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NexPoint Residential Trust, Inc. Reports Second Quarter 2020 Results

·22 min read

NXRT's Affordable Sunbelt Portfolio Exhibits Strength; Rent Collections Remain Healthy with July-to-date at 97.9%; Management Continues to Execute Strategic Value-Add Initiatives Generating Target Returns

DALLAS, Aug. 4, 2020 /PRNewswire/ -- NexPoint Residential Trust, Inc. (NYSE:NXRT) reported financial results for the second quarter ended June 30, 2020.

Highlights

  • NXRT1 reported Net Loss, FFO2, Core FFO2 and AFFO2 of $(9.3)M, $12.0M, $14.5M and $16.1M, respectively, attributable to common stockholders for the quarter ended June 30, 2020, compared to Net Loss, FFO, Core FFO, and AFFO of $(2.0)M, $11.0M, $11.0M and $12.9M, respectively, attributable to common stockholders for the quarter ended June 30, 2019.

  • NXRT reported Net Income, FFO, Core FFO and AFFO of $18.7M, $24.4M, $28.1M and $31.4M, respectively, attributable to common stockholders for the six months ended June 30, 2020, compared to Net Loss, FFO, Core FFO, and AFFO of $(6.3)M, $22.0M, $22.0M and $25.6M, respectively, attributable to common stockholders for the six months ended June 30, 2019.

  • For the three months ended June 30, 2020, Q2 Same Store properties3 average effective rent, total revenue and NOI2 increased 2.1%, 4.0% and 5.8%, respectively, and occupancy increased 120 bps over the prior year period.

  • For the six months ended June 30, 2020, YTD Same Store properties3 average effective rent, total revenue and NOI2 increased 1.9%, 4.7% and 5.3%, respectively, and occupancy increased 100 bps over the prior year period.

  • The weighted average effective monthly rent per unit across all 37 properties held as of June 30, 2020 (the "Portfolio"), consisting of 14,104 units, was $1,109, while physical occupancy was 95.3%.

  • NXRT paid a second quarter dividend of $0.3125 per share of common stock on June 30, 2020.

  • During the second quarter, for the properties in our Portfolio, we completed 411 full and partial upgrades and leased 392 upgraded units, achieving an average monthly rent premium of $113 and a 23.4% ROI4. Since inception, for the properties currently in our Portfolio, we have completed 7,325 full and partial upgrades and achieved an average monthly rental increase per unit of $95, equating to a 25.0% ROI on all units leased as of June 30, 2020.

  • During the six months ended June 30, 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.

  • During the six months ended June 30, 2020, NXRT repurchased 1,644,697 shares at a weighted average price of $27.07 per share. Since inception, NXRT has repurchased 2,382,155 shares at a weighted average price of $25.70 per share.

  • On July 27, 2020, NXRT appointed Catherine Wood as an independent director to the Company's board of directors (the "Board"). Ms. Wood brings a wealth of knowledge, extensive leadership experience, and a fresh perspective that complements the Company's mission to diversify NXRT's Board and management team. Both management and the Board believe the Company will benefit from diversification of viewpoints and experiences. Ms. Wood is Chief Executive Officer and Chief Investment Officer of ARK Investment Management LLC, an investment manager she founded in 2014.

  • On July 28, 2020 the Company, through the OP, entered into a purchase and sale agreement with a third party real estate investment firm for the sale of the Eagle Crest property, located in Irving, TX for approximately $55.5 million. The sale is expected to close on or before September 30, 2020.

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 28 properties encompassing 10,177 units of apartment space in our Same Store pool for the three months ended June 30, 2020 (our "Q2 Same Store" properties) and 25 properties encompassing 9,521 units of apartment space in our Same Store pool for the six months ended June 30, 2020 (our "YTD 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.

Second Quarter 2020 Financial Results

  • Total revenues were $50.7 million for the second quarter of 2020, compared to $43.1 million for the second quarter of 2019.

  • Net loss for the second quarter of 2020 totaled $(9.3) million, or loss of $(0.38) per diluted share, which included $21.4 million of depreciation and amortization expense. This compared to a net loss of $(2.0) million, or a loss of $(0.08) per diluted share, for the second quarter of 2019, which included $13.1 million of depreciation and amortization expense.

  • The change in our net loss of $(9.3) million for the three months ended June 30, 2020 as compared to our net loss of $(2.0) million for the three months ended June 30, 2019 primarily relates to an increase in total expenses and an increase in interest expense partially offset by an increase in total revenues.

  • For the second quarter of 2020, NOI was $29.2 million on 37 properties, compared to $24.6 million for the second quarter of 2019 on 39 properties.

  • For the second quarter of 2020, Q2 Same Store NOI increased 5.8% to $20.2 million, compared to $19.1 million for the second quarter of 2019.

  • For the second quarter of 2020, FFO totaled $12.0 million, or $0.50 per diluted share, compared to $11.0 million, or $0.46 per diluted share, for the second quarter of 2019.

