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NXRT NexPoint Residential Trust

Participants
Marilynn Meek SVP, MWW Group
Brian Mitts EVP, Finance, Treasurer, CFO & Director
Matthew McGraner CIO and EVP
Robert Stevenson Janney Montgomery Scott LLC
Craig Kucera B. Riley FBR, Inc.
John Massocca Ladenburg Thalmann & Co.
Call transcript
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Operator

Good day, and welcome to the NexPoint Residential Trust, Inc.

Second Quarter 2018 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Marilynn Meek. Ms. begin. may you Meek,

Marilynn Meek

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

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

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

quarter the Additionally, a company's review is on Investor available section information website. copy of XXXX the for supplemental company's the Relations second of your

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

expressions results also forward-looking in should can these FFO; to identified are Forward-looking operations, of Except or often that all financial does and not guarantees loss net strategy include as from required statements which measures year or operations, by or for future be are the analysis and any to adjusted NexPoint expect, for a guidance company's computed They publicly those from affect negatives performance. NXRT's FFO; used accordance with forward-looking NOI, are reliance by the and SEC and GAAP. discussion to, obligation any results and for assumptions core substitute review differ non-GAAP statements. to funds net and report or Listeners statements materially from for, subject conference statements. the risks actual This words. expressed uncertainties regarding could as income revise on such cause undertake other funds a for most other to filings complete of full not and and as any and limited update that not operating forward-looking These statements call words not variations not but place similar anticipate, These forward-looking recent company's of supplement are could results statements. statements should financial undue income, Form to intend the non-GAAP annual or on encouraged any be are of risks, XX-K a with includes of operations, and or measures of these funds forward-looking more AFFO; in core factors law, XXXX.

today. complete of and discussion more the to NOI, release core earnings turn like go ahead, now Brian a AFFO Please over company's call For earlier see Mitts. FFO, I FFO, that Brian. was the would filed to

Brian Mitts

would conference I the everyone Thanks, quarter to like Marilynn. second NXRT to welcome call.

As Marilynn the mentioned, and in the you second for guidance revised then Brian walk Mitts, the portfolio through of here. and got going to our some of McGraner the discuss results XXXX. give some for myself, quarter, markets details and Matt We're

We into our same-store right it was like growth of a NOI quarter, factors. felt driven jumping very QX That really So two was strong by it. led by XX%.

our were strong. were kind those market rental growth Dallas, and top X that I'd also are across at portfolio. markets. our is of Tampa note Atlanta new of Markets First Orlando, also note the X.X% better-off of

very new by a into go comments. his It's Matt expenses. So good more detail some also overall rental growth from perspective. in will driven

second and this we quarter. all reductions the across some taxes. assessments So course, primarily Of in test We the XX.X% quarter our portfolio, we and had got [indiscernible], nice some These Atlanta. estate good down we expense the get Nashville are by real settlements - we led Houston,

that by reductions That these green changes, was in news. driven our Mac. driven good a utilities. So expenses of implementing program once pretty then X.X% we're utilities, by big also tighter that the lower second spread. quarter But was And twofold we lower seeing from primarily conjunction Freddie kind were We savings. get year-over-year It's in implement with some a of we're 'XX.

more will Matt well. go in detail as through that So

XXX second current units versus we've front, it cost Inception-to-date the rehab first back at the across rehabed On quarter, $X,XXX unit. lower units X,XXX we portfolio, up for quarter. an rehabed our to the so per kind average of historical average of

growth, on rent $XX per unit. average XX.X% or For is

our For a return is on XX.X%. rehab on invested those capital interior

So of the growth. obviously and is contributor rental rehab program - remains strong our

every Our a NAV walking put our net per share our we quarter, value. through calculation supplement in is, slide asset indeed,

$XX.XX per This quarter, the low end, on share. have we

at our midpoint of $X.X trading. current shares On an average buybacks compare of the you I a to bought that NAV from and that average discount back million - From just for we mentioned of Share $XX.XX, if for quarter, cost $XX.XX that did XXX high end, stock of was an the XXX,XXX $XX.XX. we total XX.X%. at

