New Mountain Net Lease Trust's Q3 Net Income Dips Amid Rising Costs

TL;DR

**New Mountain Net Lease Trust's Q3 profit drop, driven by new fees, makes it a cautious hold despite revenue growth.**

AI Summary

New Mountain Net Lease Trust reported a net income of $4.176 million for the three months ended September 30, 2025, a decrease from $5.331 million in the same period of 2024. For the nine months ended September 30, 2025, net income was $11.856 million, down from $18.906 million in the prior year. Rental revenue saw a modest increase, reaching $27.611 million for the three-month period in 2025, up from $26.181 million in 2024, and $81.723 million for the nine-month period, compared to $80.931 million in 2024. Total expenses significantly rose to $12.113 million for the three months ended September 30, 2025, from $8.399 million in 2024, primarily due to the introduction of a $1.181 million management fee and a $925,000 performance participation allocation. The company completed Formation Transactions on January 2, 2025, involving the contribution of a Seed Portfolio of nearly 15 million square feet of industrial assets. Investments in real estate, net, increased to $1.260 billion as of September 30, 2025, from $1.204 billion at December 31, 2024, reflecting new acquisitions totaling $83.402 million. Mortgage notes and credit facility, net, decreased to $863.519 million from $903.523 million, while total liabilities decreased from $1.174 billion to $968.486 million. The company's strategic outlook focuses on acquiring, owning, financing, and leasing a diversified portfolio of operationally critical, single-tenant, commercial net lease real estate assets.

Why It Matters

New Mountain Net Lease Trust's declining net income, despite increased rental revenue, signals potential margin pressures for investors. The introduction of significant management and performance fees post-Formation Transactions on January 2, 2025, directly impacts profitability and shareholder returns, raising questions about the long-term value proposition. For employees, the focus on a perpetual-life REIT structure offers stability, but the competitive landscape for net lease assets remains intense, requiring efficient management to maintain growth. Customers (tenants) benefit from the company's stable, long-term lease strategy, while the broader market watches how this non-listed REIT navigates rising operational costs and interest rate environments.

Risk Assessment

Risk Level: medium — The company's net income decreased by 21.6% for the three months ended September 30, 2025, and by 37.3% for the nine months ended September 30, 2025, primarily due to the introduction of a $1.181 million management fee and a $925,000 performance participation allocation. This significant increase in expenses, coupled with a substantial decrease in restricted cash from $263.135 million to $13.696 million, indicates increased operational costs and reduced liquidity compared to the prior year.

Analyst Insight

Investors should closely monitor the impact of management and performance fees on New Mountain Net Lease Trust's future profitability. Evaluate the company's ability to offset these increased expenses through rental growth and efficient property management, and consider the implications of its non-listed, perpetual-life REIT structure on liquidity and valuation.

Financial Highlights

debt To Equity

2.26

revenue

$81.723M

operating Margin

N/A

total Assets

$1.397B

total Debt

$968.486M

net Income

$11.856M

eps

N/A

gross Margin

N/A

cash Position

$559

revenue Growth

+0.98%

Revenue Breakdown

Key Numbers

• $4.176M — Net Income (3 months) (Decreased from $5.331M in Q3 2024)
• $11.856M — Net Income (9 months) (Decreased from $18.906M in 9M 2024)
• $27.611M — Rental Revenue (3 months) (Increased from $26.181M in Q3 2024)
• $81.723M — Rental Revenue (9 months) (Increased from $80.931M in 9M 2024)
• $12.113M — Total Expenses (3 months) (Increased from $8.399M in Q3 2024)
• $1.181M — Management Fee (3 months) (New expense in Q3 2025)
• $925K — Performance Participation Allocation (3 months) (New expense in Q3 2025)
• $1.260B — Investments in Real Estate, Net (Increased from $1.204B at Dec 31, 2024)
• $863.519M — Mortgage Notes and Credit Facility, Net (Decreased from $903.523M at Dec 31, 2024)
• $13.696M — Restricted Cash (Decreased significantly from $263.135M at Dec 31, 2024)

Key Players & Entities

• New Mountain Net Lease Trust (company) — Registrant and Company
• New Mountain Finance Advisers, L.L.C. (company) — Investment Adviser
• New Mountain Capital, L.L.C. (company) — Sponsor
• CBRE Capital Advisors, Inc. (company) — Fairness opinion provider
• New Mountain Net Lease Partners Corporation (company) — Accounting Predecessor
• New Mountain Net Lease Partners, L.P. (company) — Contributor of Seed Portfolio
• NEWLEASE Operating Partnership LP (company) — Predecessor after OP Conversion
• Securities and Exchange Commission (regulator) — Filing oversight
• $4.176 million (dollar_amount) — Net income for three months ended September 30, 2025
• $11.856 million (dollar_amount) — Net income for nine months ended September 30, 2025

