Oak Street Net Lease Trust

11/07/2025 | Press release | Distributed by Public on 11/07/2025 15:14

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References herein to "Blue Owl Real Estate Net Lease Trust," "Company," "we," "us," or "our" refer to Blue Owl Real Estate Net Lease Trust and its subsidiaries unless the context specifically requires otherwise.
The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed in Part I. Item 1A - "Risk Factors" in our 2024 Annual Report on Form 10-K filed with the SEC on March 13, 2025. Dollars are in thousands, except for per share amounts.
Overview
Blue Owl Real Estate Net Lease Trust (formerly, Oak Street Net Lease Trust) was formed on April 4, 2022 ("Inception") as a Maryland statutory trust; however, no activity occurred until the first capital funding from Blue Owl on August 9, 2022. The Company invests primarily in stabilized income-generating commercial real estate in the United States. To a lesser extent, we may invest outside the U.S. and in real estate debt. The Company is the sole general partner and majority limited partner in Blue Owl NLT Operating Partnership LP (formerly, OakTrust Operating Partnership L.P.), a Delaware limited partnership ("NLT OP" or the "Operating Partnership"), and we own substantially all of our assets through NLT OP. We are externally managed by our Adviser. The Company's principal business is the acquisition, ownership, financing and leasing of single-tenant commercial real estate properties subject to long-term net leases with investment grade and other creditworthy tenants or guarantors, and its management does not distinguish the principal business, or group the operations, by property type, lease classification, investment type or any other grouping for purposes of measuring performance. Accordingly, the Company has one operating segment and one reportable segment.
The Company is a non-listed, perpetual life real estate investment trust ("REIT") that qualifies as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), for U.S. federal income tax. We generally will not be subject to U.S. federal income taxes on our taxable income to the extent we annually distribute all of our net taxable income to Shareholders and maintain our qualification as a REIT.
As of September 30, 2025, we have received net proceeds of $6,623,363 from the sale of our common shares. We have contributed the net proceeds to NLT OP in exchange for a corresponding number of Class S, Class N, Class D, and Class I units of NLT OP ("OP Units"). NLT OP has primarily used the net proceeds to make investments in real estate and real estate debt as further described below under "Investment Portfolio." We intend to continue selling shares on a monthly basis.
DST Program
On August 31, 2023, the Company, through NLT OP, initiated a program (the "DST Program") to issue and sell up to a maximum aggregate offering amount of $3,000,000 of beneficial interests ("Interests") in one or more Delaware statutory trusts (the "DSTs") holding real properties (the "DST Properties"). The Interests will be issued and sold to "accredited investors," as that term is defined under Regulation D promulgated by the SEC under the 1933 Act in private placements exempt from registration pursuant to Section 4(a)(2) of the 1933 Act (the "DST Offerings"). Under the DST Program, DST Properties, which may be sold, contributed, sourced or otherwise seeded from the Company's real properties held through NLT OP or from third parties, will be held in one or more DSTs, and will be leased back by wholly owned subsidiaries of NLT OP in accordance with corresponding master lease agreements. Each master lease agreement will be guaranteed by NLT OP, which will have the right, but not the obligation, to acquire the Interests in the applicable DST from the beneficial owners, in each case, in exchange for cash or OP Units, at a purchase price equal to the fair market value of the beneficial owner's Interest or the fair market value of the beneficial owner's interest in one or more of the DST Properties (the "FMV Buyback Option"). The FMV Buyback Option is exercisable during the one-year option period beginning two years from the final closing of the applicable DST Offering or in such other time frame as provided for in the applicable DST arrangement. After a one-year holding period, investors who receive OP Units pursuant to the FMV Buyback Option generally have the right to cause NLT OP to redeem all or a portion of their OP Units for, at the Company's sole discretion, common shares of the Company, cash or a combination of both.
We expect that the DST Program will give us the opportunity to expand and diversify our capital-raising strategies by offering what we believe to be an attractive investment product for investors that may be seeking replacement properties to complete like-kind exchange transactions under Section 1031 of the Internal Revenue Code of 1986, as amended. Affiliates of the Adviser receive fees in connection with the sale of the Interests and the management of the DSTs. We intend to
continue to use the net offering proceeds from the DST Program to make investments in accordance with our investment strategy and policies, reduce our borrowings, repay indebtedness, fund the repurchase of shares of all classes of our common shares under our Share Repurchase Plan and for other corporate purposes. We have not allocated specific amounts of the net proceeds from the DST Program for any specific purpose.
As of September 30, 2025, the Company has raised proceeds of $259,053 from its DST program including $3,427 of upfront fees earned at closing. As of September 30, 2025, approximately 100%, 100%, 97%, and 6% of the interests in our first, second, third, and fourth DST Offering, respectively, have been sold to third parties. As a result of the FMV Buyback Option, the sale of DST Interests is offset by a financing obligation liability. The Company has elected to account for its DST financing obligation using the FVO, and as such, the liability is remeasured at fair value on a recurring basis.
Emerging Growth Company Status
We are and we will remain an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") until the earlier of (a) the last day of the fiscal year (i) following the fifth anniversary of the date of an initial public offering pursuant to an effective registration statement under the 1933 Act, (ii) in which we have total annual gross revenue of at least $1,235,000, or (iii) in which we are deemed to be a large accelerated filer, which means the market value of our shares that is held by non-affiliates exceeds $700,000 as of the date of our most recently completed second fiscal quarter, and (b) the date on which we have issued more than $1,000,000 in non-convertible debt during the prior three-year period. For so long as we remain an "emerging growth company" we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. We cannot predict if investors will find our shares less attractive because we may rely on some or all of these exemptions.
In addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the 1933 Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We will take advantage of the extended transition period for complying with new or revised accounting standards, which may make it more difficult for investors and securities analysts to evaluate us since our financial statements may not be comparable to companies that comply with public company effective dates and may result in less investor confidence.
Recent Developments
The Company's businesses are materially affected by conditions in the financial markets and economic conditions in the U.S. and to a lesser extent, globally.
During the three months ended September 30, 2025, the U.S. government's imposition of tariffs and the counter-tariffs imposed by other countries, in conjunction with global economic and geopolitical uncertainty including the ongoing conflicts in Eastern Europe, the Middle East, and the North Africa region, continued to weigh on industry deal activity. In addition, any continued fluctuation in the value of the U.S. dollar against other currencies may affect our non-U.S. real-estate and real estate-related investments. It remains difficult to predict the full impact of recent events and any future changes in interest rates, currency exchange rates or inflation.
Industry valuations and transaction volumes remain under pressure due to a combination of the announcement of tariffs, increased vacancy rates, and uncertainty around future capital availability. In contrast, our real assets business, focused on triple net lease, continued to deploy significant capital. Our investors continue to benefit from the inflation-mitigating characteristics of the net lease structure, highly predictable net rent growth, and long-duration contractual income across the portfolio.
We are continuing to closely monitor developments related to the macroeconomic factors that have contributed to market volatility, and to assess the impact of these factors on financial markets and on our business. Our future results may be adversely affected by slowdowns in fundraising activity and the pace of capital deployment. It is currently not possible to predict the ultimate effects of these events on the financial markets, overall economy, and our Condensed Consolidated financial statements. See "Part I. Item 1A. Risk Factors - Risks Related to Our Business and Operations" in our 2024 Annual Report on Form 10-K filed with the SEC on March 13, 2025.
