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Item 8. Financial Statements and Supplementary Data

2024-03-14 compared with 2023-03-31 · 608 added, 461 removed, 934 unchanged (53% of the section changed)

2 unchanged sentences

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheet as of December 31, 2022

Consolidated Statement of Assets and Liabilities as of December 31, 2021 (predecessor basis)

Consolidated Statement of Operations and Comprehensive Income (Loss) for the Six Months Ended December 3 1 , 2022

Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022

Consolidated Statements of Operations and Comprehensive Income (Loss) for the Year Ended December 31, 2023 and Six Months Ended December 31, 2022

Consolidated Statement of Operations for the Six Months Ended June 30, 2022 (Predecessor Basis)

Consolidated Statement of Operations for the Year Ended December 31, 2021 (Predecessor Basis)

Consolidated Statement of Shareholders’ Equity for the Six Months Ended December 31 , 2022

Consolidated Statements of Shareholders’ Equity for the Year Ended December 31, 2023 and Six Months Ended December 31, 2022

Consolidated Statement of Changes in Net Assets for the Six Months Ended June 30, 2022 (Predecessor Basis)

Consolidated Statement of Changes in Net Assets for the Year Ended December 31, 2021 (Predecessor Basis)

Consolidated Statement of Cash Flows for the Six Months Ended D ecember 31 , 2022

Consolidated Statements of Cash Flows for the Year Ended December 31, 2023 and Six Months Ended December 31, 2022

Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2022 (Predecessor Basis)

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

To the Shareholders and Board of Trustees of

NexPoint Diversified Real Estate Trust:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of NexPoint Diversified Real Estate Trust and subsidiaries (the Company) as of December 31, 2022 (successor basis), the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for the six month period ended December 31, 2022 (successor basis).

We have also audited the statements of operations, changes in net assets, and cash flows for the six month period ended June 30, 2022 (predecessor basis), and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the six month periods ended December 31, 2022 (successor basis) and June 30, 2022 (predecessor basis), in conformity with U.S.

We have audited the accompanying consolidated balance sheets of NexPoint Diversified Real Estate Trust and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for the year ended December 31, 2023 and the six month period ended December 31, 2022 and the statements of operations, change in net assets, and cash flows for the six month period ended June 30, 2022 (predecessor basis), and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the year ended December 31, 2023, the six month period ended December 31, 2022, and the six month period ended June 30, 2022 (predecessor basis), in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 13, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

3 unchanged sentences

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

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Fair value measurement of level 3 investments

As discussed in Notes 2 and 3 to the consolidated financial statements as a result of the Company’s deregistration as an investment company on July 1, 2022, certain of the Company’s investments were recorded at fair value using inputs that are classified within Level 3 of the fair value hierarchy.

As discussed in Notes 2 and 9 to the consolidated financial statements, the Company has $691.2 million of investments that are measured at fair value on a recurring basis, a portion of which uses inputs that are classified within Level 3 of the fair value hierarchy as of December 31, 2023.

The Company uses an income approach, market approach, or a combination thereof to value each of these investments.

Establishing fair values for these Level 3 investments is inherently subjective and dependent upon significant unobservable inputs and assumptions.

We identified the evaluation of fair value measurements for certain level 3 investments as of July 1, 2022, as a critical audit matter.

Evaluation of the Company’s valuation assumptions for these level 3 investments involved a high degree of auditor judgment.

Specifically, subjective auditor judgment was required to evaluate the capitalization rates, discount rates, and market rent.

Changes in these assumptions could have a significant impact on the fair value of the level 3 investments.

We identified the evaluation of the fair value measurements for certain Level 3 investments as a critical audit matter.

Complex auditor judgment and the involvement of valuation professionals with specialized skills and knowledge were required to evaluate certain assumptions used in the Company’s determination of the fair value measurements.

Specifically, for investments that used the income approach, the assumptions included the capitalization rates, market rent, discount rates, and discount applied to net asset value.

For investments that used the market approach, the assumptions included the discount applied to net asset value and the market value of certain spectrum assets.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design of an internal control related to the significant assumptions of the capitalization rates, discount rates, and market rent.

We evaluated the design and tested the operating effectiveness of certain internal controls used in the fair value measurements process, including controls related to the assumptions described above.

We involved valuation professionals with specialized skills and knowledge who assisted in:

• Evaluating the Company’s capitalization rates and discount rates, by comparing them against a range that was independently developed using publicly available market data for comparable entities.

• Assessing the appropriateness of the market rent assumption by comparing it to independently researched transactions and current listings of comparable properties.

• evaluating the capitalization rates and discount rates by comparing them against ranges that were independently developed using publicly available market data for comparable properties.

• assessing the appropriateness of the market rent assumptions by comparing them to comparable transactions and current listings of comparable properties.

• determining the appropriateness of the discount applied to net asset value by comparing it to industry data available for comparable publicly traded companies.

• assessing the market value of certain spectrum licenses by comparing them to a range of values developed using publicly available auction data, analyst indications of comparable spectrum, and comparable transactions.

We have served as the Company’s auditor since 2022.

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March 13, 2024

2323 Ross Avenue

Dallas, TX 75201-2721

Report of Independent Registered Public Accounting Firm

1 unchanged sentence

NexPoint Diversified Real Estate Trust:

Opinion on Internal Control Over Financial Reporting

We have audited NexPoint Diversified Real Estate Trust and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for the year ended December 31, 2023 and the six month period ended December 2022, and the statements of operations, changes in net assets, and cash flows for the six month period ended June 30, 2022 (predecessor basis) and the related notes (collectively, the consolidated financial statements), and our report dated March 13, 2024 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Independent Registered Public Accounting Firm.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We have served as the Company’s auditor since 2022.

Dallas, Texas

March 13, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Trustees of

NexPoint Diversified Real Estate Trust

Opinion on the Financial Statements

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NEXPOINT DIVERSIFIED REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value amounts)

December 31, 2022

December 31, 2023 December 31, 2022

Consolidated Real Estate Investments

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Total Net Consolidated Real Estate Investments 263,914 266,083

Investments, at fair value ($ 576,419 with related parties)

Equity method investments ($ 7,272 with related parties)

Investments, at fair value ($ 533,065 and $ 576,419 with related parties, respectively)

691,238 754,910

Equity method investments ($ 7,079 and $ 7,272 with related parties, respectively)

66,263 70,656

Life insurance policies, at fair value — 67,711

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Mortgages payable, net $ 142,186 $ 144,414

Notes payable 24,250

Notes payable, net ($ 20,000 and $ 0 with related party, respectively)

52,919 24,250

Prime brokerage borrowing 1,782 2,624

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unlimited shares authorized;

37,171,807 shares issued and outstanding

38,389,600 and 37,171,807 shares issued and outstanding, respectively

Additional paid-in capital 1,011,613 999,845

Accumulated earnings less dividends 17,947

Accumulated earnings (loss) ( 126,580 ) 17,947

Total Shareholders' Equity 885,074 1,017,832

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NEXPOINT DIVERSIFIED REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES (Predecessor Basis)

(in thousands, except share and per share amounts)

December 31, 2021

Investments, at fair value (a) $ 169,884

Affiliated investments, at fair value 872,101

Total investments, at fair value 1,041,985

Cash and cash equivalents 2,238

Restricted cash - securities sold short 440

Foreign tax reclaim receivable 1,250

Receivable for:

Due from custodian 192

Other assets 277

Company shares sold 209

Dividends and interest 913

Prepaid expenses and other assets 510

TOTAL ASSETS $ 1,048,014

Notes payable $ 42,500

Due to custodian 110

Securities sold short, at value 430

Due to broker 9,188

Investment advisory fees 1,005

Interest expense and commitment fee 63

Accounting services fees 72

Accrued expenses and other liabilities 186

Total Liabilities $ 53,554

Mezzanine equity

Series A cumulative preferred shares, net of deferred financing costs ( 83,252 )

Net assets applicable to common shares $ 911,208

Net assets consist of:

Paid-in capital in excess of par $ 913,920

Total accumulated loss ( 2,712 )

Net assets applicable to common shares $ 911,208

Investments, at cost $ 279,216

Affiliated investments, at cost 828,659

Cash equivalents, at cost 2,157

Proceeds from securities sold short 765

Common Shares

Net assets $ 911,208

Shares outstanding (unlimited authorization) 37,080

Net asset value per share (net assets/shares outstanding) $ 24.57

(a) includes fair value of securities on loan of $ 1,248

See Notes to Consolidated Financial Statements

NEXPOINT DIVERSIFIED REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts)

For the Six Months Ended December 31,

For the Year Ended December 31, For the Six Months Ended December 31,

Rental income $ 20,309 $ 10,070

Interest income ($ 1,332 with related parties)

Dividend income ($ 10,881 with related parties)

Interest income ($ 2,514 and $ 1,332 with related parties, respectively)

Dividend income ($ 26,103 and $ 10,881 with related parties, respectively)

35,638 40,600

Other income 308 32

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Corporate general and administrative expenses 7,981 3,079

Conversion Expense 1,615

Conversion expenses 1,203 1,615

Depreciation and amortization 13,937 7,175

Total expenses 51,703 24,358

Operating income 30,772

Operating income (loss) 11,581 30,772

Interest expense ( 15,902 ) ( 5,759 )

Equity in losses of unconsolidated equity method ventures ( 2,257 )

Change in unrealized gain (losses) ( 92,031 )

Equity in income (losses) of unconsolidated equity method ventures ($ 624 and $( 1,935 ) with related parties, respectively)

( 306 ) ( 2,257 )

Change in unrealized gains (losses) ($( 112,717 ) and $( 57,846 ) with related parties, respectively)

( 108,249 ) ( 92,031 )

Realized gains (losses) ( 1,634 ) ( 2,323 )

Net loss before income taxes ( 71,598 )

Net income (loss) before income taxes ( 114,510 ) ( 71,598 )

Income tax expense ( 2,731 ) ( 9,975 )

Net loss ( 81,573 )

Net income attributable to preferred shareholders ( 2,310 )

Net loss attributable to common shareholders $ ( 83,883 )

Net income (loss) ( 117,241 ) ( 81,573 )

Net (income) loss attributable to preferred shareholders ( 4,619 ) ( 2,310 )

Net income (loss) attributable to common shareholders $ ( 121,860 ) $ ( 83,883 )

Weighted average common shares outstanding - basic 37,334 37,172

Weighted average common shares outstanding - diluted 37,334 37,172

Loss per share - basic $ ( 2.26 )

Loss per share - diluted $ ( 2.26 )

Earnings (loss) per share - basic $ ( 3.26 ) $ ( 2.26 )

Earnings (loss) per share - diluted $ ( 3.26 ) $ ( 2.26 )

See Notes to Consolidated Financial Statements

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Total operating expenses 20,029

Net investment income (loss) 75,107

Net investment income 75,107

Preferred dividend expenses ( 4,555 )

Net realized and unrealized gain (loss) on investments

Realized loss on:

Realized gain on:

Investments from unaffiliated issuers ( 42,530 )

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Securities sold short 351

Net change in unrealized appreciation on:

Net change in unrealized gain on:

Investments from unaffiliated issuers 40,480

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Capital Accumulated

Earnings (Loss)

Dividends Total

Earnings (Loss) Total

Year Ended December 31, 2023 Number of

Shares Amount Number of

Shares Amount

Balances, December 31, 2022 3,359,593 $ 3 37,171,807 $ 37 $ 999,845 $ 17,947 $ 1,017,832

Stock-based compensation expense — — — — 1,344 — 1,344

Shares issued to Advisor for admin and advisory fees — — 145,620 — 1,431 — 1,431

Net loss attributable to common shareholders — — — — — ( 121,860 ) ( 121,860 )

Net income attributable to preferred shareholders — — — — — 4,619 4,619

Common share dividends declared ($ 0.60 per share)

— — 1,072,173 1 8,993 ( 22,667 ) ( 13,673 )

Preferred share dividends declared ($ 1.375 per share)

— — — — — ( 4,619 ) ( 4,619 )

Balances, December 31, 2023 3,359,593 $ 3 38,389,600 $ 38 $ 1,011,613 $ ( 126,580 ) $ 885,074

See Notes to Consolidated Financial Statements

NEXPOINT DIVERSIFIED REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS ’ EQUITY

(in thousands, except share and per share amounts)

Preferred Shares Common Shares Additional

Capital Accumulated

Earnings (Loss) Total

Six Months Ended December 31, 2022 Number of

Shares Par Value Number of

Shares Par Value

Shares Amount Number of

Shares Amount

Balances, July 1, 2022 3,359,593 $ 3 37,171,807 $ 37 $ 999,845 $ 112,983 $ 1,112,868

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NEXPOINT DIVERSIFIED REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Predecessor Basis)

(in thousands, except share and par value amounts)

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS (Predecessor Basis)

(in thousands, except share amounts)

For the Year Ended December 31,

Increase in net assets operations:

Increase (decrease) in net assets operations:

Net investment income $ 75,107

Preferred dividend expenses ( 4,555 )

Accumulated net realized loss on investments, securities sold short, written options, futures contracts, and foreign currency transactions ( 41,721 )

Accumulated net realized gain (loss) on investments, securities sold short, written options, futures contracts, and foreign currency transactions ( 41,721 )

Net change in unrealized appreciation on investments, securities sold short, written options contracts and translation of assets and liabilities denominated in foreign currency 216,624

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Cost of shares redeemed ( 152,321 )

Capital gains from the retirement of tendered shares 47,319

Net decrease from shares transactions ( 102,871 )

Proceeds from sale of shares 47,319

Net increase from shares transactions ( 102,871 )

Total increase in net assets 120,383

Beginning of year 790,825

End of year $ 911,208

Beginning of period 790,825

End of period $ 911,208

Change in Common Shares

1 unchanged sentence

Shares redeemed ( 8,750 )

Net decrease in common shares ( 8,588 )

Net increase in common shares ( 8,588 )

See Notes to Consolidated Financial Statements

NEXPOINT DIVERSIFIED REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the Six Months Ended December 31,

