Company: NXDT
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001356115-25-000003
Chunk: 443

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1A
Chunk 443
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 estate taxes, utilities, insurance costs and other capital expenditures may negatively impact NHT’s operating results.

As a matter of conducting business in the ordinary course, certain significant expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs, and related charges, must be made throughout the period of ownership of real property regardless of whether a property is producing sufficient income to pay such expenses. In order to retain desirable hotel destinations and to generate adequate revenue over the long term, NHT must maintain or, in some cases, improve a property’s condition to meet market demand. These maintenance and improvement costs may be significant and may be costs NHT is unable to pass on to its hotel guests. NHT is also subject to utility and property tax risk relating to increased costs that NHT may experience as a result of higher resource prices as well as its exposure to significant increases in property taxes. There is a risk that property taxes may be raised as a result of revaluations of properties and their adherent tax rates. In some instances, enhancements to properties may result in significant increases in property assessments following a revaluation. Additionally, utility expenses, mainly consisting of natural gas and electricity service charges, have previously been subject to considerable price fluctuations. NHT may incur general liability related to guests on its properties for which it is found negligent, or for claims that are otherwise not fully covered by insurance. Any significant increase in these costs may have an adverse effect on NHT’s business, cash flows, financial condition, and results of operations and ability to make distributions to NHT’s unitholders, and, as a result of the accounting requirement that the Company consolidate NHT as of April 19, 2024, the Company’s cash flow results of operations and financial condition.

Litigation risk could affect NHT’s business.

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In the normal course of NHT’s operations, whether directly or indirectly, it may become involved in, named as a party to, or the subject of various legal proceedings, including regulatory proceedings, tax proceedings, and legal actions relating to personal injuries, property damage, property taxes, land rights, the environment, and contract disputes. The outcome with respect to outstanding, pending, or future proceedings cannot be predicted with certainty and may be determined in a manner adverse to NHT and, as a result, could have a material adverse effect on NHT’s assets, liabilities, business, financial condition, and results of operations. Even if NHT prevails in any such legal proceeding, the proceedings could be costly and time-consuming and