Q3 2025 Highlights (Results of Operations)
Operating Results
•Declared monthly net distributions on our common shares totaling $101,712 for the three months ended September 30, 2025. The details of the average annualized distribution rates and total returns are shown in the following table:
Class S
Class N
Class D Class I
Annualized Distribution Rate(1)
5.95 % 6.24 % 6.62 % 6.74 %
Year-to-Date Total Return, without upfront selling commissions(2)
7.19 % 7.45 % 7.71 % 7.89 %
Year-to-Date Total Return, assuming maximum upfront selling commissions(2)
3.56 % 5.34 % 6.12 % N/A
Inception-to-Date Total Return, without upfront selling commissions(2)
7.52 % 8.80 % 7.81 % 8.62 %
Inception-to-Date Total Return, assuming maximum upfront selling commissions(2)
6.32 % 7.20 % 7.29 % N/A
__________________
(1)The annualized distribution rate is calculated as the current month's distribution annualized and divided by the prior month's net asset value, which is inclusive of all fees and expenses. The Company believes the annualized distribution rate is a useful measure of overall investment performance of our shares.
(2)Total return is calculated as the change in NAV per share during the respective periods plus any distributions per share declared in the period and assumes any distributions are reinvested in accordance with our distribution reinvestment plan. Total return for periods greater than one year are annualized. The Company believes total return is a useful measure of the overall investment performance of our shares.
Investments
•During the three months ended September 30, 2025, acquired two industrial properties, three retail properties, and one parcel of land for a total purchase price of $105,216. These acquisitions are consistent with our strategy of acquiring diversified, income-producing, commercial real estate assets concentrated in high growth markets.
•Invested $498,530 in real estate debt, net of amounts unsettled as of September 30, 2025, consisting of commercial mortgage-backed securities ("CMBS") investments and commercial real estate loans, including mezzanine loans, and sold $74,307 of real estate debt during the three months ended September 30, 2025.
•Contributed land of $3,480 for a 99.0% membership interest in PsiQuantum JV, which was formed to facilitate the development of a quantum computing facility leased to PsiQuantum in a build-to-suit arrangement. The Company consolidates PsiQuantum JV.
•Made an indirect investment in Poseidon JV of $176,506 for a membership interest of 51.0%, which was formed to facilitate the investment in a loan collateralized by the investment of funds managed by Blackstone Infrastructure Partners in Safe Harbor Marinas.
•During the three months ended September 30, 2025, contributed $263,069 to acquire additional indirect interests in STORE. As of September 30, 2025, the total investment in STORE totaled $2,442,812, representing a 22.4% indirect ownership interest.
Capital Activity and Financings
•Raised net proceeds of $801,462 from the sale of our common shares and repurchased 10,747,101 of our common shares for $111,650 during the three months ended September 30, 2025.
•Incurred net unsecured debt of $84,500.
•Incurred net borrowings under secured financings of investments in real estate debt of $208,282, which are secured by certain of the Company's CMBS investments and commercial real estate loans.
Overall Portfolio
•As of September 30, 2025, our portfolio consisted of investments in real estate, including consolidated joint ventures (39%), investments in leases (4%), investments in real estate debt (17%), and investments in unconsolidated real estate affiliates (40%), based on fair value.
•Our 253 properties as of September 30, 2025, of which 252 are wholly owned and one is held through a consolidated joint venture, consisted of Industrial (68%), Retail (23%), Land (2%), and Office (7%) assets, based on fair value.
•Our investments in real estate debt as of September 30, 2025, consisted of CMBS, commercial real estate loans, Horizontal Risk Retention Interests ("HRRs"), and investments in loans receivable related to land at build-to-suit properties. For further details on credit ratings and underlying real estate collateral, refer to "Investment Portfolio - Investments in Real Estate Debt".
•As of September 30, 2025, our investments in unconsolidated real estate affiliates consisted of equity investments in STORE, Fleet Farm JV, Tenneco JV, CoreWeave CTP-02 JV, CoreWeave CTP-03 JV, LV Petroleum JV, Oracle 1-2 JV, Oracle 3-4 JV, Oracle 5-8 JV, and Poseidon JV of $2,442,812, $5,265, $31,959, $30,579, $2,038, $191,186, $480,309, $41,720, $196,558, and $179,075, respectively.
Investment Portfolio
Real Estate Investments
The following chart describes the diversification of our wholly owned and consolidated joint venture investments in real estate by property type based on fair value as of September 30, 2025:
Property Type (1)
(1) Property Type weighting is measured as the asset value of our wholly owned real estate investments for each sector category against the total asset value of real estate investments. "Real estate investments" excludes properties held within unconsolidated joint ventures, including the Company's investment in STORE.
The following table provides a summary of our wholly owned and consolidated joint venture property portfolio as of September 30, 2025, including Investments in real estate and Investments in leases - financing receivables:
Property Type (1)
Number of Properties Sq. Feet (in thousands)
Occupancy Rate (3) (4)
Average Effective Annual Base Rent Per Leased Sq. Foot
Gross Asset Value(2)
Annual Base Rent
Percentage of Total Revenue
Industrial
67 18,919 100% 7.5 $ 2,693,460 $ 142,588 64%
Retail
180 2,205 100% 25.1 922,082 55,390 25%
Land 2 16,584 N/A 0.2 94,959 4,092 2%
Office 4 1,006 100% 19.9 265,190 20,015 9%
Total
253 38,714 $ 3,975,691 $ 222,085 100%
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(1)Excludes properties owned by unconsolidated real estate affiliates.
(2)Based on fair value as of September 30, 2025.
(3)Occupancy rate is calculated as the percentage of square footage leased.
(4)Land investments are excluded from Occupancy Rate. Build-to-suit investments are included in Occupancy Rate to the extent a lease has been executed.
Real Estate and Leases
The following table provides information regarding our wholly owned real estate property types as of September 30, 2025:
Property Type and Investment(1)
Number of Properties Location Acquisition/Commencement Date Ownership Interest Sq. Feet (in thousands)
Occupancy Rate (2)(7)
Industrial:
Amazon 5 Various Aug. - Dec. 2022 100% 4,964 100%
Dorel Industries 1 Cornwall, ON November 2022 100% 492 100%
EquipmentShare.com (4) (5)
31 Various Oct. - Nov. 2022 100% 780 100%
Magna International 1 Bowling Green, KY September 2022 100% 1,176 100%
Paradigm (5)
3 Various October 2022 100% 314 100%
Whirlpool(5)
1 Amana, IA November 2022 100% 1,572 100%
Tenneco
5 Various December 2022 100% 2,150 100%
LOC Performance 2 Various March 2023 100% 990 100%
QVC 2 Various January 2023 100% 2,166 100%
Save Mart (5)
2 Various September 2023 100% 555 100%
Quanta Cloud 1 San Jose, CA June 2024 100% 91 100%
General Mills 1 Belvidere, IL July 2024 100% 1,318 100%
Hillenbrand 2 Various September 2024 100% 712 100%
Air Distribution Technologies 7 Various July 2024 100% 1,097 100%
Johnson Controls 1 Seattle, WA September 2022 100% 12 100%
US Foods 1 Fresno, CA July 2025 100% 97 100%
PsiQuantum (3) (4)
1 Chicago, IL September 2025 99% 433 N/A
Retail:
Cracker Barrel (5)
53 Various September 2022 100% 537 100%
Ramoco Fuels NC LLC (6)
27 Various September 2023 100% 94 100%
Walgreen Co. 29 Various September 2022 100% 426 100%
Maverick Gaming 11 Various Sep. 2022 - Jun. 2023 100% 317 100%
Save Mart (5)
10 Various July 2023 100% 475 100%
N&L Investments (6)
8 Various September 2022 100% 22 100%
JK Petroleum (6) (7)
5 Various September 2022 100% 24 100%
Abbasi (6) (7)
10 Various September 2022 100% 35 100%
World Fuel Services, Inc (6) (7)
5 Various September 2022 100% 62 100%
Dollar General 10 Various Dec. 2024 - May 2025 100% 113 100%
Tractor Supply 1 Brookville, PA January 2025 100% 22 100%
Starbucks 4 Various Feb. - Sep. 2025 100% 7 100%
Washington Trust 4 Various January 2025 100% 27 100%
MedVet
3 Various Jun.- Aug. 2025 100% 44 100%
Office:
Chubb 2 Whitehouse, NJ November 2022 100% 429 100%
Energy Center 1 Houston, TX October 2022 100% 524 100%
EquipmentShare.com 1 Columbia, MO October 2022 100% 53 100%
Land:
HOF Village Waterpark 1 Canton, OH November 2022 100% 215 N/A
Related Midwest 1 Chicago, IL September 2025 100% 16,369 N/A
Total
253 38,714
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(1)Excludes properties owned by unconsolidated real estate affiliates, including STORE.
