Net Lease Office Properties

Previous wording

During the six months ended June 30, 2024 and through the date of this Report, we completed the following (as further described in the consolidated financial statements):

Current wording

During the nine months ended September 30, 2024 and through the date of this Report, we completed the following (as further described in the consolidated financial statements):

Previous wording

•During the six months ended June 30, 2024, we sold six properties for total proceeds, net of selling costs, of $195.2 million (Note 13).

Current wording

•During the nine months ended September 30, 2024, we sold eight properties for total proceeds, net of selling costs, of $274.3 million (Note 13).

Previous wording

•In August 2024, we sold one property for gross proceeds of $71.5 million (Note 15).

Current wording

•In October 2024, we sold one property for gross proceeds of $3.9 million (Note 15).

Previous wording

•During the six months ended June 30, 2024, we repaid $156.9 million and $25.0 million of outstanding principal on the NLOP Mortgage Loan and NLOP Mezzanine Loan, respectively, using proceeds from certain dispositions and lease terminations, as well as excess cash from operations (Note 9).

Current wording

•During the nine months ended September 30, 2024, we repaid $239.8 million and $34.6 million of outstanding principal on the NLOP Mortgage Loan and NLOP Mezzanine Loan, respectively, using proceeds from certain dispositions and lease terminations, as well as excess cash from operations (Note 9).

Previous wording

•During the six months ended June 30, 2024, we prepaid one non-recourse mortgage loan for $19.2 million, which had an interest rate of 5.2% on its date of repayment (Note 9).

Current wording

•During the nine months ended September 30, 2024, we prepaid one non-recourse mortgage loan for $19.2 million, which had an interest rate of 5.2% on its date of repayment (Note 9).

Previous wording

(a)Amount for the six months ended June 30, 2024 includes $10.3 million of proceeds from the sale of a net investment in sales-type lease (Note 5). Such proceeds are included within Net cash provided by operating activities in accordance with Accounting Standards Codification 842, Leases.

Current wording

(a)Amount for the nine months ended September 30, 2024 includes $10.3 million of proceeds from the sale of a net investment in sales-type lease (Note 5). Such proceeds are included within Net cash provided by operating activities in accordance with Accounting Standards Codification 842, Leases.

Previous wording

Total revenues decreased for the three and six months ended June 30, 2024 as compared to the same periods in 2023, primarily due to the impact of disposition activity and tenant vacancies at certain properties, partially offset by higher other lease-related income.

Current wording

Total revenues decreased for the three and nine months ended September 30, 2024 as compared to the same periods in 2023, primarily due to the impact of disposition activity and tenant vacancies at certain properties, partially offset by higher other lease-related income.

Previous wording

We recognized net loss attributable to NLOP for the six months ended June 30, 2024, compared to net income attributable to NLOP for the six months ended June 30, 2023, primarily due to higher interest expense and impairment charges recognized during the current year period, partially offset by gain on sale of real estate recognized during the current year period.

Current wording

We recognized net loss attributable to NLOP for the nine months ended September 30, 2024, compared to net income attributable to NLOP for the nine months ended September 30, 2023, primarily due to impairment charges and higher interest expense recognized during the current year period, partially offset by gain on sale of real estate recognized during the current year period.

Previous wording

FFO decreased for the three and six months ended June 30, 2024 as compared to the same periods in 2023, primarily due to higher interest expense (including amortization of deferred financing costs) and the impact of disposition activity, partially offset by higher other lease-related income.

Current wording

FFO decreased for the three and nine months ended September 30, 2024 as compared to the same periods in 2023, primarily due to higher interest expense (including amortization of deferred financing costs) and the impact of disposition activity, partially offset by higher other lease-related income during the nine months ended September 30, 2024.

Previous wording

AFFO decreased for the three and six months ended June 30, 2024 as compared to the same periods in 2023, primarily due to higher interest expense (excluding amortization of deferred financing costs) and the impact of disposition activity, partially offset by higher other lease-related income.

