NREF - Earnings call 4 2023 | NexPoint Real Estate Finance, Inc.

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Operator

Good morning. My name is Dennis, 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 2023 Conference Call. [Operator Instructions] I would now like to turn the conference over to Kristen Thomas, Investor Relations. Please go ahead.

Kristen Thomas

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

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

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

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

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

Brian Mitts

lending to provide bit macro the Then the depth discuss Matt through portfolio a our quarterly guidance portfolio Paul balance the and I'm I'll morning. us metrics, then discuss talk turn little Kristen. and I'll briefly and Thank quarter. about a and the joining you, in Appreciate it to this everyone environment. year-to-date some results, more over to little then next go and sheet going for

in additional private for a was distribution quarter fourth of in a per share 'XX. diluted in per of available distribution quarter loss increased changes CMBS share per fourth net and financing VIEs. diluted investments. We per quarter quarter 'XX our for on and by Cash assets share the third The the preferred $X.X the Net million We stock our net So results, share share driven $X.XX 'XX. cash the $X.XX starting they're fourth yields in consolidated preferred increase for the our $X.XX was compared from The quarter increase period dividend for distribution and quarter distribution to XXXX. for share share fourth the for share per driven per related payable the quarter fourth income $X.XX prior in per declared offset interest largely by the 'XX. of has diluted diluted reported is with from investments $X.XX year for common available and income of available our driven a follows. more to earnings fourth -- in diluted mark-to-market by in adjustments diluted 'XX. to first in the share million fourth $X.XX XXXX $X.XX net and per costs $X.XX $X.XX quarter primarily to paid per the partially of quarter of equity to increase as Board was compared by The and same was in fourth dividend originations quarter, share diluted in compared originations higher with investments per partially higher $X.X XXXX. Earnings payable the the of

XX.X% year-over-year for was X.Xx X.XXx available covered distribution. Book available share quarter-over-quarter to $X.XX X.X% earnings for prior increased by distribution being year year-over-year diluted by sorry, the paid dividends during share, in primarily the quarter dividend due and increase -- the $XX.XX fourth and decreased decrease covered cash being primarily Our the increases. special and per out of quarter driven value to the X.XXx mark-to-market by per

preferred $X.X we X During outstanding and loan outstanding principal. X outstanding investments with outstanding principal of quarter, $XX.X preferred principal contributed million redeemed redeemed equity of the to X $XX.X of loans for XX.X%. yield principal. blended and investment of X a million with X We of million These had investments $XX.X for million originated had all-in senior

year-to-date loans moving earnings distribution the XXXX. well higher distribution income $X.XX in by net diluted driven of in related $XX.X our million, partially per as share costs net and available average to The diluted financing in available our was by $X.XX prepayments in income driven The per per of diluted interest XXXX. was share consolidated XX.X% to income compared XXXX in share for XXXX. driven cash Cash was $X.XX available net loans diluted weighted VIEs for diluted The as as increase to primarily to and compared in financing reported decrease count, $X.XX XXXX. distribution results, CMBS for was as compared We compared So share costs $X.XX available $XX.X share year largely to assets in $X.XX for to per in in follows. XXXX. prepayments per per Net by 'XX. Earnings they're decreased on on for share portfolio increased distribution was SFR share to our higher in SFR decrease CMBS million changes XXXX.

portfolio. the to Moving

Our with outstanding total portfolio is $X.X of a investments XX billion. comprised balance of

storage. sciences XX% single-family, allocated investments life and XX.X% are Our across sectors: the following X.X% multifamily, X.X%

XX.X% investments, Sun as notes. The X% Belt Our and loan-to-value allocated DSCR equity than stabilized portfolio for strips, with MBS X.X% categories: X% XX% a preference loans, investments. across mezzanine weighted loans, and XX% portfolio preferred a X.X% XX.X% assets following X.X% and Georgia, B-Pieces, X.X% XX% Texas, investment X% X.XXx. XX.X% our is Carolina exposure, investments our in MSCR XX.X% with with our collateral IO follows: average Minnesota, X% CMBS are and across XX reflecting of this Florida, in The Maryland, XX.X% senior California, collateralizing allocated heavy the geographically states all North is less

the Moving We debt debt. short-term this, sheet. is outstanding. million Of of XX% or balance had billion $X.X to $XXX

