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What changed in Net Lease Office Properties's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Net Lease Office Properties's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+184 added−230 removedSource: 10-K (2025-02-27) vs 10-K (2024-03-06)

Top changes in Net Lease Office Properties's 2024 10-K

184 paragraphs added · 230 removed · 160 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

55 edited+12 added−48 removed34 unchanged
Biggest changeNet Lease Office Properties 2023 10-K – 36 Consolidated FFO and AFFO were as follows (in thousands): Years Ended December 31, 2023 2022 2021 Net (loss) income attributable to NLOP $ (131,746) $ 15,779 $ 1,418 Adjustments: Depreciation and amortization of real property 74,998 63,205 58,580 Impairment charges — real estate (a) 63,143 — — Impairment charges — goodwill (b) 62,456 — — Loss on sale of real estate, net 3,608 — — Proportionate share of adjustments for noncontrolling interests (c) (206) (87) — Total adjustments 203,999 63,118 58,580 FFO (as defined by NAREIT) attributable to NLOP 72,253 78,897 59,998 Adjustments: Separation and distribution related costs and other (d) 8,446 6,025 — Amortization of deferred financing costs 7,672 2,913 1,385 Above- and below-market rent intangible lease amortization, net 4,335 1,959 834 Stock-based compensation 2,904 3,161 2,398 Tax benefit — deferred and other (1,200) (1,043) (227) Straight-line and other leasing and financing adjustments (631) (2,809) (3,039) Other amortization and non-cash items 547 (370) (1,086) Other (gains) and losses (e) (337) 7 17,234 Proportionate share of adjustments for noncontrolling interests (c) (61) (22) — Total adjustments 21,675 9,821 17,499 AFFO attributable to NLOP $ 93,928 $ 88,718 $ 77,497 Summary FFO (as defined by NAREIT) attributable to NLOP $ 72,253 $ 78,897 $ 59,998 AFFO attributable to NLOP $ 93,928 $ 88,718 $ 77,497 __________ (a) Amount for the year ended December 31, 2023 represents impairment charges recognized on five properties ( Note 9 ).
Biggest changeFFO and AFFO were as follows (in thousands): Years Ended December 31, 2024 2023 Net loss attributable to NLOP $ (91,471) $ (131,746) Adjustments: Impairment charges — real estate 78,237 63,143 Depreciation and amortization of real property 56,696 74,998 (Gain) loss on sale of real estate, net (20,216) 3,608 Impairment charges — goodwill (a) — 62,456 Proportionate share of adjustments for noncontrolling interests (b) (207) (206) Total adjustments 114,510 203,999 FFO (as defined by NAREIT) attributable to NLOP 23,039 72,253 Adjustments: Amortization of deferred financing costs 31,446 7,672 Other (gains) and losses (c) 3,855 (337) Tax benefit — deferred and other (3,271) (1,200) Above- and below-market rent intangible lease amortization, net 3,003 4,335 Straight-line and other leasing and financing adjustments 2,314 (631) Other amortization and non-cash items 1,449 547 Stock-based compensation 250 2,904 Separation and distribution related costs and other (d) 16 8,446 Proportionate share of adjustments for noncontrolling interests (b) (53) (61) Total adjustments 39,009 21,675 AFFO attributable to NLOP $ 62,048 $ 93,928 Summary FFO (as defined by NAREIT) attributable to NLOP $ 23,039 $ 72,253 AFFO attributable to NLOP $ 62,048 $ 93,928 __________ (a) Amount for the year ended December 31, 2023 represents an impairment charge to reduce the carrying value of goodwill to zero, since the Company’s trading value as a public company subsequent to the completion of the Spin-Off resulted in a market capitalization that was significantly below the carrying value of our net assets ( Note 8 , Note 9 ).
In addition, the financial results reflect 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.
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.
Basis of Presentation Prior to the Spin-Off 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 on a combined basis, in each case, in accordance with U.S. generally accepted accounting principles (“GAAP”).
Basis of Presentation Prior to the Spin-Off 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. generally accepted accounting principles (“GAAP”).
Net Lease Office Properties 2023 10-K – 26 Portfolio The tables below represent information about our portfolio at December 31, 2023 on a pro rata basis. See Terms and Definitions below for a description of pro rata amounts and ABR.
Net Lease Office Properties 2024 10-K – 26 Portfolio The tables below represent information about our portfolio at December 31, 2024 on a pro rata basis. See Terms and Definitions below for a description of pro rata amounts and ABR.
ABR — ABR represents contractual minimum annualized base rent for our properties and reflects exchange rates as of December 31, 2023. If there is a rent abatement, we annualize the first monthly contractual base rent following the free rent period.
ABR — ABR represents contractual minimum annualized base rent for our properties and reflects exchange rates as of December 31, 2024. If there is a rent abatement, we annualize the first monthly contractual base rent following the free rent period.
Other Gains and (Losses) For the year ended December 31, 2023, other gains and (losses) of $0.5 million were primarily comprised of net realized and unrealized losses on foreign currency exchange rate movements. For the year ended December 31, 2022, other gains and (losses) were immaterial.
For the year ended December 31, 2023, other gains and (losses) of $0.5 million were primarily comprised of net realized and unrealized losses on foreign currency exchange rate movements.
Net Lease Office Properties 2023 10-K – 35 Funds from Operations and Adjusted Funds from Operations Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts (“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.
Funds from Operations and Adjusted Funds from Operations Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts (“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.
Of this amount, $3.0 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 • unleveraged properties that had an aggregate asset carrying value of approximately $158.8 million at December 31, 2023, although there can be no assurance that we would be able to sell or obtain financing for these properties.
Of this amount, $8.6 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 • unleveraged properties that had an aggregate asset carrying value of approximately $78.9 million at December 31, 2024, although there can be no assurance that we would be able to sell or obtain financing for these properties.
Net Lease Office Properties 2023 10-K – 31 Loss on Sale of Real Estate, Net Loss on sale of real estate, net, consists of loss on the sale of properties that were (i) disposed of or (ii) subject to a purchase agreement resulting in a lease modification, during the reporting period, as more fully described in Note 6 , Note 7 , and Note 16 .
Gain (Loss) on Sale of Real Estate, Net Gain (loss) on sale of real estate, net, consists of gain (loss) on the sale of properties that were (i) disposed of or (ii) subject to a purchase agreement resulting in a lease modification, during the reporting period, as more fully described in Note 6 , Note 7 , and Note 16 .
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. AFFO also reflects adjustments for jointly owned investments.
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.
NLOP has elected to take advantage of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, NLOP, as an emerging growth company, Net Lease Office Properties 2023 10-K – 23 can adopt the new or revised standard at the time private companies adopt the new or revised standard.
NLOP has elected to take advantage of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, NLOP, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
However, there are limits on the usefulness of AFFO to investors. For example, impairment charges and unrealized foreign currency 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.
For example, impairment charges and unrealized foreign currency 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.
Asset Management Fees Upon completion of the Spin-Off on November 1, 2023 ( Note 1 ), we began paying asset management fees to our Advisor, which totaled $1.2 million during the year ended December 31, 2023 ( Note 5 ).
Asset Management Fees Upon completion of the Spin-Off on November 1, 2023 ( Note 1 ), we began paying asset management fees to our Advisor, which totaled $6.2 million and $1.2 million during the years ended December 31, 2024 and 2023, respectively ( Note 5 ).
Additionally, in the formulation of our goals and in the evaluation of the effectiveness of our strategies, we use Funds from Operations (“FFO”) and AFFO, which are non-GAAP measures defined by our management.
Additionally, in the formulation of our goals and in the evaluation of the effectiveness of our strategies, we use FFO and AFFO, which are non-GAAP measures defined by our management.
Impairments of Real Estate For real estate assets held for investment and related intangible assets in which an impairment indicator is identified, we follow a two-step process to determine whether an asset is impaired and to determine the amount of the charge.
Net Lease Office Properties 2024 10-K – 33 Impairments of Real Estate For real estate assets held for investment and related intangible assets in which an impairment indicator is identified, we follow a two-step process to determine whether an asset is impaired and to determine the amount of the charge.
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable.
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt Net Lease Office Properties 2024 10-K – 24 out is irrevocable.
Separation and Distribution Related Costs and Other For the year ended December 31, 2023, separation and distribution related costs and other are comprised of costs related to the Spin-Off, which closed on November 1, 2023 ( Note 1 ).
Separation and Distribution Related Costs and Other For the year ended December 31, 2023, separation and distribution related costs and other are comprised of costs related to the Spin-Off, which closed on November 1, 2023 ( Note 1 ). Impairment Charges — Goodwill Our impairment charges on goodwill are described in Note 9 .
Top Ten Tenants by ABR (dollars in thousands) Tenant/Lease Guarantor State/Country ABR ABR Percent Square Footage (a) Number of Properties Weighted-Average Lease Term (Years) KBR, Inc. Texas $ 20,156 14.2 % 913,713 1 6.5 BCBSM, Inc. Minnesota 13,007 9.1 % 1,029,966 5 5.4 JPMorgan Chase Bank, N.A.
Top Ten Tenants by ABR (dollars in thousands) Tenant/Lease Guarantor State/Country ABR ABR Percent Square Footage (a) Number of Properties Weighted-Average Lease Term (Years) KBR, Inc. Texas $ 20,156 22.9 % 913,713 1 5.5 JPMorgan Chase Bank, N.A.
During the next 12 months following December 31, 2023 and thereafter, we expect that our significant cash requirements will include: • making scheduled principal and balloon payments on our non-recourse mortgage debt obligations, totaling $169.5 million, with $34.9 million due during the next 12 months; • making scheduled interest payments on our non-recourse mortgage obligations (future interest payments total $12.7 million, with $6.2 million due during the next 12 months); • making scheduled principal payments on the NLOP Financing Arrangements, totaling $403.2 million, with $4.1 million due during the next 12 months; • making scheduled interest payments on the NLOP Financing Arrangements (future interest payments total $145.5 million, with $47.5 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; • funding future capital commitments and tenant improvement allowances; and • other normal recurring operating expenses.
During the next 12 months following December 31, 2024 and thereafter, we expect that our significant cash requirements will include: • making scheduled principal and balloon payments on our non-recourse mortgage debt obligations, totaling $110.8 million, with $105.0 million due during the next 12 months; • making scheduled interest payments on our non-recourse mortgage debt obligations (future interest payments total $5.3 million, with $5.1 million due during the next 12 months); • making scheduled principal payments on the NLOP Mezzanine Loan, totaling $61.1 million (no amounts are due during the next 12 months); • making scheduled interest payments on the NLOP Mezzanine Loan (future interest payments total $35.9 million, with $9.0 million due during the next 12 months); includes 4.5% payment-in-kind interest that we have the option to capitalize into the principal balance; • funding future capital commitments and tenant improvement allowances; and • other normal recurring operating expenses.
Portfolio Summary As of December 31, 2023 2022 ABR (in thousands) $ 142,438 $ 140,572 Number of properties 55 59 Number of tenants 59 66 Occupancy 97.0 % 97.1 % Weighted-average lease term (in years) 5.8 6.2 Leasable square footage (in thousands) (a) 8,379 8,678 __________ (a) Excludes 570,999 of operating square footage for a parking garage at a domestic property.
Portfolio Summary As of December 31, 2024 2023 ABR (in thousands) $ 88,124 $ 142,438 Number of properties 39 55 Number of tenants 43 59 Occupancy 85.2 % 97.0 % Weighted-average lease term (in years) 4.3 5.8 Leasable square footage (in thousands) (a) 5,613 8,379 __________ (a) Excludes 570,999 of operating square footage for a parking garage at a domestic property.
Income from Finance Leases For the year ended December 31, 2023 as compared to 2022, income from finance leases decreased by $0.6 million, primarily due to the reclassification of our remaining direct financing lease investment to operating lease during the third quarter of 2023 ( Note 7 ).
Income from Finance Leases For the year ended December 31, 2024 as compared to 2023, income from finance leases decreased by $1.1 million, 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 7 ).
