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Item 1A. Risk Factors

2025-03-31 compared with 2024-03-14 · 566 added, 165 removed, 994 unchanged (42% of the section changed)

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• our ability to change our major policies, operations and targeted investments without shareholder consent and our Board’s issuance of and ability to further issue debt securities or equity securities that may adversely impact the value or priority of or have dilutive effect on our shares or discourage a third-party acquisition;

• risks associated with (i) provisions in our governing documents that may limit stockholders’ choice of forum for disputes with us or discourage an acquisition of our securities or a change in control, including stock ownership restrictions and limits and (ii) provisions of our governing documents that may limit the ability for a third-party acquisition;

• risks associated with (i) provisions in our governing documents that may limit shareholders’ choice of forum for disputes with us or discourage an acquisition of our securities or a change in control, including share ownership restrictions and limits and (ii) provisions of our governing documents that may limit the ability for a third-party acquisition;

• recent and potential legislative or regulatory changes or other actions with respect to tax, securitization, financial or other matters affecting REITs, the mortgage industry or debt-oriented real estate investments generally;

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• risks associated with the Highland Bankruptcy (as defined below), including possible materially adverse consequences on our business, financial condition and results of operations;

• non-completion of the NHT Merger may have an adverse effect on our business and results of operations;

• risks associated with holding shares of the Series A Preferred Shares, including volatility in price and trading volume, subordination to our debt, dilution upon future issuances and lack of, or a low, rating on the Series A Preferred Shares;

• risks associated with holdings shares of the 9.00% Series B Cumulative Redeemable Preferred Shares, par value $0.001 per share, liquidation preference $25.00 per share (“Series B Preferred Shares”), including limited voting rights, subordination to our debt and dilution from future issuances;

• risk of failure to generate sufficient cash flows to service outstanding indebtedness or pay distributions on our shares at expected levels, and the risk that we may borrow funds or use funds from other sources to pay distributions;

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• the potential for uninsured or under-insured property losses.

If any of these or similar events occurs, it may reduce our return from an affected property or investment and reduce or eliminate our ability to pay dividends to shareholders.

If any of these or similar events occurs, it may reduce our return from an affected property or investment and reduce or eliminate our ability to pay distributions to shareholders.

Because we primarily invest in the real estate industry, our investments expose us to risks similar to and associated with real estate investments generally.

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Commercial real estate-related investments that are secured, directly or indirectly, by real property are subject to delinquency, foreclosure and loss, which could result in losses to us.

Commercial real estate investments, including investments in debt secured by commercial property, are subject to risks of delinquency and foreclosure and risks of loss that are greater than similar risks associated with investments in or loans made on the security of single-family residential property.

Our ability to realize a return on our investments in commercial real estate typically is dependent primarily upon the successful operation of the property or properties.

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A multi-tenant property is particularly sensitive to the risk that a tenant that occupies a large area of a commercial retail property (commonly referred to as an anchor tenant) is unable to make their lease payments, does not extend their lease upon its expiration, or otherwise vacates their rented space.

A lease termination by an anchor tenant or tenants could impact leases of other tenants.

termination by an anchor tenant or tenants could impact leases of other tenants.

Other tenants may be entitled to modify the terms of their existing leases in the event of a lease termination by an anchor tenant, or the closure of the business of an anchor tenant that leaves its space vacant even if the anchor tenant continues to pay rent.

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Certain provisions of the Company's leases may be unenforceable.

The Company's, or the underlying property owners for our investments, rights and obligations with respect to its leases are governed by written agreements with its tenants.

The Company's, or the underlying property owner’s for our investments, rights and obligations with respect to its leases are governed by written agreements with its tenants.

A court could determine that one or more provisions of such an agreement are unenforceable, such as a particular remedy, a termination provision, or a provision governing the Company's or the underlying property owner's remedies for default of the tenant.

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As a result, if revenues decline, we or the underlying property owners for our investments may not be able to reduce operating costs or expenses to keep pace with the corresponding reductions in revenues.

Many of the costs and expenses associated with our investments, such as taxes, insurance, loan payments, and maintenance generally will or may not be reduced if a property is not fully occupied or other circumstances cause revenues to decrease, which could have a material adverse effect on our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.

financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.

We are subject to certain risks associated with investing in real estate, including potential liabilities under environmental laws and risks of loss from weather conditions, man-made or natural disasters, climate change and terrorism.

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Certain environmental laws also impose liability in connection with the handling of or exposure to asbestos-containing materials, pursuant to which third parties may seek recovery from owners of real properties for personal injuries associated with asbestos-containing materials.

Certain of our properties may contain, or may have contained, microbial matter such as mold and mildew.

The presence of microbial matter could adversely affect our results of operations.

In addition, if any of our properties are not properly connected to a water or sewer system, or if the integrity of such systems are breached, or if water intrusion into our buildings otherwise occurs, microbial matter or other contamination can develop.

When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time.

Some molds may produce airborne toxins or irritants.

If this were to occur, we could incur significant remedial costs.

Weather conditions and man-made or natural disasters such as hurricanes, tornadoes, earthquakes, floods, droughts, fires and other environmental conditions can damage properties we own.

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In addition, there is a risk that one or more of our property insurers may not be able to fulfill their obligations with respect to claims payments due to a deterioration in its financial condition.

Investments in securities of other companies or issuers, including debt and equity instruments such as bonds, preferred or common stock, or convertible instruments, could cause us to incur losses or other expenses which could adversely affect our financial position, results of operations, and cash flows.

We currently own and may own in the future, investments in securities of companies or issuers including debt and equity instruments, which may include bonds, preferred or common stock, or convertible instruments.

Investments in securities of other companies or issuers, including debt and equity instruments such as bonds, preferred or common shares, or convertible instruments, could cause us to incur losses or other expenses which could adversely affect our financial position, results of operations, and cash flows.

Certain of these investments may be traded on an exchange or other active market while other investments may not be actively traded and without a readily observable market price.

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Should we incur realized losses on liquidating these investments, our financial position, results of operations and cash flows would be adversely impacted.

Our investments in the securities of

companies or issuers which are engaged in the real estate industry are also subject to risks associated with the investment in real estate generally.

Our investments in the securities of companies or issuers which are engaged in the real estate industry are also subject to risks associated with the investment in real estate generally.

Our investments in non-real estate businesses, though expected to be limited, may expose us to risks from a number of diverse issuers, industries and investment forms.

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With regard to our commercial properties, inflationary pressures have increased or may have the effect of increasing our costs related to property management, third-party contractors and vendors, insurance, transportation and taxes, and our commercial tenants may be adversely impacted by higher operating expenses, which may increase the rate of tenant defaults and harm our operating results.

Federal Reserve began rapidly raising the federal funds rate to decade-high levels in 2022 to combat inflation and restore price stability.

In addition, the Federal Reserve began a quantitative tightening program in June of 2022.

The combination of these actions have resulted in an increase in prevailing interest rates and a flattening of the yield curve.

Certain of our investments pay interest at a fixed rate, and the relative value of the fixed cash flows from these investments will decrease as prevailing interest rates rise or increase as prevailing interest rates fall, causing potentially significant changes in value.

In addition, to the extent our exposure to increases in or high interest rates on any of our debt is not eliminated through interest rate swaps and interest rate protection agreements that we may utilize for hedging purposes, such increases will result in higher debt service costs which will adversely affect our cash flows.

We cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings.

We cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely

affect the availability and terms of future borrowings, renewals or refinancings.

Such future constraints could increase our borrowing costs, which would make it more difficult or expensive to obtain additional financing or refinance existing obligations and commitments, which could slow or deter future growth.

In addition, these actions by the Federal Reserve, as well as efforts by other central banks globally to combat inflation and restore price stability and other global events, may raise the prospect or severity of a recession.

The war in Ukraine and the Israel-Hamas war add, and other international tensions or escalations of conflict may add, instability to the uncertainty driving socioeconomic forces, which may continue to have an impact on global trade and result in inflation or economic instability.

In addition, actions by the Federal Reserve, as well as efforts by other central banks globally to combat inflation and restore price stability and other global events, may raise the prospect or severity of a recession.

Wars have added, and other international tensions or escalations of conflict may add, instability to the uncertainty driving socioeconomic forces, which may continue to have an impact on global trade and result in inflation or economic instability.

Present conditions and the state of the U.S and global economies make it difficult to predict whether and/or when and to what extent a recession will occur in the near future.

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We may use leverage in our investment program, resulting in a greater risk of loss.

We may use leverage in our investment program, including the use of borrowed funds and investments in certain types of options, such as puts, calls and warrants, which may be purchased for a fraction of the price of the underlying

While such strategies and techniques increase the opportunity to achieve higher returns on the amounts invested, they also increase the risk of loss.

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We may invest in preferred equity securities which contain provisions that may result in a decline in the value of such preferred security in certain situations.

Preferred stock, which may include preferred stock in real estate transactions, represents an equity or ownership interest in an issuer that pays dividends at a specified rate and that has precedence over common stock in the payment of dividends.

In the event an issuer of preferred stock is liquidated or declares bankruptcy, the claims of creditors and owners of debt take precedence over the claims of those who own preferred and common stock.

If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline.

Preferred stock may have mandatory sinking fund provisions, as well as provisions allowing the stock to be called or redeemed prior to its maturity, which can have a negative impact on the stock’s price when interest rates decline.

Unlike interest on debt securities, preferred stock dividends may only be payable if declared by the issuer’s board of directors or other governing body.

The value of convertible preferred stock can depend heavily upon the value of the security into which such convertible preferred stock is converted, depending on whether the market price of the underlying security exceeds the conversion price.

Preferred shares, which may include preferred shares in real estate transactions, represents an equity or ownership interest in an issuer that pays dividends at a specified rate and that has precedence over common shares in the payment of dividends.

In the event an issuer of preferred shares is liquidated or declares bankruptcy, the claims of creditors and owners of debt take precedence over the claims of those who own preferred and common shares.

If interest rates rise, the fixed dividend on preferred shares may be less attractive, causing the price of preferred shares to decline.

Preferred shares may have mandatory sinking fund provisions, as well as provisions allowing the shares to be called or redeemed prior to its maturity, which can have a negative impact on the share’s price when interest rates decline.

Unlike interest on debt securities, preferred share dividends may only be payable if declared by the issuer’s board of directors or other governing body.

The value of convertible preferred shares can depend heavily upon the value of the security into which such convertible preferred share is converted, depending on whether the market price of the underlying security exceeds the conversion price.

We may invest in or write options on securities, which may result in our bearing the risk of loss should the underlying security change in value during the life of the option.

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A transaction in options or securities may be unsuccessful to some degree because of market behavior or unexpected events.

If we write a covered call option, we forgo, during the option’s life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the strike price of the call, but retains the risk of loss should the price of the underlying security decline.

If we write a covered call option, we forgo, during the option’s life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the strike price of the call, but retain the risk of loss should the price of the underlying security decline.

The writer of an option has no control over the time when it may be required to fulfill its obligation and once an option writer has received an exercise notice, it must deliver the underlying security in exchange for the strike price.

If we write a covered put option, we bear the risk of loss if the value of the underlying stock declines below the exercise price minus the put premium.

If the option is exercised, we could incur a loss if it is required to purchase the stock underlying the put option at a price greater than the market price of the stock at the time of exercise plus the put premium we received when we wrote the option.

If we write a covered put option, we bear the risk of loss if the value of the underlying shares declines below the exercise price minus the put premium.

If the option is exercised, we could incur a loss if it is required to purchase the shares underlying the put option at a price greater than the market price of the shares at the time of exercise plus the put premium we received when we wrote the option.

While our potential gain in writing a covered put option would be limited to distributions earned on the liquid assets securing the put option plus the premium received from the purchaser of the put option, we risk a loss equal to the entire exercise price of the option minus the put premium.

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Short selling allows us to profit from declines in market prices to the extent such decline exceeds the transaction costs and costs of borrowing the securities.

However, since the borrowed securities must be replaced by purchases at market prices in order to close out the short position, any appreciation in the price of the borrowed securities would result in a loss.

However, since the borrowed

securities must be replaced by purchases at market prices in order to close out the short position, any appreciation in the price of the borrowed securities would result in a loss.

Purchasing securities to close out the short position can itself cause the price of securities to rise further, thereby exacerbating the loss.

