What changed in this filing

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Item 1. Business

2024-03-14 compared with 2023-03-31 · 77 added, 152 removed, 262 unchanged (47% of the section changed)

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Key highlights and transactions completed in 2023 include the following:

On July 1, 2022, the Securities and Exchange Commission (the “SEC”) issued an order pursuant to Section 8(f) of the Investment Company Act of 1940 (the “Investment Company Act”) declaring that the Company has ceased to be an investment company under the Investment Company Act (the “Deregistration Order”).

The issuance of the Deregistration Order enables the Company to proceed with full implementation of its new business mandate to operate as a diversified REIT.

NexPoint Dominion Land, LLC

On August 9, 2022, the Company purchased 21.5 acres of undeveloped land in Plano, Texas through a wholly owned special purpose entity (“SPE”), as detailed in the table below (dollars in thousands).

The Company plans to develop this land into a life science property.

No estimated completion date is available at this time.

The details of the Company’s acquisitions held by SPEs the Company consolidates for the year ended December 31, 2022 were as follows (dollars in thousands):

Investment Vehicle Location Property Type Date of

Acquisition Purchase

Price Debt Effective

NexPoint Dominion Land, LLC Plano, Texas Land August 9, 2022 $ 26,500 $ 13,250 100 %

Represents ownership of underlying property.

The Company, through the OP, owns 100% of NexPoint Dominion Land, LLC as of December 31, 2022.

The Company borrowed approximately $13.3 million from the seller, Gabriel Legacy, LLC to finance its acquisition through NexPoint Dominion Land, LLC.

The note bears interest at an annual rate equal to the WSJ Prime Rate and matures on August 8, 2025.

Tivoli North Property

On March 30, 2022, the Company invested in Las Vegas Land Owner, LLC (“Tivoli”), a joint venture that owns an 8.5 acre tract of land (the “Tivoli North Property”) upon which site Tivoli plans to develop a 300-unit multifamily apartment community directly adjacent to Tivoli Village, a high-end mixed-use center in Las Vegas, Clark County, Nevada.

On August 8, 2022, the joint venture was restructured to a tenants-in-common arrangement (the “TIC”).

Post restructure, the Company owns 100% of Tivoli, and Tivoli owns 77% of the underlying land investment.

Members of the TIC must unanimously agree on certain major decisions regarding the underlying investment giving the Company shared control.

On March 31, 2022, the Company, through a subsidiary, borrowed approximately $13.5 million from NREF to finance its acquisition of a 77% interest in Tivoli North Property.

The bridge note bore interest at an annual rate equal to the WSJ Prime Rate plus 1.5% and had a maturity date of October 1, 2022.

The Company refinanced this bridge note with PNC Bank, N.A.

(“PNC Bank”) on August 8, 2022.

The new loan has a principal amount of $13.5 million, matures on August 7, 2023, and bears interest at an annual rate based on the daily simple secured overnight financing rate (“SOFR”) plus 3.5%.

Proceeds from the note with PNC Bank were used to repay in full the financing provided by NREF on August 9, 2022.

NexPoint Real Estate Finance, Inc.

On January 7, 2022, the Company received approximately 3,324,332 units of limited partnership of subsidiaries (“NREF SubOP Units”) of NexPoint Real Estate Finance Operating Partnership, L.P.

(the “NREF OP”) in connection with pro rata liquidating distributions by certain entities through which the Company had invested in the NREF OP subsidiaries.

Following the Company’s receipt of the NREF SubOP Units, on January 7, 2022, the Company, through its wholly owned subsidiary NexPoint Real Estate Opportunities, LLC (“NREO”), redeemed a total of approximately 3,721,571 NREF SubOP Units, representing all of its NREF SubOP Units, for cash and purchased the same number of units of limited partnership of the NREF OP (“NREF OP Units”) for the same cash.

On December 23, 2022, the Company, through NREO, redeemed 2,100,000 NREF OP Units for 2,100,000 shares of common stock of NexPoint Real Estate Finance, Inc.

The NREF OP is the operating partnership of NREF, a publicly traded mortgage REIT managed by an affiliate of the Adviser.

As of December 31, 2022, the Company held 2,100,000 shares, or approximately 12.3%, of NREF’s common stock and approximately 4,869,082 NREF OP Units, or approximately 16.1% of the outstanding NREF OP Units.

For the year ended December 31, 2023, the Company received approximately $17.5 million in distributions from its legacy CLO positions, meaning CLO investments that were held prior to the Business Change (as defined below).

The legacy CLO positions are in wind down, and the timing, and likelihood of any future distributions are uncertain.

NexPoint SFR Operating Partnership, L.P.

On June 8, 2022, the Company, directly or through one or more subsidiaries, contributed $25.0 million to the newly formed NexPoint SFR Operating Partnership, L.P.

(the “SFR OP”) in exchange for common units of the SFR OP (“SFR OP Units”).

