UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 28, 2019
NEXPOINT RESIDENTIAL TRUST, INC.
(Exact Name Of Registrant As Specified In Its Charter)
Maryland | 001-36663 | 47-1881359 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
300 Crescent Court, Suite 700
Dallas, Texas 75201
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (972)628-4100
Check the appropriate box below if the Form8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule14a-12 under the Exchange Act (17 CFR240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule14d-2(b) under the Exchange Act (17 CFR240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule13e-4(c) under the Exchange Act (17 CFR240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.01 per share | NXRT | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule12b-2 of the Securities Exchange Act of 1934(§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Explanatory Note
In its Current Report onForm 8-K, filed with the Securities and Exchange Commission on September 3, 2019 (the “Initial Report”), NexPoint Residential Trust, Inc. reported that it completed the acquisition of a1,520-unit multifamily property located in Pembroke Pines, Florida, a suburb of Miami from an unaffiliated third party for approximately $322 million. This Current Report onForm 8-K/A amends and supplements the Initial Report to provide the historical financial statements and unaudited pro forma information required by Item 9.01(a) and (b) ofForm 8-K. ThisForm 8-K/A should be read in conjunction with the Initial Report.
Item 9.01. | Financial Statements and Exhibits. |
(a) Financial Statement.
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5 | ||
Notes to Historical Statement of Revenues and Certain Direct Operating Expenses | 6 |
(b) Pro Forma Financial Information.
8 | ||
Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2019 | 9 | |
10 | ||
Notes to Unaudited Pro Forma Consolidated Financial Statements | 12 |
(d) Exhibits.
Exhibit | Exhibit Description | |
23.1 |
2
To the Stockholders and Board of Directors
NexPoint Residential Trust, Inc.
We have audited the accompanying historical statement of revenues and certain direct operating expenses of The Avant at Pembroke Pines (the “Property”) for the year ended December 31, 2018, and the related notes to the financial statement.
Management’s Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of the financial statement in accordance with accounting principles generally accepted in the United States of America and in accordance with applicable rules and regulations of the Securities and Exchange Commission for real estate properties acquired; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of a financial statement that is free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement.
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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain direct operating expenses of the Property for the year ended December 31, 2018, in accordance with accounting principles generally accepted in the United States of America and in accordance with applicable rules and regulations of the Securities and Exchange Commission for real estate properties acquired.
Emphasis of Matter
We draw attention to Note 2 to the accompanying financial statement, which describes that the statement of revenues and certain direct operating expenses of the Property was prepared for the purpose of complying with the rules of the Securities and Exchange Commission (for the inclusion on Form8-K/A of NexPoint Residential Trust, Inc.) and is not intended to be a complete presentation of the Property’s’ revenues and expenses. Our opinion has not been modified with respect to this matter.
/s/ Frazier & Deeter, LLC
Atlanta, Georgia
November 12, 2019
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THE AVANT AT PEMBROKE PINES
HISTORICAL STATEMENTS OF REVENUES AND CERTAIN DIRECT
OPERATING EXPENSES
For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||
(Unaudited) | ||||||||
Revenues | ||||||||
Rental income | $ | 12,735 | $ | 24,433 | ||||
Other income | $ | 2,201 | $ | 3,892 | ||||
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Total revenues | 14,936 | 28,325 | ||||||
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Certain direct operating expenses | ||||||||
Property operating expenses | 3,422 | 6,238 | ||||||
Real estate taxes and insurance | 2,988 | 5,619 | ||||||
Property management fees | 298 | 567 | ||||||
Property general and administrative expenses | 367 | 722 | ||||||
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Total certain direct operating expenses | 7,075 | 13,146 | ||||||
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Revenues in excess of certain direct operating expenses | $ | 7,861 | $ | 15,179 | ||||
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See accompanying notes to the historical financial statements
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THE PEMBROKE APARTMENTS
NOTES TO HISTORICAL STATEMENTS OF REVENUES AND CERTAIN
DIRECT OPERATING EXPENSES
Note 1. Business
On August 30, 2019, NexPoint Residential Trust, Inc. (the “Company”), through its operating partnership, NexPoint Residential Trust Operating Partnership, L.P. (the “OP”), acquired The Avant at Pembroke Pines (the “Property”) in Pembroke Pines, Florida for approximately $322.0 million. The accompanying historical statements of revenues and certain direct operating expenses (“Historical Summary”) include the revenues and certain expenses of the Property.
