NexPoint Residential Trust (NXRT) Q3 Earnings call transcript Oct 29, 2024
2min read NexPoint Residential Trust (NXRT) recently held its Q3 2024 earnings call, providing investors with an update on the company's financial performance and strategic initiatives. The call, led by Kristen Thomas, Executive Vice President of Investor Relations, was joined by Brian Mitts, Executive Vice President and Chief Financial Officer; Matt McGraner, Executive Vice President and Chief Investment Officer; and Bonner McDermett, President, Asset and Investment Management.
Financial Performance
The company reported a net loss for the third quarter of 2024 totaling $8.9 million, or a loss of $0.35 per diluted share, compared to a net income of $33.7 million or a gain of $1.28 per diluted share in the same quarter the previous year. This was primarily due to higher depreciation and amortization expenses. However, the company's net loss was partially offset by a 1.7% increase in same-store revenues and a 1.8% decrease in same-store operating expenses.
Operational Metrics
Matt McGraner, the Chief Investment Officer, highlighted the operational successes, including a 1.7% increase in same-store revenues and a 1.8% decrease in same-store operating expenses. The company also completed 45 full and partial upgrades and leased 39 upgraded units, achieving an average monthly rent premium of $253 and a 19.5% return on investment. Additionally, NXRT has completed 8,316 full and partial upgrades, 4,704 kitchen and laundry appliance installs, and 11,389 technology package installations since inception, resulting in a $175, $48, and $43 average monthly rental increases per unit and a 20.8%, 61.9%, and 37.2% ROI, respectively.
NAV and Guidance
Based on the current estimate of cap rates in the markets and forward NOI, NXRT is reporting a NAV per share range of $48.77 on the low end, $59.89 on the high end, for a midpoint of $54.33. The company also updated its 2024 guidance, guiding to a loss of $0.01 per share on the low end, a gain of $0.07 on the high end, and a midpoint of $0.03 per share for earnings per diluted share. For core FFO per diluted share, the company expects $2.74 to the low end, $2.82 on the high end, and $2.78 at the midpoint.
Dividend Increase and Refinancing
The earnings call also included notable updates on the company's dividend increase and refinancing activities. NXRT announced a 10.3% increase in its quarterly dividend to $0.51 per share, effective from Q4 2024. Additionally, the company entered into subordinated loan agreements and expects to enter into 17 additional new line agreements for total gross proceeds of $1.67 billion. The refinancing activities are expected to reduce NXRT's weighted average interest rate on total debt by 48 basis points to 6.1% before the impact of interest rate swap contracts and extend the company's weighted average debt maturity schedule to approximately 7 years.
Market Outlook and Operational Strategy
Matthew McGraner provided insights into the operational strategy and market outlook, highlighting the company's focus on maintaining a defensive stance in the near term while becoming more constructive on rent growth in the next 12 months. The company expects to reach peak supply across 3 final markets by the third quarter of 2025, which should sustain growth and stronger performance through 2027.
Questions from Analysts
The call included questions from analysts on various aspects of the company's performance and strategy. Omotayo Okusanya from Deutsche Bank asked about the same-store revenue growth and the impact of bad debt. Bonner McDermett, the President of Asset and Investment Management, explained that the increase in occupancy and decrease in bad debt were the primary drivers of the revenue growth. Michael Lewis from Truist Securities asked about the change in core FFO guidance, to which Matthew McGraner attributed it to the impact of the refinancing activities and the definitional change.
Conclusion
In summary, NexPoint Residential Trust's Q3 2024 earnings call provided valuable insights into the company's financial performance, strategic initiatives, and operational outlook. The company's focus on maintaining a defensive stance while preparing for growth, combined with the successful refinancing activities and dividend increase, signal a strong financial position and optimistic future prospects. The company's strategic approach to managing expenses, maintaining high occupancy levels, and implementing upgrades and renovations is expected to contribute to continued growth and profitability.
