DEF 14A: NNN REIT, Inc. Announces Director Nominees, Executive Compensation Details, and Auditor Ratification for 2024 Annual Meeting

Sentiment:

Proxy Statement 22 March 2024 7:00 AM

NNN REIT, Inc.'s proxy statement details director nominations, executive compensation, and auditor ratification for the upcoming annual meeting on May 15, 2024.

Capital raiseSuccessfully raised $31.4 million of common equityEstablished a new at-the-market equity program allowing NNN to sell up to 17,500,000 sharesExecuted a public offering of $500 million of 5.6% notes due 2033

Summary

NNN REIT, Inc. is holding its annual meeting of stockholders on May 15, 2024, in Orlando, Florida.
Stockholders will vote on the election of nine directors, an advisory vote on executive compensation, and the ratification of Ernst & Young LLP as the independent registered public accounting firm for the year ending December 31, 2024.
The Board of Directors recommends voting FOR all nominees and proposals.
The proxy statement includes details on corporate governance, executive compensation, director compensation, and security ownership.
The company's corporate governance highlights include independent board committees, annual CEO evaluation, stock ownership guidelines, and risk management practices.
Executive compensation includes base salary, annual cash incentives, and long-term equity-based incentives, with a focus on pay-for-performance.
Director compensation consists of an annual retainer, committee service retainers, and the option to receive compensation in cash or stock.
The company emphasizes corporate responsibility, environmental, social, and governance (ESG) matters, and human capital development.
The Audit Committee has recommended the inclusion of the audited consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
Stockholders of record as of March 15, 2024, are entitled to vote at the annual meeting.

Sentiment

Score: 7

Explanation: The document presents a balanced view with positive financial performance, strong corporate governance, and a commitment to ESG, but also acknowledges certain risks and areas for improvement.

Positives

The company has a strong track record of dividend growth, with 34 consecutive years of annual increases.
The company made significant investments in properties, indicating growth and expansion.
The company has a conservative balance sheet.
The company has a commitment to corporate responsibility and ESG matters.
The company has a diverse board of directors.
The company has a strong executive compensation program that aligns executive pay with performance and stockholder interests.
The company has a high percentage of stockholder support for its executive compensation program.
The company has a clawback policy for executive officers to comply with NYSE recoupment policy requirements.
The company has an anti-hedging policy that prohibits all employees, non-employee directors and executive officers from engaging in short sales of our securities, buying or selling puts or calls on our securities or otherwise engaging in hedging transactions (such as zero-cost dollars, exchange funds, and forward sale contracts) involving our securities.

Negatives

The company's 5-year annualized TSR as of December 31, 2023 of 2.5% was approximately at the 45th percentile for companies included in the NAREIT ALL Equity REIT Index over the past five years.

Risks

The company faces operational, legal, regulatory, financial, and privacy/data security risks.
The company's success is dependent on the dedication and hard work of its talented associates.
The company's tenants are responsible for environmental stewardship of the properties they occupy and control.
The company's tenants are required to carry full replacement cost coverage on all improvements located on our properties.
The company's tenants are required to carry flood insurance pursuant to the federal flood insurance program for those properties located in a nationally designated flood zone.
The company's tenants are required to carry earthquake insurance above what is generally covered in an extended coverage policy for those properties located in an area of high earthquake risk.

Future Outlook

The company aims to deliver consistent, sustainable growth in support of long-term value creation while maintaining a conservative balance sheet.

Management Comments

The Board of Directors believes that having its own leadership separate from our Chief Executive Officer provides the Board of Directors with an effective way to ensure that they are fully informed and have the opportunity to fully debate all important issues to fulfill their oversight responsibilities and hold management accountable for the performance of the Company.
This also allows our Chief Executive Officer to focus his time on running our day-to-day business.

Industry Context

The company benchmarks its executive compensation against a peer group of publicly-traded REITs, primarily in the retail sector, but recognizes competition for capital and executive talent across all property sectors.

