Net Lease Office Properties 8-K, filed Aug 6, 2025
Net Lease Office Properties (NLOP)
8-K
2025-08-06
For: 2025-08-06
View Original
Added on
April 08, 2026
About this 8-K
Net Lease Office Properties filed this 8-K on August 6, 2025.
Items reported
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 6, 2025
(Exact Name of Registrant as Specified in its Charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
Registrant’s telephone number, including area code: (844 ) 656-7348
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☑
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01 Regulation FD Disclosure.
On August 6, 2025 , Net Lease Office Properties (the “Company”) made available certain unaudited supplemental financial information at June 30, 2025. A copy of this supplemental information is attached as Exhibit 99.1.
The information furnished pursuant to this Item 7.01, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that Section, and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Net Lease Office Properties | |||||||||||
| Date: | By: | /s/ ToniAnn Sanzone | |||||||||
| ToniAnn Sanzone | |||||||||||
| Chief Financial Officer | |||||||||||
Exhibit 99.1
Net Lease Office Properties
Supplemental Financial Information
Second Quarter 2025
Terms and Definitions
As used in this supplemental package, the terms “Net Lease Office Properties,” “NLOP,” “we,” “us” and “our” include Net Lease Office Properties, its consolidated subsidiaries and its predecessors, unless otherwise indicated. Other terms and definitions are as follows:
| REIT | Real estate investment trust | ||||
| WPC | W. P. Carey Inc., a net-lease REIT (also our “Advisor”) | ||||
| U.S. | United States | ||||
| ABR | Contractual minimum annualized base rent | ||||
| NAREIT | National Association of Real Estate Investment Trusts (an industry trade group) | ||||
| WALT | Weighted-average lease term | ||||
| CPI | Consumer price index | ||||
Important Note Regarding Non-GAAP Financial Measures
This supplemental package includes certain “non-GAAP” supplemental measures that are not defined by generally accepted accounting principles (“GAAP”), including funds from operations (“FFO”); adjusted funds from operations (“AFFO”); pro rata cash net operating income (“pro rata cash NOI”); and normalized pro rata cash NOI. FFO is a non-GAAP measure defined by NAREIT. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures are provided within this supplemental package. In addition, refer to the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of these non-GAAP financial measures and other metrics.
Amounts may not sum to totals due to rounding.
Net Lease Office Properties
Supplemental Information – Second Quarter 2025
| Table of Contents | |||||
| Appendix | |||||
Net Lease Office Properties
Second Quarter 2025
| Summary Metrics | |||||
As of or for the three months ended June 30, 2025.
| Financial Results | |||||||||||||||||||||||
| Revenues, including reimbursable costs – consolidated ($000s) | $ | 29,174 | |||||||||||||||||||||
| Net loss attributable to NLOP ($000s) | (81,540) | ||||||||||||||||||||||
| Net loss attributable to NLOP per diluted share | (5.50) | ||||||||||||||||||||||
Normalized pro rata cash NOI ($000s) (a) (b) | 20,375 | ||||||||||||||||||||||
AFFO attributable to NLOP ($000s) (a) (b) | 16,909 | ||||||||||||||||||||||
AFFO attributable to NLOP per diluted share (a) (b) | 1.14 | ||||||||||||||||||||||
| Balance Sheet and Capitalization | |||||||||||||||||||||||
| Equity market capitalization – based on quarter end share price of $32.55 ($000s) | $ | 482,198 | |||||||||||||||||||||
| Total consolidated debt ($000s) | 117,170 | ||||||||||||||||||||||
Gross assets ($000s) (c) | 811,531 | ||||||||||||||||||||||
| Total consolidated debt to gross assets | 14.4 | % | |||||||||||||||||||||
| Advisory Fees and Reimbursements Paid to WPC | |||||||||||||||||||||||
Asset management fees (d) | $ | 1,209 | |||||||||||||||||||||
Administrative reimbursements (e) | 1,000 | ||||||||||||||||||||||
Portfolio (Pro Rata) (b) | |||||||||||||||||||||||
ABR (in thousands) (f) | $ | 87,987 | |||||||||||||||||||||
| Number of properties | 36 | ||||||||||||||||||||||
| Number of tenants | 39 | ||||||||||||||||||||||
| Occupancy | 88.1 | % | |||||||||||||||||||||
| Weighted-average lease term (in years) | 4.0 | ||||||||||||||||||||||
Leasable square footage (in thousands) (g) | 5,304 | ||||||||||||||||||||||
ABR from investment grade tenants as a % of total ABR (h) | 44.0 | % | |||||||||||||||||||||
| Dispositions – number of properties sold | 1 | ||||||||||||||||||||||
| Dispositions – gross proceeds (in thousands) | $ | 16,300 | |||||||||||||||||||||
| Subsequent to Quarter End | |||||||||||||||||||||||
| Dispositions – number of properties sold | 1 | ||||||||||||||||||||||
| Dispositions – gross proceeds (in thousands) | $ | 25,180 | |||||||||||||||||||||
Special cash distribution – gross distributions (in thousands) (i) | $ | 45,924 | |||||||||||||||||||||
Special cash distribution – per share (i) | 3.10 | ||||||||||||||||||||||
________
(a)Normalized pro rata cash NOI and AFFO are non-GAAP measures. See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of our non-GAAP measures and for details on how certain non-GAAP measures are calculated.
(b)Presented on a pro rata basis. See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of pro rata.
(c)Gross assets represent consolidated total assets before accumulated depreciation on buildings and improvements. Gross assets are net of accumulated amortization on in-place lease intangible assets of $121.2 million and above-market rent intangible assets of $18.9 million.
(d)Pursuant to certain advisory agreements, our Advisor provides us with strategic management services, including asset management, property disposition support, and various related services. We pay our Advisor an asset management fee that was initially set at an annual amount of $7.5 million and is being proportionately reduced each month following the disposition of each portfolio property.
(e)Pursuant to certain advisory agreements, we will reimburse our Advisor a base administrative amount of approximately $4.0 million annually, for certain administrative services, including day-to-day management services, investor relations, accounting, tax, legal, and other administrative matters.
(f)See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of ABR.
(g)Excludes 570,999 of operating square footage for a parking garage at a domestic property.