We use AFFO as one measure of our operating performance when we formulate corporate goals and evaluate the effectiveness of our strategies. 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.
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.
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 11 ). The NLOP Financing Arrangements are collateralized by the assignment of certain of our previously unencumbered real estate properties.
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, as discussed in Note 1 1 .
Cash Requirements and Liquidity As of December 31, 2023, scheduled debt principal payments total $39.0 million during 2024 and $411.9 million during 2025 ( Note 11 ).
Net Lease Office Properties 2024 10-K – 32 Cash Requirements and Liquidity As of December 31, 2024, scheduled debt principal payments total $105.0 million during 2025 and $5.9 million during 2026 ( Note 11 ).
FFO and AFFO, or similarly titled measures disclosed by other REITs, may not be comparable to our FFO and AFFO measures. Net Lease Office Properties 2023 10-K – 37
These non-GAAP measures should be used in conjunction with net income as defined by GAAP. FFO and AFFO, or similarly titled measures disclosed by other REITs, may not be comparable to our FFO and AFFO measures. Net Lease Office Properties 2024 10-K – 36
Many of these accounting policies require judgment and the use of estimates and assumptions when applying these policies in the preparation of our consolidated financial statements. On a quarterly basis, we evaluate these estimates and judgments based on historical experience as well as other factors that we believe to be reasonable under the circumstances.
On a quarterly basis, we evaluate these estimates and judgments based on historical experience as well as other factors that we believe to be reasonable under the circumstances. These estimates are subject to change in the future if underlying assumptions or factors change. Certain accounting policies, while significant, may not require the use of estimates.
Other Income and Expenses, and Provision for Income Taxes Years Ended December 31, 2023 vs. 2022 2022 vs. 2021 (in thousands) 2023 2022 2021 Change Change Other Income and Expenses Interest expense $ (42,613) $ (26,841) $ (28,641) $ (15,772) $ 1,800 Loss on sale of real estate, net (3,608) — — (3,608) — Other gains and (losses) 456 (7) (17,234) 463 17,227 Provision for income taxes (425) (486) (1,646) 61 1,160 $ (46,190) $ (27,334) $ (47,521) $ (18,856) $ 20,187 Interest Expense 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).
Other Income and Expenses, and Benefit from (Provision for) Income Taxes Years Ended December 31, (in thousands) 2024 2023 Change Other Income and Expenses Interest expense $ (67,962) $ (42,613) $ (25,349) Gain (loss) on sale of real estate, net 20,216 (3,608) 23,824 Other gains and (losses) (2,154) 456 (2,610) Benefit from (provision for) income taxes 2,382 (425) 2,807 $ (47,518) $ (46,190) $ (1,328) Interest Expense 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 (as defined in Note 11 ) 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).
Summary of Financing The table below summarizes our non-recourse mortgages, NLOP Mortgage Loan, and NLOP Mezzanine Loan (dollars in thousands): December 31, 2023 2022 Carrying Value (a) Fixed rate: Non-recourse mortgages (b) $ 125,038 $ 127,794 NLOP Mezzanine Loan (b) 106,299 — 231,337 127,794 Variable rate: NLOP Mortgage Loan — Amount subject to interest rate cap (b) 266,844 — Non-recourse mortgages (b) 43,798 46,495 310,642 46,495 $ 541,979 $ 174,289 Percent of Total Debt Fixed rate 43 % 73 % Variable rate 57 % 27 % 100 % 100 % Weighted-Average Interest Rate at End of Year Fixed rate 9.4 % 4.9 % Variable rate 9.6 % 4.6 % Total debt 9.5 % 4.8 % ____________ (a) This table excludes Parent debt.
Net Lease Office Properties 2024 10-K – 31 Summary of Financing The table below summarizes our non-recourse mortgages, NLOP Mortgage Loan, and NLOP Mezzanine Loan (dollars in thousands): December 31, 2024 2023 Carrying Value Fixed rate: Non-recourse mortgages, net (a) $ 71,488 $ 125,038 NLOP Mezzanine Loan, net (a) 57,957 106,299 129,445 231,337 Variable rate: Non-recourse mortgages, net (a) 39,771 43,798 NLOP Mortgage Loan, net — Amount subject to interest rate cap (a) — 266,844 39,771 310,642 $ 169,216 $ 541,979 Percent of Total Debt Fixed rate 76 % 43 % Variable rate 24 % 57 % 100 % 100 % Weighted-Average Interest Rate at End of Year Fixed rate 9.0 % 9.4 % Variable rate 4.9 % 9.6 % Total debt 8.1 % 9.5 % ____________ (a) Aggregate debt balance includes unamortized discount, net, totaling $1.8 million and $21.6 million as of December 31, 2024 and 2023, respectively, and unamortized deferred financing costs totaling $1.0 million and $9.2 million as of December 31, 2024 and 2023, respectively.
We expect to fund these cash requirements through cash generated from operations and cash received from dispositions of properties. Our liquidity could be adversely affected by refinancing debt at higher interest rates, unanticipated costs, and greater-than-anticipated operating expenses. Certain amounts disclosed above are based on the applicable foreign currency exchange rate at December 31, 2023.
We expect to fund these cash requirements through cash generated from operations and cash received from dispositions of properties. 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.
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.
General and Administrative 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.
(c) Adjustments disclosed elsewhere in this reconciliation are on a consolidated basis. This adjustment reflects our FFO or AFFO on a pro rata basis. (d) Amount for the year ended December 31, 2023 is primarily comprised of costs related to the Spin-Off ( Note 1 ).
(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) Primarily comprised of gains and losses on extinguishment of debt and foreign currency transactions. Amount for the year ended December 31, 2024 includes a loss of $3.2 million related to damages at a property.
AFFO increased in 2022 as compared to 2021, primarily due to lower interest expense and an increase in lease revenues from the properties acquired in the CPA:18 Merger. Portfolio Overview Portfolio information is provided on a pro rata basis, unless otherwise noted below, to better illustrate the economic impact of our one jointly owned investment.
AFFO AFFO decreased in 2024 as compared to 2023, primarily due to the impact of disposition activity, partially offset by higher other lease-related income. Portfolio Overview Portfolio information is provided on a pro rata basis, unless otherwise noted below, to better illustrate the economic impact of our one jointly owned investment.
FFO FFO decreased in 2023 as compared to 2022, primarily due to higher interest expense and Spin-Off costs, partially offset by higher lease revenues contributed from the nine properties acquired in the CPA:18 Merger and lease termination income recognized during 2023.
FFO FFO decreased in 2024 as compared to 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 and Spin-Off costs recognized during 2023.
At December 31, 2023, we had $288.9 million and $114.3 million outstanding on the NLOP Mortgage Loan and NLOP Mezzanine Loan, respectively. Cash Resources At December 31, 2023, our cash resources consisted of the following: • cash and cash equivalents totaling $16.3 million.
At December 31, 2024, we had $61.1 million total principal outstanding on the NLOP Mezzanine Loan. In February 2025, we repaid $3.3 million of outstanding principal on the NLOP Mezzanine Loan using excess cash ( Note 18 ). Cash Resources At December 31, 2024, our cash resources consisted of the following: • cash and cash equivalents totaling $25.1 million.
Environmental Obligations In connection with the purchase of many of our properties, we required the sellers to perform environmental reviews. We believe, based on the results of these reviews, that our properties were in substantial compliance with federal, state, and foreign environmental statutes at the time the properties were acquired.
We believe, based on the results of these reviews, that these properties were in substantial compliance with federal, state, and foreign environmental statutes at the time the properties were acquired. In most instances where contamination has been identified, tenants are actively engaged in the remediation process and addressing identified conditions.
Financial Highlights During the year ended December 31, 2023, we completed the following (as further described in the consolidated financial statements): Dispositions • We disposed of four properties for total proceeds, net of selling costs, of $38.9 million ( Note 16 ).
Financial Highlights During the year ended December 31, 2024 and through the date of this Report, we completed the following (as further described in the consolidated financial statements): Dispositions • During the year ended December 31, 2024, we sold 14 properties for total proceeds, net of selling costs, of $320.1 million ( Note 16 ). • 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 16 ).
References herein to “emerging growth company” have the meaning associated with it in the JOBS Act. Significant Developments Spin-Off On November 1, 2023, WPC completed the Spin-Off of 59 office properties into NLOP.
References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.
Net cash used in financing activities decreased by $12.7 million during 2022 as compared to 2021, primarily due to a decrease in prepayments of mortgage principal and other debt instruments.
Net Cash Used in Financing Activities — Net cash used in financing activities increased by $331.2 million during 2024 as compared to 2023, primarily due to higher payments of the NLOP Financing Arrangements and mortgage principal.
Net Lease Office Properties 2023 10-K – 27 Lease Expirations (dollars in thousands) Year of Lease Expiration (a) Number of Leases Expiring Number of Tenants with Leases Expiring ABR ABR Percent Square Footage (b) Square Footage Percent 2024 11 8 $ 19,081 13.4 % 1,199,405 14.3 % 2025 13 13 17,158 12.0 % 859,031 10.2 % 2026 8 8 9,361 6.6 % 574,783 6.9 % 2027 7 6 8,652 6.1 % 499,571 6.0 % 2028 7 6 13,800 9.7 % 627,627 7.5 % 2029 5 4 6,768 4.8 % 358,013 4.3 % 2030 5 4 31,005 21.8 % 1,669,375 19.9 % 2031 2 2 5,785 4.1 % 326,325 3.9 % 2032 2 2 3,620 2.5 % 257,008 3.1 % 2033 1 1 3,983 2.8 % 219,812 2.6 % 2034 1 1 1,761 1.2 % 80,664 1.0 % 2035 2 2 2,911 2.0 % 201,229 2.4 % 2037 2 2 5,735 4.0 % 402,962 4.8 % 2038 2 2 7,327 5.1 % 459,486 5.5 % 2039 1 1 5,491 3.9 % 390,380 4.6 % Vacant — — — — % 253,791 3.0 % Total 69 $ 142,438 100.0 % 8,379,462 100.0 % __________ (a) Assumes tenants do not exercise any renewal options or purchase options.
Net Lease Office Properties 2024 10-K – 27 Lease Expirations (dollars in thousands) Year of Lease Expiration (a) Number of Leases Expiring Number of Tenants with Leases Expiring ABR ABR Percent Square Footage (b) Square Footage Percent 2025 13 12 $ 13,890 15.8 % 730,062 13.0 % 2026 7 7 6,014 6.8 % 369,460 6.6 % 2027 7 6 8,834 10.0 % 499,571 8.9 % 2028 5 4 8,628 9.8 % 371,447 6.6 % 2029 5 4 5,349 6.1 % 358,013 6.4 % 2030 7 6 34,484 39.1 % 1,772,623 31.6 % 2031 1 1 615 0.7 % 50,600 0.9 % 2032 2 2 3,692 4.2 % 257,008 4.6 % 2033 1 1 4,063 4.6 % 219,812 3.9 % 2035 1 1 2,010 2.3 % 120,147 2.1 % 2037 1 1 545 0.6 % 31,120 0.6 % Vacant — — — — % 833,297 14.8 % Total 50 $ 88,124 100.0 % 5,613,160 100.0 % __________ (a) Assumes tenants do not exercise any renewal options or purchase options.
While we believe that FFO and AFFO are important supplemental measures, they should not be considered as alternatives to net income as an indication of a company’s operating performance. These non-GAAP measures should be used in conjunction with net income as defined by GAAP.
(d) Amount for the year ended December 31, 2023 is primarily comprised of costs related to the Spin-Off ( Note 1 ). Net Lease Office Properties 2024 10-K – 35 While we believe that FFO and AFFO are important supplemental measures, they should not be considered as alternatives to net income as an indication of a company’s operating performance.