Comparison to Industry Standards

The Peer Group for the 2023 market pay analysis consisted of 13 publicly-traded REITs, most of which have investment-grade credit ratings, operating across a variety of property sectors, with a primary focus on the retail sector, recognizing that the Company competes with REITs across all property sectors for capital and executive talent.
Relative to the Peer Group, the Companys net operating income was between the 25 th and 50 th percentile and equity market capitalization as of December 31, 2023 were between the 50 th and 75 th percentile values.
As of December 31, 2023, our total return to stockholders was between the peer group 25 th and 50 th percentile over one-year and three-year periods and slightly below the 25 th percentile over the five-year period.
Compared with the Peer Group, and excluding Mr. Adamo, 2023 target total direct compensation (sum of base salary plus target annual cash incentive plus target long-term incentives) was within a competitive range (defined as +/15%) of the Peer Group 50 th percentile values for each of our current NEOs other than Mr. Horn, who was below the range due to the Committee's planned multi-year phase-in of market adjustments.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Executive Vice President, General Counsel and Secretary	Christopher P. Tessitore	Gina M. Steffens	November 30, 2023	Retirement of Mr. Tessitore

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Incentive-Based Compensation Recoupment Policy	The Board adopted an Incentive-Based Compensation Recoupment Policy to comply with NYSE recoupment policy requirements. Our recoupment policy generally provides, subject to certain exceptions, that if we are required to prepare a restatement of our financial statements owing to material error, we will recover from our executive officers any incentive-based compensation that was awarded in excess of the amount that otherwise would have been awarded based on the restated financial statements.	August 17, 2023	The recovery period is the three completed fiscal years immediately preceding the date that the Compensation Committee concludes that we are required to restate our financial statements. Incentive-based compensation includes any compensation that is earned based on the attainment of a financial reporting measure of the Company and any other equity-based compensation.

Stakeholder Impact

Stockholders are provided with information to make informed decisions regarding director elections, executive compensation, and auditor ratification.
Associates are supported through human capital development programs, benefits, and work-life balance initiatives.
Communities are supported through charitable donations and volunteer efforts.
The environment is protected through sustainable practices and tenant engagement.

Next Steps

Stockholders are encouraged to vote on the proposals outlined in the proxy statement.
The company will hold its annual meeting on May 15, 2024.
The Compensation Committee intends to continue the pay-for-performance program that is currently in place in 2024.