For the Year Ended December 31, For the Six Months Ended December 31,

Cash flows from operating activities

Net loss $ ( 117,241 ) $ ( 81,573 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization 13,937 7,175

Amortization of intangible lease liabilities ( 743 )

Amortization of intangible lease assets and liabilities ( 1,217 ) ( 743 )

Amortization of deferred financing costs 776 67

Paid-in-kind interest ($ 844 with related parties)

Paid-in-kind interest ($( 1,893 ) and $( 844 ) with related parties, respectively)

( 5,952 ) ( 2,872 )

Proceeds from paid-in-kind interest on paydowns or sales from investments 3,730 —

Realized (gain) loss 1,634 2,323

Net change in unrealized (gain) loss on investments held at fair value ($( 57,847 ) with related parties)

Equity in losses of unconsolidated ventures ($( 1,935 ) with related parties)

Distributions of earnings from unconsolidated ventures ($ 277 with related parties)

Net change in unrealized (gain) loss on investments held at fair value ($ 112,717 and $ 57,847 with related parties, respectively)

108,249 92,031

Equity in (income) losses of unconsolidated ventures ($( 624 ) and $ 1,935 with related parties, respectively)

Distributions of earnings from unconsolidated ventures ($ 817 and $ 277 with related parties, respectively)

Stock-based compensation expense 1,344 —

Cash paid for life settlement premiums ( 3,355 ) ( 2,576 )

Changes in operating assets and liabilities

Deferred tax asset ( 2,247 )

Equity security dividends reinvested ($( 5,529 ) and $ 0 with related parties, respectively)

Deferred tax benefit ( 648 ) ( 2,247 )

Changes in operating assets and liabilities, net of effects of acquisitions:

Income tax payable ( 10,364 ) 10,720

Real estate taxes payable ( 23 ) ( 2,069 )

Other operating assets 606

Other operating liabilities 5,914

Net cash provided by operating activities 31,431

Operating assets ( 9,077 ) 606

Operating liabilities ( 4,923 ) 5,914

Net cash provided by (used in) operating activities:

( 24,266 ) 31,431

Cash flows from investing activities

Proceeds from asset redemptions ($ 4,000 and $ 0 with related parties, respectively)

Distributions from CLO investments 9,170 18,105

Proceeds from sale of investments 16,512 14,246

Purchases of investments ( 11,276 )

Proceeds from paydowns of investments ($ 8,543 and $ 0 with related parties, respectively)

Purchases of investments ($( 5,984 ) and $( 7,913 ) with related parties, respectively)

( 5,984 ) ( 11,276 )

Contributions to equity method investments — ( 1,382 )

3 unchanged sentences

Proceeds from life settlement policy maturities 3,000 7,055

Net cash used in investing activities ( 14,418 )

Net cash outflow from deconsolidation of subsidiary ( 3,993 ) —

Net cash provided by (used in) investing activities 21,990 ( 14,418 )

Cash flows from financing activities

7 unchanged sentences

Dividends paid to common shareholders ( 13,408 ) ( 11,153 )

Net cash used in financing activities ( 19,140 )

Net decrease in cash, cash equivalents and restricted cash ( 2,127 )

Cash, cash equivalents and restricted cash, beginning of period (Note 3) 50,776

Net cash provided by (used in) financing activities:

6,796 ( 19,140 )

Net increase (decrease) in cash, cash equivalents and restricted cash 4,520 ( 2,127 )

Cash, cash equivalents and restricted cash, beginning of period 48,649 50,776

Cash, cash equivalents and restricted cash, end of period $ 53,169 $ 48,649

4 unchanged sentences

Capitalized construction costs included in accounts payable and other accrued liabilities $ 723 $ 3,883

Fair value assets acquired from the contribution of equity method investments* $ 62,510

Fair value of assets acquired from the contribution of equity method investments $ — $ 62,510

Non-cash dividend payment $ 8,994 $ —

Fair value of assets acquired from the sale of consolidated investments¹ $ 68,500 $ —

Non-cash advisory fee payment $ 1,431 $ —

Increase in dividends payable upon vesting of restricted stock units $ 265 $ —

Adjustment to Life Insurance Policies, at fair value, on deconsolidation of entity $ ( 62,484 ) $ —

Adjustment to accounts receivable on deconsolidation of entity $ ( 2,023 ) $ —

(1) For more information about this transaction, refer to Note 10.

Equity Method Investments—NexPoint Storage Partners Operating Company, LLC

Life Settlement Portfolio

See Notes to Consolidated Financial Statements

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The Company's wholly owned subsidiary, NexPoint Diversified Real Estate Trust OP GP, LLC (the "OP GP"), is the sole general partner of the OP.

As of December 31, 2022, there were 2,000 OP Units outstanding, of which 100.0 % were owned by the Company.

As of December 31, 2023, there were 2,000 partnership units of the OP (the “OP Units”) outstanding, of which 100.0 % were owned by the Company.

On July 1, 2022 (the “Deregistration Date”), 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 that focuses primarily on investing in various commercial real estate property types and across the capital structure, including but not limited to equity, mortgage debt, mezzanine debt and preferred equity (the “Business Change”).

The issuance of the Deregistration Order enabled the Company to proceed with full implementation of its new business mandate to operate as a diversified REIT that focuses primarily on investing in various commercial real estate property types and across the capital structure, including but not limited to equity, mortgage debt, mezzanine debt and preferred equity (the “Business Change”).

The Company is externally managed by NexPoint Real Estate Advisors X, L.P.

(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 “Adviser”), through an agreement dated July 1, 2022, 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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Basis of Accounting

Prior to the Deregistration Date, the Company was accounted for as an investment company in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 946, Financial Services – Investment Companies, or the “Predecessor Basis.” Upon the Deregistration Order, the Company discontinued the use of the guidance in FASB ASC 946 and prospectively applied the guidance under generally accepted accounting principles in the United States (“GAAP”) required for companies that are not investment companies, or what we refer to as the “ Successor Basis".

As a result of these changes, our consolidated financial statements as of and for the six months ended December 31, 2022, are accounted for using the Successor Basis and are presented separately from our consolidated financial statements on the Predecessor Basis, as of and for the periods prior to the Deregistration Date.

generally accepted accounting principles (“GAAP”) required for companies that are not investment companies, or what we refer to as the “Successor Basis." As a result of these changes, our consolidated financial statements as of December 31, 2023 and 2022 and for the year ended December 31, 2023 and six months ended December 31, 2022 and thereafter, are accounted for using the Successor Basis and are presented separately from our consolidated financial statements on the Predecessor Basis, as of and for the periods prior to the Deregistration Date.

The fair value of the Company’s investments and consolidated operating properties as of the Deregistration Date became the new basis in accordance with FASB ASC 946.

4 unchanged sentences

The accompanying consolidated financial statements have been prepared according to the rules and regulations of the SEC.

In the opinion of management, all adjustments and eliminations necessary for the fair presentation of the Company’s financial position as of December 31, 2022, and December 31, 2021 (Predecessor Basis) and results of operations for the six months ended December 31, 2022, the six months ended June 30, 2022 (Predecessor Basis) and twelve months ended December 31, 2021 (Predecessor Basis) have been included.

In the opinion of management, all adjustments and eliminations necessary for the fair presentation of the Company’s financial position as of December 31, 2023 and December 31, 2022, and results of operations for the year ended December 31, 2023, six months ended December 31, 2022, six months ended June 30, 2022 (Predecessor Basis) and year ended December 31, 2021 (Predecessor Basis) have been included.

Such adjustments are normal and recurring in nature.

15 unchanged sentences

Land Not depreciated

Buildings 30 - 40

Improvements 5 - 20

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Valuation of Investments

As of December 31, 2022, the Company’s fair valued investments consisted of senior loans, corporate bonds, collateralized loan obligations ("CLOs"), convertible notes, common stocks, rights, warrants, life settlement contracts, LP interests and LLC interests.

As of December 31, 2023 and 2022 , the Company’s fair valued investments consisted of senior loans, corporate bonds, collateralized loan obligations ("CLOs"), convertible notes, common stocks, rights, warrants, LP interests and LLC interests.

The fair value of the Company’s senior loans, bonds, and CLOs are generally based on quotes received from brokers or independent pricing services.

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The Company has elected for certain of the equity method investments to be measured using fair value.

The Company has elected for all debt instruments to be measured using fair value.

The fair value of the Company’s common stocks, rights, and warrants that are not actively traded on national exchanges are generally priced using quotes derived from implied values, indicative bids, or a limited amount of actual trades and are classified as Level 3 assets because the inputs used by the brokers and pricing services to derive the values are not readily observable.

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Further, such investments may be subject to legal and other restrictions on resale or otherwise be less liquid than publicly traded securities.

The fair value of the Company’s common stocks, exchange-traded funds, other registered investment companies and warrants that are not actively traded on national exchanges are generally priced using quotes derived from implied values, indicative bids, or a limited amount of actual trades and are classified as Level 3 assets because the inputs used by the

brokers and pricing services to derive the values are not readily observable.

The fair value of the Company’s investments in common stock, exchange-traded funds, other registered investment companies and warrants that are not actively traded on national exchanges are generally priced using quotes derived from implied values, indicative bids, or a limited amount of actual trades and are classified as Level 3 assets because the inputs

used by the brokers and pricing services to derive the values are not readily observable.

The Company’s real estate investments include equity interests in limited liability companies and equity issued by REITs that invest in commercial real estate.

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Convertible notes are valued using a discounted cash flow model using discount rates derived from observable market data applied to the internal rate of return implied by the expected contractual cash flows.

Upon initial acquisition, the Company’s life settlement contracts are recognized at the transaction price.

For each subsequent reporting period, the investments are measured at fair value by a third-party valuation specialist using a life settlement pricing model and are categorized as Level 3 assets in the fair value hierarchy.

Key assumptions utilized in determining fair value include but are not limited to:

As of December 31, 2022 the Company's fair value investments also included life settlement contracts, all of which were sold during 2023 (see Note 10) The Company’s life settlement contracts were recognized at the transaction price.

For each subsequent reporting period, the investments were measured at fair value by a third-party valuation specialist using a life settlement pricing model and were categorized as Level 3 assets in the fair value hierarchy.

Key assumptions utilized in determining fair value included but were not limited to:

(i) life expectancy estimates provided by independent third party underwriters based on actuarially developed mortality tables and industry life expectancy reports;

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and (iv) offers and/or commitments from purchasers.

In addition, the valuation agent will also consider recent sales as well as offers received for the life policies deemed likely to close in the near future in estimating fair value.

The assumptions used to value life policies are by nature, inherently uncertain and the effect of changes in estimates may be material.

The fair value measurement used in estimating the present value calculations are derived from valuation techniques that include inputs that are not based on observable market data.

Changes in the fair value of the life settlement contracts are reported as net unrealized gains or losses on the Consolidated Statement of Operations (Successor Basis).

Upon the death of an insured or the sale of a life policy, the Company will recognize the difference between the proceeds received and the cost of the life policy as a realized gain or loss in the Company's Consolidated Statement of Operations (Successor basis).

In addition, the valuation agent would also consider recent sales as well as offers received for the life policies deemed likely to close in the near future in estimating fair value.

The assumptions used to value life policies were by nature, inherently uncertain and the effect of changes in estimates could be material.

The fair value measurement used in estimating the present value calculations were derived from valuation techniques that include inputs that are not based on observable market data.

Changes in the fair value of the life settlement contracts were reported as net unrealized gains or losses on the Consolidated Statement of Operations (Successor Basis).

Upon the death of an insured or the sale of a life policy, the Company would recognize the difference between the proceeds received and the cost of the life policy as a realized gain or loss in the Company's Consolidated Statement of Operations (Successor basis).

Real estate assets and equity method investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell.

As of December 31, 2022, there are no properties held for sale.

The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code"), effective for our taxable year ended December 31, 2021.

To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute annually at least

90% of its “REIT taxable income,” as defined by the Code, to its shareholders.

As of December 31, 2023, and 2022, there are no properties held for sale.

The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code"), and expects to continue to qualify as a REIT.

To qualify as a REIT, the Company must meet a

number of organizational and operational requirements, including a requirement to distribute annually at least 90% of its “REIT taxable income,” as defined by the Code, to its shareholders.

As a REIT, the Company will be subject to federal income tax on its undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions it pays with respect to any calendar year are less than the sum of (1) 85% of its ordinary income, (2) 95% of its capital gain net income and (3) 100% of its undistributed income from prior years.

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As of December 31, 2023, the Company believes it is in compliance with all applicable REIT requirements.

The Company has recorded a current income tax expense of $ 2.0 million for the six months ended June 30, 2022 and $ 10.7 million associated with the TRSs for the six months ended December 31, 2022, which is largely driven by income from the Company’s legacy CLO investments.

The tax expense is partially offset by removing the valuation allowance on a deferred tax asset of $ 2.2 million and increased by a 2021 return-to-provision adjustment of $ 1.5 million for a net expense of $ 12.0 million for the twelve months ended December 31, 2022, that is recorded on the Consolidated Statement of Operations.

The Company evaluates the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” (greater than 50% probability) of being sustained by the applicable tax authority.

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.

The Company’s 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.

As of December 31, 2022 and to the knowledge of the Company, the Company has no examinations in progress and none are expected at this time.

As a REIT for U.S.

federal income tax purposes, the Company may deduct earnings distributed to stockholders against the income generated by our REIT operations.

The Company continues to be subject to income taxes on the income of its taxable REIT subsidiaries.

Our consolidated net loss before income taxes was $ 114.5 million and $ 71.6 million for the year ended December 31, 2023 and the six months ended December 31, 2022, respectively.

The Company’s consolidated balance sheet as of December 31, 2023 consists of a $ 4.5 million net deferred tax asset at NHF TRS, LLC and a $ 1.6 million net deferred tax liability at NREO TRS, Inc.

for a consolidated net Deferred Tax asset of $ 2.9 million.

The Company's consolidated balance sheet as of December 31, 2022 consisted of a $ 3.4 million net deferred tax asset at NHF TRS, LLC and a $ 1.2 million net deferred tax liability at NREO TRS, Inc.

for a consolidated net Deferred Tax asset of $ 2.2 million.

