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What changed in NEXPOINT DIVERSIFIED REAL ESTATE TRUST's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of NEXPOINT DIVERSIFIED REAL ESTATE TRUST's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+518 added−795 removedSource: 10-K (2026-03-31) vs 10-K (2025-03-31)

Top changes in NEXPOINT DIVERSIFIED REAL ESTATE TRUST's 2025 10-K

518 paragraphs added · 795 removed · 416 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

48 edited+21 added−37 removed74 unchanged
Biggest changePetersburg, Florida Hospitality Hyatt Place Park City 2/15/2022 27,636 — 28,267 Park City, Utah Hospitality Bradenton Hampton Inn & Suites 2/22/2022 30,911 — 31,029 Bradenton, Florida Hospitality Total $ 410,289 $ 163,189 $ 265,800 Investment Real Estate Investment Date Value Debt Net Equity (1) Location Property Type Held-For-Sale Properties Addison Property (4) 5/4/2017 $ 8,250 $ — $ 8,250 Addison, Texas Hospitality Plano HomeWood Suites 5/4/2017 8,266 — 8,266 Plano, Texas Hospitality Las Colinas HomeWood Suites 5/4/2017 13,762 — 13,762 Las Colinas, Texas Hospitality Total $ 30,278 $ — $ 30,278 Real Estate Equity Method Investments Ownership Percentage Investment Type Net Equity (1) Location VineBrook Homes Operating Partnership, L.P. 11.4 % Single-Family Rental $ 151,706 Various NexPoint Real Estate Finance Operating Partnership, L.P. 15.6 % Diversified 76,396 Various NexPoint Storage Partners, Inc. 52.8 % Self-Storage 62,709 Various NexPoint SFR Operating Partnership, L.P. 30.8 % Single-Family Rental 37,953 Various NexPoint Storage Partners Operating Company, LLC 30.5 % Self-Storage 34,172 Various NexPoint Real Estate Finance, Inc. 12.0 % (2) Diversified 32,949 Various AM Uptown Hotel, LLC 60.0 % Hospitality 18,081 Dallas, Texas Las Vegas Land Owner, LLC 77.0 % (5) Multifamily 12,321 Las Vegas, Nevada Sandstone Pasadena Apartments, LLC 50.0 % Multifamily 10,055 Pasadena, Texas LLV Holdco, LLC 26.8 % Land 2,606 Henderson, Nevada Capital Acquisitions Partners, LLC 20.9 % Multifamily 407 Various Total $ 439,355 3 Table of Contents Other Real Estate Common Equity Shares/Units Investment Type Net Equity (1) IQHQ Holdings Class A-1 1,939 (2) Life Science $ 24,718 Other 1,764 (2) Real Estate Other 7,530 NexPoint Residential Trust, Inc. 96 (2) Multifamily 4,018 IQHQ Holdings Class A-2 250 (2) Life Science 3,188 Total $ 39,454 DSTs Shares/Units Investment Type Net Equity (1) NexPoint Semiconductor Manufacturing DST 2,297 Real Estate Other $ 20,959 NexPoint Life Sciences II DST 1,044 Life Science 9,600 Total $ 30,559 Real Estate Convertible Notes Principal Amount Investment Type Net Equity (1) SFR OP Convertible Notes 21,457 Single-Family Rental $ 20,846 Real Estate Senior Loans Principal Amount Investment Type Net Equity (1) LLV Holdco, LLC Revolver 4,967 Land $ 4,709 Real Estate Promissory Notes Principal Amount Investment Type Net Equity (1) NFRO SFR Promissory Note 08/15/2025 3,883 Self-Storage $ 3,883 NFRO SFR Promissory Note 06/15/2025 3,432 Single-Family Rental 3,432 NSP OC Promissory Note 2,776 Single-Family Rental 2,765 SFR OP Promissory Note 500 Single-Family Rental 500 Total $ 10,580 Other Equity Method Investments Shares/Units Investment Type Net Equity (1) Location Perilune Aero Equity Holdings One, LLC 10,310,000 Aircraft $ 13,565 Aerospace Claymore Holdings, LLC 5,054,376 (6) Litigation Claims — N/A Allenby, LLC 1,123,531 (6) Litigation Claims — N/A Haygood, LLC. 31,170 (6) Litigation Claims — N/A Total $ 13,565 Other Assets Net Equity (1) Preferred Shares $ 69,895 Common Equity 69,151 (2) 4 Table of Contents Senior Loans 35,720 Rights and Warrants 1,788 Bonds 114 Total $ 176,668 (1) Net equity represents the carrying value of the investment.
Biggest changePetersburg, Florida Hospitality Hyatt Place Park City 2/15/2022 28,106 (2) — 28,106 Park City, Utah Hospitality Bradenton Hampton Inn & Suites 2/22/2022 31,191 (2) — 31,191 Bradenton, Florida Hospitality Total 416,658 160,785 250,894 2 Table of Contents Real Estate Equity Method Investments Ownership Percentage Investment Type Net Equity (1) Location VineBrook Homes Operating Partnership, L.P. 12.3 % Single-Family Rental $ 118,599 Various NexPoint Real Estate Finance Operating Partnership, L.P. 12.9 % (2) Mortgage 56,557 Various NexPoint Storage Partners, Inc. 53.0 % Self-Storage 51,673 Various NexPoint Real Estate Finance, Inc. 15.9 % Mortgage 41,568 Various NexPoint Storage Partners Operating Company, LLC 33.8 % Self-Storage 34,470 Various NexPoint SFR Operating Partnership, L.P. 28.0 % (2) Single-Family Rental 28,573 Various Las Vegas Land Owner, LLC 77.0 % (4) Multifamily 12,324 Las Vegas, Nevada Sandstone Pasadena Apartments, LLC 50.0 % Multifamily 8,114 Pasadena, Texas LLV Holdco, LLC 26.8 % Land 1,598 Henderson, Nevada Capital Acquisitions Partners, LLC 20.9 % Multifamily 700 Various Total 354,176 Other Real Estate Common Equity Shares/Units Investment Type Net Equity (1) IQHQ Holdings Class A-1 1,939 (2) Life Science $ 8,104 NexPoint Residential Trust, Inc. 102 (2) Multifamily 3,062 IQHQ Holdings Class A-2 250 (2) Life Science 1,045 Total 12,211 DSTs Shares/Units Investment Type Net Equity (1) NexPoint Semiconductor Manufacturing DST 2,626 (2) Real Estate Other $ 23,959 NexPoint Life Sciences II DST 1,044 (2) Life Science 9,600 Total 33,559 Real Estate Convertible Notes Principal Amount Investment Type Net Equity (1) SFR OP Convertible Notes 12,264 Single-Family Rental $ 11,994 Real Estate Senior Loans Principal Amount Investment Type Net Equity (1) LLV Holdco, LLC Revolver 5,200 Land $ 4,795 Real Estate Preferred Equity Principal Amount Investment Type Net Equity (1) AMS C-Store, LLC 18,420 Real Estate Other $ 18,420 Real Estate Promissory Notes Principal Amount Investment Type Net Equity (1) NSP OC Promissory Note 1,876 Self-Storage $ 1,862 Other Equity Method Investments Shares/Units Investment Type Net Equity (1) Perilune Aero Equity Holdings One, LLC 10,310 Aircraft $ 12,650 Claymore Holdings, LLC 5,054 Litigation Claims (5) — Total 12,650 Other Assets Net Equity (1) Preferred Shares $ 73,388 Common Equity 72,517 (2) Senior Loans 40,270 Rights and Warrants 4 Bonds 112 Total 186,291 (1) Net equity represents the carrying value of the investment.
(5) The Company owns 100% of Las Vegas Land Owner, LLC ("Tivoli"), a tenants-in-common arrangement (the "TIC") that owns 77% of an 8.5 acre tract of land upon which Tivoli plans to develop a 300 unit multifamily apartment community in Las Vegas, Clark County, Nevada.
(4) The Company owns 100% of Las Vegas Land Owner, LLC ("Tivoli"), a tenants-in-common arrangement (the "TIC") that owns 77% of an 8.5 acre tract of land upon which Tivoli plans to develop a 300 unit multifamily apartment community in Las Vegas, Clark County, Nevada.
For investments in operating properties, any debt secured by the underlying real property is subtracted from the carrying value of the investment. (2) All or part of this security is pledged as collateral for short sales, margin borrowing or credit facilities.
For investments in operating properties, any debt secured by the underlying real property is subtracted from the carrying value of the investment. (2) All or part of this investment is pledged as collateral for short sales, margin borrowing or credit facilities.
The Adviser computes Managed Assets as of the end of each fiscal quarter and then computes each installment of the Fees as promptly as possible after the end of the month with respect to which such installment is payable. 8 Table of Contents Incentive compensation may be payable to our executive officers and certain other employees of our Adviser or its affiliates pursuant to a long-term incentive plan adopted by us and approved by our shareholders.
The Adviser computes Managed Assets as of the end of each fiscal quarter and then computes each installment of the Fees as promptly as possible after the end of the month with respect to which such installment is payable. 7 Table of Contents Incentive compensation may be payable to our executive officers and certain other employees of our Adviser or its affiliates pursuant to a long-term incentive plan adopted by us and approved by our shareholders.
With respect to the NHT segment’s operating properties, we face competition on the basis of location, room rates, quality, service levels, reputation and reservations systems, among many factors. The NHT segment also faces competition from alternative lodging options such as Airbnb that have and may continue to add guest accommodations that compete with hotel inventory.
With respect to the Hospitality segment’s operating properties, we face competition on the basis of location, room rates, quality, service levels, reputation and reservations systems, among many factors. The Hospitality segment also faces competition from alternative lodging options such as Airbnb that have and may continue to add guest accommodations that compete with hotel inventory.
Such competition may reduce occupancy rates and revenues of the NHT segment. In the face of this competition, we expect to have access to our Sponsor’s professionals and their industry experience, which we believe will provide us with a competitive advantage and help us assess investment risks and determine appropriate pricing for potential investments.
Such competition may reduce occupancy rates and revenues of the Hospitality segment. In the face of this competition, we expect to have access to our Sponsor’s professionals and their industry experience, which we believe will provide us with a competitive advantage and help us assess investment risks and determine appropriate pricing for potential investments.
We make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) available on our website as soon as reasonably practicable after we file such materials with, or furnish it to, the SEC.
We make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) available on our website as soon as reasonably practicable after we file such materials with, or furnish them to, the SEC.
As consideration for the Adviser’s services under the Advisory Agreement, we pay our Adviser an annual fee (the “Advisory Fee”) of 1.00% of Managed Assets and an annual fee (the “Administrative Fee” and, together with the Advisory Fee, the “Fees”) of 0.20% of the Company’s Managed Assets.
As consideration for the Adviser’s services under the Advisory Agreement, we pay our Adviser an annual fee (the “Advisory Fee”) of 1.00% of Managed Assets (as defined below) and an annual fee (the “Administrative Fee” and, together with the Advisory Fee, the “Fees”) of 0.20% of the Company’s Managed Assets.
Should an uninsured loss arise against us, we would be required to use our own funds to resolve the issue, including litigation costs. In addition, for the 12 Table of Contents operating properties in our Portfolio, we could self-insure certain portions of our insurance program and therefore, use our own funds to satisfy those limits.
Should an uninsured loss arise against us, we would be required to use our own funds to resolve the issue, including litigation costs. In addition, for the operating properties in our Portfolio, we could self-insure certain portions of our insurance program and therefore, use our own funds to satisfy those limits.
The loans may vary in duration, bear interest at a fixed or floating rate and amortize, typically with a balloon payment of principal at maturity. These investments may include whole loans or pari passu participations within such mortgage debt. 5 Table of Contents Mezzanine Loans: We expect that we may originate or acquire mezzanine loans.
The loans may vary in duration, bear interest at a fixed or floating rate and amortize, typically with a balloon payment of principal at maturity. These investments may include whole loans or pari passu participations within such mortgage debt. Mezzanine Loans: We expect that we may originate or acquire mezzanine loans.
Operating and Regulatory Structure General 10 Table of Contents Our operating properties are subject to various laws, ordinances and regulations, including those relating to fire and safety requirements, and affirmative and negative covenants and, in some instances, common area obligations. We believe that each of the operating properties in our Portfolio has the necessary permits and approvals.
Operating and Regulatory Structure General Our operating properties are subject to various laws, ordinances and regulations, including those relating to fire and safety requirements, and affirmative and negative covenants and, in some instances, common area obligations. We believe that each of the operating properties in our Portfolio has the necessary permits and approvals.
Item 1. Business General NexPoint Diversified Real Estate Trust (the “Company”, “we”, “us” or “our”) is an externally advised, publicly traded REIT focused on the acquisition, asset management, development, and disposition of opportunistic, value-add investments in real estate properties throughout the United States.
Item 1. B usiness General NexPoint Diversified Real Estate Trust (the “Company”, “we”, “us” or “our”) is an externally advised, publicly traded REIT focused on the acquisition, asset management, development, and disposition of opportunistic, value-add investments in real estate properties throughout the United States.
The property management agreement with NexVest for Cityplace also allows for the manager, as the agent of CP Tower 9 Table of Contents Owner, LLC (“Owner”), to draw on the operating account when required in connection with the operation or maintenance of the property, the payment of certain expenses defined in the agreement, or as expressly approved in writing by Owner.
The property management agreement with NexVest for Cityplace also allows for the manager, as the agent of CP Tower Owner, LLC (“Owner”), to draw on the operating account when required in connection with the operation or maintenance of the property, the payment of certain expenses defined in the agreement, or as expressly approved in writing by Owner.
As of December 31, 2024, the Company’s Portfolio also includes other investments comprised of its ownership of common and preferred equity, loans, CLOs, rights and warrants, convertible notes and bonds from a number of diverse issuers and investment vehicles, including litigation claims and midband spectrum frequency licenses.
As of December 31, 2025, the Company’s Portfolio also includes other investments comprised of its ownership of common and preferred equity, loans, rights and warrants, convertible notes and bonds from a number of diverse issuers and investment vehicles, including litigation claims and midband spectrum frequency licenses.
In general, we also expect, with regard to our subsidiaries relying on Section 3(c)(5)(C), to rely on other guidance published by the SEC staff and on our analyses of guidance published with respect to other types of assets to determine 13 Table of Contents which assets are qualifying assets and real estate-related assets.
In general, we also expect, with regard to our subsidiaries relying on Section 3(c)(5)(C), to rely on other guidance published by the SEC staff and on our analyses of guidance published with respect to other types of assets to determine which assets are qualifying assets and real estate-related assets.
Even if we qualify for taxation as a REIT, we may be subject to some U.S. federal, state and local taxes on our income or property or REIT “prohibited transaction” taxes with respect to certain of our activities.
Even if we qualify for 11 Table of Contents taxation as a REIT, we may be subject to some U.S. federal, state and local taxes on our income or property or REIT “prohibited transaction” taxes with respect to certain of our activities.
Strategic Reallocation of NXDT’s Portfolio In the coming year, NXDT plans to re-focus its asset allocation across sectors in which our Sponsor has an extensive experience and expertise. This re-focusing will involve selling legacy assets that do not fall within our core investment strategy.
Strategic Reallocation of the Portfolio In the coming year, the Company plans to re-focus its asset allocation across sectors in which our Sponsor has extensive experience and expertise. This re-focusing will involve selling legacy assets that do not fall within our core investment strategy.
In addition to investments in real estate, the Company may, to a limited extent, hold, acquire or transact in certain non-real estate securities.
The Company may, to a limited extent, hold, acquire or transact in certain non-real estate securities.
The Adviser may, at its discretion and at any time, waive its right to reimbursement for eligible out-of-pocket expenses paid on the Company’s behalf. Once waived, those expenses were considered permanently waived and became non-recoupable.
The Adviser may, at its discretion and at any time, waive its right to reimbursement for eligible out-of-pocket expenses paid on the Company’s behalf. Once waived, those expenses are considered permanently waived and become non-recoupable.
Our Portfolio As of December 31, 2024, the Company’s NXDT Portfolio includes real estate investments comprised of four operating properties, three of which are rented from the Company for retail, hospitality or office use and one of which is undeveloped, two convertible note and two promissory note investments in businesses focused on single-family rental (“SFR”) and hospitality real estate, and 13 equity investments in businesses primarily focused on investing in SFR, self-storage, hospitality, life science or undeveloped real estate, as well as investing in commercial mortgage loans or other structured investments with underlying properties types including single-family, multifamily, life science and self-storage.
Our Portfolio As of December 31, 2025, the Company’s Diversified segment includes real estate investments comprised of four operating properties, three of which are rented from the Company for retail, hospitality or office use and one of which is undeveloped, one convertible note investment in a business focused on single-family rental (“SFR”) and one promissory note investment in a business focused on self-storage, and 13 equity investments in businesses primarily focused on investing in SFR, self-storage, hospitality, life science or undeveloped real estate, as well as investing in commercial mortgage loans or other structured investments with underlying property types including single-family, multifamily, life science and self-storage.
In particular, we will compete with a variety of institutional investors, including other REITs, specialty finance companies, public and private funds, commercial and investment banks, hedge funds, mortgage bankers, commercial finance and insurance companies, governmental bodies and other financial institutions, as well as developers, owners, and operators of real estate.
We are subject to significant competition in acquiring these investments. In particular, we will compete with a variety of institutional investors, including other REITs, specialty finance companies, public and private funds, commercial and investment banks, hedge funds, mortgage bankers, commercial finance and insurance companies, governmental bodies and other financial institutions, as well as developers, owners, and operators of real estate.
The Company’s non-real estate investments include its ownership of common equity, preferred equity, loans, CLOs, rights and warrants, U.S. life settlement contracts, convertible notes and bonds from a number of diverse issuers and investment vehicles, including litigation claims and midband spectrum frequency licenses.
The Company’s non-real estate investments include its ownership of common equity, preferred equity, loans, collateralized loan obligations ("CLOs"), rights and warrants, convertible notes and bonds from a number of diverse issuers and investment vehicles, including litigation claims and midband spectrum frequency licenses.
Management of Operating Properties The Company’s operating properties in the NXDT segment, other than undeveloped land, are managed by NexVest Realty Advisors, LLC (“NexVest”), an affiliate of the Adviser. The property management agreement with NexVest for the retail property in Lubbock, Texas is dated January 1, 2014 and has a fixed fee of $1,200 per month.
Management of Operating Properties The Company’s operating properties in the Diversified segment, are managed by NexVest Realty Advisors, LLC (“NexVest”), an affiliate of the Adviser. The property management agreement with NexVest for the retail property in 8 Table of Contents Lubbock, Texas is dated January 1, 2014 and has a fixed fee of $1,200 per month.
The Adviser manages the day-to-day operations of the Company and provides investment management services. All of the Company’s investment decisions are made by the Adviser, subject to general oversight by the Adviser’s investment committee and the Company’s Board. The Adviser is wholly owned by our Sponsor. The members of our Adviser’s investment committee are James Dondero and Matt McGraner.
The Adviser manages the day-to-day operations of the Company and provides investment management services. All of the Company’s investment decisions are made by the Adviser, subject to general oversight by the Adviser’s investment 6 Table of Contents committee and the Company’s Board. The Adviser is wholly owned by our Sponsor.
Through the TIC, the Company shares control and as such accounts for this investment using the equity method. (6) The Company owns noncontrolling interests in three limited liability companies, Claymore Holdings, LLC, Allenby, LLC, and Haygood, LLC, created to hold litigation claims. The probability, timing, and potential amount of recovery, if any, are unknown as of December 31, 2024.
