NXRT 10-K & 10-Q changes, risk factors and insider trading

Macroeconomic trends including inflation, high interest ratesrates, tariffs or recession may adversely affect our financial condition and results of operations.

In addition, actions by the Federal Reserve, as well as efforts by other central banks globally to combat inflation and restore price stability and other global events, may raise the prospect or severity of a recession. The war in Ukraine and the Israel-Hamas war adds, and other international tensions or escalations of conflict may add,add instability to the uncertainty driving socioeconomic forces, which may continue to have an impact on global trade and result in inflation or economic instability. The U.S. 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 have been implemented. The U.S. 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. 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. Present conditions and the state of the U.S and global economies make it difficult to predict whether and/or when and to what extent a recession will occur in the near future. Should a recession occur it could negatively impact the value of commercial and residential real estate and the value of our investments, potentially materially. While the Company has taken steps to prepare for a potential downturn in the economy, should a recession occur there can be no guaranty that the Company’s efforts will prevent any negative impacts to the value of the Company’s investments.

As of December 31, 2024,2025, we had approximately $1.5 billion of outstanding consolidated indebtedness under our Freddie Mac mortgage loans. We rely on national and regional institutions, including Freddie Mac, to provide financing for our acquisitions and permanent financing on properties we may develop in the future. Currently, there is uncertainty regarding the future of Freddie Mac. Should Freddie Mac have its mandate changed or reduced, be disbanded or reorganized by the government, privatized or otherwise discontinue providing liquidity to our sector, it could require us to seek alternative funding sources, significantly reduce our access to debt capital and/or increase borrowing costs and could significantly reduce our sales of assets and/or the values realized upon sale.

Our multifamily properties compete with other housing alternatives to attract residents, including other rental apartments, condominiums and single-family homes that are available for rent, as well as new and existing condominiums and single-family homes for sale. All of our multifamily properties are located in developed areas that include other multifamily properties and/or condominiums. The number of competitive multifamily properties and/or condominiums in a particular area, and any increased affordability of owner occupied single and multifamily homes caused by declining housing prices, low mortgage interest rates and government programs to promote home ownership,ownership (including a recent executive order issued by the Trump Administration), could have a material adverse effect on our ability to lease our apartments and the rents we are able to obtain. In addition, single-family homes and other residential properties provide housing alternatives to residents and potential residents of our multifamily properties.

AThe decreaserelatively inlow or declining residential mortgage rates may result in potential renters purchasing residences rather than leasing them, and as a result, cause a decline in our occupancy rates.

The properties or businesses that we have acquired or may acquire, may be subject to unknown or contingent liabilities for which we have limited or no recourse against the sellers. Unknown liabilities might include liabilities for, among other things, cleanup or remediation of undisclosed environmental conditions, liabilities under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),amended, claims of residents, vendors or other persons dealing with the entities prior to the acquisition of such property, tax liabilities, and accrued but unpaid liabilities whether incurred in the ordinary course of business or otherwise. Because many liabilities, including tax liabilities, may not be identified within the applicable contractual indemnification period, we may have no recourse against any of the owners from whom we acquire such properties for these liabilities. The existence of such liabilities could significantly and adversely affect the value of the property subject to such liability. As a result, if a liability were asserted against us based on ownership of any of such properties, then we might have to pay substantial sums to settle it, which could adversely affect our cash flows.

Mold growth may occur when excessive moisture accumulates in buildings or on building materials, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Although the occurrence of mold at multifamily and other structures, and the need to remediate such mold, is not a new phenomenon, there has been increased awareness in recent years that certainCertain molds may in some instances lead to adverse health effects, including allergic or other reactions. To help limit mold growth, we educate residents about the importance of adequate ventilation and include a lease requirement that they notify us when they see mold or excessive moisture. We have established procedures for promptly addressing and remediating mold or excessive moisture when we become aware of its presence regardless of whether the resident believes or we believe a health risk is present.

Pandemics, epidemics or other health crises have and could in the future disrupt our business. Both global and locally targeted health events could materially affect areas where our properties, corporate offices or major service providers are located. These events have and could in the future have an adverse effect on our business, results of operations, financial condition and liquidity in a number of ways, including, but not limited to:ways.

As of December 31, 2024,2025, approximately $1.5$1.6 billion of our total debt outstanding bears interest at variable rates, and we may also borrow additional money at variable interest rates in the future. As of December 31, 2024,2025, 87 interest rate swap agreements, with a combined notional amount of $1.1$0.9 billion and terms expiring in 2025 and 2026, effectively fix the interest rate on $1.1$0.9 billion, or 73%,59%, of our $1.5$1.6 billion of floating rate debt outstanding. As of December 31, 2024,2025, the interest rate cap agreements we have entered into effectively cap the applicable reference rate on $2.5$1.5 billion of our floating rate mortgage debt outstanding at a weighted average rate of 6.31%7.98% for the term of the agreements, which is generally 2-3 years. Except to the extent we have arrangements in place that hedge against the risk of rising interest rates, increases in interest rates would increase our interest expense under these instruments and would increase the cost of refinancing these instruments and issuing new debt. As a result, our cash flow and our ability to service our indebtedness and to make distributions to our stockholders would be adversely affected, which could adversely affect the market price of our common stock.

