What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-25 compared with 2025-02-27 · 114 added, 101 removed, 252 unchanged (46% of the section changed)

35 unchanged sentences

References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.

Significant Developments

In January 2026, we sold the KBR property located in Houston, Texas, for gross proceeds of $66.0 million ( Note 17 ).

KBR was our largest tenant by ABR as of December 31, 2025.

In January 2026, we sold a property located in Venice, California, for gross proceeds of $39.6 million ( Note 17 ).

In February 2026, we sold a property located in Martinsville, Virginia, for gross proceeds of $3.9 million ( Note 17 ).

In February 2026, we sold a property located in Raleigh, North Carolina, for gross proceeds of $8.7 million ( Note 17 ).

Special Cash Distribution

In January 2026, our Board of Trustees declared a special cash distribution of $6.75 per share, totaling approximately $100.0 million.

The distribution was paid on February 17, 2026 to shareholders of record as of January 30, 2026 ( Note 17 ).

Financial Highlights

1 unchanged sentence

• During the year ended December 31, 2025, we sold 14 properties for total proceeds, net of selling costs, of $198.6 million ( Note 1 5 ).

• In April 2024, we disposed of two properties by transferring ownership to the respective mortgage lenders, in satisfaction of non-recourse mortgage loans encumbering the properties totaling $33.0 million ( Note 16 ).

Debt Repayments

• During the year ended December 31, 2024, we (i) fully repaid the NLOP Mortgage Loan, which had $288.9 million of outstanding principal as of December 31, 2023, and (ii) repaid $53.2 million of outstanding principal on the NLOP Mezzanine Loan, in each case using proceeds from certain dispositions, as well as cash flow from rent on our properties and other sources ( Note 11 ).

• During the year ended December 31, 2024, we prepaid two non-recourse mortgage loans totaling $20.8 million, which had a weighted-average interest rate of 5.2% ( Note 11 ).

• In February 2025, we repaid $3.3 million of outstanding principal on the NLOP Mezzanine Loan using excess cash ( Note 18 ).

• In September 2025, we disposed of our last international property by transferring ownership to a buyer, in satisfaction of the non-recourse mortgage loan encumbering the property for $45.7 million ( Note 1 5 ).

Leasing Activity

• In September 2025, we entered into a lease termination agreement with a tenant at a property located in Oak Creek, Wisconsin, to terminate the lease on October 31, 2025 (the previous lease expiration date was May 31, 2032).

In connection with the agreement, the tenant paid us a lease termination fee of $13.0 million, which was recognized within Other lease-related income in our consolidated statements of operations during the year ended December 31, 2025.

This property was sold in December 2025 ( Note 5 ).

Net Lease Office Properties 2025 10-K – 22

• During the year ended December 31, 2025, we fully repaid the NLOP Mezzanine Loan, which had $61.1 million of outstanding principal as of December 31, 2024, using net proceeds from certain dispositions, as well as excess cash flow from operations and other sources, including the application of loan reserves ( Note 10 ).

• During the year ended December 31, 2025, we repaid four non-recourse mortgage loans totaling $49.8 million with a weighted-average interest rate of 7.5% ( Note 10 ).

Special Cash Distributions

• In August 2025, our Board of Trustees declared a special cash distribution of $3.10 per share, totaling approximately $45.9 million.

The distribution was paid on September 3, 2025 to shareholders of record as of August 18, 2025 ( Note 1 2 ).

• In November 2025, our Board of Trustees declared a special cash distribution of $4.10 per share, totaling approximately $60.7 million.

The distribution was paid on December 19, 2025 to shareholders of record as of December 4, 2025 ( Note 1 2 ).

• In December 2025, our Board of Trustees declared a special cash distribution of $5.10 per share, totaling approximately $75.6 million.

The distribution was paid on January 20, 2026 to shareholders of record as of January 2, 2026 ( Note 1 2 ).

