Net Lease Office Properties
For the period ended Mar 31, 2025. Filed May 8, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 8, 2025
NLOP$9.28+2.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-06.
0001952976-24-000054
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsSupplemental Financial MeasuresCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-08.
0001952976-25-000025
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsSupplemental Financial MeasuresThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 138 previous paragraphs and 117 current paragraphs.
70 unchanged; 31 reworded; 15 added; 36 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 10 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
Financing
Current report
•In April 2025, we fully repaid the NLOP Mezzanine Loan, which had $35.6 million of outstanding principal as of March 31, 2025, using excess cash from operations and other sources, including loan reserves (Note 13).
Current report
•In April 2025, the maturity dates for two non-recourse mortgages with principal outstanding totaling $30.8 million were extended from May 2025 to March 2026 and July 2026 (Note 13).
Current report
Net Lease Office Properties 3/31/2025 10-Q –20
Current report
Net Income (Loss) Attributable to NLOP
Current report
Net Lease Office Properties 3/31/2025 10-Q –21
Current report
(a)Excludes 570,999 of operating square footage for a parking garage associated with the KBR, Inc. property in Houston, Texas.
Current report
Net Lease Office Properties 3/31/2025 10-Q –22
Current report
Net Lease Office Properties 3/31/2025 10-Q –23
Current report
For the three months ended March 31, 2025 as compared to the same period in 2024, asset management fees decreased by $0.5 million, due to the impact of disposition activity, which reduced the asset base from which our Advisor earns fees (Note 3).
Current report
Net Lease Office Properties 3/31/2025 10-Q –24
Current report
For the three months ended March 31, 2025 as compared to the same period in 2024, interest expense decreased by $15.1 million, primarily due to repayments of our debt since January 1, 2024, including the full repayment of the NLOP Mortgage Loan during 2024 (Note 8).
Current report
(b)In April 2025, we fully repaid the NLOP Mezzanine Loan (Note 13).
Current report
During the three months ended March 31, 2025, we repaid $25.5 million of outstanding principal on the NLOP Mezzanine Loan (Note 8), using proceeds from certain dispositions, as well as cash flow from rent on our properties and other sources. In April 2025, we fully repaid the NLOP Mezzanine Loan, which had $35.6 million of outstanding principal as of March 31, 2025, using excess cash from operations and other sources, including loan reserves (Note 13).
Current report
•making principal payments on the NLOP Mezzanine Loan, totaling $35.6 million, which was fully repaid in April 2025 (Note 13);
Removed paragraphs (36)
Previous report
Basis of Presentation
Previous report
Prior to the Spin-Off
Previous report
The historical results of operations and liquidity and capital resources of NLOP prior to the Spin-Off do not represent the historical results of operations and liquidity and capital resources of a legal entity, but rather a combination of entities under common control that have been “carved-out” of WPC’s consolidated financial statements and presented herein, in each case, in accordance with U.S. GAAP. Intercompany transactions and balances have been eliminated in combination. The preparation of the financial results of NLOP prior to the Spin-Off required management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the relevant reporting periods and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Previous report
The financial results of NLOP prior to the Spin-Off reflect the revenues and direct expenses of NLOP and include material assets and liabilities of WPC that are specifically attributable to NLOP. Equity represents the excess of total assets over total liabilities. Equity is impacted by contributions from and distributions to WPC, which are the result of treasury activities and net funding provided by or distributed to WPC prior to the Separation, as well as the allocated costs and expenses.
Previous report
The financial results of NLOP prior to the Spin-Off also include an allocation of indirect costs and expenses incurred by WPC related to NLOP, primarily consisting of compensation and other general and administrative costs using the relative percentage of property revenue of NLOP and WPC management’s knowledge of NLOP. In addition, the financial results reflect the allocation of interest expense from WPC unsecured debt, excluding debt that is specifically attributable to NLOP; interest expense was allocated by calculating the unencumbered net investment in real estate of each property held by NLOP as a percentage of WPC’s total consolidated unencumbered net investment in real estate and multiplying that percentage by the interest expense on WPC unsecured debt. The amounts allocated in the financial results of NLOP prior to the Spin-Off are not necessarily indicative of the actual amount of such indirect expenses that would have been recorded had the NLOP been a separate independent entity during the applicable periods. NLOP believes the assumptions underlying NLOP’s allocation of indirect expenses prior to the Spin-Off are reasonable.
Previous report
•In April 2024, we disposed of two properties by transferring ownership to the respective mortgage lenders, in satisfaction of non-recourse mortgage loans encumbering the properties totaling $33.0 million (Note 13).
Previous report
•In October 2024, we sold one property for gross proceeds of $3.9 million (Note 15).
Previous report
Debt Repayments
Previous report
•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 report
•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 report
Net (Loss) Income Attributable to NLOP
Previous report
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 report
(c)This property was sold in October 2024 (Note 15).
