Earnings

Net Lease Office Properties’ Third-Quarter Loss Narrows as Revenue Falls

The Tip Desk · November 11, 2026 · 3 min read

Third-quarter 2026 revenue fell to $5.9 million from $6.4 million in the prior quarter, while net loss attributable to NLOP narrowed to $0.6 million from $6.2 million. The company repaid its final non-recourse mortgage, which had $21.9 million of outstanding principal at December 31, 2025, and declared a $1.50-a-share special distribution totaling about $22.2 million.

Net Lease Office Properties (NLOP) reported revenue of $5.9 million and a net loss attributable to NLOP of $0.6 million for the three months ended September 30, 2026. The company repaid its final non-recourse mortgage loan on August 31, 2026, eliminating the last piece of debt that had been in default since its July 6 maturity, and declared a special cash distribution of $1.50 a share, totaling approximately $22.2 million, payable December 1.

The office REIT had $21.9 million of outstanding principal on that loan as of December 31, 2025, with a 7.0% fixed base rate and 5.0% default interest accruing after the original maturity date. Interest expense was $0.4 million in the three months ended September 30, 2026, after the repayment.

The company continued to shrink its portfolio. Total revenues were $5.9 million in the three months ended September 30, 2026, down from $6.4 million in the three months ended June 30, 2026, as the remaining portfolio continued to shrink after further dispositions. Lease revenues were $5.9 million, which the company attributed primarily to disposition activity.

Net loss attributable to NLOP narrowed to $0.6 million from a $6.2 million net loss in the prior quarter. Real estate impairment charges were $6.5 million. Gain on sale of real estate, net, was $5.5 million, up from $0.5 million.

Funds from operations attributable to NLOP were $2.4 million, down from $3.1 million. Adjusted FFO was $3.0 million.

During the nine months ended September 30, 2026, the company sold eight properties for total proceeds, net of selling costs, of $154.4 million, after selling six properties for $128.0 million during the six months ended June 30, 2026. Those proceeds exclude a $20.0 million deposit received in the fourth quarter of 2025 related to a January 2026 Houston sale leased to KBR. Since January 1, 2025, the company has disposed of 23 properties for $366.7 million, net of selling costs.

Pro rata annualized base rent was $21.9 million at September 30, 2026, down from $24.8 million at June 30. The portfolio held 16 properties and 9 tenants, with occupancy of 68.9% and a weighted-average lease term of 3.8 years. In July, the company amended Grande Communications leases at four of five Texas properties to extend expiration to June 30, 2041 and reduce ABR from $2.2 million to $1.8 million, and terminated the fifth lease effective January 31, 2027. Grande Communications ABR was $2.1 million at September 30. In September, a Norcross, Georgia tenant agreed to terminate a lease effective August 1, 2027; the company received a $1.7 million termination fee in October 2026, to be recognized in other lease-related income starting in the fourth quarter.

Effective July 1, 2026, the base administrative reimbursement to the Advisor was reduced to $2.0 million annually from $4.0 million annually. General and administrative expenses were $1.1 million in the three months ended September 30.

Cash and cash equivalents were $30.6 million at September 30, 2026, up from $23.7 million at June 30. Unleveraged properties had an aggregate carrying value of approximately $139.5 million. In October 2026, the company sold a Quincy, Massachusetts property for gross proceeds of $6.6 million; it was classified as held for sale as of September 30. The company said it expects to fund significant cash requirements through cash from dispositions and operations.