• Future special cash distributions will be at the discretion of our Board of Trustees and will depend upon, among other things, our actual and anticipated results of operations and liquidity, which will be affected by various factors, including the timely receipt of rental income from our portfolio;

the timing of and proceeds from asset sales;

our operating expenses (including management fees);

capital expenditures for our portfolio;

our current intention to maintain our qualification as a REIT;

and other factors which may be outside of our control.

There can be no assurance as to the amount or timing of future distributions.

Summary Results

11 unchanged sentences

Adjusted funds from operations attributable to NLOP (AFFO) 73,809 62,048

Net Lease Office Properties 2024 10-K – 25

(a) Amount for the year ended December 31, 2024 includes $10.3 million of proceeds from the sale of a net investment in sales-type lease ( Note 6 ).

2 unchanged sentences

See Supplemental Financial Measures below for our definition of this non-GAAP measure and a reconciliation to its most directly comparable GAAP measure.

Net Lease Office Properties 2025 10-K – 23

Total revenues decreased in 2025 as compared to 2024, primarily due to the impact of disposition activity and tenant vacancies at certain properties, partially offset by higher other lease-related income.

Net Loss Attributable to NLOP

Net loss attributable to NLOP decreased in 2024 as compared to 2023, primarily due to an impairment charge recognized on goodwill during 2023 and higher gain on sale of real estate, partially offset by higher interest expense and the impact of disposition activity.

FFO decreased in 2024 as compared to 2023, primarily due to higher interest expense (including amortization of deferred financing costs) and the impact of disposition activity, partially offset by higher other lease-related income and Spin-Off costs recognized during 2023.

AFFO decreased in 2024 as compared to 2023, primarily due to the impact of disposition activity, partially offset by higher other lease-related income.

Net loss attributable to NLOP increased in 2025 as compared to 2024, primarily due to higher impairment charges and higher loss on sale of real estate, partially offset by lower interest expense.

See Note 8 for information on impairment charges recorded during the reporting period.

FFO increased in 2025 as compared to 2024, primarily due to lower interest expense and higher other lease-related income, partially offset by the impact of disposition activity.

AFFO increased in 2025 as compared to 2024, primarily due to lower interest expense and higher other lease-related income, partially offset by the impact of disposition activity.

Portfolio Overview

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Leasable square footage (in thousands) (a)

(a) Excludes 570,999 of operating square footage for a parking garage at a domestic property.

(a) Excludes 570,999 of operating square footage for a parking garage associated with the KBR property in Houston, Texas.

This property was sold in January 2026 ( N ote 17 ).

Net Lease Office Properties 2025 10-K – 24

3 unchanged sentences

(dollars in thousands)

Tenant/Lease Guarantor State/Country ABR ABR Percent Square Footage (a)

Tenant State/Country ABR ABR Percent Square Footage (a)

Number of Properties Weighted-Average Lease Term (Years)

Texas $ 20,158 37.2 % 913,713 1 4.5

JPMorgan Chase Bank, N.A.

Florida, Texas 9,069 10.3 % 666,869 3 4.4

Siemens AS (b)

Norway 4,198 4.8 % 165,905 1 1.0

Pharmaceutical Product Development, LLC North Carolina 4,063 4.6 % 219,812 1 8.9

Omnicom Group, Inc.

Iowa Board of Regents Iowa 4,056 7.5 % 191,700 1 4.8

Omnicom California 3,961 7.3 % 120,000 1 2.7

RRD Illinois 3,461 6.4 % 167,215 1 1.7

California 3,108 5.7 % 67,681 1 4.8

Donnelley & Sons Company Illinois 3,393 3.9 % 167,215 1 2.7

Board of Regents, State of Iowa Iowa 3,254 3.7 % 191,700 1 5.8

Bankers Financial Corporation Florida 3,228 3.6 % 111,357 1 0.6

Google, LLC California 2,930 3.3 % 67,681 1 5.8

Northrop Grumman Systems Corporation Minnesota 2,679 3.0 % 191,336 1 4.9

Intuit Texas 2,577 4.8 % 166,033 1 0.5

Grande Communications Texas 2,407 4.5 % 134,009 5 2.7

Cenlar FSB Pennsylvania 2,105 3.9 % 105,584 1 2.5

iHeart Communications Texas 2,050 3.8 % 120,147 1 9.1

Arbella Insurance Massachusetts 1,850 3.4 % 132,160 1 1.4

Total $ 45,733 84.5 % 2,118,242 14 3.9

(a) Excludes 570,999 of operating square footage for a parking garage at a domestic property.

