Business Context and Reporting Period
This Form 8-K, filed on August 28, 2019, by NexPoint Residential Trust, Inc. (NXRT), reports the completion of significant asset dispositions and acquisitions. The filing details the sale of a portfolio of residential properties and the acquisition of the Pembroke Apartments, with pro forma financial data presented as of June 30, 2019, and for the periods ended June 30, 2019, and December 31, 2018.
Key Financial Metrics
Transaction Values
- Portfolio Sale: Approximately $289.9 million for The Pointe at the Foothills, Belmont at Duck Creek, The Ashlar, Heatherstone, Edgewater at Sandy Springs, and Abbington Heights.
- Pembroke Acquisition: Approximately $322.0 million.
Pro Forma Financial Position (as of June 30, 2019)
| Metric | Value (in thousands) |
|---|---|
| Total Assets | $1,255,172 |
| Total Liabilities | $856,285 |
| Stockholders' Equity | $395,855 |
| Cash and Cash Equivalents | $155,940 |
| Mortgages Payable, Net | $769,973 |
Pro Forma Operating Results
- Six Months Ended June 30, 2019:
- Total Revenues: $70,968
- Operating Income: $5,058
- Net Loss Attributable to Common Stockholders: $(8,497)
- Loss Per Share (Diluted): $(0.36)
- Year Ended December 31, 2018:
- Total Revenues: $120,436
- Operating Income: $11,867
- Net Loss Attributable to Common Stockholders: $(557)
- Loss Per Share (Diluted): $(0.03)
Material Changes Versus Prior Period
The pro forma adjustments reflect the removal of the sold Portfolio's assets, liabilities, revenues, and expenses. Key changes include:
- Asset Reduction: Total assets decreased by approximately $21.7 million in the pro forma balance sheet due to the net impact of the disposition (removal of real estate held for sale and associated liabilities, offset by cash proceeds).
- Revenue Impact: Pro forma revenues for the six months ended June 30, 2019, decreased by $13.589 million compared to historical figures due to the exclusion of the sold Portfolio's rental and other income.
- Expense Reduction: Total expenses decreased by $8.329 million for the same period, driven by lower property operating expenses, real estate taxes, and depreciation.
- Debt Reduction: Mortgages payable held for sale decreased by $143.4 million, reflecting the payoff of debt associated with the sold assets.
Guidance, Outlook, and Risks
Use of Proceeds: The Company intends to use the proceeds from the $289.9 million sale to fund a portion of the purchase price for the Pembroke Apartments (closed August 30, 2019) and the previously disclosed acquisition of the Arbors of Brentwood.
Forward-Looking Statements: The filing contains forward-looking statements regarding the expected use of proceeds and future acquisitions. Management notes these are subject to risks and uncertainties, including market conditions and financing availability, which could cause actual results to differ materially.
Financial Statement Filing: Detailed financial statements and pro forma information for the Pembroke Apartments acquisition are not included in this report but will be filed by an amendment no later than November 18, 2019.
Investor Verification Checklist
- Verify the final closing details and purchase price of the Arbors of Brentwood acquisition.
- Review the upcoming amendment (due November 18, 2019) for pro forma financial data regarding the Pembroke Apartments acquisition.
- Confirm the impact of the portfolio sale on the Company's leverage ratios and debt maturity profile.
- Assess the occupancy and rental rate performance of the remaining portfolio versus the sold assets.
- Monitor the Company's cash flow generation post-transaction to ensure sufficient liquidity for ongoing operations and future acquisitions.