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What changed in NexPoint Real Estate Finance, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of NexPoint Real Estate Finance, Inc.'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.

+419 added−463 removedSource: 10-K (2026-03-31) vs 10-K (2025-03-27)

Top changes in NexPoint Real Estate Finance, Inc.'s 2025 10-K

419 paragraphs added · 463 removed · 344 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

42 edited+6 added−22 removed57 unchanged
Biggest changeThe amounts in the table below are as of the purchase or investment date unless otherwise specified: Investment Property Type Investment Date Outstanding Principal Amount Cost (% of Par Value) Coupon (1) Current Yield (1) Maturity Date Interest Rate Type Senior loan Life Sciences 1/26/2024 $ 140,283,254 100.0 % 14.32 % 14.32 % 2/9/2027 Floating Rate CMBS B-Piece Multifamily 2/22/2024 30,869,000 85.6 % 5.90 % 6.89 % 1/25/2029 Fixed Rate Mortgage Backed Security Single-family 2/29/2024 11,000,000 85.7 % 4.50 % 5.25 % 3/19/2029 Fixed Rate Mortgage Backed Security Single-family 2/29/2024 30,000,000 94.7 % 4.50 % 4.75 % 3/19/2029 Fixed Rate Mortgage Backed Security Single-family 2/29/2024 8,213,000 79.7 % 4.50 % 5.65 % 3/19/2029 Fixed Rate Promissory Note Single-family 3/28/2024 500,000 100.0 % 12.50 % 12.50 % 3/28/2025 Fixed Rate Membership interest Multifamily 4/19/2024 6,500,000 100.0 % 13.00 % 13.00 % 4/19/2029 Fixed Rate CMBS B-Piece Multifamily 4/24/2024 31,930,636 85.3 % 5.78 % 6.77 % 3/25/2029 Fixed Rate Preferred Equity Life Sciences 6/25/2024 5,829,146 99.5 % 10.00 % 10.10 % 9/29/2025 Fixed Rate Promissory Note (2) Life Sciences 5/23/2024 (2) 100.0 % 16.50 % (2) 5/23/2025 Fixed Rate Preferred Equity Marina 6/28/2024 7,100,000 99.5 % 13.00 % 13.00 % 10/30/2028 Fixed Rate Preferred Equity Life Sciences 6/30/2024 15,837,186 99.5 % 10.00 % 10.10 % 9/29/2025 Fixed Rate Preferred Equity Multifamily 1/26/2024 8,975,606 99.0 % 13.50 % 13.64 % 4/28/2027 Floating Rate Preferred Equity Multifamily 3/31/2024 1,037,127 100.0 % 11.00 % 11.00 % 5/1/2030 Fixed Rate Promissory Note Single-family 10/31/2024 3,500,000 100.0 % 15.00 % 15.00 % 7/10/2025 Fixed Rate Revolving Credit Facility (2) Life Sciences 12/31/2024 148,600,000 100.0 % 13.50 % 13.50 % 12/31/2027 Fixed Rate $ 450,174,955 (1) Yield and coupon as of acquisition date.
Biggest changeThe amounts in the table below are as of the purchase or investment date unless otherwise specified: Investment Property Type Investment Date Outstanding Principal Amount Cost (% of Par Value) Coupon (1) Current Yield (1) Maturity Date Interest Rate Type Preferred Stock Life Science 1/2/2025 $ 137,012,612 100.0 % 16.5 % 16.5 % N/A Fixed Preferred Equity Self-Storage 1/3/2025 480,000 100.0 % 13.6 % 13.6 % 9/1/2030 Fixed Senior Loan Life Sciences 1/9/2025 37,245,641 100.0 % 14.0 % 14.0 % 2/9/2027 Floating CMBS I/O Strip Multifamily 1/16/2025 15,000,000 100.0 % 5.7 % 5.7 % 11/25/2034 Floating Preferred Equity Single-family 1/31/2025 5,933,939 99.0 % 13.5 % 13.6 % 4/28/2027 Floating Preferred Equity Multifamily 1/31/2025 1,200,000 100.0 % 14.0 % 14.0 % 4/1/2028 Fixed Preferred Equity Self-Storage 2/4/2025 1,000,000 100.0 % 11.0 % 11.0 % 7/1/2027 Fixed Common Equity Multifamily 4/4/2025 500,000 100.0 % N/A 0.0 % N/A Fixed Common Equity Multifamily 4/4/2025 500,000 100.0 % N/A 0.0 % N/A Fixed CMBS I/O Strip Multifamily 4/24/2025 15,327,418 37.0 % 5.7 % 15.4 % 4/25/2034 Fixed Preferred Equity Marina 5/6/2025 400,000 100.0 % 13.0 % 13.0 % 10/30/2028 Fixed Preferred Equity Life Science 6/18/2025 3,015,075 99.5 % 10.0 % 10.1 % 9/29/2025 Fixed Common Equity Multifamily 7/8/2025 500,000 100.0 % N/A N/A N/A Fixed Promissory Note Single-family 7/31/2025 10,936,042 100.0 % 15.0 % 15.0 % 7/10/2026 Fixed Real Estate Multifamily 7/31/2025 566,224 100.0 % N/A N/A N/A Fixed Mezzanine Self-Storage 8/1/2025 3,297,500 100.0 % 10.6 % 10.6 % 8/1/2026 Floating Preferred Equity Marina 8/1/2025 4,480,000 100.0 % 13.0 % 13.0 % 8/15/2035 Fixed Mezzanine Multifamily 8/8/2025 376,794 99.0 % 15.3 % 15.5 % 1/9/2026 Floating Promissory Note Multifamily 9/30/2025 3,000,000 100.0 % 8.0 % 8.0 % 9/30/2026 Fixed Preferred Equity Marina 10/3/2025 8,292,500 100.0 % 13.0 % 13.0 % 12/12/2035 Fixed Preferred Stock Self-Storage 10/8/2025 3,178,286 99.5 % 15.0 % 15.1 % N/A Fixed CMBS B-Piece Multifamily 10/21/2025 3,361,120 89.5 % 5.6 % 6.2 % 3/25/2029 Floating CMBS B-Piece Multifamily 10/21/2025 4,000,000 90.8 % 5.9 % 6.5 % 1/25/2029 Floating Mezzanine Self-Storage 10/23/2025 2,154,449 100.0 % 9.8 % 9.8 % 10/23/2030 N/A Preferred Equity Marina 11/3/2025 8,835,203 100.0 % 13.0 % 13.0 % 12/4/2026 Fixed Preferred Equity Self-Storage 12/10/2025 22,500,000 100.0 % 11.0 % 11.0 % 12/10/2030 Fixed Real Estate Multifamily 12/15/2025 5,112,083 100.0 % N/A N/A N/A N/A Common Stock Self-Storage 12/18/2025 533,754 100.0 % N/A N/A N/A N/A $ 298,738,640 (1) Yield and coupon as of acquisition date. 2 Table of Contents Redemptions and Sales The following investments were redeemed or sold during the year ended December 31, 2025: Investment Property Type Investment Date Disposition Date Amortized Cost Basis Redemption/Sales Proceeds Prepayment Penalties Net Gain (Loss) on Repayment (1) Preferred Equity Life Science 4/6/2023 1/2/2025 $ 21,401,604 $ 21,401,604 $ — $ — Preferred Equity Life Science 10/19/2022 1/8/2025 6,997,081 6,997,081 — — Promissory Note N/A 3/28/2024 3/12/2025 500,000 500,000 — — Promissory Note Single-family 7/10/2024 4/29/2025 1,936,042 1,936,042 — — Mezzanine Multifamily 6/12/2020 5/16/2025 2,500,000 2,500,000 — — Mezzanine Loan Multifamily 10/20/2020 5/25/2025 2,135,000 2,135,000 — — Real Estate Multifamily 12/31/2021 7/22/2025 29,865,383 29,865,383 — — Preferred Equity Multifamily 10/5/2022 9/29/2025 2,539,672 2,539,672 — — Common Equity Multifamily 5/8/2024 9/29/2025 391,500 391,500 — — Senior Loan Life Science 1/26/2024 9/30/2025 62,450,000 62,450,000 — — Mezzanine Multifamily 6/9/2022 10/23/2025 716,263 716,263 — — Mezzanine Multifamily 12/29/2021 11/6/2025 8,136,794 8,136,794 — — $ 139,569,339 $ 139,569,339 $ — $ — (1) Net Gains (Losses) on repayment are generally attributable to acceleration of premiums and discounts net of any prepayment penalties assessed.
These investments are not secured by the underlying real estate, but upon 5 Table of Contents 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. • CMBS B-Pieces: We make investments in the junior-most bonds comprising some or all of the BB-rated, B-rated and unrated tranches of CMBS securitization pools.
These investments are not secured by the underlying real 5 Table of Contents 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. • CMBS B-Pieces: We make investments in the junior-most bonds comprising some or all of the BB-rated, B-rated and unrated tranches of CMBS securitization pools.
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 Manager We are externally managed by our Manager through the Management Agreement dated February 6, 2020 and amended as of July 17, 2020 and November 3, 2021, that renewed on February 6, 2025 for a one-year term and is automatically renewed for successive one-year terms thereafter unless earlier terminated.
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 Manager We are externally managed by our Manager through a management agreement dated February 6, 2020 and amended as of July 17, 2020 and November 3, 2021, that renewed on February 6, 2026 for a one-year term and is automatically renewed for successive one-year terms thereafter unless earlier terminated (as amended, the "Management Agreement").
Our Portfolio Our portfolio consists of senior loans, including SFR Loans, CMBS B-Pieces, CMBS I/O Strips, mezzanine loans, preferred equity investments, common equity investments, multifamily properties, preferred stock investments, promissory notes, revolving credit facilities and stock warrants, with a combined unpaid principal balance of $1.5 billion as of December 31, 2024 and assumes the assets and liabilities of the nine Freddie Mac K-Series securitization entities (the “CMBS Entities”) are not consolidated.
Our Portfolio Our portfolio consists of senior loans, including SFR Loans, CMBS B-Pieces, CMBS I/O Strips, mezzanine loans, preferred equity investments, common equity investments, multifamily properties, preferred stock investments, promissory notes, revolving credit facilities and stock warrants, with a combined unpaid principal balance of $1.5 billion as of December 31, 2025 and assumes the assets and liabilities of the nine Freddie Mac K-Series securitization entities (the “CMBS Entities”) are not consolidated.
The Series A Preferred Units have economic terms that are substantially the same as the terms of our 8.50% Series A Cumulative Redeemable Preferred Stock (the “Series A Preferred Stock”) and the Series B Preferred Units have economic terms that are substantially the same as the terms of our 9.00% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”).
The Series A Preferred Units have economic terms that are substantially the same as the terms of our 8.50% Series A Cumulative Redeemable Preferred Stock (the “Series A Preferred Stock”), the Series B Preferred Units have economic terms that are substantially the same as the terms of our 9.00% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”) and the Series C Preferred Units have economic terms that are substantially the same as the terms of our 8.00% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”).
Through active portfolio management we seek to take advantage of market opportunities to achieve a superior portfolio risk-mix that delivers attractive total returns. 1 Table of Contents 2024 Highlights Key highlights and transactions completed in 2024 include the following: Acquisitions and Originations The Company acquired or originated the following investments in the year ended December 31, 2024.
Through active portfolio management we seek to take advantage of market opportunities to achieve a superior portfolio risk-mix that delivers attractive total returns. 1 Table of Contents 2025 Highlights Key highlights and transactions completed in 2025 include the following: Acquisitions and Originations The Company acquired or originated the following investments in the year ended December 31, 2025.
These metrics do not reflect our common equity investments in NexPoint Storage Partners, Inc. ("NSP") and a private ground lease REIT (the "Private REIT"), our preferred stock investments in IQHQ, Inc. or our multifamily properties, shown as real estate investments, net on the Consolidated Balance Sheets, as of December 31, 2024.
These metrics do not reflect our common equity investments in NexPoint Storage Partners, Inc. ("NSP") and a private ground lease REIT (the "Private REIT"), our preferred stock investments in IQHQ, Inc. or our multifamily properties, shown as real estate investments, net on the Consolidated Balance Sheets, as of December 31, 2025.
The Management Agreement was renewed on February 6, 2025 for a one-year term and is automatically renewed for successive one-year terms thereafter unless earlier terminated. We have the right to terminate the Management Agreement on 30 days’ written notice upon the occurrence of a cause event (as defined in the Management Agreement).
The Management Agreement was renewed on February 6, 2026 for a one-year term and is automatically renewed for successive one-year terms thereafter unless earlier terminated. We have the right to terminate the Management Agreement on 30 days’ written notice upon the occurrence of a cause event (as defined in the Management Agreement).
Under the terms of this agreement, our Manager will, among other things: • identify, evaluate and negotiate the structure of our investments (including performing due diligence); • find, present and recommend investment opportunities consistent with our investment policies and objectives; • structure the terms and conditions of our investments; • review and analyze financial information for each investment in our overall portfolio; 7 Table of Contents • close, monitor and administer our investments; and • identify debt and equity capital needs and procure the necessary capital.
Under the terms of this agreement, our Manager will, among other things: • identify, evaluate and negotiate the structure of our investments (including performing due diligence); • find, present and recommend investment opportunities consistent with our investment policies and objectives; • structure the terms and conditions of our investments; • review and analyze financial information for each investment in our overall portfolio; • close, monitor and administer our investments; and • identify debt and equity capital needs and procure the necessary capital.
“Equity” means (a) the sum of (1) total stockholders’ equity immediately prior to the closing of the IPO, plus (2) the net proceeds received by us from all issuances of our equity securities in and after the IPO, plus (3) our cumulative Earnings Available for Distribution (“EAD”) from and after the IPO to the end of the most recently completed calendar quarter, (b) less (1) any distributions to holders of our common stock from and after the IPO to the end of the most recently completed calendar quarter and (2) all amounts that we have paid to repurchase for cash the shares of our equity securities from and after the IPO to the end of the most recently completed calendar quarter.
“Equity” means (a) the sum of (1) total stockholders’ equity immediately prior to the closing of the initial public offering of shares of the Company's common stock (the "IPO"), plus (2) the net proceeds received by us from all issuances of our equity securities in and after the IPO, plus (3) our cumulative Earnings Available for Distribution (“EAD”) from and after the IPO to the end of the most recently completed calendar quarter, (b) less (1) any distributions to holders of our common stock from and after the IPO to the end of the most recently completed calendar quarter and (2) all amounts that we have paid to repurchase for cash the shares of our equity securities from and after the IPO to the end of the most recently completed calendar quarter.
Our Manager is wholly owned by our Sponsor. The members of our Manager’s investment committee are James Dondero, Matt McGraner and Paul Richards. Our Management Agreement We pay our Manager an annual management fee. We do not pay any incentive fees to our Manager. We also reimburse our Manager for expenses it incurs on our behalf.
Our Manager is wholly owned by our Sponsor. The members of our Manager’s investment committee are James Dondero, Matt McGraner and Paul Richards. 7 Table of Contents Our Management Agreement We pay our Manager an annual management fee. We do not pay any incentive fees to our Manager. We also reimburse our Manager for expenses it incurs on our behalf.
To qualify as a REIT, we must meet on a continuing basis, through our organization and actual investment and operating results, various requirements under the Code relating to, among other things, the sources of our gross income, the 9 Table of Contents composition and values of our assets, our distribution levels and the diversity of ownership of shares of our stock.
To qualify as a REIT, we must meet on a continuing basis, through our organization and actual investment and operating results, various requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of shares of our stock.
Item 1. Business General NexPoint Real Estate Finance, Inc. (the “Company”, “we”, “our”, "NREF") is a commercial mortgage REIT incorporated in Maryland on June 7, 2019 that has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”).
Item 1. B usiness General NexPoint Real Estate Finance, Inc. (the “Company”, “we”, “our”, "NREF") is a commercial mortgage REIT incorporated in Maryland on June 7, 2019 that has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”).
As of December 31, 2024, the Company held approximately 83.82% of the common limited partnership units in the OP (“OP Units”) which represents 100% of the Class A OP Units, and the OP owned all of the common limited partnership units (“SubOP Units”) of its three subsidiary partnerships (collectively, the “Subsidiary OPs”) (see Note 13 to our consolidated financial statements).
As of December 31, 2025, the Company held approximately 86.56% of the common limited partnership units in the OP (“OP Units”) which represents 100% of the Class A OP Units, and the OP owned all of the common limited partnership units (“SubOP Units”) of its three subsidiary partnerships (collectively, the “Subsidiary OPs”) (see Note 13 to our consolidated financial statements).
However, our Manager is responsible, and we will not reimburse our Manager or its affiliates, for the salaries or benefits to be paid to personnel of our Manager or its affiliates who serve as our officers, except that 50% of the salary of our VP of Finance is allocated to us and we may grant equity awards to our officers under a long-term incentive plan adopted by us and approved by our stockholders.
However, our Manager is responsible, and we will not reimburse our Manager or its affiliates, for the salaries or benefits to be paid to personnel of our Manager or its affiliates who serve as our officers and we may grant equity awards to our officers under a long-term incentive plan adopted by us and approved by our stockholders.
We are required to pay directly or reimburse our Manager for all of the documented “operating expenses” (all out-of-pocket expenses of our Manager in performing services for us, including but not limited to the expenses incurred by our Manager in connection with any provision by our Manager of legal, accounting, financial and due diligence services performed by our Manager that outside professionals or outside consultants would otherwise perform, compensation expenses under any long-term incentive plan adopted by us and approved by our stockholders and our pro rata share of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of our Manager required for our operations) and “offering expenses” (any and all expenses (other than underwriters’ discounts) paid or to be paid by us in connection with an offering of our securities, including, without limitation, our legal, accounting, printing, mailing and filing fees and other documented offering expenses) paid or incurred by our Manager or its affiliates in connection with the services it provides to us pursuant to the Management Agreement.
However, compensation expense is considered when determining Equity, in that we will adjust our calculation of EAD to remove the compensation expense that is added back in our calculation of EAD. 8 Table of Contents We are required to pay directly or reimburse our Manager for all of the documented “operating expenses” (all out-of-pocket expenses of our Manager in performing services for us, including but not limited to the expenses incurred by our Manager in connection with any provision by our Manager of legal, accounting, financial and due diligence services performed by our Manager that outside professionals or outside consultants would otherwise perform, compensation expenses under any long-term incentive plan adopted by us and approved by our stockholders and our pro rata share of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of our Manager required for our operations) and “offering expenses” (any and all expenses (other than underwriters’ discounts) paid or to be paid by us in connection with an offering of our securities, including, without limitation, our legal, accounting, printing, mailing and filing fees and other documented offering expenses) paid or incurred by our Manager or its affiliates in connection with the services it provides to us pursuant to the Management Agreement.
Our portfolio, based on net equity as of December 31, 2024, is approximately 18.6% senior loans, which includes the SFR Loans, approximately 11.1% multifamily CMBS B-Pieces, approximately 1.3% CMBS I/O Strips, approximately 9.2% mezzanine loans, approximately 27.0% preferred equity investments, approximately 7.1% common equity investments, approximately 2.3% preferred stock investments, approximately 3.5% multifamily property real estate, approximately 0.5% promissory notes, approximately 16.3% of revolving credit facilities and approximately 3.3% stock warrants.
Our portfolio, based on net equity as of December 31, 2025, is approximately 1.5% senior loans, which includes the SFR Loans, approximately 7.5% multifamily CMBS B-Pieces, approximately 1.1% CMBS I/O Strips, approximately 19.4% mezzanine loans, approximately 29.2% preferred equity investments, approximately 5.7% common equity investments, approximately 2.1% preferred stock investments, approximately 0.5% multifamily property real estate, approximately 1.7% promissory notes, approximately 15.6% of revolving credit facilities and approximately 15.8% stock warrants.
As a whole, we believe our portfolio of investments have a relatively low risk profile: 76.5% of the underlying properties in our portfolio are stabilized and have a weighted average occupancy of 92.8%; the portfolio-wide weighted average debt service coverage ratio (“DSCR”) is 1.32x; the weighted average loan to value (“LTV”) of our investments is 59.2%; and the weighted average maturity is 4.5 years as of December 31, 2024.