On October 9, 2020, Mr. Dondero resigned as an employee of Highland and as portfolio manager for all Highland-advised funds. As a result of these changes, our Sponsor is no longer under common control with Highland and therefore Highland is no longer affiliated with us. On February 22, 2021, the Bankruptcy Court entered an order confirming Highlands’s Fifth Amended Plan of Reorganization (the “Plan”), which became effective on August 11, 2021. On October 15, 2021, Marc S. Kirschner, as litigation trustee of a litigation subtrust formed pursuant to the Plan, 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, Marc S. Kirschner filed a motion seeking to voluntarily stay the Bankruptcy Trust Lawsuit, which motion was granted on April 4, 2023. AsOn of JanuaryJune 30, 2024,2025, 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 continueswere assigned to beHMIT. stayed.On December 18, 2025, the presiding judge in the Bankruptcy Trust Lawsuit recused herself. The case was reassigned to a new bankruptcy judge, and a status conference for the case is scheduled for February 26, 2026.

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, whichbut haswithdrew notits yetappeal beenon briefed.December The31, 2025. On March 26, 2025, the court entered an order denying the remaining respondents’ motions to dismiss,dismiss includingand directed the respondents to file an answer to the UBS Lawsuit within 20 days, which they did. Mr. Dondero’s,Dondero remainand pending.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 Supreme Court scheduled a status conference in the UBS Lawsuit for April 14, 2026. The UBS Lawsuit does not include claims related to our business or our assets. While neither our Sponsor nor our Adviser are parties to the UBS Lawsuit, these proceedings could expose our Sponsor, our Adviser, our affiliates, our management and/or us to negative publicity, which might adversely affect our reputation and/or investor confidence in us, and/or future debt or equity capital raising activities. In addition, the UBS Lawsuit may be both time consuming and disruptive to our operations and cause significant diversion of management attention and resources which may materially and adversely affect our business, financial condition and results of operations.

We may not replicate the historical results achieved by other entities managed or sponsored by affiliates of our Adviser, or members of our Adviser’s management teamteam.

To qualify as a REIT, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our capital stock. In order to meet these tests, we may be required to forego investments we might otherwise make. Thus, compliance with the REIT requirements may hinder our performance. In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities, stock in REITs and other qualifiedqualifying real estate assets, including certain mortgage loans and mortgage-backed securities. The remainder of our investmentinvestments in securities (other than government securities, securities of TRSs and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of TRSs and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total assets can be represented by securities of one or more TRSs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate, or contribute to a TRS, otherwise attractive investments from our Portfolio, and may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the tests for qualifying as a REIT. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

The REIT provisions of the Code may limit our ability to hedge our liabilities. Any income from a hedging transaction we enter into to manage risk of interest rate changes, price changes or currency fluctuations with respect to borrowings made or to be made to acquire or carry real estate assets or to offset certain other positions, if properly identified under applicable Treasury Regulations, does not constitute “gross income” for purposes of both of the 75% or 95% gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions will likely be treated as non-qualifying income for purposes of the 75% or 95% gross income tests. As a result of these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRSs would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses from hedges held in a TRS generally will not provide any tax benefit, except for being carried forward against future taxable income of such TRS.

Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes or non-U.S. taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. In addition, our TRSs and any TRS we form in the future will be subject to corporate U.S. federal,federal income tax and applicable state and local taxes.taxes on their net income. State, local and non-U.S. income tax laws may differ substantially from the corresponding U.S. federal income tax laws. Any of these taxes would decrease cash available for distributions to stockholders. Prospective investors are urged to consult their tax advisors regarding the effect of the other U.S. federal, state, local and non-U.S. tax laws on an investment in our stock.

As a REIT,REIT and for taxable years beginning after December 31, 2025, the value of our interests in our TRSs generally may not exceed 20%25% of the total value of our total assets at the end of any calendar quarter. If the IRS were to determine that the value of our interests in all of our TRSs exceeded this limit at the end of any calendar quarter, then we would fail to qualify as a REIT. If we determine it to be in our best interest to own a substantial number of our properties through one or more TRSs, then it is possible that the IRS may conclude that the value of our interests in our TRSs exceeds 20%25% of the value of our total assets at the end of any calendar quarter and therefore cause us to fail to qualify as a REIT. Additionally, as a REIT, no more than 25% of our gross income with respect to any year may, in general, be from sources other than certain real estate-related assets. Dividends paid to us from a TRS are typically considered to be non-real estate income. Therefore, we may fail to qualify as a REIT if dividends from all of our TRSs, when aggregated with all other non-real estate income with respect to any one year, are more than 25% of our gross income with respect to such year.