Florida, Texas 8,891 6.2 % 666,869 3 5.4 FedEx Corporation Tennessee 5,491 3.9 % 390,380 1 15.9 Total E&P Norge AS (b) Norway 5,185 3.6 % 275,725 1 7.5 Siemens AS (b) Norway 4,503 3.2 % 165,905 1 2.0 McKesson Corporation (US Oncology) (c) Texas 4,406 3.1 % 204,063 1 0.1 CVS Health Corporation Arizona 4,300 3.0 % 354,888 1 15.0 Pharmaceutical Product Development, LLC North Carolina 3,983 2.8 % 219,812 1 9.9 Omnicom Group, Inc.
Florida, Texas 9,069 10.3 % 666,869 3 4.4 Siemens AS (b) Norway 4,198 4.8 % 165,905 1 1.0 Pharmaceutical Product Development, LLC North Carolina 4,063 4.6 % 219,812 1 8.9 Omnicom Group, Inc. California 3,961 4.5 % 120,000 1 3.7 R.R.
For the year ended December 31, 2023 as compared to 2022, interest expense increased by $15.8 million, primarily due to the $455.0 million of NLOP Financing Arrangements entered into during 2023 ( Note 11 ). The weighted-average interest rate for our debt instruments as of December 31, 2023 increased to 9.5% as compared to 4.8% as of December 31, 2022.
Net Lease Office Properties 2024 10-K – 30 For the year ended December 31, 2024 as compared to 2023, interest expense increased by $25.3 million, primarily due to the $455.0 million of NLOP Financing Arrangements that were funded on November 1, 2023 ( Note 11 ).
We record environmental obligations within Accounts payable, accrued expenses and other liabilities in the consolidated financial statements. See Item 1A. Risk Factors for further discussion of potential environmental risks. Net Lease Office Properties 2023 10-K – 34 Critical Accounting Estimates Our significant accounting policies are described in Note 3 .
We believe that the ultimate resolution of any environmental matters should not have a material adverse effect on our financial condition, liquidity, or results of operations. We record environmental obligations within Accounts payable, accrued expenses and other liabilities in the consolidated financial statements. See Item 1A. Risk Factors for further discussion of potential environmental risks.
These estimates are subject to change in the future if underlying assumptions or factors change. Certain accounting policies, while significant, may not require the use of estimates. Below is a summary of certain critical accounting estimates used in the preparation of our consolidated financial statements.
Below is a summary of certain critical accounting estimates used in the preparation of our consolidated financial statements. Please also refer to our accounting policies described under Critical Accounting Policies and Estimates in Note 3 .
See Supplemental Financial Measures below for our definition of this non-GAAP measure and a reconciliation to its most directly comparable GAAP measure.
See Supplemental Financial Measures below for our definition of this non-GAAP measure and a reconciliation to its most directly comparable GAAP measure. Revenues Total revenues decreased in 2024 as compared to 2023, primarily due to the impact of disposition activity and tenant vacancies at certain properties, partially offset by higher other lease-related income.
The following table summarizes the changes in cash flows for the periods presented (in thousands): Years Ended December 31, 2023 vs. 2022 2022 vs. 2021 2023 2022 2021 Change Change Net cash provided by operating activities $ 70,966 $ 84,282 $ 75,335 $ (13,316) $ 8,947 Net cash provided by (used in) investing activities 27,693 (22,918) (4,184) 50,611 (18,734) Net cash used in financing activities (36,778) (64,541) (77,245) 27,763 12,704 Net Cash (Used in) Provided by Operating Activities — Net cash provided by operating activities decreased by $13.3 million during 2023 as compared to 2022, primarily due to higher interest expense and Spin-Off related costs incurred during 2023.
The following table summarizes the changes in cash flows for the periods presented (in thousands): Years Ended December 31, 2024 2023 Change Net cash provided by operating activities $ 71,859 $ 70,966 $ 893 Net cash provided by investing activities 297,749 27,693 270,056 Net cash used in financing activities (367,984) (36,778) (331,206) Net Cash Provided by Operating Activities — Net cash provided by operating activities increased by $0.9 million during 2024 as compared to 2023, primarily due to $10.3 million of proceeds received from the sale of a net investment in sales-type lease during 2024 ( Note 7 ) and Spin-Off related costs incurred during 2023 ( Note 1 ), substantially offset by the impact of dispositions.
For the year ended December 31, 2022 as compared to 2021, property expenses, excluding reimbursable tenant costs, increased by $1.3 million, primarily due to a maintenance expense increase related to our multi-tenant property in Houston, Texas, as a result of the return-to-office trend post COVID-19 pandemic.
Property Expenses, Excluding Reimbursable Tenant Costs For the year ended December 31, 2024 as compared to 2023, property expenses, excluding reimbursable tenant costs, increased by $2.3 million, primarily due to tenant vacancies during 2024 (which resulted in property expenses no longer being reimbursable).
Net Lease Office Properties 2023 10-K – 30 Property Expenses, Excluding Reimbursable Tenant Costs For the year ended December 31, 2023 as compared to 2022, property expenses, excluding reimbursable tenant costs, increased by $0.9 million, primarily driven by the nine properties acquired through the CPA:18 Merger.
Net Lease Office Properties 2024 10-K – 29 Reimbursable Tenant Costs For the year ended December 31, 2024 as compared to 2023, reimbursable tenant costs decreased by $1.4 million, primarily due to the impact of dispositions, partially offset by higher insurance premiums paid on certain properties.
Net Income Attributable to NLOP Net income attributable to NLOP decreased in 2023 as compared to 2022, primarily due to impairment charges recognized during the current year, higher interest expense, and an increase in depreciation and amortization expense from the nine properties acquired in the CPA:18 Merger, partially offset by higher lease revenues contributed from the nine properties acquired in the CPA:18 Merger and merger-related expenses incurred in 2022.
Net Loss Attributable to NLOP Net loss attributable to NLOP decreased in 2024 as compared to 2023, primarily due to an impairment charge recognized on goodwill during 2023 and higher gain on sale of real estate, partially offset by higher interest expense and the impact of disposition activity.
Net Cash Provided by (Used in) Investing Activities — Net cash provided by (used in) investing activities increased by $50.6 million during 2023 as compared to 2022, primarily due to the disposition of four properties during 2023 ( Note 16 ), as well as cash consideration paid attributable to NLOP for the CPA:18 Merger during 2022 ( Note 4 ).
Net Cash Provided by Investing Activities — Net cash provided by investing activities increased by $270.1 million during 2024 as compared to 2023, primarily due to higher proceeds from dispositions ( Note 16 ).
For the year ended December 31, 2022 as compared to 2021, depreciation and amortization expense increased by $4.6 million, primarily due to the impact of the nine properties acquired in the CPA:18 Merger, partially offset by the weakening of foreign currencies (primarily the euro and British pound sterling) in relation to the U.S. dollar between the periods.
Depreciation and Amortization For the year ended December 31, 2024 as compared to 2023, depreciation and amortization expense decreased by $18.3 million, primarily due to the impact of disposition activity, partially offset by accelerated amortization of intangible assets in connection with a lease restructuring.
Summary Results (in thousands) Years Ended December 31, 2023 2022 2021 Total revenues $ 174,965 $ 156,214 $ 147,906 Net (loss) income attributable to NLOP (131,746) 15,779 1,418 Net cash provided by operating activities 70,966 84,282 75,335 Net cash provided by (used in) investing activities 27,693 (22,918) (4,184) Net cash used in financing activities (36,778) (64,541) (77,245) Supplemental financial measures (a) : Funds from operations attributable to NLOP (FFO) 72,253 78,897 59,998 Adjusted funds from operations attributable to NLOP (AFFO) 93,928 88,718 77,497 __________ (a) We consider Funds from operations (“FFO”) and Adjusted funds from operations (“AFFO”), supplemental measures that are not defined by GAAP (a “non-GAAP measure”), to be important measures in the evaluation of our operating performance.
Summary Results (in thousands) Years Ended December 31, 2024 2023 Total revenues $ 142,247 $ 174,965 Net loss attributable to NLOP (91,471) (131,746) Dividends declared — 4,971 Net cash provided by operating activities (a) 71,859 70,966 Net cash provided by investing activities 297,749 27,693 Net cash used in financing activities (367,984) (36,778) Supplemental financial measures (b) : Funds from operations attributable to NLOP (FFO) 23,039 72,253 Adjusted funds from operations attributable to NLOP (AFFO) 62,048 93,928 __________ Net Lease Office Properties 2024 10-K – 25 (a) Amount for the year ended December 31, 2024 includes $10.3 million of proceeds from the sale of a net investment in sales-type lease ( Note 7 ).
Net Lease Office Properties 2023 10-K – 28 Results of Operations Revenues Years Ended December 31, 2023 vs. 2022 2022 vs. 2021 (in thousands) 2023 2022 2021 Change Change Revenues Lease revenues $ 166,034 $ 151,249 $ 143,958 $ 14,785 $ 7,291 Income from finance leases 1,189 1,744 1,709 (555) 35 Other lease-related income 7,742 3,221 2,239 4,521 982 $ 174,965 $ 156,214 $ 147,906 $ 18,751 $ 8,308 Lease Revenues For the year ended December 31, 2023 as compared to 2022, lease revenues increased by $14.8 million, primarily due to lease revenue from the nine properties acquired through the CPA:18 Merger (which closed on August 1, 2022), partially offset by the impact of disposition activity during the fourth quarter of 2023.
Net Lease Office Properties 2024 10-K – 28 Results of Operations Revenues Years Ended December 31, (in thousands) 2024 2023 Change Revenues Lease revenues $ 128,857 $ 166,034 $ (37,177) Income from finance leases 89 1,189 (1,100) Other lease-related income 13,301 7,742 5,559 $ 142,247 $ 174,965 $ (32,718) Lease Revenues For the year ended December 31, 2024 as compared to 2023, lease revenues decreased by $37.2 million, primarily due to disposition activity, tenant vacancies at certain properties, and the anticipated reimbursement of $3.3 million of rent to a tenant since the tenant had to vacate a property during a period of maintenance (this reimbursement was formally agreed upon in February 2025 ( Note 18 )).
Net Lease Office Properties 2023 10-K – 29 Operating Expenses Years Ended December 31, 2023 vs. 2022 2022 vs. 2021 (in thousands) 2023 2022 2021 Change Change Operating Expenses Depreciation and amortization $ 74,998 $ 63,205 $ 58,580 $ 11,793 $ 4,625 Impairment charges — real estate 63,143 — — 63,143 — Impairment charges — goodwill 62,456 — — 62,456 — Reimbursable tenant costs 27,957 24,251 23,651 3,706 600 General and administrative 13,610 11,871 10,307 1,739 1,564 Property expenses, excluding reimbursable tenant costs 8,642 7,751 6,429 891 1,322 Separation and distribution related costs and other 8,446 6,025 — 2,421 6,025 Asset management fees 1,245 — — 1,245 — $ 260,497 $ 113,103 $ 98,967 $ 147,394 $ 14,136 Depreciation and Amortization For the year ended December 31, 2023 as compared to 2022, depreciation and amortization expense increased by $11.8 million, primarily due to the impact of the nine properties acquired in the CPA:18 Merger and accelerated amortization of in-place lease intangibles in connection with a lease restructuring during 2023.
Operating Expenses Years Ended December 31, (in thousands) 2024 2023 Change Operating Expenses Impairment charges — real estate $ 78,237 $ 63,143 $ 15,094 Depreciation and amortization 56,696 74,998 (18,302) Reimbursable tenant costs 26,520 27,957 (1,437) Property expenses, excluding reimbursable tenant costs 10,901 8,642 2,259 General and administrative 7,502 13,610 (6,108) Asset management fees 6,243 1,245 4,998 Separation and distribution related costs and other 16 8,446 (8,430) Impairment charges — goodwill — 62,456 (62,456) $ 186,115 $ 260,497 $ (74,382) Impairment Charges — Real Estate Our impairment charges on real estate are described in Note 9 .
For the year ended December 31, 2022 as compared to 2021, provision for income taxes decreased by $1.2 million , primarily due to $0.6 million income tax benefit for the Oslo, Norway property acquired through the CPA:18 Merger, and $0.3 million provision decrease related to a property in Stavanger, Norway.