The Company’s tax provision for interim periods is determined using an estimate of its annual current and deferred effective tax rates, adjusted for discrete items.

Our effective tax rates for the year ended December 31, 2023 and six months ended December 31, 2022 were ( 2.38 )% and ( 13.93 )%, respectively.

Our effective tax rate differs from the U.S.

federal statutory corporate tax rate of 21.0% primarily due to our REIT operations generally not being subject to federal income taxes.

The Company recognizes its tax positions and evaluates them using a two-step process.

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Second, the Company will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement.

The Company had no material unrecognized tax benefit or expense, accrued interest or penalties as of December 31, 2022.

The Company had no material unrecognized tax benefit or expense, accrued interest or penalties as of December 31, 2023 and 2022.

The Company and its subsidiaries are subject to federal income tax as well as income tax of various state and local jurisdictions.

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When applicable, the Company recognizes interest and/or penalties related to uncertain tax positions on its consolidated statement of operations and comprehensive income (loss).

The Company has not recorded any uncertain tax positions for the six months ended June 30, 2022 or six months ended December 31, 2022.

The Company has not recorded any uncertain tax positions for the years ended December 31, 2023 and 2022.

A reconciliation of the statutory income tax provisions to the effective income tax provisions for the periods indicated is as follows (in thousands):

For the Period Ended December 31,

Expected tax at statutory rate $ ( 24,047 ) 21.0 % $ ( 15,036 ) 21.0 %

Non-taxable REIT income 27,426 - 24.0 % 27,258 - 38.1 %

State and local tax expense - net of federal benefit — — % — — %

Change in valuation allowance ( 648 ) 0.6 % ( 2,247 ) 3.1 %

Total provision $ 2,731 - 2.4 % $ 9,975 - 13.9 %

Deferred Tax Assets

As of December 31, 2022, significant components of the net deferred tax assets (“DTA”) of the Company's TRSs were as follows (in thousands):

Deferred Tax Asset

Capital loss carryover from December 31, 2021 $ 2,050

Capital loss carryover utilized in 2022 ( 1,924 )

Net operating loss carryover from December 31, 2021 590

Net operating loss carryover utilized in 2022 ( 119 )

As of December 31, 2023 and 2022, significant components of the net deferred tax assets (“DTA”) of the Company's TRSs were as follows (in thousands):

Deferred Tax Asset as of December 31, 2023 Deferred Tax Asset as of December 31, 2022

Capital loss carryover from prior year $ 137 $ 2,050

Capital loss carryover to be utilized in current year — ( 1,924 )

Net operating loss carryover from prior year 442 590

Net operating loss carryover to be utilized in current year ( 138 ) ( 119 )

Unrealized tax loss on investments 17,351 16,677

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The Company may not offset tax assets or liabilities from one TRS with those of another TRS.

NHF TRS, LLC, one of the Company's TRSs, is estimated to generate a net taxable capital gain of $ 16.4 million for the six months ended December 31, 2022.

NHF TRS, LLC, one of the Company's TRSs, is estimated to generate a net taxable capital gain of $ 11.0 million for the year ended December 31, 2023 and generated a net taxable capital gain of $ 10.3 million for the six months ended December 31, 2022.

The Company believes it is more likely than not that it will be able to harvest capital losses within this TRS during the three succeeding taxable years to be eligible for a capital loss carryback refund claim and has therefore not applied a valuation allowance to the extent of the expected future refund claim.

As such, the Company has recorded a valuation allowance of $ 15.0 million against the Company’s gross deferred tax assets to arrive at a net DTA of $3.4 million to reflect the expected tax benefit associated with the unrealized tax losses at this TRS.

NREO TRS, LLC ("NREO TRS"), one of the Company's TRSs, has an estimated net operating loss balance of $ 2.2 million as of December 31, 2022 that does not have an expiration date as well as an estimated $ 0.6 million capital loss balance as of December 31, 2022, that will expire if not utilized within the succeeding five taxable years.

As such, the Company has recorded a valuation allowance of $ 14.9 million and $ 15.0 million for the year ended December 31, 2023 and for the six months ended December 31, 2022 respectively, against the Company’s gross deferred tax assets to arrive at a net DTA of $ 4.5 million and $3.4 million for the year ended December 31, 2023 and six months ended December 31, 2022, respectively, to reflect the expected tax benefit associated with the unrealized tax losses at this TRS.

NREO TRS, LLC ("NREO TRS") has an estimated net operating loss balance of $ 1.4 million as of December 31, 2023 that does not have an expiration date as well as an estimated $ 0.7 million capital loss balance as of December 31, 2023 that will expire if not utilized within the succeeding five taxable years.

The Company believes that it will be able to fully utilize the tax assets from NREO TRS and has not therefore applied a valuation allowance to the $ 0.7 million DTA generated by this TRS.

NREO TRS, one of the Company's TRSs, had an estimated net operating loss balance of $2.2 million as of December 31, 2022 that does not have an expiration date as well as an estimated $0.6 million capital loss balance as of December 31, 2022, that will expire if not utilized within the succeeding five taxable years.

Cash, Cash Equivalents and Restricted Cash

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Restricted cash represents cash deposited in accounts related to security deposits, property taxes, insurance premiums and deductibles and other lender-required escrows.

Amounts deposited in the reserve accounts associated with the loans can only be used as provided for in the respective loan agreements, and security deposits held pursuant to lease agreements are required to be segregated.

deposited in the reserve accounts associated with the loans can only be used as provided for in the respective loan agreements, and security deposits held pursuant to lease agreements are required to be segregated.

Income Recognition

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Interest expense, in accordance with the Company’s financing agreements, is recorded on the accrual basis.

General and administrative expenses are expensed as incurred.

Property operating expenses - Property operating expenses include property maintenance costs, salary and employee benefit costs, utilities, casualty-related expenses and recoveries and other property operating costs.

Property management fees - Property management fees include fees paid to NexVest, our property manager, for managing each property directly or indirectly owned by us (see Note 14 to our consolidated financial statements).

Property management fees - Property management fees include fees paid to NexVest, our property manager, for managing each property directly or indirectly owned by us (see Note 13).

Real estate taxes and insurance - Real estate taxes include the property taxes assessed by local and state authorities depending on the location of each property.

Insurance includes the cost of commercial, general liability, and other needed insurance for each property.

Advisory and administrative fees - Advisory and administrative fees include the fees paid to our Adviser pursuant to the Advisory Agreement (see Note 14 to our consolidated financial statements).

Advisory and administrative fees - Advisory and administrative fees include the fees paid to our Adviser pursuant to the Advisory Agreement (see Note 13).

Property general and administrative expense - Property general and administrative expenses include the costs of marketing, professional fees, general office supplies, and other administrative related costs of each property.

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Corporate general and administrative expenses and the advisory and administrative fees paid to our Adviser will not exceed 1.5% of Managed Assets (as defined below) per calendar year (or part thereof that the Advisory Agreement is in effect), calculated in accordance with the Advisory Agreement, or the Expense Cap (as defined below).

The Expense Cap does not limit the reimbursement by us of expenses related to securities offerings paid by our Adviser.

This limitation ended on June 30, 2023 and did not limit the reimbursement by us of expenses related to securities offerings paid by our Adviser.

The Expense Cap also does not apply to legal, accounting, financial, due diligence, and other service fees incurred in connection with mergers and acquisitions, extraordinary litigation, or other events outside our ordinary course of business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of real estate assets.

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Depreciation and amortization - Depreciation and amortization costs primarily include depreciation of our properties and amortization of leases or expenses.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”).

ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

The Company will continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

The Company holds investments in publicly traded companies and privately held entities primarily involved in the life science, multifamily, self-storage, single-family rental, mortgage lending, and hospitality industries.

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The Company has elected for certain of the equity method investments to be measured using fair value.

Unaudited summary financial information for significant equity method investments, as determined in accordance with Rule 3-09 of Regulation S-X, for which results are not available on a timely basis, are reported on a three-month lag.

Investments that do not qualify for the equity method of accounting – For investees over which we determine that we do not have the ability to exercise significant influence or control, we account for each investment depending on whether it is an investment in a (i) publicly traded company, (ii) privately held entity that reports net asset value (“NAV”) per share, or (iii) privately held entity that does not report NAV per share, as described below.

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Under the cumulative earnings approach, distributions up to the amount of cumulative equity in earnings recognized are classified as cash inflows from operating activities, and those in excess of that amount are classified as cash inflows from investing activities.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses on Financial Instruments (“ASU 2016-13”), which establishes credit losses on certain types of financial instruments.

The new approach changes the impairment model for most financial assets and requires the use of a current expected credit loss ("CECL") model for financial instruments measured at amortized cost and certain other instruments.

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.

The Company adopted the guidance on January 1, 2023, which did not have a material impact.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting – Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires a public entity to disclose significant segment expenses and other segment items in interim and annual periods and expands the ASC 280 disclosure requirements for interim periods.

The ASU also explicitly requires public entities with a single reportable segment to provide all segment disclosures under ASC 280, including the new disclosures under ASU 2023-07.

The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

Management is currently evaluating this ASU to determine its impact on the Company's disclosures.

Business Change

As discussed in Note 1 and Note 2, on the Deregistration Date, the SEC issued an order pursuant to Section 8(f) of the Investment Company Act declaring that the Company has ceased to be an investment company under the Investment Company Act.

The issuance of the Deregistration Order enables the Company to proceed with full implementation of the Business Change.

As discussed in Note 1, on the Deregistration Date, the SEC issued an order pursuant to Section 8(f) of the Investment Company Act declaring that the Company has ceased to be an investment company under the Investment Company Act.

The issuance of the Deregistration Order enabled the Company to proceed with full implementation of the Business Change.

Upon the Deregistration Order, the Company discontinued the use of guidance in FASB ASC 946.

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The change also required the consolidation of several investments that were previously not required to be consolidated under FASB ASC 946.

The table below illustrates the changes from the June 30, 2022 balance sheet using the Predecessor Basis and the July 1, 2022 opening balance sheet using the Successor Basis (dollars in thousands).

June 30, 2022 Difference July 1, 2022

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The assets of each entity can only be used to settle obligations of that particular entity, and the creditors of each entity have no recourse to the assets of other entities or the Company.

As of December 31, 2022, the Company, through the OP, owned four properties through SPEs.

The following table represents the Company’s ownership in each property by virtue of its 100 % ownership of the SPEs that directly own the title to each property as of December 31, 2022:

As of December 31, 2023 and 2022, the Company, through the OP, owned four properties through SPEs.

The following table represents the Company’s ownership in each property by virtue of its 100 % ownership of the SPEs that directly own the title to each property as of December 31, 2023 and 2022:

Effective Ownership Percentage at

Property Name Location Year Acquired December 31, 2022

Property Name Location Year Acquired December 31, 2023 December 31, 2022

White Rock Center Dallas, Texas 2013 100 % 100 %

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(1) NexPoint Dominion Land, LLC owns 100 % of 21.5 acres of undeveloped land in Plano, Texas.

Real Estate Investments Statistics

As of December 31, 2022, the Company was invested in two retail properties and one office and hospitality property (excluding investments in undeveloped land), as listed below:

Average Effective Monthly

Occupied Rent Per Square Foot

*(1) as of % Occupied *(2) as of

Property Name Rentable Square

(in thousands) Property Type Date

Acquired December 31,

2022 December 31,

White Rock Center 82,793 Retail 6/13/2013 $ 1.50 66.5 %

5916 W Loop 289 30,140 Retail 7/23/2013 $ 0.40 100.0 %

Cityplace Tower 1,353,087 Office & Hospitality (3) 8/15/2018 $ 2.10 32.9 %

* Information is unaudited.

(1) Average effective monthly occupied rent per square foot is equal to the average of the contractual rent for commenced leases as of December 31, 2022, minus any tenant concessions over the term of the lease, divided by the occupied square footage of commenced leases as of December 31, 2022.

(2) Percent occupied is calculated as the rentable square footage occupied as of December 31, 2022, divided by the total rentable square footage, expressed as a percentage.

(3) Cityplace is currently under development and the Company is converting part of the property into a hotel, which was still under construction as of December 31, 2022.

Consolidated Real Estate Investments

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Total Operating Properties $ 47,708 $ 192,723 $ 4,181 $ ( 4,567 ) $ 19,177 $ 125 $ 259,347

Depreciation expense was $ 4.3 million for the six months ended December 31, 2022.

Amortization expense related to the Company’s intangible lease assets was $ 2.9 million and $ 0.7 million for the Company’s intangible lease liabilities for the six months ended December 31, 2022.

The net amount amortized as an increase to rental revenue for capitalized above and below-market lease intangibles was $ 0.6 million for the six months ended December 31, 2022.

As of December 31, 2022, the major components of the Company’s investments in real estate held by SPEs the Company consolidates, which are included in "Consolidated Real Estate Investments" on the Consolidated balance sheet, were as follows (in thousands):

Operating Properties Land Buildings and

Improvements Intangible Lease Assets Intangible Lease

Liabilities Construction in Progress Furniture, Fixtures, and

Equipment Totals

White Rock Center $ 1,315 $ 10,314 $ 1,921 $ ( 101 ) $ — $ 5 $ 13,454

5916 W Loop 289 1,081 2,939 — — — — 4,020

Cityplace Tower 18,812 161,216 9,058 ( 6,669 ) 39,731 349 222,497

NexPoint Dominion Land, LLC 26,500 — — — — — 26,500

47,708 174,469 10,979 ( 6,770 ) 39,731 354 266,471

Accumulated depreciation and amortization — ( 4,114 ) ( 2,863 ) 743 — ( 181 ) ( 6,415 )

Total Operating Properties $ 47,708 $ 170,355 $ 8,116 $ ( 6,027 ) $ 39,731 $ 173 $ 260,056

Depreciation expense was $ 9.4 million for the year ended December 31, 2023 and $ 4.3 million for the six months ended December 31, 2022.