(2)Land investments are excluded from Occupancy Rate.
(3)Includes assets held in a consolidated joint venture holding a build-to-suit asset.
(4)Includes build-to-suit assets currently in development.
(5)Includes properties sold or contributed to the DST Program that remain consolidated under GAAP.
(6)Properties previously leased to SQRL Holdings.
(7)Includes leases that have not commenced as of September 30, 2025.
(8)Occupancy Rate is calculated as the percentage of square footage leased.
Lease Expirations
The following schedule details the expiring leases at our wholly owned real estate properties by annualized base rent and square footage as of September 30, 2025:
Year Number of Expiring Leases
Annualized Base Rent (1)
% of Total Annualized Base Rent Expiring Square Feet (in thousands) % of Total Square Feet Expiring
2025 (remaining) - $ - - % - - %
2026 - - - % - - %
2027 - - - % - - %
2028 1 1,985 1 % 191 - %
2029 - - - % - - %
2030 - - - % - - %
2031 - - - % - - %
2032 2 10,686 5 % 1,187 3 %
2033 17 10,963 5 % 1,551 4 %
2034 15 13,904 6 % 1,857 5 %
Thereafter 176 184,547 83 % 33,928 88 %
Total 211 $ 222,085 100 % 38,714 100 %
(1) Excludes executed leases and build-to-suit properties for which leases have not commenced as of September 30, 2025.
STORE
As of September 30, 2025, the Company holds an 22.4% indirect interest in STORE, which owns 3,564 properties in the United States, leased to 672 tenants in various industries on a triple-net basis. We initially acquired the investment in STORE in February 2023 with incremental interests purchased throughout 2023, 2024, and the nine months ended September 30, 2025. We have determined that STORE is a significant subsidiary under SEC Regulation S-X 10-01(b) as of September 30, 2025. Accordingly, the Company is required to include STORE's summarized statement of operations information for the three and nine months ended September 30, 2025 and 2024. See "Item 1. Financial Statements-Notes to Condensed Consolidated Financial Statements-5. Investments in Unconsolidated Real Estate Affiliates" for the summarized statement of operations.
Investments in Real Estate Debt
The Company's investments in real estate debt as of September 30, 2025, consist of $767,089 in CMBS, $391,873 in commercial real estate loans, $359,492 in HRRs, and $15,377 in investments in loans receivable.
The following table details our investments in real estate debt held at fair value as of September 30, 2025:
Type of Security/Loan
Weighted Average Coupon (1) (2)
Weighted Average Maturity Date (3)
Face Amount Cost Basis Fair Value
CMBS (4)
SOFR + 4%
1/17/2035 $ 761,933 $ 764,344 $ 767,089
Commercial real estate loans (5)
10 % 2/25/2030 391,758 388,521 391,873
Total investments in real estate debt (6)
9 % $ 1,153,691 $ 1,152,865 $ 1,158,962
__________________
(1)The term SOFR refers to the relevant floating benchmark rate, one-month SOFR.
(2)The weighted average coupon for our CMBS includes both floating and fixed rate investments. Fixed rate CMBS represent a spread over SOFR for purposes of the weighted average calculation.
(3)The weighted average maturity date is based on the fully extended maturity date of the instrument.
(4)Includes investments pledged as collateral under a secured financing agreement.
(5)Certain commercial real estate loans include potential future funding obligations to borrower. See Note 14 - Commitments and Contingencies for additional information.
(6)Total investments in real estate debt per the tables above exclude our investments in HRRs and loans receivable, which are presented below.
The following table details the Company's HRR investments which are classified as held-to-maturity and presented at amortized cost. The carrying value of the HRR investments as of September 30, 2025 is net of an allowance for credit losses of $2,276. The Company did not record an allowance for credit losses related to its HRR investments as of December 31, 2024. The Company has the intent and ability to hold its HRR investments until maturity.
September 30, 2025
Type of Security/Loan
Weighted Average
Coupon(1)
Weighted Average Maturity Date
Face
Amount 		Cost Basis
Carrying Value
HRRs
SOFR + 7%
3/10/2030 $ 361,650 $ 361,685 $ 359,492
(1)The term SOFR refers to the relevant floating benchmark rate, one-month SOFR.
Other Investments
During the year ended December 31, 2024, the Company acquired land related to build-to-suit properties in sale leaseback transactions for a total purchase price of $28,827 which is being accounted for as an investment in loans receivable and are held at amortized cost, as the related lease is not deemed to have commenced until the constructed assets are made available for use by the lessee. Direct costs associated with originating loans are deferred and amortized as an adjustment to interest income over the term of the related loan receivable. During the nine months ended September 30, 2025, the Company placed six build-to-suit properties in service and contributed properties for an interest in LV Petroleum JV, including two of its build-to-suit properties with a balance of $6,623. See Note 4 - Investments in Real Estate, net and Note 5 - Investments in Unconsolidated Real Estate Affiliates for additional information. As of September 30, 2025 and December 31, 2024, the Company held 14 and 22 investments in loans receivable related to build-to-suit arrangements with a total balance of $15,377 and $27,635, respectively, which are included within Investments in real estate debt in the Condensed Consolidated Balance Sheets.
Results of Operations
The following table sets forth the results of our operations for the three months ended September 30, 2025 and 2024:
Three Months Ended Change
September 30, 2025 September 30, 2024 $
Revenues
Rental revenue $ 56,908 $ 52,684 $ 4,224
Income from investments in leases - Financing receivables 9,054 17,133 (8,079)
Total revenues 65,962 69,817 (3,855)
Expenses
Rental property operating 8,997 6,513 2,484
General and administrative 10,737 6,732 4,005
Management fee 21,361 12,330 9,031
Performance participation allocation 36,140 7,440 28,700
Depreciation and amortization 26,561 24,489 2,072
Total expenses 103,796 57,504 46,292
Other income (expense)
Income from unconsolidated real estate affiliates 231,342 22,811 208,531
Gain on dispositions of real estate
- 42,906 (42,906)
Interest expense (27,399) (27,602) 203
Interest income 29,519 5,345 24,174
Other income (expense), net 8,956 (4,344) 13,300
Total other income, net 242,418 39,116 203,302
Net income before income taxes $ 204,584 $ 51,429 $ 153,155
Income tax expense 521 1,026 (505)
Net income 204,063 50,403 153,660
Net income attributable to non-controlling interests (10,988) (3,629) (7,359)
Net income attributable to ORENT shareholders $ 193,075 $ 46,774 $ 146,301
Net income per common share - basic $ 0.31 $ 0.13
Net income per common share - diluted $ 0.31 $ 0.13
Weighted-average common shares outstanding, basic 617,009,847 357,017,433
Weighted-average common shares outstanding, diluted 651,859,673 386,191,878
Rental revenue
Rental revenue from our income property operations was $56,908 for the three months ended September 30, 2025 and $52,684 for the three months ended September 30, 2024. The increase in revenues is primarily due to an increase from 189 properties classified as Investments in real estate as of September 30, 2024 to 222 properties as of September 30, 2025, as well as contractual rent increases across the existing portfolio from September 30, 2024 to September 30, 2025.
