Correspondence 0001628280-23-018466 from Blue Owl Real Estate Net Lease Trust (CIK 0001944366)
Blue Owl Real Estate Net Lease Trust (CIK 0001944366)
Date: May 16, 2023 · CIK: 0001944366 · Accession: 0001628280-23-018466
AI Filing Summary & Sentiment
File numbers found in text: 000-56536
Referenced dates: May 2, 2023
Letter
VIA EDGAR Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549
Dear Ladies and Gentlemen:
On behalf of Oak Street Net Lease Trust (the “Company”), we hereby transmit via EDGAR for filing with the U.S. Securities and Exchange Commission Amendment No. 1 (“Amendment No. 1”) to the above-referenced registration statement on Form 10-12G (the “Registration Statement”), marked to show changes from the Registration Statement filed on April 5, 2023. The Registration Statement has been revised in response to the Staff’s comments, to include unaudited condensed consolidated financial statements as of March 31, 2023 and for the three months ended March 31, 2023, and to reflect certain other changes. We are providing the following responses to the comment letter from the staff (“Staff”) of the Commission’s Division of Corporation Finance, dated May 2, 2023. To assist your review, we have retyped the text of the Staff’s comments in italics below. Please note that all references to page numbers in our responses refer to the page numbers of Amendment No. 1.
Unless otherwise defined below, terms defined in the Registration Statement and used below shall have the meanings given to them in the Registration Statement. The responses and information described below are based upon information provided to us by the Company.
Form 10-12G
Special Note Regarding Forward-Looking Statements, page 2
1.We note that you have included the summary risk factors in this section. Please create a separate section to address the summary risk factors. Additionally, to the extent true, please add summary risk factors to address that (i) your investment strategy may change without shareholder approval, (ii) you may revoke or terminate your REIT election without shareholder approval, (iii) you may suspend the share repurchase program indefinitely, and
Simpson Thacher & Bartlett LLP
Securities and Exchange Commission -2-
May 16, 2023
(iv) you have a significant amount of loss and there is no limit on the amount of leverage that you may incur.
The Company has created a separate section to address the summary risk factors on page 4 and has added summary risk factors on pages 4-5 to address that (i) the Company’s investment strategy may change without shareholder approval, (ii) the Company may revoke or terminate its REIT election without shareholder approval, (iii) the Company may suspend the share repurchase program indefinitely, and (iv) the Company has incurred a net loss in the past and may in incur a net loss in the future, and that, although the Company’s target leverage ratio is 60%, there is no limit on the amount the Company may borrow with respect to any individual property or portfolio.
Item 1. Business, page 6
2.We note the "not necessarily complete" language relating to statements concerning certain agreements filed as exhibits. Please revise the disclosure to clarify that statements in the registration statement concerning any contracts or other documents filed as exhibits include the material provisions of the contracts or other documents.
The Company has revised the disclosure on pages 14, 19 and 20 to clarify that statements in the registration statement concerning any contracts or other documents filed as exhibits include the material provisions of the contracts or other documents.
Acquisition Strategies, page 7
3.Please revise to explain what you view as “creditworthy” and clarify whether you may accept tenants that are not rated.
The Company has revised the disclosure on page 7 to explain what it views as “creditworthy” and to clarify that it may lease property to unrated tenants that it determines to be creditworthy.
Investment Focuses of our Adviser, page 9
4.Please revise to also disclose any major adverse business developments experienced by your adviser.
The Company advises the Staff that it is not aware of any major adverse business developments experienced by its Adviser. Nonetheless, the Company has revised the disclosure on pages 9 through 12 to discuss the competitive nature of the industry in which the Adviser operates and to further discuss the Adviser’s business.
Simpson Thacher & Bartlett LLP
Securities and Exchange Commission -3-
May 16, 2023
Oak Street Net Lease Trust Structure, page 13
5.Please revise the organization chart to disclose the percentages owned.
The Company has revised the organization chart on page 14 to disclose the percentages owned.
Compensation of the Advisor, page 15
6.To the extent any fees have been paid to the advisor, please include a table of the fees paid or, if not, fees accrued through December 31, 2022. Additionally, please provide a hypothetical demonstrating how the performance allocation will be determined.