Amortization expense related to the Company’s intangible lease assets was $ 3.9 million for the year ended December 31, 2023 and $ 2.9 million for the six months ended December 31, 2022.

Amortization expense related to the Company's intangible lease liabilities was $ 1.5 million for the year ended December 31, 2023 and $ 0.7 million for the six months ended December 31, 2022.

The net amount amortized as an increase to rental revenue for capitalized above and below-market lease intangibles was 1.2 million for the year ended December 31, 2023 and $ 0.6 million for the six months ended December 31, 2022.

There were no acquisitions by the Company for the year ended December 31, 2023.

We completed one acquisition in 2022.

Details of the acquisition are in the table below (dollars in thousands):

On August 9, 2022, the Company purchased undeveloped land in Plano, Texas through a wholly owned SPE, as detailed in the table below (dollars in thousands).

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Cityplace Debt

The Company has debt on its office and hospitality real estate property.

The Company has debt on its real estate property pursuant to a Loan Agreement, originally dated August 15, 2018 and subsequently amended (the “Loan Agreement”).

The debt is limited recourse to the Company and encumbers the property.

The debt had an original maturity of September 8, 2022, and the Company has deferred the maturity date with the lender to May 8, 2023, with the possibility to extend for an additional four months to September 8, 2023 provided certain metrics are met.

The debt had an original maturity of September 8, 2022, and the Company deferred the maturity date with the lender to May 8, 2023, with the possibility to extend for an additional four months to September 8, 2023 provided certain metrics were met.

On May 8, 2023, the lender agreed to defer the maturity of the Cityplace debt by four months to September 8, 2023.

Also on May 8, 2023, the parties to the Loan Agreement agreed to convert the index upon which the interest rate is based to the one-month secured overnight financing rate ("SOFR") effective as of the first interest period beginning on or after May 8, 2023.

On September 8, 2023, the lender agreed to defer the maturity of the Cityplace debt by six months to March 8, 2024.

The debt restructuring per the terms of the Twelfth Omnibus Amendment Agreement was considered a debt modification.

The purpose of the deferral was to allow for continued discussions around refinancing the debt.

Management recognizes that finding an alternative source of funding is necessary to repay the debt by the maturity date.

Management recognizes that finding an alternative source of funding is necessary to repay the debt by the maturity

Management is evaluating multiple options to fund the repayment of the $ 142.3 million principal balance outstanding as of December 31, 2023, including refinancing the debt, securing additional equity or debt financing, selling a portion of the portfolio, or any combination thereof.

Management believes that there is sufficient time before the maturity date and that the Company has sufficient access to capital to ensure the Company is able to meet its obligations as they

Management believes that there is sufficient time before the maturity date and that the Company has sufficient access to capital to ensure the Company is able to meet its obligations as they become due.

Due to the short term nature of the debt, the fair value of the debt is approximately the outstanding balance.

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Mortgages payable, net $ 142,186

(1) If certain extension conditions are met based on the terms in the loan agreement, the maturity date will be extended to September 8, 2023.

The weighted average interest rate of the Company’s debt related to its Cityplace investment was 7.3 % as of December 31, 2022.

The loan agreements contain customary events of default, including defaults in the payment of principal or interest, defaults in compliance with the covenants contained in the documents evidencing the loan, defaults in payments under any other security instrument covering any part of the property, whether junior or senior to the loan, and bankruptcy or other insolvency events.

The weighted average interest rate of the Company’s debt related to its Cityplace investment was 8.5 % as of December 31, 2023 and 7.3 % as of December 31, 2022.

The Loan Agreement contains customary events of default, including defaults in the payment of principal or interest, defaults in compliance with the covenants contained in the documents evidencing the loan, defaults in payments under any other security instrument covering any part of the property, whether junior or senior to the loan, and bankruptcy or other insolvency events.

As of December 31, 2023, the Company believes it is in compliance with all covenants.

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

On March 31, 2022, the Company, through an unconsolidated subsidiary, borrowed approximately $ 13.5 million from NexPoint Real Estate Finance, Inc.

("NREF"), an entity advised by an affiliate of the Adviser, to finance its acquisition of a 77.0 % 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 had a principal amount of $ 13.5 million and bears interest at an annual rate of daily simple 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.

On August 8, 2023, the Company elected to extend the maturity date of this loan to January 8, 2024.

On January 8, 2024, the Company elected to extend maturity date of this loan to August 8, 2024.

Credit Facility

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and drew the full balance.

As of December 31, 2022, the Credit Facility, as amended, bore interest at the one-month London Inter-Bank Offered Rate ("LIBOR") plus 3.50 % and matures on November 6, 2023.

On March 6, 2023, the interest rate on the Credit Facility increased to one-month LIBOR plus 4.25 %.

The Company paid down $ 10.0 million on the Credit Facility during the year ended December 31, 2021.

During the twelve months ended December 31, 2022, the Company paid down $ 9.0 million on the Credit Facility.

As of December 31, 2022, the Credit Facility had an outstanding balance of $ 11.0 million.

Due to the short term nature of the debt, the fair value of the debt is approximately the outstanding balance.

On October 20, 2023, Raymond James Bank, N.A.

agreed to amend the terms of the Credit Facility, which, among other things, extended the maturity date to October 6, 2025 and increased the credit limit to $ 20.0 million.

On October 23, 2023, the Company drew $ 6.0 million of the available balance.

On November 20, 2023, the Company drew the remaining $ 13.0 million of the available balance.

During the year ended December 31, 2023, the Company paid down $ 10.0 million on the Credit Facility.

As of December 31, 2023, the Credit Facility had an outstanding balance of $ 20.0 million and bore interest at the one-month SOFR plus 4.25 %.

Due to the short term nature of

the debt, the fair value of the debt is approximately the outstanding balance.

Management believes that the Company has sufficient access to capital to ensure the Company is able to meet its obligations as they become due.

Revolving Credit Facility

On May 22, 2023, the Company entered into a $ 20.0 million revolving credit facility (the "NexBank Revolver") with NexBank, in the initial principal balance of $ 20.0 million, with the option for the Company to receive additional disbursements thereunder up to a maximum of $ 50.0 million.

As of December 31, 2023, the NexBank Revolver bears interest at one-month SOFR plus 3.50 % and matures on May 21, 2024, with the option to extend the maturity up to two times, each by six months .

Due to the short term nature of the debt, the fair value of the debt is approximately the outstanding balance.

As of December 31, 2023, the NexBank Revolver had an outstanding balance of $ 20.0 million.

Deferred Financing Costs

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Prime Brokerage Borrowing

As of October 4, 2022, the Company paid down all outstanding borrowings through its prime brokerage account with Merrill Lynch Professional Clearing Corp.

Effective July 2, 2022, the Company entered a prime brokerage account with Jefferies to hold securities owned by the Company.

Effective July 2, 2022, the Company entered a prime brokerage account with Jefferies to hold securities owned by the Company (the "Prime Brokerage").

The Company from time to time borrows against the value of these securities.

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The aggregate scheduled maturities, including amortizing principal payments, of total debt for the next five calendar years subsequent to December 31, 2023 are as follows (in thousands):

Mortgages Payable Notes Payable Total

Mortgages Payable Notes Payable Prime Brokerage Borrowing Total

2024 $ 142,305 $ 29,000 $ — $ 171,305

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Variable Interest Entities

Consolidated VIEs

At each reporting period, the Company reassesses whether it remains the primary beneficiary for VIEs consolidated under the VIE model.

As of December 31, 2022, the Company has accounted for the following investments as unconsolidated VIEs:

Entities Instrument Asset Type Percentage Ownership as of December 31, 2022 Relationship as of December 31, 2022

As of December 31, 2023 and 2022, the Company does not consolidate the investments below as it does not have a controlling financial interest in these investments:

Entities Instrument Asset Type Percentage Ownership as of December 31, 2023 Percentage Ownership as of December 31, 2022 Relationship as of December 31, 2023 Relationship as of December 31, 2022

Unconsolidated Entities:

NexPoint Storage Partners, Inc.

Common stock Self-storage 52.9 % 53.1 % VIE VIE

NexPoint Storage Partners Operating Company, LLC LLC interest Self-storage 30.0 % 30.5 % VIE VIE

Perilune Aero Equity Holdings One, LLC LLC interest Aircraft 16.4 % 16.4 % VIE VIE

SFR WLIF III, LLC LLC interest Single-family rental 20.0 % 20.0 % VIE VIE

NexPoint Real Estate Finance Operating Partnership, L.P.

LP interest Mortgage 16.1 % VIE

LP interest Mortgage 15.6 % 16.1 % VIE VIE

VineBrook Homes Operating Partnership, L.P.

LP interest Single-family rental 11.1 % VIE

NexPoint Storage Partners Operating Company, LLC LLC interest Self-storage 30.5 % VIE

NexPoint Storage Partners, Inc.

Common stock Self-storage 53.1 % VIE

Perilune Aero Equity Holdings One, LLC LLC interest Aircraft 16.4 % VIE

SFR WLIF III, LLC LLC interest Single-family rental 20.0 % VIE

IQHQ Holdings, LP LP interest Life science 1.2 % VIE

LP interest Single-family rental 11.2 % 11.1 % VIE VIE

NexPoint SFR Operating Partnership, L.P.

LP interest Single-family rental 30.8 % 31.0 % VIE VIE

IQHQ Holdings, LP LP interest Life science 1.3 % 1.2 % VIE VIE

NexAnnuity Holdings, Inc.

Preferred Shares Annuities 100.0 % (1) N/A VIE N/A

(1) The Company owns 100% of the preferred stock of NexAnnuity Holdings, Inc., but it does not own any of the outstanding common stock of NexAnnunity Holdings, Inc.

Consolidated VIEs

The Company did not have any consolidated VIEs as of and for the years ended December 31, 2023 and 2022.

Equity Method Investments

As discussed in Note 2, investments are evaluated in which Company ownership is equal to or greater than 20%, but less than or equal to 50%, of an investee’s voting stock with a presumption that the Company has the ability to exercise significant influence but not control, over an investee.

For our investments in limited partnerships and functional equivalents that maintain specific ownership accounts, we presume that such ability exists when our ownership interest exceeds 3% to 5%.

In addition to the Company’s ownership interest, the Company also considers whether it has a board seat or whether it participates in the policy-making process, among other criteria, to determine if we have an ability to exert significant influence, but not control, over an investee.

If we determine that we have such ability but do not have control, we account for the investment under the equity method of accounting.

Below is a summary of the Company’s equity method investments as of December 31, 2023 (dollars in thousands):

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Allenby, LLC LLC interest N/A 50.0 % (5) — (6) — — —

Haygood, LLC LLC interest N/A 31.0 % (8) — (6) — — —

$ 66,263 $ 38,032 $ 28,231 $ 1,570

Below is a summary of the Company's investments that qualify for equity method accounting but the Company has elected to account for using the fair value option.

Amounts are included in "investments, at fair value" on the consolidated balance sheet.

Investee Name Instrument Asset Type NXDT Percentage Ownership Investment Basis

Below is a summary of the Company's investments as of December 31, 2023 that qualify for equity method accounting for which the Company has elected to account for using the fair value option.

Amounts are included in "investments, at fair value" on the consolidated balance sheets.

Investee Name Instrument Asset Type NXDT Percentage Ownership Fair Value

NexPoint Real Estate Finance Operating Partnership, L.P.

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LLV Holdco, LLC LLC interest Land 26.8 % 2,242 (6)

Below is a summary of the Company’s equity method investments as of December 31, 2022 (dollars in thousands):

Investee Name Instrument Asset Type NXDT Percentage Ownership Investment Basis Share of Investee's Net Assets (1) Basis Difference (2) Share of Earnings (Loss)

Sandstone Pasadena Apartments, LLC LLC interest Multifamily 50.0 % $ 13,013 $ — $ 13,013 $ ( 217 )

AM Uptown Hotel, LLC LLC interest Hospitality 60.0 % (3) 27,136 21,334 5,802 ( 227 )

SFR WLIF III, LLC LLC interest Single-family rental 20.0 % 7,272 7,466 ( 194 ) 280

Las Vegas Land Owner, LLC LLC interest Land 77.0 % (4) 12,312 12,312 — —

Perilune Aero Equity Holdings One, LLC LLC interest Aircraft 16.4 % (7) 10,923 8,751 2,172 665

Claymore Holdings, LLC LLC interest N/A 50.0 % (5) — (6) — — —

Allenby, LLC LLC interest N/A 50.0 % (5) — (6) — — —

$ 70,656 $ 49,863 $ 20,793 $ 501

Below is a summary of the Company's investments as of December 31, 2022 that qualify for equity method accounting for which the Company has elected to account for using the fair value option.

Amounts are included in "investments, at fair value" on the consolidated balance sheets.

Investee Name Instrument Asset Type NXDT Percentage Ownership Fair Value

NexPoint Real Estate Finance Operating Partnership, L.P.

LP interest Mortgage 16.1 % (7) $ 77,370 (6)

NexPoint Real Estate Finance, Inc.

Common stock Mortgage 12.3 % (7) 33,369 (6)

VineBrook Homes Operating Partnership, L.P.

LP interest Single-family rental 11.1 % (7) 169,661 (6)

NexPoint Storage Partners, Inc.

Common stock Self-storage 53.1 % (3) 103,695 (6)

NexPoint Storage Partners Operating Company, LLC LLC interest Self-storage 30.5 % 56,505 (6)

NexPoint SFR Operating Partnership, L.P.

LP interest Single-family rental 31.0 % 53,480 (6)

NexPoint Hospitality Trust Common stock Hospitality 45.4 % 27,685 (6)

LLV Holdco, LLC LLC interest Land 26.8 % 4,331 (6)

(1) Represents the Company’s percentage share of net assets of the investee per the investee’s books and records.

(2) Represents the difference between the basis at which the investments in unconsolidated ventures are carried by the Company and the Company's proportionate share of the equity method investee's net assets.

To the extent that the Company’s cost basis is different from the basis reflected at the joint venture level, the basis difference

is generally amortized over the lives of the related assets and liabilities, and such amortization is included in the Company’s share of equity in earnings of the joint venture.