  • For the second quarter of 2020, Core FFO totaled $14.5 million, or $0.59 per diluted share, compared to $11.0 million, or $0.45 per diluted share, for the second quarter of 2019.

  • For the second quarter of 2020, AFFO totaled $16.1 million, or $0.66 per diluted share, compared to $12.9 million, or $0.53 per diluted share, for the second quarter of 2019.

2020 Year to Date Financial Results

  • Total revenues were $103.3 million for the six months ended June 30, 2020, compared to $84.6 million for the six months ended June 30, 2019.

  • Net income for the six months ended June 30, 2020 totaled $18.7 million, or income of $0.74 per diluted share, which included a gain on sales of real estate of $39.0 million and $44.8 million of depreciation and amortization expense. This compared to net loss of $(6.4) million, or a loss of $(0.27) per diluted share, six months ended June 30, 2019, which included $28.5 million of depreciation and amortization expense.

  • The change in our net income of $18.7 million for the six months ended June 30, 2020 as compared to our net loss of $(6.4) million for the six months ended June 30, 2019 primarily relates to increases in gains on sales of real estate and total revenues, partially offset by increases in depreciation and total property operating expenses.

  • For the six months ended June 30, 2020, NOI was $59.2 million on 37 properties, compared to $48.2 million for the six months ended June 30, 2019 on 39 properties.

  • For the six months ended June 30, 2020, Same Store NOI increased 5.3% to $36.0 million, compared to $34.2 million for the six months ended June 30, 2019.

  • For the six months ended June 30, 2020, FFO totaled $24.4 million, or $0.96 per diluted share, compared to $22.0 million, or $0.91 per diluted share, for the six months ended June 30, 2019.

  • For the six months ended June 30, 2020, Core FFO totaled $28.1 million, or $1.11 per diluted share, compared to $22.0 million, or $0.91 per diluted share, for the six months ended June 30, 2019.

  • For the six months ended June 30, 2020, AFFO totaled $31.4 million, or $1.24 per diluted share, compared to $25.6 million, or $1.06 per diluted share, for the six months ended June 30, 2019.

Subsequent Events & Operational Trends

  • The Company is providing a summary of select July operating metrics in response to economic challenges and related government actions and regulations as a result of the ongoing novel Coronavirus ("COVID-19") pandemic:

  • COVID-19 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 COVID-19's future negative impacts or how long the negative impacts of COVID-19 will persist. In addition, it is possible that, even after the initial restrictions due to COVID-19 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 COVID-19, the Company continues to withhold its full-year 2020 guidance outlook.

Second Quarter Earnings Conference Call

NXRT will host a call on Tuesday, August 4, 2020 at 11:00 a.m. ET to discuss its second quarter financial results and provide updates on the impact of COVID-19 on operations and rent collections. The conference call can be accessed live over the phone by dialing 800-367-2403 or, for international callers, +1 334-777-6978 and using passcode Conference ID: 6656055. 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 Tuesday, August 11, 2020 by dialing 888-203-1112 or, for international callers, +1 719-457-0820 and entering passcode 6656055.

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 COVID-19 pandemic and its effects on the Company, 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 COVID-19 pandemic, 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 and our Quarterly Reports on Form 10-Q. 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 and six months ended June 30, 2020 and 2019 (in thousands, except per share amounts):



For the Three Months Ended
June 30,



For the Six Months Ended
June 30,









2020



2019



2020



2019



% Change (1)



Net income (loss)


$

(9,318)



$

(1,987)



$

18,721



$

(6,360)



N/M



Depreciation and amortization



21,418




13,066




44,756




28,464



N/M



Gain on sales of real estate



(19)







(38,991)







0.0

%


Adjustment for noncontrolling interests



(36)




(33)




(73)




(66)




10.6

%


FFO attributable to common stockholders



12,045




11,046




24,413




22,038




10.8

%
























FFO per share - basic


$

0.50



$

0.47



$

0.98



$

0.93




5.4

%


FFO per share - diluted


$

0.50



$

0.46



$

0.96



$

0.91




5.6

%
























Loss on extinguishment of debt and modification costs









874







0.0

%


Casualty-related expenses/(recoveries)



723




(43)




773




(7)



N/M



Casualty losses



1,079







1,028







0.0

%


Pandemic expense

(2)


274







284







0.0

%


Amortization of deferred financing costs - acquisition term notes



345







694







0.0

%


Adjustment for noncontrolling interests



(7)







(11)







0.0

%


Core FFO attributable to common stockholders



14,459




11,003




28,055




22,031




27.3

%
























Core FFO per share - basic


$

0.59



$

0.46



$

1.13



$

0.93




21.2

%


Core FFO per share - diluted


$

0.59



$

0.45



$

1.11



$

0.91




21.4

%
























Amortization of deferred financing costs - long term debt



357




470




744




902




-17.5

%


Equity-based compensation expense



1,335




1,419




2,635




2,654




-0.7

%


Adjustment for noncontrolling interests



(5)