The Company has revised its disclosure on page 18 to include a performance allocation example which provides a hypothetical example demonstrating how the performance allocation will be determined. In addition, the Company has included a cross-reference on page 18 to Item 2. Financial Information Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations for further information about the performance allocation and management fee accrued from Inception through December 31, 2022, and during the three months ended March 31, 2023.
Allocation of Investment Opportunities, page 22
7.Please disclose the other entities that may compete with you for investments. Also revise to further explain the "certain net lease investments" over which Other Blue Owl Accounts may have priority over you, and the types of "additional priorities" that may be held by future Other Blue Owl Accounts.
The Company has revised the disclosure on pages 23 through 24 to provide additional detail regarding the other entities that may compete with it for investments, which include Other Blue Owl Accounts. “Other Blue Owl Accounts” is defined to include, among other things, “investment funds, REITs, vehicles, accounts (including separate accounts), products and/or other similar arrangements sponsored, advised, and/or managed by Blue Owl or its affiliates (including Oak Street), whether currently in existence or subsequently established.” The Company believes that the disclosure makes clear the types of other affiliated entities that may compete with the Company for investments.
The Company has also revised the disclosure on pages 23 through 24 to further clarify the “certain net lease investments” over which Other Blue Owl Accounts may have priority over the Company, noting that factors such as the long term durations of certain net leases, the credit quality of tenants, and the return profile of an investment provide a meaningful explanation of the types of net lease investments for which certain Other Blue Owl Accounts
Simpson Thacher & Bartlett LLP
Securities and Exchange Commission -4-
May 16, 2023
have priority over the Company. As a consequence, the Company further notes that the Registration Statement explains “Other Blue Owl Accounts having priority over us will result in fewer investment opportunities being made available to us, and the opportunities that are available to us may have lower return profiles, shorter lease durations and/or lower-rated tenants than would otherwise be the case.”
The Company has also revised the disclosure on page 24 to explain that there may be “additional priorities” that may be held by future Other Blue Owl Accounts, noting that, because these future Other Blue Owl Accounts have yet to be organized, it is unclear what types of investment priorities (if any) such future Other Blue Owl Accounts could have over the Company. The Company included the referenced disclosure in the Registration Statement because such investment priorities over the Company could be possible in the future.
Emerging Growth Company, page 24
8.We note that you intend to take advantage of the extended transition period. Please add risk factor disclosure and disclosure to the section "Management's Discussion and Analysis" that as a result of this election, your financial statements may not be comparable to companies that comply with public company effective dates.
The Company has revised the risk factor disclosure on page 99 and the disclosure in the section “Management’s Discussion and Analysis” on page 103 to clarify that it intends to take advantage of the extended transition period and that, as a result of this election, the Company’s financial statements may not be comparable to companies that comply with public company effective dates.
The Private Offering, page 26
9.Please clarify how you convey your NAV price changes and whether you would file a new Form D each time. Additionally, if there is a significant difference between the previous month price and the price at which you would issue shares to a new investor, clarify whether investors would have an opportunity to rescind their subscription. Similarly, if there is a significant decrease in price since the time someone submitted their repurchase request, clarify whether the investor would have an opportunity to revoke their request.
The Company provides notice of the transaction price directly to the financial intermediaries that participate in the offering. The transaction price is generally available 15 calendar days after the last calendar day of each month; however, in certain circumstances, the transaction price will not be made available until a later time. Following effectiveness of the Registration Statement, the Company will file Current Reports on Form 8-K related to Item 3.02, as required.
Simpson Thacher & Bartlett LLP
Securities and Exchange Commission -5-
May 16, 2023
The Company is conducting a continuous private offering and does not intend to file a new Form D each month; the Company intends file annual renewals and any applicable amendments to its current Form D.