For so long as we qualify as a REIT, our ability to dispose of property during the first few years following its acquisition may be restricted to a substantial extent as a result of our REIT qualification. Under applicable provisions of the Code regarding prohibited transactions by REITs, while we qualify as a REIT, we will be subject to a 100% penalty tax on any gain recognized on the sale or other disposition of any property (other than foreclosure property) that we own or hold an interest in, directly or indirectly through any subsidiary entity, including our OP, but generally excluding TRSs, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of a trade or business. Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property. During such time as we qualify as a REIT, we intend to avoid the 100% prohibited transaction tax by (1) conducting activities that may otherwise be considered prohibited transactions through a TRS (but such TRS will incur income taxes at the corporate rate with respect to any income or gain recognized by it), (2) conducting our operations in such a manner so that no sale or other disposition of an asset we own or hold an interest in, directly or through any subsidiary, will be treated as a prohibited transaction, or (3) structuring certain asset dispositions of our properties to comply with the requirements of the prohibited transaction safe harbor available under the Code for properties that, among other requirements, have been held for at least two years. However, no assurance can be given that any particular property that we own or hold an interest in, directly or through any subsidiary entity, including our OP, but generally excluding TRSs, will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business and that we will not be subject to the 100% prohibited transactions tax.

In order to maintain our qualification as a REIT, among other requirements, we must distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding net capital gains. To the extent that we satisfy this distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income. We will also be subject to U.S. 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 distributions to our stockholders to comply with the requirements of the Code for REITs and to minimize or eliminate our U.S. federal income tax obligation. However, these requirements could cause us to distribute amounts that otherwise would be spent on investments in real estate assets and it is possible that we might be required to borrow funds, possibly at unfavorable rates, or sell assets to fund these distributions.Ourdistributions. Our access to third-party sources of capital depends on a number of factors, including the market’s perception of our growth potential, our current debt levels, and our current and potential future earnings. We cannot assure you that we will have access to such capital on favorable terms at the desired times, or at all, which may cause us to curtail our investment activities and/or to dispose of assets at inopportune times, and could adversely affect our financial condition, results of operations, cash flow and the value of our securities. Certain types of assets generate substantial mismatches between REIT taxable income and available cash. Such assets include rental real estate that has been financed through financing structures which require some or all of available cash flows to be used to service borrowings. As a result, the requirement to distribute a substantial portion of our REIT taxable income could cause us to: (1) sell assets in adverse market conditions; (2) raise capital on unfavorable terms; or (3) distribute amounts that would otherwise be invested in future acquisitions, expansions or developments, capital expenditures or repayment of debt, in order to comply with REIT requirements. Further, amounts distributed will not be available to fund our operations. Under certain circumstances, covenants and provisions in our existing and future debt instruments may prevent us from making distributions that we deem necessary to comply with REIT requirements. It is possible that we might not always be able to make distributions sufficient to meet the annual distribution requirements and to avoid U.S. federal income and excise taxes on our earnings while we qualify as a REIT. Furthermore, our inability to make required distributions could threaten our status as a REIT and could result in material adverse tax consequences for us and our stockholders. Alternatively, we may make taxable in-kind distributions of our own stock, which may cause our stockholders to be required to pay income taxes with respect to such distributions in excess of any cash they receive, or we may be required to withhold taxes with respect to such distributions in excess of any cash our stockholders receive.

Income from “qualified dividends” payable to U.S. stockholders that are individuals, trusts, and estates is generally subject to tax at reduced rates. However,Currently, dividendsthe maximum tax rate applicable to qualified income payable to U.S. stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITsREITs, to their stockholdershowever, generally are not eligible for thethis reduced ratesrate. for qualified dividends and are taxed at ordinary income rates (butHowever, U.S. stockholders that are individuals, trusts and estates generally may deduct up to 20% of the ordinary dividends (e.g., dividends not designated as capital gain dividends or qualified income) received from a REIT for taxable years beginning before January 1, 2026 (subject to certain limitations)). To qualify for this deduction, the U.S. stockholder receiving such dividends must hold the dividend-paying REIT stock for at least 46 days (taking into account certain special holding period rules) of the 91-day period beginning 45 days before the stock becomes ex-dividend and cannot be under an obligation to make related payments with respect to a position in substantially similar or related property. At the current maximum ordinary income tax rate of 37% applicable for taxable years beginning before January 1, 2026,37%, the maximum tax rate on ordinary REIT dividends for non-corporate stockholders is 29.6%. Although this does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock, and could be detrimental to our ability to raise additional funds through the future sale of our common stock. In addition, certain U.S. stockholders may be subject to a 3.8% Medicare tax on dividends payable by REITs. Tax rates could be changed in future legislation.

