Real estate co trading at large discount

With possible catalyst(s) and large insider purchases

I have taken a position in Nexpoint Diversified REIT (NXDT). Adding it to the list of active ideas. A few months ago I said I would wait for an asset sale. But in the meantime several positive developments materialized. The positives here:

• Lower share price in low $3’s vs potential NAV of $7-14/share.

• Repeated commitment by management to close the gap to NAV.

• Midwave 1.4 Ghz Spectrum included in the n110 band making it fairly likely this will be upgraded from niche to a mainstream 5G band. This happened in late March. Potentially worth ~$3/share to NXDT.

• Management seems to put their money where their mouth is, in not insignificant quantities (note aggressive buys in early April). Dondero now has a significant chunk of his net worth in NXDT common (assuming NAV is realized). Aggressive buys by other employees makes me think odds of some kind of significant sale have increased and less worried that Dondero is simply buying to increase control:

  

The bad:

• James Dondero seems like a shady character. Not UDFI management criminal levels of shady, but still not entirely trustworthy.

• If you google this name you can find several blogs that were (or still are?) longNXDT several years ago at much higher prices. The thesis has been simplification and large cash distributions. This has not materialized and the stock price is down 50%+ since then.

• A third of estimated $10 NAV in NXDT’s presentation is Vinebrook homes, which has quite a lot of leverage of 70%+ of LTV.

• External Nexpoint advisors getting paid a % of gross assets.

• A 80% share dividend that is diluting share count every year.

• Interest rates going up are a significant risk (although a large portion of that is probably priced in here).