Through the TIC, the Company shares control and as such accounts for this investment using the equity method. 3 Table of Contents (5) The Company owns noncontrolling interests in one limited liability company, Claymore Holdings, LLC, created to hold litigation claims. The probability, timing, and potential amount of recovery, if any, are unknown as of December 31, 2025.
The Company does not have any ownership or economic interest in the Manager or in any of the hotel management entities. Competition Our profitability depends, in large part, on our ability to acquire investments in commercial real estate at attractive prices. We are subject to significant competition in acquiring these investments.
The Company may employ other hotel managers in the future. The Company does not have any ownership or economic interest in the hotel manager or in any of the hotel management entities. Competition Our profitability depends, in large part, on our ability to acquire investments in commercial real estate at attractive prices.
As of December 31, 2024, the Company’s NHT Portfolio includes real estate investments comprised of four operating properties, four of which are rented from the Company for hospitality use, and three properties which are held-for-sale. The Company’s Portfolio, based on net equity, is comprised of 81.6% real estate investments and 18.4% other investments.
As of December 31, 2025, the Company’s Hospitality segment includes real estate investments comprised of four operating properties, which are rented from the Company for hospitality use. The Company’s Portfolio, based on net equity, is comprised of 77.6% real estate investments and 22.4% other investments.
(3) Cityplace Tower (“Cityplace”) is currently under development, and the Company is converting part of the property into a hotel with multifamily residential floors, which was still under construction as of December 31, 2024. (4) Effective December 19, 2024, the property ceased operating under the HomeWood Suites brand.
(3) Cityplace Tower (“Cityplace”) is currently under development, and the Company is converting part of the property into a hotel with multifamily residential floors, which was still under construction as of December 31, 2025.
Our Advisory Agreement 7 Table of Contents We pay our Adviser annual fees. We do not pay any incentive fees to our Adviser. We also generally reimburse our Adviser for operating or offering expenses it incurs on our behalf or in connection with the services it performs for us.
The members of our Adviser’s investment committee are James Dondero, Matt McGraner and Paul Richards. Our Advisory Agreement We pay our Adviser annual fees. We do not pay any incentive fees to our Adviser. We also generally reimburse our Adviser for operating or offering expenses it incurs on our behalf or in connection with the services it performs for us.
These investments are not secured by the underlying real estate, but upon the occurrence of a default, the preferred equity provider typically has the right to effect a change of control with respect to the ownership of the property.
These investments are not secured by the underlying real estate, but upon the occurrence of a default, the preferred equity provider typically has the right to effect a change of control with respect to the ownership of the property. 4 Table of Contents In addition to investments in real estate, the Company may, to a limited extent, hold, acquire or transact in certain non-real estate securities.
(the “OP”), the Company’s operating partnership. As of December 31, 2024, the Company owned 100% of the issued and outstanding partnership units of the OP. The Company conducts its business (the “Portfolio”) through the OP and its wholly owned taxable REIT subsidiaries (“TRSs”).
(the “OP”), the Company’s operating partnership. As of December 31, 2025, there were 44,536,894.47 common units of the OP outstanding, of which 99.96% were owned by the Company. The Company conducts its business (the “Portfolio”) through the OP and its wholly owned taxable REIT subsidiaries (“TRSs”).
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” 6 Table of Contents Our Structure The following chart shows our ownership structure as of the date hereof: Our Adviser The Company is externally managed by the Adviser, through an agreement dated July 1, 2022, as amended on October 25, 2022, April 11, 2023 and July 22, 2024 (the “Advisory Agreement”), by and among the Company and the Adviser for an initial three-year term that will expire on July 1, 2025 and successive one-year terms thereafter unless earlier terminated.
Our Adviser The Company is externally managed by the Adviser, through an agreement dated July 1, 2022, as amended on October 25, 2022, April 11, 2023, July 22, 2024 and September 19, 2025, (the “Advisory Agreement”), by and among the Company and the Adviser for a term that will expire on July 1, 2026 and successive one-year terms thereafter unless earlier terminated.
In addition, the NHT segment’s hotel agreements generally provide that the hotel manager can earn an incentive fee for revenue or EBITDA over certain thresholds or based on a return over the required preferred return. The Company may employ other hotel managers in the future.
The agreements are terminable by the Company for convenience without penalty upon 30 to 90 days’ prior written notice. In addition, the Hospitality segment’s hotel agreements generally provide that the hotel manager can earn an incentive fee for revenue or EBITDA over certain thresholds or based on a return over the required preferred return.
Maintaining the Section 3(c)(5)(C) exclusion, however, will limit our ability to make certain investments. Smaller Reporting Company Status We are a “smaller reporting company” as defined in Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”), and may elect to take advantage of certain of the scaled disclosures available to smaller reporting companies.
Smaller Reporting Company Status We are a “smaller reporting company” as defined in Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”), and may elect to take advantage of certain of the scaled disclosures available to smaller reporting companies. 12 Table of Contents Human Capital Disclosure We are externally managed by our Adviser pursuant to the Advisory Agreement between us and our Adviser.
See below for a table of our investments as of December 31, 2024 (dollars in thousands). 2 Table of Contents Investment Real Estate Investment Date Value Debt Net Equity (1) Location Property Type Operating Properties Cityplace Tower 8/15/2018 $ 231,393 $ 139,939 $ 105,688 Dallas, Texas Office, Multifamily & Hospitality (3) NexPoint Dominion Land, LLC 8/9/2022 26,500 13,250 13,269 Plano, Texas Land 5916 W Loop 289 (2) 7/23/2013 4,019 — 3,676 Lubbock, Texas Real Estate Other White Rock Center (2) 6/13/2013 13,716 10,000 2,097 Dallas, Texas Real Estate Other Dallas Hilton Garden Inn 12/31/2014 30,318 — 32,312 Dallas, Texas Hospitality St.
Investment Investment Date Real Estate Value Debt Net Equity (1) Location Property Type Operating Properties Cityplace 8/15/2018 $ 236,235 $ 137,577 $ 96,325 Dallas, Texas (3) Office, Multifamily & Hospitality NexPoint Dominion Land, LLC 8/9/2022 26,500 13,208 13,311 Plano, Texas Land 5916 W Loop 289 7/23/2013 3,445 (2) — 2,974 Lubbock, Texas Real Estate Other White Rock Center 6/13/2013 13,820 (2) 10,000 1,626 Dallas, Texas Real Estate Other Dallas Hilton Garden Inn 12/31/2014 30,615 (2) — 30,615 Dallas, Texas Hospitality St.
Human Capital Disclosure We are externally managed by our Adviser pursuant to the Advisory Agreement between us and our Adviser. All of our executive officers are employees of our Adviser or its affiliates. As of December 31, 2024, we had no employees. Corporate Information Our and our Adviser’s offices are located at 300 Crescent Court, Suite 700, Dallas, Texas 75201.
All of our executive officers are employees of our Adviser or its affiliates. As of December 31, 2025, we had no employees. Corporate Information Our and our Adviser’s offices are located at 300 Crescent Court, Suite 700, Dallas, Texas 75201. Our and our Adviser’s telephone number is (214) 276-6300. Our website is located at nxdt.nexpoint.com.
In addition, with respect to the NXDT segment’s operating properties, we compete for tenants based on a number of factors, including location, rental rates, security, flexibility, and expertise to design space to meet prospective tenants’ needs and the manner in which the property is operated, maintained, and marketed.
An increase in the competition for such assets may decrease the availability or increase the price of such assets, which may limit our ability to generate attractive risk-adjusted current income and capital appreciation for our shareholders, thereby adversely affecting the market price of our common shares. 9 Table of Contents In addition, with respect to the Diversified segment’s operating properties, we compete for tenants based on a number of factors, including location, rental rates, security, flexibility, and expertise to design space to meet prospective tenants’ needs and the manner in which the property is operated, maintained, and marketed.
NXDT represents the Company's primary reportable segment and represents a significant majority of the Company's consolidated portfolio (the "NXDT Portfolio"). The NXDT reportable segment is the legacy reportable segment and is focused on investing in various commercial real estate property types and across the capital structure, including but not limited to, equity, mortgage, debt, mezzanine debt and preferred equity.
The Diversified reportable segment is the legacy reportable segment and is focused on investing in various commercial real estate property types and across the capital structure, including but not limited to, equity, mortgage, debt, mezzanine debt and preferred equity. The Hospitality segment is focused on operating and renovating its U.S. located hospitality assets that meet its investment objective and criteria.
The Company’s wholly owned subsidiary, NexPoint Diversified Real Estate Trust OP GP, LLC (the "OP GP"), is the sole general partner of the OP. 2024 Highlights Key highlights and transactions completed in 2024 include the following: Investments in DSTs On July 26, 2024, the Company, through a subsidiary, contributed approximately $4.6 million to NexPoint Life Sciences II DST (“Life Sciences II DST”), in exchange for LLC interests.
The Company’s wholly owned subsidiary, NexPoint Diversified Real Estate Trust OP GP, LLC (the "OP GP"), is the sole general partner of the OP. 2025 Highlights Key highlights and transactions completed in 2025 include the following: Investments in AMS C-Store JV, LLC During 2025, the Company, through a subsidiary, invested an aggregate $16.3 million in AMS C‑Store JV, LLC (“AMS”) in exchange for preferred equity interests.
Risk Factors— We are subject to certain risks associated with investing in real estate, including potential liabilities under environmental laws and risks of loss from weather conditions, man-made or natural disasters, climate change and terrorism.” Insurance We carry comprehensive general liability coverage on the operating properties in our Portfolio, with limits of liability customary within the industry to insure against liability claims and related defense costs.
Insurance We carry comprehensive general liability coverage on the operating properties in our Portfolio, with limits of liability customary within the industry to insure against liability claims and related defense costs.
On October 28, 2024, the Board authorized a new share repurchase program (the “Share Repurchase Program”) through which the Company may repurchase an indeterminate number of common shares and Series A Preferred Shares, at an aggregate market value of up to $20.0 million during a two-year period that is set to expire on October 28, 2026.
Share Repurchase Program On October 28, 2024, the Company's board of trustees (the "Board") authorized a two‑year share repurchase program permitting the Company to repurchase up to $20.0 million of its common shares and its 5.50% Series A Cumulative Preferred Shares, par value $0.001 per share (the "Series A Preferred Shares").
However, noncompliance with the ADA could result in imposition of fines or an award of damages to private litigants. The obligation to make readily accessible accommodations is an ongoing one, and we will continue to assess our operating properties and make alterations as appropriate in this respect.
However, noncompliance with the ADA could result in imposition of fines or an award of damages to private litigants.
In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants, employees of our tenants or others if property damage or personal injury occurs. We are not presently aware of any material adverse indoor air quality issues at our operating properties.
Significant mold or other indoor air contaminants could require costly remediation, increased ventilation, or lead to third-party claims. We are not presently aware of any material adverse indoor air quality issues at our properties.
Independent environmental consultants have conducted Phase I environmental site assessments at all of our operating properties, including undeveloped land, in our Portfolio, using the applicable version of American Society for Testing and Materials Standard E 1527 in effect at the time of their commission.
Independent environmental consultants have conducted Phase I environmental site assessments of all of our properties using the applicable American Society for Testing and Materials Standard E 1527. While no material issues have been identified, Phase I assessments are limited in scope and conditions may not have been identified or may arise later, and future laws could impose additional obligations.
Environmental Matters Under various federal, state and local laws and regulations relating to the environment, as a current or former owner or operator of real property, we may be liable for costs and damages resulting from the presence or discharge of hazardous or toxic substances, waste or petroleum products at, on, in, under, or migrating from such property, including costs to investigate and clean up such contamination and liability for harm to natural resources.
The obligation to make readily accessible accommodations is an ongoing one, and we will continue to assess our operating properties and make alterations as appropriate in this respect. 10 Table of Contents Environmental Matters Under various federal, state and local environmental laws and health and safety requirements, we may be liable, without regard to fault and on a joint and several basis, for costs and damages, including fines and penalties, resulting from toxic or hazardous substances or waste or petroleum products at, on, under or migrating from our properties.
The Advisory Agreement provides that the Administrative Fee shall be paid in cash and the monthly installment of the Advisory Fee shall be paid one-half in cash and one-half in common shares of the Company, subject to certain restrictions including that in no event shall the common shares issued to the Adviser under the Advisory Agreement exceed five percent of the number of common shares or five percent of the voting power of the Company outstanding prior to the first such issuance (the "Share Cap") and that in no event shall the common shares issued to the Adviser under the Advisory Agreement exceed 6,000,000 common shares; provided, however, that the Share Cap will not apply if the Company's shareholders have approved issuances in excess of the Share Cap.
On September 19, 2025, we entered into a further amendment to the Advisory Agreement whereby the monthly installments of the Fees accruing after September 19, 2025 will be paid entirely in cash unless the Adviser elects, in its sole discretion, to receive all or a portion of the monthly installment of the Fees in common shares of the Company, subject to certain restrictions, including that in no event shall the number of common shares issued to the Adviser under the Advisory Agreement exceed 6,000,000 common shares.
Target underlying property types primarily include real estate sectors where senior management has extensive operating expertise and experience including, SFR, multifamily, self-storage, life science, office, industrial, hospitality, net lease, retail and small bay industrial. The Company may, to a limited extent, hold, acquire or transact in certain non-real estate securities.
Primary Investment Objective As a diversified REIT, the Company’s primary investment objective is to provide both current income and capital appreciation. Target underlying property types primarily include, but are not limited to, single-family rentals, multifamily, self-storage, life science, office, industrial, hospitality, net lease, retail and small-bay industrial.
The Company’s operating properties in the NHT segment are managed by affiliates of Aimbridge Hospitality Holdings, LLC (the “Manager”). The hotel management agreements generally require the Company to pay a base fee to the hotel manager calculated as a percentage of hotel revenues.
The Company’s operating properties in the Hospitality segment are managed by affiliates of TPG Hotels & Resorts, Inc., Avion Hospitality, LLC, and Dreamscape Hospitality Management, LLC.
Removed
On July 26, 2024, the Company, through a subsidiary, contributed $14.9 million to NexPoint Semiconductor Manufacturing DST (“Semiconductor DST”), in exchange for LLC interests. On September 11, 2024, the Company contributed an additional $6.1 million to Semiconductor DST in exchange for LLC interests. For further information on these transactions, see Note 10 to our consolidated financial statements.
Added
The AMS preferred equity provides the Company with an 18% cumulative, compounding preferred return, along with a full return of invested capital before any participation by the common members. AMS serves as a real estate development platform focused on acquiring, developing, and operating newly constructed 7‑Eleven convenience store projects across high‑growth Texas markets.
Removed
NHT Acquisition On April 10, 2024, the Company, through a subsidiary, acquired 2,176,257 units of NexPoint Hospitality Trust (“NHT”) (the “NHT Units”). As a result, the Company owned 53.65% of the outstanding NHT Units and was determined to hold the controlling financial interest in NHT. For further information on this transaction, see Note 2 to our consolidated financial statements.
Added
As of year‑end 2025, AMS has begun development of multiple sites, with certain locations already under construction or operating.
Removed
On November 22, 2024, the Company announced that it had entered into an Agreement and Plan of Merger pursuant to which it would acquire the remaining outstanding NHT Units in a merger transaction (the “NHT Merger”) for approximately $5.5 million, to be paid principally in common shares of the Company, with limited partnership interests of the OP paid for the equity interests of NHT Operating Partnership, LLC (“NHT OP”).
Added
NHT Merger On April 17, 2025, the Company took NexPoint Hospitality Trust (“NHT”) private in a merger transaction (the “NHT Merger”), acquiring all remaining units of NHT (“NHT Units”) which were not previously owned by the Company and fully consolidating the hospitality portfolio under the Company’s sole ownership.
Removed
On February 21, 2025, NHT’s unitholders voted to approve the NHT Merger. The NHT Merger is expected to close in the second quarter of 2025. SFR WLIF III On November 25, 2024, SFR WLIF III, LLC, redeemed all of the interests in SFR WLIF III, LLC. The Company received approximately $7.2 million for the redemption of its units.
Added
For further information regarding this transaction, see Note 2 to our consolidated financial statements. Marriott Uptown Refinance On January 21, 2025, Marriott Uptown completed a $95 million refinancing of a loan held by the special purpose entity that owns Marriott Uptown, generating approximately $15 million of cash distributions to the Company.
Removed
NREF OP IV On April 19, the OP loaned $6.5 million to NREF OP IV, L.P. (“NREF OP IV”), a subsidiary of NexPoint Real Estate Finance, Inc. (“NREF”).
Added
On October 20, 2025, the Company received an additional $3.2 million in cash distributions upon the hotel achieving certain performance thresholds under the refinancing.
Removed
In connection with the loan, NREF OP IV issued a promissory note to the OP in the initial principal amount of $6.5 million bearing interest at 7.535%, which is payable in kind, is interest only during its term and matures on April 19, 2029.
Added
Series B Preferred Offering On January 30, 2025, the Company launched its continuous public offering (the “Series B Preferred Offering”) of up to 16,000,000 shares of its newly designated 9.00% Series B Cumulative Redeemable Preferred Shares, par value $0.001 per share, liquidation preference $25.00 per share (“Series B Preferred Shares”) at a price to the public of $25.00 per share.
Removed
Share Repurchase Program On October 24, 2022, our Board of Trustees (our “Board”) authorized a share repurchase program (the “Prior Share Repurchase Program”) through which we could repurchase an indeterminate number of common shares and our 5.50% 1 Table of Contents Series A Cumulative Preferred Shares, liquidation preference $25.00 per share (the “Series A Preferred Shares”), at an aggregate market value of up to $20.0 million during a two-year period that expired on October 24, 2024.
Added
During the year ended December 31, 2025, the Company issued Series B Preferred Shares for gross proceeds of approximately $22.4 million before deducting selling commissions, dealer manager fees, and offering costs. The Series B 1 Table of Contents Preferred Offering provides the Company with access to up to $400 million of gross preferred equity capital.
Removed
We did not make any repurchases of our common shares of Series A Preferred Shares pursuant to the Prior Share Repurchase Program.
Added
See Note 11 to our consolidated financial statements for additional details.
Removed
Repurchases under this program may be discontinued at any time. As of December 31, 2024, we had not made any repurchases of our common shares or Series A Preferred Shares pursuant to the Share Repurchase Program. Reportable Segments The company has two reportable segments, NXDT and NHT.
Added
During 2025, the Company commenced repurchases under the program and repurchased approximately $1.9 million of its common shares.
Removed
The NHT reportable segment represents a minority of the Company's consolidated portfolio (the "NHT Portfolio") and operations and is focused on exiting out of its remaining hospitality assets and repositioning the portfolio into other real estate sectors where management has extensive operating expertise and experience.
Added
Repurchases under the program may be discontinued at any time. See Note 11 for additional details. Reportable Segments The Company has two reportable segments, Diversified and Hospitality. Diversified represents the Company's primary reportable segment and represents a significant majority of the Company's consolidated portfolio.
Removed
Primary Investment Objective As a diversified REIT, the Company’s primary investment objective is to provide both current income and capital appreciation. The Company seeks to achieve this objective through its focus on investing across the capital structure in various commercial real estate property types.
Added
See below for a table of our investments as of December 31, 2025 (dollars and shares/units in thousands).
Removed
For additional information on sources of and trends regarding our liquidity, see “Item 7.
Added
Petersburg Marriott 9/25/2018 46,746 (2) — 46,746 St.
Removed
Prior to June 30, 2023, direct payment of operating expenses by us together with reimbursement of operating expenses to the Adviser, plus compensation expenses relating to equity awards granted under a long-term incentive plan and all other corporate general and administrative expenses of the Company, including the Fees (defined below) payable under the Advisory Agreement, could not exceed 1.5% (the “Expense Cap”) of Managed Assets (defined below), calculated as of the end of each quarter, for the twelve-month period following the Company’s receipt of the Deregistration Order.