(h)Percentage of portfolio is based on ABR, as of June 30, 2025. Includes tenants or guarantors with investment grade ratings (28.1%) and subsidiaries of non-guarantor parent companies with investment grade ratings (15.9%). Investment grade refers to an entity with a rating of BBB- or higher from Standard & Poor’s Ratings Services or Baa3 or higher from Moody’s Investors Service. See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of ABR.
(i)In August 2025, our Board of Trustees declared a special cash distribution of $3.10 per share, totaling approximately $45.9 million. The distribution is payable on September 3, 2025 to shareholders of record as of August 18, 2025.
Net Lease Office Properties | 1 | ||||||||
Net Lease Office Properties
Second Quarter 2025
| Components of Net Asset Value | |||||
In thousands.
Three Months Ended June 30, 2025 | |||||
Normalized Pro Rata Cash NOI (a) (b) | $ | 20,375 | |||
| Balance Sheet – Selected Information | As of June 30, 2025 | ||||
| Assets | |||||
Book value of select real estate (c) | $ | 13,230 | |||
| Cash and cash equivalents | 54,146 | ||||
| Restricted cash, including escrow | 2,043 | ||||
| Other assets, net: | |||||
| Straight-line rent adjustments | $ | 18,808 | |||
| Prepaid expenses | 3,608 | ||||
| Deferred charges | 2,494 | ||||
| Accounts receivable | 1,349 | ||||
| Taxes receivable | 194 | ||||
| Other | 3,512 | ||||
| Total other assets, net | $ | 29,965 | |||
| Liabilities | |||||
Non-recourse mortgages, net (d) | $ | 117,102 | |||
| Accounts payable, accrued expenses and other liabilities: | |||||
| Accounts payable and accrued expenses | $ | 11,234 | |||
| Prepaid and deferred rents | 9,133 | ||||
| Accrued taxes payable | 999 | ||||
| Tenant security deposits | 814 | ||||
| Operating lease liabilities | 222 | ||||
| Other | 21,047 | ||||
| Total accounts payable, accrued expenses and other liabilities | $ | 43,449 | |||
________
(a)Normalized pro rata cash NOI is a non-GAAP measure. See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of our non-GAAP measures and for details on how they are calculated.
(b)Presented on a pro rata basis. See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of pro rata.
(c)Represents the value of real estate not appropriately captured in normalized pro rata cash NOI, such as vacant assets.
(d)Excludes unamortized premium, net totaling $0.1 million as of June 30, 2025.
Net Lease Office Properties | 2 | ||||||||
Net Lease Office Properties
Second Quarter 2025
| Consolidated Statement of Operations | |||||
In thousands, except share and per share amounts.
Three Months Ended June 30, 2025 | |||||
| Revenues | |||||
| Lease revenues | $ | 27,508 | |||
| Other lease-related income | 1,666 | ||||
| 29,174 | |||||
| Operating Expenses | |||||
Impairment charges — real estate (a) | 81,817 | ||||
| Depreciation and amortization | 9,687 | ||||
| Reimbursable tenant costs | 6,537 | ||||
| Property expenses, excluding reimbursable tenant costs | 2,244 | ||||
General and administrative (b) | 2,144 | ||||
Asset management fees (c) | 1,209 | ||||
| 103,638 | |||||
| Other Income and Expenses | |||||
Interest expense (d) | (4,400) | ||||
| Loss on sale of real estate, net | (3,251) | ||||
| Other gains and (losses) | 697 | ||||
| (6,954) | |||||
| Loss before income taxes | (81,418) | ||||
| Provision for income taxes | (100) | ||||
| Net Loss | (81,518) | ||||
| Net income attributable to noncontrolling interests | (22) | ||||
| Net Loss Attributable to NLOP | $ | (81,540) | |||
| Basic and Diluted Loss Per Share | $ | (5.50) | |||
| Weighted-Average Shares Outstanding | |||||
| Basic and Diluted | 14,814,075 | ||||
________
(a)Primarily comprised of an impairment charge of $81.6 million recognized on the KBR, Inc. property in Houston, Texas.
(b)Includes $1.0 million of administrative reimbursements to our Advisor.
(c)Amount is comprised of fees paid to Advisor for strategic management services, including asset management, property disposition support, and various related services.
(d)Includes $2.9 million of non-cash amortization of deferred financing costs.
Net Lease Office Properties | 3 | ||||||||
Net Lease Office Properties
Second Quarter 2025
| FFO and AFFO, Consolidated | |||||
In thousands, except share and per share amounts.
Three Months Ended June 30, 2025 | |||||
| Net loss attributable to NLOP | $ | (81,540) | |||
| Adjustments: | |||||
Impairment charges — real estate (a) | 81,817 | ||||
| Depreciation and amortization of real property | 9,688 | ||||
| Loss on sale of real estate, net | 3,251 | ||||
Proportionate share of adjustments for noncontrolling interests (b) | (52) | ||||
| Total adjustments | 94,704 | ||||
FFO (as defined by NAREIT) Attributable to NLOP (c) | 13,164 | ||||
| Adjustments: | |||||
| Amortization of deferred financing costs | 2,900 | ||||
| Straight-line and other leasing and financing adjustments | 726 | ||||
Above- and below-market rent intangible lease amortization, net | 316 | ||||
| Other (gains) and losses | (293) | ||||
| Other amortization and non-cash items | 109 | ||||
Proportionate share of adjustments for noncontrolling interests (b) | (13) | ||||
| Total adjustments | 3,745 | ||||
AFFO Attributable to NLOP (c) | $ | 16,909 | |||
| Summary | |||||
FFO (as defined by NAREIT) attributable to NLOP (c) | $ | 13,164 | |||
FFO (as defined by NAREIT) attributable to NLOP per diluted share (c) | $ | 0.89 | |||
AFFO attributable to NLOP (c) | $ | 16,909 | |||
AFFO attributable to NLOP per diluted share (c) | $ | 1.14 | |||
| Diluted weighted-average shares outstanding | 14,814,075 | ||||
________
(a)Primarily comprised of an impairment charge of $81.6 million recognized on the KBR, Inc. property in Houston, Texas.
(b)Adjustments disclosed elsewhere in this reconciliation are on a consolidated basis. This adjustment reflects our FFO or AFFO on a pro rata basis.
(c)FFO and AFFO are non-GAAP measures. See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of our non-GAAP measures.
