NexPoint Real Estate Finance, Inc.

Previous wording

We are a commercial mortgage REIT incorporated in Maryland on June 7, 2019. Our strategy is to originate, structure and invest in first-lien mortgage loans, mezzanine loans, preferred equity, convertible notes, multifamily properties and common stock investments, as well as multifamily and SFR CMBS securitizations, promissory notes and mortgage backed securities, or our target assets. We primarily focus on investments in real estate sectors where our senior management team has operating expertise, including in the multifamily, SFR, self-storage and life science sectors predominantly in the top 50 MSAs. In addition, we target lending or investing in properties that are stabilized or have a light-transitional business plan.

Current wording

We are a commercial mortgage REIT incorporated in Maryland on June 7, 2019. Our strategy is to originate, structure and invest in first-lien mortgage loans, mezzanine loans, preferred equity, convertible notes, multifamily properties and common equity investments, as well as multifamily and SFR CMBS securitizations, promissory notes, revolving credit facilities and stock warrants, or our target assets. We primarily focus on investments in real estate sectors where our senior management team has operating expertise, including in the multifamily, SFR, self-storage and life science sectors predominantly in the top 50 MSAs. In addition, we target lending or investing in properties that are stabilized or have a light-transitional business plan.

Previous wording

We are externally managed by our Manager, a subsidiary of our Sponsor, an SEC-registered investment advisor, which has extensive real estate experience, having completed as of September 30, 2024 approximately $20.1 billion of gross real estate transactions since the beginning of 2012. In addition, our Sponsor, together with its affiliates and NexBank, is one of the most experienced global alternative credit managers managing approximately $9.6 billion of loans and debt or credit related investments as of September 30, 2024 and has managed credit investments for over 25 years. We believe our relationship with our Sponsor benefits us by providing access to resources including research capabilities, an extensive relationship network, other proprietary information, scalability, and a vast wealth of knowledge of information on real estate in our target assets and sectors.

Current wording

We are externally managed by our Manager, a subsidiary of our Sponsor, an SEC-registered investment advisor, which has extensive real estate experience, having completed as of March 31, 2025 approximately $21.3 billion of gross real estate transactions since the beginning of 2012. In addition, our Sponsor, together with its affiliates and NexBank, is one of the most experienced global alternative credit managers managing approximately $13.9 billion of loans and debt or credit related investments as of March 31, 2025 and has managed credit investments for over 25 years. We believe our relationship with our Sponsor benefits us by providing access to resources including research capabilities, an extensive relationship network, other proprietary information, scalability, and a vast wealth of knowledge of information on real estate in our target assets and sectors.

Previous wording

On October 15, 2021, a lawsuit (the “Bankruptcy Trust Lawsuit”) was filed by a litigation subtrust formed in connection with Highland’s bankruptcy 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, a lawsuit (the “UBS Lawsuit”) was filed by UBS Securities LLC and its affiliate against Mr. Dondero and a number of other persons and entities. Neither the Bankruptcy Trust Lawsuit nor the UBS Lawsuit include claims related to our business or our assets or operations. 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.

Current wording

On October 15, 2021, a lawsuit (the “Bankruptcy Trust Lawsuit”) was filed by a litigation subtrust formed in connection with Highland’s bankruptcy 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. On February 8, 2023, UBS Securities LLC and UBS AG London (collectively, “UBS”) filed a lawsuit in the Supreme Court of the State of New York, County of New York related to a default that occurred in 2009 on a warehouse facility between UBS and funds affiliated with Highland. The lawsuit makes claims against several persons and entities, including Mr. Dondero, the President of our Sponsor, seeking to collect on $1.3 billion in judgments UBS obtained against entities that were managed indirectly by Highland (the “UBS Lawsuit”). On March 7, 2023, the matter was removed to the United States District Court for the Southern District of New York. On April 6, 2023, UBS moved to have the case remanded to New York state court. The federal court remanded the state-law causes of action and retained and stayed the federal cause of action. On February 26, 2024, several of the respondents, including Mr. Dondero, filed motions in state court to dismiss the UBS Lawsuit on various grounds. 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 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 is appealing the denial of the motion to dismiss to the Appellate Division of the Supreme Court of the State of New York. Neither the Bankruptcy Trust Lawsuit nor the UBS Lawsuit include claims related to our business or our assets or operations. 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.

Previous wording

Change in net assets related to consolidated CMBS variable interest entities. Includes unrealized gain (loss) based on changes in the fair value of the assets and liabilities of the CMBS trusts, sales of CMBS trusts and net interest earned on the consolidated CMBS trusts. See Note 4 to our consolidated financial statements for additional information.

Current wording

Change in net assets related to consolidated CMBS variable interest entities. Includes unrealized gain (loss) based on changes in the fair value of the assets and liabilities of the CMBS trusts and net interest earned on the consolidated CMBS trusts. See Note 4 to our consolidated financial statements for additional information.

Previous wording

Revenues from consolidated real estate owned (Note 8). Reflects the total revenues for our multifamily properties. Revenues include rental income and other income of the multifamily properties.

Current wording

Revenues from consolidated real estate owned (Note 8). Reflects the total revenues for our multifamily properties. Revenues include rental income from the multifamily properties.