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Despite the protection from the equity tranche, other tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to previous defaults and the disappearance of protecting tranches, market anticipation of defaults and aversion to certain structured finance securities as a class.

We may invest in emerging markets, where investments are subject to additional risks and price volatility.

Any investments in issuers based in emerging market countries (countries in which the capital markets are developing), or in securities issued by foreign governments, may involve greater risks than investments in more developed markets and the prices of such investments may be more volatile.

The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of our investments and the income they generate, as well as our ability to repatriate such amounts.

We may be subject to risks involved in investment activity through joint ventures.

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We intend to focus primarily on investing in various real estate property types and across the capital structure, including but not limited to equity, mortgage debt, mezzanine debt and preferred equity.

In addition to our commercial real estate focus, our investments may be concentrated in terms of property type (e.g.

In addition to our commercial real

estate focus, our investments may be concentrated in terms of property type (e.g.

office), geography, asset type, industry and sponsors, as we are not required to observe specific diversification criteria, except as may be set forth in the investment guidelines adopted by our Board.

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If the assets are purchased at a premium to the par value or principal balance of the security or loans, when borrowers prepay their loans faster than expected, the corresponding prepayments on the mortgage-related securities may reduce the expected yield on such securities because the related premium will have to be amortized on an accelerated basis.

Conversely, if the assets are purchased at a discount

to either the principal balance of the loans or the par value of the loans underlying the securities, when borrowers prepay their mortgage loans slower than expected, the decrease in corresponding prepayments on the mortgage-related securities may reduce the expected yield on such securities because the related discount will not accrete as quickly as originally anticipated.

Conversely, if the assets are purchased at a discount to either the principal balance of the loans or the par value of the loans underlying the securities, when borrowers prepay their mortgage loans slower than expected, the decrease in corresponding prepayments on the mortgage-related securities may reduce the expected yield on such securities because the related discount will not accrete as quickly as originally anticipated.

Prepayment rates on loans may be affected by a number of factors including, but not limited to, the availability of mortgage credit, the relative economic vitality of the area in which the related properties are located, the servicing of the mortgage loans, possible changes in tax laws, changes in interest rates, other opportunities for investment, homeowner mobility and other economic, social, geographic, demographic and legal factors and other factors beyond our control.

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Further, we rely on management, outside experts, market participants and the Adviser to analyze potential investments for us.

There can be no assurance that any of these sources will prove credible, or that the resulting

analysis will produce accurate conclusions.

There can be no assurance that any of these sources will prove credible, or that the resulting analysis will produce accurate conclusions.

Investment in the loans or securities of financially or operationally troubled borrowers or issuers involves a high degree of credit and market risk.

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There is a possibility that we may incur substantial or total losses on our loans and investments and, in certain circumstances, become subject to certain additional potential liabilities that may exceed the value of our original investment therein.

For example, under certain circumstances, a lender that has inappropriately exercised control over the management and policies of a debtor may have its claims subordinated or disallowed or may be found liable for damages suffered by parties as a result of such actions.

For example, under certain circumstances, a lender that has inappropriately exercised control over the management and policies of a debtor may have its claims subordinated or disallowed or may be

found liable for damages suffered by parties as a result of such actions.

In any reorganization or liquidation proceeding relating to our investments, we may lose our entire investment, may be required to accept cash or securities with a value less than our original investment and/or may be required to accept different terms, including payment over an extended period of time.

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Significant losses related to such loans or investments could adversely affect our results of operations and financial condition.

Investments in subordinated debt and preferred equity also bear a greater risk of

default than senior debt and may receive payments after the holders on the more senior tranches of debt instruments with respect to an issuer.

Investments in subordinated debt and preferred equity also bear a greater risk of default than senior debt and may receive payments after the holders on the more senior tranches of debt instruments with respect to an issuer.

We may invest in senior loans, a significant portion of which may be below investment grade, which the borrower may fail to repay or which may decline in value due to changes in interest rates.

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Therefore, senior loans may not mitigate price declines in a rising long term interest rate environment.

The secondary market for loans is generally less liquid than the market for higher grade debt.

The secondary market for loans is generally less liquid than the market for

higher grade debt.

Less liquidity in the secondary trading market could adversely affect the price at which we could sell a loan, and could adversely affect our income.

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Our results of operations and financial condition could be adversely affected if our Adviser’s determinations regarding the fair value of these investments were materially higher than the values that we ultimately realize upon their disposal.

We may experience a decline in the fair value of our assets.

A decline in the fair value of our assets may require us to recognize an “other-than-temporary” impairment against such assets under GAAP if we were to determine that, with respect to any assets in unrealized loss positions, we do not have the ability and intent to hold such assets to maturity or for a period of time sufficient to allow for recovery to the original acquisition cost of such assets.

If such a determination were to be made, we would recognize unrealized losses through earnings and write down the amortized cost of such assets to a new cost basis, based on the fair value of such assets on the date they are considered to be other-than-temporarily impaired.

The Company’s real estate assets may be subject to impairment charges.

A decline in the fair value of our assets may require us to recognize an impairment against such assets under GAAP if we were to determine that, with respect to any assets in unrealized loss positions, we do not have the ability and intent to hold such assets to maturity or for a period of time sufficient to allow for recovery to the original acquisition cost of such assets.

Such impairment charges reflect non-cash losses at the time of recognition;

subsequent disposition or sale of such assets could further affect our future losses or gains, as they are based on the difference between the sale price received and adjusted amortized cost of such assets at the time of sale.

If we experience a decline in the fair value of our assets, it could adversely affect our results of operations and financial condition.

If we are required to recognize material asset impairment charges, these charges could adversely affect our results of operations and financial condition.

The due diligence process that our Adviser undertakes in regard to investment opportunities may not reveal all facts that may be relevant in connection with an investment and if our Adviser incorrectly evaluates the risks of our loans and investments, we may experience losses.

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Relying on the resources available to it, our Adviser will evaluate our potential investments based on criteria it deems appropriate for the relevant investment.

Selecting and evaluating material due diligence matters is subjective by nature, and there is no guarantee that the criteria utilized or judgment exercised by our Adviser will reflect the beliefs, values, internal policies or preferred

practices of any particular investor or align with the values or preferred practices of other commercial real estate investors or with market trends.

Our Adviser’s loss estimates may not prove accurate, as actual results may vary from estimates.

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If the properties underlying our interests are unable to obtain affordable insurance coverage, the value of our interests could decline, and in the event of an uninsured loss, we could lose all or a portion of our investment.

Risk Factors Related to the Business of NHT

The majority of the hotels owned by NHT are operated pursuant to franchise agreements with nationally recognized hotel brands and changes in the market perception of such brands may impact the desirability of NHT’s hotels to consumers.

The NHT segment operates most of its hotels pursuant to franchise or license agreements with nationally recognized hotel brands.

NHT’s management believes that building brand value is critical to increased demand and the strengthening of customer loyalty.

Most of the hotels in the NHT segment utilize brands owned by Hilton, Marriott or Hyatt.

Consequently, if market recognition or the positive perception of Hilton, Marriott or Hyatt is reduced or compromised, the goodwill associated with the Hilton, Marriott or Hyatt-branded hotels in the NHT Portfolio may be adversely affected.

Franchise agreements contain specific standards for, and restrictions and limitations on, the operation and maintenance of NHT’s hotels in order to maintain uniformity within the franchisor system.

NHT may be required to incur costs to comply with these standards and these standards could potentially conflict with NHT’s ability to create specific business plans tailored to each property and to each market.

Failure to comply with these brand standards may result in termination of the applicable franchise or license agreement.

On December 19, 2024, Hilton terminated a franchise agreement with respect to the Addison Property based on a review of the brand standards.

The Addison Property is currently held for sale, and will be operated as an independent hotel until sale.

Upon any such termination, NHT would be required to rebrand the hotel or else operate the property as an independent hotel, which could result in substantial relicensing or rebranding costs, a decline in the value of the hotel, the loss of marketing support and participation in guest loyalty programs, and harm NHT’s relationship with the franchisor, impeding NHT’s ability to operate other hotels under the same brand.

If any of the foregoing were to occur, it could have a material adverse effect on NHT and, as a result of the accounting requirement that the Company consolidate NHT as of April 19, 2024, the Company’s results of operations and financial condition.

As part of its hotel business, NHT and its franchise partners are required to collect and maintain certain information about hotel employees and customers, which subjects us to risks associated with cybersecurity breaches and compliance with privacy regulations.

NHT, through the independent contractors affiliated with the Manager, and its franchise partners are required to collect and maintain personal information about hotel employees and, through third-party providers, collect information about customers in connection with the processing of credit and debt transactions and as part of certain of NHT’s marketing programs.

The collection and use of such information is regulated in the U.S.

at the federal and state levels and in Canada at the federal and provincial levels, and the regulatory environment in these and other jurisdictions related to information security and privacy is increasingly demanding.

At the same time, NHT will rely increasingly on cloud computing and other technologies that result in third parties holding customer or hotel employee information on NHT’s behalf.

If the security of NHT’s, its franchise partners’ or third party providers’ information systems used to store or process such information is compromised, or if NHT or such third parties otherwise fail to comply with applicable laws and regulations, NHT or its franchise partners could face litigation and the imposition of penalties that could adversely affect NHT’s financial performance and the Company’s results of operations and financial conditions.

The brand reputations of NHT’s franchise partners could also be adversely affected from these types of security breaches or regulatory violations, which could impair revenues or the ability to attract and retain qualified hotel personnel.

Privacy and information security risks have generally increased in recent years because of the proliferation of new technologies, such as ransomware, and the increased sophistication and activities of perpetrators of cyber-attacks.

The security measures put in place by NHT or its franchise partners cannot provide absolute security, and NHT and its franchise partners’ information technology infrastructure may be vulnerable to similar or other criminal cyber-attacks or data security incidents, including, ransom of data, such as, without limitation, resident and/or employee information, due to employee error, malfeasance, or other vulnerabilities.

Any such incident could compromise NHT’s or such franchise partner’s networks, and the information stored by NHT or such franchise partner could be accessed, misused, publicly disclosed, corrupted, lost, or stolen, resulting in fraud, including wire fraud related to NHT’s assets, or other harm.

Moreover, if a data security incident or breach affects NHT’s systems or such franchise partner’s systems or results in the unauthorized release of personally identifiable information, NHT’s or such franchise partner’s reputation and brand could be materially damaged and NHT may be exposed to a risk of loss or litigation and possible liability, including, without limitation, loss related to the fact that agreements with such franchise partners or such franchise partner’s financial condition, may not allow NHT to recover all costs related to a cyber breach for which they alone or they and NHT should be jointly responsible for, which could result in a material adverse effect on NHT’s business, results of operations and financial condition and, as a result of the accounting requirement that the Company consolidate NHT as of April 19, 2024, the Company’s results of operations and financial condition.

In the future, the Company and its franchise partners may expend additional resources to continue to enhance information security measures and/or to investigate and remediate any information security vulnerabilities.

Despite these steps, there can be no assurance that NHT or its franchise partners will not suffer a data security incident in the future, that unauthorized parties will not gain access to sensitive data stored on NHT’s systems or the systems of its franchise partners, or that any such incident will be discovered in a timely manner.

Further, the techniques used by criminals to obtain unauthorized access to sensitive data, such as phishing and other forms of human engineering, are increasing in sophistication and are often novel or change frequently;

accordingly, NHT and its franchise partners may be unable to anticipate these techniques or implement adequate preventative measures.

Increasing real estate taxes, utilities, insurance costs and other capital expenditures may negatively impact NHT’s operating results.

As a matter of conducting business in the ordinary course, certain significant expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs, and related charges, must be made throughout the period of ownership of real property regardless of whether a property is producing sufficient income to pay such expenses.

In order to retain desirable hotel destinations and to generate adequate revenue over the long term, NHT must maintain or, in some cases, improve a property’s condition to meet market demand.

These maintenance and improvement costs may be significant and may be costs NHT is unable to pass on to its hotel guests.

NHT is also subject to utility and property tax risk relating to increased costs that NHT may experience as a result of higher resource prices as well as its exposure to significant increases in property taxes.

There is a risk that property taxes may be raised as a result of revaluations of properties and their adherent tax rates.

In some instances, enhancements to properties may result in significant increases in property assessments following a revaluation.

