NexPoint Residential Trust(NXRT) - 2024 Q2 - Quarterly Results

Executive Summary & Highlights Second Quarter 2024 Overview NXRT reported $10.6 million net income, raised 2024 guidance, completed a $39.3 million property disposition, and repurchased $14.6 million in stock Q2 2024 Key Financial Metrics vs. Q2 2023 | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net Income (Loss) | $10.6M | $(4.0)M | | FFO | $16.3M | $19.8M | | Core FFO | $17.9M | $20.4M | | AFFO | $20.9M | $23.2M | - Raised full-year 2024 guidance for Core FFO per diluted share and Same Store NOI[4][38][63] - Completed the disposition of Radbourne Lake in Charlotte, NC for approximately $39.3 million, generating a gain of $18.8 million[13][22] - Repurchased and retired 438,678 shares of common stock at an average price of $33.19 per share, totaling approximately $14.6 million[4][22] - Q2 Same Store NOI increased by 2.4% year-over-year, while YTD Same Store NOI increased by 3.2%[22][7] Financial Performance Quarterly and Year-to-Date Results NXRT reported Q2 2024 net income of $10.6 million and YTD net income of $36.9 million, largely driven by real estate sales gains Second Quarter 2024 Financial Results Q2 2024 saw total revenues of $64.2 million and a net income of $10.6 million, a significant improvement year-over-year Q2 2024 vs. Q2 2023 Financial Summary | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Revenues | $64.2M | $69.6M | | Net Income (Loss) | $10.6M | $(4.0)M | | Net Income (Loss) per Diluted Share | $0.40 | $(0.15) | | NOI | $38.9M | $42.0M | | Core FFO per Diluted Share | $0.68 | $0.77 | | AFFO per Diluted Share | $0.80 | $0.88 | - The significant improvement in net income from a loss in Q2 2023 was primarily driven by an $18.7 million increase in gain on sales of real estate[25] Year-to-Date 2024 Financial Results YTD 2024 revenues reached $131.8 million, with net income of $36.9 million, primarily due to real estate sales gains Six Months Ended June 30, 2024 vs. 2023 Financial Summary | Metric | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | | Total Revenues | $131.8M | $138.8M | | Net Income (Loss) | $36.9M | $(7.8)M | | Net Income (Loss) per Diluted Share | $1.40 | $(0.31) | | NOI | $80.0M | $83.1M | | Core FFO per Diluted Share | $1.43 | $1.49 | | AFFO per Diluted Share | $1.65 | $1.69 | - The primary driver for the $44.7 million positive swing in net income for the first six months was a $50.4 million increase in gain on sales of real estate compared to the prior year period[7] Consolidated Financial Statements Consolidated statements show total assets of $1.99 billion and total liabilities of $1.49 billion as of June 30, 2024 Consolidated Balance Sheets The balance sheet highlights total assets of $1.99 billion and total liabilities of $1.49 billion as of June 30, 2024 Balance Sheet Summary | Account | June 30, 2024 (in thousands) | Dec 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total Net Real Estate Investments | $1,845,235 | $1,968,100 | | Cash and cash equivalents | $21,262 | $12,367 | | Total Assets | $1,988,722 | $2,107,645 | | Mortgages payable, net | $1,454,418 | $1,453,787 | | Total Liabilities | $1,491,959 | $1,607,775 | | Total Stockholders' Equity | $491,145 | $494,624 | Consolidated Statements of Operations The statement of operations shows YTD 2024 total revenues of $131.8 million and net income of $37.0 million Statement of Operations Summary | Account | Q2 2024 (in thousands) | Q2 2023 (in thousands) | YTD 2024 (in thousands) | YTD 2023 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $64,238 | $69,569 | $131,815 | $138,796 | | Total Expenses | $57,442 | $59,522 | $115,737 | $115,627 | | Gain on sales of real estate | $18,686 | $0 | $50,395 | $0 | | Interest Expense | $(13,971) | $(14,524) | $(28,362) | $(31,263) | | Net Income (Loss) | $10,638 | $(3,968) | $37,040 | $(7,866) | Operational Performance Same Store Portfolio Performance Same Store portfolio achieved 2.4% Q2 and 3.2% YTD NOI growth, driven by revenue increases and stable occupancy Q2 2024 Same Store Results Q2 2024 Same Store NOI increased by 2.4%, with revenues up 2.3% and expenses up 1.2% Q2 Same Store Performance vs. Q2 2023 | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $62,905K | $61,520K | 2.3% | | Operating Expenses | $24,529K | $24,247K | 1.2% | | NOI | $38,442K | $37,532K | 2.4% | | Ending Occupancy | 94.1% | 94.1% | 0.0% | | Average Rent per Unit | $1,520 | $1,535 | -1.0% | YTD 2024 Same Store Results YTD 2024 Same Store NOI grew by 3.2%, with revenues increasing by 2.9% and expenses by 1.5% YTD Same Store Performance vs. YTD 2023 | Metric | YTD 2024 | YTD 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $126,302K | $122,704K | 2.9% | | Operating Expenses | $48,816K | $48,094K | 1.5% | | NOI | $77,660K | $75,222K | 3.2% | | Ending Occupancy | 94.1% | 94.1% | 0.0% | | Average Rent per Unit | $1,520 | $1,535 | -1.0% | Value-Add Program The value-add program completed 59 upgrades in Q2 2024 with a 20.1% ROI, and cumulatively shows strong returns across various initiatives - During Q2 2024, the company completed 59 full and partial upgrades, achieving an average monthly rent premium of $240 and a 20.1% Return on Investment (ROI)[22] Cumulative Value-Add Program Summary (Since Inception) | Program Type | Units Completed | Avg. Monthly Rent Increase | ROI | | :--- | :--- | :--- | :--- | | Interiors (Full & Partial) | 8,271 | $175 | 20.8% | | Kitchen & Laundry Appliances | 4,659 | $48 | 62.0% | | Smart Home Technology | 11,389 | $43 | 37.2% | Capital Expenditures Capital expenditures significantly decreased in Q2 2024 to $6.1 million and YTD to $13.0 million, driven by reduced rehab and maintenance spending Capital Expenditures Summary | Category | Q2 2024 (in thousands) | Q2 2023 (in thousands) | % Change | YTD 2024 (in thousands) | YTD 2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Capitalized Rehab | $1,952 | $11,922 | -83.6% | $4,157 | $23,237 | -82.1% | | Capitalized Maintenance | $4,182 | $6,958 | -39.9% | $8,877 | $11,932 | -25.6% | | Total Capital Expenditures | $6,134 | $18,880 | -67.5% | $13,034 | $35,169 | -62.9% | Portfolio & Debt Management Property Portfolio Overview NXRT's portfolio comprises 36 properties in the Sun Belt, with key markets like Phoenix and South Florida, facing average 5.6% new supply growth Portfolio Composition by Market (% of Units) | Market | % of Units | | :--- | :--- | | Phoenix | 15.2% | | South Florida | 15.0% | | Dallas/Fort Worth | 14.9% | | Atlanta | 12.7% | | Nashville | 10.2% | | Orlando | 8.9% | | Las Vegas | 8.8% | | Other | 14.3% | - The company's portfolio faces an average 3-year new supply growth of 5.6% in its submarkets, with notable markets like Huntersville/Cornelius (CHA) at 37.5% and Far North Raleigh (RDU) at 12.1%[16] Debt & Leverage Total outstanding debt was $1.46 billion with a 59% leverage ratio, featuring a staggered maturity schedule and predominantly floating-rate debt Debt Summary (as of June 30, 2024) | Metric | Amount (in thousands) | | :--- | :--- | | Total Mortgage Debt | $1,462,935 | | Credit Facilities | $0 | | Total Debt Outstanding | $1,462,935 | | Leverage Ratio | 59% | Debt Maturity Schedule (Principal Payments) | Period | Principal Due (in thousands) | | :--- | :--- | | Remainder of 2024 | $147 | | 2025 | $133,392 | | 2026 | $290,324 | | 2027 | $0 | | 2028 | $81,042 | | Thereafter | $958,030 | - As of June 30, 2024, the company's total indebtedness of $1.5 billion had an adjusted weighted average interest rate of 3.55%, with 75% of its $1.4 billion in