Subject to certain exceptions, distributions received from us will be treated as dividends of ordinary income to the extent such distributions are out of our current or accumulated earnings and profits. Such dividends paid to a non-U.S. stockholder ordinarily will be subject to U.S. withholding tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty, unless the distributions are treated as “effectively connected” with the conduct by the non-U.S. stockholder of a U.S. trade or business. Pursuant to the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”), capital gain distributions attributable to sales or exchanges of “U.S. real property interests” (“USRPIs”), generally will be taxed to a non-U.S. stockholder as if such gain were effectively connected with a U.S. trade or business. However, a capital gain dividend will not be treated as effectively connected income if (1) the distribution is received with respect to a class of stock that is regularly traded on an established securities market located in the United States and (2) the non-U.S. stockholder does not own more than 10% of the class of our stock at any time during the one-year period ending on the date the distribution is received.

Gain recognized by a non-U.S. stockholder upon the sale or exchange of our common stock generally will not be subject to U.S. federal income taxation unless such stock constitutes a USRPI under FIRPTA. Our common stock will not constitute a USRPI so long as we are a “domestically-controlled” REIT. A REIT is “domestically controlled” if less than 50% of the REIT’s stock, by value, has been owned directly or indirectly by persons who are not qualifying U.S. persons, including through a foreign-controlled domestic corporation, during a continuous five-year period ending on the date of disposition or, if shorter, during the entire period of the REIT’s existence. We cannot assure you that we will qualify as a “domestically controlled” REIT. If we were to fail to so qualify, gain realized by foreign investors on a sale of shares of our stock would be subject to FIRPTA tax, unless the shares of our stock were traded on an established securities market and the foreign investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock.

Our common stock is listed on the NYSE and NYSE Texas and broad market fluctuations could negatively affect the market price of our stock.

We have listed shares of our common stock on the NYSE and NYSE Texas under the symbol “NXRT.” The price of NXRT common stock may fluctuate significantly. Further, the market price of our common stock may be volatile. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future. Some of the factors that could affect our stock price or result in fluctuations in the price or trading volume of our common stock include:

WeWe, our Adviser, our property manager and our and their other third-party providers are highly dependent on information technology and security breaches or systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our securities and our ability to pay dividends.

Our business is highly dependent on information technology. In the ordinary course of our business, we may store sensitive data, including our proprietary business information and that of our business partners, on our networks.networks and our property manager is required to collect and maintain personal information about 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 the Company’s marketing programs. The secure maintenance and transmission of this information is critical to our operations. Cybersecurity incidents and cyber-attacks, ransomware attacks and social engineering attempts (including business email compromise attacks) have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. Despite our security measures, our information technology and infrastructure and the information technology and infrastructure of our Adviser or our third-party providers may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions, the risk of which may be heightened by the increased prevalence and use of artificial intelligence. There can be no assurance that the measures we or they take to ensure the integrity of our or their respective systems will provide protection, especially because cyberattack techniques used change frequently, may persist undetected over extended periods of time, and may not be mitigated in a timely manner to prevent or minimize the impact of an attack. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information, including accidental or unauthorized disclosure of information, could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disrupt our operations, disrupt our trading activities, or damage our reputation, which could have a material adverse effect on our financial results and negatively affect the market price of our securities and our ability to pay dividends to stockholders. Any interruption or deterioration in the performance of our information systems or our Adviser’s and our third-party service provider’s information systems could impair the quality of our operations and could affect our reputation and hence adversely affect our business. In addition, although our Adviser maintains insurance coverage that may cover certain aspects of our cyber and information security risks, such insurance coverage may be insufficient to cover all losses, such as litigation costs or financial losses that exceed policy limits or are not covered under any of our Adviser’s current insurance policies.

The resources required to protect our information technology and infrastructure, and to comply with the laws and regulations related to data and privacy protection, are subject to uncertainty. Even in circumstances where we are able to successfully protect such technology and infrastructure from attacks, we may incur significant expenses in connection with our responses to such attacks. In addition, recent well-publicized security breaches have led to enhanced government and regulatory scrutiny of the measures taken by companies to protect against cyber-security attacks, and may in the future result in heightened cyber-security requirements and/or additional regulatory oversight. As cybersecurity threats and government and regulatory oversight of associated risks continue to evolve, we may be required to expend additional resources to enhance or expand upon the security measures we currently maintain. Any such actions may adversely impact our results of operations and financial condition.

The recent changeChanges in the U.S. Presidential Administration and changes in Congress could result in significant policy changes or regulatory uncertainty in our industry. While it is not possible to predict when and whether significant policy or regulatory changes would occur, any such changes on the federal, state or local level could significantly impact, among other things, our operating expenses, the availability of financing, interest rates, the economy and the geopolitical landscape. To the extent that the new government administration takes action by proposing and/or passing regulatory policies that could have a negative impact on our industry, such actions may have a material adverse effect on our business, results of operations, liquidity and financial condition.

TheDamage directfrom extreme weather and indirectother impactsnatural of climate changeevents may adversely affect our business.

