Company: NXDT
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001356115-25-000003
Chunk: 649

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-03-31
Form: 10-K
Item: Item 8
Chunk 649
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 made, if such buyer is passed over in favor of another as part of NHT’s efforts to maximize sale proceeds. Similarly, successful buyers may later sue NHT under various damage theories, including those sounding in tort, for losses associated with latent defects or other problems not uncovered in due diligence.

Limitations on Sale

NHT may be required to expend funds to correct defects or to make improvements before a property can be sold. No assurance can be given that NHT will have funds available to correct such defects or to make such improvements. In acquiring a property, NHT may agree to lock-out provisions that materially restrict it from selling that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property or debt or other contracts that are not prepayable or terminable and must be assumed by a buyer. These provisions would restrict NHT’s ability to sell a property. These factors and any others that would impede NHT’s ability to respond to adverse changes in the performance of its properties could significantly affect NHT’s financial condition and operating results and decrease the amount of cash available for distribution to NHT’s unitholders. Additionally, franchisors need to approve replacement franchisees upon a sale and there is no assurance NHT will be able to locate buyers who are approved franchisees.

Tax-Related Risk Factors

Canadian Tax Risks

a.NHT’s taxable status on its worldwide income in both Canada and the U.S. could affect the amount of funds it has available for distribution — NHT is resident in Canada for purposes of the Tax Act and is treated as a domestic corporation in the U.S. under the Code. As a result, NHT is generally taxable on its worldwide income in both Canada and the U.S. However, in both jurisdictions, NHT generally will not be subject to tax on the portion of its income that it distributes to its unitholder (subject to certain limitations and exceptions). Management of the Company is of the view that the status of NHT as taxable in both Canada and the U.S. is not likely to give rise to any material adverse consequences in the future as it is not anticipated that NHT will be subject to material income tax in either Canada or the U.S. Nevertheless, NHT’s status as taxable on its worldwide income in both Canada and the U.S. could, in certain circumstances, have a material adverse effect on the Company and investors. As a result of NHT being resident in both