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NREF NexPoint Real Estate Finance

Participants
Jackie Graham Director-Investor Relations and Capital Markets
Brian Mitts Executive Vice President and Chief Financial Officer
Matt McGraner Executive Vice President and Chief Investment Officer
Matt Goetz Senior Vice President-Investments and Asset Management
Paul Richards Vice President-Originations and Investments
Stephen Laws Raymond James
Jade Rahmani KBW
Amanda Sweitzer Baird
Call transcript
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Operator

Good day, and welcome to the NexPoint Real Estate Finance Second Quarter Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Jackie Graham, Director of Investor Relations and Capital Markets. Please go ahead.

Jackie Graham

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

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

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

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

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

Brian Mitts

us Jackie, and today. everyone thank you, you joining Thank to

and discuss our we’ve the call, about XXXX quarter to well On made year-to-date as of our… talk acquisitions we’re the second and and going the this quarter cover portfolios as

Jackie Graham

bit. cutting off a Brian, you are little

Brian Mitts

Hi, guys.

that. about Sorry

Matt McGraner

problem, ahead, go Okay. No Brian.

Brian Mitts

Technology issues.

We Series loans paid the of preferred three rate XX% that sold investment one paid CMBS approximately principal-only CMBS off Strips. IO the that K of single and fixed purchased We rental Strips. IO had purchased we We five B-Piece. off. Mac Freddie So one

the B-Piece. we to those the CMBS Mac Freddie redeployed sales sold, investments the and net and from payoffs new the Scripts acquire we For proceeds IO

share For share value $X.XX income the to in per increased XXXX. $X QX for quarter-over-quarter share the cash share gain and diluted Partners, second for CMBS income on JCAP diluted were XX%, million on quarter was share earnings company’s increased Book quarter NexPoint net available share XX.X% per increased common and the X.X% value per share XXXX. per is to QX company which to compared a XXXX per has diluted $X.XX per portfolio. diluted net $X.XX Strip IO and has basis. book diluted of increased the recognized of on the distribution core in We investment per for $X.X million Core Storage share the in per XX% stock $XX.XX, QX results, $X.XX quarter has and in of year-over-year the earnings mark-to-market $X.X formerly compared for of diluted

XX share, investments, from are Just a core earnings. with $X.X our the ended are of mark-to-market We income reported but totalling per gains and earnings to note, excluded quarter net approximately billion. component

million $XX.X the of secured senior stack of of $XX a pool, non-controlling agreements, $XXX facility price of at June on notes, XX, loan closing mezzanine SFR following: equity preferred consisted the million capital million million million our the equity, senior pool, common of $XXX.X interest. and As on $XXX XX facility million unsecured redeemable million of June the secured $XXX repurchase $XXX

subject remaining X.X the average our has a of to our debt and of X.XX% and weighted term to XX% repos. As average a of of years is June rate weighted approximately XX, mark-to-market financing

at X.XXx ratio XX. debt-to-equity is Our

$XXX share which an average represents actually to $X.X a we’ve approximately basis record approximately common of dividend on attributable of to QX Book of dividend declared of results $XX.XX, QX issued or year. and program, cash the versus in a date value or XXXX. deployed for $X.XXX XXX,XXX was We quarter earnings to $X.XX $X.X gross compared $X million million we million year netted the the to date, million And $X.XX as per stock ATM at were to per inception issuances. A as proceeds quick through shares During of capital as and $XX.XX $XX.XX $X.XXX for last share paid here for $X.XX shareholders income per overview to as last a $X.XX those per premium to $X.X per we available million compared was Board distributions have per second common the And X.X $X.X consolidated Net share. million our $XX.X book or year. share at of CAD value. million diluted $X.X into to compared a and quarter, payable quarter investments. million on to the Core share and had $X.XX shareholders September share, compared share. share per of $XX.X of was September diluted or second share the XX through XX. per end new of price or

dividend by Our X.XXx currently earnings. is covered core

it diluted $X.XX our third end high on for and Goetz. midpoint end per $X.XX, the for on $X.XX share the is turn Matt distributions guidance the $X.XX. earnings low available our on share before cash $X.XX update midpoint. diluted end is end, to high Core on the me on for the over $X.XX quarter, per of low the Let I And

to me So turn now apologize Goetz. Matt for difficulties. the technical let But over