Current wording

AFFO decreased for the three and nine months ended September 30, 2024 as compared to the same periods in 2023, primarily due to higher interest expense (excluding amortization of deferred financing costs) and the impact of disposition activity, partially offset by higher other lease-related income during the nine months ended September 30, 2024.

Previous wording

(c)This property was sold in August 2024.

Current wording

(c)This property was sold in October 2024 (Note 15).

Previous wording

For the three and six months ended June 30, 2024 as compared to the same periods in 2023, lease revenues decreased by $6.4 million and $9.5 million, respectively, primarily due to disposition activity and tenant vacancies at certain properties.

Current wording

For the three and nine months ended September 30, 2024 as compared to the same periods in 2023, lease revenues decreased by $12.0 million and $21.5 million, respectively, primarily due to disposition activity and tenant vacancies at certain properties.

Previous wording

For the three and six months ended June 30, 2024 as compared to the same periods in 2023, income from direct finance leases decreased by $0.4 million and $0.8 million, respectively, primarily due to the reclassification of our remaining direct financing lease investment to operating lease during the third quarter of 2023, as well as the disposition of our remaining property classified as net investments in sales-type lease during the first quarter of 2024 (Note 5).

Current wording

For the three and nine months ended September 30, 2024 as compared to the same periods in 2023, income from direct finance leases decreased by $0.3 million and $1.1 million, respectively, primarily due to the reclassification of our remaining direct financing lease investment to operating lease during the third quarter of 2023, as well as the disposition of our remaining property classified as net investments in sales-type lease during the first quarter of 2024 (Note 5).

Previous wording

For the three and six months ended June 30, 2024 as compared to the same periods in 2023, depreciation and amortization expense decreased by $2.6 million and $2.3 million, respectively, primarily due to the impact of disposition activity, partially offset by accelerated amortization of intangible assets during the six months ended June 30, 2024 in connection with a lease restructuring.

Current wording

For the three and nine months ended September 30, 2024 as compared to the same periods in 2023, depreciation and amortization expense decreased by $5.4 million and $7.8 million, respectively, primarily due to the impact of disposition activity, partially offset by accelerated amortization of intangible assets during the nine months ended September 30, 2024 in connection with a lease restructuring.

Previous wording

For the six months ended June 30, 2024 as compared to the same period in 2023, reimbursable tenant costs decreased by $0.4 million, primarily due to the impact of dispositions and lower repair and maintenance costs, partially offset by higher real estate taxes at a property.

Current wording

For the three and nine months ended September 30, 2024 as compared to the same periods in 2023, reimbursable tenant costs decreased by $0.7 million and $1.0 million, respectively, primarily due to the impact of dispositions, partially offset by higher insurance premiums paid on certain properties.

Previous wording

For the three and six months ended June 30, 2024 as compared to the same periods in 2023, property expenses, excluding reimbursable tenant costs, increased by $0.6 million and $0.8 million, respectively, primarily due to tenant vacancies during the current year periods (which resulted in property expenses no longer being reimbursable).

Current wording

For the three and nine months ended September 30, 2024 as compared to the same periods in 2023, property expenses, excluding reimbursable tenant costs, increased by $0.7 million and $1.5 million, respectively, primarily due to tenant vacancies during the current year periods (which resulted in property expenses no longer being reimbursable).

Previous wording

For the three and six months ended June 30, 2024 as compared to the same periods in 2023, general and administrative expenses decreased by $1.3 million and $2.8 million, respectively, primarily since the current year periods represents actual direct expenses incurred (including $1.0 million and $2.0 million, respectively, of administrative reimbursements paid to our Advisor (Note 3)), compared to the allocation of expenses described above for the prior year periods.

