NREF - Earnings call transcript Q1 2024 | NexPoint Real Estate Finance, Inc.

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Operator

Good morning. My name is Dee, and I will be your conference operator today. At this time, I would like to welcome everyone to the NexPoint Real Estate Finance First Quarter 2024 Earnings Call. [Operator Instructions]I would now like to turn the call over to Kristen Thomas, Investor Relations. Please go ahead.

Kristen Thomas

you. Thank and the Real first company's March 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; Matthew today Vice the President Vice Chief Officer; Financial Executive Mitts, Originations

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

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

Brian Mitts

will are going starting here. for on through briefly results going then commentary as environment.So and our start quarter. I us today. lending turn guidance Thank you, Kristen. by it appreciate QX over I the Matt It's off, macro to give Paul next to then portfolio results provide to Brian the and And quarterly and Mitts the joining follows. I'm everyone

per diluted of and diluted Board for paydown. share Again, loan in per $X.XX $X.XX XXXX 'XX. prepaid the of positive from dividend in result to of net We QX of negative per $X.XX the I penalties For XXXX diluted compared payable we share to in available per diluted decrease first that prepaid $XX.X QX the a of by $X.XX in the paid for The the of prior a $X.XX period quarter same regular negative distribution the the driven share declared The for $X.XX year first the interest income SFR for $X.X $XXX.X income to has quarter decrease share the premium prepayment was income Earnings $X.XX driven in a of on partially distribution share amortized cash loss per increase a was the $X.XX is largely to The to per million share to XXXX. quarter reported was in of of of just quarter, for flow of second the XXXX. quarter was the the diluted first loan by net premium in SFR and of XXXX. premium positive on mentioned. per million was primarily diluted amortization quarter, diluted first XXXX. from per net compared acceleration decreased share of QX in from first the driven a January $X.XX distribution by on a $XX due in loan share XX.Net was compared prepayment million negative million the available loan.Cash SFR share due accelerated that SFR same in period the of positive in QX per the dividend was

of Our value decreased distribution.Book from quarter per due SFR first in share diluted decreased share, being with first quarter quarter X.X% covered regular XX.X% from for the the decrease was X.Xx available cash and XXXX $XX.XX per XXXX primarily the dividend by loan of to fourth to repayment. the the

quarter, the the a of we weighted principal over loan, of SOFR. principal to sold outstanding During million and yield redeemable penalties.Our and cumulative million outstanding $XX.X we prepayment X of of senior redeemed investments $XX.X investments of B We contributed Series $X.X $X.X $XX.X a comprised million of points And equity proceeds basis XXX our outstanding XX preferred balance million rate and XX.X% net for with X.X one shares received million. average loan of for had for at outstanding portfolio million principal preferred is one total billion. of $XXX.X in stock of originated a

Our as investments Life follows: XX.X% XX% X.X% rental, storage. are multifamily, across single-payment sectors X.X% and Sciences allocated

with weighted than of X.XXx.We a or with X.X% Georgia, collateral XX% CMBS $XXX Our are outstanding. This XX.X% XX.X% mezzanine heavy a investments. X.X% reflecting less Belt securities, in investments: is portfolio states across following for of allocated preference collateralized short-term this, X% across million X.X% geographically I/O X% XX.X% X% debt follows: loans, assets notes.The X.X% value our million and X% is investments, have our XX% average and loan the Maryland, X% loans, The portfolio Washington Strips Florida, B-Pieces, the our Colorado, DSCR MSCR mortgage-backed and exposure. as Of preferred XX.X% in is XX.X% Sun senior to remainder of investments $XXX California, allocated equity stabilized debt. XX.X% Texas, X%

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

and the to billion $X.X high to available that, the years. the debt-to-equity per for turn Cash for on our $X.XX X.X a Our share distribution X.XXx.Moving the with at share And debt available a is $X.XX with of guidance. $X.XX discussion. share end of with per and diluted end it midpoint range distribution end. on is of low share per per $X.XX a share ratio by over low at on Earnings a weighted maturity the team per of midpoint of for I'll $X.XX $X.XX the collateral diluted range high average collateralized detailed the per share with of on end.So

Paul Richards

Thanks, Brian.

