NexPoint Residential Trust, Inc. — Q1 2021 Form 10-Q
Business context and reporting period
For the three months ended March 31, 2021, NexPoint Residential Trust (NXRT) operated a portfolio of value-add multifamily properties, primarily in the Southeastern and Southwestern United States. At quarter-end, the portfolio comprised 37 properties and 14,205 apartment units; management reported approximately 95.3% leased occupancy and average effective monthly rent of $1,130 per occupied unit. NXRT is externally managed and elected REIT tax treatment.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / prior date |
|---|---|---|
| Total revenue | $51.8 million | $52.6 million |
| Net income (loss) attributable to common stockholders | $(6.9) million; $(0.27) per share | $28.0 million; $1.10 per share |
| Operating income before property-sale gains | $3.2 million | $1.6 million |
| Cash provided by operating activities | $13.7 million | $11.4 million |
| FFO / Core FFO / AFFO, attributable to common stockholders | $13.8 million / $14.1 million / $16.0 million | $12.4 million / $13.6 million / $15.3 million |
| Total assets | $1.810 billion | $1.829 billion at Dec. 31, 2020 |
| Cash and cash equivalents; restricted cash | $22.7 million; $29.9 million | $24.5 million; $32.6 million at Dec. 31, 2020 |
| Debt principal | Approximately $1.351 billion | — |
Revenue declined 1.5%. Rental income fell about $0.8 million, primarily reflecting 2020 acquisitions and dispositions; same-store rental income increased 2.2%. Same-store NOI was $28.3 million, down 0.3%, with higher property taxes and insurance partly offsetting rent and occupancy gains. Interest expense decreased $1.0 million to $10.6 million. Q1 2020 included $39.0 million of property-sale gains, explaining much of the year-over-year swing from net income to net loss. FFO, Core FFO and AFFO are non-GAAP supplemental measures, not substitutes for GAAP earnings or cash flow.
Net cash used in investing activities was $7.6 million, mainly reflecting $10.8 million of real estate additions, partly offset by casualty-insurance proceeds. Net cash used in financing activities was $10.5 million, including $8.9 million of common dividends paid. Cash, cash equivalents and restricted cash totaled $52.6 million at quarter-end. Mortgage debt had a reported weighted-average rate of 1.79%; the company cited an adjusted rate of 3.06% after considering swaps. Interest-rate swaps hedge substantially all floating-rate mortgage debt, while caps cover $379.4 million.
Material changes versus the prior comparable period
- Net loss replaced prior-year net income, principally because Q1 2020 included $39.0 million of real estate-sale gains; no properties were sold in Q1 2021.
- Same-store occupancy improved to 95.3% from 94.2% and same-store effective rent increased to $1,127 from $1,114, but same-store NOI edged down as operating costs rose, notably real estate taxes and insurance, up 14.2%.
- Operating cash flow rose to $13.7 million from $11.4 million. Investing cash flow shifted from $72.3 million provided in Q1 2020 to $7.6 million used in Q1 2021, largely reflecting prior-year property sales.
- Q1 2021 declared dividends were $0.34125 per share versus $0.3125 in Q1 2020. The board subsequently declared another $0.34125 per share, payable June 30, 2021.
Outlook, risks and unusual items
- Near-term debt refinancing: The $183 million corporate credit facility matures January 28, 2022. Management said it must secure alternative repayment funding and was evaluating an extension or recast, additional debt or equity, property sales, or a combination. The facility had $42 million of unused capacity; management believed liquidity and capital access would be sufficient, but no refinancing solution was reported as finalized.
- COVID-19 collections: Management said the pandemic had not materially affected the business to date, but 3,257 residents were on payment plans representing approximately $4.7 million of rent at quarter-end. The company cited potential effects on collections, leasing, asset values and capital access.
- Casualty events: Winter Storm Uri caused approximately $2.0 million of property write-downs; 57 units were temporarily excluded from the portfolio count, with reconstruction expected in 2021. Insurance recovery was not finalized at quarter-end. Other casualty-related reconstruction left a total of 229 units down across affected properties.
- Other exposures: The portfolio is concentrated in selected U.S. markets; property taxes, real-estate operating costs, interest rates, refinancing access and the transition from LIBOR are material risks. Management noted material contracts indexed to USD-LIBOR and was evaluating transition risks.
- No real estate impairment was recorded in the quarter; management reported no material litigation and no material change to previously disclosed risk factors. The filing provides no formal earnings or operating guidance.
Key facts for investors to verify
- Progress and committed terms for refinancing or repaying the $183 million facility due in January 2022.
- Collections and repayment performance for the $4.7 million of COVID-related rent payment plans.
- Repair timelines, units returned to service and insurance settlements for winter-storm and other casualty damage.
- Whether rent growth and occupancy can offset continued property-tax and insurance cost increases.
- LIBOR transition plans, swap expirations and the resulting effective borrowing costs.