(b) ABR amounts are subject to fluctuations in foreign currency exchange rates.

Net Lease Office Properties 2024 10-K – 27

(a) Excludes 570,999 of operating square footage for a parking garage associated with the KBR property in Houston, Texas.

(b) These properties were sold in January 2026 ( Note 17 ).

Lease Expirations

12 unchanged sentences

2041 1 1 1,084 2.0 % 75,286 2.3 %

2035 1 1 2,010 2.3 % 120,147 2.1 %

2037 1 1 545 0.6 % 31,120 0.6 %

Vacant — — — — % 710,428 21.0 %

1 unchanged sentence

(a) Assumes tenants do not exercise any renewal options or purchase options.

(b) Excludes 570,999 of operating square footage for a parking garage at a domestic property.

(b) Excludes 570,999 of operating square footage for a parking garage associated with the KBR property in Houston, Texas.

This property was sold in January 2026 ( Note 17 ).

Net Lease Office Properties 2025 10-K – 25

Terms and Definitions

5 unchanged sentences

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 December 31, 2024.

ABR — ABR represents contractual minimum annualized base rent for our properties.

If there is a rent abatement, we annualize the first monthly contractual base rent following the free rent period.

Net Lease Office Properties 2024 10-K – 28

Results of Operations

6 unchanged sentences

Lease Revenues

For the year ended December 31, 2024 as compared to 2023, lease revenues decreased by $37.2 million, primarily due to disposition activity, tenant vacancies at certain properties, and the anticipated reimbursement of $3.3 million of rent to a tenant since the tenant had to vacate a property during a period of maintenance (this reimbursement was formally agreed upon in February 2025 ( Note 18 )).

For the year ended December 31, 2025 as compared to 2024, lease revenues decreased by $29.6 million, primarily due to disposition activity and tenant vacancies at certain properties.

Income from Finance Leases

For the year ended December 31, 2024 as compared to 2023, income from finance leases decreased by $1.1 million, primarily due to the reclassification of our remaining direct financing lease investment to operating lease during the third quarter of 2023, as well as the disposition of our remaining property classified as net investments in sales-type lease during the first quarter of 2024 ( Note 7 ).

For the year ended December 31, 2025 as compared to 2024, income from finance leases increased by $0.5 million, primarily due to a reclassification of a net-lease asset to net investments in sales-type lease in the fourth quarter of 2025.

We also disposed of a property classified as net investments in sales-type lease during the first quarter of 2024 ( Note 6 ).

Other Lease-Related Income

Other lease-related income is described in Note 5 .

Net Lease Office Properties 2025 10-K – 26

Operating Expenses

9 unchanged sentences

Separation and distribution related costs and other — 16 (16)

Impairment charges — goodwill — 62,456 (62,456)

$ 219,617 $ 186,115 $ 33,502

2 unchanged sentences

Depreciation and Amortization

For the year ended December 31, 2024 as compared to 2023, depreciation and amortization expense decreased by $18.3 million, primarily due to the impact of disposition activity, partially offset by accelerated amortization of intangible assets in connection with a lease restructuring.

Net Lease Office Properties 2024 10-K – 29

For the year ended December 31, 2025 as compared to 2024, depreciation and amortization expense decreased by $20.8 million, primarily due to the impact of disposition activity and accelerated amortization of intangible assets in connection with a lease restructuring during the year ended December 31, 2024.

Reimbursable Tenant Costs

For the year ended December 31, 2024 as compared to 2023, reimbursable tenant costs decreased by $1.4 million, primarily due to the impact of dispositions, partially offset by higher insurance premiums paid on certain properties.

