NexPoint Real Estate Finance(NREF)

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NexPoint Real Estate Finance, Inc. Announces Third Quarter 2025 Earnings Conference Call
Prnewswire· 2025-10-06 13:11
, /PRNewswire/ -- NexPoint Real Estate Finance, Inc. (NYSE: NREF) (the "Company") announced today that the Company is scheduled to host a conference call on Thursday, October 30, 2025, at 11:00 a.m. ET (10:00 a.m. CT), to discuss third quarter 2025 financial results. The conference call can be accessed live over the phone by dialing 888-660-4430 or, for international callers, +1 646-960-0537 and using passcode Conference ID: 6891136. A live audio webcast of the call will be available online at the Company's ...
NexPoint Real Estate Finance: Pullback In Common Shares Presents A Buying Opportunity
Seeking Alpha· 2025-09-24 19:20
I ventured into investing in high school in 2011, mainly in REITs, preferred stocks, and high-yield bonds, starting a fascination with markets and the economy that has not faded despite the years. More recently I have been combining long stock positions with covered calls and cash secured puts. I approach investing purely from a fundamental long-term point of view. On Seeking Alpha I mostly cover REITs and financials, with occasional articles on ETFs and other stocks driven by a macro trade idea.Analyst’s D ...
NexPoint Real Estate Finance (NREF) Announces Dual Listing on NYSE Texas
Prnewswire· 2025-08-18 12:30
DALLAS, Aug. 18, 2025 /PRNewswire/ -- NexPoint Real Estate Finance, Inc. (NYSE: NREF) (the "Company") announced today the dual listing of its common stock on NYSE Texas, the newly launched fully electronic equities exchange headquartered in Dallas, Texas, effective August 19, 2025. NREF will maintain its primary listing on the New York Stock Exchange (NYSE) and continue to trade under the same ticker symbol, "NREF," on the NYSE and NYSE Texas."Joining NYSE Texas as a Founding Member marks an exciting milest ...
NexPoint Real Estate Finance(NREF) - 2025 Q2 - Quarterly Report
2025-08-07 01:39
[Cautionary Statement Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This section outlines the inherent risks and uncertainties associated with forward-looking statements, which may cause actual results to differ materially - Forward-looking statements in this report are based on management's current beliefs and assumptions and are subject to various risks and uncertainties that could cause actual results to differ materially[12](index=12&type=chunk)[13](index=13&type=chunk) - Key risks include exposure to debt-oriented real estate investments, adverse effects from macroeconomic trends (inflation, high interest rates), delinquency and foreclosure risks in commercial real estate, fluctuations in interest rates and credit spreads, substantial indebtedness, dependence on the Manager, risks of failing to qualify as a REIT, and risks associated with pandemics and specific legal proceedings[14](index=14&type=chunk)[16](index=16&type=chunk)[203](index=203&type=chunk) [PART I](index=6&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This item presents the unaudited consolidated financial statements of NexPoint Real Estate Finance, Inc. and its subsidiaries for the quarter and six months ended June 30, 2025, and comparative periods, including balance sheets, statements of operations, statements of stockholders' equity, and statements of cash flows, along with accompanying notes [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) Consolidated balance sheet highlights for June 30, 2025, and December 31, 2024, showing changes in assets, liabilities, and equity **Consolidated Balance Sheet Highlights (in thousands):** | Metric | June 30, 2025 | December 31, 2024 | Change ($) | | :------------------------------------------------ | :------------ | :---------------- | :--------- | | Cash and cash equivalents | $9,056 | $3,877 | +$5,179 | | Net Operating Real Estate Investments | $64,718 | $121,836 | -$57,118 | | Net Real Estate held for sale | $56,043 | — | +$56,043 | | Loans, held-for-investment, net | $474,203 | $497,544 | -$23,341 | | Preferred stock investments, at fair value | $113,423 | $18,949 | +$94,474 | | Mortgage loans held in variable interest entities, at fair value | $4,186,717 | $4,343,359 | -$156,642 | | **TOTAL ASSETS** | **$5,402,380** | **$5,416,073** | **-$13,693** | | Secured financing agreements, net | $233,908 | $235,769 | -$1,861 | | Master repurchase agreements | $260,947 | $243,454 | +$17,493 | | Mortgages payable, net | $63,500 | $95,464 | -$31,964 | | Mortgages payable held for sale, net | $31,824 | — | +$31,824 | | Bonds payable held in variable interest entities, at fair value | $3,883,947 | $4,029,214 | -$145,267 | | Redeemable Series B Preferred stock | $245,607 | $149,045 | +$96,562 | | Total Stockholders' Equity | $348,235 | $336,484 | +$11,751 | | **TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY** | **$5,402,380** | **$5,416,073** | **-$13,693** | [Consolidated Unaudited Statements of Operations](index=9&type=section&id=Consolidated%20Unaudited%20Statements%20of%20Operations) Unaudited consolidated statements of operations for the three and six months ended June 30, 2025, and 2024, detailing net income and earnings per share **Consolidated Statements of Operations (in thousands, except per share amounts):** | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change ($) | Change (%) | | :------------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net interest income (loss) | $12,069 | $6,740 | +$5,329 | +79.1% | | Total other income (loss) | $19,473 | $14,168 | +$5,305 | +37.4% | | Total operating expenses | $9,271 | $8,794 | +$477 | +5.4% | | Net income (loss) | $22,271 | $12,114 | +$10,157 | +83.8% | | Net income (loss) attributable to common stockholders | $12,285 | $7,488 | +$4,797 | +64.1% | | Earnings (loss) per share - basic | $0.69 | $0.43 | +$0.26 | +60.5% | | Earnings (loss) per share - diluted | $0.54 | $0.40 | +$0.14 | +35.0% | | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change ($) | Change (%) | | :------------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net interest income (loss) | $23,578 | $(6,074) | +$29,652 | -488.2% | | Total other income (loss) | $42,209 | $23,367 | +$18,842 | +80.6% | | Total operating expenses | $17,554 | $19,820 | -$2,266 | -11.4% | | Net income (loss) | $48,233 | $(2,527) | +$50,760 | -2008.7% | | Net income (loss) attributable to common stockholders | $28,802 | $(6,799) | +$35,601 | -523.6% | | Earnings (loss) per share - basic | $1.64 | $(0.39) | +$2.03 | -520.5% | | Earnings (loss) per share - diluted | $1.24 | $(0.39) | +$1.63 | -417.9% | - Interest income for the six months ended June 30, 2024, included **$25.0 million** related to accelerated amortization of the premium associated with the prepayment on a senior loan[24](index=24&type=chunk) [Consolidated Unaudited Statements of Stockholders' Equity](index=12&type=section&id=Consolidated%20Unaudited%20Statements%20of%20Stockholders%27%20Equity) This section details changes in stockholders' equity, including net income, stock-based compensation, and dividends for the periods presented - Total Stockholders' Equity increased from **$336,484 thousand** at December 31, 2024, to **$348,235 thousand** at June 30, 2025, driven by net income and vesting of stock-based compensation, partially offset by dividends[26](index=26&type=chunk) - Net income attributable to common stockholders for the six months ended June 30, 2025, was **$28,802 thousand**, a significant improvement from a net loss of **$(6,799) thousand** in the prior year[26](index=26&type=chunk)[27](index=27&type=chunk) - Common stock dividends declared remained constant at **$1.0000 per share** for both the six months ended June 30, 2025, and 2024[26](index=26&type=chunk)[27](index=27&type=chunk) [Consolidated Unaudited Statements of Cash Flows](index=14&type=section&id=Consolidated%20Unaudited%20Statements%20of%20Cash%20Flows) This section presents the consolidated statements of cash flows, categorizing cash activities into operating, investing, and financing for the six months ended June 30, 2025, and 2024 **Consolidated Statements of Cash Flows (in thousands):** | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change ($) | | :------------------------------------------ | :-------------------------- | :-------------------------- | :--------- | | Net cash provided by operating activities | $19,357 | $10,208 | +$9,149 | | Net cash provided by investing activities | $89,584 | $597,007 | -$507,423 | | Net cash used in financing activities | $(102,256) | $(616,548) | +$514,292 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $6,685 | $(9,333) | +$16,018 | | Cash, cash equivalents and restricted cash, end of period | $13,738 | $7,316 | +$6,422 | - The increase in operating cash flow was primarily due to the change in unrealized gains on investments held at fair value[272](index=272&type=chunk) - The substantial decrease in investing cash flow was mainly due to lower proceeds from payments received on mortgage loans held for investment[273](index=273&type=chunk) [Notes to Consolidated Unaudited Financial Statements](index=16&type=section&id=Notes%20to%20Consolidated%20Unaudited%20Financial%20Statements) This section provides detailed notes explaining the Company's organization, significant accounting policies, and specific financial statement line items [1. Organization and Description of Business](index=16&type=section&id=1.