Matt Goetz

quarter, portfolio portfolio and invested few is second individual as coverage ratio X.X senior average years, is of comprised XX is a loans current bias outstanding current. The average The Brian CMBS, XX% Southwest and term and said, XX.X% is we our approximately XX% debt. on with principal. remaining total billion to residential investments are of opportunities. The via Agency capitalize portfolio in average invested $X.XX weighted service to investment XXX% The still X.XXx. The the as with were diverse strongly in able in portfolio, multifamily Thanks, equity with investments of and XX% Brian. XXX% debt mezzanine continued markets, and is Southeast of and geographically stabilized loan-to-value of towards preferred portfolio’s perform

both total of equity by X.XXx had investment. $X.X underlying unpaid XXXX. our on mentioned currently one forbearance. the redemption in of $XX.X loans Mac the earnings, are full. X.X% on the of we balances quarter. million first improving the XX.XX% Mac As No We a the was billion dramatically single-family as our $X.X of none quarter And published on References loan million in preferred in XX, that invested securitized change June entered principal forbearance multiple and from before capital first or forbearance the since Freddie roughly IRR rental metrics realized repaid of Freddie

Moving to opportunities.

We’re able to take second the of advantage quarter. [indiscernible] during

downturn coverage that purchased able investment on closed target We investment service to LTV Strips. fixed the redeployed portfolio. yield over loans a remaining of of of also to earnings and repo discuss our floating IO approximately B-Piece Paul $X.X debt a value Series that our currently K hand XX% in COVID in Series rate The and the In K XXX Freddie we the ratio depths to current call, would The approximately we has rate call on Piece financing the billion. continue quarter SOFR evaluate of throughout day current bps. with And of capital the term find to opportunities of bond asset $XX equivalent XX.X% average Richards the attractive made approximately the to a X.X of some we advantage with summary, to We X.XXx. small Freddie Mac and and like in Mac discussed higher-yielding XX yield is bond markets and delivering – collateral to first shareholders. we closed $XX for years investment X.XX%. an has market of XX value is B of out opportunities and That our of we’ll has now has plus I balance classes. what SFR continue are take these Strips million appraised seeing goal of another cycling As million. up were pool IO

Paul Richards

Thanks, Matt.

active During issue secondary was Agency the CMBS. the highly as well market as second quarter, new the in bond company

discussed, million B-Piece million previously Mac floating in IO and Strips new seasoned rate $XX Freddie B-Piece a QX. a deployed we and Mac issue on a for Mac Freddie approximately Freddie As basis $XX on combined

New to to issue pricing agency compared the levels. muted bond when previous pricing bonds relatively was pre COVID with quarter, close

experienced direct of value has result as compression saw yield yet the quarter. the increase Our in a CMBS mid-XXXX since meaningful this and a past greatly portfolio benefited

weighted previously as million roughly We We season includes continue XX% on on to financing able approximately basis an to previous the to rate. to basis B-Piece, of the close tune lower be quarter’s negotiate at repo our on prudently LTV the a also financing which were end, cost and financing quarter a when $XX.X at all-in to repo repo average of of additional compared achieve XX levered our discussed. points

and to trend tenant to it McGraner. remarks of want We and in prepared over as as turn loan expect our pool. all-time questions, over on performance I’d the to rental are we persist Lastly, are it continues touch general the for enormous performing retention continued To fully before like and loans SFR we demand occupancies accelerate. finalize to for at turn this Matt current briefly All to the tailwinds single-family highs.