Current wording

For the three and nine months ended September 30, 2024 as compared to the same periods in 2023, general and administrative expenses decreased by $1.6 million and $4.4 million, respectively, primarily since the current year periods represents actual direct expenses incurred (including $1.0 million and $3.0 million, respectively, of administrative reimbursements paid to our Advisor (Note 3)), compared to the allocation of expenses described above for the prior year periods.

Previous wording

Upon completion of the Spin-Off on November 1, 2023 (Note 1), we began paying asset management fees to our Advisor, which totaled $1.6 million and $3.4 million during the three and six months ended June 30, 2024, respectively (Note 3).

Current wording

Upon completion of the Spin-Off on November 1, 2023 (Note 1), we began paying asset management fees to our Advisor, which totaled $1.5 million and $4.9 million during the three and nine months ended September 30, 2024, respectively (Note 3).

Previous wording

Separation and distribution related costs and other are comprised of costs related to the Spin-Off for the three and six months ended June 30, 2023.

Current wording

Separation and distribution related costs and other are comprised of costs related to the Spin-Off for the three and nine months ended September 30, 2023.

Previous wording

For the three and six months ended June 30, 2024 as compared to the same periods in 2023, interest expense increased by $19.2 million and $32.2 million, respectively, primarily due to the $455.0 million of NLOP Financing Arrangements entered into during the fourth quarter of 2023 (Note 9).

Current wording

For the three and nine months ended September 30, 2024 as compared to the same periods in 2023, interest expense increased by $3.7 million and $35.9 million, respectively, primarily due to the $455.0 million of NLOP Financing Arrangements entered into during the fourth quarter of 2023 (Note 9).

Previous wording

Gain on Sale of Real Estate, Net

Current wording

(Loss) Gain on Sale of Real Estate, Net

Previous wording

Gain on sale of real estate, net, consists of gain on the sale of properties that were disposed of during the reporting period, as more fully described in Note 4, Note 5, and Note 13.

Current wording

(Loss) gain on sale of real estate, net, consists of gain on the sale of properties that were disposed of during the reporting period, as more fully described in Note 4, Note 5, and Note 13.

Previous wording

For the three months ended June 30, 2024, other gains and (losses) of $0.3 million were primarily comprised of interest income on our cash deposits of $0.9 million and realized losses on our interest rate cap derivative of ($0.6) million (Note 8).

Current wording

For the three months ended September 30, 2024, other gains and (losses) of $0.4 million were primarily comprised of (i) interest income on our cash deposits of $0.7 million, (ii) net realized and unrealized gains on foreign currency exchange rate movements of $0.1 million, and (iii) net realized and unrealized losses on our interest rate cap derivative of ($0.4) million (Note 8).

Previous wording

For the six months ended June 30, 2024, other gains and (losses) of $(0.5) million were primarily comprised of (i) net realized and unrealized losses on foreign currency exchange rate movements of ($0.7) million, (ii) realized losses on our interest rate cap derivative of ($0.6) million (Note 8), (iii) a loss on extinguishment of debt of ($0.3) million (Note 9), and (iv) interest income on our cash deposits of $1.0 million.

Current wording

For the nine months ended September 30, 2024, other gains and (losses) of $(0.1) million were primarily comprised of (i) net realized and unrealized losses on our interest rate cap derivative of ($1.0) million (Note 8), (ii) net realized and unrealized losses on foreign currency exchange rate movements of ($0.5) million, (iii) a loss on extinguishment of debt of ($0.3) million (Note 9), and (iv) interest income on our cash deposits of $1.7 million.

Previous wording

For the three and six months ended June 30, 2023, other gains and (losses) were immaterial.

Current wording

For the three and nine months ended September 30, 2023, other gains and (losses) were immaterial.

Previous wording

For the three and six months ended June 30, 2024 as compared to the same periods in 2023, provision for income taxes increased by $0.5 million and $0.3 million, respectively, primarily due to a current tax benefit recognized on an international property during the prior year periods in connection with a net operating loss that was fully utilized.