(3) The Company owns greater than 50% of the outstanding common equity but is not deemed by the Company to be the primary beneficiary (for a VIE) or have a controlling financial interest of the investee and as such, accounts for the investee using the equity method.

(4) The Company owns 100 % of Las Vegas Land Owner, LLC which owns 77 % of a joint venture that owns an 8.5 acre tract of land (the "Tivoli North Property") as described below.

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

To the extent that the Company’s cost basis is different from the basis reflected at the joint venture level, the basis difference is generally amortized over the lives of the related assets and liabilities, and such amortization is included in the Company’s share of equity in earnings of the joint venture.

(3) The Company owns greater than 50% of the outstanding common equity but is not deemed to be the primary beneficiary or have a controlling financial interest of the investee and as such, accounts for the investee using the equity method.

(4) The Company owns 100 % of Las Vegas Land Owner, LLC which owns 77 % of a joint venture that owns an 8.5 acre tract of land (the "Tivoli North Property").

Through a tenants in common arrangement, the Company shares control and as such accounts for this investment using the equity method.

(5) The Company has a 50 % non-controlling interest in Claymore Holdings, LLC (“Claymore”) and Allenby, LLC, (“Allenby”).

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(6) The Company has elected the fair value option with respect to these investments.

The basis in these investments is their December 31, 2022 fair value.

The basis in these investments is their fair value.

(7) The Company owns less than 20% of the investee but has significant influence due to members of the management team serving on the board of the investee or its parent and as such, accounts for the investee using the equity method.

On May 29, 2015, the Company, via a wholly owned subsidiary, invested $ 12 million in Sandstone Pasadena Apartments, LLC ("Sandstone"), which beneficially owns a 696 -unit multifamily property (the “Ashmore”) located in Pasadena, TX.

This contribution by the Company gave it an initial ownership percentage of 83.3 %.

Sandstone and the Ashmore are managed by Knightvest 2015, LLC (the “Sandstone Manager”).

The LLC agreement of Sandstone vests the Sandstone Manager with the exclusive right, power, authority and discretion in conducting the business of Sandstone, subject to certain exceptions.

Since the Company does not have a controlling financial interest, it does not consolidate Sandstone and therefore uses the equity method of accounting.

Per the Sandstone organizational documents, the Company was entitled to a return on unreturned equity of 10 %, which compounded annually.

There was a capital event in 2018 which led to a full return of the Company’s and the other member’s equity in Sandstone.

This triggered a change in the distribution-sharing percentage, which is now effectively 50 % for the Company.

The Sandstone Manager determines the monthly distributions at their discretion.

As of December 31, 2022, the Company still maintains 50 % ownership of Sandstone.

Marriott Uptown

On June 8, 2018, the Company, through a subsidiary, initially invested amounts in exchange for which it received an approximately 85 % interest in AM Uptown Hotel, LLC, (“AM Uptown”) which beneficially owns a 255 -key upscale hotel (the “Marriott Uptown”) located in Dallas, Texas.

AM Uptown appointed Alamo Manhattan Properties, LLC (“Alamo Manhattan”) as the manager to manage and operate the Marriott Uptown.

The management, control and direction of AM Uptown and its operations, business and affairs is vested exclusively in Alamo Manhattan, which has the right, power, and authority, acting solely by itself to carry out all the purposes of AM Uptown.

The Company does not participate in the management, control, or direction of AM Uptown’s operations, business, or affairs and has no kickout rights over Alamo Manhattan.

Since the Company does not have a controlling financial interest, it does not consolidate AM Uptown and therefore uses the equity method of accounting.

As of December 31, 2022, the Company maintains 60 % ownership interest of AM Uptown due to previous capital events that triggered a change in the distribution-sharing percentage and ownership percentage.

On July 11, 2019, the Company initially invested amounts in exchange for which it received an approximately 20 % interest in SFR WLIF III, LLC, an SPE designed to hold an investment in debt issued to VineBrook Homes Operating Partnership, L.P.

(the "VB OP"), an entity that manages single family rental properties, whose parent is advised by an affiliate of the Adviser.

The loan to the VB OP bears interest at 1-month LIBOR plus 155 basis points, matures on December 1, 2025, and has an outstanding principal balance of $ 241.2 million.

SFR WLIF III, LLC is managed, directly or indirectly, by an affiliate of the Adviser.

As the Company does not have a controlling financial interest in this entity, it is accounted for as an equity method investment.

On March 30, 2022, the Company invested in Las Vegas Land Owner, LLC ("Tivoli"), a joint venture that owns the Tivoli North Property, comprised of an 8.5 -acre tract of land, 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, and as such, the Company accounts for the TIC investment using the equity method.

The Company is a 16.4 % member of Perilune Aero Equity Holdings One, LLC ("Perilune").

Perilune is a pooled investment vehicle created to finance, acquire, lease and/or sell two aircraft through subordinated or other lending arrangements and/or direct or indirect equity investments.

Due to the timing of the receipt of financial statements from Perilune, the Company applies up to a 90 day lag reporting for this investment.

In instances where the timing of the receipt of financial statements exceeds the 90 day window, earnings for the period are estimated.

Since Perilune is a partnership-like LLC, and the Company holds more than an insignificant ownership percentage but not a controlling financial interest, the investment is accounted for using the equity method.

Claymore and Allenby

The Company owns noncontrolling interests in two LLCs, Claymore and Allenby, created to hold litigation claims.

The probability, timing, and potential amount of recovery, if any, are unknown as of December 31, 2022.

Since the Company does not have controlling financial interests in these entities, they are accounted for as equity method investments.

NexPoint Real Estate Finance Operating Partnership, L.P.

In February 2020, the Company contributed assets to certain subsidiaries of the then-newly formed NexPoint Real Estate Finance Operating Partnership, L.P.

(the "NREF OP"), the operating partnership of a publicly traded mortgage REIT, in exchange for equity in those subsidiaries.

The equity in the subsidiaries owned by the Company, including additional equity received upon receipt of liquidating distributions from other vehicles that contributed to the NREF OP, was subsequently contributed to the Company's wholly owned subsidiary NexPoint Real Estate Opportunities, LLC ("NREO") and redeemed for limited partnership units in the NREF OP.

The NREF OP is the operating partnership of NexPoint Real Estate Finance, Inc.

("NREF"), a public mortgage REIT managed by an affiliate of the Adviser.

The Company, through NREO, owns approximately 16.1 % of the common units of limited partnership of the NREF OP ("NREF OP Units"), and is not considered the primary beneficiary.

The Company owns less than 20% of the investee but has significant influence due to members of the management team serving on the board of NREF and as such, the investment qualifies to be accounted for using the equity method.

However, management has elected to account for the investment using the fair value option.

NexPoint Real Estate Finance, Inc.

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

The Company, through NREO owns approximately 12.3 %, of NREF’s common stock.

The Company owns less than 20% of the investee and does not have a controlling financial interest but has significant influence due to members of the management team serving on the board of the investee, and as such, the investment qualifies to be accounted for using the equity method.

However, management has elected to account for the investment using the fair value option.

VineBrook Homes Operating Partnership, L.P.

On November 1, 2018, the Company through NREO contributed $ 70.7 million to the VB OP in exchange for limited partnership units.

The VB OP is the operating partnership of VineBrook Homes Trust ("VineBrook"), a private single-family rental REIT managed by an affiliate of the Adviser.

The Company, through NREO, owns approximately 11.1 % of the common units of VB OP as of December 31, 2022 and is not considered the primary beneficiary.

The Company owns less than 20% of the investee but has significant influence due to members of the management team serving on the board of

VineBrook and as such, the investment qualifies to be accounted for using the equity method.

However, management has elected to account for the investment using the fair value option.

NexPoint Storage Partners, Inc.

In November 2020, the Company’s preferred stock investment in Jernigan Capital, Inc.

was converted into common shares of NexPoint Storage Partners, Inc.

("NSP") as part of a transaction where affiliates of the Adviser took Jernigan Capital, Inc.

NSP is a privately owned self-storage REIT.

As of December 31, 2022, the Company owns 53.1 % of the outstanding common stock of NSP.

The Company has determined that it is not the primary beneficiary of NSP.

The investment qualifies to be accounted for using the equity method.

However, management has elected to account for the investment using the fair value option.

NexPoint Storage Partners Operating Company, LLC.

On December 8, 2022, the Company, through NREO, contributed all of its interests in the 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 47,064 newly created Class B Units of the NSP OC.

The NSP OC is the operating company of NSP.

As of December 31, 2022, the Company owns approximately 30.5 % of the outstanding combined classes of common units of the NSP OC (the “NSP OC Common Units") and is not the primary beneficiary, and as such, the investment qualifies to be accounted for using the equity method.

However, management has elected to account for the investment using the fair value option.

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 (the “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 (the “SFR OP Convertible Notes") that are interest only during the term and mature on June 30, 2027.

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

Subsequent to June 8, 2022 and before 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 31.0% of the outstanding units of SFR OP and does not have a controlling financial interest.

The investment qualifies to be accounted for using the equity method.

However, management has elected to account for the investment using the fair value option.

NexPoint Hospitality Trust

As of December 31, 2022, the Company owns 45.4 % of the outstanding common stock of NexPoint Hospitality Trust ("NHT")and does not have a controlling financial interest.

The investment qualifies to be accounted for using the equity method.

However, management has elected to account for the investment using the fair value option.

NHT is a publicly traded hospitality REIT that owns 11 properties located throughout the United States.

NHT is managed by an affiliate of the Adviser.

NHT is listed on the TSX Venture Exchange under the ticker NHT.U.

LLV Holdco, LLC

As of December 31, 2022, the Company owns approximately 26.8 % of the series A and B equity units of LLV Holdco, LLC (“LLV”) and does not have a controlling financial interest.

The investment qualifies to be accounted for using the equity method.

However, management has elected to account for the investment using the fair value option.

Additionally, the Company owns 12,127,369 par of LLV's senior revolving loan maturing December 31, 2023 and paying interest at a fixed rate of 5 % per annum.

LLV specializes in managing real estate assets, which are ultimately sold to both residential and commercial developers.

LLV owns approximately 300 gross acres of undeveloped land, of which 115 acres are developable near Lake Las Vegas in Henderson, Nevada.

(8) The Company has a 31 % non-controlling interest in Haygood, LLC, (“Haygood”).

The Company has determined it is not the primary beneficiary and does not consolidate this entity.

(9) The Company owns less than 20% of the investee but has significant influence due to the legal nature of a partnership that implies an inherent right to influence the operating and financial policies of the partnership.

Significant Equity Method Investments

The table below presents the unaudited summary balance sheets for the Company’s significant equity method investments as of September 30, 2023 (dollars in thousands).

The Company reports these unaudited summary balance sheets on a quarter lag.

For purposes of equity method investments, significance is determined in accordance with Rule 3-09 of Regulation S-X.

NREF and VineBrook Homes Trust, Inc.

("VineBrook") do not prepare standalone financials for their operating companies as all operations and investments are owned through their operating companies and are consolidated by the corporate entities.

As such, only the financial information for NREF and VineBrook are presented below.

As of December 31, 2023, NexPoint Storage Partners, Inc.

("NSP") no longer qualifies as a significant equity method investment.

NREF VineBrook

Investments $ 6,814,871 $ 2,500

Real estate assets 58,563 3,359,816

Cash and cash equivalents 10,977 34,115

Other assets 1,942 208,109

TOTAL ASSETS $ 6,886,353 $ 3,604,540

LIABILITIES AND SHAREHOLDERS' EQUITY

Debt $ 1,212,740 $ 2,487,524

Other liabilities 5,239,450 148,345

Total Liabilities 6,452,190 2,635,869

Redeemable noncontrolling interests in the operating company 89,148 482,149

Noncontrolling interests in consolidated VIEs — 12,786

Total Shareholders' Equity 345,015 473,736

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,886,353 $ 3,604,540

The table below presents the unaudited summary statement of operations for the nine months ended September 30, 2023, for the Company’s significant equity method investments (dollars in thousands).

NREF VineBrook

Rental income $ 3,057 $ 259,121

Net interest income 12,971 —

Other income — 4,362

Total revenues 16,028 263,483

Total expenses 16,950 368,968

Gain (loss) on sales and impairment of real estate — ( 65,108 )

Other income (expense) 1,727 ( 43,130 )

Unrealized gain (loss) on derivatives — 6,297

Total comprehensive income (loss) $ 805 $ ( 207,426 )

The table below presents the unaudited summary balance sheets for the Company’s significant equity method investments as of December 31, 2022 (dollars in thousands).

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Total comprehensive income (loss) $ 14,214 $ 3,171 $ ( 79,271 )

Fair Value of Derivatives and Financial Instruments

Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability.

As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy):

• Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.

• Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals.

• Level 3 inputs are the unobservable inputs for the asset or liability, which are typically based on an entity’s own assumption, as there is little, if any, related market activity.

In instances where the determination of the fair value measurement is based on input from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The Company utilizes independent third parties to perform the allocation of value analysis for each property acquisition and to perform the market valuations on its derivative financial instruments and has established policies, as described above, processes and procedures intended to ensure that the valuation methodologies for investments and derivative financial instruments are fair and consistent as of the measurement date.

As of December 31, 2022, the Company’s fair valued investments consisted of senior loans, corporate bonds, CLOs, convertible notes, common stocks, rights, warrants, life settlement contracts, LP interests and LLC interests.

The fair value of the Company’s senior loans, bonds, and CLOs are generally based on quotes received from brokers or independent pricing services.

Senior loans, bonds, and CLOs with quotes that are based on actual trades with a sufficient level of activity on or near the measurement date are classified as Level 2 assets.

Senior loans, bonds, and CLOs that are priced using quotes derived from implied values, indicative bids, or a limited number of actual trades are classified as Level 3 assets because the inputs used by the brokers and pricing services to derive the values are not readily observable.

At the end of each calendar quarter, the Adviser evaluates the Level 2 and 3 assets and liabilities for changes in liquidity, including but not limited to:

whether a broker is willing to execute at the quoted price, the depth and consistency of prices from third party services, and the existence of contemporaneous, observable trades in the market.

