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 or adverse changes in consumer preferences for particular  goods, services or store based retailing, •  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 demographic change, •  changes in tenant or consumer 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. Owning real estate and indirect interests in real estate carries inherent risks. 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. Costs of complying with changes in governmental laws and regulations may adversely affect NNN’s results of operations. NNN may be subject to known or unknown environmental liabilities and hazardous materials on Properties owned by NNN. Because real estate investments are relatively illiquid, NNN’s ability to adjust the portfolio promptly in response to economic  or other conditions is limited. Certain significant expenditures generally do not change in response to economic or other  conditions, including: (i) debt service (if any), (ii) real estate taxes, and (iii) operating and maintenance costs. This combination  of variable revenue and relatively fixed expenditures may result, under certain market conditions, in reduced earnings and  could have an adverse effect on NNN’s financial condition. NNN 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, impose significant liability, restrict or prohibit business activities and could cause a material adverse effect on NNN’s results of operation. 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 petroleum products, 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 required. 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.  8