Previous wording

Other income. Includes placement fees, exit fees and other miscellaneous income items.

Current wording

Other income. Includes exit fees, placement fees and other miscellaneous income items.

Previous wording

Loan servicing fees. We pay various service providers fees for loan servicing of our SFR Loans, mezzanine loans and consolidated CMBS trusts. We classify the expenses related to the administration of the SFR Loans and mezzanine loans as servicing fees while the fees associated with the CMBS trusts are included as a component of the change in net assets related to consolidated CMBS variable interest entities (“VIEs”).

Current wording

Loan servicing fees. We pay various service providers fees for loan servicing of our SFR Loans, mezzanine loans and consolidated CMBS trusts. We classify the expenses related to the administration of the SFR Loans and mezzanine loans as servicing fees while the fees associated with the CMBS trusts are included as a component of the change in net assets related to consolidated CMBS VIEs.

Previous wording

Results of Operations for the Three and Nine Months Ended September 30, 2024, and 2023

Current wording

Results of Operations for the Three Months Ended March 31, 2025, and 2024

Previous wording

The following tables set forth a summary of our operating results for the three and nine months ended September 30, 2024 and 2023 (in thousands):

Current wording

The following tables set forth a summary of our operating results for the three months ended March 31, 2025 and 2024 (in thousands):

Previous wording

The change in our net income (loss) for the three months ended September 30, 2024 as compared to the net income (loss) for the three months ended September 30, 2023 primarily relates to an increase in interest income due to higher yielding assets and a decrease in interest expense related to the repayment of one of our senior loans. Our net income (loss) attributable to common stockholders for the three months ended September 30, 2024 was approximately $16.1 million. We had approximately $12.5 million in net interest income, generated income of $18.7 million in other income, incurred operating expenses of $7.8 million, allocated $0.9 million of income to Series A Preferred stockholders, allocated $2.4 million of income to Series B Preferred stockholders, and allocated $3.9 million of income to redeemable noncontrolling interests for the three months ended September 30, 2024.

Current wording

The change in our net income (loss) for the three months ended March 31, 2025 as compared to the net income (loss) for the three months ended March 31, 2024 primarily relates to an increase in interest income due to higher yielding assets and a decrease in interest expense related to the repayment of one of our senior loans. Our net income (loss) attributable to common stockholders for the three months ended March 31, 2025 was approximately $16.5 million. We had approximately $11.5 million in net interest income, generated income of $22.7 million in other income, incurred operating expenses of $8.3 million, allocated $0.9 million of income to Series A Preferred stockholders, allocated $4.4 million of income to Series B Preferred stockholders, and allocated $4.2 million of income to redeemable noncontrolling interests for the three months ended March 31, 2025.

Previous wording

Net interest income. Net interest loss was $6.4 million for the nine months ended September 30, 2024 compared to net interest income of $13.0 million for the nine months ended September 30, 2023, which was a decrease of approximately $6.5 million. The decrease between the periods is primarily due to accelerated amortization of the premium associated with the prepayment on a senior loan during the nine months ended September 30, 2024. As of September 30, 2024 we own 83 discrete investments compared to 89 as of September 30, 2023.

Current wording

Net interest income (loss). Net interest income was $11.5 million for the three months ended March 31, 2025 compared to net interest loss of $12.8 million for the three months ended March 31, 2024 which was an increase of approximately $24.3 million. The increase between the periods is primarily due to accelerated amortization of the premium associated with the prepayment on a senior loan during the three months ended March 31, 2024.

Previous wording

Other income (expense). Other income was $18.7 million for the three months ended September 30, 2024 compared to $(15.5) million for the three months ended September 30, 2023, which was an increase of approximately $34.2 million. This was primarily due to an increase in unrealized gain related to consolidated CMBS VIEs and an increase in fair value marks between the periods.

Current wording

Other income. Other income was $22.7 million for the three months ended March 31, 2025 compared to $9.2 million for the three months ended March 31, 2024, which was an increase of approximately $13.5 million. This was primarily due to an increase in unrealized gain related to consolidated CMBS VIEs and an increase in income of equity method investments between the periods.

Previous wording

G&A expenses. G&A expenses were $2.2 million for the three months ended September 30, 2024 compared to $2.5 million for the three months ended September 30, 2023, which was a decrease of approximately $0.3 million. The decrease between the periods was primarily due to $0.2 million increase in payroll expense compared to the prior period.

Current wording

G&A expenses. G&A expenses were $2.5 million for the three months ended March 31, 2025 compared to $4.2 million for the three months ended March 31, 2024, which was a decrease of approximately $1.7 million. The decrease between the periods was primarily due to $1.7 million decrease in legal expense compared to the prior period.

Previous wording

Loan servicing fees. Loan servicing fees were $0.3 million for the three months ended September 30, 2024 compared to $1.0 million for the three months ended September 30, 2023, which was a decrease of approximately $0.7 million. The decrease between the periods was primarily due to a decrease in SFR Loans in the portfolio compared to the prior period.