Current wording

For the three and nine months ended September 30, 2024 as compared to the same periods in 2023, provision for income taxes increased by $0.3 million and $0.6 million, respectively, primarily due to net income recognized on a taxable entity during the current year periods.

Previous wording

Net Cash Provided by Operating Activities— Net cash provided by operating activities decreased by $2.1 million during the six months ended June 30, 2024 as compared to the same period in 2023, primarily due to higher interest expense and the impact of dispositions, partially offset by $10.3 million of proceeds received from the sale of a net investment in sales-type lease during the current year period (Note 5).

Current wording

Net Cash Provided by Operating Activities— Net cash provided by operating activities decreased by $2.5 million during the nine months ended September 30, 2024 as compared to the same period in 2023, primarily due to higher interest expense and the impact of dispositions, partially offset by $10.3 million of proceeds received from the sale of a net investment in sales-type lease during the current year period (Note 5).

Previous wording

Net Cash Provided by (Used in) Investing Activities— Net cash provided by (used in) investing activities increased by $180.1 million during the six months ended June 30, 2024 as compared to the same period in 2023, primarily due to proceeds from dispositions during the current year period.

Current wording

Net Cash Provided by (Used in) Investing Activities— Net cash provided by (used in) investing activities increased by $259.3 million during the nine months ended September 30, 2024 as compared to the same period in 2023, primarily due to proceeds from dispositions during the current year period.

Previous wording

Net Cash Used in Financing Activities— Net cash used in financing activities increased by $164.7 million during the six months ended June 30, 2024 as compared to the same period in 2023, primarily due to higher payments of the NLOP Financing Arrangements and mortgage principal.

Current wording

Net Cash Used in Financing Activities— Net cash used in financing activities increased by $239.1 million during the nine months ended September 30, 2024 as compared to the same period in 2023, primarily due to higher payments of the NLOP Financing Arrangements and mortgage principal.

Previous wording

(a)Aggregate debt balance includes unamortized discount, net, totaling $6.6 million and $21.6 million as of June 30, 2024 and December 31, 2023, respectively, and unamortized deferred financing costs totaling $2.9 million and $9.2 million as of June 30, 2024 and December 31, 2023, respectively.

Current wording

(a)Aggregate debt balance includes unamortized discount, net, totaling $3.4 million and $21.6 million as of September 30, 2024 and December 31, 2023, respectively, and unamortized deferred financing costs totaling $1.6 million and $9.2 million as of September 30, 2024 and December 31, 2023, respectively.

Previous wording

The NLOP Mortgage Loan is subject to certain deleveraging thresholds that require us to make repayments on the original loan balance. During the six months ended June 30, 2024, we repaid $156.9 million and $25.0 million of outstanding principal on the NLOP Mortgage Loan and NLOP Mezzanine Loan, respectively, using proceeds from certain dispositions and lease terminations, as well as excess cash from operations. As a result of these repayments, we reached (i) the first deleveraging threshold, which was repayments on the original loan balance totaling 15% (or $50.3 million) on or prior to November 1, 2024, and (ii) the second deleveraging threshold, which was repayments on the original loan balance totaling 25% (or $83.8 million) on or prior to November 1, 2025 (Note 9). At June 30, 2024, we had $132.0 million and $89.3 million total principal outstanding on the NLOP Mortgage Loan and NLOP Mezzanine Loan, respectively. In July and August 2024, we repaid $58.1 million and $8.4 million of outstanding principal on the NLOP Mortgage Loan and NLOP Mezzanine Loan, respectively, using proceeds from a disposition and lease terminations, as well as excess cash from operations (Note 15). As a result of these repayments, we reached the third and final deleveraging threshold, which was repayments on the original loan balance totaling 30% (or $100.5 million) on or prior to November 1, 2026, such that 70% of the loan has been repaid (Note 9).

