NREF - Earnings call transcript Q2 2024 | NexPoint Real Estate Finance, Inc.

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Operator

Thank you for standing by. My name is Amy, and I will be your conference operator for today. At this time, I would like to welcome you to the NexPoint Real Estate Finance Q2 2024 Earnings Conference Call. Please note that all lines have been placed on mute to prevent any background noise. It's now my pleasure to turn the call over to Kristen Thomas, Investor Relations. begin. Please

Kristen Thomas

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

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

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

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

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

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

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

Brian Mitts

next ] turning over and briefly for everyone us Thank commentary macro results the discuss team for our you, today. a give to quarter [ it the on our then I'm Kristen, quarterly before and rent portfolio the detailed going environment. the and to joining I appreciate guidance

follows. as results QX are

consolidated of compared For net quarter of of the realized CMBS, related for [ net income change per to share $X.XX CMBS the [ net diluted a the the sale net quarter, diluted second million. of (sic) The VIEs due was income X-Piece gain quarter including of for XXXX. $X.X increase share in second $X.XX income for the ], to assets to per in reported ] we X-Pieces

Net in from quarter driven The well $X.X expense in by was second by as an $X.X as of second million increase that in $X.X occurred first increased interest interest million year. million income, quarter interest the was the rates quarter XXXX. in by income driven to this lower from deleveraging increase the higher which

was in increase QX per distribution quarter. XXXX. same increase diluted share in in $X.XX compared share The was in Cash distribution for compared diluted by in of available earnings for XXXX. available diluted to period driven the per share for of the same the share distribution period $X.XX QX in net Earnings $X.XX was per income to available for diluted per the $X.XX

We of quarter per paid has Board per declared in third regular XXXX. a $X.XX the a quarter, share the of payable dividend for $X.XX share and the dividend of second

flow for Our X.XXx regular the second by was dividend available quarter distribution. covered cash in

share with diluted decreased decrease value to decrease fair QX the the per common investments. in our Book XXXX on to value primarily share per being from stock $XX.XX X.X% due marks

$XX.X originated yields bond on XX.X%, we Cambridge. equivalent X-Piece which a purchased ] million, mortgage million million X.X%. with in on first the [ $XX.X Sciences a funding million development the During Life a CMBS note property $XX.X quarter, drawable promissory We and funded of a $XXX

preferred preferred $XX.X we During our proceeds sold for or B million. of the net Series redeemable of -- shares quarter, million X.X cumulative

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

Life in Sciences; XX.X% in storage; XX.X% single-family in in allocated multifamily; XX.X% Our marina. across and investments follows: are in sectors X.X% as rental; X.X%

mezzanine XX.X% I/O CMBS XX.X% is port- MBS; portfolio and follows: equity as income X-Pieces; allocated XX.X% loans; investments investments; notes. senior strips; promissory X.X% of X.X% fixed loans; XX.X% X.X% across Our preferred

X% our allocated preference Texas; across are as The assets Massachusetts; Georgia; states exposure, XX% our in than X% XX% in Sunbelt the Maryland; geographically X% reflecting with in follows: California; X% less for markets. Florida; heavy in remainder in investments with collateralizing X% in

Collateral on and XX.X% X.XXx. XX.X% of stabilized average weighted our DSCR is a portfolio with loan-to-value

debt have debt. this, We $XXX XX.X%, of million $XXX outstanding. million, or Of is short-term

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

ratio weighted is Our maturity debt billion $X.X and our a is years, collateral with X.X average X.XXx. collateralized of by of debt-to-equity

share second with Moving $X.XX diluted end; with quarter, to for distribution cash the to of a of earnings and on on end. the $X.XX for we on midpoint as distribution are the share earnings range available high distribution range the midpoint diluted the for a available $X.XX low low available available end the guiding $X.XX $X.XX guidance distribution at for per for cash high and at end and of of follows: $X.XX per of

our So I'd portfolio. with a of to to it that, for like discussion Paul turn over

Paul Richards

Brian. Thanks,

our second across sectors. of strong performance investment exhibited results The each quarter

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

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

to to shareholders. lending our dependable provide reputable consistently to emphasize also value We sponsors

into In were conditions of take seasoned strong investments as the market opportunities. improving capital second quarter, accretive well in real deploy in yet bids in the recycle able estate bond the to advantage more as we despite bonds market, other less-than-ideal secondary commercial and still

total loan individual approximately with comprising continues in assets XX outstanding remain billion $X.X principal. Our of portfolio stable, to

