Summary of Significant Accounting Policies Revenue

12 Months Ended

Dec. 31, 2023

Entity Information [Line Items]

Summary of Significant Accounting Policies and Estimates

Summary of Significant Accounting Policies and Estimates

The Company believes the following significant accounting policies, among others, affect its more significant estimates and assumptions used in the preparation of the Consolidated Financial Statements.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with GAAP for annual financial information as established by the Financial Accounting Standards Board (“FASB”) in the Accounting Standards Codification (“ASC”) including modifications issued under Accounting Standards Updates (“ASUs”). The Consolidated Financial Statements include the accounts of the Company, the Company’s subsidiaries, and investments in which the Company has a controlling interest. All intercompany balances and transactions have been eliminated in consolidation.

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. Entities that do not qualify as VIEs are generally considered voting interest entities (“VOEs”) and are evaluated for consolidation under the voting interest model. VOEs are consolidated when the Company controls the entity through a majority voting interest or other means.

When the requirements for consolidation are not met and the Company has significant influence over the operations of the entity, the investment is accounted for under the equity method of accounting. Equity method investments for which the Company has not elected a fair value option are initially recorded at cost and subsequently adjusted for the Company’s pro-rata share of net income, contributions and distributions. Equity method investments for which the Company has elected a fair value option (“FVO”) are initially recorded at fair value and subsequently the changes in fair value are reported in earnings.

NLT OP is considered to be a VIE. 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.

For consolidated entities, the non-controlling partner’s share of the assets, liabilities, and operations of each entity is included in non-controlling interests as equity of the Company. The non-controlling partner’s interest is generally computed as the non-controlling interests’ ownership percentage. Any profits interest due to the other owner is reported within non-controlling interests.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Global macroeconomic conditions including the persistence of elevated inflation and interest rates, in conjunction with geopolitical uncertainty, including the ongoing hostilities between Russia and Ukraine and more recently the conflict and escalating tensions in the Middle East, continue to weigh on industry deal activity, and may have a negative impact on the Company and its investors.

The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of December 31, 2023. However, uncertainty over the current global economic environment and its impact on the Company’s operations may cause actual results to differ materially from those estimates.

Rental Revenue

The Company’s primary source of revenues is rental revenue, which is accounted for under the lease standard. Rental revenue primarily consists of fixed contractual base rent arising from tenant leases at our properties under operating leases or sales-type leases. Revenue under leases that are deemed probable of collection is recognized as revenue on a straight-line basis 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. Base rent arising from tenant leases at our properties is recognized on a straight-line basis over the life of the lease, including any rent steps or abatement provisions. For leases that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any tenant and deferred rent receivable balances charged as a direct write-off against rental revenue in the period of the change in the collectability determination. Our estimate of collectability includes, but is not limited to, factors such as the tenant’s payment history, financial condition, industry and geographic area. These estimates could differ materially from actual results.

Leases and Finance Receivables

Lessee

The Company accounts for its leases in accordance with ASC 842, Leases (“ASC 842”). We determine if an arrangement is a lease at contract inception. If there is an identified asset in the contract (either explicitly or implicitly) and the Company has control over its use, the contract is (or contains) a lease. As of the date of these financial statements, only one lease arrangement existed for the lease of land at one acquired property, for which the Company is the lessee.

Lease assets and liabilities are recognized based on the present value of future lease payments over the lease term at the commencement date. Included in the lease liability are future lease payments that are fixed, in-substance fixed, or payments based on an index or rate known at the commencement date of the lease. Variable lease payments are recognized as lease expenses as incurred. The operating lease right-of-use (“ROU”) asset also includes any lease payments made prior to commencement, initial direct costs incurred, lease incentives received and reflects the net favorable/unfavorable terms of the leases when compared with market terms (in the case of acquired leases). As of December 31, 2023 and 2022, the Company is the lessee in a single arrangement and that arrangement does not require third-party lease payments. Accordingly, no lease liability has been recognized. The Company recognized a right-of-use asset equal to the below-market lease intangible when this ground lease was acquired.

