NXDT 10-K & 10-Q changes, risk factors and insider trading
Nexpoint Diversified Real Estate Trust (also NXDT-PA) · NYSE · Real Estate Investment Trusts · CIK 1356115 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We may be required to make rent or other concessions or significant capital expenditures to improve our properties in order to retain and attract tenants, which may materially and adversely affect our financial condition, results of operations, cash flow, cash available for distribution, and ability to service our debt obligations.”
New heading “Failure of our internal control over financial reporting could harm our business, financial condition and results of operations.”
New heading “The majority of the hotels in the Hospitality segment are operated pursuant to franchise agreements with nationally recognized hotel brands and changes in the market perception of such brands may impact the desirability of our hotels to consumers.”
New heading “Recent changes in tax law may impact our shareholders or us.”
New heading “Expanding use of social media presents additional risks.”
Removed heading “Retail properties, particularly those with multiple tenants, depend on the presence of and successful operation of an anchor tenant or tenants and the failure of such tenant's business or the loss of the anchor tenant(s) could adversely affect the overall success of our property and thereby could adversely impact our financial condition, results of operations and cash flows.”
Removed heading “Competition that traditional retail tenants face from e-commerce retail sales, or the integration of brick-and-mortar stores with e-commerce retail operators, could adversely affect our business.”
Removed heading “We may invest in or write options on securities, which may result in our bearing the risk of loss should the underlying security change in value during the life of the option.”
Removed heading “We may enter into reverse repurchase transactions, which are subject to the risk that the securities subject to such reverse repurchase transaction may decline in value or that securities purchased with the proceeds of such reverse repurchase transaction will decline in value below the market value of the securities we are required to repurchase.”
Removed heading “We may engage in the short sale of securities, which involves the risk of significant loss in the event the price of the borrowed securities appreciates before the short position closes out.”
Removed heading “We may invest in structured finance securities, which are subject to the risk of default on the underlying obligation, increased sensitivity to defaults due to previous defaults and the disappearance of protecting tranches, market anticipation of defaults and aversion to certain structured finance securities as a class.”
Removed heading “Terrorist attacks, other acts of violence or war or a prolonged economic slowdown may affect the real estate industry generally and our business, financial condition and results of operations.”
Removed heading “Risk Factors Related to the Business of NHT”
Removed heading “The majority of the hotels owned by NHT are operated pursuant to franchise agreements with nationally recognized hotel brands and changes in the market perception of such brands may impact the desirability of NHT’s hotels to consumers.”
Removed heading “As part of its hotel business, NHT and its franchise partners are required to collect and maintain certain information about hotel employees and customers, which subjects us to risks associated with cybersecurity breaches and compliance with privacy regulations.”
Removed heading “Increasing real estate taxes, utilities, insurance costs and other capital expenditures may negatively impact NHT’s operating results.”
Removed heading “Litigation risk could affect NHT’s business.”
Removed heading “Litigation risk specific to real property may affect NHT’s business.”
Removed heading “There may be limitations on NHT’s ability to sell its properties, including if NHT acquires or finances properties with lock-out provisions, which may prohibit NHT from selling a property or may require NHT to maintain specified debt levels for a period of years on some properties.”
Removed heading “We may need to foreclose on certain loans and/or exercise our “foreclosure option” under the terms of investments we may acquire, which could result in losses that harm our results of operations and financial condition.”
Removed heading “Liability relating to environmental matters may impact the value of properties that we may acquire or the properties underlying our investments.”
Removed heading “We may be subject to lender liability claims, and if we are held liable under such claims, we could be subject to losses.”
Removed heading “Our ability to generate returns for our shareholders through our investment, finance and operating strategies is subject to then-existing market conditions, and we may make significant changes to these strategies in response to changing market conditions.”
Removed heading “We may invest in derivative instruments, which would subject us to increased risk of loss.”
Removed heading “Although we are a smaller reporting company, the requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act, may strain our resources, increase our costs and place additional demands on management, and we may be unable to comply with these requirements in a timely or cost-effective manner.”
Removed heading “Derivatives and hedging activity could adversely affect cash flow.”
Removed heading “If a counterparty to a repurchase agreement defaults on its obligation to resell the underlying security back to us at the end of the purchase agreement term, or if the value of the underlying asset has declined as of the end of that term, or if we default on our obligations under the repurchase agreement, we may incur losses.”
Removed heading “Risks Related to the NHT Merger”
Removed heading “Non-completion of the NHT Merger may have an adverse effect on our business and results of operations.”
Removed heading “Lawsuits challenging the NHT Merger may be filed against NHT and the Company, and an adverse judgment in any such lawsuit or any future similar lawsuits may prevent the NHT Merger from becoming effective or from becoming effective within the expected timeframe.”
Removed heading “Following the consummation of the NHT Merger, the Company may be unable to integrate the operations of the Company and NHT successfully and realize the anticipated synergies and other benefits of the NHT Merger or do so within the anticipated time frame.”
Removed heading “Our ownership of NHT prior to the NHT Merger raises certain tax risks under Canadian law.”
Removed heading “Our ownership of NHT prior to the NHT Merger raises certain U.S. tax risks.”
Removed heading “Our business could be adversely impacted if there are deficiencies in our disclosure controls and procedures or internal control over financial reporting.”
Removed heading “The direct and indirect impacts of climate change may adversely affect our business.”
Removed heading “Risk Factors Related to the Hotel and Lodging Industry”
Removed heading “The Company’s hotel properties may be adversely affected by various risks common to the hospitality and lodging industry.”
Removed heading “The hotel industry is cyclical and changes in economic conditions, consumer behavior and the travel and tourism industries may impact the demand for the Company’s hotel properties.”
Removed heading “Advances in technology and the growing use of online travel agencies may lead to increased costs and competition and lead to changes in consumer behavior.”
Removed heading “The NHT segment faces competition from other hotels and alternative lodging providers within the immediate vicinity of and in the broader geographic region where NHT’s hotels may be located.”
Removed heading “The hotel industry is subject to seasonal changes, which may cause fluctuations in room revenues, occupancy levels, room rates and operating expenses in particular hotels.”
Removed heading “Risk Factors Related to the Business of NHT”
Removed heading “All of the hotels owned by NHT are operated pursuant to franchise agreements with nationally recognized hotel brands and changes in the market perception of such brands may impact the desirability of NHT’s hotels to consumers.”
Removed heading “As part of its hotel business, NHT and its franchise partners are required to collect and maintain certain information about hotel employees and customers, which subjects us to risks associated with cybersecurity breaches and compliance with privacy regulations.”