Matt McGraner

Paul. you, Thank

from our their multifamily digits well. and July. are Paul and NOI double underlying accelerated further reaching Matt and into heard growth Revenue are verticals You have and fundamentals extremely performing SFR and

NSP Our QX, storage well. platform In the exception. saw performance is no strong partners as

growth most But in when double Jernigan of of it gained forma believe QX the pro basis in saw the and nearly XXX% up reminder, versus than is QX. XXXX. occupancy tailwinds remains XXX was our ahead well we As of our portfolio portfolio, the in back NSP QX same-store the phase. the properties in more sector, acquired points strong over we NOI in a entire Capital portfolio expectations QX the Across as lease-up given

XX%, XXXX For outperformed in-place bolstered the quarter-over-quarter. by XX.X% in our rents by growth quarter, we budget

the the to that now could like but And all position for to questions. turn per $X to have to prepared NREF to I another We execute. continue once options the I’d evaluate for share. for the NSP to continuing worth this over be $X.XX Thanks also team monetize operator call That’s to investment believe remarks. stabilized,

Operator

our James. take Raymond We’ll Instructions] from Stephen of [Operator Laws question first you. Thank

Stephen Laws

Good morning. the get match to how able relative you you of you’re in? comments how about pipeline on thoughts Kind prepared those kind investment What to coming have appreciate to like then remarks. on of I do prepayments guys the in you new touch prepayments? and investment in some think the Can opportunities the visibility up.

Matt McGraner

its Stephen, McGraner.

The of. quarter single-family saw are the that unaware investments made pool this two securitization and that as we rest the through amortize can the fixed it up off and were in their floating of that way that either be the working that’s are then B-Piece fees. I has rate large prepaid the of largely bulk the the a think we’re loans

don’t peers to forward our going on we of treadmills as a get three capital two the we’re same So or of years. material not expect every repayments. most amount Certainly, back

our and again, this going expectation probably B-Piece is be forward, we’ll the mostly it that is, of bulk of space. invest So sort in to the looking

Stephen Laws

And guys the big side? the there loan since the guess, looking – you I Mezz follow-up quarter, last what wasn’t you the what maybe see you’ll done pipeline, to a didn’t Thanks. of the at kind last And a on the a have do quantified investment quarter. table on new could sequentially so really you talk Mezz deck. day maybe the see you don’t think January impact certainly, in first, of think I that on

relative just attractive is as And this So at point? pipeline? what’s securities it to that investments not the

Matt Goetz

about anything share add it’s it – a fixed B-Piece to coupon, the rate going But at B-Piece Yes, and $X.XX because CAD. is to core. Goetz. zero The it’s per doesn’t

that’s between there’s between next – difference and for large our a core why So quarter. CAD guidance and difference

Matt McGraner

Mezz the side, it’s there’s On – McGraner here.

and multifamily, we’re Fannie. Mezz layering the currently made preferred between capital name where side, behind that underwriting where the Freddie of we private opportunities kind our there On are

X.XX% cap uptick double-digit can current opportunities of debt the most you high a right the and that an still rates X.X% are, kind now, sponsor. it’s is where so Given to to gone. of But be find cheap are can to but return, that opportunities going coupon, you get

you X% So accruing. X% or current another X% or do X% and a might

We of $XX right kind of that million-ish are say, underwriting, I’d now.

think, on I B-Piece we floating could like But so K than or And do it’s, a a that. or deal in we third the less that could attractive the quarter. fourth rate execute

Stephen Laws

or as use from ago, year you two million $X a question the for ago, unsecured about me, to notes appreciate Obviously, so year got have been there. now. able I the ATM a comparison you’ve you’ve preferred you’ve for Last got a the far.

like about for the mix your thoughts are see think what come capital you need and capital that? your outlook and you’d As growth your to how together, for stack of around

Matt McGraner

do think preferred kind to value, the we the market issue unsecured we’ll extent with To at of at we then that the or secured or we’re I more incrementally value, first. market. than above note book the can extent probably like note parity market equity book

think I of and don’t down. I cost come that the think cost markets our capital know preferred – our perpetual I of

we’ll visibility neighborhood which evaluate fund to that $XX guess, to continue I QX probably that to, the of the we million. in have order So investments and in million QX $XXX into, is

