Le Lézard
Classified in: Business
Subjects: ERN, CCA, ERP

NexPoint Residential Trust, Inc. Reports Fourth Quarter And Full Year 2018 Results


DALLAS, Feb. 19, 2019 /PRNewswire/ -- NexPoint Residential Trust, Inc. (NYSE:NXRT) reported financial results for the fourth quarter and year ended December 31, 2018.

Highlights

  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 29 properties encompassing 10,123 units of apartment space in our 2017-2018 Same Store pool for the year ended December 31, 2018 (our "2017-2018 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 fourth quarter, evidenced by 7.4% year-over-year same store NOI growth. We also completed our first equity raise since listing in April 2015, with the proceeds being used to pay down the outstanding balances under our credit and bridge facilities, which helped capitalize the purchases of two well-located value-add properties exhibiting significant upside potential in our core markets. As we move into 2019, we continue to see healthy demand, from both renters and investors, for well-located work force housing with value-add potential," stated NXRT Chairman and President, Jim Dondero.

Full Year 2018 Financial Results

Fourth Quarter 2018 Financial Results

  1. There are 31 properties encompassing 11,091 units of apartment space in our Q4 Same Store pool for the three months ended December 31, 2018 (our "Q4 Same Store" properties).

Subsequent Events

Acquisition of Multifamily Properties

We acquired the following properties, structured as a reverse 1031 Exchange, as a portfolio (the "Phoenix Portfolio") subsequent to December 31, 2018 (dollars in thousands):

Property Name


Location


Date of Acquisition


Purchase Price


Mortgage Debt


# Units


Effective Ownership


Bella Vista Apartment
Homes


Phoenix, Arizona


January 28,
2019


$

48,400


$

29,040



248



100

%

The Enclave Apartment
Homes


Tempe, Arizona


January 28,
2019



41,800



25,322



204



100

%

The Heritage Apartment
Homes


Phoenix, Arizona


January 28,
2019



41,900



24,625



204



100

%







$

132,100

(1)

$

78,987

(2)


656







(1)

We used approximately $52.5 million of proceeds drawn under a credit facility (see "$75 Million Credit Facility" below) to fund a portion of the purchase price of the Phoenix Portfolio and planned value-add improvements to the Phoenix Portfolio.

(2)

Each of the first mortgages on the properties has an 84-month term and bears interest at a rate of one-month LIBOR plus 1.32%.

$75 Million Credit Facility

On January 28, 2019, we, through NexPoint Residential Trust Operating Partnership, L.P. (the "OP"), our operating partnership, entered into a $75.0 million credit facility (the "$75 Million Credit Facility") with SunTrust Bank, as administrative agent and the lenders party thereto, and immediately drew $52.5 million to fund a portion of the purchase price of the Phoenix Portfolio. The $75 Million Credit Facility is a full-term, interest-only facility with an initial 24-month term, has one 12-month extension option, bears interest at a rate of one-month LIBOR plus a range from 2.00% to 2.50%, depending on our leverage level as determined under the credit facility agreement, and is guaranteed by us.

Fourth Quarter Earnings Conference Call

NXRT will host a call on Tuesday, February 19, 2019 at 11:00 a.m. ET to discuss its fourth quarter and full year financial results. The conference call can be accessed live over the phone by dialing (877) 260-1479 or, for international callers, (334) 323-0522, and entering passcode 6973716. A live audio webcast of the call will be available online at NXRT's website, http://www.nexpointliving.com (under "Investor Relations"). An online replay will be available shortly after the call on NXRT's website and continue to be available for 60 days.

A replay of the conference call will also be available through Tuesday, February 26, 2019, by dialing (888) 203-1112 or, for international callers, (719) 457-0820 and entering passcode 6973716.

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 full year 2019, expected acquisitions and dispositions, demand for well-located work force housing with value-add potential, the expected redevelopment of units, the projected average rent, the projected rent change and the projected return on investment after redevelopment and the planned green improvements. 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:
Investor Relations
Jackie Graham
972-419-6213

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 years ended December 31, 2018, 2017 and 2016 and for the three months ended December 31, 2018 and 2017 (in thousands, except per share amounts):




For the Year Ended December 31,



For the Three Months Ended
December 31,




2018



2017



2016



2018



2017


Net income (loss)


$

(1,614)



$

56,359



$

25,888



$

(4,782)



$

(4,343)


Depreciation and amortization



47,470




48,752




35,643




13,832




12,886


Gain on sales of real estate



(13,742)




(78,365)




(25,932)




?




21


Adjustment for noncontrolling interests



(96)




(1,695)




(4,583)




(26)




(25)


FFO attributable to common stockholders



32,018




25,051




31,016




9,024




8,539























FFO per share - basic


$

1.51



$

1.19



$

1.46



$

0.41



$

0.41


FFO per share - diluted


$

1.48



$

1.17



$

1.46



$

0.40



$

0.40























Acquisition costs



?




