Company: NNN
Filing Date: 2025-02-11
Form Type: 10-K
Source: 0000950170-25-017472
Chunk: 72

Company: NNN REIT, INC.
Filing Date: 2025-02-11
Form: 10-K
Item: Item 1B
Chunk 72
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 and rent, and estimating where within that range the acquired property falls.  Establishing the market assumptions for land, building and rent include identifying the relevant properties in the established range most comparable to the acquired property. The position within the range is a judgmental assumption that relies upon ranking comparable properties’ attributes from most similar to least similar. 

    How We Addressed the Matter in Our Audit
    We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s valuation of real estate acquisitions process.  For example, we tested controls over the review and selection of inputs and assumptions used in the valuation estimates and the review of the final allocation of value among the tangible assets acquired. To test the estimated fair values of the Company’s acquired tangible assets, we performed audit procedures that included, among others, reading the purchase agreements, assessing management’s valuation techniques and testing the completeness and accuracy of the underlying data used by the Company in its analysis. For certain acquisitions, we involved our real estate valuation specialists to evaluate management’s concluded ranges of values by benchmarking against comparable properties. We also compared certain of management’s assumptions to current and comparable industry information for land, building, building improvements and market rents.

47

    Impairment of Held and Used Real Estate Assets

    Description of the Matter
    At December 31, 2024, held and used real estate assets were $8,746 million.  As discussed in Notes 1 and 2 of the consolidated financial statements, the Company assesses held and used real estate assets for impairment when certain events or changes in circumstances indicate the carrying amount of the asset may not be recoverable through operations. When impairment indicators are determined to be present, the Company first performs a recoverability test by comparing the undiscounted future cash flows of the real estate asset to the net carrying value.  If the undiscounted cash flows used in the test for recoverability are less than the carrying amount of the asset, the Company determines the fair value of the real estate asset and recognizes an impairment loss if the carrying amount of the asset exceeds its fair value. Auditing management’s evaluation of held and used real estate assets for impairment was complex and involved subjectivity due to the significant estimation required to determine the undiscounted future cash flows of held and used assets where impairment indicators were determined to be present and the fair value for those properties in which the net carrying value of the asset exceeds its undiscounted cash flows. In particular, future cash flow estimates were sensitive to the assumptions