What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-03-14 · 393 added, 212 removed, 332 unchanged (65% of the section changed)

6 unchanged sentences

As of December 31, 2024, our Portfolio consisted primarily of debt and equity investments in the single-family rental, self-storage, office, hospitality, life science and multifamily sectors.

The Company has two reportable segments, NXDT and NHT.

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

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

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

Substantially all of our business is conducted through the OP.

The OP GP is the sole general partner of the OP and is owned 100% by the Company.

As of December 31, 2023, there were 2,000 OP Units outstanding, of which 100% were owned by us.

As of December 31, 2024, there were 2,000 partnership units of the OP outstanding, of which 100% were owned by us.

On July 1, 2022, or the Deregistration Date, the SEC issued an order pursuant to Section 8(f) of the Investment Company Act declaring that the Company has ceased to be an investment company under the Investment Company Act (the "Deregistration Order").

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

As a result of the Business Change, we have not provided a comparison of our financial statements to prior periods in which we were operating as a registered investment company because it would not be useful to our shareholders.

As a diversified REIT, the Company’s primary investment objective is to provide both current income and capital appreciation.

3 unchanged sentences

We are externally managed by the Adviser through the Advisory Agreement, by and among the Company and the Adviser.

The Advisory Agreement was dated July 1, 2022, and amended on October 25, 2022 and April 11, 2023, for an initial three-year term that will expire on July 1, 2025 and successive one-year terms thereafter unless earlier terminated.

The Advisory Agreement was dated July 1, 2022, and amended on October 25, 2022, April 11, 2023 and July 22, 2024, for an initial three-year term that will expire on July 1, 2025 and successive one-year terms thereafter unless earlier terminated.

The Adviser is wholly owned by our Sponsor.

We have elected to be taxed as a REIT under Sections 856 through 860 of the Code.

We have elected to be taxed as a REIT under Sections 856 through 860 of the Code commencing with our taxable year ended December 31, 2021.

To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT taxable income to our shareholders.

1 unchanged sentence

We believe we qualify for taxation as a REIT under the Code, and we intend to continue to operate in such a manner, but no assurance can be given that we will operate in a manner so as to qualify as a REIT.

Taxable income from certain non-REIT activities is managed through one or more TRS entities and is subject to applicable federal, state, and local income and margin taxes.

The high rate environment and ongoing economic uncertainty, has limited credit availability to commercial real estate.

Less available and more expensive debt capital has had pronounced effects on the capital markets, making property acquisitions and other investments harder to finance.

Similar factors also impact the timing of and proceeds generated from asset sales and our ability to obtain debt capital.

Taxable income from certain non-REIT activities is managed through one or more TRS entities and is subject to applicable U.S.

federal, state, and local income and margin taxes.

On October 15, 2021, Marc S.

Kirschner, as litigation trustee of a litigation subtrust formed in connection with the bankruptcy proceedings of Highland, a former affiliate of our Sponsor, filed a lawsuit (the "Bankruptcy Trust Lawsuit") against various persons and entities, including our Sponsor and James Dondero.

In addition, on February 8, 2023, UBS Securities 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").

On March 24, 2023, the litigation trustee filed a motion for leave to stay the Bankruptcy Trust Lawsuit, which was granted by the bankruptcy court on April 4, 2023.

Per the court’s order, the Bankruptcy Trust Lawsuit is stayed until any party provides 30 days’ notice of the intent to resume the adversary proceeding, with all pending deadlines extended for a period of time commensurate with the length of the stay.

As of the date of this filing, the Bankruptcy Trust Lawsuit continues to be stayed.

In addition, 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 other persons and 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.

Neither the Bankruptcy Trust Lawsuit nor the UBS Lawsuit include claims related to our business or our assets.

2 unchanged sentences

Dondero has informed us he believes the UBS Lawsuit has no merit;

we have been advised that the defendants named in each of the

lawsuits intend to vigorously defend against the claims.

we have been advised that the defendants named in each of the lawsuits intend to vigorously defend against the claims.

We do not expect the Bankruptcy Trust Lawsuit or the UBS Lawsuit will have a material effect on our business, results of operations or financial condition.

On February 22, 2023, as previously disclosed, the Board formed an independent special committee to oversee a review of the potential impact to the Company of the UBS Lawsuit and the Bankruptcy Trust Lawsuit.

The special committee retained Reichman Jorgensen Lehman Feldberg LLP (“Reichman Jorgensen”) as independent legal counsel to advise the special committee on the review.

Reichman Jorgensen reported to the special committee that they have found no evidence that the Company engaged in any conduct that would expose it to liability from the UBS Lawsuit or the Bankruptcy Trust Lawsuit.

On June 13, 2023, the special committee delivered these findings to the Board.

Following the review of the special committee, we reaffirm our expectation that neither the Bankruptcy Trust Lawsuit nor the UBS Lawsuit will have a material effect on our business, results of operations or financial condition.

Macroeconomic trends, including increases in or high inflation and rising or high interest rates, may adversely impact our business, financial condition and results of operations.

Rising inflation could have an adverse impact on our operating expenses, as these costs could increase at a rate higher than our rental and other revenue.

Inflation could have an adverse impact on our operating expenses, as these costs could increase at a rate higher than our rental and other revenue.

The high rate environment and ongoing economic uncertainty has limited credit availability to commercial real estate.

Less available and more expensive debt capital has had pronounced effects on the capital markets, making property acquisitions and other investments harder to finance.

Similar factors also impact the timing of and proceeds generated from asset sales and our ability to obtain debt capital.

There is no guarantee we will be able to mitigate the impact of rising or high inflation.

In response to high inflation, the Federal Reserve raised interest rates to combat inflation and restore price stability.

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, such increases or elevated rates will result in higher debt service costs which will adversely affect our cash flows.

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, such increases or elevated rates will result in higher debt service costs which will adversely affect our cash flows.

We cannot make assurances 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.

2 unchanged sentences

Rental income .

Our rental income is primarily attributable to the rental revenue from our investment in Cityplace Tower, a 42-story, 1.36 million-square-foot, trophy office building acquired in 2018 as well as rental income from two retail properties.

Our rental income is primarily attributable to the rental revenue from our investment in Cityplace, a 42-story, 1.36 million-square-foot, trophy office building acquired in 2018 as well as rental income from two retail properties.

Our rental income also includes utility reimbursements, late fees, common area maintenance reimbursements, and other rental fees charged to tenants.

Food and beverage revenue.

F&B revenue includes revenue from the NHT Portfolio generated from the sale of food and/or beverage offerings.

Room revenue.

Room revenue includes revenue from the NHT Portfolio from renting out rooms to customers.

Interest income.

7 unchanged sentences

Property management fees.

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

Property management fees include fees paid to NexVest, our property manager, for managing each property directly or indirectly owned by us (see Note 14 to our consolidated financial statements) and other property managers for managing the day-to-day operations of our hotels.

Real estate taxes and insurance.

2 unchanged sentences

Advisory and administrative fees.

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

Advisory and administrative fees include the fees paid to our Adviser pursuant to the Advisory Agreement and fees paid to NexPoint Real Estate Advisors VI, L.P.

(the “NHT Adviser”) pursuant to the NHT Advisory Agreement (see Note 14 to our consolidated financial statements).

Property general and administrative expenses.

7 unchanged sentences

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

Conversion expense - Conversion expenses include the costs of the Business Change in conjunction with the Deregistration Order, which primarily include legal fees and other fees incurred in preparation for or as a direct result of the conversion.

These conversion expenses are included in the consolidated statement of operations and comprehensive income (loss) as conversion expenses.

Conversion expense.

Conversion expenses include the costs of the Business Change in conjunction with the Deregistration Order, which primarily include legal fees and other fees incurred in preparation for or as a direct result of the conversion.

These conversion expenses are included in the Consolidated Statements of Operations and Comprehensive Income (Loss) as conversion expenses.

Depreciation and amortization.

Depreciation and amortization costs primarily include depreciation of our real properties and amortization of acquired in-place leases on property owned directly or indirectly by us.

Impairment loss.

Impairment loss includes impairment charges recognized on real estate assets held and used and the loss recognized for real estate held for sale, which is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell.

Other Income and Expense

5 unchanged sentences

Income Tax Expense.

Income tax expense is primarily derived from taxable gains from asset sales and other income earned from investments held in our TRSs.

Income tax expense is primarily derived from taxable gains from asset sales and other income earned from investments held in NXDT's TRSs and NHT's TRSs.

Unrealized Gain (Loss) on Investments .

2 unchanged sentences

The Company recognizes the excess, or deficiency, of net proceeds received, less the carrying value of such investments, as realized gains or losses, respectively.

The Company reverses cumulative, unrealized gains or losses previously reported in its Consolidated Statements of Operations on both the Successor and Predecessor basis with respect to the investment sold at the time of the sale.

The Company reverses cumulative, unrealized gains or losses previously reported in its Consolidated Statements of Operations and Comprehensive Income (Loss) with respect to the investment sold at the time of the sale.

Real Estate Investments Statistics

As of December 31, 2023, the Company was invested in two retail properties and one office and hospitality property (excluding investments in undeveloped land), as listed below:

As of December 31, 2024, the NXDT segment was invested in two retail properties, and one office, multifamily and hospitality property (excluding investments in undeveloped land), and the NHT segment consisted of seven hotel properties as listed below:

NXDT Segment:

Average Effective Monthly

7 unchanged sentences

5916 W Loop 289 30,140 Retail 7/23/2013 $ — — % (4)

Cityplace Tower 1,365,711 Office & Hospitality (3) 8/15/2018 $ 2.14 51.3 %

Cityplace 1,365,711 Office, Multifamily & Hospitality (3) 8/15/2018 $ 2.16 46.4 %

Brand Location Name Chain Scale Service Scale Year Built/Last Renovation Rooms

Hilton Garden Inn Dallas, Texas HGI Property Upscale Select-Service 1995/2016 240

Hyatt Park City, Utah Park City Upscale Full-Service 2016 122

Hampton Inn & Suites Bradenton, Florida Bradenton Upscale Select-Service 1926/2016 119

Homewood Suites Plano, Texas HWS Plano Upscale Extended Stay 1996/2018 99

N/A Addison, Texas Addison Property Upscale Extended Stay 1990/2018 120

Homewood Suites Irving, Texas HWS Las Colinas Upscale Extended Stay 1990/2018 136

Petersburg, Florida St.

