NexPoint Residential Trust, Inc. (NYSE: NXRT) — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This filing reports annual results, not standalone fourth-quarter financials. The company is an externally managed REIT focused on value-add multifamily properties, primarily in the Southeastern and Southwestern United States. KPMG issued unqualified opinions on the financial statements and internal control over financial reporting.
Business context and portfolio
At year-end, NXRT reported 38 properties with 14,133 apartments across seven states. It renovates units and common areas to support rents and property-level net operating income (NOI). During 2023 it completed full or partial renovations on 2,073 units at an average cost of $12,303 per unit. Across renovated units leased since inception, the company reported average monthly rent growth of $169 (14.5%) and a 20.9% return on interior renovation capital.
Financial and operating performance
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Total revenue | $277.5 million | $264.0 million |
| Net income (loss) | $44.4 million | $(9.3) million |
| Net income attributable to common stockholders | $44.3 million | $(9.3) million |
| Diluted earnings (loss) per share | $1.69 | $(0.36) |
| NOI (non-GAAP) | $167.4 million | $157.4 million |
| FFO attributable to common stockholders (non-GAAP) | $71.4 million | $73.4 million |
| Core FFO attributable to common stockholders (non-GAAP) | $73.5 million | $81.8 million |
| AFFO attributable to common stockholders (non-GAAP) | $84.4 million | $91.4 million |
| Net cash provided by operating activities | $96.6 million | $79.1 million |
Revenue rose 5.1%, led by rental income, which increased to $270.1 million. Companywide weighted-average effective monthly rent per occupied unit rose 1.5% to $1,502. For the 2022–2023 same-store pool, NOI increased 8.2% to $145.0 million; year-end occupancy was 94.7%, while same-store effective rent was nearly flat at $1,509 versus $1,508.
Net income’s return to profitability was substantially influenced by $67.9 million of property-sale gains, up $53.2 million year over year. Before sale gains, operating income was $45.3 million versus $31.6 million. Interest expense increased $16.5 million to $67.1 million. FFO, Core FFO and AFFO declined year over year despite higher revenue and NOI. These are non-GAAP measures and should be considered alongside GAAP results, not as substitutes for them.
Liquidity, debt and capital allocation
Cash, cash equivalents and restricted cash totaled $45.3 million at year-end, including $12.4 million of cash and cash equivalents and $32.9 million of restricted cash. Management stated that available cash and expected operating cash flows were sufficient for obligations, debt service and distributions over the following 12 months. The Corporate Credit Facility had $24.0 million outstanding and $326.0 million available; it matures June 30, 2025, subject to extension provisions.
Total debt principal was approximately $1.6 billion. About $1.5 billion was floating-rate debt; swaps effectively fixed rates on approximately $1.2 billion, and caps covered about $1.3 billion at a weighted-average reference-rate cap of 5.90%. The reported weighted-average debt rate was 6.90%, or approximately 3.60% after the disclosed swap adjustment. Contractual debt principal payments include $68.5 million in 2024 and $177.4 million in 2025; the filing also lists $290.3 million in 2026. Interest-rate exposure, refinancing access and debt maturities remain important risks.
Operating cash flow was $96.6 million. Investing activities provided $51.9 million, including $117.8 million of net property-sale proceeds; financing activities used $155.0 million, reflecting debt reduction and distributions. The company declared $45.2 million of dividends, or $1.722 per share, for 2023; the fourth-quarter dividend was $0.46242 per share. The board declared the same quarterly amount in February 2024. No 2024 earnings or operating guidance is provided.
Material changes, outlook and risks
- NXRT sold Silverbrook and Timber Creek, totaling 994 units, for aggregate sales prices of $119.0 million and reported $67.9 million in gains. It made three principal payments totaling $50.5 million on the Corporate Credit Facility, bringing its year-end balance to $24.0 million.
- Management is targeting a gradual reduction in leverage to 40–45% loan-to-value, but this is a target, not a forecast or covenant. The company also expects to continue renovations and pursue acquisitions when suitable opportunities and financing are available.
- Management identified inflation, high interest rates, refinancing and capital-market access, competition, operating-cost growth, property-market conditions and concentration in the Southeast and Southwest as risks. Short-term leases can expose revenue to rent declines; value-add work carries cost, timing and execution risks.
- Three properties were classified as held for sale at year-end. A buyer previously terminated a sale agreement for Old Farm and Stone Creek and forfeited its deposit; the company later entered into an agreement to sell Old Farm for $103.0 million to NexBank, an Adviser affiliate. The filing does not establish that this sale closed by year-end.
- The company disclosed ongoing litigation involving its Sponsor and Jim Dondero, including the Highland-related Bankruptcy Trust Lawsuit and UBS Lawsuit. It states neither case asserts claims related to NXRT’s business or assets and does not expect a material effect; the Bankruptcy Trust Lawsuit was stayed as of January 30, 2024.
- The Adviser voluntarily waived $21.7 million of advisory and administrative fees in 2023; these waivers are permanent, but future waivers on New Assets are discretionary. The filing also discloses affiliate relationships and transactions, including the Old Farm sale agreement and fiber-internet arrangements.
Important facts for investors to verify
- Reconcile portfolio occupancy: the narrative and same-store disclosures cite 94.7%, while the property table’s total row reports 95.3%. Confirm the applicable definition and denominator.
- Review the debt schedule, floating-rate hedges and 2024–2026 maturities, including whether held-for-sale property dispositions or refinancing change expected cash needs.
- Assess dividend sustainability against AFFO, capital spending, debt service and REIT distribution requirements; FY2023 AFFO coverage of declared dividends was 1.87x on the company’s disclosed diluted per-share measure.
- Confirm the status and terms of the Old Farm sale to Adviser-affiliated NexBank, and the disposition plans for the other properties held for sale.
- Evaluate the assumptions and sensitivity underlying reported renovation returns and property impairment estimates; impairment testing was identified as a critical audit matter, although no impairment was recorded in 2023.
- Check the full financial statements and notes for related-party fees, the potential NLMF Holdco commitment of up to $4.0 million, and subsequent developments in disclosed litigation.