We have been and may continue to be adversely impacted by the direct consequences of climate change, such as property damage due to increases in the frequency, duration and severity of extreme weather events, such as hurricanes and floods. Similarly, changes in precipitation levels could lead to increases in droughts or wildfires that could adversely impact demand for our communities. The increases in property damage due to these events have also contributed to the increases in costs we have faced in property insurance. In addition, changes in federal, state and local legislation and regulation basedrelated onto concernsenvironmental about climate changeevents could result in delays and increased costs to complete our rehabilitation projects and increased capital expenditures on our existing properties (for example, to improve their energy efficiency and/or resistance to inclement weather) without a corresponding increase in revenue, and, as a result, adversely impact our financial results and operations.

We are primarily focused on directly or indirectly acquiring, owning, and operating well-located multifamily properties with a value-add component in large cities and suburban submarkets of large cities, primarily in the Southeastern and Southwestern United States. We generate revenue primarily by leasing our multifamily properties. We intend to employ targeted management and a value-add program at a majority of our properties in an attempt to improve rental rates and the NOI at our properties and achieve long-term capital appreciation for our stockholders. We are externally managed by the Adviser through the Advisory Agreement, by and among the OP, the Adviser and us. The Advisory Agreement was renewed on February 24,23, 20252026 for a one-year term. The Adviser is wholly owned by NexPoint Advisors, L.P. On March 4, 2020, the Company, the OP and the Adviser entered into separate equity distribution agreements with each of the 2020 ATM Sales Agents, pursuant to the 2020 ATM Program (as defined below). On March 20, 2025, the equity distribution agreements with each of KeyBanc and SunTrust were terminated (each as defined below). See Note 7 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 director fees, equity-based compensation expense, investor relations costs and payments of reimbursements to our Adviser for operatingAdviser expenses.Operating CorporateExpenses. generalUnder andthe administrativeAdvisory expensesAgreement, reimbursement of Adviser Operating Expenses and the advisory and administrative feesFees paid to our Adviser (including advisory and administrative fees on properties defined in the Advisory Agreement as New Assets) will not exceed 1.5% of Average Real Estate Assets per calendar year (or part thereof that the Advisory Agreement is in effect), calculated in accordance with the Advisory Agreement, or the Expense Cap. The Expense Cap does not limit the reimbursement by us of expenses related to securities offerings paid by our Adviser. The Expense Cap also does not apply to legal, accounting, financial, due diligence, and other service fees incurred in connection with mergers and acquisitions, extraordinary litigation, or other events outside our ordinary course of business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of real estate assets. Additionally, in the sole discretion of the Adviser, the Adviser may elect to waive certain advisory and administrative feesFees otherwise due. If advisory and administrative feesFees are waived in a period, the waived feesFees for that period are considered to be waived permanently and the Adviser may not be reimbursed in the future.

Casualty losses.loss. Casualty lossesloss includeincludes expenses resulting from damages from an unexpected and unusual event such as a natural disaster. Expenses can include additional payments on insurance premiums, impairment recognized on a property, and other abnormal expenses arising from the related event.

The change in our net income (loss) between the periods primarily relates to decreases in gain on sales of real estate and rental income of $13.7$54.2 million and $18.2$8.2 million, respectively, inpartially additionoffset toby ana increasedecrease in loss on extinguishment of debt and modification costs of $21.6$24.0 million.

Rental income. Rental income was $243.7 million for the year ended December 31, 2025 compared to $251.9 million for the year ended December 31, 2024 compared to $270.1 million for the year ended December 31, 2023,2024, which was a decrease of approximately $18.2$8.2 million. The decrease between the periods was primarily due to our three dispositions in 2024 compared to two dispositions in 2023, and the timing of disposition activity. During the year ended December 31, 2023, the Company sold one property in the third quarter of 2023 and one property in the fourth quarter of 2023.2024. During the year ended December 31, 2024, the Company sold one property in each of the first, second, and fourth quarters of 2024.

PropertyOther managementincome. fees.Other Propertyincome management fees werewas $7.5 million for the year ended December 31, 20242025 compared to $8.1$7.8 million for the year ended December 31, 2023,2024, which was a decrease of approximately $0.6$0.3 million. The decrease between the periods was primarily due to a $0.6 million decrease in totalinternet/tech revenues,income, whichoffset theby feea is$0.2 primarilymillion basedincrease on.in non-refundable fees.

Property general and administrativeoperating expenses. Property general and administrativeoperating expenses were $9.2$53.9 million for the year ended December 31, 20242025 compared to $9.5$56.6 million for the year ended December 31, 2023,2024, which was a decrease of approximately $0.3$2.7 million. The decrease between the periods was primarily due to decreasesour disposition activity in audit fees of $0.3 million.2024.

DepreciationReal estate taxes and amortization.insurance. DepreciationReal estate taxes and amortizationinsurance costs were $97.8$32.4 million for the year ended December 31, 20242025 compared to $95.2$33.1 million for the year ended December 31, 2023,2024, which was ana increasedecrease of approximately $2.6$0.7 million. The increasedecrease between the periods was primarily due to ana increasedecrease of $0.7 million in valueproperty/liability addinsurance activity during 2023.costs.

