The non-listed REIT saw its deficit balloon to $11.1 million as executive transition costs and the absence of prior-year property sale gains weighed on results.

March 12, 2026

Revenue Showed Modest Growth

Highlands REIT, Inc., the Chicago-based self-advised real estate investment trust born from a 2016 spinoff of InvenTrust Properties Corp., reported a significantly wider net loss for fiscal year 2025, driven by rising operating costs and the absence of prior-year property sale gains. The company disclosed these results in its annual report covering the period ended December 31, 2025.

The REIT posted a net loss of approximately $11.1 million for the year, compared to a loss of roughly $1.0 million in 2024 — a deterioration of about $10.1 million. The dramatic swing was largely attributable to the $6.9 million gain recorded in 2024 from the sale of two industrial properties in Minnesota, with no comparable dispositions occurring during 2025. Escalating expenses across multiple categories further weighed on results.

Total revenues rose approximately 3.7 percent to $37.4 million, up from $36.1 million in the prior year. The increase was primarily driven by the commencement of a lease with Life Time Fitness at the Sherman Plaza retail property in Evanston, Illinois, which brought occupancy at that location from roughly 56 percent to nearly 92 percent. This gain was partially offset by lower rental income from the multi-family portfolio due to reduced occupancy levels and the absence of revenue from industrial properties sold in early 2024.

Portfolio-wide economic occupancy improved modestly to 74.0 percent from 72.4 percent, while average annualized base rent per leased square foot increased to $26.58 from $25.93.

Expenses Rose Sharply Across Multiple Categories

Total expenses climbed 12.0 percent to $42.1 million from $37.5 million. Property operating expenses increased by $1.3 million, or 13 percent, largely due to higher legal and professional fees related to pursuit costs on transactions that ultimately did not close, along with increased insurance, utilities, and maintenance costs.

General and administrative expenses saw the largest increase, rising $2.5 million, or roughly 21 percent. The company attributed this to higher stock compensation expense from larger annual equity grants and one-time awards for two employees. Additional costs stemmed from a consulting agreement with former CEO Richard Vance following his departure and legal expenses associated with executive employment agreements.

Real estate taxes rose by $0.8 million, though actual tax expense remained relatively stable year over year. The apparent increase reflected a smaller accrual reversal in 2025 compared to a larger reversal in 2024, both related to taxes on a previously foreclosed property where the statute of limitations had expired.

Leadership Transition and Strategic Direction

A notable development during the year was the transition in executive leadership. Richard Vance departed as President and CEO, with Robert J. Lange stepping into the role effective March 2025. Lange, who had served as Executive Vice President, Chief Operating Officer, and General Counsel since the company’s formation, was subsequently appointed to the board of directors in August 2025.

As part of his separation agreement, Vance received consulting fees totaling $800,000 for the remainder of 2025 and will receive $100,000 quarterly through 2027. The company also repurchased approximately 6,698 thousand shares of his common stock at $0.28 per share, a discount from the most recent estimated share value of $0.31.

Portfolio Composition and Debt Considerations

As of year-end, the Highlands portfolio consisted of 18 investment properties and one parcel of unimproved land, including thirteen multi-family communities, three retail properties, one office property, one vacant correctional facility, and unimproved land in Orlando. The company operates in two reportable segments: multi-family and other.

The company carries total mortgage debt of approximately $122.9 million across eleven loans with a weighted average interest rate of 5.25 percent. Two significant maturities loom in 2026:

• Buckhorn Plaza: $8.9 million loan maturing November 2026, with management planning to either sell the property or refinance
• Market at Hilliard: $13.7 million loan maturing December 2026, with refinancing expected

A key achievement during the year was the long-term extension of the $20.0 million Trimble mortgage, which had originally matured in April 2025. After initially exercising a short-term extension option, the company completed a permanent extension in September pushing the maturity to April 2029, while also removing a $4.0 million payment guarantee.

Cash Position and Liquidity

The company ended 2025 with $19.5 million in cash and cash equivalents, down significantly from $29.9 million at the end of 2024. Cash provided by operating activities declined to $1.4 million from $2.7 million. The company used $9.7 million in investing activities, primarily for capital expenditures, compared to receiving $13.8 million in 2024 when property sale proceeds were flowing in.

No cash distributions were paid to stockholders during 2025 or 2024. The estimated per share value remains at $0.31, as the board opted not to publish an updated valuation in December 2025 due to its ongoing evaluation of a potential transaction involving one of its investment properties.

Outlook and Shareholder Considerations

Highlands continues to pursue its stated strategy of preserving and maximizing portfolio value with the long-term goal of providing stockholders a return on their investment. The company indicated it plans to explore offering an additional liquidity option to shareholders, with an announcement expected during 2026. However, management acknowledged that execution of future liquidity events depends on numerous external and macroeconomic factors and cautioned that favorable terms cannot be guaranteed.

With no public trading market for its shares, approximately 142,600 stockholders of record, and only eight full-time employees managing the enterprise, Highlands REIT remains a unique entity navigating the challenges of monetizing a legacy portfolio of non-core assets in an uncertain real estate environment.