THE PHOENIX PORTFOLIO
NOTES TO HISTORICAL STATEMENT OF REVENUES AND CERTAIN
DIRECT OPERATING EXPENSES
Note 1. Business
On January 28, 2019, NexPoint Residential Trust, Inc. (the Company), through its operating partnership, NexPoint Residential
Trust Operating Partnership, L.P., acquired a three-property portfolio in Arizona for approximately $132.1 million (the Portfolio). See the table below for further detail of each property in the Portfolio. The accompanying
historical statement of revenues and certain direct operating expenses (Historical Summary) includes the revenues and certain expenses of the Portfolio.
|
|
|
|
|
|
|
|
|
|
|
Property Name
|
|
Location
|
|
Purchase Price
|
|
|
# Units
|
|
Bella Vista Apartment Homes
|
|
Phoenix, Arizona
|
|
$
|
48,400
|
|
|
|
248
|
|
The Enclave Apartment Homes
|
|
Tempe, Arizona
|
|
|
41,800
|
|
|
|
204
|
|
The Heritage Apartment Homes
|
|
Phoenix, Arizona
|
|
|
41,900
|
|
|
|
204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
132,100
|
|
|
|
656
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 2. Basis of Presentation
The accompanying Historical Summary has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission
(the SEC), and is not intended to be a complete presentation of the Portfolios revenues and expenses.
The accompanying statements of
revenues and certain operating expenses are presented in conformity with accounting principles generally accepted in the United States of America and in accordance with the provisions of Rule
3-14
of
Regulation
S-X
promulgated by the SEC, which requires certain information with respect to real estate operations be included with certain filings with the SEC. Accordingly, the statements exclude certain
historical income and expenses that are not comparable to the proposed future operations of the Portfolio such as certain ancillary income, amortization, depreciation, interest and corporate expenses. Therefore, the statements will not be comparable
to the statements of operations of the Portfolio after their acquisition by the Company and are not intended to be a complete representation of the Portfolios revenues and expenses.
Note 3. Significant Accounting Policies
Revenues
The Portfolio contains apartment units occupied
under various lease agreements with residents, typically with terms of 12 months or less. All leases are accounted for as operating leases. Rental income is recognized as earned over the life of the lease agreements on a straight-line basis. Some of
the leases include provisions under which the Portfolio is reimbursed for certain operating costs. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to residents pursuant to the lease
agreements. Other rental income consists of charges billed to residents for utilities reimbursements, administrative, application, and other fees and is recognized when earned.
Certain Direct Operating Expenses
Certain direct
operating expenses include only those costs expected to be comparable to the proposed future operations of the Portfolio. Portfolio operating costs includes property staff salaries, marketing, utilities, landscaping, repairs and maintenance, and
other general costs associated with operating the Portfolio. Costs such as depreciation, amortization, interest, and professional fees are excluded from the Historical Summary.
Use of Estimates
The preparation of financial
statements, as described in Note 2 and in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could materially differ from those estimates.
5