NexPoint Diversified Real Estate Trust Announces Quarterly Distribution and $20 Million Share Repurchase Program

Rhea-AI Summary

NexPoint Diversified Real Estate Trust (NXDT) has announced two significant updates: a quarterly distribution of $0.15 per common share and a new $20 million share repurchase program. The distribution, payable on December 31, 2024, will be a combination of cash and NXDT shares, with the cash component not exceeding 20%. Shareholders can elect to receive all cash or all shares, though cash elections may be prorated. The share repurchase program, effective until October 28, 2026, authorizes the repurchase of both common shares and 5.50% Series A Cumulative Preferred Shares.

Positive

• Authorization of $20 million share repurchase program potentially supporting stock price
• Quarterly distribution maintained at $0.15 per share
• Flexible distribution structure allowing REIT to retain capital while maintaining shareholder returns

Negative

• Cash component of distribution to 20%, forcing shareholders to accept mostly stock
• Potential share dilution from stock-based distribution payments

Insights

Financial Analyst

This dual announcement carries significant implications for NXDT shareholders. The $0.15 quarterly distribution with an 80/20 stock/cash split structure helps preserve capital while maintaining REIT status. The unique distribution mechanism, allowing shareholders to elect between cash and shares, provides flexibility but effectively functions as a partial dividend reinvestment program.

The new $20 million share repurchase program, representing approximately 9.2% of market cap, signals management's confidence in the stock's value. The two-year authorization period provides ample flexibility for opportunistic buying. However, the 80% stock component of the distribution could potentially dilute the impact of buybacks, creating an interesting dynamic between capital preservation and shareholder value enhancement.

Tax Expert

The distribution structure is strategically designed to maintain REIT qualification requirements while optimizing tax efficiency. The 80/20 split helps NXDT meet distribution requirements without depleting cash reserves. Despite the stock component, shareholders should note this remains a taxable dividend, potentially creating tax obligations without corresponding cash distributions for those receiving shares. The flexibility to pay future dividends entirely in cash provides important optionality for future tax planning.

Quarterly Distribution

DALLAS, Oct. 29, 2024 /PRNewswire/ -- NexPoint Diversified Real Estate Trust ("NXDT") (NYSE: NXDT) announced today that its board of trustees has declared a quarterly distribution of $0.15 per common share of NXDT, consisting of a combination of cash and common shares of NXDT. The distribution will be payable on December 31, 2024, to shareholders of record on November 15, 2024.

The board of trustees has determined that the cash component of the distribution (other than cash paid in lieu of fractional shares) will not exceed 20% in the aggregate, with the balance payable in common shares of NXDT. This will allow NXDT to comply with the real estate investment trust ("REIT") qualification requirements under the Internal Revenue Code, while retaining capital and enhancing NXDT's financial flexibility.

In accordance with the provisions of IRS Revenue Procedure 2017-45, shareholders will be asked to make an election to receive the distribution all in cash or all in shares. To the extent that more than 20% of cash is elected in the aggregate, the cash portion will be prorated. Shareholders who elect to receive the distribution in cash will receive at least 20% of the distribution in cash. Shareholders who do not make an election will receive the distribution entirely in common shares of NXDT. The number of shares issued as a result of the distribution will be calculated based on the volume weighted average trading prices of NXDT's common shares on the New York Stock Exchange on December 16, 17 and 18, 2024.

An election notice and election form will be mailed to shareholders of record after the record date. The properly completed election form to receive cash or common shares must be received by Equiniti Trust Company, NXDT's transfer agent, prior to 5:00 p.m. Eastern Time on December 13, 2024.

Shareholders who hold their shares through a bank or broker should inform the bank or broker of their election. NXDT expects the dividend to be a taxable dividend to shareholders, regardless of whether a particular shareholder receives the dividend in the form of cash or shares. Shareholders are urged to consult with their tax advisers for proper tax treatment of NXDT's distributions. NXDT reserves the right to pay future dividends entirely in cash.

Share Repurchase Program

NXDT also announced today that its board of trustees has authorized the repurchase of up to $20 million of its common shares and its 5.50% Series A Cumulative Preferred Shares. This authorization expires on October 28, 2026, and it replaces NXDT's previous share repurchase program that expired on October 24, 2024. NXDT may utilize various methods to effect the repurchases, and the timing and extent of the repurchases will depend upon several factors, including market and business conditions, regulatory requirements and other corporate considerations. Repurchases under this program may be discontinued at any time.

About NexPoint Diversified Real Estate Trust (NYSE: NXDT)

NexPoint Diversified Real Estate Trust is an externally advised, publicly traded, diversified REIT focused on the acquisition, development, and management of opportunistic and value-add investments throughout the United States across multiple sectors where NexPoint and its affiliates have operational expertise. NXDT is externally advised by NexPoint Real Estate Advisors X, L.P. For more information, please visit nxdt.nexpoint.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. In particular, statements relating to the tax status of the distribution, and NXDT's capital retention and financial flexibility contain forward-looking statements. We caution investors that any forward-looking statements presented in this press release are based on management's current beliefs and assumptions made by, and information currently available to, management. When used, the words "will," "retain," "expect" and "enhance," the negative version of these words and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions.

Forward-looking statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control, including the timing and amount of repurchases of our shares, if any, and the possibility that the repurchase program may be suspended or discontinued as well as those described in greater detail in our filings with the Securities and Exchange Commission (the "SEC") particularly those described in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you therefore against relying on any of these forward-looking statements and encourage you to review our other filings with the SEC for a more complete discussion of risks and other factors that could affect any forward-looking statement.

CONTACTS

Investor Relations
Kristen (Thomas) Griffith
IR@nexpoint.com

Media Relations
Prosek Partners for NexPoint
pro-nexpoint@prosek.com

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SOURCE NexPoint Diversified Real Estate Trust

FAQ

What is the amount of NXDT's quarterly distribution for Q4 2024?

NXDT announced a quarterly distribution of $0.15 per common share, payable on December 31, 2024, to shareholders of record on November 15, 2024.

How much is NXDT's new share repurchase program worth?

NXDT's board authorized a new $20 million share repurchase program for both common shares and 5.50% Series A Cumulative Preferred Shares, effective until October 28, 2026.

What is the cash component limit for NXDT's Q4 2024 distribution?

The cash component of the distribution will not exceed 20% in the aggregate, with the balance payable in NXDT common shares.

When is the deadline for NXDT shareholders to elect their distribution preference?

Shareholders must submit their election to receive cash or common shares to Equiniti Trust Company by 5:00 p.m. Eastern Time on December 13, 2024.