Added
For additional information on sources of and trends regarding our liquidity, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” 5 Table of Contents Our Structure The following chart shows our ownership structure as of the date hereof: (1) The Portfolio may be held directly or through one or more intermediate entities.
Removed
This limitation ended on June 30, 2023 and did not apply to Offering Expenses (defined below), legal, accounting, financial, due diligence and other service fees incurred in connection with extraordinary litigation and mergers and acquisitions or other events outside the ordinary course of our business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of certain real estate-related investments; provided, in the event the Company consolidates another entity that it does not wholly own as a result of owning a controlling interest in such entity or otherwise, expenses will be calculated without giving effect to such consolidation and instead such entity’s expenses will, on a pro rata basis consistent with the Company’s percentage ownership, be considered those of the Company for purposes of calculation of expenses.
Added
On July 22, 2024, we entered into an amendment to the Advisory Agreement whereby the monthly installment of the Administrative Fee shall be paid in cash and the monthly installment of the Advisory Fee shall be paid one-half in cash and one-half in common shares, subject to certain restrictions.
Removed
The Fees shall be payable independent of the performance of the Company or its investments.
Added
The property management agreement with NexVest for the undeveloped property in Plano, Texas is dated September 1, 2024, and the management fee is calculated on 3% of gross receipts, with a minimum fee of $750 per month.
Removed
An increase in the competition for such assets may decrease the availability or increase the price of such assets, which may limit our ability to generate attractive risk-adjusted current income and capital appreciation for our shareholders, thereby adversely affecting the market price of our common shares.
Added
The hotel management agreements generally require the Company to pay a base fee to the hotel manager calculated as 2.50% to 2.75% of hotel revenues, plus monthly fees ranging from $4,500 to $5,750 for various services such as accounting, revenue management, and E-commerce.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeYou should read this summary together with the more detailed description of each risk factor contained below. • unfavorable changes in economic conditions and their effects on the real estate industry generally and our operations and financial condition, including inflation, high interest rates, tightening monetary policy or recession, which may limit our ability to access funding and generate returns for shareholders; • the risk we make significant changes to our strategies in a market downturn, or fail to do so; • risks associated with ownership of real estate, including properties in transition, subjectivity of valuation, environmental matters and lack of liquidity in certain asset classes; • risks associated with our investment in diverse issuers, industries and investment forms and classes, both in real estate and in non-real estate sectors, including common equity, preferred equity securities, options or other derivatives, short sale contracts, secured loans of securities, reverse repurchase agreements, structured finance securities, below investment grade senior loans, bonds, convertible instruments, joint ventures, and emerging markets; • risks associated with our loans and investments in debt instruments including senior loans, CLOs, and structured finance securities; • the exposure of our loans and investments to risks similar to real estate investments generally, including the risk of delinquency, dependence on tenants, compliance with laws and regulations related to ownership of real property, and foreclosure and loss in any of our commercial real estate-related investments that are secured, directly or indirectly, by real property; 14 Table of Contents • fluctuations in interest rate and credit spreads that could reduce our ability to generate income on our loans and investments; • the use of leverage to finance our investments; • competition for desirable loans and investments; • the concentration of loans and investments in terms of type of interest, geography, asset types, industry and sponsors; • the risk of downgrade of any credit ratings assigned to our loans and investments; • the risk that any distressed loans or investments we may make may subject us to bankruptcy risks; • our dependence on information systems and risks associated with breaches of our data security; • costs associated with being a public company, including compliance with securities laws; • the risk of adverse impact to our business if there are deficiencies in our disclosure controls and procedures or internal control over financial reporting; • risks associated with pandemics, including the future outbreak of other highly infectious or contagious diseases; • risks associated with our substantial current indebtedness and indebtedness we may incur in the future; • risks associated with insurance, derivatives or hedging activity, including counterparty risk; • risks associated with our limited operating history as a REIT and the possibility that we may not replicate the historical results achieved by other entities managed or sponsored by affiliates of our Sponsor, members of our Adviser’s management team or their affiliates; • our dependence on our Adviser, its affiliates and personnel to conduct our day-to-day operations and identify and realize returns on our investments within very broad investment guidelines and without fiduciary duties to us or a requirement to seek Board approval; • risks associated with the Adviser’s ability to terminate the Advisory Agreement and risks associated with any potential internalization of our management functions; • conflicts of interest and competing demands for time faced by our Adviser, our Sponsor and their respective affiliates, officers and employees, and other significant potential conflicts of interest including in connection with (i) substantial fees and expenses we pay to our Adviser and its affiliates which may increase the risk that you will not earn a profit on your investment and (ii) competition with entities affiliated with our Adviser and our Sponsor for investments; • the risk of failure to maintain our status as a REIT and make required distributions to maintain such status, failure of which may materially limit our cash available for distribution to our shareholders and the risk of failure to maintain our status if values of our real estate investments rapidly change; • the risk of failure of our OP to be taxable as a partnership for U.S. federal income tax purposes, possibly causing us to fail to qualify for or to maintain REIT status; • compliance with REIT requirements, which may limit our ability to hedge our liabilities effectively and cause us to forgo otherwise attractive opportunities, liquidate certain of our investments or incur tax liabilities; • the risk associated with investments in synthetic form; 15 Table of Contents • the risk that certain of our business activities are potentially subject to the prohibited transaction tax and that even if we qualify as a REIT we may be subject to other tax liabilities that may reduce our cash flows and distributions on our shares; • the ineligibility of dividends payable by REITs for the reduced tax rates available for some dividends; • the ability of our Board to revoke our REIT qualification without shareholder approval; • our ability to change our major policies, operations and targeted investments without shareholder consent and our Board’s issuance of and ability to further issue debt securities or equity securities that may adversely impact the value or priority of or have dilutive effect on our shares or discourage a third-party acquisition; • risks associated with (i) provisions in our governing documents that may limit shareholders’ choice of forum for disputes with us or discourage an acquisition of our securities or a change in control, including share ownership restrictions and limits and (ii) provisions of our governing documents that may limit the ability for a third-party acquisition; • recent and potential legislative or regulatory changes or other actions with respect to tax, securitization, financial or other matters affecting REITs, the mortgage industry or debt-oriented real estate investments generally; • the general volatility of the capital and credit markets and the impact on the market for our shares; • the risk that we may not realize gains or income from our investments, that the repayments of our loans and investments may cause our financial performance and returns to investors to suffer or that we may experience a decline in the fair value of our assets; • risks associated with the Highland Bankruptcy (as defined below), including possible materially adverse consequences on our business, financial condition and results of operations; • non-completion of the NHT Merger may have an adverse effect on our business and results of operations; • risks associated with holding shares of the Series A Preferred Shares, including volatility in price and trading volume, subordination to our debt, dilution upon future issuances and lack of, or a low, rating on the Series A Preferred Shares; • risks associated with holdings shares of the 9.00% Series B Cumulative Redeemable Preferred Shares, par value $0.001 per share, liquidation preference $25.00 per share (“Series B Preferred Shares”), including limited voting rights, subordination to our debt and dilution from future issuances; • risk of failure to generate sufficient cash flows to service outstanding indebtedness or pay distributions on our shares at expected levels, and the risk that we may borrow funds or use funds from other sources to pay distributions; and • risks associated with the concentration of our share ownership.
Biggest changeYou should read this summary together with the more detailed description of each risk factor contained below. • unfavorable changes in economic conditions and their effects on the real estate industry generally and our operations and financial condition, including inflation, high interest rates, tightening monetary policy or recession, which may limit our ability to access funding and generate returns for shareholders; • the risk we make significant changes to our strategies in a market downturn, or fail to do so; • risks associated with ownership of real estate, including properties in transition, subjectivity of valuation, environmental matters and lack of liquidity in certain asset classes; • risks associated with our investment in diverse issuers, industries and investment forms and classes, both in real estate and in non-real estate sectors, including common equity, preferred equity securities, options or other derivatives, short sale contracts, secured loans of securities, reverse repurchase agreements, structured finance securities, below investment grade senior loans, bonds, convertible instruments, joint ventures, and emerging markets; • risks associated with our loans and investments in debt instruments including senior loans; • the exposure of our loans and investments to risks similar to real estate investments generally, including the risk of delinquency, dependence on tenants, compliance with laws and regulations related to ownership of real property, and foreclosure and loss in any of our commercial real estate-related investments that are secured, directly or indirectly, by real property; • fluctuations in interest rates and credit spreads and our use of leverage to finance our investments could reduce our ability to generate income on our loans and investments; 13 Table of Contents • competition for desirable loans and investments; • the concentration of loans and investments in terms of type of interest, geography, asset types, industry and sponsors; • credit downgrades or distressed situations may impair liquidity and value and subject us to bankruptcy-related risks, higher costs and delayed recoveries; • our dependence on information systems and risks associated with breaches of our data security; • costs associated with being a public company, including compliance with securities laws; • costs associated with being a public company, including compliance with securities laws and the risk of adverse impact to our business if there are deficiencies in our disclosure controls and procedures or internal control over financial reporting; • risks associated with pandemics, including the future outbreak of other highly infectious or contagious diseases; • risks associated with our substantial current indebtedness and indebtedness we may incur in the future; • risks associated with insurance, derivatives or hedging activity, including counterparty risk; • risks associated with our limited operating history as a REIT and the possibility that we may not replicate the historical results achieved by other entities managed or sponsored by affiliates of our Sponsor, members of our Adviser’s management team or their affiliates; • our dependence on our Adviser, its affiliates and personnel to conduct our day-to-day operations and identify and realize returns on our investments within very broad investment guidelines and without fiduciary duties to us or a requirement to seek Board approval; • risks associated with the Adviser’s ability to terminate the Advisory Agreement and risks associated with any potential internalization of our management functions; • conflicts of interest and competing demands for time faced by our Adviser, our Sponsor and their respective affiliates, officers and employees, and other significant potential conflicts of interest including in connection with (i) substantial fees and expenses we pay to our Adviser and its affiliates which may increase the risk that you will not earn a profit on your investment and (ii) competition with entities affiliated with our Adviser and our Sponsor for investments; • the risk of failure to maintain our status as a REIT and make required distributions to maintain such status, failure of which may materially limit our cash available for distribution to our shareholders and the risk of failure to maintain our status if values of our real estate investments rapidly change; • the risk of failure of our OP to be taxable as a partnership for U.S. federal income tax purposes, possibly causing us to fail to qualify for or to maintain REIT status; • compliance with REIT requirements, which may limit our ability to hedge our liabilities effectively and cause us to forgo otherwise attractive opportunities, liquidate certain of our investments or incur tax liabilities; • the risk that certain of our business activities are potentially subject to the prohibited transaction tax and that even if we qualify as a REIT we may be subject to other tax liabilities that may reduce our cash flows and distributions on our shares; • the ineligibility of dividends payable by REITs for the reduced tax rates available for some dividends; • the ability of our Board to revoke our REIT qualification without shareholder approval; 14 Table of Contents • our ability to change our major policies, operations and targeted investments without shareholder consent and our Board’s issuance of and ability to further issue debt securities or equity securities that may adversely impact the value or priority of or have a dilutive effect on our shares or discourage a third-party acquisition; • risks associated with (i) provisions in our governing documents that may limit shareholders’ choice of forum for disputes with us or discourage an acquisition of our securities or a change in control, including share ownership restrictions and limits and (ii) provisions of our governing documents that may limit the ability for a third-party acquisition; • recent and potential legislative or regulatory changes or other actions with respect to tax, securitization, financial or other matters affecting REITs, the mortgage industry or debt-oriented real estate investments generally; • the general volatility of the capital and credit markets and the impact on the market for our shares; • the risk that we may not realize gains or income from our investments, that the repayments of our loans and investments may cause our financial performance and returns to investors to suffer or that we may experience a decline in the fair value of our assets; • risks associated with the Highland Bankruptcy (as defined below), including possible materially adverse consequences on our business, financial condition and results of operations; • risks associated with holding shares of the Series A Preferred Shares, including volatility in price and trading volume, subordination to our debt, dilution upon future issuances and lack of, or a low, rating on the Series A Preferred Shares; • risks associated with holding shares of the Series B Preferred Shares, including limited voting rights, subordination to our debt and dilution from future issuances; • risk of failure to generate sufficient cash flows to service outstanding indebtedness or pay distributions on our shares at expected levels, and the risk that we may borrow funds or use funds from other sources to pay distributions; and • risks associated with the concentration of our share ownership.
The valuation of real estate, and therefore the valuation of any underlying security relating to loans and/or estate investments made by us is inherently subjective due to, among other factors, the individual nature of each property, its location, the expected future rental revenues from that particular property and the valuation methodology adopted.
The valuation of real estate, and therefore the valuation of any underlying security relating to loans and/or real estate investments made by us is inherently subjective due to, among other factors, the individual nature of each property, its location, the expected future rental revenues from that particular property and the valuation methodology adopted.
As a result of past dislocation of the credit markets, the securitization market has become subject to additional regulation. In particular, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"), various federal agencies, have promulgated rules that require issuers in securitizations to retain at least 5% of the risk associated with the securities.
As a result of past dislocation of the credit markets, the securitization market has become subject to additional regulation. In particular, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, various federal agencies have promulgated rules that require issuers in securitizations to retain at least 5% of the risk associated with the securities.
The Advisory Agreement may be terminated by (a) us, upon a cause event (as defined in the Advisory Agreement), on 30 days’ written notice, (b) either party, without cause, upon the expiration of the then-current term with at least 180 days’ written notice to the other party prior to the expiration of such term, (c) our Adviser, upon 30 days’ written notice if we materially breach the agreement and such breach continues for 30 days before we are given such notice or (d) automatically in the event of an Advisers Act Assignment unless we provide written consent.
The Advisory Agreement may be terminated by (a) us, upon a cause event (as defined in the Advisory Agreement), on 30 days’ written notice, (b) either party, without cause, upon the expiration of the then-current term with at least 180 days’ written notice to the other party prior to the expiration of such term, (c) our Adviser, upon 30 days’ written notice if we materially breach the agreement and such breach continues for 30 days before we are given such notice or (d) automatically in the event of an Advisers Act Assignment unless we provide written consent.
The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT. We plan to invest in mezzanine loans for which the Internal Revenue Service (“IRS”) has provided a safe harbor but not rules of substantive law.
The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT. We plan to invest in mezzanine loans for which the Internal Revenue Service (the “IRS”) has provided a safe harbor but not rules of substantive law.
During such time as we qualify as a REIT, we intend to avoid the 100% prohibited transaction tax by (a) conducting activities that may otherwise be considered prohibited transactions through a TRS (but such TRS will incur corporate rate income taxes with respect to any income or gain recognized by it), (b) conducting our operations in such a manner so that no sale or other disposition of an asset we own or hold an interest in, directly or through any subsidiary, will be treated as a prohibited transaction, or (c) structuring certain dispositions to comply with the requirements of the prohibited transaction safe harbor available under the Code that, among other requirements, have been held for at least two years.
During such time as we qualify as a REIT, we intend to avoid the 100% prohibited transaction tax by (a) conducting activities that may otherwise be considered prohibited transactions through a TRS (but such TRS will incur corporate rate income taxes with respect to any income or gain recognized by it), (b) conducting our operations in such a manner so that no sale or other disposition of an asset we own or hold an interest in, directly or through any subsidiary, will be treated as a prohibited transaction, or (c) structuring certain asset dispositions to comply with the requirements of the prohibited transaction safe harbor available under the Code that, among other requirements, have been held for at least two years.
The Series A Preferred Shares and Series B Preferred Shares are not rated and may not be rated in the future. The Series A Preferred Shares were previously rated by Egan-Jones Rating Company ("Egan-Jones") and are not currently rated. The Series B Preferred Shares have not been rated by any nationally recognized statistical rating organization.
The Series A Preferred Shares and Series B Preferred Shares are not rated and may not be rated in the future. The Series A Preferred Shares were previously rated by Egan-Jones Rating Company and are not currently rated. The Series B Preferred Shares have not been rated by any nationally recognized statistical rating organization.
OTAs attract consumers by offering innovation, ease of use platforms, multiple travel products, membership programs, the ability to package travel products across different suppliers (such as car rental, guest room booking, activities tickets etc.) in one transaction, and other marketing techniques.
OTAs attract consumers by offering innovation, ease of use platforms, multiple travel products, membership programs, the ability to package travel products across different suppliers (such as car rental, guest room booking, activities and tickets) in one transaction, and other marketing techniques.
Net operating income of an income-producing property can be affected by, among other things: • tenant mix and tenant bankruptcies; • success of tenant businesses; • property management decisions, including with respect to capital improvements, particularly in older building structures; • property location and condition; • competition from other properties offering the same or similar services; 17 Table of Contents • changes in laws that increase operating expenses or limit rents that may be charged; • any need to address environmental contamination at the property; • changes in national, regional or local economic conditions and/or specific industry segments; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • changes in interest rates and in the state of the debt and equity capital markets, including diminished availability or lack of debt financing for commercial real estate; • changes in real estate tax rates and other operating expenses; • changes in governmental rules, regulations and fiscal policies, including environmental legislation; • natural disasters, acts of war, terrorism, social unrest and civil disturbances, which may decrease the availability of or increase the cost of insurance or result in uninsured losses; and • adverse changes in zoning laws.
Net operating income of an income-producing property can be affected by, among other things: • tenant mix and tenant bankruptcies; • success of tenant businesses; • property management decisions, including with respect to capital improvements, particularly in older building structures; • property location and condition; • competition from other properties offering the same or similar services; • changes in laws that increase operating expenses or limit rents that may be charged; 16 Table of Contents • any need to address environmental contamination at the property; • changes in national, regional or local economic conditions and/or specific industry segments; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • changes in interest rates and in the state of the debt and equity capital markets, including diminished availability or lack of debt financing for commercial real estate; • changes in real estate tax rates and other operating expenses; • changes in governmental rules, regulations and fiscal policies; • natural disasters, acts of war, terrorism, social unrest and civil disturbances, which may decrease the availability of or increase the cost of insurance or result in uninsured losses; and • adverse changes in zoning laws.
Macroeconomic trends, including increases in inflation and high interest rates, may adversely impact our business, financial condition and results of operations. Inflation in the United States had previously accelerated to historically high levels and may continue at an elevated level in the near-term.
Macroeconomic trends, including increases in or high inflation and high interest rates, may adversely impact our business, financial condition and results of operations. Inflation in the United States had previously accelerated to historically high levels and may continue at an elevated level in the near-term.
We will depend to a significant degree on the diligence, skill and network of business contacts of the management team and other key personnel of our Adviser, including Messrs. Dondero, McGraner, Sauter, Norris, Richards and Willmore, all of whom may be difficult to replace.
We will depend to a significant degree on the diligence, skill and network of business contacts of the management team and other key personnel of our Adviser, including Messrs. Dondero, McGraner, Sauter, Norris and Richards, all of whom may be difficult to replace.
If the IRS were successful in treating our OP or any other such subsidiary partnership as an entity taxable as a corporation for U.S. federal income tax purposes (including by reason of being classified as a publicly traded partnership, unless at least 90% of its income was qualifying income as defined in the 48 Table of Contents Code, or a “taxable mortgage pool” for U.S. federal income tax purposes), we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, we would likely cease to qualify as a REIT, unless we qualified for certain statutory savings provisions.
If the IRS were successful in treating our OP or any other such subsidiary partnership as an entity taxable as a corporation for U.S. federal income tax purposes (including by reason of being classified as a publicly 44 Table of Contents traded partnership, unless at least 90% of its income was qualifying income as defined in the Code, or a “taxable mortgage pool” for U.S. federal income tax purposes), we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, we would likely cease to qualify as a REIT, unless we qualified for certain statutory savings provisions.
