive income	$	1,150		$	(1,903	)	$	1,439

Change in lease classification (direct financing lease to operating lease)	$	-		$	-		$	300

Transfer of real estate from Inventory Portfolio to Investment Portfolio	$	-		$	16,058		$	29,948

Note and mortgage receivable accepted in connection with real estate transactions	$	5,950		$	1,550		$	24,245

Mortgages payable assumed in connection with real estate transactions	$	5,432		$	-		$	-

Real estate acquired in connection with mortgage receivable foreclosure	$	6,250		$	4,240		$	2,497

Assets received in note receivable foreclosure	$	-		$	5,527		$	-

Note receivable foreclosures	$	-		$	(17,013	)	$	-

See accompanying notes to consolidated financial statements.

NATIONAL RETAIL PROPERTIES, INC.

and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2010, 2009 and 2008

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 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”).


	December 31, 2010
Investment Portfolio:
Total properties (including retail operations)		1,195
Gross leasable area (square feet)		12,972,000
States		46

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, 2010:


Date of Agreement	Entity Name	TRS’ Ownership %
November 2002	WG Grand Prairie TX, LLC		60%
February 2003	Gator Pearson, LLC		50%
February 2006	CNLRS BEP, L.P.		50%
September 2006	NNN Harrison Crossing, L.P.		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 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 term of the lease, including the probability of renewal periods. The capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases unless the Company believes that it is likely that the tenant would renew the option whereby the Company would amortize the value attributable to the renewal over the renewal period. 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.

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 significant changes in real estate market condition and the ability of NNN to re-lease or sell properties that are currently vacant or become vacant. 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 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.

In 2010, NNN acquired the 21.1% non-controlling interest in its majority owned and controlled subsidiary, OAMI, for $1,603,000, pursuant to which OAMI became a wholly owned subsidiary of NNN. NNN accounted for the transaction as an equity transaction in accordance with the FASB guidance on consolidation.

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 by comparing fair value to carrying amount annually.

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):


	2010			2009			2008

Basic and Diluted Earnings:
Net earnings attributable to NNN	$	72,997		$	54,810		$	117,153
Less: Series C preferred stock dividends		(6,785	)		(6,785	)		(6,785	)

Net earnings available to NNN’s common stockholders		66,212			48,025			110,368
Less: Earnings attributable to unvested restricted shares		(299	)		(290	)		(485	)

Net earnings used in basic earnings per share		65,913			47,735			109,883
Reallocated undistributed income (loss)		-			(1	)		-

Net earnings used in diluted earnings per share	$	65,913		$	47,734		$	109,883

Basic and Diluted Weighted Average Shares Outstanding:
Weighted average number of shares outstanding		83,320,921			80,486,215			74,732,844
Less: Unvested restricted stock		(605,276	)		(639,957	)		(483,707	)

Weighted average number of shares outstanding used in basic earnings per share		82,715,645			79,846,258			74,249,137
Effects of dilutive securities:
Common stock options		3,814			9,037			35,900
Directors’ deferred fee plan		129,903			98,204			59,194

Weighted average number of shares outstanding used in diluted earnings per share		82,849,362			79,953,499			74,344,231

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, 2010, 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 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 did not have a significant impact on NNN’s financial position or results of operations.

In January 2010, the FASB issued Fair Value Measurements and Disclosures, Improving Disclosures about Fair Value Measurements. This update requires new disclosures for transfers in and out of Level 1 and 2, as well as disclosure about the valuation techniques and inputs used to measure fair value for Level 1 and 2. In addition, activity in Level 3 should present separately information about purchases, sales, issuances and settlements on a gross basis (rather than as one net number). A reporting entity should provide fair value measurements disclosures for each class of assets and liabilities. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of the standard did not have a significant impact on NNN’s financial position or results of operations.

In February 2010, the FASB issued Subsequent Events, Amendments to Certain Recognition and Disclosure Requirements. An entity that files Exchange Act reports with the Securities and Exchange Commission (“Commission”) is required to evaluate subsequent events through the date that the financial statements are issued. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and requirements of the Commission. The scope of the reissuance disclosure requirements is refined to include revised financial statements only. Revised financial statements include financial statements revised either as a result of correction of an error or retrospective application of accounting principles generally accepted in the United States of America. All of the amendments in this are effective upon issuance of the final update, except for the use of the issued date for conduit debt obligors. That amendment is effective for interim or annual periods ending after June 15, 2010. The adoption of the standard did not have an 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 2010 presentation.

Note 2 – Real Estate – Investment Portfolio:

Leases – The following outlines key information for NNN’s Investment Property leases at December 31, 2010:


Lease classification:
Operating			1,159
Direct financing			16
Building portion – direct financing / land portion – operating			7
Weighted average remaining lease term			12 Years

The 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. 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. 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, including rent increases, consistent with the initial lease term.

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):


	2010			2009
Land and improvements	$	1,122,243		$	1,054,889
Buildings and improvements		1,592,752			1,450,348
Leasehold interests		1,290			1,290

		2,716,285			2,506,527
Less accumulated depreciation and amortization		(222,921	)		(183,948	)

		2,493,364			2,322,579
Work in progress		26,586			5,997

	$	2,519,950		$	2,328,576

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, 2010, 2009 and 2008, NNN recognized collectively in continuing and discontinued operations, $(93,000), $2,102,000 and $1,020,000, respectively, of such income, net of reserves. At December 31, 2010 and 2009, the balance of accrued rental income, net of allowances of $3,609,000 and $2,875,000, respectively, was $25,535,000 and $25,745,000, respectively.

As of December 31, 2010, in connection with the development of Investment Properties, NNN has the following funding commitments (dollars in thousands):


	# of Properties		Total Commitment⁽¹⁾		Amount Funded		Remaining Commitment
Investment Portfolio		28	$	68,746	$	50,196	$	18,550


⁽¹⁾Includes land and construction costs.

The following is a schedule of future minimum lease payments to be received on noncancellable operating leases at December 31, 2010 (dollars in thousands):


2011	$	225,328
2012		222,547
2013		214,526
2014		204,970
2015		196,748
Thereafter		1,641,387

	$	2,705,506

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):


	2010			2009
Minimum lease payments to be received	$	37,699		$	42,244
Estimated unguaranteed residual values		12,297			12,297
Less unearned income		(20,223	)		(23,224	)

Net investment in direct financing leases	$	29,773		$	31,317

The following is a schedule of future minimum lease payments to be received on direct financing leases held for investment at December 31, 2010 (dollars in thousands):


2011	$	4,531
2012		4,558
2013		4,508
2014		3,750
2015		3,457
Thereafter		16,895

	$	37,699

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 – Investment Portfolio – Accounted for Using the Operating Method).

Note 3 – Real Estate – Inventory Portfolio:

As of December 31, 2010, the TRS owned 17 Inventory Properties: 10 completed inventory and seven land parcels. As of December 31, 2009, the TRS owned 19 Inventory Properties: 13 completed inventory and six land parcels. The real estate Inventory Portfolio consisted of the following at December 31 (dollars in thousands):


	2010			2009
Inventory:
Land	$	19,734		$	37,088
Building		18,487			47,684

		38,221			84,772
Less impairment		(6,145	)		(12,349	)

	$	32,076		$	72,423

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):


	2010					2009					2008
	# of Properties		Gain			# of Properties		Gain			# of Properties		Gain
Continuing operations		2	$	641			2	$	37			1	$	21
Noncontrolling interest				(320	)				(14	)				(10	)

Total continuing operations attributable to NNN				321					23					11


Discontinued operations		2		300			2		558			24		12,644
Noncontrolling interest				(43	)				-					(3,297	)

Total discontinued operations attributable to NNN				257					558					9,347

		4	$	578			4	$	581			25	$	9,358

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 significant changes in real estate market conditions and the ability of NNN to re-lease or sell properties that are vacant or become vacant. 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):


	2010		2009		2008
Continuing operations	$	-	$	28,884	$	1,234
Discontinued operations		-		5,630		4,426

	$	-	$	34,514	$	5,660

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.

Note 5 – Business Combinations:

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. In connection with the annual review of goodwill for impairment, NNN recognized a noncash impairment charge of $1,900,000 included in Impairment losses and other charges in the Consolidated Statement of Earnings during the year ended December 31, 2010.

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):


	2010			2009

Mortgages and notes receivable	$	29,750		$	41,707
Accrued interest receivables, net of reserves		644			269
Unamortized discount		(63	)		-

	$	30,331		$	41,976

In connection with the evaluation of the collectibility of its mortgages and notes receivable, during the year ended December 31, 2010, NNN recorded a valuation reserve of $5,625,000.

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:


	Investment Interest
Securitization	Company ⁽¹⁾		OAMI ⁽²⁾		3^rd Party

BYL 99-1		-		59.0%		41.0%
CCMH I, LLC		42.7%		57.3%		-
CCMH II, LLC		44.0%		56.0%		-
CCMH III, LLC		36.7%		63.3%		-
CCMH IV, LLC		38.3%		61.7%		-
CCMH V, LLC		38.4%		61.6%		-
CCMH VI, LLC		-		100.0%		-

⁽¹⁾NNN owned these investment interests prior to its acquisition of the equity interest in OAMI. ⁽²⁾Effective July 1, 2010, NNN owns 100 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 adjusted several valuation assumptions related to prepayment speeds and default curves during 2010.


	2010		2009		2008
Unrealized gains	$	1,272	$	-	$	2,009
Unrealized losses		-		1,640		-
Other than temporary valuation impairment		3,995		498		758

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


	2010		2009
Discount rate		25%		25%
Average life equivalent CPR speeds range		4.35% to 20.37% CPR		14.5% to 20.7% CPR
Foreclosures:
Frequency curve default model		0.1% - 15.0% range		6% average rate
Loss severity of loans in foreclosure		20%		20%
Yield:
LIBOR		Forward 3-month curve		Forward 3-month curve
Prime		Forward curve		Forward curve

The following table shows the effects on the key assumptions affecting the fair value of the Residuals at December 31, 2010 (dollars in thousands):


	Residuals
Carrying amount of retained interests	$	15,915

Discount rate assumption:
Fair value at 27% discount rate	$	15,261
Fair value at 30% discount rate	$	14,357

Prepayment speed assumption:
Fair value of 1% increases above the CPR Index	$	15,910
Fair value of 2% increases above the CPR Index	$	15,909

Expected credit losses:
Fair value 2% adverse change	$	15,658
Fair value 3% adverse change	$	15,503

Yield Assumptions:
Fair value of Prime/LIBOR spread contracting 25 basis points	$	16,262
Fair value of Prime/LIBOR spread contracting 50 basis points	$	16,623

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 $17,861,000 and a weighted average interest rate of 3.8% during the year ended December 31, 2010. In November 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, 2010, $161,000,000 was outstanding, and $239,000,000 was available for future borrowings under the Credit Facility, excluding undrawn letters of credit totaling $647,000.

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, 2010, 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	Initial Balance		Interest Rate		Maturity ⁽³⁾		Carrying Value of Encumbered Asset(s) ⁽¹⁾		Outstanding Principal Balance at December
Entered	Initial Balance		Interest Rate		Maturity ⁽³⁾		Carrying Value of Encumbered Asset(s) ⁽¹⁾		31, 2010		2009
December 2001⁽²⁾	$	623		9.00%		April 2014	$	734	$	215	$	267
December 2001 ⁽²⁾		698		9.00%		April 2019		1,186		364		392
December 2001⁽²⁾		485		9.00%		April 2019		1,152		187		201
June 2002		21,000		6.90%		July 2012		24,051		18,841		19,170
February 2004 ⁽²⁾		6,952		6.90%		January 2017		11,522		4,038		4,554
March 2005 ⁽²⁾		1,015		8.14%		September 2016		1,322		624		706

							$	39,967	$	24,269	$	$25,290

⁽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, 2010.

⁽²⁾

⁽³⁾

Monthly payments include interest and principal, if any; the balance is due at maturity.

The following is a schedule of the annual maturities of NNN’s mortgages payable at December 31, 2010 (dollars in thousands):


2011	$	1,098
2012		19,290
2013		863
2014		881
2015		917
Thereafter		1,220

	$	24,269

Note 10 – Notes Payable – Convertible:

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


Terms	2026 Notes^(1)(2)(4)			2028 Notes⁽²⁾⁽⁵⁾⁽⁶⁾

Issue Date		September 2006			March 2008
Net Proceeds	$	168,650		$	228,576
Stated Interest Rate		3.950%			5.125%
Debt Issuance Costs	$	3,850	⁽³⁾	$	5,457	⁽⁷⁾
Earliest Conversion Date		September 2025			June 2027
Earliest Put Option Date		September 2011			June 2013
Maturity Date		September 2026			June 2028

Original Principal	$	172,500		$	234,035
Repurchases		(33,800	)		(11,000	)

Outstanding principal balance at December 31, 2010	$	138,700		$	223,035

⁽¹⁾

NNN repurchased $8,800 and $25,000 in 2009 and 2008, respectively, for a purchase price of $6,994 and $19,188, respectively, resulting in a gain of $1,565 and $4,961, respectively.

⁽²⁾

⁽³⁾

Includes $463 of note costs which were written off in connection with the repurchase of $33,800 of the 2026 Notes.

⁽⁴⁾

The conversion rate per $1 principal amount was 41.9803 shares of NNN’s common stock, which is equivalent to a conversion price of $23.8207 per share of common stock.

⁽⁵⁾

The conversion rate per $1 principal amount was 39.3620 shares of NNN’s common stock, which is equivalent to a conversion price of $25.4052 per share of common stock.

⁽⁶⁾

NNN repurchased $11,000 in 2009 for a purchase price of $8,588 resulting in a gain of $1,867.

⁽⁷⁾

Includes $219 of note costs which were written off in connection with the repurchase of $11,000 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.

The carrying amounts of the Company’s debt and equity balances are summarized in the table below as of December 31 (dollars in thousands):


	2010			2009
Carrying value of equity component	$	(33,873	)	$	(33,873	)
Principal amount of convertible debt		361,735			361,735
Remaining unamortized debt discount		(12,201	)		(18,355	)

Net carrying value of convertible debt	$	315,661		$	309,507

As of December 31, 2010, the remaining amortization periods for the debt discount were approximately nine months and 18 months for the 2026 Notes and the 2028 Notes, respectively.

The adjusted effective interest rates for the liability components of the 2026 Notes and the 2028 Notes were 5.840% and 7.192%, respectively. The Company recorded noncash interest charges of $6,154,000, $5,809,000 and $5,481,000 for the years ended December 31, 2010, 2009 and 2008, respectively. The Company recorded contractual interest expense of $16,909,000,

$17,046,000 and $16,548,000 for the years ended December 31, 2010, 2009 and 2008, respectively, relating to the 2026 Notes and 2028 Notes.

The if-converted values which exceed the principal amount as of December 31, 2010, are $15,601,000 and $9,611,000 for the 2026 Notes and the 2028 Notes, respectively. As of December 31, 2009, the if-converted amount did not exceed the value of the principal amount.

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

2012⁽¹⁾	June 2002	$	50,000	$	287	$	49,713		7.750%		7.833%	June 2012
2014^(1)(2)(5)	June 2004		150,000		440		149,560		6.250%		5.910%	June 2014
2015⁽¹⁾	November 2005		150,000		390		149,610		6.150%		6.185%	December 2015
2017⁽¹⁾⁽⁶⁾	September 2007		250,000		877		249,123		6.875%		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⁾

⁽⁶⁾

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 $5,226,000 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 September 2010, NNN repaid the $20,000,000 8.5% notes payable that were due in September 2010.

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, 2010, NNN was in compliance with those covenants.

Note 12 – Preferred Stock:

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 3,680,000 depositary shares, each representing 1/100^th of a share of 7.375% Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”), and received gross proceeds of $92,000,000. 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.

Note 13 – Common Stock:

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:


	2010		2009		2008
Shares of common stock		793,759		3,766,452		2,146,640
Net proceeds	$	17,623,000	$	67,354,000	$	47,372,000

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, 2010, 2009 and 2008 totaled $297,000, $302,000 and $385,000, 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:


	2010		2009		2008
Ordinary dividends	$	1.072446	$	1.495182	$	1.480000
Qualified dividends		0.081661		-		-
Capital gain		0.000861		0.003051		-
Unrecaptured Section 1250 Gain		0.000498		0.001767		-
Nontaxable distributions		0.354534		-		-

	$	1.510000	$	1.500000	$	1.480000

During the years ended December 31, 2010, 2009 and 2008, NNN declared and paid dividends to its common shareholders of $125,391,000, $120,256,000 and $110,107,000, respectively, or $1.51, $1.50 and $1.48 per share, respectively, of common stock.

On January 14, 2011, NNN declared a dividend of $0.38 per share, which is payable February 15, 2011 to its common stockholders of record as of January 31, 2011.

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


	2010		2009		2008
Ordinary dividends	$	1.703170	$	1.837828	$	1.843750
Qualified dividends		0.140580		-		-
Capital gain		-		0.003750		-
Unrecaptured Section 1250 Gain		-		0.002172		-

	$	1.843750	$	1.843750	$	1.843750

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:

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, 2010, 2009 and 2008, and the statutory rates relate to state taxes and nondeductible expenses.

For income tax purposes, NNN has taxable REIT subsidiaries in which certain real estate activities are conducted. In 2010, NNN acquired the 21.1% non-controlling interest in its majority owned and controlled subsidiary, OAMI, pursuant to which OAMI became a wholly owned subsidiary of NNN. OAMI has remaining tax liabilities relating to the built-in gain of its assets.

In June 2009, NNN incurred a new deferred income tax item as a result of NNN acquiring the operations of 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.

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


	2010			2009
Temporary differences:
Built-in gain	$	(4,068	)	$	(4,731	)
Depreciation		(772	)		(385	)
Cost basis		256			1,796
Deferred income		230			464
Other		56			(268	)
Reserves		13,160			10,892
Goodwill		3,239			2,801
Excess interest expense carryforward		5,678			5,678
Net operating loss carryforward		5,398			4,484

Net deferred income tax asset		23,177			20,731
Valuation allowance		(18,021	)		(14,900	)

Total deferred income tax asset	$	5,156		$	5,831

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, 2010. 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 $18,021,000 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):


	2010			2009			2008
Net earnings before income taxes	$	74,097		$	53,930		$	113,859
Provision for income tax benefit (expense):
Current:
Federal		(254	)		(419	)		(1,936	)
State and local		(48	)		(79	)		(364	)
Deferred:
Federal		(744	)		1,110			4,539
State and local		(54	)		268			1,055

Total benefit (expense) for income taxes		(1,100	)		880			3,294

Net earnings attributable to NNN’s stockholders	$	72,997		$	54,810		$	117,153

In June 2006, the FASB issued additional guidance, which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements 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, in accordance with FASB guidance included in Income Taxes, 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 2007 through 2010. NNN also files in many states with varying open years under statute.

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, 2010, 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):


	2010			2009			2008
Revenues:
Rental income from operating leases	$	1,181		$	4,786		$	5,655
Earned income from direct financing leases		-			-			100
Percentage rent		-			-			25
Real estate expense reimbursement from tenants		48			208			208
Interest and other income from real estate transactions		21			118			429
Interest and other income from non-real estate transactions		-			5			2

		1,250			5,117			6,419

Operating expenses:
General and administrative		16			7			(71	)
Real estate		309			784			374
Depreciation and amortization		186			1,438			1,454
Impairment losses and other charges		-			3,536			1,730

		511			5,765			3,487

Earnings (loss) before gain on disposition of real estate and income tax benefit (expense)		739			(648	)		2,932
Gain on disposition of real estate		1,134			2,392			9,980
Income tax benefit (expense)		(14	)		32			2

Earnings from discontinued operations attributable to NNN	$	1,859		$	1,776		$	12,914

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, 2010. 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):


	2010			2009			2008
Revenues:
Rental income from operating leases	$	3,369		$	4,975		$	8,646
Percentage rent		-			-			139
Real estate expense reimbursement from tenants		1,358			1,513			867
Interest and other from real estate transactions		513			141			561

		5,240			6,629			10,213

Disposition of real estate:
Gross proceeds		37,470			5,402			151,713
Costs		(37,170	)		(4,844)			(139,069)

Gain		300			558			12,644

Operating expenses:
General and administrative		71			116			22
Real estate		1,755			2,169			1,468
Depreciation and amortization		159			323			226
Impairment losses and other charges		-			2,094			2,696

		1,985			4,702			4,412

Other expenses (revenues):
Interest and other income		(3	)		-			(8	)
Interest expense		2,655			3,790			5,291

		2,652			3,790			5,283

Earnings (loss) before income tax expense		903			(1,305	)		13,162
Income tax expense		(611	)		(201	)		(3,963	)

Earnings (loss) from discontinued operations including noncontrolling interests		292			(1,506	)		9,199
Loss (earnings) attributable to noncontrolling interests		11			(166	)		(2,722	)

Earnings (loss) from discontinued operations attributable to NNN	$	303		$	(1,672	)	$	6,477

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, forward swaps (“forward hedges”) and interest rate swaps as part of its cash flow hedging strategy. Treasury locks and forward starting swaps are used to hedge forecasted debt issuances. Treasury locks designated as cash flow hedges lock in the yield/price of a treasury security. Forward swaps also lock the associated swap spread. Interest rate swaps

designated as cash flow hedges hedging the variable cash flows associated with floating rate debt 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.

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, 2010, $715,000 remains in other comprehensive income related to the effective portion of NNN’s previous interest rate hedges. During the year ended December 31, 2010, 2009 and 2008, NNN reclassed $165,000, $159,000 and $162,000, respectively, out of other comprehensive income as a reduction to interest expense. Over the next 12 months, NNN estimates that an additional $172,000 will be reclassified as a reduction 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, 2010.

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 replaced 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
	2010			2009			2008
Outstanding, January 1		12,154			77,004			118,804
Options granted		-			-			-
Options exercised		(4,654	)		(51,500	)		(28,000	)
Options surrendered		-			(13,350	)		(13,800	)

Outstanding, December 31		7,500			12,154			77,004

Exercisable, December 31		7,500			12,154			77,004

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


	2010		2009		2008
Outstanding, January 1	$	13.72	$	14.00	$	13.64
Granted during the year		-		-		-
Exercised during the year		13.08		13.72		11.17
Outstanding, December 31		14.11		13.72		14.00
Exercisable, December 31		14.11		13.72		14.00

The following summarizes the outstanding options and the exercisable options at December 31, 2010:


	Total
Outstanding options:
Number of shares		7,500
Weighted-average exercise price	$	14.11
Weighted-average remaining contractual life in years		1.8
Exercisable options:
Number of shares		7,500
Weighted-average exercise price	$	14.11

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, 2010, the intrinsic value of options outstanding was $93,000. All options outstanding at December 31, 2010, were exercisable. During the years ended December 31, 2010, 2009 and 2008, NNN received proceeds totaling $61,000, $707,000 and $313,000, 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, 2010, 2009 and 2008, was $43,000, $240,000 and $327,000, 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, 2010, of such grants.


	Number of Shares			Weighted Average Share Price
Non-vested restricted shares, January 1		668,010		$	16.95
Restricted shares granted		392,474			21.38
Restricted shares vested		(142,637	)		19.80
Restricted shares forfeited		(15,310	)		11.23

Non-vested restricted shares, December 31		902,537		$	18.52

During the year ended December 31, 2010 and 2008, a total of 15,310 and 2,520, respectively, of restricted shares were forfeited. No shares were forfeited in 2009.

Compensation expense for the restricted stock which is not contingent upon NNN’s 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, 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.

During the year ended December 31, 2010, NNN granted 91,000 performance based shares subject to its earnings based growth after a three year period relative to its peers. The shares were granted to certain executive officers and had weighted average grant price of $23.12 per share. Once the performance criteria are met and the actual number of shares earned is determined, the shares vest immediately. NNN considers the likelihood of meeting the performance criteria based upon management’s estimates and analysis of future earnings based growth relative to its peers from which it determines the amounts to be recognized. Compensation expense is recognized over the requisite service period.