Lessor

The majority of the Company’s properties, consisting of land and buildings, are leased on a long-term triple-net basis with base terms typically ranging from 15 to 25 years with long-term renewal options, which provides that the tenants are responsible for the payment of most, if not all, property operating expenses during the lease term, including, but not limited to, property taxes, repairs and maintenance, insurance and capital expenditures. The Company records such expenses on a net basis. Some contracts may contain nonlease components (e.g., charges for management fees, common area maintenance, and reimbursement of third-party maintenance expenses) in addition to lease components (i.e., monthly rental charges). Services related to nonlease components are provided over the same period of time as, and billed in the same manner as, monthly rental charges. We do not segregate the lease components from the nonlease components when accounting for all asset classes. Since the lease component is the predominant component under each of these leases, combined revenues from both the lease and nonlease components are reported as rental revenues in the accompanying

consolidated statement of operations. Refer to the section titled “Rental Revenue” for policies regarding the assessment of the collectability of rent payments from lessees.

A lease is classified as an operating lease if none of the following criteria are met: (i) ownership transfers to the lessee at the end of the lease term, (ii) the lessee has a purchase option that is reasonably certain to be exercised, (iii) the lease term is for a major part of the economic life of the leased property, (iv) the present value of the future lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the leased property, and (v) the leased property is of such a specialized nature that it is expected to have no future alternative use to the Company at the end of the lease term. If one or more of these criteria are met, the lease will generally be classified as a sales-type lease, unless the lease contains a residual value guarantee from a third party other than the lessee, in which case it would be classified as a direct financing lease under certain circumstances.

The Company executed several sale-leaseback transactions with third-party lessees in which the Company entered into contracts to acquire an asset and then subsequently leased the asset back to the seller. For these transactions, the Company must determine whether control of the asset has transferred to the Company. In instances in which it is determined that control has transferred, the leases from the sale-leaseback transaction are accounted for as operating leases. When sale-leaseback transactions are accounted for as operating leases, the Company evaluates whether an above- or below-market lease exists. These amounts are then bifurcated on a stand-alone basis and accounted for as a loan receivable or prepaid rent liability. The Company did not recognize any net sale-leaseback gains during the year ended December 31, 2023 and from the period from inception through ended December 31, 2022. In cases whereby it is determined control has not transferred to the Company, we do not recognize the underlying asset but instead recognize a financial asset in accordance with ASC 310 – Receivables (“ASC 310”). The accounting for the financing receivable under ASC 310 is materially consistent with the accounting for a net investment in sales-type lease under ASC 842. We generally invest in facilities that we believe are critical to a tenant’s business and therefore we expect to have a lower risk of tenant default. During the year ended December 31, 2023, the Company recognized $9,033 of impairment charges related to the lease intangibles of one tenant, Mountain Express, for which the leases were rejected by the presiding bankruptcy court in August 2023. During the year ended, December 31, 2022, no impairments were recorded and no leases were determined to be uncollectible. As such, no allowance in accordance with ASC 310 has been recorded. Interest income on Investment in leases - Financing receivables is recognized under the effective yield method and recorded as Income from investments in leases - Financing receivables. Generally, we would recognize interest income to the extent the tenant is not more than 90 days delinquent on their rental obligations. We have concluded certain leased properties are required to be accounted for as an Investment in leases - Financing receivables, net on our Consolidated Balance Sheet in accordance with ASC 310, since control of the underlying assets was not considered to have transferred to the Company under GAAP given the significant initial term of the lease, ranging from 39 to 99 years.

Investments in Real Estate

In accordance with the guidance for business combinations, the Company determines whether the acquisition of a property qualifies as a business combination, which requires that the assets acquired and liabilities assumed constitute a business. If the property acquired does not constitute a business, the Company accounts for the transaction as an asset acquisition. The guidance for business combinations states that when substantially all of the fair value of the gross assets to be acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the asset or set of assets is not a business. All property acquisitions to date have been accounted for as asset acquisitions.

Whether the acquisition of a property acquired is considered a business combination or asset acquisition, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquired entity. In addition, for transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase. The Company expenses acquisition-related costs associated with business combinations as they are incurred. The Company capitalizes acquisition-related costs associated with asset acquisitions.

