0001952976false00019529762024-05-102024-05-10


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): May 10, 2024
NLOP_Logo_Color.jpg
Net Lease Office Properties
(Exact Name of Registrant as Specified in its Charter)
Maryland001-4181292-0887849
(State of incorporation)(Commission File Number)(IRS Employer Identification No.)
One Manhattan West, 395 9th Avenue, 58th Floor
New York,New York10001
(Address of principal executive offices)(Zip Code)
 

Registrant’s telephone number, including area code: (844) 656-7348

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Shares of Beneficial Interest, par value $0.001 per shareNLOPNew York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☑
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐



Item 7.01 Regulation FD Disclosure.

On May 10, 2024, Net Lease Office Properties (the “Company”) made available certain unaudited supplemental financial information at March 31, 2024. A copy of this supplemental information is attached as Exhibit 99.1.

The information furnished pursuant to this Item 7.01, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that Section, and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits
Exhibit No.Description
99.1
104Cover Page Interactive Data File (embedded within the Inline XBRL document).



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Net Lease Office Properties
Date:May 10, 2024By:/s/ ToniAnn Sanzone
ToniAnn Sanzone
Chief Financial Officer


Exhibit 99.1



Net Lease Office Properties
Supplemental Financial Information
First Quarter 2024



financialdocumentcoverslidb.jpg


Terms and Definitions

As used in this supplemental package, the terms “Net Lease Office Properties,” “NLOP,” “we,” “us” and “our” include Net Lease Office Properties, its consolidated subsidiaries and its predecessors, unless otherwise indicated. Other terms and definitions are as follows:
REITReal estate investment trust
WPCW. P. Carey Inc., a net-lease REIT (also our “Advisor”)
Spin-OffThe spin-off of 59 office properties owned by WPC into NLOP, a separate publicly-traded REIT, which was completed on November 1, 2023
U.S.United States
ABRContractual minimum annualized base rent
SECSecurities and Exchange Commission
NAREITNational Association of Real Estate Investment Trusts (an industry trade group)
WALTWeighted-average lease term
NLOP Mortgage Loan
Our $335.0 million senior secured mortgage loan
NLOP Mezzanine Loan
Our $120.0 million mezzanine loan facility
NLOP Financing Arrangements
The NLOP Mortgage Loan and NLOP Mezzanine Loan, which are collateralized by the assignment of certain of our previously unencumbered real estate properties
SOFRSecured Overnight Financing Rate

Important Note Regarding Non-GAAP Financial Measures

This supplemental package includes certain “non-GAAP” supplemental measures that are not defined by generally accepted accounting principles (“GAAP”), including funds from operations (“FFO”); adjusted funds from operations (“AFFO”); pro rata cash net operating income (“pro rata cash NOI”); and normalized pro rata cash NOI. FFO is a non-GAAP measure defined by NAREIT. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures are provided within this supplemental package. In addition, refer to the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of these non-GAAP financial measures and other metrics.

Amounts may not sum to totals due to rounding.


Net Lease Office Properties
Supplemental Information – First Quarter 2024
Table of Contents


Net Lease Office Properties
First Quarter 2024
Summary Metrics
As of or for the three months ended March 31, 2024.
Financial Results
Revenues, including reimbursable costs – consolidated ($000s)$44,007 
Net loss attributable to NLOP ($000s)(27,842)
Net loss attributable to NLOP per diluted share(1.88)
Normalized pro rata cash NOI ($000s) (a) (b)
30,968 
AFFO attributable to NLOP ($000s) (a) (b)
20,014 
AFFO attributable to NLOP per diluted share (a) (b)
1.35 
Balance Sheet and Capitalization
Equity market capitalization – based on quarter end share price of $23.80 ($000s)$351,886 
Total consolidated debt ($000s)515,173 
Gross assets ($000s) (c)
1,438,200 
Total consolidated debt to gross assets35.8 %
NLOP Mortgage Loan principal outstanding (as a % of original principal) (d)
82.9 %
NLOP Mezzanine Loan principal outstanding (as a % of original principal) (d)
95.3 %
Advisory Fees and Reimbursements Paid to WPC
Asset management fees (e)
$1,804 
Administrative reimbursements (f)
1,000 
Portfolio (Pro Rata) (b)
ABR (in thousands) (g)
$128,331 
Number of properties53 
Number of tenants55 
Occupancy92.6 %
Weighted-average lease term (in years)5.7 
Leasable square footage (in thousands) (h)
8,023 
ABR from investment grade tenants as a % of total ABR (i)
60.8 %
Dispositions – number of properties sold2 
Dispositions – gross proceeds (in thousands)$43,569 
Subsequent to Quarter End
NLOP Mortgage Loan principal outstanding as of the date of this report (as a % of original principal)59.5 %
NLOP Mezzanine Loan principal outstanding as of the date of this report (as a % of original principal)83.2 %
Dispositions – number of properties sold2 
Dispositions – gross proceeds (in thousands)$98,484 
Dispositions – number of properties transferred (j)
2 
Dispositions – gross proceeds (in thousands) (j)
$32,990 
________
(a)Normalized pro rata cash NOI and AFFO are non-GAAP measures. See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of our non-GAAP measures and for details on how certain non-GAAP measures are calculated.
(b)Presented on a pro rata basis. See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of pro rata.
(c)Gross assets represent consolidated total assets before accumulated depreciation on buildings and improvements. Gross assets are net of accumulated amortization on in-place lease intangible assets of $216.2 million and above-market rent intangible assets of $34.7 million.
(d)Original principal outstanding for the NLOP Mortgage Loan was $335.0 million. Original principal outstanding for the NLOP Mezzanine Loan was $120.0 million.
(e)Pursuant to certain advisory agreements, our Advisor provides us with strategic management services, including asset management, property disposition support, and various related services. We pay our Advisor an asset management fee that was initially set at an annual amount of $7.5 million and is proportionately reduced each month following the disposition of each portfolio property.
(f)Pursuant to certain advisory agreements, we will reimburse our Advisor a base administrative amount of approximately $4.0 million annually, for certain administrative services, including day-to-day management services, investor relations, accounting, tax, legal, and other administrative matters.
(g)See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of ABR.
(h)Excludes 570,999 of operating square footage for a parking garage at a domestic property.
 Net Lease Office Properties | 1