Removed heading “Fixed Costs and Capital Expenditures”
Removed heading “Litigation Risks”
Removed heading “Litigation at the Property Level”
Removed heading “Limitations on Sale”
Removed heading “Tax-Related Risk Factors”
Largest changes
“The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations. While management will continue to review the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there can be no guarantee that our internal control over financial reporting will be effective in accomplishing all control objectives all of the time. …”see in full comparison
“NHT, through the independent contractors affiliated with the Manager, and its franchise partners are required to collect and maintain personal information about hotel employees and, through third-party providers, collect information about customers in connection with the processing of credit and debt transactions and as part of certain of NHT’s marketing programs. The collection and use of such information is regulated in the U.S. …”see in full comparison
“NHT, through the independent contractors affiliated with the Manager, and its franchise partners are required to collect and maintain personal information about hotel employees and, through third-party providers, collect information about customers in connection with the processing of credit and debt transactions and as part of certain of NHT’s marketing programs. The collection and use of such information is regulated in the U.S. …”see in full comparison
“If a counterparty to a repurchase agreement defaults on its obligation to resell the underlying security back to us at the end of the purchase agreement term, or if the value of the underlying asset has declined as of the end of that term, or if we default on our obligations under the repurchase agreement, we may incur losses.”see in full comparison
“We may invest in structured finance securities, which are subject to the risk of default on the underlying obligation, increased sensitivity to defaults due to previous defaults and the disappearance of protecting tranches, market anticipation of defaults and aversion to certain structured finance securities as a class.”see in full comparison
“As part of its hotel business, NHT and its franchise partners are required to collect and maintain certain information about hotel employees and customers, which subjects us to risks associated with cybersecurity breaches and compliance with privacy regulations.”see in full comparison
Full comparison: every changed paragraph (319)
You should carefully consider the following risks and other information in this Annual Report in evaluating us and our common shares. Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our business, financial condition or results of operations, and could, in turn, impact the trading price of our common shares. These disclosures reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.
•unfavorable changes in economic conditions and their effects on the real estate industry generally and our operations and financial condition, including inflation, high interest rates, tightening monetary policy or recession, which may limit our ability to access funding and generate returns for shareholders;
•the risk we make significant changes to our strategies in a market downturn, or fail to do so;
•risks associated with ownership of real estate, including properties in transition, subjectivity of valuation, environmental matters and lack of liquidity in certain asset classes;
•risks associated with our investment in diverse issuers, industries and investment forms and classes, both in real estate and in non-real estate sectors, including common equity, preferred equity securities, options or other derivatives, short sale contracts, secured loans of securities, reverse repurchase agreements, structured finance securities, below investment grade senior loans, bonds, convertible instruments, joint ventures, and emerging markets;
•risks associated with our loans and investments in debt instruments including senior loans, CLOs, and structured finance securitiesloans;
•the exposure of our loans and investments to risks similar to real estate investments generally, including the risk of delinquency, dependence on tenants, compliance with laws and regulations related to ownership of real property, and foreclosure and loss in any of our commercial real estate-related investments that are secured, directly or indirectly, by real property;
•fluctuations in interest raterates and credit spreads thatand our use of leverage to finance our investments could reduce our ability to generate income on our loans and investments;
•the use of leverage to finance our investments;
•competition for desirable loans and investments;
•the concentration of loans and investments in terms of type of interest, geography, asset types, industry and sponsors;
credit downgrades or distressed situations may impair liquidity and value and subject us to bankruptcy-related risks, higher costs and delayed recoveries;
•the risk of downgrade of any credit ratings assigned to our loans and investments;
•the risk that any distressed loans or investments we may make may subject us to bankruptcy risks;
•our dependence on information systems and risks associated with breaches of our data security;
•costs associated with being a public company, including compliance with securities laws;
•costs associated with being a public company, including compliance with securities laws and the risk of adverse impact to our business if there are deficiencies in our disclosure controls and procedures or internal control over financial reporting;
•risks associated with pandemics, including the future outbreak of other highly infectious or contagious diseases;
•risks associated with our substantial current indebtedness and indebtedness we may incur in the future;
•risks associated with insurance, derivatives or hedging activity, including counterparty risk;
•risks associated with our limited operating history as a REIT and the possibility that we may not replicate the historical results achieved by other entities managed or sponsored by affiliates of our Sponsor, members of our Adviser’s management team or their affiliates;
•our dependence on our Adviser, its affiliates and personnel to conduct our day-to-day operations and identify and realize returns on our investments within very broad investment guidelines and without fiduciary duties to us or a requirement to seek Board approval;
•risks associated with the Adviser’s ability to terminate the Advisory Agreement and risks associated with any potential internalization of our management functions;
•conflicts of interest and competing demands for time faced by our Adviser, our Sponsor and their respective affiliates, officers and employees, and other significant potential conflicts of interest including in connection with (i) substantial fees and expenses we pay to our Adviser and its affiliates which may increase the risk that you will not earn a profit on your investment and (ii) competition with entities affiliated with our Adviser and our Sponsor for investments;
•the risk of failure to maintain our status as a REIT and make required distributions to maintain such status, failure of which may materially limit our cash available for distribution to our shareholders and the risk of failure to maintain our status if values of our real estate investments rapidly change;
•the risk of failure of our OP to be taxable as a partnership for U.S. federal income tax purposes, possibly causing us to fail to qualify for or to maintain REIT status;
•compliance with REIT requirements, which may limit our ability to hedge our liabilities effectively and cause us to forgo otherwise attractive opportunities, liquidate certain of our investments or incur tax liabilities;
•the risk associated with investments in synthetic form;
•the risk that certain of our business activities are potentially subject to the prohibited transaction tax and that even if we qualify as a REIT we may be subject to other tax liabilities that may reduce our cash flows and distributions on our shares;
•the ineligibility of dividends payable by REITs for the reduced tax rates available for some dividends;
•the ability of our Board to revoke our REIT qualification without shareholder approval;
•our ability to change our major policies, operations and targeted investments without shareholder consent and our Board’s issuance of and ability to further issue debt securities or equity securities that may adversely impact the value or priority of or have a dilutive effect on our shares or discourage a third-party acquisition;
•risks associated with (i) provisions in our governing documents that may limit shareholders’ choice of forum for disputes with us or discourage an acquisition of our securities or a change in control, including share ownership restrictions and limits and (ii) provisions of our governing documents that may limit the ability for a third-party acquisition;
•recent and potential legislative or regulatory changes or other actions with respect to tax, securitization, financial or other matters affecting REITs, the mortgage industry or debt-oriented real estate investments generally;
•the general volatility of the capital and credit markets and the impact on the market for our shares;
•the risk that we may not realize gains or income from our investments, that the repayments of our loans and investments may cause our financial performance and returns to investors to suffer or that we may experience a decline in the fair value of our assets;
•risks associated with the Highland Bankruptcy (as defined below), including possible materially adverse consequences on our business, financial condition and results of operations;
•non-completion of the NHT Merger may have an adverse effect on our business and results of operations;
•risks associated with holding shares of the Series A Preferred Shares, including volatility in price and trading volume, subordination to our debt, dilution upon future issuances and lack of, or a low, rating on the Series A Preferred Shares;
•risks associated with holdingsholding shares of the 9.00% Series B Cumulative Redeemable Preferred Shares, par value $0.001 per share, liquidation preference $25.00 per share (“Series B Preferred Shares”),Shares, including limited voting rights, subordination to our debt and dilution from future issuances;
•risk of failure to generate sufficient cash flows to service outstanding indebtedness or pay distributions on our shares at expected levels, and the risk that we may borrow funds or use funds from other sources to pay distributions; and risks associated with the concentration of our share ownership.
•risks associated with the concentration of our share ownership.
