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NexPoint Residential Trust, Inc. Reports First Quarter 2020 Results

·21 min read

NXRT Reports Net Income of $28.0 million; $85.4 million of Capital Recycling Activity and $31.0 million of Share Repurchase Activity; Entire Portfolio Located in Markets Already Open or Expected to Re-open in May

DALLAS, May 7, 2020 /PRNewswire/ -- NexPoint Residential Trust, Inc. (NYSE:NXRT) reported financial results for the first quarter ended March 31, 2020.

Highlights

  • NXRT1 reported Net Income, FFO2, Core FFO2 and AFFO2 of $28.0M, $12.4M, $13.6M and $15.3M, respectively, attributable to common stockholders for the quarter ended March 31, 2020, compared to Net Loss, FFO, Core FFO, and AFFO of $(4.4)M, $11.0M, $11.0M and $12.7M, respectively, attributable to common stockholders for the quarter ended March 31, 2019.

  • For the three months ended March 31, 2020, Q1 Same Store properties3 average effective rent, total revenue and NOI2 increased 2.9%, 5.3% and 5.6%, respectively, and occupancy increased 90 bps over the prior year period.

  • During the three months ended March 31, 2020, NXRT disposed of three properties, Southpoint Reserve, Willow Grove, and Woodbridge, for a combined sales price of $86.5M and net cash proceeds of $43.4M.

  • The weighted average effective monthly rent per unit across all 37 properties held as of March 31, 2020 (the "Portfolio"), consisting of 14,104 units, was $1,110, while physical occupancy was 94.2%.

  • NXRT paid a first quarter dividend of $0.3125 per share of common stock on March 31, 2020.

  • During the first quarter, for the properties in our Portfolio, we completed 412 full and partial upgrades and leased 215 upgraded units, achieving an average monthly rent premium of $115 and a 23.6% ROI4. Since inception, for the properties currently in our Portfolio, we have completed 6,914 full and partial upgrades and achieved an average monthly rental increase per unit of $102, equating to a 24.6% ROI on all units leased as of March 31, 2020.

  • During the three months ended March 31, 2020, through its at-the-market offering ("ATM program"), NXRT issued approximately 0.6 million shares for approximately $28.0 million in gross proceeds. On March 4, 2020, NXRT entered into a new ATM program for $225.0 million.

(1)

In this release, "we," "us," "our," the "Company," "NexPoint Residential Trust," and "NXRT" each refer to NexPoint Residential Trust, Inc., a Maryland corporation.



(2)

FFO, Core FFO, AFFO and NOI are non-GAAP measures. For a discussion of why we consider these non-GAAP measures useful and reconciliations of FFO, Core FFO, AFFO and NOI to net income (loss), see the "Definitions and Reconciliations of Non-GAAP Measures" and "FFO, Core FFO and AFFO" sections of this release.



(3)

We define "Same Store" properties as properties that were in our Portfolio for the entirety of the periods being compared. There are 25 properties encompassing 9,521 units of apartment space in our Same Store pool for the three months ended March 31, 2020 (our "Q1 Same Store" properties).



(4)

We define Return on Investment ("ROI") as the sum of the actual rent premium divided by the sum of the total cost.

First Quarter 2020 Financial Results

  • Total revenues were $52.6 million for the first quarter of 2020, compared to $41.5 million for the first quarter of 2019.

  • Net income for the first quarter of 2020 totaled $28.0 million, or income of $1.08 per diluted share, which included $23.3 million of depreciation and amortization expense. This compared to a net loss of $(4.4) million, or a loss of $(0.19) per diluted share, for the first quarter of 2019, which included $15.4 million of depreciation and amortization expense.

  • The change in our net income of $28.0 million for the three months ended March 31, 2020 as compared to our net loss of $(4.4) million for the three months ended March 31, 2019 primarily relates to increases in gains on sales of real estate and total revenues, partially offset by increases in depreciation and property operating expenses.

  • For the first quarter of 2020, NOI was $30.0 million on 37 properties, compared to $23.6 million for the first quarter of 2019 on 38 properties.