The Company respectfully directs the Staff to its disclosure on pages 27 through 28, which describes the subscription process. As described therein and in other similar disclosures throughout the Registration Statement, the purchase price per share of each class will be equal to the then-current transaction price, which will generally be the Company’s prior month’s NAV per share for such class as of the last calendar day of such month. Thus, the investor will know the purchase price per share prior to the Company’s acceptance of the subscription order. The Company has included additional disclosure on page 27 to disclose an investor’s withdrawal rights related to a submitted subscription.
The Company also respectfully directs the Staff to its disclosure on pages 25 through 27 which describes the Company’s Existing Repurchase Plan and New Repurchase Plan. As described therein, pursuant to the Existing Share Repurchase Plan, repurchases will be made at the transaction price in effect on the last business day of the month, which is generally equal to the prior month’s NAV per share for such class, and an investor may withdraw its repurchase request by notifying the transfer agent before 4:00 p.m. (Eastern time) on the second to last business day of the applicable month.
Pursuant to the New Repurchase Plan, repurchases will be made at the NAV per share as of the last business day of the applicable calendar quarter, which will not be available until after the expiration of the applicable tender offer so shareholders will not know the exact price of shares in the tender offer when they make decisions whether to tender their shares. Following the expiration of the tender offer, shareholders will not have an opportunity to withdraw requests to tender their shares. The Company has included additional disclosure on page 26 to provide additional clarification on the New Repurchase Plan.
“Your ability to have your shares repurchased is limited.”, page 96
10.Please revise to clarify here whether affiliates may seek to have their shares repurchased and if they are subject to the same limitations as the common shareholders.
The Company confirms to the Staff that affiliates of the Company are generally subject to the same repurchase limitations as the common shareholders. However, as disclosed in the Registration Statement on pages 26 and 98, the repurchase limitations will not apply to (i) shares or units issued to the Adviser and its affiliates under our management fee, (ii) Blue Owl Capital Holdings and its related parties for the Upfront Equity Investment, (iii) Blue Owl Capital Holdings as payments of interest for its unsecured loan to the Operating Partnership, or (iv) each Special Limited Partner’s performance participation interest. As
Simpson Thacher & Bartlett LLP
Securities and Exchange Commission -6-
May 16, 2023
requested by the Staff, the Company has added clarifying disclosure on page 98 that except in the enumerated instances cited above, all other purchases of shares or units by affiliates of the Adviser will be subject to the same repurchase limitations as other shareholders.
Item 2. Financial Information
2022 Highlights (Results of Operations), page 103
11.We note that you have included an annualized distribution rate. Please disclose the six months of distributions that you have paid. To the extent you have not paid two full quarters of distributions, please remove disclosure regarding the annualized distribution rate.
The Company advises the Staff that as of December 31, 2022, the Company had not paid six months of distributions. In response to the Staff’s comment, the Company removed its disclosure regarding the annualized distribution rate on page 105. The Company respectfully notes that, as of March 31, 2023, the Company had paid six months of distributions. Accordingly, the Company has included the annualized distribution rate in its disclosures on page 104 relating to the three months ended March 31, 2023.
Management's Discussion and Analysis of Financial Condition and Results of Operations Investment Portfolio, page 104
12.Please add a footnote to the table to clarify how your rental disclosures take into account tenant concessions and abatements.
The Company advises the Staff that, as of December 31, 2022 and March 31, 2023, the Company had not entered into any concession or abatement agreements with tenants. In response to the Staff’s comment, the Company has revised its disclosure on page 110 to include a footnote to the table clarifying that the Company had not entered into any tenant concessions and abatements.
Item 2. Financial Information
Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Same Property Results of Operations, page 109
13.We note your presentation of same property net operating income. Please address the following with respect to your presentation:
•We note your reconciliation begins with net (loss) income attributable to NLT shareholders. However, it appears the amounts for the predecessor periods reflect revenues in excess of certain operating expenses calculated in accordance with Rule 3-14 of Regulation S-X. Please revise your disclosure accordingly.
Simpson Thacher & Bartlett LLP
Securities and Exchange Commission -7-
May 16, 2023
•Given the predecessor periods have been prepared under provisions of Rule 3-14 of Regulation S-X, tell us, and revise your disclosure to clarify, whether same property NOI for the predecessor periods excludes any operating expenses that are included in same property NOI for the successor period.