Additionally, on June 8, 2022, the Company, directly or through one or more subsidiaries, loaned $25.0 million to the SFR OP in exchange for $25.0 million of 7.50% convertible notes of the SFR OP (“SFR OP Convertible Notes”) that are interest only during the term and mature on June 30, 2027.

On October 25, 2023, the Company, contributed approximately $0.5 million to NexPoint SFR Operating Partnership, L.P.

(the "SFR OP") in exchange for a promissory note in the principal amount of $0.5 million made by the SFR OP (the "SFR OP Promissory Note").

The SFR OP Promissory Note has a maturity date of April 25, 2024 and accrues interest at a fixed rate of 8.80% per annum.

The SFR OP is a subsidiary of NexPoint Homes Trust, Inc., a private single-family rental ("SFR") REIT managed by an affiliate of the Adviser.

Subsequent to June

8, 2022 and through December 31, 2022, the Company, directly or through one or more subsidiaries, contributed approximately an additional $27.5 million to the SFR OP in exchange for SFR OP Units.

Subsequent to June 8, 2022 and through December 31, 2022, the Company, directly or through one or more subsidiaries, contributed approximately an additional $1.0 million to the SFR OP in exchange for SFR OP Units through distribution reinvestments.

Additionally, subsequent to June 8, 2022 and before December 31, 2022, the Company, directly or through one or more subsidiaries, loaned an additional $5.0 million to the SFR OP in exchange for $5.0 million of SFR OP Convertible Notes.

As of December 31, 2022, the Company owns approximately 2,139,180, or 31.0%, of the outstanding SFR OP Units and $30 million in outstanding principal balance of SFR OP Convertible Notes.

IQHQ Holdings, LP

On June 22, 2022, the Company subscribed for and purchased 142,857, or $4 million, of Class A-2 Units in IQHQ Holdings, LP (“IQHQ Holdings”), and subsequently subscribed for and purchased, on September 15, 2022, 107,143, or $3 million, of Class A-2 Units in IQHQ Holdings in connection with a restructuring of its investment in IQHQ, Inc.

In connection with the Company’s subscription, the Company surrendered 1,938,671 shares of common stock in IQHQ in exchange for Class A-1 Units in IQHQ Holdings.

IQHQ is a private life science REIT focused on acquiring, developing and redeveloping high-quality properties in core life science markets.

As of December 31, 2022, the Company owns 1,938,671, or 1.4%, of the Class A-1 Units, and 250,000, or 0.7%, of the Class A-2 Units in IQHQ Holdings.

NexPoint Storage Partners, L.P.

and SAFStor Ventures

On December 8, 2022, the Company, through NREO, entered into a Contribution Agreement pursuant to which NREO contributed all of its interests in joint ventures (the “SAFStor Ventures”) with SAFStor NREA GP – I, LLC, SAFStor NREA GP – II, LLC and NREA GP – III, LLC to NexPoint Storage Partners Operating Company, LLC (the “NSP OC”) in exchange for approximately 47,064 newly created Class B Units of the NSP OC, representing 14.8% of the combined classes of common units of the NSP OC (“NSP OC Common Units”) immediately after NREO’s acquisition of Class B Units.

The NSP OC is the operating company of NexPoint Storage Partners, Inc.

(“NSP”), a privately owned self-storage REIT indirectly managed by an affiliate of the Adviser, of which the Company owns approximately 86,369 shares, or 53.1%, of the outstanding common stock as of December 31, 2022.

Concurrently with the foregoing, the NSP OC acquired all of the other interests in the SAFStor Ventures from affiliates of the Adviser.

The SAFStor Ventures are invested, through subsidiaries, in various self-storage real estate development projects primarily located on the East Coast of the United States.

As of December 31, 2022, the Company owns approximately 47,064 units, or 30.5%, of the outstanding NSP OC Common Units.

In connection with the foregoing, the Company entered into a Sponsor Guaranty Agreement in favor of Extra Space Storage LP (“Extra Space”) pursuant to which the Company and certain affiliates of the Adviser (the “Co-Guarantors”) guaranteed obligations of NSP with respect to 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.

The guaranties by the Company and the Co-Guarantors are capped at $97.6 million, which cap amount will be reduced as the guaranteed obligations of NSP are paid.

Each of the Company and the Co-Guarantors generally guaranteed the foregoing obligations of NSP up to the cap amount on a pro rata basis with respect to its percentage ownership of NSP’s common stock.

The maximum liability of the Company under the guaranties is approximately $83.8 million.

In addition, on September 14, 2022, the Company entered into guaranties for the benefit of JPMorgan Chase Bank, National Association and any additional or subsequent lenders from time to time pursuant to which the Company guaranteed certain obligations of one or more borrowers in which the Company owns an indirect interest through its ownership in NSP.

With respect to a loan agreement (the “BS Loan Agreement”) providing for an initial advance of $221.8 million with the right to request additional advances, the Company guaranteed certain carrying obligations, including interest payments, of the borrowers and certain recourse obligations of the borrowers pertaining to exculpation or indemnification of the lender.