  • For the first quarter of 2020, Q1 Same Store NOI increased 5.6% to $17.8 million, compared to $16.9 million for the first quarter of 2019.

  • For the first quarter of 2020, FFO totaled $12.4 million, or $0.48 per diluted share, compared to $11.0 million, or $0.46 per diluted share, for the first quarter of 2019.

  • For the first quarter of 2020, Core FFO totaled $13.6 million, or $0.53 per diluted share, compared to $11.0 million, or $0.46 per diluted share, for the first quarter of 2019.

  • For the first quarter of 2020, AFFO totaled $15.3 million, or $0.59 per diluted share, compared to $12.7 million, or $0.53 per diluted share, for the first quarter of 2019.

Subsequent Events & Operational Trends

  • The Company is providing a summary of select April and May (through May 5, 2020) operating metrics in response to economic challenges and related government actions and regulations as a result of the ongoing Novel Coronavirus (COVID-19) pandemic:

  • The COVID Pandemic has resulted in cessation, severe curtailment, or impairment of business activities in most sectors of the economy in all markets we operate in, due to governmental "stay at home" orders, risk mitigation procedures, closure of businesses not considered to be "essential," as well as other direct and indirect impacts, including those that may not yet be identified. This has resulted in a rapid and dramatic increase in unemployment in the U.S. We cannot estimate the extent of the COVID-19 pandemic's future negative impacts or how long the negative impacts of the COVID-19 pandemic will persist. In addition, it is possible that, even after the initial restrictions due to the COVID-19 pandemic ease, they could be reinstituted in case of future waves of infection or if additional pandemics occur. As a result of these uncertainties related to the COVID-19 pandemic, the Company has temporarily withdrawn its previously provided full-year 2020 guidance outlook.

First Quarter Earnings Conference Call

NXRT will host a call on Thursday, May 7, 2020 at 11:00 a.m. ET to discuss its first quarter financial results and provide updates on the impact of the COVID-19 crisis on operations and rent collections. The conference call can be accessed live over the phone by dialing 888-599-8686 or, for international callers, +1 720-543-0302 and using passcode Conference ID: 9982730. A live audio webcast of the call will be available online at the Company's website, http://www.nexpointliving.com (under "Investor Relations"). An online replay will be available shortly after the call on the Company's website and continue to be available for 60 days.

A replay of the conference call will also be available through Thursday, May 14, 2020 by dialing 888-203-1112 or, for international callers, +1 719-457-0820 and entering passcode 9982730.

About NXRT

NexPoint Residential Trust is a publicly traded REIT, with its shares listed on the New York Stock Exchange under the symbol "NXRT," primarily focused on acquiring, owning and operating well-located middle-income multifamily properties with "value-add" potential in large cities and suburban submarkets of large cities, primarily in the Southeastern and Southwestern United States. NXRT is externally advised by NexPoint Real Estate Advisors, L.P., an affiliate of NexPoint Advisors, L.P., an SEC-registered investment advisor, which has extensive real estate experience. Our filings with the Securities and Exchange Commission (the "SEC") are available on our website, www.nexpointliving.com, under the "Investor Relations" tab.

Cautionary Statement Regarding Forward-Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions and beliefs. Forward-looking statements can often be identified by words such as "expect," "anticipate," "estimate," "may," "should," "intend" and similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding NXRT's business and industry in general, NXRT's 2020 adjusted NOI estimate and the related assumptions, the timing of re-openings, net asset value and the related components and assumptions, planned value-add programs, including projected average rent, rent change and return on investment and expected acquisitions and dispositions. They are not guarantees of future results and forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement, including the ultimate geographic spread, duration and severity of the coronavirus (COVID-19) outbreak, and the effectiveness of actions taken, or actions that may be taken, by governmental authorities to contain the outbreak or treat its impact, as well as those described in greater detail in our filings with the Securities and Exchange Commission, particularly those specifically described in our Annual Report on Form 10-K. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the Company's most recent Annual Report on Form 10-K and other filings with the SEC for a more complete discussion of the risks and other factors that could affect any forward-looking statements. The statements made herein speak only as of the date of this release and except as required by law, NXRT does not undertake any obligation to publicly update or revise any forward-looking statements.

