NexPoint Real Estate Finance, Inc. (NYSE:NREF) Q1 2023 Earnings Conference Call April 27, 2023 11:00 AM ET Company Participants Kristen Thomas - Investor Relations Brian Mitts - Executive Vice President and Chief Financial Officer Matt McGraner - Executive Vice President and Chief Investment Officer Matt Goetz - Senior Vice President, Investment and Asset Management Paul Richards - Vice President, Originations and investments Conference Call Participants Crispin Love - Piper Sandler Stephen Laws - Raymond J ...

PART I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) NREF is a commercial mortgage REIT investing in debt and equity across multifamily, SFR, and self-storage, managing a $2.0 billion portfolio with a 3-to-1 leverage target - NREF is a commercial mortgage REIT focusing on first-lien mortgage loans, mezzanine loans, preferred equity, and CMBS, primarily in the multifamily, SFR, and self-storage sectors within the top **50 MSAs**[24](index=24&type=chunk)[28](index=28&type=chunk) - The company is externally managed by NexPoint Real Estate Advisors VII, L.P., an affiliate of NexPoint Advisors, L.P., with the manager handling all investment decisions and operations[27](index=27&type=chunk) Portfolio Composition by Net Equity (December 31, 2022) | Asset Class | Percentage of Net Equity (%) | | :--- | :--- | | Multifamily CMBS B-Pieces | 28.0% | | Mezzanine Loans | 15.9% | | SFR Loans | 14.8% | | Preferred Equity Investments | 13.7% | | Common Stock Investments | 11.8% | | Multifamily Property Real Estate | 9.5% | | CMBS I/O Strips | 3.1% | | Mortgage-Backed Securities | 2.5% | | MSCR Notes | 0.7% | Key Portfolio Metrics (as of December 31, 2022) | Metric | Value | | :--- | :--- | | Stabilized Properties | 92.9% | | Weighted Average Occupancy | 89.5% | | Portfolio-wide Weighted Average DSCR | 1.78x | | Weighted Average LTV | 68.6% | | Weighted Average Maturity | 5.9 years | - The company's financing strategy targets a leverage ratio not to exceed **3-to-1**, with the manager having discretion over specific asset leverage[56](index=56&type=chunk) [2022 Highlights](index=7&type=section&id=2022%20Highlights) In 2022, the company made $380.4 million in new investments and $197.2 million in dispositions, issuing $35.0 million in notes and $12.6 million in stock 2022 Purchases and Investments Summary | Metric | Value ($) | | :--- | :--- | | Total Principal Amount | $380,401,247 | 2022 Property Acquisition | Property Name | Location | Purchase Price ($) | Mortgage Debt ($) | Units | Effective Ownership (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Elysian at Hughes | Las Vegas, NV | $184,100,000 | $89,634,000 | 368 | 36.0% | 2022 Dispositions and Loan Payoffs Summary | Metric | Value ($) | | :--- | :--- | | Total Amortized Cost Basis | $205,774,441 | | Total Disposition Proceeds | $197,234,265 | | Total Prepayment Penalties | $25,773,254 | | Total Net Gain on Prepayment | $17,233,078 | - The company issued **$35.0 million** of **5.75%** Senior Unsecured Notes due 2026 and repurchased **$5.0 million** of these notes during the year, leaving **$165.0 million** outstanding[36](index=36&type=chunk) - Under its 2022 At-the-Market (ATM) Program, the company sold **531,728 shares** of common stock for gross proceeds of **$12.6 million**[38](index=38&type=chunk) [Item 1A. Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from real estate market downturns, credit and interest rate fluctuations, portfolio concentration, external manager dependence, and internal control weaknesses - The company's loans and investments are exposed to risks associated with debt-oriented real estate, including delinquency, foreclosure, and loss, which are heightened by macroeconomic trends like inflation and rising interest rates[84](index=84&type=chunk)[88](index=88&type=chunk)[95](index=95&type=chunk) - The portfolio has significant concentration risk: one fixed-rate loan represents approximately **25.2%** of the total portfolio's unpaid principal balance, and about **53.4%** of the portfolio is located in Florida and Georgia[100](index=100&type=chunk) - A single **material weakness** was identified in the company's internal control over financial reporting related to the Elysian at Hughes Center investment, leading to the conclusion that