Pete Property Upper Upscale Full-Service 2001/2021 209

(1) Average effective monthly occupied rent per square foot is equal to the average of the contractual rent for commenced leases as of December 31, 2024, minus any tenant concessions over the term of the lease, divided by the occupied square footage of commenced leases as of December 31, 2024.

3 unchanged sentences

The Company is currently looking into leasing out the property.

Results of Operations for the Year Ended December 31, 2023 and Six Months Ended December 31, 2022

The discussion herein is principally limited to our financial condition and results of operations during the period from the Deregistration Date to December 31, 2022 and from January 1, 2023 to December 31, 2023.

The following table sets forth a summary of our operating results for the year ended December 31, 2023 and the six months ended December 31, 2022 (in thousands):

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

Consolidated Results of Operations for the Years Ended December 31, 2024 and 2023

The following table sets forth a summary of our operating results for the year ended December 31, 2024 as compared to the year ended December 31, 2023 (in thousands):

For the Year Ended December 31,

2024 2023 $ Change

Total revenues $ 83,222 $ 63,284 $ 19,938

7 unchanged sentences

Net income (loss) (56,573) (117,241) 60,668

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

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

Net (income) loss attributable to noncontrolling interests 9,843 — 9,843

Net income (loss) attributable to common shareholders $ (51,349) $ (121,860) $ 70,511

The net loss for the year ended December 31, 2023 and the six months ended December 31, 2022 primarily relates to mark-to-market losses on our investments accounted for at fair value partially offset by interest and dividends.

The net loss for the years ended December 31, 2024 and 2023 primarily relates to mark-to-market losses on our investments accounted for at fair value partially offset by interest and dividends.

Rental income .

Rental income was $20.3 million for the year ended December 31, 2023, and $10.1 million for the six months ended December 31, 2022.

Rental income primarily consists of lease revenue from our investment in Cityplace Tower.

Rental income was $15.7 million for the year ended December 31, 2024, compared to $20.3 million for the year ended December 31, 2023, which was a decrease of approximately $4.6 million.

The decrease between the periods was primarily due to a decrease in occupancy at Cityplace.

Rooms revenue.

Rooms revenue was $24.9 million for the year ended December 31, 2024.

All rooms revenue is derived from the NHT segment, which was not consolidated prior to April 19, 2024.

Food and beverage revenue.

F&B revenue was $2.2 million for the year ended December 31, 2024.

All F&B revenue is derived from the NHT segment, which was not consolidated prior to April 19, 2024.

Interest and dividends .

Interest and dividends totaled $42.7 million for the year ended December 31, 2023, and $45.0 million for the six months ended December 31, 2022.

For the year ended December 31, 2023, interest and dividends consists primarily of dividends from CLO equity investments of $17.4 million, NexPoint Real Estate Finance Operating Partnership, L.P.

("NREF OP") distributions of $8.9 million and NREF dividends of $3.6 million.

For the six months ended December 31, 2022, interest and dividends consisted primarily of dividends from CLO equity investments of $29.1 million, NREF OP distributions of $7.0 million and VB OP distributions of $2.8 million.

Interest and dividends totaled $36.6 million for the year ended December 31, 2024, compared to $42.7 million for the year ended December 31, 2023, which was a decrease of approximately $6.1 million.

The decrease between the periods was attributed to a decrease in dividends from equity investments.

Other income.

Other income was approximately $0.3 million for the year ended December 31, 2023, and $32,000 for the six months ended December 31, 2022.

Other income was approximately $3.8 million for the year ended December 31, 2024, compared to $0.3 million for the year ended December 31, 2023, which was an increase of approximately $3.5 million.

The increase between the periods was primarily due to the NHT consolidation.

Property operating expenses.

Property operating expenses were $7.5 million for the year ended December 31, 2023 and $3.7 million for the six months ended December 31, 2022.

Property operating expenses consist primarily of expenses from our investment in Cityplace Tower.

Property operating expenses were $22.3 million for the year ended December 31, 2024, compared to $7.5 million for the year ended December 31, 2023, which was an increase of approximately $14.8 million.

The increase between the periods was primarily due to the NHT consolidation.

Property management fees.

Property management fees were $0.7 million for the year ended December 31, 2023 and $0.3 million for the six months ended December 31, 2022.

Property management fees are primarily based on gross revenues derived primarily from our investment in Cityplace Tower.

Property management fees were $1.5 million for the year ended December 31, 2024, compared to $0.7 million for the year ended December 31, 2023, which was an increase of approximately $0.8 million.

The increase between the periods was primarily due to the NHT consolidation.

Real estate taxes and insurance.

Real estate taxes and insurance costs were $4.4 million for the year ended December 31, 2023 and $2.7 million for the six months ended December 31, 2022.

Real estate taxes and insurance expenses consist primarily of expenses from our investment in Cityplace Tower.

Real estate taxes and insurance costs were $6.5 million for the year ended December 31, 2024, compared to $4.4 million for the year ended December 31, 2023, which was an increase of

approximately $2.1 million.

Real estate taxes and insurance expenses consist primarily of expenses from our investment in Cityplace and our hospitality properties.

The increase between the periods was primarily due to the consolidation of NHT.

Advisory and administrative fees.

For the year ended December 31, 2023, the Company incurred Administrative Fees and Advisory Fees of $11.7 million, inclusive of $2.0 million in fees that were waived to comply with the Expense Cap.

For the six months ended December 31, 2022, the Company incurred Administrative Fees and Advisory Fees of $5.5

million, inclusive of $1.8 million in expenses that were waived and cannot be recouped by the Adviser.

For the year ended December 31, 2024, the Company incurred administrative fees and advisory fees of $14.2 million.

For the year ended December 31, 2023, the Company incurred administrative fees and advisory fees of $11.7 million, inclusive of $2.0 million in expenses that were waived and cannot be recouped by the Adviser.

The Expense Cap expired on June 30, 2023.

The increase between the year ended December 31, 2024 and the year ended December 31, 2023, is primarily due to the addition of fees paid to the NHT Adviser pursuant to the NHT Advisory Agreement from the consolidation of NHT and the expiration of the Expense Cap.

Property general and administrative expenses.

Property general and administrative expenses were $4.3 million for the year ended December 31, 2023 and $0.3 million for the six months ended December 31, 2022.

Property general and administrative expenses consist primarily of expenses from our investment in Cityplace Tower.

Property general and administrative expenses were $7.4 million for the year ended December 31, 2024, compared to $4.3 million for the year ended December 31, 2023, which was an increase of approximately $3.1 million.

The increase between the periods is primarily attributed to the NHT consolidation.

Corporate general and administrative expenses.

Corporate general and administrative expenses were $8.0 million for the year ended December 31, 2023 and $3.1 million for the six months ended December 31, 2022.

Corporate general and administrative expenses were $12.8 million for the year ended December 31, 2024, compared to $8.0 million for the year ended December 31, 2023, which was an increase of approximately $4.8 million.

The increase between periods was primarily due to an increase in accounting and audit fees.

Conversion expenses.

Conversion expenses were $1.2 million for the year ended December 31, 2023 and $1.6 million for the six months ended December 31, 2022.

Conversion expenses were $0.0 million for the year ended December 31, 2024, compared to $1.2 million for the year ended December 31, 2023, which was a decrease of approximately $1.2 million.

The decrease between the periods was primarily due to a decrease in expenses related to the Business Change.

Depreciation and amortization.

Depreciation and amortization costs were $13.9 million for the year ended December 31, 2023 and $7.2 million for the six months ended December 31, 2022.

Depreciation and amortization expenses consist primarily of expenses from our investment in Cityplace Tower.

Due to the Business Change, the fair value of our real estate properties as of July 1, 2022 became the new cost basis for the Company.

Depreciation and amortization costs were $15.6 million for the year ended December 31, 2024, compared to $13.9 million for the year ended December 31, 2023, which was an increase of approximately $1.7 million .

This change reset the depreciable basis of our properties as well as caused the recognition of new intangible lease assets.

The increase between the periods was primarily due to the NHT consolidation.

Impairment loss.

Impairment loss was $7.1 million for the year ended December 31, 2024, compared to $0.0 for the year ended December 31, 2023, which was an increase of approximately $6.1 million.

The increase between the periods was due to an increase in impairment charges relating to the Addison Property, Plano Homewood Suites and Las Colinas Homewood Suites.

Other Income and Expense

Interest expense.

Interest expense was $15.9 million for the year ended December 31, 2023 and $5.8 million for the six months ended December 31, 2022.

Interest expense was $28.4 million for the year ended December 31, 2024, compared to $15.9 million for the year ended December 31, 2023, which was an increase of approximately $12.5 million.

The increase between the periods was primarily due to the NHT consolidation.

Equity in income (losses) of unconsolidated ventures .

Equity in income of unconsolidated ventures was $0.3 million for the year ended December 31, 2023 Equity in losses of unconsolidated ventures was $2.3 million for the six months ended December 31, 2022.

Income tax expense .

The Company has recorded income tax expense (benefit) of $2.7 million associated with the TRSs for the year ended December 31, 2023 and $10.7 million associated with the TRSs for the six months ended December 31, 2022.

