NXRT NexPoint Residential Trust Inc

DALLAS, Oct. 30, 2018 /PRNewswire/ -- NexPoint Residential Trust, Inc. (NYSE:NXRT) reported financial results for the third quarter ended September 30, 2018.

Highlights

• NXRT¹ reported Net Loss, FFO², Core FFO² and AFFO² of $(5.2)M, $5.9M, $8.9M and $10.3M, respectively, attributable to common stockholders for the quarter ended September 30, 2018, compared to Net Income, FFO, Core FFO, and AFFO of $53.9M, $6.8M, $7.5M and $8.7M, respectively, attributable to common stockholders for the quarter ended September 30, 2017.
• For the three months ended September 30, 2018, Q3 Same Store properties³ average effective rent, total revenue and NOI² increased 4.1%, 4.7% and 8.3%, respectively, and occupancy decreased 0.2% over the prior year period.
• For the three months ended September 30, 2018, Q3 Same Store properties expenses increased 0.7% over the prior year period, primarily due to increases in property taxes of 3.9%, partially offset by decreases in property operating expenses of 1.9%.
• During the third quarter, NXRT acquired two properties in Nashville (Cedar Pointe and Brandywine I & II) and one in Dallas (Crestmont Reserve) for a combined purchase price of approximately $131.0M.
• During the third quarter, NXRT refinanced six mortgage loans, reducing the borrowing rates on each of the loans. These refinances, along with the refinanced mortgage loan in Q2, reduced spreads by a weighted average 54 basis points.
• On September 26, 2018, NXRT repaid the $30.0 million outstanding under the $30 Million Credit Facility and amended the loan agreement, extending the maturity date to September 26, 2020 and increasing the loan commitment to $60.0 million (the "$60 Million Credit Facility"). NXRT immediately drew $50.0 million to fund a portion of the purchase price of Brandywine I & II and Crestmont Reserve.
• On September 26, 2018, NXRT entered into a $30.0 million bridge facility (the "$30 Million Bridge Facility") with KeyBank and immediately drew $30.0 million to fund a portion of the purchase price of Brandywine I & II and Crestmont Reserve.
• The weighted average effective monthly rent per unit across all 35 properties held as of September 30, 2018 (the "Portfolio"), consisting of 12,555 units, was $979, while physical occupancy was 93.8%.
• NXRT paid a third quarter dividend of $0.25 per share of common stock on September 28, 2018.
• On October 29, 2018, our board of directors increased our quarterly dividend 10.0%, or by $0.025 per share, declaring a quarterly dividend of $0.275 per share, payable on December 31, 2018 to stockholders of record on December 17, 2018. The increase in our quarterly dividend to $0.275 per share is the third time we've increased our quarterly dividend, and results in a cumulative 33.5% increase in the dividend since becoming a public company on April 1, 2015.
• During the third quarter, for the properties in our Portfolio, we completed 439 full and partial upgrades and leased 330 upgraded units, achieving $110 average monthly rent premiums and a 25.4% ROI⁴. Since inception, for the properties in our Portfolio, we have completed 5,345 full and partial upgrades and achieved a $95 average monthly rental increase per unit, equating to a 22.6% ROI on all units leased as of September 30, 2018.

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 31 properties encompassing 11,091 units of apartment space in our Same Store pool for the three months ended September 30, 2018 (our "Q3 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 continued to experience robust demand for our well-located value-add communities in the third quarter, evidenced by 8.3% same store NOI growth. We are also pleased with the Board's approval of another double-digit increase to NXRT's quarterly dividend, buoyed by $131 million of accretive acquisitions in our core markets of Nashville and Dallas," stated NXRT Chairman and President, Jim Dondero.

Third Quarter 2018 Financial Results

• Total revenues were $36.5 million for the third quarter of 2018, compared to $37.1 million for the third quarter of 2017.
• Net loss for the third quarter of 2018 totaled $(5.3) million, or a loss of $(0.25) per diluted share, which included $11.2 million of depreciation and amortization expense and $2.9 million of loss on extinguishment of debt and modification costs. This compared to net income of $54.1 million, or earnings of $2.51 per diluted share, for the third quarter of 2017, which included $58.5 million of gain on sales of real estate, $11.2 million of depreciation and amortization expense and $0.9 million of loss on extinguishment and debt modification costs.
• The change in our net income (loss) between the periods primarily relates to decreases in total revenues and gain on sales of real estate and an increase is loss on extinguishment of debt and modification costs, and was partially offset by decreases in total property operating expenses and interest expense.
• For the third quarter of 2018, NOI was $20.0 million on 35 properties, compared to $19.5 million for the third quarter of 2017 on 32 properties.
• For the third quarter of 2018, Q3 Same Store NOI increased 8.3% to $19.0 million, compared to $17.6 million for the third quarter of 2017.
• For the third quarter of 2018, FFO totaled $5.9 million, or $0.28 per diluted share, compared to $6.8 million, or $0.32 per diluted share, for the third quarter of 2017.
• For the third quarter of 2018, Core FFO totaled $8.9 million, or $0.42 per diluted share, compared to $7.5 million, or $0.35 per diluted share, for the third quarter of 2017.
• For the third quarter of 2018, AFFO totaled $10.3 million, or $0.48 per diluted share, compared to $8.7 million, or $0.40 per diluted share, for the third quarter of 2017.

Third Quarter Earnings Conference Call

NXRT will host a call on Tuesday, October 30, 2018 at 11:00 a.m. ET to discuss its third quarter financial results. The conference call can be accessed live over the phone by dialing (800) 667-5617 or, for international callers, (334) 323-0505, and entering passcode 8481837. 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 6, 2018, by dialing (888) 203-1112 or, for international callers, (719) 457-0820 and entering passcode 8481837.

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 fourth quarter of 2018 and for the full year 2018, expected acquisitions and dispositions and the expected redevelopment of units. 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.

Contact:
Marilynn Meek
Financial Relations Board
212-827-3773

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 three and nine months ended September 30, 2018 and 2017 (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"), revised fourth quarter 2018 NOI guidance annualized ("Annualized 4^th Quarter 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 and Annualized 4^th Quarter NOI are 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. Annualized 4^th Quarter NOI is calculated by annualizing the mid-point of the Company's fourth quarter NOI guidance. 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 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 from total debt outstanding.

We believe that the use of NOI, Annualized 4^th Quarter 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, Annualized 4^th Quarter 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, Annualized 4^th Quarter 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, Annualized 4^th Quarter NOI, FFO, Core FFO, AFFO and net debt may not be comparable to NOI, Annualized 4^th Quarter NOI, FFO, Core FFO, AFFO and net debt reported by other REITs. For a more complete discussion of NOI, Annualized 4^th Quarter 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, 2018 and 2017

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles NOI and our Q3 and YTD Same Store NOI for the three and nine months ended September 30, 2018 and 2017 to net income (loss), the most directly comparable GAAP financial measure (in thousands):

Reconciliation of Debt to 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):

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, 2018 (in thousands, except per share data):

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SOURCE NexPoint Residential Trust, Inc.