UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__________ to __________ Commission File Number: 001-41812 Net Lease Office Properties (Exact name of registrant as specified in its charter) Maryland 92-0887849 (Sta ...

Alluvial Capital Management, an investment advisory firm, released its third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund rose 15.5% in the quarter, bringing the year-to-date returns to 33.6%, strongly outperforming the relevant benchmark indexes. This marks the fund’s third-best quarterly result in its 9-year history. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025. In its third-quarter 2025 investor letter, Alluvial Capital ...

Group 1: Portfolio Performance - Kingdom Capital Advisors' portfolio compounded at 21.06% (net of fees) since inception, outperforming the Russell 2000 TR (4.60%), S&P 500 TR (11.46%), and NASDAQ 100 TR (13.48%) [1] - The portfolio recovered from significant drawdowns experienced from November 2024 to June 2025 [1] Group 2: Net Lease Office Properties (NYSE:NLOP) - Net Lease Office Properties (NYSE:NLOP) had a one-month return of -1.24% and a 52-week loss of 7.17%, with shares closing at $28.60 on October 10, 2025, and a market capitalization of $423.683 million [2] - Since the initial acquisition, the company has divested 22 of 59 properties, repaid all corporate-level debt, and paid dividends equal to about 20% of the initial cost basis [3] - The company is expected to pay additional dividends soon, which could reduce the cost basis to zero on those purchases [3] Group 3: Hedge Fund Interest - Net Lease Office Properties (NYSE:NLOP) was held by 11 hedge fund portfolios at the end of Q2 2025, down from 15 in the previous quarter [4] - While acknowledging the potential of NLOP, the company believes certain AI stocks offer greater upside potential and less downside risk [4]

Group 1 - F.I.L.A. SpA experienced a decline during the quarter due to an analyst downgrade [4] - The decline was attributed to uncertainties in the US market [4]

Core Viewpoint - The company Net Lease Office Properties (NLOP) is projected to achieve "net debt zero" and commence distributions in 2025, as previously forecasted in an update published in January [1]. Group 1 - NLOP is the largest position for the author, indicating significant confidence in its future performance [1]. - The forecast made in January regarding NLOP's financial status and distribution plans has been confirmed as the target date approaches [1].

Core Viewpoint - Net Lease Office Properties (NLOP) has declared a special cash distribution of $3.10 per common share, amounting to approximately $45.9 million, payable on September 3, 2025 [1]. Company Overview - NLOP is a publicly traded real estate investment trust (REIT) that owns a portfolio of high-quality office properties primarily leased to corporate tenants on a single-tenant net lease basis [3]. - The majority of NLOP's properties are located in the U.S., with one property situated in Europe [3]. Financial Information - The special cash distribution is payable to shareholders of record as of the close of business on August 18, 2025 [1].