Amounts outstanding under the BS Loan Agreement are due and payable on September 9, 2023 which date may be extended by the borrowers for two successive one-year terms on certain terms and conditions.

Borrowings outstanding under the BS Loan Agreement bear interest at the one-month SOFR, subject to a floor of 0.50%, plus an applicable spread of approximately 4.0% with respect to approximately $184.9 million of initial principal thereunder and approximately 5.4% with respect to approximately $36.9 million of initial principal thereunder.

With respect to a loan agreement (the “CMBS Loan Agreement”) providing for a loan of $356.5 million, the Company guaranteed certain recourse obligations of the borrowers pertaining to exculpation or indemnification of the lender.

Amounts outstanding under the CMBS Loan Agreement are due and payable on September 9, 2024 which date may be extended by the borrowers for three successive one-year terms on certain terms and conditions.

Borrowings outstanding under the CMBS Loan Agreement bear interest at one-month SOFR plus a spread of approximately 3.6%, which will increase by 0.1% upon a second extension of the loan maturity and by an additional approximately 0.2% upon a third extension of the loan maturity.

The Company also may be required to repay principal amounts under both loan agreements upon the occurrence of certain events, including certain action or inaction by the borrowers.

Borrowings under the

guaranties with respect to both loan agreements are secured by mortgages on real property owned by one or more of the borrowers.

The maximum liability of the Company under the guaranties is approximately $578.3 million.

In addition, during 2022, the Company received $0.1 million in payments with respect to its holdings of NSP’s convertible debt financing that mature on February 18, 2024 (the “NSP Convertible Note”).

The NSP Convertible Note bears interest at a fixed rate of approximately 5.1% per year.

During 2022, NSP paid down the full balance on the NSP Convertible Note.

NexPoint Hospitality Trust

During 2022, the Company accrued $0.9 million in interest with respect to its holdings of convertible notes in the operating partnership (the “NHT OP”) of NexPoint Hospitality Trust (“NHT”) that mature between 2039 and 2042 (the “NHT OP Notes”).

NHT is a publicly traded hospitality REIT listed on the TSX Venture Exchange (“TSXV”) managed by an affiliate of the Adviser.

The NHT OP Notes bear interest at a fixed rate between 1.82% and 6.00%.

As of December 31, 2022, the NHT OP Notes have an outstanding balance of $24.8 million and the Company owned 13,571,131 shares, or 45.4% of the outstanding common stock of NHT and 29.9% of the outstanding NHT OP Notes.

The remaining NHT OP Notes are held by affiliates of the Adviser.

The Company is a limited guarantor and an indemnitor on one of NHT’s loans with an aggregate principal amount of $77.4 million as of December 31, 2022.

The obligations include a customary environmental indemnity and a so-called "bad boy" guarantee, which is generally only applicable if and when the borrower directly, or indirectly through an agreement with an affiliate, joint venture partner or other third party, voluntarily files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper.

Caddo Sustainable Timberlands

On August 5, 2022, the Company’s investment in Caddo Sustainable Timberlands was redeemed for approximately $10.9 million in cash.

Metro-Goldwyn Mayer, Inc.

On March 17, 2022, Amazon.com, Inc.

announced it had closed its acquisition of Metro-Goldwyn Mayer, Inc.(“MGM”).

At the announcement date, the Company held 309,137 shares of MGM’s Class A Common Stock directly and 557,618 shares of MGM’s Class A Common Stock indirectly via the CLOs.

As a result of the acquisition of MGM, the Company received $126.4 million in cash in exchange for its shares of Class A Common Stock.

Additionally, on April 18, 2023, the SFR OP paid down approximately $8.5 million of 7.50% convertible notes of the SFR OP ("SFR OP Convertible Notes") held by the Company or through one or more subsidiaries that are interest only during the term and mature on June 30, 2027.

Subsequent to December 31, 2022 and through December 31, 2023, the Company, directly or through one or more subsidiaries, received approximately $1.8 million of additional common units of SFR OP (the "SFR OP Units") through continued participation in the SFR OP distribution reinvestment plan.

As of December 31, 2023, the Company owns approximately 2,193,814, or 30.8%, of the outstanding SFR OP Units, $21.5 million in outstanding principal balance of SFR OP Convertible Notes and $0.5 million of the SFR OP Promissory Note.

NexPoint Storage Partners Operating Company, LLC

On November 9, 2023, the Company, directly or through one or more subsidiaries contributed approximately $5.0 million to NexPoint Storage Partners Operating Company, LLC (the "NSP OC") in exchange for a promissory note in the principal amount of $5.0 million made by the NSP OC (the "NSP OC Promissory Note").

The NSP OC Promissory Note has a maturity date of May 8, 2024 and accrues interest at a fixed rate of 5.32% per annum.

Specialty Financial Products, Ltd.

During 2022, the Company, through Specialty Financial Products, Ltd.

(“SFP”), a wholly owned Irish Designated Activity Company, purchased three U.S.

life settlement contracts with a combined face value of $28.0 million for $8.7 million, had one life settlement contract mature with an aggregate net death benefit of $7.0 million, and paid $2.6 million in premiums to keep the life settlement contracts in force.