•acts of nature, including extreme weather, earthquakes, floods and other natural disasters, as result of climate change or otherwise, which may result in uninsured losses;
•acts of war, terrorism, social unrest or civil disturbances, including the consequences of such acts;
•adverse changes in national and local economic and market conditions;
•changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations and ordinances;
•costs of remediation and liabilities associated with environmental conditions including, but not limited to, indoor mold; and the potential for uninsured or under-insured property losses.
•the potential for uninsured or under-insured property losses.
We cannot predict the degree to which economic conditions generally, and the conditions for loans and investments in real estate, will improve or deteriorate. Declines in the performance of the U.S. and global economies or in the real estate debt markets could have a material adverse effect on our business, financial condition and results from operations. In addition, changes in structures and/or market conditionsterms relating to real estate debt and preferred equity investments have evolved since the global financial crisis, which has resulted in a modification to certain structures and/or market terms. Any such changes in structures and/or market terms may make it relatively more difficult for us to monitor and evaluate our loans and investments.
•tenant mix and tenant bankruptcies;
•success of tenant businesses;
•property management decisions, including with respect to capital improvements, particularly in older building structures;
•property location and condition;
•competition from other properties offering the same or similar services;
•changes in laws that increase operating expenses or limit rents that may be charged;
•any need to address environmental contamination at the property;
•changes in national, regional or local economic conditions and/or specific industry segments;
•declines in regional or local real estate values;
•declines in regional or local rental or occupancy rates;
•changes in interest rates and in the state of the debt and equity capital markets, including diminished availability or lack of debt financing for commercial real estate;
Management's Discussion & Analysis (MD&A)
New heading “Recent Tax Law Update”
New heading “Series B Preferred Shares Offering”
New heading “Promissory Notes Due to Affiliates”
Removed heading “Credit Facility”
Largest changes
“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. 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. …”see in full comparison
“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. …”see in full comparison
“For information regarding the Bankruptcy Trust Lawsuit and the UBS Lawsuit, see “Item 1A. Risk Factors - The Chapter 11 bankruptcy filing by Highland Capital Management L.P. (“Highland”) may have materially adverse consequences on our business, financial condition and results of operations.” and “Item 1A. Risk Factors - Litigation against James Dondero and others may have materially adverse consequences on our business, financial condition, and results of operations.” Neither the Bankruptcy Trust Lawsuit nor the UBS Lawsuit include claims related to our business or our assets. …”see in full comparison
“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 a subsidiary of the Company to comply with affirmative and negative covenants.”see in full comparison
“The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital, which may have changed or may change in the future. …”see in full comparison
Interest expense. Interest expense was $26.6 million for the year ended December 31, 2025, compared to $28.4 million for the year ended December 31, 2024,see in full comparisoncompared to $15.9 million for the year ended December 31, 2023,which wasanaincreasedecrease of approximately$12.5$1.8 million. Theincreasedecrease betweentheperiodswas primarilyis due to theNHTdebtconsolidation.extinguishment of the Raymond James Loan (as defined in Note 6 to our consolidated financial statements) and decrease in floating interest rates.
Full comparison: every changed paragraph (146)
As of December 31, 2024,2025, 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, NXDTDiversified and NHT.Hospitality. NXDTDiversified represents the Company's primary reportable segment and represents a significant majority of the Company's consolidated portfolio. The NXDTDiversified 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 reportableHospitality segment represents a minority of the Company's consolidated portfolio and operations and is focused on exitingoperating outand ofrenovating its remainingU.S. located hospitality assets andthat repositioningmeet theits portfolioinvestment into other real estate sectors where management has extensive operating expertiseobjective and experience.criteria. 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, 2024,2025, there were 2,00044,536,894.47 partnershipcommon units of the OP outstanding, of which 100%99.96% were owned by us.the Company.
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 diversified REIT, the Company’s primary investment objective is to provide both current income and capital appreciation. The Company seeks to achieve this objective through the Business Change. Target underlying property types primarily include, but are not limited to, single-family rentals, multifamily, self-storage, life science, office, industrial, hospitality, net lease and retail. The Company may, to a limited extent, hold, acquire or transact in certain non-real estate securities. 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, April 11, 2023 and2023, July 22, 2024, and September 19, 2025 for an initial three-yeara term that will expire on July 1, 20252026 and successive one-year terms thereafter unless earlier terminated. The Adviser is wholly owned by our Sponsor.
For information regarding the Bankruptcy Trust Lawsuit and the UBS Lawsuit, see “Item 1A. Risk Factors - The Chapter 11 bankruptcy filing by Highland Capital Management L.P. (“Highland”) may have materially adverse consequences on our business, financial condition and results of operations.” and “Item 1A. Risk Factors - Litigation against James Dondero and others may have materially adverse consequences on our business, financial condition, and results of operations.” Neither the Bankruptcy Trust Lawsuit nor the UBS Lawsuit include claims related to our business or our assets. Our Sponsor and Mr. Dondero have informed us they believe the Bankruptcy Trust Lawsuit has no merit and Mr. 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 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 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. 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. Our Sponsor and Mr. Dondero have informed us they believe the Bankruptcy Trust Lawsuit has no merit and Mr. 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 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.
The U.S. government announced a comprehensive set of tariffs in the second quarter of 2025. A recent U.S. Supreme Court decision held that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs. As a result, tariffs imposed under IEEPA are no longer being collected. Tariffs imposed under other statutory authorities, such as Section 232 and Section 301, remain in effect, and the U.S. government may propose replacement or additional tariffs under other legal authorities. The impact of such tariffs is subject to uncertainties regarding the timing of their implementation, the magnitude of such tariffs and possible exemption for certain goods, among other unknowns.
Our website is located at nxdt.nexpoint.com. From time to time, we may use our website as a distribution channel for material company information.
Rental income. 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 twoone retail properties.property. Our rental income also includes utility reimbursements, late fees, common area maintenance reimbursements, and other rental fees charged to tenants.
Food and beverage revenue. Food and beverage ("F&B") revenue includes revenue from the NHT Portfolio generated from the sale of food and/or beverage offerings. All F&B revenue is derived from the Hospitality segment.
Room revenue. Room revenue includes revenue from the NHT Portfolio from renting out rooms to customers. All room revenue is derived from the Hospitality segment.
Property management fees. Property management fees include fees paid to NexVest, our property manager, for managing each property directlyin orthe indirectlyDiversified owned by us (see Note 14 to our consolidated financial statements)segment and other property managers for managing the day-to-day operations of our hotels.
Advisory and administrative fees. 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 advisory agreement entered into between NHT and the NHT Adviser (the “NHT Advisory Agreement”) that was terminated at completion of the NHT Merger (see Note 1413 to our consolidated financial statements).
Corporate general and administrative expenses. Corporate general and administrative expenses include, but are not limited to, audit fees, legal fees, listing fees, board of trustee fees, investor relations costs and payments of reimbursements to our Adviser for operating expenses.
Corporate general and administrative expenses. Corporate general and administrative expenses include, but are not limited to, audit fees, legal fees, listing fees, board of trustee fees, investor relations costs and payments of reimbursements to our Adviser for operating expenses. Corporate general and administrative expenses and the Advisory Fees and Administrative Fees paid to our Adviser were limited to the Expense Cap for the 12 months ended June 30, 2023. This limitation ended June 30, 2023, and did not limit the reimbursement by us of expenses related to securities offerings paid by our Adviser. The Expense Cap also did not apply to legal, accounting, financial, due diligence, and other service fees incurred in connection with mergers and acquisitions, extraordinary litigation, or other events outside our ordinary course of business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of real estate assets. Additionally, in the sole discretion of the Adviser, the Adviser may elect to waive reimbursement for eligible out-of-pocket expenses paid on the Company's behalf. 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 Statements of Operations and Comprehensive Income (Loss) as conversion expenses.