As a whole, we believe our portfolio of investments have a relatively low risk profile: 76.1% of the underlying properties in our portfolio are stabilized and have a weighted average occupancy of 90.5%; the portfolio-wide weighted average debt service coverage ratio (“DSCR”) is 1.24x; the weighted average loan to value (“LTV”) of our investments is 63.6%; and the weighted average maturity is 3.1 years as of December 31, 2025.
Our portfolio, based on total unpaid principal balance as of December 31, 2024, excluding the consolidation of the CMBS B-Pieces, as described further below, and common equity investments, preferred stock investments, stock warrants and multifamily property, is approximately 22.8% senior loans, which includes the SFR Loans, approximately 29.5% multifamily CMBS B-Pieces, approximately 3.1% CMBS I/O Strips, approximately 11.6% mezzanine loans, approximately 19.6% preferred equity investments, approximately 0.3% promissory notes and approximately 13.0% of revolving credit facilities.
Our portfolio, based on total unpaid principal balance as of December 31, 2025, excluding the consolidation of the CMBS B-Pieces, as described further below, and common equity investments, preferred stock investments, stock warrants and multifamily property, is approximately 10.5% senior loans, which includes the SFR Loans, approximately 28.7% multifamily CMBS B-Pieces, approximately 2.6% CMBS I/O Strips, approximately 20.4% mezzanine loans, approximately 23.2% preferred equity investments, approximately 1.4% promissory notes and approximately 13.2% of revolving credit facilities.
Total liabilities, including the consolidation of the CMBS B-Pieces, with respect to each of the aforementioned investment structures in our portfolio are approximately $110.1 million related to our senior loans, which include the SFR Loans, approximately $4.0 billion related to our multifamily CMBS B-Pieces, approximately $24.5 million related to our CMBS I/O Strips and approximately $59.3 million related to our mezzanine loans, respectively.
Total liabilities, including the consolidation of the CMBS B-Pieces, with respect to each of the aforementioned investment structures in our portfolio are approximately $108.2 million related to our senior loans, which include the SFR Loans, 4 Table of Contents approximately $3.7 billion related to our multifamily CMBS B-Pieces, approximately $22.1 million related to our CMBS I/O Strips and approximately $57.9 million related to our mezzanine loans, respectively.
In addition to OP Units, the Company holds all 2,000,000 of the issued and outstanding 8.50% Series A Cumulative Redeemable Preferred Units (liquidation preference $25.00 per unit) in our OP (the “Series A Preferred Units”) and all 6,695,715 of the issued and outstanding 9.00% Series B Cumulative Redeemable Preferred Units (liquidation preference $25.00 per unit) in our OP (the “Series B Preferred Units”) as of December 31, 2024.
In addition to OP Units, the Company holds all 2,000,000 of the issued and outstanding 8.50% Series A Cumulative Redeemable Preferred Units (liquidation preference $25.00 per unit) in our OP (the “Series A Preferred Units”), all 16,186,525 of the issued and 16,099,443 outstanding 9.00% Series B Cumulative Redeemable Preferred Units (liquidation preference $25.00 per unit) in our OP (the “Series B Preferred Units”) and all 80,412 of the issued and outstanding 8.00% Series C Cumulative Redeemable Preferred Units (liquidation preference $25.00 per unit) in our OP (the “Series C Preferred Units”) as of December 31, 2025.
Total liabilities, excluding the consolidation of the CMBS B-Pieces, with respect to each of the aforementioned investment structures in our portfolio are approximately $110.1 million related to our senior loans, which includes the SFR Loans, approximately $180.0 million related to our multifamily CMBS B-Pieces, approximately $24.5 million related to our CMBS I/O Strips and approximately $59.3 million related to our mezzanine loans.
Total liabilities, excluding the consolidation of the CMBS B-Pieces, with respect to each of the aforementioned investment structures in our portfolio are approximately $108.2 million related to our senior loans, which includes the SFR Loans, approximately $182.1 million related to our multifamily CMBS B-Pieces, approximately $22.1 million related to our CMBS I/O Strips and approximately $57.9 million related to our mezzanine loans.
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 Manager’s duties.
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 Manager’s duties. 9 Table of Contents Competition Our profitability depends, in large part, on our ability to acquire our target assets at attractive prices.
The table below provides additional details regarding borrowings under the master repurchase agreement as of December 31, 2024 (dollars in thousands): 3 Table of Contents December 31, 2024 Facility Collateral Date issued Outstanding face amount Carrying value Final stated maturity Weighted average interest rate (1) Weighted average life (years) (2) Outstanding face amount Amortized cost basis Carrying value (3) Weighted average life (years) (2) Master Repurchase Agreements CMBS Mizuho(4) 4/15/2020 243,454 243,454 N/A (5) 6.49 % 0.0 740,022 360,427 350,379 4.7 (1) Weighted-average interest rate using unpaid principal balances.
The table below provides additional details regarding borrowings under the master repurchase agreement as of December 31, 2025 (dollars in thousands): December 31, 2025 Facility Collateral Date issued Outstanding face amount Carrying value Final stated maturity Weighted average interest rate (1) Weighted average life (years) (2) Outstanding face amount Amortized cost basis Carrying value (3) Weighted average life (years) (2) Master Repurchase Agreements CMBS Mizuho (4) 4/15/2020 258,038 258,038 N/A (5) 5.53 % 0.0 740,359 352,744 336,014 3.8 (1) Weighted-average interest rate using unpaid principal balances.
We intend to achieve this objective primarily by originating, structuring and investing in our target assets. We concentrate on investments in real estate sectors where our senior management team has operating expertise, including in the multifamily, SFR, self-storage and life science sectors predominantly in the top 50 MSAs.
We concentrate on investments in real estate sectors where our senior management team has operating expertise, including in the multifamily, SFR, self-storage and life science sectors predominantly in the top 50 MSAs.
We primarily focus on investments in real estate sectors where our senior management team has operating expertise, including in the multifamily, SFR, self-storage and life science sectors predominantly in the top 50 metropolitan statistical areas (“MSAs”). Substantially all of the Company’s business is conducted through NexPoint Real Estate Finance Operating Partnership, L.P. (the “OP”), the Company’s operating partnership.
We primarily focus on investments in real estate sectors where our senior management team has operating expertise, including in the multifamily, SFR, self-storage, industrial and life science sectors predominantly in the top 50 metropolitan statistical areas (“MSAs”).
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. We may also compete with our Sponsor and its affiliates for investment opportunities.
We are subject to significant competition in acquiring our target assets. 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.
We are also 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.
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.
As of December 31, 2024, the outstanding balance on the Credit Facility was $110.1 million.
As of December 31, 2025, the outstanding balance on the Credit Facility was $108.2 million.
Series B Preferred Stock Offering During the year ended December 31, 2024, the Company issued 6,270,243 shares of Series B Preferred Stock in its continuous public offering for gross proceeds of $153.3 million in this offering.
Series C Preferred Stock Offering During the year ended December 31, 2025, the Company issued 80,412 shares of Series C Preferred Stock in its continuous public offering for gross proceeds of $2.0 million in this offering.
Our Manager may also terminate the agreement with 30 days’ written notice if we have materially breached the agreement and such breach has continued for 30 days before we are given such notice.
Our Manager may also terminate the agreement with 30 days’ written notice if we have materially breached the agreement and such breach has continued for 30 days before we are given such notice. In addition, the Management Agreement will automatically terminate in the event of an Advisers Act Assignment (as defined in the Management Agreement) unless we provide written consent.
However, in accordance with the applicable accounting standards, we consolidate all of the assets and liabilities of the trusts that issued the CMBS B-Pieces that we own which we are deemed to control. 4 Table of Contents Our portfolio, based on total unpaid principal balance as of December 31, 2024, including the consolidation of the CMBS B-Pieces, is approximately 5.1% senior loans, which includes the SFR Loans, approximately 84.3% multifamily CMBS B-Pieces, approximately 0.7% CMBS I/O Strips, approximately 2.6% mezzanine loans, approximately 4.4% preferred equity investments, approximately 0.1% of promissory notes and approximately 2.9% revolving credit facilities.
Our portfolio, based on total unpaid principal balance as of December 31, 2025, including the consolidation of the CMBS B-Pieces, is approximately 2.5% senior loans, which includes the SFR Loans, approximately 83.2% multifamily CMBS B-Pieces, approximately 0.6% CMBS I/O Strips, approximately 4.8% mezzanine loans, approximately 5.5% preferred equity investments, approximately 0.3% of promissory notes and approximately 3.1% revolving credit facilities.
Borrowings under these repurchase agreements are collateralized by portions of the CMBS B-Pieces, CMBS interest only strips (“CMBS I/O Strips”), MSCR Notes and mortgage backed securities. (5) The master repurchase agreement with Mizuho does not have a stated maturity date. The transactions in place have a one-month to two-month tenor and are expected to roll accordingly.
Borrowings under these repurchase agreements are collateralized by portions of junior most bonds of multifamily CMBS securitizations ("CMBS B-Pieces"), CMBS interest only strips (“CMBS I/O Strips”). (5) The master repurchase agreement with Mizuho does not have a stated maturity date.
Target Investments We invest primarily in first-lien mortgage loans, mezzanine loans, preferred equity, multifamily properties and common equity investments, as well as multifamily and SFR CMBS securitizations (including CMBS B-Pieces and CMBS I/O Strips), promissory notes, revolving credit facilities and stock warrants with a focus on lending or investing in properties that are stabilized or have a light transitional business plan primarily in the multifamily, SFR, self-storage, and life science sectors predominantly in the top 50 MSAs.
Target Investments We invest primarily in first-lien mortgage loans, mezzanine loans, preferred equity, multifamily properties and common equity investments, as well as multifamily and SFR CMBS securitizations (including CMBS B-Pieces and CMBS I/O Strips), promissory notes, revolving credit facilities and stock warrants.
There are significant potential conflicts of interest that could affect our investment returns. In addition, there are several REITs with similar investment objectives and others may be organized in the future. These other REITs will increase competition for the available supply of our target assets and other real estate related assets suitable for investment.
We may also compete with our Sponsor and its affiliates for investment opportunities. There are significant potential conflicts of interest that could affect our investment returns. In addition, there are several REITs with similar investment objectives and others may be organized in the future.
Information contained on, or accessible through, our website is not incorporated by reference into and does not constitute a part of this Annual Report or any other report or documents we file with or furnish to the SEC. From time to time, we may use our website as a distribution channel for material company information.
Our and our Manager’s telephone number is (214) 276-6300. Our website is located at nref.nexpoint.com. Information contained on, or 11 Table of Contents accessible through, our website is not incorporated by reference into and does not constitute a part of this Annual Report or any other report or documents we file with or furnish to the SEC.
Any distributions paid by us generally will not be eligible for taxation at the preferred U.S. federal income tax rates that apply to certain distributions received by individuals from taxable corporations.
Any distributions paid by us generally will not be eligible for taxation at the preferred U.S. federal income tax rates that apply to certain distributions received by individuals from taxable corporations. 10 Table of Contents Investment Company Act Exclusion We, as well as our subsidiaries, intend to conduct our operations so that we are not required to register as an investment company under the Investment Company Act.
We intend to achieve this objective primarily by originating, structuring and investing in our target assets. We target lending or investing in properties that are stabilized or have a light transitional business plan with positive DSCRs and high-quality sponsors.
We intend to achieve this objective primarily by originating, structuring and investing in our target assets. We target lending or investing in properties that are stabilized with positive DSCRs and high-quality sponsors. Through active portfolio management we seek to take advantage of market opportunities to achieve a superior portfolio risk-mix that delivers attractive total returns.
Through active portfolio management we seek to take advantage of market opportunities to achieve a superior portfolio risk-mix that delivers attractive total returns. Our Manager regularly monitors and stress-tests each investment and the portfolio as a whole under various scenarios, enabling us to make informed and proactive investment decisions.
Our Manager regularly monitors and stress-tests each investment and the portfolio as a whole under various scenarios, enabling us to make informed and proactive investment decisions.
Our CMBS B-Piece investments as a percentage of total assets, excluding the consolidation of the CMBS B-Pieces, reflects the assets that we actually own.
Our CMBS B-Piece investments as a percentage of total assets, excluding the consolidation of the CMBS B-Pieces, reflects the assets that we actually own. However, in accordance with the applicable accounting standards, we consolidate all of the assets and liabilities of the trusts that issued the CMBS B-Pieces that we own which we are deemed to control.
We may be a smaller reporting company even after we are no longer an “emerging growth company.” 10 Table of Contents Human Capital Disclosure We are externally managed by our Manager pursuant to the Management Agreement between us and our Manager. All of our executive officers are employees of our Manager or its affiliates.
Human Capital Disclosure We are externally managed by our Manager pursuant to the Management Agreement between us and our Manager. All of our executive officers are employees of our Manager or its affiliates. As of December 31, 2025, we had no employees. Corporate Information Our and our Manager’s offices are located at 300 Crescent Court, Suite 700, Dallas, Texas 75201.
Prior to the closing of the IPO, the Company engaged in a series of transactions through which it acquired an initial portfolio consisting of senior pooled mortgage loans backed by SFR properties (the “SFR Loans”), the junior most bonds of multifamily CMBS securitizations (the “CMBS B-Pieces”), mezzanine loan and preferred equity investments in real estate companies and properties in other structured real estate investments within the multifamily, SFR and self-storage asset classes (the “Initial Portfolio”).
Freddie Mac Credit Facility During 2025, the Company made payments under a Credit Facility (defined below) assumed by the Company as part of the initial acquisition of assets from affiliates (the “Contribution Group”) of our Sponsor, where the Contribution Group contributed their interest in an initial portfolio consisting of senior pooled loans backed by SFR Properties (“SFR Loans”), CMBS B-Pieces, mezzanine loan and preferred equity investments in real estate companies and properties in other structured real estate investments within the multifamily, SFR and self-storage asset classes (the “Initial Portfolio”) to special purpose entities (“SPEs”) owned by the Subsidiary OPs, in exchange for SubOP Units (the “Formation Transaction”) in the amount of $2.1 million.
Removed
The Series A Preferred Units and the Series B Preferred Units rank, as to distributions and upon liquidation, senior to OP Units. The Company commenced operations on February 11, 2020 upon the closing of its initial public offering of shares of its common stock (the “IPO”).
Added
The Company also lends to redevelopment and development projects in special situations where there is strong sponsorship and clear and visible cost basis detachment points and exit options. Substantially all of the Company’s business is conducted through NexPoint Real Estate Finance Operating Partnership, L.P. (the “OP”), the Company’s operating partnership.
Removed
The Initial Portfolio was acquired from affiliates (the “Contribution Group”) of our Sponsor, pursuant to a contribution agreement with the Contribution Group through which the Contribution Group contributed their interest in the Initial Portfolio to special purpose entities (“SPEs”) owned by the Subsidiary OPs, in exchange for SubOP Units (the “Formation Transaction”).
Added
The Series A Preferred Units, the Series B Preferred Units and the Series C Preferred Units rank, as to distributions and upon liquidation, senior to OP Units. The Company’s primary investment objective is to generate attractive, risk-adjusted returns for stockholders over the long term. We intend to achieve this objective primarily by originating, structuring and investing in our target assets.
Removed
Subsequent to the Formation Transaction, the Company has continued to invest in asset types and real estate sectors within the Initial Portfolio and expanded to include additional asset types and real estate sectors.
Added
The transactions in place have a one-month to two-month tenor and are expected to roll accordingly. 3 Table of Contents Series B Preferred Stock Offering During the year ended December 31, 2025, the Company issued 9,489,064 shares of Series B Preferred Stock in its continuous public offering for gross proceeds of $231.9 million in this offering.
Removed
The Company is externally managed through a management agreement dated February 6, 2020 and amended as of July 17, 2020 and November 3, 2021, that renewed on February 6, 2025 for a one-year term and is automatically renewed for successive one-year terms thereafter unless earlier terminated (as amended, the “Management Agreement”), by and between the Company and the Manager.
Added
We primarily focus on investments in real estate sectors where our senior management team has operating expertise, including in the multifamily, SFR, self-storage, industrial and life science sectors predominantly in the top 50 MSAs.
Removed
The Manager conducts substantially all of the Company’s operations and provides asset management services for its real estate investments. The Company expects it will only have accounting employees while the Management Agreement is in effect.
Added
These other REITs will increase competition for the available supply of our target assets and other real estate related assets suitable for investment.
Removed
All of the Company’s investment decisions are made by the Manager, subject to general oversight by the Manager’s investment committee and the Company’s board of directors (the “Board”). The Manager is wholly owned by our Sponsor. The Company’s primary investment objective is to generate attractive, risk-adjusted returns for stockholders over the long term.
Added
From time to time, we may use our website as a distribution channel for material company information. 12 Table of Contents
Removed
In addition, we target lending or investing in properties that are stabilized or have a “light transitional” business plan, meaning a property that requires limited deferred funding to support leasing or ramp-up of operations and for which most capital expenditures are for value-add improvements.
Removed
(2) On December 31, 2024, the $148.6 million principal amount of the Promissory Note was substituted and exchanged for 49.533% deemed borrowings under a $300 million revolving credit facility. For more information, see Note 15 to our consolidated financial statements.
Removed
Redemptions and Sales 2 Table of Contents The following investments were redeemed or sold during the year ended December 31, 2024: Investment Property Type Investment Date Disposition Date Amortized Cost Basis Redemption/Sales Proceeds Prepayment Penalties Net Gain (Loss) on Repayment (1) Senior Loan Single-family 2/11/2020 1/25/2024 $ 533,717,586 $ 508,700,000 $ 8,936,484 $ (16,081,102) Mortgage Backed Security Single-family 6/1/2022 2/1/2024 9,789,293 9,608,078 — (181,215) Mortgage Backed Security Multifamily 9/12/2022 3/25/2024 3,934,375 3,903,460 — (30,915) Mortgage Backed Security Single-family 7/28/2022 3/28/2024 923,951 907,699 — (16,252) Mortgage Backed Security Single-family 7/28/2022 3/28/2024 567,300 557,750 — (9,550) Mortgage Backed Security Single-family 6/1/2022 4/19/2024 10,143,368 10,111,429 — (31,939) Mortgage Backed Security Single-family 2/29/2024 5/8/2024 28,456,443 28,082,109 — (374,334) Mortgage Backed Security Multifamily 3/26/2018 5/17/2024 5,740,852 5,691,784 — (49,068) MSCR Note Multifamily 5/25/2022 5/20/2024 4,000,000 4,281,195 — 281,195 MSCR Note Multifamily 5/25/2022 5/20/2024 5,000,000 5,541,076 — 541,076 MSCR Note Multifamily 9/23/2022 5/20/2024 1,365,014 1,332,688 — (32,326) Mortgage Backed Security Self Storage 9/29/2022 6/12/2024 7,985,891 8,029,034 — 43,143 CMBS B-Piece Multifamily 12/30/2020 6/18/2024 55,836,041 61,960,691 — 6,124,650 CMBS B-Piece Multifamily 4/23/2020 7/26/2024 57,922,700 62,430,951 — 4,508,251 Senior Loan Single-family 2/11/2020 8/23/2024 10,137,684 9,708,780 334,981 (93,923) Preferred Equity Multifamily 2/10/2023 9/4/2024 7,750,000 7,750,000 — — Preferred Equity Multifamily 2/24/2023 9/4/2024 7,750,000 7,750,000 — — Preferred Equity Life Sciences 4/6/2023 9/21/2024 7,637,000 7,637,000 — — Mortgage Backed Security Single-family 2/29/2024 9/27/2024 6,685,380 6,725,998 — 40,618 Mortgage Backed Security Single-family 2/29/2024 11/14/2024 9,599,130 9,476,500 — (122,630) Preferred Equity Life Sciences 10/19/2022 12/18/2024 7,591,282 7,591,282 — — Preferred Equity Self Storage 4/30/2022 12/27/2024 96,879 96,879 — — $ 782,630,169 $ 767,874,383 $ 9,271,465 $ (5,484,321) (1) Net Gains (Losses) on repayment are generally attributable to acceleration of premiums and discounts net of any prepayment penalties assessed.
