Company: NXDT
Filing Date: 2025-01-21
Form Type: 424B3
Source: 0001437749-25-001494
Chunk: 48

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-01-21
Form: 424B3
Chunk 48
---
 factors.

Since the REIT’s initial public offering in 2019, the Board has considered various transactions and alternate strategies with the goal of maximizing Unitholder value. In July 2019, the REIT announced the execution of a definitive agreement with Condor pursuant to which the REIT would acquire all of the outstanding equity interests of Condor and Condor OP by merger for a total purchase price of $318 million. In September 2020, as a result of various factors, including the onset of the COVID-19 pandemic, the Condor Transaction was terminated. Pursuant to the Condor Transaction, the REIT would have acquired 15 additional hospitality properties across eight U.S. states and increased its gross asset value to approximately $700 million.

In January 2021, the Board initiated a formal strategic review process to identify, explore and evaluate a broad range of potential strategic alternatives. Given the unprecedented decline in revenue throughout the hospitality industry in general and the REIT specifically, as a result of the COVID-19 pandemic, the strategic review included an exploration of capital raising options to fund near-term operations, debt service and other obligations and possible longer-term plans to recapitalize the REIT. A special committee of independent trustees comprised of Neil Labatte and Graham Senst was formed to oversee the strategic review process and work with members of management of the REIT (“Management”) to review alternatives. As part of the strategic review, the special committee retained an investment advisor to conduct a process to solicit investment or acquisition opportunities from third parties. This process was unsuccessful.

The global response to the COVID-19 pandemic had a large negative impact on the REIT’s operations. Occupancy declined from an average of 75.1% across the REIT’s portfolio in 2019 to a low of 12.17% across the portfolio during April 2020, and ADR declined from an average of $145.81 in 2019 to a low of $93.95 during April 2020. As a result, the REIT experienced material decreases in revenues, results of operations and cash flows. In May 2020, a going concern note was included in the REIT’s annual financial statements, highlighting the REIT’s serious financial difficulties and possible risk of bankruptcy. The COVID-19 pandemic also negatively impacted the REIT’s ability to obtain new financing. Between March 2020 and September 2022, the REIT received 51 loans with favourable terms from entities controlled or managed by Mr. Dondero (