NexPoint Residential Trust, Inc. — FY2020 Form 10-K
Reporting period: Year ended December 31, 2020; filed February 22, 2021. NXRT is an externally managed REIT focused on value-add multifamily properties, primarily in the Southeastern and Southwestern United States. The filing reports annual results, not standalone fourth-quarter financial statements.
Business and portfolio
- At year-end, the Company reported 37 properties across seven states, with occupancy of approximately 94.1% and weighted-average effective monthly rent of $1,128 per occupied unit.
- Completed one acquisition: Fairways at San Marcos, Arizona, for $84.5 million (352 units). Sold four properties for $142.0 million in aggregate; net cash proceeds were $140.2 million.
- Renovated 1,679 units during 2020 at an average cost of $6,011 per unit. Across renovated units leased since inception, management reported 10.9% average rent growth and a 22.5% return on interior-renovation capital.
Financial performance
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Total revenue | $204.8 million | $181.1 million | +13.1% |
| Net income | $44.2 million | $99.4 million | -55.6% |
| Diluted EPS | $1.74 | $4.03 | Lower |
| NOI (non-GAAP) | $116.1 million | $102.6 million | +13.2% |
| FFO per diluted share (non-GAAP) | $2.27 | $1.66 | +37.0% |
| Core FFO per diluted share (non-GAAP) | $2.20 | $1.93 | +13.7% |
| AFFO per diluted share (non-GAAP) | $2.47 | $2.20 | +12.3% |
| Operating cash flow | $57.2 million | $51.4 million | +$5.9 million |
| Dividends declared per share | $1.279 | $1.138 | +12.4% |
Revenue growth reflected acquisitions and higher rents; same-store rental income rose 3.9% and same-store NOI rose 3.2%, while same-store occupancy edged down to 94.2% from 94.3%. Net income fell mainly because gains on property sales declined by $58.5 million, from $127.7 million to $69.2 million. Higher property costs and depreciation also weighed on GAAP earnings. NOI, FFO, Core FFO and AFFO are non-GAAP measures and are not substitutes for GAAP income or cash flow.
- Cash and liquidity: Cash and cash equivalents were $24.5 million; restricted cash was $32.6 million, for $57.0 million combined cash, cash equivalents and restricted cash. The Company said $10.6 million was reserved for renovations and $21.9 million for lender escrows and security deposits. It also reported $42.0 million of unused Corporate Credit Facility capacity.
- Debt: Year-end debt was approximately $1.35 billion net of deferred financing costs (about $1.4 billion total indebtedness as described in market-risk disclosures). Mortgage debt was $1.2 billion; the Corporate Credit Facility had $183.0 million outstanding and matures January 28, 2022. Management said alternative funding would be needed to repay that facility and was evaluating refinancing, new financing, equity, asset sales, or a combination.
- Interest-rate exposure: Reported total debt had a 1.94% weighted-average rate and 3.06% adjusted rate after swaps. Swaps effectively fixed rates on $1.1 billion of floating-rate mortgage debt; caps covered $393.0 million. LIBOR transition and refinancing remain risks.
- Equity and capital returns: 2020 ATM sales generated $57.7 million net proceeds across the 2019 and 2020 programs. The Company repurchased 1.645 million shares for $44.5 million. Diluted AFFO covered declared dividends 1.94x, as calculated by the Company.
Outlook, risks and unusual items
- Management said available cash, expected operating cash flow and potential financings should cover operations, scheduled debt service and dividend requirements for the 12 months following year-end 2020. Its stated longer-term leverage target is 40–45% loan-to-value; no actual year-end LTV is clearly stated in the provided text.
- COVID-19 created uncertainty around rent collections, property operations, capital access and covenant compliance. At year-end, 173 residents were on payment plans for approximately $0.1 million of rent; the Company recorded $0.5 million of pandemic-related property costs.
- Unusual property events included tornado damage and reconstruction at Cutter’s Point, plus fires at Venue 8651 and Timber Creek. Insurance recoveries contributed to 2020 casualty gains and business-interruption income. Cutter’s Point’s remaining 136 units were expected to return to service in 2021.
- The Company reported no real-estate impairment charges in 2020. Its financial statements and internal controls received unqualified audit opinions; management and the auditor reported effective internal control over financial reporting.
- Principal risks include high leverage and the near-term credit-facility maturity, variable-rate debt and LIBOR replacement, COVID-19 effects, geographic concentration, property-level and environmental liabilities, REIT qualification, and conflicts or dependence associated with external management and affiliated service providers.
Important facts for investors to verify
- Confirm the repayment or refinancing plan for the $183.0 million Corporate Credit Facility due in January 2022, including covenant headroom and available liquidity.
- Reconcile reported portfolio unit counts: the filing cites 14,069 units in its overview but 14,205 in a property table; Cutter’s Point was under reconstruction and excluded from certain portfolio metrics.
- Review rent collections, payment-plan balances, occupancy and concessions after year-end as COVID-19 conditions evolved.
- Assess the sustainability of distributions against recurring cash generation and capital needs; GAAP earnings include material property-sale gains, while FFO/AFFO are non-GAAP measures.
- Track interest-rate hedges, hedge expirations and the transition from LIBOR, as well as 2021–2025 mortgage maturities and refinancing assumptions.