results demonstrated robust our particularly quarter portfolio. investment our sectors, of B-Piece CMBS first performance all across The in

focuses advantage. real us approach aiming provides where areas expertise stack, dual that effectively returns owning leverage surpass role as commercial to the to This deliver allows and distinct our entire a dual owner estate lender the operating in risk-adjusted on norm. assess across and Our to both capital information identify value and

careful focus Our debt moderate credit that assets leverage minimal continues investments stabilized, investment strategy a are to nearly or and prioritizing underwriting, and on stable basis.

individual shareholders. provide with tough despite to gross rate commercial a comprising loan reputable first our market, X.XX% to in quarter, return paper and principal.The approximately B-Pieces also company Tuesday, collateral plus low we respectively. also assets our of and $XX consistently million portfolio In We total of the billion the levered very in XX% returns dependable emphasize prudently value of new company geographically issue lending portfolio and purchase to achieve stabilized conditions mid-double-digit the pools.The $X.X stable beginning outstanding mid-teen desirable estate a is today, levered deploying of sponsors latest remained expect on to XX the cash pool. of ABS flow closing SFR in quarter diverse the markets. to with fixed, a purchased approximately From one first amount geographical and securitizations extremely issues with bias the with metrics. sponsorships. diverse X-year been active generate fixed will Both this high These Sun SFR the in completed and pay collateral Mac and X.XXx and in unlevered DSCR attractive through past with towards X B-Piece underwriting X.X%, And very yields new footprint the has Belt the We all-in with capital. a LTVs, modest have great high Freddie opportunities leverage, real

We loan $XX repo as gross financing as approximately to the repayment was CMBS new mentioned, to summary, in issue are cautious across and engage we our disposition asset portfolio's target communication CMBS of the investment with the markets the the discussing maintain our end classes. loan we SFR $XXX paper. financing, financing received repaid conditions of financed leverage acquiring million in at consistently On loan-to-value status CMBS largest by book approach portfolio.In opportunities range repo and in we accretive our the market XX% appealing fortifying around consistently net continued identifying a and side, the and full.At our AAA of quarter, standing million lenders, of with

We value. are committed enhance to meticulously evaluating these opportunities to shareholder

in confidence the current of strong have given We interest particularly residential climate. sector, rate the resilience the

historical considered as secure Our and the dynamic, by rent-to-own and evidenced sector single-family tailwinds. providing investments the performance long-term current verticals in are multifamily

Matt to to like to continue sector.To finalize we turn investment we to CDMO Life in about Sciences over pipeline our enthusiastic before prepared I'd questions, remarks it our turn the over it very Additionally, be McGraner.

Matthew McGraner

Paul. you, Thank

on we As pleased results, with mentioned, a solid basis. we just QX relative our remain especially

or over these the properties in the underlying for Continuous to market. to near do supply-demand in distress multifamily led to in a the continues The support by start spread cash continues underlying capital XXXX to in remain further real Sciences offset be that so. Storage in next XX the well. short-term from afterwards, shocks. despite relatively loan rapidly residential dissipate capital in challenging are supply inflows multifamily, market spreads. very more assets XXXX a investors will bridge perform should portfolio higher material on risk do lies vintage the seeing mostly income we signal landlord's housing the of in create CMBS favorable should favor.And the over markets' of time. months Our longer the floating-rate see performance believe improved And a stable. balance challenges be should we plentiful non-agency But fixed From perspective, some for liquidity in deliveries with and We SFR, loans and term said, Life to tightening and

housing private still billion Over of the And in billion range. days, investors meanwhile, $XXX over the over aggressively private equity X remains last powder rate on dry XX product cap $XX of equity priced sidelines. have the low

to these that, loan the special are $XXX $XX re-lever as will match all year.To to million continue fund second sheet million and raise on look million Residential in be million We to term activity, sectors. the company.Given in be our base, lock spreads worth the additional we these of situation continue in run well successfully as accretive Science run balance Freddie modestly -- the that the via Cambridge rate including hit, to CAD opportunity of continued the and environment. growing positive coming ramp opportunities pleased Life current SFR in any Life the Science the the be and we loan to throughout extent quarter rate K go in second Proceeds underwriting for across this the half we're the quarters quarter. notes rate our on excited expect with B-pieces.In in expect over normal capital the and the our per to into redeployed To B addition, would or $XX to offering repayment we currently the close, of about -- near continue offense will and Series and do pace preferred the range term second company's $XXX in this deployed our and month CAD stability opportunities

the As to to always, the turn now to hard operator team here work.And questions. the for for over we'd the thanks call like

Operator

from [Operator Raymond from first line the Laws James. comes Instructions] Stephen And question your of