XX.X% they - capital bought an of if XXX,XXX use there. can we total So XXX shares sorry, share our in then midpoint current average of our discount program, Inception-to-date the NAV. a cost of at buyback average $XX.XX shares,

no acquisitions dispositions. were there quarter, or the For

So it's the tackling, blocking, doing think in regard we et are good cetera. as I this And really executing rehabs, that mentioned. just very quarter, results

at $XX.X go quarter 'XX, of over for of a quarter at increase for to we were the the had XX I second quarter of second in end for an comments. had we of Matt the I'll through of 'XX, end million 'XX, results all total of it his me X.X%. XX versus XXXX increase properties that the Total revenues quarter turn the Let before revenues. yet second is the of the million of which note $XX.X for quarter the versus second

million diluted in $X.X $X.XX finished year. 'XX. we QX $X.XX per was $X.X a with per QX QX $XX.X $X.X million gain QX So basis. a second measure primary to that's per for we of share million versus of $XX.X quarter we versus $X.XX or income million the good time million last $X.X an the is finished on internally, share negative diluted Net the XX non-GAAP on That's in per of year news. NOI a XXXX - 'XX increase. QX as here was for 'XX or basis or That's last follow share which diluted Again, Core million other versus compared properties loss 'XX. FFO, this 'XX. was XX a for share $X.XX X.X%

For Same-store our XX.X%. same increased revenue XX,XXX last second $XX.X XXX points units. of occupancy store, growth, Same-store to quarter, for was $XX.X from from properties million XX year's of year an basis pool X.X%. same-store million from second quarter last increase to

a down XX%, the the in year-over-year, mentioned same-store quarter As for NOI for second million decrease second resulting of versus expenses quarter second That's for is 'XX were $XX.X $XX.X $XX.X the of of million million the second 'XX. XXXX $XX.X quarter X.X% in of of which versus quarter growth the million before, XXXX.

through some the let turn results over led quarters. details and Matt to to So of to what it we see what couple of these walk of the me next

Matthew McGraner

by Thanks, briefly here. market results Brian. Same-store

the market, XX%, across it's XX.X% NOI growth for it's by improved same-store That us and giving growth markets. X.X%. really was Houston in total the better XX%, strong expense basis. Brian led As each a XX.X% total of of income same-store. our Texas by healthy mentioned, X.X%, better Dallas quarter. of of was By reductions on

X.X%; better; Metro was down X.X%; was Tampa, Orlando, Nashville, D.C. West Phoenix, X.X%. and in X%, X% Palm, XX.X% property better; one XX.X%; at X.X%; land Charlotte was Our but

NOI XX.X%. basis same-store Our ticked margin to up by points XXX

earlier. unit $XXX from ticked rent effective a by also year a to X.X% $XXX same-store a up unit Our

improved, our occupancy be up our growth. As across robust. markets Brian or basis lease points. portfolio mentioned, Eight new the of XXX achieved continues activity X.X% on also Leasing out to XX better

at at Orlando XX%, at were - Tampa a was markets markets at Nashville top Top X.X%; And X.X%. Phoenix Palm renewal X.X%, also X.X%. Atlanta at at Orlando were Palm the X.X%. at and X X.X%; Beach our at West Charlotte front, strong, top West X.X%; averaging at there on markets Our Atlanta X.X%, Beach X.X%; at X what X.X%,

a that X.X% 'XX. in strongest of renewal still pulling of on for where would as prior improve the largely markets. down to we one front average the second expect Houston the While Houston our It stated the assets averaged half positive be we quarter, calls, on

achieved renewal We rate in XX Turning also XX.X%. year-over-year. up for conversion was over the a That basis points quarter second we're occupancy, of strong.

