Earnings call transcript Q4 2022

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Operator

Ladies and gentlemen, good morning. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the NexPoint Real Estate Finance Fourth Quarter 2022 Conference Call. Today's conference is being recorded. And all lines have been placed on mute to prevent any background noise. there a remarks, session. speakers’ the will question-and-answer be After [Operator you. Instructions] Thank

conference now Kristen will I over turn And the to Thomas.

You may begin.

Kristen Thomas

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

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

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

Before assumptions we XXXX statements of everyone call beliefs. and Securities begin, within I this forward-looking Act expectations, remind Reform that would are Private like contains the Litigation that to based the on of meaning current conference management's

the any SEC Form the XX-K complete a the and by reliance speak required not encouraged only are undue the update any that could today's to call review and the not discussion on risks any as of except obligation Listeners forward-looking other should with company's forward-looking during made for affect revise place undertake and publicly report filings date NREF as factors forward-looking statements annual and more conference does law. of or other statements on The statements. company's statements. to

This analysis non-GAAP of also conference includes call financial measures.

presentation For a more was filed that measures, company's today. complete non-GAAP earlier the these discussion of see financial

Brian ahead, Mitts. I would go to turn now Please over to call like Brian. the

Brian Mitts

joined our Thank you, everyone here. Kristen. entire team today. appreciate us with I joining I'm

over then the the and the detailed the guidance discuss and I'm team to commentary the briefly quarter for results giving to lending first turn our some for for commentary. be the environment. provide some it going we'll quarter and portfolio on So year, start

of decrease net stock we net reported QX I'll a Interest XXXX. start to income XXXX, driven investments, XXXX. income The result driven for XXX of quarter quarter, net by of QX are per in in diluted and The in average QX lower on mark-to-market average lower with on basis follows. loss share per Interest and the a increased fourth prepayments CMBS $X.XX common by diluted yield of prepayments $X.XX results, increased X.X% which fourth as share XX.X%, over compared expense QX as offset rate. increase in by income our portfolios. borrowing basis in a point point XXX increase adjustments in XXXX

QX diluted distribution in the is in Earnings share available distribution compared per in in share compared result available per to portfolio share diluted diluted cash period in $X.XX diluted XXXX. for $X.XX Decrease the the flow and was distribution prepayments on distribution our earnings QX $X.XX same $X.XX in SFR lower was for same available Cash in QX. per of period per share to XXXX. for in

pay additional of a share the of paid dividend of of first the also per intend the $X.XX special declared quarter. and per The dividend the and $X.XXX has for We quarter to fourth special of we dividend payable per quarter, a Board a in quarter, declared $X.XX for the per XXXX. for first $X.XXX share dividends share Board remainder

mark-to-market share as Our a distribution $XX.XX and common for by distribution. stock of available adjustments covered covered CMBS cash dividend was in our to X.XXx value Book diluted share available by quarter portfolios. on per fourth and X.XXx per for X.XX% earnings result decreased the quarter-over-quarter

$XX.X partially we redeemed a outstanding XX%. for originated $XX two quarter, million One investment current principal. with million combined the During outstanding of yield with of of investments principal

Moving full to now. year the results

portfolio by $X.XX $X.XX per lower this XXXX. to period diluted largely SFR share the common period is in net in income For and Again, year to net of compared income mark-to-market same our adjustments. for full the XXXX, attributable we diluted driven of per reported the prepayments share in shareholders

the Earnings of of quarter XX.X%. diluted and for $X.XX available $X.XX of same diluted an per in for first were of to increase share Higher diluted year to in prepaid for compared XX.X%. requisite diluted driven higher distribution XXXX, increase XXXX. year-to-date in and share period period distribution year-to-date per year-over-year the same was an was for available for XXXX, by per and share distribution prepayments $X.XX the $X.XX distribution available share earnings the cash Cash compared per second flow available penalties of

were outstanding respectively. investments. securities As average billion stood at proposed for at and coverage our portfolio loan Weighted ratios total the value X.XXx, debt $X.X service of XX to XX.X% debt today, and

ratio As of debt-to-book the company’s value today, is X.Xx.

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

to Moving first the for guidance quarter.

on share the in and per quarter. by of The range the driven $X.XX Earnings is expected the on on $X.XX guiding available We earnings for for available Cash cash the available at per distribution distribution and first cash and share midpoint $X.XX available high follows. end for for available $X.XX share with are of per $X.XX range at decrease low redemptions end high distribution the end. share for a quarter distribution to primarily for low distribution distribution the for midpoint with $X.XX fourth diluted earnings a the of in end. available as diluted on the per

So portfolio the with me Matt that, turn detailed markets. team it Goetz? for and discussion credit the let of to a over

Matt Goetz

continued fourth Brian. each year classes. results quarter our asset show of strong full The Thanks, investments in across XXXX performance and to

an to operating advantage real find leverage information our ability believe to delivering us higher-than-average with goal our returns. commercial and operator We of to and owning estate, commercial continue an from the to relative owner risk-adjusted being the capital both focus we lender investment throughout verticals estate and we on allows experience in value stack due investment real have to where

