PR Newswire | Oct 27, 2020 07:30AM EDT

10/27 06:30 CDT

NexPoint Residential Trust, Inc. Reports Third Quarter 2020 ResultsNXRT Board Approves 9.2% Increase in Quarterly Dividend, Demonstrating Sunbelt Affordable Housing Portfolio Continues to Exhibit Resilience; Returns 5.96x Multiple on Invested Capital on $55.5 million DFW Asset DALLAS, Oct. 27, 2020

DALLAS, Oct. 27, 2020 /PRNewswire/ -- NexPoint Residential Trust, Inc. (NYSE:NXRT) reported financial results for the third quarter ended September 30, 2020.

Highlights

* NXRT1 reported Net Income, FFO2, Core FFO2 and AFFO2 of $29.6M, $17.2M, $13.3M and $15.1M, respectively, attributable to common stockholders for the quarter ended September 30, 2020, compared to Net Income, FFO, Core FFO, and AFFO of $119.1M, $8.6M, $11.5M and $13.3M, respectively, attributable to common stockholders for the quarter ended September 30, 2019. * NXRT reported Net Income, FFO, Core FFO and AFFO of $48.2M, $41.6M, $41.3M and $46.5M, respectively, attributable to common stockholders for the nine months ended September 30, 2020, compared to Net Income, FFO, Core FFO, and AFFO of $112.4M, $30.6M, $33.5M and $38.9M, respectively, attributable to common stockholders for the nine months ended September 30, 2019. * For the three months ended September 30, 2020, Q3 Same Store properties3 average effective rent, total revenue and NOI2 increased 1.8%, 3.3% and 4.5%, respectively, and occupancy increased 170 bps over the prior year period. * For the nine months ended September 30, 2020, YTD Same Store properties3 average effective rent, total revenue and NOI2 increased 1.6%, 4.1% and 4.7%, respectively, and occupancy increased 160 bps over the prior year period. * The weighted average effective monthly rent per unit across all 36 properties held as of September 30, 2020 (the "Portfolio"), consisting of 13,657 units, was $1,122, while physical occupancy was 95.0%. * On September 30, 2020, NXRT disposed of Eagle Crest for a sales price of $55.5 million and net cash proceeds of $25.0 million after repayment of debt and closing costs. * NXRT paid a third quarter dividend of $0.3125 per share of common stock on September 30, 2020. * On October 26, 2020, the Company's board declared a quarterly dividend of $0.34125 per share, a 9.2% increase from the previous dividend per share. Since inception, NXRT has increased the dividend per share by 65.7%. * During the third quarter, for the properties in our Portfolio, we completed 425 full and partial upgrades and leased 276 upgraded units, achieving an average monthly rent premium of $141 and a 22.5% ROI4. Since inception, for the properties currently in our Portfolio, we have completed 7,584 full and partial upgrades and achieved an average monthly rental increase per unit of $97, equating to a 24.4% ROI on all units leased as of September 30, 2020. * During the nine months ended September 30, 2020, through its at-the-market offering ("ATM program"), NXRT issued approximately 0.8 million shares for approximately $38.1 million in gross proceeds.

* During the nine months ended September 30, 2020, NXRT repurchased 1,644,697 shares at a weighted average price of $27.07 per share. Since inception, NXRT has repurchased 2,382,155 shares at a weighted average price of $25.70 per share. * On July 27, 2020, NXRT appointed Catherine Wood as an independent director to the Company's board of directors (the "Board"). Ms. Wood brings a wealth of knowledge, extensive leadership experience, and a fresh perspective that complements the Company's mission to diversify NXRT's Board and management team. Both management and the Board believe the Company will benefit from diversification of viewpoints and experiences. Ms. Wood is Chief Executive Officer and Chief Investment Officer of ARK Investment Management LLC, an investment manager she founded in 2014.

In this release, "we," "us," "our," the "Company," "NexPoint Residential1) Trust," and "NXRT" each refer to NexPoint Residential Trust, Inc., a Maryland corporation.

FFO, Core FFO, AFFO and NOI are non-GAAP measures. For a discussion of why we consider these non-GAAP measures useful and reconciliations of FFO, Core2) FFO, AFFO and NOI to net income (loss), see the "Definitions and Reconciliations of Non-GAAP Measures" and "FFO, Core FFO and AFFO" sections of this release.

We define "Same Store" properties as properties that were in our Portfolio for the entirety of the periods being compared. There are 28 properties encompassing 9,926 units of apartment space in our Same Store pool for the3) three months ended September 30, 2020 (our "Q3 Same Store" properties) and 24 properties encompassing 9,074 units of apartment space in our Same Store pool for the nine months ended September 30, 2020 (our "YTD Same Store" properties).

4) We define Return on Investment ("ROI") as the sum of the actual rent premium divided by the sum of the total cost.

Third Quarter 2020 Financial Results

* Total revenues were $51.0 million for the third quarter of 2020, compared to $46.8 million for the third quarter of 2019. * Net income for the third quarter of 2020 totaled $29.6 million, or income of $1.19 per diluted share, which included $17.7 million of depreciation and amortization expense. This compared to a net income of $119.1 million, or a income of $4.84 per diluted share, for the third quarter of 2019, which included $17.2 million of depreciation and amortization expense. * The change in our net income of $29.6 million for the three months ended September 30, 2020 as compared to our net income of $119.1 million for the three months ended September 30, 2019 primarily relates to a decrease in gain on sales of real estate, partially offset by an increase in total revenues. * For the third quarter of 2020, NOI was $28.8 million on 36 properties, compared to $26.1 million for the third quarter of 2019 on 37 properties. * For the third quarter of 2020, Q3 Same Store NOI increased 4.5% to $19.4 million, compared to $18.6 million for the third quarter of 2019. * For the third quarter of 2020, FFO totaled $17.2 million, or $0.69 per diluted share, compared to $8.6 million, or $0.35 per diluted share, for the third quarter of 2019. * For the third quarter of 2020, Core FFO totaled $13.3 million, or $0.53 per diluted share, compared to $11.5 million, or $0.47 per diluted share, for the third quarter of 2019. * For the third quarter of 2020, AFFO totaled $15.1 million, or $0.60 per diluted share, compared to $13.3 million, or $0.54 per diluted share, for the third quarter of 2019.

2020 Year to Date Financial Results

* Total revenues were $154.3 million for the nine months ended September 30, 2020, compared to $131.4 million for the nine months ended September 30, 2019. * Net income for the nine months ended September 30, 2020 totaled $48.4 million, or income of $1.91 per diluted share, which included a gain on sales of real estate of $69.2 million and $62.5 million of depreciation and amortization expense. This compared to net income of $112.7 million, or income of $4.63 per diluted share, nine months ended September 30, 2019, which included a gain on sales of real estate of $127.7 and $45.7 million of depreciation and amortization expense. * The change in our net income of $48.4 million for the nine months ended September 30, 2020 as compared to our net income of $112.7 million for the nine months ended September 30, 2019 primarily relates to a decrease in gains on sales of real estate and increases in depreciation and total property operating expenses, partially offset by an increase in total revenue. * For the nine months ended September 30, 2020, NOI was $88.0 million on 36 properties, compared to $74.3 million for the nine months ended September 30, 2019 on 37 properties. * For the nine months ended September 30, 2020, Same Store NOI increased 4.7% to $51.5 million, compared to $49.2 million for the nine months ended September 30, 2019. * For the nine months ended September 30, 2020, FFO totaled $41.6 million, or $1.65 per diluted share, compared to $30.6 million, or $1.26 per diluted share, for the nine months ended September 30, 2019. * For the nine months ended September 30, 2020, Core FFO totaled $41.3 million, or $1.64 per diluted share, compared to $33.5 million, or $1.38 per diluted share, for the nine months ended September 30, 2019. * For the nine months ended September 30, 2020, AFFO totaled $46.5 million, or $1.85 per diluted share, compared to $38.9 million, or $1.60 per diluted share, for the nine months ended September 30, 2019.