Previous report
Net Lease Office Properties 9/30/2024 10-Q –29
Previous report
Reimbursable Tenant Costs
Previous report
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 report
Net Lease Office Properties 9/30/2024 10-Q –30
Previous report
General and Administrative
Previous report
Prior to the Spin-Off on November 1, 2023 (Note 1), General and administrative expenses were allocated to NLOP based on the relative percentage of annualized based rent of NLOP. The amounts allocated are not necessarily indicative of the actual amount of indirect expenses that would have been recorded had NLOP been a separate independent entity.
Previous report
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 report
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 report
Separation and Distribution Related Costs and Other
Previous report
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 report
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 report
Net Lease Office Properties 9/30/2024 10-Q –31
Previous report
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 report
For the three and nine months ended September 30, 2023, other gains and (losses) were immaterial.
Previous report
Net Lease Office Properties 9/30/2024 10-Q –32
Previous report
In connection with the Spin-Off, we and certain of our wholly-owned subsidiaries entered into the NLOP Financing Arrangements, comprised of the NLOP Mortgage Loan and NLOP Mezzanine Loan (Note 9). The NLOP Financing Arrangements are collateralized by the assignment of certain of our previously unencumbered real estate properties. Additionally, property sales are subject to the satisfaction of certain conditions, including satisfaction of a debt yield test and minimum release prices. We are required to use the net proceeds from property sales collateralizing the NLOP Financing Arrangements to repay the portions of the NLOP Mortgage Loan and NLOP Mezzanine Loan representing the release amount for any individual property sale, with excess net proceeds, if any, used to repay the NLOP Mortgage Loan.
Previous report
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 report
Net Lease Office Properties 9/30/2024 10-Q –33
Previous report
•making scheduled principal payments on the NLOP Financing Arrangements, totaling $128.8 million (no amounts are due during the next 12 months);
Previous report
Net Lease Office Properties 9/30/2024 10-Q –34
Previous report
Net Lease Office Properties 9/30/2024 10-Q –35
Previous report
(c)Amounts for the three and nine months ended September 30, 2023 are comprised of costs related to the Spin-Off.
Previous report
Net Lease Office Properties 9/30/2024 10-Q –36
Reworded paragraphs (31)
Previous 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):
Current wording
During the three months ended March 31, 2025 and through the date of this Report, we completed the following (as further described in the consolidated financial statements):
Previous 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).
Current wording
•During the three months ended March 31, 2025, we sold two properties for total proceeds, net of selling costs, of $9.2 million (Note 12).
Previous 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).
Current wording
•During the three months ended March 31, 2025, we repaid $25.5 million of outstanding principal on the NLOP Mezzanine Loan, using proceeds from certain dispositions, as well as cash flow from rent on our properties and other sources (Note 8).
Previous 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.
Current wording
(a)Amount for the three months ended March 31, 2024 includes $10.4 million of proceeds from the sale of a net investment in sales-type lease. Such proceeds are included within Net cash provided by operating activities in accordance with ASC 842, Leases.
Previous 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.
Current wording
Total revenues decreased for the three months ended March 31, 2025 as compared to the same period in 2024, primarily due to the impact of disposition activity, tenant vacancies at certain properties, and lower other lease-related income.
Previous wording
We recognized net loss attributable to NLOP for the three months ended September 30, 2024, compared to net income attributable to NLOP for the three months ended September 30, 2023, primarily due to impairment charges and higher interest expense recognized during the current year period.
Current wording
We recognized net income attributable to NLOP for the three months ended March 31, 2025, as compared to net loss for the same period in 2024, primarily due to lower interest expense and lower loss on sale of real estate.
Previous 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.
Current wording
FFO increased for the three months ended March 31, 2025 as compared to the same period in 2024, primarily due to lower interest expense (including amortization of deferred financing costs), partially offset by the impact of disposition activity and lower other lease-related income.
Previous 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.
Current wording
AFFO decreased for the three months ended March 31, 2025 as compared to the same period in 2024, primarily due to the impact of disposition activity and lower other lease-related income, partially offset by lower interest expense (excluding amortization of deferred financing costs).
Previous wording
(b)ABR amounts are subject to fluctuations in foreign currency exchange rates.
Current wording
(b)ABR amount is subject to fluctuations in foreign currency exchange rates.
Previous 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.
Current wording
For the three months ended March 31, 2025 as compared to the same period in 2024, lease revenues decreased by $10.9 million, primarily due to disposition activity and tenant vacancies at certain properties.
Previous 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).
Current wording
For the three months ended March 31, 2025 as compared to the same period in 2024, income from direct finance leases decreased by less than $0.1 million, primarily due to the disposition of our remaining property classified as net investments in sales-type lease during the first quarter of 2024 (Note 4).
Previous 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.
Current wording
For the three months ended March 31, 2025 as compared to the same period in 2024, depreciation and amortization expense decreased by $8.2 million, primarily due to the impact of disposition activity and accelerated amortization of intangible assets in connection with a lease restructuring during the prior year period.
Previous 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).
Current wording
For the three months ended March 31, 2025 as compared to the same period in 2024, property expenses, excluding reimbursable tenant costs, increased by $0.2 million, primarily due to tenant vacancies (which resulted in property expenses no longer being reimbursable), partially offset by the impact of disposition activity.
