UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For transition period from to
Commission File Number 000-56611
North Haven Net REIT
(Exact name of registrant as specified in charter)
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Maryland | | 92-2570735 |
(State or other jurisdiction of incorporation or registration) | | (I.R.S. Employer Identification No.) |
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1585 Broadway, 33rd Floor | | 10036 |
New York, NY | | (Zip Code) |
(Address of principal executive offices) | | |
212-761-2340
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: None
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Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☐ | | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | | Smaller reporting company | ☒ |
| | | Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 5, 2024, the issuer had the following shares outstanding: 18,422,857 Class F-S shares, 9,203,990 Class F-I shares, 1,984,737 Class S shares, 865,778 Class I shares and 3,975,391 Class E shares.
TABLE OF CONTENTS
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PART 1 - | | |
ITEM 1. | | |
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ITEM 2. | | |
ITEM 3. | | |
ITEM 4. | | |
PART II - | | |
ITEM 1. | | |
ITEM 1A. | | |
ITEM 2. | | |
ITEM 3. | | |
ITEM 4. | | |
ITEM 5. | | |
ITEM 6. | | |
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NORTH HAVEN NET REIT
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
($ in thousands, except for share and per share data)
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| September 30, 2024 | | December 31, 2023 |
Assets | | | |
Investments in real estate, net | $ | 246,006 | | | $ | - | |
Cash and cash equivalents | 428,481 | | | 27,251 | |
Restricted cash | 19,895 | | | - | |
Intangible assets, net | 63,154 | | | - | |
Other assets | 1,429 | | | 1,500 | |
Total assets | $ | 758,965 | | | $ | 28,751 | |
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Liabilities | | | |
Secured debt arrangements, net | $ | 58,656 | | | $ | - | |
Warehouse credit facility (Note 8) | - | | | 28,750 | |
Due to affiliates | 35,372 | | | - | |
Subscriptions received in advance | 19,895 | | | - | |
Intangible liabilities, net | 18,113 | | | - | |
Other liabilities | 7,808 | | | 69 | |
Total liabilities | 139,844 | | | 28,819 | |
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Commitments and contingencies (Note 12) | - | | | - | |
Redeemable common shares, par value Class E shares, $0.01 per share, 1,225,000 and 0 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively (Note 7) | 24,643 | | | - | |
Redeemable non-controlling interests (Note 7) | 503 | | | - | |
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Shareholders' equity (deficit) | | | |
Common shares, par value $0.01 per share, 31,377,243 and 50 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively (Note 10) | 314 | | | 0 |
Additional paid-in capital | 595,984 | | | 1 | |
Accumulated deficit and cumulative distributions | (4,560) | | | (69) | |
Total shareholders' equity (deficit) | 591,738 | | | (68) | |
Non-controlling interests in third-party ventures | 2,237 | | | - | |
Total equity | $ | 593,975 | | | $ | (68) | |
Total liabilities and shareholders' equity (deficit) | $ | 758,965 | | | $ | 28,751 | |
(1)As of September 30, 2024, the condensed consolidated balance sheet include assets of a consolidated variable interest entity ("VIE") of $46,216, which can only be used to settle the obligations of the VIE, and liabilities of $1,469, which includes third-party liabilities for which the creditors or beneficial interest holders do not have recourse against us.
The accompanying notes are an integral part of the condensed consolidated financial statements
NORTH HAVEN NET REIT
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
($ in thousands, except for share and per share data)
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| Three Months Ended September 30, 2024 | | Nine Months Ended September 30, 2024 |
Revenues | | | |
Rental revenue | $ | 5,119 | | | $ | 6,746 | |
Total revenues | $ | 5,119 | | | $ | 6,746 | |
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Expenses | | | |
Rental property operating | $ | 444 | | | $ | 478 | |
Depreciation and amortization | 2,438 | | | 3,365 | |
General and administrative | 1,207 | | | 2,893 | |
Organizational costs | — | | | 1,920 | |
Total expenses | $ | 4,089 | | | $ | 8,656 | |
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Other income (expenses) | | | |
Other income | $ | 6,135 | | | $ | 10,206 | |
Interest expense | (827) | | | (1,348) | |
Total other income (expenses) | $ | 5,308 | | | $ | 8,858 | |
Net income | $ | 6,338 | | | $ | 6,948 | |
Net income attributable to non-controlling interests in Operating Partnership unit holders | $ | 5 | | | $ | 6 | |
Net income attributable to non-controlling interests in third-party ventures | $ | 2 | | | $ | 2 | |
Net income attributable to common shareholders | $ | 6,331 | | | $ | 6,940 | |
Net income per share of common shares, basic and diluted | $ | 0.20 | | | $ | 0.43 | |
Weighted-average shares of common shares outstanding, basic and diluted | 30,914,129 | | | 16,153,874 | |
The accompanying notes are an integral part of the condensed consolidated financial statements
NORTH HAVEN NET REIT
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) (Unaudited)
($ in thousands, except for share and per share data)
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| Common Shares (Par Value) | | | | | | | | | | |
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| Shares | | Amount | | Additional paid-in capital | | Accumulated deficit and cumulative distributions | | Total Shareholders' equity | | Non-controlling interests in third party ventures | | Total Equity |
Balance at June 30, 2024 | 21,873,717 | | | $ | 219 | | | $ | 436,547 | | | $ | (3,537) | | | $ | 433,229 | | | $ | — | | | $ | 433,229 | |
Common shares issued | 9,352,274 | | | 94 | | | 187,842 | | | — | | | 187,936 | | | — | | | 187,936 | |
Common shares repurchased | (24,433) | | | — | | | (480) | | | — | | | (480) | | | — | | | (480) | |
Amortization of restricted share grants | — | | | — | | | 20 | | | — | | | 20 | | | — | | | 20 | |
Offering costs | — | | | — | | | (31,361) | | | — | | | (31,361) | | | — | | | (31,361) | |
Distribution reinvestment | 175,685 | | | 1 | | | 3,523 | | | — | | | 3,524 | | | — | | | 3,524 | |
Distributions declared on common shares (Refer to Note 10 - Equity for gross per share) | — | | | — | | | — | | | (7,354) | | | (7,354) | | | — | | | (7,354) | |
Net income ($5 allocated to redeemable non-controlling interests) | — | | | — | | | — | | | 6,331 | | | 6,331 | | | 2 | | | 6,333 | |
Net contributions from non-controlling interests | — | | | — | | | — | | | — | | | — | | | 2,235 | | | 2,235 | |
Allocation to redeemable common shares | — | | | — | | | (103) | | | — | | | (103) | | | — | | | (103) | |
Allocation to redeemable non-controlling interests | — | | | — | | | (4) | | | — | | | (4) | | | — | | | (4) | |
Balance at September 30, 2024 | 31,377,243 | | | $ | 314 | | | $ | 595,984 | | | $ | (4,560) | | | $ | 591,738 | | | $ | 2,237 | | | $ | 593,975 | |
The accompanying notes are an integral part of the condensed consolidated financial statements
NORTH HAVEN NET REIT
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) (Unaudited)
($ in thousands, except for share and per share data)
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| Common Shares (Par Value) | | | | | | | | | | |
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| Shares | | Amount | | Additional paid-in capital | | Accumulated deficit and cumulative distributions | | Total Shareholders' equity (Deficit) | | Non-controlling interests in third party ventures | | Total Equity (Deficit) |
Balance at December 31, 2023 | 50 | | | $ | 0 | | | $ | 1 | | | $ | (69) | | | $ | (68) | | | $ | — | | | $ | (68) | |
Common shares issued | 31,170,131 | | | 312 | | | 625,856 | | | — | | | 626,168 | | | — | | | 626,168 | |
Common shares repurchased | (24,483) | | | — | | | (481) | | | — | | | (481) | | | — | | | (481) | |
Amortization of restricted share grants | — | | | — | | | 39 | | | — | | | 39 | | | — | | | 39 | |
Offering costs | — | | | — | | | (33,918) | | | — | | | (33,918) | | | — | | | (33,918) | |
Distribution reinvestment | 231,545 | | | 2 | | | 4,641 | | | — | | | 4,643 | | | — | | | 4,643 | |
Distributions declared on common shares (Refer to Note 10 - Equity for gross per share) | — | | | — | | | — | | | (11,420) | | | (11,420) | | | — | | | (11,420) | |
Distributions declared prior to principal operations commencement ($216.89 gross per share) | — | | | — | | | — | | | (11) | | | (11) | | | — | | | (11) | |
Net income ($6 allocated to redeemable non-controlling interests) | — | | | — | | | — | | | 6,940 | | | 6,940 | | | 2 | | | 6,942 | |
Net contributions from non-controlling interests | — | | | — | | | — | | | — | | | — | | | 2,235 | | | 2,235 | |
Allocation to redeemable common shares | — | | | — | | | (143) | | | — | | | (143) | | | — | | | (143) | |
Allocation to redeemable non-controlling interests | — | | | — | | | (11) | | | — | | | (11) | | | — | | | (11) | |
Balance at September 30, 2024 | 31,377,243 | | | $ | 314 | | | $ | 595,984 | | | $ | (4,560) | | | $ | 591,738 | | | $ | 2,237 | | | $ | 593,975 | |
The accompanying notes are an integral part of the condensed consolidated financial statements
NORTH HAVEN NET REIT
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
For the nine months ended September 30, 2024
($ in thousands)
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Cash flows from operating activities: | |
Net income | $ | 6,948 | |
Adjustments to reconcile net income to cash provided by operating activities: | |
Straight-line rent adjustment | (585) | |
Amortization of above- and below- market lease, net | (162) | |
Depreciation and amortization | 3,365 | |
Amortization of discount on mortgage loans | 262 | |
Amortization of restricted share grants | 39 | |
Changes in assets and liabilities | |
Other assets | (248) | |
Other liabilities | 1,827 | |
Due to affiliates | 4,773 | |
Net cash provided by operating activities | $ | 16,219 | |
Cash flows from investing activities: | |
Acquisition of real estate | $ | (229,695) | |
Capital improvements to real estate | (25) | |
Earnest money deposit | 250 | |
Net cash used in investing activities | $ | (229,470) | |
Cash flows from financing activities: | |
Proceeds from issuance of common shares | $ | 626,168 | |
Subscriptions received in advance | 19,895 | |
Proceeds from issuance of redeemable common shares | 24,500 | |
Proceeds from issuance of operating partnership units | 500 | |
Repurchase of common shares | (1) | |
Payment of offering costs | (3,457) | |
Repayment of the warehouse credit facility | (28,750) | |
Repayment of mortgage loans | (272) | |
Payment of distributions to common shareholders | (4,182) | |
Payment of distributions prior to principal operations commencement | (11) | |
Payment of distributions to operating partnership units | (14) | |
Net cash provided by financing activities | $ | 634,376 | |
Net change in cash, cash equivalents, and restricted cash | $ | 421,125 | |
Cash and cash equivalents at December 31, 2023 | 27,251 | |
Cash, cash equivalents, and restricted cash at September 30, 2024 | $ | 448,376 | |
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Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet: | |
Cash and cash equivalents | $ | 428,481 | |
Restricted cash | 19,895 | |
Total cash, cash equivalents and restricted cash | $ | 448,376 | |
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Supplemental disclosure: | |
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Interest paid | $ | 986 | |
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Supplemental disclosure of non-cash financing activities: | |
Assumption of mortgage loans | $ | 58,667 | |
Distribution reinvestment | $ | 4,643 | |
Accrued distributions for common shareholders | $ | 2,254 | |
Accrued distributions for redeemable non-controlling interests | $ | 340 | |
Accrued shareholder servicing fees | $ | 30,360 | |
Accrued offering costs | $ | 239 | |
Accrued share repurchases | $ | 480 | |
Allocation to redeemable common shares | $ | 143 | |
Allocation to redeemable non-controlling interests | $ | 11 | |
Net contributions from non-controlling interests | $ | 2,235 | |
The accompanying notes are an integral part of the condensed consolidated financial statements
NORTH HAVEN NET REIT
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
($ in thousands, except for share and per share data)
1.Organization and Business Purpose
North Haven Net REIT (“we,” “us,” “our,” and the “Company”) was formed on February 6, 2023 as a Maryland statutory trust and intends to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. The Company invests in net lease investments comprised of high-quality commercial real estate assets that are primarily long-term leased under net lease structures to tenants for whom the properties are mission critical, meaning essential to the continuance of their business operations. The Company seeks to create a portfolio diversified across asset class, tenant industry, lease expiration and geography to attempt to mitigate credit risk concentration and volatility resulting from market conditions. In addition, to a lesser extent, the Company also intends to invest on a tactical basis in commercial real estate debt-related assets, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans, preferred equity, real estate-related corporate credit, and commercial mortgage-backed securities, as well as other real estate-related securities (such as common and preferred stock of publicly traded REITs and other real estate companies) and loans. The Company is externally managed by MSREF Real Estate Advisor, Inc. (the “Adviser”), a Delaware corporation and wholly-owned subsidiary of Morgan Stanley (NYSE: MS) (“Morgan Stanley”).