Subsequent Events & Operational Trends

* The Company is providing a summary of select October operating metrics in response to economic challenges and related government actions and regulations as a result of the ongoing novel Coronavirus ("COVID-19") pandemic: * As of October 25, 2020, combined, rent cash collections and payment plans under lease amendments signed by residents financially impacted by COVID-19 represented 97.1% of billed rent for October 2020. This compares to 99.5% average cash collections in 2019. Rent cash collections represented 95.0% of billed October 2020 rent and promises to pay by financially impacted residents under lease amendments represented 2.1% of billed October 2020 rent. * Average Physical Occupancy for the Same Store Portfolio was strong at 94.8% as of October 26, 2020, while resident retention was 52.5%.

* COVID-19 has resulted in cessation, severe curtailment, or impairment of business activities in most sectors of the economy in all markets we operate in, due to governmental "stay at home" orders, risk mitigation procedures, closure of businesses not considered to be "essential," as well as other direct and indirect impacts, including those that may not yet be identified. This has resulted in a rapid and dramatic increase in unemployment in the U.S. We cannot estimate the extent of COVID-19's future negative impacts or how long the negative impacts of COVID-19 will persist. In addition, it is possible that, even after the initial restrictions due to COVID-19 ease, they could be reinstituted in case of future waves of infection or if additional pandemics occur. As a result of these uncertainties related to COVID-19, the Company continues to withhold its full-year 2020 guidance outlook. * On October 13, 2020, the Company extended the maturity date of the Corporate Credit Facility from January 28, 2021 to January 28, 2022. Upon exercising the option to extend the Corporate Credit Facility, the Company incurred an extension fee of $0.6 million.

Third QuarterEarnings Conference Call

NexPoint Residential Trust, Inc. ("NXRT" or the "Company") (NYSE: NXRT) announced today that the Company is scheduled to host a conference call on Tuesday, October 27, 2020 at 11:00 a.m. ET (10:00 am CT), to discuss third quarter financial results. The conference call can be accessed live over the phone by dialing 800-367-2403 or, for international callers, +1 334-777-6978 and using passcode Conference ID: 9147899. A live audio webcast of the call will be available online at the Company's website, http://www.nexpointliving.com (under "Investor Relations"). 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, November 3, 2020 by dialing 888-203-1112 or, for international callers, +1 719-457-0820 and entering passcode 9147899.

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, www.nexpointliving.com, under the "Investor Relations" 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," "should," "intend" 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, NXRT's 2020 adjusted NOI estimate and the related assumptions, the COVID-19 pandemic and its effects on the Company, net asset value and the related components and assumptions, planned value-add programs, including projected average rent, rent change and return on investment and expected acquisitions and dispositions. They are not guarantees of future results and forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement, including the ultimate geographic spread, duration and severity of the COVID-19 pandemic, and the effectiveness of actions taken, or actions that may be taken, by governmental authorities to contain the outbreak or treat its impact, as well as those described in greater detail in our filings with the Securities and Exchange Commission, particularly those specifically described in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. 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, the most directly comparable GAAP financial measure, for the three and nine months ended September 30, 2020 and 2019 (in thousands, except per share amounts):

For the Three Months For the Nine Months Ended Ended September 30, September 30,

% 2020 2019 2020 2019 Change (1)

