NREF - Earnings call transcript Q2 2022 | NexPoint Real Estate Finance, Inc.

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Operator

Good day. And welcome to the NexPoint Real Estate Finance Q2 2022 Conference Call.

As a reminder, today’s conference is being recorded. At this time, I would like to turn the conference over to Jackie Graham. Please go ahead, ma’am.

Jackie Graham

you. Thank everyone. day, Good NexPoint results Finance’s ended for XXXX. to review March call the company the Real welcome conference Estate to XX, And second quarter

the and Finance; Matt Vice Senior Vice Investments. McGraner, Officer; On and Willmore, Vice Goetz, are Asset President, Investment Chief and Management; David of and Richards, Investment Executive President Vice President, today call Paul President Matt Originations

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

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

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

Matt McGraner

portfolio to highlights second new it to investments. by over then I’ll Jackie, and results on and you, appreciate Thank financial the turn today. the joining comments us Paul’s and review Matt followed and start addressing by quarter everyone Dave

still. earnings to outperform is have We embedded inflationary to other lower NREF’s investments, $XX continue property stable provide assets types NOI primarily stabilized our believe SFR of roughly multi to in Partners environment. and in pricing collateral were converted million of investors. special notional peers, differentiated power today’s term investments REIT return equity continue growth. Storage book providing markets sit team our insulating value investments and CapEx all yields stabilized mortgage resilient investment, Matt totaling lease dynamic cap First, with significant Underlying lease total repeat two and credit volatile capital self-storage, in value of growth monetized as ground and storage remarks. detail new situation enhancing SFR provide are maintain coming sponsors should multi- shorter million, the for during didn’t duration distribution our base quarter, originated in NexPoint and a compared our XX and profile to the Though will a in and the $XXX commercial when redeployed were prepared The which we institutional years, his and/or to in

yields. across storage, ground all consists and storage pipeline million attractive of and to transparent provide our We plus in over multi-SFR it’s exciting NexPoint’s Indeed flow. preferred across today enviable new our property stable for of providing five again, the and multi Finally, and next time business. continue steady types, CGMP, believe most life and years. earnings credit portfolio’s an sciences positioned deal second profile leases is our a investments $XXX K none to stream at the Freddie integrative for relationships and

Dave? for I’d the over quarter. Now Dave NREF’s turn to review call financial the like highlights to to

David Willmore

team commentary and the over for portfolio to environment. you, our I’m lending guidance to then it on the Thank the for and provide and quarter for the Matt, briefly detailed the results quarter discuss going year, third turn our

$X.XX on of period the per in increased XX% driven second diluted share Cash net for million XXXX, income of share basis. share per by $X.XX net increased $X.XX in reported period per on of diluted dividend declared Interest same in in per share second a basis. $X.XX $X.XX increase borrowings basis. has compared XXXX, diluted net increase of compared and For diluted in decrease per over the XXXX, diluted a per the investments. increase same we Board a the additional $X.XX diluted in payable dividend an XX.X% average over was for available We a XX% of income the of a and XX% distribution per Earnings share compared increase to to for on quarter distribution share $X.XX QX Interest third XX%, XX-basis-point of Overall, share quarter the in income $X.XX share, $XXX.X of XX-basis-point quarter by in rate. XX.X% on per share expense a per share driven available per XXXX. interest an of increased the a a average quarter. of share income QX QX, for the was to XXXX, paid QX, second yield per

diluted second was for decreased by times quarter-over-quarter X.XX per covered available Our value covered share. the times and in cash X.X% X.XX quarter distribution. share for distribution dividend available to $XX.XX by Book earnings per

outstanding was were we outstanding with valued XX.X% $XX million current at redeemed investment quarter or with investments a to of investments One $XX for $XX.X equity $X total of combined converted million a X.X%. yield Two from at principal the discount originated gain note million. principal million. of of with a During a eight purchased

for of Cash of increase Earnings available per XXX.X%. per an diluted income the diluted attributable share the $X.XX to $X.XX year-to-date, of in $X.XX period For the shareholders per to for compared of $X.XX diluted compared to share XXXX, XX, XXXX. of year-to-date, distribution share was an to per XXXX, the ended of distribution $X.XX diluted in for period available diluted six per XXX.X%. same diluted June increase of same net share net share XXXX, same period months per was share, compared reported we $X.XX income common

X.X% Book was per the Our per value in by covered and diluted earnings dividend for share. cash available times share distribution covered for to year $XX.XX year-over-year distribution. available X.XX increased times by X.XX

Moving share per for available distribution for to cash distribution available of are high for $X.XX share as available and available available at prepayment is for second for end midpoint loan, by from the quarter diluted in at an end investment $X.XX primarily and diluted distribution range driven the range cash with distribution penalties the on the distribution guiding The of we from distribution of and cash and $X.XX on with quarter, third per the non-recurring at decrease share. $X.XX the high for Earnings of preferred low guidance a earnings end. and end at for the follows. $X.XX midpoint and $X.XX low the SFR earnings the the available interest-only a

over a and to detailed originations discussion to like portfolio. it the on I’d turn team a for Now