Current wording

Loan servicing fees. Loan servicing fees were $0.3 million for the three months ended March 31, 2025 compared to $0.6 million for the three months ended March 31, 2024, which was a decrease of approximately $0.2 million. The decrease between the periods was primarily due to a decrease in SFR Loans in the portfolio compared to the prior period.

Previous wording

Management fees. Management fees were $1.0 million for the three months ended September 30, 2024 compared to $0.8 million for the three months ended September 30, 2023.

Current wording

Management fees. Management fees were $1.4 million for the three months ended March 31, 2025 compared to $0.8 million for the three months ended March 31, 2024. The increase between the periods was primarily due to an increase in Equity as defined by the Management Agreement.

Previous wording

Expenses from consolidated real estate owned. Expenses from consolidated real estate owned were $4.3 million for the three months ended September 30, 2024, compared to $1.9 million for the three months ended September 30, 2023, which was an increase of approximately $2.4 million. The increase is due to the consolidation of Alexander at the District.

Current wording

Expenses from consolidated real estate owned. Expenses from consolidated real estate owned were $4.0 million for the three months ended March 31, 2025, compared to $5.4 million for the three months ended March 31, 2024, which was an decrease of approximately $1.4 million. The decrease between the periods is due to a decrease in depreciation and amortization.

Previous wording

Starting in the second quarter of 2024, EAD per diluted common share and CAD per diluted common share are based on adjusted weighted average common shares outstanding - diluted. Adjusted weighted average common shares outstanding - diluted is a non-GAAP measure calculated by subtracting the dilutive effect of potential redemptions of Series B Preferred shares for shares of our common stock from weighted average common shares outstanding - diluted. We believe providing adjusted weighted average common shares outstanding - diluted and EAD per diluted common share and CAD per diluted common share based on adjusted weighted average common shares outstanding - diluted is helpful to our investors in their assessment of our performance without the potential dilutive effective of the Series B Preferred shares. We have the right to redeem the Series B Preferred shares for cash or shares of our common stock. Additionally, Series B Preferred redemptions are capped at 2% of the outstanding Series B Preferred shares per month, 5% per quarter and 20% per year. The Company maintains sufficient liquidity to pay cash to cover any redemptions up to the quarterly redemption cap. Further, it is the Company's intent to not settle Series B Preferred redemptions in shares of common stock when the Company's common stock price is below book value.

Current wording

Starting in the second quarter of 2024, EAD per diluted common share and CAD per diluted common share are based on adjusted weighted average common shares outstanding - diluted. Adjusted weighted average common shares outstanding - diluted is a non-GAAP measure calculated by subtracting the dilutive effect of potential redemptions of Series B Preferred shares for shares of our common stock from weighted average common shares outstanding - diluted. We believe providing adjusted weighted average common shares outstanding - diluted and EAD per diluted common share and CAD per diluted common share based on adjusted weighted average common shares outstanding - diluted is helpful to our investors in their assessment of our performance without the potential dilutive effect of the Series B Preferred shares. We have the right to redeem the Series B Preferred shares for cash or shares of our common stock. Additionally, Series B Preferred redemptions are capped at 2% of the outstanding Series B Preferred shares per month, 5% per quarter and 20% per year. The Company maintains sufficient liquidity to pay cash to cover any redemptions up to the quarterly redemption cap. Further, it is the Company's intent to not settle Series B Preferred redemptions in shares of common stock when the Company's common stock price is below book value.

Previous wording

The following tables provide a reconciliation of EAD and CAD to GAAP net income including the dilutive effect of noncontrolling interests and adjusted weighted average common shares outstanding - diluted to weighted average common shares outstanding - diluted for the three and nine months ended September 30, 2024 and 2023 (in thousands, except per share amounts):

Current wording

The following table provides a reconciliation of EAD and CAD to GAAP net income including the dilutive effect of noncontrolling interests and adjusted weighted average common shares outstanding - diluted to weighted average common shares outstanding - diluted for the three months ended March 31, 2025 and 2024 (in thousands, except per share amounts):

Previous wording

(2)Unrealized gains are the net change in unrealized loss on investments held at fair value applicable to common stockholders.

Current wording

(1)Unrealized gains are the net change in unrealized loss on investments held at fair value applicable to common stockholders.

Previous wording

(3)Starting in the second quarter of 2024, EAD per diluted common share, CAD per diluted common share and adjusted weighted average common shares outstanding - diluted do not include the dilutive effect of the potential redemption of Series B Preferred Stock for common shares. Prior periods have not been updated to reflect this adjustment because the dilutive effect of potential Series B Preferred redemptions were immaterial to prior periods. In the nine months ended September 30, 2024, the adjusted weighted average common shares outstanding - diluted for the first quarter does not exclude the dilutive effect of the potential redemption of Series B Preferred Stock for common shares.

Current wording

(2)Starting in the second quarter of 2024, EAD per diluted common share, CAD per diluted common share and adjusted weighted average common shares outstanding - diluted do not include the dilutive effect of the potential redemption of Series B Preferred Stock for common shares. Prior periods have not been updated to reflect this adjustment because the dilutive effect of potential Series B Preferred redemptions were immaterial to prior periods. In the three months ended March 31, 2024, the adjusted weighted average common shares outstanding - diluted does not exclude the dilutive effect of the potential redemption of Series B Preferred Stock for common shares.