%20Organization%20and%20Description%20of%20Business) This note describes NexPoint Real Estate Finance, Inc.'s formation, REIT status, investment strategy, and external management structure - NexPoint Real Estate Finance, Inc. (NREF) is a commercial mortgage REIT, incorporated in Maryland on June 7, 2019, and elected REIT status commencing December 31, 2020[32](index=32&type=chunk) - NREF focuses on originating, structuring, and investing in first-lien mortgage loans, mezzanine loans, preferred equity, convertible notes, multifamily properties, common equity, CMBS securitizations, promissory notes, revolving credit facilities, and stock warrants[32](index=32&type=chunk)[197](index=197&type=chunk) - The Company is externally managed by NexPoint Real Estate Advisors VII, L.P. (the "Manager"), an affiliate of its Sponsor, and primarily targets investments in multifamily, SFR, self-storage, and life science sectors within the top 50 MSAs[32](index=32&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[197](index=197&type=chunk) [2. Summary of Significant Accounting Policies](index=16&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and estimates used in preparing the financial statements, including consolidation, fair value measurements, and credit loss recognition - Financial statements are prepared in accordance with GAAP, requiring management to make estimates and assumptions that affect reported amounts[39](index=39&type=chunk)[40](index=40&type=chunk)[42](index=42&type=chunk) - The Company consolidates Variable Interest Entities (VIEs) when it has the power to direct activities and the obligation to absorb losses or right to receive significant benefits; CMBS trusts are consolidated under this model with assets and liabilities reported at fair value[43](index=43&type=chunk)[44](index=44&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) - NREF adopted ASU 2016-13 (CECL model) on January 1, 2023, for estimating lifetime expected credit losses on its loan portfolio and unfunded loan commitments, using various forecasting methods and inputs[49](index=49&type=chunk)[302](index=302&type=chunk) **Expected Credit Loss Reserve (in thousands):** | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Balances, December 31, | N/A | $(1,377) | | (Provision for) reversal of credit losses | $(8,909) | $422 | | Balance at June 30, | $(10,286) | $(1,678) | - The loan portfolio had a weighted-average risk rating of **3.0** as of both June 30, 2025, and December 31, 2024, on a 5-point scale (1=least risk, 5=greatest risk)[52](index=52&type=chunk)[65](index=65&type=chunk) [3. Loans Held for Investment, Net](index=21&type=section&id=3.%20Loans%20Held%20for%20Investment%2C%20Net) This note provides a detailed breakdown of the Company's loan portfolio, including carrying values, loan counts, weighted-average coupons, and collateral property types **Loans Held-for-Investment, Net (in thousands):** | Loan Type | June 30, 2025 Carrying Value | Dec 31, 2024 Carrying Value | Loan Count (Jun 30, 2025) | Weighted Average Coupon (Jun 30, 2025) | | :-------------------------------- | :--------------------------- | :-------------------------- | :------------------------- | :------------------------------------- | | Mortgage loans | $279,587 | $263,395 | 10 | 10.26% | | Mezzanine loans | $130,088 | $134,870 | 21 | 9.39% | | Preferred equity | $205,807 | $223,653 | 17 | 10.86% | | Promissory notes | $1,562 | $3,992 | 1 | 15.00% | | Revolving credit facility | $136,746 | $135,029 | 1 | 13.50% | | **Total** | **$753,790** | **$760,939** | **50** | **10.92%** | - For the six months ended June 30, 2025, originations totaled **$33,586 thousand**, while proceeds from principal repayments were **$(39,671) thousand**[63](index=63&type=chunk) - The loan portfolio's weighted-average risk rating remained at **3.0** as of June 30, 2025, with **97.21%** of loans rated '3' (Satisfactory)[65](index=65&type=chunk) - Collateral property types are concentrated in Life Science (**35.20%**), Multifamily (**33.52%**), and Single Family Rental (**27.11%**) as of June 30, 2025[70](index=70&type=chunk) [4. CMBS Trusts](index=24&type=section&id=4.%20CMBS%20Trusts) This note details the Company's consolidated CMBS trusts, including their assets, liabilities, and changes in net assets, primarily backed by multifamily properties - The Company consolidates CMBS Entities where it is the primary beneficiary, carrying their assets and liabilities at fair value[71](index=71&type=chunk) **Trust's Assets and Liabilities (in thousands):** | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :---------------- | | Mortgage loans held in variable interest entities, at fair value | $4,186,717 | $4,343,359 | | Bonds payable held in variable interest entities, at fair value | $(3,883,947) | $(4,029,214) | **Change in Net Assets Related to Consolidated CMBS VIEs (in thousands):** | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Net interest earned | $11,839 | $18,860 | | Realized gain (loss) | $(84) | $6,198 | | Unrealized gain (loss) | $(3,882) | $(3,726) | | **Total Change in Net Assets** | **$7,873** | **$21,332** | - The collateral property type for consolidated CMBS trusts is **100% Multifamily** as of June 30, 2025[73](index=73&type=chunk) [5. Common and Preferred Stock Investments](index=25&type=section&id=5.%20Common%20and%20Preferred%20Stock%20Investments) This note describes the Company's common and preferred stock investments, including fair value measurements and changes in unrealized gains or losses - The Company holds common stock investments in NexPoint Storage Partners (NSP) and a private ground lease REIT, both accounted for at fair value (Level 3 assets)[74](index=74&type=chunk)[76](index=76&type=chunk) - Preferred stock investments include IQHQ Series D-1 (**$18,532 thousand** fair value) and IQHQ Series E (**$94,891 thousand** fair value, acquired Jan 2, 2025), also measured at fair value (Level 3 assets)[82](index=82&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) **Change in Unrealized Gain (Loss) on Stock Investments (in thousands):** | Investment Type | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Common stock investments | $(6,574) | $(2,642) | | Preferred stock and stock warrant investments | $38,195 | $102 | - Equity method investments include Resmark Forney Gateway Holdings, LLC, Resmark The Brook Holdings, LLC, Slater Apartments, and Capital Acquisitions Partners, LLC[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) [6. Unconsolidated Variable Interest Entities](index=27&type=section&id=6.%20Unconsolidated%20Variable%20Interest%20Entities) This note provides a summary of the Company's unconsolidated Variable Interest Entities (VIEs), detailing instrument types, asset types, accounting treatment, and ownership percentages **Unconsolidated Variable Interest Entities (VIEs) as of June 30, 2025:** | Entity | Instrument | Asset Type | Accounting Treatment | Percentage Ownership | | :-------------------------------- | :----------- | :----------- | :------------------- | :------------------- | | NexPoint Storage Partners, Inc. | Common Stock | Self-storage | Fair Value | 25.6% | | Resmark Forney Gateway Holdings, LLC | Common Equity | Multifamily | Equity Method | 98.0% | | Resmark The Brook Holdings, LLC | Common Equity | Multifamily | Equity Method | 98.0% | | Private REIT | Common Stock | Ground lease | Fair Value | 6.3% | | SK Apartments | Common Equity | Multifamily | Equity Method | 12.3% | | Capital Acquisitions Partners, LLC | Membership Interests | Multifamily | Equity Method | 79.1% | - The Company's maximum exposure to loss for the NSP investment is **$24.7 million**, for CAP is **$1.5 million**, and for the Private REIT is **$26.1 million**[89](index=89&type=chunk) [7. CMBS Structured Pass-Through Certificates](index=28&type=section&id=7.