Previous wording
Interest expense is comprised of interest on Non-recourse mortgages, our NLOP Mortgage Loan, and our NLOP Mezzanine Loan, as well as interest expense on Parent debt specific to NLOP properties and that was allocated to NLOP based on the relative percentage of unencumbered net investment in real estate of each property compared to WPC (prior to the Spin-Off). The amounts allocated to Parent debt in the accompanying consolidated financial statements are not necessarily indicative of the actual amount of interest expense that would have been recorded had NLOP been a separate independent entity during the applicable periods.
Current wording
Interest expense is comprised of interest on Non-recourse mortgages, our NLOP Mortgage Loan, and our NLOP Mezzanine Loan.
Previous wording
(Loss) Gain on Sale of Real Estate, Net
Current wording
Loss on Sale of Real Estate, Net
Previous 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.
Current wording
Loss on sale of real estate, net, consists of loss on the sale of properties that were disposed of during the reporting period, as more fully described in Note 4 and Note 12.
Previous 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).
Current wording
For the three months ended March 31, 2024, other gains and (losses) of $(0.8) million were primarily comprised of net realized and unrealized losses on foreign currency exchange rate movements of $0.7 million and a loss on extinguishment of debt of $0.3 million (Note 8).
Previous 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.
Current wording
For the three months ended March 31, 2025 as compared to the same period in 2024, provision for income taxes decreased by $0.1 million, primarily due to the impact of international property dispositions during the reporting period.
Previous 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).
Current wording
Net Cash Provided by Operating Activities— Net cash provided by operating activities decreased by $12.3 million during the three months ended March 31, 2025 as compared to the same period in 2024, primarily due to $10.4 million of proceeds received from the sale of a net investment in sales-type lease during the prior year period (Note 5) and the impact of disposition activity, partially offset by lower interest expense.
Previous 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.
Current wording
Net Cash Provided by Investing Activities— Net cash provided by investing activities decreased by $18.1 million during the three months ended March 31, 2025 as compared to the same period in 2024, primarily due to lower proceeds from dispositions during the current year period.
Previous 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.
Current wording
Net Cash Used in Financing Activities— Net cash used in financing activities decreased by $6.3 million during the three months ended March 31, 2025 as compared to the same period in 2024, primarily due to lower payments of the NLOP Financing Arrangements and mortgage principal (following the full repayment of the NLOP Mortgage Loan during 2024 (Note 8)).
Previous wording
The table below summarizes our non-recourse mortgages, NLOP Mortgage Loan, and NLOP Mezzanine Loan (dollars in thousands):
Current wording
The table below summarizes our non-recourse mortgages and NLOP Mezzanine Loan (dollars in thousands):
Previous 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.
Current wording
(a)Aggregate debt balance includes unamortized discount, net, totaling $1.0 million and $1.8 million as of March 31, 2025 and December 31, 2024, respectively, and unamortized deferred financing costs totaling $0.7 million and $1.0 million as of March 31, 2025 and December 31, 2024, respectively.
Previous 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
Current wording
•cash and cash equivalents totaling $28.2 million. Of this amount, $8.8 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 $83.7 million at September 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 $73.7 million at March 31, 2025, although there can be no assurance that we would be able to sell or obtain financing for these properties.
Previous 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).
Current wording
As of March 31, 2025, scheduled debt principal payments total $108.8 million during the remainder of 2025 and $5.9 million during 2026 (Note 8). In April 2025, the maturity dates for two non-recourse mortgages with principal outstanding totaling $30.8 million were extended from May 2025 to March 2026 and July 2026 (Note 13).
Previous 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;
Current wording
•making scheduled principal and balloon payments on our non-recourse mortgage debt obligations, totaling $114.7 million, with $108.8 million due during the next 12 months;
Previous 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);
Current wording
•making scheduled interest payments on our non-recourse mortgage obligations (future interest payments total $3.8 million, with $3.2 million due during the next 12 months);
Previous 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;
Current wording
•making scheduled interest payments on the NLOP Mezzanine Loan, which was fully repaid in April 2025 (Note 13) (future interest payments as of March 31, 2025 totaled $19.6 million, with $5.2 million due during the next 12 months); includes 4.5% payment-in-kind interest that we had the option to capitalize into the principal balance;
Previous wording
Our liquidity could be adversely affected by refinancing debt at higher interest rates, unanticipated costs, and greater-than-anticipated operating expenses.
Current wording
Our liquidity could be adversely affected by refinancing debt at higher interest rates or an unanticipated disruption to our operating cash flow, which could include interrupted rent collections or greater-than-anticipated operating expenses.
Previous wording
Consolidated FFO and AFFO were as follows (in thousands):
Current wording
FFO and AFFO were as follows (in thousands):
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
For the three months ended March 31, 2025, other gains and (losses) of $0.4 million were primarily comprised of interest income on our cash deposits.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
(a)Excludes 570,999 of operating square footage for a parking garage at a domestic property.