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DST Program
 9 Months Ended
Sep. 30, 2023
Equity [Abstract]  
DST Program DST Program
On August 31, 2023, the Company, through NLT OP, initiated a DST Program to issue and sell up to a maximum aggregate offering amount of $3,000,000 of Interests in specific DSTs holding DST Properties in private placement. Under the DST Program, DST Properties, which may be sold, contributed, sourced, or otherwise seeded from the Company’s real properties held through NLT OP or from third parties, will be held in separate DSTs and leased back by a wholly-owned subsidiary of NLT OP in accordance with corresponding master lease agreements. NLT OP will have the right, but not the obligation, to acquire the Interests in the applicable DST from the beneficial owners or the applicable DST’s right, title, interest in any portion of the DST Properties from the beneficial owners, in each case, in exchange for cash or OP Units, at a purchase price equal to the fair market value of the beneficial owner’s interest in one or more of the DST Properties. The FMV Buyback Option is exercisable during the one-year option period beginning two years from the final closing of the applicable DST Offering or in such other time frame as provided for in the applicable DST arrangement. After a one-year holding period, investors who receive OP Units pursuant to the FMV Buyback Option generally have the right to cause NLT OP to redeem all or a portion of their OP Units for, at the Company’s sole discretion, common shares of the Company, cash, or a combination of both.
The sale of interests in the DST Property will be accounted for as a failed sale-leaseback transaction due to the fair market value purchase option retained by NLT OP and as such, the property will remain on the Company’s books and records. The proceeds received from the DST will be accounted for as a financing obligation liability on the Condensed Consolidated Balance Sheets. Fees incurred for services provided to the DST will be accounted for as deferred loan costs and will be netted against the financing obligation liability.
Under the master lease, the Company is responsible for subleasing the DST Property to tenants, for covering all costs associated with operating the underlying DST Property, and for paying base rent to the DST that owns such property. For financial reporting purposes, the DST Properties are included in the consolidated financial statements.
During the three months ended September 30, 2023, the Company contributed two industrial assets to the DST as part of the initial DST Program offering of $85,300, and a wholly-owned subsidiary of the Company leased back the assets in accordance with a master lease agreement. As of September 30, 2023, the Company had not raised any proceeds from its DST Program. As such, the impact of the master lease is eliminated upon consolidation and has no impact on the financial statements for the three and nine months ended September 30, 2023.Equity and Non-Controlling Interest
Authorized Capital
As of September 30, 2023, the Company had the authority to issue an unlimited number of preferred shares and three classes of common shares including Class I shares, Class D shares, and Class S shares. Each class of common shares and preferred shares has a par value of $0.01. The Company’s Board of Trustees has the ability to establish the preferences and rights of each class or series of preferred shares, without shareholder approval, and as such, it may afford the holders of any series or class of preferred shares preferences, powers and rights senior to the rights of holders of common shares. The differences among the common share classes relate to upfront transaction fees and ongoing shareholder servicing fees. See Note 2 – Summary of Significant Accounting Policies and Estimates for a further description of such items. Other than the differences in upfront transaction fees and ongoing shareholder servicing fees, each class of common shares has the same economic and voting rights.
Common Shares
The following table details the movement in the Company’s outstanding shares of common shares:
Three Months Ended September 30, 2023
Class IClass DClass STotal
June 30, 202364,339,3353,341,66265,427,741133,108,738
Common shares issued17,275,612504,13112,306,31130,086,054
Distribution reinvestment535,42727,355537,9021,100,684
Common shares repurchased(793,937)(8,134)(407,668)(1,209,739)
September 30, 202381,356,4373,865,01477,864,286163,085,737
Nine Months Ended September 30, 2023
Class IClass DClass STotal
December 31, 202231,668,2591,385,42143,401,68676,455,366
Common shares issued50,193,2922,656,68134,277,27687,127,249
Distribution reinvestment1,196,56660,7751,353,4622,610,803
Common shares repurchased(1,701,680)(237,863)(1,168,138)(3,107,681)
September 30, 202381,356,4373,865,01477,864,286163,085,737
Redeemable Common Shares
In connection with the Company’s payment of its Affiliate line of credit and management fee, the Adviser holds Class I Common Shares. See Note 8 – Debt for further details of the affiliate line of credit and Note 10 – Related Party Transactions for further details on the management fee. The Adviser and BO Lender have the ability to redeem the Class I shares for cash at their election, therefore the Company has classified these Class I shares as Redeemable common shares outside of equity on the Company’s Condensed Consolidated Balance Sheet. As of September 30, 2023 and December 31, 2022, we have issued 2,706,206 and 229,300 redeemable common shares, respectively.
The Redeemable common shares are recorded at the greater of (i) their issuance amount, or (ii) their redemption value, which is equivalent to the fair value of the shares at the end of each measurement period. Accordingly, the Company recorded an allocation adjustment of $127 and $269 during the three and nine months ended September 30, 2023, respectively.