Equity in Earnings (Losses) of Unconsolidated Ventures. Equity in earnings (losses) of unconsolidated ventures represents the change in our basis in equity method investments resulting from our share of the investments’ income and expenses. Profit and loss from equity method investments for which we’ve elected the fair value option are classified in divideddividend income, change in unrealized gains (losses) and realized gains (losses) as applicable.
Income Tax Expense. Income tax expense is primarily derived from taxable gains from asset sales and other income earned from investments held in NXDT'sthe Company's TRSs and former NHT's TRSs.
As of December 31, 2024,2025, the NXDTDiversified segment was invested in two retail properties, and one office, multifamilymultifamily, and hospitality property (excluding investments in undeveloped land), and the NHTHospitality segment consisted of sevenfour hotel properties as listed below:
NXDTDiversified Segment:
NHTHospitality Segment:
(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, 2024,2025, minus any tenant concessions over the term of the lease, divided by the occupied square footage of commenced leases as of December 31, 2024.2025.
(2)Percent occupied is calculated as the rentable square footage occupied as of December 31, 2024,2025, divided by the total rentable square footage, expressed as a percentage.
(3)Cityplace is currently under developmentredevelopment and the Company is converting part of the property into a hotel, which was still under construction as of December 31, 2024.2025.
(4)The property's tenant vacated in the fourth quarter of 2023. The Company is currently looking into leasing out the property.
Rental income. Rental income was $11.1 million for the year ended December 31, 2025, compared to $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.Cityplace and an increase in the allowance for bad debt related to certain tenants.
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 $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.
OtherRooms income.revenue. OtherRooms incomerevenue was approximately$26.3 $3.8million for the year ended December 31, 2025, compared to $24.9 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$1.4 million. The increase between the periods was primarilyis due to the NHTHospitality consolidation.segment not being consolidated prior to April 19, 2024 and offset by the disposition of Hospitality properties in 2025.
Property operating expenses. 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.
PropertyFood managementand fees.beverage Propertyrevenue. managementF&B feesrevenue werewas $1.5$2.9 million for the year ended December 31, 2025, compared to $2.2 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$0.7 million. The increase between the periods was primarilyis due to the NHTHospitality consolidation.segment not being consolidated prior to April 19, 2024 and offset by the disposition of Hospitality properties in 2025.
Real estate taxes and insurance. 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, 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 generalInterest and administrativedividends. expenses. Property generalInterest and administrativedividends expensestotaled were$44.4 $7.4million for the year ended December 31, 2025, compared to $36.6 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$7.8 million. The increase between the periods is primarilywas attributed to thean NHTincrease consolidation.in dividends from equity investments.
Corporate general and administrative expenses. 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.
ConversionOther expenses.income. ConversionOther expensesincome werewas $0.0approximately $1.3 million for the year ended December 31, 2025, compared to $3.8 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$2.5 million. The decrease between the periods was primarilyis due to a decreaseone-time amendment fee received in expenses2024, and recovery fees related to thea Businesslegal Change.judgment.
Depreciation and amortization. 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.
ImpairmentProperty loss.operating Impairmentexpenses. lossProperty wasoperating $7.1expenses were $23.8 million for the year ended December 31, 2025, compared to $22.3 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$1.5 million. The increase between the periods wasis due to anthe increaseHospitality segment not being consolidated prior to April 19, 2024 and offset by the disposition of Hospitality properties in impairment charges relating to the Addison Property, Plano Homewood Suites and Las Colinas Homewood Suites.2025.
Property management fees. Property management fees were $1.6 million for the year ended December 31, 2025, compared to $1.5 million for the year ended December 31, 2024, which was an increase of approximately $0.1 million. The increase between the periods is due to the Hospitality segment not being consolidated prior to April 19, 2024 and offset by the disposition of Hospitality properties in 2025.
Real estate taxes and insurance. Real estate taxes and insurance costs were $6.3 million for the year ended December 31, 2025, compared to $6.5 million for the year ended December 31, 2024, which was a decrease of approximately $0.2 million. Real estate taxes and insurance expenses consist primarily of expenses from our investment in Cityplace and our hospitality properties. The decrease between the periods was primarily due to a decrease in the property tax assessment for Cityplace.
Advisory and administrative fees. For the year ended December 31, 2025, the Company incurred administrative fees and advisory fees of $17.1 million, compared to $14.2 million for the year ended December 31, 2024, which was an increase of approximately $2.9 million. The increase between the periods is primarily attributed to a one-time termination fee paid to the former NHT Adviser in connection with the termination of the NHT Advisory Agreement following the NHT Merger.
Property general and administrative expenses. Property general and administrative expenses were $6.7 million for the year ended December 31, 2025, compared to $7.4 million for the year ended December 31, 2024, which was a decrease of approximately $0.7 million. The decrease between the periods is due to the disposition of Hospitality properties in 2025.
Corporate general and administrative expenses. Corporate general and administrative expenses were $11.9 million for the year ended December 31, 2025, compared to $12.8 million for the year ended December 31, 2024, which was a decrease of approximately $0.9 million. The decrease between periods was primarily due to a decrease in accounting and audit fees.
Depreciation and amortization. Depreciation and amortization costs were $17.7 million for the year ended December 31, 2025, compared to $15.6 million for the year ended December 31, 2024, which was an increase of approximately $2.1 million. The increase between the periods is due to the Hospitality segment not being consolidated prior to April 19, 2024 and offset by the disposition of Hospitality properties in 2025.
Impairment loss. Impairment loss was $2.3 million for the year ended December 31, 2025, compared to $7.1 million for the year ended December 31, 2024, which was a decrease of approximately $4.8 million. The decrease between the periods was due to an increase in impairment charges relating to the Addison Property, Plano HomeWood Suites and Las Colinas HomeWood Suites in 2024, compared to only impairment charges relating to the 5916 W Loop 289 and Addison Property in 2025.
Interest expense. Interest expense was $26.6 million for the year ended December 31, 2025, compared to $28.4 million for the year ended December 31, 2024, compared to $15.9 million for the year ended December 31, 2023, which was ana increasedecrease of approximately $12.5$1.8 million. The increasedecrease between the periods was primarilyis due to the NHTdebt consolidation.extinguishment of the Raymond James Loan (as defined in Note 6 to our consolidated financial statements) and decrease in floating interest rates.
Equity in income (losses) of unconsolidated ventures. Equity in losses of unconsolidated ventures was $(1.3) million for the year ended December 31, 2025, compared to $0.1 million for the year ended December 31, 2024, compared to $(0.3) million for the year ended December 31, 2023, which was ana increasedecrease of approximately $0.4$(1.4) million. The decrease between periods was primarily due to a decrease in net income at MarriottSandstone Uptown.Pasadena Apartments, LLC in 2024.