Additionally, utility expenses, mainly consisting of natural gas and electricity service charges, have previously been subject to considerable price fluctuations.

NHT may incur general liability related to guests on its properties for which it is found negligent, or for claims that are otherwise not fully covered by insurance.

Any significant increase in these costs may have an adverse effect on NHT’s business, cash flows, financial condition, and results of operations and ability to make distributions to NHT’s unitholders, and, as a result of the accounting requirement that the Company consolidate NHT as of April 19, 2024, the Company’s cash flow results of operations and financial condition.

Litigation risk could affect NHT’s business.

In the normal course of NHT’s operations, whether directly or indirectly, it may become involved in, named as a party to, or the subject of various legal proceedings, including regulatory proceedings, tax proceedings, and legal actions relating to personal injuries, property damage, property taxes, land rights, the environment, and contract disputes.

The outcome with respect to outstanding, pending, or future proceedings cannot be predicted with certainty and may be determined in a manner adverse to NHT and, as a result, could have a material adverse effect on NHT’s assets, liabilities, business, financial condition, and results of operations.

Even if NHT prevails in any such legal proceeding, the proceedings could be costly and time-consuming and may divert the attention of management and key personnel from NHT’s business operations, which could have a material adverse effect on NHT’s business, cash flows, financial condition, and results of operations, and, as a result of the accounting requirement that the Company consolidate NHT as of April 19, 2024, the Company’s cash flow results of operations and financial condition.

Litigation risk specific to real property may affect NHT’s business.

The acquisition, ownership, and disposition of real property carry certain specific litigation risks.

Litigation may be commenced with respect to a property acquired by NHT or its subsidiaries in relation to activities that took place prior to NHT’s acquisition of such property.

In addition, at the time of disposition of an individual property, a potential buyer may claim that it should have been afforded the opportunity to purchase the asset or alternatively that such buyer should be awarded due diligence expenses incurred or damages for misrepresentation relating to disclosures made, if such buyer is passed over in favor of another as part of NHT’s efforts to maximize sale proceeds.

Similarly, successful buyers may later sue NHT under various damage theories, including those sounding in tort, for losses associated with latent defects or other problems not uncovered in due diligence.

There may be limitations on NHT’s ability to sell its properties, including if NHT acquires or finances properties with lock-out provisions, which may prohibit NHT from selling a property or may require NHT to maintain specified debt levels for a period of years on some properties.

NHT may be required to expend funds to correct defects or to make improvements before a property can be sold.

No assurance can be given that NHT will have funds available to correct such defects or to make such improvements.

In acquiring a property, NHT may agree to lock-out provisions that materially restrict it from selling that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property or debt or other contracts that are not prepayable or terminable and must be assumed by a buyer.

These provisions would restrict NHT’s ability to sell a property.

These factors and any others that would impede NHT’s ability to respond to adverse changes in the performance of its properties could significantly affect NHT’s financial condition and operating results and decrease the amount of cash available for distribution to NHT’s unitholders.

Additionally, franchisors need to approve replacement franchisees upon a sale and there is no assurance NHT will be able to locate buyers who are approved franchisees.

Risks Related to Our Industry

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Foreclosure may create a negative public perception of the related property, resulting in a diminution of its value.

Even if we are successful in foreclosing on a loan and/or investment, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis in the loan and/or investment, resulting in a

Furthermore, any costs or delays involved in the foreclosure of the loan and/or investment or a liquidation of the underlying property will further reduce the net proceeds and, thus, increase the loss.

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We may be subject to lender liability claims, and if we are held liable under such claims, we could be subject to losses.

In recent years, a number of judicial decisions have upheld the right of borrowers to sue lending institutions on the basis of various evolving legal theories, collectively termed “lender liability.” Generally, lender liability is founded on the premise that a lender has either violated a duty, whether implied or contractual, of good faith and fair dealing owed to the borrower or has assumed a degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or stockholders.

We cannot assure prospective investors that such claims will not arise or that we will not be subject to significant liability if a claim of this type did arise.

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It may also adversely affect underlying interest rates, capital availability, development of multifamily communities and the value of multifamily assets, which may also adversely affect our investments.

In addition, reforms regarding Fannie Mae and Freddie Mac could negatively impact our ability to maintain an exclusion or exemption from the Investment Company Act.

The market value of CMBS securitizations guaranteed by Fannie Mae and Freddie Mac today are highly dependent on the continued support by the U.S.

If such support is modified or withdrawn, if the U.S.

Treasury fails to inject new capital as needed or if Fannie Mae and Freddie Mac are released from conservatorship, the market value of the CMBS securitizations they guaranteed could significantly decline, making it difficult to obtain repurchase agreement financing and could force holders of CMBS securitizations to sell assets at substantial losses.

Treasury fails to

inject new capital as needed or if Fannie Mae and Freddie Mac are released from conservatorship, the market value of the CMBS securitizations they guaranteed could significantly decline, making it difficult to obtain repurchase agreement financing and could force holders of CMBS securitizations to sell assets at substantial losses.

Furthermore, any policy changes to the relationship between Fannie Mae, Freddie Mac and the U.S.

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It may also interrupt the cash flow received by investors on the underlying CMBS.

All of the foregoing could materially adversely affect the availability, pricing, liquidity, market value and financing of our assets or investments and materially adversely affect our business, operations, financial condition and book value per common share.

The securitization process is subject to an evolving regulatory environment that may affect certain aspects of our current business.

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Accordingly, if we buy CMBS B-Pieces, we may be required to purchase larger CMBS B-Pieces, potentially reducing returns on such investments.

Furthermore, any such CMBS B-Pieces purchased by us in an unaffiliated issuer generally cannot be transferred for a period of five years following the closing date of the securitization or hedged against credit risk.

Significant restrictions exist, and additional restrictions may be added in the future, regarding who may hold risk retention interests, the structure of the entities that hold risk retention interests and when and how such risk retention interests may be transferred.

These restrictions may reduce our liquidity and could potentially reduce our returns on such investments.

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Compliance with the Investment Company Act would, accordingly, limit our ability to make certain investments and require us to significantly restructure our business plan, which could materially adversely affect our ability to pay distributions to our shareholders.

The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act, may strain our resources, increase our costs and place additional demands on management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

We are a “smaller reporting company” under the federal securities laws and will be subject to reduced public company reporting requirements.

We are a “smaller reporting company,” and as such we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “smaller reporting companies,” including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

We will remain a smaller reporting company as long as, on each annual determination date, we either (a) have an unaffiliated public float of less than $250 million on the annual determination date or (b) had annual revenues of less than $100 million as of the previously completed fiscal year for which audited financial statements are available and on the annual determination date either (i) have no unaffiliated public float or (ii) have an unaffiliated public float of less than $700 million.

If we fail to satisfy these conditions on the annual determination date in any year, we will cease to qualify as a smaller reporting company.

If we do not qualify as a smaller reporting company, we may incur additional costs complying with enhanced reporting requirements that are applicable to other public companies that are not smaller reporting companies.

Although we are a smaller reporting company, the requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act, may strain our resources, increase our costs and place additional demands on management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a public company with listed equity securities, we are required to comply with new laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act"), related regulations of the SEC, including compliance with the reporting requirements of the Exchange Act of 1934, as amended (the “Exchange Act”), and the requirements of the NYSE.

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If our profitability is adversely affected because of these additional costs, it could have a negative effect on the trading price of our securities.

Risk Factors Related to the Hotel and Lodging Industry

The Company’s hotel properties may be adversely affected by various risks common to the hospitality and lodging industry.

All real property investments are subject to a degree of risk and uncertainty and are affected by various factors, including general economic conditions and local real estate markets.

The business of the NHT segment may be adversely affected by various operating risks common to the hotel industry, including competition;

over-building;

dependence on business travel and tourism;

changes in taxes and governmental regulations that influence or set wages, prices or interest rates;

availability and cost of capital necessary to fund investments, capital expenditures and service interest, principal or other debt obligations;

changes in operating costs, shortages of labor, risks of unionization of labor, increases in the costs of food and liquor;

receipt and/or maintenance of licenses and permits with local authorities;

relationships with brand franchisors;

the ability of other lodging alternatives to attract and retain customers;

changes in local market conditions due to changes in general or local economic conditions and neighborhood characteristics, and building structure and building system, health, or hygiene issues rendering properties uninhabitable on a temporary or long term basis.

Any of these factors could limit or reduce the prices charged for NHT's products or services and, as a result, any of these factors can reduce NHT's profits and limit opportunities for growth.

A decrease in NHT’s profitability could adversely affect the Company’s results of operations and financial condition as a result of the accounting requirement that the Company consolidate NHT as of April 19, 2024.

The hotel industry is cyclical and changes in economic conditions, consumer behavior and the travel and tourism industries may impact the demand for the Company’s hotel properties.

The hotel industry is cyclical.

Macroeconomic and other factors beyond NHT’s control can reduce demand for lodging products and services, including demand for rooms at properties owned and managed by the Company.

These factors include changes and volatility in general economic conditions, including:

the severity and duration of any downturn in the U.S.

or global economy and financial markets;

changes in the desirability of particular locations or travel patterns of customers;

decreased corporate budgets and spending;

low consumer confidence;

depressed housing prices;

financial condition of the airline and other transportation-related industries and its impact on travel;

oil prices and travel costs;

and cyclical over-building in the hotel ownership industry.

These factors can adversely affect individual properties, particular regions or the NHT segment’s business as a whole.

Any one or more of these factors could limit or reduce the demand, or the rates NHT’s properties are able to charge for rooms or services or the prices at which NHT is able to sell any hotel property, which could adversely affect the Company’s results of operations and financial condition as a result of the accounting requirement that the Company consolidate NHT as of April 19, 2024.

Advances in technology and the growing use of online travel agencies may lead to increased costs and competition and lead to changes in consumer behavior.

The hotel industry may be affected by advances in technology.

Consumers’ growing use of internet travel intermediaries (“OTAs”) and alternative lodging marketplaces may adversely affect NHT’s profitability.

NHT’s hotel guest rooms may be booked through OTAs such as Expedia.com, Travelocity.com, Hotels.com, etc.

As guest bookings through OTAs increase, these intermediaries may be able to obtain higher commissions, reduced room rates and other significant contract concessions from the Company.

Moreover, OTAs attempt to influence consumer choice behavior by increasing the visibility and importance of price, reviews and general indicators of quality (descriptors such as “four-star lakeside hotel”) at the expense of brand identification on their websites and mobile applications.

OTAs attract consumers by offering innovation, ease of use platforms, multiple travel products, membership programs, the ability to package travel products across different suppliers (such as car rental, guest room booking, activities tickets etc.) in one transaction, and other marketing techniques.

OTAs hope that consumers will eventually develop loyalties to their online reservation system rather than to the brands under which hotel properties are franchised.

The increasing reliance of consumers on online intermediaries and the continued expansion in technologies may negatively impact the strength of NHT’s partner brands, traditional distribution platforms and profit margins.

Advances in technology have made alternative lodging accommodations a direct source of competition to the hotel industry.

Alternative lodging marketplaces, such as Airbnb and VRBO, operate websites and mobile applications that market available furnished, privately-owned residential properties, including homes, condominiums and vacation homes, that can be rented on a nightly, weekly or monthly basis.

The influx of these lodging accommodations traditionally not available to consumers and the increased acceptance of these options by consumers may lead to a reduction in demand for conventional hotel guest rooms and to an increase in supply of lodging alternatives.

If the use of alternative lodging marketplaces significantly increases, particularly among NHT’s key customer and location segments, its profitability may be adversely affected, which could adversely affect the Company’s results of operations and financial condition as a result of the accounting requirement that the Company consolidate NHT as of April 19, 2024.

The NHT segment faces competition from other hotels and alternative lodging providers within the immediate vicinity of and in the broader geographic region where NHT’s hotels may be located.

The lodging sector is highly competitive.

NHT faces competition from a number of sources, including from Airbnb and from other hotels located in the immediate vicinity of and in the broader geographic areas where NHT’s hotels are and may be located.

NHT’s hotel properties compete on the basis of location, room rates, quality, service levels, reputation and reservations systems, among many factors.

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

OTAs may capture a greater share of guest bookings, which would have a negative impact on the strength of brands and their distribution platforms, while also adding to NHT’s expenses in the form of fees to the OTAs.