(i)Percentage of portfolio is based on ABR, as of March 31, 2024. Includes tenants or guarantors with investment grade ratings (41.0%) and subsidiaries of non-guarantor parent companies with investment grade ratings (19.8%). Investment grade refers to an entity with a rating of BBB- or higher from Standard & Poor’s Ratings Services or Baa3 or higher from Moody’s Investors Service. See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of ABR.
(j)Represents the transfer of ownership of properties and the related non-recourse mortgage loans to their respective mortgage lenders. Gross proceeds from these dispositions represent the mortgage principal outstanding on the respective dates of transfer.
 Net Lease Office Properties | 2

Net Lease Office Properties
First Quarter 2024
Components of Net Asset Value
Dollars in thousands.
Three Months Ended March 31, 2024
Normalized Pro Rata Cash NOI (a) (b)
$30,968 
Balance Sheet – Selected Information
As of March 31, 2024
Assets
Book value of select real estate (c)
$30,897 
Cash and cash equivalents39,753 
Restricted cash, including escrow (d)
48,593 
Other assets, net:
Straight-line rent adjustments$30,060 
Lease termination fees receivable (from BCBSM, Inc.)11,890 
Deferred charges10,105 
Accounts receivable4,024 
Prepaid expenses1,186 
Securities and derivatives428 
Deferred income taxes78 
Taxes receivable73 
Other583 
Total other assets, net$58,427 
Liabilities
NLOP Mortgage Loan (e)
$277,609 
NLOP Mezzanine Loan (f)
114,336 
Non-recourse mortgages, net (g)
147,755 
Deferred income taxes3,346 
Dividends payable— 
Accounts payable, accrued expenses and other liabilities:
Prepaid and deferred rents$14,731 
Accounts payable and accrued expenses13,491 
Operating lease liabilities4,647 
Accrued taxes payable3,181 
Tenant security deposits814 
Other15,607 
Total accounts payable, accrued expenses and other liabilities$52,471 
________
(a)Normalized pro rata cash NOI is a non-GAAP measure. See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of our non-GAAP measures and for details on how they are calculated.
(b)Presented on a pro rata basis. See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of pro rata.
(c)Represents the value of real estate not appropriately captured in normalized pro rata cash NOI, such as vacant assets.
(d)Comprised of approximately $45.3 million related to certain reserve requirements for debt service, capital improvements, and real estate taxes pursuant to the NLOP Mortgage Loan and NLOP Mezzanine Loan. Approximately $3.3 million is related to certain reserve requirements for other loan agreements.
(e)Excludes unamortized discount, net totaling $12.4 million and unamortized deferred financing costs totaling $5.4 million as of March 31, 2024.
(f)Excludes unamortized discount, net totaling $4.4 million and unamortized deferred financing costs totaling $1.9 million as of March 31, 2024.
(g)Excludes unamortized discount, net totaling $0.4 million as of March 31, 2024.
 Net Lease Office Properties | 3

Net Lease Office Properties
First Quarter 2024
Consolidated Statement of Operations
In thousands, except share and per share amounts.
Three Months Ended March 31, 2024
Revenues
Lease revenues$38,314 
Income from finance leases89 
Other lease-related income5,604 
44,007 
Operating Expenses
Depreciation and amortization17,970 
Reimbursable tenant costs6,200 
Impairment charges — real estate4,065 
Property expenses, excluding reimbursable tenant costs2,251 
General and administrative (a)
1,901 
Asset management fees (b)
1,804 
Separation and distribution related costs and other16 
34,207 
Other Income and Expenses
Interest expense(20,800)
Loss on sale of real estate, net(15,776)
Other gains and (losses)(821)
(37,397)
Loss before income taxes(27,597)
Provision for income taxes(224)
Net Loss(27,821)
Net income attributable to noncontrolling interests(21)
Net Loss Attributable to NLOP$(27,842)
Basic and Diluted Loss Per Share$(1.88)
Weighted-Average Shares Outstanding
Basic and Diluted14,785,118 
________
(a)Includes $1.0 million of administrative reimbursements to our Advisor.
(b)Amount is comprised of fees paid to Advisor for strategic management services, including asset management, property disposition support, and various related services.
 Net Lease Office Properties | 4