Income tax expensebenefit (benefitexpense). The Company has recorded income tax expensebenefit (benefitexpense) of $1.4$0.1 million associated with the TRSs for the year ended December 31, 20242025 and $2.7$(1.4) million associated with the TRSs for the year ended December 31, 2023.2024. The tax expensebenefit for the year ended December 31, 20242025 is partially increaseddecreased by the annual change in valuation allowance on a deferred tax asset of $(0.3)$4.1 million,million and offset by a return-to-provision adjustment of $0.2$0.5 millionmillion, income tax refund of $2.0 million, and an income tax refundbenefit of $0.7$1.7 million for a net expensebenefit of $1.4$0.1 million for the year ended December 31, 2024,2025, 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 $(103.9) million for the year ended December 31, 2025, compared to $(1.3) million for the year ended December 31, 2024, comparedwhich towas $(108.2)a milliondecrease of approximately $102.6 million. The losses for the year ended December 31, 2023,2025 whichwere waslargely andriven increaseby mark-to-market losses on VineBrook Homes Operating Partnership, L.P. common units ("VB OP Units") of approximately$33.1 $106.9million, IQHQ, LP ("IQHQ LP") interests of $16.6 million, NexPoint SFR Operating Partnership, L.P. (“NexPoint SFR OP”) partnership units of $12.0 million, NexPoint Storage Partners, Inc. ("NSP") common equity of $12.8 million and NREF common equity of $8.7 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, NXHTNexPoint Homes Trust, Inc. 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 $6.0 million for the year ended December 31, 2025, compared to $(21.5) million for the year ended December 31, 2024, comparedwhich towas $(1.6)an millionincrease of approximately $27.5 million. The gains for the year ended December 31, 2023,2025 whichwere wasprimarily adriven decreaseby realized gains on equities of approximately $(19.9)$6.0 million. The losses for the year ended December 31, 2024 were primarily driven by realized losses on the legacy CLOs of $22.8 million. 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 Specialty Financial Products, Ltd. (“SFP”) of $1.3 million.
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 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 (benefit) expenses, (6) conversion expenses, (7) non-operating property investment revenue, (87) realized and change in unrealized gains (losses) generated from non-real estate investments, (98) equity in income (losses) of unconsolidated equity method ventures, and (109) impairment loss.
These items can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies. 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 these items, 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.
The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital, which may have changed or may change in the future. 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 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. Equity in income (losses) of unconsolidated equity method ventures are eliminated because they do not reflect continuing operating costs of the properties. Non-operating property investment revenue and realized and change in unrealized gains (losses) from non-real estate investments are eliminated as they do not reflect continuing operating costs of the properties. 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, 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.
NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income (loss) as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere in “—Consolidated Results of Operations” regarding the components of net income (loss) that are eliminated in the calculation of NOI.
We define “Same Store NOI” as NOI for our properties that are comparable between periodsperiods, are stabilized and are not expected to cease being stabilized in the near future due to planned construction, renovation or similar activity that arewould stabilized.materially impact operations. Please see below for a discussion of properties included as Same Store (defined below).Store. 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.
There are two properties, White Rock Center and 5916 W Loop 289, in our same store pool for the years ended December 31, 2024,2025 and 20232024 (our "Same Store" properties). Our Same Store properties exclude Cityplace as of December 31, 20242025 and 2023,2024, 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 NHTHospitality segment, as the properties in that segment were not held in the full comparable period.
(1)Non-operating property investment revenue is defined as revenue included in the consolidated financial statements that areis from non-operating properties such as dividend income and interest income.
(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.
What changed in the latest 10-Q
Risk Factors
There have been no material changes to the risk factors previously disclosed under Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 31, 2026.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “The six months ended June 30, 2026 as compared to six months ended June 30, 2025”
New heading “Other Income and Expense”
New heading “Consolidated NOI for Our Same Store and Non-Same Store Properties for the Six Months Ended June 30, 2026 and 2025”
New heading “Consolidated Same Store Results of Operations for the Six Months Ended June 30, 2026 and 2025”
New heading “The six months ended June 30, 2026 as compared to the six months ended June 30, 2025”
Largest changes
“The Company is a guarantor and an indemnitor on one of Cityplace's loans with an aggregate principal amount of $137.0 million as of March 31, 2026. …”see in full comparison
“The Company is a limited guarantor and an indemnitor on one of our subsidiary's loans with an aggregate principal amount of $41.6 million as of March 31, 2026. The obligations include a customary environmental indemnity and a so-called "bad boy" guarantee, which is generally only applicable if and when the borrower directly, or indirectly through an agreement with an affiliate, joint venture partner or other third party, voluntarily files for bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper. …”see in full comparison
“Consolidated NOI for Our Same Store and Non-Same Store Properties for the Six Months Ended June 30, 2026 and 2025”see in full comparison
“Consolidated Same Store Results of Operations for the Six Months Ended June 30, 2026 and 2025”see in full comparison
“The six months ended June 30, 2026 as compared to the six months ended June 30, 2025”see in full comparison
“The six months ended June 30, 2026 as compared to six months ended June 30, 2025”see in full comparison
Full comparison: every changed paragraph (141)
As of MarchJune 31,30, 2026, 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, Diversified and Hospitality. Diversified represents the Company's primary reportable segment and represents a significant majority of the Company's consolidated portfolio. The Diversified 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 Hospitality segment is focused on operating and renovating its U.S. located hospitality assets that meet its investment objective and criteria. 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 MarchJune 31,30, 2026, there were 44,536,894.47 common units of the OP outstanding, of which 99.96% were owned by the Company.
On October 16, 2019, Highland, a former affiliate of our Sponsor, filed for Chapter 11 bankruptcy protection with the United States Bankruptcy Court for the District of Delaware, which was subsequently transferred to the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”). On October 15, 2021, Marc S. Kirschner, as litigation trustee of a litigation subtrust formed pursuant to Highland’s plan of reorganization and disclosure statementstatement, which became effective on August 11, 2021 and was subsequently amended, filed a lawsuit (the “Bankruptcy Trust Lawsuit”) against various persons and entities, including our Sponsor and James Dondero. The Bankruptcy Trust Lawsuit does not include claims related to our business or our assets or operations. On March 24, 2023, the litigation trustee filed a motion seeking to voluntarily stay the Bankruptcy Trust Lawsuit, which was granted by the Bankruptcy Court on April 4, 2023. On June 30, 2025, the Bankruptcy Court approved a settlement agreement between Highland and Hunter Mountain Investment Trust (“HMIT”) pursuant to which the claims asserted in the Bankruptcy Trust Lawsuit were assigned to HMIT. PartiesHMIT in interest havesubsequently filed a motion to vacatelift the HMITstay settlement, andof the Bankruptcy Trust LawsuitLawsuit, haswhich beenwas stayedgranted pendingand abecame rulingeffective on thatJuly motion.15, 2026. 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, but withdrew its appeal on December 31, 2025. On March 26, 2025, the court entered an order denying the remaining motions to dismiss and directed the respondents to file an answer to the UBS Lawsuit within 20 days, which they did. Mr. Dondero and the other remaining respondents are appealing the denial of the motion to dismiss to the Appellate Division of the Supreme Court of the State of New York. The appeal was argued on April 8, 2026. The Supreme Court rescheduled a status conference in the UBS Lawsuit previously set for AprilJuly 14, 2026 to JulySeptember 14,15, 2026. Neither the Bankruptcy Trust Lawsuit nor the UBS Lawsuit include claims related to our business or our assets. Our Sponsor and Mr. Dondero have informed us they believe the Bankruptcy Trust Lawsuit has no merit, and Mr. 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 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.