The following summarizes other grants made during the year ended December 31, 2010, pursuant to the 2007 Plan.


	Shares		Weighted Average Share Price
Other share grants under the 2007 Plan:
Directors’ fees		10,092	$	23.38
Deferred Directors’ fees		25,066		23.54

		35,158	$	23.50

Shares available under the 2007 Plan for grant, end of period		4,860,190

The total compensation cost for share-based payments for the years ended December 31, 2010, 2009 and 2008, totaled $5,310,000, $4,172,000 and $3,341,000, respectively, of such compensation expense. At December 31, 2010, NNN had $9,366,000 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 2.5 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, 2010 and 2009, approximate fair value based upon current market prices of similar issues. At December 31, 2010 and 2009, the carrying value and fair value of NNN’s notes payable and convertible notes payable, collectively, was $1,044,621,000 and $987,275,000, 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):


2010	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Revenues as originally reported	$	56,626		$	56,496		$	56,656		$	59,440
Reclassified to discontinued operations		(101	)		(54	)		(7	)		-

Adjusted revenue	$	56,525		$	56,442		$	56,649		$	59,440

Net earnings attributable to NNN’s stockholders	$	16,365		$	21,207		$	21,210		$	14,215

Net earnings per share ⁽¹⁾:
Basic	$	0.18		$	0.23		$	0.23		$	0.15
Diluted		0.18			0.23			0.23			0.15

2009
Revenues as originally reported	$	57,963		$	58,681		$	57,035		$	57,750
Reclassified to discontinued operations		114			(546	)		59			(242	)

Adjusted revenue	$	58,077		$	58,135		$	57,094		$	57,508

Net earnings (loss) attributable to NNN’s stockholders	$	26,804		$	18,090		$	22,443		$	(12,527	)

Net earnings (loss) per share ⁽¹⁾:
Basic	$	0.32		$	0.21		$	0.26		$	(0.18	)
Diluted		0.32			0.20			0.26			(0.17	)

⁽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, 2010, 2009 and 2008 (as adjusted) (dollars in thousands):


2010	Investment Assets			Inventory Assets			Eliminations (Intercompany)			Consolidated Totals
External revenues	$	223,870		$	(40	)	$	-		$	223,830
Intersegment revenues		671			534			(1,205	)		-
Interest revenue		3,231			48			-			3,279
Interest revenue on Residuals		3,460			-			-			3,460
Gain on the disposition of real estate, Inventory Portfolio		-			426			215			641
Retail operations, net		1,311			-			-			1,311
Interest expense		67,834			(1,450	)		(1,205	)		65,179
Depreciation and amortization		48,320			8			-			48,328
Operating expenses		31,983			4,329			-			36,312
Impairment losses and other charges		7,458			260			(260	)		7,458
Impairment – commercial mortgage residual interests valuation adjustment		3,995			-			-			3,995
Equity in earnings of unconsolidated affiliate		(372	)		-			800			428
Income tax benefit (expense)		(1,434	)		959			-			(475	)

Earnings (loss) from continuing operations		71,147			(1,220	)		1,275			71,202
Earnings from discontinued operations, net of income tax expense		1,859			292			-			2,151

Earnings (loss) including noncontrolling interests		73,006			(928	)		1,275			73,353
Earnings attributable to noncontrolling interests from continuing operations		(9	)		(358	)		-			(367	)
Earnings attributable to noncontrolling interests from discontinued operations		-			11			-			11

Net earnings (loss) attributable to NNN	$	72,997		$	(1,275	)	$	1,275		$	72,997

Assets	$	2,846,036		$	38,997		$	(171,458	)	$	2,713,575

Additions to long-lived assets:
Real estate	$	230,928		$	478		$	-		$	231,406


2009	Investment Assets			Inventory Assets			Eliminations (Intercompany)			Consolidated Totals
External revenues	$	223,262		$	194		$	-		$	223,456
Intersegment revenues		3,035			1,042			(4,077	)		-
Interest revenue		4,447			30			-			4,477
Interest revenue Residuals		4,252			-			-			4,252
Gain on the disposition of real estate, Inventory Portfolio		-			5			32			37
Retail operations, net		419			-			-			419
Interest expense		66,018			188			(4,055	)		62,151
Depreciation and amortization		46,529			10			-			46,539
Operating expenses		30,335			5,080			-			35,415
Impairment losses and other charges		29,367			6,713			-			36,080
Impairments – commercial mortgage residual interests valuation adjustment		498			-			-			498
Restructuring costs		731			-			-			731
Equity in earnings of unconsolidated affiliates		(12,280	)		-			12,701			421
Gain on extinguishment of debt		3,432			-			-			3,432
Income tax benefit		462			587			-			1,049

Earnings (loss) from continuing operations		53,551			(10,133	)		12,711			56,129
Earnings (loss) from discontinued operations, net of income tax expense		1,776			(1,506	)		-			270

Earnings (loss) including noncontrolling interests		55,327			(11,639	)		12,711			56,399
Loss (earnings) attributable to noncontrolling interests from continuing operations		(517	)		(906	)		-			(1,423	)
Earnings attributable to noncontrolling interests from discontinued operations		-			(166	)		-			(166	)

Net earnings (loss) attributable to NNN	$	54,810		$	(12,711	)	$	12,711		$	54,810

Assets	$	2,588,408		$	237,715		$	(235,161	)	$	2,590,962

Additions to long-lived assets:
Real estate	$	44,433		$	2,457		$	-		$	46,890


2008	Investment Assets			Inventory Assets			Eliminations (Intercompany)			Consolidated Totals
External revenues	$	217,682		$	204		$	-		$	217,886
Intersegment revenues		12,727			606			(13,333	)		-
Interest revenue		8,190			-			-			8,190
Interest revenue on Residuals		4,636			-			-			4,636
Gain on the disposition of real estate, Inventory Portfolio		-			(308	)		329			21
Interest expense		69,763			7,442			(13,241	)		63,964
Depreciation and amortization		43,626			42			-			43,668
Operating expenses		25,489			9,538			-			35,027
Impairment losses and other charges		1,234			-			-			1,234
Impairments – commercial mortgage residual interests valuation adjustment		758			-			-			758
Equity in earnings of unconsolidated affiliates		(2,785	)		-			3,149			364
Loss on derivative instrument		(804	)		-			-			(804	)
Gain on extinguishment of debt		4,961			-			-			4,961
Income tax benefit		1,329			5,926			-			7,255

Earnings (loss) from continuing operations		105,066			(10,594	)		3,386			97,858
Earnings from discontinued operations, net of income tax expense		12,914			9,199			-			22,113

Earnings including noncontrolling interests		117,980			(1,395	)		3,386			119,971
Loss (earnings) attributable to noncontrolling interests from continuing operations		(827	)		731			-			(96	)
Earnings attributable to noncontrolling interests from discontinued operations		-			(2,722	)		-			(2,722	)

Net earnings (loss) attributable to NNN	$	117,153		$	(3,386	)	$	3,386		$	117,153

Assets	$	2,650,040		$	128,916		$	(129,485	)	$	2,649,471

Additions to long-lived assets:
Real estate	$	352,618		$	33,745		$	-		$	386,363

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, 2010 (dollars in thousands):


Balance at beginning of period	$	20,153
Total gains (losses) – realized/unrealized:
Included in earnings		(3,995	)
Included in other comprehensive income		1,272
Interest income on Residuals		3,460
Cash received from Residuals		(4,975	)
Purchases, sales, issuances and settlements, net		-
Transfers in and/or out of Level 3		-

Balance at end of period	$	15,915

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	$	(133	)

Note 25 – Major Tenants:

As of December 31, 2010, 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, 2010, NNN had letters of credit totaling $647,000 outstanding under its Credit Facility.

In the ordinary course of its business, NNN is a party to various other legal actions which management believes are 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, 2010, the date of the consolidated balance sheet. 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, 2010, 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, 2010, 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, 2010, 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, 2010, 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)	FinancialStatements

	Reports of Independent Registered Public Accounting Firm	44

	Consolidated Balance Sheets as of December 31, 2010 and 2009	46

	Consolidated Statements of Earnings for the years ended December 31, 2010, 2009 and 2008	47

	Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2010, 2009 and 2008	49

	Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008	52

	Notes to Consolidated Financial Statements	54

(2)	FinancialStatement Schedules

	Schedule III – Real Estate and Accumulated Depreciation and Amortization and Notes as of December 31, 2010

	Schedule IV – Mortgage Loans on Real Estate and Notes as of December 31, 2010

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

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).

3.2

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).

3.3

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

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).

4.2

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).

4.3

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).

4.4

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).

4.5

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).

4.6

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).

4.7

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).

4.8

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

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).

4.10

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).

4.11

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).

4.12

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).

4.13

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).

4.14

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).

4.15

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).

4.16

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).

4.17

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

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).

10.2

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).

10.3

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).

10.4

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).

10.5

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).

10.6

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).

10.7

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).

10.8

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).

10.9

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 10.9 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 5, 2010, and incorporated herein by reference).

10.10

Amendment to Employment Agreement dated as of November 8, 2010, between the Registrant and Craig Macnab (filed herewith).

10.11

Amendment to Employment Agreement dated as of November 8, 2010, between the Registrant and Julian E. Whitehurst (filed herewith).

10.12

Amendment to Employment Agreement dated as of November 8, 2010, between the Registrant and Kevin B. Habicht (filed herewith).

10.13

Amendment to Employment Agreement dated as of November 8, 2010, between the Registrant and Paul E. Bayer (filed herewith).

10.14

Amendment to Employment Agreement dated as of November 8, 2010, between the Registrant and Christopher P. Tessitore (filed herewith).

12.

Statement of Computation of Ratios of Earnings to Fixed Charges (filed herewith).

21.

Subsidiaries of the Registrant (filed herewith).

23.

Consent of Independent Accountants

23.1

Ernst & Young LLP dated February 24, 2011 (filed herewith).

24.

Power of Attorney (included on signature page).

31.

Section 302 Certifications

31.1

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).

31.2

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

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).

32.2

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).

101.

Interactive Data File

101.1

The following materials from National Retail Properties, Inc. Annual Report on Form 10-K for the period ended December 31, 2010, formatted in Extensible Business Reporting Language: (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of earnings, (iii) condensed consolidated statements of cash flows, and (iv) notes to condensed consolidated financial statements. As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 (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 24^th day of February, 2011.


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	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	February 24, 2011

/s/ Ted B. Lanier Ted B. Lanier	Lead Director	February 24, 2011

/s/ Don DeFosset Don DeFosset	Director	February 24, 2011

/s/ David M. Fick David M. Fick	Director	February 24, 2011

/s/ Dennis E. Gershenson Dennis E. Gershenson	Director	February 24, 2011

/s/ Richard B. Jennings Richard B. Jennings	Director	February 24, 2011

/s/ Robert C. Legler Robert C. Legler	Director	February 24, 2011

/s/ Robert Martinez Robert Martinez	Director	February 24, 2011

/s/ Kevin B. Habicht Kevin B. Habicht	Director, Chief Financial Officer (Principal Financial and Accounting Officer), Executive Vice President, Assistant Secretary and Treasurer	February 24, 2011

Exhibit Index

3.	Articles of Incorporation and Bylaws

3.1

3.2

3.3

4.	Instruments Defining the Rights of Security Holders, Including Indentures

4.1

4.2

4.3

4.4

4.5

Securities and Exchange Commission on June 4, 2002, and incorporated herein by reference).

4.6

4.7

4.8

4.9

4.10

4.11

4.12

4.13

4.14

with the Securities and Exchange Commission on November 6, 2006, and incorporated herein by reference).

4.15

4.16

4.17

4.18

10.	Material Contracts

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

10.10

Amendment to Employment Agreement, dated as of November 8, 2010, between the Registrant and Craig Macnab (filed herewith).

10.11

Amendment to Employment Agreement dated as of November 8, 2010, between the Registrant and Julian E. Whitehurst (filed herewith).

10.12

Amendment to Employment Agreement dated as of November 8, 2010, between the Registrant and Kevin B. Habicht (filed herewith).

10.13

Amendment to Employment Agreement dated as of November 8, 2010, between the Registrant and Paul E. Bayer (filed herewith).

10.14

Amendment to Employment Agreement dated as of November 8, 2010, between the Registrant and Christopher P. Tessitore (filed herewith).

12.	Statement of Computation of Ratios of Earnings to Fixed Charges (filed herewith).

21.	Subsidiaries of the Registrant (filed herewith).

23.	Consent of Independent Accountants

23.1

Ernst & Young LLP dated February 24, 2011 (filed herewith).

24.	Power of Attorney (included on signature page).

31.	Section 302 Certifications

31.1

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).

31.2

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

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).

32.2

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).

101.	Interactive Data File

101.1

NATIONAL RETAIL PROPERTIES, INC. AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION

December 31, 2010

(Dollars in thousands)


							Costs Capitalized
			Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)																Life on Which Depreciation &
					Building,								Building,					Accumulated									Amortization in
					Improvements &								Improvements &					Depreciation									Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests			Total		and Amortization			Date of Construction			Date Acquired			Statement is Computed

Real Estate Held for Investment the Company has Invested in Under Operating Leases:

7-Eleven:
Land O’ Lakes, FL		—		1,077		817		—		—		1,077		817			1,894		244			1999			10/98	(g)		40 years
Tampa, FL		—		1,081		917		—		—		1,070		917			1,987		270			1999			12/98	(g)		40 years

A.C. Moore Arts & Crafts, Inc.:
Dover, NJ		—		1,138		3,238		—		—		1,138		3,238			4,376		982			1995			11/98			40 years

Academy:
Beaumont, TX		—		1,424		2,449		—		—		1,424		2,449			3,873		722			1992			03/99			40 years
Houston, TX		—		2,311		1,628		—		—		2,311		1,628			3,939		480			1976			03/99			40 years
Pasadena, TX		—		900		2,181		—		—		900		2,181			3,081		643			1994			03/99			40 years
Franklin, TN		—		1,807		2,108		—		—		1,807		2,108			3,915		389			1999			06/05			30 years

Ace Hardware and Lighting:
Bourbonnais, IL		—		298		1,329		—		—		298		1,329			1,627		335			1997			11/98			37 years

Advance Auto Parts:
Miami, FL		—		867		—		1,035		—		867		1,035			1,902		143			2005			12/04	(g)		40 years

All Star Sports:
Wichita, KS		—		3,275		1,631		—		—		3,275		1,631			4,906		148			1988			05/07			40 years
Wichita, KS		—		1,551		965		—		—		1,551		965			2,516		87			1987			05/07			40 years

Amazing Jake’s:
Plano, TX		—		5,705		17,049		—		—		5,705		17,049			22,754		1,198			1982			07/08			35 years

AMC Theatre:
Bloomington, IN		—		2,338		4,000		—		—		2,338		4,000			6,338		527			1987			09/07			25 years
Brighton, CO		—		1,070		5,491		—		—		1,070		5,491			6,561		452			2005			09/07			40 years
Castle Rock, CO		—		2,905		5,002		—		—		2,905		5,002			7,907		412			2005			09/07			40 years
Evansville, IN		—		1,300		4,269		—		—		1,300		4,269			5,569		401			1999			09/07			35 years
Galesburg, IL		—		1,205		2,441		—		—		1,205		2,441			3,646		201			2003			09/07			40 years
Machesney Park, IL		—		3,018		8,770		—		—		3,018		8,770			11,788		722			2005			09/07			40 years
Michigan City, IN		—		1,996		8,422		—		—		1,996		8,422			10,418		693			2005			09/07			40 years
Muncie, IN		—		1,243		5,512		—		—		1,243		5,512			6,755		454			2005			09/07			40 years
Naperville, IL		—		6,141		11,624		—		—		6,141		11,624			17,765		957			2006			09/07			40 years
New Lenox, IL		—		6,778		10,980		—		—		6,778		10,980			17,758		904			2004			09/07			40 years
Chicago, IL		—		7,257		10,955		—		—		7,257		10,955			18,212		810			2007			01/08			40 years
Johnson Creek, WI		—		1,433		3,932		—		—		1,433		3,932			5,365		332			1997			01/08			35 years
Lake Delton, WI		—		2,063		8,366		—		—		2,063		8,366			10,429		707			1999			01/08			35 years
Quincy, IL		—		1,297		2,850		—		—		1,297		2,850			4,147		241			1982			01/08			35 years
Schererville, IN		—		6,619		14,225		—		—		6,619		14,225			20,844		1,403			1996			01/08			30 years

American Payday Loans:
Des Moines, IA		—		108		379		—		—		108		379			487		53			1979			06/05			40 years

AmerUs Group Warehouse:
Des Moines, IA		—		28		85		—		—		28		85			113		47			1949			06/05			10 years

Amoco:
Miami, FL		—		969		—		—		—		969		(i	)		969		(i	)		(i	)		05/03			(i	)
Sunrise, FL		—		949		—		—		—		949		(i	)		949		(i	)		(i	)		06/03			(i	)

Amscot:
Tampa, FL		—		1,160		352		—		—		1,160		352			1,512		46			1981			10/05			40 years
Orlando, FL		—		764		—		866		—		764		866			1,630		100			2006			12/05			40 years
Orlando, FL		—		664		1,011		—		—		664		1,011			1,675		106			2006			12/05			40 years
Orlando, FL		—		358		—		922		—		358		922			1,280		103			2006			02/06	(g)		40 years
Orlando, FL		—		546		—		938		—		546		938			1,484		103			2006			02/06	(g)		40 years
Clearwater, FL		—		456		332		—		—		456		332			788		36			1967			09/06	(g)		40 years

See accompanying report of independent registered public accounting firm.

F - 1


								Costs Capitalized
				Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)															Life on Which Depreciation &
						Building,								Building,					Accumulated								Amortization in
						Improvements &								Improvements &					Depreciation								Latest Income
	Encumbrances			Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests			Total		and Amortization			Date of Construction		Date Acquired			Statement is Computed

Anna’s Linens:
Harlingen, TX		—			317		756		—		—		317		756			1,073		212			1999		11/98	(f)		40 years

Applebee’s:
Ballwin, MO		—			1,496		1,404		—		—		1,496		1,404			2,900		317			1995		12/01			40 years
Cincinnati, OH		—			312		898		—		—		312		898			1,210		11			2002		08/10			30 years
Crestview Hills, KY		—			1,069		1,367		—		—		1,069		1,367			2,436		21			1993		08/10			25 years
Danville, KY		—			641		1,645		—		—		641		1,645			2,286		21			2003		08/10			30 years
Florence, KY		—			1,075		1,488		—		—		1,075		1,488			2,563		22			1988		08/10			25 years
Frankfort, KY		—			862		1,610		—		—		862		1,610			2,472		20			1993		08/10			30 years
Georgetown, KY		—			809		1,437		—		—		809		1,437			2,246		18			2001		08/10			30 years
Hilliard, OH		—			808		1,846		—		—		808		1,846			2,654		23			1998		08/10			30 years
Mason, OH		—			545		941		—		—		545		941			1,486		12			1997		08/10			30 years
Maysville, KY		—			513		1,387		—		—		513		1,387			1,900		15			2005		08/10			35 years
Nicholasville, KY		—			454		1,077		—		—		454		1,077			1,531		13			2000		08/10			30 years
Troy, OH		—			645		862		—		—		645		862			1,507		13			1996		08/10			25 years
Grove City, OH		—			511		1,415		—		—		511		1,415			1,926		10			1990		10/10			30 years
Kettering, OH		—			359		1,043		—		—		359		1,043			1,402		6			2005		10/10			35 years
Mesa, AZ		—			748		1,734		—		—		748		1,734			2,482		12			1998		10/10			30 years
Mesa, AZ		—			974		1,514		—		—		974		1,514			2,488		11			1992		10/10			30 years
Mt. Sterling, KY		—			510		1,392		—		—		510		1,392			1,902		8			2000		10/10			35 years
Phoenix, AZ		—			458		1,099		—		—		458		1,099			1,557		7			2004		10/10			35 years
Phoenix, AZ		—			781		1,456		—		—		781		1,456			2,237		10			1995		10/10			30 years

Arby’s:
Colorado Springs, CO		—			206		534		—		—		206		534			740		121			1998		12/01			40 years
Thomson, GA		—			268		504		—		—		268		504			772		114			1997		12/01			40 years
Washington Courthouse, OH		—			157		546		—		—		157		546			703		123			1998		12/01			40 years
Whitmore Lake, MI		—			171		469		—		—		171		469			640		106			1993		12/01			40 years

Arizona Oil:
Casa Grande, AZ		—			2,340		1,894		—		—		2,340		1,894			4,234		142			1993		05/08			35 years
Gilbert, AZ		—			1,317		1,304		—		—		1,317		1,304			2,621		98			1996		05/08			35 years
Glendale, AZ		—			1,817		2,415		—		—		1,817		2,415			4,232		158			2001		05/08			40 years
Mesa, AZ		—			2,219		2,140		—		—		2,219		2,140			4,359		140			2000		05/08			40 years
Mesa, AZ		—			1,332		1,367		—		—		1,332		1,367			2,699		120			1986		05/08			30 years
Miami, AZ		—			762		2,148		—		—		762		2,148			2,910		161			1998		05/08			35 years
Peoria, AZ		—			860		1,117		—		—		860		1,117			1,977		98			1987		05/08			30 years
Prescott, AZ		—			1,266		1,261		—		—		1,266		1,261			2,527		95			1997		05/08			35 years
Scottsdale, AZ		—			1,529		1,373		—		—		1,529		1,373			2,902		103			1999		05/08			35 years
Sedona, AZ		—			1,281		1,324		—		—		1,281		1,324			2,605		87			2000		05/08			40 years
Tucson, AZ		—			1,105		1,336		—		—		1,105		1,336			2,441		100			1992		05/08			35 years
Tucson, AZ		—			1,457		1,619		—		—		1,457		1,619			3,076		121			1995		05/08			35 years
Tucson, AZ		—			1,223		1,911		—		—		1,223		1,911			3,134		143			1996		05/08			35 years
Tucson, AZ		—			1,083		1,599		—		—		1,083		1,599			2,682		120			1992		05/08			35 years

Ashley Furniture:
Altamonte Springs, FL		—			2,906		4,877		315		—		2,906		5,192			8,098		1,695			1997		09/97			40 years
Louisville, KY		—			1,667		4,989		—		—		1,667		4,989			6,656		722			2005		03/05			40 years

AT&T:
Cincinnati, OH		—			297		443		331		—		297		774			1,071		133			1999		06/98	(f)		40 years

Babies “R” Us:
Arlington, TX		—			831		2,612		—		—		831		2,612			3,443		947			1996		06/96			40 years
Independence, MO		—			1,679		2,302		115		—		1,679		2,417			4,096		532			1996		12/01			40 years

Barnes & Noble:
Brandon, FL		—			1,476		1,527		—		—		1,476		1,527			3,003		610			1995		08/94	(f)		40 years
Glendale, CO		—			3,245		2,722		—		—		3,245		2,722			5,967		1,106			1994		09/94			40 years
Houston, TX		—			3,308		2,396		—		—		3,308		2,396			5,704		913			1995		10/94	(f)		40 years
Plantation, FL		4,596	(p)		3,616		—		—		—		3,616		(c	)		3,616		(c	)		1996		05/95	(f)		(c	)
Freehold, NJ (n)		—			2,917		2,261		—		—		2,917		2,261			5,178		843			1995		01/96			40 years
Dayton, OH		—			1,413		3,325		—		—		1,413		3,325			4,738		1,110			1996		05/97			40 years
Redding, CA		—			497		1,626		—		—		497		1,626			2,123		550			1997		06/97			40 years
Memphis, TN		—			1,574		2,242		—		—		1,574		2,242			3,816		388			1997		09/97			40 years
Marlton, NJ		—			2,831		4,319		—		—		2,709		4,319			7,028		1,309			1995		11/98			40 years

Bealls:
Sarasota, FL		—			1,078		1,795		—		—		1,078		1,795			2,873		325			1996		09/97			40 years

See accompanying report of independent registered public accounting firm.

