NexPoint Residential Trust(NXRT) - 2019 Q4 - Annual Report

Cautionary Statement Regarding Forward-Looking Statements The report contains forward-looking statements subject to risks and uncertainties, cautioning that actual results may materially differ from projections Forward-Looking Statements Disclosure This section highlights that the annual report contains forward-looking statements subject to risks and uncertainties, particularly concerning liquidity, capital resources, property performance, and future financial performance - The report contains forward-looking statements regarding liquidity, capital resources, property performance, and future financial performance, which are subject to risks and uncertainties[12] - Investors are cautioned that actual results may vary materially from anticipated projections due to known and unknown risks, trends, uncertainties, and factors beyond the company's control[13] - Key risks include unfavorable market and economic conditions, real estate ownership risks (illiquidity, geographic concentration), increased risks from value-enhancement strategies, potential reforms to Freddie Mac and Fannie Mae, and competition[14] PART I This part provides a comprehensive overview of the company's business, operational strategies, and associated risk factors Business Overview NexPoint Residential Trust (NXRT) is a Maryland REIT focused on value-add multifamily investments, externally managed, aiming for cash flow and capital appreciation - NexPoint Residential Trust, Inc. (NXRT) was incorporated in Maryland on September 19, 2014, and has elected to be taxed as a REIT, focusing on 'value-add' multifamily investments in the Southeastern and Southwestern United States[16] - As of December 31, 2019, the Company owned 40 properties representing 14,724 units in eight states, with approximately 94.2% occupancy and a weighted average monthly effective rent of $1,103 per unit[23][30] - The Company is externally managed by NexPoint Real Estate Advisors, L.P. (the 'Adviser') and aims to maximize cash flow, acquire properties with growth potential, provide quarterly cash distributions, and achieve long-term capital appreciation through targeted management and a value-add program[17][18] 2019 Key Highlights and Financial Performance | Metric | Value (USD thousands) | Change from 2018 (USD thousands) | % Change from 2018 | | :----------------------------------- | :------------------- | :----------------- | :------------------- | | Net income (loss) | $99,438 | $101,052 | N/M | | NOI | $102,591 | $22,416 | 28.0% | | FFO attributable to common stockholders | $40,718 | $8,700 | 27.2% | | Core FFO attributable to common stockholders | $47,573 | $12,492 | 35.6% | | AFFO attributable to common stockholders | $54,213 | $13,460 | 33.0% | | Dividends declared per share | $1.138 | $0.113 | 11.0% | | Average Rent Growth on Renovated Units | $101 (monthly) | N/A | 11.0% | | Return on Investment (Renovations) | 24.5% | N/A | N/A | | Cash on Balance Sheet (Dec 31, 2019) | $71,200 | N/A | N/A | 2019 Acquisitions and Dispositions | Activity | Number of Properties | Number of Units | Total Value (USD thousands) | | :---------------- | :------------------- | :-------------- | :------------------------- | | Acquisitions | 11 | 4,583 | $876,746 | | Dispositions | 6 | 2,218 | $289,875 (Sales Price) | | Gain on Sales of Real Estate | N/A | N/A | $127,684 | General Company Information Provides foundational details about the company's incorporation and operational framework 2019 Highlights Summarizes key operational and financial achievements for the year 2019 Our Real Estate Portfolio Details the composition and characteristics of the company's real estate holdings Business Objectives and Strategies Outlines the company's core goals and strategic approaches for growth and value creation Acquisition and Operating Strategy Describes the company's approach to acquiring and managing its property portfolio Value-Add Strategy Explains the company's specific strategy for enhancing property value through renovations and improvements Disposition Strategy Details the company's approach to selling properties to optimize its portfolio Financing Strategy Describes the company's methods for funding its operations and acquisitions Property Management Strategy Outlines the company's approach to managing its properties for operational efficiency Our Structure Explains the legal and operational framework of the company and its subsidiaries Our Adviser Provides information about the external entity responsible for managing the company's investments Our Advisory Agreement Details the contractual terms governing the relationship with the external investment adviser Our Property Manager Describes the entity responsible for the day-to-day management of the company's properties Property Management Agreements Outlines the contractual terms for property management services Regulation Discusses the regulatory environment impacting the company's operations Insurance Provides an overview of the company's insurance coverage