The United States government announced a comprehensive set of tariffs in the second quarter of 2025. Following the pause of certain of these tariffs, the majority of the previously announced tariffs were implemented, but such tariffs were determined unconstitutional by the Supreme Court of the United States in a February 2026 ruling. Following such ruling, the current administration immediately imposed a temporary 10% global tariff under a separate statutory provision. On July 24, 2026, the same day the temporary 10% global tariff expired, the United States government imposed new tariffs of 10% or 12.5% on imports from 60 trading partners, subject to certain exceptions. The United States government has indicated that it could impose additional tariffs on particular countries and impose global tariffs on certain goods. Such tariffs could impact our results of operations by increasing the costs of various goods, including construction materials. Management is actively engaged with vendors and business partners to reduce financial risks of tariffs; however, the impact of such tariffs is subject to uncertainties regarding the timing of their implementation, the magnitude of such tariffs and possible exemptions for certain goods, among other uncertainties.
In addition, the 21st Century ROAD to Housing Act (the “ROAD Act”) was enacted into federal law on July 11, 2026 and will take effect on January 7, 2027. The ROAD Act generally imposes a federal restriction on the ability of large institutional investors to purchase single-family homes, subject to certain exemptions. The ROAD Act and the prospect of other such laws or regulations may adversely impact the value of certain of our investments.
Loss on extinguishment of debt and modification costs. Loss on extinguishment of debt and modification costs includes prepayment penalties and defeasance costs, the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt related to the early repayment of debt, costs incurred in a debt modification that are not capitalized as deferred financing costs and other costs incurred in a debt extinguishment.
Income Tax Expense.(Expense) Benefit. Income tax (expense) benefit is primarily derived from taxable gains from asset sales and other income earned from investments held in the TRSs in the Diversified segment and former NHT's TRSs.
As of MarchJune 31,30, 2026, the Diversified segment was invested in two retail properties, and one office, multifamily, and hospitality property (excluding investments in undeveloped land), and the Hospitality segment consisted of three hotel properties as listed below:
Average effective monthly occupied rent per square foot is equal to the average of the contractual rent for commenced leases as of MarchJune 31,30, 2026, minus any tenant concessions over the term of the lease, divided by the occupied square footage of commenced leases as of MarchJune 31,30, 2026.
Percent occupied is calculated as the rentable square footage occupied as of MarchJune 31,30, 2026, divided by the total rentable square footage, expressed as a percentage.
Cityplace is currently under redevelopment and the Company is converting part of the property into a hotel, which was still under construction as of MarchJune 31,30, 2026.
Consolidated Results of Operations for the Three and Six Months Ended MarchJune 31,30, 2026 and 2025
The following table sets forth a summary of our operating results for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025 (in thousands):
The following table sets forth a summary of our operating results for the three months ended June 30, 2026 and 2025 (in thousands):
The net income for the three months ended June 30, 2026 as compared to the net loss for the three months ended MarchJune 31, 2026 and30, 2025 primarily relates to mark-to-market lossesgains on our investments accounted for at fair value partially offset by interest and dividends.an increase in operating income.
Rental income. Rental income was $2.9 million for the three months ended MarchJune 31,30, 2026, compared to $3.6$3.7 million for the three months ended MarchJune 31,30, 2025, which was a decrease of approximately $0.7$0.8 million. The decrease between the periods was primarily due to a decrease in occupancy at Cityplace.
Room revenue. Room revenue was $7.8 million for the three months ended March 31, 2026, compared to $10.4 million for the three months ended March 31, 2025, which was a decrease of approximately $2.6 million. The decrease between the periods is due to the disposition of Hospitality properties in 2025.
Food and beverageRoom revenue. F&BRoom revenue was $0.8$4.4 million for the three months ended MarchJune 31,30, 2026, compared to $0.9$6.3 million for the three months ended MarchJune 31,30, 2025, which was a decrease of approximately $0.1$1.9 million. The decrease between the periods iswas primarily due to the disposition of Hospitality properties in 2025.
Interest and dividends. Interest and dividends totaled $11.1 million for the three months ended March 31, 2026, compared to $13.9 million for the three months ended March 31, 2025, which was a decrease of approximately $2.8 million. The decrease between the periods was attributed to a decrease in dividends from equity investments, offset by an increase in interest income.
Other income. Other income was approximately $0.4 million for the three months ended March 31, 2026, compared to $0.3 million for the three months ended March 31, 2025, which was an increase of approximately $0.1 million. The increase between the periods is due to an escheatment recovery of a prior tax refund and an increase in forfeited guest revenue at the Hospitality properties.
PropertyFood operatingand expenses.beverage Propertyrevenue. operatingF&B expensesrevenue werewas $5.7$0.6 million for the three months ended MarchJune 31,30, 2026, compared to $7.0$0.8 million for the three months ended MarchJune 31,30, 2025, which was a decrease of approximately $1.3$0.2 million. The decrease between the periods iswas primarily due to the disposition of Hospitality properties in 2025.
Property management fees. Property management fees were $0.5 million for the three months ended March 31, 2026, compared to $0.5 million for the three months ended March 31, 2025, which was flat.
Real estate taxes and insurance. Real estate taxes and insurance costs were $1.4 million for the three months ended March 31, 2026, compared to $1.8 million for the three months ended March 31, 2025, which was a decrease of approximately $0.4 million. Real estate taxes and insurance expenses consist primarily of expenses from our investment in Cityplace and our hospitality properties. The decrease between the periods is due to the disposition of Hospitality properties in 2025.
Advisory and administrative fees. For the three months ended March 31, 2026, the Company incurred administrative fees and advisory fees of $3.1 million, compared to $3.6 million for the three months ended March 31, 2025, which was a decrease of approximately $0.5 million. The decrease between the periods is due to the disposition of Hospitality properties in 2025.
Property general and administrative expenses. Property general and administrative expenses were $1.7 million for the three months ended March 31, 2026, compared to $2.0 million for the three months ended March 31, 2025, which was a decrease of approximately $0.3 million. The decrease between the periods is due to the disposition of Hospitality properties in 2025.
Corporate generalInterest and administrativedividends. expenses. Corporate generalInterest and administrativedividends expensestotaled were $3.4$10.7 million for the three months ended MarchJune 31,30, 2026, compared to $2.9$10.0 million for the three months ended MarchJune 31,30, 2025, which was an increase of approximately $0.5$0.7 million. The increase between the periods was primarily dueattributed to an increase in professionaldividends fees.from preferred stock investments and an increase in interest income from debt investments.
DepreciationOther andincome. amortization.Other Depreciationincome andwas amortizationapproximately costs were $3.7$0.8 million for the three months ended MarchJune 31,30, 2026, compared to $3.9$0.3 million for the three months ended MarchJune 31,30, 2025, which was aan decreaseincrease of approximately $0.2$0.5 million. The decreaseincrease between the periods is due to thea dispositionco-development fee of Hospitalityapproximately properties$0.5 in 2025.million.
