10-Q

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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 June 30, 2025


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to _______

Commission File Number 000-56536

Fortress Net Lease REIT

(Exact name of registrant as specified in its charter)


Maryland		92-1937121
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

     1345 Avenue of the Americas
New York, NY

     10105

     (Address of principal executive offices)

     (Zip Code)

Registrant’s telephone number, including area code: (212) 798-6100

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

     Title of each class:

     Trading Symbol(s):

     Name of each exchange on which 
registered:

     N/A

     N/A

     N/A

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 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.


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 August 13, 2025, the issuer had the following shares outstanding: 6,907,992 Class I shares, 13,192,268 Class F-S shares, 61,472,834 Class F-I shares, 37,453,432 Class D-S shares and 2,492,405 Class E shares.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements, which relate to future events or the future performance or financial condition of Fortress Net Lease REIT (the “Company,” “we,” “us,” or “our”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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:

•

our future operating results;

•

our business prospects and the prospects of the assets in which we may invest;

•

the impact of the investments that we expect to make;

•

our ability to raise sufficient capital to execute our investment strategy;

•

our ability to source adequate investment opportunities to efficiently deploy capital;

•

our current and expected financing arrangements and investments;

•

the effect of global and national economic and market conditions generally upon our operating results, including, but not limited to, changes with respect to inflation, interest rate changes and supply chain disruptions, and changes in government rules, regulations and fiscal policies;

•

the adequacy of our cash resources, financing sources and working capital;

•

the timing and amount of cash flows, distributions and dividends, if any, from our investments;

•

our contractual arrangements and relationships with third parties;

•

actual and potential conflicts of interest with FNLR Management LLC, a Delaware limited liability company (the “Adviser”), or any of its affiliates;

•

the dependence of our future success on the general economy and its effect on the assets in which we may invest;

•

our use of financial leverage;

•

the ability of the Adviser to locate suitable investments for us and to monitor and administer our investments;

•

the ability of the Adviser or its affiliates to attract and retain highly talented professionals;

•

our ability to structure investments in a tax-efficient manner and the effect of changes to tax legislation and our tax position; and

•

our tax status and the tax status and attributes of entities and assets in which we may invest.

In addition, forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “target,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology, although not all forward-looking statements include these words. 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,” “Item 2. Financial Information—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Annual Report”) filed with the Securities and Exchange Commission (the “SEC”) on March 28, 2025 and Part II. Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025, filed with the SEC on May 13, 2025. Other factors that could cause our actual results to differ materially include:

•

changes in the economy, particularly those affecting the real estate industry;

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•

risks associated with possible disruption in our operations or the economy generally due to terrorism, natural disasters, epidemics or other events having a broad impact on the economy;

•

investing in commercial real estate assets involves certain risks, including but not limited to: tenants’ inability to pay rent; increases in interest rates and lack of availability of financing; tenant turnover and vacancies; and changes in supply of or demand for similar properties in a given market;

•

adverse conditions in the areas where our investments or the properties underlying such investments are and may be located and local real estate conditions;

•

limitations on our business and our ability to satisfy requirements to maintain our exclusion from registration under the Investment Company Act of 1940, as amended, or to maintain our qualification as a real estate investment trust (a “REIT”), for U.S. federal income tax purposes;

•

certain economic events may cause our shareholders to request that we repurchase their shares, and if we decide to satisfy any or all of such requests, our cash flow and our results of operations and financial condition could be materially adversely affected. Further, our board of trustees may make exceptions to, modify or suspend our share repurchase plan (including to make exceptions to the repurchase limitations or purchase fewer shares than such repurchase limitations) if it deems such action to be in our best interest;

•

distributions are not guaranteed and may be funded from sources other than cash flow from operations, including, without limitation, borrowings, offering proceeds (including from sales of our shares or units of our Operating Partnership (as defined below)), and the sale of our assets, and we have no limits on the amounts we may fund from such sources;

•

the purchase and repurchase prices for our shares are generally based on our prior month’s net asset value (“NAV”) and are not based on any public trading market. The Adviser will value our properties monthly, based on current material market data and other information deemed relevant, subject to the review and confirmation for reasonableness by our independent valuation advisor. The valuation of properties is inherently subjective and our NAV may not accurately reflect the actual price at which our properties could be liquidated on any given day;

•

future changes in laws or regulations and conditions in our operating areas;

•

our limited opportunities to increase rents under long-term leases with tenants;

•

our ability to raise additional funds to enable us to make additional investments and diversify the risk profile of our portfolio;

•

our ability to capitalize on potential investment opportunities, or identify and purchase suitable properties on attractive terms;

•

our ability to integrate newly acquired investments into our existing portfolio or otherwise effectively manage our assets or growth;

•

our ability to accurately identify or adequately evaluate potential risks in volatile investing environments with limited market liquidity or price transparency;

•

the impact of macroeconomic and/or microeconomic developments on our tenants and potential tenants;

•

risks associated with the construction and renovation of our properties;

•

our ability to adequately maintain properties in accordance with the terms of the applicable leases or agreements;

•

the advent of any future epidemics, pandemics, or any other public health crises;

•

risks associated with the termination or expiration of leases and tenant defaults, which may be further exacerbated in the case whereby a single tenant is the counterparty to more than a single property;

•

risks associated with our use of single master leases and the enforceability of any such master leases under applicable law and/or in bankruptcy proceedings;

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•

risks associated with investing outside of the United States;

•

the incurrence of contingent liabilities as a result of our investments, including our assumption of default risk or other third-party risks;

•

our use of financing arrangements, including seller financing, secured and unsecured leveraged and other one-off financing solutions, could subject us to financial covenants and other covenants that could restrict our operations;

•

our ability to forecast correlations between the value of our portfolio and the direction of exchange rates, interest rates and the price of securities in order to effectively or appropriately mitigate risks associated with our investments;

•

risks associated with our hedging program, including our use of options and forward trading;

•

our ability to accurately predict the pre-determined fixed repurchase price vis-à-vis the fair value of a property as of a future date;

•

certain risks associated with limitations on our remedies under bankruptcy laws;

•

our limited rights and liquidity associated with our investments in non-controlling equity positions and other real-estate related interests;

•

system failures and cybersecurity breaches;

•

substantial compliance costs that may be required to meet the constantly evolving legal and regulatory landscape for data protection and privacy;

•

competition in our markets, which may prevent our ability to increase the occupancy and rental rates of our properties;

•

potential misconduct and unauthorized conduct from third-party providers;

•

substantial capital expenditures that may be required to comply with regulations and/or to obtain necessary permits and licenses to invest in certain properties;

•

our ability to maintain our qualification as a REIT requires us to annually distribute at least 90% of our taxable income, and therefore, we may not be able to fund future capital needs, including financing for acquisitions, from our operating cash flow, and may need to rely on third-party sources for capital;

•

our properties and properties underlying our investments may have design, construction or other defects or problems that require unforeseen capital expenditures, special repair or maintenance expenses, or the payment of damages to third parties, which may also affect their valuations;

•

compliance with state and local laws, statutes, regulations and ordinances relating to pollution, the protection of the environment and human health and safety;

•

our ability to obtain insurance for our properties at competitive market rates;

•

any limitations on our recourse under purchase and sale agreements to acquire properties;

•

risks associated with joint ventures;

•

risks associated with litigation or threatened litigation for damages that occur on, or liabilities derived from, the acquisition, ownership and disposition of our properties;

•

risks associated with our relationship with Fortress Investment Group LLC, a Delaware limited liability company (“Fortress”), and the Adviser; and

•

changes to United States federal income tax laws.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions

iii

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could also be inaccurate. In light of these and other uncertainties, the inclusion of a 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.

You should read this Form 10-Q and the documents that we reference herein and have filed as exhibits hereto with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Form 10-Q, whether as a result of any new information, future events or otherwise.

For more information regarding these and other risks and uncertainties that we face, see the section entitled “Item 1A. Risk Factors” in our Annual Report, Part II. Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025, filed with the SEC on May 13, 2025 and any such updated factors included in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this document (or our other filings).

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PART I - FINANCIAL INFORMATION		1
	ITEM 1. FINANCIAL STATEMENTS	1
	Condensed Consolidated Financial Statements (Unaudited):	1
	Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024	1
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2025 and 2024	2
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2025 and 2024	3
	Condensed Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2025 and 2024	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	29
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	43
	ITEM 4. CONTROLS AND PROCEDURES	45
PART II - OTHER INFORMATION		46
	ITEM 1. LEGAL PROCEEDINGS	46
	ITEM 1A. RISK FACTORS	46
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	47
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES.	48
	ITEM 4. MINE SAFETY DISCLOSURES	48
	ITEM 5. OTHER INFORMATION	48
	ITEM 6. EXHIBITS	49
SIGNATURES		50

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Fortress Net Lease REIT

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except per share data)


Assets	June 30, 2025			December 31, 2024
Investments in real estate, net	$	1,572,287		$	1,143,748
Intangible assets, net		315,607			207,574
Cash and cash equivalents		5,509			127,225
Restricted cash		45,810			87,737
Other assets		42,482			22,237
Total assets	$	1,981,695		$	1,588,521

Liabilities and Equity
Liabilities
Subscriptions received in advance		41,689			80,573
Due to affiliate		28,143			17,868
Revolving credit facility		622,000			562,500
Term loan, net		180,897			121,154
Distribution payable		6,770			4,260
Other liabilities		14,463			26,361
Total liabilities	$	893,962			812,716

Commitments and contingencies (Note 11)
Redeemable common stock (Note 8)		26,062			5,479
Redeemable non-controlling interests (Note 8)		4,257			—

Equity
Common stock - Class I shares, $0.01 par value per share, 5,506 and 0 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively		54			—
Common stock - Class F-S shares, $0.01 par value per share, 10,164 and 2,988 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively		102			30
Common stock - Class F-I shares, $0.01 par value per share, 58,645 and 40,463 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively		588			405
Common stock - Class D-S shares, $0.01 par value per share, 37,323 and 35,613 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively		372			355
Common stock - Class D-X shares, $0.01 par value per share, 0 and 1,347 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively		—			13
Additional paid-in capital		1,107,136			796,992
Accumulated other comprehensive income (loss)		(33	)		948
Accumulated deficit		(50,805	)		(28,417	)
Total equity		1,057,414			770,326
Total liabilities and equity	$	1,981,695		$	1,588,521

See accompanying notes to the condensed consolidated financial statements.

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Fortress Net Lease REIT

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)


	Three Months Ended					Six Months Ended
	June 30, 2025			June 30, 2024		June 30, 2025			June 30, 2024
Revenue
Rental revenue	$	39,356		$	7,473	$	71,953		$	10,150
Total revenue		39,356			7,473		71,953			10,150

Expenses
Organizational costs		—			204		—			1,957
General and administrative		2,837			1,994		6,460			3,055
Management fee		2,827			357		5,173			357
Performance participation allocation		1,855			154		3,143			154
Depreciation and amortization		15,438			2,548		26,400			3,350
Total expenses		22,957			5,257		41,176			8,873

Other income (expense)
Interest income		452			1,630		618			4,025
Interest expense, net		(10,519	)		—		(19,033	)		—
Total other income (expense)		(10,067	)		1,630		(18,415	)		4,025

Net income	$	6,332		$	3,846	$	12,362		$	5,302
Net income attributable to non-controlling interests		39			—		64			—
Net income attributable to FNLR stockholders	$	6,293		$	3,846	$	12,298		$	5,302

Earnings per share of common stock - basic and diluted - (Note 12)	$	0.06		$	0.08	$	0.12		$	0.13
Weighted-average shares of common stock outstanding - basic - (Note 12)		109,662			50,803		101,318			42,269
Weighted average number of common shares outstanding - diluted - (Note 12)		110,031			50,803		101,627			42,269

See accompanying notes to the condensed consolidated financial statements.

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Fortress Net Lease REIT

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(in thousands)


	Three Months Ended					Six Months Ended
	June 30, 2025			June 30, 2024		June 30, 2025			June 30, 2024
Net income	$	6,332		$	3,846	$	12,362		$	5,302
Other comprehensive loss:
Change in fair value of interest rate swaps		(430	)		—		(986	)		—
Other comprehensive loss		(430	)		—		(986	)		—
Comprehensive income		5,902			3,846		11,376			5,302
Comprehensive income attributable to non-controlling interests		36			—		59			—
Comprehensive income attributable to FNLR stockholders	$	5,866		$	3,846	$	11,317		$	5,302

See accompanying notes to the condensed consolidated financial statements.

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Fortress Net Lease REIT

Condensed Consolidated Statements of Changes in Equity (Unaudited)

(in thousands)


	Three Months Ended June 30, 2025
	Par Value
	Class I		Class F-S		Class F-I			Class D-S		Class D-X			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Equity
Balance at March 31, 2025	$	19	$	66	$	513		$	367	$	3		$	960,613		$	394		$	(37,933	)	$	924,042
Common stock issued		35		35		73			—		—			142,631			—			—			142,774
Offering costs		—		—		—			—		—			(530	)		—			—			(530	)
Distribution reinvestment		—		1		4			2		—			7,206			—			—			7,213
Share class exchange		—		—		—			3		(3	)		(512	)		—			—			(512	)
Common stock redeemed		—		—		(2	)		—		—			(2,010	)		—			—			(2,012	)
Other comprehensive loss (other comprehensive loss of $3 allocated to redeemable NCI)		—		—		—			—		—			—			(427	)		—			(427	)
Net income (net income of $39 allocated to redeemable NCI)		—		—		—			—		—			—			—			6,293			6,293
Distributions declared on common stock ($0.1937 gross per share)		—		—		—			—		—			—			—			(19,165	)		(19,165	)
Allocation to redeemable common shares		—		—		—			—		—			(188	)		—			—			(188	)
Allocation to redeemable non-controlling interests		—		—		—			—		—			(74	)		—			—			(74	)
Balance at June 30, 2025	$	54	$	102	$	588		$	372	$	—		$	1,107,136		$	(33	)	$	(50,805	)	$	1,057,414

See accompanying notes to the condensed consolidated financial statements.

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	Three Months Ended June 30, 2024
	Par Value
	Class I		Class F-S		Class F-I		Class F-I X		Class B-X			Class C		Class D-S		Class D-X			Class E		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit			Total Equity
Balance at March 31, 2024	$	—	$	—	$	29	$	30	$	48		$	—	$	—	$	311		$	2	$	415,965		$	—	$	(9,893	)	$	406,492
Common stock issued		—		—		82		—		—			—		—		41			—		122,552			—		—			122,675
Offering costs		—		—		—		—		—			—		—		—			—		(725	)		—		—			(725	)
Distribution reinvestment		—		—		—		—		—			—		—		1			—		2,182			—		—			2,183
Share class exchange		—		—		37		11		(48	)		—		88		(88	)		—		—			—		—			—
Net income		—		—		—		—		—			—		—		—			—		—			—		3,846			3,846
Distributions declared on common stock ($0.1464 gross per share)		—		—		—		—		—			—		—		—			—		—			—		(7,446	)		(7,446	)
Balance at June 30, 2024	$	—	$	—	$	148	$	41	$	—		$	—	$	88	$	265		$	2	$	539,974		$	—	$	(13,493	)	$	527,025

See accompanying notes to the condensed consolidated financial statements.

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	Six Months Ended June 30, 2025
	Par Value
	Class I		Class F-S		Class F-I			Class D-S		Class D-X			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Equity
Balance at December 31, 2024	$	—	$	30	$	405		$	355	$	13		$	796,992		$	948		$	(28,417	)	$	770,326
Common stock issued		54		71		177			—		—			301,582			—			—			301,884
Offering costs		—		—		—			—		—			(815	)		—			—			(815	)
Distribution reinvestment		—		1		8			4		—			12,381			—			—			12,394
Share class exchange		—		—		—			13		(13	)		(512	)		—			—			(512	)
Common stock redeemed		—		—		(2	)		—		—			(2,127	)		—			—			(2,129	)
Other comprehensive loss (other comprehensive loss of $5 allocated to redeemable NCI)		—		—		—			—		—			—			(981	)		—			(981	)
Net income (net income of $64 allocated to redeemable NCI)		—		—		—			—		—			—			—			12,298			12,298
Distributions declared on common stock ($0.3615 gross per share)		—		—		—			—		—			—			—			(34,686	)		(34,686	)
Allocation to redeemable common shares		—		—		—			—		—			(248	)		—			—			(248	)
Allocation to redeemable non-controlling interests		—		—		—			—		—			(117	)		—			—			(117	)
Balance at June 30, 2025	$	54	$	102	$	588		$	372	$	—		$	1,107,136		$	(33	)	$	(50,805	)	$	1,057,414

See accompanying notes to the condensed consolidated financial statements.

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	Six Months Ended June 30, 2024
	Par Value
	Class I		Class F-S		Class F-I		Class F-I X		Class B-X			Class C			Class D-S		Class D-X		Class E		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit			Total Equity
Balance at December 31, 2023	$	—	$	—	$	—	$	23	$	21		$	73		$	—	$	—	$	2	$	115,952		$	—	$	(6,982	)	$	109,089
Common stock issued		—		—		111		7		37			10			—		258		—		422,315			—		—			422,738
Offering costs		—		—		—		—		—			—			—		—		—		(1,407	)		—		—			(1,407	)
Distribution reinvestment		—		—		—		—		—			—			—		2		—		3,114			—		—			3,116
Share class exchange		—		—		37		11		(58	)		(83	)		88		5		—		—			—		—			—
Net income		—		—		—		—		—			—			—		—		—		—			—		5,302			5,302
Distributions declared on common stock ($0.2739 gross per share)		—		—		—		—		—			—			—		—		—		—			—		(11,813	)		(11,813	)
Balance at June 30, 2024	$	—	$	—	$	148	$	41	$	—		$	—		$	88	$	265	$	2	$	539,974		$	—	$	(13,493	)	$	527,025

See accompanying notes to the condensed consolidated financial statements.

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Fortress Net Lease REIT

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Six Months Ended
	June 30, 2025			June 30, 2024
Cash flows from operating activities:
Net income	$	12,362		$	5,302
Adjustments to reconcile net income to net cash provided by operating activities:
Organizational costs		—			1,957
Depreciation and amortization		26,400			3,350
Straight-line rent adjustment		(14,640	)		(2,746	)
Management fee		5,173			357
Performance participation allocation		3,143			154
Other items		1,692			861
Changes in assets and liabilities:
Decrease in other assets		244			172
Increase (decrease) in other liabilities		(1,497	)		648
Net cash provided by operating activities		32,877			10,055

Cash flows from investing activities:
Acquisitions of real estate		(541,224	)		(268,065	)
Capital expenditures and improvements		(34,746	)		(59,392	)
Net cash used in investing activities		(575,970	)		(327,457	)

Cash flows from financing activities:
Borrowings under revolving credit facility		442,000			—
Repayment of revolving credit facility		(382,500	)		—
Borrowings under term loan		60,000			—
Payment of deferred financing costs		(3,342	)		—
Proceeds from issuance of common stock		227,457			299,384
Proceeds from issuance of redeemable common stock		22,646			—
Offering costs paid		(968	)		—
Redemptions of common stock		(5,808	)		—
Redemptions of non-controlling interests		(1,891	)		—
Subscriptions received in advance		41,689			36,883
Payment of distributions to common shareholders		(19,729	)		(6,435	)
Payment of distributions to non-controlling interests		(104	)		—
Net cash provided by financing activities		379,450			329,832
Net change in cash, cash equivalents and restricted cash		(163,643	)		12,430

Cash, cash equivalents and restricted cash, beginning of period		214,962			132,404
Cash, cash equivalents and restricted cash, end of period	$	51,319		$	144,834

Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheet:
Cash and cash equivalents	$	5,509		$	101,496
Restricted cash		45,810			43,338
Total cash, cash equivalents and restricted cash	$	51,319		$	144,834

Supplemental disclosures:
Interest paid	$	19,066		$	—

Non-cash investing and financing activities:
Changes in accrued capital expenditures	$	7,665		$	10,321
Accrued distributions	$	6,770		$	2,730
Distribution reinvestment	$	12,447		$	3,118
Offering costs due to affiliate	$	291		$	1,407
Other offering costs payable	$	528		$	—
Issuance of Class E shares as settlement of the management fee and board of directors compensation	$	991		$	162
Issuance of Class A shares as settlement of the management fee and performance participation allocation	$	6,079		$	—
Share class exchange	$	14		$	141
Allocation to redeemable common shares	$	248		$	—
Allocation to redeemable non-controlling interests	$	117		$	—
Change in fair value of interest rate swap	$	(986	)	$	—
Accrued unpaid stockholders servicing fee	$	8,771		$	—
Redemptions payable	$	188		$	—

See accompanying notes to the condensed consolidated financial statements.

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Fortress Net Lease REIT

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Organization and Business Purpose

Fortress Net Lease REIT (“FNLR” or the “Company”) was formed on January 24, 2023 (the “Date of Formation”) as a Maryland statutory trust and has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with the year ended December 31, 2023. The Company was organized to invest primarily in single-tenant commercial real estate properties subject to long-term net leases with investment grade and other creditworthy tenants or guarantors located in the United States and, to a lesser extent, Canada, Europe or other jurisdictions as the Company sees fit. The Company, through FNLR GP LLC (a wholly owned subsidiary of the Company), is the sole general partner of FNLR OP LP, a Delaware limited partnership (“FNLR OP”), and FNLR SLP LLC (the “Special Limited Partner”), a wholly owned subsidiary of Fortress Investment Group LLC (“Fortress”), owns a special limited partner interest in FNLR OP. Substantially all of the Company’s business is conducted through FNLR OP. The Company and FNLR OP are externally managed by FNLR Management LLC (the “Adviser”), an affiliate of Fortress.

On May 1, 2023, the Company initiated the offering of its shares through a continuous private placement offering, under Regulation D of the Securities Act of 1933 (the “Securities Act”), as amended. The Company is authorized to issue an unlimited number of common shares of beneficial interests, par value $0.01 per share, including, but not limited to, common shares classified as Class S, Class D, Class I, Class F-S, Class F-D, Class F-I, Class D-S and Class E. The share classes have different upfront selling commissions, dealer manager fees, ongoing shareholder servicing fees, management fees and performance participation allocation. For the three and six months ended June 30, 2025, the Company had received aggregate proceeds of $175.8 million and $343.4 million, respectively, from the sales of shares of its common stock through the private offering. For the three and six months ended June 30, 2024, the Company had received aggregate proceeds of $124.7 million and $425.7 million, respectively, from the sales of shares of its common stock through the private offering. 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.

The Company’s principal business is the acquisition, ownership and leasing of single tenant properties subject to long-term net leases with creditworthy tenants or guarantors. The principal business and operations are not distinguished by geography or property type for purposes of measuring performance. Accordingly, the Company has only one reportable segment. See Note 2 - Summary of Significant Accounting Policies for additional information on segment reporting. As of June 30, 2025, the Company owned 39 investments in real estate, of which three are subject to build-to-suit leases, and 36 for which the Company executed triple net lease agreements to fully lease the properties. All acquisitions are industrial, retail and office properties located in the United States.

Summary of Significant Accounting Policies

The Company believes the following significant accounting policies, among others, affect its more significant estimates and assumptions used in the preparation of the condensed consolidated financial statements.

Principles of Consolidation and 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. All intercompany balances and transactions, if any, have been eliminated in consolidation. Management believes it has made all necessary adjustments, consisting of only normal recurring items, so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent. The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “Annual Report”), filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 28, 2025.

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.

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FNLR OP is considered to be a VIE. The Company consolidates this entity because it has the ability to direct the most significant activities of the entity such as purchases, dispositions, financings, budgets and overall operating plans and it has the obligation to absorb losses or receive benefits. The Company meets the VIE disclosure exemption criteria, as the Company’s interest in FNLR OP is considered a majority voting interest.

Reclassifications

Certain amounts in the Company’s prior period Condensed Consolidated Statement of Cash Flows included in Other items of $2.7 million for the six months ended June 30, 2024 have been reclassified to Straight-line rent adjustment to conform to the six months ended June 30, 2025 presentation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ materially from those estimates.

Investments in Real Estate

In accordance with Accounting Standards Codification (“ASC”) 805, 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 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 identifiable intangible assets and assumed liabilities) and allocates the purchase price to the acquired assets and assumed liabilities on a relative fair value basis. 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. 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) 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. 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 costs to execute similar leases or estimated carrying costs during hypothetical expected lease-up periods considering current market conditions. In estimating costs to execute similar leases, the Company considers leasing commissions, legal and other related expenses. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses, if any, and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. The Company also considers an allocation of purchase price of other acquired intangibles, including 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.

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The cost of building 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		35 - 40 years
Tenant improvements		15 - 25 years
Land improvements		1 - 14 years
In-place lease intangibles		Over lease term

The Company determines a tenant improvement’s depreciable useful life as the shorter of the tenant’s lease term or the economic useful life associated with the tenant improvement.

During the three and six months ended June 30, 2025 the Company recognized depreciation expense in the amount of $10.7 million and $18.9 million, respectively, as Depreciation and amortization expense in the Condensed Consolidated Statements of Operations. During the three and six months ended June 30, 2024, the Company recognized depreciation expense in the amount of $1.9 million and $2.5 million, respectively, as Depreciation and amortization expense in the Condensed Consolidated Statements of Operations.

The Company capitalizes certain costs related to the development of real estate, including pre-construction costs, construction costs, real estate taxes and insurance. 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 but no later than one year after substantial completion.

The Company reviews real estate properties for impairment quarterly or when there is an event or change in circumstances that indicates an impaired value. Since cash flows on real estate properties considered to be “long-lived assets to be held and used” are evaluated 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 our results. If the Company determines that an impairment has occurred, the affected assets must be reduced to their fair value. No impairments occurred during the periods presented.

Definite-lived intangible lease assets are recorded as Intangible assets on the Company’s Condensed Consolidated Balance Sheets and amortized at lease commencement over the life of the lease. The amortization of in-place leases is recorded as an adjustment to Depreciation and amortization expense in the Company’s Condensed Consolidated Statements of Operations. During the three and six months ended June 30, 2025, the Company recognized amortization expense in the amount of $4.7 million and $7.5 million, respectively, as Depreciation and amortization expense in the Condensed Consolidated Statements of Operations. During the three and six months ended June 30, 2024, the Company recognized amortization expense in the amount of $0.6 million and $0.8 million, respectively, as Depreciation and amortization expense in the Condensed Consolidated Statements of Operations.

The Company reviews indefinite-lived intangible assets for impairment annually or when there is an event or change in circumstances that indicate a decrease in value. If there are qualitative factors that indicate it is more likely than not that the indefinite-lived intangible asset is impaired, the Company calculates the fair value of the asset and will record the impairment charge if the carrying amount exceeds the fair value. This new cost basis will be used for future periods when recording subsequent loss and cannot be written up to a higher value as a result of increases in fair value. No impairments occurred during the periods presented.

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.

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Restricted Cash

As of June 30, 2025 and December 31, 2024, the restricted cash balances of $45.8 million and $87.7 million, respectively, primarily consist of amounts held for future construction draws and subscriptions received in advance.

Deferred Charges

The Company’s deferred charges include financing costs for legal and other loan costs incurred by the Company for its financing agreements. In accordance with ASC 835, Interest, the Company records deferred financing costs as a component of Other assets for the Secured Revolving Credit Facility (as defined below) and as a reduction of the Term Loan Facility (as defined below) on the Condensed Consolidated Balance Sheets and amortizes using the straight-line method, which approximates the effective interest method, over the term of the applicable financing agreements.

Derivatives and Hedging Activities

The Company uses interest rate swaps to limit exposure to changes in interest rates, primarily on the variable interest rate debt disclosed in “Note 5 – Debt.” The Company does not use derivative instruments for speculative or trading purposes. The interest rate swaps qualify as cash flow hedges under ASC 815, Derivatives and Hedging, and are recorded at fair value on the Condensed Consolidated Balance Sheets in Other assets and Other liabilities. Gains and losses due to changes in fair value are recorded in accumulated other comprehensive income (loss) on the Condensed Consolidated Balance Sheets and subsequently reclassified into earnings in the period that the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income (loss) for interest rate swaps will be reclassified to interest expense, net when the periodic swap settlements are made.

Fair Value Measurement

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.

Valuation of assets and liabilities measured at fair value

The Company’s interest rate swaps are valued by the Adviser utilizing a pricing model and valuation provided by the counterparty. The rates used are publicly available and therefore these instruments are generally classified within Level 2 of the fair value hierarchy. The following table details the Company’s interest rate swaps measured at fair value on a recurring basis ($ in thousands):


						June 30, 2025					December 31, 2024
Counterparty	Maturity Date	Fixed Rate			Variable Rate Index	Notional Amount		Fair Value			Notional Amount		Fair Value
Goldman Sachs Bank USA	10/21/2026		3.70	%	One-month SOFR	$	250,000	$	(110	)	$	—	$	—
Bank of America, National Association	8/13/2027		3.35	%	Daily simple SOFR		60,000		72			60,000		948
Total Swaps						$	310,000	$	(38	)	$	60,000	$	948

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Valuation of liabilities not measured at fair value

As of June 30, 2025, the Company’s Secured Revolving Credit Facility and Term Loan Facility are carried at cost which approximates fair value. 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. The inputs used in determining the fair value of the Company’s indebtedness are considered Level 3.

Redeemable Common Stock

The Company classifies common shares held by an affiliate of the Company as redeemable common stock on the Condensed Consolidated Balance Sheets at the greater of their carrying amount or their 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 stock are recorded to additional paid-in capital.

Redeemable Non-Controlling Interests

The Company classifies OP Units held by the Adviser and the Special Limited Partner as redeemable non-controlling interests on the Condensed Consolidated Balance Sheets at the greater of the carrying amount, adjusted for the share of the allocation of income or loss and distributions, or the redemption value, which is equivalent to fair value, of such OP Units at the end of each measurement period. Changes in the value of redeemable non-controlling interests are recorded to additional paid-in capital.

Rental Revenue

The Company accounts for rental revenue in accordance with ASC 842, Leases. Rental revenue primarily consists of fixed contractual base rent arising from the tenant leases at our properties under operating 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.

Income Taxes

The Company has elected to be taxed as a REIT for U.S. federal income tax purposes commencing with the year ended December 31, 2023. The Company’s qualification as a REIT will depend upon its ability to meet, on a continuing basis, through actual investment and operating results, various complex requirements under the Internal Revenue Code of 1986, as amended (the “Code”), relating to, among other things, the sources of the Company’s gross income, the composition and value of the Company’s assets, the Company’s distribution levels and the diversity of ownership of the Company’s capital shares. The Company believes that it is organized in conformity with the requirements for qualification as a REIT under the Code and that its intended manner of operation has enabled the Company to meet the requirements for qualification and taxation as a REIT for U.S. federal income tax purposes.

As a REIT, the Company generally will not be subject to U.S. federal income tax on its net taxable income that it distributes currently to its shareholders. 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 for taxation as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company’s income for that year will be taxed at regular corporate rates, and 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 U.S. federal income tax purposes, it may still be subject to state and local taxes on its income and assets and to U.S. federal income and excise taxes on its undistributed income.

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Earnings Per Share

Basic earnings/(loss) per share of common shares 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 income/(loss) at the same rate per share and receive the same gross distribution per share before class-specific fees and accruals/allocations. To the extent that class-specific fees and accruals/allocations are applicable they will be deducted to arrive at class specific net income/(loss) per share and net distribution rate per share. Diluted earnings/(loss) per share is computed by dividing net earnings/(loss) attributable to shareholders for the period by the weighted average number of common shares and common share equivalents outstanding (unless their effect is antidilutive) for the period.

Share-Based Compensation

Each of the trustees who are not affiliated with the Adviser or Fortress receive $100,000 of Class E shares for services provided annually. The Company accounts for stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation and recognizes compensation expense based on the fair value of the award on the date of grant. The award of common shares vests immediately upon issuance. See “Note 8 – Equity” for additional information regarding share-based compensation.

Segment Reporting

The Company operates and reports its business as a single reportable segment, which includes the acquisition, leasing, and ownership of net leased properties. The Company’s chief operating decision maker (“CODM”) is the Co-Chief Executive Officers. The CODM makes key operating decisions, evaluates financial results, and allocates resources at the consolidated level for the entire portfolio based on consolidated revenues, expenses, and net income as reported on the Condensed Consolidated Statements of Operations. Accordingly, the Company has a single operating and reportable segment and the CODM evaluates profitability using net income. Net income is used by the CODM in assessing the operating performance of the segment. All expense categories on the Condensed Consolidated Statements of Operations are significant and there are no significant segment expenses that require disclosure.

Concentration of Credit Risk

As the Company’s revenues predominantly consist of rental payments, the Company is dependent on its tenants for its source of revenues. Concentration of credit risk arises when the source of revenue is highly concentrated from certain tenants. The Company had two tenants from which it derived 10% or more of its revenue for the three and six months ended June 30, 2025, as follows ($ in thousands):


	Rental Income		Percentage of Total Rental Income			Rental Income		Percentage of Total Rental Income
Tenant	Three Months Ended June 30, 2025					Six Months Ended June 30, 2025
Tenant A	$	7,124		18.10	%	$	14,247		19.80	%
Tenant B	$	3,490		8.87	%	$	7,002		10.00	%

The Company had five tenants from which it derived 10% or more of its revenue for the three and six months ended June 30, 2024, as follows ($ in thousands):


	Rental Income		Percentage of Total Rental Income			Rental Income		Percentage of Total Rental Income
Tenant	Three Months Ended June 30, 2024					Six Months Ended June 30, 2024
Tenant C	$	1,970		26.37	%	$	3,967		39.09	%
Tenant D	$	2,778		37.18	%	$	2,778		27.37	%
Tenant E	$	1,054		14.10	%	$	1,087		10.71	%
Tenant F	$	620		8.29	%	$	1,053		10.37	%
Tenant G	$	851		11.39	%	$	935		9.22	%

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Recent Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03, “Income Statement (Topic 220-40): Reporting Comprehensive Income - Expense Disaggregation Disclosures” (“Topic 220-40”). Topic 220-40 requires the disaggregation of expenses into required categories in disclosures within the footnotes of the financial statements. The FASB identified the required expense categories as: (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion and amortization recognized as part of oil- and gas producing activities or other depletion expenses. The guidance is effective for annual periods beginning after December 15, 2026. 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 impact of adopting this new guidance on its financial statement disclosures.

Investments in Real Estate, net

Investments in real estate, net consisted of the following ($ in thousands):


	June 30, 2025			December 31, 2024
Buildings and tenant improvements	$	1,166,925		$	725,711
Land		305,198			259,466
Land improvements		129,599			97,389
Construction in progress		—			71,714
Total		1,601,722			1,154,280
Accumulated depreciation		(29,435	)		(10,532	)
Investments in real estate, net	$	1,572,287		$	1,143,748

During the six months ended June 30, 2025, $90.9 million of construction in progress was placed into service, including $84.3 million of buildings and $6.6 million of land improvements. No construction in progress was placed into service during the six months ended June 30, 2024.

Acquisitions

During the six months ended June 30, 2025, the Company acquired 10 industrial, 39 retail properties and two office properties for $532.6 million. The total rentable square feet of gross leasable area (“GLA”) of the Company was 13,747 thousand and 8,329 thousand square feet as of June 30, 2025 and December 31, 2024, respectively, all of which is fully occupied.

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The following table sets forth the purchase price, number of properties and total rentable square feet of GLA of the Company for the six months ended June 30, 2025 ($ and square feet in thousands):


Property Type	Location	Purchase Price		Number of Properties			Square Feet
Industrial Properties:
Industrial	Various	$	79,777		3	(1)		1,153
Industrial	Various		27,742		3	(1)		275
Industrial	Michigan		55,874		1			1,120
Industrial	Florida		15,002		1			170
Industrial	Various		34,594		2	(1)		458
Total Industrial Properties			212,989		10			3,176

Retail Properties:
Retail	Washington		26,982		5	(1)		40
Retail	Michigan		2,305		1	(1)		4
Retail	Connecticut		3,868		1			10
Retail	Texas		33,606		7	(1)		92
Retail	Missouri		56,513		25	(1)		135
Total Retail Properties			123,274		39			281

Office Properties:
Office / Headquarters	Ohio		196,379		2			1,609
Total Office Properties			196,379		2			1,609
Total		$	532,642		51			5,066

(1) Properties subject to master lease agreement.

Additionally, during the six months ended June 30, 2025, the Company acquired additional land adjacent to an existing industrial property in Texas for $1.5 million. The property was acquired in connection with an upsize to an existing industrial property subject to a master lease agreement.

The following table sets forth the purchase price, number of properties and total rentable square feet of GLA of the Company for the six months ended June 30, 2024 ($ and square feet in thousands):


Property Type	Location	Purchase Price		Number of Properties			Square Feet
Industrial Properties:
Industrial	Pennsylvania	$	21,884		1			242
Industrial	Various		25,402		2	(1)		401
Industrial	Utah		45,524		3	(1)		254
Industrial	Various		133,294		27	(1)		1,094
Total Industrial Properties			226,104		33			1,991

Retail Properties:
Retail	Washington		15,148		6	(1)		25
Retail	New Hampshire		7,822		4	(1)		20
Retail	Kentucky		12,149		7	(1)		25
Retail	Illinois		6,842		3	(1)		21
Total Retail Properties			41,961		20			91
Total		$	268,065		53			2,082

(1) Properties subject to master lease agreement.

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The following table details the purchase price allocation for the properties acquired during the six months ended June 30, 2025 ($ in thousands):


	Amount
Buildings and building improvements	$	347,910
Land		45,732
Land improvements		24,969
In-place lease intangibles		115,519
Total Purchase Price	$	534,130

During the six months ended June 30, 2025, the Company made deposits of $5.1 million for future acquisitions, which are included in Other assets on the Condensed Consolidated Balance Sheets.

The following table details the purchase price allocation for the properties acquired during the six months ended June 30, 2024 ($ in thousands):


	Amount
Buildings and building improvements	$	131,422
Land		63,884
Land improvements		26,396
In-place lease intangibles		46,363
Total Purchase Price	$	268,065

Intangible Assets, net

The gross carrying amount and accumulated amortization of the Company’s identified intangible lease assets consisted of the following ($ in thousands):


Intangible lease assets	June 30, 2025			December 31, 2024
In-place lease intangibles	$	319,092		$	203,574
Condominium interest		7,492			7,492
Total intangible lease assets		326,584			211,066
Accumulated amortization
In-place lease intangibles		(10,977	)		(3,492	)
Intangible lease assets, net	$	315,607		$	207,574

The estimated future amortization of the Company’s in-place lease intangible assets for each of the next five years and thereafter as of June 30, 2025 is as follows ($ in thousands):


Year	Amount
2025 (Remaining)	$	9,886
2026		19,773
2027		19,773
2028		19,773
2029		19,773
2030		18,643
Thereafter		200,494
Total	$	308,115

Debt

On August 13, 2024, FNLR OP (the “Borrower”) entered into a credit agreement (as most recently amended on April 11, 2025, and as may be further amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), with the Company, as guarantor, the other guarantors party thereto (together with the Company, the “Guarantors” and, collectively with the Borrower, the “Loan Parties”), the lenders, the L/C Issuer (each party thereto) and Bank

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of America, N.A. (“BofA”), as administrative agent (in such capacity, the “Administrative Agent”). The Credit Agreement initially provided for (i) a $120.0 million revolving credit facility, of which $25.0 million was available for standby letters of credit and (ii) a $5.0 million term loan credit facility.

On April 11, 2025, the Loan Parties entered into that certain Second Amendment to Credit Agreement and Incremental Facilities Confirmation (the “Second Amendment”), with each lender and L/C Issuer party thereto and the Administrative Agent. Pursuant to the Second Amendment, the Borrower’s right to request that the principal amount of the Credit Facilities be increased, subject to certain conditions, was amended from an amount not exceeding $1.0 billion to an amount not exceeding $1.5 billion (such amount, the “Incremental Facility Maximum”). In connection with the effectiveness of the increase to the Incremental Facility Maximum, the aggregate principal amount of the Credit Facilities was increased from $900.0 million to $1.1 billion in the form of (i) an increase in the aggregate commitments to the revolving credit facility from $755.0 million to $892.5 million, of which $25.0 million is available for standby letters of credit (the “Secured Revolving Credit Facility”) and (ii) an increase in the aggregate outstanding principal amount of the term loan from $145.0 million to $182.5 million (the “Term Loan Facility” and, together with the Secured Revolving Credit Facility, the “Credit Facilities”).

The following table details key terms of the Credit Facilities as of June 30, 2025 ($ in thousands):


Indebtedness	Principal Balance Outstanding			Weighted Average Interest Rate			Maturity Date	Maximum Facility Size
Secured Revolving Credit Facility (1)	$	622,000			5.89	%	10/17/2025	$	892,500
Total Secured Revolving Credit Facility		622,000

Term Loan Facility	$	182,500			5.89	%	10/17/2025	$	182,500
Deferred financing costs, net		(1,603	)
Term Loan Facility, net		180,897
Total Borrowings, net	$	802,897

The following table details key terms of the Credit Facilities as of December 31, 2024 ($ in thousands):


Indebtedness	Principal Balance Outstanding			Weighted Average Interest Rate			Maturity Date	Maximum Facility Size
Secured Revolving Credit Facility (1)	$	562,500			6.26	%	10/17/2025	$	677,500
Total Secured Revolving Credit Facility		562,500

Term Loan Facility	$	122,500			6.32	%	10/17/2025	$	122,500
Deferred financing costs, net		(1,346	)
Term Loan Facility, net		121,154
Total Borrowings, net	$	683,654

(1)

Includes a $25.0 million sublimit of standby letters of credit.

At the option of the Borrower, the Credit Facilities will bear interest at either (i) a rate equal to term secured overnight financing rate (“SOFR”) or daily simple SOFR plus a margin rate ranging from 1.40% to 1.90% or (ii) a base rate based on the highest of (A) Federal Fund's Rate plus half of 1%, (B) Bank of America's prime rate, (C) Term SOFR plus 1.00% and (D) 1.00%. The Secured Revolving Credit Facility is subject to a per annum fee based on the daily unused portion of the facility ranging from 0.15% to 0.25% to and is payable quarterly in arrears. The Credit Facilities are prepayable, in whole or in part, at any time without premium or penalty. The Company may extend the maturity date of the Credit Facilities by utilizing three one-year extension options, which are exercisable at the Company’s discretion. Prior to October 17, 2025, the Company plans to exercise the first extension option in order to extend the maturity date to October 17, 2026.

The Company is subject to various financial and operational covenants under the Credit Facilities. These covenants require the Company to maintain certain financial ratios, which include leverage and fixed charge coverage, among others. As of June 30, 2025, the Company was in compliance with all of its loan covenants.

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Related Party Transactions

Due to Affiliate

The following table details the components of due to affiliate ($ in thousands):


	June 30, 2025		December 31, 2024
Advanced organizational and offering costs	$	12,889	$	14,048
General and administrative expenses		2,372		1,255
Accrued management fee		968		691
Performance participation allocation		3,143		1,874
Accrued shareholder servicing fee		8,771		—
Total	$	28,143	$	17,868

Advanced Organizational and Offering Costs

The Adviser agreed to advance all of the organization and offering costs on behalf of the Company (including legal, marketing, due diligence, administrative, accounting, transfer agent fees and other expenses attributable to the Company’s organization) through November 1, 2024. Such costs are being reimbursed to the Adviser on a pro-rata basis over a 60-month period beginning November 1, 2024, the first anniversary of the date on which the Company broke escrow for its private offering, and are recorded as a component of Due to affiliate on the Company’s Condensed Consolidated Balance Sheets. Approximately $12.9 million and $14.0 million of reimbursable costs were payable to the Adviser at June 30, 2025 and December 31, 2024, respectively.

General and Administrative Expenses

The Adviser agreed to advance certain general and administrative expenses on behalf of the Company. General and administrative expenses primarily consist of legal fees, accounting and admin-related fees, audit fees, appraisal/valuation fees and other professional fees. Approximately $2.2 million and $0.9 million in general and administrative expenses were payable to the Adviser at June 30, 2025 and December 31, 2024, respectively. Approximately $0.2 million and $0.4 million were payable to members of the Company’s board of trustees related to compensation expense at June 30, 2025 and December 31, 2024, respectively.

Accrued Management Fee

The Company pays the Adviser a management fee ranging from 1.00% to 1.25% of NAV per annum payable monthly. However, the Adviser has waived the management fee for six months for certain investors measured from the later of (i) the day on which such shareholder first purchased any waiver-eligible shares and (ii) if applicable, the day on which such shares were released from escrow (such later date in respect of any investor, the “Issuance Date”). The Adviser agreed to waive the management fee in respect of any Class E shares issued for so long as the Company qualifies as a “publicly offered REIT”.

The management fee may be paid, at the Adviser’s election, in cash, Class E shares or Class A units of FNLR OP (the “Class A OP Units”). To date, the Adviser has elected to receive the management fee in the Company’s Class E shares or Class A units of FNLR OP, resulting in a non-cash expense.

During the three months ended June 30, 2025, the Company issued 257,267 Class A OP units and recognized management fees of $2.8 million in the Condensed Consolidated Statements of Operations. During the six months ended June 30, 2025, the Company issued 400,746 Class A OP units and 67,171 Class E shares and recognized management fees of $5.2 million in the Condensed Consolidated Statements of Operations. During the three and six months ended June 30, 2024, the Company issued 16,070 Class E shares and recognized management fees of $0.4 million in the Condensed Consolidated Statements of Operations.

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Performance Participation Allocation

The Special Limited Partner holds a performance participation interest in FNLR OP that entitles it to receive an allocation of total return. This allocation is an expense to the Company as it represents a liability payable for services rendered relating to ongoing operations of the Company. Total return is defined as total distributions plus the change in the Company’s NAV per share, adjusted for subscriptions and repurchases. The Special Limited Partner is entitled to an allocation from FNLR OP equal to (i) for the Class F-S units, Class F-D units, Class F-I units (including Class F-I X units which are eligible for a waiver of performance participation allocation), Class B units and Class E units of FNLR OP, 10% of total return and (ii) for the Class C units of FNLR OP, 5% of total return in each case, after the other unit holders have received a total return of 5% (after recouping any loss carryforward amount). The allocation of the performance participation interest is measured on a calendar year basis, made annually and accrued monthly, and is payable in Class A units of FNLR OP, Class E shares or cash at the election of the Special Limited Partner. The Special Limited Partner has waived the performance participation for six months for certain investors measured from the applicable Issuance Date. In addition, the Special Limited Partner’s performance participation interest with respect to Class E units of FNLR OP has been waived by the Special Limited Partner for so long as the Company qualifies as a “publicly offered REIT” for U.S. federal income tax purposes. During the three and six months ended June 30, 2025, the Company issued 181,062 Class A OP units to the Special Limited Partner as payment for $1.9 million of performance participation allocation expense earned during the fiscal year end 2024.

During the three and six months ended June 30, 2025, the Company recognized $1.9 million and $3.1 million, respectively, of performance participation allocation expense in the Company’s Condensed Consolidated Statements of Operations. During the three and six months ended June 30, 2024, the Company recognized $0.2 million of performance participation allocation expense in the Company’s Condensed Consolidated Statements of Operations.

Accrued Shareholder Servicing Fees

On April 11, 2025, the Company appointed Fortress Wealth Solutions LLC (the “Dealer Manager”), an affiliate of the Adviser, as dealer manager in connection with its ongoing private offering of securities. The Company accrues ongoing shareholder servicing fees payable to the Dealer Manager for ongoing services rendered to Class F-S shareholders equal to 0.85% per annum of the aggregate NAV of the outstanding shares. The ongoing servicing fees are paid monthly in arrears.

Prior to April 11, 2025, the accrued ongoing shareholder servicing fees were recorded as a component of Other liabilities on the Company’s Condensed Consolidated Balance Sheets. Subsequent to April 11, 2025, the accrued ongoing shareholder servicing fees are recorded as a component of Due to affiliates on the Company’s Condensed Consolidated Balance Sheets.

Real Estate Transactions

Investments in real estate, net and Intangible assets, net include properties that were acquired from affiliates of the Adviser. During the three and six months ended June 30, 2025, the Company acquired one industrial property located in Michigan for approximately $55.9 million, two office properties located in Ohio for approximately $196.4 million and two industrial properties located in Alabama and Ohio for approximately $34.6 million from affiliates of the Adviser. During the three and six months ended June 30, 2024, the Company did not acquire any properties from a related party.

Derivative Financial Instruments

The Company purchased interest rate swaps to minimize the interest rate risk associated with the Company’s Credit Facilities variable interest expense.

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The following table is a summary of the Company’s outstanding interest rate swap agreements ($ in thousands):


						June 30, 2025					December 31, 2024
Counterparty	Maturity Date	Fixed Rate			Variable Rate Index	Notional Amount		Fair Value			Notional Amount		Fair Value
Goldman Sachs Bank USA	10/21/2026		3.70	%	One-month SOFR	$	250,000	$	(110	)	$	—	$	—
Bank of America, National Association	8/13/2027		3.35	%	Daily simple SOFR		60,000		72			60,000		948
Total Swaps						$	310,000	$	(38	)	$	60,000	$	948

The following table details the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations during the three months ended June 30, 2025 ($ in thousands):


	Amount of Unrealized Gain (Loss) Recognized in OCI			Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
	June 30, 2025				June 30, 2025
Interest rate swap	$	(430	)	Interest Expense	$	518
Total	$	(430	)		$	518

The following table details the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations during the six months ended June 30, 2025 ($ in thousands):


	Amount of Unrealized Gain (Loss) Recognized in OCI			Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
	June 30, 2025				June 30, 2025
Interest rate swap	$	(986	)	Interest Expense	$	660
Total	$	(986	)		$	660

Equity

Authorized Capital

As of June 30, 2025, the Company had the authority to issue an unlimited number of preferred shares and six classes of common shares including Class F-S, Class F-D, Class F-I, Class B, Class D-S, and Class E. Class E shares are classified as redeemable common stock on the Company’s Condensed Consolidated Balance Sheets. The Company also presents Class F-I X, Class B-X and Class D-X which represent Class F-I shares, Class B shares and Class D shares, respectively, that were purchased during the period from the commencement of the Company’s private offering until the Company accepted subscriptions up to $300.0 million in the Company’s private offering, which amount may be increased at the Company’s discretion (the “Initial Share Offering Period”) and entitled to a fee waiver while they were outstanding, as described in the Annual Report. The Initial Share Offering Period ended as of February 1, 2024. Class D shares were renamed to Class D-S shares effective November 14, 2024. 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 ongoing servicing fees, management fees, performance participation allocation and share repurchase rights. Other than differences in fees and repurchase rights, each class of common shares has the same economic and voting rights.

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Common Shares

The following tables detail the movement in the Company’s outstanding shares of common shares (in thousands):


	Three Months Ended June 30, 2025
	Class I		Class F-S		Class F-I			Class D-S(1)		Class D-X			Class E			Total
March 31, 2025		1,939		6,597		51,222			36,829		306			630			97,523
Common shares issued		3,532		3,488		7,267			—		—			2,167			16,454
Distribution reinvestment		35		79		403			185		—			3			705
Class transfers		—		—		(50	)		309		(306	)		49			2
Common shares repurchased		—		—		(197	)		—		—			(370	)		(567	)
June 30, 2025		5,506		10,164		58,645			37,323		—			2,479			114,117


	Three Months Ended June 30, 2024
	Class I		Class F-S		Class F-I		Class F-I X		Class B-X			Class C(2)		Class D-S(1)		Class D-X			Class E		Total
March 31, 2024		—		—		2,861		2,992		4,785			—		—		31,088			211		41,937
Common shares issued		—		—		8,187		—		—			—		—		4,000			34		12,221
Distribution reinvestment		—		—		38		24		16			—		8		130			2		218
Class transfers		—		—		3,693		1,117		(4,801	)		—		8,750		(8,747	)		—		12
Common shares repurchased		—		—		—		—		—			—		—		—			—		—
June 30, 2024		—		—		14,779		4,133		—			—		8,758		26,471			247		54,388


	Six Months Ended June 30, 2025
	Class I		Class F-S		Class F-I			Class D-S(1)		Class D-X			Class E			Total
December 31, 2024		—		2,988		40,463			35,613		1,347			529			80,940
Common shares issued		5,468		7,061		17,738			—		—			2,266			32,533
Distribution reinvestment		38		115		702			354		—			5			1,214
Class transfers		—		—		(50	)		1,356		(1,347	)		49			8
Common shares repurchased		—		—		(208	)		—		—			(370	)		(578	)
June 30, 2025		5,506		10,164		58,645			37,323		—			2,479			114,117


	Six Months Ended June 30, 2024
	Class I		Class F-S		Class F-I		Class F-I X		Class B-X			Class C(2)			Class D-S(1)		Class D-X		Class E		Total
December 31, 2023		—		—		—		2,346		2,102			7,227			—		—		202		11,877
Common shares issued		—		—		11,048		630		3,669			1,052			—		25,748		41		42,188
Distribution reinvestment		—		—		38		40		30			26			8		165		4		311
Class transfers		—		—		3,693		1,117		(5,801	)		(8,305	)		8,750		558		—		12
Common shares repurchased		—		—		—		—		—			—			—		—		—		—
June 30, 2024		—		—		14,779		4,133		—			—			8,758		26,471		247		54,388

(1)

Class D shares were renamed to Class D-S shares effective November 14, 2024.

(2)

As of June 30, 2025, pursuant to the terms of the Class C shares and Class D shares, all outstanding Class C shares were automatically converted into Class D shares.

Redeemable Common Stock

In connection with the Company’s payment of its management fee, the Adviser holds Class E shares. Additionally, certain affiliates of the Adviser hold Class E shares. See Note 6 - Related Party Transactions for further details on the management fee. The ability of the Class E holders to redeem the Class E shares for cash is outside of the Company’s control. Therefore, the Company has classified these Class E shares that are held by affiliates of the Adviser as redeemable common stock outside of equity on the Company’s Condensed Consolidated Balance Sheets. The Company received proceeds from the issuance of redeemable common stock of $22.6 million for the three and six months ended June 30, 2025 and $0 for the three and six months ended June 30, 2024. As of June 30, 2025, the Company has 2,479,245 redeemable Class E shares issued and outstanding.

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The redeemable Class E shares are recorded at the greater of (i) their carrying 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 $0.2 million during the six months ended June 30, 2025.

Share and Unit Repurchases

The Company has adopted a share repurchase plan whereby, subject to certain limitations, shareholders may request, on a monthly basis, that the Company repurchase all or any portion of their shares. The aggregate NAV of total repurchases of the Company’s common shares under the Company’s share repurchase plan and redemptions of Operating Partnership units is limited to no more than 2% of the Company’s aggregate NAV per month (measured using the aggregate NAV attributable to shareholders as of the end of the immediately preceding month) and no more than 5% of the Company’s aggregate NAV per calendar quarter (measured using the average aggregate NAV attributable to shareholders as of the end of the immediately preceding three months). Shares or units issued to the Adviser and its affiliates as payment for management fees or as reimbursements of expenses or for the Special Limited Partner’s performance participation interest are subject to the repurchase plan but exempt from the redemption limitations.

Other than as described for redeemable common stock and redeemable non-controlling interests, the Company is not obligated to repurchase any shares or units, including shares or units held by the Adviser acquired as payment of the Adviser's management fee or held by the Special Limited Partner for its performance participation interest, and may choose to repurchase fewer shares than have been requested to be repurchased, or none at all, in its discretion at any time. Further, the Company’s board of trustees may make exceptions to, modify or suspend the Company’s share repurchase plan (including to make exceptions to the repurchase limitations or purchase fewer shares than such repurchase limitations) if it deems such action to be in the Company’s best interest. In the event that the Company determines to repurchase some but not all of the shares submitted for repurchase during any month, shares repurchased at the end of the month will be repurchased on a pro-rata basis.

During the three months ended June 30, 2025, the Company repurchased 566,813 shares of common shares for a total of $5.9 million. During the six months ended June 30, 2025, the Company repurchased 578,217 shares of common shares for a total of $6.0 million.

Additionally, during the three and six months ended June 30, 2025, the Company repurchased 181,062 Class A OP units for a total of $1.9 million. The Company had no unfulfilled repurchase requests during the three and six months ended June 30, 2025.

The Company did not repurchase common shares and had no outstanding repurchase requests during the three and six months ended June 30, 2024.

Distributions

The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net income in accordance with GAAP, to its shareholders each year to comply with the REIT provisions of the Code. Each class of common shares receive the same gross distribution per share during the period the Adviser and Special Limited Partner have waived the management fee and performance participation allocation, respectively.

The following table details the aggregate net distributions declared for each applicable class of common shares for the three months ended June 30, 2025 and 2024:


	Three Months Ended June 30, 2025
	Class I		Class F-S		Class F-I		Class D-S(1)		Class D-X		Class E
Aggregate net distributions declared per share	$	0.1723	$	0.1550	$	0.1765	$	0.1763	$	—	$	0.1937


	Three Months Ended June 30, 2024
	Class I		Class F-S		Class F-I		Class F-I X		Class B-X		Class C(2)		Class D-S(1)		Class D-X		Class E
Aggregate net distributions declared per share	$	—	$	—	$	0.1464	$	0.1464	$	0.0481	$	—	$	0.0983	$	0.1464	$	0.1464

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The following table details the aggregate net distributions declared for each applicable class of common shares for the six months ended June 30, 2025 and 2024:


	Six Months Ended June 30, 2025
	Class I(3)		Class F-S		Class F-I		Class D-S(1)		Class D-X		Class E
Aggregate net distributions declared per share	$	0.2849	$	0.3012	$	0.3443	$	0.3441	$	0.1678	$	0.3615


	Six Months Ended June 30, 2024
	Class I		Class F-S		Class F-I		Class F-I X		Class B-X		Class C(2)		Class D-S(1)		Class D-X		Class E
Aggregate net distributions declared per share	$	—	$	—	$	0.1904	$	0.2739	$	0.1756	$	0.0835	$	0.0983	$	0.2739	$	0.2739

(1)

Class D shares were renamed to Class D-S shares effective November 14, 2024.

(2)

As of June 30, 2025, pursuant to the terms of the Class C shares and Class D shares, all outstanding Class C shares were automatically converted into Class D shares.

(3)

Shares were outstanding for a portion of the six months ended June 30, 2025.

Redeemable Non-Controlling Interests

In connection with its performance participation interest, the Special Limited Partner receives Class A units of FNLR OP. Additionally, in connection with the payment of management fees, the Adviser owns 400,746 Class A units of FNLR OP. See Note 6 - Related Party Transactions for further details on the performance participation allocation and management fees. Because the Special Limited Partner and the Adviser have the ability to redeem the Class A units for either Class E shares in the Company or cash at their election, the Company has classified these Class A units as Redeemable non-controlling interests outside of equity on the Company's Condensed Consolidated Balance Sheets. Redeemable non-controlling interests are recorded at the greater of (i) their carrying amount, adjusted for their share of the allocation of income or loss and distributions, or their redemption value, which is equivalent to fair value, of such Class A units at the end of each measurement period. Accordingly, the Company recorded an allocation adjustment of $74,203 and $116,932 during the three and six months ended June 30, 2025, respectively.

The following table details the redeemable non-controlling interest activity for the six months ended June 30, 2025 and 2024 ($ in thousands):


	Six Months Ended
	June 30, 2025			June 30, 2024
Balance at beginning of period	$	—		$	—
Settlement of prior performance participation allocation and management fee		6,079			—
Repurchases		(1,891	)		—
Offering costs		(3	)		—
Net income		64			—
Other comprehensive loss		(5	)		—
Distributions		(104	)		—
Redemption value allocation		117			—
Ending balance	$	4,257		$	—

Share-Based Compensation

The Company accrued $0.2 million and $0.3 million of non-cash compensation expense at June 30, 2025 and December 31, 2024, respectively.

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Other Assets and Other Liabilities

The following table summarizes the components of Other Assets ($ in thousands):


	June 30, 2025		December 31, 2024
Straight-line rent receivable	$	24,243	$	9,603
Deposits		10,050		4,941
Deferred financing costs, net		6,967		5,573
Derivative swap asset		73		948
Lease commissions, net		684		696
Prepaid expenses		218		—
Other receivables		247		476
Total Other Assets	$	42,482	$	22,237

The following table summarizes the components of Other Liabilities ($ in thousands):


	June 30, 2025		December 31, 2024
Accounts payable	$	6,309	$	13,974
Prepaid rental income		4,880		5,474
Accrued shareholder servicing fee		—		2,626
Derivative swap liability		110		—
Accrued interest payable		461		1,526
Other accrued expenses		2,703		2,761
Total Other Liabilities	$	14,463	$	26,361

10.

Leases

Lessor – Operating leases

The Company’s rental revenue primarily consists of rent earned from operating leases at the Company’s triple net lease, fully occupied properties which consist of fixed annual rent that escalates annually throughout the term of the applicable leases. The tenant is generally responsible for all property-related expenses, including taxes, insurance and maintenance, and the Company has rights in accordance with the lease agreement to protect the value of the leased property. The Company’s triple net lease properties are each occupied by a single tenant.

The following table details the components of operating lease income from leases in which the Company is the lessor ($ in thousands):


	Three Months Ended				Six Months Ended
	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024
Base rent(1)	$	31,557	$	5,550	$	57,313	$	7,404
Straight-line rental revenue		7,799		1,923		14,640		2,746
Total Rental Revenue	$	39,356	$	7,473	$	71,953	$	10,150

(1)

Base rent consists of fixed lease payments

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The following table presents the undiscounted future minimum rents the Company expects to receive for its net lease properties classified as operating leases as of June 30, 2025 ($ in thousands):


Year	Future Minimum Receipts
2025 (Remaining)	$	75,218
2026		154,880
2027		160,222
2028		163,959
2029		167,796
2030		170,150
Thereafter		2,725,664
Total	$	3,617,889

11.

Commitments and Contingencies

In the normal course of business, the Company may, directly or indirectly, enter into agreements that contain representations and warranties and which provide indemnifications. Future events could occur that lead to the execution of these provisions against the Company. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. The Company had outstanding commitments of $61.5 million and $99.6 million as of June 30, 2025 and December 31, 2024, respectively, in connection with its properties under development.

12.

Earnings Per Share

Basic earnings/(loss) per common share is determined by dividing net income/(loss) attributable to common shareholders by the weighted average number of common shares outstanding during the period. All classes of common shares are allocated income/(loss) at the same rate per share and receive the same gross distribution per share before class-specific fees and accruals/allocations. To the extent that class-specific fees and accruals/allocations are applicable they will be deducted to arrive at class specific net income/(loss) per share and net distribution rate per share.

The following tables detail net income/(loss) per common share ($ in thousands, except per share data):


	Three Months Ended June 30, 2025
	Class I		Class F-S		Class F-I		Class D-S		Class D-X		Class E		Total
Net income	$	163	$	444	$	2,755	$	2,757	$	—	$	174	$	6,293
Weighted average number of common shares outstanding - basic		4,376		9,044		57,126		37,258		—		1,858		109,662
Net income per common share - basic	$	0.04	$	0.05	$	0.05	$	0.07	$	—	$	0.09	$	0.06
Net income attributable to non-controlling interests - OP units													$	39
Net income per common share - diluted													$	6,332
Weighted average number of OP units														369
Weighted average number of common shares outstanding - diluted														110,031
Net income per common share - diluted													$	0.06

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	Three Months Ended June 30, 2024
	Class I		Class F-S		Class F-I		Class F-I X		Class B-X		Class C		Class D-S		Class D-X		Class E		Total
Net income (loss)	$	—	$	—	$	391	$	355	$	164	$	—	$	194	$	2,722	$	20	$	3,846
Weighted average number of common shares outstanding		—		—		9,995		4,124		1,580		—		4,210		30,661		233		50,803
Net income (loss) per common share - basic and diluted	$	—	$	—	$	0.04	$	0.09	$	0.10	$	—	$	0.05	$	0.09	$	0.09	$	0.08


	Six Months Ended June 30, 2025
	Class I		Class F-S		Class F-I		Class D-S		Class D-X		Class E		Total
Net income	$	182	$	727	$	5,449	$	5,624	$	77	$	239	$	12,298
Weighted average number of common shares outstanding - basic		2,634		7,245		53,027		36,831		335		1,246	$	101,318
Net income per common share - basic	$	0.07	$	0.10	$	0.10	$	0.15	$	0.23	$	0.19	$	0.12
Net income attributable to non-controlling interests - OP units													$	64
Net income per common share - diluted													$	12,362
Weighted average number of OP units														309
Weighted average number of common shares outstanding - diluted														101,627
Net income per common share - diluted													$	0.12


	Six Months Ended June 30, 2024
	Class I		Class F-S		Class F-I		Class F-I X		Class B-X		Class C		Class D-S		Class D-X		Class E		Total
Net income (loss)	$	—	$	—	$	363	$	502	$	333	$	217	$	194	$	3,662	$	31	$	5,302
Weighted average number of common shares outstanding		—		—		5,485		3,505		2,716		1,165		2,105		27,074		219		42,269
Net income (loss) per common share - basic and diluted	$	—	$	—	$	0.07	$	0.14	$	0.12	$	0.19	$	0.09	$	0.14	$	0.14	$	0.13

13.

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.

14.

Subsequent Events

In preparation of the accompanying condensed consolidated financial statements, the Company has evaluated events and transactions that occurred after June 30, 2025 for recognition or disclosure purposes. Based on this evaluation, the Company

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identified the following subsequent events, from June 30, 2025 through the date the condensed consolidated financial statements were issued.

Proceeds from the Issuance of Common Shares

On July 1, 2025, the Company issued and sold 4,312,433 common shares, consisting of 636,394 Class I shares, 1,818,179 Class F-S shares, 1,780,785 Class F-I shares, 65,049 Class D-S shares and 12,026 Class E shares, to accredited investors in the Company’s private offering, amounting to proceeds of $44.2 million to the Company as payment for such shares, including shares issued pursuant to the Company’s distribution reinvestment plan.

In addition, on July 16, 2025 the Company issued 91,178 Class A OP units to the Adviser as payment for $1.0 million of management fees.

On August 1, 2025, the Company issued and sold 3,133,884 common shares, consisting of 775,548 Class I shares, 1,210,200 Class F-S shares, 1,081,800 Class F-I shares, 65,203 Class D-S shares and 1,134 Class E shares, to accredited investors in the Company’s private offering, amounting to proceeds of $32.1 million to the Company as payment for such shares, including shares issued pursuant to the Company’s distribution reinvestment plan.

Borrowings

On July 25, 2025, the Borrower, the Company, as guarantor and the other guarantors party thereto, entered into that certain Third Amendment to Credit Agreement and New Lender Joinder Agreement (the “Third Amendment”) with each lender and letter of credit issuer party thereto, Bank of America, N.A. as administrative agent, and each of JPMorgan Chase Bank, N.A. and M&T Bank, as a Joint Leader Arranger and revolving credit facility lender and term loan lender thereunder, amending the Credit Agreement.

Pursuant to the Third Amendment, the aggregate principal amount of the Credit Facilities was increased from $1.075 billion to $1.275 billion in the form of (i) an increase in the aggregate commitments to the Secured Revolving Credit Facility from $892.5 million to $1.0475 billion, of which $25.0 million is available for standby letters of credit, and (ii) an increase in the aggregate outstanding principal amount of the Term Loan Facility from $182.5 million to $227.5 million. In addition, pursuant to the Third Amendment, subject to the satisfaction of certain criteria and conditions, the Loan Parties may offer Loan Assets (as defined in the Third Amendment) that qualify as First Mortgage Investments (as defined in the Third Amendment) to be included in the calculation of Borrowing Base Value (as defined in the Third Amendment).

Subsequent to June 30, 2025, the Company paid $114.0 million towards the outstanding principal balance on the Secured Revolving Credit Facility.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References herein to “Fortress Net Lease REIT,” “we,” “us,” “our,” “FNLR,” and the “Company” refer to Fortress Net Lease REIT, together with its consolidated subsidiaries, 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 Form 10-Q. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed under “Special Note Regarding Forward-Looking Statements” and in “Item 1A.—Risk Factors” in our Annual Report.

References to “Class F-I X,” “Class B-X” and “Class D-X” in this section represent Class F-I, Class B and Class D-S shares (formerly Class D shares), respectively, that were purchased during the Initial Share Offering Period and entitled to a fee waiver while they were outstanding, as described in the Annual Report. As of June 30, 2025, there were no Class F-I X, Class B, Class B-X or Class D-X shares outstanding. All Class F-I X, Class B and Class B-X shares were automatically converted into Class F-I shares. All Class D-X shares were automatically converted into Class D-S shares.

Overview

Fortress Net Lease REIT invests primarily in single-tenant, net leased assets. We own all or substantially all of our assets through FNLR OP LP, a subsidiary of the Company (the “Operating Partnership”). FNLR GP LLC is a wholly-owned subsidiary of the Company and is the sole general partner of the Operating Partnership. We are externally managed by FNLR Management, LLC. The Company’s principal business is the acquisition, ownership, financing and leasing of single-tenant commercial real estate properties subject to long-term net leases with investment grade and other creditworthy tenants or guarantors, and our management does not distinguish our principal business, or group our operations, by geography or property type for purposes of measuring performance. Accordingly, we have only one reportable segment.

The Company was formed on January 24, 2023 (the “Date of Formation”) as a Maryland statutory trust; however, no activity occurred until we acquired our first property on September 28, 2023 (the “Inception”).

The Company is a non-listed, perpetual life REIT that has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”) for U.S. federal income tax purposes. The Company generally will not be subject to U.S. federal income taxes on our taxable income to the extent we annually distribute all of our net taxable income to shareholders and maintain our qualification as a REIT.

As of June 30, 2025, we have received aggregate proceeds of $1.2 billion from the sale of our common shares. The Company has contributed the proceeds to the Operating Partnership in exchange for a corresponding number of Operating Partnership units that correspond to the classes of our shares sold. The Operating Partnership has primarily used the proceeds to make investments in real estate as further described below under “—Overall Portfolio.” The Company intends to continue selling shares on a monthly basis.

Market Conditions and Trends

The Company’s businesses are materially affected by conditions in the financial markets and economic conditions in the U.S. and, to a lesser extent, elsewhere in the world.

During the second quarter of 2025, the persistence of both elevated inflation and interest rates, in conjunction with tariff risks, political uncertainty, geopolitical uncertainty (including the conflict between Russia and Ukraine and the conflict in the Middle East, including between Israel and Hamas and other developing conflicts), and uncertainty around future capital availability continued to weigh on industry deal activity and market valuations.

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Our real estate business, focused on triple net leases, continued to deploy significant capital. Our investors continue to benefit from the inflation-mitigating characteristics and long term risk adjusted returns of the net lease structure, including contractually guaranteed and highly predictable net rent growth and long-duration income flows across the portfolio.

We are continuing to closely monitor developments related to the macroeconomic factors that have contributed to market volatility, and to assess the impact of these factors on financial markets and on our business. Our future results may be adversely affected by slowdowns in fundraising activity and the pace of capital deployment. It remains difficult to predict the ultimate effects of these events on the financial markets, overall economy, and our financial statements. See “Item 1A. Risk Factors — Risks Related to Our Business and Operations” in our Annual Report.

Recent Developments

Since June 30, 2025, through and including the date hereof, we (i) amended the Credit Facilities as described below, (ii) paid $114.0 million towards the outstanding principal balance on the Secured Revolving Credit Facility (iii) borrowed an additional $45.0 million on the Term Loan Facility and (iv) issued and sold an aggregate of 7,446,317 common shares in our private offering, resulting in proceeds of $76.3 million (see “Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 14. Subsequent Events” and the section titled “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds”).

Borrowings

On July 25, 2025, FNLR OP LP, as borrower (the “Borrower”), the Company, as guarantor and the other guarantors party thereto (together with the Company, the “Guarantors” and, collectively with the Borrower, the “Loan Parties”), entered into that certain Third Amendment to Credit Agreement and New Lender Joinder Agreement (the “Third Amendment”) with each lender and letter of credit issuer party thereto, Bank of America, N.A. as administrative agent (the “Administrative Agent”), and each of JPMorgan Chase Bank, N.A. and M&T Bank, as a Joint Leader Arranger and revolving credit lender and term loan lender thereunder, amending that certain Credit Agreement, initially dated August 13, 2024 and as most recently amended on April 11, 2025, among the Loan Parties, the lenders and the letter of credit issuer party thereto and the Administrative Agent.

Pursuant to the Third Amendment, the aggregate principal amount of the Credit Facilities was increased from $1.075 billion to $1.275 billion in the form of (i) an increase in the aggregate commitments to the revolving credit facility from $892.5 million to $1.0475 billion, of which $25.0 million is available for standby letters of credit (the “Secured Revolving Credit Facility”), and (ii) an increase in the aggregate outstanding principal amount of the term loan from $182.5 million to $227.5 million (the “Term Loan Facility” and, together with the Secured Revolving Credit Facility, the “Credit Facilities”). In addition, pursuant to the Third Amendment, subject to the satisfaction of certain criteria and conditions, the Loan Parties may offer Loan Assets (as defined in the Third Amendment) that qualify as First Mortgage Investments (as defined in the Third Amendment) to be included in the calculation of Borrowing Base Value (as defined in the Third Amendment).

Emerging Growth Company Status

We are and will remain an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) until the earlier of (a) the last day of the fiscal year (i) following the fifth anniversary of the date of an initial public offering pursuant to an effective registration statement under the Securities Act, (ii) in which we have total annual gross revenue of at least $1.235 billion, or (iii) in which we are deemed to be a large accelerated filer, which means the market value of our shares that is held by non-affiliates exceeds $700 million as of the date of our most recently completed second fiscal quarter, and (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. For so long as we remain an “emerging growth company” we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We cannot predict if investors will find our shares less attractive because we may rely on some or all of these exemptions.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We will take advantage of the extended transition period for complying with new or revised accounting standards, which may make it more difficult for investors and securities analysts to evaluate us since our financial statements may not be comparable to companies that comply with public company effective dates. Also, because we are not a large accelerated filer or an accelerated filer under Section 12b-2 of the Exchange Act, and will not be for

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so long as our common shares are not traded on a securities exchange, we will not be subject to auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act even once we are no longer an emerging growth company.

Q2 2025 Highlights

Operating Results

•

Declared monthly net distributions totaling $19.2 million for the three months ended June 30, 2025. The details of our total returns are shown in the following table:


	Class S			Class D			Class I			Class F-S			Class F-D			Class F-I			Class D-S			Class E
Inception-to-Date Total Return(1)		—	%		—	%		3.29	%		6.87	%		—	%		8.44	%		10.01	%		9.42	%

(1)

Inception-to-Date Total Return is calculated as the change in NAV per share during the respective periods plus any distributions per share declared in the period and assumes any distributions are reinvested in accordance with our distribution reinvestment plan. Shares were initially issued for Class I on February 1, 2025. Shares were initially issued for Class D-X, Class F-I, Class D-S and Class F-S on January 1, 2024, March 1, 2024, May 1, 2024 and September 1, 2024, respectively. Class E shares were initially issued on November 1, 2023. Total return for periods greater than one year are annualized. The Company believes total return is a useful measure of the overall investment performance of our shares.

Investments

Acquired 38 properties with a total purchase price of $392.0 million during the three months ended June 30, 2025. The acquisitions are consistent with our strategy of acquiring diversified, income-producing, single-tenant, net leased commercial properties.

Capital Activity and Financings

Raised proceeds of $175.8 million from the sale of our common shares for the three months ended June 30, 2025.

Overall Portfolio

As of June 30, 2025, our portfolio was comprised of 97 industrial properties, 88 retail properties and two office properties with (i) buildings, (ii) land and (iii) properties under development, representing 73%, 27% and 0%, respectively, of our total portfolio value based on historical cost.

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Investment Portfolio

Real Estate Investments

As of June 30, 2025, we had 100% ownership interest in all our properties in our portfolio. The following table provides a summary of our portfolio as of June 30, 2025 ($ and square feet in thousands):


Property Type(1)	Location	Number of Properties			Gross Asset Cost		Annual Escalations			Lease Term (Years)		Square Feet		Acquisition Date		Occupancy Rate
Industrial Properties:
Industrial	Pennsylvania	1		(2)	$	70,026		3.25	%		30		650	9/28/2023			100	%
Industrial	Missouri	1		(2)		103,854		2.85	%		25		352	11/1/2023			100	%
Industrial	Tennessee	1		(2)		34,533		3.00	%		10		141	12/1/2023			100	%
Industrial	Wisconsin	1				66,497		3.00	%		25		983	12/28/2023			100	%
Industrial	Pennsylvania	1				21,897		3.00	%		25		242	1/29/2024			100	%
Industrial	Various	2		(3)		26,415		3.00	%		20		401	2/29/2024			100	%
Industrial	Utah	3		(3)		45,619		2.50	%		20		254	3/29/2024			100	%
Industrial	Various	27		(3)		133,859		2.75	%		20		1,094	4/11/2024			100	%
Industrial	Various	22		(3)		173,490		2.80	%		20		1,331	8/13/2024			100	%
Industrial	Various	2		(3)		9,869		2.75	%		20		137	8/22/2024			100	%
Industrial	Georgia	3		(3)		29,723	1.25 X CPI				20		343	9/26/2024			100	%
Industrial	Various	3		(3)		207,097	1.25 X CPI				17		786	10/23/2024			100	%
Industrial	Various	2		(3)		81,763		3.00	%		20		567	12/9/2024			100	%
Industrial	Various	16		(3)		132,838		2.75	%		20		847	12/20/2024			100	%
Industrial	Various	2		(3)		101,969		3.00	%		20		224	12/31/2024			100	%
Industrial	Various	3		(3)		79,777		3.00	%		20		1,153	2/12/2025			100	%
Industrial	Various	3		(3)		27,742		2.50	%		25		275	2/26/2025			100	%
Industrial	Michigan	1		(4)		55,874		1.75	%		5		1,120	4/1/2025			100	%
Industrial	Florida	1				15,002		3.00	%		20		170	5/8/2025			100	%
Industrial	Various	2		(3),(4)		34,594		3.00	%		18		458	6/18/2025			100	%
Total Industrial Properties			97			1,452,439							11,528

Retail Properties:
Retail	Washington	6		(3)		15,283		2.00	%		15		25	5/7/2024			100	%
Retail	Kentucky	7		(3)		12,241		2.00	%		15		25	6/11/2024			100	%
Retail	New Hampshire	4		(3)		7,907		2.50	%		15		20	6/11/2024			100	%
Retail	Illinois	3		(3)		6,934		2.00	%		15		21	6/28/2024			100	%
Retail	Alabama	4		(3)		8,143		2.00	%		15		38	7/9/2024			100	%
Retail	Louisiana	5		(3)		13,521		2.00	%		15		30	8/27/2024			100	%
Retail	South Carolina	1				2,740		2.00	%		15		7	9/6/2024			100	%
Retail	Florida	3		(3)		9,957		2.00	%		15		19	9/25/2024			100	%
Retail	Michigan	3		(3)		7,276		2.00	%		15		11	12/3/2024	(5)		100	%
Retail	New Jersey	3		(3)		12,974		2.00	%		15		25	12/9/2024			100	%
Retail	Minnesota	1				6,751		2.00	%		15		18	12/18/2024			100	%
Retail	Pennsylvania	2		(3)		5,735		2.00	%		15		7	12/27/2024			100	%
Retail	Washington	7		(3)		43,080		2.00	%		15		75	12/27/2024	(6)		100	%
Retail	West Virginia	4		(3)		18,141		2.00	%		15		29	12/30/2024			100	%
Retail	Florida	2		(3)		15,512		2.00	%		15		23	12/31/2024			100	%
Retail	Connecticut	1				3,868		2.00	%		15		10	3/26/2025			100	%
Retail	Texas	7		(3)		33,606		2.00	%		15		92	6/27/2025			100	%
Retail	Missouri	25		(3)		56,513		2.00	%		15		135	6/30/2025			100	%
Total Retail Properties		88				280,182							610

Office Properties:
Office / Headquarters	Ohio		2	(4)		196,379		2.00	%	14			1,609	4/29/2025			100	%
Total Office Properties			2			196,379							1,609
Total			187		$	1,929,000							13,747

(1)

Retail includes critical retail properties that provide items or services that are fundamental to the daily life of the surrounding community.

(2)

Properties subject to build-to-suit agreement. See table on the following page.

(3)

Properties subject to master lease agreements.

(4)

Properties acquired from an affiliate to the Adviser.

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(5)

Two properties acquired on December 3, 2024 and one property acquired on February 26, 2025.

(6)

Two properties acquired on December 27, 2024 and five properties acquired on February 19, 2025.

The following table summarizes the Company’s build-to-suit development projects as of June 30, 2025 ($ in thousands):


Property Type	Location	Number of Properties	Start Date	Total Project Commitment		Cumulative Investment		Estimated Remaining Investment
Industrial	Pennsylvania	1	September 2023(1)	$	72,301	$	70,011	$	2,290
Industrial	Missouri	1	November 2023(2)	$	124,021	$	101,653	$	22,368
Industrial	Tennessee	1	November 2023(3)	$	35,939	$	34,518	$	1,421
Industrial	New York	1	September 2024(4)	$	45,372	$	10,000	$	35,372

(1)

Property placed into service December 2024.

(2)

Property placed into service June 2025.

(3)

Property placed into service October 2024.

(4)

The Company began advancing the future purchase price for the acquisition of this property in September 2024.

Lease Expirations

The following schedule details the expiring leases at our real estate properties by annualized base rent and square footage as of June 30, 2025 ($ and square feet in thousands):


Year	Number of Expiring Leases(1)		Annualized Base Rent(1)		% of Total Annualized Base Rent Expiring			Square Feet(1)		% of Total Square Fee Expiring
2025		—		—		—	%		—		—	%
2026		—		—		—	%		—		—	%
2027		—		—		—	%		—		—	%
2028		—		—		—	%		—		—	%
2029		—		—		—	%		—		—	%
2030		1		4,000		2.68	%		1,120		8.15	%
2031		—		—		—	%		—		—	%
2032		—		—		—	%		—		—	%
2033		—		—		—	%		—		—	%
Thereafter		39		145,280		97	%		12,627		92	%
Total		40		149,280		100	%		13,747		100	%

(1)

Information includes properties under development.

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Results of Operations

The following table sets forth the results of our operations for the three months ended June 30, 2025 and 2024 (in thousands, except per share data):


	Three Months Ended					Change
	June 30, 2025			June 30, 2024		$
Revenue
Rental revenue	$	39,356		$	7,473	$	31,883
Total revenue		39,356			7,473		31,883

Expenses
Organizational costs		—			204		(204	)
General and administrative		2,837			1,994		843
Management fee		2,827			357		2,470
Performance participation allocation		1,855			154		1,701
Depreciation and amortization		15,438			2,548		12,890
Total expenses		22,957			5,257		17,700

Other income (expense)
Interest income		452			1,630		(1,178	)
Interest expense, net		(10,519	)		—		(10,519	)
Total other income (expense)		(10,067	)		1,630		(11,697	)

Net income	$	6,332		$	3,846	$	2,486
Net income attributable to non-controlling interests		39			—		39
Net income attributable to FNLR stockholders	$	6,293		$	3,846	$	2,447

Revenue

Rental Revenue

Rental revenue increased $31.9 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 from $7.5 million to $39.4 million. The increase is primarily due to an increase in the real estate portfolio from 54 properties as of June 30, 2024 to 187 properties as of June 30, 2025.

Expenses

Organizational costs

Organizational costs decreased by $0.2 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 from $0.2 million to $0. The decrease is primarily due to us incurring the majority of various one-time organizational costs in 2023 and 2024.

General and Administrative Expenses

General and administrative expenses increased $0.8 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 from $2.0 million to $2.8 million. The increase is primarily due to increases in legal fees, accounting and admin-related fees, audit fees, appraisal/valuation fees, and other professional fees.

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Management Fee

Management fee expense increased by $2.5 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024 from $0.4 to $2.8 million. The increase is primarily due to the expiration of the six month waiver in 2024.

Performance Participation Allocation

Performance participation allocation expense increased $1.7 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024 from $0.2 to $1.9 million. The increase is primarily due to the expiration of the six month waiver in 2024.

Depreciation and Amortization

Depreciation and amortization expense increased $12.9 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024 from $2.5 million to $15.4 million. The increase is primarily due to an increase in our real estate portfolio from 54 properties as of June 30, 2024 to 187 properties as of June 30, 2025.

Other Income (Expense)

Interest Income

Interest income decreased $1.2 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024 from $1.6 million to $0.5 million. The decrease is primarily due to a decrease in cash deposited into an interest earning money market account.

Interest Expense, net

Interest expense, net increased $10.5 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024 from $0 to $10.5 million. The increase is primarily due to borrowings on the our Credit Facilities that were entered into on August 13, 2024.

The following table sets forth the results of our operations for the six months ended June 30, 2025 and 2024 (in thousands, except per share data):


	Six Months Ended					Change
	June 30, 2025			June 30, 2024		$
Revenue
Rental revenue	$	71,953		$	10,150	$	61,803
Total revenue		71,953			10,150		61,803

Expenses
Organizational costs		—			1,957		(1,957	)
General and administrative		6,460			3,055		3,405
Management fee		5,173			357		4,816
Performance participation allocation		3,143			154		2,989
Depreciation and amortization		26,400			3,350		23,050
Total expenses		41,176			8,873		32,303

Other income (expense)
Interest income		618			4,025		(3,407	)
Interest expense, net		(19,033	)		—		(19,033	)
Total other income (expense)		(18,415	)		4,025		(22,440	)

Net income	$	12,362		$	5,302	$	7,060
Net income attributable to non-controlling interests		64			—		64
Net income attributable to FNLR stockholders	$	12,298		$	5,302	$	6,996

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Revenue

Rental Revenue

Rental revenue increased $61.8 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 from $10.2 million to $72.0 million. The increase is primarily due to an increase in the real estate portfolio from 54 properties as of June 30, 2024 to 187 properties as of June 30, 2025.

Expenses

Organizational costs

Organizational costs decreased by $2.0 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 from $2.0 million to $0. The decrease is primarily due to us incurring the majority of various one-time organizational costs in 2023 and 2024.

General and Administrative Expenses

General and administrative expenses increased $3.4 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 from $3.1 million to $6.5 million. The increase is primarily due to increases in legal fees, accounting and admin-related fees, audit fees, appraisal/valuation fees, and other professional fees.

Management Fee

Management fee expense increased by $4.8 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024 from $0.4 million to $5.2 million. The increase is primarily due to the expiration of the six month waiver in 2024.

Performance Participation Allocation

Performance participation allocation expense increased $2.9 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024 from $0.2 million to $3.1 million. The increase is primarily due to the expiration of the six month waiver in 2024.

Depreciation and Amortization

Depreciation and amortization expense increased $23.1 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024 from $3.4 million to $26.4 million. The increase is primarily due to an increase in our real estate portfolio from 54 properties as of June 30, 2024 to 187 properties as of June 30, 2025.

Other Income (Expense)

Interest Income

Interest income decreased $3.4 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024 from $4.0 million to $0.6 million. The decrease is primarily due to a decrease in cash deposited into an interest earning money market account.

Interest Expense, net

Interest expense, net increased $19.0 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024 from $0 to $19.0 million. The increase is primarily due to borrowings on the our Credit Facilities that were entered into on August 13, 2024.

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Net Asset Value

EA RESIG, LLC, a subsidiary of Eisner Advisory Group LLC, calculates our NAV per share, which our Advisor subsequently reviews and confirms the calculations in connection therewith, in each case, in accordance with the valuation guidelines that have been approved by our board of trustees. Our total NAV presented in the following tables includes the NAV of our outstanding classes of common shares, which includes Class I, Class F-S, Class F-I, Class D-S and Class E common shares, as well as the partnership interests (“OP Units”) of the Operating Partnership, if any, held by parties other than the Company. The following table provides a breakdown of the major components of our NAV as of June 30, 2025 ($ in thousands):


Components of NAV	Amount
Investments in real estate	$	1,723,224
Intangible assets		261,192
Cash and cash equivalents		5,509
Restricted cash		45,810
Other assets		18,254
Revolving credit facility		(622,000	)
Term loan		(180,897	)
Subscriptions received in advance		(41,689	)
Distribution payable		(6,770	)
Due to affiliate		(6,751	)
Other liabilities		(12,276	)
Net Asset Value	$	1,183,606
Number of outstanding shares/units(1)		114,518

(1)

Includes 2,479,245 of Class E shares of common stock and 400,746 of Class A units held by the Adviser and affiliates that are classified as Redeemable common stock and redeemable non-controlling interests, respectively.

The following table provides a breakdown of our total NAV and NAV per share/unit by class as of June 30, 2025 ($ in thousands, except per share data):


	NAV		Number of Outstanding Shares/Units		NAV Per Share/Unit
Class S(1)	$	—		—		—
Class D(1)		—		—		—
Class I		56,359		5,506	$	10.2359
Class F-S		103,948		10,164	$	10.2272
Class F-D(1)		—		—		—
Class F-I		602,921		58,645	$	10.2809
Class D-S		390,059		37,323	$	10.4508
Class D-X(2)		—		—		—
Class E(3)		26,062		2,479	$	10.5120
OP Units(4)		4,257		401	$	10.6233
Total	$	1,183,606		114,518

(1)

As of June 30, 2025, there were no Class S, Class D or Class F-D shares outstanding.

(2)

All outstanding Class D-X shares were automatically converted to Class D-S shares effective April 1, 2025.

(3)

Class E shares are classified as Redeemable common stock. The ability of the Class E holders to redeem the Class E shares for cash is outside of the Company's control, therefore, the Company has classified these Class E shares held by an affiliate of the Company as redeemable common shares.

(4)

Includes the Class A OP Units held by the Adviser.

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The following table details the weighted average capitalization rate by property type, which is the key assumption used in the valuations as of June 30, 2025:


Property Type	Capitalization Rate
Industrial		7.26	%
Retail		8.37	%

The capitalization rates are determined by the Adviser and reviewed by the Company’s independent valuation advisor. A change in the capitalization rates would impact the calculation of the value of our real estate investments. For example, assuming all other factors remain unchanged, the changes listed below would result in the following effects on our investment values:


Input	Hypothetical Change	Industrial	Retail
Capitalization Rate	0.25% Decrease	+3.66%	+3.08%
(Weighted Average)	0.25% Increase	(3.41%)	(2.90%)

Recently acquired properties are carried at cost, which approximates fair value.

The following table reconciles equity per our Condensed Consolidated Balance Sheets to our NAV ($ in thousands):


	June 30, 2025
Stockholder’s equity	$	1,057,414
Redeemable common stock		26,062
Redeemable non-controlling interest		4,257
Total partners’ capital and redeemable non-controlling interests		1,087,733
Adjustments:
Accrued organizational and offering costs		12,693
Unrealized real estate appreciation		58,297
Accumulated depreciation and amortization under GAAP		40,428
Straight-line rent		(24,243	)
Accrued shareholder servicing fee		8,698
NAV	$	1,183,606

The following details the adjustments to reconcile accounting principles generally accepted in GAAP equity and total partners’ capital of the Operating Partnership to our NAV:

•

Accrued organization and offering costs: The Adviser agreed to advance certain organization and offering costs on our behalf through November 1, 2024. The Adviser will be reimbursed for such costs on a pro-rata basis over a 60-month period beginning November 1, 2024, the first anniversary of the date on which the Company broke escrow for its private offering. Under GAAP, organization costs have been accrued as a liability. For purposes of calculating NAV, such costs will be recognized as paid over the 60-month reimbursement period.

•

Unrealized real estate appreciation: Investments in real estate, net are presented at their depreciated cost basis in the GAAP condensed consolidated financial statements. For purposes of calculating NAV, operating properties will be initially valued at cost and subsequently measured at fair value. Properties under development are recorded at the transaction price plus gross fundings, which include construction interest paid to the Company until the applicable construction is completed.

•

Accumulated depreciation and amortization under GAAP: The Company depreciates 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.

•

Straight-line rent: The Company recognizes rental revenue on a straight-line basis under GAAP. Such straight-line rent adjustments are excluded for purposes of calculating NAV.

•

Accrued shareholder servicing fee: Under GAAP, we accrue the ongoing shareholder servicing fee as an offering cost at the time we sell Class F-S shares. For purposes of calculating NAV, we recognize the ongoing servicing fee as a reduction of NAV on a monthly basis.

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Distributions

Beginning on November 30, 2023, we declared monthly distributions for each class of our common shares, which are generally paid four days after month-end. The net distribution may vary for each class based on the applicable shareholder servicing fee, which is deducted from the monthly distribution per share and paid directly to Independent Brokerage Solutions LLC (the prior dealer manager) or, after April 11, 2025, the Dealer Manager, for further remittance to the applicable distributor.

The following table details the total net distribution for each of our share classes for the six months ended June 30, 2025:


Record Date	Class S		Class D		Class I		Class F-S		Class F-D		Class F-I		Class D-S		Class D-X		Class E
January 31, 2025	$	—	$	—	$	—	$	0.0480	$	—	$	0.0552	$	0.0552	$	0.0552	$	0.0552
February 28, 2025		—		—		0.0552		0.0480		—		0.0552		0.0552		0.0552		0.0552
March 31, 2025		—		—		0.0574		0.0502		—		0.0574		0.0574		0.0574		0.0574
April 30, 2025		—		—		0.0573		0.0501		—		0.0573		0.0573		—		0.0573
May 31, 2025		—		—		0.0575		0.0524		—		0.0596		0.0594		—		0.0681
June 30, 2025		—		—		0.0576		0.0525		—		0.0597		0.0596		—		0.0683
Total	$	—	$	—	$	0.2849	$	0.3012	$	—	$	0.3443	$	0.3441	$	0.1678	$	0.3615

For the six months ended June 30, 2025, we declared distributions in the amount of $34.8 million, respectively. The Company intends for long-term cumulative distributions to be funded primarily from operating cash flows. The following table details our distributions declared for the six months ended June 30, 2025 ($ in thousands):


	Six Months Ended June 30, 2025
Distributions	Amount		Percentage
Payable in cash	$	21,117		61	%
Reinvested in shares		13,671		39	%
Total distribution	$	34,788		100	%
Sources of Distributions
Cash flows from operating activities	$	32,877		95	%
Other proceeds(1)		1,911		5	%
Total sources of distributions	$	34,788		100	%
Cash flows from operating activities	$	32,877

(1)

For the six months ended June 30, 2025, build-to-suit construction interest of $5.6 million was used as a source to support the dividend payments. Build-to-suit construction interest is not recognized as operating cash flow under GAAP.

Funds from Operations

We believe funds from operations (“FFO”) is a meaningful non-GAAP supplemental measure of our operating results. Our condensed consolidated financial statements are presented using historical cost accounting which, among other things, requires depreciation of real estate investments to be calculated on a straight-line basis. As a result, our operating results imply that the value of our real estate investments have decreased over time. However, we believe that the value of our real estate investments will fluctuate over time based on market conditions and, as such, depreciation under historical cost accounting may be less informative as a measure of our performance. FFO is an operating measure defined by the National Association of Real Estate Investment Trusts (“NAREIT”) that is broadly used in the REIT industry. FFO, as defined by NAREIT and presented below, is calculated as net income or loss (computed in accordance with GAAP), excluding (i) depreciation and amortization, (ii) impairment of investments in real estate, (iii) net gains or losses from sales of real estate, and (iv) similar adjustments for non-controlling interests and unconsolidated entities.

FFO should not be considered more relevant or accurate than GAAP net income (loss) in evaluating our performance. In addition, FFO should not be considered as an alternative to net income (loss) as an indication of our performance or as an alternative to cash flows from operating activities as an indication of our liquidity, but rather should be reviewed in conjunction with these and other GAAP measurements. Further, FFO is not intended to be used as liquidity measures indicative of cash flow available to fund our cash needs, including our ability to make distributions to our shareholders. In addition, our methodology for calculating FFO may differ from the methodologies employed by other companies to calculate the same or

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similar supplemental performance measures, and accordingly, our reported FFO may not be comparable to the FFO reported by other companies.

The following table presents a reconciliation of net income to FFO ($ in thousands):


	Three Months Ended					Six Months Ended
	June 30, 2025			June 30, 2024		June 30, 2025			June 30, 2024
Net income attributable to FNLR stockholders	$	6,293		$	3,846	$	12,298		$	5,302
Adjustments to arrive at FFO:
Depreciation and amortization		15,438			2,548		26,400			3,350
Impairment of investments in real estate		—			—		—			—
Net gain or loss from sale of real estate		—			—		—			—
Amount attributable to non-controlling interests for above adjustments		(54	)		—		(92	)		—
FFO attributable to FNLR stockholders	$	21,677		$	6,394	$	38,698		$	8,652

Liquidity and Capital Resources

Liquidity

We believe we have sufficient liquidity to operate our business, with immediate liquidity comprised of cash and cash equivalents of $5.5 million and $270.5 million available under the Credit Facilities as of June 30, 2025. In addition to our immediate liquidity, we obtain incremental liquidity through the sale of our common shares, from which we generated proceeds of $343.4 million for the six months ended June 30, 2025. We may incur indebtedness secured by our real estate and real estate debt investments, borrow money through unsecured financings, or incur other forms of indebtedness. We may also generate incremental liquidity through the sale of our real estate and other real estate investments. We closely monitor our liquidity position and believe we have sufficient current liquidity and access to additional liquidity to meet our financial obligations and comply with our debt covenants for at least 12 months.

Our primary liquidity needs are to fund our investments, make distributions to our shareholders, repurchase common shares pursuant to our share repurchase plan, pay operating expenses, fund capital expenditures, and repay indebtedness. Our operating expenses include, among other things, the management fee we pay to the Adviser and the performance participation allocation that the Operating Partnership pays to the Special Limited Partner, both of which will impact our liquidity to the extent the Adviser or the Special Limited Partner elect to receive such payments in cash, or subsequently redeem shares or Operating Partnership units previously issued to them.

Our cash needs for acquisitions and other capital investments will be funded primarily from the sale of common shares and through the incurrence or assumption of debt. We plan on fulfilling our outstanding commitment obligations for properties under development from the sale of common shares. Other potential future sources of capital include secured or unsecured financings from banks or other lenders and proceeds from the sale of assets. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures. We continue to believe that our current liquidity position is sufficient to meet the need of our expected investment activity.