side, property, about it rate, gives the did at with very rate over we lowered the spreads LIBOR, quiet terms total index in but our one We history activity which at us Mac. points Freddie basis Creek past interest swap On XXX Duck refinance of Belmont our transaction asset when a of this X.XX%. with included on

has As implementing been through Up markets. savings Mac Brian across mentioned, on material that we've achieved the the Freddie program utilities relatively Green

the the Freddie a over reminder, to monthly energy-efficient favorably units get closing, expense rental This continue modern Atlanta, X,XXX upgrades. implementation rehabs. fixtures expense to replacements of planned. all by to average Dallas mentioned, utility totaling In markets mentioned, XX% we Strong reductions this we QX, in portfolio, about to properties to unit XX brief, program As By in Green Brian push material X of on next Brian Mac and another plumbing a our get of it great forward in and rehabs and a Up $XX. toilets over on X we'll taxes, a plan across across across and basis a with focused showerheads, could and execution was - Cost with the the led $XXX,XXX. as in $XXX X and of to program savings X,XXX and to to On we going and add as reduction That's XX% expenses most quarter. XXX able We increases X months. Houston. disputes Houston points. potentially settle implement Nashville bathrooms were entails tax

a this higher front, capital of achieve at can we thank acquisition transactions accretive the want we're always one-off in the diligent members quarter. a approach, BH and add to in I where period all and can NOI value that the team be executing for On maintaining NexPoint time. our recycling short looking

the it great reacceleration. was said, Brian As one best of and

So I have. all that's

Brian Mitts

Thank you.

high Same-store core X.X%. on the midpoint end; high lowering low end, basis we're $X.XX Same-store on to the for $X.XX prior of moved the a same midpoint from X% end; at that, the Net end our X% keeping the from the per results the an end. real share; increasing prior same; expenses, the $X.XX guidance. full prior per we X%, also expenses green X% This NOI, success We're end from midpoint or low low X.X%, the our $X.XX. end; same-store of higher on low guidance. based Same-store end and from X% and were guidance X.X%. low X.X% end; were lowering guidance and the that's our basis a midpoint on from on on the we were decrease high high end; increase XXXX. just keeping $X.XX, income, our on end; same-store X.X% With with keeping NOI estate our savings increasing on point our - that midpoint midpoint with let the for that's share, is prior QX. that's same-store same the across low X% QX share guidance. we So share; the end, are per on of from Core point increase of high the low the the me XXX $X.XX $X.XX at revised on the income $X.XX; board. in of and X% the a the the X.X% FFO the the $X.XX a revenue, year program, rental FFO That's the than we're of guidance. taxes midpoint our end, increase Culminating based on high on XX of

morning. the putting before of some it So with out there's, over, we this notes already analysts obviously, that, turn

is on market. we kind of coming grow; which environment one do it do through roadshows questions cap go the in and to the was or that rates of continue are we to we acquisition address, meetings NAREITs of has what's how the discussions in et come time I'll and various and given the One the because what look there, up like cetera, got capital just that ahead again private

Our answer always the is same.

able excited It's it. same-store trying getting tackling, we've highlights executing about to lease I and with what seeing managing our program. blocking revenue, Obviously, major some to We're push from well we and think quarter renewals. and that. et cetera. growth then which the expenses, seen managing cost still to in on increases the tariffs, of rehab the work our the costs. continues China And program, we're think return basically this expenses, Freddie increase good issues with new good this despite on growth, give potential obviously, manage We're

has it be And be value we've just to plan of the the be we results. to produced acquire of and we historically, to acquisition. same think the the is we case. more We have line to acquiring proven to bottom the that for We're So think I think, grow out that not sake company.

seen So questions. years. kind I'm lots of few steady forward sure the as there's we've of And last other

questions. let me to turn over take and get So the operator it to

Operator

[Operator Instructions].

will question come first from Our Stevenson, Rob Janney.

Robert Stevenson

in versus other savings XXX-basis-point tax was and the How decline to much appeals the that the guidance way? same-store expense is property the miscellaneous savings along or stuff due the green expense

Brian Mitts

me let start side. Well, adjust the going over and of on these forward to accruals start taxes. That's some process We our with assessment the on tax accounting didn't districts. you're probably going

plan of in minimal kind there's it. we few implement really in decrease. it this baked will as quarter nothing going to we kind - On across forward. the booked there's next there Matt, of until assess forward. We the but is just what refunds the us So said, obviously, largely as what else? those going savings them, helped got quarters of in do some change properties but those any to this, be Matt and drove hard utilities, That's anything

Matthew McGraner

I still well as quarter. mentioned X.X% the Yes. for excluding tax it's same-store

you about that, about if I the or or out of is number. is much XX points, the XXX it's think basis strip how think I think, I half XX,

