Company: NREF
Filing Date: 2025-05-12
Form Type: 10-Q
Source: 0001786248-25-000010
Chunk: 102

Company: NexPoint Real Estate Finance, Inc.
Filing Date: 2025-05-12
Form: 10-Q
Item: Item 8
Chunk 102
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 accompanying Consolidated Statements of Operations, resulting in an ending allowance for credit loss of $5.0 million as of March 31, 2025.

Significant judgment is required in determining impairment and in estimating the resulting loss allowance, and actual losses, if any, could materially differ from those estimates.

Valuation of Common Equity and Preferred Stock

As of March 31, 2025, the Company owns approximately 25.6% of the total outstanding shares of NSP and thus can exercise significant influence over NSP. The Company elected the fair-value option in accordance with ASC 825-10-10. On a quarterly basis, the Company, with the assistance of an independent third-party valuation firm, determines the fair 

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value for subsequent measurement absent a readily available market price. The valuation is determined using widely accepted valuation techniques consistent with the principles of ASC 820. Specifically, these techniques include the discounted cash flow methodology whereby observable market terminal capitalization rates and discount rates are applied to projected cash flows generated by self-storage assets owned by NSP. The necessary inputs for the valuation include projected cash flows of NSP, terminal capitalization rates and discount rates. These inputs are reflective of public company comparables, but are assumptions and estimates. As a result, the determination of fair value involves significant estimation uncertainty because it involves subjective judgments and estimates that are based on unobservable inputs. For the three months ended March 31, 2025, the unrealized loss related to the change in fair value estimate is $1.2 million. See Notes 5 and 10 to our consolidated financial statements for additional disclosures regarding the valuation of NSP.

As of March 31, 2025, the Company owns approximately 6.3% of the total outstanding common equity of the Private REIT. The Company records the Private REIT at fair value in accordance with ASC 321. The valuation is determined using a market approach. The necessary input for the valuation includes the yield of the Private REIT. As a result, the determination of fair value is uncertain because it involves subjective judgments and estimates that are unobservable. For the three months ended March 31, 2025, the unrealized loss related to the change in fair value estimate is $0.2 million. See Notes 5 and 10 to our consolidated financial statements for additional disclosures regarding the valuation of the Private REIT.

As of March 31, 2025, the Company owns approximately 98.0% of the total outstanding common equity