Net Lease Office Properties
First Quarter 2024
FFO and AFFO, Consolidated
In thousands, except share and per share amounts.
Three Months Ended March 31, 2024
Net loss attributable to NLOP$(27,842)
Adjustments:
Depreciation and amortization of real property17,970 
Loss on sale of real estate, net15,776 
Impairment charges — real estate (a)
4,065 
Proportionate share of adjustments for noncontrolling interests (b)
(52)
Total adjustments37,759 
FFO (as defined by NAREIT) Attributable to NLOP (c)
9,917 
Adjustments:
Amortization of deferred financing costs7,030 
Above- and below-market rent intangible lease amortization, net
1,077 
Other (gains) and losses944 
Straight-line and other leasing and financing adjustments777 
Other amortization and non-cash items314 
Tax benefit – deferred and other(123)
Stock-based compensation 75 
Separation and distribution related costs and other16 
Proportionate share of adjustments for noncontrolling interests (b)
(13)
Total adjustments10,097 
AFFO Attributable to NLOP (c)
$20,014 
Summary
FFO (as defined by NAREIT) attributable to NLOP (c)
$9,917 
FFO (as defined by NAREIT) attributable to NLOP per diluted share (c)
$0.67 
AFFO attributable to NLOP (c)
$20,014 
AFFO attributable to NLOP per diluted share (c)
$1.35 
Diluted weighted-average shares outstanding14,785,118 
________
(a)Represents impairment charges recognized on two properties.
(b)Adjustments disclosed elsewhere in this reconciliation are on a consolidated basis. This adjustment reflects our FFO or AFFO on a pro rata basis.
(c)FFO and AFFO are non-GAAP measures. See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of our non-GAAP measures.
 Net Lease Office Properties | 5

Net Lease Office Properties
First Quarter 2024
Consolidated Balance Sheets
In thousands, except share and per share amounts.
March 31, 2024December 31, 2023
Assets
Investments in real estate:
Land, buildings and improvements$1,139,227 $1,203,991 
Net investments in finance leases— 10,522 
In-place lease intangible assets and other345,665 357,788 
Above-market rent intangible assets57,483 57,954 
Investments in real estate1,542,375 1,630,255 
Accumulated depreciation and amortization(457,349)(458,430)
Net investments in real estate1,085,026 1,171,825 
Restricted cash48,593 51,560 
Cash and cash equivalents39,753 16,269 
Other assets, net58,427 65,435 
Total assets$1,231,799 $1,305,089 
Liabilities and Equity
Debt:
NLOP Mortgage Loan, net$259,807 $266,844 
NLOP Mezzanine Loan, net108,038 106,299 
Non-recourse mortgages, net147,328 168,836 
Debt, net515,173 541,979 
Accounts payable, accrued expenses and other liabilities52,471 59,527 
Below-market rent intangible liabilities, net9,202 10,643 
Deferred income taxes3,346 10,450 
Dividends payable— 1,060 
Total liabilities580,192 623,659 
Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued
— — 
Common stock, $0.001 par value, 45,000,000 shares authorized; 14,785,118 and 14,620,919 shares, respectively, issued and outstanding
15 15 
Additional paid-in capital855,641 855,554 
Distributions in excess of accumulated earnings(170,813)(142,960)
Accumulated other comprehensive loss(37,618)(35,600)
Total shareholders' equity647,225 677,009 
Noncontrolling interests4,382 4,421 
Total equity651,607 681,430 
Total liabilities and equity$1,231,799 $1,305,089 

 Net Lease Office Properties | 6

Net Lease Office Properties
First Quarter 2024
Capitalization
In thousands, except share and per share amounts. As of March 31, 2024.
Total Enterprise ValueSharesShare PriceMarket Value
Equity
Common equity14,785,118 $23.80 $351,886 
Total Equity Market Capitalization351,886 
Outstanding Balance (a)
Debt
NLOP Mortgage Loan277,609 
NLOP Mezzanine Loan114,336 
Non-recourse mortgages147,755 
Total Debt539,700 
Less: Cash and cash equivalents(39,753)
Net Debt499,947 
Total Enterprise Value$851,833 
________
(a)Excludes unamortized discount, net totaling $17.2 million and unamortized deferred financing costs totaling $7.3 million as of March 31, 2024.
 Net Lease Office Properties | 7

Net Lease Office Properties
First Quarter 2024
Debt Overview
Dollars in thousands. Pro rata. As of March 31, 2024.
Maturity DateFixed / FloatingInterest Rate
Total Outstanding Balance (a)
% of Total
NLOP Financing Arrangements
NLOP Mortgage Loan (b)
11/9/2025Floating10.4 %$277,609 51.4 %
NLOP Mezzanine Loan (c)
11/9/2028Fixed14.5 %114,336 21.2 %
Other Mortgages (Tenant Listed)
Exelon Generation Company, LLC (d)
4/17/2024Fixed6.5 %19,830 3.7 %
Vacant (formerly AVT Technology Solutions LLC) (d)
4/26/2024Fixed5.1 %13,160 2.4 %
Orbital ATK, Inc.1/6/2025Fixed4.2 %25,621 4.7 %
Midcontinent Independent Stm Op Inc5/6/2025Fixed4.0 %9,076 1.7 %
Intuit Inc.5/6/2025Fixed4.0 %21,900 4.1 %
Acosta, Inc.8/6/2025Fixed4.4 %10,014 1.9 %
Siemens AS12/15/2025Floating4.8 %40,082 7.4 %
Merative L.P.4/1/2026Fixed5.7 %1,899 0.4 %
North American Lighting, Inc.5/6/2026Fixed4.8 %6,173 1.1 %
Total Debt Outstanding9.7 %$539,700 100.0 %
________
(a)Excludes unamortized discount, net totaling $17.2 million and unamortized deferred financing costs totaling $7.3 million as of March 31, 2024.
(b)The NLOP Mortgage Loan bears interest at an annual rate of one-month forward-looking term rate based on SOFR, subject to a floor of 3.85%, plus 5.0%. In addition, we entered into an interest rate cap agreement that limits our SOFR rate exposure at 5.35% under the terms set forth under the NLOP Mortgage Loan. The NLOP Mortgage Loan is subject to two separate one-year extension options. In April 2024, we repaid $78.1 million of outstanding principal on the NLOP Mortgage Loan using proceeds from certain dispositions. See the Summary Metrics section for the NLOP Mortgage Loan principal outstanding (as a % of original principal) following these repayments.
(c)The NLOP Mezzanine Loan bears interest at an annual rate of 14.5% (10.0% of which is required to be paid current on a monthly basis, and 4.5% of which is a payment-in-kind accrual, on a quarterly basis). In April 2024, we repaid $14.5 million of outstanding principal on the NLOP Mezzanine Loan using proceeds from certain dispositions. See the Summary Metrics section for the NLOP Mezzanine Loan principal outstanding (as a % of original principal) following these repayments.
(d)In April 2024, we transferred ownership of these properties and the related non-recourse mortgage loans to their respective mortgage lenders, as described in the Summary Metrics section.
 Net Lease Office Properties | 8