Income from investments in leases - Financing receivables
Income from investments in leases - Financing receivables was $9,054 for the three months ended September 30, 2025 and $17,133 for the three months ended September 30, 2024. The decrease in revenues is primarily due to revenue from properties that were sold or contributed to joint ventures and leases that were terminated during 2024.
Rental property operating
Rental property operating expenses were $8,997 for the three months ended September 30, 2025, and $6,513 for the three months ended September 30, 2024. The increase in expenses is primarily the result of our increased property count compared to the prior year.
General and administrative
General and administrative expenses were $10,737 for the three months ended September 30, 2025 and $6,732 for the three months ended September 30, 2024. The increase is primarily due to our credit allowance adjustment under the CECL model and an increase in legal fees during the three months ended September 30, 2025.
Management fee
The management fee for the three months ended September 30, 2025 and 2024 was $21,361 and $12,330, respectively. The increase is primarily due to an increase in NAV.
Performance participation allocation
Performance participation allocation for the three months ended September 30, 2025 and 2024 was $36,140 and $7,440, respectively. The increase was due to an increase in NAV in excess of the required 5% return.
Depreciation and amortization
Depreciation and amortization was $26,561 for the three months ended September 30, 2025 and $24,489 for the three months ended September 30, 2024. The increase in depreciation and amortization during the periods presented is due to an increase from 189 properties classified as Investments in real estate as of September 30, 2024 to 222 properties as of September 30, 2025.
Income from unconsolidated real estate affiliates
Income from unconsolidated real estate affiliates was $231,342 for the three months ended September 30, 2025, and $22,811 for the three months ended September 30, 2024. The increase in income from unconsolidated real estate affiliates is primarily due to income from the Company's investments in STORE, Oracle joint ventures, and LV Petroleum joint venture.
Gain on dispositions of real estate
During the three months ended September 30, 2024, the Company recognized a net gain on dispositions of real estate of $42,906 resulting from the disposition of one retail property and a parcel of excess land at one industrial property for total proceeds of $251,634. The Company did not dispose of any properties during the three months ended September 30, 2025.
Interest expense
Interest expense was $27,399 for the three months ended September 30, 2025, and $27,602 for the three months ended September 30, 2024. The decrease in expense was primarily due to a decrease in outstanding borrowings under the Company's credit facility and mortgage notes, offset by interest expense related to our secured financings of investments in real estate debt.
Interest income
Interest income was $29,519 and $5,345 for the three months ended September 30, 2025 and 2024, respectively. The increase in interest income in the current year was primarily due to acquisitions of investments in real estate debt in the current year, as well as an increase in interest earned on the Company's deposits with banks.
Other income (expense), net
Other income, net was $8,956 for the three months ended September 30, 2025, compared to other expense, net of $4,344 for the three months ended September 30, 2024. The increase in income in the current year was primarily due to gains on our foreign currency derivatives which increased $8,187 compared to the prior year and income of $1,374 related to our commercial real estate loans. The prior year period also included $3,308 of debt extinguishment fees not included in the current year period.
The following table sets forth the results of operations for the nine months ended September 30, 2025 and 2024:
Nine Months Ended
Change
September 30, 2025 September 30, 2024 $
Revenues
Rental revenue $ 169,878 $ 152,355 $ 17,523
Income from investments in leases - Financing receivables 28,234 46,704 (18,470)
Total revenues 198,112 199,059 (947)
Expenses
Rental property operating 26,200 19,301 6,899
General and administrative 18,249 18,242 7
Impairment charges - 4,849 (4,849)
Management fee 56,199 31,134 25,065
Performance participation allocation 67,036 22,602 44,434
Depreciation and amortization 78,624 70,641 7,983
Total expenses 246,308 166,769 79,539
Other income (expense)
Income from unconsolidated real estate affiliates 416,806 96,205 320,601
(Loss) gain on dispositions of real estate
(2,180) 43,620 (45,800)
Interest expense (70,312) (96,705) 26,393
Interest income 73,853 11,444 62,409
Other income (expense), net 5,143 (3,829) 8,972
Total other income, net 423,310 50,735 372,575
Net income before income taxes $ 375,114 $ 83,025 $ 292,089
Income tax expense 602 2,438 (1,836)
Net income 374,512 80,587 293,925
Net income attributable to non-controlling interests (20,721) (6,546) (14,175)
Net income attributable to ORENT shareholders $ 353,791 $ 74,041 $ 279,750
Net income per common share - basic $ 0.65 $ 0.25
Net income per common share - diluted $ 0.65 $ 0.25
Weighted-average common shares outstanding, basic 546,277,237 295,966,833
Weighted-average common shares outstanding, diluted 578,822,053 324,923,336
Rental revenue
Rental revenue from our income property operations was $169,878 for the nine months ended September 30, 2025 and $152,355 for the nine months ended September 30, 2024. The increase in revenues is primarily due to an increase from 189
properties classified as Investments in real estate as of September 30, 2024 to 222 properties as of September 30, 2025, as well as contractual rent increases across the existing portfolio from September 30, 2024 to September 30, 2025.
Income from investments in leases - Financing receivables
Income from investments in leases - Financing receivables was $28,234 for the nine months ended September 30, 2025 and $46,704 for the nine months ended September 30, 2024. The decrease in revenues is primarily due to revenue from properties that were sold or contributed to joint ventures and leases that were terminated during 2024.
Rental property operating expenses
Rental property operating expenses were $26,200 for the nine months ended September 30, 2025, and $19,301 for the nine months ended September 30, 2024. The increase in expenses is primarily the result of our increased property count compared to the prior year.
General and administrative expenses
General and administrative expenses were $18,249 for the nine months ended September 30, 2025 and $18,242 for the nine months ended September 30, 2024. The increase in respective General and administrative expenses is primarily due to an increase in professional fees offset by a favorable credit allowance adjustment under the CECL model during the nine months ended September 30, 2025.
Impairment charges
During the nine months ended September 30, 2024, the Company recognized $4,849 of impairment charges related to lease intangibles and straight-line rent receivables for properties previously leased to SQRL Holdings. The Company did not recognize any impairment charges during the nine months ended September 30, 2025.
Management fee
The management fee for the nine months ended September 30, 2025 and 2024 was $56,199 and $31,134, respectively. The increase was primarily due to an increase in NAV.
Performance participation allocation
Performance participation allocation for the nine months ended September 30, 2025 and 2024 was $67,036 and $22,602, respectively. The increase was due to an increase in NAV in excess of the required 5% return.
Depreciation and amortization
Depreciation and amortization was $78,624 for the nine months ended September 30, 2025 and $70,641 for the nine months ended September 30, 2024. The increase in depreciation and amortization during the periods presented is due to an increase from 189 properties classified as Investments in real estate as of September 30, 2024 to 222 properties as of September 30, 2025.
Income from unconsolidated real estate affiliates
Income from unconsolidated real estate affiliates was $416,806 for the nine months ended September 30, 2025, and $96,205 for the nine months ended September 30, 2024. The increase in income from unconsolidated real estate affiliates is primarily due to an increase in the Company's investment in STORE as well as income from its investments in the Company's Oracle, LV Petroleum, and CoreWeave joint ventures.
(Loss) gain on dispositions of real estate
During the nine months ended September 30, 2025, the Company recognized a loss on dispositions of real estate of $2,180 due to the reversal of non-cash accretion of tenant loan receivables related to the contribution of 15 LV Petroleum properties to LV Petroleum JV. During the nine months ended September 30, 2024, the Company recognized a net gain on dispositions of real estate of $43,620 resulting from the disposition of one retail property and a parcel of excess land at one industrial property for total proceeds of $256,813.
Interest expense
Interest expense was $70,312 for the nine months ended September 30, 2025, and $96,705 for the nine months ended September 30, 2024. The decrease in expense was primarily due to a decrease in outstanding borrowings under the
Company's credit facility and mortgage notes, as well as a reduction in interest related to the affiliate line of credit and the FIPA loan, which were repaid in full in 2024.
