Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Critical Accounting Policies and Estimates  20 Purchase Accounting for Acquisition of Real Estate Subject to a Lease . In accordance with the Financial Accounting Standards  Board ("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 based in each case on  their fair values. Real Estate Portfolio. NNN records the acquisition of real estate at cost, including acquisition and closing costs. The cost of  properties developed or funded 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. 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 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 assumptions; 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 estimates and assumptions used in the preparation of NNN’s consolidated  financial statements. As of the years ended December 31, 2013, 2012 and 2011, NNN's Property Portfolio has remained at least 97 percent leased.  The average remaining lease term of NNN's Property Portfolio was 12 years, and 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. 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 Property 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. 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 the Property Portfolio (such as tenant, geographic  and line of trade diversification), the occupancy rate of the Property Portfolio, certain financial performance ratios and  profitability measures, and industry trends and performance compared to that of NNN. As of December 31, 2013, NNN owned 1,860 Properties, with an aggregate gross leasable area of approximately 20,402,000  square feet, located in 47 states. Approximately 98 percent of total properties in the Property Portfolio were leased as of  December 31, 2013. NNN, a Maryland corporation, is a fully integrated real estate investment trust (“REIT”) formed in 1984. NNN's assets include:  real estate assets, mortgages and notes receivable, and commercial mortgage residual interests. 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  (“Properties” or “Property Portfolio”).  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.” 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.”