On September 1, 2023, the Company, through one of its TRSs, entered into a contribution agreement to transfer a structured promissory note (the "Structured Note") issued by Specialty Financial Products, Ltd.

("SFP") and all its rights, title and interests to a related party NexAnnuity Holdings, Inc.

("NHI") and its wholly owned subsidiaries.

The Company also transferred all of its ordinary shares in SFP to a separate share trustee.

In exchange, the Company was issued 68,500 shares of Class A Preferred Stock in NHI.

On September 28, 2023, the Company redeemed 2,000 shares of Class A Preferred Stock of NHI for $2.0 million.

On September 30, 2023, the Company elected to receive the quarterly distribution of approximately $0.5 million in Class A Preferred Stock instead of cash.

On October 24, 2023, the Company redeemed 1,000 shares of Class A Preferred Stock of NHI for $1.0 million.

On November 10, 2023, the Company redeemed 1,000 shares of Class A Preferred Stock of NHI for $1.0 million.

On December 31, 2023, the Company elected to capitalize the

quarterly distribution of approximately $1.3 million.

For further information on this transaction, see Note 10 to our consolidated financial statements.

VineBrook Homes Operating Partnership, L.P.

Subsequent to December 31, 2022 and through December 31, 2023, the Company, directly or through one or more subsidiaries, contributed approximately $4.3 million to VineBrook Homes Operating Partnership, L.P.

("VB OP") in exchange for common units of VB OP ("VB OP Units") through distribution reinvestments.

Share Repurchase Program

On October 24, 2022, our Board of Trustees (our “Board”) authorized a share repurchase program (the “Share Repurchase Program”) through which we may repurchase an indeterminate number of common shares and our 5.50% Series A Cumulative Preferred Shares, liquidation preference $25.00 per share (the “Series A Preferred Shares”), at an aggregate market value of up to $20.0 million during a two-year period that is set to expire on October 24, 2024.

We may utilize various methods to affect the repurchases, and the timing and extent of the repurchases will depend upon several factors, including market and business conditions, regulatory requirements and other corporate considerations, including whether our common shares or Series A Preferred Shares is trading at a significant discount to net asset value ("NAV") per share.

We may utilize various methods to affect the repurchases, and the timing and extent of the repurchases will depend upon several factors, including market and business conditions, regulatory requirements and other corporate considerations, including whether our common shares or Series A Preferred Shares are trading at a significant discount to net asset value ("NAV") per share.

Repurchases under this program may be discontinued at any time.

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Our Portfolio

As of December 31, 2022, the Company’s Portfolio includes real estate investments comprised of four operating properties, three of which are rented from the Company for retail, hospitality or office use and one which is undeveloped, two convertible note investments in businesses focused on SFR and hospitality real estate, and 19 equity investments in businesses primarily focused on investing in SFR, self-storage, hospitality, life science or undeveloped real estate, as well as investing in commercial mortgage loans or other structured investments with underlying properties types including

single-family, multifamily, life science and self-storage.

As of December 31, 2023, the Company’s Portfolio includes real estate investments comprised of four operating properties, three of which are rented from the Company for retail, hospitality or office use and one which is undeveloped, two convertible note and two promissory note investments in businesses focused on SFR and hospitality real estate, and 13 equity investments in businesses primarily focused on investing in SFR, self-storage, hospitality, life science or undeveloped real estate, as well as investing in commercial mortgage loans or other structured investments with underlying properties types including single-family, multifamily, life science and self-storage.

As of December 31, 2023, the Company’s Portfolio also includes other investments comprised of its ownership of common equity, loans, CLOs, rights and warrants, U.S.

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See below for a table of our investments as of December 31, 2023 (dollars in thousands).

Investment Acquisition Date Real Estate Value Debt Net Equity (1) Location Property Type

Investment Real Estate

Investment Date Value Debt Net Equity (1) Location Property Type

Operating Properties

Cityplace Tower 8/15/2018 $233,665 $142,305 $107,690 Dallas, Texas Office & Hospitality*

White Rock Center 6/13/2013 13,454 — 13,918 Dallas, Texas Retail

NexPoint Dominion Land, LLC 8/9/2022 26,500 13,250 12,967 Plano, Texas Land

5916 W Loop 289 7/23/2013 4,020 — 4,157 Lubbock, Texas Retail

White Rock Center 6/13/2013 13,485 — 12,893 Dallas, Texas Real Estate Other

5916 W Loop 289 7/23/2013 4,019 — 3,833 Lubbock, Texas Real Estate Other

Total $277,669 $155,555 $137,383

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11.2 % Single-Family Rental $ 146,516 Various

NexPoint Real Estate Finance Operating Partnership, L.P.

15.6 % Diversified 76,688 Various

NexPoint Storage Partners, Inc.

52.9 % Self-Storage 68,187 Various

NexPoint Real Estate Finance Operating Partnership, L.P.

