NexPoint Residential Trust's Q1 2025: Unraveling Key Contradictions in Strategy, Valuation, and Growth Expectations

Value-add program output and strategy, share repurchase strategy and valuation, interest expense and swap strategy, share buybacks and valuation gap, revenue growth and lease growth expectations are the key contradictions discussed in NexPoint Residential Trust's latest 2025Q1 earnings call.



Revenue and NOI Trends:
- NexPoint Residential Trust reported total revenue of $63.2 million for Q1 2025, down from $67.6 million in Q1 2024.
- The decrease in revenue was attributed to a decline in same-store revenues of 1%, which was influenced by a 1.3% decrease in same-store rent and a 0.3% decrease in occupancy.
- Despite the decrease, NOI remained stable at $37.8 million, reflecting a successful cost management strategy.

Dividend Growth and Payout Ratios:
- NexPoint Residential Trust paid a quarterly dividend of $0.51 per share, representing an increase of 147.6% since inception.
- The dividend was covered by core FFO at a rate of 1.4x, with a payout ratio of 68.3% of core FFO.
- The dividend growth strategy is supported by strong cash flow generation and a focus on efficient capital allocation.

Value-Add Program and Rent Premiums:
- The company completed 210 full and partial upgrades during Q1 2025, resulting in a 16.1% return on investment.
- These upgrades allowed for an average monthly rent premium of $62 per upgraded unit.
- The value-add program has been instrumental in driving revenue growth and improving overall asset value.

Asset Disposition and Share Buyback:
- NexPoint Residential Trust initiated a share buyback program in Q2, purchasing 223,109 shares at an average price of $34.29 per share, representing a 33% discount to the current NAV midpoint.
- The program reflects the company's confidence in its stock valuation and commitment to returning capital to shareholders.
- The ability to raise capital and repurchase shares at a discount contributes to enhancing shareholder value.

Supply and Demand Dynamics:
- Nationally, over 138,000 units were absorbed in Q1 2025, demonstrating strong demand for multifamily housing.
- Despite new supply primarily within the Class A stock, NexPoint's assets remained well-positioned due to their affordability and submarket placement.
- The company anticipates improved supply-demand dynamics in the coming years, with projected declines in new supply and increasing rental demand.