Upon acquisition of a property, the Company assesses the fair value of acquired tangible and intangible assets (including land, buildings, tenant improvements, “above-market” and “below-market” leases, acquired in-place leases, other identified intangible assets and assumed liabilities) and allocates the purchase price to the acquired assets and assumed liabilities. The Company assesses and considers fair value based on estimated 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 a number of 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 construction in process. The Company records acquired

above-market 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. The Company also considers an allocation of purchase price of other acquired intangibles, including acquired in-place leases.

Intangible lease assets and intangible lease liabilities are recorded as Intangible assets, net and a component of Other liabilities, respectively, on the Company’s Consolidated Balance Sheet. The amortization of acquired above and below-market leases, and lease inducements is recorded as an adjustment to Rental Revenue on the Company’s Consolidated Statement of Operations. The amortization of in-place leases and other lease intangibles is recorded as an adjustment to Depreciation and amortization expense on the Company’s Consolidated Statement 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 stated at cost and are generally depreciated on a straight-line basis over the estimated remaining useful lives of the assets as follows:

Description	Depreciable Life
Buildings	12 - 50 years
Land improvements	1 - 4 years
In-place lease intangibles	9 - 24 years
Other lease intangibles (1)	Over lease term

(1)    Other lease intangibles primarily includes above and below market leases, lease inducements, and lease commissions.

For the year ended December 31, 2023, and the period from Inception through December 31, 2022, depreciation expense was $65,024 and $9,003, respectively.

Significant improvements to properties are capitalized. Repairs and maintenance are expensed to operations as incurred and are included in Rental property operating expenses on the Company’s Consolidated Statement of Operations.

The Company capitalizes certain costs related to the development of real estate, including pre-construction costs, real estate taxes, insurance, construction costs, and salaries and related costs of personnel directly. Additionally, we capitalize interest costs related to development activities. Capitalization of these costs begin when the activities and related expenditures commence and cease when the project is substantially complete and ready for its intended use at which time the project is placed in service and depreciation commences. Interest costs capitalized for the year ended December 31, 2023 and the period from Inception through December 31, 2022 was approximately $17,346 and $6,007, respectively. Additionally, we make estimates as to the probability of completion of development, and we expense all capitalized costs which are not recoverable.

The Company reviews its real estate properties for impairment each quarter or when there is an event or change in circumstances that indicates an impaired value. If the GAAP depreciated cost basis of a real estate investment exceeds the undiscounted cash flows of such real estate investment, the investment is considered impaired and the GAAP depreciated cost basis is reduced to the fair value of the investment. The impairment loss is recognized based on the excess of the carrying amount of the asset over its fair value. The evaluation of anticipated future cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Since cash flows on real estate properties considered to be “long-lived assets to be held and used” are considered on an undiscounted basis to determine whether an asset has been impaired, the Company’s strategy of holding properties over the long-term directly decreases the likelihood of recording an impairment loss. If the Company’s strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material to the Company’s results. If the Company determines that an impairment has occurred, the affected assets must be reduced to their fair value.

The valuation and possible subsequent impairment of real estate properties is a significant estimate that can and does change based on the Company’s continuous process of analyzing each real estate property’s economic condition at a point in time and reviewing assumptions about uncertain inherent factors, including observable inputs such as contractual revenues and unobservable inputs such as forecasted revenues and expenses, estimated net disposition proceeds, and discount rates. These unobservable inputs are based on a real estate property’s market conditions and expected growth rates. It may be difficult to reflect fully and accurately rapidly changing market conditions or material events that may impact the value of our investments in real estate between valuations, or to obtain complete information regarding any such events in a timely manner. Changes in economic and operating conditions and the Company’s ultimate investment intent that occur subsequent to the impairment analyses could impact these assumptions and result in additional impairment of the real estate properties. None of the Company’s properties were impaired during the years ended December 31, 2023 or 2022.