The Company is the sole general partner of NH Net REIT Operating Partnership, LP, a Delaware limited partnership (the “Operating Partnership”). The Operating Partnership is consolidated by the Company and substantially all the Company's operations are conducted through the Operating Partnership. The Company owns 99.9% of the Operating Partnership and NH Net REIT Special Limited Partner LP, an affiliate of Morgan Stanley (the “Special Limited Partner”), owns a special limited partner interest in the Operating Partnership.
On January 11, 2024, the Company commenced a continuous, blind-pool private offering (the “Offering”), pursuant to which it offers and sells to a limited number of investors its common shares, including, but not limited to, common shares classified as Class S shares, Class I shares, Class F-S shares, Class F-I shares (Class F-S shares and Class F-I shares together with certain other share classes collectively referred to as “Founder Share Classes”) and Class E shares. The share classes have different upfront selling commissions, dealer manager fees and ongoing shareholder servicing fees, as well as different management fees and performance participation allocations.
The purchase price per share for each class of our common shares will vary and will generally equal the Company’s prior month’s net asset value (“NAV”) per share, as calculated monthly, plus applicable upfront selling commissions and dealer manager fees. The calculation of NAV may differ from a similar calculation under accounting principles generally accepted in the United States of America (“GAAP”).
As of September 30, 2024, the Company owned seven net lease investments in the industrial sector and one net lease investment in the retail sector. The Company currently operates in one reportable segment.
2.Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The condensed consolidated financial statements, including the condensed notes thereto, are unaudited and exclude some of the disclosures required in audited financial statements. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated balance sheet. Actual results could differ from those estimates. All intercompany balances and transactions have been eliminated in consolidation.
We have not presented condensed consolidated statements of operations and condensed consolidated statements of changes in shareholders' equity (deficit) for the three and nine months ended September 30, 2023 and a condensed consolidated statement of cash flows for the nine months ended September 30, 2023 because the Company did not have any activity or operations during that period. The Company's results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full year or any other future period.
Principles of Consolidation
The Company consolidates all entities in which it has a controlling financial interest through majority ownership or voting rights and variable interest entities whereby the Company is the primary beneficiary. In determining whether the Company has a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, the Company considers whether the entity is a variable interest entity (“VIE”) and whether it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has (i) the power to direct the most significant activities impacting the economic performance of the VIE and (ii) the obligation to absorb losses or receive benefits significant to the VIE.
The Operating Partnership is considered to be a VIE. Substantially all of the Company's operations are conducted through the Operating Partnership and the Company consolidates this entity as it has the ability to direct the most significant activities of the entity such as purchases, dispositions, financings, budgets, and overall operating plans. The Company meets the VIE disclosure exemption criteria.
During the three months ended September 30, 2024, the Company acquired a 95% interest in a joint venture, which is considered to be a VIE. The Company consolidates this entity because it is the primary beneficiary.
Cash and Cash Equivalents
Cash and cash equivalents represent cash held in banks, cash on hand, and liquid investments with original maturities of three months or less. The Company may have bank balances in excess of federally insured amounts; however, the Company deposits its cash and cash equivalents with high credit-quality institutions to minimize credit risk exposure. The Company did not hold cash equivalents as of September 30, 2024 and December 31, 2023. Income generated on our cash and cash equivalents is recorded in the period in which it is earned under other income in the condensed consolidated statements of operations.
Restricted Cash
Restricted cash consists of cash received for subscriptions prior to the date in which subscriptions are effective and shareholders are admitted into the Company. The Company’s restricted cash pertaining to subscriptions received in advance is $19,895 as of September 30, 2024 and is held in a bank account controlled by the Company’s transfer agent but in the name of the Company. There was no restricted cash as of December 31, 2023, as the Company had not yet received subscriptions.
Investments in Real Estate
When acquiring a property, the Company determines whether the acquisition should be accounted for as a business combination or an asset acquisition in accordance with Accounting Standards Codification (“ASC”) ASC 805 – “Business Combinations.” For both a business combination and an asset acquisition, the Company records the identifiable assets acquired and liabilities assumed in the acquisition. For transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase and expenses acquisition-related costs as incurred. The Company capitalizes acquisition-related costs associated with asset acquisitions. As of September 30, 2024, the Company owned eight properties and each acquisition was accounted for as an asset acquisition.
Upon acquisition of a property, the Company assesses the fair value of acquired tangible and intangible assets and assumed liabilities (including land, buildings, above- and below-market leases, in-place leases, and other identified intangible assets and liabilities) and then allocates the purchase price to these acquired assets and assumed
liabilities based on respective fair values. The Company bases its fair value assessments on cash flow projections that utilize discount and/or capitalization rates that it deems appropriate, as well as other available market information. Estimates of future cash flows are based on several factors including the historical operating results, known and anticipated trends, and market and economic conditions.
The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant. Tangible assets include land and improvements, buildings, and site improvements. The Company records acquired above- and below-market leases at their fair values (using a discount rate which reflects the risks associated with the leases acquired) equal to the difference between (1) the contractual amounts to be paid pursuant to each in-place lease and (2) the Company’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases. The Company records acquired in-place lease values based on the Company’s evaluation of the specific characteristics of each tenant’s lease. Factors to be considered include estimates of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, the Company considers leasing commissions, legal and other related expenses.
Intangible lease assets are recorded net of amortization on the Company’s condensed consolidated balance sheets. The amortization of acquired above- and below-market leases is recorded to rental revenue in the Company’s condensed consolidated statements of operations. The amortization of leasing commissions and leases in-place are recorded in depreciation and amortization in the Company’s condensed consolidated statements of operations.
The cost of buildings and improvements includes the purchase price of the Company’s properties and any acquisition-related costs, along with any subsequent improvements to such properties. The Company’s investments in real estate are recorded at cost and are generally depreciated on a straight-line basis over the estimated remaining useful lives of the assets as follows:
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Description | | Depreciable Life |
Buildings | | 30 - 40 years |
Building and site improvements | | 7 - 15 years |
Lease intangibles and leasehold improvements | | Over lease term |
For the three and nine months ended September 30, 2024, the Company recognized depreciation expense of $1,505 and $2,144, respectively, which was recorded as depreciation and amortization in the condensed consolidated statements of operations.
Significant improvements to properties are capitalized within investments in real estate on the Company's condensed consolidated balance sheets whereas repairs and maintenance are expensed as incurred and recorded in rental property operating expense in the Company’s condensed consolidated statements of operations.
Real estate investments are evaluated for impairment on a quarterly basis. The Company considers the following factors when performing its impairment analysis: (1) management, having the authority to approve the action, commits to a plan to sell the asset; (2) significant negative industry and economic outlook or trends; (3) expected material costs necessary to extend the life or operate the real estate asset; and (4) its ability to hold and dispose of the real estate asset in the ordinary course of business. A real estate investment is considered impaired when the sum of estimated future undiscounted cash flows to be generated by the real estate investment over the estimated remaining holding period is less than the carrying value of such investment. An impairment charge is recorded equal to the excess of the carrying value of the real estate investment over the fair value. When determining the fair value of a real estate investment, the Company makes certain assumptions including, but not limited to, consideration of projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the real estate asset based upon its estimate of a capitalization rate and discount rate. As of September 30, 2024, the Company has not recorded any impairments on its investments in real estate.
Redeemable Common Shares
We classify common shares held by an affiliate of the Company as redeemable common shares on our condensed consolidated balance sheets at redemption value. Redemption value is determined based on the Company's NAV per share of the applicable share class as of the reporting date. Changes in the value of redeemable common shares are recorded to additional paid-in capital.
Rental Revenue
The Company’s primary source of revenues is rental revenue, which is accounted for under ASC 842–“Leases.” Rental revenue primarily consists of fixed contractual base rent, and, to a lesser extent tenant reimbursements, arising from tenant leases at our properties under operating leases. Rent under leases where collection is deemed probable is recognized as revenue on a straight-line basis, including any determinable rent step-up or abatement provisions, over the non-cancelable term of the related leases. The Company begins to recognize revenue upon the acquisition of the related property or when a tenant takes possession of the leased space. Leases that are that are deemed uncollectible are recognized as a reduction to rental revenue through a reversal of deferred rent. Any future cash receipts on leases that are deemed uncollectible will be recorded as income on a cash basis. The Company evaluates the collectability of receivables related to rental revenue on an individual lease basis. The Company exercises judgment in assessing collectability and considers the length of time a receivable has been outstanding, tenant creditworthiness, payment history, available information about the financial condition of the tenant, and current economic trends, among other factors. As of September 30, 2024, all rent collection was deemed probable.
Income Taxes
The Company intends to make an election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its taxable year ending December 31, 2024. If the Company qualifies for taxation as a REIT, the Company generally will not be subject to federal corporate income tax to the extent it distributes 90% of its taxable income to its shareholders. REITs are subject to a number of other organizational and operational requirements. Even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income.
Earnings per Share
Basic net income per share is computed by dividing net income for the period by the weighted average number of shares of common shares outstanding during the period. The Company does not have any dilutive securities outstanding that would cause the basic earnings per share and diluted earnings per share to differ.
Organization and Offering Expenses
The Adviser has agreed to advance certain organization, offering expenses and operating expenses on behalf of the Company through April 1, 2025, which is 12 months following the initial closing of the Offering. The Company will reimburse the Adviser for all such advanced expenses ratably over a 60-month period following April 1, 2025.
As of September 30, 2024, the Adviser and its affiliates have incurred organization and offering expenses on the Company’s behalf of approximately $2,158, which is recorded as due to affiliates on the Company's condensed consolidated balance sheets. As of December 31, 2023, the Adviser and its affiliates had incurred organization and offering expenses on the Company’s behalf of approximately $1,800, however these organizational and offering expenses were not recorded in the accompanying condensed consolidated financial statements because such costs were not the Company’s liability until April 1, 2024, the date on which the Company commenced operations through the initial closing of the Offering and admittance of third-party shareholders.