The tax expense for the year ended December 31, 2023 is partially offset by the annual change in valuation allowance on a deferred tax asset of $0.6 million and increased by a 2022 return-to-provision adjustment of $1.5 million for a net expense of $3.3 million for the year ended December 31, 2023, that is recorded on the Consolidated Statement of Operations.

The tax expense for the six months ended December 31, 2022 is partially offset by removing the valuation allowance on a deferred tax asset of $2.2 million and increased by a 2021 return-to-provision adjustment of $1.5 million for a net expense of $10.0 million for the six months ended December 31, 2022, that is recorded on the Consolidated Statement of Operations.

Equity in losses of unconsolidated ventures was $0.1 million for the year ended December 31, 2024, compared to $(0.3) million for the year ended December 31, 2023, which was an increase of approximately $0.4 million.

The decrease between periods was primarily due to a decrease in net income at Marriott Uptown.

Income tax expense (benefit) .

The Company has recorded income tax expense (benefit) of $1.4 million associated with the TRSs for the year ended December 31, 2024 and $2.7 million associated with the TRSs for the year ended December 31, 2023.

The tax expense for the year ended December 31, 2024 is partially increased by the annual change in valuation allowance on a deferred tax asset of $(0.3) million, and offset by a return-to-provision adjustment of $0.2 million and an income tax refund of $0.7 million for a net expense of $1.4 million for the year ended December 31, 2024, that is recorded on the Consolidated Statements of Operations and Comprehensive Income (Loss).

Change in unrealized gains (losses) .

Unrealized gains (losses) from our investments accounted for at fair value was $(108.2) million for the year ended December 31, 2023 and $(92.0) million for the six months ended December 31, 2022.

The losses for the year ended December 31, 2023 were largely driven by mark-to-market losses on NexPoint Storage Partners, Inc.

("NSP") common equity of $35.5 million, VB OP Units of $27.5 million, NSP OC Common Units of $19.3 million offset by mark-to-market gains on and mark-to-market gains on our IQHQ, Inc.

Class A-1 shares of $3.4 million.

The losses for the six months ended December 31, 2022 were primarily driven by mark-to-market losses on NREF OP Units of $21.3 million, mark-to-market losses on NSP OC Common Units and equity of $23.6 million and losses on our CLO equity portfolio of $27.9 million.

Our CLO equity portfolio consists primarily of CLOs that are in the process of winding down operations and liquidating their remaining holdings.

The losses on the CLO equity portfolio for the six months ended December 31, 2022 are offset by dividends received of $29.1 million which are shown in interest and dividends on the Consolidated Statement of Operations.

Unrealized gains (losses) from our investments accounted for at fair value was $(1.3) million for the year ended December 31, 2024, compared to $(108.2) million for the year ended December 31, 2023, which was an increase of approximately $106.9 million .

The gains for the year ended December 31, 2024 were largely driven by redemptions of the legacy CLO positions, which generated realized losses and a positive change in unrealized, mark-to-market gains on MidWave Wireless, Inc.

common equity of $14.5 million, United Development Funding IV common equity of $6.2 million, offset by mark-to-market losses on IQHQ, LP (“IQHQ LP”) interests of $22.2 million, NXHT common equity of $13.9 million, and NSP common equity of $5.5 million, and NexPoint Storage Partners

Operating Company, LLC (“NSP OC”) common units of $2.9 million.

The losses for the year ended December 31, 2023 were primarily driven by mark-to-market losses on NSP common equity of $35.5 million and VB OP Units of $27.5 million, NSP OC common units of $19.3 million offset by mark-to-market gains on and mark-to-market gains on our IQHQ Holdings, LP.

Class A-1 limited partnership units of $3.4 million.

Realized gains (losses) .

Realized gains (losses) were $(1.6) million for the year ended December 31, 2023 and $(2.3) million for the six months ended December 31, 2022.

The losses for the year ended December 31, 2023 were primarily driven by realized losses on common stock of Elme Communities of $0.8 million, Whitestone REIT of $1.1 million, and realized losses on SFP of $1.3 million.

The loses for the six months ended December 31, 2022 were primarily driven by a realized loss of $6.9 million on the contribution of the SAFStor Ventures (as defined below) to the NSP OC.

This was primarily offset by gains on maturities in our life settlement portfolio of $3.5 million.

Realized gains (losses) were $(21.5) million for the year ended December 31, 2024, compared to $(1.6) million for the year ended December 31, 2023, which was a decrease of approximately $(19.9) million.

The losses for the year ended December 31, 2024 were primarily driven by realized losses on the legacy CLOs of $22.8 million.

(“SFP”) of $1.3 million.

Non-GAAP Measurements

Net Operating Income and Same Store Net Operating Income

Consolidated Net Operating Income and Same Store Net Operating Income

Net Operating Income ("NOI") is a non-GAAP financial measure of performance.

NOI is used by investors and our management to evaluate and compare the performance of our properties to other comparable properties, to determine trends in earnings and to compute the fair value of our properties as NOI is calculated by adjusting net income (loss) to add back (1) interest expense, (2) Advisory Fees and Administrative Fees, (3) the impact of depreciation and amortization, (4) corporate general and administrative expenses, (5) income tax expenses, (6) conversion expenses, (7) non-operating property investment revenue, (8) realized and change in unrealized gains (losses) generated from non-real estate investments, and (9) equity in income (losses) of unconsolidated equity method ventures.

NOI is used by investors and our management to evaluate and compare the performance of our properties between segments and to other comparable properties, to determine trends in earnings and to compute the fair value of our properties as NOI is calculated by adjusting net income (loss) to add back (1) interest expense, (2) advisory fees and administrative fees, (3) the impact of depreciation and amortization, (4) corporate general and administrative expenses, (5) income tax expenses, (6) conversion expenses, (7) non-operating property investment revenue, (8) realized and change in unrealized gains (losses) generated from non-real estate investments, (9) equity in income (losses) of unconsolidated equity method ventures, and (10) impairment loss.

The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints.

1 unchanged sentence

Corporate general and administrative expenses, advisory fees and administrative fees, conversion expenses, and income tax expenses are eliminated because they do not reflect continuing operating costs of the property.

Depreciation and amortization expenses are eliminated because they may not accurately represent the actual change in value in our properties that result from use of the properties or changes in market conditions.

Depreciation and amortization expenses and impairment loss are eliminated because they may not accurately represent the actual change in value in our properties that result from use of the properties or changes in market conditions.

While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time.

2 unchanged sentences

We believe that eliminating these items from net income (loss) is useful because the resulting measure captures the actual ongoing revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

However, the usefulness of NOI is limited because it excludes corporate general and administrative expenses, interest expense, Advisory Fees and Administrative Fees, conversion expenses, income tax expenses, depreciation and amortization expense, non-operating property investment revenue and realized and change in unrealized gains and losses generated from non-real estate investments, and equity in income or losses of unconsolidated equity method ventures, all of which may be material values.

However, the usefulness of NOI is limited because it excludes corporate general and administrative expenses, interest expense, advisory fees and administrative fees, conversion expenses, income tax expenses, depreciation and amortization expense, non-operating property investment revenue and realized and change in unrealized gains and losses generated from non-real estate investments, equity in income or losses of unconsolidated equity method ventures, and impairment loss, all of which may be material values.

NOI may fail to capture significant trends in these components of net income, which further limits its usefulness.

6 unchanged sentences

We view Same Store NOI as an important measure of the operating performance of our properties because it allows us to compare operating results of properties owned for the entirety of the current and comparable periods and therefore eliminates variations caused by acquisitions or dispositions from the beginning of the compared period to the end of the current period.

NOI and Same Store NOI for the Year Ended December 31, 2023 and the Six Months Ended December 31, 2022

The following table, reconciles our NOI for the year ended December 31, 2023 and for the six months ended December 31, 2022 to net income (loss), the most directly comparable GAAP financial measure (in thousands):

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

There are two properties, White Rock Center and 5916 W Loop 289, in our same store pool for the years ended December 31, 2024, and 2023 (our "Same Store" properties).

Our Same Store properties exclude Cityplace as of December 31, 2024 and 2023, because it was not yet stabilized, meaning construction or renovation was not completed.

Non-Same Store properties include properties not yet stabilized.

Our Same Store properties also exclude the NHT segment, as the properties in that segment were not held in the comparable period.

Consolidated NOI and Same Store NOI for the Years Ended December 31, 2024 and 2023

The following table, which has not been adjusted for the effects of noncontrolling interest (“NCI”), reconciles our consolidated NOI for the years ended December 31, 2024 and 2023 to net income (loss), the most directly comparable GAAP financial measure (in thousands):

For the Year Ended December 31

Net loss $ (56,573) $ (117,241)

6 unchanged sentences

Interest expense 28,352 15,902

Property general and administrative expenses (1) — (824)

Non-operating property investment revenue ¹

3 unchanged sentences

Equity in (income) losses of unconsolidated equity method ventures (129) 306

Impairment loss 7,110 —

NOI $ 6,246 $ 3,775

4 unchanged sentences

(1) Non-operating property investment revenue is defined as revenue included in the consolidated financial statements that are from non-operating properties such as dividend income and interest income.

Net Operating Income for Our Same Store and Non-Same Store Properties for the Year Ended December 31, 2023 and the Six Months Ended December 31, 2022

There are two properties, White Rock Center and 5916 W Loop 289, in our same store pool for the year ended December 31, 2023, and the six months ended December 31, 2022 (our "Same Store" properties).

Our Same Store properties exclude Cityplace Tower as of December 31, 2023 and December 31, 2022, because it was not yet stabilized, meaning construction or renovation was not completed.

Non-Same Store properties include properties not yet stabilized.