internal controls were **not effective** as of December 31, 2022[82](index=82&type=chunk)[169](index=169&type=chunk) - The company is dependent on its external Manager and its affiliates, and faces significant conflicts of interest, including those arising from the Manager's compensation structure and competition for investment opportunities with other affiliated entities[198](index=198&type=chunk)[209](index=209&type=chunk)[217](index=217&type=chunk) - Failure to qualify as a REIT would result in significant adverse tax consequences, including being subject to corporate income tax and being unable to deduct dividends paid to stockholders[232](index=232&type=chunk)[233](index=233&type=chunk) - The bankruptcy of Highland Capital Management, L.P. (a former affiliate) and related litigation involving key personnel could expose the company to negative publicity and divert management's attention, potentially impacting operations[212](index=212&type=chunk) [Item 1B. Unresolved Staff Comments](index=60&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - **None**[304](index=304&type=chunk) [Item 2. Properties](index=60&type=section&id=Item%202.%20Properties) As of December 31, 2022, the company directly owns one multifamily property and consolidates another Owned Properties | Property Name | Location | Units | Mortgage Debt (as of 12/31/22) ($) | | :--- | :--- | :--- | :--- | | Hudson Montford | Charlotte, NC | 204 | ~$32.5 million | | Elysian at Hughes Center | Las Vegas, NV | 368 | ~$89.6 million | [Item 3. Legal Proceedings](index=61&type=section&id=Item%203.%20Legal%20Proceedings) The company is not aware of any legal proceedings likely to have a material adverse effect on its financial condition or operations - Management is **not aware** of any legal proceedings likely to have a material adverse effect on the company's results or financial condition[307](index=307&type=chunk) [Item 4. Mine Safety Disclosures](index=61&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - **Not applicable**[308](index=308&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=62&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE under "NREF", with **17,471,218 shares** outstanding as of March 31, 2023 - The company's common stock trades on the NYSE under the symbol "**NREF**"[312](index=312&type=chunk) - As of March 31, 2023, there were **17,471,218 shares** of common stock outstanding[311](index=311&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=62&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net income for 2022 decreased to **$3.2 million** due to unrealized losses, with portfolio growth to **$2.0 billion** and EAD at **$2.50** and CAD at **$2.97** per share [Results of Operations](index=65&type=section&id=Results%20of%20Operations) Net income attributable to common stockholders decreased to **$3.2 million** in 2022, primarily due to unrealized losses on CMBS VIEs, despite increased net interest income Summary of Operating Results (in thousands) | | For the Year Ended Dec 31, 2022 | For the Year Ended Dec 31, 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $37,733 | $26,055 | $11,678 | 44.8% | | Other income (loss) | $2,661 | $71,263 | ($68,602) | (96.3)% | | Operating expenses | ($26,180) | ($13,846) | ($12,334) | 89.1% | | **Net income attributable to common stockholders** | **$3,234** | **$39,577** | **($36,343)** | **(91.8)%** | - The increase in net interest income for 2022 was primarily due to an increase in investments (from **74** to **83** discrete investments) and prepayment penalties related to early paydowns[336](index=336&type=chunk) - The decrease in other income for 2022 was primarily due to an increase in unrealized losses related to **consolidated** CMBS VIEs and a decrease in fair value marks between periods[337](index=337&type=chunk) [Key Financial Measures and Indicators](index=68&type=section&id=Key%20Financial%20Measures%20and%20Indicators) For FY 2022, basic EPS was **$0.22**, dividends increased to **$2.00**, EAD was **$2.50**, and CAD was **$2.97** per diluted share, with book value at **$20.29** Per Share Data Comparison | Metric | 2022 ($) | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | :--- | | Net income per share, basic | $0.22 | $6.00 | $2.13 | | Dividends declared per share | $2.0000 | $1.9000 | $1.4198 | EAD and CAD Reconciliation Summary (per diluted share, including NCI) | Metric | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | EAD per Diluted Share | $2.50 | $1.89 | | CAD per Diluted Share | $2.97 | $2.21 | Book Value Per Share / Unit | Metric | Dec 31, 2022 ($) | Dec 31, 2021 ($) | | :--- | :--- | :--- | | Book value per share of common stock | $20.29 | $21.88 | | Combined book value per share / unit | $20.03 | $21.51 | [Our Portfolio](index=71&type=section&id=Our%20Portfolio) As of December 31, 2022, the portfolio comprised **83** investments with a **$1.63 billion** principal balance, primarily fixed-rate, yielding **6.41%** Portfolio Summary (as of December 31, 2022) | Metric | Floating Rate | Fixed Rate | Common Stock | Real Estate | Total Portfolio | | :--- | :--- | :--- | :--- | :--- | :--- | | Number of investments | 22 | 57 | 2 | 2 | 83 | | Principal balance ($ thousands) | $368,021 | $1,260,751 | N/A | N/A | $1,628,772 | | Weighted-average all-in yield | 10.31% | 5.21% | N/A | N/A | 6.41% | [Liquidity and Capital Resources](index=74&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is sourced from operating cash flows, debt facilities, and equity issuances, including a **$628.6 million** Freddie Mac facility and **$331.0 million** in repurchase agreements - Primary sources of liquidity include cash from operations, debt facilities like the Freddie Mac Credit Facility and master repurchase agreements, and equity/debt issuances[365](index=365&type=chunk)[366](index=366&type=chunk) Key Financing Balances (as of December 31, 2022) | Facility | Outstanding Balance ($ thousands) | | :--- | :--- | | Freddie Mac Credit Facility (SFR Loans) | $628,633 | | Master Repurchase Agreements | $331,020 | | Unsecured Notes, net | $204,960 | | Mortgages Payable, net | $121,236 | - The company is actively managing the transition from LIBOR to SOFR: as of year-end 2022, **3.7%** of the portfolio was tied to LIBOR and **13.3%** was tied to SOFR[381](index=381&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=82&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is **not required** for smaller reporting companies, thus no disclosure is provided - **Not required** for smaller reporting companies[409](index=409&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=82&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item refers to the **consolidated** financial statements and related notes, beginning on page F-1 - The required information is included in the **consolidated** financial statements and notes beginning on page F-1[410](index=410&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=82&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports **no** changes or disagreements with its accountants on accounting and financial disclosure - **None**[411](index=411&type=chunk) [Item 9A. Controls and Procedures](index=82&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were **not effective** as of December 31, 2022, due to a **material weakness** in internal control over financial reporting, with remediation underway - Management concluded that disclosure controls and procedures were **not effective** as of December 31, 2022[412](index=412&type=chunk) - A **material weakness** was identified in internal controls relating to missing controls over obtaining and reviewing final executed documents for new investments due to inadequate risk assessment[418](index=418&type=chunk) - The remediation plan involves implementing pre-close and post-close acquisition checklists to ensure formal accounting analysis and review of final transaction documents[420](index=420&type=chunk) PART III [Items 10-14](index=84&type=section&id=Items%2010-14) Information for Items 10-14, covering governance, compensation, and ownership, is **incorporated by reference** from the company's definitive proxy statement - Information for Items 10, 11, 12, 13, and 14 is **incorporated by reference** from the company's definitive proxy statement for its 2023 Annual Meeting of stockholders[427](index=427&type=chunk)[428](index=428&type=chunk)[429](index=429&type=chunk)[430](index=430&type=chunk)[431](index=431&type=chunk) PART IV [Item 15. Exhibit and Financial Statement Schedules](index=85&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists documents filed as part of the Form 10-K, including financial statements and an index of all exhibits - This item provides an index to the **Consolidated** Financial Statements, which begin on page F-1, and lists all exhibits filed with the report[434](index=434&type=chunk)[435](index=435&type=chunk) Financial Statements and Supplementary Data [Consolidated Financial Statements](index=91&type=section&id=Consolidated%20Financial%20Statements) **Consolidated** financial statements for 2022 show total assets of **$8.15 billion**, liabilities of **$7.61 billion**, and net income of **$14.2 million**, reflecting CMBS trust **consolidation** Consolidated Balance Sheet Summary (in thousands) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $8,154,136 | $8,513,917 | | Total Liabilities | $7,609,122 | $8,007,211 | | Total Stockholders' Equity | $448,513 | $245,283 | Consolidated Statement of Operations Summary (in thousands) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total net interest income | $37,733 | $26,055 | $11,678 | 44.8% | | Total other income (loss) | $2,661 | $71,313 | ($68,602) | (96.3)% | | Total operating expenses | $26,180 | $13,896 | ($12,334) | 89.1% | | **Net income** | **$14,214** | **$83,472** | **($69,258)** | **(83.0)%** | Consolidated Statement of Cash Flows Summary (in thousands) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $65,801 | $49,298 | | Net cash provided by investing activities | $950,578 | $517,878 | | Net cash used in financing activities | ($1,029,264) | ($567,415) | [Notes to Consolidated Financial Statements](index=100&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes provide detailed financial information on VIE **consolidation**, loan portfolio, debt facilities, fair value, related-party transactions, and subsequent events, including an **immaterial error correction** - The company **consolidates** CMBS trusts where it is the **primary beneficiary**, reporting the assets and liabilities of these trusts at fair value, which significantly impacts the scale of the **consolidated** balance sheet[479](index=479&type=chunk)[480](index=480&type=chunk) - As of December 31, 2022, all **48** loans held-for-investment were rated "**3**" (**Satisfactory**), indicating that collateral performance is meeting or on track to meet underwriting expectations[542](index=542&type=chunk) - Note 16 discloses an **immaterial error correction** for the Elysian at Hughes Center investment: it was previously accounted for as an unconsolidated preferred equity investment but was revised to be **consolidated** as a real estate investment owned by the company, effective Q1 2022[652](index=652&type=chunk) - Subsequent to year-end, in Q1 2023, the company made new preferred and common equity investments, authorized a new **$20.0 million** share repurchase program, declared common and preferred dividends, and acquired a new CMBS position[658](index=658&type=chunk)[659](index=659&type=chunk)[661](index=661&type=chunk)[662](index=662&type=chunk)[664](index=664&type=chunk)

Financial Data and Key Metrics Changes - The company reported a net loss of $0.16 per diluted share for Q4 2022, compared to net income of $0.92 per diluted share for Q4 2021, indicating a significant decline in profitability [45] - Earnings available for distribution decreased to $0.49 per diluted share in Q4 2022 from $0.54 per diluted share in Q4 2021, while cash available for distribution fell to $0.52 per diluted share from $0.63 per diluted share in the same period [46] - Book value per share decreased by 6.5% year-over-year to $20.11 per diluted share, primarily due to mark-to-market adjustments [54] Business Line Data and Key Metrics Changes - The loan portfolio is composed of 85 individual assets with approximately $1.7 billion of total outstanding principal, with 96% of the portfolio being residential [66][70] - The portfolio's average remaining term is 5.9 years, with a weighted average loan-to-value of 68.6% and an average debt service coverage ratio of 1.78x [70] Market Data and Key Metrics Changes - Year-over-year market rent growth in the Sunbelt region is approximately 4% to 6%, with total rent growth for the year expected to be around 10% to 12% [21] - Single-family rents are experiencing a