Net Lease Office Properties
First Quarter 2024
Dispositions
Dollars in thousands. Pro rata.
Tenant / Lease GuarantorProperty Location(s)Gross Sale PriceABRClosing DateGross Square Footage
4Q23
Raytheon CompanyTucson, AZ$24,575 $1,978 Dec-23143,650 
Carhartt, Inc.Dearborn, MI9,806 748 Dec-2358,722 
BCBSM, Inc.Eagan, MN2,500 298 Dec-2329,916 
AVL Michigan Holding CorporationPlymouth, MI6,200 575 Dec-2370,000 
4Q23 Total43,081 3,599 302,288 
1Q24
Undisclosed – UK insurance company (a)
Newport, United Kingdom10,497 1,761 Jan-2480,664 
Total E&P Norge AS (a)
Stavanger, Norway33,072 5,185 Mar-24275,725 
1Q24 Total43,569 6,946 356,389 
Total Dispositions (b)
$86,650 $10,545 658,677 
________
(a)Amount reflects the applicable exchange rate on the date of the transaction.
(b)In April 2024, we disposed of four properties, as described in the Summary Metrics section.

 Net Lease Office Properties | 9

Net Lease Office Properties
First Quarter 2024
Capital Expenditures and Leasing Activity
Capital Expenditures
In thousands. For the three months ended March 31, 2024.
Tenant Improvements and Leasing Costs
Tenant Improvements (Tenant Listed)
CVS Health Corporation$2,306 
2,306 
Leasing Costs— 
Tenant Improvements and Leasing Costs2,306 
Maintenance Capital Expenditures (Tenant Listed)
Pharmaceutical Product Development, LLC2,759 
Xileh Holding Inc.261 
KBR, Inc.145 
Bankers Financial Corporation118 
Other70 
3,353 
Total: Tenant Improvements and Leasing Costs, and Maintenance Capital Expenditures$5,659 

Leasing Activity

Note: There was no leasing activity during the first quarter of 2024.

 Net Lease Office Properties | 10

Net Lease Office Properties
First Quarter 2024
Top Ten Tenants
Dollars in thousands. Pro rata. As of March 31, 2024.
Tenant / Lease GuarantorState / CountryABRABR %
Square Footage (a)
Number of PropertiesWeighted-Average Lease Term (Years)
KBR, Inc.Texas$20,156 15.7 %913,713 1 6.2 
BCBSM, Inc.Minnesota12,788 10.0 %1,029,966 5 4.8 
JPMorgan Chase Bank, N.A.Florida, Texas9,069 7.1 %666,869 3 5.2 
FedEx Corporation (b)
Tennessee5,491 4.3 %390,380 1 15.7 
Siemens AS (c)
Norway4,404 3.4 %165,905 1 1.7 
CVS Health CorporationArizona4,300 3.3 %354,888 1 15.1 
Pharmaceutical Product Development, LLCNorth Carolina3,983 3.1 %219,812 1 9.7 
Omnicom Group, Inc.California3,961 3.1 %120,000 1 4.5 
Orbital ATK, Inc.Minnesota3,821 3.0 %191,336 1 5.7 
E.On UK PLC (c)
United Kingdom3,602 2.8 %217,339 1 1.3 
Total (d)
$71,575 55.8 %4,270,208 16 6.7 
________
(a)Excludes 570,999 of operating square footage for a garage at a domestic property.
(b)This property was sold in April 2024.
(c)ABR amounts are subject to fluctuations in foreign currency exchange rates.
(d)See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of pro rata.
 Net Lease Office Properties | 11

