NexPoint Residential Trust(NXRT) - 2025 Q2 - Quarterly Report

Cautionary Statement Regarding Forward-Looking Statements This report contains forward-looking statements subject to significant risks, including economic conditions, geographic concentration, competition, and REIT status maintenance Cautionary Statement Regarding Forward-Looking Statements This report contains forward-looking statements subject to significant risks, including economic conditions, geographic concentration, competition, and REIT status maintenance - Forward-looking statements are based on current management beliefs and are subject to numerous known and unknown risks and uncertainties that are beyond the company's control[10][11] - Key operational and market risks include: macroeconomic trends like inflation and high interest rates, concentration of properties in the Southeastern and Southwestern U.S., competition for acquisitions and tenants, and risks associated with a value-enhancement strategy[12] - Significant financial and corporate risks include: risks from substantial indebtedness, dependence on key personnel at the Adviser, conflicts of interest, and the necessity of maintaining REIT status for tax purposes[14] PART I—FINANCIAL INFORMATION Financial Statements This section presents unaudited consolidated financial statements, including balance sheets, income statements, equity, cash flows, and notes, for Q2 and H1 2025 Consolidated Balance Sheets Total assets decreased to $1.86 billion by June 30, 2025, while liabilities slightly rose and equity declined due to net loss and dividends Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Net Operating Real Estate Investments | $1,763,255 | $1,793,223 | | Total Assets | $1,857,201 | $1,907,420 | | Mortgages payable, net | $1,466,530 | $1,463,650 | | Total Liabilities | $1,504,147 | $1,491,270 | | Total Stockholders' Equity | $347,890 | $410,368 | | Total Liabilities and Stockholders' Equity | $1,857,201 | $1,907,420 | Consolidated Statements of Operations and Comprehensive Income (Loss) Q2 2025 saw a $7.1 million net loss, a shift from 2024's net income, primarily due to the absence of real estate sale gains Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $63,149 | $64,238 | $126,365 | $131,815 | | Total expenses | $55,246 | $57,442 | $111,039 | $115,737 | | Gain on sales of real estate | $0 | $18,686 | $0 | $50,395 | | Net income (loss) | ($7,061) | $10,638 | ($13,985) | $37,040 | | Net income (loss) attributable to common stockholders | ($7,033) | $10,596 | ($13,930) | $36,894 | | Earnings (loss) per share - diluted | ($0.28) | $0.40 | ($0.55) | $1.40 | Consolidated Statements of Stockholders' Equity Stockholders' equity decreased to $347.9 million by June 30, 2025, due to a $13.9 million net loss, $26.6 million in dividends, and $7.7 million in repurchases - For the six months ended June 30, 2025, key changes to stockholders' equity included a net loss of $13.9 million, payment of $26.6 million in common stock dividends, and $7.7 million in common stock repurchases[24] Consolidated Statements of Cash Flows H1 2025 saw $48.2 million from operations, $18.7 million used in investing, and $35.4 million used in financing, resulting in a $5.9 million net cash decrease Consolidated Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $48,202 | $39,346 | | Net cash provided by (used in) investing activities | ($18,689) | $124,529 | | Net cash used in financing activities | ($35,426) | ($154,507) | | Net increase (decrease) in cash | ($5,913) | $9,368 | Notes to Consolidated Financial Statements Notes detail REIT organization, accounting policies, 2024 dispositions, $1.5 billion mortgage debt, derivatives, repurchases, related-party transactions, and a new $200 million credit facility - There were no real estate acquisitions or dispositions during the six months ended June 30, 2025. In the same period of 2024, the company sold two properties for net proceeds of $141.6 million, generating a gain of $50.4 million[42][43] - As of June 30, 2025, the company had approximately $1.5 billion in mortgage debt with a weighted average interest rate of 5.38%. The company uses interest rate swaps with a notional amount of $917.5 million to hedge its floating-rate debt[50][51][58] - During the first six months of 2025, the company repurchased 223,109 shares of common stock for $7.7 million. The Adviser voluntarily waived $10.6 million in advisory and administrative fees during the same period[71][91] - Subsequent to the quarter end, on July 11, 2025, the company entered into a new $200.0 million revolving credit facility maturing in June 2028. A quarterly dividend of $0.51 per share was also declared[109][110] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 35-property multifamily portfolio, Q2 and H1 2025 net losses due to absent property sale gains, 1.1% Same Store NOI decline, stable Core FFO, and