These restrictions on transferability and ownership will not apply, however, if our Board determines that it is no longer in our best interest to qualify as a REIT or that compliance with the restrictions is no longer required in order for us to so qualify as a REIT.
These restrictions on transferability and ownership will not apply, however, if our Board determines that it is no longer in our best interest to qualify as a REIT or that compliance with the restrictions is no longer required in order for us to qualify as a REIT.
With respect to mergers or consolidations with a corporation, association, trust or organization, other than a Principal Shareholder, or the sale, lease or exchange of all or substantially all of the Company’s property, including its good will, to other than a Principal Shareholder, our declaration of trust requires authorization by two-thirds of our trustees; provided that any merger or consolidation in which the Company is not the surviving entity, or sale, lease or exchange of all or substantially all of the Company’s property (measured at the time that such transaction was originally approved by two-thirds of the trustees) will require the affirmative vote of the holders of not less than 75% of the shares of beneficial interest of each affected class or series outstanding, voting as separate classes or series, unless the transaction has been approved by 80% of the trustees, in which case, subject to a resolution of the trustees specifying a greater or a lesser requirement with respect to the vote or quorum, such transaction will require the affirmative vote of a majority our shares of beneficial interest present in person or represented by proxy and entitled to vote thereon, at a meeting where the holders of a majority of our shares of beneficial interest entitled to vote on the matter are present in person or by proxy.
With respect to mergers or consolidations with a corporation, association, trust or organization, other than a Principal Shareholder, or the sale, lease or exchange of all or substantially all of the Company’s property, including its good will, to other than a Principal Shareholder, our declaration of trust requires authorization by two-thirds of our trustees; provided that any merger or consolidation in which the Company is not the surviving entity, or sale, lease or exchange of all or substantially all of the Company’s property (measured at the time that such transaction was originally approved by two-thirds of the trustees) will require the affirmative vote of the holders of not less than 75% of the shares of beneficial interest of each affected class or series outstanding, voting as separate classes or series, unless the transaction has been approved by 80% of the trustees, in which case, subject to a resolution of the trustees specifying a greater or a lesser requirement with respect to 41 Table of Contents the vote or quorum, such transaction will require the affirmative vote of a majority our shares of beneficial interest present in person or represented by proxy and entitled to vote thereon, at a meeting where the holders of a majority of our shares of beneficial interest entitled to vote on the matter are present in person or by proxy.
Some of the factors that could affect our share price or result in fluctuations in the price or trading volume of our common shares include: • actual or anticipated variations in our quarterly operating results, financial condition, cash flow and liquidity, or changes in investment strategy or prospects; 55 Table of Contents • changes in our operations or earnings estimates or publication of research reports about us or the real estate industry; • loss of a major funding source or inability to obtain new favorable funding sources in the future; • our financing strategy and leverage; • actual or anticipated accounting problems; • changes in market valuations of similar companies; • increases in or high interest rates that lead purchasers of our shares to demand a higher yield; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key management personnel; • actions by institutional shareholders; • speculation in the press or investment community; • the realization of any of the other risk factors presented in this Annual Report; • the extent of investor interest in our securities; • the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies; • our underlying asset value; • investor confidence and price and volume fluctuations in the shares and bond markets, generally; • changes in laws, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to REITs; • future equity issuances by us, or share resales by our shareholders, or the perception that such issuances or resales may occur; • failure to meet income estimates; • failure to meet and maintain REIT qualifications or exclusion from Investment Company Act regulations or listing on the NYSE; and • general market and economic conditions.
Some of the factors that could affect our share price or result in fluctuations in the price or trading volume of our common shares include: • actual or anticipated variations in our quarterly operating results, financial condition, cash flow and liquidity, or changes in investment strategy or prospects; • changes in our operations or earnings estimates or publication of research reports about us or the real estate industry; • loss of a major funding source or inability to obtain new favorable funding sources in the future; • our financing strategy and leverage; • actual or anticipated accounting problems; • changes in market valuations of similar companies; • increases in or high interest rates that lead purchasers of our shares to demand a higher yield; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key management personnel; • actions by institutional shareholders; • speculation in the press or investment community; • the realization of any of the other risk factors presented in this Annual Report; • the extent of investor interest in our securities; • the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies; • our underlying asset value; 51 Table of Contents • investor confidence and price and volume fluctuations in the shares and bond markets, generally; • changes in laws, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to REITs; • future equity issuances by us, or share resales by our shareholders, or the perception that such issuances or resales may occur; • failure to meet income estimates; • failure to meet and maintain REIT qualifications or exclusion from Investment Company Act regulations or listing on the New York Stock Exchange ("NYSE"); and • general market and economic conditions.
As a result of our arrangements with our Sponsor and our Adviser, there may be times when our Sponsor and our Adviser or their affiliated persons have interests that differ from those of our shareholders, giving rise to a conflict of interest. 42 Table of Contents Our trustees and management team serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do, or of investment funds managed by our Adviser or its affiliates.
As a result of our arrangements with our Sponsor and our Adviser, there may be times when our Sponsor and our Adviser or their affiliated persons have interests that differ from those of our shareholders, giving rise to a conflict of interest. 38 Table of Contents Our trustees and management team serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do, or of investment funds managed by our Adviser or its affiliates.
If we were to fail to so qualify, gain realized by foreign investors on a sale of shares of our shares beneficial interests would be subject to FIRPTA tax, unless the shares of our beneficial interests shares were traded on an established securities market and the foreign investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common shares.
If we were to fail to so qualify, gain realized by foreign investors on a sale of shares of our shares beneficial interests would be subject to FIRPTA tax, unless the shares of our beneficial interests were traded on an established securities market and the foreign investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding capital shares.
The interest apportionment rules under Treasury Regulation Section 1.856-5(c) provide that, if a mortgage is secured by both real property and other property, a REIT is required to apportion its annual interest income to the real property security based on a fraction, the numerator of which is the value of the real property securing the loan, determined when the REIT commits to acquire the loan, and the denominator of which is the highest “principal amount” of the loan during the year.
The interest apportionment rules under Treasury Regulations Section 1.856-5(c) provide that, if a mortgage is secured by both real property and other property, a REIT is required to apportion its annual interest income to the real property security based on a fraction, the numerator of which is the value of the real property securing the loan, determined when the REIT commits to acquire the loan, and the denominator of which is the highest “principal amount” of the loan during the year.
The business of the NHT segment may be adversely affected by various operating risks common to the hotel industry, including competition; over-building; dependence on business travel and tourism; changes in taxes and governmental regulations that influence or set wages, prices or interest 61 Table of Contents rates; availability and cost of capital necessary to fund investments, capital expenditures and service interest, principal or other debt obligations; changes in operating costs, shortages of labor, risks of unionization of labor, increases in the costs of food and liquor; receipt and/or maintenance of licenses and permits with local authorities; relationships with brand franchisors; the ability of other lodging alternatives to attract and retain customers; changes in local market conditions due to changes in general or local economic conditions and neighborhood characteristics, and building structure and building system, health, or hygiene issues rendering properties uninhabitable on a temporary or long term basis.
The business of the Hospitality segment may be adversely affected by various operating risks common to the hotel industry, including competition; over-building; dependence on business travel and tourism; changes in taxes and governmental regulations that influence or set wages, prices or interest rates; availability and cost of capital necessary to fund investments, capital expenditures and service interest, principal or other debt obligations; changes in operating costs, shortages of labor, risks of unionization of labor, increases in the costs of food and liquor; receipt and/or maintenance of licenses and permits with local authorities; relationships with brand franchisors; the ability of other 31 Table of Contents lodging alternatives to attract and retain customers; changes in local market conditions due to changes in general or local economic conditions and neighborhood characteristics, and building structure and building system, health, or hygiene issues rendering properties uninhabitable on a temporary or long term basis.
If we determine it to be in our best interest to own a substantial number of our properties through one or more TRSs, then it is possible that the IRS may conclude that the value of our interests in our TRSs exceeds 20% of the value of our total assets at the end of any calendar quarter and therefore cause us to fail to qualify as a REIT.
If we determine it to be in our best interest to own a substantial number of our properties through one or more TRSs, then it is possible that the IRS may conclude that the value of our interests in our TRSs exceeds 25% of the value of our total assets at the end of any calendar quarter and therefore cause us to fail to qualify as a REIT.
Under applicable provisions of the Code regarding prohibited transactions by REITs, while we qualify as a REIT, we will be subject to a 100% penalty tax on any gain recognized on the sale or other disposition of any asset (other than foreclosure property) that we own or hold an interest in, directly or indirectly through any subsidiary entity, including our OP, but generally excluding TRSs, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of a trade or business.
Under applicable provisions of the Code regarding prohibited transactions by REITs, while we qualify as a REIT, we will be subject to a 100% penalty tax on any gain recognized on the sale or other disposition of any asset (other than foreclosure property) that we own or hold an interest in, directly or indirectly through any subsidiary entity, 46 Table of Contents including our OP, but generally excluding TRSs, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of a trade or business.
OTAs hope that consumers will eventually develop loyalties to their online reservation system rather than to the brands under which hotel properties are franchised. The increasing reliance of consumers on online intermediaries and the continued expansion in technologies may negatively impact the strength of NHT’s partner brands, traditional distribution platforms and profit margins.
OTAs hope that consumers will eventually develop loyalties to their online reservation system rather than to the brands under which hotel properties are franchised. The increasing reliance of consumers on online intermediaries and the continued expansion in technologies may negatively impact the strength of our partner brands, traditional distribution platforms and profit margins.
These transactions include any: • merger or consolidation of the Company or any subsidiary of the Company with or into any Principal Shareholder; • issuance of any securities of the Company to any Principal Shareholder for cash (other than pursuant to any automatic dividend reinvestment plan); 44 Table of Contents • sale, lease or exchange of all or any substantial part of the assets of the Company to any Principal Shareholder (except assets having an aggregate fair market value of less than 2% of the total assets of the Company, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period); or • sale, lease or exchange to the Company or any subsidiary thereof, in exchange for securities of the Company, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than 2% of the total assets of the Company, aggregating for the purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period).
These transactions include any: • merger or consolidation of the Company or any subsidiary of the Company with or into any Principal Shareholder; • issuance of any securities of the Company to any Principal Shareholder for cash (other than pursuant to any automatic dividend reinvestment plan); • sale, lease or exchange of all or any substantial part of the assets of the Company to any Principal Shareholder (except assets having an aggregate fair market value of less than 2% of the total assets of the Company, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period); or • sale, lease or exchange to the Company or any subsidiary thereof, in exchange for securities of the Company, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than 2% of the total assets of the Company, aggregating for the purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period).
Prospective investors should consult their tax advisors regarding the application and effect of state and local income and other tax laws on an investment in our shares. Foreign investors may be subject to U.S. federal withholding tax and may be subject to U.S. federal income tax on distributions received from us and upon disposition of our common shares.
Prospective investors should consult their tax advisors regarding the application and effect of state and local income and other tax laws on an investment in our shares. Foreign investors may be subject to U.S. federal withholding tax and may be subject to U.S. federal income tax on distributions received from us and upon disposition of our capital shares.
Many of the costs and expenses associated with our investments, such as taxes, insurance, loan payments, and maintenance generally will or may not be reduced if a property is not fully occupied or other circumstances cause revenues to decrease, which could have a material adverse effect on our 19 Table of Contents financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.
Many of the costs and expenses associated with our investments, such as taxes, insurance, loan payments, and maintenance generally will or may not be reduced if a property is not fully occupied or other circumstances cause revenues to decrease, which could have a material adverse effect on our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.
Further, the Series A Preferred Shares may trade at prices lower than the public offering price, and the market price of the Series A Preferred Shares depends on many factors, including, but not limited to: • prevailing interest rates; • the market for similar securities; • general economic and financial market conditions; • our issuance, as well as the issuance by our subsidiaries, of additional preferred equity or debt securities; and • our financial condition, cash flows, liquidity, results of operations, funds from operations and prospects.
Further, the Series A Preferred Shares may trade at prices lower than the public offering price, and the market price of the Series A Preferred Shares depends on many factors, including, but not limited to: 53 Table of Contents • prevailing interest rates; • the market for similar securities; • general economic and financial market conditions; • our issuance, as well as the issuance by our subsidiaries, of additional preferred equity or debt securities; and • our financial condition, cash flows, liquidity, results of operations, funds from operations and prospects.
The prices of equity securities which we have invested in may fall over short or long periods of time. In addition, common equity represents a share of ownership in a company, and rank junior to debt and preferred equity in their claim on the Company’s assets in the event of bankruptcy.
The prices of equity securities which we have invested in may fall over short or long periods of time. In addition, common equity represents a share of ownership in a company and ranks junior to debt and preferred equity in their claim on the Company’s assets in the event of bankruptcy.
On September 21, 2020, Highland filed a plan of reorganization and disclosure statement with the Bankruptcy Court, which was subsequently amended (the “Fifth Amended Plan of Reorganization”). On October 9, 2020, Mr. Dondero resigned as an employee of Highland and as portfolio manager for all Highland-advised funds.
On September 21, 2020, Highland filed a plan of reorganization and disclosure statement with the Bankruptcy Court, which was subsequently amended (the “Fifth Amended Plan of Reorganization” or the “Plan”). On October 9, 2020, Mr. Dondero resigned as an employee of Highland and as portfolio manager for all Highland-advised funds.
NHT’s hotel guest rooms may be booked through OTAs such as Expedia.com, Travelocity.com, Hotels.com, etc. As guest bookings through OTAs increase, these intermediaries may be able to obtain higher commissions, reduced room rates and other significant contract concessions from the Company.
Our hotel guest rooms may be booked through OTAs such as Expedia.com, Travelocity.com, Hotels.com, etc. As guest bookings through OTAs increase, these intermediaries may be able to obtain higher commissions, reduced room rates and other significant contract concessions from the Company.
In addition, in general, no more than 5% of the value of our assets (other than government securities, securities issued by a TRS and securities that are qualifying real estate assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total securities can be represented by securities of one or more TRSs.
In addition, in general, no more than 5% of the value of our assets (other than government securities, securities issued by a TRS and securities that are qualifying real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our total securities can be represented by securities of one or more TRSs.
Our declaration of trust authorizes us to issue an unlimited number of shares of beneficial interest. The statement of preferences of the Series A Preferred Shares designates a series of 4,800,000 preferred shares as Series A Preferred Shares, of which 3,359,593 are issued and outstanding as of December 31, 2024.
Our declaration of trust authorizes us to issue an unlimited number of shares of beneficial interest. The statement of preferences of the Series A Preferred Shares designates a series of 4,800,000 preferred shares as Series A Preferred Shares, of which 3,359,593 are issued and outstanding as of December 31, 2025.
Most of our real estate investments are dependent upon our tenants successfully operating their businesses, and their failure to do so could adversely affect us. Most of our properties are occupied by tenants. Therefore, the success of our investments in these properties is materially dependent upon the performance of our tenants.
Most of our real estate investments are dependent upon our tenants successfully operating their businesses, and their failure to do so could adversely affect us. Most of our properties in the Diversified segment are occupied by tenants. Therefore, the success of our investments in these properties is materially dependent upon the performance of our tenants.
In certain situations, we may: • acquire investments subject to rights of senior classes and servicers under intercreditor or servicing agreements; • acquire only a minority and/or a non-controlling participation in an underlying investment; • co-invest with others through partnerships, joint ventures or other entities, thereby acquiring non-controlling interests; or • rely on independent third-party management or servicing with respect to the management of an asset.
In certain situations, we may: 25 Table of Contents • acquire investments subject to rights of senior classes and servicers under intercreditor or servicing agreements; • acquire only a minority and/or a non-controlling participation in an underlying investment; • co-invest with others through partnerships, joint ventures or other entities, thereby acquiring non-controlling interests; or • rely on independent third-party management or servicing with respect to the management of an asset.
Therefore, we may not be able to exercise control over all aspects of our loans or investments. Such financial assets may involve risks not present in investments where senior creditors, junior creditors, servicers or third parties controlling investors are not involved.
Therefore, we may not be able to exercise control over all aspects of our loans or investments. Such financial assets may involve risks not present in investments where senior creditors, junior creditors, servicers or third-party controlling investors are not involved.
The limitations described in the preceding two sentences will not apply, however, to the extent such damages are determined in a final binding non-appealable court or arbitration proceeding to result from the bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of our Adviser’s duties. We may change our targeted investments without shareholder consent.
The limitations described in the preceding two sentences will not apply, however, to the extent such damages are determined in a final binding non-appealable court or arbitration proceeding to result from the bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of our Adviser’s duties. We may change our targeted investments and investment guidelines without shareholder consent.
Because our decision to issue debt securities or shares expressly designated as ranking senior to the Series A Preferred Shares and Series B Preferred Shares as to distribution rights and rights upon our liquidation, dissolution, termination, cancellation or winding up in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.
Because our decision to issue debt securities or shares expressly designated as ranking senior to the Series A Preferred Shares and Series B Preferred Shares as to distribution rights and rights upon our liquidation, dissolution, termination, cancellation or winding up in any future offering will depend on market conditions and other factors 55 Table of Contents beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.
For information about our risks related to past increases in or high prevailing interest rates, see “-Macroeconomic trends including inflation, rising or high interest rates or recession may adversely affect our financial condition and results of operations” below. Macroeconomic trends including inflation, high interest rates or recession may adversely affect our financial condition and results of operations.
For information about our risks related to past increases in or high prevailing interest rates, see “-Macroeconomic trends including inflation, high interest rates, tariffs or recession may adversely affect our financial condition and results of operations” below. Macroeconomic trends including inflation, high interest rates, tariffs or recession may adversely affect our financial condition and results of operations.
In addition, our TRSs or any TRS we form will be subject to U.S. federal income tax and applicable state and local taxes on their net income. State, local and non-U.S. income tax laws may differ substantially from the corresponding U.S. federal income tax laws.
In addition, our TRSs and any TRS we form in the future will be subject to U.S. federal income tax and applicable state and local taxes on their net income. State, local and non-U.S. income tax laws may differ substantially from the corresponding U.S. federal income tax laws.
Also, as a result of this competition, desirable loans and investments in commercial real estate may be limited in the future, and we may not be able to take advantage of attractive lending and investment opportunities that may exist from time to time, as we can provide no assurance that we will be able to identify and invest in loans or make other investments that are consistent with our investment objectives.
Also, as a result of this competition, desirable loans and investments in commercial real estate may be limited in the future, and we may not be able to take advantage of attractive 23 Table of Contents lending and investment opportunities that may exist from time to time, as we can provide no assurance that we will be able to identify and invest in loans or make other investments that are consistent with our investment objectives.
There is a lack of clear authority governing the characterization of our subordinated debt or preferred equity investments for REIT qualification purposes. 47 Table of Contents There is limited case law and administrative guidance addressing whether instruments similar to any mezzanine loans or preferred equity investments that we may acquire will be treated as equity or debt for U.S. federal income tax purposes.
There is a lack of clear authority governing the characterization of our subordinated debt or preferred equity investments for REIT qualification purposes. There is limited case law and administrative guidance addressing whether instruments similar to any mezzanine loans or preferred equity investments that we may acquire will be treated as equity or debt for U.S. federal income tax purposes.
Risk of Pandemics or Other Health Crises. Pandemics, epidemics or other health crises have and could in the future disrupt our business. Both global and locally targeted health events could materially affect areas where our properties, corporate offices or major service providers are located.
Pandemics, epidemics or other health crises have and could in the future disrupt our business. Both global and locally targeted health events could materially affect areas where our properties, corporate offices or major service providers are located.
