Company: NXDT
Filing Date: 2025-01-21
Form Type: 424B3
Source: 0001437749-25-001494
Chunk: 1714

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-01-21
Form: 424B3
Chunk 1714
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I-1351</div>

requirement that the Company consolidate NHT as of April 19, 2024, the Company’s investments and growth prospects may also decline.

In addition, for NHT to qualify as a real estate investment trust for U.S. federal income tax purposes, it is not permitted to operate or manage any of the hotel properties. As a result, certain of NHT’s TRSs have entered into hotel management agreements with the Manager to operate the hotel properties. For this reason, NHT is unable to directly implement strategic business decisions with respect to the daily operation and marketing of the hotel properties, such as decisions with respect to the setting of room rates, food and beverage pricing, and certain similar matters. Although NHT consults with the Manager with respect to strategic business plans, the Manager is under no obligation to implement any of NHT’s recommendations with respect to these matters.

Changes in NHT’s investment strategy or guidelines, financing strategy or leverage policies with respect to investments, originations, acquisitions, growth, operations, indebtedness, capitalization and distributions could adversely affect NHT’s business, results of operations and financial conditions and, as a result of the accounting requirement that the Company consolidate NHT as of April 19, 2024, the Company’s results of operations and financial condition. Further, the ability of the Company to affect changes at NHT’s management and operational level are limited by TSXV listing requirements and existing agreements with the NHT Adviser and the Manager that could require significant resources and costs to change.

Risk Factors Related to the Hotel and Lodging Industry

The Company’s hotel properties may be adversely affected by various risks common to the hospitality and lodging industry.

All real property investments are subject to a degree of risk and uncertainty and are affected by various factors, including general economic conditions and local real estate markets. The business of the NHT segment may be adversely affected by various operating risks common to the hotel industry, including competition; over-building; dependence on business travel and tourism; changes in taxes and governmental regulations that influence or set wages, prices or interest rates; availability and cost of capital necessary to fund investments, capital expenditures and service interest, principal or other debt obligations; changes in operating costs, shortages of labor, risks of unionization of labor, increases in the costs of food and liquor; receipt and/or maintenance of licenses and permits with local authorities; relationships with brand franchisors; the ability of other lodging alternatives to attract and retain customers; changes in local