Current wording

The NLOP Mortgage Loan was subject to certain deleveraging thresholds that required us to make repayments on the original loan balance. During the nine months ended September 30, 2024, we repaid $239.8 million and $34.6 million of outstanding principal on the NLOP Mortgage Loan and NLOP Mezzanine Loan, respectively, using proceeds from certain dispositions and lease terminations, as well as excess cash from operations. As a result of these repayments, we reached (i) the first deleveraging threshold, which was repayments on the original loan balance totaling 15% (or $50.3 million) on or prior to November 1, 2024, (ii) the second deleveraging threshold, which was repayments on the original loan balance totaling 25% (or $83.8 million) on or prior to November 1, 2025, such that 40% of the loan has been repaid, and (iii) the third and final deleveraging threshold, which was repayments on the original loan balance totaling 30% (or $100.5 million) on or prior to November 1, 2026, such that 70% of the loan has been repaid (Note 9). At September 30, 2024, we had $49.1 million and $79.7 million total principal outstanding on the NLOP Mortgage Loan and NLOP Mezzanine Loan, respectively. In October 2024, we repaid $10.0 million of outstanding principal on the NLOP Mortgage Loan using disposition proceeds and excess cash from operations (Note 15).

Previous wording

•cash and cash equivalents totaling $36.1 million. Of this amount, $6.4 million, at then-current exchange rates, was held in foreign subsidiaries, and we could be subject to restrictions or significant costs should we decide to repatriate these amounts; and

Current wording

•cash and cash equivalents totaling $36.1 million. Of this amount, $10.2 million, at then-current exchange rates, was held in foreign subsidiaries, and we could be subject to restrictions or significant costs should we decide to repatriate these amounts; and

Previous wording

•unleveraged properties that had an aggregate asset carrying value of approximately $103.3 million at June 30, 2024, although there can be no assurance that we would be able to obtain financing for these properties.

Current wording

•unleveraged properties that had an aggregate asset carrying value of approximately $83.7 million at September 30, 2024, although there can be no assurance that we would be able to obtain financing for these properties.

Previous wording

As of June 30, 2024, scheduled debt principal payments total $22.6 million during the remainder of 2024 and $217.6 million during 2025 (Note 9).

Current wording

As of September 30, 2024, scheduled debt principal payments total $0.3 million during the remainder of 2024 and $157.0 million during 2025 (Note 9).

Previous wording

•making scheduled principal and balloon payments on our non-recourse mortgage debt obligations, totaling $115.5 million, with $57.0 million due during the next 12 months;

Current wording

•making scheduled principal and balloon payments on our non-recourse mortgage debt obligations, totaling $115.6 million, with $66.6 million due during the next 12 months;

Previous wording

•making scheduled interest payments on our non-recourse mortgage obligations (future interest payments total $9.3 million, with $6.5 million due during the next 12 months);

Current wording

•making scheduled interest payments on our non-recourse mortgage obligations (future interest payments total $8.5 million, with $5.9 million due during the next 12 months);

Previous wording

•making scheduled principal payments on the NLOP Financing Arrangements, totaling $221.3 million (no amounts are due during the next 12 months);

Current wording

•making scheduled principal payments on the NLOP Financing Arrangements, totaling $128.8 million (no amounts are due during the next 12 months);

Previous wording

•making scheduled interest payments on the NLOP Financing Arrangements (future interest payments total $77.6 million, with $26.9 million due during the next 12 months); includes 4.5% payment-in-kind interest on the NLOP Mezzanine Loan that we have the option to capitalize into the principal balance;

Current wording

•making scheduled interest payments on the NLOP Financing Arrangements (future interest payments total $55.1 million, with $16.6 million due during the next 12 months); includes 4.5% payment-in-kind interest on the NLOP Mezzanine Loan that we have the option to capitalize into the principal balance;

Previous wording

(c)Amounts for the three and six months ended June 30, 2023 are comprised of costs related to the Spin-Off.

Current wording

(c)Amounts for the three and nine months ended September 30, 2023 are comprised of costs related to the Spin-Off.