Organizational expenses are expensed as incurred, and offering expenses are charged to equity. For the three and nine months ended September 30, 2024, the Company recorded organizational expenses of $0 and $1,920, respectively, in its condensed consolidated statements of operations.
Operating Expenses
The Adviser has agreed to advance certain operating expenses on behalf of the Company through April 1, 2025, which is 12 months following the initial closing of the Offering. The Company will reimburse the Adviser for all such advanced expenses ratably over a 60-month period following April 1, 2025.
As of September 30, 2024, the Adviser and its affiliates have incurred operating expenses on the Company’s behalf of approximately $2,854, which is recorded as due to affiliates on the Company's condensed consolidated balance sheets. As of December 31, 2023, the Adviser and its affiliates has incurred operating expenses on the Company’s behalf of approximately $46, but these operating expenses were not recorded in the accompanying condensed consolidated financial statements because such costs were not the Company’s liability until April 1, 2024, the date on which the Company commenced operations through the initial closing of the Offering and admittance of third-party shareholders.
Operating expenses are expensed in the period in which they are incurred. For the three and nine months ended September 30, 2024, the Company recorded operating expenses of $1,207 and $2,807, respectively, as a component of general and administrative expenses in its condensed consolidated statements of operations.
Share-Based Compensation
We compensate each of our non-employee trustees on our board of trustees who are not affiliated with Morgan Stanley with an annual retainer of restricted Class E shares as part of their compensation for services on our board of trustees. See Note 10 - Equity for additional information regarding share-based compensation. Compensation cost related to restricted common shares issued is measured at its fair value on the grant date and amortized into expense over the vesting period on a straight-line basis.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all accounting standards and pronouncements issued by the Financial Accounting Standards Board ("FASB").
In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segments Disclosures" ("Topic 280"). Topic 280 enhances disclosures of significant segment expenses and other segment items regularly provided to the chief operating decision maker ("CODM"), extends certain annual disclosures to interim periods and permits more than one measure of segment profit (loss) to be reported under certain conditions. The amendments are effective in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Retrospective adoption to all periods presented is required, and early adoption of the amendments is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on our financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("Topic 740"). Topic 740 modifies the rules on income tax disclosures to require entities to disclose (i) specific categories in the rate reconciliation, (ii) the income (loss) from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (iii) income tax expense or benefit from continuing operations (separated by federal, state and foreign). Topic 740 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. This guidance should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on our financial statement disclosures.
3.Investments in Real Estate, net
Investments in real estate, net consisted of the following:
| | | | | |
| September 30, 2024 |
Building and building improvements | $ | 196,662 | |
Land and land improvements | 30,419 | |
Site improvements | 21,069 | |
Total | 248,150 | |
Accumulated depreciation | (2,144) | |
Investments in real estate, net | $ | 246,006 | |
As of December 31, 2023, the Company did not hold any investments in real estate.
Acquisitions
The following table details the acquisition values, including capitalized costs, property types and total rentable square feet for acquisitions made by the Company during the nine months ended September 30, 2024:
| | | | | | | | | | | | | | | | | | | | |
Property Type | | Acquisition value | | Number of properties | | Square feet (in thousands) |
Industrial | | $ | 268,318 | | | 7 | | | 2,490 | |
Retail | | 25,908 | | | 1 | | | 109 | |
Total: | | $ | 294,226 | | | 8 | | | 2,599 | |
One of the Company's acquisitions made during the three months ended September 30, 2024 was a 95% interest in a joint venture of which the Company is the primary beneficiary and which is consolidated within the Company's condensed consolidated financial statements. The 5% minority interest held by the Company's joint venture partner is $2,237 and is recorded as non-controlling interests on the condensed consolidated balance sheets.
The following table summarizes the purchase price allocation for the properties acquired during the nine months ended September 30, 2024:
| | | | | | | | | | |
| | | | Amount |
Building and building improvements | | | | $ | 196,662 | |
Land and land improvements | | | | 30,419 | |
Site improvements | | | | 21,045 | |
In-place leases | | | | 49,814 | |
Leasing commissions | | | | 9,930 | |
Above-market lease | | | | 4,839 | |
Below-market lease | | | | (18,483) | |
Total purchase price | | | | $ | 294,226 | |
Assumed borrowings (1) | | | | (58,667) | |
Net purchase price | | | | $ | 235,559 | |
(1)Refer to Note 5 - Secured Debt Arrangements, net for more information on mortgage loans assumed.
Acquisition-related intangible assets and liabilities are recorded in intangible assets, net and intangible liabilities, net, respectively, on the condensed consolidated balance sheets.
4.Intangibles
The following table summarizes the identified intangible assets and liabilities as of September 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Intangible assets: | | Intangible lease assets, gross | | Accumulated amortization | | Intangible lease assets, net | | Weighted-average life (Years) |
In-place leases | | $ | 49,814 | | | $ | (1,001) | | | $ | 48,813 | | | 15.3 |
Leasing commissions | | 9,930 | | | (220) | | | 9,710 | | | 11.3 |
Above-market lease | | 4,839 | | | (208) | | | 4,631 | | | 13.7 |
Total intangible assets: | | $ | 64,583 | | | $ | (1,429) | | | $ | 63,154 | | | 14.6 |
The Company did not have any intangible assets or liabilities as of December 31, 2023.
During the three and nine months ended September 30, 2024, the Company recognized $933 and $1,221 of amortization, respectively, related to its in-place lease intangible assets and leasing commissions.
During the three and nine months ended September 30, 2024, $83 and $208, respectively, of amortization is recorded as a decrease to rental revenue and is related to above-market lease intangible assets in the condensed consolidated statements of operations.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Intangible liabilities: | | Intangible lease liabilities, gross | | Accumulated amortization | | Intangible lease liabilities, net | | Weighted-average life (Years) |
Below-market lease | | $ | 18,483 | | | $ | (370) | | | $ | 18,113 | | | 16.4 |
Total intangible liabilities: | | $ | 18,483 | | | $ | (370) | | | $ | 18,113 | | | 16.4 |
During each of the three and nine months ended September 30, 2024, $277 and $370, respectively, of amortization is recorded as an increase to rental revenue and is related to below-market lease intangible liabilities in the condensed consolidated statements of operations.
The estimated future amortization of the Company’s intangible assets and liabilities for each of the next five years and thereafter as of September 30, 2024, is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Year | | In-place leases | | Leasing commissions | | Above-market lease | | Below-market lease |
2024 (remaining) | | $ | 970 | | | $ | 261 | | | $ | 86 | | | $ | 288 | |
2025 | | 3,879 | | | 1,044 | | | 343 | | | 1,152 | |
2026 | | 3,879 | | | 1,044 | | | 343 | | | 1,152 | |
2027 | | 3,879 | | | 1,044 | | | 343 | | | 1,152 | |
2028 | | 3,879 | | | 1,044 | | | 343 | | | 1,152 | |
Thereafter | | 32,327 | | | 5,273 | | | 3,173 | | | 13,217 | |
Total | | $ | 48,813 | | | $ | 9,710 | | | $ | 4,631 | | | $ | 18,113 | |
5.Secured Debt Arrangements, net
On June 6, 2024, the Company assumed two amortizing mortgage loans secured by two of its real estate investments with an aggregate principal balance of $61,668 (the "Mortgage Loans"). The Mortgage Loans bear interest at a fixed rate of 4.02% and mature on April 1, 2028. As of September 30, 2024, the Mortgage Loans had an aggregate principal balance of
$61,396, with a carrying value of $58,656, net of an acquisition discount of $2,740. The Company did not hold the Mortgage Loans as of December 31, 2023.
During the three and nine months ended September 30, 2024, the Company incurred interest of $827 and $1,065, respectively, related to the Mortgage Loans, inclusive of $196 and $262, respectively, of discount amortization, recorded as interest expense in the condensed consolidated statements of operations.
The Company is subject to various financial and operational covenants under certain of its Mortgage Loans. These covenants require the Company to maintain certain financial ratios, which include leverage, debt yield, and debt service coverage, among others. As of September 30, 2024, the Company was in compliance with all of its covenants related to the Mortgage Loans.
6.Other Assets and Other Liabilities
The following table details the components of the Company's other assets at the dates indicated:
| | | | | | | | | | | | | | |
| | September 30, 2024 | | December 31, 2023 |
Tenant receivables | | $ | 839 | | | $ | - | |
Straight-line rent receivables | | 585 | | | - | |
Earnest money deposit | | - | | | 1,500 | |
Other | | 5 | | | - | |
Total other assets | | $ | 1,429 | | | $ | 1,500 | |
The following table details the components of the Company's other liabilities at the dates indicated:
| | | | | | | | | | | | | | |
| | September 30, 2024 | | December 31, 2023 |
Distribution payable | | $ | 2,594 | | | $ | - | |
Due to tenants | | 2,201 | | | - | |
Unearned rental income | | 1,288 | | | - | |
Accrued property expenses | | 780 | | | - | |
Interest payable | | 206 | | | 69 | |
Other | | 739 | | | - | |
Total other liabilities | | $ | 7,808 | | | $ | 69 | |
7. Redeemable Common Shares and Non-Controlling Interests
On April 1, 2024, MSREI Holding, Inc., an affiliate of the Adviser ("MSREI Holding") purchased 1,225,000 Class E shares of the Company and the Special Limited Partner purchased 25,000 Class E Operating Partnership units, in each case, at a price per share/unit equal to $20.00 (the "Morgan Stanley Equity Investment"). Each of the offers and sales of the shares/units described above was exempt from the registration provisions of the Securities Act of 1933, as amended, by virtue of Section 4(a)(2) and/or Rule 506 of Regulation D thereunder.
MSREI Holding and the Special Limited Partner have agreed to hold the Class E shares/Operating Partnership units issued in respect of the Morgan Stanley Equity Investment until the earlier of (i) the first date that the Company's NAV reaches $1.5 billion and (ii) April 1, 2027, which is three years after the initial closing of the Company's private offering. Following such date, each quarter MSREI Holding and the Special Limited Partner may request, with respect to the Morgan Stanley Equity Investment, that the Company repurchase (each, a “MS Repurchase”), a number of Class E shares/ Operating Partnership units in an amount equal to the amount available under the Company's share repurchase plan’s 5% quarterly cap, but only after the Company first satisfy repurchase
requests from all other common shareholders who have properly submitted a repurchase request for such quarter in accordance with the Company's share repurchase plan. Notwithstanding the foregoing, for so long as Morgan Stanley or its affiliate acts as investment adviser to the Company, the Company will not effect any MS Repurchase during any quarter in which the full amount of all common shares requested to be repurchased by shareholders other than Morgan Stanley and its affiliates under the Company's share repurchase plan is not repurchased or when the Company's share repurchase plan has been suspended.
As of September 30, 2024, Class E shares held by MSREI Holding and Class E units held by the Special Limited Partner pursuant to the Morgan Stanley Equity Investment are classified in mezzanine equity because the Company is required to repurchase or redeem, as applicable, these Class E shares / units upon request by the holders, subject to certain limitations and terms set forth in the applicable subscription agreement if certain conditions outside of the control of the Company are met (as discussed above).
