NREF - Earnings call transcript Q4 2021 | NexPoint Real Estate Finance, Inc.

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Operator

Good day, and welcome to the NexPoint Real Estate Finance Q4 2021 Quarterly Conference Call. Today’s call is being recorded. At this time, I would like to turn the conference over to Ms. Jackie Graham. Please go ahead ma’am.

Jackie Graham

you. Thank XX, and the Real fourth company’s full ended everyone, call Finance’s quarter to year review to results December welcome day, Estate NexPoint conference and Good XXXX. for the

and Brian Management; On the Financial Matt Vice and Vice Officer; Paul Executive McGraner, President, Executive Investment Originations President President Chief Goetz, and Richards, Officer; and Mitts, Investments. Vice Matt call Chief Vice Investments are today Senior and President, Asset

nref.nexpoint.com. through As at a the is webcast this reminder, company’s call being website

I more to Private undertake except not the law, expectations, an factors the made XXXX any like on that Reform Form conference begin, company’s everyone undue management’s we the This within call of Before and other SEC should the Listeners of of XX-K discussion risks includes complete reliance with conference as by measures. to this and revise during statements. statements other and as assumptions financial obligation call forward-looking forward-looking would speak meaning the forward-looking not this remind NREF that non-GAAP call based are Act contains for Securities of on on filings only forward-looking today’s affect required conference could also update and are does The a statements. company’s that analysis and any publicly the of place review date annual or current statements report beliefs. any Litigation to encouraged statements

Please call over was a to the now earlier Brian would financial see Mitts. today. like For measures, the company’s of discussion filed go presentation that more complete non-GAAP Brian. these turn ahead, to I

Brian Mitts

share the company’s or available increase share per in diluted per and XXXX value Cash mark the XXXX compared Earnings and diluted of XXXX XXXX. was X.X% for turn income quarter was QX, Cash diluted storage $X.XX going diluted and distribution year for QX, joining our the available was per net everyone XXXX. discuss quarter for XXXX per share $X.XX share in over Net to for the diluted for and CMBS distribution QX, of compared distributions XXX,XXX $X.XX XXXX quarter or compared in increase $X.XX $X.XX per of fourth per and share third increased share Appreciate for increase year-over-year $X.XX compared income Jackie. share investment, of team was million fourth on XX.X% of diluted $X.XX for then available to in $X.XX for in an in X.X% quarter $XX.XX. of income compared per of per IO diluted $X.XX the results in to for XXXX, commentary. company’s to to or detailed share $X.XX of Earnings We portfolio. an the share to XX% that’s to XXXX, XXXX in for you, compared $X.XX today. the per the per and share on X.X was X.X% QX, us diluted $X.XX XX.X%. recognize Nexpoint gain share $X.XX I’m income year market was per the it diluted Thank per Net to share XXXX, to per share and or $X.XX per diluted strip quarter Book in share to diluted XX.X%. per an available diluted and respectively. net increase quarter-over-quarter respectively. an XX.X% XXXX distribution of diluted of share

originated will originated XXX quarter XX.X with We K-Series During XX%. investment basis estimated notes mezzi XX.X%. third of yielding originated discuss We rate We million to the of originated convertible and principal approximately in with another the We yield ended investments. SOFR. floating following purchase $XX.X over this X.X Mac yielding an aggregate an an funded Brian preferred XX B-Piece equity of his the a investment. amount quarter We points a investment investment end preferred $X.X originated we a this million purchased with we XX.X XX%. million remarks. yielding million. Freddie million X investments billion. We After million preferred additional equity equity XX for totaling investment for quarter Matt

received with single two to down was used XX.X quarter of are The Mac million the gross During loans million facility. senior penalties Freddie totaling pay rental the proceeds repaid XX.X pay. X.X family million

value investments average that As of we average on collateral Paul underlying estimates was Weighted times. of in February months. weighted and changes value LTV his average of is for use prepared Weighted assets is the purchase originated. our DSCR the XXXX XX.X% XX, across remaining for values years. our used collateral X.XX%. weighted these remarks. of the X.XX the is in talk the The the the Values will loans past the calculations, value multifamily loan over loans average term the dramatically is revised X.X weighted move average values using coupon portfolio, few years and during time about

the payable. debt following. repurchase XX.X XXX.X XXX.X secured million pool. As rental million of and senior XX.X family consists on facility of XXX.X notes of of mortgages December million facility of secured of loans. senior the million million XX, mezzanine single agreements. on unsecured capital our

average of term investment XXX has our a As the a basis point X.X provides debt. average cost X.XX% remaining our of a XXXX which weighted income or XX, debt spread years weighted February for rate of and