The following table reflects the revenues, property operating expenses and NOI for the year ended December 31, 2023 and six months ended December 31, 2022 for our Same Store and Non-Same Store properties (dollars in thousands):

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

The following table, which has not been adjusted for the effects of NCI, reconciles our NOI for each of our segments for the year ended December 31, 2024 to net income (loss), the most directly comparable GAAP financial measure by reportable segment (in thousands):

For the Year Ended December 31,

NexPoint Diversified Real Estate Trust NexPoint Hospitality Trust Total NexPoint Diversified Real Estate Trust ¹

Net income (loss) $ (35,337) $ (21,236) $ (56,573) $ (117,241)

Adjustments to reconcile net income (loss) to NOI:

Advisory and administrative fees 13,286 879 14,165 11,740

Corporate general and administrative expenses 9,947 2,856 12,803 7,981

Conversion expenses — — — 1,203

Income tax expense 1,441 (69) 1,372 2,731

Depreciation and amortization 11,698 3,902 15,600 13,937

Interest expense 17,443 10,909 28,352 15,902

Non-operating property investment revenue ²

(34,300) (4,981) (39,281) (42,667)

Realized (gains) losses from non-real estate investments 21,479 — 21,479 1,634

Change in unrealized (gains) losses from non-real estate investments 1,348 — 1,348 108,249

Equity in (income) losses of unconsolidated equity method ventures (129) — (129) 306

Impairment loss — 7,110 7,110 —

NOI $ 6,876 $ (630) $ 6,246 $ 3,775

Less Non-Same Store

Revenues $ (24,705) $ (18,090) $ (42,795) $ (19,147)

Operating expenses 14,326 22,731 37,057 16,310

Same Store NOI $ (3,503) $ 4,011 $ 508 $ 938

(1) As of December 31, 2023, there was only one reporting segment.

(2) Non-operating property investment revenue is defined as revenue included in the consolidated financial statements that are from non-operating properties such as dividend income and interest income.

Consolidated NOI for Our Same Store and Non-Same Store Properties for the Years Ended December 31, 2024 and 2023

The following table reflects the revenues, property operating expenses and NOI for the years ended December 31, 2024 and 2023 for our Same Store and Non-Same Store properties (dollars in thousands):

For the Year Ended December 31

2024 2023 $ Change % Change

Rental income $ 1,147 $ 1,471 $ (324) -22.0 %

2 unchanged sentences

Rental income 14,531 18,839 (4,308) -22.9 %

Other income 308 —

Other income 1,162 308 854 N/M (1)

Rooms 24,902 — 24,902 — %

Food and beverage 2,200 — 2,200 — %

Non-Same Store revenues 42,795 19,147 23,648 123.5 % (1)

7 unchanged sentences

Non-Same Store

Property operating expenses 7,361 3,561

Property operating expenses 22,033 7,361 14,672 N/M (1)

Real estate taxes and insurance 6,252 4,113 2,139 52.0 % (1)

Property management fees 653 322

Property management fees 1,415 653 762 N/M (1)

Property general and administrative expenses 7,357 4,183 3,174 75.9 % (1)

4 unchanged sentences

Total NOI $ 6,246 $ 3,775 $ 2,471 65.4 % (1)

See reconciliation of net income (loss) to NOI above under “NOI and Same Store NOI for the Year Ended December 31, 2023 and Six Months Ended December 31, 2022.”

Same Store Results of Operations for the Year Ended December 31, 2023 and the Six Months Ended December 31, 2022

As of December 31, 2023, our Same Store properties were approximately 49.6% leased with a weighted average monthly effective occupied rent per square foot of $1.11.

As of December 31, 2022, our Same Store properties were approximately 76.3% leased with a weighted average monthly effective rent per square foot of $1.21.

For our Same Store

properties, we recorded the following operating results for the year ended December 31, 2023 and for the six months ended December 31, 2022.

(1) Denotes that the significant percentage change in the current period comparison is primarily attributed to the consolidation of NHT.

See reconciliation of net income (loss) to NOI above under “NOI and Same Store NOI for the Year Ended December 31, 2024 and 2023.”

Consolidated Same Store Results of Operations for the Years Ended December 31, 2024 and 2023

As of December 31, 2024, our Same Store properties were approximately 52.1% leased with a weighted average monthly effective occupied rent per square foot of $1.10, compared to 49.6% leased with a weighted average monthly effective occupied rent per square foot of $1.11 as of December 31, 2023.

For our Same Store properties, we recorded the following operating results for the years ended December 31, 2024 and 2023.

Rental Income .

Rental income was $1.5 million for the year ended December 31, 2023 and $0.8 million for the six months ended December 31, 2022.

Rental income was $1.1 million for the year ended December 31, 2024, compared to $1.5 million for the year ended December 31, 2023, which is a decrease of approximately $0.3 million or (22.0)%.

The majority of the decrease between the year ended December 31, 2024 and the year ended December 31, 2023 is related to an increase in the amortization of above- and below-market leases.

Above-market leases decrease rental income as they are amortized, while below-market leases increase rental income.

Property operating expenses .

Property operating expenses were $0.1 million for the year ended December 31, 2023 and $0.1 million for the six months ended December 31, 2022.

Property operating expenses were $222.9 thousand for the year ended December 31, 2024, compared to $126.6 thousand for the year ended December 31, 2023, which was an increase of approximately $96.0 thousand or 75.6%.

The majority of the increase between the year ended December 31, 2024 and the year ended December 31, 2023 is related to an increase in repair and maintenance fees.

Real estate taxes and insurance .

Real estate taxes and insurance costs were $0.3 million for the year ended December 31, 2023 and $0.2 million for the six months ended December 31, 2022.

Real estate taxes and insurance costs were $292.9 thousand for the year ended December 31, 2024, compared to $264.3 thousand for the year ended December 31, 2023, which was an increase of approximately $29.0 thousand or 11.0%.

The majority of the increase between the year ended December 31, 2024 and the year ended December 31, 2023 is related to an increase in the property tax budget.

Property management fees .

Property management fees were $0.1 million for the year ended December 31, 2023 and $36,693 for the six months ended December 31, 2022.

Property management fees were $75.3 thousand for the year ended December 31, 2024, compared to $73.7 thousand for the year ended December 31, 2023, which was an increase of approximately $1.0 thousand, or 1.4%.

The increase between the year ended December 31, 2024 and the year ended December 31, 2023 is related to an increase in rental revenue, which the management fee is calculated off of.

Property general and administrative expenses .

Property general and administrative expenses were $0.1 million for the year ended December 31, 2023 and $0.1 million for the six months ended December 31, 2022.

Property general and administrative expenses were $47.9 thousand for the year ended December 31, 2024, compared to $68.0 thousand for the year ended December 31, 2023, which was a decrease of approximately $20.0 thousand, or (29.4)%.

The majority of the decrease between the year ended December 31, 2024 and the year ended December 31, 2023 is related to a decrease in professional fees.

Consolidated FFO and AFFO

We believe that net income (loss), as defined by GAAP, is the most appropriate earnings measure.

3 unchanged sentences

Thus, NAREIT created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from net income (loss), as defined by GAAP.

We compute FFO attributable to common shareholders as net income (loss), excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization and realized gains (losses).

Our calculation of FFO differs slightly from NAREIT's definition of FFO because we exclude realized gains (losses).

We believe the exclusion of realized gains (losses) is appropriate because these realized gains (losses) are not related to our real estate properties.

Our presentation differs slightly in that we begin with net income (loss) before adjusting for amounts attributable to redeemable non-controlling interests in NHT and we

show the combined amounts attributable to such non-controlling interests as an adjustment to arrive at FFO attributable to common shareholders.

AFFO makes certain adjustments to FFO in order to arrive at a more refined measure of the operating performance of our Portfolio.

There is no industry standard definition of AFFO and practice is divergent across the industry.

AFFO adjusts FFO to remove items such as equity based compensation expense and the amortization of deferred financing costs incurred in connection with obtaining long-term debt financing, and change in unrealized gains (losses).

We believe AFFO is useful to investors as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other REITs that are not as involved in the aforementioned activities.

3 unchanged sentences

Further, our computation of FFO and AFFO may not be comparable to FFO and AFFO reported by other REITs that do not define FFO in accordance with the current NAREIT definition or that interpret the current NAREIT definition or define AFFO differently than we do.

The following table reconciles our calculations of FFO and AFFO to net income (loss), the most directly comparable GAAP financial measure, for the year ended December 31, 2023 and six months ended December 31, 2022 (in thousands, except per share amounts):

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

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

The following table reconciles our calculations of FFO and AFFO to net income (loss), the most directly comparable GAAP financial measure, for the years ended December 31, 2024 and 2023 (in thousands, except per share amounts):

For the Year Ended December 31 For the Year Ended December 31

2024 2023 % Change (1)

Net income (loss) $ (56,573) $ (117,241) N/M

Depreciation and amortization 15,600 13,937 11.9 %

Realized gains (losses) 1,634 2,323

FFO (101,670) (72,075)

Realized (gains) losses 21,479 1,634 N/M

Impairment loss 7,110 — — %

Adjustment for noncontrolling interests 4,739 — — %

FFO (7,645) (101,670) N/M

Distributions to preferred shareholders (4,619) (4,619) — %

FFO attributable to common shareholders (106,289) (74,385)

FFO per share - basic $ (2.85) $ (2.00)

FFO per share - diluted $ (2.85) $ (2.00)

Equity-based compensation expense 1,344 —

FFO attributable to common shareholders (12,264) (106,289) N/M

FFO per share - basic $ (0.30) $ (2.85) N/M

FFO per share - diluted $ (0.30) $ (2.85) N/M

Equity-based compensation expense 3,010 1,344 N/M

Amortization of deferred financing costs - long term debt (696) (776) -10.3 %

Change in unrealized losses 108,249 92,031

AFFO attributable to common shareholders 2,528 17,579

AFFO per share - basic $ 0.07 $ 0.47

AFFO per share - diluted $ 0.07 $ 0.47

Change in unrealized (gains) losses 1,348 108,249 N/M

AFFO attributable to common shareholders (8,602) 2,528 N/M

AFFO per share - basic $ (0.21) $ 0.07 N/M

AFFO per share - diluted $ (0.21) $ 0.07 N/M

Weighted average common shares outstanding - basic 40,229 37,334 7.8 %

Weighted average common shares outstanding - diluted (2) 41,498 37,773 9.9 %

Dividends declared per common share $ 0.60 $ 0.30

FFO Coverage - diluted (2) -4.75x -6.67x

AFFO Coverage - diluted (2) 0.11x 1.58x

Net income (loss) coverage (2) -5.23x -7.31x

Distributions declared per common share $ 0.60 $ 0.60 — %

Net income (loss) coverage (3) -2.34x -5.23x N/M

FFO Coverage - diluted (3) -0.5x -4.75x N/M

AFFO Coverage - diluted (3) -0.35x 0.11x N/M

(1) Represents the percentage change for the year ended December 31, 2024 compared to the year ended December 31, 2023.

