What changed in this filing

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Item 1. Business

2025-03-31 compared with 2024-03-14 · 93 added, 67 removed, 272 unchanged (37% of the section changed)

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The Company is advised by the Adviser.

The Company was formed in Delaware and has elected to be taxed as a REIT.

The Company was formed as a Delaware statutory trust on March 10, 2006 under the name “Highland Credit Strategies Fund” and changed its name to “NexPoint Diversified Real Estate Trust” in 2021, and the Company has elected to be taxed as a REIT.

Substantially all of the Company’s business is conducted through NexPoint Diversified Real Estate Trust Operating Partnership, L.P.

(the “OP”), the Company’s operating partnership and wholly owned subsidiary.

(the “OP”), the Company’s operating partnership.

As of December 31, 2024, the Company owned 100% of the issued and outstanding partnership units of the OP.

The Company conducts its business (the “Portfolio”) through the OP and its wholly owned taxable REIT subsidiaries (“TRSs”).

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Key highlights and transactions completed in 2024 include the following:

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

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

NexPoint SFR Operating Partnership, L.P.

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

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

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

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

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

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

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

NexPoint Storage Partners Operating Company, LLC

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

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

Specialty Financial Products, Ltd.

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

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

("NHI") and its wholly owned subsidiaries.

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

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

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

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

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

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

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

quarterly distribution of approximately $1.3 million.

Investments in DSTs

On July 26, 2024, the Company, through a subsidiary, contributed approximately $4.6 million to NexPoint Life Sciences II DST (“Life Sciences II DST”), in exchange for LLC interests.

On July 26, 2024, the Company, through a subsidiary, contributed $14.9 million to NexPoint Semiconductor Manufacturing DST (“Semiconductor DST”), in exchange for LLC interests.

On September 11, 2024, the Company contributed an additional $6.1 million to Semiconductor DST in exchange for LLC interests.

For further information on these transactions, see Note 10 to our consolidated financial statements.

NHT Acquisition

On April 10, 2024, the Company, through a subsidiary, acquired 2,176,257 units of NexPoint Hospitality Trust (“NHT”) (the “NHT Units”).

As a result, the Company owned 53.65% of the outstanding NHT Units and was determined to hold the controlling financial interest in NHT.

For further information on this transaction, see Note 2 to our consolidated financial statements.

VineBrook Homes Operating Partnership, L.P.

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

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

On November 22, 2024, the Company announced that it had entered into an Agreement and Plan of Merger pursuant to which it would acquire the remaining outstanding NHT Units in a merger transaction (the “NHT Merger”) for approximately $5.5 million, to be paid principally in common shares of the Company, with limited partnership interests of the OP paid for the equity interests of NHT Operating Partnership, LLC (“NHT OP”).

On February 21, 2025, NHT’s unitholders voted to approve the NHT Merger.

The NHT Merger is expected to close in the second quarter of 2025.

On November 25, 2024, SFR WLIF III, LLC, redeemed all of the interests in SFR WLIF III, LLC.

The Company received approximately $7.2 million for the redemption of its units.

On April 19, the OP loaned $6.5 million to NREF OP IV, L.P.

(“NREF OP IV”), a subsidiary of NexPoint Real Estate Finance, Inc.

In connection with the loan, NREF OP IV issued a promissory note to the OP in the initial principal amount of $6.5 million bearing interest at 7.535%, which is payable in kind, is interest only during its term and matures on April 19, 2029.

Share Repurchase Program

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

On October 24, 2022, our Board of Trustees (our “Board”) authorized a share repurchase program (the “Prior Share Repurchase Program”) through which we could repurchase an indeterminate number of common shares and our 5.50%

Series A Cumulative Preferred Shares, liquidation preference $25.00 per share (the “Series A Preferred Shares”), at an aggregate market value of up to $20.0 million during a two-year period that expired on October 24, 2024.

We did not make any repurchases of our common shares of Series A Preferred Shares pursuant to the Prior Share Repurchase Program.

On October 28, 2024, the Board authorized a new share repurchase program (the “Share Repurchase Program”) through which the Company may repurchase an indeterminate number of common shares and Series A Preferred Shares, at an aggregate market value of up to $20.0 million during a two-year period that is set to expire on October 28, 2026.

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

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As of December 31, 2024, we had not made any repurchases of our common shares or Series A Preferred Shares pursuant to the Share Repurchase Program.