For the year ended December 31, 2025 as compared to 2024, reimbursable tenant costs decreased by $4.1 million, primarily due to the impact of disposition activity, as well as lower real estate taxes and maintenance costs at certain properties.

Property Expenses, Excluding Reimbursable Tenant Costs

For the year ended December 31, 2024 as compared to 2023, property expenses, excluding reimbursable tenant costs, increased by $2.3 million, primarily due to tenant vacancies during 2024 (which resulted in property expenses no longer being reimbursable).

For the year ended December 31, 2025 as compared to 2024, property expenses, excluding reimbursable tenant costs, decreased by $2.3 million, primarily due to the impact of disposition activity, partially offset by tenant vacancies (which resulted in property expenses no longer being reimbursable).

General and Administrative

Prior to the Spin-Off on November 1, 2023 ( Note 1 ), general and administrative expenses were allocated to NLOP based on the relative percentage of annualized based rent of NLOP.

The amounts allocated are not necessarily indicative of the actual amount of indirect expenses that would have been recorded had NLOP been a separate independent entity.

For the year ended December 31, 2024 as compared to 2023, general and administrative expenses decreased by $6.1 million, primarily since 2024 and the last two months of 2023 represent actual direct expenses incurred (including $4.0 million and $0.7 million of administrative reimbursements paid to our Advisor during 2024 and 2023, respectively ( Note 5 )), compared to the allocation of expenses described above for the first ten months of 2023.

For the year ended December 31, 2025 as compared to 2024, general and administrative expenses decreased by $0.2 million, primarily due to lower professional fees.

Asset Management Fees

Upon completion of the Spin-Off on November 1, 2023 ( Note 1 ), we began paying asset management fees to our Advisor, which totaled $6.2 million and $1.2 million during the years ended December 31, 2024 and 2023, respectively ( Note 5 ).

Separation and Distribution Related Costs and Other

For the year ended December 31, 2023, separation and distribution related costs and other are comprised of costs related to the Spin-Off, which closed on November 1, 2023 ( Note 1 ).

Impairment Charges — Goodwill

Our impairment charges on goodwill are described in Note 9 .

Other Income and Expenses, and Benefit from (Provision for) Income Taxes

Asset management fees paid to our Advisor are calculated based on the ABR of properties in our portfolio and are being proportionately reduced following the disposition of each portfolio property ( Note 4 ).

For the year ended December 31, 2025 as compared to 2024, asset management fees decreased by $1.7 million, primarily due to the impact of disposition activity.

Net Lease Office Properties 2025 10-K – 27

Other Income and Expenses, and (Provision for) Benefit from Income Taxes

Years Ended December 31,

(in thousands) 2025 2024 Change

Other Income and Expenses

Other Income and Expenses, and (Provision for) Benefit from Income Taxes

(Loss) gain on sale of real estate, net $ (29,006) $ 20,216 $ (49,222)

Interest expense (12,739) (67,962) 55,223

Gain (loss) on sale of real estate, net 20,216 (3,608) 23,824

Other gains and (losses) (2,557) (2,154) (403)

Benefit from (provision for) income taxes 2,382 (425) 2,807

(Provision for) benefit from income taxes (158) 2,382 (2,540)

$ (44,460) $ (47,518) $ 3,058

(Loss) Gain on Sale of Real Estate, Net

(Loss) gain on sale of real estate, net, consists of (loss) gain on (i) the sale of properties that were disposed of, net of taxes, (ii) properties subject to a purchase agreement resulting in a lease modification during the reporting period, (iii) properties included in assets held for sale and subject to a revised estimated purchase price, or (iv) the reclassification of foreign currency translation adjustments from accumulated other comprehensive income to net loss since we exited all investments denominated in a currency (which totaled losses of $41.6 million for the year ended December 31, 2025), as more fully described in Note 3 , N ote 5 and Note 15 .

