| Item 1.01. | Entry into a Material Definitive Agreement. |
Underwriting Agreement
On July 17, 2020, NexPoint Real Estate Finance, Inc. (the “Company”), its operating partnership, NexPoint Real Estate Finance Operating Partnership, L.P., (the “Operating Partnership”), and its manager, NexPoint Real Estate Advisors VII, L.P. (the “Manager”), entered into an underwriting agreement (the “Underwriting Agreement”) with Raymond James & Associates, Inc., as representative of the several underwriters named in Schedule I thereto (the “Underwriters”), pursuant to which the Company agreed to offer and sell 2,000,000 shares of the Company’s 8.50% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”) at a public offering price of $24.00 per share (the “Preferred Stock Offering”). The Company also granted the Underwriters a 30-day option to purchase up to an additional 300,000 shares of Series A Preferred Stock, bringing the total number of shares of Series A Preferred Stock that may be issued in this offering to 2,300,000 shares of Series A Preferred Stock. The Underwriting Agreement contained customary representations, warranties and covenants, conditions to closing, indemnification obligations, and termination and other customary provisions. The closing of the Preferred Stock Offering is expected to occur on July 24, 2020, subject to customary closing conditions pursuant to the terms of the Underwriting Agreement.
The shares of Series A Preferred Stock have been registered on the Company’s registration statement on Form S-11 (File No. 333-239862), which was declared effective by the Securities and Exchange Commission (the “SEC”) on July 17, 2020.
This description of the material terms of the Underwriting Agreement is qualified in its entirety by reference to the Underwriting Agreement, which is filed as Exhibit 1.1 to this Current Report on Form 8-K and is hereby incorporated by reference into this Item 1.01.
Amendment to the Operating Partnership Agreement
On July 20, 2020, in connection with the anticipated closing of the Preferred Stock Offering, the Operating Partnership, following the direction and approval of the Company’s board of directors (the “Board”), amended the Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the “Partnership Agreement Amendment”) to provide for the issuance of 8.50% Series A Cumulative Redeemable Preferred Units (liquidation preference $25.00 per unit) (the “Series A Preferred Units”). The Company expects to contribute the net proceeds from the sale of the Series A Preferred Stock in the Preferred Stock Offering to the Operating Partnership in exchange for the same number of Series A Preferred Units. The Series A Preferred Units have economic terms that mirror the terms of the Series A Preferred Stock. The issuance of the Series A Preferred Units will be exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”).
The Series A Preferred Units will rank, as to distributions and upon liquidation, senior to the common units of limited partnership interest in the Operating Partnership.
This description of the material terms of the Partnership Agreement Amendment is qualified in its entirety by reference to the Partnership Agreement Amendment, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is hereby incorporated by reference into this Item 1.01.
Amendment to the Management Agreement
On July 17, 2020, in connection with the Preferred Stock Offering, the Company and the Manager entered into an amendment to the Management Agreement, dated February 6, 2020, by and among the Company and the Manager (the “Management Agreement Amendment”) solely to revise the definition of “equity” as follows:
“‘Equity’ means (a) the sum of (i) total stockholders’ equity immediately prior to the Offering Date, plus (ii) the net proceeds received by the Company from all issuances of the Company’s equity securities in and after the IPO, plus (iii) the Company’s cumulative Core Earnings from and after the Offering Date to the end of the most recently completed calendar quarter, (b) less (i) any distributions to the Stockholders from and after the Offering Date to the end of the most recently completed calendar quarter and (ii) all amounts that the Company or any of its subsidiaries has paid to repurchase for cash the shares of the Company’s equity securities from and after the Offering Date to the end of the most recently completed calendar quarter. In the Company’s calculation of Equity, the Company will adjust its calculation of Core Earnings to remove the compensation expense relating to awards granted under one or more of its long-term incentive plans that is added back in the calculation of Core Earnings. Additionally, for the avoidance of doubt, Equity does not include the assets contributed to the Company in the Formation Transaction.”