for its assets and operations Competition Addresses the competitive landscape within the multifamily real estate market Employees Details information regarding the company's workforce Corporate Information Presents general corporate details about the company Risk Factors This section outlines various risks that could materially and adversely affect the company's business, financial condition, and stock price - Unfavorable market and economic conditions, particularly in the Southeastern and Southwestern U.S., could adversely affect occupancy, rental rates, and property values[97][100] - The company's 'value-enhancement' strategy for multifamily properties involves higher risks, including delays, increased capital costs, and potential failure to achieve anticipated rent and occupancy increases[101] - Dependence on external management (Adviser) and property manager (BH) means the company relies heavily on their key personnel and business contacts, and their resignation could disrupt operations[145][150] - Failure to qualify or maintain REIT status would subject the company to federal income tax at corporate rates, significantly reducing cash available for distributions and potentially impacting stock value[164][165] - The company's substantial variable rate debt (approximately $1.3 billion as of Dec 31, 2019) exposes it to interest rate risk, which could increase interest expense and refinancing costs, potentially impacting cash flow and distributions[109][137] Risks Related to Our Business and Industry Discusses specific risks inherent to the company's operations and the real estate industry Risks Related to Our Structure Addresses risks arising from the company's organizational and management structure Risks Related to Our REIT Status Highlights potential threats to the company's qualification and maintenance of its REIT tax status Risks Related to the Ownership of our Common Stock Covers risks that could impact the value and liquidity of the company's common stock Risks Related to Our Spin-Off Addresses specific risks associated with the company's spin-off transaction Unresolved Staff Comments There are no unresolved staff comments from the SEC - There are no unresolved staff comments[214] Properties The company's portfolio, as of December 31, 2019, consists of 40 properties with 14,724 units across eight states, detailed with key operational metrics - As of December 31, 2019, the Company's portfolio consisted of 40 properties, totaling 14,724 units, located in eight states[216] Portfolio Summary as of December 31, 2019 | Metric | Value | | :--------------------------------- | :------------------- | | Total Properties | 40 | | Total Units | 14,724 | | Average Effective Monthly Rent Per Unit | $1,103 | | % Occupied | 94.2% | | Total Rehabbed Units (since inception) | 6,711 | | Average Rehab Expenditures per Unit | $17,533 | - The '2018-2019 Same Store Properties' pool includes 25 properties (9,057 units) with an average effective monthly rent of $1,038 and 94.5% occupancy as of December 31, 2019[216] Legal Proceedings Management is unaware of any legal proceedings likely to materially adversely affect the company's operations or financial condition - Management is not aware of any legal proceedings with an outcome reasonably likely to have a material adverse effect on the company's results of operations or financial condition[220] Mine Safety Disclosures Mine Safety Disclosures are not applicable to the company - Mine Safety Disclosures are not applicable to the registrant[221] PART II This part covers market information, selected financial data, management's discussion and analysis, and financial controls Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section details the company's common stock market, stockholder information, and a performance comparison against key indices - As of February 21, 2020, the company had 25,296,836 shares of common stock outstanding, held by approximately 996 record holders[224] - The company's common stock trades on the NYSE under the ticker symbol 'NXRT'[225] - A performance graph compares the cumulative total stockholder return of NXRT common shares against the Russell 3000 Index, MSCI U.S. REIT Index, Standard & Poor's U.S. REIT Index, and NAREIT Equity REIT Index from March 31, 2015, to December 31, 2019[227] Selected Financial Data This section summarizes key financial data, including balance sheet, operating, cash flow, and non-GAAP measures, for 2015 through 2019 Selected Financial Data (2015-2019, in thousands except per share) | Metric | 2019 (USD thousands) | 2018 (USD thousands) | 2017 (USD thousands) | 2016 (USD thousands) | 2015 (USD thousands) | | :------------------------------------------ | :--------- | :--------- | :--------- | :--------- | :--------- | | Balance Sheet Data | | | | | | | Net real estate investments | $1,781,810 | $1,087,542 | $991,156 | $963,037 | $902,882 | | Total assets | $1,865,989 | $1,161,210 | $1,055,375 | $1,035,397 | $970,060 | | Total debt, net | $1,403,048 | $838,020 | $792,824 | $763,504 | $705,129 | | Stockholders' equity | $426,241 | $296,028 | $239,444 | $231,544 | $221,548 | | Operating Data | | | | | | | Total revenues | $181,066 | $146,597 | $144,235 | $132,848 | $117,658 | | Net income (loss) | $99,438 | $(1,614) | $56,359 | $25,888 | $(10,992) | | Earnings (loss) per weighted average common share - basic | $4.11 | $(0.08) | $2.53 | $1.03 | $(0.51) | | Cash Flow Data | | | | | | | Cash flows provided by operating activities | $51,366 | $41,743 | $37,506 | $33,776 | $34,514 | | Other Data | | | | | | | Dividends declared per common share | $1.138 | $1.025 | $0.910 | $0.838 | $0.618 | | FFO per share - basic | $1.69 | $1.51 | $1.19 | $1.46 | $1.20 | | Core FFO per share - basic | $1.97 | $1.66 | $1.43 | $1.48 | $1.36 | | AFFO per share - basic | $2.25 | $1.92 | $1.65 | $1.58 | $1.41 | Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a detailed analysis of the company's financial condition, operational results, liquidity, capital resources, and critical accounting policies - The company's primary revenue source is rental income from multifamily properties, supplemented by other income like utility reimbursements and fees[239][240] - Key expenses include property operating costs, real estate taxes and insurance, property management fees, advisory and administrative fees, and depreciation and amortization[241][242][243][244] Summary of Operating Results (2019 vs 2018, in thousands) | Metric | 2019 (USD thousands) | 2018 (USD thousands) | $ Change (USD thousands) | | :--------------------------------------- | :--------- | :--------- | :--------- | | Total revenues | $181,066 | $146,597 | $34,469 | | Total expenses | $(166,157) | $(129,805) | $(36,352) | | Operating income before gain on sales of real estate | $14,909 | $16,792 | $(1,883) | | Gain on sales of real estate | $127,684 | $13,742 | $113,942 | | Net income (loss) | $99,438 | $(1,614) | $101,052 | NOI and Same Store NOI (2019 vs 2018, in thousands) | Metric | 2019 (USD thousands) | 2018 (USD thousands) | $ Change (USD thousands) | % Change | | :-------------------- | :--------- | :--------- | :--------- | :--------- | | Total NOI | $102,591 | $80,175 | $22,416 | 28.0% | | Same Store NOI | $65,961 | $61,795 | $4,166 | 6.7% | FFO, Core FFO, and AFFO (2019 vs 2018 vs 2017, in thousands except per share) | Metric | 2019 (USD thousands) | 2018 (USD thousands) | 2017 (USD thousands) | | :----------------------------------- | :--------- | :--------- | :--------- | | FFO attributable to common stockholders | $40,718 | $32,018 | $25,051 | | FFO per share - diluted | $1.66 | $1.48 | $1.17 | | Core FFO attributable to common stockholders | $47,573 | $35,081 | $30,147 | | Core FFO per share - diluted | $1.93 | $1.62 | $1.41 | | AFFO attributable to common stockholders | $54,213 | $40,753 | $34,772 | | AFFO per share - diluted | $2.20 | $1.88 | $1.62 | - The company's short-term liquidity needs are met by operating cash flows and existing cash, while long-term needs are addressed through various capital sources including debt, equity issuances, and property dispositions[332][333] Cash Flows Summary (in thousands) | Cash Flow Type | 2019 (USD thousands) | 2018 (USD thousands) | 2017 (USD thousands) | | :--------------------------------------- | :--------- | :--------- | :--------- | | Net cash provided by operating activities | $51,366 | $41,743 | $37,506 | | Net cash provided by (used in) investing activities | $(553,129) | $(135,248) | $5,025 | | Net cash provided by (used in) financing activities | $529,816 | $93,386 | $(54,544) | - As of December 31, 2019, the company had $1.2 billion in mortgage debt at a weighted average interest rate of 3.34%, with $975.0 million effectively fixed by interest rate swaps[343][344] Contractual Obligations and Commitments (as of Dec 31, 2019, in thousands) | Type | Total (USD thousands) | 2020 (USD thousands) | 2021 (USD thousands) | 2022 (USD thousands) | 2023 (USD thousands) | 2024 (USD thousands) | Thereafter (USD thousands) | | :--------------------------------------- | :---------- | :------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Operating Properties Mortgage Debt (Principal) | $1,151,867 | $744 | $872 | $1,367 | $21,155 | $424,558 | $703,171 | | Operating Properties Mortgage Debt (Interest) | $209,545 | $35,561 | $37,244 | $38,249 | $37,392 | $30,154 | $30,945 | | Held For Sale Property Mortgage Debt (Principal) | $41,661 | $262 | $281 | $12,622 | $0 | $28,496 | $0 | | Held For Sale Property Mortgage Debt (Interest) | $5,619 | $1,539 | $1,524 | $1,023 | $1,023 | $510 | $0 | | Credit Facility (Principal) | $218,000 | $0 | $218,000 | $0 | $0 | $0 | $0 | | Credit Facility (Interest) | $9,570 | $8,913 | $657 | $0 | $0 | $0 | $0 | | Total contractual obligations | $1,636,262 | $47,019 | $258,578 | $53,261 | $59,570 | $483,718 | $734,116 | Capital Expenditures for Value-Add Program (in thousands) | Type | 2019 (USD thousands) | 2018 (USD thousands) | 2017 (USD thousands) | | :------------------------ | :--------- | :--------- | :--------- | | Interior Rehab Expenditures | $12,044 | $8,559 | $8,393 | | Exterior and Common Area | $11,242 | $9,133 | $7,621 | | Total Rehab Expenditures | $23,286 | $17,692 | $16,014 | Overview Provides a general introduction to the company's business and operational context Components of Our Revenues and Expenses Details the primary sources of income and categories of expenditures for the company Results of Operations for the Years Ended December 31, 2019, 2018 and 2017 Compares the company's financial performance across the fiscal years 2017, 2018, and 2019 Non-GAAP Measurements Explains and reconciles non-GAAP financial metrics used by management to assess performance Liquidity and Capital Resources Discusses the company's ability to meet its short-term and long-term financial obligations Cash Flows Analyzes the cash generated and used by operating, investing, and financing activities Debt, Derivatives and Hedging Activity Details the company's debt structure, derivative instruments, and risk management strategies Obligations and Commitments Outlines the company's contractual obligations and financial commitments Capital Expenditures and Value-Add Program Describes investments in property improvements and the value-add strategy Freddie Mac Multifamily Green Advantage Discusses the company's participation in the Freddie Mac green financing program Income Taxes Explains the company's tax position and compliance with REIT requirements Dividends Provides information on the company's dividend policy and distributions to shareholders Off-Balance Sheet Arrangements Discloses any material off-balance sheet transactions or obligations Critical Accounting Policies and Estimates Identifies accounting policies requiring significant judgment and estimation Recent Accounting Pronouncements Discusses the impact of recently issued accounting standards on the company Inflation Addresses the potential effects of inflation on the company's financial performance REIT Tax Election Confirms the company's election and adherence to REIT tax requirements Quantitative and Qualitative Disclosures About Market Risk This section details the company's market risk exposure, primarily interest rate risk, and its strategies for mitigation, including LIBOR transition considerations - The company's primary market risk exposure is interest rate risk on its $1.4 billion total indebtedness (as of Dec 31, 2019), of which $1.3 billion bears a floating interest rate[387] - Interest rate swaps effectively fix the interest rate on $975.0 million (87%) of the floating rate mortgage debt at a weighted average fixed rate of 1.4147%[387][390] - Interest rate cap agreements cover $346.5 million of floating rate mortgage debt, capping one-month LIBOR at a weighted average rate of 5.74%[388] - The company is monitoring the transition away from LIBOR after 2021, which could impact its cost of capital[393] Financial Statements and Supplementary Data This item refers to the consolidated financial statements and accompanying notes, located starting on page F-1 - The required financial statements and supplementary data are provided in the consolidated financial statements and notes, starting on page F-1[394] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There are no changes in or disagreements with accountants regarding accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure[395] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - Management concluded that disclosure controls and procedures were effective as of December 31, 2019, providing reasonable assurance for timely and accurate financial reporting[396] - Internal control over financial reporting was assessed as effective as of December 31, 2019, based on the COSO framework[400] - No material changes in internal control over financial reporting occurred during the quarter ended December 31, 2019[401] Other Information No other information is required to be reported under this item - There is no other information to report under this item[403] PART III This part incorporates information on corporate governance, executive compensation, and security ownership by reference Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2020 proxy statement - Information for this item is incorporated by reference from the definitive proxy statement for the 2020 Annual Meeting of Stockholders[405] Executive Compensation Executive compensation information is incorporated by reference from the 2020 proxy statement - Information for this item is incorporated by reference from the definitive proxy statement for the 2020 Annual Meeting of Stockholders[406] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership and related stockholder matters are incorporated by reference from the 2020 proxy statement - Information for this item is incorporated by reference from the definitive proxy statement for the 2020 Annual Meeting of Stockholders[407] Certain Relationships and Related Transactions, and Director Independence Related party transactions and director independence information are incorporated by reference from the 2020 proxy statement - Information for this