We will remain a smaller reporting company as long as, on each annual determination date, we either (a) have an unaffiliated public float of less than $250 million on the annual determination date or (b) had annual revenues of less than $100 million as of the previously completed fiscal year for which audited financial statements are available and on the annual determination date either (i) have no unaffiliated public float or (ii) have an unaffiliated public float of less than $700 million.
We will remain a smaller reporting company as long as, on each annual determination date, we either (a) have an unaffiliated public float of less than $250 million on the annual determination date or (b) had annual revenues of less than $100 million 30 Table of Contents as of the previously completed fiscal year for which audited financial statements are available and on the annual determination date either (i) have no unaffiliated public float or (ii) have an unaffiliated public float of less than $700 million.
There can be no assurance that the measures we take to ensure the integrity of our systems will provide protection, especially because cyberattack techniques used change frequently, may persist undetected over extended periods of time, and may not be mitigated in a timely manner to prevent or minimize the impact of an attack.
There can be no assurance that the measures we or they take to ensure the integrity of our or their respective systems will provide protection, especially because cyberattack techniques used change frequently, may persist undetected over extended periods of time, and may not be mitigated in a timely manner to prevent or minimize the impact of an attack.
Any weather conditions, man-made or natural disasters, terrorist attack or effect of climate change, whether or not insured, could have a material adverse effect on our financial performance, liquidity and the market price of our shares.
Any weather conditions, man-made or natural disasters, or terrorist attack, whether or not insured, could have a material adverse effect on our financial performance, liquidity and the market price of our shares.
The brand reputations of NHT’s franchise partners could also be adversely affected from these types of security breaches or regulatory violations, which could impair revenues or the ability to attract and retain qualified hotel personnel.
The brand reputations of our franchise partners could also be adversely affected from these types of security breaches or regulatory violations, which could impair revenues or the ability to attract and retain qualified hotel personnel.
OTAs may capture a greater share of guest bookings, which would have a negative impact on the strength of brands and their distribution platforms, while also adding to NHT’s expenses in the form of fees to the OTAs.
OTAs may capture a greater share of guest bookings, which would have a negative impact on the strength of brands and their distribution platforms, while also adding to the Company’s expenses in the form of fees to the OTAs.
In addition to our commercial real 24 Table of Contents estate focus, our investments may be concentrated in terms of property type (e.g. retail vs. office), geography, asset type, industry and sponsors, as we are not required to observe specific diversification criteria, except as may be set forth in the investment guidelines adopted by our Board.
In addition to our commercial real estate focus, our investments may be concentrated in terms of property type (e.g., retail vs. office), geography, asset type, industry and sponsors, as we are not required to observe specific diversification criteria, except as may be set forth in the investment guidelines adopted by our Board.
Selecting and evaluating material due diligence matters is subjective by nature, and there is no guarantee that the criteria utilized or judgment exercised by our Adviser will reflect the beliefs, values, internal policies or preferred 28 Table of Contents practices of any particular investor or align with the values or preferred practices of other commercial real estate investors or with market trends.
Selecting and evaluating material due diligence matters is subjective by nature, and there is no guarantee that the criteria utilized or judgment exercised by our Adviser will reflect the beliefs, values, internal policies or preferred practices of any particular investor or align with the values or preferred practices of other commercial real estate investors or with market trends.
Treasury fails to 33 Table of Contents inject new capital as needed or if Fannie Mae and Freddie Mac are released from conservatorship, the market value of the CMBS securitizations they guaranteed could significantly decline, making it difficult to obtain repurchase agreement financing and could force holders of CMBS securitizations to sell assets at substantial losses.
Treasury fails to inject new capital as needed or if Fannie Mae and Freddie Mac are released from conservatorship, the market value of the CMBS securitizations they guaranteed could significantly decline, making it difficult to obtain repurchase agreement financing and could force holders of CMBS securitizations to sell assets at substantial losses.
Our primary focus in making investments generally differs from that of existing investment funds, accounts or other investment vehicles that are or have been managed by affiliates of our Advisers, members of our Adviser’s management team, our Sponsor or affiliates of our Sponsor.
Our primary focus in making investments generally differs from that of existing investment funds, accounts or other investment vehicles that are or have been managed by affiliates of our Adviser, members of our Adviser’s management team, our Sponsor or affiliates of our Sponsor.
With regard to our commercial properties, inflationary pressures have increased or may have the effect of increasing our costs related to property management, third-party contractors and vendors, insurance, transportation and taxes, and our commercial tenants may be adversely impacted by higher operating expenses, which may increase the rate of tenant defaults and harm our operating results.
With regard to our commercial properties, 20 Table of Contents inflationary pressures have increased or may have the effect of increasing our costs related to property management, third-party contractors and vendors, insurance, transportation and taxes, and our commercial tenants may be adversely impacted by higher operating expenses, which may increase the rate of tenant defaults and harm our operating results.
However, the aggregate maximum amount that our Adviser may be liable to us pursuant to the Advisory Agreement will, to the extent not prohibited by law, never exceed the amount of the management fees received by our Adviser under the Advisory Agreement prior to the date that the acts or omissions giving rise to a claim for indemnification or liability have occurred.
However, the aggregate maximum amount that 37 Table of Contents our Adviser may be liable to us pursuant to the Advisory Agreement will, to the extent not prohibited by law, never exceed the amount of the management fees received by our Adviser under the Advisory Agreement prior to the date that the acts or omissions giving rise to a claim for indemnification or liability have occurred.
In addition, as regulatory capital requirements imposed on our lenders are increased, they may be required to limit, or increase the cost of, financing they provide to us. In general, this could potentially increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price.
In addition, as regulatory capital requirements imposed on our lenders are increased, they may be required to limit, or increase the cost of, financing they provide to us. In general, this could potentially increase our financing costs and reduce our liquidity 34 Table of Contents or require us to sell assets at an inopportune time or price.
In order to qualify and maintain our qualification as a REIT, we must distribute annually to our shareholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard to the deduction for distributions paid and excluding net capital gain.
In order to qualify and maintain our qualification as a REIT, among other requirements, we must distribute annually to our shareholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard to the deduction for distributions paid and excluding net capital gain.
We currently own interests in multiple TRS entities and may acquire securities in additional TRSs in the future. As of December 31, 2024, the Company wholly owned and consolidated two TRSs, NREO TRS, LLC and NHF TRS, LLC.
We currently own interests in multiple TRS entities and may acquire securities in additional TRSs in the future. As of December 31, 2025, the Company wholly owned and consolidated two TRSs, NREO TRS, LLC and NHF TRS, LLC.
To the extent joint venture partners do not meet their obligations to the joint venture or they take action inconsistent with the interests of the joint venture, we could be adversely affected. If we acquire investments through joint ventures, we may be required to make decisions jointly with the other investors who have interests in the respective joint ventures.
To the extent joint venture partners do not meet their obligations to the joint venture or they take action inconsistent with the interests of the joint venture, we could be adversely affected. 22 Table of Contents If we acquire investments through joint ventures, we may be required to make decisions jointly with the other investors who have interests in the respective joint ventures.
Our Board may issue an unlimited number of shares of beneficial interest and may issue such other securities including preferred shares as it deems necessary, desirable or appropriate and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms or conditions of redemption of any such preferred shares.
Our Board may issue an unlimited number of shares of beneficial interest and may issue such other securities including preferred shares as it deems necessary, desirable or appropriate and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms or conditions of redemption of any such 40 Table of Contents preferred shares.
Any federal or state taxes we pay will reduce our cash available for distribution to you. Prospective investors are urged to consult their tax advisors regarding the effect of other U.S. federal, state, local and non-U.S. tax laws on an investment in our shares.
Any federal or state 42 Table of Contents taxes we pay will reduce our cash available for distribution to you. Prospective investors are urged to consult their tax advisors regarding the effect of other U.S. federal, state, local and non-U.S. tax laws on an investment in our shares.
Such concentration of voting power could have the effect of delaying, deterring, or preventing a change of control or other business combination, which could, in turn, have an adverse effect on the market price of our common shares or prevent our shareholders from realizing a premium over the then-prevailing market price for their common shares.
Such concentration of voting power could have the effect of delaying, deterring, or 50 Table of Contents preventing a change of control or other business combination, which could, in turn, have an adverse effect on the market price of our common shares or prevent our shareholders from realizing a premium over the then-prevailing market price for their common shares.
We may be required to report taxable income for certain investments in excess of the economic income we ultimately realize from them. 50 Table of Contents We may acquire debt instruments, including but not limited to SFR mortgage loans and CMBS, in the secondary market for less than their face amount.
We may be required to report taxable income for certain investments in excess of the economic income we ultimately realize from them. We may acquire debt instruments, including but not limited to SFR mortgage loans and CMBS, in the secondary market for less than their face amount.
Gain recognized by a non-U.S. shareholder upon the sale or exchange of our common shares generally will not be subject to U.S. federal income taxation unless such shares constitutes a USRPI under FIRPTA. Our common shares will not constitute a USRPI so long as we are a “domestically-controlled” REIT.
Gain recognized by a non-U.S. shareholder upon the sale or exchange of our capital shares generally will not be subject to U.S. federal income taxation unless such shares constitute a USRPI under FIRPTA. Our capital shares will not constitute a USRPI so long as we are a “domestically-controlled” REIT.
Legislative or other actions affecting REITs could have a negative effect on our shareholders or us. 51 Table of Contents The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Department of the Treasury.
Legislative or other actions affecting REITs could have a negative effect on our shareholders or us. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Department of the Treasury.
Future weather conditions, man-made or natural disasters, effects of climate change or acts of terrorism could adversely impact the demand for, and value of, our assets and could also directly impact the value of our assets through damage, destruction or loss, and could thereafter materially impact the availability or cost of insurance to protect against these events.
Future weather conditions, man-made or natural disasters, or acts of terrorism could adversely impact the demand for, and value of, our assets and could also directly impact the value of our assets through damage, destruction or loss, and could thereafter materially impact the availability or cost of insurance to protect against these events.
For example, under certain circumstances, a lender that has inappropriately exercised control over the management and policies of a debtor may have its claims subordinated or disallowed or may be 26 Table of Contents found liable for damages suffered by parties as a result of such actions.
For example, under certain circumstances, a lender that has inappropriately exercised control over the management and policies of a debtor may have its claims subordinated or disallowed or may be found liable for damages suffered by parties as a result of such actions.
The hotel industry is subject to seasonal changes, which may cause fluctuations in room revenues, occupancy levels, room rates and operating expenses in particular hotels. The seasonality of the hotel industry could have a material adverse effect on NHT. The hotel industry is seasonal in nature, which can be expected to cause quarterly fluctuations in revenues.
The hotel industry is subject to seasonal changes, which may cause fluctuations in room revenues, occupancy levels, room rates and operating expenses in particular hotels. The seasonality of the hotel industry could have a material adverse effect on the Hospitality segment. The hotel industry is seasonal in nature, which can be expected to cause quarterly fluctuations in revenues.
Upon any such termination, NHT would be required to rebrand the hotel or else operate the property as an independent hotel, which could result in substantial relicensing or rebranding costs, a decline in the value of the hotel, the loss of marketing support and participation in guest loyalty programs, and harm NHT’s relationship with the franchisor, impeding NHT’s ability to operate other hotels under the same brand.
Upon any such termination, the Company would be required to rebrand the hotel or else operate the property as an independent hotel, which could result in substantial relicensing or rebranding costs, a decline in the value of the hotel, the loss of marketing support and participation in guest loyalty programs, and harm our relationship with the franchisor, impeding our ability to operate other hotels under the same brand.
Advances in technology and the growing use of online travel agencies may lead to increased costs and competition and lead to changes in consumer behavior. The hotel industry may be affected by advances in technology. Consumers’ growing use of internet travel intermediaries (“OTAs”) and alternative lodging marketplaces may adversely affect NHT’s profitability.
Advances in technology and the growing use of online travel agencies may lead to increased costs and competition and lead to changes in consumer behavior. The hotel industry may be affected by advances in technology. Consumers’ growing use of internet travel intermediaries (“OTAs”) and alternative lodging marketplaces may adversely affect the Hospitality segment’s profitability.
Franchise agreements contain specific standards for, and restrictions and limitations on, the operation and maintenance of NHT’s hotels in order to maintain uniformity within the franchisor system.
Franchise agreements contain specific standards for, and restrictions and limitations on, the operation and maintenance of our hotels in order to maintain uniformity within the franchisor system.
In general, the availability of favorable investment opportunities and, consequently, our returns, will be affected by the level and volatility of interest rates, conditions in the financial markets, general economic conditions, the demand for loan and investment opportunities in commercial real estate and the supply of capital for such opportunities.
In general, the 24 Table of Contents availability of favorable investment opportunities and, consequently, our returns, will be affected by the level and volatility of interest rates, conditions in the financial markets, general economic conditions, the demand for loan and investment opportunities in commercial real estate and the supply of capital for such opportunities.
Redetermined TRS service income generally represents amounts 52 Table of Contents by which the gross income of a TRS attributable to its services for or on behalf of us (other than to a tenant of ours) would be increased based on arm’s length negotiations.
Redetermined TRS service income generally represents amounts by which the gross income of a TRS attributable to its services for or on behalf of us (other than to a tenant of ours) would be increased based on arm’s length negotiations.
We may have to fund distributions from working capital, borrow to provide funds for such distributions, use proceeds of future offerings or sell assets to the extent distributions exceed earnings or cash flows from operations. 58 Table of Contents Funding distributions from working capital would restrict our operations.
We may have to fund distributions from working capital, borrow to provide funds for such distributions, use proceeds of future offerings or sell assets to the extent distributions exceed earnings or cash flows from operations. Funding distributions from working capital would restrict our operations.
Additionally, any convertible or exchangeable debt securities that we issue in the future may have rights, preferences and 59 Table of Contents privileges more favorable than those of the Series A Preferred Shares and Series B Preferred Shares and may result in dilution to owners of the Series A Preferred Shares or Series B Preferred Shares.
Additionally, any convertible or exchangeable debt securities that we issue in the future may have rights, preferences and privileges more favorable than those of the Series A Preferred Shares and Series B Preferred Shares and may result in dilution to owners of the Series A Preferred Shares or Series B Preferred Shares.
In addition, any dislocation or weakness in the capital and credit markets could adversely affect our lenders and 38 Table of Contents could cause one or more of our lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing.
In addition, any dislocation or weakness in the capital and credit markets could adversely affect our lenders and could cause one or more of our lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing.
In addition, investors in our securities are not acquiring an interest in any such investment funds, accounts or other investment vehicles that are or have been managed by members of our Adviser’s management team or our Sponsor or its affiliates.
In addition, investors in our securities are not acquiring 36 Table of Contents an interest in any such investment funds, accounts or other investment vehicles that are or have been managed by members of our Adviser’s management team or our Sponsor or its affiliates.
There can be no assurance that such an entity will not derive nonqualifying income for purposes of the 75% or 95% gross income test or earn income that could be subject to a 100% penalty tax.
There can be no assurance that such an entity will not derive nonqualifying income for purposes of the 75% or 95% gross income test or earn income 43 Table of Contents that could be subject to a 100% penalty tax.
We cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely 21 Table of Contents affect the availability and terms of future borrowings, renewals or refinancings.
We cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings.
Redetermined deductions and excess interest generally represent amounts that are deducted by a TRS of ours for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s-length negotiations.
Redetermined deductions and excess interest generally represent amounts that are deducted by a TRS of ours for amounts paid to us that are in excess of the amounts that would have been 49 Table of Contents deducted based on arm’s-length negotiations.
Our Board may modify our dividend policy from time to time. 56 Table of Contents We may be unable to make distributions on our common shares at expected levels, which could result in a decrease in the market price of our common shares.
Our Board may modify our dividend policy from time to time. We may be unable to make distributions on our common shares at expected levels, which could result in a decrease in the market price of our common shares.
Therefore, additional common shares issuances, directly or through convertible or exchangeable securities (including common shares and convertible preferred shares), warrants or options, will dilute the holdings of our existing common shareholders and such issuances or the perception of such issuances may reduce the market price of our common shares.
Therefore, additional common 52 Table of Contents shares issuances, directly or through convertible or exchangeable securities (including common shares and convertible preferred shares), warrants or options, will dilute the holdings of our existing common shareholders and such issuances or the perception of such issuances may reduce the market price of our common shares.
The NHT segment operates all of its hotels pursuant to franchise or license agreements with nationally recognized hotel brands. NHT’s management believes that building brand value is critical to increased demand and the strengthening of customer loyalty. All of the hotels in the NHT segment utilize brands owned by Hilton, Marriott or Hyatt.
The Hospitality segment operates all of its hotels pursuant to franchise or license agreements with nationally recognized hotel brands. Our management believes that building brand value is critical to increased demand and the strengthening of customer loyalty. All of the hotels in the Hospitality segment utilize brands owned by Hilton, Marriott or Hyatt.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAs one of the critical elements of the Company’s overall risk management, our cybersecurity program is focused on the following key areas: Governance: The Board’s oversight of cybersecurity risk management is supported by the Audit Committee of the Board (the “Audit Committee”), which interacts with our Adviser’s Director of Information Technology and other members of management of our Adviser that implement and oversee our Adviser’s cybersecurity program.
Biggest changeIn general, our Adviser seeks to address cybersecurity risks of the Company through a comprehensive, cross-functional approach that is focused on continually assessing the Company’s information systems to detect, prevent and mitigate cybersecurity threats and effectively respond to cybersecurity incidents when they occur. 57 Table of Contents As one of the critical elements of the Company’s overall risk management, our cybersecurity program is focused on the following key areas: Governance: The Board’s oversight of cybersecurity risk management is supported by the Audit Committee of the Board (the “Audit Committee”), which interacts with our Adviser’s Director of Information Technology and other members of management of our Adviser that implement and oversee our Adviser’s cybersecurity program.
The Adviser’s Director of Information Technology has served in various roles in information technology and information security for 25 years, including serving as Global Technology Manager at a multi-national publicly traded broker-dealer, and 15 years as the Director of Information Technology at a privately held financial services firm.
The Adviser’s Director of Information Technology has served in various roles in information technology and information security for over 25 years, including serving as Global Technology Manager at a multi-national publicly traded broker-dealer, and over 15 years as the Director of Information Technology at a privately held financial services firm.
Item 1C. Cybersecurity The Company’s Board recognizes the critical importance of maintaining the trust and confidence of our customers, clients, business partners and employees. The Board is actively involved in oversight of the Company’s risk management program, and cybersecurity represents an important component of the Company’s overall approach to risk management.
Item 1C. C ybersecurity The Company’s Board recognizes the critical importance of maintaining the trust and confidence of our customers, clients, business partners and employees. The Board is actively involved in oversight of the Company’s risk management program, and cybersecurity represents an important component of the Company’s overall approach to risk management.
Our Adviser engages in the periodic assessment and testing of our Adviser’s policies, standards, processes and practices that are designed to address the Company’s cybersecurity threats and incidents. These efforts include a wide range of activities, including annual penetration and third-party compliance testing and ongoing internal testing and 67 Table of Contents creation and modification of policies and procedures.
Our Adviser engages in the periodic assessment and testing of our Adviser’s policies, standards, processes and practices that are designed to address the Company’s cybersecurity threats and incidents. These efforts include a wide range of activities, including annual penetration and third-party compliance testing and ongoing internal testing and creation and modification of policies and procedures.
Our Adviser maintains cybersecurity policies, standards, processes and practices that are based on recognized security frameworks such as the National Institute of Standards and Technology cybersecurity framework (the “NIST CF”) and the Azure Security Benchmark.