Interest Expense

Interest expense is comprised of interest on Non-recourse mortgages, our NLOP Mortgage Loan, and our NLOP Mezzanine Loan, as well as interest expense on Parent Debt (as defined in Note 11 ) specific to NLOP properties and that was allocated to NLOP based on the relative percentage of unencumbered net investment in real estate of each property compared to WPC (prior to the Spin-Off).

The amounts allocated to Parent Debt in the accompanying audited consolidated financial statements are not necessarily indicative of the actual amount of interest expense that would have been recorded had NLOP been a separate independent entity during the applicable periods.

Net Lease Office Properties 2024 10-K – 30

For the year ended December 31, 2024 as compared to 2023, interest expense increased by $25.3 million, primarily due to the $455.0 million of NLOP Financing Arrangements that were funded on November 1, 2023 ( Note 11 ).

Since our NLOP Mortgage Loan was fully repaid during 2024 and we repaid $53.2 million of outstanding principal on the NLOP Mezzanine Loan during 2024, we expect Interest expense to be lower in future periods.

Gain (Loss) on Sale of Real Estate, Net

Gain (loss) on sale of real estate, net, consists of gain (loss) on the sale of properties that were (i) disposed of or (ii) subject to a purchase agreement resulting in a lease modification, during the reporting period, as more fully described in Note 6 , Note 7 , and Note 16 .

Interest expense comprises interest on Non-recourse mortgages, our NLOP Mortgage Loan, and our NLOP Mezzanine Loan.

Our NLOP Mortgage Loan was fully repaid in December 2024 and our NLOP Mezzanine Loan was fully repaid in April 2025 ( Note 10 ).

For the year ended December 31, 2025 as compared to 2024, interest expense decreased by $55.2 million, primarily due to repayments of our debt since January 1, 2024 ( Note 10 ).

Other Gains and (Losses)

For the year ended December 31, 2024, other gains and (losses) of $(2.2) million were primarily comprised of (i) loss of ($3.2) million related to damages at a property, (ii) net realized and unrealized losses on our interest rate cap derivative of ($1.0) million ( Note 10 ), (iii) net realized and unrealized gains on foreign currency exchange rate movements of ($0.8) million, (iv) loss of ($0.3) million on extinguishment of debt, (v) interest income on our cash deposits of $2.3 million, and (vi) gain of $0.9 million related to a forfeited deposit on a potential disposition.

For the year ended December 31, 2023, other gains and (losses) of $0.5 million were primarily comprised of net realized and unrealized losses on foreign currency exchange rate movements.

Benefit from (Provision for) Income Taxes

For the year ended December 31, 2024, we recognized a benefit from income taxes of $2.4 million, as compared to a provision for income taxes of $0.4 million for the year ended December 31, 2023, primarily due to the impact of an impairment charge recognized on an international property during 2024.

For the year ended December 31, 2025, other gains and (losses) of $(2.6) million primarily comprised (i) a non-cash allowance for credit loss on a sales-type lease of $(4.8) million ( Note 6 ), (ii) interest income on our cash deposits of $2.1 million, (iii) escrow refund related to facility improvements of $0.4 million, and (iv) loss on extinguishment of debt of $(0.3) million primarily related to the full repayment of the NLOP Mezzanine Loan in April 2025 ( Note 10 ).

For the year ended December 31, 2024, other gains and (losses) of $(2.2) million primarily comprised (i) loss of $(3.2) million related to damages at a property, (ii) net realized and unrealized losses on our interest rate cap derivative of $(1.0) million ( Note 9 ), (iii) net realized and unrealized gains on foreign currency exchange rate movements of $(0.8) million, (iv) loss of $(0.3) million on extinguishment of debt, (v) interest income on our cash deposits of $2.3 million, and (vi) gain of $0.9 million related to a forfeited deposit on a potential disposition.

(Provision for) Benefit from Income Taxes

For the year ended December 31, 2025, we recognized a provision for income taxes of $0.2 million, as compared to a benefit from income taxes of $2.4 million for the year ended December 31, 2024, primarily due to the impact of an impairment charge recognized on an international property during 2024.