item is incorporated by reference from the definitive proxy statement for the 2020 Annual Meeting of Stockholders[408] Principal Accountant Fees and Services Principal accountant fees and services information is incorporated by reference from the 2020 proxy statement - Information for this item is incorporated by reference from the definitive proxy statement for the 2020 Annual Meeting of Stockholders[409] PART IV This part details the exhibits and financial statement schedules included in the annual report Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed as part of the report, including key corporate documents and certifications - The report includes consolidated financial statements and schedules, as well as a comprehensive list of exhibits[412][413][414] - Exhibits include equity distribution agreements, the separation and distribution agreement, corporate charter and bylaws, advisory agreements, registration rights, indemnification agreements, and the long-term incentive plan[417] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act are also furnished[418] INDEX TO FINANCIAL STATEMENTS This section provides an index to the consolidated financial statements, auditor's report, and accompanying notes Report of Independent Registered Public Accounting Firm KPMG LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting, highlighting critical audit matters - KPMG LLP issued an unqualified opinion on the consolidated financial statements for the three-year period ended December 31, 2019, and on the effectiveness of internal control over financial reporting as of December 31, 2019[429][430][444] - Critical audit matters included the assessment of relative fair value allocation in asset acquisitions (land, building, improvements, furniture, fixtures, and equipment) due to subjective auditor judgment[435][436] - Another critical audit matter was the evaluation of real estate investments for impairment, involving subjective judgment in assessing events impacting holding period, net operating income, and capitalization rates[439][440] Consolidated Balance Sheets The consolidated balance sheets present the company's financial position, detailing assets, liabilities, and stockholders' equity as of December 31, 2019 and 2018 Consolidated Balance Sheet Highlights (in thousands) | Metric | December 31, 2019 (USD thousands) | December 31, 2018 (USD thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Total Net Real Estate Investments | $1,781,810 | $1,087,542 | | Cash and cash equivalents | $25,671 | $19,864 | | Restricted cash | $45,511 | $23,265 | | Fair market value of interest rate swaps (Asset) | $4,376 | $18,141 | | TOTAL ASSETS | $1,865,989 | $1,161,210 | | Mortgages payable, net | $1,145,371 | $824,702 | | Credit facility, net | $216,501 | $0 | | Fair market value of interest rate swaps (Liability) | $902 | $0 | | Total Liabilities | $1,436,453 | $862,615 | | Stockholders' Equity | $426,241 | $296,028 | Consolidated Statements of Operations and Comprehensive Income These statements summarize the company's revenues, expenses, net income (loss), and other comprehensive income for the years ended December 31, 2019, 2018, and 2017 Consolidated Statements of Operations Highlights (in thousands, except per share) | Metric | 2019 (USD thousands) | 2018 (USD thousands) | 2017 (USD thousands) | | :------------------------------------------ | :--------- | :--------- | :--------- | | Total revenues | $181,066 | $146,597 | $144,235 | | Total expenses | $166,157 | $129,805 | $130,946 | | Operating income | $142,593 | $30,534 | $91,654 | | Net income (loss) | $99,438 | $(1,614) | $56,359 | | Net income (loss) attributable to common stockholders | $99,140 | $(1,609) | $53,374 | | Earnings (loss) per share - basic | $4.11 | $(0.08) | $2.53 | | Unrealized gains (losses) on interest rate derivatives | $(14,625) | $1,931 | $4,568 | | Total comprehensive income | $84,813 | $317 | $60,927 | Consolidated Statements of Equity These statements detail changes in stockholders' equity for the years ended December 31, 2019, 2018, and 2017, including net income and dividends Consolidated Statements of Equity Highlights (in thousands) | Metric | December 31, 2019 (USD thousands) | December 31, 2018 (USD thousands) | January 1, 2017 (USD thousands) | | :------------------------------------------ | :------------------ | :------------------ | :---------------- | | Common Stock Par Value | $251 | $234 | $213 | | Additional Paid-in Capital | $359,748 | $285,511 | $241,450 | | Accumulated Earnings (Loss) less Dividends | $63,776 | $(6,764) | $(14,584) | | Accumulated Other Comprehensive Income (Loss) | $2,466 | $17,047 | $9,052 | | Total Stockholders' Equity | $426,241 | $296,028 | $256,102 | | Net income attributable to common stockholders | $99,140 | $(1,609) | $53,374 | | Issuance of common shares through ATM offering | $69,874 | $0 | $0 | | Common stock dividends declared | $(28,219) | $(22,601) | $(19,502) | Consolidated Statements of Cash Flows These statements present cash flows from operating, investing, and