year-over-year growth of 6% to 8%, while multi-family rents finished the year in low single digits [22] Company Strategy and Development Direction - The company continues to focus on credit investments and stabilized assets, emphasizing conservative underwriting at low leverage [6] - The investment strategy includes targeting opportunities in the life sciences sector, with approximately $400 million of preferred equity and mezzanine opportunities being underwritten [37] Management's Comments on Operating Environment and Future Outlook - Management noted that the transaction market is somewhat muted, with deal volume down 70% to 80% from a year ago, leading to lower demand for borrowings [38] - Despite the challenges, the company remains optimistic about the performance of the SFR and multi-family sectors, with high-single-digit same-store NOI growth being reported [34] Other Important Information - The company declared a special dividend of $0.185 per share for the first quarter, with intentions to continue this for the remainder of 2023 [53] - The company is guiding for earnings available for distribution of $0.47 per diluted share for Q1 2023, with a range of $0.42 to $0.52 [47] Q&A Session Summary Question: What were prepays in the quarter versus last quarter? - Management expects prepayments to be less prevalent in Q1 and Q2 of 2023 as rates stabilize [32] Question: Can you speak to your views on both multifamily and SFR right now? - Management remains bullish on SFR, noting strong performance despite rising debt costs and inflation pressures [34] Question: What are your thoughts about the market's ability to absorb the current supply? - Management indicated that there may be some softness in the market, particularly in higher-end products, but overall demand remains strong [18]

NEXE INVESTOR RELATIONS Kristen Thomas (p) 214.908.1854 (e) kthomas@nexpoint.com NYSE:NREF 4Q 2022 Financial Supplement February 23, 2023 CONTACT NEXPOINT REAL ESTATE FINANCE (NYSE:NREF) 300 Crescent Court, Suite 700 Dallas, Texas 75201 (w) nref.nexpoint.com Cautionary Statements FORWARD LOOKING STATEMENTS This presentation 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 beli ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-39210 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of ...

NexPoint Real Estate Finance, Inc. (NYSE:NREF) Q3 2022 Earnings Conference Call October 27, 2022 11:00 AM ET Company Participants Kristen Thomas - Investor Relations Matt McGraner - Executive Vice President and CIO Brian Mitts - Executive Vice President and CFO Matt Goetz - Senior Vice President, Investments and Asset Management Paul Richards - Vice President, Originations and Investments Conference Call Participants Stephen Laws - Raymond James Steve DeLaney - JMP Securities Jade Rahmani - KBW Operator Ple ...

NEX NYSE:NREF 3Q 2022 Financial Supplement October 27, 2022 CONTACT NEXPOINT REAL ESTATE FINANCE (NYSE:NREF) 300 Crescent Court, Suite 700 Dallas, Texas 75201 (w) nref.nexpoint.com INVESTOR RELATIONS Kristen Thomas (p) 214.908.1854 (e) kthomas@nexpoint.com Cautionary Statements FORWARD LOOKING STATEMENTS This presentation 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 belief ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-39210 NexPoint Real Estate Finance, Inc. (Exact Name of Registrant as Specified in Its Charter) Maryland 84-2178264 (State or oth ...

NexPoint Real Estate Finance, Inc. (NYSE:NREF) Q2 2022 Earnings Conference Call July 29, 2022 1:00 PM ET Company Participants Jackie Graham - Investor Relations Matt McGraner - Executive Vice President and CIO David Willmore - Vice President, Finance Matt Goetz - Senior Vice President, Investment and Asset Management Paul Richards - Vice President, Originations and Investments Conference Call Participants Stephen Laws - Raymond James Jade Rahmani - Keefe, Bruyette & Woods Operator Good day. And welcome to t ...

NYSE:NREF INVESTOR RELATIONS Jackie Graham (p) 214.276.6300 (e) jgraham@nexpoint.com 2Q 2022 Financial Supplement July 28, 2022 CONTACT NEXPOINT REAL ESTATE FINANCE (NYSE:NREF) 300 Crescent Court, Suite 700 Dallas, Texas 75201 (w) nref.nexpoint.com Cautionary Statements FORWARD LOOKING STATEMENTS This presentation 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. Forwa ...