Our maturity weighted cost of X.X is of average a weighted has average years. and debt X.XX%

is collateralized billion $X.X debt Our maturity years. with collateral average by X.X a weighted of

a raised is we've ratio 'XX, notes. debt-to-equity million to accretive In the used make date, investments low equity. be of X.Xx. A of through $XXX received we offering we of $XX will preferred continuous other prepayment an SFR senior February, million was a repay principal, used with million Our associated yields. In couple with QX of which of the of $XXX B gross To debt launched to on proceeds, X% mid-double-digit of to Series which loan -- loan. we December,

repaid a higher investments also into the We yields penalty than of with received loan. of million $X The million. accretive net prepayment much proceeds be redeployed will senior $XX

over midpoint for distributions, with negative previously for $X.XX at on Moving of the per low distribution of quarter result a associated that end. and before turn the I in the end. first end high diluted of high rest to with per in the negative quarter guidance on share available range 'XX to will prepaid the SFR a at loan the $X.XX premium for the $X.XX senior for available it $X.XX the mentioned the as available the is diluted midpoint the $X.XX distribution January. of was on million the and end share Earnings negative range for unamortized reversal, $XX Cash be negative $X.XX the low a team. Earnings with

with So over turn Paul. that, let me it to

Paul Richards

performance all Thanks, Brian. within and the from showcase asset of B-Piece our across our our CMBS investments strong results The fourth categories, overall especially quarter portfolio.

real centered unique edge. both gives us value allowing operating estate real owner This where to areas remains achieving exceed the lender in our utilize investment throughout strategy at information, effectively underwrite owning enables dual role to the risk-adjusted on stack aim a us and and superior Our that us with the in expertise average. recognize capital commercial market estate returns commercial and as

investments and was conditions, XX% all-in of very equity to quarter, decreased assets, year. From portfolio on of XX with more in diverse Sun performance, by debt portion XX% individual been quarter underwriting, Our as whole has underwriting QX investments both markets. exposure stable We of of has challenging as shareholders. In SFR relative the deliver Belt centered fourth in of total commercial $XX.X investment our full geographically near-stabilized the The steady largest of value making our along Georgia consisting be towards to company our preferred basis, despite and continue portfolio lending million this healthy remains portfolio XX.X% repaid assets yield at $X.X credit Texas, of approach approximately through reliable significantly follow-on SFR beginning today, the our and deploying an at approximately cautious is billion outstanding the with low steady fourth on sponsors Florida Georgia capital. verticals. in in of principal. emphasizing Atlanta, leverage and though real with estate life our to maintained the largest the science our new both than with loan as the and and of executed loan active investments bias and to year-end, our

X.XX securitization The Mac the fixed DSCR LTV, attractive unlevered purchase has a B-Piece will pay all-in completed with rate also Freddie geographical overall opportunity footprint. X-year fixed The a XX% B-Piece issue leverage. new extremely We modest a X.XX% diverse on and specs. with a of an

ABS return approximately generate property to has a of high a issue to SFR mid-double-digit also LTV, on on returns gross a low pool. The low paper purchased flowing billion and expect SFR collateral desirable stabilized cash levered in the prudently new to levered company amount pool. mid-teen achieve $XX We very

this first specific plus on this carries point during detachment as on XXX an company past and valuation SOFR Matt January. on pricing. current life McGraner appraisal touch loan million a its and mortgage his This will the Lastly, $XXX closed XX% drawable attractive investment provides remarks, more science exciting prepared loan

financing in full million generating $XX net discussing SFR of and in maintained loan financing throughout leverage the opportunities XX% our the On the attractive largest overall disposition market with of to side, repo loans, status -- lending SFR a we few and small target at the end our loan-to-value. for find of as million and to cautious continue partners, gross repo $XXX classes. loan approach financing we markets summary, repaid portfolio. In mentioned, a around investors. At SFR portfolio's we and of received portfolio's quarter, the our in and engage was and our approximately IRR attractive with standing the asset We CMBS finance conditions consistently communication investment repayment approximately

goal the resilience in a belief residential evaluate the to shareholders. our opportunities especially strong continue will maintain delivering current of of environment. value in the We to interest with rate the these we sector,

multifamily the I'd be investment turn safe and pipeline. To it historical in single-family are investments We for over we CDMO performance questions, continue Matt prepared science before our McGraner. like remarks consider -- excited and by verticals finalize the we turn extremely over our it to to as about demonstrated to life

Matthew McGraner

Thank you, Paul.

with especially on results, As he just and full a relative we mentioned, QX XXXX pleased the are year solid basis.