Investments in Unconsolidated Real Estate Affiliates

The Company evaluates its equity method investments on a periodic basis to determine if there are any indicators that the value of our equity investment may be impaired and whether or not that impairment is other-than-temporary. To the extent an impairment has occurred and is determined to be other-than-temporary, the Company measures the charge as the excess of the carrying value of our investment over its estimated fair value, which is determined by calculating our share of the estimated fair market value of the underlying net assets based on the terms of the applicable partnership or joint-venture agreement. For equity investments in entities that hold real estate, the estimated fair value of the underlying investment’s real estate is calculated based on whether the acquisition of a property qualifies as a business combination or an asset acquisition. The fair value of the underlying investment’s debt, if any, is calculated based on market interest rates and other market information. The fair value of the underlying investment’s other financial assets and liabilities have fair values that generally approximate their carrying values.

The Company has elected the FVO for certain of its investments in unconsolidated real estate affiliates, as such election aligns the accounting for GAAP and the calculation of monthly NAV for these investments. The Company therefore reports these investments at fair value in Investments in unconsolidated real estate affiliates on the Consolidated Balance Sheet. Changes in the fair value of equity method investments under the FVO are recorded as Income from unconsolidated real estate affiliates in the Consolidated Statement of Operations.

Distributions received from equity method investments are classified using the nature of distributions approach. Distributions received are classified based on the nature of the activity or activities that generated the distribution as a return on the investment, which are classified as cash inflows from operating activities, or a return of investment, which are classified as cash inflows from investing activities. Transaction costs associated with the equity method investments are expensed as incurred. Investments made, including the transaction costs, for equity method investments are classified as cash outflows from investing activities in the Consolidated Statement of Cash Flows.

Investments in Real Estate Debt

The Company’s investments in real estate debt consists of securities and loans. The Company has elected to classify its real estate debt securities as available for sale and carry such investments at fair value. As such, the resulting unrealized gains and losses of such securities are recorded as a component of Unrealized Gain/(Loss) on investments on the Company’s Consolidated Statement of Comprehensive Income (Loss).

The Company uses the specific identification method to determine the cost basis of a debt security sold and to reclassify amounts from Company’s Consolidated Statement of Comprehensive Income (Loss) for such securities. Realized gains and losses from the sale of investments are included within Other income (expense) in our Consolidated Statement of Operations.

The Company elected the fair value option (“FVO”) for its investments in loans, as such election aligns the accounting for GAAP and the calculation of monthly NAV for these investments. As such, the resulting unrealized gains and losses of such loans are recorded as a component of Income/(Loss) from Investments in Real Estate Debt on the Company’s Consolidated Statement of Operations.

Interest income from the Company’s investments in real estate debt is recognized over the life of each investment using the effective interest method and is recorded on the accrual basis. Recognition of premiums and discounts associated with these investments is deferred and recorded over the term of the investment as an adjustment to yield.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities at date of purchase of three months or less to be cash equivalents, which are stated at cost and approximates fair value.

Restricted Cash

As of December 31, 2023 and 2022, the restricted cash balances of $77,583 and $104,346, respectively, primarily consist of loan proceeds held in escrow as construction in process reserves related to mortgages at certain of our properties.

Foreign Currency

In the normal course of business, the Company makes investments in real estate outside the United States (“U.S.”) through subsidiaries that have a non-U.S. dollar functional currency. Non-U.S. dollar denominated assets and liabilities of these foreign subsidiaries are translated to U.S. dollars at the prevailing exchange rate at the reporting date and income, expenses, gains, and losses are translated at the average exchange rate over the applicable period. Cumulative translation adjustments arising from the translation of non-U.S. dollar denominated assets and liabilities are recorded in Other Comprehensive Income (Loss).

Organization and Offering Costs

Organization costs are expensed as incurred and recorded as a component of General and administrative expense on the Company’s Consolidated Statement of Operations and offering costs are charged to equity as such amounts are incurred.

The Adviser agreed to advance all of the organization and offering costs on behalf of the Company (including legal, marketing, due diligence, administrative, accounting, design and website expenses, fees and expenses of our escrow agent and transfer agent, and other expenses attributable to the Company’s organization, but excluding ongoing servicing fees) through September 1, 2023. Such costs are recorded as a component of Due to affiliates on the Company’s Consolidated Balance Sheet and are being reimbursed to the Adviser pro rata over 60 months as of September 1, 2023. As of December 31, 2023 and 2022, the Company had accrued $11,919 and $6,369 of organizational and offering costs, respectively.

