Company: NREF
Filing Date: 2025-03-27
Form Type: 10-K
Source: 0001786248-25-000004
Chunk: 223

Company: NexPoint Real Estate Finance, Inc.
Filing Date: 2025-03-27
Form: 10-K
Item: Item 4
Chunk 223
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 the credit valuation adjustments associated with the Company’s derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. The Company has determined that the significance of the impact of the credit valuation adjustments made to its derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of the Company’s derivatives held as of December 31, 2024 and 2023 were classified as Level 2 of the fair value hierarchy.The Company’s main objective in using interest rate derivatives is to add stability to interest expense related to floating rate debt. To accomplish this objective, the Company primarily uses interest rate caps as part of its interest rate risk management strategy. Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. On December 30, 2021, the Company, through a subsidiary, entered into a $32.5 million interest rate cap agreement at a strike rate of 2.29% to hedge the variable cash flows associated with the Company's floating rate debt. The interest rate cap terminates on June 1, 2025. As of December 31, 2024 and 2023, this interest rate cap had a fair value of approximately $0.7 million and $1.0 million, respectively. On October 10, 2023, the Company, through a subsidiary, entered into a $63.5 million interest rate cap agreement at a strike rate of 1.50% to hedge the variable cash flows associated with the Company's floating rate debt. As of December 31, 2023, this interest rate cap had a fair value of approximately $1.8 million. The Company did not renew the interest rate cap for this loan, and as such, the interest rate cap terminated on November 6, 2024. The fair value of the interest rate caps are presented in "Accounts receivable and other assets" on the Consolidated Balance Sheets.Financial Instruments Carried at Fair ValueSee Notes 2, 4, 5, and 7 for additional information.Financial Instruments Not Carried at Fair ValueThe fair values of cash and cash equivalents, accrued interest and dividends, accounts payable and other accrued liabilities and accrued interest payable approximated their carrying values because of the short-term nature of these instruments. The