Net Lease Office Properties | 4 | ||||||||
Net Lease Office Properties
Second Quarter 2025
| Consolidated Balance Sheets | |||||
In thousands, except share and per share amounts.
| June 30, 2025 | December 31, 2024 | ||||||||||
| Assets | |||||||||||
| Investments in real estate: | |||||||||||
| Land, buildings and improvements | $ | 581,913 | $ | 730,345 | |||||||
| In-place lease intangible assets and other | 191,977 | 209,968 | |||||||||
| Above-market rent intangible assets | 29,742 | 30,512 | |||||||||
| Investments in real estate | 803,632 | 970,825 | |||||||||
| Accumulated depreciation and amortization | (282,999) | (292,679) | |||||||||
| Assets held for sale, net | 61,868 | 29,297 | |||||||||
| Net investments in real estate | 582,501 | 707,443 | |||||||||
| Cash and cash equivalents | 54,146 | 25,121 | |||||||||
| Restricted cash | 2,043 | 43,305 | |||||||||
| Other assets, net | 29,965 | 29,200 | |||||||||
| Total assets | $ | 668,655 | $ | 805,069 | |||||||
| Liabilities and Equity | |||||||||||
| Debt: | |||||||||||
| Non-recourse mortgages, net | $ | 117,170 | $ | 111,259 | |||||||
| NLOP Mezzanine Loan, net | — | 57,957 | |||||||||
| Debt, net | 117,170 | 169,216 | |||||||||
| Accounts payable, accrued expenses and other liabilities | 43,449 | 44,145 | |||||||||
| Below-market rent intangible liabilities, net | 3,985 | 6,305 | |||||||||
| Total liabilities | 164,604 | 219,666 | |||||||||
Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued | — | — | |||||||||
Common stock, $0.001 par value, 45,000,000 shares authorized; 14,814,075 and 14,814,075 shares, respectively, issued and outstanding | 15 | 15 | |||||||||
| Additional paid-in capital | 855,813 | 855,813 | |||||||||
| Distributions in excess of accumulated earnings | (315,491) | (234,443) | |||||||||
| Accumulated other comprehensive loss | (40,323) | (40,157) | |||||||||
| Total shareholders' equity | 500,014 | 581,228 | |||||||||
| Noncontrolling interests | 4,037 | 4,175 | |||||||||
| Total equity | 504,051 | 585,403 | |||||||||
| Total liabilities and equity | $ | 668,655 | $ | 805,069 | |||||||
Net Lease Office Properties | 5 | ||||||||
Net Lease Office Properties
Second Quarter 2025
| Capitalization | |||||
In thousands, except share and per share amounts. As of June 30, 2025.
| Total Enterprise Value | Shares | Share Price | Market Value | |||||||||||||||||||||||
| Equity | ||||||||||||||||||||||||||
| Common equity | 14,814,075 | $ | 32.55 | $ | 482,198 | |||||||||||||||||||||
| Total Equity Market Capitalization | 482,198 | |||||||||||||||||||||||||
Outstanding Balance (a) | ||||||||||||||||||||||||||
| Debt | ||||||||||||||||||||||||||
| Non-recourse mortgages | 117,102 | |||||||||||||||||||||||||
| Total Debt | 117,102 | |||||||||||||||||||||||||
| Less: Cash and cash equivalents | (54,146) | |||||||||||||||||||||||||
| Net Debt | 62,956 | |||||||||||||||||||||||||
| Total Enterprise Value | $ | 545,154 | ||||||||||||||||||||||||
________
(a)Excludes unamortized premium, net totaling $0.1 million as of June 30, 2025.
Net Lease Office Properties | 6 | ||||||||
Net Lease Office Properties
Second Quarter 2025
| Debt Overview | |||||
Dollars in thousands. Pro rata. As of June 30, 2025.
| Maturity Date | Fixed / Floating | Interest Rate | Total Outstanding Balance (a) | % of Total | ||||||||||||||||||||||||||||
| Mortgages (Tenant Listed) | ||||||||||||||||||||||||||||||||
Northrop Grumman Systems Corporation (b) | 1/6/2025 | Fixed | 9.2 | % | $ | 25,220 | 21.5 | % | ||||||||||||||||||||||||
| Acosta, Inc. | 8/6/2025 | Fixed | 4.4 | % | 9,768 | 8.3 | % | |||||||||||||||||||||||||
Siemens AS (c) | 12/15/2025 | Floating | 4.9 | % | 45,451 | 38.9 | % | |||||||||||||||||||||||||
| Midcontinent Independent Stm Op Inc. | 3/6/2026 | Fixed | 7.0 | % | 8,796 | 7.5 | % | |||||||||||||||||||||||||
| North American Lighting, Inc. | 5/6/2026 | Fixed | 6.3 | % | 5,967 | 5.1 | % | |||||||||||||||||||||||||
| Intuit Inc. | 7/6/2026 | Fixed | 7.0 | % | 21,900 | 18.7 | % | |||||||||||||||||||||||||
| Total Debt Outstanding | 6.4 | % | $ | 117,102 | 100.0 | % | ||||||||||||||||||||||||||
________
(a)Excludes unamortized premium, net totaling $0.1 million as of June 30, 2025.
(b)We are in default of this non-recourse mortgage loan, as the loan was not repaid on the maturity date and the lender has the right to commence foreclosure proceedings. As of the date of this report, the lender has not exercised such a right. Since we are in default, our interest rate is 9.2% (5.0% default rate plus 4.2% base interest rate).
(c)This non-recourse mortgage loan is in a loan-to-value covenant breach as of June 30, 2025, and the lender has the right to commence foreclosure proceedings. As of the date of this report, the lender has not exercised such a right.