Such competition may reduce occupancy rates and revenues of NHT and could have an adverse effect on the Company’s business, cash flows, financial condition and results of operations.

Increases in the cost to NHT of acquiring hotel properties may adversely affect the ability of NHT to acquire such properties on favorable terms and may otherwise have an adverse effect on the Company’s results of operations and financial condition as a result of the accounting requirement that the Company consolidate NHT as of April 19, 2024.

The hotel industry is subject to seasonal changes, which may cause fluctuations in room revenues, occupancy levels, room rates and operating expenses in particular hotels.

The seasonality of the hotel industry could have a material adverse effect on NHT.

The hotel industry is seasonal in nature, which can be expected to cause quarterly fluctuations in revenues.

NHT’s earnings may be adversely affected by factors outside NHT’s control, including weather conditions and poor economic factors in certain markets in which NHT operates.

This seasonality can be expected to cause periodic fluctuations in room revenues, occupancy levels, room rates and operating expenses in particular hotels.

NHT can provide no assurances that cash flows will be sufficient to offset any shortfalls that occur as a result of these fluctuations.

A decrease in cash flows in the NHT segment could adversely affect NHT’s results of operations and, as a result of the accounting requirement that the Company consolidate NHT as of April 19, 2024, the Company’s results of operations and financial condition.

Risks Related to Our Indebtedness and Financing Strategy

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As of December 31, 2024, we have approximately $362.1 million of indebtedness outstanding related to our Portfolio.

Payments of principal and interest on borrowings may leave us with insufficient cash resources to acquire additional investments or pay the dividends necessary to maintain our REIT qualification.

Payments of principal and interest on borrowings may leave us with insufficient cash resources to acquire additional investments or pay the distributions necessary to maintain our REIT qualification.

Our level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following:

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The documents that govern these agreements may contain customary affirmative and negative covenants, including financial covenants applicable to us that may restrict our flexibility to determine our operating policies and investment strategy.

For example, these agreements may require us to maintain a specific net debt to equity ratio, minimum NAV, senior debt service coverage ratio, consolidated unencumbered assets ratio, or, among others, specified minimum levels of capacity under our credit facilities and cash.

For example, these agreements may require us to maintain a specific net debt to equity ratio, minimum NAV, senior debt service coverage ratio, consolidated unencumbered assets ratio, interest rate cap agreements, casualty and condemnation insurance or, among others, specified minimum levels of capacity under our credit facilities and cash.

As a result, we may not be able to leverage our assets as fully as we would otherwise choose, which could reduce our return on assets.

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If we fail to meet or satisfy any of these covenants, we would be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral and enforce their interests against existing collateral.

As of December 31, 2024, NHT OP, the guarantor of certain obligations under a borrowing arrangement for a $39.3 million loan (the “PC & B Loan”), was not in compliance with loan covenants contained in the loan documents for the PC & B Loan related to minimum net worth and minimum liquid assets.

While the lender under the PC & B Loan has not indicated that it will accelerate the PC & B Loan, the lender has the ability under the loan documents to do so if the conditions remain uncured after the giving of notice and expiration of a cure period.

There can be no assurance that the lender under the PC & B Loan will waive such covenant beaches, and discussions regarding such a waiver are ongoing.

The PC & B Loan is secured by mortgages on our Hyatt Place Park City (“Park City”) and Bradenton Hampton Inn & Suites (“Bradenton”) properties.

Should the lender under the PC & B Loan exercise its remedies under the relevant loan documents, up to and including the acceleration of the full amount of the PC & B Loan, it may have a material adverse impact on our financial condition, liquidity and results of operations.

If we are unable to pay the amount due upon acceleration, the lender under the PC & B Loan may elect to foreclose on the Park City and Bradenton properties to satisfy the indebtedness.

In addition, the mortgage debt secured by Cityplace had a maturity date of March 8, 2025.

We are currently engaged in discussions with the lender of the Cityplace debt regarding the extension of the maturity date.

There can be no assurance that the lender will grant such an extension or that it will not demand payment of the outstanding balance, which was $139.9 million as of December 31, 2024.

While the lender has not indicated that it will exercise any of its remedies, the lender has the ability to do so and may elect to foreclose on Cityplace.

From time to time, we may also be in default of certain covenants contained in our credit agreements.

We may also be subject to cross-default and acceleration rights in our other debt arrangements.

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An inability to successfully access the capital markets could limit our ability to grow our business and fully execute our business strategy and could decrease our earnings and liquidity.

In addition, any dislocation or weakness in the capital and credit markets could adversely affect our lenders and could cause one or more of our lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing.

In addition, any dislocation or weakness in the capital and credit markets could adversely affect our lenders and

could cause one or more of our lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing.

In addition, as regulatory capital requirements imposed on our lenders are increased, they may be required to limit, or increase the cost of, financing they provide to us.

In general, this could potentially increase our financing costs

and reduce our liquidity or require us to sell assets at an inopportune time or price.

In general, this could potentially increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price.

We cannot make assurances that we will be able to obtain any additional financing on favorable terms or at all.

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We would also incur losses on a repurchase agreement if the value of the underlying assets has declined as of the end of the repurchase agreement term, because we would have to repurchase the assets for their initial value but would receive assets worth less than that amount.

Further, if we default on our obligations under a repurchase agreement, the lender will be able to terminate the repurchase agreement and cease entering into any other repurchase agreements with us.

Further, if we default on our obligations under a repurchase agreement, the lender will be able to terminate the repurchase agreement and cease

entering into any other repurchase agreements with us.

Any repurchase agreements we enter into are likely to contain cross-default provisions, so that if a default occurs under any repurchase agreement, the lender can also declare a default with respect to all other repurchase agreements they have with us.

If a default occurs under any of our repurchase agreements and a lender terminates one or more of its repurchase agreements, we may need to enter into replacement

repurchase agreements with different lenders.

If a default occurs under any of our repurchase agreements and a lender terminates one or more of its repurchase agreements, we may need to enter into replacement repurchase agreements with different lenders.

There can be no assurance that we will be successful in entering into such replacement repurchase agreements on the same terms as the repurchase agreements that were terminated or at all.

Any losses that we incur on our repurchase agreements could adversely affect our earnings and thus our cash available for distribution to stockholders.

Any losses that we incur on our repurchase agreements could adversely affect our earnings and thus our cash available for distribution to shareholders.

Risks Related to Our Corporate Structure

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We may not be able to operate our business successfully, find suitable investments or implement our operating policies and strategies.

Our ability to provide attractive risk-adjusted returns to our shareholders over the long term depends on our ability both to generate sufficient cash flow to pay an attractive dividend and to achieve capital appreciation, and we may not be able to do either.

Similarly, we may not be able to generate sufficient revenue from operations to pay our operating expenses and make distributions to stockholders.

Our ability to provide attractive risk-adjusted returns to our shareholders over the long term depends on our ability both to generate sufficient cash flow to pay an attractive distribution and to achieve capital appreciation, and we may not be able to do either.

Similarly, we may not be able to generate sufficient revenue from operations to pay our operating expenses and make distributions to shareholders.

The results of our operations will depend on several factors, including the availability of opportunities for the acquisition or origination of investments in commercial real estate, the level and volatility of interest rates, the availability of equity capital as well as adequate short- and long-term financing, conditions in the financial markets and economic conditions.

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We will depend to a significant degree on the diligence, skill and network of business contacts of the management team and other key personnel of our Adviser, including Messrs.

Dondero, Mitts, McGraner, Sauter, Norris, Richards and Willmore, all of whom may be difficult to replace.

Dondero, McGraner, Sauter, Norris, Richards and Willmore, all of whom may be difficult to replace.

We expect that our Adviser will evaluate, negotiate, structure, close and monitor our loans and investments in accordance with the terms of the Advisory Agreement.

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In addition, in conducting periodic reviews, our trustees may rely primarily on information provided, or recommendations made, to them by our Adviser or its affiliates.

types of investments it makes for us, and how such investments are financed or hedged, which could result in investment returns that are substantially below expectations or losses, which could materially and adversely affect us.

Subject to qualifying and maintaining our REIT qualification and our exclusion from regulation under the Investment Company Act, our Adviser has significant latitude within the broad investment guidelines in determining the types of investments it makes for us, and how such investments are financed or hedged, which could result in investment returns that are substantially below expectations or losses, which could materially and adversely affect us.

We may not replicate the historical results achieved by other entities managed or sponsored by affiliates of our Adviser and members of our Adviser ’ s management team or by our Sponsor or its affiliates.

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provided, however, that our Adviser will not be held responsible for any action of our Board in following or declining to follow any written advice or written recommendation given by our Adviser.

However, the aggregate maximum amount that

our Adviser may be liable to us pursuant to the Advisory Agreement will, to the extent not prohibited by law, never exceed the amount of the management fees received by our Adviser under the Advisory Agreement prior to the date that the acts or omissions giving rise to a claim for indemnification or liability have occurred.

However, the aggregate maximum amount that our Adviser may be liable to us pursuant to the Advisory Agreement will, to the extent not prohibited by law, never exceed the amount of the management fees received by our Adviser under the Advisory Agreement prior to the date that the acts or omissions giving rise to a claim for indemnification or liability have occurred.

In addition, our Adviser will not be liable for special, exemplary, punitive, indirect, or consequential loss, or damage of any kind whatsoever, including without limitation lost profits.

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We may change our targeted investments without shareholder consent.

We focus 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.

We focus primarily on investing in various commercial real estate property types and across the capital structure, including but not limited to mortgage debt, mezzanine debt, and common and preferred equity.

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

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A change in our targeted investments or investment guidelines, which may occur without notice to you or without your consent, may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of our securities and our ability to make distributions to you.

We intend to disclose any changes in our investment policies in our next required periodic report.

We will pay substantial fees and expenses to our Adviser and its affiliates, which payments increase the risk that you will not earn a profit on your investment.

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Those fees include management fees and obligations to reimburse our Adviser and its affiliates for expenses they incur in connection with their providing services to us, including certain personnel services.

Additionally, on January 30, 2023, our shareholders approved a long-term incentive plan that provides us the ability to grant awards to employees of our Adviser and its affiliates.

Additionally, in January 2023, our shareholders approved a long-term incentive plan that provides us the ability to grant awards to employees of our Adviser and its affiliates.

For additional information on these fees and the fees paid to our Adviser, see “Item 1.

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(“NXRT”), a publicly traded multi-family REIT, VineBrook Homes Trust, Inc.

("VineBrook"), an SFR REIT, NexPoint Real Estate Finance, Inc.

("NREF"), a publicly traded mortgage REIT, and NexPoint Hospitality Trust ("NHT"), a publicly traded hospitality REIT listed on the TSXV, each of which is also managed by members of our management team.

("VineBrook"), an SFR REIT and NREF, a publicly traded mortgage REIT, each of which is also managed by members of our management team.

In serving in these multiple capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the best interest of us or our shareholders.

the management team of our Adviser has, and will continue to have, management responsibilities for other investment funds, accounts or other investment vehicles managed or sponsored by our Adviser and its affiliates.

For example, the management team of our Adviser has, and will continue to have, management responsibilities for other investment funds, accounts or other investment vehicles managed or sponsored by our Adviser and its affiliates.

Our investment objectives may overlap with the investment objectives of such affiliated investment funds, accounts or other investment vehicles.

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On February 8, 2023, UBS Securities LLC and its affiliate (collectively, "UBS") filed a lawsuit in the Supreme Court of the State of New York, County of New York against Mr.

Dondero and a number of entities currently or previously affiliated with Mr.

Dondero, seeking to collect on $1.3 billion in judgments UBS obtained against entities that were managed indirectly by Highland (the “UBS Lawsuit”).

Dondero and a number of entities seeking to collect on $1.3 billion in judgments UBS obtained against entities that were managed indirectly by Highland (the “UBS Lawsuit”).

On February 26, 2024, the respondents, including Mr.

Dondero, filed motions to dismiss the UBS Lawsuit.

A hearing was held on July 8, 2024.

The court dismissed the claims against one respondent, CLO HoldCo, Ltd., for lack of personal jurisdiction in a July 12, 2024 order.

On August 24, 2024, UBS filed a notice of appeal for that dismissal order, which has not yet been briefed.