Removed
Freddie Mac Credit Facility During 2024, the Company made payments under a Credit Facility (defined below) assumed by the Company as part of the Formation Transaction in the amount of $534.2 million.
Removed
However, compensation expense is considered when determining Equity, in that we will adjust our calculation of EAD to remove the compensation expense that is added back in our calculation of EAD.
Removed
To the extent total corporate general and administrative (“G&A”) expenses would otherwise exceed 2.5% of equity book value, our Manager will waive all or a portion of the Annual Fee to keep our total corporate G&A expenses at or below 2.5% of equity book value.
Removed
In addition, the Management Agreement will automatically 8 Table of Contents terminate in the event of an Advisers Act Assignment (as defined in the Management Agreement) unless we provide written consent.
Removed
Competition Our profitability depends, in large part, on our ability to acquire our target assets at attractive prices. We are subject to significant competition in acquiring our target assets.
Removed
Investment Company Act Exclusion We, as well as our subsidiaries, intend to conduct our operations so that we are not required to register as an investment company under the Investment Company Act.
Removed
Maintaining the Section 3(c)(5)(C) exclusion, however, will limit our ability to make certain investments.
Removed
Emerging Growth Company and Smaller Reporting Company Status Section 107 of the Jumpstart Our Business Startups Act (the “JOBS Act”) provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for complying with new or revised accounting standards applicable to public companies.
Removed
In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period.
Removed
As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates for such new or revised standards. We may elect to comply with public company effective dates at any time, and such election would be irrevocable pursuant to Section 107(b) of the JOBS Act.
Removed
As of December 31, 2024, we had one employee whose salary is 50% allocated to us for reimbursement to our Manager. This employee is an accounting employee.
Removed
We endeavor to maintain workplaces that are free from discrimination or harassment on the basis of color, race, sex, national origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression or any other status protected by applicable law. The basis for recruitment, hiring, development, training, compensation and advancement is an employee's qualifications performance, skills and experience.
Removed
Our employee is fairly compensated, without regard to gender, race and ethnicity, and routinely recognized for outstanding performance. Corporate Information Our and our Manager’s offices are located at 300 Crescent Court, Suite 700, Dallas, Texas 75201. Our and our Manager’s telephone number is (214) 276-6300. Our website is located at nref.nexpoint.com.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

172 edited+27 added−64 removed436 unchanged
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 our stockholders, as well as 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; • the exposure of our loans and investments to risks similar to debt-oriented real estate investments generally, including the risk of delinquency, foreclosure and loss in any of our commercial real estate-related investments that are secured, directly or indirectly, by real property; • fluctuations in interest rate and credit spreads that could reduce our ability to generate income on our loans and investments; • competition for desirable loans and investments; • the concentration of our loans and investments in terms of type of interest, geography, asset types 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; • risks associated with CMBS securitizations and with investments in synthetic form; • our dependence on information systems and risks associated with breaches of our data security or our use of artificial intelligence; • costs associated with being a public company, including compliance with securities laws; 11 Table of Contents • 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 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 Manager’s management team or their affiliates; • our dependence on our Manager, its affiliates and personnel to conduct our day-to-day operations and identify and realize returns on our loans and investments within very broad investment guidelines and without fiduciary duties to us or a requirement to seek Board approval; • risks associated with the Manager’s ability to terminate the Management Agreement (as defined below) and risks associated with any potential internalization of our management functions; • conflicts of interest and competing demands for time faced by our Manager, 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 Manager 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 Manager 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 stockholders 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 tax flows and distributions on our capital stock; • 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 stockholder approval; • our ability to change our major policies, operations and targeted investments without stockholder 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 shares of our capital stock or discourage a third-party acquisition; • risks associated with (i) provisions in our governing documents that may limit stockholders’ choice of forum for disputes with us or discourage an acquisition of our securities or a change in control, including stock ownership restrictions and limits and (ii) provisions of Maryland law, including the Maryland General Corporation Law (the “MGCL”), 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 capital stock; • 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; 12 Table of Contents • 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 Stock, including limited voting rights, possible volatility in price and trading volume, subordination to our debt, dilution upon future issuances, possible lack of conversion rights on a change of control and the lack of a rating on the Series A Preferred Stock; • risks associated with holding shares of the Series B Preferred Stock, including limited voting rights, subordination to our debt, lack of a rating on the Series B Preferred Stock and dilution upon future issuances; • risk of failure to generate sufficient cash flows to service outstanding indebtedness or pay distributions on our capital stock 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 our stockholders, as well as 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; • the exposure of our loans and investments to risks similar to debt-oriented real estate investments generally, including the risk of delinquency, foreclosure and loss in any of our commercial real estate-related investments that are secured, directly or indirectly, by real property; • fluctuations in interest rate and credit spreads that could reduce our ability to generate income on our loans and investments; • competition for desirable loans and investments; • the concentration of our loans and investments in terms of type of interest, geography, asset types 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; • risks associated with CMBS securitizations and with investments in synthetic form; • our dependence on information systems and risks associated with breaches of our data security or our use of artificial intelligence; • 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; 13 Table of Contents • risks associated with insurance, derivatives or hedging activity, including counterparty risk; • our dependence on our Manager, its affiliates and personnel to conduct our day-to-day operations and identify and realize returns on our loans and investments within very broad investment guidelines and without fiduciary duties to us or a requirement to seek Board approval; • risks associated with the Manager’s ability to terminate the Management Agreement (as defined below) and risks associated with any potential internalization of our management functions; • conflicts of interest and competing demands for time faced by our Manager, 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 Manager 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 Manager 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 stockholders 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 tax flows and distributions on our capital stock; • 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 stockholder approval; • our ability to change our major policies, operations and targeted investments without stockholder 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 shares of our capital stock or discourage a third-party acquisition; • risks associated with (i) provisions in our governing documents that may limit stockholders’ choice of forum for disputes with us or discourage an acquisition of our securities or a change in control, including stock ownership restrictions and limits and (ii) provisions of Maryland law, including the Maryland General Corporation Law (the “MGCL”), 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 capital stock; • 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 Capital Management, L.P.
In addition, as a result of the risk of prepayment, the market value of the prepaid assets may benefit less than other fixed income securities from declining interest rates. Prepayment rates could have an adverse effect on other of our portfolio investments, including our mezzanine loans and preferred equity investments or on additional investments we may make in the future.
In addition, as a result of the risk of prepayment, the market value of the prepaid assets may benefit less than other fixed income securities from declining interest rates. Prepayment rates could have an adverse effect on our other portfolio investments, including our mezzanine loans and preferred equity investments or on additional investments we may make in the future.
Furthermore, we currently own one and may acquire additional direct or indirect interests in one or more entities that have or will elect to be taxed as REITs under the Code (each, a “Subsidiary REIT”). A Subsidiary REIT is subject to the various REIT qualification requirements and other limitations described herein that are applicable to us.
Furthermore, we currently own and may acquire additional direct or indirect interests in one or more entities that have or will elect to be taxed as REITs under the Code (each, a “Subsidiary REIT”). A Subsidiary REIT is subject to the various REIT qualification requirements and other limitations described herein that are applicable to us.
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.
Other than the conversion right afforded to holders of Series A Preferred Stock that may become exercisable in connection with certain changes of control as described in the articles supplementary setting forth the terms of the Series A Preferred Stock and the redemption right afforded to holders of Series B Preferred Stock, none of the provisions relating to the Series A Preferred Stock or Series B Preferred Stock contain any terms relating to or limiting our indebtedness or affording the holders of Series A Preferred Stock or Series B Preferred Stock protection in the event of a highly leveraged or other transaction, including a merger or the sale, lease or conveyance of all or substantially all our assets, that might adversely affect the holders of Series A Preferred Stock and Series B Preferred Stock, so long as the rights of the holders of Series A Preferred Stock and Series B Preferred Stock are not materially and adversely affected.
Other than the conversion right afforded to holders of Series A Preferred Stock that may become exercisable in connection with certain changes of control as described in the articles supplementary setting forth the terms of the Series A Preferred Stock and the redemption right afforded to holders of Series B Preferred Stock and Series C Preferred Stock, none of the provisions relating to the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock contain any terms relating to or limiting our indebtedness or affording the holders of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock protection in the event of a highly leveraged or other transaction, including a merger or the sale, lease or conveyance of all or substantially all our assets, that might adversely affect the holders of Series A Preferred Stock Series B Preferred Stock and Series C Preferred Stock, so long as the rights of the holders of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock are not materially and adversely affected.
The Series A Preferred Stock and Series B Preferred Stock rank junior to all of our existing and future indebtedness, any classes and series of our capital stock expressly designated as ranking senior to the Series A Preferred Stock and Series B Preferred Stock as to distribution rights and rights upon our liquidation, dissolution or winding up, and other non-equity claims on us and our assets available to satisfy claims against us, including claims in bankruptcy, liquidation or similar proceedings.
The Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock rank junior to all of our existing and future indebtedness, any classes and series of our capital stock expressly designated as ranking senior to the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock as to distribution rights and rights upon our liquidation, dissolution or winding up, and other non-equity claims on us and our assets available to satisfy claims against us, including claims in bankruptcy, liquidation or similar proceedings.
The issuance of additional shares of Series A Preferred Stock, Series B Preferred Stock or additional shares of our capital stock ranking on parity with the Series A Preferred Stock and Series B Preferred Stock as to distribution rights and rights upon our liquidation, dissolution or winding up, would dilute the interests of the holders of Series A Preferred Stock and Series B Preferred Stock, and the issuance of shares of any class or series of our capital stock expressly designated as ranking senior to the Series A Preferred Stock and Series B Preferred Stock as to distribution rights and rights upon our liquidation, dissolution or winding up or the incurrence of additional indebtedness could affect our ability to pay dividends on, redeem or pay the liquidation preference on the Series A Preferred Stock and Series B Preferred Stock.
The issuance of additional shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or additional shares of our capital stock ranking on parity with the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock as to distribution rights and rights upon our liquidation, dissolution or winding up, would dilute the interests of the holders of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, and the issuance of shares of any class or series of our capital stock expressly designated as ranking senior to the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock as to distribution rights and rights upon our liquidation, dissolution or winding up or the incurrence of additional indebtedness could affect our ability to pay dividends on, redeem or pay the liquidation preference on the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock.
Interest rate and currency hedging may fail to protect or could adversely affect us because, among other things: • interest rate and/or credit hedging can be expensive and may result in us generating less net income; • available interest rate hedges may not correspond directly with the interest rate for which protection is sought; • due to a credit loss, prepayment or asset sale, the duration of the hedge may not match the duration of the related asset or liability; • the amount of income that a REIT may earn from hedging transactions (other than hedging transactions that satisfy certain requirements of the Code or that are done through a TRS) to offset interest rate losses is limited by U.S. federal income tax provisions governing REITs; • the credit quality of the hedging counterparty owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; • the hedging counterparty owing money in the hedging transaction may default on its obligation to pay; • we may fail to recalculate, readjust and execute hedges in an efficient manner; and • legal, tax and regulatory changes could occur and may adversely affect our ability to pursue our hedging strategies and/or increase the costs of implementing such strategies.
Interest rate and currency hedging may fail to protect or could adversely affect us because, among other things: • interest rate and/or credit hedging can be expensive and may result in us generating less net income; • available interest rate hedges may not correspond directly with the interest rate for which protection is sought; • due to a credit loss, prepayment or asset sale, the duration of the hedge may not match the duration of the related asset or liability; 31 Table of Contents • the amount of income that a REIT may earn from hedging transactions (other than hedging transactions that satisfy certain requirements of the Code or that are done through a TRS) to offset interest rate losses is limited by U.S. federal income tax provisions governing REITs; • the credit quality of the hedging counterparty owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; • the hedging counterparty owing money in the hedging transaction may default on its obligation to pay; • we may fail to recalculate, readjust and execute hedges in an efficient manner; and • legal, tax and regulatory changes could occur and may adversely affect our ability to pursue our hedging strategies and/or increase the costs of implementing such strategies.
Under the terms of the Management Agreement, our Manager and its affiliates and their respective partners, members, officers, directors, 32 Table of Contents employees and agents will not be liable to us (including but not limited to (1) any act or omission in connection with the conduct of our business that is determined in good faith to be in or not opposed to our best interest, (2) any act or omission based on the suggestions of certain professional advisors, (3) any act or omission by us, or (4) any mistake, negligence, misconduct or bad faith of certain brokers or other agents), unless any act or omission constitutes bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of duties.
Under the terms of the Management Agreement, our Manager and its affiliates and their respective partners, members, officers, directors, employees and agents will not be liable to us (including but not limited to (1) any act or omission in connection with the conduct of our business that is determined in good faith to be in or not opposed to our best interest, (2) any act or omission based on the suggestions of certain professional advisors, (3) any act or omission by us, or (4) any mistake, negligence, misconduct or bad 35 Table of Contents faith of certain brokers or other agents), unless any act or omission constitutes bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of duties.
To the extent that the new government administration takes action by proposing and/or passing regulatory policies that could have a negative impact on our industry, such actions may have a material adverse effect on our business, results of operations, liquidity and financial condition.
To the extent that the government administration takes action by proposing and/or passing regulatory policies that could have a negative impact on our industry, such actions may have a material adverse effect on our business, results of operations, liquidity and financial condition.
Our level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following: • require us to dedicate a substantial portion of cash flow from operations to the payment of principal, and interest on, indebtedness, thereby reducing the funds available for other purposes; • make it more difficult for us to borrow additional funds as needed or on favorable terms, which could, among other things, adversely affect our ability to meet operational needs; • force us to dispose of one or more of our investments, possibly on unfavorable terms or in violation of certain covenants to which we may be subject; 27 Table of Contents • subject us to increased sensitivity to interest rate increases; • make us more vulnerable to economic downturns, adverse industry conditions or catastrophic external events; • limit our ability to withstand competitive pressures; • limit our ability to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness; • reduce our flexibility in planning for or responding to changing business, industry and economic conditions; and/or • place us at a competitive disadvantage to competitors that have relatively less debt than we have.
Our level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following: • require us to dedicate a substantial portion of cash flow from operations to the payment of principal, and interest on, indebtedness, thereby reducing the funds available for other purposes; • make it more difficult for us to borrow additional funds as needed or on favorable terms, which could, among other things, adversely affect our ability to meet operational needs; • force us to dispose of one or more of our investments, possibly on unfavorable terms or in violation of certain covenants to which we may be subject; • subject us to increased sensitivity to interest rate increases; • make us more vulnerable to economic downturns, adverse industry conditions or catastrophic external events; • limit our ability to withstand competitive pressures; • limit our ability to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness; • reduce our flexibility in planning for or responding to changing business, industry and economic conditions; and/or • place us at a competitive disadvantage to competitors that have relatively less debt than we have.
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.
Holders of Series B Preferred Stock also have the right to request we redeem their shares at any time, and we may elect to pay any such redemption price in shares of our common stock, which would be dilutive to existing holders of shares of our common stock.
Holders of Series B Preferred Stock and Series C Preferred Stock also have the right to request we redeem their shares at any time, and we may elect to pay any such redemption price in shares of our common stock, which would be dilutive to existing holders of shares of our common stock.
No assurance can be given, however, that one or more rating agencies might not independently determine to issue such a rating or that such a rating, if issued, would not adversely affect the market price of the Series A Preferred Stock or Series B Preferred Stock (if any).
No assurance can be given, however, that one or more rating agencies might not independently determine to issue such a rating or that such a rating, if issued, would not adversely affect the market price of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock (if any).
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 Stock or Series B Preferred Stock and may result in dilution to owners of the Series A Preferred Stock or Series B Preferred Stock.
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 Stock, Series B Preferred Stock or Series C Preferred Stock and may result in dilution to owners of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock.
Some of the factors that could affect our stock price or result in fluctuations in the price or trading volume of our common stock 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 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 stockholders; • 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 stock 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 stockholders, 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 stock price or result in fluctuations in the price or trading volume of our common stock 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 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; 50 Table of Contents • actions by institutional stockholders; • 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 stock 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 stockholders, 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.
Our charter also prohibits any person from, among other things, beneficially or constructively owning shares of our capital stock that would result in our being “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), or otherwise cause us to fail to qualify as a REIT or a “domestically controlled qualified investment entity” within the meaning of Section 897(h) of the Code.
Our charter also prohibits any person from, among other things, beneficially or constructively owning shares of our capital stock that would result in our being “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), or otherwise cause us to fail to qualify as a REIT or a “domestically controlled qualified investment entity” within the meaning of Section 897(h)(4)(B) of the Code.
In addition, the Series A Preferred Stock and Series B Preferred Stock rank senior to our common stock with respect to priority of such dividend payments, which may limit our ability to make distributions to holders of our common stock.
In addition, the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock rank senior to our common stock with respect to priority of such dividend payments, which may limit our ability to make distributions to holders of our common stock.
Macroeconomic trends including inflation, high interest rates, recession, major bank failures or sustained financial market illiquidity may adversely affect our financial condition and results of operations. Macroeconomic trends, including high inflation and high interest rates, may adversely impact our business, financial condition and results of operations.
Macroeconomic trends including inflation, high interest rates, tariffs, recession, major bank failures or sustained financial market illiquidity may adversely affect our financial condition and results of operations. Macroeconomic trends, including high inflation and high interest rates, may adversely impact our business, financial condition and results of operations.
However, should one develop or should we determine to publicly list our Series B Preferred Stock, we cannot predict the effect, if any, of future sales of our Series B Preferred Stock on the market price, if any, of our Series B Preferred Stock.
However, should one develop or should we determine to publicly list our Series B Preferred Stock or Series C Preferred Stock, we cannot predict the effect, if any, of future sales of our Series B Preferred Stock or Series C Preferred Stock on the market price, if any, of our Series B Preferred Stock or Series C Preferred Stock.
If the Common Stock Price (as defined in the articles supplementary setting forth the terms of the Series A Preferred Stock) is less than $7.58 (which is approximately 50% of the per-share closing sale price of our common stock on July 17, 2020), subject to adjustment, each holder will receive a maximum of 3.2982 shares of our common stock per share of Series A Preferred Stock, which may result in a 48 Table of Contents holder receiving value that is less than the liquidation preference of the Series A Preferred Stock.
If the Common Stock Price (as defined in the articles supplementary setting forth the terms of the Series A Preferred Stock) is less than $7.58 (which is approximately 50% of the per-share closing sale price of our common stock on July 17, 2020), subject to adjustment, each holder will receive a maximum of 3.2982 shares of our 54 Table of Contents common stock per share of Series A Preferred Stock, which may result in a holder receiving value that is less than the liquidation preference of the Series A Preferred Stock.
Under the MGCL, certain “business combinations” (including a merger, consolidation, statutory share exchange or, in certain circumstances, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and an “interested stockholder” (defined generally as any person who beneficially owns, directly or indirectly, 10% or more of the voting power of our outstanding shares of voting stock or an affiliate or associate of the corporation who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding stock of the corporation), or an affiliate of any such interested 36 Table of Contents stockholder, are prohibited for five years after the most recent date on which such interested stockholder becomes an interested stockholder.
Under the MGCL, certain “business combinations” (including a merger, consolidation, statutory share exchange or, in certain circumstances, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and an “interested stockholder” (defined generally as any person who beneficially owns, directly or indirectly, 10% or more of the voting power of our outstanding shares of voting stock or an affiliate or associate of the corporation who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding stock of the corporation), or an affiliate of any such interested stockholder, are prohibited for five years after the most recent date on which such interested stockholder becomes an interested stockholder.
The rights of our common stockholders are limited by and subordinate to the rights of the holders of Series A Preferred Stock and Series B Preferred Stock and these rights may have a negative effect on the value of shares of our common stock.
The rights of our common stockholders are limited by and subordinate to the rights of the holders of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock and these rights may have a negative effect on the value of shares of our common stock.
The holders of shares of our Series A Preferred Stock and Series B Preferred Stock have rights and preferences generally senior to those of the holders of our common stock. The existence of these senior rights and preferences may have a negative effect on the value of shares of our common stock.
The holders of shares of our Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock have rights and preferences generally senior to those of the holders of our common stock. The existence of these senior rights and preferences may have a negative effect on the value of shares of our common stock.