The Class E shares held by MSREI Holding are classified as redeemable common shares on the Company's condensed consolidated balance sheets. The following table summarizes the changes in the Company's outstanding shares of redeemable common shares for the nine months ended September 30, 2024:
| | | | | | | | |
| | Nine Months Ended September 30, 2024 |
Balance at the beginning of the year | | — | |
Issuance of common shares | | 1,225,000 | |
Ending Balance | | 1,225,000 | |
Redeemable common shares are recorded at their redemption value, which is equivalent to fair value, of such Class E common shares at the end of each measurement period. As of September 30, 2024, there was an allocation of $143 to the redeemable common shares in connection with this fair value measurement.
The Class E Operating Partnership units held by the Special Limited Partner are classified as redeemable non-controlling interests on the Company's condensed consolidated balance sheets. Redeemable non-controlling interests are recorded at the greater of their carrying amount, adjusted for their share of the allocation of income or loss and dividends, or their redemption value, which is equivalent to fair value, of such Operating Partnership units at the end of each measurement period.
The following table details the activity of redeemable non-controlling interests related to the Special Limited Partner:
| | | | | | | | |
| | Nine Months Ended September 30, 2024 |
Balance at the beginning of the year | | $ | — | |
Issuance | | 500 | |
GAAP income allocation | | 6 | |
Distributions | | (14) | |
Fair value allocation | | 11 | |
Ending Balance | | $ | 503 | |
8.Related Party Transactions
The following table details the components of due to affiliates:
| | | | | | | | |
| | September 30, 2024 |
Accrued shareholder servicing fees | | $ | 30,360 | |
Advanced operating expenses | | 2,854 | |
Advanced organizational and offering expenses | | 2,158 | |
Due to affiliates | | $ | 35,372 | |
There were no amounts recorded as due to affiliates as of December 31, 2023.
Organization and Offering Expenses
The Adviser has agreed to advance organization and offering expenses (including legal, accounting, printing, mailing, subscription processing and filing fees and expenses, reasonable bona fide due diligence expenses of participating broker-dealers supported by detailed and itemized invoices, costs in connection with preparing sales materials, design and website expenses, fees and expenses of the Company’s escrow agent and transfer agent, and expense reimbursements for actual costs incurred by employees of Morgan Stanley Distribution, Inc., the dealer manager for the Offering (the "Dealer Manager"), in the performance of wholesaling activities, but excluding upfront selling commissions, dealer manager fees and the shareholder servicing fee) on the behalf of the Company through April 1, 2025, which is 12 months following the initial closing of the Offering. The Company will reimburse the Adviser for all such advanced expenses ratably over a 60-month period following April 1, 2025. Such reimbursement may be paid, at the Adviser’s election, in cash, Class E shares or Class E Operating Partnership units, or any combination thereof. If the Adviser elects to receive any portion of such reimbursement in the Company’s common shares or Operating Partnership units, the Company may repurchase such common shares or units from the Adviser at a later date.
As of September 30, 2024, the Adviser and its affiliates have incurred organization and offering expenses on the Company’s behalf of approximately $2,158, which is recorded as a liability on the Company's condensed consolidated balance sheets. As of December 31, 2023, the Adviser and its affiliates have incurred organization and offering expenses on the Company’s behalf of approximately $1,800, but these organizational and offering expenses were not recorded in the accompanying condensed consolidated financial statements because such costs were not the Company’s liability until April 1, 2024, the date on which the Company commenced operations through the initial closing of the Offering and admittance of third-party shareholders.
Organizational expenses are expensed as incurred, and offering expenses are be charged to equity. For the three and nine months ended September 30, 2024, the Company recorded organizational expenses of $0 and $1,920, respectively, in its condensed consolidated statements of operations.
Operating Expenses
The Adviser has agreed to advance certain operating expenses on behalf of the Company through April 1, 2025, which is 12 months following the initial closing of the Offering. The Company will reimburse the Adviser for all such advanced expenses ratably over a 60-month period following April 1, 2025.
As of September 30, 2024, the Adviser and its affiliates have incurred operating expenses on the Company’s behalf of approximately $2,854, which is recorded as a liability on the Company's condensed consolidated balance sheets. As of December 31, 2023, the Adviser and its affiliates have incurred operating expenses on the Company’s behalf of approximately $46, but these operating expenses were not recorded in the accompanying condensed consolidated financial statements because such costs were not the Company’s liability until April 1, 2024, the date on which the Company commenced operations through the initial closing of the Offering and admittance of third-party shareholders.
Operating expenses are expensed in the period in which they are incurred. For the three and nine months ended September 30, 2024, the Company recorded operating expenses of $1,207 and $2,807, respectively, as a component of general and administrative in its condensed consolidated statements of operations.
Dealer Manager
On April 1, 2024, the Company entered into a dealer manager agreement (the “Dealer Manager Agreement”) with the Dealer Manager, pursuant to which the Dealer Manager will serve as the dealer manager for the Offering.
The Dealer Manager is entitled to receive upfront selling commissions of up to 3.5% of the transaction price of each Class F-S share and Class S share sold in the Offering. For the three and nine months ended September 30, 2024, the
Company incurred $618 and $2,523, respectively, in upfront selling commissions which are charged against additional paid-in-capital as offering costs.
The Company pays the Dealer Manager selling commissions equal to 0.85% per annum of the aggregate NAV of our outstanding Class F-S shares and Class S shares over time as shareholder servicing fees for ongoing services rendered to shareholders. Shareholder servicing fees are accrued upon the sale of Class F-S shares and Class S shares and are based upon our best estimate of aggregate fees payable. For the three and nine months ended September 30, 2024, the Company incurred $30,880 and $31,294, respectively, in shareholder servicing fees which are charged against additional paid-in-capital as offering costs.
There are no upfront selling commissions or shareholder servicing fees for Class I shares, Class F-I shares or Class E shares.
OP Agreement
On April 1, 2024, the Operating Partnership entered into the Amended and Restated Limited Partnership Agreement, by and among the Company, as the general partner, the Special Limited Partner, and the other limited partners party thereto from time to time.
Advisory Agreement
On April 1, 2024, the Company entered into an advisory agreement (the "Advisory Agreement") with the Operating Partnership and the Adviser. Pursuant to the Advisory Agreement, the Adviser is responsible for sourcing, evaluating and monitoring the Company’s investment opportunities and making decisions related to the acquisition, management, financing and disposition of the Company’s assets, in accordance with the Company’s investment objectives, guidelines, policies and limitations, subject to oversight by the Company’s board of trustees.
Certain affiliates of the Company, including the Adviser, will receive fees and compensation in connection with the offering and ongoing management of the assets of the Company. The Adviser will be paid a management fee equal to (1) 0.50% of NAV for Founder Share Classes and (2) 1.25% of NAV for shares classes other than the Founder Share Classes except Class E shares, in each case, per annum payable monthly. Additionally, to the extent that the Operating Partnership issues Operating Partnership units to parties other than the Company, the Operating Partnership will pay the Adviser a management fee equal to (1) 0.50% of the NAV of the Operating Partnership attributable to Founder Share Class units not held by the Company and (2) 1.25% of NAV of the Operating Partnership attributable to units other than Founder Share Class units not held by the Company except Class E Operating Partnership units, in each case, per annum payable monthly. The management fee will be paid, at the Adviser’s election, in cash, Class E shares or Class E Operating Partnership units, or any combination thereof. In addition, the Adviser has agreed to waive the management fee through April 1, 2025, which is 12 months following the initial closing of the Offering.
In addition, so long as the Advisory Agreement has not been terminated between the Company and the Adviser, the Special Limited Partner holds a performance participation interest in the Operating Partnership that entitles it to receive in the aggregate an allocation from the Operating Partnership equal to 12.5% of the Total Return with respect to all of the Operating Partnership units, except Class E Operating Partnership units, subject to a 5% Hurdle Amount and a High Water Mark with respect to such class of units, with a Catch-Up (each term as defined in the limited partnership agreement of the Operating Partnership). Such allocation will be made annually and accrue monthly. Distributions on the performance participation interest may be payable in cash or Class E Operating Partnership units, or any combination thereof, at the election of the Special Limited Partner. The Special Limited Partner has agreed to waive distributions with respect to its performance participation interest through April 1, 2025 and as such the Company will not begin making monthly accruals until such date.
The Company may retain certain of the Adviser’s affiliates, from time to time, for services relating to its investments or its operations, which may include accounting and audit services (including valuation support services), account management services, corporate secretarial services, data management services, trusteeship services, information technology services, finance/budget services, human resources, judicial processes, legal services, operational services, risk management services, tax services, treasury services, loan management services, construction management services, property management services, leasing services, property, title and/or other types
of insurance and related services, transaction support services, transaction consulting services and other similar operational matters. The Operating Partnership or its subsidiary may also issue equity incentives to certain employees of such affiliates. Any payments made to the Adviser’s affiliates will not reduce the management fee or performance participation allocation. Any such arrangements will be at or below market rates. As of September 30, 2024 and December 31, 2023, the Company has not retained an affiliate of the Adviser for any such services.
Warehouse Funding Facility
On November 22, 2023, the Company, as borrower, and MSREI Holding, an affiliate of the Adviser, as lender, entered into the Warehouse Funding Facility with a maximum amount of $125,000 that generally bears interest at a variable rate based on the Secured Overnight Funding Rate plus a spread based on the external cost typically used by Morgan Stanley to price funding for its business units and has a maturity date of May 22, 2025. As of December 31, 2023, the Warehouse Funding Facility had $28,750 of principal outstanding with an average all-in interest rate of 6.83%.
During the nine months ended September 30, 2024, the Company incurred interest of $284 recorded as interest expense in the condensed consolidated statements of operations. During the three months ended September 30, 2024, no interest was incurred because the Warehouse Funding Facility was repaid and terminated on April 1, 2024. There were no financial covenants associated with the Warehouse Funding Facility.
9.Leases
The Company’s rental revenue primarily consists of rent earned from operating leases in the Company’s net leased portfolio which consists of fixed annual rents that escalates annually throughout the term of the leases, and the tenants are generally responsible for all property-related expenses, including taxes, insurance, and maintenance. As of September 30, 2024, the Company's investments in real estate are leased to single tenants on a net lease basis. The Company did not have any properties as of December 31, 2023.