As of financing of mark-to-market. XX.X% to XX, December is our subject

$XX.X first a the December a dividend fourth has quarter, declared to quarter on March XX. and XX, debt paid dividend X.X share of the payable $X.XX per times Our the board XXXX. equity ratio in at of per share of was We

Earnings $X.XX, earnings and available follows. available as for distribution, share For per dividends available the this for issuing available driven for single the tax for that loans quarter for the of on year for cash prior earnings for by prepayment distribution. diluted increases times and available penalties guidance and available prior times quarter. quarter X.XX $X.XX covered by of covered tax Today distribution by we X.X per received distribution rental first share have over distribution distribution family XXXX we’re for for of diluted

turn the provide over rest the commentary. me to Matthew to let Goetz. Now it their of team

Matt Goetz

and The our full XXXX fourth performance asset to Brian. of classes. Thanks results continue and quarter investment each year show strong across

in We continue believe real due where to on verticals advantage and commercial our we to have operating focus earning investment estate. we an experience

the being average goal owner, from information of leverage delivering allows stack with to real to lender to throughout adjusted ability estate returns. us an operator and value commercial both find capital the relative than risk higher Investments Our

focusing shareholders. to strategy in stabilized stable our assets heeled believe on leverage credit provide to investment our well low will investments underwriting conservative value and continue sponsors consistent at We with

quarter loan homes, CMBS residential outstanding loan of almost weighted average invested of and in loan senior portfolio’s debt average in for preferred and book portfolio perform ratio service of a During of of the three is to XX% principal. XX.X is the X.X strongly loan the in stabilized mezzanine, multifamily life with currently portfolio has to collateralized remaining XX% and is value years composed total is XX% XX The family individual continued with fourth X% average an X.X invested via billion agency term coverage times. sciences. The approximately loans investments XX% rental single by

exposure value on, as believe we mentioned been the described further is the earlier Paul of portion southwest and entire southeast later remarks approximately a portfolio our basis. appraisals assets, have performed the they The and As in his of since loan the originated amount not investments buyers current. Brian for towards of combined on new of market and Florida book XX% large diverse, in geographically geographic XXXX markets approximately a on is or Georgia XXX% and our XXXX. Texas, are XX%

UPV, are of a for our equating XXX references unpaid points loans number earnings, currently totaling billion the the balance. underlying Mac Freddie mentioned Mac of are account principal forbearance of basis. loan XX forbearance Freddie total of and population report forborne in monthly points basis of X.X on published loans securitized As securitized basis loan multifamily XX by by in There to outstanding

advantage during to we able this opportunities, were quarter. Moving to take the of

the During transactions have The average sponsors experience repeat aggregate occupied are two multifamily and notes of extensive The Bentonville, XX.X amount with evaluating of ratio multifamily two Dallas, principal Texas weighted on located and debt and mezzanine in quarter on properties and are coverage the stabilized sector. million. in originated XX% borrowers times. we service Arkansas, assets an XX% X.XX

an we purchased at capital On pharmaceutical current originated has Freddie an with mezz on estimated series On versus the XXX as yield with SOFR floating bottom manufacturing than B-Piece investments million a purchased previous spread of ratio sponsorship an average in of single by represents Our X.X current of stack yield equity in Mac yield underwriting This estimated a our stabilized of coverage investments of property loans. X.X% X, yield tighter a all November have December XX.XX bps. underlying the with of strong collateralized approximately service debt times, over we preferred and a debt XX%. of X, unlevered tenant XX million it an + XX% XX%. X.X% an K-Series

hand the on of to family would the evaluate over million of heeled principal these classes. Paul quarter, summary, continue value goal repaid like combined for prepared with XX%. with a to a total into value And future Richards. call of During estimated investments will reinvested more detail an single to sponsor our note an our also and Richards amount the million XX.X upside convertible the the leases the creatively how on of attractive Two markets was In XX.X%. on asset find XX.X yield with I remarks target Paul of IRR we to to and well the throughout we capital go these book shortly. with realized loan was opportunities shareholders. investments opportunities continue focused now originate X% his balance in ground delivering we’ll of rental to

Paul Richards

Matt. Thanks

primary the again market. bond fourth quarter, company the was active the in During

plus As previously we SOFR million on a discussed, and deployed rate for XXX. Mac Freddie floating $XX.X

there headwinds, market insatiable VP bonds, market loan Freddie by small as in Mac rate demand as have tighter evidenced pre-pandemic which last VP experienced balance levels. price for has been caused coming the pricing continued on an the Even tightening to multiple to we’ve in with the inflation see spreads hikes, auction than has the

quarter at roughly LTV levered end. on We continue be to at repo a XX.X sensibly

performance current want on to demand continued to expect XXXX up of the single QX, for and speed. and persist Lastly, down. loan family the All this loans the performing briefly we fully pay to retention. trend SFR loan -- of tailwinds XX continues the pool at We rental touch as are pick

pay to time a lender down as the finalize the in The our and questions, remarks and us of has original $X quarter only the net of IRR to additional quality especially penalties, loan portfolio a are I and investment first to we Matthew which Due growth horizon. SFR XX% originally had it underwritten able New to one-third approximately for occupancies an the it highs over generated To of lease were turn investments first to generate proceeds IRR prepayment over X%. at for time release original creating XXXX, sponsors. underwritten the million all turn the than rates two earliest of prepared tremendous high combined of before backdrop has a like SFR institutional roughly in McGraner.