The remaining respondents’ motions to dismiss, including Mr.

Dondero’s, remain pending.

The UBS Lawsuit does not include claims related to our business or our assets.

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In addition, the UBS Lawsuit may be both time consuming and disruptive to our operations and cause significant diversion of management attention and resources which may materially and adversely affect our business, financial condition and results of operations.

The Board formed an independent special committee to oversee a review of the UBS Lawsuit and its potential impact on the Company.

For additional information on the independent special committee and its review of the UBS Lawsuit, see "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations."

We may compete with other entities affiliated with our Adviser and our Sponsor for investments.

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• sale, lease or exchange to the Company or any subsidiary thereof, in exchange for securities of the Company, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than 2% of the total assets of the Company, aggregating for the purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period).

The Principal Shareholder Requirements are not applicable if (i) 80% of our trustees approve by resolution a memorandum of understanding with the Principal Shareholder with respect to and substantially consistent with such transaction followed by, subject to a resolution of the trustees specifying a greater or lesser requirement with respect to the vote or quorum, the affirmative vote of a majority of our shares of beneficial interest present in person or represented by proxy and entitled to vote thereon, at a meeting where the holders of a majority of our shares of beneficial interest entitled to vote on the matter are present in person or by proxy, or (ii) the transaction is with an entity of which a majority of the outstanding shares of all classes and series of a stock normally entitled to vote in elections of directors is owned of record or beneficially by the Company and its subsidiaries.

The Principal Shareholder Requirements are not applicable if (i) 80% of our trustees approve by resolution a memorandum of understanding with the Principal Shareholder with respect to and substantially consistent with such transaction followed by, subject to a resolution of the trustees specifying a greater or lesser requirement with respect to the vote or quorum, the affirmative vote of a majority of our shares of beneficial interest present in person or represented by proxy and entitled to vote thereon, at a meeting where the holders of a majority of our shares of beneficial interest entitled to vote on the matter are present in person or by proxy, or (ii) the transaction is with an entity of which a majority of the outstanding shares of all classes and series of shares normally entitled to vote in elections of directors is owned of record or beneficially by the Company and its subsidiaries.

With respect to mergers or consolidations with a corporation, association, trust or organization, other than a Principal Shareholder, or the sale, lease or exchange of all or substantially all of the Company’s property, including its good will, to other than a Principal Shareholder, our declaration of trust requires authorization by two-thirds of our trustees;

provided that any merger or consolidation in which the Company is not the surviving entity, or sale, lease or exchange of all or substantially all of the Company’s property (measured at the time that such transaction was originally approved by two-thirds of the trustees) will require the affirmative vote of the holders of not less than 75% of the shares of beneficial interest of each affected class or series outstanding, voting as separate classes or series, unless the transaction has been approved by 80% of the trustees, in which case, subject to a resolution of the trustees specifying a greater or a lesser requirement with respect to the vote or quorum, such transaction will require the affirmative vote of a majority our shares of beneficial interest present in person or represented by proxy and entitled to vote thereon, at a meeting where the holders of a majority of our shares of beneficial interest entitled to vote on the matter are present in person or by proxy.

Risks Related to the NHT Merger

Non-completion of the NHT Merger may have an adverse effect on our business and results of operations.

There are risks to the Company of the NHT Merger not being completed, including the costs to the Company incurred in pursuing the NHT Merger and the risks associated with the temporary diversion of NHT’s managements’ attention away from the operation of NHT.

If the NHT Merger is not completed, the market price of NHT’s units may be materially adversely affected, impacting the value of our investment in NHT.

NHT may terminate the merger agreement under certain limited circumstances, including if there is an order of any court or other governmental authority enjoining, prohibiting or rendering illegal the consummation of the NHT Merger, or if the Company breaches the merger agreement in such a way that the conditions precedent to closing the NHT Merger are incapable of being satisfied prior to the outside date contained in the merger agreement, May 22, 2025.

In addition, to the extent the NHT Merger is not completed before the outside date contained in the merger agreement, May 22, 2025, either NHT or the Company would have the right to terminate the merger agreement.

The completion of the NHT Merger is further subject to a number of conditions precedent, some of which are outside the control of the Company, including that the consents of certain third-parties be obtained prior to closing.

There can be no assurance that such conditions will be satisfied or waived, and as such, the completion of the NHT Merger is uncertain.

Lawsuits challenging the NHT Merger may be filed against NHT and the Company, and an adverse judgment in any such lawsuit or any future similar lawsuits may prevent the NHT Merger from becoming effective or from becoming effective within the expected timeframe.

Interested parties may file lawsuits against NHT, the Company, affiliates and/or the trustees and officers of either entity in connection with the NHT Merger.

One of the conditions to the closing of the NHT Merger is that no injunction or order of any court or other governmental authority of competent jurisdiction enjoining, prohibiting or rendering illegal the consummation of the NHT Merger or the other transactions contemplated by the merger agreement be in effect.

If any plaintiff were successful in obtaining an injunction prohibiting the defendants from completing the NHT Merger on the agreed upon terms, then such injunction may prevent the NHT Merger from becoming effective or from becoming effective within the expected timeframe and could result in significant costs to the Company, including any cost associated with the

indemnification of trustees and officers.

The defense or settlement of any lawsuit or claim that remains unresolved at the time the NHT Merger is completed may adversely affect the Company’s business and results of operations.

Following the consummation of the NHT Merger, the Company may be unable to integrate the operations of the Company and NHT successfully and realize the anticipated synergies and other benefits of the NHT Merger or do so within the anticipated time frame.

The NHT Merger involves the acquisition of a company that currently operates as a public company in Canada.

The Company is expected to benefit from the elimination of duplicative costs associated with supporting a public company platform and from the greater efficiency of having a single management team and investment adviser.

However, the Company will be required to devote management attention and resources to integrating the operations of NHT and the Company.

Potential difficulties the Company may encounter in the integration process include the following:

• the inability to successfully combine the operations of the Company and NHT, including the integration of personnel, customer records and maintaining cybersecurity protections, in a manner that permits the Company to achieve the cost savings anticipated to result from the NHT Merger;

• the inability to dispose of assets or operations that the Company desires to dispose of;

• the complexity of integrating personnel;

• potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the NHT Merger;

• the diversion of management’s attention caused by completing the NHT Merger and integrating NHT’s operations.

For all these reasons, it is possible that the integration process could result in the distraction of the Company’s management, the disruption of the Company’s ongoing business, or inconsistencies in the Company’s operations, services, standards, controls, procedures, and policies, any of which could adversely affect the ability of the Company to achieve the anticipated benefits of the NHT Merger, or could otherwise adversely affect the business and financial results of the Company.

Risks Related to Our REIT Status and Other Tax Items

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If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our shareholders because:

• we would not be allowed a deduction for dividends paid to shareholders in computing our taxable income and would be subject to U.S.

• we would not be allowed a deduction for distributions paid to shareholders in computing our taxable income and would be subject to U.S.

federal income tax at the corporate tax rate;

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federal, state, local and non-U.S.

tax laws on an investment in our stock.

tax laws on an investment in our shares.

To maintain our REIT qualification, we may be forced to borrow funds during unfavorable market conditions, and the unavailability of such capital on favorable terms at the desired times, or at all, may cause us to curtail our investment activities and/or to dispose of assets at inopportune times, which could adversely affect our financial condition, results of operations, cash flow and value of our securities.

In order to qualify and maintain our qualification as a REIT, we must distribute annually to our shareholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding net capital gain.

To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to U.S.

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The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.

We plan to invest in mezzanine loans for which the IRS has provided a safe harbor but not rules of substantive law.

We plan to invest in mezzanine loans for which the Internal Revenue Service (“IRS”) has provided a safe harbor but not rules of substantive law.

Pursuant to the safe harbor, if a mezzanine loan meets certain requirements, it will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the 75% gross income test.

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federal income tax purposes.

We typically do not anticipate obtaining private letter rulings from the Internal Revenue Service (“IRS”) or opinions of counsel on the characterization of those investments for U.S.

We typically do not anticipate obtaining private letter rulings from the IRS or opinions of counsel on the characterization of those investments for U.S.

federal income tax purposes.

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federal income tax purposes as debt for U.S.

federal income tax purposes, then that investment may be treated as producing interest

income that would be qualifying income for the 95% gross income test, but not for the 75% gross income test.

federal income tax purposes, then that investment may be treated as producing interest income that would be qualifying income for the 95% gross income test, but not for the 75% gross income test.

If the IRS successfully challenges the classification of our mezzanine loans or preferred equity investments for U.S.

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federal income tax purposes.

As a result, we could have “excess inclusion income.” Certain categories of stockholders, such as non-U.S.

stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain tax-exempt stockholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to any such excess inclusion income.

As a result, we could have “excess inclusion income.” Certain categories of shareholders, such as non-U.S.

shareholders eligible for treaty or other benefits, shareholders with net operating losses, and certain tax-exempt shareholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to any such excess inclusion income.

In addition, to the extent that our shares are owned by tax-exempt “disqualified organizations,” such as certain government-related entities and charitable remainder trusts that are not subject to tax on unrelated business taxable income, we may incur a tax at the corporate rate on a portion of any excess inclusion income.

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Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

To qualify as a REIT, we must ensure that we meet the REIT gross income tests annually and that, at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities, stock in REITs and other qualifying real estate assets, including certain mortgage loans and certain kinds of CMBS and debt instruments of publicly offered REITs.

To qualify as a REIT, we must ensure that we meet the REIT gross income tests annually and that, at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities, shares in REITs and other qualifying real estate assets, including certain mortgage loans and certain kinds of CMBS and debt instruments of publicly offered REITs.

The remainder of our investments in securities (other than government securities, securities issued by a TRS and REIT qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.

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If the IRS were successful in treating our OP or any other such subsidiary partnership as an entity taxable as a corporation for U.S.

federal income tax purposes (including by reason of being classified as a publicly traded partnership, unless at least 90% of its income was qualifying income as defined in the Code, or a “taxable mortgage pool” for U.S.

federal income tax purposes (including by reason of being classified as a publicly traded partnership, unless at least 90% of its income was qualifying income as defined in the

Code, or a “taxable mortgage pool” for U.S.

federal income tax purposes), we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, we would likely cease to qualify as a REIT, unless we qualified for certain statutory savings provisions.

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Income from “qualified dividends” payable to U.S.

stockholders that are individuals, trusts and estates is generally subject to tax at reduced rates.

Currently, the maximum tax rate applicable to qualified dividend income payable to U.S.

shareholders that are individuals, trusts and estates is 20%.

Dividends payable by REITs, however, generally are not eligible for this reduced rate.

However, U.S.

shareholders that are individuals, trusts and estates generally may deduct up to 20% of the ordinary dividends (e.g., dividends not designated as capital gain dividends or qualified dividend income) received from a REIT for taxable years beginning before January 1, 2026.

shareholders that are individuals, trusts and estates is generally subject to tax at reduced rates.

However, dividends payable by REITs to their shareholders generally are not eligible for the reduced rates for qualified dividends and are taxed at ordinary income rates (but U.S.

shareholders that are individuals, trusts and estates generally may deduct up to 20% of ordinary dividends from a REIT for taxable years beginning before January 1, 2026 (subject to certain limitations)).

To qualify for this deduction, the U.S.

shareholder receiving such dividends must hold the dividend-paying REIT stock for at least 46 days (taking into account certain special holding period rules) of the 91-day period beginning 45 days before the stock becomes ex-dividend and cannot be under an obligation to make related payments with respect to a position in substantially similar or related property.

shareholder receiving such dividends must hold the dividend-paying REIT shares for at least 46 days (taking into account certain special holding period rules) of the 91-day period beginning 45 days before the share becomes ex-dividend and cannot be under an obligation to make related payments with respect to a position in substantially similar or related property.

Although this deduction reduces the effective U.S.

federal income tax rate applicable to certain dividends paid by REITs (generally to 29.6% assuming the shareholder is subject to the 37% maximum rate), such tax rate is still higher than the tax rate applicable to corporate dividends that constitute qualified dividend income.

Accordingly, investors who are individuals, trusts and estates may perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could materially and adversely affect the value of the stock of REITs, including the per share trading price of our securities.

