NXRT

Market Fundamentals

• National multifamily supply peaked at ~700,000 units in 2024, and new starts are down 70% from the peak. 2026 deliveries are tracking to the lowest level in over a decade, with an even steeper drop in the company's Sunbelt submarkets: two-thirds of submarkets have less than 2% annual active inventory growth, and over half have fewer than 500 units under development.
• Structural renter demand remains strong: the homeownership affordability gap is at its widest since 1984, with move-outs for home purchase falling to 8.7% from 10.9% year-over-year. The company's Sunbelt markets have roughly twice the household growth rate of the national average, supported by ongoing job growth and domestic migration.

Leasing and Operating Performance

• Same-store occupancy ended the quarter at 93.6%, up 30 basis points year-over-year and flat sequentially. Leasing trajectory improved steadily through the quarter: blended lease tradeouts improved from -1.7% in April to +30 basis points in July, the first positive blended reading since early 2025.
• Concession use was cut roughly in half: the share of new leases using one month free concessions fell from 55.6% in Q1 to 27.7% in Q2, and average weeks of free rent fell from 2.2 weeks to 1.1 weeks. Bad debt fell to 60 basis points of gross residential rent, a 40% improvement year-over-year.

Value-add and Asset Updates

• The company completed 459 full/partial unit upgrades in Q2 2026, which leased at an average $89 monthly rent premium with a 23% return. Since inception, 10,474 total upgrades have delivered average rent increases of $152 for full interior upgrades at a 20.7% return, driving reliable capital-efficient growth.
• The recently acquired Sedona Mountain community in North Las Vegas hit 92.2% occupancy (up 430 basis points from Q1) and is beating NOI budget by 5%, on track to hit its targeted 7.2% NOI CAGR through 2029.

Capital Allocation

• The company's stock trades at a 40% discount to the midpoint of its estimated net asset value of $46.76 per diluted share. Top priorities are closing this value gap via operating execution, capital recycling, and share buybacks, with medium-term deleveraging funded by disposition proceeds a key goal.

• Full-year 2026 core FFO guidance is lowered to a range of $2.35 to $2.54 per diluted share, with a midpoint of $2.45, down from the prior midpoint of $2.57. The $0.12 midpoint reduction is driven by a $0.16 headwind from higher interest expense, partially offset by $0.05 from realized interest income and $0.02 from favorable G&A management.
• Full-year same-store NOI guidance is lowered to a range of -2.5% to +0.5% with a midpoint of -1.0%, down from the prior midpoint of -0.5%. Full-year same-store revenue growth guidance is cut 90 basis points to a midpoint of ~0.2%, with 85% of the same-store NOI reduction concentrated in the Nashville market.
• Full-year same-store expense growth guidance is improved 140 basis points to a midpoint of 2.1%, down from the original 3.5% forecast, with lower expense growth across all markets driven by lower real estate taxes, insurance costs, and disciplined payroll management from the company's centralized operating model.
• Full-year 2026 interest expense is now projected at $71.2 million, up from $69 million projected last quarter. Acquisition and disposition guidance is unchanged at $0 to $200 million for each, with a midpoint of $100 million, reflecting ongoing planned capital recycling.

NextPoint Residential Trust has a single multifamily residential portfolio segment covering 36 properties. For Q2 2026: total revenue was $64.6 million, up 2.4% from $63.1 million in Q2 2025. Same-store revenue (covering 35 properties representing 98% of total units) was $62.4 million, down 0.6% year-over-year. Total net operating income (NOI) was $37.9 million, flat year-over-year. Same-store NOI was $36.9 million, down 2.9% year-over-year. Core FFO was $16.9 million ($0.66 per diluted share), 1.5% ahead of consensus, down from $18 million ($0.71 per diluted share) in Q2 2025. Same-store operating expenses increased 2.4% year-over-year, with real estate taxes down 3.5%, insurance down 11.7%, and payroll down 1%, while repair and maintenance was up 13.9% and marketing up 38.2%. 83% of R&M growth came from fiber buildout in four markets, offset by growth in resident amenity fee other income, which increased 29.2% in the quarter. Core FFO for the first half of 2026 was $1.34 per diluted share, ahead of consensus estimates.

• Higher-than-expected interest rate volatility: A sustained upward shift in the interest rate forward curve since the April guidance update added ~$0.16 per share of unexpected interest expense, driven by the scheduled roll-off of $717.5 million in low-rate interest rate swaps in September 2026.
• Concentrated softness in some Sunbelt markets: Remaining new supply concentration in Nashville, Orlando, Charlotte, and Dallas created larger-than-expected revenue headwinds, with Nashville accounting for 85% of the full-year same-store NOI downward revision.
• Stagnant transaction volumes: The institutional multifamily transaction market remains well below 2025 volumes, with a wide bid-ask spread that is not expected to narrow meaningfully until 2027, which could slow planned capital recycling and deleveraging efforts.

Q: Management referenced an expected "clean inflection" in operating conditions in late 2026/2027. What does this inflection mean, and how should investors frame it? / A: Management clarified the inflection refers to turning positive on new lease pricing. Current guidance implies slightly negative new lease pricing in Q3 2026, followed by moderate small positive new lease pricing in Q4 2026. All guidance downward revisions are concentrated in just 4-5 underperforming assets, so the inflection reflects broad-based market improvement across the rest of the portfolio.

Q: Quarter-end occupancy came in at 93.6%, down from the ~94% level reported in late spring. Was this give-back intentional as the company ramped pricing, and what is July occupancy's trajectory? / A: The small 30-40 basis point decline from the late spring level was a deliberate strategic choice: the firm prioritized holding and pushing rental pricing over maximizing near-term occupancy. July leasing activity remains healthy with strong seasonal lead volume, and the company is comfortable prioritizing pricing over incremental occupancy as the inflection to positive blended rates takes hold.