Disclosures & Risks

This document does not constitute an offer to sell or a solicitation of an offer to buy any securities. Any securities will be offered only by means of a Confidential Private Placement Memorandum (“Memorandum”) provided to a limited number of accredited investors.
This document has been prepared by NexPoint Storage Partners (“NexPoint Storage ”, the “Company”, or “We”) to provide preliminary information about the offering (“the Offering”) of shares of the Company’s Cumulative Redeemable Series E Preferred Stock (the “Shares”). Some of the information contained in this document is non-public, confidential and proprietary in nature and may constitute trade secrets under applicable law with respect to the Offering, NexPoint Storage and the investments made by NexPoint Storage and its affiliates, the disclosure of which could have material adverse effects on the Offering, the Company or the Company’s respective investments and affiliates.
Investing in the Company involves a number of significant risks and other important factors relating to investments in real estate generally, and relating to the strategy and investment objectives of the Company in particular.
Prospective investors should carefully consider the following risk factors, together with all of the other information (including risk factors) included in the Memorandum before deciding to purchase Shares. As a result of these factors, as well as other risks inherent in any investment, there can be no assurance that the Company will be able to meet its investment objectives or otherwise be able to successfully to carry out its investment program.
An investment in the Company is not a direct investment in real estate, but rather an investment in a REIT that owns self-storage assets.
GENERAL REAL ESTATE RISKS. The Company will be subject to the risks incident to the ownership and operation of real estate, including risks associated with the general economic climate, local real estate conditions (including the availability of excess supply of properties relative to demand), changes in the availability of debt financing, credit risk arising from the financial condition of tenants, buyers, and sellers of properties, geographic or market concentration, competition from other spaces, government regulations, fluctuations in interest rates and various other risks. The Company or its subsidiary entities will incur the burdens of ownership of real property, which include paying expenses and taxes, maintaining the investments, and ultimately disposing of the Portfolio. LIMITED LIQUIDITY AND TRANSFERABILITY OF SHARES. There is no public market for the Shares and no such market is expected to develop in the future. The Company is not required to redeem the Shares at any time, and the ability of the Company to complete redemptions requested by holders is limited by restrictions on redemption in the terms of the Company’s Series D Preferred Stock and the consent of Extra Space to holder redemptions. Consequently, the purchase of Shares should be considered only as a long term and illiquid investment and Shares should only be acquired by investors who are able to commit their funds for an indefinite period of time. FACTORS IMPACTING THE SELF-STORAGE MARKET. Our investment strategy is premised on assumptions about occupancy levels, rental rates, interest rates, supply and demand, acquisition and operating costs and other factors in the self-storage market. If those assumptions prove to be inaccurate, our cash flows and profitability will be reduced. An increase in supply, economic recession or other tightening demand would reduce our rental revenue and profitability. LEVERAGE. The Company may continue to utilize leverage or enter into hedging agreements related to its debt in connection with its respective investments. Significant borrowings increase the risks of an investment in the Company. If there is a shortfall between the cash flow from investments and the cash flow needed to service the Company’s indebtedness, then the amount available for distributions to stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss because defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. SENIOR SECURITIES. The Company has two classes of preferred stock outstanding that rank senior to the Shares – Series C Preferred Stock and Series D Preferred Stock. Such preferred stock has preferential rights to distributions and in the event of liquidation and have certain consent rights that limit our ability to take certain actions, including redemptions of the Shares. POTENTIAL CONFLICTS OF INTEREST. Certain employees of NexPoint will have conflicts of interest in allocating their time between the Company and their other business activities. Additionally, affiliates of NexPoint own and operate and may continue to own and operate, in the future, other properties outside the Portfolio, which may result in a conflict of allocation of services and costs.
We may pay distributions from sources other than our cash flow from operations, including, without limitation, the sale of assets, borrowings or offering proceeds (including from sales from our common stock or common units of membership units (“OC Units”) to affiliates of NexPoint), and we have no limits on the amounts we may pay from such sources. Funding distributions from such sources will result in us having less funds available to acquire self-storage properties or other real estate related investments.
As a result, the return you realize on your investment may be reduced. To the extent we borrow funds to pay distributions, we would incur borrowing costs and these borrowings would require a future repayment. The use of these sources for distributions and the ultimate repayment of any liabilities incurred could adversely impact our ability to pay distributions in future periods and decrease the amount of cash we have available for operations and new investments. NexPoint Real Estate Advisors, L.P. (“NREA”) is the sole sponsor of the Offering. NREA is wholly owned by NexPoint Advisors, L.P. (“NexPoint”). Past performance does not guarantee future results. Performance during time periods shown is limited and may not reflect the performance in difference economic and market cycles. There can be no assurance that similar performance will be experienced. Investing in the Company involves a number of significant risks and other important factors relating to investments in companies generally, and relating to the strategy and investment objectives of the Company in particular. Prospective investors should carefully consider the foregoing risk factors, together with all of the other risk factors and information included in the Memorandum, before deciding to purchase shares. As a result of these factors and the risk factors in the Memorandum, as well as other risks inherent in any investment, there can be no assurance that the Company will be able to meet its investment objectives or otherwise be able to successfully to carry out its investment program.
NexPoint Securities, Inc., member FINRA/SIPC, is the dealer manager for the NexPoint Storage Partners, Inc. offering.