Matt Goetz

Thanks, Dave.

strong The of continued to our each quarter first performance asset classes. show across investments and

self-storage. our portfolio loan invested by of average As and of $X.X Loan comprised portfolio’s approximately single-family outstanding is of XX.X% with remaining for is remaining times. primarily the X.XX coverage and has the diverse with Texas, book billion loans are Florida markets. ratio principal. a average in towards X.X residential, basis. XXX% term CMBS. of total individual XX% geographic XX% The of and stabilized, of investments The rental today, and investments XX% via in The agency portfolio senior multifamily collateralized exposure in bias years XX life XX% of is our XX% Georgia and the loan an combined sciences Southwest currently is service a X% geographically the debt invested is portfolio weighted is average Southeast on value approximately current.

Moving are new to with we investments through yield XX.X%. a totaling able $XXX able yield average levered X.XX% take Matt to close were and mentioned, XX opportunities, to of of, weighted we unlevered today, average of as advantage million,

originated we stabilized million by Coastal an XX.X%. $X in Texas unlevered properties During an collateralized self-storage the yield three preferred of and investment equity Central located with quarter

MSCR with purchased million or million XX.X%. originated X.X% $XX average we Class or single-family with and by we investment unlevered $X.X levered yield yield at originated XX.XX. originated in an unlevered Arkansas $X plus Rogers, yield X% an X.X%, preferred and stabilized We property [inaudible] collateralized levered securitizations average $X in multifamily debt equity million month of purchased of of of notes also rental A yield one We a a of million

our we today repo or price over SFR we target of and attractive opportunities the to our value the discuss with the portfolio. I hand market evaluate like opportunities bond purchased rate these goal to find K-Series now and of classes SOFR to markets and Paul for summary, Freddie investment Richards also to to shareholders. Mac delivering to financing at call would B-Piece asset throughout will continue a for purchased In we continue We floating $XX purchase X.X million.

Paul Richards

Matt. Thanks,

in $XX balance active sourcing second to attractively and levered secondary -- was million the the During repo which maturity in unlevered an loan which B-Piece, the the attractive yield yield has the bond quarter low- X% market of Freddie approximately mid-teens, to levered was small prudently company Mac a priced financing.

XX-day always also prudent company bond were excellent The on yields able a finance and financing. new past geographical sheet to geographical $XX.X attractive gives underlying plus average great the Freddie the rate floating discussed afternoon. Mac a this a the B-Piece presence, bond approximately closed Matt repo prudent As bond just sorry, on sponsorship. leverage we gives million issue great balance and for bond over loan The via present, as cash and balance, a X.XX%

BX on of the and allocated yields process, of the roughly Freddie posting Mac respectively. and and $X days over syndication Certificates, Transfer bid MX bonds plus million through XXX were attractive company XX, XX Lastly Risk

along there quarter’s residential in demand experience discussed been an cycle. therefore to the as headwinds, heightened and for continues market demand Freddie Fed Though the previously hiking previous for continuous with insatiable Mac mentioned, bonds. As rate B-Piece commentary, the has inflation

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

and to original Operator quarter, red of loan in continued loan rent underwriting underwriting still over SFR turn The the one Due XXXX portfolio the growth loans want proceeds prepared I are now one-third metrics investment than payoff terms early to which back X%. for to second original SFR remarks. net in original IRR the our downs. Q&A. briefly rentals QX has compared and is of strong generated outside the pool generate of SFR performing penalty, the then the pay concludes horizon. hot. All prepayment the of occupancies, single-family investment was loan touch had roughly it performance -- I to That to and currently one able and demand on only for an IRR as demonstrating the will time as Lastly, the XX.X%

Operator

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

Stephen Laws

spreads on new Brian, talk afternoon. versus or a where And most about half? you Good type to dislocation Hi. the the and returns three or expect seeing months moved? look can on your that investments we given the Matt about ago, start, in to pockets you relative basis I and when you’re months what what of should rates second six new think during markets see investments have pipeline, guess, attractive

Matt McGraner

afternoon. of your Good coming X% kind what more kind now this second Stephen. the up opportunities. yield in Hey, we’re right quarter the we alluded then Matt pipeline another that to, and new Yeah. our environment. investments pipeline, what have in to Returns getting In of question, the probably to is goes current and new on during X%

pharmaceutical of basically lot provide in CGMP great to pharmaceutical life heeled with the to just in again, or well it’s for we liked sponsors, us preferred and money We’re financing two-year that manufacturing, having occupancy a sciences a to and success of sourcing that’s we is usually place certificate of yields. facilities XX% of It’s manufacturing CO lot. the kind XX of three-year facilities, as a where, reshoring And be. preferred space newbuilds kind

going as lot a market kind private kind of probably and doing -- where purchasing we’d job that XXX, the we’re seeing got lot with test to or most of multifamily and leverage re-trades, also to at of third be of so on kind a of moment furious as in and and is will still well issue those that and in as obviously transaction seeing SOFR+ market, we second fourth is multifamily The quite hitting and of area pick space said, so negative quarter, there. financing great probably type work The a chance aren’t the leverage well opportunities like, not then are new in the originating volumes opportunities, as preferred agencies doing second the continuing storage and is private I team the types, well. GAAP up preferred, some to property like there’s the sponsors B-Pieces sides, we of the of There’s agencies kind quarter seek. where with the GAAP lot of financing fast credit be LTV work source storage in a negative come are the we’ll XXX

but kind overview to it’s we’ve been thing getting I of highly said kind of just the a So X% more. doing doing X% like but same

