NexPoint Diversified Real Estate Trust (NXDT), mcap=$584m, price $15.73 vs $16.20

Pitch:
– Closed-end fund at 40% discount to NAV and converting into REIT in the coming months.
– REITs tend to trade at much narrower discounts.
– SEC approval, the last remaining step in conversion, was granted at the end of June.
– Index inclusion and buying by passive funds are expected to close the NAV discount gap.
– Well-aligned insider interests with 15% ownership and active buying.
– 50% of the portfolio is residential and self-storage rentals, with the rest being a mix of office, hotel, timber, and life sciences RE.
– Properties on the balance sheet are already marked at conservative valuations, making NAV discounts unwarranted.

Valuation:
– Portfolio set to yield 7% with stabilized properties, non-RE assets rotated into RE, and increased leverage to 50% LTV, a typical REIT level.
– With a 50% haircut to uncertain holdings and minimal NAV exit discount, fair value stands at $21/share.

Exp. gain: +30% to $21/share in the short term.

Full $NXDT write-up (free guest account required):
https://www.valueinvestorsclub.com/idea/NEXPOINT_DIVERSIFIED_RE_TS/4589676733

Published on: August 25, 2022  •  Published by:
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