(2) The Company uses actual diluted weighted average common shares outstanding when in a dilutive position for FFO and AFFO.

(2) Indicates coverage ratio of FFO/AFFO/net income (loss) per common share (diluted) over dividends declared per common share during the period.

The year ended December 31, 2023 and the six months ended December 31, 2022

FFO was $(101.7) million for the year ended December 31, 2023 and $(72.1) million for the six months ended December 31, 2022.

AFFO was $2.5 million for the year ended December 31, 2023 and $17.8 million for the six months ended December 31, 2022.

(3) Indicates coverage ratio of net income (loss)/FFO/AFFO per common share (diluted) over distributions declared per common share during the period.

The year ended December 31, 2024 as compared to the year ended December 31, 2023

FFO was $(7.6) million for the year ended December 31, 2024, compared to $(101.7) million for the year ended December 31, 2023, which was an increase of approximately $94.1 million.

The change in our FFO between the year

ended December 31, 2024 and the year ended December 31, 2023 primarily relates to a decrease in unrealized losses, primarily attributed to redemptions of the CLO positions, which reclassified the change in unrealized losses to realized gains of approximately $22.8 million.

AFFO was $(8.6) million for the year ended December 31, 2024, compared to $2.5 million for the year ended December 31, 2023, which was a decrease of approximately $11.1 million.

The change in our AFFO between the year ended December 31, 2024 and the year ended December 31, 2023 primarily relates to the consolidation of NHT, resulting in an increase in property operating expenses, interest expense and corporate general and administrative expenses.

Net Asset Value

The SEC does not provide rules on the methodology we must use to determine our NAV or NAV per common share.

The determination of NAV involves a number of subjective assumptions, estimates and judgments that may not be accurate or complete.

We believe there is no established practice among REITs for calculating NAV.

Different firms using different property-specific, general real estate, capital markets, economic and other assumptions, estimates and judgments could derive a NAV that could be significantly different from our NAV.

Thus, other public REITs methodologies used to calculate NAV may differ materially from ours.

Additionally, our NAV differs from the values of our real estate assets as calculated in accordance with GAAP, in that we calculate NAV based on the consolidated balance sheets as total assets minus total liabilities, less any equity attributable to preferred shareholders (such as the Series A Preferred Shares) and noncontrolling interests.

Our NAV per common share is calculated by dividing our NAV by our diluted common shares outstanding, which represents the aggregate of our common shares outstanding plus any unvested restricted share units as of the last day of the reporting period.

We calculate NAV per common share on a quarterly basis beginning with the quarter ended December 31, 2024.

The presentation of NAV and NAV per common share below is intended to be the Applicable NAV (as defined in the statement of preferences of the Series B Preferred Shares) for purposes of the offering of the Series B Preferred Shares.

The below table presents the NAV calculation (in thousands, except per common share amounts):

As Of Total Assets Total Liabilities Series A Preferred Shares (1) NCI NAV Diluted Common Shares Outstanding NAV Per Common Share

December 31, 2024 1,224,839 (391,301) (83,252) 2,970 753,256 44,118 $17.07

(1) Represents the liquidation preference, net of approximately $738 thousand issuance costs, from the issuance of the Company’s 5.50% Series A Cumulative Preferred Shares.

Liquidity and Capital Resources

Our short-term liquidity requirements consist primarily of funds necessary to pay for debt maturities, operating expenses and other expenditures including:

• capital expenditures to continue the ongoing development of Cityplace Tower;

• capital expenditures to continue the ongoing development of Cityplace;

• capital expenditures necessary to maintain the NHT hotel properties;

• interest expense and scheduled principal payments on outstanding indebtedness (see “—Obligations and Commitments” below);

13 unchanged sentences

These reserves are to be used for future interest payments on the debt facility.

As of December 31, 2024, we also had $7.5 million of restricted cash reserves associated with the NHT segment for brand-mandated Performance Improvement Plan (“PIPs”) and furniture, fixtures and equipment upgrades arising from the execution of the Company’s franchise agreement and future insurance and property tax expenses.

Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional properties, make additional accretive investments pursuant to our investment strategy, renovations and other capital expenditures to improve our properties and scheduled debt payments and distributions.

4 unchanged sentences

We estimate an additional $190 million to $210 million of capital expenditures to complete the Cityplace renovation.

Also, acquisitions, redevelopments, or expansions of our properties will require

significant capital outlays.

Long-term, we may not be able to fund such capital improvements solely from net cash provided by operations because we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gains, to qualify and maintain our qualification as a REIT, and we are subject to tax on any retained income and gains.

Also, acquisitions, redevelopments, or expansions of our properties will require significant capital outlays.

Long-term, we may not be able to fund such capital improvements solely from net cash provided by operations because we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deductions for distributions paid and excluding net capital gains, to qualify and maintain our qualification as a REIT, and we are subject to tax on any retained income and gains.

As a result, our ability to fund capital expenditures, acquisitions, or redevelopment through retained earnings long-term is limited.

1 unchanged sentence

If we are unable to obtain the necessary capital on favorable terms, or at all, our financial condition, liquidity, results of operations, and prospects could be materially and adversely affected.

We believe that our available cash, expected operating cash flows, and potential debt or equity financings will provide sufficient funds for our operations, anticipated scheduled debt service payments and dividend requirements for the twelve-month period following December 31, 2023.

The following table presents selected data from our consolidated statements of cash flows for the year ended December 31, 2023 and the six months ended December 31, 2022 (in thousands):

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

Net cash provided by (used in) operating activities $(24,266) $31,431

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

Net cash provided by (used in) used in financing activities 6,796 (19,140)

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

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

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

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

We believe that our available cash, expected operating cash flows, and potential debt or equity financings will provide sufficient funds for our operations, anticipated scheduled debt service payments and distribution requirements for the twelve-month period following December 31, 2024.

See “—Debt” for additional details regarding our indebtedness and related liquidity requirements.

The following table presents selected data from our consolidated statements of cash flows for the year ended December 31, 2024 and 2023 (in thousands):

For the Year Ended December 31

Net cash used in operating activities $(11,665) $(24,266)

Net cash provided by investing activities 25,974 21,990

Net cash provided by (used in) financing activities (18,577) 6,796

Net decrease in cash, cash equivalents and restricted cash (4,268) 4,520

2 unchanged sentences

Cash flows from operating activities.

During the year ended December 31, 2023, net cash provided by (used in) operating activities was $(24.3) million and $31.4 million for the six months ended December 31, 2022.

Cash flows from operating activities was primarily driven by an income tax payment of $10.7 million for the year ended December 31, 2023.

Operating cash flows were primarily driven by dividends received from our CLO equity portfolio for the six months ended December 31, 2022.

During the year ended December 31, 2024, net cash provided by (used in) operating activities was $(11.7) million, compared to net cash provided by operating activities of $(24.3) million for the year ended December 31, 2023.

The change in cash flows from operating activities was mainly attributable to a decrease in income taxes payable, life settlement premiums and accounts payable.

Cash flows from investing activities.

During the year ended December 31, 2023, net cash provided by (used in) investing activities was $22.0 million and $(14.4) million for the six months ended December 31, 2022.

Cash flows from investing activities was primarily driven by proceeds from the sale of several equities and senior loans for the year ended December 31, 2023.

Cash flows from investing activities was primarily driven by acquisitions of new real estate investments of $26.5 million partially offset by proceeds from the redemption of our Caddo Sustainable Timberlands LP investment of $10.9 million in cash for the six months ended December 31, 2022.

During the year ended December 31, 2024, net cash provided by investing activities was $26.0 million, compared to net cash provided by investing activities of $22.0 million for the year ended December 31, 2023.

The change in cash flows from investing activities was mainly due to the net cash acquired from the consolidation of NHT during the period.

Cash flows from financing activities.

During the year ended December 31, 2023, net cash provided by (used in) financing activities was $6.8 million and $(19.1) million for the six months ended December 31, 2022.

Cash flows from financing activities was primarily driven by notes payable borrowings of $39.0 million, offset by credit facility repayments of $10.0 million, and dividends paid to common shareholders of $16.9 million for the year ended December 31, 2023.

Cash flows from financing activities was primarily driven by borrowings of $9.5 million, offset by credit facility repayments of $12.5 million, prime brokerage repayments of $14.4 million and dividends paid to common shareholders of $11.2 million for the six months ended December 31, 2022.

During the year ended December 31, 2024, net cash used in financing activities was $(18.6) million, compared to net cash used in financing activities of $6.8 million for the year ended December 31, 2023.

