Company: NXDT
Filing Date: 2025-01-21
Form Type: 424B3
Source: 0001437749-25-001494
Chunk: 103

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-01-21
Form: 424B3
Chunk 103
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, certain source-preservation designations cannot be made by NXDT. Accordingly, for example, the portion of NXDT’s net taxable capital gains that are paid to a holder of NXDT Common Shares resident in Canada will not retain their character as taxable capital gains, and the portion of any distributions on the NXDT Common Shares representing the non-taxable portion of NXDT’s net capital gains will reduce a holder’s adjusted cost base in their NXDT Common Shares for Canadian tax purposes.

Accounting Treatment of the Transaction

NXDT prepares its financial statements in accordance with U.S. GAAP. The Mergers will be accounted for in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 810, Consolidation. As NXDT controls NHT both before and after the Mergers, the changes in NXDT’s ownership interest in NHT resulting from the Mergers will be accounted for as an equity transaction, and no gain or loss will be recognized in NXDT’s consolidated statements of operations and comprehensive income (loss). In addition, the tax effects of the Mergers are reported as adjustments to deferred income taxes and additional paid-in capital, consistent with ASC 740, Income Taxes.

Information with Respect to NHT

NHT is an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. NHT was created for the purpose of acquiring an initial portfolio of 11 hospitality assets located in the U.S. (the “Initial Portfolio”), to raise capital to acquire additional U.S. located hospitality assets that meet its investment objectives and criteria and to own, renovate and operate its portfolio of income-producing hotel properties. NHT is externally managed by the Advisor, which has been formed for the sole purpose of managing NHT and its subsidiaries.

NHT has elected to be treated as a real estate investment trust under U.S. tax laws. In general, a real estate investment trust is not subject to any entity level federal income tax provided that it satisfies various organization and operational requirements to continue to qualify as a real estate investment trust under the Code. Even if NHT continues to qualify as a real estate investment trust under the Code, it nonetheless may be subject to certain state and local income, franchise, and property taxes.Substantially all business will be conducted through NHT OP, NHT’s operating partnership, which is a Delaware limited liability company. NHT owns its properties through NHT OP and its subsidiaries. In order for NHT to