16.1 % (2) Mortgage 77,370 Various

NexPoint Storage Partners Operating Company, LLC 30.5 % Self-Storage 56,505 Various

NexPoint SFR Operating Partnership, L.P.

30.8 % Single-Family Rental 49,383 Various

NexPoint Storage Partners Operating Company, LLC.

30.0 % Self-Storage 37,157 Various

NexPoint Real Estate Finance, Inc.

12.3 % (2) Mortgage 33,369 Various

NexPoint Hospitality Trust 45.4 % Hospitality 27,685 Various

12.0 % (2) Diversified 33,075 Various

AM Uptown Hotel, LLC 60.0 % Hospitality 23,158 Dallas, Texas

Sandstone Pasadena Apartments, LLC 50.0 % Multifamily 13,013 Pasadena, Texas

Las Vegas Land Owner, LLC 76.8 % (3) Multifamily 12,312 Las Vegas, Nevada

Sandstone Pasadena Apartments, LLC 50.0 % Multifamily 11,458 Pasadena, Texas

SFR WLIF III, LLC 20.0 % Single-Family Rental 7,079 Various

NexPoint Hospitality Trust 46.2 % Hospitality 4,886 Various

LLV Holdco, LLC 26.8 % Land 2,242 Henderson, Nevada

NexPoint Residential Trust, Inc.

0.3 % Multifamily 3,825 Various

Total $ 472,141

Other Real Estate Common Equity Shares/Units (in thousands) Investment Type Net Equity (1)

Other Real Estate Common Equity Shares/Units Investment Type Net Equity (1)

IQHQ Holdings Class A-1 1,939 (2) Life Science $ 49,109

Other 197 (2) Real Estate Other 12,103

IQHQ Holdings Class A-2 250 (2) Life Science 6,684

NexPoint Residential Trust, Inc.

92 (2) Multifamily 3,154

Other 1,764 (2) Real Estate Other 1,166

Total $ 60,113

Real Estate Convertible Notes Principal Amount Investment Type Net Equity (1)

SFR OP Convertible Note $ 30,000 Single-Family Rental $ 29,350

SFR OP Convertible Notes 21,457 Single-Family Rental $ 20,814

NHT OP Notes 24,927 Hospitality 21,437

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LLV Holdco, LLC Revolver 10,715 Land $ 9,837

Other Equity Method Investments Shares/Units (in thousands) Investment Type Net Equity (1) Location

Perilune Aero Equity Holdings One, LLC 10,310 Aircraft $ 10,923 Various

Real Estate Promissory Notes Principal Amount Investment Type Net Equity (1)

NSP OC Promissory Note 5,000 Self-Storage $ 5,000

SFR OP Promissory Note 500 Single-Family Rental 500

Other Equity Method Investments Shares/Units Investment Type Net Equity (1) Location

Perilune Aero Equity Holdings One, LLC 10,310,000 Aircraft $ 12,256 Aerospace

Claymore Holdings, LLC 4,465,280 (4) Litigation Claims — N/A

Allenby, LLC 970,379 (4) Litigation Claims — N/A

Haygood, LLC.

31,170 (4) Litigation Claims — N/A

Total $ 12,256

Other Assets Net Equity (1)

Preferred Shares $ 66,268

Common Equity 52,827 (2)

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Rights and Warrants 3,993

Life Settlement 71,957

Total $ 155,404

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(2) All or part of this security is pledged as collateral for short sales, margin borrowing or credit facilities.

(3) The Company owns 100% of Tivoli which owns 77% of the Tivoli North Property as described above.

(3) The Company owns 100% of Las Vegas Land Owner, LLC ("Tivoli"), a tenants-in-common arrangement (the "TIC") that owns 77% of an 8.5 acre tract of land upon which Tivoli plans to develop a 300 unit multifamily apartment community in Las Vegas, Clark County, Nevada.

Through the TIC, the Company shares control and as such accounts for this investment using the equity method.

(4) The Company owns noncontrolling interests in two LLCs, Claymore Holdings, LLC and Allenby, LLC, created to hold litigation claims.

(4) The Company owns noncontrolling interests in three limited liability companies, Claymore Holdings, LLC, Allenby, LLC, and Haygood, LLC, created to hold litigation claims.

The probability, timing, and potential amount of recovery, if any, are unknown as of December 31, 2023.

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The Company may, to a limited extent, hold, acquire or transact in certain non-real estate securities.

The Company focuses on opportunistic investments in real estate properties with a value-add component and real estate credit with the objective to increase the cash flow and value of our properties, acquire properties with cash flow growth potential and achieve capital appreciation for shareholders through a value-add program.

The Company focuses on opportunistic investments in real estate properties with a value-add component and real estate credit with an objective to increase the cash flow and value of our properties, acquire properties with cash flow growth potential and achieve capital appreciation for shareholders through a value-add program.

The Company pursues real estate credit investments based on where the Adviser believes the various real estate subsectors are performing within the broader real estate cycle and tactically allocates its investments among these opportunities.