The change in cash flows from financing activities was due to a decrease in proceeds received from credit facilities, which was partially offset by a decrease in cash payments for distributions to common shareholders.

Mortgage Debt

6 unchanged sentences

Furthermore, following the completion of our renovation and development programs and depending on the interest rate environment at the applicable time, we may seek to refinance our floating rate debt into longer-term fixed rate debt at lower leverage levels.

Cityplace Debt

On May 8, 2023, we received lender consent to defer the maturity of the Cityplace debt to September 8, 2023.

Also on May 8, 2023, the parties to the loan agreement agreed to convert the index upon which the interest rate is based to one-month SOFR effective as of the first interest period beginning on or after May 8, 2023.

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

On March 8, 2024, the lender agreed to defer the maturity of the Cityplace debt by twelve months to March 8, 2025.

Management is currently engaged in discussions with the lender regarding the extension of the maturity date of the Cityplace debt.

Management can give no assurance that the lender will agree to such an extension.

While the lender has not yet demanded payment of the Cityplace indebtedness, management can give no assurance that it will not exercise its right to do so or exercise its other remedies under the credit agreement, including foreclosing on Cityplace.

Credit Facility

6 unchanged sentences

As of December 31, 2024, the Credit Facility bore interest at the one-month SOFR plus 4.25%.

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

During the year ended December 31, 2024, the Company paid down $9.0 million on the Credit Facility.

As of December 31, 2024, the Credit Facility had an outstanding balance of $11.0 million.

For additional information regarding our Credit Facility, see Note 6.

For additional information regarding our Credit Facility, see Note 6 to our consolidated financial statements.

The Credit Facility will mature on October 6, 2025 and is subject to monthly amortization payments through the maturity date.

We believe we will have adequate liquidity to pay these obligations when they come due.

Revolving Credit Facility

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

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

In order to extend the debt, the Company must give at the latest, a 60 day notice to the lender, as well as fund the interest reserve account up to a six-month reserve.

As of December 31, 2024, the NexBank Revolver bears interest at one-month SOFR plus 3.50% and matures on May 21, 2025.

On May 21, 2024, the Company elected to use one of the two extension options to extend the maturity by six months to November 21, 2024.

On November 21, 2024, the Company elected to use the second extension option to extend the maturity by six months to May 21, 2025.

On October 22, 2024, the Company amended the NexBank Revolver agreement to allow for the Lubbock property to be used as collateral for the debt.

As of December 31, 2024, the NexBank Revolver had an outstanding balance of $16.5 million.

As of December 31, 2024, the Company held $0.9 million in restricted cash in the interest reserve account.

Obligations and Commitments

Notes Payable, Freedom LHV

On August 2, 2024, the Company, through Freedom LHV, LLC (“Freedom LHV”), an indirect subsidiary of the Company, borrowed approximately $10.0 million from The Ohio State Life Insurance Company (“OSL”), an entity that may be deemed an affiliate of the Adviser through common beneficial ownership.

Due to the recently transacted nature of the note, the fair value of the note is approximately the outstanding balance.

The note bears interest at an annual fixed rate of 10.0% and matures on August 2, 2029.

The debt is secured by certain real property held by Freedom LHV and is guaranteed by the Company.

Mortgages Payable, NHT

On February 28, 2019, NHT, through subsidiaries of NHT OP, entered into a borrowing arrangement for a $59.4 million Note A loan (the “Note A Loan”) and a $28.6 million Note B loan (the “Note B Loan”) with ACORE.

The Note A Loan bears interest at a variable rate equal to the 30-day SOFR plus 2.00% and matures on March 1, 2025.

The Note B Loan bears interest at a variable rate equal to the 30-day SOFR plus 6.46% and matures on March 1, 2025.

See Note 15 for a discussion of the extension of the maturity dates of the Note A Loan and Note B Loan.

As of December 31, 2024, the Note A Loan and Note B Loan had an outstanding balance of $50.2 million and $24.2 million and effective interest rates of 7.34% and 11.75%, respectively.

On February 15, 2022, in connection with the acquisition of the Park City and Bradenton properties, NHT, through subsidiaries of NHT OP, entered into the PC & B Loan with an original maturity date of February 5, 2025.

See Note 15 for

a discussion of the extension of the maturity date of the PC & B Loan.

The outstanding balance on the PC & B Loan at December 31, 2024 was $37.9 million, with $1.4 million available to draw on for renovation purposes as of December 31, 2024.

The loan documents, including the guaranty, for the PC & B Loan and the Note A Loan and Note B Loan contain customary representations, warranties, and events of default, which require NHT to comply with affirmative and negative covenants.

As of December 31, 2024, NHT OP, the guarantor of certain obligations under the PC & B Loan documents, was not in compliance with the PC & B Loan covenants related to the minimum net worth and the minimum liquid assets.

AREEIF Lender, LLC, the lender under the PC & B Loan, has not granted a waiver for the covenant violations as of December 31, 2024.

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 Park City and 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.

Convertible Notes, NHT

NHT OP also entered into several convertible notes with affiliates of the NHT Adviser since January 8, 2019.

The fixed rate notes have rates ranging from 2.25% to 7.50% (which were market interest rates at the time of their issuance) while outstanding and mature in 20 years from their date of issuance.

As of December 31, 2024, the net carrying amount of the convertible notes due to affiliates of the NHT Adviser was $50.2 million.

Obligations, Commitments and Investment Opportunities

The following table summarizes our contractual obligations and commitments as of December 31, 2024 for the next five calendar years subsequent to December 31, 2024.

9 unchanged sentences

Total $ 1,517 $ 59 $ 59 $ 59 $ 59 $ 59 $ 1,222

Preferred Shares

Dividend payments N/A (2) $ 9,236 $ 9,236 $ 9,236 $ 9,236 $ 9,236 N/A (2)

Series A Preferred Shares

Distribution payments N/A (2) $ 4,618 $ 4,618 $ 4,618 $ 4,618 $ 4,618 N/A (2)

Credit Facility

6 unchanged sentences

(2) The Series A Preferred Shares are perpetual.

Credit Facility

The Credit Facility will mature on October 6, 2025 and is subject to monthly amortization payments through the maturity date.

We believe we will have adequate liquidity to pay these obligations when they come due.

Revolving Credit Facility

The NexBank Revolver will mature on May 21, 2024, with the option to extend the maturity up to two times, each by six months, and is subject to monthly interest payments through the maturity date, with the remaining principal being due on the maturity date.

We believe we will have adequate liquidity to pay these obligations when they come due.

Cityplace Debt

On May 8, 2023, we received lender consent to defer the maturity of the Cityplace debt to September 8, 2023.

Also on May 8, 2023, the parties to the loan agreement agreed to convert the index upon which the interest rate is based to one-

month SOFR effective as of the first interest period beginning on or after May 8, 2023.

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

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

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

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

Advisory Agreement

NXDT Advisory Agreement

As consideration for the Adviser’s services under the Advisory Agreement, we pay our Adviser the Fees, which includes the Advisory Fee equal to 1.00% of Managed Assets and the Administrative Fee equal to 0.20% of the Company’s Managed Assets.

The Advisory Agreement provides that the Fees shall be paid in cash, unless the Adviser, in its sole discretion, elects to have all or a portion of the monthly installment of the Fees paid in common shares of the Company, subject to certain restrictions.

The Advisory Agreement provides that the Administrative Fees shall be paid in cash and the monthly installment of the Advisory Fees shall be paid one-half in cash and one-half in common shares of the Company, subject to certain restrictions.

For additional information, see Note 14 to our consolidated financial statements.

1 unchanged sentence

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

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

This limitation ended on

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

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

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

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

The Expense Cap expired on June 30, 2023.

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

As of December 31, 2024, a total of $3.1 million in Fees to the Adviser have been waived to comply with the Expense Cap.

For the year ended December 31, 2023, the Company expensed $11.7 million related to the Fees, net of the expense reimbursement.

Of this $11.7 million, $2.8 million is related to shares that were, or are expected to be issued in lieu of cash, and $7.9 million that was, or is expected to be paid in cash.

For the year ended December 31, 2024, the Company expensed $14.2 million, related to the Fees.

Of this $14.2 million, $5.5 million is related to shares that were, or are expected to be issued in lieu of cash.

NHT Advisory Agreement

As consideration for the NHT Adviser’s services under the NHT Advisory Agreement, we pay the NHT Adviser an advisory fee equal to 1.00% of the REIT Asset Value.

Pursuant to the terms of the NHT Advisory Agreement, NHT will reimburse the NHT Adviser for all documented Operating Expenses and offering expenses it incurs on behalf of NHT.

Expenses paid or incurred by NHT for advisory fees payable to the NHT Adviser, Operating Expenses incurred by the NHT Adviser or its affiliates in connection with the services it provides to NHT and its subsidiaries and compensation expenses relating to equity awards granted under a long-term incentive plan of NHT will not exceed 1.5% of the REIT Asset Value for the calendar year (or part thereof).

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

From April 19, 2024 to December 31, 2024, NHT incurred expenses subject to the NHT Expense Cap of $4.1 million.

NHT and/or NHT OP may elect to acquire all of the outstanding and issued equity interests of the NHT Adviser (the “Internalization”) by exercising its rights, in its sole discretion, under the NHT Advisory Agreement (subject to certain terms and conditions) to effect the Internalization.

NHT will pay the NHT Adviser a fee equal to three times the prior 12 months’ advisory fee as consideration for an Internalization (the “Internalization Fee”).

The Internalization Fee is limited to 7.5% of the combined equity value of NHT and NHT OP on a consolidated basis as of the date of the Internalization.

The Internalization has not occurred as of December 31, 2024.