Net Lease Office Properties
First Quarter 2024
Lease Expirations
Dollars in thousands. Pro rata. As of March 31, 2024.
Year of Lease Expiration (a)
Number of Leases ExpiringNumber of Tenants with Leases ExpiringABRABR %
Square Footage (b)
Square Footage %
Remaining 20249 6 $12,443 9.7 %863,272 10.8 %
202513 13 17,162 13.4 %859,031 10.7 %
20268 8 9,376 7.3 %574,783 7.2 %
20277 6 8,713 6.8 %499,571 6.2 %
20287 6 13,903 10.8 %627,627 7.8 %
20295 4 6,785 5.3 %358,013 4.5 %
20305 4 31,157 24.3 %1,669,375 20.8 %
20311 1 615 0.5 %50,600 0.6 %
20322 2 3,620 2.8 %257,008 3.2 %
20331 1 3,983 3.1 %219,812 2.7 %
20352 2 2,951 2.3 %201,229 2.5 %
20372 2 5,374 4.2 %402,962 5.0 %
20381 1 2,458 1.9 %104,598 1.3 %
20392 2 9,791 7.6 %745,268 9.3 %
Vacant— — — — %589,924 7.4 %
Total (c)
65 $128,331 100.0 %8,023,073 100.0 %

chart-d90cf818266a4f58bcba.jpg
________
(a)Assumes tenants do not exercise any renewal options or purchase options.
(b)Excludes 570,999 of operating square footage for a garage at a domestic property.
(c)See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of pro rata.
 Net Lease Office Properties | 12

Net Lease Office Properties
First Quarter 2024
Property List
Dollars in thousands. Pro rata. As of March 31, 2024.

U.S. Assets:
Encumbered Status
#Primary TenantIndustry
Credit (a)
CityState
Square Footage (b)
ABRRent Increase TypeDate of Next Increase
WALT (c)
NLOP Mortgage LoanOther Mortgages
1
KBR, Inc. (d) (e)
Construction & EngineeringNon-IGHoustonTexas1,064,788$21,294Fixed: One-time 7.78%Jan-276.1
✓
$—
2
FedEx Corporation (sold on 4/26/24) (f)
Air Freight & LogisticsIGColliervilleTennessee390,380$5,491Fixed: 0.75% annuallyOct-2415.7
✓
$—
3BCBSM, Inc.Managed Health CareIGEaganMinnesota442,542$5,051Fixed: 2.00% annuallyN/A0.2
✓
$—
4JPMorgan Chase Bank, N.A.Diversified BanksIGFort WorthTexas386,154$4,755CPI: 0.0% Floor / 2.0% CapMar-255.9
✓
$—
5CVS Health CorporationHealth Care ServicesIGScottsdaleArizona354,888$4,300Fixed: 2.00% annually
Est. 2025 (g)
15.1
✓
$—
6Pharmaceutical Product Development, LLCPharmaceuticalsIGMorrisvilleNorth Carolina219,812$3,983Fixed: 2.00% annuallyOct-249.7
✓
$—
7Omnicom Group, Inc.AdvertisingIGPlaya VistaCalifornia120,000$3,961NoneN/A4.5
✓
$—
8
Orbital ATK, Inc. (h)
Aerospace & DefenseIGPlymouthMinnesota191,336$3,821Fixed: Rent reset to marketDec-245.7$25,621
9R.R. Donnelley & Sons CompanyCommercial PrintingNon-IGWarrenvilleIllinois167,215$3,327Fixed: 2.00% annuallySep-243.5✓$—
10
Caremark RX, L.L.C. (d) (e)
Health Care ServicesIGChandlerArizona183,000$3,271Fixed: $0.50/SF annuallyN/A0.2✓$—
11
Board of Regents, State of Iowa (i)
Government Related ServicesIGCoralvilleIowa191,700$3,254CPI: 0.0% Floor / No CapNov-256.6$—
12
Bankers Financial Corporation (d) (e)
Property & Casualty InsuranceNon-IGSt. PetersburgFlorida167,581$3,150Fixed: 2.50% annuallyAug-244.3✓$—
13JPMorgan Chase Bank, N.A.Diversified BanksIGTampaFlorida176,150$2,993CPI: 0.0% Floor / 2.0% CapMar-255.9✓$—
14
Exelon Generation Company, LLC (transferred to the lender on 4/17/24) (j)
Electric UtilitiesIGWarrenvilleIllinois146,745$2,935Fixed: $0.50/SF annuallyJul-242.2$19,830
15Google, LLCInternet Software & ServicesIGVeniceCalifornia67,681$2,930Fixed: 3.00% annuallyJan-251.6$—
16BCBSM, Inc.Managed Health CareIGEaganMinnesota227,666$2,887Fixed: 2.00% annuallyN/A0.2✓$—
17
ICU MEDICAL, INC. (d)
Health Care SuppliesNon-IGPlymouthMinnesota182,250$2,821Fixed: 3.25% annuallyFeb-253.5✓$—
18BCBSM, Inc.Managed Health CareIGEaganMinnesota202,608$2,704Fixed: 2.00% annuallyJan-2512.8✓$—
19Intuit Inc.Internet Software & ServicesIGPlanoTexas166,033$2,577Fixed: One-time $2.00/SF in '21N/A2.2$21,900
20
DMG MORI SEIKI U.S.A., INC. (sold on 4/30/24) (f)
Industrial MachineryIGHoffman EstatesIllinois104,598$2,458Fixed: 3.00% annuallyJan-2514.8✓$—
21Veritas Bermuda, LTDSystems SoftwareNon-IGRosevilleMinnesota136,125$2,211Fixed: 2.00% annuallyDec-248.7✓$—
 Net Lease Office Properties | 13