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The Company believes that the flexibility of the Company's investment strategy and the experience and resources of the Adviser and its affiliates will allow the Company to take advantage of changing market conditions to provide both current income and generate capital appreciation.

The Board is able to modify the Company's strategies to the extent it determines it is in Company's best interest.

The Board is able to modify the Company's strategies to the extent it determines it is in the Company's best interest.

Target Investments

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(1) The Portfolio may be held directly or through one or more intermediate entities.

The Company is externally managed by the Adviser, through an agreement dated July 1, 2022, amended on October 25, 2022 (the “Advisory Agreement”), by and among the Company and the Adviser for an initial three-year term that will expire on July 1, 2025 and successive one-year terms thereafter unless earlier terminated.

The Company is externally managed by the Adviser, through an agreement dated July 1, 2022, as amended on October 25, 2022 and April 11, 2023 (the “Advisory Agreement”), by and among the Company and the Adviser for an initial three-year term that will expire on July 1, 2025 and successive one-year terms thereafter unless earlier terminated.

The Adviser manages the day-to-day operations of the Company and provides investment management services.

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The Adviser is wholly owned by our Sponsor.

The members of our Adviser’s investment committee are James Dondero, Matt McGraner, Matthew Goetz, and Brian Mitts.

The members of our Adviser’s investment committee are James Dondero, Matt McGraner, and Brian Mitts.

Our Advisory Agreement

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Direct payment of operating expenses by us together with reimbursement of operating expenses to the Adviser, plus compensation expenses relating to equity awards granted under a long-term incentive plan and all other corporate general and administrative expenses of the Company, including the Fees (defined below) payable under the Advisory Agreement, may not exceed 1.5% (the “Expense Cap”) of Managed Assets (defined below), calculated as of the end of each quarter, for the twelve-month period following the Company’s receipt of the Deregistration Order.

provided, however, that this limitation will not apply to Offering Expenses (defined below), legal, accounting, financial, due diligence and other service fees incurred in connection with extraordinary litigation and mergers and acquisitions or other events outside the ordinary course of our business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of certain real estate-related investments;

provided, further, in the event the Company consolidates another entity that it does not wholly own as a result of owning a controlling interest in such entity or otherwise, expenses will be calculated without giving effect to such consolidation and instead such entity’s expenses will, on a pro rata basis consistent with the Company’s percentage ownership, be considered those of the Company for purposes of calculation of expenses.

This limitation ended on June 30, 2023 and did not apply to Offering Expenses (defined below), legal, accounting, financial, due diligence and other service fees incurred in connection with extraordinary litigation and mergers and acquisitions or other events outside the ordinary course of our business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of certain real estate-related investments;

provided, in the event the Company consolidates another entity that it does not wholly own as a result of owning a controlling interest in such entity or otherwise, expenses will be calculated without giving effect to such consolidation and instead such entity’s expenses will, on a pro rata basis consistent with the Company’s percentage ownership, be considered those of the Company for purposes of calculation of expenses.

The Adviser may, at its discretion and at any time, waive its right to reimbursement for eligible out-of-pocket expenses paid on the Company’s behalf.

Once waived, these expenses are considered permanently waived and become non-recoupable in the future.

Once waived, those expenses were considered permanently waived and became non-recoupable.

Under the terms of the Advisory Agreement, our Adviser will, among other things:

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As consideration for the Adviser’s services under the Advisory Agreement, we pay our Adviser an annual fee (the “Advisory Fee”) of 1.00% of Managed Assets and an annual fee (the “Administrative Fee” and, together with the Advisory Fee, the “Fees”) of 0.20% of the Company’s Managed Assets.

The Advisory Agreement provides that the first portion of the monthly installment of the Advisory Fee shall be paid in cash up to $1.0 million and the remainder of the monthly installment of the Advisory Fee, if any, shall be paid in common shares of the Company, subject to certain restrictions related to maintaining the Company’s status as a REIT and compliance with federal securities laws and rules promulgated by the New York Stock Exchange (the “NYSE”).

In addition, in no event will the common shares issued to the Adviser under the Advisory Agreement exceed five percent of the number of common shares or five percent of the voting power of the Company outstanding prior to the first such issuance.

The number of common shares payable to the Adviser under the Advisory Agreement as a portion of the Advisory Fee shall equal (i) the total dollar amount of the monthly installment of the Advisory Fee payable minus the $1.0 million cash portion of the monthly installment of the Advisory Fee divided by (ii) the volume-weighted average price per share for the 10 trading days prior to the end of the month for which the Fees will be paid.

The Advisory Agreement provides that the monthly installment of the fees shall be paid in cash unless the Adviser elects, in its sole discretion, to receive all or a portion of the monthly installment of the fees in common shares of the Company, subject to certain restrictions including that in no event shall the common shares issued to the Adviser under the Advisory Agreement exceed five percent of the number of common shares or five percent of the voting power of the Company outstanding prior to the first such issuance (the "Share Cap") and that in no event shall the Common Shares issued to the Adviser under the Advisory Agreement exceed 6,000,000 Common Shares;

provided, however, that the Share Cap will not apply if the Company's shareholders have approved issuances in excess of the Share Cap.

