Company: NREF
Filing Date: 2025-03-27
Form Type: 10-K
Source: 0001786248-25-000004
Chunk: 612

Company: NexPoint Real Estate Finance, Inc.
Filing Date: 2025-03-27
Form: 10-K
Item: Item 15
Chunk 612
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 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 estimated fair values of other financial instruments were determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company would realize on the disposition of the financial instruments. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts.In calculating the fair value of its long-term indebtedness, the Company used interest rate and spread assumptions that reflect current creditworthiness and market conditions available for the issuance of long-term debt with similar terms