Company: NXDT
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001628280-25-052132
Chunk: 186

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-11-13
Form: 10-Q
Item: Item 1
Chunk 186
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. These financial instruments utilize Level 2 inputs. Long-term indebtedness is carried at amounts that reasonably approximate their fair value at September 30, 2025 and December 31, 2024, except for the following debt (in thousands):September 30, 2025December 31, 2024Outstanding Principal BalanceEstimated Fair ValueOutstanding Principal BalanceEstimated Fair ValueNotes payable$86,731 $71,415 $98,721 $78,607 Other Financial Instruments Carried at Fair ValueRedeemable noncontrolling interests in the OP and the 9.00% Series B Cumulative Redeemable Preferred Shares, par value $0.001 per share, liquidation preference $25.00 per share (the "Series B Preferred Shares"), have redemption features and are marked to their redemption value if such value exceeds the carrying value. The redemption values are based on the liquidation preference of the Series B Preferred Shares, and less certain redemption fees. Since the valuation is based on observable inputs such as quoted prices for similar instruments in active markets, the redeemable noncontrolling interests in the OP and the Series B Preferred Shares are classified as Level 2 if they are adjusted to their redemption value. As of September 30, 2025, the redeemable noncontrolling interests in the OP and the Series B Preferred Shares are valued at their carrying value on the Consolidated Balance Sheets.Derivative Financial InstrumentsThe NHT segment manages interest rate risks primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. The NHT segment performs market valuations on its derivative financial instruments. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. 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. The NHT segment has an