Benefit from (Provision for) Income Taxes For the year ended December 31, 2024, we recognized a benefit from income taxes of $2.4 million, as compared to a provision for income taxes of $0.4 million for the year ended December 31, 2023, primarily due to the impact of an impairment charge recognized on an international property during 2024.
Removed
The Spin-Off was accomplished via a pro rata dividend of 1 NLOP common share for every 15 shares of WPC common stock outstanding, resulting in a distribution of an aggregate of 14,620,919 NLOP common shares.
Added
Debt Repayments • During the year ended December 31, 2024, we (i) fully repaid the NLOP Mortgage Loan, which had $288.9 million of outstanding principal as of December 31, 2023, and (ii) repaid $53.2 million of outstanding principal on the NLOP Mezzanine Loan, in each case using proceeds from certain dispositions, as well as cash flow from rent on our properties and other sources ( Note 11 ). • During the year ended December 31, 2024, we prepaid two non-recourse mortgage loans totaling $20.8 million, which had a weighted-average interest rate of 5.2% ( Note 11 ). • In February 2025, we repaid $3.3 million of outstanding principal on the NLOP Mezzanine Loan using excess cash ( Note 18 ).
Removed
Following the closing of the Spin-Off, NLOP operates as a separate publicly-traded REIT, for which WPC serves as our Advisor pursuant to the NLOP Advisory Agreements executed in connection with the Spin-Off.
Added
Such proceeds are included within Net cash provided by operating activities in accordance with Accounting Standards Codification (“ASC”) 842, Leases . (b) We consider Funds from operations (“FFO”) and Adjusted funds from operations (“AFFO”), supplemental measures that are not defined by GAAP (a “non-GAAP measure”), to be important measures in the evaluation of our operating performance.
Removed
Leasing Activity • During the fourth quarter of 2023, we entered into (i) an amended and restated lease agreement (the “Lease Extension”) with respect to the two properties leased by BCBSM, Inc. located at 1800 Yankee Doodle Road and 3400 Yankee Doodle Road in Eagan, Minnesota (the “Extension Premises”) and (ii) lease termination agreements (collectively, the “Lease Terminations”) with respect to the four properties leased by BCBSM, Inc. located at 3535 Blue Cross Road, 1750 Yankee Doodle Road, 3311 Terminal Drive, and 3545 Blue Cross Road (the “Termination Premises”).
Added
Donnelley & Sons Company Illinois 3,393 3.9 % 167,215 1 2.7 Board of Regents, State of Iowa Iowa 3,254 3.7 % 191,700 1 5.8 Bankers Financial Corporation Florida 3,228 3.6 % 111,357 1 0.6 Google, LLC California 2,930 3.3 % 67,681 1 5.8 Northrop Grumman Systems Corporation Minnesota 2,679 3.0 % 191,336 1 4.9 Total $ 56,931 64.6 % 2,815,588 12 4.7 __________ (a) Excludes 570,999 of operating square footage for a parking garage at a domestic property.
Removed
The Lease Extension, among other things, extends the lease expiration date for the Extension Premises by ten years until January 31, 2037, subject to the tenant’s right to further extend the lease term for two additional five-year periods following the new lease expiration date.
Added
(b) ABR amounts are subject to fluctuations in foreign currency exchange rates.
Removed
The Lease Terminations, among other things, shorten the lease term of each of the Termination Premises from January 31, 2027 to the earlier of (i) June 30, 2024 and (ii) the sale of the respective property.
Added
Other Lease-Related Income Other lease-related income is described in Note 6 .
Removed
In connection with the Lease Terminations, the tenant has agreed to pay NLOP termination fees of approximately $12.0 million to $13.0 million in the aggregate for all of the Termination Premises payable and determined based on the date of each property’s termination date.
Added
For the year ended December 31, 2024 as compared to 2023, general and administrative expenses decreased by $6.1 million, primarily since 2024 and the last two months of 2023 represent actual direct expenses incurred (including $4.0 million and $0.7 million of administrative reimbursements paid to our Advisor during 2024 and 2023, respectively ( Note 5 )), compared to the allocation of expenses described above for the first ten months of 2023.
Removed
We sold the property located at 3311 Terminal Drive in December 2023 for gross proceeds of $2.5 million.
Added
Since our NLOP Mortgage Loan was fully repaid during 2024 and we repaid $53.2 million of outstanding principal on the NLOP Mezzanine Loan during 2024, we expect Interest expense to be lower in future periods.
Removed
Net Lease Office Properties 2023 10-K – 24 Financing Transactions • On September 20, 2023, in connection with the Spin-Off, we and certain of our wholly-owned subsidiaries entered into financing arrangements for which funding was subject to certain conditions (including the closing of the Spin-Off), including (i) a $335.0 million NLOP Mortgage Loan maturing on November 9, 2025, with two separate one-year extension options subject to certain conditions, and (ii) a $120.0 million NLOP Mezzanine Loan maturing on November 9, 2028.
Added
Other Gains and (Losses) For the year ended December 31, 2024, other gains and (losses) of $(2.2) million were primarily comprised of (i) loss of ($3.2) million related to damages at a property, (ii) net realized and unrealized losses on our interest rate cap derivative of ($1.0) million ( Note 10 ), (iii) net realized and unrealized gains on foreign currency exchange rate movements of ($0.8) million, (iv) loss of ($0.3) million on extinguishment of debt, (v) interest income on our cash deposits of $2.3 million, and (vi) gain of $0.9 million related to a forfeited deposit on a potential disposition.
Removed
At that time, NLOP was a wholly-owned subsidiary of WPC. The funding of these NLOP Financing Arrangements occurred on November 1, 2023 (the date of the Spin-Off). We borrowed an aggregate of $455.0 million and each of the NLOP Mortgage Loan and the NLOP Mezzanine Loan was fully drawn.
Added
During the year ended December 31, 2024, we (i) fully repaid the NLOP Mortgage Loan, which had $288.9 million of outstanding principal as of December 31, 2023, and (ii) repaid $53.2 million of outstanding principal on the NLOP Mezzanine Loan, in each case using proceeds from certain dispositions, as well as cash flow from rent on our properties and other sources.
Removed
Approximately $343.9 million of the proceeds from the financing (net of transaction expenses) was transferred to WPC in connection with the Spin-Off ( No te 1 , Note 11 ).
Added
Certain amounts disclosed above are based on the applicable foreign currency exchange rate at December 31, 2024. Environmental Obligations In connection with the purchase of many of our properties, we have required the sellers to perform environmental reviews.
Removed
Dividends to Shareholders On December 8, 2023, our Board of Trustees authorized a common share dividend of $0.34 per share paid on January 29, 2024 to shareholders of record as of the close of business on December 18, 2023 (the “Record Date”).
Added
Critical Accounting Estimates Our significant accounting policies are described in Note 3 . Many of these accounting policies require judgment and the use of estimates and assumptions when applying these policies in the preparation of our consolidated financial statements.
Removed
Shareholders had the option to elect to receive their dividend in the form of cash or additional NLOP shares, with the aggregate amount of cash distributed by NLOP limited to a maximum of 20% of the total dividend. The total number of shares issued in the share dividend was 164,199 shares.
Added
AFFO also reflects adjustments for jointly owned Net Lease Office Properties 2024 10-K – 34 investments. We use AFFO as one measure of our operating performance when we formulate corporate goals and evaluate the effectiveness of our strategies.
Removed
Cash paid in connection with the share dividend totaled $1.1 million, which includes cash paid in lieu of fractional shares. Dividends paid by NLOP will be authorized and determined by our Board of Trustees, in its sole discretion, and will be dependent upon a number of factors.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

73 edited+7 added−14 removed170 unchanged
Biggest changeAdditionally, the NLOP Mortgage Loan is secured by first priority mortgages and deeds of trust encumbering the interests of the NLOP Mortgage Loan Borrowers (as defined in the NLOP Mortgage Loan) in the Mortgaged Properties (as defined in the NLOP Mortgage Loan), as well as by pledges of equity of the NLOP Mortgage Loan Borrowers (and, Net Lease Office Properties 2023 10-K – 11 with respect to the NLOP Mortgage Loan Borrowers that are limited partnerships, the general partners thereof), NLO Holding Company LLC, and each of NLO MB TRS LLC and NLO SubREIT LLC.
Biggest changeAdditionally, the NLOP Mezzanine Loan is secured by pledges of equity of the NLOP Mortgage Loan Borrowers (and, with respect to the NLOP Mortgage Loan Borrowers that are limited partnerships, the general partners thereof), NLO Holding Company LLC, and each of NLO MB TRS LLC and NLO SubREIT LLC.
We, our tenants and our properties are subject to various federal, state and local regulatory requirements, such as environmental laws, state and local fire and safety requirements, building codes and land use regulations.
We, our tenants and our properties are subject to various federal, state and local regulatory requirements, such as environmental laws, state and local fire and safety requirements, building codes and land use regulations.
Although at least a majority of our Board of Trustees must be independent and at least a majority of independent trustees must approve any transaction involving our Advisor, we have limited independence from our Advisor due to this delegation. Payment of fees to our Advisor will reduce cash available for distribution.
Although at least a majority of our Board must be independent and at least a majority of independent trustees must approve any transaction involving our Advisor, we have limited independence from our Advisor due to this delegation. Payment of fees to our Advisor will reduce cash available for distribution.
Our Declaration of Trust initially divides our Board of Trustees into three classes. The initial terms of the first, second and third classes will expire at the first, second and third annual meetings of shareholders, respectively, held following the Spin-Off. Initially, shareholders will elect only one class of trustees each year.
Our Declaration of Trust initially divides our Board into three classes. The initial terms of the first, second and third classes will expire at the first, second and third annual meetings of shareholders, respectively, held following the Spin-Off. Initially, shareholders will elect only one class of trustees each year.
After such five-year period, a business combination with an interested shareholder must be: (a) recommended by our Board of Trustees of the trust, and (b) approved by the affirmative vote of at least (i) 80% of the trust’s outstanding shares entitled to vote and (ii) two-thirds of the trust’s outstanding shares entitled to vote which are not held by the interested shareholder with whom the business combination is to be effected, unless, among other things, the trust’s common shareholders receive a “fair price” (as defined by the statute) for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for his or her shares.
After such five-year period, a business combination with an interested shareholder must be: (a) recommended by our Board of the trust, and (b) approved by the affirmative vote of at least (i) 80% of the trust’s outstanding shares entitled to vote and (ii) two-thirds of the trust’s outstanding shares entitled to vote which are not held by the interested shareholder with whom the business combination is to be effected, unless, among other things, the trust’s common shareholders receive a “fair price” (as defined by the statute) for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for his or her shares.
Future dividends will be declared and paid at the discretion of our Board of Trustees, and the amount and timing of dividends will depend upon cash generated by operating activities, our business, financial condition, results of operations, capital requirements, annual distribution requirements under the REIT provisions of the Code, limitations in our debt agreements and such other factors as our Board of Trustees deems relevant.
Future dividends will be declared and paid at the discretion of our Board, and the amount and timing of dividends will depend upon cash generated by operating activities, our business, financial condition, results of operations, capital requirements, annual distribution requirements under the REIT provisions of the Code, limitations in our debt agreements and such other factors as our Board deems relevant.
In the event that our Bylaws are amended to modify or eliminate this provision, certain acquisitions of outstanding shares of our common shares may constitute control share acquisitions and may be subject to the MCSAA. Until the 2027 annual meeting of shareholders, we will have a classified Board of Trustees and that may reduce the likelihood of certain takeover transactions.
In the event that our Bylaws are amended to modify or eliminate this provision, certain acquisitions of outstanding shares of our common shares may constitute control share acquisitions and may be subject to the MCSAA. Until the 2027 annual meeting of shareholders, we will have a classified Board and that may reduce the likelihood of certain takeover transactions.
Such adverse economic and geopolitical conditions may be due to, among other issues, rising inflation and interest rates, volatility in the public equity and debt markets, and international economic and other conditions, including pandemics, geopolitical instability (such as the war in Ukraine, rising tensions between China and Taiwan and the conflict in the Middle East), sanctions and other conditions beyond our control.