%20CMBS%20Structured%20Pass-Through%20Certificates) This note details the Company's holdings in CMBS interest-only strips, their carrying value, underlying collateral, and related activity - The Company held fourteen CMBS interest-only strips (CMBS I/O Strips) at fair value as of June 30, 2025, with a total carrying value of **$44,122 thousand**[90](index=90&type=chunk)[91](index=91&type=chunk) - These CMBS I/O Strips are interest-only tranches of Freddie Mac structured pass-through certificates, backed by fixed-rate mortgage loans secured primarily by stabilized multifamily properties[90](index=90&type=chunk) - The weighted-average current yield for CMBS I/O Strips was **19.72%** as of June 30, 2025[91](index=91&type=chunk) **Activity Related to CMBS I/O Strips, MSCR Notes, and Mortgage Backed Securities (in thousands):** | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Net interest earned | $(19) | $1,227 | | Change in unrealized gain (loss) on CMBS structured pass-through certificates | $1,832 | $421 | | Change in unrealized gain (loss) on MSCR Notes | — | $(13) | | Change in unrealized gain (loss) on mortgage backed securities | — | $615 | | **Total** | **$1,813** | **$2,250** | [8. Real Estate Investments, net](index=29&type=section&id=8.%20Real%20Estate%20Investments%2C%20net) This note provides information on the Company's real estate investments, including properties held for sale and net income from consolidated real estate owned - Hudson Montford, a 204-unit multifamily property, was classified as held for sale as of June 30, 2025, and subsequently sold on July 22, 2025, for **$60.0 million**[94](index=94&type=chunk)[195](index=195&type=chunk) - Alexander at the District, a 280-unit multifamily property, had a net operating real estate investment carrying value of **$64,718 thousand** as of June 30, 2025[96](index=96&type=chunk) **Net Income (Loss) from Consolidated Real Estate Owned (in thousands):** | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Total revenues | $4,911 | $4,246 | | Total expenses | $7,610 | $9,805 | | **Net income (loss)** | **$(2,699)** | **$(5,559)** | - The decrease in expenses from consolidated real estate owned was primarily due to a decrease in depreciation and amortization of Hudson Montford after its classification as held for sale[226](index=226&type=chunk)[233](index=233&type=chunk) [9. Debt](index=32&type=section&id=9.%20Debt) This note provides a comprehensive summary of the Company's debt obligations, including outstanding balances, weighted-average interest rates, and maturity schedules **Debt Summary (in thousands):** | Debt Type | June 30, 2025 Outstanding Face Amount | Dec 31, 2024 Outstanding Face Amount | June 30, 2025 Weighted Average Interest Rate | | :-------------------------------- | :------------------------------------ | :----------------------------------- | :-------------------------------------------- | | Master Repurchase Agreements | $260,947 | $243,454 | 6.05% | | Freddie Mac (SFR loans) | $109,339 | $110,097 | 2.69% | | Freddie Mac (Mezzanine loans) | $57,945 | $59,252 | 0.30% | | Mortgages payable (Multifamily) | $95,980 | $95,980 | 8.33% | | NexBank, SSB (Common stock investment) | $10,000 | $10,000 | 8.29% | | Raymond James (Promissory note) | $58,351 | $57,520 | 11.82% | | Unsecured notes | $223,000 | $223,000 | 5.90% | | **Total** | **$815,562** | **$799,303** | **5.92%** | - The Credit Facility with Freddie Mac for SFR loans had an outstanding balance of **$109.3 million** as of June 30, 2025, maturing on July 12, 2029[107](index=107&type=chunk)[261](index=261&type=chunk) - The Company has **$260.9 million** borrowed under master repurchase agreements, collateralized by **$745.8 million** par value of CMBS B-Pieces and CMBS I/O Strips[108](index=108&type=chunk)[264](index=264&type=chunk) **Schedule of Debt Maturities (in thousands):** | Year | Recourse | Non-recourse | Total | | :--- | :--------- | :------------- | :---- | | 2025 | $158,351 | $289,512 | $447,863 | | 2026 | $190,000 | $9,284 | $199,284 | | 2027 | $6,500 | — | $6,500 | | 2028 | $32,480 | $64,603 | $97,083 | | 2029 | — | $35,762 | $35,762 | | Thereafter | — | $29,070 | $29,070 | | **Total** | **$387,331** | **$428,231** | **$815,562** | [10. Fair Value of Financial Instruments](index=37&type=section&id=10.%20Fair%20Value%20of%20Financial%20Instruments) This note explains the Company's fair value hierarchy for financial instruments and provides details on Level 3 assets and their unobservable inputs - The Company uses a fair value hierarchy (Level 1, 2, and 3) for financial instruments, with cash and accrued interest primarily Level 1, mortgage loans in VIEs and CMBS pass-through certificates primarily Level 2, and common/preferred stock investments and warrants as Level 3[119](index=119&type=chunk) **Level 3 Assets and Key Unobservable Inputs (as of June 30, 2025):** | Investment | Carrying Value (in thousands) | Valuation Technique | Unobservable Inputs | Range | | :-------------------------- | :---------------------------- | :------------------ | :------------------ | :-------------------- | | NexPoint Storage Partners | $24,703 | Discounted cash flow | Terminal cap rate | 4.88% - 5.38% | | | | | Discount rate | 7.00% - 9.00% | | IQHQ Series D Preferred Stock | $18,949 | Discounted cash flow | Discount rate | 15.50% - 17.50% | | IQHQ Series E Preferred Stock | $94,513 | Discounted cash flow | Discount rate | 15.51% - 18.10% | | Private REIT | $26,113 | Market approach | NAV per share multiple | 0.95 - 1.10x | | IQHQ Warrants | $30,386 | Option pricing model | Volatility | 35.00% - 90.00% | - For the six months ended June 30, 2025, Level 3 assets saw additions of **$94,930 thousand** and a net change in unrealized gains/(losses) of **$31,116 thousand**[121](index=121&type=chunk) [11. Stockholders' Equity](index=40&type=section&id=11.%20Stockholders%27%20Equity) This note details the Company's common and preferred stock, share repurchase program, long-term incentive plan, and at-the-market program activities - As of June 30, 2025, the Company had **17,721,828 shares** of common stock issued and outstanding[124](index=124&type=chunk) - The Series B Preferred Offering has issued **11,012,369 shares** for gross proceeds of **$269.4 million** as of June 30, 2025, with a **$25.00 per share** liquidation preference[126](index=126&type=chunk)[162](index=162&type=chunk)[269](index=269&type=chunk) - The Share Repurchase Program, authorized for up to **$20.0 million**, was extended to February 24, 2027, but no purchases have been made as of June 30, 2025[128](index=128&type=chunk) - Under the Long Term Incentive Plan (LTIP), **482,772 restricted stock units** were granted and **363,852 vested** during the six months ended June 30, 2025, with **$13.9 million** in unrecognized compensation expense remaining[133](index=133&type=chunk)[134](index=134&type=chunk) - The At-The-Market (ATM) Program has sold **531,728 common shares** for total gross sales of **$12.6 million** since inception through June 30, 2025[138](index=138&type=chunk)[266](index=266&type=chunk) [12. Earnings Per Share](index=43&type=section&id=12.%20Earnings%20Per%20Share) This note presents the calculation of basic and diluted earnings per share, including the components used in the dilution analysis **Earnings Per Share (in thousands, except per share amounts):** | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Net income (loss) attributable to common stockholders | $28,802 | $(6,799) | | Weighted-average common shares outstanding - basic | 17,615 | 17,343 | | Weighted-average common shares outstanding - diluted | 37,349 | 26,399 | | Earnings (loss) per share - basic | $1.64 | $(0.39) | | Earnings (loss) per share - diluted | $1.24 | $(0.39) | - Diluted EPS calculation includes the assumed vesting of restricted stock units, potential redemption of OP Units, and conversion of Series B Preferred Stock[141](index=141&type=chunk)[143](index=143&type=chunk) [13. Noncontrolling Interests](index=44&type=section&id=13.%20Noncontrolling%20Interests) This note details the changes in redeemable noncontrolling interests in the Operating Partnership (OP) and the net income attributable to them - Redeemable noncontrolling interests in the OP increased from **$86,164 thousand** at January 1, 2025, to **$88,727 thousand** at June 30, 2025[144](index=144&type=chunk) - Net income attributable to redeemable noncontrolling interests in the OP was **$7,601 thousand** for the six months ended June 30, 2025, compared to **$382 thousand** in the prior year[144](index=144&type=chunk) - As of June 30, 2025, noncontrolling interests held **5,038,382 OP Units**[146](index=146&type=chunk) [14. Related Party Transactions](index=45&type=section&id=14.