Net Lease Office Properties | 7 | ||||||||
Net Lease Office Properties
Second Quarter 2025
| Dispositions | |||||
Dollars in thousands. Pro rata.
| Tenant / Lease Guarantor | Property Location(s) | Gross Sale Price | ABR (a) | Closing Date | Gross Square Footage | |||||||||||||||||||||||||||
| 4Q23 | ||||||||||||||||||||||||||||||||
| Raytheon Company | Tucson, AZ | $ | 24,575 | $ | 1,978 | Dec-23 | 143,650 | |||||||||||||||||||||||||
| Carhartt, Inc. | Dearborn, MI | 9,806 | 748 | Dec-23 | 58,722 | |||||||||||||||||||||||||||
| BCBSM, Inc. | Eagan, MN | 2,500 | 298 | Dec-23 | 29,916 | |||||||||||||||||||||||||||
| AVL Michigan Holding Corporation | Plymouth, MI | 6,200 | 575 | Dec-23 | 70,000 | |||||||||||||||||||||||||||
| 4Q23 Total | 43,081 | 3,599 | 302,288 | |||||||||||||||||||||||||||||
| 1Q24 | ||||||||||||||||||||||||||||||||
Undisclosed – UK insurance company (b) | Newport, United Kingdom | 10,497 | 1,761 | Jan-24 | 80,664 | |||||||||||||||||||||||||||
Total E&P Norge AS (b) | Stavanger, Norway | 33,072 | 5,185 | Mar-24 | 275,725 | |||||||||||||||||||||||||||
| 1Q24 Total | 43,569 | 6,946 | 356,389 | |||||||||||||||||||||||||||||
| 2Q24 | ||||||||||||||||||||||||||||||||
Exelon Generation Company, LLC (c) | Warrenville, IL | 19,830 | 2,935 | Apr-24 | 146,745 | |||||||||||||||||||||||||||
Vacant (formerly AVT Technology Solutions LLC) (c) | Tempe, AZ | 13,160 | — | Apr-24 | 132,070 | |||||||||||||||||||||||||||
| FedEx Corporation | Collierville, TN | 62,500 | 5,491 | Apr-24 | 390,380 | |||||||||||||||||||||||||||
| DMG MORI SEIKI U.S.A., INC. | Hoffman Estates, IL | 35,984 | 2,458 | Apr-24 | 104,598 | |||||||||||||||||||||||||||
| BCBSM, Inc. (2 properties) | Eagan, MN | 60,700 | 4,663 | Jun-24 | 347,472 | |||||||||||||||||||||||||||
| 2Q24 Total | 192,174 | 15,547 | 1,121,265 | |||||||||||||||||||||||||||||
| 3Q24 | ||||||||||||||||||||||||||||||||
| CVS Health Corporation | Scottsdale, AZ | 71,500 | 4,252 | Aug-24 | 354,888 | |||||||||||||||||||||||||||
| Xileh Holding Inc. | Auburn Hills, MI | 9,000 | 711 | Sep-24 | 55,490 | |||||||||||||||||||||||||||
| 3Q24 Total | 80,500 | 4,963 | 410,378 | |||||||||||||||||||||||||||||
| 4Q24 | ||||||||||||||||||||||||||||||||
E.On UK PLC (b) | Houghton le Spring, United Kingdom | 3,924 | 3,819 | Oct-24 | 217,339 | |||||||||||||||||||||||||||
| Vacant (formerly BCBSM, Inc.) | Eagan, MN | 11,650 | — | Nov-24 | 227,666 | |||||||||||||||||||||||||||
| Merative L.P. | Hartland, WI | 6,750 | 669 | Dec-24 | 81,082 | |||||||||||||||||||||||||||
| Charter Communications Operating, LLC | Bridgeton, MO | 7,350 | 820 | Dec-24 | 78,080 | |||||||||||||||||||||||||||
| Caremark RX, L.L.C. | Chandler, AZ | 15,000 | 1,645 | Dec-24 | 183,000 | |||||||||||||||||||||||||||
| Cofinity, Inc./ Aetna Life Insurance Co. | Southfield, MI | 2,500 | 1,833 | Dec-24 | 94,453 | |||||||||||||||||||||||||||
| 4Q24 Total | 47,174 | 8,786 | 881,620 | |||||||||||||||||||||||||||||
| 1Q25 | ||||||||||||||||||||||||||||||||
| Emerson Electric Co. | Houston, TX | 4,180 | 1,108 | Mar-25 | 52,144 | |||||||||||||||||||||||||||
Nokia Corporation (b) | Krakow, Poland | 5,595 | 779 | Mar-25 | 53,400 | |||||||||||||||||||||||||||
| 1Q25 Total | 9,775 | 1,887 | 105,544 | |||||||||||||||||||||||||||||
| 2Q25 | ||||||||||||||||||||||||||||||||
| Vacant (formerly McKesson Corporation) | The Woodlands, TX | 16,300 | — | May-25 | 204,063 | |||||||||||||||||||||||||||
| 2Q25 Total | 16,300 | — | 204,063 | |||||||||||||||||||||||||||||
Total Dispositions (d) | $ | 432,573 | $ | 41,728 | 3,381,547 | |||||||||||||||||||||||||||
________
(a)ABR is pro forma for any agreed to and signed future rent restructurings.
(b)Amount reflects the applicable exchange rate on the date of the transaction.
(c)We transferred ownership of these properties and the related non-recourse mortgage loans to the respective mortgage lenders. Gross proceeds from these dispositions represent the mortgage principal outstanding on the respective dates of transfer.
Net Lease Office Properties | 8 | ||||||||
Net Lease Office Properties
Second Quarter 2025
| Capital Expenditures and Leasing Activity | |||||
Capital Expenditures
In thousands. For the three months ended June 30, 2025.
| Tenant Improvements and Leasing Costs | |||||
| Tenant Improvements (Tenant Listed) | |||||
| S&ME, Inc. | $ | 303 | |||
| 303 | |||||
| Leasing Costs (Tenant Listed) | |||||
| JPMorgan Chase Bank, N.A. | 572 | ||||
| 572 | |||||
| Tenant Improvements and Leasing Costs | 875 | ||||
| Maintenance Capital Expenditures (Tenant Listed) | |||||
| JPMorgan Chase Bank, N.A. | 195 | ||||
| Pioneer Credit Recovery, Inc. | 182 | ||||
| Thermo Fisher Scientific Inc. | 129 | ||||
| KBR, Inc. | 113 | ||||
| 619 | |||||
| Total: Tenant Improvements and Leasing Costs, and Maintenance Capital Expenditures | $ | 1,494 | |||
Leasing Activity
Dollars in thousands. For the three months ended June 30, 2025, except ABR. Pro rata.