The Series A Preferred Stock and Series B Preferred Stock are subordinate to our existing and future debt, and such interests could be diluted by the issuance of additional shares of preferred stock and by other transactions.
The Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock are subordinate to our existing and future debt, and such interests could be diluted by the issuance of additional shares of preferred stock and by other transactions.
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.
In addition, we may elect in the future to obtain a rating of the Series A Preferred Stock or Series B Preferred Stock, which could adversely impact the market price of the Series A Preferred Stock or Series B Preferred Stock (if any).
In addition, we may elect in the future to obtain a rating of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, which could adversely impact the market price of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock (if any).
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.
Through provisions in our charter and bylaws unrelated to Subtitle 8, we already, subject to the terms of any class or series of preferred stock, (a) vest in our Board the exclusive power to fix the number of directorships, (b) require a vacancy on our Board to be filled only by the remaining directors in office, even if the remaining directors do not constitute a quorum and (c) require, unless called by our chairman of our Board, our chief executive officer, our president or our Board, the written request of stockholders entitled to cast a majority 37 Table of Contents of all of the votes entitled to be cast at such a meeting to call a special meeting.
Through provisions in our charter and bylaws unrelated to Subtitle 8, we already, subject to the terms of any class or series of preferred stock, (a) vest in our Board the exclusive power to fix the number of directorships, (b) require a vacancy on our Board to be filled only by the remaining directors in office, even if the remaining directors do not constitute a quorum and (c) require, unless called by our chairman of our Board, our chief executive officer, our president or our Board, the written request of stockholders entitled to cast a majority of all of the votes entitled to be cast at such a meeting to call a special meeting.
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 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 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 44 Table of Contents applicable to REITs and, accordingly, we would likely cease to qualify as a REIT, unless we qualified for certain statutory savings provisions.
If the market in which the asset is located fails to improve according to the borrower’s projections, or if the borrower fails to improve the quality of the asset’s management and/or the value of the asset, the borrower may not receive a sufficient return on the asset to satisfy the transitional loan, and we bear the risk that we may not recover all or a portion of our investment.
If the market in which the asset is located fails to improve according to the borrower’s projections, or if the borrower fails to improve the quality of the asset’s management and/or the value of the asset, the borrower may not receive a sufficient return on the asset to satisfy the transitional, development or redevelopment loan, and we bear the risk that we may not recover all or a portion of our investment.
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 stock. 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 shares of our common stock.
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 stock. 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 shares of our capital stock.
Gain recognized by a non-U.S. stockholder upon the sale or exchange of our common stock generally will not be subject to U.S. federal income taxation unless such stock constitutes a USRPI under FIRPTA. Our common stock will not constitute a USRPI so long as we are a “domestically-controlled” REIT.
Gain recognized by a non-U.S. stockholder upon the sale or exchange of our capital stock generally will not be subject to U.S. federal income taxation unless such stock constitutes a USRPI under FIRPTA. Our capital stock will not constitute a USRPI so long as we are a “domestically-controlled” REIT.
As a result of numerous requests for no-action relief from CPO registration, in December 2012 the CFTC’s Division of Swap Dealer and Intermediary Oversight issued a no-action letter entitled “No-Action Relief from the Commodity Pool Operator Registration Requirement for Commodity Pool Operators of Certain Pooled Investment Vehicles Organized as Mortgage Real Estate Investment Trusts,” which permits a CPO to receive relief from registration requirements by filing a claim stating that the CPO meets the criteria specified in the no-action letter.
As a result of numerous requests for no-action relief from CPO registration, in December 2012 the CFTC’s Division of Swap Dealer and Intermediary Oversight issued a no-action letter entitled 25 Table of Contents “No-Action Relief from the Commodity Pool Operator Registration Requirement for Commodity Pool Operators of Certain Pooled Investment Vehicles Organized as Mortgage Real Estate Investment Trusts,” which permits a CPO to receive relief from registration requirements by filing a claim stating that the CPO meets the criteria specified in the no-action letter.
Further, the Series A Preferred Stock may trade at prices lower than the public offering price, and the market price of the Series A Preferred Stock 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 47 Table of Contents • our financial condition, cash flows, liquidity, results of operations, funds from operations and prospects.
Further, the Series A Preferred Stock may trade at prices lower than the public offering price, and the market price of the Series A Preferred Stock 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.
To the extent we suffer such losses with respect to these transitional loans, it could adversely affect our results of operations and financial condition. We may not realize gains or income from our investments. We seek to generate both current income and capital appreciation from our investments.
To the extent we suffer such losses with respect to these transitional, development or redevelopment loans, it could adversely affect our results of operations and financial condition. We may not realize gains or income from our investments. We seek to generate both current income and capital appreciation from our investments.
The indenture and the note purchase agreements contain other customary covenants and events of default. Payments of principal and interest on borrowings may leave us with insufficient cash resources to acquire additional investments or pay the dividends necessary to maintain our REIT qualification.
The indenture and the note purchase agreement contain other customary covenants and events of default. Payments of principal and interest on borrowings may leave us with insufficient cash resources to acquire additional investments or pay the dividends necessary to maintain our REIT qualification.
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.
Further, we may face other restrictions on our ability to liquidate an investment to the extent that we or our Manager and/or its affiliates has or could be attributed as having material, non-public information regarding such business entity.
Further, we may face other restrictions on our ability to liquidate an investment to the extent that we or our Manager and/or its affiliates have or could be attributed as having material, non-public information regarding such business entity.
In certain situations, we may: • acquire investments subject to rights of senior classes and servicers under intercreditor or servicing agreements; 18 Table of Contents • 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: • 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 addition, a prolonged economic slowdown, a recession or declining real estate values, including, among other things, as a result of pandemics, inflation or high interest rates, could impair the performance of our investments and harm our financial 21 Table of Contents condition and results of operations, increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us.
In addition, a prolonged economic slowdown, a recession or declining real estate values, including, among other things, as a result of pandemics, inflation or high interest rates, could impair the performance of our investments and harm our financial condition and results of operations, increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us.
The Series A Preferred Stock and Series B Preferred Stock have not been rated. We have not sought to obtain ratings for the Series A Preferred Stock and Series B Preferred Stock.
The Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock have not been rated. We have not sought to obtain ratings for the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock.
With regard to our multifamily properties, inflationary pressures have increased or may have the effect of increasing our costs related to property 15 Table of Contents management, third-party contractors and vendors, insurance, transportation and taxes, and our residents may also be adversely impacted by higher cost of living expenses, including food, energy and transportation, which may increase our rate of tenant defaults and harm our operating results.
With regard to our multifamily 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 residents may also be adversely impacted by higher cost of living expenses, including food, energy and transportation, which may increase our rate of tenant defaults and harm our operating results.
To maintain our REIT qualification, we may be forced to borrow funds during unfavorable market conditions, and the unavailability of such capital on favorable terms at the desired times, or at all, may cause us to curtail our investment 38 Table of Contents activities and/or to dispose of assets at inopportune times, which could adversely affect our financial condition, results of operations, cash flow and value of our securities.
To maintain our REIT qualification, we may be forced to borrow funds during unfavorable market conditions, and the unavailability of such capital on favorable terms at the desired times, or at all, may cause us to curtail our investment activities and/or to dispose of assets at inopportune times, which could adversely affect our financial condition, results of operations, cash flow and value of our securities.
In addition, our TRS 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 TRS 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.
The indenture governing the 5.75% Notes and the note purchase agreements governing the OP Notes restrict our operating flexibility and if we decide to issue additional debt securities or shares of our capital stock, including traded or non-traded preferred stock, expressly designated as ranking senior to the Series A Preferred Stock and Series B Preferred Stock as to distribution rights and rights upon our liquidation, dissolution or winding up in the future, it is possible that those securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility.
The indenture governing the 5.75% Notes and the note purchase agreement governing the 2026 OP Notes restrict our operating flexibility and if we decide to issue additional debt securities or shares of our capital stock, including traded or non-traded preferred stock, expressly designated as ranking senior to the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock as to distribution rights and rights upon our liquidation, dissolution or winding up in the future, it is possible that those securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility.
Therefore, we may fail to qualify as a REIT if dividends from our TRSs, when aggregated with all other non-real estate income with respect to any one year, are more than 25% of our gross income with respect to such year. Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends.
Therefore, we may fail to qualify as a REIT if dividends from our TRSs, when aggregated with all other non-real estate income with respect to any one year, are more than 25% of our gross income with respect to such year. 45 Table of Contents Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends.
In addition, to the extent that our stock is owned by tax-exempt “disqualified organizations,” such as certain government-related entities and charitable remainder 39 Table of Contents trusts that are not subject to tax on unrelated business taxable income, we may incur a corporate level tax on a portion of any excess inclusion income.
In addition, to the extent that our stock is owned by tax-exempt “disqualified organizations,” such as certain government-related entities and charitable remainder trusts that are not subject to tax on unrelated business taxable income, we may incur a corporate level tax on a portion of any excess inclusion income.
Our Board granted James Dondero and his affiliates a waiver allowing them to collectively own up to 65% of our outstanding common stock, has granted waivers to others and may grant additional waivers in the future.
Our Board granted James Dondero and his affiliates a waiver allowing them to collectively own up to 65% of our outstanding shares of common stock and 65% of our outstanding capital stock, has granted waivers to others and may grant additional waivers in the future.
In addition, as regulatory capital requirements imposed on our lenders are increased, they may be 28 Table of Contents 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 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 stockholders 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 dividends 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 stockholders 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 dividends paid and excluding net capital gain.
If a transfer of shares of our capital stock would result in our capital stock being beneficially owned by fewer than 100 persons or the transfer to a charitable trust would be ineffective for any reason to prevent a violation of the other restrictions on ownership and transfer of our capital stock, the transfer resulting in such violation will be void ab initio.
If a transfer of shares of our capital stock would result in our capital stock being beneficially owned by fewer than 100 persons or the transfer to a 46 Table of Contents charitable trust would be ineffective for any reason to prevent a violation of the other restrictions on ownership and transfer of our capital stock, the transfer resulting in such violation will be void ab initio.
Litigation against James Dondero and others may have materially adverse consequences on our business, financial condition and results of operations. 34 Table of Contents On February 8, 2023, UBS Securities LLC and its affiliate (collectively, “UBS”) filed a lawsuit in the Supreme Court of the State of New York, County of New York against Mr.
Litigation against James Dondero and others may have materially adverse consequences on our business, financial condition and results of operations. On February 8, 2023, UBS Securities LLC and its affiliate (collectively, “UBS”) filed a lawsuit in the Supreme Court of the State of New York, County of New York against Mr.
These rights are more fully set forth in the articles supplementary setting forth the terms of the Series A Preferred Stock and in the articles supplementary setting forth the terms of the Series B Preferred Stock, and include, but are not limited to: (i) the right to receive a liquidation preference, prior to any distribution of our assets to the holders of our common stock; and (ii) for the Series A Preferred Stock, the right to convert into shares of our common stock upon the occurrence of a Change of Control (as defined in the articles supplementary setting forth the terms of the Series A Preferred Stock), which conversion terms may be adjusted as set forth therein.
These rights are more fully set forth in the articles supplementary setting forth the terms of the Series A Preferred Stock, in the articles supplementary setting forth the terms of the Series B Preferred Stock and in the articles supplementary setting forth the terms of the Series C Preferred Stock, and include, but are not limited to: (i) the right to receive a liquidation preference, prior to any distribution of our 52 Table of Contents assets to the holders of our common stock; and (ii) for the Series A Preferred Stock, the right to convert into shares of our common stock upon the occurrence of a Change of Control (as defined in the articles supplementary setting forth the terms of the Series A Preferred Stock), which conversion terms may be adjusted as set forth therein.
The valuation of real estate, and therefore the valuation of any underlying security relating to loans and/or investments made by us, is inherently subjective due to, among other factors, the individual nature of each property, its 20 Table of Contents 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 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.
Under rules implemented by the CFTC, operators of certain entities (including many mortgage REITs) may fall within the statutory definition of commodity pool operator (“CPO”), and, absent an applicable exemption or other relief from the CFTC, may 22 Table of Contents be required to register with the CFTC as a CPO.
Under rules implemented by the CFTC, operators of certain entities (including many mortgage REITs) may fall within the statutory definition of commodity pool operator (“CPO”), and, absent an applicable exemption or other relief from the CFTC, may be required to register with the CFTC as a CPO.
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 stock.
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 stock.
In addition to competitive risks, the incorporation of artificial intelligence into our technological framework poses ethical and cybersecurity risks, as well as the regulatory risks associated with compliance with state and national laws and regulations. Risk of Pandemics or Other Health Crises. Pandemics, epidemics or other health crises, including COVID-19, have and could in the future disrupt our business.
In addition to competitive risks, the incorporation of artificial intelligence into our technological framework poses ethical and cybersecurity risks, as well as the regulatory risks associated with compliance with state and national laws and regulations. Risk of Pandemics or Other Health Crises. Pandemics, epidemics or other health crises have and could in the future disrupt our business.
Because our decision to issue debt securities or shares of our capital stock expressly designated as ranking senior to the Series A Preferred Stock and Series B Preferred Stock as to distribution rights and rights upon our liquidation, dissolution or winding up in any future offering will depend 49 Table of Contents 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 of our capital stock expressly designated as ranking senior to the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock as to distribution rights and rights upon our liquidation, dissolution 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.
Increases in or high interest rates and credit spreads may also negatively affect demand for loans and could result in higher borrower default rates. Our operating results depend, in part, on differences between the income earned on our investments, net of credit losses, and our financing costs.
Increases in or high interest rates and credit spreads may also negatively affect demand for loans and could result in higher borrower default rates. 17 Table of Contents Our operating results depend, in part, on differences between the income earned on our investments, net of credit losses, and our financing costs.
Moreover, many of the loans and securities we invest in will not be registered under the relevant securities laws, resulting in prohibitions against their transfer, sale, pledge or their disposition except in transactions that are exempt from registration requirements or are 17 Table of Contents otherwise in accordance with such laws.
Moreover, many of the loans and securities we invest in will not be registered under the relevant securities laws, resulting in prohibitions against their transfer, sale, pledge or their disposition except in transactions that are exempt from registration requirements or are otherwise in accordance with such laws.
If such CMBS turns out not to be fully collectible, an offsetting loss deduction will become available only in the later year that uncollectability is provable.
If such CMBS turns out not to be fully collectible, an offsetting loss deduction will become available only in the later year that uncollectibility is provable.
Sales of substantial amounts of Series B Preferred Stock or the perception that such sales could occur may adversely affect the prevailing market price, if any, for our Series B Preferred Stock.
Sales of substantial amounts of Series B Preferred Stock or Series C Preferred Stock or the perception that such sales could occur may adversely affect the prevailing market price, if any, for our Series B Preferred Stock or Series C Preferred Stock, respectively.
In originating or acquiring our target assets, we compete with a variety of institutional lenders and investors, including other REITs, specialty finance companies, public and private funds (including other funds managed by affiliates of our Manager and Sponsor), commercial and investment banks, commercial finance and insurance companies and other financial institutions.
In originating or acquiring our target assets, we compete with a variety of institutional lenders and investors, including other REITs, specialty finance 19 Table of Contents companies, public and private funds (including other funds managed by affiliates of our Manager and Sponsor), commercial and investment banks, commercial finance and insurance companies and other financial institutions.
Such impairment charges reflect non-cash losses at the time of recognition; subsequent disposition or sale of such assets could further affect our future losses or gains, as they are based on the difference between the sale price received and adjusted amortized cost of such assets at the time of sale.
Such impairment charges reflect non-cash losses at the time of recognition; subsequent disposition or sale of such assets could further affect our future losses or gains, as they are based 24 Table of Contents on the difference between the sale price received and adjusted amortized cost of such assets at the time of sale.
For additional information on these fees and the fees paid to our Manager, see “Item 1. Business—Our Management Agreement” and Note 14 to our consolidated financial statements for more information. If we internalize our management functions, we may not achieve the perceived benefits of the internalization transaction.
For additional information on these fees and the fees paid to our Manager, see “Item 1. Business—Our Management Agreement” and Note 14 to our consolidated financial statements for more information. 36 Table of Contents If we internalize our management functions, we may not achieve the perceived benefits of the internalization transaction.
In the event of any default under transitional loans that may be held by us, we bear the risk of loss of principal and non-payment of interest and fees to the extent of any deficiency between the value of the mortgage collateral and the principal amount and unpaid interest of the transitional loan.
In the event of any default under transitional, development or redevelopment loans that may be held by us, we bear the risk of loss of principal and non-payment of interest and fees to the extent of any deficiency between the value of the mortgage collateral and the principal amount and unpaid interest of the transitional, development or redevelopment loan.
Terrorist attacks, other acts of violence or war or a prolonged economic slowdown may affect the real estate industry generally and our business, financial condition and results of operations. We cannot predict the severity of the effect that potential future terrorist attacks or other acts of violence or war would have on us.
Acts of violence or war or a prolonged economic slowdown may affect the real estate industry generally and our business, financial condition and results of operations. We cannot predict the severity of the effect that potential future acts of violence or war would have on us.
The typical borrower in a transitional loan has usually identified an undervalued asset that has been under-managed and/or is located in a recovering market.
The typical borrower in a transitional, development or redevelopment loan has usually identified an undervalued asset that has been under-managed and/or is located in a recovering market.
Maryland law provides that a director has no liability in the capacity as a director if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interest and with the care that an ordinarily 35 Table of Contents prudent person in a like position would use under similar circumstances.
Maryland law provides that a director has no liability in the capacity as a director if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interest and with the care that an ordinarily prudent person in a like position would use under similar circumstances.
In addition, recent well-publicized security breaches have led to enhanced government and regulatory scrutiny of the measures taken by companies to protect against cyber-security attacks, and may in the future result in heightened cyber-security requirements and/or additional regulatory oversight.
In addition, recent well-publicized security breaches have led to enhanced government and regulatory scrutiny of the measures taken by companies to protect against cyber-security attacks, and may in the future result 56 Table of Contents in heightened cyber-security requirements and/or additional regulatory oversight.
There can be no assurance that we will be successful in entering into such replacement repurchase agreements on the same terms as the repurchase agreements that were terminated or at all. Any losses that we incur on our repurchase agreements could adversely affect our earnings and thus our cash available for distribution to stockholders.
There can be no assurance that we will be successful in entering into such replacement repurchase 33 Table of Contents agreements on the same terms as the repurchase agreements that were terminated or at all. Any losses that we incur on our repurchase agreements could adversely affect our earnings and thus our cash available for distribution to stockholders.
These economic losses will be reflected in our results of operations, and our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time, and the need to fund these obligations could adversely affect our results of operations and financial condition.
These economic losses will be reflected in our results of 32 Table of Contents operations, and our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time, and the need to fund these obligations could adversely affect our results of operations and financial condition.
In addition, sales of significant amounts of shares beneficially held by our Sponsor or other holders of our common stock with whom Mr. Dondero has relationships, or the prospect of these sales, could adversely affect the market price of 44 Table of Contents our common stock.
In addition, sales of significant amounts of shares beneficially held by our Sponsor or other holders of our common stock with whom Mr. Dondero has relationships, or the prospect of these sales, could adversely affect the market price of our common stock.
Therefore, the value of the underlying property, the creditworthiness and financial position of the borrower and the priority and enforceability of the lien will significantly impact the value of such mortgage. In the event of a foreclosure, we may assume direct ownership of the underlying real 14 Table of Contents estate.
Therefore, the value of the underlying property, the creditworthiness and financial position of the borrower and the priority and enforceability of the lien will significantly impact the value of such mortgage. In the event of a foreclosure, we may assume direct ownership of the underlying real estate.
A change in our targeted investments or investment guidelines, which may occur without notice to you or without your consent, may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of our securities and our ability to make distributions to you.
These policies may change over time. A change in our targeted investments or investment guidelines, which may occur without notice to you or without your consent, may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of our securities and our ability to make distributions to you.
Redetermined deductions and excess interest generally 40 Table of Contents 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 deducted based on arm’s-length negotiations.