Net income $ 29,641 $ 119,104 $ 48,362 $ 112,744 N/M

Depreciation and 17,723 17,228 62,479 45,692 36.7 %amortization

Gain on sales of (30,160) (127,700) (69,151) (127,700) -45.8 %real estate

Adjustment fornoncontrolling (52) (26) (125) (92) 35.9 %interests

FFO attributableto common 17,152 8,606 41,565 30,644 35.6 %stockholders

FFO per share - $ 0.70 $ 0.36 $ 1.68 $ 1.29 30.7 %basic

FFO per share - $ 0.69 $ 0.35 $ 1.65 $ 1.26 30.7 %diluted

Loss onextinguishmentof debt and 596 2,869 1,470 2,869 -48.8 %modificationcosts

Casualty-relatedexpenses/ (47) 34 726 26 N/M(recoveries)

Casualty gains (4,960) - (3,932) - 0.0 %

Pandemic expense (2) 191 - 475 - 0.0 %

Amortization ofdeferredfinancing costs 345 - 1,039 - 0.0 %- acquisitionterm notes

Adjustment fornoncontrolling 11 (9) 2 (9) N/Minterests

Core FFOattributable to 13,288 11,500 41,345 33,530 23.3 %commonstockholders

Core FFO per $ 0.55 $ 0.48 $ 1.67 $ 1.41 18.8 %share - basic

Core FFO per $ 0.53 $ 0.47 $ 1.64 $ 1.38 18.8 %share - diluted

Amortization ofdeferred 357 541 1,102 1,443 -23.7 %financing costs- long term debt

Equity-basedcompensation 1,434 1,291 4,069 3,944 3.2 %expense

Adjustment fornoncontrolling (5) (6) (15) (16) -6.3 %interests

AFFOattributable to 15,074 13,326 46,501 38,901 19.5 %commonstockholders

AFFO per share - $ 0.62 $ 0.55 $ 1.88 $ 1.63 15.2 %basic

AFFO per share - $ 0.60 $ 0.54 $ 1.85 $ 1.60 15.2 %diluted

Weighted averagecommon shares 24,372 24,088 24,688 23,793 3.8 %outstanding -basic

Weighted averagecommon shares 24,926 24,557 25,194 24,280 3.8 %outstanding -diluted

Dividendsdeclared per $ 0.3125 $ 0.275 $ 0.938 $ 0.825 13.6 %common share

FFO Coverage - (3) 2.20x 1.27x 1.76x 1.53x 15.03 %diluted

Core FFOCoverage - (3) 1.71x 1.70x 1.75x 1.67x 4.57 %diluted

AFFO Coverage - (3) 1.94x 1.97x 1.97x 1.94x 1.38 %diluted

(1) Represents the percentage change for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Represents additional cleaning, disinfecting and other costs incurred at(2) the properties related to COVID-19 that are not reflective of the continuing operations of the properties.

(3) Indicates coverage ratio of FFO/Core FFO/AFFO per common share (diluted) over dividends declared per common share during the period.

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) the cost of funds, (2) acquisition costs, (3) advisory and administrative fees, (4) 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, (5) corporate general and administrative expenses, (6) other gains and losses that are specific to us including loss on extinguishment of debt and modification costs, (7) casualty-related expenses/(recoveries) and casualty gain (loss), (8) miscellaneous income derived from recognition of lost rents covered by insurance, (9) pandemic expenses that are not reflective of continuing operations of the properties and (10) 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 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 and the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt related to the retirement of debt and costs incurred in connection with a debt modification that are expensed), casualty-related expenses/recoveries, casualty gains or losses, pandemic expenses, the amortization of deferred financing costs incurred in connection with obtaining short-term debt financing and the noncontrolling interests related to these items.

AFFO makes certain adjustments to Core FFO. 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 for the three and nine months ended September 30, 2020 and 2019

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles NOI and our Same Store NOI for the three and nine months ended September 30, 2020 and 2019 to net income, the most directly comparable GAAP financial measure (in thousands):

For the Three Months For the Nine Months Ended Ended September 30, September 30,

2020 2019 2020 2019

Net income $ 29,641 $ 119,104 $ 48,362 $ 112,744

Adjustments toreconcile net incometo NOI:

Advisory and 1,976 1,891 5,777 5,613administrative fees

Corporate generaland administrative 2,807 2,339 8,440 7,313expenses

Casualty-related (1) (47) 34 726 26expenses/(recoveries)

Casualty gains (4,960) - (3,932) -

Miscellaneous (322) - (1,401) -income

Pandemic expense (2) 191 - 475 -

Property generaland administrative (3) 350 375 1,097 1,069expenses

Depreciation and 17,723 17,228 62,479 45,692amortization

Interest expense 11,049 9,960 33,704 26,638

Loss onextinguishment of 596 2,869 1,470 2,869debt and modificationcosts

Gain on sales of (30,160) (127,700) (69,151) (127,700)real estate

NOI $ 28,844 $ 26,100 $ 88,046 $ 74,264

Less Non-Same Store

Revenues (16,936) (13,870) (62,713) (43,415)

Operating expenses 7,499 6,345 26,194 18,351

Same Store NOI $ 19,407 $ 18,575 $ 51,527 $ 49,200

(1) Adjustment to net income to exclude certain property operating expenses that are casualty-related expenses.

Represents additional cleaning, disinfecting and other costs incurred at(2) the properties related to COVID-19 that are not reflective of the continuing operations of the properties.

Adjustment to net income to exclude certain property general and(3) administrative expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional and franchise tax fees.

NOI and Same Store NOI for the Three Months Ended June 30, 2020

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles NOI and our Same Store NOI for the three months ended June 30, 2020 to net loss, the most directly comparable GAAP financial measure (in thousands):

For the Three Months Ended June 30, 2020

Net loss $ (9,318)

Adjustments to reconcile net income to NOI:

Advisory and administrative fees 1,936

Corporate general and administrative expenses 2,932

Casualty-related recoveries 723

Casualty gains 1,079

Miscellaneous income (1,079)

Pandemic expense 274

Property general and administrative expenses 278

Depreciation and amortization 21,418

Interest expense 10,993

Loss on extinguishment of debt and modification -costs

Gain on sales of real estate (19)

NOI $ 29,217

Less Non-Same Store

Revenues (16,036)

Operating expenses 6,985

Same Store NOI $ 20,166

Reconciliation of Debt to Net Debt

(dollar amounts in thousands) Q3 2020 Q3 2019

Total mortgage debt $ 1,121,805 $ 1,060,948

Credit facilities 215,000 107,000

Total debt outstanding 1,336,805 1,167,948

Adjustments to arrive at net debt:

Cash and cash equivalents (70,282) (20,373)

Restricted cash held for value-add upgrades and (11,918) (16,535)green improvements

Net Debt $ 1,254,605 $ 1,131,040

Enterprise Value (1) $ 2,342,605 $ 2,291,040

Leverage Ratio 54 % 49 %

(1) Enterprise Value is calculated as Market Capitalization plus Net Debt.

Reconciliation of 2020 Adjusted NOI Estimate

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our adjusted NOI estimate to estimated net income (loss) (the most directly comparable GAAP financial measure) for the periods presented below (in thousands):

For the Year Ended

December 31, 2020

Estimate (1)

Net income $ 32,753

Adjustments to reconcile net income to NOI:

Advisory and administrative fees 7,609

Corporate general and administrative expenses 11,941

Property general and administrative expenses 1,563

Depreciation and amortization 86,766

Total Loss on Debt Extinguishment 1,476

Interest expense 44,231

Casualty-related expenses/(recoveries) (483)

Casualty losses 1,028

Miscellaneous income (1,079)

Gain on sales of real estate (69,655)

NOI $ 116,150

Based on Green Street Advisors' "Residential Sectors" Report dated April(1) 19, 2020. FY 2020 Adjusted NOI estimate does not consider any additional acquisition or disposition activity for the remainder of the year.

Contact:Investor RelationsJackie GrahamJGraham@nexpointadvisors.com972-419-6213

Media inquiries: MediaRelations@nexpointadvisors.com

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SOURCE NexPoint Residential Trust, Inc.