FAQ

Risk Factors

• Increased Operating Expenses [high — financial]: Total expenses rose significantly to $12.113 million in Q3 2025 from $8.399 million in Q3 2024. This increase was primarily driven by new expenses including a $1.181 million management fee and a $925,000 performance participation allocation, impacting profitability.
• Decreased Net Income [high — financial]: Net income for the three months ended September 30, 2025, was $4.176 million, a decrease from $5.331 million in the same period of 2024. For the nine months, net income fell to $11.856 million from $18.906 million, indicating a substantial decline in profitability.
• Reduced Cash Position [medium — financial]: Restricted cash decreased significantly from $263.135 million at December 31, 2024, to $13.696 million as of September 30, 2025. This sharp decline may impact liquidity and the ability to fund future operations or acquisitions.
• Reliance on Net Lease Model [medium — market]: The company's strategy focuses on single-tenant, commercial net lease real estate. This model can be susceptible to tenant defaults or financial distress, which could lead to significant income loss and property vacancies.
• Integration of Seed Portfolio [medium — operational]: The completion of Formation Transactions on January 2, 2025, involved the contribution of a large Seed Portfolio. Integrating and managing these new assets, while also pursuing new acquisitions, presents operational challenges.
• Leverage and Debt Service [medium — financial]: While total liabilities decreased to $968.486 million from $1.174 billion, the company still carries significant debt, with mortgage notes and credit facility at $863.519 million. Interest expense was $10.244 million for Q3 2025, representing a substantial ongoing cost.
• REIT Qualification Requirements [medium — regulatory]: The company intends to qualify as a REIT. Failure to meet the strict requirements for REIT status, such as distributing all taxable income and maintaining asset and income tests, could result in significant tax liabilities.
• Continuous Private Offering [low — financial]: The company is conducting a continuous, blind pool private offering of common shares. This structure may limit transparency for investors and could be subject to regulatory scrutiny regarding offering terms and investor suitability.

Industry Context

The net lease real estate sector, particularly industrial assets, has seen strong demand driven by e-commerce growth and supply chain optimization. However, rising interest rates and economic uncertainty can impact property valuations and tenant creditworthiness. Diversified portfolios and strong tenant relationships are key differentiators in this competitive landscape.

Regulatory Implications

As a company intending to operate as a REIT, New Mountain Net Lease Trust must adhere to strict IRS regulations regarding income distribution, asset composition, and operational activities. Non-compliance could lead to loss of REIT status and significant tax liabilities. Furthermore, ongoing private offerings are subject to securities regulations concerning investor qualifications and disclosure.

What Investors Should Do

1. Monitor expense growth, particularly management and performance fees.
2. Analyze the impact of the reduced restricted cash balance.
3. Evaluate the performance and integration of the Seed Portfolio.
4. Assess the sustainability of rental revenue growth against rising expenses.
5. Understand the implications of the continuous private offering structure.

Key Dates

• 2025-01-02: Completion of Formation Transactions — Involved the contribution of a significant Seed Portfolio of industrial assets, forming the basis of the company's current operations and investment strategy.
• 2025-09-30: End of Q3 2025 — Reporting period for the 10-Q, showing decreased net income and increased expenses, alongside portfolio growth.
• 2024-12-31: End of Fiscal Year 2024 — Prior period balance sheet comparison point, showing a significantly higher restricted cash balance and total liabilities.
• 2024-08-01: Formation of New Mountain Net Lease Trust — The legal establishment of the Maryland statutory trust, preceding the Formation Transactions and the commencement of operations.

Glossary

REIT

Real Estate Investment Trust. A company that owns, operates, or finances income-generating real estate. REITs are required to distribute at least 90% of their taxable income to shareholders annually. (New Mountain Net Lease Trust intends to qualify as a REIT, which impacts its tax obligations and operational requirements.)

Net Lease

A lease agreement where the tenant is responsible for paying most or all of the operating expenses of the property, including property taxes, insurance, and maintenance. (This is the core business model for New Mountain Net Lease Trust, focusing on single-tenant net lease assets.)