Stephen Laws

Thanks for there. the color

time those you disposal. options have Thanks the today. for to good So it’s to all

Matt McGraner

Stephen. Thanks,

Operator

Instructions] with [Operator We’ll next take our Jade question KBW. from Rahmani you. Thank

Jade Rahmani

Core guidance midpoint and difference the between timing note? I the quarter due core came factors the there any very earnings Or $X.XX. much. $X.XX, at prior second capital other Was Thanks that believe deployment? were would your in you to for was EPS and main guidance of

Matt McGraner

of basically – on, want into another it’s for that, Paul, repayments then can. we then did ATM elaborate kind issuances. it’s redeploy that you And if the for $X.XX back investments we $X.XX Yes, The capital timing. accretive to some and

Paul Richards

we roughly B the Hey, redeployed ones was purchased And on we Jade. discussed into as day KDX Piece million the just as then at I well some recently normal that quarter. of guess, some capital BX the last big the ones. purchase Freddie $XX was

Jade Rahmani

Okay.

taking your prior that purchase in contemplated So earlier? you place guidance,

Matt McGraner

we I more from fact that necessarily repayments No, got didn’t we think the it’s day that anticipate. on preferreds notices of the XX and the

Jade Rahmani

Okay.

not in similar you’re the expecting And Okay. third quarter? something

Matt McGraner

No.

Jade Rahmani

what of XQ And the was aggregate dollar investments? amount

Brian Mitts

about million. was it $XXX Yes,

Jade Rahmani

Okay.

think broadly business’ that terms across levered does yield ultimate change compression, the are be? space? And seeing of you going you to it ROEs the In are that what

Matt McGraner

sort that’s are, that in life of I in think the went get generating in compressing. near market. sure, necessarily where that, said And we can – We maintain think least that’s new Deal when it’s that market. think for terms of or I the investments. and what we’re I – don’t tighter that outsized areas, to we bolster ROEs term at in And to focused yields we K going much McGraner. largely public. get sciences, niche still returns B-Piece The the think in some self-storage they’re the and

earnings book And as that years have so place then outsized four next visibility are an that the the with – would be to a anything profile that’s these here credit earnings bolster and And do and of The goal. to just from in don’t five pay seven over current a ability reminder, duration, transparency new. has superior the to or our years. of dividend we

Matt Goetz

points gone of has as XX down the basis better over one And side. repo get thing Matt the roughly preferred financing just capital well, before, quarter. has And we could mentioned as as as mentioned, our a financing think add comment unsecured to cost dramatically on we note side well to decreased the Matt’s to as past

Jade Rahmani

expectation dividend the to be a Or Is room the maintained? increase? is Okay. there for potential for

Matt McGraner

I mean out it. coverage, healthy having of to we Yes. all we’re and pay have almost

there’s room So certainly increase. for

Jade Rahmani

in you the basis remind us Can Okay. NSP is? what

Matt McGraner

$XX million.

Jade Rahmani

of Okay. any events? What realization timing the potential is

Matt McGraner

questions. two Yes,

that a also And fundamentals, of like are we stabilized portfolio book probably to to best the is share constantly in do certainly come storage it’s that that now, we and we looked ability cognizant been rightsize storage the XXXX. excited now. sheet, in quarter for about of differentiator kind thought per think but like probably the amongst peers. financing in to can we’re The high-density and our believe accretion of the be infill, probably balance that $X looking And want NREF value storage itself. about investment XXXX share the NSP cap of urban fourth would – submarkets So monetize at in, we’ll our portfolio that stack be represents the we’ve we’ve at company we the to add rates country. best-in-class And company’s can $X.XX the I talking of in XXXX, some

of So problem have at this considerations, to of those a I all think good kind weighing but we’re it’s point.