Alternatively, if the IRS successfully recharacterizes a mezzanine loan or preferred equity investment that we have treated as equity for U.S. federal income tax purposes as debt for U.S. federal income tax purposes, then that investment may be treated as producing interest income that would be qualifying income for the 95% gross income test, but not for the 75% gross income test.
Alternatively, if the IRS successfully recharacterizes 43 Table of Contents a mezzanine loan or preferred equity investment that we have treated as equity for U.S. federal income tax purposes as debt for U.S. federal income tax purposes, then that investment may be treated as producing interest income that would be qualifying income for the 95% gross income test, but not for the 75% gross income test.
We cannot assure you that we will be able to timely remediate 26 Table of Contents any material weaknesses that may be identified in future periods or maintain all of the controls necessary for continued compliance.
We cannot assure you that we will be able to timely remediate any material weaknesses that may be identified in future periods or maintain all of the controls necessary for continued compliance.
If we made an election to be subject to the provisions of Subtitle 8 relating to a classified board, our Board would automatically be classified into three classes with staggered terms of office of three years each.
If we made an election to be subject to the provisions of 41 Table of Contents Subtitle 8 relating to a classified board, our Board would automatically be classified into three classes with staggered terms of office of three years each.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeCombined, our Manager’s information technology team has over 50 years of experience covering all major aspects of network architecture and management. Risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected, and we do not believe are reasonably likely to materially affect, us, including our business strategy, results of operations or financial condition.
Biggest changeRisks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected, and we do not believe are reasonably likely to materially affect, us, including our business strategy, results of operations or financial condition. However, the risk of cybersecurity threats could be significant if the cyber-attack disrupts the Company's critical operations, service or financial systems.
The Manager’s Director of Information Technology, in coordination with relevant senior management and personnel of the Manager, which includes our Manager’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.
The Manager’s Director of Information Technology , in coordination with relevant senior management and personnel of the Manager, which includes our Manager’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.
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.
Third-Party Risk Management: Our Manager maintains a comprehensive, risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including key vendors, service providers and other external 51 Table of Contents users of the Company’s and the Manager’s systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems.
Third-Party Risk Management: Our Manager maintains a comprehensive, risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including key vendors, service providers and other external users of the Company’s and the Manager’s systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems.
The results of the annual assessments are reported to the Audit Committee and the Board, and our Manager adjusts its cybersecurity policies, standards, processes and practices as necessary based on the information provided by these assessments and ongoing testing. The Audit Committee oversees the Company’s risk management policies, including the management of risks arising from cybersecurity threats.
The results of the annual assessments are reported to the Audit Committee and the Board, and our Manager adjusts its cybersecurity policies, standards, processes and practices as necessary based on the information provided by these assessments and ongoing testing. 58 Table of Contents The Audit Committee oversees the Company’s risk management policies, including the management of risks arising from cybersecurity threats.
“Risk Factors—General Risks—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 dividends.”
See Item 1A. “Risk Factors—General Risks—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 dividends.” 59 Table of Contents
The Manager’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 Manager’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 Manager’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).
Removed
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.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties The Company owns the Hudson Montford, which is a 204-unit multifamily property in Charlotte, North Carolina. The Company’s ownership is subject to mortgage debt with an outstanding principal balance of approximately $32.5 million as of December 31, 2024. The Company owns the Hudson Montford indirectly through wholly owned subsidiaries.
Biggest changeItem 2. Properties On July 22, 2025, the Company deconsolidated ownership of Hudson Montford, which is a 204-unit multifamily property in Charlotte, North Carolina because the Company sold 100% of its membership interest for $60 million. The Company recognized a gain on the deconsolidation of $3.7 million as of December 31, 2025.
The Company consolidated ownership of Alexander at the District, which is a 280-unit multifamily property in Atlanta, Georgia, as of December 31, 2023.
The Company consolidated ownership of Alexander at the District, which is a 280-unit multifamily property in Atlanta, Georgia as of December 31, 2023. The Company’s ownership is subject to mortgage debt with an outstanding principal balance of approximately $63.5 million as of December 31, 2025.
The Company’s ownership is subject to mortgage debt with an outstanding principal balance of approximately $63.5 million as of December 31, 2024. 52 Table of Contents For additional information regarding these properties, see Note 8 to our consolidated financial statements.
The Company consolidated ownership of Mag & May, which is a 240-unit multifamily property in Fort Worth, Texas, as of December 31, 2025. The Company’s ownership is subject to mortgage debt with an outstanding principal balance of approximately $42.7 million as of December 31, 2025. For additional information regarding these properties, see Note 8 to our consolidated financial statements.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeManagement 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. 53 Table of Contents PART II
Biggest changeManagement 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. M ine Safety Disclosures Not applicable. 60 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stockholder Information On March 26, 2025, we had 17,643,526 shares of common stock outstanding held by a total of eight record holders.
Biggest changeItem 5. Ma rket for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stockholder Information On March 31, 2026, we had 18,686,983 shares of common stock outstanding held by a total of three record holders.
Removed
Market Information Our common stock trades on the NYSE under the ticker symbol “NREF.” Item 6. [Reserved] 54 Table of Contents
Added
Market Information Our common stock trades on the NYSE and the NYSE Texas under the ticker symbol “NREF.” Unregistered Sales of Equity Securities On December 30, 2025, 852,273 OP Units were redeemed and issued into 852,273 shares of the Company's common stock to accredited investors in reliance upon the exemptions from registration under the Securities Act provided by Section 4(a)(2) of the Securities Act.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe following table sets forth additional information relating to our portfolio as of December 31, 2024 (dollars in thousands): Investment (1) Investment Date Current Principal Amount Net Equity (2) Location Property Type Coupon Current Yield (3) Remaining Term (4) (years) Senior Loans 1 Senior Loan 2/11/2020 $ 8,164 $ 1,174 Various Single-family 5.35 % 5.27 % 3.09 2 Senior Loan 2/11/2020 5,135 638 Various Single-family 5.24 % 5.02 % 3.75 3 Senior Loan 2/11/2020 31,793 3,558 Various Single-family 4.74 % 4.69 % 0.75 4 Senior Loan 2/11/2020 9,336 1,133 Various Single-family 6.10 % 5.82 % 3.75 5 Senior Loan 2/11/2020 35,316 4,090 Various Single-family 5.55 % 5.26 % 3.84 6 Senior Loan 2/11/2020 5,496 670 Various Single-family 5.99 % 5.70 % 3.92 7 Senior Loan 2/11/2020 8,496 1,102 Various Single-family 5.88 % 5.64 % 4.01 8 Senior Loan 2/11/2020 6,359 846 Various Single-family 5.46 % 5.27 % 4.17 9 Senior Loan 2/11/2020 10,523 1,347 Various Single-family 4.72 % 4.67 % 1.16 10 Senior Loan 1/26/2024 140,283 (5) 139,324 Cambridge, MA Life Sciences 14.00 % 14.10 % 2.11 Total 260,901 153,882 9.99 % 9.96 % 2.41 CMBS B-Pieces 64 Table of Contents 1 CMBS B-Piece 2/11/2020 13,319 (6) 3,681 Various Multifamily 9.25 % 9.25 % 1.15 2 CMBS B-Piece 2/11/2020 28,581 (6) 7,965 Various Multifamily 7.00 % 7.00 % 1.90 3 CMBS B-Piece 7/30/2020 16,310 (6) 4,905 Various Multifamily 8.02 % 8.02 % 2.48 4 CMBS B-Piece 4/20/2021 16,900 (6) 5,045 Various Multifamily 11.10 % 11.10 % 6.16 5 CMBS B-Piece 6/30/2021 108,303 (6) 27,562 Various Multifamily — % 8.84 % 2.00 6 CMBS B-Piece 5/2/2022 29,248 (6) 7,869 Various Multifamily 5.12 % 5.48 % 13.91 7 CMBS B-Piece 7/28/2022 61,891 (6) 18,281 Various Multifamily 10.10 % 10.10 % 4.57 8 CMBS B-Piece 2/22/2024 30,869 (6) 7,817 Various Multifamily 5.90 % 6.74 % 4.07 9 CMBS B-Piece 4/24/2024 31,931 (6) 8,785 Various Multifamily 5.59 % 6.44 % 4.23 Total 337,352 91,910 5.27 % 8.30 % 4.09 CMBS I/O Strips 1 CMBS I/O Strip 5/18/2020 17,590 (7) 422 Various Multifamily 2.02 % 16.62 % 5.07 2 CMBS I/O Strip 8/6/2020 108,643 (7) 4,302 Various Multifamily 2.98 % 20.73 % 5.48 3 CMBS I/O Strip 4/28/2021 63,736 (7) 1,063 Various Multifamily 1.59 % 20.52 % 5.07 4 CMBS I/O Strip 5/27/2021 20,000 (7) 952 Various Multifamily 3.38 % 20.56 % 5.40 5 CMBS I/O Strip 6/7/2021 4,266 (7) 100 Various Multifamily 2.31 % 27.43 % 3.90 6 CMBS I/O Strip 6/11/2021 92,986 (7) 365 Various Multifamily 0.61 % 9.13 % 4.40 7 CMBS I/O Strip 6/24/2021 24,418 (7) 526 Various Multifamily 1.15 % 19.71 % 5.40 8 CMBS I/O Strip 8/10/2021 25,000 (7) 575 Various Multifamily 1.89 % 20.89 % 5.32 9 CMBS I/O Strip 8/11/2021 6,942 (7) 353 Various Multifamily 3.10 % 17.20 % 6.57 10 CMBS I/O Strip 8/24/2021 1,625 (7) 57 Various Multifamily 2.61 % 18.42 % 6.07 11 CMBS I/O Strip 9/1/2021 34,625 (7) 866 Various Multifamily 1.92 % 19.72 % 5.48 12 CMBS I/O Strip 9/11/2021 20,902 (7) 927 Various Multifamily 2.95 % 17.01 % 6.74 Total 420,733 10,508 1.96 % 17.64 % 5.21 Mezzanine Loans 1 Mezzanine 6/12/2020 7,500 7,500 Houston, TX Multifamily 11.00 % 11.00 % 0.50 2 Mezzanine 10/20/2020 5,470 2,229 Wilmington, DE Multifamily 7.50 % 7.36 % 4.33 3 Mezzanine 10/20/2020 10,380 4,267 White Marsh, MD Multifamily 7.42 % 7.25 % 6.50 4 Mezzanine 10/20/2020 14,253 5,826 Philadelphia, PA Multifamily 7.59 % 7.44 % 4.42 5 Mezzanine 10/20/2020 3,700 1,503 Daytona Beach, FL Multifamily 7.83 % 7.69 % 3.75 6 Mezzanine 10/20/2020 12,000 4,930 Laurel, MD Multifamily 7.71 % 7.54 % 6.25 7 Mezzanine 10/20/2020 3,000 1,233 Temple Hills, MD Multifamily 7.32 % 7.15 % 6.59 8 Mezzanine 10/20/2020 1,500 617 Temple Hills, MD Multifamily 7.22 % 7.06 % 6.59 9 Mezzanine 10/20/2020 5,540 2,257 Lakewood, NJ Multifamily 7.33 % 7.19 % 4.33 10 Mezzanine 10/20/2020 6,829 2,778 North Aurora, IL Multifamily 7.53 % 7.39 % 4.01 11 Mezzanine 10/20/2020 3,620 1,488 Rosedale, MD Multifamily 7.42 % 7.25 % 6.50 12 Mezzanine 10/20/2020 9,610 3,950 Cockeysville, MD Multifamily 7.42 % 7.25 % 6.50 13 Mezzanine 10/20/2020 7,390 3,038 Laurel, MD Multifamily 7.42 % 7.25 % 6.50 14 Mezzanine 10/20/2020 2,135 867 Tyler, TX Multifamily 7.74 % 7.60 % 3.75 15 Mezzanine 10/20/2020 1,190 485 Las Vegas, NV Multifamily 7.71 % 7.56 % 4.17 16 Mezzanine 10/20/2020 3,310 1,349 Atlanta, GA Multifamily 6.91 % 6.78 % 4.50 17 Mezzanine 10/20/2020 2,880 1,171 Des Moines, IA Multifamily 7.89 % 7.75 % 3.84 18 Mezzanine 10/20/2020 4,010 1,630 Urbandale, IA Multifamily 7.89 % 7.75 % 3.84 19 Mezzanine 11/18/2021 12,600 12,523 Irving, TX Multifamily 15.32 % 15.41 % 3.92 20 Mezzanine 12/29/2021 (8) 7,760 7,752 Rogers, AR Multifamily 15.32 % 15.33 % 0.30 21 Mezzanine 6/9/2022 4,500 4,493 Rogers, AR Multifamily 15.37 % 15.39 % 0.44 65 Table of Contents 22 Mezzanine 10/5/2022 4,030 4,005 Kirkland, WA Multifamily 15.37 % 15.47 % 3.00 Total 133,207 75,891 9.41 % 9.31 % 4.35 Preferred Equity 1 Preferred Equity 5/29/2020 (9) 12,735 12,735 Houston, TX Multifamily 11.00 % 11.00 % 5.33 2 Preferred Equity 9/29/2021 19,011 18,980 Holly Springs, NC Life Science 10.00 % 10.02 % 0.75 3 Preferred Equity 12/28/2021 11,377 11,377 Las Vegas, NV Multifamily 10.50 % 10.50 % 7.17 4 Preferred Equity 1/14/2022 32,676 32,656 Vacaville, CA Life Science 10.00 % 10.01 % 0.75 5 Preferred Equity 4/7/2022 3,903 3,876 Beaumont, TX Self-Storage 14.32 % 14.42 % 5.67 6 Preferred Equity 6/8/2022 4,000 3,971 Temple, TX Self-Storage 13.60 % 13.70 % 5.67 7 Preferred Equity 7/1/2022 9,000 8,952 Medley, FL Self-Storage 11.00 % 11.06 % 2.50 8 Preferred Equity 8/10/2022 8,500 8,479 Plano, TX Multifamily 14.46 % 14.50 % 0.69 9 Preferred Equity 9/30/2022 9,000 8,973 Fort Worth, TX Multifamily 14.37 % 14.41 % 0.75 10 Preferred Equity 10/19/2022 12,316 12,331 Woodbury, MN Life Science 10.00 % 9.99 % 0.75 11 Preferred Equity 2/10/2023 27,595 27,585 Forney, TX Multifamily 11.00 % 11.00 % 3.25 12 Preferred Equity 2/24/2023 26,704 26,677 Richmond, VA Multifamily 11.00 % 11.01 % 2.22 13 Preferred Equity 4/6/2023 20,188 20,244 Temecula, CA Life Science 17.50 % 17.45 % 0.75 14 Preferred Equity 5/16/2023 16,126 16,001 Phoenix, AZ Single-family 13.50 % 13.61 % 2.32 15 Preferred Equity 5/17/2023 4,192 4,152 Houston, TX Life Science 13.00 % 13.12 % 0.98 16 Preferred Equity 6/28/2024 7,100 7,067 Knoxville, TN Marina 13.00 % 13.06 % 3.83 Total 224,423 224,056 11.92 % 11.94 % 2.27 Common Equity 1 Common Stock 11/6/2020 N/A 30,467 N/A Self-Storage N/A N/A N/A 2 Common Stock 4/14/2022 N/A 26,922 N/A Ground Lease N/A N/A N/A 3 Common Equity 2/10/2023 N/A — Forney, TX Multifamily N/A N/A N/A 4 Common Equity 2/24/2023 N/A — Richmond, VA Multifamily N/A N/A N/A 5 Common Equity 9/8/2023 N/A — Atlanta, GA Multifamily N/A N/A N/A 6 Common Equity 5/8/2024 N/A — Kirkland, WA Multifamily N/A N/A N/A 7 Membership Interest 4/9/2024 N/A 1,504 Various Multifamily N/A N/A N/A Total 58,893 Preferred Stock 1 Preferred Stock 11/9/2023 N/A 18,949 Various Life Science 10.50 % N/A N/A Real Estate 1 Real Estate 12/31/2021 (10) N/A 26,909 Charlotte, NC Multifamily N/A N/A N/A 2 Real Estate 10/10/2023 (11) N/A 1,728 Atlanta, GA Multifamily N/A N/A N/A Total 28,637 Promissory Notes 1 Promissory Note 3/28/2024 500 500 Various Single-family 12.50 % 12.50 % 0.24 2 Promissory Note 7/10/2024 3,500 3,500 Various Single-family 15.00 % 15.00 % 0.52 Total 4,000 4,000 14.69 % 14.69 % 0.49 Revolving Credit Facility 1 Revolving Credit Facility 12/31/2024 148,600 135,136 Various Life Science 13.50 % 13.50 % 3.00 66 Table of Contents Stock Warrants 1 Stock Warrant 5/23/2024 N/A 27,400 Various Life Sciences N/A N/A N/A (1) Our total portfolio represents the current principal amount of the consolidated senior loans, CMBS I/O Strips, mezzanine loans, preferred equity, multifamily properties, promissory notes, revolving credit facilities and stock warrants as well as the net equity of our CMBS B-Piece investments.