And multifamily, Our to perform challenges life portfolio storage performance SFR, multi, relatively continues and well. despite underlying in short-term sciences remain in supply very stable.

months. The Brian in XX% million that launched paired quarter preferred raised for run over provide investments we fundings over next As million as this originated life rate, Series XX distribution expect $XX have the as an available of cash approximately by the we with mentioned, will just to current next B At loan science to NREF couple Paul we past increase to and last of the and months. pipeline mentioned, months. successfully XX alone $XXX January, XX% over announced Paul date have the mentioned,

expect to with on match We shareholders. we B maximum investment rates our to to from fund expect proceeds -- providing fund this accretion Series draws

in $XXX we're to large delevering fund terms stability the of below the levered, extent in but delevers sources of quarters mortgage lowest create creates this balance full additional with investments. To pipeline, by us some Xx our close, environment. to sheet optionality and REIT. the company's offense excited a addition, capital the loan and to in opportunistic deploy coming turn SFR to the about and wanted to and it of go In these opportunities opportunity additional of This also the the will we investment into sit releverage payoff pleased now commercial capital million-plus on continued any

thank the want hard their I to always, work. team As for

like over I'd the to the questions. Now call to turn for operator

Operator

of line Piper the from is question first The Instructions] with [Operator Sandler. Love Crispin

Crispin Love

that prefer First, for just lenders to you the space? working borrowers out? help? that And you And to progressing? down this next can mezz Have you already begun to key way how get Are is that you've quarters some in be to progressive see to -- or started in other talk a offering borrowers takeouts opportunities expect to see about some you do or you the seeking over expect with bridge of multifamily? several agency Are road? borrowers the

Matthew McGraner

it's Yes. Matt. Great Chris, question.

being started of well seeing asset. They're to terms cash the on on on for risk providing are okay over portfolio seeking with CLO one-off deals dollars. money seeking seemingly liens fund terms the ability side, have being diluted, individual okay with mezz take replacement and the the We as Both seemingly realistic mitigation we're rates. both deals in and borrowers cap to and They're CRE agency caps. refinancing in the and and

we normally than would. we're a debt So better otherwise getting yield

us an additional come and for this fourth million have fast more million We furious pipeline. in beginning to than $XXX of they the opportunity would and were quarter. I year, be investment to they're million $XXX to this $XXX consider

Crispin Love

the just with what And managing as of of or the found strategy the as interesting. borrowers, pref kind you here do very Okay. it view you think LTVs coming operating are high in low at? the borrowers key I risk But and the strategy? any stressed kind that curious, I'm likely if just in what DSCR? there's LTVs risk of So And are

Matthew McGraner

-- rate we we're I the sure equity to that in-place asset we such The own enough asset we cap into that we either that going can Yes. make prime refi can can or at the mean sell an agency. think

one on we But underwriting. are and of some those we hit Now few far haven't yet. and between, candidly, are

on will reach We challenged. probably all still XX% investment a be value of carry no on lower today. The will to But can structure bit of stack little as-is of in XXXX flows, cash because more target pricing probably the than mid-teens. current the pay. supply, We'll of the in, be the certainly a that given

from we necessarily large on haven't estate the daily one services So on real banks, commercial we're we cetera. yet. sponsors, selective. door seeing a et hit come basis Again, the opportunities But are in investment companies, from

active year strategy. this So in we be expect to that do

Crispin Love

loan? you the quarter, That specifically? Great. anything with senior then out question just ordinary drive you Matt. the one of you prepayment What I accelerated all the on think just negative Can -- loan makes mentioned on loan that on the the for expect last the in amortization first sense, which And premium me the in Is is to quarter. there that any EAD there? prepayment give and the drove with the more borrower there SFR detail or of

Brian Mitts

for say And wouldn't us they've out years mean I to it. they No, I they so. been where reaching But point now think found there's restructure that had knowing other the to got a I to several the equity don't that to prepay company that. think I with just were issues financing and that it. loan willing there's anything any capital had or