Interest income
Interest income was $73,853 and $11,444 for the nine months ended September 30, 2025 and 2024, respectively. The increase in interest income in the current year was primarily due to acquisitions of investments in real estate debt, as well as an increase in interest earned on our deposits with banks.
Other income (expense), net
Other income, net was $5,143 for the nine months ended September 30, 2025, compared to other expense, net of $3,829 for the nine months ended September 30, 2024. The increase in income in the current year was primarily due to income related to our commercial real estate loans, as well as a reduction in debt extinguishment fees.
Net Asset Value and NAV Per Share Calculation
Each class has an undivided interest in our assets and liabilities, other than class-specific, ongoing servicing fees. In accordance with the valuation guidelines, our NAV per share for each class is determined as of the last calendar day of each month, using a process that reflects several components, including the estimated fair value of (1) each of our properties (including the DST Properties), (2) our real estate debt and other securities for which third-party market quotes are available, (3) our other real estate debt and other securities, and (4) our other assets and liabilities. The NAV for each class of shares will be based on the net asset values of our investments (including real estate debt and other securities), the addition of any other assets (such as cash on hand), and the deduction of any liabilities (including the allocation/accrual of any performance participation to the Special Limited Partners and the deduction of any ongoing servicing fees specifically applicable to such class of shares). At the end of each month, before taking into consideration repurchases or class-specific expense accruals for that month, any change in our aggregate NAV (whether an increase or decrease) is allocated among each class of shares based on each class's relative percentage of the previous aggregate NAV plus issuances of shares that were effective on the first calendar day of such month. Following the aggregation of the net asset values of our investments, the addition of any other assets (such as cash on hand), and the deduction of any other liabilities, any class-specific adjustments are incorporated into our NAV, including additional issuances and repurchases of our shares and accruals of class-specific ongoing servicing fees. For each applicable class of shares, the ongoing servicing fee is calculated as a percentage of the aggregate NAV for such class of shares. At the close of business on the date that is one business day after each record date for any declared distribution, our NAV for each class will be reduced to reflect the accrual of our liability to pay any distribution to our shareholders of record of each class as of the record date. NAV per share for each class is calculated by dividing such class's NAV at the end of each month by the number of shares outstanding for that class at the end of such month.
Our total NAV presented in the following tables includes the NAV of our Class S, Class N, Class D, and Class I common shares, as well as the partnership interests of NLT OP held by parties other than the Company. The following table provides a breakdown of the major components of our NAV as of September 30, 2025:
Components of NAV September 30, 2025
Cash and cash equivalents $ 374,834
Restricted cash 47,207
Investments in real estate
3,386,456
Investments in leases - Financing receivables
369,872
Investments in real estate debt 1,536,273
Intangible assets
213,901
Investments in unconsolidated real estate affiliates 3,602,028
Other assets 36,610
Mortgage notes and credit facility (1,419,879)
Unsecured senior notes, net
(126,593)
Other borrowings (322,510)
Due to affiliates
(54,452)
Accounts payable and accrued expenses (125,103)
Other liabilities
(477,708)
Net Asset Value $ 7,040,936
Number of outstanding shares/units 675,208,190
The following table provides a breakdown of our total NAV and NAV per share/unit by class as of September 30, 2025 (dollars are in thousands except for per share amounts):
NAV per share Class S Shares Class N Shares Class D Shares
Class I Shares (1)
Third - Party Operating Partnership Units (2)
Total
NAV $ 2,838,644 $ 427,804 $ 76,121 $ 3,328,021 $ 370,346 $ 7,040,936
Number of outstanding shares/units 273,269,795 40,849,554 7,419,241 318,253,942 35,415,658 675,208,190
NAV Per Share/Unit as of September 30, 2025
$ 10.3877 $ 10.4727 $ 10.2600 $ 10.4571 $ 10.4571
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(1)Includes 657,914 Class I Shares subject to redemption features, classified as Redeemable common shares.
(2)Includes the partnership interests of NLT OP held by the Special Limited Partners and parties other than the Company.
The following table details the weighted average capitalization rate by property type, which is the key assumption used in the valuations as of September 30, 2025:
Property Type
Capitalization Rate(1)
Industrial 5.6 %
Land (2)
7.0 %
Office 7.6 %
Retail 6.5 %
__________________
(1)Excludes properties owned by unconsolidated real estate affiliates.
(2)Excludes valuation of a land investment which is based on a regression analysis using relevant characteristics of the property and available market real estate sales values.
These assumptions are determined by the Adviser and reviewed by our independent valuation advisor. A change in these assumptions would impact the calculation of the value of our wholly owned property investments. For example, assuming all other factors remain unchanged, the changes listed below would result in the following effects on our investment values:
Input Hypothetical Change Industrial Land Office Retail
Capitalization Rate 0.25 % Decrease +3.8 % +3.7 % +3.5 % +8.1 %
(weighted average) 0.25 % Increase (3.5) % (3.4) % (3.3) % (0.5) %
The following table reconciles shareholders' equity and NLT OP partner's capital per our Consolidated Balance Sheet to our NAV (in thousands):
September 30, 2025
Shareholders' equity $ 6,167,253
Non-controlling interests attributable to NLT OP 264,145
Redeemable non-controlling interests 87,882
Redeemable common shares 6,880
Total partners' capital of NLT OP under GAAP 6,526,160
Adjustments:
Accrued shareholder servicing fee 148,087
Accrued organization and offering costs 7,550
Accumulated depreciation and amortization under GAAP 265,918
Allowance for credit losses under GAAP 24,664
Unrealized net real estate and real estate debt appreciation 153,054
Accrued interest on financing receivables (24,771)
Straight-line rent (56,424)
Deferred tax impact (3,302)
NAV $ 7,040,936
The following details the adjustments to reconcile GAAP shareholders' equity and total partners' capital of NLT OP to our NAV:
•Under GAAP, we accrue the ongoing shareholder servicing fee as an offering cost at the time we sell the Class S, Class N, and Class D shares. For purposes of calculating NAV, we recognize the ongoing servicing fee as a reduction of NAV on a monthly basis when such fee is paid.
•The Adviser agreed to advance certain organization and offering costs on our behalf through September 1, 2023. Such costs are being reimbursed to the Adviser on a pro-rata basis over a 60-month period beginning September 1, 2023. Under GAAP, organization costs have been accrued as a liability. For purposes of calculating NAV, such costs will be recognized as paid over the 60-month reimbursement period.
•We depreciate our investments in real estate and amortize certain other assets and liabilities in accordance with GAAP. Such depreciation and amortization is not recorded for purposes of calculating our NAV. Our mortgage notes, term loan credit facilities, unsecured revolving credit facilities, and unsecured senior notes ("Debt") are presented at their amortized cost basis in our consolidated GAAP financial statements. As such, any increases or decreases in the fair market value of our investments in real estate or our Debt are not included in our GAAP results. For purposes of calculating our NAV, our investments in real estate and our Debt are recorded at fair value.
•In accordance with GAAP, the Company accrues interest income from Investments in leases - Financing receivables under the effective interest method. Interest income in excess of the payment is recorded as interest receivable, which is not recognized for purposes of calculating NAV.
•We recognize rental revenue on a straight-line basis under GAAP. Such straight-line rent adjustments are excluded for purposes of calculating NAV.
Distributions
Beginning September 21, 2022, we declared monthly distributions for each class of our common shares, which are generally paid 20 days after month-end. We have paid distributions consecutively each month since such time. Each class of our common shares received the same aggregate gross distribution per share, which was $0.1750 and $0.5250 per share for the three and nine months ended September 30, 2025. The net distribution varies for each class based on the applicable shareholder servicing fee, which is deducted from the monthly distribution per share and paid directly to the Dealer Manager for further remittance to the applicable distributor.
