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Debt
 3 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
Debt Debt
 
Debt Facility

On September 20, 2023, in connection with the Spin-Off (Note 1), we and certain of our wholly-owned subsidiaries entered into financing arrangements for which funding was subject to certain conditions (including the closing of the Spin-Off), including (i) a $335.0 million senior secured mortgage loan with an original maturity on November 9, 2025, with two separate one-year extension options subject to certain conditions (the “NLOP Mortgage Loan”) and (ii) a $120.0 million mezzanine loan facility maturing on November 9, 2028 (the “NLOP Mezzanine Loan” and, together with the NLOP Mortgage Loan, the “NLOP Financing Arrangements”). Upon closing of the Spin-Off on November 1, 2023 (Note 1), the NLOP Financing Arrangements were drawn in full, and approximately $343.9 million of the proceeds from the financing (net of transaction expenses) was transferred to WPC in connection with the Spin-Off.

The NLOP Financing Arrangements were initially collateralized by the assignment of 40 of our previously unencumbered real estate properties. As of March 31, 2024, the NLOP Financing Arrangements were collateralized by 36 of our properties, following the dispositions of four properties in December 2023.
The NLOP Mortgage Loan bears interest at an annual rate of one-month forward-looking term rate based on the Secured Overnight Financing Rate (“SOFR”), subject to a floor of 3.85%, plus 5.0%. In addition, we entered into an interest rate cap agreement that limits our SOFR rate exposure to 5.35% (Note 8). The NLOP Mezzanine Loan bears interest at an annual rate of 14.5% (10.0% of which is required to be paid current on a monthly basis, and 4.5% of which is a payment-in-kind accrual, on a quarterly basis).

The NLOP Mortgage Loan is subject to certain deleveraging thresholds that require us to make repayments on the original loan balance totaling (i) 15% (or $50.3 million) on or prior to November 1, 2024, which is 12 months following the funding date of the loan; (ii) 25% (or $83.8 million) on or prior to November 1, 2025, which is 12 months following the initial deleveraging threshold of the loan, such that no less than 40% of the loan has been repaid, and (iii) in the event we exercise the first one-year extension option, 30% (or $100.5 million) on or prior to November 1, 2026, which is 12 months following the second deleveraging threshold of the loan, such that no less than 70% of the loan has been repaid. To the extent the deleveraging thresholds are not met, we may be subject to certain fees and restrictions, in accordance with the terms of the NLOP Financing Arrangements, until these thresholds are met. We reached the 15% and 25% deleveraging thresholds during the first and second quarters of 2024, respectively (Note 15).

We are required to use the net proceeds from property sales collateralizing the NLOP Financing Arrangements to repay the portions of the NLOP Mortgage Loan and NLOP Mezzanine Loan representing the release amount for any individual property sale. Property sales are subject to the satisfaction of certain conditions, including satisfaction of a debt yield test and minimum release prices. During the three months ended March 31, 2024, we repaid $11.3 million of outstanding principal on the NLOP Mortgage Loan using excess cash from operations. In April 2024, we repaid $78.1 million and $14.5 million of outstanding principal on the NLOP Mortgage Loan and NLOP Mezzanine Loan, respectively, using proceeds from certain dispositions (Note 15).

The following table presents a summary of our NLOP Financing Arrangements (dollars in thousands):
NLOP Financing ArrangementsOriginal Principal Balance
Interest Rate at March 31, 2024
Maturity Date at March 31, 2024
Principal Outstanding Balance at
March 31, 2024
December 31, 2023
NLOP Mortgage Loan (a) (b) (c)
$335,000 
10.4%
11/9/2025$277,609 $288,895 
NLOP Mezzanine Loan (d)
120,000 
14.5%
11/9/2028114,336 114,336 
$391,945 $403,231 
__________
(a)Interest rate is based on SOFR plus 5.0%. The interest rate is subject to an interest rate cap that limits our SOFR rate exposure at 5.35%.
(b)The NLOP Mortgage Loan is subject to two separate one-year extension options.
(c)Balance excludes unamortized discount of $12.4 million and $15.3 million at March 31, 2024 and December 31, 2023, respectively, and unamortized deferred financing costs of $5.4 million and $6.7 million at March 31, 2024 and December 31, 2023, respectively.
(d)Balance excludes unamortized discount of $4.4 million and $5.6 million at March 31, 2024 and December 31, 2023, respectively, and unamortized deferred financing costs of $1.9 million and $2.4 million at March 31, 2024 and December 31, 2023, respectively.

Non-Recourse Mortgages
 
Non-recourse mortgages consist of mortgage notes payable, which are collateralized by the assignment of real estate properties. At March 31, 2024, our non-recourse mortgage notes payable encumbered nine properties, with an aggregate weighted-average interest rate of 4.8% (fixed-rate and variable-rate non-recourse mortgage notes payable were both 4.8%), and maturity dates ranging from April 2024 to May 2026. In April 2024, we transferred ownership of two properties and the related non-recourse mortgage loans (which had an aggregate outstanding principal balance of $33.0 million and maturity dates in April 2024) to the respective lenders (Note 15).
Repayments

During the three months ended March 31, 2024, we prepaid one non-recourse mortgage loan for $19.2 million. We recognized a net loss on extinguishment of debt of $0.3 million on this repayment, which is included within Other gains and (losses) on our consolidated statements of operations. The interest rate for this non-recourse mortgage loan on its date of repayment was 5.2%. As a result of this repayment, WPC no longer serves as guarantor for any of our non-recourse mortgage loans.

Parent Debt

Prior to the Spin-Off, certain wholly-owned affiliates of WPC entered into debt agreements with the international NLOP entities to provide the funding necessary to acquire certain international assets. In connection with the Spin-Off, WPC assigned to us the receivable related to these debt amounts, which eliminates in consolidation. These debt instruments were reflected in these financials as Parent debt. During the three months ended March 31, 2023, we prepaid Parent debt totaling $1.5 million.

Foreign Currency Exchange Rate Impact

During the three months ended March 31, 2024, the U.S. dollar strengthened against the Norwegian krone, resulting in a decrease of $2.6 million in the aggregate carrying value of our Non-recourse mortgages, net from December 31, 2023 to March 31, 2024.

Scheduled Mortgage Debt Principal Payments
 
Scheduled mortgage debt principal payments as of March 31, 2024 are as follows (in thousands):
Years Ending December 31, Total
2024 (remainder)
$33,905 
2025383,919 
20267,540 
2027— 
2028114,336 
Total principal payments539,700 
Unamortized discount, net(17,193)
Unamortized deferred financing costs(7,334)
Total$515,173 

Certain amounts in the table above are based on the applicable foreign currency exchange rate at March 31, 2024.