22Cenlar FSBRegional BanksNon-IGYardleyPennsylvania105,584$2,053Fixed: 2.70% annuallyJan-254.2✓$—
23iHeartCommunications, Inc.BroadcastingNon-IGSan AntonioTexas120,147$2,010Fixed: 2.00% annuallyFeb-2510.8✓$—
24BCBSM, Inc.Managed Health CareIGEaganMinnesota144,864$1,958Fixed: 2.00% annuallyJan-2512.8✓$—
25
Cofinity, Inc./Aetna Life Insurance Co. (d) (e)
Multi-line InsuranceIGSouthfieldMichigan94,453$1,907Fixed: One-time 6.90% in '23N/A0.8✓$—
26Arbella Service Company, Inc.Property & Casualty InsuranceIGQuincyMassachusetts132,160$1,850Fixed: 'One-time $1.00/SF in '22N/A3.2✓$—
27ICF Consulting Group, Inc.IT Consulting & Other ServicesNon-IGMartinsvilleVirginia93,333$1,785CPI: 0.0% Floor / No CapJan-252.8✓$—
28Safelite Group, Inc.Specialized Consumer ServicesNon-IGRio RanchoNew Mexico94,649$1,500Fixed: 2.00% annuallyJan-255.2✓$—
29Acosta, Inc.AdvertisingNon-IGJacksonvilleFlorida88,062$1,497Fixed: $0.50/SF annuallyJul-243.3$10,014
30Master Lock Company, LLCBuilding ProductsNon-IGOak CreekWisconsin120,883$1,409Fixed: 2.00% annuallyJun-248.2✓$—
31
JPMorgan Chase Bank, N.A. (d) (e)
Diversified BanksIGTampaFlorida135,733$1,387CPI: 0.0% Floor / 2.0% CapN/A1.0✓$—
32Midcontinent Independent Stm Op Inc.Electric UtilitiesIGEaganMinnesota60,463$1,133Fixed: $0.25/SF annuallyMar-251.9$9,076
33Emerson Electric Co.Industrial MachineryIGHoustonTexas52,144$1,082Fixed: $0.50/SF annuallyNov-241.6✓$—
34Radiate Holdings, L.P.Cable & SatelliteNon-IGSan MarcosTexas47,000$1,043CPI: 0.0% Floor / 3.0% CapAug-244.4$—
35North American Lighting, Inc.Auto Parts & EquipmentNon-IGFarmington HillsMichigan75,286$1,032Fixed: 2.50% annuallyApr-242.0$6,173
36Arcfield Acquisition CorporationAerospace & DefenseNon-IGKing of PrussiaPennsylvania88,578$1,000Fixed: One-time 17.50% in '23N/A2.3✓$—
37Merative L.P.IT Consulting & Other ServicesNon-IGHartlandWisconsin81,082$940CPI: 0.0% Floor / No CapDec-2411.7$1,899
38
Pioneer Credit Recovery, Inc. (d)
Diversified Support ServicesNon-IGMoorestownNew Jersey65,567$912Fixed: 2.50% annuallyN/A0.9✓$—
39Charter Communications Operating, LLCCable & SatelliteNon-IGBridgetonMissouri78,080$781Fixed: $0.50/SF annuallyApr-241.0✓$—
40Xileh Holding Inc.Multi-Sector HoldingsIGAuburn HillsMichigan55,490$711Fixed: 2.50% annuallyJan-2513.8✓$—
41Undisclosed – multi-national provider of industrial gasesIndustrial GasesIGHoustonTexas49,821$617Fixed: 2.00% annuallyJan-251.8✓$—
42APCO Holdings, Inc.Property & Casualty InsuranceNon-IGNorcrossGeorgia50,600$615Fixed: 2.50% annuallyMar-256.9✓$—
43Radiate Holdings, L.P.Cable & SatelliteNon-IGWacoTexas30,699$459CPI: 0.0% Floor / 3.0% CapAug-244.4$—
44S&ME, Inc.Environmental & Facilities ServicesNon-IGRaleighNorth Carolina27,770$430Fixed: 3.00% annuallyN/A0.5✓$—
45Radiate Holdings, L.P.Cable & SatelliteNon-IGCorpus ChristiTexas20,717$344CPI: 0.0% Floor / 3.0% CapAug-244.4$—
46Radiate Holdings, L.P.Cable & SatelliteNon-IGOdessaTexas21,193$230CPI: 0.0% Floor / 3.0% CapAug-244.4$—
47Radiate Holdings, L.P.Cable & SatelliteNon-IGSan MarcosTexas14,400$206CPI: 0.0% Floor / 3.0% CapAug-244.4✓$—
48BCBSM, Inc.Managed Health CareIGEaganMinnesota12,286$187Fixed: 2.00% annuallyN/A0.2✓$—
49
Vacant (formerly McKesson Corporation) (k)
N/AN/AThe WoodlandsTexas204,063$0N/AN/AN/A
✓
$—
 Net Lease Office Properties | 14

