Net Lease Office Properties Reports 25.3% Revenue Decline and $81.5 Million Net Loss for Q2 2025

Net Lease Office Properties (NLOP) reported significant financial challenges in its latest 10-Q filing for the quarter ending June 30, 2025. The company recorded total revenues of $29.2 million for the three months ended June 30, 2025, a decrease of 25.3% from $39.0 million in the same period last year. For the six months ended June 30, 2025, revenues fell to $58.4 million, down 29.6% from $83.0 million in 2024. The decline in revenue was primarily attributed to property dispositions, tenant vacancies, and reduced other lease-related income. NLOP reported a net loss attributable to the company of $81.5 million for the second quarter, compared to a net income of $12.5 million in the prior year, reflecting a substantial increase in impairment charges.

The company’s financial position has also shifted significantly, with total assets decreasing to $668.7 million as of June 30, 2025, down from $805.1 million at the end of 2024. This decline was driven by a reduction in investments in real estate, which fell from $970.8 million to $803.6 million, largely due to impairment charges totaling $82.7 million recognized during the first half of 2025. NLOP's total liabilities decreased to $164.6 million, down from $219.7 million, primarily due to the full repayment of the NLOP Mezzanine Loan in April 2025.

Operationally, NLOP's portfolio consisted of 36 properties leased to 39 corporate tenants, with a total leasable area of approximately 5.9 million square feet. The occupancy rate improved to 88.1% from 85.2% at the end of 2024. However, the company faced challenges with tenant retention and lease renewals, as evidenced by the significant tenant concentration risk, with 28% of revenues derived from KBR, Inc. and 14% from JPMorgan Chase Bank, N.A. The weighted average lease term across the portfolio was 4.0 years, slightly down from 4.3 years previously.

Looking ahead, NLOP's management expressed caution regarding future performance, citing potential risks from macroeconomic conditions, including interest rate fluctuations and tenant payment capabilities. The company plans to continue focusing on liquidity management and may consider further property dispositions to meet its cash requirements. In August 2025, NLOP's Board of Trustees declared a special cash distribution of $3.10 per share, totaling approximately $45.9 million, which is expected to be paid on September 3, 2025. However, future distributions will depend on the company's operational performance and liquidity, which remain uncertain given the current economic landscape.