Previous wording

Our portfolio consists of SFR Loans, CMBS B-Pieces, CMBS I/O Strips, mezzanine loans, preferred equity investments, common stock investments, preferred stock investments, multifamily properties, promissory notes, and mortgage backed securities with a combined unpaid principal balance of $1.5 billion as of September 30, 2024 and assumes the CMBS Entities’ assets and liabilities are not consolidated. The following table sets forth additional information relating to our portfolio as of September 30, 2024 (dollars in thousands):

Current wording

Our portfolio consists of SFR Loans, CMBS B-Pieces, CMBS I/O Strips, mezzanine loans, preferred equity investments, common stock investments, preferred stock investments, multifamily properties, promissory notes, revolving credit facilities and stock warrants with a combined unpaid principal balance of $1.5 billion as of March 31, 2025 and assumes the CMBS Entities’ assets and liabilities are not consolidated. The following table sets forth additional information relating to our portfolio as of March 31, 2025 (dollars in thousands):

Previous wording

(1)Our total portfolio represents the current principal amount of the consolidated SFR Loans, CMBS I/O Strips, mezzanine loans, preferred equity, multifamily properties, promissory notes, a mortgage backed security as well as the net equity of our CMBS B-Piece investments and stock warrants.

Current wording

(1)Our total portfolio represents the current principal amount of the consolidated senior loans, CMBS I/O Strips, mezzanine loans, preferred equity, multifamily properties, promissory notes, revolving credit facilities and stock warrants as well as the net equity of our CMBS B-Piece investments.

Previous wording

(17)Real Estate is a 204-unit multifamily property. As of September 30, 2024, the property was 97.1% occupied, with effective rent per occupied unit of $1,855 per month.

Current wording

(10)Real Estate is a 204-unit multifamily property. As of March 31, 2025, the property was 96.1% occupied, with effective rent per occupied unit of $1,796 per month.

Previous wording

(18)Real Estate is a 280-unit multifamily property. As of September 30, 2024, the property was 93.2% occupied with effective rent per occupied unit of $1,693 per month.

Current wording

(11)Real Estate is a 280-unit multifamily property. As of March 31, 2025, the property was 98.2% occupied with effective rent per occupied unit of $1,597 per month.

Previous wording

Our short-term liquidity requirements consist primarily of funds necessary to pay for our ongoing commitments to repay borrowings, maintain our investments, make distributions to our stockholders and other general business needs. Our investments generate liquidity on an ongoing basis through principal and interest payments, prepayments and dividends. We believe that our available cash, expected operating cash flows, and potential debt or equity financings will provide sufficient funds for our operations, anticipated scheduled debt service payments, potential obligations to fulfill unfunded commitments and dividend requirements for the twelve-month period following September 30, 2024.

Current wording

Our short-term liquidity requirements consist primarily of funds necessary to pay for our ongoing commitments to repay borrowings, maintain our investments, make distributions to our stockholders and other general business needs. Our investments generate liquidity on an ongoing basis through principal and interest payments, prepayments and dividends. We believe that our available cash, expected operating cash flows, and potential debt or equity financings will provide sufficient funds for our operations, anticipated scheduled debt service payments, any potential obligations to fulfill unfunded commitments and dividend requirements for the twelve-month period following March 31, 2025.

Previous wording

Prior to the Formation Transaction, two of our subsidiaries entered into a loan and security agreement, dated July 12, 2019, with Freddie Mac (the “Credit Facility”). Under the Credit Facility, these entities borrowed approximately $788.8 million in connection with their acquisition of senior pooled mortgage loans backed by SFR properties (the “Underlying Loans”). No additional borrowings can be made under the Credit Facility, and our obligations will be secured by the Underlying Loans. The Credit Facility was assumed by the Company as part of the Formation Transaction. As such, the remaining outstanding balance of $788.8 million was contributed to the Company on February 11, 2020. Our borrowings under the Credit Facility will mature on July 12, 2029; however, if an Underlying Loan matures prior to July 12, 2029, we will be required to repay the portion of the Credit Facility that is allocated to that loan. As of September 30, 2024, the outstanding balance on the Credit Facility was $113.3 million.

Current wording

Prior to the Formation Transaction, two of our subsidiaries entered into the Credit Facility. Under the Credit Facility, these entities borrowed approximately $788.8 million in connection with their acquisition of the Underlying Loans. No additional borrowings can be made under the Credit Facility, and our obligations will be secured by the Underlying Loans. The Credit Facility was assumed by the Company as part of the Formation Transaction. As such, the remaining outstanding balance of $788.8 million was contributed to the Company on February 11, 2020. Our borrowings under the Credit Facility will mature on July 12, 2029; however, if an Underlying Loan matures prior to July 12, 2029, we will be required to repay the portion of the Credit Facility that is allocated to that loan. As of March 31, 2025, the outstanding balance on the Credit Facility was $109.7 million.