Blue Owl Securities LLC (the “Dealer Manager”), an affiliate of the Adviser, serves as the dealer manager for the Private Offering. No upfront selling fees will be paid to the Company or Dealer Manager with respect to the Class S, Class D and Class I shares, however, for Class S shares or Class I shares that are purchased through certain financial intermediaries, those financial intermediaries may directly charge transaction or other fees, including upfront placement fees or brokerage commissions, limited to a percent of the transaction price. The Dealer Manager is entitled to receive a shareholder servicing fee of 0.85% and 0.25% per annum of the aggregate NAV of the Company’s outstanding Class S shares and Class D shares, respectively. There is no ongoing servicing fee for the Class I shares.

The following details the selling commissions, dealer manager fees, and shareholder servicing fees for each applicable share class as of December 31, 2023:

	Class S	Class D	Class I
Transaction fees (% of transaction price)	up to 3.50%	up to 1.50%	—	%
Shareholder servicing fees (% of NAV)	0.85%	0.25%	—	%

Income Taxes

The Company operates in a manner to qualify as a REIT for U.S. federal income tax purposes commencing with the year ending December 31, 2022. As a REIT, the Company is entitled to a tax deduction for some or all of its dividends paid to stockholders. Accordingly, the Company generally will not be subject to federal income taxes as long as it currently distributes to stockholders an amount equal to or in excess of the Company’s taxable income. Under the Code, REITs are subject to numerous organizational and operational requirements, including a requirement that they distribute each year at least 90% of their REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. If the Company fails to qualify as a REIT in any taxable year, without the benefit of certain relief provisions, the Company will be subject to federal and state income tax on its taxable income at regular corporate tax rates. Additionally, the Company would be disqualified from taxation as a REIT for the four taxable years following the year during which the Company ceased to qualify as a REIT. Even if the Company qualifies as a REIT for federal income tax purposes, it may still be subject to state and local taxes on its income and assets and to federal income and excise taxes on its undistributed income.

The Company operates its DST Program through a wholly-owned taxable REIT subsidiary (“TRS”). The TRS is subject to taxation at the federal, state and local levels, as applicable. Fees earned by the Company’s subsidiaries through the program are recorded in the TRS along with any corresponding expenses.

We account for deferred income taxes using the asset and liability method and recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns. Under this method, we determine deferred tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Any increase or decrease in the deferred tax liability that results from a change in circumstances, and that causes us to change our judgment about expected future tax consequences of events, is included in the tax provision when such changes occur. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards. A valuation allowance is provided if we believe it is more likely than not that all or some portion of the deferred tax asset will not be realized. Any increase or decrease in the valuation allowance that results from a change in circumstances, and that causes us to change our judgment about the realizability of the related deferred tax asset, is included in the tax provision when such changes occur. As of December 31, 2023, no valuation allowance is provided against the deferred tax assets. We believe it is more-likely than-not that the Company will realize the benefits of these deductible differences.

We recognize the tax benefit from an uncertain tax position claimed or expected to be claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. We recognize interest and penalties, if applicable, related to uncertain tax positions as part of income tax benefit or expense in our Consolidated Statements of Income. For the year ended December 31, 2023, the Company did not record any adjustments related to its accounting for uncertain tax provisions.

Fair Value Measurements

The carrying amounts of cash and cash equivalents and accounts payable and accrued expenses reasonably approximate fair value, in the Company’s judgment, because of their short-term nature.

In accordance with ASC 820, Fair Value Measurement, the Company defines fair value based on the price that would be received upon sale of an asset or the exit price that would be paid to transfer or settle a liability in an orderly transaction between market participants at the measurement date. The Company uses a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of the three broad levels described below:

•Level 1 — Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

•Level 2 — Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed.

The Company has estimated the fair value of its financial instruments and non-financial assets using available market information and valuation methodologies we believe to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of amounts that would be realized upon disposition.