Key Dates

Date	Description
1993-12	Kevin B. Habicht served as Executive Vice President and Chief Financial Officer of the Company since December 1993.
1998-01	Kevin B. Habicht served as Treasurer of the Company since January 1998.
2000-06	Kevin B. Habicht has served as a director of the Company since June 2000.
2003	Stephen A. Horn, Jr. served as Vice President of Acquisitions of the Company from 2003 to 2008.
2005-03	Christopher P. Tessitore was a shareholder at the law firm of Lowndes, Drosdick, Doster, Kantor & Reed, P.A. prior to March 2005.
2006-02	Christopher P. Tessitore served as General Counsel from February 2006.
2006-05	Christopher P. Tessitore served as Secretary from May 2006.
2007-01	Christopher P. Tessitore served as Executive Vice President of the Company from January 2007.
2008-06	Stephen A. Horn, Jr. served as Senior Vice President of Acquisitions for the Company from June 2008 to December 2013.
2008-12-01	Effective December 1, 2008, the Company entered into new employment agreements with Mr. Habicht to comply with Section 409A of the Code, which was subsequently amended effective November 8, 2010.
2010-11	David M. Fick has served as a director of the Company since November 2010.
2012-02	Edward J. Fritsch has served as a director of the Company since February 2012.
2012	The Company has retained Pearl Meyer as an independent third-party consultant since 2012.
2013-08	Elizabeth C. Gulacsy worked for SeaWorld Entertainment, Inc. (NYSE: SEAS) (now known as United Parks and Resorts, Inc. (NYSE: PRKS)) from 2013 to 2023, most recently providing CFO consulting and advisory services.
2014-01	Stephen A. Horn, Jr. served as Executive Vice President and Chief Acquisition Officer of the Company from January 2014 to August 2020.
2016-03	Michelle L. Miller currently serves as Execute Vice President and Chief Accounting and Technology Officer since January 2024 and previously served as Executive Vice President and Chief Accounting Officer since March 2016.
2016-08	Pamela K. M. Beall has served as a director of the Company since August 2016.
2016-08	Steven D. Cosler has served as a director of the Company since August 2016 and Chairperson since May 2021.
2018-02	The Company entered into an employment agreement with Ms. Miller on February 15, 2018.
2019-02	Betsy D. Holden has served as a director of the company since February 2019.
2019-09	After 37 consecutive years with Highwoods Properties, Inc., a publicly traded REIT (NYSE: HIW), Mr. Fritsch retired in September 2019 as President and Chief Executive Officer.
2020-08	Stephen A. Horn, Jr. served as Executive Vice President and Chief Operating Officer of the Company since August 2020.
2021-05-01	Mr. Cosler has served as Chairperson of the Board since his election on May 1, 2021.
2022-01	Kamau O. Witherspoon has served as a Director of the Company since January 2022.
2022-02	Mr. Horn joined the Board of Directors in February 2022.
2022-03	He joined Shipt as their Chief Executive Officer in March 2022.
2022-04-29	The letter agreements for Messrs. Horn and Adamo and Ms. Steffens became effective on April 29, 2022, August 14, 2023 and November 30 , 2023, respectively.
2022-08	Ms. Castro Gulacsy was appointed to the Board of Directors of the Company effective August 2022.
2022-08-25	The SEC adopted new disclosure on August 25, 2022 for proxy statements filed with respect to fiscal years ending on or after December 16, 2022 with a new Pay Versus Performance (PVP) rule.
2022	In 2022 we created a Sustainability Team which reports directly to the Executive Vice President, General Counsel and Secretary, with direct oversight by the Governance and Nominating Committee of the Board of Directors.
2023-01-01	Mr. Tessitore retired from the Company effective January 1, 2024.
2023-07-01	Retainer values for board and committee service, and the Board Chair premium retainer value have been in effect since July 1, 2023.
2023-08	Jonathan A. Adamo, age 45 , currently serves as Executive Vice President, Portfolio Operations since August 2023.
2023-08-14	In connection with his promotion to Executive Vice President, Portfolio Operations, Mr. Adamo entered into an employment letter with the Company and became a participant in the Executive Severance and Change of Control Plan (the Executive Severance Plan). Mr. Adamos employment letter and participation in the Executive Severance Plan became effective as of August 14, 2023.
2023-08-17	On August 17, 2023, the Board adopted an Incentive-Based Compensation Recoupment Policy to comply with NYSE recoupment policy requirements.
2023-11-30	Gina M. Steffens , age 46, was appointed by the Company to succeed Mr. Tessitore as Executive Vice President, General Counsel and Secretary effective November 30, 2023.
2023-12-31	The Audit Committee appointed Ernst & Young LLP to serve as the Companys principal independent registered public accounting firm to audit the Companys financial statements for the year ending December 31, 2024, to review quarterly interim results and to perform other appropriate accounting services.
2024-01-01	Effective January 1, 2024, Ms. Miller was appointed as Chief Technology Officer of the Company and will serve in this capacity concurrently with her existing role as EVP and Chief Accounting Officer.
2024-03-15	Stockholders of record at the close of business on March 15, 2024, will be entitled to notice of and to vote at the annual meeting or at any adjournment thereof.
2024-03-22	March 22, 2024 Orlando, Florida IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON MAY 15, 2024
2024-04-02	It is anticipated that this Proxy Statement and the enclosed Proxy will be mailed to stockholders on or about April 2, 2024.
2024-05-15	You are cordially invited to attend the annual meeting of stockholders of NNN REIT, Inc. (the Company) on May 15, 2024, at 8:30 a.m. local time, at 450 South Orange Avenue, Suite 900, Orlando, Florida 32801.
2025	Stockholders will vote on the election of nine directors to serve for a term ending at the 2025 annual meeting of stockholders and until their successors are duly elected and qualified.
2025-03-17	To comply with the universal proxy rules, stockholders who intend to solicit proxies in support of nominees other than the Company's nominees to the Board of Directors at the 2025 annual meeting of stockholders must satisfy the requirements of Rule 14a-19 under the Exchange Act, including by providing notice and the information required thereunder no later than March 17, 2025, which is 60 days prior to the anniversary of the date of the Companys previous years annual meeting of stockholders.
2025-12-03	Stockholders interested in presenting a proposal for inclusion in the proxy statement for the 2025 annual meeting of stockholders may do so by following the procedures in Rule 14a-8 under the Exchange Act. To be eligible for inclusion, stockholder proposals must be received by the Secretary of the Company at the address set forth above no later than December 3, 2024, which is 120 calendar days before the anniversary of the date the Companys proxy statement was released to stockholders in connection with the previous years annual meeting.

Keywords

directors, executive compensation, annual meeting, proxy statement, corporate governance, NNN REIT, stockholders, ESG, audit committee, compensation committee, real estate, REIT

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