Previous wording

As discussed in Note 9 to our consolidated financial statements, we, through the OP and the Subsidiary OPs, have borrowed approximately $239.0 million under our repurchase agreements and posted approximately $1.0 billion par value of our CMBS B-Piece, CMBS I/O Strip and mortgage backed security investments as collateral. The CMBS B-Pieces, CMBS I/O Strips and mortgage backed securities held as collateral are illiquid and irreplaceable in nature. These assets are restricted solely to satisfy the interest and principal balances owed to the lender as described in our Annual Report.

Current wording

As discussed in Note 9 to our consolidated financial statements, we, through the OP and the Subsidiary OPs, have borrowed approximately $258.6 million under our repurchase agreements and posted approximately $737.4 million par value of our CMBS B-Piece and CMBS I/O Strip investments as collateral. The CMBS B-Pieces and CMBS I/O Strips held as collateral are illiquid and irreplaceable in nature. These assets are restricted solely to satisfy the interest and principal balances owed to the lender.

Previous wording

(4)On April 15, 2020, three of our subsidiaries entered into a master repurchase agreement with Mizuho. Borrowings under these repurchase agreements are collateralized by portions of the CMBS B-Pieces, CMBS I/O Strips, and mortgage backed securities.

Current wording

(4)Borrowings under these repurchase agreements are collateralized by portions of the CMBS B-Pieces and CMBS I/O Strips.

Previous wording

On March 15, 2022, the Company, the OP and the Manager separately entered into the 2022 Equity Distribution Agreements with the 2022 Sales Agents, pursuant to which the Company may issue and sell from time to time shares of the Company’s common stock and Series A Preferred Stock having an aggregate sales price of up to $100.0 million in the 2022 ATM Program. The 2022 Equity Distribution Agreements provide for the issuance and sale of common stock or Series A Preferred Stock by the Company through a sales agent acting as a sales agent or directly to the sales agent acting as principal for its own account at a price agreed upon at the time of sale. As of September 30, 2024, pursuant to the 2022 Equity Distribution Agreements, the Company had sold 531,728 shares of its common stock and zero shares of Series A Preferred Stock for total gross sales of $12.6 million. For additional information about the 2022 ATM Program, see Note 11 to our consolidated financial statements.

Current wording

On March 15, 2022, the Company, the OP and the Manager separately entered into Equity Distribution Agreements with each of Raymond James, Keefe, Bruyette & Woods, Inc., Robert W. Baird & Co. Incorporated and Virtu Americas LLC, pursuant to which the Company may issue and sell from time to time under its ATM Program. The Equity Distribution Agreements provide for the issuance and sale of common stock or Series A Preferred Stock by the Company through a sales agent acting as a sales agent or directly to the sales agent acting as principal for its own account at a price agreed upon at the time of sale. As of March 31, 2025, pursuant to the Equity Distribution Agreements, the Company has sold 531,728 shares of its common stock and zero shares of Series A Preferred Stock for total gross sales of $12.6 million. For additional information about the ATM Program, see Note 11 to our consolidated financial statements.

Previous wording

On November 2, 2023, the Company announced the launch of a continuous public offering of up to 16,000,000 shares of its Series B Preferred Stock at a price to the public of $25.00 per share, for gross proceeds of $400 million. Beginning on the first day of the calendar month following the date of original issuance, the Series B Preferred Stock are redeemable at the option of the holder at a redemption price per share equal to the liquidation preference of $25.00 per share, plus all accrued but unpaid cash dividends and less certain redemption fees. After the first day of the calendar month following the second anniversary of the original issue date, the Company also has the option to redeem, in whole or in part, subject to certain restrictions in the Company's charter and the articles supplementary setting forth the terms of the Series B Preferred Stock, at a redemption price per share equal to the liquidation preference of $25.00 per share, plus any accrued but unpaid cash dividends. In all optional redemptions, the Company has the right, in its sole discretion, to pay the redemption in cash or in equal value of shares of the Company’s common stock for so long as the common stock is listed or admitted to trading on the NYSE or another national securities exchange or automated quotation system. The Dealer Manager serves as the Company’s dealer manager in connection with the offering. The Dealer Manager uses its reasonable best efforts to sell the shares of Series B Preferred Stock offered in the offering, and the Company pays the Dealer Manager, subject to the discounts and other special circumstances described or referenced therein, (i) Selling Commissions of 7.0% of the aggregate gross proceeds from sales of Series B Preferred Stock in the offering and (ii) a Dealer Manager Fee of 3.0% of the gross proceeds from sales of Series B Preferred Stock in the offering. The Dealer Manager, subject to federal and state securities laws, will reallow all or any portion of the Selling Commissions and may reallow a portion of the Dealer Manager Fee to other securities dealers that the Dealer Manager may retain who sold the shares of Series B Preferred Stock as is described more fully in the agreements between such dealers and the Dealer Manager. The Company expects that the offering will terminate on the earlier of the date the Company sells all 16,000,000 shares of the Series B Preferred Stock in the offering or March 14, 2025 (which is the third anniversary of the effective date of the Company’s registration statement), which may be extended by the Board in its sole discretion. The Board may elect to terminate this offering at any time. As of September 30, 2024, the Company has sold 4,970,885 shares of Series B Preferred Stock for total gross proceeds of $121.5 million.