ImpairmentProperty loss.operating Impairmentexpenses. lossProperty wasoperating $0.0expenses were $4.6 million for the three months ended MarchJune 31,30, 2026, compared to $1.8$5.5 million for the three months ended MarchJune 31,30, 2025, which was a decrease of approximately $1.8$0.9 million. The decrease between the periods was primarily due to athe decreasedisposition of Hospitality properties in impairment charges recorded in 2025 in connection with a property classified as held for sale.2025.
Property management fees. Property management fees were $0.3 million for the three months ended June 30, 2026, compared to $0.4 million for the three months ended June 30, 2025, which was a decrease of approximately $0.1 million. The decrease between the periods was primarily due to the disposition of Hospitality properties in 2025.
Real estate taxes and insurance. Real estate taxes and insurance costs were $1.7 million for the three months ended June 30, 2026, compared to $1.6 million for the three months ended June 30, 2025, which was an increase of approximately $0.1 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 is due to a favorable real estate tax appeal recognized at Cityplace in 2025.
Advisory and administrative fees. For the three months ended June 30, 2026, the Company incurred administrative fees and advisory fees of $2.9 million, compared to $7.0 million for the three months ended June 30, 2025, which was a decrease of approximately $4.1 million. The decrease between the periods was due to a termination fee paid to the former NHT Adviser in connection with the termination of the NHT Advisory Agreement following the NHT Merger in 2025.
Property general and administrative expenses. Property general and administrative expenses were $1.5 million for the three months ended June 30, 2026, compared to $1.6 million for the three months ended June 30, 2025, which was a decrease of approximately $0.1 million. The decrease between the periods is due to the disposition of Hospitality properties in 2025.
Corporate general and administrative expenses. Corporate general and administrative expenses were $2.7 million for the three months ended June 30, 2026, compared to $1.0 million for the three months ended June 30, 2025, which was an increase of approximately $1.7 million. The increase between periods was primarily due to a write off of accrued payables and expenses in 2025.
Depreciation and amortization. Depreciation and amortization costs were $3.5 million for the three months ended June 30, 2026, compared to $4.0 million for the three months ended June 30, 2025, which was a decrease of approximately $0.5 million. The decrease between the periods is due to the disposition of Hospitality properties in 2025.
Loss on extinguishment of debt and modification costs. Loss on extinguishment of debt and modification costs was $0.2 million for the three months ended June 30, 2026, compared to $0.0 million for the three months ended June 30, 2025. The increase between the periods was due to the extinguishment of the previous note due to OSL on White Rock Center in 2026.
Interest expense. Interest expense was $5.7$5.3 million for the three months ended MarchJune 31,30, 2026, compared to $7.3$6.6 million for the three months ended MarchJune 31,30, 2025, which was a decrease of approximately $1.6$1.3 million. The decrease between periods iswas primarily attributable to the extinguishment of the PC & B Loan in February 2026, the repayment of the portion of the OSL Loan allocated to the Bradenton Hampton Inn & Suites property in connection with the Bradenton Hampton Inn & Suites property sale in March 2026, and paydowns on other mortgage and note payable balances during the period, as well as a decrease in SOFR compared to the prior year period.
Equity in (losses) income of unconsolidated ventures. Equity in (losses) income of unconsolidated ventures was $0.0$(0.9) million for the three months ended MarchJune 31,30, 2026, compared to $0.4$0.2 million for the three months ended MarchJune 31,30, 2025, which was a decrease of approximately $(0.4)$1.1 million. The decrease between periods was primarily due to an increase in net incomeloss aton Marriottequity Uptowninterests in Perilune Aero Equity Holdings One, LLC for the three months ended MarchJune 31,30, 2026.
Income tax benefit (expense). benefit. The Company has recorded income tax (expense) benefit of $0.9$(0.4) million associated with the TRSs for the three months ended MarchJune 31,30, 2026 and $1.2$0.6 million associated with the TRSs for the three months ended MarchJune 31,30, 2025.2025, which was a decrease of approximately $1.0 million. The taxdecrease expensebetween forperiods thewas threeprimarily monthsdue endedto Marchan 31, 2026 is increased by the annual changeincrease in valuationtaxable allowanceincome, onas awell as an increase in the deferred tax asset of $0.1 million and an income tax expense of $0.8 million for a net expense of $0.9 million forin the threeprior months ended March 31, 2026,period that iswas recordednot onrecognized in the Consolidatedcurrent Statements of Operations and Comprehensive Income (Loss).year.
Change in unrealized losses.gains (losses). Unrealized lossesgains from our investments accounted for at fair value was $15.3$6.5 million for the three months ended MarchJune 31,30, 2026, compared to $33.3$(41.6) million for the three months ended MarchJune 31,30, 2025, which was an increase of approximately $18.0$48.1 million. The gains for the three months ended June 30, 2026 were largely driven by mark-to-market gains on NREF OP common units of $8.2 million and NREF common stock of $6.0 million, offset by mark-to-market losses on MidWave Wireless, Inc. common stock of $2.8 million, VineBrook Homes Operating Partnership, L.P. common units of $2.6 million and NexPoint SFR Operating Partnership, L.P. partnership units of $3.3 million. The losses for the three months ended MarchJune 31, 2026 were largely driven by mark-to-market losses on VineBrook Homes Operating Partnership, L.P. common units of $5.0 million, NexPoint SFR Operating Partnership, L.P. partnership units of $5.0 million, NREF OP common units of $2.5 million, NREF common shares of $1.8 million and MidWave Wireless common shares of $1.4 million. The losses for the three months ended March 31,30, 2025 were largely driven by mark-to-market losses on NSP common equity of $16.0 million, NREF OP common units of VineBrook of $9.7$7.3 million, IQHQ,IQHQ LP interests of $5.8$5.2 million and United Development Funding IVNREF common equitystock of $5.2$3.2 million.
Realized (losses) gains. Realized (losses) gains were $0.0$0.1 million for the three months ended MarchJune 31,30, 2026, compared to $1.5$3.5 million for the three months ended MarchJune 31,30, 2025, which was a decrease of approximately $1.5$3.4 million. ThereThe weredecrease nowas materialprimarily realizeddue to the absence of significant gains orrecognized losses foron the threedisposition months ended March 31, 2026. The gains for the three months ended March 31, 2025 were primarily driven by realized gains onof United Development Funding IV common equity.equity that occurred during 2025.
The six months ended June 30, 2026 as compared to six months ended June 30, 2025
The following table sets forth a summary of our operating results for the six months ended June 30, 2026 and 2025 (in thousands):
The change in our net loss for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily related to a decrease in unrealized losses on investments at fair value, partially offset by lower realized gains, lower dividend income and a loss on sale of real estate recognized in 2026.
Rental income. Rental income was $5.8 million for the six months ended June 30, 2026, compared to $7.4 million for the six months ended June 30, 2025, which was a decrease of approximately $1.6 million. The decrease between the periods was primarily due to a decrease in occupancy at Cityplace.
Room revenue. Room revenue was $12.2 million for the six months ended June 30, 2026, compared to $16.6 million for the six months ended June 30, 2025, which was a decrease of approximately $4.4 million. The decrease between the periods was primarily due to the disposition of Hospitality properties in 2025.
