NXRT Recaps Acquisition/Disposition Activity, Value-Add Results and Issues 2023 Full Year Guidance

DALLAS, Feb. 21, 2023 /PRNewswire/ — NexPoint Residential Trust, Inc. (NYSE: NXRT) reported financial results for the fourth quarter and year ended December 31, 2022.

Highlights

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• NXRT¹ reported net loss, FFO², Core FFO² and AFFO² of $(9.3)M, $73.4M, $81.8M and $91.4M, respectively, attributable to common stockholders for the year ended December 31, 2022, compared to net income, FFO, Core FFO, and AFFO of $23.0M, $63.6M, $62.5M and $70.9M, respectively, attributable to common stockholders for the year ended December 31, 2021.
• For the year ended December 31, 2022, 2021-2022 Same Store properties³ average effective rent, total revenue and NOI² increased 17.8%, 14.0% and 16.2%, respectively, and occupancy decreased 20 bps over the prior year period.
• During the year ended December 31, 2022, NXRT acquired two properties totaling 562 units for a combined purchase price of $143.4 million.
• During the fourth quarter of 2022, the Company completed the sale of Hollister Place for a sales price of $36.8 million.
• The weighted average effective monthly rent per unit across all 40 properties held as of December 31, 2022 (the “Portfolio”), consisting of 15,127 units⁴, was $1,480, while physical occupancy was 94.1%.
• NXRT paid a fourth quarter dividend of $0.42 per share of common stock on December 30, 2022; this cash dividend represented a $0.04 per share, or 10.5% increase, over the prior quarter’s dividend.
• During 2022, for the properties in the Portfolio, NXRT completed 2,409 full/partial upgrades and washer dryer, achieving an average monthly rent premium of $154 and a 24.3% ROI⁵.
• Since inception, NXRT has completed installation of 7,633 full and partial upgrades, 4,718 kitchen and laundry appliances and 10,191 technology packages, resulting in $149, $47 and $45 average monthly rental increase per unit and 22.0%, 66.9% and 37.2% ROI, respectively.
• During the fourth quarter of 2022, the Company paid down $260.5 million of principal on its corporate credit facility and extended the maturity date to June 30, 2025.

Full Year 2022 Financial Results

• Total revenues were $264.0 million for the full year 2022, compared to $219.2 million for the full year 2021.
• Net loss for the full year 2022 totaled $(9.3) million, or loss of $(0.36) per diluted share, which included a gain on sales of real estate of $14.7 million and $97.6 million of depreciation and amortization expense. This compared to net income of $23.0 million, or income of $0.89 per diluted share, which included a gain on sales of real estate of $46.2 million and $86.9 million of depreciation and amortization expense for the full year 2021.
• The change in our net loss of $(9.3) million for the year ended December 31, 2022 as compared to our net income of $23.1 million for the year ended December 31, 2021 primarily relates to decreases in gains on sales of real estate and increases in depreciation and total property operating expenses, partially offset by an increase in total revenues.
• For the full year 2022, NOI was $157.4 million on 40 properties, compared to $128.8 million for the full year 2021 on 39 properties.
• For the full year 2022, Same Store NOI increased 16.2% to $129.3 million, compared to $111.3 million for the full year 2021.
• For the full year 2022, FFO totaled $73.4 million, or $2.81 per diluted share, compared to $63.6 million, or $2.47 per diluted share, for the full year 2021. For the full year 2022, Core FFO totaled $81.8 million, or $3.13 per diluted share, compared to $62.5 million, or $2.43 per diluted share, for the full year 2021. For the full year 2022, AFFO totaled $91.4 million, or $3.49 per diluted share, compared to $70.9 million, or $2.75 per diluted share, for the full year 2021.

Fourth Quarter 2022 Financial Results

• Total revenues were $69.3 million for the fourth quarter of 2022, compared to $58.5 million for the fourth quarter of 2021.
• Net income for the fourth quarter of 2022 totaled $3.8 million, or a gain of $0.15 per diluted share, which included $23.2 million of depreciation and amortization expense and $15.8 million of interest expense. This compared to net income of $38.8 million, or income of $1.50 per diluted share, for the fourth quarter of 2021, which included $24.5 million of depreciation and amortization expense and $11.8 million of interest expense.
• The change in our net income between the periods primarily relates to a decrease in gains on sales of real estate, increases in total property operating expenses and depreciation and amortization expense, partially offset by increases in total revenues.
• For the fourth quarter of 2022, NOI was $41.8 million on 40 properties, compared to $34.9 million for the fourth quarter of 2021 on 39 properties.
• For the fourth quarter of 2022, Q4 Same Store NOI increased 14.4% to $36.9 million, compared to $32.3 million for the fourth quarter of 2021.
• For the fourth quarter of 2022, FFO totaled $12.2 million, or $0.47 per diluted share, compared to $17.1 million, or $0.66 per diluted share, for the fourth quarter of 2021. For the fourth quarter of 2022, Core FFO totaled $19.5 million, or $0.75 per diluted share, compared to $17.8 million, or $0.69 per diluted share, for the fourth quarter of 2021. For the fourth quarter of 2022, AFFO totaled $22.0 million, or $0.84 per diluted share, compared to $20.0 million, or $0.77 per diluted share, for the fourth quarter of 2021.