Current wording

On November 2, 2023, the Company announced the launch of a continuous public offering of up to 16,000,000 shares of its Series B Preferred Stock at a price to the public of $25.00 per share, for gross proceeds of $400.0 million. Beginning on the first day of the calendar month following the date of original issuance, the Series B Preferred Stock are redeemable at the option of the holder at a redemption price per share equal to the liquidation preference of $25.00 per share, plus all accrued but unpaid cash dividends and less certain redemption fees. After the first day of the calendar month following the second anniversary of the original issue date, the Company also has the option to redeem, in whole or in part, subject to certain restrictions in the Company's charter and the articles supplementary setting forth the terms of the Series B Preferred Stock, at a redemption price per share equal to the liquidation preference of $25.00 per share, plus any accrued but unpaid cash dividends. In all optional redemptions, the Company has the right, in its sole discretion, to pay the redemption in cash or in equal value of shares of the Company’s common stock for so long as the common stock is listed or admitted to trading on the NYSE or another national securities exchange or automated quotation system. The Dealer Manager serves as the Company’s dealer manager in connection with the offering. The Dealer Manager uses its reasonable best efforts to sell the shares of Series B Preferred Stock offered in the offering, and the Company pays the Dealer Manager, subject to the discounts and other special circumstances described or referenced therein, (i) Selling Commissions of 7.0% of the aggregate gross proceeds from sales of Series B Preferred Stock in the offering and (ii) a Dealer Manager Fee of 3.0% of the gross proceeds from sales of Series B Preferred Stock in the offering. The Dealer Manager, subject to federal and state securities laws, will reallow all or any portion of the Selling Commissions and may reallow a portion of the Dealer Manager Fee to other securities dealers that the Dealer Manager may retain who sold the shares of Series B Preferred Stock as is described more fully in the agreements between such dealers and the Dealer Manager. The Company expects that the offering will terminate on the earlier of the date the Company sells all 16,000,000 shares of the Series B Preferred Stock in the offering or December 29, 2026 (which is the third anniversary of the effective date of the Company’s registration statement), which may be extended by the Board in its sole discretion. The Board may elect to terminate this offering at any time. As of March 31, 2025, the Company has sold 8,485,120 shares of Series B Preferred Stock for total gross proceeds of $207.3 million.

Previous wording

In 2022 and 2023, the Company issued a total of $35.0 million and $15.0 million in aggregate principal amount, respectively, of its 5.75% Notes for proceeds of approximately $34.6 million and $13.6 million, respectively, after original issue discount and underwriting fees.

Current wording

In 2022 and 2023, the Company issued a total of $35.0 million and $15.0 million in aggregate principal amount, respectively, of its 5.75% Notes for proceeds of approximately $35.1 million and $13.6 million, respectively, after original issue discount and underwriting fees.

Previous wording

We may seek additional sources of liquidity from further repurchase facilities, other borrowings and future offerings of common and preferred equity and debt securities and contributions from existing holders of the OP or Subsidiary OPs. In addition, we may apply our existing cash and cash equivalents and cash flows from operations to any liquidity needs. As of September 30, 2024, our cash and cash equivalents were $34.7 million.

Current wording

We may seek additional sources of liquidity from further repurchase facilities, other borrowings and future offerings of common and preferred equity and debt securities and contributions from existing holders of the OP or Subsidiary OPs. In addition, we may apply our existing cash and cash equivalents and cash flows from operations to any liquidity needs. As of March 31, 2025, our cash and cash equivalents were $19.2 million.

Previous wording

The following table presents selected data from our Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and September 30, 2023 (in thousands):

Current wording

The following table presents selected data from our Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and March 31, 2024 (in thousands):

Previous wording

Cash flows from operating activities. During the nine months ended September 30, 2024, net cash provided by operating activities was $24.9 million compared to net cash provided by operating activities of $28.4 million for the nine months ended September 30, 2023. This decrease primarily relates to the change in unrealized gains on investments held at fair value.

Current wording

Cash flows from operating activities. During the three months ended March 31, 2025, net cash provided by operating activities was $16.0 million compared to net cash provided by operating activities of $17.7 million for the three months ended March 31, 2024. This decrease primarily relates to the change in unrealized gains on investments held at fair value.

Previous wording

Cash flows from investing activities. During the nine months ended September 30, 2024, net cash provided by investing activities was $735.9 million compared to net cash provided by investing activities of $639.5 million for the nine months ended September 30, 2023. This increase was primarily due to the proceeds from payments received on mortgage loans held for investment.

Current wording

Cash flows from investing activities. During the three months ended March 31, 2025, net cash provided by investing activities was $71.3 million compared to net cash provided by investing activities of $545.4 million for the three months ended March 31, 2024. This decrease was primarily due to a decrease in proceeds from payments received on mortgage loans held for investment.

Previous wording

Cash flows from financing activities. During the nine months ended September 30, 2024, net cash used in financing activities was $738.8 million compared to net cash used in financing activities of $675.3 million for the nine months ended September 30, 2023. The increase primarily relates to principal repayments on borrowings under secured financing agreements and offset with proceeds from the issuance of Series B Preferred Stock.

