Some of the more significant risks relating to our business, our private offering and an investment in our common shares include:
•We have limited operating history and there is no assurance that we will be able to successfully achieve our investment objectives.
•We face risks associated with the deployment of our capital.
•Since there is no public trading market for our common shares, repurchase of shares by us will likely be the only way to dispose of your shares. Our share repurchase plan will provide shareholders with the opportunity to request that we repurchase their shares on a quarterly basis, but we are not obligated to repurchase any shares and may choose to repurchase only some, or even none, of the shares that have been requested to be repurchased in any particular quarter in our discretion. In addition, repurchases will be subject to available liquidity and other significant restrictions. Further, our board of trustees may make exceptions to, modify or suspend our share repurchase plan if in its reasonable judgment it deems such action to be in our best interest and the best interest of our shareholders, such as when repurchase requests would place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on us that would outweigh the benefit of repurchasing our shares. Our board of trustees cannot terminate our share repurchase plan absent a liquidity event which results in our shareholders receiving cash or securities listed on a national securities exchange or where otherwise required by law. As a result, our shares should be considered as having only limited liquidity and at times may be illiquid.
•We may pay distributions from sources other than our cash flow from operations, including, without limitation, borrowings, return of capital, offering net proceeds. the sale of assets or repayments under CRE debt investments (as defined below), and advances or the deferral of fees and expenses, and we have no limits on the amounts we may fund from such sources.
•The purchase price and repurchase price for our common shares will be generally based on our prior month’s net asset value (“NAV”) (subject to material changes as described above) and will not be based on any public trading market. While there are independent valuations of our investments from time to time, the valuation of investments is inherently subjective and our NAV may not accurately reflect the actual price at which our investments could be liquidated on any given day.
•We have no employees and are dependent on the Adviser (as defined below) to conduct our operations. The Adviser will face conflicts of interest as a result of, among other things, the allocation of investment opportunities among us and Other MSREI Clients, including the Opportunistic Funds (each as defined below), the allocation of time of its investment professionals and the substantial fees that we will pay to the Adviser.
•We may make changes to our business, investment, leverage and financing strategies without shareholder approval.
•On acquiring shares, you will experience immediate dilution in the net tangible book value of your investment.
•Principal and interest payments on any borrowings will reduce the amount of funds available for distribution or investment in additional real estate assets.
•Our shareholders generally have limited voting rights.
•There are limits on the ownership and transferability of our shares.
•While our investment strategy includes investing in net leased properties and CRE debt investments with a focus on providing current income to investors, an investment in us is not an investment in fixed income. Fixed income has material differences from an investment in the Company, including those related to vehicle structure, investment objectives and restrictions, risks, fluctuation of principal, safety, guarantees or insurance, fees and expenses, liquidity and tax treatment.
•We intend to elect and continue to qualify to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. However, if we fail to qualify as a REIT and no relief provisions apply, our NAV and cash available for distribution to our shareholders could materially decrease.
•The acquisition of investment properties has been and may in the future be financed in substantial part by borrowing, which increases our exposure to loss. The use of leverage involves a high degree of financial risk and will increase the exposure of the investments to adverse economic factors.
•Investment in net lease 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.
•We depend on tenants for our revenue, and therefore our revenue is dependent on the success and economic viability of our tenants. Our reliance on single or significant tenants in certain buildings may decrease our ability to lease vacated space and could materially adversely affect our revenue and net income, overall performance, results of operations and ability to pay distributions.
•We are subject to risks related to changes in global, national, regional or local economic, demographic or capital market conditions (including volatility as a result of the war in Ukraine and the conflict and escalation tensions in the Middle East).
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Item 1. Business
References herein to “North Haven Net REIT,” the “Company,” “we,” “us,” or “our” refer to North Haven Net REIT, a Maryland statutory trust and its subsidiaries, unless the context specifically requires otherwise.
General Description of Business and Operations
The Company invests in net lease investments comprised of high-quality commercial real estate assets that are primarily long-term leased under net lease structures to tenants for whom the properties are mission critical, meaning essential to the continuance of their business operations. The Company seeks to create a portfolio diversified across asset class, tenant industry, lease expiration and geography to attempt to mitigate credit risk concentration and volatility resulting from market conditions. In addition, to a lesser extent, the Company also invests on a tactical basis in commercial real estate debt-related assets, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans, preferred equity, real estate-related corporate credit, and commercial mortgage-backed securities, as well as other real estate-related securities (such as common and preferred stock of publicly traded real estate investment trusts (“REITs”) and other real estate companies) and loans.
The Company is the sole general partner of NH Net REIT Operating Partnership, LP, a Delaware limited partnership (the “Operating Partnership”). The Operating Partnership is consolidated by the Company and substantially all the Company's operations are conducted through the Operating Partnership. The Company owns 99.9% of the Operating Partnership and NH Net REIT Special Limited Partner LP, an affiliate of Morgan Stanley (the “Special Limited Partner”), owns a special limited partner interest in the Operating Partnership.
We are structured as a non-listed, perpetual-life REIT, and therefore our securities are not listed on a national securities exchange and, as of the date of this Form 10-K, there is no plan to list our securities on a national securities exchange. We are organized as a holding company and plan to conduct our business primarily through our various subsidiaries. Commencing with our taxable year ended December 31, 2024, we intend to elect and 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.
As of February 24, 2025, we had received cumulative net proceeds of $770.8 million (inclusive of net proceeds from investments through our distribution reinvestment plan) from the sale of our common shares and contributed the net proceeds to the Operating Partnership in exchange for a corresponding number of Operating Partnership units. The Operating Partnership has primarily used the net proceeds to make investments. We intend to continue selling shares on a monthly basis.
Our Adviser
We are externally managed by MSREF Real Estate Advisor, Inc. (the “Adviser”), a Delaware corporation and wholly-owned subsidiary of Morgan Stanley (NYSE: MS) (“Morgan Stanley”). Pursuant to the advisory agreement between us, the Operating Partnership and the Adviser (the “Advisory Agreement”), we have delegated to the Adviser the authority to source, evaluate and monitor our investment opportunities and make decisions related to the acquisition, management, financing and disposition of our assets, in accordance with our investment objectives, guidelines, policies and limitations, subject to oversight by our board of trustees. Our board of trustees will at all times have ultimate oversight and policy-making authority over us, including responsibility for governance, financial controls, compliance and disclosure.
Our Adviser operates through Morgan Stanley Real Estate Investing (“MSREI”), the dedicated global private real estate investment management arm of Morgan Stanley. MSREI is functionally located within the Global Real Assets platform of Morgan Stanley Investment Management (“MSIM”). Since its inception in the early 1990s, MSREI has acquired over $200 billion of gross real estate assets in 39 countries as of September 30, 2024. As of September 30, 2024, MSREI managed approximately $53 billion of gross real estate assets worldwide on behalf of its clients. MSIM, together with its investment advisory affiliates, has approximately $1.6 trillion in assets under management or supervision as of September 30, 2024. Morgan Stanley, founded in 1935, is a leading global financial services firm providing a wide range of investment banking, securities, wealth management and investment management services. With offices in 42 countries, Morgan Stanley’s employees serve clients worldwide including corporations, governments, institutions and individuals. MSIM, together with its investment advisory affiliates, has more than 1,300 investment professionals around the world and approximately $1.6 trillion in assets under management or supervision as of September 30, 2024. MSIM strives to provide outstanding service and long-term investment performance to a diverse client base through a comprehensive suite of investment management solutions.