The following table details the total net distribution for each of our share classes for the nine months ended September 30, 2025 and 2024:
Record Date Class S Class N Class D Class I
January 31, 2025 $ 0.0512 $ 0.0541 $ 0.0562 $ 0.0583
February 28, 2025 0.0512 0.0541 0.0562 0.0583
March 31, 2025 0.0512 0.0541 0.0562 0.0584
April 30, 2025 0.0512 0.0541 0.0562 0.0583
May 31, 2025 0.0511 0.0541 0.0562 0.0583
June 30, 2025 0.0511 0.0541 0.0562 0.0584
July 31, 2025 0.0511 0.0541 0.0562 0.0583
August 31, 2025 0.0511 0.0540 0.0562 0.0583
September 30, 2025 0.0510 0.0540 0.0562 0.0584
Total $ 0.4602 $ 0.4867 $ 0.5058 $ 0.5250
Record Date Class S Class N Class D Class I
January 31, 2024 $ 0.0512 $ - $ 0.0563 $ 0.0583
February 29, 2024 0.0512 - 0.0563 0.0583
March 31, 2024 0.0512 - 0.0562 0.0583
April 30, 2024 0.0512 - 0.0562 0.0583
May 31, 2024 0.0512 - 0.0562 0.0584
June 30, 2024 0.0512 0.0541 0.0563 0.0584
July 31, 2024 0.0512 0.0541 0.0563 0.0583
August 31, 2024 0.0512 0.0541 0.0563 0.0583
September 30, 2024 0.0512 0.0541 0.0563 0.0584
Total $ 0.4608 $ 0.2164 $ 0.5064 $ 0.5250
The following table details our distributions declared for the three and nine months ended September 30, 2025 and September 30, 2024:
Three Months Ended Nine Months Ended
September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024
Amount Percentage Amount Percentage Amount Percentage Amount Percentage
Distributions
Payable in cash $ 54,069 50 % $ 35,515 55 % $ 144,534 50 % $ 91,304 56 %
Reinvested in shares 53,736 50 % 28,594 45 % 142,752 50 % 70,562 44 %
Total distributions $ 107,805 100 % $ 64,109 100 % $ 287,286 100 % $ 161,866 100 %
Sources of Distributions
Cash flows from operating activities $ 107,805 100 % $ 64,109 100 % $ 287,286 100 % $ 161,866 100 %
Offering proceeds - - % - - % - - % - - %
Total sources of distributions $ 107,805 100 % $ 64,109 100 % $ 287,286 100 % $ 161,866 100 %
Cash flows from operating activities (1)
$ 106,330 $ 57,597 $ 281,215 $ 131,334
Adjusted cash flows from operating activities (1) (2)
$ 128,542 $ 59,270 $ 312,235 $ 133,148
Funds from Operations (2)
$ 218,358 $ 29,885 $ 430,448 $ 103,411
Adjusted Funds from Operations (2)
$ 168,530 $ 54,110 $ 334,384 $ 128,353
______________
(1)Excluding $20,988 of cash paid during the year ended December 31, 2024 for tenant lease inducements at properties previously under construction in accordance with their lease agreements, and including rent and preferred equity distributions from our build-to-suit arrangements for which rent has not commenced as of September 30, 2025, our inception to date cash flows from operating activities have funded 100% of our distributions. The payments were made using construction escrows acquired in 2022 and held in Restricted cash on the Consolidated Balance Sheets as of December 31, 2023 and 2022.
(2)Represents non-GAAP supplemental measures. See "Adjusted cash flows from operating activities" below for descriptions and reconciliations of these amounts to GAAP cash flows from operating activities. See "Funds from Operations and Adjusted Funds from Operations" below for a description of Funds from Operations and Adjusted Funds from Operations. Refer to below for reconciliations of these amounts to GAAP net income attributable to ORENT shareholders and for consideration on how to review these metrics.
Non-GAAP Financial Measures
The Company reports its financial results in accordance with US GAAP. The Company also uses certain non-GAAP measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior reported results. Non-GAAP measures do not have standardized definitions and are not defined by GAAP. Therefore, our non-GAAP measures are unlikely to be comparable to similar measures presented by other companies. The presentation of these non-GAAP measures should not be considered in isolation from, as a substitute for, or as superior to the financial information presented in accordance with GAAP. Reconciliations of non-GAAP measures to corresponding GAAP measures are below.
Adjusted Cash Flows from Operating Activities
We believe adjusted cash flows from operating activities is a meaningful non-GAAP supplemental measure of our ability to generate cash earnings to be used for the payment of distributions to our investors. Our current definition of adjusted cash flows from operating activities is cash flows from operating activities plus (i) rental revenues and preferred equity distributions related to our build-to-suit arrangements for which the lease agreements have not commenced and (ii) certain incentive payments made to tenants and funded by construction escrows acquired at acquisition which are required to be presented as operating cash flows under GAAP.
Adjusted Cash Flows from Operating Activities should not be considered more relevant or accurate than GAAP cash flows from operating activities in evaluating our operating performance or liquidity. It should not be considered as an alternative to cash flows from operating activities as an indication of our liquidity, but rather should be reviewed in conjunction with this and other GAAP measurements. Further, Adjusted Cash Flows from Operating Activities is not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs, including our ability to make distributions to our shareholders. In addition, our methodology for calculating Adjusted Cash Flows from Operating Activities may differ from the methodologies employed by other companies to calculate the same or similar supplemental measures, and accordingly, our reported Adjusted Cash Flows from Operating Activities may not be comparable to the Adjusted Cash Flows from Operating Activities reported by other companies.
The following table presents a reconciliation of our net cash flows provided by operating activities to our adjusted cash flows from operating activities:
Three months ended Nine months ended
September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024
Net cash flows provided by operating activities $ 106,330 $ 57,597 $ 281,215 $ 131,334
Build-to-suit rent and preferred equity distributions 22,212 1,673 31,020 1,814
Adjusted net cash flows provided by operating activities $ 128,542 $ 59,270 $ 312,235 $ 133,148
Funds from Operations and Adjusted Funds from Operations
We believe funds from operations ("FFO") is a meaningful non-GAAP supplemental measure of our operating results. Our condensed consolidated financial statements are presented using historical cost accounting which, among other things, requires depreciation of real estate investments to be calculated on a straight-line basis. As a result, our operating results imply that the value of our real estate investments have decreased over time. However, we believe that the value of our real estate investments will fluctuate over time based on market conditions and, as such, depreciation under historical cost accounting may be less informative as a measure of our performance. FFO is an operating measure defined by the National Association of Real Estate Investment Trusts ("NAREIT") that is broadly used in the REIT industry. FFO, as defined by NAREIT and presented below, is calculated as net income or loss (computed in accordance with GAAP), excluding (i) depreciation and amortization, (ii) impairment of investments in real estate, (iii) net gains or losses from sales of real estate, and (iv) similar adjustments for non-controlling interests and unconsolidated entities.
We also believe that adjusted FFO ("AFFO") is an additional meaningful non-GAAP supplemental measure of our operating results. AFFO further adjusts FFO to reflect the performance of our portfolio by adjusting for items we believe
are not directly attributable to our operations. Our adjustments to FFO to arrive at AFFO include removing the impact of (i) straight-line rental income and expense, (ii) deferred income amortization, (iii) amortization of above- and below-market lease intangibles, (iv) amortization of mortgage premium/discount, (v) unrealized gains or losses from changes in the fair value of real estate debt, investments in unconsolidated real estate affiliates, and other financial instruments, (vi) gains and losses resulting from foreign currency translations, (vii) provision for credit losses, (viii) non-cash income, (ix) non-cash performance participation allocation, even if repurchased by us, (x) management fees paid in shares or OP Units, even if subsequently repurchased by us, (xi) non-cash interest expense on affiliate line of credit paid in shares or OP Units, even if subsequently repurchased by us, (xii) organization costs, (xiii) amortization of deferred financing costs, (xiv) shareholder servicing fees paid during the period, (xv) debt extinguishment fees paid during the period and (xvi) similar adjustments for non-controlling interests and unconsolidated entities. AFFO is not defined by NAREIT and our calculation of AFFO may not be comparable to disclosures made by other REITs.