%20Related%20Party%20Transactions) This note describes transactions with related parties, including management fees, guarantees, and commitments with affiliates of the Manager - The Company paid the Manager **$3.0 million** in management fees for the six months ended June 30, 2025, calculated as **1.5% of 'Equity'** as defined in the Management Agreement[147](index=147&type=chunk)[157](index=157&type=chunk) - The Company, through REIT Sub, is jointly and severally liable for **85.90%** of **$13.3 million** in accrued dividends on NSP Series D Preferred Stock, totaling **$11.4 million** as of June 30, 2025[158](index=158&type=chunk)[159](index=159&type=chunk)[280](index=280&type=chunk) - NexPoint Securities, Inc., an affiliate of the Manager, serves as dealer manager for the Series B Preferred Offering, receiving **7.0%** selling commissions and a **3.0%** dealer manager fee[162](index=162&type=chunk) - The Company has significant commitments related to IQHQ transactions, including a **$195.5 million** Alewife Loan (with **$37.5 million** unfunded) and a **$160.1 million** IQHQ Subscription Agreement for Series E preferred stock (with **$65.5 million** unfunded)[176](index=176&type=chunk)[178](index=178&type=chunk)[182](index=182&type=chunk)[187](index=187&type=chunk)[285](index=285&type=chunk)[286](index=286&type=chunk)[292](index=292&type=chunk)[297](index=297&type=chunk) [15. Commitments and Contingencies](index=49&type=section&id=15.%20Commitments%20and%20Contingencies) This note outlines the Company's unfunded commitments for various investment types and specific contingent liabilities **Unfunded Commitments by Investment Type (in thousands):** | Investment Type | June 30, 2025 Unfunded Commitments | December 31, 2024 Unfunded Commitments | | :---------------- | :--------------------------------- | :----------------------------------- | | Loans | $39,035 | $64,217 | | Preferred Equity | $4,214 | $7,874 | | Common Equity | $1,536 | $2,536 | | Preferred Stock | $65,500 | $150,000 | | **Total** | **$110,285** | **$224,627** | - Specific unfunded commitments include **$6.5 million** for preferred equity in a Phoenix, AZ single-family property, **$0.3 million** for common equity in a Forney, TX multifamily property, and **$0.3 million** for common equity in a Richmond, VA multifamily property[173](index=173&type=chunk)[174](index=174&type=chunk)[282](index=282&type=chunk)[283](index=283&type=chunk) - The Company has an unfunded commitment of **$37.5 million** for the Alewife Loan (total expected maximum commitment **$195.5 million**) and **$65.5 million** for the IQHQ Subscription Agreement (Series E preferred stock)[178](index=178&type=chunk)[187](index=187&type=chunk)[286](index=286&type=chunk)[297](index=297&type=chunk) - The SFR OP Promissory Note II has an unfunded commitment of **$1.5 million**, with its maturity date extended to July 10, 2026[175](index=175&type=chunk)[284](index=284&type=chunk) [16. Segment Reporting](index=51&type=section&id=16.%20Segment%20Reporting) This note clarifies that the Company operates as a single reportable segment, NREF, managed on a consolidated basis - The Company operates as a single reportable segment, NREF, as its chief operating decision maker manages the business on a consolidated basis[188](index=188&type=chunk)[189](index=189&type=chunk) [17. Subsequent Events](index=52&type=section&id=17.%20Subsequent%20Events) This note reports significant events that occurred after the reporting period, including dividend declarations, stock issuances, and property sales - The Board declared a quarterly common stock dividend of **$0.50 per share** on July 28, 2025, payable September 30, 2025[191](index=191&type=chunk) - As of August 6, 2025, an additional **1,159,379 shares** of Series B Preferred Stock were issued for net proceeds of **$26.1 million**[192](index=192&type=chunk) - The SFR OP Note II maturity date was extended to July 10, 2026, on July 10, 2025[194](index=194&type=chunk) - The sale of the Hudson Montford property was completed on July 22, 2025, for net proceeds of **$27.3 million**[195](index=195&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=52&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, including an overview of its business strategy, recent acquisitions and dispositions, detailed analysis of revenues and expenses, key financial measures, portfolio composition, liquidity, and critical accounting policies. It highlights significant improvements in net income and EPS for the current period [Overview](index=52&type=section&id=Overview) This overview describes NREF's business as a commercial mortgage REIT, its investment focus, external management, and the expected impact of ongoing legal proceedings - NREF is a commercial mortgage REIT focused on originating and investing in diverse real estate-related assets across multifamily, SFR, self-storage, and life science sectors in top MSAs[197](index=197&type=chunk) - The Company is externally managed by an affiliate of its Sponsor, leveraging extensive real estate and credit management expertise, with approximately **$21.3 billion** in gross real estate transactions since 2012 and **$15.6 billion** in loans and debt-related investments as of June 30, 2025[200](index=200&type=chunk) - Ongoing legal proceedings involving affiliates (Highland's bankruptcy, UBS Lawsuit) are not expected to materially affect NREF's business, results of operations, or financial condition[203](index=203&type=chunk) [Purchases and Dispositions in the Quarter](index=54&type=section&id=Purchases%20and%20Dispositions%20in%20the%20Quarter) This section summarizes the Company's investment acquisitions, originations, redemptions, and sales during the quarter ended June 30, 2025 **Acquisitions and Originations (3 Months Ended June 30, 2025, in thousands):** | Investment Type | Principal Amount | Property Type | Coupon | Current Yield | | :---------------- | :--------------- | :------------ | :----- | :------------ | | Preferred Stock | $39,500 | Life Science | 16.50% | 16.50% | | Senior Loan | $6,498 | Life Science | 14.00% | 14.00% | | CMBS I/O Strip | $15,327 | Multifamily | 5.69% | 15.35% | | **Total** | **$66,493** | | | | **Redemptions and Sales (3 Months Ended June 30, 2025, in thousands):** | Investment Type | Amortized Cost Basis | Redemption/Sales Proceeds | Net Gain (Loss) | | :---------------- | :------------------- | :------------------------ | :-------------- | | Preferred Equity | $10,399 | $10,399 | $0 | | Mezzanine | $2,500 | $2,500 | $0 | | Promissory Note | $1,936 | $1,936 | $0 | | **Total** | **$18,637** | **$18,637** | **$0** | [Components of Our Revenues and Expenses](index=54&type=section&id=Components%20of%20Our%20Revenues%20and%20Expenses) This section details the primary sources of the Company's revenues and the categories of its operating expenses, including management fees and G&A costs - Revenues are primarily derived from interest income on mortgage loans, mezzanine loans, and preferred equity investments, as well as changes in fair value of CMBS and stock investments, and revenues from consolidated real estate[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk) - Expenses include general and administrative (G&A) costs, loan servicing fees, management fees, and expenses from consolidated real estate owned[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk) - Total corporate G&A expenses, including management fees and Manager reimbursements, are capped at **2.5% of equity book value**, with the Manager waiving fees if this limit is exceeded[216](index=216&type=chunk) [Results of Operations for the Three and Six Months Ended June 30, 2025 and 2024](index=56&type=section&id=Results%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section provides a comparative analysis of the Company's operating results, highlighting changes in net interest income, other income, operating expenses, and net income attributable to common stockholders **Operating Results (in thousands):** | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | $ Change | % Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :------- | :------- | | Net interest income (loss) | $12,069 | $6,740 | +$5,329 | 79.1% | | Other income | $19,473 | $14,168 | +$5,305 | 37.4% | | Operating expenses | $(9,271) | $(8,794) | $(477) | 5.4% | | Net income (loss) attributable to common stockholders | $12,285 | $7,488 | +$4,797 | 64.1% | | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | $ Change | % Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :------- | :------- | | Net interest income (loss) | $23,578 | $(6,074) | +$29,652 | (488.2)% | | Other income | $42,209 | $23,367 | +$18,842 | 80.6% | | Operating expenses | $(17,554) | $(19,820) | +$2,266 | (11.4)% | | Net income (loss) attributable to common stockholders | $28,802 | $(6,799) | +$35,601 | (523.6)% | - The increase in net interest income was primarily due to increased income from investments in preferred equity loans and the revolving credit facility[221](index=221&type=chunk)[228](index=228&type=chunk) - Other income increased mainly due to unrealized gains related to preferred stock and warrants, and increased