The following table details the components of operating lease income from the leases which the Company is the lessor:
| | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2024 | | Nine Months Ended September 30, 2024 |
Fixed lease payments | | $ | 4,111 | | | $ | 5,574 | |
Straight-line rent adjustment | | 422 | | | 585 | |
Variable lease payments (1) | | 392 | | | 425 | |
Amortization of above- and below-market leases | | 194 | | | 162 | |
Rental revenue | | $ | 5,119 | | | $ | 6,746 | |
(1)Consists of tenant reimbursements
The following table presents the undiscounted future minimum rents the Company expects to receive from its net lease properties classified as operating leases as of September 30, 2024:
| | | | | | | | |
Year | | Future Minimum Rents |
2024 (remaining) | | $ | 5,482 | |
2025 | | 22,242 | |
2026 | | 22,685 | |
2027 | | 23,139 | |
2028 | | 23,604 | |
Thereafter | | 145,464 | |
Total | | $ | 242,616 | |
10.Equity
As of December 31, 2023, the Company was authorized to issue an unlimited number of shares classified as common shares of beneficial interest, par value $0.01 per share (“common shares”). On March 29, 2024, the Company amended its Declaration of Trust, pursuant to which the Company is authorized to issue an unlimited number of common shares, including an unlimited number of shares classified as Class T shares, Class F-T shares, Class S shares, Class F-S shares, Class D shares, Class F-D shares, Class I shares, Class F-I shares, and Class E shares, and an unlimited number of shares classified as preferred shares of beneficial interest, par value $0.01 per share (“preferred shares”). The share classes have different upfront selling commissions, dealer manager fees and ongoing shareholder servicing fees, as well as different management fees and performance participation allocations. The below table details the classes of common shares outstanding as of September 30, 2024:
| | | | | | | | |
Share Class | | Shares Issued and Outstanding |
Class S common shares, $0.01 par value per share | | 995,669 | |
Class F-S common shares, $0.01 par value per share | | 18,379,637 | |
Class I common shares, $0.01 par value per share | | 434,371 | |
Class F-I common shares, $0.01 par value per share | | 8,942,181 | |
Class E common shares, $0.01 par value per share | | 2,625,385 | |
Total: | | 31,377,243 | |
The table below details activity related to the Company's common share classes for the three and nine months ended September 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2024 |
| | Class S | | Class F-S | | Class I | | Class F-I | | Class E | | Total |
Beginning balance, June 30, 2024 | | — | | | 13,809,578 | | — | | | 5,962,197 | | | 2,101,942 | | | 21,873,717 | |
Common shares issued | | 994,742 | | | 4,462,683 | | | 433,831 | | | 2,939,847 | | | 521,171 | | | 9,352,274 | |
Dividend reinvested | | 927 | | | 111,111 | | | 540 | | | 40,137 | | | 22,970 | | | 175,685 | |
Common shares repurchased | | — | | | (3,735) | | | — | | | — | | | (20,698) | | | (24,433) | |
Ending balance, September 30, 2024 | | 995,669 | | | 18,379,637 | | | 434,371 | | | 8,942,181 | | | 2,625,385 | | | 31,377,243 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2024 |
| | Class S | | Class F-S | | Class I | | Class F-I | | Class E | | Total |
Beginning balance, December 31, 2023 | | — | | | — | | — | | | — | | | — | | | — | |
Common shares issued | | 994,742 | | | 18,236,768 | | | 433,831 | | | 8,890,891 | | | 2,613,899 | | | 31,170,131 | |
Dividend reinvested | | 927 | | | 146,604 | | | 540 | | | 51,290 | | | 32,184 | | | 231,545 | |
Common shares repurchased | | — | | | (3,735) | | | — | | | — | | | (20,698) | | | (24,433) | |
Ending balance, September 30, 2024 | | 995,669 | | | 18,379,637 | | | 434,371 | | | 8,942,181 | | | 2,625,385 | | | 31,377,243 | |
Share Repurchase Plan
Our board of trustees adopted a share repurchase plan (the “Share Repurchase Plan”), pursuant to which shareholders may request on a quarterly basis that the Company repurchase all or any portion of their common shares, subject to certain limitations as set forth therein. The aggregate NAV of total repurchases of our common shares
(including repurchases at certain non-U.S. investor access funds primarily created to hold our common shares) is limited to no more than 5% of our aggregate NAV per calendar quarter (measured using the average aggregate NAV as of the end of each of the immediately preceding three months). Shares or units issued to the Adviser and the Special Limited Partner pursuant to the Advisory Agreement or with respect to the performance participation allocation, respectively, are not subject to these repurchase limitations. We are not obligated to repurchase any shares and may choose to repurchase only some, or even none, of the shares that have been requested to be repurchased in any particular quarter in our discretion. In addition, our ability to fulfill repurchase requests is subject to a number of limitations. As a result, share repurchases may not be available each quarter. Under our share repurchase plan, to the extent we choose to repurchase shares in any particular quarter, we will only repurchase shares as of the opening of the last business day of that quarter (each such date, a “Repurchase Date”). Repurchases will be made at the transaction price in effect on the Repurchase Date, except that shares that have not been outstanding for at least one year will be repurchased at 98% of the transaction price. The one-year holding period is measured as of the subscription closing date immediately following the prospective repurchase date.
During the three and nine months ended September 30, 2024, the Company repurchased 3,735 Class F-S shares and 20,698 Class E shares for a total of $73 and $407, respectively.
Distributions
The table below details the Company's distribution per share for the Company's common share classes for the three and nine months ended September 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2024 |
| | Class S | | Class F-S | | Class I | | Class F-I | | Class E |
Aggregate gross distributions declared per share | | $ | 0.1756 | | | $ | 0.2632 | | | $ | 0.1756 | | | $ | 0.2632 | | | $ | 0.2632 | |
Shareholder servicing fee per share | | (0.0284) | | | (0.0426) | | | — | | | — | | | — | |
Net distributions declared per share | | $ | 0.1472 | | | $ | 0.2206 | | | $ | 0.1756 | | | $ | 0.2632 | | | $ | 0.2632 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended September 30, 2024 |
| | Class S | | Class F-S | | Class I | | Class F-I | | Class E |
Aggregate gross distributions declared per share | | $ | 0.1756 | | | $ | 0.5174 | | | $ | 0.1756 | | | $ | 0.5174 | | | $ | 0.5174 | |
Shareholder servicing fee per share | | (0.0284) | | | (0.0852) | | | — | | | — | | | — | |
Net distributions declared per share | | $ | 0.1472 | | | $ | 0.4322 | | | $ | 0.1756 | | | $ | 0.5174 | | | $ | 0.5174 | |
On October 20, 2023, the Company was capitalized with a $1 investment by MSREI Holding at a purchase price of $20.00 per share. On March 28, 2024, the Company paid a distribution of $11 or $216.89 per common share to MSREI Holding. Immediately following such distribution, the Company repurchased all 50 shares from MSREI Holding at a price per common share equal to $20.00.
Share-Based Compensation
In April 2024, the Company's board of trustees were granted $79 in aggregate compensation in the form of 3,938 restricted Class E shares. The shares were issued at the most recent NAV per share of $20.00 and the shares, and their related distributions, are subject to a vesting period of one year. During the three and nine months ended September 30, 2024, the Company recognized $20 and $39 of compensation expense, respectively, related to these grants recorded in general and administrative expense in the condensed consolidated statements of operations.
11.Economic Dependency
The Company is dependent on the Adviser and its affiliates for certain services that are essential to it, including the sale of the Company’s common shares, origination, acquisition and disposition decisions, and certain other
responsibilities. In the event that the Adviser and its affiliates are unable to provide such services, the Company would be required to find alternative service providers.
12.Commitments and Contingencies
As of September 30, 2024 and December 31, 2023, the Company is not subject to any material litigation nor is the Company aware of any material litigation threatened against it.
13.Subsequent Events
The following table details the shares issued subsequent to the end of the period through the date of this report:
| | | | | | | | | | | | | | |
Title of Securities | | Number of Shares Sold | | Aggregate Consideration (1) |
Class S common shares | | 986,687 | | | $ | 20,017 | |
Class F-S common shares | | 2,490 | | | 51 | |
Class I common shares | | 430,654 | | | 8,644 | |
Class F-I common shares | | 244,891 | | | 4,925 | |
Class E common shares | | 116,148 | | | 2,335 | |
Total: | | 1,780,870 | | | $ | 35,972 | |
(1) Class F-S and Class S common shares includes aggregate upfront selling commissions of $217.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References herein to (i) “North Haven Net REIT,” the “Company,” “we,” “us,” or “our” refer to North Haven Net REIT and its subsidiaries and (ii) "Founder Share Classes" refer to, collectively, Class F-S shares and Class F-I shares together with certain other share classes, in each case, 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 (“Form 10-Q”). Dollars are in thousands, except for per share amounts or unless otherwise noted.
Forward-Looking Statements
Some of the statements in this Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this Form 10-Q may include statements as to:
•Interest rates;
•Economic growth;
•Changes in demographics;
•Market conditions;
•Rent growth;
•Net operating income growth;
•Capitalization rates; and
•Occupancy rates.
The forward-looking statements contained in this Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Item 1A. Risk Factors” section of our Registration Statement on Form 10, as amended (the “Registration Statement”) filed with the Securities and Exchange Commission (the “SEC”), and elsewhere in this Form 10-Q. Other factors that could cause actual results to differ materially include:
•Changes in interest rates;
•Inflation;
•Unexpected market movements;
•A slowdown or contraction of the economy;
•Legislative or regulatory developments;
•Errors in strategy execution;
•Acts of God and wars (including the recent wars between Israel and Hamas and Russia and Ukraine); and
•Other asset-level developments, including the risk factors described in “Risk Factors.”
Although we believe the assumptions underlying the forward-looking statements, are reasonable, any of the assumptions could be inaccurate, and, as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. These forward-looking statements apply only as of the date of this Form 10-Q. Moreover, we assume no duty and do not undertake to update the forward-looking statements.
Overview
We are a Maryland statutory trust formed on February 6, 2023. Our investment strategy is focused primarily on originating, acquiring, financing and managing a portfolio of high-quality commercial real estate assets that are primarily long-term leased under net lease structures to tenants for whom the properties are mission critical, meaning essential to the continuance of their business operations. We will also prioritize investing in real estate sectors such as industrial (e-commerce), manufacturing (on-shoring and near-shoring) and healthcare (aging demographics). To a lesser extent, we may invest in commercial real estate debt-related assets, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans, preferred equity, real estate-related corporate credit, and commercial mortgage-backed securities (“CMBS”), as well as other real estate-related securities (such as common and preferred stock of publicly traded REITs and other real estate companies) and loans (collectively referred to as, “CRE debt investments”).
We are an externally advised, perpetual-life REIT formed to pursue the following investment objectives:
•Preserve and protect invested capital;
•Provide attractive current income in the form of predictable, stable cash distributions;
•Realize appreciation in NAV from differentiated sourcing, investment selection, structuring and proactive asset management; and
•Provide an investment alternative for shareholders seeking to allocate a portion of their long-term investment portfolios to commercial real estate and private credit funds with the potential for additional upside through real estate tax advantages and appreciation potential, and with potentially lower volatility than publicly-traded real estate companies.
We may not achieve our investment objectives. See “Item 1A, Risk Factors” in our Registration Statement.
We are structured as a non-listed, perpetual-life real estate investment trust ("REIT"), and therefore our securities are not listed on a national securities exchange and, as of the date of this Form 10-Q, there is no plan to list our securities on a national securities exchange. We are organized as a holding company and plan to conduct our business primarily through our various subsidiaries. Commencing with our taxable year ending December 31, 2024, we intend to elect and qualify to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code") for U.S. federal income tax purposes and generally will not be subject to U.S. federal income taxes on our taxable income to the extent we annually distribute all of our REIT taxable income to shareholders and maintain our qualification as a REIT.
Our board of trustees will at all times have ultimate oversight and policy-making authority over us, including responsibility for governance, financial controls, compliance and disclosure. Pursuant to an advisory agreement (the “Advisory Agreement”), by and among us, NH Net REIT Operating Partnership, LP, a Delaware limited partnership (the “Operating Partnership”), and MSREF Real Estate Advisor, Inc. (the “Adviser”), a Delaware corporation and wholly-owned subsidiary of Morgan Stanley (NYSE: MS) (“Morgan Stanley”), however, we have delegated to the Adviser the authority to source, evaluate and monitor our investment opportunities and make decisions related to the acquisition, management, financing and disposition of our assets, in accordance with our investment objectives, guidelines, policies and limitations, subject to oversight by our board of trustees.