Fourth Quarter Earnings Conference Call

NXRT will host a call on Tuesday, February 21, 2023, at 11:00 a.m. ET (10:00 a.m. CT), to discuss its full year and fourth quarter 2022 financial results. The conference call can be accessed live over the phone by dialing 888-660-4430 or, for international callers, +1 646-960-0537 and using passcode Conference ID: 5001576.  A live audio webcast of the call will be available online at the Company’s website, nxrt.nexpoint.com (under “Resources”).  An online replay will be available shortly after the call on the Company’s website and continue to be available for 60 days.

A replay of the conference call will also be available through Tuesday, March 7, 2023, by dialing 800- 770- 2030 or, for international callers, +1 647-362-9199 and entering passcode 5001576.

About NXRT

NexPoint Residential Trust is a publicly traded REIT, with its shares listed on the New York Stock Exchange under the symbol “NXRT,” primarily focused on acquiring, owning and operating well-located middle-income multifamily properties with “value-add” potential in large cities and suburban submarkets of large cities, primarily in the Southeastern and Southwestern United States. NXRT is externally advised by NexPoint Real Estate Advisors, L.P., an affiliate of NexPoint Advisors, L.P., an SEC-registered investment advisor, which has extensive real estate experience. Our filings with the Securities and Exchange Commission (the “SEC”) are available on our website, nxrt.nexpoint.com, under the “Financials” tab.

Cautionary Statement Regarding Forward-Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management’s current expectations, assumptions and beliefs. Forward-looking statements can often be identified by words such as “expect,” “anticipate,” “estimate,” “may,” “plan” and similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding NXRT’s business and industry in general, the closing of the sales of Old Farm and Stone Creek at Old Farm in the first half of 2023 and the paydown of the remainder of the Corporate Credit Facility and the results of the paydown and other refinancing activities on the Company’s debt profile, 2023 full year guidance and the related components and assumptions, including acquisitions and dispositions, shares outstanding, interest expense and the related components and same store growth projections, NXRT’s net asset value and the related components and assumptions, estimated value-add expenditures, debt payments, dispositions, outstanding debt and shares outstanding, guidance for the first quarter 2023 and the related assumptions, planned value-add programs, including projected average rent, rent change and return on investment, expected settlement of interest rate swaps and the effect on the debt maturity schedule, rehab budgets, and expected acquisitions and dispositions. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement, including those described in greater detail in our filings with the Securities and Exchange Commission, particularly those described in our Annual Report on Form 10-K. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the Company’s most recent Annual Report on Form 10-K and other filings with the SEC for a more complete discussion of the risks and other factors that could affect any forward-looking statements. The statements made herein speak only as of the date of this release and except as required by law, NXRT does not undertake any obligation to publicly update or revise any forward-looking statements.

FFO, Core FFO and AFFO

The following table reconciles our calculations of FFO, Core FFO and AFFO to net income (loss), the most directly comparable GAAP financial measure, for the years ended December 31, 2022, 2021 and 2020 and for the three months ended December 31, 2022 and 2021 (in thousands, except per share amounts):

Definitions and Reconciliations of Non-GAAP Measures

Definitions

This presentation contains non-GAAP financial measures. A “non-GAAP financial measure” is defined as a numerical measure of a company’s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets or statements of cash flows of the Company. The non-GAAP financial measures used within this presentation are net operating income (“NOI”), funds from operations attributable to common stockholders (“FFO”), FFO per diluted share, Core FFO, Core FFO per diluted share, adjusted FFO (“AFFO”), AFFO per diluted share and net debt.