Lease Renewals and Extensions (a) | Expected Tenant Improvements ($000s) | Leasing Commissions ($000s) | ||||||||||||||||||||||||||||||||||||||||||||||||
| ABR | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Tenant | Location | Square Feet | Prior Lease ($000s) | New Lease ($000s) (b) | Rent Recapture | Incremental Lease Term | ||||||||||||||||||||||||||||||||||||||||||||
Midcontinent Independent Stm Op Inc. (c) | Eagan, MN | 60,463 | $ | 1,148 | $ | 937 | 81.6 | % | $ | — | $ | 605 | 10.0 years | |||||||||||||||||||||||||||||||||||||
Total / Weighted Average (d) | 60,463 | $ | 1,148 | $ | 937 | 81.6 | % | $ | — | $ | 605 | 10.0 years | ||||||||||||||||||||||||||||||||||||||
_______
(a)Excludes lease extensions for a period of one year or less.
(b)New lease amounts are based on in-place rents at time of lease commencement and exclude any free rent periods.
(c)New rent commences in March 2026.
(d)Weighted average refers to the incremental lease term.
Net Lease Office Properties | 9 | ||||||||
Net Lease Office Properties
Second Quarter 2025
| Top Ten Tenants | |||||
Dollars in thousands. Pro rata. As of June 30, 2025.
| Tenant / Lease Guarantor | State / Country | ABR | ABR % | Square Footage | Number of Properties | Weighted-Average Lease Term (Years) | ||||||||||||||||||||||||||||||||
KBR, Inc. (a) | Texas | $ | 20,156 | 22.9 | % | 913,713 | 1 | 5.0 | ||||||||||||||||||||||||||||||
JPMorgan Chase Bank, N.A. (b) | Florida, Texas | 9,766 | 11.1 | % | 666,869 | 3 | 4.3 | |||||||||||||||||||||||||||||||
Siemens AS (c) | Norway | 4,842 | 5.5 | % | 165,905 | 1 | 0.5 | |||||||||||||||||||||||||||||||
| Thermo Fisher Scientific Inc. | North Carolina | 4,063 | 4.6 | % | 219,812 | 1 | 8.4 | |||||||||||||||||||||||||||||||
| Omnicom Group, Inc. | California | 3,961 | 4.5 | % | 120,000 | 1 | 3.3 | |||||||||||||||||||||||||||||||
| R.R. Donnelley & Sons Company | Illinois | 3,393 | 3.9 | % | 167,215 | 1 | 2.3 | |||||||||||||||||||||||||||||||
| Board of Regents, State of Iowa | Iowa | 3,254 | 3.7 | % | 191,700 | 1 | 5.3 | |||||||||||||||||||||||||||||||
| Bankers Financial Corporation | Florida | 3,228 | 3.7 | % | 111,357 | 1 | 0.1 | |||||||||||||||||||||||||||||||
| Google, LLC | California | 3,018 | 3.4 | % | 67,681 | 1 | 5.3 | |||||||||||||||||||||||||||||||
| Northrop Grumman Systems Corporation | Minnesota | 2,679 | 3.0 | % | 191,336 | 1 | 4.4 | |||||||||||||||||||||||||||||||
Total (d) | $ | 58,360 | 66.3 | % | 2,815,588 | 12 | 4.2 | |||||||||||||||||||||||||||||||
________
(a)Excludes 570,999 of operating square footage for a parking garage associated with the KBR, Inc. property in Houston, Texas.
(b)A property in Tampa, Florida, was sold in July 2025, as described in the Summary Metrics section.
(c)ABR amount is subject to fluctuations in foreign currency exchange rates.
(d)See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of pro rata.
Net Lease Office Properties | 10 | ||||||||
Net Lease Office Properties
Second Quarter 2025
| Lease Expirations | |||||
Dollars in thousands. Pro rata. As of June 30, 2025.
Year of Lease Expiration (a) | Number of Leases Expiring | Number of Tenants with Leases Expiring | ABR | ABR % | Square Footage (b) | Square Footage % | ||||||||||||||||||||||||||||||||
| Remaining 2025 | 7 | 7 | $ | 12,142 | 13.8 | % | 571,125 | 10.8 | % | |||||||||||||||||||||||||||||
| 2026 | 6 | 6 | 4,940 | 5.6 | % | 308,997 | 5.8 | % | ||||||||||||||||||||||||||||||
| 2027 | 7 | 6 | 8,879 | 10.1 | % | 499,571 | 9.4 | % | ||||||||||||||||||||||||||||||
| 2028 | 7 | 6 | 10,551 | 12.0 | % | 476,036 | 9.0 | % | ||||||||||||||||||||||||||||||
| 2029 | 4 | 3 | 4,597 | 5.2 | % | 304,613 | 5.7 | % | ||||||||||||||||||||||||||||||
| 2030 | 7 | 6 | 34,720 | 39.5 | % | 1,772,623 | 33.4 | % | ||||||||||||||||||||||||||||||
| 2031 | 1 | 1 | 631 | 0.7 | % | 50,600 | 1.0 | % | ||||||||||||||||||||||||||||||
| 2032 | 2 | 2 | 3,721 | 4.2 | % | 257,008 | 4.8 | % | ||||||||||||||||||||||||||||||
| 2033 | 1 | 1 | 4,063 | 4.6 | % | 219,812 | 4.2 | % | ||||||||||||||||||||||||||||||
| 2035 | 1 | 1 | 2,050 | 2.4 | % | 120,147 | 2.3 | % | ||||||||||||||||||||||||||||||
| 2036 | 1 | 1 | 1,148 | 1.3 | % | 60,463 | 1.1 | % | ||||||||||||||||||||||||||||||
| 2037 | 1 | 1 | 545 | 0.6 | % | 31,120 | 0.6 | % | ||||||||||||||||||||||||||||||
| Vacant | — | — | — | — | % | 631,438 | 11.9 | % | ||||||||||||||||||||||||||||||
Total (c) | 45 | $ | 87,987 | 100.0 | % | 5,303,553 | 100.0 | % | ||||||||||||||||||||||||||||||
________
(a)Assumes tenants do not exercise any renewal options or purchase options.
(b)Excludes 570,999 of operating square footage for a garage at a domestic property.
(c)See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of pro rata.
Net Lease Office Properties | 11 | ||||||||
Net Lease Office Properties
Second Quarter 2025
| Property List | |||||
Dollars in thousands. Pro rata. As of June 30, 2025.
