NexPoint Residential Trust, Inc. Q3 FY2024 earnings call

• Results: Q3 net loss, NOI comparison, same-store metrics, core FFO, and dividend details.
• Operational: Same-store revenue up 1.7%, occupancy at 94.9%, renewal conversions up 63%, six out of 10 markets with at least 2% growth. Expenses at 8.2%, with R&M and marketing/utilities trends. Supply side: Seven out of 10 markets past peak supply, expected occupancy and rent growth in next 12 months.
• Refinancing and Disposition: Entered $1.67 billion in loan agreements, extending debt maturity and reducing interest rates; sold Stone Creek property for ~$23.7 million.
• Core FFO Adjustment: Changed calculation to remove amortization of deferred financing costs and mark-to-market gains/losses on interest rate caps, recasting prior periods.

For the third quarter of 2024, NexPoint Residential Trust reported a net loss of $8.9 million, or $0.35 per diluted share. NOI was $38.1 million on 36 properties, compared to $42.1 million on 40 properties in Q3 2023. Same-store rent decreased 1.8%, occupancy grew to 94.9%, same-store revenues increased 1.7%, and same-store operating expenses increased 8.2%, leading to a 2.4% decrease in same-store NOI vs Q3 2023. Reported Q3 core FFO was $17.9 million, or $0.69 per diluted share. The company paid a third quarter dividend of $0.46 per share and increased the dividend to $0.51 per share. It entered into $1.67 billion in loan agreements, extending debt maturity and reducing interest rates. It sold Stone Creek at Old Farm in Houston for ~$23.7 million. NAV midpoint was $54.33 per share, based on cap rates 5.25% to 5.75%.

• Earnings per diluted share: $0.01 loss to $0.07 gain, midpoint $0.03.
• Core FFO per diluted share: $2.74 to $2.82, midpoint $2.78 (increase from prior quarter).
• Revenue: 1.3% to 2.2% increase, midpoint 1.7%.
• Expenses: 4.4% to 3% increase, midpoint 3.7%.
• Same-store NOI: -0.6% to 1.6% change, midpoint 0.5%.
• Acquisitions: No acquisitions vs $50 million prior.
• Dispositions: ~$167 million vs $175 million prior.

• Market risks: Impact of interest rate changes, supply and demand dynamics in markets.
• Refinancing risks: Dependence on successful refinancing and market conditions.
• Operational risks: Volatility in operating expenses, bad debt levels, and leasing environment fluctuations.

Q: About same-store revenue and bad debt, what drove same-store revenue growth?

A: Occupancy growth (financial occupancy up 140 basis points year-over-year) and decreasing bad debt (1.3% bad debt in the quarter, down from 3.1% last year).

Q: About property G&A, why did it come down and is it sustainable?

A: Utilization of AI and reducing on-site leasing staff, with continued focus on controlling controllable expenses going forward.

Q: About core FFO guidance change, what caused the small increase?

A: Impact of refinancing and definitional changes, including removing amortization of deferred financing costs and mark-to-market impacts on interest rate caps.

Q: About swaps and hedging, what's the plan?

A: Plan to actively look to layer in swaps as interest rates change, aiming to take advantage of favorable interest rate environments.

Q: About new and renewal rent spreads, what were the figures?

A: New leases down minus 6.43% ($93 on 1,730 leases), renewals up 2.2% ($31 on 2,040 leases)