Valuation of assets and liabilities measured at fair value

The Company’s investments in real estate debt and FVO equity method investments are reported at fair value. As of December 31, 2023, the Company’s investments in real estate debt, directly or indirectly, consisted of commercial mortgage-backed securities (“CMBS”), which are securities backed by one or more mortgage loans secured by real estate assets, as well as a commercial real estate loan. The Company generally determines the fair value of its investments in real estate debt by utilizing third-party pricing service providers whenever available.

In determining the fair value of a particular investment, pricing service providers may use broker-dealer quotations, reported trades or valuation estimates from their internal pricing models to determine the reported price. The pricing service providers’ internal models for securities such as real estate debt generally consider the attributes applicable to a particular class of the security (e.g., credit rating, seniority), current market data, and estimated cash flows for each security, and incorporate specific collateral performance, as applicable. Certain of the Company’s investments in real estate debt are unlikely to have readily available market quotations. In such cases, the Company will generally determine the initial value based on the acquisition price of such investment if acquired by the Company or the par value of such investment if originated by the Company. Following the initial measurement, the Company will determine fair value by utilizing or reviewing certain of the following: (i) market yield data, (ii) discounted cash flow modeling, (iii) collateral asset performance, (iv) local or macro real estate performance, (v) capital market conditions, (vi) debt yield or loan-to-value ratios, and (vii) borrower financial condition and performance. Refer to Note 5 - Investments in Real Estate Debt for additional details on the Company’s investments in real estate debt.

The Company has elected the FVO for certain of its investments in unconsolidated real estate affiliates and therefore, reports these investments at fair value. The Company estimates the fair market value of these investments based on its share of the investments’ equity at fair value. The investments’ underlying real estate holdings and debt are valued on a recurring basis using unobservable inputs (Level 3 inputs). The fair value of the underlying real estate holdings is generally determined using the income capitalization valuation method. As of December 31, 2023, the weighted average capitalization rate utilized was 7.3%. The fair value of the underlying debt is determined by discounting the future contractual cash flows to the present value using current market interest rates. As of December 31, 2023, the weighted average interest rate utilized was 6.6%.

The Company’s derivative financial instruments are reported at fair value and consist of interest rate and foreign currency contracts. The fair values of the Company’s interest rate and foreign currency contracts were estimated using advice from a third-party derivative specialist, based on cash flows and observable inputs comprising of yield curves, foreign currency rates, and credit spreads (Level 2 inputs). Fair value information relating to derivative financial instruments is provided in Note 9 - Derivative Financial Instruments.

The Company has elected to account for the DST financing obligation arising from repurchase option on the sale of DST interests to third parties through the Company’s DST Program at fair value. The fair value of the Company’s DST Program obligation is determined based on changes in fair value of the underlying assets held by the DST interests as well as undistributed earnings related to DST interests owned by third parties.

The following table details the Company’s assets measured at fair value on a recurring basis:

	December 31, 2023						December 31, 2022
	Level 2		Level 3		Total		Level 2		Level 3		Total
Assets:
Investments in unconsolidated real estate affiliates	$	—	$	699,570	$	699,570	$	—	$	—	$	—
Investments in real estate debt	30,974		56,235		87,209		23,816		50,000		73,816
Interest rate hedging derivatives	6,945		—		6,945		11,766		—		11,766
Foreign currency hedging derivatives	5,065		—		5,065		—		—		—
Total	$	42,984	$	755,805	$	798,789	$	35,582	$	50,000	$	85,582
Liabilities:
Interest rate hedging derivatives	$	4,651	$	—	$	4,651	$	—	$	—	$	—
Foreign currency hedging derivatives	6,820		—		6,820		—		—		—
DST Financing obligation	—		13,694		13,694		—		—		—
Total	$	11,471	$	13,694	$	25,165	$	—	$	—	$	—

The Company has a repurchase option related to a security included within Investment in real estate debt, which is stated at cost in Other liabilities and approximates fair value.