FFO, Core FFO and AFFO

The following table reconciles our calculations of FFO, Core FFO and AFFO to net income (loss), the most directly comparable GAAP financial measure, for the three months ended March 31, 2020 and 2019 (in thousands, except per share amounts):



For the Three Months Ended March 31,









2020



2019



% Change (1)



Net income (loss)


$

28,039



$

(4,373)



N/M



Depreciation and amortization



23,338




15,398



N/M



Gain on sales of real estate



(38,972)







0.0

%


Adjustment for noncontrolling interests



(37)




(33)




12.1

%


FFO attributable to common stockholders



12,368




10,992




12.5

%
















FFO per share - basic


$

0.49



$

0.47




4.4

%


FFO per share - diluted


$

0.48



$

0.46




4.7

%
















Loss on extinguishment of debt and modification costs



874







0.0

%


Casualty-related expenses



60




35



N/M



Casualty gains



(51)







0.0

%


Amortization of deferred financing costs - acquisition term notes



349







0.0

%


Adjustment for noncontrolling interests



(4)







0.0

%


Core FFO attributable to common stockholders



13,596




11,027




23.3

%
















Core FFO per share - basic


$

0.54



$

0.47




14.4

%


Core FFO per share - diluted


$

0.53



$

0.46




14.7

%
















Amortization of deferred financing costs - long term debt



386




432




-10.6

%


Equity-based compensation expense



1,300




1,235




5.3

%


Adjustment for noncontrolling interests



(5)




(5)




0.0

%


AFFO attributable to common stockholders



15,277




12,689




20.4

%
















AFFO per share - basic


$

0.60



$

0.54




11.7

%


AFFO per share - diluted


$

0.59



$

0.53




12.0

%
















Weighted average common shares outstanding - basic



25,388




23,550




7.8

%


Weighted average common shares outstanding - diluted



25,851




24,044




7.5

%
















Dividends declared per common share


$

0.3125



$

0.275




14

%
















FFO Coverage - diluted

(2)

1.53x



1.66x




-7.91

%


Core FFO Coverage - diluted

(2)

1.68x



1.67x




0.92

%


AFFO Coverage - diluted

(2)

1.89x



1.92x




-1.46

%




(1)

Represents the percentage change for the three months ended March 31, 2020 compared to the three months ended March 31, 2019.

(2)

Indicates coverage ratio of FFO/Core FFO/AFFO per common share (diluted) over dividends declared per common share during the period.

Definitions and Reconciliations of Non-GAAP Measures

Definitions

This presentation contains non-GAAP financial measures. A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets or statements of cash flows of the Company. The non-GAAP financial measures used within this presentation are net operating income ("NOI"), funds from operations attributable to common stockholders ("FFO"), FFO per diluted share, Core FFO, Core FFO per diluted share, adjusted FFO ("AFFO"), AFFO per diluted share and net debt.

NOI is used by investors and our management to evaluate and compare the performance of our properties to other comparable properties, to determine trends in earnings and to compute the fair value of our properties. NOI is calculated by adjusting net income (loss) to add back (1) the cost of funds, (2) acquisition costs, (3) advisory and administrative fees, (4) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (5) corporate general and administrative expenses, (6) other gains and losses that are specific to us, (7) casualty-related expenses/(recoveries) and casualty gain (loss), and (8) property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on behalf of the Company at the property for expenses such as legal, professional and franchise tax fees. We define "Same Store NOI" as NOI for our properties that are comparable between periods. We view Same Store NOI as an important measure of the operating performance of our properties because it allows us to compare operating results of properties owned for the entirety of the current and comparable periods and therefore eliminates variations caused by acquisitions or dispositions during the periods.

FFO is defined by the National Association of Real Estate Investment Trusts ("NAREIT"), as net income (loss) computed in accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization. We compute FFO in accordance with NAREIT's definition. Our presentation differs slightly in that we begin with net income (loss) before adjusting for amounts attributable to redeemable noncontrolling interests in the OP and we show the combined amounts attributable to such noncontrolling interests as an adjustment to arrive at FFO attributable to common stockholders.