Note 2. Basis of Presentation
The accompanying Historical Summary has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (the “SEC”), and is not intended to be a complete presentation of the Property’s revenues and expenses.
The accompanying statements of revenues and certain direct operating expenses are presented in conformity with generally accepted accounting principles in the United States of America (“GAAP”) and in accordance with the provisions of Rule3-14 of RegulationS-X promulgated by the SEC. Accordingly, the statements exclude historical income and expenses that are not comparable to the proposed future operations of the Property such as ancillary income, depreciation, amortization, interest and corporate expenses. Therefore, the statements will not be comparable to the statements of operations of the Property after their acquisition by the Company and are not intended to be a complete representation of the Property’s revenues and expenses.
Note 3. Unaudited Interim Information
The Historical Summary for the six months ended June 30, 2019 has been prepared in accordance with GAAP for interim financial information. In the opinion of the Property’s management, all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation (in accordance with Basis of Presentation as described in Note 2) have been made to the accompanying unaudited amounts for the six months ended June 30, 2019.
Note 4. Significant Accounting Policies
Revenues
The Property contains apartment units occupied under various lease agreements with residents, typically with terms of 12 months or less. All leases are accounted for as operating leases. Rental income is recognized as earned over the life of the lease agreements on a straight-line basis. Some of the leases include provisions under which the Property is reimbursed for certain operating costs. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to residents pursuant to the lease agreements. Other rental income consists of charges billed to residents for utilities reimbursements, administrative, application, and other fees and is recognized when earned.
Certain Direct Operating Expenses
Certain direct operating expenses include only those costs expected to be comparable to the proposed future operations of the Property. Property operating costs includes property staff salaries, marketing, utilities, landscaping, repairs and maintenance, and other general costs associated with operating the Property. Costs such as depreciation, amortization, interest and corporate expenses are excluded from the Historical Summary.
Use of Estimates
The preparation of financial statements, as described in Note 2 and in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
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THE PEMBROKE APARTMENTS
NOTES TO HISTORICAL STATEMENTS OF REVENUES AND CERTAIN
DIRECT OPERATING EXPENSES
Note 5. Commitments and Contingencies
Litigation
The Property may become party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its results of operations or financial condition.
Other Matters
The Company is not aware of any material environmental liabilities relating to the Property that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environment laws and regulations or other environmental conditions with respect to the Property could result in future environmental liabilities.
Note 6. Related Party Transactions
The previous owner of the Property engaged a related party (the “Manager”) to operate theday-to-day management of the Property. The Manager is deemed to be a related party due to its affiliation with one of the members of the owner of the Property. The property management agreement includes management fees, administration costs for payroll and benefits, and expense reimbursements. For the year ended December, 31, 2018, in accordance with the management agreement, management fees, administration costs for payroll and benefits, and expense reimbursements totaled approximately $1.2 million. Management fees are included in property management fees on the Historical Summary. Administration costs for payroll and benefits and expense reimbursements are included in property general and administrative expenses on the Historical Summary.
Note 7. Subsequent Events
In preparation of the accompanying Historical Summary, subsequent events were evaluated for recognition or disclosure through November 12, 2019, which is the date the Historical Summary was issued.
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NEXPOINT RESIDENTIAL TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma information should be read in conjunction with the Company’s historical consolidated financial statements and the notes thereto as filed in the Company’s Annual Report on Form10-K for the year ended December 31, 2018, which was filed with the SEC on February 19, 2019, and the Company’s Quarterly Report on Form10-Q for the six months ended June 30, 2019, which was filed with the SEC on July 30, 2019. In addition, this unaudited pro forma information should be read in conjunction with the historical statements of revenues and certain direct operating expenses and the notes thereto of the Property, which are included herein.