Accordingly, investors who are individuals, trusts and estates may perceive investments in REITs to be relatively less attractive than investments in the shares of non-REIT corporations that pay dividends, which could materially and adversely affect the value of the shares of REITs, including the per share trading price of our securities.

In addition, certain U.S.

stockholders may be subject to a 3.8% Medicare tax on dividends payable by REITs.

shareholders may be subject to a 3.8% Medicare tax on dividends payable by REITs.

The share ownership restrictions of the Code for REITs and the 9.8% share ownership limits in our declaration of trust may inhibit market activity in our shares and restrict our business combination opportunities.

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To help ensure that we meet these tests, among other purposes, our declaration of trust includes restrictions on the acquisition and ownership of our shares.

To assist us in complying with the limitations on the concentration of ownership of a REIT imposed by the Code, among other purposes, our declaration of trust, including the statement of preferences setting forth the terms of the Series A Preferred Shares, prohibits, with certain exceptions, any shareholder from beneficially or constructively owning, applying certain attribution rules under the Code, more than 9.8% by value or number of shares, whichever is more restrictive, of the aggregate of our outstanding common shares, or 9.8% by value or number of shares, whichever is more restrictive, of the aggregate of our outstanding shares of any class or series, including the Series A Preferred Shares.

To assist us in complying with the limitations on the concentration of ownership of a REIT imposed by the Code, among other purposes, our declaration of trust, including the statements of preferences setting forth the terms of the Series A Preferred Shares and the Series B Preferred Shares, prohibits, with certain exceptions, any shareholder from beneficially or constructively owning, applying certain attribution rules under the Code, more than 9.8% by value or number of shares, whichever is more restrictive, of the aggregate of our outstanding common shares, or 9.8% by value or number of shares, whichever is more restrictive, of the aggregate of our outstanding shares of any class or series, including the Series A Preferred Shares and Series B Preferred Shares.

Our Board may, in its sole discretion, subject to such conditions as it may determine and the receipt of certain representations and undertakings, waive the 9.8% ownership limit with respect to a particular shareholder if such ownership will not then or in the future jeopardize our qualification as a REIT.

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These waivers may be subject to certain initial and ongoing conditions designed to preserve our status as a REIT.

These restrictions on transferability and ownership will not apply, however, if our Board

determines that it is no longer in our best interest to qualify as a REIT or that compliance with the restrictions is no longer required in order for us to so qualify as a REIT.

These restrictions on transferability and ownership will not apply, however, if our Board determines that it is no longer in our best interest to qualify as a REIT or that compliance with the restrictions is no longer required in order for us to so qualify as a REIT.

These ownership limits could also delay or prevent a transaction or a change in control that might involve a premium price for our securities or otherwise be in the best interest of the shareholders.

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If such debt instrument turns out not to be fully collectible, an offsetting loss deduction will become available only in the later year that uncollectibility is provable.

Finally, in the event that any debt instruments acquired by us are delinquent as to mandatory principal and

interest payments, or in the event payments with respect to a particular debt instrument are not made when due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income as it accrues, despite doubt as to its ultimate collectability.

Finally, in the event that any debt instruments acquired by us are delinquent as to mandatory principal and interest payments, or in the event payments with respect to a particular debt instrument are not made when due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income as it accrues, despite doubt as to its ultimate collectability.

Similarly, we may be required to accrue interest income with respect to subordinate debt instruments at their stated rate regardless of whether corresponding cash payments are received or are ultimately collectable.

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The sale of certain properties could result in significant tax liabilities unless we are able to defer the taxable gain through 1031 Exchanges.

We may structure asset sales for possible inclusion in 1031 Exchanges.

We may structure asset sales to qualify as a tax deferred exchange under Section 1031 of the Code (“1031 Exchanges”).

The ability to complete a 1031 Exchange depends on many factors, including, among others, identifying and acquiring suitable replacement property within limited time periods, and the ownership structure of the properties being sold and acquired.

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When successful, a 1031 Exchange enables us to defer the taxable gain on the asset sold.

If we cannot defer the taxable gain resulting from the sales of certain properties, our business, financial condition, results of operations and cash flow, the market price per share of our securities and our ability to satisfy our debt service obligations and make distributions to our stockholders could be materially and adversely affected.

If we cannot defer the taxable gain resulting from the sales of certain properties, our business, financial condition, results of operations and cash flow, the market price per share of our securities and our ability to satisfy our debt service obligations and make distributions to our shareholders could be materially and adversely affected.

The ability of our Board to revoke our REIT qualification without shareholder approval may cause adverse consequences to our shareholders.

Our declaration of trust provides that our Board may revoke or otherwise terminate our REIT election, without the approval of our shareholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT.

If we cease to be a REIT, we will not be allowed a deduction for dividends paid to shareholders in computing our taxable income and will be subject to U.S.

If we cease to be a REIT, we will not be allowed a deduction for distributions paid to shareholders in computing our taxable income and will be subject to U.S.

federal income tax at corporate rates and state and local taxes, which may have adverse consequences on our total return to our shareholders.

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Prospective investors are urged to consult with their tax advisors regarding the effect of potential changes to the U.S.

federal tax laws on an investment in our stock.

We and our subsidiaries and stockholders may be subject to state, local or foreign tax filing and payment obligations taxation in various jurisdictions including those in which we or they transact business, own property or reside.

federal tax laws on an investment in our shares.

We and our subsidiaries and shareholders may be subject to state, local or foreign tax filing and payment obligations taxation in various jurisdictions including those in which we or they transact business, own property or reside.

We may own assets located in, or transact business in, numerous jurisdictions, and may be required to file tax returns in some or all of those jurisdictions.

Our state, local or foreign tax treatment and that of our stockholders may not conform

federal income tax treatment discussed above.

Prospective investors should consult their tax advisors regarding the application and effect of state and local income and other tax laws on an investment in our stock.

Our state, local or foreign tax treatment and that of our shareholders may not conform tax treatment discussed above.

Prospective investors should consult their tax advisors regarding the application and effect of state and local income and other tax laws on an investment in our shares.

Foreign investors may be subject to U.S.

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federal income tax on distributions received from us and upon disposition of our common shares.

Subject to certain exceptions, distributions received from us will be treated as dividends of ordinary income to the extent of our current or accumulated earnings and profits.

Such dividends paid to a non-U.S.

stockholder ordinarily will be subject to U.S.

Subject to certain exceptions, distributions received from us will be treated as distributions of ordinary income to the extent of our current or accumulated earnings and profits.

Such distributions paid to a non-U.S.

shareholder ordinarily will be subject to U.S.

withholding tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty, unless the distributions are treated as “effectively connected” with the conduct by the non-U.S.

stockholder of a U.S.

shareholder of a U.S.

trade or business.

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real property interests” (“USRPIs”), generally will be taxed to a non-U.S.

stockholder as if such gain were effectively connected with a U.S.

shareholder as if such gain were effectively connected with a U.S.

trade or business.

However, a capital gain dividend will not be treated as effectively connected income if (1) the distribution is received with respect to a class of stock that is regularly traded on an established securities market located in the United States and (2) the non-U.S.

stockholder does not own more than 10% of the class of our stock at any time during the one-year period ending on the date the distribution is received.

However, a capital gain dividend will not be treated as effectively connected income if (1) the distribution is received with respect to a class of shares that is regularly traded on an established securities market located in the United States and (2) the non-U.S.

shareholder does not own more than 10% of the class of our shares at any time during the one-year period ending on the date the distribution is received.

Gain recognized by a non-U.S.

stockholder upon the sale or exchange of our common shares generally will not be subject to U.S.

federal income taxation unless such stock constitutes a USRPI under FIRPTA.

shareholder upon the sale or exchange of our common shares generally will not be subject to U.S.

federal income taxation unless such shares constitutes a USRPI under FIRPTA.

Our common shares will not constitute a USRPI so long as we are a “domestically-controlled” REIT.

A REIT is “domestically controlled” if less than 50% of the REIT’s stock, by value, has been owned directly or indirectly by persons who are not qualifying U.S.

persons during a continuous five-year period ending on the date of disposition or, if shorter, during the entire period of the REIT’s existence.

A REIT is “domestically controlled” if less than 50% of the REIT’s shares, by value, has been owned directly or indirectly by persons who are not qualifying U.S.

persons, including through a foreign-controlled domestic corporation, during a continuous five-year period ending on the date of disposition or, if shorter, during the entire period of the REIT’s existence.

We cannot assure you that we will qualify as a “domestically controlled” REIT.

If we were to fail to so qualify, gain realized by foreign investors on a sale of shares of our stock would be subject to FIRPTA tax, unless the shares of our stock were traded on an established securities market and the foreign investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common shares.

If we were to fail to so qualify, gain realized by foreign investors on a sale of shares of our shares beneficial interests would be subject to FIRPTA tax, unless the shares of our beneficial interests shares were traded on an established securities market and the foreign investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common shares.

Our ownership of interests in TRSs raises certain tax risks.

A TRS is a corporation other than a REIT in which a REIT directly or indirectly holds stock, and that has made a joint election with such REIT to be treated as a TRS.

A TRS is a corporation other than a REIT in which a REIT directly or indirectly holds shares, and that has made a joint election with such REIT to be treated as a TRS.

A TRS also includes any corporation other than a REIT with respect to which a TRS owns securities possessing more than 35% of the total voting power or value of the outstanding securities of such corporation.

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As of December 31, 2024, the Company wholly owned and consolidated two TRSs, NREO TRS, LLC and NHF TRS, LLC.

As of December 31, 2024, the Company consolidated ten TRSs (the “NHT TRSs”) that are subsidiaries of NHT as a result of the NHT Acquisition (as defined in Note 2).

We will be required to pay a 100% tax on any “redetermined rents,” “redetermined deductions,” “excess interest” or “redetermined TRS service income.” In general, redetermined rents are rents from real property that are overstated as a result of services furnished to any of our tenants by a TRS of ours.

Redetermined deductions and excess interest generally represent amounts that are deducted by a TRS of ours for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s-length negotiations.

Redetermined TRS service income generally represents amounts by which the gross income of a TRS attributable to its services for or on behalf of us (other than to a tenant of ours) would be increased based on arm’s length negotiations.

Redetermined TRS service income generally represents amounts

by which the gross income of a TRS attributable to its services for or on behalf of us (other than to a tenant of ours) would be increased based on arm’s length negotiations.

Our TRSs are and any TRS we acquire in the future will be subject to corporate income tax at the U.S.

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If we determine it to be in our best interest to own a substantial number of our properties through one or more TRSs, then it is possible that the IRS may conclude that the value of our interests in our TRSs exceeds 20% of the value of our total assets at the end of any calendar quarter and therefore cause us to fail to qualify as a REIT.

Additionally, as a REIT, no more than 25% of our gross income

with respect to any year may, in general, be from sources other than certain real estate-related assets.

Additionally, as a REIT, no more than 25% of our gross income with respect to any year may, in general, be from sources other than certain real estate-related assets.

Dividends paid to us from a TRS are typically considered to be non-real estate income.

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Foreclosures could also trigger tax indemnification obligations under the terms of any tax protection agreements with respect to the sales of properties subject to any such agreements.

Our ownership of NHT prior to the NHT Merger raises certain tax risks under Canadian law.

• NHT’s taxable status on its worldwide income in both Canada and the U.S.

could affect the amount of funds it has available for distribution — NHT is resident in Canada for purposes of the Income Tax Act (Canada) (the “Tax Act”) and is treated as a domestic corporation in the U.S.

under the Code.

As a result, NHT is generally taxable on its worldwide income in both Canada and the U.S.

However, in both jurisdictions, NHT generally will not be subject to tax on the portion of its income that it distributes to its unitholder (subject to certain limitations and exceptions).

Management of the Company is of the view that the status of NHT as taxable in both Canada and the U.S.

is not likely to give rise to any material adverse consequences in the future as it is not anticipated that NHT will be subject to material income tax in either Canada or the U.S.

Nevertheless, NHT’s status as taxable on its worldwide income in both Canada and the U.S.

could, in certain circumstances, have a material adverse effect on the Company and investors.

As a result of NHT being resident in both Canada and the U.S., withholding taxes of both Canada and the U.S.

will be relevant to distributions by NHT and could result in double taxation to certain investors in NHT and other consequences.