Our Adviser maintains cybersecurity policies, standards, processes and practices that are based on recognized security frameworks such as the National Institute of Standards and Technology cybersecurity framework (the “NIST CSF”) and the Azure Security Benchmark.
See “Risk Factors - We are highly dependent on information technology and security breaches or systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our securities and our ability to pay distributions”.
Risk Factors - We are highly dependent on information technology and security breaches or systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our securities and our ability to pay distributions”.
However, the risk of cybersecurity threats could be significant if the cyber-attack disrupts the Company’s critical operations, service or financial systems.
However, the risk of cybersecurity threats could be significant if the cyber-attack disrupts the Company’s critical operations, service or financial systems. See “Item 1A.
The Adviser’s Director of Information Technology holds an undergraduate degree in biochemistry and has attained numerous information technology certifications over the years including Microsoft Certified Systems Engineer (MCSE) and Cisco Certified Network Professional (CCNP). The Adviser’s Senior Infrastructure Engineer has over 20 years industry experience, holds an undergraduate degree in radiology, and has completed various Microsoft related information technology certifications.
The Adviser’s Director of Information Technology holds an undergraduate degree in biochemistry and has attained numerous information technology certifications over the years including Microsoft Certified Systems Engineer (MCSE) and Cisco Certified Network Professional (CCNP).
The Adviser’s Director of Information Technology, in coordination with relevant senior management and personnel of the Adviser, which includes our Adviser’s Chief Financial Officer, Senior Infrastructure Engineer, and Chief Compliance Officer, work to conceive, implement, and monitor the effectiveness of a program designed to protect the Company’s information systems from cybersecurity threats and to promptly respond to any security incidents in accordance with the Company’s business continuity plan.
On an annual basis, the Board and the Audit Committee discuss the Company’s approach to cybersecurity risk management with our Adviser, including the Adviser’s Director of Information Technology. 58 Table of Contents The Adviser’s Director of Information Technology, in coordination with relevant senior management and personnel of the Adviser, which includes our Adviser’s Chief Financial Officer and Chief Compliance Officer, work to conceive, implement, and monitor the effectiveness of a program designed to protect the Company’s information systems from cybersecurity threats and to promptly respond to any security incidents in accordance with the Company’s business continuity plan.
The Audit Committee also receives prompt and timely information regarding any cybersecurity incident that meets established reporting thresholds, as well as ongoing updates regarding any such incident until it has been addressed. On an annual basis, the Board and the Audit Committee discuss the Company’s approach to cybersecurity risk management with our Adviser, including the Adviser’s Director of Information Technology.
The Audit Committee also receives prompt and timely information regarding any cybersecurity incident that meets established reporting thresholds, as well as ongoing updates regarding any such incident until it has been addressed.
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In general, our Adviser seeks to address cybersecurity risks of the Company through a comprehensive, cross-functional approach that is focused on continually assessing the Company’s information systems to detect, prevent and mitigate cybersecurity threats and effectively respond to cybersecurity incidents when they occur.
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Combined, our Adviser’s information technology team has over 50 years of experience covering all major aspects of network architecture and management.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeNHT Segment: Brand Location Name Chain Scale Service Scale Year Built/Last Renovation Rooms Hilton Garden Inn Dallas, Texas HGI Property Upscale Select-Service 1995/2016 240 Hyatt Park City, Utah Park City Upscale Full-Service 2016 122 Hampton Inn & Suites Bradenton, Florida Bradenton Upscale Select-Service 1926/2016 119 Homewood Suites (1) Plano, Texas HWS Plano Upscale Extended Stay 1996/2018 99 N/A (1) Addison, Texas Addison Property Upscale Extended Stay 1990/2018 120 Homewood Suites (1) Irving, Texas HWS Las Colinas Upscale Extended Stay 1990/2018 136 Marriott St.
Biggest changeHospitality Segment: Brand Location Name Chain Scale Service Scale Year Built/Last Renovation Rooms Hilton Garden Inn Dallas, Texas HGI Property Upscale Select-Service 1995/2016 240 Hyatt Park City, Utah Park City Upscale Full-Service 2016 122 Hampton Inn & Suites Bradenton, Florida Bradenton Upscale Select-Service 1926/2016 119 Marriott St. Petersburg, Florida St.
Properties The following tables provide a summary of the Company’s physical properties as of December 31, 2024: NXDT Segment: 68 Table of Contents Average Effective Monthly Occupied Rent Per Square Foot (1) as of % Occupied (2) as of Property Name Rentable Square Footage (in thousands) Property Type Date Acquired December 31, 2024 December 31, 2024 White Rock Center 82,793 Retail 6/13/2013 $ 1.50 71.1 % 5916 W Loop 289 30,140 Retail 7/23/2013 $ — — % (3) Cityplace 1,365,711 Office, Multifamily & Hospitality 8/15/2018 $ 2.16 46.4 % 1,478,644 (1) Average effective monthly occupied rent per square foot is equal to the average of the contractual rent for commenced leases as of December 31, 2024, minus any tenant concessions over the term of the lease, divided by the occupied square footage of commenced leases as of December 31, 2024.
Pro perties The following tables provide a summary of the Company’s physical properties as of December 31, 2025: Diversified Segment: Rentable Average Effective Monthly Occupied Rent Per Square Foot (1) as of % Occupied (2) as of Property Name Square Footage (in thousands) Property Type Date Acquired December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024 White Rock Center 82,793 Retail 6/13/2013 $ 1.62 $ 1.50 81.4 % 71.1 % 5916 W Loop 289 30,140 Retail 7/23/2013 — — 0.0 % 0.0 % Cityplace 1,365,711 Office, Multifamily & Hospitality (3) 8/15/2018 $ 2.05 $ 2.16 41.2 % 46.4 % 1,478,644 (1) Average effective monthly occupied rent per square foot is equal to the average of the contractual rent for commenced leases as of December 31, 2025, minus any tenant concessions over the term of the lease, divided by the occupied square footage of commenced leases as of December 31, 2025.
For further information on the Company’s owned real properties, see Notes 4, 5 and 6 to our consolidated financial statements. 69 Table of Contents
For further information on the Company’s owned real properties, see Notes 4, 5 and 6 to our consolidated financial statements.
(2) Percent occupied is calculated as the rentable square footage occupied as of December 31, 2024, divided by the total rentable square footage, expressed as a percentage. (3) The property's tenant vacated in the fourth quarter of 2023. The Company is currently looking into leasing out the property.
(2) Percent occupied is calculated as the rentable square footage occupied as of December 31, 2025, divided by the total rentable square footage, expressed as a percentage.
The Company's ownership of Cityplace is subject to mortgage debt with an outstanding principal balance of approximately $139.9 million as of December 31, 2024. For further information on the Company’s owned real properties, see Notes 4, 5 and 6 to our consolidated financial statements.
For further information on the Company’s owned real properties, see Notes 4, 5 and 6 to our consolidated financial statements.
Petersburg, Florida St. Pete Property Upper Upscale Full-Service 2001/2021 209 Total Rooms: 1,045 (1) As of December 31, 2024 this property was held-for-sale. Each of the hotel properties in the NHT segment is encumbered by a mortgage securing the payment of debt of $112.2 million by NHT.
Pete Property Upper Upscale Full-Service 2001/2021 209 Total Rooms: 690 The HGI Property and St. Pete Property are encumbered by mortgages securing the payment of debts of $26.4 million and $12.7 million, respectively. The Bradenton and Park City properties are encumbered by mortgages securing the payment of debt of $38.6 million.
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(3) Cityplace is currently under redevelopment and the Company is converting part of the property into a hotel, which was still under construction as of December 31, 2025. 59 Table of Contents The Company's ownership of Cityplace is subject to mortgage debt with an outstanding principal balance of approximately $137.6 million as of December 31, 2025.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, we are party to legal proceedings that arise in the ordinary course of our business.
Biggest changeItem 3. L egal Proceedings From time to time, we are party to legal proceedings that arise in the ordinary course of our business.
Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies. Item 4. Mine Safety Disclosures Not applicable. 70 Table of Contents PART II — OTHER INFORMATION
Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies. Item 4. Mine Safety Disclosures Not applicable. 60 Table of Contents PART II — OTHER INFORMATION

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeBusiness—2024 Highlights—Share Repurchase Program.” As of December 31, 2024, we have not repurchased any of our common shares or Series A Preferred Shares under the Share Repurchase Program. Item 6. [Reserved] 71 Table of Contents
Biggest changeAs of December 31, 2025, we have not repurchased any of our Series A Preferred Shares under the share repurchase program. During the year ended December 31, 2025, the Company repurchased 562,157 shares of its common shares, par value $0.001 per share, at a total cost of approximately $1.9 million, or $3.35 per share on average.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common shares trade on the New York Stock Exchange (“NYSE”) under the ticker symbol “NXDT.” Shareholder Information On March 31, 2025, we had 44,517,013.24 common shares outstanding held by a total of approximately 838 record holders.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common shares trade on the NYSE and NYSE Texas under the ticker symbol “NXDT.” Shareholder Information On March 31, 2026, we had 50,219,590 common shares outstanding held by a total of approximately 820 record holders.
The number of holders does not include individuals or entities who beneficially own shares but whose shares are held of record by a broker or clearing agency, but does include each such broker or clearing agency as one record holder. Repurchase of Shares On October 28, 2024, our Board authorized the Share Repurchase Program. For more information, see “Item 1.
The number of holders does not include individuals or entities who beneficially own shares but whose shares are held of record by a broker or clearing agency, but does include each such broker or clearing agency as one record holder.
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Repurchase of Shares On October 28, 2024, the Board authorized us to repurchase an indeterminate number of common shares and Series A Preferred Shares, at an aggregate market value of up to $20.0 million during a two-year period that is set to expire on October 28, 2026. This authorization replaced the Board’s prior authorization.
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Since the inception of the share repurchase program in October 2024, the Company had repurchased 562,157 shares of its common shares, at a total cost of approximately $1.9 million, or $3.35 per share.
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During the three months ended December 31, 2025 the Company repurchased 376,800 shares of its common shares as shown in the table below: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that may yet be Purchased under the Plans or Programs (in millions) Beginning Total 185,477 $ 4.31 185,477 $ 19.2 October 1 – October 31 — — — 19.2 November 1 – November 30 259,019 2.89 259,019 18.5 December 1 – December 31 117,661 2.85 117,661 18.1 Total as of December 31, 2025 562,157 $ 3.35 562,157 $ 18.1

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeConsolidated NOI and Same Store NOI for the Years Ended December 31, 2024 and 2023 The following table, which has not been adjusted for the effects of noncontrolling interest (“NCI”), reconciles our consolidated NOI for the years ended December 31, 2024 and 2023 to net income (loss), the most directly comparable GAAP financial measure (in thousands): For the Year Ended December 31 2024 2023 Net loss $ (56,573) $ (117,241) Adjustments to reconcile net loss to NOI: Advisory and administrative fees 14,165 11,740 Corporate general and administrative expenses 12,803 7,981 Conversion expenses — 1,203 Income tax expense 1,372 2,731 Depreciation and amortization 15,600 13,937 Interest expense 28,352 15,902 Non-operating property investment revenue ¹ (39,281) (42,667) Realized (gains) losses from non-real estate investments 21,479 1,634 Change in unrealized (gains) losses from non-real estate investments 1,348 108,249 Equity in (income) losses of unconsolidated equity method ventures (129) 306 Impairment loss 7,110 — NOI $ 6,246 $ 3,775 Less Non-Same Store Revenues $ (42,795) $ (19,147) Operating expenses 37,057 16,310 Same Store NOI $ 508 $ 938 (1) Non-operating property investment revenue is defined as revenue included in the consolidated financial statements that are from non-operating properties such as dividend income and interest income. 79 Table of Contents The following table, which has not been adjusted for the effects of NCI, reconciles our NOI for each of our segments for the year ended December 31, 2024 to net income (loss), the most directly comparable GAAP financial measure by reportable segment (in thousands): For the Year Ended December 31, 2024 2023 NexPoint Diversified Real Estate Trust NexPoint Hospitality Trust Total NexPoint Diversified Real Estate Trust ¹ Net income (loss) $ (35,337) $ (21,236) $ (56,573) $ (117,241) Adjustments to reconcile net income (loss) to NOI: Advisory and administrative fees 13,286 879 14,165 11,740 Corporate general and administrative expenses 9,947 2,856 12,803 7,981 Conversion expenses — — — 1,203 Income tax expense 1,441 (69) 1,372 2,731 Depreciation and amortization 11,698 3,902 15,600 13,937 Interest expense 17,443 10,909 28,352 15,902 Non-operating property investment revenue ² (34,300) (4,981) (39,281) (42,667) Realized (gains) losses from non-real estate investments 21,479 — 21,479 1,634 Change in unrealized (gains) losses from non-real estate investments 1,348 — 1,348 108,249 Equity in (income) losses of unconsolidated equity method ventures (129) — (129) 306 Impairment loss — 7,110 7,110 — NOI $ 6,876 $ (630) $ 6,246 $ 3,775 Less Non-Same Store Revenues $ (24,705) $ (18,090) $ (42,795) $ (19,147) Operating expenses 14,326 22,731 37,057 16,310 Same Store NOI $ (3,503) $ 4,011 $ 508 $ 938 (1) As of December 31, 2023, there was only one reporting segment.
Biggest changeConsolidated NOI and Same Store NOI for the Years Ended December 31, 2025 and 2024 The following table, which has not been adjusted for the effects of noncontrolling interest (“NCI”), reconciles our consolidated NOI for the years ended December 31, 2025 and 2024 to net income (loss), the most directly comparable GAAP financial measure (in thousands): For the Year Ended December 31 2025 2024 Net loss $ (127,037 ) $ (56,573 ) Adjustments to reconcile net loss to NOI: Advisory and administrative fees 17,073 14,165 Corporate general and administrative expenses 11,901 12,803 Income tax (benefit) expense (111 ) 1,372 Depreciation and amortization 17,739 15,600 Interest expense 26,604 28,352 Non-operating property investment revenue (1) (44,952 ) (39,281 ) Realized (gains) losses from non-real estate investments (5,994 ) 21,479 Change in unrealized (gains) losses from non-real estate investments 103,904 1,348 Equity in (income) losses of unconsolidated equity method ventures 1,289 (129 ) Impairment loss 2,328 7,110 NOI $ 2,744 $ 6,246 Less Non-Same Store Revenues $ (39,294 ) $ (42,795 ) Operating expenses 37,655 37,057 Operating income (37 ) — Same Store NOI $ 1,068 $ 508 (1) Non-operating property investment revenue is defined as revenue included in the consolidated financial statements that is from non-operating properties such as dividend income and interest income. 69 Table of Contents The following table, which has not been adjusted for the effects of NCI, reconciles our NOI for each of our segments for the year ended December 31, 2025 to net income (loss), the most directly comparable GAAP financial measure by reportable segment (in thousands): For the Year Ended December 31, 2025 2024 Diversified Hospitality Total Diversified Hospitality Total Net income (loss) $ (110,956 ) $ (16,081 ) $ (127,037 ) $ (35,337 ) $ (21,236 ) $ (56,573 ) Adjustments to reconcile net income (loss) to NOI: Advisory and administrative fees 13,175 3,898 17,073 13,286 879 14,165 Corporate general and administrative expenses 10,574 1,327 11,901 9,947 2,856 12,803 Income tax (benefit) expense 262 (373 ) (111 ) 1,441 (69 ) 1,372 Depreciation and amortization 13,245 4,494 17,739 11,698 3,902 15,600 Interest expense 14,682 11,922 26,604 17,443 10,909 28,352 Non-operating property investment revenue (1) (44,224 ) (728 ) (44,952 ) (34,300 ) (4,981 ) (39,281 ) Realized (gains) losses from non-real estate investments (5,994 ) — (5,994 ) 21,479 — 21,479 Change in unrealized (gains) losses from non-real estate investments 103,904 — 103,904 1,348 — 1,348 Equity in (income) losses of unconsolidated equity method ventures 1,289 — 1,289 (129 ) — (129 ) Impairment loss 576 1,752 2,328 — 7,110 7,110 NOI $ (3,467 ) $ 6,211 $ 2,744 $ 6,876 $ (630 ) $ 6,246 Less Non-Same Store Revenues $ (9,382 ) $ (29,912 ) (39,294 ) $ (15,693 ) $ (27,102 ) (42,795 ) Operating expenses 13,918 23,737 37,655 9,325 27,732 37,057 Operating income — (37 ) (37 ) — — — Same Store NOI $ 1,069 $ (1 ) $ 1,068 $ 508 $ — $ 508 (1) Non-operating property investment revenue is defined as revenue included in the consolidated financial statements that are from non-operating properties such as dividend income and interest income. 70 Table of Contents Consolidated NOI for Our Same Store and Non-Same Store Properties for the Years Ended December 31, 2025 and 2024 The following table reflects the revenues, property operating expenses and NOI for the years ended December 31, 2025 and 2024 for our Same Store and Non-Same Store properties (dollars in thousands): For the Year Ended December 31 For the Year Ended December 31 2025 2024 $ Change % Change Revenues Same Store Rental income $ 1,719 $ 1,147 $ 572 49.9 % Same Store revenues 1,719 1,147 572 49.9 % Non-Same Store Rental income 9,342 14,531 (5,189 ) -35.7 % Rooms 26,300 24,902 1,398 5.6 % Food and beverage 2,883 2,200 683 31.0 % Other income 769 1,162 (393 ) -33.8 % Non-Same Store revenues 39,294 42,795 (3,501 ) -8.2 % Total revenues 41,013 43,942 (2,929 ) -6.7 % Operating expenses Same Store Property operating expenses 260 223 37 16.6 % Real estate taxes and insurance 280 293 (13 ) -4.4 % Property management fees 85 75 10 13.3 % Property general and administrative expenses 26 48 (22 ) -45.8 % Same Store operating expenses 651 639 12 1.9 % Non-Same Store Property operating expenses 23,532 22,033 1,499 6.8 % Real estate taxes and insurance 5,978 6,252 (274 ) -4.4 % Property management fees 1,464 1,415 49 3.5 % Property general and administrative expenses 6,681 7,357 (676 ) -9.2 % Non-Same Store operating expenses 37,655 37,057 598 1.6 % Total operating expenses 38,306 37,696 610 1.6 % Operating income Non-Same Store Gain on sales of real estate 37 — 37 0.0 % Total operating income 37 — 37 0.0 % NOI Same Store 1,068 508 560 110.2 % Non-Same Store 1,676 5,738 (4,062 ) -70.8 % Total NOI $ 2,744 $ 6,246 $ (3,502 ) -56.1 % See reconciliation of net income (loss) to NOI above under “NOI and Same Store NOI for the Years Ended December 31, 2025 and 2024.” 71 Table of Contents Consolidated Same Store Results of Operations for the Years Ended December 31, 2025 and 2024 As of December 31, 2025, our Same Store properties were approximately 59.7% leased with a weighted average monthly effective occupied rent per square foot of $1.19, compared to 52.1% leased with a weighted average monthly effective occupied rent per square foot of $1.10 as of December 31, 2024.
Upon such payment, the IQHQ Participating Purchaser would become entitled to all interest accrued on the amounts paid to NREF or the OP, if applicable, on and after the date of such payment. Bridge Investor I can allocate all or any portion of the IQHQ Warrant to any parties to the participation rights agreement.
Upon such payment, the IQHQ Participating Purchaser would become entitled to all interest accrued on the amounts paid to NREF or the OP, if applicable, on and after the date of such payment. Bridge Investor I can allocate all or any portion of the IQHQ Bridge Warrant to any parties to the participation rights agreement.
As a REIT, we will be subject to federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years.
As a REIT, we will be subject to federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years.
As a REIT, we will be subject to federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years.
As a REIT, we will be subject to federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years.