Reportable Segments

The company has two reportable segments, NXDT and NHT.

NXDT represents the Company's primary reportable segment and represents a significant majority of the Company's consolidated portfolio (the "NXDT Portfolio").

The NXDT reportable segment is the legacy reportable segment and is focused on investing in various commercial real estate property types and across the capital structure, including but not limited to, equity, mortgage, debt, mezzanine debt and preferred equity.

The NHT reportable segment represents a minority of the Company's consolidated portfolio (the "NHT Portfolio") and operations and is focused on exiting out of its remaining hospitality assets and repositioning the portfolio into other real estate sectors where management has extensive operating expertise and experience.

Our Portfolio

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

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

life settlement contracts, convertible notes and bonds from a number of diverse issuers and investment vehicles, including litigation claims and midband spectrum frequency licenses.

As of December 31, 2024, the Company’s NXDT Portfolio includes real estate investments comprised of four operating properties, three of which are rented from the Company for retail, hospitality or office use and one of which is undeveloped, two convertible note and two promissory note investments in businesses focused on single-family rental (“SFR”) and hospitality real estate, and 13 equity investments in businesses primarily focused on investing in SFR, self-storage, hospitality, life science or undeveloped real estate, as well as investing in commercial mortgage loans or other structured investments with underlying properties types including single-family, multifamily, life science and self-storage.

As of December 31, 2024, the Company’s Portfolio also includes other investments comprised of its ownership of common and preferred equity, loans, CLOs, rights and warrants, convertible notes and bonds from a number of diverse issuers and investment vehicles, including litigation claims and midband spectrum frequency licenses.

As of December 31, 2024, the Company’s NHT Portfolio includes real estate investments comprised of four operating properties, four of which are rented from the Company for hospitality use, and three properties which are held-for-sale.

The Company’s Portfolio, based on net equity, is comprised of 81.6% real estate investments and 18.4% other investments.

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Operating Properties

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

Cityplace Tower 8/15/2018 $ 231,393 $ 139,939 $ 105,688 Dallas, Texas Office, Multifamily & Hospitality (3)

NexPoint Dominion Land, LLC 8/9/2022 26,500 13,250 13,269 Plano, Texas Land

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

5916 W Loop 289 (2) 7/23/2013 4,019 — 3,676 Lubbock, Texas Real Estate Other

White Rock Center (2) 6/13/2013 13,716 10,000 2,097 Dallas, Texas Real Estate Other

Dallas Hilton Garden Inn 12/31/2014 30,318 — 32,312 Dallas, Texas Hospitality

Petersburg Marriott 9/25/2018 45,796 — 49,462 St.

Petersburg, Florida Hospitality

Hyatt Place Park City 2/15/2022 27,636 — 28,267 Park City, Utah Hospitality

Bradenton Hampton Inn & Suites 2/22/2022 30,911 — 31,029 Bradenton, Florida Hospitality

Total $ 410,289 $ 163,189 $ 265,800

* 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, 2023.

Investment Real Estate

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

Held-For-Sale Properties

Addison Property (4) 5/4/2017 $ 8,250 $ — $ 8,250 Addison, Texas Hospitality

Plano HomeWood Suites 5/4/2017 8,266 — 8,266 Plano, Texas Hospitality

Las Colinas HomeWood Suites 5/4/2017 13,762 — 13,762 Las Colinas, Texas Hospitality

Total $ 30,278 $ — $ 30,278

Real Estate Equity Method Investments Ownership Percentage Investment Type Net Equity (1) Location

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30.8 % Single-Family Rental 37,953 Various

NexPoint Storage Partners Operating Company, LLC.

30.0 % Self-Storage 37,157 Various

NexPoint Storage Partners Operating Company, LLC 30.5 % Self-Storage 34,172 Various

NexPoint Real Estate Finance, Inc.

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Sandstone Pasadena Apartments, LLC 50.0 % Multifamily 10,055 Pasadena, Texas

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

NexPoint Hospitality Trust 46.2 % Hospitality 4,886 Various

LLV Holdco, LLC 26.8 % Land 2,606 Henderson, Nevada

Capital Acquisitions Partners, LLC 20.9 % Multifamily 407 Various

Total $ 439,355

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IQHQ Holdings Class A-1 1,939 (2) Life Science $ 24,718

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

Other 1,764 (2) Real Estate Other 7,530

NexPoint Residential Trust, Inc.