F - 2


								Costs Capitalized
				Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)															Life on Which Depreciation &
						Building,								Building,					Accumulated								Amortization in
						Improvements &								Improvements &					Depreciation								Latest Income
	Encumbrances			Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests			Total		and Amortization			Date of Construction		Date Acquired			Statement is Computed

Beautiful America Dry Cleaners:
Orlando, FL		47	(o)		40		111		—		—		40		111			151		19			2001		02/04			40 years

Bed Bath & Beyond:
Richmond, VA		2,634	(p)		1,184		2,843		179		—		1,184		3,021			4,205		613			1997		06/98			40 years
Glendale, AZ		—			1,082		—		2,758		—		1,082		2,758			3,840		790			1999		12/98	(g)		40 years
Midland, MI		—			231		—		2,702		—		231		2,702			2,933		279			2006		07/03			40 years

Best Buy:
Brandon, FL		—			2,985		2,772		—		—		2,985		2,772			5,757		962			1996		02/97			40 years
Cuyahoga Falls, OH		—			3,709		2,359		—		—		3,709		2,359			6,068		799			1970		06/97			40 years
Rockville, MD		—			6,233		3,419		—		—		6,233		3,419			9,652		1,150			1995		07/97			40 years
Fairfax, VA		—			3,052		3,218		—		—		3,052		3,218			6,270		1,076			1995		08/97			40 years
St. Petersburg, FL		4,204	(p)		4,032		2,611		—		—		4,032		2,611			6,643		640			1997		09/97			35 years
Pittsburg, PA		—			2,331		2,293		—		—		2,331		2,293			4,624		719			1997		06/98			40 years
Denver, CO		—			8,882		4,373		—		—		8,882		4,373			13,255		1,043			1991		06/01			40 years

Best Smoke & Gas:
Abbottstown, PA		—			55		200		—		—		55		200			255		25			2000		01/06			40 years

Billy Bob’s:
Gresham, OR		—			817		108		—		—		817		108			925		24			1993		12/01			40 years

BJ’s Wholesale Club:
Orlando, FL		3,762	(o)		3,271		8,627		367		—		3,271		8,993			12,264		1,539			2001		02/04			40 years

Black Fox Beauty Supply:
Corpus Christi, TX		—			116		137		195		—		125		332			457		69			1967		11/93			40 years

Blockbuster Video:
Conyers, GA		—			320		556		—		—		320		556			876		188			1997		06/97			40 years
Alice, TX		—			318		578		—		—		318		578			896		131			1995		12/01			40 years
Gainesville, GA		—			295		612		—		—		295		612			907		138			1997		12/01			40 years
Glasgow, KY		—			303		561		—		—		303		561			864		127			1997		12/01			40 years
Kingsville, TX		—			499		458		30		—		499		487			986		106			1995		12/01			40 years
Mobile, AL		—			491		498		—		—		491		498			989		113			1997		12/01			40 years
Mobile, AL		—			843		562		—		—		843		562			1,405		127			1997		12/01			40 years

BMW:
Duluth, GA		—			4,434		4,080		6,559		—		4,504		10,639			15,143		1,435			1984		12/01			40 years

Borders:
Wilmington, DE		—			3,031		6,062		—		—		2,994		6,062			9,056		2,429			1994		12/94			40 years
Richmond, VA		—			2,177		2,600		—		—		2,177		2,600			4,777		1,011			1995		06/95			40 years
Ft. Lauderdale, FL		4,428	(p)		3,165		3,319		—		—		3,165		3,319			6,484		863			1995		02/96			33 years
Bangor, ME		—			1,547		2,487		—		—		1,547		2,487			4,034		903			1996		06/96			40 years
Altamonte Springs, FL		—			1,947		—		—		—		1,947		(c	)		1,947		(c	)		1997		09/97			(c	)

Borough of Abbottstown:
Abbottstown, PA		—			55		200		—		—		55		200			255		25			2000		01/06			40 years

Boston Market:
Burton, MI		—			620		707		—		—		620		707			1,327		160			1997		12/01			40 years
Geneva, IL		—			1,125		1,037		—		—		1,125		893			2,018		204			1996		12/01			40 years
N. Olmsted, OH		—			602		461		—		—		602		389			991		89			1996		12/01			40 years
Novi, MI		—			836		651		—		—		836		298			1,134		72			1995		12/01			40 years
Orland Park, IL		—			562		556		—		—		562		377			939		88			1995		12/01			40 years
Warren, OH		—			562		468		—		—		562		468			1,030		106			1997		12/01			40 years

Buccaneer Car Wash:
Tampa, FL		—			541		829		—		—		541		829			1,370		23			1978		04/10			25 years

Buck’s:
St. Louis, MO		—			776		—		3,822		—		776		3,822			4,598		163			2009		12/07	(m)		40 years

Buffalo Wild Wings:
Michigan City, IN		—			163		492		—		—		163		492			655		111			1996		12/01			40 years

Bugaboo Creek:
Rochester, NY		—			792		1,535		—		—		792		1,535			2,327		136			1995		06/07			40 years

See accompanying report of independent registered public accounting firm.

F - 3


							Costs Capitalized
			Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)												Life on Which Depreciation &
					Building,								Building,				Accumulated						Amortization in
					Improvements &								Improvements &				Depreciation						Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests		Total		and Amortization		Date of Construction		Date Acquired		Statement is Computed

Burger King:
Colonial Heights, VA		—		662		610		—		—		662		610		1,272		138		1997		12/01		40 years

Camping World:
Vacaville, CA		—		2,467		6,575		—		—		2,467		6,575		9,042		86		2008		07/10		35 years
North Little Rock, AR		—		1,198		3,348		—		—		1,198		3,348		4,546		28		2007		09/10		35 years
Strafford, MO		—		1,278		3,694		—		—		1,278		3,694		4,972		31		2007		09/10		35 years

Carl’s Jr.:
Spokane, WA		—		471		530		—		—		471		530		1,001		120		1996		12/01		40 years
Chandler, AZ		—		729		644		—		—		729		644		1,373		178		1984		06/05		20 years
Tucson, AZ		—		681		536		103		—		681		639		1,320		344		1988		06/05		10 years

CarQuest:
Abbeville, LA		—		23		148		—		—		23		148		171		—		1970		12/10		20 years
Abbotsford, WI		—		56		163		—		—		56		163		219		—		1984		12/10		25 years
Aberdeen, SD (n)		—		71		329		—		—		71		329		400		1		1961		12/10		20 years
Addison, IL		—		76		314		—		—		76		314		390		1		1971		12/10		25 years
Alsip, IL		—		57		323		—		—		57		323		380		1		1972		12/10		20 years
Anaconda, MT		—		35		307		—		—		35		307		342		1		1965		12/10		20 years
Ann Arbor, MI		—		25		241		—		—		25		241		266		1		1970		12/10		20 years
Antigo, WI		—		96		294		—		—		96		294		390		—		1998		12/10		30 years
Appleton, WI (n)		—		85		438		—		—		85		438		523		1		1995		12/10		30 years
Arden, NC		—		42		281		—		—		42		281		323		—		1989		12/10		25 years
Baker, MT		—		12		140		—		—		12		140		152		—		1965		12/10		20 years
Bakersfield, CA		—		77		484		—		—		77		484		561		1		1945		12/10		20 years
Bangor, ME		—		51		339		—		—		51		339		390		1		1985		12/10		25 years
Bangor, ME (n)		—		53		356		—		—		53		356		409		1		1945		12/10		15 years
Bartlett, TN		—		40		293		—		—		40		293		333		—		1989		12/10		25 years
Bay City, MI		—		14		100		—		—		14		100		114		—		1942		12/10		15 years
Bay City, MI		—		41		282		—		—		41		282		323		—		1989		12/10		25 years
Bay City, MI		—		106		521		—		—		106		521		627		1		1920		12/10		15 years
Bellevue, NE		—		29		142		—		—		29		142		171		—		1965		12/10		20 years
Bend, OR		—		125		245		—		—		125		245		370		1		1935		12/10		15 years
Biddeford, ME		—		60		320		—		—		60		320		380		1		1968		12/10		20 years
Billings, MT		—		31		188		—		—		31		188		219		—		1970		12/10		25 years
Bismarck, ND		—		25		136		—		—		25		136		161		—		1985		12/10		25 years
Bozeman, MT		—		28		257		—		—		28		257		285		1		1964		12/10		20 years
Brunswick, ME		—		41		254		—		—		41		254		295		—		1985		12/10		25 years
Bucksport, ME		—		19		114		—		—		19		114		133		—		1976		12/10		20 years
Burlington, NC		—		47		229		—		—		47		229		276		—		1994		12/10		30 years
Carol Stream, IL		—		103		515		—		—		103		515		618		1		1960		12/10		20 years
Chicago, IL		—		83		383		—		—		83		383		466		1		1987		12/10		25 years
Chippewa Falls, WI		—		33		328		—		—		33		328		361		—		1996		12/10		30 years
Cody, WY (n)		—		146		253		—		—		146		253		399		—		1999		12/10		30 years
Colstrip, MT		—		39		275		—		—		39		275		314		—		1981		12/10		25 years
Connersville, IN		—		28		171		—		—		28		171		199		—		1920		12/10		15 years
Corapolis, PA (n)		—		74		316		—		—		74		316		390		1		1980		12/10		20 years
Cut Bank, MT		—		9		115		—		—		9		115		124		—		1937		12/10		20 years
Devils Lake, ND		—		38		276		—		—		38		276		314		—		1999		12/10		30 years
Dillon, MT		—		24		204		—		—		24		204		228		—		1973		12/10		20 years
Dodge City, KS (n)		—		43		166		—		—		43		166		209		—		1948		12/10		15 years
Eau Claire, WI		—		33		204		—		—		33		204		237		—		1956		12/10		20 years
Elgin, IL		—		88		311		—		—		88		311		399		1		1965		12/10		20 years
Enterprise, AL		—		25		184		—		—		25		184		209		—		1988		12/10		25 years
Escanaba, MI		—		40		283		—		—		40		283		323		—		1982		12/10		25 years
Evansville, IN		—		60		301		—		—		60		301		361		1		1980		12/10		25 years
Fairbanks, AK		—		292		545		—		—		292		545		837		1		2003		12/10		35 years
Gainesville, FL (n)		—		47		362		—		—		47		362		409		1		1957		12/10		15 years
Glasgow, MT		—		48		275		—		—		48		275		323		1		1972		12/10		20 years
Great Falls, MT		—		17		173		—		—		17		173		190		—		1967		12/10		20 years
Greenville, OH		—		63		193		—		—		63		193		256		1		1910		12/10		15 years
Hamilton, MT		—		24		242		—		—		24		242		266		—		1991		12/10		25 years
Harlem, MT		—		17		116		—		—		17		116		133		—		1983		12/10		25 years
Havre, MT		—		22		311		—		—		22		311		333		1		1964		12/10		20 years
Hayward, WI		—		57		333		—		—		57		333		390		1		1980		12/10		25 years
Helena, MT		—		31		282		—		—		31		282		313		—		1987		12/10		25 years
Houlton, ME		—		38		219		—		—		38		219		257		1		1915		12/10		10 years
Irving, TX		—		182		208		—		—		182		208		390		—		1984		12/10		20 years
Kalispell, MT (n)		—		59		645		—		—		59		645		704		1		1998		12/10		30 years
Kennedale, TX		—		88		283		—		—		88		283		371		1		1959		12/10		20 years
Lafayette, LA		—		51		357		—		—		51		357		408		—		1996		12/10		30 years
Laurel, MS		—		74		202		—		—		74		202		276		1		1959		12/10		15 years

See accompanying report of independent registered public accounting firm.

F - 4


							Costs Capitalized
			Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)													Life on Which Depreciation &
					Building,								Building,				Accumulated							Amortization in
					Improvements &								Improvements &				Depreciation							Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests		Total		and Amortization		Date of Construction		Date Acquired			Statement is Computed
Lewistown, MT		—		19		180		—		—		19		180		199		—		1964		12/10			25 years
Libby, MT		—		33		262		—		—		33		262		295		1		1965		12/10			20 years
Livingston, MT		—		34		261		—		—		34		261		295		1		1976		12/10			20 years
Lufkin, TX (n)		—		94		229		—		—		94		229		323		—		1986		12/10			20 years
Madison, TN		—		78		179		—		—		78		179		257		—		1988		12/10			25 years
Madison, WI		—		57		409		—		—		57		409		466		1		1973		12/10			25 years
Malta, MT		—		19		181		—		—		19		181		200		—		1976		12/10			25 years
Marshfield, WI		—		60		282		—		—		60		282		342		1		1940		12/10			20 years
Medford, WI		—		37		229		—		—		37		229		266		—		1988		12/10			25 years
Memphis, TN		—		38		199		—		—		38		199		237		—		1987		12/10			25 years
Metamora, IL		—		69		292		—		—		69		292		361		—		1996		12/10			30 years
Midland, MI		—		44		336		—		—		44		336		380		—		1986		12/10			30 years
Midland, TX		—		36		212		—		—		36		212		248		1		1960		12/10			15 years
Montello, WI		—		26		173		—		—		26		173		199		—		1997		12/10			30 years
Muskegon, MI		—		38		257		—		—		38		257		295		—		1990		12/10			30 years
Neillsville, WI		—		26		145		—		—		26		145		171		—		1979		12/10			25 years
Nicholasville, KY		—		54		241		—		—		54		241		295		—		1988		12/10			25 years
Ocala, FL		—		78		416		—		—		78		416		494		1		1971		12/10			15 years
Olathe, KS		—		78		235		—		—		78		235		313		1		1950		12/10			15 years
Oshkosh, WI		—		99		224		—		—		99		224		323		—		1999		12/10			30 years
Overland, MO		—		68		370		—		—		68		370		438		1		1961		12/10			20 years
Owosso, MI		—		50		264		—		—		50		264		314		—		1986		12/10			25 years
Pearl, MS		—		43		195		—		—		43		195		238		—		1989		12/10			30 years
Phillips, WI		—		23		177		—		—		23		177		200		—		1992		12/10			30 years
Powell, WY		—		37		182		—		—		37		182		219		—		1978		12/10			25 years
Rhinelander, WI		—		28		115		—		—		28		115		143		—		1958		12/10			20 years
River Falls, WI		—		42		234		—		—		42		234		276		—		1976		12/10			20 years
Riverton, WY		—		99		300		—		—		99		300		399		1		1978		12/10			25 years
Rockford, IL		—		61		376		—		—		61		376		437		1		1962		12/10			25 years
Roundup, MT		—		23		205		—		—		23		205		228		—		1972		12/10			20 years
Schofield, WI		—		41		425		—		—		41		425		466		1		1968		12/10			20 years
Sheboygan, WI		—		77		370		—		—		77		370		447		—		2007		12/10			35 years
Shelby, MT		—		20		208		—		—		20		208		228		—		1976		12/10			20 years
Shelbyville, KY		—		52		224		—		—		52		224		276		—		1982		12/10			25 years
Sidney, MT (n)		—		42		395		—		—		42		395		437		1		1962		12/10			20 years
Spartanburg, SC		—		53		252		—		—		53		252		305		—		1972		12/10			25 years
Spokane, WA		—		66		201		—		—		66		201		267		—		1965		12/10			20 years
Spokane, WA		—		93		373		—		—		93		373		466		1		1972		12/10			20 years
St. Peter, MN		—		17		259		—		—		17		259		276		—		1999		12/10			30 years
Stayton, OR		—		88		312		—		—		88		312		400		—		1994		12/10			30 years
Stevens Point, WI (n)		—		61		405		—		—		61		405		466		1		1975		12/10			25 years
Sulphur, LA		—		31		216		—		—		31		216		247		—		1984		12/10			20 years
Thornton, CO		—		414		536		—		—		414		536		950		1		1996		12/10			30 years
Troy, AL		—		15		52		—		—		15		52		67		—		1966		12/10			15 years
Wasilla, AK		—		227		504		—		—		227		504		731		1		2002		12/10			35 years
Wausau, WI		—		52		300		—		—		52		300		352		—		1989		12/10			25 years
Wautoma, WI		—		18		106		—		—		18		106		124		—		1959		12/10			20 years
Waynesboro, MS		—		15		71		—		—		15		71		86		—		1962		12/10			15 years
West Columbia, SC		—		41		159		—		—		41		159		200		—		1962		12/10			20 years
West Memphis, AR		—		58		294		—		—		58		294		352		—		1987		12/10			25 years
Whitefish, MT		—		30		227		—		—		30		227		257		—		1993		12/10			30 years
Williston, ND		—		35		297		—		—		35		297		332		—		1999		12/10			30 years
Windom, MN		—		5		137		—		—		5		137		142		—		1950		12/10			20 years
Wisconsin Rapids, WI		—		41		215		—		—		41		215		256		—		1975		12/10			20 years
Yakima, WA		—		50		321		—		—		50		321		371		1		1965		12/10			20 years

Carvers:
Centerville, OH		—		851		1,059		—		—		851		1,059		1,910		239		1986		12/01			40 years

Certified Auto Sales:
Albuquerque, NM		—		1,113		—		1,419		—		1,113		1,419		2,532		194		2005		04/04	(f)		40 years

Champps:
Alpharetta, GA		—		3,033		1,642		—		—		3,033		1,642		4,675		371		1999		12/01			40 years
Irving, TX		—		1,760		1,724		—		—		1,760		1,724		3,484		390		2000		12/01			40 years

Char-Hut:
Sunrise, FL		—		287		424		—		—		287		424		711		70		1979		05/04			40 years

See accompanying report of independent registered public accounting firm.

F - 5


								Costs Capitalized
				Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)																Life on Which Depreciation &
						Building,								Building,					Accumulated									Amortization in
						Improvements &								Improvements &					Depreciation									Latest Income
	Encumbrances			Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests			Total		and Amortization			Date of Construction			Date Acquired			Statement is Computed

Checkers:
Orlando, FL		—			257		—		—		—		257		(c	)		257		(c	)		1988			07/92			(c	)

Cheddar’s Cafe:
Baytown, TX		—			858		2,251		—		—		858		2,251			3,109		2			2010			12/10			40 years

Chili’s:
Camden, SC		—			627		1,888		—		—		627		1,888			2,515		250			2005			09/05			40 years
Milledgeville, GA		—			516		1,997		—		—		516		1,997			2,513		264			2005			09/05			40 years
Sumter, SC		—			800		1,717		—		—		800		1,717			2,517		216			2004			12/05			40 years
Hinesville, GA		—			921		1,898		—		—		921		1,898			2,819		184			2006			02/07			40 years
Albany, GA		—			615		—		1,984		—		615		1,984			2,599		159			2007			06/07	(m)		40 years
Statesboro, GA		—			703		—		1,888		—		703		1,888			2,591		147			2007			06/07	(m)		40 years
Florence, SC		—			889		1,715		—		—		889		1,715			2,604		152			2007			06/07			40 years
Valdosta, GA		—			716		—		1,871		—		716		1,871			2,587		142			2007			07/07	(m)		40 years
Tifton, GA		—			454		1,550		—		—		454		1,550			2,004		86			2008			06/08	(m)		40 years
Evans, GA		—			700		—		1,511		—		700		1,511			2,211		71			2009			10/08	(m)		40 years
Jefferson City, MO		—			305		898		—		—		305		898			1,203		27			2003			12/09			35 years
Merriam, KS		—			853		981		—		—		853		981			1,834		34			1998			12/09			30 years
Wichita, KS		—			420		623		—		—		420		623			1,043		22			1995			12/09			30 years

China 1:
Cohoes, NY		—			16		87		6		—		16		93			109		14			1994			09/04			40 years

China Wok:
Carlisle, PA		—			90		107		—		—		90		107			197		13			1988			01/06			40 years

Cinemark:
Draper, UT		—			1,523		—		—		—		1,523		(e	)		1,523		(e	)		(e	)		08/10	(m)		(e	)

Claim Jumper:
Roseville, CA		—			1,557		2,014		—		—		1,557		2,014			3,571		455			2000			12/01			40 years
Tempe, AZ		—			2,531		2,921		—		—		2,531		2,921			5,452		660			2000			12/01			40 years

Continental Rental:
Lapeer, MI		—			88		633		—		—		88		633			721		53			2007			10/05			40 years

Cool Crest:
Independence, MO		—			1,838		1,534		—		—		1,838		1,534			3,372		139			1988			05/07			40 years

CORA Rehabilitation Clinics:
Orlando, FL		93	(o)		80		221		—		—		80		221			301		38			2001			02/04			40 years

CVS:
San Antonio, TX		—			441		—		—		—		441		(c	)		441		(c	)		1993			12/93			(c	)
Lafayette, LA		—			968		—		—		—		968		(c	)		968		(c	)		1995			01/96			(c	)
Midwest City, OK		—			673		1,103		—		—		673		1,103			1,776		409			1996			03/96			40 years
Pantego, TX		—			1,016		1,449		—		—		1,016		1,449			2,465		491			1997			06/97			40 years
Flower Mound, TX		—			932		881		—		—		831		881			1,712		152			1996			09/97			40 years
Arlington, TX		—			2,079		—		1,397		—		2,079		1,397			3,476		432			1998			11/97	(g)		40 years
Leavenworth, KS		—			726		—		1,331		—		726		1,331			2,057		417			1998			11/97	(g)		40 years
Lewisville, TX		—			789		—		1,335		—		789		1,335			2,124		410			1998			04/98	(g)		40 years
Forest Hill, TX		—			692		—		1,175		—		692		1,175			1,867		363			1998			04/98	(g)		40 years
Garland, TX		—			1,477		—		1,400		—		1,477		1,400			2,877		424			1998			06/98	(g)		40 years
Oklahoma City, OK		—			1,581		—		1,471		—		1,581		1,471			3,052		440			1999			08/98	(g)		40 years
Dallas, TX		—			2,618		—		2,571		—		2,618		2,571			5,189		463			2003			06/99			40 years
Gladstone, MO		—			1,851		—		1,740		—		1,851		1,740			3,591		451			2000			12/99	(g)		40 years

Dave & Buster’s:
Hilliard, OH		—			934		4,689		—		—		934		4,689			5,623		484			1998			11/06			40 years
Tulsa, OK		—			1,862		—		2,105		—		1,862		2,105			3,967		103			2009			04/08	(m)		40 years
Wauwatosa, WI		—			5,694		—		5,638		—		5,694		5,638			11,332		112			2010			12/08	(m)		40 years
Orlando, FL		—			8,114		—		—		—		8,114		(e	)		8,114		(e	)		(e	)		06/10	(m)		(e	)

Denny’s:
Columbus, TX (n)		—			428		817		—		—		428		817			1,245		185			1997			12/01			40 years
Alexandria, VA		—			604		196		—		—		604		196			800		42			1981			09/06			20 years
Amarillo, TX		—			590		632		—		—		590		632			1,222		136			1982			09/06			20 years
Arlington Heights, IL		—			470		228		—		—		470		228			698		49			1977			09/06			20 years
Austintown, OH		—			466		397		—		—		466		397			863		85			1980			09/06			20 years
Boardman Township, OH		—			497		258		—		—		497		258			755		55			1977			09/06			20 years

See accompanying report of independent registered public accounting firm.