Stephen Laws

that. the about One slowing kind asset the the that there repayment follow-up, you in saw I your or what about quarter? fees, prepayment the color are on Great. think Appreciate slowdown around bar. you and when Can talk expectations of how certainly

Paul Richards

It’s Stephen. Yeah. Paul. Hey,

down. During the pay quarter, loan the one we saw

from up or XXXX seeing rates you I on what highest loan the though you’re still originations. think and rates higher have build on SFR book is, XXXX, HPA still

are lot the realized on the loan to these those not might smaller those penalty HPA are prepayment operators kind for realize what up see of them to devastating of printing seeing So a or a gains. be as and you’re rack balances, continue gain

don’t -- I think gain for So of for year. these operators a some pay a off smaller these up them and question sizing good maybe do see loans the to

loan kind how of see now. that’s book that’s in right our So we

Stephen Laws

Appreciate that. the color Thank Great. for you.

Matt McGraner

Thank you, Stephen.

Operator

take our And you. & Woods. we’ll Jade Thank with Rahmani Bruyette from question last today Keefe,

Jade Rahmani

range multifamily, to your you and cap it’s take from very overall higher and far, know for what’s you impact expectation cap moving Can so I Either self-storage currently, rates? the rates slow single-family moving quantify But Thank valuations? in time much. deals close. to rates rental

Matt McGraner

cap XX%. Good translating question. basis [ph] for XX are some Roughly -- Class where in we’ve me, on or starting spot XX for into the average Q in basis Jade get to the that excuse to feel in decrease property capitulation have you Good. or deals points, There’s Class same market points call weeks. the around NexPoint X% have rates recent called types, today’s few feels rate values points, to risen days from multifamily, Yeah. in B, sellers we ago. that from on the on basis cap XX about a XX% the A multifamily some see seen done most

values, cap we points, basis is or basis bit XX storage, but cap roughly identical rates at points, multi. little moved cap QX didn’t but multi. those re-trade a And range. multi are almost So of or X%. in sub-X% the less certainly dipped moving Storage as SFR cap X% of dipped that’s and than a -- and rates bit sometimes the that, kind there that, least then so the to SFR the I’d as values to say but haven’t it multi low less that see XX% rates rates low little same and XX at a QX, in they

So, values here XX% we spot on been of average XX% sit re-trade basis as kind to today. has on a

Jade Rahmani

primarily be? moderate in the forbearance, expected, would than Would do And slightly different impact would either in impact more what of in the Thanks you’re rent maybe be think would and BDC or recession, the it growth structure, lower, exposure debt touch but company occupancy, capital you terms be a the equity? if what the of preferred and since performance on also lot. the could you be loans

Matt McGraner

Yeah.

You bet. question. Good

tough test recession, the what we self-storage times COVID, NOIs own coming, are exactly the and in a these that XX%. growing of during to think I of portfolio prepared remarks, our across in performance business do best did SFR, XX property during the of designed think to said, I the the outperform. multifamily may which be was types our credit present, to continue X% recent consumer profile kind resilient although obviously it recession -- in at and to led around Like be portfolio perhaps, and my is

of JV were K asset mitigation in a our a on the an in our an to and portfolio and of go up we -- preferred and Freddie during clean asset So, bases risk equity we we our at within To take I the our with tool ability well you the almost the ended insulated it’s had in extra side, and wipe kind mechanisms own those just by extent sponsors. those -- didn’t issue, have One multifamily present, the the they’re at fine. of any performing but have COVID. think the I situation, borrowers into the well, structures most had in that exceptionally kind performed losses, think, forbearance dire side, performing built couple also again, a over downturn, but deals

credit is our never, portfolio in say again, the up profile never and recent yeah, but credit our stood portfolio -- of think, I resilient or our history. pretty So,

Operator

Anything further Jade?

Jade Rahmani

very Thank much. you

Matt McGraner

have You Thank bet. Operator no further you. And questions. we

Matt McGraner

everyone a and in today appreciate look great dialing have you We here earnings in to QX with few discussing months. a and Thanks forward day.

Operator

conclude participation. your Thank appreciate you. And does today’s do that teleconference. We

You may now disconnect.

NexPoint Real Estate Finance (NREF) 31 Jul 222022 Q2 Earnings call transcript