NexPoint Residential Trust(NXRT) - 2024 Q1 - Quarterly Results

Earnings Release Highlights NXRT achieved a net income of $26.3 million in Q1 2024, a significant turnaround from a prior year loss, driven by property sales and growth in Core FFO, AFFO, and Same Store NOI Q1 2024 vs Q1 2023 Key Financial Metrics (in millions) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income (Loss) | $26.3 | $(3.9) | | FFO | $18.9 | $19.3 | | Core FFO | $19.6 | $18.6 | | AFFO | $22.6 | $21.0 | - Q1 Same Store properties saw positive year-over-year performance with total revenue increasing 3.6%, NOI growing 4.0%, and occupancy rising by 30 basis points[5] - Strategic capital activities in the first quarter included the sale of the Old Farm property for $103.0 million and the full repayment of the $24.0 million drawn balance on the Corporate Credit Facility[5] - The value-add program continued with 59 full and partial unit upgrades completed during the quarter, achieving an average monthly rent premium of $240 and a 21.8% ROI[5] First Quarter 2024 Financial Results Q1 2024 total revenues were $67.6 million, with net income reaching $26.3 million due to property sales, while Core FFO and AFFO per share increased to $0.75 and $0.86 respectively Q1 2024 vs Q1 2023 Financial Performance | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenues | $67.6M | $69.2M | | Net Income (Loss) | $26.3M | $(3.9)M | | Earnings (Loss) per Diluted Share | $1.00 | $(0.15) | | Core FFO per Diluted Share | $0.75 | $0.71 | | AFFO per Diluted Share | $0.86 | $0.81 | - The primary drivers for the $30.3 million increase in net income year-over-year were an increase in gain on the sale of real estate and a decrease in interest expense[11] Company Overview Company Profile and Portfolio Composition As of Q1 2024, NXRT (NYSE:NXRT) has nearly 14% insider ownership and a portfolio concentrated in the Southeastern and Southwestern US, with Phoenix, South Florida, and Dallas/Fort Worth as top markets Company Profile (as of Q1 2024) | Metric | Value | | :--- | :--- | | Exchange/Ticker | NYSE:NXRT | | Share Price (Apr 29, 2024) | $33.31 | | Insider Ownership (Mar 31, 2024) | 13.98% | | Q2 2024 Dividend Per Share | $0.46242 | | Dividend Yield | 5.55% | Portfolio Composition by Market (% of Units) | Market | % of Units | | :--- | :--- | | Phoenix | 15.0% | | South Florida | 14.6% | | Dallas/Fort Worth | 14.5% | | Atlanta | 12.6% | | Nashville | 10.0% | | Other | 33.3% | Highlights of Recent Activity Capital Recycling and Market Trends NXRT executed capital recycling with the $103 million Old Farm property sale, achieving a 22.1% IRR, and anticipates stronger job growth in its markets despite potential new supply pressures Q1 2024 Completed Disposition | Property Name | Location | Sales Price | IRR | Multiple on Invested Capital | Net Cash Proceeds | | :--- | :--- | :--- | :--- | :--- | :--- | | Old Farm | Houston, TX | $103.0M | 22.1% | 2.98x | $49.4M | - The Radbourne Lake property in Charlotte, NC is under contract for sale for $39.25 million, with the disposition expected to be completed in Q2 2024[19][23] - Job growth in NXRT's markets is forecasted to outpace other major MSAs, with NXRT markets projected to account for 50.3% of total job creation among the top 80 MSAs by 2027[21] Financial Summary Comparative Financial and Operating Metrics Q1 Same Store NOI increased 4.0% year-over-year, AFFO per diluted share rose to $0.86, portfolio occupancy improved to 94.6%, and total debt decreased to $1.5 billion, supported by successful value-add initiatives Q1 2024 vs Q1 2023 Performance Snapshot | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income (Loss) Attributable to Common Stockholders | $26.3M | $(3.9)M | | Same Store NOI Growth | 4.0% | N/A | | AFFO per Common Share (diluted) | $0.86 | $0.81 | | Dividends Declared per Common Share | $0.46 | $0.42 | | Portfolio Occupancy | 94.6% | 94.0% | | Total Debt Outstanding | $1,498.3M | $1,678.6M | - The cumulative value-add program has completed 8,593 full/partial interior rehab units, achieving an average monthly rent increase of $170 per unit and a 