The Company's definition of AFFO excludes the impact of the amortization of deferred financing costs ("DFCs") on our debt, which is included in GAAP net income (loss). We do not consider the amortization of DFCs to be directly attributable to our operations and view DFCs similar to acquisition expenses, which are capitalized into the cost basis of our investments, and therefore excluded from AFFO. We believe that excluding amortization of DFCs from our calculations of AFFO and results in metrics that better reflect the results of our operations.
FFO and AFFO should not be considered more relevant or accurate than GAAP net income (loss) in evaluating our operating performance. In addition, FFO and AFFO should not be considered as alternatives to net income (loss) as indications of our performance or as alternatives to cash flows from operating activities as indications of our liquidity, but rather should be reviewed in conjunction with these and other GAAP measurements. Further, FFO and AFFO are not intended to be used as liquidity measures indicative of cash flow available to fund our cash needs, including our ability to make distributions to our shareholders. In addition, our methodology for calculating AFFO may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures, and accordingly, our reported AFFO may not be comparable to the AFFO reported by other companies.
The following table presents a reconciliation of net income (loss) attributable to ORENT shareholders to FFO and AFFO attributable to ORENT shareholders (in thousands):
Three Months Ended Nine Months Ended
September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024
Net income attributable to ORENT shareholders $ 193,075 $ 46,774 $ 353,791 $ 74,041
Adjustments to arrive at FFO:
Depreciation and amortization 26,561 24,489 78,624 70,641
Impairment charges - - - 4,849
(Gain) loss on dispositions of real estate - (42,906) 2,180 (43,620)
Amount attributable to investment in unconsolidated affiliates 149 149 447 447
Amount attributable to non-controlling interests for above adjustments (1,427) 1,379 (4,594) (2,947)
FFO attributable to ORENT shareholders 218,358 29,885 430,448 103,411
Adjustments to arrive at AFFO:
Straight-line rental income (5,198) (4,899) (15,603) (14,017)
Amortization of ground lease and below market lease intangibles 75 49 224 253
Unrealized (gain) loss on foreign currency derivatives (6,014) 1,447 634 258
Unrealized gain from changes in fair value of financial instruments
(1,374) (244) (3,353) (344)
Adjustment for investments accounted for under fair value option (98,471) 6,961 (194,926) (15,160)
Unrealized loss from changes in fair value of DST financing obligation 1,832 434 2,711 994
Provision for credit losses
4,661 2,314 1,813 3,056
Accretion of tenant loan receivable (1,660) (1,569) (4,997) (9,372)
Performance participation allocation 36,140 7,440 67,036 22,602
Management fee 21,361 12,330 56,199 31,134
Interest on affiliate line of credit - - - 5,420
Debt extinguishment fees - 3,309 257 3,309
Amortization of deferred financing costs 2,770 2,475 5,763 9,201
Shareholder servicing fees (6,370) (3,538) (16,487) (8,780)
Amount attributable to investment in unconsolidated affiliate (33) (21) (104) (119)
Amount attributable to non-controlling interests for above adjustments 2,453 (2,263) 4,769 (3,493)
AFFO attributable to ORENT shareholders $ 168,530 $ 54,110 $ 334,384 $ 128,353
Liquidity and Capital Resources
Liquidity
We believe we have sufficient liquidity to operate our business, with immediate liquidity comprised of cash and cash equivalents of $374,834 and availability under our credit facility of $388,327 as of September 30, 2025. In addition to our immediate liquidity, we obtain incremental liquidity through the sale of our common shares, from which we generated net proceeds of $2,291,862 for the nine months ended September 30, 2025, as well as through the ability to sell our liquid CMBS investments with a fair value of $767,089 as of September 30, 2025. Additionally, we may incur indebtedness secured by our real estate and real estate debt investments, borrow money through unsecured financings, or incur other forms of indebtedness. We may also generate incremental liquidity through the sale of our real estate.
Our primary liquidity needs are to fund our investments, make distributions to our shareholders, repurchase common shares pursuant to our Share Repurchase Plan, pay operating expenses, fund capital expenditures, and repay indebtedness. Our operating expenses include, among other things, the management fee we pay to the Adviser and the performance participation allocation that NLT OP pays to the Special Limited Partners, both of which will impact our liquidity to the extent the Adviser or the Special Limited Partners elect to receive such payments in cash, or subsequently redeem shares or OP Units previously issued to them.
Our cash needs for acquisitions and other capital investments will be funded primarily from the sale of common shares and through the incurrence or assumption of debt. Other potential future sources of capital include secured or unsecured financings from banks or other lenders and proceeds from the sale of assets. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures. We expect to be able to refinance debt obligations maturing in the near term through the use of capacity on our unsecured line of credit or exercise of existing extension options.
We continue to believe that our current liquidity position is sufficient to meet the need of our expected investment activity.
Capital Resources
As of September 30, 2025, our indebtedness included loans secured by our properties, unsecured credit facilities, unsecured senior notes and other borrowings. The following table is a summary of our indebtedness as of September 30, 2025 (in thousands):
Principal Balance as of
Indebtedness
Weighted Average
Interest Rate(1)(2)
Weighted Average
Maturity Date
Maximum Facility Size
September 30, 2025 December 31, 2024
Mortgage notes & credit facility:
Unsecured credit facility
S + 1.35 % 6/12/2030 $ 1,250,000 $ 1,250,000 $ 1,165,500
Unsecured revolving credit facility
S + 1.40 % 6/12/2029 $ 2,610,000 - 246,950
Fixed rate mortgages 4.99% 8/25/2029 N/A 106,403 99,098
Variable rate mortgages
S + 1.88 % 4/3/2028 N/A 106,376 129,824
Deferred financing costs, net (44,225) (13,624)
Total Mortgage notes & credit facilities, net: $ 1,418,554 $ 1,627,748
Unsecured senior notes
Unsecured senior notes
6.35% 2/2/2030 N/A $ 130,000 $ 130,000
Deferred financing costs, net (3,407) (3,655)
Unsecured senior notes, net $ 126,593 $ 126,345
Other borrowings
Secured financings of investments in real estate debt S + 1.82 % 1/4/2027 $799,275 $ 323,557 $ -
Deferred financing costs, net (1,047) -
Other borrowings, net $ 322,510 $ -
Total indebtedness $ 1,867,657 $ 1,754,093
_______________
(1)The term "S" refers to the relevant floating benchmark rates, which include daily secured overnight financing rate ("SOFR"), 30-day SOFR, one-month euro interbank offered rate ("EURIBOR"), daily Canadian overnight repo rate average ("CORRA"), and one-month SONIA as applicable to each loan. As of September 30, 2025, we have outstanding interest rate swaps that mitigate our exposure to potential future interest rate increases under our floating rate debt. See further discussion of outstanding interest rate swaps below.
(2)The Company's mortgage and notes payable contain yield or spread maintenance provisions.
Mortgage Notes and Credit Facilities
On June 12, 2025, the Company entered into an amended and restated credit agreement, which amends and restates the credit agreement dated August 11, 2022. The amended and restated credit agreement provides for, among other things, (a) an upsize of the senior unsecured term loan facility from $1,165,500 to $1,250,000, (b) an upsize of the aggregate principal amount of the senior unsecured revolving credit facility from $724,500 to $2,485,000, (c) an upsize of the accordion feature, subject to the satisfaction of various conditions, which could bring total commitments from up to $3,200,000 to up to $5,000,000, (d)an extension of the revolving credit scheduled maturity date from August 2026 to June 2029, (e) an extension of the initial term loan scheduled maturity date from August 2027 to June 2030, and (f) the amendment of certain financial and other covenants. On July 23, 2025, the agreement was further amended to increase the aggregate principal amount of the senior unsecured revolving credit facility from $2,485,000to $2,610,000.
