NEXPOINT DIVERSIFIED REAL ESTATE TRUST

The six months ended June 30, 2025 as compared to the six months ended June 30, 2024

The following table sets forth a summary of our operating results for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 (in thousands):

The net loss for the six months ended June 30, 2025 increased by $47.1 million as compared to the six months ended June 30, 2024. The increase between periods primarily relates to mark-to-market losses on our investments accounted for at fair value partially offset by an increase to total revenues.

Rental income. Rental income was $7.4 million for the six months ended June 30, 2025, compared to $8.0 million for the six months ended June 30, 2024, which was a decrease of approximately $0.6 million. The decrease between the periods was primarily due to a decrease in occupancy at Cityplace Tower.

Rooms revenue. Rooms revenue was $16.6 million for the six months ended June 30, 2025, compared to $8.2 million for the six months ended June 30, 2024, which was an increase of approximately $8.4 million. The increase between the periods is due to the Hospitality segment not being consolidated prior to April 19, 2024.

Food and beverage revenue. F&B revenue was $1.6 million for the six months ended June 30, 2025, compared to $0.8 million for the six months ended June 30, 2024, which was an increase of approximately $0.8 million. The increase between the periods is due to the Hospitality segment not being consolidated prior to April 19, 2024.

Interest and dividends. Interest and dividends totaled $23.9 million for the six months ended June 30, 2025, compared to $17.6 million for the six months ended June 30, 2024, which was an increase of approximately $6.3 million. The increase between the periods was attributed to an increase in dividends from equity investments.

Other income. Other income was approximately $0.6 million for the six months ended June 30, 2025, compared to $0.4 million for the six months ended June 30, 2024, which was an increase of approximately $0.2 million. The decrease between the periods was primarily due to a decrease in resort charges, associated with a decrease in Hospitality assets.

Property operating expenses. Property operating expenses were $12.5 million for the six months ended June 30, 2025, compared to $8.3 million for the six months ended June 30, 2024, which was an increase of approximately $4.2 million. The increase between the periods was primarily due to the NHT consolidation.

Property management fees. Property management fees were $0.9 million for the six months ended June 30, 2025, compared to $0.4 million for the six months ended June 30, 2024, which was an increase of approximately $0.5 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 $3.4 million for the six months ended June 30, 2025, compared to $3.0 million for the six months ended June 30, 2024, which was an increase of approximately $0.4 million. Real estate taxes and insurance expenses consist primarily of expenses from our investment in Cityplace Tower and our Hospitality properties. The increase between the periods was primarily due to the consolidation of NHT.

Advisory and administrative fees. For the six months ended June 30, 2025, the Company incurred administrative fees and advisory fees of $10.7 million. For the six months ended June 30, 2024, the Company incurred administrative fees and advisory fees of $6.7 million. The increase between the six months ended June 30, 2025 and the six months ended June 30, 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 $3.6 million for the six months ended June 30, 2025, compared to $2.9 million for the six months ended June 30, 2024, which was an increase of approximately $0.7 million. The increase between the periods is primarily attributed to the NHT consolidation.

Corporate general and administrative expenses. Corporate general and administrative expenses were $3.9 million for the six months ended June 30, 2025, compared to $6.0 million for the six months ended June 30, 2024, which was a decrease of approximately $2.1 million. The decrease between periods was primarily due to a write off of accrued payables and expenses.

Depreciation and amortization. Depreciation and amortization costs were $7.9 million for the six months ended June 30, 2025, compared to $6.9 million for the six months ended June 30, 2024, which was an increase of approximately $1.0 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 six months ended June 30, 2025, compared to $0 for the six months ended June 30, 2024.The increase between the periods was due to an increase in impairment charges relating to the Addison Property.

Interest expense. Interest expense was $13.9 million for the six months ended June 30, 2025, compared to $12.4 million for the six months ended June 30, 2024, which was an increase of approximately $1.5 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 $(0.2) million for the six months ended June 30, 2025, compared to $(1.0) million for the six months ended June 30, 2024, which was a decrease of approximately $0.8 million. The decrease between periods was primarily due to a decrease in net loss at Marriott Uptown.

Income tax expense (benefit). The Company has recorded income tax expense (benefit) of $0.6 million associated with the TRSs for the six months ended June 30, 2025 and $1.0 million associated with the TRSs for the six months ended June 30, 2024. The tax expense for the six months ended June 30, 2025 is partially decreased by the annual change in valuation allowance on a deferred tax asset of $0.2 million, and an income tax expense of $0.8 million for a net expense of $0.6 million for the six months ended June 30, 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 $(75.0) million for the six months ended June 30, 2025, compared to $3.1 million for the six months ended June 30, 2024, which was a decrease of approximately $(78.1) million. The losses for the six months ended June 30, 2025 were largely driven by mark-to-market losses on NSP common equity of $19.8 million, NREF OP Units of $9.3 million, IQHQ LP interests of $5.8 million and NREF common stock of $4.0 million. The gains for the six months ended June 30, 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 VB OP Units of $7.2 million, offset by NREF OP Units of $9.8 million, and NREF common stock of $7.3 million.

Realized gains (losses). Realized gains (losses) were $5.0 million for the six months ended June 30, 2025, compared to $(21.9) million for the six months ended June 30, 2024, which was an increase of approximately $26.9 million. The gains for the six months ended June 30, 2025 were primarily driven by realized gains on United Development Funding IV common equity. The losses for the six months ended June 30, 2024 were primarily driven by realized losses on the legacy CLOs of $22.8 million.