NexPoint Real Estate Finance, Inc. Q3 FY2024 earnings call

• Quarterly results: Net income $0.74 per diluted share in Q3 2024 vs. net loss $0.90 per diluted share in Q3 2023. Earnings available for distribution $0.75 per diluted common share in Q3 vs. $0.43 in Q3 2022. Cash available for distribution $0.67 per diluted common share in Q3 vs. $0.47 in Q3 2022. Book value per share increased 2.6% to $16.95 per diluted share. - Portfolio and balance sheet: 83 investments, $1.1 billion total outstanding balance. Funded $28.8 million on a Life Science development property, redeemed $9.7 million senior loans, sold $82 million CMBS B-piece. Sold 1.9 million shares of Series B cumulative redeemable preferred shares for net proceeds of $42 million. - Operational highlights: Credit quality attractive and stable. Absorption of multifamily supply exceeded expectations. Leasing in Life Sciences sector increasing. Portfolio achieved 90%-plus occupancy. Closed accretive SASB financing in early October.

The portfolio is comprised of 83 investments with a total outstanding balance of $1.1 billion. Allocations across sectors: 17% SFR, 52.3% multifamily, 26.7% Life Sciences, 1.5% storage, 1.8% specialty manufacturing, 0.6% marina. Fixed income portfolio allocations: 11.2% senior loans, 31% CMBS B-pieces, 20.1% preferred equity investments, 23.2% mezzanine loans, 4.2% I/O strips, 1% MBS, 9.2% promissory notes. Geographically, 16% Texas, 20% Massachusetts, 8% California, 6% Florida, 6% Georgia, 5% Maryland, with the remainder 4% across other markets, heavily exposed to Sunbelt markets. Collateral is 77.5% stabilized, 60.2% loan-to-value, weighted average DSCR of 1.36 times.

• Q4 guidance: Earnings available for distribution at midpoint $0.79 per diluted share, range $0.75-$0.83. Cash available for distribution at midpoint $0.50 per diluted share, range $0.45-$0.55. - More active in multifamily sector in next couple of quarters, underwriting ~$250 million of opportunities for senior bridge loans, CMBS, construction financing. - Potential to monetize storage assets in 2025 instead of 2026 due to SASB financing.

• Market conditions and interest rate changes could impact investments. - Credit quality issues in multifamily or other sectors could arise. - Competition for deals in the debt space, with many players and limited good deals.

Q: How do you expect portfolio exposure shifts to progress, especially with Life Sciences now making up more than a quarter of the portfolio?

A: Life Science exposure is due to deployed opportunities and capital return from residential sector. Expect multifamily exposure to increase in next couple of quarters, and ultimately want Life Sciences to be about a quarter to third of the portfolio on a fully levered basis.

Q: Do you have an update as to how book value is trending intra-quarter, given the spike in rates?

A: In CMBS book, it's been flat to somewhat positive, pretty mute in terms of growth or decline.

Q: How do you characterize competition in the debt space?

A: Tons of capital on the sidelines, much competition for stabilized deals. Differentiate by relationships with repeat sponsors, involvement in HRR deal flow with banks, and selective approach.