Food and beverage revenue. F&B revenue was $1.4 million for the six months ended June 30, 2026, compared to $1.6 million for the six months ended June 30, 2025, which was a decrease of approximately $0.2 million. The decrease between the periods was primarily due to the disposition of Hospitality properties in 2025.
Interest and dividends. Interest and dividends totaled $21.7 million for the six months ended June 30, 2026, compared to $23.9 million for the six months ended June 30, 2025, which was a decrease of approximately $2.2 million. The decrease between the periods was attributed to a decrease in dividends from equity investments, offset by an increase in interest income.
Other income. Other income was approximately $1.1 million for the six months ended June 30, 2026, compared to $0.6 million for the six months ended June 30, 2025, which was an increase of approximately $0.5 million. The increase between the periods was primarily due to a co-development fee of approximately $0.5 million.
Property operating expenses. Property operating expenses were $10.3 million for the six months ended June 30, 2026, compared to $12.5 million for the six months ended June 30, 2025, which was a decrease of approximately $2.2 million. The decrease between the periods was primarily due to the disposition of Hospitality properties in 2025.
Property management fees. Property management fees were $0.8 million for the six months ended June 30, 2026, compared to $0.9 million for the six months ended June 30, 2025, which was a decrease of approximately $0.1 million. The decrease between the periods was primarily due to the disposition of Hospitality properties in 2025.
Real estate taxes and insurance. Real estate taxes and insurance costs were $3.1 million for the six months ended June 30, 2026, compared to $3.4 million for the six months ended June 30, 2025, which was a decrease of approximately $0.3 million. Real estate taxes and insurance expenses consist primarily of expenses from our investment in Cityplace and our Hospitality properties. The decrease between the periods was primarily due to the disposition of Hospitality properties in 2025.
Advisory and administrative fees. For the six months ended June 30, 2026, the Company incurred administrative fees and advisory fees of $6.0 million, compared to $10.7 million for the six months ended June 30, 2025, which was a decrease of approximately $4.7 million. The decrease between the periods was due to the disposition of Hospitality properties in 2025, a decrease in investments at fair value and a termination fee paid to the former NHT Adviser in connection with the termination of the NHT Advisory Agreement following the NHT Merger in 2025.
Property general and administrative expenses. Property general and administrative expenses were $3.1 million for the six months ended June 30, 2026, compared to $3.6 million for the six months ended June 30, 2025, which was a decrease of approximately $0.5 million. The decrease between the periods is due to the disposition of Hospitality properties in 2025.
Corporate general and administrative expenses. Corporate general and administrative expenses were $6.2 million for the six months ended June 30, 2026, compared to $3.9 million for the six months ended June 30, 2025, which was an increase of approximately $2.3 million. The increase between periods was primarily due to an increase in professional fees and a write off of accrued payables and expenses in 2025.
Depreciation and amortization. Depreciation and amortization costs were $7.2 million for the six months ended June 30, 2026, compared to $7.9 million for the six months ended June 30, 2025, which was a decrease of approximately $0.7 million. The decrease between the periods is due to the disposition of Hospitality properties in 2025.
Impairment loss. There was no impairment loss for the six months ended June 30, 2026, compared to $1.8 million for the six months ended June 30, 2025, which was a decrease of approximately $1.8 million. The decrease between the periods was primarily attributable to impairment losses recognized on properties classified as held for sale in 2025.
Loss on extinguishment of debt and modification costs. Loss on extinguishment of debt and modification costs was $0.2 million for the six months ended June 30, 2026, compared to $0.0 million for the six months ended June 30, 2025, which was an increase of $0.2 million. The increase between the periods was due to the extinguishment on of the previous note due to OSL on White Rock Center Note in 2026.
Other Income and Expense
Interest expense. Interest expense was $11.0 million for the six months ended June 30, 2026, compared to $13.9 million for the six months ended June 30, 2025, which was a decrease of approximately $2.9 million. The decrease between periods is primarily attributable to the extinguishment of the PC & B Loan in February 2026, the repayment of the portion of the OSL Loan allocated to the Bradenton Hampton Inn & Suites property in connection with the Bradenton Hampton Inn & Suites property sale in March 2026, and paydowns on other mortgage and note payable balances during the period, as well as a decrease in SOFR compared to the prior year period.
Equity in (losses) income of unconsolidated ventures. Equity in losses of unconsolidated ventures was $0.9 million for the six months ended June 30, 2026, compared to $0.2 million for the six months ended June 30, 2025, which was an increase of approximately $(0.7) million. The increase between periods was primarily due to an increase in net loss on equity interests in Perilune Aero Equity Holdings One, LLC for the six months ended June 30, 2026.
Income tax benefit (expense). The Company has recorded income tax expense of $1.3 million associated with the TRSs for the six months ended June 30, 2026 and $0.6 million associated with the TRSs for the six months ended June 30, 2025, which was an increase of approximately $0.7 million. The increase between periods was primarily due to an increase in taxable income, and a decrease in the deferred tax asset recognized in the current year.
NXDT insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 1 trade date, 53,663 shares, about $262.9K) and open-market sales in 0 filings. Net open-market shares: 53,663 (purchases minus sales); net value about $262.9K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-06-10 | Mitts Brian |
Disposition to issuer | 2,415 | — | — |
| 2026-06-10 | Mitts Brian |
Option exercise | 4,830 | — | — |
| 2026-06-10 | Kavanaugh Scott F |
Option exercise | 4,830 | — | — |
| 2026-06-10 | Wood Catherine D. |
Option exercise | 4,830 | — | — |
| 2026-06-10 | Swain Carol |
Option exercise | 4,830 | — | — |
| 2026-06-10 | Swain Carol |
Disposition to issuer | 2,415 | — | — |
| 2026-06-10 | Sauter Dennis Charles Jr |
Shares withheld for tax | 3,014 | $5.07 | $15.3K |
| 2026-06-10 | Sauter Dennis Charles Jr |
Option exercise | 6,036 | — | — |
| 2026-06-10 | Richards Paul |
Option exercise | 6,036 | — | — |
| 2026-06-10 | Richards Paul |
Shares withheld for tax | 3,014 | $5.07 | $15.3K |
| 2026-06-10 | Norris Dustin David |
Option exercise | 7,245 | — | — |
| 2026-06-10 | Norris Dustin David |
Shares withheld for tax | 1,973 | $5.07 | $10.0K |
| 2026-06-10 | Mcgraner Matt |
Shares withheld for tax | 15,849 | $5.07 | $80.4K |
| 2026-06-10 | Mcgraner Matt |
Option exercise | 36,692 | — | — |
| 2026-06-10 | Laffer Arthur B |
Option exercise | 4,830 | — | — |
| 2026-06-10 | Dondero James D |
Option exercise | 36,692 | — | — |
| 2026-06-10 | Constantino Edward N. |
Option exercise | 4,830 | — | — |
| 2026-06-10 | Constantino Edward N. |
Disposition to issuer | 2,415 | — | — |
| 2026-05-20 | Norris Dustin David |
Open-market purchase | 53,663 | $4.90 | $262.9K |
| 2026-03-18 | Mcgraner Matt |
Shares withheld for tax | 24,837 | $4.41 | $109.5K |
Well-known investors holding NXDT (13F)
None of the 59 investors we track reported a position in their latest 13F.