Such adverse economic and geopolitical conditions may be due to, among other issues, inflation and interest rates, volatility in the public equity and debt markets, and international economic and other conditions, including pandemics, geopolitical instability (such as the war in Ukraine, rising tensions between China and Taiwan and the conflict in the Middle East), tariffs, sanctions and other conditions beyond our control.
Defending ourselves in any litigation related to any disposition strategy may be expensive and, even if we ultimately prevail, the process of defending against lawsuits will divert our Board of Trustees and our Advisor’s attention from implementing the disposition strategy and otherwise operating our business. If we do not prevail in any lawsuit, we may be liable for damages.
Defending ourselves in any litigation related to any disposition strategy may be expensive and, even if we ultimately prevail, the process of defending against lawsuits will divert our Board and our Advisor’s attention from implementing the disposition strategy and otherwise operating our business. If we do not prevail in any lawsuit, we may be liable for damages.
The number of our common shares available for future issuance or sale could adversely affect the per share trading price of our common shares and may be dilutive to current shareholders. Our Declaration of Trust authorizes our Board of Trustees to, among other things, issue additional common shares without shareholder approval.
The number of our common shares available for future issuance or sale could adversely affect the per share trading price of our common shares and may be dilutive to current shareholders. Our Declaration of Trust authorizes our Board to, among other things, issue additional common shares without shareholder approval.
Our Board of Trustees may change our divestiture strategy, financing strategy or leverage policies with respect to operations, indebtedness, capitalization and dividends at any time without the consent of our shareholders, which could result in an investment portfolio with a different risk profile.
Our Board may change our divestiture strategy, financing strategy or leverage policies with respect to operations, indebtedness, capitalization and dividends at any time without the consent of our shareholders, which could result in an investment portfolio with a different risk profile.
Until the 2027 annual meeting of the shareholders, our Board of Trustees will be classified, which may reduce the possibility of certain attempts to change control of the Company, such as through a tender offer or a proxy contest, even though a change in control might be in our best interests.
Until the 2027 annual meeting of the shareholders, our Board will be classified, which may reduce the possibility of certain attempts to change control of the Company, such as through a tender offer or a proxy contest, even though a change in control might be in our best interests.
Among other things, unless exempted by our Board of Trustees, no person may actually or constructively own more than 9.8% of the aggregate of the outstanding common shares of NLOP by value or by number of shares, whichever is more restrictive, or 9.8% of the aggregate of the outstanding shares of each class and series of outstanding preferred shares of NLOP by value or by number of shares, whichever is more restrictive.
Among other things, unless exempted by our Board, no person may actually or constructively own more than 9.8% of the aggregate of the outstanding common shares of NLOP by value or by number of shares, whichever is more restrictive, or 9.8% of the aggregate of the outstanding shares of each class and series of outstanding preferred shares of NLOP by value or by number of shares, whichever is more restrictive.
Unless approved in advance by our Board of Trustees, or otherwise exempted by the statute, such a business combination is prohibited for a period of five years after the most recent date on which the interested shareholder became an interested shareholder.
Unless approved in advance by our Board, or otherwise exempted by the statute, such a business combination is prohibited for a period of five years after the most recent date on which the interested shareholder became an interested shareholder.
Furthermore, under our Declaration of Trust, our Board of Trustees has the authority to classify and reclassify any of our unissued shares into shares with such preferences, rights, powers and restrictions as our Board of Trustees may determine.
Furthermore, under our Declaration of Trust, our Board has the authority to classify and reclassify any of our unissued shares into shares with such preferences, rights, powers and restrictions as our Board may determine.
In addition, our Board of Trustees has the power under our Declaration of Trust to amend our Declaration of Trust to increase (or decrease) the number of authorized shares of any class from time to time, without approval of our shareholders.
In addition, our Board has the power under our Declaration of Trust to amend our Declaration of Trust to increase (or decrease) the number of authorized shares of any class from time to time, without approval of our shareholders.
Net Lease Office Properties 2023 10-K – 6 We depend on significant tenants, and the majority of our properties depend upon a single tenant for all or a majority of their rental income; therefore, our financial condition, including our ability to make distributions to shareholders, may be adversely affected by the bankruptcy or insolvency, a downturn in the business, or a lease termination of such a single tenant.
Net Lease Office Properties 2024 10-K – 6 We depend on significant tenants, and the majority of our properties depend upon a single tenant for all or a majority of their rental income; therefore, our financial condition, including our ability to make distributions to shareholders, may be adversely affected by the bankruptcy or insolvency, a downturn in the business, or a lease termination of such a single tenant.
Our Board of Trustees may, in its sole discretion, grant exemptions to the share ownership limits, subject to such conditions and the receipt by our Board of Trustees of certain representations and undertakings.
Our Board may, in its sole discretion, grant exemptions to the share ownership limits, subject to such conditions and the receipt by our Board of certain representations and undertakings.
Net Lease Office Properties 2023 10-K – 14 If certain of our (or any of our subsidiary REITs’) subsidiaries, including our operating company, fail to qualify as partnerships or disregarded entities for federal income tax purposes, we (or any of our subsidiary REITs) could cease to qualify as a REIT and suffer other adverse consequences.
Net Lease Office Properties 2024 10-K – 14 If certain of our (or any of our subsidiary REITs’) subsidiaries, including our operating company, fail to qualify as partnerships or disregarded entities for federal income tax purposes, we (or any of our subsidiary REITs) could cease to qualify as a REIT and suffer other adverse consequences.
In connection with the Spin-Off, we entered into the NLOP Financing Arrangements; however, we may require additional capital to implement our business plan, respond to business opportunities, challenges or unforeseen circumstances and may determine to engage in equity or debt financings, refinance the NLOP Financing Arrangements or enter into new credit facilities.
In connection with the Spin-Off, we entered into the NLOP Financing Arrangements; however, we may require additional capital to implement our business plan, respond to business opportunities, challenges or unforeseen circumstances and may determine to engage in equity or debt financings, refinance the NLOP Mezzanine Loan or enter into new credit facilities.
In particular, in light of current office space utilization trends, our ability to find buyers for our properties at desirable prices, or at all, may be adversely impacted by these trends, and we may be required to sell our properties for less than their market value.
In particular, in light of current office space utilization trends, our ability to find buyers for our properties at desirable prices, or at all, has been adversely impacted by these trends, and we may be required to sell our properties for less than their market value.
Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local income, property and excise taxes on our income or property and, in certain cases, a 100% penalty tax, in the event we sell property as a dealer.
Even though we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local income, property and excise taxes on our income or property and, in certain cases, a 100% penalty tax, in the event we sell property as a dealer.
Our Board of Trustees may change our dividend policy at any time, and there can be no assurance as to the manner in which future dividends will be paid or that the current dividend level will be maintained in future periods.
Our Board may change our dividend policy at any time, and there can be no assurance as to the manner in which future dividends will be paid or that the current dividend level will be maintained in future periods.
The amounts we receive upon the sale of any of our assets depends on the underlying value of such assets, and the underlying value of such assets may be reduced by a number of factors that are beyond our control, including, without limitation, the following: • changes in general economic or local conditions; • changes in supply of or demand for similar or competing properties in an area; • changes in interest rates and availability of mortgage funds that may render the sale of our properties difficult or unattractive; • increases in operating expenses; • the financial performance of our tenants, and the ability of our tenants to satisfy their obligations under their leases; • vacancies and inability to lease or sublease space; • potential major repairs which are not presently contemplated or other contingent liabilities associated with such assets; Net Lease Office Properties 2023 10-K – 12 • competition; and • changes in tax, real estate, environmental and zoning laws.
The amounts we receive upon the sale of any of our assets depends on the underlying value of such assets, and the underlying value of such assets may be reduced by a number of factors that are beyond our control, including, without limitation, the following: • changes in general economic or local conditions; • changes in supply of or demand for similar or competing properties in an area; • changes in interest rates and availability of mortgage funds that may render the sale of our properties difficult or unattractive; • increases in operating expenses; • the financial performance of our tenants, and the ability of our tenants to satisfy their obligations under their leases; • vacancies and inability to lease or sublease space; • potential major repairs which are not presently contemplated or other contingent liabilities associated with such assets; • competition; and • changes in tax, real estate, environmental and zoning laws.
Our Board of Trustees may permit us to incur additional debt and would do so, for example, if it were necessary to maintain our status as a REIT.
Our Board may permit us to incur additional debt and would do so, for example, if it were necessary to maintain our status as a REIT.
Also, inflation may adversely affect tenant leases with stated rent increases or limits on such tenant’s obligation to pay its share of operating expenses, which could be lower than the increase in inflation at any given time. It may also limit our ability to recover all of our operating expenses.
Continued inflation has adversely affected tenant leases with stated rent increases or limits on such tenant’s obligation to pay its share of operating expenses, which could be lower than the increase in inflation at any given time. It may also limit our ability to recover all of our operating expenses.
Changes to the tax laws, with or without retroactive application, could adversely affect us or our investors, including holders of our common shares or debt securities. We cannot predict how changes in the tax laws might affect us or our investors.
Changes to the tax laws, including the possibility of major tax legislation, with or without retroactive application, could adversely affect us or our investors, including holders of our common shares or debt securities. We cannot predict how changes in the tax laws might affect us or our investors.
Real estate sales prices depend on a number of factors, including occupancy percentages, and lease rates, and in light of current office space utilization trends, our ability to find buyers for our properties at desirable prices, or at all, may be adversely impacted by these trends.
Real estate sales prices depend on a number of factors, including occupancy percentages, and lease rates, and in light of current office space utilization trends, our ability to find buyers for our properties at desirable prices, or at all, has been adversely impacted by these trends.
We intend to elect to be taxed as a REIT and believe we have operated and will operate in a manner that has allowed and will allow us to qualify and to remain qualified as a REIT for U.S. federal income tax purposes commencing with the taxable year ended December 31, 2023.
We have elected to be taxed as a REIT and believe we have operated and will operate in a manner that has allowed us to qualify and to remain qualified as a REIT for U.S. federal income tax purposes commencing with the taxable year ended December 31, 2023.
If our tenants decide not to renew their leases, terminate early or default on their lease, or if we fail to find suitable tenants to lease our vacant properties, we may not be able to re-lease the space or may experience delays in finding suitable replacement tenants and may be in default under the NLOP Financing Arrangements.
If our tenants decide not to renew their leases, terminate early or default on their lease, or if we fail to find suitable tenants to lease our vacant properties, we may not be able to re-lease the space or may experience delays in finding suitable replacement tenants and may be in default under the NLOP Mezzanine Loan.
The Maryland Business Combination Act (Title 3, Subtitle 6 of the Maryland General Corporation Law (the “MGCL”)) (the “Business Combination Act”) imposes conditions and restrictions on certain “business combinations” (including, among other transactions, a merger, consolidation, share exchange, or, in certain circumstances, an asset transfer or issuance of equity securities) between a Maryland real estate investment trust and certain persons who beneficially own at least 10% of the corporation’s stock or affiliates of such persons (an “interested shareholder”).
The Maryland Business Combination Act (Title 3, Subtitle 6 of the Maryland General Corporation Law (the “MGCL”)) (the “Business Combination Act”) imposes conditions and restrictions on certain “business combinations” (including, among other transactions, a merger, consolidation, share exchange, or, in certain circumstances, an asset transfer or issuance of equity Net Lease Office Properties 2024 10-K – 17 securities) between a Maryland real estate investment trust and certain persons who beneficially own at least 10% of the corporation’s stock or affiliates of such persons (an “interested shareholder”).
“Cybersecurity” in this Report. Risks Related to Our Status as a REIT Failure to qualify as a REIT would materially and adversely affect us and the value of our common shares.
“Cybersecurity” in this Report. Risks Related to Our Status as a REIT Failure to remain qualified as a REIT would materially and adversely affect us and the value of our common shares.
If a tenant experiences a downturn in its business or other types of financial distress, it may be unable to make timely rental payments. If lease defaults occur, we may experience delays in enforcing our rights as landlord. As of December 31, 2023, our portfolio had a WALT of 5.8 years, and no properties were fully vacant.