The following unaudited pro forma consolidated balance sheet as of June 30, 2019 has been prepared to give effect to the acquisition of the Property, which occurred on August 30, 2019, as if the acquisition occurred on June 30, 2019.
The following unaudited pro forma consolidated statement of operations for the six months ended June 30, 2019 and for the year ended December 31, 2018 has been prepared to give effect to the acquisition of the Property as if the acquisition occurred on January 1, 2018.
These unaudited pro forma consolidated financial statements are prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had the acquisition of the Property been consummated on January 1, 2018 or June 30, 2019.
In the opinion of the Company’s management, all adjustments necessary to reflect the effect of the transaction described above have been included in the pro forma consolidated financial statements.
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NEXPOINT RESIDENTIAL TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 2019
(in thousands, except share and per share amounts)
�� | NXRT, Inc. (Historical) (a) | Purchase of Property (b) | Pro Forma Total | |||||||||
ASSETS | ||||||||||||
Operating Real Estate Investments | ||||||||||||
Land | $ | 203,748 | $ | 48,436 | $ | 252,184 | ||||||
Buildings and improvements | 914,771 | 265,580 | 1,180,351 | |||||||||
Intangible lease assets | 2,971 | 6,989 | 9,960 | |||||||||
Construction in progress | 612 | — | 612 | |||||||||
Furniture, fixtures, and equipment | 57,545 | 3,102 | 60,647 | |||||||||
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Total Gross Operating Real Estate Investments | 1,179,647 | 324,107 | 1,503,754 | |||||||||
Accumulated depreciation and amortization | (127,118 | ) | — | (127,118 | ) | |||||||
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Total Net Operating Real Estate Investments | 1,052,529 | 324,107 | 1,376,636 | |||||||||
Real estate held for sale, net of accumulated depreciation of $33,305 | 175,968 | — | 175,968 | |||||||||
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Total Net Real Estate Investments | 1,228,497 | 324,107 | 1,552,604 | |||||||||
Cash and cash equivalents | 16,892 | (148,821 | )(c) | (131,929 | ) | |||||||
Restricted cash | 22,676 | 4,736 | 27,412 | |||||||||
Accounts receivable | 2,667 | 221 | 2,888 | |||||||||
Prepaid and other assets | 3,826 | 546 | 4,372 | |||||||||
Fair market value of interest rate swaps | 2,363 | — | 2,363 | |||||||||
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TOTAL ASSETS | $ | 1,276,921 | $ | 180,789 | $ | 1,457,710 | ||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Liabilities: | ||||||||||||
Mortgages payable, net | $ | 769,973 | $ | 176,533 | $ | 946,506 | ||||||
Mortgages payable held for sale, net | 156,636 | — | 156,636 | |||||||||
Credit facilities, net | 51,536 | — | 51,536 | |||||||||
Accounts payable and other accrued liabilities | 6,679 | 251 | 6,930 | |||||||||
Accrued real estate taxes payable | 10,192 | 3,272 | 13,464 | |||||||||
Accrued interest payable | 3,086 | — | 3,086 | |||||||||
Security deposit liability | 2,032 | 733 | 2,765 | |||||||||
Prepaid rents | 1,554 | — | 1,554 | |||||||||
Fair market value of interest rate swaps | 853 | — | 853 | |||||||||
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Total Liabilities | 1,002,541 | 180,789 | 1,183,330 | |||||||||
Redeemable noncontrolling interests in the Operating Partnership | 3,032 | — | 3,032 | |||||||||
Stockholders’ Equity: | ||||||||||||
Preferred stock, $0.01 par value: 100,000,000 shares authorized; 0 shares issued | — | — | — | |||||||||
Common stock, $0.01 par value: 500,000,000 shares authorized; 23,895,442 shares issued and outstanding | 238 | — | 238 | |||||||||
Additionalpaid-in capital | 297,448 | — | 297,448 | |||||||||
Accumulated earnings less dividends | (26,824 | ) | — | (26,824 | ) | |||||||
Accumulated other comprehensive income | 486 | — | 486 | |||||||||
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Total Stockholders’ Equity | 271,348 | — | 271,348 | |||||||||
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TOTAL LIABILITIES AND EQUITY | $ | 1,276,921 | $ | 180,789 | $ | 1,457,710 | ||||||
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See accompanying notes to the unaudited pro forma consolidated financial statements
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NEXPOINT RESIDENTIAL TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2019
(in thousands, except share and per share amounts)