income from equity method investments[222](index=222&type=chunk)[229](index=229&type=chunk) - G&A expenses decreased by **$1.1 million** for the six-month period, primarily due to a **$0.9 million** decrease in legal expense and a **$0.1 million** decrease in audit expense[230](index=230&type=chunk) [Key Financial Measures and Indicators](index=58&type=section&id=Key%20Financial%20Measures%20and%20Indicators) This section presents key financial performance metrics, including earnings per share, dividends, Earnings Available for Distribution (EAD), Cash Available for Distribution (CAD), and book value per share **Earnings Per Share and Dividends Declared:** | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | % Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :--------- | | Net income per share, basic | $1.64 | $(0.39) | 520.5% | | Net income per share, diluted | $1.24 | $(0.39) | 417.9% | | Dividends declared per share | $1.0000 | $1.0000 | —% | **EAD and CAD (in thousands, except per share amounts):** | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | % Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :--------- | | EAD | $19,680 | $4,508 | 336.6% | | EAD per Diluted Common Share | $0.86 | $0.19 | 352.6% | | CAD | $21,116 | $29,915 | (29.4)% | | CAD per Diluted Common Share | $0.93 | $1.29 | (27.9)% | - EAD (Earnings Available for Distribution) is a non-GAAP measure used to evaluate performance and long-term distribution ability, excluding unrealized gains/losses and adding back stock-based compensation amortization[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk) **Book Value per Share / Unit (in thousands, except per share data):** | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Common stockholders' equity | $307,333 | $295,624 | | Book value per share of common stock | $17.34 | $16.93 | | Combined book value per share / unit (including redeemable OP Units) | $17.40 | $16.97 | [Our Portfolio](index=63&type=section&id=Our%20Portfolio) This section provides an overview of the Company's investment portfolio, including the number of investments, principal balance, carrying value, and weighted-average yields - The Company's portfolio had a combined unpaid principal balance of **$1.5 billion** as of June 30, 2025, comprising various real estate-related investments[252](index=252&type=chunk) **Overall Portfolio Statistics (in thousands) as of June 30, 2025:** | Metric | Total Portfolio | | :------------------------ | :-------------- | | Number of investments | 86 | | Principal balance | $1,149,292 | | Carrying value | $1,525,479 | | Weighted-average cash coupon | 7.08% | | Weighted-average all-in yield | 8.65% | - The portfolio includes senior loans, CMBS B-Pieces, CMBS I/O Strips, mezzanine loans, preferred equity, common equity, preferred stock, real estate, promissory notes, revolving credit facilities, and stock warrants[252](index=252&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) [Liquidity and Capital Resources](index=66&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's strategy for managing liquidity and capital, including sources of funding and current cash position - The Company's liquidity strategy relies on operating cash flows, debt/equity financings, and principal/interest payments from investments to meet both short-term and long-term capital requirements[257](index=257&type=chunk)[258](index=258&type=chunk) - Key financing sources include Freddie Mac Credit Facilities (**$109.3 million** outstanding), repurchase agreements (**$260.9 million** borrowed), the ATM Program (**$12.6 million** gross sales), and the Series B Preferred Stock Offering (**$269.4 million** gross proceeds)[261](index=261&type=chunk)[264](index=264&type=chunk)[266](index=266&type=chunk)[269](index=269&type=chunk) - As of June 30, 2025, cash and cash equivalents were **$9.1 million**, with additional liquidity expected from future debt or equity issuances and other borrowings[271](index=271&type=chunk) [Recent Tax Law Update](index=66&type=section&id=Recent%20Tax%20Law%20Update) This section provides an update on recent tax law changes, specifically the "One Big Beautiful Bill Act" (OBBBA), and its expected impact on the Company - The "One Big Beautiful Bill Act" (OBBBA), signed July 4, 2025, permanently extended reduced U.S. federal income tax rates and the **20% deduction** on "qualified REIT dividends"[259](index=259&type=chunk) - The OBBBA also increased the REIT asset test limit for TRSs from **20% to 25%** for taxable years beginning after December 31, 2025[259](index=259&type=chunk) - The Company does not expect the OBBBA to have a material impact on its business[259](index=259&type=chunk) [Cash Flows](index=69&type=section&id=Cash%20Flows) This section summarizes the Company's cash flow activities, detailing net cash provided by or used in operating, investing, and financing activities **Cash Flow Summary (in thousands):** | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $19,357 | $10,208 | | Net cash provided by investing activities | $89,584 | $597,007 | | Net cash (used in) financing activities | $(102,256) | $(616,548) | - The increase in operating cash flow was primarily due to changes in unrealized gains on investments held at fair value[272](index=272&type=chunk) - The decrease in investing cash flow was mainly due to lower proceeds from payments received on mortgage loans held for investment[273](index=273&type=chunk) [Emerging Growth Company and Smaller Reporting Company Status](index=69&type=section&id=Emerging%20Growth%20Company%20and%20Smaller%20Reporting%20Company%20Status) This section clarifies the Company's status as an "emerging growth company" and "smaller reporting company" and the associated disclosure flexibilities - The Company has elected the extended transition period for complying with new or revised accounting standards as an "emerging growth company" under the JOBS Act[275](index=275&type=chunk)[276](index=276&type=chunk) - As a "smaller reporting company," NREF may take advantage of certain scaled disclosures[277](index=277&type=chunk) [Dividends](index=70&type=section&id=Dividends) This section outlines the Company's dividend policy, including its intention to make regular payments and the REIT distribution requirements - The Company intends to make regular quarterly dividend payments to common stockholders and accrued dividend payments on Series A and Series B Preferred Stock[277](index=277&type=chunk) - As a REIT, NREF is required to distribute annually at least **90%** of its REIT taxable income[277](index=277&type=chunk) - Dividends are based on taxable earnings, which may differ from GAAP earnings, and may require asset sales, borrowings, or stock distributions if cash available for distribution is less than taxable income[277](index=277&type=chunk)[278](index=278&type=chunk) [Off-Balance Sheet Arrangements](index=70&type=section&id=Off-Balance%20Sheet%20Arrangements) This section identifies the Company's significant off-balance sheet arrangements, specifically the NSP Sponsor Guaranty Agreement - The Company has one significant off-balance sheet arrangement: the NSP Sponsor Guaranty Agreement[279](index=279&type=chunk) - As of June 30, 2025, the Company is jointly and severally liable for **85.90%** of **$13.3 million** in accrued dividends on NSP Series D Preferred Stock, amounting to **$11.4 million**[280](index=280&type=chunk) [Commitments and Contingencies](index=70&type=section&id=Commitments%20and%20Contingencies) This section details the Company's unfunded commitments across various investment types and specific contingent liabilities **Unfunded Commitments by Investment Type (in thousands):** | Investment Type | June 30, 2025 Unfunded Commitments | December 31, 2024 Unfunded Commitments | | :---------------- | :--------------------------------- | :----------------------------------- | | Loans | $39,035 | $64,217 | | Preferred Equity | $4,214 | $7,874 | | Common Equity | $1,536 | $2,536 | | Preferred Stock | $65,500 | $150,000 | | **Total** | **$110,285** | **$224,627** | - Specific unfunded commitments include **$6.5 million** for preferred equity in a Phoenix, AZ single-family property, **$0.3 million** for common equity in a Forney, TX multifamily property, and **$0.3 million** for common equity in a Richmond, VA multifamily property[173](index=173&type=chunk)[174](index=174&type=chunk)[282](index=282&type=chunk)[283](index=283&type=chunk) - The Company has an unfunded commitment of **$37.5 million** for the Alewife Loan (total expected maximum commitment **$195.5 million**) and **$65.5 million** for the IQHQ Subscription Agreement (Series E preferred stock)[178](index=178&type=chunk)[187](index=187&type=chunk)[286](index=286&type=chunk)[297](index=297&type=chunk) [Critical Accounting Policies and