U.S. Assets:
| Encumbered Status | |||||||||||||||||||||||||||||||||||
| # | Primary Tenant | Industry | Credit (a) | City | State | Square Footage (b) | ABR | Rent Increase Type | Date of Next Increase | WALT (c) | In-Place Mortgage Debt | ||||||||||||||||||||||||
| 1 | KBR, Inc. (d) (e) | Construction & Engineering | Non-IG | Houston | Texas | 1,064,788 | $21,286 | Fixed: One-time 7.78% | Jan-27 | 4.9 | $— | ||||||||||||||||||||||||
| 2 | JPMorgan Chase Bank, N.A. | Diversified Banks | IG | Fort Worth | Texas | 386,154 | $4,850 | CPI: 0.0% Floor / 2.0% Cap | Mar-26 | 4.7 | $— | ||||||||||||||||||||||||
| 3 | Thermo Fisher Scientific Inc. | Pharmaceuticals | IG | Morrisville | North Carolina | 219,812 | $4,063 | Fixed: 2.00% annually | Oct-25 | 8.4 | $— | ||||||||||||||||||||||||
| 4 | Omnicom Group, Inc. | Advertising | IG | Playa Vista | California | 120,000 | $3,961 | None | N/A | 3.3 | $— | ||||||||||||||||||||||||
| 5 | R.R. Donnelley & Sons Company | Commercial Printing | Non-IG | Warrenville | Illinois | 167,215 | $3,393 | Fixed: 2.00% annually | Sep-25 | 2.3 | $— | ||||||||||||||||||||||||
| 6 | Board of Regents, State of Iowa (f) | Government Related Services | IG | Coralville | Iowa | 191,700 | $3,254 | CPI: 0.0% Floor / No Cap | Nov-25 | 5.3 | $— | ||||||||||||||||||||||||
| 7 | Bankers Financial Corporation (d) (g) | Property & Casualty Insurance | Non-IG | St. Petersburg | Florida | 167,581 | $3,228 | Fixed: 2.50% annually | N/A | 0.1 | $— | ||||||||||||||||||||||||
| 8 | JPMorgan Chase Bank, N.A. (sold on 7/18/25) | Diversified Banks | IG | Tampa | Florida | 176,150 | $3,053 | CPI: 0.0% Floor / 2.0% Cap | Mar-26 | 4.7 | $— | ||||||||||||||||||||||||
| 9 | Google, LLC | Internet Software & Services | IG | Venice | California | 67,681 | $3,018 | Fixed: 3.00% annually | Nov-25 | 5.3 | $— | ||||||||||||||||||||||||
| 10 | ICU MEDICAL, INC. (d) (h) | Health Care Supplies | Non-IG | Plymouth | Minnesota | 182,250 | $2,909 | Fixed: 3.25% annually | N/A | 0.3 | $— | ||||||||||||||||||||||||
| 11 | Northrop Grumman Systems Corporation | Aerospace & Defense | IG | Plymouth | Minnesota | 191,336 | $2,679 | Fixed: 2.00% annually | Dec-25 | 4.4 | $25,220 | ||||||||||||||||||||||||
| 12 | Intuit Inc. | Internet Software & Services | IG | Plano | Texas | 166,033 | $2,577 | Fixed: One-time $2.00/SF in '21 | N/A | 1.0 | $21,900 | ||||||||||||||||||||||||
| 13 | Cohesity Inc. | Systems Software | Non-IG | Roseville | Minnesota | 136,125 | $2,255 | Fixed: 2.00% annually | Dec-25 | 7.4 | $— | ||||||||||||||||||||||||
| 14 | Cenlar FSB | Regional Banks | Non-IG | Yardley | Pennsylvania | 105,584 | $2,105 | Fixed: 2.50% annually | Jan-26 | 3.0 | $— | ||||||||||||||||||||||||
| 15 | iHeartCommunications, Inc. | Broadcasting | Non-IG | San Antonio | Texas | 120,147 | $2,050 | Fixed: 2.00% annually | Feb-26 | 9.6 | $— | ||||||||||||||||||||||||
| 16 | JPMorgan Chase Bank, N.A. (d) (e) | Diversified Banks | IG | Tampa | Florida | 135,733 | $1,932 | CPI: 0.0% Floor / 2.0% Cap | Mar-26 | 2.6 | $— | ||||||||||||||||||||||||
| 17 | Arbella Service Company, Inc. | Property & Casualty Insurance | IG | Quincy | Massachusetts | 132,160 | $1,850 | Fixed: One-time $1.00/SF in '22 | N/A | 1.9 | $— | ||||||||||||||||||||||||
| 18 | ICF Consulting Group, Inc. | IT Consulting & Other Services | Non-IG | Martinsville | Virginia | 93,333 | $1,830 | CPI: 0.0% Floor / No Cap | Jan-26 | 1.6 | $— | ||||||||||||||||||||||||
| 19 | Acosta, Inc. | Advertising | Non-IG | Jacksonville | Florida | 88,062 | $1,541 | Fixed: $0.50/SF annually | Jul-25 | 2.1 | $9,768 | ||||||||||||||||||||||||
| 20 | Safelite Group, Inc. | Specialized Consumer Services | Non-IG | Rio Rancho | New Mexico | 94,649 | $1,527 | Fixed: 2.00% annually | Jan-26 | 3.9 | $— | ||||||||||||||||||||||||
| 21 | Master Lock Company, LLC | Building Products | Non-IG | Oak Creek | Wisconsin | 120,883 | $1,466 | Fixed: 2.00% annually | Jun-26 | 6.9 | $— | ||||||||||||||||||||||||
| 22 | Midcontinent Independent Stm Op Inc. (i) | Electric Utilities | IG | Eagan | Minnesota | 60,463 | $1,148 | Fixed: 2.50% annually | Mar-27 | 10.7 | $8,796 | ||||||||||||||||||||||||
| 23 | North American Lighting, Inc. | Auto Parts & Equipment | Non-IG | Farmington Hills | Michigan | 75,286 | $1,084 | Fixed: 2.50% annually | N/A | 0.8 | $5,967 | ||||||||||||||||||||||||