Current wording

Cash flows from financing activities. During the three months ended March 31, 2025, net cash used in financing activities was $70.9 million compared to net cash used in financing activities of $560.5 million for the three months ended March 31, 2024. The increase primarily relates to a decrease of principal repayments on borrowings under secured financing agreements.

Previous wording

We are also a “smaller reporting company” as defined in Regulation S-K under the Securities Act, and may elect to take advantage of certain of the scaled disclosures available to smaller reporting companies. We may be a smaller reporting company even after we are no longer an “emerging growth company.”

Current wording

We are also a “smaller reporting company” as defined under the Exchange Act, and may elect to take advantage of certain of the scaled disclosures available to smaller reporting companies. We may be a smaller reporting company even after we are no longer an “emerging growth company.”

Previous wording

We intend to make regular quarterly dividend payments to holders of our common stock. We also intend to make the accrued dividend payments on the Series A Preferred Stock, which are payable quarterly in arrears as provided in the articles supplementary setting forth the terms of the Series A Preferred Stock and the Series B Preferred Stock, which are payable monthly as provided in the articles supplementary setting forth the terms of the Series B Preferred Stock. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains. As a REIT, we will be subject to federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years. We intend to make regular quarterly dividend payments of all or substantially all of our taxable income, which is not used to pay a dividend on the Series A Preferred Stock and Series B Preferred Stock, to holders of our common stock out of assets legally available for this purpose, if and to the extent authorized by our Board. Before we make any dividend payments, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our debt payable. If our cash available for distribution is less than our taxable income, we could be required to sell assets, borrow funds or raise additional capital to make cash dividends or we may make a portion of the required dividend in the form of a taxable distribution of stock or debt securities.

Current wording

We intend to make regular quarterly dividend payments to holders of our common stock. We also intend to make the accrued dividend payments on the Series A Preferred Stock, which are payable quarterly in arrears as provided in the articles supplementary setting forth the terms of the Series A Preferred Stock, and the Series B Preferred Stock, which are payable monthly as provided in the articles supplementary setting forth the terms of the Series B Preferred Stock. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains. 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 intend to make regular quarterly dividend payments of all or substantially all of our taxable income, which is not used to pay dividends on the Series A Preferred Stock and Series B Preferred Stock, to holders of our common stock out of assets legally available for this purpose, if and to the extent authorized by our Board. Before we make any dividend payments, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our debt payable. If our cash available for distribution is less than our taxable income, we could be required to sell assets, borrow funds or raise additional capital to make cash dividends or we may make a portion of the required dividend in the form of a taxable distribution of stock or debt securities.

Previous wording

We will make dividend payments to holders of our common stock based on our estimate of taxable earnings per share of common stock, but not earnings calculated pursuant to GAAP. Our dividends and taxable income and GAAP earnings will typically differ due to items such as depreciation and amortization, fair-value adjustments, differences in premium amortization and discount accretion and non-deductible G&A expenses. Our quarterly dividends per share of our common stock may be substantially different than our quarterly taxable earnings and GAAP earnings per share. Our Board declared the second regular quarterly dividend to common stockholders of $0.50 per share on April 29, 2024, which was paid on June 28, 2024, to stockholders of record as of June 14, 2024. Our Board declared a Series A Preferred Stock dividend to Series A Preferred stockholders of $0.53125 per share on June 7, 2024, which was paid on July 25, 2024, to Series A Preferred stockholders of record as of July 15, 2024. On March 22, 2024, our Board declared a Series B Preferred Stock dividend to Series B Preferred stockholders of $0.1875, which was paid on May 6, 2024, to stockholders of record as of April 25, 2024. On April 18, 2024, our Board declared a Series B Preferred Stock dividend to Series B Preferred stockholders of $0.1875, which was paid on June 5, 2024, to stockholders of record as of May 24, 2024. On May 23, 2024, our Board declared a Series B Preferred Stock dividend to Series B Preferred stockholders of $0.1875, which was paid on July 5, 2024, to stockholders of record as of June 25, 2024. On June 25, 2024, our Board declared a Series B Preferred Stock dividend to Series B Preferred stockholders of $0.1875, which was paid on August 5, 2024, to stockholders of record as of July 25, 2024. Our Board declared the third regular quarterly dividend to common stockholders of $0.50 per share on July 29, 2024, which was paid on September 30, 2024, to stockholders of record as of September 13, 2024. On July 16, 2024, our Board declared a Series B Preferred Stock dividend to Series B Preferred stockholders of $0.1875, which was paid on September 5, 2024, to stockholders of record as of August 23, 2024. On August 19, 2024, our Board declared a Series B Preferred Stock dividend to Series B Preferred stockholders of $0.1875, which was paid on October 7, 2024, to stockholders of record as of September 25. On September 9, 2024, our Board declared a Series A Preferred Stock dividend of $0.53125 per share, which was paid on October 25, 2024, to stockholders of record as of October 15, 2024. On September 18, 2024, our Board declared a Series B Preferred Stock dividend to Series B Preferred stockholders of $0.1875, which was paid on November 5, 2024, to stockholders of record as of October 25, 2024.