If a tenant experiences a downturn in its business or other types of financial distress, it may be unable to make timely rental payments. If lease defaults occur, we may experience delays in enforcing our rights as landlord. As of December 31, 2024, our portfolio had a WALT of 4.3 years, and no properties were fully vacant.
As of December 31, 2023, approximately 25.4% of our ABR was comprised by tenants with leases expiring in the next two years. We derive our net income primarily from rent received from our tenants, and our profitability is significantly dependent upon ability to minimize vacancies in our properties and ensure our tenants timely pay rent at an attractive rate.
As of December 31, 2024, approximately 22.6% of our ABR was comprised by tenants with leases expiring in the next two years. We derive our net income primarily from rent received from our tenants, and our profitability is significantly dependent upon ability to minimize vacancies in our properties and ensure our tenants timely pay rent at an attractive rate.
We are also subject to potential fluctuations in exchange rates between the euro and the U.S. dollar because we translate revenue denominated in euros into U.S. dollars for our financial statements.
We are also subject to potential fluctuations in exchange rates between the euro or Norwegian krone and the U.S. dollar because we translate revenue denominated in euros or Norwegian kroner into U.S. dollars for our financial statements.
The agreement governing the NLOP Mortgage Loan (the “NLOP Mortgage Loan Agreement”) also contains certain cash management provisions which provide that all cash from the Mortgaged Properties is held by the lenders and applied pursuant to a waterfall set forth in the NLOP Mortgage Loan Agreement, with excess cash flow being retained by the Lenders (subject to NLOP Mortgage Loan Borrowers’ right to request funds for certain permitted payments).
The agreement governing the NLOP Mortgage Loan (the “NLOP Mortgage Loan Agreement”) also contains certain cash management provisions which provide that all cash from the assets indirectly securing such debt is held by the lenders and applied pursuant to a waterfall set forth in the NLOP Mortgage Loan Agreement, with excess cash flow being retained by the Lenders (subject to NLOP Mortgage Loan Borrowers’ right to request funds for certain permitted payments).
If we are able to obtain additional financing and if we received credit ratings, these credit ratings could be adversely affected, which could further raise our borrowing costs and further limit our future access to capital and our ability to satisfy our obligations under our indebtedness, which may have a material adverse effect on our business, financial condition and results of operations.
If we are able to obtain additional financing and if we received credit ratings, these credit ratings could be adversely affected, which could further raise our Net Lease Office Properties 2024 10-K – 9 borrowing costs and further limit our future access to capital and our ability to satisfy our obligations under our indebtedness, which may have a material adverse effect on our business, financial condition and results of operations.
Differences in timing between the receipt of income and the payment of expenses to arrive at taxable income, along with the effect of required debt amortization Net Lease Office Properties 2023 10-K – 15 payments, could require us to borrow funds to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT.
Differences in timing between the receipt of income and the payment of expenses to arrive at taxable income, along with the effect of required debt amortization payments, could require us to borrow funds to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT.
High geographic concentration of our properties could magnify the effects of adverse economic or regulatory developments in such geographic areas on our operations and financial condition. As of December 31, 2023, 27.3% of our portfolio (as a percentage of ABR) was located in Texas, representing the highest concentration of our assets, and 16.1% was located in Minnesota.
High geographic concentration of our properties could magnify the effects of adverse economic or regulatory developments in such geographic areas on our operations and financial condition. As of December 31, 2024, 39.4% of our portfolio (as a percentage of ABR) was located in Texas, representing the highest concentration of our assets, and 10.1% was located in Minnesota.
This restriction may limit our ability to pursue strategic transactions or engage in other transactions that may maximize the value of our business. Our governing documents do not limit the amount of indebtedness we may incur and we may become more highly leveraged.
This restriction may limit our ability to pursue strategic transactions or engage in other transactions that may maximize the value of our business. Net Lease Office Properties 2024 10-K – 10 Our governing documents do not limit the amount of indebtedness we may incur and we may become more highly leveraged.
We have existing debt and refinancing risks that could affect our cost of operations. At December 31, 2023, fixed-rate debt comprises 43% of our debt and variable-rate debt comprises 57%. We may incur additional fixed and variable-rate indebtedness in the future.
We have existing debt and refinancing risks that could affect our cost of operations. At December 31, 2024, fixed-rate debt comprises 76% of our debt and variable-rate debt comprises 24%. We may incur additional fixed and variable-rate indebtedness in the future.
Even though we qualify as a REIT, certain of our business activities will be subject to corporate level income tax and foreign taxes, which will continue to reduce our cash flows, and we will have potential deferred and contingent tax liabilities.
Even though we qualify as a REIT, certain of our business activities will be subject to other tax liabilities, which will continue to reduce our cash flows, and we will have potential deferred and contingent tax liabilities.
Our results of our foreign operations are adversely affected by a stronger U.S. dollar relative to foreign currencies (i.e., absent other considerations, a stronger U.S. dollar will reduce both our revenues and our expenses), which may in turn adversely affect the price of our common shares.
Our results of our foreign operations are adversely affected by a stronger U.S. dollar relative to foreign currencies (i.e., absent other Net Lease Office Properties 2024 10-K – 8 considerations, a stronger U.S. dollar will reduce both our revenues and our expenses), which may in turn adversely affect the price of our common shares.
Temporary closures of businesses and the resulting remote working arrangements for personnel in response to the pandemic changed work practices in a manner that has negatively impacted us and our business.
Remote working arrangements for personnel in response to the pandemic changed work practices in a manner that has negatively impacted us and our business.
Net Lease Office Properties 2023 10-K – 7 Real estate property investments are illiquid. We may not be able to dispose of properties when desired or on favorable terms. Real estate investments are relatively illiquid. Our ability to quickly sell or exchange any of our properties in response to changes in economic and other conditions will be limited.
We may not be able to dispose of properties when desired or on favorable terms. Real estate investments are relatively illiquid. Our ability to quickly sell or exchange any of our properties in response to changes in economic and other conditions will be limited.
Additional rules with respect to certain capital gain distributions will apply to non-U.S. shareholders that own more than 10% of our common shares. Item 1B. Unresolved Staff Comments. None.
Additional rules with respect to certain capital gain distributions will apply to non-U.S. shareholders that own more than 10% of our common shares. Net Lease Office Properties 2024 10-K – 19 Item 1B. Unresolved Staff Comments. None.
The primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our relationship with our tenants, expensive remediation efforts, liability exposure under federal and state law, and private data exposure.
The primary risks that could directly result Net Lease Office Properties 2024 10-K – 13 from the occurrence of a cyber incident include operational interruption, damage to our relationship with our tenants, expensive remediation efforts, liability exposure under federal and state law, and private data exposure.
We are subject to the reporting requirements of the Securities Exchange Act of 1934 (the “Exchange Act”), the Sarbanes-Oxley Act, and the rules and regulations of the NYSE.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the NYSE.
Uninsured and underinsured losses may adversely affect our operations. We, or in certain instances, tenants at our properties, carry comprehensive commercial general liability, fire, extended coverage, business interruption, rental loss coverage, environmental and umbrella liability coverage on all of our properties.
We, or in certain instances, tenants at our properties, carry comprehensive commercial general liability, fire, extended coverage, business interruption, rental loss coverage, environmental and umbrella liability coverage on all of our properties.
We have made and intend to continue to make distributions to our shareholders to comply with the distribution requirements of the Code as well as to reduce our exposure to federal income taxes and the non-deductible excise tax.
Net Lease Office Properties 2024 10-K – 15 We have made and intend to continue to make distributions to our shareholders to comply with the distribution requirements of the Code as well as to reduce our exposure to federal income taxes and the non-deductible excise tax.
Risks Related to an Investment in Our Common Shares Limitations on the ownership of our common shares and other provisions of our Declaration of Trust and the NLOP Financing Arrangements may preclude the acquisition or change of control of our company.
Net Lease Office Properties 2024 10-K – 16 Risks Related to an Investment in Our Common Shares Limitations on the ownership of our common shares and other provisions of our Declaration of Trust and the NLOP Financing Arrangements may preclude the acquisition or change of control of our company.
Provisions of our Declaration of Trust are designed to assist us in maintaining our qualification as a REIT under the Code by preventing Net Lease Office Properties 2023 10-K – 16 concentrated ownership of our shares that might jeopardize REIT qualification.
Provisions of our Declaration of Trust are designed to assist us in maintaining our qualification as a REIT under the Code by preventing concentrated ownership of our shares that might jeopardize REIT qualification.
Failure to hedge effectively against interest rate changes and foreign exchange rate changes may have a material adverse effect on our business, financial condition and results of operations.
Net Lease Office Properties 2024 10-K – 11 Failure to hedge effectively against interest rate changes and foreign exchange rate changes may have a material adverse effect on our business, financial condition and results of operations.
Future issuances of our common shares may be dilutive to existing shareholders, which may have a material adverse effect on our business, financial condition and results of operations.
Future issuances of our common Net Lease Office Properties 2024 10-K – 18 shares may be dilutive to existing shareholders, which may have a material adverse effect on our business, financial condition and results of operations.
Holders of our common shares are not entitled to preemptive rights or other protections against dilution. Any preferred shares that we issue in the future could have a preference on liquidating distributions or a preference on dividends that could limit our ability to pay dividends to the holders of our common shares.
Any preferred shares that we issue in the future could have a preference on liquidating distributions or a preference on dividends that could limit our ability to pay dividends to the holders of our common shares.
Net Lease Office Properties 2023 10-K – 9 Risks Related to Financing and Our Indebtedness We have a significant amount of indebtedness and may need to incur more in the future. As of December 31, 2023, net of capitalized financing costs, we had approximately $542.0 million of total outstanding indebtedness.
Risks Related to Financing and Our Indebtedness We have a significant amount of indebtedness and may need to incur more in the future. As of December 31, 2024, net of capitalized financing costs, we had approximately $169.2 million of total outstanding indebtedness.
Additionally, any convertible or exchangeable securities that we may issue in the future may have rights, preferences and privileges more favorable than those of our common Net Lease Office Properties 2023 10-K – 18 shares, and may result in dilution to owners of our common shares.
Additionally, any convertible or exchangeable securities that we may issue in the future may have rights, preferences and privileges more favorable than those of our common shares, and may result in dilution to owners of our common shares. Holders of our common shares are not entitled to preemptive rights or other protections against dilution.
We may be materially adversely affected by laws, regulations or other issues related to climate change as well as by potential physical impacts related to climate change. We are subject to laws and regulations related to climate change.
We may be materially adversely affected by laws, regulations or other issues related to climate change as well as by potential physical impacts related to climate change. We are subject to laws and regulations related to climate change. For example, the State of California has enacted new climate change disclosure requirements, including emissions requirements.
The changes in work habits and reduced demand for office space have also resulted in adverse capital markets and financing conditions for office properties. The value of our properties and our business, operating results, financial condition and prospects may continue to be materially adversely impacted by the negative trends impacting the office property market.
The value of our properties and our business, operating results, financial condition and prospects may continue to be materially adversely impacted by the negative trends impacting the office property market.
The value of our single tenant properties is materially dependent on the performance of those tenants under their respective leases. These tenants face competition within their industries and other factors that could reduce their ability to pay us rent. Lease payment defaults by such tenants could cause us to reduce the amount of distributions that we pay to our shareholders.
In addition, as of December 31, 2024, the majority of our ABR was from our properties leased to single tenants. The value of our single tenant properties is materially dependent on the performance of those tenants under their respective leases. These tenants face competition within their industries and other factors that could reduce their ability to pay us rent.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information resources, which could be an intentional attack or an unintentional accident or error.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information resources, which could be an intentional attack or an unintentional accident or error. Information technology, communication networks, and other computer resources are essential for us to carry out important operational activities and maintain our business records.
However, we cannot assure you that our Board of Trustees will not opt to be subject to such provisions in the future, including opting to be subject to such provisions retroactively.