Core FFO makes certain adjustments to FFO, which are either not likely to occur on a regular basis or are otherwise not representative of the ongoing operating performance of our Portfolio. Core FFO adjusts FFO to remove items such as losses on extinguishment of debt and modification costs (includes prepayment penalties and defeasance costs incurred and the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt related to the retirement of debt and costs incurred in connection with a debt modification that are expensed), casualty-related expenses, casualty gains or losses, the amortization of deferred financing costs incurred in connection with obtaining short-term debt financing and the noncontrolling interests related to these items.

AFFO makes certain adjustments to Core FFO. There is no industry standard definition of AFFO and practice is divergent across the industry. AFFO adjusts Core FFO to remove items such as equity-based compensation expense and the amortization of deferred financing costs incurred in connection with obtaining long-term debt financing, and the noncontrolling interests related to these items.

Net debt is calculated by subtracting cash and cash equivalents and restricted cash held for value-add upgrades and green improvements from total debt outstanding.

We believe that the use of NOI, FFO, Core FFO, AFFO and net debt, combined with the required GAAP presentations, improves the understanding of operating results and debt levels of real estate investment trusts ("REITs") among investors and makes comparisons of operating results and debt levels among such companies more meaningful. While NOI, FFO, Core FFO, AFFO and net debt are relevant and widely used measures of operating performance and debt levels of REITs, they do not represent cash flows from operations, net income (loss) or total debt as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity, operating performance and debt levels. NOI, FFO, Core FFO and AFFO do not purport to be indicative of cash available to fund our future cash requirements. We present net debt because we believe it provides our investors a better understanding of our leverage ratio. Net debt should not be considered an alternative to total debt, as we may not always be able to use our available cash to repay debt. Our computation of NOI, FFO, Core FFO, AFFO and net debt may not be comparable to NOI, FFO, Core FFO, AFFO and net debt reported by other REITs. For a more complete discussion of NOI, FFO, Core FFO and AFFO, see our most recent Annual Report on Form 10-K and our other filings with the SEC.

Reconciliations

NOI and Same Store NOI for the three months ended March 31, 2020 and 2019

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles NOI and our Q1 Same Store NOI for the three months ended March 31, 2020 and 2019 to net income (loss), the most directly comparable GAAP financial measure (in thousands):



For the Three Months Ended March 31,




2020



2019


Net income (loss)


$

28,039



$

(4,373)


Adjustments to reconcile net income (loss) to NOI:









Advisory and administrative fees



1,865




1,850


Corporate general and administrative expenses



2,701




2,233


Casualty-related expenses

(1)


60




35


Casualty gains



(51)





Property general and administrative expenses

(2)


469




356


Depreciation and amortization



23,338




15,398


Interest expense



11,662




8,088


Loss on extinguishment of debt and modification costs



874





Gain on sales of real estate



(38,972)





NOI


$

29,985



$

23,587


Less Non-Same Store









Revenues



(20,782)




(11,290)


Operating expenses



8,644




4,609


Same Store NOI


$

17,847



$

16,906




(1)

Adjustment to net income (loss) to exclude certain property operating expenses that are casualty-related expenses.

(2)

Adjustment to net income (loss) to exclude certain property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional and franchise tax fees.

NOI and 2018-2019 Same Store NOI for the years ended December 31, 2019 and 2018, and NOI and Same Store NOI for the three months ended December 31, 2019

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles NOI and our 2018-2019 Same Store NOI for the years ended December 31, 2019 and 2018, and NOI and our Same Store NOI for the three months ended December 31, 2019 to net income (loss), the most directly comparable GAAP financial measure (in thousands):



For the Year Ended December 31,



For the Three
Months Ended
December 31,




2019



2018



2019


Net income (loss)


$

99,438



$

(1,614)



$

(13,306)


Adjustments to reconcile net income (loss) to NOI:













Advisory and administrative fees



7,500




7,474




1,887


Corporate general and administrative expenses



9,613




7,808




2,300


Casualty-related recoveries

(1)