The Fees shall be payable independent of the performance of the Company or its investments.

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We are required to pay directly or reimburse the Adviser for all of the documented “operating expenses” (all out-of-pocket expenses of the Adviser in performing services for us, including but not limited to the expenses incurred by the Adviser in connection with any provision by the Adviser of legal, accounting, financial, due diligence, investor relations or other services performed by the Adviser that outside professionals or outside consultants would otherwise perform and our pro rata share of rent, telephone, utilities, office furniture, equipment, machinery or other office, internal and overhead expenses of the Adviser required for our operations) and 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 (collectively, “Offering Expenses”), paid or incurred by the Adviser or its affiliates in connection with the services it provides to us pursuant to the Advisory Agreement.

Direct payment of operating expenses by us together with reimbursement of operating expenses to the Adviser, plus compensation expenses relating to equity awards granted under a long-term incentive plan and all other corporate general and administrative expenses of the Company, including the Fees payable under the Advisory Agreement, may not exceed the Expense Cap of 1.5% of Managed Assets, calculated as of the end of each quarter, for the twelve-month period following the Company’s receipt of the Deregistration Order;

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 or other events outside the ordinary course of our business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of certain real estate-related investments;

The Adviser may, at its discretion and at any time, waive its right to reimbursement for eligible out-of-pocket expenses paid on the Company’s behalf.

Once waived, these expenses are considered permanently waived and become non-recoupable in the future.

The Advisory Agreement has an initial term of three years that will expire on July 1, 2025 and successive additional one-year terms thereafter unless earlier terminated.

We have the right to terminate the Advisory Agreement on 30 days’ written notice upon the occurrence of a cause event (as defined in the Advisory Agreement).

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The Adviser 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 Advisory Agreement will automatically terminate in the event of Advisers Act Assignment (as defined in the Advisory Agreement) unless we provide written consent.

In addition, the Advisory Agreement will automatically terminate in the event of an Advisers Act Assignment (as defined in the Advisory Agreement) unless we provide written consent.

A termination fee will be payable to the Adviser by us upon termination of the Advisory Agreement for any reason, including non-renewal, other than a termination by us upon the occurrence of a cause event or due to an Advisers Act Assignment.

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The property management agreement with NexVest for the White Rock Center is dated June 1, 2013, and the management fee is calculated on 4% of gross receipts, payable monthly.

Management of Life Settlement Contracts

The Company’s investments in U.S.

life settlement contracts through SFP, a wholly owned Irish Designated Activity Company, are managed by NexAnnuity Asset Management, L.P.

(“NexAnnuity”), an affiliate of the Adviser.

SFP acquires life settlement contracts funded by the issuance of debt securities (the “Structured Note”) purchased by the Company and utilizes proceeds from maturing life settlement contracts to repay the Structured Note and to further invest in life settlement contracts.

The management agreement (the “SFP IMA”) with NexAnnuity provides that NexAnnuity will receive a management fee (the “SFP Management Fee”) paid monthly in an amount equal to 1.0% of the average weekly value of an amount equal to the total assets of SFP, including any form of leverage, minus all accrued expenses incurred in the normal course of operations, but not excluding any liabilities or obligations attributable to investment leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing through a credit facility or the issuance of debt securities), (ii) the issuance of preferred stock or other preference securities, (iii) the reinvestment of collateral received for securities loaned in accordance with the investment objective, investment guidelines and policies under the SFP IMA, and/or (iv) any other means, plus any value added tax or any other applicable tax, if any, thereon.

NexAnnuity may waive all or a portion of the SFP Management Fee.

For the year ended December 31, 2022, NexAnnuity did not waive any portion of the SFP Management Fee.

The property management agreement with NexVest for Cityplace Tower also allows for the manager, as the agent of CP Tower Owner, LLC (“Owner”), to draw on the operating account when required in connection with the operation or maintenance of the property, the payment of certain expenses defined in the agreement, or as expressly approved in writing by Owner.

Our profitability depends, in large part, on our ability to acquire investments in commercial real estate at attractive prices.

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government, if we are not eligible to participate in programs established by the U.S.

In addition, some of our competitors are not subject to the operating constraints associated with REIT tax compliance or maintenance of an exclusion or exemption from the Investment Company Act.

In addition, some of our competitors are not subject to the operating constraints associated with REIT tax compliance or maintenance of an exclusion or exemption from the Investment Company Act of 1940 (the "Investment Company Act").

Furthermore, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments, or pay higher prices, than we can.

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We expect that these relationships will enable us to compete more efficiently and effectively for attractive investment opportunities.

Although we believe we are well positioned to compete effectively, there can be no assurance that we will be able to achieve our business goals or expectations due to the extensive

competition in our market sector.

Although we believe we are well positioned to compete effectively, there can be no assurance that we will be able to achieve our business goals or expectations due to the extensive competition in our market sector.