As permitted under Maryland law, we have elected by resolution of our Board to opt out of the foregoing provisions on business combinations. However, we cannot assure you that our Board will not opt to be subject to such provisions in the future, including opting to be subject to such provisions retroactively.
Distributions in excess of this amount must be Net Lease Office Properties 2023 10-K – 10 paid in a combination of cash and common shares, which will in turn affect the cash and common share components of any distributions we may pay to our shareholders.
Covenants also limit the amount of cash distributions that may be paid by the subsidiary borrower to less than $1.0 million. Distributions in excess of this amount must be paid in a combination of cash and common shares, which will in turn affect the cash and common share components of any distributions we may pay to our shareholders.
If we are not able to find buyers for our assets or if we have overestimated the value of our assets, any distributions to our shareholders may be delayed or reduced.
If we are not able to find buyers for our assets or if we have overestimated the value of our assets, any distributions to our shareholders may be delayed or reduced. Inflation has adversely affected our financial condition, cash flows and results of operations, and may continue to do so in the future.
We cannot predict how future laws and regulations, or future interpretations of current laws and regulations related to climate change will affect our business, financial condition and results of operations. In addition to the laws and regulations surrounding climate change, the potential physical impacts of climate change on our operations are highly uncertain.
We cannot predict how future laws and regulations, or future interpretations of current laws and regulations related to climate change will affect our business, financial condition and results of operations. Uninsured and underinsured losses may adversely affect our operations.
Historically, extraordinary corporate actions by a company, such as disposition strategies, often lead to securities class action lawsuits being filed against that company.
Shareholder litigation related to any disposition strategy could result in substantial costs and distract our Board and Advisor. Historically, extraordinary corporate actions by a company, such as disposition strategies, often lead to securities class action lawsuits being filed against that company.
Additionally, the real property taxes on our properties may increase as property tax rates change and as those properties are assessed or reassessed by tax authorities. As a result, if revenues drop, we may not be able to reduce our expenses accordingly, which may have a material adverse effect on our business, financial condition and results of operations.
As Net Lease Office Properties 2024 10-K – 7 a result, if revenues drop, we may not be able to reduce our expenses accordingly, which may have a material adverse effect on our business, financial condition and results of operations. Real estate property investments are illiquid.
We will also incur additional costs involved in locating a new buyer and negotiating a new sale agreement for any such sale. If we incur these additional costs, potential distributions to our shareholders would be reduced. Shareholder litigation related to any disposition strategy could result in substantial costs and distract our Board of Trustees and Advisor.
We will also incur additional costs involved in Net Lease Office Properties 2024 10-K – 12 locating a new buyer and negotiating a new sale agreement for any such sale. If we incur these additional costs, potential distributions to our shareholders would be reduced.
If substantial office space reconfiguration is required, the tenant may explore other office space and find it more advantageous to relocate than to renew its Net Lease Office Properties 2023 10-K – 5 lease and renovate the existing space.
The need to reconfigure leased office space may impact space requirements and also may require us to spend increased amounts for tenant improvements. If substantial office space reconfiguration is required, the tenant may explore other office space and find it more advantageous to relocate than to renew its lease and renovate the existing space.
As of December 31, 2023, our ten largest tenants in our portfolio (by ABR) represented approximately 51.9% of ABR and our three largest tenants in our portfolio (by ABR) represented approximately 29.5% of ABR. In addition, as of December 31, 2023, the majority of our ABR was from our properties leased to single tenants.
As of December 31, 2024, our top tenant in our portfolio (by ABR) represented approximately 22.9% of ABR, our three largest tenants in our portfolio (by ABR) represented approximately 38.0% of ABR, and our ten largest tenants in our portfolio (by ABR) represented approximately 64.6% of ABR.
We have invested in properties located outside the United States. At December 31, 2023, our real estate properties located outside of the United States represented 11.4% of our ABR.
We have invested in two properties located outside the United States. At December 31, 2024, our real estate properties located outside of the United States represented 5.6% of our ABR. These investments may be affected by factors particular to the local jurisdiction where the property is located and may expose us to additional risks.
Information technology, Net Lease Office Properties 2023 10-K – 13 communication networks, and other computer resources are essential for us to carry out important operational activities and maintain our business records. Our Advisor has implemented processes, procedures, and controls, which are reviewed periodically and are intended to address ongoing and evolving cybersecurity risks.
Our Advisor has implemented processes, procedures, and controls, which are reviewed periodically and are intended to address ongoing and evolving cybersecurity risks.
Since 2021, inflation and interest rates have been elevated compared to the years prior to that date. Inflation and high interest rates have had an adverse impact on our financial condition.
Periods of inflation and elevated interest rates, particularly when sustained over a longer time horizon, have an adverse impact on our operations and financial condition.
Removed
We cannot predict whether changes in working arrangements are permanent or will return to the more typical arrangements in effect pre-pandemic.
Added
While office occupancy has generally improved since the end of the pandemic, it remains below pre-pandemic levels in certain places and for certain classes of office properties.
Removed
If this trend continues or accelerates, our tenants may elect to not renew their leases, or to renew them for less space than they currently occupy, which could increase the vacancy and decrease rental income and the value of our properties.
Added
The Net Lease Office Properties 2024 10-K – 5 changes in work habits and reduced demand for office space have also resulted in adverse capital markets and financing conditions for office properties.
Removed
The need to reconfigure leased office space, either in response to the pandemic or tenants’ needs, may impact space requirements and also may require us to spend increased amounts for tenant improvements.
Added
Lease payment defaults by such tenants could cause us to reduce the amount of distributions that we pay to our shareholders.
Removed
In addition, our ability to dispose of properties may also be adversely affected by the terms of prepayment or assumption costs associated with debt encumbering our real estate assets, transactional fees and expenses or unknown liabilities. Inflation has adversely affected our financial condition, cash flows and results of operations, and may continue to do so in the future.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Advisor has relationships with a number of third party service providers to assist with cybersecurity containment and remediation efforts, including outside legal counsel, vendors and external insurance brokers. In the event of a cybersecurity incident, we intend to follow the steps outlined in our Advisor’s incident response plan, including notifying our Audit Committee and Board, as appropriate.
Biggest changeThey may include returning affected systems to an operationally ready state and confirming that the affected systems are functioning normally. Our Advisor has relationships with a number of third party service providers to assist with cybersecurity containment and remediation efforts, including outside legal counsel, vendors and external insurance brokers.
Board oversight of risk is also performed as needed between meetings through our Audit Committee and communications between our Advisor and our Board of Trustees. Our Board of Trustees will receive periodic education around cybersecurity risks and best practices. Additionally, our Audit Committee, which consists solely of independent trustees, is responsible for overseeing cybersecurity risks and related initiatives.
Board oversight of risk is also performed as needed between meetings through our Audit Committee and communications between our Advisor and our Board. Our Board will receive periodic education around cybersecurity risks and best practices. Additionally, our Audit Committee, which consists solely of independent trustees, is responsible for overseeing cybersecurity risks and related initiatives.
Our Advisor has also engaged a managed security provider to manage a supply chain defense subscription that will help obtain clear visibility into cybersecurity risks across third party vendors by proactively identifying, prioritizing, and driving remediation for cyber risks posed by critical business partners.
Our Advisor has also engaged a managed security provider to manage a supply chain defense subscription that will help obtain visibility into cybersecurity risks across third party vendors by proactively identifying, prioritizing, and driving remediation for cyber risks posed by critical business partners.
Risk Factors – The occurrence of cyber incidents, or a deficiency in our Advisor ’ s cybersecurity, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results .
Risk Factors – The occurrence of cyber incidents, or a deficiency in our Advisor’s cybersecurity, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results .
Our Advisor’s managed security provider’s risk operations center will escalate certain alerts regarding third-party vendors directly to the appropriate business partners thus providing direct collaboration with third parties, saving time and improving risk reduction while safeguarding our relationships with such third parties.
Our Advisor’s managed security provider’s risk operations center will escalate certain alerts regarding third-party vendors directly to the IT Department thus providing direct collaboration with third parties, saving time and improving risk reduction while safeguarding our relationships with such third parties.
Detection and Analysis Cybersecurity incidents may be detected through a variety of means, including but not limited to automated event-detection notifications or similar technologies which are monitored by our Advisor’s managed cybersecurity provider, notifications from Net Lease Office Properties 2023 10-K – 20 our Advisor’s employees, vendors or service providers, and notifications from third party information technology system providers.
Detection and Analysis Cybersecurity incidents may be detected through a variety of means, including but not limited to automated event-detection notifications or similar technologies which are monitored by our Advisor’s managed cybersecurity provider, notifications from our Advisor’s employees, vendors or service providers, and notifications from third party information technology system providers.
Our Advisor’s internal audit team evaluates and monitors our internal controls over systems access in an effort to mitigate information security risks that may result from unauthorized access to systems and data. Third-party vendors are vetted through our Advisor’s service delivery program to ensure they have an established cybersecurity program.
Our Advisor’s internal audit team evaluates and monitors Net Lease Office Properties 2024 10-K – 20 our internal controls over systems access in an effort to mitigate information security risks that may result from unauthorized access to systems and data. Third-party vendors are vetted through our Advisor’s service delivery program to ensure they have an established cybersecurity program.
Net Lease Office Properties 2023 10-K – 19 As part of our Board’s oversight of risk management, our Board of Trustees will review our cyber-risks and the actions being taken to mitigate such risks with our Advisor. These actions include implementing industry-recognized practices for protecting systems, third-party monitoring of certain systems and cybersecurity training for the Advisor’s employees.
As part of our Board’s oversight of risk management, our Board will review our cyber-risks and the actions being taken to mitigate such risks with our Advisor. These actions include implementing industry-recognized practices for protecting systems, third-party monitoring of certain systems and cybersecurity training for the Advisor’s employees.
Once a potential cybersecurity incident is identified, including a third party cybersecurity event, the incident response team designated pursuant to our Advisor’s incident response plan follows the procedures set forth in the plan to investigate the potential incident, such as determining the nature of the event (e.g., ransomware or personal data breach) and assessing the severity of the event and sensitivity of any compromised data.
Once a potential cybersecurity incident is identified, including a third party cybersecurity event, the incident response team designated pursuant to our Advisor’s incident response plan follows the procedures set forth in the plan to investigate the potential incident, such as determining the nature of the event and assessing the severity of the event.
Our Advisor’s information technology team also recently worked with various third-party consultants to update our incident response plan. In addition, our Advisor’s information technology team conducts routine security assessments as well as ongoing cybersecurity training campaigns for the Advisor’s employees to enhance awareness and increase vigilance for the various types of cybersecurity attacks to which they may be exposed.
In addition, our Advisor’s information technology team conducts routine security assessments as well as ongoing cybersecurity training campaigns for the Advisor’s employees and board of directors to enhance awareness and increase vigilance for the various types of cybersecurity attacks to which they may be exposed.
Our Audit Committee reviews our enterprise risk and cybersecurity risks. It also reviews the steps our Advisor has taken to protect against threats to our information systems and security and receives updates on cybersecurity on a quarterly basis. Our Advisor’s information technology team is led by its Chief Information Officer who has extensive experience working with information security systems.
Our Audit Committee reviews our enterprise risk and cybersecurity risks. It also reviews the steps our Advisor has taken to protect against threats to our information systems and security and receives updates on cybersecurity on a quarterly basis.
Containment, Eradication, Recovery, and Reporting In the event of a cybersecurity incident, the incident response team is initially focused on containing the cybersecurity incident as quickly and efficiently as possible, consistent with the procedures in the incident response plan.
Containment, Eradication, Recovery, and Reporting In the event of a cybersecurity incident, the incident response team is responsible for containing the cybersecurity incident, consistent with the procedures in the incident response plan. Once a cybersecurity incident is contained, the focus shifts to remediation. Eradication and recovery activities depend on the nature of the cybersecurity incident.
Our Advisor’s information technology and internal audit teams utilize frameworks based on industry standards to identify and mitigate information security risks and oversee an active cybersecurity training program. For example, in January 2023, our Advisor’s information technology team held a tabletop exercise with senior management of the Advisor to consider different cybersecurity scenarios.