Estimates](index=73&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section discusses the Company's critical accounting policies and estimates, emphasizing the significant judgment involved in areas like credit loss allowance and fair value measurements - The Company's critical accounting policies and estimates involve significant judgment, particularly for the allowance for credit losses (CECL model) and the valuation of common equity, preferred stock, and warrants[298](index=298&type=chunk)[299](index=299&type=chunk)[304](index=304&type=chunk) - The CECL model, adopted January 1, 2023, requires estimating lifetime expected credit losses on loans and unfunded commitments, relying on complex forecasting models and various inputs[301](index=301&type=chunk)[302](index=302&type=chunk) - Valuation of Level 3 assets like NSP common stock, Private REIT common equity, IQHQ preferred stock, and IQHQ warrants involves subjective judgments and unobservable inputs (e.g., discount rates, terminal capitalization rates, volatility)[304](index=304&type=chunk)[305](index=305&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) - The macroeconomic environment, characterized by high interest rates and economic uncertainty, increases the estimation uncertainty for financial instruments and real estate investments[309](index=309&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=75&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not required for smaller reporting companies - This item is not required for smaller reporting companies[311](index=311&type=chunk) [Item 4. Controls and Procedures](index=75&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely. No material changes in internal control over financial reporting occurred during the quarter - The Company's disclosure controls and procedures were evaluated as effective as of June 30, 2025, providing reasonable assurance for timely and accurate information disclosure[312](index=312&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[314](index=314&type=chunk) [PART II](index=75&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=76&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not aware of any legal proceedings that are reasonably likely to have a material adverse effect on its results of operations or financial condition - Management is not aware of any legal proceedings likely to have a material adverse effect on the Company's results of operations or financial condition[316](index=316&type=chunk) [Item 1A. Risk Factors](index=76&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K filed on March 27, 2025 - No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K filed March 27, 2025[317](index=317&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=76&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This item reports no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities - There were no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities to report[318](index=318&type=chunk) [Item 3. Defaults Upon Senior Securities](index=76&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item reports no defaults upon senior securities - There were no defaults upon senior securities to report[319](index=319&type=chunk) [Item 4. Mine Safety Disclosures](index=76&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable - This item is not applicable[320](index=320&type=chunk) [Item 5. Other Information](index=76&type=section&id=Item%205.%20Other%20Information) This item reports no other information - There is no other information to report[321](index=321&type=chunk) [Item 6. Exhibits](index=77&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from principal officers, XBRL documents, and the cover page interactive data file - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1)[322](index=322&type=chunk) - The filing includes Inline XBRL Instance Document and Taxonomy Extension Documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE)[322](index=322&type=chunk) - The Cover Page Interactive Data File (104) is formatted as Inline XBRL[322](index=322&type=chunk) [Signatures](index=78&type=section&id=Signatures) The report is signed by Jim Dondero, President (Principal Executive Officer), and Paul Richards, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), on August 7, 2025 - The report was signed by Jim Dondero, President (Principal Executive Officer), and Paul Richards, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)[327](index=327&type=chunk) - The signing date for the report was August 7, 2025[327](index=327&type=chunk)
NexPoint (NREF) Q2 EAD Drops 37%
The Motley Fool· 2025-08-02 05:17
Core Viewpoint - NexPoint Real Estate Finance reported Q2 2025 results with Non-GAAP earnings per diluted share of $0.46, aligning with analyst consensus and internal guidance, but showed significant year-over-year declines in earnings available for distribution and cash available for distribution, indicating a stable yet cautious operating environment with pressure on distributable earnings [1][6][11] Financial Performance - Non-GAAP earnings per diluted common share for Q2 2025 were $0.46, matching analyst estimates [1] - Earnings available for distribution (EAD) decreased to $10.0 million, down 37.3% year-over-year, while cash available for distribution (CAD) fell to $10.6 million, a 29.3% decline from Q2 2024 [2][6] - Net income attributable to common stockholders increased to $12.3 million, a 64.2% rise from $7.488 million in Q2 2024 [6] Portfolio and Investment Strategy - The company focuses on investments in commercial real estate debt and equity, with a portfolio totaling $1.1 billion across 86 investments as of June 30, 2025 [5] - Key sectors include multifamily properties (49.5%), life sciences (32.7%), and smaller allocations to single-family rentals, self-storage, specialty manufacturing, and marinas [5] - The weighted-average loan-to-value (LTV) ratio was 58.5%, and the debt service coverage ratio (DSCR) was 1.44x, indicating a conservative risk profile [4] Dividend and Coverage Ratios - The declared dividend remained stable at $0.50 per share for both Q1 and Q2 2025, but coverage ratios based on EAD and CAD fell below 1.0x, indicating pressure on distributable earnings [7][8] - Management guidance for Q3 2025 suggests modest improvement, with expectations for cash available for distribution to reach parity with dividends [8][11] Risk Management and Credit Quality - The company recorded a $3.6 million provision for credit losses in Q1 2025, reflecting a cautious stance amid changing market conditions [9] - The external management structure includes a 1.5% management fee on equity, which may impact operational efficiency and costs [10] Future Outlook - For Q3 2025, management projects EAD per diluted share of $0.425 and CAD per diluted share of $0.505, indicating continued disciplined capital deployment [11] - The company plans to remain active in core sectors, particularly multifamily and life sciences, while seeking opportunities in self-storage and advanced manufacturing [11]
NexPoint Real Estate Finance(NREF) - 2025 Q2 - Earnings Call Transcript
2025-07-31 16:00
Financial Data and Key Metrics Changes - The company reported a net income of $0.54 per diluted share for Q2 2025, an increase from $0.40 per diluted share in Q2 2024, driven by an increase in interest income [6][7] - Interest income rose by $4.6 million to $22.8 million in Q2 2025 from $18.2 million in Q2 2024, attributed to increased income from investments [7] - Earnings available for distribution decreased to $0.43 per diluted common share in Q2 2025 from $0.68 in the same period of 2024, while cash available for distribution fell to $0.46 from $0.64 [7][8] - The company declared a regular dividend of $0.50 per share for Q2 2025, with a coverage ratio of 0.92 times based on cash available for distribution [8] Business Line Data and Key Metrics Changes - The portfolio consists of 86 investments with a total outstanding balance of $1.1 billion, allocated as follows: 49.5% multifamily, 32.7% life science, 15.5% single-family rental, 1.6% storage, 0.7% marina, and 0.1% specialty manufacturing [9] - The fixed income portfolio is diversified across various investments, with 28.3% in CMBS BPs and 24.9% in mezzanine loans [10] Market Data and Key Metrics Changes - The company noted a significant drop in inventory growth in the residential sector, with a national delivery outlook contracting to just 77,000 units per quarter, supporting a positive outlook for the multifamily sector in 2026-2028 [12][13] - The life science sector is facing challenges due to tariff and NIH funding uncertainties, but the company is optimistic about a major lease announcement that could enhance its portfolio [16][30] Company Strategy and Development Direction - The company aims to