We operate in a competitive market for investment opportunities and future competition may limit our ability to acquire desirable investments in commercial real estate and could also affect the pricing of our securities.

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Compliance with the ADA, as well as other federal, state and local laws, may require modifications to operating properties we currently own or may purchase or may restrict renovations of those properties.

Failure to comply with these laws or regulations could result in the imposition of fines or an award of damages to private litigants, as well as the incurrence of the costs of making modifications to attain compliance, and future legislation could impose additional obligations or restrictions on our operating properties.

obligations or restrictions on our operating properties.

We could be held liable as the owner of the property for a failure of one of our tenants to comply with these laws or regulations.

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A prior owner or operator of a property or historic operations at our operating properties, or operations and conditions at nearby properties, may have created a material environmental condition that is not known to us or the independent consultants preparing the site assessments.

Material environmental conditions may have arisen after

the review was completed or may arise in the future, and future laws, ordinances or regulations may impose material additional environmental liability.

Material environmental conditions may have arisen after the review was completed or may arise in the future, and future laws, ordinances or regulations may impose material additional environmental liability.

Moreover, conditions identified in environmental assessments that did not appear material at that time, may in the future result in material liability.

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There are certain losses (including, but not limited to, losses arising from environmental conditions, acts of war or certain kinds of terrorist attacks) that are not insured, in full or in part, because they are either uninsurable or the cost of insurance makes it, in our belief, economically impractical to maintain such coverage.

Should an uninsured loss arise

against us, we would be required to use our own funds to resolve the issue, including litigation costs.

Should an uninsured loss arise against us, we would be required to use our own funds to resolve the issue, including litigation costs.

In addition, for the operating properties in our Portfolio, we could self-insure certain portions of our insurance program and therefore, use our own funds to satisfy those limits.

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REIT Qualification

We have to be treated as a REIT for U.S.

We have elected to be treated as a REIT for U.S.

federal income tax purposes, beginning with our taxable year ended December 31, 2021.

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We will monitor our holdings to ensure continuing and ongoing compliance with this test.

In addition, we believe that neither we nor our OP are considered an investment company under Section 3(a)(1)(A) of the Investment Company Act because neither of us engage primarily, propose to engage primarily, or hold ourselves out as being engaged primarily in the business of investing, reinvesting or trading in securities.

In addition, we believe that neither we nor our OP are considered an investment company under Section 3(a)(1)(A) or Section 3(a)(1)(C) of the Investment Company Act because neither of us engage primarily, propose to engage primarily, or hold ourselves out as being engaged primarily in the business of investing, reinvesting or trading in securities.

Rather, we and our OP are primarily engaged in the non-investment company businesses of our subsidiaries.

We anticipate that certain of our subsidiaries will meet the requirements of the exclusion set forth in Section 3(c)(5)(C) of the Investment Company Act, which excludes entities primarily engaged in the business of “purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” To meet this exclusion, the SEC staff has taken the position that at least 55% of a subsidiary’s assets must constitute qualifying assets (as interpreted by the SEC staff under the Investment Company Act) and at least another 25% of assets (subject to reduction to the extent the subsidiary invested more than 55% of its total assets in qualifying assets) must constitute real estate-related assets under the Investment Company Act (and no more than 20% comprised of miscellaneous assets).

We anticipate that certain of our subsidiaries will meet the requirements of the exclusion set forth in Section 3(c)(5)(C) of the Investment Company Act, which excludes entities primarily engaged in the business of “purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” To meet this exclusion, the Securities and Exchange Commission ("SEC") staff has taken the position that at least 55% of a subsidiary’s assets must constitute qualifying assets (as interpreted by the SEC staff under the Investment Company Act) and at least another 25% of assets (subject to reduction to the extent the subsidiary invested more than 55% of its total assets in qualifying assets) must constitute real estate-related assets under the Investment Company Act (and no more than 20% comprised of miscellaneous assets).

In general, we also expect, with regard to our subsidiaries relying on Section 3(c)(5)(C), to rely on other guidance published by the SEC staff and on our analyses of guidance published with respect to other types of assets to determine which assets are qualifying assets and real estate-related assets.

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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.

Based on our annual revenues for 2023, we have transitioned from a "smaller reporting company" as defined in the Exchange Act.

For this Annual Report and in our definitive proxy statement on Schedule 14A for our 2024 Annual Meeting of Shareholders, we may elect to take advantage of certain of the scaled disclosures available to smaller reporting companies.

Human Capital Disclosure

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As of December 31, 2023, we had no employees.

COVID-19 Pandemic Updates

For information on the effects that the COVID-19 pandemic has had on our business, see “Item 1A.

Risk Factors— The current COVID-19 pandemic or the future outbreak of other highly infectious or contagious diseases could materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance.”

Corporate Information

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Our website is located at nxdt.nexpoint.com.

We make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) available on our website as soon as reasonably practicable after we file such materials with, or furnish it to, the SEC.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business