Share and Unit Repurchases
The Company adopted a share repurchase plan whereby, subject to certain limitations, from January 2023 through June 30, 2023, shareholders could request, on a monthly basis, that the Company repurchase all or any portion of their shares. Shares were repurchased at a price equal to the transaction price on the applicable repurchase date, subject to any early repurchase deduction. For any shares held for less than one year, the Board waived the 2% penalty that would have otherwise applied to the redemption value to shareholders. The total amount of aggregate repurchases of Class S, Class D, and Class I shares (excluding any early repurchase deduction) was limited to 2% of the aggregate NAV per month (measured using the aggregate NAV as of the end of the immediately preceding month) and 5% of the aggregate NAV per calendar quarter (measured using the aggregate NAV as of the end of the immediately preceding quarter).
The Company adopted an amended and restated repurchase plan (the “Quarterly Repurchase Plan”) that was effective from July 1, 2023 through October 17, 2023. Under the Quarterly Repurchase Plan, the Company repurchased once per quarter no more than 5% aggregate NAV per calendar quarter (measured using the average aggregate NAV as of the end of the immediately preceding three months). The Company conducted such repurchase offers in accordance with the requirements of Rule 13e-4 promulgated under the Securities Exchange Act of 1934, as amended.
Other than as described for Redeemable Common Shares and Redeemable Non-Controlling Interests, the Company is not obligated to repurchase any shares and could choose to repurchase fewer shares than were requested to be repurchased, or none at all. Further, the Board may modify and suspend the Company’s share repurchase plan if it deems such action to be in the Company’s best interest and the best interest of its shareholders. In the event that the Company determined to repurchase some but not all of the shares submitted for repurchase during any month, shares repurchased at the end of the month would be repurchased on a pro rata basis.
For the three months ended September 30, 2023, the Company repurchased 1,209,739 shares of common shares and 0 OP Units for a total of $12,477 and $—, respectively. For the nine months ended September 30, 2023, the Company repurchased 3,107,681 shares of common shares and 2,158,725 OP Units for a total of $31,820 and $21,992, respectively. The Company had no unfulfilled repurchase requests during the nine months ended September 30, 2023. See Note 15 –Subsequent Events for more information about the Company’s share repurchase plan.
Distributions
The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net income as calculated in accordance with GAAP, to its shareholders each year to comply with the REIT provisions of the Internal Revenue Code. Each class of common shares receive the same gross distribution per share. 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 the applicable distributor.
The following table details the aggregate distributions declared for each applicable class of common shares:
Three Months Ended September 30, 2023
Class IClass DClass S
Aggregate gross distributions declared per share of common shares$0.1750 $0.1750 $0.1750 
Shareholder servicing fee per share of common shares— (0.0063)(0.0218)
Net distributions declared per share of common shares$0.1750 $0.1687 $0.1532 
Nine Months Ended September 30, 2023
Class IClass DClass S
Aggregate gross distributions declared per share of common shares$0.5250 $0.5250 $0.5250 
Shareholder servicing fee per share of common shares—(0.0189)(0.0651)
Net distributions declared per share of common shares$0.5250 $0.5061 $0.4599 
The Company has adopted a distribution reinvestment plan whereby shareholders will have their cash distributions automatically reinvested in additional common shares unless they elect to receive their distributions in cash. The per share purchase price for shares purchased pursuant to the distribution reinvestment plan will be equal to the transaction price at the time the distribution is payable. Shareholders will not pay an upfront transaction fee when purchasing shares pursuant to the distribution reinvestment plan. The ongoing servicing fees with respect to shares of Class D shares and Class S shares are calculated based on the NAV for those shares and may reduce the NAV.
Redeemable Non-controlling Interest
In connection with its performance participation interest, the Special Limited Partner holds Class I units in NLT OP. See Note 10 - Related Party Transactions for further details of the Special Limited Partner’s performance participation interest. Because the Special Limited Partner has the ability to redeem its Class I units for Class I shares in the Company or cash, at the election of the Special Limited Partner, the Company has classified these Class I units as Redeemable Non-controlling Interest in mezzanine equity on the Company’s Condensed Consolidated Balance Sheet.
The following table details the redeemable non-controlling interest activity related to the Special Limited Partner for the nine months ended September 30, 2023:
Nine Months Ended September 30, 2023
December 31, 2022
$1,657 
Settlement of prior performance participation allocation
10,638 
Repurchases— 
Conversion to Class I shares— 
GAAP income allocation(68)
Other comprehensive income75 
Distributions(292)
Fair value allocation346 
Reallocation between additional paid-in capital and non-controlling interests due to changes in NLT OP ownership82 
September 30, 2023
$12,438 
During the nine months ended September 30, 2023, the Company issued Class I units in NLT OP to the Special Limited Partner as payment of the performance participation allocation. No units were subsequently redeemed for cash or exchanged for Class I shares in the Company during the period.
The Redeemable Non-controlling Interests are recorded at the greater of (i) their carrying amount, adjusted for their share of the allocation of GAAP net income or loss and distributions, or (ii) their redemption value, which is equivalent to the fair value of such interests at the end of each measurement period. Accordingly, the Company recorded an allocation adjustment of $341 and $346 during the three and nine months ended September 30, 2023, respectively, between Additional Paid-in Capital and Redeemable Non-controlling Interest.
Share-Based Compensation
We awarded independent members of the Board 16,397 shares of restricted Class I shares subject to a vesting period of 13.5 months and recognized approximately $84 and $252 of compensation expense for the three and nine months ended September 30, 2023, respectively, related to these awards.