James Dondero
About James Dondero
James Dondero, age 62, is President and Chairman of NexPoint Residential Trust (NXRT) and has served since May 2015, with over 30 years of credit and equity investing experience and prior leadership at Highland Capital Management. Under his tenure, NXRT’s pay-versus-performance disclosure shows total shareholder return (TSR) evolving from $94 to $191 and back to $107 for an initial fixed $100 over 2020–2024, while reported net income swung from $44,150k (2020) to $23,106k (2021), $(9,291)k (2022), $44,433k (2023), and $1,114k (2024) . He concurrently holds senior roles across affiliated NexPoint REITs and financial entities, providing broad capital markets reach but introducing potential related-party governance complexities .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Highland Capital Management, L.P. | Co-Founder; President | Co-founded 1993; President 2004–2020 | Built CLO/structured credit platform; firm later entered Chapter 11 (2019), highlighting restructuring experience and controversy exposure . |
| MGM Studios | Director | 2009–2020 | Entertainment governance experience; strategic oversight during industry shifts . |
| Jernigan Capital, Inc. | Director | Aug 2016–Nov 2020 | Self-storage lending REIT governance; niche real estate finance exposure . |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| NexPoint Real Estate Finance, Inc. (NREF) | President; Chairman | Since Feb 2020 | Public commercial mortgage REIT; affiliate exposure . |
| VineBrook Homes Trust, Inc. | Chairman (since Aug 2022); prior President & Director | President/Director Feb 2019–Aug 2021; Chairman since Aug 2022 | Single-family rental REIT; affiliate . |
| NexPoint Diversified Real Estate Trust (NXDT) | President (since May 2015); Chairman of Trustees (since Jul 2022) | Since 2015/2022 | Diversified REIT; affiliate . |
| NexPoint Homes Trust, Inc. (NXHT) | Director | Since Jun 2022 | Single-family rental REIT; affiliate . |
| NexBank; NexBank Capital, Inc. | Director; Chairman | Ongoing | Texas chartered bank and parent; affiliate banking ties . |
| NexPoint Hospitality Trust, Inc. (NHT) | CEO | Since Dec 2019 | Public hospitality REIT (TSXV); affiliate . |
| NexPoint Capital, Inc.; NexPoint Real Estate Strategies Fund | President | Ongoing | Affiliated investment vehicles . |
Fixed Compensation
NXRT is externally managed; named executive officers, including Dondero, do not receive cash compensation, pension, perquisites, or deferred comp from NXRT. Cash compensation is set and paid by the Adviser; NXRT paid its Adviser ~$6.9 million in 2024 (with $21.3 million in fees permanently waived) .
| Component | 2024 Amount | Notes |
|---|---|---|
| Base Salary (Company-paid) | $0 | Executives are Adviser employees; NXRT pays no cash comp. |
| Target/Actual Bonus (Company-paid) | $0 | Adviser determines cash pay; not disclosed by NXRT at the individual level. |
| Pension/Deferred Comp/Perqs | $0 | None provided by NXRT. |
Performance Compensation
NXRT grants time-based RSUs; no explicit formulaic performance metrics govern NXRT equity awards; compensation committee considers Company performance, market conditions, executive performance, and President’s recommendations. Company does not use financial performance measures to link “compensation actually paid” to performance in SEC’s Item 402(v) context .
| Grant Date | Shares Granted (#) | Grant-Date Fair Value ($) | Vesting Schedule |
|---|---|---|---|
| Mar 13, 2024 | 111,752 | $3,452,019 | Vest 1/5 annually each Mar 13, 2025–2029 . |
| Mar 28, 2023 | 66,024 | — | Vest 1/4 annually each Mar 28, 2025–2028 . |
| Feb 17, 2022 | 26,430 | — | Vest 1/3 annually each Feb 17, 2025–2027 . |
| Feb 18, 2021 | 23,880 | — | Vest 1/2 each Feb 18, 2025 and Feb 18, 2026 . |
| May 11, 2020 | 6,779 (unvested at 12/31/24) | — | Vest May 11, 2025 . |
| Feb 20, 2020 | 9,756 (unvested at 12/31/24) | — | Vest Feb 20, 2025 . |
Detailed vesting outcomes in 2025 (insider selling pressure signal):
- Feb 20, 2025: 9,756 shares vest
- Feb 18, 2025: 11,940 shares (half of 23,880) vest
- Feb 17, 2025: 8,810 shares (one-third of 26,430) vest
- Mar 28, 2025: 16,506 shares (one-fourth of 66,024) vest
- Mar 13, 2025: 22,350 shares (one-fifth of 111,752) vest
- May 11, 2025: 6,779 shares vest
| Metric | Weighting | Target | Actual | Payout | Vesting |
|---|---|---|---|---|---|
| Time-based RSUs | N/A | N/A | N/A | N/A | As scheduled above . |
Policy features (2025 LTIP governance):
- Double-trigger change-in-control vesting; no repricing; minimum 1-year vesting; clawbacks; no excise tax gross-ups; hedging prohibited by policy (for directors/executives) .
Equity Ownership & Alignment
| Item | Value | Notes |
|---|---|---|
| Beneficial ownership (Exec list) | 3,183,689 shares; 12.5% of class (as of Feb 25, 2025) | Includes 38,858 RSUs vesting within 60 days counted as beneficially owned . |
| Unvested RSUs (12/31/2024) | 244,621 shares | Market value $10,212,927 at $41.75 close . |
| Ownership guidelines (executives) | None currently | No required multiple of salary. |
| Hedging of Company stock | Prohibited for directors/executives | Policy bans hedging/short sales. |
| Pledging | Sister Nancy Marie Dondero’s trust pledged 756,167 (CrossFirst), 314,169 (Lakeside), 349,475 (American National) shares | Related-party pledge; not disclosed as James’s direct pledge. |
Potential forced-selling vectors:
- Scheduled RSU vesting dates above (2025 cadence) .