F - 6


							Costs Capitalized
			Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)																Life on Which Depreciation &
					Building,								Building,					Accumulated									Amortization in
					Improvements &								Improvements &					Depreciation									Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests			Total		and Amortization			Date of Construction			Date Acquired			Statement is Computed
Campbell, CA		—		460		238		—		—		460		238			698		51			1976			09/06			20 years
Carson, CA		—		1,246		157		—		—		1,246		157			1,403		34			1975			09/06			20 years
Chehalis, WA		—		415		287		—		—		415		287			702		62			1977			09/06			20 years
Chubbuck, ID		—		350		394		—		—		344		394			738		85			1983			09/06			20 years
Clackamas, OR		—		468		407		—		—		468		407			875		87			1993			09/06			20 years
Collinsville, IL		—		676		283		—		—		676		283			959		61			1979			09/06			20 years
Colorado Springs, CO		—		585		390		—		—		585		390			975		84			1978			09/06			20 years
Colorado Springs, CO		—		321		377		—		—		321		377			698		81			1984			09/06			20 years
Corpus Christi, TX		—		345		776		300		—		345		1,076			1,421		192			1980			09/06			20 years
Dallas, TX		—		497		150		—		—		497		150			647		32			1979			09/06			20 years
Enfield, CT		—		684		229		—		—		684		229			913		49			1976			09/06			20 years
Fairfax, VA		—		768		683		—		—		768		683			1,451		147			1979			09/06			20 years
Federal Way, WA		—		543		193		—		—		543		193			736		41			1977			09/06			20 years
Florissant, MO		—		443		238		—		—		443		238			681		51			1977			09/06			20 years
Ft. Worth, TX		—		392		314		—		—		392		314			706		67			1974			09/06			20 years
Hermitage, PA		—		321		420		—		—		321		420			741		90			1980			09/06			20 years
Hialeah, FL		—		432		175		—		—		432		175			607		38			1978			09/06			20 years
Houston, TX		—		504		348		—		—		504		348			852		75			1976			09/06			20 years
Indianapolis, IN		—		310		590		—		—		310		590			900		127			1981			09/06			20 years
Indianapolis, IN		—		326		511		—		—		326		511			837		110			1978			09/06			20 years
Indianapolis, IN		—		358		767		—		—		358		767			1,125		165			1978			09/06			20 years
Indianapolis, IN		—		231		511		—		—		231		511			742		110			1974			09/06			20 years
Kernersville, NC		—		407		557		—		—		407		557			964		120			2000			09/06			20 years
Lafayette, IN		—		424		773		—		—		416		773			1,189		166			1978			09/06			20 years
Laurel, MD		—		528		379		—		—		528		379			907		81			1976			09/06			20 years
Little Rock, AR		—		672		77		—		—		672		77			749		16			1979			09/06			20 years
Little Rock, AR		—		703		180		—		—		703		180			883		39			1979			09/06			20 years
Maplewood, MN		—		630		271		—		—		630		271			901		58			1983			09/06			20 years
Merriville, IN		—		368		813		—		—		368		813			1,181		174			1976			09/06			20 years
Middleburg Heights, OH		—		497		260		—		—		497		260			757		56			1976			09/06			20 years
N. Miami, FL		—		855		151		—		—		855		151			1,006		32			1977			09/06			20 years
Nampa, ID		—		357		729		—		—		357		729			1,086		156			1979			09/06			20 years
North Richland Hills, TX		—		500		130		—		—		500		130			630		28			1970			09/06			20 years
Novi, MI		—		545		305		—		—		545		305			850		66			1979			09/06			20 years
Omaha, NE		—		496		314		—		—		496		314			810		67			1994			09/06			20 years
Pompano Beach, FL		—		436		394		—		—		436		394			830		84			1976			09/06			20 years
Portland, OR		—		764		161		—		—		764		161			925		35			1977			09/06			20 years
Provo, UT		—		519		216		—		—		519		216			735		46			1978			09/06			20 years
Pueblo, CO		—		475		302		—		—		475		302			777		65			1980			09/06			20 years
Raleigh, NC		—		1,094		482		—		—		1,094		482			1,576		103			1984			09/06			20 years
Southfield, MI		—		401		330		—		—		401		330			731		71			1980			09/06			20 years
St. Louis, MO		—		520		266		—		—		520		266			786		57			1973			09/06			20 years
Sugarland, TX		—		315		334		—		—		315		334			649		72			1997			09/06			20 years
Tacoma, WA		—		580		201		—		—		580		201			781		43			1984			09/06			20 years
Tucson, AZ		—		922		290		—		—		922		290			1,212		62			1979			09/06			20 years
Wethersfield, CT		—		884		176		—		—		884		176			1,060		38			1978			09/06			20 years
Worcester, MA		—		383		493		—		—		383		493			876		106			1978			09/06			20 years
Boise, ID		—		514		477		—		—		514		477			991		96			1983			12/06			20 years
St. Louis, MO		—		635		303		—		—		635		303			938		60			1980			01/07			20 years
Virginia Gardens, FL		—		793		133		—		—		793		133			926		26			1977			01/07			20 years

Dick’s Sporting Goods:
Taylor, MI		—		1,920		3,527		—		—		1,920		3,527			5,447		1,260			1996			08/96			40 years
White Marsh, MD		—		2,681		3,917		—		—		2,681		3,917			6,598		1,400			1996			08/96			40 years

Dimitri’s Family Restaurant:
Indianapolis, IN		—		223		483		—		—		223		483			706		104			1979			09/06			20 years

Dollar General:
Memphis, TN		—		266		1,136		46		—		266		1,182			1,448		329			1998			12/97			40 years
High Springs, FL		—		432		—		—		—		432		(e	)		432		(e	)		(e	)		07/10	(m)		(e	)
Inverness, FL		—		459		—		—		—		459		(e	)		459		(e	)		(e	)		08/10	(m)		(e	)
Cocoa, FL		—		406		—		—		—		406		(e	)		406		(e	)		(e	)		08/10	(m)		(e	)
Palm Bay, FL		—		355		—		—		—		355		(e	)		355		(e	)		(e	)		08/10	(m)		(e	)
Deland, FL		—		585		—		—		—		585		(e	)		585		(e	)		(e	)		11/10	(m)		(e	)
Seffner, FL		—		659		—		—		—		659		(e	)		659		(e	)		(e	)		12/10	(m)		(e	)

Dollar Tree:
Garland, TX		—		239		626		—		—		239		626			865		149			1994			02/94			40 years
Copperas Cove, TX		—		242		512		194		—		242		706			948		200			1972			11/98			40 years

See accompanying report of independent registered public accounting firm.

F - 7


							Costs Capitalized
			Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)															Life on Which Depreciation &
					Building,								Building,					Accumulated								Amortization in
					Improvements &								Improvements &					Depreciation								Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests			Total		and Amortization			Date of Construction		Date Acquired			Statement is Computed

Donato’s:
Medina, OH		—		405		464		—		—		405		464			869		105			1996		12/01			40 years

Dr. Clean Dry Cleaners:
Monticello, NY		—		20		72		—		—		20		72			92		10			1996		03/05			40 years

Easyhome:
Cohoes, NY		—		64		348		242		—		64		590			654		69			1994		09/04			40 years

Ecotech Institute:
Aurora, CO		—		5,076		13,874		6,043		—		5,076		19,917			24,993		1,294			1986		04/07			40 years

El Tapatio Grill:
Hammond, LA		—		248		814		62		—		248		627			875		156			1997		12/01			40 years

Enterprise Rent-A-Car:
Wilmington, NC		—		218		327		33		—		218		360			578		76			1981		12/01			40 years

Express Oil Change:
Birmingham, AL		—		470		695		—		—		470		695			1,165		49			2008		02/08	(f)		40 years
Florence, AL		—		110		381		—		—		110		381			491		37			1987		02/08			30 years
Helena, AL		—		363		628		—		—		363		628			991		45			1998		02/08			40 years
Muscle Shoals, AL		—		168		624		—		—		168		624			792		60			1985		02/08			30 years
Opelika, AL		—		547		680		—		—		547		680			1,227		49			2006		02/08			40 years
Cordova, TN		—		639		785		—		—		639		785			1,424		40			2000		12/08			40 years
Horn Lake, MS		—		326		611		—		—		326		611			937		36			1998		12/08			35 years
Lakeland, TN		—		186		489		—		—		186		489			675		25			2000		12/08			40 years
Memphis, TN		—		402		721		—		—		402		721			1,123		37			2001		12/08			40 years

Fallas Paredes:
Arlington, TX		—		318		1,680		242		—		318		1,923			2,241		623			1996		06/96			38 years

Family Dollar:
Albany, NY (n)		—		34		824		—		—		34		824			858		130			1992		09/04			40 years
Cohoes, NY		—		94		507		33		—		94		540			634		80			1994		09/04			40 years
Hudson Falls, NY		—		51		380		—		—		51		380			431		60			1993		09/04			40 years
Monticello, NY		—		96		352		—		—		96		352			448		51			1996		03/05			40 years

Famous Footwear:
Lapeer, MI		—		163		835		—		—		163		835			998		69			2007		10/05			40 years

Fantastic Sams:
Eden Prairie, MN		—		65		181		81		—		65		261			326		56			1997		12/01			40 years

Fazoli’s:
Bay City, MI		—		647		634		—		—		647		634			1,281		143			1997		12/01			40 years

Ferguson:
Destin, FL		—		554		1,012		253		—		554		1,265			1,819		111			2006		03/07			40 years

First Watch Restaurant:
Tulsa, OK		—		325		314		34		—		325		382			707		68			1978		09/06			20 years

Flash Markets:
Lebanon, TN		—		582		—		2,063		—		582		2,063			2,645		148			2007		03/07			40 years

Food 4 Less:
Chula Vista, CA		—		3,569		—		—		—		3,569		(c	)		3,569		(c	)		1995		11/98			(c	)

Food Fast:
Bossier City, LA		—		883		658		—		—		883		658			1,541		155			1975		06/07			15 years
Brownsboro, TX		—		328		385		—		—		328		385			713		45			1990		06/07			30 years
Flint, TX		—		272		411		—		—		272		411			683		58			1985		06/07			25 years
Forney, TX		—		545		707		—		—		545		707			1,252		83			1989		06/07			30 years
Forney, TX		—		473		654		—		—		473		654			1,127		77			1990		06/07			30 years
Gun Barrel City, TX		—		242		467		—		—		242		467			709		66			1988		06/07			25 years
Gun Barrel City, TX		—		270		386		—		—		270		386			656		55			1986		06/07			25 years
Jacksonville, TX		—		660		632		—		—		660		632			1,292		149			1976		06/07			15 years
Kemp, TX		—		581		505		—		—		581		505			1,086		72			1986		06/07			25 years
Longview, TX		—		403		572		—		—		403		572			975		81			1985		06/07			25 years
Longview, TX		—		426		382		—		—		426		382			808		54			1984		06/07			25 years

See accompanying report of independent registered public accounting firm.

F - 8


							Costs Capitalized
			Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)																Life on Which Depreciation &
					Building,								Building,					Accumulated									Amortization in
					Improvements &								Improvements &					Depreciation									Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests			Total		and Amortization			Date of Construction			Date Acquired			Statement is Computed
Longview, TX		—		360		535		—		—		360		535			895		76			1983			06/07			25 years
Longview, TX		—		178		236		—		—		178		236			414		42			1977			06/07			20 years
Longview, TX		—		252		304		—		—		252		304			556		43			1983			06/07			25 years
Longview, TX		—		271		431		—		—		271		431			702		51			1990			06/07			30 years
Mabank, TX		—		229		494		—		—		229		494			723		70			1986			06/07			25 years
Mt. Vernon, TX		—		292		666		—		—		292		666			958		94			1990			06/07			25 years
Shreveport, LA		—		361		250		—		—		361		250			611		59			1969			06/07			15 years
Tyler, TX		—		302		455		—		—		302		455			757		81			1981			06/07			20 years
Tyler, TX		—		316		545		—		—		316		545			861		64			1989			06/07			30 years
Tyler, TX		—		258		419		—		—		258		419			677		74			1978			06/07			20 years
Tyler, TX		—		542		403		—		—		481		403			884		57			1984			06/07			25 years
Tyler, TX		—		323		283		—		—		323		283			606		50			1978			06/07			20 years
Tyler, TX		—		488		831		—		—		488		831			1,319		147			1980			06/07			20 years
Tyler, TX		—		256		542		—		—		256		542			798		96			1980			06/07			20 years
Tyler, TX		—		742		546		—		—		742		546			1,288		77			1985			06/07			25 years
Tyler, TX		—		188		329		—		—		188		329			517		47			1984			06/07			25 years

Fresenius Medical Care:
Houston, TX		—		422		1,915		—		—		460		1,915			2,375		241			1995			08/06			40 years

Fresh Market:
Gainesville, FL		—		317		1,248		656		—		317		1,904			2,221		287			1982			03/99			40 years

Fuel-On:
Bloomsburg, PA		—		541		146		—		—		541		146			687		39			1967			08/05			20 years
Dallas, PA		—		677		1,091		—		—		677		1,091			1,768		293			1995			08/05			20 years
Emporium, PA		—		380		569		—		—		380		569			949		153			1996			08/05			20 years
Hazleton, PA		—		2,529		728		—		—		2,529		728			3,257		196			2001			08/05			20 years
Johnsonburg, PA		—		781		504		—		—		781		504			1,285		135			1978			08/05			20 years
Kane, PA		—		478		592		—		—		356		—			356		—			1984			08/05			20 years
Luzerne, PA		—		171		415		—		—		171		415			586		112			1989			08/05			20 years
Ridgway, PA		—		382		259		—		—		382		259			641		70			1975			08/05			20 years
St. Mary’s, PA		—		274		261		—		—		274		261			535		70			1979			08/05			20 years
White Haven, PA		—		486		867		—		—		486		867			1,353		233			1990			08/05			20 years
Yeagertown, PA		—		142		180		—		—		142		180			322		48			1977			08/05			20 years
Carlisle, PA		—		170		202		—		—		170		202			372		25			1988			01/06			40 years
Clairton, PA		—		215		701		—		—		215		701			916		139			1986			01/06			25 years
Danville, PA		—		180		359		—		—		180		359			539		45			1988			01/06			40 years
Houtzdale, PA		—		541		500		—		—		356		—			356		—			1977			01/06			15 years
Minersville, PA		—		680		582		—		—		680		582			1,262		72			1974			01/06			40 years
Pittsburgh, PA		—		905		1,346		—		—		905		1,346			2,251		167			1967			01/06			40 years
Summerville, PA		—		93		272		—		—		93		272			365		34			1988			01/06			40 years
Zelienople, PA		—		160		437		—		—		160		437			597		54			1988			01/06			40 years

Furr’s Family Dining:
Las Cruces, NM		—		947		—		2,182		—		947		2,182			3,129		234			2006			01/06	(m)		40 years
Tucson, AZ		—		1,116		—		—		—		1,116		(e	)		1,116		(e	)		(e	)		07/06			(e	)
Moore, OK		—		939		—		2,429		—		939		2,429			3,368		195			2007			03/07	(m)		40 years
Arlington, TX		—		1,061		—		—		—		1,061		(e	)		1,061		(e	)		(e	)		04/10	(m)		(e	)

Gander Mountain:
Amarillo, TX		—		1,514		5,781		—		—		1,514		5,781			7,295		885			2004			11/04			40 years
DeForest, WI		—		2,798		10,953		—		—		2,798		10,953			13,751		91			2008			09/10			35 years
Springfield, IL		—		1,717		7,622		—		—		1,717		7,622			9,339		64			2009			09/10			35 years
Onalaska, WI		—		1,963		—		—		—		1,963		(e	)		1,963		(e	)		(e	)		10/10	(m)		(e	)
Ocala, FL		—		3,315		8,908		—		—		3,315		8,908			12,223		53			2008			10/10			35 years

Gate Petroleum:
Concord, NC		—		852		1,201		—		—		852		1,201			2,053		166			2001			06/05			40 years
Rocky Mount, NC		—		259		1,164		—		—		259		1,164			1,423		161			2000			06/05			40 years

Gen-X Clothing:
Federal Way, WA		—		2,037		1,662		257		—		2,037		1,919			3,956		567			1994			06/98			40 years

Golden Corral:
Lake Placid, FL		—		115		305		54		—		115		359			474		246			1985			05/85			35 years
Brandon, FL		—		1,188		1,339		—		—		1,188		1,339			2,527		303			1998			12/01			40 years
Dallas, TX		—		1,138		1,025		—		—		1,138		1,025			2,163		232			1994			12/01			40 years
Temple Terrace, FL		—		1,330		1,391		—		—		1,330		1,391			2,721		314			1997			12/01			40 years

See accompanying report of independent registered public accounting firm.

F - 9


								Costs Capitalized
			Initial Cost to Company					Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)																Life on Which Depreciation &
						Building,									Building,					Accumulated								Amortization in
						Improvements &									Improvements &					Depreciation								Latest Income
	Encumbrances		Land			Leasehold Interests		Improvements		Carrying Costs		Land			Leasehold Interests			Total		and Amortization			Date of Construction			Date Acquired		Statement is Computed

Goodyear Truck & Tire:
Park City, KS		—		214			687		—		—		214			687			901		190			1989			06/05		20 years
Anthony, TX		—		(l	)		1,242		—		—		(l	)		1,242			1,242		107			2007			02/07		40 years

Great Clips:
Lapeer, MI		—		27			194		—		—		27			194			221		16			2007			10/05		40 years

Green Light Convenience:
Moosic, PA		—		323			309		—		—		323			309			632		83			1980			08/05		20 years

Guitar Center:
Roseville, MN		—		1,599			1,419		—		—		1,599			1,419			3,018		179			1994			08/06		40 years

GymKix:
Copperas Cove, TX		—		204			432		171		—		204			603			807		170			1972			11/98		40 years

H&R Block:
Swansea, IL		—		46			132		69		—		46			201			247		45			1997			12/01		40 years

Hastings:
Nacogdoches, TX		—		397			1,257		—		—		397			1,257			1,654		381			1997			11/98		40 years

Havertys Furniture:
Clearwater, FL		—		1,184			2,526		44		—		1,184			2,570			3,754		1,125			1992			05/93		40 years
Orlando, FL		—		820			2,441		6		—		820			2,448			3,268		1,001			1992			05/93		40 years
Pensacola, FL		—		633			1,595		—		—		603			1,595			2,198		579			1994			06/96		40 years
Bowie, MD		—		1,966			4,221		—		—		1,966			4,221			6,187		1,256			1997			12/97		39 years

Health Source Chiropractic:
Houston, TX		—		112			509		—		—		112			509			621		65			1995			08/06		40 years

Healthy Pet:
Suwanee, GA		—		175			1,038		—		—		175			1,038			1,213		105			1997			12/06		40 years
Colonial Heights, VA		—		160			746		—		—		160			746			906		74			1996			01/07		40 years

Heilig-Meyers/The Room Store:
Baltimore, MD		—		470			813		—		—		470			813			1,283		246			1968			11/98		40 years
Glen Burnie, MD		—		632			932		—		—		632			932			1,564		282			1968			11/98		40 years

Hog Pit:
Tucson, AZ		—		827			305		18		—		845			305			1,150		79			1974			12/01		40 years

Hollywood Feed:
Ridgeland, MS		—		343			411		362		—		343			773			1,116		53			1997			08/06		40 years

Home Decor:
Memphis, TN		—		549			540		364		—		549			904			1,453		247			1998			12/97		40 years

Home Depot:
Sunrise, FL		—		5,149			—		—		—		5,149			(i	)		5,149		(i	)		(i	)		05/03		(i	)

HomeGoods:
Fairfax, VA		—		971			756		1,585		—		971			2,341			3,312		552			1995			12/95		40 years

Hooters:
Tampa, FL		—		784			505		—		—		784			505			1,289		114			1993			12/01		40 years

Humana:
Sunrise, FL		—		800			253		—		—		800			253			1,053		42			1984			05/04		40 years

Hy-Vee:
St. Joseph, MO		—		1,580			2,849		—		—		1,580			2,849			4,429		591			1991			09/02		40 years

Int’l House of Pancakes:
Midwest City, OK		—		407			—		—		—		407			(i	)		407		(i	)		(i	)		11/00		(i	)
Ankeny, IA		—		693			515		—		—		693			515			1,208		95			2002			06/05		30 years

J & J Insurance:
Hollywood, FL		—		195			44		18		—		119			—			119		—			1960			12/05		15 years

See accompanying report of independent registered public accounting firm.

F - 10


								Costs Capitalized
				Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)													Life on Which Depreciation &
						Building,								Building,				Accumulated							Amortization in
						Improvements &								Improvements &				Depreciation							Latest Income
	Encumbrances			Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests		Total		and Amortization		Date of Construction		Date Acquired			Statement is Computed

Jack in the Box:
Plano, TX		—			1,055		1,237		—		—		1,055		1,237		2,292		171		2001		06/05			40 years

Jacobson Industrial:
Des Moines, IA		—			61		112		—		—		61		112		173		31		1973		06/05			20 years

Jared Jewelers:
Richmond, VA		—			955		1,336		—		—		955		1,336		2,291		302		1998		12/01			40 years
Brandon, FL		—			1,197		1,182		—		—		1,197		1,182		2,379		255		2001		05/02			40 years
Lithonia, GA		—			1,271		1,216		—		—		1,271		1,216		2,487		262		2001		05/02			40 years
Houston, TX		—			1,676		1,440		—		—		1,676		1,440		3,116		289		1999		12/02			40 years

Jazzercise Fitness Center:
Orlando, FL		42	(o)		37		101		—		—		37		101		138		18		2001		02/04			40 years

Jin’s Asian Cafe:
Sealy, TX		—			67		74		—		—		67		74		141		22		1982		03/99			40 years

Jo-Ann etc:
Corpus Christi, TX		—			818		896		12		—		818		909		1,727		389		1967		11/93			40 years
St. Peters, MO		—			1,741		5,406		—		—		1,741		5,406		7,147		738		2005		06/05	(g)		40 years

Johnny Carino’s:
Lewisville, TX		—			1,370		1,019		—		—		1,370		1,019		2,389		230		1994		12/01			40 years
Lubbock, TX		—			1,007		1,206		—		—		1,007		1,206		2,213		272		1995		12/01			40 years
S. Beaumont, TX		—			439		1,363		—		—		439		1,363		1,802		308		2000		12/01			40 years

Kangaroo Express:
Carthage, NC		—			485		354		—		—		485		354		839		39		1989		08/06			40 years
Sanford, NC		—			1,638		1,371		—		—		1,638		1,371		3,009		150		2003		08/06			40 years
Sanford, NC		—			666		661		—		—		666		661		1,327		72		2000		08/06			40 years
Siler City, NC		—			586		645		—		—		586		645		1,231		71		1998		08/06			40 years
West End, NC		—			426		516		—		—		426		516		942		56		1999		08/06			40 years
Belleview, FL		—			471		1,451		—		—		471		1,451		1,922		159		2006		08/06			40 years
Jacksonville, FL		—			683		1,362		—		—		683		1,362		2,045		149		1969		08/06			40 years
Jacksonville, FL		—			807		1,239		—		—		807		1,239		2,046		136		1975		08/06			40 years
Destin, FL		—			1,366		1,192		—		—		1,366		1,192		2,558		128		2000		09/06			40 years
Niceville, FL (n)		—			1,434		1,124		—		—		1,434		1,124		2,558		121		2000		09/06			40 years
Kill Devil Hills, NC		—			490		741		—		—		490		741		1,231		78		1995		10/06			40 years
Kill Devil Hills, NC		—			679		552		—		—		679		552		1,231		58		1990		10/06			40 years
Interlachen, FL		—			519		1,500		—		—		519		1,500		2,019		105		2007		10/06			40 years
Clarksville, TN		—			276		955		—		—		276		955		1,231		96		1999		12/06			40 years
Clarksville, TN		—			521		710		—		—		521		710		1,231		72		1999		12/06			40 years
Gallatin, TN		—			474		757		—		—		474		757		1,231		76		1999		12/06			40 years
Midland City, AL		—			729		2,538		—		—		729		2,538		3,267		256		2006		12/06			40 years
Naples, FL		—			3,195		1,403		—		—		3,195		1,403		4,598		142		2001		12/06			40 years
Oxford, MS		—			440		1,097		—		—		440		1,097		1,537		111		1998		12/06			40 years
Columbiana, AL		—			771		989		—		—		771		989		1,760		98		1982		01/07			40 years
Naples, FL		—			3,162		1,597		—		—		3,162		1,597		4,759		155		1995		02/07			40 years
Longs, SC		—			745		758		—		—		745		758		1,503		72		2001		03/07			40 years
Kentwood, LA		—			985		891		—		—		985		891		1,876		84		2001		03/07			40 years
Dothan, AL		—			774		1,886		—		—		774		1,886		2,660		179		2007		03/07			40 years
Naples, FL		—			2,412		1,589		—		—		2,412		1,589		4,001		144		2000		05/07			40 years
Montgomery, AL		—			666		1,185		—		—		666		1,185		1,851		105		1998		06/07			40 years
Cary, NC		—			1,314		2,125		—		—		1,314		2,125		3,439		179		2007		08/07			40 years

Kash n’ Karry:
Seffner, FL		—			322		1,222		—		—		322		1,222		1,544		220		1983		03/99			40 years

Keg Steakhouse:
Lynnwood, WA		—			1,256		649		—		—		1,256		649		1,905		147		1992		12/01			40 years
Tacoma, WA		—			527		795		—		—		527		795		1,322		180		1981		12/01			40 years

KFC:
Fenton, MO		—			307		496		—		—		307		496		803		279		1985		07/92			33 years
Erie, PA		—			517		496		—		—		517		496		1,013		112		1996		12/01			40 years
Marysville, WA		—			647		546		—		—		647		546		1,193		123		1996		12/01			40 years
Evansville, IN		—			370		767		—		—		370		767		1,137		89		2004		05/06			40 years

Kohl’s:
Florence, AL		—			818		1,047		—		—		818		1,047		1,865		111		2006		06/04			40 years

See accompanying report of independent registered public accounting firm.