Jade Rahmani

Okay.

paid capital preferred rationalized, if structure and you be be it – a And share so a the would was off, potentially? the $X gain $X would streamlined, of be that there’ll said to

Matt McGraner

No.

was is position contributor recall, into was that you converted – was common. – the If that current preferred

So is the preferred common a $XX into converted a common million the was special that of situations a investment company. and investment

party that go we stabilized or common it sell third is forma wait conservative. share based – for stabilize or now. get that’s at of it not pro think rate think to funds share range couple to right range could that’s – we in we wanted re-IPO can sell could bucks per our today, for going probably can a a $X and sure. could anywhere The we a it that the discounted a per pro do $X.XX to forma we to sell sell So And point. We a cap then it future. I I foreseeable to if that that But upon NREF

Jade Rahmani

it. Got

if guys necessarily down wouldn’t company mean you streamlined, structure was or that are recapitalized, capital that So anything? the the selling the position

Matt McGraner

if be a we’re $XX earnings. that we And it then reinvest drive and book and $XX then the into monetize value relever ability then we the mean to could convert Whereas or wanted years that. and it then, I to and X.X million million, reducing closer yield right. preferred, to, we we but for capital X% That’s the took weighted if that would example, a into X%. turns

So that’s attractive option. an

Jade Rahmani

an today, given rates former rates potential to rental loan that is there lastly, be side, on update the Front the are could where Progress single-family And increase? are Residential, today, you give prepaid on Okay. for Yard,

Matt McGraner

yield no, doesn’t which, bills $XXX Jade, them on much of actual maintenance or million, term the sense just it well course, and paying yield left has the that so make over to loan. still it – that prepay loan maintenance refinance would for

story as last quarter. So same it’s

Jade Rahmani

Thanks for taking the questions.

Operator

Instructions] We’ll [Operator next our Sweitzer take Baird. Amanda with question from

Amanda Sweitzer

about investments morning, upon storage? the any you Thanks. JCAP life those pursue? or of timing is there you for Good some more timing that the either talk expect to investment? something mezzanine self near-term Or where you’re opportunities science about thinking Are it Can guys. potential of recycling this into

Matt McGraner

Yes.

Amanda, I think the McGraner. Matt – it’s life

life for occur the in of investments will the think half sciences second I the year sure.

get into thought two We to into hopefully to the in We’re second the it’s – been done. probably one the or one able well, get might we pushed be quarter, done third some think is third life of year. will little done get do end sciences at of quarter, But Self-storage a the harder. I this we’ll bit the quarter. I – those and

We’re still enough size. working some opportunities, on aggregating

million doing underwritings really that on splash a We’re But like year. assets of half think, the single the sciences, life second some on $XX the needle. million, the bigger one-off I won’t $XX be move in will

Amanda Sweitzer

Okay. an do storage? about how And That’s life level exposure self you to projects? go with think investments development willing are And life on those science helpful. and then science that to you’re

Matt McGraner

opportunities piece the million think companies, I investing million we that’s comfortable or Yes. a that types we either with certain one space life do worked cell right to few science And of platform facilities that the of a of may figure a gotten near-term as familiarity are Mezz $XX pretty sale at looking from in interesting are leasebacks for Alan it’s and outside kind mean, $XX nine the could last him $XX in. preferred of years Gold’s I’d know, made we’re investment say you as some largely and and are opportunities million types that manufacturing have have we’re IQHQ, deals logistical those some or a anywhere on. other now. type small to that smaller of

Amanda Sweitzer

I time. Appreciate Yes, That’s all interesting. that is the had.

Matt McGraner

Thanks, Amanda.

Operator

queue. we remarks. it turn back And have further I’ll Thank in you. no for to time, questions management this at closing

Matt McGraner

our We Matt McGraner. to speaking this appreciate time conference It’s look to everyone’s Thanks. you and call. availability during Thanks third forward quarter again. morning and Yes.

Operator

Thank for call. you participation. This your concludes today’s

may disconnect. You now