maintain a strong credit profile and low leverage compared to peers, allowing for various capital options to pursue growth [18] - There is a focus on the multifamily sector, with expectations of improving rental rates as supply constraints ease [13] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about market dynamics in the second half of the year, despite challenges in the macroeconomic environment [18] - The company anticipates an improvement in delinquency trends in the residential sector due to increased liquidity in the market [24] Other Important Information - The company funded $39.5 million in Life Science Preferred and purchased $15.3 million in CMBS IO strips during the quarter [8] - The debt outstanding is $815.6 million with a weighted average cost of 5.9%, and the debt to equity ratio stands at 1.14 times [11] Q&A Session Summary Question: Can you comment on credit trends within the Freddie Mac DPs portfolio? - Management noted that the portfolio remains solid compared to other CRE CLOs, with some problem loans but overall good credit profiles [20][22] Question: Can you talk about the lease mentioned for the life science project? - The lease will cover about two-thirds of the first phase of the project, with a remaining loan duration of roughly two and a half years [25][27] Question: What are your thoughts on the seniors housing space? - Management expressed agreement that the outlook for seniors housing has improved, citing strong capital interest in the sector and plans to explore opportunities [31][33]
NexPoint Real Estate Finance(NREF) - 2025 Q2 - Earnings Call Presentation
2025-07-31 15:00
Financial Highlights - The company's book value was $3961 million, or $1740 per common share[16] - Net income was $223 million in 2Q 2025, with net income attributable to common stockholders of $123 million, or $054 per diluted common share[16] - Cash available for distribution (CAD) was $106 million, or $046 per diluted common share in 2Q 2025[16] - A 2Q 2025 dividend of $050 per common share was paid on June 30, 2025[16] Portfolio Composition - The outstanding total portfolio is $11 billion, composed of 86 investments[17] - The company funded $65 million on a loan with a monthly coupon of SOFR+900bps[17] - The company purchased a $153 million CMBS I/O Strip with a bond equivalent yield of 724%[17] - The company purchased $395 million of Preferred Stock[17] Capitalization Metrics - The debt to equity ratio was 187x as of June 30, 2025[18] - NREF Series B Preferred dividends were covered 187x in the quarter[18] - The weighted average remaining term is 37 years[18] - Outstanding repo financing is $2609 million, equating to 478% advance rate on CMBS B-Piece and IO Strips Portfolio[18]
NexPoint (NREF) Q2 Earnings Match Estimates
ZACKS· 2025-07-31 14:32
NexPoint (NREF) came out with quarterly earnings of $0.43 per share, in line with the Zacks Consensus Estimate . This compares to earnings of $0.68 per share a year ago. These figures are adjusted for non-recurring items. A quarter ago, it was expected that this company would post earnings of $0.46 per share when it actually produced earnings of $0.41, delivering a surprise of -10.87%. Over the last four quarters, the company has surpassed consensus EPS estimates two times. NexPoint, which belongs to the Za ...
NREF Announces Second Quarter 2025 Results, Provides Third Quarter 2025 Guidance
Prnewswire· 2025-07-31 12:15
Core Viewpoint - NexPoint Real Estate Finance, Inc. reported strong financial results for Q2 2025, highlighting resilience in earnings amid challenging credit conditions in the market [2][3]. Financial Performance - Net income attributable to common stockholders for Q2 2025 was $12.3 million, or $0.54 per diluted share [1][14]. - Cash available for distribution for the same period was $10.6 million, or $0.46 per diluted common share [1][14]. Investment Strategy - The company remains disciplined and opportunistic in its investment approach, focusing on capital deployment in a complex credit landscape [2]. - NREF's total portfolio is valued at $1.1 billion, consisting of 86 investments across various sectors, including single-family rentals, multifamily, and life sciences [9]. Future Guidance - For Q3 2025, the company projects earnings available for distribution per diluted common share to be $0.425 at the midpoint [8]. - Cash available for distribution per diluted common share guidance for Q3 2025 is set at $0.505 at the midpoint [10]. Portfolio Composition - As of June 30, 2025, the investment portfolio is composed of 15.5% single-family rental, 49.5% multifamily, and 32.7% life sciences, among other sectors [9]. - The weighted-average loan to value (LTV) ratio is 58.5%, with a debt service coverage ratio (DSCR) of 1.44x [9]. Recent Transactions - During Q2 2025, NREF purchased $39.5 million of preferred stock and funded $6.5 million on a loan with a monthly coupon of SOFR + 900 bps [9]. - The company also acquired a $15.3 million CMBS I/O strip with a bond equivalent yield of 7.24% [9]. Conference Call - A conference call is scheduled for July 31, 2025, to discuss the financial results for Q2 2025 [11].
NexPoint Real Estate Finance(NREF) - 2025 Q2 - Quarterly Results
2025-07-31 12:00
[Second Quarter 2025 Results Overview](index=1&type=section&id=NREF%20Announces%20Second%20Quarter%202025%20Results) NREF reported strong Q2 2025 financial performance with significant net income and CAD, supported by a diversified portfolio and strategic investments [Q2 2025 Financial Performance](index=1&type=section&id=Q2%202025%20Financial%20Performance) NexPoint Real Estate Finance (NREF) reported net income attributable to common stockholders of $12.3 million, or $0.54 per diluted share, and cash available for distribution (CAD) of $10.6 million, or $0.46 per diluted common share, for the second quarter ended June 30, 2025 Q2 2025 Key Financial Metrics | Metric | Q2 2025 Amount | Per Diluted Share | | :----------------------------------------- | :------------- | :---------------- | | Net income attributable to common stockholders | $12.3 million | $0.54 | | Cash available for distribution (CAD) | $10.6 million | $0.46 | [Management Commentary](index=1&type=section&id=Management%20Commentary) Matthew McGraner, CIO, expressed satisfaction with NREF's strong and consistent earnings, highlighting the company's disciplined and opportunistic investment approach in a challenging credit market. He emphasized their ability to effectively deploy capital to capture opportunities and generate long-term shareholder value - NREF reported a strong quarter with **consistent and resilient earnings** across core property sectors[3](index=3&type=chunk) - The company maintains a **disciplined, opportunistic, and strategic investment approach** amidst ongoing credit challenges faced by traditional lenders[3](index=3&type=chunk) - Effective capital deployment in the current complex credit landscape is expected to capture **compelling opportunities** and generate **long-term value for shareholders**[3](index=3&type=chunk) [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) NREF's portfolio as of June 30, 2025, totaled $1.1 billion across 86 investments, with significant allocations to multifamily (49.5%), life sciences (32.7%), and single-family rental (15.5%). Key metrics included a weighted-average LTV of 58.5% and DSCR of 1.44x on senior loans and CMBS. The company also made new investments during the quarter, including preferred stock, a loan, and a CMBS I/O strip Q2 2025 Portfolio and Investment Metrics | Metric | Value | | :----------------------------------------- | :----------- | | Total portfolio outstanding | $1.1 billion | | Number of investments | 86 | | Weighted-average LTV (senior loans, CMBS) | 58.5% | | Weighted-average DSCR (senior loans, CMBS) | 1.44x | Q2 2025 Investment Portfolio Allocation | Investment Sector | % of Portfolio (as of June 30, 2025) | | :----------------------- | :----------------------------------- | | Multifamily | 49.5% | | Life sciences | 32.7% | | Single-family rental (SFR) | 15.5% | | Self-storage | 1.6% | | Marinas | 0.7% | | Specialty manufacturing | 0.1% | - During Q2 2025, NREF purchased **$39.5 million of preferred stock**, funded a **$6.5 million loan at SOFR + 900 bps**, and acquired a **$15.3 million CMBS I/O strip with a 7.24% bond equivalent yield**[9](index=9&type=chunk) [Third Quarter 2025 Guidance](index=2&type=section&id=Looking%20Ahead%3A%20Third%20Quarter%202025%20Guidance) NREF provides Q3 2025 guidance for EAD and CAD per diluted common share, including projected dividend coverage ratios [Earnings Available for Distribution (EAD) Guidance](index=2&type=section&id=Earnings%20Available%20for%20Distribution2) For Q3 2025, NREF projects EAD per diluted common share guidance at a midpoint of $0.425, with