Alewife Holdings Loan

On May 10, 2024, the Company, through the OP, NREF OP IV, a subsidiary of NREF, an entity that is managed by an affiliate of the Adviser, and OSL, an entity that may be deemed an affiliate of the Adviser through common beneficial ownership, entered into an Assignment and Assumption and Co-Lender Agreement, pursuant to which NREF OP IV assigned the right to fund up to 9% of a loan (the “Alewife Loan”) to be made to IQHQ-Alewife Holdings, LLC (“Alewife Holdings”) to the OP and allocated the right to fund up to 9% of the Alewife Loan to OSL.

Effective January 2, 2025, NREF OP IV and OSL entered into an Assignment and Assumption and Co-Lender Agreement, pursuant to which NREF OP IV assigned $7.5 million of interest in the Alewife Loan to OSL for cash and increased OSL’s allocation of the right to fund up to 10.32% of the Alewife Loan.

In addition, at any time and from time to time, NREF may purchase up to all of the amounts funded by OSL in the Alewife Loan from OSL.

Upon receipt of a draw request, the OP and OSL have the right to elect to fund an amount equal or greater than zero and up to (i) 9% or 10.32%, respectively, of the total amount of all advances previously made under the Alewife Loan plus the amount of the then current borrowing, (ii) less the total amount of advances previously made by the OP and OSL, respectively.

NREF OP IV is required to fund any amounts not funded by OSL and the OP.

At any time that the OP and OSL have funded less than their respective percentages of all advances made under the Alewife Loan, the OP and OSL have the option upon notice to NREF OP IV to pay to NREF OP IV any amount of such unfunded amount.

Upon such payment, the OP or OSL would become entitled to all interest and fees accrued on the amount paid to NREF OP IV on and after the date of such payment.

IQHQ Promissory Note and Warrant

On May 23, 2024, NexPoint Bridge Investor I, LLC (“Bridge Investor I”), an entity owned by an affiliate of the Adviser, entered into a Secured Convertible Promissory Note and Warrant Purchase Agreement (“Bridge Purchase Agreement”) whereby IQHQ, LP issued and sold to Bridge Investor I a Secured Convertible Promissory Note (the “IQHQ Promissory Note”) with a purchase commitment of $150 million.

The IQHQ Promissory Note bore interest at 16.5%, which was payable in kind, and matured on May 23, 2025.

The IQHQ Promissory Note would automatically convert into Series E preferred stock of IQHQ, Inc.

upon a Qualified Equity Financing (as defined in the IQHQ Promissory Note).

In accordance with the Bridge Purchase Agreement, IQHQ Holdings, LP (“IQHQ Holdings”) also issued and sold a corresponding warrant to Bridge Investor I to purchase Class A-3 Units of IQHQ Holdings (as amended, the “IQHQ Bridge Warrant”).

The IQHQ Bridge Warrant entitles the holder to purchase, at an exercise price of $0.01, Class A-3 Units of IQHQ Holdings initially intended to represent 6.25% of the fully diluted and outstanding common equity of IQHQ Holdings.

The IQHQ Bridge Warrant is exercisable, in whole or in part, at any time, and expires on May 23, 2034, unless there is an earlier change of control, initial public offering or liquidation.

The OP and certain entities advised by affiliates of our Adviser (the “IQHQ Participating Purchasers”) own common equity in IQHQ Holdings and/or IQHQ LP and NREF owns Series D-1 preferred stock in IQHQ, Inc., which is the limited partner in IQHQ LP.

In connection with the Bridge Purchase Agreement, the OP, NREF, through certain subsidiaries, and the IQHQ Participating Purchasers entered into a participation rights agreement with Bridge Investor I pursuant to which the OP and the IQHQ Participating Purchasers had a right to fund up to specified amounts of the IQHQ Promissory Note and IQHQ Bridge Warrant.

On December 2, 2024, the IQHQ Promissory Note was fully funded by NREF and the IQHQ Participating Purchasers and the OP did not fund any amounts.

On December 31, 2024, Bridge Investor I entered into a Subscription Agreement (“IQHQ Subscription Agreement”) whereby Bridge Investor I committed to purchase $160.1 million of Series E preferred stock of IQHQ, Inc.

Pursuant to the IQHQ Subscription Agreement, the full $10.1 million of the interest accrued on the IQHQ Promissory Note was substituted and exchanged for a deemed funding of $10.1 million under the IQHQ Subscription Agreement.

In connection with the IQHQ Subscription Agreement, on December 31, 2024, Bridge Investor I also entered into a Warrant Purchase Agreement (the “IQHQ Warrant Purchase Agreement”) whereby IQHQ Holdings issued and sold a corresponding warrant to Bridge Investor I to purchase Class A-3 Units of IQHQ Holdings (as amended, the “IQHQ Series E Warrant”).

The IQHQ Series E Warrant entitles the holder to purchase, at an exercise price of $0.01, Class A-3 Units of IQHQ Holdings initially intended to represent up to 10.25% of the fully diluted and outstanding common equity of IQHQ Holdings.

The IQHQ Series E Warrant is exercisable, in whole or in part, at any time for ten years unless there is an earlier change of control, initial public offering or liquidation.

In connection with the IQHQ Subscription Agreement and IQHQ Warrant Purchase Agreement, the OP, along with NREF, through certain subsidiaries, and the IQHQ Participating Purchasers entered into a participation rights agreement with Bridge Investor I pursuant to which the OP and the IQHQ Participating Purchasers have a right to fund up to specified amounts of the Series E preferred stock of IQHQ, Inc.

commitment and the IQHQ Series E Warrant.

Upon receipt of a draw request, each IQHQ Participating Purchaser has the right to elect to fund an amount equal or greater than zero up to their respective preemptive right under the IQHQ Holdings or IQHQ, L.P.

organizational documents less the total amount of advances previously made by such IQHQ Participating Purchaser.

Upon receipt of a draw request, the OP will also have the right to elect to fund an amount equal or greater than zero up to 50% of the total requested amount that is not funded by the IQHQ Participating Purchasers.

NREF would be required to fund any amounts not funded by the IQHQ Participating Purchasers and the OP.

At any time that the IQHQ Participating Purchasers have funded less than their respective participation amounts, the IQHQ Participating Purchasers have the option to pay NREF or the OP (to the extent it has funded) any amount of such unfunded amount.

Upon such payment, the IQHQ Participating Purchaser would become entitled to all interest accrued on the amounts paid to NREF or the OP, if applicable, on and after the date of such payment.

Bridge Investor I can allocate all or any portion of the IQHQ Warrant to any parties to the participation rights agreement.

As of the December 31, 2024, the OP has not funded any amounts.

U.S REIT Status

We anticipate that we will continue to qualify to be taxed as a REIT for U.S.

federal income tax purposes, and we intend to continue to be organized and to operate in a manner that will permit us to qualify as a REIT.

However, we can give no assurance that we will maintain REIT qualification.

However, we can

give no assurance that we will maintain REIT qualification.

To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual “REIT taxable income”, as defined by the Code, to stockholders.

1 unchanged sentence

Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes.

The Company has recorded a current income tax expense of $2.7 million associated with the TRSs for the year ended December 31, 2023, which is largely driven by income from the Company’s legacy CLO investments and investments in debt instruments not secured by mortgages on real property.

The tax expense is decreased by the annual change in valuation allowance on a deferred tax asset of $0.6 million and partially offset by a return-to-provision adjustment of $1.5 million for a net expense of $2.7 million for the year ended December 31, 2023, that is recorded on the Consolidated Statement of Operations.

The Company has recorded a current income tax expense of $1.4 million associated with the TRSs for the year ended December 31, 2024, which is largely driven by income from the Company’s preferred stock investments and investments in debt instruments not secured by mortgages on real property.

The tax expense is increased by the annual change in valuation allowance on a deferred tax asset of $0.3 million and offset by a return-to-provision adjustment of $0.2 million and income tax refund of $0.7 million for a net expense of $1.4 million for the year ended December 31, 2024, that is recorded on the Consolidated Statement of Operations and Comprehensive Income (Loss).

If we fail to qualify as a REIT in any taxable year, we could be subject to U.S.

federal income tax on our taxable income at regular corporate income tax rates, and dividends paid to our shareholders would not be deductible by us in computing taxable income.

federal income tax on our taxable income at regular corporate income tax rates, and distributions paid to our shareholders would not be deductible by us in computing taxable income.

Any resulting corporate liability could be substantial and could materially and adversely affect our net income (loss) and net cash available for distribution to stockholders.

Unless we were entitled to relief under certain

Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be taxed as a REIT.

Unless we were entitled to relief under certain Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be taxed as a REIT.

As of December 31, 2024, we believe we are in compliance with all applicable REIT requirements.

10 unchanged sentences

When applicable, we recognize interest and/or penalties related to uncertain tax positions on our Consolidated Statements of Operations and Comprehensive Income (Loss).

We intend to make regular quarterly dividend payments to holders of our common shares.

federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains.

Canadian mutual fund status

NHT is a mutual fund trust pursuant to the Tax Act.

Under current tax legislation, a mutual fund trust that is not a SIFT pursuant to the Tax Act is entitled to deduct distributions of taxable income such that it is not liable to pay Canadian income taxes provided that its taxable income is fully distributed to unitholders.

NHT intends to qualify as a mutual fund trust that is not a SIFT and to make distributions not less than the amount necessary to ensure that NHT will not be liable to pay Canadian income taxes.

Distributions

We intend to make regular quarterly distribution payments to holders of our common shares.

federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for distributions paid and excluding net capital gains.

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

We intend to make regular quarterly dividend payments of all or substantially all of our taxable income to holders of our common shares out of assets legally available for this purpose, if and to the extent authorized by our Board.

Before we make any dividend payments, whether for U.S.

