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## Item7A. 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, 2013, 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, 2013 and 2012. The table presents principal payments and related interest rates by year for debt obligations outstanding as of December 31, 2013. The variable interest rates shown represent weighted average rate for the Credit Facility for the year ended December 31, 2013. The table incorporates only those debt obligations that existed as of December 31, 2013, 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, 2013. 

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(1) NNN's mortgages payable include unamortized premium. (2) 

Includes NNN’s notes payable and convertible notes payable, each net of unamortized discounts. NNN uses market prices quoted from Bloomberg, a third party, which is a level one input, 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 $11,721,000 and $13,096,000 as of December 31, 2013 and 2012, 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. 