Biggest changeThe following table sets forth additional information relating to our portfolio as of December 31, 2025 (dollars in thousands): 71 Table of Contents Investment (1) Investment Date Current Principal Amount Net Equity (2) Location Property Type Coupon Current Yield (3) Remaining Term (4) (years) Senior Loans 1 Senior Loan 2/11/2020 $ 7,422 $ 1,036 Various Single-family 5.35 % 5.30 % 2.09 2 Senior Loan 2/11/2020 5,029 571 Various Single-family 5.24 % 5.08 % 2.75 3 Senior Loan 2/11/2020 31,793 3,330 Various Single-family 4.74 % 4.72 % 0.25 4 Senior Loan 2/11/2020 9,224 1,010 Various Single-family 6.10 % 5.88 % 2.75 5 Senior Loan 2/11/2020 34,669 3,556 Various Single-family 5.55 % 5.33 % 2.84 6 Senior Loan 2/11/2020 5,313 586 Various Single-family 5.99 % 5.77 % 2.92 7 Senior Loan 2/11/2020 8,340 1,003 Various Single-family 5.88 % 5.70 % 3.01 8 Senior Loan 2/11/2020 6,237 780 Various Single-family 5.46 % 5.31 % 3.17 9 Senior Loan 2/11/2020 10,523 1,261 Various Single-family 4.72 % 4.71 % 0.16 Total 118,550 13,133 5.31 % 5.19 % 1.88 CMBS B-Pieces 1 CMBS B-Piece 2/11/2020 13,202 (5) 3,164 Various Multifamily 10.12 % 10.12 % 0.15 2 CMBS B-Piece 2/11/2020 28,581 (5) 7,026 Various Multifamily 5.72 % 5.72 % 0.90 3 CMBS B-Piece 7/30/2020 15,172 (5) (4,964 ) Various Multifamily 13.12 % 13.12 % 1.48 4 CMBS B-Piece 4/20/2021 14,087 (5) 3,073 Various Multifamily 10.26 % 10.26 % 5.16 5 CMBS B-Piece 6/30/2021 108,303 (5) 25,314 Various Multifamily — % 9.18 % 1.00 6 CMBS B-Piece 5/2/2022 23,642 (5) 5,329 Various Multifamily 4.94 % 5.27 % 12.91 7 CMBS B-Piece 7/28/2022 53,286 (5) 13,447 Various Multifamily 9.26 % 9.26 % 3.57 8 CMBS B-Piece 2/22/2024 32,869 (5) 6,992 Various Multifamily 5.90 % 6.54 % 3.07 9 CMBS B-Piece 4/24/2024 33,611 (5) 7,923 Various Multifamily 5.59 % 6.25 % 3.23 Total 322,753 67,304 5.06 % 8.30 % 2.95 CMBS I/O Strips 1 CMBS I/O Strip 5/18/2020 17,590 (6) 266 Various Multifamily 2.02 % 22.00 % 4.07 2 CMBS I/O Strip 8/6/2020 108,643 (6) 2,845 Various Multifamily 2.98 % 24.75 % 4.48 3 CMBS I/O Strip 4/28/2021 62,987 (6) 856 Various Multifamily 1.58 % 24.88 % 4.07 4 CMBS I/O Strip 5/27/2021 20,000 (6) 581 Various Multifamily 3.38 % 24.72 % 4.40 5 CMBS I/O Strip 6/7/2021 4,266 (6) 58 Various Multifamily 2.31 % 36.17 % 2.90 6 CMBS I/O Strip 6/11/2021 84,771 (6) 536 Various Multifamily 2.01 % 35.42 % 3.40 7 CMBS I/O Strip 6/24/2021 18,983 (6) 144 Various Multifamily — % — % 4.40 8 CMBS I/O Strip 8/10/2021 25,000 (6) 333 Various Multifamily 1.89 % 25.19 % 4.32 9 CMBS I/O Strip 8/11/2021 6,942 (6) 255 Various Multifamily 3.10 % 19.91 % 5.57 10 CMBS I/O Strip 8/24/2021 1,625 (6) 40 Various Multifamily 2.61 % 21.70 % 5.07 11 CMBS I/O Strip 9/1/2021 34,625 (6) 609 Various Multifamily 1.92 % 23.73 % 4.48 12 CMBS I/O Strip 9/11/2021 20,902 (6) 725 Various Multifamily 2.95 % 19.57 % 5.74 13 CMBS I/O Strip 1/16/2025 15,000 (6) 1,362 Various Multifamily 5.67 % 15.22 % 8.91 14 CMBS I/O Strip 4/15/2025 15,327 (6) 1,365 Various Multifamily 5.69 % 16.03 % 8.32 Total 436,661 9,975 2.47 % 24.74 % 4.53 Mezzanine Loans 1 Mezzanine 6/12/2020 5,000 5,000 Houston, TX Multifamily 11.00 % 11.00 % 1.44 2 Mezzanine 10/20/2020 5,470 2,208 Wilmington, DE Multifamily 7.50 % 7.38 % 3.33 3 Mezzanine 10/20/2020 10,380 4,238 White Marsh, MD Multifamily 7.42 % 7.27 % 5.50 4 Mezzanine 10/20/2020 14,253 5,768 Philadelphia, PA Multifamily 7.59 % 7.47 % 3.42 5 Mezzanine 10/20/2020 3,700 1,488 Daytona Beach, FL Multifamily 7.83 % 7.72 % 2.75 6 Mezzanine 10/20/2020 12,000 4,895 Laurel, MD Multifamily 7.71 % 7.56 % 5.25 7 Mezzanine 10/20/2020 3,000 1,225 Temple Hills, MD Multifamily 7.32 % 7.17 % 5.59 8 Mezzanine 10/20/2020 1,500 612 Temple Hills, MD Multifamily 7.22 % 7.08 % 5.59 9 Mezzanine 10/20/2020 5,540 2,236 Lakewood, NJ Multifamily 7.33 % 7.22 % 3.33 10 Mezzanine 10/20/2020 6,829 2,750 North Aurora, IL Multifamily 7.53 % 7.42 % 3.01 72 Table of Contents 11 Mezzanine 10/20/2020 3,620 1,478 Rosedale, MD Multifamily 7.42 % 7.27 % 5.50 12 Mezzanine 10/20/2020 9,610 3,923 Cockeysville, MD Multifamily 7.42 % 7.27 % 5.50 13 Mezzanine 10/20/2020 7,390 3,017 Laurel, MD Multifamily 7.42 % 7.27 % 5.50 14 Mezzanine 10/20/2020 1,190 480 Las Vegas, NV Multifamily 7.71 % 7.59 % 3.17 15 Mezzanine 10/20/2020 3,310 1,337 Atlanta, GA Multifamily 6.91 % 6.80 % 3.50 16 Mezzanine 10/20/2020 2,880 1,159 Des Moines, IA Multifamily 7.89 % 7.78 % 2.84 17 Mezzanine 10/20/2020 4,010 1,613 Urbandale, IA Multifamily 7.89 % 7.78 % 2.84 18 Mezzanine 11/18/2021 12,600 12,541 Irving, TX Multifamily — % — % 2.92 19 Mezzanine 6/9/2022 (7) 3,784 3,783 Rogers, AR Multifamily — % — % (0.14 ) 20 Mezzanine 8/1/2025 3,712 3,437 Wappinger, NY Self-Storage 10.90 % 11.77 % 0.58 21 Mezzanine 10/23/2025 2,416 2,191 Rockville, NY Self-Storage 10.44 % 11.51 % 4.81 22 Mezzanine 1/26/2024 107,733 (8) 107,733 Cambridge, MA Life Science 14.00 % 14.00 % 1.11 Total 229,927 173,112 10.18 % 10.15 % 2.55 Preferred Equity 1 Preferred Equity 5/29/2020 12,735 12,735 Houston, TX Multifamily 11.00 % 11.00 % 4.33 2 Preferred Equity 9/29/2021 24,142 24,109 Holly Springs, NC Life Science 10.00 % 10.01 % 0.75 3 Preferred Equity 12/28/2021 11,377 11,377 Las Vegas, NV Multifamily 10.50 % 10.50 % 6.17 4 Preferred Equity 1/14/2022 36,068 36,058 Vacaville, CA Life Science 10.00 % 10.00 % 0.75 5 Preferred Equity 4/7/2022 3,903 3,880 Beaumont, TX Self-Storage 13.82 % 13.90 % 4.67 6 Preferred Equity 6/8/2022 4,480 4,456 Temple, TX Self-Storage 13.10 % 13.17 % 4.67 7 Preferred Equity 7/1/2022 13,000 12,970 Medley, FL Self-Storage 11.00 % 11.03 % 1.50 8 Preferred Equity 8/10/2022 8,500 8,500 Plano, TX Multifamily — % — % (0.10 ) 9 Preferred Equity 10/19/2022 5,077 5,114 Woodbury, MN Life Science 10.00 % 9.93 % 0.75 10 Preferred Equity 2/10/2023 30,557 30,576 Forney, TX Multifamily 11.00 % 10.99 % 2.25 11 Preferred Equity 2/24/2023 29,768 29,784 Richmond, VA Multifamily 11.00 % 10.99 % 1.22 12 Preferred Equity 5/16/2023 22,060 21,944 Phoenix, AZ Single-family 13.50 % 13.57 % 1.32 13 Preferred Equity 5/17/2023 4,192 4,154 Houston, TX Life Science 13.00 % 13.12 % 1.00 14 Preferred Equity 6/28/2024 7,500 7,475 Knoxville, TN Marina 13.00 % 13.04 % 2.83 15 Preferred Equity 3/19/2025 5,285 5,285 Kuttawa, KY Marina 13.00 % 13.00 % 9.63 16 Preferred Equity 1/31/2025 1,200 1,200 Houston, TX Multifamily 14.00 % 14.00 % 2.25 17 Preferred Equity 12/12/2025 8,293 8,258 Grafton, IL Marina 13.00 % 13.05 % 9.95 18 Preferred Equity 12/4/2025 9,054 9,023 Eufuala, OK Marina 13.00 % 13.04 % 9.96 19 Preferred Equity 12/10/2025 22,500 22,222 Miami, FL Industrial 11.00 % 11.14 % 4.95 20 Preferred Equity 10/5/2022 1,484 1,478 Kirkland, WA Multifamily 9.00 % 9.04 % 2.00 Total 261,175 260,598 10.92 % 10.95 % 2.80 Common Equity 1 Common Stock 11/6/2020 N/A 24,761 N/A Self-Storage N/A N/A N/A 2 Common Stock 4/14/2022 N/A 24,343 N/A Ground Lease N/A N/A N/A 3 Common Equity 2/10/2023 N/A — Forney, TX Multifamily N/A N/A N/A 4 Common Equity 2/24/2023 N/A — Richmond, VA Multifamily N/A N/A N/A 5 Common Equity 9/8/2023 N/A — Atlanta, GA Multifamily N/A N/A N/A 6 Common Equity 7/8/2025 N/A — Irving, TX Multifamily N/A N/A N/A 7 Membership Interest 4/9/2024 N/A 1,714 Various Multifamily N/A N/A N/A Total 50,818 Preferred Stock 1 Preferred Stock 11/9/2023 N/A 18,617 Various Life Science 15.50 % N/A N/A 73 Table of Contents 2 Preferred Stock 1/2/2025 N/A 136,115 Various Life Science 16.50 % N/A N/A 3 Preferred Stock 10/6/2025 N/A 3,161 Various Self-Storage 15.00 % N/A N/A Total 157,893 16.35 % Real Estate 1 Real Estate 12/31/2021 (9) N/A 102 Charlotte, NC Multifamily N/A N/A N/A 2 Real Estate 10/10/2023 (10) N/A (2,500 ) Atlanta, GA Multifamily N/A N/A N/A 3 Real Estate 10/1/2025 (11) N/A 6,506 Ft Worth, TX Multifamily N/A N/A N/A Total 4,108 Promissory Notes 1 Promissory Note 7/10/2024 12,500 12,500 Various Single-family 15.00 % 15.00 % 0.52 2 Promissory Note 9/30/2025 3,000 3,000 Las Vegas, NV Multifamily 8.00 % 8.00 % 0.75 Total 15,500 15,500 13.65 % 13.65 % 0.56 Revolving Credit Facility 1 Revolving Credit Facility 12/31/2024 148,600 138,904 Various Life Science 13.50 % 13.50 % 2.00 Total 148,600 138,904 13.50 % 13.50 % 2.00 Stock Warrants 1 Stock Warrant 5/23/2024 N/A 141,186 Various Life Science N/A N/A N/A Total 141,186 (1) Our total portfolio represents the current principal amount of the consolidated senior loans, CMBS I/O Strips, mezzanine loans, preferred equity, multifamily properties, promissory notes, revolving credit facilities and stock warrants as well as the net equity of our CMBS B-Piece investments.
The Dealer Manager uses its reasonable best efforts to sell the shares of Series B Preferred Stock offered in the offering, and the Company pays the Dealer Manager, subject to the discounts and other special circumstances described or referenced therein, (i) Selling Commissions of 7.0% of the aggregate gross proceeds from sales of Series B Preferred Stock in the offering and (ii) a Dealer Manager Fee of 3.0% of the gross proceeds from sales of Series B Preferred Stock in the offering.
The Dealer Manager uses its reasonable best efforts to sell the shares of Series B Preferred Stock offered in the offering, and the Company pays the Dealer Manager, subject to the discounts and other special circumstances described or referenced therein, (i) selling commissions of 7.0% of the aggregate gross proceeds from sales of Series B Preferred Stock in the offering (the "Series B Selling Commissions") and (ii) a dealer manager fee of 3.0% of the gross proceeds from sales of Series B Preferred Stock in the offering (the "Series B Dealer Manager Fee").
The Dealer Manager, subject to federal and state securities laws, will reallow all or any portion of the Selling Commissions and may reallow a portion of the Dealer Manager Fee to other securities dealers that the Dealer Manager may retain who sold the shares of Series B Preferred Stock as is described more fully in the agreements between such dealers and the Dealer Manager.
The Dealer Manager, subject to federal and state securities laws, will reallow all or any portion of the Series B Selling Commissions and may reallow a portion of the Series B Dealer Manager Fee to other securities dealers that the Dealer Manager may retain who sold the shares of Series B Preferred Stock as is described more fully in the agreements between such dealers and the Dealer Manager.
As a REIT, we will be subject to U.S. 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 U.S. 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.
Effective January 2, 2025, OP IV and OSL entered into an Assignment and Assumption and Co-Lender Agreement, pursuant to which OP IV assigned $7.5 million interest in the Alewife Loan to OSL for cash and increased OSL's allocation of the right to fund to up to 10.32% of the Alewife Loan.
Effective January 2, 2025, OP IV and OSL entered into an Assignment and Assumption and Co-Lender Agreement, pursuant to which OP IV assigned $7.5 million interest in the Alewife Loan to OSL for cash and increased OSL's allocation of the right to fund up to 10.32% of the Alewife Loan.
We intend to make regular quarterly dividend payments of all or substantially all of our taxable income, which is not used to pay dividends on the Series A Preferred Stock and Series B Preferred Stock, to holders of our common stock out of assets legally available for this purpose, if and to the extent authorized by our Board.
We intend to make regular quarterly dividend payments of all or substantially all of our taxable income, which is not used to pay dividends on the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, to holders of our common stock out of assets legally available for this purpose, if and to the extent authorized by our Board.
Further, once the Company's preferred equity and accrued interest has been repaid, any additional cash flow and net sale proceeds shall be distributed as follows: • 0% to the Company and 100% to issuer up to a 20.0% IRR • 10% to the Company and 90% to issuer thereafter On February 10, 2023, the Company, through one of the Subsidiary OPs, through a unit purchase agreement, committed to purchase $30.3 million of the preferred units with respect to a multifamily property development located in Forney, Texas, which has been fully funded as of December 31, 2024.
Further, once the Company's preferred equity and accrued interest has been repaid, any additional cash flow and net sale proceeds shall be distributed as follows: • 0% to the Company and 100% to issuer up to a 20.0% IRR • 10% to the Company and 90% to issuer thereafter On February 10, 2023, the Company, through one of the Subsidiary OPs, through a unit purchase agreement, committed to purchase $30.3 million of the preferred units with respect to a multifamily property development located in Forney, Texas, which has been fully funded as of December 31, 2025.
In connection with the IQHQ Revolving Loan, the full $150 million of the principal amount of the IQHQ Promissory Note and the full $150 million of the principal amount of a promissory note held by Bluerock was substituted and exchanged for deemed borrowings under the IQHQ Revolving Loan, and the IQHQ Revolving Loan was fully funded on December 31, 2024.
In connection with the IQHQ Revolving Loan, the full $150.0 million of the principal amount of the IQHQ Promissory Note and the full $150.0 million of the principal amount of a promissory note held by Bluerock was substituted and exchanged for deemed borrowings under the IQHQ Revolving Loan, and the IQHQ Revolving Loan was fully funded on December 31, 2024.
Direct payment of operating expenses by us, which includes compensation expense relating to equity awards granted under the Amended and Restated LTIP or the NexPoint Real Estate Finance, Inc. 2020 Long Term Incentive Plan (the “Original LTIP” as amended and restated by the Amended and Restated LTIP, the “LTIP”), together with reimbursement of operating expenses to our Manager, plus the Annual Fee, may not exceed 2.5% of equity book value determined in accordance with GAAP, for any calendar year or portion thereof, provided, however, that this limitation will not apply to Offering Expenses, legal, accounting, financial, due diligence and other service fees incurred in connection with extraordinary litigation and mergers and acquisitions and 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.
Direct payment of operating expenses by us, which includes compensation expense relating to equity awards granted under the Amended and Restated 63 Table of Contents LTIP or the NexPoint Real Estate Finance, Inc. 2020 Long Term Incentive Plan (the “Original LTIP” as amended and restated by the Amended and Restated LTIP, the “LTIP”), together with reimbursement of operating expenses to our Manager, plus the Annual Fee, may not exceed 2.5% of equity book value determined in accordance with GAAP, for any calendar year or portion thereof, provided, however, that this limitation will not apply to Offering Expenses, legal, accounting, financial, due diligence and other service fees incurred in connection with extraordinary litigation and mergers and acquisitions and 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.
We also intend to make the accrued dividend payments on the Series A Preferred Stock, which are payable quarterly in arrears as provided in the articles supplementary setting forth the terms of the Series A Preferred Stock, and the Series B Preferred Stock, which are payable monthly as provided in the articles supplementary setting forth the terms of the Series B Preferred Stock.
We also intend to make the accrued dividend payments on the Series A Preferred Stock, which are payable quarterly in arrears as provided in the articles supplementary setting forth the terms of the Series A Preferred Stock, the Series B Preferred Stock, which are payable monthly as provided in the articles supplementary setting forth the terms of the Series B Preferred Stock and the Series C Preferred Stock, which are payable monthly as provided in the articles supplementary setting forth the terms of the Series C Preferred Stock.
We and our subsidiaries are subject to U.S. federal income tax as well as income tax of various state and local jurisdictions. The 2023, 2022 and 2021 tax years remain open to examination by tax jurisdictions to which our subsidiaries and we are subject.
We and our subsidiaries are subject to U.S. federal income tax as well as income tax of various state and local jurisdictions. The 2024, 2023, 2022 and 2021 tax years remain open to examination by tax jurisdictions to which our subsidiaries and we are subject.
Asset Metrics Debt Metrics Investment Fixed/Floating Rate Interest Rate Maturity Date Fixed/Floating Rate Interest Rate Maturity Date Net Spread Senior Loans Senior loan Fixed 5.35% 2/1/2028 Fixed 3.51% 2/1/2028 1.84% Senior loan Fixed 5.24% 10/1/2028 Fixed 2.64% 10/1/2028 2.60% Senior loan Fixed 4.74% 10/1/2025 Fixed 2.14% 10/1/2025 2.60% Senior loan Fixed 6.10% 10/1/2028 Fixed 3.30% 10/1/2028 2.80% Senior loan Fixed 5.55% 11/1/2028 Fixed 2.70% 11/1/2028 2.85% Senior loan Fixed 5.99% 12/1/2028 Fixed 3.14% 12/1/2028 2.85% Senior loan Fixed 5.88% 1/1/2029 Fixed 3.14% 1/1/2029 2.74% Senior loan Fixed 5.46% 3/1/2029 Fixed 2.99% 3/1/2029 2.47% Senior loan Fixed 4.72% 3/1/2026 Fixed 2.45% 3/1/2026 2.27% Mezzanine Loans Mezzanine Fixed 7.50% 5/1/2029 Fixed 0.30% 5/1/2029 7.20% Mezzanine Fixed 7.42% 7/1/2031 Fixed 0.30% 7/1/2031 7.12% Mezzanine Fixed 7.59% 6/1/2029 Fixed 0.30% 6/1/2029 7.29% Mezzanine Fixed 7.83% 10/1/2028 Fixed 0.30% 10/1/2028 7.53% Mezzanine Fixed 7.71% 4/1/2031 Fixed 0.30% 4/1/2031 7.41% Mezzanine Fixed 7.32% 8/1/2031 Fixed 0.30% 8/1/2031 7.02% Mezzanine Fixed 7.22% 8/1/2031 Fixed 0.30% 8/1/2031 6.92% Mezzanine Fixed 7.33% 5/1/2029 Fixed 0.30% 5/1/2029 7.03% Mezzanine Fixed 7.53% 1/1/2029 Fixed 0.30% 1/1/2029 7.23% Mezzanine Fixed 7.42% 7/1/2031 Fixed 0.30% 7/1/2031 7.12% Mezzanine Fixed 7.42% 7/1/2031 Fixed 0.30% 7/1/2031 7.12% Mezzanine Fixed 7.42% 7/1/2031 Fixed 0.30% 7/1/2031 7.12% Mezzanine Fixed 7.74% 10/1/2028 Fixed 0.30% 10/1/2028 7.44% Mezzanine Fixed 7.71% 3/1/2029 Fixed 0.30% 3/1/2029 7.41% Mezzanine Fixed 6.91% 7/1/2029 Fixed 0.30% 7/1/2029 6.61% Mezzanine Fixed 7.89% 11/1/2028 Fixed 0.30% 11/1/2028 7.59% Mezzanine Fixed 7.89% 11/1/2028 Fixed 0.30% 11/1/2028 7.59% Our primary sources of liquidity and capital resources to date consist of cash generated from our operating results and the following: Freddie Mac Credit Facilities Prior to the Formation Transaction, two of our subsidiaries entered into a loan and security agreement, dated July 12, 2019, with Freddie Mac (the “Credit Facility”).