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Q2 **2025** saw an **$81.5 million** net loss due to an **$81.8 million** impairment, with assets and liabilities declining Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$668,655** | **$805,069** | | Net investments in real estate | $582,501 | $707,443 | | Assets held for sale, net | $61,868 | $29,297 | | Cash and cash equivalents | $54,146 | $25,121 | | **Total Liabilities** | **$164,604** | **$219,666** | | Debt, net | $117,170 | $169,216 | | **Total Equity** | **$504,051** | **$585,403** | Consolidated Statement of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $29,174 | $39,029 | $58,387 | $83,036 | | Impairment charges — real estate | $81,817 | $8,222 | $82,737 | $12,287 | | Interest expense | ($4,400) | ($27,798) | ($10,146) | ($48,598) | | **Net (Loss) Income Attributable to NLOP** | **($81,540)** | **$12,451** | **($81,048)** | **($15,391)** | | **Diluted (Loss) Earnings Per Share** | **($5.50)** | **$0.84** | **($5.47)** | **($1.04)** | Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $25,828 | $41,084 | | Net Cash Provided by Investing Activities | $22,706 | $177,543 | | Net Cash Used in Financing Activities | ($61,496) | ($205,179) | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail operations, policies, and key events including loan repayment, impairment, and property dispositions - As of **June 30, 2025**, NLOP's portfolio consisted of **36 properties** totaling approximately **5.9 million** leasable square feet with a weighted-average lease term of **4.0 years**[36](index=36&type=chunk) - During Q2 **2025**, the company recognized an impairment charge of **$81.6 million** on a property in Houston, Texas, leased to KBR, Inc., after commencing sale efforts for the property. The fair value was estimated at **$73.2 million**[80](index=80&type=chunk) - The NLOP Mezzanine Loan, with **$61.1 million** outstanding at year-end **2024**, was fully repaid during the six months ended **June 30, 2025**, using proceeds from dispositions and cash flow[93](index=93&type=chunk) - A non-recourse mortgage loan on a property in Norway with a **$45.5 million** balance is in a loan-to-value covenant breach as of **June 30, 2025**. Another domestic non-recourse loan of **$25.2 million** was not repaid at its January **2025** maturity[95](index=95&type=chunk)[96](index=96&type=chunk) - In August **2025**, the Board of Trustees declared a special cash distribution of **$3.10 per share**, totaling approximately **$45.9 million**[115](index=115&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q2 **2025** net loss to impairment; FFO increased from lower interest, AFFO decreased from dispositions - Key financial activities in H1 **2025** include selling **three properties** for **$25.4 million** and fully repaying the NLOP Mezzanine Loan, which had a **$61.1 million** principal at year-end **2024**[121](index=121&type=chunk)[122](index=122&type=chunk) FFO and AFFO Reconciliation Summary (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income attributable to NLOP | ($81,540) | $12,451 | ($81,048) | ($15,391) | | FFO (as defined by NAREIT) | $13,164 | ($1,979) | $25,257 | $7,938 | | AFFO attributable to NLOP | $16,909 | $17,402 | $31,874 | $37,416 | - FFO increased for Q2 and H1 **2025** compared to **2024**, primarily due to lower interest expense from debt repayments. AFFO decreased over the same periods, mainly due to the impact of property dispositions and lower other lease-related income[129](index=129&type=chunk)[131](index=131&type=chunk) [Portfolio Overview](index=27&type=section&id=Portfolio%20Overview) Portfolio includes **36 properties** with **88.1%** occupancy and **4.0-year** lease term; KBR, Inc. is top tenant Portfolio Summary | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | ABR (in thousands) | $87,987 | $88,124 | | Number of properties | 36 | 39 | | Occupancy | 88.1% | 85.2% | | Weighted-average lease term (years) | 4.0 | 4.3 | - The top ten tenants represent **66.3%** of total ABR. KBR, Inc. is the largest tenant, contributing **22.9%** of ABR[135](index=135&type=chunk) - A significant concentration of lease expirations occurs in **2030**, accounting for **39.5%** of ABR and **33.4%** of square footage[136](index=136&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Q2 **2025** revenues decreased from dispositions; operating expenses surged from impairment, interest expense fell - Lease revenues for Q2 **2025** decreased by **$7.6 million** compared to Q2 **2024**, primarily due to disposition activity and tenant vacancies[142](index=142&type=chunk) - Impairment charges on real estate increased by **$73.6 million** in Q2 **2025** compared to Q2 **2024**, reaching **$81.8 million**[145](index=145&type=chunk)[146](index=146&type=chunk) - Interest expense for Q2 **2025** decreased by **$23.4 million** year-over-year, primarily due to the full repayment of the NLOP Mortgage Loan in **2024** and the NLOP Mezzanine Loan in April **2025**[153](index=153&type=chunk) - The company experienced a **$3.3 million loss** on the sale of real estate in Q2 **2025**, a significant reversal from the **$37.7 million gain** in Q2 **2024**[152](index=152&type=chunk)[154](index=154&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Company holds **$54.1 million** cash; debt shifted to **39%** variable-rate with **$80.5 million** payments due **2025** - Net cash from operating activities decreased by **$15.3 million** in the first six months of **2025** compared to the same period in **2024**, primarily due to lower proceeds from sales-type leases and the impact of dispositions[160](index=160&type=chunk) Debt Composition | Debt Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Fixed rate | 61% | 76% | | Variable rate | 39% | 24% | | **Total Debt (Carrying Value)** | **$117,170 thousand** | **$169,216 thousand** | - As of **June 30, 2025**, the company has scheduled debt principal payments of **$80.5 million** for the remainder of **2025** and **$36.6 million** for **2026**[166](index=166&type=chunk) - Cash resources at **June 30, 2025**, included **$54.1 million** in cash and cash equivalents and unleveraged properties with a carrying value of approximately **$471.8 million**[167](index=167&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks include interest rate and foreign currency exposure, with credit concentration in KBR and Texas - At **June 30, 2025**, **61%** of debt is fixed-rate and **39%** is variable-rate. A **1%** change in annual interest rates would change annual interest expense on variable-rate debt by **$0.5 million**[187](index=187&type=chunk)[188](index=188&type=chunk) - Foreign currency risk is primarily from an investment in Norway. A **1%** change in the Norwegian krone to U.S. dollar exchange rate would change projected net cash flow by less than **$0.1 million** over the next **12 months**[190](index=190&type=chunk) - Significant credit risk concentrations exist. For the six months ended **June 30, 2025**, tenant KBR, Inc. represented **28%** of total revenues, and properties in Texas accounted for **43%** of total revenues[193](index=193&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls effective as of **June 30, 2025**, with no material changes in internal controls - The CEO and CFO concluded that as of **June 30, 2025**, the company's disclosure controls and procedures were effective at a reasonable level of assurance[195](index=195&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[196](index=196&type=chunk) PART II — OTHER INFORMATION [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists exhibits including officer certifications (SOX **302**/906) and XBRL interactive data files - The exhibits filed with the report include CEO and CFO certifications under Sarbanes-Oxley Sections **302** and **906**[199](index=199&type=chunk) - The filing also includes XBRL instance documents and related taxonomy files for interactive data[199](index=199&type=chunk) [Signatures](index=41&type=section&id=Signatures) The report was signed by the Chief Financial Officer and Chief Accounting Officer on **August 6, 2025** - The Form 10-Q was signed on **August 6, 2025**, by ToniAnn Sanzone, Chief Financial Officer, and Brian Zander, Chief Accounting Officer[201](index=201&type=chunk)