Matt McGraner

Paul. Thanks,

that convert quarter we supply sophisticated financing just potential. our is and I in the Matt wanted responded investment year. and X% for strong of XX.X% span risk attachment two the and convertible and ability in on investment We touch with both and our in XX to equity in to full an return quickly a creates late XXXX chain the is late LTV to solution of in XX% sponsoring originating common in a yielding point efficient fourth weeks forward mentioned. assets notes, with advantage the year and quick total the XXXX. We’re to special COVID its reward to yield needed related delays fourth The and investment financing Goetz terms discount. ground year company’s in interest made A profound sponsors’ roughly for a a December obviously results the quarter situation pleased another late needs of million and met look and

of senior and Finally, rates strengthening portion refinance lender integrated be refinancing of equity storage we’re favorable capital more a sort efforts to stack a the we expect speak. these sector generally along held the and chosen Nexpoint storage to common partners’ by in We’ve to proceeds middle [Indiscernible]. debt with itself at as to self

remarks We That’s expect financing the And during to today. this quarterly for to QX an turn call will results. for next questions. all to have operator close in over prepared our we like now update and provide I’d

Operator

and with take go [Operator Raymond Instructions] Laws question from Stephen We’ll you. James. our first Thank ahead

Stephen Laws

morning. good Hi,

nice little you Can XX%, looks is congrats all, in? the of a I maybe investors. quarter First talk bit total delivered next your pulled QX. on and increase think like you items dividend guidance about What big to QX? another a in guys of certainly like year’s XX% are Brian, a guide EAP is being

a bit you drive to little the talk onetime in can earnings? items what’s to So going benefit about QX

Brian Mitts

of across most the focused to Yes, the of loans. sector. calculation that metric. increase It’s And and on SFR that just a that has been how prepayment prepayment of the is it’s related something penalties, SEC that’s function the calculated

that down family that sector the we’ll the new the see remainders, our into That’s a Obviously, higher we’ve then So bonds, may debts the getting with probably given with that yielding that decrease creatively mentioned. that us what’s strength more feels investments, single most lease we’re is in lowest driving the climbing are prepayments and road. payments the that we yielding, see we’re the continue and to Matt we’re of the those made, discussed are SFR of we reinvesting some quarter. for like currently first of ground this back these on prepayments structured, seeing, getting,

Stephen Laws

maybe you that, this how half thinking on next year expected issued Brian think about say, you and when the did go the months, second in of how guys guidance? three conservative piggybacking guidance you your but calculating for year So full the about just or not contributions

Brian Mitts

time make We prepayments, didn’t of thing. type any Yes. one assumptions or around

look And in So and our scenarios we we we a make XXXX what available recognize earnings generally and what in then to but penalty and higher fill distribution. based people those could a hugely then drive stabilize, that show that just distribution to smooth clip for that analysis like run more redeploy investments we’d value yielding positive, if and accretive the and have. would investments. those can we view repaid out book a tried immediately, give the return that book and that entire be it’d earnings cash profile, that Obviously and as on for prepayments, big we

Stephen Laws

and flowing when about may the item, investment investments? intentions to Great. nicely harvest Switching QX. with your capital like in cash looks those the to recently stock you look it over that? Any in portfolio one depreciated common can that talk timing But you say recycled games

Matt Goetz

is to or XXXX We’ll we viable. make it I better to to May So can. restructure equity to think preferred. common to it’s do an that to we hold to either the common we were for of to that, think that. equity following we and probably then going going as expect re-IPO to And the the as close once creating of enhanced kind that valuable then down we’re refinance look recap of out the the in yield extra we which space the upon senior we value, And the exit we debt think in that, if do profile blend

the look we’ll year, better the this for So into second update an half outcomes and of have probably But I think be it. those visibility in in would one greatly either appreciated company. for of QX

Stephen Laws

care. Right. Appreciate Matt. my Yes. questions helpful, you this Take morning. That’s taking

Operator

KBW. Jade our Instructions] take can [Operator go We with question from next Rahmani and ahead