- Related-party pledging may increase collateral call risk in stress scenarios .
Employment Terms
| Provision | Terms |
|---|---|
| Employment agreement; severance | NXRT pays no cash comp; no severance agreements; equity-only alignment via RSUs . |
| RSU acceleration (death/disability/retirement) | All outstanding RSUs vest . |
| RSU acceleration (change-in-control) | If awards not assumed/replaced, vest in full; if replaced, full vest upon termination without cause or for good reason within 2 years (double trigger) . |
| RSU acceleration (termination without cause) | For awards granted in/after 2022, RSUs scheduled to vest in next 12 months vest (subject to release) . |
| Clawbacks | LTIP includes clawback/recapture provisions . |
| Non-compete / non-solicit | Not disclosed. |
| Advisory Agreement (external management) | One-year term; renewable; advisory fee 1.00% of Average Real Estate Assets; administrative fee 0.20%; expense cap 1.5% of Average Real Estate Assets; renewed Feb 24, 2025 . |
Estimated value of RSU acceleration (12/31/2024):
| Scenario | Estimated Value |
|---|---|
| Death, disability, retirement, change-in-control, or termination without cause/for good reason during 2 years after change-in-control | $10,212,927 (at $41.75) . |
| Termination without cause | $2,987,129 . |
| Termination for good reason | $996,990 . |
Board Governance
- Dual role: President and Chairman; Board states this is the most effective structure, with Lead Independent Director (Scott Kavanaugh) to counterbalance .
- Committee service: Audit, Compensation, and Nominating committees are fully independent; Dondero is not a member of these committees .
- Attendance: Each director attended ≥75% of meetings except Dondero in 2024, reflecting a participation shortfall .
- Independence: Five of seven directors are independent; Dondero is a management director .
- Director compensation: Officers receive no director fees; Dondero’s director comp is $0 .
Director Compensation (for reference)
| Name | Fees Earned (Cash) | Stock Awards | Total |
|---|---|---|---|
| James Dondero (Officer Director) | — | — | — |
Pay Versus Performance (context)
| Metric | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| PEO Compensation Actually Paid ($) | $3,250,561 | $9,578,551 | $(2,791,636) | $2,015,109 | $5,443,050 |
| NXRT TSR (value of fixed $100) | $94 | $191 | $102 | $84 | $107 |
| Net Income ($000s) | $44,150 | $23,106 | $(9,291) | $44,433 | $1,114 |
Say-on-Pay support: 83% approval in 2024 .
Related-Party Transactions and Conflicts
- Fiber Internet Agreements with affiliated entities (NLMF Holdco/Leaseco; ~$2.6M expense in 2024) approved by Audit Committee under policy .
- Sale of “Old Farm” asset to affiliate NexBank Capital for $103.0M (Mar 1, 2024) .
- Normal banking services with NexBank (affiliate) .
- External Adviser fee structure and potential leverage incentives discussed; Board oversight and expense cap apply .
Risk Indicators and Red Flags
- Attendance: Dondero attended less than 75% of Board/committee meetings in 2024 .
- External management and multi-entity roles: Potential conflicts and allocation of time; extensive affiliate overlap .
- Highland Capital bankruptcy history: Chapter 11 case remains open; signals prior restructuring exposure .
- Pledging: Significant shares pledged by sister Nancy’s trust (multiple banks) .
- Hedging: Prohibited (mitigates misalignment risk) .
Compensation Committee Analysis
- Committee: Independent members (Chair: Dr. Laffer); met five times in 2024; authority to retain independent consultants; implements LTIP; reviews Adviser performance .
- Approach: No benchmarking of equity awards typical for externally managed REITs; President recommends grants; committee approves .
Equity Ownership & Vesting Detail (Donnerdo Outstanding at 12/31/2024)
| Unvested RSUs | Market Value at $41.75 |
|---|---|
| 244,621 | $10,212,927 |
Grant-specific vesting schedule (selected awards):
- Feb 20, 2020: 9,756 vested 2/20/2025
- May 11, 2020: 6,779 vest 5/11/2025
- Feb 18, 2021: 23,880 with 1/2 vesting 2/18/2025 and 1/2 2/18/2026
- Feb 17, 2022: 26,430 with 1/3 vesting each on 2/17/2025, 2/17/2026, 2/17/2027
- Mar 28, 2023: 66,024 with 1/4 vesting each on 3/28/2025–2028
- Mar 13, 2024: 111,752 with 1/5 vesting each on 3/13/2025–2029
Investment Implications
- Alignment: Dondero’s sizable beneficial stake (12.5%) and large unvested RSUs support alignment, with governance safeguards (double-trigger CIC vesting, clawbacks, hedging bans) mitigating some risk .
- Near-term supply pressure: 2025 vesting cadence concentrates between Feb–May, creating potential selling pressure or liquidity events; monitoring Form 4 activity around those dates is prudent .
- Governance: Dual President/Chairman role with Lead Independent Director provides counterbalance, but 2024 attendance shortfall is a red flag; continued focus on independent committee oversight is key .
- External management structure: Fee mechanics and affiliate transactions introduce performance-leverage incentives and conflict complexity; Board’s expense cap and related-party policy are mitigating factors; investors should monitor capital allocation, leverage, and affiliate dealings for alignment with minority shareholders .
- Pay-for-performance: Equity awards are time-based without explicit performance metrics; Item 402(v) shows no use of performance-based measures to link “compensation actually paid” to Company performance, diluting direct pay-for-performance signaling . The 2025 LTIP’s performance award capabilities exist but usage should be tracked post-approval .