NOI is used by investors and our management to evaluate and compare the performance of our properties to other comparable properties, to determine trends in earnings and to compute the fair value of our properties. NOI is calculated by adjusting net income (loss) to add back (1) interest expense (2) advisory and administrative fees, (3) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (4) corporate general and administrative expenses, (5) other gains and losses that are specific to us including loss on extinguishment of debt and modification costs, including loss on extinguishment of debt and modification costs, (6) casualty-related expenses/(recoveries) and casualty gains (losses) and (7) property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on behalf of the Company at the property for expenses such as legal, professional, centralized leasing service and franchise tax fees. We define “Same Store NOI” as NOI for our properties that are comparable between periods. We view Same Store NOI as an important measure of the operating performance of our properties because it allows us to compare operating results of properties owned for the entirety of the current and comparable periods and therefore eliminates variations caused by acquisitions or dispositions during the periods.

FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”), as net income (loss) computed in accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization. We compute FFO in accordance with NAREIT’s definition. Our presentation differs slightly in that we begin with net income (loss) before adjusting for amounts attributable to redeemable noncontrolling interests in the OP and we show the combined amounts attributable to such noncontrolling interests as an adjustment to arrive at FFO attributable to common stockholders.

Core FFO makes certain adjustments to FFO, which are either not likely to occur on a regular basis or are otherwise not representative of the ongoing operating performance of our Portfolio. Core FFO adjusts FFO to remove items such as losses on extinguishment of debt and modification costs (includes prepayment penalties and defeasance costs incurred on the early payment of debt, the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt related to the retirement of debt, costs incurred in connection with a debt modification that are not capitalized as deferred financing costs and other costs incurred in a debt extinguishment that are expensed), casualty-related expenses/and recoveries and gains (losses), pandemic expenses, the amortization of deferred financing costs incurred in connection with obtaining short-term debt financing, and the noncontrolling interests (as described above) related to these items.

AFFO makes certain adjustments to Core FFO in order to arrive at a more refined measure of the operating performance of our portfolio. There is no industry standard definition of AFFO and practice is divergent across the industry. AFFO adjusts Core FFO to remove items such as equity-based compensation expense and the amortization of deferred financing costs incurred in connection with obtaining long-term debt financing, and the noncontrolling interests related to these items.

Net debt is calculated by subtracting cash and cash equivalents and restricted cash held for value-add upgrades and green improvements from total debt outstanding.

We believe that the use of NOI, FFO, Core FFO, AFFO and net debt, combined with the required GAAP presentations, improves the understanding of operating results and debt levels of real estate investment trusts (“REITs”) among investors and makes comparisons of operating results and debt levels among such companies more meaningful. While NOI, FFO, Core FFO, AFFO and net debt are relevant and widely used measures of operating performance and debt levels of REITs, they do not represent cash flows from operations, net income (loss) or total debt as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity, operating performance and debt levels. NOI, FFO, Core FFO and AFFO do not purport to be indicative of cash available to fund our future cash requirements. We present net debt because we believe it provides our investors a better understanding of our leverage ratio. Net debt should not be considered an alternative to total debt, as we may not always be able to use our available cash to repay debt. Our computation of NOI, FFO, Core FFO, AFFO and net debt may not be comparable to NOI, FFO, Core FFO, AFFO and net debt reported by other REITs. For a more complete discussion of NOI, FFO, Core FFO and AFFO, see our most recent Annual Report on Form 10-K and our other filings with the SEC.

Reconciliations

NOI and Same Store NOI

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles NOI and our Same Store NOI for the years and three months ended December 31, 2022 and 2021 to net income (loss), the most directly comparable GAAP financial measure (in thousands):

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our NOI and our 2020-2022 Same Store NOI for the years ended December 31, 2022, 2021 and 2020 to net income (loss), the most directly comparable GAAP financial measure (in thousands):

Reconciliation of Debt to Net Debt

Guidance Reconciliations of NOI, Same Store NOI, FFO, Core FFO and AFFO

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our 2023 NOI guidance to our net income (loss) (the most directly comparable GAAP financial measure) guidance for the year ended December 31, 2023 and for the three months ended March 31, 2023 (in thousands):

The following table reconciles our FFO, Core FFO and AFFO guidance to our net income (the most directly comparable GAAP financial measure) guidance for the year ended December 31, 2023 (in thousands, except per share data):

The following table reconciles our NOI to our net income (loss) for the years ended December 31, 2019, 2018, 2017, 2016 and 2015 (in thousands):

The following table reconciles our FFO, Core FFO and AFFO to our net income (loss) for the years ended December 31, 2019, 2018, 2017, 2016 and 2015 (in thousands):

Contact:
Investor Relations
Kristen Thomas
IR@nexpoint.com 
(214) 276-6300 
Media inquiries: Pro-Nexpoint@prosek.com

SOURCE NexPoint Residential Trust, Inc.