The following table details the Company’s assets and liabilities measured at fair value on a recurring basis using Level 3 inputs:

	Investments in real estate debt		Investments in unconsolidated real estate affiliates		Total Assets		DST Financing Obligation
Balance as of December 31, 2022	$	50,000	$	—	$	50,000	$	—
Purchases	18,838		738,013		756,851		—
Sales	(12,603)		—		(12,603)		—
Distributions received	—		(52,420)		(52,420)		—
DST Program proceeds	—		—		—		13,659
Included in net income
Unrealized loss on sale of DST interests included in Other income, net	—		—		—		35
Income from unconsolidated real estate affiliates measured at fair value	—		13,977		13,977		—
Balance as of December 31, 2023	$	56,235	$	699,570	$	755,805	$	13,694

The commercial real estate loan is categorized in Level 3 of the fair value hierarchy. As of December 31, 2023, the change in value of the investment is immaterial. The Company did not hold any Investments in real estate debt or Investments in unconsolidated affiliates measured at fair value on a recurring basis for the period from Inception through December 31, 2022.

Valuation of assets measured at fair value on a nonrecurring basis

Certain of the Company’s assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments, such as when there is evidence of impairment, and therefore such assets are measured at fair value on a nonrecurring basis. The Company reviews its real estate properties for impairment each quarter and when there is an event or change in circumstances that could indicate the carrying amount of the real estate value may not be recoverable. During the year ended December 31, 2023, the Company recognized $9,033 of impairment charges on intangible assets related to one tenant, Mountain Express, for which the leases were rejected by the presiding bankruptcy court in August 2023. The estimated fair value of such assets as of December 31, 2023 was $0.00. The Company did not recognize any impairment during the period from Inception through December 31, 2022.

Valuation of liabilities not measured at fair value

As of December 31, 2023 and December 31, 2022, the fair value of the Company’s unsecured term loan credit facility, unsecured revolving credit facility, and mortgages payable was $2,666 below carrying value and $512 above carrying value, respectively. Fair value of the Company’s indebtedness is estimated by modeling the cash flows required by the Company’s debt agreements and discounting them back to the present value using an estimated market yield. Additionally, the Company considers current market rates and conditions by evaluating similar borrowing agreements with comparable loan-to-value ratios and credit profiles. The inputs used in determining the fair value of the Company’s indebtedness are considered Level 3. Fair value information pertaining to debt is provided in Note 8 – Debt.

Allowance for credit losses

The allowance for credit losses, which is recorded as a reduction to Investment in leases - Financing receivables, net on our Consolidated Balance Sheet was measured, considers the Company’s ownership of the leased asset given the nature of failed sale-leaseback transaction and sales-type leases accounted for as financing receivables, using a probability of default method based on the lessee’s respective credit ratings, the expected value related to releasing underlying assets or collateral, our historical loss experiences, and other factors related to other sale-leasebacks accounted for as financing receivables. Included in our model are factors that incorporate forward-looking information. Changes in the allowance for credit losses are subsequently included in the Company’s Consolidated Statements of Operations within General and administrative expenses. As of December 31, 2023, the Company has recorded an allowance for credit losses of $16,638.

Deferred Financing Fees

In accordance with ASC 835, Interest, the Company defers fees and direct costs incurred to obtain financing. Deferred financing costs are amortized to expense using the straight-line method, which approximates the effective interest method, over the term of the loan to which they apply. Unamortized deferred financing costs are charged to interest expense when the related financing is repaid prior to its scheduled maturity date.

Derivatives and Hedging Activities

The Company uses derivative financial instruments to limit exposure to changes in interest rates, primarily on variable interest rate debt, as well as the impact of foreign currency exchange rates on our foreign operations. We do not use derivative instruments for speculative or trading purposes. The Company’s derivative financial instruments are recorded at fair value on the Consolidated Balance Sheet in Other assets and Other liabilities, as applicable.

The accounting for changes in the fair value of a derivative varies based on the intended use of the derivative, whether the election has been made to designate a derivative as a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the necessary criteria.

Earnings Per Share

Basic net income per common share is determined by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the period. All classes of common shares are allocated net income/(loss) at the same rate per share and receive the same gross distribution per share.