20.9% ROI[27] 2024 Full Year Guidance Full Year 2024 Outlook NXRT reaffirmed its 2024 guidance, projecting Core FFO per diluted share at a midpoint of $2.72 and Same Store NOI growth at 0.0%, while planning $150 million to $300 million in dispositions and up to $200 million in acquisitions 2024 Full Year Guidance Summary | Metric | Mid-Point | Low-End | High-End | | :--- | :--- | :--- | :--- | | Earnings per diluted share | $0.72 | $0.59 | $0.85 | | Core FFO per diluted share | $2.72 | $2.60 | $2.85 | | Same Store NOI Growth | 0.0% | -2.0% | 2.0% | | Dispositions | $225.0M | $150.0M | $300.0M | | Acquisitions | $100.0M | $0 | $200.0M | - The guidance is based on an estimated weighted average diluted share count of approximately 25.6 million for the full year[32] Components of Net Asset Value NAV Estimation As of March 31, 2024, NXRT's estimated NAV per diluted share is $52.44 at the midpoint, derived from a real estate valuation of $2.56 billion to $2.90 billion using cap rates between 5.5% and 6.0% Estimated NAV per Share Summary | Metric | Value | | :--- | :--- | | Est. NAV / Share (Min) | $45.91 | | Est. NAV / Share (Max) | $58.97 | | NAV / Share (Mid-point) | $52.44 | - The real estate valuation is based on applying a cap rate range of 5.5% to 6.0% to the portfolio's Net Operating Income (NOI)[35] Implied Valuation Metrics | Metric | Mid-point Value | | :--- | :--- | | Implied Value/Apartment Unit | $203,800 | Consolidated Financial Statements Consolidated Balance Sheets As of March 31, 2024, total assets decreased to $2.04 billion from $2.11 billion, while total liabilities reduced to $1.52 billion, leading to an increase in stockholders' equity to $512.8 million Balance Sheet Summary (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Net Real Estate Investments | $1,880,274 | $1,968,100 | | Cash and cash equivalents | $37,234 | $12,367 | | TOTAL ASSETS | $2,042,686 | $2,107,645 | | Mortgages payable, net (incl. held for sale) | $1,489,305 | $1,541,831 | | Credit facility, net | $0 | $23,243 | | Total Liabilities | $1,524,825 | $1,607,775 | | Total Stockholders' Equity | $512,779 | $494,624 | Consolidated Statements of Operations Q1 2024 saw total revenues of $67.6 million and a net income of $26.4 million, a significant turnaround from Q1 2023's net loss, primarily driven by a $31.7 million gain on real estate sales Statement of Operations Summary (in thousands) | Account | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total revenues | $67,577 | $69,227 | | Total expenses | $58,295 | $56,105 | | Gain on sales of real estate | $31,709 | $0 | | Interest expense | $(14,391) | $(16,739) | | Net income (loss) | $26,402 | $(3,898) | | Net income (loss) attributable to common stockholders | $26,298 | $(3,883) | NOI and Same Store NOI NOI and Same Store NOI Reconciliation Q1 2024 net income of $26.4 million reconciled to a total NOI of $41.1 million, with Same Store NOI reaching $39.2 million, demonstrating year-over-year growth Reconciliation of Net Income (Loss) to NOI (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income (loss) | $26,402 | $(3,898) | | Adjustments (Depreciation, Interest, G&A, etc.) | $14,687 | $45,028 | | NOI | $41,089 | $41,130 | | Less: Non-Same Store NOI | $(1,873) | $(3,439) | | Same Store NOI | $39,216 | $37,691 | Q1 Same Store Results The Q1 2024 Same Store portfolio of 35 properties achieved a 4.0% year-over-year NOI increase to $39.2 million, driven by 3.6% revenue growth outpacing 1.8% expense increases Q1 Same Store Performance (YoY % Change) | Metric | % Change | | :--- | :--- | | Total Same Store Revenues | 3.6% | | Total Same Store Operating Expenses | 1.8% | | Q1 Same Store NOI | 4.0% | - Same Store occupancy increased by 30 basis points to 94.7%, while average rent per unit saw a slight decrease of 0.4% to $1,514[49][51] Q1 Same Store Properties Operating Metrics (YoY) Q1 year-over-year Same Store performance varied by market, with South Florida showing 7.6% rental income growth, while the overall portfolio's average effective rent decreased by 0.4% Q1 Same Store Performance by Market (YoY) | Market | Avg. Effective Rent % Change | Occupancy bps Δ | Total Rental Income % Change | | :--- | :--- | :--- | :--- | | South Florida | 4.8% | -20 | 7.6% | | Atlanta | -2.4% | 370 | 4.6% | | Las Vegas | -5.7% | 120 | 6.4% | | Dallas | -1.3% | -200 | 0.2% | | Average/Total | -0.4% | 30 | 3.6% | QoQ Same Store Properties Operating Metrics Q1 2024 Same Store portfolio showed sequential stability with a negligible 0.1% decrease in average effective rent and flat occupancy, while total rental income grew 1.4%, led by Florida markets Q1 2024 Same Store Performance by Market (QoQ) | Market | Avg. Effective Rent % Change | Occupancy bps Δ | Total Rental Income % Change | | :--- | :--- | :--- | :--- | | Florida (Blended) | 0.6% | -20 | 3.0% | | Atlanta | -0.4% | -10 | 1.2% | | Nashville | -1.9% | 160 | 0.4% | | Dallas | -1.1% | -20 | 0.3% | | Average/Total | -0.1% | 0 | 1.4% | FFO, Core FFO and AFFO Reconciliation of FFO, Core FFO and AFFO Q1 2024 Core FFO grew 5.6% to $19.6 million ($0.75 per share), and AFFO increased 7.4% to $22.6 million ($0.86 per share), reflecting strong operational performance and healthy dividend coverage FFO, Core FFO, and AFFO Reconciliation (in thousands) | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Net income (loss) | $26,402 | $(3,898) | N/M | | FFO attributable to common stockholders | $18,941 | $19,295 | -1.8% | | Core FFO attributable to common stockholders | $19,649 | $18,613 | 5.6% | | AFFO attributable to common stockholders | $22,571 | $21,007 | 7.4% | Per Share Metrics and Dividend Coverage | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Core FFO per share - diluted | $0.75 | $0.71 | | AFFO per share - diluted | $0.86 | $0.81 | | Core FFO Coverage - diluted | 1.61x | 1.70x | | AFFO Coverage - diluted | 1.85x | 1.92x | Historical Capital Expenditures Capital Expenditures Summary Q1 2024 total capital expenditures decreased 57.6% to $6.9 million, primarily due to an 80.5% reduction in capitalized rehab expenditures, while maintenance capital increased 8.9% Capital Expenditures Comparison (in thousands) | Category | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Capitalized Rehab Expenditures | $2,204 | $11,316 | -80.5% | | Capitalized Maintenance Expenditures | $4,695 | $4,974 | -5.6% | | Total Capital Expenditures | $6,899 | $16,290 | -57.6% | Value-Add Program Details Interiors (Full & Partials) As of March 31, 2024, 8,593 interior rehabs generated an average monthly rent increase of $170 per unit, achieving a 20.9% ROI on an average cost of $9,746 Interior Value-Add Program Summary | Metric | Value | | :--- | :--- | | Units Completed | 8,593 | | Average Cost Per Unit | $9,746 | | Average Post-Rehab Monthly Rent Increase | $170 | | Weighted Average ROI | 20.9% | Kitchen & Laundry Appliances As of Q1 2024, 4,829 appliance upgrades generated an average monthly rent premium of $39 per unit, achieving a 51.4% ROI on an average cost of $911 Appliance Value-Add Program Summary | Metric | Value | | :--- | :--- | | Units Completed | 4,829 | | Average Cost Per Unit | $911 | | Average Post-Rehab Monthly Rent Increase | $39 | | Weighted Average ROI | 51.4% | Smart Home Technology Packages By Q1 2024, 11,614 smart home tech packages generated an average monthly rent increase of $43 per unit, achieving a 37.4% ROI on an average cost of $1,104 Smart Home Tech Program Summary | Metric | Value | | :--- | :--- | | Units Completed | 11,614 | | Average Cost Per Unit | $1,104 | | Average Post-Rehab Monthly Rent Increase | $43 | | Weighted Average ROI | 37.4% | Outstanding Debt Details Mortgage Debt As of March 31, 2024, total outstanding mortgage principal was approximately $1.5 billion, predominantly floating-rate and benchmarked to 30-Day Average SOFR Mortgage Debt Summary (as of March 31, 2024) | Category | Outstanding Principal (in thousands) | | :--- | :--- | | Operating Properties | $1,463,003 | | Held For Sale Properties | $35,274 | | Total Mortgage Debt | $1,498,277 | - The majority of the mortgage debt is floating-rate, with interest based on a reference rate (SOFR) plus an applicable margin[69] Credit Facility and Interest Rate