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

portfolio composed perform is $X.X the to and currently approximately loan strongly quarter, XX continued total During of assets individual the outstanding with of billion fourth principal.

collateralized is residential and primarily XX% XX% loan of Agency X.X term average loan stabilized XX% coverage X% service book years is by the the mentioned, average sciences via multifamily, loans properties remaining remaining average portfolio’s debt in with invested an and is is CMBS. of a in invested XX% of The X.XXx. life and self-storage. rental weighted has The loan-to-value XX.X% Brian portfolio single-family As ratio

we portfolio bias beginning of a is attractive of the geographically to Texas, through From average with and to markets. the with our and we our Southeast four investments portfolio approximately XX%. able markets the unlevered opportunities Florida the close be our The diverse Georgia XXX% target of current. investments new Southwest and at XX.X%. are approximately to find portion $XX quarter largest were of today, million asset classes. continue continue throughout investment towards summary, fourth yield In totaling a weighted

We will to to continue the goal value opportunities with evaluate of these delivering our shareholders.

I’d to Paul now over to hand like Richards. the call

Paul Richards

Thanks, Matt.

could entire could cap growth risk space quarter, growth these the results rates. was bond investments. but portfolio’s of primary determine until the residential resiliency years by demonstrated targets believe in how would cap the the and strong fourth or the rates theoretically stressed continue investment at the of rates We’ve minimal refi the over vast company an of the to active market appealing secondary not rates the expected. daily. and rise The portfolio as We somewhat again portfolio bond During portfolio long-dated nature safety the NOI underwrite in backdrop. CMBS has and past three shocking in CMBS environment interest and the and NOI evaluate of even widen BP’s The current performance inflationary is deteriorate. far majority source, are stress potential the firmly the The provides

on on continue financing LTV levered to approximately at continuous the repo quarter-end state finance the market lending the and at with our have We of XX% be portfolio. partners prudently dialogue our and repo

touching the Lastly, strong SFR performance occupancy are performing growth displaying in an continues portfolio the not are loan as did All terms in fourth of quarter. SFR to of on the currently loans The and in and paydowns robust. the metrics for the demand – SFR have be pool. SFR continued portfolio rent

like over back I’d we Mitts. over to Brian prepared it turn To questions, turn finalize remarks it our before for to

Brian Mitts

guys. Thanks, over questions to now. it we’ll turn so Yes,

Operator

will you. our first Instructions] from take [Operator question And we Crispin Sandler. Thank Piper Love with

Your line open. is

Crispin Love

Good everyone. morning, Thanks.

don’t I it last quarter? over near-term? I think lower release, were in prepays expect saw the prepays. remain on what quarter question the the prepays you to but And First versus in do

Paul Richards

I we this at of probably yes, rate. continue prepayments less expect that prevalent think would as In year, of QX of QX start the XX-year kind to this rates SFR, in to type year X% terms be

of as see much think we’ll I So probably continue evaluate. action prepayment, terms but we to in won’t

Crispin Love

X% a seems to borrowers? the debt at SFR, to X% are speak you lot right can then asset back active? still probably demand bullish little Or bit both a And on more pockets still and cost It views Thanks. from are where in pull you’re SFR X% with range. now? there classes Are cap borrowers just multifamily right. you All your rates on about or like but seeing

Matt McGraner

this a Yes. and to on It’s this call, anyone generally, is muted. just say market, isn’t somewhat Matt McGraner. surprise the I transaction would

XX% I ago. volume a XX%, think from is year deal down

XX-year So are for because Obviously, terminal also that between stabilized we also refinancings don’t a lower far yet. demand and few equates to borrowings. have rate

for a greater including we’re most greater at me, pause ourselves clarity – SFR seeing a least, some pivot on excuse growth. think or waiting same-store the strong, more be to our equity transaction I or Notwithstanding multi-family performance both So in the businesses, we’re and are high-single-digit still that NOI continue in from side participants that, the Fed. or the

the and no fact well. So price performing there’s SFR notwithstanding that multi business is are very still that discovery the

Crispin Love

now I what if they’re and Can basis, as guess, just well. single-family one seeing Thanks, year-on-year could detail provide and on And you’re then, one squeeze in. how you rents any month-on-month and on Matt. just right a I just on growing then last multi-family

Matt McGraner

Yes.

we’re there’s earn-in the pretty XX% skewed X% that the prior that year-over-year first quarter. Smile. That’s to dramatic XX% rent the Year-over-year in I’m growth were the signed so because little to in X% leases far So roughly Sunbelt from bit year is speaking mostly – growth a market a range. to

our rent XX%, So historically total at XX% it’s portfolio is least kind for to year – in healthy. of growth so the still is

