NexPoint Diversified Real Estate Trust Reports $56.57 Million Net Loss for 2024

NexPoint Diversified Real Estate Trust (NXDT) reported a net loss of $56.57 million for the year ended December 31, 2024, compared to a net loss of $117.24 million in 2023. Total revenues for 2024 were $83.22 million, an increase of $19.94 million from 2023, driven primarily by increased rooms revenue ($24.9 million) and other income ($3.8 million) from the consolidation of NexPoint Hospitality Trust (NHT) in April 2024. However, total expenses also rose significantly to $87.37 million, a $35.67 million increase, largely due to the NHT consolidation impacting property operating expenses, property management fees, real estate taxes and insurance, and advisory and administrative fees.

Significant changes compared to the previous year include the acquisition of a controlling interest in NHT in April 2024, resulting in its consolidation into NXDT's financial statements. This acquisition involved the purchase of 2,176,257 NHT units for approximately $5.5 million, primarily paid in NXDT common shares. Further, NXDT announced a plan to acquire the remaining outstanding NHT units in a merger expected to close in the second quarter of 2025. Other notable transactions included investments in NexPoint Life Sciences II DST and NexPoint Semiconductor Manufacturing DST, totaling $25.6 million, and the redemption of interests in SFR WLIF III, LLC for approximately $7.2 million.

During 2024, NXDT also initiated a new share repurchase program authorizing the repurchase of up to $20 million in common shares and Series A Preferred Shares over two years. The company's portfolio, as of December 31, 2024, consisted of 81.6% real estate investments and 18.4% other investments. NXDT's investment strategy focuses on opportunistic, value-add investments in various commercial real estate property types across the capital structure, with a planned reallocation of its portfolio in the coming year to focus on residential, self-storage, and life sciences sectors, involving the sale of $100 million to $150 million in legacy assets.

Key operational developments included a decrease in occupancy at Cityplace, impacting rental income, and the termination of a franchise agreement for the Addison Property, which is now held for sale. The company's two reportable segments, NXDT and NHT, had a combined NOI of $6.25 million in 2024, compared to $3.78 million in 2023. NXDT had no employees as of December 31, 2024, and its operations are managed by the external Adviser under the Advisory Agreement, which expires on July 1, 2025, with options for renewal. The company's financial performance was significantly impacted by the NHT consolidation, resulting in both increased revenues and expenses.

NXDT's outlook includes a strategic reallocation of its portfolio, focusing on sectors where its sponsor has extensive expertise. The company anticipates using proceeds from asset sales to reinvest in target asset classes. The company also notes several risks, including unfavorable economic conditions, competition, interest rate fluctuations, and the inherent subjectivity of real estate valuations. The company's continued success depends on its ability to identify and execute on attractive investment opportunities and maintain its REIT qualification.