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The company presents its unaudited Q1 2025 balance sheets, income statements, and cash flow statements [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $784.1 million, driven by lower real estate investments and debt repayments Consolidated Balance Sheets (in millions) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total assets** | **$784.1** | **$805.1** | | Net investments in real estate | $692.3 | $707.4 | | Cash and cash equivalents | $28.2 | $25.1 | | Restricted cash | $37.6 | $43.3 | | **Total liabilities** | **$197.9** | **$219.7** | | Debt, net | $148.5 | $169.2 | | **Total equity** | **$586.2** | **$585.4** | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) The company achieved a net income of $0.5 million in Q1 2025, a significant turnaround from a prior-year loss Consolidated Statements of Operations (in millions) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Total Revenues** | **$29.2** | **$44.0** | | Lease revenues | $27.4 | $38.3 | | **Total Operating Expenses** | **$22.3** | **$34.2** | | Depreciation and amortization | $9.7 | $18.0 | | Interest expense | ($5.7) | ($20.8) | | Loss on sale of real estate, net | ($1.0) | ($15.8) | | **Net Income (Loss)** | **$0.5** | **($27.8)** | | **Net Income (Loss) Attributable to NLOP** | **$0.5** | **($27.8)** | | **Basic and Diluted EPS** | **$0.03** | **($1.88)** | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow decreased to $14.1 million, with investing proceeds from property sales and financing used for debt repayment Consolidated Statements of Cash Flows (in millions) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | **$14.1** | **$26.4** | | **Net Cash Provided by Investing Activities** | **$8.7** | **$26.8** | | Proceeds from sales of real estate | $9.2 | $32.4 | | **Net Cash Used in Financing Activities** | **($25.8)** | **($32.0)** | | Payments of mortgage principal and other debt | ($25.7) | ($30.9) | | **Net (decrease) increase in cash** | **($2.7)** | **$20.5** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key disclosures cover the REIT structure, related-party fees, property sales, and significant post-quarter debt repayments - As of March 31, 2025, NLOP's portfolio consisted of **37 properties** with a weighted-average lease term of **4.1 years**[34](index=34&type=chunk)[35](index=35&type=chunk) - During Q1 2025, the company paid its advisor, WPC, **$1.26 million** in asset management fees and **$1.0 million** in administrative reimbursements[49](index=49&type=chunk) - In Q1 2025, NLOP sold two properties for net proceeds of **$9.2 million**, recognizing a net loss of **$1.0 million** and exiting all euro-denominated investments[104](index=104&type=chunk) - Subsequent to quarter end, the company fully repaid the **$35.6 million** NLOP Mezzanine Loan and extended maturities on **$30.8 million** of other mortgage loans[106](index=106&type=chunk)[107](index=107&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes financial results, highlighting the impact of property sales and debt reduction on performance and liquidity [Financial Highlights and Summary Results](index=25&type=section&id=Financial%20Highlights%20and%20Summary%20Results) Q1 2025 featured property sales and significant debt repayments, leading to positive net income despite lower AFFO - Sold two properties for total net proceeds of **$9.2 million** during Q1 2025[113](index=113&type=chunk) - Repaid **$25.5 million** of the NLOP Mezzanine Loan during Q1 2025 and fully repaid the remaining **$35.6 million** in April 2025[114](index=114&type=chunk) Q1 Financial Summary (in millions) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total revenues | $29.2 | $44.0 | | Net income (loss) attributable to NLOP | $0.5 | ($27.8) | | FFO attributable to NLOP | $12.1 | $9.9 | | AFFO attributable to NLOP | $15.0 | $20.0 | [Portfolio Overview](index=27&type=section&id=Portfolio%20Overview) The portfolio comprises 37 properties with 84.9% occupancy and significant tenant and lease expiration concentrations Portfolio Summary | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Number of properties | 37 | 39 | | Occupancy | 84.9% | 85.2% | | Weighted-average lease term (in years) | 4.1 | 4.3 | - The top ten tenants contribute **66.3% of total ABR**, with KBR, Inc. alone accounting for **23.0%**[124](index=124&type=chunk) - Leases expiring in the remainder of 2025 account for **13.6% of ABR**, while a large concentration of leases (**39.6% of ABR**) expires in 2030[127](index=127&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Revenues declined YoY due to dispositions, but lower operating and interest expenses drove improved net income - Lease revenues decreased by **$10.9 million YoY**, primarily due to disposition activity and tenant vacancies[132](index=132&type=chunk) - Depreciation and amortization expense decreased by **$8.2 million YoY**, mainly from dispositions and accelerated amortization in the prior year[137](index=137&type=chunk) - Interest expense decreased by **$15.1 million YoY**, primarily due to debt repayments, including the full repayment of the NLOP Mortgage Loan in 2024[142](index=142&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains liquidity through operations and dispositions to meet debt obligations, including a major post-quarter repayment - Cash and cash equivalents totaled **$28.2 million** at March 31, 2025[152](index=152&type=chunk) - Scheduled debt principal payments total **$108.8 million** for the remainder of 2025, though maturities for **$30.8 million** were extended into 2026[153](index=153&type=chunk) - The NLOP Mezzanine Loan, with a principal of **$35.6 million**, was fully repaid in April 2025 using excess cash from operations and loan reserves[151](index=151&type=chunk) FFO and AFFO Reconciliation (in millions) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income (loss) attributable to NLOP | $0.5 | ($27.8) | | **FFO (as defined by NAREIT) attributable to NLOP** | **$12.1** | **$9.9** | | **AFFO attributable to NLOP** | **$15.0** | **$20.0** | [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks include interest rate fluctuations on variable-rate debt and significant geographic revenue concentration - At March 31, 2025, **fixed-rate debt comprised 71%** of total debt, with variable-rate debt at 29%[170](index=170&type=chunk) - A **1% change** in annual interest rates would cause annual interest expense on variable-rate debt to change by **$0.4 million**[172](index=172&type=chunk) - The company has significant geographic concentration risk, with **96%** of Q1 2025 consolidated revenues from domestic operations, including **43% from Texas**[176](index=176&type=chunk) [Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes in the quarter - Management concluded that **disclosure controls and procedures were effective** as of March 31, 2025[178](index=178&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter[179](index=179&type=chunk) PART II — OTHER INFORMATION [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including Sarbanes-Oxley certifications and XBRL data - Exhibits filed with the report include certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act and XBRL data files[182](index=182&type=chunk) [Signatures](index=39&type=section&id=Signatures) The report was duly authorized and signed by the company's Chief Financial Officer and Chief Accounting Officer - The report was signed on May 8, 2025, by ToniAnn Sanzone (CFO) and Brian Zander (CAO)[184](index=184&type=chunk)