Additionally, the Adviser evaluates the Level 1 and 2 assets and liabilities on a quarterly basis for changes in listings or delistings on national exchanges.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period.

Additionally, the fair value of investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values the Company may ultimately realize.

Further, such investments may be subject to legal and other restrictions on resale or otherwise be less liquid than publicly traded securities.

The Company’s real estate investments include equity interests in limited liability companies and equity issued by REITs that invest in commercial real estate.

The fair value of real estate investments that are not actively traded on national exchanges are based on internal models developed

by the Adviser.

The significant inputs to the models include cash flow projections for the underlying properties, capitalization rates and appraisals performed by independent valuation firms.

These inputs are not readily observable, and the Company has classified the investments as Level 3 assets.

Exchange-traded options are valued based on the last trade price on the primary exchange on which they trade.

If an option does not trade, the mid-price, which is the mean of the bid and ask price, is utilized to value the option.

The fair value of the Company’s convertible notes are categorized as Level 3 assets in the fair value hierarchy.

Upon initial acquisition, the Company’s life settlement contracts are recognized at the transaction price.

Key assumptions utilized in determining fair value include but are not limited to:

(i) life expectancy estimates provided by independent third-party underwriters based on actuarially developed mortality tables and industry life expectancy reports;

(ii) future premium estimates;

(iii) rates of return consistent with those sought by independent purchasers of life policies at the time of purchase;

and (iv) offers and/or commitments from purchasers.

In addition, the valuation agent will also consider recent sales as well as offers received for the life policies deemed likely to close in the near future in estimating fair value.

The assumptions used to value life policies are by nature, inherently uncertain and the effect of changes in estimates may be material.

The fair value measurement used in estimating the present value calculations are derived from valuation techniques that include inputs that are not based on observable market data.

Changes in the fair value of the life settlement contracts are reported as net unrealized gains or losses on the consolidated statement of operations (Successor Basis).

Upon the death of an insured or the sale of a life policy, the Company will recognize the difference between the proceeds received and the cost of the life policy as a realized gain or loss in the Company's consolidated statement of operations (Successor Basis).

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available fair market value, the fair value of the Company’s investments may fluctuate from period to period.

Further, such investments may be subject to legal and other restrictions on resale or otherwise be less liquid than publicly traded securities.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The table below summarizes the inputs used to value the Company’s assets carried at fair value on a recurring basis as of December 31, 2022 (in thousands):

Fair Value of Financial Instruments

The table below summarizes the Company’s assets within the valuation hierarchy carried at fair value on a recurring basis as of December 31, 2023 (in thousands):

Cost Basis Level 1 Level 2 Level 3 Total

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Convertible notes 46,385 — — 42,251 42,251

LLC interest 66,825 — — 39,399 39,399

LP interest 326,555 — 76,688 195,898 272,586

Preferred Shares 66,268 — — 66,268 66,268

Rights and warrants 3,937 — 3,993 — 3,993

Senior loan 46,174 — 55 46,353 46,408

$ 891,924 $ 42,832 $ 80,766 $ 567,640 $ 691,238

The table below summarizes the Company’s assets within the valuation hierarchy carried at fair value on a recurring basis as of December 31, 2022 (in thousands):

Cost Basis Level 1 Level 2 Level 3 Total

Bond $ 17 $ — $ 20 $ — $ 20

CLO 34,958 — 563 6,412 6,975

Common stock 325,275 53,872 — 234,667 288,539

Convertible notes 54,802 — — 50,828 50,828

Life settlement 64,267 — — 67,711 67,711

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$ 914,183 $ 53,872 $ 81,813 $ 686,936 $ 822,621

The table below sets forth a summary of changes in the Company’s Level 3 assets (assets measured at fair value using significant unobservable inputs) for the year ended December 31, 2023 (in thousands):

December 31, 2022 Contributions/

Purchases Paid in-

dividends Transfer Into Level 3 Redemptions/

conversions Return of capital Realized

gain/(loss) Unrealized gain/(loss) December 31, 2023

CLO $ 6,412 $ — $ — $ 563 $ — $ ( 9,170 ) $ ( 1,601 ) $ 5,011 $ 1,215

Common stock 234,667 — — — ( 305 ) — — ( 58,106 ) 176,256

Convertible notes 50,828 — 125 — ( 8,542 ) — — ( 160 ) 42,251

Life settlement 67,711 3,355 — — ( 67,506 ) — ( 1,101 ) ( 2,459 ) —

LLC interest 60,836 334 — — — — — ( 21,771 ) 39,399

LP interest 223,141 5,528 — — — — — ( 32,771 ) 195,898

Preferred Shares — 68,500 1,768 — ( 4,000 ) — — — 66,268

Senior loan 43,341 5,500 4,059 — ( 7,007 ) — 223 237 46,353

Total $ 686,936 $ 83,217 $ 5,952 $ 563 $ ( 87,360 ) $ ( 9,170 ) $ ( 2,479 ) $ ( 110,019 ) $ 567,640

The table below sets forth a summary of changes in the Company’s Level 3 assets (assets measured at fair value using significant unobservable inputs) for the six months ended December 31, 2022 (in thousands):

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Total $ 690,432 $ 86,156 $ 2,208 $ ( 17,954 ) $ ( 18,548 ) $ 3,476 $ ( 58,834 ) $ 686,936

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the significant unobservable inputs used in the fair valuation of assets categorized within Level 3 of the fair value hierarchy as of December 31, 2023.

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(Arithmetic Mean) Fair Value

CLO Discounted Net Asset Value Discount N/A $ 1,215

Common Stock Market Approach Unadjusted Price/MHz-PoP $ 0.10 — $ 0.90 $( 0.48 ) 176,256

Discounted Cash Flow Discount Rate 7.5 % — 13.90 % ( 9.18 )%

Market Rent (per sqft) $ 11.50 — $ 41.00 $( 26.25 )

RevPAR $ 75.00 — $ 145.00 $( 102.00 )

Capitalization Rates 5.25 % — 9.5 % ( 7.58 )%

NAV Approach Discount Rate 10.00 %

Multiples Analysis Multiple of EBITDA 3.00 x

Multiple of NAV 1.00 x

Recent Transaction Implied Enterprise Value from Transaction Price ($mm) $ 841.00

N/A $ 25.31 — $ 28.00 $( 26.66 )

Discount to NAV ( 25.00 )% — ( 10.00 )% ( 17.50 )%

Offer Price per Share $ 1.10

Convertible Notes Discounted Cash Flow Discount Rate 6.08 % — 10.25 % ( 8.17 )% 42,251

Option Pricing Model Volatilty 55.00 % — 65.00 % ( 60.00 )%

LLC Interest Discounted Cash Flow Discount Rate 7.50 % — 30.50 % 14 % 39,399

Market Rent (per sqft) $ 11.5 — $ 41 $( 26.25 )

Capitalization Rate 5.25 %

LP Interest Direct Capitalization Approach Capitalization Rate 4.00 % — 6.80 % 5.51 % 195,898

Discount to NAV ( 12.5 )% — ( 2.5 )% (- 7.5 %)

Market Approach Capitalization Rate 5.00 % — 5.50 % ( 5.22 )%

Recent Transaction Price per Share $ 21.59

Preferred Shares Recent Transaction Price per Share $ 1,000 66,268

Senior Loan Discounted Cash Flow Discount Rate 12.30 % — 20.00 % ( 16.15 )% 46,353

Total $ 567,640

The following is a summary of the significant unobservable inputs used in the fair valuation of assets categorized within Level 3 of the fair value hierarchy as of December 31, 2022.

Category Valuation Technique Significant Unobservable Inputs Input Value(s)

(Arithmetic Mean) Fair Value

CLO Discounted Net Asset Value Discount 70 % $ 6,412

Common Stock Market Approach Unadjusted Price/MHz-PoP $ 0.09 % - $ 0.95 % ( 0.515 %) $ 234,667

NAV / sh multiple $ 1.10 x

NAV / sh multiple $ 1.10 x - $ 1.45 x $( 1.28 )x

Discounted Cash Flow Discount Rate 8.63 % - 14.5 % ( 9.98 )%

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Life Settlement Portfolio

The Company owns 100 % of the outstanding equity and debt of Specialty Financial Products, Ltd.

("SFP"), an Ireland domiciled private company with limited liability and a Designated Activity Company.

SFP was formed for the purpose of and at the proposal of NexAnnuity Asset Management, L.P.

("NexAnnuity"), an affiliate of the Adviser, entering into acquisitions of U.S.

Prior to September 1, 2023, the Company, through one of its TRSs, owned 100 % of the outstanding equity and debt of Specialty Financial Products, Ltd.

("SFP"), an Ireland domiciled private company with limited liability and a Designated

Activity Company.

At the proposal of NexAnnuity Asset Management, L.P.

("NexAnnuity"), an affiliate of the Adviser, SFP was formed for the purpose of entering into acquisitions of U.S.

life settlement policies approved by NexAnnuity and funded by the issuance of debt securities, or the Structured Note purchased by the Company.

SFP utilizes proceeds from maturing life settlement contracts to repay the Structured Note and to further invest in life settlement contracts.

As the Company owns the outstanding equity of and Structured Note issued by SFP, the Company consolidates SFP in its entirety.

The Company did not elect the fair value option for SFP as of December 31, 2022.

SFP’s equity and the Structured Note are eliminated during consolidation and the financial assets held by SFP are measured at fair value.

Prior to September 1, 2023, as the Company owned the outstanding ordinary shares of and Structured Note issued by SFP, the Company consolidated SFP in its entirety.

On September 1, 2023, the Company, through one of its TRSs, entered into a contribution agreement to transfer the Structured Note in SFP and all its rights, title and interests to NHI and its wholly owned subsidiaries, a related party.

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.

As a result, the Company now holds none of the outstanding equity and debt of SFP, and SFP no longer meets the requirements for consolidation under ASC 810 – Consolidation.

The Company will have no continuing involvement with SFP.

As such, SFP has been deconsolidated herein as of September 1, 2023.

The Class A Preferred Stock in NexAnnuity Holdings, Inc.

is accounted for as an investment in an equity security.

However, management has elected to account for the investment using the fair value option and presented it within Investments, at fair value.

The fair value of the Class A Preferred Stock is its original issue price of $ 1,000 per share due to the recent nature of the transaction.

Dividends on the Class A Preferred Stock are cumulative and are payable quarterly on March 31, June 30, September 30, and December 31 at an annual rate of 8.0 % for years one through seven, 9.5 % for years eight through ten, 11.0 % for years eleven through thirteen, and 12.0 % for years fourteen through sixteen and thereafter.

The transfer of the Structured Note of SFP qualified as a sale under ASC 860 – Transfers and Servicing as (1) the transfer legally isolated the transferred assets from the transferor, (2) the transferee has the right to pledge or exchange the transferred assets and no condition both constrains the transferee’s right to pledge or exchange the assets and provides more than a trivial benefit to the transferor, and (3) the transferor does not maintain effective control over the transferred assets.

As of December 31, 2022, the Company’s life settlement portfolio consists of the following (dollars in thousands):

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28 $1,500 -$15,000 $ 142,952 $350 - $3,895 $ 48,132 $0 - $580 $ 4,589 $117 - $6,095 $ 67,711

$ 142,952 $ 350 - $ 3,895

$ 48,132 $ 0 - $ 580

$ 4,589 $0 $ 117 - $ 6,095

Remaining Life Expectancy (in years) Number Face Value Fair Value

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Total 28 $ 142,952 $ 67,711

The premiums to be paid for each of the five succeeding calendar years to keep the life settlement contracts in force as of December 31, 2022, assuming no maturities occur in that period, are as follows (dollars in thousands):

Year Premiums

During the six months ended December 31, 2022, the Company purchased 3 policies with a combined face value of $ 28.0 million for $ 8.7 million, had 1 policy 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.

During the six months ended December 31, 2022, the Company purchased three policies with a combined face value of $ 28.0 million for $ 8.7 million, had one policy 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.

Shareholders ’ Equity

Common Shares

As of December 31, 2023, the Company had 38,389,600 common shares, par value $ 0.001 per share, issued and outstanding.

1,217,792.99 shares of which were issued during the year ended December 31, 2023.

During the year ended December 31, 2023, the Company paid a distribution of $ 0.15 per share on its common shares on March 31, 2023 to shareholders of record on March 15, 2023, June 30, 2023 to shareholders of record on June 15, 2023, September 29, 2023 to shareholders of record on August 14, 2023 and December 29, 2023 to shareholders of record on November 17, 2023.

The dividends paid on September 29, 2023 and December 29, 2023 consisted of a combination of cash and shares, with the cash component of the dividend (other than cash paid in lieu of fractional shares) comprising 20 % of the dividend, with the balance being paid in the Company's common shares.

During the six months ended June 30, 2022, the Company issued 92,067 common shares pursuant to its dividend reinvestment plan that was terminated on July 1, 2022.

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The Series A Preferred Shares are callable beginning on December 15, 2023 at a price of $ 25 per share.

The Company has the option to exercise the callable function of the preferred shares at the Company's discretion.

The Company may exercise its call option at the Company's discretion.

As a result, these are included in permanent equity.

During the year ended December 31, 2023, the Company declared four distributions on its Series A Preferred Shares, each in the amount of $ 0.34375 per share, which were paid to holders of Series A Preferred Shares on March 31, 2023 to shareholders of record on March 24, 2023, on June 30, 2023 to shareholders of record on June 23, 2023, on October 2, 2023 to shareholders of record on September 25, 2023 and on January 2, 2024 to shareholders of record on December 12, 2023.

The Company sent funding to the transfer agent for the fourth quarter dividend prior to December 31, 2023, which was then paid to shareholders on January 2, 2024.

During the six months ended December 31, 2022, the Company declared distributions on its Series A Preferred Shares on September 1, 2022 and December 6, 2022, in the amount of $ 0.34375 per share, respectively.

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Dividends on the Series A Preferred Shares are cumulative from their original issue date at the annual rate of 5.5 % of the $ 25 per share liquidation preference and are payable quarterly on March 31, June 30, September 30, and December 31 of each year, or in each case on the next succeeding business day.