F - 11


								Costs Capitalized
				Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)																Life on Which Depreciation &
						Building,								Building,					Accumulated									Amortization in
						Improvements &								Improvements &					Depreciation									Latest Income
	Encumbrances			Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests			Total		and Amortization			Date of Construction			Date Acquired			Statement is Computed
Kum & Go:
Omaha, NE		—			393		214		—		—		393		214			607		59			1979			06/05			20 years

Kwik Pik:
Bradford, PA		—			184		762		—		—		184		762			946		205			1983			08/05			20 years
Coraopolis, PA (n)		—			476		347		—		—		476		347			823		93			1983			08/05			20 years
St Clair, PA		—			212		475		—		—		212		475			687		128			1984			08/05			20 years
Beech Creek, PA		—			477		613		—		—		477		613			1,090		76			1988			01/06			40 years
Canisteo, NY		—			142		485		—		—		142		485			627		60			1983			01/06			40 years
Curwensville, PA		—			226		608		—		—		226		608			834		75			1983			01/06			40 years
Ellwood City, PA		—			196		526		—		—		196		526			722		65			1987			01/06			40 years
Hastings, PA		—			199		455		—		—		199		455			654		56			1989			01/06			40 years
Jersey Shore, PA		—			515		381		—		—		515		381			896		47			1960			01/06			40 years
Leeper, PA		—			286		644		—		—		286		644			930		80			1987			01/06			40 years
Lewisberry, PA		—			412		534		—		—		412		534			946		66			1988			01/06			40 years
Mercersburg, PA		—			672		746		—		—		672		746			1,418		93			1988			01/06			40 years
New Florence, PA		—			298		812		—		—		298		812			1,110		101			1989			01/06			40 years
Newstead, NY		—			255		835		—		—		255		835			1,090		104			1990			01/06			40 years
Philipsburg, PA		—			428		269		—		—		428		269			697		33			1978			01/06			40 years
Plainfield, PA		—			244		383		—		—		244		383			627		47			1988			01/06			40 years
Reynoldsville, PA		—			113		328		—		—		113		328			441		41			1983			01/06			40 years
Port Royal, PA		—			238		635		—		—		238		635			873		142			1989			07/06			20 years

LA Fitness:
Centerville, OH		—			2,700		—		8,572		—		2,700		8,572			11,272		330			2009			06/08	(m)		40 years
Warren, MI		—			2,360		6,674		—		—		2,360		6,674			9,034		299			2009			07/08	(m)		40 years
Cincinnati, OH		—			5,145		—		9,011		—		5,145		9,011			14,156		347			2009			08/08	(m)		40 years
Lawrence, IN		—			1,604		5,867		—		—		1,604		5,867			7,471		55			2010			01/10	(m)		40 years
Laveen, AZ		—			1,665		—		—		—		1,665		(e	)		1,665		(e	)		(e	)		02/10	(m)		(e	)
Kennesaw, GA		—			3,653		—		—		—		3,653		(e	)		3,653		(e	)		(e	)		07/10	(m)		(e	)

Las Margaritas:
Indianapolis, IN		—			640		1,107		—		—		640		1,107			1,747		239			1996			12/01			40 years

Lil’ Champ:
Gainesville, FL		—			900		—		1,800		—		900		1,800			2,700		171			2006			07/05	(m)		40 years
Jacksonville, FL		—			2,225		3,265		—		—		2,225		3,265			5,490		211			2006			08/05			40 years
Ocala, FL		—			846		—		1,564		—		846		1,564			2,410		138			2006			02/06	(m)		40 years

Logan’s Roadhouse:
Alexandria, LA		—			1,218		3,049		—		—		1,218		3,049			4,267		314			1998			11/06			40 years
Beckley, WV		—			1,396		2,405		—		—		1,396		2,405			3,801		248			2006			11/06			40 years
Cookeville, TN		—			1,262		2,271		—		—		1,262		2,271			3,533		234			1997			11/06			40 years
Fort Wayne, IN		—			1,274		2,110		—		—		1,172		2,110			3,282		218			2003			11/06			40 years
Greenwood, IN		—			1,341		2,105		—		—		1,341		2,105			3,446		217			2000			11/06			40 years
Hurst, TX		—			1,858		1,916		—		—		1,858		1,916			3,774		198			1999			11/06			40 years
Jackson, TN		—			1,200		2,246		—		—		1,200		2,246			3,446		232			1994			11/06			40 years
Lake Charles, LA		—			1,285		2,202		—		—		1,285		2,202			3,487		227			1998			11/06			40 years
McAllen, TX		—			1,608		2,178		—		—		1,608		2,178			3,786		225			2005			11/06			40 years
Opelika, AL		—			1,028		1,753		—		—		1,028		1,753			2,781		181			2005			11/06			40 years
Roanoke, VA		—			2,302		1,947		—		—		2,302		1,947			4,249		201			1998			11/06			40 years
San Marcos, TX		—			837		1,453		—		—		837		1,453			2,290		150			2000			11/06			40 years
Sanford, FL		—			1,678		1,730		—		—		1,678		1,730			3,408		178			1999			11/06			40 years
Smyrna, TN		—			1,335		2,047		—		—		1,335		2,047			3,382		211			2002			11/06			40 years
Warner Robins, GA		—			905		1,534		—		—		905		1,534			2,439		158			2004			11/06			40 years
Franklin, TN		—			2,519		1,705		—		—		2,519		1,705			4,224		172			1995			12/06			40 years
Southhaven, MS		—			1,298		1,338		—		—		1,298		1,338			2,636		135			2005			12/06			40 years
Columbus, MS		—			707		—		—		—		707		(e	)		707		(e	)		(e	)		11/10	(m)		(e	)
Lancaster, TX		—			987		—		—		—		987		(e	)		987		(e	)		(e	)		12/10	(m)		(e	)

Lowe’s:
Memphis, TN		—			3,215		9,170		24		—		3,215		9,194			12,409		1,960			2001			06/02			40 years

M & T Bank:
Carlisle, PA		—			87		103		—		—		87		103			190		13			1988			01/06			40 years

Magic China Café:
Orlando, FL		47	(o)		40		111		—		—		40		111			151		19			2001			02/04			40 years

See accompanying report of independent registered public accounting firm.

F - 12


							Costs Capitalized
			Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)													Life on Which Depreciation &
					Building,								Building,				Accumulated							Amortization in
					Improvements &								Improvements &				Depreciation							Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests		Total		and Amortization		Date of Construction		Date Acquired			Statement is Computed

Magic Mountain:
Columbus, OH		—		5,380		2,693		—		—		5,380		2,693		8,073		238		1990		06/07			40 years
Columbus, OH		—		2,076		1,906		—		—		2,076		1,906		3,982		169		1990		06/07			40 years

Majestic Liquors:
Coffee City, TX		—		1,330		3,858		—		—		1,330		3,858		5,188		567		1996		02/05			40 years
Ft. Worth, TX		—		988		2,368		—		—		988		2,368		3,356		348		1997		02/05			40 years
Ft. Worth, TX		—		1,652		2,018		—		—		1,652		2,018		3,670		296		2000		02/05			40 years
Ft. Worth, TX		—		2,505		2,138		—		—		2,505		2,138		4,643		314		1988		02/05			40 years
Ft. Worth, TX		—		611		1,609		—		—		579		1,609		2,188		236		1974		02/05			40 years
Hudson Oaks, TX		—		361		1,029		—		—		361		1,029		1,390		151		1993		02/05			40 years
Granbury, TX		—		786		1,234		—		—		786		1,234		2,020		148		2006		05/05	(g)		40 years
Azle, TX		—		648		859		—		—		648		859		1,507		76		1970		06/07			40 years
Ft. Worth, TX		—		575		933		—		—		575		933		1,508		83		1982		06/07			40 years

Mattress Firm:
Baton Rouge, LA		—		609		914		—		—		609		914		1,523		343		1995		12/95			40 years

MC Sports:
Lapeer, MI		—		408		2,086		—		—		408		2,086		2,494		172		2007		10/05			40 years

Merchant’s Tires:
Hampton, VA		—		180		427		—		—		180		427		607		62		1986		03/05			40 years
Newport News, VA		—		234		259		—		—		234		259		493		38		1986		03/05			40 years
Norfolk, VA		—		398		508		—		—		398		508		906		74		1986		03/05			40 years
Rockville, MD		—		1,030		306		—		—		1,030		306		1,336		44		1974		03/05			40 years
Washington, DC		—		624		578		—		—		624		578		1,202		84		1983		03/05			40 years

Mi Pueblo Foods:
Palo Alto, CA		—		2,272		3,405		28		—		2,272		3,433		5,705		1,004		1998		12/98	(f)		40 years

Michaels:
Fairfax, VA		—		992		773		1,369		—		992		2,141		3,133		527		1995		12/95			40 years
Grapevine, TX (n)		—		1,018		2,067		—		—		1,018		2,067		3,085		648		1998		06/98			40 years
Plymouth Meeting, PA		—		2,911		2,595		—		—		2,911		2,595		5,506		696		1999		10/98	(g)		40 years

Michael’s Family Restaurant:
Sherman, TX		—		233		126		24		—		233		150		383		29		1969		09/06			20 years

Mister Car Wash:
Anoka, MN		—		212		214		—		—		212		214		426		53		1968		04/07			15 years
Brooklyn Park, MN		—		438		778		—		—		438		778		1,216		115		1985		04/07			25 years
Cedar Rapids, IA		—		391		816		—		—		391		816		1,207		121		1989		04/07			25 years
Clive, IA		—		1,141		935		—		—		1,141		935		2,076		173		1983		04/07			20 years
Cottage Grove, MN		—		274		485		—		—		274		485		759		72		1992		04/07			25 years
Des Moines, IA		—		249		596		—		—		249		596		845		74		1990		04/07			30 years
Des Moines, IA		—		213		476		—		—		213		476		689		88		1964		04/07			20 years
Eden Prairie, MN		—		865		751		—		—		865		751		1,616		139		1984		04/07			20 years
Edina, MN		—		894		687		—		—		894		687		1,581		127		1985		04/07			20 years
Houston, TX		—		1,846		1,592		—		—		1,846		1,592		3,438		236		1983		04/07			25 years
Houston, TX		—		624		1,108		—		—		624		1,108		1,732		137		1988		04/07			30 years
Houston, TX		—		5,126		1,267		—		—		5,126		1,267		6,393		134		1995		04/07			35 years
Houston, TX		—		796		678		—		—		796		678		1,474		101		1986		04/07			25 years
Houston, TX		—		1,347		1,702		—		—		1,347		1,702		3,049		210		1984		04/07			30 years
Houston, TX		—		1,960		1,145		—		—		1,960		1,145		3,105		170		1983		04/07			25 years
Houston, TX		—		3,193		1,305		—		—		3,193		1,305		4,498		138		1995		04/07			35 years
Houston, TX		—		288		466		—		—		288		466		754		115		1970		04/07			15 years
Houston, TX		—		2,260		1,806		—		—		2,260		1,806		4,066		268		1975		04/07			25 years
Humble, TX		—		1,204		1,517		—		—		1,204		1,517		2,721		161		1993		04/07			35 years
Plymouth, MN		—		827		182		—		—		827		182		1,009		67		1955		04/07			10 years
Roseville, MN		—		861		564		—		—		861		564		1,425		104		1963		04/07			20 years
Spokane, WA		—		214		580		—		—		214		580		794		72		1990		04/07			30 years
Spokane, WA		—		1,253		1,146		—		—		1,253		1,146		2,399		121		1997		04/07			35 years
St. Cloud, MN (n)		—		243		391		—		—		243		391		634		73		1986		04/07			20 years
Stillwater, MN		—		289		214		—		—		289		214		503		53		1971		04/07			15 years
Sugarland, TX		—		3,789		1,972		—		—		3,789		1,972		5,761		209		1995		04/07			35 years
West St Paul, MN		—		836		236		—		—		836		236		1,072		44		1972		04/07			20 years
Rochester, MN		—		319		451		—		—		319		451		770		36		1994		10/07			40 years
Rochester, MN		—		1,055		2,327		—		—		1,055		2,327		3,382		187		2003		10/07			40 years
Birmingham, AL		—		2,378		2,145		—		—		2,378		2,145		4,523		223		1985		11/07			30 years
Clearwater, FL		—		825		765		—		—		825		765		1,590		96		1969		11/07			25 years

See accompanying report of independent registered public accounting firm.

F - 13


							Costs Capitalized
			Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)													Life on Which Depreciation &
					Building,								Building,				Accumulated							Amortization in
					Improvements &								Improvements &				Depreciation							Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests		Total		and Amortization		Date of Construction		Date Acquired			Statement is Computed
Mesquite, TX		—		1,596		2,201		—		—		1,596		2,201		3,797		275		1987		11/07			25 years
Seminole, FL		—		2,166		1,496		—		—		2,166		1,496		3,662		156		1985		11/07			30 years
Tampa, FL		—		2,993		1,669		—		—		2,993		1,669		4,662		209		1969		11/07			25 years
Vestavia Hills, AL		—		1,009		956		—		—		1,009		956		1,965		119		1967		11/07			25 years
El Paso, TX		—		1,424		1,306		—		—		1,424		1,306		2,730		132		1986		12/07			30 years
El Paso, TX		—		988		1,046		—		—		988		1,046		2,034		80		1998		12/07			40 years
El Paso, TX		—		1,399		1,468		—		—		1,399		1,468		2,867		112		1991		12/07			40 years
El Paso, TX		—		664		824		—		—		664		824		1,488		63		1991		12/07			40 years
El Paso, TX		—		1,807		2,287		—		—		1,807		2,287		4,094		175		1983		12/07			40 years

Muchas Gracias Mexican Restaurant:
Salem, OR		—		556		736		—		—		556		736		1,292		166		1996		12/01			40 years

My Big Fat Greek Restaurant:
Tucson, AZ		—		996		2,742		—		—		996		2,742		3,738		226		2007		12/06	(m)		40 years
Olathe, KS		—		525		731		—		—		525		731		1,256		6		2005		09/10			35 years

Nitlantika:
Hollywood, FL		—		383		88		37		—		234		—		234		—		1960		12/05			15 years

Office Depot:
Arlington, TX		—		596		1,411		—		—		596		1,411		2,007		597		1994		01/94			40 years
Richmond, VA		—		889		1,948		—		—		889		1,948		2,837		710		1996		05/96			40 years
Hartsdale, NY		—		4,509		2,454		—		—		4,509		2,454		6,963		408		1996		09/97			40 years
Gastonia, NC		—		1,554		2,367		—		—		1,554		2,367		3,921		357		2004		12/04			40 years

OfficeMax:
Cincinnati, OH		—		543		1,575		—		—		543		1,575		2,118		649		1994		07/94			40 years
Evanston, IL		—		1,868		1,758		—		—		1,868		1,758		3,626		684		1995		06/95			40 years
Altamonte Springs, FL		—		1,690		3,050		—		—		1,690		3,050		4,740		1,135		1995		01/96			40 years
Cutler Bay, FL		—		989		1,479		—		—		989		1,479		2,468		536		1995		06/96			40 years
Sacramento, CA		—		1,144		2,961		—		—		1,144		2,961		4,105		1,037		1996		12/96			40 years
Salinas, CA		—		1,353		1,829		—		—		1,353		1,829		3,182		635		1995		02/97			40 years
Redding, CA		—		667		2,182		—		—		667		2,182		2,849		739		1997		06/97			40 years
Kelso, WA		—		868		—		1,806		—		868		1,806		2,674		585		1998		09/97	(g)		40 years
Lynchburg, VA		—		562		—		1,851		—		562		1,851		2,413		569		1998		02/98	(m)		40 years
Leesburg, FL		—		640		—		1,929		—		640		1,929		2,569		581		1998		08/98	(m)		40 years
Tigard, OR		—		1,540		2,247		—		—		1,540		2,247		3,787		681		1995		11/98			40 years
Griffin, GA		—		685		—		1,802		—		685		1,802		2,487		527		1999		11/98	(g)		40 years

Old River Cabinets:
Fairfax, VA		—		194		365		29		—		194		394		588		73		1995		12/95			40 years

Orlando Metro Gymnastics:
Orlando, FL		—		428		1,345		—		—		428		1,345		1,773		200		2003		01/05			40 years

Palais Royale:
Sealy, TX		—		457		504		1,634		—		462		2,134		2,596		259		1982		03/99			40 years

Pantry I Petroleum:
Avis, PA		—		392		326		—		—		392		326		718		88		1976		08/05			20 years
Howard, PA		—		136		375		—		—		136		375		511		46		1987		01/06			40 years

Patriot Fuels:
Vinita, OK		—		72		368		—		—		72		368		440		24		1972		07/09			20 years

Pennstar Bank:
Dallas, PA		—		214		345		—		—		214		345		559		93		1995		08/05			20 years

Pep Boys:
Chicago, IL		—		1,077		3,756		—		—		1,077		3,756		4,833		335		1993		11/07			35 years
Cicero, IL		—		1,341		3,760		—		—		1,341		3,760		5,101		336		1993		11/07			35 years
Cornwell Heights, PA		—		2,058		3,102		—		—		2,058		3,102		5,160		388		1972		11/07			25 years
East Brunswick, NJ		—		2,449		5,026		—		—		2,449		5,026		7,475		524		1987		11/07			30 years
Guayama, PR		—		1,729		2,732		—		—		1,729		2,131		3,860		70		1998		11/07			33 years
Jacksonville, FL		—		810		2,331		—		—		810		2,331		3,141		208		1989		11/07			35 years
Joliet, IL		—		1,506		3,727		—		—		1,506		3,727		5,233		333		1993		11/07			35 years
Lansing, IL		—		869		3,440		—		—		869		3,440		4,309		307		1993		11/07			35 years
Las Vegas, NV		—		1,917		2,530		—		—		1,917		2,530		4,447		226		1989		11/07			35 years
Marietta, GA		—		1,311		3,556		—		—		1,311		3,556		4,867		370		1987		11/07			30 years
Marlton, NJ		—		1,608		4,142		—		—		1,608		4,142		5,750		431		1983		11/07			30 years
Philadelphia, PA		—		1,300		3,830		—		—		1,300		3,830		5,130		342		1995		11/07			35 years
Quakertown, PA		—		1,129		3,252		—		—		1,129		3,252		4,381		290		1995		11/07			35 years
Reading, PA		—		1,189		3,367		—		—		1,189		2,819		4,008		109		1989		11/07			28 years

See accompanying report of independent registered public accounting firm.

