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Compensation expense for the restricted stock which is not contingent upon NNN’s performance goals is determined based upon the fair value at the date of grant and is recognized as the greater of the amount amortized over a straight lined basis or the amount vested over the vesting periods. Vesting periods for officers and key associates of NNN range from three to five years and generally vest yearly. NNN recognizes compensation expense on a straight-line basis for awards with only service conditions. 

During the years ended December 31, 2013 and 2012, NNN granted 152,901 and 185,915, respectively, performance based shares subject to its total shareholder return growth after a three years period relative to its peers. The shares were granted to certain executive officers and had weighted average grant price of $33.73 and $26.85, respectively, per share. Once the performance criteria are met and the actual number of shares earned is determined, the shares vest immediately. For the 2013 and 2012 grants, the conditions are based on market conditions, and the fair value was determined at the grant date (for a fair value share price of $21.54 and $15.71, respectively). Compensation expense is recognized over the requisite service period for both grants. 

The following summarizes other grants made during the year ended December 31, 2013, pursuant to the 2007 Plan. 

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The total compensation cost for share-based payments for the years ended December 31, 2013, 2012 and 2011, totaled $7,459,000, $8,131,000 and $6,390,000, respectively, of such compensation expense. At December 31, 2013, NNN had $10,929,000 of unrecognized compensation cost related to non-vested share-based compensation arrangements under the 2007 Plan. This cost is expected to be recognized over a weighted average period of 2.5 years. In addition, NNN recognized performance based long term incentive cash compensation of $729,000, $1,684,000 and $1,702,000 for the years ended December 31, 2013, 2012 and 2011 respectively. 

## Note 18 – Fair Value of Financial Instruments: 

NNN believes the carrying value of its Credit Facility approximates fair value based upon its nature, terms and variable interest rate. NNN believes that the carrying value of its cash and cash equivalents, mortgages, notes and other receivables, mortgages payable and other liabilities at December 31, 2013 and 2012, approximate fair value based upon current market prices of similar issues. At December 31, 2013 and 2012, the carrying value and fair value of NNN’s notes payable and convertible notes payable, collectively, was $1,555,672,000 and $1,585,756,000, respectively, based upon quoted market prices, which are a level 1 input. 