Net Lease Office Properties 2025 10-K – 28

Liquidity and Capital Resources

Sources and Uses of Cash During the Year

We use the cash flow generated from our investments primarily to meet our operating expenses, capital expenditures and debt service.

We use the cash flow generated from our investments primarily to meet our operating expenses, pay distributions to shareholders, make capital expenditures as necessary, and pay debt service.

Our cash flows fluctuate periodically due to a number of factors, which may include, among other things:

12 unchanged sentences

Net cash used in financing activities (218,885) (367,984) 149,099

Net Cash Provided by Operating Activities — Net cash provided by operating activities increased by $0.9 million during 2024 as compared to 2023, primarily due to $10.3 million of proceeds received from the sale of a net investment in sales-type lease during 2024 ( Note 7 ) and Spin-Off related costs incurred during 2023 ( Note 1 ), substantially offset by the impact of dispositions.

Net Cash Provided by Investing Activities — Net cash provided by investing activities increased by $270.1 million during 2024 as compared to 2023, primarily due to higher proceeds from dispositions ( Note 16 ).

Net Cash Used in Financing Activities — Net cash used in financing activities increased by $331.2 million during 2024 as compared to 2023, primarily due to higher payments of the NLOP Financing Arrangements and mortgage principal.

Net Cash Provided by Operating Activities — Net cash provided by operating activities decreased by $7.7 million during 2025 as compared to 2024, primarily due to the impact of disposition activity and $10.3 million of proceeds received from the sale of a net investment in sales-type lease during 2024 ( Note 6 ), partially offset by lower interest expense.

Net Cash Provided by Investing Activities — Net cash provided by investing activities decreased by $89.5 million during 2025 as compared to 2024, primarily due to lower proceeds from dispositions ( Note 1 5 ).

Net Cash Used in Financing Activities — Net cash used in financing activities decreased by $149.1 million during 2025 as compared to 2024, primarily due to lower payments of the NLOP Financing Arrangements and mortgage principal (following the full repayment of the NLOP Mortgage Loan during 2024 and full repayment of the NLOP Mezzanine Loan during 2025 ( Note 10 )), partially offset by $106.7 million of distributions paid during 2025.

Net Lease Office Properties 2025 10-K – 29

Summary of Financing

The table below summarizes our non-recourse mortgages, NLOP Mortgage Loan, and NLOP Mezzanine Loan (dollars in thousands):

The table below summarizes our non-recourse mortgages and NLOP Mezzanine Loan (dollars in thousands):

Carrying Value

1 unchanged sentence

$ 21,900 $ 71,488

NLOP Mezzanine Loan, net (a)

57,957 106,299

NLOP Mezzanine Loan, net (a) (b)

21,900 129,445

2 unchanged sentences

$ 21,900 $ 169,216

NLOP Mortgage Loan, net — Amount subject to interest rate cap (a)

39,771 310,642

$ 169,216 $ 541,979

Percent of Total Debt

5 unchanged sentences

Total debt 7.0 % 8.1 %

(a) Aggregate debt balance includes unamortized discount, net, totaling $1.8 million and $21.6 million as of December 31, 2024 and 2023, respectively, and unamortized deferred financing costs totaling $1.0 million and $9.2 million as of December 31, 2024 and 2023, respectively.

In connection with the Spin-Off, we and certain of our wholly-owned subsidiaries entered into the NLOP Financing Arrangements, comprised of the NLOP Mortgage Loan and NLOP Mezzanine Loan, as discussed in Note 1 1 .

During the year ended December 31, 2024, we (i) fully repaid the NLOP Mortgage Loan, which had $288.9 million of outstanding principal as of December 31, 2023, and (ii) repaid $53.2 million of outstanding principal on the NLOP Mezzanine Loan, in each case using proceeds from certain dispositions, as well as cash flow from rent on our properties and other sources.