F - 14


							Costs Capitalized
			Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)													Life on Which Depreciation &
					Building,								Building,				Accumulated							Amortization in
					Improvements &								Improvements &				Depreciation							Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests		Total		and Amortization		Date of Construction		Date Acquired			Statement is Computed
Roswell, GA		—		931		2,732		—		—		931		2,732		3,663		285		2007		11/07			30 years
Turnersville, NJ		—		990		3,494		—		—		990		3,494		4,484		364		1986		11/07			30 years
Houston, TX		—		734		3,028		—		—		734		3,028		3,762		71		1994		04/10			30 years

Perkins Restaurant:
Des Moines, IA		—		226		203		—		—		226		203		429		113		1976		06/05			10 years
Des Moines, IA		—		270		218		—		—		270		218		488		121		1977		06/05			10 years
Des Moines, IA		—		256		136		—		—		256		136		392		75		1976		06/05			10 years
Newton, IA		—		354		402		—		—		354		402		756		223		1979		06/05			10 years
Urbandale, IA		—		377		581		—		—		377		581		958		161		1979		06/05			20 years

Pet Paradise:
Houston, TX		—		417		2,306		—		—		417		2,306		2,723		161		2008		03/08			40 years
Bunnell, FL		—		316		881		—		—		316		881		1,197		60		1997		04/08			40 years
Houston, TX		—		535		—		3,426		—		535		3,426		3,961		146		2009		09/08	(m)		40 years
Charlotte, NC		—		825		—		3,231		—		825		3,231		4,056		118		2009		11/08	(m)		40 years
Davie, FL		—		1,138		1,069		—		—		1,138		1,069		2,207		62		2003		12/08			35 years

Petco:
Grand Forks, ND		—		307		910		—		—		307		910		1,217		297		1996		12/97			40 years

Petro Express:
Charlotte, NC		—		1,025		1,605		—		—		1,025		1,605		2,630		198		1986		04/07			30 years
Belmont, NC		—		1,508		1,622		—		—		1,508		1,622		3,130		172		2001		04/07			35 years
Charlotte, NC		—		1,697		2,419		—		—		1,697		2,419		4,116		224		2005		04/07			40 years
Charlotte, NC		—		1,258		1,560		—		—		1,258		1,560		2,818		145		2004		04/07			40 years
Charlotte, NC		—		1,810		2,570		—		—		1,810		2,570		4,380		238		2004		04/07			40 years
Charlotte, NC		—		1,030		1,725		—		—		1,030		1,725		2,755		213		1983		04/07			30 years
Charlotte, NC		—		1,037		1,468		—		—		1,037		1,468		2,505		155		1997		04/07			35 years
Charlotte, NC		—		2,316		2,064		—		—		2,316		2,064		4,380		219		1996		04/07			35 years
Charlotte, NC		—		1,291		1,839		—		—		1,291		1,839		3,130		227		1988		04/07			30 years
Charlotte, NC		—		1,340		1,790		—		—		1,340		1,790		3,130		190		1998		04/07			35 years
Charlotte, NC		—		1,458		2,047		—		—		1,458		2,047		3,505		253		1987		04/07			30 years
Charlotte, NC		—		1,323		870		—		—		1,323		870		2,193		108		1982		04/07			30 years
Charlotte, NC		—		507		698		—		—		507		698		1,205		129		1967		04/07			20 years
Charlotte, NC		—		629		876		—		—		629		876		1,505		108		1986		04/07			30 years
Charlotte, NC		—		429		425		—		—		429		425		854		53		1983		04/07			30 years
Charlotte, NC		—		1,778		1,977		—		—		1,778		1,977		3,755		244		1992		04/07			30 years
Charlotte, NC		—		2,165		1,965		—		—		2,165		1,965		4,130		208		1997		04/07			35 years
Charlotte, NC		—		2,784		3,720		—		—		2,784		3,720		6,504		394		1998		04/07			35 years
Charlotte, NC		—		1,532		1,973		—		—		1,532		1,973		3,505		209		1998		04/07			35 years
Charlotte, NC		—		1,293		1,837		—		—		1,293		1,837		3,130		227		1987		04/07			30 years
Concord, NC		—		2,144		1,986		—		—		2,144		1,986		4,130		210		2000		04/07			35 years
Concord, NC		—		1,828		1,677		—		—		1,828		1,677		3,505		178		2002		04/07			35 years
Conover, NC		—		917		1,275		—		—		917		1,275		2,192		135		1999		04/07			35 years
Cornelius, NC		—		1,653		2,664		—		—		1,653		2,664		4,317		282		2000		04/07			35 years
Denver, NC		—		2,317		1,750		—		—		2,317		1,750		4,067		185		1999		04/07			35 years
Fort Mill, SC		—		1,883		1,559		—		—		1,883		1,559		3,442		193		1988		04/07			30 years
Fort Mill, SC		—		3,825		2,554		—		—		3,825		2,554		6,379		271		1998		04/07			35 years
Gastonia, NC		—		745		760		—		—		745		760		1,505		70		2003		04/07			40 years
Gastonia, NC		—		1,070		1,185		—		—		1,070		1,185		2,255		126		1990		04/07			35 years
Gastonia, NC		—		965		1,228		—		—		965		1,228		2,193		130		2001		04/07			35 years
Gastonia, NC		—		335		545		—		—		335		545		880		50		2000		04/07			40 years
Hickory, NC		—		1,975		1,530		—		—		1,975		1,530		3,505		162		2002		04/07			35 years
Kings Mountain,
NC		—		1,210		982		—		—		1,210		982		2,192		104		1988		04/07			35 years
Lake Wylie, SC		—		1,972		1,283		—		—		1,972		1,283		3,255		136		2003		04/07			35 years
Lake Wylie, SC		—		1,381		2,061		—		—		1,381		2,061		3,442		218		1998		04/07			35 years
Lincolnton, NC		—		723		532		—		—		723		532		1,255		66		1989		04/07			30 years
Lincolnton, NC		—		2,359		1,771		—		—		2,359		1,771		4,130		188		2000		04/07			35 years
Matthews, NC		—		1,197		1,746		—		—		1,197		1,746		2,943		216		1987		04/07			30 years
Mineral Springs, NC		—		678		577		—		—		678		577		1,255		54		2002		04/07			40 years
Monroe, NC		—		709		796		—		—		709		796		1,505		84		1999		04/07			35 years
Monroe, NC		—		421		834		—		—		421		834		1,255		88		1997		04/07			35 years
Monroe, NC		—		857		1,023		—		—		857		1,023		1,880		95		2004		04/07			40 years
Rock Hill, SC		—		778		727		—		—		778		727		1,505		90		1990		04/07			30 years
Rock Hill, SC		—		2,119		1,886		—		—		2,119		1,886		4,005		200		1998		04/07			35 years
Rock Hill, SC		—		3,095		1,910		—		—		3,095		1,910		5,005		202		1999		04/07			35 years
Statesville, NC		—		1,886		2,182		—		—		1,886		2,182		4,068		231		1999		04/07			35 years
Thomasville, NC		—		994		1,761		—		—		994		1,761		2,755		187		2000		04/07			35 years
Waxhaw, NC		—		508		747		—		—		508		747		1,255		69		2002		04/07			40 years
York, SC		—		2,306		1,449		—		—		2,306		1,449		3,755		154		1999		04/07			35 years
Charlotte, NC		—		1,231		1,214		—		—		1,231		1,214		2,445		110		1997		05/07			40 years
Charlotte, NC		—		1,849		2,280		—		—		1,849		2,280		4,129		207		2005		05/07			40 years
Rock Hill, SC		—		3,108		2,146		—		—		3,108		2,146		5,254		194		1999		05/07			40 years

See accompanying report of independent registered public accounting firm.

F - 15


								Costs Capitalized
				Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)													Life on Which Depreciation &
						Building,								Building,				Accumulated							Amortization in
						Improvements &								Improvements &				Depreciation							Latest Income
	Encumbrances			Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests		Total		and Amortization		Date of Construction		Date Acquired			Statement is Computed

PetSmart:
Chicago, IL		—			2,724		3,566		—		—		2,724		3,566		6,290		1,096		1998		09/98			40 years

Pier I Imports:
Anchorage, AK		—			928		1,663		—		—		928		1,663		2,591		617		1995		02/96			40 years
Memphis, TN		—			713		822		—		—		713		822		1,535		278		1997		09/96	(f)		40 years
Sanford, FL		—			738		803		—		—		738		803		1,541		257		1998		06/97	(f)		40 years
Valdosta, GA		—			391		806		—		—		391		806		1,197		224		1999		01/99	(f)		40 years

Pizza Hut:
Monroeville, AL		—			547		44		—		—		547		44		591		10		1976		12/01			40 years

Popeye’s:
Snellville, GA		—			642		437		—		—		642		437		1,079		99		1995		12/01			40 years

Pro Tip Nails & Spa:
Orlando, FL		47	(o)		40		111		—		—		40		111		151		—		2001		02/04			40 years

Pull-A-Part:
Augusta, GA		—			1,414		—		1,451		—		1,414		1,451		2,865		128		2007		08/06	(m)		40 years
Birmingham, AL		—			1,165		2,090		—		—		1,165		2,090		3,255		229		1964		08/06			40 years
Charlotte, NC		—			2,913		1,724		—		—		2,913		1,724		4,637		189		2006		08/06			40 years
Conley, GA		—			1,686		1,387		—		—		1,686		1,387		3,073		152		1999		08/06			40 years
Harvey, LA		—			1,887		—		4,326		—		1,887		4,326		6,213		266		2008		08/06	(m)		40 years
Knoxville, TN		—			961		2,384		—		—		961		2,384		3,345		206		2007		08/06	(m)		40 years
Louisville, KY		—			3,206		1,532		—		—		3,206		1,532		4,738		168		2006		08/06			40 years
Nashville, TN		—			2,164		1,414		—		—		2,164		1,414		3,578		155		2006		08/06			40 years
Norcross, GA		—			1,831		1,040		—		—		1,831		1,040		2,871		114		1998		08/06			40 years
Cleveland, OH		—			4,556		—		2,096		—		4,556		2,096		6,652		164		2007		08/06	(m)		40 years
Lafayette, LA		—			1,036		—		2,226		—		1,036		2,226		3,262		169		2007		08/06	(m)		40 years
Montgomery, AL		—			934		—		2,013		—		934		2,013		2,947		157		2007		11/06	(m)		40 years
Jackson, MS		—			1,315		2,471		—		—		1,315		2,471		3,786		162		2008		12/06	(m)		40 years
Baton Rouge, LA		—			893		—		3,256		—		893		3,256		4,149		146		2009		01/07	(m)		40 years
Memphis, TN		—			1,779		—		2,964		—		1,779		2,964		4,743		195		2008		05/07	(m)		40 years
Mobile, AL		—			550		—		2,772		—		550		2,772		3,322		136		2009		06/07	(m)		40 years
Winston-Salem, NC		—			846		—		2,449		—		846		2,449		3,295		125		2009		08/07	(m)		40 years
Lithonia, GA		—			2,410		—		2,345		—		2,410		2,345		4,755		115		2009		08/07	(m)		40 years
Columbia, SC		—			935		2,178		—		—		935		2,178		3,113		107		2009		09/07	(m)		40 years
Akron, OH		—			1,065		—		1,869		—		1,065		1,869		2,934		53		2009		10/08	(m)		40 years

QuikTrip:
Alpharetta, GA		—			1,048		607		—		—		1,048		607		1,655		84		1996		06/05			40 years
Clive, IA		—			623		557		—		—		623		557		1,180		103		1994		06/05			30 years
Des Moines, IA		—			379		455		—		—		379		455		834		84		1990		06/05			30 years
Des Moines, IA		—			259		792		—		—		259		792		1,051		146		1996		06/05			30 years
Gainesville, GA		—			592		913		—		—		592		913		1,505		169		1989		06/05			30 years
Herculaneum, MO		—			856		1,613		—		—		856		1,613		2,469		298		1991		06/05			30 years
Johnston, IA		—			394		385		—		—		394		385		779		71		1991		06/05			30 years
Lee’s Summit, MO		—			374		1,224		—		—		374		1,224		1,598		170		1999		06/05			40 years
Norcross, GA		—			844		297		—		—		839		297		1,136		55		1994		06/05			30 years
Norcross, GA		—			948		294		—		—		948		294		1,242		54		1989		06/05			30 years
Norcross, GA		—			966		202		—		—		966		202		1,168		37		1993		06/05			30 years
Olathe, KS		—			793		1,392		—		—		793		1,392		2,185		193		1999		06/05			40 years
Tulsa, OK		—			1,225		650		—		—		1,225		650		1,875		120		1990		06/05			30 years
Urbandale, IA		—			340		764		—		—		340		764		1,104		106		1993		06/05			40 years
Wichita, KS		—			118		454		—		—		113		454		567		84		1989		06/05			30 years
Wichita, KS		—			127		543		—		—		127		543		670		100		1990		06/05			30 years
Woodstock, GA		—			488		1,042		—		—		488		1,042		1,530		144		1997		06/05			40 years

Qwest Corporation Service Center:
Cedar Rapids, IA		—			184		629		—		—		184		629		813		174		1976		06/05			20 years
Decorah, IA		—			72		272		—		—		72		272		344		151		1974		06/05			10 years

Rallys:
Toledo, OH		—			126		320		—		—		126		320		446		153		1989		07/92			39 years

See accompanying report of independent registered public accounting firm.

F - 16


							Costs Capitalized
			Initial Cost to				Subsequent to				Gross Amount at Which													Life on Which
			Company				Acquisition				Carried at Close of Period (a) (b)													Depreciation &
					Building,								Building,				Accumulated							Amortization in
					Improvements &								Improvements &				Depreciation							Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests		Total		and Amortization		Date of Construction		Date Acquired			Statement is Computed

RBC Bank:
Altamonte Springs, FL		—		1,316		2,014		—		—		1,316		2,014		3,330		36		2007		05/10			35 years

REB Oil:
Deerfield Beach, FL		—		770		274		—		—		770		274		1,044		35		1980		12/05			40 years
Lake Placid, FL		—		2,532		1,157		491		—		2,532		1,648		4,180		188		1990		12/05			40 years

Regal Theatre:
Bolingbrook, IL		—		2,937		3,032		—		—		2,937		3,032		5,969		333		1994		09/07			30 years

Reliable Life Insurance:
St. Louis, MO		—		2,078		13,762		—		—		2,076		13,762		15,838		2,224		1975		05/04			40 years

Retail Operations (h):
Bakersfield, CA		—		3,664		3,709		—		—		3,664		3,709		7,373		296		1994		03/08			35 years
Bakersfield, CA		—		3,363		3,288		—		—		3,363		3,288		6,651		230		2002		03/08			40 years
Bakersfield, CA		—		2,043		3,520		—		—		2,043		680		2,723		212		1988		03/08			30 years
Bakersfield, CA		—		2,564		4,465		2,093		—		2,564		6,558		9,122		416		1988		03/08			30 years
Bakersfield, CA		—		2,099		2,011		—		—		1,759		—		1,759		93		1990		03/08			35 years
Bakersfield, CA		—		3,346		6,016		—		—		3,346		6,016		9,362		477		1998		03/08			35 years
Bakersfield, CA		—		3,303		3,845		—		—		1,978		—		1,978		268		1975		03/08			25 years
Bakersfield, CA		—		2,798		5,260		—		—		2,044		—		2,044		263		1997		03/08			35 years
San Fernando, CA		—		6,630		2,706		—		—		6,630		2,706		9,336		257		1988		03/08			30 years
Ventura, CA		—		6,253		4,560		207		—		6,253		4,767		11,020		367		1994		03/08			35 years
Ventura, CA		—		5,590		4,431		94		—		5,590		4,526		10,116		311		2001		03/08			40 years

Rite Aid:
Douglasville, GA		—		413		995		—		—		413		995		1,408		371		1996		01/96			40 years
Conyers, GA		—		575		999		—		—		575		999		1,574		338		1997		06/97			40 years
Augusta, GA		—		569		1,327		—		—		502		1,327		1,829		433		1997		12/97			40 years
Riverdale, GA		—		1,089		1,707		—		—		1,089		1,707		2,796		557		1997		12/97			40 years
Warner Robins, GA		—		707		—		1,227		—		707		1,227		1,934		367		1999		03/98	(g)		40 years
Mobile, AL		—		1,137		1,694		—		—		1,137		1,694		2,831		383		2000		12/01			40 years
Orange Beach, AL		—		1,410		1,996		—		—		1,410		1,996		3,406		451		2000		12/01			40 years
Norfolk, VA		—		2,742		1,797		—		—		2,742		1,797		4,539		399		2001		02/02			40 years
Thorndale, PA		—		2,261		2,472		—		—		2,261		2,472		4,733		548		2001		02/02			40 years
West Mifflin, PA		—		1,402		2,044		—		—		1,402		2,044		3,446		453		1999		02/02			40 years
Albany, NY		—		25		867		—		—		25		867		892		136		1994		09/04			40 years
Saratoga Springs, NY		—		762		591		30		—		762		621		1,383		93		1993		09/04			40 years
Monticello, NY		624		664		769		—		—		664		769		1,433		111		1996		03/05			40 years

Rite Rug:
Columbus, OH		—		1,596		934		13		—		1,605		939		2,544		144		1970		11/04			40 years

Road Ranger:
Springfield, IL		—		705		1,500		—		—		705		1,500		2,205		170		1997		06/06			40 years
Belvidere, IL		—		748		1,256		—		—		1,098		1,256		2,354		143		1997		06/06			40 years
Brazil, IN		—		2,199		907		—		—		2,199		907		3,106		103		1990		06/06			40 years
Cherry Valley, IL		—		1,409		1,897		—		—		1,409		1,897		3,306		215		1991		06/06			40 years
Cottage Grove, WI		—		2,175		1,733		—		—		2,175		1,733		3,908		197		1990		06/06			40 years
Decatur, IL		—		815		1,314		—		—		815		1,314		2,129		149		2002		06/06			40 years
Dekalb, IL		—		747		1,658		—		—		747		1,658		2,405		188		2000		06/06			40 years
Elk Run Heights, IA		—		1,538		2,470		—		—		1,538		2,470		4,008		280		1989		06/06			40 years
Lake Station, IN		—		3,172		1,112		—		—		3,172		1,112		4,284		126		1987		06/06			40 years
Mendota, IL		—		959		1,296		—		—		1,214		1,296		2,510		147		1996		06/06			40 years
Oakdale, WI		—		1,844		1,663		—		—		1,844		1,663		3,507		189		1998		06/06			40 years
Rockford, IL		—		1,094		1,662		—		—		1,094		1,662		2,756		189		1996		06/06			40 years
Rockford, IL		—		623		1,331		—		—		623		1,331		1,954		151		2000		06/06			40 years
Springfield, IL		—		1,795		1,863		—		—		1,795		1,863		3,658		211		1978		06/06			40 years
Champaign, IL		—		3,241		2,008		—		—		3,241		2,008		5,249		194		2006		02/07			40 years
DeKalb, IL		—		505		1,503		—		—		505		1,503		2,008		146		2004		02/07			40 years
Fenton, MO		—		2,584		2,622		—		—		2,584		2,622		5,206		254		2007		02/07			40 years
Hampshire, IL		—		1,307		1,501		1,629		—		1,307		3,130		4,437		272		1988		02/07	(f)		40 years
Princeton, IL (n)		—		1,141		3,066		—		—		1,141		3,066		4,207		297		2003		02/07			40 years
South Beloit, IL		—		3,824		2,309		—		—		3,824		2,309		6,133		224		2002		02/07			40 years
Cedar Rapids, IA		—		1,025		984		—		—		1,025		984		2,009		93		1990		03/07			40 years
Marion, IA		—		737		1,071		—		—		737		1,071		1,808		102		1974		03/07			40 years
Okawville, IL		—		930		1,147		—		—		930		1,147		2,077		97		1997		08/07			40 years
Dubuque, IA		—		561		1,941		—		—		561		1,941		2,502		160		2000		09/07			40 years
Belvidere, IL		—		521		1,053		—		—		521		1,053		1,574		82		2008		09/07	(f)		40 years
South Beloit, IL		—		1,182		1,324		—		—		1,182		1,324		2,506		103		2008		09/07	(f)		40 years

See accompanying report of independent registered public accounting firm.

F - 17


							Costs Capitalized
			Initial Cost to				Subsequent to					Gross Amount at Which																Life on Which
			Company				Acquisition					Carried at Close of Period (a) (b)																Depreciation &
					Building,									Building,					Accumulated									Amortization in
					Improvements &									Improvements &					Depreciation									Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements			Carrying Costs		Land		Leasehold Interests			Total		and Amortization			Date of Construction			Date Acquired			Statement is Computed
Alexandria, KY		—		624		1,306		—			—		624		1,306			1,930		101			1993			04/08			35 years
Covington, KY		—		486		1,420		—			—		486		1,420			1,906		110			1996			04/08			35 years
Dry Ridge, KY		—		892		1,946		—			—		892		1,946			2,838		176			1973			04/08			30 years
Florence, KY		—		615		1,242		—			—		615		1,242			1,857		96			1990			04/08			35 years
Florence, KY		—		741		1,272		—			—		741		1,272			2,013		98			1994			04/08			35 years
Florence, KY		—		884		1,557		—			—		884		1,557			2,441		121			1995			04/08			35 years
Hebron, KY		—		1,522		2,984		—			—		1,522		2,984			4,506		231			1996			04/08			35 years
Wilder, KY		—		954		1,902		—			—		954		1,902			2,856		147			1994			04/08			35 years

Robb & Stucky:
Ft. Myers, FL		—		2,188		6,225		—			—		2,188		6,225			8,413		2,052			1997			12/97			40 years

Roger & Marv’s:
Kenosha, WI		—		1,918		3,431		—			—		1,918		3,431			5,349		1,186			1992			02/97			40 years

Roni Deutch Tax Services:
Hollywood, FL		—		203		46		19			—		124		—			124		—			1960			12/05			15 years

Ross Dress for Less:
Coral Gables, FL		—		1,782		1,661		—			—		1,782		1,661			3,443		557			1994			06/96			38 years
Lodi, CA		—		614		1,415		—			—		614		1,415			2,029		255			1984			03/99			40 years

Rue 21:
Lapeer, MI		—		126		645		—			—		126		645			771		53			2007			10/05			40 years

Sally Beauty Supply:
Lapeer, MI		—		33		167		—			—		33		167			200		14			2007			10/05			40 years

Saltgrass Steakhouse:
Beaumont, TX		—		553		—		—			—		553		(e	)		553		(e	)		(e	)		09/10	(m)		(e	)

Schlotzsky’s Deli:
Phoenix, AZ		—		706		315		—			—		706		315			1,021		71			1995			12/01			40 years
Scottsdale, AZ		—		717		311		—			—		717		311			1,028		70			1995			12/01			40 years

Season’s 52:
Schaumburg, IL		—		2,065		1,311		—			—		2,065		1,311			3,376		296			1998			12/01			40 years

Shek’s Chinese Express:
Eden Prairie, MN		—		65		261		—			—		65		261			326		56			1997			12/01			40 years

Shoes on a Shoestring:
Albuquerque, NM		—		1,442		2,335		—			—		1,442		2,335			3,777		791			1997			06/97			40 years

Shop’ n Save:
Homestead, PA		—		1,139		—		2,158	(j)		—		1,139		2,158			3,297		374			1994			02/97			31 years

Shop-a-Snak:
Bessemer, AL		—		564		742		—			—		564		742			1,306		86			2002			05/06			40 years
Chelsea, AL		—		391		628		—			—		391		628			1,019		73			1981			05/06			40 years
Jasper, AL		—		551		747		—			—		551		747			1,298		86			1998			05/06			40 years
Birmingham, AL		—		490		769		—			—		490		769			1,259		89			1992			05/06			40 years
Birmingham, AL		—		361		744		—			—		361		744			1,105		86			1989			05/06			40 years
Birmingham, AL		—		446		672		—			—		446		672			1,118		78			1989			05/06			40 years
Birmingham, AL		—		439		704		—			—		439		704			1,143		81			1989			05/06			40 years
Homewood, AL		—		468		657		—			—		468		657			1,125		76			1990			05/06			40 years
Hoover, AL		—		764		1,157		—			—		663		1,157			1,820		134			2005			05/06			40 years
Hoover, AL		—		713		865		—			—		713		865			1,578		100			1998			05/06			40 years
Trussville, AL		—		272		542		—			—		272		542			814		63			1992			05/06			40 years
Tuscaloosa, AL		—		525		463		—			—		525		463			988		54			1991			05/06			40 years
Tuscaloosa, AL		—		386		733		—			—		386		733			1,119		85			1991			05/06			40 years
Tuscaloosa, AL		—		432		559		—			—		432		559			991		65			1991			05/06			40 years

SOAKS Express Wash:
Ankeny, IA		—		662		—		—			—		662		(e	)		662		(e	)		(e	)		06/05			(e	)

Sonic Automotive:
Charlotte, NC		—		3,619		4,854		—			—		3,619		4,854			8,473		440			1996			05/07			40 years

Spec’s Liquor and Fine Foods:
Corpus Christi, TX		—		777		918		520			—		768		1,438			2,206		407			1967			11/93			40 years

See accompanying report of independent registered public accounting firm.

