Greetings, ladies and gentlemen, and welcome to the National Retail Properties Second Quarter 2008 Earnings Conference Call. At this time all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Craig Macnab, Chief Executive Officer for National Retail Properties, Inc. Thank you, Mr. Macnab; you may begin.

Ryan, thanks very much, and good morning to all of you. Welcome to our second quarter earnings release call. As usual, on this call with me is Kevin Habicht, our Chief Financial Officer, who will review details of our second quarter financial results after brief opening comments from me. We're very pleased with $0.50 of FFO in the second quarter, which is a 6.4% increase over the same period in 2007. Despite the anxiety about the economy and, of course, the pitiful credit markets, we are comfortable with our prior guidance of $1.97 to $2.02 per share for calendar 2008. Our portfolio continues to be in solid shape, with occupancy at the end of the quarter just above 98%. Although the daily news reports are full of retailers that are struggling, I want to point out that we have zero stores in our investment portfolio that are leased to tenants such as Starbucks, Steve & Barry's, Linens 'n Things, or most recently, Mervyns. Of the last several years, we've had an abundance of opportunities to acquire properties leased to these retailers, and I'm delighted that our underwriting and real estates disciplines prevented us from completing such transactions. In the case of Linens 'n Things, we had previously owned stores leased to that retailer, but through our proactive capital recycling efforts, we disposed of our last store leased to Linens 'n Things several years ago, and, I may add, at a very good cap rate. Subsequent to the end of the quarter, Uni-Mart, which is one of our tenants, did reject thirteen properties in our investment or, in our portfolio, pursuant to their bankruptcy proceedings. These stores are generally smaller units, and in total they represent about 0.36% of our current annual base rent. Our guidance does take into affect the…

Thanks, Craig. Let me start with our standard cautionary language. We will make certain statements today that may be considered forward-looking statements under Federal Securities laws. The Company's actual future may differ significantly from the matters discussed in these forward-looking statements. And we may not release revisions to those forward-looking statements to reflect changes after we made the statements. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in our filings with the SEC and in this morning's press release. With that, as Craig indicated and the press release indicated, we reported second quarter 2008 FFO results totaling $36.7 million or $0.50 per share representing a 6.4% increase from the $0.47 per share in the second quarter of 2007. For the six months, we reported $1.01 per FFO per share, which represents a 5.2% increase over 2007's first half. We were pleased with the results. We believe we have good visibility on our $1.97 to $2.02 per share guidance for calendar 2008, and that represents a 5% to 8% growth over 2007's result. Our business plan continues to produce good results, the balance sheet is in good shape, and our property portfolio continues to produce the rent we anticipated, even in this tough environment. Let me quickly go through some of the details in the second quarter, and then we'll take questions. Looking at the income statement, total revenues for the second quarter increased to $57 million, primarily driven by additional rent from net new investments made over the past year as well as accretive capital recycling from the dispositions. Acquisitions in the core portfolio totaled $103.2 million in the second quarter, as Craig just discussed, and $253.8 million for the first half, which puts us well…

Ryan, we'd like to open it up to questions, please.

Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. (Operator Instructions). Our first question comes from the line of Michael Bilerman, with Citi.

Hi, it's actually Greg Schweitzer here with Michael. Good morning.

Good morning, Greg.

Could you talk a little bit about the tenant or sector composition of the -- I think it's $175 million in the inventory portfolio? And just basically how you get comfortable with that balance?

Well, just before that, the starting point is and Kevin is going to give you some information, but the starting point is that during the course of this year, we have reduced that inventory by just over $100 million through June 30. And we've already had, as Kevin mentioned, he said, we have several properties under contract. In fact, several of them are actually closed here in the month of July, and again, at very low cap rates. So, we have done a good job of shrinking that. We did complete a large transaction in late 2007, where we did put a meaningful slug of properties into the TRS. This was quality control from that portfolio and the good news is, we've dramatically curtailed and shrunk that inventory.

And, Greg, we don't get a whole lot of detail on what's in there. We'll note and remind folks that our nnn1031.com website lists things that we're marketing. Much of that is from our TRS. But I will note that in our TRS, of the $176 million that you see on the balance sheet at quarter end, about $77 million of that is in our 1031 exchange properties, which are properties we've acquired for immediate resale, and about $99 million is in development, and of that development $99 million $74 million, $75 million is completed. So, it's properties and tenants that look a whole lot like our core portfolio, and you can get some color on that website as to exactly what they are and what kind of cap rates we're looking at.

Okay, thanks. And, the sales that you completed in July. Cap rates in the low 7s? Is that reasonable?

Maybe a little bit better than that. These were deals that were struck several months ago, and cap rates were aggressive.

Are the three Uni-Mart assets still in the [hope] to sell budget?

Yes, absolutely. Unfortunately, yes.

And what are the chances that you could see impairment on those, I mean, how would you raise those assets to the rest of the Uni-Mart assets in the portfolio?

Given that we were trying to sell them, they were probably on the weaker size, but the fact of the matter is, it's very small dollars. Our task for the next several months is to release all of the thirteen Uni-Mart properties, and early indications look quite promising.

Okay. And then, just one more, I'm not sure if I missed this in your comments or not, but where do you think occupancy will shake up towards the end of the year?

You know, I think, let's just step back for a second. I think if you take a look at ICSC data across the entire retail spectrum, there's about a 6.5% vacancy level. So here we are, sitting at 98%, and that's very, very high in the scheme of things. Now, obviously, that represents the quantity of our portfolio, but we know that there are, between now and the end of the year, we've already seen some stores closed in our portfolio. We measure occupancy by number of properties, and given that some of these properties that are closed are very small and low-rent payers, our occupancy just round numbers, is probably going to come in depending on what happens between now and the end of the year, and the number of properties we acquire, etcetera, but, somewhere between 96% and 97%, I am speculating. But the actual amount of rent that's lost from these vacant properties is less than that 2%. It's actually quite a bit less than that.

Okay. Are there any new tenants that you have concern over?

The consumer is stretched, retail is tough. Another tenant that has most recently filed Chapter 7 is Bennigan's/Steak and Ale, and in our portfolio we have five properties there. Two of these five, I would add, are extremely strong real estate locations. This tenant filed on Tuesday of this week, and on one of those properties, one of the five, we are very close to having a Letter of Intent with a bank. Now, this speaks to a couple of different things. It talks to proactive portfolio management, it talks to the quality of our leasing team being ahead of that curve, we had several tenants in the hunt, and I think we're going to have a deal with a bank in that space. One of the other properties is probably in our top twenty locations. It's in a major urban market. And then, predictably, in five of them, there's one of them we wish we didn't have. But let me say this, that I think a take-away is that the retail environment, is clearly weaker than it was at this time last year, the impact on national retail properties taken in totality is not that high. We're just repeating our prior guidance, which shows healthy growth over 2007, despite the external environment. There's always noise. Retailers come and go, but at the end of the day, National Retail Properties, with its strong real estate and its good balance sheet, is in extremely good shape.

Great. Thanks very much.

Thank you, Greg.

(Operator Instructions). Seeing as there are no further questions, I'd like to turn the call back to management for any concluding remarks.

Ryan, thanks very much. We look forward to speaking to you in about 90 days. If you have any questions, Kevin and I would like to take them. Thanks very much, and good morning.

Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation.