NexPoint Residential Trust(NXRT) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Net loss for Q3 2024 totaled $8.9 million, or a loss of$ 0.35 per diluted share, compared to net income of $33.7 million, or a gain of$ 1.28 per diluted share for Q3 2023 [6] - Q3 2024 NOI was $38.1 million on 36 properties, down from$ 42.1 million for Q3 2023 on 40 properties [6] - Same-store rent decreased 1.8%, while same-store occupancy grew to 94.9% [6] - Same-store NOI decreased by 2.4% compared to Q3 2023, driven by an 8.2% increase in same-store operating expenses [7] - Core FFO for Q3 2024 was $17.9 million, or$ 0.69 per diluted share, compared to $0.69 per diluted share for the same quarter last year [7] Business Line Data and Key Metrics - Completed 45 full and partial upgrades and leased 39 upgraded units in Q3, achieving an average monthly rent premium of$ 253 and a 19.5% ROI [8] - Since inception, the company has completed 8,316 full and partial upgrades, 4,704 kitchen and laundry appliance installs, and 11,389 technology package installations, resulting in significant rental increases and ROIs [8] - Dividend increased by 10.3% to $0.51 per share, with a payout ratio of 68% of core FFO [9] Market Data and Key Metrics - Same-store rental revenue increased by 2%, with Las Vegas and Raleigh markets leading growth at 11.6% and 5.4%, respectively [15] - Occupancy closed at 94.9% for Q3, with 96.2% leased as of the call date [17] - Seven out of ten markets are past peak supply, with nine markets forecasted to grow occupancy and all ten expected to grow rents over the next 12 months [19] Company Strategy and Industry Competition - The company expects to reach peak supply in Charlotte, Phoenix, and South Florida by Q3 2025, leading to a fundamental shift in favor of sustained growth through 2027 [19] - Refinancing activities have extended the weighted average debt maturity to approximately seven years and reduced the weighted average interest rate by 48 basis points to 6.21% [10] - The company plans to increase rehab output materially in 2025, focusing on value-add opportunities [19] Management Commentary on Operating Environment and Future Outlook - Management is optimistic about the near-term outlook, expecting stronger performance through 2027 due to favorable market conditions and refinancing benefits [20] - The company has$ 100 million of buying power for accretive investments in 2025, supported by the sale of Stone Creek and available cash [20] Other Important Information - The company adjusted core FFO to remove the amortization of deferred financing costs and mark-to-market gains or losses related to interest rate caps, aiming to better reflect ongoing operations [14] - NAV per share is estimated at a midpoint of $54.33, based on cap rates ranging from 5.25% to 5.75% [12] Q&A Session Question: What drove the 1.7% same-store revenue growth despite a 1.8% decrease in net effective rent? - The increase was driven by a 1.4% year-over-year growth in financial occupancy and a reduction in bad debt from 3.1% to 1.3% [25] Question: What caused the decrease in property G&A expenses, and is it sustainable? - The decrease was due to the use of AI and reduced on-site leasing staff, which is expected to be sustainable [26][27] Question: What drove the increase in core FFO guidance? - The increase was due to the impact of refinancing activities and the removal of mark-to-market impacts, which smoothed out core FFO calculations [29] Question: What are the company's plans for hedging new debt? - The company plans to layer in swaps as interest rates potentially decrease, aiming to take advantage of the interest rate environment [31] Question: What were the new and renewal rent spreads for the quarter? - New leases were down 6.43%, while renewals were up 2.2% [32]