Company: NXDT
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001356115-25-000003
Chunk: 259

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1
Chunk 259
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 Shares on the market price, if any, of our Series B Preferred Shares. Sales of substantial amounts of Series B Preferred Shares or the perception that such sales could occur may adversely affect the prevailing market price, if any, for our Series B Preferred Shares.

Our cash available for distribution may not be sufficient to pay distributions on the Series A Preferred Shares and Series B Preferred Shares at expected levels, and we cannot assure you of our ability to pay distributions in the future. We may use borrowed funds or funds from other sources to pay distributions, which may adversely impact our operations. 

We intend to pay regular quarterly dividends to our Series A preferred shareholders and regular monthly dividends to our Series B preferred shareholders. Distributions declared by us will be authorized by our Board in its sole discretion out of assets legally available for distribution and will depend upon a number of factors, including our earnings, our financial condition, the requirements for qualification as a REIT, restrictions under applicable law, our need to comply with the terms of our existing financing arrangements, our capital requirements and other factors as our Board may deem relevant from time to time. We may have to fund distributions from working capital, borrow to provide funds for such distributions, use proceeds of future offerings or sell assets to the extent distributions exceed earnings or cash flows from operations. 

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Funding distributions from working capital would restrict our operations. If we are required to sell assets to fund distributions, such asset sales may occur at a time or in a manner that is not consistent with our disposition strategy. If we borrow to fund distributions, our leverage ratios and future interest costs would increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have been. We may not be able to pay distributions in the future. In addition, some of our distributions may be considered a return of capital for income tax purposes. If we decide to make distributions in excess of our current and accumulated earnings and profits, such distributions would generally be considered a return of capital for U.S. federal income tax purposes to the extent of the holder’s adjusted tax basis in their shares. A return of capital is not taxable, but it has the effect of reducing the holder’s adjusted tax basis in its investment. If distributions exceed the adjusted tax basis of a holder’s shares, they will be treated as gain from the sale or exchange of such shares.

The Series A Preferred Shares and Series B Preferred Shares are subordinate to our existing and future debt, and such interests could be diluted by the issuance of additional shares of preferred shares and by other transactions.