Robert Stevenson

space. guess one other in expense I for and the year being But awfully that's great, is, up - I X% of difficult best because the post going winds probably Okay X%, the down up mean being obviously, apartment up that to the question wind next winds guys. comparison side being and to of - getting you growth same-store

the - expenses. pressure to eliminate expense standpoint, the And with you from up or so to eventually have other of sort for these you things out comps way wind and have an incredibly flushing would one on keep difficult

that's helpful. So

top and point, on In you to trigger the this there, disposition Are pull cash buyback anything the do terms out have don't at those wait to going acquisitions anything stock inventory you on size regardless side? until are of and/or difficulty to guys you the of acquisitions have your about on if comments feeling identifiable on you to really or basically some how dispositions buy?

Brian Mitts

or being not sake and buy underwrite comment acquisition just deals. that the see we Let me out sense, made take deals the and I not I so We We see to think buying prudent. that thoughtful I go we we beginning address initially that tons makes comments. something horizon. buying. that that in to we like of no suggest that want We're where aggressive, we're don't can first. just be looking we're the the there's of and wouldn't anything competitive on for

value-add appropriate the et just is our opportunities bucket. like was very not want, make we it it's of we our be cost, it discount replacement about thoughtful in plenty to X cap that ago. job that years and sure it's Just rate And cetera, reasonable of think a property type sitting

more. I Matt from I'm some cleared my got just So sure remarks.

Matthew McGraner

news question, I into last is is a they that - Yes. first, just your relative us go other into group, don't. have choose. to the get might they for think really our an tougher this outsized to And to we of we have - also sort opportunity people don't point, that rent we grow comp peer good

on rehab. basis, and of stock a kind drive enough back buy flow have to to vis-à-vis cash acquire to flow cash enough growth deals have we So relatively internal material one-off

months, out of market. for view, is Dallas the company are balance could - to just is So grow in there the concentration, course portfolio next buy up having too, out still X reason There We we to well, without the the XX our figure over here. of sake favorite can lighten our buying. a the and

Nashville into sell So like few on there markets Florida. or deals a much standpoint swap are is some to that probably in - other like concentration we of a an South from a few as NOI Dallas the and but lighter

a do. be to focus looking we're that'll something actively So and

Robert Stevenson

you're of across XX%, last XX%, is And occupancy, XX%, your XXX you When one a pushing for than I aggressively? from at that reason of at when in in markets occupied a are underlying you is the the redevelopments on XX% theoretically not are more look portfolio, today where look friction out? lot then mean these you Okay. you're your the that points to When look the you the take market. me. basis you the you higher Is not higher markets, why strengths a and the rents look as at guys what's an consciously take that occupancy side? why factors at occupancy, even guys

Matthew McGraner

Yes.

in in upgrades - XX% it's we which some allows occupancy to make we upgrading the while still on to of XX% we're mainly to of and hurt trade-off try time, rental any these be or are most worth type at there's range marketing the a private But but of try given funds XX% - natural to more guys point equity growth one planned look Once management private us or increases rehab that might at our more. our of than and a achieve rent two market, peers. trying of a as XX% the well. more which of system XX% I to interiors, also trade-off. concerted revenue the still portfolio those operating our REIT if have little as would is in push aggressive point But light We are and revenue to that's do renovation, the I probably, of XX% allowed that's growth, types we it say, effort undergoing on XX%, X/X you think think style in with the it completed we've most drive from to a to standpoint, updates the

Operator

Instructions]. [Operator

Kucera, come Craig Riley question FBR. B. next from will Our

Craig Kucera

get your just your units to I several wanted read expectations regarding left work what upgrades third years? through - amount the sort total of the outlook to your of quarter on next over for is and on

Matthew McGraner

Yes.

be So is at for the we kind of we but balance QX, XXXX-ish prior approximately in respect to kind doing quarters We that we're mentioned kind going XXX, and interior that then the sheet think the for of number. to consider QX, to some full we unit bespoke to for packages obviously, also, - on next new calls, X,XXX to we're to the the have the Across X of with cash hit some upgrade. gen-X sorted number as upgrades X,XXX just XXX. and we spend, least the that And in X XXX units portfolio there. kind of portfolio appliances here what magic across try showers, to are per the tech

Craig Kucera

the Got to third program, about quarter? do you of couple you quarters a with properties this it? as something green Is quarter another take is to going completed And that can you seven. XX Or think the looking here that in complete you think it.