Sunbelt geographically quarter the preference through very is the with the capital. has of portfolio deploying and in first markets. been beginning diverse From The towards a today, underwriting company active

fixed to generate with diverse Freddie return yield the expect we of levered X.Xx securitization reasonable and fixed [ attractive footprint investment purchase mid-teen B-Piece LTV, completed we quarter, geographical The pool. a new-issue great a with collateral the with DSCR high strong ] a X-Piece rate metrics. During unlevered utilizing The X-year XX% X.X% has plus on sponsorships. leverage, Mac an and all-in will a of

also funded company interest Life Science which rate million XXX. $XX of of senior bears The additional SOFR loan plus an

disposition was repayment gain, [ loan a very into ] healthy newly originated we redeployed which generated a as accretive side, which sold mentioned, the bond, On and deals.

and our lines our financing in At range the maintaining repo market loan-to-value of our communications remain a we value committed status CMBS delevering debt-to-book with approach $XX by financing quarter, repo the over consistently from engage our to decreasing quarter. approximately end in lending X.XXx the the the million We of to standing to and XX% leverage portfolio. further and overall repo with discussing ratio the conditions prior from the X.Xx partners, cautious

opportunities target across markets In are and we appealing classes. consistently asset summary, investment our identifying

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

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

single-family the in tailwind. are as investments evidenced by dynamic, and and multifamily a performance long-term Our verticals secure, sector historical the rent-versus-ownership considered providing current

to about Additionally, CDMO our pipeline Life very we investment Science the in sector. enthusiastic continue be

to To finalize Matt for our over prepared it like remarks before McGraner. we turn turn questions, to over it I'd

Matthew McGraner

Paul. it, Appreciate

during is Science outsized worth great to loan quarter which active mentioned, across was just risk-adjusted returns. and verticals. he Life deals $XXX an As investment emblematic originated of we in earn The of opportunities the quarter in million million the $XXX multifamily originated QX bridge market

loan TI construction, and mid-double-digit opportunities secured We -- at loans loans on last-mile sector increasingly wonderful are in Sciences bases the returns. to senior new redevelopment great LTVs are ]. make underwriting all-in to funding [ mid-XX% These seeing Life with

outperform the broadly Freddie half were material in NOI supply. investments quarter and being during improve exceptional even expectations quality the face credit Same-store the multifamily Mac sector continues the to quite the demand to made year. during of growth other performance continues with residential in the The where program first of K in record underwriting

starts our trailing 'XX from average. Since which XX-month metros, tracking major in a from down year. represent peak the is year, including second units, now all I'd supply couple starts stats the XQ level markets, peak. is XXX,XXX at peak at starts sector like Annual share years, approximately Sunbelt drawdown XXXX starts new to XXXX's starts in units the came down from units way in are expected XX%. lowest of year-over-year XX,XXX from in XX half the deliveries. annual The are an of and just anywhere in XX-year their multifamily research per of quarterly XXX,XXX across versus Trailing or the approximately of run rate XX% would XX% nationally, XX% to to

XXXX. in return normal organic growth a to forecasts rent RealPage Finally, X% X% annual to

results, remain Meanwhile, solid our relative basis. pleased QX especially on we with a

the to multi, portfolio SFR, multifamily, exceptionally Sciences performance Our remain well supply underlying stable. and Life storage -- short-term perform and in ] in continues despite [ challenges challenge

stability and in opportunity these quarters on about To and with coming go pleased the continued in opportunities this close, the company's excited offense to environment. we're the

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

like And call questions. now to the we'd for turn operator to over the

Operator

now is [Operator floor moment questions. The you. a open for pause the roster. to Q&A Thank compile just Instructions] for We'll

from The first question Laws Raymond with Stephen of line the James. comes

Stephen Laws

the of where the sort that X I the supporting Series and funding that those And capital outside large raising, base, I you just well redeploying the Sciences that, as to then, up capital in repayment drawdown stand raising? capital guidance, Do always. match investment. think on of the as quarter. was wanted things the the Nice perpetual you the appreciate matches about do Life the occurred QX? comments of touch how as as the B what is

Matthew McGraner

It's I'll start. Matt.