Matthew McGraner

very to it are it's I a for a capital. us healthy real think well-heeled general. right? I'd that new ABS commercial sponsors I SFR, sponsor, it it's known The go, in the it's think liquidity that, to healthy sign And in I very market active, ABS while a with in think space. add sad of sign provides and And just we're see -- estate well

Operator

Your next is from Laws of James. the Raymond question line with Stephen

Stephen Laws

Congrats nice the year. close to on a

Matt, of kind XX want move I forward get think the in to to your in Looking a want I months. XX% XX% the the sure I for results. I through to mentioned the -- understand I yes. make you as growth brief to comments sure make next opportunity your you CAD year.

about you a a QX get then from moving think you'll year? see penalty redeployed? return about fully CAD as the the we repayment through trough $X How do of benefit through in year, migration As think kind capital the you and QX does million this

Matthew McGraner

-- with Yes. It's B $XX to B, Paul our -- per about raise accretive CAD. The Series $X.XX and $X.XX pipeline for we is in a loan Series look life that's about way the good mentioned, $X.XX the just question. science to it's construction million at that of the that

be that's So taken. it as accretion your up where XX% is the we point, again, XX%. with perhaps could move through to year, that more And well picking I'm --

see On with to turn. that enhanced make is I'm the still But funded. and you our first available fully payoff, second full sure able little grow cash then the will ability redeploy quarter a distribution comfortable to bit job delevering in that in the And again, a we're the to -- be quarter. being while for

Stephen Laws

can pipeline you about new any those stock book, how just you to you redeploying returns there Appreciate think you liquidity. in comments. investment that given new you there's about I capital, the versus do that? about about some think when given the And discount should see know have But think stock investments, repurchases? the talk repurchases you'd large and limits deploy the how to where

Matthew McGraner

Yes.

if first to B obligation foremost, To are to it's back comfortable which and to fund our we excess to, again, we what it buy $XXX that and raise levels. We're fund we And trade absolute we commitments. these Series those the we'll buy at certainty million, excess we another cash, fund like to other a chances discount. be the position an capital. I $XXX then that have to, have of getting expect an managing have repayments to We to continue funding at ramps, in with preferred extent our million to of back and stock and a that kind going and investments cash the stock look extent

Operator

KBW. the line Your of next is question from with Rahmani Jade

Jade Rahmani

prepayment supposed wasn't to a XX% penalty? be On the SFR repayment, there

Paul Richards

of Jade, based matters Paul. calculations. it Yes, it so yield on course, just it's -- maintenance

was and we ago, discussed lot low when So were prepayment years that, penalty rates higher. X.X a back the

what was market rate was X% prepayment have back the was back traded when that penalty lot less to a land, the a Now lower. than that lot it rates up

Jade Rahmani

So $X there's be penalty, correct? million going to prepayment a

Paul Richards

That's correct.

Jade Rahmani

an premium? into that's there's And to unamortized factored more the but earnings, the offset than reverse

Matthew McGraner

That's correct.

Jade Rahmani

pro should book reversal premium? be for value the know Okay. forma Do you the unamortized what of

Paul Richards

around -- $X the of than of so It's less book the about premium, it's little Yes. reversal a unamortized value.

Jade Rahmani

to $X? we decline by So expect book should value

Paul Richards

a vacuum, In the if variable, was only that yes.

mark-to-market Of book. on course, there CMBS et could movements, cetera, the be

Jade Rahmani

Do on where mark-to-market CMBS? the to you is know Okay. date

Paul Richards

relatively doing little to it's means, been up have January. basis. It's flat a bit. through It's little by a going but not any up -- But bonds some from gangbusters bit well overall, mark-to-market a

we'll So out, the then, see of March works. get how and in course, marks that February coming and

Matthew McGraner

the Jade, the seen in spreads the markets of CMBS as of in and rise active, in Being a couple year, returns. indices ABS we've bit the quite first more months liquidity as and come

marks So as strong. the sit like feel here we will today, we be

Jade Rahmani

Okay.