In connection with the IQHQ Subscription Agreement, on December 31, 2024, Bridge Investor I also entered into a Warrant Purchase Agreement (the “IQHQ Warrant Purchase Agreement”) whereby IQHQ Holdings issued and sold a corresponding warrant to Bridge Investor I to purchase Class A-3 Units of IQHQ Holdings (as amended, the “IQHQ Series E Warrant”).
In connection with the IQHQ Subscription Agreement, on December 31, 2024, Bridge Investor I also entered into a Warrant Purchase Agreement (the “IQHQ Warrant Purchase Agreement”) whereby IQHQ Holdings, LP ("IQHQ Holdings") issued and sold a corresponding warrant to Bridge Investor I to purchase Class A-3 Units of IQHQ Holdings (as amended, the “IQHQ Series E Warrant”).
NXDT Advisory Agreement As consideration for the Adviser’s services under the Advisory Agreement, we pay our Adviser the Fees, which includes the Advisory Fee equal to 1.00% of Managed Assets and the Administrative Fee equal to 0.20% of the Company’s Managed Assets.
Advisory Agreement As consideration for the Adviser’s services under the Advisory Agreement, we pay our Adviser the Fees, which includes the Advisory Fee equal to 1.00% of Managed Assets and the Administrative Fee equal to 0.20% of the Company’s Managed Assets.
NOI is used by investors and our management to evaluate and compare the performance of our properties between segments and to other comparable properties, to determine trends in earnings and to compute the fair value of our properties as NOI is calculated by adjusting net income (loss) to add back (1) interest expense, (2) advisory fees and administrative fees, (3) the impact of depreciation and amortization, (4) corporate general and administrative expenses, (5) income tax expenses, (6) conversion expenses, (7) non-operating property investment revenue, (8) realized and change in unrealized gains (losses) generated from non-real estate investments, (9) equity in income (losses) of unconsolidated equity method ventures, and (10) impairment loss.
NOI is used by investors and our management to evaluate and compare the performance of our properties between segments and to other comparable properties, to determine trends in earnings and to compute the fair value of our properties as NOI is calculated by adjusting net income (loss) to add back (1) interest expense, (2) advisory fees and administrative fees, (3) the impact of depreciation and amortization, (4) corporate general and administrative expenses, (5) income tax (benefit) expenses, (6) non-operating property investment revenue, (7) realized and change in unrealized gains (losses) generated from non-real estate investments, (8) equity in income (losses) of unconsolidated equity method ventures, and (9) impairment loss.
Unless we were entitled to relief under certain Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be taxed as a REIT. As of December 31, 2024, we believe we are in compliance with all applicable REIT requirements.
Unless we were entitled to relief under certain Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be taxed as a REIT. As of December 31, 2025, we believe we are in compliance with all applicable REIT requirements.
The NHT Expense Cap does not apply to legal, accounting, financial, due diligence and other service fees incurred in connection with extraordinary litigation and mergers and acquisitions and other events outside NHT’s ordinary course of business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of real estate assets.
The NHT Expense Cap did not apply to legal, accounting, financial, due diligence and other service fees incurred in connection with extraordinary litigation and mergers and acquisitions and other events outside NHT’s ordinary course of business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of real estate assets.
The obligations consist of liability for losses suffered by the lender arising out of certain bad acts, such as if the borrower takes actions that are fraudulent or improper or upon certain violations of the related loan agreement. See Note 14 to our consolidated financial statements for additional information.
The obligations consist of liability for losses suffered by the lender arising out of certain bad acts, such as if the borrower takes actions that are fraudulent or improper or upon certain violations of the related loan agreement. See Note 13 to our consolidated financial statements for additional information.
There are two properties, White Rock Center and 5916 W Loop 289, in our same store pool for the years ended December 31, 2024, and 2023 (our "Same Store" properties). Our Same Store properties exclude Cityplace as of December 31, 2024 and 2023, because it was not yet stabilized, meaning construction or renovation was not completed.
There are two properties, White Rock Center and 5916 W Loop 289, in our same store pool for the years ended December 31, 2025 and 2024 (our "Same Store" properties). Our Same Store properties exclude Cityplace as of December 31, 2025 and 2024, because it was not yet stabilized, meaning construction or renovation was not completed.
Liquidity and Capital Resources Our short-term liquidity requirements consist primarily of funds necessary to pay for debt maturities, operating expenses and other expenditures including: • capital expenditures to continue the ongoing development of Cityplace; • capital expenditures necessary to maintain the NHT hotel properties; • interest expense and scheduled principal payments on outstanding indebtedness (see “—Obligations and Commitments” below); • recurring maintenance necessary to maintain our properties; • distributions necessary to qualify for taxation as a REIT; • income taxes for taxable income generated by TRS entities; • acquisition of additional properties or investments; 85 Table of Contents • advisory and administrative fees payable to our Adviser; • general and administrative expenses; • reimbursements to our Adviser; and • property management fees.
Liquidity and Capital Resources Our short-term liquidity requirements consist primarily of funds necessary to pay for debt maturities, operating expenses and other expenditures including: • capital expenditures to continue the ongoing development of Cityplace; • capital expenditures necessary to maintain the Hospitality hotel properties; 75 Table of Contents • interest expense and scheduled principal payments on outstanding indebtedness (see “—Obligations and Commitments” below); • recurring maintenance necessary to maintain our properties; • distributions necessary to qualify for taxation as a REIT; • income taxes for taxable income generated by TRS entities; • acquisition of additional properties or investments; • advisory and administrative fees payable to our Adviser; • general and administrative expenses; • reimbursements to our Adviser; and • property management fees.
Off-Balance Sheet Arrangements As of December 31, 2024 , we had the following off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Off-Balance Sheet Arrangements As of December 31, 2025, we had the following off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
The majority of the decrease between the year ended December 31, 2024 and the year ended December 31, 2023 is related to a decrease in professional fees. Consolidated FFO and AFFO We believe that net income (loss), as defined by GAAP, is the most appropriate earnings measure.
The majority of the decrease between the year ended December 31, 2025 and the year ended December 31, 2024 is related to a decrease in professional fees. Consolidated FFO and AFFO We believe that net income (loss), as defined by GAAP, is the most appropriate earnings measure.
Different firms using different property-specific, general real estate, capital markets, economic and other assumptions, estimates and judgments could derive a NAV that could be significantly different from our NAV. Thus, other public REITs methodologies used to calculate NAV may differ materially from ours.
Different firms using different property-specific, general real estate, capital markets, economic and other assumptions, estimates and judgments could derive a NAV that could be significantly different from our NAV. Thus, other public REITs' methodologies used to calculate NAV may differ materially from ours.
Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell. As of December 31, 2024 and December 31, 2023, there were three and zero properties classified as held for sale, respectively.
Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell. As of December 31, 2025 and December 31, 2024, there were zero and three properties classified as held for sale, respectively.
Under current tax legislation, a mutual fund trust that is not a SIFT pursuant to the Tax Act is entitled to deduct distributions of taxable income such that it is not liable to pay Canadian income taxes provided that its taxable income is fully distributed to unitholders.
Under the then-current tax legislation, a mutual fund trust that was not a SIFT pursuant to the Tax Act is entitled to deduct distributions of taxable income such that it was not liable to pay Canadian income taxes provided that its taxable income was fully distributed to unitholders.
As of December 31, 2024 and to our knowledge, we have no examinations in progress and none are expected at this time. We recognize our tax positions and evaluate them using a two-step process.
As of December 31, 2025 and to our knowledge, we have no examinations in progress and none are expected at this time. We recognize our tax positions and evaluate them using a two-step process.
We had no material unrecognized tax benefit or expense, accrued interest or penalties as of December 31, 2024. We and our subsidiaries are subject to federal income tax as well as income tax of various state and local jurisdictions.
We had no material unrecognized tax benefit or expense, accrued interest or penalties as of December 31, 2025. We and our subsidiaries are subject to federal income tax as well as income tax of various state and local jurisdictions.
Upon receipt of a draw request, the OP and OSL have the right to elect to fund an amount equal or greater than zero and up to (i) 9% or 10.32%, respectively, of the total amount of all advances previously made under the Alewife Loan plus the amount of the then current borrowing, (ii) less the total amount of advances previously made by the OP and OSL, respectively.
Upon receipt of a draw request, the OP and OSL have the right to elect to fund an amount equal or greater than zero and up to (i) 9% or 10.32%, respectively, of the total amount of all advances previously made under the Alewife Loan plus the amount of the then current borrowing, (ii) less the 81 Table of Contents total amount of advances previously made by the OP and OSL, respectively.
Corporate general and administrative expenses include, but are not limited to, audit fees, legal fees, listing fees, board of trustee fees, investor relations costs and payments of reimbursements to our Adviser for operating expenses.
Corporate general and administrative expenses include, but are not limited to, audit fees, legal fees, listing fees, board of trustee fees, investor relations costs and payments of reimbursements to our Adviser for operating expenses. Depreciation and amortization.
The increase between the year ended December 31, 2024 and the year ended December 31, 2023 is related to an increase in rental revenue, which the management fee is calculated off of. Property general and administrative expenses .
The increase between the year ended December 31, 2025 and the year ended December 31, 2024 is related to an increase in rental revenue, which the management fee is calculated off of. Property general and administrative expenses .
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion and analysis of our financial condition and our historical results of operations. The following should be read in conjunction with our financial statements and accompanying notes included herein. This discussion contains forward-looking statements that involve risks and uncertainties.
Item 7. M anagement's Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion and analysis of our financial condition and our historical results of operations. The following should be read in conjunction with our financial statements and accompanying notes included herein. This discussion contains forward-looking statements that involve risks and uncertainties.
The majority of the increase between the year ended December 31, 2024 and the year ended December 31, 2023 is related to an increase in repair and maintenance fees. Real estate taxes and insurance .
The majority of the increase between the year ended December 31, 2025 and the year ended December 31, 2024 is related to an increase in repair and maintenance fees. Real estate taxes and insurance .
We compute FFO attributable to common shareholders as net income (loss), excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization, plus impairment losses and realized gains (losses). Our calculation of FFO differs slightly from NAREIT's definition of FFO because we exclude realized gains (losses).
We compute FFO attributable to common shareholders as net income (loss), excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization, plus impairment losses and realized gains (losses). Our calculation of FFO differs slightly from NAREIT's definition of FFO because we exclude 72 Table of Contents realized gains (losses).
Our rental income is primarily attributable to the rental revenue from our investment in Cityplace, a 42-story, 1.36 million-square-foot, trophy office building acquired in 2018 as well as rental income from two retail properties. Our rental income also includes utility reimbursements, late fees, common area maintenance reimbursements, and other rental fees charged to tenants. Food and beverage revenue.
Our rental income is primarily attributable to the rental revenue from our investment in Cityplace, a 42-story, 1.36 million-square-foot, trophy office building acquired in 2018 as well as rental income from one retail property. Our rental income also includes utility reimbursements, late fees, common area maintenance reimbursements, and other rental fees charged to tenants. Food and beverage revenue.
Our quarterly dividends per share may be substantially different than our quarterly taxable earnings and GAAP earnings per share. Our Board declared a distribution on our common shares of $0.15 per share which was paid on December 31, 2024 to shareholders of record on November 15, 2024.
Our quarterly dividends per share may be substantially different than our quarterly taxable earnings and GAAP earnings per share. Our Board declared a distribution on our common shares of $0.15 per share which was paid on December 31, 2025 to shareholders of record on November 21, 2025.
The Company is a guarantor on one of NSP’s loans, with an aggregate principal amount of $750.0 million outstanding as of December 31, 2024.
The Company is a guarantor on one of NSP’s loans, with an aggregate principal amount of $750.0 million outstanding as of December 31, 2025.
In such cases, we will evaluate the recoverability of such real estate assets based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate asset.
In such cases, we will evaluate the recoverability 85 Table of Contents of such real estate assets based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate asset.
We expect to meet our short-term liquidity requirements generally through our investment income, existing cash balance and, if necessary, future debt or equity issuances. As of December 31, 2024 , we had $8.8 million of cash available to meet our short-term liquidity requirements.
We expect to meet our short-term liquidity requirements generally through our investment income, existing cash balance and, if necessary, future debt or equity issuances. As of December 31, 2025, we had $8.2 million of cash available to meet our short-term liquidity requirements.
Pete Property Upper Upscale Full-Service 2001/2021 209 Total Rooms: 1,045 (1) Average effective monthly occupied rent per square foot is equal to the average of the contractual rent for commenced leases as of December 31, 2024, minus any tenant concessions over the term of the lease, divided by the occupied square footage of commenced leases as of December 31, 2024.
Pete Property Upper Upscale Full-Service 2001/2021 209 Total Rooms: 690 (1) Average effective monthly occupied rent per square foot is equal to the average of the contractual rent for commenced leases as of December 31, 2025, minus any tenant concessions over the term of the lease, divided by the occupied square footage of commenced leases as of December 31, 2025.
Any resulting corporate liability could be substantial and could materially and adversely affect our net income (loss) and net cash available for distribution to stockholders.
Any resulting corporate liability could be substantial and could materially and adversely affect our net income (loss) and net cash available for distribution to shareholders.
Alewife Holdings Loan On May 10, 2024, the Company, through the OP, NREF OP IV, a subsidiary of NREF, an entity that is managed by an affiliate of the Adviser, and OSL, an entity that may be deemed an affiliate of the Adviser through common beneficial ownership, entered into an Assignment and Assumption and Co-Lender Agreement, pursuant to which NREF OP IV assigned the right to fund up to 9% of a loan (the “Alewife Loan”) to be made to IQHQ-Alewife Holdings, LLC (“Alewife Holdings”) to the OP and allocated the right to fund up to 9% of the Alewife Loan to OSL.
("NREF OP IV"), a subsidiary of NREF, an entity that is managed by an affiliate of the Adviser, and OSL, an entity that may be deemed an affiliate of the Adviser through common beneficial ownership, entered into an Assignment and Assumption and Co-Lender Agreement, pursuant to which NREF OP IV assigned the right to fund up to 9% of a mezzanine loan (the “Alewife Loan”) to be made to IQHQ-Alewife Holdings, LLC (“Alewife Holdings”) to the OP and allocated the right to fund up to 9% of the Alewife Loan to OSL.
In addition to the net real estate assets, the consolidated balance sheets also includes approximately $0.1 million and $0 million of accounts receivable and prepaid and other assets, and approximately $0.8 million and $0 million of accounts payable, real estate taxes payable, security deposits, prepaid rents, and other accrued liabilities related to assets held for sale as of December 31, 2024 and December 31, 2023, respectively.
In addition to the net real estate assets, the Consolidated Balance Sheets also include approximately $0.0 million and $0.1 million of accounts receivable and prepaid and other assets, and approximately $0.0 million and $0.8 million of accounts payable, real estate taxes payable, security deposits, prepaid rents, and other accrued liabilities related to assets held for sale as of December 31, 2025 and December 31, 2024, respectively.
Equity in earnings (losses) of unconsolidated ventures represents the change in our basis in equity method investments resulting from our share of the investments’ income and expenses. Profit and loss from equity method investments for which we’ve elected the fair value option are classified in divided income, change in unrealized gains and realized gains as applicable. Income Tax Expense.
Equity in earnings (losses) of unconsolidated ventures represents the change in our basis in equity method investments resulting from our share of the investments’ income and expenses. Profit and loss from equity method investments for which we’ve elected the fair value option are classified in dividend income, change in unrealized gains (losses) and realized gains (losses) as applicable.
We expect to meet our long-term liquidity requirements through various sources of capital, which may include a revolving credit facility and future debt or equity issuances, existing working capital, net cash provided by operations, long-term mortgage indebtedness and other secured and unsecured borrowings, and property and non-real estate asset dispositions.
We expect to meet our long-term liquidity requirements through various sources of capital, which may include the Series B Preferred Offering, a revolving credit facility and future debt or equity issuances, existing working capital, net cash provided by operations, long-term mortgage indebtedness and other secured and unsecured borrowings, and property and non-real estate asset dispositions.
The success of our business strategy will depend, in part, on our ability to access these various capital sources. In addition to our ongoing renovation of Cityplace, our other properties will require periodic capital expenditures and renovation to remain competitive. We estimate an additional $190 million to $210 million of capital expenditures to complete the Cityplace renovation.
The success of our business strategy will depend, in part, on our ability to access these various capital sources. In addition to our ongoing renovation of Cityplace, our other properties will require periodic capital expenditures and renovation to remain competitive. We estimate an additional $250 million to $270 million of capital expenditures to complete the Cityplace renovation.
The loan documents, including the guaranty, for the PC & B Loan and the Note A Loan and Note B Loan contain customary representations, warranties, and events of default, which require NHT to comply with affirmative and negative covenants.
The loan documents, including the guaranty, for the PC & B Loan and the Note A Loan and Note B Loan contain customary representations, warranties, and events of default, which require a subsidiary of the Company to comply with affirmative and negative covenants.
As of December 31, 2024 , we also had $0.9 million of restricted cash held in reserve by the lender on the NexBank Revolver. These reserves are to be used for future interest payments on the debt facility.
As of December 31, 2025, we also had $0.9 million of restricted cash held in reserve by the lender on the NexBank Revolver (as defined below). These reserves are to be used for future interest payments on the debt facility.
Valuation of Level 3 Fair Valued Investments As of December 31, 2024, approximately 42.3% of the total assets owned by the Company are comprised of fair valued level 3 investments. The Company elected the fair-value option in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 825-10-10.
Valuation of Level 3 Fair Valued Investments As of December 31, 2025, approximately 42.3% of the total assets owned by the Company are comprised of fair valued level 3 investments. The Company elected the fair-value option in accordance with FASB Accounting Standards Codification ("ASC") 825-10-10.
Overview As of December 31, 2024, our Portfolio consisted primarily of debt and equity investments in the single-family rental, self-storage, office, hospitality, life science and multifamily sectors. The Company has two reportable segments, NXDT and NHT. NXDT represents the Company's primary reportable segment and represents a significant majority of the Company's consolidated portfolio.
Overview As of December 31, 2025, our Portfolio consisted primarily of debt and equity investments in the single-family rental, self-storage, office, hospitality, life science and multifamily sectors. The Company has two reportable segments, Diversified and Hospitality. Diversified represents the Company's primary reportable segment and represents a significant majority of the Company's consolidated portfolio.
The majority of the decrease between the year ended December 31, 2024 and the year ended December 31, 2023 is related to an increase in the amortization of above- and below-market leases. Above-market leases decrease rental income as they are amortized, while below-market leases increase rental income. Expenses Property operating expenses .
The majority of the increase between the year ended December 31, 2025 and the year ended December 31, 2024 is related to a decrease in the amortization of above- and below-market leases. Above-market leases decrease rental income as they are amortized, while below-market leases increase rental income. Expenses Property operating expenses .
Mortgages Payable, NHT On February 28, 2019, NHT, through subsidiaries of NHT OP, entered into a borrowing arrangement for a $59.4 million Note A loan (the “Note A Loan”) and a $28.6 million Note B loan (the “Note B Loan”) with ACORE.
Mortgages Payable, Hospitality On February 28, 2019, NHT, through subsidiaries of NHT OP, entered into a borrowing arrangement for a $59.4 million Note A loan (the “Note A Loan”) and a $28.6 million Note B loan (the “Note B Loan”) with ACORE Capital Mortgage, LP.
Our presentation differs slightly in that we begin with net income (loss) before adjusting for amounts attributable to redeemable non-controlling interests in NHT and we 82 Table of Contents show the combined amounts attributable to such non-controlling interests as an adjustment to arrive at FFO attributable to common shareholders.