Long Term Incentive Plan

On January 30, 2023, the Company’s shareholders approved a long-term incentive plan (the “2023 LTIP”) and the Company subsequently filed a registration statement on Form S-8 registering 2,545,000 common shares, which the Company may issue pursuant to the 2023 LTIP.

The 2023 LTIP authorizes the compensation committee of the Board to provide equity-based compensation in the form of share options, appreciation rights, restricted shares, restricted share units, performance shares, performance units and certain other awards denominated or payable in, or otherwise based on, the Company’s common shares or factors that may influence the value of the Company’s common shares, plus cash incentive awards, for the purpose of providing the Company’s trustees, officers and other key employees (and those of the Adviser and the Company’s subsidiaries), and potentially certain nonemployees who perform employee-type functions, incentives and rewards for performance (the "participants").

Restricted Share Units.

Under the 2023 LTIP, restricted share units may be granted to the participants and typically vest over a three to five-year period for officers, employees and certain key employees of the Adviser and annually for trustees.

The most recent grant of restricted share units to officers, employees and certain key employees of the Adviser

will vest over a four-year period.

Beginning on the date of grant, restricted share units earn dividends that are payable in cash on the vesting date.

Compensation expense is recognized on a straight-line basis over the total requisite service period for the entire award.

Forfeitures are recognized as they occur.

On April 4, 2023, pursuant to the 2023 LTIP, the Company granted 37,313 restricted share units to its trustees and 566,169 restricted share units to its officers and other employees of the Adviser.

The following table includes the number of restricted share units granted, vested, forfeited and outstanding as of and for the year ended December 31, 2023:

Number of Units Weighted Average

Grant Date Fair Value

Outstanding January 1, 2023 — $ —

Granted 603,482 10.45

Forfeited ( 13,576 ) —

Outstanding December 31, 2023 589,906 $ 10.45

The following table contains information regarding the vesting of restricted share units under the 2023 LTIP for the next five calendar years subsequent to December 31, 2023:

Shares Vesting

2024 178,856 178,856

2025 140,404 140,404

2026 135,323 135,323

2027 135,323 135,323

Total 589,906 589,906

For the year ended December 31, 2023, the Company recognized approximately $ 1.4 million of equity-based compensation expense related to grants of restricted share units.

As of December 31, 2023, the Company had recognized a liability of approximately $ 0.3 million related to dividends earned on restricted share units that are payable in cash upon vesting.

As of December 31, 2023, total unrecognized compensation expense on restricted share units was approximately $ 4.8 million, and the expense is expected to be recognized over a weighted average vesting period of 1.6 years.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common shareholders by the weighted average number of the Company’s common shares outstanding.

The Company currently does not have any dilutive instruments outstanding.

The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share and share amounts):

For the Six Months ended December 31,

Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common shareholders by the weighted average number of the Company’s common shares outstanding and excludes any unvested restricted share units issued pursuant to the 2023 LTIP.

Diluted earnings (loss) per share is computed by adjusting basic earnings per share for the dilutive effect of the assumed vesting of restricted share units.

During periods of net loss, the assumed vesting of restricted share units is anti-dilutive and is not included in the calculation of earnings (loss) per share.

The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share amounts):

Year Ended December 31, Six Months Ended December 31,

Numerator for loss per share:

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Denominator for basic and diluted loss per share 37,334 37,172

Weighted average unvested restricted share units 440 —

Denominator for diluted loss per share (1) 37,334 37,172

Loss per weighted average common share:

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Diluted $ ( 3.26 ) $ ( 2.26 )

(1) For the year ended December 31, 2023 and the six months ended December 31, 2022, this excludes approximately 439,601 and 0 shares, respectively, related to assumed vesting of restricted share units as the effect would be anti-dilutive.

Related Party Transactions

Advisory and Administration Services Fee

Prior to the Deregistration Date, the Company was party to an investment advisory agreement (the "Former Advisory Agreement") with an affiliate of the Adviser (the "Former Adviser") pursuant to which the Former Adviser

provided investment advisory services to the Company and certain of its subsidiaries.

Advisory and Administrative Fees

The Company's contractual fee under the Former Advisory Agreement was an annual fee, payable monthly, in an amount equal to 1.00 % an amount (the "Former Managed Assets”) equal to the total assets of the Company, including any form of investment 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 Company’s investment objectives and policies, and/or (iv) any other means.

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For its services, the Former Adviser received an annual fee, payable monthly, in an amount equal to 0.20 % of the average weekly value of the Former Managed Assets.

For the six months ended June 30, 2022, the Company incurred fees under the Former Advisory Agreement and Former Administrative Services Agreement of $ 6.3 million prior to the Deregistration Date.

In connection with the Business Change and effective on the Deregistration Date, the Company terminated its investment advisory agreement and its administrative services agreement with NexPoint and entered into the Advisory Agreement with the Adviser, a subsidiary of NexPoint.

The Company also terminated the investment advisory agreements between NexPoint and its wholly owned subsidiaries, NREO and NexPoint Real Estate Capital, LLC, effective on the Deregistration Date.

In connection with the Business Change and effective on the Deregistration Date, the Company terminated its investment advisory agreement and its administrative services agreement with the Former Adviser and entered into the Advisory Agreement with the Adviser, a subsidiary of NexPoint.

The Company also terminated the investment advisory agreements between NexPoint and its wholly owned subsidiaries, NexPoint Real Estate Opportunities, LLC ("NREO") and NexPoint Real Estate Capital, LLC, effective on the Deregistration Date.

Pursuant to the Advisory Agreement, subject to the overall supervision of our Board, the Adviser manages the day-to-day operations of the Company, and provides investment management services.

As of December 31, 2023, 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 (defined below).

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.

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

The Advisory Agreement also provides that the Administrative Fee shall be paid in cash.

On April 11, 2023, we entered into an amendment to the Advisory Agreement whereby 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.

At the Company’s 2023 annual meeting of shareholders, the Company’s shareholders did not approve issuances in excess of the Share Cap.

During the year ended December 31, 2023, we issued 145,619.99 common shares to the Advisor in payment of the Fees in an amount of $ 1.43 million.

Under the Advisory Agreement, “Managed Assets” means an amount equal to the total assets of the Company, 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 leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing to purchase or develop real estate or other investments, borrowing through a credit facility, or the issuance of debt securities), (ii) the issuance of preferred shares or other preference securities, (iii) the reinvestment of collateral received for securities loaned in accordance with the Company’s investment objectives and policies, and/or (iv) any other means.

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The Company is 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 1.5 % (the "Expense Cap") 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;

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.

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, could not exceed 1.5 % (the "Expense Cap") of Managed Assets, calculated as of the end of each quarter, for the twelve-month period which followed the Company’s receipt of the Deregistration Order.

This limitation ended on June 30, 2023 and did 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;

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

On occasion, the Adviser may waive additional fees to the extent assets are invested in certain affiliated 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.

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

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).

The Advisory Agreement can be terminated by us or the Adviser without cause upon the expiration of the then-current term with at least 180 days’ written notice to the other party prior to the expiration of s term.

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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provided, however, if the Advisory Agreement is terminated prior to the one year anniversary of the date of the Advisory Agreement, the Fees earned during such period will be annualized for purposes of calculating the Fees.

For the six months ended December 31, 2022, the Company incurred Administrative Fees and Advisory Fees of $ 5.5 million, inclusive of $ 1.1 million in expenses that were deferred to comply with the Expense Cap.

Should the Fees and expenses and any other items subject to the Expense Cap be less than the 1.5 % limit for the twelve-month period subsequent to the Deregistration Date, some or all of the deferred expenses could be recouped by the Adviser up to the Expense Cap.

For the year ended December 31, 2023, the Company incurred Administrative Fees and Advisory Fees of $ 13.7 million, which excludes $ 2.0 million, in fees that were waived to comply with the Expense Cap.

Revolving Credit Facility

On May 22, 2023, the Company entered into the NexBank Revolver pursuant to which the Company in the initial principal amount of $ 20.0 million, with the option for the Company to receive additional disbursements thereunder up to a maximum amount of $ 50.0 million and bears interest at one-month SOFR plus 3.50 % and matures on May 21, 2024.

The Company drew the $ 20.0 million on May 22, 2023.

As of December 31, 2023, the NexBank Revolver had an outstanding balance of $ 20.0 million.

Guaranties of NexPoint Storage Partners, Inc.

On July 2, 2021, the Company, together with Highland Opportunities and Income Fund (“HFRO”) and Highland Global Allocation Fund (collectively, the “Co-Guarantors”) as limited guarantors, entered into a Guaranty of Recourse Obligations (“SAFStor Recourse Guaranty I”) in favor of ACORE Capital Mortgage, LP (“ACORE”) in its capacity as Administrative Agent for and on behalf of the Lenders under a Loan Agreement ("SAFStor Loan Agreement I"), in an aggregate principal amount of $ 235.86 million, for the benefit of entities indirectly owned by SAFStor NREA JV – I, LLC (“SAFStor – I”), SAFStor NREA JV – III, LLC (“SAFStor – III”), SAFStor NREA JV – IV, LLC (“SAFStor – IV”), SAFStor NREA JV – V, LLC (“SAFStor – V”), SAFStor NREA JV – VI, LLC (“SAFStor – VI”), SAFStor NREA JV – VII, LLC (“SAFStor – VII”), and SAFStor NREA JV – VIII, LLC (“SAFStor – VIII”) (collectively, “SAFStor”), pursuant to which the Company and the Co-Guarantors guaranteed certain obligations of SAFStor.

On July 2, 2021, the Company also entered a substantively identical guaranty in favor of ACORE in its capacity as Administrative Agent for and on behalf of the Lenders under a Mezzanine Loan Agreement ("SAFStor Mezzanine Loan Agreement I"), in the amount of $ 6.05 million, for the benefit of entities indirectly owned by SAFStor.

On December 8, 2022, NSP completed a transaction that resulted in it acquiring 100 % of the equity interest in SAFStor.

On April 24, 2023, the Company joined certain separate guaranties previously made in favor of ACORE by the Co-Guarantors pursuant to an Omnibus Amendment to and Reaffirmation of Loan Documents (the “SAFStor Recourse Guaranty II”) in favor of ACORE in its capacity as (i) Administrative Agent for and on behalf of the Lenders under a Loan Agreement (“SAFStor Loan Agreement II”), in an aggregate principal amount of $ 41.99 million, for the benefit of SAFStor, and (ii) Administrative Agent for and on behalf of the Lenders under a Mezzanine Loan Agreement (“SAFStor Mezzanine Loan Agreement II”), in the amount of $ 1.08 million, for the benefit of entities indirectly owned by SAFStor.

Pursuant to the SAFStor Recourse Guaranty I and SAFStor Recourse Guaranty II, the Company guarantees the loss recourse liability and obligation for any Recourse Liabilities (as defined in the respective SAFStor Loan Agreement) arising out of or in connection with certain bad acts, such as if the borrower takes actions that are fraudulent or improper or upon certain violations of the respective SAFStor Loan Agreement.

The Company also guarantees the full payment of the debt upon the occurrence of any Springing Recourse Events (as defined in the respective SAFStor Loan Agreement), such as if the borrower voluntarily files a bankruptcy or similar liquidation or reorganization action or upon certain other violations of the respective SAFStor Loan Agreement.

The guarantees by the Company are limited for loss recourse events, to the loss attributable to properties in which it indirectly owns an interest and for Springing Recourse Events (as defined in the respective SAFStor Loan

Agreement) to the pro-rata share of the aggregate liability of all guarantors within the pool of the guarantor properties.

As of December 31, 2023, the outstanding balance of the pools of guaranties is $ 270.96 million.

On September 14, 2022, the Company entered into guaranties (the “BS Guaranties”) for the benefit of JPMorgan Chase Bank, National Association (“JPM”) and any additional or subsequent lenders from time to time (collectively, “BS Lender”) under a loan agreement (the "BS Loan Agreement"), pursuant to which the Company guaranteed certain obligations of the borrowers (“BS Borrower”) under the BS Loan Agreement.

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Pursuant to the BS Guaranties, the Company guaranteed certain carrying obligations, including interest payments, of BS Borrower and certain recourse obligations of BS Borrower pertaining to exculpation or indemnification of BS Lender.

The BS Guaranties also provide that the Company may be required to repay

principal amounts upon the occurrence of certain events, including certain action or inaction by BS Borrower, but does not provide for a full guarantee of repayment in all circumstances.

The BS Guaranties also provide that the Company may be required to repay principal amounts upon the occurrence of certain events, including certain action or inaction by BS Borrower, but does not provide for a full guarantee of repayment in all circumstances.

The BS Loan Agreement provides for a single initial advance of the loan in the amount of $ 221.8 million to BS Borrower on the closing date and provides BS Borrower the right to request additional advances in connection with subsequently acquired properties.

Amounts outstanding under the BS Loan Agreement are due and payable on September 9, 2023 which date may, at the option of BS Borrower, be extended for two successive one-year terms upon the satisfaction of certain terms and conditions.

Borrowings outstanding under the BS Loan Agreement are secured by mortgages on real property owned by one or more of the borrowers comprising BS Borrower and bear interest at the one-month secured overnight financing rate ("SOFR"), subject to a floor of 0.5 %, 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.

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.

The Company has not recorded a contingent liability due to NSP being current on all debt and preferred dividend payments and in compliance with all debt compliance provisions of the Sponsor Guaranty Agreement.

Amounts outstanding under the BS Loan Agreement are due and payable on March 9, 2024 which date may, at the option of BS Borrower, be extended for an additional six months upon the satisfaction of certain terms and conditions.

Borrowings outstanding under the BS Loan Agreement are secured by mortgages on real property owned by one or more of the borrowers comprising BS Borrower and bear interest at the one-month SOFR, subject to a floor of 0.5 %, plus an applicable spread of approximately 4.0 % with respect to approximately $ 149.9 million of principal as of December 31, 2023 and approximately 5.4 % with respect to approximately $ 46.9 million of principal as of December 31, 2023.