•Revise your disclosure to clar
Show Raw Text
CORRESP 1 filename1.htm Document Simpson Thacher & Bartlett LLP 425 LEXINGTON AVENUE NEW YORK, NY 10017-3954 TELEPHONE: +1-212-455-2000 FACSIMILE: +1-212-455-2502 May 16, 2023 VIA EDGAR Re: Oak Street Net Lease Trust Registration Statement on Form 10-12G Filed April 5, 2023 File No. 000-56536 Ms. Stacie Gorman Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549 Dear Ladies and Gentlemen: On behalf of Oak Street Net Lease Trust (the “Company”), we hereby transmit via EDGAR for filing with the U.S. Securities and Exchange Commission Amendment No. 1 (“Amendment No. 1”) to the above-referenced registration statement on Form 10-12G (the “Registration Statement”), marked to show changes from the Registration Statement filed on April 5, 2023. The Registration Statement has been revised in response to the Staff’s comments, to include unaudited condensed consolidated financial statements as of March 31, 2023 and for the three months ended March 31, 2023, and to reflect certain other changes. We are providing the following responses to the comment letter from the staff (“Staff”) of the Commission’s Division of Corporation Finance, dated May 2, 2023. To assist your review, we have retyped the text of the Staff’s comments in italics below. Please note that all references to page numbers in our responses refer to the page numbers of Amendment No. 1. Unless otherwise defined below, terms defined in the Registration Statement and used below shall have the meanings given to them in the Registration Statement. The responses and information described below are based upon information provided to us by the Company. Form 10-12G Special Note Regarding Forward-Looking Statements, page 2 1.We note that you have included the summary risk factors in this section. Please create a separate section to address the summary risk factors. Additionally, to the extent true, please add summary risk factors to address that (i) your investment strategy may change without shareholder approval, (ii) you may revoke or terminate your REIT election without shareholder approval, (iii) you may suspend the share repurchase program indefinitely, and Simpson Thacher & Bartlett LLP Securities and Exchange Commission -2- May 16, 2023 (iv) you have a significant amount of loss and there is no limit on the amount of leverage that you may incur. The Company has created a separate section to address the summary risk factors on page 4 and has added summary risk factors on pages 4-5 to address that (i) the Company’s investment strategy may change without shareholder approval, (ii) the Company may revoke or terminate its REIT election without shareholder approval, (iii) the Company may suspend the share repurchase program indefinitely, and (iv) the Company has incurred a net loss in the past and may in incur a net loss in the future, and that, although the Company’s target leverage ratio is 60%, there is no limit on the amount the Company may borrow with respect to any individual property or portfolio. Item 1. Business, page 6 2.We note the "not necessarily complete" language relating to statements concerning certain agreements filed as exhibits. Please revise the disclosure to clarify that statements in the registration statement concerning any contracts or other documents filed as exhibits include the material provisions of the contracts or other documents. The Company has revised the disclosure on pages 14, 19 and 20 to clarify that statements in the registration statement concerning any contracts or other documents filed as exhibits include the material provisions of the contracts or other documents. Acquisition Strategies, page 7 3.Please revise to explain what you view as “creditworthy” and clarify whether you may accept tenants that are not rated. The Company has revised the disclosure on page 7 to explain what it views as “creditworthy” and to clarify that it may lease property to unrated tenants that it determines to be creditworthy. Investment Focuses of our Adviser, page 9 4.Please revise to also disclose any major adverse business developments experienced by your adviser. The Company advises the Staff that it is not aware of any major adverse business developments experienced by its Adviser. Nonetheless, the Company has revised the disclosure on pages 9 through 12 to discuss the competitive nature of the industry in which the Adviser operates and to further discuss the Adviser’s business. Simpson Thacher & Bartlett LLP Securities and Exchange Commission -3- May 16, 2023 Oak Street Net Lease Trust Structure, page 13 5.Please revise the organization chart to disclose the percentages owned. The Company has revised the organization chart on page 14 to disclose the percentages owned. Compensation of the Advisor, page 15 6.To the extent any fees have been paid to the advisor, please include a table of the fees paid or, if not, fees accrued through December 31, 2022. Additionally, please provide a hypothetical demonstrating how the performance allocation will be determined. The Company has revised its disclosure on page 18 to include a performance allocation example which provides a hypothetical example demonstrating how the performance allocation will be