Agreements As of March 31, 2024, the corporate credit facility had a zero balance, and NXRT uses interest rate swaps with a $1.17 billion notional amount to fix a weighted average rate of 1.0682% on floating-rate debt - The Corporate Credit Facility had an outstanding principal of $0 as of March 31, 2024[70] Interest Rate Swap Summary | Metric | Value | | :--- | :--- | | Total Notional Amount | $1,167,500,000 | | Weighted Average Fixed Rate | 1.0682% | Interest Rate Cap Agreements NXRT holds interest rate cap agreements with a notional amount exceeding $1.34 billion and a weighted average strike rate of 5.90% to mitigate rising interest rate risks - The company holds interest rate caps with a total notional value of $1.34 billion and a weighted average strike rate of 5.90% to hedge against rising interest rates[75] Debt Maturity Schedule NXRT's debt maturity is staggered, with no significant maturities in 2024, and 80% of its $1.5 billion floating-rate mortgage debt is hedged by interest rate swaps, resulting in a 3.39% adjusted weighted average interest rate Mortgage Debt Principal Payments Due by Period (in thousands) | Period | Principal Payments | | :--- | :--- | | 2024 | $15,496 | | 2025 | $153,386 | | 2026 | $290,324 | | 2027 | $0 | | 2028 | $81,041 | | Thereafter | $958,030 | - As of March 31, 2024, interest rate swaps effectively covered 80% of the company's $1.5 billion of floating-rate mortgage debt[79] Historical Portfolio Activity Historical Acquisition Details As of March 31, 2024, the portfolio comprises 13,399 units with a total investment of $2.24 billion, including rehab budgets, representing a weighted average cost of $167,427 per unit Acquisition Summary for Current Portfolio (in thousands) | Metric | Value | | :--- | :--- | | Total Units | 13,399 | | Total Purchase Price | $2,078,559 | | Total Rehab Budget | $164,796 | | Total Investment | $2,243,355 | | Weighted Average Investment Per Unit | $167,427 | Historical Disposition Details NXRT has successfully recycled capital by selling 10,371 units for over $1.17 billion, generating a cumulative gain on sale of $475.4 million, including the recent $103 million Old Farm property sale Cumulative Disposition Summary (in thousands) | Metric | Value | | :--- | :--- | | Total Units Sold | 10,371 | | Total Purchase Price | $727,465 | | Total Sale Price | $1,173,925 | | Total Gain on Sale | $475,402 | Definitions and Reconciliations of Non-GAAP Measures Definitions This section defines key non-GAAP financial measures like NOI, FFO, Core FFO, and AFFO, which provide investors with a clearer understanding of the company's operating results and ongoing profitability - NOI (Net Operating Income) is used to evaluate and compare property performance by adjusting net income for items like interest, depreciation, and corporate G&A[86] - FFO (Funds from Operations) is calculated per NAREIT's definition, starting with GAAP net income and excluding gains/losses from real estate sales and adding back real estate depreciation[87] - Core FFO adjusts FFO for non-recurring or non-representative items like debt extinguishment costs and casualty-related expenses to better reflect ongoing operating performance[88] - AFFO (Adjusted FFO) further adjusts Core FFO for items such as equity-based compensation and amortization of deferred financing costs[89] Reconciliations This section provides detailed reconciliations of non-GAAP measures to GAAP equivalents, including total debt to net debt of $1.46 billion and 2024 full-year net income guidance to Core FFO guidance of $69.6 million Reconciliation of Debt to Net Debt (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Debt | $1,498,277 | $1,678,634 | | Less: Cash and certain restricted cash | $(40,141) | $(21,130) | | Net Debt | $1,458,136 | $1,657,504 | Reconciliation of 2024 Guidance: Net Income to Core FFO (Mid-Point, in thousands) | Line Item | Amount | | :--- | :--- | | Net income | $18,524 | | Depreciation and amortization | $99,127 | | Gain on sales of real estate | $(49,427) | | Other adjustments | $1,370 | | Core FFO attributable to common stockholders | $69,604 |