net income attributable to common stockholders estimated between $6.9 million and $9.4 million. The EAD dividend coverage ratio is projected to be 0.84x at the midpoint Q3 2025 EAD Guidance | Metric | Low (Sept 30, 2025) | Mid (Sept 30, 2025) | High (Sept 30, 2025) | | :----------------------------------------- | :------------------ | :------------------ | :------------------- | | Net income attributable to common stockholders (in thousands) | $6,946 | $8,245 | $9,382 | | EAD (in thousands) | $8,496 | $9,795 | $10,932 | | EAD per diluted common share | $0.37 | $0.42 | $0.47 | | EAD Dividend Coverage Ratio | 0.74x | 0.84x | 0.94x | [Cash Available for Distribution (CAD) Guidance](index=3&type=section&id=Cash%20Available%20for%20Distribution2) NREF's Q3 2025 CAD per diluted common share guidance is set at a midpoint of $0.505. The projected CAD dividend coverage ratio at the midpoint is 1.00x, indicating full coverage of dividends by CAD Q3 2025 CAD Guidance | Metric | Low (Sept 30, 2025) | Mid (Sept 30, 2025) | High (Sept 30, 2025) | | :----------------------------------------- | :------------------ | :------------------ | :------------------- | | EAD (in thousands) | $8,496 | $9,795 | $10,932 | | CAD (in thousands) | $10,303 | $11,602 | $12,739 | | CAD per diluted common share | $0.45 | $0.50 | $0.55 | | CAD Dividend Coverage Ratio | 0.90x | 1.00x | 1.10x | [Conference Call Details](index=3&type=section&id=Conference%20Call%20Details) Information regarding the conference call held to discuss NREF's Q2 2025 financial results, including access and replay options [Conference Call Information](index=3&type=section&id=Conference%20Call%20Information) NexPoint Real Estate Finance hosted a conference call on Thursday, July 31, 2025, at 11:00 a.m. ET to discuss its second quarter 2025 financial results. Details for live access, webcast, and replay were provided - A conference call was held on **July 31, 2025, at 11:00 a.m. ET** to discuss Q2 2025 financial results[14](index=14&type=chunk) - Access details for the live call (dial-in, **Conference ID 6891136**) and a live audio webcast on the company's website (https://nref.nexpoint.com) were provided[15](index=15&type=chunk) - An online replay is available for **60 days**, and a phone replay was available until **August 14, 2025**. Additional portfolio information is available in the earnings supplement on the company's website[15](index=15&type=chunk)[16](index=16&type=chunk) [Non-GAAP Financial Measures Reconciliation](index=4&type=section&id=Reconciliations%20of%20Non-GAAP%20Financial%20Measures) This section reconciles non-GAAP financial measures like EAD and CAD to GAAP net income, highlighting year-over-year changes and adjustments [EAD and CAD Reconciliation](index=4&type=section&id=EAD%20and%20CAD%20Reconciliation) The report provides a reconciliation of non-GAAP measures, EAD and CAD, to GAAP net income attributable to common stockholders for the three months ended June 30, 2025, and 2024. EAD decreased significantly year-over-year, while CAD also saw a notable reduction Q2 2025 vs Q2 2024 EAD and CAD Reconciliation | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | YoY Change (approx.) | | :----------------------------------------- | :--------------------- | :--------------------- | :------------------- | | Net income (loss) attributable to common stockholders | $12,286 | $7,488 | +64.1% | | EAD | $10,006 | $15,959 | -37.3% | | EAD per diluted common share | $0.43 | $0.68 | -36.8% | | CAD | $10,629 | $15,042 | -29.3% | | CAD per diluted common share | $0.46 | $0.64 | -28.1% | Q2 2025 Non-GAAP Adjustments | Adjustment (Q2 2025, in thousands) | Amount | | :----------------------------------------- | :------- | | Amortization of stock-based compensation | $1,688 | | Provision for credit losses | $5,284 | | Equity in (income) losses of equity method investments | $1,017 | | Unrealized (gains) or losses | $(13,706)| | Amortization of premiums | $2,558 | | Accretion of discounts | $(2,561) | | Depreciation and amortization of real estate investments | $614 | | Amortization of deferred financing costs | $12 | - Adjusted weighted-average common shares outstanding – diluted decreased from **23,431 thousand in Q2 2024 to 23,052 thousand in Q2 2025**[17](index=17&type=chunk) [About NexPoint Real Estate Finance, Inc.](index=4&type=section&id=About%20NexPoint%20Real%20Estate%20Finance%2C%20Inc.) NREF is a publicly traded REIT specializing in diverse real estate-related debt and equity investments across various property types [Company Overview](index=4&type=section&id=Company%20Overview) NexPoint Real Estate Finance, Inc. (NREF) is a publicly traded REIT listed on the NYSE, specializing in originating, structuring, and investing in various real estate-related debt and equity instruments. Its investment focus includes first-lien mortgage loans, mezzanine loans, preferred equity, convertible notes, multifamily properties, common equity, and commercial mortgage-backed securities securitizations - NREF is a publicly traded REIT (**NYSE: NREF**) with common stock and **8.50% Series A Cumulative Redeemable Preferred Stock** listed on the NYSE[18](index=18&type=chunk) - The company primarily focuses on originating, structuring, and investing in a **diverse range of real estate finance instruments**[18](index=18&type=chunk) - Investment types include **first-lien mortgage loans, mezzanine loans, preferred equity, convertible notes, multifamily properties, common equity, CMBS securitizations (multifamily and single-family), promissory notes, revolving credit facilities, and stock warrants**[18](index=18&type=chunk) [Legal & Non-GAAP Disclosures](index=5&type=section&id=Legal%20%26%20Non-GAAP%20Disclosures) This section provides important disclaimers regarding forward-looking statements and detailed definitions of non-GAAP financial measures used in the report [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section outlines that the press release contains forward-looking statements based on management's current expectations, which are subject to risks and uncertainties detailed in SEC filings. Readers are cautioned not to place undue reliance on these statements, and the company does not undertake to update them - The press release includes forward-looking statements regarding business, strategy, industry, Q3 2025 guidance, and capital deployment, identifiable by words like "anticipate," "believe," "estimate," "expect," etc[19](index=19&type=chunk) - These statements are not guarantees of future results and are subject to **risks, uncertainties, and assumptions** detailed in SEC filings (**10-K, 10-Q**)[19](index=19&type=chunk) - Readers should not place undue reliance on forward-looking statements, and the company disclaims any obligation to publicly update or revise them, except as required by law[19](index=19&type=chunk) [Non-GAAP Financial Measures Definitions](index=5&type=section&id=Non-GAAP%20Financial%20Measures) This section defines the non-GAAP financial measures used in the press release: Earnings Available for Distribution (EAD), Cash Available for Distribution (CAD), EAD and CAD per diluted common share, and adjusted weighted average common shares outstanding - diluted. It explains their calculation, purpose for management and investors, and clarifies that they should not be considered alternatives to GAAP measures - Non-GAAP measures used are **EAD, CAD, EAD/CAD per diluted common share, and adjusted weighted average common shares outstanding - diluted**[20](index=20&type=chunk) - EAD is defined as GAAP net income (loss) attributable to common stockholders, adjusted for realized gains/losses, excluding unrealized gains/losses or other non-cash items, adding back stock-based compensation amortization, and removing income/(losses) from equity method investments (until cash distributions are received)[21](index=21&type=chunk) - CAD is calculated by adjusting EAD by adding back amortization of premiums, depreciation and amortization of real estate investment, and amortization of deferred financing costs, and by removing accretion of discounts[23](index=23&type=chunk) - Adjusted weighted average common shares outstanding - diluted is calculated by subtracting the dilutive effect of potential Series B Preferred share redemptions from weighted average common shares outstanding - diluted. The company intends not to settle Series B Preferred redemptions in common stock when the price is below book value[24](index=24&type=chunk) - These non-GAAP measures are used to evaluate performance and assess the ability to pay distributions but are not substitutes for GAAP net income or cash flows from operating activities and may not be comparable to those reported by other REITs[21](index=21&type=chunk)[23](index=23&type=chunk)[25](index=25&type=chunk)