Core Viewpoint - Net Lease Office Properties (NLOP) has successfully repaid its J.P. Morgan mezzanine loan and sold two office properties for a total of approximately $10 million, indicating a strategic move to reduce debt and optimize its asset portfolio [1][2]. Group 1: Debt Repayment - NLOP repaid the outstanding balance on the J.P. Morgan mezzanine loan, which totaled approximately $36 million, using net proceeds from asset sales and other funding sources [2]. - The company has now fully repaid all outstanding debt associated with J.P. Morgan financing arrangements, including a senior secured mortgage repaid in December 2024 [2]. Group 2: Property Sales - In March, NLOP sold two office properties for gross proceeds of $9.8 million, located in Houston, TX, and Krakow, Poland, leased to Emerson Electric Co. and Nokia Corporation, respectively [4]. - Following these sales, NLOP's portfolio consists of 37 office properties, with 36 located in the U.S. and one in Europe [4]. Group 3: Future Distributions - NLOP is considering making special distributions to shareholders using excess proceeds from future sales or other cash sources, with any decisions to be made at the discretion of the Board of Directors [3].

Group 1 - Net Lease Office Properties (NYSE: NLOP) is trading at a 25% discount to its balance sheet book value and a 22% discount based on risk-adjusted valuation estimates [1] - The company is focused on value investing, particularly in high-quality, long/short mid and small-cap companies [1] - The analyst utilizes data analytics skills to identify good investment opportunities from SEC filings and other data sources [1] Group 2 - The article does not provide any specific investment recommendations or advice regarding the suitability of investments for particular investors [2][3] - There is no indication of any stock, option, or similar derivative positions held by the analyst in the companies mentioned [2] - The views expressed in the article may not reflect those of Seeking Alpha as a whole, and the analysts are third-party authors without guaranteed licensing or certification [3]