50
Vacant (formerly AVT Technology Solutions LLC) (transferred to the lender on 4/26/24) (j)
N/AN/ATempeArizona132,070$0N/AN/AN/A$13,160
U.S. Total (k)
7,586,429$119,2526.0$107,673
European Assets:
Encumbered Status
#Primary TenantIndustry
Credit (a)
CityCountrySquare FootageABRRent Increase TypeDate of Next Increase
WALT (c)
NLOP Mortgage LoanOther Mortgages
1Siemens ASIndustrial ConglomeratesIGOsloNorway165,905$4,404CPI: 0.0% Floor / No CapJan-251.7$40,082
2E.On UK PLCInternet RetailIGHoughton le SpringUnited Kingdom217,339$3,603CPI: 2.0% Floor / 4.0% CapN/A1.3$—
3Nokia CorporationCommunications EquipmentIGKrakowPoland53,400$1,072CPI: 0.0% Floor / No CapSep-245.4$—
European Total (l)
436,644$9,0792.0$40,082
________
✓ Indicates an asset that is in the NLOP Financing Arrangements collateral pool.
_    Indicates an asset that was disposed of in April 2024, as described in the Summary Metrics section.
(a)“IG” refers to investment grade rated tenants.
(b)Excludes 570,999 of operating square footage for a parking garage associated with the KBR, Inc. property in Houston, Texas.
(c)Assumes parties do not exercise any renewal or purchase options pursuant to their applicable leases.
(d)Denotes multi-tenant property. Primary tenant generating largest percentage of ABR shown. Industry, credit, rent increase type and next rent increase are for primary tenant.
(e)Denotes leased property that is not 100% occupied.
(f)These properties were sold in April 2024, as described in the Summary Metrics section.
(g)Fixed rent increase structure with 2.00% annual bumps commences upon completion of an in-process renovation, which is anticipated to occur in 2024. The first rent increase will be one year after completion of the renovation.
(h)In the fourth quarter of 2023, the lease term was extended by five years. In connection with the rent terms under the renewal term, rent is based on fair market value. The determination of rent has not been finalized as of the date of this report.
(i)We own a 90% controlling interest in this consolidated property.
(j)In April 2024, we transferred ownership of these properties and the related non-recourse mortgage loans to their respective mortgage lenders, as described in the Summary Metrics section.
(k)Denotes property that is vacant as of the date of this report.
(l)See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of pro rata.
 Net Lease Office Properties | 15





Net Lease Office Properties
Appendix
First Quarter 2024



financialdocumentcoverslidc.jpg
 Net Lease Office Properties | 16

Net Lease Office Properties
First Quarter 2024
Normalized Pro Rata Cash NOI
In thousands.
Three Months Ended March 31, 2024
Consolidated Lease Revenues and Other
Total lease revenues – as reported$38,314 
Income from finance leases – as reported89 
Parking garage revenues (a)
513 
Less: Consolidated Reimbursable and Non-Reimbursable Property Expenses
Reimbursable property expenses – as reported6,200 
Non-reimbursable property expenses – as reported2,251 
30,465 
Adjustments for Pro Rata Ownership of Real Estate Joint Ventures:
Less: Pro rata share of NOI attributable to noncontrolling interests(90)
(90)
30,375 
Adjustments for Pro Rata Non-Cash Items:
Add: Above- and below-market rent intangible lease amortization1,077 
Less: Straight-line and other leasing and financing adjustments777 
Add: Other non-cash items98 
1,952 
Pro Rata Cash NOI (b)
32,327 
Adjustment to normalize for intra-period dispositions (c)
(1,359)
Normalized Pro Rata Cash NOI (b)
$30,968 
 Net Lease Office Properties | 17

Net Lease Office Properties
First Quarter 2024

The following table presents a reconciliation from Net loss attributable to NLOP to Normalized pro rata cash NOI:
Three Months Ended March 31, 2024
Net Loss Attributable to NLOP
Net loss attributable to NLOP – as reported$(27,842)
Adjustments for Consolidated Operating Expenses
Add: Operating expenses – as reported34,207 
Less: Property expenses, excluding reimbursable tenant costs – as reported(2,251)
31,956 
Adjustments for Other Consolidated Revenues and Expenses:
Less: Other lease-related income (excluding parking garage revenues)(5,091)
Less: Reimbursable property expenses – as reported(6,200)
Add: Other income and (expenses) – as reported37,397 
Add: Provision for income taxes – as reported224 
26,330 
Other Adjustments:
Adjustment to normalize for intra-period dispositions (c)
(1,359)
Add: Above- and below-market rent intangible lease amortization1,077 
Less: Straight-line and other leasing and financing adjustments777 
Add: Property expenses, excluding reimbursable tenant costs, non-cash98 
Add: Adjustments for pro rata ownership(69)
524 
Normalized Pro Rata Cash NOI (b)
$30,968 
________
(a)Amount is comprised of revenues from a parking garage at a domestic property and is included in Other lease-related income on our consolidated income statements.
(b)Pro rata cash NOI and normalized pro rata cash NOI are non-GAAP measures. See the Disclosures Regarding Non-GAAP and Other Metrics section that follows for a description of our non-GAAP measures and for details on how pro rata cash NOI and normalized pro rata cash NOI are calculated.
(c)For properties disposed of during the period, the adjustment eliminates our pro rata share of cash NOI for the period.
 Net Lease Office Properties | 18

Net Lease Office Properties
First Quarter 2024
Disclosures Regarding Non-GAAP and Other Metrics