F - 18


							Costs Capitalized
			Initial Cost to				Subsequent to				Gross Amount at Which													Life on Which
			Company				Acquisition				Carried at Close of Period (a) (b)													Depreciation &
					Building,								Building,				Accumulated							Amortization in
					Improvements &								Improvements &				Depreciation							Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests		Total		and Amortization		Date of Construction		Date Acquired			Statement is Computed

Spencer’s Air Conditioning & Appliance:
Glendale, AZ		—		342		982		—		—		342		982		1,324		281		1999		12/98	(g)		40 years

Sports Authority:
Tampa, FL		—		2,128		1,522		—		—		2,128		1,522		3,650		552		1994		06/96			40 years
Sarasota, FL		—		1,428		1,703		—		—		1,428		1,703		3,131		294		1988		09/97			40 years
Memphis, TN (n)		—		820		—		2,598		—		820		2,598		3,418		786		1998		12/97	(g)		40 years
Little Rock, AR		—		3,113		2,660		—		—		3,113		2,660		5,773		817		1997		09/98			40 years
Iselin, NJ		—		3,750		5,983		—		—		3,750		5,983		9,733		1,190		1994		01/03			40 years

Stone Mountain Chevrolet:
Lilburn, GA		—		3,027		4,685		—		—		3,027		4,685		7,712		747		2004		08/04			40 years

Stop N Go:
Grand Prairie, TX		—		421		685		—		—		421		685		1,106		155		1986		12/01			40 years
Kennedale, TX		—		400		692		—		—		391		692		1,083		156		1985		12/01			40 years

Stripes:
Laredo, TX		—		841		739		—		—		841		739		1,580		93		2001		12/05			40 years
Brownsville, TX		—		1,843		1,419		—		—		1,843		1,419		3,262		179		2000		12/05			40 years
Brownsville, TX		—		1,039		1,145		—		—		1,039		1,145		2,184		144		2004		12/05			40 years
Brownsville, TX		—		2,530		1,125		—		—		2,530		1,125		3,655		142		1990		12/05			40 years
Brownsville, TX		—		1,182		1,105		—		—		1,182		1,105		2,287		139		2000		12/05			40 years
Brownsville, TX		—		2,915		1,800		—		—		2,915		1,800		4,715		227		2000		12/05			40 years
Brownsville, TX		—		1,392		1,444		—		—		1,392		1,444		2,836		182		2005		12/05			40 years
Brownsville, TX		—		933		699		—		—		933		699		1,632		88		1999		12/05			40 years
Brownsville, TX		—		1,015		1,308		—		—		1,015		1,308		2,323		165		2003		12/05			40 years
Brownsville, TX		—		2,033		1,288		—		—		2,033		1,288		3,321		162		1995		12/05			40 years
Brownsville, TX		—		1,279		1,015		—		—		1,279		1,015		2,294		128		1990		12/05			40 years
Brownsville, TX		—		2,417		1,828		—		—		2,417		1,828		4,245		230		2000		12/05			40 years
Corpus Christi, TX		—		703		1,037		—		—		703		1,037		1,740		131		1986		12/05			40 years
Corpus Christi, TX		—		1,308		2,151		—		—		1,308		2,151		3,459		271		1995		12/05			40 years
Corpus Christi, TX		—		1,400		1,531		—		—		1,400		1,531		2,931		193		1984		12/05			40 years
Corpus Christi, TX		—		853		1,416		—		—		853		1,416		2,269		179		2005		12/05			40 years
Corpus Christi, TX		—		1,385		1,419		—		—		1,385		1,419		2,804		179		1982		12/05			40 years
Donna, TX		—		1,004		1,127		—		—		1,004		1,127		2,131		142		1995		12/05			40 years
Edinburg, TX		—		1,317		1,624		—		—		1,317		1,624		2,941		205		1999		12/05			40 years
Edinburg, TX		—		970		1,286		—		—		970		1,286		2,256		162		2003		12/05			40 years
Falfurias, TX		—		4,244		4,458		—		—		4,213		4,458		8,671		562		2002		12/05			40 years
Freer, TX		—		1,151		1,158		—		—		1,151		1,158		2,309		146		1984		12/05			40 years
George West, TX		—		1,243		695		—		—		1,243		695		1,938		88		1996		12/05			40 years
Harlingen, TX		—		755		601		—		—		755		601		1,356		76		1987		12/05			40 years
Harlingen, TX		—		754		1,152		—		—		754		1,152		1,906		145		1999		12/05			40 years
Harlingen, TX		—		906		953		—		—		906		953		1,859		120		1991		12/05			40 years
La Feria, TX		—		900		1,347		—		—		900		1,347		2,247		170		1988		12/05			40 years
Laredo, TX		—		736		670		—		—		736		670		1,406		84		1984		12/05			40 years
Laredo, TX		—		675		533		—		—		675		533		1,208		67		1993		12/05			40 years
Laredo, TX		—		1,553		1,775		—		—		1,553		1,775		3,328		224		2000		12/05			40 years
Laredo, TX		—		459		460		—		—		459		460		919		58		1983		12/05			40 years
Laredo, TX		—		1,495		1,400		—		—		1,495		1,400		2,895		177		1993		12/05			40 years
Lawton, OK		—		697		964		—		—		697		964		1,661		122		1984		12/05			40 years
Los Indios, TX		—		1,387		1,457		—		—		1,387		1,457		2,844		184		2005		12/05			40 years
McAllen, TX		—		975		1,030		—		—		975		1,030		2,005		130		2003		12/05			40 years
McAllen, TX		—		987		893		—		—		987		893		1,880		113		1999		12/05			40 years
Mission, TX		—		1,125		1,213		—		—		1,125		1,213		2,338		153		2003		12/05			40 years
Mission, TX		—		880		1,101		—		—		880		1,101		1,981		139		1999		12/05			40 years
Olmito, TX		—		3,688		2,880		—		—		3,688		2,880		6,568		363		2002		12/05			40 years
Pharr, TX		—		784		805		—		—		784		805		1,589		101		2000		12/05			40 years
Pharr, TX		—		2,426		1,881		—		—		2,426		1,881		4,307		237		2003		12/05			40 years
Pharr, TX		—		982		1,178		—		—		982		1,178		2,160		148		1988		12/05			40 years
Port Isabel, TX		—		2,062		1,299		—		—		2,062		1,299		3,361		164		1994		12/05			40 years
Portland, TX		—		656		915		—		—		656		915		1,571		115		1983		12/05			40 years
Progreso, TX		—		1,769		1,811		—		—		1,769		1,811		3,580		228		1999		12/05			40 years
Riviera, TX		—		2,351		2,158		—		—		2,351		2,158		4,509		272		2005		12/05			40 years
San Benito, TX		—		791		1,857		—		—		791		1,857		2,648		234		1994		12/05			40 years
San Benito, TX		—		1,103		1,586		—		—		1,103		1,586		2,689		200		2005		12/05			40 years
San Juan, TX		—		1,424		1,546		—		—		1,424		1,546		2,970		195		2004		12/05			40 years
San Juan, TX		—		1,124		1,172		—		—		1,124		1,172		2,296		148		1996		12/05			40 years
South Padre Island, TX		—		1,367		1,389		—		—		1,367		1,389		2,756		175		1988		12/05			40 years
Wichita Falls, TX		—		440		751		—		—		440		751		1,191		95		1984		12/05			40 years
Wichita Falls, TX		—		905		1,351		—		—		905		1,351		2,256		170		2000		12/05			40 years
Wichita Falls, TX		—		484		828		—		—		484		828		1,312		104		1983		12/05			40 years
Palmview, TX		—		835		1,372		—		—		835		1,372		2,207		144		2005		10/06			40 years

See accompanying report of independent registered public accounting firm.

F - 19


							Costs Capitalized
			Initial Cost to				Subsequent to				Gross Amount at Which														Life on Which
			Company				Acquisition				Carried at Close of Period (a) (b)														Depreciation &
					Building,								Building,					Accumulated							Amortization in
					Improvements &								Improvements &					Depreciation							Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests			Total		and Amortization			Date of Construction		Date Acquired		Statement is Computed
Harlingen, TX		—		638		1,807		—		—		638		1,807			2,445		183			2006		12/06		40 years
Rio Grande City, TX		—		1,871		1,612		—		—		1,871		1,612			3,483		163			2006		12/06		40 years
San Juan, TX		—		816		1,434		—		—		816		1,434			2,250		145			2006		12/06		40 years
Zapata, TX		—		1,333		1,773		—		—		1,333		1,773			3,106		179			2006		12/06		40 years
Orange Grove, TX		—		1,767		1,838		—		—		1,767		1,838			3,605		170			2007		04/07		40 years
Harlingen, TX		—		408		826		—		—		408		826			1,234		86			1982		11/07		30 years
Laredo, TX		—		698		1,169		—		—		698		1,169			1,867		122			1981		11/07		30 years
Laredo, TX		—		448		734		—		—		448		734			1,182		77			1981		11/07		30 years
Laredo, TX		—		348		1,168		—		—		348		1,168			1,516		122			1983		11/07		30 years
Laredo, TX		—		468		728		—		—		468		728			1,196		76			1973		11/07		30 years
Laredo, TX		—		584		958		—		—		584		958			1,542		100			1981		11/07		30 years
San Benito, TX		—		420		1,135		—		—		420		1,135			1,555		118			1985		11/07		30 years
Del Rio, TX		—		1,565		758		—		—		1,565		758			2,323		59			1996		11/07		40 years
Kerrville, TX		—		640		1,616		—		—		640		1,616			2,256		126			1996		11/07		40 years
Monahans, TX		—		2,628		2,973		—		—		2,628		2,973			5,601		232			1996		11/07		40 years
Odessa, TX		—		2,633		3,199		—		—		2,633		3,199			5,832		250			2006		11/07		40 years
San Angelo, TX		—		194		471		—		—		194		471			665		37			1998		11/07		40 years
Pharr, TX		—		573		1,229		—		—		573		1,229			1,802		93			2000		12/07		40 years
Harlingen, TX		—		329		935		—		—		329		935			1,264		92			1980		01/08		30 years
Harlingen, TX		—		277		808		—		—		277		808			1,085		80			1983		01/08		30 years
Laredo, TX		—		325		816		—		—		325		816			1,141		80			1983		01/08		30 years
McAllen, TX		—		643		1,776		—		—		643		1,776			2,419		175			1980		01/08		30 years
Port Isabel, TX		—		299		855		—		—		299		855			1,154		84			1983		01/08		30 years
Brownsville, TX		—		843		1,429		—		—		843		1,429			2,272		94			2007		05/08		40 years
Edinburg, TX		—		834		1,787		—		—		834		1,787			2,621		117			2007		05/08		40 years
La Villa, TX		—		710		2,166		—		—		710		2,166			2,876		142			2007		05/08		40 years
Laredo, TX		—		879		1,593		—		—		879		1,593			2,472		105			2007		05/08		40 years
Laredo, TX		—		1,183		1,934		—		—		1,183		1,934			3,117		127			2007		05/08		40 years
McAllen, TX		—		1,270		2,383		—		—		1,270		2,383			3,653		208			1986		05/08		30 years
Houston, TX		—		696		1,458		—		—		696		1,458			2,154		74			2008		12/08		40 years
Lubbock, TX		—		671		1,612		—		—		671		1,612			2,283		82			2007		12/08		40 years

Subway:
Eden Prairie, MN		—		54		150		67		—		54		218			272		47			1997		12/01		40 years
Albany, NY		—		3		67		—		—		3		67			70		10			1992		09/04		40 years
Cohoes, NY		—		21		116		8		—		21		123			144		18			1994		09/04		40 years

Sunshine Energy:
Kansas City, MO		—		517		720		—		—		517		720			1,237		42			1993		07/09		25 years
Neosho, MO		—		352		—		—		—		352		(c	)		352		(c	)		1992		07/09		(c	)

Superior Petroleum:
Midway, PA		—		311		708		—		—		311		708			1,019		117			1990		01/06		30 years

Supervalu:
Huntington, WV		—		1,254		761		—		—		1,254		761			2,015		264			1971		02/97		40 years
Maple Heights, OH		—		1,035		2,874		—		—		1,035		2,874			3,909		997			1985		02/97		40 years

Susser:
Corpus Christi, TX		—		630		3,131		—		—		630		3,131			3,761		923			1983		03/99		40 years

Swansea Quick Cash:
Swansea, IL		—		46		132		—		—		46		132			178		30			1997		12/01		40 years

Taco Bell:
Ocala, FL		—		275		755		—		—		275		755			1,030		171			2001		12/01		40 years
Ormond Beach, FL		—		632		526		—		—		632		526			1,158		119			2001		12/01		40 years
Phoenix, AZ		—		594		283		—		—		594		283			877		64			1995		12/01		40 years
Bedford, IN		—		797		937		—		—		797		937			1,734		108			1989		05/06		40 years
Columbus, IN		—		690		1,213		—		—		690		1,213			1,903		140			2005		05/06		40 years
Columbus, IN		—		1,257		2,055		—		—		1,257		2,055			3,312		238			1990		05/06		40 years
Evansville, IN		—		524		1,815		—		—		524		1,815			2,339		210			2005		05/06		40 years
Evansville, IN		—		221		828		—		—		221		828			1,049		96			2003		05/06		40 years
Evansville, IN		—		308		1,301		—		—		308		1,301			1,609		150			2000		05/06		40 years
Fishers, IN		—		990		486		—		—		990		486			1,476		56			1998		05/06		40 years
Greensburg, IN		—		648		1,079		—		—		648		1,079			1,727		125			1998		05/06		40 years
Indianapolis, IN		—		1,032		1,650		—		—		1,032		1,650			2,682		191			2004		05/06		40 years
Indianapolis, IN		—		547		703		—		—		547		703			1,250		81			2004		05/06		40 years
Madisonville, KY		—		682		1,193		—		—		682		1,193			1,875		138			1999		05/06		40 years
Ownesboro, KY		—		639		1,326		—		—		639		1,326			1,965		153			2005		05/06		40 years
Shelbyville, IN		—		670		1,756		—		—		670		1,756			2,426		203			1998		05/06		40 years
Speedway, IN		—		408		1,426		—		—		408		1,426			1,834		165			2003		05/06		40 years
Terre Haute, IN		—		1,037		1,656		—		—		1,037		1,656			2,693		191			2003		05/06		40 years
Terre Haute, IN		—		1,314		2,249		—		—		1,314		2,249			3,563		260			2003		05/06		40 years

See accompanying report of independent registered public accounting firm.

F - 20


							Costs Capitalized
			Initial Cost to				Subsequent to				Gross Amount at Which													Life on Which
			Company				Acquisition				Carried at Close of Period (a) (b)													Depreciation &
					Building,								Building,				Accumulated							Amortization in
					Improvements &								Improvements &				Depreciation							Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests		Total		and Amortization		Date of Construction		Date Acquired			Statement is Computed
Vincennes, IN		—		502		880		—		—		502		880		1,382		102		2004		05/06			40 years
Anderson, SC		—		176		436		—		—		176		436		612		1		2000		12/10			30 years
Anderson, SC		—		273		820		—		—		273		820		1,093		1		1989		12/10			25 years
Asheville, NC		—		408		732		—		—		408		732		1,140		1		1992		12/10			25 years
Asheville, NC		—		252		483		—		—		252		483		735		1		1993		12/10			25 years
Black Mountain, NC		—		149		313		—		—		149		313		462		1		1992		12/10			25 years
Blue Ridge, GA		—		276		553		—		—		276		553		829		1		1992		12/10			25 years
Cedartown, GA		—		353		890		—		—		353		890		1,243		1		1990		12/10			25 years
Duncan, SC		—		280		483		—		—		280		483		763		1		1999		12/10			30 years
Easley, SC (n)		—		444		818		—		—		444		818		1,262		1		1991		12/10			25 years
Fort Payne, AL		—		362		533		—		—		362		533		895		1		1989		12/10			25 years
Franklin, NC		—		472		687		—		—		472		687		1,159		1		1992		12/10			25 years
Gaffney, SC		—		388		940		—		—		388		940		1,328		1		1998		12/10			30 years
Greenville, SC		—		169		330		—		—		169		330		499		1		1990		12/10			25 years
Greenville, SC		—		414		810		—		—		414		810		1,224		1		1995		12/10			30 years
Hendersonville, NC		—		569		1,163		—		—		569		1,163		1,732		2		1988		12/10			25 years
Inman, SC		—		223		502		—		—		223		502		725		1		1999		12/10			30 years
Lavonia, GA		—		122		359		—		—		122		359		481		—		1999		12/10			30 years
Madison, AL		—		498		886		—		—		498		886		1,384		1		1985		12/10			25 years
Oneonta, AL		—		362		881		—		—		362		881		1,243		1		1992		12/10			25 years
Piedmont, SC		—		249		702		—		—		249		702		951		1		2000		12/10			30 years
Pisgah Forest, NC		—		260		672		—		—		260		672		932		1		1998		12/10			30 years
Rainsville, AL		—		411		1,077		—		—		411		1,077		1,488		1		1998		12/10			30 years
Seneca, SC		—		304		807		—		—		304		807		1,111		1		1993		12/10			25 years
Simpsonville, SC		—		635		1,022		—		—		635		1,022		1,657		2		1991		12/10			25 years
Spartanburg, SC		—		239		496		—		—		239		496		735		1		1992		12/10			30 years
Spartanburg, SC		—		492		949		—		—		492		949		1,441		1		1993		12/10			30 years
Sylva, NC		—		580		786		—		—		580		786		1,366		1		1994		12/10			30 years
Toccoa, GA		—		201		600		—		—		201		600		801		1		1993		12/10			30 years
Waynesville, NC		—		395		585		—		—		395		585		980		1		1998		12/10			30 years

Taverna Greek Grill:
Farmington, NM		—		2,757		730		—		—		2,757		730		3,487		48		2003		12/07	(m)		40 years

Texas Roadhouse:
Grand Junction, CO		—		584		920		—		—		584		920		1,504		208		1997		12/01			40 years
Thornton, CO		—		599		1,019		—		—		599		1,019		1,618		230		1998		12/01			40 years

TGI Friday’s:
Corpus Christi, TX		—		1,210		1,532		—		—		1,210		1,532		2,742		346		1995		12/01			40 years

Third Federal Savings:
Parma, OH		—		370		238		1,100		—		370		1,338		1,708		135		1977		09/06			20 years

Thomasville:
Buford, GA		—		1,267		2,406		—		—		1,267		2,406		3,673		388		2004		07/04			40 years

TitleMax:
Aiken, SC		—		442		646		—		—		442		646		1,088		51		1989		08/08			30 years
Anniston, AL		—		160		453		—		—		160		453		613		27		2008		08/08			40 years
Berkeley, MO		—		237		282		—		—		237		282		519		33		1961		08/08			20 years
Cheraw, SC		—		88		330		—		—		88		330		418		31		1976		08/08			25 years
Columbia, SC		—		212		319		—		—		212		319		531		25		1987		08/08			30 years
Dalton, GA		—		178		347		—		—		178		347		525		33		1972		08/08			25 years
Darlington, SC		—		47		267		—		—		47		267		314		25		1973		08/08			25 years
Fairfield, AL		—		133		178		—		—		133		178		311		17		1974		08/08			25 years
Gadsden, AL		—		250		389		—		—		250		389		639		23		2007		08/08			40 years
Hueytown, AL		—		135		93		—		—		135		93		228		22		1948		08/08			10 years
Jonesboro, GA		—		675		292		—		—		675		292		967		28		1970		08/08			25 years
Lawrenceville, GA		—		370		332		—		—		370		332		702		26		1986		08/08			30 years
Lewisburg, TN		—		70		298		—		—		70		298		368		20		1998		08/08			35 years
Macon, GA		—		103		290		—		—		103		290		393		34		1967		08/08			20 years
Marietta, GA		—		285		278		—		—		285		278		563		33		1967		08/08			20 years
Memphis, TN		—		226		444		—		—		226		444		670		35		1986		08/08			30 years
Memphis, TN		—		111		237		—		—		111		237		348		19		1981		08/08			30 years
Montgomery, AL		—		96		233		—		—		96		233		329		22		1970		08/08			25 years
Nashville, TN		—		268		276		—		—		268		276		544		26		1978		08/08			25 years
Nashville, TN		—		256		301		—		—		256		301		557		24		1982		08/08			30 years

See accompanying report of independent registered public accounting firm.

F - 21


							Costs Capitalized
			Initial Cost to				Subsequent to				Gross Amount at Which															Life on Which
			Company				Acquisition				Carried at Close of Period (a) (b)															Depreciation &
					Building,								Building,					Accumulated								Amortization in
					Improvements &								Improvements &					Depreciation								Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests			Total		and Amortization			Date of Construction			Date Acquired		Statement is Computed
Norcross, GA		—		599		350		—		—		599		350			949		33			1975			08/08		25 years
Pulaski, TN		—		109		361		—		—		109		361			470		29			1986			08/08		30 years
Riverdale, GA		—		877		400		—		—		877		400			1,277		38			1978			08/08		25 years
Snellville, GA		—		565		396		—		—		565		396			961		38			1977			08/08		25 years
Springfield, MO		—		125		230		—		—		125		230			355		22			1979			08/08		25 years
Springfield, MO		—		220		400		—		—		220		400			620		38			1979			08/08		25 years
St. Louis, MO		—		134		398		—		—		134		398			532		27			1993			08/08		35 years
St. Louis, MO		—		244		288		—		—		244		288			532		27			1971			08/08		25 years
Sylacauga, AL		—		94		191		—		—		94		191			285		15			1986			08/08		30 years
Taylors, SC		—		299		372		—		—		299		372			671		25			1999			08/08		35 years

Tony’s Tires:
Montgomery, AL		—		593		1,187		43		—		593		1,229			1,822		150			1998			08/06		40 years

Top’s:
Lacey, WA		—		2,777		7,082		—		—		2,777		7,082			9,859		2,457			1992			02/97		40 years

Tractor Supply Co.:
Aransas Pass, TX		—		101		1,399		200		—		100		1,599			1,699		428			1983			03/99		40 years

Tully’s:
Cheektowaga, NY		—		689		386		—		—		689		386			1,075		87			1994			12/01		40 years

Ultra Car Wash:
Mobile, AL		—		1,071		1,086		—		—		1,071		1,086			2,157		92			2005			08/07		40 years
Lilburn, GA		—		1,396		1,119		—		—		1,396		1,119			2,515		73			2004			05/08		40 years

Uni-Mart:
Bear Creek, PA		—		191		230		—		—		191		230			421		62			1980			08/05		20 years
Chambersburg, PA		—		76		197		—		—		76		197			273		53			1990			08/05		20 years
East Brady, PA		—		269		583		—		—		269		583			852		157			1987			08/05		20 years
Pleasant Gap, PA		—		332		593		—		—		332		593			925		159			1996			08/05		20 years
Port Vue, PA		—		824		118		—		—		824		118			942		32			1953			08/05		20 years
Punxsutawney, PA		—		253		542		—		—		253		542			795		146			1983			08/05		20 years
Shamokin, PA		—		324		506		—		—		324		506			830		136			1956			08/05		20 years
Shippensburg, PA		—		204		330		—		—		204		330			534		89			1989			08/05		20 years
Taylor, PA		—		181		527		—		—		181		527			708		142			1973			08/05		20 years
Wilkes-Barre, PA		—		178		471		—		—		178		471			649		127			1989			08/05		20 years
Wilkes-Barre, PA		—		876		1,957		—		—		876		1,957			2,833		526			1998			08/05		20 years
Wilkes-Barre, PA		—		171		422		—		—		171		422			593		114			1999			08/05		20 years
Williamsport, PA		—		909		122		—		—		909		122			1,031		33			1950			08/05		20 years
Ashland, PA		—		355		545		—		—		355		545			900		144			1977			09/05		20 years
Bear Creek, PA (n)		—		689		275		—		—		689		275			964		73			1980			09/05		20 years
Mountaintop, PA		—		423		616		—		—		423		616			1,039		163			1987			09/05		20 years
Effort, PA		—		1,297		1,202		—		—		1,297		1,202			2,499		149			2000			01/06		40 years
Export, PA		—		222		215		—		—		222		215			437		27			1988			01/06		40 years
Hughesville, PA		—		290		566		—		—		290		566			856		70			1977			01/06		40 years
McSherrystown, PA		—		135		365		—		—		135		365			500		45			1988			01/06		40 years
Milesburg, PA		—		134		373		—		—		134		373			507		46			1987			01/06		40 years
Nanticoke, PA		—		175		482		—		—		175		482			657		60			1988			01/06		40 years
Nuangola, PA		—		1,062		1,203		—		—		1,062		1,203			2,265		149			2000			01/06		40 years
Plains, PA		—		204		401		—		—		204		401			605		50			1994			01/06		40 years
Punxsutawney, PA		—		294		650		—		—		294		650			944		81			1983			01/06		40 years
Williamsport, PA		—		295		379		—		—		295		379			674		47			1988			01/06		40 years
Burnham, PA		—		265		510		—		—		340		435			775		97			1978			07/06		20 years

United Rentals:
Carrollton, TX		—		478		535		—		—		478		535			1,013		81			1981			12/04		40 years
Cedar Park, TX		—		535		829		—		—		535		829			1,364		125			1990			12/04		40 years
Clearwater, FL		—		1,173		1,811		—		—		1,173		1,811			2,984		273			2001			12/04		40 years
Fort Collins, CO		—		2,057		978		—		—		2,057		978			3,035		148			1975			12/04		40 years
Irving, TX		—		708		911		—		—		708		911			1,619		138			1984			12/04		40 years
La Porte, TX		—		1,115		2,125		—		—		1,115		2,125			3,240		321			2000			12/04		40 years
Littleton, CO		—		1,743		1,944		—		—		1,743		1,944			3,687		294			2002			12/04		40 years
Oklahoma City, OK		—		744		1,265		—		—		744		1,265			2,009		191			1997			12/04		40 years
Perrysburg, OH		—		642		1,119		—		—		642		1,119			1,761		169			1979			12/04		40 years
Plano, TX		—		1,030		1,148		—		—		1,030		1,148			2,178		173			1996			12/04		40 years
Temple, TX		—		1,160		1,360		—		—		1,160		1,360			2,520		205			1998			12/04		40 years
Ft. Worth, TX		—		510		1,128		—		—		510		1,128			1,638		168			1997			01/05		40 years
Ft. Worth, TX		—		1,428		—		—		—		1,428		(i	)		1,428		(i	)		(i	)		01/05		(i	)
Melbourne, FL		—		747		607		—		—		747		607			1,354		85			1970			05/05		40 years

See accompanying report of independent registered public accounting firm.