determined. In addition, the Company has included a cross-reference on page 18 to Item 2. Financial Information Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations for further information about the performance allocation and management fee accrued from Inception through December 31, 2022, and during the three months ended March 31, 2023. Allocation of Investment Opportunities, page 22 7.Please disclose the other entities that may compete with you for investments. Also revise to further explain the "certain net lease investments" over which Other Blue Owl Accounts may have priority over you, and the types of "additional priorities" that may be held by future Other Blue Owl Accounts. The Company has revised the disclosure on pages 23 through 24 to provide additional detail regarding the other entities that may compete with it for investments, which include Other Blue Owl Accounts. “Other Blue Owl Accounts” is defined to include, among other things, “investment funds, REITs, vehicles, accounts (including separate accounts), products and/or other similar arrangements sponsored, advised, and/or managed by Blue Owl or its affiliates (including Oak Street), whether currently in existence or subsequently established.” The Company believes that the disclosure makes clear the types of other affiliated entities that may compete with the Company for investments. The Company has also revised the disclosure on pages 23 through 24 to further clarify the “certain net lease investments” over which Other Blue Owl Accounts may have priority over the Company, noting that factors such as the long term durations of certain net leases, the credit quality of tenants, and the return profile of an investment provide a meaningful explanation of the types of net lease investments for which certain Other Blue Owl Accounts Simpson Thacher & Bartlett LLP Securities and Exchange Commission -4- May 16, 2023 have priority over the Company. As a consequence, the Company further notes that the Registration Statement explains “Other Blue Owl Accounts having priority over us will result in fewer investment opportunities being made available to us, and the opportunities that are available to us may have lower return profiles, shorter lease durations and/or lower-rated tenants than would otherwise be the case.” The Company has also revised the disclosure on page 24 to explain that there may be “additional priorities” that may be held by future Other Blue Owl Accounts, noting that, because these future Other Blue Owl Accounts have yet to be organized, it is unclear what types of investment priorities (if any) such future Other Blue Owl Accounts could have over the Company. The Company included the referenced disclosure in the Registration Statement because such investment priorities over the Company could be possible in the future. Emerging Growth Company, page 24 8.We note that you intend to take advantage of the extended transition period. Please add risk factor disclosure and disclosure to the section "Management's Discussion and Analysis" that as a result of this election, your financial statements may not be comparable to companies that comply with public company effective dates. The Company has revised the risk factor disclosure on page 99 and the disclosure in the section “Management’s Discussion and Analysis” on page 103 to clarify that it intends to take advantage of the extended transition period and that, as a result of this election, the Company’s financial statements may not be comparable to companies that comply with public company effective dates. The Private Offering, page 26 9.Please clarify how you convey your NAV price changes and whether you would file a new Form D each time. Additionally, if there is a significant difference between the previous month price and the price at which you would issue shares to a new investor, clarify whether investors would have an opportunity to rescind their subscription. Similarly, if there is a significant decrease in price since the time someone submitted their repurchase request, clarify whether the investor would have an opportunity to revoke their request. The Company provides notice of the transaction price directly to the financial intermediaries that participate in the offering. The transaction price is generally available 15 calendar days after the last calendar day of each month; however, in certain circumstances, the transaction price will not be made available until a later time. Following effectiveness of the Registration Statement, the Company will file Current Reports on Form 8-K related to Item 3.02, as required. Simpson Thacher & Bartlett LLP Securities and Exchange Commission -5- May 16, 2023 The Company is conducting a continuous private offering and does not intend to file a new Form D each month; the Company intends file annual renewals and any applicable amendments to its current Form D. The Company respectfully directs the Staff to its disclosure on pages 27 through 28, which describes the subscription process. As described therein and in other similar disclosures throughout the Registration Statement, the purchase price per share of each class will be equal to the then-current transaction price, which will generally be