Formation Transactions

The specific set of transactions, including the contribution of a Seed Portfolio, that established the company's operational structure and asset base as of January 2, 2025. (Marks the beginning of the company's consolidated operations and the acquisition of its initial significant real estate portfolio.)

Perpetual-Life REIT

A REIT structure that does not have a predetermined liquidation date, allowing for continuous operations and asset management without the pressure of a forced sale. (This structure is highlighted as advantageous for shareholders, providing flexibility in managing the investment portfolio.)

NAV per share

Net Asset Value per share. The value of a company's assets minus its liabilities, divided by the number of outstanding shares. For non-listed REITs, this is often used as the basis for share pricing. (The company sells its common shares at a price generally equal to the prior month's NAV per share.)

Seed Portfolio

The initial portfolio of nearly 15 million square feet of industrial assets contributed to the company as part of the Formation Transactions. (Represents the foundational real estate assets upon which the company's operations are built.)

Accredited Investor

An investor who meets certain income or net worth requirements and is therefore presumed by the SEC to be able to understand and bear the risks of investing in securities sold in private offerings. (The company is conducting its private offering of common shares to accredited investors.)

Variable Interest Entities (VIEs)

Entities for which the voting interest is not sufficient to control the entity, and where one party has the power to direct the activities that most significantly impact the entity's economic performance. (The company consolidates VIEs when it is the primary beneficiary, impacting its reported assets and liabilities.)

Year-Over-Year Comparison

Compared to the prior year, New Mountain Net Lease Trust shows a modest increase in rental revenue for both the three-month ($27.611M vs $26.181M) and nine-month ($81.723M vs $80.931M) periods. However, net income has significantly declined, with Q3 net income falling to $4.176M from $5.331M and year-to-date net income dropping to $11.856M from $18.906M. This is largely attributable to a substantial increase in total expenses, which rose to $12.113M in Q3 2025 from $8.399M in Q3 2024, driven by new management and performance fees. Total assets have grown to $1.397B from $1.571B (as of Dec 31, 2024), while total liabilities have decreased to $968.486M from $1.174B.

Key Financial Figures

• $20.00 — e Seed Portfolio Fair Value, divided by $20.00 (the "REIT Contribution"). Substantial

Filing Documents

• tmb-20250930x10q.htm (10-Q) — 2561KB
• tmb-20250930xex31d1.htm (EX-31.1) — 12KB
• tmb-20250930xex31d2.htm (EX-31.2) — 12KB
• tmb-20250930xex32d1.htm (EX-32.1) — 7KB
• tmb-20250930xex32d2.htm (EX-32.2) — 7KB
• tmb-20250930x10q004.jpg (GRAPHIC) — 5KB
• tmb-20250930x10q012.jpg (GRAPHIC) — 74KB
• 0001104659-25-110043.txt ( ) — 10131KB
• tmb-20250930.xsd (EX-101.SCH) — 64KB
• tmb-20250930_cal.xml (EX-101.CAL) — 67KB
• tmb-20250930_def.xml (EX-101.DEF) — 243KB
• tmb-20250930_lab.xml (EX-101.LAB) — 469KB
• tmb-20250930_pre.xml (EX-101.PRE) — 422KB
• tmb-20250930x10q_htm.xml (XML) — 1898KB

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 8 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 30 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 45 Item 4.

Controls and Procedures

Controls and Procedures 46 Part II Other Information 47 Item 1.

Legal Proceedings

Legal Proceedings 47 Item 1A.

Risk Factors

Risk Factors 47 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

SIGNATURES 50 3 Table of Contents

– Financial Information

PART I – Financial Information ITEM I: Financial Statements New Mountain Net Lease Trust Consolidated Balance Sheets (unaudited) (Dollars in thousands, except per share data) September 30, 2025 December 31, 2024 Assets Investments in real estate, net $ 1,260,070 $ 1,204,195 Intangible assets, net 41,603 36,854 Cash and cash equivalents 559 3,335 Restricted cash 13,696 263,135 Other assets 80,662 63,908 Total assets $ 1,396,590 $ 1,571,427 Liabilities Mortgage notes and credit facility, net $ 863,519 $ 903,523 Aggregation facility 51,875 — Subscriptions received in advance 13,495 262,934 Accounts payable and accrued expenses 10,411 3,352 Affiliate line of credit 7,750 — Due to affiliates 7,929 294 Distribution and redemption payable 4,292 — Intangible liabilities, net 4,505 1,065 Other liabilities 4,710 2,972 Total liabilities 968,486 1,174,140 Commitments and contingencies (see Note 14) Equity Common shares – Class A; $ 0.01 par value per share; 9,159,016 and 831,571 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively 92 8 Common shares – Class F; $ 0.01 par value per share; 11,409,040 and 6,287,642 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively 114 63 Common shares – Class I; $ 0.01 par value per share; 2,996,150 and 0 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively 30 — Common shares – Class E; $ 0.01 par value per share; 6,712,132 and 20,188,521 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively 67 202 Additional paid-in capital 495,557 441,319 Earnings less than distributions ( 126,935 ) ( 104,860 ) Total shareholders' equity 368,925 336,732 Non-controlling interests 59,179 60,555 Total equity 428,104 397,287 Total liabilities and shareholders' equity