Asset Metrics Debt Metrics Investment Fixed/Floating Rate Interest Rate Maturity Date Fixed/Floating Rate Interest Rate Maturity Date Net Spread Senior Loans Senior loan Fixed 5.35% 2/1/2028 Fixed 3.51% 2/1/2028 1.84% Senior loan Fixed 5.24% 10/1/2028 Fixed 2.64% 10/1/2028 2.60% Senior loan Fixed 4.74% 10/1/2025 Fixed 2.14% 10/1/2025 2.60% Senior loan Fixed 6.10% 10/1/2028 Fixed 3.30% 10/1/2028 2.80% Senior loan Fixed 5.55% 11/1/2028 Fixed 2.70% 11/1/2028 2.85% Senior loan Fixed 5.99% 12/1/2028 Fixed 3.14% 12/1/2028 2.85% Senior loan Fixed 5.88% 1/1/2029 Fixed 3.14% 1/1/2029 2.74% Senior loan Fixed 5.46% 3/1/2029 Fixed 2.99% 3/1/2029 2.47% Senior loan Fixed 4.72% 3/1/2026 Fixed 2.45% 3/1/2026 2.27% Mezzanine Loans Mezzanine Fixed 7.50% 5/1/2029 Fixed 0.30% 5/1/2029 7.20% Mezzanine Fixed 7.42% 7/1/2031 Fixed 0.30% 7/1/2031 7.12% Mezzanine Fixed 7.59% 6/1/2029 Fixed 0.30% 6/1/2029 7.29% Mezzanine Fixed 7.83% 10/1/2028 Fixed $0.30% 10/1/2028 7.53% Mezzanine Fixed 7.71% 4/1/2031 Fixed $0.30% 4/1/2031 7.41% Mezzanine Fixed 7.32% 8/1/2031 Fixed 0.30% 8/1/2031 7.02% Mezzanine Fixed 7.22% 8/1/2031 Fixed 0.30% 8/1/2031 6.92% Mezzanine Fixed 7.33% 5/1/2029 Fixed 0.30% 5/1/2029 7.03% Mezzanine Fixed 7.53% 7/1/2031 Fixed 0.30% 7/1/2031 7.23% Mezzanine Fixed 7.42% 1/1/2029 Fixed 0.30% 1/1/2029 7.12% Mezzanine Fixed 7.42% 7/1/2031 Fixed 0.30% 7/1/2031 7.12% Mezzanine Fixed 7.42% 4/1/2031 Fixed 0.30% 4/1/2031 7.12% Mezzanine Fixed 7.71% 3/1/2029 Fixed 0.30% 3/1/2029 7.41% Mezzanine Fixed 6.91% 7/1/2029 Fixed 0.30% 7/1/2029 6.61% Mezzanine Fixed 7.89% 11/1/2028 Fixed 0.30% 11/1/2028 7.59% Mezzanine Fixed 7.89% 11/1/2028 Fixed 0.30% 11/1/2028 7.59% 75 Table of Contents Our primary sources of liquidity and capital resources to date consist of cash generated from our operating results and the following: Freddie Mac Credit Facilities Prior to the Formation Transaction, two of our subsidiaries entered into a loan and security agreement, dated July 12, 2019, with Freddie Mac (the “Credit Facility”).
Real estate-related depreciation and amortization are computed on a straight-line basis over the estimated useful lives as described in the following table: Land Not depreciated Buildings (in years) 30 Improvements (in years) 15 Furniture, fixtures, and equipment (in years) 3 Intangible lease assets (in months) 6 Post-acquisition, construction in progress includes the cost of renovation projects being performed at the various properties.
Real estate-related depreciation and amortization are computed on a straight-line basis over the estimated useful lives as described in the following table: Land Not depreciated Buildings (in years) 30 Improvements (in years) 15 Furniture, fixtures, and equipment (in years) 3 Intangible lease assets (in months) 6 86 Table of Contents Post-acquisition, construction in progress includes the cost of renovation projects being performed at the various properties.
As of December 31, 2024, pursuant to the Equity Distribution Agreements, the Company has sold 531,728 shares of its common stock and zero shares of Series A Preferred Stock for total gross sales of $12.6 million. For additional information about the ATM Program, see Note 11 to our consolidated financial statements.
As of December 31, 2025, pursuant to the Equity Distribution Agreements, the Company has sold 531,728 shares of its common stock and zero shares of Series A Preferred Stock for total gross sales of $12.6 million. For additional information about the ATM Program, see Note 11 to our consolidated financial statements.
In addition, our Sponsor, together with its affiliates, including NexBank, is one of the most experienced global alternative credit managers managing approximately $13.9 billion of loans and debt or credit related investments as of December 31, 2024 and has managed credit investments for over 25 years.
In addition, our Sponsor, together with its affiliates, including NexBank, is one of the most experienced global alternative credit managers managing approximately $13.9 billion of loans and debt or credit related investments as of December 31, 2025 and has managed credit investments for over 25 years.
See Notes 5 and 10 to our consolidated financial statements for additional disclosures regarding the valuation of the Private REIT. As of December 31, 2024, the Company owns approximately 98.0% of the total outstanding common equity of each of Resmark Forney Gateway Holdings, LLC ("RFGH") and Resmark The Brook, LLC ("RTB").
See Notes 5 and 10 to our consolidated financial statements for additional disclosures regarding the valuation of the Private REIT. As of December 31, 2025, the Company owns approximately 98.0% of the total outstanding common equity of each of Resmark Forney Gateway Holdings, LLC ("RFGH") and Resmark The Brook, LLC ("RTB").
On February 10, 2023, the Company, through one of the Subsidiary OPs, through a unit purchase agreement, committed to purchase $30.3 million of the preferred units with respect to a multifamily property development located in Richmond, Virginia, which has been fully funded as of December 31, 2024.
On February 10, 2023, the Company, through one of the Subsidiary OPs, through a unit purchase agreement, committed to purchase $30.3 million of the preferred units with respect to a multifamily property development located in Richmond, Virginia, which has been fully funded as of December 31, 2025.
After the first day of the calendar month following the second anniversary of the original issue date, the Company also has the option to redeem, in whole or in part, subject to certain restrictions in the Company's charter and the articles supplementary setting forth the terms of the Series B 69 Table of Contents Preferred Stock, at a redemption price per share equal to the liquidation preference of $25.00 per share, plus any accrued but unpaid cash dividends.
After the first day of the calendar month following the second anniversary of the original issue date, the Company also has the option to redeem, in whole or in part, subject to certain restrictions in the Company's charter and the articles supplementary setting forth the terms of the Series B Preferred Stock, at a redemption price per share equal to the liquidation preference of $25.00 per share, plus any accrued but unpaid cash dividends.
We believe that our various sources of capital, which may include future debt or equity issuances, net cash provided by operations and other secured and unsecured borrowings, will provide sufficient funds for our operations, anticipated debt service payments, potential obligations to purchase investments under the Company's commitments noted 67 Table of Contents in Note 15 to our consolidated financial statements and dividend requirements for the long-term.
We believe that our various sources of capital, which may include future debt or equity issuances, net cash provided by operations and other secured and unsecured borrowings, will provide sufficient funds for our operations, anticipated debt service payments, potential obligations to purchase investments under the Company's commitments noted in Note 15 to our consolidated financial statements and dividend requirements for the long-term.
Second, we will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement. We had no material unrecognized tax benefit or expense, accrued interest or penalties as of December 31, 2024 .
Second, we will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement. We had no material unrecognized tax benefit or expense, accrued interest or penalties as of December 31, 2025.
The increase between the periods is primarily due to additional investments in preferred equity, revolving credit facilities and senior loans in the portfolio compared to the prior period. As of December 31, 2024 we own 83 discrete investments compared to 87 as of December 31, 2023. Other income.
The increase between the periods is primarily due to additional investments in preferred equity, revolving credit facilities and senior loans in the portfolio compared to the prior period. As of December 31, 2024 we owned 83 discrete investments compared to 87 as of December 31, 2023. Other income.
On February 15, 2023, NSP paid down approximately $15.0 million of these promissory notes, resulting in an aggregate principal amount of approximately $49.2 million. On December 8, 2023, NSP paid down the remaining principal balance of $49.2 million. The NSP Series D preferred stock remains outstanding as of December 31, 2024.
On February 15, 2023, NSP paid down approximately $15.0 million of these promissory notes, resulting in an aggregate principal amount of approximately $49.2 million. On December 8, 2023, NSP paid down the remaining principal balance of $49.2 million. The NSP Series D preferred stock remains outstanding as of December 31, 2025.
Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. We had no significant taxes associated with our TRS for the year ended December 31, 2024.
Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. We had no significant taxes associated with our TRS for the year ended December 31, 2025.
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, any potential obligations to purchase up to $150 million of the Series E preferred stock of IQHQ, Inc. (described below) and dividend 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 payments, any potential obligations to purchase up to $150 million of the Series E preferred stock of IQHQ, Inc. (described below) and dividend requirements for the twelve-month period following December 31, 2025.
The common interest allows the Company to receive a 10% profit share once aggregate distributions exceed the 20% internal rate of return ("IRR") hurdle as shown below. There was no value ascribed to the common interest as of December 31, 2024.
The common interest allows the Company to receive a 10% profit share once aggregate distributions exceed the 20% internal rate of return ("IRR") hurdle as shown below. There was no value ascribed to the common interest as of December 31, 2025.
We are also a “smaller reporting company” as defined in Regulation S-K under 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 also a “smaller reporting company” as defined in Regulation S-K under the Securities Act, and may elect to take advantage of certain of the scaled disclosures available to smaller reporting companies.
Tax positions not deemed to meet the more-likely-than-not threshold would 71 Table of Contents be recorded as a tax benefit or expense in the current year. Our management is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states.
Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Our management is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states.
We earned approximately $28.1 million in net interest income, generated income of $44.5 million in other income, incurred operating expenses of $36.6 million, allocated $3.5 million of income to Series A Preferred stockholders, allocated $8.0 million of income to Series B Preferred stockholders, and allocated $6.8 million of income to redeemable non-controlling interests for the year ended December 31, 2024.
We earned approximately $28.1 million in net 65 Table of Contents interest income, generated income of $44.5 million in other income, incurred operating expenses of $36.6 million, allocated $3.5 million of income to Series A Preferred stockholders, allocated $8.0 million of income to Series B Preferred stockholders, and allocated $6.8 million of income to redeemable non-controlling interests for the year ended December 31, 2024.
Pursuant to the IQHQ Subscription Agreement, the full $10.1 million of the interest accrued on the IQHQ Promissory Note was substituted and exchanged for a deemed funding of $10.1 million under the 74 Table of Contents IQHQ Subscription Agreement.
Pursuant to the IQHQ Subscription Agreement, the full $10.1 million of the interest accrued 83 Table of Contents on the IQHQ Promissory Note was substituted and exchanged for a deemed funding of $10.1 million under the IQHQ Subscription Agreement.
During the year ended December 31, 2024, net cash provided by investing activities was $956.5 million, compared to net cash provided by operating activities of $741.3 million for the year ended 70 Table of Contents December 31, 2023. This increase was primarily due to the proceeds from payments received on mortgage loans held for investment. Cash flows from financing activities.
During the year ended December 31, 2024, net cash provided by investing activities was $956.5 million, compared to net cash provided by operating activities of $741.3 million for the year ended December 31, 2023. This increase was primarily due to the proceeds from payments received on mortgage loans held for investment. Cash flows from financing activities.
("NXDT OP"), the operating partnership of NXDT, and OSL entered into an Assignment and Assumption and Co-Lender Agreement, pursuant to which OP IV assigned the right to fund up to 9% of the Alewife Loan to NXDT OP and allocated the right to fund up to 9% of the Alewife Loan to OSL.
("NXDT OP") and OSL entered into an Assignment and Assumption and Co-Lender Agreement, pursuant to which OP IV assigned the right to fund up to 9% of the Alewife Loan to NXDT OP and allocated the right to fund up to 9% of the Alewife Loan to OSL.
The Company has an ownership interest in the Series D-1 preferred stock in IQHQ, Inc., which is the limited partner in IQHQ, L.P.; however, the Company has no controlling financial interest nor significant influence in IQHQ, L.P.
The Company has an ownership interest in the Series D-1 preferred stock in IQHQ, Inc., who is the limited partner in IQHQ, L.P.; however, the Company has no controlling financial interest nor significant influence in IQHQ, L.P.
See Off Balance Sheet Arrangements above for further details. On March 14, 2023, the Company, through one of the Subsidiary OPs, committed to fund $24.0 million of preferred equity with respect to a ground up construction horizontal single-family property located in Phoenix, Arizona, of which 7.9 million was unfunded as of December 31, 2024.
See Off Balance Sheet Arrangements above for further details. On March 14, 2023, the Company, through one of the Subsidiary OPs, committed to fund $24.0 million of preferred equity with respect to a ground up construction horizontal single-family property located in Phoenix, Arizona, of which $1.9 million was unfunded as of December 31, 2025.
Prior periods have not been updated to reflect this adjustment because the 63 Table of Contents dilutive effect of potential Series B Preferred redemptions were immaterial to prior periods.
Prior periods have not been updated to reflect this adjustment because the dilutive effect of potential Series B Preferred 69 Table of Contents redemptions were immaterial to prior periods.
Significant judgment is required in determining impairment and in estimating the resulting loss allowance, and actual losses, if any, could materially differ from those estimates. Purchase Price Allocation 76 Table of Contents The Company considers the acquisition of real estate investments as asset acquisitions.
Significant judgment is required in determining impairment and in estimating the resulting loss allowance, and actual losses, if any, could materially differ from those estimates. Purchase Price Allocation The Company considers the acquisition of real estate investments as asset acquisitions.
These inputs are reflective of public company comparables, but are assumptions and estimates. As a result, the determination of fair value involves significant estimation uncertainty because it involves subjective judgments and estimates that are based on unobservable inputs. For the year ended December 31, 2024, the unrealized loss related to the change in fair value estimate is $2.7 million.
These inputs are reflective of public company comparables, but are assumptions and estimates. As a result, the determination of fair value involves significant estimation uncertainty because it involves subjective judgments and estimates that are based on unobservable inputs. For the year ended December 31, 2025, the unrealized loss related to the change in fair value estimate is $6.2 million.
See Notes 5 and 10 to our consolidated financial statements for additional disclosures regarding the valuation of NSP. As of December 31, 2024, the Company owns approximately 6.3% of the total outstanding common equity of the Private REIT. The Company records the Private REIT at fair value in accordance with ASC 321. The valuation is determined using a market approach.
See Notes 5 and 10 to our consolidated financial statements for additional disclosures regarding the valuation of NSP. As of December 31, 2025, the Company owns approximately 6.2% of the total outstanding common equity of the Private REIT. The Company records the Private REIT at fair value in accordance with ASC 321. The valuation is determined using a market approach.
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 results of operations. The following should be read in conjunction with our financial statements and accompanying notes. This discussion contains forward-looking statements that involve risks and uncertainties.
Item 7. Ma nagement ’ s Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion and analysis of our financial condition and results of operations. The following should be read in conjunction with our financial statements and accompanying notes. This discussion contains forward-looking statements that involve risks and uncertainties.
We believe providing adjusted weighted average common shares outstanding - diluted and EAD per diluted common share and CAD per diluted common share based on adjusted weighted average common shares outstanding - diluted is helpful to our investors in their assessment of our performance without the potential dilutive effective of the Series B Preferred shares.
We believe providing adjusted weighted average common shares outstanding - diluted and EAD per diluted common share and CAD per diluted common share based on adjusted weighted average common shares outstanding - diluted is helpful to our investors in their assessment of our performance without the potential dilutive effect of the Series B Preferred and Series C Preferred shares.
The preparation of these financial 75 Table of Contents statements requires our management to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate these judgments, assumptions and estimates for changes that would affect the reported amounts.
The preparation of these financial statements requires our management to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate these judgments, assumptions and estimates for changes that would affect the reported amounts.
As discussed in Note 9 to our consolidated financial statements, in connection with our CMBS acquisitions, we, through the OP and the Subsidiary OPs, have borrowed approximately $243.5 million under our repurchase agreements and posted approximately $740.0 million par value of our CMBS B-Piece and CMBS I/O Strip as collateral.
As discussed in Note 9 to our consolidated financial statements, in connection with our CMBS acquisitions, we, through the OP and the Subsidiary OPs, have borrowed approximately $258.0 million under our repurchase agreements and posted approximately $740.4 million par value of our CMBS B-Piece and CMBS I/O Strip as collateral.
The Company expects that the offering will terminate on the earlier of the date the Company sells all 16,000,000 shares of the Series B Preferred Stock in the offering or December 29, 2026 (which is the third anniversary of the effective date of the Company’s registration statement), which may be extended by the Board in its sole discretion.
The Company expects that the offering will terminate on the earlier of the date the Company sells all 8,000,000 shares of the Series C Preferred Stock in the offering or December 29, 2026 (which is the third anniversary of the effective date of the Company’s registration statement), which may be extended by the Board in its sole discretion.
See Note 2 to our consolidated financial statements for additional information. 57 Table of Contents Realized losses. Realized losses include the excess, or deficiency, of net proceeds received, less the carrying value of such investments, as realized losses.
See Note 2 to our consolidated financial statements for additional information. Realized losses. Realized losses include the excess, or deficiency, of net proceeds received, less the carrying value of such investments, as realized losses.
We are externally managed by our Manager, a subsidiary of our Sponsor, an SEC-registered investment advisor, which has extensive real estate experience, having completed as of December 31, 2024 approximately $20.1 billion of gross real estate transactions since the beginning of 2012.
We are externally managed by our Manager, a subsidiary of our Sponsor, an SEC-registered investment advisor, which has extensive real estate experience, having completed as of December 31, 2025 approximately $22.1 billion of gross real estate transactions since the beginning of 2012.
Considerations Related to Tightening Monetary Policy The macroeconomic environment remains challenging as central banks have held interest rates high to combat inflation. The high rate environment and ongoing economic uncertainty, has limited credit availability to commercial real estate.
Considerations Related to Tightening Monetary Policy 87 Table of Contents The macroeconomic environment remains challenging as central banks have held interest rates high to combat inflation. The high rate environment and ongoing economic uncertainty, has limited credit availability to commercial real estate.
Our computation of EAD may not be comparable to EAD reported by other REITs. We also use EAD as a component of the management fee paid to our Manager.
Our computation of EAD may not be comparable to EAD reported by other REITs. 67 Table of Contents We also use EAD as a component of the management fee paid to our Manager.
We calculate CAD by adjusting EAD by adding back amortization of premiums, depreciation and amortization of real estate investment, amortization of deferred financing costs and by removing accretion of discounts and non-cash items, such as stock dividends. We use CAD to evaluate our performance and our current ability to pay distributions.
CAD is a non-GAAP financial measure. We calculate CAD by adjusting EAD by adding back amortization of premiums, depreciation and amortization of real estate investment, amortization of deferred financing costs and by removing accretion of discounts and non-cash items, such as stock dividends. We use CAD to evaluate our performance and our current ability to pay distributions.
The Company holds RFGH and RTB based on the Company's proportionate share of income (losses) for the year ended December 31, 2024. 77 Table of Contents See Notes 5 and 6 to our consolidated financial statements for additional disclosures regarding the equity method investments RFGH and RTB.
The Company holds RFGH and RTB based on the Company's proportionate share of income (losses) for the year ended December 31, 2025. See Notes 5 and 6 to our consolidated financial statements for additional disclosures regarding the equity method investments RFGH and RTB.
The necessary input for the valuation includes the yield of the Private REIT. As a result, the determination of fair value is uncertain because it involves subjective judgments and estimates that are unobservable. For the year ended December 31, 2024, the unrealized loss related to the change in fair value estimate is $1.5 million.
The necessary input for the valuation includes the yield of the Private REIT. As a result, the determination of fair value is uncertain because it involves subjective judgments and estimates that are unobservable. For the year ended December 31, 2025, the unrealized loss related to the change in fair value estimate is $2.6 million.
However, our Manager is responsible, and we will not reimburse our Manager or its affiliates, for the salaries or benefits to be paid to personnel of our Manager or its affiliates who serve as our officers, except that 50% of the salary of our VP of Finance is allocated to us and we may grant equity awards to our officers under the Amended and Restated NexPoint Real Estate Finance, Inc. 2020 Long Term Incentive Plan (the "Amended and Restated LTIP").
However, our Manager is responsible, and we will not reimburse our Manager or its affiliates, for the salaries or benefits to be paid to personnel of our Manager or its affiliates who serve as our officers, and we may grant equity awards to our officers under the Amended and Restated NexPoint Real Estate Finance, Inc. 2020 Long Term Incentive Plan (the "Amended and Restated LTIP").
The Company holds 49.533% of the revolving commitment under the IQHQ Revolving Loan. In connection with the IQHQ Revolving Loan, on December 31, 2024, Bridge Investor I entered into a Subscription Agreement (“IQHQ Subscription Agreement”) whereby Bridge Investor I committed to purchase $160.1 million of Series E preferred stock of IQHQ, Inc.