The unsecured term loan credit facility bears interest at a base rate plus a margin ranging from 0.25% to 1.85%. The base rate is SOFR plus 0.10% or the greater of (a) Keybank N.A.'s announced prime rate, (b) 0.5% above the federal funds effective rate, and (c) 1.0%, as applicable. The weighted average interest rate for the unsecured term loan credit facility for the nine months ended September 30, 2025 was 5.68% (unhedged) and 5.01% (hedged).
The unsecured revolving credit facility consists of USD ("USD Revolver") and Alternative ("Alternative Revolver") denominated currencies, and bears interest at a base rate plus a margin ranging from 0.30% to 1.90%. The base rate is the greater of (a) Keybank N.A.'s announced prime rate, (b) 0.5% above the federal funds effective rate, (c) adjusted floating rate, and (d) 1.0%. The adjusted floating rate for the USD Revolver is SOFR plus 0.10%, while the Alternative Revolver is EURIBOR for Euro borrowings, and CORRA plus 0.30% for Canadian Dollar borrowings. The weighted average interest rate for the unsecured revolving credit facility for the nine months ended September 30, 2025 was 5.75% (unhedged) and 4.73% (hedged). During the nine months ended September 30, 2025, the Company earned an additional $558 of income as a result of over hedging on our interest rate swaps. We believe the interest rate swaps are still highly effective.
During the nine months ended September 30, 2025, the Company entered into a variable rate mortgage note of $57,750 secured by a property contributed to a DST as part of our DST Program. The interest on the mortgage and any amounts received or owed under the interest rate swap are borne by such DST and are not consolidated in the Company's Condensed Consolidated Financial Statements. Additionally, the Company contributed a variable rate mortgage note of $84,500 for interest in a joint venture. Refer to Note 3 - Acquisitions and Dispositions for additional information.
The following table details the Company's interest rate swaps as of September 30, 2025:
Notional Balance Fixed Rate
Mortgage notes & credit facilities:
Unsecured term loan credit facility
$700,000 3.65%
$250,000 3.42%
$145,500 4.23%
$100,000 3.67%
$54,500 3.40%
Unsecured revolving credit facility
$100,000 3.25%
$45,500 3.40%
Variable rate mortgages
$47,793 3.74%
Unsecured Senior Notes
On August 28, 2024, NLT OP entered into a Note Purchase Agreement (the "Note Purchase Agreement") governing the issuance of $29,000 of 6.24% Senior Notes, Series A, due August 28, 2028, $38,500 of 6.32% Senior Notes, Series B, due August 28, 2029, $39,500 of 6.40% Senior Notes, Series C, due August 28, 2030 and $23,000 of 6.43% Senior Notes, Series D, due August 28, 2031 (collectively, the "Notes"), to qualified institutional investors in a private placement. Interest on the notes is due semi-annually on the 28th day of February and August of each year beginning on February 28, 2025. Proceeds from the issuance of the notes were used to pay down existing indebtedness of the Company and for other general purposes.
Secured Financings of Investments in Real Estate Debt
During the nine months ended September 30, 2025, the Company entered into financing agreements secured by certain of its CMBS investments and commercial real estate loans. The terms of the CMBS master repurchase agreements provide the lenders the ability to determine the size and terms of the financing provided based upon the particular collateral pledged by the Company, and may require the Company to provide additional collateral in the form of cash or securities if the market value of such financed investment declines. The CMBS master repurchase agreements have no set maturity date, with each borrowing having initial terms of one to three months. The Company has the option to continuously extend the maturity of outstanding balances for additional one to three month terms upon each interim maturity date. The financing arrangement secured by the Company's commercial real estate loans has a maturity date which is the earlier of (a) July 11, 2029 with a one year extension option, or (b) the maturity date of the underlying secured commercial real estate loan. The Company also has a note-on-note financing for a commercial real estate loan investment which has an initial maturity date of June 30, 2027 with three one-year extension options, subject to certain conditions.
As of September 30, 2025, the Company's total secured financings of investments in real estate debt outstanding was $323,557, secured by $347,385 of its CMBS investments and $174,303 of its commercial real estate loans. These financings have a weighted average maturity date of January 4, 2027, and a weighted average interest rate of SOFR + 1.82%, the relevant floating benchmark rate. As of December 31, 2024, the Company did not have any secured financings of investments in real estate debt outstanding. The Company's secured financings of investments in real estate debt are included within Other Borrowings within the Condensed Consolidated Balance Sheets. As of September 30, 2025, the Company believes it was in compliance with all of its loan covenants that could result in a default under such agreements.
On September 1, 2022, the Company commenced the offering of its shares through a continuous private placement offering. As of September 30, 2025, the Company is authorized to issue an unlimited number of each of its four classes of shares of its common shares (Class S shares, Class N shares, Class D shares, and Class I shares).
As of November 5, 2025, we had received net proceeds of $7,177,876 from selling an aggregate 704,016,958 common shares in the private offering (consisting of 300,718,820 Class S shares, 45,651,261 Class N shares, 12,489,129 Class D shares, and 345,157,748 Class I shares).
Cash Flows
Cash flows provided by operating activities was $281,215 for the nine months ended September 30, 2025 compared to $131,334 for the nine months ended September 30, 2024. The change in cash flows provided by operating activities was primarily due to an increase in distributions of earnings from unconsolidated real estate affiliates and interest income from investments in real estate debt.
Cash flows used in investing activities was $2,207,069 for the nine months ended September 30, 2025 compared to $855,527 for the nine months ended September 30, 2024. The change in cash flows used in investing activities was primarily due to an increase in investing activity related to unconsolidated real estate affiliates, real estate debt, and properties classified as financing receivables.
Cash flows provided by financing activities was $2,185,744 for the nine months ended September 30, 2025 compared to $828,102 for the nine months ended September 30, 2024. The change in cash flows provided by financing activities was primarily due to an increase in proceeds received from the issuance of common shares, proceeds from the Company's DST program, and a decrease in net payments of principal on debt, partially offset by increased repurchases on common shares.
Critical Accounting Estimates
The preparation of the financial statements in accordance with GAAP involves significant judgments and assumptions and requires estimates about matters that are inherently uncertain. These judgments will affect our reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our consolidated financial statements. There have been no material changes to our Critical Accounting Policies, including significant accounting policies that we believe are the most affected by our judgments, estimates, and assumptions, which are described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Recent Accounting Pronouncements
See "Item 1. Financial Statements-Notes to Condensed Consolidated Financial Statements-2. Summary of Significant Accounting Policies and Estimates" for a discussion concerning recent accounting pronouncements.
Future Cash Requirements
The following table aggregates our contractual obligations and commitments as of September 30, 2025 (in thousands):
Obligations Total Less than 1 year 1-3 years 3-5 years More than 5 years
Indebtedness $ 1,916,336 $ 247,218 $ 75,500 $ 1,570,618 $ 23,000
Organizational and offering costs 7,550 2,588 4,962 - -
Total $ 1,923,886 $ 249,806 $ 80,462 $ 1,570,618 $ 23,000
The Company has future commitments to fund the construction of wholly owned assets and assets held at joint ventures under build-to-suit arrangements. As of September 30, 2025, the Company estimates that its total remaining future commitments to complete the construction of the assets is $219,676 which it expects to fund over the next six months. Additionally, as of September 30, 2025, the Company has commitments to fund up to $66,792 in additional future fundings related to our commercial real estate loans, including those held through joint ventures.
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