Matthew McGraner

advantage where also and of can we a Yes. next, program going numbers the of a They'll to think third through green to deals over just the program, push thing will the we're one I tighter we than benefits. green in is probably quarter. both probably and of to the lowest It's those mention months. third taking - get in refinance the the say, help quarter, think spread which There's it to also fourth respect with at I we quarters. it to But and a spread XX portfolio the couple take just been think more the X would of itself, across and

now. of that's what So I to that's at deals, I looking - X that's we're when actually mentioned, more think that, kind right X

Craig Kucera

I Point see. Stoney And on then [ph]. Yes. finally,

that maybe that match of with had Are you I slowing get would there a quarter. Is to last that think you sort new waiting just guys closed thought we down? anything possibly up acquisition?

Matthew McGraner

Yes.

are One is second people and two go versus can that up TXX probably then mention latter. think one piece to that kind need the to before. is XX-month we is that bit have markets getting basis, too to a the to the - little going are good is Number announcement we think a of From thing sell from happening. a is probably TX extent it. I the trailing is things don't there's announcement it's more sell to stronger. but living the or a to And and basis the it's continuing not NOI extent we want to in like around thing, of Amazon - D.C., that this you theory over

waiting quarter it's think I So probably a or two. worth

Operator

[Operator Instructions].

next Our from Massocca Ladenburg come John will Thalmann. question

John Massocca

ParcXXX a at that? detail decline There's Palm. West big So one. just of occupancy kind quarter-over-quarter What in drove quick

Brian Mitts

yes the think XX% kind just ParcXXX, the it today, it's quarter. I timing, at it wasn't of mean end a - was I of occupied.

nothing So there's material.

John Massocca

draw to transaction some caused Or of on Makes on what sense. money $X any color you the kind was specific refinancing Belmont? line the some Was Just Okay. And fund then need it extra the there credit that there million just for? something at would there? be helpful. - of

Matthew McGraner

in the Yes. an was to cash the we got advantage month, opportunity using take We to obviously, probably buy available. but down some back. have and When of it up earlier REITs paid ended opportunistic just disconnect this to it not just kind saw of stock hit potentially

John Massocca

extra rest of was with out taken cash the And it Belmont? then from the

Matthew McGraner

Correct.

John Massocca

of become your on kind from would and kind rate taking that to more it fixed little to rehab on kind the of direction assets asset long of you Is put it? to more Belmont, that debt a fixed And maybe what an as you expect upon you'd to then appeal potential on less something want took and maybe any period there's And there? variable. before that mature whole term, it variable has from other you moving fixed? philosophy What's

Matthew McGraner

Yes.

it included it's swap because fixed in still I basket. our think is

swap's our asset. this covered So

change instrument fixed fixed view or instrument. variable was It swap to debt didn't rate from rate you debt a will. we if a So necessarily to lower it a as fixed,

Obviously, for the enough still it, pulling us safe It's and XXXX. rate fixed. the swaps through are XX-year that's a in, it's to [indiscernible]. time flexibility. not maintain it's But call whatever debt Now feel material

continue be will I think and clearly that's our philosophy. to

versus fixed I zero think Freddie kind we using Fannie like if or the swaps debt. of rate maintenance long-term isn't it

as the long take of we will. market, ability So we as to the have advantage swap

John Massocca

like swap kind debt So to expect would of... out long you rate use term, as variable

Matthew McGraner

Yes.

Operator

at time, Ladies this no questions and we queue. further the have gentlemen, in

turn over conference for back closing remarks. the to to like management I'd So

Brian Mitts

appreciate everyone's we'll We time, Great. and Thank next you see you. quarter.

Operator

you Thank concludes gentlemen, today's very much. and conference. Ladies this

your week. disconnect have great you. lines may the You phone and a of rest Thank