NEXPOINT DIVERSIFIED REAL ESTATE TRUST

The following table sets forth a summary of our operating results for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 (in thousands):

The net loss for the three months ended March 31, 2025 and 2024 primarily relates to mark-to-market losses on our investments accounted for at fair value partially offset by interest and dividends.

Rental income. Rental income was $3.6 million for the three months ended March 31, 2025, compared to $4.0 million for the three months ended March 31, 2024, which was a decrease of approximately $0.4 million. The decrease between the periods was primarily due to a decrease in occupancy at Cityplace.

Rooms revenue. Rooms revenue was $10.4 million for the three months ended March 31, 2025. 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 $0.9 million for the three months ended March 31, 2025. 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 $13.9 million for the three months ended March 31, 2025, compared to $8.7 million for the three months ended March 31, 2024, which was an increase of approximately $5.2 million. The increase between the periods was attributed to an increase in dividends from equity investments.

Other income. Other income was approximately $278.0 thousand for the three months ended March 31, 2025, compared to $27.0 thousand for the three months ended March 31, 2024, which was an increase of approximately $251.0 thousand. The increase between the periods was primarily due to the NHT consolidation.

Property operating expenses. Property operating expenses were $7.0 million for the three months ended March 31, 2025, compared to $1.6 million for the three months ended March 31, 2024, which was an increase of approximately $5.4 million. The increase between the periods was primarily due to the NHT consolidation.

Property management fees. Property management fees were $0.5 million for the three months ended March 31, 2025, compared to $0.2 million for the three months ended March 31, 2024, which was an increase of approximately $0.3 million. The increase between the periods was primarily due to the NHT consolidation.

Real estate taxes and insurance. Real estate taxes and insurance costs were $1.8 million for the three months ended March 31, 2025, compared to $1.2 million for the three months ended March 31, 2024, which was an increase of approximately $0.6 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 three months ended March 31, 2025, the Company incurred administrative fees and advisory fees of $3.6 million. For the three months ended March 31, 2024, the Company incurred administrative fees and advisory fees of $3.2 million. The increase between the three months ended March 31, 2025 and the three months ended March 31, 2024, is primarily due to the addition of fees paid to the NHT Adviser pursuant to the NHT Advisory Agreement from the consolidation of NHT.

Property general and administrative expenses. Property general and administrative expenses were $2.0 million for the three months ended March 31, 2025, compared to $0.7 million for the three months ended March 31, 2024, which was an increase of approximately $1.3 million. The increase between the periods is primarily attributed to the NHT consolidation.

Corporate general and administrative expenses. Corporate general and administrative expenses were $2.9 million for the three months ended March 31, 2025, compared to $2.8 million for the three months ended March 31, 2024, which was an increase of approximately $0.1 million. The increase between periods was primarily due to an increase in legal and professional fees.

Depreciation and amortization. Depreciation and amortization costs were $3.9 million for the three months ended March 31, 2025, compared to $2.8 million for the three months ended March 31, 2024, which was an increase of approximately $1.1 million. This change reset the depreciable basis of our properties as well as caused the recognition of new intangible lease assets. The increase between the periods was primarily due to the NHT consolidation.

Impairment loss. Impairment loss was $1.8 million for the three months ended March 31, 2025, compared to $0 for the three months ended March 31, 2024, which was an increase of approximately $1.8 million. The increase between the periods was due to an increase in impairment charges relating to the Addison Property.

Other Income and Expense

Interest expense. Interest expense was $7.3 million for the three months ended March 31, 2025, compared to $4.5 million for the three months ended March 31, 2024, which was an increase of approximately $2.8 million. The increase between the periods was primarily due to the NHT consolidation.

Equity in income (losses) of unconsolidated ventures. Equity in losses of unconsolidated ventures was $(0.4) million for the three months ended March 31, 2025, compared to $(1.2) million for the three months ended March 31, 2024, which was an increase of approximately $0.8 million. The decrease between periods was primarily due to a decrease in net income at Marriott Uptown.

Income tax expense (benefit). The Company has recorded income tax expense (benefit) of $1.2 million associated with the TRSs for the three months ended March 31, 2025 and $0.6 million associated with the TRSs for the three months ended March 31, 2024. The tax expense for the three months ended March 31, 2025 is partially increased by the annual change in valuation allowance on a deferred tax asset of $(2.2) million, and an income tax expense of $0.6 million for a net expense of $2.8 million for the three months ended March 31, 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 $(33.3) million for the three months ended March 31, 2025, compared to $6.3 million for the three months ended March 31, 2024, which was a decrease of approximately $(39.6) million. The losses for the three months ended March 31, 2025 were largely driven by mark-to-market losses on common units of VineBrook of $9.7 million, IQHQ, LP (“IQHQ LP”) interests of $5.8 million and United Development Funding IV common equity of $5.2 million. The gains for the three months ended March 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 NSP common equity of $1.3 million, offset by NREF OP Units of $6.8 million, and NREF common stock of $2.9 million.

Realized gains (losses). Realized gains (losses) were $1.5 million for the three months ended March 31, 2025, compared to $(21.9) million for the three months ended March 31, 2024, which was an increase of approximately $23.4 million. The gains for the three months ended March 31, 2025 were primarily driven by realized gains on United Development Funding IV common equity. The losses for the three months ended March 31, 2024 were primarily driven by realized losses on the legacy CLOs of $22.8 million.