Stephen Laws

your get may comments. year dividend. or to -- did some of mention towards with you some -- -- new noise, of half Matt, the to it capital investments. at the recycling into of end mentioned but here CAD in not kind you versus Obviously, regards first noise of or outlook, very the turnover I your wanted have end the this

as the with dividend you $X.XX that fully continue kind capital have You earnings of redeployed EAD the this level? comfort And your as still and get outlook a power the CAD supporting deployed can portfolio? what's the level of as far

Matthew McGraner

grow from rate kind have that of deploy CAD XX% -- year. we guess, to could We didn't We range annual annual course. or in B -- investments basis. big an the detracted we little $X.XX bit of an was of what on we I we XXXX and with of pipeline XX%. on on The the Yes, more, $XXX rate front CAD the thought throughout roughly. the yard loan, about to 'XX see Series an which that run $X.XX $X.XX loan a ended year, repayment from on know the was run the -- annual was the million That

match. Series-B So that investments here quarter -- and our then in second the back on new to $X.XX the job run vis-a-vis get the capital and is to increase that us rate redeploy and $X.XX, $X.XX

pretty feel about the capital. redeployment I run good this of So the rate post

with so And that's we're why dividend. sticking the

Stephen Laws

generally appreciate believe was some also some achievable those different as new you versus can the pref And and there. your appreciate I of loan. you securities I pipeline, that. provided you when color B-Pieces, numbers seeing return you're I at you investments, the But And on Great. what it or attractiveness mezz across about returns talk look options? look kind at relative in

Matthew McGraner

we're everything think with on modest the construction K B-Piece whether in we originations, a loan Really, mid-teens, Freddie we can mid-teens Yes. the do as well. underwriting, it's side, leverage

So I from into. private say a securities investment over originating that areas have pipeline think X are and visibility those favor a I risk-reward focus the perspective, on I primary investment. wouldn't we'll necessarily

to if add you have that? do think enough any opportunities in well I to thing Paul, don't other spades. I we pretty to know, have price both can and each

Paul Richards

that's No, exactly think I right.

Stephen Laws

expenses, final onetime can was may. OpEx more the expenses if One Operating for out. QX? of the get expectations But I a any your that about events color Or forward? run you we'll comes talk when operating moving one, rate in result Q

Brian Mitts

Yes. kind the -- stock some a -- legal some and expenses, of of things [indiscernible], debt gets as forfeitures of amortized think flushed There's once. audit way to that Steve, through as the all from gets the costs, compensation Brian. that well in. overruns the at with couple of contributed yield We and one it's

to on that, rest rate where the think the normal year. throughout we things So that run increased returns our needed. We've accruals various of

the and run be you that it to So stable of kind seen back had rate more before. should

Stephen Laws

I back kind number or on that the think give OpEx. take, we'll to X.X%, move of

Brian Mitts

Yes. That's right.

Operator

line question KBW. Our of the from from comes next Rahmani Jade

Jade Rahmani

you what credit in broadly multifamily credit trends market speak the your is on trends? if This of Jade. seeing could actually for generally, Sabshon you're would And helpful Jason within to and pref It mezz be terms in investments?

Matthew McGraner

Yes.

More issues where have books, trying eviction -- especially say is whether in pref that biggest broadly, bridge outside they I last an we're the the we as nature. Those kind are XXXX with scare and have respect issues working rate decide to some as CRE with extended defend that, see are certain I'd think resolve and largely some extensions in given courts.But floating the in seeing deals zombie the loan in our asset. on issues asset to developing and the I and of one Atlanta, mentioned, Again, the the submarkets everything investment to mezz lenders XXXX all that through loans half or doesn't second we one and were perfs to want been challenging else They are the working distress issues.The us. relate to of of we was these deals. year some fraud with them becoming just near-term in anyway problem Atlanta market, CLOs. sponsor and

in interest of operations So are control units. still any keep they're the flow rehab to have -- that to money all the up, -- because the don't the than they're have cash constrained operators, doubled. And extent more assets, rates the

in and these market. And isolated distress. experiencing performance some solid there's dipping causing of really broadly, agency submarket distress.And In the good still K-Series, and occupancy CRE again somewhat so in very our that's are are More books submarkets CLO some little performance. the the

people is 'XX, the basically robust. 'XX multifamily look, aggressively you respect think after deliveries. are underwriting where know you because in looking which then so are underwrite, the in market it there's transaction wrap I no it depends will here what can weigh to They're supply, the through an I being in.But loans pretty So that class both geographically on and with asset and and

to the be next will bit X little I multifamily, months X I after much more think so But challenging. a will be broadly it that, think improved. over And