the to pretty matching draws month, We're raising well. raising million Series million On roughly fairly approximately $XX and B, or a up a $XX that the about it's month. $XX matches capital front, actually of so with million

second perspective, one So timing we out half dividend the reason from are that. the into well why think going forecasting our of feel working about good covering a guidance the -- we why and it's and really year actually

with to Cambridge and investments -- relever redeploying redeploy the B several capital markets match is then balance opportunities. new and then the match the delevered the consistent loan. and match-fund easier best from us we're it payoffs, that, for those making largely Series the in on how reviewing of terms sheet But by options for And of we've the those kind and and now, to loan payback capital

Stephen Laws

Great. the drop imagine do wanted the but DSCR, the bit about kind it's stabilized, a portfolio to of bit. and seen in good in it's of the shift probably And LTV I hate a transition, less as little but it. also a a lower a little little time follow-up, talk I to cycle the a right I to say --

advantage like you're as taking seems you kind seeing of looking left about put of have talk most focus attractive But and the of it some you're you financing what's can new maybe So where efficiencies today? work returns money kind and the market at risk-adjusted that that sector. driving people to

Matthew McGraner

from And seeing [AREs a sector. think Yes, is a different vantage growth. time when of of in We're alluding development. resurgence square a quarter, this things ] our activity increasing Life seeing at you're in feet Sciences a types over any really retrenchment feet, I the investments our space not of number It's same in hockey into really quarter re-leasing lenders new stick but you're of that. lender square point, to of X it across Life million a some without just had the support. our the -- in XXX,XXX they Sciences second of

some were capital. that so and be warm-shell in mispriced and last a and are a on come of last basis are raised foot $X,XXX $XXX, We that square finished are started da- TIs that and raised the you square probably dollars XXXX, ton $X,XXX been components in that that a out all-in the normalized that of prime rates to with a that's in these projects And a worth $XXX 'XX in fund projects to have of capital finish other environment. foot, can

announced side, multifamily in. you and into at NXRT, borrower come a the ago, $X.X or over spreads space, ton SOFR. with spread a liquidity just X have of days a points refinancing yesterday on Meanwhile, of that XXX billion dramatically coming have We basis

or as from billion, give just about did. third, I to [ the indication $X.X upsized ] well $X.X It oh, that's Blackstone was go CMBS should almost a -- deal off, by AIRC, think, to So billion. the some as you that

will advantage that So there conviction really 'XX see will over of we the make not it investments take to have and the that on in for enough and the now, right market belief And property where ground certain and can fruit our types for and term liquidity return 'XX. and it's is long probably certainly we shareholders. today want bear

Operator

Your question KBW. Jade next with from comes Rahmani

Jade Rahmani

their And any the What this what behavior do agencies? is terms Are are of deal from you you think seeing multifamily driving flow? you year? in seeing pickup

Matthew McGraner

I that missed repeat question, the second part Jade. Can of me? you the for

Jade Rahmani

is seem year? their behavior what conservative this think They multifamily and driving lending. somewhat on Difficulty] [Technical you do

Matthew McGraner

the part X% from going for question. very rate. good-quality or guess I rates perspective, in cap it's part Negative our that flow just deal off finance Cap at are your think, the I product of of still second cap answers -- very, on flow. the leverage deal rate persists. typically deal is that the or muted. question was first a we've still ended up agencies would X.X% -- South been X.X% a Florida The

leverage is in the That and see some in being worth billion having did So you obviously equity the which the transactions most first flow. deal $XX multifamily KKR-Lennar still quarter. cases, go of to negative is said, deal impact off, private

deals down. are So are done. large I deals smaller say, individual, still getting would

it's year-over-year transaction saw think I think I was volume. stat again, XX%, in the I down last

I And seen with bulk, your I'll kick lot you them they after have agency a they're if to from billion, I an that. standpoint, if pretty anything it's, Paul, there's overly When loans, But just it's you Paul, add product. So of They the don't not for this haven't our not that the to you think to we this to pool excited know conservative. were the $X.X about opportunities. went of just being comments. will. multifamily

Paul Richards

Yes.

term. I X rates alone, in origination ]. we've to now, But that's And fixed, Matt of rally. we as fine lot fixed think, out, has it's been they're you more seems to some flow if year seeing so X.XX% past, as space it close deal flow. saw still we treasury -- the been [ on on fixed see shorter down X a think deal I this agency the treasuries little right like little X-year but in more pointed treasure years ], today, as -- might continue XX-year But X-year from a as of But [ floats. for the tight new a

Jade Rahmani

Is that NXRT basis spread? at refinancing the to XXX points XXX

Matthew McGraner

points basis XXX It's over SOFR.

