NexPoint Residential Trust, Inc. Reports First Quarter 2019 Results

Date : 04/30/2019 @ 12:30PM
Source : PR Newswire (US)
Stock : Nexpoint Residential Trust, Inc. (NXRT)
Quote : 41.1  -0.87 (-2.07%) @ 9:05PM

NexPoint Residential Trust, Inc. Reports First Quarter 2019 Results

Nexpoint Residential Trust, Inc. (NYSE:NXRT)
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DALLAS, April 30, 2019 /PRNewswire/ -- NexPoint Residential Trust, Inc. (NYSE:NXRT) reported financial results for the first quarter ended March 31, 2019.

FIRST QUARTER 2019 EARNINGS SUPPLEMENT

Highlights

  • NXRT1 reported Net Loss, FFO2, Core FFO2 and AFFO2 of $(4.4)M, $11.0M, $11.0M and $12.7M, respectively, attributable to common stockholders for the quarter ended March 31, 2019, compared to Net Income, FFO, Core FFO, and AFFO of $10.1M, $7.7M, $8.3M and $9.5M, respectively, attributable to common stockholders for the quarter ended March 31, 2018.
  • For the three months ended March 31, 2019, Q1 Same Store properties3 average effective rent, total revenue and NOI2 increased 4.0%, 4.7% and 7.0%, respectively, and occupancy decreased 40 bps over the prior year period.
  • For the three months ended March 31, 2019, Q1 Same Store properties expenses increased 2.0% over the prior year period, primarily due to increases in property taxes of 9.8%, partially offset by decreases in property operating expenses of 1.8% which was a result of lower utility costs from implementation of the Freddie Mac Green Advantage program.
  • During the first quarter, NXRT acquired three properties in Phoenix (Bella Vista, The Heritage and The Enclave or the "Phoenix Portfolio") for a combined purchase price of approximately $132.1M.
  • On January 28, 2019, NXRT entered into a $75.0 million credit facility (the "$75 Million Credit Facility") with SunTrust Bank and immediately drew $52.5 million to fund a portion of the purchase price of the Phoenix Portfolio.
  • The weighted average effective monthly rent per unit across all 38 properties held as of March 31, 2019 (the "Portfolio"), consisting of 13,211 units, was $1,007, while physical occupancy was 93.6%.
  • NXRT paid a first quarter dividend of $0.275 per share of common stock on March 29, 2019.
  • During the first quarter, for the properties in our Portfolio, we completed 245 full and partial upgrades and leased 174 upgraded units, achieving an average monthly rent premium of $119 and a 27.4% ROI4. Since inception, for the properties in our Portfolio, we have completed 5,906 full and partial upgrades and achieved an average monthly rental increase per unit of $97, equating to a 23.3% ROI on all units leased as of March 31, 2019.

 

  1. In this release, "we," "us," "our," the "Company," "NexPoint Residential Trust," and "NXRT" each refer to NexPoint Residential Trust, Inc., a Maryland corporation.
  2. 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, Core 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.
  3. We define "Same Store" properties as properties that were in our Portfolio for the entirety of the periods being compared. There are 32 properties encompassing 11,471 units of apartment space in our Same Store pool for the three months ended March 31, 2019 (our "Q1 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.

"We're excited about the strong start to 2019, with the Company's continued execution of its value-add strategy producing outsized revenue growth and 20%+ ROIs on upgraded units. In addition, we are already pleased with the $132 million Phoenix Portfolio acquired in January, where operations are exceeding our expectations" stated NXRT Chairman and President, Jim Dondero. "Looking ahead, we believe the future outlook for quality Class B/workforce housing in our high-growth markets remains bright."