On January 11, 2024, we commenced a continuous, blind pool private offering (the “Offering”) of an unlimited number of our common shares in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), by virtue of Section 4(a)(2) and Rule 506 of Regulation D thereunder, to investors that are (i) accredited investors (as defined in Regulation D under the Securities Act) and (ii) in the case of common shares sold outside the United States, to persons that are not “U.S. persons” (as defined in Regulation S under the Securities Act). We intend to sell our common shares in the Offering on a monthly basis. We completed the initial closing of the Offering and our principal operations commenced on April 1, 2024.
As of September 30, 2024, we have received gross proceeds of $626,168 from the sale of our common shares and contributed the net proceeds to the Operating Partnership in exchange for a corresponding number of Operating Partnership units. The Operating Partnership has primarily used the net proceeds to make investments. We intend to continue selling shares on a monthly basis.
We are not aware of any material trends or uncertainties, favorable or unfavorable, other than national economic conditions affecting real estate generally, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from acquiring properties or real estate-related securities, other than those referred to in this Form 10-Q.
Q3 2024 Highlights
Capital Activity
•Raised gross proceeds of $187,936 for the three months ended September 30, 2024, through the sale of our common shares.
Operating Results
•Declared monthly net distributions totaling $7,353 for the three months ended September 30, 2024. The details of our total returns are shown in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Class S | | Class F-S | | Class I | | Class F-I | | Class E |
Annualized Distribution Rate (1) | | N/A | | 4.40 | % | | N/A | | 5.25 | % | | 5.25 | % |
Inception-to-Date Total Return (2)(3) | | 1.02 | % | | 2.74 | % | | 1.16 | % | | 3.18 | % | | 3.21 | % |
(1)The annualized distribution rate is calculated by annualizing the declared distributions per share as of September 30, 2024 and dividing by the NAV per share as of August 31, 2024. The inaugural monthly distribution for Class S and Class I were declared in August 2024 and the annualized distribution rates for each of those classes will be disclosed once distributions have been declared for two consecutive fiscal quarters. Refer to Note 10 - Equity for more information.
(2)Total return is calculated as the change in NAV per share from the date the first share of each respective class was sold through September 30, 2024, plus any distributions per share declared in the period and assumes reinvestment of distributions pursuant to the Company's distribution reinvestment plan. The inception dates for the Class F-S, F-I and E shares are April 1, 2024 and inception dates for Class S and I shares are August 1, 2024. We believe total return is a useful measure of our overall performance.
(3)Class S and Class F-S shares exclude upfront selling commissions. Inclusive of the maximum upfront selling commissions, the inception-to-date total return for class Class S and Class F-S are -1.92% and -0.25%, respectively.
Investments
•Acquired three additional industrial properties and one retail property for an aggregate gross purchase price of $142,343. The acquisitions are consistent with our strategy of acquiring income-producing, mission-critical, single-tenant, net leased commercial properties.
Investment Portfolio
The following table provides information regarding our real estate investments as of September 30, 2024 (dollars and square feet in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Property Type | | Market | | Acquisition Date | | Square Feet | | Gross Asset Value (1) | | Occupancy Rate (2) | | Remaining Lease Term (Years) |
Industrial | | Norfolk, Virginia | | February 2024 | | 154 | | | $ | 29,220 | | | 100 | % | | 14.0 | |
Industrial (3) | | Boston, Massachusetts | | June 2024 | | 446 | | | 43,170 | | | 100 | % | | 15.2 | |
Industrial (3) | | Boston, Massachusetts | | June 2024 | | 524 | | | 61,180 | | | 100 | % | | 15.2 | |
Industrial | | Charlotte, North Carolina | | June 2024 | | 239 | | | 16,600 | | | 100 | % | | 14.3 | |
Industrial | | Bedford, Indiana | | July 2024 | | 401 | | | 40,927 | | | 100 | % | | 10.0 | |
Industrial | | Detroit, Michigan | | August 2024 | | 258 | | | 33,380 | | | 100 | % | | 9.0 | |
Industrial (4) | | Kansas City, Missouri | | September 2024 | | 468 | | | 46,184 | | | 100 | % | | 8.2 | |
Retail | | Phoenix, Arizona | | September 2024 | | 109 | | | 25,908 | | | 100 | % | | 25.0 | |
Totals: | | | | | | 2,599 | | | $ | 296,569 | | | | | 13.4 | |
(1)Based on fair value as of September 30, 2024.
(2)Occupancy rate includes all leased square footage as of September 30, 2024.
(3)Remaining lease term assumes the exercise of the extension options that are for materially below market rents.
(4)The Company owns 95% of this property through a consolidated joint-venture.
Key Components of Our Results from Operations
The following table sets forth information regarding our condensed consolidated results of operations for the three months ended September 30, 2024, and for the three months ended June 30, 2024. The Company did not have any activity or operations during the nine months ended September 30, 2023, and as such the Company did not present a comparison of that period to the nine months ended September 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | $ | | | | |
| | September 30, 2024 | | June 30, 2024 | | Change | | | | | | |
Revenues | | | | | | | | | | | | |
Rental revenue | | $ | 5,119 | | | $ | 1,250 | | | $ | 3,869 | | | | | | | |
Total revenues | | $ | 5,119 | | | $ | 1,250 | | | $ | 3,869 | | | | | | | |
Expenses | | | | | | | | | | | | |
Rental property operating | | $ | 444 | | | $ | 27 | | | $ | 417 | | | | | | | |
Depreciation and amortization | | 2,438 | | | 787 | | | 1,651 | | | | | | | |
General and administrative | | 1,207 | | | 1,686 | | | (479) | | | | | | | |
Organizational costs | | — | | | 1,920 | | | (1,920) | | | | | | | |
Total expenses | | $ | 4,089 | | | $ | 4,420 | | | $ | (331) | | | | | | | |
Other income (expenses) | | | | | | | | | | | | |
Other income | | $ | 6,135 | | | $ | 4,071 | | | $ | 2,064 | | | | | | | |
Interest expense | | (827) | | | (237) | | | (590) | | | | | | | |
Total other income (expenses) | | $ | 5,308 | | | $ | 3,834 | | | $ | 1,474 | | | | | | | |
Net income | | $ | 6,338 | | | $ | 664 | | | $ | 5,674 | | | | | | | |
Net income attributable to non-controlling interests | | $ | 7 | | | $ | — | | | $ | 7 | | | | | | | |
Net income attributable to common shareholders | | $ | 6,331 | | | $ | 664 | | | $ | 5,667 | | | | | | | |
Rental Revenue
During the three months ended September 30, 2024, we recorded rental income of $5,119 from our tenants in connection with our real estate investments. The increase of $3,869 from the three months ended June 30, 2024, is largely attributable to the Company's purchase of four additional real estate investments during the third quarter.
Rental Property Operating
During the three months ended September 30, 2024, operating expenses in connection with our real estate investments increased by $417. The increase results from an increased number of investments in real estate held during the three months ended September 30, 2024, as compared to the three months ended June 30, 2024. These expenses are generally reimbursable by our tenants and those reimbursements are recorded as a component of rental revenue.
Depreciation and Amortization
During the three months ended September 30, 2024, depreciation and amortization in connection with our real estate investments and related leases increased by $1,651. The increase results from an increased number of investments in real estate held during the three months ended September 30, 2024 as compared to the three months ended June 30, 2024.
Management Fee
Certain affiliates of the Company, including the Adviser, will receive fees and compensation in connection with the Offering and ongoing management of the assets of the Company. The Adviser will be paid a management fee equal to (1) 0.50% of NAV for Founder Share Classes and (2) 1.25% of NAV for shares classes other than the Founder Share Classes except Class E shares, in each case, per annum payable monthly. Additionally, to the extent that the Operating Partnership issues Operating Partnership units to parties other than the Company, the Operating Partnership will pay the Adviser a management fee equal to (1) 0.50% of the NAV of the Operating Partnership attributable to Founder Share Class units not held by the Company and (2) 1.25% of NAV of the Operating Partnership attributable to units other than Founder Share Class units not held by the Company except Class E Operating Partnership units, in each case, per annum payable monthly. The management fee will be paid, at the Adviser’s election, in cash, Class E shares or Class E Operating Partnership units, or any combination thereof.
The Adviser has agreed to waive the management fee through April 1, 2025, which is the date that is 12-months following the initial closing of the Offering and as such the Company has not yet incurred a management fee.
Performance Participation Allocation
NH Net REIT Special Limited Partner LP, an affiliate of Morgan Stanley ("Special Limited Partner"), holds a performance participation interest in the Operating Partnership that entitles it to receive in the aggregate an allocation from the Operating Partnership equal to 12.5% of the Total Return with respect to all of the Operating Partnership units, except Class E Operating Partnership units, subject to a 5% Hurdle Amount and a High Water Mark with respect to such class of units, with a Catch-Up (each term as defined in the limited partnership agreement of the Operating Partnership). Such allocation is calculated annually, accrues monthly and paid quarterly. Distributions on the performance participation interest may be payable in cash or Class E Operating Partnership units, or any combination thereof, at the election of the Special Limited Partner.
The Special Limited Partner has agreed to waive distributions with respect to its performance participation interest through April 1, 2025 and as such the Company will not begin making monthly accruals until such date.
Organizational Costs and General and Administrative Costs
The Adviser has agreed to advance organizational costs and certain operating expenses on the behalf of the Company through April 1, 2025, which is 12 months following the initial closing of the Offering. During the three months ended June 30, 2024, the Company recorded $1,686 in general and administrative expenses and $1,920 in organizational costs. These costs are inclusive of amounts incurred prior to the Company's commencement of principal operations on April 1, 2024. The decrease of general and administrative expenses of $479 during the three months ended September 30, 2024 is largely attributed to expenses incurred only during that period are recorded in the condensed consolidated statements of operations. The Company did not incur any organizational costs during the three months ended September 30, 2024.
Other Income
Other income increased by $2,064 during the three months ended September 30, 2024 compared to the three months ended June 30, 2024, primarily attributable to interest income generated on a higher average cash and cash equivalents balance.
Interest Expense
Interest expense increased by $590 for the three months ended September 30, 2024 compared to the three months ended June 30, 2024, due to a higher average principal balance on secured debt arrangements during the three months ended September 30, 2024.
Net Asset Value
We calculate NAV per share in accordance with the valuation guidelines that have been approved by our board of trustees (the "Valuation Guidelines"). The following table provides a breakdown of the major components of our NAV as of September 30, 2024:
| | | | | | | | |
Components of NAV | | September 30, 2024 |
Investments in real estate | | $ | 296,569 | |
Cash and cash equivalents | | 428,481 | |
Restricted cash | | 19,895 | |
Other assets | | 844 | |
Secured debt arrangements | | (59,417) | |
Subscriptions received in advance | | (19,895) | |
Other liabilities | | (7,808) | |
Due to affiliates | | (275) | |
Non-controlling interests related to joint ventures | | (2,237) | |
Net Asset Value | | $ | 656,157 | |
Number of outstanding common shares / units (1) | | 32,627,243 | |
(1)Includes Class E Shares and Class E Units subject to redemption features, classified as redeemable common shares and redeemable non-controlling interests.