• There can be no assurance that Canadian federal income tax laws respecting mutual fund trusts will not be changed in a way that adversely affects NHT — NHT intends to qualify as a “unit trust” and a “mutual fund trust” for purposes of the Tax Act.

There can be no assurance that Canadian federal income tax laws and the administrative policies and practices of the Canada Revenue Agency ("CRA") respecting the treatment of mutual fund trusts will not be changed in a manner that adversely affects NHT and the Company as the majority owner of NHT.

Should NHT cease to qualify as a mutual fund trust under the Tax Act, current Canadian income tax considerations could be materially and adversely different in certain respects.

• If the rules applicable to SIFTS were to apply to NHT, they could affect the amount of funds available to NHT for distribution — The rules (the “SIFT Rules”) applicable to specified investment flow-through trusts (“SIFTs”) will apply to a trust that is a SIFT.

NHT will not be considered to be a SIFT in respect of a particular taxable year and, accordingly, will not be subject to the SIFT Rules in that year, if it does not own any non-portfolio property and does not carry on business in Canada in that year.

NHT has not and does not currently intend to own any non-portfolio property nor carry on a business in Canada.

If the SIFT Rules were to apply to NHT, they could adversely affect the marketability of investments in NHT, and the amount of cash available for distribution and the after-tax return to investors in NHT (including the Company).

• NHT may realize foreign accrual property income for purposes of the Tax Act — Any foreign actual property income (“FAPI”) earned directly or indirectly by any controlled foreign affiliate of NHT must be included in computing the income of NHT for the fiscal year of NHT in which the taxation year of such controlled foreign affiliate ends (including in accordance with the stub-period FAPI rules), subject to a deduction for grossed-up foreign actual tax (“FAT”) as computed in accordance with the Tax Act.

It is not anticipated that the deduction for grossed-up FAT will materially offset any FAPI realized by NHT, and accordingly, any FAPI realized generally will increase the allocation of income by NHT to investors.

In addition, as FAPI generally must be computed in accordance with Part I of the Tax Act as though the controlled foreign affiliate were a resident of Canada (subject to the detailed rules contained in the Tax Act), income or transactions may be taxed differently under foreign tax rules as compared to the FAPI rules and, accordingly, may result in additional income being allocated to investors.

For example, certain transactions that do not give rise to taxable income under the Code may still give rise to FAPI for purposes of the Tax Act.

If the rules applicable to SIFTS were to apply to NHT, they could affect the amount of funds available to NHT for distribution.

• Canadian withholding tax may apply to non-Canadian Investors — The Tax Act may impose additional withholding or other taxes on distributions made by NHT to investors in NHT (including the Company) who are non-residents of Canada for the purposes of the Tax Act.

These taxes and any reduction thereof under a tax treaty between Canada and another country may change from time to time.

• Income or gains may be realized by NHT as a result of currency fluctuations — For purposes of the Tax Act, NHT generally is required to compute its Canadian tax results, including any FAPI earned, using Canadian currency.

Where an amount that is relevant in computing a taxpayer’s Canadian tax results is expressed in a currency other than Canadian currency, such amount must be converted into Canadian dollars using the appropriate exchange rate determined in accordance with the detailed rules in the Tax Act in that regard.

As a result, NHT may realize gains and losses for tax purposes and FAPI by virtue of the fluctuation of the value of foreign currencies relative to Canadian dollars.

• Changes in Canadian tax laws could impact NHT and its investors — There can be no assurance that Canadian federal income tax laws, the judicial interpretation thereof, the terms of any treaty, or the administrative practices and policies of the CRA and the Department of Finance (Canada) will not be changed in a manner that adversely affects NHT or investors in NHT (including the Company).

Any such change could increase the amount of tax payable by NHT or its affiliates or could otherwise adversely affect investors in NHT by reducing the amount available to pay distributions or changing the tax treatment applicable to investors in respect of such distributions.

• NHT may be subject to a tax on repurchases of equity — Recent amendments to the Tax Act impose a tax on certain repurchases of equity (the “Equity Repurchase Rules”), effective for transactions that occur after 2023.

Under the Equity Repurchase Rules, NHT will generally be subject to a 2% tax on the value of NHT’s equity repurchases (i.e., redemptions) in a taxation year (net of cash subscriptions received by NHT in that taxation year).

If NHT is subject to tax under the Equity Repurchase Rules, the after-tax return to its investors could be reduced.

Our ownership of NHT prior to the NHT Merger raises certain U.S.

There is limited guidance relating to the application of Section 7874 of the Code and if NHT were deemed a non-U.S.

corporation for U.S.

federal income tax purposes, NHT would fail to qualify as a REIT, causing adverse tax consequences — NHT relies on Section 7874 of the Code to be classified as a domestic corporation for U.S.

federal income tax purposes.

federal income tax purposes, an entity taxed as a corporation is generally considered to be a tax resident in the jurisdiction of its organization or incorporation.

federal income tax law, an entity which is organized under the laws of Canada would generally be classified as a non-U.S.

entity for U.S.

federal income tax

Section 7874 of the Code provides an exception to this general rule under which a non-U.S.

incorporated entity may, in certain circumstances, be treated as a U.S.

corporation for U.S.

federal income tax purposes.

These rules are complex and there is limited guidance regarding their application.

If NHT were deemed to be a non-U.S.

corporation for U.S.

federal income tax purposes, NHT would fail to qualify as a REIT, and the intended benefits of the structure would not be achieved.

This would result in adverse tax consequences.

Additionally, NHT could not re-elect to qualify as a REIT.

If NHT did not qualify as a REIT, that could also materially adversely affect the Company’s REIT status.

Changes in accounting rules and other policy or regulatory changes could occur at any time and could impact us in significantly negative ways that we are unable to predict or protect against.

The SEC, Financial Accounting Standards Board (“FASB”) and other regulatory bodies that establish the accounting rules applicable to us have proposed or enacted a wide array of changes to accounting rules over the last several years.

Moreover, in the future, these regulators may propose additional changes that we do not currently anticipate.

Changes to accounting rules that apply to us could significantly impact our business or our reported financial performance in negative ways that we cannot predict or protect against.

We cannot predict whether any changes to current accounting rules will occur or what impact any codified changes will have on our business, results of operations, liquidity or financial condition.

The recent change in the U.S.

Presidential Administration and changes in Congress could result in significant policy changes or regulatory uncertainty in our industry.

While it is not possible to predict when and whether significant policy or regulatory changes would occur, any such changes on the federal, state or local level could significantly impact, among other things, our operating expenses, the availability of financing, interest rates, the economy and the geopolitical landscape.

To the extent that the new government administration takes action by proposing and/or passing regulatory policies that could have a negative impact on our industry, such actions may have a material adverse effect on our business, results of operations, liquidity and financial condition.

Risks Related to the Ownership of Our Common Shares

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• our underlying asset value;

• investor confidence and price and volume fluctuations in the stock and bond markets, generally;

• investor confidence and price and volume fluctuations in the shares and bond markets, generally;

• changes in laws, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to REITs;

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• general market and economic conditions.

In the past, class-action litigation has often been instituted against companies following periods of volatility in the price of their common stock.

In the past, class-action litigation has often been instituted against companies following periods of volatility in the price of their common shares.

This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have an adverse effect on our financial condition, results of operations, cash flow and trading price of our common shares.

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Future issuances of debt securities and equity securities may negatively affect the market price of our common shares and, in the case of equity securities, may be dilutive to owners of our common shares and could reduce the overall value of an investment in our common shares.

In the future, we may issue debt or equity securities or incur other financial obligations, including share dividends and shares that may be issued in exchange for common shares.

In the future, we may issue debt or equity securities or incur other financial obligations, including share distributions and shares that may be issued in exchange for common shares.

Upon liquidation, holders of our debt securities and other loans and preferred shares will receive a distribution of our available assets before common shareholders.

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The statement of preferences of the Series A Preferred Shares designates a series of 4,800,000 preferred shares as Series A Preferred Shares, of which 3,359,593 are issued and outstanding as of December 31, 2024.

The statement of preferences of the Series B Preferred Shares designates a series of 16,000,000 preferred shares as Series B Preferred Shares, of which 0 are issued and outstanding as of December 31, 2024.

In the future, our Board may elect to (1) sell additional shares in future public offerings;

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Therefore, it may not be possible for shareholders to participate in such future share issuances, which may dilute such shareholders’ interests in us.

The rights of our common shareholders are limited by and subordinate to the rights of the holders of Series A Preferred Shares and these rights may have a negative effect on the value of our common shares.

The holders of shares of our Series A Preferred Shares have rights and preferences generally senior to those of the holders of our common shares.

The rights of our common shareholders are limited by and subordinate to the rights of the holders of Series A Preferred Shares and Series B Preferred Shares and these rights may have a negative effect on the value of our common shares.

The holders of shares of our Series A Preferred Shares and Series B Preferred Shares have rights and preferences generally senior to those of the holders of our common shares.

The existence of these senior rights and preferences may have a negative effect on the value of our common shares.

These rights are more fully set forth in the statement of preferences setting forth the terms of the Series A Preferred shares, and include, but are not limited to the right to receive a liquidation preference, prior to any distribution of our assets to the holders of our common shares.

In addition, the Series A Preferred Shares rank senior to our common shares with respect to priority of such dividend payments, which may limit our ability to make distributions to holders of our common shares.

Risks Related to the Ownership of the Series A Preferred Shares

These rights are more fully set forth in the statements of preferences setting forth the terms of the Series A Preferred Shares and Series B Preferred Shares, and include, but are not limited to the right to receive a liquidation preference, prior to any distribution of our assets to the holders of our common shares.

In addition, the Series A Preferred Shares and Series B Preferred Shares rank senior to our common shares with respect to priority of such dividend and distribution payments, which may limit our ability to make distributions to holders of our common shares.

Risks Related to the Ownership of the Series A Preferred Shares and Series B Preferred Shares

The market price and trading volume of the Series A Preferred Shares may fluctuate significantly and be volatile due to numerous circumstances beyond our control.

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An increase in interest rates may lead prospective purchasers of the Series A Preferred Shares to demand a higher annual yield, which could reduce the market price of the Series A Preferred Shares.

Future offerings of debt securities or our shares, including future offerings of traded or non-traded preferred shares, expressly designated as ranking senior to the Series A Preferred Shares as to distribution rights and rights upon our liquidation, dissolution or winding up may adversely affect the market price of the Series A Preferred Shares.

Our cash available for distribution may not be sufficient to pay dividends on the Series A Preferred Shares at expected levels, and we cannot assure you of our ability to pay dividends in the future.

We may use borrowed funds or funds from other sources to pay dividends, which may adversely impact our operations.

We intend to pay regular quarterly dividends to our preferred shareholders.

Future offerings of debt securities or our shares, including future offerings of traded or non-traded preferred shares, expressly designated as ranking senior to the Series A Preferred Shares as to distribution rights and rights upon our liquidation, dissolution, termination, cancellation or winding up may adversely affect the market price of the Series A Preferred Shares.

There is no market for our Series B Preferred Shares and one may not develop.

The Series B Preferred Shares are not listed on a national exchange.

There is no public market for our Series B Preferred Shares and one is not guaranteed to develop.

However, should one develop or should we determine to publicly list our Series B Preferred Shares, we cannot predict the effect, if any, of future sales of our Series B Preferred Shares on the market price, if any, of our Series B Preferred Shares.

Sales of substantial amounts of Series B Preferred Shares or the perception that such sales could occur may adversely affect the prevailing market price, if any, for our Series B Preferred Shares.

Our cash available for distribution may not be sufficient to pay distributions on the Series A Preferred Shares and Series B Preferred Shares at expected levels, and we cannot assure you of our ability to pay distributions in the future.

We may use borrowed funds or funds from other sources to pay distributions, which may adversely impact our operations.

We intend to pay regular quarterly dividends to our Series A preferred shareholders and regular monthly dividends to our Series B preferred shareholders.

Distributions declared by us will be authorized by our Board in its sole discretion out of assets legally available for distribution and will depend upon a number of factors, including our earnings, our financial condition, the requirements for qualification as a REIT, restrictions under applicable law, our need to comply with the terms of our existing financing arrangements, our capital requirements and other factors as our Board may deem relevant from time to time.

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Funding distributions from working capital would restrict our operations.

If we are required to sell assets to fund dividends, such asset sales may occur at a time or in a manner that is not consistent with our disposition strategy.