On December 8, 2022 and in connection with a restructuring of NSP, the Company, together with NREF, Highland Opportunities and Income Fund ("HFRO") and NexPoint Real Estate Strategies Fund (collectively, the "NSP Co-Guarantors"), as guarantors, entered into a Sponsor Guaranty Agreement in favor of Extra Space Storage, LP ("Extra Space") pursuant to which the Company and the NSP 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.

The guaranties by the Company and the NSP Co-Guarantors were capped at $ 97.6 million, and each of the Company and the NSP 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.

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 Series D Preferred Stock remains outstanding as of December 31, 2023.

Separately, on September 14, 2022, the Company entered into a Guaranty Agreement (Recourse Obligations), dated September 14, 2022 (the “CMBS Guaranty”) for the benefit of JPM and any additional or subsequent lenders from time to time (collectively, the “CMBS Lender”) under a loan agreement (the "CMBS Loan Agreement"), by and among the borrowers thereunder (collectively, “CMBS Borrower”) and the CMBS Lender.

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Dondero is the primary beneficiary.

In exchange for its services, the SFP IMA 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.

As discussed in Note 10, the Company disposed of its interest in SFP on September 1, 2023.

Prior to its disposition, the Company paid $ 0.1 million in management fees to NexAnnuity.

In exchange for its services, the SFP IMA provided that NexAnnuity would 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 could waive all or a portion of the SFP Management Fee.

Other Related Party Transactions

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The Company’s operating properties, other than undeveloped land, are managed by NexVest Realty Advisors, LLC ("NexVest"), an affiliate of the Adviser.

For the six and twelve months ended December 31, 2022, the Company through its subsidiaries has paid approximately $ 0.3 million and $ 0.7 million, respectively, in property management fees to NexVest.

The property management agreement with NexVest for the retail property in Lubbock, Texas is dated January 1, 2014 and has a fixed fee of $ 750 per month.

For year ended December 31, 2023 and 2022, the Company through its subsidiaries has paid approximately $ 0.7 million and $ 0.7 million, respectively, in property management fees to NexVest.

The property management agreement with NexVest for the retail property in Lubbock, Texas is dated January 1, 2014 and had a fixed fee of $ 750 per month.

Effective January 1, 2023, the property management agreement was amended and the property management fee was increased to $ 1,200 per month.

The property management agreement with NexVest for Cityplace Tower is dated August 15, 2018, and the management fee is calculated on 3 % of gross revenues, with a minimum fee of $ 20,000 per month.

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.

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 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.

For the year ended 2023, Cityplace Tower reimbursed $ 1.9 million to NexVest for these expenses.

The Company is a limited guarantor and an indemnitor on one of NexPoint Hospitality Trust's ("NHTs") loans with an aggregate principal amount of $ 77.4 million as of December 31, 2023.

NHT is a publicly traded hospitality REIT that is managed by an affiliate of the Adviser.

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.

The Company has not recorded a contingent liability as NHT is current on all debt payments and in compliance with all debt compliance provisions.

On March 31, 2022, the Company, through an unconsolidated subsidiary, borrowed approximately $ 13.5 million from NREF, an entity advised by an affiliate of the Adviser, to finance its acquisition of a 77.0 % 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 had a principal amount of $ 13.5 million, matures on August 7, 2023, and bears interest at an annual rate of daily simple 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.

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

The new loan had a principal amount of $ 13.5 million and bears interest at an annual rate of daily simple 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 and matures on August 8, 2024.

On December 8, 2022, the Company, through NREO, entered into a Contribution Agreement pursuant to which NREO contributed all of its interests in the 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 common operating company units of the NSP OC ("Class B Units"), representing 14.8 % of the outstanding combined classes of common units of the NSP OC (the "NSP OC Common Units") immediately after NREO’s acquisition of Class B Units.

The NSP OC is the operating company of NSP, of which the Company owns approximately 86,369 shares, or 52.9 %, of the outstanding common stock as of December 31, 2023.

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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.

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

As of December 31, 2023, the Company owns approximately 47,064 Class B Units, or 30.0 %, of the outstanding NSP OC Common Units.

On December 23, 2022, the Company, through NREO, redeemed 2,100,000 common units of limited partnership (the "NREF OP Units") of NexPoint Real Estate Finance Operating Partnership, L.P.

(the "NREF OP") for 2,100,000 shares of

common stock of NREF.

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

On September 1, 2023, the Company, through one of its wholly owned TRSs, entered into a contribution agreement to transfer the Structured Note in SFP and all its rights, title and interests to related party NexAnnuity Holdings, Inc.

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 NexAnnuity Holdings, Inc.

On September 28, 2023, the Company, through one of its wholly owned TRSs, redeemed 2,000 shares of Class A Preferred Stock in NexAnnuity Holdings, Inc.

On October 24, 2023, the Company, through one of its wholly owned TRSs, redeemed 1,000 shares of Class A Preferred Stock in NexAnnuity Holdings, Inc.

On November 10, 2023, the Company, through one of its wholly owned TRSs, redeemed 1,000 shares of Class A Preferred Stock in NexAnnuity Holdings, Inc.

Related Party Investments

The Company, from time to time, may invest in entities managed by affiliates of the Adviser.

For the year ended and as of December 31, 2023, the Company has the following investments in entities managed or advised by, or directly or indirectly owned by entities managed or advised by, affiliates of the Adviser (in thousands).

Related Party Investment Fair

Value/Carrying Value Change in Unrealized

Gain/(Loss) Realized

Gain/(Loss) Equity in income (loss) Interest and

Dividends Total Income

NexPoint Hospitality Trust Common Stock $ 4,886 $ ( 22,800 ) $ — $ — $ 610 $ ( 22,190 )

NexPoint Real Estate Finance, Inc.

Common Stock 33,075 ( 294 ) — — 5,754 5,460

NexPoint Storage Partners, Inc.

Common Stock 68,187 ( 35,506 ) — — — ( 35,506 )

NexPoint Residential Trust, Inc.

Common Stock 3,154 ( 821 ) — — 155 ( 666 )

NexPoint SFR Operating Partnership, L.P.

Convertible Notes 20,814 7 — — 1,822 1,829

NexPoint Hospitality Trust Convertible Notes 21,437 ( 166 ) — — 644 478

NexPoint Storage Partners Operating Company, LLC LLC Units 37,157 ( 19,349 ) — — — ( 19,349 )

SFR WLIF III, LLC LLC Units 7,079 — — 624 — 624

Claymore Holdings, LLC LLC Units — — — — — —

Allenby, LLC LLC Units — ( 304 ) — — — ( 304 )

Haygood, LLC.

LLC Units — ( 31 ) — — — ( 31 )

VineBrook Homes Operating Partnership, L.P.

Partnership Units 146,516 ( 27,463 ) — — 4,318 ( 23,145 )

NexPoint Real Estate Finance Operating Partnership, L.P.

Partnership Units 76,688 ( 682 ) — — 11,686 11,004

NexPoint SFR Operating Partnership, L.P.

Partnership Units 49,383 ( 5,308 ) — — 1,813 ( 3,495 )

NexAnnuity Holdings, Inc.

Preferred Shares 66,268 — — — 1,768 1,768

NexPoint Storage Partners Operating Company, LLC Promissory Note 5,000 — — — 39 39

NexPoint SFR Operating Partnership, L.P.

Promissory Note 500 — — — 8 8

Total $ 540,144 $ ( 112,717 ) $ — $ 624 $ 28,617 $ ( 83,476 )

For the six months ended and as of December 31, 2022, the Company has the following investments in entities managed or advised by, or directly or indirectly owned by entities managed or advised by, affiliates of the Adviser (in thousands).

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Commitments and Contingencies

On December 8, 2022 and in connection with a restructuring of NSP, the Company, together with the certain affiliates of the Adviser (the "Co-Guarantors"), as guarantors, entered into a Sponsor Guaranty Agreement in favor of Extra Space Storage LP ("Extra Space") pursuant to which the Company and 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.

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

As of December 31, 2022, the Company owns approximately 53.1 % of the total outstanding shares of common stock of NSP.

NSP is current on all debt and dividend payments and in compliance with all debt compliance provisions.

On December 8, 2022 and in connection with a restructuring of NSP, the Company, together with the NSP Co-Guarantors, as guarantors, entered into a Sponsor Guaranty Agreement in favor of Extra Space pursuant to which the Company and the NSP 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 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, 2023.

On July 2, 2021, the Company, together the Co-Guarantors as limited guarantors, entered into a SAFStor Recourse Guaranty I in favor of ACORE in its capacity as Administrative Agent for and on behalf of the Lenders under the SAFStor Loan Agreement I, in an aggregate principal amount of $ 235.86 million, for the benefit of entities indirectly owned by SAFStor, pursuant to which the Company and the Co-Guarantors guaranteed certain obligations of SAFStor.

On July 2, 2021, the Company also entered a substantively identical guaranty in favor of ACORE in its capacity as Administrative Agent for and on behalf of the Lenders under the SAFStor Mezzanine Loan Agreement I, in the amount of $ 6.05 million, for the benefit of entities indirectly owned by SAFStor.

On April 24, 2023, the Company joined certain separate guaranties previously made in favor of ACORE by the Co-Guarantors pursuant to the SAFStor Recourse Guaranty II in favor of ACORE in its capacity as (i) Administrative Agent for and on behalf of the Lenders under the SAFStor Loan Agreement II, for the benefit of SAFStor, and (ii) Administrative Agent for and on behalf of the Lenders under the SAFStor Mezzanine Loan Agreement II, for the benefit of entities indirectly owned by SAFStor.

See Note 13 for additional information.

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The Company has not recorded a contingent liability as NHT is current on all debt payments and in compliance with all debt compliance provisions.

The Company is a guarantor and an indemnitor on one of Cityplace’s loans with an aggregate principal amount of $ 142.3 million as of December 31, 2023.

The obligations include a completion guarantee, which is generally only applicable if and when the borrower, which is a subsidiary of the Company, directly, or indirectly through an agreement with an affiliate, joint venture partner or other third party, voluntarily terminates construction services prior to the completion of the project, files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper.

As of December 31, 2023, management does not anticipate any material deviations from schedule or budget related to construction projects current in process, and Cityplace is current on all debt payments and in compliance with all debt compliance provisions.

Contingencies

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There can be no assurance that material environmental liabilities do not exist.

Claymore and Allenby are engaged in ongoing litigation that could result in a possible gain contingency to the Company.

Claymore, Allenby and Haygood are engaged in ongoing litigation that could result in a possible gain contingency to the Company.

The probability, timing, and potential amount of recovery, if any, are unknown.

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Lessor Accounting

We generate the majority of our revenue by leasing our operating properties to customers under operating lease agreements.

The manner in which we recognize these transactions in our financial statements is described in the Income Recognition section of Footnote 1 to these consolidated financial statements.

The following table summarizes the future minimum lease payments to the Company as the lessor under the operating lease obligations at December 31, 2023 (in thousands).

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Operating Leases

2023 $ 10,334

Thereafter 22,718

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The following table lists the tenants where the rental revenue from the tenants during the period presented represented 10% or more of total rental income in the Company’s consolidated statements of operations (in thousands):

Six Months Ended December 31, 2022

Tenant Rental Income

For the Year Ended December 31, 2023 Six Months Ended December 31, 2022

Tenant Rental Income Rental Income

Hudson Advisors LLC $ 2,610 $ 1,424

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Dividends Declared

On February 22, 2023, the Board approved a quarterly dividend of $ 0.15 per common share, payable on March 31, 2023 to shareholders of record on March 15, 2023.

Also on February 22, 2023, the Board approved a quarterly dividend of $ 0.34375 per Series A Preferred Share, payable on March 31, 2023 to shareholders of record on March 24, 2023.

Adoption of Long Term Incentive Plan

On January 30, 2023, we held a special meeting of shareholders, at which our shareholders approved our 2023 Long Term Incentive Plan (the “2023 LTIP”).

The 2023 LTIP authorizes the Compensation Committee of the Board to provide equity-based compensation in the form of option rights, share appreciation rights, restricted shares, restricted shares units, performance shares, performance units, cash incentive awards, profits interest units and other awards based on or related to the Company’s shares.

On February 2, 2024, the Board approved a quarterly dividend of $ 0.15 per common share, payable on March 28, 2024 to shareholders of record on February 16, 2024.

The dividend on the Company’s common shares consists of a combination of cash and shares, with the cash component of the dividend (other than cash paid in lieu of fractional shares) not to exceed 20 % in the aggregate, with the balance being paid in the Company’s common shares.

Also on February 2, 2024, the Board approved a quarterly dividend of $ 0.34375 per Series A Preferred Share, payable on April 1, 2024 to shareholders of record on March 25, 2024.

Issuance of Common Shares to Adviser

On January 12, 2024, the Company issued 169,920.62 common shares to the Adviser as payment of a portion of the monthly Advisory Fees pursuant to the Advisory Agreement.

Redemption of Series A Preferred Stock in NexAnnuity Holdings, Inc.

On January 12, 2024, NHI, in its sole discretion redeemed 1,700 shares of Class A Preferred Stock in NHI held by one of the Company's wholly owned TRSs for $ 1.7 million.

Cityplace Debt Extension

On February 8, 2023, the lenders agreed to defer the maturity of the Cityplace debt by three months to May 8, 2023, with the possibility to extend for an additional four months to September 8, 2023 provided certain metrics are met.

The purpose of the deferral was to allow for continued discussions around refinancing the debt.

On March 8, 2024, the lender agreed to defer the maturity of the Cityplace debt by twelve months to March 8, 2025.

The terms of this extension require a 0.25 % extension fee, with the loan continuing to amortize during the extension period, as well as a waiver to purchase an interest rate cap.

NSP BS Guaranties Extension

On March 8, 2024, the BS Lender agreed to extend the maturity date to March 22, 2024, which will allow NSP to use February 2024 financials to calculate the Debt Yield (as defined in the BS Loan Agreement), which is part of the process for obtaining a longer extension.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

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 8. Financial Statements and Supplementary Data