NXRT, Inc. (Historical) (a) | Purchase of Property (b) | Pro Forma Total | ||||||||||
Revenues | ||||||||||||
Rental income | $ | 74,033 | $ | 12,735 | $ | 86,768 | ||||||
Other income | 10,524 | 2,201 | 12,725 | |||||||||
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Total revenues | 84,557 | 14,936 | 99,493 | |||||||||
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Expenses | ||||||||||||
Property operating expenses | 19,800 | 3,422 | 23,222 | |||||||||
Real estate taxes and insurance | 11,322 | 2,988 | 14,310 | |||||||||
Property management fees (related party) | 2,531 | 298 | 2,829 | |||||||||
Advisory and administrative fees (related party) | 3,722 | — | (c) | 3,722 | ||||||||
Corporate general and administrative expenses | 4,974 | — | 4,974 | |||||||||
Property general and administrative expenses | 3,426 | 367 | 3,793 | |||||||||
Depreciation and amortization | 28,464 | 5,112 | (d) | 33,576 | ||||||||
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Total expenses | 74,239 | 12,187 | 86,426 | |||||||||
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Operating income | 10,318 | 2,749 | 13,067 | |||||||||
Interest expense | (16,678 | ) | (3,430 | )(e) | (20,108 | ) | ||||||
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Net income (loss) | (6,360 | ) | (681 | ) | (7,041 | ) | ||||||
Net loss attributable to redeemable noncontrolling interests in the Operating Partnership | (19 | ) | — | (19 | ) | |||||||
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Net income (loss) attributable to common stockholders | $ | (6,341 | ) | $ | (681 | ) | $ | (7,022 | ) | |||
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Other comprehensive income (loss) | ||||||||||||
Unrealized gains on interest rate derivatives | (16,611 | ) | — | (16,611 | ) | |||||||
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Total comprehensive income (loss) | (22,971 | ) | (681 | ) | (23,652 | ) | ||||||
Comprehensive loss attributable to redeemable noncontrolling interests in the Operating Partnership | (69 | ) | — | (69 | ) | |||||||
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Comprehensive income (loss) attributable to common stockholders | $ | (22,902 | ) | $ | (681 | ) | $ | (23,583 | ) | |||
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Weighted average common shares outstanding - basic | 23,643 | 23,643 | ||||||||||
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Weighted average common shares outstanding - diluted | 24,139 | 24,139 | ||||||||||
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Basic loss per share (see Note 2) | $ | (0.27 | ) | $ | (0.30 | ) | ||||||
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Diluted loss per share (see Note 2) | $ | (0.27 | ) | $ | (0.29 | ) | ||||||
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See accompanying notes to the unaudited pro forma consolidated financial statements
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NEXPOINT RESIDENTIAL TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2018
(in thousands, except share and per share amounts)
NXRT, Inc. (Historical) (f) | Purchase of Property (b) | Pro Forma Total | ||||||||||
Revenues | ||||||||||||
Rental income | $ | 127,964 | $ | 24,433 | $ | 152,397 | ||||||
Other income | 18,633 | 3,892 | 22,525 | |||||||||
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Total revenues | 146,597 | 28,325 | 174,922 | |||||||||
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Expenses | ||||||||||||
Property operating expenses | 35,824 | 6,238 | 42,062 | |||||||||
Real estate taxes and insurance | 20,713 | 5,619 | 26,332 | |||||||||
Property management fees (related party) | 4,382 | 567 | 4,949 | |||||||||
Advisory and administrative fees (related party) | 7,474 | — | (c) | 7,474 | ||||||||
Corporate general and administrative expenses | 7,808 | — | 7,808 | |||||||||
Property general and administrative expenses | 6,134 | 722 | 6,856 | |||||||||
Depreciation and amortization | 47,470 | 17,213 | (d) | 64,683 | ||||||||
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Total expenses | 129,805 | 30,359 | 160,164 | |||||||||
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Operating income | 16,792 | (2,034 | ) | 14,758 | ||||||||
Interest expense | (28,572 | ) | (7,046 | )(e) | (35,618 | ) | ||||||
Loss on extinguishment of debt and modification costs | (3,576 | ) | — | (3,576 | ) | |||||||
Gain on sales of real estate | 13,742 | — | 13,742 | |||||||||
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Net loss | (1,614 | ) | (9,080 | ) | (10,694 | ) | ||||||