| 24 | Radiate Holdings, L.P. | Cable & Satellite | Non-IG | San Marcos | Texas | 47,000 | $1,074 | CPI: 0.0% Floor / 3.0% Cap | Aug-25 | 3.2 | $— | ||||||||||||||||||||||||
| 25 | Arcfield Acquisition Corporation | Aerospace & Defense | Non-IG | King of Prussia | Pennsylvania | 88,578 | $1,000 | Fixed: One-time 17.50% in '23 | N/A | 0.4 | $— | ||||||||||||||||||||||||
| 26 | Pioneer Credit Recovery, Inc. (d) | Diversified Support Services | Non-IG | Moorestown | New Jersey | 65,567 | $931 | Fixed: 2.50% annually | Jan-26 | 2.6 | $— | ||||||||||||||||||||||||
| 27 | APCO Holdings, Inc. | Property & Casualty Insurance | Non-IG | Norcross | Georgia | 50,600 | $631 | Fixed: 2.50% annually | Mar-26 | 5.7 | $— | ||||||||||||||||||||||||
Net Lease Office Properties | 12 | ||||||||
| 28 | Undisclosed – multi-national provider of industrial gases | Industrial Gases | IG | Houston | Texas | 49,821 | $629 | Fixed: 2.00% annually | N/A | 0.5 | $— | ||||||||||||||||||||||||
| 29 | S&ME, Inc. | Environmental & Facilities Services | Non-IG | Raleigh | North Carolina | 31,120 | $545 | Fixed: 2.75% annually | Mar-26 | 11.7 | $— | ||||||||||||||||||||||||
| 30 | Radiate Holdings, L.P. | Cable & Satellite | Non-IG | Waco | Texas | 30,699 | $473 | CPI: 0.0% Floor / 3.0% Cap | Aug-25 | 3.2 | $— | ||||||||||||||||||||||||
| 31 | Radiate Holdings, L.P. | Cable & Satellite | Non-IG | Corpus Christi | Texas | 20,717 | $355 | CPI: 0.0% Floor / 3.0% Cap | Aug-25 | 3.2 | $— | ||||||||||||||||||||||||
| 32 | Radiate Holdings, L.P. | Cable & Satellite | Non-IG | Odessa | Texas | 21,193 | $236 | CPI: 0.0% Floor / 3.0% Cap | Aug-25 | 3.2 | $— | ||||||||||||||||||||||||
| 33 | Radiate Holdings, L.P. | Cable & Satellite | Non-IG | San Marcos | Texas | 14,400 | $212 | CPI: 0.0% Floor / 3.0% Cap | Aug-25 | 3.2 | $— | ||||||||||||||||||||||||
| 34 | Vacant (formerly BCBSM, Inc.) (g) | N/A | N/A | Eagan | Minnesota | 442,542 | $0 | N/A | N/A | 0.0 | $— | ||||||||||||||||||||||||
| 35 | Vacant (formerly BCBSM, Inc.) (g) | N/A | N/A | Eagan | Minnesota | 12,286 | $0 | N/A | N/A | 0.0 | $— | ||||||||||||||||||||||||
U.S. Total (j) | 5,137,648 | $83,145 | 4.2 | $71,651 | |||||||||||||||||||||||||||||||
European Asset:
| Encumbered Status | |||||||||||||||||||||||||||||||||||
| # | Primary Tenant | Industry | Credit (a) | City | Country | Square Footage | ABR | Rent Increase Type | Date of Next Increase | WALT (c) | In-Place Mortgage Debt | ||||||||||||||||||||||||
| 1 | Siemens AS | Industrial Conglomerates | IG | Oslo | Norway | 165,905 | $4,842 | CPI: 0.0% Floor / No Cap | N/A | 0.5 | $45,451 | ||||||||||||||||||||||||
European Total (j) | 165,905 | $4,842 | 0.5 | $45,451 | |||||||||||||||||||||||||||||||
________
_ Indicates an asset that was disposed of in July 2025, as described in the Summary Metrics section.
(a)“IG” refers to investment grade rated tenants.
(b)Excludes 570,999 of operating square footage for a parking garage associated with the KBR, Inc. property in Houston, Texas.
(c)Assumes parties do not exercise any renewal or purchase options pursuant to their applicable leases.
(d)Denotes multi-tenant property. Primary tenant generating largest percentage of ABR shown. Industry, credit, rent increase type and next rent increase are for primary tenant.
(e)Denotes leased property that is not 100% occupied.
(f)We own a 90% controlling interest in this consolidated property.
(g)Denotes property that is vacant as of the date of this report.
(h)In July 2025, we entered into a lease amendment with the primary tenant (ICU MEDICAL INC.), taking back a majority of the space for a ten-month lease extension. As of the date of this report, the property is partially leased to two tenants with total ABR of $1.0 million and coterminous lease expirations of May 31, 2026.
(i)In May 2025, we entered into a lease amendment with the tenant to extend the term beyond its current lease expiration of February 2026. ABR during the extension period will reset to $0.9 million, with 2.50% annual rent increases beginning February 2027.
(j)See the Disclosures Regarding Non-GAAP and Other Metrics section in the Appendix for a description of pro rata.
Net Lease Office Properties | 13 | ||||||||
Net Lease Office Properties
Appendix
Second Quarter 2025
Net Lease Office Properties | 14 | ||||||||
Net Lease Office Properties
Second Quarter 2025
| Normalized Pro Rata Cash NOI | |||||
In thousands.