Interest expense. Interest expense was $60.7 million for the year ended December 31, 2025 compared to $58.5 million for the year ended December 31, 2024 compared to $67.1 million for the year ended December 31, 2023,2024, which was aan decreaseincrease of approximately $8.6$2.2 million. The decreaseincrease between the periods was primarily due to a decrease in interest on debt and an increase in mark-to-market gain on interest rate capsamortization of $6.3deferred millionfinancing andcosts $2.1of $3.2 million, respectively, for the years ended December 31, 20242025 and 20232024 (in thousands):

Loss on extinguishment of debt and modification costs. Loss on extinguishment of debt and modification costs was $0.0 million for the year ended December 31, 2025 compared to $24.0 million for the year ended December 31, 2024 compared to $2.4 million for the year ended December 31, 2023,2024, which was ana increasedecrease of approximately $21.6$24.0 million. The increasedecrease between periods is primarily driven by increasesdecreases in prepayment penalties and defeasance costs and write-off of deferred financing costs of $13.1$15.5 million and $8.0$8.5 million, respectively, due to our refinance activity in 2024 as compared to 2023.2025. During the year ended December 31, 2024, the Company completed a portfolio refinance on 34 of its property mortgages. The following table details the various costs included in loss on extinguishment of debt and modification costs for the years ended December 31, 20242025 and 20232024 (in thousands):

Casualty gains (losses).loss. Casualty lossesloss werewas $0.2 million for the year ended December 31, 2025 compared to $0.6 million for the year ended December 31, 2024 compared to casualty gains of $0.9 million for the year ended December 31, 2023.2024. The increasedecrease in casualty lossesloss is attributable to damagesthe sustainedCompany's atcasualty Bellaevents Solaraand the timing of such events (see Note 4 to our consolidated financial statements).

Miscellaneous income. Miscellaneous income was $0.6 million for the year ended December 31, 2025 compared to $0.5 million for the year ended December 31, 2024 compared to $1.2 million for the year ended December 31, 2023,2024, which was aan decreaseincrease of approximately $0.7$0.1 million. The decreaseincrease between the periods was primarily due to more business interruption proceeds received from casualty events (see Note 4).

Gain on sales of real estate. Gain on sales of real estate was $0.0 million for the year ended December 31, 2025 compared to $54.2 million for the year ended December 31, 2024 compared to $67.9 million for the year ended December 31, 2023,2024, which was a decrease of approximately $13.7$54.2 million. During the year ended December 31, 2025, we did not sell any properties compared to the year ended December 31, 2024, in which we sold three properties for a combined gain of $54.2 million whereas during the year ended December 31, 2023, we sold two properties for a combined gain of $67.9 million.

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 and administrative fees, (3) depreciation and amortization expenses, (4) gains or losses from the sale of operating real estate assets that are included in net income (loss) computed in accordance with GAAP, (5) corporate income and corporate general and administrative expenses that are not reflective of operations of the properties, (6) other gains and losses that are specific to us including gain (loss) on extinguishment of debt and modification costs, (7) casualty-related expenses/(recoveries) and casualty gains (losses),loss, (8) gain on forfeited deposits, (9) property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on behalf of the Company at the property for expenses such as legal, professional, centralized leasing service and franchise tax fees and (109) equity in earnings of affiliates.

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our NOI and our 2023-20242024-2025 Same Store NOI for the years ended December 31, 20242025 and 20232024 to net income,income (loss), the most directly comparable GAAP financial measure (in thousands):

Adjustment to net income (loss) to exclude certain property operating expenses that are casualty-related expenses/(recoveries).

Adjustment to net income (loss) to exclude certain property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional, centralized leasing service and franchise tax fees.

There are 35 properties encompassing 12,94812,963 units of apartment space in our 2023-20242024-2025 Same Store properties. Our 2023-20242024-2025 Same Store properties exclude the 3621 units that are currently down (see Note 4 to our consolidated financial statements). We consider a property to be a same store property if we held the property during the entirety of both periods.

The followingproperties tablein reflectsour thesame revenues,store property operating expenses and NOIpool for the years ended December 31, 2025, 2024 and 2023 forare ourthe 2023-2024same as the 2024-2025 same store properties and, accordingly, 2023-2025 Same Store andNOI Non-Sameresults were the same as 2024-2025 Same Store propertiesNOI (dollars in thousands):results.

OtherRental income. OtherRental income was $5.2$243.5 million for the year ended December 31, 20242025 compared to $5.7$246.7 million for the year ended December 31, 2023,2024, which was a decrease of $0.5approximately million.$3.2 million, or 1.3%. The majority of the decrease is related to a decrease in cableweighted TVaverage incomeoccupancy ofduring $0.1the millionyear andended decreasesDecember in31, all2025 othercompared incometo ofthe $0.4year million.ended December 31, 2024.

There have been no material changes to the risk factors previously disclosed under Part I, Item 1A, “Risk Factors” in our 2025 Annual Report on Form 10-K for the year ended December 31, 2025,Report, filed with the SEC on February 26, 2026.