(5)




(10)




(11)




-9.1

%


AFFO attributable to common stockholders



16,146




12,887




31,424




25,576




22.9

%
























AFFO per share - basic


$

0.66



$

0.54



$

1.26



$

1.08




16.9

%


AFFO per share - diluted


$

0.66



$

0.53



$

1.24



$

1.06




17.1

%
























Weighted average common shares outstanding - basic



24,307




23,736




24,847




23,643




5.1

%


Weighted average common shares outstanding - diluted



24,307




24,233




25,330




24,139




4.9

%
























Dividends declared per common share


$

0.3125



$

0.275



$

0.625



$

0.550




13.6

%
























FFO Coverage - diluted

(3)

1.59x



1.66x



1.54x



1.66x




-7.10

%


Core FFO Coverage - diluted

(3)

1.90x



1.65x



1.77x



1.66x




6.79

%


AFFO Coverage - diluted

(3)

2.13x



1.93x



1.98x



1.93x




3.04

%



(1)

Represents the percentage change for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

(2)

Represents additional cleaning, disinfecting and other costs incurred at the properties related to COVID-19.

(3)

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), (8) miscellaneous income derived from recognition of lost rents covered by insurance, (9) pandemic expenses and (10) 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/recoveries, casualty gains or losses, pandemic expenses, 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 and six months ended June 30, 2020 and 2019

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles NOI and our Same Store NOI for the three and six months ended June 30, 2020 and 2019 to net income (loss), the most directly comparable GAAP financial measure (in thousands):



For the Six Months Ended June 30,



For the Three Months Ended June
30,




2020



2019



2020



2019


Net income (loss)


$

18,721



$

(6,360)



$

(9,318)



$

(1,987)


Adjustments to reconcile net income (loss) to NOI:

















Advisory and administrative fees



3,801




3,722




1,936




1,872


Corporate general and administrative expenses



5,633




4,974




2,932




2,741


Casualty-related expenses/(recoveries)

(1)


773




(7)




723




(43)


Casualty losses



1,028







1,079





Miscellaneous income



(1,079)







(1,079)





Pandemic expense

(2)


284







274





Property general and administrative expenses

(3)


747




696




278




339


Depreciation and amortization



44,756




28,464




21,418




13,066


Interest expense



22,655




16,678




10,993




8,590


Loss on extinguishment of debt and modification costs



874











Gain on sales of real estate



(38,991)







(19)





NOI


$

59,202



$

48,167



$

29,217



$

24,578


Less Non-Same Store

















Revenues



(39,523)




(23,653)




(16,036)




(9,769)


Operating expenses



16,347




9,684




6,985




4,259


Same Store NOI


$

36,026



$

34,198



$

20,166



$

19,068



(1)

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

(2)

Represents additional cleaning, disinfecting and other costs incurred at the properties related to COVID-19.

(3)

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 Same Store NOI for the Three Months Ended March 31, 2020

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



For the Three Months Ended
March 31, 2020


Net income


$

28,039


Adjustments to reconcile net income to NOI:





Advisory and administrative fees



1,865


Corporate general and administrative expenses



2,701


Casualty-related recoveries



60


Casualty gains



(51)


Property general and administrative expenses



469


Depreciation and amortization



23,338


Interest expense



11,662


Loss on extinguishment of debt and modification costs



874


Gain on sales of real estate



(38,972)


NOI


$

29,985


Less Non-Same Store





Revenues



(20,782)


Operating expenses



8,644


Same Store NOI


$

17,847


Reconciliation of Debt to Net Debt

(dollar amounts in thousands)


Q2 2020



Q2 2019


Total mortgage debt


$

1,151,500



$

934,345


Credit facilities



225,000




52,500











Adjustments to arrive at net debt:









Cash and cash equivalents



(53,171)




(16,892)


Restricted cash held for value-add upgrades and green improvements



(10,790)




(8,210)


Net Debt


$

1,312,539



$

961,743


Enterprise Value (1)


$

2,171,539



$

1,950,743


Leverage Ratio



60

%



49

%


(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




Estimate (1)


Net income (loss)


$

32,753


Adjustments to reconcile net loss to NOI:





Advisory and administrative fees



7,609


Corporate general and administrative expenses



11,941


Property general and administrative expenses



1,563


Depreciation and amortization



86,766


Total Loss on Debt Extinguishment



1,476


Interest expense



44,231


Casualty-related expenses/(recoveries)



(483)


Casualty losses



1,028


Miscellaneous income



(1,079)


Gain on sales of real estate



(69,655)


NOI


$

116,150



(1)

Based on Green Street Advisors' "Residential Sectors" Report dated April 19, 2020. FY 2020 Adjusted NOI estimate does not consider any additional acquisition or disposition activity for the remainder of the year.

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

Cision
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SOURCE NexPoint Residential Trust, Inc.