Non-GAAP Financial Disclosures
FFO and AFFO
Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated a non-GAAP measure known as FFO, which we believe to be an appropriate supplemental measure, when used in addition to and in conjunction with results presented in accordance with GAAP, to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental non-GAAP measure. FFO is not equivalent to, nor a substitute for, net income or loss as determined under GAAP.
We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as restated in December 2018. The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from the sale of certain real estate, impairment charges on real estate or other assets incidental to the company’s main business, gains or losses on changes in control of interests in real estate and depreciation and amortization from real estate assets; and after adjustments for unconsolidated partnerships and jointly owned investments. Adjustments for unconsolidated partnerships and jointly owned investments are calculated to reflect FFO on the same basis.
We also modify the NAREIT computation of FFO to adjust GAAP net income for certain non-cash charges, such as amortization of real estate-related intangibles, deferred income tax benefits and expenses, straight-line rent and related reserves, other non-cash rent adjustments, non-cash allowance for credit losses on finance leases, stock-based compensation, non-cash environmental accretion expense, amortization of discounts and premiums on debt and amortization of deferred financing costs. Our assessment of our operations is focused on long-term sustainability and not on such non-cash items, which may cause short-term fluctuations in net income but have no impact on cash flows. Additionally, we exclude non-core income and expenses, such as gains or losses from extinguishment of debt, merger and acquisition expenses, and spin-off expenses. We also exclude realized and unrealized gains/losses on foreign currency exchange rate movements (other than those realized on the settlement of foreign currency derivatives), which are not considered fundamental attributes of our business plan and do not affect our overall long-term operating performance. We refer to our modified definition of FFO as AFFO. We exclude these items from GAAP net income to arrive at AFFO as they are not the primary drivers in our decision-making process and excluding these items provides investors a view of our portfolio performance over time and makes it more comparable to other REITs that are currently not engaged in acquisitions, mergers and restructuring, which are not part of our normal business operations. AFFO also reflects adjustments for jointly owned investments. We use AFFO as one measure of our operating performance when we formulate corporate goals, evaluate the effectiveness of our strategies and determine executive compensation.
We believe that AFFO is a useful supplemental measure for investors to consider as we believe it will help them to better assess the sustainability of our operating performance without the potentially distorting impact of these short-term fluctuations. However, there are limits on the usefulness of AFFO to investors. For example, impairment charges and unrealized foreign currency exchange rate losses that we exclude may become actual realized losses upon the ultimate disposition of the properties in the form of lower cash proceeds or other considerations. We use our FFO and AFFO measures as supplemental financial measures of operating performance. We do not use our FFO and AFFO measures as, nor should they be considered to be, alternatives to net income computed under GAAP, or as alternatives to net cash provided by operating activities computed under GAAP, or as indicators of our ability to fund our cash needs.
Pro Rata Cash NOI
Cash net operating income (“cash NOI”) is a non-GAAP financial measure that is intended to reflect the performance of our properties. We define cash NOI as cash rents from our properties less non-reimbursable property expenses. Cash NOI excludes amortization of intangibles and straight-line rent adjustments that are included in GAAP lease revenues. We present cash NOI on a pro rata basis (“pro rata cash NOI”) to account for our share of income related to noncontrolling interests. We believe that pro rata cash NOI is a helpful measure that both investors and management can use to evaluate the financial performance of our properties and it allows for comparison of our operating performance between periods and to other REITs. Pro rata cash NOI should not be considered as an alternative to net income as an indication of our financial performance or to cash flows as a measure of liquidity or our ability to fund all needs. The method by which we calculate and present cash NOI and/or pro rata cash NOI may not be directly comparable to the way other REITs present such metrics.
Normalized Pro Rata Cash NOI
Normalized pro rata cash NOI is pro rata cash NOI as defined above adjusted primarily to exclude our pro rata share of cash NOI from properties disposed of during the most recent quarter. We believe this measure provides a helpful representation of our net operating income from our in-place leased properties.
 Net Lease Office Properties | 19

Net Lease Office Properties
First Quarter 2024

Other Metrics
Pro Rata Metrics
This supplemental package contains certain metrics prepared on a pro rata basis. We refer to these metrics as pro rata metrics. We have one investment in which our economic ownership is less than 100%. On a full consolidation basis, we report 100% of the assets, liabilities, revenues and expenses of this investment that is deemed to be under our control, even though our ownership is less than 100%. On a pro rata basis, we generally present our proportionate share, based on our economic ownership of this jointly owned investment, of the assets, liabilities, revenues and expenses of this investment. Multiplying our jointly owned investment’s financial statement line items by our percentage ownership and adding or subtracting those amounts from our totals, as applicable, may not accurately depict the legal and economic implications of holding an ownership interest of less than 100% in our jointly owned investment.
ABR
ABR represents contractual minimum annualized base rent for our properties and reflects exchange rates as of March 31, 2024. If there is a rent abatement, we annualize the first monthly contractual base rent following the free rent period. ABR is presented on a pro rata basis.
 Net Lease Office Properties | 20
v3.24.1.1.u2
Cover Page Document
May 10, 2024
Cover [Abstract]  
Document Type 8-K
Document Period End Date May 10, 2024
Entity Registrant Name Net Lease Office Properties
Entity Incorporation, State or Country Code MD
Entity File Number 001-41812
Entity Tax Identification Number 92-0887849
Entity Address, Street Address One Manhattan West, 395 9th Avenue, 58th Floor
Entity Address, City New York,
Entity Address, State NY
Entity Address, Postal Zip Code 10001
City Area Code 844
Local Phone Number 656-7348
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of each class Common Shares of Beneficial Interest, par value $0.001 per share
Trading Symbol(s) NLOP
Name of each exchange on which registered NYSE
Entity Emerging Growth Company true
Entity Central Index Key 0001952976
Amendment Flag false
Entity Ex Transition Period false
Net Lease Office Propert... (NYSE:NLOP)
Historical Stock Chart
Von Nov 2024 bis Dez 2024 Click Here for more Net Lease Office Propert... Charts.
Net Lease Office Propert... (NYSE:NLOP)
Historical Stock Chart
Von Dez 2023 bis Dez 2024 Click Here for more Net Lease Office Propert... Charts.