the Company’s prior month’s NAV per share for such class as of the last calendar day of such month. Thus, the investor will know the purchase price per share prior to the Company’s acceptance of the subscription order. The Company has included additional disclosure on page 27 to disclose an investor’s withdrawal rights related to a submitted subscription. The Company also respectfully directs the Staff to its disclosure on pages 25 through 27 which describes the Company’s Existing Repurchase Plan and New Repurchase Plan. As described therein, pursuant to the Existing Share Repurchase Plan, repurchases will be made at the transaction price in effect on the last business day of the month, which is generally equal to the prior month’s NAV per share for such class, and an investor may withdraw its repurchase request by notifying the transfer agent before 4:00 p.m. (Eastern time) on the second to last business day of the applicable month. Pursuant to the New Repurchase Plan, repurchases will be made at the NAV per share as of the last business day of the applicable calendar quarter, which will not be available until after the expiration of the applicable tender offer so shareholders will not know the exact price of shares in the tender offer when they make decisions whether to tender their shares. Following the expiration of the tender offer, shareholders will not have an opportunity to withdraw requests to tender their shares. The Company has included additional disclosure on page 26 to provide additional clarification on the New Repurchase Plan. “Your ability to have your shares repurchased is limited.”, page 96 10.Please revise to clarify here whether affiliates may seek to have their shares repurchased and if they are subject to the same limitations as the common shareholders. The Company confirms to the Staff that affiliates of the Company are generally subject to the same repurchase limitations as the common shareholders. However, as disclosed in the Registration Statement on pages 26 and 98, the repurchase limitations will not apply to (i) shares or units issued to the Adviser and its affiliates under our management fee, (ii) Blue Owl Capital Holdings and its related parties for the Upfront Equity Investment, (iii) Blue Owl Capital Holdings as payments of interest for its unsecured loan to the Operating Partnership, or (iv) each Special Limited Partner’s performance participation interest. As Simpson Thacher & Bartlett LLP Securities and Exchange Commission -6- May 16, 2023 requested by the Staff, the Company has added clarifying disclosure on page 98 that except in the enumerated instances cited above, all other purchases of shares or units by affiliates of the Adviser will be subject to the same repurchase limitations as other shareholders. Item 2. Financial Information 2022 Highlights (Results of Operations), page 103 11.We note that you have included an annualized distribution rate. Please disclose the six months of distributions that you have paid. To the extent you have not paid two full quarters of distributions, please remove disclosure regarding the annualized distribution rate. The Company advises the Staff that as of December 31, 2022, the Company had not paid six months of distributions. In response to the Staff’s comment, the Company removed its disclosure regarding the annualized distribution rate on page 105. The Company respectfully notes that, as of March 31, 2023, the Company had paid six months of distributions. Accordingly, the Company has included the annualized distribution rate in its disclosures on page 104 relating to the three months ended March 31, 2023. Management's Discussion and Analysis of Financial Condition and Results of Operations Investment Portfolio, page 104 12.Please add a footnote to the table to clarify how your rental disclosures take into account tenant concessions and abatements. The Company advises the Staff that, as of December 31, 2022 and March 31, 2023, the Company had not entered into any concession or abatement agreements with tenants. In response to the Staff’s comment, the Company has revised its disclosure on page 110 to include a footnote to the table clarifying that the Company had not entered into any tenant concessions and abatements. Item 2. Financial Information Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Same Property Results of Operations, page 109 13.We note your presentation of same property net operating income. Please address the following with respect to your presentation: •We note your reconciliation begins with net (loss) income attributable to NLT shareholders. However, it appears the amounts for the predecessor periods reflect revenues in excess of certain operating expenses calculated in accordance with Rule 3-14 of Regulation S-X. Please revise your disclosure accordingly. Simpson Thacher & Bartlett LLP Securities and Exchange Commission -7- May 16, 2023 •Given the predecessor periods have been prepared under provisions of Rule 3-14 of Regulation S-X, tell us, and revise your disclosure to clarify, whether same property NOI for the predecessor periods excludes any operating expenses that are included in same property NOI for the successor period. •Revise your disclosure to clar