Jade Rahmani

Great.

geographic So that in would find there you or B-Piece Science. you find markets to be hear It any for thoughts. terms are into Life of -- But you and the opportunities capital loans, helpful guess I about compelling or that pref deployment and overall just direct purchases more investment your talked interesting? broadly deployment mezz

Brian Mitts

the Yes. for penchant geographical we're type we I think areas. -- on certain mean, depending a property have I

Our bread the and Sun has butter Smile decade Belt been past over residential.

right? it's multifamily now most operating on for Belt where Sun it's like markets which weaker the Sun though right in household these -- supply right because residential sale, -- now and we term, issues interesting that's job The somewhat formation, And long in feel opportunities lead growth comfortable. even sure. but there's the the country are performance more is the So the is Belt in over

So opportunity. that creates bit a more little

talking there we're We're a underwriting you're So that's lab. investment that for know comfortable. and or Sciences, Life it our site Cambridge most concentrating if GMP that's really where in like good we depends because in well. our

to GMP, Houston. have on still or have $XXX Vacaville, runway. the that. good in opportunities us we are or another So But And we gives earnings of those a loan, most fund Triangle Research million that where a

So pharmaceutical to shoring think those pretty will secular certainly have manufacturing the near and I strong advanced see with and industries behind re-shoring, growth. manufacturing And markets continue it. a tailwind

about excited market. places of we're in the So both those

Operator

next the line Our comes Crispin of Love Sandler. from from question Piper

Crispin Love

I'm has just exposure asset It Slide shifted looking at X. your on type materially.

longer gap bridge you've to to exposure prepayment in that there. and trend assume prepay multifamily even SFR. Now, driven split term, closer by to provide said term? financing any you more and multifamily get where seen towards that you on stress talked do now right opportunities more But XX% going to bridge would expect I And the a that it's near multifamily expect space? you multifamily XX% with about. potentially Or could and you could that's over you've SFR have

Matthew McGraner

depend chart, I whether And predominantly multifamily more residential. is paper there, multifamily think distress going be And that's will just more tackle the there. the your the -- opportunities. our flow out we think pie we're moment. or there to There's SFR to at there's active on I Yes, question, first

focusing our lot -- transaction we'll of an ABS will we I and B-Piece efforts. take And extent that said, the find a XX-ish ABS attractive, an pie largely being the where probably So percent it. looks somewhat that that's or continue. more residential transaction chart that we'll a be But think to to

what your of Sorry, question? part was second your

Crispin Love

bridge financing? have either you of the kind of basis of of exposure -- Do from now, kind the right kind an organic some or multifamily gap

Matthew McGraner

Yes.

senior and direct platform we're of loan. Atlanta a I owned, no preferred to take So deals our common was we verticals -- what equity have Atlanta out in kind kind we with would the beauty again, the be But to multifamily. That CLO of the The big that over mentioned business one mezz one loan X,XXX exposure. that behind our we have -- have bridge units and I space. the a is, the bridge and wipe mezz asset in owners like about of that loan, position extent the in in operating of

that's up heals. over once a where situation time actual more So money market that, we the But investment than no. making wind beyond may our

Crispin Love

Okay. to bit, to want just for that's make would you redeploying What's little that given can sure. just cadence? that just the and the how take continuous I monthly a been? then prepay and And backseat expect Great. the deployment a I preferred capital? That's you the thought. what And of about talk

Paul Richards

is Chris, Paul. this

million, constant there's continue Series a I and raise, run that beauty this month, we're Cambridge that what's million, $XX that as has as match we'll Life -- to call $XX of, -- to asset mentioned, B the with about the million draws. monthly which fund $XX it, able think Science Matt rate preferred

on into well able structured to capital the types deploying other future. those continuously paper, additional we'll B-pieces, paper in be as So match of as

with able we'll Series-B to So year them match of the remainder throughout pretty I preferred. well be think the the

Operator

to questions. over I'm showing turn more no there I'll the the team closing are management now for call back remarks.

Brian Mitts

I Yes, next And from you. we'll I talk appreciate Thank to appreciate. us. time. Nothing quarter. further you everyone's

Operator

today's that gentlemen, concludes and call. Ladies

NexPoint Real Estate Finance (NREF) 2 May 242024 Q1 Earnings call transcript