96 (2) Multifamily 4,018

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

IQHQ Holdings Class A-2 250 (2) Life Science 3,188

Total $ 39,454

DSTs Shares/Units Investment Type Net Equity (1)

NexPoint Semiconductor Manufacturing DST 2,297 Real Estate Other $ 20,959

NexPoint Life Sciences II DST 1,044 Life Science 9,600

Total $ 30,559

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

SFR OP Convertible Notes 21,457 Single-Family Rental $ 20,846

NHT OP Notes 24,927 Hospitality 21,437

Total $ 42,251

Real Estate Senior Loans Principal Amount Investment Type Net Equity (1)

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

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

NFRO SFR Promissory Note 08/15/2025 3,883 Self-Storage $ 3,883

NFRO SFR Promissory Note 06/15/2025 3,432 Single-Family Rental 3,432

NSP OC Promissory Note 2,776 Single-Family Rental 2,765

SFR OP Promissory Note 500 Single-Family Rental 500

Total $ 10,580

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

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

(3) Cityplace Tower (“Cityplace”) is currently under development, and the Company is converting part of the property into a hotel with multifamily residential floors, which was still under construction as of December 31, 2024.

(4) Effective December 19, 2024, the property ceased operating under the HomeWood Suites brand.

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

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The Company seeks to achieve this objective through its focus on investing across the capital structure in various commercial real estate property types.

Target underlying property types primarily include, but are not limited to, SFR, multifamily, self-storage, life science, office, industrial, hospitality, net lease and retail.

Target underlying property types primarily include real estate sectors where senior management has extensive operating expertise and experience including, SFR, multifamily, self-storage, life science, office, industrial, hospitality, net lease, retail and small bay industrial.

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

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life settlement contracts, convertible notes and bonds from a number of diverse issuers and investment vehicles, including litigation claims and midband spectrum frequency licenses.

Strategic Reallocation of NXDT’s Portfolio

In the coming year, NXDT plans to re-focus its asset allocation across sectors in which our Sponsor has an extensive experience and expertise.

This re-focusing will involve selling legacy assets that do not fall within our core investment strategy.

A more favorable capital market environment, with lower interest rates and increased liquidity, is expected to facilitate this process.

The Company’s objective is to opportunistically sell $100 million to $150 million in assets to free up capital for reinvestment in target asset classes such as residential, self-storage, and life sciences.

Our Financing Strategy

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The following chart shows our ownership structure as of the date hereof:

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

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

The Company is externally managed by the Adviser, through an agreement dated July 1, 2022, as amended on October 25, 2022, April 11, 2023 and July 22, 2024 (the “Advisory Agreement”), by and among the Company and the Adviser for an initial three-year term that will expire on July 1, 2025 and successive one-year terms thereafter unless earlier terminated.

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

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The Adviser is wholly owned by our Sponsor.

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

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

Our Advisory Agreement

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We also generally reimburse our Adviser for operating or offering expenses it incurs on our behalf or in connection with the services it performs for us.

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

Prior to June 30, 2023, direct payment of operating expenses by us together with reimbursement of operating expenses to the Adviser, plus compensation expenses relating to equity awards granted under a long-term incentive plan and all other corporate general and administrative expenses of the Company, including the Fees (defined below) payable under the Advisory Agreement, could not exceed 1.5% (the “Expense Cap”) of Managed Assets (defined below), calculated as of the end of each quarter, for the twelve-month period following the Company’s receipt of the Deregistration Order.

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

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

The Advisory Agreement provides that the 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;

The Advisory Agreement provides that the Administrative Fee shall be paid in cash and the monthly installment of the Advisory Fee shall be paid one-half in cash and one-half in common shares of the Company, subject to certain restrictions including that in no event shall the common shares issued to the Adviser under the Advisory Agreement exceed five percent of the number of common shares or five percent of the voting power of the Company outstanding prior to the first such issuance (the "Share Cap") and that in no event shall the common shares issued to the Adviser under the Advisory Agreement exceed 6,000,000 common shares;

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

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.

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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Management of Operating Properties

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

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

The property management agreement with NexVest for the retail property in Lubbock, Texas is dated January 1, 2014 and has a fixed fee of $1,200 per month.

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 Cityplace 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 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.