Three Months Ended June 30, 2025 | |||||
| Consolidated Lease Revenues and Other | |||||
| Total lease revenues – as reported | $ | 27,508 | |||
Parking garage revenues (a) | 495 | ||||
| Less: Consolidated Reimbursable and Non-Reimbursable Property Expenses | |||||
| Reimbursable property expenses – as reported | 6,537 | ||||
| Non-reimbursable property expenses – as reported | 2,244 | ||||
| 19,222 | |||||
| Adjustments for Pro Rata Ownership of Real Estate Joint Ventures: | |||||
| Less: Pro rata share of NOI attributable to noncontrolling interests | (90) | ||||
| (90) | |||||
| 19,132 | |||||
| Adjustments for Pro Rata Non-Cash Items: | |||||
| Add: Straight-line and other leasing and financing adjustments | 726 | ||||
| Add: Above- and below-market rent intangible lease amortization | 316 | ||||
| Add: Other non-cash items | 109 | ||||
| 1,151 | |||||
Pro Rata Cash NOI (b) | 20,283 | ||||
Adjustment to normalize for intra-period dispositions (c) | 92 | ||||
Normalized Pro Rata Cash NOI (b) | $ | 20,375 | |||
Net Lease Office Properties | 15 | ||||||||
Net Lease Office Properties
Second Quarter 2025
The following table presents a reconciliation from Net loss attributable to NLOP to Normalized pro rata cash NOI:
Three Months Ended June 30, 2025 | |||||
| Net Loss Attributable to NLOP | |||||
| Net loss attributable to NLOP – as reported | $ | (81,540) | |||
| Adjustments for Consolidated Operating Expenses | |||||
| Add: Operating expenses – as reported | 103,638 | ||||
| Less: Property expenses, excluding reimbursable tenant costs – as reported | (2,244) | ||||
| 101,394 | |||||
| Adjustments for Other Consolidated Revenues and Expenses: | |||||
| Less: Other lease-related income (excluding parking garage revenues) | (1,171) | ||||
| Less: Reimbursable property expenses – as reported | (6,537) | ||||
| Add: Other income and (expenses) – as reported | 6,954 | ||||
| Add: Provision for income taxes – as reported | 100 | ||||
| (654) | |||||
| Other Adjustments: | |||||
| Add: Straight-line and other leasing and financing adjustments | 726 | ||||
| Add: Above- and below-market rent intangible lease amortization | 316 | ||||
| Add: Property expenses, excluding reimbursable tenant costs, non-cash | 109 | ||||
Adjustment to normalize for intra-period dispositions (c) | 92 | ||||
| Less: Adjustments for pro rata ownership | (68) | ||||
| 1,175 | |||||
Normalized Pro Rata Cash NOI (b) | $ | 20,375 | |||
________
(a)Amount is comprised of revenues from a parking garage at a domestic property and is included in Other lease-related income on our consolidated statements of operations.
(b)Pro rata cash NOI and normalized pro rata cash NOI are non-GAAP measures. See the Disclosures Regarding Non-GAAP and Other Metrics section that follows for a description of our non-GAAP measures and for details on how pro rata cash NOI and normalized pro rata cash NOI are calculated.
(c)For properties disposed of during the period, the adjustment eliminates our pro rata share of cash NOI for the period.
Net Lease Office Properties | 16 | ||||||||
Net Lease Office Properties
Second Quarter 2025
| Disclosures Regarding Non-GAAP and Other Metrics | |||||
Non-GAAP Financial Disclosures
FFO and AFFO
Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated a non-GAAP measure known as FFO, which we believe to be an appropriate supplemental measure, when used in addition to and in conjunction with results presented in accordance with GAAP, to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental non-GAAP measure. FFO is not equivalent to, nor a substitute for, net income or loss as determined under GAAP.
We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as restated in December 2018. The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from the sale of certain real estate, impairment charges on real estate or other assets incidental to the company’s main business, gains or losses on changes in control of interests in real estate, and depreciation and amortization from real estate assets; and after adjustments for unconsolidated partnerships and jointly owned investments. Adjustments for unconsolidated partnerships and jointly owned investments are calculated to reflect FFO on the same basis.
We also modify the NAREIT computation of FFO to adjust GAAP net income for certain non-cash charges, such as amortization of real estate-related intangibles, deferred income tax benefits and expenses, straight-line rent and related reserves, other non-cash rent adjustments, non-cash allowance for credit losses on finance leases, stock-based compensation, non-cash environmental accretion expense, amortization of discounts and premiums on debt, and amortization of deferred financing costs. Our assessment of our operations is focused on long-term sustainability and not on such non-cash items, which may cause short-term fluctuations in net income but have no impact on cash flows. Additionally, we exclude non-core income and expenses, such as gains or losses from extinguishment of debt, merger and acquisition expenses, and spin-off expenses. We also exclude realized and unrealized gains/losses on foreign currency exchange rate movements, which are not considered fundamental attributes of our business plan and do not affect our overall long-term operating performance. We refer to our modified definition of FFO as AFFO. We exclude these items from GAAP net income to arrive at AFFO as they are not the primary drivers in our decision-making process and excluding these items provides investors a view of our portfolio performance over time and makes it more comparable to other REITs. AFFO also reflects adjustments for jointly owned investments. 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. 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. We do not use our FFO and AFFO measures as, nor should they be considered to be, alternatives to net income computed under GAAP, or as alternatives to net cash provided by operating activities computed under GAAP, or as indicators of our ability to fund our cash needs.
Pro Rata Cash NOI
Cash net operating income (“cash NOI”) is a non-GAAP financial measure that is intended to reflect the performance of our properties. We define cash NOI as cash rents from our properties less non-reimbursable property expenses. Cash NOI excludes amortization of intangibles and straight-line rent adjustments that are included in GAAP lease revenues. We present cash NOI on a pro rata basis (“pro rata cash NOI”) to account for our share of income related to noncontrolling interests. We believe that pro rata cash NOI is a helpful measure that both investors and management can use to evaluate the financial performance of our properties and it allows for comparison of our operating performance between periods and to other REITs. Pro rata cash NOI should not be considered as an alternative to net income as an indication of our financial performance or to cash flows as a measure of liquidity or our ability to fund all needs. The method by which we calculate and present cash NOI and/or pro rata cash NOI may not be directly comparable to the way other REITs present such metrics.
Normalized Pro Rata Cash NOI
Normalized pro rata cash NOI is pro rata cash NOI as defined above adjusted primarily to exclude our pro rata share of cash NOI from properties disposed of during the most recent quarter. We believe this measure provides a helpful representation of our net operating income from our in-place leased properties.
Net Lease Office Properties | 17 | ||||||||
Net Lease Office Properties
Second Quarter 2025
Other Metrics
Pro Rata Metrics
This supplemental package contains certain metrics prepared on a pro rata basis. We refer to these metrics as pro rata metrics. We have one investment in which our economic ownership is less than 100%. On a full consolidation basis, we report 100% of the assets, liabilities, revenues and expenses of this investment that is deemed to be under our control, even though our ownership is less than 100%. On a pro rata basis, we generally present our proportionate share, based on our economic ownership of this jointly owned investment, of the assets, liabilities, revenues and expenses of this investment. Multiplying our jointly owned investment’s financial statement line items by our percentage ownership and adding or subtracting those amounts from our totals, as applicable, may not accurately depict the legal and economic implications of holding an ownership interest of less than 100% in our jointly owned investment.
ABR
ABR represents contractual minimum annualized base rent for our properties and reflects exchange rates as of June 30, 2025. If there is a rent abatement, we annualize the first monthly contractual base rent following the free rent period. ABR is presented on a pro rata basis.
Net Lease Office Properties | 18 | ||||||||