At December 31, 2024, we had $61.1 million total principal outstanding on the NLOP Mezzanine Loan.

In February 2025, we repaid $3.3 million of outstanding principal on the NLOP Mezzanine Loan using excess cash ( Note 18 ).

(a) Aggregate debt balance includes unamortized discount, net, totaling $1.8 million and unamortized deferred financing costs totaling $1.0 million as of December 31, 2024.

(b) In April 2025, we fully repaid the NLOP Mezzanine Loan ( Note 10 ).

During the year ended December 31, 2025, we fully repaid the NLOP Mezzanine Loan, which had $61.1 million of outstanding principal as of December 31, 2024, using net proceeds from certain dispositions, as well as excess cash flow from operations and other sources, including the application of loan reserves ( Note 10 ).

Cash Resources

1 unchanged sentence

• cash and cash equivalents totaling $119.6 million;

Of this amount, $8.6 million, at then-current exchange rates, was held in foreign subsidiaries, and we could be subject to restrictions or significant costs should we decide to repatriate these amounts;

• unleveraged properties that had an aggregate asset carrying value of approximately $276.8 million at December 31, 2025, although there can be no assurance that we would be able to sell or obtain financing for these properties.

1 unchanged sentence

Cash Requirements and Liquidity

As of December 31, 2024, scheduled debt principal payments total $105.0 million during 2025 and $5.9 million during 2026 ( Note 11 ).

As of December 31, 2025, scheduled debt principal payments total $21.9 million during 2026 ( Note 10 ).

During the next 12 months following December 31, 2025 and thereafter, we expect that our significant cash requirements will include:

• making scheduled principal and balloon payments on our non-recourse mortgage debt obligations, totaling $110.8 million, with $105.0 million due during the next 12 months;

• making scheduled interest payments on our non-recourse mortgage debt obligations (future interest payments total $5.3 million, with $5.1 million due during the next 12 months);

• making scheduled principal payments on the NLOP Mezzanine Loan, totaling $61.1 million (no amounts are due during the next 12 months);

• making scheduled interest payments on the NLOP Mezzanine Loan (future interest payments total $35.9 million, with $9.0 million due during the next 12 months);

includes 4.5% payment-in-kind interest that we have the option to capitalize into the principal balance;

• funding future capital commitments and tenant improvement allowances;

• making scheduled principal and balloon payments on our non-recourse mortgage debt obligations, totaling $21.9 million, which are due during the next 12 months;

• making scheduled interest payments on our non-recourse mortgage debt obligations, totaling $0.9 million, which are due during the next 12 months;

• other normal recurring operating expenses.

1 unchanged sentence

Our liquidity could be adversely affected by refinancing debt at higher interest rates or an unanticipated disruption to our operating cash flow, which could include interrupted rent collections or greater-than-anticipated operating expenses.

Certain amounts disclosed above are based on the applicable foreign currency exchange rate at December 31, 2024.

Environmental Obligations

5 unchanged sentences

Risk Factors for further discussion of potential environmental risks.

New Tax Legislation

Effective July 4, 2025, certain changes to U.S.

tax law were approved that may impact us and our shareholders.

Among other changes, this legislation (i) permanently extended the 20% deduction for “qualified REIT dividends” for individuals and other non-corporate taxpayers under Section 199A of the Code, (ii) increased the percentage limit under the REIT asset test applicable to TRSs from 20% to 25% for taxable years beginning after December 31, 2025, and (iii) increases the base on which the 30% interest deduction limit under Section 163(j) of the Code applies by excluding depreciation, amortization, and depletion from the definition of “adjusted taxable income” (i.e.

based on EBITDA rather than EBIT) for taxable years beginning after December 31, 2024.

Critical Accounting Estimates

16 unchanged sentences

If the future net undiscounted cash flow of the property’s asset group is less than the carrying value, the carrying value of the property’s asset group is considered not recoverable.

We then measure the impairment loss as the excess of the carrying value of the property’s asset group over its estimated fair value.

