NexPoint Real Estate Finance(NREF) - 2024 Q4 - Annual Report

FORM 10-K Filing Information Filing Details This section details the Form 10-K filing for NexPoint Real Estate Finance, Inc., including registration, NYSE-listed securities, and filer status - NexPoint Real Estate Finance, Inc. (NREF) filed its annual report on Form 10-K for the fiscal year ended December 31, 2024[2] Securities Registered on NYSE | Title of each class | Trading Symbol | Name of each exchange on which registered | | :------------------ | :------------- | :---------------------------------------- | | Common Stock, par value $0.01 per share | NREF | New York Stock Exchange | | 8.50% Series A Cumulative Redeemable Preferred Stock, par value 0.01 per share | NREF-PRA | New York Stock Exchange | Registrant Status | Status | Indicator | | :-------------------- | :-------- | | Well-known seasoned issuer | No | | Required to file reports | Yes | | Submitted Interactive Data File | Yes | | Large Accelerated Filer | No | | Accelerated Filer | No | | Non-Accelerated Filer | Yes | | Smaller reporting company | Yes | | Emerging growth company | Yes | - The aggregate market value of common stock held by non-affiliates was approximately $153,877,972.70 as of June 28, 2024[4] - As of March 26, 2025, there were 17,643,526 shares of common stock outstanding[5] Documents Incorporated by Reference Incorporation Details Portions of the proxy statement for the registrant's 2025 Annual Meeting of stockholders are incorporated by reference into Part III of this Form 10-K - Portions of the proxy statement for the 2025 Annual Meeting of stockholders are incorporated by reference in Part III of this Form 10-K[7] Table of Contents Cautionary Statement Regarding Forward-Looking Statements This section outlines the company's forward-looking statements, emphasizing that they are subject to risks and uncertainties and actual results may differ materially from projections - The Annual Report contains forward-looking statements regarding liquidity, capital resources, performance, and results of operations, which are subject to risks and uncertainties[19] - Key risks include those associated with debt-oriented real estate investments, commercial real estate delinquency and loss, interest rate and credit spread fluctuations, concentration of investments, substantial indebtedness, and dependence on the Manager[21] - The company cautions against relying on forward-looking statements, as actual results may vary materially due to known and unknown risks, trends, uncertainties, and factors beyond its control[20] PART I Part I of the report covers the company's business overview, risk factors, unresolved staff comments, cybersecurity practices, property details, legal proceedings, and mine safety disclosures Item 1. Business This section provides a comprehensive overview of NexPoint Real Estate Finance, Inc.'s business, including its structure as a commercial mortgage REIT, investment strategy, 2024 highlights, portfolio composition, financing strategy, management structure, competitive landscape, and regulatory compliance - NexPoint Real Estate Finance, Inc. (NREF) is a commercial mortgage REIT incorporated in Maryland on June 7, 2019, and has elected to be taxed as a REIT under the Internal Revenue Code[25] - The company focuses on originating, structuring, and investing in first-lien mortgage loans, mezzanine loans, preferred equity, convertible notes, multifamily properties, common equity, and CMBS securitizations, primarily in multifamily, SFR, self-storage, and life science sectors within the top 50 MSAs[25][29] - NREF is externally managed by NexPoint Real Estate Advisors VII, L.P. (the 'Manager'), which conducts substantially all operations and provides asset management services[28][52] Item 1A. Risk Factors This section details various risks that could materially and adversely affect the company's business, financial condition, or results of operations, categorized into business, industry, legal/regulatory/accounting, indebtedness/financing, corporate structure, REIT status, and common stock ownership risks - The company's loans and investments are exposed to general real estate risks, including delinquency, foreclosure, and loss, and are concentrated by type, geography, asset, and sponsors[75][97] - Fluctuations in interest rates and credit spreads could reduce income, and macroeconomic trends like inflation or recession may adversely impact financial condition[75][89][91] - Dependence on the external Manager, potential conflicts of interest, and substantial fees paid to the Manager and its affiliates pose significant risks[75][197][207] - Failure to qualify or maintain REIT status would result in serious tax consequences, reducing funds available for distributions[75][225][226] - The company has substantial indebtedness, which may limit financial and operating activities and adversely affect its ability to incur additional debt[75][164] Item 1B. Unresolved Staff Comments This section states that there are no unresolved staff comments from the SEC - There are no unresolved staff comments[297] Item 1C. Cybersecurity This section details the company's cybersecurity risk management program, overseen by the Board's Audit Committee, highlighting a comprehensive, cross-functional approach based on recognized security frameworks - The Board's Audit Committee oversees the company's cybersecurity risk management program, which is based on recognized security frameworks like NIST CF and Azure Security Benchmark[298][299][308] - The program includes annual risk assessments, deployment of technical safeguards (firewalls, intrusion prevention, anti-malware, access controls), comprehensive business continuity plans, and third-party risk management[300][301][302][303][304] - The Manager's Director of Information Technology, with 25 years of experience, leads the cybersecurity program, which includes regular employee training and continuous monitoring of system security postures[305][308][309] - Cybersecurity threats have not materially affected the company's business strategy, results of operations, or financial condition to date, but the risk remains significant if critical operations are disrupted[310] Item 2. Properties This section lists the multifamily properties owned by the company, including Hudson Montford in Charlotte, NC, and Alexander at the District in Atlanta, GA, along with their outstanding mortgage debt as of December 31, 2024 - The company owns Hudson Montford, a 204-unit multifamily property in Charlotte, North Carolina, with approximately $32.5 million in mortgage debt as of December 31, 2024[311] - The company consolidated ownership of Alexander at the District, a 280-unit multifamily property in Atlanta, Georgia, as of December 31, 2023, with approximately $63.5 million in mortgage debt as of December 31, 2024[312] Item 3. Legal Proceedings This section states that the company is not aware of any legal proceedings likely to have a material adverse effect on its operations or financial condition - Management is not aware of any legal proceedings with an outcome reasonably likely to have a material adverse effect on the company's results of operations or financial condition[314] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine Safety Disclosures are not applicable[315] PART II Part II of the report covers market information for the registrant's common equity, management's discussion and analysis of financial condition and results of operations, quantitative and qualitative disclosures about market risk, financial statements, and controls and procedures Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section provides information on the company's common stock trading on the NYSE under 'NREF' and the number of outstanding shares and record holders as of March 26, 2025 - The company's common stock trades on the NYSE under the ticker symbol 'NREF'[318] - As of March 26, 2025, there were 17,643,526 shares of common stock outstanding, held by eight record holders[317] Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, and liquidity, including an overview of its business strategy, revenue and expense components, and key financial measures for the years ended December 31, 2024, 2023, and 2022 - The company is a commercial mortgage REIT focused on originating, structuring, and investing in target assets within multifamily, SFR, self-storage, and life science sectors[320] - The primary investment objective is to generate attractive, risk-adjusted returns for stockholders over the long term through a flexible and relative-value focused investment strategy[321] - The company is externally managed by NexPoint Real Estate Advisors VII, L.P., leveraging its extensive real estate and credit management experience[322] - Net income attributable to common stockholders increased by 70.1% from $10.4 million in 2023 to $17.7 million in 2024, primarily due to increased other income and lower unrealized losses on common stock investments[345] Key Financial Measures (2024 vs. 2023) | Metric | 2024 (in thousands) | 2023 (in thousands) | $ Change | % Change | | :----------------------------------- | :------------------ | :------------------ | :------- | :------- | | Net interest income | $28,136 | $16,79