financing activities for 2019, 2018, and 2017, including noncash activity disclosures Consolidated Statements of Cash Flows (in thousands) | Cash Flow Type | 2019 (USD thousands) | 2018 (USD thousands) | 2017 (USD thousands) | | :--------------------------------------- | :--------- | :--------- | :--------- | | Net cash provided by operating activities | $51,366 | $41,743 | $37,506 | | Net cash provided by (used in) investing activities | $(553,129) | $(135,248) | $5,025 | | Net cash provided by (used in) financing activities | $529,816 | $93,386 | $(54,544) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $28,053 | $(119) | $(12,013) | | Cash, cash equivalents and restricted cash, end of period | $71,182 | $43,129 | $43,248 | - Significant noncash activities include changes in fair value on derivative instruments designated as hedges, and write-offs of fully amortized in-place leases[462] Notes to Consolidated Financial Statements These notes provide detailed information supporting the financial statements, covering organization, accounting policies, investments, debt, and related party transactions - The company is a REIT focused on 'value-add' multifamily investments, externally managed by NexPoint Real Estate Advisors, L.P., and conducts business through its Operating Partnership and a TRS[464][465] - Key accounting policies include revenue recognition (rental income, utility reimbursements, fees), purchase price allocation for acquisitions, and impairment testing for real estate assets[472][477][481] - As of December 31, 2019, the company owned 40 multifamily properties, with 11 acquisitions and 6 dispositions completed during the year[500][510][512] - The company utilizes interest rate swaps and caps to manage interest rate risk on its floating rate debt, with $975.0 million notional amount covered by swaps as of December 31, 2019[541][543] - Related party transactions include advisory and administrative fees paid to the Adviser, with significant voluntary waivers of fees on New Assets in 2019 ($9.1 million)[588][589] - Subsequent events include a declared quarterly dividend of $0.3125 per share, planned dispositions of two properties for $63.0 million, and a new $92.5 million interest rate swap[597][598][600] 1. Organization and Description of Business Describes the company's legal structure, business focus, and operational framework 2. Summary of Significant Accounting Policies Outlines the key accounting principles and methods applied in preparing the financial statements 3. Investments in Subsidiaries Details the company's investments in its operating partnership and other subsidiaries 4. Real Estate Investments Statistics Provides statistical data and key metrics related to the company's real estate portfolio 5. Real Estate Investments Presents detailed information on the company's real estate assets, including acquisitions and dispositions 6. Debt Describes the company's various debt instruments, terms, and maturities 7. Fair Value of Derivatives and Financial Instruments Discusses the fair value measurements of derivative and other financial instruments 8. Stockholders' Equity Details the components and changes in the company's stockholders' equity 9. Earnings (Loss) Per Share Explains the calculation of basic and diluted earnings per share 10. Noncontrolling Interests Provides information on the noncontrolling interests in the company's operating partnership 11. Related Party Transactions Discloses transactions and agreements with related parties, including the Adviser 12. Commitments and Contingencies Outlines the company's contractual commitments and potential contingent liabilities 13. Subsequent Events Reports significant events occurring after the balance sheet date 14. Quarterly Results (unaudited) Presents unaudited financial results for each quarter of the reported fiscal years Financial Statements Schedules This section includes Schedule III, detailing real estate investments and accumulated depreciation for the company's properties as of December 31, 2019, and activity summaries Real Estate and Accumulated Depreciation Summary (in thousands) | Metric | 2019 (USD thousands) | 2018 (USD thousands) | 2017 (USD thousands) | | :--------------------------------------- | :--------- | :--------- | :--------- | | Real Estate: | | | | | Balance, beginning of year | $1,222,563 | $1,082,805 | $1,029,349 | | Real estate acquired | $882,313 | $131,679 | $198,173 | | Improvements | $47,739 | $28,809 | $25,748 | | Real estate sold | $(191,203) | $(18,311) | $(160,250) | | Balance, end of year | $1,942,221 | $1,222,563 | $1,082,805 | | Accumulated Depreciation and Amortization: | | | | | Balance, beginning of year | $135,021 | $91,649 | $66,312 | | Depreciation expense | $56,360 | $45,002 | $39,812 | | Amortization expense | $12,726 | $2,468 | $8,940 | | Balance, end of year | $160,411 | $135,021 | $91,649 | - Depreciation for buildings is computed over 30 years, improvements over 15 years, furniture/fixtures/equipment over 3 years, and intangible lease assets over 6 months[609]