We then measure the impairment loss as the excess of the carrying value of the property’s asset group over its estimated fair value, less costs to sell.

Supplemental Financial Measures

16 unchanged sentences

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.

We exclude these items from GAAP net income to arrive at AFFO because they are not the primary drivers in our decision-making process and excluding these items provides investors with a view of our portfolio performance over time and makes it more comparable to other REITs.

AFFO also reflects adjustments for jointly owned

1 unchanged sentence

We use AFFO as one measure of our operating performance when we formulate corporate goals and evaluate the effectiveness of our strategies.

We believe that AFFO is a useful supplemental measure for investors to consider as we believe it will help them to better assess the sustainability of our operating performance without the potentially distorting impact of these short-term fluctuations.

We believe that AFFO is a useful supplemental measure for investors to consider because we believe it will help them 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.

1 unchanged sentence

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.

We do not use our FFO and AFFO measures as, nor should they be considered to be, alternatives to net income computed under GAAP, alternatives to net cash provided by operating activities computed under GAAP, or indicators of our ability to fund our cash needs.

FFO and AFFO were as follows (in thousands):

1 unchanged sentence

Net loss attributable to NLOP $ (145,262) $ (91,471)

Impairment charges — real estate 78,237 63,143

Impairment charges — real estate (a)

140,814 78,237

Depreciation and amortization of real property 35,878 56,696

(Gain) loss on sale of real estate, net (20,216) 3,608

Impairment charges — goodwill (a)

Proportionate share of adjustments for noncontrolling interests (b)

Loss (gain) on sale of real estate, net (b)

29,006 (20,216)

Proportionate share of adjustments for noncontrolling interests (c)

Total adjustments 205,491 114,510

1 unchanged sentence

Amortization of deferred financing costs 4,970 31,446

Other (gains) and losses (c)

Tax benefit — deferred and other (3,271) (1,200)

Above- and below-market rent intangible lease amortization, net 3,003 4,335

Other (gains) and losses (d)

Straight-line and other leasing and financing adjustments 2,523 2,314

Above- and below-market rent intangible lease amortization, net 1,080 3,003

Other amortization and non-cash items 439 1,449

Tax benefit — deferred — (3,271)

Stock-based compensation — 250

Separation and distribution related costs and other (d)

Proportionate share of adjustments for noncontrolling interests (b)

Separation and distribution related costs and other — 16

Proportionate share of adjustments for noncontrolling interests (c)

Total adjustments 13,580 39,009

2 unchanged sentences

AFFO attributable to NLOP $ 73,809 $ 62,048

(a) Amount for the year ended December 31, 2023 represents an impairment charge to reduce the carrying value of goodwill to zero, since the Company’s trading value as a public company subsequent to the completion of the Spin-Off resulted in a market capitalization that was significantly below the carrying value of our net assets ( Note 8 , Note 9 ).

(b) Adjustments disclosed elsewhere in this reconciliation are on a consolidated basis.

(a) Amount for the year ended December 31, 2025 represents impairment charges totaling $84.8 million recognized on the KBR property in Houston, Texas ( Note 8 ).

(b) Amount for the year ended December 31, 2025 includes loss on sale of real estate of $41.6 million, comprising foreign currency translation adjustments reclassified from accumulated other comprehensive income to net loss since we exited all investments denominated in the Norwegian krone during the third quarter of 2025 and the euro during the first quarter of 2025 ( Note 3 , Note 1 5 ).

This adjustment reflects our FFO or AFFO on a pro rata basis.

(d) Amount for the year ended December 31, 2025 includes a non-cash allowance for credit loss recorded on a net investment in a sales-type lease of $4.8 million ( Note 6 ).

Amount for the year ended December 31, 2024 includes a loss of $3.2 million related to damages at a property.

(d) Amount for the year ended December 31, 2023 is primarily comprised of costs related to the Spin-Off ( Note 1 ).

These amounts also include gains and losses on extinguishment of debt and foreign currency transactions.

Net Lease Office Properties 2025 10-K – 33

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis