NLOP released Q2 2026 earnings this week. Not a very eventful quarter with no closed dispositions and no additional shareholder distributions.

Of note:

• No assets were sold in Q2 and none held for sale at the end of the quarter but they did take a $7.1m impairment charge on a property to reduce its carrying value to estimated fair value so at least one process is ongoing.

• They amended their leases for 5 properties with Grande Communications - For four of the five properties they lowered rent to $1.8m from $2.2m but extended WALT to 15yrs with 2.5% annual rent increases and agreed to terminate the lease at the 5th effective January 31st, 2027 (moved up from August 2028).

  • I think this adds a bit of value - my estimate for the 5 goes to $14.8m from $13.4m based on a 12.5% cap on the leased assets / $30 PSF on the vacant property.

  • The vacant property is more flex / shallow bay than pure office next to their main headquarters building in San Marcos, which probably helps with liquidity (but value PSF is going to be low given the market).

• They defaulted on last encumbered asset - Intuit in Plano - on July 6th and while the lender has the right to commence foreclosure proceeds, they have not yet done so. Accruing default interest at 5% on top of the 7% contractual rate (but non-recourse to NLOP). The property is vacant as the Intuit lease has expired.

On valuation, given the profile of the remaining assets and as we get closer to the end, it’s time to incorporate some REIT wind-down costs into my net liquidation value estimate. I’ve estimated these are $10m. A key factor is that the company has no employees, so no severance expense to speak of, and I’ve also separately estimated ~$7m of disposition costs and ~$3m for the WPC management contract termination fee.

I estimate that net liquidation value is ~$13.45 per share. The current share price of ~$12 per share reflects a ~11% discount.

AFFO according to NLOP’s definition, which does not include CAPEX, was $0.22 per share in Q2. This is actually a decent run-rate for the remainder of 2026 barring additional asset sales as Intuit is the remaining expiry in 2026 ($2.6m of ABR), the impact of which will be almost entirely offset by the reduction in administrative expense reimbursements to WPC of $1m and interest expense on the Intuit loan of $1.6m.

Assuming $0.30 - $0.40 per share of retained cash flow (1-2 quarters) the total potential return is ~15%, 10% - 15% annualized assuming a 12 - 18 month liquidation timeline.