With Approval of Proposal, Fund to Begin Transition to Diversified REIT
DALLAS, Aug. 28, 2020 — NexPoint Strategic Opportunities Fund (NYSE:NHF) (“NHF” or the “Fund”), a closed-end fund managed by NexPoint Advisors, L.P. (the “Adviser” and together with its affiliates “NexPoint”), announced the results of the special meeting of shareholders (the “Special Meeting”), which took place earlier today.
At the Special Meeting, shareholders approved the proposal to covert the Fund from a registered investment company to a diversified real estate investment trust (“REIT”) and to amend certain fundamental investment restrictions (the “Business Change Proposal”).
The Adviser announced the Business Change Proposal on June 19, 2020 in conjunction with a preliminary proxy filing. It filed a definitive proxy statement on July 10, 2020.
The Fund’s Board of Trustees (the “Board”), which includes members who are not interested persons of the Fund (the “Independent Trustees”), believes the Business Change Proposal provides the best path to increase shareholder value over time.
Shareholders likewise supported this path in voting to approve the Business Change Proposal.
“We are pleased that shareholders recognized the opportunities in both the REIT structure and the real estate investment landscape,” said James Dondero, president of NexPoint Advisors and the Fund’s portfolio manager. “We are grateful for the support of the proposal and look forward to delivering value through this transition.”
At the Special Meeting, shareholders also approved the amendment and restatement of the Fund’s Agreement and Declaration of Trust (the “Amendment Proposal” and, together with the Business Change Proposal, the “Proposals”). The approval of the Business Change Proposal was a precondition for the Amendment Proposal.
Per the Proposals, the Fund will begin to transition its business and investments to those of a diversified REIT. Additional information on the transition can be found in the definitive proxy statement.
With the conversion, NHF will be the fourth publicly traded REIT on the NexPoint platform. NexPoint is the external manager for: NexPoint Residential Trust, Inc. (NYSE: NXRT), a value-add multifamily REIT; NexPoint Real Estate Finance, Inc. (NYSE: NREF), a mortgage REIT; and NexPoint Hospitality Trust (TSX-V: NHT.U), a hospitality REIT focused on select service and extended stay properties.
About the NexPoint Strategic Opportunities Fund (NHF)
The NexPoint Strategic Opportunities Fund (NYSE:NHF) is a closed-end fund managed by NexPoint Advisors, L.P. The fund invests primarily in below investment grade debt, equity securities, and real estate, and has the ability to hedge risk.
For more information visit www.nexpoint.com/nexpoint-strategic-opportunities-fund/
About NexPoint Advisors, L.P.
NexPoint Advisors, L.P. is an SEC-registered adviser on the NexPoint alternative investment platform. It serves as the adviser to a suite of funds and investment vehicles, including a closed-end fund, an interval fund, a business development company, and various real estate vehicles. NexPoint Advisors is the external manager for three publicly traded REITs: NexPoint Residential Trust, Inc. (NYSE: NXRT), NexPoint Real Estate Finance, Inc. (NYSE: NREF), and NexPoint Hospitality Trust (TSX-V: NHT.U).
While NexPoint is committed to the REIT conversion, it is still contingent upon regulatory approval and the ability to reconfigure NHF’s portfolio to attain REIT status and deregister as an investment company. The time required to reconfigure the Fund’s portfolio could be impacted by, among other things, the COVID-19 pandemic and related market volatility, determinations to preserve capital, the Fund’s ability to identify and execute on desirable investments, and applicable regulatory, lender and governance requirements. The conversion process could take up to 24 months; and there can be no assurance that conversion of NHF to REIT status will improve its performance or reduce the discount to NAV. Further, the SEC may determine not to grant the Fund’s request for a deregistration order, which would materially change the Fund’s plans for its business and investments.
In addition, these actions may adversely affect the Fund’s financial condition, yield on investment, results of operations, cash flow, per share trading price of our common shares and ability to satisfy debt service obligations, if any, and to make cash distributions to shareholders. Whether the Fund remains a registered investment company or converts to a REIT, its common shares, like an investment in any other public company, are subject to investment risk, including the possible loss of investment. For a discussion of certain other risks relating to the proposed conversion to a REIT, see “Implementation of the Business Change Proposal and Related Risks” in the proxy statement.
Shares of closed-end investment companies frequently trade at a discount to net asset value. The price of the Fund’s shares is determined by a number of factors, several of which are beyond the control of the Fund. Therefore, the Fund cannot predict whether its shares will trade at, below or above net asset value. Past performance does not guarantee future results.
No assurance can be given that the Fund will achieve its investment objectives.
Closed-End Fund Risk. The Fund is a closed-end investment company designed primarily for long-term investors and not as a trading vehicle. No assurance can be given that a shareholder will be able to sell his or her shares on the NYSE when he or she chooses to do so, and no assurance can be given as to the price at which any such sale may be effected.
Credit Risk. Investments rated below investment grade are commonly referred to as high-yield, high risk or “junk debt.” They are regarded as predominantly speculative with respect to the issuing company’s continuing ability to meet principal and/or interest payments. Non-payment of scheduled interest and/or principal would result in a reduction of income to the Fund, a reduction in the value of the asset experiencing non-payment and a potential decrease in NAV of the Fund.
Interest Rate Risk. Interest rate risk is the risk that debt securities, and the Fund’s net assets, may decline in value because of changes in interest rates. Generally, fixed rate debt securities will decrease in value when interest rates rise and increase in value when interest rates decline.
Leverage Risk. The Fund uses leverage through borrowings from notes and a credit facility, and may also use leverage through the issuances of preferred shares. The use of leverage magnifies both the favorable and unfavorable effects of price movements in the investments made by the Fund. Insofar as the Fund employs leverage in its investment operations, the Fund will be subject to substantial risks of loss.
Industry Concentration Risk. The Fund must invest at least 25% of the value of its total assets at the time of purchase in securities of issuers conducting their principal business activities in the real estate industry. The Fund may be subject to greater market fluctuations than a fund that does not concentrate its investments in a particular industry. Financial, economic, business, and other developments affecting issuers in the real estate industry will have a greater effect on the Fund, and if securities of the real estate industry fall out of favor, the Fund could underperform, or its NAV may be more volatile than, funds that have greater industry diversification.
Real Estate Risk. Real estate investments are subject to various risk factors. Generally, real estate investments could be adversely affected by a recession or general economic downturn where the properties are located. The full extent of the impact and effects of the recent outbreak of COVID-19 on the future financial performance of the Fund, and specifically, on its investments and tenants to properties held by its REIT subsidiaries, are uncertain at this time. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown.
Illiquidity of Investments Risk. The investments made by the Fund may be illiquid, and consequently the Fund may not be able to sell such investments at prices that reflect the Investment Adviser’s assessment of their value or the amount originally paid for such investments by the Fund.