Current wording

We will make dividend payments to holders of our common stock based on our estimate of taxable earnings per share of common stock, but not earnings calculated pursuant to GAAP. Our dividends and taxable income and GAAP earnings will typically differ due to items such as depreciation and amortization, fair-value adjustments, differences in premium amortization and discount accretion and non-deductible G&A expenses. Our quarterly dividends per share of our common stock may be substantially different than our quarterly taxable earnings and GAAP earnings per share. On November 21, 2024, our Board declared a Series B Preferred Stock dividend to Series B Preferred stockholders of $0.1875 per share, which was paid on January 6, 2025 to stockholders of record as of December 24, 2024. On December 12, 2024, our Board declared a Series A Preferred Stock dividend to Series A Preferred stockholders of $0.53125 per share, which was paid on January 25, 2025, to Series A Preferred stockholders of record as of January 12, 2025. On December 23, 2024, our Board declared a Series B Preferred Stock dividend to Series B Preferred stockholders of $0.1875 per share, which was paid on February 5, 2025, to Series B Preferred stockholders of record as of January 24, 2025. On January 15, 2025, our Board declared a Series B Preferred Stock dividend to Series B Preferred stockholders of $0.1875, which was paid on March 5, 2025, to Series B Preferred stockholders of record as of February 25, 2025. On February 19, 2025, our Board declared a Series B Preferred Stock dividend to Series B Preferred stockholders of $0.1875, which was paid on April 7, 2025, to Series B Preferred stockholders of record as of March 25, 2025. Our Board declared the first quarterly dividend to common stockholders of $0.50 per share on February 24, 2025, which was paid on March 31, 2025, to common stockholders of record as of March 14, 2025. On February 24, 2025, our Board declared a Series A Preferred dividend to Series A Preferred stockholders of $0.53125 per share, which was paid on April 25, 2025, to Series A Preferred stockholders of record as of April 15, 2025. On March 20, 2025, our Board declared a Series B Preferred Stock dividend to Series B Preferred stockholders of $0.1875, which was paid on May 5, 2025, to Series B Preferred stockholders of record as of April 25, 2025. On March 20, 2025, our Board declared a Series B Preferred Stock dividend to Series B Preferred stockholders of $0.1875 per share, which will be paid on June 5, 2025, to Series B Preferred stockholders of record as of May 23, 2025. On March 20, 2025, our Board declared a Series B Preferred Stock dividend to Series B Preferred stockholders of $0.1875 per share, which will be paid on July 7, 2025, to Series B Preferred stockholders of record as of June 25, 2025.

Previous wording

On December 8, 2022 and in connection with a restructuring of NSP, the Company, through REIT Sub, together with NexPoint Diversified Real Estate Trust ("NXDT"), an entity that is advised by an affiliate of the Manager, Highland Income Fund and NexPoint Real Estate Strategies Fund (collectively, the "Co-Guarantors"), as guarantors, entered into a sponsor guaranty agreement (the "NSP Sponsor Guaranty Agreement") in favor of Extra Space Storage, LP ("Extra Space") pursuant to which REIT Sub and the Co-Guarantors guaranteed obligations of NSP with respect to accrued dividends on NSP’s newly created Series D preferred stock and two promissory notes in an aggregate principal amount of approximately $64.2 million issued to Extra Space. The guaranties by REIT Sub and the Co-Guarantors are capped at $97.6 million, and each of REIT Sub and the Co-Guarantors generally guaranteed the foregoing obligations of NSP up to the cap amount on a pro rata basis with respect to its percentage ownership of NSP’s common stock. On February 15, 2023, NSP paid down approximately $15.0 million of these promissory notes, resulting in an aggregate principal amount of approximately $49.2 million. On December 8, 2023, NSP paid down the remaining principal balance of $49.2 million. The NSP Series D preferred stock remains outstanding as of September 30, 2024. As of September 30, 2024, the outstanding NSP Series D Preferred Stock accrued dividends was $11.6 million and the Company and NexPoint Diversified Real Estate Trust are jointly and severally liable for 85.90% of the guaranteed amount equal to $10.0 million.

Current wording

On December 8, 2022, the Co-Guarantors, as guarantors, entered into the NSP Sponsor Guaranty Agreement in favor of Extra Space pursuant to which REIT Sub and the Co-Guarantors guaranteed obligations of NSP with respect to accrued dividends on NSP’s newly created Series D preferred stock and two promissory notes in an aggregate principal amount of approximately $64.2 million issued to Extra Space. The guaranties by REIT Sub and the Co-Guarantors are capped at $97.6 million, and each of REIT Sub and the Co-Guarantors generally guaranteed the foregoing obligations of NSP up to the cap amount on a pro rata basis with respect to its percentage ownership of NSP’s common stock. On February 15, 2023, NSP paid down approximately $15.0 million of these promissory notes, resulting in an aggregate principal amount of approximately $49.2 million. On December 8, 2023, NSP paid down the remaining principal balance of $49.2 million. The NSP Series D preferred stock remains outstanding as of March 31, 2025. As of March 31, 2025, the outstanding NSP Series D Preferred Stock accrued dividends was $12.5 million and the Company and NexPoint Diversified Real Estate Trust are jointly and severally liable for 85.90% of the guaranteed amount equal to $10.7 million.