First Quarter 2019 Financial Results

  • Total revenues were $41.5 million for the first quarter of 2019, compared to $35.1 million for the first quarter of 2018.
  • Net loss for the first quarter of 2019 totaled $(4.4) million, or a loss of $(0.19) per diluted share, which included $15.4 million of depreciation and amortization expense. This compared to net income of $10.1 million, or earnings of $0.47 per diluted share, for the first quarter of 2018, which included $13.7 million of gain on sales of real estate, $11.4 million of depreciation and amortization expense and $0.6 million of loss on extinguishment and debt modification costs.
  • The change in our net income (loss) between the periods primarily relates to a decrease in gain on sales of real estate and an increase in total expenses and interest expense, and was partially offset by an increase in total revenues and decreases in loss on extinguishment of debt and modification costs.
  • For the first quarter of 2019, NOI was $23.6 million on 38 properties, compared to $19.1 million for the first quarter of 2018 on 32 properties.
  • For the first quarter of 2019, Q1 Same Store NOI increased 7.0% to $20.4 million, compared to $19.1 million for the first quarter of 2018.
  • For the first quarter of 2019, FFO totaled $11.0 million, or $0.46 per diluted share, compared to $7.7 million, or $0.36 per diluted share, for the first quarter of 2018.
  • For the first quarter of 2019, Core FFO totaled $11.0 million, or $0.46 per diluted share, compared to $8.3 million, or $0.39 per diluted share, for the first quarter of 2018.
  • For the first quarter of 2019, AFFO totaled $12.7 million, or $0.53 per diluted share, compared to $9.5 million, or $0.45 per diluted share, for the first quarter of 2018.

First Quarter Earnings Conference Call

NXRT will host a call on Tuesday, April 30, 2019 at 11:00 a.m. ET to discuss its first quarter financial results. The conference call can be accessed live over the phone by dialing 877-260-1479 or, for international callers, (334) 323-0522, and using passcode Conference ID: 1362865. 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 will continue to be available for 60 days.

A replay of the conference call will also be available through Sunday, May 5, 2019, by dialing (888) 203-1112 or, for international callers, (719) 457-0820 and entering passcode 1362865.

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 Highland Capital Management, L.P., a leading global alternative asset manager and an SEC-registered investment adviser. 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 guidance for financial results for the full year 2019 and the related assumptions, net asset value and the related components and assumptions, guidance for the second quarter 2019 and the related assumptions, expected acquisitions and dispositions, the expected redevelopment of units and the projected average rent, rent change and ROI after redevelopment. 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. 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 periods shown below (in thousands, except per share amounts):



For the Three Months Ended
March 31,



For the Twelve Months Ended
December 31,




2019



2018



2018



2017


Net income (loss)


$

(4,373)



$

10,094



$

(1,614)



$

56,359


Depreciation and amortization



15,398




11,372




47,470




48,752


Gain on sales of real estate






(13,742)




(13,742)




(78,365)


Adjustment for noncontrolling interests



(33)




(23)




(96)




(1,695)


FFO attributable to common stockholders



10,992




7,701




32,018




25,051



















FFO per share - basic


$

0.47



$

0.37



$

1.51



$

1.19


FFO per share - diluted


$

0.46



$

0.36



$

1.48



$

1.17



















Loss on extinguishment of debt and modification costs






551




3,576




5,719


Casualty-related expenses/(recoveries)



35




24




(663)




(287)


Change in fair value on derivative instruments - ineffective portion












(309)


Amortization of deferred financing costs - acquisition term notes






21




159




403


Adjustment for noncontrolling interests






(26)




(9)




(430)


Core FFO attributable to common stockholders



11,027




8,271




35,081




30,147



















Core FFO per share - basic


$

0.47



$

0.39



$

1.66



$

1.43


Core FFO per share - diluted


$

0.46



$

0.39



$

1.62



$

1.41



















Amortization of deferred financing costs - long term debt



432




368




1,491




1,592


Equity-based compensation expense



1,235




914




4,198




3,109


Adjustment for noncontrolling interests



(5)




(4)




(17)




(76)


AFFO attributable to common stockholders



12,689




9,549




40,753




34,772



















AFFO per share - basic


$

0.54



$

0.45



$

1.92



$

1.65


AFFO per share - diluted


$

0.53



$

0.45



$

1.88



$

1.62



















Weighted average common shares outstanding - basic



23,550




20,987




21,189




21,057


Weighted average common shares outstanding - diluted



24,044




21,430




21,667




21,399



















Dividends declared per common share


$

0.275



$

0.250



$

1.025



$

0.910



















FFO Coverage - diluted

(1)

1.66x



1.44x




1.44x




1.29x


Core FFO Coverage - diluted

(1)

1.67x



1.54x




1.58x




1.55x


AFFO Coverage - diluted

(1)

1.92x



1.78x




1.84x




1.79x




(1)

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, (7) casualty-related expenses/(recoveries), and (8) 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 and impairment charges. 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 (1) noncontrolling interests in consolidated joint ventures and (2) 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 and recoveries, the amortization of deferred financing costs incurred in connection with obtaining short-term debt financing, the ineffective portion of fair value adjustments on our interest rate derivatives designated as cash flow hedges, 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