The following table provides a breakdown of our total NAV and NAV per common share/unit by class as of September 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value per share | | Class S | | Class F-S | | Class I | | Class F-I | | Class E (1) | | Operating Partnership Units | | Total |
NAV | | $ | 20,001 | | | $ | 369,625 | | | $ | 8,725 | | | $ | 179,845 | | | $ | 77,458 | | | $ | 503 | | | $ | 656,157 | |
Shares / units outstanding | | 995,669 | | | 18,379,637 | | | 434,371 | | | 8,942,181 | | | 3,850,385 | | | 25,000 | | | 32,627,243 | |
NAV per share / unit | | $ | 20.0876 | | | $ | 20.1105 | | | $ | 20.0861 | | | $ | 20.1120 | | | $ | 20.1169 | | | $ | 20.1169 | | | $ | 20.1107 | |
(1)Includes Class E Shares subject to redemption features, classified as redeemable common shares.
The key assumption used to determine the valuations of our investments in real estate is the capitalization rate. As of September 30, 2024, the weighted-average capitalization rate for our industrial properties was 7.5%. The table below shows how a change in the capitalization rate, assuming all other factors remain unchanged, would impact the value of our industrial property investments.
| | | | | | | | | | | | | | |
Assumption | | Hypothetical Change | | Change to Value |
Capitalization rate | | 0.25% Decrease | | 3.5% |
(weighted average) | | 0.25% Increase | | (3.2)% |
In accordance with our Valuation Guidelines, investments in real estate are held at cost for up to three months following their acquisition. Once we determine a fair value for more than one retail property, we will include the key assumptions used in the determination of fair value for such property type and a sensitivity analysis related thereto.
The following table reconciles total shareholders' equity per our condensed consolidated balance sheets to our NAV:
| | | | | |
| September 30, 2024 |
Total shareholders' equity | $ | 591,738 | |
Redeemable common shares | 24,643 | |
Redeemable non-controlling interests | 503 | |
Total shareholders' equity, redeemable common shares and redeemable non-controlling interests under GAAP | $ | 616,884 | |
Adjustments: | |
Accrued shareholder servicing fees | 30,085 | |
Advanced organization and offering costs and advanced operating expenses | 5,012 | |
Accumulated depreciation and amortization | 2,880 | |
Unrealized net real estate appreciation | 2,318 | |
Unrealized loss on secured debt arrangements | (1,022) | |
NAV | $ | 656,157 | |
The following details the adjustments to reconcile accounting principles generally accepted in the United States of America ("GAAP") total shareholders' equity to our NAV:
•Under GAAP, shareholder servicing fees are accrued upon the sale of Class S or Class F-S shares, while for NAV only the portion that is payable in the proceeding month is recognized.
•The Adviser agreed to advance certain organization and offering costs and operating expenses on our behalf through April 1, 2025. Such costs will be reimbursed to the Adviser on a pro-rata basis over a 60 month period beginning April 1, 2025. Amounts advanced by the Adviser will not impact NAV until such amounts are reimbursed by the Company.
•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. For the purposes of calculating our NAV investments in real estate and borrowings are held at their fair values.
•We recognize rental revenue on a straight-line basis under GAAP. Such straight-line rent adjustments are excluded for purposed of calculating NAV.
Distributions
We commenced our principal operations on April 1, 2024 and declared distributions for common shareholders of record as of the last business day of each month thereafter. Each class of our common shares received the same aggregate gross distribution per share, however 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 Morgan Stanley Distribution, Inc., the dealer manager for the Offering (the "Dealer Manager").
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Record Date | | Class S | | Class F-S | | Class I | | Class F-I | | Class E (1) |
April 30, 2024 | | $ | — | | | $ | 0.0691 | | | $ | — | | | $ | 0.0833 | | | $ | 0.0833 | |
May 31, 2024 | | — | | | 0.0691 | | | — | | | 0.0833 | | | 0.0833 | |
June 28, 2024 | | — | | | 0.0734 | | | — | | | 0.0876 | | | 0.0876 | |
July 31, 2024 | | — | | | 0.0734 | | | — | | | 0.0876 | | | 0.0876 | |
August 30, 2024 | | 0.0735 | | | 0.0735 | | | 0.0877 | | | 0.0877 | | | 0.0877 | |
September 30, 2024 | | 0.0735 | | | 0.0735 | | | 0.0877 | | | 0.0877 | | | 0.0877 | |
Total: | | $ | 0.1470 | | | $ | 0.4320 | | | $ | 0.1754 | | | $ | 0.5172 | | | $ | 0.5172 | |
(1)Our non-controlling interests hold Class E units of the Operating Partnership and received per unit distributions equal to Class E shares.
On March 28, 2024, the Company paid a distribution of $11 or $216.89 per common share to MSREI Holding. Immediately following such distribution, the Company repurchased all 50 shares from MSREI Holding at price per common share equal to $20.00.
The following table summarizes the payment character and sources of distributions paid and payable for the nine months ended September 30, 2024:
| | | | | | | | | | | | | | |
Distributions | | Amount | | Percentage |
Payable in cash | | $ | 6,314 | | | 55 | % |
Reinvested in shares | | 5,131 | | | 45 | % |
Total distributions | | $ | 11,445 | | | 100 | % |
Sources of Distributions | | | | |
Cash flows from operating activities (1) | | $ | 11,445 | | | 100 | % |
Total sources of distributions | | $ | 11,445 | | | 100 | % |
(1)Cash flows from operations are calculated in accordance with GAAP and are $16,219 for the nine months ended September 30, 2024.
Financial Condition, Liquidity and Capital Resources
Liquidity
We believe we have sufficient liquidity to operate our business with $448,376 in cash, cash equivalents and restricted cash as of September 30, 2024. We expect to generate cash primarily from (i) the net proceeds of the Offering, (ii) cash flows from our operations, (iii) financing arrangements and (iv) any future offerings of our equity or debt securities.
Our primary use of cash will be for (i) acquisition of net lease assets, acquisition or origination of CRE debt investments and other real estate-related debt investments, (ii) the cost of operations (including the management fee and performance participation), (iii) debt service of any borrowings, (iv) periodic repurchases, including under our share repurchase plan, and (v) cash distributions (if any) to the holders of our common shares to the extent declared by our board of trustees.
Capital Resources
As of September 30, 2024, the Company has two amortizing mortgage loans secured by two of its real estate investments with an aggregate principal balance of $61,396, a fixed rate of 4.02% and maturity of April 1, 2028.
Cash Flows
Cash flows from operating activities were $16,219 for the nine months ended September 30, 2024, primarily as a result of rental income generated on our investments in real estate and interest income generated on our cash and cash equivalents.
Cash flows used in investing activities were $229,470 for the nine months ended September 30, 2024, relating to acquisition of our investments in real estate.
Cash flows from financing activities were $634,376 for the nine months ended September 30, 2024, primarily relating to proceeds from the Offering.
Critical Accounting Estimates
The preparation of the financial statements in accordance with GAAP involve significant judgments and assumptions and require 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 condensed consolidated financial statements. The following is a summary of our significant accounting policies that we believe are the most affected by our judgments, estimates, and assumptions. See “Note 2—Summary of Significant Accounting Policies” to our condensed consolidated financial statements in this for further descriptions of the below accounting policies.
Investments in Real Estate
We expect that most of our acquisitions will qualify as asset acquisitions rather than business combinations pursuant to ASC 805–“Business Combinations.” Upon the acquisition of a property, we assess the fair value of the acquired tangible and intangible assets and assumed liabilities (including land, buildings, above- and below-market leases, acquired in-place leases, and other identified intangible assets and assumed liabilities) and we allocate the purchase price to them, on a relative fair value basis. The most significant portion of the allocation is generally to building and land and requires the use of market-based estimates and assumptions. We assess and consider fair value based on estimated cash flow projections that utilize appropriate discount and/or capitalization rates, as well as other available market information. Estimates of future cash flows are based on several factors including the historical operating results, known and anticipated trends, and market and economic conditions.
The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant. We also consider an allocation of purchase price of acquired intangible assets and liabilities.
Acquired in-place leases that may have a customer relationship intangible value, including (but not limited to) the nature and extent of the existing relationship with the tenants, the tenants’ credit quality and expectations of lease renewals.
Acquired above- and below-market leases are recorded at their fair values (using a discount rate which reflects the risks associated with the leases acquired) equal to the difference between (1) the contractual amounts to be paid pursuant to each in-place lease and (2) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases.
Other intangible assets acquired include amounts for in-place lease values that are based on our evaluation of the specific characteristics of each tenant’s lease. Factors to be considered include estimates of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, we consider leasing commissions, legal and other related expenses.
Impairment of Investments in Real Estate
Once real estate assets have been recorded, they are subsequently evaluated for impairment on a quarterly basis. A real estate asset is considered impaired when the sum of estimated future undiscounted cash flows to be generated by the real estate asset over the estimated remaining holding period is less than the carrying value of such real estate asset. An impairment charge is recorded equal to the excess of the carrying value of the real estate asset over the fair value. When determining the fair value of a real estate asset for the purpose of assessing impairment, we make certain assumptions including, but not limited to: consideration of projected operating cash flows, intended holding period of the real estate, comparable selling prices and projected cash flows from the eventual disposition of the real estate based upon our estimate of a capitalization rate and discount rate. While we exercise significant judgment in generating our assumptions, the asset's fair value is subject to uncertainty, as actual operating cash flows and disposition proceeds could differ from those assumed in our valuations. Additionally, the output is sensitive to the assumptions used in calculating any potential impairment.
Recent Accounting Pronouncements
See “Note 2—Summary of Significant Accounting Policies” to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for a discussion concerning recent accounting pronouncements.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
The primary components of our market risk are related to interest rates, credit spreads, credit market values, liquidity and foreign currency exchange rates. While we do not seek to avoid risk completely, we believe that risk can be quantified from historical experience, and we seek to actively manage that risk, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake.
Interest Rate Risk
Interest rate risk is highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. Our net interest income is exposed to interest rate volatility primarily as a result of the floating rate nature of the investments we hold and the financing we place on them. Additionally, we may use company-level facilities featuring floating interest rates for liquidity and working capital purposes. Furthermore, we may make investments in fixed and floating rate debt securities; the value of our positions may increase or decrease depending on interest rate movements. Finally, interest rate changes may impact the demand for loans and the availability of financing needed to expand our investment portfolio.
A rise in the general level of interest rates can be expected to lead to higher debt service payment requirements relative to any variable rate investments we hold and to declines in the value of any fixed rate investments we may hold. Rising interest rates carry default risk to our borrowers, because cash flows from underlying properties may fall below the debt service payments due to us on the investments, triggering borrower liquidity covenants. Therefore, we expect to protect property cash flows by requiring borrowers to purchase interest rate caps, which provides a hedge against rising interest rates, whereby the borrower will receive excess cash if interest rates exceed predetermined strike prices. Furthermore, rising interest rates also cause our overall cost of borrowing to increase, partially or fully, offsetting any increase in elevated debt service payments received on our variable rate investments. In general, we will seek to match the interest rate characteristics of our investments with the interest rate characteristics of any related financing obligations. In instances where the interest rate characteristics of an investment and the related financing obligation are not matched, we may mitigate such interest rate risk through the utilization of interest rate derivatives of the same duration. Given our target leverage ratios, an increase in interest rates may result in an increase in our net investment income and the amount of the performance participation allocation payable to the Special Limited Partner.