?




386




?




?


Loss on extinguishment of debt and modification costs



3,576




5,719




1,722




?




2


Casualty-related expenses/(recoveries)



(663)




(287)




151




39




64


Change in fair value on derivative instruments - ineffective portion



?




(309)




(1,683)




?




(212)


Amortization of deferred financing costs -
acquisition term notes



159




403




?




138




80


Adjustment for noncontrolling interests



(9)




(430)




(107)




?




1


Core FFO attributable to common stockholders



35,081




30,147




31,485




9,201




8,474























Core FFO per share - basic


$

1.66



$

1.43



$

1.48



$

0.41



$

0.40


Core FFO per share - diluted


$

1.62



$

1.41



$

1.48



$

0.41



$

0.40























Amortization of deferred financing costs - long
term debt



1,491




1,592




1,423




430




367


Equity-based compensation expense



4,198




3,109




825




1,095




694


Adjustment for noncontrolling interests



(17)




(76)




(140)




(5)




(4)


AFFO attributable to common stockholders



40,753




34,772




33,593




10,721




9,531























AFFO per share - basic


$

1.92



$

1.65



$

1.58



$

0.48



$

0.45


AFFO per share - diluted


$

1.88



$

1.62



$

1.58



$

0.47



$

0.45























Weighted average common shares outstanding - basic



21,189




21,057




21,232




22,207




21,055


Weighted average common shares outstanding - diluted



21,667




21,399




21,314




22,672




21,375























Dividends declared per common share


$

1.025



$

0.910



$

0.838



$

0.275



$

0.250























FFO Coverage - diluted

(1)

1.44x




1.29x



1.74x



1.45x



1.60x


Core FFO Coverage - diluted

(1)

1.58x



1.55x



1.76x



1.48x



1.59x


AFFO Coverage - diluted

(1)

1.84x



1.79x



1.88x



1.72x



1.78x




(1)

Indicates coverage ratio of FFO/Core FFO/AFFO per common share (diluted) over dividends declared per common share during the period.

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"), 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 is 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. 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 and defeasance costs 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 and green improvements from total debt outstanding.

We believe that the use of 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, 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, 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, FFO, Core FFO, AFFO and net debt may not be comparable to NOI, FFO, Core FFO, AFFO and net debt reported by other REITs. For a more complete discussion of 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 2017-2018 Same Store NOI for the Years Ended December 31, 2018 and 2017

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our NOI and our 2017-2018 Same Store NOI for the years ended December 31, 2018 and 2017 to net income (loss), the most directly comparable GAAP financial measure (in thousands): 



For the Year Ended December 31,




2018



2017


Net income (loss)


$

(1,614)



$

56,359


Adjustments to reconcile net income (loss) to NOI:









   Advisory and administrative fees



7,474




7,419


   Corporate general and administrative expenses



7,808




6,275


   Casualty-related recoveries

(1)


(663)




(287)


   Property general and administrative expenses

(2)


1,294




1,130


   Depreciation and amortization



47,470




48,752


   Interest expense



28,572




29,576


   Loss on extinguishment of debt and modification costs



3,576




5,719


   Gain on sales of real estate



(13,742)




(78,365)


NOI


$

80,175



$

76,578


Less Non-Same Store









   Revenues



(23,012)




(25,765)


   Operating expenses



10,744




12,433


Same Store NOI


$

67,907



$

63,246




(1)

Adjustment to net income (loss) to exclude certain property operating expenses that are casualty-related recoveries.

(2)

Adjustment to net income (loss) to exclude certain property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional and franchise tax fees.

NOI and 2016-2018 Same Store NOI for the Years Ended December 31, 2018, 2017 and 2016

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our NOI and our 2016-2018 Same Store NOI for the years ended December 31, 2018, 2017 and 2016 to net income (loss), the most directly comparable GAAP financial measure (in thousands):



For the Year Ended December 31,




2018



2017



2016


Net income (loss)


$

(1,614)



$

56,359



$

25,888


Adjustments to reconcile net income (loss) to NOI:













   Advisory and administrative fees



7,474




7,419




6,802


   Corporate general and administrative expenses



7,808




6,275




4,014


   Casualty-related expenses/(recoveries)

(1)


(663)




(287)




151


   Property general and administrative expenses

(2)


1,294




1,130




879


   Depreciation and amortization



47,470




48,752




35,643


   Interest expense



28,572




29,576




20,167


   Loss on extinguishment of debt and modification costs



3,576




5,719




1,722


   Gain on sales of real estate



(13,742)




(78,365)




(25,932)


   Acquisition costs



?




?