F - 22


							Costs Capitalized
			Initial Cost to Company				Subsequent to Acquisition				Gross Amount at Which Carried at Close of Period (a) (b)																Life on Which Depreciation &
					Building,								Building,					Accumulated									Amortization in
					Improvements &								Improvements &					Depreciation									Latest Income
	Encumbrances		Land		Leasehold Interests		Improvements		Carrying Costs		Land		Leasehold Interests			Total		and Amortization			Date of Construction			Date Acquired			Statement is Computed

United Trust Bank:
Bridgeview, IL		—		673		744		—		—		673		744			1,417		168			1997			12/01			40 years

Vacant Land:
Florence, AL		—		1,034		—		—		—		748		(e	)		748		(e	)		(e	)		06/04			(e	)
Longwood, FL		—		975		—		—		—		975		(e	)		975		(e	)		(e	)		03/06			(e	)

Vacant Property:
Arlington, TX		—		435		2,300		334		—		435		2,634			3,069		845			1996			06/96			38 years
Sarasota, FL		—		1,168		1,904		219		—		1,168		2,122			3,290		375			1996			09/97			40 years
Knoxville, TN		—		467		735		—		—		467		735			1,202		220			1999			01/98	(f)		40 years
Aransas Pass, TX		—		90		1,241		—		—		89		1,241			1,330		366			1983			03/99			40 years
Corpus Christi, TX		—		224		2,159		—		—		224		2,159			2,383		636			1983			03/99			40 years
Sarasota, FL		—		471		1,344		312		—		471		1,656			2,127		243			1983			03/99			40 years
Sealy, TX		—		820		905		—		—		820		905			1,725		267			1982			03/99			40 years
Winfield, AL		—		420		1,685		—		—		420		1,685			2,105		497			1983			03/99			40 years
Augusta, GA		—		177		674		—		—		177		674			851		152			1998			12/01			40 years
Chandler, AZ		—		655		791		—		—		655		791			1,446		182			1997			12/01			40 years
Cincinnati, OH		—		282		521		279		—		543		539			1,082		119			1998			12/01			40 years
Clifton, CO		—		245		732		—		—		245		732			977		166			1998			12/01			40 years
Columbus, OH		—		1,032		1,107		—		—		1,032		1,107			2,139		250			1998			12/01			40 years
Eden Prairie, MN		—		76		211		94		—		76		305			381		66			1997			12/01			40 years
Jacksonville, FL		—		987		856		—		—		794		—			794		170			1996			12/01			40 years
Mesa, AZ		—		153		400		—		—		153		400			553		116			1997			12/01			40 years
Mesa, AZ		—		43		113		363		—		43		476			519		32			1997			12/01			40 years
Montgomery, AL		—		1,418		1,140		—		—		1,418		1,044			2,462		244			1999			12/01			40 years
Southfield, MI		—		405		644		—		—		405		644			1,049		167			1976			12/01			40 years
Swansea, IL		—		92		265		—		—		92		265			357		60			1997			12/01			40 years
Florissant, MO		—		2,490		2,937		—		—		2,490		2,937			5,427		566			1996			04/03			40 years
Woodstock, GA		—		1,937		1,285		—		—		1,891		1,016			2,907		210			1997			05/03			40 years
Buford, GA		—		1,925		5,035		—		—		1,925		5,035			6,960		813			2003			07/04			40 years
Cohoes, NY		—		27		145		9		—		27		154			181		23			1994			09/04			40 years
Cohoes, NY		—		46		246		16		—		46		262			308		39			1994			09/04			40 years
Hudson Falls, NY		—		57		780		39		—		57		819			876		126			1990			09/04			40 years
Ticonderoga, NY		—		89		689		—		—		89		689			778		108			1993			09/04			40 years
Gastonia, NC		—		994		1,513		—		—		994		1,513			2,507		229			2004			12/04			40 years
Dallas, TX		—		2,407		2,299		—		—		2,407		2,299			4,706		312			1971			06/05			40 years
Dallas, TX		—		1,554		1,229		—		—		1,554		1,229			2,783		170			1982			06/05			40 years
Olean, NY		—		40		259		—		—		40		259			299		70			1990			08/05			20 years
Fairview Heights, IL		—		1,258		2,623		—		—		1,258		2,623			3,881		342			1980			10/05			40 years
Lapeer, MI		—		29		211		—		—		29		211			240		18			2007			10/05			40 years
Lapeer, MI		—		100		721		—		—		100		721			821		61			2007			10/05			40 years
Lafayette, LA		—		603		1,149		—		—		603		1,149			1,752		145			1999			12/05			40 years
West Palm Beach, FL		—		619		161		—		—		619		161			780		35			1984			09/06			20 years
Hillman, MI		—		167		823		—		—		167		363			530		64			1952			10/06			40 years
Lithonia, GA		—		923		1,276		—		—		923		1,276			2,199		113			2002			06/07			40 years
Lubbock, TX		—		2,606		2,898		—		—		2,606		2,898			5,504		251			1983			07/07			40 years
Lubbock, TX		—		1,293		1,211		—		—		1,293		1,211			2,504		105			1983			07/07			40 years
Bakersfield, CA		—		1,643		1,959		—		—		530		—			530		137			1975			03/08			25 years
Bellingham, WA		—		1,237		1,260		—		—		1,237		408			1,645		61			1994			06/08			30 years
Lubbock, TX		—		943		957		—		—		943		957			1,900		12			1964			11/10			10 years

Value City Furniture:
White Marsh, MD		—		3,762		—		3,006		—		3,762		3,006			6,768		961			1998			10/97	(g)		40 years

Vitamin Shoppe, The:
Cincinnati, OH		—		297		443		368		—		297		810			1,107		134			1999			06/98	(f)		40 years

Walgreens:
Sunrise, FL		—		1,958		1,401		—		—		1,958		1,401			3,359		267			1994			05/03			40 years
Tulsa, OK		—		1,193		3,056		—		—		1,193		3,056			4,249		423			2003			06/05			40 years
Boise, ID		—		792		1,875		—		—		792		1,875			2,667		49			2000			03/10			30 years
Nampa, ID		—		1,062		2,253		—		—		1,062		2,253			3,315		59			2000			03/10			30 years

Wendy’s:
Sacramento, CA		—		586		—		—		—		586		(i	)		586		(i	)		(i	)		02/98			(i	)
New Kensington, PA		—		501		333		—		—		501		333			834		75			1980			12/01			40 years

Whataburger:
Albuquerque, NM		—		624		419		—		—		624		419			1,043		95			1995			12/01			40 years

See accompanying report of independent registered public accounting firm.

F - 23


								Costs Capitalized
			Initial Cost to					Subsequent to				Gross Amount at Which																		Life on Which
			Company					Acquisition				Carried at Close of Period (a) (b)																		Depreciation &
						Building,									Building,						Accumulated									Amortization in
						Improvements &									Improvements &						Depreciation									Latest Income
	Encumbrances		Land			Leasehold Interests		Improvements		Carrying Costs		Land			Leasehold Interests			Total			and Amortization			Date of Construction			Date Acquired			Statement is Computed

Wherehouse Music:
Homewood, AL		—		1,032			697		—		—		1,032			697			1,729			158			1997			12/01			40 years
Independence, MO		—		503			1,209		—		—		503			1,209			1,712			152			1994			12/05			40 years

Wingfoot:
Beaverdam, OH		—		(l	)		1,521		—		—		(l	)		1,521			1,521			138			2004			05/07			40 years
Benton, AR		—		(l	)		309		—		—		(l	)		309			309			27			2001			05/07			40 years
Bowman, SC		—		(l	)		969		—		—		(l	)		969			969			100			1998			05/07			35 years
Dalton, GA		—		(l	)		1,541		—		—		(l	)		1,541			1,541			140			2004			05/07			40 years
Dandridge, TN		—		(l	)		1,030		—		—		(l	)		1,030			1,030			107			1989			05/07			35 years
Franklin, OH		—		(l	)		563		—		—		(l	)		563			563			58			1998			05/07			35 years
Gary, IN		—		(l	)		1,486		—		—		(l	)		1,486			1,486			135			2004			05/07			40 years
Georgetown, KY		—		(l	)		679		—		—		(l	)		679			679			82			1997			05/07			30 years
Mebane, NC		—		(l	)		561		—		—		(l	)		561			561			58			1998			05/07			35 years
Piedmont, SC		—		(l	)		567		—		—		(l	)		567			567			59			1999			05/07			35 years
Port Wentworth,
GA		—		(l	)		552		—		—		(l	)		552			552			57			1998			05/07			35 years
Valdosta, GA		—		(l	)		1,477		—		—		(l	)		1,477			1,477			134			2004			05/07			40 years
Temple, GA		—		(l	)		1,065		—		—		(l	)		1,065			1,065			83			2007			06/07			40 years
Whiteland, IN		—		(l	)		1,471		—		—		(l	)		1,471			1,471			127			2004			07/07			40 years
Des Moines, IA		—		(l	)		816		—		—		(l	)		816			816			71			1987			07/07			40 years
Robinson, TX		—		(l	)		1,183		—		—		(l	)		1,183			1,183			92			2007			07/07			40 years
Kearney, MO		—		(l	)		1,269		—		—		(l	)		1,269			1,269			110			2003			07/07			40 years
Oklahoma City, OK		—		(l	)		1,247		—		—		(l	)		1,247			1,247			90			2008			08/07			40 years
Amarillo, TX		—		(l	)		1,158		—		—		(l	)		1,158			1,158			74			2008			02/08			40 years
Jackson, MS		—		(l	)		1,281		—		—		(l	)		1,281			1,281			79			2008			03/08			40 years
Glendale, KY		—		(l	)		1,066		—		—		(l	)		1,066			1,066			59			2008			07/08			40 years
Lebanon, TN		—		(l	)		1,331		—		—		(l	)		1,331			1,331			68			2008			08/08			40 years
Laredo, TX		—		(l	)		1,238		—		—		(l	)		1,238			1,238			55			2009			11/08	(q)		40 years
Midland, TX		—		(l	)		1,148		—		—		(l	)		1,148			1,148			13			2010			04/10	(q)		40 years
Tuscaloosa, AL		—		(l	)		8		—		—		(l	)		8			8			—			(q	)		08/10	(q)		(q	)
Kenly, NC		—		(l	)		—		—		—		(l	)		—			—			—			(q	)		11/10	(q)		(q	)

Winn-Dixie:
Columbus, GA		—		1,023			1,875		—		—		1,023			1,875			2,898			350			1984			07/03			40 years

Wireless Wizard:
Ridgeland, MS		—		436			523		26		—		436			549			985			66			1997			08/06			40 years

Your Choice:
Hazleton, PA		—		670			377		—		—		670			377			1,047			101			1974			08/05			20 years
Montoursville, PA		—		158			415		13		—		158			428			586			52			1988			01/06			40 years

Ziebart:
Maplewood, MN		—		308			311		—		—		308			311			619			46			1990			02/05			40 years
Middleburg Heights, OH		—		199			148		—		—		199			148			347			22			1961			02/05			40 years

Zio’s Italian Kitchen:
Aurora, CO (n)		—		1,168			1,105		—		—		1,168			1,105			2,273			210			2000			06/05			30 years

Leasehold Interests:
Lima, OH		—		1,290			—		—		—		1,290			(e	)		1,290			1,055			(e	)		08/01			(e	)

SUBTOTAL		20,524		1,127,836			1,463,619		151,411		—		1,123,517			1,592,756			2,716,273			222,921


Real Estate Held for Investment the Company has Invested in Under Direct Financing Leases:

Barnes & Noble:
Plantation, FL		—		—			3,498		—		—		—			(c	)		(c	)		(c	)		1996			05/95	(f)		(c	)

Borders:
Altamonte Springs, FL		—		—			3,267		—		—		—			(c	)		(c	)		(c	)		1997			09/97			(c	)

Checkers:
Orlando, FL		—		—			287		—		—		—			(c	)		(c	)		(c	)		1988			07/92			(c	)

CVS:
San Antonio, TX		—		—			744		—		—		—			(c	)		(c	)		(c	)		1993			12/93			(c	)
Amarillo, TX		—		159			855		—		—		(d	)		(d	)		(d	)		(d	)		1994			12/94			(d	)
Lafayette, LA		—		—			949		—		—		—			(c	)		(c	)		(c	)		1995			01/96			(c	)
Oklahoma City, OK		—		(l	)		1,365		—		—		(l	)		(c	)		(c	)		(c	)		1997			06/97			(c	)
Oklahoma City, OK		—		(l	)		1,419		—		—		(l	)		(c	)		(c	)		(c	)		1997			06/97			(c	)

See accompanying report of independent registered public accounting firm.

F - 24


									Costs Capitalized
				Initial Cost to					Subsequent to				Gross Amount at Which																		Life on Which
				Company					Acquisition				Carried at Close of Period (a) (b)																		Depreciation &
							Building,									Building,						Accumulated									Amortization in
							Improvements &									Improvements &						Depreciation									Latest Income
	Encumbrances			Land			Leasehold Interests		Improvements		Carrying Costs		Land			Leasehold Interests			Total			and Amortization			Date of Construction			Date Acquired			Statement is Computed
Denny’s:
Stockton, CA		—			940			509		—		—		(d	)		(d	)		(d	)		(d	)		1982			09/06			(d	)

Food 4 Less:
Chula Vista, CA		—			—			4,266		—		—		—			(c	)		(c	)		(c	)		1995			11/98			(c	)

Heilig-Meyers/The Room Store:
York, PA		—			279			1,110		—		—		(d	)		(d	)		(d	)		(d	)		1997			11/98			(d	)
Marlow Heights, MD		—			416			1,397		—		—		(d	)		(d	)		(d	)		(d	)		1968			11/98			(d	)

Jared Jewelers:
Phoenix, AZ		215	(k)		(l	)		1,242		—		—		(l	)		(c	)		(c	)		(c	)		1998			12/01			(c	)
Toledo, OH		—			(l	)		1,458		—		—		(l	)		(c	)		(c	)		(c	)		1998			12/01			(c	)
Oviedo, FL		364	(k)		(l	)		1,500		—		—		(l	)		(c	)		(c	)		(c	)		1998			12/01			(c	)
Lewisville, TX		187	(k)		(l	)		1,503		—		—		(l	)		(c	)		(c	)		(c	)		1998			12/01			(c	)
Glendale, AZ		—			(l	)		1,599		—		—		(l	)		(c	)		(c	)		(c	)		1998			12/01			(c	)

Kash n’ Karry:
Valrico, FL		2,979	(p)		1,235			3,255		—		—		(d	)		(d	)		(d	)		(d	)		1997			06/02			(d	)

Rite Aid:
Kennett Square, PA		—			(l	)		—		1,984		—		(l	)		(c	)		(c	)		(c	)		2000			12/00			(c	)
Arlington, VA		—			(l	)		3,201		—		—		(l	)		(c	)		(c	)		(c	)		2000			02/02			(c	)

Sunshine Energy:
Altamont, KS		—			124			142		—		—		(d	)		(d	)		(d	)		(d	)		1979			07/09			(d	)
Chouteau, OK		—			113			301		—		—		(d	)		(d	)		(d	)		(d	)		1988			07/09			(d	)
Neosho, MO		—			—			775		—		—		—			(c	)		(c	)		(c	)		1992			07/09			(c	)

SUBTOTAL		3,745			3,266			34,642		1,984		—		—			—			—			—


Real Estate Held for Sale the Company has Invested in:

Our Place:
North Richland Hills, TX		—			584			180		184		—		596			342			938			—			1989			02/06			—

Power Center:
Midland, MI		—			1,085			1,635		—		—		1,085			1,635			2,720			—			2006			05/05	(g)		—
Elmira, NY		—			2,248			7,159		—		—		2,248			5,291			7,539			—			2006			08/05	(g)		—
Topsham, ME		—			1,885			1,735		—		—		1,885			62			1,947			—			2007			02/06	(g)		—
Irving, TX		—			951			1,090		—		—		951			1,063			2,014			—			1987			02/06			—
Waxahachie, TX		—			1,249			1,097		—		—		1,249			1,069			2,318			—			1995			02/06			—
Harlingen, TX		—			247			807		—		—		247			807			1,054			—			2008			09/06	(g)		—
Harlingen, TX.		—			749			1,238		—		—		749			1,238			1,987			—			2008			09/06	(g)		—
Woodstock, GA		—			261			701		—		—		261			606			867			—			1997			07/08			—

Tutor Time:
Elk Grove, CA		—			1,216			2,786		—		—		1,216			2,741			3,957			—			2009			09/08			—

Vacant Land:
Grand Prairie, TX		—			387			—		—		—		108			—			108			(e	)		(e	)		12/02			—
Topsham, ME		—			1,034			—		—		—		293			—			293			(e	)		(e	)		02/06			—
Rockwall, TX		—			900			—		—		—		900			—			900			(e	)		(e	)		02/06			—
Fairfield Township, OH		—			3,201			—		—		—		1,868			—			1,868			(e	)		(e	)		08/06			—
Bonita Springs, FL		—			112			—		—		—		25			—			25			(e	)		(e	)		09/06			—
Lancaster, OH		—			2,135			—		—		—		1,339			—			1,339			(e	)		(e	)		01/08			—
Hadley, MA		—			2,869			—		—		—		2,091			—			2,091			(e	)		(e	)		02/08			—

SUBTOTAL		—			21,113			18,428		184		—		17,111			14,854			31,965			—

See accompanying report of independent registered public accounting firm.

F - 25

NATIONAL RETAIL PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION

December 31, 2010

(dollars in thousands)

(a)	Transactions in real estate and accumulated depreciation during 2010, 2009, and 2008 are summarized as follows:


	2010			2009			2008
Land, buildings, and leasehold interests:
Balance at the beginning of year	$	2,584,947		$	2,605,288		$	2,415,536
Acquisitions, completed construction and tenant improvements		248,438			35,924			410,787
Disposition of land, buildings, and leasehold interests		(58,438	)		(21,751	)		(215,542	)
Provision for loss on impairment of real estate		—			(34,514	)		(5,493	)

Balance at the close of year	$	2,774,947		$	2,584,947		$	2,605,288


Accumulated depreciation and amortization:
Balance at the beginning of year	$	183,949		$	146,289		$	111,080
Disposition of land, buildings, and leasehold interests		(2,071	)		(3,143	)		(2,591	)
Depreciation and amortization expense		41,043			40,803			37,800

Balance at the close of year	$	222,921		$	183,949		$	146,289

As of December 31, 2010, 2009, and 2008, the detailed real estate schedule excludes work in progress of $26,699, $5,634, and $42,253, respectively, which is included in the above reconciliation.

(b)	As of December 31, 2010, the leases are treated as either operating or financing leases for federal income tax purposes. As of December 31, 2010, the aggregate cost of the properties owned by NNN that are under operating leases were $2,641,832 and financing leases were $4,178.

(c)	For financial reporting purposes, the portion of the lease relating to the building has been recorded as a direct financing lease; therefore, depreciation is not applicable.

(d)	For financial reporting purposes, the lease for the land and building has been recorded as a direct financing lease; therefore, depreciation is not applicable.

(e)	NNN owns only the land for this property.

(f)	Date acquired represents acquisition date of land. Pursuant to lease agreement, NNN purchased the buildings from the tenants upon completion of construction, generally within 12 months from the acquisition of the land.

(g)	Date acquired represents acquisition date of land. NNN developed the buildings, generally completing construction within 12 months from the acquisition date of the land.

(h)	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 certain Investment Properties.

(i)	NNN owns only the land for this property, which is subject to a ground lease between NNN and the tenant. The tenant funded the improvements on the property.

(j)	In 2005, there was a lease amendment to this property, resulting in a reclassification from a direct financing lease to an operating lease.

(k)	NNN owns only the building for this property, which is encumbered by a fixed rate mortgage and security agreement.

(l)	NNN owns only the building for this property. The land is subject to a ground lease between NNN and an unrelated third party.

(m)	Date acquired represents acquisition date of land. Pursuant to lease agreement, NNN funds the tenant’s construction draws, final funding occurs generally within 12 months from the acquisition of the land.

(n)	The tenant of this property has subleased the property. The tenant continues to be responsible for complying with all the terms of the lease agreement and is continuing to pay rent on this property to NNN.

(o)	Property is encumbered as a part of NNN’s $6,952 long-term, fixed rate mortgage and security agreement.

(p)	Property is encumbered as a part of NNN’s $21,000 long-term, fixed rate mortgage and security agreement.

(q)	The land is subject to a ground lease between NNN and an unrelated third party. Pursuant to the lease agreement, NNN funds the tenant’s construction draws, final funding occurs generally within 12 months from the execution of the ground lease.

See accompanying report of independent registered public accounting firm.

F - 26

NATIONAL RETAIL PROPERTIES, INC. AND SUBSIDIARIES

SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE

December 31, 2010

(dollars in thousands)


Description	Interest Rate			Maturity Date		Periodic Payment Terms			Prior Liens		Face Amount of Mortgages		Carrying Amount of Mortgages (f)			Principal Amount of Loans Subject to Delinquent Principal or Interest

First mortgages on properties:
Paramus, NJ		9.000	%		2022		(b	)		—	$	6,000	$	4,971		$	—

Des Moines, IA		8.000	%		2013		(d	)		—		400		269			—

Terre Haute, IN		7.000	%		2011		(c	)		—		1,582		1,452			—

Cleveland, OH		10.000	%		2028		(c	)		—		6,644		6,644			—

Milford, CT		8.000	%		2013		(c	)		—		1,550		1,550			—

Hollywood, FL		6.000	%		2013		(c	)		—		450		450			—

Taylorsville, NC		9.500	%		2013		(e	)		—		352		352			—

4 properties in FL and GA		6.250	%		2014		(c	)		—		5,500		5,450			—


											$	22,478	$	21,138	(a)	$	—

(a)	The following shows the changes in the carrying amounts of mortgage loans during the years:


	2010			2009			2008
Balance at beginning of year	$	34,707		$	35,993		$	49,336
New mortgage loans		6,302	(g)		2,259	(g)		17,028	(g)
Deductions during the year:
Collections of principal		(7,148	)		(3,545	)		(27,874	)
Foreclosures		(12,723	)		—			(2,497	)

Balance at the close of year	$	21,138		$	34,707		$	35,993

(b)	Principal and interest is payable at level amounts over the life of the loan.

(c)	Interest only payments are due monthly. Principal is due at maturity.

(d)	Principal and interest is payable at level amounts over the life of the loan with a principal balloon payment at maturity.

(e)	Principal and interest is payable in full on the earlier of (i) specific events as outlined in the loan agreement, or (ii) maturity date.

(f)	Mortgages held by NNN and its subsidiaries for federal income tax purposes for the years ended December 31, 2010, 2009 and 2008 were $21,138, $34,707, and $35,993, respectively.

(g)	Mortgages totaling $6,302, $2,259, and $17,028, were accepted in connection with real estate transactions for the year ended December 31, 2010, 2009 and 2008, respectively.

See accompanying report of independent registered public accounting firm.