A decline in interest rates can be expected to lead to lower debt service payments received from any variable rate investments we may hold, decreases in the interest income earned on any floating rate investments we hold, and increases in the value of any fixed rate investments we hold. To mitigate the impact of reduced earnings as a result of declining interest rates, we expect to structure interest rate floors into each loan where the borrower will be required
to pay minimum interest payments should interest rates fall below a predetermined rate. Additionally, reduced interest rates also cause our overall cost of borrowings to decrease. Because our borrowings do not typically feature interest rate floors, but our variable rate investments feature minimum interest payments due to us, declining interest rates may result in an increase to the Company’s net interest income and an increase in the amount of the performance participation allocation payable to the Special Limited Partner.
Credit Spread Risk
Credit spread risk is the risk that interest rate spreads between two different financial instruments will change. In general, U.S. fixed-rate commercial mortgage loans and CMBS are priced based on a spread to U.S. Treasury securities or interest rate swaps. We will generally benefit if credit spreads narrow during the time that we hold a portfolio of mortgage loans, CMBS and/or collateralized loan obligations ("CLO") investments, and we may experience losses if credit spreads widen during the time that we hold a portfolio of mortgage loans, CMBS and/or CLO investments. We actively monitor our exposure to changes in credit spreads and we may enter into credit total return swaps or take positions in other credit-related derivative instruments to moderate our exposure to losses associated with a widening of credit spreads.
Credit Risk
We are exposed to credit risk in our investments with respect to a borrower’s ability to make required debt service payments to us and repay the unpaid principal balance in accordance to the terms of the loan agreement. We manage this risk by conducting a credit analysis prior to making an investment and by actively monitoring our portfolio and the underlying credit quality, including subordination and diversification, of our investments on an ongoing basis. In addition, we re-evaluate the credit risk inherent in our investments on a regular basis taking into consideration a number of fundamental macro-economic factors such as gross domestic product, unemployment, interest rates, capital markets activity, retail sales, store closing/openings, corporate earnings, housing inventory, affordability and regional home price trends.
We are exposed to credit risk with respect to the tenants that occupy properties that serve as collateral to our investments. To mitigate this risk, we seek to avoid large single tenant exposure and we undertake a credit evaluation of major tenants prior to making a loan. This analysis includes extensive due diligence of a potential tenant’s creditworthiness and business, as well as an assessment of the strategic importance of the property to the tenant’s core business operations.
Finally, we may be exposed to counterparty credit risk under the terms of a derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We may seek to mitigate the credit risk associated with derivative instruments by entering into transactions with high-quality counterparties.
Market Value Risks
We may also be exposed to market value risk with respect to the fair value of our investments, including debt securities, and borrowings due to changes in market conditions, including credit spreads, interest rates, property cash flows, and commercial property values that serve as collateral. We seek to manage our exposure to market risk by originating or acquiring investments secured by different property types located in diverse, but liquid markets, with stable credit ratings. The fair value of our investments may fluctuate, therefore the amount we will realize upon any repayment, sale, or an alternative liquidation event is unknown.
Commercial property values are subject to volatility and may be adversely affected by a number of factors, including: national, regional and local economic conditions; local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes and/or tax and legal considerations. Changes in commercial property values are difficult to predict with accuracy. We model a range of valuation scenarios and the resulting impacts to our investments.
Liquidity Risk
Market disruptions may lead to a significant decline in transaction activity in all or a significant portion of the asset classes in which we intend to invest and may at the same time lead to a significant contraction in short-term and long-term debt and equity funding sources. A decline in liquidity of real estate and real estate-related investments, as well as a lack of availability of observable transaction data and inputs, may make it more difficult to sell our investments or determine their fair values. As a result, we may be unable to sell investments, or only be able to sell investments at a price that may be materially different from the fair values presented. Also, in such conditions, there is no guarantee that the Company’s borrowing arrangements or other arrangements for obtaining leverage will continue to be available or, if available, will be available on terms and conditions acceptable to us. In addition, a decline in market value of our assets may have particular adverse consequences in instances where we borrowed money based on the fair value of our assets. A decrease in the market value of the our assets may result in the lender requiring it to post additional collateral or otherwise sell assets at a time when it may not be in our best interest to do so.
Foreign Currency Risk
Should we acquire any loans and investments that are denominated in a foreign currency, they may be subject to risks related to fluctuations in exchange rates. We generally expect to mitigate this exposure by matching the currency of our foreign currency assets to the currency of the borrowings that finance those assets. As a result, we expect to substantially reduce our exposure to changes in portfolio value related to changes in foreign exchange rates.
We intend to hedge our net currency exposures in a prudent manner. In doing so, we generally expect to structure our foreign currency hedges so that the notional values and expiration dates of our hedges approximate the amounts and timing of future payments we expect to receive on the related investments. However, our currency hedging strategies may not eliminate all of our currency risk due to, among other things, uncertainties in the timing and/or amounts of payments received on the related investments, and/or unequal, inaccurate, or unavailable hedges to perfectly offset changes in future exchange rates. Additionally, we may be required under certain circumstances to collateralize our currency hedges for the benefit of the hedge counterparty, which could adversely affect our liquidity.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (as amended, the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q was made under the supervision and with the participation of our management, including our Chief Financial Officer (“CFO”) and Head of Capital Markets, and our Chief Accounting Officer (“CAO”) and Treasurer. Based upon this evaluation, our CFO and Head of Capital Markets, and our CAO and Treasurer have concluded that our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our CFO and Head of Capital Markets, and our CAO and Treasurer, as appropriate to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives.
Changes in Internal Controls over Financial Reporting
There have been no changes in our “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during our most recent quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of September 30, 2024, we were not involved in any material legal proceedings.
ITEM 1A. RISK FACTORS
For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed in “Item 1A. Risk Factors” in our Registration Statement. As of September 30, 2024, there have been no material changes from the risk factors set forth in “Item 1A. Risk Factors” in the Registration Statement.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
We are conducting the Offering to “accredited investors” (as defined in Rule 501 promulgated pursuant to the Securities Act) pursuant to exemptions provided by Section 4(a)(2) of the Securities Act and applicable state securities laws. The below table details the common shares sold in the Offering (primary and distribution reinvestment plan):
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Shares Sold Date | | Number of Common Shares Sold | | Aggregate Consideration(7) |
April 2024(1) | | 11,170,776 | | | $ | 224,290 | |
May 2024(2) | | 4,705,655 | | | 94,192 | |
June 2024(3) | | 5,997,286 | | | 119,750 | |
July 2024(4) | | 5,894,789 | | | 117,991 | |
August 2024(5) | | 2,272,517 | | | 45,547 | |
September 2024(6) | | 1,360,653 | | | 27,305 | |
Total: | | 31,401,676 | | | $ | 629,075 | |
(1)Includes 6,076,341 of class F-S common shares, 3,702,750 of class F-I common shares and 1,391,685 of class E common shares
(2)Includes 3,206,883 of class F-S common shares, 1,129,001 of class F-I common shares and 369,771 of class E common shares
(3)Includes 4,526,354 of class F-S common shares, 1,130,446 of class F-I common shares and 340,486 of class E common shares
(4)Includes 4,093,531 of class F-S common shares, 1,567,601 of class F-I common shares and 233,657 of class E common shares
(5)Includes 402,664 of class S common shares, 415,626 of class F-S common shares, 228,901 of class I common shares, 1,087,913 of class F-I common shares and 137,413 of class E common shares
(6)Includes 593,005 of class S common shares, 64,637 of class F-S common shares, 205,470 of class I common shares, 324,470 of class F-I common shares and 173,071 of class E common shares
(7)Includes upfront selling commissions and dealer manager fees for Class F-S common shares of $2,522
On April 1, 2024, MSREI Holding purchased 1,225,000 Class E shares of the Company and the Special Limited Partner purchased 25,000 Class E Operating Partnership units, in each case, at a price per share/unit equal to $20.00. Each of the offers and sales of the shares/units described above was exempt from the registration provisions of the Securities Act, by virtue of Section 4(a)(2) and/or Rule 506 of Regulation D thereunder.
On October 20, 2023, the Company was capitalized with a $1 investment by MSREI Holding at a purchase price of $20.00 per share. On March 28, 2024, the Company paid a distribution of $11 or $216.89 per common share to MSREI Holding. Immediately following such distribution, the Company repurchased all 50 shares from MSREI Holding at price per common share equal to $20.00.
Share Repurchase Plan
Our board of trustees adopted a share repurchase plan (the “Share Repurchase Plan”), pursuant to which shareholders may request on a quarterly basis that the Company repurchase all or any portion of their common shares, subject to certain limitations as set forth therein. The aggregate NAV of total repurchases of our common shares
(including repurchases at certain non-U.S. investor access funds primarily created to hold shares of our shares) is limited to no more than 5% of our aggregate NAV per calendar quarter (measured using the average aggregate NAV as of the end of each of the immediately preceding three months). Shares or units issued to the Adviser and the Special Limited Partner pursuant to the Advisory Agreement or with respect to the performance participation allocation, respectively, are not subject to these repurchase limitations. We are not obligated to repurchase any shares and may choose to repurchase only some, or even none, of the shares that have been requested to be repurchased in any particular quarter in our discretion. In addition, our ability to fulfill repurchase requests is subject to a number of limitations. As a result, share repurchases may not be available each quarter. Under our share repurchase plan, to the extent we choose to repurchase shares in any particular quarter, we will only repurchase shares as of the opening of the last business day of that quarter (each such date, a “Repurchase Date”). Repurchases will be made at the transaction price in effect on the Repurchase Date, except that shares that have not been outstanding for at least one year will be repurchased at 98% of the transaction price. The one-year holding period is measured as of the subscription closing date immediately following the prospective repurchase date.
The table below sets forth common share repurchases by the Company during the three months ended September 30, 2024 under the share repurchase plan:
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Repurchase Date: | | Total Number of Common Shares Repurchased | | Average Purchase Price Paid per Share (1) | | Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs (2) | | Maximum Approximately Dollar Value of Common Shares That May Yet be Purchased as Part of Publicly Announced Plans or Programs (3) |
September 30, 2024 | | 24,433 | | $19.68 | | 24,433 | | — |
(1)Repurchase price was reflective of 98% of NAV per share as of August 31, 2024 for each share class because the repurchased shares were not outstanding for at least one year as set forth in our share repurchase plan described above.
(2)Repurchases are limited as set forth in our share repurchase plan described above. All requests under the share repurchase plan were satisfied.
(3)Repurchases are limited as set forth in our share repurchase plan described above. All requests under the share repurchase plan were satisfied.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
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Exhibit No. | | Description |
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101 | | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 formatted in inline XBRL (eXtensible Business Reporting Language): (i) Condensed consolidated Balance Sheet (Unaudited), (ii) Statements of Operations (Unaudited), (iii) Statements of Changes in Deficit (Unaudited), (iv) Statement of Cash Flows (Unaudited), (v) the Notes to Financial Statements (Unaudited), and (vi) cover page |
104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* Filed herewith
** Furnished herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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North Haven Net REIT |
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November 6, 2024 | | By: | /s/ Douglas Armer |
| | | Douglas Armer Chief Financial Officer and Head of Capital Markets (Principal Executive Officer) |
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November 6, 2024 | | By: | /s/ John Calace |
| | | John Calace Chief Accounting Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) |