NexPoint Residential Trust(US:NXRT)2023-02-21 20:28Financial Data and Key Metrics Changes - For the year 2022, net operating income (NOI) was $157.4 million across 40 properties, up 22.3% from $128.8 million across 39 properties in 2021 [23] - Core funds from operations (FFO) for 2022 were $81.8 million or $3.13 per diluted share, a 28.9% increase from $2.43 per diluted share in 2021 [23] - The fourth quarter net income was $3.8 million or $0.15 per diluted share on total revenue of $69.3 million, compared to $38.8 million or $1.50 per diluted share on total revenue of $58.5 million in Q4 2021 [33] Business Line Data and Key Metrics Changes - Same-store rent increased by 17.3% in Q4 2022, while same-store occupancy decreased by 20 basis points to 94.1% [33] - The company completed 481 full and partial renovations in Q4 2022, achieving an average monthly rent premium of $184, representing a 23.1% return on investment (ROI) [27] - Same-store NOI growth for the full year was 16.2%, driven by a 17.8% increase in same-store rates and an 11.1% increase in same-store expenses [23] Market Data and Key Metrics Changes - Effective rent growth in Q4 2022 was 11.5% across all markets, with Tampa leading at 23.3% [38] - The company expects Tampa to grow same-store NOI by approximately 15.5% to 17.5%, driven by budgeted revenue growth of 13% to 15% [42] - The average effective rent growth in top markets like Phoenix, Dallas, and Nashville reached 19.7% [38] Company Strategy and Development Direction - The company is focused on internal growth and capital recycling, emphasizing value-add programs and renovations to enhance property performance [56] - The 2023 guidance includes a same-store revenue growth forecast of 10.9% at the midpoint, with expectations of continued strength in middle-market rental housing [50] - The company plans to complete 1,370 full interior upgrades in 2023, targeting an average monthly premium of $214 per unit [43] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2023, anticipating continued strength and resilience in the middle-market rental housing sector [30] - The company is monitoring economic conditions and believes it is well-positioned to withstand potential downturns while still poised for growth [30] - Management noted that the current economic environment is expected to impact interest expenses, but they remain confident in achieving their revenue growth targets [73] Other Important Information - The company completed a cash-out refinance on 19 properties, reducing the spread on 17 previously variable-rate properties by an average of 14 basis points [28] - The company sold Hollister Place for a 13.5% levered IRR and is under contract to sell Old Farm and Stone Creek for $135 million, expected to generate a 24.8% levered IRR [29] - The NAV per share is estimated between $67.46 and $78.15, reflecting an increase in cap rates due to rising interest rates [34] Q&A Session Summary Question: What is driving the high same-store growth guidance? - Management indicated that the unit upgrade program is a significant contributor to same-store revenue growth, alongside strong leasing activity [6] Question: Can you comment on the transaction environment? - Management noted a significant decrease in transaction volumes, down 60% to 70% year-over-year, and expects some capitulation from sellers in Q2 [10] Question: How are you addressing the impact of rising interest rates? - Management emphasized the importance of flexible debt structures to maintain value and reduce transaction costs, while also hedging near-term interest rates [95]