The property management agreement with NexVest for Cityplace also allows for the manager, as the agent of CP Tower

Owner, LLC (“Owner”), to draw on the operating account when required in connection with the operation or maintenance of the property, the payment of certain expenses defined in the agreement, or as expressly approved in writing by Owner.

The Company’s operating properties in the NHT segment are managed by affiliates of Aimbridge Hospitality Holdings, LLC (the “Manager”).

The hotel management agreements generally require the Company to pay a base fee to the hotel manager calculated as a percentage of hotel revenues.

In addition, the NHT segment’s hotel agreements generally provide that the hotel manager can earn an incentive fee for revenue or EBITDA over certain thresholds or based on a return over the required preferred return.

The Company may employ other hotel managers in the future.

The Company does not have any ownership or economic interest in the Manager or in any of the hotel management entities.

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

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An increase in the competition for such assets may decrease the availability or increase the price of such assets, which may limit our ability to generate attractive risk-adjusted current income and capital appreciation for our shareholders, thereby adversely affecting the market price of our common shares.

In addition, with respect to our operating properties, we compete for tenants based on a number of factors, including location, rental rates, security, flexibility, and expertise to design space to meet prospective tenants’ needs and the manner in which the property is operated, maintained, and marketed.

In addition, with respect to the NXDT segment’s operating properties, we compete for tenants based on a number of factors, including location, rental rates, security, flexibility, and expertise to design space to meet prospective tenants’ needs and the manner in which the property is operated, maintained, and marketed.

As leases at our properties expire, we may encounter significant competition to renew or re-lease space in light of the large number of competing properties within the markets in which we operate.

As a result, we may be required to provide rent concessions or abatements, incur charges for tenant improvements and other inducements, including early termination rights or below-market renewal options, or we may not be able to timely lease vacant space.

With respect to the NHT segment’s operating properties, we face competition on the basis of location, room rates, quality, service levels, reputation and reservations systems, among many factors.

The NHT segment also faces competition from alternative lodging options such as Airbnb that have and may continue to add guest accommodations that compete with hotel inventory.

Such competition may reduce occupancy rates and revenues of the NHT segment.

In the face of this competition, we expect to have access to our Sponsor’s professionals and their industry experience, which we believe will provide us with a competitive advantage and help us assess investment risks and determine appropriate pricing for potential investments.

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

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

obligations or restrictions on our operating properties.

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

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Moreover, if contamination is discovered on our operating properties, environmental laws may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures.

Independent environmental consultants have conducted Phase I environmental site assessments at all of our operating properties, including undeveloped land, in our Portfolio.

A Phase I environmental site assessment is a report that identifies potential or existing environmental contamination liabilities.

Site assessments are intended to discover and evaluate information regarding the environmental condition of the assessed property and surrounding properties.

Independent environmental consultants have conducted Phase I environmental site assessments at all of our operating properties, including undeveloped land, in our Portfolio, using the applicable version of American Society for Testing and Materials Standard E 1527 in effect at the time of their commission.

A Phase I environmental site assessment is a report that reviews various publicly available information and includes a site visit to identify recognized environmental conditions.

Phase I Site assessments are intended to identify and evaluate known and reasonably ascertainable information regarding the environmental condition of the assessed property and surrounding properties.

These assessments do not generally include soil samplings, subsurface investigations or an asbestos survey.

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

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

In addition, for the

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

We believe the policy specifications and insured limits are adequate given the relative risk of loss, the cost of the coverage and industry practice.

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Even if we qualify for taxation as a REIT, we may be subject to some U.S.

federal, state and local taxes on our income or property or REIT “prohibited transactions” taxes with respect to certain of our activities.

federal, state and local taxes on our income or property or REIT “prohibited transaction” taxes with respect to certain of our activities.

Any distributions paid by us generally will not be eligible for taxation at the preferred U.S.

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

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

which assets are qualifying assets and real estate-related assets.

Maintaining the Section 3(c)(5)(C) exclusion, however, will limit our ability to make certain investments.

Smaller Reporting Company Status

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

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

We are a “smaller reporting company” as defined in Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”), and may elect to take advantage of certain of the scaled disclosures available to smaller reporting companies.

Human Capital Disclosure

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Information contained on, or accessible through, our website is not incorporated by reference into and does not constitute a part of this Annual Report or any other report or documents we file with or furnish to the SEC.

From time to time, we may use our website as a distribution channel for material company information.

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

What changed 10-K

Item 1. Business