Jade Rahmani

look weighted you moderation, when all-in how you -- look the And average mind, expectation do your and that at so, of what capital you rate deal? some do of of in think the maybe debt at the of cost capital cost

Matthew McGraner

Well, is that deal of blend different swaps $X.XX of X.XX%. because we at billion of have sort an average

are 'XX. points in but over is the an additional cost just XXX borrowing So basis off that, swaps burning

and the So in [ sleeves, it for But that defeasance the company, to does, particular, agencies, with rate floating and and in one select or flexibility yield one-off it's situation. amazingly a accretive Freddie refinance rolling up sponsors. on to up bespoke their have solution their X to of a in buy digging to I keeping maintenance lease-up ]. a think, trying illustrate come That's

Jade Rahmani

a at you multifamily bidding for broadly, NXRT, more on that And you when at sold acquisition something look X.X%. mentioned maybe some a

X%-ish. Let's say at at kind How were situation? that of looking a are in returns maybe levered bidding you you

Matthew McGraner

our rate depends on out transaction -- at all rates. it's think X% sitting transaction market company still public lower still cap who is I tight and at market case, at or an it that you a the X.XX%, tight the has mean -- implied private I we're is Yes. cap there are. In

So we that's have back we sell there opportunity to and stock, assets do. what the continue buy to and

years go returns, deciding at sell move X course in plus and terms value look and X% the new refinance. to whether of levered units historically try X.X%, it and cap or a or renovating adding way rate or is that rate the to of by X% minus then cap over we X in But to underwriting a that at

Jade Rahmani

a value? on it quarter-end intra-quarter do post-quarter How then, or And share, do with lastly, compares value per you think book update? you the have book Okay.

Matthew McGraner

or--- Are about X-XX you from to talking today

Jade Rahmani

spreads? Yes. be, Yes, just there's where the if might mark-to-market been impact an on of value book based improvement

Matthew McGraner

Yes, that's a great question.

are reflation a month from seeing of treasury alone of mark-to-market this mark-to-market rates our CMBS. We book just on more on past

values. those uptick seeing an are yes, you So in

So back CMBS points [indiscernible]. I month on just the mark-to-market past would of some say have that clawed percentage the this we

Paul Richards

in was in that in later value we're for is and stabilized, It's probably storage there addition, in time our big XX% the third refinancing that in all to a is on that pretty on year, it well. now 'XX, late report, Jade. was I it's good to the think of not the storage leased the doing XX% the quarter, is, value the 'XX, book given for if to expect -- to we'll history, decline question, 'XX, part And portfolio, a in third QX. of the mention debt -- quarter, from and pleased quarter early accrete the portfolio -- third a wanted performing I occupied back in that development some first portfolio I'm And SASB

expect as we So well. mark that reflation some in

Jade Rahmani

issuance, that dilution confusion, on exclude preferred believe think to and how now excluding eventually I those share that? be know so just sense Just the from to shares you settled cash, it potential you're the of dilution? any And would count. that Do in do the you makes reduce

Paul Richards

another that's question. good Yes,

So that how we of methodology. came there's factors of to a couple

there's and the shares. First a foremost, redeem lockout to X-year for even company

] actual mechanism XX% is The [ is be can there prep point only per second redeemed of a the year. where outstanding

cap there's So it. a on

fully where be wouldn't full be there would point any the prep any one redeemed So in event at time.

redeem. believe, investors an to down there's, investors point XX% That time. But this currently, for at redeem time. penalties for large penalty also to There's stair-steps over I in

in company that all have you value. NREF, book dilute below trading helpful. our is think I the when our plan It's we're seen not guys point, just vehicles, last the NXRT. to And never

we future. in settle so would look to cash And the in

versus conclusion included. with share the the diluted Series to of a came count this So shares fully using that's why B we specific

Operator

to to turn there this further closing back like time, questions. I remarks. management team the call At the no over Instructions] for would are [Operator

Matthew McGraner

All right.

Paul Richards

ahead. you I go go Matt, Thanks Thanks. appreciate to everyone's Sorry, We'll next talk quarter. for No, it. ahead. time.

Operator

you That concludes today. the much. Thank call for so

disconnect. You may now

NexPoint Real Estate Finance (NREF) 1 Aug 242024 Q2 Earnings call transcript