Our Advisor’s information technology and internal audit teams utilize frameworks consistent with well-recognized industry cybersecurity frameworks to identify and mitigate information security risks and oversee an active cybersecurity training program.
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Containment procedures may include shutting down systems; disconnecting systems from a network, disabling specific ports, protocols, services, functions, etc., disabling access to compromised systems; examining code in a controlled environment and making forensic backups of affected systems for possible legal action for third party forensic analysis. Once a cybersecurity incident is contained, the focus shifts to remediation.
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Our Advisor’s information technology team is led by its Chief Information Officer who reports to its Chief Financial Officer and has extensive experience working with information security systems.
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Eradication and recovery activities depend on the nature of the cybersecurity incident. They may include returning affected systems to an operationally ready state, confirming that the affected systems are functioning normally and implementing, as necessary, additional monitoring to look for future related activity.
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In the event of a cybersecurity incident, the incident response team is responsible for following the steps outlined in our Advisor’s incident response plan, including notifying our Audit Committee and Board, as appropriate. Cybersecurity Risks As of December 31, 2024, we are not aware of any instances of material cybersecurity incidents that impacted the Company in the last three years.
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Cybersecurity Risks As of December 31, 2023, we are not aware of any material cybersecurity incidents that impacted the Company in the last three years. However, we routinely face risks of potential incidents, whether through cyber-attacks or cyber intrusions over the Internet, ransomware and other forms of malware, computer viruses, attachments to emails, phishing attempts, extortion or other scams.
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However, there can be no assurance that our cybersecurity efforts and measures will be effective or that attempted cybersecurity incidents or disruptions would not be successful or damaging. See Item 1A.
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For a discussion of these risks, see Item 1A.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. Various claims and lawsuits arising in the normal course of business are pending against us. The results of these proceedings are not expected to have a material adverse effect on our consolidated financial position or results of operations.
Biggest changeItem 3. Legal Proceedings. Various claims and lawsuits arising in the normal course of business are pending against us. The results of these proceedings are not expected to have a material adverse effect on our consolidated financial position or results of operations. Net Lease Office Properties 2024 10-K – 21

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends Dividends paid by NLOP will be authorized and determined by our Board of Trustees, in its sole discretion, and will be dependent upon a number of factors.
Biggest changeDividends Dividends paid by NLOP will be authorized and determined by our Board, in its sole discretion, and will be dependent upon a number of factors. In general, we expect to pay dividends as necessary to maintain our REIT qualification and if we have excess cash available from disposition proceeds.
The graph assumes a $100 investment on November 2, 2023 (the date our common shares began trading on the NYSE), and its relative performance is tracked through December 31, 2023, together with the reinvestment of all dividends. The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our common shares.
The graph assumes a $100 investment on November 2, 2023 (the date our common shares began trading on the NYSE), and its relative performance is tracked through December 31, 2024, together with the reinvestment of all dividends. The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our common shares.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common shares are listed on the NYSE under the ticker symbol “NLOP.” At February 28, 2024 there were 7,668 registered holders of record of our common shares. This figure does not reflect the beneficial ownership of shares of our common shares.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common shares are listed on the NYSE under the ticker symbol “NLOP.” At February 21, 2025 there were 7,217 registered holders of record of our common shares. This figure does not reflect the beneficial ownership of shares of our common shares.
At November 2, 2023 At December 31, 2023 Net Lease Office Properties $ 100.00 $ 179.61 S&P 500 Index 100.00 110.81 MSCI US REIT Index 100.00 116.83 The share price performance included in this graph is not indicative of future share price performance.
At November 2, 2023 At December 31, 2023 At December 31, 2024 Net Lease Office Properties $ 100.00 $ 179.61 $ 303.34 S&P 500 Index 100.00 110.81 138.53 MSCI US REIT Index 100.00 116.83 127.06 The share price performance included in this graph is not indicative of future share price performance.
In addition, the credit agreements for our NLOP Financing Arrangements ( Note 11 ) contain covenants that limit the amount of distributions that we can pay, as discussed in Item 1A. Risk Factors .
In addition, the credit agreements for our NLOP Financing Arrangements ( Note 11 ) contain covenants that limit the amount of distributions that we can pay, as discussed in Item 1A. Risk Factors . Refer to Note 13 for information on the tax treatment of our dividends.
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While the Company paid a dividend in January 2024 of $0.34 per share, it does not intend to pay regular dividends going forward, except as may be necessary to maintain its REIT qualification.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeThis item also provides our perspective on our financial position and liquidity, as well as certain other factors that may affect our future results. The following discussion should be read in conjunction with our consolidated financial statements in Item 8 of this Report and the matters described under Item 1A. Risk Factors . Refer to
Biggest changeThis item also provides our perspective on our financial position and liquidity, as well as certain other factors that may affect our future results. The following discussion should be read in conjunction with our consolidated financial statements in Item 8 of this Report and the matters described under Item 1A. Risk Factors .
Item 6. Reserved Net Lease Office Properties 2023 10-K – 22 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 6. Reserved Net Lease Office Properties 2024 10-K – 23 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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Please see our Annual Report on Form 10-K for the year ended December 31, 2023 for discussion of our financial condition and results of operations for the year ended December 31, 2022. Refer to

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAvailable Information We will supply to any shareholder, upon written request and without charge, a copy of this Report as filed with the SEC. Our filings can also be obtained for free on the SEC’s website at http://www.sec.gov.
Biggest changeHowever, employees of WPC are available to perform services under our Advisory Agreements. Our Advisory Agreements do not require the Advisor to dedicate any particular employees to us. Available Information We will supply to any shareholder, upon written request and without charge, a copy of this Report as filed with the SEC.
Tenant/Lease Information At December 31, 2023, our tenants/leases had the following characteristics: • Number of tenants — 59; • Investment grade tenants as a percentage of total ABR — 43%; • Implied investment grade tenants as a percentage of total ABR — 21%; • Weighted-average lease term (“WALT”) — 5.8 years; • 93.8% of our leases as a percentage of total ABR provide rent adjustments as follows: ◦ Fixed — 74.0% ◦ Consumer Price Index (“CPI”) and similar — 19.7% ◦ Other — 0.1% Human Capital We have no employees.
Tenant/Lease Information At December 31, 2024, our tenants/leases had the following characteristics: • Number of tenants — 43; • Investment grade tenants as a percentage of total ABR — 25%; • Implied investment grade tenants as a percentage of total ABR — 20%; • Weighted-average lease term (“WALT”) — 4.3 years; • 94.8% of our leases as a percentage of total ABR provide rent adjustments as follows: ◦ Fixed — 70.3% ◦ Consumer Price Index (“CPI”) and similar — 24.3% ◦ Other — 0.2% Human Capital We have no employees.
We do not intend to incorporate the information contained on our website into this Report or other documents filed with or furnished to the SEC. Net Lease Office Properties 2023 10-K – 4
We are providing our website address solely for the information of investors and do not intend for it to be an active link. We do not intend to incorporate the information contained on our website into this Report or other documents filed with or furnished to the SEC. Net Lease Office Properties 2024 10-K – 4
We intend to make available on our website any future amendments or waivers to our Code of Business Conduct and Ethics within four business days after any such amendments or waivers. We are providing our website address solely for the information of investors and do not intend for it to be an active link.
We intend to make available on our website all disclosures that are required under the Securities Exchange Act of 1934 (the “Exchange Act”) or NYSE listing standards concerning amendments or waivers to our Code of Business Conduct and Ethics.
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At December 31, 2023, our Advisor had 197 employees, 144 of which were located in the United States and 53 of which were located in Europe. Employees of WPC are available to perform services under our Advisory Agreements. Our Advisory Agreements do not require the Advisor to dedicate any particular employees to us.
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Our filings can also be obtained for free on the SEC’s website at http://www.sec.gov.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table presents principal cash flows based upon expected maturity dates of our debt obligations outstanding at December 31, 2023 (in thousands): 2024 2025 2026 2027 2028 Thereafter Total Fair Value Fixed-rate debt (a) $ 34,937 $ 84,603 $ 7,540 $ — $ 114,336 $ — $ 241,416 $ 237,970 Variable-rate debt (a) $ 4,071 $ 327,270 $ — $ — $ — $ — $ 331,341 $ 332,262 __________ (a) Amounts are based on the exchange rate at December 31, 2023, as applicable.
Biggest changeThe following table presents principal cash flows based upon expected maturity dates of our debt obligations outstanding at December 31, 2024 (in thousands): 2025 2026 2027 2028 2029 Total Fair Value Fixed-rate debt (a) $ 66,092 $ 5,882 $ — $ 61,141 $ — $ 133,115 $ 128,237 Variable-rate debt (a) $ 38,867 $ — $ — $ — $ — $ 38,867 $ 25,158 __________ (a) Amounts are based on the exchange rate at December 31, 2024, as applicable.
We estimate that, for a 1% increase or decrease in the exchange rate between the Norwegian krone, British pound sterling, or euro and the U.S. dollar, there would be a corresponding change in the projected estimated cash flow (scheduled future rental revenues, net of scheduled future debt service payments for the next 12 months) for our consolidated foreign operations at December 31, 2023 of $0.1 million for all three currencies.
We estimate that, for a 1% increase or decrease in the exchange rate between the Norwegian krone or euro and the U.S. dollar, there would be a corresponding change in the projected estimated cash flow (scheduled future rental revenues, net of scheduled future debt service payments for the next 12 months) for our consolidated foreign operations at December 31, 2024 of $0.1 million for both currencies.
We have entered into, and may continue to enter into, interest rate cap agreements with counterparties related to certain of our variable-rate debt. See Note 10 for additional information on our interest rate caps. At December 31, 2023, fixed-rate debt comprises 43% of our debt and variable-rate debt comprises 57%.
We have entered into, and may continue to enter into, interest rate cap agreements with counterparties related to certain of our variable-rate debt. See Note 10 for additional information on our interest rate caps. At December 31, 2024, fixed-rate debt comprises 76% of our debt and variable-rate debt comprises 24%.
Annual interest expense on our variable-rate debt at December 31, 2023 would increase or decrease by $3.3 million, for each respective 1% change in annual interest rates.
Annual interest expense on our variable-rate debt at December 31, 2024 would increase or decrease by $0.4 million, for each respective 1% change in annual interest rates.
Net Lease Office Properties 2023 10-K – 38 Foreign Currency Exchange Rate Risk We own international investments in Europe, and as a result are subject to risk from the effects of exchange rate movements in three foreign currencies, primarily the Norwegian krone, which may affect future costs and cash flows.
Net Lease Office Properties 2024 10-K – 37 Foreign Currency Exchange Rate Risk We own international investments in Europe, and as a result are subject to risk from the effects of exchange rate movements in the Norwegian krone and euro, which may affect future costs and cash flows.
Interest rate fluctuations will generally not affect future earnings or cash flows on fixed rate debt unless such debt matures or is otherwise terminated. However, interest rate changes will affect the fair value of fixed rate instruments.
We have borrowed funds at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect future earnings or cash flows on fixed rate debt unless such debt matures or is otherwise terminated. However, interest rate changes will affect the fair value of fixed rate instruments.
For the year ended December 31, 2023, our consolidated portfolio had the following significant characteristics in excess of 10%, based on the percentage of our consolidated total revenues: • 91% related to domestic operations, which included concentrations of 31% and 17% in Texas and Minnesota, respectively; and • 9% related to international operations.
For the year ended December 31, 2024, our consolidated portfolio had the following significant characteristics in excess of 10%, based on the percentage of our consolidated total revenues: • 94% related to domestic operations, which included concentrations of 36% and 19% in Texas and Minnesota, respectively. Net Lease Office Properties 2024 10-K – 38
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We expect higher interest rates and debt balances to have a material impact on our results of operations depending on the terms we are able to obtain in new financings or refinancings. We have borrowed funds at a combination of fixed and variable rates.
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Net Lease Office Properties 2023 10-K – 39

Other NLOP 10-K year-over-year comparisons