Net loss attributable to redeemable noncontrolling interests in the Operating Partnership | (5 | ) | — | (5 | ) | |||||||
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Net loss attributable to common stockholders | $ | (1,609 | ) | $ | (9,080 | ) | $ | (10,689 | ) | |||
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Other comprehensive income | ||||||||||||
Unrealized gains on interest rate derivatives | 1,931 | — | 1,931 | |||||||||
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Total comprehensive income (loss) | 317 | (9,080 | ) | (8,763 | ) | |||||||
Comprehensive income attributable to redeemable noncontrolling interests in the Operating Partnership | 1 | — | 1 | |||||||||
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Comprehensive income (loss) attributable to common stockholders | $ | 316 | $ | (9,080 | ) | $ | (8,764 | ) | ||||
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Weighted average common shares outstanding—basic | 21,189 | 21,189 | ||||||||||
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Weighted average common shares outstanding—diluted | 21,667 | 21,667 | ||||||||||
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Basic loss per share (see Note 2) | $ | (0.08 | ) | $ | (0.50 | ) | ||||||
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Diluted loss per share (see Note 2) | $ | (0.08 | ) | $ | (0.49 | ) | ||||||
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See accompanying notes to the unaudited pro forma consolidated financial statements
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Balance sheet adjustments
a) | Represents the unaudited historical consolidated balance sheet of the Company as of June 30, 2019. See the historical consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form10-Q for the six months ended June 30, 2019. |
b) | Represents the acquisition of the Property as if it occurred on June 30, 2019. |
c) | To fund the acquisition, the Company, through the OP, sent approximately $21.0 million of cash directly to the title company. The remainder of the cash to close the acquisition, approximately $127.8 million, came from the proceeds of a 1031 exchange related to the disposition of six properties disclosed in the Company’s Current Report on Form8-K filed September 3, 2019. |
Income statement adjustments
a) | Represents the unaudited historical consolidated operations of the Company for the six months ended June 30, 2019. See the historical consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form10-Q for the six months ended June 30, 2019. |
b) | Represents the historical operations of the Property acquired by the Company. See the historical statements of revenues and certain direct operating expenses and the notes thereto of the Property, which are included herein. |
c) | Advisory and administrative fees related to the Property that may have been payable to the Company’s advisor in connection with the acquisition were assumed to be waived, as these fees were actually waived during the third quarter of 2019. |
d) | Represents depreciation and amortization expense (not reflected in the historical consolidated statements of operations of the Company) as if the Property was acquired on January 1, 2018. Real estate-related depreciation and amortization are computed on a straight-line basis over the respective estimated useful lives of the assets. |
e) | Represents interest expense (not reflected in the historical consolidated statements of operations of the Company) as if the borrowings attributable to the Property were borrowed on January 1, 2018. In connection with the acquisition of the Property, the Company: |
• | Originated a $177.1 million first mortgage, which has a current annual interest rate ofone-month LIBOR plus 1.43% and an84-month term; and |
• | Additionally, the adjustment reflects the amortization of deferred financing costs incurred in connection with the aforementioned loan. |
f) | Represents the audited historical consolidated operations of the Company for the year ended December 31, 2018. See the historical consolidated financial statements and notes thereto included in the Company’s Annual Report on Form10-K for the year ended December 31, 2018. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NEXPOINT RESIDENTIAL TRUST, INC. | ||
By: | /s/ Brian Mitts | |
Name: Brian Mitts Title: Chief Financial Officer, Executive VP-Finance, Secretary and Treasurer |
Date: November 12, 2019
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