Jade Rahmani

of equity much. in ground secured entity this kind the Can some about investment very What the structure this you this Thank is, by by lease capital interest. you and portfolio is more a investment? say of by kind was

that If be would elaborate helpful? you could

Brian Mitts

early a XXX XXXX think the raised capital offering, out, and of started via XXXX. private some of on REIT deals deals. extra happy in million vehicle originating with offering. this the through about money hit close was and the had We they follow and managing in they went equity, went They for a formed Sure, Yes. XXX I XXX around raised to came additional that quarter those fourth to. It’s for

we with corporate instrument level. the effectively So at that bridge this

company the investments. these funded funds and we company, the So then

ground like were is so, and this on our bread portion we’d said multifamily, butter. to of And of like our assets a obviously they originating we nine we’d one like leases that which reward, risk significant

we it. So to return great with to think great, total it’s and extent just wanted jump investment potential the on it. that we again, a yield And both hold

Jade Rahmani

equity It a investment? preferred was just

Brian Mitts

through is this it notes. that, No is convertible

Jade Rahmani

I you occur? to guess expect any portfolio. prepay? when not, the family on might that update progress has It not to rental if residential, single And seems that started

Brian Mitts

from word communications any gotten them We or or indications. haven’t any

they would And So it’s big gotten a of part said progress number has definitely It’s here that lot hard of to that issuers they it’s prepay. mean, to recently. deal. market securitizations. are tell. I Having a wider that the have

it immediately So do and progress party we to with for to they want really what would depends If repay, to that look start want to on places portfolio. in. put

plenty have of you’ve indication anything them any that roll different? can from and we think I Paul places got we if that

Paul Richards

No, million what thoughts year is penalty. it’s as it’s half so million to my roughly And stands, are. And a $XX you $XX [Indiscernible]. currently exactly that’s what said prepayment still it

Jade Rahmani

prepayments the else? Are lenders something you’re what refinancing start is -- getting planning going or far So into? to they

Paul Richards

of little You are a but the we think breaking got up the gist question. I bit

they’re much think value run that just are rolling necessarily of. some getting proceeds. cases, bank I because or additional out into they essentially they’re getting securitizations, just But another up cheaper going of either in that isn’t than they’re so what the

those in but lot higher LTV. cheaper cases paying their are XX XX, and investments rate the a underwritten XX%, prepayment higher A I somewhere on think maybe or finance penalty today a investments. their XX%. similar, some these lot getting they worth of LTV analysis is getting it’s can even And a

they’re their that’s math is the in where it into. out favor. And rolling think I So working

Jade Rahmani

driving that do is you Is think of else? security market. widening in it the a January saw What mentioned on based And we the or the magnitude something you supply issue that? in issuance spread

Paul Richards

Yes it’s I Hey that’s right. think Jade Paul.

saw and increase think seven last years, year and very Also rate a in five continuing so large in the shock the interest help this a we QX year. QX that I of in supply didn’t either. on

probably in then deals. these are on I think LTVs XX.X% this in cases general see some you’ll and

as currently. So a we them with Brian bank debt versus they this or higher, have are case, to, XX% loan LTV in alluded

So those spreads of the widening are all kind to factors contributing reasonably.

Jade Rahmani

of or be range the would earnings earnings anchoring expectation there quarter repayment quarter? have you Is Can income an guess. first excluding earnings us I a post to what just tell first the the accelerated? Okay, outsize beyond return these to

Paul Richards

that has can We pull number the and to, to said, want of out SEC pretty been of careful these like stock. get be monitoring disclosures kind closely. metrics prepayment different We I

to in what outside line they something of we make providing that’s for. kind So were not that sure looking we’re and that of want with

Jade Rahmani

the Does it language the Because well, assume income? the any says doesn’t contemplating the specifically first the dividend of from reading in an prepayment the quarterly dividend. press just increase increase benefit I It quarter. release, cite

this that to increase of a any foreseeable dividend is the recurring, be going SFR dividend for is part that the the So $X.XX to the Is future. prepayment implies income? early

Paul Richards

consistent No. It’s to be meant a dividend.

and So numbers. prepayment driven any by it’s special a dividend wasn’t

Jade Rahmani

So it’s earnings that close be that? fair something recurring might to to assume

Paul Richards

right. That’s

Jade Rahmani

Okay.

couple much. time. couple see. Let’s second Yes. so of A of Thanks appreciate Really your things.

Operator

remarks. any are further I conference no additional appears turn the It this back speakers would for at closing to like questions there and time. the

Jackie Graham

you. appreciate appreciate be I Yes everyone’s We’ll questions. the thank next quarter. and you. touch time Thank in

Operator

you today’s call. for concludes all Thank participation. your this And

may disconnect. now You

NexPoint Real Estate Finance (NREF) 17 Feb 222021 Q4 Earnings call transcript