NXRT's Q2 2025 Earnings: A Sunny Outlook in Sunbelt Multifamily Real Estate

The multifamily housing sector has long been a haven for income-driven investors, but navigating its complexities requires a sharp focus on markets, execution, and resilience. NexPoint Residential Trust, Inc. (NASDAQ: NXRT) has positioned itself as a standout player in the Sunbelt region, where its value-add multifamily portfolio is poised to capitalize on strong demand and favorable demographic trends. As NXRT prepares to report its Q2 2025 results on July 29, let's dissect how occupancy trends, rent growth, and strategic capital allocation are aligning to create a compelling investment case—especially amid rising interest rates and shifting supply dynamics.

The Sunbelt Advantage: Occupancy and Rent Growth Take Center Stage

NXRT's portfolio spans high-growth Sunbelt markets like Nashville, Phoenix, Las Vegas, and South Florida, all of which are experiencing job creation, population influx, and limited housing supply. This geographic focus is paying off:

• Occupancy Trends:
• Q1 2025 ended with occupancy at 94.4%, a slight dip from the prior quarter but reflective of seasonal patterns. By April 2025, occupancy rebounded to 95.5%, with a 60-day trailing rate of 92% (likely a typo in the original data, but the trend suggests stabilization).
• Key markets like Las Vegas (94.6%) and Charlotte (95.1%) are outperforming, driven by affordability and job growth.

• Rent Growth Acceleration:
• While Q1 2025 saw muted new lease growth (30 basis points over Q4 2024), April 2025 marked a turning point. Effective rents rose to $1,495, with 17 of 35 properties across four markets showing positive momentum.
• Las Vegas led with 7% rent growth, followed by Tampa (4.8%) and Dallas-Fort Worth (3.5%). These figures signal a rent inflection point, as NXRT's strategy of delaying initial lease hikes to prioritize occupancy is paying off. Renewal rates also improved, with 73 basis points of growth in Q1.

Capital Allocation: Buying Low and Hedging Risks

NXRT's management has demonstrated discipline in deploying capital to maximize shareholder value:

1. Share Buybacks at a Discount to NAV:
2. In Q1, NXRT repurchased 223,109 shares at an average price of $34.29, a 33% discount to its NAV midpoint of $51.20. This move reflects confidence in the company's intrinsic value and a commitment to closing the valuation gap.

3. The stock's current trading range offers further opportunities, as the company plans to continue buybacks if shares trade below 6.25%–6.75% cap rates.

4. Interest Rate Swaps Mitigate Borrowing Costs:

5. NXRT secured a $100M SOFR swap at 3.489% for five years, locking in low rates despite Fed tightening. This shields the company from rising interest expenses, a critical defense in a high-rate environment.

Why the Sunbelt Holds the Key to Defensive Resilience

The Sunbelt's appeal isn't just about current demand—it's about long-term fundamentals:

• Supply Constraints:
• New multifamily deliveries in NXRT's markets are projected to drop 22% in 2025, with an even steeper decline (82% by 2027) as developers pull back. This supply contraction will tighten markets, further supporting occupancy and rent growth.
• Demographics and Affordability:
• Sunbelt cities like Las Vegas and Orlando attract younger, working-class households priced out of coastal markets. NXRT's focus on middle-income multifamily properties (average rent ~$1,500) aligns perfectly with this demographic's needs.

Investment Thesis: A Strategic Entry Point Ahead of Q2 Earnings

NXRT's Q2 results are likely to reinforce its growth narrative, with management guiding toward a $1,520 per-unit rent target by year-end. Here's why investors should take note:

• Valuation Discount Opportunity:
• At a $51.20 NAV midpoint, NXRT's shares trade at a 21% discount to NAV, offering a margin of safety. Closing this gap could unlock significant upside.
• Dividend Stability:
• The $0.51 quarterly dividend (yielding ~5% at current prices) is well-covered, with a 68.3% payout ratio in Q1. This makes NXRT an attractive income play.

Risks and Considerations

• Interest Rate Sensitivity: While swaps mitigate borrowing costs, rising rates could pressure broader REIT valuations.
• Supply Risks: Though new construction is slowing, delays or cost overruns in existing projects could disrupt near-term demand.

Final Take: NXRT's Q2 Earnings Signal a Strategic Buy

NXRT's Q2 2025 earnings are shaping up to be a catalyst for re-rating its stock. With occupancy stabilizing, rent growth accelerating, and capital allocation prioritizing shareholder returns, the company is well-positioned to outperform in the Sunbelt. Investors seeking exposure to the multifamily sector—especially those favoring defensive, value-oriented plays—should consider adding NXRT ahead of the earnings call.

Action Items:
- Monitor the July 29 earnings call for updated guidance on occupancy, rent, and NAV.
- Consider a gradual position build in NXRT at current discounts, with a focus on capital appreciation and dividends.

The Sunbelt's housing story isn't going away—and NXRT is the trust to bet on.