Share-Based Compensation

We compensate each of our non-employee trustees on the Board who are not affiliated with Blue Owl with an annual retainer of restricted Class I shares as part of their compensation for services on the Board. See Note 12 - Equity and Non-Controlling Interest for additional information regarding share-based compensation. We recognize compensation expense related to share-based awards to our independent trustees in our consolidated financial statements based on the fair value of the award on the date of grant.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). Topic 326 replaces the “incurred loss” model with an “expected loss” model, resulting in the earlier recognition of credit losses even if the risk of loss is remote. This standard applies to financial assets measured at amortized cost and certain other instruments, including loans receivable and net investments in direct financing leases. This standard does not apply to receivables arising from operating leases, which are within the scope of ASU 2016-02, Leases (Topic 842).

The Company adopted Topic 326 on January 1, 2023 using the modified retrospective method, which requires applying changes in loss reserves through a cumulative-effect adjustment to retained earnings. Upon adoption, the Company recorded a reserve of $7,157, which is reflected as a cumulative net decrease in accumulated earnings (deficit) and cumulative distributions and non-controlling interests within our Consolidated Statement of Changes in Equity.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides relief that, if elected, will provide less accounting analysis and less accounting recognition for modifications related to reference rate reform. ASU 2020-04 was available to be adopted upon issuance. The relief provided by ASU 2020-04 is considered temporary in nature and has been deferred until December 31, 2024 by ASU 2022-06. This is meant to coincide with the period that global financial markets transition away from reference rates that will cease to exist, as the LIBOR is expected to be phased out by the end of 2024. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”). ASU 2021-01 clarifies that the practical expedients in ASU 2020-04 apply to derivatives impacted by changes in the interest rate used for margining, discounting, or contract price alignment. During the six-months ended June 30, 2023, the Company elected the practical expedient provided under ASU 2020-04 and modified certain of its mortgages and derivative agreements that had terms based on LIBOR to utilize SOFR as the replacement reference rate for LIBOR. As of December 31, 2023, this reference rate transition only impacted our mortgages, as described in Note 8 – Debt. The adoption of these standards did not have a material impact on our Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

The Company considers the applicability and impact of all accounting standards and pronouncements issued by the FASB. Accounting standards and pronouncements not yet adopted were assessed and determined to be either not

applicable or are expected to have minimal impact on the Company’s results of operations, financial position and cash flows.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The amendments in ASU 2023-07 are meant to improve reportable segment disclosure requirements through enhanced disclosures in order to enable investors to better understand an entity’s overall performance and better assess the entity’s future cash flows. The enhanced disclosures include the disclosure of significant segment expenses as well as the expansion of interim disclosure requirements to require nearly all of the annual segment disclosures. Significant segment expenses are those that are significant to the segment, regularly provided to or easily computed from information regularly provided to the chief operating decision maker (CODM), and included in the reported measure of segment profit or loss. The ASU is effective for public companies for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024. The ASU should be adopted on a retrospective basis unless it is impracticable to do so. Early adoption is permitted, including in an interim period. The Company is currently assessing the impact of adopting the standard on the Company's financial statement disclosures.

Oak Street Real Estate Capital Fund IV and V Acquired Predecessor Portfolio

Entity Information [Line Items]

Summary of Significant Accounting Policies and Estimates

Summary of Significant Accounting Policies

Revenue Recognition

Rental revenue consists of fixed contractual base rent arising from tenant leases at Predecessor properties under operating leases. Revenue under operating leases that are deemed probable of collection is recognized as revenue on a straight-line basis over the non-cancelable term of the related leases. The Predecessor begins to recognize revenue upon the acquisition of the related property or when a tenant takes possession of the leased space.

Certain Operating Expenses

A majority of the properties in the Predecessor are leased on a long-term triple-net basis, which provides that the tenants are responsible for the payment of most, if not all, property operating expenses during the lease term, including, but not limited to, property taxes, repairs and maintenance and insurance. Such payments are made by the lessee directly to third parties, and as such, Management records such expenses on a net basis. Operating expenses represent the direct expenses of operating the Predecessor properties that are expected to continue in the ongoing operations of the Predecessor. Property operating expenditures are charged to operations as incurred.

Use of Estimates

The preparation of the Statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period presented. The estimates, judgments and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.