(34)




(663)




(60)


Casualty losses



3,488







3,488


Miscellaneous income



(587)







(587)


Property general and administrative expenses

(2)


1,517




1,294




448


Depreciation and amortization



69,086




47,470




23,394


Interest expense



37,385




28,572




10,747


Loss on extinguishment of debt and modification costs



2,869




3,576





Gain on sales of real estate



(127,684)




(13,742)




16


NOI


$

102,591



$

80,175



$

28,327


Less Non-Same Store













Revenues



(62,429)




(32,871)




(16,158)


Operating expenses



25,799




14,491




6,649


Same Store NOI

(3)

$

65,961



$

61,795



$

18,818




(1)

Adjustment to net income (loss) to exclude certain property operating expenses that are casualty-related recoveries.

(2)

Adjustment to net income (loss) to exclude certain property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional and franchise tax fees.

(3)

Our 2018-2019 and Q4 2019 same store pools consisted of 25 and 28 properties, respectively.

The following table reconciles our FFO, Core FFO and AFFO to our net income (loss) for the years ended December 31, 2019 and 2018, and for the three months ended March 31, 2020 (in thousands, except per share data):



For the Year Ended December 31,



For the Three
Months Ended
March 31,




2019



2018



2020


Net income (loss)


$

99,438



$

(1,614)



$

28,039


Depreciation and amortization



69,086




47,470




23,338


Gain on sales of real estate



(127,684)




(13,742)




(38,972)


Adjustment for noncontrolling interests



(122)




(96)




(37)


FFO attributable to common stockholders



40,718




32,018




12,368


FFO per share - diluted


$

1.66



$

1.48



$

0.48















Loss on extinguishment of debt and modification costs



2,869




3,576




874


Casualty-related expenses/(recoveries)



(34)




(663)




60


Casualty gain (loss)



3,488







(51)


Amortization of deferred financing costs - acquisition term notes



553




159




349


Adjustment for noncontrolling interests



(21)




(9)




(4)


Core FFO attributable to common stockholders



47,573




35,081




13,596


Core FFO per share - diluted


$

1.93



$

1.62



$

0.53















Amortization of deferred financing costs - long term debt



1,530




1,491




386


Equity-based compensation expense



5,130




4,198




1,300


Adjustment for noncontrolling interests



(20)




(17)




(5)


AFFO attributable to common stockholders



54,213




40,753




15,277


AFFO per share - diluted


$

2.20



$

1.88



$

0.59




Reconciliation of Debt to Net Debt


(dollar amounts in thousands)


Q1 2020



Q1 2019


Total mortgage debt


$

1,151,683



$

924,463


Credit facilities



225,000




52,500











Adjustments to arrive at net debt:









Cash and cash equivalents



(69,540)




(20,536)


Restricted cash held for value-add upgrades and green improvements



(15,356)




(8,863)


Net Debt


$

1,291,787



$

947,564


Enterprise Value (1)


$

1,918,787



$

1,853,564


Leverage Ratio



67

%



51

%



(1)

Enterprise Value is calculated as Market Capitalization plus Net Debt.

Reconciliation of 2020 Adjusted NOI Estimate

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our adjusted NOI estimate to estimated net income (the most directly comparable GAAP financial measure) for the periods presented below (in thousands):



For the Year Ended

December 31, 2020


Net income


$

5,969


Adjustments to reconcile net gain to NOI:





Advisory and administrative fees



7,500


Corporate general and administrative expenses



9,932


Property general and administrative expenses

(1)


1,500


Depreciation and amortization



85,000


Gain on Dispositions



(38,972)


Total Loss on Debt Extinguishment



874


Interest Expense



44,697


NOI


$

116,500




(1)

Adjustment to net income to exclude certain property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional and franchise tax fees.

Contact:
Investor Relations
Jackie Graham
JGraham@nexpointadvisors.com
972-419-6213
Media inquiries: MediaRelations@nexpointadvisors.com

Cision
Cision

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SOURCE NexPoint Residential Trust, Inc.