The following is a discussion and analysis of our financial condition and our historical results of operations. The following should be read in conjunction with our financial statements and accompanying notes included herein and with our annual report on Form 10-K for the year ended December 31, 2025 (our “Annual Report”),Report, filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2026. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected, forecasted, or expected in these forward-looking statements as a result of various factors, including, but not limited to, those discussed below and elsewhere in this quarterly report. See “Cautionary Statement Regarding Forward-Looking Statements” in this report, and “Risk Factors” in Part I, Item 1A, “Risk Factors” of our 2025 Annual Report. Our management believes the assumptions underlying the Company’s financial statements and accompanying notes are reasonable. However, the Company’s financial statements and accompanying notes may not be an indication of our financial condition and results of operations in the future.

As of MarchJune 31,30, 2026, our Portfolio consisted of 36 multifamily properties primarily located in the Southeastern and Southwestern United States encompassing 13,305 units of apartment space that was approximately 93.5% leased with a weighted average monthly effective rent per occupied apartment unit of $1,485.$1,490. Substantially all of our business is conducted through the OP. We own the Portfolio through the OP and our TRS. The OP owns approximately 99.9% of the Portfolio; our TRS owns approximately 0.1% of the Portfolio. The OP GP is the sole general partner of the OP. As of MarchJune 31,30, 2026, there were 26,053,988 OP Units outstanding, of which 25,951,154, or 99.6%, were owned by us, and 102,834, or 0.4%, were owned by unaffiliated limited partners (see Note 8 to our consolidated financial statements).

We have elected to be taxed as a REIT under Sections 856 through 860 of the Code, and expect to continue to qualify as a REIT. 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 stockholders. As a REIT, we will be subject to U.S. 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 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 a TRS and is subject to applicable federal, state, and local income and margin taxes. We had no significant taxes associated with our TRS for the threesix months ended MarchJune 31,30, 2026 and 2025.

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 (the “Highland Bankruptcy”), 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 statement 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. HMIT subsequently filed a motion to lift the stay of the Bankruptcy Trust Lawsuit, which was granted and became effective on OctoberJuly 3, 2025. On December 18, 2025, the presiding judge in the Bankruptcy Trust Lawsuit recused herself, and the case was reassigned to a new bankruptcy judge. A status conference for the case is currently scheduled for April 30,15, 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.

Other income. Other income includes ancillary income earned from tenants such as non-refundable fees, application fees, laundry fees, cable TV income, and other miscellaneous fees charged to tenants.tenants, as well as interest income from the Waterford Loan.

Property management fees. Property management fees include fees paid to BH, our property manager,manager for managing each property (see Note 8 to our consolidated financial statements).

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 and 2025 (in thousands):

The change in our net loss for the three months ended MarchJune 31,30, 2026 as compared to our net loss for the three months ended MarchJune 31,30, 2025 primarily relates to an increase in total operating income of $1.1 millionexpenses and a decrease in miscellaneous income of $0.1 million, offset by increase in interest expense of $1.1$2.1 million and $0.7 million, respectively, offset by an increase in total revenues of $1.5 million.

Rental income. Rental income was $61.1$61.8 million for the three months ended MarchJune 31,30, 2026 compared to $61.4$61.2 million for the three months ended MarchJune 31,30, 2025, which was aan decreaseincrease of approximately $0.3$0.6 million. The decreaseincrease between the periods was primarily due to our acquisition activity in the fourth quarter of 2025, offset by an increase in one-time rent concessions of $0.9 million offset by increases in bad debt write offs/recoveries of $0.2 million and in utility reimbursements of $0.3$0.4 million.

RealOther estateincome. taxesOther andincome insurance.was Real estate taxes and insurance costs were $8.1$2.8 million for the three months ended MarchJune 31,30, 2026 compared to $9.0$1.9 million for the three months ended MarchJune 31,30, 2025, which was aan decreaseincrease of approximately $0.9 million. The decreaseincrease between the periods was primarily due to decreasesan increase in internet income and deposit insurance of $0.5 million and $0.2$0.1 million in property taxes and property/liability insurance expense,million, respectively.

Property general and administrativeoperating expenses. Property general and administrativeoperating expenses were $2.3$14.6 million for the three months ended MarchJune 31,30, 2026 compared to $2.0$12.5 million for the three months ended MarchJune 31,30, 2025, which was an increase of approximately $0.3$2.1 million. The increase between the periods was primarily due to anour increaseacquisition activity in the fourth quarter of $0.22025 and increases in internet expense and water/sewer expenses of $0.5 million inand centralized$0.2 servicesmillion, expense.respectively.

DepreciationReal estate taxes and amortization.insurance. DepreciationReal estate taxes and amortizationinsurance costs were $24.3$8.2 million for the three months ended MarchJune 31,30, 2026 compared to $24.4$8.5 million for the three months ended MarchJune 31,30, 2025, which was a decrease of approximately $0.1$0.3 million. The decrease between the periods was primarily due to a decrease in depreciation expensedecreases of $0.6property taxes and property liability insurance of $0.1 million and $0.2 million, offset by an increase in amortization expense of $0.5 million.respectively.