I’d quarter to dynamic, say On year-over-year, rents year earn-in. we for the bit first the extent. single-family single with are lesser little X% to finished Multi-family the digits X% a was there’s decelerating. X%-ish. Quarter-over-quarter, same they’re SFR low was smaller – side, a but

thing are they far, to Same decelerating. So with a but lesser extent. so that

Crispin Love

for Thanks. my taking questions. appreciate. Thanks I

Operator

And Stephen Laws James. take our will we question Raymond with next from

open. is line Your

Stephen Laws

certainly, year. Hi. a great pretty a a Congrats seeing material size special Good It’s as nice morning. dividend. I on well. mean, special

equity two on you congrats deals you the So the mix that. when look know the the best investment your may where pipeline, talked the next at best you you months? and at your how guys you Where But capital is or as the opportunities seeing think quarter. look see look pipeline When over did deploy to I how and in about out you’re shift not about year, do as last may portfolio you of the pipeline kind you that building? six opportunity

Matt McGraner

think science you’re life the us to I going Yes, see water space. in grass some

historically, We’re kind the of number underwriting opportunities. but time in XX% of not banked. true the the preferred about space that of lab and mezz redevelopment least on. the both more in not say opportunities of million CGMP XX% mezz, space lot to spending equity kind we’re of a CGMP There’s to on I XX% kind That the side, When well of it’s of $XXX-ish XX% a stack. in stack, at of

in we space, a So as niche that speak. we’re defining

looking a So I would that expand from is. you’re to where chart, if at pie it expect portion,

X% think now to it's XX%. XX%, to I maybe roughly X%

preferred overwhelming the the majority have but in probably well. a still we're what right multifamily robust doing as that's So we pipeline now, of private

Stephen Laws

models? need Great. marks Brian, any consider answer, or implementation, quick our any CECL as a anything far change maybe of with or to And book we Thanks. impact but reserve to as value

Brian Mitts

Yes.

little be. It So going to we're the is is and be what a going impact on bit the proceeding range But will implementation the of to a an impact. in we're have of well, K, target.

quarter, we'll under this be starting So reporting CECL.

Stephen Laws

this comment I’ll well, the look K. for Great, for that thanks And morning.

Brian Mitts

you. Thank

Operator

And question Jade we'll with next KBW. our Rahmani from take

Your line is open.

Jade Rahmani

Thank very much. you

CECL? to could from value question. any Is on, to this Just comment there book call impact to follow-up percentage on you Stephen's

Brian Mitts

Not a be little this impact bit quarter. an of as of XX/XX, there'll but starting

the basis, loan go-forward a So I is loss our on bit think is little a than CECL provisions without calculated CECL. amount more

Jade Rahmani

Okay. Thanks very much.

the But you it it mentioned can of opportunistic. that's Do that opportunistic buckets to expect out, the any in of I preferreds about multifamily? office the broadly, you In market? of credit commercial the kind terms feel whether think play real in outlook for distress estate of of investment overall do be segment you NexPoint since be somewhat playing platform whether how repositioning, be, or

Matt McGraner

it's big are playing we're have retail operating type sides pretty off. condo types, or point. in any hands say Jade, heavy Hey platform know – this that that office in smart SASBs distressed. our office McGraner. of put I folks in wouldn't I'd are higher the property don't money a retail we or folks a Since significantly weighted of lot we're at those in and not pretty I Matt do investors' are of of office, transactions CapEx

Jade Rahmani

and construction, Phoenix including absorb five Austin. any constitute it are and think growth issues whether about Wanted the market's ask ability your million such under about units thoughts X What markets of creates XX% multifamily, Okay. as currently the – downstream? supply to that about markets to I

Matt McGraner

peaking in a down a Yes. softness will be this this off Sunbelt going I with fourth supply Largely, rents some the Smile Smile XXX,XXX point. albeit next, They're our over we fall said, of the quarter of year units terms cliff. from in the We – or fourth in quarter basically that, in or XXX,XXX operate, XXXX. NXRT's QX after the But in of so. view, There delivered to next in like units assets, deliveries year year see in at a QX the and occupancy where price either lower year. the the are of Sunbelt

So that's in they're to – QX XXXX XX,XXX. down and – to of then

and mostly the that's be of to of end owner data a the terms of that There on late be XXXX. I type want we're kind So and in seeing. multifamily you areas, higher think, assets of an But product. I in blip, will in of short-term these softness XXXX owner think

Jade Rahmani

There's increased pressures on growth how issues high. inflation for is single-family side? and there's performance are for a uptick seeing clearly expense single-family high, in as the well side, expectations. And on moderation driving still also Any still is which rent tracking expense. turnover, rent the relative performance we're And on an is as in rent Nevertheless, to your rents then the occupancy side. that

Brian Mitts

Not nor in we in have. portfolio our the that loan portfolio

mitigating seen. ever pretty of good As at the clip, rents you cost mentioned, are and up I think other still going a increases some

or see So NOI growth is portfolio our the any still relatively strong. in issues future. in We that with don't

Jade Rahmani

Thanks very much.

Brian Mitts

Thanks Jade.

Operator

for and the closing time. ladies at have no gentlemen, And over we questions further our remarks. back call this I additional or will presenters turn to any now

Brian Mitts

time No, to appreciate we're you Appreciate talk well I good. it. We'll questions. quarter. next everyone's and thoughtful

Operator

And conference this for your thank today's We participation. you call. concludes

disconnect. now may You

NexPoint Real Estate Finance (NREF) 23 Feb 232022 Q4 Earnings call transcript