If we borrow to fund dividends, our leverage ratios and future interest costs would increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have been.

We may not be able to pay dividends in the future.

If we are required to sell assets to fund distributions, such asset sales may occur at a time or in a manner that is not consistent with our disposition strategy.

If we borrow to fund distributions, our leverage ratios and future interest costs would increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have been.

We may not be able to pay distributions in the future.

In addition, some of our distributions may be considered a return of capital for income tax purposes.

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If distributions exceed the adjusted tax basis of a holder’s shares, they will be treated as gain from the sale or exchange of such shares.

The Series A Preferred Shares are subordinate to our existing and future debt, and such interests could be diluted by the issuance of additional shares of preferred stock and by other transactions.

The Series A Preferred Shares rank junior to all of our existing and future indebtedness, any classes and series of our shares of beneficial interest expressly designated as ranking senior to the Series A Preferred Shares as to distribution rights and rights upon our liquidation, dissolution or winding up, and other non-equity claims on us and our assets available to satisfy claims against us, including claims in bankruptcy, liquidation or similar proceedings.

Our declaration of trust gives our Board the authority to authorize and issue such securities as they determine to be necessary desirable or appropriate, and the Board has authorized the issuance of up to 4,800,000 Series A Preferred Shares.

Subject to limitations prescribed by Delaware law and our declaration of trust and the statement of preferences setting forth the terms of the Series A Preferred Shares, our Board is authorized to issue preferred shares in such classes or series as our Board may determine and to establish from time to time the number of preferred shares to be included in any such class or series.

The issuance of additional shares of Series A Preferred Shares or additional shares of our beneficial interest ranking on parity with the Series A Preferred Shares as to distribution rights and rights upon our liquidation, dissolution or winding up, would dilute the interests of the holders of Series A Preferred Shares, and the issuance of shares of any class or series of our shares of beneficial interest expressly designated as ranking senior to the Series A Preferred Shares as to distribution rights and rights upon our liquidation, dissolution or winding up or the incurrence of additional indebtedness could affect our ability

to pay dividends on, redeem or pay the liquidation preference on the Series A Preferred Shares.

Other than the right to vote on matters which are submitted to a vote of our common shareholders, none of the provisions relating to the Series A Preferred Shares contain any terms relating to or limiting our indebtedness or affording the holders of Series A Preferred Shares protection in the event of a highly leveraged or other transaction, including a merger or the sale, lease or conveyance of all or substantially all our assets, that might adversely affect the holders of Series A Preferred Shares.

The Series A Preferred Shares are not rated and may not be rated in the future.

The Series A Preferred Shares and Series B Preferred Shares are subordinate to our existing and future debt, and such interests could be diluted by the issuance of additional shares of preferred shares and by other transactions.

The Series A Preferred Shares and Series B Preferred Shares rank junior to all of our existing and future indebtedness, any classes and series of our shares of beneficial interest expressly designated as ranking senior to the Series A Preferred Shares and Series B Preferred Shares as to distribution rights and rights upon our liquidation, dissolution, termination, cancellation or winding up, and other non-equity claims on us and our assets available to satisfy claims against us, including claims in bankruptcy, liquidation or similar proceedings.

Subject to limitations prescribed by Delaware law and our declaration of trust and the statements of preferences setting forth the terms of the Series A Preferred Shares and Series B Preferred Shares, our Board is authorized to issue preferred shares in such classes or series as our Board may determine and to establish from time to time the number of preferred shares to be included in any such class or series.

The issuance of additional shares of Series A Preferred Shares, Series B Preferred Shares or additional shares of our beneficial interest ranking on parity with the Series A Preferred Shares and Series B Preferred Shares as to distribution rights and rights upon our liquidation, dissolution, termination, cancellation or winding up, would dilute the interests of the holders of Series A Preferred Shares and Series B Preferred Shares, and the issuance of shares of any class or series of our shares of beneficial interest expressly designated as ranking senior to the Series A Preferred Shares and Series B Preferred Shares as to distribution rights and rights upon our liquidation, dissolution, termination, cancellation or winding up or the incurrence of additional indebtedness could affect our ability to pay distributions on, redeem or pay the liquidation preference on the Series A Preferred Shares and Series B Preferred Shares.

Other than the right to vote on matters which are submitted to a vote of our common shareholders, none of the provisions relating to the Series A Preferred Shares or Series B Preferred Shares contain any terms relating to or limiting our indebtedness or affording the holders of Series A Preferred Shares or Series B Preferred Shares protection in the event of a highly leveraged or other transaction, including a merger or the sale, lease or conveyance of all or substantially all our assets, that might adversely affect the holders of Series A Preferred Shares and Series B Preferred Shares.

The Series A Preferred Shares and Series B Preferred Shares are not rated and may not be rated in the future.

The Series A Preferred Shares were previously rated by Egan-Jones Rating Company ("Egan-Jones") and are not currently rated.

We do not currently intend to seek or maintain a rating for our Series A Preferred Shares.

No assurance can be given, however, that one or more rating agencies might not independently determine to issue such a rating or that such a rating, if issued, would not adversely affect the market price of the Series A Preferred Shares.

The Series B Preferred Shares have not been rated by any nationally recognized statistical rating organization.

We do not currently intend to seek or maintain a rating for our Series A Preferred Shares or Series B Preferred Shares.

In addition, we may elect in the future to again obtain a rating of the Series A Preferred Shares, which could adversely impact the market price of the Series A Preferred Shares.

Ratings only reflect the views of the rating agency or agencies issuing the ratings and such ratings could be revised downward or withdrawn entirely at the discretion of the issuing rating agency if in its judgment circumstances so warrant.

Any such downward revision or withdrawal of a rating could have an adverse effect on the market price of the Series A Preferred Shares.

Future offerings of debt securities or of our shares expressly designated as ranking senior to our Series A Preferred Shares as to distribution rights and rights upon our liquidation, dissolution or winding up may adversely affect the market price of our Series A Preferred Shares.

If we decide to issue debt securities or additional shares, including traded or non-traded preferred shares, expressly designated as ranking senior to the Series A Preferred Shares as to distribution rights and rights upon our liquidation, dissolution or winding up in the future, it is possible that those securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility.

Additionally, any convertible or exchangeable debt securities that we issue in the future may have rights, preferences and privileges more favorable than those of the Series A Preferred Shares and may result in dilution to owners of the Series A Preferred Shares.

Any such downward revision or withdrawal of a rating could have an adverse effect on the market price of the Series A Preferred Shares or Series B Preferred Shares (if any).

Future offerings of debt securities or of our shares expressly designated as ranking senior to our Series A Preferred Shares and Series B Preferred Shares as to distribution rights and rights upon our liquidation, dissolution, termination, cancellation or winding up may adversely affect the market price of our Series A Preferred Shares.

If we decide to issue debt securities or additional shares, including traded or non-traded preferred shares, expressly designated as ranking senior to the Series A Preferred Shares and Series B Preferred Shares as to distribution rights and rights upon our liquidation, dissolution, termination, cancellation or winding up in the future, it is possible that those securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility.

Additionally, any convertible or exchangeable debt securities that we issue in the future may have rights, preferences and

privileges more favorable than those of the Series A Preferred Shares and Series B Preferred Shares and may result in dilution to owners of the Series A Preferred Shares or Series B Preferred Shares.

We and, indirectly, our shareholders, will bear the cost of issuing and servicing such securities.

Because our decision to issue debt securities or shares expressly designated as ranking senior to the Series A Preferred Shares as to distribution rights and rights upon our liquidation, dissolution or winding up in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.

Because our decision to issue debt securities or shares expressly designated as ranking senior to the Series A Preferred Shares and Series B Preferred Shares as to distribution rights and rights upon our liquidation, dissolution, termination, cancellation or winding up in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.

Thus, holders of the Series A Preferred Shares will bear the risk of our future offerings reducing the market price of the Series A Preferred Shares and diluting the value of their share holdings in us and any future issuances or offerings of Series B Preferred Shares may dilute the value of the Series B Preferred Shares.

General Risks

We are highly dependent on information technology and security breaches or systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our securities and our ability to pay dividends.

Our business is highly dependent on information technology.

Our business is highly dependent on information technology, including systems provided by third-party service providers.

In the ordinary course of our business, we may store sensitive data, including our proprietary business information and that of our business partners, on our networks.

The secure maintenance and transmission of this information is critical to our operations.

Cybersecurity incidents and cyber-attacks, ransomware attacks and social engineering attempts (including business email compromise attacks) have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future.

Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions, which risk may be heightened by the increased prevalence and use of artificial intelligence.

There can be no assurance that the measures we take to ensure the integrity of our systems will provide protection, especially because cyberattack techniques used change frequently, may persist undetected over extended periods of time, and may not be mitigated in a timely manner to prevent or minimize the impact of an attack.

Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.

Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disrupt our operations, disrupt our trading activities, or damage our reputation, which could have a material adverse effect on our financial results and negatively affect the market price of our securities and our ability to pay dividends to shareholders.

Any such access, disclosure or other loss of information, including accidental unauthorized disclosure of information, could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disrupt our operations, disrupt our trading activities, or damage our reputation, which could have a material adverse effect on our financial results and negatively affect the market price of our securities and our ability to pay distributions to shareholders.

Any interruption or deterioration in the performance of our information systems or our third-party service provider’s information systems could impair the quality of our operations and could affect our reputation and hence adversely affect our business.

The resources required to protect our information technology and infrastructure, and to comply with the laws and regulations related to data and privacy protection, are subject to uncertainty.

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Risk of Pandemics or Other Health Crises.

Pandemics, epidemics or other health crises, including the COVID-19 pandemic, have and could in the future disrupt our business.

Pandemics, epidemics or other health crises have and could in the future disrupt our business.

Both global and locally targeted health events could materially affect areas where our properties, corporate offices or major service providers are located.

These events have and could in the future have an adverse effect on our business, results of operations, financial condition and liquidity in a number of ways, including, but not limited to:

• The deterioration of global economic conditions as a result of such a crisis could ultimately decrease occupancy levels and pricing across our portfolio and/or increase concessions, reduce or defer tenants’ spending, result in changes in tenant preferences (including changes resulting from increased employer flexibility to work from home) or negatively impact tenants’ ability to pay their rent on time or at all;

changes in tenant preferences (including changes resulting from increased employer flexibility to work from home) or negatively impact tenants’ ability to pay their rent on time or at all;

• Local and national authorities expanding or extending certain measures that impose restrictions on our, or the underlying property owners for our investments, ability to enforce tenants’ contractual rental obligations (such as eviction moratoriums or rental forgiveness) and limit our, or the underlying property owners for our investments, ability to raise rents or charge certain fees;

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The direct and indirect impacts of climate change may adversely affect our business.

We may be adversely impacted by the direct consequences of climate change, such as property damage due to increases in the frequency, duration and severity of extreme weather events, such as hurricanes and floods.

Increases in property damage due to these events may contribute to increases in costs in property insurance.

Our business may be indirectly impacted by the effects of climate change as well.

Increases in property damage due to extreme weather events may contribute to increases in costs in property insurance.

Other indirect effects of climate change may include increases to the costs of electricity, fuel, water consumption and waste disposal.

In addition, changes in federal, state and local legislation and regulation based on concerns about climate change could result in delays and increased capital expenditures on our existing properties (for example, to improve their energy efficiency and/or resistance to inclement weather) without a corresponding increase in revenue, and, as a result, adversely impact our financial results and operations.

Our business could be harmed if we are unable to effectively integrate artificial intelligence.

If we are unable to remain competitive by integrating and using artificial intelligence, our business could be harmed.

In addition to competitive risks, the incorporation of artificial intelligence into our technological framework poses ethical and cybersecurity risks, as well as the regulatory risks associated with compliance with state and national laws and regulations.

Risk Factors Related to the Hotel and Lodging Industry

The Company’s hotel properties may be adversely affected by various risks common to the hospitality and lodging industry.

All real property investments are subject to a degree of risk and uncertainty and are affected by various factors, including general economic conditions and local real estate markets.

The business of the NHT segment may be adversely affected by various operating risks common to the hotel industry, including competition;

over-building;

dependence on business travel and tourism;

changes in taxes and governmental regulations that influence or set wages, prices or interest