Interest expense. Interest expense was $15.4$15.8 million for the three months ended MarchJune 31,30, 2026 compared to $14.4$15.2 million for the three months ended MarchJune 31,30, 2025, which was an increase of approximately $1.0$0.6 million. The increase in interest expense between the periods wasis primarily dueattributable to a decrease indecreased benefit from swaps.interest rate swaps of $1.9 million, offset by a decrease of $1.1 million in interest on debt. The following table details the various costs included in interest expense for the three months ended MarchJune 31,30, 2026 and 2025 (in thousands):

CasualtyMiscellaneous loss.income. CasualtyMiscellaneous lossincome was $0.0 million compared to a $0.2$0.1 million loss for the three months ended MarchJune 31,30, 2026 and 2025, respectively.respectively, which was a decrease of $0.1 million. The decrease in casualty loss between periods of $0.2 million is attributable to thea Company'sdecrease casualtyof eventsbusiness andinterruption theproceeds timingof thereof.$0.1 million.

MiscellaneousThe income.change Miscellaneousin incomeour wasnet $0.1 millionloss for the threesix months ended MarchJune 31,30, 2026 as compared to $0.1the millionnet loss for the threesix months ended MarchJune 31,30, 2025,2025 whichprimarily wasrelates flat.to an increase in interest expense of $1.7 million.

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 and administrative fees, (3) depreciation and amortization expenses, (4) corporate income and corporate general and administrative expenses that are not reflective of operations of the properties, (5) casualty-related expenses/(recoveries) and casualty loss, (6) property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on behalf of the Company at the property for expenses such as legal, professional, centralized leasing service and franchise tax fees and (7) equity in earnings of affiliates.affiliate.

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 that have not made similarly timed purchases or sales. We believe that eliminating these items from net income (loss) is useful for investors and management 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 the items listed above, all of which are significant economic costs.above. NOI may fail to capture significant trends in these components of net income, which further limits its usefulness.

NOI and Same Store NOI for the Three and Six Months Ended MarchJune 31,30, 2026 and 2025

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our NOI and our Same Store NOI for the three and six months ended MarchJune 31,30, 2026 and 2025 to net loss,income (loss), the most directly comparable GAAP financial measure (in thousands):

NOINet Operating Income for Our Q1Q2 Same Store and Non-Same Store Properties for the Three Months Ended MarchJune 31,30, 2026 and 2025

There are 35 properties encompassing 12,984 units of apartment space in our same store pool for the three months ended MarchJune 31,30, 2026 and 2025 (our “Q1Q2 Same Store” properties). Our Q1Q2 Same Store properties exclude the 1following unitproperty thatin isour currentlyPortfolio downas (seeof NoteJune 3).30, 2026: Sedona at Lone Mountain. We consider a property to be a same store property if we held the property during the entirety of both periods.

The following table reflects the revenues, property operating expenses and NOI for the three months ended MarchJune 31,30, 2026 and 2025 for our Q1Q2 Same Store and Non-Same Store properties (dollars in thousands):

For the three months ended MarchJune 31,30, 2026 and 2025, excludes approximately $96,000$77,000 and $(656,000792,000), respectively, of casualty-related expenses/(recoveries).

For the three months ended MarchJune 31,30, 2026 and 2025, excludes approximately $807,000$1,062,000 and $791,000,$835,000, respectively, of expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional, centralized leasing service and franchise tax fees.

For the three months ended MarchJune 31,30, 2026 and 2025, excludes approximately $44,000$26,000 and $(1,000),$33,000, respectively, of expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional, centralized leasing service and franchise tax fees.

See reconciliation of net loss to NOI above under “NOI and Same Store NOI for the Three and Six Months Ended MarchJune 31,30, 2026 and 2025.”

Q2 Same Store Results of Operations for the Three Months Ended MarchJune 31,30, 2026 and 2025

As of MarchJune 31,30, 2026, our Q1Q2 Same Store properties were approximately 93.6% leased with a weighted average monthly effective rent per occupied apartment unit of $1,482.$1,487. As of MarchJune 31,30, 2025, our Q1Q2 Same Store properties were approximately 94.4%93.3% leased with a weighted average monthly effective rent per occupied apartment unit of $1,495.$1,500. For our Q1Q2 Same Store properties, we recorded the following operating results for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025:2025.

OtherRental income. OtherRental income was $1.9$60.4 million for the three months ended MarchJune 31,30, 2026 compared to $1.3$61.2 million for the three months ended MarchJune 31,30, 2025, which was ana increasedecrease of approximately $0.6$0.8 millionmillion, or 39.0%.1.4%. The majority of the increasedecrease is relatedattributable to a $0.4 million increasedecrease in internet/techweighted income.average monthly effective rent during the three months ended June 30, 2026 compared to the three months ended June 30, 2025.