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
























Q1 2019



Q4 2018



Q1 2018



FY 2018



FY 2017


Net income (loss)


$

(4,373)



$

(4,782)



$

10,094



$

(1,614)



$

56,359


Adjustments to reconcile net income (loss) to NOI:





















   Advisory and administrative fees



1,850




1,888




1,838




7,474




7,419


   Corporate general and administrative expenses



2,233




2,077




1,813




7,808




6,275


   Casualty-related expenses

(1)


35




39




24




(663)




(287)


   Property general and administrative expenses

(2)


356




364




380




1,294




1,130


   Depreciation and amortization



15,398




13,832




11,372




47,470




48,752


   Interest expense



8,088




7,833




6,797




28,572




29,576


   Loss on extinguishment of debt and modification costs









551




3,576




5,719


   Gain on sales of real estate









(13,742)




(13,742)




(78,365)


NOI


$

23,587



$

21,251



$

19,127



$

80,175



$

76,578


Less Non-Same Store





















   Revenues



(5,012)




(4,816)




(218)




(23,012)




(25,765)


   Operating expenses



1,842




2,238




176




10,744




12,433


Same Store NOI


$

20,417



$

18,673



$

19,085



$

67,907



$

63,246




(1)

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



(2)

Adjustment to net income (loss) to exclude certain property general and 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.

Reconciliation of Debt to Net Debt

(dollar amounts in thousands)


Q1 2019



Q1 2018


Total mortgage debt


$

924,463



$

744,473


Credit facilities



52,500




30,000


Bridge facility







   Adjustments to arrive at net debt:









   Cash and cash equivalents



(20,536)




(13,935)


   Restricted cash held for value-add upgrades and green improvements



(8,863)




(4,703)


Net Debt


$

947,564



$

755,835


Enterprise Value (1)


$

1,853,564



$

1,275,835


Leverage Ratio



51

%



59

%



(1)

Enterprise Value is calculated as Market Capitalization plus Net Debt.

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 NOI to net income (loss) (the most directly comparable GAAP financial measure) for the periods presented below (in thousands):



For the Year Ended
December 31, 2019



For the Three Months Ended
June 30, 2019




Guidance (1)



Guidance (1)


Net loss


$

(17,040)



$

(5,640)


Adjustments to reconcile net loss to NOI:









   Advisory and administrative fees



7,500




1,870


   Corporate general and administrative expenses



9,000




2,400


   Property general and administrative expenses

(2)


1,295




350


   Depreciation and amortization



62,225




16,350


   Interest expense



34,170




8,670


NOI


$

97,150



$

24,000


Less Non-Same Store









   Revenues

(3)


(23,350)






   Operating expenses

(3)


8,650






Same Store NOI

(3)

$

82,450








(1)

Estimates shown for full year and second quarter 2019 guidance. Assumptions made for full year and second quarter 2019 NOI guidance include the Same Store operating growth projections included in the "2019 Full Year Guidance Summary" section of this release, the effect of the acquisition of the Phoenix Portfolio, and the other acquisition and disposition assumptions presented under "2019 Full Year Guidance Summary."



(2)

Adjustment to net loss to exclude certain property general and 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.



(3)

Amounts are derived from the results of operations of our pro forma Full Year 2019 Same Store properties and Non-Same Store properties. There are 32 properties in our pro forma Full Year 2019 Same Store pool.

The following table reconciles our FFO, Core FFO and AFFO guidance to our net loss (the most directly comparable GAAP financial measure) guidance for the year ended December 31, 2019 (in thousands, except per share data):



For the Year Ended
December 31, 2019




Mid-Point


Net loss


$

(17,040)


Depreciation and amortization



62,225


Adjustment for noncontrolling interests



(136)


FFO attributable to common stockholders



45,049


FFO per share - diluted (1)


$

1.87







Core FFO attributable to common stockholders



45,049


Core FFO per share - diluted (1)


$

1.87







Amortization of deferred financing costs - long term debt



1,815


Equity-based compensation expense



5,165


Adjustment for noncontrolling interests



(21)


AFFO attributable to common stockholders



52,008


AFFO per share - diluted (1)


$

2.16







Weighted average common shares outstanding - diluted



24,100




(1)

For purposes of calculating per share data, we assume a weighted average diluted share count of approximately 24.1 million for the full year 2019.

Contact:
Investor Relations
Jackie Graham
972-419-6213

 

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SOURCE NexPoint Residential Trust, Inc.

Copyright 2019 PR Newswire

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