Our presentation differs slightly in that we begin with net income (loss) before adjusting for amounts attributable to redeemable non-controlling interests in NHT and redeemable non-controlling interests in the OP and we show the combined amounts attributable to such non-controlling interests as an adjustment to arrive at FFO attributable to common shareholders.
Implications of being a Smaller Reporting Company As of December 31, 2024, we are a "smaller reporting company" as defined in the Exchange Act, and may elect to take advantage of certain of the scaled disclosures available to smaller reporting companies. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not required.
Implications of being a Smaller Reporting Company As of December 31, 2025, we are a "smaller reporting company" as defined in the Exchange Act, and may elect to take advantage of certain of the scaled disclosures available to smaller reporting companies. Item 7A. Qua ntitative and Qualitative Disclosures About Market Risk Not required.
This re-focusing will involve selling legacy assets that do not fall within our core investment strategy. A more favorable capital market environment, with lower interest rates and increased liquidity, is expected to facilitate this process.
This re-focusing will involve selling legacy assets that do not fall within our core investment strategy or recycling assets at attractive prices. A more favorable capital market environment, with lower interest rates and increased liquidity, is expected to facilitate this process.
Before we make any distribution 93 Table of Contents payments, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our debt payable.
Before we make any distribution payments, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our debt payable.
Inflation has had a significant impact in the regions in which the NHT segment holds properties, causing a decrease in the willingness of the general population to travel and reduced occupancy, the effect of which may continue to impact NHT’s operations.
Inflation has had a significant impact in the regions in which the Hospitality segment holds properties, causing a decrease in the willingness of the general population to travel and reduced occupancy, the effect of which may continue to impact the Hospitality segment's operations.
Expenses paid or incurred by NHT for advisory fees payable to the NHT Adviser, Operating Expenses incurred by the NHT Adviser or its affiliates in connection with the services it provides to NHT and its subsidiaries and compensation expenses relating to equity awards granted under a long-term incentive plan of NHT will not exceed 1.5% of the REIT Asset Value for the calendar year (or part thereof).
Expenses paid or incurred by NHT for advisory fees payable to the NHT Adviser, Operating Expenses incurred by the NHT Adviser or its affiliates in connection with the services it provides to NHT and its subsidiaries and compensation expenses relating to equity awards granted under a long-term incentive plan of NHT will not exceed 1.5% of the REIT Asset Value for the calendar year (or part thereof) that the NHT Advisory Agreement is in effect (the “NHT Expense Cap”).
As of December 31, 2024 , we also had $31.7 million of restricted cash held in reserve by the lender on the Cityplace debt. These reserves include escrows for property taxes and insurance, reserves for tenant improvements as well as required excess collateral.
As of December 31, 2025, we also had $32.8 million of restricted cash held in reserve by the lender on the Cityplace debt. These reserves include escrows for property taxes and insurance, reserves for tenant improvements as well as required excess collateral.
Non-Same Store properties include properties not yet stabilized. Our Same Store properties also exclude the NHT segment, as the properties in that segment were not held in the comparable period.
Non-Same Store properties include properties not yet stabilized. Our Same Store properties also exclude the Hospitality segment, as the properties in that segment were not held in the full comparable period.
The Company has recorded a current income tax expense of $1.4 million associated with the TRSs for the year ended December 31, 2024, which is largely driven by income from the Company’s preferred stock investments and investments in debt instruments not secured by mortgages on real property.
The Company has recorded a current income tax benefit of $0.1 million associated with the TRSs for the year ended December 31, 2025, which is largely driven by income from the Company’s preferred stock investments and investments in debt instruments not secured by mortgages on real property.
Income tax expense is primarily derived from taxable gains from asset sales and other income earned from investments held in NXDT's TRSs and NHT's TRSs. Unrealized Gain (Loss) on Investments .
Income Tax Expense. Income tax expense is primarily derived from taxable gains from asset sales and other income earned from investments held in the Company's TRSs and former NHT's TRSs. Unrealized Gain (Loss) on Investments .
The Advisory Agreement was dated July 1, 2022, and amended on October 25, 2022, April 11, 2023 and July 22, 2024, for an initial three-year term that will expire on July 1, 2025 and successive one-year terms thereafter unless earlier terminated. The Adviser is wholly owned by our Sponsor.
The Advisory Agreement was dated July 1, 2022, and amended on October 25, 2022, April 11, 2023, July 22, 2024, and September 19, 2025 for a term that will expire on July 1, 2026 and successive one-year terms thereafter unless earlier terminated. The Adviser is wholly owned by our Sponsor.
Debt Mortgage Debt As of December 31, 2024, our consolidated subsidiaries had aggregate mortgage debt outstanding to third parties of approximately $252.2 million at a weighted average interest rate of 7.54%. See Note 6 to our consolidated financial statements for additional information.
Debt Mortgage Debt As of December 31, 2025, our consolidated subsidiaries had aggregate mortgage debt outstanding to third parties of approximately $225.2 million at a weighted average interest rate of 7.52%. See Note 6 to our consolidated financial statements for additional information.
As of December 31, 2024, we also had $7.5 million of restricted cash reserves associated with the NHT segment for brand-mandated Performance Improvement Plan (“PIPs”) and furniture, fixtures and equipment upgrades arising from the execution of the Company’s franchise agreement and future insurance and property tax expenses.
As of December 31, 2025, we also had $9.5 million of restricted cash reserves associated with the Hospitality segment for brand-mandated Performance Improvement Plan and furniture, fixtures and equipment upgrades arising from the execution of the Company’s franchise agreement and future insurance and property tax expenses.
During the year ended December 31, 2024, net cash used in financing activities was $(18.6) million, compared to net cash used in financing activities of $6.8 million for the year ended December 31, 2023.
During the year ended December 31, 2025, net cash used in financing activities was $(43.6) million, compared to net cash used in financing activities of $(18.6) million for the year ended December 31, 2024.
While the lender has not yet demanded payment of the Cityplace indebtedness, management can give no assurance that it will not exercise its right to do so or exercise its other remedies under the credit agreement, including foreclosing on Cityplace.
While the lender has not yet demanded payment of the Cityplace indebtedness, management cannot provide assurance that the lender will not exercise its right to do so or exercise its other remedies under the credit agreement, including foreclosing on Cityplace.
The Company reverses cumulative, unrealized gains or losses previously reported in its Consolidated Statements of Operations and Comprehensive Income (Loss) with respect to the investment sold at the time of the sale. 74 Table of Contents Real Estate Investments Statistics As of December 31, 2024, the NXDT segment was invested in two retail properties, and one office, multifamily and hospitality property (excluding investments in undeveloped land), and the NHT segment consisted of seven hotel properties as listed below: NXDT Segment: Average Effective Monthly Occupied Rent Per Square Foot (1) as of % Occupied (2) as of Property Name Rentable Square Footage (in thousands) Property Type Date Acquired December 31, 2024 December 31, 2024 White Rock Center 82,793 Retail 6/13/2013 $ 1.50 71.1 % 5916 W Loop 289 30,140 Retail 7/23/2013 $ — — % (4) Cityplace 1,365,711 Office, Multifamily & Hospitality (3) 8/15/2018 $ 2.16 46.4 % 1,478,644 NHT Segment: Brand Location Name Chain Scale Service Scale Year Built/Last Renovation Rooms Hilton Garden Inn Dallas, Texas HGI Property Upscale Select-Service 1995/2016 240 Hyatt Park City, Utah Park City Upscale Full-Service 2016 122 Hampton Inn & Suites Bradenton, Florida Bradenton Upscale Select-Service 1926/2016 119 Homewood Suites Plano, Texas HWS Plano Upscale Extended Stay 1996/2018 99 N/A Addison, Texas Addison Property Upscale Extended Stay 1990/2018 120 Homewood Suites Irving, Texas HWS Las Colinas Upscale Extended Stay 1990/2018 136 Marriott St.
The Company reverses cumulative, unrealized gains or losses previously reported in its Consolidated Statements of Operations and Comprehensive Income (Loss) with respect to the investment sold at the time of the sale. 64 Table of Contents Real Estate Investments Statistics As of December 31, 2025, the Diversified segment was invested in two retail properties, and one office, multifamily, and hospitality property (excluding investments in undeveloped land), and the Hospitality segment consisted of four hotel properties as listed below: Diversified Segment: Rentable Average Effective Monthly Occupied Rent Per Square Foot (1) as of % Occupied (2) as of Property Name Square Footage (in thousands) Property Type Date Acquired December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024 White Rock Center 82,793 Retail 6/13/2013 $ 1.62 $ 1.50 81.4 % 71.1 % 5916 W Loop 289 30,140 Retail 7/23/2013 — — 0.0 % 0.0 % Cityplace 1,365,711 Office, Multifamily & Hospitality (3) 8/15/2018 $ 2.05 $ 2.16 41.2 % 46.4 % 1,478,644 Hospitality Segment: Brand Location Name Chain Scale Service Scale Year Built/Last Renovation Rooms Hilton Garden Inn Dallas, Texas HGI Property Upscale Select-Service 1995/2016 240 Hyatt Park City, Utah Park City Upscale Full-Service 2016 122 Hampton Inn & Suites Bradenton, Florida Bradenton Upscale Select-Service 1926/2016 119 Marriott St.
The tax expense for the year ended December 31, 2024 is partially increased by the annual change in valuation allowance on a deferred tax asset of $(0.3) million, and offset by a return-to-provision adjustment of $0.2 million and an income tax refund of $0.7 million for a net expense of $1.4 million for the year ended December 31, 2024, that is recorded on the Consolidated Statements of Operations and Comprehensive Income (Loss).
The tax benefit for the year ended December 31, 2025 is decreased by the annual change in valuation allowance on a deferred tax asset of $4.1 million and offset by a return-to-provision adjustment of $0.5 million, income tax refund of $2.0 million, and an income tax benefit of $1.7 million for a net benefit of $0.1 million for the year ended December 31, 2025, that is recorded on the Consolidated Statements of Operations and Comprehensive Income (Loss).
Management is currently engaged in discussions with the lender regarding the extension of the maturity date of the Cityplace debt. Management can give no assurance that the lender will agree to such an extension.
Management is currently engaged in discussions with the lender regarding the extension of the maturity date of the Cityplace debt. Management cannot provide assurance that the lender will agree to such an extension.
The Company has recorded income tax expense (benefit) of $1.4 million associated with the TRSs for the year ended December 31, 2024 and $2.7 million associated with the TRSs for the year ended December 31, 2023.
The Company has recorded income tax benefit (expense) of $0.1 million associated with the TRSs for the year ended December 31, 2025 and $(1.4) million associated with the TRSs for the year ended December 31, 2024.
U.S REIT Status We anticipate that we will continue to qualify to be taxed as a REIT for U.S. federal income tax purposes, and we intend to continue to be organized and to operate in a manner that will permit us to qualify as a REIT.
REIT Status We anticipate that we will continue to qualify to be taxed as a REIT for U.S. federal income tax purposes, and we intend to continue to be organized and to operate in a manner that will permit us to qualify as a REIT. However, we can give no assurance that we will maintain REIT qualification.
NHT is current on all debt payments and in compliance with all debt compliance provisions. The Company is a guarantor and an indemnitor on one of Cityplace’s loans with an aggregate principal amount of $139.9 million as of December 31, 2024.
The Company is current on all debt payments and in compliance with all debt compliance provisions. The Company is a guarantor and an indemnitor on one of Cityplace's loans with an aggregate principal amount of $138.2 million as of December 31, 2025.
For the year ended December 31, 2024, the unrealized gains (loss) related to the change in fair value of level 3 investments is $(4.2) million. See Note 9 to our consolidated financial statements for additional disclosures regarding the valuation of level 3 fair valued investments.
For the year ended December 31, 2025, the unrealized gains (losses) related to the change in fair value of level 3 investments is $(91.0) million. See Note 9 to our consolidated financial statements for additional disclosures regarding the valuation of level 3 fair valued investments.
The 2023, 2022 and 2021 tax years remain open to examination by tax jurisdictions to which our subsidiaries and we are subject. When applicable, we recognize interest and/or penalties related to uncertain tax positions on our Consolidated Statements of Operations and Comprehensive Income (Loss). II. Canadian mutual fund status NHT is a mutual fund trust pursuant to the Tax Act.
The 2023, 2022 and 2021 tax years remain open to examination by tax jurisdictions to which our subsidiaries and we are subject. When applicable, we recognize interest and/or penalties related to uncertain tax positions on our Consolidated Statements of Operations and Comprehensive Income (Loss). II.
Equity in losses of unconsolidated ventures was $0.1 million for the year ended December 31, 2024, compared to $(0.3) million for the year ended December 31, 2023, which was an increase of approximately $0.4 million. The decrease between periods was primarily due to a decrease in net income at Marriott Uptown. Income tax expense (benefit) .
Equity in losses of unconsolidated ventures was $(1.3) million for the year ended December 31, 2025, compared to $0.1 million for the year ended December 31, 2024, which was a decrease of approximately $(1.4) million. The decrease between periods was primarily due to a decrease in net income at Sandstone Pasadena Apartments, LLC in 2024. Income tax benefit (expense) .
The Company’s objective is to opportunistically sell $100 million to $150 million in assets to free up capital for reinvestment in target asset classes such as residential, self-storage, and life sciences.
The Company’s objective is to opportunistically sell $100 million to $150 million in assets to free up capital for reinvestment (through debt or equity) in target asset classes such as residential, hospitality, self-storage, and life sciences, or to repurchase the Company's common shares.
Cash flows from investing activities. During the year ended December 31, 2024, net cash provided by investing activities was $26.0 million, compared to net cash provided by investing activities of $22.0 million for the year ended December 31, 2023.
During the year ended December 31, 2025, net cash provided by investing activities was $37.0 million, compared to net cash provided by investing activities of $26.0 million for the year ended December 31, 2024.
As of the December 31, 2024, the OP has not funded any amounts. Income Taxes I.
As of the December 31, 2025, the OP has not funded any amounts. Income Taxes I. U.S.
For the year ended December 31, 2024, the Company recorded approximately $1.9 million of losses on real estate held for sale, which are included in impairment loss on the Consolidated Statements of Operations and Comprehensive Income (Loss). The Company did not record any losses on real estate held for sale for the year ended December 31, 2023.
For the years ended December 31, 2025 and 2024, the Company recorded approximately $1.8 million and $1.9 million of losses on real estate held for sale, which are included in impairment loss on the Consolidated Statements of Operations and Comprehensive Income (Loss).
The tax expense is increased by the annual change in valuation allowance on a deferred tax asset of $0.3 million and offset by a return-to-provision adjustment of $0.2 million and income tax refund of $0.7 million for a net expense of $1.4 million for the year ended December 31, 2024, that is recorded on the Consolidated Statement of Operations and Comprehensive Income (Loss).
The tax benefit is decreased by the annual change in valuation allowance on a deferred tax asset of $4.1 million 82 Table of Contents and offset by a return-to-provision adjustment of $0.5 million, income tax refund of $2.0 million, and an income tax benefit of $1.7 million for a net benefit of $0.1 million for the year ended December 31, 2025, that is recorded on the Consolidated Statement of Operations and Comprehensive Income (Loss).
The gains for the year ended December 31, 2024 were largely driven by redemptions of the legacy CLO positions, which generated realized losses and a positive change in unrealized, mark-to-market gains on MidWave Wireless, Inc. common equity of $14.5 million, United Development Funding IV common equity of $6.2 million, offset by mark-to-market losses on IQHQ, LP (“IQHQ LP”) interests of $22.2 million, NXHT common equity of $13.9 million, and NSP common equity of $5.5 million, and NexPoint Storage Partners 77 Table of Contents Operating Company, LLC (“NSP OC”) common units of $2.9 million.
The gains for the year ended December 31, 2024 were largely driven by redemptions of the legacy CLO positions, which generated realized losses and a positive change in unrealized, mark-to-market gains on MidWave Wireless, Inc. common equity of $14.5 million, United Development Funding IV common equity of $6.2 million, offset by mark-to-market losses on IQHQ LP interests of $22.2 million, NexPoint Homes Trust, Inc. common equity of $13.9 million, and NSP common equity of $5.5 million.
Furthermore, following the completion of our renovation and development programs and depending on the interest rate environment at the applicable time, we may seek to refinance our floating rate debt into longer-term fixed rate debt at lower leverage levels. 87 Table of Contents Cityplace Debt On May 8, 2023, we received lender consent to defer the maturity of the Cityplace debt to September 8, 2023.
Furthermore, following the completion of our renovation and development programs and depending on the interest rate environment at the applicable time, we may seek to refinance our floating rate debt into longer-term fixed rate debt at lower leverage levels. Cityplace Debt Effective March 8, 2026, the lender agreed to defer the maturity of the Cityplace debt to May 8, 2026.
The Prime Brokerage (as defined below) balance has no stated maturity date. (2) The Series A Preferred Shares are perpetual.
The Prime Brokerage (as defined below) balance has no stated maturity date. 80 Table of Contents (2) The Series A Preferred Shares and the Series B Preferred Shares are perpetual.
In connection with the IQHQ Subscription Agreement and IQHQ Warrant Purchase Agreement, the OP, along with NREF, through certain subsidiaries, and the IQHQ Participating Purchasers entered into a participation rights agreement with Bridge Investor I pursuant to which the OP and the IQHQ Participating Purchasers have a right to fund up to specified amounts of the Series E preferred stock of IQHQ, Inc. commitment and the IQHQ Series E Warrant.
In connection with the IQHQ Subscription Agreement and IQHQ Warrant Purchase Agreement, the OP, along with NREF, through certain subsidiaries, and certain entities advised by affiliates of our Adviser (the “IQHQ Participating Purchasers”) entered into a participation rights agreement with Bridge Investor I pursuant to which the OP and the IQHQ Participating Purchasers have a right to fund up to specified amounts of the IQHQ Subscription Agreement and the IQHQ Series E Warrant.
We believe that our available cash, expected operating cash flows, and potential debt or equity financings will provide sufficient funds for our operations, anticipated scheduled debt service payments and distribution requirements for the twelve-month period following December 31, 2024.
We believe that our available cash, expected operating cash flows, and potential debt or equity financings will provide sufficient funds for our operations, anticipated scheduled debt service payments and distribution requirements for the twelve-month period following December 31, 2025. See “—Debt” for additional details regarding our indebtedness and related liquidity requirements.
The high rate environment and ongoing economic uncertainty has limited credit availability to commercial real estate. Less available and more expensive debt capital has had pronounced effects on the capital markets, making property acquisitions and other investments harder to finance. Similar factors also impact the timing of and proceeds generated from asset sales and our ability to obtain debt capital.
Less available and more expensive debt capital has had pronounced effects on the capital markets, making property acquisitions and other investments harder to finance. Similar factors also impact the timing of and proceeds generated from asset sales and our ability to obtain debt capital.
Revolving Credit Facility On May 22, 2023, the Company entered into the revolving credit facility with NexBank (the "NexBank Revolver"), with the option for the Company to receive additional disbursements thereunder up to a maximum amount of $50.0 million, and with the option to extend the maturity two times by six months.
Revolving Credit Facility On May 22, 2023, the Company entered into a revolving credit facility with NexBank (the "NexBank Revolver"), with the option for the Company to receive additional disbursements thereunder up to a maximum amount of $50.0 million, and matures on May 21, 2026.
Due to the recently transacted nature of the note, the fair value of the note is approximately the outstanding balance. The note bears interest at an annual fixed rate of 10.0% and matures on August 2, 2029. The debt is secured by certain real property held by Freedom LHV and is guaranteed by the Company.
The note bears interest at an annual fixed rate of 10.0% and matures on August 2, 2029. The debt is secured by certain real property held by Freedom LHV and is guaranteed by the Company.

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