Company: NXDT
Filing Date: 2025-01-21
Form Type: 424B3
Source: 0001437749-25-001494
Chunk: 1636

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-01-21
Form: 424B3
Chunk 1636
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 of interest rate caps, the NHT segment has no performance obligation, so no credit valuation adjustment is necessary. As a result, all of the NHT segment’s derivatives held as of September 30, 2024 were classified as Level 2 of the fair value hierarchy.

Changes in fair value of the interest rate caps are recorded directly as interest expense on the Consolidated Statement of Operations and Comprehensive Income. For the three and nine months ended September 30, 2024, NHT recorded $(0.1) million, and $0.1 million, respectively, in interest expense related to changes in the fair value of interest rate caps. The combined fair value of the interest rate caps is $0.4 million as of September 30, 2024, and is recorded as interest rate caps in the Consolidated Balance Sheets.

As of September 30, 2024, the NHT segment had the following outstanding interest rate caps:

| Type of Derivative |     | Hedged Financial Instrument |     | Notional |        |     | Strike Rate |      |   | Reference Rate |     |      |   |     | Termination Date |
|:-------------------|:----|:----------------------------|:----|:---------|-------:|:----|:------------|-----:|:--|:---------------|:----|-----:|:--|:----|:-----------------|
| Interest rate cap  |     | Note payable                |     | $        | 39,300 |     |             | 2.00 | % | One-month SOFR |     | 2.00 | % |     | March 5, 2025    |

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10. Investments in DSTs

The Company invested in the Class 1 Beneficial Interests (“Class 1”) in two Delaware Statutory Trusts (DSTs). The Class 1 are accounted for as investments in equity securities without readily determinable fair values under the measurement alternative, which measures the investment at cost minus impairment, if any, plus or minus changes in fair value when observable prices are identified. As the Class 1 are still being actively issued, the investments are held at cost with no upward or downward fair value adjustment nor impairment losses to date. Therefore, the fair value of the Investment in DSTs utilizing Level 3 inputs approximate their carrying amount. The Company recognized $0.2 million and $0.3 million in dividend income