In connection with the IQHQ Revolving Loan, on December 31, 2024, Bridge Investor I entered into a Subscription Agreement (the “IQHQ Subscription Agreement”) whereby Bridge Investor I committed to purchase $160.1 million of Series E preferred stock of IQHQ, Inc.
We primarily focus on investments in real estate sectors where our senior management team has operating expertise, including in the multifamily, SFR, self-storage and life science sectors predominantly in the top 50 MSAs. In addition, we target lending or investing in properties that are stabilized or have a light-transitional business plan.
We primarily focus on investments in real estate sectors where our senior management team has operating expertise, including in the multifamily, SFR, self-storage, industrial and life science sectors predominantly in the top 50 MSAs. In addition, we target lending or investing in properties that are stabilized.
For the purpose of calculating EAD for the management fee, net income (loss) attributable to common stockholders may be adjusted for the effects of certain GAAP adjustments and transactions that may not be indicative of our current operations, in each case after discussions between the Manager and the independent directors of our Board and approved by a majority of the independent directors of our Board. 61 Table of Contents CAD is a non-GAAP financial measure.
For the purpose of calculating EAD for the management fee, net income (loss) attributable to common stockholders may be adjusted for the effects of certain GAAP adjustments and transactions that may not be indicative of our current operations, in each case after discussions between the Manager and the independent directors of our Board and approved by a majority of the independent directors of our Board.
Valuation of Common and Preferred Equity As of December 31, 2024, the Company owns approximately 25.7% of the total outstanding shares of NSP and thus can exercise significant influence over NSP. The Company elected the fair-value option in accordance with ASC 825-10-10.
Valuation of Common and Preferred Equity As of December 31, 2025, the Company owns approximately 26.0% of the total outstanding shares of NSP and thus can exercise significant influence over NSP. The Company elected the fair-value option in accordance with ASC 825-10-10.
(3) Starting in the second quarter of 2024, EAD per diluted common share, CAD per diluted common share and adjusted weighted average common shares outstanding - diluted do not include the dilutive effect of the potential redemption of Series B Preferred Stock for common shares.
(2) Starting in the second quarter of 2024, EAD per diluted common share, CAD per diluted common share and adjusted weighted average common shares outstanding - diluted do not include the dilutive effect of the potential redemption of Series B Preferred Stock, and, beginning in the fourth quarter of 2025, the Series C Preferred Stock, for common shares.
Upon such payment, NXDT OP or OSL would become entitled to all interest and fees accrued on the amount paid to OP IV on and after the date of such payment. The Company's expected maximum commitment under the Alewife Loan is $203.0 million, of which $62.7 million was unfunded as of December 31, 2024.
Upon such payment, NXDT OP or OSL would become entitled to all interest and fees accrued on the amount paid to OP IV on and after the date of such payment. The Company's expected maximum commitment under the Alewife Loan is $133.0 million, of which $25.3 million was unfunded as of December 31, 2025.
This model applies to trade and other receivables, loans, debt securities, net investments in leases and off-balance sheet credit exposures (such as loan commitments, standby letters of credit and financial guarantees not accounted for as insurance) and requires entities to estimate the lifetime expected credit loss on such instruments and record an allowance that represents the portion of the amortized cost basis that the entity does not expect to collect.
This model applies to trade and other receivables, loans, debt securities, net investments in leases and off-balance sheet credit exposures (such as loan commitments, standby letters of credit and financial guarantees not accounted for as insurance) and requires entities to estimate the lifetime expected credit loss on such instruments and record an allowance that represents the portion of the amortized cost basis that the entity does not expect to collect. 85 Table of Contents We adopted ASU 2016-13 as of January 1, 2023.
Expenses include interest, real estate taxes and insurance, operating, general and administrative, management fees, depreciation and amortization, rate cap (income) expense, and debt service bridge expenses of the multifamily properties. 58 Table of Contents Results of Operations for the Years Ended December 31, 2024 and 2023 The following table sets forth a summary of our operating results for the years ended December 31, 2024 and 2023 (in thousands): For the Year Ended December 31, $ Change % Change 2024 2023 Net interest income $28,136 $16,798 $11,338 67.5 % Other income 44,467 25,292 19,175 75.8 % Operating expenses (36,641) (23,350) (13,291) 56.9 % Net income 35,962 18,740 17,222 91.9 % Net (income) loss attributable to Series A Preferred stockholders (3,496) (3,496) — — % Net (income) loss attributable to Series B Preferred stockholders (8,003) (80) (7,923) N/A Net (income) loss attributable to redeemable noncontrolling interests (6,770) (4,765) (2,005) 42.1 % Net income attributable to common stockholders $ 17,693 $ 10,399 $ 7,294 70.1 % The change in our net income for the year ended December 31, 2024 as compared to the net income for the year ended December 31, 2023 primarily relates to an increase in other income including changes in net assets related to consolidated CMBS VIEs and a lower unrealized loss on common stock investments.
Results of Operations for the Years Ended December 31, 2024 and 2023 The following table sets forth a summary of our operating results for the years ended December 31, 2024 and 2023 (in thousands): For the Year Ended December 31, 2024 2023 $ Change % Change Net interest income $ 28,136 $ 16,798 $ 11,338 67.5 % Other income 44,467 25,292 19,175 75.8 % Operating expenses (36,641 ) (23,350 ) (13,291 ) 56.9 % Net income 35,962 18,740 17,222 91.9 % Net (income) loss attributable to Series A Preferred stockholders (3,496 ) (3,496 ) — - % Net (income) loss attributable to Series B Preferred stockholders (8,003 ) (80 ) (7,923 ) 9903.8 % Net (income) loss attributable to redeemable noncontrolling interests (6,770 ) (4,765 ) (2,005 ) 42.1 % Net income attributable to common stockholders $ 17,693 $ 10,399 $ 7,294 70.1 % The change in our net income for the year ended December 31, 2024 as compared to the net income for the year ended December 31, 2023 primarily relates to an increase in other income including changes in net assets related to consolidated CMBS VIEs and a lower unrealized loss on common stock investments.
On January 26, 2024, the Company, through one of its subsidiaries (“OP IV”), along with The Ohio State Life Insurance Company (“OSL”), an entity that may be deemed an affiliate of the Manager through common beneficial ownership, entered into a Mezzanine Loan and Security Agreement (the "Alewife Loan") whereby it made a loan in the maximum principal amount of up to $218.0 million to IQHQ-Alewife Holdings, LLC ("Alewife Holdings"), which is solely owned by IQHQ, L.P.
(“OP IV”), along with The Ohio State Life Insurance Company ("OSL"), an entity that may be deemed an affiliate of the Manager through common beneficial ownership, entered into a Mezzanine Loan and Security Agreement (the “Alewife Loan”) whereby it made a loan in the maximum principal amount of up to $218.0 million to IQHQ-Alewife Holdings, LLC (“Alewife Holdings”) which is solely owned by IQHQ, L.P.
IQHQ Holdings is the sole common stockholder of IQHQ, Inc. and the IQHQ Participating Purchasers own common equity in IQHQ Holdings and/or IQHQ, L.P.
IQHQ Holdings is the sole common stockholder of IQHQ, Inc., and the IQHQ Participating Purchasers own common equity and stock warrants to purchase common equity in IQHQ Holdings and/or IQHQ, L.P.
Further, the Company committed to purchase $4.3 million of common equity with respect to the same property, of which $1.3 million was unfunded as of December 31, 2024. SFR OP issued a note (the “SFR OP Note II”) to the Company on July 10, 2024.
Further, the Company committed to purchase $4.3 million of common equity with respect to the same property, of which $0.8 million was unfunded as of December 31, 2025. SFR OP issued a note (the "SFR OP Note II") to the Company on July 10, 2024.
Further, the Company committed to purchase $4.3 million of common equity with respect to the same property, of which $1.3 million was unfunded as of December 31, 2024.
Further, the Company committed to purchase $4.3 million of common equity with respect to the same property, of which $0.8 million was unfunded as of December 31, 2025.
(7) The number shown represents the notional value on which interest is calculated for the CMBS I/O Strips. CMBS I/O Strips receive no principal payments and the notional value decreases as the underlying loans are paid off. (8) On January 9, 2025, the mezzanine loan term was extended to April 9, 2025.
(6) The number shown represents the notional value on which interest is calculated for the CMBS I/O Strips. CMBS I/O Strips receive no principal payments and the notional value decreases as the underlying loans are paid off. (7) The mezzanine loan term was extended effective April 9, 2025 to May 16, 2025, and extended further to November 10, 2025.
Book Value per Share / Unit The following table calculates our book value per share (in thousands, except per share data): December 31, 2024 December 31, 2023 Common stockholders' equity $ 295,624 $ 309,832 Shares of common stock outstanding at period end 17,461 17,232 Book value per share of common stock $ 16.93 $ 17.98 Due to the large noncontrolling interest in the OP (see Note 13 to our consolidated financial statements for more information), we believe it is useful to also look at book value on a combined basis as shown in the table below (in thousands, except per share data): December 31, 2024 December 31, 2023 Common stockholders' equity $ 295,624 $ 309,832 Redeemable noncontrolling interests in the OP 86,164 89,471 Total equity $ 381,788 $ 399,303 Redeemable OP Units at period end 5,038 5,038 Shares of common stock outstanding at period end 17,461 17,232 Combined shares of common stock and redeemable OP Units 22,499 22,270 Combined book value per share / unit $ 16.97 $ 17.93 Our Portfolio Our portfolio consists of senior loans, CMBS B-Pieces, CMBS I/O Strips, mezzanine loans, preferred equity investments, common equity investments, preferred stock, multifamily properties, promissory notes, revolving credit facilities and stock warrants with a combined unpaid principal balance of $1.2 billion as of December 31, 2024 and assumes the CMBS Entities’ assets and liabilities are not consolidated.
Book Value per Share / Unit The following table calculates our book value per share (in thousands, except per share data): December 31, 2025 December 31, 2024 Common stockholders' equity $ 350,380 $ 295,624 Shares of common stock outstanding at period end 18,574 17,461 Book value per share of common stock $ 18.86 $ 16.93 Due to the large noncontrolling interest in the OP (see Note 13 to our consolidated financial statements for more information), we believe it is useful to also look at book value on a combined basis as shown in the table below (in thousands, except per share data): December 31, 2025 December 31, 2024 Common stockholders' equity $ 350,380 $ 295,624 Redeemable noncontrolling interests in the OP 82,235 86,164 Total equity $ 432,615 $ 381,788 Redeemable OP Units at period end 4,186 5,038 Shares of common stock outstanding at period end 18,574 17,461 Combined shares of common stock and redeemable OP Units 22,760 22,499 Combined book value per share / unit $ 19.01 $ 16.97 70 Table of Contents Our Portfolio Our portfolio consists of senior loans, CMBS B-Pieces, CMBS I/O Strips, mezzanine loans, preferred equity investments, common equity investments, preferred stock, multifamily properties, promissory notes, revolving credit facilities and stock warrants with a combined unpaid principal balance of $1.5 billion as of December 31, 2025 and assumes the CMBS Entities’ assets and liabilities are not consolidated.
OP IV is required to fund any amounts not funded by OSL and NXDT OP.
OP IV is required to fund any 82 Table of Contents amounts not funded by OSL and NXDT OP.
Loan servicing fees were $4.2 million for the year ended December 31, 2023 compared to $4.4 million for the year ended December 31, 2022 which was a decrease of approximately $0.2 million. The decrease between the periods was primarily due to a decrease in SFR Loans and mezzanine loans in the portfolio compared to the prior period. Management fees.
Loan servicing fees were $1.4 million for the year ended December 31, 2025 compared to $1.6 million for the year ended December 31, 2024 which was a decrease of approximately $0.2 million. The decrease between the periods was primarily due to a decrease in SFR Loans and mortgage backed securities in the portfolio compared to the prior period. Management fees.
We adopted ASU 2016-13 as of January 1, 2023. The implementation process included the utilization of loan loss forecasting models, updates to our loan credit loss policy documentation, changes to internal reporting processes and related internal controls, and overall operational readiness for our adoption of the new standard.
The implementation process included the utilization of loan loss forecasting models, updates to our loan credit loss policy documentation, changes to internal reporting processes and related internal controls, and overall operational readiness for our adoption of the new standard.
Repurchase agreements will effectively allow us to borrow against loans and securities that we own in an amount equal to (1) the market value of such loans and/or securities multiplied by (2) the applicable advance rate.
Repurchase Agreements From time to time, we may enter into repurchase agreements to finance the acquisition of our target assets. Repurchase agreements will effectively allow us to borrow against loans and securities that we own in an amount equal to (1) the market value of such loans and/or securities multiplied by (2) the applicable advance rate.
The cumulative effect of adoption of ASU 2016-13 for the year ended December 31, 2023 was a $1.6 million reduction in retained earnings. The beginning allowance for credit loss as of January 1, 2024 was $2.1 million.
The cumulative effect of adoption of ASU 2016-13 as of January 1, 2023 was a $1.6 million reduction in retained earnings. The beginning allowance for credit loss as of January 1, 2025 was $1.4 million.
We have implemented loan loss forecasting models for estimating expected life-time credit losses, at the individual loan level, for our loan portfolio. These models are also utilized for estimating expected life-time credit losses for unfunded loan commitments for which the Company has a present contractual obligation to extend the credit and the obligation is not unconditionally cancellable.
These models are also utilized for estimating expected life-time credit losses for unfunded loan commitments for which the Company has a present contractual obligation to extend the credit and the obligation is not unconditionally cancellable.
Our borrowings under the Credit Facility will mature on July 12, 2029; however, if an Underlying Loan matures prior to July 12, 2029, we will be required to repay the portion of the Credit Facility that is allocated to that loan.
Our borrowings under the Credit Facility will mature on July 12, 2029; however, if an Underlying Loan matures prior to July 12, 2029, we will be required to repay the portion of the Credit Facility that is allocated to that loan. As of December 31, 2025, the outstanding balance on the Credit Facility was $108.2 million.
Our net income attributable to common stockholders for the year ended December 31, 2023 was approximately $10.4 million.
Our net income attributable to common stockholders for the year ended December 31, 2025 was approximately $75.7 million.
The table below provides additional details regarding recent borrowings under the master repurchase agreements (dollars in thousands): December 31, 2024 Facility Collateral Date issued Outstanding face amount Carrying value Final stated maturity Weighted average interest rate (1) Weighted average life (years) (2) Outstanding face amount Amortized cost basis Carrying value (3) Weighted average life (years) (2) Master Repurchase Agreements CMBS Mizuho(4) 4/15/2020 243,454 243,454 N/A (5) 6.49 % 0.0 740,022 360,427 350,379 4.7 (1) Weighted-average interest rate using unpaid principal balances.
The table below provides additional details regarding recent borrowings under the master repurchase agreements (dollars in thousands): December 31, 2025 Facility Collateral Date issued Outstanding face amount Carrying value Final stated maturity Weighted average interest rate (1) Weighted average life (years) (2) Outstanding face amount Amortized cost basis Carrying value (3) Weighted average life (years) (2) Master Repurchase Agreements CMBS Mizuho (4) 4/15/2020 258,038 258,038 N/A (5) 5.53 % 0.0 740,359 352,744 336,014 3.8 (1) Weighted-average interest rate using unpaid principal balances.
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. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not required for smaller reporting companies.
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. 88 Table of Contents Item 7A.
Off-Balance Sheet Arrangements As of December 31, 2024, we had one off balance sheet arrangement that has or is 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. 72 Table of Contents On December 8, 2022 and in connection with a restructuring of NSP, the Company, through NREF OP IV REIT Sub, LLC ("REIT Sub"), together with NexPoint Diversified Real Estate Trust ("NXDT"), an entity that is advised by an affiliate of the Manager, Highland Income Fund and NexPoint Real Estate Strategies Fund (collectively, the "Co-Guarantors"), as guarantors, entered into a sponsor guaranty agreement (the "NSP Sponsor Guaranty Agreement") in favor of Extra Space Storage, LP ("Extra Space") pursuant to which REIT Sub and the Co-Guarantors guaranteed obligations of NSP with respect to accrued dividends on NSP’s newly created Series D preferred stock and two promissory notes in an aggregate principal amount of approximately $64.2 million issued to Extra Space.
On December 8, 2022 and in connection with a restructuring of NSP, the Company, through NREF OP IV REIT Sub, LLC ("REIT Sub"), together with NexPoint Diversified Real Estate Trust ("NXDT"), an entity that is advised by an affiliate of the Manager, Highland Income and Opportunities Fund and NexPoint Real Estate Strategies Fund (collectively, the 80 Table of Contents "Co-Guarantors"), as guarantors, entered into a sponsor guaranty agreement (the "NSP Sponsor Guaranty Agreement") in favor of Extra Space Storage, LP ("Extra Space") pursuant to which REIT Sub and the Co-Guarantors guaranteed obligations of NSP with respect to accrued dividends on NSP’s newly created Series D preferred stock and two promissory notes in an aggregate principal amount of approximately $64.2 million issued to Extra Space.
Cash Flows The following table presents selected data from our Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022 (in thousands): For the Year Ended December 31, 2024 2023 2022 Net cash provided by operating activities $ 29,284 $ 31,556 $ 65,801 Net cash provided by investing activities 956,537 741,342 950,578 Net cash (used in) financing activities (995,417) (776,596) (1,029,264) Net increase (decrease) in cash, cash equivalents, and restricted cash (9,596) (3,698) (12,885) Cash, cash equivalents and restricted cash, beginning of year 16,649 20,347 33,232 Cash, cash equivalents and restricted cash, end of year $ 7,053 $ 16,649 $ 20,347 The year ended December 31, 2024 as compared to the year ended December 31, 2023 Cash flows from operating activities.
Cash Flows The following table presents selected data from our Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024, and 2023 (in thousands): For the Year Ended December 31, 2025 2024 2023 Net cash provided by operating activities $ 22,916 $ 29,284 $ 31,556 Net cash provided by investing activities 321,543 956,537 741,342 Net cash (used in) financing activities (317,158 ) (995,417 ) (776,596 ) Net increase (decrease) in cash, cash equivalents, and restricted cash 27,301 (9,596 ) (3,698 ) Cash, cash equivalents and restricted cash, beginning of year 7,053 16,649 20,347 Cash, cash equivalents and restricted cash, end of year $ 34,354 $ 7,053 $ 16,649 The year ended December 31, 2025 as compared to the year ended December 31, 2024 78 Table of Contents Cash flows from operating activities.
Management fees were $3.9 million for the year ended December 31, 2024 compared to $3.3 million for the year ended December 31, 2023 which was an increase of approximately $0.6 million.
Management fees were $3.9 million for the year ended December 31, 2024 compared to $3.3 million for the year ended December 31, 2023 which was an increase of approximately $0.6 million. The increase between the periods was primarily due to an increase in Equity as defined by the Management Agreement.
Adjusted weighted average common shares outstanding - diluted should not be considered as an alternative to the GAAP measures. Our computation of adjusted weighted average common shares outstanding - diluted may not be comparable to adjusted weighted average common shares outstanding - diluted reported by other companies.
Our computation of adjusted weighted average common shares outstanding - diluted may not be comparable to adjusted weighted average common shares outstanding - diluted reported by other companies.
The CECL forecasting methods used by the Company include (i) a probability of default and loss given default method using underlying third-party CMBS/Commercial Real Estate loan database with historical loan losses from 1998 to 2022, and (ii) probability weighted expected cash flow method, depending on the type of loan and the availability of relevant historical market loan loss data.
The CECL forecasting methods used by the Company include a probability of default and loss given default method using underlying third-party CMBS/Commercial Real Estate loan database with historical loan losses from 1998 to 2025.
The increase between the periods was primarily due to a $1.1 million increase in stock compensation expense, a $0.6 million increase in legal fees, and a $0.7 million increase in audit fees compared to the prior period. Loan servicing fees.
The decrease between the periods was primarily due to a $1.1 million decrease in legal fees, offset with a $0.6 million increase in accounting fees, and a $0.1 million increase in payroll expenses compared to the prior period. Loan servicing fees.

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