So partial will a be to hopefully book that the offset impact? value

Matthew McGraner

mean, in good. which terms delever million, too, I did by $XXX again, we -- we like trade-offs, the is Yes. of

Jade Rahmani

caught going basically my Howard to was not totally comments market banks loan seen -- I being I Hughes' are pull they've The construction transcript, market like a getting mean do red and attention. through market the a challenging. It's told lined never is really loan their where this, multifamily and about to construction office. they said everywhere even else. back

how loan so on attachment That's and you science, future being the the sounds it pro low. all a about based construction feel the magnitude So is it estimate. point that? of life LTC And a on forma do like fundings

looking active is get area more So in? construction to an you're

Matthew McGraner

repeat sponsors million roughly of into This mezz well-heeled loan. fact, in to opportunity ours the $XXX the X say senior Cambridge, the borne a construction the was and mortgage. We on of has on where going One of do were, syndicate back, to site equity XX-acre sponsor trying the pulling I'd $XXX banks is is out And million this project. so. think I Yes, loan things. in in

built. mortgage of The same the we stepped X was so terms the of creating And and attractive the also did pulled project in back, just profile. banks lower in already rate, at when X point, the a pretty detachment basically buildings senior risk-return were funded equity.

about The out. top to third is

a risk-reward, was this one. one good So from a

over a loans led Our would whereby team storage expect past you're well us that John more self-storage all multifamily XX would the developer, profits space a development multifamily you fund as of and to as 'XX. property 'XX as construction months, you mentioned, and take as this developers well our platform through storage space participation -- through because you're But and interest. types a to the get construction had past in has, to really the decade they hurting. performance for X active I Good, by bodes in pipeline, if well

You can't find access to capital.

time, already good and radar, So on it. doing it been a it our is is we've

So ] has news. your good [ buddy

Jade Rahmani

the a hit to tenant lot On quite there there's I Because year is already a of year. up? this signed life science, and supply next know expected

Matthew McGraner

been lot the Yes. That's pushed hitting supply a of 'XX and to out 'XX. has rumor. A

to XX of half think I what was next won't over deliver planned the months deliver.

the numbers, again, we're the the particular full and to the XXXX. fairly into to of ability to out you, COs dig last sciences it of And before expect with project is attractive. And the you far if be It's we Cambridge project. is very to think blocks in I be is happy the share So this overstated. This hits. life not -- in in supply a those like moratorium feet one XXX,XXX opens take size, it location, total, square developed

no just But of basis expect today, tenant. there very But leasing land we I as to is would is add -- well do So thing, our our velocity here. value. one

Jade Rahmani

of -- at on delinquencies in of lot -- of that then the stabilized multifamily, lots are manage. your their peers. a the some showing lots But & same pretty CLO portfolios mortgage showing scrutiny servicing Walker Dunlop There's reports low REIT And on others delinquencies. peers GSEs time, Okay. noise, like their of

the on us performance? credit yet and give of just with sense side pretty challenges you can equity the what's since the on supply going what looks a of so some ground like multifamily, active you're So on, even decent

Matthew McGraner

bet. you Yes,

then flips throughout dynamic gets and storm, QX, to 'XX in versus into I 'XX, multifamily bifurcate it in just, landlord's the -- supply guess, QX, speak. agency supply non-agency. -- I favor. now, of to generally the really QX the is eye QX wanes storm, think right And And you got so the

obviously, Their zombie starved, there that business ago. lower-quality and loans, ground, conducted the CLO no or to rehabs extent flows the CRE a or On of the plans that -- hitting collateral created cash were are flow fund to or air is cash their deals probably years there pockets. couple are operations almost

our I'm going deals you're portfolios, to work are those through not but Multifamily lot agency the right? And work own, and a have then those can't held particularly a that say makes And more you through sense, are go sponsors, better challenged. the it. better. underwriting seeing easiest There is to bunch most up layers may be including where are of located, well different So through, weakness. The diversified. of

be so especially through will deals to also will be be will next continue once things system, getting help. and the the Fed fine supply those -- to we I ease pivot, X which once decides then on the -- to pressure actually we get think or able through some quarters, and the And I as X think refinanced, that

the little a a in quarters, next do the at but of or X X there's rough tunnel. So the light bit think end time of I

Operator

the call. of session the closing will remarks. now Q&A the concludes turn This team management back to I for today's call

Brian Mitts

today. soon. Thank again Yes. time. Appreciate We to look forward Great speaking everybody's you. questions

Operator

XXXX you NexPoint Estate This concludes Call. for Quarter participation. Fourth your Conference the Real Finance Thank

may now disconnect. You

NexPoint Real Estate Finance (NREF) 29 Feb 242023 Q4 Earnings call transcript