Capital Resources

For the six months ended June 30, 2025, we issued and sold 33,650,839 common shares, consisting of 5,505,972 Class I shares, 7,175,643 Class F-S shares, 18,439,609 Class F-I shares, 354,419 Class D-S shares and 2,175,195 Class E shares to accredited investors in our private offering, amounting to proceeds of $343.4 million as payment for such shares, including shares issued pursuant to our distribution reinvestment plan. Additionally, 67,171 Class E shares were issued as a payment of $0.7 million of management fees incurred. 29,155 Class E shares were also issued to the board of trustees as payment for $0.3 million compensation expense for 2024 fiscal year service. We also issued 181,062 Class A units of the Operating Partnership (the “Class A OP units”) to the Special Limited Partner as payment for $1.9 million 2024 performance participation allocation fees and 400,746 Class A OP units to the Adviser as payment for $4.3 million of management fees incurred. During the six months ended June 30, 2025, the Company repurchased 578,217 common shares for $6.0 million.

As of June 30, 2025, we had received aggregate proceeds of $1.2 billion from the issuance and sale of common shares in our private offering and pursuant to our distribution reinvestment program. As of June 30, 2025, after giving effect to shares issued pursuant to our distribution reinvestment plan, share transfers, conversions, and redemptions we had an aggregate of

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114,116,806 common shares outstanding, consisting of 5,505,972 Class I shares, 10,163,889 Class F-S shares, 58,644,520 Class F-I shares, 37,323,180 Class D-S shares and 2,479,245 Class E shares.

See “Recent Developments” for information relating to our Credit Facilities.

Cash Flows

Cash flows provided by operating activities increased $22.8 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024 from $10.1 million to $32.9 million. The increase is primarily attributable to the growth of our real estate portfolio, which increased by 133 properties for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 from 54 properties to 187 properties.

Cash flows used in investing activities increased $248.5 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 from $327.5 million to $576.0 million. The increase is primarily attributable to the growth of our real estate portfolio, of which $534.1 million was used to acquire 51 operating properties and $34.7 million was used to fund construction in progress for the three build-to-suit properties for the six months ended June 30, 2025.

Cash flows provided by financing activities increased $49.6 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 from $329.8 million to $379.5 million. The increase is primarily attributable to $119.5 million of net cash inflows from borrowings and repayments of the credit facility offset by $71.9 million decrease in proceeds from the issuance of common stock for the six months ended June 30, 2025.

Future Cash Requirements

The following table aggregates our contractual obligations and commitments as of June 30, 2025 ($ in thousands):


Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Secured Revolving Credit Facility and Term Loan Facility	$	804,500	$	804,500	$	—	$	—	$	—
Advanced organizational and offering costs		12,889		1,487		8,923		2,479		—
Commitments		61,451		26,079		35,372		—		—
Total	$	878,840	$	832,066	$	44,295	$	2,479	$	—

Critical Accounting Estimates

The preparation of our 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 “Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 2. Summary of Significant Accounting Policies” 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 (including land, buildings, tenant improvements, “above-market” and “below-market” leases, acquired in-place leases, other identified intangible assets and assumed liabilities) and we allocate the purchase price to the acquired assets and assumed liabilities, on a relative fair value basis. The most significant portion of the allocation is to buildings, land, and construction in process 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 a number of factors including 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 other acquired intangibles, including acquired in-place leases that may have

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intangible value, such as customer relationships, 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-market 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, if any, 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 and Intangible Assets

We review real estate properties for impairment each quarter or when there is an event or change in circumstances that indicates an impaired value. If the carrying amount of the real estate investment is no longer recoverable and exceeds the fair value of such investment, an impairment loss is recognized. 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, our strategy of holding properties over the long term directly decreases the likelihood of recording an impairment loss. If our strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized, and such loss could be material to our results. If we determine that an impairment has occurred, the affected assets must be reduced to their fair value.

We review indefinite-lived intangible assets for impairment annually or when there is an event or change in circumstances that indicates a decrease in value. If there are qualitative factors that indicate it is more likely than not that the indefinite-lived intangible asset is impaired, we calculate the fair value of the asset and record the impairment charge if the carrying amount exceeds the fair value. This new cost basis will be used for future periods when recording subsequent income or loss and cannot be written up to a higher value as a result of increases in fair value.

Recent Accounting Pronouncements

See “Notes to Condensed Consolidated Financial Statements—2. Summary of Significant Accounting Policies” for a discussion concerning recent accounting pronouncements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Quantitative and Qualitative Disclosures about Market Risk

The primary components of our market risk are related to interest rates, credit risk, 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

Through our investment portfolio and floating rate leverage facilities that we may use to finance our investment portfolio, we are exposed to risk from changes in interest rates and inflation. An increase in interest rates could increase the cost of variable rate debt that we may incur in the future, which may affect our ability to make distributions or payments to our investors. During times when inflation is greater than the increases in rent provided by many of our leases, rent increases will not keep up with the rate of inflation, which could cause the value of our properties to decline. Increased costs may have an adverse impact on our tenants if increases in their operating expenses exceed increases in revenue, which may adversely affect the tenants’ ability to pay rent owed to us, which in turn could materially and adversely affect us. Inflationary expectations or periods of rising inflation could also be accompanied by rising prices of commodities that are critical to the construction and/or operation of real estate properties. The market value of our investments could potentially decline in value in times of higher inflation rates. Some of our investments could have income linked to inflation, whether by regulation or contractual arrangement or other means. However, as inflation could affect both income and expenses, any increase in income could potentially not be sufficient to cover increases in expenses. Moreover, as inflation increases, the real value of our investments and distributions therefrom can decline. If we are unable to increase the revenue and profits of our investments at times of higher inflation, we could be unable to pay out higher distributions to shareholders to compensate for the relative decrease in the value of money, thereby affecting the expected return of investors.

We generally expect to mitigate this exposure to interest rate risk by purchasing or selling various financial instruments, including interest rate cap or collar agreements and interest rate swap agreements. While we have not experienced any significant credit losses since we commenced operations, in the event of a significant rising interest rate environment and/or economic downturn, tenant vacancies or defaults could increase and result in losses, which could adversely affect our operating results and liquidity, including our ability to pay any debt obligations we may incur. However, our interest rate hedging strategies may not eliminate all of our interest rate risk due to, among other things, uncertainties in the timing and/or amounts of inflation or the general interest rate environment and/or unequal, inaccurate, or unavailable hedges to offset changes in future interest rates.

We are exposed to interest rate risk with respect to our variable rate indebtedness, where an increase in interest rates would directly result in higher interest expense costs. We may seek to manage or mitigate our exposure to interest rate risk through interest rate protection agreements to fix or cap a portion of our variable rate debt. As of June 30, 2025, the outstanding principal balance of our variable rate indebtedness was $804.5 million.

The Company’s Secured Revolving Credit Facility and Term Loan Facility are indexed to SOFR. We have executed interest rate swaps with an aggregate notional amount of $310.0 million as of June 30, 2025 to hedge the risk of increasing interest rates. Assuming no changes in the balance of the Secured Revolving Credit Facility and Term Loan Facility as of June 30, 2025, a 10% increase in SOFR would result in increased interest expense of $1.6 million over a 12 month period, net of the impact of our interest rate swaps.

Credit Risk

We are exposed to credit risk in our investments with respect to a tenant’s ability to make required rent payments to us. We intend to manage this risk by employing a credit-first approach to understanding the financial wherewithal of a tenant prior to entering into a lease and by actively monitoring the macro- and micro-economic and industry trends that impact our tenants as well as their financial statements when available.

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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 real estate property values, interest rates and property cash flows. 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. Within the parameters of our valuation guidelines, the valuation methodologies used to value our properties and certain of our investments will involve subjective judgments and projections and may not be accurate. Valuation methodologies will also involve assumptions and opinions about future events, which may or may not turn out to be correct. Valuations and appraisals of our properties and other investments will be only estimates of fair value. Ultimate realization of the value of an asset depends to a great extent on economic, market and other conditions beyond our control and the control of the Adviser and our independent valuation advisor. In addition, commercial property values are subject to volatility and may be adversely affected by a number of factors, including, but not limited to 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.

•

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

•

Valuation of assets and liabilities measured at fair value

The Company’s interest rate swap is valued by the Adviser utilizing a pricing model and valuation provided by the counterparty. The rates used are publicly available and therefore these instruments are generally classified within Level 2 of the fair value hierarchy. The following table details the Company’s interest rate swaps measured at fair value on a recurring basis ($ in thousands):


						June 30, 2025					December 31, 2024
Counterparty	Maturity Date	Fixed Rate			Variable Rate Index	Notional Amount		Fair Value			Notional Amount		Fair Value
Goldman Sachs Bank USA	10/21/2026		3.70	%	One-month SOFR	$	250,000	$	(110	)	$	—	$	—
Bank of America, National Association	8/13/2027		3.35	%	Daily simple SOFR		60,000		72			60,000		948
Total Swaps						$	310,000	$	(38	)	$	60,000	$	948

Valuation of liabilities not measured at fair value

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

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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. 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.

Foreign Currency Risk

Any of our investments that may be denominated in a foreign currency will also be subject to risks related to fluctuations in exchange rates. We generally expect to mitigate this exposure by hedging the net currency exposure of our foreign currency assets to the U.S. Dollar. As a result, we expect to reduce our exposure to changes in portfolio value related to changes in foreign exchange rates. 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 offset changes in future exchange rates.

ITEM 4. CONTROLS AND PROCEDURES

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 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 Co-Chief Executive Officers (“Co-CEOs”), who are our principal executive officers, and our Chief Financial Officer (“CFO”), who is our principal financial officer. Based upon this evaluation, our Co-CEOs and CFO 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 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 Co-CEOs and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the period covered by this report, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) identified in connection with the evaluation described above that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we, the Adviser or Fortress may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. We may also be subject to regulatory proceedings. While the outcome of these legal or regulatory proceedings cannot be predicted with certainty, we may incur significant costs and expenses in connection with any such 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 Part I. Item 1A. “Risk Factors” in our Annual Report and Part II. Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025, filed with the SEC on May 13, 2025.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

Except as previously reported by the Company on its current reports on Form 8-K, the Company did not sell any securities during the period covered by this Form 10-Q that were not registered under the Securities Act.

Share Repurchases

The Company has adopted a share repurchase plan whereby, subject to certain limitations, shareholders may request, on a monthly basis, that the Company repurchase all or any portion of their shares. The aggregate NAV of total repurchases of the Company’s common shares under the Company’s share repurchase plan and redemptions of Operating Partnership units is limited to no more than 2% of the Company’s aggregate NAV per month (measured using the aggregate NAV attributable to shareholders as of the end of the immediately preceding month) and no more than 5% of the Company’s aggregate NAV per calendar quarter (measured using the average aggregate NAV attributable to shareholders as of the end of the immediately preceding three months). Shares or units issued to the Adviser and its affiliates as payment for management fees or as reimbursements of expenses or for the Special Limited Partner’s performance participation interest are not subject to these repurchase plan but exempt from the redemption limitations.

The Company is not obligated to repurchase any shares and may choose to repurchase fewer shares than have been requested to be repurchased, or none at all, in its discretion at any time. Further, the Company’s board of trustees may make exceptions to, modify or suspend the Company’s share repurchase plan (including to make exceptions to the repurchase limitations or purchase fewer shares than such repurchase limitations) if it deems such action to be in the Company’s best interest. In the event that the Company determines to repurchase some but not all of the shares submitted for repurchase during any month, shares repurchased at the end of the month will be repurchased on a pro-rata basis.

The following table sets forth shares repurchased by the Company during the six months ended June 30, 2025 under the share repurchase plan:


Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number of shares that may yet be purchased under the plans or programs(1)
January 1 — January 31, 2025		—		—		—		—
February 1 — February 28, 2025		—		—		—		—
March 1 — March 31, 2025		11,404	$	10.2237		11,404		—
April 1 — April 30, 2025		589,792	$	10.4205		589,792		—
May 1 — May 30, 2025		137,185	$	10.2739		137,185		—
June 1 — June 30, 2025		20,898	$	10.2768		20,898		—
Total		759,279				759,279		—

(1)

Repurchases are limited as set forth in our share repurchase plan described above. All requests under the share repurchase plan were satisfied.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the three months ended June 30, 2025, none of the Company’s trustees or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, (as such terms are defined in Item 408(a) of Regulation S-K of the Securities Act).

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ITEM 6 EXHIBITS

(b)

Exhibits


4.1	Amended and Restated Share Repurchase Plan, dated April 11, 2025 (filed as Exhibit 4.1 to the Company’s Current Report on April 15, 2025)
10.1	Dealer Manager Agreement, dated April 11, 2025, by and among Fortress Net Lease REIT, FNLR Management LLC, as the adviser, and Fortress Wealth Solutions LLC, as the dealer manager (filed as Exhibit 10.1 to the Company’s Current Report on April 15, 2025)
10.2	Form of Participating Broker-Dealer Agreement by and between Fortress Wealth Solutions LLC, as the dealer manager, and participating broker-dealers (filed as Exhibit 10.2 to the Company’s Current Report on April 15, 2025)
10.3	Second Amendment to Credit Agreement and Incremental Facility Confirmation, dated April 11, 2025, by and among FNLR OP LP, as borrower, Fortress Net Lease REIT, as guarantor, the other guarantors party thereto, each lender and L/C Issuer party thereto, and Bank of America, N.A., as administrative agent (filed as Exhibit 10.1 to the Company’s Current Report on April 15, 2025)
10.4	Third Amendment to Credit Agreement and New Lender Joinder Agreement, dated July 25, 2025, by and among FNLR OP LP, as borrower, Fortress Net Lease REIT, as guarantor, the other guarantors party thereto, each lender and L/C Issuer party thereto, and Bank of America, N.A., as administrative agent.
31.1	Certification of the Co-Chief Executive Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith*
31.2	Certification of the Co-Chief Executive Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith*
31.3	Certification of the Chief Financial Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith*
32.1	Certification of the Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, filed herewith*
32.2	Certification of the Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, filed herewith*
32.3	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, filed herewith*
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the inline XBRL document**
101.SCH	Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents**
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)**

The certifications furnished in Exhibits 32.1, 32.2 and 32.3 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

The financial information contained in these XBRL documents is unaudited.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 13, 2025


Fortress Net Lease REIT

By:	/s/ Avraham Dreyfuss
	Name:	Avraham Dreyfuss
	Title:	Chief Financial Officer