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Dollars in thousands, except per share data) Note 1. Organization and Business Purpose New Mountain Net Lease Trust ("we," "our," "us," the "Company" or "NEWLEASE") is a Maryland statutory trust formed in August 2024 to acquire, own, finance and lease a diversified portfolio of operationally critical, single-tenant, commercial net lease real estate assets primarily located in the United States. The Company is externally managed by our investment adviser, New Mountain Finance Advisers, L.L.C. (the "Adviser"), a Delaware limited liability company and an affiliate of our sponsor, New Mountain Capital, L.L.C. (the "Sponsor"). We are structured as a non-listed, perpetual-life real estate investment trust ("REIT"), and therefore our securities are not listed on a national securities exchange and, as of the date of this report, there is no plan to list our securities on a national securities exchange. As a perpetual-life REIT, our common shares are intended to be sold monthly on a continuous basis at a price generally equal to our prior month's net asset value ("NAV") per share. We have elected and intend to qualify to be taxed as a REIT under the U.S. Internal Revenue Code of 1986, as amended (the "Code"), for U.S. federal income tax purposes and generally will not be subject to U.S. federal income taxes on our taxable income to the extent we annually distribute all of our REIT taxable income to shareholders and maintain our qualification as a REIT. Our structure as a perpetual-life REIT allows us to originate, acquire, finance and manage our investment portfolio in an active and flexible manner. We believe the structure is advantageous to shareholders, as we are not limited by a pre-determined operational period and the need to liquidate assets, potentially in an unfavorable market, to satisfy a liquidity event at the end of a pre-specified period. The Company is conducting a continuous, blind pool private offering of

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Dollars in thousands, except per share data) NM Fund I then distributed in kind the 27,307,734 common shares that it received in connection with the REIT Contribution to its existing partners in proportion to their ownership in NM Fund I immediately prior to the completion of the Formation Transactions, who had the opportunity to elect to have their common shares repurchased by us. As used throughout this document, the terms the "Company", "we", "our", and "us" mean: The Predecessor for periods on or prior to the closing of the Formation Transactions on January 2, 2025; and The combined operations of the Company and the Predecessor beginning January 2, 2025, following the completion of the Formation Transactions. As of September 30, 2025, the Company owned 169 properties leased to 34 tenants. Note 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In connection with the Formation Transactions, NM Fund I contributed 100 % of the outstanding common stock of the Predecessor, which prior to such contribution indirectly owned the Seed Portfolio. As the contribution of 100 % of NM Fund I's interest in the Seed Portfolio to the Company qualifies as a transaction between parties under a common control in accordance with ASC 805-50, the unaudited consolidated Balance Sheets of Seed Portfolio and the Company as of December 31, 2024, have been presented on a combined basis. The Company concluded that the Predecessor and the Seed Portfolio's financial statements are to be reflected at historical carryover basis in the unaudited consolidated financial statements for the three and nine months ended September 30, 2025 and 2024. All intercompany balances and transactions have been eliminated in consoli

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Dollars in thousands, except per share data) Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company's most significant assumptions and estimates relate to the useful lives of real estate assets, lease accounting, real estate impairment assessments and allocation of fair value of purchase consideration. These estimates are based on historical experience and other assumptions which management believes are reasonable. The Company evaluates its estimates on an ongoing basis and revises these estimates and related disclosures as experience develops or new information becomes known. Actual results could differ from those estimates. Investment in Real Estate Real estate assets are stated at cost, less accumulated depreciation and amortization. The Company evaluates each acquisition transaction to determine whether the acquired asset meets the definition of a business and therefore accounted for as a business combination or if the acquisition transaction should be accounted for as an asset acquisition. Under Accounting Standards Update ("ASU") 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business" ("ASU 2017-01"), an acquisition does not qualify as a business when substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets or the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay. Transaction costs related to

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