386


NOI


$

80,175



$

76,578



$

69,720


Less Non-Same Store













   Revenues



(43,978)




(46,094)




(41,001)


   Operating expenses



20,939




22,761




20,374


Same Store NOI


$

57,136



$

53,245



$

49,093




(1)

Adjustment to net income (loss) to exclude certain property operating expenses that are casualty-related expenses/(recoveries).

(2)

Adjustment to net income (loss) to exclude certain property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional and franchise tax fees.

NOI and Q4 Same Store NOI for the Three Months Ended December 31, 2018 and 2017

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our NOI and our Q4 Same Store NOI for the three months ended December 31, 2018 and 2017 to net loss, the most directly comparable GAAP financial measure (in thousands):



For the Three Months Ended December 31,




2018



2017


Net loss


$

(4,782)



$

(4,343)


Adjustments to reconcile net loss to NOI:









   Advisory and administrative fees



1,888




1,875


   Corporate general and administrative expenses



2,077




1,433


   Casualty-related expenses

(1)


39




64


   Property general and administrative expenses

(2)


364




226


   Depreciation and amortization



13,832




12,886


   Interest expense



7,833




7,097


   Loss on extinguishment of debt and modification costs



?




2


   Gain on sales of real estate



?




21


NOI


$

21,251



$

19,261


Less Non-Same Store









   Revenues



(4,816)




(1,865)


   Operating expenses



2,238




1,053


Same Store NOI


$

18,673



$

18,449




(1)

Adjustment to net loss to exclude certain property operating expenses that are casualty-related expenses.

(2)

Adjustment to net loss to exclude certain property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional and franchise tax fees.

Reconciliation of Debt to Net Debt

(dollar amounts in thousands)


FY 2018



FY 2017



FY 2016


Total mortgage debt


$

845,713



$

762,404



$

425,426


Credit facilities



?




30,000




315,000


Bridge facility



?




8,597




30,000


   Adjustments to arrive at net debt:













   Cash and cash equivalents



(19,864)




(16,036)




(22,705)


   Restricted cash held for value-add upgrades and green improvements



(5,209)




(9,052)




(13,448)


Net Debt


$

820,640



$

775,913



$

734,273


Enterprise Value (1)


$

1,644,640



$

1,363,913



$

1,204,273


Leverage Ratio



50

%



57

%



61

%



(1)

Enterprise Value is calculated as Market Capitalization plus 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 our NOI guidance to our net loss (the most directly comparable GAAP financial measure) guidance for the year ended December 31, 2019 and for the three months ended March 31, 2019 (in thousands):



For the Year Ended

December 31, 2019



For the Three Months Ended

March 31, 2019




Mid-Point (1)



Mid-Point (1)


Net loss


$

(17,040)



$

(5,550)


Adjustments to reconcile net loss to NOI:









   Advisory and administrative fees



7,500




1,850


   Corporate general and administrative expenses



9,000




2,190


   Property general and administrative expenses

(2)


1,295




320


   Depreciation and amortization



62,225




15,900


   Interest expense



34,170




8,040


NOI


$

97,150



$

22,750


Less Non-Same Store









   Revenues

(3)


(23,350)




(5,050)


   Operating expenses

(3)


8,650




1,900


Same Store NOI

(3)

$

82,450



$

19,600




(1)

Mid-point estimates shown for full year and first quarter 2019 guidance. Assumptions made for full year and first quarter 2019 NOI guidance include the Same Store operating growth projections included in the "2019 Full Year Guidance Summary" section of this release, the effect of the acquisition of the Phoenix Portfolio, and assumes no further acquisition or disposition activity for the remainder of the year.

(2)

Adjustment to net loss to exclude certain property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional and franchise tax fees.

(3)

Amounts are derived from the results of operations of our pro forma Full Year 2019 Same Store properties and Non-Same Store properties. There are 32 properties in our pro forma Full Year 2019 Same Store pool.

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, 2019 (in thousands, except per share data):



For the Year Ended

December 31, 2019




Mid-Point


Net loss


$

(17,040)


Depreciation and amortization



62,225


Adjustment for noncontrolling interests



(136)


FFO attributable to common stockholders



45,049


FFO per share - diluted (1)


$

1.87







Core FFO attributable to common stockholders



45,049


Core FFO per share - diluted (1)


$

1.87







Amortization of deferred financing costs - long term debt



1,815


Equity-based compensation expense



5,165


Adjustment for noncontrolling interests



(21)


AFFO attributable to common stockholders



52,008


AFFO per share - diluted (1)


$

2.16







Weighted average common shares outstanding - diluted



24,100




(1)

For purposes of calculating per share data, we assume a weighted average diluted share count of approximately 24.1 million for the full year 2019.

 

SOURCE NexPoint Residential Trust, Inc.


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