We intend to make regular quarterly distribution payments of all or substantially all of our taxable income to holders of our common shares out of assets legally available for this purpose, if and to the extent authorized by our Board.

Before we make any distribution

payments, whether for U.S.

federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our debt payable.

If our cash available for distribution is less than our taxable income, we could be required to sell assets, borrow funds or raise additional capital to make cash dividends or we may make a portion of the required dividend in the form of a taxable distribution of stock or debt securities.

We will make dividend payments based on our estimate of taxable earnings per common share, but not earnings calculated pursuant to GAAP.

Our dividends and taxable income and GAAP earnings will typically differ due to items such as depreciation and amortization, fair value adjustments, differences in premium amortization and discount accretion, investments held through our TRSs, book/tax differences on income derived from partnerships, and non-deductible general and administrative expenses.

If our cash available for distribution is less than our taxable income, we could be required to sell assets, borrow funds or raise additional capital to make cash distributions or we may make a portion of the required distribution in the form of a taxable distribution of shares or debt securities.

We will make distribution payments based on our estimate of taxable earnings per common share, but not earnings calculated pursuant to GAAP.

Our distributions and taxable income and GAAP earnings will typically differ due to items such as depreciation and amortization, fair value adjustments, differences in premium amortization and discount accretion, investments held through our TRSs, book/tax differences on income derived from partnerships, and non-deductible general and administrative expenses.

Our quarterly dividends per share may be substantially different than our quarterly taxable earnings and GAAP earnings per share.

Our Board declared a dividend on our common shares of $0.15 per share which was paid on December 29, 2023 to shareholders of record on November 17, 2023.

Our Board declared a dividend on our Series A Preferred Shares of $0.34375 per share which was sent to the transfer agent prior to December 31, 2023, and paid on January 2, 2024, to shareholders of record on December 22, 2023.

We expect that dividends on our common shares, when, if and as declared by our Board, will be declared on a quarterly basis.

The purpose of paying the elective stock dividend partially in shares and partially in cash is to conserve cash for additional investments at the Company.

The Company may revert to paying the dividend solely in cash at some point in the future when cash flow from operations supports such a cash dividend.

However, there can be no assurance that cash flow from operations will be able to support a cash dividend in the future.

Our Board declared a distribution on our common shares of $0.15 per share which was paid on December 31, 2024 to shareholders of record on November 15, 2024.

The distribution on the Company’s common shares consists of a combination of cash and shares, with the cash component of the distribution (other than cash paid in lieu of fractional shares) not to exceed 20% in the aggregate, with the balance being paid in the Company’s common shares.

Our Board declared a distribution on our Series A Preferred Shares of $0.34375 per share which was paid on December 31, 2024, to shareholders of record on December 23, 2024.

We expect that distributions on our common shares, when, if and as declared by our Board, will be declared on a quarterly basis.

The purpose of paying the elective stock distribution partially in shares and partially in cash is to conserve cash for additional investments at the Company.

The Company may revert to paying the distribution solely in cash at some point in the future when cash flow from operations supports such a cash distribution.

However, there can be no assurance that cash flow from operations will be able to support a cash distribution in the future.

Off-Balance Sheet Arrangements

As of December 31, 2024 , we had the following off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

The Company is the guarantor on three secured loans to, and dividend payments with respect to Series D Preferred Stock of NSP, an affiliate of the Adviser, with the secured loans having an aggregate principal amount of approximately $553.3 million outstanding as of December 31, 2023.

NSP is current on all debt and dividend payments and in compliance with all debt compliance provisions.

See Note 13 for additional information.

The Company is also the guarantor on two pools of loans of SAFStor, Inc.

("SAFStor"), an entity that NSP acquired 100% of the equity interest of on December 8, 2022.

The Company guarantees the loss recourse liability and obligation for any Recourse Liabilities (as defined below) arising out or in connection with certain bad acts.

The Company also guarantees the full payment of the debt, upon the occurrence of any Springing Recourse Events (as defined below).

As of December 31, 2023 the outstanding balance of the pools of guaranties is $270.9 million.

NSP is current on all debt and dividend payments and in compliance with all debt compliance provisions.

The Company is a guarantor on dividend payments with respect to Series D Preferred Stock of NSP, an affiliate of the Adviser.

NSP is current on all dividend payments as of December 31, 2024.

See Note 14 to our consolidated financial statements for additional information.

The Company is a guarantor on one of NSP’s loans, with an aggregate principal amount of $750.0 million outstanding as of December 31, 2024.

The obligations consist of liability for losses suffered by the lender arising out of certain bad acts, such as if the borrower takes actions that are fraudulent or improper or upon certain violations of the related loan agreement.

See Note 14 to our consolidated financial statements for additional information.

The Company is a limited guarantor and an indemnitor on one of NHT's loans with an aggregate principal amount of $74.4 million as of December 31, 2024.

2 unchanged sentences

The Company is a guarantor and an indemnitor on one of Cityplace’s loans with an aggregate principal amount of $139.9 million as of December 31, 2024.

The obligations include a completion guarantee, which is generally only applicable if and when the borrower, which is a subsidiary of the Company, directly, or indirectly through an agreement with an affiliate, joint venture partner or other third party, voluntarily terminates construction services prior to the completion of the project, files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper.

The obligations include guarantees, which are generally only applicable if and when the borrower, which is a subsidiary of the Company, directly, or indirectly through an agreement with an affiliate, joint venture partner or other third party, voluntarily terminates construction services prior to the completion of the project, files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper.

As of December 31, 2024, management does not anticipate any material deviations from schedule or budget related to construction projects current in process, and Cityplace is current on all debt payments and in compliance with all debt compliance provisions.

6 unchanged sentences

Below is a discussion of the accounting policies that we consider critical to understanding our financial condition or results of operations where there is uncertainty or where significant judgment is required.

See Note 2, “Summary of Significant Accounting Policies”, for further discussion of our accounting estimates and policies.

See Note 3 to our consolidated financial statements, “Summary of Significant Accounting Policies”, for further discussion of our accounting estimates and policies.

Valuation of Level 3 Fair Valued Investments

3 unchanged sentences

The valuation is determined using widely accepted valuation techniques.

See Note 9, “Fair Value of Derivatives and Financial Instruments”, for further discussion of our valuation techniques of level 3 investments.

See Note 9 to our consolidated financial statements, “Fair Value Financial Instruments”, for further discussion of our valuation techniques of level 3 investments.

The necessary inputs for these valuations includes a variety of valuation techniques and unobservable inputs.

1 unchanged sentence

As a result, the determination of fair value is uncertain because it involves subjective judgments and estimates that are unobservable.

For the year ended December 31, 2023, the unrealized loss related to the

change in fair value of level 3 investments is $110.6 million.

See Note 9 for additional disclosures regarding the valuation of level 3 fair valued investments.

For the year ended December 31, 2024, the unrealized gains (loss) related to the change in fair value of level 3 investments is $(4.2) million.

See Note 9 to our consolidated financial statements for additional disclosures regarding the valuation of level 3 fair valued investments.

Purchase Price Allocation

3 unchanged sentences

If any debt is assumed in an acquisition, the difference between the fair value, which is estimated using inputs that are classified within Level 2 of the fair value hierarchy, and the face value of debt is recorded as a premium or discount and amortized as interest expense over the life of the debt assumed.

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

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

The key inputs into our impairment analysis include, but are not limited to, the holding period, net operating income, and capitalization rates.

2 unchanged sentences

The Company’s impairment analysis identifies and evaluates events or changes in circumstances that indicate the carrying amount of a real estate investment may not be recoverable, including determining the period the Company will hold the rental property, net operating income, and the estimated capitalization rate for each respective real estate investment.

For the year ended December 31, 2024, the Company recorded approximately $5.2 million of impairment charges on real estate assets held and used, which are included in impairment loss on the Consolidated Statements of Operations and

Comprehensive Income (Loss).

The Company did not record any impairment charges for the year ended December 31, 2023.

Held for Sale

The Company periodically classifies real estate assets as held for sale when certain criteria are met in accordance with U.S.

At that time, the Company presents the net real estate assets and the liabilities associated with the real estate held for sale separately in its consolidated balance sheet, and the Company ceases recording depreciation and amortization expense related to that property.

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

As of December 31, 2024 and December 31, 2023, there were three and zero properties classified as held for sale, respectively.

In addition to the net real estate assets, the consolidated balance sheets also includes approximately $0.1 million and $0 million of accounts receivable and prepaid and other assets, and approximately $0.8 million and $0 million of accounts payable, real estate taxes payable, security deposits, prepaid rents, and other accrued liabilities related to assets held for sale as of December 31, 2024 and December 31, 2023, respectively.

For the year ended December 31, 2024, the Company recorded approximately $1.9 million of losses on real estate held for sale, which are included in impairment loss on the Consolidated Statements of Operations and Comprehensive Income (Loss).

The Company did not record any losses on real estate held for sale for the year ended December 31, 2023.

The real estate market has not been directly affected by inflation in the past several years due to increases in rents nationwide.

2 unchanged sentences

Inflation may also affect the overall cost of debt, as the implied cost of capital increases.

The Federal Reserve has raised interest rates to combat inflation and restore price stability.

We intend to mitigate these risks through long-term fixed interest rate loans and interest rate hedges.

Inflation has had a significant impact in the regions in which the NHT segment holds properties, causing a decrease in the willingness of the general population to travel and reduced occupancy, the effect of which may continue to impact NHT’s operations.

Implications of being a Smaller Reporting Company

As of December 31, 2024, we are a "smaller reporting company" as defined in the Exchange Act, and may elect to take advantage of certain of the scaled disclosures available to smaller reporting companies.

Quantitative and Qualitative Disclosures About Market Risk

1 unchanged sentence

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

What changed 10-K

Item 7. Management’s Discussion and Analysis