floating rate debt effectively covered by interest rate swaps[100] Hedging Activities NXRT manages interest rate risk with $1.0675 billion in interest rate swaps at a 0.9807% fixed rate and various interest rate caps - The company has interest rate swap agreements with a total notional amount of $1.0675 billion, effectively fixing the interest rate on a significant portion of its floating-rate debt, with a weighted average fixed rate of 0.9807%[111] - A forward interest rate swap is in place with an effective date of September 1, 2026, for a notional amount of $92.5 million at a fixed rate of 1.7980%[97][111] - NXRT holds numerous interest rate cap agreements on individual property mortgages to limit exposure to rising interest rates, with strike rates ranging from 2.74% to 6.82%[112] Full Year 2024 Guidance & Outlook 2024 Full Year Guidance NXRT revised its 2024 guidance, projecting Core FFO per diluted share of $2.66-$2.79 and Same Store NOI growth of -0.6% to 1.6% Revised Full Year 2024 Guidance Summary | Metric | Low-End | Mid-Point | High-End | | :--- | :--- | :--- | :--- | | Earnings (loss) per diluted share | $(1.22) | $(1.15) | $(1.08) | | Core FFO per diluted share | $2.66 | $2.72 | $2.79 | | Same Store NOI Growth | -0.6% | 0.5% | 1.6% | | Dispositions (in millions) | $150.0 | $175.0 | $200.0 | | Acquisitions (in millions) | $0 | $50.0 | $100.0 | Strategic Outlook and Net Asset Value NXRT's 'Path to Growth' strategy aims to enhance EPS through debt refinancing, with an estimated NAV per share of $49.77 to $61.97 - The 'NXRT Path to Growth: 2025-2027' strategy includes refinancing debt to lower the average SOFR spread from 158 bps to 100-110 bps, which is estimated to benefit EPS by $0.15-$0.20 annually[6][26] Net Asset Value (NAV) Summary | Component | Value Range (Min) | Value Range (Max) | | :--- | :--- | :--- | | Real Estate Value | $2,663,332K | $2,982,345K | | Total Value of Assets | $2,802,280K | $3,121,293K | | Total Value of Liabilities | $1,500,156K | $1,500,156K | | Net Asset Value | $1,302,124K | $1,621,137K | | Est. NAV / Share | $49.77 | $61.97 | Appendix Non-GAAP Reconciliations Detailed reconciliations of non-GAAP financial measures, including FFO, Core FFO, AFFO, NOI, and Same Store NOI, are presented Reconciliation of Net Income (Loss) to FFO, Core FFO, and AFFO (Q2 2024) | Metric | Amount (in thousands) | | :--- | :--- | | Net income (loss) | $10,638 | | Depreciation and amortization | $24,442 | | Gain on sales of real estate | $(18,686) | | FFO attributable to common stockholders | $16,330 | | Adjustments (casualty loss, etc.) | $1,549 | | Core FFO attributable to common stockholders | $17,879 | | Adjustments (equity comp, etc.) | $3,044 | | AFFO attributable to common stockholders | $20,923 | Reconciliation of Net Income (Loss) to NOI (Q2 2024) | Metric | Amount (in thousands) | | :--- | :--- | | Net income (loss) | $10,638 | | Adjustments (Interest, D&A, G&A, etc.) | $28,229 | | NOI | $38,867 | | Less Non-Same Store NOI | $(425) | | Same Store NOI | $38,442 | Definitions Key non-GAAP financial measures such as NOI, FFO, Core FFO, and AFFO are defined to clarify their application in performance analysis - NOI (Net Operating Income): Calculated by adjusting net income for interest expense, corporate expenses, depreciation, gains/losses on sales, and other non-property specific items to evaluate property performance[121] - FFO (Funds from Operations): Defined by NAREIT as net income excluding gains/losses from real estate dispositions plus real estate depreciation and amortization[121] - Core FFO & AFFO (Adjusted FFO): Core FFO adjusts FFO for non-recurring items like casualty losses or debt extinguishment costs, while AFFO further adjusts Core FFO for non-cash items like equity-based compensation[121]