a new $200 million credit facility Overview As of June 30, 2025, the company managed 35 multifamily properties with 12,984 units, 93.3% leased, and an average monthly rent of $1,500 Portfolio Snapshot as of June 30, 2025 | Metric | Value | | :--- | :--- | | Number of Properties | 35 | | Number of Units | 12,984 | | Occupancy | 93.3% leased | | Avg. Monthly Effective Rent | $1,500 | Results of Operations Q2 2025 net income declined by $17.7 million to a $7.1 million net loss, primarily due to the absence of $18.7 million in 2024 real estate sale gains Summary of Operating Results (in thousands) | Period | Metric | 2025 | 2024 | $ Change | | :--- | :--- | :--- | :--- | :--- | | Q2 | Net income (loss) | ($7,061) | $10,638 | ($17,699) | | | Gain on sales of real estate | $0 | $18,686 | ($18,686) | | H1 | Net income (loss) | ($13,985) | $37,040 | ($51,025) | | | Gain on sales of real estate | $0 | $50,395 | ($50,395) | Non-GAAP Measurements Non-GAAP analysis shows Same Store NOI decreased 1.1% in Q2 2025, with Core FFO per diluted share stable at $0.71 and AFFO per diluted share at $0.80 Same Store NOI Performance | Period | Same Store NOI (in thousands) | % Change YoY | | :--- | :--- | :--- | | Q2 2025 | $38,036 | -1.1% | | H1 2025 | $75,773 | -2.4% | FFO, Core FFO, and AFFO Per Diluted Share | Metric per Diluted Share | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | FFO | $0.67 | $0.62 | $1.34 | $1.34 | | Core FFO | $0.71 | $0.69 | $1.45 | $1.43 | | AFFO | $0.80 | $0.79 | $1.64 | $1.62 | Liquidity and Capital Resources Liquidity relies on operations and credit facilities, with $48.0 million cash as of June 30, 2025, and a new $200 million revolving credit facility secured in July 2025 - Short-term liquidity is met through net cash from operations and credit facility capacity. Long-term needs are funded by various capital sources including debt, equity issuances, and property dispositions[205][206] - A new $200 million revolving credit facility was established on July 11, 2025, maturing in June 2028, which replaces the prior facility that matured on June 30, 2025[226] Value-Add Program Capital Expenditures (in thousands) | Period | Interior Rehab | Exterior & Common Area | Total | | :--- | :--- | :--- | :--- | | Q2 2025 | $1,329 | $91 | $1,420 | | H1 2025 | $1,981 | $149 | $2,130 | Quantitative and Qualitative Disclosures About Market Risk Primary market risk is interest rate exposure on $1.5 billion floating-rate debt, with 62% hedged by swaps; a 1.00% rate increase would raise annual interest expense by $5.5 million - The company's main market risk is interest rate risk. As of June 30, 2025, 62% of its $1.5 billion in floating-rate debt was effectively fixed through interest rate swaps[259] Interest Rate Sensitivity Analysis | Change in Interest Rates | Annual Increase to Interest Expense (in thousands) | | :--- | :--- | | 0.25% | $1,380 | | 0.50% | $2,760 | | 1.00% | $5,520 | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls during the quarter - Management concluded that disclosure controls and procedures were effective as of the end of the quarter, June 30, 2025[264] - No material changes to internal control over financial reporting occurred during the second quarter of 2025[266] PART II—OTHER INFORMATION Legal Proceedings The company is not involved in any legal proceedings expected to materially adversely affect its financial condition or operations - Management is not aware of any legal proceedings likely to have a material adverse effect on the company[269] Risk Factors No material changes have occurred to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K - No material changes to the risk factors previously disclosed in the 2024 Annual Report have occurred[270] Unregistered Sales of Equity Securities and Use of Proceeds, and Issuer Purchases of Securities The company repurchased 223,109 shares for $7.7 million in H1 2025, with $77.8 million remaining under the repurchase program Share Repurchase Activity (Q2 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Approx. Dollar Value Remaining (in millions) | | :--- | :--- | :--- | :--- | | April 1 – April 30 | 223,109 | $34.29 | $77.8 | | May 1 – May 31 | — | — | $77.8 | | June 1 – June 30 | — | — | $77.8 | Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the period[273] Mine Safety Disclosures This item is not applicable to the company's operations or reporting requirements - This item is not applicable to the company[274] Other Information No other material information is required to be reported for this period - There is no other information to report for this period[275] Exhibits Exhibits include the 2025 Long Term Incentive Plan, award agreements, a new Credit Agreement, and CEO/CFO certifications - Key exhibits filed include the new 2025 Long Term Incentive Plan, a new Credit Agreement dated July 11, 2025, and required CEO/CFO certifications[277]